Case 20-41504-elm11 Doc 297 Filed 07/11/20 Entered 07/11

DEBTORS’ RESPONSE TO SUPPLEMENT OF REPEAT PRECISION LLC TO ITS MOTION TO TERMINATE EXCLUSIVITY – PAGE 1
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Marcus A. Helt (TX 24052187) Paul V. Storm (TX 19325350) C. Ashley Ellis (TX 00794824) Emily F. Shanks (TX 24110350) FOLEY & LARDNER LLP 2021 McKinney Avenue, Suite 1600 Dallas, TX 75201 Telephone: 214.999.3000 Facsimile: 214.999.4667 PROPOSED COUNSEL FOR THE DEBTORS, DIAMONDBACK INDUSTRIES, INC., et al.
UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS
FORT WORTH DIVISION
IN RE: § CHAPTER 11 § DIAMONDBACK INDUSTRIES, INC., et al.,1 § CASE NO.: 20-41504-ELM-11 §
DEBTORS. § JOINTLY ADMINISTERED
TO ITS MOTION TO TERMINATE EXCLUSIVITY
Diamondback Industries, Inc., (“Diamondback”), Discerner Holdings, Inc. (“Discerner
Holdings”); and Discerner Investments, LLC (“Discerner Investments”), (collectively,
“Diamondback” or the “Debtors” or “debtors”), as debtors and debtors-in-possession in the
above-captioned chapter 11 cases (collectively, the “case” or “Case”), hereby respond (the
“Response”) to the Supplement of Repeat Precision, LLC to its Motion to Terminate Exclusivity
1 The debtors in these Chapter 11 Cases, along with the last four digits of each debtor’s federal tax identification number, include: Diamondback Industries, Inc. (4403) (“Diamondback”); Discerner Holdings, Inc. (5110) (“Discerner Holdings”); and Discerner Investments, LLC (3076) (“Discerner Investments”). The debtors’ service address is 3824 Williamson Road, Crowley, Texas 76036.
Case 20-41504-elm11 Doc 297 Filed 07/11/20 Entered 07/11/20 16:30:26 Page 1 of 15
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(the “Supplement”), filed by Repeat Precision, LLC (“Repeat” or “Repeat Precision”). In
support of this Response, the Debtors respectfully represent as follows:
I. EXECUTIVE SUMMARY
1. Enough is enough. In another desperate action to squelch any attempt by the
debtors to successfully reorganize, Repeat filed its latest dilatory and unsupported pleading
before this Court. Repeat’s counsel could have easily resolved this situation through a simple
phone call or email to debtors’ counsel under the dictates of Dondi Properties Corp. v.
Commerce Savings and Loan Association.2 Instead, Repeat decided to continue its “shoot-first-
and-ask-questions-later” assault on the debtors, their independent board, and their fundamental
right to reorganize under chapter 11 of the Bankruptcy Code—this time accusing debtors of
improper solicitation in violation of Bankruptcy Rule 3017 and § 1125(b) of the Bankruptcy
Code, without confirming the basic facts and the law before filing the Supplement.
2. The truth is nothing improper happened. The debtors’ service agent gathered
several documents that had been filed in this case and requested permission from an assistant of
the debtors’ counsel—during the June 23, 2020, hearing—to serve them as part of its service
function in this case. Not realizing that Repeat would misconstrue serving these publicly filed
documents as solicitation, this assistant approved the serving of the documents. Debtors’ service
agent then served these documents only on the parties listed on this Court’s service list in its 2 121 F.R.D. 284, 286 (N.D. Tex. 1988) (“We address today a problem that . . . is so pernicious that it threatens to delay the administration of justice and to place litigation beyond the financial reach of litigants. With alarming frequency, we find that valuable judicial and attorney time is consumed in resolving unnecessary contention and sharp practices between lawyers. Judges and magistrates of this court are required to devote substantial attention to refereeing abusive litigation tactics that range from benign incivility to outright obstruction. Our system of justice can ill-afford to devote scarce resources to supervising matters that do not advance the resolution of the merits of the case; nor can justice long remain available to deserving litigants if the costs of litigation are fueled unnecessarily to the point of being prohibitive.”)
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Order Granting Complex Chapter 11 Bankruptcy Case Treatment, which is proper under the
Bankruptcy Rules and consistent with service agent’s past practices in cases all over the country.
At no point did the debtors or their counsel instruct the claims agent to serve these documents on
all creditors. Nor were these documents served on all creditors, as Repeat erroneously states.
Moreover, because the documents served did not contain ballots and even contained explicit,
capitalized language stating that this was not a solicitation attempt, there can be no bona fide
argument that this service was a solicitation. The first page of the disclosure statement at the top
even reads:
THIS IS NOT A SOLICITATION OF ACCEPTANCE OR REJECTION OF THE PLAN. ACCEPTANCES OR REJECTIONS MAY NOT BE SOLICITED UNTIL A DISCLOSURE STATEMENT HAS BEEN APPROVED BY THE BANKRUPTCY COURT. THIS DISCLOSURE STATEMENT IS BEING SUBMITTED TO THE BANKRUPTCY COURT FOR APPROVAL BUT HAS NOT YET BEEN APPROVED BY THE BANKRUPTCY COURT.
3. This language is bolded and unequivocal. It is also language used in plans drafted
by the undersigned to avoid creating confusion. Without that language, though, service of the
disclosure statement on the service list—although not solicitation—was still proper under
Bankruptcy Rule 3017. That rule requires service of the disclosure statement and plan on the
service list. The reason is clear: If the service list did not receive the disclosure statement, then
how would it know whether to object to the disclosure statement for a lack of “adequate
information?” It would not. Besides, the disclosure statement is a public document. It is available
free of charge on the service agent’s website. That is common in complex bankruptcy cases.
4. It should be noted that, based on history in this case, if the disclosure statement
were not served pursuant to Rule 3017, then Repeat would complain to this Court that there is a
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lack of notice to the service list and that shows some nefarious intent on the debtors to railroad
approval of a disclosure statement without giving service-list parties a fair opportunity to opine
on the disclosure statement. So, presumably recognizing that the record is devoid of cause to
terminate exclusivity, especially this early in the case, and sensing the momentum swing toward
a swift 100% reorganization-payout plan that respects the parties appellate rights, Repeat decided
to use this procedural step as a ruse and a distraction to seek a tactical advantage. Sadly, this is
not new in this case. This is just Repeat’s latest attempt to continue its patent litigation into this
bankruptcy and squash the Debtors’ fundamental rights to reorganize their business and appeal
the patent judgment. Repeat’s earlier attempts to control this process include: (a) declaring
nuclear war on original debtors’ counsel unless it withdrew from this case, (b) requesting and
meeting with Mark Andrews to influence him to resign from the board, (c) moving to terminate
exclusivity less than three weeks in the case and before professional employment could even
been approved by this Court under the Bankruptcy Rules, (d) informally objecting to the
employment of current proposed counsel, (e) objecting to use of cash collateral, even though
Repeat asserts no interest in the cash, (f) using a sitting U.S. Congressman to call the bank and
influence the bank to abandon the Debtors and support Repeat’s improperly-solicited plan, and
(g) again lobbying the bank on multiple occasions to vote for Repeat’s improperly-solicited plan.
5. Repeat’s endless quest to prevent the Debtors from reorganizing under the
Bankruptcy Code by misdirecting the Court on specious arguments and rabbit trails—like almost
every hearing in this case—shows that it is worried that the Debtors will confirm a chapter 11
plan. That plan will not allow Repeat—a competitor of the debtors—destroy or own the business,
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and dismiss the appeal. Instead, it will allow the Debtors to repay their debts 100% with interest
and prosecute their appeal in the patent litigation.
6. Finally, there is also substantial irony with this Supplement. While Repeat takes a
shot at the debtors for mailing their disclosure on the service list, it fails to tell the Court that it
has on multiple occasions asked the bank to vote for its chapter 11 plan during the Debtors’
exclusivity periods. By definition, this is improper solicitation, no doubt. This Court should not
allow this conduct. This Court should stop Repeat from continuing to impede and suppress the
Debtors’ reorganization progress; instead, it should allow the Debtors the full opportunity to
explore its congressionally mandated right to reorganize their business affairs, repay their
creditors 100% plus interest, and pursue their appellate rights to the fullest extent allowed by the
law. No other result is fair and equitable or supported by any law.
II. JURISDICTION AND VENUE
7. This Court has jurisdiction over this Motion under 28 U.S.C. §§ 157 and 1334.
This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2), and venue is
proper under 28 U.S.C. §§ 1408 and 1409.
III. BACKGROUND
8. On April 21, 2020 (the “Petition Date”), the Debtors filed voluntary petitions for
relief under the Bankruptcy Code initiating the Case in the Bankruptcy Court for the Northern
District of Texas (the “Court”) and creating their bankruptcy estates (the “Estates”). The
Debtors continue to operate and to manage their businesses as “debtors-in-possession” pursuant
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to §§ 1107 and 1108 of the Bankruptcy Code. No trustee, examiner, or statutory committee has
been appointed in the Chapter 11 Case pursuant to §§ 1102 and 1104.3
9. On May 8, 2020, the Debtors filed an Application for Entry of an Order Under 11
U.S.C. §§ 327(a), 330, and 1107(b) Authorizing the Employment and Retention of Haynes and
Boone, LLP as Attorneys for the Debtors and the Debtors in Possession Effective Nunc Pro Tunc
to the Petition Date [Docket No. 66].
10. Subsequent to that filing, and after Repeat alleged a conflict, Haynes & Boone
determined, in consultation with the Debtors, that it was in the best interests of the debtors and
the Estates for it to withdraw from representing the debtors.
11. After demanding that Haynes & Boone withdraw from this case, twenty-three
(23) days after the Petition Date, and before the Debtors locked down replacement counsel,
Repeat filed the Motion of Repeat Precision, LLC to Terminate Exclusivity [Docket No. 82]
(the “Motion”).
12. In the Motion, Repeat seeks to terminate the statutory exclusivity period granted
to the Debtors to file a plan, based on Repeat’s clear animosity towards Diamondback, and its
view of the underlying litigation between the parties in Case No. 6:19-cv-00034-ADA in the
Western District of Texas, Waco Division (the “Patent Litigation”).
13. Seven days later, on Thursday, May 21, 2020, the Debtors filed an Application for
an Order Pursuant to 11 U.S.C. § 327(a) Authorizing Employment of Foley & Lardner as
Counsel to the Debtors and Debtors in Possession [Docket No. 99] (the “Foley Application”).
3 Information relating to the Debtor’ business operations is set forth in the Declaration of Cade Kennedy in Support of the Debtors’ Chapter 11 Petitions and First Day Motions [Docket No. 15].
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14. Repeat informally objected to the Foley Application, and then agreed to language
in a draft order preserving rights to sue Foley.
15. On June 15, 2020, the Debtors filed their Notice of Change to Debtors’ Board of
Directors [Docket No. 195], which named Mark Andrews as a new member of the Debtors’
board of directors. Only four days after the Debtors’ made Mr. Andrews’ position on the board
known, Repeat’s representative, Gary Martin, requested a meeting with Mr. Andrews and flew to
Mr. Andrews’ home in South Carolina on June 19, 2020, in Mr. Martin’s private jet to convince
him not to sit on the Debtors’ board. See Exhibit C, which is Declaration of Mark Andrews, at ¶
4. Mr. Andrews left the meeting with the understanding that Mr. Martin harbored ill will towards
Derrek Drury, Diamondback’s CEO, and Mr. Andrews was afraid that any action he took as a
member of the Debtors’ board might cause friction with Mr. Martin. Id. at ¶ 5. Mr. Andrews also
thought that his independence on the board might be questioned, given his prior relationship with
Mr. Martin. As a result, Mr. Andrews thought it best to resign from the board. Id.
16. On June 23, 2020, this Court heard oral argument and evidence related to the
Motion. A few hours prior to the hearing, the Debtors filed their first proposed plan and
disclosure statement. [See Docket Nos. 231, 232].
17. During this June 23 hearing, a representative from the Debtors’ servicing agent
contacted an assistant for the Debtors’ counsel regarding service of recently filed pleadings and
other papers in this case, including the disclosure statement with exhibits—which includes the
proposed plan. See Exhibits A and B, which are the Declaration of Brittnie Hutchinson and the
Declaration of Travis Vandell, respectively. No attorney was copied on this correspondence. See
Ex. A-1. The assistant simply believed these were routine filings, and gave permission to
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proceed to Stretto to serve these documents on the Court’s limited service list contained in its
Order Granting Complex Chapter 11 Bankruptcy Case Status [Docket No. 42]. See Ex A, at ¶¶
3–4. Stretto proceeded to serve the disclosure statement and exhibits, and two other filings, to the
persons or entities listed on the Court’s limited service list—and not to all creditors (as Repeat
Precision asserts). See Ex. B, at ¶¶ 3–4. Moreover, this service of documents did not contain
ballots, and as Repeat Precision admitted, contained clear, all-capitalized language stating that
this was not a solicitation. See Ex. B, at ¶¶ 3–7; see also Supplement, at ¶ 5 [Docket No. 272]. At
no point did Repeat Precision’s counsel attempt to clarify this situation, or otherwise try to
resolve the perceived improper solicitation with Debtors’ counsel prior to filing the Supplement.
IV. ARGUMENT
A. The Debtors did not “solicit” votes.
18. Repeat bases its call for sanctions against the Debtors for improper solicitation on
case law from other jurisdictions that is decades old. This is probably by design, because courts
in the Northern District of Texas take a different approach to “solicitation” under the Bankruptcy
Code than the courts cited by Repeat do.
19. In 2007, Judge Barbara Houser of the United States Bankruptcy Court for the
Northern District of Texas analyzed what “solicitation” actually meant under 11 U.S.C. §
1125(b). See In re Heritage Organization, L.L.C., 376 B.R. 783, 791–92 (Bankr. N.D. Tex.
2007). Judge Houser conceded that while one who “solicits” prior to the transmission of a court-
approved disclosure statement is in violation of § 1125(b), the term “solicitation” is not defined
anywhere in the Bankruptcy Code. Id. at 791. Judge Houser then looked to how other courts
have interpreted this phrase, noting that a majority of courts have interpreted the term narrowly.
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Id. at 791–92. Specifically, Judge Houser found the reasoning of the Third Circuit persuasive,
which held that a narrow interpretation fostered communications between the debtors and
creditors, and the potential harm was minimal due to the court-ordered disclosures and time
frames that allow for a creditor to change its position on a potential plan. Id. at 792. Judge
Houser continued on to state that, even if § 1125(b) permitted solicitation only after the court
approved a disclosure statement, solicitation only occurs if the plan proponents request an
official acceptance or rejection of the plan. Id.
20. Under the reasoning and precedent of this Court, the Debtors did not “solicit” any
creditor in violation of § 1125(b) by serving the disclosure statement with exhibits and other
filings in this case. Any implication or allegation otherwise is unsupported by fact or law. The
same cannot be said about Repeat. Repeat has asked the bank to vote for its plan—during the
Debtors’ exclusivity periods and without a court-approved disclosure statement—on a number of
occasions. The bank’s counsel will attest to this fact. Therefore, if anyone improperly solicited
anything in this case, it was Repeat who improperly solicited a vote for its plan in violation of §
1125 and relevant case law.
B. There is no case law holding that Debtors’ service of the disclosure statement with exhibits constitutes a violation of Rule 3017.
21. Next, Repeat alleges that it should be granted priority in confirmation proceedings
because the Debtors have violated Rule 3017 of the Federal Rules of Bankruptcy Procedure.
Debtors’ counsel has searched case law citing to Rule 3017 to find any case with a similar fact
pattern as the one at hand, and has found none to support Repeat’s request. That is likely because
the request is outrageous, especially under these facts. In fact, only four cases exist that address
any type of sanction for an apparent violation of Rule 3017—all four with vastly different
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circumstances than the present, and all focused more on § 1125 than Rule 3017. This was not
explained by Repeat in its papers, which is consistent in this case.
22. First, in In re Wilson (cited by Repeat), debtor’s counsel was admittedly ignorant
of the Bankruptcy Code, and the bankruptcy court interpreted § 1125 much more broadly than
the Northern District of Texas does. There, counsel for the debtor-in-possession’s counsel
intentionally mailed the disclosure statement to all creditors, and was unaware that he needed
approval to solicit votes for his plan and disclosure statement. See In re Wilson, 2013 WL
6404776, at *1–2 (Bankr. N.D. Cal. Dec. 6, 2013). The court summarily determined this to be a
violation of § 1125 and sanctioned the counsel for his acknowledged ignorance of the
Bankruptcy Code. See id.
23. Second, in In Rook Broadcasting of Idaho, Inc. (also cited by Repeat), a creditor
intentionally distributed its proposed plan and unapproved disclosure statement just a few days
after the debtor filed its plan.4 In Rook Broadcasting of Idaho, Inc., 154 B.R. 970, 972 (Bankr. D.
Idaho 1993). The court considered this a violation of § 1125 and sanctioned the creditor
accordingly. Id. at 975–76. Notably, the only mention of Rule 3017 was a passing reference to
the procedure to approve a disclosure statement and the restriction on dissemination of
unapproved disclosure statements, and the sanctions were based on the perceived violation of a
broadly construed § 1125, not Rule 3017. Id.
24. Third, the case of In re Clamp-All Corp., cited by Repeat for the proposition that
service of the plan and disclosure statement is sanctionable, contained vastly different
4 These facts are consistent with the facts in our case. Repeat has referenced and submitted through email its proposed plan. Repeat also asked the bank specifically to vote for Repeat’s proposed plan. This was all done during the debtors’ exclusivity periods.
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circumstances. There, a group of creditors attached, filed, and served their proposed plan and
unapproved disclosure statement during the exclusivity period to the entire creditor body as
exhibits to their objections to the debtor’s plan. In re Clamp-All Corp., 233 B.R. 198, 202–03
(Bankr. D. Mass. 1999). The court rejected the narrow interpretation of § 1125 that the Northern
District of Texas has embraced, and found that the creditors’ actions amounted to improper
solicitation and a violation of the debtor’s exclusivity rights. See id. at 204–211.
25. Finally, the only other Rule 3017 “sanctions” case involved a Chapter 11 debtor-
in-possession serving two additional “alternate” plans along with its court-approved disclosure
statement, plan, and ballots to creditors. See In re Media Ctr., Inc., 89 B.R. 685, 687–88 (Bankr.
E.D. Tenn 1988). The court found that the transmission of two other unfiled plans with the filed-
plan and approved disclosure statement violated § 1125, and disallowed the improperly solicited
votes. Id. at 690.
26. Not one of these cases addresses the service of a filed disclosure statement with
exhibits to a court-approved service list. Further, each case focuses more on admitted ignorance
of the law regarding solicitation or a blatant disregard of the law. Neither is the case here—
where the yet-to-be-approved disclosure statement was served by the service agent pursuant to
Rule 3017 just like it has done in hundreds of cases all over the country during its professionals’
combined decades of experience. As discussed supra, this District’s prevailing view is that
solicitation only occurs with an actual request for an official vote. That has not happened here.
As such, and because there can be no bona fide argument that the debtors improperly solicited
votes in violation of § 1125, none of these cases applies. Further, Repeat has shown no authority
to support its requested sanction, especially sanctions as severe as requested by Repeat, for
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service on a service list of a publicly filed document. Repeat cannot also show it is in equity to
request such a sanction, because it has repeatedly asked the bank to vote for its plan while the
Debtors remain in exclusivity. For that reason alone, the Court should deny the Motion.
C. Even if the Debtors did violate Rule 3017, sanctions are not warranted.
27. Finally, even if the Debtors did violate Rule 3017 by serving the yet-to-be-
approved disclosure statement on only the service list, Repeat’s requested sanctions are not
warranted under the circumstances.
28. “Although typically a disclosure statement should be approved before the
proponent solicits votes for the plan . . . a harmless failure to comply with § 1125's solicitation
requirements ‘is not necessarily fatal to the success of a Chapter 11 reorganization.’” In re
Cypresswood Land Partners, I, 409 B.R. 396, 424 (Bankr. S.D. Tex. 2009) (quoting In re N.W.
Recreational Activities, Inc., 8 B.R. 10, 12 (Bankr. D.Ga.1980)); see also First Am. Bank of N.Y.
v. Century Glove, Inc., 81 B.R. 274, 278–80 (D.Del.1988) (holding that a plan proponent's
failure to obtain court approval of solicitation materials is not per se fatal to the confirmation
process). Indeed, in In re Cypresswood Land Partners, I, the court held that its delayed approval
of the disclosure statement until the confirmation hearing did not prohibit confirmation due to
“solicitation” of the unapproved disclosure statement. Id. at 424–25.
29. Here, Repeat spends much of its supplement opining on the possible confusion
and harm caused by the Debtors’ service of the filed materials. Yet not one sentence of these
descriptions of harm is supported by actual evidence. There is no evidence of any harm caused
by debtors’ service of these materials on the service list—the very people who this Court ordered
receive notice of every document filed and publicly available. And the disclosure statement itself
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contains language expressly stating that this is not a solicitation attempt, and that the statement
had not been approved by the Court yet. See Debtors’ Disclosure Statement, at p. 1 [Docket No.
232].
30. The Debtors’ service agent routinely performs this exact service—serving papers
and other publicly filed documents on a limited service list all over the country, and it has yet to
face an accusation of improper solicitation. See Ex. B, at ¶¶ 5, 7; see also, e.g., In re Whiting
Petroleum Corp., Case No. 20-32021, Bankr. S.D. Tex., Docket No. 219 (Stretto certifying
service of a plan and disclosure statement on a limited service list). As Repeat admits, Stretto is
“highly qualified and experienced.” [See Docket No. 272, at ¶ 11]. Debtors rely on Stretto to
apprise themselves of the proper service and solicitation rules, and Stretto advised (and the law
confirms) that the Debtors did nothing improper. See Ex. B, at ¶ 5.
31. As mentioned, the filed materials were not sent to all creditors. Instead, they were
sent to the service list contained in the Court’s Order Granting Complex Chapter 11 Bankruptcy
Case Status [Docket No. 42]. See Ex. A, at ¶ 3; Ex. B, at ¶¶ 3–4. These parties have thus
received all pleadings, motions, and other documents requiring notice. [See Docket No. 42, at ¶
1.] The disclosure statement (with exhibits) is not the first document to be served on these parties
in this case, and it will not be the last. Further, these parties are more likely to have counsel or be
more sophisticated than a creditor who is not on this list. If any of these creditors were to be
confused by the receipt of the disclosure statement with exhibits, they have likely been confused
as to all of the other filings in this case as well. They also would have likely called Stretto or
Debtors’ counsel. Neither has happened. Simply put, there is no evidentiary or logical basis to
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find that the service of the disclosure statement on the service list caused any harm. Without
harm, there is no basis for a sanction.
32. Finally, Repeat’s allegations of improper solicitation and request for sanctions are
particularly ironic given Repeat recent actions. Within the last two weeks, Repeat Precision has
openly discussed its plan for reorganization (while debtors still maintain exclusivity) with UMB
and requested UMB support its plan. Repeat has also used a sitting U.S. Congressman to call
UMB and imply (or even ask) UMB to support Repeat and its plan and abandon the Debtors.
There should be no argument that Repeat’s actions are improper in many ways, including under
§ 1125. Repeat has now shown its hand enough to this Court—it will take whatever steps
necessary to hinder the Debtors’ reorganization process. This Court should not allow Repeat to
challenge the integrity of the bankruptcy process.
V. CONCLUSION
33. Repeat Precision’s “supplement” to the Motion is a thinly veiled attempt to
continue to discredit the Debtors and their independent directors’ good-faith attempt to use the
Bankruptcy Code properly and efficiently to reorganize the debts of the Debtors. As a business
competitor, Repeat does not want that to happen. Repeat wants to harm the Debtors or own the
Debtors through a hostile takeover.
34. The Supplement is not based on relevant law and ignores the relief granted to
debtors by the Bankruptcy Code and bankruptcy courts to use their exclusivity periods wisely
and efficiently. The Debtors did nothing wrong. Like all other cases, they served the yet-to-be-
approved disclosure statement to a limited service list in accordance with this Court’s order.
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They did not improperly solicit votes for its plan. Exclusivity should not be terminated, and the
debtors should not be sanctioned.
Dated: July 11, 2020
/s/ Marcus A. Helt
Marcus A. Helt (TX 24052187) Paul V. Storm (TX 19325350) C. Ashley Ellis (TX 00794824) Emily F. Shanks (TX 24110350) FOLEY & LARDNER LLP 2021 McKinney Avenue, Suite 1600 Dallas, TX 75201 Telephone: 214.999.3000 Facsimile: 214.999.4667
PROPOSED COUNSEL FOR THE DEBTORS, DIAMONDBACK INDUSTRIES, INC., et al.
CERTIFICATE OF SERVICE
I certify that, on July 11, 2020, a true and correct copy of the foregoing motion was served via CM/ECF to all parties authorized to receive electronic notice in this case.
/s/ Marcus A. Helt Marcus A. Helt
EXHIBIT A
Case 20-41504-elm11 Doc 297-1 Filed 07/11/20 Entered 07/11/20 16:30:26 Page 1 of 11
4848-7682-1698.2
Marcus A. Helt (TX 24052187) Paul V. Storm (TX 19325350) C. Ashley Ellis (TX 00794824) Emily F. Shanks (TX 24110350) FOLEY & LARDNER LLP 2021 McKinney Avenue, Suite 1600 Dallas, TX 75201 Telephone: 214.999.3000 Facsimile: 214.999.4667
PROPOSED COUNSEL FOR THE DEBTORS, DIAMONDBACK INDUSTRIES, INC., et al.
FORT WORTH DIVISION
DECLARATION OF BRITTNIE HUTCHINSON IN SUPPORT OF DEBTORS’ RESPONSE TO REPEAT PRECISION’S SUPPLEMENT TO MOTION TO
TERMINATE EXCLUSIVITY
I, Brittnie Hutchinson, hereby submit this declaration (this “Declaration”) under penalty of
perjury:
1. My name is Brittnie Hutchinson. I am an assistant at the law firm of Foley & Lardner
LLP. I have worked in this position for approximately 1.5 years. This is my first job in the legal field.
Prior to working at Foley & Lardner LLP, I worked in another industry.
1 The debtors in these Chapter 11 Cases, along with the last four digits of each debtor’s federal tax identification number, include: Diamondback Industries, Inc. (4403) (“Diamondback”); Discerner Holdings, Inc. (5110) (“Discerner Holdings”); and Discerner Investments, LLC (3076) (“Discerner Investments”). The location of the debtors’ service address is 3824 Williamson Road, Crowley, Texas 76036.
2 4848-7682-1698.2
2. I have worked as an assistant on the above-referenced case since May 2020. My duties
in this case have included communicating with the claims and noticing agent, Stretto, about service
issues.
3. On June 23, 2020, I received an email from a representative of Stretto asking for
approval to serve the Amended Monthly Operating Report [Docket No. 227], the Second Notice of
Change to the Debtors’ Board [Docket No. 230], the Debtors’ Chapter 11 Plan [Docket No. 231],
and the Debtors’ Disclosure Statement [Docket No. 232] to the Court’s Limited Service List. I
approved the serving of these documents to this limited service list. A true and correct copy of this
email exchange is attached hereto as Exhibit A-1.
4. I did not seek approval from any of the attorneys to serve these documents, nor did
the attorneys ask or imply for me to send out these documents. I simply understood these documents
to be routine filings that were required to be sent to those on the service list. I did not anticipate that
any person or entity would allege that the service of these filings was improper solicitation under the
Bankruptcy Code or the Federal Rules of Bankruptcy Procedure.
5. Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that the foregoing is
true and correct to the best of my information, knowledge and belief.
Dated: July 8, 2020 ______________________
Brittnie Hutchinson
3 4848-7682-1698.2
EXHIBIT A-1
1
Werner, Brittnie
From: Werner, Brittnie Sent: Tuesday, June 23, 2020 2:11 PM To: Duke Repko Cc: Team Diamondback Subject: RE: Diamondback Service 6/23
Hey Duke, Nope, that sounds good. They are having a hearing right now so I wouldn’t be surprised if you saw a few more things filed later this afternoon. Just a heads up in case you want to hold off as long as you can so you can mail more at once. Thank you! Brittnie Werner-Hutchinson Assistant

From: Duke Repko <[email protected]> Sent: Tuesday, June 23, 2020 2:09 PM To: Werner, Brittnie <[email protected]> Cc: Team Diamondback <[email protected]> Subject: RE: Diamondback Service 6/23
** EXTERNAL EMAIL MESSAGE ** Hi Brittnie, We saw that an Amended Monthly Operating Report (DN 227), the Second Notice of Change to the Debtors’ Board (DN 230), the Ch 11 Plan (DN 231), and the Disclosure Statement (DN 232) were filed with the Court this afternoon. We will plan to serve these documents on the Limited Service List/Core 2002 via first-class mail and email. Please let us know if you prefer a different method of service or if any additional parties require service. Thank you, Duke Duke Repko Associate Stretto 7 Times Square Tower, Suite 1601 | New York, NY 10036 T: 714.616.5398 | C: 203.803.8443 Stretto.com
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From: [email protected] <[email protected]> Sent: Tuesday, June 23, 2020 11:17 AM To: Duke Repko <[email protected]> Cc: Team Diamondback <[email protected]> Subject: RE: Diamondback Service 6/23 Hey Duke, Yes, this method works since it is day of. Thank you! Brittnie Werner-Hutchinson Assistant

From: Duke Repko <[email protected]> Sent: Tuesday, June 23, 2020 9:53 AM To: Werner, Brittnie <[email protected]> Cc: Team Diamondback <[email protected]> Subject: Diamondback Service 6/23
** EXTERNAL EMAIL MESSAGE ** Hi Brittnie, We saw the Amended Agenda (DN 226) just get filed with the Court. Unless otherwise instructed, we will serve this via email on the Limited Service List/Core 2002 as soon as possible. Please let us know if you have any other preferences. Thank you, Duke Duke Repko Associate Stretto 7 Times Square Tower, Suite 1601 | New York, NY 10036 T: 714.616.5398 | C: 203.803.8443 Stretto.com
From: pacerpleadingsmailbox <[email protected]> Sent: Tuesday, June 23, 2020 10:40 AM To: Team Diamondback <[email protected]> Subject: FW: 2041504elm11 Notice (generic)
From: [email protected] Sent: Tuesday, June 23, 2020 10:39:24 AM (UTC-05:00) Eastern Time (US & Canada)
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To: [email protected] Subject: 20-41504-elm11 Notice (generic)
***NOTE TO PUBLIC ACCESS USERS*** Judicial Conference of the United States policy permits attorneys of record and parties in a case (including pro se litigants) to receive one free electronic copy of all documents filed electronically, if receipt is required by law or directed by the filer. PACER access fees apply to all other users. To avoid later charges, download a copy of each document during this first viewing. However, if the referenced document is a transcript, the free copy and 30page limit do not apply.
U.S. Bankruptcy Court
Northern District of Texas
Notice of Electronic Filing The following transaction was received from C. Ashley Ellis entered on 6/23/2020 at 9:39 AM CDT and filed on 6/23/2020
Case Name: Diamondback Industries, Inc.
Case Number: 2041504elm11
Document Number: 226
Docket Text: Amended Notice of Agenda for June 23, 2020 filed by Debtor Diamondback Industries, Inc. (RE: related document(s)[216] Notice of Agenda for June 23, 2020 hearing filed by Debtor Diamondback Industries, Inc. (RE: related document(s)[11] Motion to use cash collateral Filed by Debtor Diamondback Industries, Inc., [71] Amended Motion to borrow/incur debt Debtors' Amended Motion for Entry of Final Order (I) Authorizing the Debtors to Obtain Postpetition Financing; (II) Granting Liens and Providing Superpriority Administrative Expense Status; and (III) Granting Related Relief (related document: [64]) Filed by Debtor Diamondback Industries, Inc., [73] Application to employ Ordinary Course Professionals as Other Professional Filed by Debtor Diamondback Industries, Inc., [188] Expedited Motion to pay pre-petition debtMotion for an Order Authorizing, but not Directing, the Debtors to Pay Certain Prepetition Unemployment Taxes Filed by Debtor Diamondback Industries, Inc. (Attachments: # 1 Proposed Order) (Ellis, C.)). (Ellis, C.)). (Ellis, C.)
The following document(s) are associated with this transaction:
Document description:Main Document Original filename:Diamondback Agenda for Hearing on 6232020 482087045056 v.1.pdf Electronic document Stamp: [STAMP bkecfStamp_ID=1017686615 [Date=6/23/2020] [FileNumber=45703952 0] [01cef88e905af3376acf5d0cc4a796deaa04a83d807331981dc66f6102e536992c dfef3b64de140a0d154220d222530c64e3519dea5b59c66abcd512095fe468]]
2041504elm11 Notice will be electronically mailed to: Thomas Daniel Berghman on behalf of Creditor Repeat Precision, LLC [email protected] Decker A. Cammack on behalf of Plaintiff Diamondback Industries, Inc. [email protected], [email protected];[email protected] Lawrence Chek on behalf of Creditor WELLS FARGO EQUIPMENT FINANCE, INC.
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[email protected], [email protected] Eboney D. Cobb on behalf of Creditor Crowley ISD [email protected], [email protected];[email protected] C. Ashley Ellis on behalf of Debtor Diamondback Industries, Inc. [email protected], [email protected];[email protected];[email protected] C. Ashley Ellis on behalf of Debtor Discerner Holdings, Inc. [email protected], [email protected];[email protected];[email protected] C. Ashley Ellis on behalf of Debtor Discerner Investments, LLC [email protected], [email protected];[email protected];[email protected] C. Ashley Ellis on behalf of Plaintiff Diamondback Industries, Inc. [email protected], [email protected];[email protected];[email protected] W. Scott Hastings on behalf of Creditor Repeat Precision, LLC [email protected], [email protected] Marcus Alan Helt on behalf of Debtor Diamondback Industries, Inc. [email protected], [email protected] Kyle S Hirsch on behalf of Creditor UMB Bank, N.A. [email protected], [email protected] Bradley Clay Knapp on behalf of Creditor Repeat Precision, LLC [email protected], [email protected] Tara LeDay on behalf of Creditor Midland CAD [email protected], [email protected];[email protected];[email protected];[email protected] Tricia W. Macaluso on behalf of Creditor UMB Bank, N.A. [email protected], [email protected];[email protected] Meagan Martin Powers on behalf of Creditor William Grant Martin [email protected], [email protected];[email protected] Michael A. McCabe on behalf of Defendant Kingdom Downhole Tools, LLC [email protected], [email protected] Michael A. McCabe on behalf of Defendant Justice Baker [email protected], [email protected] Michael A. McCabe on behalf of Defendant Trea H. Baker [email protected], [email protected] Laura Jane Monroe on behalf of Creditor Midland County [email protected], [email protected] Christopher S. Murphy on behalf of Creditor Texas Comptroller of Public Accounts
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[email protected], [email protected] Ian T. Peck on behalf of Attorney Haynes and Boone, LLP [email protected], [email protected];[email protected] Ian T. Peck on behalf of Debtor Discerner Holdings, Inc. [email protected], [email protected];[email protected] Ian T. Peck on behalf of Debtor Discerner Investments, LLC [email protected], [email protected];[email protected] Mark Joseph Petrocchi on behalf of Creditor Derrek Drury [email protected], [email protected];[email protected] Davor Rukavina on behalf of Creditor Repeat Precision, LLC [email protected] Davor Rukavina on behalf of Plaintiff Repeat Precision, LLC [email protected] Erin Marie Schmidt on behalf of U.S. Trustee United States Trustee [email protected], [email protected] Laurie A. Spindler on behalf of Creditor Tarrant County [email protected], [email protected] David Lawrence Staab on behalf of Debtor Discerner Holdings, Inc. [email protected] David Lawrence Staab on behalf of Debtor Discerner Investments, LLC [email protected] Mack Ed Swindle on behalf of Plaintiff Diamondback Industries, Inc. [email protected] United States Trustee [email protected] Julian Preston Vasek on behalf of Creditor Repeat Precision, LLC [email protected] Julian Preston Vasek on behalf of Plaintiff Repeat Precision, LLC [email protected] 2041504elm11 Notice will not be electronically mailed to: CR3 Partners, LLC , Kelly P Chen on behalf of Defendant Kingdom Downhole Tools, LLC Munck Wilson Mandala LLP 12770 Coit Road, Suite 600
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Dallas, TX 75251 Kelly P Chen on behalf of Defendant Justice Baker Munck Wilson Mandala LLP 12770 Coit Road, Suite 600 Dallas, TX 75251 Kelly P Chen on behalf of Defendant Trea H. Baker Munck Wilson Mandala LLP 12770 Coit Road, Suite 600 Dallas, TX 75251 Commonwealth of Pennsylvania Department of Labor and Industry C/O Deb Secrest 651 Boas Street Room 925 Harrisburg, PA 17121 Cade Kennedy CR3 Partners, LLC , J Mitchell Little on behalf of Plaintiff Diamondback Industries, Inc. 2600 Network Blvd, Suite 400 Frisco, TX 75034 William A Munck on behalf of Defendant Kingdom Downhole Tools, LLC Munck Wilson Mandala LLP 12770 Coit Road, Suite 600 Dallas, TX 75251 William A Munck on behalf of Defendant Justice Baker Munck Wilson Mandala LLP 12770 Coit Road, Suite 600 Dallas, TX 75251 William A Munck on behalf of Defendant Trea H. Baker Munck Wilson Mandala LLP 12770 Coit Road, Suite 600 Dallas, TX 75251 Nichole Marie Plagens on behalf of Defendant Kingdom Downhole Tools, LLC Munck Wilson Mandala LLP 12770 Coit Road, Suite 600 Dallas, TX 75251 Nichole Marie Plagens on behalf of Defendant Justice Baker Munck Wilson Mandala LLP 12770 Coit Road, Suite 600 Dallas, TX 75251 Nichole Marie Plagens on behalf of Defendant Trea H. Baker
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Munck Wilson Mandala LLP 12770 Coit Road, Suite 600 Dallas, TX 75251 David A. Skeels on behalf of Plaintiff Diamondback Industries, Inc. Whitaker Chalk Swindle & Schwartz PLLC 301 Commerce Street Suite 3500 Fort Worth, TX 76102 Brian J Smith on behalf of Plaintiff Diamondback Industries, Inc. Whitaker, Chalk, Swindle & Schwartz 301 Commerce Street Suite 3500 Fort Worth, TX 76102 Stretto , Stretto 410 Exchange Pl, Ste 100 Irvine, CA 92602
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EXHIBIT B
1 The debtors in these Chapter 11 cases, along with the last four digits of each debtor’s federal tax identification
number, include: Diamondback Industries, Inc. (4403) (“Diamondback”); Discerner Holdings, Inc. (5110) (“Discerner
Holdings”); and Discerner Investments, LLC (3076) (“Discerner Investments”). The location of the debtors’ service
address is 3824 Williamson Road, Crowley, Texas 76036. 4843-4054-0610.1
Marcus A. Helt (TX 24052187) Paul V. Storm (TX 19325350) C. Ashley Ellis (TX 00794824) Emily F. Shanks (TX 24110350) FOLEY & LARDNER LLP 2021 McKinney Avenue, Suite 1600 Dallas, TX 75201 Telephone: 214.999.3000 Facsimile: 214.999.4667 PROPOSED COUNSEL FOR THE DEBTORS, DIAMONDBACK INDUSTRIES, INC., et al.
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF TEXAS FORT WORTH DIVISION
In re: Diamondback Industries, Inc., et al.,1 Debtors.
§ § § § §
DECLARATION OF TRAVIS VANDELL
I, Travis Vandell, under penalty of perjury, declare as follows:
1. I am a Managing Director of Corporate Restructuring at Stretto (“Stretto”), a chapter
11 administrative services firm with offices at 410 Exchange, Ste. 100, Irvine, California 92602. Except
as otherwise noted in this declaration (this “Declaration”), I have personal knowledge of the matters
set forth herein, and if called and sworn as a witness, I could and would testify competently thereto.
2. On April 28, 2020, the Court entered an Order Granting Debtors’ Application for
Authority to Retain Stretto as Claims and Noticing Agent (Docket No. 49) (the “Claims and
Noticing Agent Order”). The Claims and Noticing Order tasks Stretto with, among other things,
serving documents in conjunction with the Order Granting Complex Chapter 11 Bankruptcy
Treatment (Docket No. 42) (the “Complex Case Designation Order”).
4843-4054-0610.1
3. The Complex Case Designation Order provides that the Debtors (and, in turn, Stretto
as the Court-appointed noticing agent) “shall maintain a service list identifying the parties that must
be served whenever a motion or other pleading requires notice.” Per the Complex Case Designation
Order, such list (oftentimes referred to as the “Limited-Service List,” “Master Service List,” or
“Core/2002 List”) is to be comprised of the Debtors, Debtors’ counsel, counsel for UMB Bank, N.A.;
counsel for the unsecured creditors’ committee (if any), the U.S. Trustee, all secured creditors, the
consolidated 30 largest unsecured creditors of the Debtors, and any party that requests notice.
Moreover, any party-in-interest beyond the foregoing that wishes to receive notice (and be added to
the Limited-Service List) shall be added to the service list by filing and serving Debtors’ counsel with
a notice of appearance and request for service. To be clear, Stretto actively monitors the docket for
notices of appearance and maintains the Limited-Service List, which can be found in real-time on the
case-specific website (https://cases.stretto.com/diamondback).
4. On June 23, 2020, at direction from Debtors’ counsel, Stretto served both the Joint
Chapter 11 Plan of Reorganization for Diamondback Industries, Inc. and Its Affiliated Debtors
(Docket No. 231) (the “Plan”) and the Disclosure Statement to Joint Chapter 11 Plan of
Reorganization filed by Diamondback Industries, Inc. and Its Affiliated Debtors2 (Docket No. 232)
(the “Disclosure Statement”) via email and first-class mail on the Limited-Service List. A subsequent
and related Certificate of Service was filed at Docket No. 260.
5. I have personally worked in the claims and noticing arena since 2004. In that time, I
have worked on literally hundreds of cases across multiple jurisdictions. Moreover, my fellow Stretto
2 In capital letters at the top of the as-filed Disclosure Statement, it clearly reads as follows: “THIS IS NOT A
SOLICITATION OF ACCEPTANCE OR REJECTION OF THE PLAN. ACCEPTANCES OR
REJECTIONS MAY NOT BE SOLICITED UNTIL A DISCLOSURE STATEMENT HAS BEEN
APPROVED BY THE BANKRUPTCY COURT. THIS DISCLOSURE STATEMENT IS BEING
SUBMITTED TO THE BANKRUPTCY COURT FOR APPROVAL BUT HAS NOT YET BEEN
APPROVED BY THE BANKRUPTCY COURT.”
team members assigned to the matter at hand have similar backgrounds and experience. In all those
prior cases, across combined decades’ worth of experience, it has been standard operating practice to
serve as-filed copies of the Plan and Disclosure Statement on the Limited-Service List (or whatever
name variant that jurisdiction may use for such list). This document service does not amount to
solicitation, but rather, is part of the noticing agent role: to serve all documents filed by the Debtors
on such service list.
6. In addition to the foregoing, it is proposed that Stretto be employed in these cases by
the Debtors as the solicitation agent (see Docket No. 104). This Court has not yet set a hearing date to
approve the Disclosure Statement. Further, related voting and tabulation procedures for such
Disclosure Statement have not been proposed by the Debtors, much less approved by this Court.
7. Given the foregoing, Stretto has not yet commenced service of solicitation materials
on the various voting and non-voting parties (as would determined by Court-approved tabulation
procedures). Rather, Stretto’s prior and aforementioned service of the Plan and Disclosure Statement
was done so on only the Limited-Service List as any other document filed by the Debtors would be
and as required by this Court’s Complex Case Designation Order.
8. Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that the foregoing is
true and correct to the best of my information, knowledge and belief.
Dated: July 8, 2020
Managing Director Stretto 410 Exchange, Ste. 100 Irvine, CA 92602
EXHIBIT C
FORT WORTH DIVISION
I; Mark E. Andrews, declare as follows:
1. I am a lawyer admitted to practice in Texas and also in the Northern District of
Texas. I have practiced law specializing in Bankruptcy for over 35 years. I have personal
knowledge of the facts stated herein. If called as a witness, I would testify as to the matters stated
herein.
2. A few weeks ago I was asked to consider taking a position on a Board of
Directors for Diamondback Industries, Inc. ("Diamondback"). As it was described to me,
Diamondback was currently in bankruptcy after losing a lawsuit and, because of contentions in
the case, a fair and impartial Board of Directors (the "Board") was needed to protect the interests
of creditors. I agreed to take on the role. At the time I agreed to the Board appointment, I thought
that the role would begin in the near future but not immediately.
3. Shortly after agreeing to take on the position, I became aware that my firm,
Dykema Gossett PLLC, would not likely permit me to take a seat on the Board while I was
employed by my firm. Because I was close to retiring from my firm, I asked if it would be
possible to defer accepting the Board appointment for a few weeks until I retired from my firm
instead of a starting immediately. Before resolving that issue with my firm and debtor's counsel,
however, another issue arose. It turns out that the judgment creditor, Repeat Precision, is
connected to Gary Martin. I have known Gary for many years — well over 20 years, I believe —
DECLARATION MARK E. ANDREWS - PAGE 1
and represented some entities in which he may have had an interest many years ago. I found this
out when a lawyer, Bernard ("Barney Given") R. Given II, who knows me and has represented
Martin contacted me and asked if I knew that Repeat Precision was Martin's company. I was not.
4. While neither I nor my firm represents Mr. Martin, Barney Given's call
introduced a new issue for me to consider. On further contact with Mr. Given I was told that Mr.
Martin wanted to meet with me and would fly to South Carolina, where I now reside, and meet
me midday Frida-y, June 19. After disclosing my Gary Martin connection to debtor's counsel,
and gaining his consent for a meeting, I agreed to meet Gary Martin. I told the same to Mr.
Given, and he confirmed the meeting. The morning before meeting Mr. Martin, I read the
findings of fact and conclusions of law connected to the judgment that contributed to the
Bankruptcy. I then met with Mr. Martin and Mr. Nipper (whom I had never met) in a conference
room at an Air Terminal in Charleston, South Carolina.
5. At that meeting, I concluded that the case was likely to be contentious and
difficult. Mr. Martin was very upset with the actions of the defendant. The findings of fact
suggested a very messy dispute was likely. Beyond that, however, it occurred to me that if
disputes arose over a business decision endorsed by the other directors, any position I took might
be viewed by the debtor as too favorable to Mr. Martin, leading perhaps to more distrust. I was
also concerned that, because Mr. Martin and I had worked together in the past, Mr. Martin might
be disappointed in decisions I made that might be perceived as adverse to him. The more I
reflected on the likely outcomes, the more that I became convinced remaining on the Board
could create more division and problems between the parties. For those reasons, I told debtor's
counsel that I needed to resign from the Board.
I declare under penalty of perjury under the laws of the States of Texas and South
Carolina that the foregoing is true and correct and of my personal knowledge.
Executed this on July 7' , 2020, in Charleston, South Carolina.
Mark E. Andrews
COUNTY OF 3-/`Q1J (-1 A-r/v‘ §
SUBSCRIBED AND SWORN to before me this 7 day of July, 2020.
Not Pub ic, in and for the State of South Carolina
[Notary's Seal] 4 , 4,
Diamondback Industries, Inc., (“Diamondback”), Discerner Holdings, Inc. (“Discerner Holdings”); and Discerner Investments, LLC (“Discerner Investments”), (collectively, “Diamondback” or the “Debtors” or “debtors”), as debtors and debtors-in-possession...
I.
EXECUTIVE SUMMARY
1. Enough is enough. In another desperate action to squelch any attempt by the debtors to successfully reorganize, Repeat filed its latest dilatory and unsupported pleading before this Court. Repeat’s counsel could have easily resolved this situation ...
2. The truth is nothing improper happened. The debtors’ service agent gathered several documents that had been filed in this case and requested permission from an assistant of the debtors’ counsel—during the June 23, 2020, hearing—to serve them as par...
THIS IS NOT A SOLICITATION OF ACCEPTANCE OR REJECTION OF THE PLAN. ACCEPTANCES OR REJECTIONS MAY NOT BE SOLICITED UNTIL A DISCLOSURE STATEMENT HAS BEEN APPROVED BY THE BANKRUPTCY COURT. THIS DISCLOSURE STATEMENT IS BEING SUBMITTED TO THE BANKRUPTCY CO...
3. This language is bolded and unequivocal. It is also language used in plans drafted by the undersigned to avoid creating confusion. Without that language, though, service of the disclosure statement on the service list—although not solicitation—was ...
4. It should be noted that, based on history in this case, if the disclosure statement were not served pursuant to Rule 3017, then Repeat would complain to this Court that there is a lack of notice to the service list and that shows some nefarious int...
5. Repeat’s endless quest to prevent the Debtors from reorganizing under the Bankruptcy Code by misdirecting the Court on specious arguments and rabbit trails—like almost every hearing in this case—shows that it is worried that the Debtors will confir...
6. Finally, there is also substantial irony with this Supplement. While Repeat takes a shot at the debtors for mailing their disclosure on the service list, it fails to tell the Court that it has on multiple occasions asked the bank to vote for its ch...
II. JURISDICTION AND VENUE
7. This Court has jurisdiction over this Motion under 28 U.S.C. §§ 157 and 1334. This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2), and venue is proper under 28 U.S.C. §§ 1408 and 1409.
III. BACKGROUND
8. On April 21, 2020 (the “Petition Date”), the Debtors filed voluntary petitions for relief under the Bankruptcy Code initiating the Case in the Bankruptcy Court for the Northern District of Texas (the “Court”) and creating their bankruptcy estates (...
9. On May 8, 2020, the Debtors filed an Application for Entry of an Order Under 11 U.S.C. §§ 327(a), 330, and 1107(b) Authorizing the Employment and Retention of Haynes and Boone, LLP as Attorneys for the Debtors and the Debtors in Possession Effectiv...
10. Subsequent to that filing, and after Repeat alleged a conflict, Haynes & Boone determined, in consultation with the Debtors, that it was in the best interests of the debtors and the Estates for it to withdraw from representing the debtors.
11. After demanding that Haynes & Boone withdraw from this case, twenty-three (23) days after the Petition Date, and before the Debtors locked down replacement counsel, Repeat filed the Motion of Repeat Precision, LLC to Terminate Exclusivity [Docket ...
12. In the Motion, Repeat seeks to terminate the statutory exclusivity period granted to the Debtors to file a plan, based on Repeat’s clear animosity towards Diamondback, and its view of the underlying litigation between the parties in Case No. 6:19-...
13. Seven days later, on Thursday, May 21, 2020, the Debtors filed an Application for an Order Pursuant to 11 U.S.C. § 327(a) Authorizing Employment of Foley & Lardner as Counsel to the Debtors and Debtors in Possession [Docket No. 99] (the “Foley App...
14. Repeat informally objected to the Foley Application, and then agreed to language in a draft order preserving rights to sue Foley.
15. On June 15, 2020, the Debtors filed their Notice of Change to Debtors’ Board of Directors [Docket No. 195], which named Mark Andrews as a new member of the Debtors’ board of directors. Only four days after the Debtors’ made Mr. Andrews’ position o...
16. On June 23, 2020, this Court heard oral argument and evidence related to the Motion. A few hours prior to the hearing, the Debtors filed their first proposed plan and disclosure statement. [See Docket Nos. 231, 232].
17. During this June 23 hearing, a representative from the Debtors’ servicing agent contacted an assistant for the Debtors’ counsel regarding service of recently filed pleadings and other papers in this case, including the disclosure statement with ex...
IV. ARGUMENT
A. The Debtors did not “solicit” votes.
18. Repeat bases its call for sanctions against the Debtors for improper solicitation on case law from other jurisdictions that is decades old. This is probably by design, because courts in the Northern District of Texas take a different approach to “...
19. In 2007, Judge Barbara Houser of the United States Bankruptcy Court for the Northern District of Texas analyzed what “solicitation” actually meant under 11 U.S.C. § 1125(b). See In re Heritage Organization, L.L.C., 376 B.R. 783, 791–92 (Bankr. N.D...
20. Under the reasoning and precedent of this Court, the Debtors did not “solicit” any creditor in violation of § 1125(b) by serving the disclosure statement with exhibits and other filings in this case. Any implication or allegation otherwise is unsu...
B. There is no case law holding that Debtors’ service of the disclosure statement with exhibits constitutes a violation of Rule 3017.
21. Next, Repeat alleges that it should be granted priority in confirmation proceedings because the Debtors have violated Rule 3017 of the Federal Rules of Bankruptcy Procedure. Debtors’ counsel has searched case law citing to Rule 3017 to find any ca...
22. First, in In re Wilson (cited by Repeat), debtor’s counsel was admittedly ignorant of the Bankruptcy Code, and the bankruptcy court interpreted § 1125 much more broadly than the Northern District of Texas does. There, counsel for the debtor-in-pos...
23. Second, in In Rook Broadcasting of Idaho, Inc. (also cited by Repeat), a creditor intentionally distributed its proposed plan and unapproved disclosure statement just a few days after the debtor filed its plan.3F In Rook Broadcasting of Idaho, In...
24. Third, the case of In re Clamp-All Corp., cited by Repeat for the proposition that service of the plan and disclosure statement is sanctionable, contained vastly different circumstances. There, a group of creditors attached, filed, and served thei...
25. Finally, the only other Rule 3017 “sanctions” case involved a Chapter 11 debtor-in-possession serving two additional “alternate” plans along with its court-approved disclosure statement, plan, and ballots to creditors. See In re Media Ctr., Inc., ...
26. Not one of these cases addresses the service of a filed disclosure statement with exhibits to a court-approved service list. Further, each case focuses more on admitted ignorance of the law regarding solicitation or a blatant disregard of the law....
C. Even if the Debtors did violate Rule 3017, sanctions are not warranted.
27. Finally, even if the Debtors did violate Rule 3017 by serving the yet-to-be-approved disclosure statement on only the service list, Repeat’s requested sanctions are not warranted under the circumstances.
28. “Although typically a disclosure statement should be approved before the proponent solicits votes for the plan . . . a harmless failure to comply with § 1125's solicitation requirements ‘is not necessarily fatal to the success of a Chapter 11 reor...
29. Here, Repeat spends much of its supplement opining on the possible confusion and harm caused by the Debtors’ service of the filed materials. Yet not one sentence of these descriptions of harm is supported by actual evidence. There is no evidence o...
30. The Debtors’ service agent routinely performs this exact service—serving papers and other publicly filed documents on a limited service list all over the country, and it has yet to face an accusation of improper solicitation. See Ex. B, at 5, 7...
31. As mentioned, the filed materials were not sent to all creditors. Instead, they were sent to the service list contained in the Court’s Order Granting Complex Chapter 11 Bankruptcy Case Status [Docket No. 42]. See Ex. A, at 3; Ex. B, at 3–4. T...
32. Finally, Repeat’s allegations of improper solicitation and request for sanctions are particularly ironic given Repeat recent actions. Within the last two weeks, Repeat Precision has openly discussed its plan for reorganization (while debtors still...
V. CONCLUSION
33. Repeat Precision’s “supplement” to the Motion is a thinly veiled attempt to continue to discredit the Debtors and their independent directors’ good-faith attempt to use the Bankruptcy Code properly and efficiently to reorganize the debts of the De...
34. The Supplement is not based on relevant law and ignores the relief granted to debtors by the Bankruptcy Code and bankruptcy courts to use their exclusivity periods wisely and efficiently. The Debtors did nothing wrong. Like all other cases, they s...
exhibit a-1
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Documents

Case 20-41504-elm11 Doc 297 Filed 07/11/20 Entered 07/11