Case: HJB Doc #: 3304 Filed: 03/08/16 Desc: Main Document Page 1 of 8 UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW HAMPSHIRE

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1 Case: HJB Doc #: 3304 Filed: 03/08/16 Desc: Main Document Page 1 of 8 UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW HAMPSHIRE In re: GT Advanced Technologies, Inc., et al, Debtors 1 Chapter 11 Case No HJB et al Jointly Administered The Court indicated that if objections were filed they would be heard in Springfield, Massachusetts on March 9, 2016 OBJECTION OF UNITED STATES TRUSTEE TO PROPOSED CONFIRMATION ORDER OF DEBTORS AMENDED JOINT PLAN UNDER CHAPTER 11 OF THE BANKRUPTCY CODE DATED MARCH 7, 2016 To the Honorable Henry J. Boroff, U.S. Bankruptcy Judge William K. Harrington, United States Trustee ( United States Trustee ), by his attorney, submits this objection to the proposed confirmation Order and incorporated Litigation Trust Agreement with respect to the Debtors Amended Joint Plan of Reorganization dated March 7, 2016 (the Order ), filed on March 8, 2016 [Court Docket Nos. 3329; 3300]. PRELIMINARY STATEMENT The United States Trustee objects to the proposed confirmation Order for three reasons: 1) despite representations made at the confirmation hearing regarding the ability of creditors to opt out of the releases, the Order provides for full releases to be given by creditors who had no ability to opt out of the releases and could not affirmatively consent to the same; and 2) the Order creates an inefficient mechanism to address future quarterly fees due the United States Trustee 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s tax identification number, as applicable, are: GT Advanced Technologies Inc. (6749), GTAT Corporation (1760), GT Advanced Equipment Holding LLC (8329), GT Equipment Holdings, Inc. (0040), Lindbergh Acquisition Corp. (5073), GT Sapphire Systems Holding LLC (4417), GT Advanced Cz LLC (9815), GT Sapphire Systems Group LLC (5126), and GT Advanced Technologies Limited (1721).

2 Case: HJB Doc #: 3304 Filed: 03/08/16 Desc: Main Document Page 2 of 8 and reporting requirements of the Litigation Trust, which would unnecessarily expend Debtor, Litigation Trust, and Court resources; and 3) the procedure established in the Litigation Trust Agreement for the appointment of another individual to serve as a disinterested person in the event of a conflict fails to adequately address potential future conflict issues. JURISDICTION The Court has jurisdiction over this matter pursuant to 28 U.S.C. 157(a) and 1334 and L.R. 77.4(a) of the Local Rules of the United States District Court for the District of New Hampshire. This is a core proceeding pursuant to 28 U.S.C. 157(b). I. Confirmation Order and Plan Provides for Full Releases to Non-Debtor Third Parties Even Though Creditors in such Classes Did Not Affirmatively Consent. The Debtors proposed confirmation Order includes provisions which purport to address the objections to confirmation raised by the Official Creditors Committee (Paragraph 2 on Page 31); Duncan Harwood (Paragraph 68); Chad Fero (Paragraph 69); Intego GmbH (Paragraph 70); Tera Xtal (Paragraph 71); Lapmaster (Paragraph 72); Dow Corning (Paragraph 73); and HTOT (Paragraph 74). In the Notice of Filing of Revised Proposed Confirmation Order, the Debtor acknowledged the United States Trustee has not confirmed that [the] modifications resolve her concerns. One of the unresolved objections to confirmation raised by the United States Trustee in his Objection filed February 26, 2016 is the scope and breadth of releases afforded to non-debtor third parties. At the confirmation hearing the Debtors argued that the releases should be granted because all of the parties providing the same had notice and an opportunity to opt-out. The United States Trustee respectfully disputes this contention because those parties which are allegedly unimpaired or paid in full did not receive a ballot and had no chance to opt out to the 2

3 Case: HJB Doc #: 3304 Filed: 03/08/16 Desc: Main Document Page 3 of 8 releases the only chance they would have had is if they filed an objection to the Plan, certainly an expensive and onerous burden on any individual creditor. Within the First Circuit there is no authority for the proposition that consent to provide a third party release can be contrived in this manner. See In re Quincy Medical Center, Inc., 2011 WL (Bankr. D. Mass. 2011)(only consensual releases of third parties are permissible). The Debtors did not provide such entities with a ballot because the Debtors have asserted that such parties are unimpaired. In order to be unimpaired for purposes of 11 U.S.C. 1124(a)(1), a creditor s legal, equitable and contractual rights must remain unaltered. [S]imply classifying a party as unimpaired does not mean that they should be somehow automatically deemed to grant a release where the requirements of Metromedia [In re Metromedia Fiber Network, Inc., 416 F.3d 136 (2d Cir. 2005)] have not been met. In re Genco Shipping & Trading Ltd., 513 B.R. 233, 270 (Bankr. S.D.N.Y. 2014). Given the Debtors decision to treat such creditors as unimpaired, the Debtors should not now be able to alter the legal rights of such creditors by compelling them to provide releases of various third parties. II. The Debtors Proposal to Resolve Future Unpaid Quarterly Fees Due the Estate on D&O Recoveries and the Filing of Post Confirmation Operating Reports by the Litigation Trustee May be Inefficient Use of Debtor, Litigation Trust, Official Committee, and Court Resources. The United States Trustee previously raised as an objection to confirmation that the Litigation Trustee should be required to file post confirmation operating reports, pay quarterly fees on any disbursements he may make, and be jointly and severally liable on unpaid quarterly fees due to the United States Trustee under 28 U.S.C At the hearing on confirmation the parties agreed that the confirmation Order would reserve all parties rights to bring such matters before the Court post-confirmation. After further discussion, the United States Trustee offered to have the Debtors treat the transfer of the D&O policy limits to the Litigation Trust as a 3

4 Case: HJB Doc #: 3304 Filed: 03/08/16 Desc: Main Document Page 4 of 8 disbursement, and pay the associated incremental quarterly fees at the time of the transfer, estimated to be $15,000. The United States Trustee has also agreed to have the Reorganized Debtors file one post-confirmation quarterly operating report, with separate schedules for each of the surviving Reorganized Debtors, and further suggested that a separate schedule for the Litigation Trust would suffice for the reporting sought. 2 The Debtors have opted to instead engage in litigation over the issue, which would necessarily involve the Debtors, the Litigation Trust, possibly the Committee, not to mention the resources of the Court. III. The Litigation Trust Agreement Would Allow the Litigation Trustee to Remain In Place If he Determines He Has a Conflict, and to Appoint Another Person as Disinterested Person. The United States Trustee previously raised an objection to the provision of the Litigation Trust that would permit the Litigation Trustee, Mr. Eugene Davis, to remain in place even if he determined he had a conflict, and to appoint another party to serve as Disinterested Person to handle the conflict matters. See Litigation Trust Agreement and Declaration of Trust, Paragraph The Debtors cite no legal precedent or authority for this provision, and on information and belief did not fully respond to this objection. To have a Litigation Trustee and a Disinterested Person both acting in a bankruptcy case is contrary to established precedent and appears contrary to the Debtors position that the Litigation Trustee is deemed to be the representative of the Debtors estates, a bankruptcy trustee, liquidator or similar official See Confirmation Order, Paragraph 45. See also 11 U.S.C. 701; 1104(d); 1202; 1302 (providing for the appointment of one disinterested person to serve as trustee.) 2 Through the Plan, the Reorganized Debtors must provide the Litigation Trustee with a quarterly report on the status of the Reorganized Debtors. See Plan, Article 8.16(f). The United States Trustee s recommendation for a joint post-confirmation quarterly Report would be an ideal solution to this perceived quandary, especially where the Debtors chairman of the Board for the Reorganized Debtor, Mr. Eugene Davis, will also serve as Litigation Trustee. 4

5 Case: HJB Doc #: 3304 Filed: 03/08/16 Desc: Main Document Page 5 of 8 The United States Trustee submits that only one individual may serve as the Litigation Trustee, and that the Litigation Trustee may not assign to another duties for which he may have a conflict. FOR THE FOREGOING REASONS, the United States Trustee objects to the Debtors proposed Confirmation Order, and requests that the Court make affirmative rulings on these points. Respectfully submitted, William K. Harrington United States Trustee By: /s/ Geraldine Karonis Geraldine Karonis Assistant U.S. Trustee Office of U.S. Trustee 1000 Elm Street, Suite 605 Manchester, NH (603) Bnh Dated: March 8, 2016 CERTIFICATE OF SERVICE I hereby certify that on this date I caused to be served a copy of the foregoing upon the following attorneys of record by CM/ECF: HJB Notice will be electronically mailed to: Jason R. Adams Christopher J. Allwarden Philip D. Anker David P. Azarian Bryan Bagdady Holly Barcroft David L. Barrack Andrew D. Behlmann Joshua M. Bennett 5

6 Case: HJB Doc #: 3304 Filed: 03/08/16 Desc: Main Document Page 6 of 8 Mark I. Bernstein G. Alexander Bongartz J. William Boone Ryan Borden Eric K. Bradford Peter Breslauer Christopher M. Candon James S. Carr Rosanne Ciambrone Donald H. Cram Brian Cullen Keith Cunningham Eleanor Wm Dahar Daniel M. Deschenes Cheryl Deshaies Ann Marie Dirsa Christopher M. Dube Lawrence Edelman John Elrod Marita S. Erbeck Michael Etkin Jeremy R. Fischer J. Mark Fisher Andrew Flame Christopher Floyd Edmond J. Ford Kenneth H. Frenchman Kelly J. Gagliuso William S. Gannon Dustin N. Gauthier Matthew Gensburg Steven Ginther Matthew A. Gold Douglas Gooding Irvin D. Gordon Lawrence B. Gormley Steven E. Grill David M. Grogan James T. Grogan, III William S.Gyves James Harrington Honor S. Heath Jordan Hershman Camden B. Hillas Gary T. Holtzer Daniel Holzman 6

7 Case: HJB Doc #: 3304 Filed: 03/08/16 Desc: Main Document Page 7 of 8 Nancy Isaacson Michael D. Jankowski Dennis L. Jenkins Matthew R. Johnson Brad M. Kahn Michael S. Kalis Robert J. Keach Martin Kedziora Ryan F. Kelley Brenda Keith Susheel Kirpalani Michael A. Klass Louis Kornreich Lisa M. Kresge James S. LaMontagne James Laboe Robert J. Lemons Kenneth Leonetti Michael Licker John Love Benjamin Loveland Colin P. Maher Robert K. Malone Jason A. Manekas Jacob A. Manheimer Benjamin E. Marcus George J. Marcus Walter L. Maroney Sarah Mayhew Alan S. Maza Michael T. McCormack Marc W. McDonald Peter B. McGlynn Joseph McMahon, Jr. Frank B. Mesmer Joshua N. Mesmer Gregory A. Moffett Stephen G. Murphy Steven M. Notinger Paul F. O'Donnell, III Michael W. Ott Kelly L. Ovitt Puc Thomas J. Pappas Richard C. Pedone Charles R. Powell, III William Pugh 7

8 Case: HJB Doc #: 3304 Filed: 03/08/16 Desc: Main Document Page 8 of 8 John J. Ramirez Jennifer Raviele David W. Rayment Alexander Rheaume Bronwyn L. Roberts Peter C.L. Roth Jennifer M. Roussil Katherine Scherling Sage M. Sigler Daniel W. Sklar Robert A. Soriano Jeffrey C. Spear John M. Sullivan Ryan D. Sullivan Peter N. Tamposi Lisa Snow Wade Michael F. Walsh Christopher A. Ward John Robert Weiss Jack S. White Eric Wilson James M. Wilton Colin Zick /s/ Geraldine Karonis Geraldine Karonis Dated: March 8,