Debtors’ Application For Entry Of An Order Authorizing
- Date
- 2024-07-31
Summary
The Debtors' Application for Entry of an Order Authorizing the Retention and Employment of Kirkland & Ellis LLP and Kirkland & Ellis International LLP as Attorneys for the Debtors, filed July 9, 2024 as Doc 236 in In re: Vyaire Medical, Inc., et al., Case No. 24-11217 (BLS), in the U.S. Bankruptcy Court for the District of Delaware, with a hearing date of July 31, 2024. The application asks to retain Kirkland effective as of June 9, 2024 under an engagement letter effective March 28, 2024. It lists the legal services Kirkland would provide and hourly rate ranges, including partners at $1,195-$2,465 and paraprofessionals at $325-$625. It states the Debtors paid $2,500,000 to Kirkland on April 9, 2024 as a special purpose retainer. It is supported by declarations of a Kirkland partner and of John Bibb, Group Chief Executive Officer, who signs the application.
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Case 24-11217-BLS Doc 236 Filed 07/09/24 Page 1 of 12
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 31, 2024 at 2:00 p.m. (ET)
) Objection Deadline: July 23, 2024 at 4:00 p.m. (ET)
DEBTORS’ APPLICATION FOR ENTRY OF AN ORDER AUTHORIZING
THE RETENTION AND EMPLOYMENT OF KIRKLAND & ELLIS LLP AND
KIRKLAND & ELLIS INTERNATIONAL LLP AS ATTORNEYS FOR THE
DEBTORS AND DEBTORS IN POSSESSION EFFECTIVE AS OF JUNE 9, 2024
The above-captioned debtors and debtors in possession (collectively, the “Debtors”) file
this application (this “Application”) for the entry of an order (the “Order”), substantially in the
form attached hereto as Exhibit A, authorizing the Debtors to retain and employ Kirkland & Ellis
LLP and Kirkland & Ellis International LLP (collectively, “Kirkland”) as their attorneys effective
as of the Petition Date (as defined herein). In support of this Application, the Debtors submit the
declaration of Spencer A. Winters, president of Spencer A. Winters, P.C., a partner of Kirkland &
Ellis LLP and Kirkland & Ellis International LLP, (the “Winters Declaration”), which is attached
hereto as Exhibit B and the declaration of John Bibb, the Group Chief Executive Officer of Vyaire
Medical, Inc., which is attached hereto as Exhibit C (the “Bibb Declaration”). In further support
of this Application, the Debtors respectfully state as follows.
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.
Case 24-11217-BLS Doc 236 Filed 07/09/24 Page 2 of 12
Jurisdiction and Venue
1. The United States Bankruptcy Court for the District of Delaware (the “Court”) has
jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334. This matter is a core
proceeding within the meaning of 28 U.S.C. § 157(b)(2), and 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 Application 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.
2. Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409.
3. The bases for the relief requested herein are sections 327(a) and 330 of title 11 of
the United States Code (the “Bankruptcy Code”), rules 2014(a) and 2016 of the Federal Rules of
Bankruptcy Procedure (the “Bankruptcy Rules”), and Local Rules 2014-1 and 2016-1.
Background
4. On June 9, 2024, (the “Petition Date”), Vyaire Medical, Inc. and certain of its
subsidiaries filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code. The
Debtors are operating their businesses and managing their properties as debtors in possession
pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. On June 11, 2024, the Court
entered an order [Docket No. 84] authorizing the joint administration and procedural consolidation
of these chapter 11 cases pursuant to Bankruptcy Rule 1015(b). No request for the appointment
of a trustee or examiner has been made in these chapter 11 cases. On June 26, 2024, the United
States Trustee for the District of Delaware (the “U.S. Trustee”) appointed an official committee of
unsecured creditors pursuant to section 1102 of the Bankruptcy Code (the “Committee”).
See Docket No. 121.
2
Case 24-11217-BLS Doc 236 Filed 07/09/24 Page 3 of 12
5. A description of the Debtors’ business, the reasons for commencing the chapter 11
cases, and the relief sought from the Court to allow for a smooth transition into chapter 11 are set
forth in the Declaration of John Bibb, Group Chief Executive Officer of Vyaire Medical, Inc., in
Support of Debtors’ Chapter 11 Petitions and First Day Motions, filed on June 10, 2024 [Docket
No. 15], incorporated herein by reference.
Relief Requested
6. By this Application, the Debtors seek entry of the Order authorizing the retention
and employment of Kirkland as their attorneys in accordance with the terms and conditions set
forth in that certain engagement letter between the Debtors and Kirkland effective as of March 28,
2024 (the “Engagement Letter”), a copy of which is attached hereto as Exhibit 1 to the Order and
incorporated herein by reference.2
Kirkland’s Qualifications
7. The Debtors seek to retain Kirkland because of Kirkland’s recognized expertise and
extensive experience and knowledge in the field of debtors’ protections, creditors’ rights, and
business reorganizations under chapter 11 of the Bankruptcy Code.
8. Kirkland has been actively involved in major chapter 11 cases and has represented
debtors in many cases, including, among others: In re Appgate, Inc., No. 24-10956 (CTG) (Bankr.
D. Del. June 13, 2024); In re Express, Inc., No. 24-10831 (KBO) (Bankr. D. Del. June 4, 2024);
In re Sientra, Inc., No. 24-10245 (JTD) (Bankr. D. Del. Feb. 12, 2024); In re MVK FarmCo LLC,
No. 23-11721 (LSS) (Bankr. D. Del. Oct. 13, 2023); In re Yellow Corp., No. 23-11069 (CTG)
2 The Debtors also seek to employ and retain Cole Schotz P.C. (“Cole Schotz”) as their conflicts counsel in
connection with these chapter 11 cases to handle matters that the Debtors may encounter that cannot be handled
appropriately by Kirkland because of a conflict of interest. It is intended that the services of Cole Schotz shall
complement, and not duplicate, the services to be rendered by Kirkland. Moreover, the responsibilities of Cole
Schotz shall be confined to discrete legal matters that are distinct from the matters handled by Kirkland. Cole
Schotz shall act on its own and will not act under the direct supervision of Kirkland.
3
Case 24-11217-BLS Doc 236 Filed 07/09/24 Page 4 of 12
(Bankr. D. Del. Aug. 30, 2023); In re PGX Holdings, Inc., No. 23-10718 (CTG) (Bankr. D. Del.
Jun. 4, 2023).3
9. In preparing for its representation of the Debtors in these chapter 11 cases, Kirkland
has become familiar with the Debtors’ business and many of the potential legal issues that may
arise in the context of these chapter 11 cases. The Debtors believe that Kirkland is both
well-qualified and uniquely able to represent the Debtors in these chapter 11 cases in an efficient
and timely manner.
Services to be Provided
10. Subject to further order of the Court, and consistent with the Engagement Letter,
the Debtors request the retention and employment of Kirkland to render the following legal
services:
a. advising the Debtors with respect to their powers and duties as debtors in
possession in the continued management and operation of their businesses
and properties;
b. advising and consulting on the conduct of these chapter 11 cases, including
all of the legal and administrative requirements of operating in chapter 11;
c. attending meetings and negotiating with representatives of creditors and
other parties in interest;
d. taking all necessary actions to protect and preserve the Debtors’ estates,
including prosecuting actions on the Debtors’ behalf, defending any action
commenced against the Debtors, and representing the Debtors in
negotiations concerning litigation in which the Debtors are involved,
including objections to claims filed against the Debtors’ estates;
e. preparing pleadings in connection with these chapter 11 cases, including
motions, applications, answers, orders, reports, and papers necessary or
otherwise beneficial to the administration of the Debtors’ estates;
3 Because of the voluminous nature of the orders cited in this Application, they are not attached to this Application.
Copies of these orders are available upon request to Kirkland.
4
Case 24-11217-BLS Doc 236 Filed 07/09/24 Page 5 of 12
f. representing the Debtors in connection with obtaining authority to continue
using cash collateral and postpetition financing;
g. advising the Debtors in connection with any potential sale of assets;
h. appearing before the Court and any appellate courts to represent the interests
of the Debtors’ estates;
i. advising the Debtors regarding tax matters;
j. taking any necessary action on behalf of the Debtors to negotiate, prepare,
and obtain approval of a disclosure statement and confirmation of a
chapter 11 plan and all documents related thereto; and
k. performing all other necessary legal services for the Debtors in connection
with the prosecution of these chapter 11 cases, including: (i) analyzing the
Debtors’ leases and contracts and the assumption and assignment or
rejection thereof; (ii) analyzing the validity of liens against the Debtors’
assets; and (iii) advising the Debtors on corporate and litigation matters.
Professional Compensation
11. Kirkland intends to apply for compensation for professional services rendered on
an hourly basis and reimbursement of expenses incurred in connection with these chapter 11 cases,
subject to the Court’s approval and in compliance with applicable provisions of the Bankruptcy
Code, the Bankruptcy Rules, the Local Rules, and any other applicable procedures and orders of
the Court. The hourly rates and corresponding rate structure Kirkland will use in these chapter 11
cases are the same as the hourly rates and corresponding rate structure that Kirkland uses in other
restructuring matters, and are comparable to the hourly rates and corresponding rate structure that
Kirkland uses for complex corporate, securities, and litigation matters whether in court or
otherwise, regardless of whether a fee application is required. These rates and the rate structure
reflect that such restructuring and other complex matters typically are national in scope and involve
great complexity, high stakes, and severe time pressures.
5
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12. Kirkland operates in a national marketplace for legal services in which rates are
driven by multiple factors relating to the individual lawyer, his or her area of specialization, the
firm’s expertise, performance, and reputation, the nature of the work involved, and other factors.
13. Kirkland’s current hourly rates for matters related to these chapter 11 cases range
as follows:4
Billing Category5 U.S. Range
Partners $1,195-$2,465
Of Counsel $820-$2,245
Associates $745-$1,495
Paraprofessionals $325-$625
14. Kirkland’s hourly rates are set at a level designed to compensate Kirkland fairly for
the work of its attorneys and paraprofessionals and to cover fixed and routine expenses. Hourly
rates vary with the experience and seniority of the individuals assigned. These hourly rates are
subject to periodic adjustments to reflect economic and other conditions.6
4 For professionals and paraprofessionals residing outside of the U.S., hourly rates are billed in the applicable
currency. When billing a U.S. entity, such foreign rates are converted into U.S. dollars at the then applicable
conversion rate. After converting these foreign rates into U.S. dollars, it is possible that certain rates may exceed
the billing rates listed in the chart herein. While the rate ranges provided for in this Application may change if
an individual leaves or joins Kirkland, if any such individual’s billing rate falls outside the ranges disclosed above,
Kirkland does not intend to update the ranges for such circumstances.
5 Although Kirkland does not anticipate using contract attorneys during these chapter 11 cases, in the unlikely event
that it becomes necessary to use contract attorneys, Kirkland will not charge a markup to the Debtors with respect
to fees billed by such attorneys. Any contract attorneys or non-attorneys who are employed by the Debtors in
connection with work performed by Kirkland will be subject to conflict checks and disclosures in accordance
with the requirements of the Bankruptcy Code.
6 For example, like many of its peer law firms, Kirkland typically increases the hourly billing rate of attorneys and
paraprofessionals twice a year in the form of: (i) step increases historically awarded in the ordinary course on the
basis of advancing seniority and promotion and (ii) periodic increases within each attorney’s and
paraprofessional’s current level of seniority. The step increases do not constitute “rate increases” (as the term is
used in the Guidelines for Reviewing Applications for Compensation and Reimbursement of Expenses Filed
Under 11 U.S.C. § 330 by Attorneys in Larger Chapter 11 Cases, effective November 1, 2013). As set forth in
the Order, Kirkland will provide ten business-days’ notice to the Debtors, the U.S. Trustee, and any official
committee before implementing any periodic increases, and shall file any such notice with the Court.
6
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15. Kirkland represented the Debtors during the twelve-month period before the
Petition Date, using the hourly rates listed above and in the Winters Declaration. Moreover, these
hourly rates are consistent with the rates that Kirkland charges other comparable chapter 11 clients,
regardless of the location of the chapter 11 case.
16. The rate structure provided by Kirkland is appropriate and not significantly
different from (a) the rates that Kirkland charges for other similar types of representations or
(b) the rates that other comparable counsel would charge to do work substantially similar to the
work Kirkland will perform in these chapter 11 cases.
17. It is Kirkland’s policy to charge its clients in all areas of practice for identifiable,
non-overhead expenses incurred in connection with the client’s case that would not have been
incurred except for representation of that particular client. It is also Kirkland’s policy to charge
its clients only the amount actually incurred by Kirkland in connection with such items. Examples
of such expenses include postage, overnight mail, courier delivery, transportation, overtime
expenses, computer-assisted legal research, photocopying, airfare, meals, and lodging.
18. To ensure compliance with all applicable deadlines in these chapter 11 cases, from
time-to-time, Kirkland utilizes the services of overtime secretaries. Kirkland charges fees for these
services pursuant to the Engagement Letter, which permits Kirkland to bill the Debtors for
overtime secretarial charges that arise out of business necessity. In addition, Kirkland
professionals also may charge their overtime meals and overtime transportation to the Debtors
consistent with prepetition practices.
19. Kirkland currently charges the Debtors $0.16 per page for standard duplication in
its offices in the United States. Notwithstanding the foregoing and consistent with the Local Rules,
Kirkland will charge no more than $0.10 per page for standard duplication services in these
7
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chapter 11 cases. Kirkland does not charge its clients for incoming facsimile transmissions.
Kirkland has negotiated a discounted rate for Westlaw computer-assisted legal research.
Computer-assisted legal research is used whenever the researcher determines that using Westlaw
is more cost effective than using traditional (non-computer assisted legal research) techniques.
Compensation Received by Kirkland from the Debtors
20. Per the terms of the Engagement Letter, on April 9, 2024, the Debtors paid
$2,500,000 to Kirkland, which, as stated in the Engagement Letter, constituted a “special purpose
retainer” (also known as an “advance payment retainer”) as defined in Rule 1.5(d) of the Illinois
Rules of Professional Conduct and Dowling v. Chicago Options Assoc., Inc., 875 N.E.2d 1012,
1018 (Ill. 2007). Subsequently, the Debtors paid to Kirkland additional special purpose retainer
totaling $4,600,000 in the aggregate. As stated in the Engagement Letter, any special purpose
retainer is earned by Kirkland upon receipt, any special purpose retainer becomes the property of
Kirkland upon receipt, the Debtors no longer have a property interest in any special purpose
retainer upon Kirkland’s receipt, any special purpose retainer will be placed in Kirkland’s general
account and will not be held in a client trust account, and the Debtors will not earn any interest on
any special purpose retainer.7 A chart identifying the statements setting forth the professional
services provided by Kirkland to the Debtors and the expenses incurred by Kirkland in connection
therewith, as well as the special purpose retainer transferred by the Debtors to Kirkland, prior to
the Petition Date is set forth in the Winters Declaration.
7 The Engagement Letter provides that Kirkland may continue to hold any remaining prepetition special purpose
retainer during the pendency of a chapter 11 case rather than applying such special purpose retainer to postpetition
fees and expenses. Kirkland evaluates whether to retain any remaining prepetition special purpose retainer on a
case-by-case basis. In this particular case, Kirkland has elected not to hold any remaining prepetition special
purpose retainer but, instead, will apply any remaining special purpose retainer to postpetition fees and expenses
as such fees and expenses are allowed by the Court.
8
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21. Pursuant to Bankruptcy Rule 2016(b), Kirkland has neither shared nor agreed to
share (a) any compensation it has received or may receive with another party or person, other than
with the partners, associates, and contract attorneys associated with Kirkland or (b) any
compensation another person or party has received or may receive.
22. As of the Petition Date, the Debtors did not owe Kirkland any amounts for legal
services rendered before the Petition Date. Although certain expenses and fees may have been
incurred but not yet applied to Kirkland’s special purpose retainer, the amount of Kirkland’s
special purpose retainer always exceeded any amounts listed on statements describing services
rendered and expenses incurred (on a “rates times hours” and “dates of expenses incurred” basis)
prior to the Petition Date.
Kirkland’s Disinterestedness
23. To the best of the Debtors’ knowledge and as disclosed herein and in the Winters
Declaration, (a) Kirkland is a “disinterested person” within the meaning of section 101(14) of the
Bankruptcy Code, as required by section 327(a) of the Bankruptcy Code, and does not hold or
represent an interest adverse to the Debtors’ estates and (b) Kirkland has no connection to the
Debtors, their creditors, or other parties in interest, except as may be disclosed in the Winters
Declaration.
24. Kirkland will review its files periodically during the pendency of these chapter 11
cases to ensure that no conflicts or other disqualifying circumstances exist or arise. If any new
relevant facts or relationships are discovered or arise, Kirkland will use reasonable efforts to
identify such further developments and will promptly file a supplemental declaration, as required
by Bankruptcy Rule 2014(a).
9
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Supporting Authority
25. The Debtors seek retention of Kirkland as their attorneys pursuant to section 327(a)
of the Bankruptcy Code, which provides that a debtor, subject to Court approval:
[M]ay employ one or more attorneys, accountants, appraisers,
auctioneers, or other professional persons, that do not hold or
represent an interest adverse to the estate, and that are disinterested
persons, to represent or assist the [debtor] in carrying out the
[debtor]’s duties under this title.
11 U.S.C. § 327(a).
26. Bankruptcy Rule 2014(a) requires that an application for retention include:
[S]pecific facts showing the necessity for the employment, the name
of the [firm] to be employed, the reasons for the selection, the
professional services to be rendered, any proposed arrangement for
compensation, and, to the best of the applicant’s knowledge, all of
the [firm’s] connections with the debtor, creditors, any other party
in interest, their respective attorneys and accountants, the United
States trustee, or any person employed in the office of the United
States trustee.
Fed. R. Bankr. P. 2014.
27. The Debtors submit that for all the reasons stated above and in the Winters
Declaration, the retention and employment of Kirkland as counsel to the Debtors is warranted.
Further, as stated in the Winters Declaration, Kirkland is a “disinterested person” within the
meaning of section 101(14) of the Bankruptcy Code, as required by section 327(a) of the
Bankruptcy Code, and does not hold or represent an interest adverse to the Debtors’ estates and
has no connection to the Debtors, their creditors, or other parties in interest, except as may be
disclosed in the Winters Declaration.
Notice
28. The Debtors have provided notice of this Application to the following parties or
their respective counsel: (a) the U.S. Trustee; (b) counsel to the Committee; (c) the holders of the
10
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30 largest unsecured claims against the Debtors (on a consolidated basis); (d) the office of the
attorney general for each of the states in which the Debtors operate; (e) the United States
Attorney’s Office for the District of Delaware; (f) the Internal Revenue Service; (g) the United
States Securities and Exchange Commission; (h) the United States Department of Justice; (i) the
DIP Agent and counsel thereto; (j) First Lien Credit Agreement Agent and counsel thereto; (k) the
Second Lien Credit Agreement Agent and counsel thereto; (l) First Lien Notes Agent and counsel
thereto; and (m) any party that has requested notice pursuant to Bankruptcy Rule 2002. A copy of
this Application is also available on the website of the Debtors’ notice and claims agent at
https://omniagentsolutions.com/Vyaire. In light of the nature of the relief requested, the Debtors
submit that no other or further notice is required.
No Prior Request
29. No prior request for the relief sought in this Application has been made to this or
any other court.
[Remainder of Page Intentionally Left Blank]
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WHEREFORE, the Debtors respectfully request that the Court enter the Order,
substantially in the form attached hereto as Exhibit A, granting the relief requested herein and
granting such other relief as is just and proper.
Dated: July 9, 2024 /s/ John Bibb
John Bibb
Group Chief Executive Officer of Vyaire
Medical, Inc.
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