Case 2:19-bk-14989-WB 1 2 3 4 5 6 7 Proposed Attorneys for Debtors and Debtors-in-Possession, Scoobeez, Scoobeez Global, Inc., and Scoobur, LLC UNITED STATES BANKRUPTCY COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 12 13 14 15 16 17 18 19 20 Desc Ashley M. McDow (245114) John A. Simon (Admitted Pro Hac Vice) FOLEY & LARDNER LLP 555 S. Flower St., Suite 3300 Los Angeles, CA 90071 Telephone: 213.972.4500 Facsimile: 213.486.0065 Email: amcdow@foley.com jsimon@foley.com 8 11 Doc 194 Filed 07/12/19 Entered 07/12/19 21:11:09 Main Document Page 1 of 11 LOS ANGELES DIVISION In re ) ) SCOOBEEZ, et al.1 ) ) Debtors and Debtors in Possession. ) ) _____________________________________ ) ) Affects: ) ) ■ All Debtors ) ) □ Scoobeez, ONLY ) ) □ Scoobeez Global, Inc., ONLY ) ) □ Scoobur LLC, ONLY ) ) Case No. 2:19-bk-14989-WB Jointly Administered: 2:19-bk-14991-WB; 2:19-bk-14997-WB Chapter 11 NOTICE OF OMNIBUS MOTION AND OMNIBUS MOTION OF DEBTORS TO REJECT CERTAIN UNEXPIRED VEHICLE LEASES; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF; AND DECLARATION OF BRIAN WEISS [No hearing required pursuant to Local Bankruptcy Rule 9013-1(o)(1)] HON. JULIA BRAND 21 22 TO THE HONORABLE JULIA BRAND, UNITED STATES BANKRUPTCY JUDGE, 23 24 25 26 27 28 PORSCHE FINANCIAL SERVICES, MERCEDES-BENZ FINANCIAL SERVICES, BENTLEY FINANCIAL SERVICES, HILLAIR CAPITAL MANAGEMENT, LLC, THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS, PARTIES REQUESTING SPECIAL NOTICE, AND THE OFFICE OF THE UNITED STATES TRUSTEE: 1 The Debtors and the last four digits of their respective federal taxpayer identification numbers are as follows: Scoobeez (6339); Scoobeez Global, Inc. (9779); and Scoobur, LLC (0343). The Debtors’ address is 3463 Foothill Boulevard, Glendale, California 91214. 1 4823-5549-8394.3 Case 2:19-bk-14989-WB 1 Doc 194 Filed 07/12/19 Entered 07/12/19 21:11:09 Main Document Page 2 of 11 Desc PLEASE TAKE NOTICE that by this motion Scoobeez, Scoobeez Global, Inc. and Scoobur, 2 LLC, the debtors and debtors-in-possession (collectively, the “Debtors”) in the above-captioned jointly 3 administered bankruptcy proceedings (collectively, the “Chapter 11 Cases”), hereby move the Court for 4 entry of an order, pursuant to section 365 of title 11 of the United States Code (the “Bankruptcy Code”) 5 rejecting certain unexpired vehicle leases (the “Leases”) executed among Debtors and three separate 6 lessors concerning vehicles (the “Vehicles”), for the vehicles set forth below: 7 8 Vehicle Description 9 2017 Porsche Panamera 4S 10 VIN: WPOAB2A71HL122432 11 2017 Mercedes-Benz S63V4 12 VIN: WDDUG7JB3HA332354 13 2017 Bentley CONT GTC V8 S 14 VIN: SCBGH3ZA7HC063551 Lessor Rejection Date Porsche Financial Services April 30, 2019 Mercedes-Benz Financial Services April 30, 2019 Bentley Financial Services April 30, 2019 15 16 17 PLEASE TAKE FURTHER NOTICE that the Debtors seek to reject the Leases as of April 30, 2019 (the “Rejection Date”). 18 PLEASE TAKE FURTHER NOTICE that the basis for the relief requested in this Motion is 19 set forth below in the attached Memorandum of Points and Authorities and in the Declaration of Brian 20 Weiss (the “Weiss Declaration”), which is being filed concurrently with this Motion and is incorporated 21 herein by reference. 22 PLEASE TAKE FURTHER NOTICE that, pursuant to Local Bankruptcy Rule 9013-1(o), the 23 Debtors have not scheduled a hearing on the Motion and are requesting that relief be granted without a 24 hearing. Accordingly, any response to this Motion and request for hearing must be filed with the 25 Bankruptcy Court and served on proposed counsel for the Debtors and the United States Trustee within 26 fourteen (14) days of the date of service of this Notice. 27 28 PLEASE TAKE FURTHER NOTICE that pursuant to Local Bankruptcy Rule 9013-1(h), any failure to file and serve a timely response and request for hearing may be deemed by the Court to 2 4823-5549-8394.3 Case 2:19-bk-14989-WB Doc 194 Filed 07/12/19 Entered 07/12/19 21:11:09 Main Document Page 3 of 11 Desc 1 constitute consent to the relief requested in the Motion, and the Motion may be granted without a 2 hearing. 3 PLEASE TAKE FURTHER NOTICE that the Debtors will serve this Notice and Motion and 4 the attached Memorandum of Points and Authorities on: (a) the Office of the United States Trustee, (b) 5 counsel for the Official Committee of Unsecured Creditors, (c) counsel for the Debtors’ secured lender, 6 Hillair Capital Management, LLC (d) counsel for Porsche Financial Services, (e) Mercedes-Benz 7 Financial Services, (f) counsel for Bentley Financial Services, and (g) all other parties requesting notice 8 in the Chapter 11 Cases. In the event that the Court grants the relief requested by the Motion, the 9 Debtors shall provide notice of the entry of the order granting such relief upon each of the foregoing 10 parties and any other parties-in-interest as the Court directs. The Debtors submit that such notice is 11 sufficient and that no other or further notice be given. 12 13 Dated: July 12, 2019 FOLEY & LARDNER, LLP 14 /s/Ashley M. McDow Ashley M. McDow 15 Ashley M. McDow (245114) John A. Simon (Admitted Pro Hac Vice) FOLEY & LARDNER LLP 555 S. Flower St., Suite 3300 Los Angeles, CA 90071 Telephone: 213.972.4500 Facsimile: 213.486.0065 Email: amcdow@foley.com jsimon@foley.com 16 17 18 19 20 Proposed Attorneys for Debtors and Debtors-inPossession, Scoobeez, Scoobeez Global, Inc., and Scoobur, LLC 21 22 23 24 25 26 27 28 3 4823-5549-8394.3 Case 2:19-bk-14989-WB 1 Doc 194 Filed 07/12/19 Entered 07/12/19 21:11:09 Main Document Page 4 of 11 Desc MEMORANDUM OF POINTS AND AUTHORITIES 2 Scoobeez, Scoobeez Global, Inc. and Scoobur, LLC, the debtors and debtors-in-possession in the 3 above-captioned jointly administered bankruptcy proceedings (collectively, the “Debtors”) hereby file 4 this Memorandum of Points and Authorities in support of their Omnibus Motion to Reject Certain 5 Unexpired Vehicle Leases, and respectfully represent as follows: 6 I. JURISDICTION AND VENUE 7 The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334. This is a core 8 proceeding pursuant to 28 U.S.C. § 157(b)(2). Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409. 9 The statutory predicate for the relief requested herein is section 365 of title 11 of the United States Code 10 (the “Bankruptcy Code”). 11 II. 12 STATEMENT OF FACTS A. 13 The Bankruptcy Cases On April 30, 2019, (the “Petition Date”), the Debtors each filed a petition for relief (a 14 “Petition”) under Chapter 11 of Title 11 of the Bankruptcy Code (the “Chapter 11 Cases”), in the United 15 States Bankruptcy Court for the Central District of California, Los Angeles Division (the “Court”). The 16 Debtors intend to continue in possession of their property and to operate their businesses as debtors-in- 17 possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No request for appointment 18 of a Chapter 11 trustee or examiner has been made. On May 20, 2019, the Office of the United States 19 Trustee appointed an Official Committee of Unsecured Creditors (the “Committee”) in the Chapter 11 20 Cases. 21 22 23 On May 13, 2019, the Court granted the joint administration motion filed by the Debtors and the Chapter 11 Cases are being jointly administered under Case No. 19-14989. B. 24 Debtor’s Formation and Business Overview Scoobeez is a logistics and delivery company headquartered at 3463 Foothill Boulevard, 25 Glendale, California 91214. Amazon is their largest customer. Over the past two (2) years, an 26 increasing number of lawsuits had been filed against one or more of the Debtors, including various labor 27 disputes. Most recently, on or about April 22, 2019, Hillair Capital Management LLC (“Hillair”) filed a 28 three-count complaint against the Debtors, alleging breach of contract, breach of guaranty and replevin 1 4823-5549-8394.3 Case 2:19-bk-14989-WB Doc 194 Filed 07/12/19 Entered 07/12/19 21:11:09 Main Document Page 5 of 11 Desc 1 and delivery, which is currently pending as case number 19GDCV00492 in the Superior Court of the 2 State of California, County of Los Angeles, North Central District (the “Los Angeles Case”). On or 3 about April 24, 2019, Hillair filed an Ex Parte Application to Appoint Receiver, Issue Temporary 4 Restraining Order and Set Order to Show Cause Why Receiver Should Not Be Confirmed and Why 5 Preliminary Injunction Should Not Be Issued (the “Ex Parte Application”) in the Los Angeles Case. 6 The hearing on the Ex Parte Application was set for May 1, 2019 at 1:30 p.m., however, the Debtors 7 commenced the Chapter 11 Cases prior to that hearing. In addition, within the past 90-120 days, a 8 number of purported creditors have filed UCC-1 financing statements asserting liens against 9 substantially all, if not all, of the Debtors’ personal property, including but not limited to accounts 10 receivable. 11 Based on the aforementioned events and circumstances, amongst others, the Debtors began to 12 explore and evaluate potential reorganization strategies aimed towards preserving and strengthening the 13 Debtors’ operations. After significant deliberation by the Debtors in this regard, the Debtors 14 determined, that pursing reorganization under Chapter 11 of the Bankruptcy Code provided the best 15 option for the Debtors, their customer(s), and their creditors. 16 III. RELIEF REQUESTED 17 By this Motion, the Debtors seek entry of an order, pursuant to section 365 of the 18 Bankruptcy Code, rejecting as of April 30, 2019 certain unexpired vehicle leases (the “Leases”) 19 executed between Debtors and three separate lessors concerning vehicles (the “Vehicles”) described as: 20 21 Vehicle Description 22 2017 Porsche Panamera 4S 23 VIN: WPOAB2A71HL122432 24 2017 Mercedes-Benz S63V4 25 VIN: WDDUG7JB3HA332354 26 2017 Bentley CONT GTC V8 S 27 VIN: SCBGH3ZA7HC063551 Lessor Rejection Date Porsche Financial Services April 30, 2019 Mercedes-Benz Financial Services April 30, 2019 Bentley Financial Services April 30, 2019 28 2 4823-5549-8394.3 Case 2:19-bk-14989-WB 1 2 IV. Doc 194 Filed 07/12/19 Entered 07/12/19 21:11:09 Main Document Page 6 of 11 Desc ARGUMENT Section 365(a) of the Bankruptcy Code provides that, “subject to the court’s approval [a debtor 3 in possession] may assume or reject any executory contract or unexpired lease of the debtor.” Courts 4 apply the “business judgment test” in determining whether a debtor in possession’s proposed assumption 5 or rejection of an executory contract or unexpired lease is appropriate under Bankruptcy Code § 365. 6 Agarwal v. Pomona valley Medical Group, Inc. (In re Pomona Valley Medical Group, Inc.), 476 F.3d 7 665, 670 (9th Cir. 2007); Durkin v. Benedor Corp. (In re G.I. Indust., Inc.), 204 F.3d 1276, 1282 (9th 8 Cir. 2000); see also NLRB v. Bildisco & Bildisco, 465 U.S. 513, 523 (1984). Under the business 9 judgment test, if assumption or rejection would benefit the debtor’s estate, the court should approve the 10 debtor’s proposed assumption or rejection. Pomona Valley Medical Group, Inc., 476 F.3d at 670-71. At 11 least one bankruptcy court concluded that a debtor’s decision to reject a lease should be granted as a 12 matter of course: 13 [C]ourt approval under Section 365(a), if required, except in extraordinary situations, should be granted as a matter of course. To begin, this rule places responsibility for administering the estate with the trustee, not the court, and therefore furthers the policy of judicial independence considered vital by the authors of the Code. Second, this rule expedites the administration of estates, another goal of the Bankruptcy Reform Act. Third, the rule encourages rehabilitation by permitting the replacement of marginal with profitable business arrangements . . . . 14 15 16 17 18 19 Summit Land Co. v. Allen (In re Summit Land Co.), 13 B.R. 310, 315 (Bankr. D. Utah 1981). The Debtors have determined in their sound business judgment that rejection of the Leases is in 20 the best interest of the estates. Rejection of the Leases will help avoid potential monthly charges and 21 increase the Debtors’ liquidity. The proposed rejection will help avoid additional administrative 22 expenses. There is no operational need for the Debtors to retain the Leases for the Vehicles. In 23 addition, the Debtors have determined that they will be unable to assign the Leases to third parties for 24 value. Given that the Vehicles are not a part of the Debtors’ going-forward business plan and that the 25 Leases appear to have no value, the Debtors have decided, in the exercise of their sound business 26 judgment, to reject the Leases in order to eliminate the incurrence of additional post-petition 27 administrative obligations. 28 3 4823-5549-8394.3 Case 2:19-bk-14989-WB 1 V. 2 Doc 194 Filed 07/12/19 Entered 07/12/19 21:11:09 Main Document Page 7 of 11 Desc NOTICE Notice of this Motion has been provided to: (a) the Office of the United States Trustee for the 3 Central District of California; (b) counsel to Hillair Capital Management, LLC (c) counsel to the 4 Committee; (d) counsel for Porsche Financial Services; (e) Mercedes-Benz Financial Services, (f) 5 counsel for Bentley Financial Services, and (g) the parties that file with the Court requests for notice of 6 all matters in accordance with Bankruptcy Rule 2002. The Debtors submit that in light of the nature of 7 the relief requested, no further notice is required. 8 VI. 9 10 NO PRIOR REQUEST No prior application for the relief requested herein has been made to this or any other court. VII. CONCLUSION 11 For all the foregoing reasons, the Debtors respectfully request that the Court enter an order (i) 12 granting the Motion, effective April 30, 2019, and (ii) granting such other and further relief as is just and 13 proper under the circumstances. 14 Dated: July 12, 2019 15 FOLEY & LARDNER, LLP /s/Ashley M. McDow Ashley M. McDow 16 Ashley M. McDow (245114) John A. Simon (Admitted Pro Hac Vice) FOLEY & LARDNER LLP 555 S. Flower St., Suite 3300 Los Angeles, CA 90071 Telephone: 213.972.4500 Facsimile: 213.486.0065 Email: amcdow@foley.com jsimon@foley.com 17 18 19 20 21 Proposed Attorneys for Debtors and Debtors-inPossession, Scoobeez, Scoobeez Global, Inc., and Scoobur, LLC 22 23 24 25 26 27 28 4 4823-5549-8394.3 Case 2:19-bk-14989-WB 1 Doc 194 Filed 07/12/19 Entered 07/12/19 21:11:09 Main Document Page 8 of 11 Desc DECLARATION OF BRIAN WEISS 2 I, Brian Weiss, hereby declare: 3 1. I am an individual over 18 years of age. I have personal knowledge of the facts stated 4 herein as more fully set forth below or have gained such knowledge by review of the file and if called as 5 a witness, I could and would competently testify thereto. 6 2. I make this Declaration in support of the motion (the “Motion”)2 filed by Scoobeez, 7 Scoobeez Global, Inc., and Scoobur, LLC (collectively the “Debtors”) for entry of an order, pursuant to 8 section 365 of the Bankruptcy Code rejecting Leases concerning the Vehicles. All facts in this 9 Declaration are based on my personal knowledge, information gathered from my review of relevant 10 documents, and information supplied to me by the Debtors or their professionals. 11 3. I am the Chief Restructuring Officer of the Debtors. As such, I am generally responsible 12 for managing the operations of the Debtors and, thus, am familiar with the Debtors’ operations, assets, 13 and liabilities. In the ordinary course of business, I rely on the maintenance by personnel of the Debtors 14 of true and correct copies of various documents and information relating to the Debtors. As to the 15 following facts, I know them to be true of my own knowledge or I have gained knowledge of them from 16 discussions with personnel of the Debtors or business records, which were made at or about the time of 17 the events recorded, and which are maintained in the ordinary course of the Debtors’ business at or near 18 the time of the acts, conditions or events to which they related. Additionally, as the CRO, I have been 19 involved in discussions and planning sessions related to the potential reorganization options and, thus, 20 am familiar with the objectives the Debtors intend to achieve through the Bankruptcy Cases. 21 4. The Debtors have determined in their sound business judgment that rejection of the 22 Leases is in the best interest of the estates. Rejection of the Leases will help avoid potential monthly 23 charges and increase the Debtors’ liquidity. The proposed rejection will help avoid additional 24 administrative expenses. There is no operational need for the Debtors to retain the Leases for the 25 Vehicles. In addition, the Debtors have determined that they will be unable to assign the Leases to third 26 parties for value. Given that the Vehicles are not a part of the Debtors’ going-forward business plan and 27 28 2 Capitalized terms not defined herein have the terms ascribed to them in the Motion. 1 4823-5549-8394.3 Case 2:19-bk-14989-WB Doc 194 Filed 07/12/19 Entered 07/12/19 21:11:09 Main Document Page 9 of 11 Desc 1 that the Leases appear to have no value, the Debtors have decided, in the exercise of their sound 2 business judgment, to reject the Leases in order to eliminate the incurrence of additional post-petition 3 administrative obligations 4 5 I declare under penalty of perjury that the foregoing is true and correct. Executed this 12th day of July, 2019. ____________________________ 6 Brian Weiss 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2 4823-5549-8394.3 Case 2:19-bk-14989-WB Doc 194 Filed 07/12/19 Entered 07/12/19 21:11:09 Main Document Page 10 of 11 Desc PROOF OF SERVICE OF DOCUMENT I am over the age of 18 and not a party to this bankruptcy case or adversary proceeding. My business address is: Foley & Lardner LLP, 555 South Flower Street, Suite 3300, Los Angeles, CA 90072-2411 A true and correct copy of the foregoing document entitled (specify): NOTICE OF OMNIBUS MOTION AND OMNIBUS MOTION OF DEBTORS TO REJECT CERTAIN UNEXPIRED VEHICLE LEASES; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF; AND DECLARATION OF BRIAN WEISS will be served or was served (a) on the judge in chambers in the form and manner required by LBR 5005-2(d); and (b) in the manner stated below: 1. TO BE SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (NEF): Pursuant to controlling General Orders and LBR, the foregoing document will be served by the court via NEF and hyperlink to the document. On (date) 07/12/2019, I checked the CM/ECF docket for this bankruptcy case or adversary proceeding and determined that the following persons are on the Electronic Mail Notice List to receive NEF transmission at the email addresses stated below: John-Patrick M Fritz jpf@lnbyb.com, JPF.LNBYB@ecf.inforuptcy.com Vivian Ho BKClaimConfirmation@ftb.ca.gov Alvin Mar alvin.mar@usdoj.gov Ashley M McDow amcdow@foley.com, sgaeta@foley.com;mhebbeln@foley.com;swilson@foley.com;jsimon@foley.com Stacey A Miller smiller@tharpe-howell.com Akop J Nalbandyan jnalbandyan@LNtriallawyers.com, cbautista@LNtriallawyers.com Rejoy Nalkara rejoy.nalkara@americaninfosource.com Anthony J Napolitano anapolitano@buchalter.com, IFS_filing@buchalter.com;salarcon@buchalter.com David L. Neale dln@lnbyb.com Aram Ordubegian ordubegian.aram@arentfox.com Gregory M Salvato gsalvato@salvatolawoffices.com, calendar@salvatolawoffices.com; jboufadel@salvatolawoffices.com; gsalvato@ecf.inforuptcy.com Steven M Spector sspector@buchalter.com, IFS_efiling@buchalter.com;salarcon@buchalter.com United States Trustee (LA) ustpregion16.la.ecf@usdoj.gov Eric K Yaeckel yaeckel@sullivanlawgroupapc.com Service information continued on attached page 2. SERVED BY UNITED STATES MAIL: On (date) 07/12/2019, I served the following persons and/or entities at the last known addresses in this bankruptcy case or adversary proceeding by placing a true and correct copy thereof in a sealed envelope in the United States mail, first class, postage prepaid, and addressed as follows. Listing the judge here constitutes a declaration that mailing to the judge will be completed no later than 24 hours after the document is filed. Honorable Julia W. Brand United States Bankruptcy Court Central District of California Edward R. Roybal Federal Building and Courthouse 255 E. Temple Street, Suite 1382 Los Angeles, CA 90012 Service information continued on attached page 3. SERVED BY PERSONAL DELIVERY, OVERNIGHT MAIL, FACSIMILE TRANSMISSION OR EMAIL (state method for each person or entity served): Pursuant to F.R.Civ.P. 5 and/or controlling LBR, on (date) , I served the following persons and/or entities by personal delivery, overnight mail service, or (for those who consented in writing to such service method), by facsimile transmission and/or email as follows. Listing the judge here constitutes a declaration that personal delivery on, or overnight mail to, the judge will be completed no later than 24 hours after the document is filed. Service information continued on attached page I declare under penalty of perjury under the laws of the United States that the foregoing is true and correct. 07/12/2019 Ashley M. McDow /s/ Ashley M. McDow Date Printed Name Signature This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California. June 2012 F 9013-3.1.PROOF.SERVICE Case 2:19-bk-14989-WB Doc 194 Filed 07/12/19 Entered 07/12/19 21:11:09 Main Document Page 11 of 11 Desc 2. SERVED BY UNITED STATES MAIL: Calstar Motors, Inc. Attention: Officer, Managing or General Agent 700 S. Brand Blvd. Glendale, CA 91204 MERCEDES-BENZ FINANCIAL SERVICES USA LLC c/o The Corporation Trust Company Corporation Trust Center 1209 Orange Street Wilmington, DE 19801 This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California. June 2012 F 9013-3.1.PROOF.SERVICE