Proposed and Revised Chapter 11 Confirmation Orders, and Proffers of Testimony
- Orders. While Local Rule 9013(b) does not require proposed confirmation orders to be filed, draft orders are often circulated to and negotiated among select parties. To provide notice of this process, Judge Davis expects that proposed confirmation orders should be filed, and as revisions are made, that such revisions be circulated to the Court, counsel for any official committees, the Office of the United States Trustee, and any parties having objected to the plan or in active negotiations regarding provisions of the plan. Prior to a hearing, he would like the most recent draft to be filed on the docket with a cover sheet titled “Notice of Filing Proposed Order.” This notice should be filed using the <document> event and linked to the plan. It should also include a “redline” demonstrating whatever changes have been made since the original proposed order was circulated.
- Proffers of Testimony. Depending on the complexity of the case, Judge Davis believes that a written proffer of the testimony in support of the elements of section 1129(a), and where needed, section 1129(b), can be helpful in expediting the hearing. In some cases, Judge Davis may request such a proffer of the plan proponent. If he does so, or if you decide on your own to submit a proffer, please file the proffer with the court, preferably the day before the confirmation hearing.
Disclosure Statement Tips
On the topic of disclosure statements, Judge Davis would direct parties’ attention to a March 2014 email circulated by Lisa Fancher, then Chair of the Bankruptcy Law Section of the Austin Bar Association, which said:
As some of you know, Judge Davis has been focusing on disclosure statements lately and has offered some suggestions in court for improving them. This summary is being provided to you in order to communicate his suggestions to all Austin bankruptcy lawyers.
Judge Davis says that the disclosure statements that he sees are generally fairly good and cover the required Metrocraft elements. He also says that Austin lawyers are doing a reasonably good job of managing Chapter 11 cases. However, he believes that with relatively minor retooling to disclosure statement forms, they could be improved and made more useful to creditors and equity holders. While his suggestions are particularly important in connection with individual and small Chapter 11 cases in which there is no creditors’ committee, all Chapter 11 disclosure statements would benefit from including them.
His suggestions are as follows:
- Add a thumbnail summary in the introductory section of the disclosure statement describing what the plan provides and how it will affect impaired creditors, unsecured creditors and equity holders: what, if anything, does the plan propose to distribute, and what are the risks that this proposed treatment will not occur.
- Make the disclosure statement adequate at the time that it is initially filed if at all possible.
- If it is necessary to amend the disclosure statement prior to the hearing, please do so as far in advance of the hearing as possible, and email his law clerk (Sarah_Wood@txwb.uscourts.gov (link sends e-mail)) a redline showing the changes made.
- Provide better financial disclosure. This is the area of the greatest concern.
- Don’t attach all of the monthly operating reports; they create bulk without offering enough information. If you believe the financial information in the MORs is the most appropriate information, then provide a chart showing the numbers on a monthly basis.
- In general, before attaching any voluminous document, consider whether the information contained in the document could be summarized. Even with disclosures, less could be more.
- Include estimates of outstanding professional fees and projected future fees.
- Tailor the financial disclosures to the needs of those impaired creditors and equity holders who have not already agreed to their treatment and will be voting on the plan. If it is a liquidating plan, that could be very simple.
- If it will be an operating plan, provide historical information regarding operations or explain why operations will be different in the future.
- In business cases, provide appropriately detailed income, balance sheet, and statement of changes in financial condition projections. Also, include where appropriate a cash flow budget showing cash on hand as of (or near) the time of the disclosure statement hearing, and anticipated cash on the effective date.
- In individual cases that resemble Chapter 13 cases, provide statements of anticipated income and expenses similar in detail to Schedules I and J, but (in most cases) on a monthly basis for the life of the plan.
- Include a request to vote for the plan and the reasons that the plan is preferable to the alternatives, but be modest in the sales pitch and craft appropriate disclaimers; think like a securities lawyer.
- Tailor the boilerplate (including the Metrocraft factors) to fit the facts of the case.
- A table of contents would be very helpful for both the disclosure and the plan, particularly if the document is 25 pages or more.
- With respect to preserving causes of action, please refer to Judge Davis’s findings of fact and conclusions of law in Ciesla v. Harney Management Partners, Adv. Pro. No. 13-01013, Doc. No. 40), which is posted on the Court’s website at: 13-01013 Michael Ciesla Trustee of the KLN Liquidating Trust v. Harney Management Partners.
[Ed. Note: Ciesla is also instructive regarding Judge Davis’s views on preference defenses... and pleading requirements. And while you’re on the website, please take a look at the other judges’ links and their procedures.]
In Chapter 11 cases with many pending adversary proceedings, please file periodic litigation status reports that detail the status of the adversary proceedings filed in the case. For an example of a helpful chart that displays this information, see Post-Confirmation Litigation Status Report.