Best Practices Identified A Chat with the Claims Noticing and Solicitation Agents Helping Us Avoid Some Case Administration Landmines

Journal Issue

Jul/Aug 2006

Column Name

Claims Chat

Citation

ABI Journal, Vol. XXV, No. 6, p. 34, July/August 2006

Topic Tags

Plan Confirmation

Practice and Procedure

Journal HTML Content

Any candid case-administration
expert will tell you that he or she knows what they know—at
least in part—from either working through his or her own
mistakes or learning from the mistakes of others. If you are a new
professional in this industry whose eyes glaze over when conversation
turns to the anatomy of a notice, take note: Notices might seem like
the most mundane restructuring task, but they are actually among the
most important. Without proper notice, there is no due process.
Without due process, there is no deal, there will be no order and
there can be no reorganization. As cases become more complicated,
courts and debtors have increasingly relied on claims and noticing
agents to help facilitate information flow and ensure due-process
protections for stakeholders. As the chart on p. 78 illustrates, the
claims agent plays a role in every facet of the restructuring process.
Below, we enlisted a panel of experts—Meade Monger and
Todd Brents of AlixPartners, Jonathan Carson of Kurtzman

Carson Consultants, Stephenie Kjontvedt and Tinamarie
Feil of BMC Group, Ronda Collum and Kathy Yeatter of

Wells Fargo Trumbull, and Diane Streany, Kathy Gerber

and Ron Jacobs of BSI—to share some thoughts on how
professionals can avoid some of the most typical landmines.
"Twas the Night Before Confirmation..."
Situation #1: The constituencies finally reached a deal on

a plan. The debtors' professionals quickly produced a comprehensive
reorganization plan and disclosure statement. The court approved the
disclosure statement and set the plan-confirmation hearing date.
Ballots had been sent to the voting classes. Oddly, a week before the
voting deadline, the debtors still hadn't received any executed
ballots. Routine procrastination, right? Wrong. Was there an incorrect

return address? Nope, it was right. Then what was the problem? In short,

rent. Just before the voting deadline, the debtors discovered that the

lease on the return P.O. box had expired; the Post Office had already
rejected hundreds of ballots. Result: re-solicitation; confirmation
delayed. Situation #2: Ballots were printed by a financial
printer. Each ballot included the creditor name and voting
information. In the first run of the two-page ballot, the printer
discovered formatting problems on the first page of the ballot (which
included the creditor name and voting information). Acting alone, the
printer decided to reprint only that page and used the wrong data file.
Claims Chat: How could these problems have been avoided?
Diane Streany: Dot every "i" and cross every
"t." Check and recheck every phone number, address and P.O.
box. While duplicating and revising notices can save time and money,
never assume that numbers or addresses have not changed.
Jonathan Carson: Attorneys often come to the printer to
spot-check documents. Their participation in the process [is
welcomed]. When I was a lawyer working on large debtor cases, I would
sit at the printer to monitor large jobs. A more hands-on approach
could have avoided the problems identified above. Tinamarie
Feil: Involve the claims agent in the planning meetings, copy him
or her on correspondence related to solicitation, provide clear points
of contact for the claims agent and channels of communication. Do not
leave him or her out of the loop when it involves solicitation or
service of documents upon large populations. Don't farm it out. If you

do, make sure there is a "babysitter!" Ronda Collum:

[One] practice is to set up the P.O. boxes for automatic renewal and
always maintain case-specific contact points for at least duration of
our retention. Solid relationships with bankruptcy professionals and
print providers, proactive planning and demonstrated quality control
procedures are crucial to the balloting process. Successful
solicitations start long before the paper "rolls off the
presses." Claims Chat: Provide clear, written
instructions to all of the players in the printing and mailing
process. Arrange a call with all of the players (printer, claims
agent, financial consultants and lawyers) to walk through the
instructions before the mailing event. Listen to the suggestions of the
claims agent and printer—sometimes they are in the best position

to know how it should work. Still Partying Like It's 1999

Situation #3: It was a debtor's New Year's resolution to set a

bar date with a mere 60-day notice period. The bar date notice was
perfect, except that it was dated January 1999 as opposed to January
2000. Result: set a new bar date and reserve. Claims
Chat: This is a common mistake, especially in January and February.

It is also common to see incorrect phone or fax numbers on notices. How

can the parties prevent this from happening? Diane Streany:
Check your .pdf documents before sending them to [the claims agent].
Ask...to conduct a final review of the notice and check all dates,
addresses and phone numbers. When I receive a request from counsel to
serve a document, I print it out, check the formatting and try to
catch any obvious problems. In this age of electronic noticing, it is
possible that the attorney may not see a document once it leaves his
or her office. Through the processes of e-mail, photo copying, .pdf
conversions and scanning, bad things can happen to good documents.
Claims Chat: Ask the claims agent to conduct a "numbers
review" just before going final. In a numbers review, the
reviewer focuses solely on the numbers to verify accuracy.
Situation #4: In another case, without checking the local
rules that required a 90-day bar date notice period, this debtor tried

to establish a bar date with a 60-day notice period. Claims
Chat: What advice do you have concerning the establishment of a
bar date? Jonathan Carson: Many aspects of the bar date and
proof of claim process greatly vary between jurisdictions, and the
claims agent is best qualified to facilitate the administrative
aspects of the bar-date process (such as determining the appropriate
turnaround time between entry of the bar date order and the deadline
to send the notice and proof-of-claim forms). Retaining a claims agent

before the process commences enables all parties to collaborate on the
desired procedural approach to noticing creditors of the bar date and
ensuring a smooth claims process. Claims Chat: Clerks'
offices in some jurisdictions automatically serve upon creditors
identified on the creditors' matrix a notice of case commencement,
341(a) meeting and bar date immediately after a case files. This can
lead to confusion if the debtor intends to seek an alternative bar
date. If you do not have a claims agent on board that is coordinating
with the clerk's office before the filing, make sure you contact (1)
the clerk's office to indicate that the debtor intends to seek an
order of the court establishing a bar date and (2) the U.S. Trustee's
office to schedule the 341(a) meeting. Kathy Gerber: While
mailing of bar date notices in many jurisdictions is routine, the
claims agent can work with the clerk's office to facilitate mailing of

these notices in keeping with the needs of the case, rather than as a

pro forma response to a chapter 11 filing. Most claims agents
typically will obtain approval to issue a tailored bar-coded notice
containing unique ID numbers instead of the standard b-10. Such
tailored notices (a) eliminate unnecessary filing of claims in
instances where the debtor has scheduled the creditor properly and (b)

save the debtor time and money in resolution of its claims by
automated matching of scheduled liabilities to filed proofs of claims.

Additionally, a tailored notice will address other aspects of a case
that may give rise to confusion and will channel creditors to FAQ
pages on the debtor's Web site. "What's Up, Doc?"
Situation #5: Many people consider themselves
"professionals," especially doctors. This health care debtor

served an administrative bar date notice—requiring all
"professionals" to file fee applications—on more than
60,000 physician-creditors. Result: The debtor received tons of phone
calls from doctors asking whether the professional fee bar date affected

them since they considered themselves "professionals."
Claims Chat: The debtor was required to serve the
physician-creditors with notice of the administrative claim bar date.
What could have been done to curtail the confusion? Jonathan
Carson: Attorneys should draft notices to avoid confusion. Know
your audience. When drafting the notice, stand in the shoes of the
reader and ask whether the reader will be confused and forced to call
or e-mail the debtor. If the answer is yes, tailor the notice to
accommodate different audiences. In this case, the drafter could have
included language to the effect of: "'Professional,' as defined
in this notice, does not include doctors; it includes lawyers,
accountants or financial advisors who are employed by the company
pursuant to an order of the bankruptcy court." Ronda
Collum: It is not uncommon to serve several different forms of
notice, particularly in large or complex cases, if it will help avoid
confusion among various creditor constituencies. In this case, the
general form of notice sent to all creditors could have been
appropriately modified for the physician-creditors and served upon
them in a special mailing. Ron Jacobs: The debtor could have
established a call center to address the doctors' inquiries. A call
center should be established when a notice is served on large
populations. [This] accomplishes several important goals. First, it
ensures consistency in that all callers will receive a clear and
consistent message from the debtor. Second, it eases the burden on
counsel and the debtor's personnel, thereby resulting in a cost
savings to the estates. Claims agents are often in the best position
to administer the call center because we have the technology to log
calls and relay questions to counsel. If the questions are fairly
uniform, counsel may decide to send additional correspondence or post
additional information on the company's Web site. Tinamarie
Feil: On certain notices to which a response is not required
(e.g., notice of case commencement, 341(a) meeting, establishment

of procedures, sale motion), many of our clients include clear
language at the top of the document that says: "You have received

this notice because you are a known creditor of the XYZ Company. You
are not required to respond to this notice."

Hmm: Maybe It
Wasn't a Mistake After All... Situation #6: A junior
associate was asked to "duplicate and revise" a notice that
would be served upon thousands of creditors. Thinking she was being
diligent, she included the supervising attorney's direct-line phone
number on the notice. Result: the partner received so many calls that
his line was unavailable for days. Situation #7: In another
case, the debtor's president sent a letter to 50,000 parties on
company letterhead. The company letterhead included his direct dial
phone number and e-mail address. Result: 50,000 people had direct
access to the president. Claims Chat: What can be done to
prevent this from happening, and what are some tips for communicating
with employees and creditors? Stephenie Kjontvedt: To avoid
the problems above, a notice [should be] sent to more than a few
hundred people include only one phone number—a hotline number
established by the company or claims agent. Although the attorneys'
names, phone numbers and e-mails are often included in their standard
signature block, we try to warn counsel that this is not the best and
most efficient way to handle mass phone calls. Remove the full
signature block and only include the attorneys' names. Claims
Chat: If you have to include the name of a lawyer, employee or any

other person on a notice, let that person know that their name is being

included on a notice that will be served upon thousands of creditors.
If you are going to include contact information for committee counsel
or any other player, make sure they are aware! 15 Minutes of
Shame Situation #8: Counsel could not believe how lucky he

was to have no responses to the hundreds of claim objections that were

not served upon an officer of the company in accordance with Rule 7004

of the Federal Rules of Bankruptcy Procedure. Result: Counsel showed
up to court and was directed by the judge to re-serve the claim
objections in accordance with the rule, giving the claimants an
additional 30 days to respond to the claim objection. Claims
Chat: How do you avoid this landmine? Todd Brents: Know
the rules and check them often. It is critical to understand the
"local local" rules and the idiosyncrasies of the particular

judge. For example, while some judges would require service of a claim
objection in accordance with Rule 7004, some do not. Claims
Chat: This would not have happened if claim-objection procedures
were in place that included a waiver of the requirement to serve an
officer of the company in accordance with Rule 7004. Get ahead of the
process and control it—don't let it control you. A Second
Bite at the Apple Here are some other instances in which parties

could be given a second bite at the apple due to a noticing or
procedural failure: • failing to serve lienholders and/or
taxing authorities with a 363 sale motion or notice; •
sending first day pleadings to P.O. boxes via Federal Express or another

carrier that won't deliver to P.O. boxes; • not checking
the notice provisions of unexpired leases or executory contracts for
addresses before serving a notice to extend the time to assume or
reject or similar motions; • serving a bar date notice that
includes the wrong zip code for a return address. Claims
Chat: How can professionals avoid these pitfalls? Kathy
Yeatter: It is critical to know which creditors must be served
with a motion or notice and in what manner they must be served.
Effective communication between counsel and the claims agent is
another crucial element of this process. [M]aintain checklists with
respect to the various categories of creditors and parties in interest

that must be served with each motion or document, and [be] available
to discuss the related requirements with counsel in the event of any
questions. For example, a lien search must be conducted, and all
lienholders must be served with notice of an asset sale. Claims
Chat: When the intended action involves a contract or lease,
review the notice provisions of the contract and serve the motion or
notice on the parties who are required to be served, at the addresses
set forth in the contract. If there are no names, address the mailing
to "General Counsel." Also, serve any guarantors with a
notice of the intended action. If you are working with a financial
advisor, claims agent or company personnel who are preparing a
database of contracts and leases, verify that the reviewers are
capturing information from the notice provisions of each contract or
lease. Jonathan Carson: [Claims agents can] often make
recommendations concerning the service of documents. For example, KCC
was once asked to fax fee applications (at times, exceeding 400+
pages) to the Rule 2002 service list. This request is impractical and
inefficient. To save time and costs, KCC faxed a one-page notice
directing the parties being served to go to the case-specific Web site

to download the full document (free of charge) or request a faxed copy.

Closing Words of Wisdom Todd Brents on Data
Integration: The key to successful case management is
understanding the debtor's business and obtaining the most useful data
early on to leverage its use throughout the proceedings. Good data
begins with proper pre-filing planning, which leads to accurate and
complete Statement of Financial Affairs and Schedules. This
information can be integrated throughout the remainder of the
proceedings, such as in claims reconciliation, preference analysis,
executory contract assessments, balloting and distributions. During
each of these steps, the case data repository grows and becomes more
intertwined, allowing for the efficient and effective management of
the case. Jonathan Carson on the Importance of Case Management
Orders: Case Management Orders (CMOs) should include the basic
standards and processes for notice procedures, hearing schedules and
the claims-administration process. With input from the claims agent,
counsel can draft CMOs to reflect cost-effective and logical means of
service (such as mailing, faxing, e-mailing, copying and printing).
Certain CMOs also identify unique noticing roles of the claims agent.
For example, in one case, the CMO directed interested parties to the
case Web site to access pleadings. To avoid pitfalls, counsel should
provide the claims agent with a draft to review and comment,
particularly because counsel may not be familiar with the most
efficient means of notice in a particular jurisdiction. Stephenie
Kjontvedt on Solicitation: The balloting agent should participate
in the formulation of the solicitation procedures. The single biggest
misunderstanding in this context is the solicitation of public
securities, and we often see unworkable procedures for soliciting this

sector. An example of poor drafting includes provisions that require
that certain materials be delivered to or distributed to beneficial
holders by the indenture trustee. Indenture trustees are not equipped
to distribute materials to the beneficial holders and then submit a
master ballot on their behalf. Additionally, orders have been entered
requesting the nominees provide the balloting agent with a list of all

of their beneficial holder names and addresses. Regardless of whether
a bankruptcy court order directs this, the nominees in the securities
industry dig in their heels and are adamant that they will not release

the names and addresses of all of their beneficial holders based upon
the nominees' need to protect the privacy of their clients.

Journal Authors

Carrianne Basler

Michelle Campbell Ross

Journal Date

Saturday, July 1, 2006 - 12:00

Bankruptcy Rule

2006

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