Madison Square Boys & Girls Club, Inc.

FOR PUBLICATION
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
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In re: 	Chapter 11
MADISON SQUARE BOYS & GIRLS CLUB, INC. 	Case No. 22-10910 (SHL)
Debtor.
---------------------------------------------------------------x
MEMORANDUM OF DECISION
A P P E A R A N C E S :
PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
Counsel for the Debtor
1285 Avenue of the Americas
New York, New York 10019
By: 	Alan W. Kornberg, Esq.
Andrew M. Parlen, Esq.
William A. Clareman, Esq.
John T. Weber, Esq.
EPIQ CORPORATE RESTRUCTURING, LLC
777 Third Avenue, 12th Floor
New York, New York 10017
By: 	Kate Mailloux
LATHAM & WATKINS LLP
Counsel for Xclaim Inc.
355 South Grand Avenue, Suite 100
Los Angeles, California 90071
By: 	Kimberly A. Posin, Esq. (pro hac vice)
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SEAN H. LANE
UNITED STATES BANKRUPTCY JUDGE
In large bankruptcy cases, a claims and noticing agent (a “claims agent”) is often retained
to assist the Clerk of Court with noticing and claims-processing tasks that the Clerk and court
staff would normally perform. The retention of such a claims agent is governed by 28 U.S.C. §
156(c), which permits claims agents to be compensated by the estate for performing these
administrative functions. Madison Square Boys & Girls Club, Inc. (“Debtor”) seeks to retain
Epiq Corporate Restructuring, LLC (“Epiq”) as the claims agent in this case. The traditional
administrative functions to be performed by Epiq in this case are uncontroversial and not
objected to by any party. But as part of its proposed retention here, Epiq also seeks approval for
an agreement with Xclaim Inc. (“Xclaim”) – a third-party claims-trading website – to
synchronize the proofs of claim submitted to Epiq as claims agent with the Xclaim website
where such claims are posted for sale. In return, Epiq receives a percentage of the commissions
that Xclaim charges for facilitating claims trades on its website.
The issue before the Court is whether Epiq may be compensated by Xclaim for the
synchronization services using the data Epiq obtains as claims agent. Because Epiq is acting in
its capacity as an agent of the Clerk, the Court concludes that Epiq may not enter into this
business arrangement with Xclaim because the Clerk of Court would not be permitted to enter
into such a relationship or receive such fees. For the reasons explained below, Epiq’s retention
application is DENIED to the extent it includes the data-sharing arrangement with Xclaim.
BACKGROUND
I. 	The Access Agreement
During the course of bankruptcy cases, a creditor files a proof of claim to assert its right
to payment from a bankruptcy debtor. The amount a creditor receives on its claim depends upon
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the terms of any confirmed chapter 11 plan of reorganization or the statutory waterfall provisions
in a chapter 7 case. Epiq is among the companies preapproved by the Clerk of this Court to
serve as a claims agent to handle the receipt and processing of claims. Epiq has served as a
court-approved claims agent in many bankruptcy cases in the Southern District of New York.
On or around June 24, 2022, Epiq entered in the Access Agreement with Xclaim
(“Access Agreement”),1 a company that operates a claims-trading website. See generally Letter
submitted by Xclaim CEO Matt Sedigh, dated July 12, 2022 (“Xclaim Letter”).2 Simply put,
claims trading is the purchase and sale of claims held by creditors against a bankruptcy debtor. It
is done outside the supervision of the Court by agreement between private parties, although any
transfer of a claim is recorded on the claims register in a bankruptcy case.3
Xclaim is in the business of facilitating for its own commercial gain the trading of claims
in bankruptcy cases. (Epiq Letter Brief at 1 of 24; Xclaim Letter at 21 of 24).4 The purpose of
the Access Agreement here is to allow Xclaim to synchronize the claims registers that Epiq
administers as the Clerk’s claims agent with the claims available for sale on the Xclaim platform.
1 	A copy of the Access Agreement is annexed as Exhibit A to the letter submitted by Epiq’s Senior Director
Kate Mailloux, dated July 13, 2022 (“Epiq Letter Brief”) [ECF No. 55].
2 	A copy of the Xclaim Letter is annexed as Exhibit B to the Epiq Letter Brief.
3 	Federal Bankruptcy Rule 3001(e)(2) requires the following to document a claims trade:
Transfer of Claim Other Than for Security After Proof Filed. If a claim other than one based
on a publicly traded note, bond, or debenture has been transferred other than for security after the
proof of claim has been filed, evidence of the transfer shall be filed by the transferee. The clerk
shall immediately notify the alleged transferor by mail of the filing of the evidence of transfer and
that objection thereto, if any, must be filed within 21 days of the mailing of the notice or within
any additional time allowed by the court. If the alleged transferor files a timely objection and the
court finds, after notice and a hearing, that the claim has been transferred other than for security, it
shall enter an order substituting the transferee for the transferor. If a timely objection is not filed
by the alleged transferor, the transferee shall be substituted for the transferor.
4 	Neither the Epiq Letter Brief nor the Xclaim Letter is paginated. Therefore, the opinion will reference the
page number imprinted by the electronic court filing system on the header of each page.
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Xclaim has created custom software (“API”) to receive claims information submitted by Epiq
“so that [Xclaim] will have real-time information and documents as reflected in each Claims
Register.” (Access Agreement § 1.1). Epiq, in turn, grants Xclaim direct access to claims
registers through the API, and when claims trades occur on the Xclaim platform, Xclaim sends
the trade information to Epiq. The Access Agreement provides in relevant part:
Access. EPIQ hereby grants XCLAIM direct access through the API to the
[claims-related data] maintained by EPIQ in connection with any Bankruptcy
Proceeding and to allow XCLAIM . . . to transmit Claims Transfer Data to EPIQ
for its review and approval of any changes to the Claims Registers to reflect any
Claim Transfers facilitated through XCLAIM’s Platform.
(Id. § 2.1).
Under the Access Agreement, Epiq has corresponding obligations to ensure Xclaim’s
timely access and ongoing synchronization to the claims registers. Epiq must provide Xclaim
with direct access to a claims register within three business days of the creation of such register
or the filing of the bankruptcy petition, whichever occurs later, (id. § 3.1), and Epiq must provide
the same when there is any “subsequent modification” to a claims register. (Id.). Epiq is also
obligated to provide ongoing technical support to Xclaim to ensure that the claims data continues
to be transmitted through the API:
EPIQ agrees to provide XCLAIM with access to EPIQ’s systems and to make
reasonably available to XCLAIM the services of qualified personnel for
assistance and understanding the Technical Data, Claims Registers and Accessible
Data in order to enable XCLAIM to develop, test, validate and maintain the API,
and gain direct access to the Accessible Data.
(Id. § 3.3). When Xclaim transmits claims-trade information to Epiq, Epiq must review it “as
soon as practicable” and notify Xclaim within one business day if Epiq sees any issue with the
claims trade. (Id. § 3.4).
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In exchange for the synchronization services, Xclaim pays Epiq a fee (“Fee”) equal to
10% of the commissions Xclaim receives from users who trade claims on its website in cases in
which Epiq serves as the court-approved claims agent. (Id. § 4.1). The Fee is paid at the
beginning of each year upon Xclaim providing a report to Epiq showing the applicable
commissions it collected during the prior year. (Id. § 4.2).
The Access Agreement is a successor agreement to a prior “Exclusive Access
Agreement,” dated October 3, 2019, (see id. § 7.5) under which Epiq presumably provided
Xclaim the same access and synchronization services but excluded other parties from obtaining
the same services.5 To the Court’s knowledge, Epiq has not, prior to the application here,
disclosed the existence of its relationship with Xclaim in any of its retention applications filed in
other cases in this district after Epiq entered into the Exclusive Access Agreement. See, e.g.,
Epiq’s claims-agent retention applications in (i) In re Roman Catholic Diocese of Rockville
Centre, New York, dated Oct. 1, 2020 [ECF Case No. 20-12345 Doc. 21]; (ii) In re Grupo
Aeroméxico, S.A.B. de C.V., dated July 1, 2020 [ECF Case No. 20-11563 Doc. 12]; and (iii) In re
Jason Indus., Inc., dated June 24, 2020 [ECF Case No. 20-22766 Doc. 5].
Notably, Epiq represents to Xclaim in the Access Agreement that Epiq has exclusive
ownership rights over the claims registers in cases where Epiq serves as claims agent. (Access
Agreement § 5.5 (“EPIQ exclusively owns all right, title and interest in and to the Claims
Registers free and clear of any encumbrances, security interests, notes, loans, instruments, liens,
judgments, orders, decrees, commitments, liabilities, licenses, agreements or other binding
arrangements or obligations between EPIQ and any other person or entity that conflict with the
5 	The Access Agreement drops the exclusivity provision so, at least in theory, Epiq could enter into similar
agreements with other claims-trading platforms. While the exclusivity provision made the agreement even more
problematic, the Court concludes that the Access Agreement is improper even without the exclusivity provision.
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rights granted by EPIQ under this agreement.”); id. § 2.2 (“As between the Parties, EPIQ shall
continue to own all rights in and to . . . the Claims Registers . . . .”)).
II. 	The Retention Application
On June 29, 2022, the Debtor filed a petition for relief under chapter 11 of the
Bankruptcy Code and contemporaneously moved to appoint Epiq as its claims agent. In her
declaration supporting Epiq’s retention, Kate Mailloux – an Epiq Senior Director – disclosed the
existence of Epiq’s agreement with Xclaim and stated that the Fee compensates Epiq for costs
incurred in preparing the claims register “in a digital format that is compatible with Xclaim’s
platform.” Declaration of Kate Mailloux, dated June 29, 2022 at ¶ 9 [ECF No. 2]. During the
first day hearing in this case on July 1st, the Court requested a letter brief on the propriety of the
Access Agreement and the Fee, see Transcript of July 1, 2022 Hr’g at 53:13-25 [ECF No. 84],
and approved Epiq’s retention application only on an interim basis subject to the additional
briefing and further hearing.
In the subsequent Epiq Letter Brief, Epiq provided a copy of the Access Agreement and
the Xclaim Letter. Epiq primarily argued that, under the Access Agreement, it “is not acting in
its capacity as an agent of the Clerk but rather in its capacity as a private, for-profit enterprise.”
(Epiq Letter Brief at 3 of 24). At the second day hearing on July 20th, the Court by bench ruling
denied the retention application to the extent it included the file-sharing arrangement with
Xclaim, see Transcript of July 20, 2022 Hr’g at 44:6-47:17; 50:9-12; 52:24-53:4 [ECF No. 82],
and previewed that it may issue a written opinion to more fully explain the Court’s reasoning.6
Id. at 49:1-4. This is that written opinion.
6 	The Court subsequently approved Epiq’s retention with an express provision excluding this case from the
file-sharing arrangement with Xclaim. See Order, dated July 29, 2022 [ECF No. 86].
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DISCUSSION
I. 	Applicable Statutes and Authorities
A. 	28 U.S.C. § 156(c) and the SDNY Protocol
The Clerk is the “official custodian of the records and dockets of the bankruptcy court.”
28 U.S.C. § 156(e). When it appears that there will be a distribution to unsecured creditors, the
Clerk must “keep in a claims register a list of claims filed in a case.” F ED. R. B ANKR . P. 5003(b).
The authority to retain a claims agent to assist the Clerk comes from 28 U.S.C. § 156(c), which
states in pertinent part:
Any court may utilize . . . services . . . off the court’s premises, which pertain to
the provision of notices, dockets, calendars, and other administrative information
to parties in [bankruptcy cases], where the costs of such . . . services are paid for
out of the assets of the estate and are not charged to the United States. The
utilization of such . . . services shall be subject to such conditions and limitations
as the pertinent circuit council may prescribe.
Thus, a claims agent may be retained in a bankruptcy case to assist the Clerk with certain
administrative tasks and be compensated by the bankruptcy estate.
In this District, a claims agent must be retained in any case when the number of creditors
and equity security holders, in total, is 250 or more. Bankr. S.D.N.Y. R. 5075-1(b)(1). The
claims agent remains “subject to the supervision of the Clerk,” Bankr. S.D.N.Y. R. 5075-1(a),
and the Clerk “remains responsible for the integrity of the court’s records and dockets, including
those maintained by claims and noticing agents.” 9 C OLLIER ON B ANKRUPTCY ¶ 5003.04 (16th
ed. 2022); accord 28 U.S.C. § 156(e).
A claims agent’s administrative activities and duties are further governed by this Court’s
Protocol for the Employment of Claims and Noticing Agents Under 28 U.S.C. § 156(c) (“SDNY
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Protocol”).7 Consistent with a claims agent’s defined grant of authority under section 156(c), the
SDNY Protocol provides that the claims agent activities should not extend beyond the notice and
processing tasks that the Clerk of Court may perform:
An application seeking to retain a claims and noticing agent under 28 U.S.C. §
156(c) . . . should be limited in scope to those duties that would be performed by a
Clerk of Court with respect to providing notice and processing claims (such as
maintaining a claims register).
SDNY Protocol at 1 (emphasis added). The limited scope of a retention under section 156(c) is
also highlighted by this Court’s Form Application for an Order Authorizing Retention and
Appointment of Claims and Noticing Agent (“Form 156(c) Retention Application”):
This Section 156(c) Application pertains only to the work to be performed by
Claims and Noticing Agent under the Clerk’s delegation of duties permitted by 28
U.S.C. § 156(c) and S.D.N.Y. LBR 5075-1, and any work to be performed by
Claims and Noticing Agent outside of this scope is not covered by this Section
156(c) Application or by any Order granting approval hereof.
See Form 156(c) Retention Application at ¶ 5.8 Consistent with this limited scope, this Court’s
form application for retention of claims agents under section 156(c) details the agent’s permitted
activities relating to noticing and claims management, see Form 156(c) Retention Application at
¶ 5(a) – (s) (collectively, “156(c) Activities”), and includes “[r]ecord[ing] all transfers of claims
and provid[ing] any notices of such transfers as required by Bankruptcy Rule 3001(e).” Id. at ¶
5(k). A claims agent retained to perform 156(c) Activities has a “duty to comply with all
relevant statutory provisions and rules of procedure, including local rules of procedure, general
orders and applicable guidelines.” SDNY Protocol ¶ 3. The SDNY Protocol further states that
7 	A copy of the SDNY Protocol is available on the Court’s website at
https://www.nysb.uscourts.gov/sites/default/files/pdf/newClaimsAgentsProtocol.pdf.
8 	The Form 156(c) Retention Application as well as other forms used by this Court with respect to claims
agent retention and termination can be found on the Court’s website at https://www.nysb.uscourts.gov/claims-agent-
forms.
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failure to comply with its terms “may lead to removal of the claims and noticing agent’s name
from the list of approved agents.” SDNY Protocol at 2.
Separate from any retention under section 156(c), a claims agent is sometimes also
retained under 11 U.S.C. § 327(a) in large cases to perform administrative services for the debtor
including the preparation of schedules, acting as balloting and tabulation agent, or distributing
assets under a plan of reorganization (collectively, “327(a) Activities”).9 The SDNY Protocol
distinguishes the 156(c) Activities that a claims agent performs as an agent of the Clerk from the
327(a) Activities that a claims agent performs on behalf of the debtor; a separate application and
order is required for each retention:
The Section 156(c) Application should exclude those duties that would not be
performed by a Clerk of Court [including the 327(a) Activities]; such services
should be the subject of a separate application to and order of the Court.
SDNY Protocol at 1 (emphases in original).
B. 	Code of Conduct for Judicial Employees
The Clerk is subject to the Code of Conduct for Judicial Employees (“Code of Conduct”)
which consists of five Canons. See Guide to Judiciary Policy, Vol. 2, Pt. A, Ch. 3. Canon 2 of
the Code of Conduct requires the Clerk to avoid impropriety and the appearance of impropriety.
It states in relevant part:
Canon 2: A Judicial Employee Should Avoid Impropriety and the
Appearance of Impropriety in All Activities
A judicial employee should not engage in any activities that would put into
question the propriety of the judicial employee’s conduct in carrying out the
duties of the office. . . . A judicial employee should not lend the prestige of the
9 	11 U.S.C. § 327(a) permits a bankruptcy trustee to “employ one or more . . . professional persons, that do
not hold or represent an interest adverse to the estate, and that are disinterested persons, to represent or assist the
trustee in carrying out the trustee’s duties,” and 11 U.S.C. § 1107(a) gives the same power to a debtor-in-possession
in a chapter 11 case.
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office to advance or to appear to advance the private interests of others. A
judicial employee should not use public office for private gain.
Further, the Clerk could not contract with a third party, like Epiq, to perform a task that
the Clerk himself could not perform. P RINCIPLES OF FED. APPROPRIATIONS LAW , Chapter 3, p. 3-
13 (United States Government Accountability Office, Office of the General Counsel) (4th ed.
2017) (“Brief mention should also be made of the axiom that an agency cannot do indirectly
what it is not permitted to do directly. Thus, an agency cannot use the device of a contract,
grant, or agreement to accomplish a purpose it could not do by direct expenditure.”).
C. 	Fees a Clerk May Charge
The ability of a Clerk of a bankruptcy court to collects fees is limited to fees authorized
under 28 U.S.C. § 1930. See 28 U.S.C. § 1930(e) (“The clerk of the court may collect only the
fees prescribed under this section.”). The permitted fees are specifically broken down in detail in
subparts of section 1930. Section 1930(a)(1) through (a)(5) of Title 28 sets forth the fees
payable to the Clerk when commencing bankruptcy cases under different chapters of the
Bankruptcy Code, section 1930(c) describes fees charged when commencing an appeal, and
section 1930(b) provides that additional collectable fees may be prescribed by the Judicial
Conference of the United States under section 1914(b). The additional fees contemplated by
section 1914(b) are set forth in extensive and painstaking detail in the Bankruptcy Court
Miscellaneous Fee Schedule (“Miscellaneous Fee Schedule”).10 Of relevance to the application
here, the Miscellaneous Fee Schedule includes (i) a $26 fee (“Claim Transfer Fee”) for filing a
transfer of claim, see Miscellaneous Fee Schedule ¶ 20, and (ii) a $31 fee (“Electronic Copy
Fee”) for providing a copy of an “electronic record stored outside the court’s electronic case
10 	A copy of the Miscellaneous Fee Schedule is available at https://www.uscourts.gov/services-
forms/fees/bankruptcy-court-miscellaneous-fee-schedule.
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management system, including but not limited to, document files, audio recordings, and video
recordings . . . .” Id. ¶ 1(b). These fees are paid to the Treasury Department and split between
the Treasury’s general fund and a special fund from which proceeds are available to offset funds
appropriated for the operation and maintenance of federal courts. See Federal Courts
Improvement Act of 2000, Pub. L. No. 106-518, § 102, 114 Stat. 2410, 2411; see also Guide to
Judiciary Policy, Vol. 4, Ch. 6 § 610.20(b).
II. 	The Access Agreement is Improper
A. 	The Access Agreement Requires Epiq to Perform Tasks that the Clerk Could
Not Perform and Receive a Fee that the Clerk Could Not Collect
Epiq here seeks to be retained under section 156(c). As a claims agent under section
156(c), Epiq’s authority to act is derivative of the Clerk’s authority. As provided in the SDNY
Protocol, Epiq’s duties are “limited in scope to those duties that would be performed by the
Clerk of Court with respect to providing notice and processing claims (such as maintaining a
claims register),” viz., the 156(c) Activities.
Epiq’s obligations and duties under the Access Agreement clearly go beyond the 156(c)
Activities. Under the agreement, Epiq synchronizes the claims registers in bankruptcy cases
with Xclaim’s claims-trading platform via the API, (Access Agreement § 2.1), within three days
of the creation of the claims register or filing of the bankruptcy petition (id. at 3.1), provides
ongoing technical support to Xclaim (id. at § 3.3), and promptly reviews and approves claims-
trade data submitted by Xclaim. (Id. at § 3.4). These services are not part of the Clerk’s
obligation under Federal Bankruptcy Rule 5003(b) to “keep in a claims register a list of claims
filed in the case,” and to perform related administrative functions in the maintenance of the
claims register. Rather, the purpose of these services is to assist Xclaim – a for profit claims
trader – by providing electronic information about the entire claims register so that it can be
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synchronized with Xclaim’s website to facilitate trades between creditors and potential claims
purchasers.
Said another way, the Clerk cannot engage in a for-profit relationship solely to benefit
Xclaim. If the Clerk contracted with Xclaim to synchronize claims registers with Xclaim’s
platform, the Clerk would be in violation of Canon 2 of the Code of Conduct prohibiting the
Clerk from “lend[ing] the prestige of the office to advance or to appear to advance the private
interests of others.”11 Moreover, if the Clerk was paid the Fee in exchange for the
synchronization services, he would undoubtedly run afoul of Canon 2’s prohibition against using
the public office “for private gain.”12 As a claims agent, the Clerk may only collect fees that are
permitted under 28 U.S.C. § 1930, and there is no provision in section 1930 or the Miscellaneous
Fee Schedule for providing the type of ongoing synchronization services and related technical
support contemplated by the Access Agreement. Since the Clerk could not enter into the Access
Agreement, it must follow that his agent – Epiq – cannot. P RINCIPLES OF F ED. APPROPRIATIONS
LAW , Chapter 3, at 3-13.
Epiq’s and Xclaim’s arguments do not change the result. First, Epiq asserts that the
limitations set forth in 28 U.S.C. § 156(c) do not apply to its relationship with Xclaim because it
is acting in its capacity as a private, for-profit business rather than as an agent of the Clerk.
(Epiq Letter Brief at 3-4 of 24). But Epiq misconstrues the scope of a retention under section
156(c). The SDNY Protocol makes clear that the 156(c) Activities include “maintaining a claims
11 	This violation would be even more severe under an exclusive access agreement.
12 	Obviously, claims agents are private companies who are entitled to be compensated for their performance
of the 156(c) Activities. But the 156(c) Activities that a claims agent may perform are limited to activities the Clerk
would normally perform without additional compensation. Synchronizing claims data with a private, for-profit
entity is not an activity the Clerk could engage in. Thus, the Clerk’s receipt of a third-party fee to engage in an
otherwise unauthorized activity would violate the prohibition against using his office for private gain.
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register,” and the Form 156(c) Retention Application further specifies that this includes
“[r]ecord[ing] all transfers of claims and provid[ing] any notices of such transfers as required by
Bankruptcy Rule 3001(e).”13 Form 156(c) Retention Application ¶ 5(k). Indeed, the Debtor’s
motion to retain Epiq makes clear that the retention is for services under section 156(c). See
Debtor’s Application for Entry of an Order Authorizing Retention and Appointment of Epiq
Corporate Restructuring, LLC as Claims and Noticing Agent under 28 U.S.C. § 156(c), 11
U.S.C. § 105(a), and Local Rule 5075-1 and Granting Related Relief, dated June 29, 2022 at ¶ 8
[ECF No. 2].
Epiq would not have the data that Xclaim seeks but for Epiq’s retention under section
156(c). Notwithstanding Epiq’s representations in the Access Agreement, Epiq has no
ownership interest to the claims data. Such data belongs to the U.S. Courts as the Clerk of Court
is the official custodian of court records, 28 U.S.C. § 156(e), and the Clerk remains responsible
for the data even when an agent is retained to assist him with administrative tasks. 9 C OLLIER ON
B ANKRUPTCY ¶ 5003.04; see also Bankr. S.D.N.Y. R. 5075-1(a) (claims agents are subject to
Clerk’s supervision). At the closing of a case, the claims agent must provide the Clerk with the
final version of the claims register and send all original proofs of claim to the Federal Records
Center of the National Archives and Records Administration located in Lee’s Summit, Missouri
or to another location as designated by the Clerk. Form 156(c) Retention Application ¶ 5(r) &
13 	For trades performed outside of the Xclaim platform, Epiq would presumably fulfill this obligation by
reviewing the notice of transfer filed by the transferee, sending the appropriate notice under Federal Bankruptcy
Rule 3001(e) to the transferor, and updating the claims register in the absence of an objection. For trades facilitated
through Xclaim, Epiq relies on the claims-trade data transmitted by Xclaim as outlined in the Access Agreement to
update the claims register. In other words, for the subset of claims trades involving Xclaim, the Access Agreement
is the means under which Epiq “record[s] . . . transfers of claims and provide[s] any notices of such transfers as
required by Bankruptcy Rule 3001(e)” – an obligation it has pursuant to its retention under 28 U.S.C. § 156(c). (See
Access Agreement at 1 (“XCLAIM desires . . . to provide EPIQ with the means of reviewing such Claims Transfer
Data to allow EPIQ to quickly and efficiently approve updates to the Claims Registers to reflect such
transactions.”)).
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(s). Even when the claims data is stored in the Federal Records Center, such data remains in the
legal custody of the judiciary. Guide to Judiciary Policy, Vol. 10, Ch. 6, § 635.20. Indeed, the
Clerk may request the return of any claims data stored in the Federal Records Center, id. §
635.40, and the Clerk must provide written authorization to the Federal Records Center prior to
the disposal or transfer of the claims data. Id. § 635.30. But for Epiq’s ability to manage and
administer the claims register as the Clerk’s agent under 28 U.S.C. § 156(c), Epiq could not
provide the synchronization services under the Access Agreement.
Second, Epiq suggests that the SDNY Protocol permits Epiq to enter into the arrangement
with Xclaim because it (i) contemplates a separate engagement to perform other administrative
tasks for the debtor (i.e., the 327(a) Activities), and (ii) is silent on any other services Epiq may
provide “to the public or third parties at the option of the claims agent – for example, Epiq’s
election to provide access to claims register data in a digital format compatible with Xclaim’s
platform.” (Epiq Letter Brief at 4 of 24). As a threshold matter, Epiq’s position fails because the
Debtor has not moved under 11 U.S.C. § 327(a) to retain Epiq to help Xclaim facilitate claims
trades. Moreover, the proposed arrangement here provides a benefit to Xclaim – and presumably
to Epiq by virtue of the Fee – but not to the Debtor as contemplated by section 327. In any
event, an application under section 327(a) would not be appropriate given that Epiq only has the
relevant information because of its role as a claims agent under section 156(c). Indeed, the
SDNY Protocol and 28 U.S.C. § 156(c) place affirmative limitations on the administrative tasks
that a claims agent may perform with the information it acquires. These limitations mean that
the claims agent, in relation to its management of the claims register, is not free to engage in
other activities as part of its claims agent role if those activities are not included in section 156(c)
and the protocol.
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Third, Xclaim argues that it is unfair to deprive it of access to this information. (Xclaim
Letter at 22-24 of 24). But Xclaim’s complaint isn’t about access; it has the same access to
information about filed claims as any member of the public. Xclaim’s real complaint is not
being able to obtain this information in its preferred electronic format, a format that is best for its
online claims trading business. (Xclaim Letter at 23 of 24 (complaining that claims data as
displayed on the claims agent websites is not made available in the “digitally accessible format”
that would enable it to synchronize such data to its platform)). The claims data that Epiq
generates in the ordinary course of business as a claims agent does not satisfy Xclaim’s needs; it
wants Epiq to take the additional step of processing the data into Xclaim’s preferred electronic
format, and Xclaim is willing to pay for that service. But the Clerk of Court could not receive a
fee to process this claims data simply to further Xclaim’s private interest. See Code of Conduct,
Canon 2 (the Clerk should avoid the appearance of impropriety in all activities and should not
lend the prestige of the office to advance the private interests of others). And as the Clerk’s
agent, neither can Epiq.14
Fourth, Epiq asserts that the Fee is authorized because the Miscellaneous Fee Schedule
includes a $31 fee (i.e., the Electronic Copy Fee) collectable for providing an electronic copy of
a court record. (Epiq Letter Brief at 5 of 24). But the fees set forth in 28 U.S.C. § 1930 and the
Miscellaneous Fee Schedule are collected by the Clerk and deposited with the Treasury.
Collection of such fees is a Clerk’s office function. For instance, the $26 Claim Transfer Fee
14 	Epiq and Xclaim also make a policy argument that having a centralized platform from which to buy and
sell bankruptcy claims ultimately inures to the benefit of creditors particularly those seeking to sell their claim in the
short term. (Epiq Letter Brief at 7 of 24; see generally Xclaim Letter). In the end, however, “even the most
formidable policy arguments cannot overcome a clear statutory directive,” BP P.L.C. v. Mayor & City Council of
Baltimore, 141 S. Ct. 1532, 1542 (2021) (citation and internal quotation marks omitted), and the means under which
Epiq and Xclaim sought to further their objective were in plain violation of 28 U.S.C. § 156(c) and the SDNY
Protocol.
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which must be paid each time a trade is executed is paid to the Clerk, not the claims agent. Epiq
has not provided authority for the proposition that it is entitled to keep for itself the fees that are
paid to the Clerk by statute. Even assuming that a claims agent could collect such statutory fees,
the Fee compensates Epiq for ongoing synchronization services and related technical support. It
is not paid for a single electronic copy of a court record.15
Lastly, Epiq asserts that the Fee from Xclaim is not subject to the prices set forth in 28
U.S.C. § 1930 and the Miscellaneous Fee Schedule. (Epiq Letter Brief at 5-6 of 24). Epiq points
out that the SDNY Protocol requires a debtor to solicit engagement proposals from at least three
preapproved claims agents each of whom could charge different rates. See SDNY Protocol ¶ 1.
Epiq’s argument fails, however, because it conflates (i) the rates Epiq may charge the estate in
the performance of the 156(c) Activities with (ii) the Fee Epiq would receive from Xclaim here.
There is no dispute that Epiq may set its own competitive rates for the performance of the 156(c)
Activities as the Clerk’s agent to be paid by the estate. That is not at issue in this case. Instead,
the issue is that the Access Agreement requires Epiq to perform activities that the Clerk could
not engage in, in exchange for a third-party fee that the Clerk could not charge, and that is paid
from a source not authorized under 28 U.S.C. § 156(c).16
15 	It is also not clear what the fee for an electronic copy of a claims register would be. While the Electronic
Copy Fee is $31 “per record provided,” Xclaim seeks an electronic copy of all the information in each proof of
claim.
16 	Section 156(c) of Title 28 permits a claims agent to be compensated for its services “out of the assets of the
estate.” Under the Access Agreement, the claims agent receives compensation from Xclaim, not the debtor.
Therefore, Epiq’s receipt of the Fee violates 28 U.S.C. § 156(c) because it is paid by an unauthorized third party.
The terms of the Access Agreement might also place Epiq outside the definition of a “disinterested person”
under 11 U.S.C. § 101(14). See SDNY Protocol at 2 (requiring a claims agent to be a disinterested person). A
“creditor” is not a disinterested person under section 101(14)(A) because “[i]t is presumed by the statute that a
person who is a creditor . . . is incapable of the impartial judgment required of a professional in the conduct of a case
under the Code.” 3 COLLIER ON BANKRUPTCY ¶ 327.04[2][a][iii][C]. While Epiq is not a creditor as defined in 11
U.S.C. § 101(10), Epiq stands to benefit monetarily from the case from something other than its professional fees.
Specifically, Epiq has a pecuniary interest in maximizing the volume of claims trades in a case to increase the
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CONCLUSION
For the reasons stated, Epiq may not be retained as the Clerk of Court’s claims agent to
the extent the terms of the Access Agreement apply to the claims register in this case.
Dated: New York, New York
August 18, 2022
/s/ Sean H. Lane
UNITED STATES BANKRUPTCY JUDGE
amount of the Fee. As the Court is denying the current retention on other grounds, however, it need not resolve the
question of disinterestedness.
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