In re Vyaire Medical, Inc., et al., 11-19-25
- Date
- 2025-11-19
Source document: In re Vyaire Medical, Inc., et al., 11-19-25; document type: Hearing transcript.
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UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
IN RE:
. Chapter 11
. Case No. 24-11217 (BLS)
VYAIRE MEDICAL, INC., .
.
.
Liquidating Debtor. . Courtroom No. 1
. 824 Market Street
. Wilmington, Delaware 19801
.
. Wednesday, November 19, 2025
. . . . . . . . . . . . . . 2:48 p.m.
TRANSCRIPT OF HEARING
BEFORE THE HONORABLE BRENDAN L. SHANNON
UNITED STATES BANKRUPTCY JUDGE
APPEARANCES:
For David M. Barse,
Plan Administrator:
Melissa M. Hartlipp, Esquire
COLE SCHOTZ, P.C.
500 Delaware Avenue
Suite 600
Wilmington, Delaware 19801
For Hartford Fire
Insurance Company: Gary D. Bressler, Esquire
McElroy, Deutsch, Mulvaney
& Carpenter, LLP
300 Delaware Avenue
Suite 1014
Wilmington, Delaware 19801
Audio Operator: Dana L. Moore, ECRO
Transcription Company: Reliable
The Nemours Building
1007 N. Orange Street, Suite 110
Wilmington, Delaware 19801
Telephone: (302)654-8080
Email: gmatthews@reliable-co.com
Proceedings recorded by electronic sound recording,
transcript produced by transcription service.
Case 24-11217-BLS Doc 1149 Filed 12/08/25 Page 1 of 26
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INDEX
MOTIONS:
PAGE
Agenda
Item 1:
Request by Hartford Fire Insurance Company to
Allow and Require Payment of an Administrative
Expense Claim
(Filed December 23, 2024) [Docket No. 851]
3
Court's Ruling:
23
Transcriptionist's Certificate 26
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(Proceedings commenced at 2:48 p.m.)
MS. HARTLIPP: ...on behalf of David Barse in his
capacity as the plan administrator of Vyaire Medical, Inc.
and its affiliated Debtors.
As noted on the agenda today, filed at
Docket 1142, only one matter: Hartford Insurance Company's
request for the allowance and payment of an administrative
expense claim --
THE COURT: Can you get that microphone a little
closer?
MS. HARTLIPP: Oh, yes.
THE COURT: Actually, I'll tell you what the deal
is. They're both very directionally sensitive, so just pick
one and stick with it.
MS. HARTLIPP: Okay.
THE COURT: It doesn't matter which one.
MS. HARTLIPP: All right. Great.
THE COURT: That would be perfect.
MS. HARTLIPP: Would you like me to start over?
THE COURT: No, I gotcha.
MS. HARTLIPP: -- is scheduled to go forward this
afternoon.
As a general housekeeping matter, in advance of
today's hearing, you know, the parties met and conferred and
filed a joint stipulation of facts --
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THE COURT: I have that, thank you.
MS. HARTLIPP: -- which I would move to admit into
the record at this time. I'm happy to read it if Your Honor
would like?
THE COURT: I definitely don't. I very much
appreciate the parties' coordination in advance.
Mr. Bressler, good afternoon. It's good to see
you, as always.
MR. BRESSLER: Good afternoon, Your Honor.
THE COURT: I assume that both sides are
supportive of the stipulation; if so, then I would admit it
into evidence as part of the record for our case.
MS. HARTLIPP: Yes.
MR. BRESSLER: Yes.
THE COURT: Very well.
MS. HARTLIPP: And with that, I would propose to
hand the podium over to Mr. Bressler, as the movant this
afternoon.
THE COURT: Very good.
MS. HARTLIPP: Thank you.
MR. BRESSLER: Your Honor, Gary Bressler, counsel
for the Hartford surety entities.
We've agreed, subject to Your Honor's approval, to
bifurcate this hearing in the following way.
THE COURT: Okay.
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MR. BRESSLER: We've agreed for Your Honor to
decide today whether or not Hartford is entitled to an
administrative claim for fees and costs. If Your Honor found
that Hartford is, there's still the issue of reasonableness
of fees and what the standard is as to whether it should be
reasonableness or something else.
We had discussed maybe having a discussion with
Your Honor as to what you would want as to that; are you
going to want a lawyer from our firm to testify as to what we
did or how --
THE COURT: Could you remind me -- and I saw it in
the papers, but I want to make sure I understand what we're
fighting over -- what is the amount of the request?
MR. BRESSLER: So the amount through the effective
date was about $28,000, but it keeps accruing, unfortunately.
THE COURT: Because of -- right.
MR. BRESSLER: Among other things, as we're
fighting over fees, what we did when we submitted our post-
effective date time, there are items for, say, negotiating a
new indemnity agreement with the buyer. We put little
asterisks next to them because we didn't include them in the
fees. But, unfortunately, they just keep accruing until we
resolve this issue, and it's our position we're entitled to
our fees for fighting over our fees.
THE COURT: Okay. That sounds fine.
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I will tell you that I would, I want to hear the
question and I'll deal with the question of whether there's
an entitlement to an admin claim. I would not expect, just
as a matter of practicality, that we would turn this into an
evidentiary hearing and bring witnesses in.
I'm sensitive to the issue of fighting fees over
fees; there's no shortage of case law about that. In
addition, you know, I think the issue of how much or the
reasonableness of those is something, if the Court permits an
admin claim, then, we'd be able to figure out that number,
probably without a further evidentiary hearing that would
probably materially increase the amount that is in dispute.
So, I appreciate the practical approach of counsel.
MR. BRESSLER: Thank you.
Hartford also asserts a liquidated claim
for $1,000 for a claim Customs has asserted that Hartford is
paying. We would ask for the admission of all the documents
that are on the agenda, which is the request of Hartford for
an administrative expense, the plan administrator's
objection, which has our proof of claim attached to it, our
response, and then we already agreed to the stipulation of
facts.
THE COURT: No, I appreciate that.
Rather than admitting those documents, they are
all of record and the Court will -- I don't even know that I
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need to take notice of matters that are in the docket in
front of me, but they are certainly part of the record, but
not necessarily admitted. I think we're talking about
distinction without the difference.
MR. BRESSLER: Okay. I also just want to mention
we cited in the stipulation of facts to one of the pleadings,
which is a first day motion as to surety bonds and the
confirmation order.
THE COURT: And the confirmation order.
MR. BRESSLER: Your Honor, with that, if I may
proceed with argument?
THE COURT: Sure.
MR. BRESSLER: For the stipulation of facts, it's
acknowledged that Hartford issued four surety bonds on behalf
of the Debtors and their non-debtor affiliates in the amount
of $700,000 that were active on the following date of the
debtors' cases. It's also not disputed that the Debtors
executed two indemnity agreements in connection with the
bonds, which, among other things, covered Hartford's
attorney's fees and costs.
The Debtors, in their first day motion, at
Docket 9, indicated that the bonds weren't needed for the
debtors' operations. It's also acknowledged that the
confirmation order says that the rights of Hartford, under
the indemnity agreements, shall continue in effect.
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The plan administrator cites to a number of cases
that allegedly supports its argument, that since the
indemnity agreements were executed prepetition, any claims
under the indemnity agreements were prepetition and not an
administrative claim; however, none of these cases have
language in the confirmation order preserving the claimant's
right under the contract that was entered into prepetition.
THE COURT: But I guess the question would be:
Does that preservation change the character?
If the debtor didn't have that language, wouldn't
you still be here?
MR. BRESSLER: If the debtor didn't have that
language, we would still argue that we have an administrative
claim.
THE COURT: Sure.
MR. BRESSLER: But I will tell you in that
situation, it tends to always settle --
(Laughter)
THE COURT: Right.
MR. BRESSLER: -- and you never get to it. So
whenever I've asserted that argument, I've never actually had
a Court decide it because I've always resolved it.
But here, with the additional language, we think
we have a more stronger argument as to why we're entitled to
the fees, because it's consistent with the confirmation
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order. There are cases where we cited to where if there's
language in the confirmation order preserving a position, the
position is preserved. In addition, while we didn't cite to
it in our response, going as far back as 1935 in Stoll v
Gottlieb and the cases thereafter, 305 U.S. 165, the Court
held that a confirmation order has res judicata effect.
THE COURT: It does. But, again, I guess the
question I have is, imagine that we have a situation where
you've got a landlord and the confirmation order says the
landlord's rights are unaffected and then at the effective
date, the lease is rejected, okay.
The fact that the confirmation order says his
rights are unaffected or not impaired by confirmation doesn't
change -- doesn't render something that -- actually, I'm not
being articulate and it's not a good hypothetical. Let me
take a step back.
I guess the trustee's point of view is that
language is preserving language, presumably negotiated with
the surety company, so that -- but it didn't change what
those rights were. So I think my point would be if you've
got -- if you don't have an admin claim by virtue of the
facts that we have, then I think that the trust's position
would be the language in the confirmation order didn't change
that fact.
If you've got an admin claim, then you still have
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it, but it didn't elevate anything; it just made sure that
nothing in the plan would change what your current rights
were.
I'm not being clear, but --
MR. BRESSLER: This -- but this is a little
different. This is (indiscernible). Sometimes rather than
assuming the indemnity agreement, language is put in saying
all the rights under the indemnity agreement survive. But I
would submit that it's basically the same thing, that instead
of the indemnity agreement being rejected -- it wouldn't make
sense. You don't reject agreement and then, I would submit,
and then say, All the rights under the agreement survive to
continue on. That, to me, would be contradictory.
By preserving the rights under the indemnity
agreement, that's the equivalent of assuming it; that the
rights continue and that you have the right to assert them
and it's not just a prepetition claim.
THE COURT: So the confirmation order provides
at 113:
"Notwithstanding anything else to the contrary,"
yadda, yadda, "including trust and/or subrogation rights
under any surety bonds, they shall continue in full force and
effect, including to the extent applicable, following any
indemnity agreement."
So, it continues in full force and effect. Is
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that functionally an assumption; is that your argument?
MR. BRESSLER: Your Honor, yes; it's the
equivalent, because they're adopting it and then continuing
it.
If it's still an unsecured claim, then that would
render that language meaningless. What would be the effect
of it if it's still an unsecured claim; it wouldn't have any
purpose or meaning. The whole idea is your rights are going
to continue and, therefore, we have the right to assert an
administrative claim, just as if the contract had been
assumed because it's continuing. They're not disowning it;
instead, they're owning it.
THE COURT: So, I guess one of the things that I
would wrestle with here is that as a practical matter on that
side of the podium, this language is often, by all kinds of
stakeholders, language similar to this is negotiated because
the debtor has a, you know, an 80-page, single-spaced plan
with a 400-page plan supplement that's got all kinds of
potential landmines that people are afraid of.
And so language like this, I think it's often
negotiated reservation of right or preserving language that
says nothing bad in -- there is -- we used to say, with
respect to Ms. Sleight from the U.S. Attorney's Office, she
said she had this wall of text that basically outlawed
anything that made the United States sad and -- because her
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point was, I don't know everything that's in here and if you
think you're going to have something that gets you out of
taxes or environmental liability or something else; it ain't
happening.
And that is normally how I would view this kind of
language, but I think you're giving it more teeth and I want
to make sure I understand why.
MR. BRESSLER: Because it says any rights continue
in effect. It just doesn't say, Nothing herein negatively be
affects it. It's even stronger, saying, the rights under
this agreement continue in effect, just as it would if an
executory contract was assumed --
THE COURT: Okay.
MR. BRESSLER: -- and we would submit that is the
difference.
And other -- I can't rattle them off, but in other
cases where we've had similar language we're, then, able to
settle for the indemnity agreement. This is not unusual.
The other thing I wanted to mention is they argue
the attorney's fees provided no benefit. Assuming for a
second, we lose the first argument and Your Honor doesn't
accept what I'm saying, that they just automatically,
everything continues, in effect, post-petition. During the
case, the attorney's fees were incurred as part of the bonds
being in place and the bonds provided a benefit. So, to the
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extent the agreement was regarded as executory, we were still
providing a benefit during that time through the bonds and,
therefore, we should be entitled to our attorney's fees.
THE COURT: Okay.
MR. BRESSLER: Finally addressing the one-
thousand-dollar argument. If Your Honor finds that we can
enforce our rights, that would include for reimbursement of
the $1,000, they argue that because Customs did not file a
claim, we can't now assert that claim; however, there are a
number of cases that say that even if the underlying party
didn't file a claim, this doesn't preclude a claim against
the surety, so that the claim would have survived against our
client, and that's why we had to tie it.
And I can -- there's an old Delaware District
Court case, Tidewater v New Amsterdam, 20 F.2d 951, that said
that and they said the way for the surety to protect its
claim when the other party is -- when the bond beneficiary
hasn't filed the claim, is for the surety to file a claim
itself like we did. So, if Your Honor finds either that
we're correct, that we could still enforce the indemnity
agreement or we're correct that there was a -- let me go
back.
THE COURT: Uh-huh.
MR. BRESSLER: I think you would have to find that
we're correct, that we could enforce the indemnity agreement
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for this thousand-dollar claim, because it's a prepetition
period.
THE COURT: Right.
MR. BRESSLER: So, I can't -- I don't have the
same argument with the attorney's fees that were approved
during the case.
THE COURT: I got it. Okay.
MR. BRESSLER: Thank you.
THE COURT: Sure. Thank you.
Ms. Hartlipp?
MS. HARTLIPP: Thank you, Your Honor.
Yes, and we (indiscernible) Mr. Bressler are
exactly on point. I believe that our position is that -- and
I believe the cases that Hartford cites to stand for the
position that the clear language of the plan should control.
And the clear language here seems to suggest that Hartford's
rights remain the same. It's a reservation of rights that
we've all seen time and time again and they continue on.
And I think assuming a contract is different than
their rights continuing. And I think other provisions of the
plan --
THE COURT: When were these fees incurred; are
these fees post-confirmation or post-petition?
MS. HARTLIPP: Post-petition and post-effective
date. I believe that they run through -- and, again,
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Mr. Bressler probably is more familiar with them and can
correct me if I'm wrong -- but I believe they run through, at
least, July of 2025 and that Hartford's position is that they
continue to accrue as we continue this dispute.
THE COURT: And can I ask, do these fees -- and I
know that they're in the stipulation -- but do these fees
relate to, essentially, recovering -- is the -- are the
charges, the time entries largely about this issue or are
they about providing services as counsel to the surety bond
in terms of renegotiating or memorializing an -- the analogy
that I'm looking for is, we deal with the questions for fees
often, relatively often, in the context of landlords.
MS. HARTLIPP: Yes.
THE COURT: And a landlord's lease will often say,
You've got to pay my fees.
And I think the Bankruptcy Court, here, and I
think most have generally said that you get your fees for the
work you do on behalf of the landlord in connection with this
proceeding, but that you don't get it, for example, simply
for monitoring or for preparing your fee application or
something else.
And so I'd like -- and, again, Mr. Bressler will
have an opportunity to reply -- but I'd like your thoughts on
that question.
MS. HARTLIPP: Yes, I believe that our position to
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that question is that we take the position that Hartford and
Mr. Bressler have asserted an administrative claim and to
assert an administrative claim, under Section 503, as Your
Honor is more than aware, you need a post-petition
transaction with the debtor and an actual, necessary benefit
to the estate.
And so, the indemnity agreements at issue, we take
the position that they're prepetition transactions because as
Your Honor is, I'm sure, more than aware and as held in
Pinnacle and numerous other cases, I think, in this district
and elsewhere, an indemnity obligation accrues upon the
signing of the indemnity agreement and not when the fees
arise, whether that's pre or post-petition, and so Hartford
cannot be entitled to an administrative claim by virtue of
the fact that there's no post-petition transaction with the
Debtors and the estate.
And also dispute that Hartford and its
attorneys -- its attorney's fees provided an actual and
necessary benefit to the estate, period. I believe that
Hartford, you know, says that the bonds benefited the estate,
but the bonds, which the bond premiums were paid throughout
the course of the bankruptcy, separate than the attorney's
fees, and that Hartford's own legal counsel doing, I guess,
protecting their interests is separate and doesn't meet the
standards --
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THE COURT: It doesn't benefit the estate.
MS. HARTLIPP: -- to provide an actual, necessary
benefit to the estate.
THE COURT: Well, let me ask you, to that point, I
know that at your -- in your submissions at paragraph 28, you
recite:
"The Debtors paid a premium for the use of the
bonds. The administrative claim is more than five times that
premium."
Again, I have not studied the underlying bond
agreements, but, so that would mean that the premium on the
bonds was about five grand?
MS. HARTLIPP: Frankly, I'm not a hundred-percent
certain of the numbers throughout the course of the
bankruptcy.
THE COURT: Okay. They're in the record --
MS. HARTLIPP: Yes.
THE COURT: -- I know, because the stipulation is
there.
MS. HARTLIPP: Yes, I would need to fresh my
memory.
THE COURT: No, that's okay.
I guess I think you covered this, but I want to
make sure that I understand your argument, with respect to
the terms of the plan. And, again, you heard Mr. Bressler
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place significant weight on "rights shall continue."
MS. HARTLIPP: Yes.
THE COURT: I think it's -- I will say I
understand the argument that it's tantamount to assumption.
It certainly can't be equal to assumption; you can't assume
without a motion and an order. It's almost, I think it's
almost an estoppel argument, right, that, look, you told me
that my rights would continue. And I continued to perform, I
think, is the surety's argument, and now you're saying that
those rights are cut off.
How do I deal with that?
MS. HARTLIPP: I think that as of the petition
date, I think if it were to be assumed, right, then it would
be, like, a cure issue.
THE COURT: Right.
MS. HARTLIPP: And so, I think that Hartford's
rights to cover on a cure would be different than an admin
claim. And so I think, you know, to the extent you might
have potential -- not that, you know, not that I'm
necessarily agreeing here that there would be one -- but to
the extent that there might be a contingent, you know,
unliquidated claim, you still have that claim. I think that,
you know, nothing is precluding you from asserting that like
you'd normally be able to in this sort of position.
THE COURT: Okay. I think I understand.
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MS. HARTLIPP: And I think --
THE COURT: And I didn't want to cut you off. I
know I asked a bunch of questions, so if there are any other
points that you wanted to make?
MS. HARTLIPP: I think the one final point that I
would make --
THE COURT: Of course.
MS. HARTLIPP: -- is that I think, under the --
going back to the terms of the plan, I think the terms of the
plan don't contemplate the Wind-down Trust paying post-
effective date fees incurred like (indiscernible) the Debtors
have ceased to operate and exist and that the plan addresses
prepetition and claims that arose during the bankruptcy and
there's a wind-down budget budgeted for that.
THE COURT: Right. And these obligations are not
included in that.
MS. HARTLIPP: Yes.
And these obligations, to the extent, especially
to the extent they continue to accrue post-effective date,
are not contemplated as part of the plan.
THE COURT: Very good.
MS. HARTLIPP: And I think with that, unless Your
Honor has any further questions for me, I will turn the
podium back over.
THE COURT: No, I don't.
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Mr. Bressler, I'm going to give you the last word,
and here's what we're going to do. I want you to respond to
Ms. Hartlipp's comments and I think I have a question or two
for you, so that I understand the back-and-forth.
The question was, depending on how the Court
rules, we would need to address the question of the amount.
I want to take under advisement -- I expect to rule this week
or early next week -- I want the opportunity to study the
surety documents themselves. We deal with surety bonds a
lot, but to your comment, they are rarely contested. So, I
want to make sure that I understand the mechanic of this and
I'm not looking to either change established practice, but,
you know, again, I've seen you in my courtroom on surety
issues. They're critical, but quiet in a bankruptcy
proceeding, typically.
So, I just wanted you to know that that's what I
intend to do, but I would appreciate the benefit of any
response to Ms. Hartlipp's comments you have.
MR. BRESSLER: They tend to be quiet because most
of the time, we do resolve them.
THE COURT: Uh-huh.
MR. BRESSLER: It's usually the day before the
hearing, but we do get them resolved.
THE COURT: Yeah.
MR. BRESSLER: So, I wanted to first answer a
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question Your Honor had as to what type of fees were incurred
between the petition date --
THE COURT: Sure.
MR. BRESSLER: -- and the effective date.
They were -- they weren't, primarily, to preserve
a claim for fees; although, we submit in the confirmation
order, there's language that does that. There are -- here's
how we normally get involved. We get involved -- and we did
in this case -- we get involved with cash collateral
financing; getting language in the order to make sure that
the surety's rights are protected.
We get involved, and we did in this case, with the
two sales and what's going to happen with the bonds and
protecting rights, both, as to what happens with the bonds
and what might happen concerning setoff, recoupment, those
types of rights.
And then we got involved a fourth time in
connection with the plan in negotiating language under the
plan. There was probably a little time reading other
pleadings, but those are the primary things we normally get
involved in that we did in this case, so it wasn't primarily
just to protect the claim for fees; although, we're
submitting --
THE COURT: Although that's in there.
MR. BRESSLER: -- that's part of what's in the
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confirmation order.
THE COURT: Okay.
MR. BRESSLER: Post-effective date, we have
included some time just dealing with general bankruptcy
issues, but most of the post-effective date time, but not
all, has dealt with this fee issue. We had discussions.
They wrote a detailed letter why they felt we weren't
entitled to it. We responded. We went back and forth.
So -- and, also, obviously, with the pleadings
we've had to prepare for this hearing, and we would submit
because they continue to contest it, rather than our
resolving it, that those fees were necessary to protect our
rights. I understand that if I don't get the first set of
fees, we're not going to get the second set of fees.
And I would, again, just try to stress that this
order doesn't just say, Nothing herein affects our rights;
it's stronger. It says, "The indemnity agreement shall
continue in full force and effect." That's a little
different than a lot of the provisions that just say, Nothing
herein affects your rights.
The rights under the debt to enforce the terms of
the indemnity agreement were specifically preserved by the
language in the order. It's not often people get something:
Nothing herein affects (A); nothing herein affects (B). But
it doesn't normally saying, All your rights under this
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document are preserved. If all our rights under the document
are preserved, one of the those rights is the rights to
attorney's fees.
I don't -- they said there were no benefit. I
already presented argument. The benefit was the bonds.
Not -- obviously, not the fees, but they're all -- but
they're together; the indemnity agreement and the bonds
really have to be looked at together.
THE COURT: Very good.
All right. As I said, I'm going to take the
matter under advisement. I expect to deal with this
promptly. I will not be writing an opinion on this; I want
to be clear.
And to the extent that we need further
proceedings, then once I rule, I will get the parties on the
phone. We'll do it -- if we head down that path, we would do
it, as I said, in a way that is cognizant of the amounts that
are at issue.
MR. BRESSLER: I think we both appreciate that,
Your Honor.
THE COURT: Ah, that's fine.
All right. Anything else before we adjourn?
MS. HARTLIPP: Just one quick further question.
THE COURT: Ms. Hartlipp?
Yeah, can you get to the podium?
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MS. HARTLIPP: Yes.
THE COURT: Yes, ma'am?
MS. HARTLIPP: My question would be, to the extent
that you expect to rule this week, would you expect that to
be a virtual, just get us on the phone or...
THE COURT: I would probably not get you on the
phone; I would probably do it by letter --
MS. HARTLIPP: Okay.
THE COURT: -- or by the Court's own order. So,
no, look, I know that we're coming up on holidays and
everything else and I -- but, no, that's a good question,
because often, I advise that I'm going to take something
under advisement, but usually if I intend to do a bench
ruling, then I will tell the parties that I will get you on
the phone.
I don't see that here. The issues are narrow
enough that I just need to make sure I understand exactly the
business framework that we're talking about from the
documents that you've been kind enough to stipulate into the
record so that I understand what I'm being asked to do, okay.
MS. HARTLIPP: Yes, understood.
THE COURT: All right. Anything else this
afternoon?
MR. BRESSLER: I realize I didn't address one
thing that --
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THE COURT: Back to the podium, then.
MR. BRESSLER: -- that (inaudible) said.
So, I can't tell you what the exact premiums are,
but they're not hundreds of thousands of dollars. But I
would submit the important number is our possible exposure
under the bonds, because that's what we're trying to protect
by incurring the attorney's fees, not the premiums, which are
usually a few percentage points of what the bonds are.
THE COURT: That, I understand. No, I appreciate
that.
MR. BRESSLER: Thank you.
THE COURT: Okay. With that, we are adjourned.
Thank you very much, counsel.
MS. HARTLIPP: Thank you.
THE COURT: Thank you, Dana.
THE CLERK: Have a good one.
(Proceedings concluded at 3:17 p.m.)
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CERTIFICATION
I certify that the foregoing is a correct
transcript from the electronic sound recording of the
proceedings in the above-entitled matter to the best of my
knowledge and ability.
/s/ William J. Garling December 5, 2025
William J. Garling, CET-543
Certified Court Transcriptionist
For Reliable
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