Case 18-04177-TOM11 Doc 964 Filed 03/08/19 Entered 03/08/19 17:17:52 .

shall be extended for live (5) days after entry of an order ruling on the Standing Motion. FinalDIP Order at 1129(a).1 5.The Committee has diligently investigated the liens and claims of the Second LienLender MCF and potential claims and causes of action against the Defendants. As part of itsinvestigation, the Committee has reviewed in excess of 260,000 documents produced by theDebtors and certain of the Defendants, and conducted fifteen (15) interviews of witnesses.Based on this investigation, the Committee has determined that the Claims set forth in theattached Complaint are viable and the prosecution of such Claims would be beneficial tounsecured creditors.RELIEF REQUESTED1 6.The Committee hereby requests leave, standing, and authority to commence anadversary proceeding to prosecute the Claims against the Defendants and the sole authority tosettle all or a portion of the Claims on behalf of the Debtors' estates.BASIS FOR RELIEF REQUESTEDThe Committee Should Be Granted Standing and the Authority to Pursue theClaims on Behalf of the Debtors' Estates1 7.These Chapter 11 Cases present a paradigmatic situation for granting theCommittee standing and the authority to pursue valuable and meritorious Claims that the Debtorssimply cannot or will not pursue. The Defendants consist of the Debtors' equity members,managers and officers, entities they control, or related parties such as Bay Point. It is illogical tobelieve or assume that the Debtors' "independent" directors and counsel will turn around and suethe very people who hired them, or their affiliated entities, including the Second Lien LenderMCF, which is owned by principals of the Debtors.1 8.The Committee's authority to bring these Claims flows from its well-recognizedstatutory voice in the Debtors' affairs. Section 1109(b) of the Bankruptcy Code provides, inpertinent part, that the Committee "may raise and may appear and be heard on any issue" in theDebtors' Chapter 11 Cases. Moreover, pursuant to section 1103(c)(2) of the Bankruptcy Code,144837-0581-9530v ICase 18-04177-TOM11Doc 964 Filed 03/08/19 Entered 03/08/19 17:17:52Main DocumentPage 14 of 33Desc

the Committee may also "investigate the acts, conduct, assets, liabilities, and financial conditionof the debtor, the operation of the debtor's business . . . and any other matter relevant to the caseor to the formulation of a plan.I 9.It appears that the Eleventh Circuit has not ruled on the standard for grantingstanding to a creditors' committee to prosecute claims on the debtor's behalf I lowever, at leasttwo courts in this this district have cited the Second Circuit's decision in Unsecured CreditorsCommittee v. Noyes (In re SIN Enters.), 779 F.2d 901 (2d Cir. 1985), as the seminal case. See Inre Shelby Motel Grp., Inc., 123 B.R. 98, 101 (N.D. Ala. 1990); In re Chalk Line Allk, Inc., 184B.R. 828, 832(Bankr. N.D. Ala. 1995).20.In Chapter 11 cases where no trustee has been appointed, the Bankruptcy Codeprovides that a debtor-in-possession enjoys the powers that would otherwise vest in a bankruptcytrustee. See 11 U.S.C. §1107( ). In conjunction therewith, a debtor is vested with the fiduciaryduty to maximize the value of the estate for purposes of distribution to all parties in interest. Inre Cybergenics Corp., 226 F.3d 237, 243 (3d Cir. 2000)(finding that the paramount duty" of adebtor in possession is to act on behalf of creditors to maximize the value of the estate), cited inOfficial Committee of Unsecured Creditors of Cybergenics Corp. v. Chinery, 330 F.3d 548, 568(3d Cir. 2003)(en bane): see also, In re Marvel Entm'i Group, Inc., 140 F.3d 463, 471 (3d Cir.1 998)(holding that a debtor has a fiduciary duty to refrain from conduct that may damage theestate); In re Commodore Intl, Ltd., 262 F.3d 96, 99 (2d Cir. 2001) (finding that a debtor-inpossession "has an obligation to pursue all actions that are in the best interests of creditors andthe estate").21.It is well settled law that, under appropriate circumstances, bankruptcy courts mayallow a creditors' committee to commence and pursue litigation on behalf of the estate. SeeCvbergenics, 330 F.3d at 580; Official Committee of Unsecured Creditors v. Barron (In rePolaroid Corporation), 2004 Bankr. Lexis 841, 2004 WL 1397582 (Bankr. D. Del. Tune 22,2004); Official Committee of Unsecured Creditors v. Cablevision Systems Corp. (In re Valley154837-0581-9530v1Case 18-04177-TOM11Doc 964 Filed 03/08/19 Entered 03/08/19 17:17:52Main DocumentPage 15 of 33Desc

Media, Inc.), 2003 Bankr. Lewis 940, 2003 WL 21956410 (Banks. D. Del. August 14, 2003);Official Committee of Unsecured Creditors v. Clark (In re Nall Forge Co.), 304 B.R. 214(Bankr. W.D. Pa. 2004), gird, 326 B.R. 532 (W.D. Pa. 2005). See also Scott v. NationalCentury Enterprises, Inc. (In re Baltimore Emergency Serrices 11 Corp,), 432 F.3d 557, 560 (4t11Cir. 2005); In re Commodore Int '1 Ltd., 262 F.3d 96 (2d Cir. 2001); Louisiana World Expositionv. Fed. Ins. Co., 858 F.2d 233, 253-54 (5th Cir. 1988); Unsecured Creditors Committee v. Noyes(In re S'IN Ewers.), 779 F.2d 901, 904(2d Cir. 1985); Shelby Motel, 123 B.R. at 101.Courts in other circuits have held that the Bankruptcy Code contains an impliedright for parties in interest to commence a lawsuit or prosecute a claim on behalf of a debtor-inpossession with bankruptcy court approval. STN Enters., 779 F.2d at 904. If a debtor is unableor unwilling to meet its statutory obligation to maximize the value of its estate, "[t]he practice ofauthorizing the prosecution of actions on behalf of an estate by [parties in interest] upon ashowing that such is in the interests of the estate, is one of long-standing, and nearly universallyrecognized." In re Adelphia Comm. Corp., 330 B.R. 364, 373 (Bankr. S.D.N.Y. 2005)(citationsomitted).As a result, creditors and other stakeholders have "the comfort that potentiallyvaluable (and sometimes critical) claims on behalf of the estate will be prosecuted — withoutrequiring bankruptcy judges to . . resort[] to much more draconian or ineffective mechanisms toensure the prosecution of those claims, with the destruction to going concern value and creditorrecoveries that would frequently be the result." Id.23.Where a debtor refuses to bring suit, the court should decide whether such refusalis unjustified by determining whether0"the committee presents a colorable claim or claims forrelief that on appropriate proof would support a recovery" and (ii) "an action asserting suchclaim(s) is likely to benefit the reorganization estate." STN Enters., 779 F.2d at 905. When adebtor consents to a committee bringing suit, the court still must determine whether the suit is"in the best interest of the bankruptcy estate" and "is necessary and beneficial to the fair and164837-0581-9530v1Case 18-04177-TOM11Doc 964 Filed 03/08/19 Entered 03/08/19 17:17:52Main DocumentPage 16 of 33Desc

efficient resolution of the bankruptcy proceedings." Commodore, 262 F.3d at 100 (citationsomitted).A.The Debtors Are Unable to Bring the Claims, and Any Committee Demandto Pursue Such Claims Is Futile24.The Debtors are effectively disabled from bringing the Claims against the Debtorsdue to actual and potential conflicts of interest given the relationship of the Debtors and theirmembers and affiliated parties with the Defendants. Despite the Committee's written demand tothe Debtors dated March 4, 2019, the Debtors have not given their consent nor have they advisedthe Committee that they will or intend to prosecute the Claims. The Debtors did respond byletter dated March 5.2019. but did not state a definitive position to the Committee's demand.25.The Committee does not believe the Debtors can or will commence such an actionagainst the Defendants because certain individual Defendants are the ultimate equity owners ofthe Debtors, their affiliated parties, or alleged lenders to the Debtors (MCF and Bay Point).Thus. the Committee believes that the Debtors and their counsel would have an actual conflictand be unable to prosecute the Claims. Accordingly, in order for the Committee to fulfill itsfiduciary duty and properly act for the Debtors' estates, the Committee should be grantedstanding to file the Complaint and commence an adversary proceeding against the Defendants.26.Once a party has shown that it has asserted a colorable claim, in order to satisfythe prong - that the debtor has unjustifiably refused to pursue the claim - the party seekingderivative standing may show that (a) demand was futile or (b) demand was made of the debtorand the debtor consented to derivative standing or refused or is unable to act. See STN Enters.,779 F.2d at 904; In re G-I Ifolcling,s', Inc., 313 B.R. 612. 630-31 (Bankr. D.N.J. 2004).27.Here, given the potential and actual conflicts, it is unlikely the Debtors could orwould purse the Defendants for the Claims set forth in the Complaint. Thus, only the Committeeis in a position to do so.28.A debtor's refusal to pursue actions on behalf of the estate must be"unjustifiable." Cybergenic,s', 330 F.3d at 566-67. Standing should be granted when a debtor174837-0581-9530v1Case 18-04177-TOM11Doc 964 Filed 03/08/19 Entered 03/08/19 17:17:52Main DocumentPage 17 of 33Desc

unjustifiably or unreasonably refuses to pursue claims that the Bankruptcy Court finds wouldbenefit the estate. See Cybergenics, 330 F.3d at 568; see also In re The V Companies, 292 B.R.290 (B.A.P. 6th Cir. 2003). If a debtor fails to pursue litigation that is likely to benefit its estate,such failure is unjustifiable. See, e.g., STN Enters., 779 F.2d at 904-05. "The unjustifiablefailure' of a debtor to bring the suit itself suit does not require an improper motive for the failure.Rather, a debtor's failure to bring a claim is deemed to be unjustifiable when the committee haspresented a colorable claim that on appropriate proof would support recovery, and the action islikely to benefit the reorganization estate." Adelphia, 330 B.R. at 374. n.19 (citing STN Ent., 779F.2d at 905). A creditor need only show that a debtor was unable or unwilling to pursueclaims" on the estate's behalf. In re Newcorn Enterprises Ltd., 287 B.R. 744. 749-50 (Bankr.ED. Mo. 2002); see also Louisiana World, 858 F.2d at 253 (finding that "[w]here the interests ofan estate and its creditors arc impaired by the refusal of a trustee or a debtor-in-possession toinitiate adversary proceedings to recover property of the estate, . . . that refusal [is] unjustified").If the Debtors assert the Committee should not be granted standing, such a position would beunjustifiable given the foregoing. Thus. the Court should grant the Motion and authorize theCommittee to file the Complaint.B.The Committee's Claims Are Colorable29.Second, the Committee's Complaint demonstrates that colorable claims existagainst the Defendants. Presenting a colorable claim requires a relatively easy showing underapplicable case law. See, e.g., In re Adelphia Commc'ns Corp., 330 B.R. 364, 376-81 (Thar.S.D.N.Y. 2005); In re America's Robby Or., 223 B.R. 275. 288 (Bankr. S.D.N.Y. 1998)(standing should be denied only if claim is "facially defective"). To determine if a colorableclaim exists, courts should not conduct a mini-trial. See STN Enters., 779 F.2d at 905-06; seealso Adelphia Commc'as, 330 B.R. at 369. A committee seeking standing need not lay bare itscomplete proof, but rather is required only to describe a facially valid claim, which will beevaluated under a standard "much the same as that undertaken when a defendant moves to184837-0581-9530v 1Case 18-04177-TOM11Doc 964 Filed 03/08/19 Entered 03/08/19 17:17:52Main DocumentPage 18 of 33Desc

dismiss a complaint for failure to state a claim." America's flabby Cir., 223 B.R. at 282 accordIn re KDI Holdings, Inc., 277 B.R. 493, 508 (Banks. S.D.N.Y. 1999). See also In re iPCS, Inc.,297 B.R. 283, 291 (Banks. N.D. Ga 2003).30.Each of the Claims set forth in the proposed Complaint — annexed hereto asExhibit C — are colorable. After an intensive investigation by the Committee, the proposedComplaint asserts facts demonstrating and supporting the various causes of action detailed in theattached Complaint and summarized in paragraph 3 above. 'Elms, the Committee's Complaintmakes a primafacie showing that the Claims set forth in the Complaint are viable.31.In sum. the allegations contained in the proposed Complaint are sufficient todemonstrate that the Claims are colorable. Therefore, the second element of the standing test issatisfied.C.The Committee's Pursuit of the Claims Will Benefit the Debtors' Estates32.Finally, should the Court in its discretion decide to consider the benefit to theestate, the Committee contends that prosecuting the Claims will benefit the estates. With respectto this prong as well, the Court need not conduct a "mini-trial . . to determine [the] likelihood ofsuccess in such a suit or the attendant fees and expenses involved." See ,STNEniers., 779 F.2d at905. The Court only needs to "assure itself that there is a sufficient likelihood of success tojustify the anticipated delay and expense to the bankruptcy estate that the initiation andcontinuation of litigation will likely produce." Id. at 906. In other words, the Committee shouldbe awarded standing if there is a "fair chance that the benefits to be obtained from the litigationwill outweigh its costs." America's Hobby Ctr., 223 B.R. at 284.33.The Committee believes that the costs of litigating the Claims against theDefendants are likely to be far outweighed by the potential recovery for general unsecuredcreditors. If successful, the Committee will avoid the Second Lien Lender's alleged liens in theasserted amount of approximately 127.2 million. In addition, the Committee may recoverpotentially tens of millions of dollars in assets or proceeds that would then be available for194837-0581-9530v1Case 18-04177-TOM11Doc 964 Filed 03/08/19 Entered 03/08/19 17:17:52Main DocumentPage 19 of 33Desc

distribution to general unsecured creditors. Even applying a conservative litigation discountfactor, the expected value of the Claims would greatly exceed the cost of litigating them, as thecost associated with litigating whether these particular assets are subject to a valid lien shouldnot be time consuming or expensive. Accordingly, the Court should grant the Committeestanding to prosecute the Claims on behalf of the estates.11.The Committee Should Be Granted Sole Authority to Settle the Claims34.The Debtors' inability and refusal to pursue the Claims also disables them fromeffectively managing or settling any resulting litigation. Therefore, the Debtors should not retainany rights to settle and compromise any Claims that the Committee is granted leave to prosecute.35.The Committee's ability to litigate the Claims will be hindered if the Debtorsretain the right to propose a settlement. Among other things, it likely will reduce the Defendantsincentives to enter into settlement negotiations with the Committee. Granting the Committee thesole right to negotiate a settlement with the Debtors makes clear to all potential defendants thatthe party that controls litigation controls any potential settlement. Similar relief has been grantedby various bankruptcy courts. See, e.g., In re Majestic Capital, LID, Case No. 11-36225(CGM)(Bankr. S.D.N.Y. Dec. 12. 2011)(Docket No. 211 at3); In re Evergreen Solar, Inc., Case No.1 1-12590(MFW)(Bankr. D. Del. Oct. 28. 201])(Docket No. 382 at 113); In re Old CarCo LLCf/k/a/ Chrysler LLC), Case No. 09-50002 (AJG)(Bankr. S.D.N.Y. Aug. 13, 2009)(Docket No.(5151 at ¶ 2); In re Vesta Insurance Group, Inc., et al., Case No. 06-02517-TBB11 (Bankr. N.D.Ala. December 12, 2006) (Bennett, J.) (order granting creditors' committee with derivativestanding to pursue certain causes of action).' Accordingly, the Committee should be granted thesole right to enter into settlement negotiations and to compromise any Claims against theDefendants, subject to Court approval.III.Additional ReliefDue to the voluminous nature of the referenced orders. the Committee has not attached such orders hereto. TheCommittee will provide the referenced orders to the Court upon request.5204837-0581-95300Case 18-04177-TOM11Doc 964 Filed 03/08/19 Entered 03/08/19 17:17:52Main DocumentPage 20 of 33Desc

36.In order to enable the Committee to efficiently and effectively prosecute theClaims against the Defendants, the Court should determine and grant the Committee the right toassert, waive, or otherwise exercise any attorney-client privilege, work product privilege,immunity, and/or confidentiality provision or agreement heretofore vested in, or controlled by,the Debtors that are related to the Claims and the causes of action substantially set forth in theComplaint.37.While the Complaint has been filed under seal consistent with the ProtectiveOrder, the Committee requests the Court permit the Committee to file the Complaint as anadversary proceeding on the public docket, not under seal, within five (5) days of the Court'sentry of an order granting this Motion.Reservation of Rights38.The Committee reserves the right to supplement or amend this Motion at or priorto any hearing on the Motion, including asserting claims and causes of action against additionalentities and individuals. Nothing in this Motion constitutes an admission by the Committee withrespect to any alleged claims, liens, security interests, and/or encumbrances against the Debtors'assets.CONCLUSIONWHEREFORE, the Committee respectfully requests that the Court: (i) enter theProposed Order granting the relief sought herein in the same form or substantially the same formattached hereto as Exhibit A; and (ii) grant the Committee such other and 'further relief as theCourt deems just and proper.Respectfully submitted,Dated: March 8, 2019BAKER DONELSON BEARMAN CALDWELL& BERKOWITZ,P.C./s/ Rita HallettRita Hullett, Esq.1400 Wells Fargo Tower420 20th Street N214837-0581-95300Case 18-04177-TOM11Doc 964 Filed 03/08/19 Entered 03/08/19 17:17:52Main DocumentPage 21 of 33Desc

Birmingham, AL 35203Telephone:(205) 276-9807Email: rhull bakerdonelson.com-andLOWENSTEIN SANDLER LLPJeffrey Cohen, Esq.Jennifer Kimble, Esq.1251 Avenue of the AmericasNew York, NY 10020Telephone:(212)262-6700Email: jeohen@lowenstein.comjkimble(cilowenstein.com-and -Bruce Bueehler, Esq.Michael Kaplan, Esq.Nicole Fulfree, Esq.One Lowenstein DriveRoseland, New Jersey 07068Email: ulfree@lowenslein.eomCounsel for the Official CotinnitIce ofUnsecured Ureditors224837-0581-9530v1Case 18-04177-TOM11Doc 964 Filed 03/08/19 Entered 03/08/19 17:17:52Main DocumentPage 22 of 3

Management IV, LLC, Iron Management V. LLC. Lara Natural Resources LLC, ERP Compliant Fuels, LLC, ERP Steel Works, LLC, ERP Compliant Coke, LLC, Coking Coal Leasing, LLC,