ashford – schael llc courtney a. schael, esq. (cs-1295)

ASHFORD – SCHAEL LLC Courtney A. Schael, Esq. (CS-1295) 100 Quimby Street, Suite 1 Westfield, NJ 07090 (908) 232-5566 (908) 728-3113 telecopy Counsel for the Debtor and Debtor in Possession UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK

In re:

METROPARK USA, INC.,

Debtor.

Chapter 11

Case No. 11-22866 (RDD)

DEBTOR’S MEMORANDUM OF LAW IN OPPOSITION TO SECOND APPLICATION OF BLAKELEY LLP, COUNSEL TO THE OFFICIAL

COMMITTEE OF UNSECURED CREDITORS, FOR COMPENSATION AND REIMBURSEMENT OF EXPENSES

11-22866-rdd Doc 805 Filed 07/03/18 Entered 07/03/18 17:36:55 Main Document Pg 1 of 29

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PRELIMINARY STATEMENT

Metropark USA, Inc., the debtor and debtor-in-possession (the “Debtor”) by and

through its counsel, Ashford – Schael LLC, submits this memorandum of law in opposition to

the Second Application of Blakeley LLP, Counsel to the Official Committee of Unsecured

Creditors, for Compensation and Reimbursement of Expenses (the “Second Application”).

The Debtor’s bankruptcy case was filed to liquidate the assets of the Debtor, a

fashion retailer. All of the Debtor’s assets were fully encumbered by secured claims with the

exception of Chapter 5 avoidance actions. Within months of the Petition Date, the Debtor

completed going out of business sales and liquidated substantially all of its assets with the

exception of Chapter 5 avoidance actions.

Pursuant to a settlement among the Debtor, the Committee and the Debtor’s

secured creditor, the Committee was authorized to bring Chapter 5 actions and retain Blakeley &

Blakeley LLP (“Blakeley”) as its counsel on a contingency fee basis. To reduce administrative

expenses, the Debtor substituted Ashford – Schael LLC for Cooley LP, as counsel for the

Debtor.

Even with anticipated recoveries from Chapter 5 actions, it was at all times clear

that the Debtor would not have any funds to distribute to unsecured creditors irrespective of any

efforts by the Committee or Blakeley. Despite the financial status of the case, Blakeley

continued to generate excessive hourly fees in its capacity as Committee Counsel without

considering the cost-benefit of its services to general unsecured creditors or the estate. In its

Second Application Blakeley seeks hourly fees (in addition to its contingency fees) in the

amount of $168,969.50 for services which had no little or benefit whatsoever to the estate or

unsecured creditors.


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Blakeley’s services billed at hourly rates included preparing motions that were

never filed, preparing and filing a disclosure statement and liquidating plan that was

unconfirmable on its face, repeated and duplicative review and reconciliation of claims, and

preparing an amended disclosure statement and plan that was never filed. To the extent that

Blakeley’s services provided any benefit to the estate, Blakeley’s fees were grossly excessive.

For example, Blakeley generated $22,531.00 in fees to file a form motion to set a bar date for

filing administrative claims.

The Debtor submits that the majority of the Blakeley’s requested hourly

compensation should not be allowed and Blakeley should be ordered to disgorge and return fees

to the estate. Significantly, Blakeley already requested and was paid $202,614.93 for its First

Interim Application. (See dkt. no. 403). Accordingly, the total compensation that Blakeley

seeks to be paid in this liquidating chapter 11 case which will not pay any distributions to

unsecured creditors is $855,656.82.1

The Debtor also objects to Blakeley’s request for contingency fees for Avoidance

Action Litigation and submits that Blakeley’s fees should be reduced by the amount of the

Debtor’s fees resulting from Blakeley’s failure to comply with its obligations under the Global

Stipulation, failure to provide information regarding the Avoidance Actions, and failure to

properly account for the proceeds from Avoidance Actions, necessitating a motion by the Debtor

for a complete accounting. In addition, Blakeley’s contingency fees should be reduced by the

losses to the estate attributable to the amount of certain administrative claim waivers that

Blakeley accepted as consideration for settlements of Avoidance Actions to the extent that the

waived administrative claims had no value or merit. 1 $202,614.93 First Fee Application + $168,969.50 Second Fee Application hourly + $484,345.39 Second Fee Application contingency. 2 As defined in the Amended Motion for an Order Approving Stipulation Regarding Global Resolution of Open


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STATEMENT OF FACTS

A. FACTUAL BACKGROUND

The Debtor as a fashion retailer with approximately 70 stores in 21 states. On May

2, 2011, the Debtor filed a voluntary petition under Chapter 11 of the Bankruptcy Code (the

“Petition Date”). Cooley LLP was retained as counsel for the Debtor by Order entered May 24,

2011. No examiner or trustee has been appointed in the Chapter 11 bankruptcy.

On May 6, 2011, the Office of the United States Trustee appointed the Official

Committee of Unsecured Creditors (the “Committee”) pursuant to section 1102(a)(1) of the

Bankruptcy Code. The members of the Committee are True Religion, Diesel USA and GGP

Limited Partnership. (See dkt. no. 57).

As of the Petition Date and thereafter, all of the Debtor’s assets were fully

encumbered and subject to security interests of various lenders with the exception of actions

under Chapter 5 of the Bankruptcy Code. (See Order Approving Amended Motion for an Order

Approving Stipulation Regarding Global Resolution of Open Issues Between Debtor, Second

Lien Lenders and Committee Pursuant to Rule 9019 of the Federal Rules of Bankruptcy

Procedure, Including Authorization to Obtain Postpetition Financing From Second Lien Lender

and Retention of Replacement Counsel, docket no. 443).

Beginning on or about May 6, 2011, the Court entered various orders effectuating

a liquidation of the Debtor’s assets (see docket nos. 59, 149, 190, and 255). Pursuant to these

and other orders by June 30, 2011, the Debtor had completed all going out of business sales,

vacated store locations and liquidated substantially all of its assets.

After liquidation of substantially all of the Debtor’s assets, the Debtor’s only

remaining unencumbered assets were avoidance actions under the Bankruptcy Code and


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applicable state law. All other nominal assets, such as, insurance refunds and pre-paid deposits,

were subject to security interests of the Second Secured Lien Lenders. (See Stipulation

Regarding Global Resolution of Open Issues Between Debtor, Second Lien Lenders and

Committee, dkt. no. 426).

B. GLOBAL STIPULATION

The Debtor, the Committee and its Second Secured Lien Lenders2 entered into a

Stipulation Regarding Global Resolution of Open Issues Between Debtor, Second Lien Lenders

and Committee (“Global Stipulation”) approved by the Court by Order entered on January 18,

2013, docket no. 443 (the “Global Order”).

The Global Stipulation provided that the Committee would prosecute all Chapter

5 claims on behalf of the estate and that Blakeley would act as counsel for the Committee to

pursue the Chapter 5 claims.

The Stipulation further provided for the substitution of Ashford – Schael LLC for

Cooley LLP as counsel for the Debtor. After the liquidation of substantially all of the Debtor’s

assets and settling various affairs, the Debtor believed that substituting Ashford – Schael LLC as

counsel for Cooley LLP to wind-down the affairs of the Debtor and conclude the Case would be

more cost effective for the estate and maximize the estate’s assets for the benefit of creditors.

(See Debtor’s Application for Entry of Order Pursuant to Bankruptcy Code Sections 327(a) and

328 and Bankruptcy Rules 2014 and 2016 Authorizing Employment and Retention of Ashford-

Schael LLC as Counsel for the Debtor, Authorizing Substitution of Ashford-Schael LLC for

Cooley LLP as Counsel for the Debtor and Related Relief (docket no. 427).

2 As defined in the Amended Motion for an Order Approving Stipulation Regarding Global Resolution of Open Issues Between the Debtor, Second Lien Lenders and Committee Pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure, Including Authorization to Obtain Post-petition Financing From Second Lien Lender and Retention of Replacement Counsel (“Motion for Approval of Global Resolution”), docket no. 426.


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C. FACTS PERTAINING TO OBJECTIONS

The facts relevant to the Debtor’s Objection are set forth at length in the

Certification of Courtney A. Schael in Support of Debtor’s Objection to Second Application of

Blakeley LLP Counsel to the Official Committee of Unsecured Creditors, for Compensation and

Reimbursement of Expenses filed herewith (the “Schael Certification”).

LEGAL ARGUMENT

I. BLAKELEY IMPROPERLY SEEKS FEES THAT ARE NOT COMPENSABLE UNDER BLAKELEY’S AMENDED RETENTION ORDER AND BY PRIOR AGREEMENTS BY BLAKELEY.

A. Blakeley’s Services Relating to Avoidance Action Litigation is Not Compensable at

Hourly Rates.

Avoidance Action Litigation—Exhibit “1” Objection Code—“AA”—Amount $18,652.00

Blakeley’s Amended Retention Order provides for Blakeley to be compensated on

a thirty percent (30%) contingency fee basis for Avoidance Action Litigation (dkt. no. 538).

The Amended Retention Application provided that:

B&B will provide the Committee, the Debtor and the Second Lien Lenders with reports summarizing the collections in accordance with the terms of the 9019 Order. B&B will receive its contingency fees from gross amounts collected and remit the net proceeds to the estate. B&B will submit an interim application to the Court for fees earned prosecuting the Avoidance Claims.

(See docket no. 445 at p. 3). The Global Stipulation required the Committee to “provide monthly

written reports on the status of the Chapter 5 Claims to the Debtor, Second Lien Lenders, and the

Court in form and substance reasonably acceptable to the Debtor and Second Secured Lien

Lenders.” (See dkt. 426 at p. 42). The Amended Retention Application provided that Blakeley

would be paid a contingency fee only on proceeds from the Avoidance Action Litigation with no

provisions for hourly compensation.


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In the Second Application, Blakeley seeks substantial amounts of hourly

compensation for work relating to Avoidance Action Litigation contrary to its Amended

Retention Order and its contingency fee agreement. Blakeley also requests allowance of

$484,345.39 under its contingency fee agreement.3

The Second Application improperly includes services relating to the Avoidance

Action Litigation billed at hourly rates, including: (i) services directly involved in litigating

Avoidance Actions, such as communicating with counsel regarding approval of settlements,

obtaining documents from the Debtor to pursue actions and respond to discovery requests, and

communicating with Debtor’s counsel for execution of certifications in support of default

judgments, (ii) services relating the Committee’s reporting requirements, responding to requests

for information regarding Avoidance Action Litigation from the Debtor; (iii) administration of

Avoidance Action Litigation, (iii) preparation of contingency fee statements, and (iv) preparation

of its Amended Retention Application and Modification Application. These services are not

compensable at hourly rates because Blakeley was retained on a contingency basis as provided in

Global Stipulation and the Amended Retention Order.

Had the Debtor retained an outside firm to pursue the Avoidance Action

Litigation on a contingency basis, such retention would clearly not have included or

contemplated hourly compensation, in addition to contingency fee compensation, for the outside

counsel’s record keeping, billing and other administrative tasks associated with its contingency

fee arrangement. See e.g. In re APP Winddown, 16-12551, docket no. 949 (Application to

3 Prior to entry of its Amended Retention Order approving Blakeley’s contingency fee retention, Blakeley had already done extensive work relating to Avoidance Actions including preparing preference analyses and billed the estate hourly for such services. (See First Application, dkt. no. 430-2 at pp 53, 70, 83-85, 89-92, 94 and 96).


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Retain ASK) (Bankr. D. Del.). Merely because Committee Counsel also had a retention order

providing for Committee Counsel to receive an hourly compensation its representation of the

Committee in the Case does not allow Blakeley to bill the estate hourly for services relating to

Avoidance Action Litigation.

Attached hereto as Exhibit 1 is a compilation of Blakeley’s invoices by project

category with objections to various time entries. Most of Blakeley’s services relating to

Avoidance Action Litigation appear under the “Case Administration” project category although

these improper charges appear under almost all project categories. The Debtor submits that the

Court should deduct all time relating to Avoidance Action Litigation in the total amount of

$18,652.00.

B. Blakeley Improperly Requests Compensation in Full for Services Blakeley Agreed to Waive or Discount.

Waived Fees—Exhibit “1” Objection Code—“W”—Amount $1,553.50 Discounted Fees—Exhibit “1” Objection Code—“D”—Amount of Discount—$966.82

The Debtor objects to compensation requested by Blakeley that Blakeley

previously agreed to waive or discount as part of the Global Stipulation. On or about December

21, 2012, Blakeley filed its First Interim Application for compensation seeking fees in the

amount of $238,370.50 for the time period May 10, 2011 (the effective date of the Order

approving Blakeley’s retention) through October 31, 2012 (the “First Application”). As set forth

in the Global Stipulation, Blakeley agreed to reduce its fees in the First Application by fifteen

percent (15%), bringing the fee request to $202,614.93. (See Global Stipulation, dkt. no 443 at

p. 6 and First Application, dkt. no. 430 at p. 7).

Blakeley further agreed not to seek fees for the time period from November 1,

2012 through November 20, 2012 (calling its fees de minimis for this time period) and that its


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fees for the time period from November 20, 2012 through the date of the hearing to approve the

Global Stipulation on January 10, 2013 would also be subject to the fifteen percent discount

(15%) and reflected in a fee statement for January 2013. Blakeley did not file a fee statement for

January 2013. Instead, on or about May 31, 2013, Blakeley filed a fee statement for the time

period from November 1, 2012 through May 26, 2011 requesting hourly compensation in the

amount of $13,075.50. In the March 2013 Fee Statement, contrary to its agreement, Blakeley

included fees predating November 20, 2012 and did not discount fees from November 20, 2012

through January 10, 2013 by fifteen percent.

The Debtor objects to allowance of fees for services between November 1, 2012

through November 20, 2012 in the amount of $1,553.50 and an additional $966.82 which

represents the discount agreed to by Blakeley for services between November 21, 2012 and

January 20, 2013. (See Exhibit 1).

II. BLAKELEY CANNOT BE COMPENSATED FOR SERVICES THAT DID NOT BENEFIT THE ESTATE OR WERE NOT NECESSARY TO THE ADMINISTRATION OF THE CASE.

Section 330(a)(1)(A) of the Bankruptcy Code provides in part that the Court may

award a professional person employed under section 327 “reasonable compensation for actual,

necessary services rendered by the trustee, examiner, ombudsman, professional person, or

attorney and by any paraprofessional person employed by any such person . . . “ 11 U.S.C. §

330(a)(1)(A) (emphasis added). Before determining the reasonableness of services, the court

must make a threshold determination that that the compensation sought is for actual, necessary

services. In re Keene Corp., 205 B.R. 690, 696 (Bankr. S.D.N.Y. 1997). “Necessary services”

are those that benefit the estate. Id.


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The requirement that the services be necessary or beneficial is reiterated by

section 330(a)(4)4 of the Bankruptcy Code which expressly precludes the Court from allowing

compensation for “(i) unnecessary duplication of services; or (ii) services that were not--(I)

reasonably likely to benefit the debtor's estate; or (II) necessary to the administration of the

case.” 11 U.S.C. § 330(a)(4). Courts apply an objective test, considering “what services a

reasonable lawyer or law firm would have performed in the same circumstances.” In re Ames

Dept. Stores, 76 F.3d 66, 72 (2d Cir. 1996). This includes a cost-benefit analysis. See e.g. In re

Keene Corp., 205 B.R. 690, 696 (Bankr. S.D.N.Y. 1997) (“once it becomes reasonably obvious

that the prospective costs of commencing or continuing litigation will exceed any benefit to the

estate, the attorney is duty bound to abandon the claim.”) Blakeley bears the burden of proof on

its Second Application. See Zeisler & Zeilser, P.C. v. Prudential Ins. Co. of Am (In re JLM,

Inc.), 210 B.R. 19, 24 (B.A.P. 2d Cir. 1997).

If the Court determines that any of Blakeley’s services were necessary to the

administration of the case or reasonably likely to benefit the debtor’s estate, the Court must make

an independent analysis of the reasonableness of the compensation for such necessary or

beneficial services. In reviewing reasonableness of requested compensation, section 330(a)(3)

provides that:

(3) In determining the amount of reasonable compensation to be awarded to an examiner, trustee under chapter 11 [11 USCS §§ 1101 et seq.], or professional person, the court shall consider the nature, the extent, and the value of such services, taking into account all relevant factors, including--

(A) the time spent on such services; (B) the rates charged for such services;

4 Section 330(a)(4) includes an exception in chapter 12 and 13 cases which is not applicable to this chapter 11 case.


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(C) whether the services were necessary to the administration of, or beneficial at the time at which the service was rendered toward the completion of, a case under this title [11 USCS §§ 101 et seq.]; (D) whether the services were performed within a reasonable amount of time commensurate with the complexity, importance, and nature of the problem, issue, or task addressed;

(E) with respect to a professional person, whether the person is board certified or otherwise has demonstrated skill and experience in the bankruptcy field; and (F) whether the compensation is reasonable based on the customary compensation charged by comparably skilled practitioners in cases other than cases under this title [11 USCS §§ 101 et seq.].

11 U.S.C. § 330(a)(3). The Court has discretion to award less than the amount of compensation

requested. 11 U.S.C. § 330(a)(2). To the extent that the amount awarded by the Court is less

than the amount of interim compensation retained by Blakeley, the Court may order Blakeley to

return compensation retained to the estate.5 11 U.S.C. § 330(a)(5).

Blakeley’s hour fees for services rendered in Blakeley’s capacity as counsel to the

Committee must be considered in the context of this Case as a liquidating chapter 11 with no

possibility of a distribution to unsecured creditors. In In re Sheehan Mem. Hosp., the bankruptcy

court addressed appropriate compensation to counsel for an unsecured creditors’ committee in a

case where a debtor lacked financial resources to make a meaningful distribution to unsecured

creditors. In re Sheehan Mem. Hosp., 380 B.R. 299, 306-307 (Bankr. W.D.N.Y. 2007). The

Sheehan Court noted that “where a debtor lacked resources for any meaningful distribution to

unsecured creditors, prudent counsel would have recognized the futility of intensive

representation and should have recommended to the committee that the firm down-size the scope

5 Blakeley expressly acknowledged and agreed that Blakeley would be required to repay the Debtor the amount that any aggregate interim payments exceeded amounts allowed by the Court. See Application for Order Under Bankruptcy Code Sections 327(a) and 328 and Bankruptcy Rules 2014 and 2016 Authorizing Employment of Blakeley & Blakeley LLP as Counsel to the Official Committee of Unsecured Creditors (dkt. no. 99).


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of its involvement.” Id. at 305.

While the Sheehan Court recognized that committees are entitled to compensation

for meaningful contributions to the completion of a bankruptcy case, the Sheehan Court

explained that “[w]e will not reward counsel who approach representation in bankruptcy as a

"make work" opportunity. Unfortunately, the court is unable to identify more than one

meaningful contribution by the committee's counsel to the outcome of this case.” In re Sheehan

Mem. Hosp., 380 B.R. 299, 306-307 (Bankr. W.D.N.Y. 2007). Just as in Sheehan, the majority

of Blakeley’s services were make work and provided no benefit to the estate.

A. Blakeley Can Not be Compensated for Fees Relating to the Committee’s Disclosure Statement and Plan Because Such Services were Not Necessary or Reasonably Likely to Benefit to the Estate.

Plan and Disclosure Statement—Exhibit “1” Objection Code—“PLAN”—Amount $22,343.00 Amended Disclosure Statement and Plan—Exhibit “1” Objection Code—“APLAN”—Amount $12,844.50

Section 330(a)(4) of the Bankruptcy Code precludes Blakeley from recovering

any fees for the Committee’s Disclosure Statement and Plan and amended Disclosure Statement

and Amended Plan because the services were not reasonably likely to benefit the estate at the

time rendered. The Debtor objects to all fees in this project category in the amount of

$36,855.00 and to fees relating to the Disclosure Statement and Plan that were incorrectly

included in other project categories. (See Exhibit 1).

Blakeley is not entitled to any compensation for the Committee’s Plan and

Disclosure Statement because the Plan was unconfirmable on its fact. The district court in In re

Ahead Communs., Sys. reversed the bankruptcy court’s award of fees to debtor’s counsel for

services relating to the debtor’s plan and disclosure statement. In re Ahead Communs., Sys., 395

B.R. 512, 519 (D. Conn. 2008). The district court determined that the debtor’s counsel services


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preparing and filing a plan that debtor’s counsel reasonably should have known was not

confirmable, were not beneficial to the estate at the time rendered or reasonably likely to benefit

the estate. In re Ahead Communs., Sys., 395 B.R. 512, 519 (D. Conn. 2008), Rejecting

arguments that the plan could have been amended, the district court explained that

[amending the plan] does not cure the harm to the estate that flows from an award of attorney's fees for both the preparation of an obviously defective plan and the additional expense of negotiating a correction to its key provisions, i.e., those dealing with the claims of the only secured creditor and equity shareholder. These actions were directly against the interests of the estate and served only to benefit the officers of Ahead, who would be ensured a place in management unencumbered by accountability to the vote of the equity shareholder, and Zeisler itself, which would benefit from the award of fees at the expense of the estate's assets.

Id., see also and cases cited therein, In re Quigley Co., 500 B.R. 347 (Bankr. S.D.N.Y. 2013)

(“compensation should be denied then it is clear that the plan was unconfirmable at the time the

plan-related services were rendered” but allowing fees because the plan raised litigable issues

and was not unconfirmable on its face).

On February 21, 2014, Blakeley filed the Committee’s Disclosure Statement and

Plan. The Disclosure Statement and Plan were essentially boilerplate forms with a long

historical recitations repeated from other pleadings filed in the case. The Plan was

unconfirmable on its face. The Plan provided for payment in full on confirmation of over $3

million in claims ($1,258,400.79 of administrative claims and $886,364.74 in priority claims).

(See dkt. 601-1). Yet, as stated in the Disclosure Statement, the net funds from Avoidance

Action Litigation available to fund the Plan were only, $659,988.04—not enough to pay

administrative claims in full or provide any dividend to priority creditors. (See dkt. no. 601 at p.

28). Further, the Committee indicated in the Disclosure Statement that most of the Avoidance

Actions were already resolved and only a few remained pending. (See dkt. 601 at p. 22).


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Just as in In re Ahead Communs., Sys, the Committee’s Plan and Disclosure

Statement and resulting fees were directly against the interests of the estate in maximizing

distributions and served only to benefit Blakeley. The Plan provided for the Committee to take

over complete oversight of the Case as a Post-Confirmation Committee (“PCC”) and Blakeley to

be the exclusive counsel upon confirmation with no Court oversight as to its fees or expenses.

The Plan further provided for appointment of a disbursing agent to be compensated at a rate of

2% commission on disbursements. According to the Disclosure Statement, “given that the only

parties-in-interest going forward will be the general unsecured non-priority creditors, it is in the

Committee’s best interest to monitor the case and ensure that all remaining issues are resolved

efficiently, and that disbursements are made as soon as practicable.” (See dkt no. 601 at p. 48).

On the contrary, general unsecured non-priority creditors had no interests going forward as it

was clear that the estate did not have, and would never have, any funds to distribute to unsecured

creditors.

The Committee members had no reason or incentive to spend time and resources

as a PCC overseeing implementation of a liquidating plan that provided no distribution to

unsecured creditors.6 The only parties who would benefit from a Committee sponsored Plan was

Blakeley and the proposed liquidating trustee, both generating fees and commissions that would

deplete estate assets and reduce distributions to priority and administrative creditors.

The Disclosure Statement and Plan did not benefit the estate under the objective

test. No reasonable attorney would have spent time and estate funds preparing and filing an

unconfirmable Plan and Disclosure Statement and Plan for an administratively insolvent estate.

6 It is not clear whether the Committee ever authorized or directed Blakeley to prepare and file the Disclosure Statement and Plan or why the Committee would participate in such a Plan.


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Neither the Debtor nor the Second Secured Lenders were consulted or told that

the Committee intended on filing a plan and first learned of the Plan after it was filed. (Schael

Cert. at par 23-24). In response, Debtor’s Counsel questioned the reasons for filing a plan that

was unconfirmable on its face because the case was administratively insolvent. (See id.)

Blakeley claimed that it was filed as a “placeholder” because they were concerned that the

Office of the United States Trustee would file a motion to convert the case to chapter 7. (See id.)

If there was cause to convert the Case to chapter 7, merely putting an unconfirmable plan on the

docket was not going to defeat a motion to convert. No reasonable attorney would have spent

time and money filing an unconfirmable plan as a “placeholder” in an attempt to defeat a motion

to convert that had not even been filed.

After filing the Disclosure Statement and Plan, Blakeley never scheduled a

hearing on approval of the Disclosure Statement nor did anything else to pursue confirmation.

Merely filing a Disclosure Statement and Plan did not benefit the estate.

The month after filing the Disclosure Statement and Plan, Blakeley began billing

time for preparing an amended disclosure statement and amended plan. Over the next year,

Blakeley billed excessive hourly fees in the amount of $12,844.00 to prepare an amended

disclosure statement and amended plan. After billing the estate for over a year to prepare an

amended disclosure statement and amended plan, nothing was ever filed (or provided to the

Debtor).7 During that year, the Debtor’s financial status had not changed, the estate was still

administratively insolvent and would never be able to make any distributions to unsecured

7 With respect to the amended disclosure statement and amended plan and other pleadings never filed by Blakeley, the Debtor has never seen any of the work product to verify that the services were actually provided as required under section 330.


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creditors. Under the circumstances, no reasonable lawyer or law firm would have prepared an

amended disclosure statement and plan.

Even if Blakeley could prove some benefit to the estate relating to the filed

Disclosure Statement and Plan, Blakeley’s fees were excessive. Blakeley billed $22,343.00 in

fees to draft and file a boilerplate chapter 11 plan in a small case in which the only assets were

proceeds from avoidance actions. Matthew Grimshaw billed over fifty hours at $395.00 hour to

draft the boilerplate Disclosure Statement and Plan. At his billing rate and experience level, the

hours should have been a fraction of what was billed. During the time that Mr. Grimshaw was

preparing the Disclosure Statement and Plan, Mr. Grimshaw also billed $10,507.00 for 26.6

hours for reviewing claims and reconciling claims,8 yet the Disclosure Statement and Plan

included no analysis whatsoever of the anticipated amount of claims after objections or any other

claim information other than a list of administrative claims and tax claims obtainable from Rust

Omni’s website.

The Debtor requests that the Court disallow all of Blakeley’s fees under the

Disclosure Statement and Plan of Reorganization project category in the amount of $36,855.00

relating to the Committee’s Disclosure Statement and Plan. (See Exhibit 1).

B. Blakeley Can Not be Compensated for Fees Relating to Case Administration that were Not Necessary or Reasonably Likely to Benefit the Estate and Where the Fees for Such Services were Clearly Excessive.

Blakeley seeks compensation of $21,631.00 for services relating to case

administration. As set forth supra, Blakeley included a significant amount of uncompensable

hourly fees for Avoidance Action Litigation under the “Case Administration.” The Debtor’s

objects to Blakeley’s fees under case administration totaling $17,430.50 as set forth on Exhibit 8 The Debtor’s objections to the excessive amounts of time purportedly spent reviewing and reconciling claims by multiple Blakeley professionals is address infra.


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“1”, for fees that are not compensable, including, fees relating Avoidance Action Litigation

(“AA”), fees which appear were billed to the incorrect client (“IC”), duplicative services and

other objections. Blakeley’s fees under Case Administration must be further reduced for waived

fees ($488.00) (“W”), fees that should have been discounted ($177.00) (“D”). In addition,

Blakeley included $3,415.50 in fees for services relating to reviewing claims in this project

category and should be disallowed as addressed infra. After deducting the amounts objected to

the balance for Case Administration is $4,200.50.

The Debtor, not the Committee, is responsible for case administration. Debtor’s

Counsel seeks compensation of $17,640.00 for services relating to case administration during the

same time period. Blakeley’s fees for services relating to case administration should have been

minimal and certainly significantly less than Debtor’s Counsel. Blakeley’s compensable services

for case administration should be limited to services such as corresponding with Debtor’s

Counsel and the Office of the United States Trustee regarding status of the case, and reviewing

monthly operating reports filed by the Debtor. Any other services were not necessary to the

case administration or beneficial to the estate.

C. Blakeley Can Not be Compensated for Fees Relating to Claim Administration and Objections Because Such Services were Not Necessary or Reasonably Likely to Benefit to the Estate.

Administrative Claims Bar Date Motion—Exhibit “1” Objection Code—“ABM”—Amount $22,531.10 First Omnibus Objection to Duplicative Claims—Exhibit “1” Objection Code—“1st”—Amount $11,278.10 Motion for Claim Objection Procedures—Exhibit “1” Objection Code—“MCP”—Amount $6,607.00 Claim Review and Reconciliation—Exhibit “1” Objection Code—“CL”—Amount $25,152.50


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Blakeley seeks compensation in the amount of $71,362.00 under the project

category Claims Administration and Objections. Under this category, Blakeley billed the

following services: (i) preparing and filing an administrative bar date motion; (ii) preparing and

filing the Committee’s First Omnibus Objection to Claims; (iii) reviewing and reconciling

claims; (iv) drafting a motion for claim objections procedures that was never filed.

a. Claims Review and Reconciliation

Blakeley billed $25,152.50 in this project category and an additional $5,114.50 in

other project categories for a total of $30,267.00 for reviewing and reconciling claims.

Blakeley’s repeated review and reconciliation of claims over the course of fives years was

excessive and duplicative and did not benefit the estate. Blakeley’s claim review and analysis

did not benefit the estate because the information was not used for any motion or pleading

providing a benefit to the estate.9 Further, any review and reconciliation of claims provided no

benefit to unsecured creditors who would not receive any distribution regardless of how many

claims were analyzed, objected to and/or expunged.

Blakeley’s descriptions relating to claims review are generally vague and do not

permit meaningful review. As one court noted “[w]hen multiple timekeepers “review” and

“analyze” generic categories of documents for many days, it is incumbent upon them to

demonstrate, through sufficient specific descriptions, what each timekeeper is reviewing and

why.” In re GSC Group, Inc., 502 B.R. 673, 745 (Bankr. S.F.N.Y. 2013). In this case,

Blakeley’s review of claims by multiple professionals was not for many days, it was for years.

9 As set forth supra, Matthew Grimshaw billed extensive time reviewing and reconciling claims at the same time he was preparing the Committee’s Disclosure Statement and Plan, yet the exhibit of Non-Professional Claims attached as an exhibit to the Disclosure Statement included $1,258,400.79 in administrative claims, including claims by landlords and others (see dkt. no. 601-1, Exhibit 1) who had already been paid by the estate and whose claims were subsequently disallowed after the Debtor filed claim objections.


19

Blakeley’s services for reviewing and reconciling claims should not be compensated because

there was no benefit to the estate.

Even if Blakeley could meet its burden of showing benefit to the estate, the fees

were excessive. Blakeley’s fees for this project category were $71,362.00 as compared to the

Debtor’s Counsel fees in the same category of $69,825.00. Debtor’s Counsel reviewed and

analyzed all non-professional administrative, secured and priority claims; prepared and filed

seventeen (17) motions objecting to claims, including three omnibus objections (see dkt. nos.

661, 663, 664, 665, 666, 692, 693, 695, 699, 739, 742, 748, 749, 750, 751, 752, 753); to

negotiated, prepared and filed ten (10 stipulations and consent orders resolving objections (see

dkts., 716, 721, 722, 724, 734, 737, 763, 765, 766, 792), and prepared and filed thirteen orders

on claims motions (see dkt. nos. 681, 682, 683, 717, 718, 720, 767, 774, 775, 776, 777, 778,

779).

b. First Omnibus Objection to Claims

Blakeley seeks compensation in the amount of $11,278.10 for the Committee’s

First Omnibus Objection to Claims which provided no benefit to the estate, and resulted in the

duplication and additional work by the Debtor. In the Committee’s First Omnibus Objection

filed on February 19, 2014, the Committee objected to 29 duplicate claims filed by 23 creditors.

The First Omnibus Objection did not include all duplicate claims on the claims registry nor any

particular category. The claims objected to included administrative claims, priority claims,

secured claims and unsecured claims filed after Avoidance Actions under section 502(h).

Significantly, the order setting the bar date for filing administrative proofs of claim had not been

entered yet, so it was foreseeable that additional amended and duplicate claims would be filed.

Rather than benefiting the estate, the First Omnibus Objection resulted in the


20

additional work by the Debtor. Debtor’s Counsel had to review the order on the First Omnibus

Objection for duplicative claims that were already expunged and include additional duplicative

claims that were not included in the First Omnibus Objection in various other motions. (See e.g.

dkt. 664). Further, the Debtor had to file a motion to expunge duplicative administrative claims

that were filed subsequent to entry of the administrative claim bar date, two claims that could

have been included in the Committee’s First Omnibus Objection and multiple claims that were

released by the Committee in the Avoidance Action Litigation. (See dkt. no. 695-1).

To the extent that the First Omnibus Motion had any marginal benefit to the

estate, Blakeley’s fees are clearly excessive and must be reduced. Blakeley seeks $11,278.11 in

fees for the First Omnibus Objection. In contrast, Debtor’s Counsel billed the estate $1,400.00

for its Second Omnibus Objection objecting to duplicative claims.

c. Administrative Claim Bar Date Motion

The only service under this project category that arguably provided a benefit to

the estate was Blakeley’s Administrative Bar Date Motion. However, the Blakeley’s fees for this

motion were grossly excessive and must be reduced. Blakeley seeks $22,531.10 in fees for

preparing and filing a form motion to set a bar date to file administrative claims.

As set forth at length in the Schael Certification, there was no reason for the estate

to incur these excessive fees generated by Blakeley for an administrative bar date motion.

Blakeley contacted Debtor’s Counsel with respect to the Debtor filing the bar date motion and

indicated that it had a “good form” and would forward it to Debtor’s Counsel. Rather than

sending Debtor’s Counsel the “good form” motion that Blakeley claimed to have in June 2013,

Blakeley spent the next six months preparing and filing a bar date motion and billing the estate a

total of $22,531.00 in fees. Had Blakeley advised Debtor’s Counsel that it did not have a “good


21

form” motion as originally indicated, Debtor’s Counsel would have used one of its own form

motions and filed the motion at a minimal cost to the estate.

It appears from Blakeley’s time records that there were significant issues with

Blakeley not knowing the local procedures and rules of this Court because the professionals at

Blakeley working on this Case are not admitted in New York. The expenses for Blakeley’s

learning curve can not be imposed on the estate. Further, Blakeley has an attorney in New York

and could have consulted with him regarding the correct procedures.

Blakeley’s fees for filing a bar date motion must be reduced to reasonable

compensation. Had the Debtor’s Counsel filed the motion, the Debtor’s estimated fees for

preparing and filing a bar date motion would not have exceeded $2,000 (5 hours at $400).

D. Blakeley Can Not be Compensated for Fees Relating to Filing Retention Applications for Contingency Fee Work or Monthly Fee Statements for Contingency Work and its Fees for Preparing Monthly Fee Statements Must be Substantially Reduced.

Amended Retention Application—Exhibit “1” Objection Code—“ARA”—Amount $1,464.50 Modified Retention Application—Exhibit “1” Objection Code—“MRA”—Amount $2,766.00 Monthly Fee Statements—Exhibit “1” Objection Code—“MFS”—Amount $16,424.50

Blakeley requests compensation in the amount of $28,059.50 in the project

category of “Employment and Compensation of Committee’s Professionals” primarily for

preparing monthly fee statements, preparing its application to be retained by the Committee to

pursue Avoidance Action Litigation, and preparing its Modified Application with respect to its

employment in the Avoidance Action Litigation. The requested amount must be reduced by the

fees that Blakeley agreed to waive in the amount of $1,010.00 and fees that Blakeley agreed to

discount.


22

Blakeley’s time relating to preparing and filing an application to be retained

should not be compensated, because as with any professional seeking retention, the professional

can not paid for time prior to the effective date of an Order authorizing retention. Furthermore,

Blakeley was retained on a contingency fee basis, so none of its work relating to Avoidance

Action Litigation is compensable on an hourly basis, including its retention application or its

application to “clarify” the terms of its retention to include a contingency fee on waived

adversary claims.

Blakeley’s fees to prepare monthly fee statements is excessive and includes a

substantial amount of non-compensable time attributable to its contingency fees from Avoidance

Actions. For the reasons set forth supra, Blakeley cannot receive compensation on an hourly

basis for its contingency fee bills or status reports on adversary proceedings. Most of the time

entries under this project category are not segregated by the time spent on the contingency

portion of the monthly fees statements and the time spent on the hourly portion of the fee

statements so it is not possible to determine the amount attributable to Avoidance Action

Litigation.

Section 330(a)(6) of the Bankruptcy Code provides that “[a]ny compensation

awarded for the preparation of a fee application shall be based on the level and skill reasonably

required to prepare the application.” 11 U.S.C. § 330(a)(6). Time for reviewing, editing and

maintaining time records is not compensable. See In re 415 W. 150 LLC, 2013 Bankr. LEXIS

3552, 2013 WL 4603162, note 3 (Bankr. S.D.N.Y. 2013). Courts have considered the

percentage of time billed for preparing fee applications to the total time billed and found that the

typical range is 3-5%. See Id. In this case, even without deducting the time that Blakeley

improperly billed for services relating to Avoidance Action Litigation and other non-


23

compensable time, Blakeley’s fees for preparing fee and employment applications is over 16% of

the total requested compensation. The only substantive portion of the Monthly Fee Statements

for hourly work was a one page list in each Statement of activities performed during the time

period and a compilation of the fees and expenses. All other portions were repeated from prior

Statements or pertained to contingency fee work. The Debtor submits that the time for preparing

Statements must be reduced to less than 5% of the total fees requested ($168,696.50 * 5% =

$8,434) and then further reduced by at least 50% ($8,434 * 50% = $4,217) to account for the

portion attributable to contingency fees.

E. Blakeley Can Not be Compensated for Fees Relating to Motion to Pay Expenses of Committee Member.

Motion to Reimburse Committee Member—Exhibit “1” Objection Code

“GGP”—Amount $2,358.00

Blakeley billed fees for services in the total amount of $2,358.0010 relating to a

motion to get approval to pay GGP, a Committee Member, expenses in the amount of $871.61

for traveling to New York for an auction. According to the Motion, GGP’s attendance at the

auction was “reasonable and necessary in [the Committee] carrying out its fiduciary duties to

unsecured creditors of the Debtor” and that GGP’s participate “allowed the Committee to

meaningfully participate in the auction, with its counsel having real time client contact on

various issues that arose at the auction, which issues required almost immediate input from the

Committee.” (See dkt. 602). The Motion did not describe the various issues that required

“almost immediate input” or why in person client contact, as opposed to phone contact, was

required.

10 See Exhibit “1”—fees relating to the Motion appear in four different project categories.


24

Significantly, the Motion did not disclose that the Committee Member, GGP, was

one of the Debtor’s landlords under multiple leases that were to be auctioned and sold at the sale

in New York. While it was apparent that GGP traveled to the auction in New York to represent

its own business interests, rather than the Committee’s interests, the Debtor did not file an

objection to the Motion because the legal fees would exceed the amount requested in the Motion.

The Court should deny all fees relating to the Motion because the Motion did not

benefit the estate, it only benefited the one committee member who had its own business interest

in attending the auction. In addition, Blakeley’s fees were clearly excessive—more than double

the expense reimbursement requested in the Motion.

F. Blakeley Can Not be Compensated for Clerical Work Clerical Work—Objection Code—“CL”—Amount $8,409.00 Time for clerical services is not compensable. The list of Professionals providing

services in Blakeley’s Fee Application includes two “Paralegals” and five “Law Clerks.”11 One

of these “Law Clerks,” Sara Nasseri billed $7,036.50 for 27.4 hours of work at a rate of $165.00

per hour and 12.9 hours at a rate of $195.00.12 Sara Nasseri is Ronald Clifford’s secretary. (See

Schael Certification at par. 6 and Exhibit A). Blakeley’s Fee Application does not set forth any

education or experience that would qualify services provided by secretaries as paraprofessionals

or justifying a billing rate of $165.00 and $195.00 per hour. Further, the descriptions of Ms.

Nasseri’s services such as “Finalize Bar Date Motion and prepare for filing and service” could

include typing revisions and making copies for mailing service. Considering Ms. Nasseri is a

secretary and Blakeley billed over $22,500 to prepare and file the Bar Date Motion, it is unlikely 11 Blakeley’s First Application did not include any “Law Clerks” but it did include one “Paraprofessional,” Maryam Nouraei. (See dkt. 403 at p. 17). 12 Notably, this rate increase was not included in rate increase notice nor is it apparent when Blakeley increased her rate as her rate changed in the time records without respect to dates.


25

that Ms. Nasseri provided substantive work on the Bar Date Motion or any other aspect of the

Case.

The other “Law Clerks” likewise performed non-compensable clerical work, such

as scanning documents and preparing documents for service. Most of these services do not

describe what documents they are related to and given the lack of filings in the Case, they are

mostly attributable to Avoidance Action Litigation.

The Debtor objects to payment of Blakeley’s secretaries as paraprofessionals for

clerical work and submits that the Court should disallow all fees billed by “Law Clerks” in the

total amount of $8,409.00.

G. Blakeley Cannot Be Compensated for “Make Work” that Did Not Benefit the Estate.

Memorandum on MORs—Exhibit “1” Objection Code—“MMOR”—

Amount $3,835.00 Review of Accounts Receivable—Exhibit “1” Objection Code—

“AR”—Amount $1,058.50 a. Memoranda Summarizing Debtor’s Operating Reports

Blakeley seeks compensation for $3,835.00 in fees for time spent drafting

memoranda summarizing the Debtor’s monthly operating reports for January 2014 through July

2014. The Debtor does not object to time billed by the lead partner at Blakeley to review

monthly operating reports. However, the Debtor objects to time billed for preparing memoranda

summarizing monthly operating reports of a debtor that had no operations. The monthly

operating reports changed little from month to month, showing the same 3 - 4 reoccurring

monthly expenses and an occasional receipt of a payment from Blakeley for Avoidance Action

proceeds. There was nothing in the monthly operating reports that required analysis or multiple

memoranda. This “make work” did not benefit the estate.


26

To the extent that Blakeley could show that preparing memoranda summarizing

monthly operating reports was beneficial to the estate, the amount billed was excessive and not

reasonable. The monthly operating reports had no significant changes from month to month.

For comparison purposes, the Debtor billed the estate $800.00 to prepare a detailed list and

summary of all 58 monthly operating reports, including expenses, disbursements and receipts for

May 2013 through February 2018 (see Ashford Schael LLC First Interim Fee Application, dkt.

no. 797-1 at p. 20, 4/6/18).

b. Analyzing Accounts Receivable

Blakeley seeks compensation for $1,058.50 in fees for time spent reviewing the

Debtor’s accounts receivable long after the Debtor had fully liquidated all collectible receivables.

Again, this type of “make work” should not be compensated as it provided no benefit to the

estate.

H. Blakeley’s Fees Should be Reduced for Vague Descriptions and Categorical Lumped Time

Blakeley’s Second Application does not comply with certain of the Guidelines for

Fees and Disbursements for Professionals in Southern District of New York Bankruptcy Cases

dated June 24, 1991 and the Amended Guidelines for Fees and Disbursements for Professionals

in Southern District of New York Bankruptcy Cases effective February 5, 2013 (the

“Guidelines”). Specifically, the Debtor objects to the following:

Category Lumped Time (“CL”)—the Guidelines require time and service

entries to be reported under appropriate project categories. There was a significant amount of

time entries relating to different project categories lumped together in single entry rather than

split into applicable project categories resulting in additional work for Debtor’s counsel and

making review of the fee application more difficult for the Court.


27

Lumped Time (“L”)—the Guidelines require each service to have separate time

entry and not combined or lumped unless aggregate time is less than .5 hours. For the most part,

the Second Application does not have lumped time entries with the notable exception of the

clerical “Law Clerks”.

Vague Descriptions (“VD”)—the Guidelines require time entries for telephone

calls, letters and other communications to given enough detail to identify the parties and nature

of the communication. The guidelines also require time entries for court hearings and

conferences to identify the subject to the hearing or conference. Blakeley’s Second Application

includes vague descriptions, particular for non-compensable services relating to Avoidance

Action Litigation. For the most part, the Debtor was able to determine which of these time

entries with vague descriptions were related to Avoidance Action Litigation because either the

referenced communication was with Debtor’s Counsel or no other hearings were scheduled in

the Bankruptcy Case. However, the lack of proper descriptions warrants an overall reduction in

fees.

III. BLAKELEY’S CONTINGENCY FEES FOR AVOIDANCE ACTION LITIGATION SHOULD BE REDUCED.

Section 328(a) of the Bankruptcy Code allows employment of a professional

person “on any reasonable terms and conditions of employment,” including hourly and

contingency fee basis. However, section 328(a) of the Bankruptcy Code permits the Court to

“allow compensation different from the compensation provided under such terms and conditions

after the conclusion of such employment, if such terms and conditions prove to have been

improvident in light of developments not capable of being anticipated at the time of the fixing of

such terms and conditions.”


28

A. Blakeley’s Settlements for Invalid Waivers

The consideration for the Committee’s settlement of three of the avoidance

actions included administrative expenses claim waivers in the total amount of $124,815.92.

Simon Properties—release of $81,497.67 administrative rent claim

Dolan Group—release of $28,646.25 section 503(b)(9) claim—POC 18

Rosenthal/Mindy Candy—release of $14,672 section 503(b)(9) claim—POC 84

As set forth at length in the Schael Certification, the Debtor verified that the

claims waived in the Simon Property Settlement had been paid by the Debtor. Debtor’s Counsel

sent repeated emails to Blakeley requesting an explanation of the Committee’s analysis of the

consideration under the Simon Properties Settlement. To date, Blakeley has never responded.

Absent a plausible explanation, Blakeley’s contingency fees should be reduced and Blakeley

should be ordered to disgorge fees to compensate the estate for the settlement value in the

amount of $81,497.67 that the estate never received.

With respect to the claims in the Dolan Group Settlement and the Mindy

Settlement, the Debtor has no records that the goods were ever delivered to the Debtor to support

the validity of those claims. To the extent the Committee obtained proof of delivery for these

claims during discovery, the Committee should provide it to the Debtor. If the Committee

cannot show that the claims were valid and enforceable, Blakeley’s contingency fees should be

reduced to compensate the estate for the settlement value in the amount of $43,318.25 that the

estate never received.

Between the Simon Settlement and the Dolan Settlement, the estate did not

receive $110,143.92 of bargained for consideration to the detriment of creditors. Unless

Blakeley can show that the waived claims were valid and enforceable against the estate, Blakeley


29

should be required to disgorge $110,143.92 of the contingency fees that it retained from the

proceeds of the Avoidance Action Litigation to compensate the estate for this loss.

Blakeley’s contingency fees should also be reduced by the amount that Debtor’s

Counsel’s fees increased as a result of Blakeley failing to provide information and properly

account for proceeds from the Avoidance Action Litigation, including the Debtor’s fees to file a

motion to compel an accounting from Blakeley.

CONCLUSION

For the foregoing reasons, the Debtor respectfully requests that the Court reduce

Blakeley’s requested compensation in the amounts and for the reasons set forth herein and grant

such other and further relief as the Court deems appropriate.

Dated: July 3, 2018 ASHFORD SCHAEL LLC Counsel for the Debtor and Debtor in Possession /s/ Courtney A. Schael By: Courtney A. Schael, Esq. (CS-1295) 100 Quimby Street, Suite 1 Westfield, New Jersey 07090 (908) 232-5566 (908) 728-3113 fax [email protected]


A S H F O R D - S C H A E L L L CCourtney A. Schael, Esq. (CS-1295)100 Quimby Street, Suite 1Westfield,NJ 07090(908) 232-5566(908) 728-3113 telecopyCounsel for the Debtor and Debtor in Possession

U N I T E D S TAT E S B A N K R U P T C Y C O U R TS O U T H E R N D I S T R I C T O F N E W Y O R K

In re: Chapter 11

METROPARK USA, INC., Case No. 11-22866 (RDD)

D e b t o r .

C E R T I F I C AT I O N O F C O U R T N E Y A . S C H A E L I N S U P P O R T O FD E B T O R ' S O B J E C T I O N T O S E C O N D A P P L I C AT I O N O F

BLAKELEY LLP, COUNSEL TO THE OFFICIAL COMMITTEE OFUNSECURED CREDITORS, FOR COMPENSATION AND

R E I M B U R S E M E N T O F E X P E N S E S

I, Courtney A. Schael, of full age, hereby certifies to the Court as follows:

1. I am an attorney admitted to practice in the State of New York and the

sole member of Ashford Schael LLC, counsel for Debtor, Metropark USA, Inc., in this

bankruptcy case.

2. I make this certification in support of the Debtor's Objection to Second

Application of Blakeley LLP, Counsel to the Official Committee of Unsecured Creditors, for

Compensation and Reimbursement of Expenses based on firsthand knowledge and the review of

documents maintained in the ordinary course of business.

11-22866-rdd Doc 805-1 Filed 07/03/18 Entered 07/03/18 17:36:55 Certification in Support of Opposition Pg 1 of 33

3. Ashford - Schael LLC was retained effective January 14, 2013 to

substitute for Cooley LLP as counsel for the Debtor. At that time, the Debtor had already

liquidated substantially all of the Debtor's assets and the Debtor believed that substituting

Ashford - Schael LLC as counsel for Cooley LLP to wind-down the affairs of the Debtor and

conclude the Case would be more cost effective for the estate and maximize the estate's assets

for the benefit of creditors. (See Debtor's Application for Entry of Order Pursuant to Bankruptcy

Code Sections 327(a) and 328 and Bankruptcy Rules 2014 and 2016 Authorizing Employment

and Retention of Ashford-Schael LLC as Counsel for the Debtor, Authorizing Substitution of

Ashford-Schael LLC for Cooley LLP as Counsel for the Debtor and Related Relief (docket no.

427).

4. Just prior to Ashford - Schael LLC's retention, the Debtor, the Committee

and its Second Secured Lien Lenders* entered into a Stipulation Regarding Global Resolution of

Open Issues Between Debtor, Second Lien Lenders and Committee ("Global Stipulation")

approved by the Court by Order entered on January 18, 2013, docket no. 443 (the "Global

Order"). The Global Stipulation provided that the Committee would prosecute all Chapter 5

claims of the estate and that Blakeley & Blakeley LLP ("Blakeley" or "Committee Counsel")

would act as counsel for the Committee to pursue the Chapter 5 claims.

A . B i a k e l e v ' s R e t e n t i o n a n d F e e S t r u c t u r e

5. On February 25, 2013, Blakeley filed an amended application to modify

its employment terms (the "Amended Retention Application") (dkt. no. 445). The Amended

Retention Application sought modification of the terms of Blakeley's employment to include

' As defined in the Amended Motion for an Order Approving Stipulation Regarding Global Resolution of OpenIssues Between the Debtor, Second Lien Lenders and Committee Pursuant to Rule 9019 of the Federal Rules ofBankruptcy Procedure, Including Authorization to Obtain Post-petition Financing From Second Lien Lender andRetention of Replacement Counsel ("Motion for Approval of Global Resolution"), docket no. 426.

2


prosecution and collection of avoidance claims (the "Avoidance Action Litigation"). The

Amended Retention Application provided that Blakeley would be paid a contingency fee only on

proceeds from the Avoidance Action Litigation with no provisions for hourly compensation. On

May 2, 2013, the Court entered an Order approving the Amended Retention Application and

compensation on a contingency fee basis (the "Amended Retention Order") (dkt. no. 538).

B . A c c e s s t o D e b t o r ' s S e r v e r s a n d F i n a n c i a l I n f o r m a t i o n

6. During the course its prosecution of Avoidance Action Litigation, Ronald

Clifford, Esq. of Blakeley sent me an email requesting that his assistant, Sara Nasseri, have

direct access to the Debtor to obtain documents because the document requests were more

administrative in nature. (See email dated April 10, 2013 attached hereto as Exhibit A).

Blakeley subsequently requested access to the Debtor's computer servers. The Debtor and

Committee entered into a confidentiality agreement and the Debtor provided Blakeley with two

computer servers and documents. (See Exhibit A, email dated October 11,2017).

C . A m e n d e d R e t e n t i o n A p p l i c a t i o n a n d S e t t l e m e n t s

7. On November 11, 2013, Blakeley filed an Application for Order

Clarifying the Terms of the Court's Order Authorizing the Official Committee of Unsecured

Creditors of Metropark USA, Inc. to Modify the Employment Terms of Blakeley & Blakeley,

LLP Entered May 2, 2013 and if Necesseiry, Further Modifying the Employment Terms of

Blakeley & Blakeley, LLP (the "Modification Application") (dkt. no. 574). In the Modification

Application, Blakeley asserted that the Amended Retention Order contemplated that Blakeley

would be paid a contingency fee on funds the estate saved as a result of obtaining administrative

claim waivers and/or waiver of unsecured claims in the Avoidance Action Litigation. To the

extent that the Amended Retention Order did not provide for these additional contingency fees,

3


Blakeley sought to amend its retention to change the terms of its contingency fee arrangement.

According to the Modification Application, the Committee agreed to the terms set forth in the

Modification Application.

a. Simon Propert ies Sett lement

8. On or about October 15, 2013, I contacted Blakeley regarding the

Debtor's objection to the Modification Application because the proposed terms were not part of

the original agreement for Blakeley's retention. I had also been contacted by Counsel for the

Second Lien Lenders about their objections to the Modification Application. Blakeley told me

that the Modification Application was to address a settlement of avoidance actions against one of

the Debtor's landlords, Simon Properties. Under the terms of the settlement, Simon Properties

would waive its administrative claims as consideration for settling the avoidance action with no

additional payment from Simon Properties (the "Simon Properties Settlemenf). Blakeley told

me that Simon Properties had clear administrative claims. Blakeley wanted a contingency fee on

the amount of distributions Simon Properties would receive had the administrative claims not

been waived. The Debtor agreed to entry of an order allowing Blakeley to be paid a contingency

fee solely with respect to Simon Properties Settlement. {See emails attached hereto as Exhibit

B). Blakeley submitted a proposed Order on the Modification Application limiting the relief as

per its agreement with the Debtor which was entered by the Court on November 7, 2013. (See

dkt. no. 580).

9. At that time, I had no reason to question Blakeley's representation that

Simon Properties had clear administrative claims that were being waived as fair consideration for

the settlement. Blakeley had complete access to documents from the Debtor, two of the Debtor's

computer servers and discovery during litigation. Further, one of the Debtor's landlords. General

4


Growth Properties ("GGP") was a member of the Committee and had also filed administrative

rent claims against the Debtor. Finally, the Committee had sole authority to settle any

Avoidance Action Litigation without Court approval for amounts less than $500,000 and without

approval of the Second Secured Lien Lenders for amounts less than $250,000. {See Global

Stipulation, dkt. no. 426, p. 17).

10. In the process of preparing objections to claims, the Debtor reviewed all

administrative Proofs of Claim to confirm that the claims were not paid, that goods were

received and other factors relevant to objections. Based on that review, I determined that the

Debtor had paid post-petition rent to landlords, including to landlords whose leases that were

rejected. Those payments included payment of post-petition rent to Simon Properties for the

administrative claims waived Simon Properties in consideration of the Simon Properties

S e t t l e m e n t .

11. On December 19, 2017, the Debtor filed its Third Omnibus Objection to

administrative claims filed by the Debtor's landlords. The Third Omnibus Objection included

objections to thirteen administrative claims filed by landlords for administrative rent of over

$525,000.00 which had already been paid by the Debtor. (See dkt. no. 742). Notably, in the

Third Omnibus Objection, the Debtor objected to multiple administrative rent claims filed by

Committee Member GGP. GGP did not oppose the Motion.

12. Upon determining that all administrative rent claims were paid, I

contacted Blakeley regarding the Simon Properties settlement and the value that the Committee

attributed to the waived administrative claims. Despite multiple follow-up communications to

Blakeley regarding this issue, to date, Blakeley has never responded.

^ On February 25, 2014, Blakeley billed the estate $118.50 for time to "Analyze issues regarding GGPAdministrative claim (.1); email exchange regarding same (.2)".

5


b . D o l a n S e t t l e m e n t

13. On or about February 4, 2014,1 received an email from Bradley Blakeley,

Esq. of Blakeley, outlining the terms of a proposed settlement of an avoidance action against the

Dolan Group (the "Dolan Settlement"). {See email dated February 4, 2014 attached hereto as

Exhibit C). The Dolan Settlement included Dolan waiving an administrative claim under

section 503(b)(9) of the Bankruptcy Code in the amount of $28,646.25 and additional

consideration which Blakeley valued at 61% of the net preference after application of new value.

The purpose of the email was to request the Debtor's consent to Blakeley being paid an

additional thirty percent contingency fee on the amount of the waived administrative claim. The

Debtor did not consent to Blakeley receiving a contingency fee on the administrative claims

waived.

14. During the preparation of objections to administrative claims, the Debtor

determined that $27,400.00 of the Dolan administrative claim was presumptively invalid. (See

Motion Objecting to Dolan Group Claim, dkt. no. 691). Neither Dolan's administrative Proof of

Claim nor its Request for Payment of Administrative Expense (dkt. no. 95) included any

documents proving that goods valued at $27,400 were actually delivered to the Debtor as

required xmder section 503(b)(9) of the Bankruptcy Code. According to the Debtor's records,

Dolan only delivered $1,196.25 in goods during the twenty days prior to the Petition Date and

the balance of Dolan's administrative claim under section 503(b)(9) of the Bankruptcy Code in

the amount of $27,450.00 was presumptively invalid because the goods were never delivered."

^ This Motion and accompanying Certification were filed but the Debtor later withdrew the Motionbecause the administrative claims had already been waived by the Committee. (See dkt. no. 691 and May5, 2017 docket notation).

Blakeley may have obtained documents during discovery proving deliveiy of the goods, however, theDebtor's records do not reflect that the goods were received.

6


(See dkt. no. 691-3-Certification of Rick Hicks).

c. Mindly Candy Settlement

15 . The Deb to r a l so rev iewed admin is t ra t i ve c la ims tha t were wa ived as

consideration in settlement by the Committee of an adversary proceedmg against Mindy Candy

Inc. (the "Mindy Settlement"). The Mindy Settlement involved six adversary proceedings

against multiple parties. The consideration for the Mindy Settlement included a cash payment of

$53,000, a waiver of administrative Proof of Claim no. 84 in the amount of $14,672.00 and

waivers of other claims.

16. Mindy's Proof of Claim no. 84 did not include any documents proving

that goods valued at $14,672.00 were actually delivered to the Debtor as required under section

503(b)(9) of the Bankruptcy Code. According to the Debtor's records, Mindy never delivered

$14,672.00 in goods during the twenty days prior to the Petition Date and Mindy's

administrative claim under section 503(b)(9) of the Bankruptcy Code in the amount of

$27,450.00 was presumptively invalid because the goods were never delivered.

D. Blakeley's Hourly Billing and Related Issues

17. On June 5, 2013, Ronald Clifford, Esq. of Blakeley contacted the Debtor's

Counsel regarding filing a motion to set a bar date for filing administrative claims. (See emails

dated June 2013 attached hereto as Exhibit D). He indicated that he had "a good form" motion

that he could forward to me for filing. I told Mr. Clifford to send me the form motion and that

the Debtor would file it. On June 24, 3013,1 received an email from Matthew Grimshaw, Esq.

of Blakeley regarding the status of filing an administrative bar date motion. I responded that I

had not yet received a response from Ronald Clifford and the form motion. (See id.)

^ Blakeley may have obtained documents during discovery proving delivery of the goods, however, theDebtor's records do not reflect that the goods were received.


18. On January 24, 2014, I received an email from Ronald Clifford with

attached proposed bar date pleadings. (See emails dated January 24, 2014 attached hereto as

Exhibit E). Because Blakeley had not yet filed its monthly fee statement, I was not aware at that

time that Blakeley had billed excessive amounts of fees to prepare this "form motion" that

Ronald Clifford, Esq. told me he already had in June 2013. Had Ronald Clifford, Esq. advised

me that he did not already have a form motion complying with the Local Rules of Bankruptcy

Court for the Southern District of New York as he previously represented, I would have used one

of Ashford Schael LLC's form motions and filed the bar date motion at a fraction of the cost

charged by Blakeley.

19. On February 2, 2014, Blakeley requested permission to speak to the

Debtor directly to obtain declarations from the Debtor in support of claim objections. I was

never informed that Blakeley was preparing claim objections nor did I expect Blakeley to be

preparing claim objections because such objections would have not benefit Blakeley's client, the

Committee, who represented the interests of general unsecured creditors. Further, any claim

objections were premature. The bar date for filing administrative claims had not been set and

there was no reason to prepare objections to priority claims until Blakeley completed the

Avoidance Action Litigation and the Debtor determined if there were sufficient funds to pay

administrative claims in full and make a partial distribution to priority creditors.

^ The pleadings provided that the motion would be filed jointly by the Debtor and the Committee.Although I responded to the Committee, the Committee then modified the motion so that it was filedsolely by the Committee.' The Debtor had previously denied Blakeley's request for direct contact with the Debtor to executedeclarations with respect to Avoidance Action Litigation and only agreed to Blakeley's limited request tohave Mr. Clifford's assistant contact the Debtor directly for documents relating to the Avoidance ActionLitigation.

8


20. Two weeks later, on February 14, 2014, Blakeley filed the Committee's

First Omnibus Objection to Claims seeking to expunge and disallow duplicative proofs of claim.

(See dkt, no. 594, as amended by dkt. no. 597).

21. On February 18, 2014, in response to Blakeley's request for authorization

to contact the Debtor directly, I sent Blakeley an extensive email regarding Blakeley's failure to

comply with its reporting obligations under the Global Stipulation, failure to timely remit

proceeds from Avoidance Action Litigation to the estate, filing the First Omnibus Objection to

Claims and references in the First Omnibus Objection to Claims that Blakeley was filing a

disclosure statement and plan and authority for Blakeley to be paid for such services. Up until

that date, Blakely had filed only one monthly fee statement for the period of November 1, 2012

through May 3, 2013 with hourly fees in the amount of $13,075.50.

22. On or about February 21, 2014, several days after the Debtor raised issues

regarding Blakeley's hourly fees, Blakeley filed its second monthly fee statement for services

from May 6, 2013 through February 16, 2014 for $65,91.450 in hourly fees (the "Second

Monthly Fee Statement"). On February 21, 2014, the Committee also filed a Disclosure

Statement and Plan.

23. After reviewing the Second Monthly Fee Statement and Disclosure

Statement and Plan, on February 21, 2014,1 sent an email to Blakeley questioning its filing a

disclosure statement and plan for an estate that was administratively insolvent. The Committee

never advised the Debtor or the Second Secured Lenders that it was filing a disclosure statement

or plan, nor sought any input from the Debtor or the Second Secured Lenders. I also addressed

the fact that Blakeley's fee statement improperly included hourly billing for fees relating to the

Avoidance Action Litigation and the hourly fees associated with other activities was excessive


considering the size of the estate. I also requested that Blakeiey remove charges from its fee

statement relating to Avoidance Action Litigation. (See email dated February 21, 2014 attached

hereto as Exhibit F). Blakeiey did not reduce its monthly fee statement in response to my

request.

24. In response to my concerns about filing a Plan that was unconfirmable on

its face, Blakeiey told me that it filed the Plan as a "placeholder" because Blakeiey v^as

concerned that the Office of the United States Trustee would filed a motion to convert the Case

to chapter 7.

25. Notwithstanding my multiple communications to Blakeiey, in and before

February 2014, regarding Blakeiey's hourly fees, the futility of preparing and filing an

unconfirmable Plan and Disclosure Statement and other issues, Blakeiey continued to bill the

estate hourly for services that did not benefit to the estate. Blakeley's next monthly fee

statement for the time period from February 17, 2014 through July 13, 2014 included $44,076.00

in hourly billings, including $31,836 for work on an amended disclosure statement and plan,

reviewing claims and claims objections. (See dkt. no. 625).

26. I continued throughout the Case, to communicate the Debtor's concerns

regarding Blakeley's hourly fees. For example, on January 15, 2016, the Debtor raised issues

regarding Blakeley's monthly fee statement including that a significant portion of the hourly fees

were attributable to Avoidance Action Litigation and that the Committee was not authorized to

do work beyond pursuing adversary proceedings so there should not be hourly billing. (See

email dated January 15, 2016 attached hereto as Exhibit GV In response, Blakeiey agreed to

remove $3,786.00 from its billing statement. Blakeiey further indicated that it was permitted to

continue to bill hourly under its original retention order because it was not employed solely to

1 0


prosecute adversary proceedings and continued to represent the Committee.

E. Accounting of Avoidance Action Proceeds and Related Issues

27. On or about June 17, 2015, I requested that Blakeley remit all proceeds

from Avoidance Actions and provide a detailed accounting of collections, fees and expenses. I

also requested that Blakeley provide a list of administrative claims resolved or settled as part of

the avoidance actions. The Debtor expected that Blakely would already have this information as

part of its ongoing tracking of the Avoidance Action Litigation and settlements, particularly

when these administrative claim waivers were the consideration for various sett lements. In

response, Blakely indicated that they "are still creating a spreadsheet."

28. In April 2016,1 sent a series of emails to Blakeley regarding the financial

status of the estate, requesting a final accounting and remittance of proceeds to the Debtor.

29. It was not until July 2016 that Blakeley remitted all of the Avoidance

Action proceeds to the Debtor and provided a "final accounting" which was an incomplete

quickbooks report. {See emails dated July 19, 2016 attached hereto as Exhibit ED. In response,

the Debtor requested detailed information regarding Blakeley's accounting for Avoidance Action

Proceeds, its fees and expenses. The Debtor also again raised the issue of Blakeley's fees for

hourly work. While the Debtor acknowledged that responding to creditor's inquiries could

reasonably be billed outside of the contingency fee agreement, the Debtor stated that once again

indicated that Blakeley should not be charging fees of more than a few thousand dollars for

hourly work. In response, Blakeley stated that all fees and expenses were accounted for in

filings on the docket and never responded to the Debtor's specific questions about items on the

accounting or provided any additional information. (See Exhibit H).


30, Over the course of the next several months, I sent multiple emails to

Blakeley requesting various documents and information regarding the Avoidance Action

Litigation that the Debtor needed to complete claim objections and wind down the estate,

including copies of the settlement agreement and a list of default judgments. I also requested

specific quantitative information regardmg the Avoidance Action Litigation to understand

Blakeley's final "accounting" which should have been already prepared and available to

Blakeley in its tracking of Avoidance Action Litigation. I also requested specific information

regarding tax claims that Ronald Clifford, Esq. stated in an email that he believed were resolved

in the 9019 process. It was not until March 16, 2017 that Blakeley sent me copies of the

settlement agreements. Blakeley never sent me a list of default judgments, details on the final

accounting or other information that I requested.

31. I certify that the foregoing statements made by me are true. I am aware

that if any statements are willfully false, I am subject to punishment.

J u l y 2 , 2 0 1 8 / s / C o u r t n e y A . S c h a e lCourtney A. Schael, Esq.

1 2


E X H I B I T A


From: Ron Clifford [email protected] SSubject: Metropark USA, Inc.

Date: April 10.2013 at 1:54 PMTo: [email protected]: Scott Blakeley [email protected]

Courtney:

We are in need of some documents for the preference actions as listed below. Given that thedocument requests are more administrative in nature, I propose that I have my assistant, Sara Nasseri,who is dealing with the compilation of the documents, contact Rick Hicks directly, while copying us onthe communications, so that it frees us of the burden of playing the middle persons. Thoughts?

We need copies of the following check numbers showing they cleared the debtor's account (cancelledcheck copies):

Towson TC: 73943, 74194, 75179Galleria at Tyler: 74195, 75189Shoppes at La Cantera: 74041, 74611, 75188Perimeter iVIall: 73904, 74008, 75176Stonestown Galleria: 74190, 75180Supreme International: 74702,74828Mek Denim: 74450KC New York: 74453U n i o n : 7 4 4 6 9

7 D i a m o n d s : 7 4 4 6 2Velvet: 74479, 74673, 74865J.T. Design (Eight Sixty): 74445, 74688, 74959Akiko: 73997, 74454, 74890International Nation: no check # listed - only "CCNATIONPPDINV"Urgent Gear: 74889Alderwood Mall: 74160, 75182Beachwood: 74011, 75175Bridgewater Commons: 74166, 75187GGP-Tucson: 74038, 75184Kenwood IVIall: 74027, 75181Northbrook Court: 74181, 75185GGP Ala Moana: 74028, 75183GGP/Homart II: 74176, 75190Latique Handbags & Accessories: 74478Gala, Inc.: 74199, 74209The Original Cult: 73890, 74056, 74153,74154

We need the bank statements for the DIP account through August 2011, and the January 2011 banks t a t e m e n t s .

We need a list of items that were returned to vendors during the 90 days preceding the petition date.


From: Ron Clifford [email protected] ^Subject: Re; In re Metropark, Case no. 11-22866

Date: October 11. 2017 at 2:58 PMTo: Courtney Schael [email protected]

Ms. Schael; I have 10 banker's boxes of documents and 2 servers that all belong to Metropark. We used them for the preferencelitigation. Can you tell me where I should ship those documents and servers back to? They were sent back in 2012 by Rick, butnot sure where the records are being stored now.

Ronald A. Clifford, Esq.P a r t n e r

Blakeley LLP18500 Von Kamnan Ave, 5th Floor I Irvine, California 92612Direct: (949) 260-0616 I General; (949) 260-0611 I Cell; (949) 533-9774RCIi [email protected] I www.BlakelevLLP.com I Blakelev LLP BloaOrange Countv I Los Angelas I New York I Delaware

UnkedQIprofieAdmitted Only in CaliforniaThe preceding e-mail message is subject to Blakeley LLP's E-mail Policy which can be foundatht tD; / /www.blakelev l lp .com/emai lPol icv.Dhp

On May 10, 2017, at 12:41 PM, Courtney Schael <[email protected]> wrote:

Dear Counsel:

Please see attached Motion filed today Hard copies will also be served by mail today

<METROPARK Motion docket nos 700 and 701.pdf>

Courtney A. Schael, Esq.A S H F O R D - S C H A E L L L C5 1 1 S u m m i t A v e n u e

Westfield, NJ 07090- a n d -

100 Quimby Street, Suite 1Westfield, NJ 07090

(908) 232-5566 main(908) 255-0462 direct(908) 728-3113 faxw w w. A s h f o r d N J L a u / . c o m

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Ronald A. Clifford, Esq.Blaketey Blafeeleyur2 Park Plaza, Suite 4001 Irvine, California 92614Direct: (949) 260-06161 General: (949) 260-06111 Cell: (949) [email protected] | vyww.BlakelevLLP.com | B&B BlogOrange County | Los Angeles | San Francisco | New York | Delaware

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E X H I B I T B


From: Courtney A. Schael [email protected]: Re: Metropark/True Religion/Settlement Agreement

Date: October 30, 2013 at 9:56 AMTo: Matthew Grtmshaw [email protected]: [email protected], Mehgan Rogers [email protected]

The Order is fine. Based on your agreement to submit the Order and limit the relief on the application to the Order, I will not filean objection.

Thank you.

Courtney

Courtney A. Schael, Esq.ASHFORD - SCHAEL LLC5 1 1 S u m m i t A v e n u e

W e s t fi e l d . N J 0 7 0 9 0-and -

1 3 7 1 M o r r i s A v e n u e

(908) 232-5566 main(909) 2^5-0462 direct(908) 728-3113 faxw w w . A s h f o r d N J L a w . c o m

CONFIDENTIALITY NOTICE: This e-mail and any attachment(s) to it, contain information that is privileged and confidential,intended for use only by the person or entity to whom it is addressed. If you are not the intended recipient, you are prohibitedfrom reading, copying, distributing or otherwise using this information. If you have received this e-mail in en-or, please contact usimmediately and delete this e-mail and all attachments from your system

On Oct 29, 2013, at 8:16 PM, "Matthew Grimshaw" <[email protected]> wrote:

Courtney:I tried reaching you by phone earlier today but was unsuccessful. Attached is a draft order that limitsthe claim waiver compensation to the case we discussed. If you have questions or comments, thenplease let me know.

Regards,M a t tM a t t h e w W. G r i m s h a w

<image001.jpg>2 Park Plaza, Suite 400 | Irvine, California 92614Direct: (949) 260-0618 | General: (949) 260-0611

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From: Bradley Blakeley rmailto:[email protected]: Tuesday, October 29, 2013 11:15 AMTo: 'Courtney Schael, Esq.'Subject: RE: Metropark/True Religion/Settlement Agreement

We will get back to you shortly.


Bradley D. Blakeley<image002.jpg>2 Park Plaza, Suite 4001 Irvine, California 92614Direct: (949) 260-06141 General: (949) [email protected] | wvm.BlakelevLLP.com 1 B&B BlogOrange County | Los Angeles | New York | Delaware

From: Courtney Schael, Esq. rmailto:[email protected]: Tuesday, October 29, 2013 9:35 AMTo: Bradley BlakeleyCc; Mayerson, Sandra E.; Clifford Ron; Rogers MehganSubject: Re: Metropark/True Religion/Settlement Agreement

I have not been able to reach Sandra.

With respect to your amended retention application, the retention agreement did mot provide foryour firm to get a contingency fee on waivers of admin claims. However, I have no objection ifyou limit the contingency fee to the one case that we discussed involving a landlord waiving aclear $60,000 admin claim. You said you were not aware of any other adversary proceedingswith this issue.

Please advise if you're willing to submit a modified order limiting the contingency onadministrative claims to that one case so that I don't need to file an objection today.

Thank you.

Courtney

Courtney A. Schael, Esq.A S H F O R D - S C H A E L L L C511 Summit AvenueW e s t fi e l d N J 0 7 0 9 0

-and -1371 Morr is AvenueU n i o n . N J 0 7 0 8 3

r908^ 232-5566 main

(908) 255-0462 directr908^ 728-3113 faxw w w . A s h f o r d N J L a w . c o m

CONFIDENTIALITY NOTICE: This e-mail and any attachment(s) to it, contain informationthat is privileged and confidential, intended for use only by the person or entity to whom it isaddressed. If you are not the intended recipient, you are prohibited from reading, copying,distributing or otherwise using this information. If you have received this e-mail in error, pleasecontact us immediately and delete this e-mail and all attachments from your system.


E X H I B I T C


From: Bradley Blakeley [email protected]: Metropark/Dolan Group/proposed settlement

Date: February 4. 2014 at 1 ;21 PMTo: Courtney Schael cschael@ashfordnjIaw,com

Courtney:

We have reached a settlement with Dolan Group, Inc. that we need your approval on as it involvesa waiver of an administrative claim and the payment of related contingency fees. We filed suitagainst Dolan to recover six transfers totaling $169,525.55. Dolan has a new value defense of$64,816.50. Our ordinary course analysis shows a tight range of 45 to 63 days to pay, with anaverage of 53 v. 51 for the historical average. However, we have emails that evidence unusualcollection activity throughout the period that undermine their defense.

Dolan has agreed to settle for cash payment of $3 5k, plus waiver of its admin claim of$28,646.25, balance of general unsecured claim of $36,170.25 and its 502(h) replacement claimof $3 5 k. Assuming 100% distribution to admin claimants, the settlement represents 61% of thenet preference after application of new value but before application of their ordinary coursedefense.

In addition to the contingency fee on the cash payment, we request that B&B be paid its 30%contingency-fee on the value admin claim.

Regards,

B r a d

B r a d l e y D . B l a k e l e y ,r

Blakeley | Blakeleyu2 Park Plaza, Suite 4001 Irvine, California 92614Direct: (949) 260-0614 | General: (949) [email protected] | www.BlakelevLLP.com | B&B BlogOrange Countv | Los Angeles | New York | Delaware

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E X H I B I T D


From: [email protected] SSubject: Re: Metropark USA, Inc.

Date: June 24,2013 at 2:41 PMTo: Matthew Grimshaw [email protected]: Ron Clifford [email protected], [email protected]

No. See my email attached in response to Ron's email regarding a bar date motion. I never received a response.

Courtney

Courtney A. Schael <csdiae(@asMoRtnpaMrxoni>To: Ron CWNmi 4clfllord9b{akeis^pxofn>Cc SootI Blakelfly <seb€^bttkelByllpucanfi>Ra: MeCropflik USA, tn&

June 5. 2013 11:25 PM

Thaftffaw, please foiwanflfie form and iwtOtalcocaro Of It Was ttiece a bar data onler for other proofs ddalm?

In addtion. kinder oonfinn that you will add language ctari ng your order on adv proceedhga^ i dont want the securedlendeiB to somehow constnie this Issue as a breach underthe DIP Note or Setttofnenl and I nota the hearing la scheduledfor Friday.

Courtney

SentfremmylPad

O n J u n S , 2 0 1 3 . a t 2 3 0 8 P M . - R o n C f i B o r d ' « T o t e :

Ms. Schael: We need an administrative expense bar ctete to fix 503(b)(9} daims and any otherrent/operational dainu through the date of the sale. I believe the debitor needs to file the nrtollon, or It Isat least better form. I have a good form, and can forward the motion to you for filing if you areagreeable.

Ronald A. Clifford, Esq.<lmage001.ipg>2 Faifc Plaza, Suite 4001 Irvine, Califomia 92614Direct: (949) 16M616 \ Gineral: (949) 260-06111 CeU: (949) 533-9774RniffwitiaRinlfftlflyl t P iKHTi I wi¥W.BbkgfflyT.T.P mm I BABBfogOraiBC fflmtty i Lm Angglffis i NwYnrfc I Ibteus

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E X H I B I T E


From: Ron Clifford [email protected] ^Subject: In re Metropark USA, Inc.

Date: January 24, 2014 at 7:34 PMTo: cschael@ashfordnj law.comCc: Matthew Grimshaw [email protected]

Ms. Schael :

Are you available Monday to discuss the attached?

Ronald A. Clifford, Esq.

Blaket^ Blakeleyu»2 Park Plaza, Suite 400 | Irvine, California 92614Direct: (949) 260-06161 General: (949) 260-06111 Cell: (949) [email protected] | www.BlakelevLLRcom | B&B BlogOrange County | Los Angeles | New York | Delaware

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Proposed Order onA d m i n B a r . . . 1 4 0 1 2 2 . d o c

A d m i n B a r D a t e M o t i o n

v 5 1 4 0 1 2 3 . d o c

A d m i n i s t r a t i v e P r o o f o f

C la im Form. . .0122 .docxN o t i c e o f B a r D a t e

M o t i o n v 2 1 4 0 1 2 4 . d o c


E X H I B I T F


From: Courtney Schael [email protected]: Re; Metropark USA, Inc.

Date: February 21, 2014 at 10:32 PMTo: Ronald A. Clifford, Esq. [email protected]: [email protected], [email protected], RIchner Kristin E. [email protected]

Boo: Courtney Schael [email protected]

Ron—please direct any emails to me at the following address; [email protected]

Thank you for the report. Apparently, the Committee has decided to proceed with a liquidating plan without the input of theDebtor or the Second Lien Holders. I have not reviewed it entirely, but it is clear from the Disclosure Statement that the estate iscurrently administratively insolvent. As you may recall, this was one of the concerns that Sandy raised last summer when weagreed to hold off filing a bar date motion.

Also, I briefly reviewed your fee statement and note that there are a significant amount of fees related to the avoidance actions forwhich your firm seeks hourly compensation. Please review your fee statement and remove any of these charges that shouldhave been included as part of the contingency fee work. I also note that the fees your firm billed for the administrative bar datemotion (which is merely a form motion), for preparation of an amended employment agreement, fee statements and inpreparation of claims objections seems very costly considering the size of this estate as does the Committee's proposal forliquidation in the Plan.

Have a great weekend.

Courtney

Courtney A. Schael, Esq.A S H F O R D - S C H A E L L L C511 Summit Avenue

Westfield, NJ 07090- a n d -

1371 Morr is AvenueUnion, NJ 07083

(908) 232-5566 main(908) 255-0462 direct(908) 728-3113 faxw w v y / . A s h f o r d N J L a w. c o m

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On Feb 21, 2014, at 7:33 PM, Ron Clifford <[email protected]> wrote:

I <Settlement Chart v1 (Feb 21).xlsx>


E X H I B I T G


From: Ron Clifford [email protected] ^ P*Subject: RE; Metropark

Date: January 19, 2016 at 1 ;08 PMTo: Cschael, Esq. [email protected]: Scott Blakeley [email protected], Sandy Mayerson [email protected],

Ms. Schael:

After a review of the fee statement, there are approximately 16.4 hours related to avoidance actionprosecution, totaling $3,579, that we hereby remove from our fee statement request withoutprejudice to request those fees through a fee application in the future . Providing spreadsheets inresponse to your inquiries regarding the avoidance actions is not prosecuting preference actions,however, these time entries only account for $207, so we hereby remove those from the feestatement request as well, again, without prejudice to request those fees through a fee application inthe fu tu re .

Your point as to our responding to inquiries by creditors is based on a mistaken premise. Our firm isnot employed in this case solely to prosecute the adversary actions. My firm's employment wasmodified to include a compensation structure for prosecution of the employment actions. Thecommittee did not fall away from the case in total through the 9019 agreement with the debtor andthe secured creditor. The original employment order, the modified order, and the second modifiedorder all apply to our firm's employment.

I am in my office all day to discuss winding down the estate. My direct dial is 949.260.0611.

Regards,


Blakeleyuo18500 Von Karaian Ave, Suite 530 | Irvine, California 92612Direct: (949) 260-0616 | General: (949) 260-0611 1 Cell: (949) [email protected] | www.BlakelevLLF.com | Blakeley LLP BiggOrange County | Los Angeles | New York | DelawareLinked BJI prottle

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From: Cschael, Esq. [mailto:[email protected]]Sent: Friday, January 15, 2016 10:24 AMTo: Ronald A. Clifford, Esq.Cc: Scott Blakeley; Sandy Mayerson; Mehgan RogersSubject: Re: Metropark

Mehgan Rogers [email protected]

Ron—^we also have to discuss your most recent monthly fee statement that I just reviewed brieflyand includes some $13,000 in fees unrelated to the avoidance actions. First it appears that a


significant portion of the charges are related to the avoidance actions. For example, preparingreports of your efforts in pursuing the adversary proceedings is part of the contingency fee thatyou are already being paid for on each adversary proceeding. Second, contacts with creditorsshould all be referred to our office as counsel for the Debtor and should not be billed by yourfirm. Finally, the Committee was not authorized to do work beyond pursuing adversaryproceedings so there should be no hourly billing whatsoever by your firm.

We can discuss this further on Tuesday.

Courtney

Courtney A. Schael, Esq.ASHFORD - SCHAEL LLC100 Quimby Street, Suite 1Westfield, NJ 07090- a n d -5 1 1 S u m m i t A v e n u e

Westfield, NJ 07090*Please mail all correspondence to 511 Summit Ave.*(908) 232-5566 main(908) 728-3113 faxw w w. A s h f o r d N J L a w. c o mCONFIDENTIALITY NOTICE: This e-mail and any attachment(s) to it, contain information that is privileged andconfidential, intended for use only by the person or entity to whom it is addressed. If you are not theintended recipient, you are prohibited from reading, copying, distributing or otherwise using this information.If you have received this e-mail in error, please contact us immediately and delete this e-mail and allattachments from your system.

On Jan 15, 2016, at 1:15 PM, Cschael, Esq, <[email protected]> wrote:

Yes. I will speak to you Tuesday. We have been reviewing all of the administrativeand tax claims for objections. Please do not spend time on these issues as it isduplicative.

Is that the fmal settlement and are all other adversary proceedings resolved??

Thank you.

Courtney

Courtney A. Schael, Esq.ASHFORD - SCHAEL LLC100 Quimby Street, Suite 1Westfield, NJ 07090- a n d -5 1 1 S u m m i t A v e n u e


E X H I B I T H


Ron Clifford [email protected]: Metropark Claims ListJuly 19, 2016 at 9:30 PMCschael, Esq. [email protected] Blakeley [email protected], Sandy Mayerson [email protected]

All of the fees and expenses to my firm have been accounted for in detailed filings on the docket,including invoices. We have turned over all sums owed the estate.


Blakeleyiu.18500 Von Karman Ave, Suite 5301 Irvine, California 92612Direct: (949) 260-06161 General: (949) 260-06111 Cell: (949) 533-9774RCliffordfg[BlakelevLLP.com | www.BlakelevLLP.com | Blakelev LLP BloiOrange County, j Los Angeles | New York | Delawarelinked Qprofte

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From: Cschael, Esq. [mailto:[email protected]]Sent: Tuesday, July 19, 2016 5:09 PMTo: Ronald A. Clifford, Esq.Cc: Scott Blakeley; Sandy MayersonSubject: Re: Metropark Claims List

Please provide detail regarding all disbursements, including who they were made to and a detailedinvoice or description. Also, please provide detailed calculations of your firm's fees and anitemization of all expenses for the avoidance actions.

According to the accounting, your firm remitted (or is going to remit) only approximately onehalf of the total amounts collected to the Debtor. Your firm's fees were 1/3 of amounts collectedwhich would be approximately $530,000 leaving $1.056 million for the estate. Even withexpenses due to your firm for avoidance actions, there is approximately $250,000 that needs to beaccounted for. I see various payments such as "MG's 15%" which I don't know what this is forand various other disbursements (ex. 3/24/16 to Blakely for $43,946 with no description).

To the extent that your firm billed for activities not within the scope of avoidance actions, as wepreviously discussed, your firm was retained to pursue avoidance actions and while responding toa creditor's inquiry on occasion could reasonably be billed to the estate outside of the commissionbilling, there is no reason that your firm should have incurred fees in excess of a few thousanddollars for issues unrelated to the avoidance actions. From the attached accounting, it appears thatyour firm billed the estate close to $100,000 fees in addition to your 1/3 commission.

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amount of $44,868.24 (by check which is not typical as it was usually remitted by wire) was notreceived as it is not reflected in the monthly operating reports.

Courtney

Courtney A. Schael, Esq.A S H F O R D - S C H A E L L L C100 Quimby Street, Suite 1Westfield, NJ 07090- a n d -5 11 S u m m i t A v e n u e

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On Jul 19,2016, at 2:01 PM, Ron Clifford <rclij > . c o m > w r o t e ;

Ms. Schael :

The final accounting is attached. The last of the settlement amounts totaling $120,084.44owing the estate are being forwarded to the estate.


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From: Cschael, Esq. rmailto:[email protected]]Sent: Tuesday, July 19, 2016 9:22 AM


ashford – schael llc courtney a. schael, esq. (cs-1295)

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