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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
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In re:
VYAIRE MEDICAL, INC., et al.,
Debtors.1
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Chapter 11
Case No. 24-11217 (BLS)
(Jointly administered)
Re: D.I. 238
Hearing Date: July 31, 2024, at 2:00 p.m.
Obj. Deadline: July 23, 2024, at 4:00 p.m.
LIMITED OBJECTION OF THE UNITED STATES TRUSTEE
TO DEBTORS’ APPLICATION TO EMPLOY BDO USA P.C.
Andrew R. Vara, United States Trustee for Region 3 (the “U.S. Trustee”), through
his undersigned counsel, objects on a limited basis to the Debtors’ Application for Entry of an
Order Authorizing the Retention and Employment of BDO USA P.C. as Tax Accountant for the
Debtors and Debtors in Possession Effective as of the Petition Date, and Modifying Certain
Timekeeping Requirements [D.I. 238] (the “Application”), and in support of his limited
objection respectfully states:
JURISDICTION & STANDING
1.
Pursuant to 28 U.S.C. § 1334, applicable order(s) of the United States
District Court for the District of Delaware issued pursuant to 28 U.S.C. § 157(a), and 28 U.S.C.
§ 157(b)(2)(A), this Court has jurisdiction to hear and resolve the Application and this limited
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.
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objection.
2.
Pursuant to 28 U.S.C. § 586, the U.S. Trustee is charged with monitoring
the federal bankruptcy system. See United States Trustee v. Columbia Gas Sys., Inc. (In re
Columbia Gas Sys., Inc.), 33 F.3d 294, 295-96 (3d Cir. 1994) (noting that 11 U.S.C. § 307
gives the U.S. Trustee “public interest standing”); Morgenstern v. Revco D.S., Inc. (In re Revco
D.S., Inc.), 898 F.2d 498, 500 (6th Cir. 1990) (describing the U.S. Trustee as a “watchdog”).
The U.S. Trustee is specifically authorized to monitor retention applications filed under 11
U.S.C. § 327 and, whenever the U.S. Trustee deems it appropriate, to file comments about such
applications with the Court. See 28 U.S.C. § 586(a)(3)(I).
3.
The U.S. Trustee has standing to be heard on the Application pursuant to
11 U.S.C. § 307.
BACKGROUND
4.
On June 9, 2024, the above-captioned debtors (the “Debtors”) filed
chapter 11 petitions in this Court.
5.
On July 9, 2024, the Debtors filed the Application. The Application
seeks to employ BDO USA, P.C. (“BDO”) as tax accountant to the Debtors.
6.
The Debtors propose to compensate BDO on an hourly basis, and the
Debtors also propose that BDO be permitted to keep time in 0.5-hour increments. See
Application ¶¶ 14 & 16.
7.
The form of order accompanying the Application provides in para. 3:
BDO shall file fee applications and be compensated in accordance
with sections 330 and 331 of the Bankruptcy Code, applicable
Bankruptcy Rules, the Local Rules, this Order and any other
applicable orders of this Court; provided, however, that the
requirements of the Bankruptcy Code, the Bankruptcy Rules, and
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Local Rules are hereby modified such that BDO shall not be
required to keep contemporaneous time records of the services
performed in one-tenth (0.1) hour increments and by project
category, but instead BDO shall provide, as an exhibit to each fee
application that BDO files in these Chapter 11 Cases: (a) a narrative
describing in summary detail the services rendered; and (b) time
records maintained contemporaneously in one-half (0.5) hour
increments.
ARGUMENT
8.
The U.S. Trustee objects to BDO’s keeping time in 0.5-hour
increments, and to BDO’s not providing detailed time entries to support its fees.
9.
Section 328(a) of the Bankruptcy Code authorizes a trustee, with the
Court’s approval, to retain professional persons under section 327 “on any reasonable terms
and conditions of employment, including . . . on an hourly basis[.]”
10.
Fed. R. Bankr. P. 2016(a) required fee applications to set forth “a
detailed statement of (1) the services rendered, time expended and expenses incurred, and
(2) the amounts requested.”
11.
Del. Bankr. L.R. 2016-2(d)(iv) provides that fee applications “shall
include activity descriptions which shall be sufficiently detailed to allow the Court to
determine whether all the time, or any portion thereof, is actual, reasonable and
necessary[.]” To that end, “All motions shall include complete and detailed activity
descriptions;” and “Activities shall be billed in tenths of an hour (six (6) minutes)[.]” L.R.
2016-2(d)(ii) & (iv).
12.
Del. Bankr. L.R. 2016-2(h) allows the Court to waive the information
requirements of the Rule “for cause[.]”
13.
Bankruptcy Courts have an independent duty to review fee applications,
regardless of whether a party in interest objects. See In re Busy Beaver Bldg. Centers., Inc.,
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19 F.3d 833, 841 (3d Cir. 1994). “[T]he bankruptcy court must protect the estate, lest
overreaching attorneys or other professionals drain it of wealth which by right should inure
to the benefit of unsecured creditors.” Id. at 844. The Third Circuit has observed that the
bankruptcy court “has an obligation to prevent unnecessary expenditures in the
administration of an estate.” In re Congoleum Corp., 426 F.3d 675, 693 (3d Cir. 2005)
(citing Busy Beaver).
14.
The Court should require BDO to keep detailed activity descriptions in
0.1-hour increments. The Local Rule 2016-2(d)(iv) requires this. The Application makes
no attempt to show cause exists under Local Rule 2016-2(h). There is no reason a
professional that is being paid hourly and that is keeping time in 0.5-hour increments cannot
keep time in more precise, 0.1-hour increments. If the Application is approved, then BDO
would be paid for 30 minutes of work for every task (e.g. reviewing a brief e-mail, making a
quick phone call, etc.) that it completed in six minutes or less.2 BDO’s hourly rates top out
at $1,150 per hour.
15.
Tax advisors or accountants can and do keep time in 0.1-hour
increments to support their hourly fees. See, e.g., In re Paragon Offshore plc, 16-10386
(CSS) D.I. 1415 ¶ 7 (“for all services PwC performs on an hourly basis PwC shall maintain
detailed descriptions of those services in 0.1-hour increments and include that time detail in
its fee applications.”); In re Cano Health, Inc., 24-10164 (KBO) D.I. 250 ¶ 6 (“For all
services rendered on an hourly basis, KPMG will maintain detailed records in one-tenth
hour increments.”).
2 Same goes for tasks completed in 12, 18, or 24 minutes or less.
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CONCLUSION
16.
The U.S. Trustee reserves any and all rights, remedies and obligations to
complement, supplement, augment, alter and/or modify this limited objection, file an
appropriate motion or conduct any and all discovery as may be deemed necessary or as may
be required, and to assert such other grounds as may become apparent upon further factual
discovery.
WHEREFORE, the U.S. Trustee respectfully requests that the Court deny the
Application unless BDO agrees to keep detailed time entries in 0.1-hour increments.
Dated: July 23, 2024
Wilmington, DE
Respectfully submitted,
ANDREW R. VARA
UNITED STATES TRUSTEE,
REGIONS 3 & 9
By: /s/ Benjamin Hackman
Benjamin A. Hackman
Trial Attorney
Office of the United States Trustee
J. Caleb Boggs Federal Building
844 King Street, Suite 2207, Lockbox 35
Wilmington, DE 19801
(302) 573-6491 (Phone)
(302) 573-6497 (Fax)
benjamin.a.hackman@usdoj.gov
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