Summary Chart of Confirmation Objections — In re Kabbage, Inc. d/b/a KServicing, Case No. 22-10951 (CTG) (Doc 637-1)
Summary
The debtors' summary chart of confirmation objections, filed March 9, 2023 as Doc 637-1 in In re Kabbage, Inc. d/b/a KServicing, Case No. 22-10951 (CTG), sets each objection to the Amended Plan beside the debtors' response. The Carr Plaintiffs, PPP borrowers in a stayed class action, argue the plan fails the best-interests test and unfairly favors the Reserve Bank's claims. The U.S. Trustee and Paul Pietschner, a False Claims Act plaintiff, object to the third-party releases and injunction; Cross River Bank and Customers Bank question whether servicing of their PPP loans can be transferred; the DOJ and SBA object on settlement, release and setoff points. The chart marks the DOJ and SBA points and Pietschner's informal release objection resolved, most others pending, and a cure objection by Insperity adjourned.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
- Date
- 2022-12-30
Cite this document
“Summary Chart of Confirmation Objections — In re Kabbage, Inc. d/b/a KServicing, Case No. 22-10951 (CTG) (Doc 637-1).”
Original at archive.org, dated 2022-12-30. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2022-12-30-carr-et-al-v-kabbage-inc-case-no/
, SHA-256 0c8285149e86bc1399d972abd65a5925408397692f27a2c9885a3de0aa93cd58.Full text
Case 22-10951-CTG Doc 637-1 Filed 03/09/23 Page 1 of 8
IN RE KABBAGE, INC. D/B/A KSERVICING ET AL.,
CASE NO. 22-10951 (CTG)
SUMMARY CHART OF CONFIRMATION OBJECTIONS1
No. Docket Debtors Response
Objecting Party Summary of Objection
No.
I. Confirmation Objections (Excluding Cure Objections)
1. 548 Plaintiffs and putative Carr Plaintiffs object to confirmation of the Amended Plan on Pending.
class members in stayed grounds that:
action filed as Carr et al.,
v. Kabbage, Inc., Case No. a) The Amended Plan violates section 1129(a)(7), or the a) The Amended Plan satisfies the “best interests” test.
22-cv-02149 (N.D. Ga. “best interests” test, under the Bankruptcy Code because:
Mar. 30, 2022) (“Carr i. Debtors have failed to provide an adequate i. On December 30, 2022, the Debtors timely filed their
Plaintiffs”) Liquidation Analysis in a timely manner prior to Liquidation Analysis, as Exhibit C to the first
the Plan Objection Deadline and the Debtors’ filed Amended Disclosure Statement. On January 17,
Liquidation Analysis will be too speculative; 2023, the Debtors filed a revised Liquidation
Analysis; in each case, well in advance of the Voting
Deadline. Further, the Liquidation Analysis,
prepared by the Debtors and their advisors, is sound,
reasonable, and incorporates widely accepted and
justified assumptions and estimates regarding the
Debtors’ assets and claims. See Memorandum ¶ 87,
138, 146. The Carr Plaintiffs did not object to the
Amended Disclosure Statement, nor the Liquidation
Analysis at the Disclosure Statement hearing.
ii. Debtors’ Liquidation Analysis fails to account ii. The Debtors’ Liquidation Analysis appropriately
for the Third-Party Releases provided under the accounts for Claims that may be affected by releases
Amended Plan; in the Amended Plan. See Memorandum ¶ 141-46.
The Debtors’ Liquidation Analysis properly
excludes unasserted and unknown Claims
hypothetically held by the Carr Plaintiffs against
non-Debtor third-parties. Id. ¶ 145.
Notwithstanding this, the Carr Plaintiffs have
objected to the releases provided under the Amended
Plan. See Voting Decl. Ex. D (Opt-Out Report).
1
Capitalized terms used but not otherwise defined herein shall have the meaning ascribed to such terms in the Memorandum, the relevant Objection, the Plan, or the
Disclosure Statement, as applicable. This chart summarizes certain key issues raised in the Objections. To the extent that an Objection or a specific point raised in an
Objection is not addressed herein or the Memorandum, the Debtors reserve the right to respond to such Objection up to and at the Confirmation Hearing.
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Case 22-10951-CTG Doc 637-1 Filed 03/09/23 Page 2 of 8
No. Docket Debtors Response
Objecting Party Summary of Objection
No.
iii. The Amended Plan improperly uses the Carr iii. To the extent a PPP Loan was originated by the
Plaintiffs’ PPP Loans as collateral in satisfaction Debtors using funds from the PPPLF, such PPP Loan
of the Reserve Bank’s claims. To the extent the was pledged to the PPPLF and is part of the Reserve
Carr Plaintiffs’ PPP Loans are transferred to Bank’s collateral. See Memorandum ¶ 151; Cash
Reserve Bank and/or the Wind Down Estate, it Collateral Order § D(v); Loan Servicing Motion
should be done without any release or waiver of ¶ 19. For the avoidance of doubt, any consensual
claims by Carr Plaintiffs. releases provided to the Reserve Bank and the Wind
Down Estates would not impact or prejudice the Carr
Plaintiffs’ ability, if any, to seek forgiveness of their
PPP Loans from the Small Business Administration.
See Memorandum ¶ 149. Notwithstanding this, the
Carr Plaintiffs have objected to the releases provided
under the Amended Plan. See Voting Decl. Ex. D
(Opt-Out Report).
b) Plan is not “fair and equitable” as to Class 4 (General b) The Plan satisfies the “cram down” requirements for plan
Unsecured Claims) as required by section 1129(b)(2)(B) confirmation pursuant to section 1129(b) of the Bankruptcy
of the Bankruptcy Code: Code. See Memorandum § I.J.
i. Amended Plan unfairly discriminates between i. The Amended Plan does not unfairly discriminate
similarly situated claims by prioritizing Reserve between the Reserve Bank Claims and the Carr
Bank’s GUC Pool Class A Interests over Carr Plaintiff’s claims. The Reserve Bank Claims are
Plaintiffs’ GUC Pool Class B Interests; either secured claims or, to the extent not secured,
entitled to priority under section 507(a)(2) of the
Bankruptcy Code. The Debtors stipulated to the
amount and treatment of the Reserve Bank Claims,
as memorialized by the Cash Collateral Order, and
such stipulation was subject to a challenge period
that has lapsed and the stipulations are now binding
on parties in interest. See Cash Collateral Order;
Memorandum ¶ 148, 153.
2
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Case 22-10951-CTG Doc 637-1 Filed 03/09/23 Page 3 of 8
No. Docket Debtors Response
Objecting Party Summary of Objection
No.
ii. Reserve Bank should not receive distributions ii. As part of the cash collateral stipulations, the
from Avoidance Actions because its pre-petition Debtors granted the Reserve Bank adequate
liens would not have attached to such causes of protection in the form of, among other things,
action; replacement liens on all the Debtors’
unencumbered property and assets. Even if the
adequate protection liens did not extend to
potential proceeds of avoidance actions, the
Reserve Bank Priority Clams have priority over the
General Unsecured Claims as to all property of the
estate, which would include avoidance proceeds.
See Memorandum ¶ 151, 155; Cash Collateral
Order § D(v).
iii. Carr Plaintiffs, as General Unsecured Creditors, iii. The Carr Plaintiffs are not entitled to consent or
have no rights in decisions regarding pursuit of consultation rights, nor is this fact relevant to a
Avoidance Actions, as the Amended Plan section 1129(b)(2)(B) analysis. See Memorandum
designates this decision to the Wind Down ¶ 156, 159.
Officer (with certain consultation rights to other
parties);
iv. Debtors provide no basis for allowance of iv. As noted, the amount and priority of Reserve Bank
Reserve Bank’s allowed Claim (as it is yet an Claims was stipulated to in the Cash Collateral
unknown amount), nor do they set a process in Order. Further, the Debtors’ Wind Down Officer
place to challenge Reserve Bank’s claim; owes fiduciary duties to all parties in interests in
these Chapter 11 Cases, and per the Amended Plan,
has the ability to object to Reserve Bank Priority
Claims if they are improper. See Cash Collateral
Order § D(ii); Memorandum ¶ 154, 203.
v. The Amended Plan does not provide an adequate v. The Debtors have demonstrated the
liquidation analysis and contains improper appropriateness and consensual nature of the Third
releases that burden General Unsecured Party Releases provided under the Amended Plan,
Creditors. including their compliance with applicable law.
See Memorandum ¶¶ 48-55; 163. The Carr
Plaintiffs have objected to the releases provided
under the Amended Plan. See Voting Decl. Ex. D
(Opt-Out Report).
3
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Case 22-10951-CTG Doc 637-1 Filed 03/09/23 Page 4 of 8
No. Docket Debtors Response
Objecting Party Summary of Objection
No.
2. 590 United States Trustee The U.S. Trustee objected, on a limited basis, to confirmation Pending. The Third Party Releases and Injunction Provision
(“U.S. Trustee”) of the Amended Plan on grounds that the Third Party Releases provided in the Amended Plan do not violate section 1141(d)(3)
and Injunction Provision provided under the Amended Plan and should be approved. The Third Party Releases are
constitute an impermissible discharge by a liquidating debtor, consensual and do not amount to a discharge. The Injunction
in violation of section 1141(d)(3) of the Bankruptcy Code. Provision is critical to the effectiveness of the Amended Plan,
and prevents depletion of the limited estate. Even if the Third
Party Releases and Injunction Provision combine to create a de
facto discharge, that does not preclude their approval, as each is
appropriate in its own right. See Memorandum ¶ 166.
3. 591 Paul Pietschner Pietschner objected to confirmation of the Amended Plan on
(“Pietschner”), a plaintiff grounds that:
in a False Claims Act
proceeding currently
stayed in the United a) the injunction and release provisions provided under the Pending. The Injunction Provision and Releases provided under
States District Court for Amended Plan are overbroad, such that they would the Amended Plan do not constitute a discharge for purposes of
the Eastern District of prohibit Pietschner from liquidating his Claims by 1141(d)(6)(A). See Memorandum ¶ 163. Additionally, the
Texas, Case No. 4:21-cv- releasing Debtors from liability under FCA suit and Debtors included proposed procedures in the Confirmation
110 (the “FCA Action”) enjoining Pietschner from further prosecution of the Order that provides Pietschner with the ability to prosecute the
Debtors in connection with the FCA suit—thereby FCA Action in the Texas Court if his claims are
constituting an impermissible discharge by the Debtors in nondischargeable, while also protecting other creditors from the
violation of section 1141(d)(6)(A) of the Bankruptcy harm that would occur if Pietschner could pursue the Wind
Code. Down Estates outside of the confines of the Amended Plan
before there has been a determination that the holders of Allowed
General Unsecured Creditors will receive a Distribution. See
Proposed Confirmation Order ¶ 32; Memorandum ¶ 170.
b) Pietschner informally objected to the Third-Party Resolved. See Voting Decl. Ex. D (Opt-Out Report), reflecting
Releases provided under the Amended Plan. the same.
4. 592 Cross River Bank CRB objected, on a limited basis, to confirmation of the Pending.
(“CRB”) Amended Plan on grounds that:
a) the Plan violates the feasibility requirement under section a) The Amended Plan satisfies the feasibility requirement and
1129(a)(11) of the Bankruptcy Code and fails to provide provides for adequate means of implementation. See
for “adequate means for implementation” pursuant to Memorandum ¶ 28; 99-101; 113, 176-201. Per the evidence
section 1123(a)(5) because the Debtors have not and testimony on the record, the Debtors have demonstrated
demonstrated their ability to transfer servicing obligations with reasonably probability that the Amended Plan may be
with respect to CRB’s PPP Loans to a new servicer, nor performed—the Debtors will have sufficient funds to
the related Servicing Files to CRB. implement the Amended Plan, conditions precedent will be
satisfied, and the Debtors have undertaken substantial, good
4
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Case 22-10951-CTG Doc 637-1 Filed 03/09/23 Page 5 of 8
No. Docket Debtors Response
Objecting Party Summary of Objection
No.
faith, commercially reasonable efforts to effectuate the
transfer of its loan servicing obligations to alternate
servicers. See Memorandum ¶ 102-106; 179-181; Rieger-
Paganis Decl. ¶ 16, 19, 26; Kafiti Decl. ¶ 6, 8.
b) Due to the Debtors’ inability to transfer servicing b) CRB’s assertion of an Administrative Expense Claim is
obligations and related documentation, CRB will file a baseless: further, CRB carries the burden to prove such a
substantial Administrative Expense Claim, which must be claim. Even assuming, arguendo, that CRB was owed an
paid in full at the Effective Date, making the Amended Administrative Expense Claim that would only create an
Plan infeasible. issue as to the timing of the Effective Date and should not
prevent confirmation of the Amended Plan. Section
1129(a)(9) is satisfied by the express terms of the Amended
Plan. See Memorandum ¶ 198-99.
c) The Debtors have failed to comply with sections c) The identity of the Wind Down Officer has been disclosed,
1129(a)(5) and 1123(a)(7) of the Bankruptcy Code due to as well as the nature of their disinterestedness and
the fact that they have not selected a Wind Down Officer compensation, all as required by section 1129(a)(5). See
nor provided justifications for their proposed selection. Memorandum ¶ 202; Plan Supplement Ex. D. The Debtors’
selected Wind Down Officer complies with the standards
often considered by courts when assessing whether section
1123(a)(7) has been met, i.e., the Wind Down Officer is
competent, experienced, and independent. See
Memorandum ¶ 203; Plan Supplement Ex. D.
5. 594 Customers Bank (“CB”) CB filed a joinder to the limited objection of CRB and objected Pending.
to confirmation of the Amended Plan on grounds that:
a) the Plan violates the feasibility requirement under section a) The Amended Plan satisfies the feasibility requirement and
1129(a)(11) of the Bankruptcy Code because the Debtors provides for adequate means of implementation. See
have not demonstrated their ability to transfer servicing Memorandum ¶ 28; 99-101; 113, 176-201.
obligations and related documentation with respect to
CB’s PPP loans.
i. CB argues that (i) the CB Agreements, including i. Per the evidence and testimony on the record, the
the Court-approved settlement between the Debtors have used and continue to use
Debtors and CB (see Docket Nos. 172 & 232), commercially reasonable efforts to continue
obligates the Debtors to perform servicing until servicing the CB PPP Loans, as required by the
transfer of servicing is effectuated. Amended Plan and the CB Settlement Agreement.
However, the Debtors are not required to continue
servicing beyond March 31, 2023 nor are they
required to transfer servicing obligations by a
certain timeline. See Memorandum ¶ 212, 215,
221.
5
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Case 22-10951-CTG Doc 637-1 Filed 03/09/23 Page 6 of 8
No. Docket Debtors Response
Objecting Party Summary of Objection
No.
ii. Due to the Debtors’ inability to transfer servicing ii. CB’s assertion of a possible Administrative
obligations and related documentation, CB will Expense Claim is baseless: further, CB carries the
likely file a substantial Administrative Expense burden to prove such a claim. The Debtors never
Claim, which must be paid in full at the Effective agreed to transfer their servicing obligations to
Date, making the Amended Plan not feasible. CB, nevertheless, have demonstrated
commercially reasonable efforts to do so.
Additionally, even assuming, arguendo, that CB
has a likely Administrative Expense Claim, it
would not preclude confirmation. Section
1129(a)(9) is satisfied by the express terms of the
Amended Plan. See Memorandum ¶ 214-217.
b) The Amended Plan was not proposed in good faith, and b) The Debtors have complied with section 1129(a)(3). The
therefore does not comply with section 1129(a)(3) of the Amended Plan seeks to maximize value for the benefit of
Bankruptcy Code, because it does not serve a “legitimate stakeholders and the Debtors have worked diligently and
and honest purpose to reorganize the debtor” and allows with the honest purpose to engage in a constructive and
the Debtors to shirk transition obligations post-Effective cooperative manner with all parties in interest to achieve
Date while the unsecured creditors are left with the consensus with respect to the Amended Plan and the orderly
prospect of uncertain recoveries. wind down of the Estates. See Memorandum ¶ 72, 220. CB
does not have standing to object to the treatment nor
recoveries of the General Unsecured Creditors under the
Amended Plan. CB is not itself an unsecured creditor, given
that CB has released all prepetition Claims against the
Debtors, including contract rejection damages, pursuant to
the CB Settlement Agreement. See CB Settlement
Agreement § 9(c); Memorandum ¶ 218, 222.
6. 593 United States of America The DOJ and SBA objected, on a limited basis, to Resolved.
Department of Justice confirmation of the Amended Plan on grounds that:
(Civil Division) (the
“DOJ) on behalf of itself a) the Amended Plan cannot unilaterally settle claims held a) Resolved. The Amended Plan, as drafted, does not
and the U.S. Small by the DOJ and SBA, and to the extent that it does, the contemplate any unilateral settlement of the DOJ/SBA’s
Business Administration Amended Plan is in violation of section 1123(b)(3)(A) of Claims. Clarifying language was added to the Confirmation
(“SBA”) the Bankruptcy Code and should be amended to clarify Order. See Proposed Confirmation Order ¶ 32.
settlement provisions;
b) the DOJ and SBA object to and opt out of the Third-Party b) Resolved. The United States and SBA are reflected on the
Releases provided under the Amended Plan; Debtors’ opt-out report. See Voting Decl. Ex. D (Opt-Out
Report), reflecting the same.
c) the injunction provisions provided under the Amended c) Resolved. Clarifying language was added to the proposed
Plan constitute an impermissible discharge by a Confirmation Order. See ¶ 32.
6
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Case 22-10951-CTG Doc 637-1 Filed 03/09/23 Page 7 of 8
No. Docket Debtors Response
Objecting Party Summary of Objection
No.
liquidating debtor, in violation of section 1141(d)(3) of the
Bankruptcy Code;
d) the Confirmation Order may not: (i) prohibit or enjoin the d) Resolved. Clarifying language was added to the proposed
DOJ and SBA from engaging in their police and Confirmation Order. See ¶ 32.
regulatory powers post-confirmation; and (ii) prohibit or
enjoin the DOJ and SBA from exercising their setoff and
recoupment rights, as such rights are not extinguished by
confirmation of a plan if timely asserted.
The DOJ and SBA requested certain language to be added to Pending. The Debtors are continuing to work with the DOJ and
the Amended Plan, not cited in their filed Objection. SBA to reflect agreed-to language in the Amended Plan and
Confirmation Order.
7. N/A Vaco LLC (“Vaco”) and Vaco and Morgan Franklin requested the following language Resolved. Agreed-to language was added to the proposed
Morgan Franklin to be included in the Confirmation Order to preserve the Confirmation Order. See ¶ 29.
Consulting LLC parties’ rights under the contracts pending assumption by the
(“Morgan Franklin”) Debtors:
(informal objection) a) Notwithstanding anything to the contrary in the Plan,
the Plan Supplement, or this Confirmation Order, the
Debtors agree and stipulate that: (i) Kabbage, Inc. is
assuming the executory contract with Vaco LLC
(“Vaco”) identified in the Plan Supplement
(including all amendments, modifications, and
supplements thereto, the “Vaco Contract”); (ii)
Kabbage, Inc. is assuming the executory contract
with Morgan Franklin Consulting LLC (“Morgan
Franklin”) identified in the Plan Supplement
(including all amendments, modifications, and
supplements thereto, the “Morgan Franklin
Contract”); (iii) pursuant to 11 U.S.C. § 365, upon
the occurrence of the Effective Date, Kabbage, Inc.
shall be deemed to have assumed all rights, benefits,
and liabilities under the Vaco Contract and Morgan
Franklin Contract, regardless of the date of accrual
thereof, including without limitation any contingent
or unliquidated liabilities; (iv) Kabbage, Inc. reserves
all defenses to any claims under the Vaco Contract,
Morgan Franklin Contract, and applicable law; and
(v) Kabbage, Inc. shall pay all of its obligations under
the Vaco Contract or Morgan Franklin Contract in the
ordinary course of business without the necessity of
7
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Case 22-10951-CTG Doc 637-1 Filed 03/09/23 Page 8 of 8
No. Docket Debtors Response
Objecting Party Summary of Objection
No.
Vaco or Morgan Franklin filing any application for
an administrative expense claim.
II. Cure Objections (Regarding Cure and Assumption Only)2
1. 607 Insperity PEO Services, Insperity objects, on a limited basis, to the potential Adjourned.
L.P. (“Insperity”) assumption of the Insperity Agreement on grounds that the
Debtors are prohibited from assuming the Insperity
Agreement under section 365(c)(1) of the Bankruptcy Code
without Insperity’s consent, as the Insperity Agreement is a
personal services contract. If the Court finds that the Insperity
Agreement is not a personal services contract, Insperity
requests that the limited Objection serve as the requisite
writing to cancel the Insperity Agreement, with the 30-day
requirement provided in the Insperity Agreement being
calculated upon the date of service of the limited Objection.
2
The Objections contemplated in this section relate solely to the Debtors’ assumption of certain contracts or unexpired leases and the cure amounts associated therewith.
While the Debtors are not addressing such Objections at this time, they will continue to work with the respective counterparties to resolve such Objections in the
ordinary course pursuant to § 8 of the Amended Plan.
8
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