# Ditech Holding Corporation

> United States Bankruptcy Court, S.D. New York · May 24, 2023

URL: https://www.frixlaw.com/law-library/cases/10461193

## Case

- **Court:** United States Bankruptcy Court, S.D. New York
- **Decided:** May 24, 2023
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10461193

## How later opinions describe it (automated extraction)

- finding that bankruptcy courts retain post-confirmation jurisdiction to the extent provided in the plan of reorganization
- concluding trustee established a sound business reason to abandon certain property—“jettison[ing] unnecessary systems and records” to quickly close a proceeding—and granting trustee’s motion to abandon

## Opinion text

UNITED STATES BANKRUPTCY COURT NOT FOR PUBLICATION
SOUTHERN DISTRICT OF NEW YORK
--------------------------------------------------------x
In re: :
Case No. 19-10412 (JLG)
:
Chapter 11
Ditech Holding Corporation, et al., :

:
(Jointly Administered)
Debtors.1 :
--------------------------------------------------------x

MEMORANDUM DECISION AND ORDER GRANTING THE PLAN
ADMINISTRATOR’S MOTION AND AUTHORIZING THE WIND DOWN ESTATES
TO (I) ABANDON AND DISPOSE OF OBSOLETE PHYSICAL RECORDS AND (II)
NOT TAKE FURTHER ACTION ON INCUR FURTHER LIABILITY TO MAINTAIN
ACCESS TO ADDITIONAL OBSOLETE ELECTRONIC RECORDS

A P P E A R A N C E S :

WEIL, GOTSHAL & MANGES LLP
Attorneys for the Plan Administrator
on Behalf of the Wind Down Estates
767 Fifth Avenue
New York, New York 10153
By: Ray C. Schrock, P.C.
Richard W. Slack
Natasha S. Hwangpo

Ms. Launa Lishamer
Appearing Pro Se
223 174th Ave. E.
Redington Shores, Florida 33708

1 The Debtors’ Third Amended Joint Chapter 11 Plan of Ditech Holding Corporation and Its Affiliated Debtors,
ECF No. 1326, was confirmed, which created the Wind Down Estates. The Wind Down Estates, along with the last
four digits of each of their federal tax identification numbers, as applicable, are Ditech Holding Corporation (0486);
DF Insurance Agency LLC (6918); Ditech Financial LLC (5868); Green Tree Credit LLC (5864); Green Tree Credit
Solutions LLC (1565); Green Tree Insurance Agency of Nevada, Inc. (7331); Green Tree Investment Holdings III
LLC (1008); Green Tree Servicing Corp. (3552); Marix Servicing LLC (6101); Walter Management Holding
Company LLC (9818); and Walter Reverse Acquisition LLC (8837). The Wind Down Estates’ principal offices are
located at 2600 South Shore Blvd., Suite 300, League City, TX 77573.
HON. JAMES L. GARRITY, JR.
U.S. BANKRUPTCY JUDGE
Introduction2

The matter before the Court is the Plan Administrator’s motion, on behalf of the Wind
Down Estates, and in aid of execution of the Debtors’ Third Amended Plan, pursuant to sections
105(a), 554(a) and 1142(b) of the Bankruptcy Code, Rule 6007 of the Bankruptcy Rules, and Rule
2015-1 of the Local Rules for the Bankruptcy Court for the Southern District of New York (the
“Local Rules”), for the entry of an order authorizing the Wind Down Estates to (i) abandon and
dispose of the Obsolete Physical Records; and (ii) not take further action or incur further liability
to maintain access to the Additional Obsolete Electronic Records (the “Motion”).3
Three parties in interest objected to the Motion: Launa L. Lishamer (the “Lishamer
Objection”),4 Finance of America Reverse LLC (“FAR”) (the “Finance of America Objection”),5
and Lisa Janco (the “Janco Objection” ).6 The Plan Administrator filed a reply to the objections

2 Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the
Third Amended Plan. References to “ECF No. __” are to documents filed on the electronic docket in these jointly
administered cases under Case No. 19-10412.

3 Motion of the Wind Down Estates for Entry of Order in Aid of Execution of Third Amended Joint Chapter 11 Plan
of Ditech Holding Corporation and Its Affiliated Debtors (I) Authorizing the Wind Down Estates to (A) Abandon and
Dispose of Obsolete Physical Records and (B) Not Take Further Action or Incur Further Liability to Maintain Access
to Additional Obsolete Electric Records, and (II) Granting Related Relief, ECF No. 4350.

4 Objection to Debtors Motion Dockets #4350 and #4352 Authorizing the Wind Down Estates Proposed Motion:
(A) Abandon and Dispose of Obsolete Physical Records and (B) Not Take Further Action or Incur Further Liability
to Maintain Access to Additional Obsolete Electric Records, and (II) Granting Related Relief, ECF No. 4370.

5 Limited Objection of Finance of America Reverse LLC to Motion of the Wind Down Estates for Entry of Order
in Aid of Execution of Third Amended Joint Chapter 11 Plan of Ditech Holding Corporation and Its Affiliated Debtors
(I) Authorizing the Wind Down Estates to (A) Abandon and Dispose of Obsolete Physical Records and (B) Not Take
Further Action or Incur Further Liability to Maintain Access to Additional Obsolete Electric Records, and
(II) Granting Related Relief, ECF No. 4369.

6 Objection to Erase Records from Servers, and the Right to be Heard at the Hearing, ECF No. 4387.
(the “Reply”),7 which is supported by the declaration of Kathryn Schultea (the “Schultea
Declaration”).
FAR withdrew the Finance of America Objection.8 By order dated May 4, 2023, the Court
disallowed and expunged Ms. Janco’s claim.9 That order is final. Accordingly, the Court overrules
the Janco Objection as moot. The Court heard arguments on the Motion from the Wind Down

Estates, by their counsel, and Ms. Lishamer, acting pro se. The Court finds that the Plan
Administrator has demonstrated that in furtherance of his mandate under the Third Amended Plan,
and in the exercise of his business judgment, he has rightly concluded that it is in the best interests
of the Wind Down Estates to abandon the Obsolete Physical Records and Additional Obsolete
Electronic Records because those records are burdensome to the estate and of inconsequential
value to the estate. Moreover, independent of that showing, the Plan Administrator has
demonstrated that documents that may have some plausible nexus to the Lishamer Claim either
are being retained by the Wind Down Estates or are publicly available to Ms. Lishamer. The Court
overrules the Lishamer Objection and grants the Motion.

7 The Wind Down Estates’ Omnibus Reply in Further Support of Motion of the Wind Down Estates for Entry of
Order in Aid of Execution of Third Amended Joint Chapter 11 Plan of Ditech Holding Corporation and Its Affiliated
Debtors (I) Authorizing the Wind Down Estates to (A) Abandon and Dispose of Obsolete Physical Records and (B) Not
Take Further Action or Incur Further Liability to Maintain Access to Additional Obsolete Electric Records, and (II)
Granting Related Relief, ECF No. 4697.

8 Notice of Withdrawal of Limited Objection of Finance of America Reverse LLC to Motion of the Wind Down
Estates for Entry of Order in Aid of Execution of Third Amended Joint Chapter 11 Plan of Ditech Holding Corporation
and Its Affiliated Debtors (I) Authorizing the Wind Down Estates to (A) Abandon and Dispose of Obsolete Physical
Records and (B) Not Take Further Action or Incur Further Liability to Maintain Access to Additional Obsolete Electric
Records, and (II) Granting Related Relief, ECF No. 4670.

9 Memorandum Decision and Order Sustaining the Plan Administrator’s Twenty-Eighth Omnibus Objection, the
Consumer Claims Trustee’s Fiftieth Omnibus Objection and the Plan Administrator’s and Consumer Claims Trustee’s
Eighty-First Omnibus Objection to the Claims of Lisa Janco, ECF No. 4726.
Jurisdiction
The Court has jurisdiction to consider this matter pursuant to 28 U.S.C. §§ 157 and 1334
and the Amended Standing Order of Referral of Cases to Bankruptcy Judges of the United States
District Court for the Southern District of New York (M-431), dated January 31, 2012 (Preska,
C.J.). This is a core proceeding pursuant to 28 U.S.C. § 157(b).

Pursuant to the Confirmation Order, the Court retained jurisdiction to, among other things,
“interpret, implement, and enforce the terms and provisions of [the Confirmation Order], all
amendments thereto, and any waivers and consents thereunder.” Confirmation Order ¶ 66.10
Moreover, pursuant to the Plan, as of the Effective Date, the Court shall retain jurisdiction “over
all matters arising in, arising under, and related to the Chapter 11 Cases for, among other things,
the following purposes . . . to take any action and issue such orders as may be necessary to
construe, interpret, enforce, implement, execute, and consummate the Plan.” Third Amended Plan,
art. XI, § 11.1(k). The relief that the Plan Administrator is seeking in this Motion concerns the
implementation and furtherance of the Plan and Confirmation Order.

Background

The Chapter 11 Cases
On February 11, 2019 (the “Petition Date”), Ditech Holding Corporation (f/k/a Walter
Investment Management Corp.) and certain of its affiliates (the “Debtors”), including Ditech
Financial, LLC (“Ditech Financial”), filed petitions for relief under Chapter 11 of the Bankruptcy
Code in this Court (the “Chapter 11 Cases”). The Debtors remained in possession of their business
and assets as debtors and debtors in possession pursuant to sections 1107(a) and 1108 of the

10 Order Confirming Third Amended Joint Chapter 11 Plan of Ditech Holding Corporation and its Affiliated
Debtors, ECF No. 1404.
Bankruptcy Code. On February 22, 2019, the Court entered an order fixing April 1, 2019, at 5:00
p.m. (prevailing Eastern Time) as the deadline for each person or entity, not including
governmental units (as defined in section 101(27) of the Bankruptcy Code) to file a proof of claim
in the Chapter 11 Cases (the “General Bar Date”).11 Thereafter, the Court extended the General
Bar Date for consumer borrowers, like Ms. Lishamer, twice, ultimately setting the date as June 3,

2019, at 5:00 p.m. (prevailing Eastern Time).12
On September 26, 2019, the Court entered the Confirmation Order approving the Debtors’
Third Amended Plan,13 and on September 30, 2019, that plan became effective.14 In broad strokes,
and without limitation, pursuant to the Third Amended Plan, the Debtors sold their forward and
reverse mortgage loan business to the Forward Stalking Horse Purchaser and Reverse Stalking
Horse Purchaser and their respective mortgage servicers, and the Debtors paid their creditors with
the sale proceeds. The Confirmation Order created the Wind Down Estates. The Plan
Administrator is a fiduciary appointed under the Third Amended Plan who is charged with the
duty of winding down, dissolving, and liquidating the Wind Down Estates. See Third Amended

Plan, art. I, §§ 1.130, 1.184, 1.186. The Consumer Claims Trustee is a fiduciary appointed under
the Third Amended Plan who is responsible for the reconciliation and resolution of Consumer

11 Order Establishing Deadline for Filing Proofs of Claim and Approving the Form and Manner of Notice Thereof,
ECF No. 90.

12 Order Further Extending General Bar Date for Filing Proofs of Claim for Consumer Borrowers Nunc Pro Tunc,
ECF No. 496.

13 Third Amended Joint Chapter 11 Plan of Ditech Holding Corporation and Its Affiliated Debtors, ECF No. 1326.

14 Notice of (I) Entry of Order Confirming Third Amended Joint Chapter 11 Plan of Ditech Holding Corporation
and Its Affiliated Debtors, (II) Occurrence of Effective Date, and (III) Final Deadline for Filing Administrative
Expense Claims, ECF No. 1449.
Creditor Claims and distribution of funds to holders of Allowed Consumer Creditor Claims in
accordance with the Third Amended Plan. See id. art. I, § 1.41.
The Wind Down Estates
The Wind Down Estates no longer have any operating businesses, and in the more than
three years since the Effective Date of the Third Amended Plan, the Plan Administrator has made

extensive progress in winding down the affairs of the Debtors. Among other things, the Plan
Administrator has:
Transferred mortgage loans and related loan servicing files in their entirety to the
Forward Buyer, New Residential Investment Corp. (“NewRez”) and its designated
servicers, pursuant to the Sale Transaction authorized by the Third Amended Plan.

Reduced Ditech’s workforce from more than 2,900 employees to zero full-time
employees, and a few contractors on a part-time basis, all of whom are employed
solely for wind down purposes.

See Schultea Declaration ¶ 4. On April 4, 2022, in furtherance of the wind-down of the Debtors’
businesses, the Plan Administrator, on behalf of the Wind Down Estate, sought Court authorization
to permit the Wind Down Estates not to incur further expense regarding data stored on servers sold
(the “Sold Servers”) to the Forward Buyer (the “Electronic Data Motion”).15 In furtherance of
that motion, the Wind Down Estates, working with the Consumer Claims Trustee, among others,
identified, downloaded, and retained information deemed related to (i) any unresolved claims or
litigation involving the Debtors; (ii) the administration of the Wind Down Estates and unclaimed
borrower funds; (iii) the Debtors’ obligations under Bond and Surety, as defined in the
Confirmation Order; and (iv) any required tax and financial records. (collectively, the “Retained

15 Motion of the Wind Down Estates for Entry of Order in Aid of Execution of Third Amended Joint Chapter 11 Plan
of Ditech Holding Corporation and Its Affiliated Debtors (I) Authorizing the Wind Down Estates Not to Take Any
Further Action or Incur Further Liability Regarding the Electronic Data Stored on the Sold Servers upon the
Expiration of the Wind Down Estates’ Access to the Sold Servers, and (II) Granting Related Relief, ECF No. 3969.
Records”). Electronic Data Motion ¶¶ 11, 18. On June 23, 2022, the Court entered an order
granting the Electronic Data Motion.16 That order authorized the Plan Administrator to abandon
electronic records stored on the Sold Servers upon the expiration of the Wind Down Estates’ access
to those servers; it allowed the Plan Administrator to take no action to replace the Sold Servers.
Still, the Wind Down Estates are incurring substantial ongoing document/data storage

charges, as follows:
The Wind Down Estates store approximately 135,000 boxes of documents and
tapes, which contain approximately 237 million files (the “Obsolete Physical
Records”) that were accumulated by the Debtors in conducting the forward and
reverse businesses, which were subsequently sold pursuant to the Third Amended
Plan. The Obsolete Physical Records are stored and maintained by multiple vendors
at an aggregate cost of over $47,000 a month, or approximately $570,000 a year.

The Wind Down Estates have additional electronic data stored on third-party
servers or accessed through third-party software (the “Additional Obsolete
Electronic Records”) which are no longer useful to the Wind Down Estates. The
Additional Obsolete Electronic Records consist of emails and attachments thereto
related to matters pertaining to the Debtors’ previous forward and reverse
businesses. The maintenance of access to the Additional Obsolete Electronic
Records costs the Wind Down Estates approximately $250,000 per year without
any corresponding benefit.

Schultea Declaration ¶¶ 5-6.

The Motion

The Plan Administrator seeks an order pursuant to sections 105(a), 554(a), 1142(b) of the
Bankruptcy Code, Rule 6007 of the Bankruptcy Rules and Local Rule 2015-1 authorizing the Wind
Down Estates (i) to abandon and dispose of the Obsolete Physical Records; and (ii) not take further
action and incur further costs to maintain the Additional Obsolete Electronic Records. Motion ¶ 9;

16 Order in Aid of Execution of Third Amended Joint Chapter 11 Plan of Ditech Holding Corporation and Its
Affiliated Debtors (I) Authorizing the Wind Down Estates Not to Take Any Further Action or Incur Further Liability
Regarding the Electronic Data Stored on the Sold Servers upon the Expiration of the Wind Down Estates’ Access to
the Sold Servers, and (II) Granting Related Relief, ECF No. 4131.
see also id., Ex. A (Proposed Order). The Plan Administrator asserts that the relief in this Motion
does not impact the Retained Records and that the Wind Down Estates will continue to take
commercially reasonable steps to assure the Retained Records are preserved. Motion ¶ 22.
The Objection

Ms. Lishamer filed an unsecured claim against Ditech Financial in the sum of $500,000.
See Claim No. 23944 (the “Lishamer Claim”). In general, and without limitation or prejudice, in
her claim, Ms. Lishamer seeks damages occasioned by Ditech Financial’s alleged wrongdoing in
servicing her loan, particularly in the wake of Hurricane Irma. As filed, the Lishamer Claim asserts
damages, including punitive damages in the absence of compensatory damages, together with
attorney fees and costs of litigation, and pre-judgment and post-judgment interest, for:
(i) misrepresentation involving transaction causation and loss causation; (ii) lost earnings due to
time and effort; (iii) recovery of interest and finance charges; (iv) not abiding by Fannie Mae
guidelines for credit reporting and delay in returned insurance checks; (v) not providing
modification options or forbearance information; (vi) violations of RESPA Regulations X and Z,

FDIC regulations, Florida Statute 559.72, Fair Credit Reporting Act; and (vii) all other relief as
may be just and proper. Lishamer Claim at 4.
On October 23, 2020, the Consumer Claims Trustee objected to the Lishamer Claim on the
basis that, without limitation, Ms. Lishamer failed to allege specific facts related to her legal claims
and failed to identify the legal basis for her claim.17 In her response to the objection, and without
limitation, Ms. Lishamer asserts damages based upon Ditech’s alleged: (i) breach of the Deed of
Trust; (ii) violation of section 19 of the FDIC Act; (iii) dishonesty or breach of trust; (iv) violation

17 See Consumer Claims Trustee’s Twenty-Ninth Omnibus Objection to Proofs of Claim (Insufficient Legal Basis
Unsecured Consumer Creditor Claims), ECF No. 2837 at 18.
of Florida’s Deceptive and Unfair Trade Practices Act; (v) violation of RESPA, 12 U.S.C. § 2605
and 12 C.F.R §§ 1024.35, 1024.36, 1024.41(c)(1); (vi) violation of Fair Credit Reporting Act;
(vii) misappropriation of funds 18 U.S.C § 1344; (viii) failure to promptly credit account 12 C.F.R.
§ 1026.36; (ix) failure to provide accurate accounting 12 C.F.R. § 1026.41; and (x) violation of
Section 501.202 of the Florida Consumer Protection Statute.18 The Consumer Claims Trustee has

not scheduled a hearing on the objection to the Lishamer Claim.
Ms. Lishamer objects to the Motion essentially on the grounds that as the hearing on her
claim has not been scheduled, and the Motion is vague with regard to the documents and electronic
data that the Wind Down Estates will preserve, she may be prejudiced in the defense of her claim,
if documents and electronic data that she may require to defend the merits of her claim are not
preserved. Lishamer Objection at 2. In support of the objection, she states as follows:
I am asserting my right under due process and statute 9014 to oppose and reject
said motion as my case is still pending, a hearing date has not been set to determine
the class status of my claim. Attached included in this objection is Exhibit A, dated
August 23, 2021 which indicates New Residential Mortgage is the current owner
of my note.

Judge Garrity agreed to a hearing date to be set in the future. My Proof of Claim is
now classified as a Class 6 Creditor. I believe that my claim may qualify to be
classified as a 363(0) (see Exhibit A) and perhaps a Summary Judgement under
Florida Deceptive and Unfair Trade Practices, Chapter 501-part II, Florida Statutes
Section 501.1377 whereas I believe that my Proof of Claim provides information
that proves that Ditech Financial was fraudulent as well as other violation stated in
Docket #2982.

The Debtors interpretation of Obsolete records and electronic records is vague. My
objection is related to any and all records, filings, hearings, transcripts related to
my case that would be detrimental to my case as the Debtors motions are requesting
relief of liability.

18 Statement and Motion and Order Pursuant to Bankruptcy Rule 9014 to Protect this Claim from Being
Discarded/Deleted, ECF No. 2982, at 5, 9-11.
Title 18 U.S. Code Section 2071 may be applicable and be in conflict with the
Debtors Motion as proposed in Dockets #4350 and #4352.

Objection at 2.

The Reply

In the Reply, the Plan Administrator addresses the Lishamer Objection stating that “the
Wind Down Estates, at the request and direction of the Consumer Claims Trustee, have retained
the entire servicing file for the underlying loans and mortgages of [] Ms. Lishamer.” Schultea
Declaration ¶ 8. Moreover, the Plan Administrator contends that he is not aware of any document
related to the Lishamer Claim that the Wind Down Estates have not retained. Id. The Plan
Administrator argues that the relief requested in the Motion should not prejudice the rights of Ms.
Lishamer and further notes that the Consumer Claims Trustee has not objected to the Motion.
Reply ¶ 5.
The Hearing
On May 11, 2023, the Court conducted a hearing on the Motion. After hearing from the
parties, and in an effort to determine whether the parties could resolve the Lishamer Objection, the
Court set up a process whereby Ms. Lishamer could set forth requests for documents to be
preserved by May 15, 2023, at 12:00 p.m. (prevailing Eastern Time), and the Wind Down Estates,
in coordination with the Consumer Claims Trustee, would have the opportunity to respond to those
requests by May 17, 2023, at 12:00 p.m. (prevailing Eastern Time). The Court adjourned the
hearing to May 18, 2023.
The Plan Administrator did not receive any timely requests for preservation by Ms.
Lishamer. On May 15, 2023, at 4:00 p.m., the Plan Administrator wrote to inform the Court that
Ms. Lishamer had not provided any requests for preservation. After that communication, Ms.
Lishamer provided a number of requests for preservation of documents to the Plan Administrator.
She sent two additional emails adding more requests into the evening on May 15, 2023. A copy
of these emails is attached as Exhibit A to the letter to the Court of Richard W. Slack, as counsel
to the Plan Administrator, dated May 17, 2023 (the “Slack Letter”).19 In all, Ms. Lishamer made
seventeen requests for preservation.
Upon receipt of these requests, the Plan Administrator coordinated with the Consumer

Claims Trustee and her counsel and then timely responded to Ms. Lishamer’s requests for
preservation. The response is set forth in Exhibit B to the Slack Letter. The Plan Administrator
confirmed that the documents in twelve of the seventeen requests (items 2, 4, 7–11, 13–17) were
either being preserved by the Wind Down Estates—as Retained Records—or were publicly
available documents. With respect to four of the requests (items 1, 3, 5, and 12), the Plan
Administrator advised that he was not able to understand the requests and therefore was not able
to respond as to whether some or all of the documents sought were being preserved—although, in
the Plan Administrator’s view, none of the requests are relevant to the Lishamer Claim. With
respect to one request (item 6), which appears to request that the Wind Down Estates preserve all

documents shared with NewRez, the Plan Administrator advised Ms. Lishamer that the Wind
Down Estates preserved documents provided to NewRez relating to her loan and mortgage, but
they were not willing to preserve all documents shared with New Residential with respect to
thousands of loans for other consumers or the many thousands of documents created in negotiating
the agreements in the Plan. Ms. Lishamer responded to the Slack Letter with her own status update,
which included her responses to the Plan Administrator’s review of her seventeen requests for
preservation (the “Lishamer Letter”).20

19 Letter to the Honorable James L. Garrity, Jr. Regarding Obsolete Data Motion (ECF No. 4350), ECF No. 4746.

20 Launa Lishamer’s Status Update Letter to the Honorable James L. Garrity, Jr., ECF No. 4748.
On May 18, 2023, the Court conducted the adjourned hearing on the Motion. After hearing
additional arguments from the parties and confirming that they could not resolve the Lishamer
Objection, the Court took the matter under advisement and adjourned the hearing on the Motion
to May 25, 2023, for holding purposes.21
Discussion

Together, sections 105(a) and 1142(b) of the Bankruptcy Code vest the Court with broad
authority over the property administered under the Third Amended Plan, including the authority
to issue orders necessary to implement the relevant provisions of the plan and the Bankruptcy
Code. Under section 105, “[t]he court may issue any order, process or judgment that is necessary
or appropriate to carry out the provisions of this title.” 11 U.S.C. § 105(a); see also Hosp. & Univ.
Prop. Damage Claimants v. Johns Manville Corp. (In re Johns Manville Corp.), 7 F.3d 32, 34 (2d
Cir. 1993) (finding that bankruptcy courts retain post-confirmation jurisdiction to the extent
provided in the plan of reorganization). Section 1142(b) of the Bankruptcy Code provides that
[t]he court may direct the debtor and any other necessary party to execute or deliver
or to join in the execution or delivery of any instrument required to effect a transfer
of property dealt with by a confirmed plan, and to perform any other act . . . that is
necessary for the consummation of the plan.

11 U.S.C. § 1142(b). This section “empowers the bankruptcy court to enforce the unperformed
terms of a confirmed plan.” In re WorldCom, Inc., No. 02-13533, 2009 WL 2959457, at *7 (Bankr.
S.D.N.Y. May 19, 2009) (quoting U.S. Brass Corp. v. Travelers Ins. Group, Inc. (In re U.S. Brass
Corp.), 301 F.3d 296, 306 (5th Cir. 2002)); see also In re Park Ave. Radiologists, P.C., 450 B.R.
461, 467 (Bankr. S.D.N.Y. 2011) (“Additionally, 11 U.S.C. § 1142 confers limited post-
confirmation jurisdiction upon the bankruptcy court for the purpose of implementing the plan.”);

21 At the close of the hearing, the Court extended the parties’ time to attempt to negotiate a resolution to the Lishamer
Objection to Friday, May 19, 2023, at 12:00 p.m. (prevailing Eastern Time). By emailed dated May 19, 2023, Mr.
Slack advised the Court that the parties were not able to resolve their dispute.
In re Oversight & Control Comm’n of Avanzit, S.A., 385 B.R. 525, 535 (Bankr. S.D.N.Y. 2008)
(“The bankruptcy court retains jurisdiction under 11 U.S.C. § 1142(b) . . . and it has ‘continuing
responsibilities to satisfy itself that the [p]lan is being properly implemented.’” (alteration in
original) (quoting Findley v. Blinken (In re Joint E. & S. Dist. Asbestos Litig.) 982 F.2d 721, 750
(2d Cir. 1992))). Section 1142(b) is not an independent source of power; it does not confer any

substantive rights on a party apart from what is provided for in the plan. See Vill. of Rosemont v.
Jaffe, 482 F.3d 926, 935 (7th Cir. 2007) (citing In re U.S. Brass Corp., 301 F.3d at 306).
Section 554(a) of the Bankruptcy Code provides that a trustee or debtor in possession “after
a notice and hearing . . . may abandon any property of the estate that is burdensome to the estate
or that is of inconsequential value and benefit to the estate.” 11 U.S.C. § 554(a); see also Fed. R.
Bankr. P. 6007(a) (authorizing abandonment on advance notice); Local Rule 2015-1 cmt. (“On
request, the Court may issue an appropriate order limiting storage of the debtor’s books, records,
and papers. Disposal of the debtor’s books, records, and papers is governed by sections 363 and
554 of the Bankruptcy Code.”). “The abandonment power embodied in Section 554 enables the

trustee to rid the estate of burdensome or worthless assets, and so speeds the administration of the
estate . . . and also protects the estate from diminution.” In re Quanta Resources Corp., 739 F.2d
912, 915 (3d Cir. 1984); see also Mele v. First Colony Ins. Co., 127 B.R. 82, 85 (D.D.C. 1991)
(“[A]bandonment provisions are designed to allow the trustee to relinquish assets that would be a
financial drain on the estate, or relieve the trustee of the financial burden of administering
inconsequential assets that would cost more than they are worth to the estate.”).
The Third Amended Plan contemplates that, post-confirmation, the Wind Down Estates
may abandon burdensome property, and the Confirmation Order preserves the Court’s jurisdiction
to authorize such abandonment. As relevant, the Third Amended Plan provides that, except for
property of the Debtors’ Estates that was acquired by the Forward Stalking Horse Purchaser or the
Reverse Stalking Horse Purchaser, all remaining property of the Debtors’ Estates shall vest in the
Wind Down Estates, and on or after the Effective Date . . . the Wind Down Estates may take any
action including the “use, acquisition, sale, lease and disposition of property” and “the entry into
transactions, agreements, understandings, or arrangements, whether in or other than in the ordinary

course of business . . . .” Third Amended Plan, art. X, § 10.1. It also provides that, after the
Effective Date, pursuant to the Third Amended Plan, the Plan Administrator shall wind down, sell,
liquidate, and may operate, use, acquire, or dispose of property and compromise or settle any
Claims, Interests, or Causes of Action remaining with the [Wind Down Estates] after
consummation of the Sale Transaction . . . .” Third Amended Plan, art. V, § 5.6(e)(iii).
Pursuant to Article XI of the Third Amended Plan, this Court retained jurisdiction over:
all matters arising in, arising under, and or related to the Chapter 11 Cases for,
among other things, the following purposes:
. . .
(b) to determine any motion, adversary proceeding, application, contested
matter, and other litigated matter pending on or commenced after the Confirmation
Date;
. . .
(k) to take any action and issue such orders as may be necessary to construe,
interpret, enforce, implement, execute, and consummate the Plan.”

Third Amended Plan, art. XI, § 11.1. Also, pursuant to the Confirmation Order, this Court retained
jurisdiction to “interpret, implement, and enforce the terms and provisions of this Order, all
amendments thereto, and any waivers and consents thereunder.” Confirmation Order ¶ 66.
A trustee’s decision to abandon property of the estate is within the trustee’s discretion, and
that decision is “bounded only by [the discretion] of the court.” In re Interpictures, Inc., 168 B.R.
526, 535 (Bankr. E.D.N.Y. 1994); see In re Blasingame, 598 B.R. 864, 871 (B.A.P. 6th Cir. 2019).
Still, the party requesting abandonment has the burden of proof. In re CC Holdings 2000 LLC,
No. 18-CV-2139, 2020 WL 1430012, at *2 (D. Conn. Mar. 24, 2020) (citing 5 Collier on
Bankruptcy ¶ 554.02); In re Wilton Armetale, Inc., 618 B.R. 424, 433 (Bankr. E.D. Pa. 2020)
(same). The standard for abandoning estate assets is written in the disjunctive and is met if the
Plan Administrator can show that the Obsolete Physical Records and the Additional Electronic
Obsolete Records either are “burdensome to the estate” or are “of inconsequential value and benefit

to the estate.” 5 Collier on Bankruptcy ¶ 554.02[1] (citing In re A.J. Lane & Co., 133 B.R. 264
(Bankr. D. Mass. 1991); In re Johnston, 49 F.3d 538 (9th Cir. 1995)).
Courts apply the business judgment standard to a trustee’s decision to abandon estate
property. To meet that burden, the trustee “need only demonstrate that he has exercised sound
business judgment in making the determination to abandon.” In re Cult Awareness Network, Inc.,
205 B.R. 575, 579 (Bankr. N.D. Ill. 1997); see also In re Slack, 290 B.R. 282, 284 (Bankr. D.N.J.
2003) (“The court only needs to find the trustee made: 1) a business judgment; 2) in good faith; 3)
upon some reasonable basis; and 4) within the trustee's scope of authority.”) (citations omitted).
The party opposing the abandonment must show some likely benefit to the estate, not mere

speculation about possible scenarios in which there might be a benefit to the estate. In re Cult
Awareness, 205 B.R. at 579.
The Plan Administrator has plainly met his burden herein. The Debtors have accumulated
the Obsolete Physical Records and the Additional Obsolete Electronic Records over the course of
many years in the ordinary course of their business operations. They no longer engage in these
business operations and have been winding down their business since the Effective Date. The
continued storage of the Obsolete Physical Records and the Additional Obsolete Electronic
Records by the Wind Down Estates serves no apparent usefulness because the retention of those
records does not contribute in any way to future distributions to creditors. See Motion ¶¶ 16, 19;
see also Schultea Declaration ¶ 9 (“[T]he benefits to the estates of maintaining access to the
Obsolete Physical Records and the Additional Obsolete Electronic Records is vastly outweighed
by the costs and potential liability of doing so.”). Neither the Buyers nor subsequent servicers of
the Debtors’ business operations have requested access to or possession of the Obsolete Physical
Records. Motion ¶ 13. It costs the Wind Down Estates approximately $570,000 per year to

preserve and store the Obsolete Physical Records, while the maintenance of access to the servers
and software and personnel to access the systems related to the Additional Obsolete Electronic
Records cost the Wind Down Estates approximately $250,000 per year. Schultea Declaration
¶¶ 5–6. There is no corresponding benefit to the Wind Down Estates for those expenditures. See
id. ¶ 9. Disposing of the Obsolete Physical Records and not taking further action to maintain
access to the Additional Obsolete Electronic Records will result in substantial cost savings, freeing
up funds that can be more effectively applied towards the necessary costs of administration of the
Wind Down Estates or to the payment of creditors. Motion ¶ 28. Moreover, abandoning and
disposing of the Obsolete Physical Records and abandoning access to the Additional Obsolete

Electronic Records is consistent with the mandate of the Plan Administrator to conduct the
operations of the Wind Down Estates as efficiently as possible, so as to maximize recoveries for
creditors.
The relief that the Plan Administrator seeks in this Motion is limited only to the Obsolete
Physical Records and the Additional Obsolete Electronic Records. It does not affect in any way
the Retained Records, which include Ms. Lishamer’s servicing file. The Plan Administrator, on
behalf of the Wind Down Estates, will continue to take commercially reasonable steps to assure
that the Retained Records are preserved in accordance with the terms of the Plan, the Confirmation
Order, and any other applicable laws. Motion ¶ 22.
Based on the foregoing, the Court finds that the Plan Administrator has demonstrated both
that the retention of the Obsolete Physical Records and Additional Obsolete Electronic Records is
burdensome to the estate and that these records have inconsequential value to the estate.
Furthermore, the Court finds that the Plan Administrator has made a reasonable business decision
to abandon these records, while at the same time preserving the Retained Records. See In re

Motors Liquidation Co., 625 B.R. 605, 613 (Bankr. S.D.N.Y. 2021) (finding that books and
records were no longer necessary to the completion of the case); In re MF Glob. Inc., 535 B.R.
596, 608 (Bankr. S.D.N.Y. 2015) (concluding trustee established a sound business reason to
abandon certain property—“jettison[ing] unnecessary systems and records” to quickly close a
proceeding—and granting trustee’s motion to abandon).
To challenge the Motion, Ms. Lishamer must demonstrate that the Plan Administrator has
abused his discretion in making the business decision to abandon these records. In re Interpictures,
168 B.R. at 535. She has failed to do so. Indeed, in her objection, Ms. Lishamer does not challenge
the Plan Administrator’s business judgment or his determination that the retention of the Obsolete

Physical Records and Additional Obsolete Electronic Records is burdensome to the estate and that
the records are of inconsequential value to the estate. In re Cult Awareness, 205 B.R. at 579.
(finding that the opposing parties have not met their burden to demonstrate that the Trustee abused
his discretion or made an unsound business decision in abandoning assets). The Court overrules
the Lishamer Objection.
Ms. Lishamer opposes the Motion because she has not taken discovery from the Debtors
in connection with the objection to her claim, and she believes that she will be prejudiced in the
defense of her claim if the Plan Administrator abandons the Obsolete Physical Records and
Additional Obsolete Electronic Records before she conducts her discovery. Independent from the
Court’s determination that the Plan Administrator is authorized to abandon the Obsolete Physical
Records and the Additional Obsolete Electronic Records, the Court finds no merit to that
contention. The record clearly shows that the Plan Administrator has worked closely with the
Consumer Claims Trustee to identify documents that are relevant to claims objections—the
Retained Records—including the entirety of Ms. Lishamer’s servicing file. The Court has

reviewed the Slack Letter and Lishamer Letter. The Court agrees with the Plan Administrator’s
assertion that in reviewing the seventeen requests for preservation, the Court should consider
whether the documents that Ms. Lishamer is asking the Plan Administrator to preserve bear some
reasonable connection to a colorable claim against the Debtors. In reviewing the Lishamer Claim
and Response to the objection to that claim, the Court finds that nine of the requests (item 6 (as
limited by the Plan Administrator), and items 7-11, 13, 15, and 16) meet that standard. Documents
responsive to those requests are either being preserved by the Wind Down Estates or are publicly
available. In making that determination, the Court does not find that the Lishamer Claim states
colorable claims against the Debtors. The sufficiency of the Lishamer Claim is not before the

Court. The Court finds that four requests (items 2, 4, 14, 17) do not meet that standard, but
documents responsive to those requests are publicly available documents related to these Chapter
11 Cases and thus are not subject to abandonment herein. The Court finds that four requests (items
1, 3, 5, and 12) do not meet that standard and are not publicly available. The Plan Administrator
is not required to preserve any such documents.
Conclusion

For the reasons stated herein, the Court overrules the Janco Objection and Lishamer
Objection and grants the Motion.
IT IS SO ORDERED.

Dated: New York, New York
May 24, 2023
James L. Garrity, Jr.
/s/
Hon. James L. Garrity, Jr.
U.S. Bankruptcy Judge

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10461193. Public record. Not legal advice.