Order Granting Debtors’ Second Omnibus
- Date
- 2023-04-04
Summary
Doc 752-1, filed April 4, 2023 in In re Kabbage, Inc. d/b/a KServicing, et al., Case No. 22-10951 (CTG), in the United States Bankruptcy Court for the District of Delaware, is Exhibit A: an order granting the Debtors' Second Omnibus Objection (Substantive) to Certain Misclassified Claims. The order reclassifies each proof of claim listed on Schedule 1 as set forth in its Modified Classification Status column and overrules unresolved responses. It treats each claim as a separate contested matter, reserves rights to further objections, and authorizes Omni Agent Solutions to modify the Claims Register. Schedule 1 lists five claims filed by PPP loan borrowers asserting priority, administrative or secured status, each reclassified as a general unsecured claim. The document is 8 pages.
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Case 22-10951-CTG Doc 752-1 Filed 04/04/23 Page 1 of 8
EXHIBIT A
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UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
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:
In re : Chapter 11
:
KABBAGE, INC. d/b/a KSERVICING, et al., : Case No. 22-10951 (CTG)
:
:
1
Debtors. : (Jointly Administered)
:
Re: Docket No. 679
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ORDER GRANTING DEBTORS’ SECOND OMNIBUS
OBJECTION (SUBSTANTIVE) TO CERTAIN MISCLASSIFIED CLAIMS
Upon the Debtors’ Second Omnibus Objection (Substantive) to Certain
Misclassified Claims (the “Objection”) 2 of Kabbage, Inc. d/b/a KServicing and its debtor
affiliates, as debtors and debtors in possession in the Chapter 11 Cases (collectively,
the “Debtors”), for entry of an order pursuant to section 502 under title 11 of the United States
Code (the “Bankruptcy Code”), Rule 3007 of the Federal Rules of Bankruptcy Procedures (the
“Bankruptcy Rules”), and Rule 3007-1 of the Local Rules of Bankruptcy Practice and Procedure
of the United States Bankruptcy Court for the District of Delaware (the “Local Rules”),
(i) reclassifying the Misclassified Claims as general unsecured claims, and (ii) granting related
relief, all as more fully set forth in the Objection; and this Court having jurisdiction to consider the
1
The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification
number, as applicable are: Kabbage, Inc. d/b/a KServicing (3937); Kabbage Canada Holdings, LLC (N/A); Kabbage
Asset Securitization LLC (N/A); Kabbage Asset Funding 2017-A LLC (4803); Kabbage Asset Funding 2019-A
LLC (8973); and Kabbage Diameter, LLC (N/A). Kabbage is a trademark of American Express used under license;
Kabbage, Inc. d/b/a KServicing is not affiliated with American Express. The Debtors’ mailing and service address
is 925B Peachtree Street NE, Suite 383, Atlanta, GA 30309.
2
Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms
in the Objection.
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Objection and the relief requested therein pursuant to 28 U.S.C. §§ 157(a)–(b) and 1334(b) and
the Amended Standing Order of Reference from the United States District Court for the District of
Delaware, dated February 29, 2012; and upon consideration of the Objection and the requested
relief being a core proceeding pursuant to 28 U.S.C. § 157(b); and venue being proper before this
Court pursuant to 28 U.S.C. §§ 1408 and 1409; and due and proper notice of the Objection having
been provided; and such notice having been adequate and appropriate under the circumstances;
and it appearing that no other or further notice need be provided; and this Court having held a
hearing to consider the relief requested in the Objection (the “Hearing”), if necessary; and upon
the record of the Hearing; and this Court having determined that the legal and factual bases set
forth in the Objection establish just cause for the relief granted herein; and it appearing that the
relief requested in the Objection is in the best interests of the Debtors, their estates, creditors, and
all parties in interest; and upon all of the proceedings had before the Court and after due
deliberation and sufficient cause appearing therefor,
IT IS HEREBY ORDERED THAT:
1. The Objection is granted to the extent set forth herein.
2. Each proof of claim listed under the heading “Misclassified Claims” on
Schedule 1 annexed hereto is hereby reclassified as set forth on Schedule 1 under the column
“Modified Classification Status”.
3. Any Response to the Objection not otherwise withdrawn, resolved, or
adjourned is hereby overruled on the merits.
4. The objections by the Debtors to the Misclassified Claims, as addressed in
the Objection and the schedules hereto, constitute a separate contested matter with respect to each
2
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such proof of claim, as contemplated by Bankruptcy Rule 9014 and Local Rule 3007-1. This Order
shall be deemed a separate Order with respect to each Misclassified Claim.
5. Any stay of this Order pending appeal by any holder of a Misclassified
Claim or any other party with an interest in such claims that are subject to this Order shall only
apply to the contested matter which involves such party and shall not act to stay the applicability
and/or finality of this Order with respect to the other contested matters arising from the Objection
or this Order.
6. This Order has no res judicata, estoppel, or other effect on the validity,
allowance, or disallowance of any claim referenced and/or identified in the Objection that is not
listed on Schedule 1 annexed hereto as a Misclassified Claim, and all rights to object to or defend
against such claims on any basis are expressly reserved.
7. The rights of the Debtors, or any other party in interest, as applicable, to (a)
file subsequent objections to any of the Misclassified Claims on any and all substantive and/or
non-substantive grounds; (b) amend, modify, and/or supplement the Objection, including, without
limitation, the filing of objections to further amended or newly filed claims; (c) seek expungement
or reduction of any claim to the extent all or a portion of such claim has been paid; and (d) settle
any claim for less than the asserted amount are preserved.
8. The Debtors and Omni Agent Solutions are authorized to modify the Claims
Register to comport with the entry of this Order.
9. Nothing contained in the Objection or this Order, nor any payment made
pursuant to the authority granted by this Order, is intended to be or shall be construed as (a) an
admission as to the validity of any claim against the Debtors; (b) an agreement or obligation to pay
any claims; (c) a waiver of the Debtors’ or any appropriate party in interest’s rights to dispute the
3
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amount of, basis for, or validity of any claim against the Debtors, including but not limited to, any
future objections on substantive and/or non-substantive grounds; (d) a waiver of any claim or cause
of action which may exist against any creditor or interest holder; or (e) an approval, assumption,
adoption, or rejection of any agreement, contract, lease, program, or policy between the Debtors
and any third party under section 365 of the Bankruptcy Code.
10. Notwithstanding entry of this Order, nothing herein shall create, nor is
intended to create, any rights in favor of or enhance the status of any claim held by any party.
11. The Debtors are authorized to take all action necessary to effectuate the
relief granted in this Order.
12. The Court shall retain jurisdiction to hear and determine all matters arising
from or related to the implementation, interpretation, or enforcement of this Order.
4
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Schedule 1
Misclassified Claims
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Misclassified Claims
(Claims are listed alphabetically)
Claimant Name Misclassified Modified
Date Claim Claim
# Debtor Name Claim Classification Reason for Reclassification
Filed No.
Amount Status1
Ayesha Salahuddin asserted a total claim of $14,000. Notwithstanding the total
amount of the claim set forth on the proof of claim, the claimant asserts that: (i)
$114,350 is entitled to priority pursuant to sections 507(a)(7), 507(a)(8), and an
unspecified subsection of 507(a) of the Bankruptcy Code; (ii) $140,000 is entitled to
administrative expense status pursuant to section 503(b)(9) of the Bankruptcy Code;
and (iii) $14,000 is secured. The proof of claim asserts “Money loaned, services
performed” as the basis for the claim. See proof of claim no. 951-232. Based on a
review of the Debtors’ books and records, the Debtors have determined Ayesha
$114,350.00 (P) $0.00 (P) Salahuddin is a borrower of a Paycheck Protection Program loan (“PPP Loan”) that
Ayesha Salahuddin $140,000.00 (A) $0.00 (A) the Debtors service, and that there are no amounts entitled to priority due and owing to
Kabbage, Inc.
1 01/30/2023 951-232 $14,000.00 (S) $0.00 (S) Ayesha Salahuddin under sections 507(a)(7) (the claim is not on account of a deposit in
d/b/a KServicing
$0.00 (U) $14,000.00 (U)2 connection with the purchase, lease, or rental of property or purchase of services),
507(a)(8) (the claim is not on account of governmental units), or any other section of
507(a) of the Bankruptcy Code.
In addition, the Debtors have determined there is no evidence of the Debtors receiving
goods from Ayesha Salahuddin within the twenty days prior to the Petition Date, in the
ordinary course, as required by section 503(b)(9) of the Bankruptcy Code, and that
there is no basis for the claim’s secured status under section 506 of the Bankruptcy
Code. Accordingly, Ayesha Salahuddin’s claim should be reclassified as a general
unsecured claim.
Nella's Seafood Lounge & Co Inc (“Nella’s Seafood”) filed a $20,833 claim asserting
that the entire amount is entitled to priority pursuant to an unspecified subsection of
507(a) of the Bankruptcy Code. The proof of claim asserts “PPP Loan forgiveness” as
Nella's Seafood Lounge & Co Inc the basis for the claim. See proof of claim no. 951-239. Based on a review of the
Kabbage, Inc. $20,833.00 (P) $0.00 (P)
2 02/22/2023 951-239 Debtors’ books and records, the Debtors have determined Nella’s Seafood is a
d/b/a KServicing $0.00 (U) $20,833.00 (U)
borrower of a PPP Loan that the Debtors service, and there are no amounts entitled to
priority due and owing to Nella’s Seafood under section 507(a) of the Bankruptcy
Code. Accordingly, Nella’s Seafood’s priority claim should be reclassified as a
general unsecured claim.
1
(A) - Administrative, including 503(b)(9); (S) - Secured; (P) - Priority; (U) - Unsecured; (T) – Total.
2
The amount reflected herein is the total claim amount asserted on the proof of claim notwithstanding any inconsistencies contained in such proof of claim.
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Claimant Name Misclassified Modified
Date Claim Claim
# Debtor Name Claim Classification Reason for Reclassification
Filed No.
Amount Status1
Quang Ho filed a total claim of $7,000 asserting that: (i) an undetermined amount is
entitled to priority pursuant to sections 507(a)(4) and 507(a)(7) of the Bankruptcy
Code, and (ii) $2,500 is entitled to administrative expense status pursuant to section
503(b)(9) of the Bankruptcy Code. The proof of claim asserts “Goods Sold, Lease” as
the basis for the claim. See proof of claim no. 951-235. Based on a review of the
Debtors’ books and records, the Debtors have determined Quang Ho is a borrower of a
Quang Ho Undetermined (P) $0.00 (P) PPP Loan that the Debtors service, and there are no amounts entitled to priority due
Kabbage, Inc.
3 02/13/2023 951-235 $2,500.00 (A) $0.00 (S) and owing to Quang Ho under sections 507(a)(4) (the claim is not on account of
d/b/a KServicing
Undetermined (U) $7,000.00 (U) wages) and 507(a)(7) (the claim is not on account of a deposit in connection with the
purchase, lease, or rental of property or purchase of services) of the Bankruptcy Code,
or any record of the alleged lease. The Debtors have also determined that there is no
evidence of the Debtors receiving goods from Quang Ho within the twenty days prior
to the Petition Date, in the ordinary course, as required by section 503(b)(9) of the
Bankruptcy Code. Accordingly, Quang Ho’s claim should be reclassified as a general
unsecured claim.
Studio Forte Spa Salon (“Studio Forte”) filed a $20,833 claim asserting that the entire
amount is entitled to priority pursuant to an unspecified subsection of 507(a) of the
Bankruptcy Code. The proof of claim asserts “PPP Loan forgiveness that was applied
Studio Forte Spa Salon Kabbage, Inc. $20,833.00 (P) $0.00 (P) for” as the basis for the claim. See proof of claim no. 951-238. Based on a review of
4 02/22/2023 951-238
d/b/a KServicing $0.00 (U) $20,833.00 (U) the Debtors’ books and records, the Debtors have determined Studio Forte is a
borrower of a PPP Loan that the Debtors service, and there are no amounts entitled to
priority due and owing to Studio Forte under section 507(a) of the Bankruptcy Code.
Accordingly, Studio Forte’s claim should be reclassified as a general unsecured claim.
Summer Stegall filed a $42,023.65 claim asserting that: (i) $12,023.63 is entitled to
priority pursuant to section 507(a)(8) of the Bankruptcy Code and (ii) $30,000 is
secured. The proof of claim asserts “Money loaned/personal injury/lose of business”
as the basis for the claim. See proof of claim no. 951-234. Based on a review of the
Summer Stegall $12,023.63 (P) $0.00 (P) Debtors’ books and records, the Debtors have determined Summer Stegall is a
Kabbage, Inc.
5 02/06/2023 951-234 $30,000.00 (S) $0.00 (S) borrower of a PPP Loan that the Debtors service, and that there are no amounts entitled
d/b/a KServicing
$0.00 (U) $42,023.65 (U) to priority due and owing to Summer Stegall under section 507(a)(8) (the claim is not
on account of governmental units) of the Bankruptcy Code. In addition, the Debtors
have determined that there is no basis for the claim’s secured status under section 506
of the Bankruptcy Code. Accordingly, Summer Stegall’s claim should be reclassified
as a general unsecured claim
2
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