Case 19-10603-JTD Doc 352-1 Filed 08/26/20 Page 1 of 15

Exhibit 1
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IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF DELAWARE

)
In re: ) Chapter 11
)
MABVAX THERAPEUTICS HOLDINGS, ) Case No. 19-10603 (JTD)
INC., et al.,1 )
)
Debtors. ) Jointly Administered
)
) Hearing Date: Sept. 21, 2020 at 2:00 p.m. (ET)
) Obj. Deadline: Sept. 9, 2020 at 4:00 p.m. (ET)

MOTION BY PLAN ADMINISTRATOR FOR ENTRY OF AN ORDER PURSUANT

TO BANKRUPTCY RULE 9019 APPROVING SETTLEMENT AGREEMENT

David Hansen, in his capacity as Plan Administrator for the Post-Effective bankruptcy

estates of MabVax Therapeutics Holdings, Inc. and MabVax Therapeutics, Inc., the debtors and

debtors in possession (together, the “Debtors”), in the above-captioned chapter 11 cases (the

“Chapter 11 Cases”), by and through their undersigned counsel, hereby submits this motion for

entry of an order, substantially in the form attached hereto as Exhibit A, approving the Settlement

Agreement (defined below) between the Debtors, Sichenzia Ross Ference LLP (“SRF”) and

Harvey Kesner (“Kesner” and, collectively with the Debtors and SRF, the “Parties”). The

Settlement is intended to resolve, inter alia,

A copy of the Settlement

Agreement is attached hereto as Exhibit B. In support of this Motion, the Debtors respectfully

state as follows:

1
The last four digits of the taxpayer identification numbers of the Debtors follow in parentheses: (i) MabVax
Therapeutics Holdings, Inc. (7903) and (ii) MabVax Therapeutics, Inc. (1765). The Debtors’ mailing address is
11535 Sorrento Valley Road, Suite 400, San Diego, CA 92121.

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JURISDICTION

1. This Court has jurisdiction over this Motion under 28 U.S.C. § 1334. This matter

is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(A), (K), and (O). Venue is proper

before this Court pursuant to 28 U.S.C. §§ 1408 and 1409. The statutory predicates for the relief

requested herein are section 105(a) of chapter 11 of the Bankruptcy Code and Rule 9019 of the

Bankruptcy Rules.

BACKGROUND

A. The Chapter 11 Cases

2. On March 21, 2019 (the “Petition Date”), the Debtors each filed a voluntary

petition for relief under chapter 11 of the Bankruptcy Code commencing these chapter 11 cases.

The Debtors’ bankruptcy cases are being jointly administered pursuant to Bankruptcy Rule

1015(b).

3. The factual background regarding the Debtors, including their current and historical

business operations and Debtors’ allegations precipitating these Chapter 11 Cases, is set forth in

detail in the Declaration of J. David Hansen in Support of Debtors’ Chapter 11 Petitions and First

Day Motions [D.I. 10]. The SRF Defendants disputed Debtors’ allegations and the Hansen

Declaration and have asserted numerous affirmative defenses set forth in detail in the Answer of

Defendant Sichenzia Ross Ference LLP to Complaint and Defendant Harvey Kesner’s Answer to

Complaint [SRF Action, ECF No. 42 – 43].

4. By Order of this Court [D.I. 102], on April 23, 2019, the Debtors retained Block &

Leviton post-petition as special litigation counsel to the Debtors to continue to prosecute the SRF

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Action (defined below). Following its post-petition retention, Block & Leviton continued to

prosecute the SRF Action as described below.

5. On May 7, 2019, the Court entered an order [ECF No. 141] approving the sale of

substantially all of the Debtors’ assets to BioNTech AG. The Debtors retained certain litigation

claims including, among others, the SRF Action.

6. On March 5, 2020, the Court entered an order [D.I. 327] confirming the Second

Amended Combined Disclosure Statement and Joint Plan of Liquidation for Debtors (the “Plan”).

The Plan became effective, and was substantially consummated, on March 20, 2020 (the

“Effective Date”). See D.I. 328. The Plan expressly retained prosecution of the SRF Action for

the benefit of the Post-Effective Debtors and stakeholders,

7. Upon occurrence of the Effective Date, J. David Hansen was appointed as plan

administrator (the “Plan Administrator”) of the Debtors’ estates. The Plan Administrator is

tasked with and authorized to liquidate the Post-Effective Date Debtors’ assets in accordance with

the Plan, including prosecuting, inter alia, the SRF Action.

B. The SRF Action

8. On September 10, 2018—approximately five-and-a-half months before the Petition

Date—the Debtors2 filed the complaint in the SRF Action against the SRF Defendants in the

Superior Court of California for the County of San Diego.

9. The Debtors’ allegations in the SRF Action are described in detail in the First-Day

Declaration and the operative Complaint in the SRF Action. [SRF Action, ECF No. 1-2]. The

Debtors asserted certain claims against the SRF Defendants and certain other individual partners

of Sichenzia Ross Ference LLP arising from the SRF Defendants’ prior representation of Debtors,

2
The sole named plaintiff in the settled action is MabVax Therapeutics Holdings, Inc. The releases contemplated by
the Settlement apply equally to both Debtors. The Plan substantially consolidated the Debtors’ assets and liabilities.

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including, inter alia, claims for negligent professional practice, breach of contract, and breach of

fiduciary duty.

10. On October 3, 2018, the SRF Defendants removed the SRF Action to the United

States District Court for the Southern District of California (the “California Court”) [SRF Action

ECF No. 1].

11. On April 23, 2019, as noted, this Court granted the Debtors’ application to retain

Block & Leviton LLP as Special Litigation Counsel to prosecute the Settled Action [ECF No.

102].

12. On May 9, 2019, the California Court granted the motion to dismiss of certain

individual partners of Sichenzia Ross Ference and denied the motions to dismiss and/or transfer

filed by the SRF Defendants [SRF Action, ECF No. 36]. On July 1, 2019, the California Court

denied Harvey Kesner’s motion for certification of an interlocutory appeal [SRF Action, ECF No.

48].

13. On August 27, 2019, the Debtors and the SRF Defendants engaged in settlement

discussions at an Early Neutral Evaluation conference presided over by the magistrate judge

assigned to the SRF Action. Those negotiations were unsuccessful.

14. Over the months that followed, the parties to the SRF Action engaged in hard-

fought litigation. They exchanged voluminous written discovery requests, made substantial

document productions, and engaged in extensive motion practice before the California Court.

15. On February 25, 2020, at the request of the parties to the SRF Action, the California

Court stayed the SRF Action to facilitate a mediation by limiting the parties’ expenditure of

resources on the litigation.

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Settlement Negotiations

16. The mediation was conducted by Jed Melnick, Esq. of JAMS, a prominent

nationally recognized mediator (the “Mediator”). The mediation was originally scheduled to take

place in person on April 20, 2020. Due to the COVID-19 pandemic, the mediation was rescheduled

and ultimately took place by Zoom on June 11, 2020. Prior to the mediation, the parties exchanged

lengthy mediation statements. At the mediation, which was attended by the Plan Administrator,

the SRF Defendants, and their respective counsel, the parties engaged in a candid exchange of

views and a robust discussion of the strengths and weaknesses of Debtors’ case and the SRF

Defendants’ likely defenses.

17. The parties to the SRF Action made substantial progress during the mediation but

were unable to reach agreement at the mediation. The parties continued their negotiations in the

days following the mediation, facilitated by the Mediator, and were ultimately able to reach

agreement on the terms of the Settlement.

SUMMARY OF THE MATERIAL TERMS OF THE SETTLEMENT

18.

i)

ii)

3
This summary of material terms of the Settlement has been included for convenience. It in no way alters, changes,
or amends the actual terms set forth in the Settlement itself. In the event that there are any inconsistencies between
this summary and the Settlement, the language set forth in the Settlement controls.

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iii)

19. The Debtors believe that the terms of the Settlement are beneficial and that approval

of the Settlement will further the paramount interests of the estates’ creditors.

RELIEF REQUESTED

20. By this Motion, the Debtors seek the entry of an order, pursuant to section 105(a)

of the Bankruptcy Code and Rule 9019 of the Bankruptcy Rules, approving the terms of the

Settlement and authorizing the Debtors to take any and all actions necessary to effectuate the

Settlement.

BASIS FOR RELIEF

21. Pursuant to Rule 9019 of the Bankruptcy Rules, bankruptcy courts are authorized

to approve a compromise following the filing of a motion and a hearing with notice to the creditors.

Fed. R. Bankr. P. 9019(a). In reviewing a proposed settlement, the Court must determine that (1) it

is “fair and equitable,” Protective Comm. for Ind. Stockholders of TMT Trailer Ferry, Inc. v.

Anderson, 390 U.S. 414, 424 (1968), and (2) in the best interests of the estate, In re Best Prods.

Co., 168 B.R. 35, 50 (Bankr. S.D.N.Y. 1994). Rule 9019(a) commits the approval or rejection of

a settlement to the sound discretion of the bankruptcy court. In re Key3Media Group, Inc., 336

B.R. 87, 92 (Bankr. D. Del. 2005).

4
For avoidance of doubt, the Settlement does not release certain claims in various related actions identified in the
Settlement, including certain claims brought by Kesner against persons arguably affiliated with Debtors (including
the law firm Baker Botts L.L.P.) and certain claims brought by the Debtors against various former investors in the
Debtors (the “Excluded Matters”). The Settlement makes clear that it does not impair the ability of any party to those
matters to litigate those actions.

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22. “Settlement[s] … are … encouraged, in bankruptcy proceedings, as they provide

for an often needed and efficient resolution of the bankruptcy case.” In re TSIC, Inc., 2008 WL

3845378 (Bankr. D. Del. Aug. 18, 2008) (citing Myers v. Martin (In re Martin), 91 F.3d 389, 393

(3d Cir.1996)). The court does not have to be convinced that the settlement is the best possible

compromise. Nellis v. Shugrue, 165 B.R. 115, 123 (S.D.N.Y.1994). Rather, it need only conclude

that “the compromise is fair, reasonable, and in the best interest of the estate.” In re Louise's,

Inc., 211 B.R. 798, 801 (Bankr. D. Del. 1997). In evaluating a proposed settlement, the settlement

need only be “above the lowest point in the range of reasonableness.” In re Pa. Truck Lines, Inc.

v. Pa. Truck Lines, Inc., 150 B.R. 595, 598 (E.D.Pa.1992).

23. The Third Circuit has identified four criteria that the Court should consider in

evaluating a settlement: (a) the probability of success in litigation; (b) the likely difficulties in

collection; (c) the complexity of the litigation involved, and the expense, inconvenience and delay

necessarily attending it; and (d) the paramount interest of creditors. In re Martin, 91 F.3d 389, 393

(3d Cir. 1996); see also In re RFE Industries, Inc., 283 F.3d 159, 165 (3d Cir. 2002) (reiterating

the Martin factors).

24. All four Martin factors weigh in favor of approval of the Settlement. With respect

to the first and third factors, the Debtors and the SRF Defendants both believe in the merits of their

legal positions, but the litigation of the SRF Action has already been extraordinarily complex,

time-consuming, and expensive with the outcome uncertain. Given the practical difficulties of

litigating in the midst of a pandemic, the timeline for resolving the SRF Action is highly uncertain

and further delays are almost certain.

25.

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26. With respect to the paramount interest of creditors, the Settlement is in the best

interests of creditors insofar as

27. In short, the SRF Action was litigated by sophisticated counsel whose interests were

fully aligned with the Debtors through contingent compensation. Those counsel negotiated the

Settlement with the SRF Defendants in good faith and at arm’s length with the assistance of an

experienced and highly respected Mediator. The Settlement represents a reasonable resolution for

the benefit of these estates.

28. Ultimately, given the costs, risks, and delay associated with litigation, the Debtors

believes that the terms of the Settlement are fair and reasonable, satisfy the standard promulgated

by the Third Circuit governing compromise of controversies under Bankruptcy Rule 9019, and

should be approved.

NOTICE AND NO PRIOR REQUEST

29. Notice of this Application shall be provided to: (a) the Office of the United States

Trustee for the District of Delaware; (b) counsel to proposed DIP lender; (c) counsel to Oxford

Finance LLC, the pre-petition secured lender; (d) the Debtors’ twenty (20) largest unsecured

creditors; and (e) all parties requesting notice pursuant to Bankruptcy Rule 2002. In light of the

nature of the relief requested in this Application, the Debtors respectfully submit that no further

notice is necessary.

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30. No prior request for the relief sought in this application has been made to this or

any other court.

WHEREFORE, the Debtors respectfully request that this Court enter an order,

substantially in the form annexed hereto, granting the relief requested in the Application and such

other and further relief as is just and proper.

Dated: August 26, 2020 Respectfully submitted,

Wilmington, Delaware
THE ROSNER LAW GROUP LLC

/s/ Jason A. Gibson

Frederick B. Rosner (DE 3995)
Scott J. Leonhardt (DE 4885)
Jason A. Gibson (DE 6091)
Zhao (Ruby) Liu (DE 6436)
824 N. Market Street, Suite 810
Wilmington, Delaware 19801
Tel.: (302) 777-1111
Email: rosner@teamrosner.com
leonhardt@teamrosner.com
gibson@teamrosner.com
liu@teamrosner.com

Counsel to the Plan Administrator

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Exhibit A
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IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF DELAWARE

)
In re: ) Chapter 11
)
MABVAX THERAPEUTICS HOLDINGS, ) Case No. 19-10603 (JTD)
INC., et al.,1 )
)
Debtors. ) Jointly Administered
)
) Re: D.I.

ORDER GRANTING MOTION BY PLAN

ADMINISTRATOR FOR ENTRY OF AN ORDER PURSUANT
TO BANKRUPTCY RULE 9019 APPROVING SETTLEMENT AGREEMENT

Upon the motion (“Motion”)2 filed by the Plan Administrator for entry of an order

approving a settlement between the Debtors, Sichenzia Ross Ference LLP and Harvey Kesner, all

as more fully described in the Motion; and the Court having jurisdiction over the matters raised in

the Motion pursuant to 28 U.S.C. §§ 157 and 1334, the Amended Standing Order of Reference

from the United States District Court for the District of Delaware, dated February 29, 2012 and

section XV.M of the Second Amended Combined Disclosure Statement and Joint Plan of

Liquidation for Debtors; and the Court having found that this is a core proceeding pursuant to 28

U.S.C. § 157(b)(2) and that the Court may enter a final order consistent with Article III of the

United States Constitution; and the Court having found that venue of this proceeding and the

Motion in this district is proper pursuant to 28 U.S.C. §§ 1408 and 1409; and the Court having

found that proper and adequate notice of the Motion has been given and that no other or further

notice is necessary; and the Court having found that good and sufficient cause exists for the

1
The last four digits of the taxpayer identification numbers of the Debtors follow in parentheses: (i) MabVax
Therapeutics Holdings, Inc. (7903) and (ii) MabVax Therapeutics, Inc. (1765). The Debtors’ mailing address is 11535
Sorrento Valley Road, Suite 400, San Diego, CA 92121.
2
Capitalized terms used herein but otherwise not defined shall have the meaning ascribed to them in the
Motion.

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granting of the relief requested in the Motion after having given due deliberation upon the Motion

and all pleadings before the Court in connection with the Motion, it is HEREBY ORDERED

THAT:

1. The Motion is GRANTED.

2. The Settlement Agreement, attached hereto as Exhibit 1, is fair, equitable,

and reasonable, and is hereby approved. The Debtors are authorized to take such actions as are

necessary to consummate the Settlement Agreement.

3. The clerk is authorized and directed to update the Claims Register in these

chapter 11 cases to reflect that Claim No. 8, as amended, is withdrawn.

4. This Order and the Settlement Agreement shall be binding upon the

Debtors, Sichenzia Ross Ference LLP, Harvey Kesner, and all other parties in interest.

5. This Court retains jurisdiction with respect to all matters arising from or

related to the implementation or interpretation of this Order.

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Exhibit 1

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Exhibit %

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