Enviva Inc.

United States Bankruptcy Court, E.D. Virginia·Decided July 2, 2024·No. 24-10453·Unknown

Opinion

UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF VIRGINIA Alexandria Division

In re: ) ) ENVIVA INC., et al., ) Case No. 24-10453-BFK ) Chapter 11 ) (Jointly Administered) ) Debtors. ) _______________________________________ )

MEMORANDUM OPINION AND ORDER DENYING DEBTORS’ MOTION TO RECONSIDER MEMORANDUM OPINION AND ORDER DENYING APPLICATION TO EMPLOY VINSON & ELKINS LLP

This matter comes before the Court on the Debtors’ Motion to Reconsider the Court’s Memorandum Opinion and Order Denying the Debtors’ Application to Employ Vinson & Elkins LLP (“V&E”). Docket No. 663. The Motion is supported by the Declarations of David S. Meyer of V&E and Jason E. Paral. Docket Nos. 664, 665.1 The Ad Hoc Committee filed a Joinder in Support of the Debtors’ Motion, as did the Successor Indenture Trustee for the 6.50% Senior Notes Due 2026. Docket Nos. 703, 704. The U.S. Trustee filed an Opposition to the Motion. Docket No. 705. The Official Committee of Unsecured Creditors filed a Statement in Support of the Debtors’ Motion. Docket No, 712. The Court heard the parties’ arguments on June 14, 2024. For the reasons stated below, the Court will deny the Motion. Procedural History A. The May 9, 2024, Hearing.

1 Mr. Meyer is a partner with V&E. Docket No. 665, ¶ 1. Mr. Paral is the Executive Vice President, General Counsel and Secretary of Enviva, Inc. Docket No. 664, ¶ 1. Prior to his employment with Enviva, he practiced law at V&E from 2008 to 2015. Id. at ¶ 5. On March 27, 2024, the Debtors filed their Application to Employ V&E. Docket No. 183. The Application was supported by the Declaration of David S. Meyer, and later, two Supplemental Meyer Declarations. Docket Nos. 183, 442, 481. The U.S. Trustee filed an Objection to the Application, and a Supplemental Brief in Support of his Objection. Docket Nos. 273, 440. V&E filed a Reply to the U.S. Trustee’s Objection. Docket No. 441.

On April 3, 2024, the Court issued an Order, sua sponte, setting the V&E Application for a hearing, noting that: (a) V&E represented the Debtors’ Officers and Directors in shareholder and derivative litigation; and (b) V&E also represented the Riverstone entities, which owned 43% of the Debtors’ common stock. Docket No. 224. The Court noted in its Order: “There does not appear to be any reference to a wall of separation in the Meyer Declaration.” Id. at p. 1. Apparently unwilling to take the hint, V&E did not address the issue of an ethical wall in its Reply Memorandum. Rather, it argued that it represented Riverstone in unrelated matters, and therefore, it was disinterested. See Docket No. 441, pp. 7-15. On May 9, 2024, the Court held a hearing on the V&E Application. At the hearing, the

Court inquired whether a wall of separation at V&E would be appropriate. Mr. Meyer responded as follows: But a wall of separation in unrelated matters is not required by the model rules, the Bankruptcy Code, the bankruptcy rules, or the local rules. And we do agree, as we must, that no confidential information of Enviva will be shared with Riverstone, and no confidential information of Riverstone will be shared with Enviva. But a wall of separation where none is required would be incredibly harmful to Enviva at this critical phase of its restructuring efforts. To be clear, this isn't a situation where the harm outweighs the need, but rather there's no need and it would be harmful.

Docket No. 532, Hr’g. Tr. 13:7-11 (emphasis added).

Mr. Meyer further stated:

So specifically, if we have scenarios where we have senior partners in particular that have worked on Enviva-related matters but they've also worked on Riverstone-related matters unrelated to Enviva of course over the last calendar year, then the world we find ourselves in is, first, if those partners could not work on Enviva because they worked on Riverstone matters, well, now, there's certainly a detriment to Enviva because certain of those partners have highly specialized knowledge, specific information about the company, ongoing matters in which they've represented the company, whether it be in litigation matters, finance matters, restructuring matters. And so to tell Enviva that those parties cannot work on Enviva-related matters would be detrimental to the debtors.

Id. at 13:14-14:2 (emphasis added).

The Court then asked whether there were attorneys at V&E who simultaneously represented the Debtors and Riverstone. Id. at 14:3-5. Mr. Meyer responded that there were a “handful” of such attorneys, and that “it’s a very limited group.” Id. at 14:6-9. On May 30, 2024, the Court denied the V&E Application, after finding that V&E was not “disinterested” within the meaning of Section 327(a) of the Bankruptcy Code. Docket No. 653.2 B. The Motion to Reconsider. On June 3, 2024, the Debtors filed a Motion to Reconsider, supported by the Meyer Declaration and the Paral Declaration. Docket Nos. 663, 664, 665. The Debtors moved for an expedited hearing, which the Court granted. Docket Nos. 666, 668. The U.S. Trustee filed an Opposition to the Motion. Docket No. 705. The Ad Hoc Group and the Indenture Trustee filed Statements in Support of the Debtors’ Motion. Docket Nos. 703, 704. V&E now proposes an ethical wall as follows: a. Team A (Enviva). All timekeepers who have billed time to the Debtors but have not billed time to Riverstone since the Petition Date will be on Team A, and will be prohibited from working on Riverstone engagements through the later of the effective date of any confirmed plan of reorganization in this case and any dismissal or conversion of the Debtors’ chapter 11 cases (or potentially longer should the Court find that circumstances at the time of plan confirmation so warrant); b. Team B (Riverstone). All timekeepers who have billed time to Riverstone but have not billed time to the Debtors since the Petition Date will be on Team B, and will be prohibited from working for the Debtors through the later of the effective date of any confirmed plan of reorganization in this case and any dismissal or conversion of the Debtors’ chapter 11 cases

2 In re Enviva Inc., 2024 WL 2795274 (Bankr. E.D. Va. May 30, 2024) (“Enviva I”). (or potentially longer should the Court find that circumstances at the time of plan confirmation so warrant); c. V&E will divide the 13 timekeepers who have billed time to both Riverstone and the Debtors since the Petition Date as follows: (i) All timekeepers who have billed less than 12.5 hours to Riverstone since the Petition Date will be on Team A (Enviva); (ii) All timekeepers who have billed 12.5 or more hours to Riverstone since the Petition Date will be on Team B (Riverstone); d. Any new timekeepers working for the Debtors: (1) will be on Team A; (2) must not have already been on Team B; and (3) will be prohibited from working on matters for Riverstone during the relevant time period; e. Any new timekeepers working for Riverstone: (1) will be on Team B; (2) must not have already been on Team A; and (3) will be prohibited from working on matters for the Debtors during the relevant time period; f. V&E will establish an electronic wall in V&E’s document management system that prevents team members from accessing the other team’s electronic documents; g. V&E will instruct members of both teams in writing: (1) not to discuss confidential information regarding their respective representation with the other team; (2) not to access files maintained by the other team; and (3) to restrict access to data to protect against in advertent access to such material; and h. V&E will require members of each team to affirm in writing that they understand and will comply with the ethical screen.

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