AMR Corporation

UNITED STATES BANKRUPTCY COURT 	FOR PUBLICATION
SOUTHERN DISTRICT OF NEW YORK
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In re: 	Chapter 11
AMR CORPORATION, et al., 	Case No. 11-15463 (SHL)
Debtors. 	(Jointly Administered)
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MEMORANDUM OF DECISION
A P P E A R A N C E S :
WEIL, GOTSHAL & MANGES LLP
Counsel for the Debtors
767 Fifth Avenue
New York, New York 10153
By: 	Harvey R. Miller, Esq.
Stephen Karotkin, Esq.
Alfredo R. Pérez, Esq.
TRACY HOPE DAVIS
UNITED STATES TRUSTEE
33 Whitehall Street, 21st Floor
New York, New York 10004
By: 	Susan Golden, Esq.
Brian S. Masumoto, Esq.
Michael T. Driscoll, Esq.
SKADDEN ARPS SLATE MEAGHER & FLOM LLP
Counsel for the Official Committee of Unsecured Creditors
Four Times Square
New York, New York 10036
By: 	Jay M. Goffman, Esq.
-and-
155 North Wacker Drive
Chicago, Illinois 60606
By: 	John Wm. Butler, Jr., Esq.
Albert L. Hogan III, Esq.
John K. Lyons, Esq.
Felicia Gerber Perlman, Esq.
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MILBANK, TWEED, HADLEY & MCCLOY LLP
Counsel for the Ad Hoc Committee of AMR Corporation Creditors
1 Chase Manhattan Plaza
New York, New York 10005
By: 	Gerard Uzzi, Esq.
Eric K. Stodola, Esq.
LATHAM & WATKINS LLP
Counsel for US Airways
885 Third Avenue
New York, New York 10022
By: 	D.J. (Jan) Baker, Esq.
STEPTOE & JOHNSON LLP
Counsel for the Allied Pilots Association
1330 Connecticut Ave., NW
Washington, DC 20036
By: 	Filiberto Agusti, Esq.
Joshua R. Taylor, Esq.
JAMES & HOFFMAN, P.C.
Counsel for the Allied Pilots Association
1130 Connecticut Ave., NW, Suite 950
Washington, DC 20036
By: 	Edgar N. James, Esq.
Kathy Krieger, Esq.
David P. Dean, Esq.
Darin M. Dalmat, Esq.
Daniel M. Rosenthal, Esq.
CAPLIN & DRYSDALE, CHARTERED
Counsel for the US Airline Pilots Association
One Thomas Circle, NW, Suite 1100
Washington, DC 20005
By: 	James P. Wehner, Esq.
Kevin C. Maclay, Esq.
Todd E. Phillips, Esq.
DAVIS POLK & WARDWELL LLP
Counsel for Citibank, N.A.
450 Lexington Avenue
New York, New York 10017
By: 	Marshall S. Huebner, Esq.
Timothy E. Graulich, Esq.
Natasha Tsiouris, Esq.
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MINTZ LEVIN COHN FERRIS GLOVSKY & POPEO, P.C.
Counsel for U.S. Bank National Association
One Financial Center
Boston, Massachusetts 02111
By: 	William W. Kannel, Esq.
Ian A. Hammel, Esq.
CHAPMAN AND CUTLER LLP
Counsel for U.S. Bank National Association and U.S. Bank Trust National Association
111 West Monroe Street
Chicago, Illinois 60603
By: 	James E. Spiotto, Esq.
Franklin H. Top III, Esq.
-and-
330 Madison Avenue, 34 th Floor
New York, New York 10017-5010
By: 	Craig M. Price, Esq.
Laura E. Appleby, Esq.
SHIPMAN AND GOODWIN LLP
Counsel for U.S. Bank National Association and U.S. Bank Trust National Association
One Constitution Plaza
Hartford, Connecticut 06103
By: 	Ira H. Goldman, Esq.
Kathleen M. LaManna, Esq.
Corrine L. Burnick, Esq.
FOLEY & LARDNER LLP
Counsel for U.S. Bank National Association and U.S. Bank Trust National Association
90 Park Avenue
New York, New York 10016
By: 	Mark L. Prager, Esq.
Douglas E. Spelfogel, Esq.
SIDLEY AUSTIN LLP
Counsel for U.S. Bank Trust National Association
787 Seventh Avenue
New York, New York 10019
By: 	Michael G. Burke, Esq.
Andrew P. Propps, Esq.
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SEAN H. LANE
UNITED STATES BANKRUPTCY JUDGE
Before the Court is the objection (ECF No. 9427) of the United States Trustee (the
“Trustee”) to confirmation of the Debtors’ Second Amended Joint Chapter 11 Plan (the
“Plan”) (ECF No. 8590). The Trustee raises two objections.1 First, the Trustee argues
that the Plan violates Section 503(b) of the Bankruptcy Code by paying the professional
fees of individual members on the Committee of Unsecured Creditors (the “Committee”).
Second, the Trustee contends that the Plan violates Section 503(c) by paying a severance
of $19,875,000 to the Debtors’ outgoing Chief Executive Officer Thomas Horton (the
“Horton Severance Payment”). The Debtors and the Committee contend that all the
proposed payments are permitted under Section 1129(a)(4) pursuant to a plan of
reorganization and do not implicate the restrictions on the payment of administrative
expenses set forth in Section 503. For the reasons stated below, the Court approves the
payment of professional fees for Committee members over the Trustee’s objection, but
concludes that the Horton Severance Payment is not permissible.
BACKGROUND
Article 6.23 of the Plan proposes to pay the reasonable professional fees of certain
individual members of the Committee. The Committee has played a key role in the
negotiation of the Plan and developments in the case leading up to the Plan’s formation.
See Committee Confirmation Br. at 1-3 (ECF No. 9508); Hr’g Tr. 113:12-15, 125:1-14
(Aug. 15, 2013) (ECF No. 9033). Article 6.24 of the Plan contemplates approval of a
1 The Trustee, along with several other parties, raised a number of objections to the Plan. This
opinion addresses only two specific objections raised by the Trustee. The remaining objections ─ those of
the Trustee and other parties ─ were addressed by the Court on the record at hearings held on August 15,
2013, August 29, 2013 and September 12, 2013 (collectively, the “Confirmation Hearing”). As explained at
the Confirmation Hearing, the Plan is confirmed except to the extent provided herein.
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letter agreement with Mr. Horton (the “Chairman Letter Agreement”) that provides,
among other things, for severance of $19,875,000 in cash and stock to Mr. Horton. 	Under
this agreement, the employment of Mr. Horton as Chief Executive Officer will terminate
and he will be appointed as the Chairman of the Board of Directors for the new merged
entity. The proposed severance is “in recognition of Mr. Horton’s effort in leading the
Debtors’ restructuring and his role in enhancing the value of the Debtors and overseeing
the evaluation and assessment of the potential strategic alternatives that culminated in the
[m]erger, at the [c]losing, [and] subject to the execution of a standard release by Mr.
Horton against AMR and its [s]ubsidiaries.” See Motion of Debtors’ for Entry of Order
Authorizing and Approving Merger Agreement at ¶ 89 (ECF No. 6800).
While the payment of the Committee members’ professional fees has not
previously come before the Court, the Horton Severance Payment has. Six months ago,
the Debtors sought approval of the Horton Severance Payment as part of a motion to
approve the merger agreement that forms the basis of the Plan. At that time, the Trustee
objected to the approval of the Horton Severance Payment on substantially the same
grounds that she objects now, namely that it does not satisfy the requirements for payment
of a severance under Section 503(c). 	After a hearing on the matter, the Court granted the
merger motion but denied the Horton Severance Payment as impermissible under Section
503(c)(2). In re AMR Corp., 490 B.R. 158 (Bankr. S.D.N.Y. 2013) (the “Merger
Opinion”).2 In rejecting the Horton Severance Payment, the Merger Opinion
contemplated the possibility that the Debtors might seek approval of the Horton Severance
Payment under Section 1129(a)(4) as part of the confirmation of a plan of reorganization.
2 Familiarity with the Merger Opinion is assumed for purposes of this decision.
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But the Court’s prior decision declined to address that possibility, deciding instead to wait
to see if that issue would come before the Court. Id., at 170 n.16.
DISCUSSION
Payment of Fees to Members of the Committee
Section 503(b) of the Bankruptcy Code sets forth the requirements for payment of
an administrative expense claim in a Chapter 11 case. Section 503(b)(3)(F) provides for
payment of “actual, necessary expenses” for individual members of a committee
appointed under Section 1102 of the Bankruptcy Code, which includes an official
committee of unsecured creditors. Section 503(b)(4) permits reimbursement of
“reasonable compensation for professional fees rendered by an attorney” for certain
specified parties listed in Section 503(b). See 11 U.S.C. § 503(b)(4) (allowable only for
entities “whose expense is allowable under subparagraph (A), (B), (C), (D), or (E) of
paragraph (3) of this subsection”). Section 503(b)(3)(F) is not one of the subsections
listed in Section 503(b)(4). So while expenses incurred by a member of an official
committee are eligible for reimbursement under Section 503(b)(3)(F), the professional
fees of an attorney of such committee members are not covered by Section 503(b)(4). As
the Trustee notes in her objection, prior to the Bankruptcy Abuse Prevention and
Consumer Protection Act (“BAPCPA”) amendments of 2005, individual members of a
committee could seek payment for such professional fees under Section 503(b)(4). See
Trustee Objection at 18-22; 11 U.S.C. § 503(b)(4) (2000) (amended 2005); see In re
Lehman Bros. Inc., 487 B.R. 181, 190 n.7 (Bankr. S.D.N.Y. 2013), appeal docketed, 13-
cv-02211-RJS (S.D.N.Y. Apr. 3, 2013). In 2005, Congress rewrote Section 503(b)(4) to
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omit committee members as a party permitted to seek fees for professional compensation
as an administrative expense, despite retaining other parties as eligible for such a payment.
Given this statutory backdrop, the Trustee contends that any professional fees not
explicitly authorized as an administrative expense under Section 503(b) cannot be paid.
More specifically, the Trustee argues that members of the Committee are prohibited from
having their professional fees paid. The Debtors, on the other hand, rely on the language
of Sections 1123(b)(6) and 1129(a)(4) to argue that the payments are permissible. These
sections allow for payments to be made through a plan of reorganization if, respectively,
the payment is not inconsistent with applicable provisions of Chapter 11 and is reasonable.
The permissibility of fees of this kind has been thoughtfully addressed by two
other judges of this Court in Lehman Brothers, 487 B.R. 181 and In re Adelphia
Commc’ns Corp., 441 B.R. 6 (Bankr. S.D.N.Y. 2010). Both opinions conclude that such
fees are permissible under the Bankruptcy Code when proposed and approved through a
consensual plan. This Court reaches the same conclusion.
In Lehman Brothers, the court held that the broad language of Sections 1123(b)(6)
and 1129(a)(4) allowed members of a creditors’ committee to bargain to have their fees
paid through a plan of reorganization without meeting the requirements of Section 503(b).
See 487 B.R. at 193. Similarly, in Adelphia, the court held that creditors could be paid
reasonable fees as part of a Chapter 11 plan pursuant to Section 1129(a)(4) without a
showing of substantial contribution under Section 503(b).3 See 441 B.R. at 19. As
discussed at length in Lehman Brothers, Section 1123(b)(6) governs the contents of a plan
and allows for any provision in a plan so long as such provision is not inconsistent with
3 The court in Adelphia grappled with whether a request for fees and expenses must satisfy the
substantial contribution requirement embodied in Sections 503(b)(3)(D) and 503(b)(4). See 441 B.R. at 12.
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other provisions of the Bankruptcy Code. Lehman Bros., 487 B.R. at 186. As the Lehman
Brothers court noted, this section “is a broadly worded, open-ended invitation to the
creativity of those who are engaged in drafting plan language.” Lehman Bros., 487 B.R.
at 190. Similarly, the broad language of Section 1129(a)(4), which set forth confirmation
requirements for the Plan, allows for payments not otherwise contemplated in the
Bankruptcy Code so long as a court finds them reasonable. This provision endorses the
notion that a debtor will sometimes need to negotiate certain payments to stakeholders in
order to come to a consensual resolution and get a plan approved. Taken together, these
two provisions contemplate payments as part of a plan of reorganization to be put before
creditors for approval.
Nonetheless, the Trustee argues that Section 503(b) provides the exclusive vehicle
for these creditors to receive fees. The Court disagrees. As the court in Lehman Brothers
noted, “Section 503(b) is not a straitjacket, and the provisions of that [S]ection that
directly govern the allowance of administrative claims do not control the plan process.”
Lehman Bros., 487 B.R. at 186. The phrasing and structure of the statute is particularly
important to the Court’s analysis. As noted by the court in Adelphia, Section 503(b) is not
consensual in nature. See Adelphia, 441 B.R. at 12. Rather, it provides a creditor with an
affirmative right to a claim whether or not a debtor agrees to such a payment, provided
that the creditor meets the standards set forth therein. See id. “But importantly, [S]ection
503(b) does not provide in words or substance, that it is the only way in which fees of this
character may be absorbed by an estate.” Id. “That is so even though, from time to time,
the Code does exactly that.” Id., at 13 n.18 (citing 11 U.S.C. § 503(c) and noting that
“payments of the character [covered under Section 503(c)] can be made only if its rigid
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requirements are satisfied.”). Despite outright prohibitions of certain types of payments in
other places in the Bankruptcy Code, Section 503(b) does not contain any such prohibitive
or restrictive language. It merely sets forth the instances in which a creditor is definitively
entitled to a claim.4
Following the reasoning of the Adelphia and Lehman Brothers decisions,
therefore, the Court concludes that the professional fees contemplated by Article 6.23 of
the Plan are permitted under Sections 1129(a)(4) and 1123(b)(6) and approved given the
overwhelming support of the Plan by creditors.5 See Certification of Ballots of Craig E.
Johnson (ECF No. 9504).6
Horton Severance Payment
Section 503(c)(2) restricts severance payments made to insiders by setting
conditions on the coverage of such severance programs and limits on the amounts paid. It
provides in relevant part that:
there shall neither be allowed, nor paid ─
(2) a severance payment to an insider of the debtor, unless ─
(A) the payment is part of a program that that is generally applicable to all
full-time employees; and
4 The lack of such restrictive language is a presumptively intentional decision by Congress. See
Kucana v. Holder, 558 U.S. 233, 249 (2010) (“[W]here Congress includes particular language in one section
of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts
intentionally and purposely in the disparate inclusion or exclusion.”); cf TRW Inc. v. Andrews, 534 U.S. 19,
28 (2001) (“Where Congress explicitly enumerates certain exceptions to a general prohibition, additional
exceptions are not to be implied, in the absence of evidence of a contrary legislative intent.” )
5 Measured by dollar amount, each of the nine voting classes accepted the Plan by a margin of at
least 97% to 3%; measured by number of votes, each class accepted by a margin of at least 88% to 12%.
See Certification of Ballots of Craig E. Johnson at 21-22. With over 100,000 ballots mailed to creditors and
equity interest holders, only 61 voted to reject the Plan. See id.
6 As the parties seek the Court’s approval only for “reasonable” fees, the Court anticipates that the
parties will seek approval by motion for the precise amount of fees.
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(B) the amount of the payment is not greater than 10 times the amount of
the mean severance pay given to nonmanagement employees during the
calendar year in which the payment is made . . . .
11 U.S.C. § 503(c)(2). The Debtors do not contend that the Horton Severance Payment
meets the requirements set forth in Section 503(c)(2). Rather, they argue that the payment
can be approved as part of the Plan under Section 1129(a)(4), just like the professional
fees discussed above. But in contrast to the professional fees, severance payments are the
subject of a specific prohibition in the Bankruptcy Code. As noted in the Merger Opinion,
Section 503(c) was added to the Bankruptcy Code in 2005 as part of the BAPCPA
amendments to “eradicate the notion that executives were entitled to bonuses simply for
staying with the [c]ompany through the bankruptcy process.” In re Velo Holdings, Inc.,
472 B.R. 201, 209 (Bankr. S.D.N.Y. 2012) (citing In re Global Home Prods., LLC, 369
B.R. 778, 783-84 (Bankr. D. Del. 2007)). The effect of adding the section was to put in
place “a set of challenging standards” and “high hurdles” for debtors to overcome before
such payments could be paid. Global Home Prods., 369 B.R. at 784-85.
Importantly, the language contained in Section 503(c) stands in stark contrast to
the language of Section 503(b), the section of the Code pertaining to the professional fees
discussed above. On the one hand, Section 503(b) provides a vehicle for the payment of
such fees. See 11 U.S.C. § 503(b) (“there shall be allowed, administrative expenses . . .
.”). On the other hand, the language of Section 503(c) is prohibitive, providing that a
severance payment that does not comply with the applicable provisions therein “shall
neither be allowed, nor paid.” 11 U.S.C. § 503(c). If Section 1129(a)(1)’s instruction that
a plan must comply with all applicable provisions of the Bankruptcy Code means
anything, the Court cannot approve a payment that is clearly prohibited by another, more
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specific part of the Bankruptcy Code. See RadLAX Gateway Hotel, LLC v. Amalgamated
Bank, 132 S. Ct. 2065, 2071 (2012) (noting that “[t]he general/specific canon is perhaps
most frequently applied to statutes in which a general permission or prohibition is
contradicted by a specific prohibition or permission. To eliminate the contradiction, the
specific provision is construed as an exception to the general one.”); see Adelphia, 441
B.R. at 13 n.18 (noting that meeting the requirements of Section 503(c) was the only
method of approving a severance payment to a debtors’ insider in the context of a Chapter
11 case). It is not surprising then that courts disfavor attempts to bypass the requirements
of section 503(c) given the history and intent of the section. See Velo Holdings, 472 B.R.
at 209; RadLAX, 132 S. Ct. at 2071 (the general/ specific canon holds true particularly
where Congress “has deliberately targeted specific problems with specific solutions.”).7
Relying heavily on In re Journal Register, 407 B.R. 520 (Bankr. S.D.N.Y. 2009),
the Debtors argue that the Horton Severance Payment is outside the scope of Section
503(c) and within the authority of Section 1129(a)(4). Debtors’ Confirmation Br. at 15
(ECF No. 9516) (asserting that the Horton Severance Payment “is indistinguishable from
Journal Register. . . .”). But Journal Register is, in fact, distinguishable. In that case, the
court approved a key employee “[p]ost–[e]mergence [i]ncentive [p]lan” pursuant to
Section 1129(a)(4) through a plan of reorganization. The decision overruled the Trustee’s
objection that the payments were subject to the limitations of Section 503(c)(1), which
prohibits payments to a debtor’s insiders for the “purpose of inducing such person to
remain with the debtor’s business” unless certain other criteria are met. 11 U.S.C. §
7 It should be noted that “[S]ection 503(c) was not intended to foreclose a Chapter 11 debtor from
reasonably compensating employees, including ‘insiders,’ for their contribution to the debtors’
reorganization.” In re Dana Corp., 358 B.R. 567, 575 (Bankr. S.D.N.Y. 2006) (emphasis in original)
(citations omitted). “Accordingly, [S]ection 503(c)(3) gives the court discretion as to bonus and incentive
plans, which are not primarily motivated by retention or in the nature of severance.” Id. at 576.
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503(c)(1); Journal Register, 407 B.R. at 536. The court in Journal Register found that
the insider payments in that case were not retentive in nature and therefore were not
subject to the prohibitions set forth in Section 503(c)(1). Journal Register, 407 B.R. at
536 (noting that employees were entitled to receive incentive payments even if they left
the company before the payment date and therefore “the principal purpose of the
[i]ncentive [p]lan is not to induce participating employees to remain with the Debtors, and
503(c)(1) does not apply”). By contrast, the Horton Severance Payment is precisely the
type of compensation implicated by Section 503(c)(2). Indeed, despite some suggestions
at the Confirmation Hearing to the contrary, there can be no credible dispute that the
Horton Severance Payment is a severance payment. 	See Ex. G to Merger Motion (ECF
No. 6800) (Chairman Letter Agreement referring to payment as “severance”); AMR, 490
B.R. at 166-67.
The Debtors raise a few other arguments that were rejected in the Merger Opinion
and that fare no better here. The Debtors argue that the Horton Severance Payment is
being paid post-emergence by non-estate assets and therefore is not subject to the
requirements of Section 503. Hr’g Tr. 100: 5-10 (Aug. 15, 2013) (asserting that the
obligations under the Chairman Letter Agreement “are obligations payable by . . . the new
merged company, and . . . only take effect . . . if the plan goes effective.”). But the Horton
Severance Payment is a condition precedent to the plan going effective, and therefore
must be paid in order for the Debtors to emerge from bankruptcy. See Plan at Art. 6.24;
Disclosure Statement at 68 (ECF No. 8591) (“It is a condition precedent to the
effectiveness of the Plan and the Merger Agreement that the Chairman Letter Agreement
and the proposed payments and benefits to Mr. Horton provided therein be approved by
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the Bankruptcy Court and be in effect.”). As the Court noted in its Merger Opinion, the
argument that the Horton Severance Payment will not be paid by estate assets is a legal
fiction. See AMR Corp., 490 B.R. at 168 (“As a practical matter . . . the proposed
severance would be paid without any action from [the merged entity], an entity that will
consist of 72% of the property of the reorganized Debtors.” ).
The Debtors further contend that because the Chairman Letter Agreement contains
provisions that will remain in effect after the effective date (such as the provision
providing for Mr. Horton to serve as chairman of the board of the merged company), it is a
post-effective date obligation and is not subject to Section 503(c)(2). Hr’g Tr. 112:20-
113:19 (Aug. 15, 2013). That argument fails as well. The Chairman Letter Agreement
provides for independent compensation above and beyond the Horton Severance Payment
for Mr. Horton’s service as chairman of the merged entity. See Chairman Letter
Agreement at 2. That compensation has not been objected to by any party. The only
objection has been to the Horton Severance Payment, which is an obligation that must be
satisfied under the Plan before the Debtors can emerge from bankruptcy.
The Debtors also once again argue that approval of the Horton Severance
Agreement is crucial to ensuring Mr. Horton’s continued involvement with the merged
entity and maximizing value for the new company. Hr’g Tr. 119:15-120:1 (Aug. 15,
2013); Debtors’ Confirmation Br. at 2, 5-7. The Court does not question the value of Mr.
Horton’s assistance in orchestrating a smooth transition after the Debtors’ emerge from
bankruptcy. But if the merged entity wants to ensure Mr. Horton’s presence, it is free to
pay him without the oversight of the Bankruptcy Court or the confines of the Bankruptcy
Code. AMR, 490 B.R. at 169. In order to obtain approval from this Court, however, the
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Debtors must comply with applicable law, and the Chairman Agreement Letter fails to do
so.
Finally, even assuming that the severance here is not covered by Section 503(c),
the Chairman Letter Agreement would need to be reasonable to satisfy Section 1129(a)(4).
And the Court concludes that it is not. The reasonableness standard of 1129(a)(4) is
vague, and the case law provides little guidance on its meaning. The court in Journal
Register, however, examined the standard in evaluating a post-emergence incentive
package. Journal Register, 407 B.R. at 537. It noted that the reasonableness standard
“will clearly vary from case to case and, among other things, will hinge to some degree
upon who makes the payments at issue, who receives those payments, and whether the
payments are made from assets of the estate.” Id. (quoting Mabey v. Southwestern Elec.
Power Co. (In re Cajun Elec. Power Coop., Inc.), 150 F.3d 503, 517 (5th Cir.1998), cert.
denied, 526 U.S. 1144 (1999)).
In evaluating reasonableness here, the Debtors point to the market-level pay of
CEOs of merged airlines to justify the amount of the Horton Severance Payment. But as
noted in this Court’s prior decision, those mergers did not occur in a Chapter 11
bankruptcy. See AMR Corp., 490 B.R. at 169-170. For a merger in bankruptcy, the
standards of Section 503(c) would certainly inform the analysis, even if they might not be
dispositive. Moreover, it would seem sensible to evaluate the reasonableness of the
Horton Severance Payment in light of other compensation agreements between these same
parties. And in fact, the Debtors entered into a pre-petition agreement with Mr. Horton
whereby he was to receive a maximum of $15.3 million dollars if the company was
involved in a merger. See Trustee Objection at 14-15. It is unclear why Mr. Horton
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should receive $4.5 million more now than was contemplated when he took the reins of
the Debtors on the eve of the Chapter 11 filing less than two years ago, presumably
negotiating that prior agreement with these bankruptcy cases in mind.8 Moreover, in
considering the facts of this case, there have been significant sacrifices by the Debtors’
employees, most notably by its union members, that allowed the Plan to move forward.
These sacrifices should be considered in evaluating the reasonableness of this proposed
payment, notwithstanding the very favorable recoveries provided by the Plan to creditors
and equity holders.
Turning to the other factors relevant to 1129(a)(4), the court in Journal Register
noted that the payments were going to several employees and were being paid by a
secured creditor that was purchasing the debtor. By contrast, the payment here would be
to one executive for services rendered during the bankruptcy and would be coming from
estate assets, or, at the very least, a new entity comprised of 72% of the Debtors’ assets.
8 	The Court notes that it specifically asked the Debtors for briefing on the issue of Mr. Horton’s pre-
petition severance agreement after the Trustee raised this issue at the Disclosure Statement hearing. The
Debtors, however, provided very limited information on the subject. In the end, while the Debtors noted that
the pre-petition severance agreement has now expired, they did not dispute its essential terms.
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CONCLUSION
For the reasons explained above, the Court approves the payment of professional
fees for Committee members set forth in Article 6.23 of the Plan but does not approve the
Horton Severance Payment contemplated by Article 6.24 of the Plan and the Chairman
Letter Agreement. For the reasons stated on the record at the Confirmation Hearing,
therefore, the Plan is confirmed except to the extent provided herein. The Debtors shall
settle an order consistent with this Opinion on five days’ notice.
Dated: New York, New York
September 13, 2013
/s/ Sean H. Lane
UNITED STATES BANKRUPTCY JUDGE
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