Opinion
Case No. 02-13533 (AJG), (Jointly Administered).
August 9, 2005
Marcia L. Goldstein, Esq. (MG 2606), Lori R. Fife, Esq. (LF 2839), New York, NY, and Alfredo R. Pérez, Esq., WEIL, GOTSHAL MANGES LLP, Houston, TX, Attorneys for Debtors and Reorganized Debtors.
David M. Posner (DP-6505), HOGAN HARTSON L.L.P., New York, NY, Attorneys for Discover Financial Services, Inc.
MCI, Inc. and certain of its direct and indirect subsidiaries, as reorganized debtors (collectively, "MCI"), and Discover Financial Services, Inc. ("Discover"), respectfully submit this Stipulation and Agreed Order ("Stipulation and Order"):
WHEREAS, on July 21, 2002 (the "Commencement Date") and November 8, 2002, WorldCom, Inc. and certain of its direct and indirect subsidiaries (the "Debtors") commenced cases under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code"). By Orders dated July 22, 2002 and November 12, 2002, these chapter 11 cases were consolidated for procedural purposes. During the chapter 11 cases, the Debtors operated their businesses and managed their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code.
WHEREAS, on October 31, 2003, this Court entered an order confirming the Debtors' Modified Second Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code (the "Plan").
Unless otherwise defined herein, capitalized terms shall have the meanings that are ascribed to such terms in the Plan.
WHEREAS, on April 20, 2004, the Plan became effective in accordance with its terms, and pursuant to the Plan, WorldCom, Inc. merged with and into MCI, Inc. with MCI, Inc. being the survivor.
WHEREAS, Discover is in the business of offering credit cards to the general public bearing a "Discover Card" logo (the "Discover Card"). Prior to the Commencement Date, the Debtors and Discover executed certain contracts and agreements between them, including a certain Merchant Services Agreement, dated December 21, 1993 (the "Merchant Services Agreement") between Discover and MCI WorldCom Network Services, Inc. (formerly, MCI Telecommunications Corporation) that authorized the Debtors to accept the Discover Card from customers who elected to pay for the Debtors' services with the Discover Card.
WHEREAS, Discover has filed the Proofs of Claim identified on Exhibit A attached hereto (collectively, "Discover Claims"), against certain of the Debtors, alleging that the Debtors owe the amounts set forth therein pursuant to, among other things, the Merchant Services Agreement.
WHEREAS, the Debtors have disputed the Discover Claims and, accordingly, have filed objections thereto with the Bankruptcy Court.
WHEREAS, the Debtors assert that Discover owes MCI Network Services, Inc., a Debtor herein, $258,231.87 (the "Discover Debt") under the Merchant Services Agreement in connection with prepetition charges incurred by Discover's cardholders for the Debtors' services.
WHEREAS, Discover disputes the amount of the Discover Debt and disputes any entitlement of the Debtors to interest thereon.
WHEREAS, on or about December 2, 2004, Discover filed a Motion for Clarification of Order Granting Reorganized Debtors' Twenty-Eighth Omnibus Objection to Proofs of Claim (Multiple Debtor Claims — Duplicative Claims — Redundant Claims) or, in the Alternative, for Reconsideration with Respect to the Disallowance of the Claim(s) of Discover Financial Services, Inc. [docket # 14169] (the "Motion for Reconsideration"), seeking to have Discover Claim Number 24381 reinstated.
WHEREAS, in order to resolve their disputes and the issues raised in the Debtors' objections and Discover's Motion for Reconsideration, Discover and MCI have negotiated this Stipulation and Order in good faith and at arms' length and desire that it shall be binding on each of them.
NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and between the MCI and Discover (together, the "Parties"), through their undersigned counsel, that:
1. The Motion for Reconsideration. The Motion for Reconsideration shall be deemed withdrawn with prejudice upon this Stipulation and Order becoming final and non-appealable.
2. Assumption of the Merchant Services Agreement. MCI WorldCom Network Services, Inc., a Debtor, has assumed the Merchant Services Agreement in accordance with the Plan and the Bankruptcy Code. MCI represents and warrants that the Merchant Services Agreement is currently in force and effect between Discover and MCI WorldCom Network Services, Inc. Any cure of defaults due under section 365 of the Bankruptcy Code for the assumption of the Merchant Services Agreement shall be deemed fully satisfied and paid in full by allowing Discover to apply $93,830.21 against the Discover Debt. Applying $93,830.21 of the Discover Debt shall fully satisfy Proof of Claim Number 24381 and reduce the Discover Debt to $164,401.66. Discover hereby waives and releases any right to a distribution under the Plan on account of Proof of Claim Number 24381.
3. Other Discover Claims. The Parties further agree that Proof of Claim Number 24378 shall be reduced and Allowed in the total amount of $44,085, to be treated as an Allowed WorldCom General Unsecured Claim under Class 6 of the Plan. Except as otherwise provided in this paragraph, all Claims and Proofs of Claim filed by or on behalf of Discover, including the Proofs of Claim identified on Exhibit A hereto, shall be disallowed and expunged in their entirety.
4. The Discover Debt. After accounting for the reduction in the Discover Debt described above, the Parties' agree that accrued interest in the amount of $10,490.20 shall be added to the Discover Debt, making the total amount due from Discover to MCI $174,891.86 (the "Remaining Discover Debt"). Discover shall pay MCI the Remaining Discover Debt as follows: (a) in full, without setoff, recoupment, counterclaim or reduction of any kind; and (b) by wire transfer of immediately available funds within ten (10) business days after Discover receives Notice (as defined below) from MCI that this Stipulation and Order has become a final, non-appealable order. "Notice" to Discover from MCI shall be given in writing to David M. Posner by email to DMPosner@HHLAW.com or by facsimile to David M. Posner at 212-918-3100. After Discover pays MCI the $174,891.86 of the Remaining Discover Debt, as set forth above in this paragraph, Discover shall not be obligated to pay any additional amount to MCI for prepetition charges arising under or related to the Merchant Services Agreement.
5. Release. Except as otherwise provided herein, and upon this Stipulation and Order becoming final and non-appealable, Discover hereby releases and forever discharges the Debtors and/or MCI and their respective affiliates, and each of their respective predecessors, successors, parents, subsidiaries, assigns, transferees, agents, directors, officers, employees, shareholders, and attorneys from any and all claims, debts, liabilities, demands, obligations, costs, expenses, actions, causes of action and claims for relief of every nature, arising prior to the effective date of the Plan, including without limitation, all claims under sections 365, 502, 503, and 507 of the Bankruptcy Code.
6. Entire Agreement. This Stipulation and Order is the entire agreement between the Parties with respect to the subject matter of this Stipulation and Order. All representations, warranties, inducements, and/or statements of intention made by the Parties are embodied in this Stipulation and Order, and none of the Parties relied upon, shall be bound by, or shall be liable for any alleged representation, warranty, inducement, or statement of intention that is not expressly set forth in this Stipulation and Order. Accordingly, the Parties have independently verified all facts and/or conditions of facts that they have determined are necessary to their decision to enter into this Stipulation and Order, and they have not relied upon any representations, written or oral, express or implied, of any other person in verifying and satisfying themselves as to such facts and/or condition of facts.
7. No Admission of Liability. This Stipulation and Order is a compromise with respect to the disputes and issues raised in the Debtors' objections, the Motion for Reconsideration and the Discover Debt, and is not to be construed as an admission of any liability or the lack of validity of any claim by Discover or MCI.
8. Counterparts. This Stipulation and Order may be executed in two or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to the other party.
9. Modifications. This Stipulation and Order and/or its terms may not be modified, waived, or amended except in a written instrument signed by each of the Parties. Accordingly, this Stipulation and Order and/or its terms may not be orally modified, amended, or waived.
10. Choice of Law. This Stipulation and Order shall be governed by and construed in accordance with the Bankruptcy Code and the internal laws of the State of New York, without regard to the conflict of laws principles thereof.
11. Authority. Each person who executes this Stipulation and Order by or on behalf of each respective party warrants and represents that he or she has been duly authorized and empowered to execute and deliver this Stipulation and Order on behalf of such party. MCI also warrants that it is authorized and empowered to bind the Debtors to the terms hereof. Discover also warrants and represents that it owns the claims, liabilities, and causes of action released herein and that it has not assigned, transferred, conveyed, or in any way encumbered any claim, damage, liability, or cause of action released herein. Additionally, the Parties acknowledge, warrant, and represent that they have had the opportunity to consult with legal counsel of their choosing prior to entering into this Stipulation and Order, and that they enter into this Stipulation and Order freely and voluntarily.
12. Severability. If any part or any provision of this Stipulation and Order shall be finally determined to be invalid or unenforceable under applicable law, that part or provision shall be ineffective to the extent of such invalidity or unenforceability only, without in any way affecting the remaining parts of said provision or the remaining provisions of this Stipulation and Order.
13. Effective Date. This Stipulation shall be binding on the Parties from the date of its execution, but is expressly subject to and contingent upon its approval by the Bankruptcy Court. If the Bankruptcy Court does not approve this Stipulation, this Stipulation shall be null and void.
14. Captions. The captions contained in this Stipulation and Order are for convenience only. They are not a part of this Stipulation and Order and do not in any way limit or amplify the terms and provisions of this Stipulation and Order. The captions shall have no effect on the interpretation of this Stipulation and Order.
15. Retention of Jurisdiction. The Bankruptcy Court shall retain exclusive jurisdiction over any and all disputes arising out of or otherwise relating to this Stipulation and Order and/or the subject matter of this Stipulation and Order.
IT IS SO ORDERED.
Exhibit A
Claim No. Debtor Against Whom Claim Filed Claim Amount
24378 MCI Wireless, Inc. $45,421.97 24379 Telecom *USA, Inc. $518.81 24380 1-800-COLLECT, Inc. $14,595.64 24381 WorldCom, Inc. $93,830.21 24410 WorldCom Wireless, Inc. $45,421.97 24411 MCI Communications Corporation $93,830.21 24412 MCI WorldCom Network Services, Inc. $93,830.21 25441 1-800-COLLECT, Inc. $14,595.64 27452 WorldCom Wireless, Inc. $45,421.97 27453 Telecom *USA, Inc. $518.81 27454 MCI Wireless, Inc. $45,421.97 29269 WorldCom, Inc. $93,830.21 29270 MCI WorldCom Network Services, Inc. $93,830.21 29271 MCI Communications Corporation $93,830.21