Wednesday, September 02, 2009 11:07:43 AM
This week the co. filed a motion to extend the exclusivity of filing their POR(Docket # 1953)...in that motion which is copied below are some details of progress thus far--see paragraphs 12-15 regarding "inter-estate" and "LES mediation" progress...
http://chapter11.epiqsystems.com/docket/docketlist.aspx?pk=61832e15-08f8-42b6-930c-7849e9ffe32d
Paul V. Shalhoub, Esq. (Admitted Pro Hac Vice)
Rachel C. Strickland, Esq. (Admitted Pro Hac Vice)
WILLKIE FARR & GALLAGHER LLP
787 Seventh Avenue
New York, New York 10019
(212) 728-8000
- and -
Dion W. Hayes (VSB No. 34304)
John H. Maddock III (VSB No. 41044)
McGUIREWOODS LLP
One James Center
901 East Cary Street
Richmond, Virginia 23219-4030
(804) 775-1000
Attorneys for the Debtors and
Debtors in Possession
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
RICHMOND DIVISION
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In re : Chapter 11
:
LandAmerica Financial Group, Inc., et al., : Case No. 08-35994 (KRH)
:
Debtors. : (Jointly Administered)
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DEBTORS’ MOTION FOR ORDER EXTENDING CERTAIN
DEBTORS’ EXCLUSIVE PERIODS TO FILE CHAPTER 11
PLAN AND SOLICIT ACCEPTANCES THERETO
PURSUANT TO SECTION 1121(d) OF THE BANKRUPTCY CODE
TO: THE HONORABLE UNITED STATES BANKRUPTCY JUDGE
The debtors and debtors in possession in the above-captioned cases (collectively,
the “Debtors”) hereby move this Court (the “Motion”) for entry of an order, pursuant to section
1121(d) of title 11 of the United States Code (the “Bankruptcy Code”), (a) extending the
Exclusive Filing Period (as defined herein) during which LandAmerica Financial Group, Inc.
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(“LFG”), LandAmerica 1031 Exchange Services, Inc. (“LES”), LandAmerica Title Company
(“LandAm Title”), Southland Title Corporation, Southland Title of Orange County, and
Southland Title of San Diego (the “Southland Entities,” and collectively with LFG, LES and
LandAm Title, the “Initial Debtors”) have the exclusive right to file a chapter 11 plan, through
and including October 15, 2009; (b) extending the Exclusive Solicitation Period (as defined
herein) during which the Initial Debtors have the exclusive right to solicit acceptances of a
chapter 11 plan, through and including December 15, 2009; and (c) allowing a further thirty (30)
day extension of each of the Exclusive Filing Period and the Exclusive Solicitation Period upon
written consent of the Creditors’ Committees (as defined herein) without further application to
this Court, which further extended Exclusive Periods (as defined herein) shall apply to all
Debtors. In support of this Motion, the Debtors, by and through their undersigned counsel,
respectfully represent as follows:
BACKGROUND
1. On November 26, 2008 (the “Petition Date”), LFG and LES each filed a
voluntary petition for relief under chapter 11 of the Bankruptcy Code. On March 6, 2009, March
27, 2009, March 31, 2009 and July 17, 2009, various other LFG affiliates (LandAmerica
Assessment Corporation (“LAC”), LandAm Title, the Southland Entities and LandAmerica
Credit Services, Inc. (“LandAm Credit”)) each filed voluntary petitions for relief under chapter
11 of the Bankruptcy Code, respectively. Pursuant to orders of this Court dated November 28,
2008, March 11, 2009, April 8, 2009, April 9, 2009 and July 22, 2009, the chapter 11 cases of
the Debtors are being jointly administered under case number 08-35994. The Debtors continue
to manage their properties as debtors in possession pursuant to sections 1107 and 1108 of the
Bankruptcy Code. No trustee or examiner has been appointed in the Debtors’ chapter 11 cases.
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2. On December 3, 2008, the United States Trustee for the Eastern District of
Virginia (the “U.S. Trustee”) appointed an Official Committee of Unsecured Creditors in the
case of (a) LandAmerica Financial Group, Inc. (the “LFG Committee”), and (b) LandAmerica
1031 Exchange Services, Inc. (the “LES Committee,” and, together with the LFG Committee,
the “Creditors’ Committees”).
3. On June 4, 2009, the U.S. Trustee filed his Amended Appointment of
Unsecured Creditors’ Committee, adding two (2) additional members to the LES Committee.
A. Ongoing Asset Sales
4. LFG is a holding company that operates through its various subsidiaries
(collectively, with LFG, the “Company”). Prior to the Petition Date, approximately 85 to 90%
of the Company’s revenue was derived from LFG’s primary title insurance underwriting
subsidiaries – Commonwealth Land Title Insurance Company, Lawyers Title Insurance
Corporation, United Capital Title Insurance Company, and their respective subsidiaries
(collectively, the “Underwriters”). On December 22, 2008, LFG sold its direct and/or indirect
ownership of its stock in the Underwriters to Fidelity National Financial, Inc. (“FNF”), Fidelity
National Title Insurance Company (“FNTIC”) and Chicago Title Insurance Company (“CTIC”
and collectively with FNF and FNTIC, “Fidelity”) pursuant to this Court’s orders dated
December 17, 2008 and December 21, 2008.
5. Since the sale of the Underwriters, LFG, with the assistance of its
professionals, has successfully marketed, negotiated and consummated sales of several
subsidiaries, which resulted in substantial value to the LFG estate. On March 20, 2009, this
Court approved the sale of LandAmerica Valuation Corporation, a wholly-owned subsidiary of
LFG that performed valuations on commercial real estate, to BB Valuation, Inc. (the “LVC
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Sale”). The LVC Sale closed on April 1, 2009, resulting in approximately $0.8 million in value
for LFG’s estate. In addition, on March 25, 2009, this Court approved the sale of all or
substantially all of the principal assets of LAC to Partner Assessment Corporation d/b/a Partner
Engineering and Science (the “LAC Sale”). The LAC Sale closed on March 26, 2009, resulting
in approximately $2 million in value for LAC’s estate. Furthermore, LFG sold its stock in its
wholly-owned subsidiaries LoanCare Servicing Center, Inc. and LC Insurance Agency, Inc.
(“LoanCare”). The sale of LoanCare was approved by this Court on May 21, 2009 and closed
on June 3, 2009, resulting in approximately $15.9 million in value for LFG’s estate.
Additionally, LFG sold its 22% ownership interest in RealEC Technologies, Inc. (“RealEC”) to
LPS Asset Management Solutions, Inc., which resulted in approximately $2.6 million in value
for LFG’s estate. Finally, LFG sold LandAmerica Home Warranty Company, LandAmerica
Property Inspection Services, Inc., Buyers Real Estate Services, Inc. and Residential Property
Maintenance, Inc. (the “Home Warranty”) to Buyers Protection Group, Inc. By order dated
May 21, 2009, this Court approved the sale of Home Warranty, which is expected to result in
over $11 million in value for LFG’s estate.
6. LFG continues to evaluate the Company’s remaining businesses to
determine the manner in which to best maximize value, including through one or more sales of
the Company’s remaining businesses and/or the prompt and orderly wind-down and liquidation
of such businesses.
B. Resolution of Material Claims
7. Since the Petition Date, the Debtors have worked diligently to resolve
significant claims filed against their estates. The Debtors have settled certain prepetition and
postpetition claims in accordance with the settlement procedures that were approved by this
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Court on May 21, 2009. Specifically, the Debtors have entered into consensual agreements
terminating or amending several of their unexpired non-residential real property leases. In
addition, the Debtors continue to negotiate the settlement of certain lawsuits that are pending
against their estates. Finally, the Debtors have filed six (6) omnibus claim objections to expunge
numerous claims against their estates. The Debtors continue to review the proofs of claim filed
in theses cases and will continue to work to resolve such claims.
8. The Debtors and their professionals have also focused on resolving certain
significant governmental claims. The Internal Revenue Service (“IRS”) has asserted various
priority tax claims against the Debtors’ estates in excess of $54 million. The Debtors dispute the
extent, validity and priority of such claims, and are engaged in negotiations with the IRS with
respect to such tax claims.
9. In addition, the Pension Benefit Guarantee Corporation (the “PBGC”) has
asserted claims against LFG’s and LES’s estates, each in the amount of $37.5 million, for the
unfunded benefit liabilities of the LandAmerica Cash Balance Plan (the “Pension Plan”), which
are contingent on the termination of the Pension Plan. The Debtors are working with the PBGC
to value the potential costs of terminating the Pension Plan, to determine an appropriate manner
in which to accomplish the termination, and ultimately to resolve or settle the PBGC’s claims.
10. The Debtors continue to address numerous complex issues relating to the
sale of the Underwriters to Fidelity, including handling transition issues relating to the Fidelity
sale. Specifically, LFG and its professionals have worked to separate LFG and its subsidiaries’
operations from the Underwriters pursuant to the Transition Services Agreement (the “TSA”),
whereby LFG operated material elements of the Underwriters’ businesses (e.g., accounting,
information technologies, human resources, etc.) pending their transition to Fidelity. The
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Debtors and their professionals have spent a significant amount of time in an effort to resolve
issues with respect to reimbursement of services provided pursuant to the TSA and to reconcile
amounts owed by and among the parties.
C. Sale of Auction Rate Securities
11. In an effort to maximize the value of its estate, LES has also focused its
efforts on marketing and selling its investments in subordinate student loan auction rate
securities (“Auction Rate Securities”). LES currently holds twenty (20) tranches of Auction
Rate Securities with a total face value of $201.7 million. As has been widely publicized, the
market for auction rate securities froze in early 2008, and as a result, LES has been unable to
liquidate the Auction Rate Securities at a price near their par value. Due to the nature of these
assets, the sale of ARS has required prolonged discussions between the Debtors, the LES
Committee and prospective brokers and purchasers. The Debtors anticipate filing a motion with
the Court seeking approval of procedures to market and, if appropriate, sell the Auction Rate
Securities.
D. Plan Process
12. On May 21, 2009, the Court approved a protocol (the “Mediation
Protocol”) providing for a two-step mediation of (a) certain inter-estate transactions between
LFG and LES (the “Inter-Estate Mediation”), and (b) issues relating to a compromise plan of
liquidation involving a global resolution of, among other things, certain litigation test cases (the
“Lead Cases”),1 which share common legal and factual issues with other adversary proceedings
pending against LES (the “LES Mediation”).
1 A fifth Lead Case was later designated. However, as LES consummated a Court-approved settlement with
one of the Lead Case claimants, Health Care REIT, Inc., four Lead Cases now remain.
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13. The Inter-Estate Mediation, the first step of the Mediation Protocol, was
designed to address the validity, priority, characterization or allowance of certain inter-estate
transfers and, to the extent that such transfers are claims, the extent to which such claims should
be avoided or disallowed under chapter 5 of the Bankruptcy Code as well as LES’ and LFG’s
estates allocable share of liabilities associated with the claims asserted by the Internal Revenue
Services and Pension Benefit Guarantee Corporation. Since the resolution of these inter-estate
disputes would have a material impact on the recoveries of LFG’s and LES’ creditors, such
issues needed to be addressed prior to the formulation of a plan. Due to the efforts of all
involved, this mediation was a success. At the conclusion of the Inter-Estate Mediation on July
3, 2009, the Creditors’ Committees agreed to a proposed resolution for the treatment of all interestate
issues. This resolution took the form of a term sheet that will be embodied in a plan of
liquidation.
14. The second step of the Mediation Protocol, the LES Mediation, was
designed to address a structure for a plan of liquidation encompassing a global resolution of,
among other things, outstanding issues relating to the Lead Cases, including the resolution of
whether certain customers were entitled to consequential damages and whether proceeds of sales
of relinquished properties (the “Exchange Funds”) were held by LES in constructive trusts on
behalf of their customers. Furthermore, the Mediation Protocol imposed a stay of the Lead
Cases to alleviate the related litigation expenses and to enable the parties to focus on the
mediation. As part of the LES Mediation, which concluded on July 14, 2009, the Creditors’
Committees and the Lead Case plaintiffs agreed to a proposed resolution of many of the
outstanding issues related to the Lead Cases. Like the Inter-Estate Mediation, the LES
Mediation resulted in a term sheet.
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15. Since the conclusion of the LES Mediation, the Debtors, with the input of
the Creditors’ Committees, have worked diligently to document the resolution of the Inter-Estate
Mediation and the LES Mediation in a consensual plan of liquidation. Since July 30, 2009, the
Debtors and the Creditors’ Committees have exchanged over a dozen drafts of a proposed joint
chapter 11 plan of liquidation and ancillary documents related thereto. There have been multiple
conference calls between the professionals retained by the Debtors and the Creditors’
Committees to negotiate and finalize the terms of the plan. Given the diligent efforts of all
involved, the Debtors are optimistic that they will be in a position to file a largely consensual
plan in the near term.
JURISDICTION
16. The Court has jurisdiction over this Motion pursuant to 28 U.S.C. §§ 157
and 1334. Venue is proper in this district pursuant to 28 U.S.C. §§ 1408 and 1409. This matter
is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2). The statutory predicate for the
relief sought herein is section 1121(d) of the Bankruptcy Code, as supplemented by Rule
9006(b)(1) of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”).
RELIEF REQUESTED
17. Section 1121(b) of the Bankruptcy Code provides for an initial period of
120 days after the commencement of a chapter 11 case during which a debtor has the exclusive
right to file a chapter 11 plan (the “Exclusive Filing Period”). Section 1121(c)(3) of the
Bankruptcy Code provides that, if a debtor files a plan of reorganization within the Exclusive
Filing Period, then it has an initial period of 180 days after the commencement of its chapter 11
case to solicit acceptances of such plan (the “Exclusive Solicitation Period” and, together with
the Exclusive Filing Period, the “Exclusive Periods”).
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18. By order of this Court dated July 22, 2009, the Exclusive Filing Period for
the Initial Debtors was extended through and including September 15, 2009 and the Exclusive
Solicitation Period for the Initial Debtors was extended through and including November 15,
2009 for each of the Initial Debtors.
19. In addition, LAC’s current Exclusive Filing Period ends November 3,
2009, and LAC’s Exclusive Solicitation Period ends December 31, 2009. LandAm Credit’s
current Exclusive Filing Period ends November 14, 2009, and LandAm Credit’s Exclusive
Solicitation Period ends January 13, 2010.
20. The Debtors are currently in the process of formulating a plan of
liquidation and have made significant progress in that respect. In order to facilitate discussions
with the Creditors’ Committees and other parties in interest, and to maintain much needed order,
process and momentum, the Debtors believe that the extension of the Exclusive Filing Period
through and including October 15, 2009 and the extension of the Excusive Solicitation Period
through and including December 15, 2009 for the Initial Debtors are not only warranted but
critical in these cases. If extensions of the Exclusive Periods are granted as set forth herein, the
Debtors believe they will have the requisite time to propose and solicit a confirmable plan
without the confusion and chaos that wound ensue if multiple competing agendas were permitted
to be pursued by divergent constituencies. In addition, the Debtors request authority to further
extend the Exclusive Periods one or more times by thirty (30) days each, upon the written
consent of each of the Creditors’ Committees without further application to this Court, which
further extended dates shall also apply to LAC and LandAm Credit. The Debtors will file
notices of additional extensions of the Exclusive Periods with the Court and serve such notices
on the U.S. Trustee and all parties who have requested notice in the Debtors’ chapter 11 cases
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pursuant to Bankruptcy Rule 2002. The relief requested herein will ensure that the Debtors and
the Creditors’ Committees lead the efforts to achieve a consensual plan, and that such plan
incorporates the results of the Inter-Estate and LES Mediations.
21. The Debtors request that the extension of the Exclusive Periods be through
and including the later of October 15, 2009 and December 15, 2009, respectively, or the
exclusivity dates otherwise applicable to the Debtors.
22. The relief requested herein shall be without prejudice to the Debtors’
rights to request further extensions of the Exclusive Periods in compliance with section
1121(d)(2) of the Bankruptcy Code or to seek other appropriate relief. For the reasons set forth
herein, the Debtors believe that “cause” exists to extend the Exclusive Periods.
BASIS FOR RELIEF
23. The Exclusive Periods under section 1121(b) of the Bankruptcy Code are
intended to afford debtors an opportunity to propose a chapter 11 plan and to solicit acceptances
of such plan without the disruption to the debtors’ cases that might be caused by the filing of
competing plans by non-debtor parties. In circumstances where, as here, the Exclusive Periods
prove to be insufficient to formulate, negotiate, file and solicit acceptances of a meaningful
chapter 11 plan which garners support of various parties in interest, section 1121(d) of the
Bankruptcy Code allows the Court to extend the Initial Debtors’ Exclusive Periods for “cause.”
Specifically, section 1121(d) of the Bankruptcy Code provides:
(1) Subject to paragraph (2), on request of a party in interest made
within the respective periods specified in subsections (b) and (c) of
this section and after notice and a hearing, the court may for cause
reduce or increase the 120-day period or the 180-day period
referred to in this section.
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(2) (A) The 120-day period specified in paragraph (1) may not be
extended beyond a date that is 18 months after the date of the order
for relief under this chapter.
(B) The 180-day period specified in paragraph (1) may not be
extended beyond a date that is 20 months after the date of the order
for relief under this chapter.
11 U.S.C. § 1121(d).
24. It is well established that a decision to extend the Exclusive Periods is left
to the sound discretion of the Bankruptcy Court and should be based upon the facts and
circumstances of a particular case. See First American Bank of New York v. Southwest Gloves
and Safety Equip., Inc., 64 B.R. 963, 965 (D. Del. 1986); In re Reetz, 61 B.R. 412, 414 (Bankr.
W.D. Wis. 1986). Although the Bankruptcy Code does not define “cause” for the purpose of an
extension of the Exclusive Periods, courts have looked to the legislative history of section
1121(d) of the Bankruptcy Code for guidance. See In re Gibson & Cushman Dredging Corp.,
101 B.R. 405, 409 (E.D.N.Y. 1989); In re Amko Plastics, Inc., 197 B.R. 74, 77 (Bankr. S.D.
Ohio 1996). In doing so, courts have found that Congress did not intend that the 120- and 180-
day periods be a hard and fast rule. See Amko Plastics, 197 B.R. at 77 (noting that Congress
intended courts to have flexibility in dealing with extensions of exclusivity); Gaines v. Perkins
(In re Perkins), 71 B.R. 294, 297 (W.D. Tenn. 1987) (“The hallmark of … [section 1121(d)] is
flexibility”). Rather, Congress intended that the Exclusive Periods be of an adequate length,
given the circumstances, for a debtor to formulate, negotiate and draft a viable plan, which by
definition means one supported by some or all of a debtor’s key constituents, without the
disruption that would occur with the filing of competing plans. See Geriatrics Nursing Home,
Inc. v. First Fidelity Bank, N.A. (In re Geriatrics Nursing Home, Inc.), 187 B.R. 128, 133 (D.N.J.
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1995). Indeed, Congress recognized that often a 120-day exclusivity period will not afford a
debtor in large cases sufficient time to formulate and negotiate a plan:
The court is given the power, though, to increase . . . the 120-day
period depending on the circumstances of the case. [T]he bill
allows the flexibility for individual cases that is not available
today. For example, if an unusually large company were to seek
reorganization under chapter 11, the Court would probably need to
extend the time in order to allow the debtor to reach an agreement.
H.R. Rep. No. 95-595, 95th Cong. 1st Sess. 232 (1977) (footnotes omitted).2
25. When determining whether cause exists for an extension of the Exclusive
Periods, courts have relied on a variety of factors, each of which may provide sufficient grounds
for extending exclusivity. Factors considered by courts in making such a determination have
included: (a) the size and complexity of the case; (b) the necessity of sufficient time to negotiate
a plan and prepare adequate information; (c) whether the debtor is paying its debts as they come
due; (d) whether the debtor has demonstrated reasonable prospects for filing a viable plan;
(e) whether the debtor has made progress in negotiating with creditors; (f) the length of time the
case has been pending; (g) whether the debtor is seeking the extension to pressure creditors; and
(h) whether unresolved contingencies exist. See, e.g., Continental Casualty Co. v. Burns & Roe
Enters., Inc. (In re Burns & Roe Enters., Inc.), 2005 U.S. Dist. LEXIS 26247, at *11-12 (D.N.J.
2005); In re Gibson & Cushman Dredging Corp., 101 B.R. at 409-10; In re Central Jersey
Airport Servs., LLC, 282 B.R. 176, 184 (Bankr. D.N.J. 2002); In re Express One Int’l Inc., 194
B.R. 98, 100 (Bankr. E.D. Tex. 1996); In re Grand Traverse Dev. Co. Ltd. P’ship, 147 B.R. 418,
420 (Bankr. W.D. Mich. 1992); In re Southwest Oil Co. of Jourdanton, Inc., 84 B.R. 448, 451-54
2 Notwithstanding the 2005 amendment to section 1121(d), courts have continued to adopt a flexible
approach in granting requests for extensions of the exclusivity and solicitation periods. See, e.g., In re
Stone Barn Manhattan LLC, Case No. 08-12579 (ALG) (Bankr. SDNY July 16, 2009) (granting third
exclusivity extension); In re Tweeter Home Entm’t Group, Inc., Case No. 07-10787 (PJW) (Bankr. D. Del.
Sept. 29, 2008) (extending exclusivity to nearly 18 months after the petition date).
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(Bankr. W.D. Tex. 1987). The application of the relevant factors to the facts and circumstances
of these cases demonstrates that the requested extensions are both appropriate and necessary to
afford the Initial Debtors with adequate time to propose, negotiate, and solicit acceptances to a
chapter 11 plan.
A. Size and Complexity of the Cases
26. As of the Petition Date, LFG wholly-owned approximately 28 direct
subsidiaries, approximately 219 active and inactive indirect subsidiaries (certain of which are
joint ventures), and an interest in approximately 14 non-title joint ventures. In addition, the
Company had approximately 27 different lines of business and over 7,300 employees. The size
of LFG’s case alone supports a finding of cause to further extend LFG’s Exclusive Periods.
During these chapter 11 cases, LFG has continued to work to resolve numerous complex issues
relating to the disposition of its subsidiaries. In addition, LFG and its professionals continue to
address and respond to creditors’ inquiries related to these cases on a daily basis.
27. The size and complexity of LES’s chapter 11 case also warrant a further
extension of its Exclusive Periods. LES is a party to numerous adversary proceedings
commenced by its customers. Since the early stages of these cases, LES devoted significant
resources to litigating the Lead Cases and has been successful in negotiating settlements and
obtaining Court approval of the settlement agreements with several customers. However, many
more adversary proceedings remain unresolved. LES is hopeful that the outcome of the LES
Mediation, will enable LES to confirm a plan without the need for further protracted, expensive
litigation that will erode the value of its estate.
28. To date, there have been more than 2,700 claims filed against the Debtors’
estates in the aggregate face amount of $2.2 billion.
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B. The Debtors Require Additional Time to Prepare
Adequate Information and Formulate a Chapter 11 Plan
29. The Debtors have worked arduously to formulate a plan and are engaged
in dynamic negotiations with the Creditors’ Committees over the details of such plan. Even
though significant progress has been made so far, many pieces are still in flux. At this juncture,
it is critical that creditors’ focus be on only one plan of liquidation, which embodies the
settlements reached pursuant to the Mediation Protocol, and that the Debtors have a meaningful
opportunity to resolve any open issues, finalize the plan and lead the solicitation and
confirmation process. If multiple competing plans are permitted, much of the success reached by
the parties in their negotiations and their long-standing efforts to reach consensual resolutions
could very well be squandered.
C. The Debtors Have Made Good Faith Progress In These Cases
and Do Not Seek Extension of the Exclusive Periods For Improper Reasons
30. The Debtors have made material progress in these chapter 11 cases and do
not seek the extension of the Exclusive Periods as a means to exert pressure on the relevant
parties in interest. Since the extension of LFG’s initial Exclusive Periods, the Debtors and their
professionals have devoted a substantial amount of time towards, inter alia: (a) assisting the
Debtors in winding-down their businesses; (b) working with LFG to evaluate, market, and sell,
as applicable, the remaining businesses of its subsidiaries; (c) litigating disputes relating to the
ownership of Exchange Funds; (d) implementing the Mediation Protocol to resolve both interestate
and LES related disputes; (e) rejecting leases and contracts that are burdensome to the
Debtors in order to mitigate losses and maximize values; (f) settling and otherwise resolving
material claims, including the claims filed by the IRS and the PBGC; (g) reviewing and filing
omnibus objections to claims filed against the Debtors; (h) resolving issues related to the
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transition of the Underwriters to Fidelity and the reimbursement of costs by and among the
parties; and (i) drafting and finalizing a consensual chapter 11 plan of liquidation.
31. The requested extensions are not proposed for improper reasons. To the
contrary, such extensions will allow the Debtors to address the concerns of key parties in interest
while they finalize the plan, which will encompasses the resolution of significant issues
determined during the Inter-Estate Mediation and the LES Mediation.
D. The Debtors are Paying Their Debts as They Come Due
32. The Debtors continue to make timely payment of their undisputed
postpetition obligations. As such, the requested extension will afford parties in interest a
meaningful opportunity to negotiate with the Debtors as they formulate their chapter 11 plan and
solicit votes to accept or reject such plan without prejudice to parties in interest.
E. The Debtors Have Reasonable Prospects for Filing a Viable Plan
33. The Debtors believe they have reasonable prospects for filing a viable
plan. The Debtors are in the process of finalizing a plan of liquidation memorializing the
resolutions reached during the Inter-Estate Mediation and the LES Mediation, and intend to file
the plan within the coming weeks.
F. Negotiations with Creditors
34. The development of a chapter 11 plan has been and will continue to be a
consensual process in which the Creditors’ Committees and other parties in interest play a
significant role. A suitable extension of the Exclusive Periods will allow the Debtors the
flexibility and time necessary to pursue further meaningful plan discussions with the Creditors’
Committees. In addition, permission to extend the Exclusive Filing Period and the Exclusive
Solicitation Period beyond October 15, 2009 and December 15, 2009 with the written approval
of the Creditors’ Committees, will likewise promote further collaboration between all of the
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parties and increase the likelihood of achieving a consensual plan. Accordingly, the Debtors
submit that this factor favors granting the Motion and extending the Exclusive Periods.
G. The Debtors Are Not Seeking an Extension to Pressure Creditors
35. The requested extensions of the Debtors’ Exclusive Periods are not being
made to pressure creditors. To the contrary, the Debtors continue to work and fully cooperate
with both of the Creditors’ Committees and their professionals. Counsel and financial advisors
for the Debtors maintain regular contact with the professionals for the Creditors’ Committees,
responding to inquiries and keeping such professionals apprised of all material issues and case
status. Notably, the Debtors seek these extensions to enable more time to collaborate with, not
oppose, their creditor constituencies.
H. The Debtors’ Cases Have Been Pending for Less Than Ten Months
36. The Debtors commenced the initial cases on November 26, 2008, and filed
the subsequent cases on March 6, 2009, March 7, 2009, March 31, 2009 and July 17, 2009.
Although this is the third time the Initial Debtors have sought an extension of the Exclusive
Periods, in cases as complex as these, it is not unreasonable, or unusual, to extend the Exclusive
Periods multiple times. In addition, the Initial Debtors previously requested and were granted
short extensions of their Exclusivity Periods in order to maintain the momentum in these cases.
Now, as before, the Initial Debtors seek a short extension of their Exclusive Periods. Compare,
e.g., In re Stone Barn Manhattan LLC, Case No. 08-12579 (ALG) (Bankr. SDNY June 30, 2009)
(seeking a six-month exclusivity extension); In re Frontier Airlines Holdings, Inc., Case No. 08-
11298 (RDD) (Bankr. S.D.N.Y. May 8, 2009) (seeking a four-month exclusivity extension).
I. Termination of the Debtors’ Exclusive Periods Could Adversely Impact These Cases
37. Termination of the Initial Debtors’ Exclusive Periods could adversely
impact the progress of these cases. Indeed, if this Court were to deny the Initial Debtors’ request
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for an extension of the Exclusive Periods, any party in interest would be free to propose a plan.
As this Court is well aware, such a ruling would foster a chaotic environment with no central
focus, and the forward progress made could potentially be lost as multiple parties assert their
own proposed plans asserting competing rights to the same assets. Neither the Debtors nor their
creditors can afford to enter into a litigious environment of competing chapter 11 plans. In fact,
such an environment would not only be counterproductive, it would significantly delay these
cases at great cost to all.
38. Relief similar to the relief requested herein has routinely been granted in
other chapter 11 cases, including in liquidating chapter 11 cases. See, e.g., In re S & K Famous
Brands, Inc., Case No. 09-30805 (KRH) (Bankr. E.D. Va. June 5, 2009) (exclusivity extended by
60 days); In re LandAmerica Financial Group, Inc., Case No. 08-35994 (KRH) (Bankr. E.D. Va.
Mar. 23, 2009) (exclusivity extended by 120 days); In re Circuit City Stores, Inc., Case No. 08-
35653 (KRH) (Bankr. E.D. Va. Mar. 3. 2009) (exclusivity extended by 120 days); In re US
Airways, Inc., et al., Case No.04-13819 (SSM) (Bankr. E.D. Va. Jan. 28, 2005) (exclusivity
initially extended by 80 days); In re Stone Barn Manhattan LLC, Case No. 08-12579 (ALG)
(Bankr. SDNY July 16, 2009) (extending exclusivity by 14 months); In re Frontier Airlines
Holdings, Inc., Case No. 08-11298 (RDD) (Bankr. S.D.N.Y. May 20, 2009) (same); In re
Tweeter Home Entm’t Group, Inc., Case No. 07-10787 (PJW) (Bankr. D. Del. Sept. 29, 2008)
(extending exclusivity to nearly 18 months after the petition date); In re SCO Group, Inc., Case
No. 07-11337 (KG) (Bankr. D. Del. Sept. 24, 2008) (extending exclusivity to more than 15
months after the petition date).
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NOTICE
39. Notice of this Motion will be given to: (a) the U.S. Trustee, (b) counsel for
the Creditors’ Committees, (c) all parties who have requested notice in the Debtors’ chapter 11
cases, and (d) such other parties entitled to receive notice pursuant to this Court’s December 23,
2008 Amended Administrative Order entered in these cases. The Debtors submit that no other or
further notice is required.
NO PRIOR REQUEST
40. No previous request for the relief sought herein has been made to this or to
any other Court.
WAIVER OF MEMORANDUM OF LAW
41. Pursuant to Local Rule 9013-1(G), and because there are no novel issues
of law presented in the Motion and all applicable authority is set forth in the Motion, the Debtors
respectfully request that the requirement that all motions be accompanied by a separate written
memorandum of law be waived.
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CONCLUSION
WHEREFORE, the Debtors respectfully request that the Court grant the Motion, enter
the proposed order annexed hereto as Exhibit A, and grant such other and further relief as the
Court deems just and proper.
Dated: Richmond, Virginia Respectfully submitted,
August 31, 2009
/s/ Dion W. Hayes__________________
Dion W. Hayes (VSB No. 34304)
John H. Maddock III (VSB No. 41044)
McGUIREWOODS LLP
One James Center
901 East Cary Street
Richmond, Virginia 23219-4030
(804) 775-1000
- and -
WILLKIE FARR & GALLAGHER LLP
Paul V. Shalhoub, Esq.
Rachel C. Strickland, Esq.
787 Seventh Avenue
New York, New York 10019
(212) 728-8000
Attorneys for the Debtors and
Debtors in Possession
\9860671.1
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EXHIBIT A
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Paul V. Shalhoub, Esq. (Admitted Pro Hac Vice)
Rachel C. Strickland, Esq. (Admitted Pro Hac Vice)
WILLKIE FARR & GALLAGHER LLP
787 Seventh Avenue
New York, New York 10019
(212) 728-8000
- and -
Dion W. Hayes (VSB No. 34304)
John H. Maddock III (VSB No. 41044)
McGUIREWOODS LLP
One James Center
901 East Cary Street
Richmond, Virginia 23219-4030
(804) 775-1000
Attorneys for the Debtors and
Debtors in Possession
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
RICHMOND DIVISION
------------------------------------------------------x
In re : Chapter 11
:
LandAmerica Financial Group, Inc., et al., : Case No. 08-35994 (KRH)
:
Debtors. : (Jointly Administered)
------------------------------------------------------x
ORDER EXTENDING CERTAIN DEBTORS’ EXCLUSIVE PERIODS TO
FILE A CHAPTER 11 PLAN AND SOLICIT ACCEPTANCES THERETO
PURSUANT TO SECTION 1121(d) OF THE BANKRUPTCY CODE
Upon the motion (the “Motion”) of the debtors and debtors in possession in the
above-captioned cases (collectively, the “Debtors”), for an Order Extending the Exclusive Periods
for LFG, LES, LandAm Title and the Southland Entities to File a Chapter 11 Plan and Solicit
Acceptances thereto Pursuant to Section 1121(d) of the Bankruptcy Code; and notice of the Motion
having been provided to the parties identified in the Motion; and no other or further notice being
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necessary or required; and a hearing having been held on the Motion; and it appearing to the Court,
based upon the Motion, and the full record of these cases, that the Motion should be granted; and
after due deliberation, and sufficient cause appearing therefor, it is hereby
ORDERED, ADJUDGED, AND DECREED that:
1. The Motion is granted to the extent set forth herein.
2. Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Motion.
3. Any responses or objections to the Motion that have not been previously
withdrawn or otherwise resolved are hereby overruled and denied.
4. The Exclusive Filing Period for LFG, LES, LandAm Title and the Southland
Entities shall be extended through and including October 15, 2009.
5. The Exclusive Solicitation Period for LFG, LES, LandAm Title and the
Southland Entities shall be extended through and including December 15, 2009.
6. The Debtors’ Exclusive Periods shall be extended through and including the
later of October 15, 2009 and December 15, 2009, respectively, or the exclusivity dates otherwise
applicable to the Debtors.
7. The Exclusive Filing Period and the Exclusive Solicitation Period for LFG,
LES, LandAm Title and the Southland Entities may each be extended for additional thirty (30) day
periods upon written consent of the Creditors’ Committees, without further application to this
Court, which further extended dates shall also apply to LAC and LandAm Credit.
8. The Debtors shall file a notice of any additional extensions of the Exclusive
Periods with this Court and serve such notice on the U.S. Trustee and all parties who have
requested notice in the Debtors’ chapter 11 cases pursuant to Bankruptcy Rule 2002.
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9. The entry of this Order shall be without prejudice to the rights of the
Debtors to request further extensions of the Exclusive Periods or to seek other appropriate relief.
10. This Court shall retain jurisdiction with respect to all matters arising from or
related to the implementation or interpretation of this Order.
Dated: September __, 2009
____________________________________
UNITED STATES BANKRUPTCY JUDGE
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WE ASK FOR THIS:
Paul V. Shalhoub (Admitted Pro Hac Vice)
Rachel C. Strickland (Admitted Pro Hac Vice)
WILLKIE FARR & GALLAGHER LLP
787 Seventh Avenue
New York, New York 10019
(212) 728-8000
- and -
Dion W. Hayes (VSB No. 34304)
John H. Maddock III (VSB No. 41044)
McGUIREWOODS LLP
One James Center
901 East Cary Street
Richmond, Virginia 23219-4030
(804) 775-1000
Attorneys for the Debtors and
Debtors in Possession
LOCAL BANKRUPTCY RULE 9022-1(C) CERTIFICATION
Pursuant to Local Rule 9022-1(C), I hereby certify that the foregoing proposed order has
been endorsed by or served upon all necessary parties.
Dion W. Hayes (VSB No. 34304)
John H. Maddock III (VSB No. 41044)
McGUIREWOODS LLP
One James Center
901 East Cary Street
Richmond, Virginia 23219-4030
(804) 775-1000
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http://chapter11.epiqsystems.com/docket/docketlist.aspx?pk=61832e15-08f8-42b6-930c-7849e9ffe32d
Paul V. Shalhoub, Esq. (Admitted Pro Hac Vice)
Rachel C. Strickland, Esq. (Admitted Pro Hac Vice)
WILLKIE FARR & GALLAGHER LLP
787 Seventh Avenue
New York, New York 10019
(212) 728-8000
- and -
Dion W. Hayes (VSB No. 34304)
John H. Maddock III (VSB No. 41044)
McGUIREWOODS LLP
One James Center
901 East Cary Street
Richmond, Virginia 23219-4030
(804) 775-1000
Attorneys for the Debtors and
Debtors in Possession
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
RICHMOND DIVISION
------------------------------------------------------x
In re : Chapter 11
:
LandAmerica Financial Group, Inc., et al., : Case No. 08-35994 (KRH)
:
Debtors. : (Jointly Administered)
------------------------------------------------------x
DEBTORS’ MOTION FOR ORDER EXTENDING CERTAIN
DEBTORS’ EXCLUSIVE PERIODS TO FILE CHAPTER 11
PLAN AND SOLICIT ACCEPTANCES THERETO
PURSUANT TO SECTION 1121(d) OF THE BANKRUPTCY CODE
TO: THE HONORABLE UNITED STATES BANKRUPTCY JUDGE
The debtors and debtors in possession in the above-captioned cases (collectively,
the “Debtors”) hereby move this Court (the “Motion”) for entry of an order, pursuant to section
1121(d) of title 11 of the United States Code (the “Bankruptcy Code”), (a) extending the
Exclusive Filing Period (as defined herein) during which LandAmerica Financial Group, Inc.
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(“LFG”), LandAmerica 1031 Exchange Services, Inc. (“LES”), LandAmerica Title Company
(“LandAm Title”), Southland Title Corporation, Southland Title of Orange County, and
Southland Title of San Diego (the “Southland Entities,” and collectively with LFG, LES and
LandAm Title, the “Initial Debtors”) have the exclusive right to file a chapter 11 plan, through
and including October 15, 2009; (b) extending the Exclusive Solicitation Period (as defined
herein) during which the Initial Debtors have the exclusive right to solicit acceptances of a
chapter 11 plan, through and including December 15, 2009; and (c) allowing a further thirty (30)
day extension of each of the Exclusive Filing Period and the Exclusive Solicitation Period upon
written consent of the Creditors’ Committees (as defined herein) without further application to
this Court, which further extended Exclusive Periods (as defined herein) shall apply to all
Debtors. In support of this Motion, the Debtors, by and through their undersigned counsel,
respectfully represent as follows:
BACKGROUND
1. On November 26, 2008 (the “Petition Date”), LFG and LES each filed a
voluntary petition for relief under chapter 11 of the Bankruptcy Code. On March 6, 2009, March
27, 2009, March 31, 2009 and July 17, 2009, various other LFG affiliates (LandAmerica
Assessment Corporation (“LAC”), LandAm Title, the Southland Entities and LandAmerica
Credit Services, Inc. (“LandAm Credit”)) each filed voluntary petitions for relief under chapter
11 of the Bankruptcy Code, respectively. Pursuant to orders of this Court dated November 28,
2008, March 11, 2009, April 8, 2009, April 9, 2009 and July 22, 2009, the chapter 11 cases of
the Debtors are being jointly administered under case number 08-35994. The Debtors continue
to manage their properties as debtors in possession pursuant to sections 1107 and 1108 of the
Bankruptcy Code. No trustee or examiner has been appointed in the Debtors’ chapter 11 cases.
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2. On December 3, 2008, the United States Trustee for the Eastern District of
Virginia (the “U.S. Trustee”) appointed an Official Committee of Unsecured Creditors in the
case of (a) LandAmerica Financial Group, Inc. (the “LFG Committee”), and (b) LandAmerica
1031 Exchange Services, Inc. (the “LES Committee,” and, together with the LFG Committee,
the “Creditors’ Committees”).
3. On June 4, 2009, the U.S. Trustee filed his Amended Appointment of
Unsecured Creditors’ Committee, adding two (2) additional members to the LES Committee.
A. Ongoing Asset Sales
4. LFG is a holding company that operates through its various subsidiaries
(collectively, with LFG, the “Company”). Prior to the Petition Date, approximately 85 to 90%
of the Company’s revenue was derived from LFG’s primary title insurance underwriting
subsidiaries – Commonwealth Land Title Insurance Company, Lawyers Title Insurance
Corporation, United Capital Title Insurance Company, and their respective subsidiaries
(collectively, the “Underwriters”). On December 22, 2008, LFG sold its direct and/or indirect
ownership of its stock in the Underwriters to Fidelity National Financial, Inc. (“FNF”), Fidelity
National Title Insurance Company (“FNTIC”) and Chicago Title Insurance Company (“CTIC”
and collectively with FNF and FNTIC, “Fidelity”) pursuant to this Court’s orders dated
December 17, 2008 and December 21, 2008.
5. Since the sale of the Underwriters, LFG, with the assistance of its
professionals, has successfully marketed, negotiated and consummated sales of several
subsidiaries, which resulted in substantial value to the LFG estate. On March 20, 2009, this
Court approved the sale of LandAmerica Valuation Corporation, a wholly-owned subsidiary of
LFG that performed valuations on commercial real estate, to BB Valuation, Inc. (the “LVC
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Sale”). The LVC Sale closed on April 1, 2009, resulting in approximately $0.8 million in value
for LFG’s estate. In addition, on March 25, 2009, this Court approved the sale of all or
substantially all of the principal assets of LAC to Partner Assessment Corporation d/b/a Partner
Engineering and Science (the “LAC Sale”). The LAC Sale closed on March 26, 2009, resulting
in approximately $2 million in value for LAC’s estate. Furthermore, LFG sold its stock in its
wholly-owned subsidiaries LoanCare Servicing Center, Inc. and LC Insurance Agency, Inc.
(“LoanCare”). The sale of LoanCare was approved by this Court on May 21, 2009 and closed
on June 3, 2009, resulting in approximately $15.9 million in value for LFG’s estate.
Additionally, LFG sold its 22% ownership interest in RealEC Technologies, Inc. (“RealEC”) to
LPS Asset Management Solutions, Inc., which resulted in approximately $2.6 million in value
for LFG’s estate. Finally, LFG sold LandAmerica Home Warranty Company, LandAmerica
Property Inspection Services, Inc., Buyers Real Estate Services, Inc. and Residential Property
Maintenance, Inc. (the “Home Warranty”) to Buyers Protection Group, Inc. By order dated
May 21, 2009, this Court approved the sale of Home Warranty, which is expected to result in
over $11 million in value for LFG’s estate.
6. LFG continues to evaluate the Company’s remaining businesses to
determine the manner in which to best maximize value, including through one or more sales of
the Company’s remaining businesses and/or the prompt and orderly wind-down and liquidation
of such businesses.
B. Resolution of Material Claims
7. Since the Petition Date, the Debtors have worked diligently to resolve
significant claims filed against their estates. The Debtors have settled certain prepetition and
postpetition claims in accordance with the settlement procedures that were approved by this
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Court on May 21, 2009. Specifically, the Debtors have entered into consensual agreements
terminating or amending several of their unexpired non-residential real property leases. In
addition, the Debtors continue to negotiate the settlement of certain lawsuits that are pending
against their estates. Finally, the Debtors have filed six (6) omnibus claim objections to expunge
numerous claims against their estates. The Debtors continue to review the proofs of claim filed
in theses cases and will continue to work to resolve such claims.
8. The Debtors and their professionals have also focused on resolving certain
significant governmental claims. The Internal Revenue Service (“IRS”) has asserted various
priority tax claims against the Debtors’ estates in excess of $54 million. The Debtors dispute the
extent, validity and priority of such claims, and are engaged in negotiations with the IRS with
respect to such tax claims.
9. In addition, the Pension Benefit Guarantee Corporation (the “PBGC”) has
asserted claims against LFG’s and LES’s estates, each in the amount of $37.5 million, for the
unfunded benefit liabilities of the LandAmerica Cash Balance Plan (the “Pension Plan”), which
are contingent on the termination of the Pension Plan. The Debtors are working with the PBGC
to value the potential costs of terminating the Pension Plan, to determine an appropriate manner
in which to accomplish the termination, and ultimately to resolve or settle the PBGC’s claims.
10. The Debtors continue to address numerous complex issues relating to the
sale of the Underwriters to Fidelity, including handling transition issues relating to the Fidelity
sale. Specifically, LFG and its professionals have worked to separate LFG and its subsidiaries’
operations from the Underwriters pursuant to the Transition Services Agreement (the “TSA”),
whereby LFG operated material elements of the Underwriters’ businesses (e.g., accounting,
information technologies, human resources, etc.) pending their transition to Fidelity. The
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Debtors and their professionals have spent a significant amount of time in an effort to resolve
issues with respect to reimbursement of services provided pursuant to the TSA and to reconcile
amounts owed by and among the parties.
C. Sale of Auction Rate Securities
11. In an effort to maximize the value of its estate, LES has also focused its
efforts on marketing and selling its investments in subordinate student loan auction rate
securities (“Auction Rate Securities”). LES currently holds twenty (20) tranches of Auction
Rate Securities with a total face value of $201.7 million. As has been widely publicized, the
market for auction rate securities froze in early 2008, and as a result, LES has been unable to
liquidate the Auction Rate Securities at a price near their par value. Due to the nature of these
assets, the sale of ARS has required prolonged discussions between the Debtors, the LES
Committee and prospective brokers and purchasers. The Debtors anticipate filing a motion with
the Court seeking approval of procedures to market and, if appropriate, sell the Auction Rate
Securities.
D. Plan Process
12. On May 21, 2009, the Court approved a protocol (the “Mediation
Protocol”) providing for a two-step mediation of (a) certain inter-estate transactions between
LFG and LES (the “Inter-Estate Mediation”), and (b) issues relating to a compromise plan of
liquidation involving a global resolution of, among other things, certain litigation test cases (the
“Lead Cases”),1 which share common legal and factual issues with other adversary proceedings
pending against LES (the “LES Mediation”).
1 A fifth Lead Case was later designated. However, as LES consummated a Court-approved settlement with
one of the Lead Case claimants, Health Care REIT, Inc., four Lead Cases now remain.
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13. The Inter-Estate Mediation, the first step of the Mediation Protocol, was
designed to address the validity, priority, characterization or allowance of certain inter-estate
transfers and, to the extent that such transfers are claims, the extent to which such claims should
be avoided or disallowed under chapter 5 of the Bankruptcy Code as well as LES’ and LFG’s
estates allocable share of liabilities associated with the claims asserted by the Internal Revenue
Services and Pension Benefit Guarantee Corporation. Since the resolution of these inter-estate
disputes would have a material impact on the recoveries of LFG’s and LES’ creditors, such
issues needed to be addressed prior to the formulation of a plan. Due to the efforts of all
involved, this mediation was a success. At the conclusion of the Inter-Estate Mediation on July
3, 2009, the Creditors’ Committees agreed to a proposed resolution for the treatment of all interestate
issues. This resolution took the form of a term sheet that will be embodied in a plan of
liquidation.
14. The second step of the Mediation Protocol, the LES Mediation, was
designed to address a structure for a plan of liquidation encompassing a global resolution of,
among other things, outstanding issues relating to the Lead Cases, including the resolution of
whether certain customers were entitled to consequential damages and whether proceeds of sales
of relinquished properties (the “Exchange Funds”) were held by LES in constructive trusts on
behalf of their customers. Furthermore, the Mediation Protocol imposed a stay of the Lead
Cases to alleviate the related litigation expenses and to enable the parties to focus on the
mediation. As part of the LES Mediation, which concluded on July 14, 2009, the Creditors’
Committees and the Lead Case plaintiffs agreed to a proposed resolution of many of the
outstanding issues related to the Lead Cases. Like the Inter-Estate Mediation, the LES
Mediation resulted in a term sheet.
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15. Since the conclusion of the LES Mediation, the Debtors, with the input of
the Creditors’ Committees, have worked diligently to document the resolution of the Inter-Estate
Mediation and the LES Mediation in a consensual plan of liquidation. Since July 30, 2009, the
Debtors and the Creditors’ Committees have exchanged over a dozen drafts of a proposed joint
chapter 11 plan of liquidation and ancillary documents related thereto. There have been multiple
conference calls between the professionals retained by the Debtors and the Creditors’
Committees to negotiate and finalize the terms of the plan. Given the diligent efforts of all
involved, the Debtors are optimistic that they will be in a position to file a largely consensual
plan in the near term.
JURISDICTION
16. The Court has jurisdiction over this Motion pursuant to 28 U.S.C. §§ 157
and 1334. Venue is proper in this district pursuant to 28 U.S.C. §§ 1408 and 1409. This matter
is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2). The statutory predicate for the
relief sought herein is section 1121(d) of the Bankruptcy Code, as supplemented by Rule
9006(b)(1) of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”).
RELIEF REQUESTED
17. Section 1121(b) of the Bankruptcy Code provides for an initial period of
120 days after the commencement of a chapter 11 case during which a debtor has the exclusive
right to file a chapter 11 plan (the “Exclusive Filing Period”). Section 1121(c)(3) of the
Bankruptcy Code provides that, if a debtor files a plan of reorganization within the Exclusive
Filing Period, then it has an initial period of 180 days after the commencement of its chapter 11
case to solicit acceptances of such plan (the “Exclusive Solicitation Period” and, together with
the Exclusive Filing Period, the “Exclusive Periods”).
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18. By order of this Court dated July 22, 2009, the Exclusive Filing Period for
the Initial Debtors was extended through and including September 15, 2009 and the Exclusive
Solicitation Period for the Initial Debtors was extended through and including November 15,
2009 for each of the Initial Debtors.
19. In addition, LAC’s current Exclusive Filing Period ends November 3,
2009, and LAC’s Exclusive Solicitation Period ends December 31, 2009. LandAm Credit’s
current Exclusive Filing Period ends November 14, 2009, and LandAm Credit’s Exclusive
Solicitation Period ends January 13, 2010.
20. The Debtors are currently in the process of formulating a plan of
liquidation and have made significant progress in that respect. In order to facilitate discussions
with the Creditors’ Committees and other parties in interest, and to maintain much needed order,
process and momentum, the Debtors believe that the extension of the Exclusive Filing Period
through and including October 15, 2009 and the extension of the Excusive Solicitation Period
through and including December 15, 2009 for the Initial Debtors are not only warranted but
critical in these cases. If extensions of the Exclusive Periods are granted as set forth herein, the
Debtors believe they will have the requisite time to propose and solicit a confirmable plan
without the confusion and chaos that wound ensue if multiple competing agendas were permitted
to be pursued by divergent constituencies. In addition, the Debtors request authority to further
extend the Exclusive Periods one or more times by thirty (30) days each, upon the written
consent of each of the Creditors’ Committees without further application to this Court, which
further extended dates shall also apply to LAC and LandAm Credit. The Debtors will file
notices of additional extensions of the Exclusive Periods with the Court and serve such notices
on the U.S. Trustee and all parties who have requested notice in the Debtors’ chapter 11 cases
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pursuant to Bankruptcy Rule 2002. The relief requested herein will ensure that the Debtors and
the Creditors’ Committees lead the efforts to achieve a consensual plan, and that such plan
incorporates the results of the Inter-Estate and LES Mediations.
21. The Debtors request that the extension of the Exclusive Periods be through
and including the later of October 15, 2009 and December 15, 2009, respectively, or the
exclusivity dates otherwise applicable to the Debtors.
22. The relief requested herein shall be without prejudice to the Debtors’
rights to request further extensions of the Exclusive Periods in compliance with section
1121(d)(2) of the Bankruptcy Code or to seek other appropriate relief. For the reasons set forth
herein, the Debtors believe that “cause” exists to extend the Exclusive Periods.
BASIS FOR RELIEF
23. The Exclusive Periods under section 1121(b) of the Bankruptcy Code are
intended to afford debtors an opportunity to propose a chapter 11 plan and to solicit acceptances
of such plan without the disruption to the debtors’ cases that might be caused by the filing of
competing plans by non-debtor parties. In circumstances where, as here, the Exclusive Periods
prove to be insufficient to formulate, negotiate, file and solicit acceptances of a meaningful
chapter 11 plan which garners support of various parties in interest, section 1121(d) of the
Bankruptcy Code allows the Court to extend the Initial Debtors’ Exclusive Periods for “cause.”
Specifically, section 1121(d) of the Bankruptcy Code provides:
(1) Subject to paragraph (2), on request of a party in interest made
within the respective periods specified in subsections (b) and (c) of
this section and after notice and a hearing, the court may for cause
reduce or increase the 120-day period or the 180-day period
referred to in this section.
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(2) (A) The 120-day period specified in paragraph (1) may not be
extended beyond a date that is 18 months after the date of the order
for relief under this chapter.
(B) The 180-day period specified in paragraph (1) may not be
extended beyond a date that is 20 months after the date of the order
for relief under this chapter.
11 U.S.C. § 1121(d).
24. It is well established that a decision to extend the Exclusive Periods is left
to the sound discretion of the Bankruptcy Court and should be based upon the facts and
circumstances of a particular case. See First American Bank of New York v. Southwest Gloves
and Safety Equip., Inc., 64 B.R. 963, 965 (D. Del. 1986); In re Reetz, 61 B.R. 412, 414 (Bankr.
W.D. Wis. 1986). Although the Bankruptcy Code does not define “cause” for the purpose of an
extension of the Exclusive Periods, courts have looked to the legislative history of section
1121(d) of the Bankruptcy Code for guidance. See In re Gibson & Cushman Dredging Corp.,
101 B.R. 405, 409 (E.D.N.Y. 1989); In re Amko Plastics, Inc., 197 B.R. 74, 77 (Bankr. S.D.
Ohio 1996). In doing so, courts have found that Congress did not intend that the 120- and 180-
day periods be a hard and fast rule. See Amko Plastics, 197 B.R. at 77 (noting that Congress
intended courts to have flexibility in dealing with extensions of exclusivity); Gaines v. Perkins
(In re Perkins), 71 B.R. 294, 297 (W.D. Tenn. 1987) (“The hallmark of … [section 1121(d)] is
flexibility”). Rather, Congress intended that the Exclusive Periods be of an adequate length,
given the circumstances, for a debtor to formulate, negotiate and draft a viable plan, which by
definition means one supported by some or all of a debtor’s key constituents, without the
disruption that would occur with the filing of competing plans. See Geriatrics Nursing Home,
Inc. v. First Fidelity Bank, N.A. (In re Geriatrics Nursing Home, Inc.), 187 B.R. 128, 133 (D.N.J.
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1995). Indeed, Congress recognized that often a 120-day exclusivity period will not afford a
debtor in large cases sufficient time to formulate and negotiate a plan:
The court is given the power, though, to increase . . . the 120-day
period depending on the circumstances of the case. [T]he bill
allows the flexibility for individual cases that is not available
today. For example, if an unusually large company were to seek
reorganization under chapter 11, the Court would probably need to
extend the time in order to allow the debtor to reach an agreement.
H.R. Rep. No. 95-595, 95th Cong. 1st Sess. 232 (1977) (footnotes omitted).2
25. When determining whether cause exists for an extension of the Exclusive
Periods, courts have relied on a variety of factors, each of which may provide sufficient grounds
for extending exclusivity. Factors considered by courts in making such a determination have
included: (a) the size and complexity of the case; (b) the necessity of sufficient time to negotiate
a plan and prepare adequate information; (c) whether the debtor is paying its debts as they come
due; (d) whether the debtor has demonstrated reasonable prospects for filing a viable plan;
(e) whether the debtor has made progress in negotiating with creditors; (f) the length of time the
case has been pending; (g) whether the debtor is seeking the extension to pressure creditors; and
(h) whether unresolved contingencies exist. See, e.g., Continental Casualty Co. v. Burns & Roe
Enters., Inc. (In re Burns & Roe Enters., Inc.), 2005 U.S. Dist. LEXIS 26247, at *11-12 (D.N.J.
2005); In re Gibson & Cushman Dredging Corp., 101 B.R. at 409-10; In re Central Jersey
Airport Servs., LLC, 282 B.R. 176, 184 (Bankr. D.N.J. 2002); In re Express One Int’l Inc., 194
B.R. 98, 100 (Bankr. E.D. Tex. 1996); In re Grand Traverse Dev. Co. Ltd. P’ship, 147 B.R. 418,
420 (Bankr. W.D. Mich. 1992); In re Southwest Oil Co. of Jourdanton, Inc., 84 B.R. 448, 451-54
2 Notwithstanding the 2005 amendment to section 1121(d), courts have continued to adopt a flexible
approach in granting requests for extensions of the exclusivity and solicitation periods. See, e.g., In re
Stone Barn Manhattan LLC, Case No. 08-12579 (ALG) (Bankr. SDNY July 16, 2009) (granting third
exclusivity extension); In re Tweeter Home Entm’t Group, Inc., Case No. 07-10787 (PJW) (Bankr. D. Del.
Sept. 29, 2008) (extending exclusivity to nearly 18 months after the petition date).
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(Bankr. W.D. Tex. 1987). The application of the relevant factors to the facts and circumstances
of these cases demonstrates that the requested extensions are both appropriate and necessary to
afford the Initial Debtors with adequate time to propose, negotiate, and solicit acceptances to a
chapter 11 plan.
A. Size and Complexity of the Cases
26. As of the Petition Date, LFG wholly-owned approximately 28 direct
subsidiaries, approximately 219 active and inactive indirect subsidiaries (certain of which are
joint ventures), and an interest in approximately 14 non-title joint ventures. In addition, the
Company had approximately 27 different lines of business and over 7,300 employees. The size
of LFG’s case alone supports a finding of cause to further extend LFG’s Exclusive Periods.
During these chapter 11 cases, LFG has continued to work to resolve numerous complex issues
relating to the disposition of its subsidiaries. In addition, LFG and its professionals continue to
address and respond to creditors’ inquiries related to these cases on a daily basis.
27. The size and complexity of LES’s chapter 11 case also warrant a further
extension of its Exclusive Periods. LES is a party to numerous adversary proceedings
commenced by its customers. Since the early stages of these cases, LES devoted significant
resources to litigating the Lead Cases and has been successful in negotiating settlements and
obtaining Court approval of the settlement agreements with several customers. However, many
more adversary proceedings remain unresolved. LES is hopeful that the outcome of the LES
Mediation, will enable LES to confirm a plan without the need for further protracted, expensive
litigation that will erode the value of its estate.
28. To date, there have been more than 2,700 claims filed against the Debtors’
estates in the aggregate face amount of $2.2 billion.
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B. The Debtors Require Additional Time to Prepare
Adequate Information and Formulate a Chapter 11 Plan
29. The Debtors have worked arduously to formulate a plan and are engaged
in dynamic negotiations with the Creditors’ Committees over the details of such plan. Even
though significant progress has been made so far, many pieces are still in flux. At this juncture,
it is critical that creditors’ focus be on only one plan of liquidation, which embodies the
settlements reached pursuant to the Mediation Protocol, and that the Debtors have a meaningful
opportunity to resolve any open issues, finalize the plan and lead the solicitation and
confirmation process. If multiple competing plans are permitted, much of the success reached by
the parties in their negotiations and their long-standing efforts to reach consensual resolutions
could very well be squandered.
C. The Debtors Have Made Good Faith Progress In These Cases
and Do Not Seek Extension of the Exclusive Periods For Improper Reasons
30. The Debtors have made material progress in these chapter 11 cases and do
not seek the extension of the Exclusive Periods as a means to exert pressure on the relevant
parties in interest. Since the extension of LFG’s initial Exclusive Periods, the Debtors and their
professionals have devoted a substantial amount of time towards, inter alia: (a) assisting the
Debtors in winding-down their businesses; (b) working with LFG to evaluate, market, and sell,
as applicable, the remaining businesses of its subsidiaries; (c) litigating disputes relating to the
ownership of Exchange Funds; (d) implementing the Mediation Protocol to resolve both interestate
and LES related disputes; (e) rejecting leases and contracts that are burdensome to the
Debtors in order to mitigate losses and maximize values; (f) settling and otherwise resolving
material claims, including the claims filed by the IRS and the PBGC; (g) reviewing and filing
omnibus objections to claims filed against the Debtors; (h) resolving issues related to the
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transition of the Underwriters to Fidelity and the reimbursement of costs by and among the
parties; and (i) drafting and finalizing a consensual chapter 11 plan of liquidation.
31. The requested extensions are not proposed for improper reasons. To the
contrary, such extensions will allow the Debtors to address the concerns of key parties in interest
while they finalize the plan, which will encompasses the resolution of significant issues
determined during the Inter-Estate Mediation and the LES Mediation.
D. The Debtors are Paying Their Debts as They Come Due
32. The Debtors continue to make timely payment of their undisputed
postpetition obligations. As such, the requested extension will afford parties in interest a
meaningful opportunity to negotiate with the Debtors as they formulate their chapter 11 plan and
solicit votes to accept or reject such plan without prejudice to parties in interest.
E. The Debtors Have Reasonable Prospects for Filing a Viable Plan
33. The Debtors believe they have reasonable prospects for filing a viable
plan. The Debtors are in the process of finalizing a plan of liquidation memorializing the
resolutions reached during the Inter-Estate Mediation and the LES Mediation, and intend to file
the plan within the coming weeks.
F. Negotiations with Creditors
34. The development of a chapter 11 plan has been and will continue to be a
consensual process in which the Creditors’ Committees and other parties in interest play a
significant role. A suitable extension of the Exclusive Periods will allow the Debtors the
flexibility and time necessary to pursue further meaningful plan discussions with the Creditors’
Committees. In addition, permission to extend the Exclusive Filing Period and the Exclusive
Solicitation Period beyond October 15, 2009 and December 15, 2009 with the written approval
of the Creditors’ Committees, will likewise promote further collaboration between all of the
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parties and increase the likelihood of achieving a consensual plan. Accordingly, the Debtors
submit that this factor favors granting the Motion and extending the Exclusive Periods.
G. The Debtors Are Not Seeking an Extension to Pressure Creditors
35. The requested extensions of the Debtors’ Exclusive Periods are not being
made to pressure creditors. To the contrary, the Debtors continue to work and fully cooperate
with both of the Creditors’ Committees and their professionals. Counsel and financial advisors
for the Debtors maintain regular contact with the professionals for the Creditors’ Committees,
responding to inquiries and keeping such professionals apprised of all material issues and case
status. Notably, the Debtors seek these extensions to enable more time to collaborate with, not
oppose, their creditor constituencies.
H. The Debtors’ Cases Have Been Pending for Less Than Ten Months
36. The Debtors commenced the initial cases on November 26, 2008, and filed
the subsequent cases on March 6, 2009, March 7, 2009, March 31, 2009 and July 17, 2009.
Although this is the third time the Initial Debtors have sought an extension of the Exclusive
Periods, in cases as complex as these, it is not unreasonable, or unusual, to extend the Exclusive
Periods multiple times. In addition, the Initial Debtors previously requested and were granted
short extensions of their Exclusivity Periods in order to maintain the momentum in these cases.
Now, as before, the Initial Debtors seek a short extension of their Exclusive Periods. Compare,
e.g., In re Stone Barn Manhattan LLC, Case No. 08-12579 (ALG) (Bankr. SDNY June 30, 2009)
(seeking a six-month exclusivity extension); In re Frontier Airlines Holdings, Inc., Case No. 08-
11298 (RDD) (Bankr. S.D.N.Y. May 8, 2009) (seeking a four-month exclusivity extension).
I. Termination of the Debtors’ Exclusive Periods Could Adversely Impact These Cases
37. Termination of the Initial Debtors’ Exclusive Periods could adversely
impact the progress of these cases. Indeed, if this Court were to deny the Initial Debtors’ request
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for an extension of the Exclusive Periods, any party in interest would be free to propose a plan.
As this Court is well aware, such a ruling would foster a chaotic environment with no central
focus, and the forward progress made could potentially be lost as multiple parties assert their
own proposed plans asserting competing rights to the same assets. Neither the Debtors nor their
creditors can afford to enter into a litigious environment of competing chapter 11 plans. In fact,
such an environment would not only be counterproductive, it would significantly delay these
cases at great cost to all.
38. Relief similar to the relief requested herein has routinely been granted in
other chapter 11 cases, including in liquidating chapter 11 cases. See, e.g., In re S & K Famous
Brands, Inc., Case No. 09-30805 (KRH) (Bankr. E.D. Va. June 5, 2009) (exclusivity extended by
60 days); In re LandAmerica Financial Group, Inc., Case No. 08-35994 (KRH) (Bankr. E.D. Va.
Mar. 23, 2009) (exclusivity extended by 120 days); In re Circuit City Stores, Inc., Case No. 08-
35653 (KRH) (Bankr. E.D. Va. Mar. 3. 2009) (exclusivity extended by 120 days); In re US
Airways, Inc., et al., Case No.04-13819 (SSM) (Bankr. E.D. Va. Jan. 28, 2005) (exclusivity
initially extended by 80 days); In re Stone Barn Manhattan LLC, Case No. 08-12579 (ALG)
(Bankr. SDNY July 16, 2009) (extending exclusivity by 14 months); In re Frontier Airlines
Holdings, Inc., Case No. 08-11298 (RDD) (Bankr. S.D.N.Y. May 20, 2009) (same); In re
Tweeter Home Entm’t Group, Inc., Case No. 07-10787 (PJW) (Bankr. D. Del. Sept. 29, 2008)
(extending exclusivity to nearly 18 months after the petition date); In re SCO Group, Inc., Case
No. 07-11337 (KG) (Bankr. D. Del. Sept. 24, 2008) (extending exclusivity to more than 15
months after the petition date).
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NOTICE
39. Notice of this Motion will be given to: (a) the U.S. Trustee, (b) counsel for
the Creditors’ Committees, (c) all parties who have requested notice in the Debtors’ chapter 11
cases, and (d) such other parties entitled to receive notice pursuant to this Court’s December 23,
2008 Amended Administrative Order entered in these cases. The Debtors submit that no other or
further notice is required.
NO PRIOR REQUEST
40. No previous request for the relief sought herein has been made to this or to
any other Court.
WAIVER OF MEMORANDUM OF LAW
41. Pursuant to Local Rule 9013-1(G), and because there are no novel issues
of law presented in the Motion and all applicable authority is set forth in the Motion, the Debtors
respectfully request that the requirement that all motions be accompanied by a separate written
memorandum of law be waived.
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CONCLUSION
WHEREFORE, the Debtors respectfully request that the Court grant the Motion, enter
the proposed order annexed hereto as Exhibit A, and grant such other and further relief as the
Court deems just and proper.
Dated: Richmond, Virginia Respectfully submitted,
August 31, 2009
/s/ Dion W. Hayes__________________
Dion W. Hayes (VSB No. 34304)
John H. Maddock III (VSB No. 41044)
McGUIREWOODS LLP
One James Center
901 East Cary Street
Richmond, Virginia 23219-4030
(804) 775-1000
- and -
WILLKIE FARR & GALLAGHER LLP
Paul V. Shalhoub, Esq.
Rachel C. Strickland, Esq.
787 Seventh Avenue
New York, New York 10019
(212) 728-8000
Attorneys for the Debtors and
Debtors in Possession
\9860671.1
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EXHIBIT A
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Paul V. Shalhoub, Esq. (Admitted Pro Hac Vice)
Rachel C. Strickland, Esq. (Admitted Pro Hac Vice)
WILLKIE FARR & GALLAGHER LLP
787 Seventh Avenue
New York, New York 10019
(212) 728-8000
- and -
Dion W. Hayes (VSB No. 34304)
John H. Maddock III (VSB No. 41044)
McGUIREWOODS LLP
One James Center
901 East Cary Street
Richmond, Virginia 23219-4030
(804) 775-1000
Attorneys for the Debtors and
Debtors in Possession
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
RICHMOND DIVISION
------------------------------------------------------x
In re : Chapter 11
:
LandAmerica Financial Group, Inc., et al., : Case No. 08-35994 (KRH)
:
Debtors. : (Jointly Administered)
------------------------------------------------------x
ORDER EXTENDING CERTAIN DEBTORS’ EXCLUSIVE PERIODS TO
FILE A CHAPTER 11 PLAN AND SOLICIT ACCEPTANCES THERETO
PURSUANT TO SECTION 1121(d) OF THE BANKRUPTCY CODE
Upon the motion (the “Motion”) of the debtors and debtors in possession in the
above-captioned cases (collectively, the “Debtors”), for an Order Extending the Exclusive Periods
for LFG, LES, LandAm Title and the Southland Entities to File a Chapter 11 Plan and Solicit
Acceptances thereto Pursuant to Section 1121(d) of the Bankruptcy Code; and notice of the Motion
having been provided to the parties identified in the Motion; and no other or further notice being
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necessary or required; and a hearing having been held on the Motion; and it appearing to the Court,
based upon the Motion, and the full record of these cases, that the Motion should be granted; and
after due deliberation, and sufficient cause appearing therefor, it is hereby
ORDERED, ADJUDGED, AND DECREED that:
1. The Motion is granted to the extent set forth herein.
2. Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Motion.
3. Any responses or objections to the Motion that have not been previously
withdrawn or otherwise resolved are hereby overruled and denied.
4. The Exclusive Filing Period for LFG, LES, LandAm Title and the Southland
Entities shall be extended through and including October 15, 2009.
5. The Exclusive Solicitation Period for LFG, LES, LandAm Title and the
Southland Entities shall be extended through and including December 15, 2009.
6. The Debtors’ Exclusive Periods shall be extended through and including the
later of October 15, 2009 and December 15, 2009, respectively, or the exclusivity dates otherwise
applicable to the Debtors.
7. The Exclusive Filing Period and the Exclusive Solicitation Period for LFG,
LES, LandAm Title and the Southland Entities may each be extended for additional thirty (30) day
periods upon written consent of the Creditors’ Committees, without further application to this
Court, which further extended dates shall also apply to LAC and LandAm Credit.
8. The Debtors shall file a notice of any additional extensions of the Exclusive
Periods with this Court and serve such notice on the U.S. Trustee and all parties who have
requested notice in the Debtors’ chapter 11 cases pursuant to Bankruptcy Rule 2002.
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-3-
9. The entry of this Order shall be without prejudice to the rights of the
Debtors to request further extensions of the Exclusive Periods or to seek other appropriate relief.
10. This Court shall retain jurisdiction with respect to all matters arising from or
related to the implementation or interpretation of this Order.
Dated: September __, 2009
____________________________________
UNITED STATES BANKRUPTCY JUDGE
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WE ASK FOR THIS:
Paul V. Shalhoub (Admitted Pro Hac Vice)
Rachel C. Strickland (Admitted Pro Hac Vice)
WILLKIE FARR & GALLAGHER LLP
787 Seventh Avenue
New York, New York 10019
(212) 728-8000
- and -
Dion W. Hayes (VSB No. 34304)
John H. Maddock III (VSB No. 41044)
McGUIREWOODS LLP
One James Center
901 East Cary Street
Richmond, Virginia 23219-4030
(804) 775-1000
Attorneys for the Debtors and
Debtors in Possession
LOCAL BANKRUPTCY RULE 9022-1(C) CERTIFICATION
Pursuant to Local Rule 9022-1(C), I hereby certify that the foregoing proposed order has
been endorsed by or served upon all necessary parties.
Dion W. Hayes (VSB No. 34304)
John H. Maddock III (VSB No. 41044)
McGUIREWOODS LLP
One James Center
901 East Cary Street
Richmond, Virginia 23219-4030
(804) 775-1000
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