IN the UNITED STATES BANKRUPTCY COURT for the MIDDLE DISTRICT of TENNESSEE NASHVILLE DIVISION in RE: ) ) Case No
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IN THE UNITED STATES BANKRUPTCY COURT FOR THE MIDDLE DISTRICT OF TENNESSEE NASHVILLE DIVISION IN RE: ) ) Case No. 3:20-bk-03138 OLD TIME POTTERY, LLC, ) Chapter 11 ) Judge Charles M. Walker Debtor. ) IN RE: ) ) Case No. 3:20-bk-03139 OTP HOLDINGS, LLC, ) Chapter 11 ) Judge Charles M. Walker Debtor. ) EXPEDITED MOTION, PURSUANT TO SECTION 366 OF THE BANKRUPTY CODE, FOR ENTRY OF EXPEDITED ORDER: (a) PROHIBITING UTILITIES FROM ALTERING, REFUSING OR DISCONTINUING SERVICES TO, OR DISCRIMINATING AGAINST, THE DEBTOR ON ACCOUNT OF PREPETITION INVOICES; (B) DETERMINING THAT THE UTILITIES ARE ADEQUATELY ASSURED FOR FUTURE PAYMENT; (C) ESTABLISHING PROCEDURES FOR DETERMINING REQUESTS FOR ADDITIONAL ASSURANCE; AND, (D) PERMITTING UTILITY COMPANIES TO OPT OUT OF THE ESTABLISHED ADEQUATE ASSURANCE PROCEDURES Old Time Pottery, LLC and its affiliate Debtor, OTP Holdings, LLC (collectively “Old Time Pottery”, the “Company”, or the “Debtors”), as debtors and debtors-in-possession, by and through their undersigned counsel, respectfully request the Court to enter an order on an expedited basis substantially in the form attached hereto as Exhibit A (the “Order”) (i) determining adequacy of assurance of payment for future service from utilities; (ii) establishing procedures for determining requests for additional or other adequate assurance; (iii) permitting utility companies to opt out of the procedures for determining adequate assurance; (iv) scheduling a hearing on any Procedures Objections (defined below); and (v) deeming the order to be a final order, granting the requested relief on a permanent basis, absent a timely objection Case 3:20-bk-03138 Doc 14 Filed 06/28/20 Entered 06/28/20 20:05:59 Desc Main Document Page 1 of 26 filed pursuant to the procedures herein (the “Motion”). In support of their request for expedited relief, the Debtors rely on their Expedited Motion to Set Emergency Hearing on First Day Motions, filed concurrently with this motion. In further support of its Motion, the Debtors rely on the separately-filed Declaration of Jonathan Tyburski, Chief Financial Officer of the Debtor, in Support of Chapter 11 Petitions and Various First Day Applications and Motions (the “Tyburski Declaration”)1, and respectfully represent: I. JURISDICTION AND VENUE 1. This Court has jurisdiction over the subject matter of this Motion pursuant to 28 U.S.C. §§ 157 and 1334. Venue is proper in this Court pursuant to 28 U.S.C. § 1408. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), (B) and (M). The Court possesses the requisite authority to grant the relief requested herein pursuant to 11 U.S.C. §§ 105(a), 366(a) and 507. 2 II. BACKGROUND 2. Old Time Pottery is a retailer headquartered in Murfreesboro, Tennessee focused on selling home décor and seasonal items. As of the Petition Date, the Company operates 43 retail locations located in 11 states. Old Time Pottery was performing well prior to the shutdown of American retailers caused by the COVID-19 pandemic; however, the COVID-19 related shutdown caused Company sales to decline precipitously beginning in mid-March. As a result, the Company furloughed most of its employees and took immediate steps to conserve cash. The Company’s business has improved as stay-at-home restrictions ease and more home décor shoppers venture out, but the Company believes that reorganizing under Chapter 11 of the 1 All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Tyburski Declaration. 2 Title 11 of the United States Code will be referred to hereinafter as “the Bankruptcy Code.” 2 Case 3:20-bk-03138 Doc 14 Filed 06/28/20 Entered 06/28/20 20:05:59 Desc Main Document Page 2 of 26 Bankruptcy Code will be in the best long-term interest of all constituencies and allow Old Time Pottery to emerge stronger. The Debtors’ Chapter 11 voluntary petitions were filed on June 28, 2020 (the “Petition Date”). III. RELIEF REQUESTED 3. By this Motion, the Debtors seek an order: (i) determining adequacy of assurance of payment for future service from utilities; (ii) establishing procedures for determining requests for additional or other adequate assurance; (iii) permitting utility companies to opt out of the procedures for determining adequate assurance; (iv) scheduling a hearing on the requested relief; and (v) deeming the order a final order, granting the requested relief on a permanent basis, absent a timely objection filed pursuant to the procedures set forth herein. 4. The Debtors currently use electric, natural gas, water, sewer, internet, electronic data services, cable, phone, cellular phones, trash/garbage removal, fire alarm monitoring, and other similar services (“Utility Services”) at the Debtors’ businesses located across 11 states. 5. All of the providers of Utility Services to Debtors are referred to collectively herein as the “Utility Companies”. A list of known Utility Companies and currently identifiable accounts is attached hereto and will be attached to the Debtors’ proposed order as Exhibit 1 (the “Utility List”). a. The Debtors believe the Utility List is a complete list of all Utility Companies and currently open accounts. For each Utility Company, the Utility List identifies: (i) the name and address of and services provided by the Utility Company; (ii) the existing security deposit, if any; and (iii) the average monthly service costs. b. A copy of this Motion and the Order, if entered by the Court, and the Utility List will be provided to all Utility Companies. 3 Case 3:20-bk-03138 Doc 14 Filed 06/28/20 Entered 06/28/20 20:05:59 Desc Main Document Page 3 of 26 c. The inclusion of any entity on, or any omission of any entity from, the Utility List is not an admission by the Debtors that such entity is or is not a utility within the meaning of section 366 of the Bankruptcy Code, and the Debtors reserve their rights with respect thereto. d. In addition, the Debtors are requesting that this Motion apply to all of Debtors’ Utility Companies, whether or not any given Utility Company is included on the Utility List. The Debtors have proposed a procedure for supplementing the Utility List. e. Additionally, it is possible that certain entities may mistakenly be included on the Utility List and, therefore, the Debtors reserve the right to assert that any such entities are not Utility Companies for the purposes of this Motion or section 366. 6. Uninterrupted utility service is essential to the Debtors’ ongoing operations and, therefore, to the success of these bankruptcy cases. Should any Utility Company refuse or discontinue service, even for a brief period, it may cause the Debtors to be in default of their own obligations and create tremendous difficulty for Debtors’ ongoing business operations. The temporary or permanent discontinuation of Utility services could irreparably harm the Debtors’ businesses and jeopardize these bankruptcy cases. 7. The Debtors timely paid all pre-petition bills to the Utility Companies, and the only unpaid utility bills will be for the last billing cycle before the Petition Date. The Debtors intend to pay their postpetition obligations to the Utility Companies timely. Subject to Court approval, the Debtors will make these payments from cash collateral.3 8. Pursuant to section 366(c)(2) of the Bankruptcy Code, a utility may alter, refuse or discontinue a chapter 11 debtor’s utility service if the utility does not receive from the debtor 3 Concurrently with the filing of this Motion, the Debtors have filed a motion for authority to use cash collateral. 4 Case 3:20-bk-03138 Doc 14 Filed 06/28/20 Entered 06/28/20 20:05:59 Desc Main Document Page 4 of 26 or the trustee adequate “assurance of payment” within 30 days of the commencement of the debtor’s chapter 11 case.4 PROPOSED ADEQUATE PROTECTION 9. Section 366(c)(1)(A) defines the phrase “assurance of payment” to mean, among other things, a cash deposit. Accordingly, the Debtor proposes to provide a deposit to any requesting Utility Company in an amount equal to the cost of one-fourth of one month’s average service from that Utility Provider (the “Adequate Assurance Deposit”), provided that: (a) such request is made in writing no later than July 28, 2020, which is 30 days after the Petition Date (the “Request Deadline”); (b) such requesting Utility Company does not already hold a deposit, net of pre-petition debt, equal to or greater than the Adequate Assurance Deposit (in which case, the Debtors propose to provide the requesting Utility Company with an additional $500 cash deposit); and (c) such requesting Utility Company is not currently paid in advance for its services. 10. The proposed Adequate Assurance Deposits for each Utility Company are disclosed on the Utility List, attached to the proposed Order. The Debtors request that the Utility 4 There is an apparent discrepancy between subsections (b) and (c) of section 366 because these two subsections set forth different time periods during which a utility is prohibited from altering, refusing or discontinuing utility service. Specifically, section 366(b) allows a utility to alter, refuse or discontinue service “if neither the trustee nor the debtor, within 20 days after the date of the order for relief, furnishes adequate assurance of payment”, while section 366(c)(2) allows a utility “in a case filed under chapter 11” to alter, refuse or discontinue service to a chapter 11 debtor “if during the 30-day period beginning on the date of the filing of the petition, the utility does not receive from the debtor or the trustee adequate assurance of payment for utility service ...” (emphases added). Under the canon of statutory construction that specific language controls over general, the language of section 366(c)(2) controls here because the Debtors are chapter 11 debtors.