In re Wythe Berry Fee Owner LLC

HERRICK, FEINSTEIN LLP Attorneys for the Debtor By: Stephen B. Selbst, Esq Janice Goldberg, Esq. Roya Imani, Esq. Avery S. Mehlman, Esq. Rodger T. Quigley, Esq. Meaghan Roe, Esq. Steven B. Smith, Esq.

ABRAMSON BROOKS LLP Attorney for Wythe Berry LLC By: Jon S. Brooks, Esq.

PAUL HASTINGS LLP Attorneys for Zelig Weiss By: Nicholas A. Bassett, Esq.

GORNITZKY & CO. Attorneys for Notes Trustee By: Maya Ben Meir, Esq. Amnon Biss, Esq.

CHAPMAN AND CUTLER LLP Attorneys for Notes Trustee/Plan Administrator for Wind Down Co. By: Michael Friedman, Esq. Helena Honig, Esq. By: Eric Silvestri, Esq.

GORDON REES SCULLY MANSUKHANI, LLP Attorneys for Schimenti Construction By: Jacob C. Cohn, Esq.

GIBSON, DUNN &CRUTCHER LLP Attorneys for William Vale Owner LLC By: Michael G. Farag, Esq. By: Keith R. Martorana, Esq. Harry R. Silvera, Esq.

DAVIS POLK &WARDWELL LLP Attorneys for Yoel Goldman By: Chase McReynolds, Esq., Elliot Moskowitz, Esq.

OFFICE OF THE NYS ATTORNEY GENERAL Attorneys for NYS Department of Taxation and Finance By: Leo V. Gagion, Esq.

MEMORANDUM OPINION AND ORDER APPROVING THE SETTLEMENT WITH ZELIG WEISS

MARTIN GLENN CHIEF UNITED STATES BANKRUPTCY JUDGE

Settlements are welcome in bankruptcy because they prevent costly litigation between parties and contribute to the efficient administration of the bankruptcy estate. See e.g., Myers v. Martin (In re Martin), 91 F.3d 389, 393 (3d Cir.1996); In re MF Glob. Inc., 466 B.R. 244, 247 (Bankr. S.D.N.Y. 2012). However, a settlement must be fair, equitable, and in the best interest of the estate to be approved by a bankruptcy court. See, e.g., Protective Comm. for Indep. S'holders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414, 424-25 (1968); Motorola, Inc. v. Official Comm. of Unsecured Creditors (In re Iridium Operating LLC), 478 F.3d 452, 462 (2d Cir. 2007); Air Line Pilots Assoc. v. Am. Nat'l Bank &Trust Co. of Chi. (In re Ionosphere Clubs, Inc.), 156 B.R. 414, 426 (S.D.N.Y. 1993), aff'd, 17 F.3d 600 (2d Cir. 1994). And, even more fundamentally, parties entering a settlement must have the requisite authority to bind their side to the compromise. The settlement at issue here is proper on both fronts.

On April 21, 2024, Wythe Berry Fee Owner LLC (the "Debtor") filed a motion for entry of an order approving the global settlement (as amended, the "Settlement") pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure (the "Motion," ECF Doc. # 304). The

Debtor annexed a copy of the settlement agreement (the "Settlement Agreement") as Exhibit A to the Motion, and submitted the declaration of Assaf Ravid (the "First Ravid Declaration") in support of the Motion as Exhibit B. On May 10, 2024, the Debtor filed a revised settlement agreement (the "Revised Settlement Agreement," ECF Doc. #341.)^[1] The Revised Settlement Agreement is between the Debtor, WB Hotel LLC ("Hotel Sub"), WB Operations LLC ("Op Sub"), WB FNB LLC ("FNB Sub"), YG WV LLC ("YG WV"), Wythe Berry Member LLC ("Member"), AYH Wind Down LLC ("Wind Down"), Wythe Berry LLC ("WB"), The William Vale Hotel LLC ("WV Hotel"), The William Vale FNB LLC ("WV FNB"), North 12 Parking LLC ("Parking"), Espresso Hospitality Management LLC ("Espresso"), Zelig Weiss ("Weiss"), TWV Domain LLC ("Domain"), The William Vale Staffing LLC ("Staffing"), and Mishmeret Trust Company Ltd., solely in its capacity as Trustee of the Series C Notes (the "Trustee," and collectively, the "Parties"). Notably, on May 10, 2024, the Debtor filed the Third Amended Plan of Reorganization of Wythe Berry Fee Owner LLC (the "Third Amended Plan," ECF Doc. # 340). Later, on May 20, 2024, the Debtor filed the Fourth Amended Plan of Reorganization of Wythe Berry Fee Owner LLC (the "Fourth Amended Plan," ECF Doc. # 364.)

On May 8, 2024, Yoel Goldman ("Goldman") filed an objection to the Second Amended Chapter 11 Plan of Reorganization of Wythe Berry Fee Owner LLC and the Motion (the "Goldman Objection," ECF Doc. # 330). The Goldman Objection is supported by the declaration of Elliot Moskowitz, Esq. (the "Moskowitz Declaration," ECF Doc. # 331). Thereafter, Weiss filed a reply to the Goldman Objection (the "Weiss Reply," ECF Doc. # 351). The same day, the Debtor filed a reply to the Goldman Objection (the "Debtor Reply," ECF Doc. # 352), which is supported by the declaration of Assaf Ravid (the "Ravid Reply Declaration,"

ECF Doc. # 354).^[2] The Court held a hearing on the Motion, and a combined hearing on the Disclosure Statement and confirmation of the Plan, on May 15, 2024 (the "Hearing").

For the reasons explained below, the Court GRANTS the relief requested in the Motion and approves the Settlement. Concurrent with the entry of this Opinion, the Court will enter a separate Opinion confirming the Fourth Amended Plan. In addition, the Court will also enter the Findings of Fact, Conclusions of Law, and Order Approving the Modified Disclosure Statement and Confirming the Modified Chapter 11 Plan of Wythe Berry Fee Owner LLC (the "Disclosure Statement and Confirmation Order").

I. BACKGROUND

A. Relevant Case History

The facts below, unless otherwise noted, are derived from supporting documentation as cited.

1. The Involuntary Chapter 11 Filing

On October 6, 2022 (the "Petition Date"), the Trustee, Yelin Lapidot Provident Funds Management Ltd., The Phoenix Insurance Company Limited and Klirmark Opportunity Fund III L.P. filed an involuntary chapter 11 petition against the Debtor (the "Involuntary Filing," ECF Doc. # 1.) Following a hearing on the Involuntary Filing on January 17, 2023, the Court denied Weiss's Motion to Dismiss and entered an Order for Relief against the Debtor on January 18, 2023. (ECF Doc. # 58.)

The Debtor remains in possession of its property and continues to operate and manage its business as debtor-in-possession under sections 1107(a) and 1108 of the Bankruptcy Code.

(Motion ¶ 9.) No trustee, examiner, or statutory committee of creditors has been appointed in this chapter 11 Case. (Id.)

2. The Debtor and the Lease Agreement

The Debtor owns the commercial real property complex located at 55 Wythe Avenue, Brooklyn, New York (the "WV Complex"), comprised of The William Vale Hotel, office and retail space, and parking. (Id. ¶¶ 1, 11.) The Debtor is owned by its sole member, Member. (Id. ¶ 11.) In turn, Member is co-owned equally by YG WV and Weiss, with each holding 50% of the membership interests. (Id.) YG WV is the managing member of Member, and YG WV sits below Wind Down as its wholly owned subsidiary. (Id.) Notably, Wind Down is the successor entity to All Year Holdings Limited ("All Year"), which was the debtor that confirmed a plan of reorganization in a separate chapter 11 case in this Court. (Id.)

The WV Complex was leased to WB until May 20, 2021. (Id. ¶ 12.) However, WB stayed in possession of the WV Complex by first holding over and then securing a use and occupancy order from the New York Supreme Court, extending its possession through October 31, 2023. (Id.) On August 16, 2023, the Court entered an order approving a stipulation amending the initial cash collateral order, which provided for, among other things: "(i) WB to remain in possession of the WV Complex through January 31, 2024; (ii) the right of the Debtor or WB to give notice (an "Early Vacate Notice") of an intent to terminate the occupancy of the WV Complex by WB at the end of any calendar month, which would entitle WB to receive a pro rata refund of a $7.5 million use and occupancy payment made by WB in August 2023; and (iii) WB to provide transition services and information if it surrendered possession of the WV Complex prior to January 31, 2024." (Id.)

On September 29, 2023, WB provided the Early Vacate Notice, and the Debtor assumed operational control of the WV Complex on November 1, 2023. (Id. ¶ 13.)

3. Prior Ownership Structure and the 2017 Refinancing

WB originally owned the WV Complex. (Id. ¶ 14.) WB is co-owned equally by Weiss and Goldman, both of which are Class A Members holding 50% interest. (Id.) The WB operating agreement (as amended, the "WB Operating Agreement," ECF Doc. # 354-5) designates Weiss as the "Managing Member" of WB, who is "responsible for the management of the business and affairs of [WB] ...." (WB Operating Agreement at 37.)

In February 2017, WB refinanced its existing mortgage debt and formed the Debtor. (Motion ¶ 15.) Thereupon, WB transferred the title of the WV Complex to the Debtor who then leased the WV Complex back to WB pursuant to that certain Lease Agreement dated and effective as of February 28, 2017 (the "Lease") for a period of 15 years. (Id.; see also Revised Settlement Agreement at 1.)

The Debtor borrowed $166,320,000 from All Year (the "Mortgage Loan") to refinance its existing mortgage debt, which was secured by a mortgage on the WV Complex (the "Mortgage"). (Motion ¶ 16.) The Lease transaction contemplated rent payable to the Debtor that would allow the Debtor to make Mortgage payments and provide All Year the necessary funds to make payments due under the Series C Notes issued by All Year in the original principal amount of NIS 617,970,000 pursuant to a Deed of Trust dated February 19, 2017 between All Year and the Trustee. (Id.; see also Revised Settlement Agreement at 1.) Notably, the Debtor executed a Guaranty of Payment in connection with the issuance of the Series C Notes, which guaranteed to All Year, in relevant part, the "prompt payment and performance of

all debts, obligations, and liabilities [of All Year] . . . under the Bond Documents . . . and any and all sums of money under the provisions of the Deed of Trust." (Motion ¶ 16.)

4. All Year and WB Defaults

In November 2020, All Year, while under Goldman's control, defaulted on its payment...