On March 15, 2010 Lehman Brothers Holdings, Inc. and its affiliated debtors (the “Debtors”) filed a motion (the “Motion”) with the Bankruptcy Court overseeing the Debtors’ Chapter 11 cases (the “Court”) seeking authorization to establish certain claims and alternative dispute resolution procedures designed to expedite the process of reconciling claims filed against the Debtors’ estates.
The procedures, set forth in detail in an exhibit to the proposed order filed with the Motion, are summarized as follows:
- If the Debtors object to a claim, the claimant may file a response. If no response is filed or if a consensual resolution of the claim is reached, the Debtors would seek to have the claim disallowed and expunged, or the resolution approved, on the hearing date set for the objection.
- If the Debtors object to a claim on its merits and the claimant files a response, the Debtors may, in their sole discretion, serve the claimant with one of two notices: (i) a Notice of Alternative Dispute Resolution (ADR) Procedures, or (ii) a Notice of Merits Hearing. If the Debtors serve the former, the objection would proceed in accordance with specified ADR Procedures (summarized below). If the latter, the objection would proceed to resolution by the Court. The Debtors may append an Offer of Settlement to either such notice.
- The proposed ADR Procedures would consist of a mandatory, but non-binding, process of negotiation and mediation, unless the parties agree otherwise. Negotiation would only take place at the request of either the Debtors or the claimant and would be conducted via telephone outside the presence of a mediator. Mediation would take place in person in New York, in the presence of a neutral mediator. (Upon consent of both parties, the mediation could take place telephonically.) Both parties would agree to a mediator selected from a list to be provided by the Debtors. In conjunction with the mediation, both parties would submit briefs to the mediator, but the briefs would not be filed with the Court. Costs of mediation would be born by the individual parties, and the Debtors would have authorization to pay the mediator’s fees.
- If the Debtors object to a claim on the grounds that it fails to state a claim upon which relief may be granted pursuant to the standard applied for rule 7012(b)(6) of the Federal Rules of Bankruptcy Procedure and a response is filed by the claimant, in lieu of the Debtors opting for an ADR Procedure or a Merits Hearing, the Court may hold a “Sufficiency Hearing.” The issue at the Sufficiency Hearing would be whether the claimant has stated a legal claim upon which relief can be granted.
- Upon the Debtors’ service of an objection to a claim, the recipient/claimant would be enjoined from commencing or continuing any action or proceeding, or engaging in any discovery, that seeks to establish, liquidate, collect on, or otherwise enforce a contested claim filed by the claimant other than i) through the resolution procedures set forth in the Motion, or (ii) pursuant to a plan confirmed in the Debtors’ Chapter 11 cases.
The proposed claims and alternative dispute resolution procedures have NOT yet been approved. A hearing to consider approval of the procedures is scheduled for April 14, 2010, at 10 a.m. EDT, and objections, if any, must be filed by March 31, 2010, at 4 p.m. EDT.
The full Motion with accompanying exhibits may be found here.