In the United States Bankruptcy Court for the District of Delaware
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Case 21-10549-JTD Doc 262 Filed 04/27/21 Page 1 of 2 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: Chapter 11 SC SJ HOLDINGS LLC, et al.1 Case No. 21-10549 (JTD) Debtors. Jointly Administered NOTICE OF FILING OF UNREDACTED VERSIONS OF (I) ACCOR MANAGEMENT (U.S.) INC.’S SUPPLEMENTAL OPPOSITION TO DEBTORS’ MOTION TO ESTIMATE MAXIMUM AMOUNT OF ACCOR’S CLAIM AND (II) THE TAYLOR DECLARATION IN SUPPORT OF ACCOR’S SUPPLEMENTAL OPPOSITION PLEASE TAKE NOTICE that on April 23, 2021, Accor Management (US) Inc. filed (“Accor”) Accor Management (U.S.) Inc.’s Supplemental Opposition to Debtors’ Motion to Estimate Maximum Amount of Accor’s Claim [Docket No. 230] (the “Supplemental Opposition”) and the Declaration of Greig Taylor in Support of Accor Management (U.S.) Inc.’s (f/k/a Fairmont Hotels & Resorts (U.S.) Inc.) Supplemental Opposition in Response to the Motion of Debtors for Order Under Bankruptcy Code Section 502(c) and Bankruptcy Rule 3018 Estimating Maximum Amount of Contingent and Unliquidated Claim of Fairmont Hotels & Resorts (U.S.) Inc. (Dkt. No. 71), filed by FMT SJ LLC and SC SJ Holdings LLC [Docket No. 234] (the “Taylor Declaration,” and together with the Supplemental Opposition, the “Sealed Documents”). PLEASE TAKE FURTHER NOTICE that due to certain potentially commercially sensitive information contained in the Sealed Documents, Accor filed the Sealed Documents under seal so that counsel for Accor could confer with counsel for the Debtors on whether any redactions to the Sealed Documents were necessary. 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, include: SC SJ Holdings LLC (5141) and FMT SJ LLC (7200). The mailing address for both Debtors is 3223 Crow Canyon Road, Suite 300 San Ramon, CA 94583. 28053616.1 Case 21-10549-JTD Doc 262 Filed 04/27/21 Page 2 of 2 PLEASE TAKE FURTHER NOTICE that, after conferring with the Debtors regarding the confidentiality of the Sealed Documents, the parties determined that the Sealed Documents did not require any redactions, and that unredacted versions of the Sealed Documents could be publicly filed. PLEASE TAKE FURTHER NOTICE that attached hereto as Exhibit 1 is the unredacted version of the Supplemental Opposition, and attached hereto as Exhibit 2 is the unredacted version of the Taylor Declaration. Dated: April 27, 2021 YOUNG CONAWAY STARGATT & TAYLOR, LLP Wilmington, Delaware /s/ S. Alexander Faris Sean M. Beach (No. 4070) [email protected] S. Alexander Faris (No. 6278) [email protected] 1000 North King Street Wilmington, Delaware 19801 Telephone: (302) 571-6600 Facsimile: (302) 571-1253 - and - SIDLEY AUSTIN LLP Samuel A. Newman [email protected] Genevieve G. Weiner [email protected] Julia Philips Roth [email protected] 555 West Fifth Street Los Angeles, California 90013 Telephone: (213) 896-6000 Facsimile: (213) 896-6600 SIDLEY AUSTIN LLP Chad S. Hummel [email protected] 1999 Avenue of the Stars, 17 Floor Los Angeles, California 90067 Telephone: (310) 595-9500 Facsimile: (310) 595-9501 Counsel to Accor Management US Inc. (f/k/a Fairmont Hotels and Resorts (U.S.) Inc. 28053616.1 2 Case 21-10549-JTD Doc 262-1 Filed 04/27/21 Page 1 of 65 EXHIBIT 1 Supplemental Opposition 28053616.1 Case 21-10549-JTD Doc 262-1 Filed 04/27/21 Page 2 of 65 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: Chapter 11 SC SJ HOLDINGS LLC, et al.1 Case No. 21-10549 (JTD) Debtors. (Jointly Administered) Hearing Date: April 29, 2021, 3:00 p.m. (ET) ACCOR MANAGEMENT (U.S.) INC.’S SUPPLEMENTAL OPPOSITION TO DEBTORS’ MOTION TO ESTIMATE MAXIMUM AMOUNT OF ACCOR’S CLAIM Accor Management (U.S.) Inc. (f/k/a Fairmont Hotels & Resorts (U.S.) Inc.) (“Accor”) by and through its undersigned counsel, respectfully files this supplemental opposition (the “Supplemental Opposition”) in response to the Motion of Debtors for Order Under Bankruptcy Code Section 502(c) and Bankruptcy Rule 3018 Estimating Maximum Amount of Contingent and Unliquidated Claim of Fairmont Hotels & Resorts (U.S.) Inc. (Dkt. No. 71) (the “Motion to Estimate”), filed by FMT SJ LLC (“FMT”) and SC SJ Holdings LLC (“SC Holdings” and together with FMT, the “Debtors”) and in further support of Accor’s preliminary objection to the Motion to Estimate (Dkt. No. 107) (the “Preliminary Objection”).2 As directed by the Court at the hearing on April 7, 2021 (the “April 7 Hearing”) Accor files this Supplemental Opposition, and the declarations of Dan McGowen, Greig Taylor, Paul Tormey, Peter Sherwin, Eben Perison, Chad Hummel, and Terence Badour filed contemporaneously herewith, to (i) further address the Debtors’ failure to meet their burden to establish a factual predicate for undue delay, (ii) address 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, include: SC SJ Holdings LLC (5141) and FMT SJ LLC (7200). The mailing address for both Debtors is 3223 Crow Canyon Road, Suite 300 San Ramon, CA 94583. 2 Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Preliminary Objection or in the HMA (as defined below), as context requires. Case 21-10549-JTD Doc 262-1 Filed 04/27/21 Page 3 of 65 the proper purpose and scope of estimation, and (iii) only if estimation for final allowance is appropriate under the circumstances, address whether the Liquidated Damages provision is applicable and is the sole measure of damages of Accor’s claim against Debtors. Case 21-10549-JTD Doc 262-1 Filed 04/27/21 Page 4 of 65 TABLE OF CONTENTS Page Preliminary Statement ..................................................................................................................... 1 Background ..................................................................................................................................... 7 Argument ...................................................................................................................................... 10 I. Estimation is Not Required or Appropriate at This Time Because the Debtors Have Failed to Establish Undue Delay. ........................................................................................ 10 A. The Court should not estimate a claim absent a showing that undue delay would otherwise result. ............................................................................................... 10 B. No undue delay exists at this time. ............................................................................. 12 C. The Court can estimate at a later date if circumstances change. ................................ 15 II. If the Court Decides that the Debtors have Proven Undue Delay and that Estimation of Accor’s Claim is Necessary and Appropriate at this Time, Estimation for Purposes of Final Allowance is Improper Under the Circumstances of These Cases. ........ 16 A. In the vast majority of cases, section 502(c) estimation is used for purposes other than final allowance of a claim. ......................................................................... 17 B. Even where debtors request estimation for all purposes, courts frequently exercise their discretion and broad authority to limit the scope of estimation as appropriate under the facts and circumstances. .......................................................... 19 C. The limited universe of cases where estimation is used for purposes of final allowance involve situations where there is no legitimate dispute, there is mass tort litigation, or the parties consensually agree to the terms of the estimation. ................................................................................................................... 21 D. Estimation of Accor’s legitimate causes of action for purposes of final allowance at this early stage of the Chapter 11 Cases poses substantial due process concerns. ........................................................................................................ 26 E. Debtors’ requested truncated estimation proceeding cannot adequately protect Accor’s due process rights, and is directly contradictory to their objections to Accor’s proposed expedited arbitration schedule. ...................................................... 29 III. By Its Plain Terms, The Liquidated Damages Provision Does Not Apply to Most of Accor’s Causes of Action in the Arbitration, and Thus is Not the Sole Basis for Determining the Value of Accor’s Claim Against Debtors. ................................................ 31 A. HMA “Article XVI: Events of Default and Termination” sets forth a comprehensive set of provisions (i) limiting the parties’ rights to terminate the HMA and (ii) drafted with the intent of ensuring Accor would be adequately compensated in the event of any breach by Owner. ................................................... 32 B. Summary of facts relevant to Accor’s causes of action. ............................................. 36 C. Accor asserts several contract causes of action that do not implicate the Liquidated Damages provision. .................................................................................. 41 1 Case 21-10549-JTD Doc 262-1 Filed 04/27/21 Page 5 of 65 IV. Even as to Accor’s Breach Termination Cause of Action, the Liquidated Damages Provision Cannot be Applied Under the Circumstances, and the Issue of Whether the Liquidated Damages Provision Is Valid is a Mixed Question of Law and Fact. ........... 50 Conclusion ...................................................................................................................................