IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
)
In re: ) Chapter 11
) NORTHWEST HARDWOODS, INC., et al.,1
Debtors. ) ) ) ) ) ) Case No. 20-13005 (CSS) (Jointly Administered) Hearing Date:
January 6, 2021 at 11:00 a.m. (ET) )
)
Objection Deadline:
December 30, 2020 at 4:00 p.m. (ET)
APPLICATION OF DEBTORS FOR ENTRY OF
AN ORDER AUTHORIZING THE RETENTION AND EMPLOYMENT OF GIBSON, DUNN & CRUTCHER LLP AS ATTORNEYS FOR THE DEBTORS AND DEBTORS IN
POSSESSION EFFECTIVE AS OF THE PETITION DATE
Northwest Hardwoods, Inc. (“NWH OpCo”) and its affiliated debtors and debtors-in-possession (each, a “Debtor,” and collectively, the “Debtors”) respectfully submit this application (this “Application”) for entry of an order, substantially in form of Exhibit A hereto (the “Proposed Order”), pursuant to sections 327(a) and 330 of title 11 of the United States Code, §§ 101-1532 (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 of the United States Bankruptcy Court for the District of Delaware (the “Local Rules”), authorizing the Debtors to retain and employ Gibson, Dunn & Crutcher LLP (“Gibson Dunn” or the “Firm”) as their attorneys effective as of the Petition Date (as defined herein). In further support of this Application, the Debtors respectfully state as follows:
1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are: Northwest Hardwoods, Inc. (5401), Hardwoods Intermediate Holdings II, Inc. (7760), and Hardwoods Holdings, Inc. (3443). The location of the Debtors’ service address in these chapter 11 cases is:
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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(b) and the Amended Standing Order of Reference of the United States District Court for the District of Delaware dated as of February 29, 2012. This is a core proceeding pursuant to 28 U.S.C. § 157(b). The Debtors confirm their consent pursuant to Local Rule 9013-1(f) to the entry of a final order by the Court in connection with the Motion to the extent 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 before the Court pursuant to 28 U.S.C. §§ 1408 and 1409.
3. The statutory and legal predicates for the relief requested herein are sections 327(a) and 330 of the Bankruptcy Code, Bankruptcy Rules 2014(a) and 2016 and Local Rules 2014-1 and 2016-1.
BACKGROUND
4. On November 23, 2020 (the “Petition Date”), each of the Debtors commenced a voluntary case under chapter 11 of the Bankruptcy Code (collectively, the “Chapter 11 Cases”). Pursuant to sections 1107(a) and 1108 of the Bankruptcy Code, the Debtors are continuing to operate their businesses and manage their financial affairs as debtors in possession.
5. Also on the Petition Date, the Debtors filed a motion seeking procedural consolidation and joint administration of the Chapter 11 Cases pursuant to Bankruptcy Rule 1015(b). No request for a trustee, or examiner has been made in the Chapter 11 Cases, and no committees have been appointed or designated.
6. Information regarding the Debtors’ history and business operations, capital structure and primary secured indebtedness, and the events leading up to the commencement of the
Chapter 11 Cases can be found in the Declaration of Nathan Jeppson in Support of the Debtors’ Chapter 11 Petitions and Requests for First Day Relief [Docket No. 2] (the “First Day Declaration”).
RELIEF REQUESTED
7. The Debtors request that the Court approve the retention of Gibson Dunn as their counsel, effective as of the Petition Date, to perform the extensive legal services that will be required during the Chapter 11 Cases in accordance with Gibson Dunn’s normal hourly rates in effect when services are rendered and in accordance with Gibson Dunn’s normal reimbursement policies. In support of this Application, the Debtors rely upon and incorporate herein by reference the Declaration of David M. Feldman in Support of Application of Debtors for Entry of an Order Authorizing the Retention and Employment of Gibson, Dunn & Crutcher LLP as Attorneys for the Debtors and Debtors in Possession Effective as of the Petition Date, (the “Feldman Declaration”), a copy of which is annexed hereto as Exhibit B; and the Declaration of Nathan Jeppson, President and Chairman, in Support of Application of Debtors for Entry of an Order Authorizing the Retention and Employment of Gibson, Dunn & Crutcher LLP as Attorneys for the Debtors and Debtors in Possession Effective as of the Petition Date (the “Jeppson Declaration”), a copy of which is annexed hereto as Exhibit C.
BASIS FOR RELIEF
8. The Debtors seek retention of Gibson Dunn as their attorneys pursuant to section 327(a) of the Bankruptcy Code, which provides that a debtor, subject to Court approval:
[M]ay employ one or more attorneys, accountants, appraisers, auctioneers, or other professional persons, that do not hold or represent an interest adverse to the estate, and that are disinterested persons, to represent or assist the [debtor] in carrying out the [debtor]’s duties under this title.
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9. As described in greater detail in the Feldman Declaration, Gibson Dunn is a “disinterested person” within the meaning of section 101(14) of the Bankruptcy Code, as required by section 327(a) of the Bankruptcy Code, and does not hold or represent an interest adverse to the Debtors’ estates and has no connection to the Debtors, their creditors, or other parties in interest, except as may be disclosed in the Feldman Declaration. Accordingly, the Debtors may employ Gibson Dunn as counsel in the Chapter 11 Cases.
10. Bankruptcy Rule 2014(a) requires that a debtor’s application to retain a professional in a bankruptcy case include:
[S]pecific facts showing the necessity for the employment, the name of the [firm] to be employed, the reasons for the selection, the professional services to be rendered, any proposed arrangement for compensation, and, to the best of the applicant’s knowledge, all of the [firm’s] connections with the debtor, creditors, any other party in interest, their respective attorneys and accountants, the United States trustee, or any person employed in the office of the United States trustee.
Fed. R. Bankr. P. 2014.
11. The Debtors submit that, for the reasons stated herein, and in the Feldman Declaration, Gibson Dunn’s retention and employment is necessary and in the best interests of the Debtors and their estates.
A. Gibson Dunn’s Qualifications
12. Gibson Dunn is well-qualified to represent the Debtors. Gibson Dunn is an international law firm with over 1,400 attorneys in 20 offices in major cities throughout the United States, Europe, the Middle East, Asia, and South America. The Firm maintains offices in Century City, Dallas, Denver, Houston, Los Angeles, New York City, Orange County, Palo Alto, San Francisco, and Washington, D.C., as well as in Beijing, Brussels, Dubai, Frankfurt, Hong Kong, London, Munich, Paris, São Paulo, and Singapore. Gibson Dunn has extensive expertise and
experience in virtually all aspects of bankruptcy, litigation, finance, real estate, tax, securities, and other corporate issues that may arise in the Chapter 11 Cases.
13. The numerous attorneys practicing in Gibson Dunn’s international Business Restructuring and Reorganization practice group have played significant roles in many large and complex cases commenced under the Bankruptcy Code, including, without limitation, representing the debtors in the chapter 11 cases of Rosehill Resources, Inc., Brookstone Holdings, Corp., TSAWD (formerly The Sports Authority), MAC Acquisition, Inc., Woodbridge Group of Companies, THQ Inc., The Standard Register Company, Leaf123, Inc. formerly Natrol, Inc., SH130 Concession, Arcapita Bank, B.S.C.(c), Pacific Monarch Resorts, Inc., R.E. Loans, LLC, TBS Shipping Services, Inc., Freedom Communications, Inc., Leap Wireless, Inc., Almatis B.V., Building Materials Holding Corporation, Fleetwood Enterprises, Inc., and Scotia Pacific Company LLC.
14. In preparing for its representation of the Debtors in the Chapter 11 Cases, Gibson Dunn’s attorneys have become familiar with many aspects of the Debtors’ business and legal affairs and have worked closely with the Debtors’ management and other professionals. Gibson Dunn is well acquainted with the Debtors’ corporate history, debt structure, loan documents, and business operations and, as a result, has developed experience and expertise regarding the Debtors that will assist in providing effective and efficient services in the Chapter 11 Cases.
B. Services To Be Provided
15. The Debtors seek the authority to employ and retain Gibson Dunn to provide legal services to the Debtors, which services include:
a) advising the Debtors with respect to their powers and duties as debtors in possession in the continued management and operation of their businesses and properties;
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b) advising and consulting on the conduct of the Chapter 11 Cases, including all of the legal and administrative requirements of operating in chapter 11;
c) attending meetings and negotiating with representatives of creditors and other parties in interest;
d) taking all necessary actions to protect and preserve the Debtors’ estates, including prosecuting actions on the Debtors’ behalf, defending any action commenced against the Debtors, and representing the Debtors in negotiations concerning litigation in which the Debtors are involved, including objections to claims filed against the Debtors’ estates;
e) preparing pleadings in connection with the Chapter 11 Cases, including motions, applications, answers, orders, reports, and papers necessary or otherwise beneficial to the administration of the Debtors’ estates;
f) representing the Debtors in connection with obtaining authority to continue using cash collateral and postpetition financing;
g) advising the Debtors in connection with any potential sale of assets;
h) appearing before the Court and any appellate courts to represent the interests of the Debtors’ estates;
i) advising the Debtors regarding tax matters;
j) taking any necessary action on behalf of the Debtors to negotiate, prepare, and obtain approval of a disclosure statement and confirmation of a chapter 11 plan and all documents related thereto;
k) preparing organizational documents and other corporate documents in connection with the Debtors’ restructuring efforts; and
l) performing all other necessary legal services for the Debtors in connection with the prosecution of the Chapter 11 Cases, including, but not limited to: (i) analyzing the Debtors’ leases and contracts and the assumption and assignment or rejection thereof; (ii) analyzing the validity of liens against the Debtors; and (iii) advising the Debtors on corporate and litigation matters.
16. By separate applications, the Debtors are seeking Court approval for the retention of: (a) Young Conaway Stargatt & Taylor, LLP (“Young Conaway”), as bankruptcy co-counsel; (b) Prime Clerk LLC, as claims and noticing agent and as administrative advisor; (c) Miller Nash Graham & Dunn LLP, as special transactional counsel; and (d) Moss Adams LLP, as tax services provider. The Debtors may also file motions or applications to employ additional professionals and may seek authority to retain certain ordinary course professionals.
17. Each of the firms listed above works, and will continue to work, under the direction of the Debtors’ management. The Debtors’ directors and senior management are committed to minimizing duplication of services to reduce professional costs. To that end, Gibson Dunn will work closely with each professional to ensure that there is no unnecessary duplication of effort or cost.
18. The Debtors require knowledgeable counsel to provide these essential professional services. Gibson Dunn has stated its desire and willingness to act in the Chapter 11 Cases and provide the necessary services as attorneys for the Debtors. To the extent Gibson Dunn determines that the Debtors require services that fall outside of the scope of services historically or generally performed by counsel in a bankruptcy case and that are not authorized by the relief requested by this Application, Gibson Dunn will file a supplemental declaration pursuant to Bankruptcy Rule 2014(a).
19. As noted above, Gibson Dunn has substantial expertise in all of these areas, and has gained valuable knowledge of the Debtors’ business and financial affairs as a result of its prepetition representation of the Debtors and negotiation with the Debtors’ various stakeholders. For all of these reasons, the Debtors believe that Gibson Dunn is both well-qualified and uniquely able to represent the Debtors’ interests in the Chapter 11 Cases.
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C. Prepetition Payments to Gibson Dunn
20. In connection with its prepetition services, Gibson Dunn has periodically invoiced and charged the Debtors for fees and expenses, as set forth in more detail in the chart below. On October 5, 2020, the Debtors provided Gibson Dunn with an advance payment retainer in the amount of $500,000.00 (the “Retainer”). As of the Petition Date, there was a residual retainer estimated to total approximately $118,497.00.
21. The payments by the Debtors to Gibson Dunn during the ninety (90) day period before the Petition Date are set forth below:
Invoice Date Invoice Amount Nature Payment/Replenishment of Retainer Date Payment/Retainer Replenishment Amount 7/28/20 $59,201.99 Restructuring Preparation and Advice 8/28/20 $59,201.99 8/25/20 $159,559.80 Restructuring Preparation and Advice 9/16/20 $159,559.80 9/9/20 $278,093.24 Restructuring Preparation and Advice 9/21/20 $278,093.24 10/5/20 $500,000.00 Advance Payment Retainer - - 10/12/20 $475,249.25 Restructuring Preparation and Advice 10/12/20 $475,249.25 10/28/20 $462,788.11 Restructuring Preparation and Advice 10/28/20 $462,788.11 11/4/20 $494,681.57 Restructuring Preparation and Advice 11/4/20 $494,681.57
11/18/20 $499,982.26 Restructuring Preparation and Advice 11/18/20 $499,982.26 11/22/20 $381,503.00 Restructuring Preparation and Advice 11/22/20 $381,503.00
22. Gibson Dunn invoiced and charged the Debtors for professional fees and expenses in connection with pre-bankruptcy contingency planning activities, and preparation and negotiation of numerous agreements and documents, including the RSA and accompanying term sheets, the Plan and the Disclosure Statement, and the Debtors’ preparation for the Chapter 11 Cases. All invoices for prepetition services have been paid in full, and accordingly as of the Petition Date, the Debtors do not owe Gibson Dunn any amounts for legal services rendered before the Petition Date. 23. Pursuant to Bankruptcy Rule 2016(b), Gibson Dunn has neither shared nor agreed to share (a) any compensation it has received or may receive with another party or person, other than with the partners, associates, and contract attorneys associated with Gibson Dunn or (b) any compensation another person or party has received or may receive.
D. Professional Compensation
24. Gibson Dunn intends to apply for compensation for professional services rendered on an hourly basis and reimbursement of expenses incurred in connection with the Chapter 11 Cases, subject to the Court’s approval and subject to applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, the Local Rules, and any other applicable procedures and orders of the Court. The hourly rates and corresponding rate structure that Gibson Dunn will use in the Chapter 11 Cases are the same as the hourly rates and corresponding rate structure that Gibson Dunn uses in other restructuring matters, as well as similar complex corporate, securities, and litigation matters whether in court or otherwise, regardless of whether a fee application is required. These rates and
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the rate structure reflect that such restructuring and other complex matters typically are national in scope and involve great complexity, high stakes, and severe time pressures.
25. Gibson Dunn operates in a national marketplace for legal services in which rates are driven by multiple factors relating to the individual lawyer, his or her area of specialization, the Firm’s expertise, performance, and reputation, the nature of the work involved, and other factors. 26. Gibson Dunn’s current hourly rates for matters related to the Chapter 11 Cases range as follows: 2020 Rates 2021 Rates2 Partners $1,095 - $1,550 $1,095 - $1,645 Counsel $985 - $1,045 $1,025 - $1,210 Associates $585 - $1,025 $610 - $1,060 Paraprofessionals $285 - $645 $335 - $645
27. Gibson Dunn’s hourly rates are set at a level designed to compensate Gibson Dunn fairly for the work of its attorneys and paraprofessionals and to cover fixed and routine expenses. Hourly rates vary with the experience and seniority of the individuals assigned. These hourly rates are subject to periodic adjustments to reflect economic and other conditions.3
28. Gibson Dunn has represented one or more of the Debtors in non-bankruptcy work since August 2014. For the period from January 1, 2020 to the Petition Date, Gibson Dunn represented the Debtors using the hourly rates listed above. Gibson Dunn’s work during the
2 To be effective as of January 1, 2021.
3 For example, like many of its peer law firms, Gibson Dunn typically increases the hourly billing rate of attorneys and paraprofessionals twice a year in the form of: (i) step increases historically awarded in the ordinary course on the basis of advancing seniority and promotion and (ii) periodic increases within each attorney’s and paraprofessional’s current level of seniority. The step increases do not constitute “rate increases” (as the term is used in the Guidelines for Reviewing Applications for Compensation and Reimbursement of Expenses Filed Under 11 U.S.C. § 330 by Attorneys in Larger Chapter 11 Cases, effective November 1, 2013 (the “U.S. Trustee Guidelines”)). Other than in respect of the effectiveness of the 2021 rates set forth above, which will take effect on January 1, 2021, Gibson Dunn will provide reasonable notice to the Debtors, the U.S. Trustee, and any official committee before implementing any periodic increases, and shall file any such notice with the Court, as set forth in the Proposed Order.
Chapter 11 Cases is not being discounted, and is being billed only at the hourly rates listed above. Gibson Dunn’s hourly rates for its professionals working on the Chapter 11 Cases are consistent with the rates that Gibson Dunn charges other comparable chapter 11 clients, regardless of the location of the chapter 11 case.
29. The rate structure provided by Gibson Dunn is appropriate and not significantly different from (a) the rates that Gibson Dunn charges for other similar types of representations or (b) the rates that other comparable counsel would charge to do work substantially similar to the work Gibson Dunn will perform in the Chapter 11 Cases.
30. It is Gibson Dunn’s policy, in all areas of practice, to charge its clients for identifiable, non-overhead expenses incurred in connection with the client’s case that would not have been incurred except for representation of that particular client. It is also Gibson Dunn’s policy to charge its clients only the amount actually incurred by Gibson Dunn in connection with such items. Examples of such expenses include postage, overnight mail, courier delivery, transportation, overtime expenses, computer-assisted legal research, photocopying, airfare, meals, and lodging. Consistent with practice, Gibson Dunn will charge no more than $0.10 per page for standard duplication services in the Chapter 11 Cases. Gibson Dunn does not charge its clients for incoming facsimile transmissions.
31. Gibson Dunn professionals also may charge their overtime meals and overtime transportation to the Debtors consistent with prepetition practices. Gibson Dunn will charge the Debtors for these expenses in a manner and at rates consistent with charges made generally to Gibson Dunn’s other clients and consistent with applicable U.S. Trustee Guidelines.
32. In addition, Gibson Dunn will make every reasonable effort to comply with the U.S. Trustee’s requests for information and additional disclosures as set forth in the U.S. Trustee
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Guidelines, both in connection with any interim fee application(s) and final fee application to be filed by Gibson Dunn in the Chapter 11 Cases.
E. Gibson Dunn’s Disinterestedness
33. To the best of the Debtors’ knowledge, information, and belief, based on the annexed Feldman Declaration, Gibson Dunn does not hold or represent an interest adverse to the Debtors and, except as disclosed in the Feldman Declaration, does not have any “connections” to the Debtors or their affiliates, their creditors, their significant equity holders, any other party in interest, or any of their respective attorneys and accountants, or the U.S. Trustee for the District of Delaware or any person employed in the office of the U.S. Trustee for such district or any Bankruptcy Judge currently serving on the United States Bankruptcy Court for the District of Delaware.
34. To check and clear conflicts, and in preparing the Feldman Declaration, Gibson Dunn used a set of procedures that it has developed to ensure compliance with the requirements of the Bankruptcy Code and the Bankruptcy Rules regarding the retention of professionals in chapter 11 cases. As set forth in the Feldman Declaration, pursuant to these procedures, Gibson Dunn performed the following actions to determine whether Gibson Dunn or any of its attorneys has any connections with, has in the past represented, or is currently representing potential parties in interest in the Chapter 11 Cases:
a) A list of interested parties (the “Potential Parties in Interest”) was created using information provided by the Debtors and their professionals, and additional information identified by Gibson Dunn. The list of Potential Parties in Interest is composed of the following categories, with specific entities set forth in Schedule 1, attached to the Feldman Declaration:
Schedule Category
1(a) Debtor and Non-Debtor Affiliates (Including any Trade Names)
1(b) Current Officers and Directors, Board Members of the Debtors and Individuals who have served as Officers or Directors of the Debtors in the past two years
1(c) Debtors’ Prepetition and Postpetition Noteholders, Notes Trustee, Secured Bank Lenders, and Advisors and Counsel
1(d) Holders of More Than 5% of Any of the Debtors’ Equity Securities
1(e) Parties Relating to Known Litigation Matters Involving the Debtors
1(f) The Debtors’ 30 Largest Unsecured Creditors on a Consolidated Basis as Identified in Their Chapter 11 Petitions
1(g) Bankruptcy Professionals 1(h) The Debtors’ Landlords
1(i) Government and Regulatory Agencies 1(j) The Debtor’s Utility Providers
1(k) The Debtors’ Insurers, Insurance Brokers and Surety Bond Providers
1(l) Other Significant Trade Vendors or Customers Not on Debtors’ 30 Largest Unsecured Creditors List 1(m) Parties to Material Executory Contracts
1(n) Attorneys for U.S. Trustee’s Office, District of Delaware
1(o) U.S. Bankruptcy Court Judges, District of Delaware 1(p) Debtors’ Bank Accounts
1(q) Entities that filed Notices of Appearance and Requests for Service
1(r) Ordinary Course Professionals
b) Gibson Dunn compared each of the Potential Parties in Interest to the names that Gibson Dunn maintains in its master client database created from its conflict clearance and billing records. Gibson Dunn’s client database includes: (i) the name of each current or former client of the Firm; (ii) the names of any entities materially related to, or materially adverse to, current or former client; (iii) the names of the Gibson Dunn attorneys responsible for such current or former clients; (iv) the status of the matter as either “active” or “inactive”; (v) the dates on which the matter was opened and/or closed; and (vi) the name of each former client of each Gibson Dunn attorney whom such
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attorney represented in the two years prior to the date such attorney joined Gibson Dunn; and
c) Any matches between the Potential Parties in Interest and the entities in Gibson Dunn’s client database were identified, reviewed by an attorney and compiled for purposes of the Feldman Declaration. To the extent that Gibson Dunn currently represents, or has represented within the last two years, any of the Potential Parties in Interest, the identities of such entities are set forth in Schedule 2 attached to the Feldman Declaration (the “Disclosure List”). In determining whether a client is presently represented by Gibson Dunn, Gibson Dunn attorneys relied on the existence of an “active” notation on the report to reflect current representation. With respect to matters showing as “inactive,” Gibson Dunn relied on the “close date” to determine whether the representation occurred within the past two years. If an “inactive” matter opened prior to November 2017 showed no “close date,” Gibson Dunn assumed for purposes of this Application and the Feldman Declaration that such matter was inactive during the past two years and did not include the client on the Disclosure List.
35. Gibson Dunn will review its files periodically during the pendency of the Chapter 11 Cases to ensure that no conflicts or other disqualifying circumstances exist or arise. If any new relevant facts or relationships are discovered or arise, Gibson Dunn will use reasonable efforts to identify such further developments and will promptly file a supplemental declaration, as required by Bankruptcy Rule 2014(a).
NOTICE
36. The Debtors have provided notice of this Application to: (a) the Office of the United States Trustee for the District of Delaware; (b) the holders of the 30 largest unsecured claims against the Debtors on a consolidated basis; (c) the United States Attorney’s Office for the District of Delaware; (d) the Internal Revenue Service; (e) counsel to the Ad Hoc Noteholder Group, (i) Willkie Farr & Gallagher LLP, 787 Seventh Avenue, New York, New York 10019, Attn: Jeffrey Pawlitz, Esq., Weston T. Eguchi, Esq., and Agustina G. Berro, Esq and (ii) Pachulski Stang
Ziehl & Jones, 919 North Market Street, 17th Floor, Wilmington, Delaware 19801, Attn: Laura Davis Jones, Esq.; (f) counsel to the Sponsor Equityholder, Wachtell, Lipton, Rosen & Katz, 51 W 52nd St, New York, NY 10019, Attn: Scott K. Charles, Esq. and David E. White, Esq.; (g) counsel to the ABL Agent, McGuireWoods LLP, 1251 6th Ave 20th floor, New York, NY 10020, Attn: Brian I. Swett, Esq.; (h) counsel to the Indenture Trustee, Emmet, Marvin & Martin, LLP, 120 Broadway # 32, New York, NY 10271, Attn.: Elizabeth Taraila, Esq.; and (i) any party that has requested notice pursuant to Bankruptcy Rule 2002. Notice of this Application and any order entered hereon will be served in accordance with Local Rule 9013-1(m). In light of the nature of the relief requested herein, the Debtors submit that no other or further notice is necessary.
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WHEREFORE, the Debtors respectfully request that the Court grant the relief requested herein and such other and further relief as the Court may deem just and proper.
Dated: December 16, 2020 /s/ Nathan Jeppson Wilmington, Delaware Nathan Jeppson
President and Chairman
IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
)
In re: ) Chapter 11
) NORTHWEST HARDWOODS, INC., et al.,1
Debtors. ) ) ) ) ) ) Case No. 20-13005 (CSS) (Jointly Administered) Hearing Date:
January 6, 2021 at 11:00 a.m. (ET) )
)
Objection Deadline:
December 30, 2020 at 4:00 p.m. (ET)
NOTICE OF APPLICATION
TO: (I) THE U.S. TRUSTEE; (II) THE HOLDERS OF THE THIRTY (30) LARGEST UNSECURED CLAIMS AGAINST THE DEBTORS ON A CONSOLIDATED BASIS; (III) COUNSEL TO THE AD HOC NOTEHOLDER GROUP; (IV) COUNSEL TO THE ABL AGENT; (V) COUNSEL TO THE SPONSOR EQUITYHOLDER; (VI) COUNSEL TO THE ABL AGENT; (VII) COUNSEL TO THE INDENTURE TRUSTEE; (VIII) COUNSEL TO ANY COMMITTEE APPOINTED IN THESE CHAPTER 11 CASES; AND (IX) ANY PARTY THAT HAS REQUESTED NOTICE PURSUANT TO BANKRUPTCY RULE 2002.
PLEASE TAKE NOTICE that the above-captioned debtors and debtors in
possession (collectively, the “Debtors”) have filed the attached Application of Debtors for Entry of an Order Authorizing the Retention and Employment of Gibson Dunn & Crutcher LLP as Attorneys for the Debtors and Debtors in Possession Effective as of the Petition Date (the “Application”).
PLEASE TAKE FURTHER NOTICE that objections or responses to the relief
requested in the Application must be filed on or before December 30, 2020 at 4:00 p.m. (ET) (the “Objection Deadline”) with the United States Bankruptcy Court for the District of Delaware, 824 N. Market Street, 3rd Floor, Wilmington, Delaware 19801. At the same time, copies of any responses or objections to the Application must be served upon the undersigned proposed counsel to the Debtors so as to be received on or before the Objection Deadline.
PLEASE TAKE FURTHER NOTICE THAT A HEARING TO CONSIDER
THE APPLICATION WILL BE HELD ON JANUARY 6, 2021 AT 11:00 A.M. (ET) BEFORE THE HONORABLE CHRISTOPHER S. SONTCHI IN THE UNITED STATES BANKRUPTCY
1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are: Northwest Hardwoods, Inc. (5401), Hardwoods Intermediate Holdings II, Inc. (7760), and Hardwoods Holdings, Inc. (3443). The location of the Debtors’ service address in
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COURT FOR THE DISTRICT OF DELAWARE, 824 N. MARKET STREET, 5TH FLOOR, COURTROOM NO. 6, WILMINGTON, DELAWARE 19801.
PLEASE TAKE FURTHER NOTICE THAT, IF NO OBJECTIONS OR RESPONSES TO THE APPLICATION ARE TIMELY FILED AND RECEIVED IN ACCORDANCE WITH THIS NOTICE, THEN THE COURT MAY GRANT THE RELIEF REQUESTED THEREIN WITHOUT FURTHER NOTICE OR A HEARING.
Dated: December 16, 2020
Wilmington, Delaware /s/ Jacob D. Morton
YOUNG CONAWAY STARGATT & TAYLOR, LLP Sean M. Beach (No. 4070)
Jacob D. Morton (No. 6684) Rodney Square
1000 North King Street Wilmington, Delaware 19801 Tel: (302) 571-6600
Fax: (302) 571-1253 Email: sbeach@ycst.com
jmorton@ycst.com
GIBSON, DUNN & CRUTCHER LLP David M. Feldman (admitted pro hac vice) J. Eric Wise (admitted pro hac vice)
Matthew K. Kelsey (admitted pro hac vice) Alan Moskowitz (admitted pro hac vice) 200 Park Avenue
New York, New York 10166 Tel: (212) 351-4000 Fax: (212) 351-4035 Email: dfeldman@gibsondunn.com ewise@gibsondunn.com mkelsey@gibsondunn.com amoskowitz@gibsondunn.com
Proposed Counsel to the Debtors and Debtors in Possession
EXHIBIT A PROPOSED ORDER
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IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
)
In re: ) Chapter 11
) NORTHWEST HARDWOODS, INC., et al.,4 Debtors. ) ) ) ) Case No. 20-20-13005 (CSS) (Jointly Administered) ) Re: Docket No. __
ORDER AUTHORIZING THE RETENTION AND EMPLOYMENT OF GIBSON, DUNN & CRUTCHER LLP AS ATTORNEYS FOR THE DEBTORS AND DEBTORS IN
POSSESSION EFFECTIVE AS OF THE PETITION DATE
Upon the Application of Debtors for Entry of an Order Authorizing the Retention and Employment of Gibson, Dunn & Crutcher LLP as Attorneys for the Debtors and Debtors in Possession Effective as of the Petition Date (the “Application”)5 filed by the above-captioned affiliated debtors and debtors-in-possession (the “Debtors”); and the Court having found that it has jurisdiction over this matter pursuant to 28 U.S.C. §1334(b) and the Amended Standing Order of Reference from the United States District Court for the District of Delaware dated as of February 29, 2012; and the Court having found that venue of these cases and the Application in this district is proper pursuant to 28 U.S.C. §§ 1408 and 1409; and the Court having found that this matter is a core proceeding pursuant to 28 U.S.C. § 157(b); and that this Court may enter a final order consistent with Article III of the United States Constitution; and it appearing that notice of the Application has been given as set forth in the Application and that such notice is adequate and no
4 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are: Northwest Hardwoods, Inc. (5401), Hardwoods Intermediate Holdings II, Inc. (7760), and Hardwoods Holdings, Inc. (3443). The location of the Debtors’ service address in these chapter 11 cases is: 1313 Broadway, Suite 300, Tacoma, WA 98402.
other or further notice need be given; and the Court having reviewed the Application and having heard the statements in support of the relief requested therein at any hearing before this Court (the “Hearing”); and the Court having considered the Feldman Declaration and the Jeppson Declaration; and the Court having considered the First Day Declaration; and the Court being satisfied that Gibson Dunn has the capability and experience to provide the services described in the Application and that Gibson Dunn does not hold an interest adverse to the Debtors or their estates regarding the matters upon which Gibson Dunn is to be engaged; and the Court finding that Gibson Dunn is a “disinterested person” as defined in section 101(14) of the Bankruptcy Code and as required by section 327(a) of the Bankruptcy Code; and the Court having determined that the legal and factual basis set forth in the Application and at any Hearing establishes just cause for the relief granted herein; and the Court having determined that the relief sought in the Application is in the best interests of the Debtors and their estates; and after due deliberation and sufficient cause appearing therefor,
IT IS HEREBY ORDERED THAT:
1. The Application is GRANTED as set forth herein.
2. The Debtors are authorized, pursuant to sections 327(a) and 330 of the Bankruptcy Code, Bankruptcy Rules 2014(a) and 2016, and Local Rules 2014-1 and 2016-1 to employ and retain Gibson Dunn as their counsel effective as of the Petition Date on the terms and conditions set forth in the Application and the Feldman Declaration.
3. Gibson Dunn is authorized to render the following professional services to the Debtors:
a) advising the Debtors with respect to their powers and duties as debtors in possession in the continued management and operation of their businesses and properties;
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b) advising and consulting on the conduct of the Chapter 11 Cases, including all of the legal and administrative requirements of operating in chapter 11;
c) attending meetings and negotiating with representatives of creditors and other parties in interest;
d) taking all necessary actions to protect and preserve the Debtors’ estates, including prosecuting actions on the Debtors’ behalf, defending any action commenced against the Debtors, and representing the Debtors in negotiations concerning litigation in which the Debtors are involved, including objections to claims filed against the Debtors’ estates;
e) preparing pleadings in connection with the Chapter 11 Cases, including motions, applications, answers, orders, reports, and papers necessary or otherwise beneficial to the administration of the Debtors’ estates;
f) representing the Debtors in connection with obtaining authority to continue using cash collateral and postpetition financing;
g) advising the Debtors in connection with any potential sale of assets; h) appearing before the Court and any appellate courts to represent the
interests of the Debtors’ estates;
i) advising the Debtors regarding tax matters;
j) taking any necessary action on behalf of the Debtors to negotiate, prepare, and obtain approval of a disclosure statement and confirmation of a chapter 11 plan and all documents related thereto; k) preparing organizational documents and other corporate documents
in connection with the Debtors’ restructuring efforts; and
l) performing all other necessary legal services for the Debtors in connection with the prosecution of the Chapter 11 Cases, including, but not limited to: (i) analyzing the Debtors’ leases and contracts and the assumption and assignment or rejection thereof; (ii) analyzing the validity of liens against the Debtors; and (iii) advising the Debtors on corporate and litigation matters.
4. Gibson Dunn shall file fee application(s) and be compensated in accordance with the procedures set forth in sections 330 and 331 of the Bankruptcy Code, applicable Bankruptcy Rules, the Local Rules and any other such procedures as may be fixed by order of this Court.
5. Gibson Dunn shall make a reasonable effort to comply with the Office of the United States Trustee’s requests for information and additional disclosures as set forth in the Appendix B-Guidelines for Reviewing Applications for Compensation and Reimbursement of Expenses Filed Under 11 U.S.C. § 330 by Attorneys in Larger Chapter 11 Cases (in connection with both the Application and all applications for compensation and reimbursement of expenses filed by Gibson Dunn in the Chapter 11 Cases).
6. Gibson Dunn shall provide reasonable notice to the Debtors, the U.S. Trustee, and any official committee before implementing any periodic increase of Gibson Dunn’s hourly rates set forth in the Feldman Declaration, and shall file any such notice with the Court; provided however, that no such notice or filing shall be required in respect of Gibson Dunn’s rate increase effective January 1, 2021 as set forth in the Feldman Declaration.
7. To the extent that there is any inconsistency among the Application, and the express terms of this Order, the express terms of this Order shall govern.
8. The terms of this Order shall be immediately effective and enforceable upon its entry. 9. The Debtors are authorized to take all steps necessary or appropriate to carry out the relief granted in this Order in accordance with the Application and the Feldman Declaration.
10. This Court shall retain exclusive jurisdiction to hear and determine all matters arising from or related to the implementation, interpretation, or enforcement of this Order.
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EXHIBIT B Feldman Declaration
IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
)
In re: ) Chapter 11
) NORTHWEST HARDWOODS, INC., et al.,6 Debtors. ) ) ) Case No. 20-20-13005 (CSS) (Jointly Administered) )
DECLARATION OF DAVID M. FELDMAN IN SUPPORT OF
APPLICATION OF DEBTORS FOR ENTRY OF AN ORDER AUTHORIZING THE RETENTION AND EMPLOYMENT OF GIBSON, DUNN & CRUTCHER LLP AS ATTORNEYS FOR THE DEBTORS AND DEBTORS IN POSSESSION EFFECTIVE AS
OF THE PETITION DATE
I, David M. Feldman, being duly sworn, declare the following under penalty of perjury: 1. I am a partner in the law firm of Gibson, Dunn & Crutcher LLP (“Gibson Dunn” or the “Firm”), 200 Park Avenue, New York, NY 10166. I am a member in good standing of the Bar of the State of New York, and I am admitted to practice before the Southern District of New York. There are no disciplinary proceedings pending against me.
2. I submit this declaration (the “Declaration”) in support of the Application of Debtors for Entry of an Order Authorizing the Retention and Employment of Gibson, Dunn & Crutcher LLP as Attorneys for the Debtors and Debtors in Possession Effective as of the Petition Date (the “Application”).7 Except as otherwise noted, I have personal knowledge of the matters set forth herein, and the statements made herein are based on the conflicts search conducted by
6 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are: Northwest Hardwoods, Inc. (5401), Hardwoods Intermediate Holdings II, Inc. (7760), and Hardwoods Holdings, Inc. (3443). The location of the Debtors’ service address in these chapter 11 cases is: 1313 Broadway, Suite 300, Tacoma, WA 98402.
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the Firm to date and described herein and are made to the best of my knowledge, information and belief.
3. To the extent that any information disclosed herein requires amendment or modification upon Gibson Dunn’s receipt of additional information or as additional party in interest information becomes available, I or one of my partners will use reasonable efforts to file a supplemental declaration with the Court.
GIBSON DUNN’S QUALIFICATIONS
4. Gibson Dunn is well-qualified to represent the Debtors. Gibson Dunn is an international law firm with over 1,400 attorneys in 20 offices in major cities throughout the United States, Europe, the Middle East, Asia, and South America. The Firm maintains offices in Century City, Dallas, Denver, Houston, Los Angeles, New York City, Orange County, Palo Alto, San Francisco, and Washington, D.C., as well as in Beijing, Brussels, Dubai, Frankfurt, Hong Kong, London, Munich, Paris, São Paulo, and Singapore. Gibson Dunn has extensive expertise and experience in virtually all aspects of bankruptcy, litigation, finance, real estate, tax, securities, and other corporate issues that may arise in the Chapter 11 Cases.
5. The numerous attorneys practicing in Gibson Dunn’s international Business Restructuring and Reorganization Practice Group have played significant roles in many large and complex cases under the Bankruptcy Code, including, without limitation, representing the debtors in the chapter 11 cases of Rosehill Resources, Inc., Brookstone Holdings, Corp., TSAWD (formerly The Sports Authority), MAC Acquisition, Inc., Woodbridge Group of Companies, THQ Inc., The Standard Register Company, Leaf123, Inc. formerly Natrol, Inc., SH130 Concession, Arcapita Bank, B.S.C.(c), Pacific Monarch Resorts, Inc., R.E. Loans, LLC, TBS Shipping Services, Inc., Freedom Communications, Inc., Leap Wireless, Inc., Almatis B.V., Building Materials Holding Corporation, Fleetwood Enterprises, Inc., and Scotia Pacific Company LLC.
6. In preparing for its representation of the Debtors in the Chapter 11 Cases, Gibson Dunn’s attorneys have become familiar with many aspects of the Debtors’ business and legal affairs and have worked closely with the Debtors’ management and other professionals. Gibson Dunn is well acquainted with the Debtors’ corporate history, debt structure, loan documents, and business operations and, as a result, has developed experience and expertise regarding the Debtors that will assist in providing effective and efficient services in the Chapter 11 Cases.
7. If the Debtors are forced to retain counsel other than Gibson Dunn, the Debtors’ estates would incur additional expenses and delays associated with familiarizing new counsel with the intricacies of the Debtors’ financial affairs and business operations. I believe that Gibson Dunn is both well-qualified and uniquely able to represent the Debtors in the Chapter 11 Cases in an efficient and timely manner.
SERVICES TO BE PROVIDED
8. The Debtors seek the authority to employ and retain Gibson Dunn to provide legal services to the Debtors, which services include:
a) advising the Debtors with respect to their powers and duties as debtors in possession in the continued management and operation of their businesses and properties;
b) advising and consulting on the conduct of the Chapter 11 Cases, including all of the legal and administrative requirements of operating in chapter 11;
c) attending meetings and negotiating with representatives of creditors and other parties in interest;
d) taking all necessary actions to protect and preserve the Debtors’ estates, including prosecuting actions on the Debtors’ behalf, defending any action commenced against the Debtors, and representing the Debtors in negotiations concerning litigation in which the Debtors are involved, including objections to claims filed against the Debtors’ estates;
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e) preparing pleadings in connection with the Chapter 11 Cases, including motions, applications, answers, orders, reports, and papers necessary or otherwise beneficial to the administration of the Debtors’ estates;
f) representing the Debtors in connection with obtaining authority to continue using cash collateral and postpetition financing;
g) advising the Debtors in connection with any potential sale of assets; h) appearing before the Court and any appellate courts to represent the
interests of the Debtors’ estates;
i) advising the Debtors regarding tax matters;
j) taking any necessary action on behalf of the Debtors to negotiate, prepare, and obtain approval of a disclosure statement and confirmation of a chapter 11 plan and all documents related thereto; k) preparing organizational documents and other corporate documents
in connection with the Debtors’ restructuring efforts; and
l) performing all other necessary legal services for the Debtors in connection with the prosecution of the Chapter 11 Cases, including, but not limited to: (i) analyzing the Debtors’ leases and contracts and the assumption and assignment or rejection thereof; (ii) analyzing the validity of liens against the Debtors; and (iii) advising the Debtors on corporate and litigation matters.
9. Gibson Dunn will work closely with each professional to ensure that there is no unnecessary duplication of effort or cost. To the extent Gibson Dunn determines that the Debtors require services that fall outside of the scope of services historically or generally performed by counsel in a bankruptcy case and that are not authorized by the relief requested by the Application, Gibson Dunn will file a supplemental declaration pursuant to Bankruptcy Rule 2014(a).
PREPETITION PAYMENTS TO GIBSON DUNN
10. In connection with its prepetition services, Gibson Dunn has periodically invoiced and charged the Debtors for fees and expenses, as set forth in more detail in the chart below. On October 5, 2020, the Debtors provided Gibson Dunn with an advance payment retainer in the
amount of $500,000.00 (the “Retainer”). As of the Petition Date, there was a residual retainer estimated to total approximately $118,497.00.
11. The payments by the Debtors to Gibson Dunn during the ninety (90) day period before the Petition Date are set forth below:
Invoice Date Invoice Amount Nature Payment/Retainer Replenishment Date Payment/Retainer Replenishment Amount 7/28/20 $59,201.99 Restructuring Preparation and Advice 8/28/20 $59,201.99 8/25/20 $159,559.80 Restructuring Preparation and Advice 9/16/20 $159,559.80 9/9/20 $278,093.24 Restructuring Preparation and Advice 9/21/20 $278,093.24 10/5/20 $500,000.00 Advance Payment Retainer - - 10/12/20 $475,249.25 Restructuring Preparation and Advice 10/12/20 $475,249.25 10/28/20 $462,788.11 Restructuring Preparation and Advice 10/28/20 $462,788.11 11/4/20 $494,681.57 Restructuring Preparation and Advice 11/4/20 $494,681.57 11/18/20 $499,982.26 Restructuring Preparation and Advice 11/18/20 $499,982.26 11/22/20 $381,503.00 Restructuring Preparation and Advice 11/22/20 $381,503.00
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of numerous agreements and documents, including the RSA and accompanying term sheets, the Plan and the Disclosure Statement, and the Debtors’ preparation for the Chapter 11 Cases. All invoices for prepetition services have been paid in full, and accordingly as of the Petition Date, the Debtors do not owe Gibson Dunn any amounts for legal services rendered before the Petition Date.
PROFESSIONAL COMPENSATION
13. The hourly rates and corresponding rate structure that Gibson Dunn will use in the Chapter 11 Cases are the same as the hourly rates and corresponding rate structure that Gibson Dunn uses in other restructuring matters, as well as similar complex corporate, securities, and litigation matters whether in court or otherwise, regardless of whether a fee application is required. These rates and the rate structure reflect that such restructuring and other complex matters typically are national in scope and involve great complexity, high stakes, and severe time pressures.
14. Gibson Dunn operates in a national marketplace for legal services in which rates are driven by multiple factors relating to the individual lawyer, his or her area of specialization, the Firm’s expertise, performance, and reputation, the nature of the work involved, and other factors. 15. Gibson Dunn’s current hourly rates for matters related to the Chapter 11 Cases range as follows: 2020 Rates 2021 Rates8 Partners $1,095 - $1,550 $1,095 - $1,645 Counsel $985 - $1,045 $1,025 - $1,210 Associates $585 - $1,025 $610 - $1,060 Paraprofessionals $285 - $645 $335 - $645
16. Gibson Dunn’s hourly rates are set at a level designed to compensate Gibson Dunn fairly for the work of its attorneys and paraprofessionals and to cover fixed and routine expenses.
Hourly rates vary with the experience and seniority of the individuals assigned. These hourly rates are subject to periodic adjustments to reflect economic and other conditions.9
17. Gibson Dunn has represented one or more of the Debtors in non-bankruptcy work since August 2014. For the period from January 1, 2020 to the Petition Date, Gibson Dunn represented the Debtors using the hourly rates listed above. Gibson Dunn’s work during the Chapter 11 Cases is not being discounted, and is being billed only at the hourly rates listed above. Gibson Dunn’s hourly rates for its professionals working on the Chapter 11 Cases are consistent with the rates that Gibson Dunn charges other comparable chapter 11 clients, regardless of the location of the chapter 11 case.
18. The rate structure provided by Gibson Dunn is appropriate and not significantly different from (a) the rates that Gibson Dunn charges for other similar types of representations or (b) the rates that other comparable counsel would charge to do work substantially similar to the work Gibson Dunn will perform in the Chapter 11 Cases.
19. It is Gibson Dunn’s policy, in all areas of practice, to charge its clients for identifiable, non-overhead expenses incurred in connection with the client’s case that would not have been incurred except for representation of that particular client. It is also Gibson Dunn’s policy to charge its clients only the amount actually incurred by Gibson Dunn in connection with such items. Examples of such expenses include postage, overnight mail, courier delivery, transportation,
9 For example, like many of its peer law firms, Gibson Dunn typically increases the hourly billing rate of attorneys and paraprofessionals twice a year in the form of: (i) step increases historically awarded in the ordinary course on the basis of advancing seniority and promotion and (ii) periodic increases within each attorney’s and paraprofessional’s current level of seniority. The step increases do not constitute “rate increases” (as the term is used in the Guidelines for Reviewing Applications for Compensation and Reimbursement of Expenses Filed Under 11 U.S.C. § 330 by Attorneys in Larger Chapter 11 Cases, effective November 1, 2013). Other than in respect of the effectiveness of the 2021 rates set forth above, which will take effect on January 1, 2021, Gibson Dunn will provide reasonable notice to the Debtors, the U.S. Trustee, and any official committee before implementing any periodic increases, and shall file any such notice with the Court, as set forth in the Proposed
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overtime expenses, computer-assisted legal research, photocopying, airfare, meals, and lodging. Gibson Dunn will charge the Debtors for these expenses in a manner and at rates consistent with charges made generally to Gibson Dunn’s other clients and consistent with applicable U.S. Trustee Guidelines. Gibson Dunn professionals also may charge their overtime meals and overtime transportation to the Debtors consistent with prepetition practices. Gibson Dunn will charge the Debtors for these expenses in a manner and at rates consistent with charges made generally to Gibson Dunn’s other clients and consistent with applicable U.S. Trustee Guidelines.
GIBSON DUNN’S HOURLY RATES ARE APPROPRIATE AND REASONABLE
20. Gibson Dunn’s hourly rates summarized above are consistent with Gibson Dunn’s normal and customary billing practices for comparably sized and complex cases and transactions, both in and out of court, involving the types of services to be provided in connection with the Chapter 11 Cases. Gibson Dunn’s restructuring expertise, as well as its capital markets knowledge, financing skills and mergers and acquisitions expertise, some or all of which may be required by the Debtors during the term of Gibson Dunn’s engagement hereunder, were important factors in determining Gibson Dunn’s standard hourly rates. Moreover, the standard hourly rates are consistent with and typical of arrangements entered into by Gibson Dunn and other counsel in connection with the rendering of comparable services to clients such as the Debtors. Gibson Dunn believes that Gibson Dunn’s fees for this engagement are both reasonable and market-based.
21. Gibson Dunn’s rates and fees, in exchange for its legal services, reflect the substantial commitment of professional time and effort that will be required of Gibson Dunn and its professionals and the facts that (i) such commitment may foreclose other opportunities for Gibson Dunn and (ii) the actual time and commitment required of Gibson Dunn and its professionals to perform its services may vary substantially from week to week and month to month.
STATEMENT REGARDING U.S. TRUSTEE GUIDELINES
22. Gibson Dunn shall apply for compensation for professional services rendered and reimbursement of expenses incurred in connection with the Chapter 11 Cases in compliance with sections 330 and 331 of the Bankruptcy Code and applicable provisions of the Bankruptcy Rules, Local Rules, and any other applicable procedures and orders of the Court. Gibson Dunn also intends to make a reasonable effort to comply with the U.S. Trustee’s requests for information and additional disclosures as set forth in the U.S. Trustee Guidelines, both in connection with the Application and the interim and final fee applications to be filed by Gibson Dunn in the Chapter 11 Cases.
Attorney Statement Pursuant to U.S. Trustee Guidelines
23. The following is provided in response to the request for additional information set forth in Paragraph D.1. of the U.S. Trustee Guidelines:
Question: Did Gibson Dunn agree to any variations from, or
alternatives to, its standard billing arrangements for this engagement?
Answer: No. Gibson Dunn has not agreed to any variations from,
or alternatives to, its standard billing arrangements for this engagement. Gibson Dunn’s rate structure is appropriate and the same as: (a) the rates that Gibson Dunn charges for other non-bankruptcy representations; and/or (b) the rates of other comparably skilled professionals.
Question: Do any of Gibson Dunn’s professionals in this
engagement vary their rate based on the geographic location of the Chapter 11 Cases?
Answer: No. The Gibson Dunn’s professionals involved in this
engagement do not vary their rates based on the geographic location of the Chapter 11 Cases. Gibson Dunn’s hourly rates in representing the Debtors are consistent with its rates for other comparable clients, regardless of the location of the Chapter 11 Cases.
Question: If Gibson Dunn has represented the Debtors in the 12
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material financial terms for the prepetition engagement, including any adjustments during the 12 months prepetition. If Gibson Dunn’s billing rates and material financial terms have changed postpetition, explain the difference and the reasons for the difference.
Answer: Gibson Dunn has represented the Debtors in the 12
months prepetition. The billing rates and material financial terms of the prepetition engagement are the same as those described in the Application and this Declaration, subject to customary annual rate increases typically as of January 1 each year and step-ups in rates for associates when they advance in class seniority.
Question: Have the Debtors approved Gibson Dunn’s prospective
budget and staffing plan, and if so, for what budget period?
Answer: The Debtors will approve a prospective budget and
staffing plan for Gibson Dunn’s engagement for the anticipated postpetition period as appropriate. In accordance with the U.S. Trustee Guidelines, the budget may be amended as necessary to reflect changed or unanticipated developments.
GIBSON DUNN’S SEARCH AND DISCLOSURE PROCEDURES
24. Gibson Dunn maintains a master client database created from its conflict clearance and billing records (the “System”). The System includes: (i) the name of each current or former client; (ii) the names of any entities materially related to, or materially adverse to, such current or former clients; (iii) the names of the Gibson Dunn attorneys responsible for such current or former clients; (iv) the status of the matter as either “active” or “inactive”; and (v) the dates on which the matter was opened and closed.
25. Gibson Dunn has utilized the System to search for potential conflicts of interest and other connections to existing and former clients and other potential parties-in-interest in the Chapter 11 Cases whom Gibson Dunn has represented in the previous twenty-four (24) months. In regard to the connections that Gibson Dunn has to certain Debtors and certain of their affiliates, I or Gibson Dunn attorneys at my direction, have contacted certain Gibson Dunn attorneys shown on the System report as having previously submitted relevant connections information to the
System. From such attorneys and these databases, we have obtained information and guidance with regard to the particular connections reflected.
GIBSON DUNN’S DISINTERESTEDNESS
26. In connection with its proposed retention by the Debtors in the Chapter 11 Cases, Gibson Dunn undertook to determine whether it had any conflicts or other relationships that might cause it not to be disinterested or to hold or represent an interest adverse to the Debtors. Specifically, Gibson Dunn obtained from the Debtors and their professionals the names of individuals and entities that may be parties in interest in the Chapter 11 Cases (the “Potential Parties in Interest”) and such parties are listed on Schedule 1 hereto. Gibson Dunn has searched on the System for its connections to the Potential Parties in Interest. In addition, Gibson Dunn sent a daily report of new matters firmwide. All Gibson Dunn attorneys are responsible for reviewing the daily report of new matters and raising any potential concerns with respect to new representations. To the extent that I have been able to ascertain that Gibson Dunn currently represents, or has represented within the last two years, any of the Potential Parties in Interest (or their affiliates, as the case may be) in matters unrelated to the Chapter 11 Cases, such facts are disclosed on Schedule 2 (the “Disclosure List”) attached hereto.
27. Gibson Dunn and certain of its partners and associates may have in the past represented, may currently represent, and likely in the future will represent, entities that may be parties in interest in the Chapter 11 Cases in connection with matters unrelated (except as otherwise disclosed herein) to the Debtors and the Chapter 11 Cases. Gibson Dunn has searched on its electronic database for its connection to the Potential Parties in Interest. The individuals and entities that may be parties in interest in the Chapter 11 Cases may have changed from those which are listed on Schedule 1 without our knowledge and may change during the pendency of the
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Chapter 11 Cases. Accordingly, Gibson Dunn will update this Declaration as necessary and when Gibson Dunn becomes aware of additional material information.
28. The following is a list of the categories that Gibson Dunn has searched:
Schedule Category
1(a) Debtor and Non-Debtor Affiliates (Including any Trade Names) 1(b) Current Officers and Directors, Board Members of the Debtors and
Individuals who have served as Officers or Directors of the Debtors in the past two years
1(c) Debtors’ Prepetition and Postpetition Noteholders, Notes Trustee, Secured Bank Lenders, and Advisors and Counsel
1(d) Holders of More Than 5% of Any of the Debtors’ Equity Securities
1(e) Parties Relating to Known Litigation Matters Involving the Debtors
1(f) The Debtors’ 30 Largest Unsecured Creditors on a Consolidated Basis as Identified in Their Chapter 11 Petitions
1(g) Bankruptcy Professionals 1(h) The Debtors’ Landlords
1(i) Government and Regulatory Agencies 1(j) The Debtor’s Utility Providers
1(k) The Debtors’ Insurers, Insurance Brokers and Surety Bond Providers
1(l) Other Significant Trade Vendors or Customers Not on Debtors’ 30 Largest Unsecured Creditors List
1(m) Parties to Material Executory Contracts
1(n) Attorneys for U.S. Trustee’s Office, District of Delaware 1(o) U.S. Bankruptcy Court Judges, District of Delaware 1(p) Debtors’ Bank Accounts
1(q) Entities that filed Notices of Appearance and Requests for Service 1(r) Ordinary Course Professionals
29. To the best of my knowledge, (a) Gibson Dunn is a “disinterested person” within the meaning of section 101(14) of the Bankruptcy Code, as required by section 327(a) of the Bankruptcy Code, and does not hold or represent an interest adverse to the Debtors’ estates and (b) Gibson Dunn has no connection to the Debtors, their creditors, or other parties in interest, except as may be disclosed in this Declaration.
30. The Disclosure List sets forth the results of Gibson Dunn’s searches in the System for conflicts or connections with the Potential Parties in Interest. Gibson Dunn will not initiate any specific litigation against the entities listed on the Disclosure List that are current clients of Gibson Dunn (including entities listed below under the “Specific Disclosures” section of this Declaration) unless Gibson Dunn has an applicable waiver on file or first receives a waiver from such entity allowing Gibson Dunn to commence such an action. In circumstances where the Debtors will be adverse to another Gibson Dunn client in this case, either Young Conaway Stargatt & Taylor, LLP will act as counsel for the Debtors for such matters, or Gibson Dunn will assist the Debtors in engaging other counsel to handle the investigation and prosecution of any claims or defenses. Additionally, an ethical wall will be established at the Firm. Therefore, the Debtors do not believe that Gibson Dunn’s concurrent representation of any of the Potential Parties in Interest on unrelated matters (as described on the Disclosure List) creates a disqualifying conflict of interest in this case.
31. Gibson Dunn’s searches in the System for conflicts or connections with the Potential Parties in Interest (that Gibson Dunn was able to locate using its reasonable efforts) reveals, to the best of my knowledge, that those Gibson Dunn attorneys and paraprofessionals who previously worked at other law firms that represented such entities in the Chapter 11 Cases have not worked on matters relating to the Debtors’ restructuring efforts while at Gibson Dunn.
32. Based on the conflicts search conducted to date and described herein, to the best of my knowledge, neither I, Gibson Dunn, nor any partner or associate thereof, insofar as I have been able to ascertain, have any connection with the Debtors, their creditors, or any other parties in interest, their respective attorneys and accountants, the United States Trustee for the District of Delaware (the “U.S. Trustee”), any person employed by the U.S. Trustee, or any Bankruptcy Judge
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currently serving on the United States Bankruptcy Court for the District of Delaware, except as disclosed or otherwise described herein.
SPECIFIC DISCLOSURES
33. As specifically set forth below and on the Disclosure List, Gibson Dunn represents certain of the Debtors’ creditors, equity security holders, or other entities that may be parties in interest in ongoing matters unrelated to the Debtors and the Chapter 11 Cases. None of the representations described herein are materially adverse to the interests of the Debtors’ estates.
34. Gibson Dunn currently represents, formerly represented, and in the future will likely represent Littlejohn & Co. LLC and certain of its affiliates (“Littlejohn”) on a variety of matters. Littlejohn indirectly holds a majority of the equity interests in the Debtors’ parent entity, HHI. Gibson Dunn previously represented Littlejohn in connection with Littlejohn’s equity investment in the Company in 2014. Since then Gibson Dunn has not represented Littlejohn in matters relating to the Debtors.10 Gibson Dunn’s other representations of Littlejohn have been in matters unrelated
to the Debtors or the Chapter 11 Cases. Gibson Dunn’s representations of Littlejohn and its affiliates accounted for less than 1% of Gibson Dunn’s fee receipts for the twelve-month period ending on November 30, 2020. Wachtell Lipton Rosen & Katz represents Littlejohn in connection with the Chapter 11 Cases. Gibson Dunn has not represented and will not represent Littlejohn in matters related to the Debtors or the Chapter 11 Cases during the pendency of the Chapter 11 Cases. I do not believe Gibson Dunn’s current and prior representations of Littlejohn preclude Gibson Dunn from meeting the disinterestedness standard under the Bankruptcy Code.
10 Gibson Dunn has represented Littlejohn in connection with transactions wholly unrelated to the Debtors. Notwithstanding that the Firm’s representation did not relate to Debtors, certain regulatory disclosures appurtenant to the Firm’s unrelated representations have included administrative or regulatory disclosure of Littlejohn’s interests in the Debtors. For example, in 2019 the Firm represented Littlejohn in connection with disclosures required under the Hart-Scott-Rodino Antitrust Improvements Act.
