you
good morning again this is judge Kaplan and I am hearing the committees
emergent motion in the BlockFi Inc. matter I have limited counsel in front of
me so let me take appearances on behalf of the debtor thank you on behalf of
the committee thank you counsel but behalf of the US trustee
morning your honor Jeff Sponder and Lauren Bielski on behalf of the United States trustee
this court engaged with all counsel in chambers in a conference outside of the
record in an effort to address the issues that were raised in the emergent
motion brought before the court specifically the committees the
committee filed an emergent motion requesting an order remedying the
debtors improper plant solicitations in violation of the Bank of Secodes section
1125 B the purpose in speaking with counsel off record were to examine the
various issues and statements under scrutiny in a matter which didn't
further exacerbate any issues with respect to whether creditors parties in
interest or the public received unauthorized improper communications
your honor maybe muted what that come I'm rooted shows that you're muted on
there so it is forgive me for interrupting all right I don't think I'm
muted that's it says it there but we run through the communications through
our court recording not a problem better safe than sorry so let me first address
because the man on which the court addresses the motion to be a bit
unusual let me say at the outset the issue that's been raised by the
committee are the statements that have been made in tweets and letters emailed
to by the debtor to its customers as well as statements reference them in the
filed disclosure statement and plan with links to certain statements contained in
the various communications and the issue is whether or not these communications
are fall outside the scope of permissible activity under section 1125
the court has reviewed for instance the letter to creditors that was emailed to
block by customers that was referenced in their tweets the court is reviewed
the various identified provisions of the disclosure statement to which the
committee has raised concerns given that there were links to such provisions in
the various communications to the public to the customers and to the creditors
and the court and all candors takes issue with the manner in which these
communications were made indeed many of the communications fall outside the
scope of permissible solicitation under the Banker T code I applaud the
committee for acting in this emergent fashion to bring the matter before the
court professionally quickly and efficiently the manner in which the
committee raised these issues of course are consistent with the manner in which
they've prosecuted the case on behalf of the committee council the manner in
which they have protected the both the committee and the council have protected
the interest of creditors the court is cognizant that you don't see often what
goes on outside of court that the public unfortunately is limited to what they see
inside the court and there's usually a tremendous amount of activity this case
is no different indeed I think I've referred to this case as being a stealth
case in that so much of the work that is being done to protect the interest of
both the creditors the debtor and parties and interest is being done
outside the courtroom without without a show so to speak that it usually just
adds and feeds into the cost of the case so the court is appreciative of the
manner in which the committee and council have worked to protect their
interests in doing so and now having said that over the committee council
strenuous objections and chambers I have decided to limit the manner in which
the motion today is going to be presented to the court in that I'm directing the
parties to rely on their papers without adding additional argument I'm doing so
because in this court's view continued argument over the merits or lack of
merits or the truthfulness of statements and positions that appear in the
communications that are on file would simply exacerbate the problem the court
does not want oral argument in which certain statements that have not been
vetted by the court that have not been authorized by the court that have not
been supported by outside evidence to be communicated to the public for reliance
outside of the process that is improved by the code in section 1125 B for
parties to argue and contest the merits and truthfulness and accuracy of the of
their competing positions simply provides the public with information
that has not yet been vetted and approved and only makes this situation
even worse the court is prepared to enter an order and I'm going to read
portions of the order into the record that addresses the fact that in the
court's view the debtors statements outside of their filing invade the
process and the court wants certain steps taken to ensure at the committee's
assistance and the court agrees that all creditors understand that what's
reflected in the disclosure statement and the plan that's on file has not been
authorized by the court has not been vetted by the court has not been
approved by the court and that solicitations based on what's been filed
are improper the committee has filed a statement in which they outline the
issues they have generally with the plan by category and by substance and
since that information is on file along with the information that's included in
the debtor's disclosure statement and the debtor's position further argument
should await proper process which is a contested disclosure statement hearing
where both the debtor and the committee can supplement their arguments and the
court will decide what information should go out to the public to the
parties in interest and creditors before that process is completed the court
urges all parties in interest to avoid reliance on any of the statements that
they are reading because they were they reflect only the position of complete
parties and advocacy the court is prepared to enter today on the
emergent motion the following order enforcing section 1125 of the Bankruptcy
Code the sum and substance of the court's order we will read as follows
apart from the pleadings consistent with the Bankruptcy Code and rules or as
permitted by today's ruling neither the debtor nor the official committee of
unsecured creditors shall publish any advocacy communication to a website
Twitter feed on the docket or otherwise concerning the debtors plan and
disclosure tape statement until such time as the disclosure statement is
solicitation materials have been approved within 24 hours of the entry of
this order the debtors shall post a corrective letter on the case docket
their website and their Twitter feed will also email to all creditors that
receive communications described in the emergency motion the corrective letter
shall state as follows to all concerned parties and creditors please submit a
message as follows to all concerned block by prematurely posted certain
statements to the court docket its website and its Twitter feed on May 13th
2023 regarding a proposed plan of reorganization we urge each of you to
disregard those communications until such a time as the publication and
dissemination of such statements are authorized block by publication of those
communications is inconsistent with the requirements of the Bankruptcy Code and
undertaken without court authorization the court is directed block by to
circulate this communication on behalf of the committee to clarify that the
court has not yet approved block by disclosure statement or block by
ability to solicit acceptances of its plan at this juncture the committee
also among other parties does not support the plan of reorganization in
question among other issues the committee the committee believe that the
plan provides releases of litigation claims against among others current and
former directors and officers of block by that committed significant misconduct
that harmed block by and its customers these are the positions taken by the
committee as of this date the committee also believe that it is not appropriate
for block by via its current management and professionals to control the
validation of block by and district distributions creditors the committee
has requested changes to the plan the committee has not however proposed its
own plan as and in fact is barred from doing so by the debtors exclusivity
entitlements under the Bankruptcy Code nor has the committee taken any formal
position on certain issues ascribed to the committee in the prior
communications a disclosure statement must be approved by the court before
the committee party may lawfully encourage you to accept or reject any
plan of reorganization accordingly block by withdraws any prior statements
concerning your vote on the plan the committee's positions regarding the
plan and any alternatives that might be proposed by the committee at the
appropriate time after the court has authorized the dissemination of one or
more disclosure statements the parties may communicate to all creditors their
respective positions as part of the solicitation process that's this court's
ruling today I am authorizing the committee in conjunction with the
efforts of the debtor to communicate the court's ruling to provide its
statement which is already on the docket to those parties that have received the
communications by Bach fi and to reiterate of course today's court's
ruling now the court recognizes that both the committee statement as well as
the debtors disclosure statement and responses will be supplemented
consistent with the Bankruptcy Court with the Bankruptcy Rules and the code
and that all parties are reserving their rights going forward with respect to the
plan process at the same time the court is of the firm belief that parties are
not served by a hotly contested expensive and time-consuming litigation
over this plan process if that happens the court will address the contested
issues in an efficient and expeditious fashion but in order to avoid those
costs and delays and risks the court is directing the parties to engage in an
expedited mediation process with respect to the plan proposed plan
the court will identify a mediator after taking recommendations from both the
committee and the debtor if the parties can agree on a proposed mediator of
course the court will pursue the efforts of that mediator the court will also ask
debtors council to prepare a proposed form of mediation order once the
mediator has been identified and a protocol
and of course communications made and documents and information provided
during the course of the mediation will remain confidential and not be available
absent consent there are also pending motions to seal much of what we've
referenced what the court has referenced as far as information that was included
in the declaration of kristen axelrod as well as information that was included in
the statement that that's on file
well the only objection that the court is aware of well I shouldn't say that
needless to say the committee has expressed an interest in having full
disclosure but recognizes the mandate to at least pursue sealing efforts but I
understand that the US trustee has objected to sealing or redactions under
section 107 mr. Sponder did you as trustee want to place anything on the
record thank you your honor good afternoon again Jeff Sponder from the
office the United States trustee your honor the debtor and or the committee
since the committee is the one that filed the motions to seal bear the burden of
showing that the information to be sealed falls within the parameters and
an exception to section 107 a by demonstrating that the interest in
secrecy outweighs the presumption in favor of access it appears that the
ceiling motions rely on a protective order and or some type of confidentiality
agreement your honor a protective order is not sufficient grounds to support
the ceiling of information nor is an agreement among parties to keep
information confidential not a not sufficient grounds neither the debtor
nor the committee have made any showing that the information to be sealed is
protected under section 107 as a result the United States trustee believes your
honor that these motions should be denied and the information should be
disseminated to the public thank you thank you mr. Sponder the court is
overruling the objections of the US trustee and doing so notes the inherent
tension between 1125 of the code and 107 with a section 1125 restricting the
information that can go out to the public as part of the plan and disclosure
statement process until court court approval to avoid improper solicitation
activity and and to ensure that the information that the public receives as
part of this process has been vetted has been reviewed by all parties in
interest and and has been approved only after the court has had the ability and
the opportunity to hold a hearing in which the parties can raise issues with
the language and content that flies in the face of section 107 which mandates
disclosure of information that is on file in order to ensure the proper
administration of this case and to better serve the interest of the
creditors in getting accurate information that has been approved vetted
and authorized the court is going to employ its authority under section 105
to overrule the objection noting the tension between the statutory sections
let me ask at this point do through any council wish to raise any issues or
concerns that the court may have missed some clarification thrown if I may again
Robert Stark Brown Rudnick on behalf of the creditors committee first just so
that we have a clear record we had asked that I do not believe there's an
objection from my opposition that the documents that were attached to the
Axelrod declarations would be formally admitted into evidence so that they are
as part of the record in evidentiary fashion all of them that was my
understanding that there would be no objection albeit they are under seal no
objection your honor as long as they're under seal they are under seal and the
court accepts that those documents into the record thank you second
clarification your honor when we were chatting earlier your honors ruling
earlier about clarification that that creditors would receive and I think your
honor was was clear with respect to what the debtor has to do but I want to be
make sure that we have clarity on the record about the committee's
authorization in terms of making its views known my understanding had been
and I think your honor alluded to it but I want to make sure we have a clear
record and I have clear instructions is that the committee is authorized to send
emails to the same people that received the company's emails and we can hyper
link or otherwise attach our statement with respect to the plan and today's
ruling from Iran or whether it be in whole or in part from the record and
that would be the same communication format that individual creditors
received whether it be email what have you and that the company is required to
assist us in terms of being able to get that out the door that is my
understanding is there any objection no your honor we will coordinate we will
send the order and a statement no no no your honor it's the commit it'll be the
committee's communication I thought that the debtor has to actually undertake
that as part of the same platform or share with us how it can be done correct
it will be ours it's your communication it won't be blockbites communication
all right thank you any other issues nothing further from us your honor
Joshua Suspert from Kirkland Alice on behalf of the debtors we appreciate
your time today and look forward to mediation all right I will ask let's see
it's Thursday if possible by the close of business tomorrow can I get
recommendations on mediators yes yes you're happy to please meet and confer
again I want to thank all the professionals involved I know this is an
emotional that there's that there are issues here that are troubling that
they are difficult and I appreciate the courtesies and professionalism engaged
in by all counsel thank you