Case 18-10601-MFW Doc 775 Filed 05/07/18 Page 1 of 19

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF DELAWARE

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:
In re: : Chapter 11
:
The Weinstein Company Holdings LLC, et al.,1 : Case No. 18-10601 (MFW)
:
Debtors. : (Jointly Administered)
:
: Re: Docket No. 770
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DEBTORS’ OBJECTION TO EMERGENCY MOTION OF OFFICIAL

COMMITTEE OF UNSECURED CREDITORS PURSUANT TO BANKRUPTCY
RULES 7026(C) AND 9014(C) AND LOCAL RULES 7026-A(C) TO QUASH
NOTICE OF DEPOSITION AND FOR PROTECTIVE ORDER BARRING
REQUESTED DISCOVERY PROPOUNDED BY THE DEBTORS

The above-captioned debtor and its affiliated debtors and debtors in possession

(collectively, the “Debtors”) hereby submit this Objection (the “Objection”) to the Official

Committee of Unsecured Creditors’ (the “Committee” or the “UCC”) emergency motion to

Quash Notice of Deposition and for Protective Order Barring Requested Discovery Propounded

by the Debtors (the “Motion”). The Committee’s Motion should be denied because (i) the

discovery sought by the Debtors is relevant and narrowly tailored to the Committees’

Preliminary Objection to Sale of Substantially All of the Debtors’ Assets to Lantern

Entertainment LLC (the “Sale Objection”), and to its anticipated supplemental objection

addressing late-submitted “overbids” (the “Supplemental Objection”), each of which the Debtors

1
The last four digits of The Weinstein Company Holdings LLC’s federal tax
identification number are (3837). The mailing address for The Weinstein Company Holdings
LLC is 99 Hudson Street, 4th Floor, New York, New York 10013. Due to the large number of
Debtors in these cases, which are being jointly administered for procedural purposes only, a
complete list of the Debtors and the last four digits of their federal tax identification numbers are
not provided herein. A complete list of this information may be obtained on the website of the
Debtors’ noticing and claims agent at http://dm.epiq11.com/twc.
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must address at the hearing to approve the sale of substantially all of the Debtors’ assets (the

“Sale Hearing”); (ii) the Debtors do not seek any privileged communications or documents; (iii)

the Debtors gave reasonable notice of the discovery under the circumstances; and (iv) the

Committee’s timing in filing the Motion threatens to make it self-granting. In support of this

Objection, the Debtors respectfully state as follows:

PRELIMINARY STATEMENT

1. Debtors seek narrowly-tailored discovery in order to understand the Committee’s

objection to Debtors’ acceptance of Lantern Entertainment LLC’s (“Lantern”) qualified bid,

embodied in the March 19, 2018 Asset Purchase Agreement (the “Lantern APA”), to purchase

substantially all of the assets of The Weinstein Company. Although the Lantern bid was the only

whole-company bid Debtors received by April 30, 2018 (i.e., the Court-ordered bid deadline),

the Committee has objected to the sale, calling it “mystifying” that “Debtors could have

determined that the sale to Lantern was better than the alternatives, including an independent sale

of the unencumbered assets.” (D.I. 602 ¶ 2.)

2. Among the “alternatives” that the Committee has pressed is a preliminary,

conditional expression of interest made by Inclusion Media, LLC (“Inclusion Media”) for the

first time on May 1, 2018 – after the bid deadline. The expression of interest offered less overall

value than the Lantern APA and, in addition to being late, contained none of the Court-approved

requirements for a qualified bid; among other things, the expression of interest lacked a deposit,

a purchase agreement or a financing commitment. Indeed, there was no indication on May 1—

and there remains no indication today—that Inclusion Media has the financing or equity

commitment to make a qualified bid now or in the future. Indeed, Debtors spent substantial time

with Inclusion Media and its counsel seeking some assurance that the expression of interest

could turn into a qualified bid. No such assurance ever came; instead, Inclusion Media’s
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purported offer lacked all of the criteria of a real offer and appeared calculated to disrupt the

Lantern sale process, rather than to materialize into a legitimate bid. This is the case despite the

fact that Inclusion Media signed its NDA on April 6, 2018, expressing its interest in purchasing

some or all of the assets of the company, and gaining access to the data room with all of the

documents necessary for its diligence purposes. Thus, Debtors accepted the Lantern bid in

furtherance of their fiduciary duties and have focused on consummating that sale, which brings

up to $437 million of value to the estate.

3. Although the Committee acknowledges that Inclusion Media has not made a

qualified bid, the Committee has nevertheless insisted that Debtors expend significant estate

resources over the past week providing further diligence to Inclusion Media – diligence in

addition to the significant information Debtors provided to Inclusion Media (like all bidders)

before the bid deadline. The Committee’s enthusiasm for Inclusion Media appears to be tied to

the fact that Inclusion Media has vowed to earmark a portion of the purchase price for a “victim

fund” intended to compensate Harvey Weinstein’s victims. While Inclusion Media’s concept of

a victim fund has obvious benefits for a worthy subset of the unsecured creditors, Debtors have

seen no evidence to date that Inclusion Media is a serious bidder. Nevertheless, counsel to one

of the Committee members (Hagens Berman) has taken to the press, making disparaging

statements about Lantern and the Debtors’ sale process.

4. Before Debtors had even formally selected Lantern, the Committee filed their

objections to the sale. On the morning of May 2, Debtors informed the Committee that they

would be serving targeted discovery requests relating to the sale, which Debtors served that same

day. The parties met and conferred on May 3, after and as a result of which Debtors served

amended discovery requests aimed at addressing the issues raised in the parties’ meet and confer.

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After business hours on Friday, May 4, the Committee filed their motion to quash and has

refused to provide any discovery whatsoever. At the same time, the Committee states in its

papers that it intends to file a supplemental objection in support of viable overbids.

5. To oppose this discovery, unsecured creditors have not only taken to the Court,

they have taken to the press. Hagens Berman has claimed that Debtors served this discovery “to

scare [unsecured creditors] into withholding support for the only bidder who has pledged to do

right by the victims” and “to silence women.”2 Respectfully, that is absurd. Discovering the

Committee’s position should not scare anyone, nor was that Debtors’ intent. Nor are Debtors

trying to silence anyone. To the contrary, Debtors are asking to hear the bases for the

Committee’s sale positions. By refusing this discovery, the unsecured creditors are silencing

themselves.

6. In short, Debtors seek discovery that is relevant and narrowly tailored to the

imminent sale. The Committee acknowledges that the volume of responsive information is

small, and accordingly, there cannot be an undue burden. The Court should deny the

Committee’s motion and compel this discovery on Monday, May 7, in advance of the May 8 sale

hearing.

BACKGROUND

A. The Lantern APA

7. On March 19, 2018, each of the Debtors commenced voluntary cases under

Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”). (D.I. 1.) Also on

March 19, The Weinstein Company Holdings LLC (“TWCH”) and Lantern entered into an Asset

2
https://www.thewrap.com/weinstein-co-seeks-to-depose-group-supporting-harvey-
weinstein-accusers/

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Purchase Agreement (the “Lantern APA”), by which Lantern became the Stalking Horse Bidder

to purchase substantially all of the Debtors’ assets. (D.I. 8.)

8. On April 6, 2018, this Court issued an Order (I) (A) Approving Bidding

Procedures for Sale of Substantially all of the Debtors’ Assets, (B) Approving Stalking Horse Bid

Protections, (C) Scheduling Auction for, and Hearing to Approve, Sale of Substantially All of the

Debtors’ Assets, (D) Approving Form and Manner of Notices of Sale, Auction and Sale Hearing,

(E) Approving Assumption and Assignment Procedures and (F) Granting Related Relief (the

“Bidding Procedures Order”). In the Bidding Procedures Order, the Court set April 30, 2018 at

5:00 p.m. as the deadline for submitting qualified bids. The Court also set an April 30 deadline

for sale objections and scheduled the Sale Hearing to be held on May 8, 2017, at 11:30 a.m.

(D.I. 190.) On April 27, 2018, the Debtors agreed to extend the sale order objection deadline

until May 4, 2018 at 12:00 p.m. (ET).

9. On April 30, 2018, the Committee filed its Sale Objection. Among its objections,

the Committee challenged as “mystifying” the Debtors’ conclusion that “the Sale to Lantern was

better than the alternatives, including an independent sale of the unencumbered assets,” and

hypothesized that a valuation of “unencumbered assets” might support a different conclusion.

(D.I. 602 ¶ 2.)

10. The Court-ordered bid deadline expired on April 30 at 5:00 p.m. (See D.I. 190.)

Despite extensive efforts by the Debtors and their advisors to secure additional bids, as of the

deadline the Lantern bid was the only qualified bid for the purchase of substantially all of the

Debtors’ assets. It remains so today.

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11. On April 30 and May 2, the Committee took the depositions of Debtors, Debtors’

Chief Restructuring Officer Robert Del Genio and Lantern, following document productions by

Debtors and Lantern.

B. The Inclusion Media Expression of Interest

12. On May 1, 2018, after the bid deadline had passed, Debtors received a letter from

Inclusion Media, LLC (“Inclusion Media”), purporting to express interest in purchasing

substantially all of the Debtors’ assets (together with any subsequent expressions of interest, the

“Inclusion Media Expression of Interest,” attached hereto as Exhibit A). Aside from being

untimely, the Inclusion Media Expression of Interest offered less overall value than the Lantern

APA3 and did not meet any of the court-ordered requirements for a qualified bid, such as a

deposit of 5% of the purchase price, evidence of the ability to pay the purchase price, a financing

commitment, or a duly authorized asset purchase agreement. Indeed, the Debtors and the

Consultation Parties – including the Committee – even participated in an hour-long phone call to

determine if this was even a real bid. In other words, Inclusion Media did not submit a real bid –

they simply sent a letter.

13. In parallel with submitting its Expression of Interest, Inclusion Media also sought

significant additional due diligence from the Debtors. On May 1 at 7:18 p.m., Inclusion Media

sent an e-mail requesting five broad categories of diligence. To take just two examples,

Inclusion Media sought (a) a meeting with management to “walk through the company’s cure

analysis for every contract on the cure list”, which list contained more than 26,069 entries; and

(b) “a discussion with management of the status of all discussions with contract counterparties on

3
The Inclusion Media Expression of Interest offered less overall value to the estate than the
Lantern APA, because the $30 million it earmarked for the “victim fund” intended to
compensate Harvey Weinstein’s victims would be reduced from the overall purchase price and
would offer no direct benefit to the estate. (See Exhibit A.)

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waiving the key man provisions and how the FTI cash flow estimates is impacted by each key

man contract”. Essentially, this was a request to discuss with management every executory

contract in the days leading up to the sale hearing. A copy of that email is attached hereto as

Exhibit B.

14. The Debtors determined that their fiduciary duties required them to focus their

resources on consummating the transaction with Lantern, rather than allowing scarce

management resources to be diverted to extensive diligence requests from a party that did not

appear anywhere close to making a qualified bid. Accordingly, on May 1 at 8:22 p.m. counsel

for the Debtors responded to counsel for Inclusion Media as follows:

“Having now received the due diligence request list from your
client as a putative bidder, the Debtors have concluded that
responding would require a significant diversion of scarce
management resources. While your list may appear short, it is
very detailed and would require weeks, not hours or even days, to
fully address. We simply don’t have that time.

The Debtors have determined to focus management’s time and

attention on preparing for the Sale Hearing and consummating the
transaction with Lantern, consistent with the Debtor’s obligation
under the Lantern APA and the best interests of the estates.”

15. After notifying Inclusion Media, the Debtors issued a press release announcing

that Lantern was the winning bidder for the purchase of substantially all of the assets of the

company. Independent director Ivona Smith, who recently joined the Debtors’ Board of

Directors at the behest of the Committee, explained that “Lantern’s bid clearly achieves the

highest and best value.” The press release also addressed the indication of interest from

Inclusion Media:

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“Earlier today, news outlets reported that the Company received a

letter of interest from Inclusion Media, a potential bidder backed
by Howard Kagan. That letter, submitted after the bid deadline,
was a conditional indication of interest that contemplated
substantially less value to the estate, and did not include a purchase
agreement, a financing commitment, a deposit, or a number of
other requirements for a qualified bid. While the Inclusion letter
did claim to offer certain attractive aspects for victims, the Debtors
concluded after discussions with Mr. Kagan that the Inclusion
letter was not a bona fide offer. Thus, in furtherance of its
fiduciary duty, the Board selected the bid that offered, with
certainty, the most overall value to the estate.

A copy of the press release is attached hereto as Exhibit C.

16. At 9:37 p.m. on May 1, counsel for the Committee responded by e-mail, copying

counsel for Inclusion Media, stating that the Committee was “distressed” by the Debtors’

decision that their fiduciary duties required them to focus on consummating the Lantern

transaction. The Committee “request[ed] that the Debtors immediately contact Inclusion to

review the due diligence request”. A copy of the Committee’s email is attached hereto as

Exhibit D. Counsel for Inclusion Media sent an email reply 14 minutes later, echoing a similar

message, in addition to giving an inflammatory and misleading interview in Variety in apparent

violation of Inclusion Media’s NDA. http://variety.com/2018/biz/news/howard-kagan-

weinstein-bid-we-were-shut-out-1202794698/.

17. Also in the evening of May 1, counsel representing Committee-member Louisette

Geiss made public statements supporting Inclusion Media and stating that the Geiss plaintiffs

“strongly oppose” the Lantern bid. Among other things, Geiss’s counsel stated that “[t]he

[Geiss] plaintiffs have every reason to believe that Inclusion Media will be the highest and best

bidder and will be the ultimate purchaser of the Weinstein Co. assets”, that the Lantern bid

“contains no fund for assault survivors”, and that the Lantern bid somehow “would sweep the

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100+ instances of sexual assault, rape and more under the rug”.4 Copies of news articles

containing these statements in opposition of the Lantern APA and in support of the Inclusion

Media Expression of Interest are attached hereto as Exhibit E, Exhibit F and Exhibit G.

18. On May 2, the Debtors received a subsequent email from Inclusion Media, stating

that it would increase its offer to $324.5 million. (See Exhibit A.) However, as the Debtors

made clear, this amount was still $450,000 lower than the Minimum Initial Overbid Amount

specified in the Court-approved bidding procedures; and Inclusion Media had to send a

subsequent offer, purporting to increase its purchase price to meet the Minimum Initial Overbid

Amount. (See id.) But despite increasing its purchase price, Inclusion Media once again failed

to provide any of the necessary elements of a qualified bid.

C. The Discovery Requests

19. On May 2, 2018, the Debtors sent an e-mail to the Committee notifying it that the

Debtors would be serving discovery later that day, including “both document requests and a

deposition notice relating to the sale”. In the e-mail (attached hereto as Exhibit H), the Debtors

explained that they would be “happy to work with [the Committee] to conduct the deposition at

any point before Tuesday [May 8] including the weekend if necessary”.

20. Later on May 2, the Debtors served the Notice of Deposition Upon Oral

Examination of Designated Representative(s) of Official Committee of Unsecured Creditors,

4
See Weinstein Co. Declares Lantern Capital Winner of Bankruptcy Sale, Variety (May 1,
2018), http://variety.com/2018/biz/news/weinstein-lantern-sale-1202794488/ (Exhibit E);
Hagens Berman and the Armenta Law Firm: Default Purchaser of The Weinstein Co. Would
Leave Harvey Victims Empty-Handed; Class Plaintiffs Support Alternative with Proposed $30
Million Victims’ Fund, Business Wire (May 1, 2018) (Exhibit F),
https://www.businesswire.com/news/home/20180501006615/en/Hagens-Berman-Armenta-Law-
Firm-Default-Purchaser; Broadway Producer Howard Kagan Submits Bid For The Weinstein
Co., Wins Support of Women Who Brought Class Action Suit Against Harvey Weinstein,
Deadline (May 1, 2018), http://deadline.com/2018/05/broadway-producer-howard-kagan-
submits-bid-weinstein-co-1202380306/ (Exhibit G).

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Pursuant to Fed. R. Civ. P. 30(b)(6), in Connection With the Sale of Substantially all of the

Debtors’ Assets (D.I. 689), and served Debtors’ First Request for Production of Documents to

the Official Committee of Unsecured Creditors in Connection with the Sale of Substantially All

of the Debtors’ Assets (see D.I. 690) (together, the “Initial Discovery Requests”).

21. On May 3, 2018, at 6:00 p.m., the Debtors and the Committee participated in a

telephonic meet and confer regarding the Initial Discovery Requests. During the meet and

confer, Debtors made clear that they were seeking a narrow set of documents relating to the sale

and the Inclusion Media bid, and confirmed that they, of course, do not seek privileged

communications or communications already in Debtors’ possession. As a result of the meet and

confer, Debtors agreed to serve amended notices narrowing the scope of their discovery requests

to reflect the discussion in the parties’ meet and confer. Pursuant to that agreement, the Debtors

filed an Amended Notice of Deposition Upon Oral Examination of Designated Representative(s)

of Official Committee of Unsecured Creditors, Pursuant to Fed. R. Civ. P. 30(b)(6), in

Connection With the Sale of Substantially all of the Debtors’ Assets (D.I. 743), and Debtors’

Amended Request for Production of Documents to the Official Committee of Unsecured

Creditors in Connection with the Sale of Substantially All of the Debtors’ Assets (see D.I. 744)

(together, the “Amended Discovery Requests”).

22. The Amended Discovery Requests are narrowly tailored to discovery relating to

the Committee’s evaluation of the Lantern bid and apparent support for the Inclusion Media

Expression of Interest. Specifically, the requests seek six categories of documents:

 All Communications between the UCC and Inclusion Media.

 All Documents and Communications concerning the Inclusion Media Expression

of Interest.

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 All Communications between or among the UCC and any Unsecured Creditors,
including but not limited to Alleged Victims, concerning the Lantern Bid and/or
the Inclusion Media Expression of Interest.

 All Documents and Communications concerning the UCC’s evaluation of (i) the
Lantern Bid, (ii) any other bid filed in connection with the Sale and (iii) the
“alternatives” to the Lantern Bid referred to in the Objection, including but not
limited to liquidation and/or the Inclusion Media Expression of Interest.

 All Documents and Communications concerning the UCC’s analysis of valuations

or estimates of recoveries in bankruptcy of any unsecured creditors (including, for
the purpose of this request, unsecured creditors who are members of the UCC) or
group of unsecured creditors under (i) the Lantern Bid, (ii) any other bid filed in
connection with the Sale, and (iii) any of the “alternatives” referred to in the UCC
Objection, including but not limited to liquidation and/or the Inclusion Media
Expression of Interest.

 All Documents the UCC intends to rely upon or otherwise use in connection with
its Objection at the Sale Hearing.

The Debtors also issued a deposition notice for a Rule 30(b)(6) representative of the Committee

covering the same topics.

23. On Friday, May 4, just before 8:00 p.m., the Committee filed the instant Motion.

(See Motion, ECF. No. 770 ¶¶ 11-13.) In the Motion, the Committee expressly forecasts that it

may file an objection in support of Inclusion Media, stating that a “supplemental objection will

address any viable overbids (if such overbids are presented) that should be considered by the

Court with good cause for a late submission.” (Id. ¶ 1.) The Committee maintains that the

“Debtors’ Discovery is premature as to any possible supplementary objection”, however,

contending that because “[t]here is no formal bid from Inclusion Media as yet and the Committee

has not taken a position in support of any such potential bid, . . . there is no basis to conduct

discovery on this point under current circumstances”. (Id. ¶ 2 n.4.) It appears to be a

coordinated effort to sabotage the Court-approved process and the Debtors have every right to

better understand it that is the case, and if so, why the Committee is subjecting the estate to the

serious risks associated with losing the bird in the hand.

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24. In anticipation of a hearing on this motion, Debtors asked the Committee over the

weekend to gather responsive documents and identify their witness so that, if the discovery is

submitted, Debtors will be able to proceed quickly and efficiently to complete the discovery in

advance of the sale hearing. The Committee did not respond to that request.

25. The Sale Hearing is scheduled to begin in less than two days, on Tuesday, May 8,

2018 at 11:30 a.m. Any “supplemental objection” the Committee files will be heard at that

hearing.

LEGAL STANDARD

26. Federal Rule of Civil Procedure 26(b) (“Rule 26”) as made applicable by Federal

Rules of Bankruptcy Procedure 9014 and 7026, provides that “[p]arties may obtain discovery

regarding any nonprivileged matter that is relevant to any party’s claim or defense and

proportional to the needs of the case”. Fed. R. Civ. P. 26(b). The scope of discovery under Rule

26 is broad: “any material that is relevant to the subject matter involved in the action is

discoverable as long as it is not privileged”. Premium Payment Plan v. Shannon Cab Co., 268

F.R.D. 203, 204 (E.D. Pa. 2010); see also In re Allied Systems Holdings, Inc., Case No. 12–

11564 (CSS), 2015 WL 687490, at *4 (Bankr. D. Del Nov. 9, 2015) (“parties can obtain

discovery on any nonprivileged matters ‘relevant to any party’s claim or defense,’ which is

‘reasonably calculated to lead to the discovery of admissible evidence’”). Indeed, as the

Committee’s Motion provides, “the Federal Rules of Civil Procedure unquestionably allow broad

discovery”. (Motion, D.I. 770 ¶ 8.) Because of this broad construction, “discovery is ordinarily

allowed under the concept of relevancy ‘unless it is clear that the information sought can have no

possible bearing upon the subject matter of the action’”. In re Allied Systems, 2015 WL 687490,

at *4 (emphasis added).

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27. A party seeking a protective order over discovery materials must show that “good

cause” exists for the protection that it requests. Fed R. Civ. P. 26(c); Shingara v. Skiles, 420

F.3d 301, 306 (3d Cir. 2005). Under Third Circuit law, “good cause” is established only where

the party seeking the protective order “shows that disclosure will result in a clearly defined,

specific and serious injury”. Id. By contrast, “broad allegations of harm” will not suffice.5 Id.

For the reasons set forth below, the Committee has failed to articulate “good cause” for the

issuance of a protective order, and the Committee’s Motion should be denied.

ARGUMENT

28. The Debtors have served the Amended Discovery Notices in accordance with

their fiduciary duties and out of concern that Inclusion Media is working with certain creditors to

undermine the Lantern sale. The expression of interest—submitted less than 24 hours after the

bid deadline passed—appears calculated to disrupt the Lantern sale process, not to lead to a

genuine topping bid. The Committee’s apparent support for that effort, including statements

suggesting that the Committee may file sale objections in favor of Inclusion Media, are

concerning to the Debtors, and the Debtors are entitled to discovery to understand the relevant

facts in preparation for the sale hearing on May 8.

I. THE DEBTORS SEEK INFORMATION THAT IS RELEVANT AND

NARROWLY TAILORED TO THE SALE OBJECTIONS.

29. The Amended Discovery Requests are relevant both to the Committee’s pending

sale objections and to what it forecasts may be a supplemental objection filed shortly before the

sale hearing that is scheduled to take place two days from now. (Motion, D.I. 770 ¶ 1.)

5
In its Motion, the Committee seeks a protective order in part because the only individuals
knowledgeable about the topics listed in the Amended Discovery Notices are counsel to the
Committee. However, the mere fact that a proposed deponent is an attorney for a party in the
matter “is clearly not enough, by itself, to justify granting in full the motion for a protective
order”. Premium Payment Plan, 268 F.R.D. at 204.

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30. First, the Amended Discovery Requests are relevant to the Committee’s existing

objections. The Committee’s Sale Objection contends that a valuation of “the unencumbered

assets” might demonstrate that “alternatives” to the Lantern bid would yield superior recovery

for the creditors. (See D.I. 602 ¶ 2 (emphasis added).) The Debtors are entitled to take discovery

to understand any facts that the Committee has in making this statement. Requests 4 and 5 are

directly relevant to that assertion: Request 4 seeks “Documents and Communications concerning

the UCC’s evaluation” of the Lantern Bid and any “alternatives; and Request 5 seeks any

“analysis of valuations or estimates of recoveries” under the Lantern Bid or any “alternatives”.

(D.I. 743, Topics 4-5.)6 Such requests go to understanding the basis for the Committee’s

contention in its Sale Objection that there are superior “alternatives” to the Lantern bid.

31. Second, the Amended Discovery Requests are relevant to the “supplemental

objection” that the Committee states it plans to file before the sale hearing. In its Motion,

Committee states that it “intends to file a supplement” that “will address any viable overbids

(if such overbids are presented) that should be considered by the Court with good cause for a late

submission”. (Motion, D.I. 770 ¶ 1.) Although this prediction is worded broadly, the expression

of interest from Inclusion Media is the only purported “overbid”.7 Requests 1 through 3 are

relevant to that anticipated objection in that they seek, respectively, (1) communications with

Inclusion Media; (2) any nonprivileged documents and communications concerning Inclusion

6
Because the document requests listed in the Debtors’ Amended Request for Production of
Documents to the Official Committee of Unsecured Creditors in Connection with the Sale of
Substantially All of the Debtors’ Assets are identical to the topics noticed in the Debtors’
Amended Notice of Deposition Upon Oral Examination of Designated Representative(s) of
Official Committee of Unsecured Creditors, Pursuant to Fed. R. Civ. P. 30(b)(6), in Connection
With the Sale of Substantially all of the Debtors’ Assets (D.I. 743), all references to topic
numbers herein shall equally refer to the related document requests.
7
Of course, if the Committee knows of some other possible newcomer and is withholding
that information from the Debtors, it is crucial for the Debtors to know that as well.

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Media; and (3) nonprivileged communications between or among the Committee and any

unsecured creditors concerning the Lantern APA and/or the Inclusion Media Expression of

Interest. (D.I. 743, Topics 1-3.)

32. As the Committee admits in its Motion, “there is no formal bid from Inclusion

Media as yet”. (Motion, D.I. 729 at 3 n.4.) However, the Committee continues to insist that the

Debtors engage with Inclusion Media and comply with their burdensome requests for diligence.

This can only mean that Committee anticipates making a further objection in support of

Inclusion Media in the event a bid materializes. This discovery is narrowly targeted to

understand the basis for the Committee’s position in objecting to the Sale on that basis.

33. It should also be noted that the Committee’s statement that it does not intend to

introduce documents at the hearing and if it changes its mind it will produce documents provides

no answer. That simply is not how discovery works. Parties are permitted far broader discovery

under Rule 7026 than just what their opponent intends to reply on at trial.

II. THE COMMITTEE FAILS TO DEMONSTRATE THAT THE REQUESTED

DISCOVERY IS UNDULY BURDENSOME.

34. The Committee argues that the Amended Discovery Requests are unduly

burdensome and compliance therewith would be “impossible to achieve”. (Motion, D.I. 770 ¶¶

4, 11.) However, the Committee’s position that the Amended Discovery Requests seek

privileged information and documents “and little else” undercuts this very argument.

35. The Debtors are not seeking the production of privileged documents, and it is not

“good cause” for a protective order that some of the documents that are responsive to the

Debtors’ requests may be privileged. On their face, the requests seek documents and information

that is not privileged—for example, “Communications between the UCC and Inclusion Media,”

if any, would not be privileged, and any financial valuations of the Lantern bid or “alternatives”

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also would not be privileged. The Debtors simply seek whatever “little else” exists. Based on

the Committee’s representations that there aren’t many responsive documents, it should not be

difficult—let alone unduly burdensome—to produce.8

III. THE DEBTORS PROVIDED REASONABLE NOTICE OF THE DISCOVERY

UNDER THE CIRCUMSTANCES.

36. The Debtors acknowledge that their requested discovery includes an expedited

production and deposition schedule. However, this is a consequence of the timing of events

surrounding the announcement that Lantern would be the winning bidder for the Sale, and the

notice given to the Committee was reasonable given those circumstances.

37. The Committee filed its Sale Objection on April 30, 2018. The Debtors did not

receive the Inclusion Media Expression of Interest until the next day, at 1:22 p.m. (ET) on May

1, 2018. At 9:37 p.m. on May 1, counsel for the Committee expressed concern with the Debtors’

decision to focus on consummating the Lantern transaction, and “request[ed] that the Debtors

immediately contact Inclusion to review the due diligence request”. (See Exhibit D). Only after

the Committee made this request did it become apparent that the Committee would encourage a

sale to Inclusion Media and not to Lantern. As such, the need to take discovery did not arise

until the evening of May 1, 2018.

38. The Debtors acted immediately upon recognition that the Committee was

supporting Inclusion Media—a party that did not submit a qualified bid and is acting to disrupt

the orderly sale of the Debtors’ assets to the only party that did submit a qualified bid. In fact,

8
The Committee complains that the timeframe for the requests is March 19, 2018 to the
present, even though the Committee was not formed until March 28. (Motion, D.I. 770 ¶ 2 n.5.)
The Committee did not raise this on the parties’ meet and confer, nor should the extra nine days
impose any burden if documents do not exist. Nevertheless, Debtors are of course willing to
amend the timeframe to be from the date of the Committee’s formation, i.e., March 28, to the
present.

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the Debtors emailed the Committee on the morning of May 2 to alert the Committee that Debtors

would be seeking discovery in order to give the Committee as much notice as possible. (See

Exhibit H.) In that same email, Debtors agreed to be as flexible as needed, including being

available over the weekend, in order to complete the discovery in advance of the sale hearing.

(Id.) The Debtors filed the Initial Discovery Requests after providing immediate email notice,

and the Committee and the Debtors have been in communication about the discovery requests on

a daily basis since that time. Given the circumstances, the Debtors could not have provided the

Committee with any more notice than they did.

39. To reiterate, the Committee contends that there is “little else” that exists outside

of privileged documents and information responsive to the discovery requests. (Motion, D.I. 770

¶ 13). Given that assertion, it should not be difficult for the Committee to produce a small set of

responsive documents in a short amount of time.

IV. THE MOTION SHOULD BE DENIED BECAUSE THE COMMITTEE FILED IT

IN A STRATEGIC MANNER SUCH THAT IT WOULD BE SELF-GRANTING.

40. The Motion should be denied because the Committee’s strategic filing of the

Motion sought to make it self-granting. The Debtors put the Committee on notice in the early

afternoon on May 2, 2018 that the Debtors would be serving discovery requests that day. (See

Exhibit H.) Further, the Debtors and the Committee have been in communication about this

discovery since the Initial Discovery Requests were served. Instead of seeking protection from

the Court at a time after which the Debtors could appropriately respond, and the Court could

make an informed decision thereon, the Committee filed its Motion after business hours on

Friday, and refused discovery in advance of and including a deposition scheduled to begin on

Monday morning. As the Committee knows, the Debtors seek this discovery to prepare for the

Sale Hearing on Tuesday, May 8, 2018. Therefore, even if the Court denies the Committee’s

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Motion, as the Debtors respectfully request, the Committee may take the position that it will not

be able to produce documents sufficiently in advance of a deposition, such that the deposition

may also occur at a meaningful time before the Sale Hearing. This strategic conduct by the

Committee belies the cooperation that the Committee and the Debtors have exercised thus far in

these Chapter 11 cases, and the Debtors respectfully request that the Court deny the Motion for

all of the reasons provided herein. If as the Committee asserts there is not much by way of

relevant documents, the Committee should be able to produce them on Monday, May 7 promptly

following the telephonic hearing request below by the Debtors so that the deposition may go

forward the afternoon of May 7 to allow the Debtors to adequately prepare for the May 8 Sale

Hearing.

WHEREFORE, the Debtors respectfully request that the Court deny the Motion to Quash

and for Protective Order and grant such other and further relief as may be appropriate. The

Debtors request that the Court convene an emergency telephone conference to hear this matter on

Monday, May 7, 2018.

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Dated: May 7, 2018

Wilmington, Delaware
/s/ Russell C. Silberglied
RICHARDS, LAYTON & FINGER, P.A.
Mark D. Collins (No. 2981)
Russell C. Silberglied (No. 3462)
Paul N. Heath (No. 3704)
Zachary I. Shapiro (No. 5103)
Brett M. Haywood (No. 6166)
David T. Queroli (No. 6318)
One Rodney Square
920 North King Street
Wilmington, DE 19801
Telephone: (302) 651-7700
Facsimile: (302) 651-7701

- and -

CRAVATH, SWAINE & MOORE LLP

Paul H. Zumbro (admitted pro hac vice)
George E. Zobitz (admitted pro hac vice)
Karin A. DeMasi (admitted pro hac vice)
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Telephone: (212) 474-1000
Facsimile: (212) 474-3700

Attorneys for the Debtors

and Debtors in Possession

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