1

UNITED STATES BANKRUPTCY COURT 

SOUTHERN DISTRICT OF FLORIDA 

FT. LAUDERDALE DIVISION 

www.flsb.uscourts.gov 

In re: 

LIBERTY POWER HOLDINGS, LLC, Case No.: 21-13797-PDR 

 Chapter 11 

 Debtor. 

____________________________________/ 

LIBERTY POWER CORP., LLC’S RESPONSE TO DEBTOR’S EMERGENCY 

MOTION TO COMPEL (I) TURNOVER OF ALL BOOKS, RECORDS, SYSTEMS AND 

PROCESSES RELATED TO THE DEBTOR AND ITS OPERATIONS IN THE 

POSSESSION AND CONTROL OF LIBERTY POWER CORP, LLC, (II) ACCESS TO 

CORPORATE PREMISES AND (III) FOR RELATED RELIEF 

 Liberty Power Corp., LLC (“LPC”), by and through its undersigned counsel, files its 

Response (“Response”) in opposition to the Debtor’s Emergency Motion to Compel (I) 

Turnover of all Books, Records, Systems and Processes Related to the Debtor and its Operations 

in the Possession and Control of Liberty Power Corp, LLC, (II) Access to Corporate Premises 

and (III) for Related Relief [ECF No. 11] (the “Turnover Motion”), for the reasons set forth 

below. LPC also relies on and incorporates by reference the accompanying Declaration of David 

Hernandez for the factual background relevant to this Response, which is attached hereto as 

Exhibit A. 

PRELIMINARY STATEMENT 

1. Less than a week after his appointment, the Debtor’s CRO – who was handpicked 

by the Debtor’s senior secured lender – precipitously commenced the Debtor’s bankruptcy case 

by filing a barebones petition. Only after this case was filed did the Debtor and its senior secured 

lender likely realize the extent to which Debtor needs LPC and its employees to run its business. 

Now, facing an erosion in value based on their hasty decision, the Debtor (through its 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 1 of 34
   

2

representatives appointed by its secured lender), seeks emergency relief from the Court which 

greatly exceeds the limitations imposed by the Bankruptcy Code.

2. As acknowledged by the Debtor in its Turnover Motion, the Debtor relied on LPC 

“to be able to conduct its business, manage customers’ accounts, deal with regulatory matters 

and perform other critical business operations on a daily basis.” See Mot., at ¶ 10. The Debtor 

has no employees of its own, no systems to manage its assets, and no structure of any kind. 

Similarly, LPC depends on revenue from the Debtor to reimburse its expenses incurred pursuant 

to the Second Amended and Restated Management Services Agreement dated as of July 6, 2020 

(the “Management Agreement”). Without this revenue – which only included reimbursement of 

expenses and did not include any profit margin – LPC has no way of paying the employees or 

vendors necessary for its business and for the Debtor’s business. 

3. It was against this backdrop of mutual dependency that the Debtor and LPC 

started negotiating with Boston Energy Trading and Marketing LLC (“BETM”), the Debtor’s 

secured lender, regarding a potential sale or other disposition of the Debtor. These negotiations 

commenced after the Debtor’s alleged obligations to BETM skyrocketed as a result of the 

dramatic increase in wholesale prices for electricity following Winter Storm Uri in Texas in midFebruary. For more than eight (8) weeks, BETM, on the one hand, and the Debtor and LPC, on 

the other hand, discussed ways that they might work together to maximize the value of their 

respective assets and ensure continuity of operations for both the Debtor and LPC. 

4. The negotiations were complicated by the fact that, pursuant to its loan 

documents, BETM had a security interest against substantially all of the Debtor’s assets, but not 

the assets of LPC. Similarly, BETM had a pledge of the membership interest of the Debtor’s 

direct corporate parent, Liberty Power Super Holdings LLC (“Super Holdings”), but no 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 2 of 34
   

3

corresponding pledge of the membership interest of LPC. In short, BETM had remedies that it 

could seek to employ in an attempt to take control of the Debtor, but no way to control LPC. 

Since the Debtor is dependent on LPC and LPC’s employees, computer systems, and business 

structure, LPC believed BETM would make every effort to reach a consensual agreement before 

putting the Debtor and LPC on a path that would severely diminish the value of their respective 

assets. That belief proved wrong. 

5. By letter dated April 15, 2021 (the “Step-In Letter”), BETM attempted to sever 

the Debtor from LPC when it purported to take control of Super Holdings, and to reconstitute the 

Debtor’s Board of Managers. Among the attachments to the Step-In Letter were draft board 

resolutions authorizing a bankruptcy filing. Faced with the prospect that its only significant 

source of revenue would file for bankruptcy on some unknown date over the next few weeks or 

months, LPC exercised its contractual right to request that the Debtor shift from paying LPC in 

arrears for its expenses and immediately pay a total of $1,453,883.26, which would allow LPC to 

pay outstanding amounts owed to employees and vendors, and would fund the next two weeks of 

payroll. When BETM refused to pay all but one-third of this amount, which would leave (and 

has left) LPC with unreimbursed employee and substantial unpaid expenses owed by the Debtor, 

LPC – fearing it could not continue to incur expenses and employee costs with no ability to pay 

them – had no choice but to shut down. 

6. While LPC reached out to BETM over the next two days to try to reach some 

agreement that would allow LPC to be put back together, these negotiations were unsuccessful. 

Of note, for purposes of this Response, LPC reached out to BETM the night before this 

bankruptcy was filed with an offer that included cooperation in a bankruptcy, and again reached 

out to BETM after the bankruptcy was filed, but before Turnover Motion was filed, with a 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 3 of 34
   

4

request to continue the discussions from the prior evening and that, as, a sign of good faith, it 

was willing to discuss potential options for providing BETM with access to the documents and 

records the BETM-controlled Debtor now seeks pursuant to the Turnover Motion. 

7. LPC stands by its offers, both in terms of a global resolution of the issues between 

LPC and the Debtor that are necessary to preserve value of the Debtor and LPC, but also as an 

indication of its good faith to turnover to the Debtor the property to which it would be entitled 

under Section 542 of the Bankruptcy Code if the Debtor’s bankruptcy is deemed to have been 

properlyy filed.1/ Assuming this case was properly filed, LPC fully recognizes the Debtor’s right 

to such property under the Bankruptcy Code and intends to start providing the Debtor with the 

books and records it requests on a rolling basis and on the timeline set forth in Part D hereof, 

starting as early as this afternoon. Still, many of the Debtor’s requests are extremely timeconsuming, especially considering that the number of individuals at LPC available to transfer the 

Debtor’s assets has gone from more than 80 to 4 due to the required shut down of LPC. LPC will 

provide the books and records to the Debtor as soon as it practically can, and is willing to work 

with the Debtor on an appropriate schedule, but some requests will take some time. 

8. Finally, LPC objects to the Turnover Motion to the extent it requests turnover of 

any property belonging to LPC or entities who are not before the Court. As noted above, the 

Debtor’s assets, which consist primarily of data, are stored on LPC’s computer system and 

require LPC’s software to be accessed. This software and the accompanying computer system 

are the crown jewel of LPC’s assets, the result of tens of millions of dollars of development 

costs. If the Debtor’s Turnover Motion is granted in the form suggested – including (i) that the 

1/ On April 16, 2021, Super Holdings sent a detailed letter to BETM demonstrating why BETM’s exercise of 

its Step-in Rights was invalid. As a result of BETM improperly exercising remedies prior to this bankruptcy, 

without which this bankruptcy would not be properly authorized, as well as other issues, Super Holdings and LPC 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 4 of 34
   

5

Debtor have access to the systems and processes related to the operation of the Debtor’s 

business, (ii) that the Debtor (through its CRO) be given immediate and unfettered access to the 

corporate premises (which are primarily LPC’s corporate premises); and (iii) that LPC comply 

with all other requests of the Debtor (through the CRO) for documents and information 

necessary for the Debtor to continue its operations and comply with its obligations under the 

Bankruptcy Code – the Debtor will have effectively procured the benefit of LPC’s assets and 

systems, and will be able to force LPC to help prepare and run the bankruptcy case that BETM 

devised to force LPC to help BETM liquidate its collateral – even though BETM never had a 

security interest in the LPC assets. The Debtor is entitled to the turnover of its property, not

LPC’s. The Debtor’s requests go too far. 

I. BACKGROUND 

9. Contemporaneously herewith, LPC filed Declaration of David Hernandez in 

support of this Response, which is expressly incorporated herein by reference. 

II. ARGUMENT 

A. LPC will voluntarily turn-over any of the Debtor’s property it has in its 

 possession. 

10. Through the Turnover Motion, the Debtor seeks an order: 

(i) compelling [LPC (and the principals and persons in control of 

LPC)] to immediately provide access to and turnover to the Debtor 

. . . all books, records, systems and processes of and related to the 

operation of the Debtor’s business (the “Books and Records”), (ii) 

compelling [LPC] to provide the Debtor . . . immediate access to 

the corporate premises under the control of [LPC] at which the 

Debtor’s operations are conducted, (iii) compelling [LPC] to 

cooperate and comply with any and all other requests of the Debtor 

. . . for documents and information necessary for the Debtor to

continue its operations and comply with its obligations under the 

Bankruptcy Code, and (iv) compelling [LPC (and the principals 

reserve all rights related to the filing of this bankruptcy, and any agreement by LPC to – in the meantime – provide 

records belonging to the Debtor is subject to and without waiver of LPC’s rights. 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 5 of 34
   

6

and persons in control of LPC)] to comply with the automatic stay 

under section 362(a) of the Bankruptcy Code, including preventing 

[LPC] and its principals from taking any action against property of 

the Debtor’s estate. 

Mot., at ¶ 20. 

11. To the extent the Debtor seeks turnover of its property, its request is unnecessary. 

LPC fully recognizes the Debtor’s right to turnover of property of its estate pursuant to section 

542 of the Bankruptcy Code. In fact, even before the filing of the Turnover Motion, LPC offered 

to provide access to the Debtor’s documents and records, and, despite the Debtor’s refusal to 

respond to LPC’s offer, LPC started the process of compiling these books and records. The 

categories of these documents, books and records, as well as the time-frame that LPC believes it 

can transfer these documents is discussed in more detail in Part D below. Despite LPC’s 

willingness to cooperate, the Debtor filed the Turnover Motion on an emergency basis, without 

even informing LPC that the motion would be filed or conferring with LPC about the relief 

requested therein. 

B. The Debtor is not entitled to turnover of property that is not the Debtor’s 

 property. 

12. Based on the Debtor’s aggressive actions in the face of LPC’s offer to provide 

exactly what it has requested from the Court, the Turnover Motion appears to be a litigation 

tactic intended to provide the Debtor with books, records, and other assets of non-debtors, 

without affording LPC and other non-debtors a meaningful opportunity to protect their rights or 

the due process to which they are entitled under Federal Rule of Bankruptcy Procedure 7001. 

More specifically, through the Turnover Motion, the Debtor seeks to compel LPC to turn over 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 6 of 34
   

7

not only the Debtor’s books and records, but property belonging to LPC and other non-debtors2/

as well. In addition, the Debtor requests a sweeping order requiring non-debtor LPC and its 

principals to provide any documents or information which the Debtor unilaterally determines are 

necessary to the Debtor’s operations – even if the documents and information requested by the 

Debtor are not property of the estate, and even if the requested documents and information are 

proprietary to LPC or other non-debtors. 

13. This relief is not authorized by the Bankruptcy Code. Section 542 provides that 

“an entity . . . in possession, custody, or control, during the case, of property that the trustee may 

use, sell, or lease under section 363 of this title . . . shall deliver to the trustee, and account for, 

such property or the value of such property, unless such property is of inconsequential value or 

benefit to the estate.” 11 U.S.C. § 542(a). Courts – including the Eleventh Circuit – have limited 

section 542(a)’s reach to property of the estate. See, e.g., Bracewell v. Kelley (In re Bracewell), 

454 F.3d 1234, 1243 (11th Cir. 2006) (“§542(a) authorizes turnover of property in another’s 

possession only if it is property of the estate”), cert. denied, 548 U.S. 1301 (2007); see also 5 

COLLIER ON BANKRUPTCY ¶ 542.03 (citing Bailey v. Suhar (In re Bailey), 380 B.R. 486, 490 

(B.A.P. 6th Cir. 2008) (in a turnover action, trustee or debtor in possession must prove, by a 

preponderance of the evidence, that subject asset is property of the estate). 

14. In light of the limitations imposed by Section 542(a), the broad relief requested by 

the Debtor must be denied. For example, the Debtor seeks an order compelling LPC “to provide . 

. . immediate access to the corporate premises under the control of [LPC] at which the Debtor’s 

operations are conducted.” Mot., at ¶ 20. However, all premises belong to LPC, not the Debtor, 

2/ It appears that the relief requested by the Debtor would reach any property of the Debtor’s subsidiaries 

even though those subsidiaries have not filed bankruptcies. To the extent an order is necessary and procedurally 

appropriate, the Court should limit the scope of the order to turnover of assets of the Debtor. 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 7 of 34
   

8

so it is unclear how the Court could order access to premises which the Debtor has no right to 

occupy. Hernandez Decl., ¶ 18. 

15. As a second example of how the Debtor overreaches, the Debtor seeks an order 

compelling LPC “to immediately provide access to and turnover to the Debtor . . . all books, 

records, systems and processes of and related to the operation of the Debtor’s business.” Mot., at 

¶ 20 (emphasis added). Among other issues, because the Debtor has no systems or processes, this 

request implicates LPC’s computer systems and certain software, which store and process 

information about customers of the Debtor, as well as other entities. The Debtor has no license, 

contract, or other right to use or even access these computer systems, related to the operation of 

the Debtor or not. While LPC is willing to work cooperatively to furnish data regarding the 

Debtor’s customers to the Debtor, the Debtor has no legal or equitable right to use or access 

LPC’s computer systems and software. If the Court were to grant the Debtor’s Turnover Motion 

as suggested, arguably the Debtor’s request for a “system[] [or] process[] [] related to the 

operation of the Debtor’s business” would reach LPC’s software and systems. See Mot., at ¶ 20. 

16. Third, the Debtor seeks an order compelling LPC “to cooperate and comply with 

any and all other requests of the Debtor (through the CRO) for documents and information 

necessary for the Debtor to continue its operations and comply with its obligations under the 

Bankruptcy Code.” Mot., at ¶ 20, 21. Not only does this request arguably reach the assets of LPC 

(as opposed to the Debtor) since it includes information required for the Debtor to continue its 

operations, but it seemingly requires LPC to cooperate with the Debtor to prepare the Debtor’s 

schedules and statements and other requirements of a bankruptcy filing that were not completed 

by the Debtor before this case was filed, as well as the routine financial reports that are required 

in bankruptcy. In so requesting, the Debtor seeks to use LPC as its accounting department or 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 8 of 34
   

9

financial advisor for purposes of preparing its bankruptcy, despite the fact that the Debtor’s 

dispute with LPC was the primary reason why the Debtor filed a bankruptcy in the first instance. 

17. Thus, much of the relief sought by the Debtor cannot be granted, and, to the 

extent LPC is compelled to turnover any assets, the relief must be strictly and clearly limited to 

the books and records of the Debtor, which constitute property of the estate, as further described

in Part D below. 

C. The relief requested by the Debtor requires the filing of an adversary 

 proceeding. 

18. Nevertheless, the Turnover Motion should be denied in its entirety because it is 

procedurally improper. Turnover cannot be sought by motion; it must be sought by adversary 

proceeding. Fed. R. Bankr. P. 7001(1) (“The following are adversary proceedings: (1) a 

proceeding to recover money or property, other than a proceeding to compel the debtor to deliver 

property to the trustee . . .”); see 5 COLLIER ON BANKRUPTCY ¶ 542.02 (“Generally, an adversary 

proceeding – not a motion – is required for section 542 turnover actions. A trustee must file an 

adversary proceeding to bring a turnover action against a nondebtor.”); Camall Co. v. Steadfast 

Ins. Co. (In re Camall Co.), 2001 U.S. App. LEXIS 17243, at *14 (6th Cir. July 31, 2001) 

(“Courts have given effect to Bankruptcy Rule 7001 by holding that ‘a turnover proceeding 

commenced by motion . . . [rather than by complaint] will be dismissed.”) (citing In re Perkins, 

902 F.2d 1254, 1258 (7th Cir. 1990)); In re Wheeler Tech. Inc., 139 B.R. 235, 240 (B.A.P. 9th 

Cir. 1992) (the debtor’s ex parte turnover motion “does not provide the due process protection 

required for the ordered turnover of property”); In re Dillon, 148 B.R. 852, 852-53 (Bankr. E.D. 

Tenn. 1992) (the debtor’s motion for turnover was denied because turnover proceedings are 

properly commenced by filing a complaint); In re Ace Indus, Inc., 65 B.R. 199, 200 (Bankr. 

W.D. Mich. 1986) (the debtor’s motion for turnover should have been commenced by an 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 9 of 34
   

10

adversary proceeding); In re Taronji, 174 B.R. 964, 966 (Bankr. N.D. Ill. 1994) (typically a 

trustee must bring an adversary proceeding to recover estate property; however, the trustee may 

cover property held by the debtor via motion); In re IGC Roofing, Inc., Case No. 6:06-bk-00223-

ABB, 2006 Bankr. LEXIS 4015, at *1 (Bankr. M.D. Fla. Dec. 29, 2006) (debtor’s “Emergency 

Motion for Turnover of Funds” was “require[d] to be filed as an adversary proceeding pursuant 

to Federal Rule of Bankruptcy Procedure 7001.”); In re Dean, Case No. 06-71654-pwb, 2006 

Bankr. LEXIS 3931, at *7 (Bankr. N.D. Ga. Dec. 18, 2006) (“the Debtor contends that the banks 

are holding property that belongs to him and that should be turned over to him. Obtaining such 

relief requires an adversary proceeding under Rule 7001(1).”); In re Gold Leaf Corp., 73 B.R. 

146, 147 (Bankr. N.D. Fla. 1987) (application to compel turnover was “not the proper method for 

obtaining refunds, and such relief is appropriate only in the context of an adversary proceeding” 

unless the application sought relief from a custodian). 

19. Requiring the Debtor to comply with Rule 7001 in order to afford LPC the due 

process protections of an adversary proceeding is especially necessary here, given the expansive 

and unsupported relief sought by the Debtor. As explained above, the Turnover Motion is not 

restricted to property of the estate, but also demands books, records, and other assets which 

belong to LPC and other non-debtors. See Mot., at ¶ 20 (requesting turnover of “all books, 

records, systems and processes of and related to the operation of the Debtor’s business”) 

(emphasis added). The Turnover Motion does not even clearly delineate which books and 

records LPC must provide to comply with the Debtor’s demands. Moreover, the relief sought by 

the Debtor is potentially limitless, and includes an open-ended requirement that LPC to provide 

any documents or information which the Debtor unilaterally determines are necessary to the 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 10 of 34
   

11

Debtor’s operations – even if the documents and information requested by the Debtor belong to 

LPC or another non-debtor – without further judicial oversight.

D. Timeline for turnover of the Debtor’s property. 

20. As set forth in Parts A and B above, LPC is willing to cooperate with the Debtor 

to promptly turnover its property, while reserving all rights as to the propriety of this bankruptcy 

filing. However, LPC has only a few individuals available to find and transfer the voluminous 

documents that the Debtor seemingly requests. Given its severe personnel limitations (which are 

the direct result of the BETM’s threat to put the Debtor into bankruptcy at an unknown date, 

which it did, and refusal to fund expenses incurred by LPC to support the Debtor’s demands), 

LPC believes that the most efficient way to proceed would be for the Debtor and LPC to work 

together toward a mutually agreeable timeline based on categories of documents. To this end, 

LPC has identified the following categories of documents of the Debtor in its possession and 

believes that it can turnover such documents to the Debtor by the corresponding estimated date 

to transfer:3/

Category of Documents Estimated Date to Transfer Notes or Comments 

Vendor Agreements to which 

the Debtor is a party 

April 28, 2021 

Renewable Energy Certificates 

(REC) of the Debtor 

April 28, 2021 LPC will prioritize Renewable 

Energy Certificates with parties 

other than BETM as BETM 

already has such documents in 

its control

Licenses of the Debtor April 28, 2021

FERC License of the Debtor April 28, 2021

Contracts between the Debtor 

and utility companies 

May 5, 2021 

ISO Related Documents May 5, 2021

Channel Partner Agreements 

between Brokers/Consultants 

and the Debtor

May 12, 2021 

3/ Notwithstanding the use of a heading “estimated date to transfer” LPC intends to transfer all property of the 

Debtor as quickly as practicable and to do so on a rolling basis. 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 11 of 34
   

12

Customer Contracts with large, 

commercial customers of the 

Debtor

May 12, 2021 

Customer contracts with small 

and medium size business 

customers of the Debtor

May 12, 2021 

Historical compliance filings 

made by the Debtor

May 30, 2021 

Residential contracts with 

customers of the Debtor

TBD Need to determine how to 

extract

Telephonic contracts with 

customers of the Debtor 

TBD Will likely need to be stored on 

cloud as there are hundreds of 

thousands of such contracts

Customer complaints from 

customers of the Debtor

TBD 

Quality control documents Subject to attorney review due 

to ongoing investigations; 

documents are voluminous

Collections correspondence sent 

and received by the Debtor

TBD 

Financial documents, accounts 

payable of the Debtor 

TBD Debtor should make specific 

request for dates and categories 

and parties will work together to 

see if such reports can be run or 

data extracted 

Sales and marketing materials of 

the Debtor 

TBD Information is embedded in 

fields and systems; will need to 

be extracted. 

 

In the event the Debtor believes that LPC has additional categories of documents in its 

possession or control, LPC requests that the Debtor identify such documents or categories of 

documents and the parties will confer to determine an appropriate time-line for transfer. In 

addition, to the extent there are documents in the foregoing chart that the Debtor does not want 

or seek, LPC requests that the Debtor timely inform LPC of such. 

III. CONCLUSION 

21. For the foregoing reasons, the Turnover Motion is substantively and procedurally 

improper – in addition to being wholly unnecessary in light of LPC’s prepetition offer to provide 

the Debtor’s books and records, which is all the Debtor is entitled to as a matter of law. 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 12 of 34
   

13

WHEREFORE, LPC respectfully requests that this Honorable Court enter an Order 

denying the Motion (without prejudice as to any assets which are property of the estate) and for 

any and all other relief this Court deems just and appropriate, in favor of allowing the parties to 

confer as to an appropriate time-table for the turnover of assets of the Debtor. 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 

 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 13 of 34
   

14

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a true and correct copy of the foregoing was served on April 

22, 2021, via the Court's Notice of Electronic Filing upon the Registered Users listed on the 

attached Exhibit 1. 

s/Daniel N. Gonzalez 

Michael S. Budwick, Esquire 

Florida Bar No. 938777 

mbudwick@melandbudwick.com

Daniel N. Gonzalez, Esq. 

Florida Bar No. 592749 

dgonzalez@melandbudwick.com

MELAND BUDWICK, P.A. 

3200 Southeast Financial Center 

200 South Biscayne Boulevard 

Miami, Florida 33131 

Telephone: (305) 358-6363 

Facsimile: (305) 358-1221 

Local Counsel for Liberty Power Corp., LLC 

 and 

 

Charles W. Azano, Esq. (Pro Hac Vice Pending) 

Massachusetts Bar No. 655775 

CWAzano@mintz.com

Breton Leone-Quick, Esq. (Pro Hac Vice Pending)

Massachusetts Bar No. 655571 

BLeone-Quick@mintz.com

Mintz, Levin, Cohn, Ferris, Glovsky 

and Popeo, P.C. 

One Financial Center 

Boston, MA 02111 

Telephone: (617) 348-1843 

Attorneys for Liberty Power Corp., LLC

 and 

Abigail V. O'Brient, Esq. (Pro Hac Vice Pending)

California Bar No. 265704 

AVObrient@mintz.com 

Mintz, Levin, Cohn, Ferris, Glovsky 

and Popeo, P.C. 

2029 Century Park East, Suite 3100 

Los Angeles, CA 90067 

Telephone: (310) 226-7886 

Attorneys for Liberty Power Corp., LLC

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 14 of 34
EXHIBIT 1

Electronic Mail Notice List

The following is the list of parties who are currently on the list to receive email notice/service 

for this case. 

 Scott Andron sandron@broward.org, swulfekuhle@broward.org 

 Paul J. Battista pbattista@gjb-law.com, gjbecf@gjb-law.com;chopkins@gjblaw.com;jzamora@gjb-law.com;gjbecf@ecf.courtdrive.com;vlambdin@gjb-law.com 

 Daniel N Gonzalez dgonzalez@melandbudwick.com, 

ltannenbaum@melandbudwick.com;mrbnefs@yahoo.com;gonzalez@ecf.courtdrive.com;

ltannenbaum@ecf.courtdrive.com;phornia@ecf.courtdrive.com 

 Jordi Guso jguso@bergersingerman.com, 

fsellers@bergersingerman.com;efile@bergersingerman.com;efile@ecf.inforuptcy.com 

 Heather L Harmon HHarmon@gjb-law.com, gjbecf@gjblaw.com;ecastellanos@gjb-law.com;gjbecf@ecf.courtdrive.com;jzamora@gjb-law.com 

 Office of the US Trustee USTPRegion21.MM.ECF@usdoj.gov 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 15 of 34
UNITED STATES BANKRUPTCY COURT 

SOUTHERN DISTRICT OF FLORIDA 

FT. LAUDERDALE DIVISION 

www.flsb.uscourts.gov

In re: 

LIBERTY POWER HOLDINGS, LLC, Case No.: 21-13797-PDR 

 Chapter 11 

 Debtor. 

____________________________________/ 

DECLARATION OF DAVID HERNANDEZ 

I, David Hernandez, am providing this declaration pursuant to 28 U.S.C. § 1746, and 

declare under the pains and penalties of perjury that the following is true to the best of my 

knowledge and belief: 

1. I am currently the majority member and CEO of Liberty Power Corp., LLC 

(“LPC”), which is the sole member of Liberty Power Super Holdings, LLC, which, in turn, is the 

sole member of debtor Liberty Power Holdings, LLC (“LPH”). LPH has three wholly owned 

subsidiaries: Liberty Power DC LLC, LPT, LLC, and Liberty Power Maryland LLC. 

Overview of LPC and LPH 

2. LPH, together with its subsidiaries, serves as a retail energy provider (“REP”), and 

delivers electricity to retail, commercial, and industrial customers. LPH is the largest and longest 

tenured founder-operated REP in the United States. It is also the first minority-owned REP with 

a national footprint and has been recognized as the largest minority-owned REP in the United 

States. 

3. In 2001, Alberto Daire and I founded the company that became LPC in 2002, to 

provide an alternative way for consumers to purchase electricity than through the traditional 

utilities that – prior to deregulation – functioned as monopolies over their respective regions. We 

EXHIBIT A

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 16 of 34
2 

focused on being able to provide our customers with price certainty and price savings, and 

excellent customer service. We founded LPC on the principles of “Built to Last,” which was a 

concept popularized by the Jim Collins book of that same name. We focused on the company’s 

culture, which was built around people who were humble, hungry, and smart. We wanted a 

cohesive leadership team and a meritocracy mindset where the best ideas prevailed. 

4. To start LPC, Alberto and I used personal savings, credit cards, and a home equity 

loan. Neither one of us took any salary during the first couple of years of the business, and did not 

start taking any salary until the company had grown large enough so that it could cover its expenses 

and meet payroll for all of its other employees. 

5. As corporations and consumers increasingly weigh the importance of 

Environmental, Social, and Governance factors in allocating their resources, Liberty is the only 

minority-owned REP that can sell power to its customers from all sources, including renewable 

sources that are in increasingly high demand. Indeed, nearly all of the electricity that Liberty 

provides to its residential customers comes from renewable sources. In addition, Liberty offers a 

program for its customers to purchase Renewable Energy Certificates (“RECs”), which represent 

1 MWh of electricity produced from a renewable source. Purchasing RECs is a way for businesses 

and consumers to promote the use and development of renewable energy sources. 

6. Over time, we grew LPH into a mid-sized REP with a national footprint. Over the 

years, LPH has served more than 100 Fortune 500 companies, and hundreds of thousands of small 

and medium sized business, not-for-profits, and residential customers. 

How REPs Work 

7. The generation and delivery of electricity to consumers consists of three 

components. The first component is the generation of power by a power generating facility. The 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 17 of 34
3 

second component is transmission of the electricity from the generator to the power grid. The final 

component involves the sale and distribution of electricity from the power grid to consumers (i.e., 

businesses and residential homes). 

8. REPs do not generate power, and are not involved in its transmission. They also 

do not directly purchase or receive delivery of electricity themselves. They are, however, involved 

in the sale and distribution of electricity directly to consumers. 

9. The way that REPs do this involves participating in the energy trading market and 

entering derivative contracts (also referred to as hedges) that provide them the right to direct 

delivery of electricity to their retail customers in a specific amount and for a specific price at a 

specific time. In order to make money, therefore, REPs need to be able to purchase their 

derivatives at prices lower than what they charge their customers. 

10. REPs need access to a significant amount of capital to participate in the energy 

trading market, and so they need to enter expensive “credit sleeve” arrangements with larger 

energy trading companies. These credit sleeve arrangements are structured so that the credit sleeve 

provider becomes a secured lender to the REP. In return for providing the credit the REP needs to 

participate in the energy trading market, the credit sleeve provider receives a fee for each unit of 

energy (MWh) delivered by the REP to its customers. In addition, the credit sleeve provider 

receives security, typically in the form of collateral consisting of the customer agreements, 

receivables, and licenses that belong the REP. 

LPH Enters a Credit Sleeve Arrangement with BETM 

11. The credit sleeve arrangement that LPH has with Boston Energy Trading and 

Marketing, LLC (“BETM”) is at the heart of the dispute which resulted in the commencement of 

this case. 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 18 of 34
4 

12. By the spring of 2020, LPH was looking to replace its current credit sleeve provider, 

and began negotiations with BETM to be its new credit sleeve provider. At or around this time, 

LPH was also having discussions with three or four other potential credit sleeve providers, but the 

discussions with BETM began to advance more quickly than the others, given BETM’s enthusiasm 

for becoming a credit sleeve provider to a REP. 

13. Effective July 6, 2020, LPH and BETM closed on the new credit sleeve 

arrangement, which was reflected in numerous different agreements. First and foremost, there was 

the Supply and Services Agreement (“SSA”), which set forth the terms under which LPH would 

seek to place trades in the energy market, and BETM would make those trades on behalf of LPH. 

The SSA established how BETM would be paid for providing these services, and how proceeds 

that LPH received from its customers would be applied as between the two entities. The SSA also 

contained numerous representations, warranties, ands covenants by each party. 

14. Because the energy markets are highly regulated, and because the pricing in the 

energy markets can be subject to considerable swings through regulatory action, LPH specifically 

bargained for a Change in Law provision. This provision read, in relevant part: 

In the event of any change in applicable laws, rules or regulations 

during the Term of this Agreement by a Governmental Authority 

that...(b) result in a materially adverse change in a Party’s 

economics under this Agreement . . . [the Affected Party] may 

provide the other Party with written notice of the Regulatory Event. 

The Parties shall for thirty (30) Business Days after such notice is 

delivered attempt in good faith to reach mutual agreement to resolve 

the material adverse impact on the Affected Party or the inability of 

the Affected Party to continue to perform or to amend the terms of 

this Agreement in light of the Regulatory Event to give effect to the 

original intention of the Parties, consistent with the original

economic expectation of both Parties. 

15. As set forth above, the fundamental economic expectation for LPH with respect to 

the credit sleeve arrangement was that it enabled it an opportunity to purchase derivative contracts 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 19 of 34
5 

for the delivery of power to its customers at prices below what it would then charge and collect 

from its customers. Put another way, the only way that LPH could make money under the credit 

sleeve arrangement is if the SSA provided LPH an opportunity to purchase derivative contracts for 

the delivery of electricity to its customers at prices lower than what it would charge and collect 

from its customers. Any “Change in Law” that materially and adversely impacts this opportunity 

would therefore trigger the Change on Law provision of the SSA.

16. In addition to the SSA, the parties also executed several other agreements as part 

of the overall credit sleeve arrangement, including a Pledge and Security Agreement. Under that 

agreement, LPH provided a security interest in all of its assets to BETM. Notably, the negotiated 

and executed Pledge and Security Agreement did not give any rights to BETM to any of the 

property or assets owned by LPC, and LPC is not a party to either the SSA or the Pledge and 

Security Agreement. 

17. Prior to closing the transaction, BETM understood that LPH did not have any 

employees, did not own any technology, intellectual property, or have any other business 

infrastructure. Rather its assets and property primarily consisted of its membership interests in its 

subsidiaries, contracts with retail customers for electricity, receivables, and the licenses necessary 

to function as a REP. 

18. On the other hand, all of the intellectual property, human capital, and other business 

infrastructure (including the premises where the employees work and the operations occur) are 

assets that belong to LPC. Notably, BETM did not receive any rights over these assets that belong 

to LPC. 

19. LPH has a Management Services Agreement (“MSA”) with LPC where LPH 

outsources its business operations to LPC, which uses its own intellectual capital and technology 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 20 of 34
6 

to provide certain services to LPH that LPH needs to conduct its operations. The MSA requires 

that LPH provide the funding to LPC that is necessary for LPC to provide the services it is 

obligated to provide to LPH pursuant to the MSA. The MSA was renegotiated with BETM as part 

of the other transaction documents that became effective in July 2020. 

LPH and BETM Begin Operating Pursuant to the Credit Sleeve Arrangement 

20. After the closing of the transaction, LPH and BETM began working together. LPC 

and LPH provided assistance to BETM as BETM learned the details and gained the capacity to 

support a REP through a credit sleeve arrangement because BETM had never done so before with 

a company the size and national scale of LPH. BETM frequently praised the LPC team for helping 

them get up the learning curve. BETM said that they reviewed a couple dozen retailers both before 

the transaction and afterward, as they had received numerous inquires after the press release 

announcing the deal. BETM said that of all the retailers they reviewed “none hold a candle to 

you” and said that they were “spoiled” by the LPC team for its responsiveness, quality of data and 

reporting, and technical and subject matter competency. After the initial transition work, the 

discussions with BETM quickly evolved to the opportunity for the two companies to grow together 

within the retail space by combining BETM’s financial capital and wholesale market access and 

expertise with LPC intellectual capital and experience. 

21. As a result of working with LPC and LPH and getting experience with providing a 

credit sleeve to an REP, BETM began getting additional opportunities for it to work with other 

REPs. BETM met with several of these REPs to explore a potential credit sleeve arrangement 

with them. But after conducting their diligence on these other REPs, BETM consistently came 

back to LPH and stated how LPH was in a class of its own, and superior to the other REPs BETM 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 21 of 34
7 

was seeing, based on the sophistication of LPH’s management team, its sales and marketing, and 

its risk management practices. 

A Winter Storm of Unprecedented Severity Strikes Texas in February 2021

22. The week of February 15, 2021 saw a historically severe winter storm paralyze 

Texas. On February 12, as the weather system approached, Texas Governor Greg Abbott declared 

a state of disaster covering every one of Texas’ 254 counties. Record-setting subfreezing 

temperatures and winter precipitation set in across Texas from February 13 through 18. 

23. The winter storm’s historically low temperatures and unusual winter precipitation 

caused massive, far-reaching injury to person and property across Texas. Millions were left 

without power or water, some for days on end. Most homes in Texas use electric heating and are 

much more poorly insulated than homes in colder regions of the country. 

24. As temperatures dropped, the demand for electricity soared as Texans sought to 

keep their homes warm. While consumer demand on the electric grid climbed, supply was 

stretched to the breaking point as the extreme cold impaired the state’s power generating 

infrastructure, diminishing power plants’ ability to generate electricity and the natural gas system’s 

capacity to deliver fuel. 

25. Texas, alone among the other continental states, operates its own, essentially 

independent power grid, with limited ability to receive power from neighboring states. The Texas 

power grid is managed by the Electric Reliability Council of Texas (“ERCOT”), which schedules 

and manages power for more than 26 million Texas customers (roughly 90% of the state’s electric 

load). One of ERCOT’s core responsibilities is maintaining the electric system’s reliability. 

ERCOT, in turn, is overseen by the Public Utility Commission of Texas (“PUCT”). 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 22 of 34
8 

26. On February 15, PUCT held a six-minute emergency meeting to address the critical 

situation facing the power grid. During that meeting, PUCT took the extraordinary step of ordering 

ERCOT to raise electricity prices to the statutory market cap of $9,000 per MWh, instead of 

continuing to allow market forces to prevail. To place this astronomical increase in context, the 

average system-wide pricing for January 2021 was $20.79 per MWh—hundreds of times lower 

than the price required by the PUCT order. 

27. Even though energy prices had been successfully clearing on February 15 as low 

as $1,200 per MWh, PUCT ordered prices to be immediately raised to the statutory maximum in 

an attempt to send “scarcity pricing signals” to the market (the “PUCT Order”). PUCT evidently 

believed the $9,000 per MWh price would incentivize power generators to begin supplying 

additional power, notwithstanding that they knew or had reason to know that nearly half of the 

grid’s power generating capacity had already been incapacitated by the extreme weather. ERCOT 

dutifully followed PUCT’s order and artificially set prices at $9,000 per MWh, where it allowed 

prices to remain until February 19. 

28. The PUCT Order resulted in electricity prices being set and maintained at the 

statutory maximum instead of stepping in to halt the market to ensure that nobody gained in 

equitable profits (or suffered inequitable losses) as a result of this weather and humanitarian crisis. 

This occurred even well after conditions improved to the point where ERCOT no longer needed 

to “shed load,” i.e., institute controlled power outages, to serve consumer demand. As PUCT’s 

Independent Market Monitor reported following the winter storm, ERCOT held electric prices 

artificially high for longer than necessary, resulting in billions of dollars in overcharges to 

ERCOT’s market, including REPs such as LPH. The artificially high energy prices set by the 

PUCT’s Order had a direct effect on the prices for ancillary services, which are payments to 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 23 of 34
9 

generators for providing short-term reliability services to stand by and be responsive. These 

ancillary services prices, often in excess of $20,000/MWh were a very significant additional driver 

of the excessive charges to customer serving entities. Most market participants at the time had 

commented and even the PUCT Chairman stated as not realizing that such prices were even 

possible. These astronomical prices and the related charges were also identified by the Independent 

Market Monitor as being excessive and inappropriate. 

29. The extreme spike in energy prices in Texas resulting from the PUCT Order caused 

LPH to pay millions of dollars more for the electricity to be delivered to its Texas customers than 

it would normally need to pay. 

30. In addition, while LPH customers are technically liable to LPH for these amounts, 

it is certain that LPH will never be able to collect the amounts owed by its customers, due to the 

fact that PUCT does not allow for any disconnections. 

LPC and LPH Enter Negotiations With BETM on Possible Solutions 

31. In large part as a result of the events in Texas and this liability, on February 17, 

2021, BETM sent LPH a Notice of Potential Event of Default under the SSA. On February 19, 

2021, BETM sent LPH a Notice of an Event of Default. That same night, Derik Viner, who was 

President of LPC, and I had dinner with Louis Martinsen, our primary contact at BETM in order 

to begin discussions of possible solutions for LPC, LPH and BETM in the wake of the Texas 

events. At this meeting and in subsequent discussions it was made clear to us that BETM 

understood that the event was driven by wholly unexpected, unpredictable exogenous conditions, 

and that, specifically, Liberty Power “did everything right” and that there was absolutely nothing 

the company could have done to mitigate such circumstances. 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 24 of 34
10 

32. Over the next couple of weeks, and as we began discussions with BETM on this 

issue, BETM sent additional Notices of Events of Default to LPH. Despite receiving these letters 

that seemed intended to unnecessarily escalate the situation and gain leverage over LPC and LPH, 

LPC and LPH remained engaged in negotiations with BETM to try and find a potential resolution. 

LPC and LPH provided BETM with numerous concepts and ideas for a solution, but BETM 

expressed no overt interest in exploring any of these options. 

33. At the same time, BETM and LPC and LPH collaborated to develop a formal 

dispute of charges with ERCOT, which BETM submitted on the parties’ behalf on March 3rd. LPC 

and LPH requested on at least four occasions to BETM to confirm the submission of the dispute 

and to share a copy of this dispute. The formal dispute with ERCOT was sent to LPC and LPH on 

March 26th. In this dispute BETM. In this dispute BETM argues “Real-Time Reliability 

Deployment Prices for Energy (RTRDP) as applied after PUCT order dated 2/15/2021 appear 

arbitrary, unreasonable, inconsistent with ERCOT tariff, and inconsistent with the unmodified 

scarcity pricing on 2/15/21 (HE1 – HE22), and the entire history of Liberty’s prior nodal 

settlements (2010 to present).” And further argues “The RTRDP adder continued beyond the end 

of forced load shed through 2/19/21, which as numerous entities have noted in PUCT filings 

appears arbitrary, capricious, and inconsistent with the Tariff.” 

34. Specifically, in early March, LPH and BETM began negotiations on a term sheet 

for a forbearance agreement, which was intended to be a collaboration between LPC, LPH and 

BETM in an attempt to maximize the value of LPH and its assets in a potential sale scenario. One 

key component of this term sheet was the level of involvement that LPC would have in any sale 

process. From LPC’s and LPH’s perspective, having LPC assist and participate in any sale process 

was the best way to maximize the value of LPH. In addition, LPC was also willing, depending on 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 25 of 34
11 

the terms, to put itself up for sale along with LPH so that a buyer could purchase a fully functioning 

ongoing concern. As set forth above, because LPH had no employees or ability to operate its 

business without LPC, any sale of LPH would potentially result in a higher price for the LPH assets 

if the buyer also was able to purchase LPC in a manner that would allow LPC to continue to 

provide services to LPH to support LPH’s operations. LPC and LPH also demonstrated for BETM 

why waiting (rather than engaging in a hasty sale or bankruptcy) would return more value from 

any sale. But BETM resisted these ideas for some reason, and consistently downplayed the 

importance of LPC to LPH. BETM did not seem interested in maximizing the value of LPH, but 

rather seemed intent on as rapid of a sale of LPH as possible. In addition, BETM seemed to be 

assuming that LPC was obligated (or would) provide additional services to LPH and BETM as 

part of any sale transaction of LPH or bankruptcy process. We tried to make it clear that LPC did 

not have any obligation to provide this type of assistance to LPH and BETM. 

35. On March 15, 2021, in order to preserve its rights and because it started to become 

clear that BETM would not be willing to enter a forbearance agreement designed to maximize 

LPH’s value and recognize LPC’s contributions to any sale process, LPH exercised its rights under 

Section 12.2 of the SSA and provided notice to BETM of a Change of Law. Specifically, Liberty’s 

notice identified that the February 15, 2021 PUCT Order constituted a Change of Law, as defined 

in the SSA, and that this Change in Law resulted in a materially adverse impact to LPH’s 

economics under the SSA. 

36. BETM sent LPH a response on March 17, 2021. Notably, in that response, BETM 

did not dispute that the PUCT Order that caused electricity levels to spike constituted a Change of 

Law. Rather, BETM somewhat incredibly claimed that the spike in pricing and resulting millions 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 26 of 34
12 

of dollars in liability incurred by LPH did not constitute a material adverse change to LPH’s 

economics under the SSA, and thus the Change in Law provision was not triggered. 

37. LPC and LPH continued to stay engaged with BETM to try and agree on a process 

for maximizing the value of any sale of LPH. Specifically, on Friday, April 9, 2021, LPH sent a 

detailed analysis to BETM demonstrating the added value that LPC involvement in a sale of LPH 

would have, as well as the impact of value destruction resulting from not having use of LPC’s 

platform. 

38. On Monday April 12, 2021, without responding to the analysis that LPH sent on 

April 9, BETM surprisingly sent a Notice of Termination of the SSA to LPH. Along with the 

Notice of Termination, BETM sent LPH a Preliminary Debtor-in-Possession (DIP) Financing 

Term Sheet, making it very clear that BETM intended to seek to exercise its rights under the Pledge 

and Security Agreement and force LPH to file bankruptcy. 

39. Because LPC relies on LPH for its funding, BETM’s intention to put LPH into 

bankruptcy threatened LPC’s ability to be able to satisfy its debts and obligations. Accordingly, 

on April 12, 2021, in order to obtain this critical past due funding and ensure retention of key 

employees, LPC sent LPH a formal notice under the MSA of LPH’s failure to provide funding for 

these key payments. LPH forwarded this funding request to BETM, but BETM indicated that it 

would not agree to fund these payments, despite knowing the adverse impact to LPC and LPH that 

losing these key employees would have. 

40. On April 13 and 14, LPC, LPH and BETM continued to discuss options for a 

collaborative path forward that would ensure LPH had the support it needed prior to or during any 

bankruptcy. On April 14, 2021, BETM’s representatives expressed their desire to have LPH file 

bankruptcy by Friday, April 16, 2021. 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 27 of 34
13 

41. On April 15, 2021, as our discussions were ongoing and without any advance 

notice, BETM sent LPH and Liberty Power Super Holdings a Notice of Exercise of Step-In Rights 

under the Pledge and Security Agreement. Under the Pledge and Security Agreement, and in 

certain situations, BETM purportedly had the ability to “step-in” and exercise the voting rights 

that Liberty Power Super Holdings had with respect to LPH, which is its wholly owned subsidiary. 

Through the Notice of Step-In Rights, BETM sought to remove certain mangers from the LPH 

Board of Managers, appoint three new persons (including two persons who were BETM 

employees) as managers, and appoint Bob Butler as the Chief Restructuring Officer of LPH. 

42. Also on April 15, 2021, because it appeared as if BETM was planning to use its 

purported control over LPH to put LPH into bankruptcy, LPC exercised its rights under the MSA 

to send LPH an advanced funding request for payment to prospectively cover two weeks of payroll 

for its employees, and two weeks of vendor expenses that would be incurred by LPC. The amount 

of these expenses was consistent with the amounts LPH had been regularly paying to LPC in the 

past. Under the terms of the MSA, LPH was obligated to make a payment on this advanced funding 

request on April 16, 2021. LPC conveyed this advanced funding request to BETM, which now 

controlled LPH. 

43. On April 16, 2021, Liberty Power Super Holdings sent BETM a detailed letter 

describing why – for several reasons – BETM’s exercise of its step-in rights was invalid under the 

SSA and the Pledge and Security Agreement. To date, BETM has not provided any written 

response to that letter disputing its lack of authority to exercise its step-in rights. 

44. Because we believe that BETM’s use of its step-in rights was invalid, we do not 

believe that this Bankruptcy has been properly authorized or initiated by LPH, and will be seeking 

to dismiss this bankruptcy in short order. 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 28 of 34
14 

45. Also on April 16, 2021, representatives from LPC and BETM discussed LPC’s 

request for advance funding, and why receiving this funding would be critical to keep LPC’s 

operations going in light of BETM’s plans to cause LPH to file for bankruptcy. Critically, while 

BETM made representations that it would allow LPH to provide advanced funding to cover payroll 

expenses for two weeks, it did not provide any assurances beyond that, and it stated that it would 

not do so for vendor expenses and would instead pay those vendor expenses which it chose to 

approve in the ordinary course as they became due. LPC explained to BETM that this was 

untenable for several reasons (as well as being a breach by LPH of the MSA). For example, LPC 

faced the risk of incurring liability to its vendors that LPH would not be able to fund once it filed 

for bankruptcy, or which BETM would choose not to fund. LPC explained that unless it received 

reasonable assurances from LPH and BETM for advanced funding for these liabilities LPC would 

be incurring, it could not continue to utilize the services of its vendors given that it would lack the 

ability to pay them. LPC also explained to BETM the critical services that these vendors provided 

to LPC to perform under the MSA, and that LPH’s and BETM’s agreement to provide advance 

funding for payroll would be meaningless because the employees could not do their jobs without 

the involvement of the vendors. 

46. Despite these discussions, BETM remained non-committal about whether it would 

provide advance funding for LPC’s vendors by the end of the day on Friday, April 16. 

47. Over the course of the weekend (April 17 and 18), and in the absence of any 

reasonable assurances from LPH and BETM that they would provide advance funding to LPC so 

that LPC could have money to pay its vendors so that LPC could continue its operations, I struggled 

to decide on what LPC should do. Ultimately, I made one of the most difficult decisions of my 

life and on Sunday, April 18, authorized LPC to provide notice to its employees terminating their 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 29 of 34
15 

employment. Had LPH and BETM provided assurances that they intended to provide advanced 

funding for the vendor charges that were critical to allow LPC to continue to operate, I would not 

have made this decision. LPH’s and BETM’s lack of commitment to provide this funding appeared 

to me to be part of a pattern of them trying to continually squeeze LPC, especially given that LPH 

had a clear obligation to provide the advanced funding pursuant to the MSA, and its failure to do 

so represented a breach of that agreement. 

48. I have read the Declaration of Bob Butler and want to address his attempts to blame 

me and LPC for taking the steps we took. Simply put, for Mr. Butler to suggest that I terminated 

employees in bad faith or out of pique is incredibly offensive to me and inexcusable. As set forth 

above, I founded LPC nearly 20 years ago, helped build it from the ground up, and have spent a 

majority of my professional life overseeing its growth and operations. Over the years, the members 

have had LPC reinvest over $100 million into the business in order to make it grow, rather than 

taking those funds for ourselves. I have remained incredibly dedicated to LPC’s employees, just 

as I was form the start when I refused to take any pay until the company had enough capital to pay 

all of its other employees. At the time of the original deal with BETM in July 2020, I contributed 

a significant amount of my personal net worth to save jobs at LPC and to protect its vendors. And 

throughout the more recent negotiations with BETM, I consistently advocated for employee 

incentive payments would have to be part of any deal. To be clear, despite Mr. Butler’s statements 

that he was working on the funding issues and expected everything to be taken care of on Monday, 

April 19, none of this was ever communicated to me or anyone else at LPC prior to LPC’s decision 

to terminate its employees, and, in fact, the only communications from BETM we received on this 

issue were extremely non-committal. We have been telling BETM for the past several weeks the 

importance of LPC’s vendors, and we specifically repeated to them on Friday, April 16 how critical 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 30 of 34
16 

it was to LPC’s operations to get advanced funding for vendor payments, but provided no 

assurances on that day or prior to the terminations on Sunday evening that they would provide this 

critical funding. 

49. I also take issue with Mr. Butler’s claims that LPC has been uncooperative in the 

aftermath of the terminations. I responded to a text message from Mr. Butler within minutes and 

then personally spoke with him on Monday morning in order to discuss a path forward and possible 

solutions, including a proposal that LPC would seek to rehire some or all of its employees to 

resume operations. As for Mr. Butler’s requests for records, I explained to him that LPC’s ability 

to gather these records was inhibited due to the fact that it had to terminate its employees, and that 

without employees or funding, it would be difficult for LPC to provide records, but that LPC was 

interested in trying to negotiate a solution with LPH and BETM on this point. 

50. Unfortunately, those negotiations did not lead anywhere, but not because – as Mr. 

Butler suggests – LPC took unreasonable positions or imposed unreasonable conditions. 

Throughout the negotiations with BETM – going all the way back to February 19 – I have only 

insisted on terms that I felt in good-faith were fair to LPC and reasonable in light of its added 

value. 

51. At 12:51 p.m. on April 19, Mr. Butler sought to schedule an emergency meeting 

for the Board of LPH for 2:30 p.m. In response, we reiterated our objection to any Board meeting 

called or involving managers that we did not believe had been appropriately appointed given the 

infirmities with BETM’s exercise of its step-in rights, but stated that we would be willing to reserve 

rights on this issue and proceed with a meeting in order to continue to explore a potential path 

forward that would work for all the stakeholders. We also requested an agenda for the meeting, 

but did not get one. We also noted how the attempt to schedule the meeting violated the 24-

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 31 of 34
17 

advance notice requirement for any Board meeting, and that it was difficult to waive this advance 

notice requirement without knowing what would be on the agenda so that we could have some 

ability to prepare in advance. We explained that we would still be willing to proceed with the 

meeting at 2:30 p.m. that day, and would be willing to put any objections to the meeting on the 

back burner in order to try to reach a potential resolution expeditiously. In response, Mr. Butler 

postponed the Board meeting to the following day, April 20. 

52. During the Board meeting, the managers that had been appointed by BETM and 

Mr. Butler (who was appointed by the BETM managers) all advocated for an immediate 

bankruptcy filing for LPH. I explained how this would be premature and would destroy value, 

and that the parties should continue to work on a potential resolution. But it became clear to me 

that Mr. Butler and the inappropriately appointed BETM Board members had previously made up 

their mind to proceed with a bankruptcy filing and the Board discussion was nothing more than a 

perfunctory gesture. Ultimately, the three managers appointed by BETM voted in favor of a 

bankruptcy, with the other two managers (myself and Martin Halpern) voting against a bankruptcy. 

53. That evening, I continued to advocate for a negotiated resolution, and conveyed a 

new offer to BETM from LPC that would result in LPC taking steps to rehire employees and 

resume operations in exchange for some modest financial commitments from BETM. 

54. On April 21, that next morning, and without BETM providing LPC with any 

counter-offer or feedback on LPC’s offer, LPH filed their petition for bankruptcy with this Court. 

We immediately reached out to BETM and expressed our desire to continue our negotiations 

despite what we felt was an unnecessary step of LPH filing for bankruptcy. As part of that 

outreach, and prior to LPH filing its turnover motion, we offered to discuss providing BETM with 

direct access to certain of LPH’s records. Despite this fact, LPH filed its turnover motion that – 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 32 of 34
18 

in my view – is incredibly overbroad and seeks to get access to property and assets belonging to 

LPC. My personal belief is that the BETM managers instructed LPH to overreach in this regard 

in an attempt to get access to the LPC assets that were not part of the deal that BETM negotiated 

and agreed to back in 2020 as part of its credit sleeve arrangement with LPH. This is an improper 

attempt by BETM to enlist this Court’s assistance in essentially rewriting the agreements BETM 

previously executed. 

55. Later in the afternoon of April 21, BETM contacted me to set up a call at 4:15 p.m. 

to discuss their counter-offer. During the call we discussed their counter-offer, and after our call, 

they sent me their counter-offer in writing. We are now preparing a counter-offer back to BETM 

that we plan to communicate today. 

56. In closing, my sense is that LPC and BETM are closer to finalizing a deal than we 

have ever been, and this deal will include provisions providing that LPC and BETM will work 

together to ensure that LPH gets the staffing, operational support, and access to records it will need 

to continue its operations, and to ensure that LPC’s employees are provided appropriate transition 

support, and LPC’s vendors are also paid. For this reason, I think it makes sense for this Court to 

defer entering any order on LPH’s turnover motion for a short period of time in order to allow LPC 

and BETM to finalize their agreement and resolve this issue without the need for this Court’s 

involvement. 

Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 33 of 34
Case 21-13797-SMG Doc 23 Filed 04/22/21 Page 34 of 34