UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION

Transcription

1 Keith J. Shapiro (Admitted Pro Hac Vice) Andrew Cardonick (Admitted Pro Hac Vice) David W. Baddley (Admitted Pro Hac Vice) GREENBERG TRAURIG, LLP West Wacker Drive, Suite 0 Chicago, IL 001 Telephone: 1/-00 Facsimile: 1/- John D. Fiero (CA Bar No. ) Kenneth H. Brown (CA Bar No. 0) 0 California Street, th Floor San Francisco, California 1-00 Telephone: /-000 Facsimile: /-0 jfiero@pszjlaw.com kbrown@pszjlaw.com [Proposed] Attorneys for Debtor and Debtor in Possession Heller Ehrman LLP In re: UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION Case No.: 0-1 Heller Ehrman LLP, Chapter 0 1 Debtor EX PARTE APPLICATION FOR ORDER SHORTENING TIME FOR HEARING ON MOTION FOR ORDER AUTHORIZING THE ESTATE S PURCHASE OF TAIL LEGAL MALPRACTICE INSURANCE COVERAGE PURSUANT TO U.S.C. (B)(1) Date: Time: Place: Judge: January, 00 [Requested] 1:0 p.m. [Requested] U. S. Bankruptcy Court Pine Street, nd Floor San Francisco, CA Honorable Dennis Montali -001\DOCS_SF:0. Case: 0-1 Doc #: Filed: 01/1/00 Page 1 of

2 TO THE HONORABLE DENNIS MONTALI, UNITED STATES BANKRUPTCY JUDGE, THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS, THE OFFICE OF THE UNITED STATES TRUSTEE, COUNSEL TO THE DEBTOR S SECURED LENDERS, AND OTHER PARTIES REQUESTING NOTICE PURSUANT TO BANKRUPTCY RULE 00: Heller Ehrman LLP, the debtor and debtor-in-possession herein (the Debtor ), hereby files this ex parte application (the Application ) for an order shortening time so that shortened time hearings may be held on the following motion: MOTION OF DEBTOR AND DEBTOR IN POSSESSION FOR ORDER AUTHORIZING THE ESTATE S PURCHASE OF TAIL LEGAL MALPRACTICE INSURANCE COVERAGE PURSUANT TO U.S.C. (B)(1) (the Motion ) The essential facts supporting this Application are contained in the Declaration of John D. Fiero in Support of Ex Parte Application for Order Shortening Time for Hearing on Motion for Order Authorizing the Estate s Purchase of Tail Legal Malpractice Insurance Coverage Pursuant to U.S.C. (b)(1) filed concurrently herewith, along with the Motion and its supporting papers. In further support of the Application, the Debtor respectfully represents as follows: Procedural Background. STATEMENT OF FACTS On December, 00 (the Petition Date ), the Debtor filed a voluntary petition for relief under Chapter of the Bankruptcy Code. The Debtor has continued in possession of its property and is operating and managing its business as debtor-in-possession pursuant to Sections 0(a) and 0 of the Bankruptcy Code. On January, 00, the United States Trustee for this district appointed an official committee of unsecured creditors (the Committee ). No request has been made for the appointment of a trustee or examiner. On January 1, the Committee retained counsel. The Debtor s Current Operations. The Debtor is currently winding down its business and affairs following the adoption of a Plan of Dissolution by the shareholders of the Debtor s limited partners on September, 00. Although the Debtor is no longer engaged in the practice of law, there remain a substantial number of unperformed, yet necessary, tasks relating to winding down the business, maximizing the value of -001\DOCS_SF:0. 1 Case: 0-1 Doc #: Filed: 01/1/00 Page of

3 the Debtor s assets for the benefit of its creditors and equity interest holders, and discharging the Debtor s obligations to former clients. While the Debtor s existing insurance continues to provide coverage for post-petition activities, it will not protect the estate against malpractice claims (whether occurring pre-petition or post-petition) that are reported to the insurer more than 0 days after the April th policy expiration date (or, June 1, 00). Because malpractice claims are typically reported many months, or even years, after the alleged wrongful act took place, the Debtor s estate will be exposed to potentially substantial liabilities unless tail coverage is purchased. Therefore, the Debtor believes that it is critical for the estate to acquire tail insurance in order to ensure that the estate does not become substantially diluted by uninsured malpractice claims. See Hayden Declaration at The Search for Tail Coverage After significant review, analysis and consideration of options, the Dissolution Committee (established under the Plan of Dissolution) ultimately decided that the best and most economical option for a tail coverage package was a $ million primary policy offered by American International Specialty Lines Insurance Company ( AISLIC ) and a $ million excess policy issued by Valiant Insurance Company ( Valiant ). Upon exhaustion of the excess coverage, the primary 0 1 limits reinstate for an additional $ million in coverage (but not for the same claim that exhausted the excess amounts). Like the Debtor s current coverage, there is a self-insured retention of $ million per claim. The cost of the tail insurance is $ million for the primary coverage and $0,000 for the excess coverage, plus taxes. The primary carrier would not agree to the $ million reinstatement unless the Debtor purchased at least $ million in excess coverage. The tail coverage program provides months of tail malpractice insurance reporting (until June, 01) for claims or circumstances arising prior to January 1, 00. Brokerage commissions would be paid out of the premiums. The tail coverage has been bound and the Debtor must pay the full premium by no later than January 0, 00. The coverage was bound shortly before the bankruptcy filing on December, 00. Because of the filing and the fact that the tail coverage has been bound, the Debtor believes that the other options presented by Marsh for coverage are no longer available. Indeed, the Debtor -001\DOCS_SF:0. Case: 0-1 Doc #: Filed: 01/1/00 Page of

4 believes that tail coverage would, under the present circumstances, be either unavailable or significantly more expensive. The Relief Requested in the Motion In the Motion, the Debtor seeks authority to pay $,0,000 in premiums for up to $0 million in -month tail legal malpractice insurance, to ensure that the estate remains protected against legal malpractice claims asserting potentially substantial amounts in damages. The Debtor s current insurance (a claims made policy) will expire on April, 00, and if it remains in place until expiration, all claims will need to be reported by approximately June 1, 00 to receive coverage. In other words, the Debtor s estate currently has no insurance in place to report claims after June 1, 00. This is problematic because, typically, the Debtor does not learn of the circumstances giving rise to a malpractice claim (so they can be reported to the insurer) until several years after the alleged wrongful act occurs. Thus, it is likely that numerous malpractice claims will be asserted against the Debtor after the current reporting period expires, and absent the proposed tail coverage, the defense and payment of those claims will be uninsured. NECESSITY FOR EXPEDITED SCHEDULE January, 00 is about as late as the Debtor can afford to have the hearing on the Motion 0 1 held because the Debtor must pay the premiums for the tail insurance by January 0, 00 in order to preserve the bound tail coverage. Therefore, the Motion also requests a waiver of the -day stay of any order approving this Motion under Bankruptcy Rule 00(h). -001\DOCS_SF:0. EFFECT OF REQUESTED SHORTENING OF TIME If this Application is granted, the period to notice a hearing on the Motions will be shortened to days, so that that a hearing would be held on January, 00 at 1:0 p.m. Because the Debtor will agree that oppositions can be offered orally at the hearing and service will be made in many instances by or fax, creditors and parties in interest will have two weeks to respond to the Motion. Case: 0-1 Doc #: Filed: 01/1/00 Page of

5 PROPOSED SCHEDULE FOR OPPOSING THE MOTION Consistent with the Court s preferences with regard to oppositions in situations such as this one, the Debtor proposes that any opposition or response to the Motion may be made orally at the hearing, if the opposing party so chooses. NOTICE To maximize the extent of notice, concurrent with the filing of this Application, on January 1, 00, the Debtor will serve this Application and its supporting papers (with a copy of the Motion and its supporting papers) by electronic mail, facsimile, or overnight delivery upon the counsel for the Official Committee of Unsecured Creditors, the Office of the United States Trustee, and all parties requesting special notice in this case Promptly after the Court considers this Application, the Debtor will serve notice of entry of the Court s order by electronic mail, facsimile, or overnight delivery upon the same parties. CONCLUSION WHEREFORE, the Debtor respectfully requests that the Court grant this Application in its entirety and enter an Order: 1. Setting a hearing on the Motion for January, 00 at 1:0 p.m.; 0 1. Providing that any opposition to the Motion may be made at the hearing; and. Directing the Debtor to serve notice of the entry of the order approving the Application upon counsel for the Official Committee of Unsecured Creditors, the Office of the United States Trustee, and all parties requesting special notice in this case. Dated: January 1, 00 By /s/ John D. Fiero John D. Fiero (CA Bar No. ) Kenneth H. Brown (CA Bar No. 0) [Proposed] Attorneys for Debtor and Debtor in Possession Heller Ehrman LLP -001\DOCS_SF:0. Case: 0-1 Doc #: Filed: 01/1/00 Page of

6 Keith J. Shapiro (Admitted Pro Hac Vice) Andrew Cardonick (Admitted Pro Hac Vice) David W. Baddley (Admitted Pro Hac Vice) GREENBERG TRAURIG, LLP West Wacker Drive, Suite 0 Chicago, IL 001 Telephone: 1/-00 Facsimile: 1/- John D. Fiero (CA Bar No. ) Kenneth H. Brown (CA Bar No. 0) 0 California Street, th Floor San Francisco, California 1-00 Telephone: /-000 Facsimile: /-0 jfiero@pszjlaw.com kbrown@pszjlaw.com [Proposed] Attorneys for Debtor and Debtor in Possession Heller Ehrman LLP In re: UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION Case No.: 0-1 Heller Ehrman LLP, Chapter 0 1 Debtor DECLARATION OF JOHN D. FIERO IN SUPPORT OF EX PARTE APPLICATION FOR ORDER SHORTENING TIME FOR HEARING ON MOTION FOR ORDER AUTHORIZING THE ESTATE S PURCHASE OF TAIL LEGAL MALPRACTICE INSURANCE COVERAGE PURSUANT TO U.S.C. (B)(1) Date: Time: Place: Judge: January, 00 [Requested] 1:0 p.m. [Requested] U. S. Bankruptcy Court Pine Street, nd Floor San Francisco, CA Honorable Dennis Montali -001\DOCS_SF:.1 Case: 0-1 Doc #: Filed: 01/1/00 Page 1 of DECLARATION OF JOHN D. FIERO IN SUPPORT OF EX PARTE APPLICATION

7 I, John D. Fiero, do hereby declare: 1. I am an attorney at law duly licensed to practice in the State of California and admitted to practice before this Court and am a member of Pachulski Stang Ziehl & Jones, LLP, counsel to Heller Ehrman, LLP, the debtor and debtor in possession herein. The following is true of my personal knowledge and, if called as a witness, I could and would testify competently thereto.. The Debtor has filed a motion for which it seeks expedited consideration: MOTION OF DEBTOR AND DEBTOR IN POSSESSION FOR ORDER LEGAL MALPRACTICE INSURANCE COVERAGE PURSUANT TO U.S.C. (B)(1) (the Motion ) Reasons for Shortening Time. In the Motion, the Debtor seeks authority to pay $,0,000 in premiums for up to $0 million in -month tail legal malpractice insurance, to ensure that the estate remains protected against legal malpractice claims asserting potentially substantial amounts in damages. The Debtor s current insurance (a claims made policy) will expire on April, 00, and if it remains in place until expiration, all claims will need to be reported by approximately June 1, 00 to receive coverage. In other words, the Debtor s estate currently has no insurance in place to report claims after June 1, 00. This is problematic because, typically, the Debtor does not learn of the 0 1 circumstances giving rise to a malpractice claim (so they can be reported to the insurer) until several years after the alleged wrongful act occurs. Thus, it is likely that numerous malpractice claims will be asserted against the Debtor after the current reporting period expires, and absent the proposed tail coverage, the defense and payment of those claims will be uninsured.. January, 00 is about as late as the Debtor can afford to have the hearing on the Motion held because the Debtor must pay the premiums for the tail insurance by January 0, 00 in order to preserve the bound tail coverage. Therefore, the Motion also requests a waiver of the - day stay of any order approving this Motion under Bankruptcy Rule 00(h). Previous Time Modifications Related to the Motions. No prior modifications of the time periods related to the Motion have been sought or agreed-upon. -001\DOCS_SF:.1 Case: 0-1 Doc #: Filed: 1/1/00 Page of DECLARATION OF JOHN D. FIERO IN SUPPORT OF EX PARTE APPLICATION

8 The Effect of the Requested Time Modification. This case is in its early days. If this Application is granted, the period to notice a hearing on the Motions will be shortened to days, so that that a hearing would be held on January, 00 at 1:0 p.m. Because the Debtor will agree that oppositions can be offered orally at the hearing and service will be made in many instances by or fax, creditors and parties in interest will have two weeks to respond to the Motion. Efforts Made to Speak to the Respondents. No special efforts have been made to speak with potential respondents to the Motion prior to the filing of the Application. I declare under penalty of perjury that the foregoing is true and correct and that this declaration was executed this 1 th day of January, 00 at San Francisco, California. /s/ John D. Fiero \DOCS_SF:.1 Case: 0-1 Doc #: Filed: 01/1/00 Page of DECLARATION OF JOHN D. FIERO IN SUPPORT OF EX PARTE APPLICATION