15-52071-cag Doc#10 Filed 0/06/16 Entered 0/06/16 09:32:34 Main Document Pg 1 of IN THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION IN RE: FWLL, LLC, DEBTOR. CHAPTER 7 CASE CASE NO. 15-52071-cag JOINT MOTION UNDER BANKRUPTCY RULE 9019 TO APPROVE SETTLEMENT BETWEEN CHAPTER 7 TRUSTEE AND DEFENDANT CARLOS URESTI THIS PLEADING REQUESTS RELIEF THAT MAY BE ADVERSE TO YOUR INTERESTS. IF NO TIMELY RESPONSE IS FILED WITHIN 21 DAYS FROM THE DATE OF SERVICE, THE RELIEF REQUESTED HEREIN MAY BE GRANTED WITHOUT A HEARING BEING HELD. A TIMELY FILED RESPONSE IS NECESSARY FOR A HEARING TO BE HELD. TO THE HONORABLE CRAIG A. GARGOTTA, UNITED STATES BANKRUPTCY JUDGE: NOW COME RANDOLPH N. OSHEROW, Chapter 7 Trustee for the estate of FWLL, LLC (the Trustee ) in the above captioned case (the Case ), together with Carlos Uresti and The Uresti Law Firm, P.C. (the Defendants and together with the Trustee, the Parties ) and hereby file this motion (the Motion ), pursuant to Section 105(a) of Title 11 of the United States Code (the Bankruptcy Code ) and Rule 9019(a) of the Federal Rules of Bankruptcy Procedure seeking approval of the settlement (the Settlement ) by and among the Trustee and the Defendants. In support of this Motion, the Parties respectfully represent as follows: I. JURISDICTION, VENUE, AND PROCEDURAL BACKGROUND 1. This Court has jurisdiction to consider the Motion pursuant to 2 U.S.C. 157 and 1334. This is a core proceeding pursuant to 2 U.S.C. 157(b)(2). Venue is proper before this Court pursuant to 2 U.S.C. 140 and 1409. L & B 14121/0013/L1152.DOC/ 1
15-52071-cag Doc#10 Filed 0/06/16 Entered 0/06/16 09:32:34 Main Document Pg 2 of 2. The statutory predicate for the relief requested herein is Section 105(a) of the Bankruptcy Code and Rule 9019(a) of the Bankruptcy Rules. 3. On August 27, 2015, the Debtor filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. The case was converted to a Chapter 7 case on November 4, 2015. 4. Randolph N. Osherow was appointed Chapter 7 Trustee in the case. 5. As the duly appointed Trustee, Mr. Osherow has the standing to pursue various claims, including collection of accounts receivable. 6. On April 19, 2016, the Trustee filed his Original Complaint styled Randolph N. Osherow, in his capacity as Chapter 7 Trustee vs. Carlos Uresti and The Uresti Law Firm, P.C. ( Defendants ); Adversary 16-0502. 7. Thereafter, on May 23, 2016, Defendants filed their Original Answer, Affirmative Defenses and Counter-Claims to Plaintiff s Original Complaint.. Discovery has been propounded by the Trustee and answered by the Defendants. 9. In the Adversary, the Trustee sought recovery from the Defendants for a loan or advance of $40,000 made by the Debtor to the Defendants. II. RELIEF REQUESTED 10. The Trustee and Defendants have reached an agreement whereby all claims and causes of action brought in the adversary would be compromised and settled in exchange for the payment by Defendants of the sum of $30,000. 11. The settlement sum of $30,000.00 has now been delivered by the Defendants to the Trustee in contemplation of Court approval of this agreement. 12. In the Original Answer, Defendants assert a number of affirmative defenses, counterclaims, and offsets including misrepresentations by an officer of the Debtor and L & B 14121/0013/L1152.DOC/ 2
15-52071-cag Doc#10 Filed 0/06/16 Entered 0/06/16 09:32:34 Main Document Pg 3 of fraudulent inducement at the outset. 13. In addition, Defendants allege they provided certain legal services to the Debtor for which they were not paid. 14. Further, Defendants allege that they were to have been paid finders fees by the Debtor for bringing additional investors into the company that they were owed. 15. Following discovery and discussions between the Parties, the Trustee believes that the settlement of the instant Adversary for the sum referenced above of $30,000 is fair and equitable and in the best interest of the bankruptcy estate. Following approval of this Motion, the Trustee will dismiss the Adversary Proceeding with prejudice as to it being refiled and also provide the Defendants with a written release. 16. By this Motion, the Trustee asks the Court to approve the Settlement referenced above. III. ARGUMENTS AND AUTHORITY A. Standards Under Rule 9019(a) 17. Pursuant to Section 105(a) of the Bankruptcy Code and Rule 9019(a) of the Bankruptcy Rules, this Court may approve the compromise reached by the Trustee and the Debtor. One of the goals of Congress in fashioning the Bankruptcy Code was to encourage parties in a distress situation to work out a deal among themselves. In re Mirant Corp., 334 B.R. 00, 11 (Bankr. N.D. Tex. 2005). Compromises are favored in bankruptcy because they minimize litigation costs and further the parties interest in expediting the administration of a bankruptcy case. In re Martin, 91 F.3d 39, 393 (3d Cir. 1996) (quoting 9 Collier on Bankruptcy 9019.03[1] (15th ed. Rev. 1993)). L & B 14121/0013/L1152.DOC/ 3
15-52071-cag Doc#10 Filed 0/06/16 Entered 0/06/16 09:32:34 Main Document Pg 4 of 1. Bankruptcy Rule 9019 governs the procedural requirements to be followed before a settlement may be approved, and provides in relevant part that, [o]n motion by the trustee and after notice and a hearing, the court may approve a compromise and settlement. Fed. R. Bankr. P. 9019(a). Bankruptcy Rule 9019(a) empowers a bankruptcy court to approve compromises and settlements if they are fair and equitable and in the best interest of the estate. In re Cajun Elec. Power Coop., Inc., 119 F.3d 349, 355 (5th Cir. 1997); In re Foster Mortgage Corp., 6 F.3d 914, 917 (5th Cir. 1995). Moreover, Bankruptcy Code Section 105(a) provides in pertinent part that [t]he court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title. 11 U.S.C. 105(a). 19. Approval of a proposed compromise is left to the sound discretion of the reviewing court. See, e.g., In re Hibbard Brown & Co., Inc., 217 B.R. 41 (Bankr. S.D.N.Y. 199) (noting that courts should exercise their discretion in light of the general public policy favoring settlements ). The burden of establishing the fairness of a compromise rests on the proponent(s) of the compromise; however, the court does not conduct a mini-trial or evidentiary hearing to adjudicate the issues being settled. The Court is not to decide the numerous questions of law and fact raised by the compromise, but is to canvass the issues and see whether the settlement falls below the lowest point in the range of reasonableness. ARS Brook, LLC v. Jalbert (In re ServiSense.com, Inc.), 32 F.3d 6, 72 (1st Cir. 2004); Vaughn v. Drexel Burnham Lambert Group, Inc. (In re Drexel Burnham Lambert Group, Inc.), 134 B.R. 499, 505 (Bankr. S.D.N.Y. 1991). Courts generally rel[y] heavily on the trustee and defer to the trustee s judgment, provided there is a legitimate business justification for the settlement. Martin, 91 F.3d at 395. Courts will approve a settlement if it is in the best interest of the estate. See In re Marvel Entertainment Group, Inc., 222 B.R. 243, 249 (D.Del. 199). L & B 14121/0013/L1152.DOC/ 4
15-52071-cag Doc#10 Filed 0/06/16 Entered 0/06/16 09:32:34 Main Document Pg 5 of 20. In determining whether a proposed compromise is fair and equitable, a court should consider the following factors: a. The probabilities of ultimate success should the claim be litigated; b. An educated estimate of (i) the complexity, expense, and likely duration of such litigation, (ii) possible difficulties of collecting on any judgment which might be obtained and (iii) all other factors relevant to a full and fair assessment of the wisdom of the proposed compromise; and c. The comparison of the terms of the settlement and compromise with the likely rewards of litigation. Protective Comm. for Indep. Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414, 424 (196). In In the Matter of Jackson Brewing Co., the Fifth Circuit specified further considerations, including (a) uncertainties of fact and law which impact the probability of success in the litigation and (b) delay and inconvenience which impact the complexity or duration of the litigation. 624 F.2d 599, 602-603 (5th Cir. 190) (decided under the Bankruptcy Act). In considering all factors, the Fifth Circuit has explained that courts should consider the best interest of the creditors, with proper deference to their reasonable views, and consider the extent to which the settlement is truly the product of arms-length bargaining, and not of fraud or collusion. See In re Cajun Elec. Power Coop., Inc., 119 F.3d at 356. 21. The Trustee submits that the proposed compromise falls well within the range of reasonableness and meets the standards of TMT Trailer Ferry, Jackson Brewing, and other applicable law. Controlling authority weighs in favor of the approval of the compromise and settlement in light of the practical reality that compromises are... often times desirable and wise methods of bringing to a close proceedings [that are] otherwise lengthy, complicated and costly. Jackson Brewing, 624 F.2d at 602 (quoting Case v. Los Angeles Lumber Prods. Co., 30 U.S. 106, 130 (1939)). L & B 14121/0013/L1152.DOC/ 5
15-52071-cag Doc#10 Filed 0/06/16 Entered 0/06/16 09:32:34 Main Document Pg 6 of B. Application of Relevant Factors to the Settlement. 22. The Settlement is the product of arms-length negotiations between the Parties. Other than the terms provided in the Settlement, there are no side agreements, arrangements, or understandings between the Trustee and Defendants. The compromises present the most efficient resolution of this dispute. 23. Considering all the circumstances as a whole, the consensual resolution of this case is in the best interest of the Debtor and its creditors. 24. The amount to be paid to the Trustee in settlement represents 75% of the principal amount sought by the Trustee. As noted above, the Defendants have asserted various defenses, including set-offs. The Trustee is not in possession of many of the Debtor s documentsteh because they were seized by the Federal Bureau of Investigation before the Trustee s appointment. Thus, litigating this matter would be difficult and expensive, and the outcome could not be guaranteed. Taking into account these difficulties and risks, the Trustee believes that settling the adversary case as outlined above is in the best interest of the estate and all of the Debtor s creditors. 25. For all the foregoing reasons, the Trustee contends that the proposed Settlement satisfies the applicable standards for such compromises and asks that it be approved by the Court. IV. PRAYER WHEREFORE, PREMISES CONSIDERED, the Trustee prays that this Court enter an Order, approving the Settlement and authorizing the Trustee to take such actions as necessary to consummate the Settlement and for such other relief as is just and proper. Respectfully submitted: August 6, 2016. L & B 14121/0013/L1152.DOC/ 6
15-52071-cag Doc#10 Filed 0/06/16 Entered 0/06/16 09:32:34 Main Document Pg 7 of Respectfully submitted LANGLEY & BANACK, INC. 745 E. Mulberry, Suite 900 San Antonio, TX 7212 Telephone: (210) 736-6600 Telecopier: (210) 735-69 By: /s/ David S. Gragg DAVID S. GRAGG State Bar No. 0253300 dgragg@langleybanack.com NATALIE F. WILSON State Bar No. 240776779 ATTORNEYS FOR THE TRUSTEE AGREED TO: CHAPTER 7 TRUSTEE Randolph N. 0 ero ral.n.no sst to.-1 in his capacity as Chapter 7 Trustee,e._;/).20/p. Texas State Bar No. 15335500 342 West Woodlawn, Suite 100 San Antonio, Texas 7212 Telephone: (210) 73-3001 Telecopier: (210) 737-6312 rosherow@hotmail.com ATTORNEY FOR THE DEFENDANTS E. Anthony Hervo u-111,4- pgtimy Law Office of H. Ant ony Hervol 0/6/2-6/4 4414 Centerview Drive, Suite 200 San Antonio, Texas 722 (210) 522-9500 (210) 522-0205 Fax email: hervol@sbcglobal.net L & B 14121/0013/L1152.DOC/ 7
15-52071-cag Doc#10 Filed 0/06/16 Entered 0/06/16 09:32:34 Main Document Pg of CERTIFICATE OF SERVICE I hereby certify that on August 6, 2016, a true and correct copy of the above and foregoing instrument has been served via the Court s electronic transmission facilities to all parties who have requested electronic service and mailed, first class, postage prepaid to the parties on the mailing matrix attached hereto. H. Anthony Hervol Law Office of H. Anthony Hervol 4414 Centerview Drive, Suite 200 San Antonio, Texas 722 Attorney for Defendants /s/ David S. Gragg DAVID S. GRAGG L & B 14121/0013/L1152.DOC/