Judge Michael E. Romero declined to rule on the proposed settlement between USA Cricket and American Cricket Enterprises at Wednesday afternoon’s hearing in Denver, opening with the observation that he had received “quite a few” objections in a period when, at the last status, the parties “weren’t sure if there were going to be any objections whatsoever.” He scheduled an evidentiary hearing for Monday, May 18, narrowed the scope of what that hearing will address, and ruled on which of the objecting parties will be able to participate in cross-examination.
The case proceeds, in other words, but the trustee will not be receiving an approval order on the timeline he had asked for. The post-petition financing the trustee has lined up from ACE was conditioned on entry of an approval order by May 8 — a milestone that has now slipped.
Counsel for the trustee acknowledged on the record that he does not have authority to extend the milestones unilaterally; counsel for ACE indicated some flexibility but warned the court that, in her view, “this is the only viable option” and that prolonged litigation could push the case toward conversion to chapter 7. “There’s $35,000 in cash here,” she said.
What May 18 will and will not decide
Romero’s framing of what the May 18 hearing is for, and what it is not, was the most consequential part of this afternoon’s proceeding. The legal standard governing a Rule 9019 settlement requires the court to assess factors that include the probability of success of the underlying litigation — here, the dispute between USA Cricket and ACE over the terminated Term Sheet and the $150 million proof of claim ACE filed in December.
Counsel for ACE, Amalia Sax-Bolder of Reed Smith, urged the court not to allow the hearing to become “an exercise in putting ACE on trial.” Romero said he agreed that the case would not be tried, but also told her that the court still has to be able to evaluate the underlying disputes well enough to apply the legal factors. “I need to hear Mr. Dennis to be comfortable with what he has done,” Romero said, referring to the chapter 11 trustee, Mark Dennis.
The narrower question Judge Romero identified is what Dennis knew when he negotiated the settlement — his evaluation of the $150 million claim, his investigation of the disputes between the parties, and the steps he took to test the financing market before agreeing to the deal that ACE has put on the table.
The court will not, Romero said, conduct a bid contest. “I’m not going to be going into competing bids,” he said in a later exchange about whether the National Cricket League’s Chairman should appear in person. “What I limited the testimony to was you’re going to be able to cross-examine Mr. Dennis about his efforts.”
In substance, the May 18 hearing will turn on whether Dennis exercised reasonable business judgment, with particular focus on whether he adequately tested alternative sources of financing before agreeing to the ACE settlement. If he did, the court is unlikely to second-guess his judgment. If he did not, the settlement may have to be reopened.
Who can participate, and who cannot
A substantial portion of the hearing was given over to standing — the question of which objecting parties have a sufficient legal interest in the outcome to be allowed to participate. Romero’s rulings produced a tiered structure for May 18.
Former USA Cricket Chairman Venu Pisike filed a proof of claim with the court that same morning. Romero said the late-filed proof of claim is enough to establish his standing for purposes of the hearing, even though an objection to its allowance could be filed later. Sesha Kalapatapu, the former USA Cricket counsel and creditor who filed a four-page objection, was determined to have standing as a recognized creditor in the schedules, despite his late-filed objection.
The two former directors who joined Pisike’s side of the case — Anj Balusu and Srini Salver — received a more limited form of participation. Counsel for the trustee, Adam Hirsch of Davis Graham & Stubbs, argued that they were not creditors, were not equity holders (USA Cricket is a non-profit, so there are no equity holders), and had “no economic interest in the outcome.”
Romero pressed back on an interesting related point: the USA Cricket board has not been disbanded, he said, and although a Chapter 11 trustee has been appointed, the board members are still legally board members.
He acknowledged the broader question Hirsch raised — whether individual board members of an entity now operated by a trustee have standing to participate in trustee proceedings — but resolved it pragmatically. Balusu and Salver will be permitted to state their positions on the record, but will not be permitted to cross-examine witnesses. Their objections will be considered as part of the record the court reviews.
The most contested standing question concerned the National Cricket League. Hours before the hearing, NCL filed a notice that it had purchased two creditor claims (including that of former US National team player Nisarg Patel) of approximately $2,000 each, in what its counsel framed as an effort to establish creditor standing in addition to the economic-interest argument NCL had already made in its objection. Counsel argued that NCL has a vested economic interest because, prior to the bankruptcy, ACE had taken the position that NCL was not permitted to conduct competitive events in the United States and had threatened to sue — a posture that, in NCL’s reading, would continue if ACE’s exclusive rights are reinstated. ACE disputed that characterization in its filings from earlier that day.
Romero’s ruling threaded a narrow path. He told NCL counsel that the small-claim purchases did not, in his view, give NCL the kind of standing it sought. But he allowed NCL to participate to a limited extent: the NCL may cross-examine Dennis on his evaluation of NCL’s proposals and his understanding of them generally. That said, the NCL will not be allowed to turn the hearing into a competition between NCL’s offer and ACE’s. “I’m not going to get into a competition between Miss Sax-Bolder’s client’s proposal and your proposal,” Romero said. “We are dealing with the trustee exercising his business judgment.”
NCL’s counsel also told the court that NCL’s Chairman Arun Agarwal, who he asked to attend in person on May 18, would have testimony to offer about the existence of alternative financing sources — not, he said, about the terms of any competing offer.
The ICC’s position, on the record
Counsel for the International Cricket Council appeared at the hearing but had filed no pleadings supporting or opposing either motion. The ICC’s position, as stated on the record, was that it does not take any position on the motions in support or in opposition. The substantive part of the statement was what came next.
ICC counsel told the court that “both USA Cricket and ACE have coordinated with ICC, kept us abreast of the settlement and the DIP motion, and have made those expressly contingent on satisfying ICC’s reinstatement conditions and addressing its concerns with the term sheet.”
That is the most direct on-the-record statement to date that the settlement’s reference to “the concerns and comments raised by ICC to ACE prepetition” is something both the trustee and ACE remain in active coordination with the ICC about. ICC counsel added that the council was present at the hearing in case the court had questions, and that, to the extent objectors invoke ICC concerns as a basis for opposing the motions, the ICC itself is taking no position.
The $150 million claim, contested
The most pointed substantive exchange of the afternoon came from former USAC General Counsel Kalapatapu, who pressed an argument about the foundation of ACE’s $150 million proof of claim. Kalapatapu told the court that the bulk of ACE’s claimed losses are premised on the risk that ACE could lose its investment in Major League Cricket if its sanctioning rights were unwound. But, Kalapatapu argued, that premise is contradicted by a filing ACE made earlier that day — a filing he said acknowledges that MLC has been sanctioned directly by the International Cricket Council for five years, through 2029, regardless of what happens to USA Cricket.
“So there’s no loss of that investment,” Kalapatapu told the court. “You don’t even have to get into the merits of who did what or how. The question is what efforts did the trustee undertake to understand the viability of the claim itself?”
Kalapatapu also argued that he is positioned to offer the court something other witnesses are not. “Next to Mr. Hirsch and Mr. Dennis, I probably have the most experience with these claims, the most knowledge about the viability of the claims or the nuances about did the trustee consider X, Y, or Z in terms of validity.”
He told the court he intends to call witnesses on May 18 to testify about conversations with Dennis or information that they could have made available to him. Romero said he would consider that, with the question constrained, in his words, to “what did Mr. Dennis know, and when did he know it.”
“Capitulation” versus “the only viable option”
The broader competing characterizations of the proposed deal sat in the background of the afternoon’s scheduling discussion. Kalapatapu put his framing on the record directly. “The trustee’s motion to approve the settlement is essentially a capitulation,” he said. “If that ACE contract is revived in its entirety, the whole dispute is about the validity of that contract — not just whether they breached it or not, but is it, for public policy purposes, does it violate 501(c)(3) guidelines.”
By approving the settlement, he argued, the court would be “giving ACE what it really wants” — a 501(c)(3) entity with $32,000 in the bank is never going to pay $150 million, but the contract itself “has value,” and the trustee’s motion concedes ACE’s position on that contract “in its entirety.”
ACE attorney Sax-Bolder’s framing was structurally different. The relevant standard for the court, she argued, is whether the trustee’s decision falls within the range of reasonableness and whether the settlement reflects an exercise of business judgment.
Allowing the objections to expand into a litigation of every prepetition claim would, in her telling, ensure that “this deal is not going to get done because it’s going to go on forever in this court.” At that point, she said, the case would convert to chapter 7 — “because there’s 35,000 in cash here.”
Judge Romero indicated he agreed that the hearing would not be a litigation of every underlying dispute. He also indicated, however, that he needs to understand both sides well enough to weigh on Dennis’s evaluation of the $150 million claim.
What May 18 looks like
The May 18 hearing will begin at 9:30 a.m. local time in Denver in a hybrid format. Dennis will appear in person. ACE executives may also testify. Witness lists from the participating parties are due to the court by Monday, May 11, exhibits by Thursday, May 14. Balusu and Salver will be able to participate by video, and will not be required to travel to Denver to make their statements on the record.
On scope, the court has signaled what it will be listening for: whether the trustee adequately tested the financing market; whether he understood what he was settling. The dispute over the underlying contract, the disputes over performance, the disputes over governance and the dispute over the value of ACE’s claim will inform that question.
