Hearing Date: October 19, 2011 Time: 10:00 a.m. ROSEN & ASSOCIATES, P.C.

Attorneys for Kenneth A. Adler 747 Third Avenue New York, NY 10017-2803 (212) 223-1100 Sanford P. Rosen UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK -----------------------------------------------------------x In re THELEN LLP, Debtor. -----------------------------------------------------------x

Chapter 7 Case No. 09-15631 (ALG)

OBJECTION OF KENNETH A. ADLER TO (I) TRUSTEES MOTION, PURSUANT TO BANKRUPTCY RULE 9019, FOR AN ORDER APPROVING SETTLEMENT AGREEMENTS WITH CERTAIN FORMER PARTNERS OF THE DEBTOR; AND (II) TRUSTEES APPLICATION TO FILE SUCH SETTLEMENT AGREEMENTS UNDER SEAL TO THE HONORABLE ALLAN L. GROPPER, UNITED STATES BANKRUPTCY JUDGE: Kenneth A. Adler, by his attorneys, Rosen & Associates, P.C., as and for his objection to (a) the motion (the Motion) of Yann Geron (the Trustee) of the estate of Thelen LLP (the Debtor), pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure, for an order (i) approving settlement agreements between the Trustee and certain former partners of the Debtor (the Settling Partners) 1, (ii) finding such settlements are in good faith, and (iii) barring certain claims against Settling Partners and (b) the application of the Trustee to file such settlement agreements under seal (the Seal Application), respectfully represents as follows:

Introduction 1. Mr. Adler is a former partner of the Debtor. As such, he has an interest in

assuring that the Trustee maximizes the value of the Debtors estate. Given that the Trustee, in large measure, is monetizing the estate through the settlement of the estates claims against former partners, Mr. Adler has a particular interest in assuring that the settlement process and the settlements themselves are transparent and fair. As to the settlements that are the subject of the Motion, they are neither. Objection to Motion to Approve Settlement Agreements 2. The Trustee has failed to provide this Court with sufficient facts that would

enable it both to make an informed and independent determination that the proposed settlement agreements are fair and equitable and to canvass the issues and see whether the settlement falls below the lowest point in the range of reasonableness. In re AppliedTheory Corporation, 2008 WL 1869770, at *3 (citing Cosoff v. Rodman (In re W.T. Grant Co.), 699 F.2d 599, 608 (2d Cir.), cert. denied, 464 U.S. 822, 104 S.Ct. 89, 78 L.Ed.2d 97 (1983)). 3. He merely asserts, in the most conclusory fashion, that the settlements

should be approved because they are the product of his business judgment, were negotiated at arms length among sophisticated counsel, reflect the fair value of the Claims and defenses, are fair, fall within the range of reasonableness, and are cost-efficient. 4. The Trustee, other than providing a very general description of the claims

against and defenses of the Settling Partners as a group, has failed to discuss their merits, the likelihood of success of any litigation, its complexity or expense, or the collectability of any judgment.

Unless otherwise defined herein, defined terms shall have the meaning ascribed to them in the Motion or the Trustees supplemental Declaration, as the case may be.

5.

While the Trustee discloses some of the factors he considered in arriving at

the settlement amounts, e.g., each Settling Partners share of equity points of the Debtor in the relevant period [and] corresponding capital contribution requirements, and other relevant financial information developed from the Debtors records, and states that the aggregate settlement payment includes certain discounts on disputed portions of the Claims, while providing for repayment in full of other portions of the Claims, Motion at 8, the Trustee does not disclose all the factors he considered. Nor does he disclose the relative weight he gave to each. 6. The Trustee admits that he has not completed his investigation of the so-

called Jewel Claims. Consequently, he could not have assessed their value. Nevertheless, he relinquishes them through negative covenants contained in the settlement agreements. And, he concedes that his decision was dictated solely by the refusal of the Settling Partners to settle without them. 2 Although the Trustee is certainly free, in his negotiations, to recognize the power in numbers, as implied by the Settling Partners stance, his decision to yield to them without investigating and valuing the Jewel Claims could not have been based on any rational judgment. 7. Assuming the Trustees description of the Most Favored Term provision

of the proposed settlement agreements is accurate, the provision itself is deeply flawed. Paragraph 10 of the Motion provides: Most Favored Terms: In order to assure all other partners of egalitarian treatment, the Trustee has agreed that he will not enter into any settlement with any other former partners of the Debtor on terms materially less favorable to the Debtors estate, viewed in the totality of the circumstances, than those contained in the settlement agreements with the
The Trustees Motion also is internally inconsistent and confusing. In paragraph 10 of the Motion and paragraph 13 of the Declaration, the Trustee, in summarizing the terms of the proposed settlement agreements states that the Settling Partners will receive a release from the Trustee except with respect to the Jewel Claims. However, in paragraph 14 of the Motion, the Trustee refers to covenants that shield the Settling Partners from these claims.
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Settling Partners. Violation of this provision will result in the creation of a super-priority administrative expense claim in favor of the Settling Partners in an amount adequate to equalize the treatment of the Settling Partners. Motion at 10. See also Declaration at 8. 8. The Trustees agreement not to enter into other settlements with non-

settling partners on terms materially less favorable to the Debtors estate, viewed in the totality of the circumstances creates a standard that is not susceptible of objective application. Worse, it precludes the Trustee from entering into other less favorable settlements with non-settling partners whose circumstances are different, even though those settlements may best serve the interests of the estate and its creditors, as opposed to the Settling Partners. 9. Additionally, the methodology proposed with respect to the penalty for a

breach is vague; there is no objective means of measuring the amount of the super-priority administrative expense claim, and it is unclear whether the claim is allocated to the Settling Partners as a group or individually. As a practical matter, the threat of the imposition of such a penalty is sufficient to deter the Trustee from entering into other less favorable settlements in spite of the estates interests, or the fairness of such other settlements. 10. Lastly, under the proposed settlement agreements, third parties, including

non-settling partners, will be enjoined from prosecuting claims against Settling Partners. As a bargained for component of the settlement, the Trustee has agreed to seek entry of an order barring certain third parties from commencing or continuing actions against Settling Partners to the extent such actions relate to the Claims released against the Settling Partners by the Estate Parties. Motion at 10. 11. While the Trustee, in paragraph 13 of his Declaration, attempts to clarify

his description by explaining that [t]here is nothing specific or implied in the Settlement Agreement that would release direct claims of third parties against the Settling Partners, 4

Declaration at 13, the statement clearly is inconsistent with the Motion. Although the actual provision, as opposed to the Trustees description of it, indeed may seek only to protect the Settling Partners from third party claims that are derivative of estate claims and not from claims that are personal to the third parties, such personal claims may nevertheless relate to the Claims released against the Settling Partners by the estate, and thus be enjoined. Therefore, the provision as described by the Trustee is not sufficiently tailored so as to protect the rights of third parties, including non-settling partners having personal claims against Settling Partners. Objection to Seal Application 12. In his Seal Application, the Trustee seeks, pursuant to section 105(a) of the

Bankruptcy Code, to file the settlement agreements under seal. He asserts, without citing one case, that such relief is warranted because (a) the settlement agreements contain personal financial information of the partners, which is unnecessary for the approval of the agreements, and (b) the dissemination of the material would be a breach of the confidentiality provision of the agreements. 13. Although the Trustee seeks authority under section 105 of the Bankruptcy

Code, the relief is available only under section 107 of the Bankruptcy Code. And, under this Circuits standard, he has failed to satisfy, and cannot satisfy, the high burden necessary to seal the settlement agreements. Such extraordinary relief is available to protect an individual from the risk of identity theft or other unlawful activity. Here, neither risk is present. Rather, the Trustee is seeking to shield the settlement agreements from the scrutiny of parties in interest, including other non-settling partners. This unfairly deprives such parties in interest from access to the terms of other settlements, which is critical both to their assessment of the reasonableness of a particular settlement with the Settling Partners and to the ability of non-settling partners to exercise judgment as to their own possible settlements. 14. Section 107(a) of the Bankruptcy Code provides that [e]xcept as provided

in subsections (b) and (c) . . . a paper filed in a case under this title and the dockets of a 5

bankruptcy court are public records and open to examination by an entity at reasonable times without charge. 11 U.S.C. 107(a). This section codifie[s] the Supreme Courts decision in Nixon v. Warner Commcn, Inc., 435 U.S. 589, 59798, 98 S.Ct. 1306, 55 L.Ed.2d 570 (1978), in the bankruptcy setting by recognizing the common-law right of public access . . . . In re Food Management Group, LLC, 359 B.R. 543, 553 (Bankr. S.D.N.Y. 2007) (citations omitted). See also Video Software Dealers Assn v. Orion Pictures Corp. (In re Orion Pictures Corp.), 21 F.3d 24, 26 (2d Cir.1994) (policy of open inspection, codified generally in 107(a) of the Bankruptcy Code evidences congresss [sic] strong desire to preserve the publics right of access to judicial records in bankruptcy proceedings). 15. In the context of personal financial information of individuals, section

107(c) establishes an exception to the general right of access where under compelling or extraordinary circumstances an exception is necessary. In re Food Management Group, LLC, 359 B.R. 543, 554 (quoting In re Orion Pictures Corp., 21 F.3d. 24, 27) (Congress, itself, has recognized that under compelling or extraordinary circumstances, an exception to the general policy of public access is necessary.). 16. That section provides in pertinent part: (c)(1) The bankruptcy court, for cause, may protect an individual, with respect to the following types of information to the extent the court finds that disclosure of such information would create undue risk of identity theft or other unlawful injury to the individual or the individuals property: (A) Any means of identification (as defined in section 1028 (d) of title 18) contained in a paper filed, or to be filed, in a case under this title. (B) Other information contained in a paper described in subparagraph (A).

17.

Here, the Trustee has failed to set forth any facts that demonstrate that there

are compelling and extraordinary circumstances, i.e., undue risk of identity theft or other unlawful injury to the Settling Partners, warranting an exception to the general right of access and the Bankruptcy Codes policy of transparency. WHEREFORE, Mr. Adler respectfully requests that this Court deny the Motion and the Seal Application and grant him such other and further relief as is just and proper. Dated: New York, New York October 14, 2011 ROSEN & ASSOCIATES, P.C. Attorneys for Kenneth A. Adler By: /s/Sanford P. Rosen Sanford P. Rosen 747 Third Avenue New York, NY 10017-2803 (212) 223-1100