In In re Millennium Lab Holdings II, Case No. 15-12284 (Bankr. D. Del. Dec. 2, 2016), Bankruptcy Judge Laurie Selber Silverstein granted the post-confirmation motion of a trustee of trusts created pursuant to the debtors’ plan of reorganization to examine third parties regarding the cause of the debtors’ financial collapse under Federal Rule of Bankruptcy Procedure 2004. In so doing, Silverstein rejected the argument that the bankruptcy court had no subject matter jurisdiction to authorize the use of Rule 2004 after confirmation. Silverstein also found that the Rule 2004 examination was not subject to an arbitration clause in the contract between the debtors and one of the targets of the examination.
The debtors had been in the business of providing laboratory-based diagnostic testing. Pre-petition, the debtors had borrowed approximately $1.8 billion pursuant to a senior secured term loan agreement, which were used to pay off existing debt and provide a special dividend to equity holders, and to provide working capital for the business. On Nov. 10, 2015, the debtors filed petitions for Chapter 11 relief along with a prepackaged joint Chapter 11 plan of reorganization. The plan contained a settlement that resolved disputes between and among the Debtors, certain pre-petition lenders and the debtors’ equity holders. The settlement also created two trusts to pursue additional recoveries against “excluded parties.”
