UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF 

TEXAS, DALLAS DIVISION 

In Re: Highland Capital Management, L.P. § Case No. 19-34054-SGJ-11 

The Charitable DAF Fund LP § 

 Appellant § 22-03052 

vs. § 

Highland Capital Management, L.P. § 

 Appellee § 3:22-CV-02280-S

[43] Order granting amended motion to dismiss adversary proceeding with prejudice (related 

document # 19) Entered on 9/30/2022 

APPELLANT RECORD 

VOLUME 5 

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(;+,%,7%

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IN THE UNITED STATES BANKRUPTCY COURT 

FOR THE NORTHERN DISTRICT OF TEXAS 

DALLAS DIVISION 

 ) Case No. 19-34054-sgj-11

In Re: ) Chapter 11 

 ) 

HIGHLAND CAPITAL ) Dallas, Texas 

MANAGEMENT, L.P., ) Monday, February 8, 2021 

 ) 9:00 a.m. Docket 

 Debtor. ) 

 ) BENCH RULING ON CONFIRMATION 

 ) HEARING [1808] AND AGREED 

 ) MOTION TO ASSUME [1624] 

 ) 

TRANSCRIPT OF PROCEEDINGS 

BEFORE THE HONORABLE STACEY G.C. JERNIGAN, 

UNITED STATES BANKRUPTCY JUDGE. 

WEBEX APPEARANCES: 

For the Debtor: Jeffrey Nathan Pomerantz 

 PACHULSKI STANG ZIEHL & JONES, LLP 

 10100 Santa Monica Blvd., 

 13th Floor 

 Los Angeles, CA 90067-4003 

 (310) 277-6910 

For the Official Committee Matthew A. Clemente 

of Unsecured Creditors: SIDLEY AUSTIN, LLP 

 One South Dearborn Street 

 Chicago, IL 60603 

 (312) 853-7539 

For James Dondero: D. Michael Lynn 

 John Y. Bonds, III 

 Bryan C. Assink 

 BONDS ELLIS EPPICH SCHAFER 

 JONES, LLP 

 420 Throckmorton Street, 

 Suite 1000 

 Fort Worth, TX 76102 

 (817) 405-6900 

For Get Good Trust and Douglas S. Draper 

Dugaboy Investment Trust: HELLER, DRAPER & HORN, LLC 

 650 Poydras Street, Suite 2500 

 New Orleans, LA 70130 

 (504) 299-3300 

(;+,%,7 %

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000675

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APPEARANCES, cont'd.: 

For Certain Funds and Davor Rukavina 

Advisors: MUNSCH, HARDT, KOPF & HARR 

 500 N. Akard Street, Suite 3800 

 Dallas, TX 75201-6659 

 (214) 855-7587 

For Certain Funds and A. Lee Hogewood, III 

Advisors: K&L GATES, LLP 

 4350 Lassiter at North Hills 

 Avenue, Suite 300 

 Raleigh, NC 27609 

 (919) 743-7306 

Recorded by: Michael F. Edmond, Sr. 

 UNITED STATES BANKRUPTCY COURT 

 1100 Commerce Street, 12th Floor 

 Dallas, TX 75242 

 (214) 753-2062 

Transcribed by: Kathy Rehling 

 311 Paradise Cove 

 Shady Shores, TX 76208 

 (972) 786-3063 

Proceedings recorded by electronic sound recording; 

transcript produced by transcription service.

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000676

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DALLAS, TEXAS - FEBRUARY 8, 2021 - 9:08 A.M. 

 THE COURT: Please be seated. 

 (Beeping.) 

 THE COURT: Someone needs to turn off their whatever. 

 All right. Good morning. This is Judge Jernigan, and we 

have scheduled today a bench ruling regarding the Debtor's 

plan that we had a confirmation trial on last week. This is 

Highland Capital Management, LP, Case No. 19-34054. 

 Let me first make sure we've got Debtor's counsel on the 

line. Do we have -- 

 MR. POMERANTZ: Yes. 

 THE COURT: -- Mr. Pomerantz? 

 MR. POMERANTZ: Yes, Your Honor. Good morning, Your 

Honor. Jeff Pomerantz; Pachulski Stang Ziehl & Jones; on 

behalf of the Debtor. 

 THE COURT: Okay. Good morning. Do we have the 

Creditors' Committee on the phone? 

 MR. CLEMENTE: Good morning, Your Honor. Matthew 

Clemente of Sidley Austin on behalf of the Creditors' 

Committee. 

 THE COURT: Good morning. All right. We had various 

Objectors. Do we have Mr. Dondero's counsel on the phone? 

 MR. LYNN: Yes, Your Honor. Michael Lynn, together 

with John Bonds and Bryan Assink, for Jim Dondero. 

 THE COURT: Good morning. For the Trusts, the 

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Dugaboy and Get Good Trusts, do we have Mr. Draper? 

 MR. DRAPER: Yes. Douglas Draper is on the line, 

Your Honor. 

 THE COURT: Good morning. Now, for what I'll call 

the Funds and Advisor Objectors, do we have Mr. Rukavina and 

your crew on the line? 

 MR. RUKAVINA: Davor Rukavina. And Lee Hogewood is 

also on the line. 

 THE COURT: All right. Good morning to you. All 

right. And we had objections pending from the U.S. Trustee as 

well. Do we have the U.S. Trustee on the line? 

 (No response.) 

 THE COURT: All right. If you're appearing, you're 

on mute. We're not hearing you. 

 All right. Well, we have lots of other folks. I don't 

mean to be neglectful of them, but we're going to get on with 

the ruling this morning. This is going to take a while. This 

is a complex matter, so it should take a while. 

 All right. Before the Court, of course, for consideration 

is the Debtor's Fifth Amended Plan, first filed on November 

24, 2020, as later modified on or around January 22, 2021, 

with more amendments filed on or around February 1, 2021. The 

Court will hereinafter refer to this as the "Plan." 

 The parties refer to the Plan as a monetization plan 

because it involves the gradual wind-down of the Debtor's 

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assets and certain of its funds over time, with the 

Reorganized Debtor continuing to manage certain other funds 

for a while, under strict governance and monitoring, and a 

Claimants Trust will receive the proceeds of that process, 

with the creditors receiving an interest in that trust. There 

is also anticipated to be Litigation Sub-Trust established for 

the purpose of pursuing certain avoidance or other causes of 

action for the benefit of creditors. 

 The recovery for general unsecured creditors is estimated 

now at 71 percent. 

 The Plan was accepted by 99.8 percent of the dollar amount 

of voting creditors in Class 8, the general unsecured class, 

but as to numerosity, a majority of the class of general 

unsecured creditors did not vote in favor of the plan. 

Specifically, 27 claimants voted no and 17 claimants voted 

yes. All but one of the rejecting ballots were cast by 

employees who, according to the Debtor, are unlikely to have 

allowed claims because they are asserted for bonuses or other 

compensation that will not become due. 

 Meanwhile, in a convenience class, Class 7, of general 

unsecured claims under one million dollars, one hundred 

percent of the 16 claimants who chose to vote in that class 

chose to accept the Plan. 

 Because of the rejecting votes in Class 8, and because of 

certain objections to the Plan, the Court heard two full days 

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of evidence, considering testimony from five witnesses and 

thousands of pages of documentary evidence, in considering 

whether to confirm the Plan pursuant to Sections 1129(a) and 

(b) of the Bankruptcy Code. 

 The Court finds and concludes that the Plan meets all of 

the relevant requirements of Sections 1123, 1124, and 1129 of 

the Code, and other applicable provisions of the Bankruptcy 

Code, but is issuing this detailed ruling to address certain 

pending objections to the Plan, including but not limited to 

objections regarding certain Exculpations, Releases, Plan 

Injunctions, and Gatekeeping Provisions of the Plan. 

 The Court reserves the right to amend or supplement this 

oral ruling in more detailed findings of fact, conclusions of 

law, and an Order. 

 First, by way of introduction, this case is not your 

garden-variety Chapter 11 case. Highland Capital Management, 

LP is a multibillion dollar global investment advisor, 

registered with the SEC pursuant to the Investment Advisers 

Act of 1940. It was founded in 1993 by James Dondero and Mark 

Okada. Mr. Okada resigned from his role with Highland prior 

to the bankruptcy case being filed. Mr. Dondero was in 

control of the Debtor as of the day it filed bankruptcy, but 

agreed to relinquish control of it on or about January 9, 

2020, pursuant to an agreement reached with the Official 

Unsecured Creditors' Committee, which will be described later. 

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000680

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 Although Mr. Dondero remained on as an unpaid employee and 

portfolio manager with the Debtor after January 9, 2020, his 

employment with the Debtor terminated on October 9, 2020. Mr. 

Dondero continues to work for and essentially control numerous 

nondebtor companies in the Highland complex of companies. 

 The Debtor is headquartered in Dallas, Texas. As of the 

October 2019 petition date, the Debtor employed approximately 

76 employees. 

 Pursuant to various contractual arrangements, the Debtor 

provides money management and advisory services for billions 

of dollars of assets, including CLOs and other investments. 

Some of these assets are managed pursuant to shared services 

agreements with a variety of affiliated entities, including 

other affiliated registered investment advisors. In fact, 

there are approximately 2,000 entities in the Byzantine 

complex of companies under the Highland umbrella. 

 None of these affiliates of Highland filed for Chapter 11 

protection. Most, but not all, of these entities are not 

subsidiaries, direct or indirect, of Highland. And certain 

parties in the case preferred not to use the term "affiliates" 

when referring to them. Thus, the Court will frequently refer 

loosely to the so-called, in air quotes, "Highland complex of 

companies" when referring to the Highland enterprise. That's 

a term many of the lawyers in the case use. 

 Many of the companies are offshore entities, organized in 

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such faraway jurisdictions as the Cayman Islands and Guernsey. 

 The Debtor is privately owned 99.5 percent by an entity 

called Hunter Mountain Investment Trust; 0.1866 percent by the 

Dugaboy Investment Trust, a trust created to manage the assets 

of Mr. Dondero and his family; 0.0627 percent by Mark Okada, 

personally and through family trusts; and 0.25 percent by 

Strand Advisors, Inc., the general partner. 

 The Debtor's primary means of generating revenue has 

historically been from fees collected for the management and 

advisory services provided to funds that it manages, plus fees 

generated for services provided to its affiliates. 

 For additional liquidity, the Debtor, prior to the 

petition date, would sell liquid securities in the ordinary 

course, primarily through a brokerage account at Jefferies, 

LLC. The Debtor would also, from time to time, sell assets at 

nondebtor subsidiaries and distribute those proceeds to the 

Debtor in the ordinary course of business. 

 The Debtor's current CEO, James Seery, credibly testified 

that the Debtor was "run at a deficient for a long time and 

then would sell assets or defer employee compensation to cover 

its deficits." This Court cannot help but wonder if that was 

necessitated because of enormous litigation fees and expenses 

that Highland was constantly incurring due to its culture of 

litigation, as further addressed hereafter. 

 Highland and this case are not garden-variety for so many 

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reasons. One is the creditor constituency. Highland did not 

file bankruptcy because of some of the typical reasons a large 

company files Chapter 11. For example, it did not have a 

large asset-based secured lender with whom it was in default. 

It only had relatively insignificant secured indebtedness 

owing to Jefferies, with whom it had a brokerage account, and 

one other entity called Frontier State Bank. 

 Highland did not have problems with trade vendors or 

landlords. It did not suffer any type of catastrophic 

business calamity. In fact, it filed Chapter 11 six months 

before the COVID-19 pandemic was declared. The Debtor filed 

Chapter 11 due to a myriad of massive unrelated business 

litigation claims that it was facing, many of which had 

finally become liquidated or were about to become liquidated 

after a decade or more of contentious litigation in multiple 

fora all over the world. 

 The Unsecured Creditors' Committee in this case has 

referred to the Debtor under its former chief executive, Mr. 

Dondero, as a serial litigator. This Court agrees with that 

description. By way of example, the members of the Creditors' 

Committee and their history of litigation with the Debtor and 

others in the Highland complex are as follows: 

 First, the Redeemer Committee of the Highland Crusader 

Fund, which I'll call the Redeemer Committee. This Creditors' 

Committee member obtained an arbitration award against the 

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Debtor of more than $190 million, inclusive of interest, 

approximately five months before the petition date from a 

panel of the American Arbitration Association. It was on the 

verge of having that award confirmed by the Delaware Chancery 

Court immediately prior to the petition date, after years of 

disputes that started in late 2008 and included legal 

proceedings in Bermuda. This creditor's claim was settled 

during the bankruptcy case in the amount of approximately 

$137.7 million. The Court is omitting various details and 

aspects of that settlement. 

 The second Creditors' Committee member, Acis Capital 

Management, LP, which was formerly in the Highland complex of 

companies but was not affiliated with Highland as of the 

petition date. This UCC member and its now-owner, Josh Terry, 

were involved in litigation with Highland dating back to 2016. 

Acis was forced into an involuntary bankruptcy in the 

Bankruptcy Court for the Northern District of Texas, Dallas 

Division, by Josh Terry, who was a former Highland portfolio 

manager, in 2018 after Josh Terry obtained an approximately $8 

million arbitration award and judgment against Acis that was 

issued by a state court in Dallas County, Texas. Josh Terry 

was ultimately awarded the equity ownership of Acis by the 

Dallas Bankruptcy Court in the Acis bankruptcy case. 

 Acis subsequently asserted a multimillion dollar claim 

against Highland in the Dallas Bankruptcy Court for Highland's 

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alleged denuding of Acis in fraud of its creditors, primarily 

Josh Terry. 

 The litigation involving Acis and Mr. Terry dates back to 

mid-2016, and has continued on, with numerous appeals of 

bankruptcy court orders, including one appeal still pending at 

the United States Court of Appeals for the Fifth Circuit. 

 There was also litigation involving Josh Terry and Acis in 

the Royal Court of the Island of Guernsey and in a court in 

New York. 

 The Acis claim was settled during this bankruptcy case in 

court-ordered mediation for approximately $23 million. Other 

aspects and details of this settlement are being omitted. 

 Now, the third Creditors' Committee member, UBS 

Securities. It's a creditor who filed a proof of claim in the 

amount of $1,039,000,000 in the Highland case. Yes, over one 

billion dollars. The UBS claim was based on the amount of a 

judgment that UBS received from a New York state court in 2020 

after a multi-week bench trial which had occurred many months 

earlier on a breach of contract claim against other entities 

in the Highland complex. UBS alleged that the Debtor should 

be liable for the judgment. The UBS litigation related to 

activities that occurred in 2008. The litigation involving 

UBS and Highland and its affiliates was pending for more than 

a decade, there having been numerous interlocutory appeals 

during its history. 

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 The Debtor and UBS recently announced a settlement of the 

UBS claim, which came a few months after court-ordered 

mediation. The settlement is in the amount of $50 million as 

a general unsecured claim, $25 million as a subordinated 

claim, and $18 million of cash coming from a nondebtor entity 

in the Highland complex known as Multistrat. Other aspects of 

this settlement are being omitted. 

 The fourth and last Creditors' Committee member is Meta-e 

Discovery. It is a vendor who happened to supply litigation 

and discovery-related services to the Debtor over the years. 

It had unpaid invoices on the petition date of more than 

$779,000. 

 It is fair to say that the members of the Creditors' 

Committee in this case all have wills of steel. They fought 

hard before and during the bankruptcy case. The members of 

the Creditors' Committee are highly sophisticated and have had 

highly sophisticated professionals representing them. They 

have represented their constituency in this case as 

fiduciaries extremely well. 

 In addition to these Creditors Committee members, who were 

all embroiled in years of litigation with Highland and its 

affiliates in various ways, the Debtor has been in litigation 

with Patrick Daugherty, a former limited partner and employee 

of Highland, for many years in both Delaware and Texas state 

courts. Patrick Daugherty filed a proof of claim for "at 

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least $37.4 million" relating to alleged breached employmentrelated agreements and for the tort of defamation arising from 

a 2017 press release posted by the Debtor. 

 The Debtor and Patrick Daugherty recently announced a 

settlement of the Patrick Daugherty claim in the amount of 

$750,000 cash on the effective date, an $8.25 million general 

unsecured claim, and a $2.75 million subordinated claim. 

Other aspects and details of this settlement are being 

omitted. 

 Additionally, an entity known as HarbourVest, who invested 

more than $70 million with an entity in the Highland complex, 

asserted a $300 million proof of claim against Highland, 

alleging, among other things, fraud and RICO violations. The 

HarbourVest claim was settled during the bankruptcy case for a 

$45 million general unsecured claim and a $35 million junior 

claim. 

 Other than these claims just described, most of the other 

claims in this case are claims asserted against the Debtor by 

other entities in the Highland complex, most of which entities 

the Court finds to be controlled by Mr. Dondero; claims of 

employees who believe that they are entitled to large bonuses 

or other types of deferred compensation; and claims of 

numerous law firms that did work for Highland and were unpaid 

for amounts due to them on the petition date. 

 Yet another reason this is not your garden-variety Chapter 

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11 case is its postpetition corporate governance structure. 

Highland filed bankruptcy October 16, 2019. Contentiousness 

with the Creditors' Committee began immediately, with first 

the Committee's request for a change of venue from Delaware to 

Dallas, and then a desire by the Committee and the U.S. 

Trustee for a Chapter 11 or 7 trustee to be appointed due to 

concerns over and distrust of Mr. Dondero and his numerous 

conflicts of interest and alleged mismanagement or worse. 

 After many weeks of the threat of a trustee lingering, the 

Debtor and the Creditors' Committee negotiated and the Court 

approved a corporate governance settlement on January 9, 2020 

that resulted in Mr. Dondero no longer being an officer or 

director of the Debtor or of its general partner, Strand. 

 As part of the court-approved settlement, three eminentlyqualified Independent Directors were chosen by the Creditors' 

Committee and engaged to lead Highland through its Chapter 11 

case. They were James Seery, John Dubel, and Retired 

Bankruptcy Judge Russell Nelms. They were technically the 

Independent Directors of Strand, the general partner of the 

Debtor. Mr. Dondero had previously been the sole director of 

Strand, and thus the sole person in ultimate control of the 

Debtor. 

 The three independent board members' resumes are in 

evidence. James Seery eventually was named CEO of the Debtor. 

Suffice it to say that this changed the entire trajectory of 

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the case. This saved the Debtor from a trustee. The Court 

trusted the new directors. The Creditors' Committee trusted 

them. They were the right solution at the right time. 

 Because of the unique character of the Debtor's business, 

the Court believed this solution was far better than a 

conventional Chapter 7 or 11 trustee. Mr. Seery, in 

particular, knew and had vast experience at prominent firms 

with high-yield and distressed investing similar to the 

Debtor's business. Mr. Dubel had 40 years of experience 

restructuring large, complex businesses and serving on their 

boards of directors in this context. And Retired Judge Nelms 

had not only vast bankruptcy experience but seemed 

particularly well-suited to help the Debtor maneuver through 

conflicts and ethical quandaries. 

 By way of comparison, in the Chapter 11 case of Acis, the 

former affiliate of Highland that this Court presided over two 

or three years ago, which company was much smaller in size and 

scope than Highland, managing only five or six CLOs, a Chapter 

11 trustee was elected by the creditors that was not on the 

normal rotation panel for trustees in this district, but 

rather was a nationally-known bankruptcy attorney with more 

than 45 years of large Chapter 11 case experience. This 

Chapter 11 trustee performed valiantly, but was sued by 

entities in the Highland complex shortly after he was 

appointed, which this Court had to address. The Acis trustee 

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could not get Highland and its affiliates to agree to any 

actions taken in the case, and he finally obtained 

confirmation of a plan over Highland and its affiliates' 

objections in his fourth attempted plan, which confirmation 

then was promptly appealed by Highland and its affiliates. 

 Suffice it to say it was not easy to get such highlyqualified persons to serve as independent board members and 

CEO of this Debtor. They were stepping into a morass of 

problems. Naturally, they were worried about getting sued, no 

matter how defensible their efforts might be, given the 

litigation culture that enveloped Highland historically. It 

seemed as though everything always ended in litigation at 

Highland. 

 The Court heard credible testimony that none of them would 

have taken on the role of Independent Director without a good 

D&O insurance policy protecting them, without indemnification 

from Strand, guaranteed by the Debtor; without exculpation for 

mere negligence claims; and without a gatekeeper provision, 

such that the Independent Directors could not be sued without 

the bankruptcy court, as a gatekeeper, giving a potential 

plaintiff permission to sue. 

 With regard to the gatekeeper provision, this was 

precisely analogous to what bankruptcy trustees have pursuant 

to the so-called "Barton Doctrine," which was first 

articulated in an old U.S. Supreme Court case. 

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 The Bankruptcy Court approved all of these protections in 

a January 9, 2020 order. No one appealed that order. And Mr. 

Dondero signed the settlement agreement that was approved by 

that order. 

 An interesting fact about the D&O policy came out in 

credible testimony at the confirmation hearing. Mr. Dubel and 

an insurance broker from Aon, named Marc Tauber, both credibly 

testified that the gatekeeper provision was needed because of 

the so-called, and I quote, "Dondero Exclusion" in the 

insurance marketplace. 

 Specifically, the D&O insurers in the marketplace did not 

want to cover litigation claims that might be brought against 

the Independent Directors by Mr. Dondero because the 

marketplace of D&O insurers are aware of Mr. Dondero's 

litigiousness. The insurers would not have issued a D&O 

policy to the Independent Directors without either the 

gatekeeping provision or a "Dondero Exclusion" being in the 

policy. 

 Thus, the gatekeeper provision was part of the January 9, 

2020 settlement. There was a sound business justification for 

it. It was reasonable and necessary. It was consistent with 

the Barton Doctrine in an extremely analogous situation -- 

i.e., the independent board members were analogous to a threeheaded trustee in this case, if you will. Mr. Dondero signed 

off on it. And, again, no one ever appealed the order 

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approving it. 

 The Court finds that, like the Creditors' Committee, the 

independent board members here have been resilient and 

unwavering in their efforts to get the enormous problems in 

this case solved. They seem to have at all times negotiated 

hard and with good faith. As noted previously, they changed 

the entire trajectory of this case. 

 Still another reason why this was not your garden-variety 

case was the mediation effort. In summer of 2020, roughly 

nine months into the Chapter 11 case, this Court ordered 

mediation among the Debtor, Acis, UBS, the Redeemer Committee, 

and Mr. Dondero. The Court selected co-mediators, since this 

seemed like such a Herculean task, especially during COVID-19, 

where people could not all be in the same room. Those comediators were Retired Bankruptcy Judge Allan Gropper from the 

Southern District of New York, who had a distinguished career 

presiding over complex Chapter 11 cases, and Ms. Sylvia Mayer, 

who likewise has had a distinguished career, first as a 

partner in a preeminent law firm working on complex Chapter 11 

cases, and subsequently as a mediator and arbitrator in 

Houston, Texas. 

 As noted earlier, the Acis claim was settled during the 

mediation, which seemed nothing short of a miracle to this 

Court, and the UBS claim was settled many months later, and 

this Court believes the groundwork for that ultimate 

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settlement was laid, or at least helped, through the 

mediation. And as earlier noted, other enormous claims have 

been settled during this case, including that of the Redeemer 

Committee, who, again, had asserted approximately or close to 

a $200 million claim; HarbourVest, who asserted a $300 million 

claim; and Patrick Daugherty, who asserted close to a $40 

million claim. 

 This Court cannot stress strongly enough that the 

resolution of these enormous claims and the acceptance of all 

of these creditors of the Plan that is now before the Court 

seems nothing short of a miracle. It was more than a year in 

the making. 

 Finally, a word about the current remaining Objectors to 

the Plan before the Court. Once again, the Court will use the 

phrase "not garden-variety." Originally, there were over one 

dozen objections filed to this Plan. The Debtor has made 

various amendments or modifications to the Plan to address 

some of these objections. The Court finds that none of these 

modifications require further solicitation, pursuant to 

Sections 1125, 1126, 1127 of the Code, or Bankruptcy Rule 

3019, because, among other things, they do not materially 

adversely change the treatment of the claims of any creditor 

or interest holder who has not accepted in writing the 

modifications. 

 Among other things, there were changes to the projections 

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that the Debtor filed shortly before the confirmation hearing 

that, among other things, show the estimated distribution to 

creditors and compare plan treatment to a likely disbursement 

in a Chapter 7. 

 These do not constitute a materially adverse change to the 

treatment of any creditors or interest holders. They merely 

update likely distributions based on claims that have now been 

settled, and they've otherwise incorporated more recent 

financial data. This happens often before confirmation 

hearings. The Court finds that it did not mislead or 

prejudice any creditors or interest holders, and certainly 

there was no need to resolicit the Plan. 

 The only Objectors to the Plan left at this time were Mr. 

Dondero and entities that the Court finds are controlled by 

him. The standing of these entities to object to the Plan 

exists, but the remoteness of their economic interest is 

noteworthy, and the Court questions the good faith of the 

Objectors. In fact, the Court has good reason to believe that 

these parties are not objecting to protect economic interests 

they have in the Debtor, but to be disruptors. 

 Mr. Dondero wants his company back. This is 

understandable. But it's not a good faith basis to lob 

objections to the Plan. The Court has slowed down 

confirmation multiple times on the current Plan and urged the 

parties to talk to Mr. Dondero. The parties represent that 

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they have, and the Court believes that they have. 

 Now, to be specific about the remoteness of the objectors' 

interests, the Court will address them each separately. 

First, Mr. Dondero has a pending objection. Mr. Dondero's 

only economic interest with regard to the Debtor at this point 

is an unliquidated indemnification claim. And based on 

everything this Court has heard, his indemnification claim 

will be highly questionable at this juncture. 

 Second, a joint objection has been filed by the Dugaboy 

Trust and the Get Good Trust. As for the Dugaboy Trust, it 

was created to manage the assets of Mr. Dondero and his 

family, and it owns a 0.1866 percent limited partnership 

interest in the Debtor. The Court is not clear what economic 

interest the Get Good Trust has, but it likewise seems to be 

related to Mr. Dondero, and it has been represented to the 

Court numerous times that the trustee is Mr. Dondero's college 

roommate. 

 Another group of Objectors that has joined together in one 

objection is what the Court will refer to as the Highland and 

NexPoint Advisors and Funds. The Court understands they 

assert disputed administrative expense claims against the 

estate. While the evidence presented was that they have 

independent board members that run these companies, the Court 

was not convinced of their independence from Mr. Dondero. 

None of the so-called independent board members of these 

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entities have ever testified before the Court. Moreover, they 

have all been engaged with the Highland complex for many 

years. 

 The witness who testified on these Objectors' behalves at 

confirmation, Mr. Jason Post, their chief compliance officer, 

resigned from Highland after more than twelve years in October 

2020, at the same time that Mr. Dondero resigned or was 

terminated by Highland. And a prior witness recently for 

these entities whose testimony was made part of the record at 

the confirmation hearing essentially testified that Mr. 

Dondero controlled these entities. 

 Finally, various NexBank entities objected to the Plan. 

The Court does not believe they have liquidated claims. Mr. 

Dondero appears to be in control of these entities as well. 

 To be clear, the Court has allowed all of these objectors 

to fully present arguments and evidence in opposition to 

confirmation, even though their economic interests in the 

Debtor appear to be extremely remote and the Court questions 

their good faith. Specifically on that latter point, the 

Court considers them all to be marching pursuant to the orders 

of Mr. Dondero. 

 In the recent past, Mr. Dondero has been subject to a TRO 

and preliminary injunction by the Bankruptcy Court for 

interfering with the current CEO's management of the Debtor in 

specific ways that were supported by evidence. Around the 

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time that this all came to light and the Court began setting 

hearings on the alleged interference, Mr. Dondero's company 

phone supplied to him by Highland, which he had been asked to 

turn in, mysteriously went missing. The Court merely mentions 

this in this context as one of many reasons that the Court has 

to question the good faith of Mr. Dondero and his affiliated 

objectors. 

 The only other pending objection besides these objections 

of the Dondero and Dondero-controlled entities is an objection 

of the United States Trustee pertaining to the release, 

exculpation, and injunction provisions in the Plan. 

 In juxtaposition to these pending objections, the Court 

notes that the Debtor has resolved earlier-filed objections to 

the Plan filed by the IRS, Patrick Daugherty, CLO Holdco, 

Ltd., numerous local taxing authorities, and certain current 

and former senior-level employees of the Debtor. 

 With that rather detailed factual background addressed, 

because certainly context matters here, the Court now 

addresses what it considers the only serious objections raised 

in connection with confirmation. Specifically, the Plan 

contain certain releases, exculpation, plan injunctions, and a 

gatekeeper provision which are obviously not fully consensual, 

since there are objections. Certainly, these provisions are 

mostly consensual when you consider that parties with hundreds 

of millions of dollars' worth of legitimate claims have not 

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objected to them. 

 First, a word about plan releases generally, since the 

Objectors at times seem to gloss over, in this Court's view, 

relevant distinctions, and seem to refer to the plan releases 

in this Plan and the exculpations and the plan injunctions all 

as impermissible third-party releases, when, in fact, they are 

not, per se. 

 It has, without a doubt, become quite commonplace in 

complex Chapter 11 bankruptcy cases to have three categories 

of releases in plans. These three types are as follows. 

 First, Debtor Releases. A debtor release involves a 

release by the debtor and its bankruptcy estate of claims 

against nondebtor third-parties. For example, a release may 

be granted in favor of creditors, directors, officers, 

employees, professionals who participated in the bankruptcy 

process. This is the least-controversial type of release 

because the debtor is extinguishing its own claims, which are 

property of the estate, that a debtor has authority to utilize 

or not, pursuant to Sections 541 and 363 of the Bankruptcy 

Code. 

 Authority for a debtor release pursuant to a plan arises 

out of Section 1123(b)(3)(A), which indicates that a plan may 

provide for "the settlement or adjustment of any claim or 

interest belonging to the debtor or to the estate." 

 In this context, it would appear that the only analysis 

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required is to determine whether the release or settlement of 

the claim is an exercise of reasonable business judgment on 

that part of the debtor, is it fair and equitable, is it in 

the best interest of the estate, given all the relevant facts 

and circumstances? Also relevant is whether there's 

consideration given of some sort by the releasees. 

 Now, the second type of very commonplace Chapter 11 plan 

release is an exculpation. Chapter 11 plans also very often 

have these exculpation provisions, and they're something much 

narrower in scope and time than a full-fledged release. An 

exculpation provision is more like a shield for a certain 

subset of key actors in the case for their acts during and in 

connection with the case, which acts may have been merely 

negligent. 

 Specifically, a plan may absolve certain actors -- usually 

estate fiduciaries -- such as an Official Unsecured Creditors' 

Committee and its members, Committee professionals, sometimes 

Debtor professionals, senior management, officers and 

directors of the Debtor, from any liability for postpetition 

negligent conduct -- i.e., conduct which occurred during the 

administration of the Chapter 11 case and in the negotiation, 

drafting, and implementation of a plan. An exculpation 

provision typically excludes gross negligence and willful 

misconduct. It is usually worded in a passive voice, so it 

may seem a little unclear as to whether it is actually a 

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release and by whom. 

 In any event, the rationale is that parties who actively 

participate in a court-approved process -- often, courtapproved transactions by court order -- should receive 

protection for their work. Otherwise, who would want to work 

in such a messy, contentious situation, only to be sued for 

alleged negligence for less-than-perfect end results? 

 Chapter 11 end results are not always pretty. One could 

argue that these exculpation provisions, though, are much ado 

about nothing. Why? For one thing, again, the shield is only 

as to negligent conduct. There is no shield for other 

problematic conduct, such as gross negligence or willful 

misconduct. 

 Second, in many situations, any claims or causes of action 

that might arise will belong to the Debtor or its estate. 

Thus, they would already be released pursuant to a debtor 

release. 

 Additionally, there is case law stating that, where a 

claim is brought against an estate professional whose fees 

have already been approved in a final fee application, any 

claims are barred by res judicata. Thus, exculpated 

professionals would only have potential exposure for a very 

short window of time, until final fee applications. 

 Additionally, certain case law in Texas makes clear that 

an attorney generally does not owe any duties to persons other 

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than his own client. 

 All of this suggests that the shield of a typical 

exculpation provision may rarely become useful or needed. 

 Moving now to the third type of release, a true thirdparty release, Chapter 11 plans also sometimes contain thirdparty releases. A true third-party release involves the 

release of claims held by nondebtor third parties against 

other nondebtor third parties, and there is often no 

limitation on the scope and time of the claims released. 

 This is the most heavily scrutinized of the three types of 

plan releases. Much of the case authority focuses on whether 

a third-party release is consensual or not in analyzing their 

propriety and/or enforceability. 

 In Highland, there are no third-party releases. Rather, 

there are debtor releases and exculpations. There also happen 

to be plan injunctions and gatekeeper provisions that have 

been challenged. The Objectors argue that these provisions 

violate the Fifth Circuit's opinion in Pacific Lumber or are 

otherwise beyond the jurisdiction or authority of the 

bankruptcy court. These arguments are now addressed. 

 First, the debtor release is found at Article IX.D of the 

Plan. The language, in pertinent part, reads as follows. "On 

and after the effective date, each Released Party is deemed to 

be hereby conclusively, absolutely, unconditionally, 

irrevocably, and forever released and discharged by the Debtor 

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and the Estate, in each case on behalf of themselves and their 

respective successors, assigns, and representatives, including 

but not limited to the Claimant Trust and the Litigation SubTrust, from any and all causes of action, including any 

derivative claims, asserted on behalf of the Debtor, whether 

known or unknown, foreseen or unforeseen, matured or 

unmatured, existing or hereafter arising, in law, equity, 

contract, tort, or otherwise, that the Debtor or the Estate 

would have been legally entitled to assert in their own right, 

whether individually or collectively, or on behalf of the 

holder of any claim against, or interest in, a debtor or other 

person." 

 There are certain exceptions discussed, and then Released 

Parties are defined at Definition 113 of the Plan collectively 

as: the Independent Directors; Strand, solely from the date 

of the appointment of the Independent Directors through the 

effective date; the CEO/CRO; the Committee, the members of the 

Committee, in their official capacities; the professionals 

retained by the Debtor and the Committee in the Chapter 11 

case; and the employees. This is a defined term in the Plan 

Supplement and does not include certain employees. 

 To be clear, these are not third-party releases such as 

addressed in the Pacific Lumber case. These are the Debtor's 

and/or the bankruptcy estate's causes of action that are 

proposed to be released. Releases by a debtor are 

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discretionary and can be provided by a debtor to persons who 

have provided consideration to the debtor and the estate. 

Section 1123(b)(3)(A) of the Bankruptcy Code permits this. 

 The evidence here supported the notion that these releases 

are a quid pro quo for the Released Parties' significant 

contributions to a highly complex and contentious 

restructuring. The Debtor is releasing its own claims. Some 

of the Released Parties would have indemnification rights 

against the Debtor. And the Debtor's CEO, James Seery, 

credibly testified that he does not believe any claims exist 

as to the Released Parties. The Court approves the Debtor 

releases and overrules the objections to them. 

 Next, the exculpations appear at Article IX.C of the Plan 

and provide as follows: Subject in all respects to Article 

XII.D of the Plan, to the maximum extent permitted by 

applicable law, no Exculpated Party will have or incur, and 

each Exculpated Party is hereby exculpated from, any claim, 

obligation, suit, judgment, damage, demand, debt, right, cause 

of action, remedy, loss, and liability for conduct occurring 

on or after the petition date in connection with or arising 

out of the filing and administration of the Chapter 11 case, 

the negotiation and pursuit of a disclosure statement, the 

Plan, or the solicitation of votes for or confirmation of the 

Plan, the funding or consummation of the Plan, or any related 

agreements, instruments, et cetera, et cetera, whether or not 

Case: 21-90011 Document: 00515803515 Page: 214 Date Filed: 03/31/2021

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000703

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such Plan distributions occur following the effective date, 

the implementation of the Plan, and any negotiation, 

transactions, and documentation in connection with the 

foregoing clauses, provided, however, the foregoing will not 

apply to any acts or omissions of any Exculpated Party arising 

out of or related to acts or omissions that constitute bad 

faith, fraud, gross negligence, criminal misconduct, or 

willful misconduct; or Strand or any employee other than with 

respect to actions taken by such entities from the date of 

appointment of the Independent Directors through the effective 

date. 

 Exculpated Parties are later defined at Section -- or, 

earlier defined at Section 62 of the Plan, Definition No. 62 

of the Plan, as later limited by the Debtor, as announced in 

the confirmation hearing. And so these are the Exculpated 

Parties: the Debtor and its successors and assigns; the 

employees, certain employees, as defined; Strand; the 

Independent Directors; the Committee, the members of the 

Committee, in their official capacities; the professionals 

retained by the Debtor and the Committee in the Chapter 11 

case; the CEO and CRO; and the related persons as to each of 

these parties listed in Part (iv) through (viii) above; 

provided, for the avoidance of doubt, and it goes on to say 

Dondero, Mark Okada, and various others aren't Exculpated 

Parties. 

Case: 21-90011 Document: 00515803515 Page: 215 Date Filed: 03/31/2021

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000704

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 Now, as earlier mentioned, the Objectors argue that 

Pacific Lumber, 584 F.3d 229, a Fifth Circuit case from 2009, 

categorically rejects the permissibility of nonconsensual 

exculpations as well as third-party releases in a Chapter 11 

plan. So the Court is going to take a deep dive into that 

assertion. 

 In Pacific Lumber, the Fifth Circuit reviewed on appeal 

numerous challenges to a confirmed plan of affiliated debtors 

known as Palco and Scopac and four subsidiaries. The debtor 

Palco owned and operated the sawmill, a power plant, and even 

a town called Scotia, California. The debtor Scopac owned 

timberlands. A creditor, a secured creditor called Marathon 

had a claim against Palco's assets. Marathon estimated 

Palco's assets were worth $110 million. Its claim was $160 

million. Meanwhile, other parties had large secured claims 

against the other debtor, Scopac. 

 The plan that the bankruptcy court confirmed, which was on 

appeal to the Fifth Circuit, was filed by both the secured 

creditor Marathon and a joint plan proponent called MRC. MRC 

was a competitor of the debtor Palco. The Marathon/MRC plan 

proposed to dissolve all the debtors, cancel intercompany 

debts, and create two new entities, Townco and Newco. Almost 

all of the debtor Palco's assets, including the town of 

Scotia, California, would be transferred to Townco. The 

timberlands and other assets, including the sawmill, would be 

Case: 21-90011 Document: 00515803515 Page: 216 Date Filed: 03/31/2021

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000705

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placed in Newco. 

 Marathon and MRC proposed to contribute $580 million to 

Newco to pay claims against Scopac. And Marathon would 

convert its secured claim against Palco's assets into equity, 

giving it full ownership of Townco, a 15 percent stake in 

Newco, and a new note for the sawmill's working capital. MRC 

would own the other 80 percent of Newco and would manage and 

run the company. 

 An indenture trustee for the secured indebtedness against 

Scopac -- which, by the way, had also been a plan proponent of 

a competing plan -- appealed the confirmation order, raising 

eight distinct issues on appeal. One of the eight issues 

pertained to what the Fifth Circuit referred to as a 

"nondebtor exculpation and release clause." This issue is 

discussed on the last two pages of a very lengthy opinion. 

 While the complained-of provision is not quoted verbatim 

in the Pacific Lumber opinion, it appears to have been a 

typical exculpation clause. Not a third-party release; a 

typical exculpation clause. The Fifth Circuit stated, "The 

plan releases MRC, Marathon, Newco, Townco, and the Unsecured 

Creditors' Committee, and their personnel, from liability, 

other than for willful and gross negligence related to 

proposing, implementing, and administering the plan" at Page 

251. 

 The Fifth Circuit held that "the nondebtor releases must 

Case: 21-90011 Document: 00515803515 Page: 217 Date Filed: 03/31/2021

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000706

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be struck except with respect to the Creditors' Committee and 

its members." 

 Footnote 26 of the opinion also states that the appellants 

had "not briefed why Newco and Townco or their officers and 

directors should not be released," and so "we do not analyze 

their position." Rather, the Fifth Circuit merely analyzed 

why the exculpation provision was not permissible as to the 

two plan proponents, MRC and Marathon. 

 Thus, the Court views Pacific Lumber as being a holding 

that squarely addressed the propriety of two plan proponents, 

a secured lender and a third-party competitor purchaser of the 

Debtors, obtaining nonconsensual exculpation in the plan. 

However, its reasoning certainly cannot be ignored, strongly 

suggesting it would not be inclined to approve an exculpation 

for any party other than a Creditors' Committee or its 

members. 

 As far as the Fifth Circuit's reasoning, it relied on 

Bankruptcy Code Section 524(e) for striking down the 

exculpations, stating, "The law states, however, that 

discharge of a debt of the debtor does not affect the 

liability of any other entity on such debt." Page 251. The 

opinion suggests that MRC and Marathon may have tried to argue 

that 524(e) did not apply to their exculpations because MRC 

and Marathon were not liable as co-obligors in any way on any 

of the debtor's debt. 

Case: 21-90011 Document: 00515803515 Page: 218 Date Filed: 03/31/2021

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000707

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 The Fifth Circuit seemed dismissive of this argument, 

stating as follows, "MRC/Marathon insist the release clause is 

part of their bargain because, without the clause, neither 

company would have been willing to provide the plan's 

financing. Nothing in the records suggests that MRC/Marathon, 

the Committee, or the Debtor's officers and directors were coliable for the Debtor's prepetition debts. Instead, the 

bargain the proponents claim to have purchased is exculpation 

from any negligence that occurred during the course of the 

case. Any costs the released parties might incur defending 

against suits alleging such negligence are unlikely to swamp 

either of these parties or the consummated reorganization. We 

see little equitable about protecting the released nondebtors 

from negligence suits arising out of the reorganization." 

 The Court goes on to note that, in a variety of cases, 

that releases have been approved, but these cases "seem 

broadly to foreclose nonconsensual nondebtor releases and 

permanent injunctions." 

 The Court then adds at Footnote 27 that the Fifth Circuit 

in the past did not set aside challenged plan releases that 

were in final nonappealable orders and were the subject of 

collateral attack much later, citing its famous Republic 

Supply v. Shoaf case, where the Fifth Circuit ruled that res 

judicata barred a debtor from bringing a claim that was 

specifically and expressly released by a confirmed 

Case: 21-90011 Document: 00515803515 Page: 219 Date Filed: 03/31/2021

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reorganization plan because the debtor -- the objector failed 

to object to the release at confirmation. 

 The Fifth Circuit in Pacific Lumber also noted that the 

Bankruptcy Code permits bankruptcy courts to enjoin thirdparty asbestos claims under certain circumstances, 524(g), 

which the Court said suggests nondebtor releases are most 

appropriate as a method to channel mass tort claims towards a 

specific pool of assets, citing numerous cases, including 

Johns-Manville. 

 In reach its holding, the Fifth Circuit saw no reason to 

uphold exculpation to the plan proponents MRC and Marathon, 

seeming to find it inconsistent with 524(e) under the facts at 

bar, but the Court did uphold exculpation for the Creditors' 

Committee and its members, stating, "We agree, however, with 

courts that have held that 1103(c) under the Code, which lists 

the Creditors' Committee's powers, implies Committee members 

have qualified immunity for actions within the scope of their 

duties." Numerous cites. "The Creditors' Committee and its 

members are the only disinterested volunteers among the 

parties sought to be released here. The scope of protection, 

which does not insulate them from willful and gross 

negligence, is adequate." 

 Thus, the Court held that the exculpation provisions in 

Pacific Lumber must be struck except with regard to the 

Creditors' Committee and its members. 

Case: 21-90011 Document: 00515803515 Page: 220 Date Filed: 03/31/2021

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 Now, after all of that, this Court believes the following 

can be gleaned from Pacific Lumber. First, the Fifth Circuit 

hinted that consensual exculpations and/or consensual 

nondebtor third-party releases are permissible. The Court 

was, of course, dealing with nonconsensual exculpations in 

Pacific Lumber. In this regard, I note Page 252, where the 

Court cited various prior Fifth Circuit authority and then 

stated, "These cases seem broadly to foreclose nonconsensual 

nondebtor releases and permanent injunctions." 

 The second thing that can be gleaned from Pacific Lumber: 

The Fifth Circuit hinted that nondebtor releases may be 

permissible in cases involving global settlements of mass 

claims against the debtors and co-liable parties. The Court, 

of course, referred to 524(g), but various other cases which 

approved nondebtor releases where mass claims were channeled 

to a specific pool of assets. 

 Third, the Fifth Circuit outright held that exculpations 

from negligence for a Creditors' Committee and its members are 

permissible because the concept is both consistent with 

1103(c), "which implies Committee members have qualified 

immunity for actions within the scope of their duties," and a 

good policy result, since "if members of the Committee can be 

sued by persons unhappy with the outcome of the case, it will 

be extremely difficult to find members to serve on an official 

committee." 

Case: 21-90011 Document: 00515803515 Page: 221 Date Filed: 03/31/2021

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 Fourth, the Fifth Circuit recognized in Pacific Lumber 

that res judicata may bar complaints regarding an 

impermissible plan release, citing to its earlier Republic 

Supply v. Shoaf opinion. 

 Now, being ever-mindful of the Fifth Circuit's words in 

Pacific Lumber, this Court cannot help but wonder about at 

least three things. 

 First, did the Fifth Circuit leave open the door that 

facts/equities might sometimes justify approval of an 

exculpation for a person other than a Creditors' Committee and 

its members? For example, the Fifth Circuit stated, in 

referring to the plan proponents Marathon and MRC, that "Any 

costs the released parties might incur defending against suits 

alleging such negligence are unlikely to swamp either of these 

parties or the consummated reorganization." Here, this Court 

can easily expect the proposed exculpated parties to incur 

costs that could swamp them and the reorganization based on 

the past litigious conduct of Mr. Dondero and his controlled 

entities. Do these words of the Fifth Circuit hint that 

equities/economics might sometimes justify an exculpation? 

 Second, did the Fifth Circuit's rationale for permitted 

exculpations to Creditors' Committee and their members, which 

was clearly policy-based, based on their implied qualified 

immunity flowing from their duties in Section 1103 and their 

disinterestedness, and the importance of their role in a 

Case: 21-90011 Document: 00515803515 Page: 222 Date Filed: 03/31/2021

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Chapter 11 case, did this rationale leave open the door to 

sometimes permitting exculpations to other parties in a 

particular Chapter 11 case besides Creditors' Committees and 

their members? For example, in a situation such as the 

Highland case, in which Independent Directors, brought in to 

avoid a trustee, are more like a Creditors' Committee than an 

incumbent board of directors. 

 Third, the Fifth Circuit's sole statutory basis was 

Section 524(e). This Court would humbly submit that this is a 

statute dealing with prepetition liability in which some 

nondebtor is liable with the Debtor. Exculpation is a concept 

dealing with postpetition liability. 

 The Ninth Circuit recently, in a case called Blixseth v. 

Credit Suisse, 961 F.3d 1074 (9th Cir. 2020), approved the 

validity of an exculpation clause incorporated into a 

confirmed Chapter 11 plan that purported to absolve certain 

nondebtor parties that were "closely involved" in drafting the 

plan. They were the largest secured creditor, a purchaser, 

and an individual who was an indirect owner of certain of the 

debtor companies. The exculpation was from any negligence, 

liability, for "any act or omission in connection with, 

related to, or arising out of the Chapter 11 cases." 

 By the time the appeal was before the Ninth Circuit, the 

only issue was the propriety of the exculpation clause as to 

the large secured creditor, which was also a plan proponent, 

Case: 21-90011 Document: 00515803515 Page: 223 Date Filed: 03/31/2021

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since all the other exculpated parties had settled with the 

appellant. 

 The Court, in determining that the exculpation clause was 

permissible as to the secured lender, concluded that Section 

524(e) "does not bar a narrow exculpation clause of the kind 

here at issue -- that is, one focused on actions of various 

participants in the plan approval process and relating only to 

that process," Page 1082. Why? Because "Section 524(e) 

establishes that discharge of a debt of the debtor does not 

affect the liability of any other entity on such debt." In 

other words, the discharge in no way affects the liability of 

any other entity for the discharged debt. By its terms, 

524(e) prevents a bankruptcy court from extinguishing claims 

of creditors against nondebtors over the very discharged debt 

through the bankruptcy proceedings. 

 The Court went on to explicitly disagree with Pacific 

Lumber in its analysis of 524(e), reiterating that an 

exculpation clause covers only liabilities arising from the 

bankruptcy proceedings and not of any of the debtor's 

discharged debt. Footnote 7, Page 1085. 

 Ultimately, the Court held that under Section 105(a), 

which empowers a bankruptcy court to issue any order, process, 

or judgment that is necessary or appropriate to carry out the 

provisions of Chapter 11 and Section 1123, which establishes 

the appropriate content of the bankruptcy plan, under these 

Case: 21-90011 Document: 00515803515 Page: 224 Date Filed: 03/31/2021

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sections, the bankruptcy court had authority to approve an 

exculpation clause intended to trim subsequent litigation over 

acts taken during the bankruptcy proceedings and so render the 

plan viable. 

 This Court concludes that, just as the Fifth Circuit left 

open the door for consensual exculpations and releases in 

Pacific Lumber, just as it left open the door for consensual 

exculpations and releases in Pacific Lumber, its dicta 

suggests that an exculpation might be permissible if there is 

a showing that "costs that the released parties might incur 

defending against suits alleging such negligence are likely to 

swamp either the Exculpated Parties or the reorganization." 

Again, that was a quote from the Fifth Circuit. 

 If ever there were a risk of that happening in a Chapter 

11 reorganization, it is this one. The Debtor's current CEO 

credibly testified that Mr. Dondero has said outside the 

courtroom that if Mr. Dondero's own pot plan does not get 

approved, that he will "burn the place down." Here, this 

Court can easily expect the proposed exculpated parties might 

expect to incur costs that could swamp them and the 

reorganization process based on the past litigious conduct of 

Mr. Dondero and his controlled entities. 

 Additionally, this Court concludes that the Fifth 

Circuit's rationale in Pacific Lumber for permitted 

exculpations to Creditors' Committees and their members, which 

Case: 21-90011 Document: 00515803515 Page: 225 Date Filed: 03/31/2021

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was clearly policy-based based on their implied qualified 

immunity flowing from Section 1103 and their importance in a 

Chapter 11 case, leaves the door open to sometimes permitting 

exculpations to other parties in a particular Chapter 11 case 

besides a UCC and its members. 

 Again, if there was ever such a case, the Court believes 

it is this one, in which Independent Directors were brought in 

to avoid a trustee and are much more like a Creditors' 

Committee than an incumbent board of directors. While, 

admittedly, there are a few exculpated parties here proposed 

beyond the independent board, such as certain employees, it 

would appear that no one is invulnerable to a lawsuit here if 

past is prologue in this Highland saga. 

 The Creditors' Committee was initially not keen on 

exculpations for certain employees. However, Mr. Seery 

credibly testified that there was a contentious arm's-length 

negotiation over this and that he needs these employees to 

preserve value implementing the Plan. Mr. Dondero has shown 

no hesitancy to litigate with former employees in the past, to 

the nth degree, and there is every reason to believe he would 

again in the future, if able. 

 Finally, in this situation, in the case at bar, we would 

appear to have a Shoaf reason to approve the exculpations. 

The January 9, 2020 order of this Court, Docket Entry 339, 

which approved the independent board and an ongoing corporate 

Case: 21-90011 Document: 00515803515 Page: 226 Date Filed: 03/31/2021

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governance structure for this case, and which is incorporated 

into the Plan at Article IX.H, provided as follows: "No 

entity may commence or pursue a claim or cause of action of 

any kind against any Independent Director, any Independent 

Director's agents, or any Independent Director's advisors 

relating in any way to the Independent Director's role as an 

Independent Director of Strand without the Court (1) first 

determining, after notice, that such claim or cause of action 

represents a colorable claim of willful misconduct or gross 

negligence against Independent Director, any Independent 

Director's agents, or any Independent Director's advisors; and 

(2) specifically authorizing such entity to bring such a 

claim. The Court will have sole jurisdiction to adjudicate 

any claim for which approval of the Court to commence or 

pursue has been granted." 

 This was both an exculpation from negligence as to the 

Independent Directors and their agents and advisors, as well 

as a gatekeeping provision. This Court believes that this 

provision basically approved an exculpation for the 

Independent Directors way back on January 9, 2020 for their 

postpetition conduct that might be negligent. And this is the 

law of the case and has res judicata preclusive effect now. 

 Thus, as to the three Independent Directors, as well as 

the other named parties in the January 9, 2020 order, their 

agents, their advisors, we have a situation that fits within 

Case: 21-90011 Document: 00515803515 Page: 227 Date Filed: 03/31/2021

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Republic Supply v. Shoaf, and we fit within the exception 

articulated in Pacific Lumber. 

 The Court reserves the right to supplement these findings 

and conclusions as to the exculpations, but based on the 

foregoing, they are approved and the objections are overruled. 

 Now, turning to the Plan objection, it appears at Article 

IX.F of the Plan and provides, in pertinent part, as follows: 

Upon entry of the confirmation order, all enjoined parties are 

and shall be permanently enjoined on and after the effective 

date from taking any action to interfere with the 

implementation or consummation of the Plan. Except as 

expressly provided in the Plan, the confirmation order, or a 

separate order of the Bankruptcy Court, all Enjoined Parties 

are and shall be permanently enjoined on and after the 

effective date, with respect to any claims and interests, from 

directly or indirectly -- and then commencing, conducting, 

continuing any suit, action, proceeding of any kind, and 

numerous other acts of that vein. 

 The injunction set forth herein shall extend to and apply 

to any act of the type set forth in any of the causes above 

against any successors to the Debtor, including but not 

limited to the Reorganized Debtor, the Litigation Sub-Trust, 

and the Claimant Trust, and their respective property and 

interests in property. 

 Plan injunctions like this are commonplace and 

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Exhibit 18 Page 229 of 249

000717

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appropriate. They are entirely consistent with and 

permissible under Bankruptcy Code Sections 1123(a)(5), 

1123(a)(6), 1141(a) and (c), and 1142, as well as Bankruptcy 

Rule 3016(c), which articulates the form that a plan 

injunction must be set forth in a plan. 

 The Court finds the objections to the Plan Injunctions to 

be unfounded, and they are thus overruled without much 

discussion here. 

 Now, lastly, the Gatekeeper Provision. It appears at 

Paragraph 4 of Article IX.F of the Plan and provides, in 

pertinent part, "Subject in all respects to Article XII.D, no 

Enjoined Party may commence or pursue a claim or cause of 

action of any kind against any Protected Party that arose or 

arises from or is related to the Chapter 11 case, the 

negotiation of the Plan, the administration of the Plan, or 

property to be distributed under the Plan, the wind-down of 

the business of the Debtor or Reorganized Debtor, the 

administration of the Claimant Trust or the Litigation SubTrust, or the transactions in furtherance of the foregoing, 

without the Bankruptcy Court (1) first determining, after 

notice and a hearing, that such claim or cause of action 

represents a colorable claim of any kind, including but not 

limited to negligence, bad faith, criminal misconduct and 

willful misconduct, fraud, or gross negligence against a 

Protected Party; and (2) specifically authorizing such 

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Exhibit 18 Page 230 of 249

000718

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Enjoined Party to bring such claim or cause of action against 

such Protected Party, provided, however, that the foregoing 

will not apply to a claim or cause of action against Strand or 

against any employee other than with respect to actions taken, 

respectively, by Strand or any such employee from the date of 

appointment of the Independent Directors through the effective 

date. The Bankruptcy Court will have sole and exclusive 

jurisdiction to determine whether a claim or cause of action 

is colorable and, only to the extent legally permissible and 

as provided for in Article XI, shall have jurisdiction to 

adjudicate the underlying colorable claim or cause of action." 

 This gatekeeper provision appears necessary and reasonable 

in light of the litigiousness of Mr. Dondero and his 

controlled entities that has been described at length herein. 

Provisions similar to this have been approved in this district 

in the Pilgrim's Pride case and the CHC Helicopter case. The 

provision is within the spirit of the Supreme Court's Barton 

Doctrine. And it appears consistent with the notion of a prefiling injunction to deter vexatious litigants that has been 

approved by the Fifth Circuit in such cases as Baum v. Blue 

Moon Ventures, 513 F.3d 181, and in the In re Carroll case, 

850 F.3d 811, which arose out of a bankruptcy pre-filing 

injunction. 

 The Fifth Circuit, in fact, noted in the Carroll case that 

federal courts have authority to enjoin vexatious litigants 

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000719

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under the All Writs Act, 28 U.S.C. § 1651. And additionally, 

under the Bankruptcy Code, a bankruptcy court can issue any 

order, including a civil contempt order, necessary or 

appropriate to carry out the provisions of the Code, citing, 

of course, 105 of the Bankruptcy Code. 

 The Fifth Circuit stated that, when considering whether to 

enjoin future filings against a vexatious litigant, a 

bankruptcy court must consider the circumstances of the case, 

including four factors: (1) the party's history of 

litigation; in particular, whether he has filed vexatious, 

harassing, or duplicative lawsuits; (2) whether the party had 

a good faith basis for pursuing the litigation, or perhaps 

intended to harass; (3) the extent of the burden on the courts 

and other parties resulting from the party's filings; and (4) 

the adequacy of alternatives. 

 In the Baum case, the Fifth Circuit stated that the 

traditional standards for injunctive relief -- i.e., 

irreparable harm and inadequate remedy at law -- do not apply 

to the issuance of an injunction against a vexatious litigant. 

 Here, although I have not been asked to declare Mr. 

Dondero and his affiliated entities as vexatious litigants per 

se, it is certainly not beyond the pale to find that his long 

history with regard to the major creditors in this case has 

strayed into that possible realm, and thus this Court is 

justified in approving this provision. 

Case: 21-90011 Document: 00515803515 Page: 231 Date Filed: 03/31/2021

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000720

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 One of the Objectors' lawyers stated very eloquently in 

closing argument, in opposing the plan injunction and 

gatekeeping provisions, that "Even a serial killer has 

constitutional rights," suggesting that these provisions would 

deprive Mr. Dondero and his controlled entities of fundamental 

rights or due process somehow. But to paraphrase the district 

court in the Carroll case, no one, rich or poor, is entitled 

to abuse the judicial process. There exists no constitutional 

right of access to the courts to prosecute actions that are 

frivolous or malicious. The Plan injunction and gatekeeper 

provisions in Highland's plan simply set forth a way for this 

Court to use its tools, its inherent powers, to avoid abuse of 

the court system, protect the implementation of the Plan, and 

preempt the use of judicial time that properly could be used 

to consider the meritorious claims of other litigants. 

 Accordingly, the Objectors' objections to this provision 

are overruled. 

 As earlier stated, this Court reserves the right to alter 

or supplement this ruling in a written order. In this regard, 

the Court directs Debtor's counsel -- I hope you are still 

awake; it's been a long time -- the Court directs Debtor's 

counsel to submit a form of order. And specifically, I assume 

that you've already prepared or have been in the process of 

preparing a set of findings of fact, conclusions of law, and 

confirmation order that tracks the confirmation evidence and 

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Exhibit 18 Page 233 of 249

000721

Case 3:22-cv-02280-S Document 3-5 Filed 12/06/22 Page 56 of 193 PageID 807
 48 

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recites conclusions of law that the Plan complies with all the 

various provisions of Section 1123, 1129, and other applicable 

Code provisions. 

 What I want you to do is take this bench ruling and add it 

to what you've prepared. And what I mean is, as you can tell, 

I've been reading: I will have my courtroom deputy email to 

you all a copy of what I just read. I'll have her obviously 

copy the Debtor's counsel, Creditors' Committee, Dondero and 

the other Objectors, copy them on this written document she's 

going to send out. And, again, I want you to kind of meld it 

into what you've already been preparing. 

 Obviously, I did not address in this oral ruling every 

provision of 1129(a) and (b). I did not address every 1123 

objection. I did not even address every single objection of 

the Objectors. But, again, any objection I've not 

specifically addressed today is overruled. 

 The briefing, I should say, that the Debtor submitted, 

there was a Memorandum of Law in Support of Confirmation filed 

on January 22nd. There was also a reply brief, a hundred 

pages or so, separately filed, replying to all the objections. 

I don't disagree with anything that was in that. So, again, 

to the extent you want to send me conclusions of law that are 

along the lines of that briefing, I would consider that. 

 And so what I thought is you'll send me the melded 

document and I will edit it if I see fit. I recognize this 

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000722

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may take a few days, so I don't give you a strict timetable, 

just hopefully it won't take too many days. 

 All right. Is there anyone out there -- Mr. Pomerantz, 

you had to go to jury duty, except I can't believe -- 

 MR. POMERANTZ: No, I -- 

 THE COURT: I can't believe you were called, but are 

you there? 

 MR. POMERANTZ: Your Honor, I am here. I was luckily 

excused, because I probably wouldn't have made it. 

 Your Honor, one just comment I'd make. You referred to 

the January 9th order. You didn't refer to the CEO order, 

which is your order July 16th, which had the same gatekeeper 

provision. I assume that was the same analysis? 

 THE COURT: That was an oversight. Same analysis. 

And that's exactly why I said I reserve the right to 

supplement or amend, because I know there had to be places 

like that where I omitted to mention something important. 

 MR. POMERANTZ: But thank you, Your Honor, for your 

thoughtful ruling, and we will certainly incorporate your 

materials into the order that we're working on and get it to 

you when we can. But we appreciate it on behalf of the 

Debtor. We know this took a lot of time and a lot of effort. 

Hopefully, you got a chance to still watch the Super Bowl 

yesterday. 

 THE COURT: Well, when I saw that Tom Brady was going 

Case: 21-90011 Document: 00515803515 Page: 234 Date Filed: 03/31/2021

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to win, I turned it off. 

 I'm sorry. That's terrible. You know, my law clerk, my 

law clerk that you can't see, Nate, he is from Ann Arbor, 

Michigan, University of Michigan, and he almost cried when I 

said I didn't like Tom Brady the other day. So, I apologize. 

 MR. POMERANTZ: Your Honor, one other comment. We 

had our motion to assume our nonresidential real property 

lease that was also on. It got missed in all the fanfare, but 

it was -- it has been unopposed and essentially done pursuant 

to stipulation. So we'd like to submit an order on that as 

well. 

 THE COURT: Okay. I have seen that, and I approve it 

under 365. You may submit the order. Okay. Thank you. 

 MR. POMERANTZ: Thank you, Your Honor. 

 THE CLERK: All rise. 

 (Proceedings concluded at 10:35 a.m.) 

--oOo-- 

CERTIFICATE 

 I certify that the foregoing is a correct transcript from 

the electronic sound recording of the proceedings in the 

above-entitled matter. 

 /s/ Kathy Rehling 02/09/2021 

______________________________________ ________________ 

Kathy Rehling, CETD-444 Date 

Certified Electronic Court Transcriber 

Case: 21-90011 Document: 00515803515 Page: 235 Date Filed: 03/31/2021

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 51 

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5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

INDEX 

PROCEEDINGS 3 

WITNESSES 

-noneEXHIBITS 

-noneRULINGS 

Confirmation Hearing [1808] 3 

Agreed Motion to (1) Assume Non-Residential Real Property 50 

Lease with Crescent TC Investors, LP upon Confirmation of 

Plan and (II) Extend Assumption Deadline [1624] 

END OF PROCEEDINGS 50 

INDEX 51 

 

Case: 21-90011 Document: 00515803515 Page: 236 Date Filed: 03/31/2021

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EXHIBIT 

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Case 3:22-cv-02280-S Document 3-5 Filed 12/06/22 Page 73 of 193 PageID 824
No. __________________ 

IN THE 

United States Court of Appeals for the Fifth Circuit _________________________ 

In Re: HIGHLAND CAPITAL MANAGEMENT, L.P. 

Proposed Appeal of Highland Income Fund, NexPoint Strategic Opportunities 

Fund, Highland Global Allocation Fund and NexPoint Capital, Inc. 

_________________________ 

On petition for direct appeal from the United States Bankruptcy Court 

for the Northern District of Texas at No. 19-34054; Appeal pending in the United States 

District Court for the Northern District of Texas at No. 3:21-cv-00539-N 

_________________________ 

PETITION FOR DIRECT APPEAL UNDER 28 U.S.C. § 158(d) 

_________________________ 

 

A. Lee Hogewood, III 

K&L GATES LLP 

4350 Lassiter at North Hills Ave. 

Suite 300 

Raleigh, N.C. 27609 

(919) 743-7306 

lee.hogewood@klgates.com 

Artoush Varshosaz 

K&L GATES LLP 

1717 Main St. 

Suite 2800 

Dallas, TX 75201 

(214) 939-5659 

artoush.varshosaz@klgates.com 

David R. Fine 

K&L GATES LLP 

Market Square Plaza 

17 North Second St. 

18th Floor 

Harrisburg, PA 17101 

(717) 231-5820 

david.fine@klgates.com 

Counsel for Petitioners 

Case: 21-90011 Document: 00515826308 Page: 1 Date Filed: 04/14/2021

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Case 3:22-cv-02280-S Document 3-5 Filed 12/06/22 Page 74 of 193 PageID 825
i

CERTIFICATE OF INTERESTED PERSONS 

Appellants 

Highland Income Fund; NexPoint Strategic Opportunities Fund; Highland Global 

Allocation Fund and NexPoint Capital, Inc. 

Counsel: 

K&L GATES LLP 

A. Lee Hogewood, III 

Artoush Varshosaz 

David R. Fine 

Appellee

Highland Capital Management, L.P. 

Counsel: 

PACHULSKI STANG ZIEHL & JONES LLP 

Jeffrey N. Pomerantz 

John A. Morris 

HAYWARD PLLC 

Melissa S. Hayward 

Zachery Z. Annable 

Other Appellants: 

1. James Dondero 

Counsel: 

BONDS ELLIS EPPICH SCHAFER JONES LLP 

D. Michael Lynn 

John Y. Bonds, III 

Clay M. Taylor 

Bryan C. Assink 

 

Case: 21-90011 Document: 00515826308 Page: 2 Date Filed: 04/14/2021

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Case 3:22-cv-02280-S Document 3-5 Filed 12/06/22 Page 75 of 193 PageID 826
ii

2. Get Good Trust 

 The Dugaboy Investment Trust 

Counsel: 

HELLER, DRAPER & HORN, L.L.C. 

Douglas S. Draper 

Leslie A. Collins 

Greta M. Brouphy

3. NexPoint Advisors, L.P. 

 Highland Capital Management Fund Advisors, L.P. 

Counsel: 

MUNSCH HARDT KOPF & HARR, P.C. 

Davor Rukavina 

 

Case: 21-90011 Document: 00515826308 Page: 3 Date Filed: 04/14/2021

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Case 3:22-cv-02280-S Document 3-5 Filed 12/06/22 Page 76 of 193 PageID 827
iii

TABLE OF CONTENTS 

INTRODUCTION ................................................................................................. 1 

FACTUAL AND PROCEDURAL HISTORY ....................................................... 3 

QUESTIONS PRESENTED ............................................................................... 11 

REASONS FOR THE COURT TO GRANT THIS PETITION ......................... 12 

A. The Bankruptcy Court correctly determined that an immediate appeal 

would materially advance the progress of the case. ...................................... 13 

B. The Bankruptcy Court’s Confirmation Order involves questions of law on 

which lower courts have differed such that this Court’s resolution is 

necessary. ..................................................................................................... 14 

C. The Bankruptcy Court’s determination that certain protections afforded to 

a creditors’ committee and its members should be extended to “other parties 

in a particular chapter 11 case that perform similar roles to a creditors’ 

committee and its members” raises a question of law as to which there is no 

controlling authority . .................................................................................. 20 

CONCLUSION ................................................................................................... 22 

 

Case: 21-90011 Document: 00515826308 Page: 4 Date Filed: 04/14/2021

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Case 3:22-cv-02280-S Document 3-5 Filed 12/06/22 Page 77 of 193 PageID 828
iv

TABLE OF AUTHORITIES 

 Page(s) 

Cases 

Bank of N.Y. Trust Co., N.A. v. Official Unsecured Creditors’ Comm. (In 

re Pacific Lumber Co.), 584 F.3d 229 (5th Cir. 2009) ................................... passim

Dropbox, Inc. v. Thru, Inc. (In re Thru, Inc.), 

No. 3:17-CV-1958-G, 2018 WL 5113124 (N.D. Tex. Oct. 19, 2018) ....... 16, 17, 19 

In re MPF Holding U.S. LLC, 444 B.R. 719 (Bankr. S.D. Tex. 2011) ...................... 13 

In re MPF Holding U.S. LLC, 701 F.3d 449 (5th Cir. 2012) ................................... 14 

In re OCA, Inc., 552 F.3d 413 (5th Cir. 2008) ........................................................ 13 

In re Patriot Place, Ltd., 486 B.R. 773 (Bankr. W.D. Tex. 2013) ........................ 16, 19 

In re Pilgrim’s Pride Corp., 08-45664-DML-11, 2010 WL 200000 

(Bankr. N.D. Tex. Jan. 14, 2010) ...................................................................... 18 

Statutes 

11 U.S.C. § 524(e) ................................................................................................. 18 

11 U.S.C. § 1103(c) ...............................................................................................20 

28 U.S.C. § 158(d) ............................................................................................ 1, 12 

28 U.S.C. § 158(d)(2)(A)(i) ................................................................... 2, 12, 13, 21 

28 U.S.C. § 158(d)(2)(A)(ii) ............................................................. 2, 12, 13, 15, 20 

28 U.S.C. § 158(d)(2)(A)(iii) .................................................................. 1, 11, 13, 14 

Case: 21-90011 Document: 00515826308 Page: 5 Date Filed: 04/14/2021

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000743

Case 3:22-cv-02280-S Document 3-5 Filed 12/06/22 Page 78 of 193 PageID 829
INTRODUCTION 

 Section 158(d)(2) allows a direct appeal from a bankruptcy court to the court 

of appeals if at least one of four conditions is met. See 28 U.S.C. § 158(d). The 

bankruptcy court order at issue here, which confirmed a complex plan and included 

a number of contested provisions, independently meets three of Section 158(d)(2)’s 

provisions. 

First, as the Bankruptcy Court held when it certified its confirmation order for 

direct appeal, a direct appeal “may materially advance the progress of the case” 

because (1) the interests at stake guarantee that the case will ultimately be appealed 

to this Court, (2) the parties have significant interests in obtaining this Court’s 

prompt review so that they can order their affairs accordingly in light of certain future 

actions Highland Capital Management, L.P. (the “Debtor”), proposes to take and 

(3) the parties will collectively spend hundreds of thousands of dollars in districtcourt proceedings that will almost certainly be unnecessary in light of this Court’s 

ultimate review. See 28 U.S.C. § 158(d)(2)(A)(iii). 

Second, the confirmed plan includes broad exculpation and injunction 

provisions the Funds believe Bank of N.Y. Trust Co., N.A. v. Official Unsecured 

Creditors’ Comm. (In re Pacific Lumber Co.), 584 F.3d 229 (5th Cir. 2009), plainly 

Case: 21-90011 Document: 00515826308 Page: 6 Date Filed: 04/14/2021

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Case 3:22-cv-02280-S Document 3-5 Filed 12/06/22 Page 79 of 193 PageID 830
2

prohibits.1 A number of district courts and bankruptcy courts in this Circuit read 

Pacific Lumber as the Funds do, but the Bankruptcy Court read the case more 

narrowly. Accordingly, there is a conflict among the “lower” courts on a question of 

law that requires this Court’s resolution. See 28 U.S.C. § 158(d)(2)(A)(ii). 

Third, the Bankruptcy Court held that the protections the Bankruptcy Code 

affords to creditors’ committees and their members may be extended to “other 

parties in a particular chapter 11 case that perform similar roles to a creditors’ 

committee and its members.” Neither this Court nor the Supreme Court has 

addressed or approved such a protection-by-analogy holding, and, so, there is no 

controlling authority on that legal question. See 28 U.S.C. § 158(d)(2)(A)(i). 

 The Confirmation Order meets the requirements of Section 158(d)(2) in three 

independent ways, and the Funds request that the Court allow a direct appeal.2

 

 

1

 The Funds, who are the petitioners, include Highland Income Fund, NexPoint 

Strategic Opportunities Fund, Highland Global Allocation Fund and NexPoint 

Capital, Inc. 

2

 As other aggrieved parties have noted in their separate petition for permission, there 

are issues for review beyond the exculpation and injunction issues. Because of space 

constraints, the Funds focus here on those issues that most plainly demonstrate that 

the confirmation order should be directly appealed; the Funds reserve the right to 

raise additional issues should the Court accept the direct appeal. 

Case: 21-90011 Document: 00515826308 Page: 7 Date Filed: 04/14/2021

Appx. 0660

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FACTUAL AND PROCEDURAL HISTORY 

 The Bankruptcy Court fairly noted that this is not a garden-variety bankruptcy 

case. However, while the facts and procedural history are complex, the Funds believe 

the Court needs only a summary to understand this petition. 

 James Dondero co-founded Highland Capital Management L.P. (the 

“Debtor”) in 1993.3

 The Debtor provided services to and support for an extensive 

network of investment entities, trusts, other ventures and investment advisers.4

 The 

Debtor invested and managed billions of dollars on behalf of itself, its subsidiaries 

and affiliates and other unaffiliated entities.5

 The Debtor provided such services to 

collateralized loan obligation vehicles (“CLOs”).6

 The CLOs own assets, generally 

securities at this stage, and the Debtor manages them pursuant to a series of 

portfolio-management agreements between itself and the CLOs.7

 

3

 Order (I) Confirming the Fifth Amended Plan of Reorganization of Highland 

Capital Management, L.P. (as Modified) and (II) Granting Related Relief (the 

“Confirmation Order”) at ¶ 4 (attached at Tab “A”). 

4

 Confirmation Order at ¶ 6. 

5 Id. 

6 Id. 

7

 Debtor’s Fifth Amended Plan of Reorganization of Highland Capital Management, 

L.P. (as Modified) (the “Plan”) at Exh. B (attached at Tab “B”). 

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 The Debtor filed for Chapter-11 bankruptcy protection in Delaware in October 

2019.8

 

 The Debtor and the Official Unsecured Creditors’ Committee (the 

“Committee”) had a difficult relationship from the start.9

 First, the Committee 

moved for a change of venue to the Northern District of Texas (which was granted).10

Second, the Committee and, ultimately, the bankruptcy trustee pushed for 

appointment of a Chapter-11 trustee.11

 On January 9, 2020, the Debtor, the Committee and Mr. Dondero entered into 

a stipulation and consent order (the “January 9 Order”).12 The January 9 Order 

provided, among other things, for the removal of Mr. Dondero from the management 

of the Debtor, replaced him with a board of independent directors (the “Independent 

Directors) and prohibited Mr. Dondero from causing “Related Entities” to terminate 

contracts with the Debtor.13 

 

8 Id. at ¶ 4. 

9 Id. at ¶ 11. 

10 Id. 

11 Id. 

12 Id. at ¶ 12. 

13 Id. The Independent Directors include James P. Seery, Jr.; John S. Dubel and 

retired bankruptcy judge Russell Nelms. Id. 

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 Among other things, Mr. Dondero beneficially owns two investment advisers, 

Highland Capital Management Fund Advisors, L.P., and NexPoint Advisors, L.P. 

(the “Advisors”), because he owns their general partners.14 

 Petitioners are several retail investment funds (the “Funds”). The Funds 

invest more than $1 billion for the benefit of thousands of investors/shareholders. In 

doing so, the Funds receive advice and services from the Advisors. The Advisors and 

the Funds are subject to the regulatory regime established pursuant to the Investment 

Company Act of 1940 and the Investment Advisers Act of 1940. Among other 

investments, the Funds hold interests in a number of the CLOs described above. 

 Because Mr. Dondero is a beneficial owner, the Advisors are “Related 

Entities” under the January 9 Order. At the time of the January 9 Order, each of the 

Advisors was a party to a shared-services agreement with the Debtor. Under the 

respective shared-services agreements, the Debtor was required to provide a wide 

range of services and support to the Advisors (and by extension, to the Funds), 

including accounting, legal, clerical, valuation and other “back-office” services, as 

well as office space, in exchange for a fee. The Advisors’ compliance with their 

 

14 The Advisors have filed a separate appeal from the Confirmation Order and have 

filed a separate petition seeking permission to appeal directly to this Court. That 

petition is docketed at No. 21-90011. 

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regulatory and fiduciary obligations to the Funds was facilitated by their access to 

shared services provided by the Debtor. 

 While the January 9 Order limited Mr. Dondero’s ability to cause the Advisors 

to terminate agreements, the Debtor was not so limited. Thus, the Debtor notified 

the Advisors on November 30, 2020, that the shared-services agreements would be 

terminated effective January 31, 2021 (as extended, through February 28). In 

December 2020, the Advisors advised—and the Funds agreed—that the Advisors 

should seek limited relief from the Bankruptcy Court with respect to the Debtor’s 

role as portfolio manager of the CLOs. Specifically, the Advisors and the Funds 

requested that the Bankruptcy Court prohibit the Debtor from trading or disposing 

of CLO assets pending the confirmation hearing on the Debtor’s plan.15 After the 

Bankruptcy Court denied the motion, the Advisors and the Funds requested that the 

Debtor not trade in CLO assets on a voluntary basis. The Debtor denied that request. 

 Outside of the bankruptcy context, the Funds collectively hold the majority of 

preference shares in three CLOs for which the respective portfolio-management 

agreements allow them to remove the Debtor as portfolio manager “for cause.” 

While the Debtor remained in bankruptcy and before confirmation of the Plan, the 

 

15 The CLO assets are not property of the bankruptcy estate; they are, instead, assets 

under the Debtor’s management and for which the Debtor is paid a management fee. 

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Bankruptcy Court would have had to approve any such removal in the form of relief 

from the automatic stay. After confirmation, the general rule is that contracts may be 

terminated according to their terms, if those contracts have been assumed. 

 Over objections from the Funds and others, the Bankruptcy Court confirmed 

the Plan on February 22, 2021. The Debtor’s representatives presented the Plan as 

an “asset-maximization plan.” Under the confirmed Plan, the reorganized Debtor 

intends to liquidate its assets over the course of an approximate two-year period. In 

addition to liquidating its assets, the Debtor, having assumed the portfoliomanagement agreements, continues to manage the assets of others, including the 

CLOs. It similarly intends to liquidate the assets of others within the same period. 

 As noted, the Debtor assumed the portfolio-management agreements. 

However, the Plan goes further than merely assuming and reinstating those 

agreements and binding the parties to their written terms. 

 The Plan, as approved over objections by the Funds and others, includes a 

number of disputed provisions. Article IX includes both exculpation and injunction 

provisions: 

C. Exculpation 

Subject in all respects to ARTICLE XII.D of this Plan, to the maximum 

extent permitted by applicable law, no Exculpated Party will have or 

incur, and each Exculpated Party is hereby exculpated from, any claim, 

obligation, suit, judgment, damage, demand, debt, right, Cause of 

Action, remedy, loss, and liability for conduct occurring on or after the 

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Petition Date in connection with or arising out of (i) the filing and 

administration of the Chapter 11 Case; (ii) the negotiation and pursuit 

of the Disclosure Statement, the Plan, or the solicitation of votes for, or 

confirmation of, the Plan; (iii) the funding or consummation of the Plan 

(including the Plan Supplement) or any related agreements, 

instruments, or other documents, the solicitation of votes on the Plan, 

the offer, issuance, and Plan Distribution of any securities issued or to 

be issued pursuant to the Plan, including the Claimant Trust Interests, 

whether or not such Plan Distributions occur following the Effective 

Date; (iv) the implementation of the Plan; and (v) any negotiations, 

transactions, and documentation in connection with the foregoing 

clauses (i)-(iv); provided, however, the foregoing will not apply to (a) any 

acts or omissions of an Exculpated Party arising out of or related to acts 

or omissions that constitute bad faith, fraud, gross negligence, criminal 

misconduct, or willful misconduct or (b) Strand or any Employee other 

than with respect to actions taken by such Entities from the date of 

appointment of the Independent Directors through the Effective Date. 

This exculpation shall be in addition to, and not in limitation of, all other 

releases, indemnities, exculpations, any other applicable law or rules, or 

any other provisions of this Plan, including ARTICLE IV.C.2, 

protecting such Exculpated Parties from liability.16

Article I.B of the Plan defines “Exculpated Parties” broadly: 

“Exculpated Parties” means, collectively, (i) the Debtor and its 

successors and assigns, (ii) the Employees, (iii) Strand, (iv) the 

Independent Directors, (v) the Committee, (vi) the members of the 

Committee (in their official capacities), (vii) the Professionals retained 

by the Debtor and the Committee in the Chapter 11 Case, (viii) the 

CEO/CRO; and (ix) the Related Persons of each of the parties listed in 

(iv) through (viii) ...17

 

16 See Plan at IX.C. 

17 Id. at I.B. 

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 Thus, the approved Plan exculpates not only the Debtor but also the 

Independent Directors, employees of the Debtor, officers and directors of the Debtor 

and professionals retained by the Debtor—among others. That exculpation extends 

not only to creditors’ direct claims but to the negotiation, administration and 

implementation of the Plan as well as to ordinary business matters and postconfirmation matters related to plan implementation.18

 The accompanying Plan injunction is broad as well. It provides, among other 

things, that “all Enjoined Parties are and shall be permanently enjoined, on and after 

the Effective Date, from taking any actions to interfere with the implementation or 

consummation of the Plan.”19 (“Enjoined Parties” is defined broadly to include, 

among others, all entities that “have held, hold, or may hold claims against the 

Debtor’s equity interests and any entity “that has appeared and/or filed any motion, 

objection, or other pleading” in the Chapter-11 case.20) The Confirmation Order bars 

any Enjoined Party from commencing or pursuing a claim or cause of action against 

 

18 To be clear, the exculpation is not a full release but imposition of a particularly high 

burden of proof on anyone seeking to assert a claim against an Exculpated Party. 

Essentially, an Exculpated Party is released unless its acts or omissions “constitute 

bad faith, fraud, gross negligence, criminal misconduct, or willful misconduct ...” 

Plan at IX.C. That heightened burden is material in that, among other things, it 

releases that large group of persons and entities from claims for negligence. 

19 Plan at IX.F. 

20 Id. at I.B. 

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any “Protected Party” unless the Bankruptcy Court first determines that the claim 

or cause of action is “colorable.”21 (“Protected Parties” is defined broadly to 

include, among others, the Debtor, the Debtor’s employees, the Committee and its 

members and professionals retained by the Debtor and the Committee in the 

Chapter-11 case.22) 

 The Funds believe that the exculpation and gatekeeper/channeling-injunction 

provisions exceed the scope of what this Court has previously permitted. The Funds 

contend that these provisions restrict their ability to act quickly and appropriately in 

fulfillment of their investment objectives and impair their ability to protect their retail 

investors. The issue is of critical and practical importance to the Funds because they 

invest in a number of illiquid assets with a long-term investment horizon. On the 

other hand, the Debtor’s liquidation plan anticipates a short, two-year window for 

the Debtor to liquidate its assets as well as those assets it manages. Thus, the 

Debtor’s short-term liquidation goal conflicts with the Funds’ plan to hold the assets 

for a longer term. Were the Debtor to sell the CLO assets as planned, it would act 

against the Fund’s wishes, and the Funds believe the challenged Plan terms 

 

21 Plan at IX.F. 

22 Id. at I.B. 

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improperly interfere with the Funds’ right and ability to remove the manager in such 

a situation. 

QUESTIONS PRESENTED 

 1. Whether the Court should accept direct review of the Bankruptcy 

Court’s Confirmation Order because an immediate appeal may materially advance 

the progress of the case, see 28 U.S.C. § 158(d)(2)(A)(iii), since— 

 a. all parties concur that the interests at stake in this bankruptcy 

matter are such that, if the appeals are heard in the District Court, it is all but certain 

that the non-prevailing party or parties will then take an appeal or appeals to this 

Court; 

 b. all parties concur that, in light of the inevitability of this Court’s 

review, requiring the parties to pursue appeals first in the District Court would delay 

finality of the Plan for the Debtor, creditors and other interested parties by a year or 

more; and 

 c. all parties concur that, in light of the inevitability of this Court’s 

review, requiring the parties to pursue appeals first in the District Court would cause 

the parties collectively to incur hundreds of thousands of dollars in attorneys’ fees 

for ultimately unnecessary proceedings in the District Court. 

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 2. Whether the Court should accept direct review of the Bankruptcy 

Court’s Confirmation Order because that order involves a question of law requiring 

resolution of conflicting decisions since a number of cases in this Circuit have 

interpreted Pacific Lumber to prohibit inclusion in a bankruptcy plan of broad 

exculpation and injunction provisions such as those the Bankruptcy Court approved 

in this case. See 28 U.S.C. § 158(d)(2)(A)(ii). 

 3. Whether the Court should accept direct review of the Confirmation 

Order because the Bankruptcy Court’s holding that the protections the Bankruptcy 

Code affords to creditors’ committees and their members may be extended to “other 

parties in a particular chapter 11 case that perform similar roles to a creditors’ 

committee and its members” is a question of law as to which there is no controlling 

decision of this Court or the Supreme Court. See 28 U.S.C. § 158(d)(2)(A)(i).

REASONS FOR THE COURT TO GRANT THIS PETITION 

 Section 158(d)(2) of Title 28 of the U.S. Code provides that a bankruptcy court 

may certify an order for direct appeal to the court of appeals when the order (1) 

involves a controlling issue of law as to which there is no controlling decision of the 

court of appeals or the Supreme Court, (2) the order involves a question of law 

requiring resolution of conflicting decisions or (3) an immediate appeal from the 

order may materially advance the progress of the case or proceeding in which the 

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appeal is taken. See 28 U.S.C. § 158(d)(2)(A)(i)-(iii); In re OCA, Inc., 552 F.3d 413, 

418 (5th Cir. 2008). If the bankruptcy court certifies the order, the would-be 

appellant must then file a petition with the court of appeals seeking permission to 

appeal under the same standard. Id. 

 The parties jointly asked the Bankruptcy Court to certify its confirmation 

order for direct appeal to this Court, and the Bankruptcy Court did so.23

A. The Bankruptcy Court correctly determined that an immediate appeal would 

 materially advance the progress of the case. 

 In granting the parties’ joint motion for certification, the Bankruptcy Court 

agreed that “a direct appeal may materially advance the progress of the case or 

proceeding in which the appeal is taken.”24 The Funds agree. 

 In In re MPF Holding U.S. LLC, 444 B.R. 719 (Bankr. S.D. Tex. 2011), a 

bankruptcy court held that a direct appeal would be appropriate because the stakes 

were sufficiently high that it was particularly likely that any decision by the district 

court would ultimately be appealed to this Court such that requiring the parties first 

to appeal to the district court would unnecessarily delay a final resolution of the 

 

23 See Order Certifying Appeals of the Confirmation Order for Direct Appeal to the 

United States Court of Appeals for the Fifth Circuit (the “Certification Order”) 

(Tab “C”). 

24 Id. at 2. 

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bankruptcy. Id. at 727. This Court accepted and decided the appeal. See 701 F.3d 449 

(5th Cir. 2012). 

 Moreover, as the parties informed the Bankruptcy Court in requesting its 

certification for direct appeal, the parties, creditors and others would benefit from a 

direct appeal in that they would have this Court’s decision that much sooner and the 

bankruptcy case could be fully administered and closed. Among other things, as 

noted above the Debtor intends to take certain steps in the next two years—steps the 

Funds believe may impair their interests and those of the CLOs—and the Funds 

believe the Plan as confirmed leaves them with an insufficient remedy. When it 

reviews the Plan, this Court will of course either reject or allow the challenged 

provisions, but the progression of events and the Debtor’s plans make it important 

for the parties to have that resolution sooner rather than later. 

 Thus, the case meets the requirements of Section 158(d)(2)(A)(iii), and the 

Funds request that the Court grant permission for a direct appeal from the 

Bankruptcy Court’s Confirmation Order. 

B. The Bankruptcy Court’s Confirmation Order involves questions of law on 

 which lower courts have differed such that this Court’s resolution is 

 necessary. 

 On at least one of the principal issues on which the Funds seek permission to 

appeal, the Bankruptcy Court’s interpretation of the law conflicts with that of other 

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courts. While the Funds believe the Bankruptcy Court erred in not following Pacific 

Lumber such that its Confirmation Order should be reversed, they will focus here on 

detailing the conflict rather than arguing the ultimate merits because the conflict is 

the focus under § 158(d)(2)(A)(ii). 

 In this Circuit, Pacific Lumber is important—and, in the Funds view, 

controlling—authority regarding the permissible scope of exculpation provisions and 

related injunctions. The procedural background of Pacific Lumber is lengthy and 

complex, but the facts relevant here are neither. The bankruptcy court approved a 

plan that included an exculpation provision that protected not just the debtor but a 

number of other persons and entities, including the debtor’s personnel, the current 

owners of the reorganized debtor (MRC and Marathon) and two entities created by 

the plan (Newco and Townco) into which certain of the debtor’s assets were 

transferred as well as the personnel of those parties. On direct appeal from the 

bankruptcy court, this Court rejected the exculpation of non-debtor parties: 

The plan releases MRC, Marathon, Newco, Townco, and the 

Unsecured Creditors’ Committee (and their personnel) from 

liability—other than for willfulness and gross negligence—related to 

proposing, implementing, and administering the plan. The law states, 

however, that “discharge of a debt of the debtor does not affect the 

liability of any other entity on such debt.” 11 U.S.C. § 524(e). 

*** 

We see little equitable about protecting the released non-debtors from 

negligence suits arising out of the reorganization. In a variety of 

contexts, this court has held that Section 524(e) only releases the 

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debtor, not co-liable third parties. See, e.g., In re Coho Resources, Inc., 345 

F.3d 338, 342 (5th Cir. 2003); Hall v. National Gypsum Co., 105 F.3d 

225, 229 (5th Cir. 1997); Matter of Edgeworth, 993 F.2d 51, 53-54 (5th 

Cir. 1993); Feld v. Zale Corporation, 62 F.3d 746 (5th Cir. 1995). These 

cases seem broadly to foreclose non-consensual non-debtor releases 

and permanent injunctions. 

*** 

There are no allegations in this record that either MRC/Marathon or 

their or the Debtors’ officers or directors were jointly liable for any of 

Palco’s or Scopac’s pre-petition debt. They are not guarantors or 

sureties, nor are they insurers. Instead, the essential function of the 

exculpation clause proposed here is to absolve the released parties from 

any negligent conduct that occurred during the course of the 

bankruptcy. The fresh start § 524(e) provides to debtors is not 

intended to serve this purpose. 

584 F.3d at 251-52 (footnotes omitted). A number of courts have interpreted Pacific 

Lumber broadly to reject exculpation provisions that reach beyond the debtor itself 

and the creditors’ committee. For example, in In re Patriot Place, Ltd., 486 B.R. 773 

(Bankr. W.D. Tex. 2013), the court wrote that this Court “takes a very restrictive 

approach to non-debtor releases in bankruptcy cases” and cited Pacific Lumber for 

the proposition that “[t]he Fifth Circuit cases seem Bbroadly to foreclose nonconsensual non-debtor releases and permanent injunctions.’” 486 B.R. at 882. In 

Dropbox, Inc. v. Thru, Inc. (In re Thru, Inc.), No. 3:17-CV-1958-G, 2018 WL 5113124 

(N.D. Tex. Oct. 19, 2018), the district court rejected an exculpation clause much like 

the one in the Plan in this case and offered the following analysis: 

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In In re The Pacific Lumber Company, the plan in question released the 

debtor and its personnel from liability, other than for willfulness and 

gross negligence, “related to proposing, implementing, and 

administering the plan.” In re The Pacific Lumber Company, 584 F.3d at 

251. There, the Fifth Circuit determined that the broad exculpation 

provision contained in the plan was designed “to absolve the released 

parties from any negligent conduct that occurred during the course of 

the bankruptcy” which the fresh start provision in Bankruptcy Code 

section 524(e)[14] was not intended to do. Id. at 252. Here, Thru’s plan 

releases Thru, its officers, directors, and various other personnel from 

liability, except for acts or omissions made in bad faith, “in connection 

with or related to formulating, negotiating, implementing, confirming, 

or consummating” the plan, disclosure statement, or any plan 

document. Modified Chapter 11 Plan at 25, ¶ 9.7 (emphasis added). 

The appellees’ attempts to distinguish their plan’s exculpation 

language from that of the language used in In re The Pacific Lumber 

Company are unpersuasive. 

Id. at *22-*23. The court also rejected an injunction provision that was “broad 

enough to cover non-debtor third parties ...” because the court read Pacific Lumber to 

preclude such an injunction. Id. at *21 (citing Pacific Lumber, 584 F.3d at 252 (Fifth 

Circuit authority “seems broadly to foreclose non-consensual non-debtor releases 

and permanent injunction.”). 

 A judge in the same bankruptcy court from which this matter arises 

understood Pacific Lumber to preclude non-consensual third-party exculpation: 

The plan in Pacific Lumber provided numerous third parties with 

protection from liability for their negligent conduct during the course of 

the chapter 11 case including liability related to proposing, 

implementing, and administering the plan. The third-party protections 

in Pacific Lumber applied to the debtors’ officers and directors as well as 

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18

the companies that proposed the plan and that ultimately acquired 

majority ownership of the reorganized debtors. Although a third-party 

exculpation provision arguably might be defended as justified by the 

bankruptcy court’s equitable powers given by Code § 105, Chief Judge 

of the Fifth Circuit Court of Appeals Edith Jones struck the exculpatory 

provisions because the Court saw “little equitable about protecting the 

released non-debtors from negligence suits arising out of the 

reorganization.” Id. at 252. 

*** 

Debtors and the Equity Committee argue that the ruling in Pacific 

Lumber is limited to the facts of that case. The court disagrees. Chief 

Judge Jones wrote that “non-debtor releases are most appropriate as a 

method to channel mass claims toward a specific pool of assets.” Id. at 

252. Chief Judge Jones also cited to several prior Fifth Circuit decisions 

... stating that, “these cases seem broadly to foreclose non-consensual 

non-debtor releases and permanent injunctions.” Id. These statements 

persuade the court that the ruling in Pacific Lumber is not limited to its 

facts. Indeed, there is nothing in the Pacific Lumber opinion which, in 

the court’s view, can reasonably be read to limit its ruling to the facts of 

that case. 

In re Pilgrim’s Pride Corp., 08-45664-DML-11, 2010 WL 200000 at *4-*5 (Bankr. 

N.D. Tex. Jan. 14, 2010). 

 The Bankruptcy Court in this matter understood Pacific Lumber differently.25

The court held that Pacific Lumber focused on 11 U.S.C. § 524(e) but that the case 

 

25 The Bankruptcy Court wrote that certain earlier orders in the case, including the 

January 9 Order described in the statement of the case, above, and a July 16, 2020, 

order had already exculpated the Independent Directors and Mr. Seery and were due 

res judicata effect. See Confirmation Order at ¶ 73. When the merits are before this 

Court, the Funds will demonstrate that the Bankruptcy Court was mistaken in that 

determination, and in any event those orders would not shield the exculpation and 

injunction provisions from appellate review. 

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000761

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19

does not prohibit all exculpations under the Bankruptcy Code and the 

court in such case specifically approved the exculpations of a creditor’s 

committee and its members on the grounds that “11 U.S.C. § 1103(c), 

which lists the creditors’ committee’s powers, implies committee 

members have qualified immunity for actions within the scope of their 

duties. ... [I]f members of the committee can be sued by persons 

unhappy with the committee’s performance during the case or unhappy 

with the outcome of the case, it will be extremely difficult to find 

members to serve on the committee. Pacific Lumber’s rationale for 

permitted exculpation of creditors’ committees and their members 

(which was clearly policy based and based on creditors’ committee 

qualified immunity flowing from their duties under section 1103(c) of 

the Bankruptcy Code and their disinterestedness and importance in 

chapter 11 cases) does not preclude exculpation to other parties in a 

particular chapter 11 case that perform similar roles to a creditors’ 

committee and its members.26

Thus, the Bankruptcy Court read Pacific Lumber as rejecting only third-party 

exculpations in the Section-524(e) context but not in others. That holding is plainly 

in conflict with cases like Patriot Place, 486 B.R. at 882 (“[t]he Fifth Circuit cases 

seem Bbroadly to foreclose non-consensual non-debtor releases and permanent 

injunctions.’”), and In re Thru, 2018 WL 5113124 at *22. 

 The Bankruptcy Court also overruled the Funds’ objection that the Plan’s 

channeling injunction is foreclosed by Pacific Lumber because it extends 

impermissibly to protect third parties.27 As noted, In re Thru understood Pacific 

 

26 Confirmation Order at ¶ 74(a). 

27 Id. at ¶¶ 75-76. 

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000762

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20

Lumber to prohibit non-consensual, permanent injunctions in favor of non-debtors. 

See In re Thru, 2018 WL 5113124 at *21.

 While the Funds believe this Court will confirm that Pacific Lumber should be 

read more broadly than the Bankruptcy Court did, the Court need not decide that 

issue now. It is enough for the Court to decide that there are conflicting decisions in 

need of this Court’s resolution. See § 158(d)(2)(A)(ii). There are. 

C. The Bankruptcy Court’s determination that certain protections afforded to 

 a creditors’ committee and its members should be extended to “other parties 

 in a particular chapter 11 case that perform similar roles to a creditors’ 

 committee and its members” raises a question of law as to which there is no 

 controlling authority . 

 As noted in the previous section, in its discussion of Pacific Lumber, the 

Bankruptcy court held that 

Pacific Lumber’s rationale for permitted exculpation of creditors’ 

committees and their members (which was clearly policy based and 

based on creditors’ committee qualified immunity flowing from their 

duties under section 1103(c) of the Bankruptcy Code and their 

disinterestedness and importance in chapter 11 cases) does not preclude 

exculpation to other parties in a particular chapter 11 case that perform 

similar roles to a creditors’ committee and its members.28

The Funds believe that protection-by-analogy holding is wrong under both Pacific 

Lumber and Section 1103(c), but for present purposes it is sufficient to say that the 

 

28 Id. at ¶ 74(a). 

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000763

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21

Bankruptcy Court appears to be the first court to reach that holding and that neither 

this Court nor the Supreme Court has addressed it. 

 Section 158(d)(2)(A)(i) permits a direct appeal when the bankruptcy court’s 

order “involves a question of law as to which there is no controlling decision of the 

court of appeals for the circuit or of the Supreme Court of the United States ...” The 

legal question of whether parties “that perform similar roles to a creditors’ 

committee and its members” should be entitled to the same protections as creditors’ 

committees and their members is such a question. 

 

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000764

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22

CONCLUSION 

 Accordingly, the Funds respectfully request that the Court grant this petition 

and allow a direct appeal to this Court from the Bankruptcy Court’s Confirmation 

Order. 

 Respectfully submitted, 

 K&L GATES LLP 

A. Lee Hogewood, III 

4350 Lassiter at North Hills Ave. 

Suite 300 

Raleigh, N.C. 27609 

(919) 743-7306 

lee.hogewood@klgates.com 

Artoush Varshosaz 

1717 Main St., Suite 2800 

Dallas, TX 75201 

(214) 939-5659 

artoush.varshosaz@klgates.com 

/s/ David R. Fine 

David R. Fine 

Market Square Plaza 

17 North Second St. 

Harrisburg, PA 17101 

(717) 231-5820 

david.fine@klgates.com 

Counsel for Petitioners

April 13, 2021 

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000765

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CERTIFICATE OF COMPLIANCE 

Pursuant to Federal Rule of Appellate Procedure 32(g), the undersigned 

counsel certifies that this brief: 

(i) complies with the type-volume limitation of Federal Rule of Appellate 

Procedure 5(C)(1) because it contains 4,912 words, including footnotes and 

excluding the cover, certificate of interested persons, table of contents, table of 

authorities, certificate of compliance and certificate of service. 

(ii) complies with the typeface requirements of Rule 32(a)(5) and the typestyle requirements of Rule 32(a)(6) because it has been prepared using Microsoft 

Office Word 2010 and is set in Equity font in a size equivalent to 14 points or larger. 

 /s/ David R. Fine

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000766

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CERTIFICATE OF SERVICE 

 I certify that, on April 13, 2021, I filed the attached document with the Court’s 

CM/ECF system and that I also e-mailed a copy with exhibits to the following: 

Jeffrey Pomerantz, Esq. (jpomerantz@pszlaw.com) 

John A. Morris, Esq. (jmorris@pszlaw.com) 

Counsel for the Debtor 

John Bonds, Esq. (john@bondsellis.com) 

Clay Taylor, Esq. (clay.taylor@bondsellis) 

Counsel for J. Dondero 

Douglas Draper, Esq. (ddraper@hellerdraper.com) 

Counsel for the Dugaboy Investment Trust 

Davor Rukavina, Esq. (drukavina@munsch.com) 

Counsel for the Advisors 

 /s/ David R. Fine 

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000767

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Tab “A” 

 

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000768

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DOCS_SF:104487.21 36027/002

IN THE UNITED STATES BANKRUPTCY COURT 

FOR THE NORTHERN DISTRICT OF TEXAS 

DALLAS DIVISION 

In re: 

HIGHLAND CAPITAL MANAGEMENT, L.P.,1

Debtor. 

) 

) 

) 

) 

) 

) 

Chapter 11 

Case No. 19-34054-sgj11 

ORDER (I) CONFIRMING THE FIFTH AMENDED 

PLAN OF REORGANIZATION OF HIGHLAND CAPITAL 

MANAGEMENT, L.P. (AS MODIFIED) AND (II) GRANTING RELATED RELIEF 

The Bankruptcy Court2

 having: 

a. entered, on November 24, 2020, the Order (A) Approving the Adequacy of the 

Disclosure Statement, (B) Scheduling A Hearing to Confirm the Fifth Amended 

Plan of Reorganization (C) Establishing Deadline for Filing Objections to 

Confirmation of Plan, (D) Approving Form of Ballots, Voting Deadline and 

Solicitation Procedures, and (E) Approving Form and Manner of Notice [Docket 

No. 1476] (the “Disclosure Statement Order”), pursuant to which the Bankruptcy 

Court approved the adequacy of the Disclosure Statement Relating to the Fifth 

1

 The Debtor’s last four digits of its taxpayer identification number are (6725). The headquarters and service address 

for the above-captioned Debtor is 300 Crescent Court, Suite 700, Dallas, TX 75201. 

2

 Capitalized terms used but not otherwise defined herein have the meanings given to them in the Plan (as defined 

below). The rules of interpretation set forth in Article I of the Plan apply to this Confirmation Order. 

______________________________________________________________________

Signed February 22, 2021

The following constitutes the ruling of the court and has the force and effect therein described.

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000769

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DOCS_SF:104487.21 36027/002

Amended Plan of Reorganization of Highland Capital Management, L.P. [Docket 

No. 1473] (the “Disclosure Statement”) under section 1125 of the Bankruptcy Code 

and authorized solicitation of the Disclosure Statement; 

b. set January 5, 2021, at 5:00 p.m. prevailing Central Time (the “Objection 

Deadline”), as the deadline for filing objections to confirmation of the Fifth 

Amended Plan of Reorganization of Highland Capital Management, L.P. (As 

Modified) [Docket No. 1808] (as amended, supplemented or modified, the “Plan”); 

c. set January 5, 2021, at 5:00 p.m. prevailing Central Time, as the deadline for voting 

on the Plan (the “Voting Deadline”) in accordance with the Disclosure Statement 

Order; 

d. initially set January 13, 2021, at 9:30 a.m. prevailing Central Time, as the date and 

time to commence the hearing to consider confirmation of the Plan pursuant to 

Bankruptcy Rules 3017 and 3018, sections 1126, 1128, and 1129 of the Bankruptcy 

Code, and the Disclosure Statement Order, which hearing was continued to January 

26, 2021, at 9:30 a.m. prevailing Central Time and further continued to February 2, 

2021; 

e. reviewed: (i) the Plan; (ii) the Disclosure Statement; and (iii) Notice of (I) Entry of 

Order Approving Disclosure Statement; (II) Hearing to Confirm; and (III) Related 

Important Dates (the “Confirmation Hearing Notice”), the form of which is 

attached as Exhibit 1-B to the Disclosure Statement Order; 

f. reviewed: (i) the Debtor’s Notice of Filing of Plan Supplement for the Third 

Amended Plan of Reorganization of Highland Capital Management, L.P. [Docket 

No. 1389] filed November 13, 2020; (ii) Debtor’s Notice of Filing of Plan 

Supplement for the Fifth Amended Plan of Reorganization of Highland Capital 

Management, L.P. [Docket No. 1606] filed on December 18, 2020; (iii) the 

Debtor’s Notice of Filing of Plan Supplement for the Fifth Amended Plan of 

Reorganization of Highland Capital Management, L.P. [Docket No. 1656] filed on 

January 4, 2021; (iv) Notice of Filing Plan Supplement to the Fifth Amended Plan 

of Reorganization of Highland Capital Management, L.P. (with Technical 

Modifications)t dated January 22, 2021 [Docket No. 1811]; and (v) Debtor’s Notice 

of Filing of Plan Supplement to the Fifth Amended Plan of Reorganization of 

Highland of Highland Capital Management, L.P. (As Modified) on February 1, 

2021 [Docket No. 1875]; (collectively, the documents listed in (i) through (v) of 

this paragraph, the “Plan Supplements”); 

g. reviewed: (i) the Notice of (I) Executory Contracts and Unexpired Leases to be 

Assumed by the Debtor Pursuant to the Fifth Amended Plan, (II) Cure Amounts, if 

Any, and (III) Related Procedures in Connection Therewith filed on December 30, 

2020 [Docket No. 1648]; (ii) the Second Notice of (I) Executory Contracts and 

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000770

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Unexpired Leases to be Assumed by the Debtor Pursuant to the Fifth Amended 

Plan, (II) Cure Amounts, if Any, and (III) Related Procedures in Connection 

Therewith filed on January 11, 2021 [Docket No.1719]; (iii) the Third Notice of 

(I) Executory Contracts and Unexpired Leases to be Assumed by the Debtor 

Pursuant to the Fifth Amended Plan, (II) Cure Amounts, if Any, and (III) Related 

Procedures in Connection Therewith filed on January 15, 2021 [Docket No. 1749]; 

(iv) the Notice of Withdrawal of Certain Executory Contracts and Unexpired 

Leases from List of Executory Contracts and Unexpired Leases to be Assumed by 

the Debtor Pursuant to the Fifth Amended Plan [Docket No. 1791]; (v) the Fourth 

Notice of (I) Executory Contracts and Unexpired Leases to be Assumed by the 

Debtor Pursuant to the Fifth Amended Plan (II) Cure Amounts, if Any, and (III) 

Released Procedures in Connection Therewith filed on January 27, 2021 [Docket 

No. 1847]; (vi) the Notice of Hearing on Agreed Motion to (I) Assume 

Nonresidential Real Property Lease with Crescent TC Investors, L.P. Upon 

Confirmation of Plan and (II) Extend Assumption Deadline filed on January 28, 

2021 [Docket No. 1857]; and (vii) the Fifth Notice of (I) Executory Contracts and 

Unexpired Leases to be Assumed by the Debtor Pursuant to the Fifth Amended Plan 

(II) Cure Amounts, if Any, and (III) Released Procedures in Connection Therewith

filed on February 1, 2021 [Docket No. 1873] (collectively, the documents referred 

to in (i) to (vii) are referred to as “List of Assumed Contracts”); 

h. reviewed: (i) the Debtor’s Memorandum of Law in Support of Confirmation of the 

Fifth Amended Plan of Reorganization of Highland Capital Management, L.P. 

[Docket No. 1814] (the “Confirmation Brief”); (ii) the Debtor’s Omnibus Reply to 

Objections to Confirmation of the Fifth Amended Chapter 11 Plan of 

Reorganization of Highland Capital Management; [Docket No. 1807]; and (iii) the 

Certification of Patrick M. Leathem With Respect to the Tabulation of Votes on the 

Fifth Amended Plan of Reorganization of Highland Capital Management, L.P.

[Docket No. 1772] and Supplemental Certification of Patrick M. Leathem With 

Respect to the Tabulation of Votes on the Fifth Amended Plan of Reorganization of 

Highland Capital Management, L.P. [Docket No. 1887] filed on February 3, 2021 

(together, the “Voting Certifications”). 

i. reviewed: (i) the Notice of Affidavit of Publication dated December 3, 2020 [Docket 

No. 1505]; (ii) the Certificate of Service dated December 23, 2020 [Docket No. 

1630]; (iii) the Supplemental Certificate of Service dated December 24, 2020 

[Docket No. 1637]; (iv) the Second Supplemental Certificate of Service dated 

December 31, 2020 [Docket No. 1653]; (v) the Certificate of Service dated 

December 23, 2020 [Docket No. 1627]; (vi) the Certificate of Service dated January 

6, 2021 [Docket No. 1696]; (vii) the Certificate of Service dated January 7, 2021 

[Docket No. 1699]; (viii) the Certificate of Service dated January 7, 2021 [Docket 

No 1700]; (ix) the Certificate of Service dated January 15, 2021 [Docket No. 1761]; 

(x) the Certificate of Service dated January 19, 2021 [Docket No. 1775]; (xi) the 

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000771

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Certificate of Service dated January 20, 2021 [Docket No. 1787]; (xii) the 

Certificate of Service dated January 26, 2021[Docket No. 1844]; (xiii) the 

Certificate of Service dated January 27, 2021 [Docket No. 1854]; (xiv) the 

Certificate of Service dated February 1, 2021 [Docket No. 1879]; (xv) the 

Certificates of Service dated February 3, 2021 [Docket No. 1891 and 1893]; and 

(xvi) the Certificates of Service dated February 5, 2021 [Docket Nos. 1906, 1907, 

1908 and 1909] (collectively, the “Affidavits of Service and Publication”); 

j. reviewed all filed3 pleadings, exhibits, statements, and comments regarding 

approval of the Disclosure Statement and confirmation of the Plan, including all 

objections, statements, and reservations of rights; 

k. conducted a hearing to consider confirmation of the Plan, which commenced on 

February 2, 2021, at 9:30 a.m. prevailing Central Time and concluded on February 

3, 2021, and issued its oral ruling on February 8, 2021 (collectively, the 

“Confirmation Hearing); 

l. heard the statements and arguments made by counsel in respect of confirmation of 

the Plan and having considered the record of this Chapter 11 Case and taken judicial 

notice of all papers and pleadings filed in this Chapter 11 Case; and 

m. considered all oral representations, testimony, documents, filings, and other 

evidence regarding confirmation of the Plan, including (a) all of the exhibits 

admitted into evidence;4

 (b) the sworn testimony of (i) James P. Seery, Jr., the 

Debtor’s Chief Executive Officer and Chief Restructuring Officer and a member of 

the Board of Directors of Strand Advisors, Inc. (“Strand”), the Debtor’s general 

partner; (ii) John S. Dubel, a member of the Board of Strand; (iii) Marc Tauber, a 

Vice President at Aon Financial Services; and (iv) Robert Jason Post, the Chief 

Compliance Officer of NexPoint Advisors, LP (collectively, the “Witnesses”); (c) 

the credibility of the Witnesses; and (d) the Voting Certifications. 

NOW, THEREFORE, after due deliberation thereon and good cause appearing therefor, 

the Bankruptcy Court hereby makes and issues the following findings of fact and conclusions of 

law: 

3

 Unless otherwise indicated, use of the term “filed” herein refers also to the service of the applicable document filed 

on the docket in this Chapter 11 Case, as applicable. 

4

 The Court admitted the following exhibits into evidence: (a) all of the Debtor’s exhibits lodged at Docket No. 1822 

(except TTTTT, which was withdrawn by the Debtor); (b) all of the Debtor’s exhibits lodged at Docket No. 1866; (c) 

all of the Debtor’s exhibits lodged at Docket No. 1877; (d) all of the Debtor’s exhibits lodged at Docket No. 1895; 

and (e) Exhibits 6-12 and 15-17 offered by Mr. James Dondero and lodged at Docket No. 1874. 

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000772

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FINDINGS OF FACT AND CONCLUSIONS OF LAW 

1. Findings of Fact and Conclusions of Law. The findings and conclusions 

set forth herein, together with the findings of fact and conclusions of law set forth in the record 

during the Confirmation Hearing, constitute the Bankruptcy Court’s findings of fact and 

conclusions of law pursuant to Federal Rule of Civil Procedure 52, made applicable to this 

proceeding pursuant to Bankruptcy Rules 7052 and 9014. To the extent any of the following 

findings of fact constitute conclusions of law, they are adopted as such. To the extent that any of 

the following conclusions of law constitute findings of fact, they are adopted as such. 

2. Introduction and Summary of the Plan. Prior to addressing the specific 

requirements under the Bankruptcy Code and Bankruptcy Rules with respect to the confirmation 

of the Plan, the Bankruptcy Court believes it would be useful to first provide the following 

background of the Debtor’s Chapter 11 Case, the parties involved therewith, and some of the major 

events that have transpired culminating in the filing and solicitation of the Plan of this very unusual 

case. Before the Bankruptcy Court is the Debtor’s Fifth Amended Plan of Reorganization of 

Highland Capital Management, L.P., filed on November 24, 2020, as modified on January 22, 

2021 and again on February 1, 2021. The parties have repeatedly referred to the Plan as an “asset 

monetization plan” because it involves the orderly wind-down of the Debtor’s estate, including the 

sale of assets and certain of its funds over time, with the Reorganized Debtor continuing to manage 

certain other funds, subject to the oversight of the Claimant Trust Oversight Board. The Plan 

provides for a Claimant Trust to, among other things, manage and monetize the Claimant Trust 

Assets for the benefit of the Debtor’s economic stakeholders. The Claimant Trustee is responsible 

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000773

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for this process, among other duties specified in the Plan’s Claimant Trust Agreement. There is 

also anticipated to be a Litigation Sub-trust established for the purpose of pursuing certain 

avoidance or other causes of action for the benefit of the Debtor’s economic constituents. 

3. Confirmation Requirements Satisfied. The Plan is supported by the 

Committee and all claimants with Convenience Claims (i.e., general unsecured claims under $1 

million) who voted in Class 7. Claimants with Class 8 General Unsecured Claims, however, voted 

to reject the Plan because, although the Plan was accepted by 99.8% of the amount of Claims in 

that class, only 17 claimants voted to accept the Plan while 27 claimants voted to reject the Plan. 

As a result of such votes, and because Mr. Dondero and the Dondero Related Entities (as defined 

below) objected to the Plan on a variety of grounds primarily relating to the Plan’s release, 

exculpation and injunction provisions, the Bankruptcy Court heard two full days of evidence on 

February 2 and 3, 2021, and considered testimony from five witnesses and thousands of pages of 

documentary evidence in determining whether the Plan satisfies the confirmation standards 

required under the Bankruptcy Code. The Bankruptcy Court finds and concludes that the Plan 

meets all of the relevant requirements of sections 1123, 1124, and 1129, and other applicable 

provisions of the Bankruptcy Code, as more fully set forth below with respect to each of the 

applicable confirmation requirements. 

4. Not Your Garden Variety Debtor. The Debtor’s case is not a garden 

variety chapter 11 case. The Debtor is a multibillion-dollar global investment adviser registered 

with the SEC, pursuant to the Investment Advisers Act of 1940. It was founded in 1993 by James 

Dondero and Mark Okada. Mark Okada resigned from his role with Highland prior to the 

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000774

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bankruptcy case being filed on October 16, 2019 (the “Petition Date”). Mr. Dondero controlled 

the Debtor as of the Petition Date but agreed to relinquish control of it on or about January 9, 2020, 

pursuant to an agreement reached with the Committee, as described below. Although Mr. Dondero 

remained with the Debtor as an unpaid employee/portfolio manager after January 9, 2020, his 

employment with the Debtor terminated on October 9, 2020. Mr. Dondero continues to work for 

and/or control numerous non-debtor entities in the complex Highland enterprise. 

5. The Debtor. The Debtor is headquartered in Dallas, Texas. As of the 

Petition Date, the Debtor employed approximately 76 employees. The Debtor is privately-owned: 

(a) 99.5% by the Hunter Mountain Investment Trust; (b) 0.1866% by The Dugaboy Investment 

Trust, a trust created to manage the assets of Mr. Dondero and his family; (c) 0.0627% by Mark 

Okada, personally and through family trusts; and (d) 0.25% by Strand, the Debtor’s general 

partner. 

6. The Highland Enterprise. Pursuant to various contractual arrangements, 

the Debtor provides money management and advisory services for billions of dollars of assets, 

including collateralized loan obligation vehicles (“CLOs”), and other investments. Some of these 

assets are managed by the Debtor pursuant to shared services agreements with certain affiliated 

entities, including other affiliated registered investment advisors. In fact, there are approximately 

2,000 entities in the byzantine complex of entities under the Highland umbrella. None of these 

affiliated entities filed for chapter 11 protection. Most, but not all, of these entities are not 

subsidiaries (direct or indirect) of the Debtor. Many of the Debtor’s affiliated companies are 

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Appx. 0690

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Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 38 of 266

000775

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offshore entities, organized in jurisdictions such as the Cayman Islands and Guernsey. See 

Disclosure Statement, at 17-18. 

7. Debtor’s Operational History. The Debtor’s primary means of generating 

revenue has historically been from fees collected for the management and advisory services 

provided to funds that it manages, plus fees generated for services provided to its affiliates. For 

additional liquidity, the Debtor, prior to the Petition Date, would sell liquid securities in the 

ordinary course, primarily through a brokerage account at Jefferies, LLC. The Debtor would also, 

from time to time, sell assets at non-Debtor subsidiaries and cause those proceeds to be distributed 

to the Debtor in the ordinary course of business. The Debtor’s current Chief Executive Officer, 

James P. Seery, Jr., credibly testified at the Confirmation Hearing that the Debtor was “run at a 

deficit for a long time and then would sell assets or defer employee compensation to cover its 

deficits.” The Bankruptcy Court cannot help but wonder if that was necessitated because of 

enormous litigation fees and expenses incurred by the Debtor due to its culture of litigation—as 

further addressed below. 

8. Not Your Garden Variety Creditor’s Committee. The Debtor and this 

chapter 11 case are not garden variety for so many reasons. One of the most obvious standouts in 

this case is the creditor constituency. The Debtor did not file for bankruptcy because of any of the 

typical reasons that large companies file chapter 11. For example, the Debtor did not have a large, 

asset-based secured lender with whom it was in default; it only had relatively insignificant secured 

indebtedness owing to Jeffries, with whom it had a brokerage account, and one other entity, 

Frontier State Bank. The Debtor also did not have problems with its trade vendors or landlords. 

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Appx. 0691

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Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 39 of 266

000776

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The Debtor also did not suffer any type of catastrophic business calamity. In fact, the Debtor filed 

for Chapter 11 protection six months before the onset of the COVID-19 pandemic. Rather, the 

Debtor filed for Chapter 11 protection due to a myriad of massive, unrelated, business litigation 

claims that it faced—many of which had finally become liquidated (or were about to become 

liquidated) after a decade or more of contentious litigation in multiple forums all over the world. 

The Committee in this case has referred to the Debtor—under its former chief executive, Mr. 

Dondero—as a “serial litigator.” The Bankruptcy Court agrees with that description. By way of 

example, the members of the Committee (and their history of litigation with the Debtor and others 

in the Highland complex) are as follows: 

a. The Redeemer Committee of the Highland Crusader Fund (the “Redeemer 

Committee”). This Committee member obtained an arbitration award against the 

Debtor in the amount of $190,824,557, inclusive of interest, approximately five 

months before the Petition Date, from a panel of the American Arbitration 

Association. It was on the verge of having that award confirmed by the Delaware 

Chancery Court immediately prior to the Petition Date, after years of disputes that 

started in late 2008 (and included legal proceedings in Bermuda). This creditor’s 

claim was settled during this Chapter 11 Case in the amount of approximately 

$137,696,610 (subject to other adjustments and details not relevant for this 

purpose). 

b. Acis Capital Management, L.P., and Acis Capital Management GP, LLC 

(“Acis”). Acis was formerly in the Highland complex of companies, but was not 

affiliated with Highland as of the Petition Date. This Committee member and its 

now-owner, Joshua Terry, were involved in litigation with the Debtor dating back 

to 2016. Acis was forced by Mr. Terry (who was a former Highland portfolio 

manager) into an involuntary chapter 11 bankruptcy in the Bankruptcy Court for 

the Northern District of Texas, Dallas Division before the Bankruptcy Court in 

2018, after Mr. Terry obtained an approximately $8 million arbitration award and 

judgment against Acis. Mr. Terry ultimately was awarded the equity ownership of 

Acis by the Bankruptcy Court in the Acis bankruptcy case. Acis subsequently 

asserted a multi-million dollar claim against Highland in the Bankruptcy Court for 

Highland’s alleged denuding of Acis to defraud its creditors—primarily Mr. Terry. 

The litigation involving Acis and Mr. Terry dates back to mid-2016 and has 

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Appx. 0692

Case 3:21-cv-01710-N Document 10-19 Filed 10/05/21 Page 40 of 266 PageID 746

Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 40 of 266

000777

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continued on with numerous appeals of Bankruptcy Court orders, including one 

appeal still pending at the Fifth Circuit Court of Appeals. There was also litigation 

involving Mr. Terry and Acis in the Royal Court of the Island of Guernsey and in 

a state court in New York. The Acis claim was settled during this Chapter 11 Case, 

in Bankruptcy Court-ordered mediation, for approximately $23 million (subject to 

other details not relevant for this purpose), and is the subject of an appeal being 

pursued by Mr. Dondero. 

c. UBS Securities LLC and UBS AG London Branch (“UBS”). UBS is a 

Committee member that filed a proof of claim in the amount of $1,039,957,799.40 

in this Chapter 11 Case. The UBS Claim was based on a judgment that UBS 

received from a New York state court in 2020. The underlying decision was issued 

in November 2019, after a multi-week bench trial (which had occurred many 

months earlier) on a breach of contract claim against non-Debtor entities in the 

Highland complex. The UBS litigation related to activities that occurred in 2008 

and 2009. The litigation involving UBS and Highland and affiliates was pending 

for more than a decade (there having been numerous interlocutory appeals during 

its history). The Debtor and UBS recently announced an agreement in principle for 

a settlement of the UBS claim (which came a few months after Bankruptcy Courtordered mediation) which will be subject to a 9019 motion to be filed with the 

Bankruptcy Court on a future date. 

d. Meta-E Discovery (“Meta-E”). Meta-E is a Committee member that is a vendor 

who happened to supply litigation and discovery-related services to the Debtor over 

the years. It had unpaid invoices on the Petition Date of more than $779,000. 

It is fair to say that the members of the Committee in this case all have wills of steel. They fought 

hard before and during this Chapter 11 Case. The members of the Committee, all of whom have 

volunteered to serve on the Claimant Trust Oversight Board post-confirmation, are highly 

sophisticated and have had highly sophisticated professionals representing them. They have 

represented their constituency in this case as fiduciaries extremely well. 

9. Other Key Creditor Constituents. In addition to the Committee members 

who were all embroiled in years of litigation with Debtor and its affiliates in various ways, the 

Debtor has been in litigation with Patrick Daugherty, a former limited partner and employee of the 

Debtor, for many years in both Delaware and Texas state courts. Mr. Daugherty filed an amended 

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Appx. 0693

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Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 41 of 266

000778

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proof of claim in this Chapter 11 Case for $40,710,819.42 relating to alleged breaches of 

employment-related agreements and for defamation arising from a 2017 press release posted by 

the Debtor. The Debtor and Mr. Daugherty recently announced a settlement of Mr. Daugherty’s 

claim pursuant to which he will receive $750,000 in cash on the Effective Date of the Plan, an 

$8.25 million general unsecured claim, and a $2.75 million subordinated claim (subject to other 

details not relevant for this purpose). Additionally, entities collectively known as “HarbourVest” 

invested more than $70 million with an entity in the Highland complex and asserted a $300 million 

proof of claim against the Debtor in this case, alleging, among other things, fraud and RICO 

violations. HarbourVest’s claim was settled during the bankruptcy case for a $45 million general 

unsecured claim and a $35 million subordinated claim, and that settlement is also being appealed 

by a Dondero Entity. 

10. Other Claims Asserted. Other than the Claims just described, most of the 

other Claims in this Chapter 11 Case are Claims asserted against the Debtor by: (a) entities in the 

Highland complex—most of which entities the Bankruptcy Court finds to be controlled by Mr. 

Dondero; (b) employees who contend that are entitled to large bonuses or other types of deferred 

compensation; and (c) numerous law firms that worked for the Debtor prior to the Petition Date 

and had outstanding amounts due for their prepetition services.

11. Not Your Garden Variety Post-Petition Corporate Governance 

Structure. Yet another reason this is not your garden variety chapter 11 case is its post-petition 

corporate governance structure. Immediately from its appointment, the Committee’s relationship 

with the Debtor was contentious at best. First, the Committee moved for a change of venue from 

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Appx. 0694

Case 3:21-cv-01710-N Document 10-19 Filed 10/05/21 Page 42 of 266 PageID 748

Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 42 of 266

000779

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Delaware to Dallas. Second, the Committee (and later, the United States Trustee) expressed its 

then-desire for the appointment of a chapter 11 trustee due to its concerns over and distrust of Mr. 

Dondero, his numerous conflicts of interest, and his history of alleged mismanagement (and 

perhaps worse). 

12. Post-Petition Corporate Governance Settlement with Committee. After 

spending many weeks under the threat of the potential appointment of a trustee, the Debtor and 

Committee engaged in substantial and lengthy negotiations resulting in a corporate governance 

settlement approved by the Bankruptcy Court on January 9, 2020.5

 As a result of this settlement, 

among other things, Mr. Dondero relinquished control of the Debtor and resigned his positions as 

an officer or director of the Debtor and its general partner, Strand. As noted above, Mr. Dondero 

agreed to this settlement pursuant a stipulation he executed,6

 and he also agreed not to cause any 

Related Entity (as defined in the Settlement Motion) to terminate any agreements with the Debtor. 

The January 9 Order also (a) required that the Bankruptcy Court serve as “gatekeeper” prior to the 

commencement of any litigation against the three independent board members appointed to 

oversee and lead the Debtor’s restructuring in lieu of Mr. Dondero and (b) provided for the 

exculpation of those board members by limiting claims subject to the “gatekeeper” provision to 

those alleging willful misconduct and gross negligence. 

5

 This order is hereinafter referred to as the “January 9 Order” and was entered by the Court on January 9, 2020 

[Docket No. 339] pursuant to the Motion of the Debtor to Approve Settlement with Official Committee of Unsecured 

Creditors Regarding the Governance of the Debtor and Procedures for Operation in the Ordinary Course [Docket 

No. 281] (the “Settlement Motion”). 

6 See Stipulation in Support of Motion of the Debtor for Approval of Settlement With the Official Committee of 

Unsecured Creditors Regarding Governance of the Debtor and Procedures for Operations in Ordinary Course

[Docket No. 338] (the “Stipulation”). 

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Appx. 0695

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Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 43 of 266

000780

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13. Appointment of Independent Directors. As part of the Bankruptcy 

Court-approved settlement, three eminently qualified independent directors were chosen to lead 

Highland through its Chapter 11 Case. They are: James P. Seery, Jr., John S. Dubel (each chosen 

by the Committee), and Retired Bankruptcy Judge Russell Nelms. These three individuals are 

each technically independent directors of Strand (Mr. Dondero had previously been the sole 

director of Strand and, thus, the sole person in ultimate control of the Debtor). The three 

independent board members’ resumes are in evidence. The Bankruptcy Court later approved Mr. 

Seery’s appointment as the Debtor’s Chief Executive Officer, Chief Restructuring Officer, and 

Foreign Representative. Suffice it to say that this settlement and the appointment of the 

independent directors changed the entire trajectory of the case and saved the Debtor from the 

appointment of a trustee. The Bankruptcy Court and the Committee each trusted the independent 

directors. They were the right solution at the right time. Because of the unique character of the 

Debtor’s business, the Bankruptcy Court believed the appointment of three qualified independent 

directors was a far better outcome for creditors than the appointment of a conventional chapter 11 

trustee. Each of the independent directors brought unique qualities to the table. Mr. Seery, in 

particular, knew and had vast experience at prominent firms with high-yield and distressed 

investing similar to the Debtor’s business. Mr. Dubel had 40 years of experience restructuring 

large complex businesses and serving on boards in this context. And Retired Judge Nelms had not 

only vast bankruptcy experience but seemed particularly well-suited to help the Debtor maneuver 

through conflicts and ethical quandaries. By way of comparison, in the chapter 11 case of Acis, 

the former affiliate of Highland that the Bankruptcy Court presided over and which company was 

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Appx. 0696

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Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 44 of 266

000781

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much smaller in size and scope than Highland (managing only 5-6 CLOs), the creditors elected a 

chapter 11 trustee who was not on the normal trustee rotation panel in this district but, rather, was 

a nationally known bankruptcy attorney with more than 45 years of large chapter 11 experience. 

While the Acis chapter 11 trustee performed valiantly, he was sued by entities in the Highland 

complex shortly after he was appointed (which the Bankruptcy Court had to address). The Acis 

trustee was also unable to persuade the Debtor and its affiliates to agree to any actions taken in the 

case, and he finally obtained confirmation of Acis’ chapter 11 plan over the objections of the 

Debtor and its affiliates on his fourth attempt (which confirmation was promptly appealed). 

14. Conditions Required by Independent Directors. Given the experiences 

in Acis and the Debtor’s culture of constant litigation, it was not as easy to get such highly qualified 

persons to serve as independent board members and, later, as the Debtor’s Chief Executive Officer, 

as it would be in an ordinary chapter 11 case. The independent board members were stepping into 

a morass of problems. Naturally, they were worried about getting sued no matter how defensible 

their efforts—given the litigation culture that enveloped Highland historically. Based on the 

record of this Case and the proceedings in the Acis chapter 11 case, it seemed as though everything 

always ended in litigation at Highland. The Bankruptcy Court heard credible testimony that none 

of the independent directors would have taken on the role of independent director without (1) an 

adequate directors and officers’ (“D&O”) insurance policy protecting them; (2) indemnification 

from Strand that would be guaranteed by the Debtor; (3) exculpation for mere negligence claims; 

and (4) a gatekeeper provision prohibiting the commencement of litigation against the independent 

directors without the Bankruptcy Court’s prior authority. This gatekeeper provision was also 

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Appx. 0697

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Exhibit 19 Page 45 of 266

000782

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included in the Bankruptcy Court’s order authorizing the appointment of Mr. Seery as the Debtor’s 

Chief Executive Officer, Chief Restructuring Officer, and Foreign Representative entered on 

July 16, 2020.7

 The gatekeeper provisions in both the January 9 Order and July 16 Order are 

precisely analogous to what bankruptcy trustees have pursuant to the so-called “Barton Doctrine” 

(first articulated in an old Supreme Court case captioned Barton v. Barbour, 104 U.S. 126 (1881)). 

The Bankruptcy Court approved all of these protections in the January 9 Order and the July 16 

Order, and no one appealed either of those orders. As noted above, Mr. Dondero signed the 

Stipulation that led to the settlement that was approved by the January 9 Order. The Bankruptcy 

Court finds that, like the Committee, the independent board members have been resilient and 

unwavering in their efforts to get the enormous problems in this case solved. They seem to have 

at all times negotiated hard and in good faith, which culminated in the proposal of the Plan 

currently before the Bankruptcy Court. As noted previously, they completely changed the 

trajectory of this case. 

15. Not Your Garden Variety Mediators. And still another reason why this 

was not your garden variety case was the mediation effort. In the summer of 2020, roughly nine 

months into the chapter 11 case, the Bankruptcy Court ordered mediation among the Debtor, Acis, 

UBS, the Redeemer Committee, and Mr. Dondero. The Bankruptcy Court selected co-mediators 

because mediation among these parties seemed like such a Herculean task—especially during 

COVID-19 where people could not all be in the same room. Those co-mediators were: Retired 

7 See Order Approving the Debtor’s Motion Under Bankruptcy Code Sections 105(a) and 363(b) Authorizing 

Retention of James P. Seery, Jr., as Chief Executive Officer, Chief Restructuring Officer, and Foreign Representative 

Nunc Pro Tunc to March 15, 2020 [Docket No. 854] entered on July 16, 2020 (the “July 16 Order”) 

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Exhibit 19 Page 46 of 266

000783

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Bankruptcy Judge Alan Gropper from the Southern District of New York, who had a distinguished 

career presiding over complex chapter 11 cases, and Ms. Sylvia Mayer, who likewise has had a 

distinguished career, first as a partner at a preeminent law firm working on complex chapter 11 

cases, and subsequently as a mediator and arbitrator in Houston, Texas. As noted earlier, the 

Redeemer Committee and Acis claims were settled during the mediation—which seemed nothing 

short of a miracle to the Bankruptcy Court—and the UBS claim was settled several months later 

and the Bankruptcy Court believes the ground work for that ultimate settlement was laid, or at 

least helped, through the mediation. And, as earlier noted, other significant claims have been 

settled during this case, including those of HarbourVest (who asserted a $300 million claim) and 

Patrick Daugherty (who asserted a $40 million claim). The Bankruptcy Court cannot stress 

strongly enough that the resolution of these enormous claims—and the acceptance by all of these 

creditors of the Plan that is now before the Bankruptcy Court—seems nothing short of a miracle. 

It was more than a year in the making. 

16. Not Your Garden Variety Plan Objectors (That Is, Those That 

Remain). Finally, a word about the current, remaining objectors to the Plan before the Bankruptcy 

Court. Once again, the Bankruptcy Court will use the phrase “not your garden variety”, which 

phrase applies to this case for many reasons. Originally, there were over a dozen objections filed 

to the Plan. The Debtor then made certain amendments or modifications to the Plan to address 

some of these objections, none of which require further solicitation of the Plan for reasons set forth 

in more detail below. The only objectors to the Plan left at the time of the Confirmation Hearing 

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Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 47 of 266

000784

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were Mr. Dondero [Docket No. 1661] and entities that the Bankruptcy Court finds are owned 

and/or controlled by him and that filed the following objections: 

a. Objection to Confirmation of the Debtor’s Fifth Amended Plan of Reorganization

(filed by Get Good Trust and The Dugaboy Investment Trust) [Docket No. 1667]; 

b. Objection to Confirmation of Fifth Amended Plan of Reorganization of Highland 

Capital Management, L.P. (filed by Highland Capital Management Fund Advisors, 

L.P., Highland Fixed Income Fund, Highland Funds I and its series, Highland 

Funds II and its series, Highland Global Allocation Fund, Highland Healthcare 

Opportunities Fund, Highland Income Fund, Highland Merger Arbitrate Fund, 

Highland Opportunistic Credit Fund, Highland Small-Cap Equity Fund, Highland 

Socially Responsible Equity Fund, Highland Total Return Fund, Highland/iBoxx 

Senior Loan ETF, NexPoint Advisors, L.P., NexPoint Capital, Inc., NexPoint Real 

Estate Strategies Fund, NexPoint Strategic Opportunities Fund) [Docket No. 

1670]; 

c. A Joinder to the Objection filed at 1670 by: NexPoint Real Estate Finance Inc., 

NexPoint Real Estate Capital, LLC, NexPoint Residential Trust, Inc., NexPoint 

Hospitality Trust, NexPoint Real Estate Partners, LLC, NexPoint Multifamily 

Capital Trust, Inc., VineBrook Homes Trust, Inc., NexPoint Real Estate Advisors, 

L.P., NexPoint Real Estate Advisors II, L.P., NexPoint Real Estate Advisors III, 

L.P., NexPoint Real Estate Advisors IV, L.P., NexPoint Real Estate Advisors V, 

L.P., NexPoint Real Estate Advisors VI, L.P., NexPoint Real Estate Advisors VII, 

L.P., NexPoint Real Estate Advisors VIII, L.P., and any funds advised by the 

foregoing [Docket No. 1677]; 

d. NexPoint Real Estate Partners LLC’s Objection to Debtor’s Fifth Amended Plan 

of Reorganization (filed by NexPoint Real Estate Partners LLC f/k/a HCRE 

Partners LLC) [Docket No. 1673]; and 

e. NexBank’s Objection to Debtor’s Fifth Amended Plan of Reorganization (filed by 

NexBank Title, Inc., NexBank Securities, Inc., NexBank Capital, Inc., and 

NexBank) [Docket No. 1676]. The entities referred to in (i) through (v) of this 

paragraph are hereinafter referred to as the “Dondero Related Entities”). 

17. Questionability of Good Faith as to Outstanding Confirmation 

Objections. Mr. Dondero and the Dondero Related Entities technically have standing to object to 

the Plan, but the remoteness of their economic interests is noteworthy, and the Bankruptcy Court 

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Exhibit 19 Page 48 of 266

000785

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questions the good faith of Mr. Dondero’s and the Dondero Related Entities’ objections. In fact, 

the Bankruptcy Court has good reason to believe that these parties are not objecting to protect 

economic interests they have in the Debtor but to be disruptors. Mr. Dondero wants his company 

back. This is understandable, but it is not a good faith basis to lob objections to the Plan. As 

detailed below, the Bankruptcy Court has slowed down plan confirmation multiple times and urged 

the parties to talk to Mr. Dondero in an attempt to arrive at what the parties have repeatedly referred 

to as a “grand bargain,” the ultimate goal to resolve the Debtor’s restructuring. The Debtor and 

the Committee represent that they have communicated with Mr. Dondero regarding a grand 

bargain settlement, and the Bankruptcy Court believes that they have. 

18. Remote Interest of Outstanding Confirmation Objectors. To be specific 

about the remoteness of Mr. Dondero’s and the Dondero Related Entities’ interests, the Bankruptcy 

Court will address them each separately. First, Mr. Dondero has a pending objection to the Plan. 

Mr. Dondero’s only economic interest with regard to the Debtor is an unliquidated indemnification 

claim (and, based on everything the Bankruptcy Court has heard, his indemnification claims would 

be highly questionable at this juncture). Mr. Dondero owns no equity in the Debtor directly. Mr. 

Dondero owns the Debtor’s general partner, Strand, which in turn owns a quarter percent of the 

total equity in the Debtor. Second, a joint objection has been filed by The Dugaboy Trust 

(“Dugaboy”) and the Get Good Trust (“Get Good”). The Dugaboy Trust was created to manage 

the assets of Mr. Dondero and his family and owns a 0.1866% limited partnership interest in the 

Debtor. See Disclosure Statement at 7, n.3. The Bankruptcy Court is not clear what economic 

interest the Get Good Trust has, but it likewise seems to be related to Mr. Dondero. Get Good 

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Appx. 0701

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Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 49 of 266

000786

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filed three proofs of claim relating to a pending federal tax audit of the Debtor’s 2008 return, which 

the Debtor believes arise from Get Good’s equity security interests and are subject to subordination 

as set forth in its Confirmation Brief. Dugaboy filed three claims against the Debtor: (a) an 

administrative claim relating to the Debtor’s alleged postpetition management of Multi-Strat 

Credit Fund, L.P., (b) a prepetition claim against a subsidiary of the Debtor for which it seeks to 

pierce the corporate veil, each of which the Debtor maintains are frivolous in the Confirmation 

Brief, and (c) a claim arising from its equity security interest in the Debtor, which the Debtor 

asserts should be subordinated. Another group of objectors that has joined together in one 

objection is what the Bankruptcy Court will refer to as the “Highland Advisors and Funds.” See

Docket No. 1863. The Bankruptcy Court understands they assert disputed administrative expense 

claims against the estate that were filed shortly before the Confirmation Hearing on January 23, 

2021 [Docket No. 1826], and during the Confirmation Hearing on February 3, 2021 [Docket No. 

1888]. At the Confirmation Hearing, Mr. Post testified on behalf of the Highland Advisors and 

Funds that the Funds have independent board members that run the Funds, but the Bankruptcy 

Court was not convinced of their independence from Mr. Dondero because none of the so-called 

independent board members have ever testified before the Bankruptcy Court and all have been 

engaged with the Highland complex for many years. Notably, the Court questions Mr. Post’s 

credibility because, after more than 12 years of service, he abruptly resigned from the Debtor in 

October 2020 at the exact same time that Mr. Dondero resigned at the Board of Directors’ request, 

and he is currently employed by Mr. Dondero. Moreover, Dustin Norris, a witness in a prior 

proceeding (whose testimony was made part of the record at the Confirmation Hearing), recently 

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Appx. 0702

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Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 50 of 266

000787

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testified on behalf of the Highland Advisors and Funds in another proceeding that Mr. Dondero 

owned and/or controlled these entities. Finally, various NexBank entities objected to the Plan. 

The Bankruptcy Court does not believe they have liquidated claims against the Debtor. Mr. 

Dondero appears to be in control of these entities as well. 

19. Background Regarding Dondero Objecting Parties. To be clear, the 

Bankruptcy Court has allowed all these objectors to fully present arguments and evidence in 

opposition to confirmation, even though their economic interests in the Debtor appear to be 

extremely remote and the Bankruptcy Court questions their good faith. Specifically, the 

Bankruptcy Court considers them all to be marching pursuant to the orders of Mr. Dondero. In 

the recent past, Mr. Dondero has been subject to a temporary restraining order and preliminary 

injunction by the Bankruptcy Court for interfering with Mr. Seery’s management of the Debtor in 

specific ways that were supported by evidence. Around the time that this all came to light and the 

Bankruptcy Court began setting hearings on the alleged interference, Mr. Dondero’s company 

phone, which he had been asked to turn in to Highland, mysteriously went missing. The 

Bankruptcy Court merely mentions this in this context as one of many reasons that the Bankruptcy 

Court has to question the good faith of Mr. Dondero and his affiliates in raising objections to 

confirmation of the Plan. 

20. Other Confirmation Objections. Other than the objections filed by Mr. 

Dondero and the Dondero Related Entities, the only other pending objection to the Plan is the 

United States Trustee’s Limited Objection to Confirmation of Debtor’s Fifth Amended Plan of 

Reorganization [Docket No. 1671], which objected to the Plan’s exculpation, injunction, and 

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Appx. 0703

Case 3:21-cv-01710-N Document 10-19 Filed 10/05/21 Page 51 of 266 PageID 757

Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 51 of 266

000788

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 21 

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Debtor release provisions. In juxtaposition, to these pending objections, the Bankruptcy Court 

notes that the Debtor resolved the following objections to the Plan: 

a. CLO Holdco, Ltd.’s Joinder to Objection to Confirmation of Fifth Amended Plan 

of Reorganization of Highland Capital Management, L.P. and Supplemental 

Objections to Plan Confirmation [Docket No. 1675]. This Objection has been 

resolved pursuant to mutually agreed language by the parties set forth in paragraph 

VV of the Confirmation Order; 

b. Objection of Dallas County, City of Allen, Allen ISD, City of Richardson, and 

Kaufman County to Confirmation of the Fifth Amended Plan of Reorganization of 

Highland Capital Management, L.P. [Docket No. 1662]. This Objection has been 

resolved pursuant to mutually agreed language by the parties set forth in paragraph 

QQ of the Confirmation Order; 

c. Senior Employees’ Limited Objection to Debtor’s Fifth Amended Plan of 

Reorganization (filed by Scott Ellington, Thomas Surgent, Frank Waterhouse, 

Isaac Leventon) [Docket No. 1669]. This Objection has been resolved pursuant to 

mutually agreed language by the parties set forth in paragraph 82 and paragraphs 

RR and SS of the Confirmation Order; 

d. Limited Objection of Jack Yang and Brad Borud to Fifth Amended Plan of 

Reorganization of Highland Capital Management, L.P. [Docket No. 1666] and the 

amended joinder filed by Davis Deadman, Paul Kauffman and Todd Travers 

[Docket No. 1679]. This Objection and the amended joinder were resolved by 

agreement of the parties pursuant to modifications to the Plan filed by the Debtor; 

e. United States’ (IRS) Limited Objection to Debtor’s Fifth Amended Plan of 

Reorganization [Docket No. 1668]. This Objection has been resolved pursuant to 

mutually agreed language by the parties set forth in paragraphs TT and UU of the 

Confirmation Order; and 

f. Patrick Hagaman Daugherty’s Objection to Confirmation of Fifth Amended Plan 

of Reorganization [Docket No. 1678]. This objection was resolved by the parties 

pursuant to the settlement of Mr. Daugherty’s claim announced on the record of the 

Confirmation Hearing. 

21. Capitalized Terms. Capitalized terms used herein, but not defined herein, 

shall have the respective meanings attributed to such terms in the Plan and the Disclosure 

Statement, as applicable. 

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Appx. 0704

Case 3:21-cv-01710-N Document 10-19 Filed 10/05/21 Page 52 of 266 PageID 758

Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 52 of 266

000789

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 22 

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22. Jurisdiction and Venue. The Bankruptcy Court has jurisdiction over the 

Debtor’s Chapter 11 Case pursuant to 28 U.S.C. §§ 157 and 1334. This is a core proceeding 

pursuant to 28 U.S.C. § 157(b)(2). Venue of this proceeding and this Chapter 11 Case is proper 

in this district and in the Bankruptcy Court pursuant to 28 U.S.C. §§ 1408 and 1409. 

23. Chapter 11 Petition. On the Petition Date, the Debtor commenced a 

voluntary case under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court 

for the District of Delaware, which case was transferred to the Bankruptcy Court on December 19, 

2019. The Debtor continues to operate its business and manage its property as debtor in possession 

pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No trustee or examiner has been 

appointed in this Chapter 11 Case. The Office of the United States Trustee appointed the 

Committee on October 29, 2019. 

24. Judicial Notice. The Bankruptcy Court takes judicial notice of the docket 

in this Chapter 11 Case maintained by the clerk of the Bankruptcy Court and the court-appointed 

claims agent, Kurtzman Carson Consultants LLC (“KCC”), including, without limitation, all 

pleadings, notices, and other documents filed, all orders entered, and all evidence and arguments 

made, proffered or adduced at the hearings held before the Bankruptcy Court during this Chapter 

11 Case, including, without limitation, the hearing to consider the adequacy of the Disclosure 

Statement and the Confirmation Hearing, as well as all pleadings, notices, and other documents 

filed, all orders entered, and all evidence and arguments made, proffered, or adduced at hearings 

held before the Bankruptcy Court or the District Court for the Northern District of Texas in 

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Appx. 0705

Case 3:21-cv-01710-N Document 10-19 Filed 10/05/21 Page 53 of 266 PageID 759

Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 53 of 266

000790

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connection with an adversary proceeding or appellate proceeding, respectively, related to this 

Chapter 11 Case. 

25. Plan Supplement Documents. Prior to the Confirmation Hearing, the 

Debtor filed each of the Plan Supplements. The Plan Supplements contain, among other 

documents, the Retained Causes of Action, the Claimant Trust Agreement, the Litigation SubTrust Agreement, the Senior Employee Stipulation, the Related Entity List, the Schedule of 

Employees, the Reorganized Limited Partnership Agreement, supplements to the Liquidation 

Analysis/Financial Projections, the Schedule of Contracts and Leases to be Assumed, and the other 

Plan Documents set forth therein (collectively, the “Plan Supplement Documents”). 

26. Retained Causes of Action Adequately Preserved. The Bankruptcy 

Court finds that the list of Retained Causes of Action included in the Plan Supplementssufficiently 

describes all potential Retained Causes of Action, provides all persons with adequate notice of any 

Causes of Action regardless of whether any specific claim to be brought in the future is listed 

therein or whether any specific potential defendant or other party is listed therein, and satisfies 

applicable law in all respects to preserve all of the Retained Causes of Action. The definition of 

the Causes of Action and Schedule of Retained Causes of Action, and their inclusion in the Plan, 

specifically and unequivocally preserve the Causes of Action for the benefit of the Reorganized 

Debtor, the Claimant Trust, or the Litigation Sub-Trust, as applicable. 

27. Plan Modifications Are Non-Material. In addition to the Plan 

Supplements, the Debtor made certain non-material modifications to the Plan, which are reflected 

in (i) the Redline of Fifth Amended Plan of Reorganization of Highland Capital Management, L.P. 

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Appx. 0706

Case 3:21-cv-01710-N Document 10-19 Filed 10/05/21 Page 54 of 266 PageID 760

Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 54 of 266

000791

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(as Modified) filed on January 22, 2021 [Docket No. 1809], and (ii) Exhibit B to the Debtor’s 

Notice of Filing of Plan Supplement to Fifth Amended Plan of Reorganization of Highland Capital 

Management, L.P. (as Modified) filed on February 1, 2021 [Docket No. 1875] (collectively, the 

“Plan Modifications”). Section 1127(a) of the Bankruptcy Code provides that a plan proponent 

may modify its plan at any time before confirmation so long as such modified plan meets the 

requirements of sections 1122 and 1123 of the Bankruptcy Code. None of the modifications set 

forth in the Plan Supplements or the Plan Modifications require any further solicitation pursuant 

to sections 1125, 1126, or 1127 of the Bankruptcy Code and Bankruptcy Rule 3019, because, 

among other things, they do not materially adversely change the treatment of the claims of any 

creditors or interest holders who have not accepted, in writing, such supplements and 

modifications. Among other things, there were changes to the projections that the Debtor filed 

shortly before the Confirmation Hearing (which included projected distributions to creditors and 

a comparison of projected distributions under the Plan to potential distributions under a 

hypothetical chapter 7 liquidation). The Plan Supplements and Plan Modifications did not mislead 

or prejudice any creditors or interest holders nor do they require that Holders of Claims or Equity 

Interests be afforded an opportunity to change previously cast votes to accept or reject the Plan. 

Specifically, the Amended Liquidation Analysis/Financial Projections filed on February 1, 2021 

[Docket No. 1875] do not constitute any material adverse change to the treatment of any creditors 

or interest holders but, rather, simply update the estimated distributions based on Claims that were 

settled in the interim and provide updated financial data. The filing and notice of the Plan 

Supplements and Plan Modifications were appropriate and complied with the requirements of 

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Appx. 0707

Case 3:21-cv-01710-N Document 10-19 Filed 10/05/21 Page 55 of 266 PageID 761

Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 55 of 266

000792

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section 1127(a) of the Bankruptcy Code and the Bankruptcy Rules, and no other solicitation or 

disclosure or further notice is or shall be required. The Plan Supplements and Plan Modifications 

each became part of the Plan pursuant section 1127(a) of the Bankruptcy Code. The Debtor or 

Reorganized Debtor, as applicable, is authorized to modify the Plan or Plan Supplement 

Documents following entry of this Confirmation Order in a manner consistent with section 1127(b) 

of the Bankruptcy Code, the Plan, and, if applicable, the terms of the applicable Plan Supplement 

Document. 

28. Notice of Transmittal, Mailing and Publication of Materials. As is 

evidenced by the Voting Certifications and the Affidavits of Service and Publication, the 

transmittal and service of the Plan, the Disclosure Statement, Ballots, and Confirmation Hearing 

Notice were adequate and sufficient under the circumstances, and all parties required to be given 

notice of the Confirmation Hearing (including the deadline for filing and serving objections to the 

confirmation of the Plan) have been given due, proper, timely, and adequate notice in accordance 

with the Disclosure Statement Order and in compliance with the Bankruptcy Code, the Bankruptcy 

Rules, the Local Rules, and applicable non-bankruptcy law, and such parties have had an 

opportunity to appear and be heard with respect thereto. No other or further notice is required. 

The publication of the Confirmation Hearing Notice, as set forth in the Notice of Affidavit of 

Publication dated December 3, 2020 [Docket No. 1505], complied with the Disclosure Statement 

Order. 

29. Voting. The Bankruptcy Court has reviewed and considered the Voting 

Certifications. The procedures by which the Ballots for acceptance or rejection of the Plan were 

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Case 3:21-cv-01710-N Document 10-19 Filed 10/05/21 Page 56 of 266 PageID 762

Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 56 of 266

000793

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distributed and tabulated, including the tabulation as subsequently amended to reflect the 

settlement of certain Claims to be Allowed in Class 7, were fairly and properly conducted and 

complied with the Disclosure Statement Order, the Bankruptcy Code, the Bankruptcy Rules, and 

the Local Rules. 

30. Bankruptcy Rule 3016(a). In accordance with Bankruptcy Rule 3016(a), 

the Plan is dated and identifies the Debtor as the proponent of the Plan. 

31. Plan Compliance with Bankruptcy Code (11 U.S.C. § 1129(a)(1)). As 

set forth below, the Plan complies with all of the applicable provisions of the Bankruptcy Code, 

thereby satisfying section 1129(a)(1) of the Bankruptcy Code. 

32. Proper Classification (11 U.S.C. §§ 1122, 1123(a)(1)). Section 1122 of 

the Bankruptcy Code provides that a plan may place a claim or interest in a particular class only if 

such claim or interest is substantially similar to the other claims or interest of such class. The 

Claims and Equity Interests placed in each Class are substantially similar to other Claims and 

Equity Interests, as the case may be, in each such Class. Valid business, factual, and legal reasons 

exist for separately classifying the various Classes of Claims and Equity Interests created under 

the Plan, and such Classes do not unfairly discriminate between Holders of Claims and Equity 

Interests. 

33. Classification of Secured Claims. Class 1 (Jefferies Secured Claim) and 

Class 2 (Frontier Secured Claim) each constitute separate secured claims held by Jefferies LLC 

and Frontier State Bank, respectively, and it is proper and consistent with section 1122 of the 

Bankruptcy Code to separately classify the claims of these secured creditors. Class 3 (Other 

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Appx. 0709

Case 3:21-cv-01710-N Document 10-19 Filed 10/05/21 Page 57 of 266 PageID 763

Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 57 of 266

000794

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Secured Claims) consists of other secured claims (to the extent any exist) against the Debtor, are 

not substantially similar to the Secured Claims in Class 1 or Class 2, and are also properly 

separately classified. 

34. Classification of Priority Claims. Class 4 (Priority Non-Tax Claims) 

consists of Claims entitled to priority under section 507(a), other than Priority Tax Claims, and are 

properly separately classified from non-priority unsecured claims. Class 5 (Retained Employee 

Claims) consists of the potential claims of employees who may be retained by the Debtor on the 

Effective Date, which claims will be Reinstated under the Plan, are not substantially similar to 

other Claims against the Debtor, and are properly classified. 

35. Classification of Unsecured Claims. Class 6 (PTO Claims) consists solely 

of the claims of the Debtor’s employees for unpaid paid time off in excess of the $13,650 statutory 

cap amount under sections 507(a)(4) and (a)(5) of the Bankruptcy Code and are dissimilar from 

other unsecured claims in Class 7 and Class 8. Class 7 (Convenience Claims) allows holders of 

eligible and liquidated Claims (below a certain threshold dollar amount) to receive a cash payout 

of the lesser of 85% of the Allowed amount of the creditor’s Claim or such holder’s pro rata share 

of the Convenience Claims Cash Pool. Class 7 (Convenience Claims) are provided for 

administrative convenience purposes in order to allow creditors, most of whom are either trade 

creditors or holders of professional claims, to receive treatment provided under Class 7 in lieu of 

the treatment of Class 8 (General Unsecured Claims). The Plan also provides for reciprocal “opt 

out” mechanisms to allow holders of Class 7 Claims to elect to receive the treatment for Class 8 

Claims. Class 8 creditors primarily constitute the litigation claims of the Debtor. Class 8 Creditors 

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Appx. 0710

Case 3:21-cv-01710-N Document 10-19 Filed 10/05/21 Page 58 of 266 PageID 764

Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 58 of 266

000795

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will receive Claimant Trust Interests which will be satisfied pursuant to the terms of the Plan. 

Class 8 also contains an “opt out” mechanism to allow holders of liquidated Class 8 Claims at or 

below a $1 million threshold to elect to receive the treatment of Class 7 Convenience Claims. The 

Claims in Class 7 (primarily trade and professional Claims against the Debtor) are not substantially 

similar to the Claims in Class 8 (primarily the litigation Claims against the Debtor), and are 

appropriately separately classified. Valid business reasons also exist to classify creditors in Class 

7 separately from creditors in Class 8. Class 7 creditors largely consist of liquidated trade or 

service providers to the Debtor. In addition, the Claims of Class 7 creditors are small relative to 

the large litigation claims in Class 8. Furthermore, the Class 8 Claims were overwhelmingly 

unliquidated when the Plan was filed. The nature of the Class 7 Claims as being largely liquidated 

created an expectation of expedited payment relative to the largely unliquidated Claims in Class 

8, which consists in large part of parties who have been engaged in years, and in some cases over 

a decade of litigation with the Debtor. Separate classification of Class 7 and Class 8 creditors was 

the subject of substantial arm’s-length negotiations between the Debtor and the Committee to 

appropriately reflect these relative differences. 

36. Classification of Equity Interests. The Plan properly separately classifies 

the Equity Interests in Class 10 (Class B/C Limited Partnership Interests) from the Equity Interests 

in Class 11 (Class A Limited Partnership Interests) because they represent different types of equity 

security interests in the Debtor and different payment priorities. 

37. Elimination of Vacant Classes. Section III.C of the Plan provides for the 

elimination of Classes that do not have at least one holder of a Claim or Equity Interest that is 

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Appx. 0711

Case 3:21-cv-01710-N Document 10-19 Filed 10/05/21 Page 59 of 266 PageID 765

Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 59 of 266

000796

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 29 

DOCS_SF:104487.21 36027/002

Allowed in an amount greater than zero for purposes of voting to accept or reject the Plan, and are 

disregarded for purposes of determining whether the Plan satisfies section 1129(a)(8) of the 

Bankruptcy Code with respect to such Class. The purpose of this provision is to provide that a 

Class that does not have voting members shall not be included in the tabulation of whether that 

Class has accepted or rejected the Plan. Pursuant to the Voting Certifications, the only voting 

Class of Claims or Equity Interests that did not have any members is Class 5 (Retained 

Employees). As noted above, Class 5 does not have any voting members because any potential 

Claims in Class 5 would not arise, except on account of any current employees of the Debtor who 

may be employed as of the Effective Date, which is currently unknown. Thus, the elimination of 

vacant Classes provided in Article III.C of the Plan does not violate section 1122 of the Bankruptcy 

Code. Class 5 is properly disregarded for purposes of determining whether or not the Plan has 

been accepted under Bankruptcy Code section 1129(a)(8) because there are no members in that 

Class. However, the Plan properly provides for the treatment of any Claims that may potentially 

become members of Class 5 as of the Effective Date in accordance with the terms of the Plan. The 

Plan therefore satisfies section 1122 of the Bankruptcy Code. 

38. Classification of Claims and Designation of Non-Classified Claims (11 

U.S.C. §§ 1122, 1123(a)(1)). Section 1123(a)(1) of the Bankruptcy Code requires that the Plan 

specify the classification of claims and equity security interests pursuant to section 1122 of the 

Bankruptcy Code, other than claims specified in sections 507(a)(2), 507(a)(3), or 507(a)(8) of the 

Bankruptcy Code. In addition to Administrative Claims, Professional Fee Claims, and Priority 

Tax Claims, each of which need not be classified pursuant to section 1123(a)(1) of the Bankruptcy 

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Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 60 of 266

000797

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 30 

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Code, the Plan designates eleven (11) Classes of Claims and Equity Interests. The Plan satisfies 

sections 1122 and 1123(a)(1) of the Bankruptcy Code. 

39. Specification of Unimpaired Classes (11 U.S.C. § 1123(a)(2)). Article III 

of the Plan specifies that each of Class 1 (Jefferies Secured Claim), Class 3 (Other Secured 

Claims), Class 4 (Priority Non-Tax Claims), Class 5 (Retained Employee Claims), and Class 6 

(PTO Claims) are Unimpaired under the Plan. Thus, the requirement of section 1123(a)(2) of the 

Bankruptcy Code is satisfied. 

40. Specification of Treatment of Impaired Classes (11 U.S.C. § 

1123(a)(3)). Article III of the Plan designates each of Class 2 (Frontier Secured Claim), Class 7 

(Convenience Claims), Class 8 (General Unsecured Claims), Class 9 (Subordinated Claims), Class 

10 (Class B/C Limited Partnership Interests), and Class 11 (Class A Limited Partnership Interests) 

as Impaired and specifies the treatment of Claims and Equity Interests in such Classes. Thus, the 

requirement of section 1123(a)(3) of the Bankruptcy Code is satisfied. 

41. No Discrimination (11 U.S.C. § 1123(a)(4)). The Plan provides for the 

same treatment by the Plan proponent for each Claim or Equity Interest in each respective Class 

unless the Holder of a particular Claim or Equity Interest has agreed to a less favorable treatment 

of such Claim or Equity Interest. The Plan satisfies this requirement because Holders of Allowed 

Claims or Equity Interests in each Class will receive the same rights and treatment as other Holders 

of Allowed Claims or Equity Interests within such holder’s respective class, subject only to the 

voluntary “opt out” options afforded to members of Class 7 and Class 8 in accordance with the 

terms of the Plan. Thus, the requirement of section 1123(a)(4) of the Bankruptcy Code is satisfied. 

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Appx. 0713

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Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 61 of 266

000798

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 31 

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42. Implementation of the Plan (11 U.S.C. § 1123(a)(5)). Article IV of the 

Plan sets forth the means for implementation of the Plan which includes, but is not limited to, the 

establishment of: (i) the Claimant Trust; (ii) the Litigation Sub-Trust; (iii) the Reorganized Debtor; 

and (iv) New GP LLC, in the manner set forth in the Plan Documents, the forms of which are 

included in the Plan Supplements. 

a. The Claimant Trust. The Claimant Trust Agreement provides for the 

management of the Claimant Trust, as well as the Reorganized Debtor with the 

Claimant Trust serving as the managing member of New GP LLC (a wholly-owned 

subsidiary of the Claimant Trust that will manage the Reorganized Debtor as its 

general partner). The Claimant Trust, the Claimant Trustee, the management and 

monetization of the Claimant Trust Assets, and the management of the Reorganized 

Debtor (through the Claimant Trust’s role as managing member of New GP LLC) 

and the Litigation Sub-Trust will all be managed and overseen by the Claimant 

Trust Oversight Committee. Additionally, the Plan provides for the transfer to the 

Claimant Trust of all of the Debtor’s rights, title, and interest in and to all of the 

Claimant Trust Assets in accordance with section 1141 of the Bankruptcy Code and 

for the Claimant Trust Assets to automatically vest in the Claimant Trust free and 

clear of all Claims, Liens, encumbrances, or interests subject only to the Claimant 

Trust Interests and the Claimant Trust Expenses, as provided for in the Claimant 

Trust Agreement. The Claimant Trust will administer the Claimant Trust Assets as 

provided under the Plan and the Claimant Trust Agreement contained in the Plan 

Supplements. 

b. The Litigation Sub-Trust. The Plan and the Litigation Sub-Trust Agreement 

provide for the transfer to the Litigation Sub-Trust all of the Claimant Trust’s rights, 

title, and interest in and to all of the Estate Claims (as transferred to the Claimant 

Trust by the Debtor) in accordance with section 1141 of the Bankruptcy Code and 

for the Estate Claims to automatically vest in the Litigation Sub-Trust free and clear 

of all Claims, Liens, encumbrances, or interests subject only to the Litigation SubTrust Interests and the Litigation Sub-Trust Expenses, as provided for in the 

Litigation Sub-Trust Agreement. The Litigation Trustee is charged with 

investigating, pursuing, and otherwise resolving any Estate Claims (including those 

with respect to which the Committee has standing to pursue prior to the Effective 

Date pursuant to the January 9 Order) pursuant to the terms of the Litigation SubTrust Agreement and the Plan, regardless of whether any litigation with respect to 

any Estate Claim was commenced by the Debtor or the Committee prior to the 

Effective Date. 

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Exhibit 19 Page 62 of 266

000799

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c. The Reorganized Debtor. The Reorganized Debtor will administer the 

Reorganized Debtor Assets, which includes managing the wind down of the 

Managed Funds. 

The precise terms governing the execution of these restructuring transactions are set forth in greater 

detail in the applicable definitive documents included in the Plan Supplements, including the 

Claimant Trust Agreement, the Litigation Sub-Trust Agreement, and the Schedule of Retained 

Causes of Action. The Plan, together with the documents and forms of agreement included in the 

Plan Supplements, provides a detailed blueprint for the transactions contemplated by the Plan. The 

Plan’s various mechanisms provide for the Debtor’s continued management of its business as it 

seeks to liquidate the Debtor’s assets, wind down its affairs, and pay the Claims of the Debtor’s 

creditors. Upon full payment of Allowed Claims, plus interest as provided in the Plan, any residual 

value would then flow to the holders of Class 10 (Class B/C Limited Partnership Interests), and 

Class 11 (Class A Limited Partnership Interests). Finally, Mr. Seery testified that the Debtor 

engaged in substantial and arm’s length negotiations with the Committee regarding the Debtor’s 

post-Effective Date corporate governance, as reflected in the Plan. Mr. Seery testified that he 

believes the selection of the Claimant Trustee, Litigation Trustee, and members of the Claimant 

Trust Oversight Board are in the best interests of the Debtor’s economic constituents. Thus, the 

requirements of section 1123(a)(5) of the Bankruptcy Code are satisfied. 

43. Non-Voting Equity Securities (11 U.S.C. § 1123(a)(6)). The Debtor is 

not a corporation and the charter documents filed in the Plan Supplements otherwise comply with 

section 1123(a)(6) of the Bankruptcy Code. Therefore, the requirement of section 1123(a)(6) of 

the Bankruptcy Code is satisfied. 

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Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 63 of 266

000800

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44. Selection of Officers and Directors (11 U.S.C. § 1123(a)(7)). Article IV 

of the Plan provides for the Claimant Trust to be governed and administered by the Claimant 

Trustee. The Claimant Trust, the management of the Reorganized Debtor, and the management 

and monetization of the Claimant Trust Assets and the Litigation Sub-Trust will be managed by 

the Claimant Trust Oversight Board. The Claimant Trust Oversight Board will consist of: (1) Eric 

Felton, as representative of the Redeemer Committee; (2) Joshua Terry, as representative of Acis; 

(3) Elizabeth Kozlowski, as representative of UBS; (4) Paul McVoy, as representative of Meta-E 

Discovery; and (5) David Pauker. Four of the members of the Claimant Trust Oversight 

Committee are the holders of several of the largest Claims against the Debtor and/or are current 

members of the Committee. Each of these creditors has actively participated in the Debtor’s case, 

both through their fiduciary roles as Committee members and in their individual capacities as 

creditors. They are therefore intimately familiar with the Debtor, its business, and assets. The 

fifth member of the Claimant Trustee Oversight Board, David Pauker, is a disinterested 

restructuring advisor and turnaround manager with more than 25 years of experience advising 

public and private companies and their investors, and he has substantial experience overseeing, 

advising or investigating troubled companies in the financial services industry and has advised or 

managed such companies on behalf of boards or directors, court-appointed trustees, examiners and 

special masters, government agencies, and private investor parties. The members of the Claimant 

Trust Oversight Board will serve without compensation, except for Mr. Pauker, who will receive 

payment of $250,000 for his first year of service, and $150,000 for subsequent years. 

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Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 64 of 266

000801

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45. Selection of Trustees. The Plan Supplements disclose that Mr. Seery will 

serve as the Claimant Trustee and Marc Kirschner will serve as the Litigation Trustee. As noted 

above, Mr. Seery has served as an Independent Board member since January 2020, and as the 

Chief Executive Officer and Chief Restructuring Officer since July 2020, and he has extensive 

management and restructuring experience, as evidenced from his curriculum vitae which is part of 

the record. The evidence shows that Mr. Seery is intimately familiar with the Debtor’s 

organizational structure, business, and assets, as well as how Claims will be treated under the Plan. 

Accordingly, it is reasonable and in the Estate’s best interests to continue Mr. Seery’s employment 

post-emergence as the Claimant Trustee. Mr. Seery, upon consultation with the Committee, 

testified that he intends to employ approximately 10 of the Debtor’s employees to enable him to 

manage the Debtor’s business until the Claimant Trust effectively monetizes its remaining assets, 

instead of hiring a sub-servicer to accomplish those tasks. Mr. Seery testified that he believes that 

the Debtor’s post-confirmation business can most efficiently and cost-effectively be supported by 

a sub-set of the Debtor’s current employees, who will be managed internally. Mr. Seery shall 

initially be paid $150,000 per month for services rendered after the Effective Date as Claimant 

Trustee; however, Mr. Seery’s long-term salary as Claimant Trustee and the terms of any bonuses 

and severance are subject to further negotiation by Mr. Seery and the Claimant Trust Oversight 

Board within forty-five (45) days after the Effective Date. The Bankruptcy Court has also 

reviewed Mr. Kirschner’s curriculum vitae. Mr. Kirschner has been practicing law since 1967 and 

has substantial experience in bankruptcy litigation matters, particularly with respect to his prior 

experience as a litigation trustee for several litigation trusts, as set forth on the record of the 

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Exhibit 19 Page 65 of 266

000802

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Confirmation Hearing and in the Confirmation Brief. Mr. Kirschner shall be paid $40,000 per 

month for the first three months and $20,000 per month thereafter, plus a success fee related to 

litigation recoveries. The Committee and the Debtor had arm’s lengths negotiations regarding the 

post-Effective Date corporate governance structure of the Reorganized Debtor and believe that the 

selection of the Claimant Trustee, the Litigation Trustee, and the Claimant Trust Oversight 

Committee are in the best interests of the Debtor’s economic stakeholders. Section 1123(a)(7) of 

the Bankruptcy Code is satisfied. 

46. Debtor’s Compliance with Bankruptcy Code (11 U.S.C. § 1129(a)(2)). 

Pursuant to section 1129(a)(2) of the Bankruptcy Code, the Debtor has complied with the 

applicable provisions of the Bankruptcy Code, including sections 1122, 1123, 1124, 1125, and 

1126 of the Bankruptcy Code, the Bankruptcy Rules, and the Disclosure Statement Order 

governing notice, disclosure, and solicitation in connection with the Plan, the Disclosure 

Statement, the Plan Supplements, and all other matters considered by the Bankruptcy Court in 

connection with this Chapter 11 Case. 

47. Debtor’s Solicitation Complied with Bankruptcy Code and Disclosure 

Statement Order. Before the Debtor solicited votes on the Plan, the Bankruptcy Court entered 

the Disclosure Statement Order. In accordance with the Disclosure Statement Order and evidenced 

by the Affidavits of Service and Publication, the Debtor appropriately served (i) the Solicitation 

Packages (as defined in the Disclosure Statement Order) on the Holders of Claims in Classes 2, 7, 

8 and 9 and Holders of Equity Interests in Classes 10 and 11 who were entitled to vote on the Plan; 

and (ii) the Notice of Nonvoting Status (as defined in the Disclosure Statement Order) and the 

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Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 66 of 266

000803

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Confirmation Hearing Notice to the Holders of Claims in Classes 1, 3, 4, 5 and 6, who were not 

entitled to vote on the Plan pursuant to the Disclosure Statement Order. The Disclosure Statement 

Order approved the contents of the Solicitation Packages provided to Holders of Claims and Equity 

Interests entitled to vote on the Plan, the notices provided to parties not entitled to vote on the Plan, 

and the deadlines for voting on and objecting to the Plan. The Debtor and KCC each complied 

with the content and delivery requirements of the Disclosure Statement Order, thereby satisfying 

sections 1125(a) and (b) of the Bankruptcy Code, as evidenced by the Affidavits of Service and 

Publication. The Debtor also satisfied section 1125(c) of the Bankruptcy Code, which provides 

that the same disclosure statement must be transmitted to each holder of a claim or interest in a 

particular class. The Debtor caused the same Disclosure Statement to be transmitted to all holders 

of Claims and Equity Interests entitled to vote on the Plan. The Debtor has complied in all respects 

with the solicitation requirements of section 1125 of the Bankruptcy Code and the Disclosure 

Statement Order. The Bankruptcy Court rejects the arguments of the Mr. Dondero and certain 

Dondero Related Entities that the changes made to certain assumptions and projections from the 

Liquidation Analysis annexed as Exhibit C to the Disclosure Statement (the “Liquidation 

Analysis”) to the Amended Liquidation Analysis/Financial Projections require resolicitation of the 

Plan. The Bankruptcy Court heard credible testimony from Mr. Seery regarding the changes to 

the Liquidation Analysis as reflected in the Amended Liquidation Analysis/Financial Projections. 

Based on the record, including the testimony of Mr. Seery, the Bankruptcy Court finds that the 

changes between the Liquidation Analysis and the Amended Liquidation Analysis/Financial 

Projections do not constitute materially adverse change to the treatment of Claims or Equity 

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Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 67 of 266

000804

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Interests. Instead, the changes served to update the projected distributions based on Claims that 

were settled after the approval of the Disclosure Statement and to otherwise incorporate more 

recent financial data. Such changes were entirely foreseeable given the large amount of 

unliquidated Claims at the time the Disclosure Statement was approved and the nature of the 

Debtor’s assets. The Bankruptcy Court therefore finds that holders of Claims and Equity Interests 

were not misled or prejudiced by the Amended Liquidation Analysis/Financial Projections and the 

Plan does not need to be resolicited. 

48. Plan Proposed in Good Faith and Not by Means Forbidden by Law (11 

U.S.C. § 1129(a)(3)). The Debtor has proposed the Plan in good faith and not by any means 

forbidden by law, thereby satisfying section 1129(a)(3) of the Bankruptcy Code. In determining 

that the Plan has been proposed in good faith, the Bankruptcy Court has examined the totality of 

the circumstances surrounding the filing of this Chapter 11 Case, the Plan itself, and the extensive, 

unrebutted testimony of Mr. Seery in which he described the process leading to Plan’s formulation. 

Based on the totality of the circumstances and Mr. Seery’s testimony, the Bankruptcy Court finds 

that the Plan is the result of extensive arm’s-length negotiations among the Debtor, the Committee, 

and key stakeholders, and promotes the objectives and purposes of the Bankruptcy Code. 

Specifically, the Debtor’s good faith in proposing the Plan is supported by the following facts 

adduced by Mr. Seery: 

a. The Independent Board determined that it should consider all potential 

restructuring alternatives, including pursuit of a traditional restructuring and the 

continuation of the Debtor’s business, a potential sale of the Debtor’s assets in one 

or more transactions, an asset monetization plan similar to that described in the 

Plan, and a so-called “grand bargain” plan that would involve Mr. Dondero’s 

sponsorship of a plan with a substantial equity infusion. 

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Exhibit 19 Page 68 of 266

000805

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b. The Debtor subsequently engaged in arm’s-length, good faith negotiations with the 

Committee over an asset monetization Plan commencing in June 2020, which 

negotiations occurred over the next several months. 

c. Negotiations between the Debtor and the Committee were often contentious over 

disputes, including, but not limited to, the post-confirmation corporate governance 

structure and the scope of releases contemplated by the Plan. 

d. While negotiations with the Committee progressed, the Independent Board engaged 

in discussions with Mr. Dondero regarding a potential “grand bargain” plan which 

contemplated a significant equity infusion by Mr. Dondero, and which Mr. Seery 

personally spent hundreds of hours pursuing over many months. 

e. On August 3, 2020, the Bankruptcy Court entered the Order Directing Mediation

[Docket No. 912] pursuant to which the Bankruptcy Court ordered the Debtor, the 

Committee, UBS, Acis, the Redeemer Committee, and Mr. Dondero into 

mediation. As a result of this mediation, the Debtor negotiated the settlement of 

the claims of Acis and Mr. Terry, which the Bankruptcy Court approved on October 

28, 2020 [Docket No. 1302]. 

f. On August 12, 2020, the Debtor filed its Chapter 11 Plan of Reorganization of 

Highland Capital Management, L.P. [Docket No. 944] (the “Initial Plan”) and 

related disclosure statement (the “Initial Disclosure Statement”) which were not 

supported by either the Committee or Mr. Dondero. The Independent Board filed 

the Initial Plan and Initial Disclosure Statement in order to act as a catalyst for 

continued discussions with the Committee while it simultaneously worked with Mr. 

Dondero on the “grand bargain” plan. 

g. The Bankruptcy Court conducted a contested hearing on the Initial Disclosure 

Statement on October 27, 2020. The Committee and other parties objected to 

approval of the Disclosure Statement at the Initial Disclosure Statement hearing, 

which was eventually continued to November 23, 2020. 

h. Following the Initial Disclosure Statement hearing, the Debtor continued to 

negotiate with the Committee and ultimately resolved the remaining material 

disputes and led to the Bankruptcy Court’s approval of the Disclosure Statement on 

November 23, 2020. 

i. Even after obtaining the Bankruptcy Court’s approval of the Disclosure Statement, 

the Debtor and the Committee continued to negotiate with Mr. Dondero and the 

Committee over a potential “pot plan” as an alternative to the Plan on file with the 

Bankruptcy Court, but such efforts were unsuccessful. This history conclusively 

demonstrates that the Plan is being proposed in good faith within the meaning of 

section 1129(a)(3). 

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Exhibit 19 Page 69 of 266

000806

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49. Payments for Services or Costs and Expenses (11 U.S.C. § 1129(a)(4)). 

Article II.B of the Plan provides that Professionals will file all final requests for payment of 

Professional Fee Claims no later than 60 days after the Effective Date, thereby providing an 

adequate period of time for interested parties to review such claims. The procedures set forth in 

the Plan for the Bankruptcy Court’s approval of the fees, costs, and expenses to be paid in 

connection with this chapter 11 Case, or in connection with the Plan and incident to this Chapter 

11 Case, satisfy the objectives of and are in compliance with section 1129(a)(4) of the Bankruptcy 

Code. 

50. Directors, Officers, and Insiders (11 U.S.C. § 1129(a)(5)). Article IV.B 

of the Plan provides for the appointment of the Claimant Trustee, Litigation Trustee, and the 

Claimant Trust Oversight Committee and the members thereto. For the reasons more fully 

explained in paragraphs 44-45 of this Confirmation Order with respect to the requirement of 

section 1123(a)(7) of the Bankruptcy Code, the Debtor has disclosed the nature of compensation 

of any insider to be employed or retained by the Reorganized Debtor, if applicable, and 

compensation for any such insider. The appointment of such individuals is consistent with the 

interests of Claims and Equity Interests and with public policy. Thus, the Plan satisfies section 

1129(a)(5) of the Bankruptcy Code. 

51. No Rate Changes (11 U.S.C. § 1129(a)(6)). The Plan does not provide for 

any rate change that requires regulatory approval. Section 1129(a)(6) of the Bankruptcy Code is 

thus not applicable. 

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Exhibit 19 Page 70 of 266

000807

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52. Best Interests of Creditors (11 U.S.C. § 1129(a)(7)). The “best interests” 

test is satisfied as to all Impaired Classes under the Plan, as each Holder of a Claim or Equity 

Interest in such Impaired Classes will receive or retain property of a value, as of the Effective Date 

of the Plan, that is not less than the amount that such Holder would so receive or retain if the 

Debtor were liquidated under chapter 7 of the Bankruptcy Code. On October 15, 2020, the Debtor 

filed the Liquidation Analysis [Docket 1173], as prepared by the Debtor with the assistance of its 

advisors and which was attached as Exhibit C to the Disclosure Statement. On January 29, 2021, 

in advance of Mr. Seery’s deposition in connection with confirmation of the Plan, the Debtor 

provided an updated version of the Liquidation Analysis to the then-objectors of the Plan, 

including Mr. Dondero and the Dondero Related Entities. On February 1, 2021, the Debtor filed 

the Amended Liquidation Analysis/Financial Projections. The Amended Liquidation 

Analysis/Financial Projections included updates to the Debtor’s projected asset values, revenues, 

and expenses to reflect: (1) the acquisition of an interest in an entity known as “HCLOF” that the 

Debtor will acquire as part of its court-approved settlement with HarbourVest and that was valued 

at $22.5 million; (2) an increase in the value of certain of the Debtor’s assets due to changes in 

market conditions and other factors; (3) expected revenues and expenses arising in connection with 

the Debtor’s continued management of the CLOs pursuant to management agreements that the 

Debtor decided to retain; (4) increases in projected expenses for headcount (in addition to adding 

two or three employees to assist in the management of the CLOs, the Debtor also increased 

modestly the projected headcount as a result of its decision not to engage a Sub-Servicer) and 

professional fees; and (5) an increase in projected recoveries on notes resulting from the 

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Exhibit 19 Page 71 of 266

000808

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acceleration of term notes owed to the Debtor by the following Dondero Related Entities: 

NexPoint Advisors, L.P.; Highland Capital Management Services, Inc.; and HCRE Partners, LLC 

(n/k/a NexPoint Real Estate Partners, LLC). Under the Plan, as of the Confirmation Date, (a) Class 

7 General Unsecured Creditors are projected to receive 85% on account of their claims; and (b) 

Class 8 General Unsecured Creditors are projected to receive at least approximately 71% on 

account of their Claims. Under a hypothetical chapter 7 liquidation, all general unsecured creditors 

are projected to receive approximately 55% on account of their Claims. The Bankruptcy Court 

finds that the distributions that Class 7 and 8 General Unsecured Creditors are projected to receive 

under the Plan substantially exceeds that which they would receive under a chapter 7 liquidation 

based on Mr. Seery’s testimony, including the following credible reasons he posited, among 

others: 

a. The nature of the Debtor’s assets is complex. Certain assets relate to complicated 

real estate structures and private equity investments in operating businesses. Mr. 

Seery’s extensive experience with the Debtor during the thirteen months since his 

appointment as an Independent Director and later Chief Executive Officer and 

Chief Restructuring Officer, provides him with a substantial learning curve in 

connection with the disposition of the Debtor’s assets and are reasonably expected 

to result in him being able to realize tens of millions of dollars more value than 

would a chapter 7 trustee. 

b. Assuming that a hypothetical chapter 7 trustee could even operate the Debtor’s 

business under chapter 7 of the Bankruptcy Code and hire the necessary personnel 

with the relevant knowledge and experience to assist him or her in selling the 

Debtor’s assets, a chapter 7 trustee would likely seek to dispose of the Debtor’s 

assets in a forced sale liquidation which would generate substantially less value for 

the Debtor’s creditors than the asset monetization plan contemplated by the Plan. 

c. A chapter 7 trustee would be unlikely to retain the Debtor’s existing professionals 

to assist in its efforts to monetize assets, resulting in delays, increased expenses, 

and reduced asset yields for the chapter 7 estate. 

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Exhibit 19 Page 72 of 266

000809

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d. The chapter 7 estate would be unlikely to maximize value as compared to the asset 

monetization process contemplated by the Plan because potential buyers are likely 

to perceive a chapter 7 trustee as engaging in a quick, forced “fire sale” of assets; 

and 

e. The Debtor’s employees, who are vital to its efforts to maximum value and 

recoveries for stakeholders, may be unwilling to provide services to a chapter 7 

trustee. 

Finally, there is no evidence to support the objectors’ argument that the Claimant Trust 

Agreement’s disclaimed liability for ordinary negligence by the Claimant Trustee compared to a 

chapter 7 trustee’s liability has any relevance to creditor recoveries in a hypothetical chapter 7 

liquidation. Thus, section 1129(a)(7) of the Bankruptcy Code is satisfied. 

53. Acceptance by Certain Classes (11 U.S.C. § 1129(a)(8)). Classes 1, 3, 4, 

5 and 6 are Unimpaired under the Plan. Class 2 (Frontier Secured Claim), Class 7 (Convenience 

Claims), and Class 9 (Subordinated Claims) have each voted to accept the Plan in accordance with 

the Bankruptcy Code, thereby satisfying section 1129(a)(8) as to those Classes. However, Class 

8 (General Unsecured Claims), Class 10 (Class B/C Limited Partnership Interests), and Class 11 

(Class A Limited Partnership Interests) have not accepted the Plan. Accordingly, section 

1129(a)(8) of the Bankruptcy Code has not been satisfied. The Plan, however, is still confirmable 

because it satisfies the nonconsensual confirmation provisions of section 1129(b), as set forth 

below. 

54. Treatment of Administrative, Priority, Priority Tax Claims, and 

Professional Fee Claims (11 U.S.C. § 1129(a)(9)). The treatment of Administrative Claims, 

Priority Claims, and Professional Fee Claims pursuant to Article III of the Plan, and as set forth 

below with respect to the resolution of the objections filed by the Internal Revenue Service and 

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Exhibit 19 Page 73 of 266

000810

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certain Texas taxing authorities satisfies the requirements of sections 1129(a)(9) of the Bankruptcy 

Code. 

55. Acceptance by Impaired Class (11 U.S.C. § 1129(a)(10)). Class 2 

(Frontier Secured Claims) and Class 7 (Convenience Claims) are each Impaired Classes of Claims 

that voted to accept the Plan, determined without including any acceptance of the Plan by any 

insider. Therefore, the requirement of section 1129(a)(10) of the Bankruptcy Code is satisfied. 

56. Feasibility (11 U.S.C. § 1129(a)(11)). Article IV of the Plan provides for 

the implementation of the Plan through the Claimant Trust, the Litigation Sub-Trust, and the 

Reorganized Debtor. The Plan provides that the Claimant Trust, among other things, will monetize 

and distribute the Debtor’s remaining assets. The Disclosure Statement, the Amended Liquidation 

Analysis/Financial Projections, and the other evidence presented at the Confirmation Hearing 

provide a reasonable probability of success that the Debtor will be able to effectuate the provisions 

of the Plan. The Plan contemplates the establishment of the Claimant Trust upon the Effective 

Date, which will monetize the Estate’s assets for the benefit of creditors. Mr. Seery testified that 

the Class 2 Frontier Secured Claim will be paid over time pursuant to the terms of the New Frontier 

Note and the Reorganized Debtor will have sufficient assets to satisfy its obligations under this 

note. The Claims of the Holders of Class 7 Claims (as well as those Class 8 creditors who validly 

opted to receive the treatment of Class 7 Claims) are expected to be satisfied shortly after the 

Effective Date. Holders of Class 8 Claims (including any holders of Class 7 Claims who opted to 

receive the treatment provided to Class 8 Claims) are not guaranteed any recovery and will 

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000811

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periodically receive pro rata distributions as assets are monetized pursuant to the Plan and the 

Claimant Trust Agreement. Thus, section 1129(a)(11) of the Bankruptcy Code is satisfied. 

57. Payment of Fees (11 U.S.C. § 1129(a)(12)). All fees payable under 28 

U.S.C. § 1930 have been paid or will be paid on or before the Effective Date pursuant to Article 

XII.A of the Plan, thus satisfying the requirement of section 1129(a)(12) of the Bankruptcy Code. 

The Debtor has agreed that the Reorganized Debtor, the Claimant Trust, and the Litigation SubTrust shall be jointly and severally liable for payment of quarterly fees to the Office of the United 

States Trustee pursuant to 28 U.S.C. § 1930 through the entry of the Final Decree for the Debtor 

or the dismissal or conversion of the Chapter 11 Case. 

58. Retiree Benefits. The Plan provides for the assumption of the Pension Plan 

(to the extent such Pension Plan provides “retiree benefits” and is governed by section 1114 of the 

Bankruptcy Code). Thus, the Plan complies with section 1129(a)(13) of the Bankruptcy Code, to 

the extent applicable.

59. Miscellaneous Provisions (11 U.S.C. §§ 1129(a)(14)-(16)). Sections 

1129(a)(14)-(16) of the Bankruptcy Code are inapplicable as the Debtor (i) has no domestic 

support obligations (section 1129(a)(14)), (ii) is not an individual (section 1129(a)(15)), and (iii) 

is not a nonprofit corporation (section 1129(a)(16)). 

60. No Unfair Discrimination; Fair and Equitable Treatment (11 U.S.C. § 

1129(b)). The classification and treatment of Claims and Equity Interests in Classes 8, 10 and 11, 

which have not accepted the Plan, is proper pursuant to section 1122 of the Bankruptcy Code, does 

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Exhibit 19 Page 75 of 266

000812

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 45 

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not discriminate unfairly, and is fair and equitable pursuant to section 1129(b)(1) of the Bankruptcy 

Code. 

a. Class 8. The Plan is fair and equitable with respect to Class 8 General Unsecured 

Claims. While Equity Interests in Class 10 and Class 11 will receive a contingent 

interest in the Claimant Trust under the Plan (the “Contingent Interests”), the 

Contingent Interests will not vest unless and until holders of Class 8 General 

Unsecured Claims and Class 9 Subordinated Claims receive distributions equal to 

100% of the amount of their Allowed Claims plus interest as provided under the 

Plan and Claimant Trust Agreement. Accordingly, as the holders of Equity 

Interests that are junior to the Claims in Class 8 and Class 9 will not receive or 

retain under the Plan on account of such junior claim interest any property unless 

and until the Claims in Class 8 and Class 9 are paid in full plus applicable interest, 

the Plan is fair and equitable with respect to holders of Class 8 General Unsecured 

Claims pursuant to section 1129(b)(2)(B) of the Bankruptcy Code and the reasoning 

of In re Introgen Therapuetics 429 B.R 570 (Bankr. W.D. Tex. 2010). 

b. Class 10 and Class 11. There are no Claims or Equity Interests junior to the Equity 

Interests in Class 10 and Class 11. Equity Interests in Class 10 and 11 will neither 

receive nor retain any property under the Plan unless Allowed Claims in Class 8 

and Class 9 are paid in full plus applicable interest pursuant to the terms of the Plan 

and Claimant Trust Agreement. Thus, the Plan does not violate the absolute priority 

rule with respect to Classes 10 and 11 pursuant to Bankruptcy Code section 

1129(b)(2)(C). The Plan does not discriminate unfairly as to Equity Interests. As 

noted above, separate classification of the Class B/C Partnership Interests from the 

Class A Partnerships Interests is appropriate because they constitute different 

classes of equity security interests in the Debtor, and each are appropriately 

separately classified and treated. 

Accordingly, the Plan does not violate the absolute priority rule, does not discriminate unfairly, 

and is fair and equitable with respect to each Class that has rejected the Plan. Thus, the Plan 

satisfies the requirements of section 1129(b) of the Bankruptcy Code with respect to Classes 8, 10, 

and 11. 

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Exhibit 19 Page 76 of 266

000813

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 46 

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61. Only One Plan (11 U.S.C. § 1129(c)). The Plan is the only chapter 11 plan 

confirmed in this Chapter 11 Case, and the requirements of section 1129(c) of the Bankruptcy 

Code are therefore satisfied. 

62. Principal Purpose (11 U.S.C. § 1129(d)). Mr. Seery testified that the 

principal purpose of the Plan is neither the avoidance of taxes nor the avoidance of the application 

of section 5 of the Securities Act of 1933, and no governmental unit has objected to the 

confirmation of the Plan on any such grounds. Accordingly, section 1129(d) of the Bankruptcy 

Code is inapplicable. 

63. Satisfaction of Confirmation Requirements. Based upon the foregoing, 

the Plan satisfies the requirements for confirmation set forth in section 1129 of the Bankruptcy 

Code and should be confirmed. 

64. Good Faith Solicitation (11 U.S.C. § 1125(e)). The Debtor, the 

Independent Directors, and the Debtor’s employees, advisors, Professionals, and agents have acted 

in good faith within the meaning of section 1125(e) of the Bankruptcy Code and in compliance 

with the applicable provisions of the Bankruptcy Code and Bankruptcy Rules in connection with 

all of their respective activities relating to the solicitation of acceptances of the Plan and their 

participation in the activities described in section 1125 of the Bankruptcy Code, and they are 

entitled to the protections afforded by section 1125(e) of the Bankruptcy Code. 

65. Discharge (11 U.S.C. § 1141(d)(3)). The Debtor is entitled to a discharge 

of debts pursuant to section 1141(d)(3)(B) of the Bankruptcy Code. Under the Plan, the Claimant 

Trust or Reorganized Debtor, as applicable, will continue to manage funds and conduct business 

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000814

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in the same manner as the Debtor did prior to Plan confirmation, which includes the management 

of the CLOs, Multi-Strat, Restoration Capital, the Select Fund and the Korea Fund. Although the 

Plan projects that it will take approximately two years to monetize the Debtor’s assets for fair 

value, Mr. Seery testified that while the Reorganized Debtor and Claimant Trust will be 

monetizing their assets, there is no specified time frame by which this process must conclude. Mr. 

Seery’s credible testimony demonstrates that the Debtor will continue to engage in business after 

consummation of the Plan, within the meaning of Section 1141(d)(3)(b) and that the Debtor is 

entitled to a discharge pursuant to section 1141(d)(1) of the Bankruptcy Code. 

66. Retention of Jurisdiction. The Bankruptcy Court may properly retain 

jurisdiction over the matters set forth in Article XI of the Plan and/or section 1142 of the 

Bankruptcy Code to the maximum extent under applicable law. 

67. Additional Plan Provisions (11 U.S.C. § 1123(b)). The Plan’s provisions 

are appropriate, in the best interests of the Debtor and its Estate, and consistent with the applicable 

provisions of the Bankruptcy Code, Bankruptcy Rules, and Local Rules. 

68. Executory Contracts and Unexpired Leases (11 U.S.C. § 1123(b)(2)). 

The Debtor has exercised reasonable business judgment with respect to the rejection of the 

Executory Contracts and Unexpired Leases pursuant the terms of the Plan and this Confirmation 

Order, and such rejections are justified and appropriate in this Chapter 11 Case. The Debtor also 

filed the List of Assumed Contracts, which contain notices to the applicable counterparties to the 

contracts set forth on Exhibit “FF” to Plan Supplement filed on February 1, 2021 [Docket No. 

1875] and which exhibit sets forth the list of executory contracts and unexpired leases to be 

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000815

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assumed by the Debtor pursuant to the Plan (collectively, the “Assumed Contracts”). With respect 

to the Assumed Contracts, only one party objected to the assumption of any of the Assumed 

Contracts, but that objection was withdrawn.8

 Any modifications, amendments, supplements, and 

restatements to the Assumed Contracts that may have been executed by the Debtor during the 

Chapter 11 Case shall not be deemed to alter the prepetition nature of the Assumed Contracts or 

the validity, priority, or amount of any Claims that may arise in connection therewith. Assumption 

of any Assumed Contract pursuant to the Plan and full payment of any applicable Cure pursuant 

to the Plan shall result in the full release and satisfaction of any Cures, Claims, or defaults, whether 

monetary or nonmonetary, including defaults of provisions restricting the change in control or 

ownership interest composition or other bankruptcy-related defaults, arising under any assumed 

Executory Contract or Unexpired Lease at any time prior to the effective date of assumption. 

69. Compromises and Settlements Under and in Connection with the Plan 

(11 U.S.C. § 1123(b)(3)). All of the settlements and compromises pursuant to and in connection 

with the Plan, comply with the requirements of section 1123(b)(3) of the Bankruptcy Code and 

Bankruptcy Rule 9019. 

70. Debtor Release, Exculpation and Injunctions (11 U.S.C. § 1123(b)). The 

Debtor Release, Exculpation, and Injunction provisions provided in the Plan (i) are within the 

jurisdiction of the Bankruptcy Court under 28 U.S.C. § 1334; (ii) are integral elements of the 

transactions incorporated into the Plan, and inextricably bound with the other provisions of the 

Plan; (iii) confer material benefit on, and are in the best interests of, the Debtor, its Estate, and its 

8 See Notice of Withdrawal of James Dondero’s Objection Debtor’s Proposed Assumption of Contracts and Cure 

Amounts Proposed in Connection Therewith [Docket No. 1876] 

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000816

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creditors; (iv) are fair, equitable, and reasonable; (v) are given and made after due notice and 

opportunity for hearing; (vi) satisfy the requirements of Bankruptcy Rule 9019; and (vii) are 

consistent with the Bankruptcy Code and other applicable law, and as set forth below. 

71. Debtor Release. Section IX.D of the Plan provides for the Debtor’s release 

of the Debtor’s and Estate’s claims against the Released Parties. Releases by a debtor are 

discretionary and can be provided by a debtor to persons who have provided consideration to the 

Debtor and its estate pursuant to section 1123(b)(3)(A) of the Bankruptcy Code. Contrary to the 

objections raised by Mr. Dondero and certain of the Dondero Related Entities, the Debtor Release 

is appropriately limited to release claims held by the Debtor and does not purport to release the 

claims held by the Claimant Trust, Litigation Sub-Trust, or other third parties. The Plan does not 

purport to release any claims held by third parties and the Bankruptcy Court finds that the Debtor 

Release is not a “disguised” release of any third party claims as asserted by certain objecting 

parties. The limited scope of the Debtor Release in the Plan was extensively negotiated with the 

Committee, particularly with the respect to the Debtor’s conditional release of claims against 

employees, as identified in the Plan, and the Plan’s conditions and terms of such releases. The 

Plan does not release (i) any obligations of any party under the Plan or any document, instrument, 

or agreement executed to implement the Plan, (ii) the rights or obligations of any current employee 

of the Debtor under any employment agreement or plan, (iii) the rights of the Debtor with respect 

to any confidentiality provisions or covenants restricting competition in favor of the Debtor under 

any employment agreement with a current or former employee of the Debtor, (iv) any Avoidance 

Actions, or (v) any Causes of Action arising from willful misconduct, criminal misconduct, actual 

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000817

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fraud, or gross negligence of such applicable Released Party as determined by Final Order of the 

Bankruptcy Court or any other court of competent jurisdiction. The Debtor Release also contains 

conditions to such releases as set forth in Article X.D of the Plan with respect to employees (the 

“Release Conditions”). Until the an employee satisfies the Release Conditions or the Release 

Conditions otherwise terminate, any claims against such employee will be tolled so that if the 

Release Conditions are not met the Litigation Trustee may pursue claims against an employee at a 

later date. The evidence before the Bankruptcy Court, including, but not limited to Mr. Seery’s 

testimony, demonstrates that the Debtor is not aware of any claims against any of the Released 

Parties, that the Released Parties have been instrumental in assisting the Debtor’s efforts toward 

confirmation of the Plan and that, therefore, the releases are a quid pro quo for the Released 

Parties’ significant contributions to a highly complex and contentious restructuring. The 

Committee, whose members hold approximately $200 million in claims against the Estate, is 

highly sophisticated and is represented by highly sophisticated professionals, and has actively and 

vigorously negotiated the terms of the Debtor Release, which was the subject of significant 

controversy at the Initial Disclosure Statement hearing held by the Bankruptcy Court on October 

27, 2020. 

72. Exculpation. Section IX.C of the Plan provides for the exculpation of 

certain Exculpated Parties to the extent provided therein (the “Exculpation Provision”). As 

explained below, the Exculpation Provision is appropriate under the unique circumstances of this 

litigious Chapter 11 Case and consistent with applicable Fifth Circuit precedent. First, with respect 

to the Independent Directors, their agents, and their advisors, including any employees acting at 

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000818

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their direction, the Bankruptcy Court finds and concludes that it has already exculpated these 

parties for acts other than willful misconduct and gross negligence pursuant to the January 9 Order. 

The January 9 Order was specifically agreed to by Mr. Dondero, who was in control of the Debtor 

up until entry of the January 9 Order. The January 9 Order was not appealed. In addition to the 

appointment of the Independent Directors in an already contentious and litigious case, the January 

9 Order set the standard of care for the Independent Directors and specifically exculpated them for 

negligence. Mr. Seery and Mr. Dubel each testified that they had input into the contents of the 

January 9 Order and would not have agreed to their appointment as Independent Directors if the 

January 9 Order did not include the protections set forth in paragraph 10 of the January 9 Order. 

Paragraph 10 of the January 9 Order (1) requires that parties wishing to sue the Independent 

Directors or their agents and advisors must first seek approval from the Bankruptcy Court before 

doing so; (2) sets the standard of care for the Independent Directors during the Chapter 11 Case 

and exculpated the Independent Directors for acts other than willful misconduct or gross 

negligence; (3) only permits suits against the Independent Directors to proceed for colorable claims 

of willful misconduct and gross negligence upon order of the Bankruptcy Court; and (4) does not 

expire by its terms. 

73. Existing Exculpation of Independent Directors. The Bankruptcy Court 

also finds and concludes that it has already exculpated Mr. Seery acting in the capacity as Chief 

Executive Officer and Chief Restructuring Officer pursuant to the July 16 Order. The Bankruptcy 

Court concludes its previous approval of the exculpation of the Independent Directors, their agents, 

advisors and employees working at their direction pursuant to the January 9 Order, and the Chief 

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000819

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Executive Officer and Chief Restructuring Officer pursuant to the July 16 Order constitutes the 

law of this case and are res judicata pursuant to In re Republic Supply Co. v. Shoaf, 815 F.2d 1046 

(5th Cir.1987). The January 9 Order and July 16 Order cannot be collaterally attacked based on 

the objectors’ objection to the exculpation of the Independent Directors, their agents, and advisors, 

including any employees acting at their direction, as well as the Chief Executive Officer and Chief 

Restructuring Officer, that the Bankruptcy Court already approved pursuant to the January 9 Order 

and the July 16 Order. 

74. The Exculpation Provision Complies with Applicable Law. Separate 

and apart from the res judicata effect of the January 9 Order and the July 16 Order, the Bankruptcy 

Court also finds and concludes that the Exculpation Provision is consistent with applicable law, 

including In re Pacific Lumber Co., 584 F.3d 229 (5th Cir. 2009), for several reasons: 

a. First, the statutory basis for Pacific Lumber’s denial of exculpation for certain 

parties other than a creditors’ committee and its members is that section 524(e) of 

the Bankruptcy Code “only releases the debtor, not co-liable third parties.” Pacific 

Lumber, 253 F.3d. at 253. However, Pacific Lumber does not prohibit all 

exculpations under the Bankruptcy Code and the court in such case specifically 

approved the exculpations of a creditors’ committee and its members on the 

grounds that “11 U.S.C. § 1103(c), which lists the creditors’ committee’s powers, 

implies committee members have qualified immunity for actions within the scope 

of their duties.... [I]f members of the committee can be sued by persons unhappy 

with the committee’s performance during the case or unhappy with the outcome of 

the case, it will be extremely difficult to find members to serve on an official 

committee.” Pacific Lumber, 253 F.3d at 253 (quoting Lawrence P. King, et al, 

Collier on Bankruptcy, ¶ 1103.05[4][b] (15th Ed. 2008]). Pacific Lumber’s

rationale for permitted exculpation of creditors’ committees and their members 

(which was clearly policy-based and based on a creditors’ committee qualified 

immunity flowing from their duties under section 1103(c) of the Bankruptcy Code 

and their disinterestedness and importance in chapter 11 cases) does not preclude 

exculpation to other parties in a particular chapter 11 case that perform similar roles 

to a creditors’ committee and its members. The Independent Directors, and by 

extension the Chief Executive Officer and Chief Restructuring Officer, were not 

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000820

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part of the Debtor’s enterprise prior to their appointment by the Bankruptcy Court 

under the January 9 Order. The Bankruptcy Court appointed the Independent 

Directors in lieu of a chapter 11 trustee to address what the Bankruptcy Court 

perceived as serious conflicts of interest and fiduciary duty concerns with the thenexisting management prior to January 9, 2020, as identified by the Committee. In 

addition, the Bankruptcy Court finds that the Independent Directors expected to be 

exculpated from claims of negligence, and would likely have been unwilling to 

serve in contentious cases absent exculpation. The uncontroverted testimony of 

Mr. Seery and Mr. Dubel demonstrates that the Independent Directors would not 

have agreed to accept their roles without the exculpation and gatekeeper provision 

in the January 9 Order. Mr. Dubel also testified as to the increasing important role 

that independent directors are playing in complex chapter 11 restructurings and that 

unless independent directors could be assured of exculpation for simple negligence 

in contentious bankruptcy cases they would be reluctant to accept appointment in 

chapter 11 cases which would adversely affect the chapter 11 restructuring process. 

The Bankruptcy Court concludes that the Independent Directors were appointed 

under the January 9 Order in order to avoid the appointment of a chapter 11 trustee 

and are analogous to a creditors’ committee rather than an incumbent board of 

directors. The Bankruptcy Court also concludes that if independent directors 

cannot be assured of exculpation for simple negligence in contentious bankruptcy 

cases, they may not be willing to serve in that capacity. Based upon the foregoing, 

the Bankruptcy Court concludes that Pacific Lumber’s policy of exculpating 

creditors’ committees and their members from “being sued by persons unhappy 

with the committee’s performance during the case or unhappy with the outcome of 

the case” is applicable to the Independent Directors in this Chapter 11 Case.9

 

b. Second, the Bankruptcy Court also concludes that Pacific Lumber does not 

preclude the exculpation of parties if there is a showing that “costs [that] the 

released parties might incur defending against such suits alleging such negligence 

are likely to swamp either the Exculpated Parties or the reorganization.” Pacific 

Lumber, 584 F.3d at 252. If ever there was a risk of that happening in a chapter 11 

reorganization, it is this one. Mr. Seery credibly testified that Mr. Dondero stated 

outside the courtroom that if Mr. Dondero’s pot plan does not get approved, that 

Mr. Dondero will “burn the place down.” The Bankruptcy Court can easily expect 

that the proposed Exculpated Parties might expect to incur costs that could swamp 

them and the reorganization based on the prior litigious conduct of Mr. Dondero 

and his controlled entities that justify their inclusion in the Exculpation Provision. 

9

 The same reasoning applies to the inclusion of Strand in the Exculpation Provision because Strand is the general 

partner of the Debtor through which each of the Independent Board members act. 

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000821

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75. Injunction. Section IX.D of the Plan provides for a Plan inunction to 

implement and enforce the Plan’s release, discharge and release provisions (the “Injunction 

Provision”). The Injunction Provision is necessary to implement the provisions in the Plan. Mr. 

Seery testified that the Claimant Trustee will monetize the Debtor’s assets in order to maximize 

their value. In order to accomplish this goal, the Claimant Trustee needs to be able to pursue this 

objective without the interference and harassment of Mr. Dondero and his related entities, 

including the Dondero Related Entities. Mr. Seery also testified that if the Claimant Trust was 

subject to interference by Mr. Dondero, it would take additional time to monetize the Debtor’s 

assets and those assets could be monetized for less money to the detriment of the Debtor’s 

creditors. The Bankruptcy Court finds and concludes that the Injunction Provision is consistent 

with and permissible under Bankruptcy Code sections 1123(a), 1123(a)(6), 1141(a) and (c), and 

1142. The Bankruptcy Court rejects assertions by certain objecting parties that the Injunction 

Provision constitutes a “third-party release.” The Injunction Provision is appropriate under the 

circumstances of this Chapter 11 Case and complies with applicable bankruptcy law. The 

Bankruptcy Court also concludes that the terms “implementation” and “consummation” are neither 

vague nor ambiguous 

76. Gatekeeper Provision. Section IX.F of the Plan contains a provision 

contained in paragraph AA of this Confirmation Order and which the Debtor has referred to as a 

gatekeeper provision (the “Gatekeeper Provision”). The Gatekeeper Provision requires that 

Enjoined Parties first seek approval of the Bankruptcy Court before they may commence an action 

against Protected Parties. Thereafter, if the Bankruptcy Court determines that the action is 

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000822

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colorable, the Bankruptcy Court may, if it has jurisdiction, adjudicate the action. The Bankruptcy 

Court finds that the inclusion of the Gatekeeper Provision is critical to the effective and efficient 

administration, implementation, and consummation of the Plan. The Bankruptcy Court also 

concludes that the Bankruptcy Court has the statutory authority as set forth below to approve the 

Gatekeeper Provision. 

77. Factual Support for Gatekeeper Provision. The facts supporting the need 

for the Gatekeeper Provision are as follows. As discussed earlier in this Confirmation Order, prior 

to the commencement of the Debtor’s bankruptcy case, and while under the direction of Mr. 

Dondero, the Debtor had been involved in a myriad of litigation, some of which had gone on for 

years and, in some cases, over a decade. Substantially all of the creditors in this case are either 

parties who were engaged in litigation with the Debtor, parties who represented the Debtor in 

connection with such litigation and had not been paid, or trade creditors who provided litigationrelated services to the Debtor. During the last several months, Mr. Dondero and the Dondero 

Related Entities have harassed the Debtor, which has resulted in further substantial, costly, and 

time-consuming litigation for the Debtor. Such litigation includes: (i) entry of a temporary 

restraining order and preliminary injunction against Mr. Dondero [Adv. Proc. No. 20-03190 

Docket No. 10 and 59] because of, among other things, his harassment of Mr. Seery and employees 

and interference with the Debtor’s business operations; (ii) a contempt motion against Mr. 

Dondero for violation of the temporary restraining order, which motion is still pending before the 

Bankruptcy Court [Adv. Proc. No. 20-03190 Docket No. 48]; (iii) a motion by Mr. Dondero’s 

controlled investors in certain CLOs managed by the Debtor that the Bankruptcy Court referred to 

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Exhibit 19 Page 86 of 266

000823

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as frivolous and a waste of the Bankruptcy Court’s time [Docket No. 1528] which was denied by 

the Court [Docket No. 1605]; (iv) multiple plan confirmation objections focused on ensuring the 

Dondero Related Entities be able to continue their litigation against the Debtor and its successors 

post-confirmation [Docket Nos. 1661, 1667, 1670, 1673, 1676, 1677 and 1868]; (v) objections to 

the approval of the Debtor’s settlements with Acis and HarbourVest and subsequent appeals of the 

Bankruptcy Court’s order approving each of those settlements [Docket Nos. 1347 and 1870]; and 

(vi) a complaint and injunction sought against Mr. Dondero’s affiliated entities to prevent them 

from violating the January 9 Order and entry of a restraining order against those entities [Adv Proc. 

No. 21-03000 Docket No 1] (collectively, the “Dondero Post-Petition Litigation”). 

78. Findings Regarding Dondero Post-Petition Litigation. The Bankruptcy 

Court finds that the Dondero Post-Petition Litigation was a result of Mr. Dondero failing to obtain 

creditor support for his plan proposal and consistent with his comments, as set forth in Mr. Seery’s 

credible testimony, that if Mr. Dondero’s plan proposal was not accepted, he would “burn down 

the place.” The Bankruptcy Court concludes that without appropriate protections in place, in the 

form of the Gatekeeper Provision, Mr. Dondero and his related entities will likely commence 

litigation against the Protected Parties after the Effective Date and do so in jurisdictions other than 

the Bankruptcy Court in an effort to obtain a forum which Mr. Dondero perceives will be more 

hospitable to his claims. The Bankruptcy Court also finds, based upon Mr. Seery’s testimony, that 

the threat of continued litigation by Mr, Dondero and his related entities after the Effective Date 

will impede efforts by the Claimant Trust to monetize assets for the benefit of creditors and result 

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Exhibit 19 Page 87 of 266

000824

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in lower distributions to creditors because of costs and distraction such litigation or the threats of 

such litigation would cause. 

79. Necessity of Gatekeeper Provision. The Bankruptcy Court further finds 

that unless the Bankruptcy Court approves the Gatekeeper Provision, the Claimant Trustee and the 

Claimant Trust Oversight Board will not be able to obtain D&O insurance, the absence of which 

will present unacceptable risks to parties currently willing to serve in such roles. The Bankruptcy 

Court heard testimony from Mark Tauber, a Vice President with AON Financial Services, the 

Debtor’s insurance broker (“AON”), regarding his efforts to obtain D&O insurance. Mr. Tauber 

credibly testified that of all the insurance carriers that AON approached to provide D&O insurance 

coverage after the Effective Date, the only one willing to do so without an exclusion for claims 

asserted by Mr. Dondero and his affiliates otherwise requires that this Order approve the 

Gatekeeper Provision. Based on the foregoing, the Bankruptcy Court finds that the Gatekeeper 

Provision is necessary and appropriate in light of the history of the continued litigiousness of Mr. 

Dondero and his related entities in this Chapter 11 Case and necessary to the effective and efficient 

administration, implementation and consummation of the Plan and is appropriate pursuant to 

Carroll v. Abide (In re Carroll) 850 F.3d 811 (5th Cir. 2017). Approval of the Gatekeeper 

Provision will prevent baseless litigation designed merely to harass the post-confirmation entities 

charged with monetizing the Debtor’s assets for the benefit of its economic constituents, will avoid 

abuse of the court system and preempt the use of judicial time that properly could be used to 

consider the meritorious claims of other litigants. Any suit against a Protected Party would 

effectively be a suit against the Debtor, and the Debtor may be required to indemnify the Protected 

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Exhibit 19 Page 88 of 266

000825

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Parties under the Limited Partnership Agreement, which will remain in effect through the Effective 

Date, or those certain Indemnification and Guaranty Agreements, dated January 9, 2020, between 

Strand, the Debtor, and each Independent Director, following the Confirmation Date as each such 

agreement will be assumed pursuant to 11 U.S.C. § 365 pursuant to the Plan. 

80. Statutory Authority to Approve Gatekeeper Provision. The 

Bankruptcy Court finds it has the statutory authority to approve the Gatekeeper Provision under 

sections 1123(a)(5), 1123(b)(6), 1141, 1142(b), and 105(a). The Gatekeeper Provision is also 

within the spirit of the Supreme Court’s “Barton Doctrine.” Barton v. Barbour, 104 U.S. 126 

(1881). The Gatekeeper Provision is also consistent with the notion of a prefiling injunction to 

deter vexatious litigants, that has been approved by the Fifth Circuit in such cases as Baum v. Blue 

Moon Ventures, LLC, 513 F.3d 181, 189 (5th Cir. 2008), and In re Carroll, 850 F.3d 811 (5th Cir. 

2017). 

81. Jurisdiction to Implement Gatekeeper Provision. The Bankruptcy Court 

finds that it will have jurisdiction after the Effective Date to implement the Gatekeeper Provision 

as post-confirmation bankruptcy court jurisdiction has been interpreted by the Fifth Circuit under 

United States Brass Corp. v. Travelers Ins. Group, Inc. (In re United States Brass Corp.), 301 F.3d 

296 (5th Cir. 2002) and EOP-Colonnade of Dallas Ltd. P’Ship v. Faulkner (In re Stonebridge 

Techs., Inc.), 430 F.3d 260 (5th Cir. 2005). Based upon the rationale of the Fifth Circuit in Villegas 

v. Schmidt, 788 F.3d 156, 158-59 (5th Cir. 2015), the Bankruptcy Court’s jurisdiction to act as a 

gatekeeper does not violate Stern v. Marshall. The Bankruptcy Court’s determination of whether 

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Exhibit 19 Page 89 of 266

000826

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a claim is colorable, which the Bankruptcy Court has jurisdiction to determine, is distinct from 

whether the Bankruptcy Court would have jurisdiction to adjudicate any claim it finds colorable. 

82. Resolution of Objections of Scott Ellington and Isaac Leventon. Each 

of Scott Ellington (“Mr. Ellington”) and Isaac Leventon (“Mr. Leventon”) (each, a “Senior 

Employee Claimant”) has asserted certain claims for liquidated but unpaid bonus amounts for the 

following periods: 2016, 2017, and 2018, as set forth in Exhibit A to that certain Senior Employees’ 

Limited Objection to Debtor’s Fifth Amended Plan of Reorganization [Docket No. 1669] (the 

“Senior Employees’ Objection”) (for each of Mr. Ellington and Mr. Leventon, the “Liquidated 

Bonus Claims”). 

a. Mr. Ellington has asserted Liquidated Bonus Claims in the aggregate amount of 

$1,367,197.00, and Mr. Leventon has asserted Liquidated Bonus Claims in the 

aggregate amount of $598,198.00. Mr. Ellington received two Ballots10 – a Ballot 

for Class 7 of the Plan and a Ballot for Class 8 of the Plan. Mr. Ellington completed 

and timely returned both of such Ballots, voted to reject the Plan, and elected to 

have his Class 8 Liquidated Bonus Claims treated under Class 7 of the Plan, subject 

to the objections and reservations of rights set forth in the Senior Employees’ 

Objection. If Mr. Ellington is permitted to elect Class 7 treatment for his Liquidated 

Bonus Claims, then the maximum amount of his Liquidated Bonus Claims will be 

$1,000,000. 

b. Mr. Leventon received two Ballots—a Ballot for Class 7 of the Plan and a Ballot 

for Class 8 of the Plan. Mr. Leventon completed and timely returned both of such 

Ballots and voted each such Ballots to rejected the Plan. 

c. The Senior Employees’ Objection, among other things, objects to the Plan on the 

grounds that the Debtor improperly disputes the right of Mr. Ellington to elect Class 

7 treatment for his Liquidated Bonus Claims and Mr. Leventon’s entitlement to 

receive Class 7 Convenience Class treatment for his Liquidated Bonus Claims. The 

Debtor contended that neither Mr. Ellington or Mr. Leventon were entitled to elect 

to receive Class 7 Convenience Class treatment on account of their Liquidated 

10 As defined in the Plan, “Ballot” means the forms(s) distributed to holders of Impaired Claims or Equity Interests 

entitled to vote on the Plan on which to indicate their acceptance or rejection of the Plan. 

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000827

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Bonus Claims under the terms of the Plan, the Disclosure Statement Order or 

applicable law. 

d. The Debtor and Mr. Ellington and Mr. Leventon negotiated at arms’ length in an 

effort to resolve all issues raised in the Senior Employee’s Objection, including 

whether or not Mr. Ellington and Mr. Leventon were entitled to Class 7 

Convenience Class treatment of their Liquidated Bonus Claims. As a result of such 

negotiation, the Debtor, Mr. Ellington, and Mr. Leventon have agreed to the 

settlement described in paragraphs 82(e) through 82(k) below and approved and 

effectuated pursuant to decretal paragraphs RR through SS (the “Senior Employees' 

Settlement”). 

e. Under the terms of the Senior Employees' Settlement, the Debtor has the right to 

elect one of two treatments of the Liquidated Bonus Claims for a Senior Employee 

Claimant. Under the first treatment option (“Option A”), the Liquidated Bonus 

Claims will be entitled to be treated in Class 7 of the Plan, and the Liquidated Bonus 

Claims will be entitled to receive payment in an amount equal to 70.125% of the 

Class 7 amount of the Liquidated Bonus Claims, subject to the Liquidated Bonus 

Claims becoming Allowed Claims under the terms of the Plan. Under this 

calculation, Mr. Ellington would be entitled to receive $701,250.00 on account of 

his Class 7 Convenience Class Claim when and as Allowed under the Plan, and Mr. 

Leventon would be entitled to receive $413,175.10 on account of his Class 7 

Convenience Class Claim when and as Allowed under the Plan. If, however, any 

party in interest objects to the allowance of the Senior Employee Claimant's 

Liquidated Bonus Claims and does not prevail in such objection, then such Senior 

Employee Claimant will be entitled to a payment in an amount equal to 85% of his 

Allowed Liquidated Bonus Claims (subject, in the case of Mr. Ellington, to the cap 

imposed on Class 7 Claims). In addition, under Option A, each of Mr. Ellington 

and Mr. Leventon would retain their respective rights to assert that the Liquidated 

Bonus Claims are entitled to be treated as Administrative Expense Claims, as 

defined in Article I.B.2. of the Plan, in which case the holder of such Liquidated 

Bonus Claims would be entitled to payment in full of the Allowed Liquidated 

Bonus Claims. Under Option A, parties in interest would retain the right to object 

to any motion seeking payment of the Liquidated Bonus Amounts as 

Administrative Expenses. 

f. Under the second treatment option (“Option B”), the Debtor would agree that the 

Senior Employee Claimant has Allowed Liquidated Bonus Claims, no longer 

subject to objection by any party in interest, in the amounts of the Liquidated Bonus 

Claims (subject, in the case of Mr. Ellington, to the cap imposed by Class 7). If the 

Debtor elects Option B as to a Senior Employee Claimant, then such Senior 

Employee Claimant would be entitled to a payment on account of his Allowed 

Liquidated Bonus Claims in an amount equal to 60% of the amount of the 

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000828

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Liquidated Bonus Claims (which, in Mr. Ellington’s case, would be $600,000 and 

in Mr. Leventon’s case, would be $358,918.80), and such payment would be the 

sole recovery on account of such Allowed Liquidated Bonus Claims. 

g. The Debtor may, with the consent of the Committee, elect Option B with respect to 

a Senior Employee Claimant at any time prior to the occurrence of the Effective 

Date. If the Debtor does not make an election, then Option A will apply. 

h. Under either Option A or Option B, Mr. Ellington and Mr. Leventon will retain all 

their rights with respect to all Claims other than the Liquidated Bonus Amounts, 

including, but not limited to, their Class 6 PTO Claims, other claims asserted as 

Class 8 General Unsecured Claims, the Senior Employees’ claims for 

indemnification against the Debtor, and any other claims that they may assert 

constitute Administrative Expense Claims, and any other such Claims are subject 

to the rights of any party in interest to object to such Claims, and the Debtor reserves 

any all of its rights and defenses in connection therewith. 

i. Subject to entry of this Confirmation Order and as set forth and announced on the 

record at the hearing on confirmation of the Plan and no party objecting thereto, 

Mr. Ellington and Mr. Leventon agreed to change the votes in their respective 

Ballots from rejection to acceptance of the Plan and to withdraw the Senior 

Employees’ Objection. 

j. The Senior Employees’ Settlement represents a valid exercise of the Debtor’s 

business judgment and satisfies the requirements for a compromise under 

Bankruptcy Rule 9019(a). 

k. For the avoidance of doubt, neither Mr. Leventon nor Mr. Ellington shall be a 

Released Party under the Plan regardless of how the Senior Employee Claimants’ 

Claims are to be treated hereunder. 

Based upon the foregoing findings, and upon the record made before the Bankruptcy Court 

at the Confirmation Hearing, and good and sufficient cause appearing therefor, it is hereby 

ORDERED, ADJUDGED AND DECREED THAT:

A. Confirmation of the Plan. The Plan is approved in its entirety and 

CONFIRMED under section 1129 of the Bankruptcy Code. The terms of the Plan, including the 

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Exhibit 19 Page 92 of 266

000829

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Plan Supplements and Plan Modifications, are incorporated by reference into and are an integral 

part of this Confirmation Order.11

B. Findings of Fact and Conclusions of Law. The findings of fact and the 

conclusions of law set forth in this Confirmation Order and on the record of the Confirmation 

Hearing constitute findings of fact and conclusions of law in accordance with Bankruptcy Rule 

7052, made applicable to this proceeding by Bankruptcy Rule 9014. All findings of fact and 

conclusion of law announced by the Bankruptcy Court at the Confirmation Hearing in relation to 

confirmation of the Plan are hereby incorporated into this Confirmation Order. To the extent that 

any of the following constitutes findings of fact or conclusions of law, they are adopted as such. 

To the extent any findings of fact or conclusions of law set forth in this Confirmation Order 

(including any findings of fact or conclusions of law announced by the Bankruptcy Court at the 

Confirmation Hearing and incorporated herein) constitutes an order of the Bankruptcy Court, and 

is adopted as such. 

C. Objections. Any resolution or disposition of objections to confirmation of 

the Plan or otherwise ruled upon by the Bankruptcy Court on the record of the Confirmation 

Hearing is hereby incorporated by reference. All objections and all reservations of rights 

pertaining to confirmation of the Plan that have not been withdrawn, waived or settled are 

overruled on the merits, except as otherwise specifically provided in this Confirmation Order. 

D. Plan Supplements and Plan Modifications. The filing with the 

Bankruptcy Court of the Plan Supplements and the Plan Modifications constitutes due and 

11 The Plan is attached hereto as Exhibit A. 

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Exhibit 19 Page 93 of 266

000830

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sufficient notice thereof. Accordingly, pursuant to section 1127(a) of the Bankruptcy Code and 

Bankruptcy Rule 3019, the Plan Modifications and the Plan Supplements do not require additional 

disclosure under section 1125 of the Bankruptcy Code or resolicitation of votes under section 1126 

of the Bankruptcy Code, nor do they require that Holders of Claims or Equity Interests be afforded 

an opportunity to change previously cast acceptances or rejections of the Plan. The Plan 

Modifications and the Plan Supplements constitute the Plan pursuant to section 1127(a) of the 

Bankruptcy Code. Accordingly, the Plan, as modified, is properly before the Bankruptcy Court 

and all votes cast with respect to the Plan prior to such modification shall be binding and shall 

apply with respect to the Plan. 

E. Deemed Acceptance of Plan. In accordance with section 1127 of the 

Bankruptcy Code and Bankruptcy Rule 3019, all Holders of Claims and Equity Interests who voted 

to accept the Plan (or whom are conclusively presumed to accept the Plan) are deemed to have 

accepted the Plan as modified by the Plan Modifications. No holder of a Claim shall be permitted 

to change its vote as a consequence of the Plan Modifications. 

F. Vesting of Assets in the Reorganized Debtor. Except as otherwise 

provided in the Plan or this Confirmation Order, on or after the Effective Date, all Reorganized 

Debtor Assets will vest in the Reorganized Debtor, free and clear of all Liens, Claims, charges or 

other encumbrances pursuant to section 1141(c) of the Bankruptcy Code, except with respect to 

such Liens, Claims, charges, and other encumbrances that are specifically preserved under the Plan 

upon the Effective Date. The Reorganized Debtor shall be the exclusive trustee of the Reorganized 

Debtor Assets for purposes of 31 U.S.C. § 3713(b) and 26 U.S.C. § 6012(b)(3), as well as the 

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Exhibit 19 Page 94 of 266

000831

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representative of the Estate appointed pursuant to section 1123(b)(3)(B) of the Bankruptcy Code 

with respect to the Reorganized Debtor Assets. 

G. Effectiveness of All Actions. All actions contemplated by the Plan, 

including all actions in connection with the Claimant Trust Agreement, the Senior Employee 

Stipulation, the New GP LLC Documents, the New Frontier Note, the Reorganized Limited 

Partnership Agreement, the Litigation Sub-Trust Agreement, and the other Plan Documents, are 

authorized to be taken on, prior to, or after the Effective Date, as applicable, under this 

Confirmation Order, without further application to or order of the Bankruptcy Court, or further 

action by the directors, managers, officers or partners of the Debtor or the Reorganized Debtor and 

with the effect that such actions had been taken by unanimous action of such parties. 

H. Restructuring Transactions. The Debtor or Reorganized Debtor, as 

applicable, are authorized to enter into and effectuate the Restructuring provided under the Plan, 

including, without limitation, the entry into and consummation of the transactions contemplated 

by the Claimant Trust Agreement, the Senior Employee Stipulation, the New GP LLC Documents, 

the New Frontier Note, the Reorganized Limited Partnership Agreement, the Litigation Sub-Trust 

Agreement, and the other Plan Documents, and may take any actions as may be necessary or 

appropriate to effect a corporate restructuring of its business or a corporate restructuring of the 

overall corporate structure of the Reorganized Debtor, as and to the extent provided in the Plan. 

Any transfers of assets or equity interests effected or any obligations incurred through the 

Restructuring pursuant to the Plan are hereby approved and shall not constitute fraudulent 

conveyances or fraudulent transfers or otherwise be subject to avoidance. 

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Exhibit 19 Page 95 of 266

000832

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I. Preservation of Causes of Action. Unless a Cause of Action against a 

Holder of a Claim or an Equity Interest or other Entity is expressly waived, relinquished, released, 

compromised or settled in the Plan or any Final Order (including, without limitation, this 

Confirmation Order), such Cause of Action is expressly reserved for later adjudication by the 

Reorganized Debtor, the Litigation Sub-Trust, or the Claimant Trust, as applicable (including, 

without limitation, Causes of Action not specifically identified or of which the Debtor may 

presently be unaware or that may arise or exist by reason of additional facts or circumstances 

unknown to the Debtor at this time or facts or circumstances that may change or be different from 

those the Debtor now believes to exist) and, therefore, no preclusion doctrine, including, without 

limitation, the doctrines of res judicata, collateral estoppel, issue preclusion, claim preclusion, 

waiver, estoppel (judicial, equitable or otherwise) or laches will apply to such Causes of Action as 

a consequence of the confirmation, effectiveness, or consummation of the Plan based on the 

Disclosure Statement, the Plan, or this Confirmation Order, except where such Causes of Action 

have been expressly released in the Plan or any other Final Order (including, without limitation, 

this Confirmation Order). In addition, the right of the Reorganized Debtor, the Claimant Trust, or 

the Litigation Sub-Trust to pursue or adopt any claims alleged in any lawsuit in which the Debtor 

is a plaintiff, defendant or an interested party, against any Entity, including, without limitation, the 

plaintiffs or co-defendants in such lawsuits, is expressly reserved. 

J. Independent Board of Directors of Strand. The terms of the current 

Independent Directors shall expire on the Effective Date without the need for any further or other 

action by any of the Independent Directors. For avoidance of doubt, the Assumed Contracts 

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Exhibit 19 Page 96 of 266

000833

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include the Indemnification and Guaranty Agreement between Highland Capital Management, 

Strand Advisors, Inc. and James Seery; the Indemnification and Guaranty Agreement between 

Highland Capital Management, Strand Advisors, Inc. and John Dubel and Indemnification and 

Guaranty Agreement between Highland Capital Management, Strand Advisors, Inc. and Russell 

Nelms and shall each remain in full force and effect notwithstanding the expiration of the terms of 

any Independent Directors. 

K. Cancellation of Equity Interests and Issuance of New Partnership 

Interests. On the Effective Date, all Class A Limited Partnership Interests, including the Class A 

Limited Partnership Interests held by Strand, as general partner, and Class B/C Limited 

Partnerships in the Debtor will be deemed cancelled, and all obligations or debts owed by, or 

Claims against, the Debtor on account of, or based upon, such Class A Limited Partnership 

Interests and Class B/C Limited Partnership Interests shall be deemed as cancelled, released, and 

discharged, including all obligations or duties by the Debtor relating to the Equity Interests in any 

of the Debtor’s formation documents, including the Limited Partnership Agreement. As of the 

Effective Date and pursuant to the Plan, new Class A Limited Partnership Interests in the 

Reorganized Debtor will be issued to the Claimant Trust and New GP LLC. The Claimant Trust, 

as limited partner, will ratify New GP LLC’s appointment as general partner of the Reorganized 

Debtor, and on and following the Effective Date, the Claimant Trust will be the Reorganized 

Debtor’s limited partner and New GP LLC will be its general partner. The Claimant Trust, as 

limited partner, and New GP LLC, as general partner, will execute the Reorganized Limited 

Partnership Agreement, which will amend and restate, in all respects, the Debtor’s current Limited 

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Exhibit 19 Page 97 of 266

000834

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Partnership Agreement. Following the Effective Date, the Reorganized Debtor will be managed 

consistent with the terms of the Reorganized Limited Partnership Agreement by New GP LLC. 

The sole managing member of New GP LLC will be the Claimant Trust, and the Claimant Trustee 

will be the sole officer of New GP LLC on the Effective Date. 

L. Transfer of Assets to Claimant Trust. On or prior to the Effective Date, 

the Debtor shall irrevocably transfer and shall be deemed to have irrevocably transferred to the 

Claimant Trust all of its rights, title, and interest in and to all of the Claimant Trust Assets, and in 

accordance with section 1141 of the Bankruptcy Code, the Claimant Trust Assets shall 

automatically vest in the Claimant Trust free and clear of all Claims, Liens, encumbrances, or 

interests subject only to the Claimant Trust Interests and the Claimant Trust Expenses, as provided 

for in the Claimant Trust Agreement, and such transfer shall be exempt from any stamp, real estate 

transfer, mortgage from any stamp, transfer, reporting, sales, use, or other similar tax. Following 

the Effective Date, the Claimant Trust will administer the Claimant Trust Assets pursuant to the 

Plan and the Claimant Trust Agreement. 

M. Transfer of Estate Claims to Litigation Sub-Trust. On or prior to the 

Effective Date, the Claimant Trust shall irrevocably transfer and shall be deemed to have 

irrevocably transferred to the Litigation Sub-Trust all of the Claimant Trust’s rights, title, and 

interest in and to all of the Estate Claims as successor in interest to the Debtor, and in accordance 

with section 1141 of the Bankruptcy Code, the Estate Claims shall automatically vest in the 

Litigation Sub-Trust free and clear of all Claims, Liens, encumbrances, or interests subject only to 

the Litigation Sub-Trust Interests and Litigation Sub-Trust Expenses. The Litigation Trustee will 

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Appx. 0750

Case 3:21-cv-01710-N Document 10-19 Filed 10/05/21 Page 98 of 266 PageID 804

Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 98 of 266

000835

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be authorized to investigate, pursue, and otherwise resolve the Estate Claims pursuant to the terms 

of the Litigation Sub-Trust Agreement and the Plan, including as successor in interest to the Debtor 

or Committee, as applicable, in any litigation commenced prior to the Effective Date in which 

Estate Claims are asserted. 

N. Compromise of Controversies. In consideration for the distributions and 

other benefits, including releases, provided under the Plan, the provisions of the Plan constitute a 

good faith compromise and settlement of all Claims, Equity Interests, and controversies resolved 

under the Plan and the entry of this Confirmation Order constitutes approval of such compromise 

and settlement under Bankruptcy Rule 9019. 

O. Objections to Claims. The Claims Objection Deadline shall be the date 

that is 180 days after the Effective Date, provided, however, that the Claims Objection Deadline 

may be extended by the Bankruptcy Court upon a motion by the Claimant Trustee and as otherwise 

provided under the Plan. 

P. Assumption of Contracts and Leases. Effective as of the date of this 

Confirmation Order, each of the Assumed Contacts shall be assumed by the Debtor without the 

need for any further notice to or action, order, or approval of the Bankruptcy Court, under section 

365 of the Bankruptcy Code and the payment of Cures, if any, shall be paid in accordance with the 

Plan. Each Assumed Contract shall include all modifications, amendments, supplements, 

restatements, or other agreements related thereto, and all rights related thereto, if any, including 

all easements, licenses, permits, rights, privileges, immunities, options, rights of first refusal, and 

any other interests. Modifications, amendments, supplements, and restatements to any of the 

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Appx. 0751

Case 3:21-cv-01710-N Document 10-19 Filed 10/05/21 Page 99 of 266 PageID 805

Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 99 of 266

000836

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DOCS_SF:104487.21 36027/002

Assumed Contracts that have been executed by the Debtor during the Chapter 11 Case shall not 

be deemed to alter the prepetition nature of such Assumed Contracts or the validity, priority, or 

amount of any Claims that may arise in connection therewith. Assumption of the Assumed 

Contracts pursuant to Article V.A of the Plan and full payment of any applicable Cure pursuant to 

the Plan shall result in the full release and satisfaction of any Cures, Claims, or defaults, whether 

monetary or nonmonetary, including defaults of provisions restricting the change in control or 

ownership interest composition, or other bankruptcy-related defaults, arising under any Assumed 

Contracts. 

Q. Rejection of Contracts and Leases. Unless previously assumed during the 

pendency of the Chapter 11 Case or pursuant to the Plan, all other Executory Contracts and 

Unexpired Leases are rejected as of the date of the entry of this Confirmation Order and pursuant 

to the terms of the Plan. To the extent that any party asserts any damages resulting from the 

rejection of any Executory Contract or Unexpired Lease, such claim must be filed within thirty 

(30) days following entry of this Confirmation Order, or such claim will be forever barred and 

disallowed against the Reorganized Debtor. 

R. Assumption of Issuer Executory Contracts. On the Confirmation Date, 

the Debtor will assume the agreements set forth on Exhibit B hereto (collectively, the “Issuer 

Executory Contracts”) pursuant to section 365 of the Bankruptcy Code and Article V of the Plan. 

In full and complete satisfaction of its obligation to cure outstanding defaults under section 

365(b)(1) of the Bankruptcy Code, the Debtor or, as applicable, any successor manager under the 

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Case 3:21-cv-01710-N Document 10-19 Filed 10/05/21 Page 100 of 266 PageID 806

Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 100 of 266

000837

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Issuer Executory Contracts (collectively, the “Portfolio Manager”) will pay to the Issuers12 a 

cumulative amount of $525,000 (the “Cure Amount”) as follows: 

a. $200,000 in cash on the date that is five business days from the Effective Date, with 

such payment paid directly to Schulte Roth & Zabel LLP (“SRZ”) in the amount of 

$85,714.29, Jones Walker LLP (“JW”) in the amount of $72,380.95, and Maples 

Group (“Maples” and collectively with SRZ and JW, the “Issuers’ Counsel”) in the 

amount of $41,904.76 as reimbursement for the attorney’s fees and other legal 

expenses incurred by the Issuers in connection with the Debtor’s bankruptcy case; 

and 

b. $325,000 in four equal quarterly payments of $81,250.00 (each, a “Payment”), 

which amounts shall be paid to SRZ in the amount of $34,821.43, JW in the amount 

of $29,404.76, and Maples in the amount of $17,023.81 as additional 

reimbursement for the attorney’s fees and other legal expenses incurred by the 

Issuers in connection with the Debtor’s bankruptcy case (i) from any management 

fees actually paid to the Portfolio Manager under the Issuer Executory Contracts 

(the “Management Fees”), and (ii) on the date(s) Management Fees are required to 

be paid under the Issuer Executory Contracts (the “Payment Dates”), and such 

obligation shall be considered an irrevocable direction from the Debtor and the 

Bankruptcy Court to the relevant CLO Trustee to pay, on each Payment Date, the 

Payment to Issuers’ Counsel, allocated in the proportion set forth in such 

agreement; provided, however, that (x) if the Management Fees are insufficient to 

make any Payment in full on a Payment Date, such shortfall, in addition to any 

other amounts due hereunder, shall be paid out of the Management Fees owed on 

the following Payment Date, and (y) nothing herein shall limit either Debtor’s 

liability to pay the amounts set forth herein, nor the recourse of the Issuers or 

Issuers’ Counsel to the Debtor, in the event of any failure to make any Payment. 

S. Release of Issuer Claims. Effective as of the Confirmation Date, and to 

the maximum extent permitted by law, each Issuer on behalf of itself and each of its current and 

former advisors, trustees, directors, officers, managers, members, partners, employees, 

beneficiaries, shareholders, agents, participants, subsidiaries, parents, successors, designees, and 

12 The “Issuers” are: Brentwood CLO, Ltd., Gleneagles CLO, Ltd., Greenbriar CLO, Ltd., Highland CLO 2018-1, 

Ltd., Highland Legacy Limited, Highland Loan Funding V Ltd., Highland Park CDO I, Ltd., Pam Capital Funding 

LP, Rockwall CDO II Ltd., Rockwall CDO Ltd., Southfork CLO Ltd., Stratford CLO Ltd., Westchester CLO, Ltd., 

Aberdeen Loan Funding, Ltd., Eastland CLO, Ltd., Grayson CLO, Ltd., Highland Credit Opportunities CDO Ltd., 

Jasper CLO, Ltd., Liberty Cayman Holdings, Ltd., Liberty CLO, Ltd., Red River CLO, Ltd., Valhalla CLO, Ltd. 

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Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 101 of 266

000838

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assigns hereby forever, finally, fully, unconditionally, and completely releases, relieves, acquits, 

remises, and exonerates, and covenants never to sue, (i) the Debtor and (ii) the Professionals 

retained by the Debtor and the Committee in the Chapter 11 Case, the Independent Directors, the 

CEO/CRO, and with respect to the Persons listed in this subsection (ii), such Person’s Related 

Persons (collectively, the “Debtor Released Parties”), for and from any and all claims, debts, 

liabilities, demands, obligations, promises, acts, agreements, liens, losses, costs and expenses 

(including, without limitation, attorney’s fees and related costs), damages, injuries, suits, actions, 

and causes of action of whatever kind or nature, whether known or unknown, suspected or 

unsuspected, matured or unmatured, liquidated or unliquidated, contingent or fixed, at law or in 

equity, statutory or otherwise, including, without limitation, any claims, defenses, and affirmative 

defenses, whether known or unknown, including, without limitation, those which were or could 

have been asserted in, in connection with, or with respect to the Bankruptcy Case (collectively, the 

“Issuer Released Claims”). 

T. Release of Debtor Claims against Issuer Released Parties. Upon entry 

of this Order, and to the maximum extent permitted by law, the Debtor hereby forever, finally, 

fully, unconditionally, and completely releases, relieves, acquits, remises, and exonerates, and 

covenants never to sue [(i) each Issuer and (ii) Wendy Ebanks, (iii) Yun Zheng, (iv) Laura 

Chisholm, (v) Mora Goddard, (vi) Stacy Bodden, (vii) Suzan Merren (viii) Scott Dakers, (ix) Samit 

Ghosh, (x) Inderjit Singh, (xi) Ellen Christian, (xii) Andrew Dean, (xiii) Betsy Mortel, (xiv) David 

Hogan, (xv) Cleveland Stewart, (xvi) Rachael Rankin, (xvii) Otelia Scott, (xviii) Martin Couch, 

(xx) Ferona Bartley-Davis, (xxi) Charlotte Cloete, (xxii) Christina McLean, (xxiii) Karen Ellerbe, 

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Case 3:21-cv-01710-N Document 10-19 Filed 10/05/21 Page 102 of 266 PageID 808

Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 102 of 266

000839

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(xxiv) Gennie Kay Bigord, (xxv) Evert Brunekreef, (xxvii) Evan Charles Burtton (collectively, 

the “Issuer Released Parties”),] for and from any and all claims, debts, liabilities, demands, 

obligations, promises, acts, agreements, liens, losses, costs and expenses (including, without 

limitation, attorney’s fees and related costs), damages, injuries, suits, actions, and causes of action 

of whatever kind or nature, whether known or unknown, suspected or unsuspected, matured or 

unmatured, liquidated or unliquidated, contingent or fixed, at law or in equity, statutory or 

otherwise, including, without limitation, any claims, defenses, and affirmative defenses, whether 

known or unknown, which were or could have been asserted in, in connection with, or with respect 

to the Bankruptcy Case (collectively, the “Debtor Released Claims”); provided, however, that 

notwithstanding anything herein to the contrary, the release contained herein will apply to the 

Issuer Released Parties set forth in subsection (ii) above only with respect to Debtor Released 

Claims arising from or relating to the Issuer Executory Contracts. Notwithstanding anything in 

this Order to the contrary, the releases set forth in paragraphs S and T hereof will not apply with 

respect to the duties, rights, or obligations of the Debtor or any Issuer hereunder. 

U. Authorization to Consummate. The Debtor is authorized to consummate 

the Plan after the entry of this Confirmation Order subject to satisfaction or waiver of the 

conditions precedent to the Effective Date of the Plan set forth in Article VIII.A of the Plan. The 

Plan shall not become effective unless and until the conditions set forth in Article VIII.A of the 

Plan have been satisfied, or otherwise waived pursuant to Article VIII.B of the Plan. 

V. Professional Compensation. All requests for payment of Professional Fee 

Claims for services rendered and reimbursement of expenses incurred prior to the Effective Date 

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Appx. 0755

Case 3:21-cv-01710-N Document 10-19 Filed 10/05/21 Page 103 of 266 PageID 809

Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 103 of 266

000840

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must be filed no later than sixty (60) days after the Effective Date. The Bankruptcy Court shall 

determine the Allowed amounts of such Professional Fee Claims after notice and an opportunity 

for hearing in accordance with the procedures established by the Bankruptcy Code and the 

Bankruptcy Court. The Debtor shall fund the Professional Fee Reserve as provided under the Plan. 

The Reorganized Debtor shall pay Professional Fee Claims in Cash in the amounts the Bankruptcy 

Court allows. The Debtor is authorized to pay the pre-Effective Date fees and expenses of all 

ordinary course professionals in the ordinary course of business without the need for further 

Bankruptcy Court order or approval. From and after the Effective Date, any requirement that 

Professionals comply with sections 327 through 331 and 1103 (if applicable) of the Bankruptcy 

Code in seeking retention or compensation for services rendered after such date shall terminate, 

and the Reorganized Debtor or Claimant Trustee, as applicable, may employ and pay any 

Professional or Entity employed in the ordinary course of the Debtor’s business without any further 

notice to or action, order, or approval of the Bankruptcy Court. 

W. Release, Exculpation, Discharge, and Injunction Provisions. The 

following release, exculpation, discharge, and injunction provisions set forth in the Plan are 

approved and authorized in their entirety, and such provisions are effective and binding on 

all parties and Entities to the extent provided therein. 

X. Discharge of Claims and Termination of Interests. To the fullest extent 

provided under section 1141(d)(1)(A) and other applicable provisions of the Bankruptcy Code, 

except as otherwise expressly provided by the Plan or this Confirmation Order, all consideration 

distributed under the Plan will be in exchange for, and in complete satisfaction, settlement, 

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Appx. 0756

Case 3:21-cv-01710-N Document 10-19 Filed 10/05/21 Page 104 of 266 PageID 810

Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 104 of 266

000841

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discharge, and release of, all Claims and Equity Interests of any kind or nature whatsoever against 

the Debtor or any of its Assets or properties, and regardless of whether any property will have been 

distributed or retained pursuant to the Plan on account of such Claims or Equity Interests. Except 

as otherwise expressly provided by the Plan or this Confirmation Order, upon the Effective Date, 

the Debtor and its Estate will be deemed discharged and released under and to the fullest extent 

provided under section 1141(d)(1)(A) and other applicable provisions of the Bankruptcy Code 

from any and all Claims and Equity Interests of any kind or nature whatsoever, including, but not 

limited to, demands and liabilities that arose before the Confirmation Date, and all debts of the 

kind specified in section 502(g), 502(h), or 502(i) of the Bankruptcy Code. 

Y. Exculpation. Subject in all respects to Article XII.D of the Plan, to the 

maximum extent permitted by applicable law, no Exculpated Party will have or incur, and each 

Exculpated Party is hereby exculpated from, any claim, obligation, suit, judgment, damage, 

demand, debt, right, Cause of Action, remedy, loss, and liability for conduct occurring on or after 

the Petition Date in connection with or arising out of (i) the filing and administration of the Chapter 

11 Case; (ii) the negotiation and pursuit of the Disclosure Statement, the Plan, or the solicitation 

of votes for, or confirmation of, the Plan; (iii) the funding or consummation of the Plan (including 

the Plan Supplement) or any related agreements, instruments, or other documents, the solicitation 

of votes on the Plan, the offer, issuance, and Plan Distribution of any securities issued or to be 

issued pursuant to the Plan, including the Claimant Trust Interests, whether or not such Plan 

Distributions occur following the Effective Date; (iv) the implementation of the Plan; and (v) any 

negotiations, transactions, and documentation in connection with the foregoing clauses (i)-(v); 

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Case 3:21-cv-01710-N Document 10-19 Filed 10/05/21 Page 105 of 266 PageID 811

Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 105 of 266

000842

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provided, however, the foregoing will not apply to (a) any acts or omissions of an Exculpated Party 

arising out of or related to acts or omissions that constitute bad faith, fraud, gross negligence, 

criminal misconduct, or willful misconduct or (b) Strand or any Employee other than with respect 

to actions taken by such Entities from the date of appointment of the Independent Directors through 

the Effective Date. The Plan’s exculpation shall be in addition to, and not in limitation of, all other 

releases, indemnities, exculpations, any other applicable law or rules, or any other provisions of 

the Plan, including Article IV.C.2 of the Plan, protecting such Exculpated Parties from liability. 

Z. Releases by the Debtor. On and after the Effective Date, each Released 

Party is deemed to be, hereby conclusively, absolutely, unconditionally, irrevocably, and forever 

released and discharged by the Debtor and the Estate, in each case on behalf of themselves and 

their respective successors, assigns, and representatives, including, but not limited to, the Claimant 

Trust and the Litigation Sub-Trust from any and all Causes of Action, including any derivative 

claims, asserted on behalf of the Debtor, whether known or unknown, foreseen or unforeseen, 

matured or unmatured, existing or hereafter arising, in law, equity, contract, tort or otherwise, that 

the Debtor or the Estate would have been legally entitled to assert in their own right (whether 

individually or collectively) or on behalf of the holder of any Claim against, or Interest in, a Debtor 

or other Person. Notwithstanding anything contained herein to the contrary, the foregoing release 

does not release: (i) any obligations of any party under the Plan or any document, instrument, or 

agreement executed to implement the Plan, (ii) the rights or obligations of any current employee 

of the Debtor under any employment agreement or plan, (iii) the rights of the Debtor with respect 

to any confidentiality provisions or covenants restricting competition in favor of the Debtor under 

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Appx. 0758

Case 3:21-cv-01710-N Document 10-19 Filed 10/05/21 Page 106 of 266 PageID 812

Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 106 of 266

000843

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any employment agreement with a current or former employee of the Debtor, (iv) any Avoidance 

Actions, or (v) any Causes of Action arising from willful misconduct, criminal misconduct, actual 

fraud, or gross negligence of such applicable Released Party as determined by Final Order of the 

Bankruptcy Court or any other court of competent jurisdiction. 

AA. Injunction. Upon entry of this Confirmation Order, all Enjoined 

Parties are and shall be permanently enjoined, on and after the Effective Date, from taking 

any actions to interfere with the implementation or consummation of the Plan. Except as 

expressly provided in the Plan, this Confirmation Order, or a separate order of the 

Bankruptcy Court, all Enjoined Parties are and shall be permanently enjoined, on and after 

the Effective Date, with respect to any Claims and Equity Interests, from directly or 

indirectly (i) commencing, conducting, or continuing in any manner, any suit, action, or 

other proceeding of any kind (including any proceeding in a judicial, arbitral, administrative 

or other forum) against or affecting the Debtor or the property of the Debtor, (ii) enforcing, 

levying, attaching (including any prejudgment attachment), collecting, or otherwise 

recovering, enforcing, or attempting to recover or enforce, by any manner or means, any 

judgment, award, decree, or order against the Debtor or the property of the Debtor, (iii) 

creating, perfecting, or otherwise enforcing in any manner, any security interest, lien or 

encumbrance of any kind against the Debtor or the property of the Debtor, (iv) asserting any 

right of setoff, directly or indirectly, against any obligation due to the Debtor or against

property or interests in property of the Debtor, except to the limited extent permitted under 

Sections 553 and 1141 of the Bankruptcy Code, and (v) acting or proceeding in any manner, 

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Appx. 0759

Case 3:21-cv-01710-N Document 10-19 Filed 10/05/21 Page 107 of 266 PageID 813

Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 107 of 266

000844

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in any place whatsoever, that does not conform to or comply with the provisions of the Plan. 

The injunctions set forth in the Plan and this Confirmation Order shall extend to, and apply 

to any act of the type set forth in any of clauses (i)-(v) of the immediately preceding 

paragraph against any successors of the Debtor, including, but not limited to, the 

Reorganized Debtor, the Litigation Sub-Trust, and the Claimant Trust and their respective 

property and interests in property. Subject in all respects to Article XII.D of the Plan, no 

Enjoined Party may commence or pursue a claim or cause of action of any kind against any 

Protected Party that arose or arises from or is related to the Chapter 11 Case, the negotiation 

of the Plan, the administration of the Plan or property to be distributed under the Plan, the 

wind down of the business of the Debtor or Reorganized Debtor, the administration of the 

Claimant Trust or the Litigation Sub-Trust, or the transactions in furtherance of the 

foregoing without the Bankruptcy Court (i) first determining, after notice and a hearing, 

that such claim or cause of action represents a colorable claim of any kind, including, but 

not limited to, negligence, bad faith, criminal misconduct, willful misconduct, fraud, or gross 

negligence against a Protected Party and (ii) specifically authorizing such Enjoined Party to 

bring such claim or cause of action against any such Protected Party; provided, however, the 

foregoing will not apply to a claim or cause of action against Strand or against any Employee 

other than with respect to actions taken, respectively, by Strand or by such Employee from 

the date of appointment of the Independent Directors through the Effective Date. The 

Bankruptcy Court will have sole and exclusive jurisdiction to determine whether a claim or 

cause of action is colorable and, only to the extent legally permissible and as provided for in 

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Appx. 0760

Case 3:21-cv-01710-N Document 10-19 Filed 10/05/21 Page 108 of 266 PageID 814

Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 108 of 266

000845

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Article XI of the Plan, shall have jurisdiction to adjudicate the underlying colorable claim or 

cause of action. 

BB. Duration of Injunction and Stays. Unless otherwise provided in the 

Plan, in this Confirmation Order, or in a Final Order of the Bankruptcy Court, (i) all 

injunctions and stays entered during the Chapter 11 Case and in existence on the 

Confirmation Date, shall remain in full force and effect in accordance with their terms; and 

(ii) the automatic stay arising under section 362 of the Bankruptcy Code shall remain in full 

force and effect subject to Section 362(c) of the Bankruptcy Code, and to the extent necessary 

if the Debtor does not receive a discharge, the Bankruptcy Court will enter an equivalent 

order under Section 105.

CC. Continuance of January 9 Order and July 16 Order. Unless otherwise 

provided in the Plan, in this Confirmation Order, or in a Final Order of the Bankruptcy Court, each 

of the Order Approving Settlement with Official Committee of Unsecured Creditors Regarding 

Governance of the Debtor and Procedures for Operations in the Ordinary Course, entered by the 

Bankruptcy Court on January 9, 2020 [Docket No. 339] and Order Approving the Debtor’s Motion 

Under Bankruptcy Code Sections 105(a) and 363(b) Authorizing Retention of James P. Seery, Jr., 

as Chief Executive Officer, Chief Restructuring Officer, and Foreign Representative Nunc Pro 

Tunc to March 15, 2020 [Docket No. 854] entered on July 16, 2020 shall remain in full force and 

effect from the Confirmation Date and following the Effective Date. 

DD. No Governmental Releases. Nothing in this Confirmation Order or the 

Plan shall effect a release of any claim by the United States Government or any of its agencies or 

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Case 3:21-cv-01710-N Document 10-19 Filed 10/05/21 Page 109 of 266 PageID 815

Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 109 of 266

000846

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DOCS_SF:104487.21 36027/002

any state and local authority whatsoever, including without limitation any claim arising under the 

Internal Revenue Code, the environmental laws or any criminal laws of the United States or any 

state and local authority against any party or person, nor shall anything in this Confirmation Order 

or the Plan enjoin the United States or any state or local authority from bringing any claim, suit, 

action, or other proceedings against any party or person for any liability of such persons whatever, 

including without limitation any claim, suit, or action arising under the Internal Revenue Code, 

the environmental laws or any criminal laws of the United States or any state and local authority 

against such persons, nor shall anything in this Confirmation Order or the Plan exculpate any party 

or person from any liability to the United States Government or any of its agencies or any state 

and local authority whatsoever, including any liabilities arising under the Internal Revenue Code, 

the environmental laws, or any criminal laws of the United States or any state and local authority 

against any party or person.

EE. Exemption from Transfer Taxes. Pursuant to section 1146(a) of the 

Bankruptcy Code, any transfers (whether from the Debtor to the Reorganized Debtor or to any 

other Person) of property under the Plan or pursuant to: (a) the issuance, distribution, transfer, or 

exchange of any debt, equity security, or other interest in the Debtor or the Reorganized Debtor; 

(b) the Restructuring transactions pursuant to the Plan; (c) the creation, modification, 

consolidation, termination, refinancing, and/or recording of any mortgage, deed of trust, or other 

security interest, or the securing of additional indebtedness by such or other means; (d) the making, 

assignment, or recording of any lease or sublease; or (e) the making, delivery, or recording of any 

deed or other instrument of transfer under, in furtherance of, or in connection with, the Plan, 

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Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 110 of 266

000847

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DOCS_SF:104487.21 36027/002

including any deeds, bills of sale, assignments, or other instrument of transfer executed in 

connection with any transaction arising out of, contemplated by, or in any way related to the Plan, 

shall not be subject to any document recording tax, stamp tax, conveyance fee, intangibles or 

similar tax, mortgage tax, real estate transfer tax, mortgage recording tax, Uniform Commercial 

Code filing or recording fee, regulatory filing or recording fee, or other similar tax or governmental 

assessment to the fullest extent contemplated by section 1146(a) of the Bankruptcy Code, and upon 

entry of this Confirmation Order, the appropriate state or local governmental officials or agents 

shall forego the collection of any such tax or governmental assessment and accept for filing and 

recordation of any of the foregoing instruments or other documents without the payment of any 

such tax, recordation fee, or governmental assessment. 

FF. Cancellation of Notes, Certificates and Instruments. Except for the 

purpose of evidencing a right to a distribution under the Plan and except as otherwise set forth in 

the Plan or as otherwise provided in this Confirmation Order, on the Effective Date, all agreements, 

instruments, Securities and other documents evidencing any prepetition Claim or Equity Interest 

and any rights of any Holder in respect thereof shall be deemed cancelled, discharged, and of no 

force or effect. The holders of or parties to such cancelled instruments, Securities, and other 

documentation will have no rights arising from or related to such instruments, Securities, or other 

documentation or the cancellation thereof, except the rights provided for pursuant to the Plan, and 

the obligations of the Debtor thereunder or in any way related thereto will be fully released, 

terminated, extinguished and discharged, in each case without further notice to or order of the 

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Case 3:21-cv-01710-N Document 10-19 Filed 10/05/21 Page 111 of 266 PageID 817

Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 111 of 266

000848

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Bankruptcy Court, act or action under applicable law, regulation, order, or rule or any requirement 

of further action, vote or other approval or authorization by any Person. 

GG. Documents, Mortgages, and Instruments. Each federal, state, 

commonwealth, local, foreign, or other governmental agency is authorized to accept any and all 

documents, mortgages, and instruments necessary or appropriate to effectuate, implement, or 

consummate the Plan, including the Restructuring transactions contemplated under the Plan, and 

this Confirmation Order. 

HH. Post-Confirmation Modifications. Subject section 1127(b) of the 

Bankruptcy Code and the Plan, the Debtor and the Reorganized Debtor expressly reserve their 

rights to revoke or withdraw, or to alter, amend, or modify materially the Plan, one or more times 

after Confirmation and, to the extent necessary, may initiate proceedings in the Bankruptcy Court 

to so alter, amend, or modify the Plan, or remedy any defect or omission, or reconcile any 

inconsistencies in the Plan or this Confirmation Order, in such manner as may be necessary to 

carry out the purposes and intent of the Plan. Any such modification or supplement shall be 

considered a modification of the Plan and shall be made in accordance with Article XII.B of the 

Plan. 

II. Applicable Nonbankruptcy Law. The provisions of this Confirmation 

Order, the Plan and related documents, or any amendments or modifications thereto, shall apply 

and be enforceable notwithstanding any otherwise applicable nonbankruptcy law. 

JJ. Governmental Approvals Not Required. This Confirmation Order shall 

constitute all approvals and consents required, if any, by the laws, rules, or regulations of any state, 

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Case 3:21-cv-01710-N Document 10-19 Filed 10/05/21 Page 112 of 266 PageID 818

Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 112 of 266

000849

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federal, or other governmental authority with respect to the dissemination, implementation, or 

consummation of the Plan and the Disclosure Statement, any certifications, documents, 

instruments or agreements, and any amendments or modifications thereto, and any other acts 

referred to in, or contemplated by, the Plan and the Disclosure Statement. 

KK. Notice of Effective Date. As soon as reasonably practicable after the 

Effective Date, the Reorganized Debtor shall file notice of the Effective Date and shall serve a 

copy of the same on all Holders of Claims and Equity Interests, and all parties who have filed with 

the Bankruptcy Court requests to receive notices in accordance with Bankruptcy Rules 2002 and 

3020(c). Notwithstanding the above, no notice of Confirmation or Consummation or service of 

any kind shall be required to be mailed or made upon any Entity to whom the Debtor mailed notice 

of the Confirmation Hearing, but received such notice returned marked “undeliverable as 

addressed,” “moved, left no forwarding address” or “forwarding order expired,” or similar reason, 

unless the Debtor has been informed in writing by such Entity, or is otherwise aware, of that 

Entity’s new address. The above-referenced notices are adequate under the particular 

circumstances of this Chapter 11 Case and no other or further notice is necessary. 

LL. Substantial Consummation. On the Effective Date, the Plan shall be 

deemed to be substantially consummated under sections 1101 and 1127 of the Bankruptcy Code. 

MM. Waiver of Stay. For good cause shown, the stay of this Confirmation Order 

provided by any Bankruptcy Rule is waived, and this Confirmation Order shall be effective and 

enforceable immediately upon its entry by the Bankruptcy Court. 

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Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 113 of 266

000850

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NN. References to and Omissions of Plan Provisions. References to articles, 

sections, and provisions of the Plan are inserted for convenience of reference only and are not 

intended to be a part of or to affect the interpretation of the Plan. The failure to specifically include 

or to refer to any particular article, section, or provision of the Plan in this Confirmation Order 

shall not diminish or impair the effectiveness of such article, section, or provision, it being the 

intent of the Bankruptcy Court that the Plan be confirmed in its entirety, except as expressly 

modified herein, and incorporated herein by this reference. 

OO. Headings. Headings utilized herein are for convenience and reference only, 

and do not constitute a part of the Plan or this Confirmation Order for any other purpose. 

PP. Effect of Conflict. This Confirmation Order supersedes any Bankruptcy 

Court order issued prior to the Confirmation Date that may be inconsistent with this Confirmation 

Order. If there is any inconsistency between the terms of the Plan and the terms of this 

Confirmation Order, the terms of this Confirmation Order govern and control. If there is any 

inconsistency between the terms of this Confirmation Order and the terms of a final, executed Plan 

Supplement Document, the terms of the final, executed Plan Supplement Document will govern 

and control. 

QQ. Resolution of Objection of Texas Taxing Authorities. Dallas County, 

Kaufman County, City of Allen, Allen ISD and City of Richardson (collectively, the “Tax 

Authorities”) assert that they are the holders of prepetition and administrative expense claims for 

2019, 2020 and 2021 ad valorem real and business personal property taxes. The ad valorem 

property taxes for tax year 2020 shall be paid in accordance with and to the extent required under 

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Case 3:21-cv-01710-N Document 10-19 Filed 10/05/21 Page 114 of 266 PageID 820

Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 114 of 266

000851

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applicable nonbankruptcy law. In the event the 2020 taxes are paid after February 1, 2021, the 

Tax Authorities may assert any rights and amounts they claim are owed with respect to penalties 

and interest that have accrued through the date of payment and the Debtor and Reorganized Debtor 

reserve any all rights and defenses in connection therewith. 

a. The Debtor/Reorganized Debtor shall pay all amounts owed to the Tax Authorities

for tax year 2021 in accordance with and to the extent required under applicable 

nonbankruptcy law. The Tax Authorities shall not be required to file and serve an 

administrative expense claim and request for payment as a condition of allowance 

of their administrative expense claims pursuant to 11 U.S.C. Section 503(b)(1)(D). 

With regard to year 2019 ad valorem property taxes, the Tax Authorities will 

receive payment of their prepetition claims within 30 days of the Effective Date of 

the Plan. The payment will include interest from the Petition Date through the 

Effective Date and from the Effective Date through payment in full at the state 

statutory rate pursuant to 11 U.S.C. Sections 506(b), 511, and 1129, if applicable, 

subject to all of the Debtor’s and Reorganized Debtor’s rights and defenses in 

connection therewith. Notwithstanding any other provision in the Plan, the Tax 

Authorities shall (i) retain the liens that secure all prepetition and postpetition 

amounts ultimately owed to them, if any, as well as (ii) the state law priority of 

those liens until the claims are paid in full. 

b. The Tax Authorities’ prepetition claims and their administrative expense claims 

shall not be discharged until such time as the amounts owed are paid in full. In the 

event of a default asserted by the Taxing Authorities, the Tax Authorities shall 

provide notice Debtor or Reorganized Debtor, as applicable, and may demand cure 

of any such asserted default. Subject to all of its rights and defenses, the Debtor or 

Reorganized Debtor shall have fifteen (15) days from the date of the notice to cure 

the default. If the alleged default is not cured, the Tax Authorities may exercise 

any of their respective rights under applicable law and pursue collection of all 

amounts owed pursuant to state law outside of the Bankruptcy Court, subject in all 

respects to the Debtor’s and Reorganized Debtor’s applicable rights and defenses. 

The Debtor/Reorganized Debtor shall be entitled to any notices of default required 

under applicable nonbankruptcy law and each of the Taxing Authorities, the Debtor 

and the Reorganized Debtor reserve any and all of their respective rights and 

defenses in connection therewith. The Debtor’s and Reorganized Debtor’s rights 

and defenses under Texas Law and the Bankruptcy Code with respect to this 

provision of the Confirmation Order, including their right to dispute or object to the 

Tax Authorities’ Claims and liens, are fully preserved. 

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Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 115 of 266

000852

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DOCS_SF:104487.21 36027/002

RR. Resolution of Objections of Scott Ellington and Isaac Leventon. 

Pursuant to Bankruptcy Rule 9019(a), the Senior Employees’ Settlement is approved in all 

respects. The Debtor may, only with the consent of the Committee, elect Option B for a Senior 

Employee Claimant by written notice to such Senior Employee Claimant on or before the 

occurrence of the Effective Date. If the Debtor does not elect Option B, then Option A will govern 

the treatment of the Liquidated Bonus Claims. 

a. Notwithstanding any language in the Plan, the Disclosure Statement, or this 

Confirmation Order to the contrary, if Option A applies to the Liquidated Bonus 

Claims of a Senior Employee Claimant, then the Liquidated Bonus Claims of such 

Senior Employee Claimant will receive the treatment described in paragraph 82(e) 

hereof, and if the Debtor timely elects Option B with respect to the Liquidated 

Bonus Claims of a Senior Employee Claimant, then the Liquidated Bonus Claims 

of such Senior Employee will receive the treatment described in paragraph 82(f) 

hereof. 

b. The Senior Employees’ Settlement is hereby approved, without prejudice to the 

respective rights of Mr. Ellington and Mr. Leventon to assert all their remaining 

Claims against the Debtor’s estate, including, but not limited to, their Class 6 PTO 

Claims, their remaining Class 8 General Unsecured Claims, any indemnification 

claims, and any Administrative Expense Claims that they may assert and is without 

prejudice to the rights of any party in interest to object to any such Claims. 

c. Pursuant to Bankruptcy Rule 3018(a), Mr. Ellington and Mr. Leventon were 

permitted to change their votes on the Plan. Accordingly, Mr. Ellington’s votes on 

his Ballots in Class 7 and Class 8 of the Plan were changed from a rejection of the 

Plan to acceptance of the Plan, and Mr. Leventon’s votes on his Ballots in Class 7 

and Class 8 of the Plan were, changed from rejections of the Plan to acceptances of 

the Plan. 

d. The Senior Employees’ Objection is deemed withdrawn. 

SS. No Release of Claims Against Senior Employee Claimants. For the 

avoidance of doubt, the Senior Employees’ Settlement, as approved herein, shall not, and shall not 

be deemed to, release any Claims or Causes of Action held by the Debtor against either Senior 

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Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 116 of 266

000853

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DOCS_SF:104487.21 36027/002

Employee Claimant nor shall either Senior Employee Claimant be, or be deemed to be, a “Released 

Party” under the Plan. 

TT. Resolution of Objection of Internal Revenue Service. Notwithstanding 

any other provision or term of the Plan or Confirmation Order, the following Default Provision 

shall control as to the United States of America, Internal Revenue Service (“IRS”) and all of its 

claims, including any administrative claim (the “IRS Claim”): 

(a) Notwithstanding any other provision in the Plan, if the Debtor, the Reorganized Debtor, 

or any successor in interest fails to pay when due any payment required to be made on 

federal taxes, the IRS Claim, or other payment required to be made to the IRS under the 

terms and provisions of this Plan, the Confirmation Order, or the Internal Revenue Code 

(26 U.S.C.), or fails to timely file any required federal tax return, or if any other event of 

default as set forth in the Plan occurs, the IRS shall be entitled to give the Debtor, the 

Reorganized Debtor and/or any successor in interest and their counsel of record, by United 

States Certified Mail, written notice of the failure and/or default with demand that it be 

cured, and if the failure and/or default is not cured within 14 days of the date of said notice 

and demand, then the following shall apply to the IRS: 

(1) The administrative collection powers and the rights of the IRS shall 

be reinstated as they existed prior to the filing of the bankruptcy petition, 

including, but not limited to, the assessment of taxes, the filing of a notice 

of Federal tax lien and the powers of levy, seizure, and collection as 

provided under the Internal Revenue Code; 

(2) The automatic stay of 11 U.S.C. § 362 and any injunction of the 

Plan or in the Confirmation Order shall, with regard to the IRS only, lift or 

terminate without further notice or hearing by the Bankruptcy Court, and 

the entire prepetition liability owed to the IRS, together with any unpaid 

postpetition tax liabilities, may become due and payable immediately; and 

(3) The IRS shall have the right to proceed to collect from the Debtor, 

the Reorganized Debtor or any successor in interest any of the prepetition 

tax liabilities and related penalties and interest through administrative or 

judicial collection procedures available under the United States Code as if 

no bankruptcy petition had been filed and as if no plan had been confirmed. 

(b) If the IRS declares the Debtor, the Reorganized Debtor, or any successor-in-interest to 

be in default of the Debtor’s, the Reorganized Debtor’s and/ or any successor- in-interest’s 

obligations under the Plan, then entire prepetition liability of an IRS’ Allowed Claim, 

together with any unpaid postpetition tax liabilities shall become due and payable 

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Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 117 of 266

000854

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DOCS_SF:104487.21 36027/002

immediately upon written demand to the Debtor, Reorganized Debtor and/or any 

successor-in-interest. Failure of the IRS to declare a failure and/or default does not 

constitute a waiver by the United States or its agency the IRS of the right to declare that 

the Debtor, Reorganized Debtor, and/or any successor in interest is in default. 

(c) The IRS shall only be required to send two notices of failure and/or default, and upon 

the third event of a failure and/or default, the IRS shall be entitled to proceed as set out in 

paragraphs (1), (2), and/or (3) herein above without further notice to the Debtor, the 

Reorganized Debtor, or any successor in interest, or its counsel. The collection statute 

expiration date for all unpaid federal tax liabilities shall be extended pursuant to nonbankruptcy law. 

(d) The Internal Revenue Service shall not be bound by any release provisions in the Plan 

that would release any liability of the responsible persons of the Debtor, the Reorganized 

Debtor, and/or any successor in interest to the IRS. The Internal Revenue Service may 

take such actions as it deems necessary to assess any liability that may be due and owing 

by the responsible persons of the Debtor, the Reorganized Debtor and/or any successor in 

interest to the Internal Revenue Service. 

(e) Nothing contained in the Plan or the Confirmation Order shall be deemed to be a waiver 

or relinquishment of any rights, claims, causes of action, rights of setoff or recoupment, 

rights to appeal tax assessments, or other legal or equitable defenses that the Debtor or 

Reorganized Debtor have under non-bankruptcy law in connection with any claim, liability 

or cause of action of the United States and its agency the Internal Revenue Service. 

(f) The term “any payment required to be made on federal taxes,” as used herein above, is 

defined as: any payment or deposit required by the Internal Revenue Code to be made by 

the Debtor from and after the Confirmation Date, or the Reorganized Debtor and/or any 

successor in interest from and after the Effective Date, to the date the IRS Claim is together 

with interest paid in full. The term “any required tax return,” as used herein above, is 

defined as: any tax return or report required by the Internal Revenue Code to be made by 

the Debtor from and after the Confirmation Date, or the Reorganized Debtor and/or any 

successor in interest from and after the Effective Date, to the date the IRS Claim is together 

with interest paid in full. 

UU. IRS Proof of Claim. Notwithstanding anything in the Plan or in this 

Confirmation Order, until all required tax returns are filed with and processed by the IRS, the IRS’s 

proof of claim will not be deemed fixed for purposes of Section 502 of the Bankruptcy Code and 

may be amended in order to reflect the IRS’ assessment of the Debtor’s unpaid priority and general 

unsecured taxes, penalties and interest. 

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Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 118 of 266

000855

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VV. CLO Holdco, Ltd. Settlement Notwithstanding anything contained 

herein to the contrary, nothing in this Order is or is intended to supersede the rights and obligations 

of either the Debtor or CLO Holdco contained in that certain Settlement Agreement between CLO 

Holdco, Ltd., and Highland Capital Management, L.P., dated January 25,2021 [Docket No. 1838-

1] (the “CLOH Settlement Agreement”). In the event of any conflict between the terms of this 

Order and the terms of the CLOH Settlement Agreement, the terms of the CLOH Settlement 

Agreement will govern. 

WW. Retention of Jurisdiction. The Bankruptcy Court may properly, and upon 

the Effective Date shall, to the maximum extent permitted under applicable law, retain jurisdiction 

over all matters arising out of, and related to, this Chapter 11 Case, including the matters set forth 

in Article XI of the Plan and section 1142 of the Bankruptcy Code. 

XX. Payment of Statutory Fees; Filing of Quarterly Reports. All fees 

payable pursuant to 28 U.S.C. § 1930 shall be paid on or before the Effective Date. The 

Reorganized Debtor, the Claimant Trust, and the Litigation Sub-Trust shall be jointly and severally 

liable for payment of quarterly fees to the Office of the United States Trustee pursuant to 28 U.S.C. 

§ 1930 through the entry of the Final Decree for the Debtor or the dismissal or conversion of the 

Chapter 11 Case. Notwithstanding anything to the contrary in the Plan, the U.S. Trustee shall not 

be required to file any proofs of claim with respect to quarterly fees payable pursuant to 28 U.S.C. 

§ 1930. 

YY. Dissolution of the Committee. On the Effective Date, the Committee will 

dissolve, and the members of the Committee and the Committee’s Professionals will cease to have 

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Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 119 of 266

000856

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DOCS_SF:104487.21 36027/002

any role arising from or relating to the Chapter 11 Case, except in connection with final fee 

applications of Professionals for services rendered prior to the Effective Date (including the right 

to object thereto). Notwithstanding the foregoing, any Committee member or Professional may 

serve following the Effective Date with respect to the Claimant Trust Oversight Board or Litigation 

Sub-Trust. The Professionals retained by the Committee and the members thereof will not be 

entitled to assert any fee claims for any services rendered to the Committee or expenses incurred 

in the service of the Committee after the Effective Date, except for reasonable fees for services 

rendered, and actual and necessary costs incurred, in connection with any applications for 

allowance of Professional Fees pending on the Effective Date or filed and served after the Effective 

Date pursuant to the Plan. Nothing in the Plan shall prohibit or limit the ability of the Debtor’s or 

Committee’s Professionals to represent either of the Trustees or to be compensated or reimbursed 

per the Plan, the Claimant Trust Agreement, and/or Litigation Sub-Trust in connection with such 

representation. 

ZZ. Miscellaneous. After the Effective Date, the Debtor or Reorganized 

Debtor, as applicable, shall have no obligation to file with the Bankruptcy Court or serve on any 

parties reports that the Debtor or Reorganized Debtor, as applicable, were obligated to file under 

the Bankruptcy Code or a court order, including monthly operating reports (even for those periods 

for which a monthly operating report was not filed before the Effective Date), ordinary course 

professional reports, reports to any parties otherwise required under the “first” and “second” day 

orders entered in this Chapter 11 Case (including any cash collateral financing orders entered in 

this Chapter 11 Case) and monthly or quarterly reports for Professionals; provided, however, that 

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Case 3:21-cv-01710-N Document 10-19 Filed 10/05/21 Page 120 of 266 PageID 826

Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 120 of 266

000857

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DOCS_SF:104487.21 36027/002

the Debtor or Reorganized Debtor, as applicable, will comply with the U.S. Trustee’s post 

confirmation reporting requirements. 

###END OF ORDER###

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Case 22-03052-sgj Doc 10-19 Filed 05/25/22 Entered 05/25/22 17:52:21 Desc

Exhibit 19 Page 121 of 266

000858

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