__________________________________________ 

Vernon E. Inge, Jr. (Va. State Bar No. 32699) 

Corey S. Booker (Va. State Bar No. 73419) 

Robert N. Drewry (Va. State Bar No. 91282) 

WHITEFORD, TAYLOR & PRESTON, L.L.P. 

Two James Center 

1021 East Cary Street, Suite 1700 

Richmond, Virginia 23219 

Telephone: 804.977.3301 

Facsimile: 804.977.3291 

E-Mail: vinge@wtplaw.com 

E-Mail: cbooker@wtplaw.com 

E-mail: rdrewry@wtplaw.com 

Special Litigation Counsel for Harry Shaia, Jr., Chapter 7 Trustee 

UNITED STATES BANKRUPTCY COURT 

EASTERN DISTRICT OF VIRGINIA 

Richmond Division 

In re: ) 

) 

DELTA CAREER EDUCATION ) Case No. 18-33822-KLP 

CORP., et al., ) Chapter 7 

) 

Debtors. ) (Jointly Administered) 

TRUSTEE’S LIMITED OBJECTION AND RESERVATION OF RIGHTS TO THE 

MOTION FOR ENTRY OF AN ORDER MODIFYING THE AUTOMATIC STAY TO 

ALLOW FOR PAYMENT BY THE INSURERS UNDER CERTAIN D&O POLICIES

Harry Shaia, Jr., Chapter 7 Trustee (the “Trustee”) of the bankruptcy estates (the 

“Estates”) of Delta Career Education Corporation (the “Debtor” and collectively with its 13 direct 

and indirect subsidiaries1 who are debtors in this jointly administered case, the “Debtors”), by 

counsel, submits this Limited Objection and Reservation of Rights (“Limited Objection”) to the 

Motion for Entry of an Order Modifying the Automatic Stay to Allow for Payment by the Insurers 

1

 In addition to Delta Career Education Corporation, the following 13 related entities filed chapter 7 bankruptcy cases: 

Academy of Court Reporting, Inc. (Case No. 18-33819); Atlantic Coast Colleges, Inc. (Case No. 18-33820) Berks 

Technical Institute, Inc. (Case No. 18-33821); Creative Circus, Inc. (Case No. 18-33814); Delta Educational Systems, 

Inc. (Case No. 18-33818); McCann Education Centers, Inc. (Case No. 18-33828); McCann School of Business and 

Technology, Inc. (Case No. 18-33825); Miller-Motte Business College, Inc. (Case No. 18-33827); National Career 

Education, Inc. (Case No. 18-33829); Palmetto Technical College, Inc. (Case No. 18-33801); Piedmont Business 

Colleges, Inc. (Case No. 18-33830); Southwest Business Colleges, Inc. (Case No. 18-33831); The Miami-Jacobs 

Business College Company (Case No. 18-33826). 

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Under Certain D&O Policies (D.N. 154) (the “Motion”) filed herein on August 24, 2020 by 

Movants, R. David Andrews, Nicholas A. Orum, Williard E. Lynn and Andrew J. Meyers and 

joined by John P. Olsen (D.N. 157), Bill Nance (D.N. 158), and Charles P. Brissman, Timothy J. 

Ryder and Kevin A. Smith (D.N. 159) (collectively, the “Movants”). In support of this Limited 

Objection, the Trustee respectfully states as follows: 

PRELIMINARY STATEMENT2

1. The Trustee does not oppose the relief sought by the Movants in the Motion; 

provided, however, that the order granting the Motion: (i) require Movants to provide summary of 

legal fees and expenses monthly, not bi-monthly; and (ii) reserve the Trustee’s right to object to 

the relief sought in the motion in the event Movants are extinguishing an unreasonable amount of 

the insurance policy’s proceeds. 

BACKGROUND 

The Chapter 7 Case 

2. This bankruptcy case was commenced by the Debtors filing of voluntary petitions 

for relief under Chapter 7 of the Bankruptcy Code on July 26 and 27, 2018 (the “Petition Date”). 

3. The Court entered an Order (D.N. 18) on August 1, 2018, providing for the joint 

administration of the Debtors’ bankruptcy cases (collectively and as jointly administered, the 

“Bankruptcy Case”). 

4. On July 24, 2020, the Trustee filed his Complaint against the Debtors’ directors and 

officers asserting a number of causes of actions relating to, their acts arising out of and relating to, 

2

 All capitalized terms not otherwise defined herein shall have the meaning set forth in the Motion. 

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among other things, a transaction on January 18, 2018, pursuant to which Delta Career Education 

Corporation (the “Debtor Holding Company”) and its subsidiary companies sold certain assets 

to Ancora Intermediate Holdings, LLC (the “Ancora Transaction”). It also arises out of and 

relates to the subsequent closure of the Debtors’ schools following the Ancora Transaction (the 

“Adversary Proceedings”). 

5. Prior to and following the Petition Date, the Debtors maintained a number of 

liability insurance policies, including a D&O policy, a Fiduciary Liability Insurance policy, and 

an Employment Practices Liability Insurance policy (the “Policies”).3

6. In the Motion, the Movants seek to modify the automatic stay allowing certain 

insurance companies to advance defense costs incurred in the Adversary Proceedings by the 

Movants from the proceeds of the Policies pursuant to the terms and conditions of the Policies. 

LIMITED OBJECTION 

7. The Trustee does not object to the Movants’ ability to use the proceeds from the 

Policies for the advancement of defense costs. The Trustee, however, objects to certain aspects of 

the proposed form of order to the Motion as set forth herein. 

8. Here, the Policies provide an aggregate policy limit; thus, the Movants’ use of the 

proceeds from the Policies reduces any potential recovery and/or proceeds to the Debtors’ Estate. 

9. Consequently, the Movants’ ability to utilize the proceeds should not go unfettered, 

particularly because the Trustee is still investigating whether there are other claims that may be 

covered by the Policies. 

3

 In addition to the Debtor’s underlying policy, the Debtor maintained the Delta Excess Policies and the Delta Winding 

Down Policy. See D.N. 154 (Motion for Entry of an Order Modifying The Automatic Stay to Allow For Payment By 

the Insurers Under Certain D&O Policies, ¶ 9). 

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10. To the extent there is a claim or claims which the Policies cover, proceeds of the 

Policies could flow to the Estate as direct defense costs or other Estate proceeds. See In re 

Louisiana World Exposition, 832 F.2d 1391, 1399 (5th Cir. 1987) (stating the question is not who 

owns the policies, but who owns the liability proceeds). 

11. In evaluating insurance claims, “it is necessary to examine what equitable interest, 

if any, a debtor has to those proceeds when the contract is one of liability.” In re Doug Baity 

Trucking, Inc., 2005 WL 1288018, at *5 (M.D.N.C. April 21, 2005). To do so requires a case-bycase analysis. See In re Downey Financial Corp., 428 B.R. 595, 608-09 (D. Del. 2010). Thus, the 

Trustee reserves his right to object to the relief should he determine the funds advanced for defense 

costs are unreasonable. 

12. Moreover, Movants seek to provide monitoring of the availability of the Policies’ 

proceeds through a proposed reporting requirement of every other month. The Trustee believes a 

monthly reporting requirement is more appropriate given that the cost of litigation are inconsistent 

and could increase substantially during a 60-day period. 

RESERVATION OF RIGHTS 

14. The Trustee reserves all of his rights, obligations, and defenses he would otherwise 

have under the Polices. 

15. The Trustee further reserves the right to object to the Movants’ use of the Policies’ 

proceeds to the extent those advances become, in the Trustee’s business judgment, unreasonable. 

The Trustee further requests the Movants provide statements of their defense costs on a monthly 

basis. 

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16. The Trustee further reserves all of his rights, claims, defenses, and remedies, 

including, without limitation, the right to amend, modify, or supplement this Limited Objection, 

to seek discovery, and to raise additional objections relating to and concerning the Motion. 

Dated: September 8, 2020 HARRY SHAIA, JR., TRUSTEE 

/s/ Corey S. Booker

Vernon E. Inge, Jr. (Va. State Bar No. 32699) 

Corey S. Booker (Va. State Bar No. 73419) 

Robert N. Drewry (Va. State Bar No. 91282) 

WHITEFORD, TAYLOR & PRESTON, L.L.P. 

Two James Center 

1021 East Cary Street, Suite 1700 

Richmond, Virginia 23219 

Telephone: 804.977.3301 

Facsimile: 804.977.3291 

E-Mail: vinge@wtplaw.com 

E-Mail: cbooker@wtplaw.com 

E-Mail: rdrewry@wtplaw.com 

Special Litigation Counsel for Harry Shaia, Jr., Chapter 7 Trustee 

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CERTIFICATE OF SERVICE 

I hereby certify that on September 8, 2020, a true and correct copy of the foregoing 

Trustee’s Limited Objection and Reservation of Rights to the Motion for Entry of an Order 

Modifying the Automatic Stay to Allow for Payment by the Insurers Under Certain D&O 

Policies was served on all persons receiving electronic notices in these cases and/or by first-class, 

postage-prepaid, U.S. mail upon the following: 

Harry Shaia, Jr., Trustee 

SPINELLA, OWINGS & SHAIA, P.C. 

8559 Mayland Drive 

Richmond, Virginia 23294 

William A. Broscious, Esq. 

KEPLEY BROSCIOUS & BIGGS, PLC 

2211 Pump Road 

Richmond, Virginia 23233 

Tyler F. Brown, Esq. 

Justin F. Paget, Esq. 

Nathan Kramer, Esq. 

HUNTON ANDREWS KURTH LLP 

Riverfront Plaza, East Tower 

951 East Byrd Street 

Richmond, Virginia 23219 

Peter J. Barrett, Esq. 

Brian H. Richardson, Esq. 

KUTAK ROCK L.L.P. 

901 East Byrd Street, Suite 1000 

Richmond, Virginia 23219 

David R. Ruby, Esq. 

William D. Prince IV, Esq. 

THOMPSONMCMULLAN, P.C. 

100 Shockoe Slip, 3rd Floor 

Richmond, Virginia 23219 

David G. Browne, Esq. 

SPIRO & BROWNE PLC 

6802 Paragon Place, # 410 

Richmond, Virginia 23230 

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Jennifer Jo West, Esq. 

Patricia J. Bugg Turner, Esq. 

SPOTTS FAIN PC 

411 East Franklin Street, Suite 600 

Richmond, Virginia 23219 

Ann B. Brogan, Esq. 

DAVEY & BROGAN, P.C. 

101 Granby Street, Suite 300 

Norfolk, Virginia 23510 

AIG, Financial Lines Claims 

Post Office Box 25947 

Shawnee Mission, Kansas 66225 

National Union Fire Insurance Company of Pittsburgh, Pa. 

c/o Corporation Service Company 

100 Shockoe Slip, Floor 2 

Richmond, Virginia 23219 

ARGO GROUP US 

Management Liability – Claims 

101 Hudson Street, Suite 1201 

Jersey City, New Jersey 07302 

ARGO GROUP US 

c/o Corporation Service Company 

100 Shockoe Slip, Floor 2 

Richmond, Virginia 23219 

/s/ Corey S. Booker

Corey S. Booker 

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