Law360 (January 9, 2020, 5:40 PM EST) — The unsecured creditors of bankrupt ride-hailing company Juno USA have asked a Delaware judge for permission to investigate the possibility creditors are being shorted of the proceeds of a pre-Chapter 11 sale of company assets to competitor Lyft Inc.
In a request filed Wednesday for discovery into the sale and Juno’s corporate structure, the unsecured creditors committee said what evidence they have received so far has given them reason to question Juno’s claims that because its operating assets were owned by non-bankrupt affiliates, it has no rights to the proceeds of a pre-Chapter 11 sale of those assets to Lyft.
“In fact, based on the information produced to date, it appears that the debtors and non-debtor affiliates failed to maintain any corporate formalities and grounds may exist to pierce the corporate veil or consolidate the non-debtor affiliates into these Chapter 11 proceedings,” the committee said.
Juno filed for Chapter 11 protection in November, citing burdensome new regulations imposed by New York City, where it operated its app-based ride-hailing service, as well as costly litigation defenses that have hampered its liquidity.
The company is facing two multimillion-dollar lawsuits by drivers over the termination of a stock compensation plan. The company is also facing suits by drivers seeking classification as employees, competitors claiming patent infringement and passengers claiming personal injuries.
In their motion, the unsecured creditors said Juno has claimed its operating assets — including trademarks, software and customer lists — were owned by nondebtor affiliates and sold to Lyft in a confidential transaction prepetition.
“The debtors maintain, however, that they have no rights to the proceeds of the transaction, other than a nominal sum of $25,000 received pursuant to a co-marketing agreement,” the committee said.
However, the committee said Juno has failed to produce any licensing or shared service agreements as evidence of the claimed prebankruptcy ownership structure and had refused to produce audited financial statements “because all returns were prepared on a consolidated basis.”
The committee also said Juno’s proposed Chapter 11 plan includes “broad” liability releases for the nondebtor affiliates.
“Therefore, as structured, the debtors’ non-debtor affiliates are receiving the benefit of both the prepetition sale transaction and the Chapter 11 filing to the detriment of creditors. This is unacceptable,” the committee said.
Counsel for the unsecured creditors and Juno did not immediately respond to requests for comment Thursday.
Juno is represented by William E. Chipman Jr., Mark L. Desgrosseilliers and Mark D. Olivere of Chipman Brown Cicero & Cole LLP.
The lead case is In re: Juno USA LP, case number 1:19-bk-12484, in the U.S. Bankruptcy Court for the District of Delaware.
–Additional reporting by Vince Sullivan. Editing by Jay Jackson Jr.