Effective January 1, 2023, the procedures for filing complex cases in the Southern District of Texas changed. The courts have made the procedures specific and detailed. Below are some of the highlights of the new rules.
“Complex Case” is now defined to be a case or group of affiliated cases in which i) the total liabilities of the debtors and their non-filing affiliates exceed $10 million; (ii) there are more than 50 parties-in-interest; or (iii) any claims against or interests in the debtors are publicly traded. For cases where the debtors and their non-filing affiliates have $200 million or more in liabilities, the Complex Case designation is mandatory.
Judge Christopher M. Lopez will join Chief Judge David R. Jones as the two judges that will hear the complex cases. The case manager for Judge David Jones, is designated as the initial point of contact for all pre-filing matters to obtain a setting for first-day hearings. Unless otherwise ordered, first-day hearings will be conducted as Virtual Hearings, no in-person attendance will be permitted unless combined with other relief.
Final orders may be obtained on the first day on (i) motions to pay employee wages and benefits that do not include relief of the nature specified in 11 U.S.C. § 503(c) or that do not otherwise contain a request for payments outside the ordinary course; (ii) motions to pay pre-petition and post-petition taxes that are (a) secured by property of the estate; (b) held in trust by the debtors pursuant to state or federal law; or (c) entitled to priority pursuant to Section 507(a)(8); (iii) motions to pay (a) oil and gas royalties; (b) mineral liens, or mechanic and material liens that meet the criteria of Section 546(b); (c) joint interest billing disbursements to joint interest parties; or (d) PACA or PSSA claims; (iv) applications to retain a claims, balloting and/or noticing agent; (v) motions to limit or modify the notice requirements; (v) motions to approve adequate assurance procedures under Section 366; and (vi) motions that are procedural in nature.
At the initial cash collateral of DIP financing hearing, the debtors must introduce a cash flow projection showing sources and uses of cash necessary for ongoing operations on a weekly basis for not less than the first 3 weeks of the case. If a motion to approve DIP financing under Sections 363 or 364 seeks to include sale or plan milestones, cross-collateralization, roll-ups, lien on avoidance actions or self-executing default provisions, the motion must provide specific reasons why each should be approved. Cash collateral and financing orders that contain a release of claims against lenders and other third parties by the debtors should provide that the official committee of unsecured creditors has at least 60 days from the date of the committee’s formation to investigate claims against the lenders and to challenge the extent and validity of any liens or the appropriateness of such release, which can be extended by agreement or court order. Self-executing termination provisions are disfavored.
There is now an official form of order for retaining claims agents. Unless otherwise directed by the court, hearing dates must be obtained by contacting the court’s case manager. There is a new case caption for filing motions and emergency motions.Appearances in a main case matter must be made by completing an electronic appearance form on the judge’s home page.
Unless the court orders a hearing as virtual which is mandatory remote participation, parties may appear for a hearing in person or by remote participation. No motion is required for remote participation. Witnesses must appear by both audio and video.
Motions to extend the time to take any action before the expiration of the period prescribed by the Bankruptcy Code, the Bankruptcy Rules, the Local Bankruptcy Rules, or a confirmed plan, the time for taking the action is automatically extended until the court rules on the motion.
Bid procedures motions should provide for consultation with any official committees and secured lenders with liens on the property being sold.
If a proposed plan seeks releases with respect to claims that creditors may hold against non-debtor parties, then a ballot must be sent to creditors and notices must be sent to non-voting creditors informing them and provide a box to check to indicate assent or opposition to such releases.
No hearing should be self-calendared for an application to retain a professional.
The court may order mediation of any dispute arising in an adversary proceeding, contested matter or otherwise. Parties may agree to mediate any dispute without court approval. No matter may be mediated by a sitting judge without first obtaining an order from the court. For avoidance actions, plaintiff must bear the mediation costs. Otherwise, the cost is shared equally.
Hearing agendas should be filed using the CM/ECF “agenda” code at least 24 hours prior to the scheduled hearing. Hearing agendas must include instructions for remote or virtual participation.
Exhibits must be filed on CM/ECF in advance of the hearing. Each exhibit must be filed as a separate attachment to an Exhibit List. The Court will review the exhibits from CM/ECF. Exhibits must be offered into evidence by reference to the CM/ECF docket number of the filed exhibit.
Applications for compensation and reimbursement of expenses filed by professionals must follow a precise list of items. Proposed orders must follow the form located on the court’s website. Parties objecting to a final fee application are not required to object on an interim basis. Complex Case Fee Application Coversheets may not be altered.
While this blog merely highlights some of the significant changes to the rules, make sure you carefully check these rules to comply with every detail and requirement outlined in them. To close in the words of a home grown Texan, “learn them rules so you ain’t two sandwiches short of a picnic!”