Upload
others
View
2
Download
0
Embed Size (px)
Citation preview
18430641
Hearing Date and Time: August 27, 2013, at 10:00 a.m. (Eastern Time)Objection Deadline: August 20, 2013, at 5:00 p.m. (Eastern Time)
DECHERT LLP1095 Avenue of the AmericasNew York, New York 10036Telephone: (212) 698-3500Facsimile: (212) 698-3599Michael J. SageShmuel VasserDavin J. HallJanet M. Bollinger
Attorneys for Velo ACU LLC and the Reorganized Debtors
UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORK--------------------------------------------------------------X
:In re: : Chapter 11
:VELO HOLDINGS INC., et al., : Case No. 12-11384 (MG)
:Reorganized Debtors. 1 :
--------------------------------------------------------------X
NOTICE OF MOTION OF VELO ACU LLCAND THE REORGANIZED DEBTORS FOR AN ORDER ENFORCING THE
PLAN OF REORGANIZATION AND CONFIRMATIONORDER INJUNCTIONS AGAINST THE ARKANSAS ATTORNEY GENERAL
PLEASE TAKE NOTICE that a hearing on the Motion of Velo ACU LLC and
the Reorganized Debtors for an Order Enforcing the Plan of Reorganization and Confirmation
Order Injunctions Against the Arkansas Attorney General (the “Motion”) will be held before the
Honorable Martin Glenn, United States Bankruptcy Judge, United States Bankruptcy Court for
the Southern District of New York (the “Court”), One Bowling Green, Courtroom No. 501, New
York, New York 10004-1408, on August 27, 2013, at 10:00 a.m., prevailing Eastern Time.
1 The last four digits of Velo Holdings Inc.’s taxpayer identification number are: 3155.
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 1 of 75
2
PLEASE TAKE FURTHER NOTICE that any responses or objections to the
Motion (the “Responses”) shall conform to the Federal Rules of Bankruptcy Procedure (the
“Bankruptcy Rules”), all General Orders and Local Bankruptcy Rules of the Court, and the
Administrative Order Establishing Case Management Procedures [Dkt. No. 46] (the “Case
Management Order”) approved by the Court; shall set forth in writing describing the basis
therefore; shall be filed electronically with the Court on the docket of In re Velo Holdings Inc.,
Case 12-11384 (MG), pursuant to the Court’s General Order M-399 (which can be found at
www.nysb.uscourts.gov) by registered users of the Court’s case filing system and by all parties
in interest on a CD or flash drive, preferably in portable document format (“PDF”), Microsoft
Word, or any other Windows-based word processing format (with a hard copy delivered directly
to Chambers) and served in accordance with General Order M-242 or otherwise so as to be
actually received no later than August 20, 2013, at 5:00 p.m. (prevailing Eastern Time) by (i)
the Chambers of the Honorable Martin Glenn, One Bowling Green, New York, New York,
10004; (ii) Dechert LLP, Attorneys for the Reorganized Debtors, 1095 Avenue of the Americas,
New York, New York 10036 Attn: Michael J. Sage, Shmuel Vasser, Davin J. Hall and Janet M.
Bollinger; (iii) Office of the United States Trustee, 33 Whitehall Street, New York, New York
10004, Attn: Paul Schwartzberg; and (iv) Willkie Farr & Gallagher LLP, Attorneys for the Pre-
Petition First Lien Facility Agent, 787 Seventh Avenue, New York, New York 10019, Attn:
Margot B. Schonholtz and Ana M. Alfonso (the foregoing parties, collectively, the “Notice
Parties”).
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 2 of 75
3
PLEASE TAKE FURTHER NOTICE that only those Responses that are timely
filed, served, and received by the Notice Parties will be considered at the hearing. Failure to file
a timely Response may result in entry of a final order with no further notice or opportunity to be
heard.
Dated: August 8, 2013New York, New York /s/ Shmuel Vasser
Michael J. SageShmuel VasserDavin HallJanet M. Bollinger (admitted pro hac vice)DECHERT LLP1095 Avenue of the AmericasNew York, New York 10036Telephone: (212) 698-3500Facsimile: (212) 698-3599Email: [email protected]
[email protected]@[email protected]
Attorneys for Velo ACU LLC and theReorganized Debtors
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 3 of 75
18430781
Hearing Date and Time: August 27, 2013, at 10:00 a.m. (Prevailing Eastern Time)Objection Deadline: August 20, 2013, at 5:00 p.m. (Prevailing Eastern Time)
DECHERT LLP1095 Avenue of the AmericasNew York, New York 10036Telephone: (212) 698-3500Facsimile: (212) 698-3599Michael J. SageShmuel VasserDavin J. HallJanet M. Bollinger (admitted pro hac vice)
Attorneys for Velo ACU LLC and the Reorganized Debtors
UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORK---------------------------------------------------------------X
:In re: : Chapter 11
:VELO HOLDINGS INC., : Case No. 12-11384 (MG)
:Reorganized Debtor.1 :
---------------------------------------------------------------X
MOTION OF VELO ACU LLC AND THE REORGANIZEDDEBTORS FOR AN ORDER ENFORCING THE
PLAN OF REORGANIZATION AND CONFIRMATIONORDER INJUNCTIONS AGAINST THE ARKANSAS ATTORNEY GENERAL
1 The last four digits of Velo Holdings Inc.’s taxpayer identification number are: 3155.
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 4 of 75
-
TABLE OF CONTENTS
PRELIMINARY STATEMENT ................................................................................................... 2
JURISDICTION ............................................................................................................................ 5
BACKGROUND ........................................................................................................................... 5
I. The Pre-Petition ACU Business and Pre-Petition Customer MarketingPractices ................................................................................................................. 5
II. The AG Group’s Pre-Petition Investigations......................................................... 6
III. The Debtors’ Bankruptcy Cases and the ACU Harvest......................................... 7
IV. Plan Discharge, Injunctive and Release Provisions............................................... 9
V. The 2013 CIDs..................................................................................................... 10
RELIEF REQUESTED................................................................................................................ 12
ARGUMENT............................................................................................................................... 12
VI. The Arkansas 2013 Demand Violates the Confirmation Order and the Plan ...... 12
CONCLUSION............................................................................................................................ 15
Exhibit 1 (Arkansas 2013 Demand)
Exhibit 2 (Arkansas 2010 Demand)
Exhibit 3 (June 13 Letter)
Exhibit 4 (June 19 Email)
Exhibit 5 (Debtors’ Post-Petition Response)
Exhibit 6 (CID Withdrawals from State Attorneys General)
Exhibit 7 (Arkansas June 24 Letter)
Exhibit 8 (July 3 Response)
Exhibit 9 (Arkansas July 19 Letter)
Exhibit 10 (Proposed Form of Order)
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 5 of 75
TABLE OF AUTHORITIES
Page(s)CASES
Browning v. MCI, Inc. (In re Worldcom, Inc.),546 F.3d 211 (2d Cir. 2008).....................................................................................................13
Curtis Mfg. Co., Inc. v. Plasti-Clip Corp.,888 F. Supp. 1212 (D.N.H. 1994)............................................................................................13
In re Penn Central Transp. Co.,771 F.2d 762 (3d Cir. 1985).....................................................................................................13
Tam Travel, Inc. v. Delta Airlines, Inc.,583 F.3d 896 (6th Cir. 2009) .....................................................................................................13
Texaco Inc. v. Sanders (In re Texaco Inc.),182 B.R. 937 (Bankr. S.D.N.Y. 1995).....................................................................................13
STATUTES
11 U.S.C. § 524(a)(2).......................................................................................................................9
11 U.S.C. § 1141(d) ...................................................................................................................9, 10
Ark. Code Ann. 4-88-111 ..............................................................................................................14
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 6 of 75
2
Velo ACU LLC (“ACU LLC”) and its affiliated reorganized debtors
(collectively, the “Reorganized Debtors” or the “Debtors,”2 and together with ACU LLC
(“ACU LLC,” the “Movants”) hereby move (the “Motion”) for entry of an Order enforcing
sections 10.2 and 10.4 of the Modified First Amended Joint Plan of Reorganization of Velo
Holdings Inc., and its Affiliated Debtors and Debtors in Possession under Chapter 11 of the
Bankruptcy Code [Dkt. No. 702, Ex. 1] (the “Plan”)3 and paragraphs 28 and 30 of the Findings
of Fact, Conclusions of Law, and Order Confirming the Modified First Amended Joint Plan of
Reorganization of Velo Holdings Inc., and its Affiliated Debtors and Debtors in Possession
under Chapter 11 of the Bankruptcy Code [Dkt. No. 702] (the “Confirmation Order”) against
the Office of the Attorney General for the State of Arkansas (the “Arkansas AG”), by ordering
that the Arkansas AG’s May 28, 2013 civil investigative demand served on ACU LLC (the
“Arkansas 2013 Demand”), a copy of which is attached hereto as Exhibit 1, is null and void,
and by directing the Arkansas AG to refrain from issuing any new civil investigative demands
with respect to or otherwise continuing its improper investigation of the ACU Business. In
support of the Motion, the Movants respectfully represent as follows:
PRELIMINARY STATEMENT
1. The Arkansas AG is one of several attorneys general from various States
(collectively, the “AG Group”) that conducted an extensive multi-state investigation of the
marketing practices of Vertrue LLC (“Vertrue”) and Adaptive Marketing LLC (“Adaptive”)
2 In addition to Velo Holdings Inc., the Reorganized Debtors and the last four digits of their respectivetaxpayer identification numbers are: V2V Holdings LLC (8801), Coverdell & Company, Inc. (4660),V2V Corp. (0857), LN, Inc. (8759), FYI Direct Inc. (2491), Vertrue LLC (6882), Idaptive MarketingLLC (3362), My Choice Medical Holdings, Inc. (5870), Adaptive Marketing LLC (6882), InteractiveMedia Group (USA) Ltd. (1016), Brand Magnet, Inc. (8978), Neverblue Communications, Inc.(7832), Interactive Media Consolidated Inc. (0774), and FreeScore, LLC (3513).
3 Capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Planand if not defined therein, in the Confirmation Order.
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 7 of 75
3
prior to the Petition Date. Vertrue and Adaptive are part of the Debtors’ ACU Business, which
ceased all marketing practices and was placed into “harvest” immediately upon filing these
chapter 11 cases. Pursuant to the Plan, since the Effective Date, the ACU Business has
continued to operate as a harvest, the net proceeds of which have been and will be used to pay
distributions to the holders of pre-petition first lien secured claims against the Debtors (the “First
Lien Lenders”).
2. Notwithstanding that the ACU Business is no longer engaged in any
marketing practices and rejected all of its marketing agreements by the Effective Date, the
Arkansas AG and five other members of the AG Group (collectively, the “2013 AG Group”)
recently renewed their investigations of the ACU Business by serving six separate civil
investigative demands or subpoenas on the Movants (collectively, the “2013 CIDs”) seeking a
subset of the same information they sought and obtained during their pre-petition investigations.
The Movants promptly notified the 2013 AG Group that (i) the ACU Business is no longer
conducting any marketing and (ii) the issuance and pursuit of the 2013 CIDs violated this
Court’s injunctions under the Plan and Confirmation Order. Upon further discussion and
correspondence with the Movants, all members of the 2013 AG Group except for the Arkansas
AG withdrew their respective 2013 CIDs and discontinued their investigations.
3. The Arkansas 2013 Demand, which was issued under the Arkansas
Deceptive Trade Practices Act (“DTPA”), seeks: (i) a list (including names, addresses and
telephone numbers) of all Arkansas residents who were billed by ACU LLC during the period
from February 1, 2013 (prior to the Effective Date) to the present; (ii) the names of all
membership programs for which each person on the list was billed; (iii) the names of the
membership programs in which each person was enrolled, and (iv) a complete list of ACU
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 8 of 75
4
LLC’s marketing partners for the “relevant time period” of February 1, 2013 to the present.
Although the Arkansas 2013 Demand is written to suggest the Arkansas AG is investigating
post-Effective Date conduct, there is no post-Effective Date conduct for the Arkansas AG to
investigate. All of the ACU Business’ existing customers were originated either through pre-
petition marketing or through “organic” enrollment (which does not involve any marketing).
Thus, the information the Arkansas AG seeks under the DTPA can only pertain to an
investigation of its purported pre-petition claims.
4. The Arkansas AG denies that its investigation is prohibited by the
injunctions set forth in the Plan and Confirmation Order, which among other things enjoin
parties from (i) commencing or continuing all actions and proceedings in respect of Claims and
(ii) interfering with the Plan’s implementation. According to the Arkansas AG, the Arkansas
2013 Demand is a mere “investigatory tool” that it is using to obtain “information relevant to
Velo’s transactions with consumers which transpired after the [E]ffective [D]ate.” As more fully
set forth below, the Arkansas 2013 Demand is not an investigation of post-Effective Date
conduct; it is a thinly disguised investigation of pre-petition claims and a misguided attempt to
interfere with the Court-approved harvest of the ACU Business and the Plan.
5. The Arkansas AG did not file a proof of claim based on the Debtors’
prepetition marketing practices, nor did it at any time during the bankruptcy cases raise any
concerns about the harvest or object to the continued implementation of the harvest pursuant to
the Plan. The Arkansas AG received all required notices in the Debtors’ cases. Having
remained silent throughout the bankruptcy cases, the Arkansas AG should not be permitted to
circumvent the Plan and re-launch its investigation of discharged claims after the Effective Date.
The Movants respectfully request that the Court enforce the Plan injunctions against the
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 9 of 75
5
Arkansas AG by (i) ordering that the Arkansas 2013 Demand is null and void and (ii) directing
the Arkansas AG to refrain from issuing any new civil investigative demands with respect to or
otherwise continuing its improper investigation of the ACU Business.
JURISDICTION
6. This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157
and 1334, the Amended Standing Order of Reference of the United States District Court for the
Southern District of New York, dated January 31, 2012 (Preska, C.J.), Paragraph 35 of the
Confirmation Order, and Sections 11.1(f), (i), (j) and (o) of the Plan. This is a core proceeding
pursuant to 28 U.S.C. § 157(b)(2)(A), (I), (L) and (O). Venue is proper in this District pursuant
to 28 U.S.C. §§ 1408 and 1409. The predicates for the relief requested herein are sections 10.2
and 10.4 of the Plan, paragraphs 28 and 30 of the Confirmation Order, and section 105(a) of the
Bankruptcy Code.
BACKGROUND
I. The Pre-Petition ACU Business and Pre-Petition Customer Marketing Practices
7. As is well-documented in the public record of these cases, prior to the
Petition Date, certain of the Debtors, including Vertrue and Adaptive, operated the Debtors’
Credit & Identity Theft Protection Business and the Lifestyle & Shopping Business, which the
Debtors referred to collectively as the “ACU Business.”
8. Prior to the Petition Date, Adaptive actively marketed its programs to
consumers, almost exclusively through third-party marketing firms with which Adaptive had
contracted. This third-party marketing took various forms. For example, these third-parties
would place banner advertisements for Adaptive programs on other web sites; consumers who
“clicked” those ads would be directed to a website for the advertised Adaptive product. In other
instances, third-party telemarketing firms would market Adaptive programs to consumers by
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 10 of 75
6
telephone. Most often, the telemarketing firms would call a potential customer to sell a lead
product, like magazines or kitchen accessories, and then offer a “follow-on” Adaptive
membership program to the customer.
9. Adaptive also offered its programs through “post transaction third-party
sales.” Adaptive contracted with third-party retailers to make Adaptive programs available to the
retailers’ customers. A consumer who visited the third-party retailer’s web site, upon completion
of a purchase, would be directed to an Adaptive-owned web site and solicited to enroll in
Adaptive programs. See Declaration of Lorraine DiSanto in Accordance with Local Bankruptcy
Rule 1007-2, filed on the Petition Date [Dkt. No. 3] (“First Day Decl.”) at ¶¶ 10-12.
10. Prospective customers of the ACU Business also had the ability to enroll
in the Debtors’ membership programs on an “organic” basis, i.e., by directly seeking out and
visiting one of the Debtors’ websites on his or her own accord, rather than clicking on a link
through another website or being solicited by a third-party to subscribe. For example, a
consumer who runs a query in Google or another search engine seeking a particular type of
service could find an ACU Business web site among the “hits” generated by the search and could
visit the site and enroll in a membership program. Unlike customers enrolled through the
methods described in paragraphs 8 and 9 above, organic enrollees are not solicited through any
marketing partners or practices.
II. The AG Group’s Pre-Petition Investigations
11. From 2008 through 2010, the Arkansas AG and other members of the AG
Group issued multiple civil investigative demands (the “Pre-Petition CIDs”) to Vertrue and
Adaptive seeking extensive information related to the marketing practices of the ACU Business.
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 11 of 75
7
The Arkansas AG served its Pre-Petition CID on Vertrue on August 2, 2010 (the “Arkansas
2010 Demand”). A copy of the Arkansas 2010 Demand is attached hereto as Exhibit 2.4
12. The Arkansas 2010 Demand propounded 43 broad requests for documents
concerning the marketing, financial information and general business activities of Vertrue and its
parents, affiliates, successors, assignees, principals, operating divisions, present and former
owners, employees, servants, officers, directors, agents, representatives, attorneys, accountants
and other persons acting on behalf of or under the direction or control of Vertrue or its principals.
See Ex. 2. Among many other things, the Arkansas 2010 Demand sought a list of the customers
who were Arkansas residents (including names, addresses and telephone numbers), the
membership programs in which they were enrolled, and a list of all marketing contract parties.
Id. at Requests Nos. 16, 17, 27. The other Pre-Petition CIDs were similar in breadth and scope.
13. In response to the Arkansas 2010 Demand, the Debtors produced over
10,000 pages of documents and electronic data as well as narrative responses to interrogatories.
Neither the Arkansas AG nor any other member of the AG Group filed proceedings against the
Debtors following the Debtors’ responses to the Pre-Petition CIDs.
III. The Debtors’ Bankruptcy Cases and the ACU Harvest
14. On the Petition Date, as part of an agreed chapter 11 protocol executed by
the Debtors and certain First Lien Lenders holding a majority of the Debtors’ prepetition first
lien debt (the “Agreed Protocol”), the Debtors agreed and publicly disclosed their business plan
to “continue to operate in the ordinary course, but [] cease spending new marketing dollars to
acquire new members on a go forward basis (i.e., a “harvest” of the businesses).” See First Day
Decl. ¶ 36; Disclosure Statement, p. 15 (“On the Petition Date, the Company commenced a
4 Copies of the Pre-Petition CIDs are not attached to this Motion, but the Movants will make themavailable to the Court or to an appropriate party in interest upon request.
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 12 of 75
8
‘harvest’ of the ACU Business by discontinuing new marketing to customers, but continuing to
operate and service the business.”). The implementation of the harvest and the cessation of new
marketing spending, as well as the engagement of Alan M. Jacobs as Chief Restructuring Officer
to supervise the harvest, were also conditions to the Debtors’ consensual use of cash collateral
and post-petition financing that the First Lien Lenders provided to the Debtors during the
bankruptcy cases. See Cash Collateral and DIP Financing Motion [Dkt. No. 13], pp. 12, 15, 17,
23; Final DIP Financing Order ¶¶ 6(c)(5), 17.
15. Shortly after the Petition Date, the Debtors commenced the rejection of
their third party marketing and advertising contracts related to the ACU Business, all of which
were rejected by the Effective Date. See, e.g., Dkt. Nos. 106-108, 111, 135-137, 478-480, 499-
502, 530-532, 582-584 (notices of rejection of marketing contracts). See also Plan § 8.1 and
Plan Supplement (deemed rejection of executory contracts not listed on Scheduled of Assumed
Leases and Executory Contracts).
16. Although all marketing for the ACU business ceased on the Petition Date,
the ACU Business continued to accept members through organic enrollment. Pursuant to the
Plan, as a result of an agreement with the Official Committee of Unsecured Creditors, organic
enrollments will no longer be accepted by ACU LLC and its direct or indirect subsidiaries after
April 2, 2014. See Plan ¶ 5.12.
17. In accordance with the Plan, since the Effective Date, the harvest
continues to be implemented under the supervision of Mr. Jacobs, the former Chief Restructuring
Officer of the ACU Business who was appointed Chief Executive Officer of the Reorganized
Debtors pursuant to the Plan. See Declaration of Alan M. Jacobs in Support of Plan
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 13 of 75
9
Confirmation [Dkt. No. 682] ¶ 39 (“the Debtors’ ACU Business is and will continue to be
‘harvested’ following the Debtors’ exit from bankruptcy.”)
18. During the bankruptcy cases, the Arkansas AG did not file any proofs of
claim against the Debtors alleging unlawful marketing practices, did not object to the harvest, did
not object to approval of the Debtors’ Disclosure Statement in connection with the Plan, did not
object to confirmation of the Plan, did not file an application for allowance of an Administrative
Expense Claim, and did not otherwise raise any issues in this Court in connection with these
chapter 11 cases.
IV. Plan Discharge, Injunction and Release Provisions
19. The Plan and the Confirmation Order contain numerous discharge, release,
and injunction provisions. The sections most relevant to this Motion provide:
All parties in interest and creditors are enjoined from taking any actions tointerfere with the implementation or consummation of the Plan. SeeConfirmation Order ¶ 30; Plan § 10.4
All parties in interest and creditors are enjoined from prosecuting or assertingall Claims5 against the Reorganized Debtors and ACU LLC or their assets andproperties and all Claims are discharged. See Confirmation Order ¶ 28(a), (b);Plan § 10.2.
The injunctions contained in the Plan and the Confirmation Order are consistent with section
524(a)(2) of the Bankruptcy Code (“A discharge in a case under this title … operates as an
injunction against the commencement or continuation of an action, employment of process, or an
act, to collect, recover … any such debt….”) as well as section 1141(d) of the Bankruptcy Code
5 “ Claim” is defined as “a claim against any Debtor, whether or not asserted, as defined in section101(5) of the Bankruptcy Code, including as Administrative Expense Claim.” See Plan ¶ 1.20.Administrative Expense Claim is defined to include all allowed post petition liabilities. See Plan ¶1.17.
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 14 of 75
10
(“the confirmation of a plan discharges the debtor from any debt that arose before the date of
such confirmation…”).
V. The 2013 CIDs
20. Between May 28 and June 4, 2013, the Arkansas AG and the five other
members of the 2013 AG Group served the 2013 CIDs on one or more of the Movants.6 Each of
the 2013 CIDs requested substantially similar information pertaining to customers residing in
each of the States represented by the 2013 AG Group.
21. The Arkansas 2013 Demand is addressed to (i) ACU LLC, a holding
company that was formed pursuant to the Plan which did not exist until the day before the
Effective Date, and (ii) “Velo LLC,” which does not exist. The Arkansas 2013 Demand states
that it was issued pursuant to the DTPA and requests that ACU LLC produce documents in aid
of its investigation with respect to the subjects set forth in paragraph 3 above.7
22. Counsel for the Movants responded to the Arkansas 2013 Demand, as
well as each of the other 2013 CIDs, in writing and by a telephonic conference with the 2013 AG
Group. Among other things, the Movants’ counsel explained that (i) the ACU Business is in
harvest, does not advertise or market to consumers, is no longer a party to any marketing
agreements with third party marketing partners and has not spent any money on marketing, and
(ii) new customers of the ACU Business have only been obtained through organic enrollment
6 Copies of the2013 CIDs are not attached to this Motion, but the Movants will make them available tothe Court or to an appropriate party in interest upon request.
7 The Arkansas AG sought this same information for in the Arkansas 2010 Demand, except that theArkansas August 2010 Demand sought information that existed at the time it was issued, whereas theArkansas 2013 Demand seeks information from the “relevant time period” of February 1, 2013 to thepresent.
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 15 of 75
11
since the Petition Date.8 The Movants’ counsel also explained that the issuance and pursuit of
the 2013 CIDs are prohibited by injunctions contained in the Plan and the Confirmation Order.9
23. In response to the Movants’ representations about the limited nature of the
ongoing ACU Business, on June 21, 2013, all members of the 2013 AG Group except the
Arkansas AG withdrew their 2013 CIDs and discontinued their investigations. Copies of such
withdrawals are attached hereto as Exhibit 6. By letter dated June 24, 2013, the Arkansas AG
informed the Movants’ counsel that (i) it does not believe that the injunctions in the
Confirmation Order apply to its investigation because, in its view, “each instance in which Velo
bills a customer is a new transaction,” which is a “claim that is based on an action that occurred
after the Effective Date,” and (ii) in the event the Arkansas AG pursues an enforcement action,
any disputes regarding the Arkansas 2013 Demand should be addressed in Arkansas State court.
A copy of the June 24 letter is attached hereto as Exhibit 7.
24. On July 3, 2013, in a final attempt to persuade the Arkansas AG to
discontinue its improper investigation, the Movants’ counsel provided written responses to the
specific questions posed in the Arkansas 2013 Demand. See Ex. 8 (July 3 response). Since the
Arkansas 2013 Demand only requested information concerning ACU LLC (a holding company)
and Velo LLC (a non-existent entity), the Movants’ counsel provided responses on behalf of
ACU LLC only.
8 The Movants provided all of this information to the Arkansas AG in a letter dated June 13, 2013 andan email dated June 19, 2013. See Ex. 3 (June 13 letter) and Ex. 4 (June 19 email). A representativeof the Arkansas AG also participated on the conference call that Movants held with the 2013 AGGroup on June 18, 2013.
9 The Movants’ counsel also pointed out that shortly after the Petition Date, the Arkansas AG andcertain other members of the 2013 AG Group demanded a settlement conference with the Debtors orthey would face “continued investigation” and potential lawsuits in 24 jurisdictions. The Debtors’counsel responded that the threatened actions were subject to the automatic stay. See Ex. 5 (post-petition response). Thereafter, neither the Arkansas AG nor any other member of the AG Group eversought relief from the automatic stay to continue their investigations.
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 16 of 75
12
25. By letter dated July 19, 2013, the Arkansas AG stated that it was
expanding its investigation to ACU LLC’s “affiliates, parent corporations, partners, subsidiaries
or any entity that it has an ownership interest in.” A copy of this letter is attached hereto as
Exhibit 9. The Arkansas AG made it clear that it will persist in the commencement or
continuation of an action, employment of process, or an act which are barred by the Plan
injunctions. The letter set a response deadline of August 8, 2013. Accordingly, having met and
conferred repeatedly with the Arkansas AG in an effort to avoid a dispute, the Movants seek this
Court’s intervention to enforce the Plan and provide other necessary relief.
RELIEF REQUESTED
26. By this Motion, the Reorganized Debtors request the entry of an Order, the
proposed form of which is attached hereto as Exhibit 10, enforcing the Plan and Confirmation
Order injunctions by (i) ordering that that the Arkansas 2013 Demand is null and void and (ii)
directing the Arkansas AG to refrain from issuing any new civil investigative demands with
respect to or otherwise continuing its improper investigation of the ACU Business.
ARGUMENT10
VI. The Arkansas 2013 Demand Violates the Confirmation Order and the Plan
27. The Arkansas AG is enjoined by the Confirmation Order and the Plan
from “commencing or continuing in any manner any action or other proceeding of any kind with
respect to …Claim[s] … against the Reorganized Debtors [and] ACU LLC.” See Confirmation
Order, ¶ 28(b); see also Confirmation Order ¶ 28(a); Plan ¶ 10.5(b). The Confirmation Order
and Plan also enjoin parties in interest from “taking any actions to interfere with the
implementation or consummation of the Plan.” Confirmation Order ¶ 30; Plan § 10.4.
10 The Movants reserve all of their rights to raise additional, supplemental, or different arguments and torely on all available facts and authorities in reply and/or during oral argument.
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 17 of 75
13
28. The Arkansas AG has taken the position that the Plan injunctions do not
enjoin it from pursuing the Arkansas 2013 Demand because (i) the Arkansas AG is not
“prosecuting or asserting [a] discharged Claim,” (ii) its investigation is purely an investigation
into post-Effective Date activities, because it only seeks information regarding the customers
currently being billed by the ACU Business, and (iii) “each instance in which Velo bills a
customer is a new transaction” that gives rise to a claim “based on an action that occurred after
the [E]ffective [D]ate.” See Ex. 7. This thinly veiled attempt to circumvent the Plan injunctions
has no merit. Courts have routinely held that when post-confirmation conduct is merely the
natural consequence of pre-confirmation conduct, claims arising from that conduct are
discharged. See Browning v. MCI, Inc. (In re Worldcom, Inc.), 546 F.3d 211, 220 (2d Cir. 2008)
(alleged continued trespass discharged by plan confirmation); Tam Travel, Inc. v. Delta Airlines,
Inc., 583 F.3d 896, 901-02 (6th Cir. 2009) (claim for post effective date conduct as allegedly
violating anti-trust law, discharged); In re Penn Central Transp. Co., 771 F.2d 762, (3rd Cir.
1985) (Bankruptcy Act case; anti-trust conspiracy gives rise to claims that were discharged upon
plan confirmation); Texaco Inc. v. Sanders (In re Texaco Inc.), 182 B.R. 937, 951 (Bankr.
S.D.N.Y. 1995) (continued migration of contaminants is a discharged pre-confirmation claim).11
11 The Arkansas AG’s June 24 letter erroneously cites to Curtis Mfg. Co., Inc. v. Plasti-Clip Corp., 888F. Supp. 1212, 1218 (D.N.H. 1994) as support for its position that the Plan injunctions do notprohibit its investigation. In Curtis, the post-confirmation debtor sought to bar claims against it forpost-confirmation acts of patent infringement, on the ground that the claims required a determinationof the validity of a patent issued to the debtor pre-petition. The district court found that the debtor’sdischarge did not extinguish claims for post-confirmation patent infringement because patent lawexplicitly provides that “each act of patent infringement constitutes a separate cause of action.” Id. at1218. As far as the Movants are aware, there is no authority for the proposition that a separate causeof action arises each time a customer of the ACU Business is billed for its membership fees.Moreover, it is clear that the claims the Arkansas AG is investigating arise from pre-petitionmarketing practices allegedly used by the ACU Business to enroll members. Thus, Curtis isinapposite here.
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 18 of 75
14
29. As the Movants’ counsel explained to the Arkansas AG in the June 13,
2013 letter, the Plan and the record in these bankruptcy cases are unambiguous that the Movants
ceased all marketing activities on the Petition Date. All of the existing customers of the ACU
Business were either obtained through pre-petition marketing practices or enrolled organically.
A fortiori, any claim against the Movants based on marketing practices is a discharged pre-
petition claim. Each member of the 2013 AG Group except for the Arkansas AG accepted these
facts and withdrew its 2013 CID.
30. If the Arkansas AG believed that the Movants engaged in unlawful
prepetition conduct, a remedy was available: filing a proof of claim in the bankruptcy cases
before the prepetition claims bar date. The Arkansas AG did not do so. If the Arkansas AG
believed that the harvest of the ACU Business and/or the acceptance of organic enrollees was
improper or unlawful, it should have raised that concern with this Court during the bankruptcy
cases, objected to the Disclosure Statement and/or confirmation of the Plan, and/or filed an
application for allowance of an Administrative Expense Claim before the Administrative
Expense Claims bar date. The Arkansas AG did not do so. Having sat on its rights throughout
the bankruptcy cases, the Arkansas AG is enjoined from pursuing Claims and should not now be
permitted to investigate discharged claims or interfere with Plan implementation by interfering
with the harvest of the ACU Business.
31. Moreover, if it is true that the Arkansas AG is investigating only post-
Effective Date conduct, then it had no basis under Arkansas State law to issue the Arkansas 2013
Demand. The DTPA permits the Arkansas AG to investigate “whether a person has engaged in,
is engaging in, or shows evidence of intent to engage in any practice declared to be unlawful by
the [Deceptive Trade Practices] chapter.” Ark. Code Ann. 4-88-111. Although the Arkansas AG
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 19 of 75
15
has yet to identify the allegedly deceptive practices that it is investigating pursuant to the
Arkansas 2013 Demand, here, these practices, if any, could only consist of pre-petition conduct.
32. Accordingly, for each of the foregoing reasons, the Movants respectfully
request that the Court put an end to this improper investigation by ordering the Arkansas AG to
comply with the Plan injunctions and specifically authorizing the Movants to disregard the
improper Arkansas 2013 Demand.
CONCLUSION
WHEREFORE, the Movants request the entry of an Order granting the Motion in
all respects and granting the Movants such other and further relief as is just and proper.
Dated: August 8, 2013New York, New York /s/ Shmuel Vasser
Shmuel VasserDavin J. HallDECHERT LLP1095 Avenue of the AmericasNew York, New York 10036Telephone: (212) 698-3500Facsimile: (212) 698-3599Email: [email protected]
Attorneys for Velo ACU LLC and theReorganized Debtors
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 20 of 75
Exhibit 1
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 21 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 22 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 23 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 24 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 25 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 26 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 27 of 75
Exhibit 2
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 28 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 29 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 30 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 31 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 32 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 33 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 34 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 35 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 36 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 37 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 38 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 39 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 40 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 41 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 42 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 43 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 44 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 45 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 46 of 75
Exhibit 3
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 47 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 48 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 49 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 50 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 51 of 75
Exhibit 4
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 52 of 75
1
Hall, Davin
From: Vasser, ShmuelSent: Wednesday, June 19, 2013 2:03 PMTo: Kakuk Michael ACc: 'Michael Ziegler'; [email protected]; [email protected]; [email protected];[email protected]; Schonholtz, MargotSubject: Velo ACU LLC, Vertrue LLC and Adaptive Marketing LLC
Dear Michael,
Thank you again for setting up the conference call yesterday to discuss the Civil Investigative Demands andSubpoenas Duces Tecum (collectively, “Demands”) recently served on our client Velo Holdings, Inc. (“Velo”)and/or its affiliates ACU, Vertrue and Adaptive (collectively the “Company” or “ACU Businesses”) by theOffices of the Attorneys General of Arkansas, Colorado, Kansas, Ohio, Oregon, and Washington (the“States”). During the call, you and other representatives of the States posed several questions about theongoing business of the Company. We have reviewed the States’ questions with the Company and can confirmthe following:
Since the Company’s bankruptcy filing on April 2, 2012, the ACU Businesses have ceased marketingthrough any and all channels. This includes both direct marketing by the ACU Businesses andmarketing through third-parties. Indeed, as we explained on the call, the ACU Businesses are no longerparties to any agreements with third-party marketing partners and no funds have been allocated tomarketing.
The only means for a consumer to purchase a product or service offered by the ACU Businesses is tovisit the website through which a particular product or service is offered. The consumer may then signup for the desired product or service via the website.
You asked whether the ACU Businesses engage in certain business practices you characterized as “mid-or post-transaction cross-marketing” and “mid- or post-transaction internal marketing.” Although theCompany is not familiar with these terms, we can confirm that the ACU Businesses do not engage in theactivity you described. A consumer who visits a website operated by one Company business unit is notprompted or solicited to purchase products or services offered by a different business unit or any third-party. Of course, each business unit offers a variety of products and services, so a consumer who visits awebsite operated by a business unit and signs up for a particular product or service has access to otherproducts and services offered by the same business unit.
We trust that this information satisfies the States’ requests for additional information concerning the Company’songoing business. We therefore renew our request that the States withdraw the Demands in writing no laterthan Friday, June 21, 2013. I also note that Kansas provided us only with a general email, not with theindividual email of Meghan E. Stoppel who signed KS’s Demand. It will be great if you can ensure that Ms.Stoppel gets this email. Best regards.
Shmuel VasserDechert LLP1095 Avenue of the AmericasNew York, New York 10036Direct 212.698.3691Mobile 914.806.3012
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 53 of 75
2
Direct Fax 212.698.0418www.dechert.com
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 54 of 75
Exhibit 5
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 55 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 56 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 57 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 58 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 59 of 75
Exhibit 6
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 60 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 61 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 62 of 75
Exhibit 7
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 63 of 75
THE ATTORNEY GENERALSTATE OF ARKANSAS
DUSTIN McDANIELBart W. Calhoun
Assistant Attorney GeneralDirect Dial: (501) 682-3561
E-mail: [email protected]
323 Center Street, Suite 1100 Little Rock, Arkansas 72201Telephone (501) 682-2007 Fax (501) 682-8084
INTERNET WEBSITE http://www.arkansasag.gov
June 24, 2013
Dechert, LLPAttn: Shmuel Vasser1095 Avenue of the AmericasNew York, NY 10036
Re: Civil Investigative Demand for Production of Documents to Velo ACU LLC
Mr. Vasser:
This will acknowledge the receipt of your letter of June 13, 2013, and your related emailof June 21, 2013. You contend that the State of Arkansas (“the State”) has violated theConfirmation Order entered by the Bankruptcy Court and is otherwise barred from seeking theinformation requested in its Civil Investigative Demand (“CID”). Respectfully, the Statedisagrees.
You first contend that the State’s CID violates the specific terms of the ConfirmationOrder. The Order states that “[o]n the Effective Date, all holders of such Claims and EquityInterests shall be forever precluded and enjoined . . . from prosecuting or asserting any suchdischarged Claim . . . based on any act or omission, transaction, or other activity of any kind ornature that occurred prior to the Effective Date. . . .” See the Confirmation Order, Section 10.2(emphasis added). In issuing the CID, the State is not “prosecuting or asserting any suchdischarged Claim.” Also, the CID is not an “action or other proceeding” as your letter states, butonly an investigatory tool used by the Attorney General to gather information. As such, theinjunction issued by the bankruptcy court does not apply to the State’s CID.
Even if the injunction did apply to the State’s CID, each instance in which Velo bills acustomer is a new transaction. The new transaction is not a claim that is “based on any action . .. that occurred prior to the effective date”, but rather a claim that is based on an action thatoccurred after the effective date. Thus, seeking information relevant to Velo’s transactions withconsumers which transpired after the effective date is not enjoined or prohibited by theConfirmation Order.
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 64 of 75
August 8, 2013Page 2 of 3
Bankruptcy relief is intended to “protect the debtor from the continuing costsbankruptcy acts but not to insulate the debtor from the costs of postconfirmation “does not encompass a postPlasti-Clip Corp., 888 F. Supp. 1212, 1218 (D.N.H. 1994).Inc. held that a party can use preaction. Id. at 1218. The reasoning behindconfirmation conduct is relevant to the postOrder does not enjoin or prohibit the State from seeking the information requested in its CID.
Second, you contend that the company is not engaged in practices which would entitlethe State to collect evidence under the Arkansas Deceptive Trade Practices Act (“DTPA”). TheDTPA states that “[w]hen the Attorney General determinesto whether a person has engaged in, is engaging in, or shows evidence of intent to engage in anypractice declared to be unlawful by this chapter . . . he or she may require that person to file astatement or report in writing as to the facts and circumstances concerning the matter, together withsuch other data as may be reasonably related thereto. . . .”(emphasis added). The Attorney General has determined that an investigation shouyour client and respectfully asks that it respond to the CID with the requested information.case, this is not an issue which falls within the purview of the Bankruptcy Court. Ithe State lacks authority to issue thArkansas state court, assuming that Velo persists in its refusal to respond to the CID, and assumingthat the State thereafter pursues enforcement of that CID in state court.
Third, you contend that since this is the second request from the State for the same type ofinformation, the CID is unreasonable and improper. However, as you can see in the State’s responseto your second concern, the Attorney General is, by statute, the entitinvestigation should be undertaken and whether information should be sought.requests that your client respond to the CID in full.information related to a time fraFinally, this issue, like the one set out immediately above, is more appropriately addressed in statecourt, assuming a CID enforcement action ever occurs.
While the CID responses are dudeadline for response to July 12.Attorney General may, at his discretion,Circuit Court of the State of Arkansas.please do not hesitate to contact me at the number above
intended to “protect the debtor from the continuing costsbankruptcy acts but not to insulate the debtor from the costs of post-bankruptcy acts” and preconfirmation “does not encompass a post-confirmation time frame”. Curtis Mfg. Co., Inc. v.
888 F. Supp. 1212, 1218 (D.N.H. 1994). Further, the court inheld that a party can use pre-confirmation facts to support a post-confirmation cause of
he reasoning behind Curtis supports the argument that your client’sant to the post-confirmation conduct. As such, the Confirmation
Order does not enjoin or prohibit the State from seeking the information requested in its CID.
Second, you contend that the company is not engaged in practices which would entitleto collect evidence under the Arkansas Deceptive Trade Practices Act (“DTPA”). The
[w]hen the Attorney General determines that an investigation should be made asto whether a person has engaged in, is engaging in, or shows evidence of intent to engage in anypractice declared to be unlawful by this chapter . . . he or she may require that person to file a
in writing as to the facts and circumstances concerning the matter, together withsuch other data as may be reasonably related thereto. . . .” ARK. CODE ANN. § 4emphasis added). The Attorney General has determined that an investigation shou
and respectfully asks that it respond to the CID with the requested information.case, this is not an issue which falls within the purview of the Bankruptcy Court. I
ks authority to issue the CID, that is a matter which is more appropriately addressed in anArkansas state court, assuming that Velo persists in its refusal to respond to the CID, and assumingthat the State thereafter pursues enforcement of that CID in state court.
you contend that since this is the second request from the State for the same type ofinformation, the CID is unreasonable and improper. However, as you can see in the State’s responseto your second concern, the Attorney General is, by statute, the entity that decides whether aninvestigation should be undertaken and whether information should be sought.requests that your client respond to the CID in full. In addition, the CID currently at issue seeksinformation related to a time frame not covered by the earlier CID. It is not the same information.Finally, this issue, like the one set out immediately above, is more appropriately addressed in statecourt, assuming a CID enforcement action ever occurs.
While the CID responses are due no later than June 30, we have decided to extend thedeadline for response to July 12. If we do not receive responses to the CID
may, at his discretion, file a petition to enforce the CID in the Pulaski CountyCourt of the State of Arkansas. If you have any questions or want to discuss this matter,
please do not hesitate to contact me at the number above.
Sincerely,
Bart CalhounAssistant Attorney General
intended to “protect the debtor from the continuing costs of pre-bankruptcy acts” and pre-Curtis Mfg. Co., Inc. v.the court in Curtis Mfg. Co.,confirmation cause of
ument that your client’s pre-As such, the Confirmation
Order does not enjoin or prohibit the State from seeking the information requested in its CID.
Second, you contend that the company is not engaged in practices which would entitleto collect evidence under the Arkansas Deceptive Trade Practices Act (“DTPA”). The
that an investigation should be made asto whether a person has engaged in, is engaging in, or shows evidence of intent to engage in anypractice declared to be unlawful by this chapter . . . he or she may require that person to file a
in writing as to the facts and circumstances concerning the matter, together with4-88-111(A)(1)
emphasis added). The Attorney General has determined that an investigation should be made intoand respectfully asks that it respond to the CID with the requested information. In any
case, this is not an issue which falls within the purview of the Bankruptcy Court. If you contend thate CID, that is a matter which is more appropriately addressed in an
Arkansas state court, assuming that Velo persists in its refusal to respond to the CID, and assuming
you contend that since this is the second request from the State for the same type ofinformation, the CID is unreasonable and improper. However, as you can see in the State’s response
y that decides whether aninvestigation should be undertaken and whether information should be sought. As such, the State
In addition, the CID currently at issue seeksme not covered by the earlier CID. It is not the same information.
Finally, this issue, like the one set out immediately above, is more appropriately addressed in state
e no later than June 30, we have decided to extend theot receive responses to the CID by that date , the
file a petition to enforce the CID in the Pulaski CountyIf you have any questions or want to discuss this matter,
Sincerely,
Bart CalhounAssistant Attorney General
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 65 of 75
August 8, 2013Page 3 of 3
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 66 of 75
Exhibit 8
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 67 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 68 of 75
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 69 of 75
Exhibit 9
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 70 of 75
THE ATTORNEY GENERAL
STATE OF ARKANSAS
DUSTIN McDANIEL Bart W. Calhoun
Assistant Attorney General
Direct Dial: (501) 682-3561
E-mail: [email protected]
323 Center Street, Suite 1100 Little Rock, Arkansas 72201
Telephone (501) 682-2007 Fax (501) 682-8084
INTERNET WEBSITE http://www.arkansasag.gov
July 19, 2013
Dechert, LLP
Attn: Shmuel Vasser
1095 Avenue of the Americas
New York, NY 10036
Re: Civil Investigative Demand for Production of Documents to Velo ACU LLC
Mr. Vasser:
Thank you for your client’s response to the State’s CID. Pursuant to ARK. CODE. ANN. 4-
88-111(2) and the explicit language of the CID itself, the response to the CID must be made
under oath. As such, the State asks that your client’s response to the State’s CID be made under
oath.
Further, in your letter dated July 3, 2013, you state that Velo ACU LLC has not
contracted with or billed or received money from Arkansas consumers between February 1,
2013, and the present. Just to clarify, it was our understanding that the bankruptcy plan
contemplated that Velo ACU, LLC would continue to service existing customers of Vertrue and
would bill and accept contract payments from such customers. If Velo ACU, LLC has not billed
any such customers since February 1, 2013, and has not accepted any payments from such
customers since February 1, 2013, then can we conclude that we have either misinterpreted the
bankruptcy plan, or perhaps our interpretation of the plan is accurate, but Velo ACU, LLC has
decided to abandon that plan. The State understands your response to mean that neither Velo
ACU LLC nor any of its affiliates, parent corporations, partners, subsidiaries, or any entity that
it has an ownership interest in have have billed or received payment from any Arkansas resident.
If our understanding of your client’s response is not correct, please provide an explanation.
The State asks that your client’s response to the State’s CID be made under oath and
delivered to our office within twenty (20) days of your receipt of this letter. If our understanding
of the meaning of the response is incorrect, please provide an explanation as requested above
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 71 of 75
July 19, 2013
Page 2 of 2
within the same time frame. If you have any questions or want to discuss this matter, please do
not hesitate to contact me at the number above.
Sincerely,
Bart Calhoun
Assistant Attorney General
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 72 of 75
Exhibit 10
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 73 of 75
18430781 1
UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORK---------------------------------------------------------------X
:In re: : Chapter 11
:VELO HOLDINGS INC., : Case No. 12-11384 (MG)
:Reorganized Debtor.1 :
---------------------------------------------------------------X
ORDER ENFORCING THE PLAN OF REORGANIZATION AND THECONFIRMATION ORDER INJUNCTIONS AGAINST
THE ARKANSAS ATTORNEY GENERAL
Upon consideration of the Motion of Velo ACU LLC and the Reorganized Debtors
for an Order Enforcing the Plan of Reorganization and Confirmation Order Injunctions Against
the Arkansas Attorney General, dated August 8, 2013 (the “Motion”)2; and the Court having
jurisdiction to consider the Motion and the relief requested thereby; and the Court having found
and concluded that the relief requested in the Motion is in the best interest of the Reorganized
Debtors, estate creditors, and other parties-in-interest; and the Court having found that the
issuance and pursuit of the Arkansas 2013 Demand violate the Confirmation Order and the Plan;
and it appearing that due and appropriate notice of the Motion has been given and that no further
notice need be given; and good and sufficient cause appearing therefor; it is hereby
ORDERED that the Motion is granted; and it is further
ORDERED that the Arkansas AG is hereby enjoined and prohibited from (i)
pursuing the Arkansas 2013 Demand and the related investigation and (ii) issuing any new civil
1 The Reorganized Debtor and the last four digits of its taxpayer identification number is:Velo Holdings Inc. (3155).
2 Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them inthe Motion.
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 74 of 75
2
investigative demands with respect to or otherwise continuing its improper investigation of the
ACU Business; and it is further
ORDERED that ACU LLC and the Reorganized Debtors shall have no obligation
to respond to the Arkansas 2013 Demand, which is hereby deemed null and void; and it is further
ORDERED that this Court shall retain jurisdiction to hear and determine all
matters arising from or related to the implementation, interpretation and/or enforcement of this
Order.
Dated: August __, 2013New York, New York
____________________________________MARTIN GLENN
United States Bankruptcy Judge
12-11384-mg Doc 863 Filed 08/08/13 Entered 08/08/13 19:56:48 Main Document Pg 75 of 75