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Case 21-10527-JTD Doc 106 Filed 03/18/21 Page 1 of 9 Case 21-10527-JTD Doc 106 Filed 03/18/21 Page 1 of 9 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE ) In re: ) Chapter 11 ) CARBONLITE HOLDINGS LLC, et al.,1 ) Case No. 21-10527 (JTD) ) Debtors. ) (Jointly Administered) ) Hearing Date: April 8, 2021 at 1:00 p.m. (ET) Objection Deadline: April 1, 2021 at 4:00 p.m. (ET) DEBTORS’ APPLICATION PURSUANT TO SECTION 327(e) OF THE BANKRUPTCY CODE, RULE 2014 OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE, AND LOCAL RULE 2014-1 FOR AN ORDER AUTHORIZING THE RETENTION AND EMPLOYMENT OF REED SMITH LLP AS SPECIAL CORPORATE COUNSEL TO THE DEBTORS AND DEBTORS IN POSSESSION EFFECTIVE AS OF THE PETITION DATE The above-captioned debtors and debtors in possession (the “Debtors”) hereby file this application (the “Application”) for the entry of an order substantially in the form annexed hereto as Exhibit A (the “Proposed Order”), pursuant to section 327(e) of Title 11 of the United States Code (the “Bankruptcy Code”), Rules 2014(a) and 2016 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”), and Rules 2014-1 and 2016-1 of the Local Rules of Bankruptcy Practice and Procedure for the United States Bankruptcy Court for the District of Delaware (the “Local Rules”), authorizing the Debtors to retain and employ Reed Smith LLP (“Reed Smith”), as special corporate counsel to the Debtors effective as of the Petition Date. In support of the Application, the Debtors rely upon and incorporate by reference 1 The Debtors in these cases, along with the last four digits of each Debtor’s federal tax identification number, are: CarbonLite Holdings LLC (8957); CarbonLite Industries LLC (3596); CarbonLite P Holdings, LLC (8957); CarbonLite P, LLC (5453); CarbonLite PI Holdings, LLC (8957); CarbonLite Pinnpack, LLC (8957); CarbonLite Recycling Holdings LLC (8957); CarbonLite Recycling LLC (3727); CarbonLite Sub-Holdings, LLC (8957); Pinnpack P, LLC (8322); and Pinnpack Packaging, LLC (9948). The address of the Debtors’ corporate headquarters is 10250 Constellation Blvd., Los Angeles, CA 90067. DOCS_LA:336250.4 Case 21-10527-JTD Doc 106 Filed 03/18/21 Page 2 of 9 the Rule 2016 statement (the “Rule 2016 Statement”) attached hereto as Exhibit B, the declaration of Moshe J. Kupietzky (the “Kupietzky Declaration”) attached hereto as Exhibit C, and the declaration of Brian Weiss (the “Weiss Declaration”) attached hereto as Exhibit D. In further support of the Application, the Debtors respectfully state as follows: Jurisdiction and Venue 1. The United States Bankruptcy Court for the District of Delaware (the “Court”) has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334 and the Amended Standing Order of Reference from the United States District Court for the District of Delaware, dated February 29, 2012. This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2), and the Debtors confirm their consent pursuant to Rule 9013-1(f) of the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District of Delaware (the “Local Rules”) to the entry of a final order by the Court in connection with this Motion to the extent that it is later determined that the Court, absent consent of the parties, cannot enter final orders or judgments in connection herewith consistent with Article III of the United States Constitution. 2. Venue is proper in this District pursuant to 28 U.S.C. §§ 1408 and 1409. 3. The statutory bases for the relief sought herein are sections 327(e) of the Bankruptcy Code, Bankruptcy Rule 2014(a), and Local Rule 2014-1. Background 4. On March 8, 2021 (the “Petition Date”), the Debtors commenced these cases by each Debtor filing a voluntary petition for relief under chapter 11 of the Bankruptcy 2 DOCS_LA:336250.4 Case 21-10527-JTD Doc 106 Filed 03/18/21 Page 3 of 9 Code. The Debtors are operating their businesses and managing their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No request for the appointment of a trustee or examiner has been made in these chapter 11 cases, and no committees have been appointed or designated. 5. The Debtors are on the forefront of processing post-consumer recycled polyethylene terephthalate (“rPET”) plastic products and producing high-quality rPET and polyethylene terephthalate (“PET”) beverage and food packaging products. As of the Petition Date, the Debtors operate three facilities at which they process PET bottles and flake into rPET pellets, which are later incorporated into other products and packaging. The Debtors also operate PinnPack, which processes the rPET and PET into high-quality thermoformed tubs, bowls, domes, and clamshell packaging for food applications. A detailed description of the Debtors’ business and facts precipitating the filing of the Debtors’ chapter 11 proceedings are set forth in the Declaration of Brian Weiss in Support of Debtors’ Chapter 11 Petitions and First Day Relief (the “First Day Declaration”), incorporated herein by reference.2 Relief Requested 6. By this Application, the Debtors seek the entry of an order authorizing the employment of Reed Smith as special corporate counsel to the Debtors. The Debtors request that Reed Smith be retained to perform the services described in this Application. 2 Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the First Day Declaration. 3 DOCS_LA:336250.4 Case 21-10527-JTD Doc 106 Filed 03/18/21 Page 4 of 9 Basis for Relief 7. Section 327(e) of the Bankruptcy Code authorizes a debtor, with court approval, to retain for a specified special purpose, other than to represent the trustee in conducting the case, an attorney that has represented the debtor, if in the best interest of the estate, and if such attorney does not represent or hold any interest adverse to the debtor or to the estate with respect to the matter on which such attorney is to be employed. 11 U.S.C. § 327(e). Clarifying the statute, Bankruptcy Rule 1107(b) provides that “a person is not disqualified for employment under section 327 of this title by a debtor in possession solely because of such person’s employment by or representation of the debtor before the commencement of the case.” 8. Accordingly, retention of general non-bankruptcy counsel is permissible so long as: (i) the appointment is in the best interest of the debtor’s estate; (ii) counsel does not hold an interest adverse to the estate with respect to the subject matter of its retention; and (iii) the engagement does not amount to conducting the bankruptcy case for the debtor in possession. See In re DeVlieg, Inc., 174 B.R. 497 (N.D. Ill. 1994); In re Carla Leather, Inc., 44 B.R. 457, 474 (Bankr. S.D.N.Y. 1984), aff’d, 50 B.R. 764 (S.D.N.Y. 1985) (“[section] 327(e) bars engagement of special counsel only in the presence of an actual conflict of interest concerning the subject matter of the engagement.”). 9. Reed Smith’s retention as the Debtors’ special corporate counsel falls within the scope of section 327(e) of the Bankruptcy Code. See, e.g., In re Bertucci’s Holdings, Inc., Case No. 18-10894 (MFW) (Bankr. D. Del. May 31, 2018) (authorizing retention of general 4 DOCS_LA:336250.4 Case 21-10527-JTD Doc 106 Filed 03/18/21 Page 5 of 9 non-bankruptcy counsel under section 327(e) of the Bankruptcy Code); In re Dex Liquidating Co., Case No. 17-12913 (KJC) (Bankr. D. Del. January 19, 2018) (same). Services to be Provided by Reed Smith 10. Reed Smith has been providing general non-bankruptcy services to the Debtors since 2018, including, without limitation, representing the Debtors in most of their financing transactions, advising the Board of Directors and officers on a variety of issues, preparing and filing various non-tax governmental reports, reviewing and/or preparing and negotiating a number of material contracts to which one or more of the Debtors are parties, or which directly affected one or more of the Debtors. Moshe Kupietzky, the principal attorney at Reed Smith advising the Debtors, had, at his prior law firm, represented the Debtors since 2011. The Debtors submit that both the interruption and duplicative cost involved in obtaining substitute counsel to replace Reed Smith at this juncture would be extremely harmful to the Debtors and their estates in light of Reed Smith’s unique role. Were the Debtors required to retain counsel other than Reed Smith in connection with the matters described herein, the Debtors, their estates, and all parties in interest would be prejudiced by the time and expense necessary to replicate Reed Smith’s familiarities with the Debtors and the legal issues related thereto. 11. The Debtors have filed an application contemporaneously herewith seeking to employ Pachulski Stang Ziehl & Jones LLP (“PSZ&J”) as bankruptcy counsel in connection with the commencement and prosecution of these Chapter 11 cases. It is the intention of the Debtors that the services to be performed by Reed Smith, those services to be 5 DOCS_LA:336250.4 Case 21-10527-JTD Doc 106 Filed 03/18/21 Page 6 of 9 performed by PSZ&J, and any other parties retained by the Debtors, will not be duplicative, but rather will ensure the most economic and effective means for the Debtors to be represented in these cases while continuing to operate their business. However, Reed Smith may be required, from time to time, to consult and/or advise PSZ&J with regard to the matters on which Reed Smith is representing the Debtors, which may include without limitation, matters that impact the Debtors’ efforts to consummate a potential chapter 11 plan of reorganization.
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