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Tennenbaum Capital Partners LLC v. Kennedy

United States District Court, E.D. Pennsylvania

October 24, 2014

TENNENBAUM CAPITAL PARTNERS LLC, Plaintiff,
v.
MICHAEL T. KENNEDY, Defendant.

MEMORANDUM

C. DARNELL JONES, II, District Judge.

Defendant Michael T. Kennedy ("Defendant") brings two motions (1) to stay the execution of the judgment pending his United States Bankruptcy Court for the District of Delaware adversary case, to repay all fees and expenses, and to assess damages and sanctions, and (2) to vacate the judgment pursuant to Federal Rule of Civil Procedure ("FRCP") 60(b) and (d). Plaintiff has responded and opposed these motions and has moved for a writ of revival to reissue execution of the judgment. The Court hereby DENIES Defendant's Motions and ORDERS the Clerk of Court to reissue the writ of execution for this judgment.

I. Background

As this Court has previously written, "[t]his matter is years past its expiration date." (Dkt No. 243.) The parties are well familiar with the facts. The Court writes only those facts necessary to address the pending motions before the Court.

A. Underlying Bankruptcy Case in the Bankruptcy Court for the District of Delaware

Defendant was the CEO and majority shareholder of Radnor Holdings Corporation and its consolidated subsidiaries ("Radnor"). On or about April 4, 2006, Plaintiff Tennenbaum Capital Partners LLC ("Plaintiff") loaned Radnor money ("Tennenbaum Loan") pursuant to a Guaranty and Negative Pledge Agreement ("Guaranty Agreement") in which Defendant personally guaranteed repayment of not more than $10 million of the principal amount of the Tennenbaum Loan. At that time, Radnor retained Skadden Arps, Slate, Meagher & Flom LLP ("Skadden Arps") as counsel. Radnor defaulted on the Tennenbaum Loan. On August 17, 2006, Plaintiff demanded payment from Defendant under the Guaranty Agreement.

On August 21, 2006, Radnor filed for Chapter 11 bankruptcy in the Bankruptcy Court for the District of Delaware ("the Bankruptcy Court"). The Bankruptcy Court authorized Plaintiff to credit bid on Radnor. Plaintiff formed an entity ("Tennenbaum Funds") to bid and acquire Radnor assets. On September 22, 2006, the Bankruptcy Court established bid procedures. On October 30, 2006, the Bankruptcy Court entered a standing order.

On October 31, 2006, the Official Committee of Unsecured Creditors ("the Committee") in the Radnor Bankruptcy filed an adversary complaint against Plaintiff. Following roughly two months of extensive pre-trial discovery and an eight day trial, the Bankruptcy Court dismissed the Committee Complaint in its entirety. Radnor Holdings Corp. v. Tennenbaum Capital Partners, LLC, 353 B.R. 820 (Del. Bankr. 2006). In this opinion, the Bankruptcy Court found "that [Tennenbaum] did not engage in egregious conduct tantamount to fraud, overreaching or spoliation." Id. at 840 (internal citations omitted). Further, the Court held that "TCP at all times acted in good faith with a view to maximize Radnor's value to all constituents." Id. at 841.

On or about February 11, 2010, Defendant filed his "Objection to Confirmation of the Liquidation of Radnor Holding Corporation and its Related Debtors and Debtors in Possession" with the Bankruptcy Court. On or about February 17, 2012, Defendant alleges that he discovered "improprieties and undisclosed material and adverse conflicts between Tennenbaum Capital Partners LLC and other professionals involved." (Dkt No. 255 ¶ 6.) On March 15, 2012, at the hearing on Defendant's Initial Objection, Defendant notified the Bankruptcy Court of his findings of misconduct. (Dkt No. 255 ¶ 7.) On July 24, 2012, Defendant delivered evidence of misconduct and misrepresentation to the Office of the United States Trustee for the District of Delaware. (Dkt No. 255 ¶ 8.) On September 10, 2012, the Bankruptcy Court confirmed the Liquidation Plan. (Dkt No. 255, Ex. A.)

On December 26, 2012, Defendant filed an adversary action against Plaintiff, and others, in the Bankruptcy Court, further amending said complaint on February 15, 2013. (Dkt No. 255 ¶ 9.) The gist of Defendant's Adversary Complaint is that he discovered new information, previously not disclosed to the tribunal, that while Skadden Arps served as his, his family's, and Radnor's attorneys between 1997 and 2006, Skadden Arps simultaneously served as counsel to Tennenbaum during the formation of the Tennenbaum Funds. (Dkt No. 255, Ex. A ¶¶ 36-37.) Further, partners of Skadden Arps were investors in the Tennenbaum Funds. ( Id. ) Defendant alleges that he had no knowledge of the extent of Skadden Arp's relationship with the Tennenbaum Funds.

On May 1 and 2, 2013, the Bankruptcy Court held an evidentiary hearing on Defendant's objections. On June 20, 2013, the Court found that found that:

50. At all times during these Chapter 11 cases (i) Skadden acted in good faith as counsel to Debtors and (ii) did not hold or represent an interest adverse to Debtors' estates and was disinterested within the meaning of 11 U.S.C. § 327(a).
51. Skadden's Pre-Retention Disclosures and other disclosures made in connection with Skadden's retention as bankruptcy counsel, including Skadden's disclosures with respect to Tennenbaum, were adequate and sufficient.
52. Skadden did not engage in any malpractice, breach of fiduciary duty, fraud, conspiracy, perjury, obstruction of justice or other willful misconduct in connection with the above-captioned Chapter 11 cases. In re Radnor Holdings Corp., 2013 WL 3228116, at *12 (Del. Bankr. 2013) (internal citations omitted).

On July 1, 2013, Defendant filed an appeal to the United States District Court for the District of Delaware, alleging that the Bankruptcy Court overlooked Plaintiff and Skadden Arps's misconduct and failed to investigate evidence presented by Defendant. (Dkt No. 261 at 8-9.) Presently, there are numerous motions and a Withdrawal of Reference pending in the Bankruptcy Court. (Dkt No. 255, Exs. B-C.) In August 2013, ...


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