Opinion
Case No. 02-13533 (AJG), Jointly Administered.
June 20, 2005
Weil, Gotshal Manges LLP, By: Adam P. Strochak, Esq., Marcia L. Goldstein, Esq. (MG 2606), Lori R. Fife, Esq., (LF 2839), Alfredo R. Perez, Esq., on behalf MCI, Inc. and the other Reorganized Debtors.
Cohen Grigsby, P.C., By: John M. Pierce, On behalf of Bryan Cipoletti, Dru A. Sedwick, and Kirby J. Campbell.
STIPULATION AND ORDER RESOLVING PROOFS OF CLAIM NUMBER 23472, 23473, and 23474
MCI, Inc. (formerly, WorldCom, Inc.) and certain of its direct and indirect subsidiaries, each reorganized debtors in the above-captioned cases (collectively "MCI" or the "Reorganized Debtors"), Bryan Cipoletti, Dru A. Sedwick, and Kirby J. Campbell (collectively "Claimants"), hereby stipulate and agree as follows:
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");
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, on or about June 21, 2001 plaintiffs Roger B. Abbott, Atocha LP, Gold Appel Transfer, S.A., Edward Heimrich, William S. Miller III, individually and as trustee, Joanne T. Miller, individually and as trustee, and Edward Soren (collectively, the "Abbott Litigants") commenced an action against 18 defendants, including WorldCom, in the Superior Court of the State of California (the "California State Court Action") alleging a fraudulent scheme facilitated by a variety of individuals, WorldCom, certain of its executives, and officers and directors of another telecommunications company named World Access, including claimants Kirby J. Campbell, Dru A. Sedwick, and Bryan Cipoletti. The complaint in the California State Court Action alleges that World Access misrepresented its financial ties to WorldCom in order to inflate its stock price, which it then used to acquire a number of smaller telecommunications firms. Plaintiff Abbott was the founder of a company named WorldxChange Communications, which was allegedly to be acquired by World Access. The remaining plaintiffs are alleged to have been investors in WorldxChange. Plaintiffs claim that as a result of the alleged scheme, World Access and WorldxChange are worthless, causing plaintiffs to sustain damages.
WHEREAS, on August 31, 2001 WorldCom submitted a demurrer seeking to dismiss all five counts alleged by plaintiffs pertaining to WorldCom. On January 30, 2002 the court in the California State Court Action sustained WorldCom's demurrer with respect to three of these five counts, thereby dismissing them. The only counts against WorldCom to survive the dismissal are a count under state securities law for rescissory damages (plaintiffs asserted these claims against 15 defendants, some of which were subsequently dismissed) and a count alleging aiding and abetting the alleged fraud of World Access' officers and directors (plaintiffs asserted this claim against 5 defendants).
WHEREAS, upon the Commencement Date the California State Court Action was stayed as to WorldCom and the claims for relief previously asserted therein are now pending in proofs of claim filed in these chapter 11 cases;
WHEREAS, the Reorganized Debtors disputed having any liability under any legal theory pleaded in the California State Court Action;
WHEREAS, Kirby J. Campbell, Bryan Cipoletti, and Dru A. Sedwick filed proofs of claim on January 22, 2003 (Claim Nos. 23472, 23473, and 23474, respectively). These claims, collectively referred to as "Contribution Claims," seek recovery from WorldCom under theories of contribution or indemnity, whether statutory, common law, or by agreement, for any liability that may be imposed upon Claimants in connection with the claims for relief asserted in the California State Court Action. The Contribution Claims are contingent, unliquidated claims for any and all damages (including, but not limited to, attorney's fees) for which the Claimants may ultimately be liable to any third party.
WHEREAS, the Claimants were dismissed from the California State Court Action for lack of personal jurisdiction and dispute having any liability under any legal theory pleaded therein;
WHEREAS, the Reorganized Debtors filed and served an objection to Dru A. Sedwick's proof of claim (23474) as part of the Reorganized Debtors' 72nd Omnibus Objection;
WHEREAS, the Reorganized Debtors filed and served an objection to Kirby J. Campbell's and Bryan Cipoletti's proofs of claim (23472 and 23473) and asserted counterclaims alleging that any liability to the Abbott Litigants is the responsibility of Claimants; and
WHEREAS, MCI and Claimants (singularly "Party," collectively, the "Parties") desire to resolve these issues and the claims and disputes between them. Accordingly, the Parties have negotiated this Stipulation 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 Debtors and Claimants as follows:
1. The Contribution Claims. Claimants agree that the Contribution Claims are hereby withdrawn in their entirety, with prejudice except with respect to the reinstatement rights reserved in paragraph 3, below. Upon entry of this Stipulation and Order by the Court, the proofs of claim number 23472, 23473, and 23474 shall be expunged without payment.
2. The Objections and Counterclaims. MCI agrees that the objection to proofs of claim number 23472 and 23473, and the 72d omnibus objection as to proof of claim number 23474, are hereby resolved. MCI agrees that its counterclaims against Kirby J. Campbell and Bryan Cipoletti are hereby dismissed, with prejudice except with respect to the reinstatement rights reserved in paragraph 3, below.
3. In the event MCI incurs any liability in connection with the claims for relief alleged in the California State Court Action (including as realleged in the proofs of claim filed in these chapter 11 cases), MCI may reinstate its counterclaims against Claimants and such counterclaims shall be deemed filed as of their original filing date and no party shall be entitled to challenge the timeliness of such counterclaims, and any otherwise available objection to the timely filing of such reinstated counterclaims is hereby waived. Claimants reserve all other rights and defenses to such reinstated counterclaims. In the event Claimants incur any liability in connection with the claims for relief alleged in the California State Court Action, Claimants may reinstate their Contribution Claims against MCI asserted in proofs of claim 23472, 23473, and 23474. In such event, proofs of claim 23472, 23473, and 23474 shall be deemed filed as of their original filing date and MCI's objection shall be reinstated. No party shall be entitled to challenge the timeliness of such proofs of claim, or the objection, and any otherwise available objection to the timely filing of such reinstated claims is hereby waived. MCI reserves all other rights and defenses to such reinstated claims.
4. No Other Claims. Except as to re-filing rights specifically reserved herein, Claimants shall have no prepetition claim(s) of any kind whatsoever, including, but not limited to, any and all claims under sections 365, 502 or 507 of the Bankruptcy Code, against any of the Debtors and/or the Reorganized Debtors.
5. Choice of Law. This Stipulation shall be governed, in all respects, by the laws of the State of New York, irrespective of its choice of law rules.
6. Entire Agreement. This Stipulation is the entire agreement between the Parties with respect to the subject matter of this Stipulation. All representations, warranties, inducements, and/or statements of intention made by the Parties are embodied in this Stipulation, and no party hereto 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.
7. Counterparts. This Stipulation may be executed in any number of counterparts, and all such counterparts, taken together, shall be deemed to constitute one and the same instrument.
8. Modifications. This Stipulation may not be modified, except in a written instrument signed by each of the Parties hereto.
9. Authority. Both the Reorganized Debtors and Claimants represent that they are authorized to execute this Stipulation, subject to the Bankruptcy Court's approval. Further, both the Reorganized Debtors and Claimants represent and agree that this Stipulation is binding on the Parties and their predecessors, successors, subsidiaries, affiliates, assignees, agents, directors, officers, employees, and shareholders.
10. Effective Date. This Stipulation shall be binding on the Parties from the date of its execution by each of the Parties.
11. Retention of Jurisdiction. The Bankruptcy Court shall retain exclusive jurisdiction over any and all disputes arising out of or otherwise relating to the matter in this Stipulation.
IT IS SO ORDERED.