In re SVB Fin. Grp.

660 B.R. 60

IN RE: SVB FINANCIAL GROUP, Debtor.

Case No. 23-10367 (MG)

United States Bankruptcy Court, S.D. New York

Signed June 7, 2024

JENNER & BLOCK LLP, Conflicts Attorneys for the Debtor, 353 N. Clark Street, Chicago, Illinois 60654, By: Vincent E. Lazar, Esq., Landon S. Raiford, Esq., 1155 Avenue of the Americas, New York, New York 10036, By: Marc Hankin, Esq., Carl Wedoff, Esq.

SHEARMAN & STERLING LLP, Attorney for Morgan Stanley & Co. LLC, 599 Lexington Avenue, New York, New York 10022, By: Daniel Lewis, Esq.

GOODWIN PROCTER LLP, Attorneys for Christopher Cooper, 620 Eighth Avenue, New York, New York 10018, By: Howard S. Steel, Esq., Alexander J. Nicas, Esq., Artem Skorostensky, Esq.

FRIEDMAN KAPLAN SEILER ADELMAN & ROBBINS LLP, Attorneys for Anthony DeChellis, 7 Times Square, New York, New York 10036, By: Jason C. Rubinstein, Esq., Michael S. Palmieri, Esq., Dania Bardavid, Esq.

MEMORANDUM OPINION AND ORDER DENYING MOTIONS OF MORGAN STANLEY, CHRISTOPHER COOPER AND ANTHONY DECHELLIS FOR LEAVE TO FILE LATE PROOFS OF CLAIM PURSUANT TO BANKRUPTCY RULES 3003(c) AND 9006(b)(1)

MARTIN GLENN, CHIEF UNITED STATES BANKRUPTCY JUDGE

One of the core tenets of bankruptcy law is the prompt and effectual administration and settlement of a debtor's estate within a limited period of time. See In re Best Prods. Co., Inc., 140 B.R. 353, 356 (Bankr. S.D.N.Y. 1992) (citing Katchen v. Landy, 382 U.S. 323, 86 S.Ct. 467, 15 L.Ed.2d 391 (1966)). Thus, bar dates, which fix the time within which proofs of claim or interest may be filed, are "critically important." In re Lehman Bros. Holdings, Inc., 433 B.R. 113, 119 (Bankr. S.D.N.Y. 2010) (citing In re Musicland Holding Corp., 356 B.R. 603, 607 (Bankr. S.D.N.Y. 2006)); see FED. R. BANKR. P. 3003(c)(3) (requiring a court to establish bar dates). Indeed, it is the bar date order that "enabl[es] the parties in interest to ascertain with reasonable promptness the identity of those making claims against the estate and the general amount of the claims, a necessary step in achieving the goal of successful reorganization." Best Prods., 140 B.R. at 357 (citation omitted). Compliance with a bar date is therefore imperative. "[T]he legal system would groan under the weight of a regimen of uncertainty in which time limitations were not rigorously enforced." Midland Cogeneration Venture Ltd. P'ship v. Enron Corp. (In re Enron Corp.), 419 F.3d 115, 123 (2d Cir. 2005) (quoting Silivanch v. Celebrity Cruises, Inc., 333 F.3d 355, 367-68 (2d Cir. 2003)). Therefore, it is for this reason—as well as a need for finality—that the Second Circuit adheres to a strict observance of bar dates, and "[c]reditors act at their peril where they fail to adequately investigate and pursue their rights." Lehman, 433 B.R. at 126.

Pending before the Court are the three contested motions (collectively, the "Motions") of Morgan Stanley & Co. LLC ("Morgan Stanley," and its motion, the "Morgan Stanley Motion," ECF Doc. # 921), Christopher Cooper ("Cooper" and his motion, the "Cooper Motion," ECF Doc. # 923), and Anthony DeChellis ("DeChellis," and his motion, the "DeChellis Motion," ECF Doc. # 925 and, together with Morgan Stanley and Cooper, the "Movants"). Each of the Motions, filed roughly seven months after the August 11, 2023 general bar date (the "General Bar Date"), seeks authorization to amend or supplement an existing proof of claim, as applicable, or leave to file a late proof of claim:

• The Morgan Stanley Motion seeks entry of an order granting a nunc pro tunc extension of Morgan Stanley's time to file a proof of claim to within 14 days of a decision granting relief.¹ (Morgan Stanley Motion ¶¶ 3, 24.)

• The Cooper Motion seeks entry of an order granting nunc pro tunc extension of Cooper's time to file a proof of claim to within 14 days of a decision granting relief. (Cooper Motion ¶ 33.)

• The DeChellis Motion seeks entry of an order (i) permitting DeChellis to file a "supplemental" proof of claim² or (ii) granting a nunc pro tunc extension of DeChellis's time to file a proof of claim to within 14 days of a decision granting relief. (DeChellis Motion ¶ 17, 32.)

On April 5, 2024, SVB Financial Group, (the "Debtor") filed a "consolidated" objection to the Motions (the "Consolidated Objection," ECF Doc. # 1008) in which the Official Committee of Unsecured Creditors (the "Committee") joined (the "Committee Joinder," ECF Doc. # 1011).

On May 9, 2024, each of Morgan Stanley, Cooper, and DeChellis filed a reply in further support of their respective Motions. (See Reply to Objection to Motion of Morgan Stanley & Co. LLC for Order Granting Leave to File Late Proof of Claim Pursuant to Bankruptcy Rules 3003(c) and 9006(b)(1), ECF Doc. # 1113 (the "Morgan Stanley Reply"); Reply of Christopher Cooper in Support of Motion for Order Granting Leave to File Late Proof of Claim Pursuant to Bankruptcy Rules 3003(c) and 9006(b)(1), ECF Doc. # 1116 (the "Cooper Reply"); Reply in Further Support of Motion for Order Granting Leave to File Late Proof of Claim Pursuant to Bankruptcy Rules 3003(c) and 9006(b)(1), ECF Doc. # 1117 (the "DeChellis Reply").) On May 16, 2024, the Court held a hearing on the Motions.

For the reasons discussed, the Court DENIES the Motions.

I. BACKGROUND

A. Generally

1. The Merger

On July 1, 2021, the Debtor acquired Boston Private Financial Holdings, Inc. ("Boston Private") pursuant to a merger transaction (the "Merger") between Boston Private and the Debtor with the Debtor continuing as the surviving corporation. (Cooper Motion ¶ 1.) As set forth in section 2.01 of the merger agreement (the "Merger Agreement," Morgan Stanley Motion, Ex. E), Silicon Valley Bank, as the "Surviving Bank," shall be "responsible for all of the liabilities of every kind and description of each of the merging banks existing as of the Effective Time, including all deposits, accounts, debts, obligations and contracts thereof . . . ." (Morgan Stanley Motion ¶ 2.)

Additionally, the Merger Agreement also provides that each shareholder of Boston Private stock has the right to receive cash and shares of the Debtor's common stock. (Cooper Motion ¶ 2.) Therefore, as part of this stock-for-stock exchange, the Debtor issued (i) an amended registration statement (the "Registration Statement") filed with the U.S. Securities and Exchange Commission ("SEC") on March 16, 2021, which the SEC declared effective on March 17, 2021; and (ii) a prospectus filed on Form 424B3 dated March 17, 2021 that was subsequently mailed to Boston Private shareholders on or about March 19, 2021 (collectively, with the "Registration Statement," the "Offering Materials"). (Id.)

Cooper and DeChellis are two former executives of Boston Private, and Morgan Stanley served as the underwriter that advised Boston Private in connection with the Merger. (Consolidated Objection at 1.)

2. Pre-Petition Litigation Relating to the Merger

In connection with the Merger, on September 20, 2021, lead plaintiff Richard Savoy commenced a putative class action lawsuit on behalf of himself and all similarly situated former public Boston Private shareholders against Boston Private, DeChellis, and other former members of Boston Private's Board of Directors. See Class Action Complaint at 1, Savoy v. Boston Priv. Fin. Holdings, Inc., 626 F. Supp. 3d 242 (D. Mass. 2022) (No. 1:21-cv-11537), 2021 WL 4264768. While also a former Boston Private executive, Cooper was not named.

The complaint, as amended (the "Savoy Complaint," ECF Doc. # 1008-2), alleged violations of sections 14(a) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act") and SEC Rule 14a-9. See Savoy v. Boston Priv. Fin. Holdings, Inc., 626 F. Supp. 3d 242, 245 (D.Mass. 2022) (describing the Savoy Complaint). Specifically, the Savoy Complaint claimed that Boston Private's proxy solicitations concerning its approval of the Merger contained "false or misleading statements, omissions, and half-truths." Id. Such statements were allegedly material and intended to "suppress shareholder opposition and consolidate support for a deal." (Savoy Complaint ¶ 4.) Additionally, the Savoy Complaint also alleged that individual defendants were liable pursuant to section 20(a) of the Exchange Act. Savoy, 626 F. Supp. 3d at 245.

Ultimately, the Savoy Complaint was dismissed on pleading grounds pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure and the Private Securities Litigation Reform Act of 1995. See id. at 249-53 (discussing the court's reasoning in dismissing the Savoy Complaint). Nonetheless, the dismissal decision sheds light on the contentious state of affairs leading up to the Merger. As discussed therein, a day after the proposed Merger was announced, HoldCo Asset Management, LP ("HoldCo"), Boston Private's fourth largest shareholder, issued public letters and press releases detailing its concerns with the Merger that culminated into a "pitched proxy battle." Id. at 246; see also id. at 251 (describing the proxy battle as "contentious"). HoldCo contended that Boston Private failed to conduct a competitive process to maximize value for shareholders as there were three companies other than the Debtor who expressed interest in a potential transaction with Boston Private. Id. at 246-47. HoldCo also asserted that Boston Private's board cut a bad deal for shareholders, and DeChellis possessed a conflict of interest. Id. at 246.

Aside from competing proxy statements filed by Boston Private and HoldCo, the decision also notes that there were eight civil lawsuits filed by Boston Private shareholders, including one filed by lead plaintiff Richard Savoy in February 2021, alleging that "Boston Private's proxy filings omitted various facts." Id. In response, Boston Private provided subsequent written communication that included supplemental disclosures, and the civil lawsuits were later voluntarily dismissed. Id.

3. The Debtor's Chapter 11 Case

On March 17, 2023 (the "Petition Date"), the Debtor filed a voluntary petition (the "Pe...