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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE
WINST AR HOLDINGS LLC and IDT CORP.
Plaintiffs
A. No. 07- 828- GMS
THE BLACKSTONE GROUP LP IMPALA PARTNERS , LLC and CITICORP
Defendants.
MOTION TO REFER CASE TO THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
The Blackstone Group LP ("Blackstone ), Impala Partners , LLC (" Impala ), and
Citigroup Inc. ,
as successor by
Citicorp
), Defendants in the
captioned matter ,
by their
, move that this Court refer this
United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court" ), and in
support thereof state as follows:
BACKGROUND
Plaintiffs Winstar Holdings LLC and IDT Corp. originally filed this action
in the Supreme Court of the State of New York , County of New York. Defendants subsequently
removed the action to the United States District Court for the
After removing the action , Defendants moved to transfer the action to this Court for referral to
the Bankruptcy Court. Plaintiffs
Opinion and Order dated December 10 , 2007 (the " Transfer Order "
attached hereto as Exhibit
A), the United States District Court for the Southern District of New York transferred this action
to this Court , for referral to the Bankruptcy Court for this District.
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This
misrepresentation by Defendants in the sale of assets in the Bankruptcy Proceeding (as defined
below).
Defendants are Blackstone , the debtor s financial advisor , Impala , the debtor
restructuring advisor , and Citicorp, a creditor of the debtor. Plaintiffs
(a)s a result"
of what Plaintiffs contend were fraudulent or negligent representations , Plaintiffs " entered into
an Asset Purchase Agreement ... "
(the " Asset Purchase Agreement" ). (Complaint ~ 43.
Plaintiffs further allege that if they "
had known the truth
(Complaint ~ 60.
s finances and
operations , they would not have entered into the Agreement. "
The Asset
contains a forum
which the parties agree that the United States Bankruptcy Court for the District of Delaware shall
have exclusive jurisdiction to resolve any dispute arising out of or related" to it. (Transfer Order
at 2.
On December 19 2001 ,
the Bankruptcy Court entered an order (the " Sale
In re
Approval Order " attached hereto as Exhibit B) in the bankruptcy
Winstar Communications, Inc. et at
Case No. 01- 1430
(KJC) (the " Bankruptcy
Proceeding
approving the Asset Purchase Agreement. The Sale Approval Order provides , in pertinent part
that the Bankruptcy Court " retains and shall have exclusive jurisdiction to.. . resolve any disputes
arising under or related to the Asset Purchase Agreement." (Sale Approval Order ~ 15.
In the Transfer Order , Judge Lynch held that this action is one " arising in
the Bankruptcy Proceeding, finding that it is " intimately
bankruptcy.
related to the administration of the
(Transfer Order at 9. )
He concludes ,
based on the forum-selection provisions in
the Asset Purchase Agreement and the Sale Approval Order , that " common sense dictates the
conclusion that the Bankruptcy Court is the proper forum for resolving these disputes.
11.)
(Id.
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Indeed , the Transfer Order also notes that Plaintiffs themselves understood
that "
the Delaware Bankruptcy Court is the proper forum for
debtor)." (Transfer
DISCUSSION
This is a matter that arises in and is related to the Bankruptcy Proceeding,
and the Court should refer this matter to the Bankruptcy Court.
The Court has authority to refer this matter to the Bankruptcy Court per
the September 6 , 2001 Order of Reference (the " Reference Order
" attached hereto as Exhibit C).
The Reference Order states " effective October 6 , 2001 , the automatic
cases to the judges of the United States
reinstated , pursuant to 28 U.
C. 9 157(a).
Moreover , because the Sale Approval
Bankruptcy Court exclusive jurisdiction over disputes relating to the Asset Purchase Agreement
reference to that court would be proper notwithstanding the Reference Order.
STATEMENT PURSUANT TO D. DEL. L R
1.1
10.
Pursuant to Local District Court Civil Rule 7.
, before filing this motion
Defendants have made reasonable efforts to reach an agreement with Plaintiffs on the matters set
forth above; however , an agreement could not be reached.
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WHEREFORE ,
Defendants respectfully request that the Court enter an
referring this case to the United
granting such other and further relief as is just and equitable.
Dated: January 29 ,
2008
Wilmington , Delaware
LANDIS RA TH & COBB LLP
ch d
3157)
James S. Green , Jr. (Bar No. 4406)
919 Market Street , Suite 600 Wilmington , DE 19801 Telephone: (302) 467- 4400 Facsimile: (302) 467- 4450 cobb(fYlrclaw. com green(fYlrclaw. com
- and -
Andrew C. Gold
John Oleske
HERRICK, FEINSTEIN LLP
2 Park Avenue
New York , NY
Telephone: (212) 592- 1400 Facsimile: (212) 592- 1500 agold(fYherrick.com
joleske(fYherrick.com
Attorneys for Defendant
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GREENBERG TRAURIG , LLP
Isl Victoria Watson Counihan Victoria Watson Counihan (Bar. No. 3488) Dennis A. Meloro (Bar No. 4435) The Nemours Building 1007 North Orange Street , Suite 1200 Wilmington , Delaware 19801 Telephone: (302) 661- 7000 Facsimile: (302) 661- 7360 counihanv(fYgtlaw. com melorod(fYgtlaw. com
-andY osef J. Riemer
Vickie Reznik David S. Flugman KIRKLAND & ELLIS LLP
153 East 53rd Street
New York NY 10022
Telephone: (212) 446- 4800
Facsimile: (212) 446- 4900
yriemer(fYkirkland. com vreznik(fYkirkland. com dflugman(fYkirkland. com
Attorneys for Defendant The Blackstone Group LP
GREENBERG TRAURIG , LLP
Isl Victoria Watson Counihan Victoria Watson Counihan (Bar. No. 3488) Dennis A. Meloro (Bar No. 4435) The Nemours Building 1007 North Orange Street , Suite 1200 Wilmington , Delaware 19801 Telephone: (302) 661- 7000 Facsimile: (302) 661- 7360 counihanv(fYgtlaw. com melorod(fYgtlaw. com
-and-
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Stephen L. Saxl William A. Wargo GREENBERG TRAURIG , LLP 200 Park Avenue , 39th Floor New York , New York 10166 Telephone: (212) 801- 9200 Facsimile: (212) 801- 6400 saxls(fYgtlaw. com wargow(fYgtlaw. com
Attorneys for Defendant
as successor by merger to Citicorp
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Exhibit A
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Page
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
WINST AR HOLDINGS , LLC and IDT CORP.
Plaintiffs
07 Civ. 4634 (GEL)
-againstOPINION AND
ORDER
THE BLACKSTONE GROUP L.P. IMPALA PARTNERS , LLC , and CITICORP
Defendants.
Joseph M. Vann (Jed Lewin , of counsel), Cohen Tauber Spievack & Wagner LLP , New York , NY and Melissa A. Roover (Alan M. Grayson , of counsel), Grayson & Kubli , P. , McLean , VA for plaintiffs.
Vickie Reznik (Yosef J. Riemer , David S. Flugman , of counsel), Kirkland & Ellis LLP , New York , NY for defendant The Blackstone Group, L.P.
Andrew C. Gold (Stephen M. Rathkopf, of counsel), Herick , Feinstein LLP , New York , NY for defendant Impala Partners , LLC
Stephen L. Saxl (William Wargo, of counsel), Greenberg Traurig, LLP , New York , NY for defendant Citicorp
GERARD E. LYNCH District Judge
The parties to this case agree on one thing: they don t want to be here. They disagree
however , on where they should be. Plaintiffs filed this action in the Supreme Court of the State
of New York , where they believe it should remain; accordingly, they have moved to remand the
case to the state court. Defendants removed the case to this Court , only in order to move to
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transfer the case to the United States Bankruptcy Court for the District of Delaware. The
plaintiffs ' motion will be denied , and defendants ' motion granted.
BACKGROUND
Plaintiff IDT Corp. formed plaintiff Winstar Holdings , LLC , in order to acquire the assets
of Winstar Communications , Inc. (" Old Winstar ), and related entities. Old Winstar had filed for bankruptcy protection in the Bankruptcy Court in Delaware , and was in the process of
liquidation. With the approval of the Bankruptcy Court , Old Winstar retained defendant
Blackstone Group, L.P. as its financial advisor , and defendant Impala Partners, LLC (" Impala
as a restructuring advisor. Defendant Citicorp, Old Winstar s largest creditor , played a role in
negotiating the terms of the contract between Old Winstar and Impala. Plaintiffs purchased the
business assets of Old Winstar from the bankruptcy estate at an auction approved by the
Bankruptcy Court for $42. 5 million pursuant to an Asset Purchase Agreement (" APA") dated
December 18 2001 ,
which was approved by the Bankruptcy Court the following day. The APA
contains a forum selection clause in which the parties agree that the United States Bankruptcy Court for the District of Delaware shall have exclusive jurisdiction to resolve any dispute arising
out of or related to the APA. (APA 99.
, Gold Decl. Ex. 1.) The Bankruptcy Court' s order
jurisdiction "
approving the sale similarly provides that that court retains " exclusive
any disputes arising under or related to " the APA. (Sale
Plaintiffs allege that they were induced to enter the AP
to " resolve
, Gold Decl. Ex. 2.
made by the defendants and by Old Winstar in an offering statement. Their claims sound solely
in New York common law.
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DISCUSSION
Plaintiffs ' Motion to Remand
The threshold issue in addressing plaintiffs ' remand motion is whether federal
jurisdiction over this case exists because it " aris(es) in " a bankruptcy case or " aris(es) under " the
bankruptcy code , or merely because it is " related
to "
a bankruptcy case. Although 28 U.S. C.
9
1334(b) provides for federal jurisdiction in either situation , if the case is merely one "related
to
the Old Winstar bankruptcy, and could not otherwise be brought in a federal court, statutory
provisions requiring (28 U.
c. 9 1334(c)(2)) or permitting (28 U.
C. 9 1334(c)(1)) the Court to
abstain from exercising jurisdiction and deferring to the state courts may apply. If, however , the
case is a " core " bankruptcy proceeding that " arises under" the bankruptcy code or " arises
bankruptcy case , the mandatory abstention provision by its own terms do not apply and
in " a
permissive abstention is less likely. Plaintiffs , accordingly, argue that the Court has , at most
related to "
jurisdiction , I while defendants
arising in
I Plaintiffs argue , in fact , that defendants have not established even " related
to
jurisdiction (P. Remand Mem. 10- 12), but their arguments in this regard are unpersuasive. Whether an action is " related to " a bankruptcy depends on whether there is " a significant In re Turner , 724 F. 2d 338 341 connection" between the action and the underlying bankruptcy. (2d Cir. 1983) (citations and internal quotation marks omitted). The "proceeding need not necessarily be against the debtor or against the debtor s property. In re WorldCom , Inc. Sec. Y. 2003), quoting Ce10tex Corp. v. Edwards , 514 U. S. 300 , 308 Litig. , 293 B. R. 308 , 317 (S. n. 6 (1995). In any ordinary sense , the connection between this case and the bankruptcy is obvious: the sale that is the subject of the litigation was an aspect of the bankruptcy proceeding. More importantly, the outcome of the action "' could alter the debtor s rights , liabilities , options or freedom of action '" and affect "' the handling and administration of the bankrupt estate.''' WorldCom 293 B. R. at 317 , quoting Celotex 514 U. S. at 308 n. 6 (1995). Although plaintiffs have not named Old Winstar as a defendant , Impala allegedly has indemnification rights against Old Winstar. While plaintiffs claim that the indemnification cannot apply to this case because of an exclusion for "willful misconduct " and because (according to plaintiffs) there is no estate left to affect , the bankruptcy proceedings are on- going, as is litigation that could bring assets into the estate. The Court cannot assume the correctness of plaintiffs ' assertions , which turn on facts yet
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or "
arising under" headings of jurisdiction.
Arising Under" Jurisdiction
The most frequently cited explanation of the meaning of "arising under " jurisdiction can
be found in the legislative history of the Bankruptcy Reform Act of 1978. The House Report
accompanying the bill that became that Act noted that
The phrase " arising under" has a well defined and broad meaning in the jurisdictional context. By a grant of jurisdiction over all proceedings arising under title 11 , the bankruptcy courts will be able to hear any matter under which a claim is made under a provision of title 11. For example , a claim of exemptions under
c. 9 522 would be cognizable by the
, as
would a claim of discrimination in violation of II U. c. 9 525. Any action by the trustee under an avoiding power would be a proceeding arising under title 11 , because the trustee would be claiming based on a right given by one of the sections in subchapter III of chapter 5 of title 11.
R. Rep. No. 595 , 95th Cong. , 1st Sess. 445 (1977). As the leading commentator on
bankruptcy law puts it
What this language seems to mean is that , when a cause of action is one
which is created by title 11 , then that civil proceeding is one ' arising under title 11. '"
on Bankruptcy,-r 3. 01(4)(c)(i) at 3- 21 (15th ed. rev. 2007).
to be found or even in some instances to occur. It is unquestionable that the outcome of this case could" affect the debtor , and that is sufficient to invoke the " related to " jurisdiction. " Related " jurisdiction exists where " the outcome of (the) proceeding could conceivably have any effect on the estate being administered in bankruptcy. Pacor, Inc. v. Higgins 743 F. 2d 984 , 994 (3d
Cir. 1984) (citations and italics omitted);
In re Cuyahoga Equip. Corp. , 980 F. 2d 110 , 114 (2d
Cir. 1992) (A litigation has a " significant connection with a pending bankruptcy proceeding " and falls within the ' related to ' jurisdiction of the bankruptcy court" if the outcome " might have any conceivable effect' on the bankrupt estate. ) As the courts have recognized A key word in (the) test is ' conceivable.' Certainty, or even likelihood , is not required. Bankruptcy jurisdiction will exist so long as it is possible '" that the proceeding may affect the debtor s rights or the administration of the estate. In re Dow Corning Corp. , 86 F. 3d 482 491 (6th Cir. 1996), quoting In re Marcus Hook Dev. Park Inc. , 943 F. 2d 261 , 264 (3d Cir. 1991).
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The language of the statute is self-consciously patterned on that of the general federal question jurisdiction statute , which provides for federal court jurisdiction over " all civil actions
arising under the Constitution , laws , or treaties of the United States. "
also
28 U.
c. 9 1331.
See
S. Const. Art. III 9 2 , cl. 1 (" The judicial Power shall extend to all Cases , in Law and
Equity, arising under this Constitution , the Laws of the United States , and Treaties made , or
which shall be made , under their Authority.
). While the precise
arising under"
13B Wright ,
in
the general federal question context has vexed courts and commentators see
Miller
and Cooper , Federal Practice and Procedure 93562 (2d ed. 1984), it has been suggested that an
action arises under federal law " if in order for the plaintiff to secure the relief sought he will be
obliged to establish both the correctness and the applicability to his case of a proposition of
federal law. " Bator , Mishkin , Shapiro & Wechsler , Hart & Wechsler s The Federal Courts and
the Federal System 889 (2d ed. 1973), quoted with approval in
Franchise Tax Bd. v.
1
Construction Laborers Vacation Trust , 463 U. S.
9 (1983). Moreover , it is well established
plaintiffs statement of his
that a case does not arise under federal law unless "the
action shows that it is based upon " federal law.
S. 149 , 152 (1908).
Louisville & Nashville R. R. Co. v. Mottley , 211
Applying these standards to this case , it is plain that the instant case does not arise under
title 11. Simply put , plaintiffs ' causes of action are based on state tort law , and rest on familiar common- law principles prohibiting fraud and misrepresentation. No proposition of bankruptcy
law must be established for plaintiffs to prevail , and no provision of the bankruptcy code is
implicated in their allegations. The causes of action asserted in the complaint are in
created by " title 11 of the United States Code.
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Defendants argue that the case nevertheless arises under the bankruptcy code "because it will be necessary for the Delaware Bankruptcy Court to interpret" its own order approving the
APA in the course of deciding the case. (D. Remand Mem. 9. )
But this
what it means for a case to " arise under " bankruptcy law. It may be that provisions of the APA
and of the Bankruptcy Court' s order approving it will be relevant to the outcome of the case.
However , as the Supreme Court held in
Mottley in the context of general federal question
jurisdiction
(a)lthough such allegations show that very likely, in the course of the litigation , a
question under (bankruptcy law) would arise , they do not show that the suit , that is , the
plaintiffs original
, arises under (title 11)." 211 U. S. at 153.
Accordingly, this is not a case of " arising under" jurisdiction.
Arising In "
Jurisdiction
The extent of the " arising in" jurisdiction is less clearly defined. The leading bankruptcy
treatise refers to it as a " residual category of civil proceedings " that " includes such things as
administrative matters , orders to turn over property of the estate and determinations of the
validity, extent , or priority of liens. "
Collier on Bankruptcy, ,-r 3. 01(4)(c)(iv)
(15th ed. 2004)
(internal quotation marks and footnotes omitted). Courts too have stated that
(t)he meaning of ' arising in ' proceedings is less clear , but seems to be a reference to those ' administrative ' matters that arise only in bankruptcy cases. In other words arising in ' proceedings are those that are not based on any right expressly created by title 11
but nevertheless , would have no existence outside of the bankruptcy.
In re Wood , 825 F. 2d 90 96- 97
(5th Cir. 1987).
Defendants argue that this standard is met , pointing out that had Old Winstar not been in
bankruptcy, the sale would never have taken place, the alleged misrepresentations would never
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have occurred ,
and so this action would have no existence absent the bankruptcy. (D. Remand
Mem.
) This argument
using the "no existence outside of the bankruptcy " formulation seem to be referring to
proceedings that by their nature cannot exist outside of bankruptcy, and not merely to actions
that , as a factual matter , have their origins in events occurring during a bankruptcy proceeding.
The Bankruptcy Court in this district , for example , in a case relied upon by defendants
themselves , puts the matter this way:
A claim " arises in " bankruptcy if, by its very nature , the claim can only be brought in a bankruptcy action , because it has no existence See fIn rel Riverside Nursing Home , 144 outside of bankruptcy. R. (951 ) 955 (S. Y. 1992); 176- 60 Union Turnpike v. Howard Beach Fitness Center , 209 B. R. 307 , 311 , n. 2 (S. 1997) (Sprizzo , J. ). Matters involving the construction of a bankruptcy court order are in this category.
In re Sterling Optical Corp. , 302 B. R. 792 , 801 (Bankr. S.
fraud. Such a claim is not one that by its very nature.
Y. 2003). Plaintiffs here sue for
. . can only be brought in a bankruptcy
action. "
Rather ,
it is a garden-variety common- law claim that most usually is brought outside of
bankruptcy.
The type of administrative matters cited in Collier , and in
arising in
Sterling , as examples of
" jurisdiction are closely tied to the administration of the estate itself. Actions such as
motions for contempt of bankruptcy court orders , motions to change the composition of a
creditors ' committee or appoint or elect trustees or examiners , are matters that , while the cause
of action is not created by title 11 , could not " have been the subject of a lawsuit absent the filing
of a bankruptcy case. "
Collier ,-r 3. 01 (4) (c)(iv).
never have arisen absent this particular bankruptcy is not enough to confer jurisdiction.
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Nevertheless , the claims at issue here are more closely connected to the administration of
the bankruptcy than most garden-variety common- law claims. There is persuasive precedent for
treating a state- law tort suit regarding the conduct of professionals involved in the administration
of the bankruptcy estate as a matter that " arises
163 F . 3d
in "
a bankruptcy case.
In re Southmark Corp.
925 (5th Cir. 1999), involved a professional malpractice action against an accounting
firm that worked for the court-appointed Examiner in a bankruptcy reorganization. When the
defendant removed the case to the bankruptcy court that had presided over the reorganization the plaintiff argued , like plaintiffs here , that mandatory abstention applied because the
bankruptcy court' s jurisdiction was of the " related
to
" variety because the matter was not a
Southmark
core " bankruptcy proceeding.
. at 928- 29. Like plaintiffs here , the plaintiff in
argued that its claims were simple state common- law tort claims that were not the sort that could
arise only in a bankruptcy action , since " Southmark could have sued any accounting firm that
worked for it on similar grounds of disloyalty, non- disclosure and malpractice.
. at 930- 31.
The Fifth Circuit rejected the argument , finding that " the professional malpractice claims
alleged against (the accounting firm) are inseparable from the bankruptcy context."
. at 931.
The court' s reasoning is instructive , and is applicable here:
sine qua non
in restructuring the debtor-creditor relationship is
ability to police the fiduciaries , whether trustees or debtors- in-possession and other court-appointed professionals who are responsible for managing the debtor s estate in the best interest of creditors. The bankruptcy court must be able to assure itself and the creditors who rely on the process that court-approved managers of the debtor s estate are performing their work conscientiously and cost-effectively.
the court' s
Id.
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Here , too , plaintiffs ' claims go directly to the proper performance of duties by
professionals retained by the bankruptcy estate , with the approval of the Bankruptcy Court , to
assist it in maximizing the assets of the estate. As the
Southmark court pointed out
(s)upervising the court-appointed professionals also bears directly on the distribution of the
debtor s estate. If the estate is not marshaled and liquidated or reorganized
will be far less money available to pay creditors ' claims.
. Here , of course , the claim is not
brought by the bankruptcy estate itself, and the claim is rather that the professionals advising the
estate obtained excessive
compensation by defrauding the purchaser of the estate s assets. But
the matter is still intimately related to the administration of the bankruptcy. The Bankruptcy
Court has a vital interest in policing the integrity of the bankruptcy process in general , and of the
sales of estate assets under the court' s supervision in particular.
The Bankruptcy Court itself recognized the importance of the sale to its on- going
administration of the case. Its order approving the sale expressly provides that the Delaware
Bankruptcy Court retains " exclusive jurisdiction to . . . resolve any dispute arising under or
related to the Asset Purchase Agreement." (Sale
, Gold Decl. Ex. 2. )
This language is
broad , encompassing not merely contract disputes or disputes between the parties to the AP A
themselves, and at a minimum expresses the Bankruptcy Court' s keen interest in the resolution
of disputes relating to the sale of Old Winstar s assets. It plainly covers the dispute at hand
which unquestionably is a dispute "related
to "
the AP A.
2 Plaintiffs cannot be surprised by being asked to
the Delaware Bankruptcy Court , as they themselves agreed in the AP A to a choice of forum clause in which they " irrevocably submit to the exclusive jurisdiction " of that court " over any dispute arising out of or relating to this Agreement " and waived any objection to venue in that court. (APA 9 9. , Gold Decl. Ex. 1.) Defendants do not contend that this clause of the APA
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The Second Circuit has construed the core jurisdiction of the bankruptcy courts "
broadly as possible " because wide bankruptcy jurisdiction is " essential to the efficient
administration of bankruptcy proceedings.
Luan Investment S. E. v. Franklin 145 Corp. (In re
Petrie Retail , Inc. 304 F. 3d 223 , 229 (2d Cir. 2002). Given this jurisdictional sweep, it is clear
that this is a case " arising
Abstention
in
" the Old Winstar bankruptcy case.
Since this case " aris(es)
in
" a bankruptcy case and is not merely " related
to
" a bankruptcy
case , mandatory abstention under 28 U. C. 9 1334(c)(2) by its own terms does not apply.
However , this Court may still , in its discretion , abstain from hearing the proceeding " in the
interest of justice , or in the interest of comity with State courts or respect for State law. "
c. 9 1334(c)(1).
Federal courts should be " sparing "
28
in their exercise of discretionary abstention. In re
Y. 1995), citing
Texaco Inc. , 182 B. R. 937 , 946- 47 (Bankr. S.
New Orleans Public Serv.
Inc. v. Council of the City of New Orleans , 491 U. S. 350 , 358 (1989),
Gas Co. , 212 U. S.
19
40 (1909), and
Willcox v. Consolidated
Chicot County v. Sherwood , 148 U.S. 529 , 534 (1893).
There is little basis to invoke comity to the state courts here , and every reason to invoke the
federal jurisdiction. Although plaintiffs ' claims are based on state law , the state law claims are
straightforward common- law claims that do not involve arcane or idiosyncratic provisions of
New York law. As the case was promptly removed , the New York courts have invested no effort
in the case.
to which they were not parties , of itself controls the outcome of this motion. At a minimum however , it reflects plaintiffs ' own understanding that the Delaware Bankruptcy Court is the proper forum for disputes about the sale of Old Wins
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In contrast , the matter is closely tied to the bankruptcy case. The very sale that is the
subject of the proceedings was a central aspect and basic function of the bankruptcy proceedings.
The sale of Old Winstar s assets was pursuant to directives issued by the Bankruptcy Court , and
the APA was specifically approved by that court. The conduct of the debtor and its advisors
(who were retained with the approval of the Bankruptcy Court) that is the subject of the
plaintiffs ' claims is post- petition conduct that took place under the Bankruptcy Court' s auspices.
Although the plaintiffs ' claims are asserted as tort claims of fraud in the inducement , the
evaluation of those claims will necessarily involve the interpretation of the Bankruptcy Courtapproved AP A , which contains provisions (including a merger clause , AP A 99. 13; two
disclaimers of warranties
. 99 5.10 , 9. 3; and an " as is " clause
. 9 5. 10) that are arguably
inconsistent with plaintiffs ' claims , and of the Bankruptcy Court' s own orders and findings
(including a finding that the consideration was fair and reasonable and a finding that the AP
was negotiated in good faith , Order,-r,-r G , H). Most significantly, both the plaintiffs and the Bankruptcy Court expressly stipulated that the Bankruptcy Court would be the exclusive forum
for resolving claims related to the sale.
Under all these circumstances , common sense dictates the conclusion that the Bankruptcy
Court is the proper forum for resolving these disputes , and that the Court should exercise its
discretion to direct the case to that forum. 3
3 For the same reasons that abstention is inappropriate , the closely-related doctrine of
equitable remand , 28 U. C. 9 1452(b), is also inapplicable here.
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II.
Defendants ' Motion to Transfer
In light of the above discussion , little further need be said regarding defendants ' motion to transfer the case to the United States District Court for the District of Delaware for referral to
its Bankruptcy Court. The only
reason why this case belongs in federal court is because of its
in
close association to the Old Winstar liquidation proceedings in Delaware. The case " arises
those proceedings , the Delaware Bankruptcy Court reserved its jurisdiction to deal with matters
related to the bankruptcy sale that is the subject of this proceeding, and the defendants are
accused of fraud in executing a sale that was ordered and approved by that court. There is a strong argument that venue must be laid in Delaware under the APA'
mandatory choice of forum clause. As the Second Circuit has held , a contract clause electing a
forum for all disputes " arising out of or related to " the contract encompasses claims of fraudulent
inducement.
Turtur v. Rothschild Registry Int'l. , 26 F. 3d 304 309- 10 (2d Cir. 1994). Although
defendants are not parties to that clause , plaintiffs are. The plaintiffs agreed to resolve any
disputes related to the AP A in the Delaware Bankruptcy Court. Moreover , the defendants are
sued for wrongdoing that essentially without exception is charged to have been committed
jointly with the plaintiffs ' counterparty in the APA , Old Winstar.
No. 05 Civ. 2024 , 2005 WL 2990645 , at *5- 6
(S.
Weingrad v. Telepathy, Inc.
Y. Nov. 7 2005).
c. 9 1406 ,
But even if transfer is not mandatory pursuant to 28 U.
under 9 1404(
discretionary transfer
, the whole point
of federal jurisdiction here is the close connection of the case to the bankruptcy proceedings.
There is no plausible rationale for removing the case to federal court in order to decide it in a
forum remote from the court where that proceeding is pending. Plaintiffs seek to avoid this
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obvious point by retreating to a conventional analysis of the factors ordinarily applicable in
deciding transfer applications. Even if their convenience arguments did not ring hollow
they do , where the physical distance between the courts involved is a short train ride and given
that in real-world modem litigation the greatest expenditure of litigation effort in most cases
takes place away from court - the plain fact is that in entering the AP
irrevocably
waive(d)" any objections to venue in the District of Delaware on grounds of inconvenience.
CONCLUSION
For the reasons stated above, plaintiffs ' motion to remand is denied and defendants'
motion to transfer the case to the United States District Court for the District of Delaware is
granted.
SO ORDERED.
Dated: New York, New York
December 10, 2007
~.~f:~
GERARD E. L United States District Judge
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Exhibit B
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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
n -- - _n --- - --
In re:
: Chapter 11
WINST AR COMMUNICATIONS , INC. et aI.
: Case No. :
01- 1430 (JJF)
: Jointly Administered
Debtors.
_n- ---- -- -- n- --- - -- --- --- - --
ORDER AUTHORIZING (i) SALE OF CERTAIN OF THE DEBTORS' ASSETS FREE AND CLEAR OF LIENS, CLAIMS ENCUMBRANCES, AND INTERESTS, (ii) APPROVING CURE AMOUNTS WITH RESPECT TO CERTAIN EXECUTORY CONTRACTS (Hi) AUTHORIZING MANAGEMENT AGREEMENT, (iv) APPROVING REGULATORY TRANSITION PROCESS AND
This matter having
Original
Motion ; terms not otherwise defined in this Sale Order shall have the meanings ascribed to such
terms in the Original Motion) filed by Winstar Communications , Inc. and its affiliated
and debtors in possession in the
the entry of (A) an order pursuant to sections 363(b)
(the " Bankruptcy
Debtors ), requesting
Code
) and Rules 2002 , 6004 ,
6006 and 9014 of
Bankruptcy Procedure (the " Bankruptcy Rules ) (i) approving bidding procedures , including bid
protections , (ii) approving the form and manner of notice of (a) the hearing to consider
certain bid protections (the " Bid
Procedures Hearing
), (b) the hearing on the sale of
the Debtors ' assets (the " Sale Hearing ), (c) proposed cure payments and (d)
assignment of executory contracts and unexpired leases , and (iii) scheduling the Sale
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and (B) an order authorizing and approving (i) the sale of certain of the Debtors ' assets free and
clear of liens
, claims and encumbrances (the " Sale ) and (ii) the assumption and
certain executory contracts and unexpired leases , and (II) the supplement to the Original Motion
filed with the Bankruptcy Court on December 14 , 2001 (the " Motion
Supplement" , and together
with the Original Motion , the "Motion ) seeking entry of an order (i) authorizing the Debtors to
enter into , and approving, a
Motion Supplement as
Management Agreement
authorizing the Debtors to implement , the Debtors ' proposed regulatory transition process (the
Regulatory Transition Process ) and (iii) granting related relief, including an extension of the
period under Bankruptcy Code section 365(d)(4) within which the Debtors may decide whether
to assume or reject
conducted a hearing on November 27 , 2001 , and having entered an order dated November 27
2001 approving the Bidding
Shearman & Sterling, counsel to the Debtors , on December 5 , 2001 ,
Bidding Procedures previously approved by this Court; and
in accordance
Auction , the Debtors , in consultation with their financial advisors, and after consultation
counsel to each of the Creditors ' Committee , the Agent for the Prepetition Lenders and the Agent
for the DIP Lenders , having (i) reviewed each bid on the basis of financial and contractual terms
and the factors relevant to the sale process ,
including those factors affecting the speed
certainty of consummating the Sale , and (ii) identified the bid of IDT Winstar Acquisition , Inc.
(the "
Buyer ), as set forth in the Asset Purchase Agreement , dated as of December 18 , 2001 (the
Asset Purchase Agreement" ) as the highest and best offer for the Purchased Assets (as defined
below in Paragraph H) at the Auction
Successful Bid" ); and a
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having been commenced on
December 18, 2001 (the " Sale Hearing ); and all
, 2001 and
opportunity to be heard with
considered (i) the Motion , (ii) the
, if any, and (iii) the
made , and the evidence proffered or adduced at the Sale Hearing; and it appearing that the relief
requested in the Motion and
Purchase Agreement (as defined therein , the " Purchased Assets
) and the entry of an order
, their estates
approving the Sale (this " Sale
Order ) is in the best
creditors , and other parties in interest; and upon the record of the Sale Hearing, and these
and after due deliberation thereon; and good cause appearing therefor , it is hereby
FOUND AND DETERMINED AS FOLLOWS:
This Court has jurisdiction over the Motion and the transactions contemplated by
the Motion pursuant to 28 U.S. c.
28 U.
c. 9157(b )(2)(M).
99157 and 1334. This
991408 and 1409.
The statutory predicates for the relief sought in the Motion are sections 105 , 363
and 365 of 11 U.
c. 99101
Bankruptcy Code " )
and Rules 2002, 6004 , 6006 , and
9014 of the Federal Rules of Bankruptcy Procedure.
As evidenced by the affidavits of
, and
based on the
, timely, adequate and
sufficient notice of the Motion , the Sale Hearing, the Cure Notices , the Sale of the
Findings of fact shall be construed as conclusions of
findings of fact when appropriate.
See Fed.
Bank. P. 7052.
WI'3:714361.
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Assets and of the
entry of the Debtors into the Management Agreement and the implementation of the
Transition Process) has been provided in
Bankruptcy Code and Rules 2002 ,
6004 , 6006 and 9014 of the
Procedure; (ii) such notice was reasonable , sufficient , and appropriate under the
and (iii) no other or further notice of the Motion , the Sale Hearing, the Cure Notices , the Sale of
the Purchased Assets and all the related
limitation the entry of the Debtors into the
the Regulatory Transition Process) shall be required.
A reasonable opportunity to object or be heard with respect to the Motion and the
relief requested in the Motion has been afforded to all interested persons and entities , including
(i) counsel for the Buyer ,
(ii)
, as Agent
, N.
Petition Credit Agreement ,
Agreement , (iv) counsel
(iii)
, as agent under the DIP
Creditors
Committee ), (v) the Office of the
, (vi) each
Debtors as a potential Buyer of the
process , (vii) all entities known to have any asserted lien , claim , encumbrance , alleged interest in
or with respect to the Purchased Assets , (viii) all
authorities; and (ix) all other entities that have filed requests for notices pursuant to Bankruptcy
Rule 2002.
The Debtors (i) have full
Purchase Agreement and all other
, (ii) have all of the
corporate power and authority necessary to
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Motion and the Asset Purchase Agreement and (iii) have taken all corporate action necessary
authorize and approve the Sale
contemplated thereby.
The Debtors have demonstrated sound business justifications for the Sale and the
other transactions and actions
Bankruptcy Code.
Each of the Sale , the Management Agreement and the Asset Purchase Agreement
were negotiated , proposed and agreed to by the Debtors and the Buyer as parties thereto without
collusion , in good faith , and from arm
length bargaining positions. The
purchaser under section 363(m) of the
protections afforded thereby.
, as such is entitled to all of
The consideration provided by the Buyer for the Purchased Assets (i) is fair and
reasonable ,
(ii) is the
provide a greater recovery for the Debtors ' creditors and other interested parties than would be
provided by any other practically available alternative.
The transfer of the
Purchase Agreement will be a legal , valid , and effective transfer of such Purchased Assets , and
will , upon the occurrence of the Closing (as defined in the Asset Purchase
the Buyer all right , title and interest of the Debtors in the Purchased Assets free and clear of all
Encumbrances and interests other than the Permitted Encumbrances (in each case , as defined in
the Asset Purchase Agreement) (collectively, the " Interests ) including, but not limited to , those
(i) that purport to give to any party a right or option to give any of the foregoing in the
any sale or contingent sale or title retention agreement or lease , or termination of the Debtors ' or
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the Buyer s
interest in the
, or any similar
arising under or out of, in connection with , or in any way relating to the operation of the Debtors
businesses prior to the Closing Date (as defined in the Asset Purchase Agreement).
The transfer of the
will not result in any undue burden or
Interests of any kind or nature whatsoever shall attach to the net proceeds of the Sale (the " Sale
Proceeds ) in the order of their priority, with the same validity, force and effect which they now
have as against the Purchased Assets ,
subject to the
Authorizing Debtors In Possession to Enter Into Post- Petition Credit
Post- Petition Financing Pursuant to Section 363 and 364 of the Bankruptcy Code , and Providing
Adequate Protection and Granting Liens , Security Interests and Superpriority Claims , dated May
, 2001 and entered in these cases) and to any claims and defenses the Debtors or other parti
may possess with respect thereto.
The Buyer would not consummate the transactions contemplated by the Sale, thus
adversely affecting the Debtors ,
their estates ,
and their creditors ,
if the
Assets to the Buyer was not free and clear of all Interests of any kind or nature whatsoever , or if
the Buyer would, or in the future could , be liable for any such Interests and if the assignment of
the Purchased Assets could not be made under section 363 of the Bankruptcy Code.
The Debtors may
kind or nature whatsoever because , in each case , one or more of the standards set forth in section
363(f) of the Bankruptcy Code has been
debtor parties who did not object , or who withdrew their objections, to the Sale , the Sale of the
Purchased Assets or the Motion are
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section 363(f)(2). Those holders of
Bankruptcy Code section 363(f) and are
attach to the proceeds of the Sale ultimately attributable to the property against or in which they
claim or may claim an
Purchase Agreement to the contrary, the Sale of the Purchased Assets is subject to the consent of
the DIP Lenders.
Due to the
operated ,
the entry of
services to customers of the Debtors (the " Customers ) during the period in which the Buyer and
the Debtors seek to comply with the applicable federal and state regulatory laws and to enter into
contractual or other legal arrangements necessary for the consummation of the Sale , the transfer
of the Licenses (as defined below) to the Buyer and the operation of the Purchased Assets by the
Buyer (the " Compliance Items
Approval at this
, the Asset Purchase
Management Agreement , and all the transactions contemplated thereby and hereby (including the
Regulatory Transition Process) is in the best interests of the Debtors , their creditors , their estate
and other parties in interest.
NOW THEREFORE , BASED UPON THE FOREGOING FINDINGS OF FACT , IT IS
HEREBY ORDERED , ADJUDGED , AND DECREED, EFFECTIVE IMMEDIATELY , THAT:
The Motion is granted , as further described herein.
All objections to the Motion or the relief requested therein that have not
been withdrawn , waived , or settled , and all reservations of rights included therein , are overruled
on the merits provided however , that nothing herein shall alter or impair the rights of any party
WI'3:714361.
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that has filed and served a timely objection to dispute the amount of a cure payment listed on an
applicable Cure Notice , which
resolved either consensually or , as necessary, by further order of the Court.
anything in the Motion , the Asset
Debtors shall not be authorized to assume and assign any executory contract(s) between any of
the Debtors and the United
GSA" )
without the
prior consent of a person authorized to act on behalf of the GSA to the extent such
required by any contract or applicable law.
The Asset
Exhibit A to the Notice of Filing of
(including all exhibits
, dated
, 2001
, schedules and annexes
thereof, are hereby approved.
Pursuant to
, the Debtors are
authorized to consummate the Sale of the Purchased Assets , pursuant to and in accordance with
the terms and conditions of the Asset Purchase Agreement , to enter into the
Agreement and to implement the Regulatory Transition Process.
The Debtors are authorized to execute and deliver , and are empowered to
perform under ,
consummate and implement , the Asset Purchase Agreement , together with all
additional instruments and
implement the Asset Purchase Agreement (including the Management Agreement), and to take
all further actions as may be requested by the Buyer for the purpose of
granting, conveying and conferring to the Buyer or reducing to possession , the Purchased Assets,
or as may be necessary or appropriate to the performance of the obligations as
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the Asset Purchase Agreement,
Regulatory Transition Process. Notwithstanding anything in the Motion ,
Agreement or this Sale Order to the
the Asset Purchase
arose prior to the Closing Date , including any accrued
but
unbilled liabilities.
The transfer of the Purchased Assets to the Buyer pursuant to , and subject
to the terms of, the Asset Purchase Agreement shall constitute a legal , valid and effective transfer
of the Purchased Assets , and shall , upon the
right , title and interest of the
Buyer free and clear of all Interests of any kind or nature whatsoever ,
with all such Interests to
attach to the Sale Proceeds in the order of their priority, with the same validity, force and
which they now have as against the Purchased Assets , subject to the Carveout and to any claims
and defenses the Debtors or other parties may possess with respect thereto.
In consideration for the
, and subject to the terms and
conditions of the Asset Purchase Agreement , the Buyer shall assume the Assumed Liabilities (as
defined therein) and ,
on the Closing Date ,
shall irrevocably (i) pay, at the Debtors '
election
exercised prior to the Closing Date , (x) an
000 000 (the " Cash
Payment ) or (y) an amount in cash equal to $30 000 000 and cause to be issued to the Debtors a
number of shares of
, having a value equal to
$12 500 000 based on the average closing price of such stock during the seven trading day period
ended December 14 , 2001
IDT Shares
, and
000 000 ,
the
Cash/Stock Payment ), and (ii) issue to the Debtors such number of shares of common stock of
the Buyer , representing 5% of the
hereof,
all in
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Pursuant to the Escrow
hereby approved , on or before the date of this Sale Order , the Buyer shall deliver or shall have
delivered the Cash Payment to the Escrow Agent (as defined in the Asset Purchase
to be held in escrow pending
, the Debtors and the Buyer shall
instruct the Escrow Agent to promptly
Purchase Agreement) to an account or
Debtors in accordance with the terms of the
, on behalf of the
interest- bearing account in the name of one or more of the Debtors established at Citibank , N.
for the purpose of receiving such funds (the " Proceeds Account
maintained in the Proceeds Account
). The Sale Proceeds
including professionals and secured parties , pending further order of the Court following
and a hearing. Accrued interest on such funds shall constitute part of the Sale Proceeds available
for distribution. The Buyer shall have no claim whatsoever
Proceeds Account or to the IDT Shares or the Buyer Common Stock subsequent to the
Any allocation of the Purchase Price agreed to by the Debtors and the Buyer shall not be binding
on any other party.
On the
, the Buyer
A. (the
Management Agreement , and the Buyer shall
Operating Account" ) an amount in cash equal to $60 million in immediately available funds , to
be used from and after the Closing Date through and including the Cutoff Date (as defined in the
Management Agreement) exclusively to pay all
1(a) of the
Management Agreement. In the event that the Buyer shall fail to pay, as and when due , any such
costs and the Debtors shall be held liable therefore , the Buyer hereby agrees to indemnify the
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Debtors for all such costs. In the
defined in the Management Agreement) after the Cutoff Date , and all accrued and unpaid
required to be paid in
, any
balance may, upon five (5) days ' written notice to the Debtors , the Agent for the
Lenders and such telecommunications service providers that shall send written request to
Buyer requesting such notice and the Buyer shall provide such notice to each party to the extent
such party shall continue to provide services to the Debtors or the Buyer , be withdrawn by the
Buyer.
Except as expressly permitted or otherwise specifically provided for in the
Asset Purchase Agreement or this Sale Order , effective upon the occurrence of the Closing, all
persons and entities ,
including, but not limited to, all debt security holders , equity security
holders , governmental , tax and other regulatory authorities , lenders, trade and other
holding Interests (including but not limited to any claims under any applicable revenue , pension,
ERISA ,
tax , labor
, environmental or natural resource law ,
rule or regulation , or any products
liability law) of any kind or nature whatsoever against or in the Debtors or the Purchased Assets
(whether legal or equitable ,
contingent ,
secured or unsecured ,
matured or unmatured ,
contingent or non-
liquidated or unliquidated , senior or subordinated), arising under or
, in
connection with ,
or in any way relating to , the Debtors , the Purchased Assets , the operation of
, or the
the Debtors ' businesses prior to the Closing Date of the Sale of the
transfer of such
, hereby are forever barred , estopped , and
permanently enjoined from asserting against the Buyer, its successors or assigns (to the
allowed by law), its property, its officers , directors and shareholders or the
such persons '
or entities ' Interests.
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herein shall in any way affect or diminish any
(including any chapter 11 or chapter 7 trustee) with respect to obligations of the Buyer arising
under the Asset Purchase Agreement , the Management Agreement or this Sale Order. This Sale
Order shall be binding on the Debtors
' estates , including, following any
conversion of these cases, any successor chapter 7 estates , and any chapter 7 trustees
in these cases.
10.
The consideration provided by the Buyer for the Purchased Assets
the Asset Purchase Agreement shall be deemed to constitute reasonably equivalent value and fair
consideration under the Bankruptcy Code and under the laws of the United States ,
territory, possession or the District of Columbia.
11.
any state
Notwithstanding any provision to the
, the
Motion or the Asset Purchase Agreement , certain prototype laboratory equipment (as listed on
Exhibit A hereto , the " Lab
Equipment" ) and
established in connection with the Lucent Credit Agreement (as listed on Exhibit B hereto , the
Accounts ) shall be
' other assets , shall not constitute part of the
Purchased Assets and shall not be included in the Sale. Nothing in this Sale Order, the Motion or
the Asset Purchase Agreement shall impair or affect the rights and interests of Lucent in the Lab
Equipment and the Accounts.
, subject to notice and a
hearing, to seek to characterize the Lab Equipment as owned by the Debtors , and to the extent an
Order so providing is entered by the court , the Lab Equipment shall constitute Purchased Assets.
12.
Closing Date ,
This Sale Order (a)
, on the
and subject to the
whatsoever existing prior to the Closing as to the
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Asset Purchase Agreement (including but not
revenue , pension , ERISA , tax , labor , environmental or natural resource law , rule or regulation , or
any products liability law)
Purchased Assets , and that the conveyances described herein have been effected , and (b) shall be
binding upon and shall
, including without limitation ,
all filing
agents , filing officers , title agents , title companies , recorders of mortgages , recorders of deeds
registrars of deeds ,
federal ,
state
administrative agencies , governmental departments , secretaries of state
, and local officials , and all other persons
operation ofJaw , the duties of their office , or contract , to accept , file , register or otherwise record
or release any documents or instruments , or who may be required to report or insure any title or
state of title in or to any of the Purchased Assets.
13.
Each and every federal , state and local governrnental agency, department
or unit is hereby directed to accept
appropriate to consummate the
except the FCC as regards its approval of the transfer of the Licenses.
14.
Except as expressly permitted or otherwise specifically provided for in the
Asset Purchase Agreement or this Sale Order in respect of the Asset Purchase Agreement or the
Purchased Assets to be transferred pursuant to such Asset Purchase Agreement , the Buyer shall
have no liability or responsibility for any liability or other obligation of the Debtors arising under
or related to such Purchased Assets and , to the extent allowed by law , the Buyer (and its officers
managers and members) shall not be liable for any other claims against the Debtors or any of
their predecessors or affiliates , and the Buyer shall have no successor or vicarious
any kind or
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Purchase Agreement , now existing or hereafter arising, whether fixed or contingent, with respect
to the Debtors or any obligations of the Debtors , other than the Permitted Encumbrances , arising
prior to the Closing Date under the Asset Purchase Agreement, including, but not limited to , any
liabilities under any revenue , pension , ERISA , tax , labor , environmental or natural resource law
rule or regulation ,
or any products liability law , arising, accruing, or payable under , out of,
in
connection with , or in any way relating to the
' businesses prior to the
, the Buyer shall have no
Closing Date. After the Closing and the payment of the
liability to the Debtors or their estates for any diminution in value or other damage of any
whatsoever to the Regulated Assets or the Licenses that may result from the Buyer s operation of
the Debtors ' business.
15.
This Court retains and shall have
implement the terms and provisions of the Asset Purchase Agreement , all amendments thereto
any waivers and
, and each of the agreements executed in
therewith (including the Management Agreement) in all respects , including, but not limited to
retaining jurisdiction to (a) compel delivery of the Purchased Assets to the Buyer , (b) compel
delivery of the purchase price or
, (c)
resolve any disputes arising under or related to the Asset Purchase Agreement , and (d) interpret
implement , and enforce the provisions of the Asset Purchase Agreement and this Sale Order.
16.
The
undertaken by the Buyer in good faith , as that term is used in section 363(m) of the Bankruptcy
Code , and accordingly, the reversal or modification on
herein to consummate the Sale of any Purchased Assets shall not affect the validity of the Sale of
such Purchased Assets to the Buyer ,
unless such authorization is duly stayed
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appeal prior to the Closing with respect to such Purchased
good faith of the Purchased Assets , and the Buyer is entitled to all of the protections afforded by
section 363(m) of the Bankruptcy Code.
17.
The terms and provisions of the Asset Purchase Agreement and this Sale
Order shall be binding in all respects upon , and shall inure to the benefit of, the Debtors , their
estates , and their creditors , the Buyer and their respective affiliates , successors and assigns and
any affected third parties (including, but not limited to, all
Purchased Assets to be
notwithstanding any
Bankruptcy Code , as to which trustee(s) such terms and provisions likewise shall be binding.
18.
The failure specifically to include any particular provisions of the Asset
Purchase Agreement in this Sale Order shall not diminish or impair
provisions , it being the intent of the Court that the Asset Purchase Agreement be authorized
approved in its entirety. To the extent that any
the Asset Purchase Agreement or the Management Agreement , the terms of this Sale Order shall
control.
19.
The Asset Purchase Agreement and any related agreements , documents or
other instruments may be modified, amended or supplemented by the parties in accordance with
the terms thereof,
without
, provided that any such modification
amendment or supplement does not have a material adverse effect on the Debtors ' estates and is
if occurring prior to the Closing Date , approved by counsel for each
' Committee
and the agent for the lenders
the agent for the lenders under the Pre- Petition Credit Agreement ,
under the DIP
Credit Agreement.
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modification, amendment or
modification , amendment or supplement impairs or adversely affects Lucent's rights as a secured
creditor in these chapter 20.
, shall obtain Lucent's prior consent thereto.
The transfer of the
Agreement , and the transactions contemplated thereby constitute steps toward the formulation , or
in anticipation of the formulation of, a chapter
with section 1146(c) of the
, in accordance
, the making or delivery of any
transfer to effectuate the Asset Purchase Agreement and the transactions
shall not be taxed under any law imposing a stamp tax or a sale , transfer or any other similar tax
and the
amendments thereto) to evidence the Sale of the
such tax.
, leases , assignments and
21.
All of the Debtors ' interests in the Purchased Assets to be acquired by the
, as of the Closing
Buyer under the Asset Purchase Agreement
occurrence of the Closing, transferred to and vested in the Buyer.
Closing, this Sale Order shall be
complete general assignment , conveyance and transfer of the Purchased Assets acquired by the
Buyer under the Asset Purchase Agreement and/or a bill of sale or assignment transferring good
and marketable ,
indefeasible title and interest in the
under the Asset Purchase Agreement to the Buyer.
22.
As of the Closing Date , the Buyer shall be hereby granted immediate and
unfettered access to the Purchased Assets (other than the Licenses) acquired by the Buyer.
Regulatory Transition Process
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23.
The
Regulatory
Compliance Period" ) of one hundred- twenty (120) days (subject to extension) from the Closing
Date to obtain the
Business and to
consummation of the Sale , transfer of the Licenses and the Regulated Assets (as defined below)
to the Buyer and the operation of the Purchased Assets by the Buyer (the " Compliance Items
In order to ensure the uninterrupted provision of services to the Customers during the Regulatory
Compliance Period , and the orderly transfer of the
other applicable law ,
any other assets subject
, to the extent
Regulated
Assets ) to the Buyer , the Buyer , the Debtors and all
Debtors , including but not limited to the common carrier service providers that provide
to the Debtors and any landlords of properties used by the Debtors (the " Service
hereby authorized and directed as follows:
Providers
) are
As soon as practicable following the entry of this Sale Order , the Debtors
and the Buyer are directed to file such applications as are required to seek the federal and state regulatory authority necessary for the Debtors to assign, and the Buyer to acquire
own and operate, the Licenses and the Regulated Assets.
On the Closing Date , the Buyer and the Debtors are directed to enter into a
Management Agreement substantially in the form appended as Exhibit E to the Asset
Purchase Agreement , pursuant to which the Buyer shall be entitled to manage and operate
the business of the Debtors during the Regulatory Compliance Period on the terms and
conditions set forth therein.
From the Closing Date to the Cutoff Date , all agreements and other
arrangements with Service Providers relating to the Debtors providing service to
Customers shall , subject to compliance with paragraph (d) below , remain in effect and
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may not be canceled or terminated , and absent an event of default occurring after the
Closing Date in respect of facts arising after the Closing Date that has not been cured
within three (3) business days after written notice (by email and facsimile) thereof has
been received by the Buyer (Attention: Chief Financial Officer , email:
steveb~corp.idt.net , facsimile: 973- 438- 1414 , and McDermott, Will & Emery,
Attention: David C. Albalah , Esq., email:
dalbalahaV.mwe. com . facsimile: 212- 574- 5444),
no Service Provider shall reduce or otherwise alter in any adverse manner its
performance under any such agreement(s) or arrangement(s) until the Cutoff Date.
The Buyer shall be responsible for , and is directed to pay on a timely
basis , all charges incurred for services used by the Debtors to provide services to the
Customers from the Closing Date to the Cutoff Date , including all charges incurred with
respect to Service Providers. The rates charged by Service Providers for such services
shall not exceed the rates for those services in effect as of the date of this Sale Order.
Neither the Debtors or Buyer shall have any obligation or liability for services not
actually being utilized and each Service Provider shall , upon written notice from the
Debtors and the Buyer , immediately and without charge or further liability of any kind
discontinue and disconnect any such services provided to the Debtors and/or the Buyer.
The Buyer is further authorized to promptly establish such contractual or other legal arrangements as the Buyer and the Debtors deem necessary to operate the
Debtors ' assets and to provide service to Customers (including interconnection and other
common carrier service agreements with Service Providers) and that will permit Buyer to provide service to Customers in a manner similar to the manner in which the Debtors
provided such service prior to the date of this Sale Order and that will enable the
Customers to continue to receive service in an uninterrupted and transparent manner.
During the 120- day
period commencing on the Closing Date , in the event
that any contract with any Service Provider that is a telecommunications carrier shall be
rejected: (i) no termination liabilities shall
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shall provide telecommunications services in accordance with , and to the extent required
by, applicable law in a non- discriminatory manner; and (iii) such telecommunications
carrier will charge the Buyer for replacement circuits the lower of actual costs and tari
rates to set up or establish such replacement circuits.
24.
The Buyer is hereby directed to pay all costs of the ongoing
the Business in accordance with the Management Agreement. The Buyer shall have the ability
during the Regulatory Compliance Period to direct the Debtors to seek the entry of one or more
orders of the Court authorizing the Debtors to
contract or unexpired lease to which the Debtors are a party,
provided that the Buyer shall be
solely responsible for paying any cure
assumption and assignment. The Buyer shall have the ability during the Regulatory
Period to direct the Debtors to reject any
Debtors are a party provided that the Buyer must elect whether to assume and assign or reject
any contracts with t