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Burtch v. Avnet, Inc.

United States District Court, D. Delaware

January 16, 2015

JEOFFREY L. BURTCH, Appellant,
v.
AVNET, INC., Appellee

For Trustee Jeoffrey L. Burtch, Appellant: Susan E. Kaufman, LEAD ATTORNEY, Robert Grant Dick, IV, Cooch & Taylor, Wilmington, DE.

For Avnet Inc., Appellee: Dennis Anthony Meloro, LEAD ATTORNEY, Greenberg Traurig, LLP, Wilmington, DE; Annapoorni Sankaran, PRO HAC VICE.

Page 151

MEMORANDUM ORDER

LEONARD P. STARK, UNITED STATES DISTRICT JUDGE.

At Wilmington this 16th day of January, 2015:

Having reviewed the appeal taken by Jeoffrey L. Burtch (" Trustee" ), and the

Page 152

papers submitted in connection therewith (D.I. 1-1; see also, e.g., D.I. 11, 12, 14),

IT IS HEREBY ORDERED that, for the reasons stated below, the order of the bankruptcy court dated November 26, 2012 is REVERSED and REMANDED.

Background. This appeal stems from a lengthy history of proceedings in the Bankruptcy Court, from which the Court will highlight the most relevant events. ManagedStorage International, Inc. and its related affiliates (" the Debtors" ) filed voluntary petitions under chapter 11 of the Bankruptcy Code in February 2009. (D.I. 11 at 3) That same day, the Debtors filed a motion to sell all of their assets free and clear of liens to Laurus Master Fund, Ltd. (" Laurus" ). ( Id. at 4) Avnet objected to the sale and asserted a purchase money security interest (" PMSI" ) in certain of Debtors' assets. ( Id. at 3) To resolve Avnet's objection, on April 2, 2009, the Debtors, the Creditors' Committee, and Avnet entered into and filed a " Stipulation Between Debtors, The Official Committee of Unsecured Creditors, and Secured Creditor, Avnet, Inc., Regarding Purchase Money Security Interest Funds" (the " PMSI Stipulation" ), which required that the Debtors segregate and maintain the Avnet PMSI collateral. ( See D.I. 11 at 4; D.I. 12 at 4)

On February 24, 2010, Avnet filed a Motion of Secured Creditor Avnet, Inc., To Enforce Sale Order To Specifically Exclude Avnet PMSI Collateral From Sale Assets And To Compel Laurus Master Fund, Ltd., Valens Offshore SPV I, Ltd., Valens Offshore SPV II, Corp., Valens U.S. SPV I, LLC, And/Or Psource Structured Debt Limited, To Tum Over Avnet Collateral (the " Avnet Enforcement Motion" ). (D.I. 12 at 5) The Avnet Enforcement Motion asserted that the Avnet PMSI collateral was never segregated into the Debtor PMSI Account as required by the PMSI Stipulation that had been entered into at the time of the sale of assets to Laurus. (D.I. 11 at 5) On March 27, 2010, Laurus filed an Objection to the Avnet Enforcement Motion. (D.I. 12 at 5)

A hearing was scheduled for May 19, 2010. (D.I. 11 at 7) On May 17, 2010, an agenda for the forthcoming hearing was distributed to all parties in interest, showing that Avnet's Enforcement Motion was the only contested matter going forward. (D.I. 12 at 5; D.I. 13 at SA31-32) The agenda also stated: " Avnet's counsel has circulated a proposed stipulation that the parties are attempting to finalize prior to the hearing. This matter will go forward." (D.I. 13 at SA31-32; D.I. 11-5 at A441)

Meanwhile, Avnet, Laurus, and the Debtors negotiated a settlement among themselves (" the Stipulation and Release" ) to resolve the Avnet Enforcement Motion. (D.I. 11-4 at A242-52) The Stipulation and Release provides as follows:

Debtors, for themselves and their respective heirs, executors, administrators, representatives, officers, directors, agents, attorneys, subsidiaries, affiliates, divisions, parents, predecessors and assigns hereby: (a) release and discharge Avnet and each of its heirs, representatives, officers, directors, employees, agents, attorneys, subsidiaries, affiliates, parents, predecessors, successors and assigns, from any and all actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, judgments, executions, claims and ...

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