Document Page 1 of 9 IN THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA IN RE: PITTSBURGH ATHLETIC ASSOCIATION, et al. 1 Debtors. YVONNE ROSE, AS MEMBER AND MEMBER OF BOARD OF DIRECTORS OF THE PITTSBURGH ATHLETIC ASSOCIATION, v. (NO RESPONDENT. Movant, Jointly Administered at: Bankruptcy Case No. 17-22222-JAD Bankruptcy Case Nos: 17-22222-JAD 17-22223-JAD Chapter 11 The Honorable Jeffery A. Deller Docket No. Related to Docket Nos. 183 and 187 Hearing Date: August 22, 2017 Hearing Time: 10:00 am ET Response Deadline: August 8, 2017 RESPONSE OF THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF PITTSBURGH ATHLETIC ASSOCIATION, ET AL., TO THE MOTION TO APPOINT CHAPTER 11 TRUSTEE PURSUANT TO 11 U.S.C. 1104(a and (b The Official Committee of Unsecured Creditors of Pittsburgh Athletic Association, et al. (the "Committee" hereby files this Response (the "Response" to the Motion to Appoint Chapter 11 Trustee Pursuant to 11 U.S.C. 1104(a and (b (the "Motion to Appoint", respectfully representing as follows: JURISDICTION 1. The Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334. This is a core proceeding pursuant to 28 U.S.C. 157(b(2. 1 The Debtors have the following cases pending: Pittsburgh Athletic Association, Case No. 17-22222-JAD and the Pittsburgh Athletic Association Land Company, Case No. 17-22223-JAD, both cases are being jointly administered under Case No. 17-22222-JAD. 1
Document Page 2 of 9 2. Venue of the Debtor's Chapter 11 case is proper pursuant to 28 U.S.C. 1408 and 1409. BACKGROUND 3. The Debtors, Pittsburgh Athletic Association (the "PAA" and Pittsburgh Athletic Association Land Company (the "PAACL", and together with the PAA, the "Debtors", filed Voluntary Petitions for relief under Chapter 11 of Title 11 of the United States Code, 11 U.S.C. 101 et seq., (the "Bankruptcy Code" on May 30, 2017 (the "Petition Date" in the United States Bankruptcy Court for the Western District of Pennsylvania at the above-captioned case numbers (the "Bankruptcy Cases". The Bankruptcy Cases have been jointly administered under Bankruptcy Case No. 17-22222. 4. On June 8, 2017, the Office of the United States Trustee appointed the Committee. [Docket No. 91]. 5. On June 14, 2017, the Committee filed its Application for Order Authorizing the Official Committee of Unsecured Creditors of Pittsburgh Athletic Association, et al., to Employ Counsel, Nunc Pro Tunc [Docket No. 97] (the "LT Application". 6. On July 12, 2017, this Court entered an Order approving the LT Application. [Docket No. 178]. 7. On July 12, 2017, Yvonne Rose ("Rose", as an alleged PAA member, member of the PAA Board of Directors, creditor and party in interest filed the instant Motion to Appoint. [Docket No. 183]. 8. On July 14, 2017, this Court entered an Order Setting Date Certain for Response and Hearing on Motion scheduling a hearing for August 15, 2017 at 10:00 a.m. and setting the response deadline at August 8, 2017. [Docket No. 187]. 2
Document Page 3 of 9 9. On July 27, 2017, this Court entered on Order Cancelling and Rescheduling Hearing on the Motion to Appoint cancelling the August 15, 2017 hearing and rescheduling the hearing to August 22, 2017 at 10:00 a.m. [Docket No. 200]. 10. On July 28, 2017, the Pittsburgh Athletic Association Preservation Association (the "PAAPA" filed a joinder to the Motion to Appoint (the "Joinder"[Docket No.203]. 2 COMMITTEE RESPONSE 11. In summary, Rose alleges in her Motion to Appoint that the appointment of a Chapter 11 Trustee is warranted under Section 1104 of the Bankruptcy Code because the PAA, the PAACL, and their directors and officers have committed a series of ongoing acts constituting: (i fraud; (ii partiality; (iii conflicts of interests; (iv dishonesty; (v secrecy; (vi disregard for legally binding By-Laws; and (vii gross mismanagement. 3 12. In support of the above allegations, Rose describes a series of actions/inactions (ultra vires or otherwise of the PAA and/or PAACL directors that Rose submits were in violation of the By-Laws of the PAA/PAACL. See Motion to Appoint, Failure to Comply with By-Laws and Ultra Vires Acts, Sections A through E, 19 through 68. It is unclear in this recitation of the alleged facts whether the actions/inactions alleged to have been taken or not taken by the directors refer to directors of the PAA board or the PAACL board or both. Further, since only the By-Laws of the PAA have been appended to the Motion to Appoint as Exhibit D, it is equally unclear what document or documents control the governance of the PAACL. 2 It is unclear whether PAAPA in its Joinder is asking this Court to order that F.R.B.P. 7020 be made applicable to this contested matter pursuant to F.R.B.P. 9014 and if this Court were to order that Rule 7020 is applicable that PAAPA be joined as a movant/plaintiff to the Motion to Appoint, or PAAPA's joinder is being filed simply as a response in support of the Motion to Appoint. 3 The Motion to Appoint is not clear as to whether Rose seeks the appointment of Chapter 11 Trustee in the PAA case or the PAACL case, or both. In so much as the first paragraph of the Motion to Appoint references actions/inactions of both the PAA and PAACL and its directors and officers, the Committee will assume for the sake of this Response that Rose is seeking the appointment of a Chapter 11 Trustee in both cases. 3
Document Page 4 of 9 13. Further, without more information regarding what alternatives the PAA and/or PAACL directors had available to them at the time these alleged actions/inactions occurred, it is difficult to draw any conclusions as to the reasonableness of these actions and/or inactions and whether the directors exercised sound business judgment in arriving at their decisions and course of action. The Committee submits that a fair reading of the Motion to Appoint seems to describe the actions/inactions of directors, officers and/or managers at the helm of a financially distressed business. 14. The crux of Rose s argument in support of the Motion to Appoint centers around the alleged failure of the directors of the PAA and PAACL to adhere to proper corporate governance and alleged gross mismanagement in making certain business decisions leading up to and including the filing of these Bankruptcy Cases. 14. There does not appear to be any specific reference or allegation to any actions/inactions of directors amounting to fraud, partiality and/or dishonesty. 15. Of some concern to the Committee is Rose s allegations that certain former or current directors may be potential bidders/purchasers of the PAA and PAACL assets. Rose does not provide any specifics as to whom may be implicated by this allegation, but the Committee would submit that directors, officers and/or other insiders should be required to disclose any interest they may have in purchasing the assets. However, it is not uncommon in bankruptcy cases that insiders and/or persons in control of the debtor are also bidders, purchasers and/or otherwise participate in a bankruptcy sale process. Because Rose does not provide any specific details on the person(s involved, or any other facts, it is difficult to discern whether a particular director s individual interest in a sale would render that person(s, or the entire board, unable to 4
Document Page 5 of 9 effectively manage and discharge their fiduciary duties and obligations to these bankruptcy estates and their creditors in a disinterested manner. 17. Section 1104 of the Bankruptcy Code provides in relevant part as follows: (a At any time after the commencement of the case but before confirmation of a plan, on request of a party in interest... and after notice and a hearing, the court shall order the appointment of a trustee (1 For cause, including fraud, dishonesty, incompetence, or gross mismanagement of the affairs of the debtor by current management, either before or after the commencement of the case, or similar cause....; or (2 If such appointment is in the interests of creditors, any equity security holders, and other interests of the estate.... 11 U.S.C. 1104(a (emphasis added. 4 18. Decisions regarding the appointment of a Chapter 11 trustee "must be made on a case-by-case basis." In re Sharon Steel Corp., 871 F.2 1217, 1226 (3d Cir. 1989. "The party moving for appointment of a trustee... must prove the need for a trustee under either subsection by clear and convincing evidence." Official Committee of Asbestos Claimants v. G-I Holdings, Inc. (In re G-I Holdings, Inc., 385 F.3d 313, 317-18 (3d Cir. 2004 (citing In re Marvel Entertainment Group, Inc., 140 F.3d 463, 473 (3d Cir. 1998 and In re Sharon Steel, 871 F.2d at 1226 (emphasis added. "Appointing a trustee in a Chapter 11 case is an extraordinary remedy, and there is a corresponding strong presumption that the debtor should be permitted to remain in possession." The Official Committee of Unsecured Creditors of Cybergenics Corp. v. Chinery, 330 F.3d 548, 577 (3d Cir. 2003 (citations omitted. See also In re Insilco Technologies, Inc., 480 F.3d 212, 215 n.3 (3d Cir. 2007 (noting that "the default rule is that the debtor remains in control of the bankruptcy estate and operates its business as debtor in 4 It is unclear whether the allegations in the Motion to Appoint refer to the actions/inactions of current or former directors or a combination of both. 5
Document Page 6 of 9 possession. "; In re Marvel, 140 F.3d at 471 ("It is settled that the appointment of a trustee should be the exception, rather than the rule." (quoting In re Sharon Steel, 871 F.2 at 1225; Community Bank v. Five Rivers Petroleum, LLC (In re Five Rivers Petroleum, 2013 Bankr. LEXIS 678, *23 (Bankr. W.D. Pa. Feb. 22, 2013 ("[T]he appointment of a [t]rustee in a [c]hapter 11 case is an extraordinary remedy which should not be granted lightly, as it may impose a substantial financial burden on a hard-pressed debtor seeking relief under the Bankruptcy Code.". "If a court finds that the moving party has discharged this burden, it shall appoint a trustee, but determining whether the moving party has satisfied its burden under either subsection is committed to the court s discretion." In re G-I Holdings, 385 F.3d at 318 (citations omitted. 19. As stated previously, Rose generally asserts that a Chapter 11 Trustee should be appointed in these cases because the PAA, the PAACL and their directors and officers, failed to adhere to requisite corporate governance procedures and/or otherwise grossly mismanaged the business affairs of the PAA and PAACL. However, beyond these conclusory assertions, Rose fails to provide any specific evidence, let alone clear and convincing evidence, that current management is mismanaging the Debtors operations or is so conflicted that they cannot discharge their fiduciary obligations to these bankruptcy estates and their creditors. In point of fact, and in contravention to at least a portion of Rose s argument, after a lengthy evidentiary hearing, this Court approved the retention of Holiday Fenoglio Fowler, L.P. ("HFF" as real estate broker and capital advisor for the Debtors. In doing so, this Court found that the pre and 6
Document Page 7 of 9 post-petition actions of the directors in and relating to the retention of HFF was in compliance with existing corporate governance documents and applicable State law. 5 20. The Committee submits that without further specifics/evidence as to the actual conduct of current management that sufficiently demonstrates cause, including fraud, dishonesty, incompetence or gross mismanagement, as required under Section 1104(a(1, the appointment of a Chapter 11 Trustee is not warranted and the Motion to Appoint should be denied without prejudice. Should facts and/or circumstances arise or come to light that would warrant the appointment of a Chapter 11 Trustee under Section 1104, the Committee would reserve its rights to seek such an appointment. 21. With regard to the interest of creditors under Section 1104(b, aside for a short conclusory statement that a Chapter 11 Trustee would provide the "Debtors" with a true fiduciary to the bankruptcy estate, Rose offers no insight as to why the appointment of a Chapter 11 Trustee would serve the interests of creditors in these Bankruptcy Cases. See Motion to Appoint, Argument, Section II. 22. Contrary to Rose s assertions, the Committee submits that the appointment of Chapter 11 Trustee at this stage of these Bankruptcy Cases would not serve the interests of creditors. A robust sale process is well underway. It is the Committee s understanding that in the next few weeks the Debtors will be filing motions to approve bid and other sale procedures. At this point, it does not seem prudent to disrupt the sale process by bringing in a Chapter 11 Trustee, with the added delays and costs associated with the same. 22. The Committee is concerned that the efforts of Rose (and now the PAAPA is not about what is best for the these estates, creditors and interest holders, but an expensive 5 It is the Committee's understanding that based upon the evidence presented at the hearing on the HFF retention, the decision by the directors to place the PAA and PAACL into bankruptcy and ratification of the same followed the same protocol and procedure as that used by the directors in retaining HFF. 7
Document Page 8 of 9 distraction and fight between Rose and former and current directors with Rose offering no demonstration of how her efforts will ultimately benefit these Bankruptcy Cases and their estates and creditors. By example, the Conclusion in the Motion to Appoint confusingly states that, among other things, the appointment a Chapter 11 Trustee is necessary to provide members with adequate information and to "ensure that proper procedure and rules of governance are being followed with respect to the oversight and management of the Debtors". The Committee is confused as to how this requested relief can be accomplished by the appointment of a Chapter 11 Trustee, who if appointed, would not need to consult with, or seek the approval of, members, directors, officers or other management for actions he or she would take in the administration of these Bankruptcy Cases. In effect, the appointment of a Chapter 11 Trustee would disenfranchise officers, directors and other management from any oversight. 23. For the reason stated above, the Committee submits that the Motion to Appoint should be denied without prejudice. Should facts and/or circumstances arise or come to light that would warrant the appointment of a Chapter 11 Trustee, the Committee reserves the right to seek such appointment. WHEREFORE, the Committee requests that this Response be made a part of the record at the hearing held on this matter, that the Committee be permitted to be heard at the hearing on this matter and that the Court deny the Motion to Appoint without prejudice and grant just and further relief as this Court deems appropriate. [SIGNATURE PAGE TO FOLLOW] 8
Document Page 9 of 9 Respectfully submitted, LEECH TISHMAN FUSCALDO & LAMPL, LLC Dated: August 8, 2017 By:/s/ David W. Lampl David W. Lampl, Esquire PA I.D. No. 28900 John M. Steiner, Esquire PA ID No. 79390 Leech Tishman Fuscaldo & Lampl, LLC 525 William Penn Place, 28 th Floor Pittsburgh, PA 15219 Telephone: 412.261.1600 Facsimile: 412.227.5551 dlampl@leechtishman.com jsteiner@leechtishman.com 9
Case 17-22222-JAD Doc 225-1 Filed 08/08/17 Entered 08/08/17 15:54:25 Desc Certificate of Service Page 1 of 5 IN THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA IN RE: PITTSBURGH ATHLETIC ASSOCIATION, et al. 1 Debtors. YVONNE ROSE, AS MEMBER AND MEMBER OF BOARD OF DIRECTORS OF THE PITTSBURGH ATHLETIC ASSOCIATION, v. (NO RESPONDENT. Movant, Jointly Administered at: Bankruptcy Case No. 17-22222-JAD Bankruptcy Case Nos: 17-22222-JAD 17-22223-JAD Chapter 11 The Honorable Jeffery A. Deller Docket No. Related to Docket Nos. 183 and 187 Hearing Date: August 22, 2017 Hearing Time: 10:00 am ET Response Deadline: August 8, 2017 CERTIFICATE OF SERVICE I, David W. Lampl, do hereby certify that those parties listed on Attachment "A" requesting electronic service were served on August 8, 2017 via the Court's CM/ECF system and electronic mail with the following document: RESPONSE OF THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF PITTSBURGH ATHLETIC ASSOCIATION, ET AL., TO THE MOTION TO APPOINT CHAPTER 11 TRUSTEE PURSUANT TO 11 U.S.C. 1104(a and (b. 1 The Debtors have the following cases pending: Pittsburgh Athletic Association, Case No. 17-22222-JAD and the Pittsburgh Athletic Association Land Company, Case No. 17-22223-JAD, both cases are being jointly administered under Case No. 17-22222-JAD.
Case 17-22222-JAD Doc 225-1 Filed 08/08/17 Entered 08/08/17 15:54:25 Desc Certificate of Service Page 2 of 5 Respectfully Submitted, Dated: August 8, 2017 LEECH TISHMAN FUSCALDO & LAMPL, LLC By:/s/ David W. Lampl David W. Lampl, Esquire PA I.D. No. 28900 John M. Steiner, Esquire PA I.D. No. 79390 Leech Tishman Fuscaldo & Lampl, LLC 525 William Penn Place, 28 th Floor Pittsburgh, PA 15219 Telephone: 412-261-1600 Facsimile: 412-227-5551 dlampl@leechtishman.com jsteiner@leechtishman.com
Case 17-22222-JAD Doc 225-1 Filed 08/08/17 Entered 08/08/17 15:54:25 Desc Certificate of Service Page 3 of 5 ATTACHMENT "A"
Case 17-22222-JAD Doc 225-1 Filed 08/08/17 Entered 08/08/17 15:54:25 Desc Certificate of Service Page 4 of 5 Jordan S. Blask Tucker Arensberg, P.C. 1500 One PPG Place jblask@tuckerlaw.com Matthew James Burne Tucker Arensberg, P.C. 1500 One PPG Place mburne@tuckerlaw.com Claudia Davidson Office of Claudia Davidson 429 Fourth Avenue, Ste. 500 Law & Finance Building Pittsburgh, PA 15219 Claudia.davidson@pghlaborlawyers.com Thomas J. Michael 436 S. Main Street, Suite 200 Pittsburgh, PA 15220 tmichael@tjmandassociates.com Sloane B. O'Donnell c/o Tucker Arensberg, P.C. 1500 One PPG Place sodonnell@tuckerlaw.com T. Lawrence Palmer Office of the Attorney General of PA 564 Forbes Avenue Pittsburgh, PA 15219 lpalmer@attorneygeneral.gov William C. Price Clark Hill PLC 301 Grant Street, 14 th Floor Pittsburgh, PA 15219 wprice@clarkhill.com David K. Rudov Rudov Law 437 Grant Street, Suite 1806 The Frick Building Pittsburgh, PA 15219 david@rudovlaw.com Michael A. Shiner Tucker Arensberg, P.C. 1500 One PPG Place mshiner@tuckerlaw.com Jillian Nolan Snider Tucker Arensberg, P.C. 1500 One PPG Place jsnider@tuckerlaw.com Brett A. Solomon Tucker Arensberg, P.C. 1500 One PPG Place bsolomon@tuckerlaw.com John A. Straka, III Straka & Gustine, LLP 435 Beaver Street, Second Floor Sewickley, PA 15143 john@strakalaw.com S. James Wallace 845 N. Lincoln Avenue Pittsburgh, PA 15233 sjw@sjwpgh.com Norma Hildenbrand, on Behalf of the U.S. Trustee by Office of the U.S. Trustee Suite 970 Liberty Center 1001 Liberty Avenue Norma.L.Hildenbrand@usdoj.gov
Case 17-22222-JAD Doc 225-1 Filed 08/08/17 Entered 08/08/17 15:54:25 Desc Certificate of Service Page 5 of 5 David A. Golin, Esquire Arnstein & Lehr, LLP 161 N. Clark, Suite 4200 Chicago, IL 60601 DABolin@arnstein.com Michael J. Joyce, Esquire Saul Ewing, LLP One PPG Place, 30 th Floor mjoyce@saul.com Eric D. Rosenberg Metz Lewis Brodman Must O'Keefe, LLC 535 Smithfield Street, Suite 800 erosenberg@metzlewis.com John R. O'Keefe, Jr. Metz Lewis Brodman Must O'Keefe, LLC 535 Smithfield Street, Suite 800 jokeefe@metzlewis.com Robert O. Lampl 960 Penn Avenue, Suite 1200 rlampl@lampllaw.com