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BRACEWELL LLP Robert G. Burns Mark E. Dendinger Joshua D. Neifeld (admitted pro hac vice) 1251 Avenue of the Americas New York, New York 10020 Telephone: (212) 508-6100 Facsimile: (212) 508-6101

Proposed Counsel for Debtors and Debtors in Possession

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK

In re Chapter 11

Seabras 1 USA, LLC et al., Case No. 19-14006 (SMB)

Debtors.1 (Jointly Administered)

Related Docket Nos. 70, 95

REPLY IN SUPPORT OF DEBTORS’ APPLICATION FOR ENTRY OF AN ORDER AUTHORIZING AND APPROVING RETENTION AND EMPLOYMENT OF BRACEWELL LLP AS ATTORNEYS FOR THE DEBTORS NUNC PRO TUNC TO THE PETITION DATE

1 The Debtors in these chapter 11 cases, along with the last four digits of their respective tax identification numbers, are Seabras 1 USA, LLC (0027) and Seabras 1 Bermuda Ltd. (7149). The Debtors’ principal offices are located at 600 Cummings Center, Suite 268-Z, Beverly, MA 01915.

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TABLE OF CONTENTS

PRELIMINARY STATEMENT ...... 1

REPLY ...... 5

I. Bracewell is Disinterested and Has no Adverse Interest as a Matter of Law ...... 5

II. Bracewell Never Represented Seabras Group ...... 6

A. Bracewell Was Retained Only by Seabras Bermuda ...... 6

B. No Attorney Client Relationship was Formed Between Bracewell and Seabras Group ...... 7

III. There is No Actual Conflict that Precludes Bracewell’s Retention Even If the Court Were to Find Bracewell Represented Seabras Group ...... 11

IV. The Debtors Have the Right to Select Their Own Counsel and Denying the Bracewell Retention Application Will Damage the Debtor’s Estates ...... 13

V. The Payments Made In The Preference Period Should Not Disqualify Bracewell From Representing The Debtors In These Cases ...... 14

RESERVATION OF RIGHTS ...... 15

CONCLUSION ...... 15

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TABLE OF AUTHORITIES

Page(s)

Cases

In re Ampal-Am. Isr. Corp., 534 B.R. 569 (Bankr. S.D.N.Y. 2015), aff’d, 554 B.R. 604 (S.D.N.Y. 2016) ...... 5, 6, 12

In re Ampal-Am. Isr. Corp., 554 B.R. 604 (S.D.N.Y. 2016) ...... 6

Bank Brussels Lambert v. Coan (In re AroChem Corp.), 176 F.3d 610 (2d Cir. 1999)...... 6

In re Caldor Inc. NY, 193 B.R. 165 (Bankr. S.D.N.Y. 1996) ...... 5, 14

In re Casesars Entertainment Operating Co., Inc., 561 B.R. 420 (Bankr. N.D. Ill. 2015) ...... 13

In re Codesco Inc., 18 B.R. 997 (Bankr. S.D.N.Y. 1982) ...... 5

Ello v. Singh, No. 05-Cv-9625 (KMK), 2006 WL 2270871 (S.D.N.Y. Aug. 7, 2006) ...... 10

In re Corp., No. 01-16034 (AJG), 2002 WL 32034346 (Bankr. S.D.N.Y. May 23, 2002) ...... 13

In re Granite Partners, L.P., 219 B.R. 22 (Bankr. S.D.N.Y. 1998) ...... 5

GSI Commerce Solutions, Inc. v. BabyCenter, L.L.C., 618 F.3d 204 (2d Cir. 2010)...... 11

Hashemi v. Shack, 609 F. Supp. 391 (S.D.N.Y. 1984)...... 11

Latin Am. Fin. Grp., Inc. v. Pareja, No. 04 Civ. 10082 (DLC), 2006 WL 2032627 (S.D.N.Y. July 19, 2006) ...... 8

Makhoul v. Watt, Tieder, Hoffar & Fitzgerald, LLP, No. 11-CV-5108 (PKC), 2015 WL 5158477 (E.D.N.Y. Sept. 2, 2015) ...... 8, 9

Merck Eprova AG v. ProThera, Inc., 670 F. Supp. 2d 201 (S.D.N.Y. Sept. 17, 2009) ...... 8

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Pellegrino v. Oppenheimer & Co., 49 A.D.3d 94 (N.Y. App. Div. 2008) ...... 8

In re Pillowtex, Inc., 304 F.3d 246 (3rd Cir. 2002) ...... 15

In re Project Orange Assocs., LLC, 431 B.R. 363 (Bankr. S.D.N.Y. 2010) ...... 5, 6

Pryor v. Ready & Pontisakos (In re Vouzianas), 259 F.3d 103 (2d Cir. 2001)...... 5

Wei Cheng Chang v. Pi, 288 A.D.2d 378 (N.Y. App. Div. 2001) ...... 8

In re West End Fin. Advisors, LLC, No. 11-11152 (SMB), 2012 WL 2590613 (Bankr. S.D.N.Y. July 3, 2012) ...... 15

In re Wingspread Corp., 152 B.R. 861 (Bankr. S.D.N.Y. 1993) ...... 14

Statutes

Bankruptcy Code § 327 ...... 4, 5, 6, 12, 15

Bankruptcy Code § 327(a) ...... 5, 14

Bankruptcy Code § 547 ...... 14

English Law ...... 7

Other Authorities

https://www.sra.org.uk/solicitors/standards-regulations/code-conduct-solicitors/; https://www.legislation.gov.uk/uksi/2017/692/part/2 ...... 7

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Seabras 1 USA, LLC (“Seabras USA”) and Seabras 1 Bermuda Ltd. (“Seabras

Bermuda” and, together with Seabras USA, the “Debtors”), the debtors and debtors in

possession in the above-captioned chapter 11 cases (these “Cases”), acting by and through their

undersigned counsel, respectfully submit this reply (this “Reply”) to the objection [D.I. 95] (the

“Objection”) of Seabras Group, LLC (“Seabras Group”) to the Debtors’ Application for Entry

of an Order Authorizing and Approving Retention and Employment of Bracewell LLP as

Attorneys for the Debtors Nunc Pro Tunc to the Petition Date [D.I. 70] (the

“Bracewell Retention Application”). In support of this Reply, the Debtors rely on: (i) the

Declaration of Robert G. Burns (the “Burns Declaration”) attached as Exhibit B to the

Bracewell Retention Application; (ii) the Declaration of Larry Schwartz (the

“Schwartz Declaration”), which is being filed simultaneously herewith; and (iii) the

Declaration of Oliver Irwin (the “Irwin Declaration”)1, which is being filed simultaneously

herewith, and respectfully represent as follows:

PRELIMINARY STATEMENT

1. Bracewell was retained by Seabras Bermuda pursuant to an engagement letter

dated May 16, 2018. Bracewell later expanded the scope of its representation pursuant to an

engagement letter executed with Seabras Bermuda and Seabras USA dated December 17, 2019.

Bracewell was never retained by any other entity in this matter. Bracewell never represented,

provided a bill for services, or was paid by any entity other than the Debtors. The attempt by

Seabras Group to disqualify Bracewell is based upon a distortion of events where key

executives held positions in different interconnected entities. These principals understood at the

1 Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Irwin Declaration and Bracewell Retention Application, as applicable.

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time who Bracewell did and did not represent. No role fulfilled by Bracewell prevents

Bracewell from serving as Debtors’ counsel in these Cases.

2. Corporations are inanimate objects that act by and through their officers,

directors and authorized employees. The Objection is based on solely on the Declaration of

Todd Smith (the “Smith Declaration”), but Mr. Smith is not the sole arbiter of whether it was

reasonable for Seabras Group, as a corporate entity, to believe it was represented by Bracewell.

The underlying record clearly shows that other members of the Seabras Group board, as well as

Seabras Group’s executive officers, were abundantly clear that Bracewell was counsel only to

Seabras Bermuda. When Mr. Smith made occasional references to Bracewell as Seabras

Group’s counsel he was contemporaneously corrected. Moreover, the record will show that

some of his purported interactions with Bracewell on which his declaration rests stretch the

bounds of credibility.

3. The key players relevant to the allegations raised in the Objection acted in

different capacities for distinct legal entities during the months leading up to the filing of these

Cases. The following will give the Court a sense of the many roles the parties played:

 Larry Schwartz, Andrew Bax and Roger Kuebel (collectively, the “Executive Team”) were the Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, respectively, of: (i) Seabras Group; (ii) Seabras Bermuda; and (iii) Seabras USA. They were also members of the boards of directors of all three entities.2

 Todd Smith is the Senior Vice President, Private Infrastructure of Partners Group (USA), Inc. and a member of the Seabras Group Board.

 Todd Bright is a Partner with Partners Group (USA), Inc., Mr. Bright is not a member of the Seabras Group Board.

2 The Objection makes the incredible claim that Bracewell is still representing Seabras Group because Patrick Hill was the corporate secretary for Seabras Group for eight days following the petition date and is the general counsel of Seabras Group. See Obj. at 9, n. 9. Mr. Hill is not now, nor has he ever been, the general counsel of Seabras Group. As for the brief period while he remained corporate secretary, Bracewell dealt with Mr. Hill solely in his capacity as General Counsel of Seaborn Management. See Schwartz Decl. ¶ 5.

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 Adam Pilchman is a Senior Vice President of Partners Group (USA), Inc., Mr. Pilchman is not a member of the Seabras Group Board.

 Scott Salopek is an employee of Partners Group (USA), Inc., Mr. Salopek is not a member of the Seabras Group Board.

(Messrs. Smith, Bright, Pilchman and Salopek are referred to collectively as the “Partners

Group Team”). Despite the fact that Partners Group (USA) is not a direct or indirect

shareholder in the project, these individuals took the lead role on the restructuring and other

matters that were under discussion during the time frame referenced in the Smith Declaration.

Mr. Bright and later Mr. Pilchman were active in giving feedback on the restructuring proposal

discussed in the Objection. Yet only Mr. Smith had any role with Seabras Group. The others

had no legal connection whatsoever to Seabras Group. The actions of the Partners Group Team

vis-à-vis Seabras Group makes evident that Partners Group was working to protect and advance

at all times its interests in the project and largely disregarded Seabras Group in the process.

4. Seabras Group’s Objection rests on Mr. Smith’s factually inaccurate premise that

Bracewell represented Seabras Group prior to the commencement of these Cases. Attached to

the Smith Declaration are a limited set of carefully curated emails that paint a very one-sided

and misleading picture. Mr. Smith is not unsophisticated when it comes to the attorney-client

relationship. He is a former lawyer. In his current role as a senior member of a worldwide

private equity firm he undoubtedly comes into contact with lawyers on a daily basis. While it is

now convenient to use select emails he wrote to purportedly show he had some expectation of

representation, the record will show that Mr. Smith had actual knowledge that Bracewell was

not Seabras Group counsel. Additionally, Mr. Smith was a member of the Partners Group Team

which has historically received advice from Sidley Austin LLP (“Sidley”). It was not reasonable

for him to expect that Bracewell was his counsel. He had every reason to conclude the opposite.

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5. Even, assuming arguendo, that Bracewell could be construed to have effectuated

a common law attorney-client relationship with Seabras Group prior to the Petition Date, the

Objection must still fail. Nothing in the Objection reveals circumstances that give rise to any

actual conflict which would prevent Bracewell from carrying out effective and disinterested

representation of the Debtors. Accordingly, there is no conflict for purposes of section 327 of

the Bankruptcy Code.

6. Seabras Group’s other arguments in opposition similarly fail. First, Bracewell is

not rendered un-disinterested simply because Bracewell advised the Debtors in the lead up to

filing these Cases. While Seabras Group contends that there are valuable breach of fiduciary

duty claims existing against Seabras Bermuda’s directors and officers, those claims have yet to

be put forth and they are not related to the successful resolution of these cases. In any event,

conflicts counsel could be employed to investigate such claims. Second, Bracewell is not

precluded from being retained as Debtors’ counsel because of Seabras Group’s allegation that

the Debtors’ current management should be replaced. By Seabras Group’s own admission, the

standard for retention is deferential and it does not preclude a retention order simply because a

party-in-interest is seeking to dislodge management. Lastly, Bracewell is not precluded from

being retained because it is the recipient of payments within the ninety day preference period of

these Cases. As discussed herein, it strains credulity to let ordinary course payments stand in the

way of a firm’s retention. A bright line rule to the contrary would make the retention of law

firms as debtor’s counsel nearly impossible.

7. As such, and for the reasons discussed herein, Seabras Group’s objection should

be overruled and the Court should authorize the Debtors to retain Bracewell as their counsel.

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REPLY

I. Bracewell is Disinterested and Has no Adverse Interest as a Matter of Law

8. Section 327 of the Bankruptcy Code permits a debtor to employ professionals to

represent the estate during bankruptcy with court approval. See, e.g., In re Project Orange

Assocs., LLC, 431 B.R. 363, 369 (Bankr. S.D.N.Y. 2010). Public policy favors permitting

parties to retain professionals of their choice. See, e.g., In re Caldor Inc. NY, 193 B.R. 165, 170

(Bankr. S.D.N.Y. 1996); In re Codesco Inc., 18 B.R. 997, 999 (Bankr. S.D.N.Y. 1982) (“Only

in the rarest cases should the trustee be deprived of the privilege of selecting his own

counsel[.]”) (citation omitted).

9. To qualify under section 327(a), professionals must be both disinterested and not

hold or represent any interest adverse to the estate. See Pryor v. Ready & Pontisakos (In re

Vouzianas), 259 F.3d 103, 107 (2d Cir. 2001) (citation omitted). As explained by the Project

Orange court, “[t]he structure of the Bankruptcy Code distills these dual requirements into a

single test for analysis of a conflict of interest.” 431 B.R. at 369-70; see also In re Granite

Partners, L.P., 219 B.R. 22, 33 (Bankr. S.D.N.Y. 1998) (observing that “the two prongs of

section 327(a) are duplicative and form a single test to judge conflicts of interest” and noting the

test concerns issues with “divided loyalties and affected judgements”). Whether an adverse

interest exists is best determined on a “case-by-case basis giving due consideration to the

totality of the circumstances.” In re Ampal-Am. Isr. Corp., 534 B.R. 569, 580 (Bankr. S.D.N.Y.

2015) (citations omitted) (“Ampal I”), aff’d, 554 B.R. 604 (S.D.N.Y. 2016) (“Ampal II”).

10. Moreover, “[t]he test is not retrospective; courts only examine present interests

when determining whether a party has an adverse interest.” In re Project Orange Assocs., LLC.,

431 B.R. at 370 (citing Bank Brussels Lambert v. Coan (In re AroChem Corp.), 176 F.3d 610,

623-24 (2d Cir. 1999)); accord Ampal II, 554 B.R. at 615. In this way, it is only when a former

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representation rises to the level of an actual present conflict that section 327 is implicated. See

Ampal I, 534 B.R. at 582 (discussing why limited prior representation did not create actual or

potential dispute). As discussed herein, Bracewell’s retention meets the legal standards

established by section 327 of the Bankruptcy Code.

II. Bracewell Never Represented Seabras Group

11. At its core, Seabras Group argues that Bracewell had an attorney-client

relationship with Seabras Group, which precludes its retention in these Cases under section 327

of the Bankruptcy Code. That contention is contradicted by the facts. Bracewell never

represented Seabras Group and no attorney-client relationship ever developed or existed.

A. Bracewell Was Retained Only by Seabras Bermuda

12. In May 2018, Seabras Bermuda retained Bracewell (UK) LLP (“Bracewell

UK”). See Irwin Decl. ¶ 6. On May 3, 2018, Mr. Irwin sent an email to the board of Seabras

Bermuda to confirm the terms of the engagement. See Irwin Decl., Exh. B. In his email, Mr.

Irwin wrote that “the contracting Seaborn entity (and thus the client) will be Seabras 1 Bermuda

Ltd.” See id. Like most law firms in England, Bracewell UK maintains a strict policy of

executing engagement letters with its clients and conducting stringent “Know Your Customer”

due diligence (“KYC”) on its prospective clients. Accordingly, Mr. Irwin further advised that

“[b]efore we can start work on this matter, in order to meet the requirements of the United

Kingdom’s anti-money laundering regime, we are required to identify Seabras 1 Bermuda Ltd

(“Seabras”) and any ultimate beneficial owners of the company.” See id. Bracewell UK

executed an engagement letter with Seabras Bermuda providing for the provision of services by

Bracewell UK and its affiliates to Seabras Bermuda. See Irwin Decl., Exh. E.

13. At no time has Bracewell ever signed an engagement letter with Seabras Group.

See Burns Decl. ¶ 17. At no time has Bracewell ever requested any materials from Seabras

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Group to conduct KYC due diligence regarding a Seabras Group retention. Irwin Decl. ¶ 7. At

no time has Seabras Group ever requested to execute an engagement letter with Bracewell.

Burns Decl. ¶ 17; Irwin Decl. ¶ 7. Bracewell has never requested, and Seabras Group has never

paid, any legal fees to Bracewell. Burns Decl. ¶ 17; Irwin Decl. ¶ 7. At no time has any

Bracewell attorney represented to Seabras Group, or any of its officers or directors, that

Bracewell was, or is, acting as counsel to Seabras Group. Irwin Decl. ¶ 7. Seabras Group’s

contention that Bracewell was acting for and on the behalf of Seabras Group is undermined by

these and other facts.

B. No Attorney Client Relationship was Formed Between Bracewell and Seabras Group

14. Mr. Irwin is a UK solicitor, at all relevant times he practiced in London pursuant

to relevant professional rules, and the Bracewell UK Engagement Letter provided that

Bracewell’s engagement would be governed by English Law. Under English law generally, the

question of who is a lawyer’s client is governed by contract and heavily regulated under the

Solicitors Regulation Authority for Solicitors in England and Wales and the Money Laundering,

Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations of 2017.3

There was no contract, let alone any necessary KYC undertaken in accordance with these

regulations with respect to Seabras Group retaining Bracewell. Under English law, Seabras

Group was not a client of Bracewell.

15. Similarly, under New York law, “the formation of an attorney-client relationship

is governed by contract principles.” See Latin Am. Fin. Grp., Inc. v. Pareja, No. 04 Civ. 10082

(DLC), 2006 WL 2032627, at *7 (S.D.N.Y. July 19, 2006). “The unilateral belief of a plaintiff

3See https://www.sra.org.uk/solicitors/standards-regulations/code-conduct-solicitors/; https://www.legislation.gov.uk/uksi/2017/692/part/2.

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alone does not confer upon him or her the status of a client.” Wei Cheng Chang v. Pi, 288

A.D.2d 378, 380 (N.Y. App. Div. 2001) (citations omitted). Rather, “to determine whether an

attorney-client relationship exists, a court must consider the parties’ actions[.]” Pellegrino v.

Oppenheimer & Co., 49 A.D.3d 94, 99 (N.Y. App. Div. 2008) (citations omitted). Specifically,

courts in this jurisdiction consider six factors to determine whether an attorney-client

relationship exists:

1) whether a fee arrangement was entered into or a fee paid; 2) whether a written contract or retainer agreement exists indicating that the attorney accepted representation; 3) whether there was an informal relationship whereby the attorney performed legal services gratuitously; 4) whether the attorney actually represented the individual in one aspect of the matter (e.g., at a deposition); 5) whether the attorney excluded the individual from some aspect of the litigation in order to protect another (or a) client's interest; 6) whether the purported client believes that the attorney was representing him and whether this belief is reasonable.

Makhoul v. Watt, Tieder, Hoffar & Fitzgerald, LLP, No. 11-CV-5108 (PKC), 2015 WL

5158477, at *4 (E.D.N.Y. Sept. 2, 2015) (quoting Merck Eprova AG v. ProThera, Inc., 670 F.

Supp. 2d 201, 210 (S.D.N.Y. Sept. 17, 2009). The burden is on the plaintiff to prove the

attorney-client relationship. See Makhoul, 2015 WL 5158477, at *4 (noting “a plaintiff must

show” the relevant factors).

16. As noted above, there was never a fee arrangement with Seabras Group or a

written engagement letter. Bracewell did not represent Seabras Group in any litigation or

deposition. Bracewell excluded the Partners Group Team from conversations with Seabras

Bermuda to preserve privileged advice. Moreover, despite allegations made in the Objection,

Bracewell received no confidential information unique to Seabras Group. Irwin Decl. ¶ 9. In

fact, numerous correspondence sent by and between Mr. Smith and Mr. Irwin had non-Seabras

Group personnel in copy which completely undermines any expectation of confidentiality or an

attorney-client privilege or relationship. See, e.g., Obj. at 6 (citing July 6, 2019 correspondence

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where Mr. Schwartz, Mr. Bright, and other Partners Group Team members are in copy).

Further, any information shared with Mr. Irwin was already shared with Seabras Bermuda or

shared at the same time. See, e.g., id.; Irwin Decl. ¶ 9.

17. Seabras Bermuda repeatedly made clear Bracewell was acting as its counsel. See

Schwartz Decl ¶ 10. Any contention that Mr. Smith believed Bracewell represented Seabras

Group should not be viewed as reasonable given the facts.

18. Seabras Group never questioned Bracewell’s representation until about three

weeks before these Cases were filed. See Irwin Decl. ¶ 10. At that time, the officers and

directors of Seabras Bermuda and the Partners Group Team were in severe conflict. See id. In

an effort to deprive Seabras Bermuda of its counsel, the Partners Group Team sought to replace

Bracewell as Seabras Bermuda’s counsel with the Partners Group Team’s preferred to

represent Seabras Bermuda going forward. Schwartz Decl. ¶¶ 12-13. Notably, at no time did

Mr. Smith ever attempt to terminate Bracewell as alleged counsel to Seabras Group.

19. Further, given the alleged client is a legal entity, there is the added question of

how Mr. Smith’s individual perceptions could create an attorney-client relationship between

Bracewell and Seabras Group. Mr. Smith is only one Seabras Group Board member. Mr.

Schwartz was also a Seabras Group Board Member at the time and did not have any belief that

Bracewell acted as counsel to Seabras Group. In the absence of a formal retention, the views of

one individual board member should not govern the creation of an implied attorney-client

relationship.

20. Mr. Smith’s concerted efforts to build a record that Bracewell was previously

serving as counsel to Seabras Group after the commencement of these Cases do not change the

reality. For example, on December 23, 2019, the day after the Debtors filed for bankruptcy, Mr.

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Smith wrote an email to Mr. Irwin wherein Mr. Smith made references to Bracewell acting as

“counsel for Seabras [Group] and its subsidiaries.” See Irwin Decl. ¶ 14. Later that day, Mr.

Irwin respond to Mr. Smith, advising him that “Bracewell does not represent Seabras Group,

LLC. We represent Seabras 1 Bermuda Limited.” See id.

21. As will become clear to this Court, Bracewell solely advised Seabras Bermuda

pursuant to the terms of its engagement. For example, Mr. Irwin only provided assistance on the

restructuring proposal discussed in the Objection after receiving direction from his Seabras

Bermuda (his client) to provide such assistance. Irwin Decl. ¶ 9. Similarly, Mr. Smith, fully

aligned with Partners Group, received legal services and/or advice from Sidley. See id. ¶ 5.

22. Thus, Mr. Smith’s assertion that he believed he was being represented by

Bracewell through Mr. Irwin is not reasonable and far from dispositive. As such, no attorney-

client relationship was formed. Cf. Ello v. Singh, No. 05-Cv-9625 (KMK), 2006 WL 2270871,

at *4 (S.D.N.Y. Aug. 7, 2006) (finding union representative plaintiff’s “subjective belief” that

opposing counsel represented him “patently unreasonable” where plaintiff should have known

counsel represented union and communications would not be kept confidential) (citations

omitted); Hashemi v. Shack, 609 F. Supp. 391, 395 (S.D.N.Y. 1984) (finding correspondence

read in their entirety makes clear that “defendants assumed no duty to represent [plaintiff]”).

23. The concurrent representation cases cited by Seabras Group (see Obj. ¶ 35) do

not compel a different result. In those cases, counsel was disqualified from suing a corporate

subsidiary of the firm’s current client where such entities were so aligned and intertwined so as

to deemed “a single entity for conflict purposes.” However, there is no allegation of an active

concurrent representation here. Moreover, the Second Circuit “agree[s] with the ABA that

affiliates should not be considered a single entity for conflicts purposes based solely on the fact

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that one entity is a wholly-owned subsidiary of the other, at least when the subsidiary is not

otherwise operationally integrated with the parent company.” GSI Commerce Solutions, Inc. v.

BabyCenter, L.L.C., 618 F.3d 204, 211 (2d Cir. 2010). In this case, Seabras Group and Seabras

Bermuda adhered to corporate formalities, held separate board meetings, and at all times Mr.

Schwartz exercised diligence in maintaining separateness of the entities and his obligations to

each. See Schwartz Decl. ¶ 6. Further, there was no unity of interests or shared general counsel

between Seabras Group and Seabras Bermuda during the relevant time period. The divergent

interests of Seabras Bermuda and Seabras Group were particularly acute after the Executive

Team received advice from Appleby that Seabras Bermuda was in the “zone of insolvency” and

therefore their fiduciary duties were to creditors rather than shareholders. Under these

circumstances, there can be no legitimate dispute that Bracewell’s client was Seabras Bermuda

and any communications also received by Mr. Smith (along with the various other third parties

on those communications) from Mr. Irwin cannot reasonably be said to have created an

attorney-client relationship between Seabras Group and Bracewell.

III. There is No Actual Conflict that Precludes Bracewell’s Retention Even If the Court Were to Find Bracewell Represented Seabras Group

24. Even assuming arguendo that Bracewell represented Seabras Group, that fact,

standing alone, would not be a basis to bar Bracewell’s retention. Here, there is no contention

that Bracewell currently represents Seabras Group. The Objection generally only alleges the

following with respect to legal services allegedly provided by Bracewell to Seabras Group: (i)

sharing a legal analysis regarding a contract dispute with a Seabras Bermuda vendor; (ii)

responding to requests to formalize a restructuring proposal and attending a video conference

meeting (with representatives from the lender group and their counsel as well as the Partners

Group Team) concerning the same proposal; (iii) setting up a call to discuss the impact of

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insolvency on certain contracts; and (iv) giving advice regarding the novation of the MSA to

Seabras Bermuda board members who were at the time also officers and directors of Seabras

Group. See Obj. ¶ 12. Bracewell did not receive confidential information from Seabras Group

regarding any of these matters, let alone any confidential information that it could use to

Seabras Group’s detriment or to the detriment of the estate. See Ampal I, 534 B.R. at 582

(noting the issue of actual conflict focuses on whether confidential communications passed

between proposed counsel and former clients that would prevent counsel from representing the

best interests of the estate) (citation omitted). Moreover, none of these matters are central to the

progress of these Cases and do not preclude Bracewell from rendering disinterested advice in

the best interests of the estate. Accordingly, even assuming Bracewell did represent Seabras

Group, such limited representation does not present an actual conflict barring representation.

See id. at 588 (overruling section 327 objection where proposed counsel’s prior representation

of creditors would not interfere with serving best interests of estate and disqualification would

have a deleterious effect on estate).

25. Similarly, Seabras Group’s contention that Bracewell’s role in advising Seabras

Bermuda regarding the novation of the MSA and the filing of these Cases creates an actual

conflict because it precludes Bracewell from pursuing breach of fiduciary claims is

unpersuasive. See Obj. ¶¶ 21-27. 4 First, unlike the cases cited in paragraph 25 of the Objection

concerning proposed counsel’s concurrent significant representations or deep and undisclosed

conflicts with central creditors or litigation targets, Bracewell’s advice to Seabras Bermuda or

allegedly to Seabras Group prior to these Cases does not, and will not, cause it to suffer from

divided loyalties or affected judgments as it relates to the interests of the estate and its creditors.

4 Contrary to the allegations made in the Objection, Bracewell did not advise Seabras Group regarding the MSA Novation. Bracewell gave such advice to Seabras Bermuda. Irwin Decl. ¶ 12.

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Bracewell will work with the Debtors to put forward a viable plan of reorganization that is in

the best interest of the estate and all creditors. Second, to the extent breach of fiduciary duty

claims may exist, such claims may be investigated by conflicts counsel. See, e.g., In re Casesars

Entertainment Operating Co., Inc., 561 B.R. 420, 435 (Bankr. N.D. Ill. 2015) (“Should

questions arise about [Debtor’s] willingness to pursue claims belonging to the bankruptcy

estates, there are better solutions than depriving [Debtor] of its choice of counsel.”); In re Enron

Corp., No. 01-16034 (AJG), 2002 WL 32034346, *10 (Bankr. S.D.N.Y. May 23, 2002)

(recognizing “[c]onflicts counsel, limited engagement agreements, and ethical walls have been

acceptable procedures to address conflict of interest issues.”).

IV. The Debtors Have the Right to Select Their Own Counsel and Denying the Bracewell Retention Application Will Damage the Debtor’s Estates

26. Seabras Group argues that because Seabras Bermuda’s management is allegedly

not properly in charge of the Debtors, they should not be permitted to retain Bracewell. See Obj.

¶¶ 15-20. As discussed above, public policy favors permitting parties to retain professionals of

their choice. Moreover, a “party seeking disqualification must carry a ‘heavy burden’ and meet

a ‘high standard of proof’.” See In re Caldor, 193 B.R. at 178 (quoting In re Wingspread Corp.,

152 B.R. 861, 863 (Bankr. S.D.N.Y. 1993)).

27. Here, while Seabras Group is actively disputing who should have control over

Seabras Bermuda, and consequently these Cases, this Court has not rendered a decision on that

pending dispute. It should therefore not hamper the Debtors’ control over these Cases and their

business judgement in electing to retain Bracewell as their counsel. To prevent the Debtors from

retaining Bracewell on this ground now would serve no purpose other than advancing Seabras

Group’s agenda. By contrast, approving and authorizing the Debtors retention of Bracewell

would permit the Debtors’ to advance these cases with a renewed ability to focus on the key

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matters around which a restructuring will unfold. Seabras Group will not be prejudiced by these

continued efforts. If the Debtors put forth a plan to which Seabras Group objects, Seabras

Group has already amply shown that it can represent its interests in these Cases.

V. The Payments Made In The Preference Period Should Not Disqualify Bracewell From Representing The Debtors In These Cases

28. Lastly, Seabras Group alleges that because payments were made to Bracewell

during the 90-day preference period, Bracewell is not disinterested and should not be retained

under section 327(a) of the Bankruptcy Code. See Obj. ¶¶ 40-42. The allegation is unavailing.

Bracewell received six invoice payments totaling $171,727 in the 90 days prior to the filing of

these Cases. The average age of the invoices was 19.5 days. Only one payment (for $10,947)

was made more than 30 days after the invoice date. As for the $100,000 retainer received on

December 20, 2019, that was an advance payment for work to be done on the preparation of the

cases. Given that this payment was not received on account of an antecedent debt it does fall

within the scope of Section 547 of the Bankruptcy Code.

29. Taken to its logical end, the theory advanced here would mean that no law firm

that received payment of legal fees in the 90 days prior to the case could be retained. That has

simply never been the rule. While prepetition payments could certainly constitute preferences,

see In re Pillowtex, Inc., 304 F.3d 246, 255 (3rd Cir. 2002), the common practice would be for

the firm to disgorge any preference payment so as to avoid any conflict with Section 327 of the

Code. See In re West End Fin. Advisors, LLC, No. 11-11152 (SMB), 2012 WL 2590613, at *10

(Bankr. S.D.N.Y. July 3, 2012) (discussing procedure for resolving potential preference issue).

This is a practical rule and a practical approach. By the time a debtor arrives in bankruptcy, the

proposed counsel has spent countless hours and billed sometimes millions of dollars in fees. To

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disqualify a firm because it received fees within the preference period would be highly

disruptive in the early stages of a case.

RESERVATION OF RIGHTS

30. The Debtors reserve all rights to supplement, update and/or amend this Reply

and to assert any and all other arguments and/or evidence. Further, the Debtors do not waive,

and expressly preserve, all other rights, including rights of discovery, claims and defenses it

may have in this proceeding or any other matter.

CONCLUSION

For the reasons set forth above, the Debtors respectfully request that the Court enter an

order, substantially in the form attached to the Bracewell Retention Application, granting the

relief requested in the Bracewell Retention Application and such other and further relief as may

be just and proper.

[Signature Page on Following Page]

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WHEREFORE the Debtors respectfully request entry of an order granting the relief

requested herein and such other and further relief as this Court may deem just and appropriate.

Dated: February 1, 2020 New York, New York

BRACEWELL LLP

/s/ Robert G. Burns Robert G. Burns Mark E. Dendinger Joshua D. Neifeld (admitted pro hac vice) 1251 Avenue of the Americas New York, New York 10020 Telephone: (212) 508-6100 Facsimile: (212) 508-6101

Proposed Counsel for Debtors and Debtors in Possession

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