VYR - OCP Motion Proposed Filing Version

Summary

Motion of the Debtors in the Vyaire Medical Chapter 11 case, Case No. 24-11217 (BLS), for an order authorizing the Debtors to retain and compensate professionals utilized in the ordinary course of business without a formal retention application for each. The motion states that the Debtors are not requesting authority to pay prepetition amounts owed to those professionals. Its proposed procedures call for a declaration of disinterestedness within 30 days and give the Notice Parties 14 days to object. The Debtors would pay 100% of fees and disbursements on invoice, with monthly fee caps of $50,000, $25,000 and $15,000 per professional by schedule, calculated as an average over a rolling three-month period. Quarterly caps are $150,000, $75,000 and $45,000 per professional.

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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
)
In re:
)
Chapter 11
)
VYAIRE MEDICAL, INC., et al.,1
)
Case No. 24-11217 (BLS)
)
Debtors.
)
(Jointly Administered)
)
)
Hearing Date: July 9, 2024, at 10:00 a.m. (ET)
)
Obj. Deadline: July 2, 2024, at 4:00 p.m. (ET)
MOTION OF DEBTORS FOR ENTRY OF
AN ORDER (I) AUTHORIZING THE DEBTORS TO
RETAIN AND COMPENSATE PROFESSIONALS UTILIZED IN THE
ORDINARY COURSE OF BUSINESS AND (II) GRANTING RELATED RELIEF
The above-captioned debtors and debtors in possession (collectively, the “Debtors” and,
each, a “Debtor”) state as follows in support of this motion:2
Relief Requested
1.
The Debtors seek entry of an order, substantially in the form attached hereto as
Exhibit A (the “Order”), (a) authorizing, but not directing, the Debtors to retain and compensate
the OCPs (as defined herein) on a postpetition basis pursuant to the procedures set forth herein
(the “OCP Procedures”), without the need for each OCP to file a formal application for retention
and compensation, and (b) granting related relief.
1
The last four digits of Debtor Vyaire Medical, Inc.’s federal tax identification number are 6495.  A complete list
of each of the Debtors in these chapter 11 cases and each such Debtor’s federal tax identification number may be
obtained on the website of the Debtors’ claims and noticing agent at https://omniagentsolutions.com/Vyaire.  The
location of Debtor Vyaire Medical, Inc.’s principal place of business and the Debtors’ service address in these
chapter 11 cases is 26125 North Riverwoods Boulevard, Mettawa, Illinois, USA 60045.
2
A detailed description of the Debtors and their business, including the facts and circumstances giving rise to the
Debtors’ chapter 11 cases, is set forth in the Declaration of John Bibb, Group Chief Executive Officer of Vyaire
Medical, Inc., in Support of Chapter 11 Petitions and First Day Motions [Docket No. 15] (the “First Day
Declaration”).  Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them
in the First Day Declaration.
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Jurisdiction and Venue
2.
The United States District Court for the District of Delaware has jurisdiction over
this matter pursuant to 28 U.S.C. §1334, which was referred to the United States Bankruptcy Court
for the District of Delaware (the “Court”) under 28 U.S.C. § 157 and the Amended Standing Order
of Reference from the United States District Court for the District of Delaware, dated
February 29, 2012.  The Debtors confirm their consent, pursuant to rule 9013-1(f) of the
Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the
District of Delaware (the “Local Rules”), to the entry of a final order by the Court in connection
with this motion to the extent that it is later determined that the Court, absent consent of the parties,
cannot enter final orders or judgments in connection herewith consistent with Article III of the
United States Constitution.
3.
Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409.
4.
The statutory bases for the relief requested herein are sections 105(a), 327, 328,
330, and 363 of title 11 of the United States Code, 11 U.S.C. §§ 101–1532 (the “Bankruptcy
Code”), rules 2002, 6004, 6006, and 6007 of the Federal Rules of Bankruptcy Procedure
(the “Bankruptcy Rules”), and Local Rules 2002-1 and 9013-1.
Background
5.
Vyaire Medical, Inc., together with its direct and indirect subsidiaries (collectively,
“Vyaire” or the “Company”), is a global company focused on developing products and providing
related services for the diagnosis, treatment, and monitoring of various cardiology, pulmonology,
and respiratory health conditions.  With a 70-year history of pioneering breathing technology, the
integrated solutions offered by the Company help enable, enhance, and extend
lives.  Headquartered in Mettawa, Illinois, Vyaire operates approximately 27 offices and
manufacturing facilities, and employs approximately 950 individuals around the world.  The
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Company has a global reach, and Vyaire products are available in more than 100 countries.  Its
customers are the hospitals, health centers, and private practice facilities delivering life-enhancing
products and services to patients every day.
6.
On June 9, 2024 (the “Petition Date”), Vyaire Medical, Inc. and certain of its
subsidiaries filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code.  The
Debtors are operating their business and managing their property as debtors in possession pursuant
to sections 1107(a) and 1108 of the Bankruptcy Code.  On June 11, 2024, the Court entered an
order authorizing the procedural consolidation and joint administration of these chapter 11 cases
pursuant to Bankruptcy Rule 1015(b) and Local Rule 1015-1.  See Docket No. 84.  No request for
the appointment of a trustee or examiner has been made in these chapter 11 cases, and no official
committees have been appointed or designated.
The Ordinary Course Professionals
7.
The Debtors employ various attorneys, consultants, and other professionals
(collectively, the “OCPs”) in the ordinary course of their business.  The OCPs provide services for
the Debtors in a variety of matters unrelated to these chapter 11 cases, including specialized legal
services and consulting services.  Nonexclusive lists of the Debtors’ current OCPs are attached as
Schedule 1, Schedule 2, and Schedule 3 to the Order (the “OCP List”).3
8.
The continued employment and compensation of the OCPs is in the best interests
of the Debtors’ estates, their creditors, and other parties in interest.  The OCPs have significant
knowledge, expertise, and familiarity with the Debtors and their operations.  Although the Debtors
anticipate that the OCPs will continue to represent the Debtors during these chapter 11 cases, many
3
The Debtors reserve the right to retain additional OCPs from time to time during these chapter 11 cases, as the
need arises, by filing a list or lists of such additional professionals and complying with the notice requirements
set forth in the OCP Procedures.
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will not do so if the Debtors cannot pay them on a regular basis.  The Debtors undoubtedly would
incur additional and unnecessary expenses in educating and retaining replacement professionals
without the knowledge, expertise, and familiarity the OCPs have.  Accordingly, the Debtors’
estates and their creditors are best served by avoiding any disruption in the professional services
that are required to facilitate the cost-effective wind down of their operations and allow for the
sale of some or all of the Debtors’ assets during the administration of these chapter 11 cases.
Moreover, in light of the costs associated with the preparation of employment applications for
professionals who will receive relatively modest fees, it would be impractical, inefficient, and
costly for the Debtors and their legal advisors to prepare and submit individual applications and
proposed retention orders for each OCP.
9.
The Debtors are not requesting authority to pay prepetition amounts owed to OCPs.
Although some of the OCPs may hold unsecured claims against the Debtors relating to services
rendered to the Debtors prepetition, the Debtors do not believe that any of the OCPs have an
interest materially adverse to the Debtors, their creditors, or other parties in interest.
The OCP Procedures
10.
The Debtors request that the Court approve the following OCP Procedures for
retention and payment of the OCPs:
a.
Within 30 days after the later of (i) the date of entry of the Order or (ii) the date
on which an OCP commences work for the Debtors, such OCP shall file, or
cause to be filed, a declaration of disinterestedness, substantially in the form
attached as Exhibit 1 to the Order (each, a “Declaration of Disinterestedness”),
with the Court and served upon:  (a) the Debtors, 26125 North Riverwoods
Boulevard,
Mettawa,
Illinois,
USA
60045,
Attn.:
Charles
Braley
(cbraley@alixpartners.com); (b) proposed co-counsel to the Debtors,
(i) Kirkland & Ellis LLP, 601 Lexington Avenue, New York, New York 10022,
Attn.: Joshua A. Sussberg, P.C. (joshua.sussberg@kirkland.com) and Chris
Ceresa (chris.ceresa@kirkland.com), (ii) Kirkland & Ellis LLP, 333 West Wolf
Point Plaza, Chicago, Illinois, 60654, Attn.: Spencer A. Winters
(spencer.winters@kirkland.com),
Yusuf
U.
Salloum
(yusuf.salloum@kirkland.com),
and
Rebecca
Marston
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(rebecca.marston@kirkland.com), (iii) Cole Schotz P.C., 500 Delaware
Avenue, Suite 1410, Wilmington, Delaware 19801, Attn.: Patrick J. Reilley,
Esq.
(preilley@coleschotz.com),
Stacy
L.
Newman
(snewman@coleschotz.com),
Michael
E.
Fitzpatrick,
Esq.
(mfitzpatrick@coleschotz.com),
and
Jack
M.
Dougherty,
Esq.
(jdougherty@coleschotz.com), and (iv) Cole Schotz P.C., Court Plaza North,
25 Main Street, Hackensack, New Jersey 07601, Attn.: Michael D. Sirota, Esq.
(msirota@coleschotz.com)
and
Warren
A.
Usatine,
Esq.
(wusatine@coleschotz.com); (c) counsel to the 1L Ad Hoc Group, (i) Gibson,
Dunn & Crutcher LLP, 200 Park Avenue, New York, NY 10166-0193,
Attn.:  Scott J. Greenberg (SGreenberg@gibsondunn.com), Jason Zachary
Goldstein
(JGoldstein@gibsondunn.com),
Joshua
Brody
(JBrody@gibsondunn.com), and Kevin Liang (KLiang@gibsondunn.com) and
(ii) Pachulski Stang Ziehl & Jones LLP, 919 North Market Street, 17th Floor,
Wilmington, DE 19801, Attn.: Laura Davis Jones (ljones@pszjlaw.com) and
Timothy P. Cairns (tcairns@pszjlaw.com); (d) the United States Trustee, 844
King Street, Suite 2207, Lockbox 35, Wilmington, Delaware 19801, Attn.:
Benjamin A. Hackman (Benjamin.A.Hackman@usdoj.gov); and (e) counsel to
any statutory committee appointed in these chapter 11 cases (collectively,
the “Notice Parties”).
b. The Notice Parties shall have 14 days after the date of filing of each OCP’s
Declaration of Disinterestedness (the “Objection Deadline”) to object to the
retention of such OCP.  The objecting party shall file any such objection and
serve such objection upon the Notice Parties and the respective OCP on or
before the Objection Deadline.  If any such objection cannot be resolved within
14 days of its receipt, the matter shall be scheduled for hearing before the Court
at the next regularly scheduled omnibus hearing date that is no less than 14 days
from that date or on a date otherwise agreeable to the parties.  The Debtors shall
not be authorized to retain and compensate such OCP until all outstanding
objections have been withdrawn, resolved, or overruled by order of the Court.
c.
If no objection is received from any of the Notice Parties by the Objection
Deadline with respect to any particular OCP, the Debtors shall be authorized,
but not directed, to:  (i) retain such OCP as of the date such OCP commenced
providing services to the Debtors and (ii) compensate such OCP as set forth
below.
d. The Debtors shall be authorized, but not directed, to pay, without formal
application to the Court by any OCP, 100% of fees and disbursements to each
of the OCPs retained by the Debtors pursuant to the OCP Procedures upon
submission to the Debtors of an appropriate invoice setting forth in reasonable
detail the nature of the services rendered after the Petition Date; provided that
fees paid to each OCP set forth on Schedule 1 attached to the Order, excluding
costs and disbursements, may not exceed $50,000 per month per OCP,
calculated as an average over a rolling three-month period, while these
chapter 11 cases are pending (the “Tier 1 OCP Monthly Cap”) and the fees of
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each OCP set forth in Schedule 2 attached to the Order, excluding costs and
disbursements, may not exceed $25,000 per month per OCP, calculated as an
average over a rolling three-month period, while these chapter 11 cases are
pending (the “Tier 2 OCP Monthly Cap”) and the fees of each OCP set forth in
Schedule 3 attached to the Order, excluding costs and disbursements, may not
exceed $15,000 per month per OCP, calculated as an average over a rolling
three-month period, while these chapter 11 cases are pending (the “Tier 3 OCP
Monthly Cap”); provided, further, that the total amount disbursed per quarter,
for each OCP set forth on Schedule 1, does not exceed $150,000 per OCP
(the “Tier 1 OCP Quarterly Cap”) and the total amount disbursed per quarter,
for each OCP set forth on Schedule 2, does not exceed $75,000 per OCP
(the “Tier 2 OCP Quarterly Cap”) and the total amount disbursed per quarter,
for each OCP set forth on Schedule 3, does not exceed $45,000 per OCP
(the “Tier 3 OCP Quarterly Cap” and, together with the Tier 1 OCP Monthly
Cap, Tier 1 OCP Quarterly Cap, Tier 2 OCP Monthly Cap, Tier 2 OCP
Quarterly Cap, and Tier 3 Monthly Cap, the “OCP Caps”).  The OCP Caps may
be increased by mutual agreement between the Debtors, the U.S. Trustee, the
DIP Agent (acting at the direction of the required lenders under and pursuant to
the DIP Credit Agreement), and counsel to any statutory committee appointed
in these chapter 11 cases; provided that the Debtors shall file a notice with the
Court and submit notice to the Notice Parties of any such agreed increase.
e.
To the extent that fees payable to any OCP exceed the applicable OCP Cap, the
OCP shall file a fee application (a “Fee Application”) with the Court for the
amount in excess of the applicable OCP Cap pursuant to sections 330 and 331
of the Bankruptcy Code, the Bankruptcy Rules, the Local Rules, the fee
guidelines promulgated by the Office of the United States Trustee, and any
applicable orders of the Court, unless the United States Trustee agrees
otherwise.
f.
Beginning on the quarter ending September 30, 2024, and for each quarter
thereafter during which these chapter 11 cases are pending, the Debtors shall,
within thirty days thereof, file with the Court and serve on the Notice Parties a
statement with respect to each OCP paid during the immediately preceding
quarterly period (the “Quarterly Statement”).  Each Quarterly Statement shall
include: (i) the name of the OCP; (ii) the aggregate amounts paid as
compensation for services rendered and reimbursement of expenses incurred by
that OCP during the reported quarter; and (iii) a general description of the
services rendered by that OCP.
g. The Debtors reserve the right to retain additional OCPs from time to time during
these chapter 11 cases by including such OCPs on an amended version of the
OCP List that is filed with the Court and served on the Notice Parties and having
such OCPs comply with the OCP Procedures.
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Basis for Relief
11.
Section 327 of the Bankruptcy Code requires court approval for the employment of
“professional persons” retained to represent or perform services for the estate.  In determining
whether an entity is a “professional” within the meaning of section 327 of the Bankruptcy Code
and, therefore, must be retained by express approval of the court, courts generally consider whether
such entity is involved in the actual reorganization effort, rather than a debtor’s ongoing business
operations.  See, e.g., Comm. of Asbestos-Related Litigants and/or Creditors v. Johns-Manville
Corp. (In re Johns-Manville Corp.), 60 B.R. 612, 619 (Bankr. S.D.N.Y. 1986) (“[T]he phrase
‘professional persons,’ as used in § 327(a), is a term of art reserved for those persons who play an
intimate role in the reorganization of a debtor’s estate.”).  In making this determination, courts
often consider the following factors in determining whether an entity is a “professional” within the
meaning of section 327 of the Bankruptcy Code:
a.
whether the entity controls, manages, administers, invests, purchases, or
sells assets that are significant to the debtor’s reorganization;
b.
whether the entity is involved in negotiating the terms of a plan of
reorganization;
c.
whether the entity’s employment is directly related to the type of work
carried out by the debtor or to the routine maintenance of the debtor’s
business operations;
d.
whether the entity is given discretion or autonomy to exercise its own
professional judgment in some part of the administration of the debtor’s
estate;
e.
the extent of the entity’s involvement in the administration of the debtor’s
estate; and
f.
whether the entity’s services involve some degree of special knowledge or
skill, such that it can be considered a “professional” within the ordinary
meaning of the term.
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See, e.g., In re First Merchs. Acceptance Corp., No. 97-1500 (JJF), 1997 WL 873551, at *3
(D. Del. Dec. 15, 1997) (listing factors); see also In re Am. Tissue, Inc., 331 B.R. 169, 174
(Bankr. D. Del. 2005) (applying the First Merchs. factors and holding that a litigation consulting
firm was not a “professional” for purposes of section 327 of the Bankruptcy Code as the litigation
consulting firm “did not play a central or significant role in the overall administration of the
[d]ebtors’ estate”); In re Riker Indus., Inc., 122 B.R. 964, 973 (Bankr. N.D. Ohio 1990) (finding
that the fees of a management and consulting firm that performed only “routine administrative
functions” and whose “services were not central to [the] bankruptcy case” did not require approval
under section 327 of the Bankruptcy Code); In re Fretheim, 102 B.R. 298, 299 (Bankr. D. Conn.
1989) (noting that only those professionals involved in the “administration of the debtor’s estate,”
rather than the debtor’s ongoing business, require approval under section 327 of the Bankruptcy
Code).  The foregoing factors must be considered as a whole when determining if an entity is a
“professional” within the meaning of section 327 of the Bankruptcy Code.  None of the factors
alone is dispositive.  See First Merchs., 1997 WL 873551, at *3 (“In applying these factors, the
Court stresses that no one factor is dispositive and that the factors should be weighed against each
other and considered in total.”).
12.
Upon consideration of all the factors, and because the OCPs will not be involved in
the administration of these chapter 11 cases, the Debtors do not believe that the OCPs are
“professionals” requiring formal retention proceedings under section 327 of the Bankruptcy Code.
Instead, the OCPs will provide services in connection with the wind down of the Debtors’ business
operations, which services are ordinarily provided by non-bankruptcy professionals.  Nevertheless,
to provide clarity and an opportunity for oversight, the Debtors seek the relief requested herein to
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establish clear mechanisms for retention and compensation of the OCPs pursuant to the OCP
Procedures and thereby avoid any subsequent controversy with respect thereto.
13.
Retaining the OCPs as provided herein is reasonably necessary for the cost-efficient
wind down of the Debtors’ business, including facilitating the sale and marketing process for the
Debtors’ assets, and the Debtors will closely monitor expenses for the OCPs.  In addition, the
OCPs will not perform substantial bankruptcy-related services without filing an application with
the Court for separate retention as a non-ordinary course professional.
14.
Moreover, in light of the number of OCPs and the costs associated with the
preparation of retention applications for professionals who will receive relatively modest fees, it
would be impractical, inefficient, and extremely costly for the Debtors and their legal advisors to
prepare and submit individual applications and proposed retention orders for each OCP.
Therefore, it is in the best interests of all creditors and parties in interest to retain the OCPs in
accordance with the OCP Procedures and avoid any disruption in the professional services that are
required for the day-to-day operation of the Debtors’ business.
15.
Although some of the OCPs may hold unsecured claims against the Debtors relating
to services rendered to the Debtors prepetition, the Debtors do not believe that any of the OCPs
have an interest materially adverse to the Debtors, their creditors, or other parties in interest.  In
any event, the OCP Procedures include a requirement that each OCP file a Declaration of
Disinterestedness before an OCP can be compensated.
16.
The relief requested herein is commonly granted by courts in this district.  See, e.g.,
In re Express, Inc., No. 24-10831 (KBO) (Bankr. D. Del. June 4, 2024) (approving comparable
OCP procedures); In re Sientra, Inc., No. 24-10245 (JTD) (Bankr. D. Del. Mar. 26, 2024) (same);
In re MVK FarmCo LLC, No. 23-11721 (LSS) (Bankr. D. Del. Nov. 15, 2023) (same); In re Am.
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Physician Partners, LLC, No. 23-11469 (BLS) (Bankr. D. Del. Oct. 16, 2023) (same); In re Yellow
Corp., No. 23-11069 (CTG) (Bankr. D. Del. Sept. 19, 2023) (same).
17.
For the reasons set forth herein, the relief requested is in the best interest of the
Debtors, their estates, creditors, and other parties in interest, and therefore should be granted.
Waiver of Bankruptcy Rule 6004(a) and 6004(h)
18.
To implement the foregoing successfully, the Debtors seek a waiver of the notice
requirements under Bankruptcy Rule 6004(a) and the 14-day stay of an order authorizing the use,
sale, or lease of property under Bankruptcy Rule 6004(h).
Notice
19.
The Debtors will provide notice of this motion to:  (a) the United States Trustee for
the District of Delaware; (b) the holders of the 30 largest unsecured claims against the Debtors
(on a consolidated basis); (c) counsel to the 1L Ad Hoc Group; (d) the agent of the DIP Facility
and counsel thereto; (e) the agent of the First Lien Credit Agreement and counsel thereto; (f) the
Second Lien Credit Agreement Agent and counsel thereto; (g) the agent of the First Lien Notes
and counsel thereto; (h) counsel to any statutory committee appointed in these chapter 11 cases;
(i) the OCPs; and (j) any party that has requested notice pursuant to Bankruptcy Rule 2002.  The
Debtors submit that, in light of the nature of the relief requested, no other or further notice need
be given.
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WHEREFORE, the Debtors request entry of the Order, substantially in the form attached
hereto as Exhibit A, (a) granting the relief requested herein and (b) granting such other relief as
the Court deems appropriate under the circumstances.
Dated: June 25, 2024
Wilmington, Delaware
/s/ Patrick J. Reilley
COLE SCHOTZ P.C.
KIRKLAND & ELLIS LLP
Patrick J. Reilley, Esq. (DE Bar No. 4451)
KIRKLAND & ELLIS INTERNATIONAL LLP
500 Delaware Avenue, Suite 1410
Joshua A. Sussberg, P.C. (admitted pro hac vice)
Wilmington, Delaware 19801
601 Lexington Ave
Telephone:
(302) 652-3131
New York, New York 10022
Facsimile:
(302) 652-3117
Telephone:
(212) 446-4800
Email:
preilley@coleschotz.com
Facsimile:
(212) 446-4900
Email:
joshua.sussberg@kirkland.com
- and -
- and -
Michael D. Sirota, Esq. (admitted pro hac vice)
Spencer A. Winters, P.C. (admitted pro hac vice)
Warren A. Usatine, Esq (admitted pro hac vice)
Yusuf U. Salloum (admitted pro hac vice)
Court Plaza North, 25 Main Street
333 West Wolf Point Plaza
Hackensack, New Jersey 07601
Chicago, Illinois 60654
Telephone:
(201) 489-3000
Telephone:
(312) 862-2000
Facsimile:
(201) 489-1536
Facsimile:
(312) 862-2200
Email:
msirota@coleschotz.com
Email:
spencer.winters@kirkland.com
wusatine@coleschotz.com
yusuf.salloum@kirkland.com
Proposed Co-Counsel to the Debtors
Proposed Co-Counsel to the Debtors
and Debtors in Possession
and Debtors in Possession
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