The U.S. Trustee assigned to the Walter Investment Management case filed with the U.S. Bankruptcy Court an objection to the Debtor’s Disclosure Statement and Plan.
The Trustee asserts, “Neither the Disclosure Statement nor the Plan provides a sufficient justification for the non-debtor releases and it is the Debtor’s burden to provide information as to why the Metromedia standard has not been met. The Debtor has also failed to explain why the exculpation provision, which extends to third-parties who are not estate fiduciaries who served during the chapter 11 cases (such as the estate professionals and the Committee and its members) is appropriate. Further, the acts for which these parties are being exculpated are vague….The Plan does not contain any provision to ensure compliance with the New York Rule and ensure that the exculpations for attorneys are appropriately limited.”
In addition, “The Plan, therefore, should not be approved until it is revised to include the following provision: ‘Nothing in the Plan shall limit the liability of attorneys to their respective clients pursuant to Rule 1.8(h) of the New York Rules of Professional Conduct.’ Section 7.2 of the Plan provides that ‘except insofar as a Claim is Allowed under the Plan, only the Reorganized Debtor shall be entitled to object to Claims after the Effective Date.’ The United States Trustee objects to the limitation imposed on who may object to claims.”
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