David G. Barger (VSB No. 21652) 

Thomas J. McKee, Jr. (VSB No. 68427) 

J. Gregory Milmoe (admitted pro hac vice) 

Greenberg Traurig, LLP 

1750 Tysons Boulevard, Suite 1000 

McLean, Virginia 22102 

Telephone: (703) 749-1300 

Fax: (703) 749-1301 

Email: mckeet@gtlaw.com 

Counsel to ULX Partners, LLC 

IN THE UNITED STATES BANKRUPTCY COURT 

FOR THE EASTERN DISTRICT OF VIRGINIA 

(Richmond Division)

In re: 

LECLAIRRYAN PLLC, 

 Debtor. 

Chapter 7 

Case No. 19-34574 (KRH) 

OBJECTION OF ULX PARTNERS, LLC TO THE TRUSTEE’S SUPPLEMENTAL 

MOTION FOR USE OF CASH COLLATERAL AND 

GRANT OF ADEQUATE PROTECTION RELATED THERETO 

ULX Partners, LLC (“ULXP”) files this Objection to the Trustee’s Supplemental Motion 

for Use of Cash Collateral and Grant of Adequate Protection Related Thereto [Docket No. 645] 

(the “Supplemental Motion”). 

INTRODUCTION 

 ULXP holds a valid $8 million claim against LeClairRyan (“LCR”) secured by a lien on 

substantially all of LCR’s assets which was perfected more than 90 days, but less than one year, 

prior to the Petition Date. In the face of overwhelming and uncontroverted evidence to the 

contrary, including sworn testimony, the Trustee persists in alleging without substantiation that 

ULXP’s claim can be avoided because ULXP was an “insider” of LCR and/or that the claim was 

the result of a fraudulent conveyance. Moreover, fully aware that ULXP was constrained from 

participating in this case until LCR’s senior lender had been repaid in full pursuant to the terms 

of ULXP’s intercreditor agreement with the senior lender, the Trustee has for more than six 

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months subverted ULXP’s legitimate rights as a secured lender to exercise control over the use 

of its collateral while using that collateral to “investigate” specious claims against ULXP. 

Further, it was many months before the Trustee would even engage ULXP in even limited 

discussion regarding the “insider” issue – despite ULXP’s repeated efforts to do so. 

 As discussed below, the Trustee has offered no evidence (distinguished from conclusory 

statements) that ULXP was an insider. Under such circumstances, the law is clear that ULXP’s 

secured claim is deemed allowed unless and until the Court makes a determination to the 

contrary. Accordingly, ULXP objects to the continued use by the Trustee of any cash collateral 

unless the Trustee is able to provide adequate protection for the diminution in value of the 

collateral since the Petition Date. 

RELEVANT BACKGROUND 

A. Transaction Background 

1. UnitedLex Corporation (“United Lex”) is a multinational corporation which 

provides support and consulting services to a variety of businesses including law firms and law 

departments with a view to using digital technology and other best business practices to enhance 

those businesses’ efficiency and the profitability of its clients. UnitedLex is not a law firm. In 

late 2017, UnitedLex and LCR began discussing how they might work together. As a result of 

these discussions, in April 2018, UnitedLex and LCR formed a new limited partnership, ULXP, 

99% owned and controlled by UnitedLex, which took over the back office operations of LCR. 

Pursuant to the transaction, (i) substantially all of LCR’s non-attorney employees (secretaries, 

paralegals, accounting and marketing staff etc.) became employees of ULXP which assumed 

ongoing responsibility for their compensation, benefits and management, and (ii) the parties 

executed a Master Services Agreement (the “MSA”) which detailed the non-legal and consulting 

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services which ULXP would “propose” and “provide” to LCR on an outsourced basis. (Exhibit 

1, p. LCR37 - 38). The fees for these services were initially priced to closely reflect nearly the 

same costs previously paid internally by LCR when it staffed such services in-house. 

2. ULXP’s and LCR’s relationship was a typical outsourcing arrangement both by 

design, in order to comply with governing law and ethics rules, and in practice, in which LCR 

retained control over all decisions affecting the practice of law and its business as a law firm. 

The implementation of the transaction proceeded with ULXP frequently providing business 

recommendations, cash flow analyses, and personnel recommendations, among other services, to 

LCR’s Chief Executive Officer and Board of Directors for their consideration, review, and final 

decision-making. ULXP’s primary chance for profit (which was not achieved before the 

bankruptcy) would generally come from developing efficiencies over time. 

3. As partner attrition gained momentum at LCR, however, the hits to LCR’s 

finances outpaced the long-term savings that LCR anticipated receiving through its agreement 

with ULXP. Rather than pay ULXP for the services ULXP continued to provide, LCR’s 

management opted to pay other vendors and expenses and instead left ULXP with a growing, 

and substantial receivable. More specifically, by December 2018, the outstanding payments 

owed by LCR to ULXP for services provided amounted to almost $12 million. Through an 

arms-length transaction, ULXP and LCR agreed to convert $8 million of such outstanding 

invoices into long term secured debt (and the remaining $4M remained outstanding and 

unsecured). 

4. The secured debt was evidenced by an Outstanding Deferred Loan Promissory 

Note (the “ULXP Note”) and Security Agreement that established a lien on substantially all of 

LCR’s assets, including accounts receivable. Copies of the ULXP Note and Security Agreement 

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are attached hereto as Exhibits 2 and 3, respectively. The lien was perfected by the recording of 

a UCC Financing Statement on or about April 22, 2019. (Exhibit 4).1 

5. ULXP’s lien was subordinate to the pre-existing lien on the same collateral held 

by Virginia Commercial Finance (“VCF”), which had entered into its own Loan and Security 

Agreement with LCR on December 29, 2017, through which VCF provided a revolving loan to 

LCR in the amount of $15,000,000 (the “VCF Loan”). 

6. Although the ULXP Note and Security Agreement were not finalized until April, 

2019, the ULXP Note was dated December 20, 2018 which was the date on which ULXP agreed 

in principle with LCR to defer the payment of the overdue accounts receivable for five years. 

ULXP understood that it was important to LCR to be able to represent to VCF, LCR’s senior 

lender, that it “had a deal” prior to year-end and therefore that date was agreed to and preserved. 

7. In light of the pre-existing VCF Loan, ULXP and VCF entered into an 

Intercreditor Agreement on April 2, 2019 (the “Intercreditor Agreement”) whereby ULXP’s 

right to repayment and lien were subordinate to the VCF Loan and ULXP was prohibited, among 

other things, from exercising any rights with respect to the cash collateral or contesting the 

actions of VCF. A copy of the Intercreditor Agreement is attached as Exhibit 5. More 

specifically, the Intercreditor Agreement prohibited ULXP from, among other things, 

“object[ing] to or oppos[ing] any . . . cash collateral usage,” and from “assert[ing] any right 

[ULXP] may have to ‘adequate protection’ of its interests in any Collateral in any Insolvency 

Proceeding . . . .” (Exhibit 5, § 8.2(d)). 

 

1 The ULXP Note and the Security Agreement, as well as the referenced UCC Financing 

Statement and the Intercreditor Agreement, were all attached to the Proof of Claim filed by 

ULXP (Claim No. 174), but are being provided here again for the Court’s convenience.

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8. Approximately five months after executing the Intercreditor Agreement, by 

September 2019, LCR’s increase in departing partners and decrease in revenue became too great 

and LCR filed for Chapter 11 bankruptcy protection on September 3, 2019 (the “Petition Date”), 

and the restraints imposed upon ULXP by the Intercreditor Agreement were triggered. 

9. As of the Petition Date, VCF and ULXP were the only creditors with alleged liens 

on the cash collateral, with LCR owing approximately $6.8 million on the VCF Loan and owing 

more than $12 million to ULXP. (Docket No. 13, ¶9). 

B. The Cash Collateral Orders and Initial Adequate Protection 

10. On the Petition Date, the Debtor filed its Motion for Entry of Interim and Final 

Orders Authorizing the Debtor to Use Cash Collateral and Granting Adequate Protection and 

Related Relief (Docket No. 13). The Court granted the Debtor’s Motion, and entered the Interim 

Order Authorizing the Debtor to Use Cash Collateral and Granting Adequate Protection and 

Related Relief (the “Debtor’s First Interim Order”) (Docket No. 41). In the Debtor’s First 

Interim Order, and again in the Second Interim Order entered on September 26, 2019 [Docket 

No. 124], the Court stated that: 

[F]or the purpose of providing adequate protection for any valid perfected security 

interests ULXP may have in the cash collateral, ULXP is hereby granted as security 

solely to the extent of the diminution in value of the cash collateral, a valid, 

perfected, and enforceable security interest subordinate in all respects to [VCF’s 

liens] in and upon the cash collateral (i) to the extent the cash collateral is used by 

the Debtor pursuant to the Budget and (ii) to the same extent, nature, and priority 

of any security interests held by ULXP as of the Petition Date. 

(Docket No. 41, ¶3); (Docket No. 124, ¶4). 

11. On October 4, 2019, this Court converted this matter to Chapter 7, and Lynn L. 

Tavenner was appointed as Chapter 7 Trustee (Docket Nos. 140 and 175). 

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12. On October 4, 2019, the Trustee filed her Motion for Use of Cash Collateral and 

Grant of Adequate Protection Related Thereto (the “Trustee’s First Cash Collateral Motion”) 

[Docket No. 143], in which the Trustee sought to continue providing replacement liens as 

adequate protection for ULXP and in which the Trustee stated that the proposed replacement 

liens for VCF and ULXP “will serve to maintain the value of the respective interests of the 

Lender and/or ULXP, if any, in the cash collateral during the initial stages of this case . . . .” 

(Docket No. 143, ¶260) (emphasis added). According to the Debtor’s Schedules filed on 

October 31, 2019, the Debtor had accounts receivable of approximately $17,473,865.70 (Docket 

No. 208, p.23). 

13. The Court granted the Trustee’s First Cash Collateral Motion (which has been 

subsequently extended multiple times), providing VCF and ULXP with replacement liens on the 

cash collateral, but providing only VCF (and not ULXP) with a valid superpriority administrative 

expense under Bankruptcy Code sections 507(b) and 503(b) “having priority over all other costs 

and expenses of administration of any kind, which claim shall at all times be senior to the rights 

of the Chapter 7 Trustee and the Estate to the extent of the diminution in the value of VCF’s 

Collateral.” The Court’s Order also stated that ULXP reserved “the right to request further or 

different adequate protection . . . .” (Docket No. 151, ¶16). 

14. On December 12-13, 2019, ULXP filed a secured claim of $8,563,288 and an 

unsecured claim of $3,952,025 (collectively, the “Proof of Claim”). A copy of the Proof of 

Claim is attached as Exhibit 6. A copy of the Intercreditor Agreement, which the Trustee was 

aware of very early in this case, was attached to the Proof of Claim when filed with the Court. 

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C. Multiple Delays in Paying Off VCF and Causing ULXP to Remain a “SilentSecond” 

15. According to the multiple budgets filed by the Trustee in May, July, and 

September 2020, the total receipts of net accounts receivable that the Trustee expected to collect 

during that time exceeded $1.1 million. (Docket Nos. 453, 550, and 617). And in her multiple 

supporting Declarations, as further detailed below, she confirmed that she collected well in 

excess of what was owed to VCF, yet she ultimately chose to delay – for many months – the 

final payment to VCF despite making repeated statements that the final payoff was forthcoming. 

16. On April 29, 2020, after paying nearly $6 million to VCF to curtail the VCF 

Loan, and in support of her request to further extend an interim cash collateral Order, the Trustee 

filed a Declaration with the Court stating that as of that date the amount owed to VCF was down 

to only “approximately $60,000.00” and that VCF was expected to be paid in full on or before 

May 31, 2020 (the “April Declaration”). (Docket No. 435, ¶4). As further explained by the 

Trustee’s Counsel at the April 30, 2020 Omnibus Hearing, the $60,000 consisted of 

approximately $10,000 in legal fees owed to VCF as well as a $50,000 litigation reserve to be 

funded and that the Court approved to be held in escrow by VCF’s counsel. (Exhibit 7, p: 20:3-

9; 15:8-20). Until VCF was actually paid in full, however, ULXP remained in the second 

position and bound by the terms of the Intercreditor Agreement. Per the Trustee’s counsel’s 

representations to the Court, that position was expected to soon change no later than May 31, 

2020. 

17. The timeline set forth in the April Declaration regarding payment to VCF was not 

met as the Trustee ultimately chose not to pay VCF by May 31, 2020 despite having available 

funds. Rather, approximately two months later, on June 24, 2020, the Trustee filed another 

Declaration acknowledging that she had still not paid off VCF and stating instead that the 

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amount owed to VCF was approximately $67,821.00 ($17,821.00 and $50,000 litigation reserve) 

(the “June Declaration”). (Docket No. 538, ¶8). At the June 25, 2020 Omnibus Hearing, the 

Trustees’ counsel informed the Court that VCF was “extremely close” to being paid off “in the 

very near future.” (Exhibit 8, p.8:13-25). Further, despite the fact that the Court had already 

approved having VCF’s counsel hold the $50k litigation reserve in escrow, the Trustee’s counsel 

indicated that she was still working out such logistics and that the reserve would be “funded very 

shortly.” (Exhibit 8, p.8:13-25, 9:1-3). In light of the outstanding amount due to VCF, ULXP 

remained in the second position and bound by the terms of the Intercreditor Agreement. Per the 

Trustee’s counsel’s representations, however, that position was expected to soon change “in the 

very near future.” (Exhibit 8, p.8:13-25). 

18. Yet again, however, the represented timeline regarding payoff to VCF was not 

met as the Trustee again chose not to pay off VCF despite having the funds to do so. And again, 

approximately two months later on August 26, 2020, the Trustee filed yet another Declaration in 

support of a cash collateral extension – this time merely stating that “the Estate owes [VCF] for 

recent legal fees and the agreed Litigation Reserve [of $50k]” (the “August Declaration”). 

(Docket No. 604, ¶11). At the August 27, 2020 Omnibus Hearing, the Trustee’s counsel 

informed the Court that the amount still outstanding to VCF was now less than $2,000, but that 

the litigation reserve still had not been funded allegedly due to logistics but was expected to be 

funded by “mid-September.” (Exhibit 9, p.7:1-10; p14:17-p.15-23). Such statements prompted 

the Court to inquire “why it has been taking so long” and noting that the Court “thought we were 

going to have the secured lender paid out in May.” (Exhibit 9, p.14:23-24). Regardless, the 

failure to pay off VCF meant that ULXP remained in the second position and bound by the terms 

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of the Intercreditor Agreement. Per the Trustee’s counsel’s representations, however, that 

position was again expected to soon change by “mid-September.” 

19. But yet again, and in what is now a clearly established pattern, the represented 

timeline regarding payoff to VCF was not met. The Trustee chose again to withhold payment 

from VCF rather than use available funds to satisfy LCR’s obligations. More specifically, the 

Trustee’s counsel explains in the Supplemental Motion filed on October 2, 2020, that payoff to 

VCF has still not occurred and instead “it is anticipated that the Trustee will have paid and/or 

otherwise provided all amount [sic] owed to the Lender on or before October 31, 2020.” 

(Supplemental Motion ¶15). Until such time as the payoff occurs, however, ULXP remains in 

the second position and bound by the terms of the Intercreditor Agreement. 

20. Significantly, the above-referenced delays in satisfying the VCF Loan and 

keeping ULXP on the sidelines all occurred during the time when the Trustee was investigating 

and evaluating claims and demands to be made upon ULXP. Upon information and belief, and 

as discussed below, the cash collateral was used, in part, to evaluate and consider such claims 

and demands. The delay in paying off VCF enabled the Trustee to avoid treating ULXP as a 

secured creditor without having to offer any evidence that the claim could be avoided. 

D. The Diminishing Cash Collateral 

21. As noted above, the amount of LCR’s accounts receivable as of the Petition Date, 

and when ULXP was provided a replacement lien on all accounts receivables through the 

Debtor’s First Interim Order, was over $17 million. Since that time, and while ULXP was on the 

sidelines, the Trustee has used the cash collateral to the detriment of ULXP. 

22. At the April Omnibus Hearing, the Trustee’s counsel noted that accounts 

receivable collections were approximately $7,850,000. She further explained that from that sum, 

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a “large portion” went to curtail the VCF Loan, $438,721 was used to pay the Court-approved 

collection agent, and that the funds were also used for the “operating costs and expenses 

associated with the estate nuances.” (Exhibit 7, p.19:11-17). 

23. In the June Declaration filed by the Trustee, she noted that “the amount of 

existing accounts receivable on the books and records of LeClairRyan is approximately 

$8,900,000.00” and that as of June 17, 2020, “approximately $1,073,000.00 [was] being 

specifically reviewed with the likelihood of write-off.” (Docket No. 538, ¶8). At the June 

Omnibus Hearing, the Trustee’s counsel further explained that collections stood at 

$8,015,610.61, and that the Trustee had paid $5,275,299.35 to VCF for the VCF Loan, close to 

“a half million dollars” to the Court-authorized collection agent, and “general IT costs of over a 

million dollars.” (Exhibit 8, p.20:1-12). 

24. In the August Declaration filed by the Trustee, she noted that the “amount of 

existing accounts receivable on the books and records of LeClairRyan is approximately 

$8,545,000,” but that “[i]t appears that a material amount of the existing accounts receivable may 

not be collectable but the exact amount has yet to be determined.” (Docket No. 604, ¶9). 

25. As of the Supplemental Motion, however, the Trustee now asserts that the value 

of ULXP’s lien on the cash collateral has been all but wiped out, calling it “miniscule, if not 

zero.” (Supplemental Motion, ¶25). 

26. The adequate protection originally provided to ULXP has thus been confirmed to 

have been inadequate and ULXP is entitled to additional adequate protection. 

REQUESTED RELIEF 

27. In light of the Trustee’s anticipated payoff of the VCF Loan, the Trustee has 

moved for use of ULXP’s cash collateral, allegedly to “operate certain designated aspects of the 

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Debtor’s business and to conduct an orderly wind down.” (Supplemental Motion ¶ 19). 

Regardless of whether the proffered timeline of payoff to VCF holds this time, ULXP either will 

have moved, or should have moved, into the first position by the time the current cash collateral 

order expires and therefore ULXP now objects to the Supplemental Motion and the Trustee’s use 

of ULXP’s cash collateral. In the alternative, if the Court permits the use of such cash collateral, 

ULXP respectfully requests that it be provided adequate protection and that the Trustee be 

prohibited from using such cash collateral in connection with the Trustee’s pursuit of demands 

and/or claims against ULXP and/or UnitedLex. 

ARGUMENT 

A. ULXP’S Claim and Lien Must be Accepted as Valid 

28. Section 363(c)(2) of the Bankruptcy Code provides that cash collateral may only 

be used by a debtor under two circumstances: “(A) each entity that has an interest in such cash 

collateral consents; or (B) the court, after notice and hearing, authorizes such use, sale, or lease 

in accordance with the provisions of [§ 363].” 11 U.S.C. §363(c)(2)(A-B). As noted above, and 

as demonstrated in ULXP’s proof of claim, ULXP has an interest in the cash collateral and does 

not consent to the Trustee’s use of the same. ULXP’s claim must be accepted as valid unless and 

until the Court makes a final determination to the contrary. 

29. Section 502(a) of the Bankruptcy Code provides, in part, that “[a] claim or 

interest is deemed allowed, unless a party in interest objects.” 11 U.S.C. §502(a). When a 

claimant files a proof of claim with the required supporting documentation, it is prima facie

evidence of the claim’s validity and the amount owed by the debtor. See In re Falwell, 434 B.R. 

779, 783 (Bankr. W.D.Va. 2009); see also Fed. R. Bankr. P. 3001(f). Once the proof of claim is 

filed, “[t]he burden then shifts to the debtor to object to the claim” and to “introduce evidence to 

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rebut the claim’s presumptive validity.” In re Harford Sands Inc., 372 F.3d 637, 640 (4th Cir. 

2004). The evidence “must be sufficient to demonstrate the existence of a true dispute and must 

have probative force equal to the contents of the claim.” In re Falwell, 434 B.R. 779, 783 

(Bankr. W.D.Va. 2009). Upon offering such evidence, the burden would then shift back to the 

creditor “to produce evidence meeting the objections [to the claim] and establishing the claim.” 

Id.

30. The Trustee seeks to avoid ULXP’s interests by asserting that ULXP is an insider 

of the Debtor. As noted by this Court in Arrowsmith v. Mallory, 2017 Bankr. LEXIS 2230, 

however, “[t]he test [for insider status] in the Fourth Circuit is that the alleged insider must 

exercise sufficient authority over the debtor so as to unqualifiably dictate corporate policy and 

the disposition of corporate assets.” Id. at 63-64 (citing In re Starlight Group, LLC, 531 B.R. 

611, 635 (Bankr. E.D.Va. 2015) (citing Butler v. David Shaw, Inc., 72 F.3d 437 (4th Cir. 1996)) 

(emphasis added). Mere influence, or even financial dependence on a creditor, is not sufficient 

for insider purposes. See Gray v. Giant Wholesale Corp., 758 F.2d 1000, 1003 (4th Cir. 1985) 

(holding employee who controlled dispensation of debtor’s checks was not an insider); see also 

Smith v. Porter, 416 B.R. 239, 258-59 (Bankr. E.D.Va. 2009) (citing Ellenberg v. William 

Goldberg & Co., 208 B.R. 239 (Bankr. N.D.Ga. 1997) (holding that financial consultants who 

worked daily with debtor, advised on all financial matters, assisted in acquiring financing, and 

frequently communicated with debtor’s banks and creditors, were not insiders)). 

31. The Trustee alleges in her Supplemental Motion that ULXP “(a) exerted 

operational control over the Debtor, (b) had the ability to make personnel decisions, (c) had the 

authority to incur or pay obligations, and (d) had access to financial and other information 

essential to the Debtor’s operation.” (Supplemental Motion ¶17). The Trustee also contends that 

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ULXP, “(a) had a close relationship with the Debtor, (b) exercised extensive influence over the 

Debtor, and (c) engaged in transactions that were not arms length.” (Id.). The only purported 

evidence offered by the Trustee in support of the foregoing allegations, however, is a conclusory 

allegation from the Declaration of Lori D. Thompson, Esq. in Support of Chapter 11 Petition and 

First Day Motions, in which Ms. Thompson speculates that “LeClairRyan may be an insider of 

the Debtor under Bankruptcy Code section 101(31)” and that “any security interest transferred to 

ULXP may be an avoidable transfer to an insider . . . .” (Docket No.3, ¶21) (emphasis added). 

32. Putting aside for now the absurdity of alleging that ULXP controlled LCR but still 

left itself with a $12 million receivable, Ms. Thompson’s speculation is nevertheless insufficient 

to overcome the prima facie evidence of the validity of ULXP’s claim as asserted and described 

in the Proof of Claim. Nor does it even demonstrate the existence of a true dispute regarding the 

same or have any probative force. See Brown v. IRS (In re Brown), 82 F.3d 801, 805 (8th Cir. 

1996) (stating that a claim’s presumptive validity is not altered unless an objection is supported 

by substantial evidence). 

33. To the contrary, ample evidence exists that directly undermines the Trustee’s bare 

allegations. The governing documents for LCR’s relationship with ULXP, for example, do not 

satisfy the test for insider status. The MSA is structured to ensure that LCR retains ultimate 

control by noting that only the policies and practices that LCR approves of will be implemented. 

The MSA, for example, notes that although ULXP will “identify, develop and propose modified 

or new Law Firm policies,” only the policies that LCR “agrees [with]” will ultimately be 

adopted. (Exhibit 1, p.LCR37) (emphasis added). Even when the MSA appears to go further 

regarding ULXP’s role, such as stating that ULXP will “manage the process for” LCR’s conflict 

system,” it nevertheless confirms LCR’s superiority by stating that LCR’s “General Counsel [is] 

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to provide [ULXP] with oversight and final determination of all conflict resolution.” (Exhibit 1, 

p. LCR41-42) (emphasis added). In other words, despite ULXP playing many roles and 

providing many services, nothing happened at LCR without LCR’s final approval. 

34. Sworn testimony obtained by the Trustee, but ignored by the Trustee for purposes 

of the Supplemental Motion, confirm that the implementation of the MSA matched its written 

design and thus directly refutes the Trustee’s allegations. By way of example, Dan Reed, Chief 

Executive Officer of UnitedLex, testified during his deposition that “it was the executive 

committee [of LCR] that would sign off on all manner of major – significant decisions 

concerning personnel, contracts, or things of that nature.” (Exhibit 10, pp.114:23-25, p:115:1). 

Similarly, Nick Hinton, Chief Financial Officer of UnitedLex, testified that ULXP did not have 

the ability to pay vendors, but instead would offer advice as to which vendors should get paid 

and it would be ultimately the LCR’s team’s decision as to which vendors were actually paid and 

it was LCR that controlled its own cash and checkbook. (See Exhibit 11, pp. 92:10-13, 94:8-

95:1, 95:17-25, 152:6 – 154:3). 

35. With no proffered evidence to refute the prima face case presented in ULXP’s 

proof of claim, and with ample evidence to demonstrate that ULXP was not an insider, ULXP’s 

secured claim should be deemed valid for current purposes of considering the Trustee’s request 

to use cash collateral. Accordingly, ULXP objects to the use of the cash collateral by the 

Trustee. 

B. ULXP is Entitled to Adequate Protection 

36. As a secured creditor, ULXP is entitled to adequate protection in the event the 

Court permits use of the cash collateral by the Trustee. Section 363(e) of the Bankruptcy Code 

provides that upon the request of any entity with an interest in property that is being “used” by 

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the debtor, the court shall “prohibit or condition such use . . . as is necessary to provide adequate 

protection of such interest.” 11 U.S.C. §363(e). See, e.g., Metromedia Fiber Network Servs. v. 

Lexent, Inc. (In re Metromedia Fiber Network, Inc.), 290 B.R. 487, 491 (Bankr. S.D.N.Y. 2003) 

(“Section 363(e) is not permissive or discretionary – it states that the court ‘shall’ grant the relief 

specified, at any time, on request of the secured entity.”). In other words, a secured creditor is 

entitled to receive adequate protection during the course of a debtor’s bankruptcy case to the 

extent that the debtor’s possession or use of the creditor’s collateral threatens to diminish the 

value of the secured creditor’s interest. A debtor requesting court approval to use cash collateral 

has the burden of proof as to the issue of adequate protection. 11 U.S.C. § 363(p)(1). 

37. The Trustee makes no attempt to demonstrate that the replacement liens, first 

provided for in the Debtor’s First Interim Order, adequately protect ULXP’s interests; rather, her 

argument rests entirely on the premise that ULXP should be “entitled to no adequate protection,” 

because the current value of ULXP’s lien “is miniscule, if not zero . . . .” (Supplemental Motion 

¶24). 

38. The Trustee offers no evidence that the value of ULXP’s lien is “miniscule, if not 

zero,” and thus cannot meet her burden. See 11 U.S.C. § 363(p)(1). 

39. Even if she did offer evidence, however, such proof would only bolster ULXP’s 

contention that the prior replacement liens were insufficient to protect ULXP’s interests in the 

cash collateral and that new adequate protection is required. 

40. As noted above, the value of LCR’s accounts receivable as of the Petition Date, 

which is also the date on which ULXP was first provided a replacement lien, was approximately 

$17 million. The value of such collateral diminished during the course of this bankruptcy 

proceeding – going from the $17 million as of the Petition Date, down to approximately $8 

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million in April 2020, and again down to an alleged “miniscule” amount as of the Supplemental 

Motion – all while ULXP seemed to have been purposely kept on the sidelines by the Trustee’s 

failure to pay off VCF. 

41. The decreasing value of the cash collateral was caused by collections that were 

paid to VCF, designation of some aged receivables as uncollectable, and the Trustee’s use of the 

cash collateral to fund operating expenses. Upon information and belief, the Trustee’s activities 

and use of the cash collateral included activities related to the investigation and evaluation of 

potential claims and/or demands against ULXP. In other words, ULXP’s own collateral was 

being used to avoid ULXP’s rights to such collateral. 

42. The Trustee acknowledges that more than $1 million of the accounts receivable 

that were collected went to pay for collection fees and operating expenses (Exhibit 8, p.20:1-

12). Thus, at a minimum, ULXP must be provided adequate protection to account for the 

diminished value of the cash collateral since the Petition Date caused by the Trustee’s use of 

such collateral. 

43. Among the forms of protection available is designation of a superpriority 

administrative expense claim under Bankruptcy Code Section 507(b) equal to the decrease in 

value of ULXP’s interest in the cash collateral since the Petition Date, but not greater than the 

amount of its secured claim. 

44. A superpriority administrative expense claim, or similar adequate protection, is 

necessary to provide ULXP with “the assurance of . . . continued recoverability” during the case. 

See Supplemental Motion ¶24 (citing In re Arriens, 25 B.R. 79, 81 (Bankr. D. Or. 1982)). 

WHEREFORE, ULXP respectfully requests that the Court sustain ULXP’s objection to 

the Supplemental Motion and deny the Trustee use of the cash collateral, and grant such other 

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relief as may be just and proper. Alternatively, ULXP respectfully requests, (i) that the Trustee 

be prohibited from using the cash collateral to fund any investigation, litigation, and/or 

evaluation of any action or proceeding against ULXP, seeking to avoid ULXP’s lien, claim, or 

interest, (ii) enter an Order requiring adequate protection in the form of a superpriority 

administrative expense claim in favor of ULXP, or such other form of adequate protection that 

the Court may determine to be appropriate, and (iii) grant ULXP such other relief as is just and 

proper. 

Dated: October 16, 2020 

Respectfully submitted, 

__/s/ Thomas J. McKee, Jr.________________

David G. Barger (VSB No. 21652) 

Thomas J. McKee, Jr. (VSB No. 68427) 

Greenberg Traurig, LLP 

1750 Tysons Boulevard, Suite 1000 

McLean, Virginia 22102 

Telephone: (703) 749-1300 

Facsimile: (703) 749-1301 

Email: bargerd@gtlaw.com 

 mckeet@gtlaw.com 

and 

J. Gregory Milmoe (admitted pro hac vice) 

Greenberg Traurig, LLP 

One International Place, Suite 2000 

Boston, MA 02110 

Telephone: (617) 310-6064 

Email: milmoeg@gtlaw.com 

Counsel to ULX Partners, LLC

 

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CERTIFICATE OF SERVICE

I hereby certify that on this 16th day of October 2020, a true and correct copy of the 

foregoing Objection, was served electronically through the CM/ECF filing system with notice 

being automatically provided to all those entitled to receive the same, including, without 

limitation, the Core Group and all entities on the 2002 List, pursuant to the Order Establishing 

Certain Notice, Case Management and Administrative Procedures [ECF No. 38], including 

without limitation the following persons: 

Lynn L. Tavenner, Esq., Chapter 7 Trustee (ltavenner@tb-lawfirm.com) 

Paula S. Beran, Esq., counsel to the Chapter 7 Trustee (pberan@tb-lawfirm.com) 

Erika L. Morabito, Esq., counsel to the Chapter 7 Trustee (emorabito@foley.com) 

/s/ Thomas J. McKee, Jr.____________

 Thomas J. McKee, Jr. (VSB No. 68427) 

 Greenberg Traurig, LLP 

 1750 Tysons Boulevard, Suite 1000 

 McLean, Virginia 22102 

 Telephone: (703) 749-1300 

 Facsimile: (703) 749-1301 

 Email: mckeet@gtlaw.com 

 Counsel to ULX Partners, LLC

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