Opinion ID: 791875
Heading Depth: 2
Heading Rank: 2

Heading: The Good-Faith Hearing and the Adversary Proceeding

Text: 7 Soon after the sale was approved, relations between the parties soured. According to Smart World, Juno circumvented the process established in the agreement for tracking subscribers referred to Juno by causing a database dump on the very day the sale was approved. The database dump allegedly prevented Smart World from identifying how many of its subscribers became qualified subscribers, and thus, how much Juno owed Smart World. When Smart World raised these allegations before the bankruptcy court, the court scheduled a hearing for September 6, 2000 on the issue of Juno's good faith in the § 363 sale. 8 Juno's response to the scheduling of the good-faith hearing was twofold. First, Juno refused to respond to Smart World's discovery requests, complaining that they were overly broad and burdensome. When the bankruptcy court ordered Juno to expedite discovery, Juno dumped tens of thousands of documents on Smart World's counsel just days before the hearing. 6 Second, Juno commenced a declaratory action in an adversary proceeding, which subsumed the good-faith allegations raised by Smart World. 9 Specifically, Juno's complaint, filed just days after the bankruptcy court decided to hold the good-faith hearing, addressed the precise issues regarding implementation of the Term Sheet raised by Smart World. Juno denied that it had engaged in a database dump and instead asserted that Smart World had concoct[ed] false claims relating to the implementation of the Term Sheet . . . in an effort to extract additional and unearned consideration from Juno. According to Juno, it was Smart World, and not Juno, who had impeded implementation of the agreement. In fact, Juno argued, Smart World had not only failed to fully implement critical elements [of the Term Sheet], but in addition Smart World's three most senior officers had in effect extorted Juno, threaten[ing] to immediately resign . . . unless Juno immediately paid [them] salaries in excess of the amounts previously authorized by the Court, a demand to which Juno allegedly felt that it had to yield. In short, Juno maintained, Smart World's accusations of wrongdoing were part of a wholesale effort to extract additional consideration from Juno . . . and to obtain other modifications to the Term Sheet.