Opinion
Case No. 02-13533 (AJG) Jointly Administered
December 16, 2003
Marcia L. Goldstein, Esq., Lori R. Fife, Esq., WEIL, GOTSHAL MANGES LLP, New York, NY, for Debtors and Debtors In Possession
Alfredo R. Perez, Esq., WEIL, GOTSHAL MANGES LLP, Houston, TX, for Debtors and Debtors In Possession
Moshe Maimon, Susan M. Jaffe, Lizabeth L. Burrell, Brian T. FitzPatrick, LEVY PHILLIPS KONIGSBERG, LLP, New York, New York, for Debtors and Debtors In Possession
Barbara J. Olshansky, Robert T. Perry, CENTER FOR CONSTITUTIONAL RIGHTS, New York, New York, for Debtors and Debtors In Possession
This Stipulation and Order (the "Stipulation") is made by and between WorldCom, Inc. ("WorldCom") and certain of its direct and indirect subsidiaries, as debtors and debtors-in-possession (collectively the "Debtors") and the Byrd Claimants, by their respective undersigned counsel.
The Byrd Claimants, individually and as representatives of a proposed class, are comprised of Wanda Best-Deveuaux, Norma Boothe-Dixon, Reverend Dr. Calvin O. Butts, Ill, Mary Byrd, Carole Bullard, Alison Coleman, Elizabeth Fink, William Moses Kunsfler Fund for Racial Justice, Mary Mortimore, Inez Patterson and Cora Williams.
Pursuant to this Stipulation, the Debtors and the Byrd Claimants agree and stipulate as follows:
RECITALS
WHEREAS, on July 21, 2002 and continuing thereafter (the "Commencement Date"), the Debtors commenced cases under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code"). The Debtors continue to operate their businesses and manage their properties as debtors-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. By order dated July 22, 2002 and subsequent orders, the Debtors' Chapter 11 cases have been consolidated for procedural purposes only and are being jointly administered.
By Order dated October 31, 2003, the Debtors' Plan of Reorganization susbstantively consolidating the Chapter 11 cases (the "Plan") was approved by the Court.
WHEREAS, by order dated October 29, 2002, the Court established January 23, 2003 as the deadline for filing proofs of claim against the Debtors.
WHEREAS, on January 23, 2003, the Byrd Claimants filed 22 separate identical claims each in an amount in excess of $150 million against WorldCom, Inc. and MCI WorldCom Network Services, Inc. (the "Claims") (the Claims are identified in Exhibit A hereto). The Claims are designated claim numbers 28226 through 28247. The Claims arise out of the allegations set forth in Byrd et al, v. Goord et al., 00 Civ 21535 (S.D.N.Y.) (GBD) currently pending in the United States District Court, Southern District of New York (the "Action"). The Action seeks to challenge a single provider/collect call-only system implemented by the New York State Department of Correctional Services ("DOCS"). The Action also seeks class certification The Byrd Claimants filed the Claims as individuals and as representatives of the proposed class.
WHEREAS, on January 23, 2003, the Byrd Claimants also filed a Notice of Objection in which they objected to WorldCom's sending the proof of claim forms to the Byrd Claimants' counsel rather than directly to each of the Byrd Claimants. The Byrd Claimants further objected to WorldCom's not having sent proof of claim forms to other members of the proposed class.
WHEREAS, on April 22, 2003, the Debtors filed the Sixth Omnibus Objection to Proofs of Claim (the "Objection") seeking to disallow or expunge the Claims.
WHEREAS, on May 15, 2003, the Byrd Claimants filed a response to the Objection requesting that the Bankruptcy Court either hear the dispute or lift the automatic stay so that the Action may proceed in the District Court.
WHEREAS, as a result of the Objection to their Claims, the Byrd Claimants were not entitled to vote to accept or reject the Plan.
Relevant Background
1. DOCS is the agency of the State of New York responsible for operating the state's prisons. In 1995, DOCS issued a Request For Proposal ("RFP") inviting long distance carriers to compete to become the long distance provider for DOCS' Phone Home Program under which inmates at the prisons placed telephone calls. Among other things, the RFP set forth the rates that the winning bidder may charge for calls placed by inmates. DOCS selected MCI WorldCom Inc. and MCI Telecommunications Corporation (collectively "WorldCom Parties") as the carrier for the Phone Home Program. Once selected, the WorldCom Parties filed tariffs with the FCC and PSC.
On May 1, 2000, MCI Worldcom, Inc. changed its name to WorldCom, Inc., and on May 7, 1999, MCI Telecommunications Corp. was renamed MCI Worldcom Network Services, Inc.
2. On February 16, 1999, a group of plaintiffs — led by Wanda Best-Deveaux — filed a class action complaint against DOCS, the WorldCom Parties and others in the United States District Court for the Eastern District of New York. That case was captioned Best-Deveaux v. MCI Communications Corp., No. 99-CV-882 (E.D.N.Y.). Plaintiffs in that case challenged the constitutionality of the DOCS Phone Home Program and claimed that the rates charged for inmate-initiated calls were too high. On February 25, 1999, the WorldCom Parties filed a Memorandum of Law opposing any preliminary injunction, pointing out (among other things) that the filed rate doctrine barred any claims against them. The court held oral argument on plaintiffs request for injunctive relief on March 1, 1999, and denied the motion. Two days later, plaintiffs in that action executed a stipulation of dismissal of all claims against the WorldCom Parties.
3. On March 21, 2000, the Byrd Claimants commenced the Actioa The Byrd Claimants allege that the DOCS Phone Home Program is unconstitutional because it allegedly violates freedom of speech, due process, equal protection and freedom to contact and that the defendants have imposed an illegal tax and have violated antitrust laws.
4. On May 29, 2000 the WorldCom Parties moved to dismiss the Action on the grounds that, among other things, the filed rate doctrine bars courts from adjudicating any claim directed at the reasonableness of rates that have been approved by a regulatory agency and that government agencies (and by extension public contractors such as the WorldCom Parties) are plainly immune from antitrust liability.
The WorldCom Parties' motion to dismiss the Action remains sub judice before the District Court.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto stipulate and agree as follows:
1. The Byrd Claimants consent to the withdrawal and expungement of all of the Claims except for claim 28266, which claim shall constitute the claim under which the Byrd Claimants shall seek recovery against the Debtors (hereinafter the "Claim").
2. The Debtors and the Byrd Claimants agree that the automatic stay is hereby modified to permit the Byrd Claimants to liquidate the Claim through the Action in the District Court, which Claim, if liquidated in favor of the Byrd Claimants, will be deemed an allowed general unsecured claim in Class 6 of the Debtors' approved Plan in these cases; provided however, that nothing in this Stipulation is intended to, nor shall it be construed to be, a waiver by any of the Debtors or the Byrd Claimants of any right to appeal any judgment or decision rendered in the Action to the appropriate appellate court. The Debtors and the Byrd Claimants further agree that no judgment against the Debtors in the Action may be enforced except in the context of payment under the Plan.
4. This Stipulation shall become effective and binding as of entry of this Stipulation on the docket as "So Ordered" by the Court. In the event that this Stipulation is not approved by the Court, it shall be null and void and have no force or effect and the parties agree that, in such circumstances, this Stipulation shall be of no evidentiary value whatsoever in any proceedings.
5. The hearing on the Objection shall be adjourned to January 6, 2004 for calendar control purposes only.
IT IS SO ORDERED