eScribers, LLC | (973) 406-2250

operations@escribers.net | www.escribers.net

1

 1 IN THE UNITED STATES BANKRUPTCY COURT

 EASTERN DISTRICT OF VIRGINIA (RICHMOND)

 2

 In Re: ) Case No. 19-34574-KRH

 3 ) Richmond, Virginia

 LECLAIRRYAN PLLC, )

 4 )

 Debtor. ) April 19, 2022

 5 ) 11:21 a.m.

 -------------------------------- )

 6 )

 LYNN L. TAVENNER, AS CHAPTER 7 ) Adv. Proc. Case No.

 7 TRUSTEE, ) 20-03142-KRH

 )

 8 Plaintiff, )

 )

 9 v. )

 )

10 ULX PARTNERS, LLC, ET AL., )

 )

11 Defendants. )

 -------------------------------- )

12

 TRANSCRIPT OF HEARING ON

13 MOTION TO AMEND FIRST AMENDED COMPLAINT

 BEFORE THE HONORABLE KEVIN R. HUENNEKENS

14 UNITED STATES BANKRUPTCY JUDGE

15 APPEARANCES:

 For the Chapter 7 Trustee: PAULA BERAN, ESQ.

16 TAVENNER & BERAN, PLC

 20 North 8th Street

17 Richmond, VA 23219

18 Special Counsel for the Chapter ERIKA L. MORABITO, ESQ.

 7 Trustee: BRITTANY J. NELSON, ESQ.

19 QUINN EMANUEL URQUHART &

 SULLIVAN, LLP

20 1300 I Street NW

 Suite 900

21 Washington, DC 20005

22 DAVID M. GRABLE, ESQ.

 MATTHEW R. SCHECK, ESQ.

23 QUINN EMANUEL URQUHART &

 SULLIVAN, LLP

24 865 South Figueroa Street

 10th Floor

25 Los Angeles, CA 90017

Case 19-34574-KRH Doc 1382 Filed 06/06/22 Entered 06/06/22 14:03:26 Desc Main

Document Page 35 of 144

Case 20-03142-KRH Doc 266 Filed 06/28/22 Entered 06/28/22 21:44:57 Desc Main

Document Page 1 of 17
eScribers, LLC | (973) 406-2250

operations@escribers.net | www.escribers.net

2

 1 For ULX Partners, LLC: J. GREGORY MILMOE, ESQ.

 GREENBERG TRAURIG, LLP

 2 One Vanderbilt Avenue

 New York, NY 10017

 3

 DAVID G. BARGER, ESQ.

 4 THOMAS J. MCKEE, JR., ESQ.

 GREENBERG TAURIG, LLP

 5 1750 Tysons Boulevard

 Suite 1000

 6 McLean, VA 22102

 7 Special Insurance Counsel for STEPHEN R. MYSLIWIEC, ESQ.

 ULX Partners: MILLER FRIEL, PLLC

 8 2445 M Street NW

 Suite 910

 9 Washington, DC 20037

10 For the U.S. Trustee: SHANNON F. PECORARO, ESQ.

 U.S. DEPARTMENT OF JUSTICE

11 OFFICE OF THE UNITED STATES

 TRUSTEE

12 701 East Broad Street

 Suite 4304

13 Richmond, VA 23219

14

15

16

17

18

19

20

21 Transcription Services: eScribers, LLC

 7227 North 16th Street

22 Suite #207

 Phoenix, AZ 85020

23 (973) 406-2250

24 PROCEEDINGS RECORDED BY ELECTRONIC SOUND RECORDING.

25 TRANSCRIPT PRODUCED BY TRANSCRIPTION SERVICE.

Case 19-34574-KRH Doc 1382 Filed 06/06/22 Entered 06/06/22 14:03:26 Desc Main

Document Page 36 of 144

Case 20-03142-KRH Doc 266 Filed 06/28/22 Entered 06/28/22 21:44:57 Desc Main

Document Page 2 of 17
eScribers, LLC | (973) 406-2250

operations@escribers.net | www.escribers.net

Colloquy 3

 1 THE COURT OFFICER: The United States Bankruptcy Court

 2 for the Eastern District of Virginia is now in session. The

 3 Honorable Kevin R. Huennekens presiding. Please come to order.

 4 THE CLERK: Item number 1, Tavenner v. ULX Partners

 5 LLC, motion to amend first amended complaint.

 6 THE COURT: Good morning.

 7 MS. MORABITO: Good morning, Your Honor.

 8 MR. BARGER: Morning, Your Honor.

 9 MS. MORABITO: Good morning, Your Honor; Erika

10 Morabito, Quinn Emanuel, special counsel to the Chapter 7

11 trustee. With me this morning, I have my colleagues, Ms.

12 Brittany Nelson, Mr. Dave Grable, Mr. Matt Scheck. Can you

13 hear me okay, Your Honor?

14 THE COURT: I can, thank you.

15 MS. MORABITO: Thank you, Your Honor. And I also have

16 Ms. Tavenner and Ms. Beran together, and hopefully you can see

17 them on your screen.

18 First, the parties want to thank the Court for

19 accommodating us. I know you have a crazy busy docket this

20 morning. The good news is, is that we do believe the parties

21 have reached a settlement. So while we were up preparing for

22 the contested hearing today, we did get a call from Chief Judge

23 Santoro, the Court appointed mediator in this case. I received

24 a call roughly about thirty-five or forty minutes ago. And so

25 we are ready to -- not asking for the Court for approval, but

Case 19-34574-KRH Doc 1382 Filed 06/06/22 Entered 06/06/22 14:03:26 Desc Main

Document Page 37 of 144

Case 20-03142-KRH Doc 266 Filed 06/28/22 Entered 06/28/22 21:44:57 Desc Main

Document Page 3 of 17
eScribers, LLC | (973) 406-2250

operations@escribers.net | www.escribers.net

Colloquy 4

 1 Judge Santoro did ask that I put the terms of the settlement on

 2 the record for Your Honor to hear, if that's okay with you,

 3 because obviously we can dispel with the motion to amend and

 4 the motion to seal.

 5 THE COURT: You may. Please proceed.

 6 MS. MORABITO: Thank you, Your Honor. And I apologize

 7 if it's a little disjointed. I have chicken scratch from my

 8 call with Judge Santoro, so hopefully I'm going to get all the

 9 terms in. But I know that I have Greenberg Traurig on here to

10 catch me if I miss something.

11 Your Honor, this is what the deal is comprised of. It

12 is a twenty-one-million-dollar cash settlement to the estate.

13 Those dollars would come as follows: there would be 12.25

14 million contributed by CNA, which is the primary insurance

15 carrier in this case. There will be another 500,000 -- and

16 that's an estimate, and I'll get to that in a minute -- which

17 will be contributed by Travelers Insurance Company. The reason

18 that's an estimate is that policy is almost exhausted. The

19 estimate that's left by Travelers is roughly 500,000. We can

20 count on the 500,000 coming into the estate, however, because

21 whatever shortfall there is from Travelers, UnitedLex has

22 agreed to make up that difference. So we can count on the

23 500,000.

24 The third component of the 21 million is 8.25 million

25 dollars coming in from a combination of UnitedLex and CVC.

Case 19-34574-KRH Doc 1382 Filed 06/06/22 Entered 06/06/22 14:03:26 Desc Main

Document Page 38 of 144

Case 20-03142-KRH Doc 266 Filed 06/28/22 Entered 06/28/22 21:44:57 Desc Main

Document Page 4 of 17
eScribers, LLC | (973) 406-2250

operations@escribers.net | www.escribers.net

Colloquy 5

 1 That would be the total of twenty-one million dollars coming

 2 into the estate by way of cash.

 3 The way that will be broken down, Your Honor -- and

 4 this is all the mediator's proposal. The way that that would

 5 be broken down would be at closing -- and we'll talk about when

 6 closing is in a minute, but at closing, the insurance companies

 7 would be required to provide their full contribution. So what

 8 we know would come in at closing would be 12.25 from CNA and

 9 500,000 dollars from Travelers, and 2 million dollars from

10 UnitedLex and CVC. And to the extent Travelers is short,

11 UnitedLex and CVC will make up that additional shortfall of the

12 500,000. So at closing, the estate would receive 14.75

13 million.

14 Subsequent to closing twelve months from settlement,

15 the estate would receive another three million dollars from

16 UnitedLex and CVC. We are told by Chief Judge Santoro, that

17 that three million dollars will be fully secured by an

18 irrevocable letter of credit. The last installment would be

19 3.25 million dollars from UnitedLex and CVC, and that would be

20 required to be paid twenty-four months from the date of

21 settlement. And that, too, would be fully secured by an

22 irrevocable letter of credit.

23 Our understanding is there would be no risk, then, to

24 the estate or to the trustee that those remaining payments of

25 6.25, would come in.

Case 19-34574-KRH Doc 1382 Filed 06/06/22 Entered 06/06/22 14:03:26 Desc Main

Document Page 39 of 144

Case 20-03142-KRH Doc 266 Filed 06/28/22 Entered 06/28/22 21:44:57 Desc Main

Document Page 5 of 17
Case 19-34574-KRH Doc 1382 Filed 06/06/22 Entered 06/06/22 14:03:26 Desc Main

Document Page 40 of 144

Case 20-03142-KRH Doc 266 Filed 06/28/22 Entered 06/28/22 21:44:57 Desc Main

Document Page 6 of 17
eScribers, LLC | (973) 406-2250

operations@escribers.net | www.escribers.net

Colloquy 7

 1 The other component to this is UnitedLex Partners

 2 filed a claim, claim number 174, in the amount of 8,563,288

 3 dollars. And they also filed claim number 175, again, ULX

 4 Partners, and that claim is in the amount of 3,952,025 dollars.

 5 The total of those two claims, Your Honor, is 12,515,308

 6 dollars. Currently, those claims are purported as secured

 7 claims. Part of the litigation against UnitedLex was a

 8 recharacterization of those claims to unsecured.

 9 As part of this deal, and in addition to the 21-

10 million-dollar cash settlement, ULX Partners has agreed to

11 waive the full amount of the 12,515,308 claim. It will not be

12 a secured, nor will it be an unsecured, or any other claim.

13 They will not be entitled to a 502(h) claim, and none of the

14 defendants will have any claims against the estate.

15 Another component of the agreement -- and the mediator

16 wanted me to state on the record, this was a unilateral

17 mediator's proposal; it was not suggested, nor requested by the

18 Chapter 7 trustee, or by myself or anybody at Quinn Emanuel.

19 For reasons that the mediator said he would be happy to answer

20 any questions from Your Honor, the United States Trustee, or

21 anybody else, the recommendation is that Quinn Emanuel would

22 receive 10.5 million dollars from the settlement proceeds into

23 the estate. And that would be in lieu of the current

24 agreement, which is the thirty-five percent under the

25 contingency arrangement.

Case 19-34574-KRH Doc 1382 Filed 06/06/22 Entered 06/06/22 14:03:26 Desc Main

Document Page 41 of 144

Case 20-03142-KRH Doc 266 Filed 06/28/22 Entered 06/28/22 21:44:57 Desc Main

Document Page 7 of 17
eScribers, LLC | (973) 406-2250

operations@escribers.net | www.escribers.net

Colloquy 8

 1 In terms of timing of the settlement, the mediator is

 2 requiring the parties, absent an extension by the mediator

 3 only, to have documents executed. So that would be the full

 4 settlement agreement and the 9019, which trustee's counsel will

 5 draft. Those need to be executed by Friday of next week, which

 6 is April 29th. Our anticipation and hope is that we would be

 7 in a position to file those with the Court on or before that

 8 Monday, which is May 2nd.

 9 We currently don't have an omnibus hearing scheduled

10 in this case; we have one on May 3rd and one on May 31st. The

11 trustee would ask that since the Court had blocked off for

12 trial May 16 through May 27th, if the Court had a date

13 available that week of May 23rd that was supposed to be trial,

14 it would allow enough time for us to get regular notice out on

15 the 9019 and still be able to have a specially set hearing the

16 week of the 23rd so that we can get this to closing and get

17 money into the estate as soon as possible.

18 I think I have covered everything that Chief Judge

19 Santoro had asked me to cover and to put on the record. Before

20 I turn it over for affirmation from the defendant's counsel,

21 does Your Honor have any questions?

22 THE COURT: A couple of questions. And the first

23 question is, if we proceed with the schedule that you just

24 outlined, when would you anticipate closing occurring?

25 MS. MORABITO: As soon as the order's entered in

Case 19-34574-KRH Doc 1382 Filed 06/06/22 Entered 06/06/22 14:03:26 Desc Main

Document Page 42 of 144

Case 20-03142-KRH Doc 266 Filed 06/28/22 Entered 06/28/22 21:44:57 Desc Main

Document Page 8 of 17
eScribers, LLC | (973) 406-2250

operations@escribers.net | www.escribers.net

Colloquy 9

 1 connection with the 9019.

 2 THE COURT: Okay. Second question, I assume that

 3 there will be mutual releases exchanged among all of the

 4 parties. My question --

 5 MS. MORABITO: That's correct. That is --

 6 THE COURT: -- is that on the --

 7 MS. MORABITO: I'm sorry.

 8 THE COURT: -- is that on the third anniversary?

 9 MS. MORABITO: That is correct.

10 THE COURT: Okay, thank you. I also assume that in

11 this kind of an arrangement, like most arrangements, that

12 there'd be a provision that no parties admitting any liability

13 and that this is a business decision to resolve the case.

14 MS. MORABITO: That's correct, Your Honor.

15 THE COURT: One final question. Do I have permission

16 to talk with the mediator about the unilateral proposal that he

17 has made regarding the change in the fee structure?

18 MS. MORABITO: You have permission from Quinn Emanuel,

19 and the mediator has indicated you have permission from him.

20 And I would turn it over to Greenberg Traurig to see if they

21 have any objection to that request for permission.

22 THE COURT: I will ask them the same question in just

23 a moment. And my last question is, is the trustee agreeable to

24 the change in the compensation structure?

25 MS. MORABITO: Ms. Tavenner is on the phone. If you

Case 19-34574-KRH Doc 1382 Filed 06/06/22 Entered 06/06/22 14:03:26 Desc Main

Document Page 43 of 144

Case 20-03142-KRH Doc 266 Filed 06/28/22 Entered 06/28/22 21:44:57 Desc Main

Document Page 9 of 17
Case 19-34574-KRH Doc 1382 Filed 06/06/22 Entered 06/06/22 14:03:26 Desc Main

Document Page 44 of 144

Case 20-03142-KRH Doc 266 Filed 06/28/22 Entered 06/28/22 21:44:57 Desc Main

Document Page 10 of 17
eScribers, LLC | (973) 406-2250

operations@escribers.net | www.escribers.net

Colloquy 11

 1 .

 2 THE COURT: All right. Thank you. Those are all the

 3 questions I have.

 4 Mr. Barger, are you going to speak on behalf of

 5 Greenberg?

 6 MR. BARGER: Your Honor, I think Mr. Milmoe will speak

 7 on our behalf. The only thing I did want to add is I wanted to

 8 introduce Stephen Mysliwiec, who is our outside insurance

 9 counsel from the firm of Miller Friel, who was instrumental in

10 the show of diplomacy in resolving it. And he is available,

11 since he was present with Ms. Morabito, should we need

12 additional confirmation. But I did want to note his and the

13 trustee's efforts to resolve it. Thank you.

14 THE COURT: Thank you very much, sir.

15 Mr. Milmoe.

16 MR. MILMOE: And thank you, Your Honor. For the

17 record, Gregory Milmoe for Greenberg Traurig on behalf of the

18 defendants.

19 Ms. Morabito's presentation was accurate in every

20 respect, except for one thing at the very end. And that was

21 the timing of the releases. It is our understanding, and as

22 Ms. Morabito outlined, we're providing irrevocable letters of

23 credit to back the payments coming due in the future. And we,

24 therefore, anticipated and would expect to get releases at the

25 closing.

.

Case 19-34574-KRH Doc 1382 Filed 06/06/22 Entered 06/06/22 14:03:26 Desc Main

Document Page 45 of 144

Case 20-03142-KRH Doc 266 Filed 06/28/22 Entered 06/28/22 21:44:57 Desc Main

Document Page 11 of 17
eScribers, LLC | (973) 406-2250

operations@escribers.net | www.escribers.net

Colloquy 12

 1 Other than that, I thought the presentation was, as

 2 usual, succinct and spot on. And we would also like to express

 3 our gratitude to Chief Judge Santoro for his enormous efforts

 4 in bridging the fairly significant gaps between the parties.

 5 THE COURT: Well, obviously, I don't know what's been

 6 going on with the mediation. I do know that each of us, as

 7 judicial mediators, are required to file time statements with

 8 the Fourth Circuit every month as far as our mediation hours

 9 are concerned. I never thought I would have to keep track of

10 my time anymore. But in any event, I saw his report go in this

11 month, and it looks to me like I'm eternally indebted to him

12 for the time he has spent with regard to this. So I share your

13 gratitude to him for what he's been able to accomplish. It's

14 no mean feat. And I know that it was difficult for the parties

15 to get to a resolution, but I congratulate everyone on doing

16 that.

17 Is there anything further, Mr. Milmoe?

18 MR. MILMOE: No, Your Honor. We would concur with

19 your request about permission to speak with the mediator. And

20 I think that was the only outstanding item.

21 THE COURT: Okay. My conversation would be limited to

22 the one issue, by the way; I'm not going to get into any of the

23 confidential discussions that the parties had with the

24 mediator.

25 Is there any other party that wishes to be heard in

Case 19-34574-KRH Doc 1382 Filed 06/06/22 Entered 06/06/22 14:03:26 Desc Main

Document Page 46 of 144

Case 20-03142-KRH Doc 266 Filed 06/28/22 Entered 06/28/22 21:44:57 Desc Main

Document Page 12 of 17
eScribers, LLC | (973) 406-2250

operations@escribers.net | www.escribers.net

Colloquy 13

 1 connection with this matter?

 2 MS. PECORARO: Yes, Your Honor. Shannon Pecoraro for

 3 the United States Trustee's office. Can --

 4 THE COURT: Please don't object.

 5 MS. PECORARO: Your Honor, I can't speak as to whether

 6 we would object or not object. I'm just finding out about this

 7 deal about twenty minutes ago, and I have not had an

 8 opportunity to discuss it with my superiors. So I just wanted

 9 to put on the record that we reserve any and all rights until

10 we can actually see the terms of the deal.

11 THE COURT: I understand. Thank you very much for

12 that. I do appreciate it.

13 Does any other party wish to be heard?

14 All right, so Ms. Morabito, I think you quite

15 accurately figured out that my docket is pretty clear for those

16 two weeks that we had previously set aside. So I'm sure that

17 you can get a date from my courtroom deputy. I'm loathe to

18 give dates out my own self because I always screw it up. So if

19 you would, please make arrangements with Ms. Gary, and get a

20 date, and I'll make sure that she understands she can give you

21 whatever date is most convenient for the parties during that

22 time slot that we had otherwise set aside so that we can give

23 the proper notice to all of the creditors in the case.

24 Is there any other business we need to take up in this

25 matter today?

Case 19-34574-KRH Doc 1382 Filed 06/06/22 Entered 06/06/22 14:03:26 Desc Main

Document Page 47 of 144

Case 20-03142-KRH Doc 266 Filed 06/28/22 Entered 06/28/22 21:44:57 Desc Main

Document Page 13 of 17
eScribers, LLC | (973) 406-2250

operations@escribers.net | www.escribers.net

Colloquy 14

 1 MS. MORABITO: There's not, Your Honor, and I just

 2 want to conclude again with thank you. I know this has not

 3 been an easy case. It's gone on for a long period of time.

 4 The Court is certainly, in addition to Judge Santoro, who did

 5 an extraordinary job -- sometimes when the judicial branch

 6 pushes the parties the way in which you all did, we get to a

 7 resolution that I guess nobody's thrilled with, but I guess

 8 that means it's a good settlement. So again, we are very

 9 appreciative of the efforts. Judge Santoro put in weekends and

10 late nights and his law clerk. Unfortunately, he's gone to

11 another firm, but his law clerk, Jake Lange (ph.), was

12 exceptional as well. So thank you, Your Honor again.

13 And thank you to the defendants. I know this has been

14 a difficult case for all of us, but I do appreciate everybody

15 coming together to work at the end, including Mr. Mysliwiec --

16 and I'm sure I said your name incorrectly -- but we do -- the

17 trustee does appreciate everybody's efforts. So we have

18 nothing further, Your Honor, and thank you.

19 THE COURT: All right. Thank you, all. I do

20 appreciate it. You know as they say, the devil's in the

21 detail. So go and get this documented and such. I'm sure that

22 Chief Judge Santoro is not going to leave you in the wilderness

23 on that front and will give you some guidance with regard to

24 that as well, if you need help. And he is extremely

25 experienced.

Case 19-34574-KRH Doc 1382 Filed 06/06/22 Entered 06/06/22 14:03:26 Desc Main

Document Page 48 of 144

Case 20-03142-KRH Doc 266 Filed 06/28/22 Entered 06/28/22 21:44:57 Desc Main

Document Page 14 of 17
eScribers, LLC | (973) 406-2250

operations@escribers.net | www.escribers.net

Colloquy 15

 1 It's amazing, you know we were classmates together at

 2 William & Mary. I've known him for a long time. I've

 3 litigated many cases with him, and we've entered into many

 4 settlements. I know how he thinks and how he proceeds, and I

 5 think he knows how I think and how I would have proceeded. I

 6 think you've reached a good settlement.

 7 MS. MORABITO: Thank you, Your Honor.

 8 MR. BARGER: Thank you, Judge.

 9 THE COURT: All right.

10 THE CLERK: Your Honor?

11 THE COURT: Yes?

12 THE CLERK: Your Honor. What about items 2 and 3 on

13 today's docket?

14 THE COURT: Are we continuing everything, Ms.

15 Morabito?

16 MS. MORABITO: I mean, it was the motion to amend,

17 yes, and the motion to seal, so I think we should continue

18 those subject to the execution of the settlement just in case.

19 THE COURT: Okay.

20 MR. BARGER: That's fine, Your Honor.

21 THE COURT: Okay. Everything would just be continued

22 to the date that we select for approval of the settlement, and

23 hopefully we can get this across the finish line completely,

24 but it sounds like we're there.

25 MS. MORABITO: Thank you, Ms. Gary. Thank you, Your

Case 19-34574-KRH Doc 1382 Filed 06/06/22 Entered 06/06/22 14:03:26 Desc Main

Document Page 49 of 144

Case 20-03142-KRH Doc 266 Filed 06/28/22 Entered 06/28/22 21:44:57 Desc Main

Document Page 15 of 17
eScribers, LLC | (973) 406-2250

operations@escribers.net | www.escribers.net

Colloquy 16

 1 Honor.

 2 THE COURT: Thank you, all. We will be in recess.

 3 THE COURT OFFICER: The Court is now in recess.

 4 (Whereupon these proceedings were concluded at 11:43 AM)

 5

 6

 7

 8

 9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Case 19-34574-KRH Doc 1382 Filed 06/06/22 Entered 06/06/22 14:03:26 Desc Main

Document Page 50 of 144

Case 20-03142-KRH Doc 266 Filed 06/28/22 Entered 06/28/22 21:44:57 Desc Main

Document Page 16 of 17
eScribers, LLC | (973) 406-2250

operations@escribers.net | www.escribers.net

17

 1 C E R T I F I C A T I O N

 2

 3 I, Ashley Bennett, the court-approved transcriber, do

 4 hereby certify the foregoing is a true and correct transcript

 5 from the official electronic sound recording of the proceedings

 6 in the above-entitled matter.

 7

 8

 9 April 22, 2022

10 ______________________________ ____________________ 

11 ASHLEY BENNETT DATE

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Case 19-34574-KRH Doc 1382 Filed 06/06/22 Entered 06/06/22 14:03:26 Desc Main

Document Page 51 of 144

Case 20-03142-KRH Doc 266 Filed 06/28/22 Entered 06/28/22 21:44:57 Desc Main

Document Page 17 of 17