In re Avaya, Inc.

608 B.R. 366

IN RE: AVAYA, INC., Debtor.

Case No. 17-10089 (SMB)

United States Bankruptcy Court, S.D. New York.

Signed September 16, 2019

KIRKLAND & ELLIS LLP, KIRKLAND & ELLIS INTERNATIONAL LLP, 601 Lexington Avenue, New York, New York 10022, James H.M. Sprayregen, P.C., Jonathan S. Henes, P.C., Of Counsel and 300 North LaSalle Street, Chicago, Illinois 60654, Patrick J. Nash, Jr., P.C., Christina L. Briesacher, Esq., Of Counsel, Attorneys for Avaya Inc.

ALAN WATTENMAKER, c/o AMI, CFC AWvAV, 127 West 83rd Street, Apartment 501, New York, New York 10024-0501, Pro Se

MEMORANDUM DECISION AND ORDER GRANTING SECOND MOTION FOR PARTIAL SUMMARY JUDGMENT AND ALLOWING CLAIM 3103 IN PART

STUART M. BERNSTEIN, UNITED STATE BANKRUPTCY JUDGE:

Alan Wattenmaker, a former employee of the debtor Avaya, Inc. ("Avaya"),¹ filed secured, priority claim no. 3103 in the amount of "$170,000.00 +" (the "Claim ") on May 5, 2017.² The Court granted partial summary judgment to Avaya relating to its Objection³ to the Claim , (Memorandum Decision and Order Granting Motion for Partial Summary Judgment , dated Apr. 22, 2019 ("Prior Decision ") (ECF Doc. # 2329)), and identified three open issues that needed to be resolved before the Objection could be fully adjudicated. Avaya has now made a supplemental motion for summary judgment on these issues. (Avaya Inc.'s Supplemental Motion for Summary Judgment and Memorandum of Law in Support , dated May 10, 2019 ("Motion ") (ECF Doc. # 2341).) Wattenmaker opposes the Motion. (See (Updated) Notice of Claimant's Opposition to Avaya Inc.'s Supplemental Summary Judgment Motion with Regard to Claim 3103 , dated June 13, 2019 ("Opposition ") (ECF Doc. # 2372).)

For the reasons that follow, the Motion is granted, and the Claim is allowed to the extent set forth in this decision.

BACKGROUND

The background is set forth in the Prior Decision , familiarity with which is assumed. I limit the background discussion to the facts necessary to explain this decision.

Avaya hired Wattenmaker on April 20, 1998 and terminated him from employment on June 11, 2009. In June 2012, he commenced an action against Avaya in the New York Supreme Court claiming discrimination based on age, religion and disability. The parties settled the action following mediation on or about November 26, 2013 and memorialized the terms in a Settlement Term Sheet.⁴ The Settlement Term Sheet provided in relevant part that (i) Avaya would reinstate Wattenmaker for one day on January 13, 2014 and Wattenmaker would voluntarily retire the same day; (ii) Wattenmaker would be entitled to sixteen years of service credit (as opposed to his actual service credit of roughly eleven years); (iii) Wattenmaker would get the pension, employment retirement medical benefits and the retirement benefits to which he would be entitled under the collective bargaining agreement with the Communications Workers of America ("CWA"), based on the retirement date of January 13, 2014; and (iv) Avaya would pay Wattenmaker $92,000.00 (Settlement Term Sheet at ¶¶ 2, 3.) The Settlement Term Sheet contemplated a more formal agreement but the parties never executed one. Further litigation ensued and the Supreme Court concluded in a decision dated July 22, 2016 that the Settlement Term Sheet was a binding agreement. Wattenmaker v. Avaya, Inc. , Index No. 102877/2012 (N.Y. Sup. Ct. July 22, 2016).⁵

Following the commencement of the chapter 11 case, Wattenmaker filed the Claim .⁶ The principal components of the Claim were the $92,000 Avaya agreed to pay pursuant to the Settlement Term Sheet and Wattenmaker's pension benefits. He also claimed he was entitled to "retirement benefits TBD," interest from January 2014 (also to be determined) and "expenses TBD." After Avaya filed the Objection , Wattenmaker updated his computations in an email to Avaya as follows:

Payment due $92,000, pension 49 months @2000/mo. = $98,000, Legal expenses approximately $30,000, interest from approximately January, 2014 @ 5% $11,000/year, times = 5 years = $55,000, expenses TBD = approximate total $275,000

(Sur-Reply at ¶ 4 & Ex. C.) When informal attempts to resolve the Objection failed, Avaya filed the Supplemental Declaration of James Kobar in Support of the Debtor’s Eighth Omnibus Objection to Certain: (I) Amended Claims; (II) No Liability Claims; and (III) Claims to Be Modified with Respect to Claim No. 3103 , dated July 11, 2018 ("Kobar Declaration ") (ECF Doc. # 2094) in support of the Objection .

The Prior Decision concluded that Wattenmaker was entitled to a monthly pension benefit in the sum of $1,123.68 beginning on February 1, 2013 and an allowed unsecured claim in the sum of $92,000.00 plus interest on that claim to the petition date. The Court rejected Wattenmaker's arguments including his contentions that he was still employed by Avaya and that Avaya had breached the Settlement Term Sheet or that he was entitled to retirement benefits that Avaya had failed to provide. At the conclusion of the Prior Decision , the Court identified three open questions that were not addressed in Avaya's motion: (1) Wattenmaker's right to legal fees and "expenses TBD"; (2) whether Wattenmaker's refusal to accept his pension checks stopped the running of interest on the unpaid amounts; and (3) the date on which interest started to accrue on the $92,000.00 under N.Y.C.P.L.R. § 5001. Wattenmaker had argued that interest started to accrue the date the Settlement Term Sheet was signed — November 26, 2013. Avaya argued that it started to accrue the date the New York Supreme Court entered a judgment in September 2016 after it determined that the Settlement Term Sheet was binding. Avaya has now acceded to the November 26, 2013 date and agrees that interest accrues at the C.P.L.R. rate of 9% per annum, (Motion at 7-8), leaving only the first two open questions to consider.

DISCUSSION

A. Legal Fees and Expenses and Other Benefits

Under Federal Bankruptcy Rule 3001(f), a proof of claim executed and filed in accordance with the Federal Bankruptcy Rules constitutes prima facia evidence of the validity and amount of the debt. To meet this standard, the claimant must allege facts sufficient to support the claim. In re Allegheny Int'l, Inc. , 954 F.2d 167, 173 (3d Cir. 1992) ; In re Lehman Bros. Holdings, Inc. , 602 B.R. 564, 574 (Bankr. S.D.N.Y. 2019). If he does, the burden of going forward shifts to the objector to submit some evidence to rebut the prima facie validity of the claim. Allegheny , 954 F.2d at 173 ; In re Dreier, LLP , 544 B.R. 760, 766 (Bankr. S.D.N.Y. 2016), aff'd , No. 16CV575-LTS-RLE, 2016 WL 3920358 (S.D.N.Y. July 15, 2016), aff'd , 683 F. App'x 78 (2d Cir. 2017). If the objector meets this burden, the burden shifts back to the claimant to prove the validity of the claim by a preponderance of the evidence. Allegheny , 954 F.2d at 174 ; In re Residential Capital, LLC , 552 B.R. 50, 68 (S.D.N.Y. 2015)

Except for the $92,000, the Claim does not allege facts sufficient to support the claim. The Claim includes a monetary demand, in part unliquidated, and attaches the Settlement Term Sheet, the New York Supreme Court's decision and order enforcing the Settlement Term Sheet and the Notice of Entry of Judgment but nothing else. The attachments do not show that any debts for legal fees, legal expenses or other benefits exist and the Claim does not liquidate those sums. The Settlement Term Sheet does state that in addition to $92,000.00, Wattenmaker is entitled to the "pension, employment retirement medical benefits and retirements" under the relevant collective bargaining agreement ("CBA") but the Claim does not attach the CBA or identify the benefits to which Wattenmaker thinks he is entitled but has been denied. Thus, the Claim is not prima facie evidence of the debt except for $92,000 which is not in dispute.

Even if the Claim is prima facie evidence of the debt, Avaya has rebutted it and shifted the ultimate burden of persuasion back to Wattenmaker. The Court has already dealt with the pension. Under the "American Rule," a litigant must bear his own attorneys' fees, unless a contract or statute provides otherwise. Baker Botts L.L.P. v. ASARCO LLC , ––– U.S. ––––, 135 S. Ct. 2158, 2164, 192 L.Ed.2d 208 (2015). Wattenmaker has not identified any basis to award legal fees and the Court is aware of none. In addition, while Federal Bankruptcy Rule 7054(b), made applicable to this contested matter by Federal Bankruptcy Rule 9014(c), may authorize an award of costs to the prevailing party, Wattenmaker has not prevailed.

This leaves Wattenmaker's retirement benefits which apparently refers to retirement health care and medical benefits. He contends that Avaya was obligated to pay for his medical insurance, copays, and associated expenses and he is entitled to be reimbursed. However, he says he cannot quantify his claim because the Court has not yet determined what those benefits are and Avaya has refused to answer discovery requests (and the Court has stayed discovery) relating to the scope of those benefits. (Opposition at 5.)

Wattenmaker is mistaken. The record includes a letter dated Aug. 1, 2016, from Avaya to Wattenmaker, explaining his health benefits. (See Kobar Declaration , Ex. F, at ECF pp. 239-44 of 244.) The letter contains hyperlinks to the various health care plans. Importantly, the letter states that effective January 1, 2017, Avaya will no longer be providing medical and prescription drug coverage to represented retirees like Wattenmaker who retired before October 15, 2015. After that date, retirees had to go into the marketplace and buy their own coverage through an exchange. (Id. , Ex. F, at ECF p. 239 of 244.) In addition, Avaya would no longer offer a subsidy to represented retirees to cover their Medicare Part B premiums. (Id. , Ex. F, at ECF p. 242 of 244.) While Avaya would fund a Health Reimbursement Account ("HRA") of up to $2,200.00 per annum for a single represented retiree, the retiree had to meet...