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Hearing Date and Time: November 22, 2011 at 3 p.m.

BAKER & HOSTETLER LLP Geraldine Ponto 45 Rockefeller Plaza New York, New York 10111 Telephone: (212) 589-4200 Facsimile: (212) 589-4201 Attorneys for Bimbo Foods, Inc. and Bimbo Hungria Company, the U.S. Branch of Bimbo Hungria, Zrt., a Hungarian corporation UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: Case No. 11-2790 (MG) SIPA MF GLOBAL, INC. Debtor. BIMBO FOODS, INC. AND BIMBO HUNGRIA COMPANYS LIMITED OBJECTION TO MOTION FOR ORDER AUTHORIZING THE APPOINTMENT OF AN OFFICIAL COMMITTEE OF COMMODITY BROKER CUSTOMERS AND APPROVING COMPENSATION OF ALLOWED FEES AND EXPENSES OF COMMITTEE PROFESSIONALS Bimbo Foods, Inc. and Bimbo Hungria Company, the U.S. Branch of Bimbo Hungria, Zrt., a Hungarian corporation (collectively, BFI), by and through its undersigned counsel, respectfully submits this limited objection (the Limited Objection) to the Motion for Order Authorizing the Appointment of an Official Committee of Commodity Broker Customers and Approving Compensation of Allowed Fees and Expenses of Committee Professionals filed on November 15, 2011 (the Motion) [ECF No. 161] by certain individual commodity broker

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customers1 (the Movants) of MF Global, Inc. (MFGI), and respectfully represents as follows: BACKGROUND 1. MFGI is a futures commission merchant, a U.S. broker-dealer and a member of

the Securities Investor Protection Corporation (SIPC). 2. On October 31, 2011 (the "Filing Date"), upon the complaint and application of

SIPC, the United States District Court for the Southern District of New York (Engelmayer, J.) entered an order commencing the liquidation proceeding of MFGI under the Securities Investor Protection Act of 1970, as amended, 15 U.S.C. 78aaa et seq. (SIPA), appointing James W. Giddens as trustee (the Trustee), and removing the MFGI SIPA proceeding to this Court. 3. According to the Motion, on November 7, 2011, a group of commodity broker

customers, who cleared their commodity trades through MFGI, formed an ad hoc committee to protect their interests in MFGIs SIPA proceeding. See Motion, 4 at 3 and 4. 4. On the Filing Date, BFI was a commodities customer of MFGI. Since the Filing

date, all of BFIs commodities positions have been transferred from MFGI either pursuant to the bulk transfer put in place by the Trustee and approved by Order of this Court dated November 2, 2011 (Bulk Transfer) [ECF No. 14], or to a commodities broker independently identified by BFI. At the present time, the Trustee has retained all of BFIs collateral relating to approximately 21% of BFIs commodities positions that BFI transferred independently to ABN AMRO on November 1, 2011, before the Trustee gave notice of the Bulk Transfer. The Trustee also is holding a percentage of the collateral relating to the remaining 79% of BFIs commodities positions transferred with the Bulk Transfer.
The Movants are David Rosen, Daniel Shak, Gary Parziale, Michael Caponiti and David Kotz, commodities customers of MFGI, and constitute the steering committee for an ad hoc group of commodity customers, as detailed below. See Motion, n.1.
1

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LIMITED OBJECTION TO AD HOC COMMITTEES MOTION 5. The Motion seeks entry of an order (i) authorizing the appointment of an official

committee of commodity broker customers of MFGI, and (ii) approving the allowance and payment of the fees and expenses of the customer committees professionals as administrative expenses of the commodity customer property estate. See Motion, 5 at 4. The Motion relies upon sections 105, 503 and 705 of the Bankruptcy Code as statutory support for the relief sought. 6. Section 705 of the Bankruptcy Code allows for the selection of a committee of

unsecured creditors in a liquidation case under chapter 7 of the Bankruptcy Code. It provides: (a) At the meeting under section 341(a) of this title, creditors that may vote for a trustee under section 702(a) of this title may elect a committee of not fewer than three, and not more than eleven, creditors, each of whom holds an allowable unsecured claim of a kind entitled to distribution under section 726(a)(2) of this title. (b) A committee elected under subsection (a) of this section may consult with the trustee or the United States trustee in connection with the administration of the estate, make recommendations to the trustee or the United States trustee respecting the performance of the trustees duties, and submit to the court or the United States trustee any question affecting the administration of the estate. 11 U.S.C. 705(a) and (b). 7. Section 705 does not provide for compensation for a creditors committee under

chapter 7 of the Bankruptcy Code. See Id. The Ninth Circuit Court of Appeals has held that [t]he legislative history of section 705 confirms that the omission of a compensation provision for a Chapter 7 creditors committee attorney was intentional. In re Dominelli, 788 F.2d 584, 586 (9th Cir. 1986)(citing Notes of Committee on Judiciary, S.Rep. No. 989, 95th Cong., 2d Sess. 94, reprinted in 1978 U.S.Code Cong. & Ad.News, 5787, 5880). 8. If section 705 of the Bankruptcy Code does not permit a creditors committees

professionals to be compensated from the estate, section 105(a) cannot provide that support.

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Section 105(a) of the Bankruptcy Code does not empower the Bankruptcy Court to create substantive rights not otherwise provided for under applicable law. In re Park South Securities, LLC. 326 B.R. 505, 514 (Bankr. S.D.N.Y., 2005); New England Dairies, Inc. v. Dairy Mart Convenience Stores, Inc. ( In re Dairy Mart Convenience Stores, Inc.), 351 F.3d 86, 9192 (2d Cir.2003). 9. The Motion acknowledges that section 705 of the Bankruptcy Code does not

expressly authorize the allowance and payment of the fees and expenses of a committee appointed in a chapter 7 case. See Motion, 16. The Movants argue nonetheless that the Court has the power to authorize such compensation under sections 766(h) and 507(a)(2) of the Bankruptcy Code. Those sections provide generally that allowed net equity claims of customers shall receive a ratable distribution of customer property in priority to all other allowed claims, except administrative expenses allowed under section 503(b) of the Bankruptcy Code. See 11 U.S.C. 507(a)(2) and 766(h). 10. Section 503(b) of the Bankruptcy Code accords a first-priority administrative

expense to compensation and reimbursement of expenses awarded under section 330(a) of the Bankruptcy Code. 11 U.S.C. 503(b)(2). Section 330(a) applies only to professional persons employed under sections 327 or 1103 of the Code. Section 327 applies to professionals employed by the Trustee, which is patently not applicable to professionals retained by Movants. Moreover, inasmuch as this is a liquidation proceeding conducted under chapters 1, 3 and 5 and 7 of the Bankruptcy Code, to the extent not inconsistent with SIPA,2 15 U.S.C. 78fff(b), section 1103 is equally inapplicable. Section 503(b), in relevant part, provides that the actual and necessary expenses of a creditor that recovers property for the benefit of the estate, after the

There is no counterpart in SIPA to section 705 of the Bankruptcy Code that would permit the selection of a creditors committee in a SIPA liquidation.

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Courts approval, and the reasonable compensation of an attorney or accountant employed by such a creditor, may be allowed. 11 U.S.C. 503(b)(3)(B) and (b)(4). However, the Trustee is charged with recovering any property transferred or concealed by MFGI. See 11 U.S.C. 544, 547, 548, 550 and 551; 15 U.S.C. 78fff-2(c)(3). Even if a committee could be officially recognized in a SIPA liquidation absent statutory authority under SIPA, a committee could not exercise a trustees power to avoid and recover property. Under section 705(b) of the Bankruptcy Code, the role of a committee in a liquidation case is merely to consult with the trustee, make recommendations to the trustee and U.S. Trustee, and submit questions concerning administration to the court or U.S. Trustee. 11 U.S.C. 705(b). A committee that makes a substantial contribution in a case under chapter 9 or chapter 11 of the Bankruptcy Code, and any attorney or accountant employed by such a committee, may be compensated from the estate. 11 U.S.C. 503(b)(3)(D) and (b)(4). On the face of those statutes, they also do not apply in a liquidation case. Accordingly, none of the statutory authority relied upon by the Movants supports their right to obtain recognition as an official committee or be compensated from customer property. 11. Analyzing the decisional authority relief upon by Movants, none of the cases

Movants cite supports recognition of the formation of an official committee in a SIPA liquidation or compensation for a committee from customer property. See In re Property Lyons Transp. Lines, Inc., 162 B.R. 460 (Bankr. W.D.Pa., 1994) (counsel to a creditors committee appointed in a chapter 11 case allowed compensation from the estate for services rendered after the case converted to a liquidation under chapter 7 because the Court had previously ordered that it should remain intact to provide services post-conversion and continue to bear responsibility for the course of the case functioning as special counsel to the trustee); In re Wonder Corp. of

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America, 72 B.R. 580 (Bankr. D.Conn.,1987) (permitting payment of fees to counsel for a chapter 11 creditors committee post-conversion to chapter 7 pursuant to prior court order allowing fees). 12. In a SIPA liquidation, SIPC has exclusive discretion to specify who shall serve as

attorney for the Trustee. 15 U.S.C. 78eee(b)(3). Compensation for services rendered and reimbursement of expenses incurred by the SIPA Trustee and professionals employed by the Trustee are governed by 15 U.S.C. 78eee(b)(5). Allowances to the Trustee and professionals employed by the Trustee are charged against the general estate of the debtornot against customer property. 15 U.S.C. 78eee(b)(5)(E). 13. Under the CFTCs regulations, in determining a customers allowed net equity

claim, [d]isbursements to or on behalf of the customer and [t]he normal costs attributable to the payment of commissions, brokerage, interest, taxes, storage, transaction fees, insurance and other costs and charges lawfully incurred in connection with the purchase, sale, exercise, or liquidation of any commodity contract are to be deducted from the ledger balance of the customer account. In re Stotler and Co., 1991 WL 158889, at *2 (N.D. Ill. 1991)(quoting 190.07(b)(1)(B)( 1 )-( 3 )). The court in Stotler and Co. also explained that that the intent to favor the customer could not be clearer. In re Stotler and Co., 144 B.R. 385, 392 (N.D. Ill. 1992) (citing 17 C.F.R. 190.07, 190.08(a)(1)(ii)(J) (1991) (a customer's claim is limited to her net equity, defined to exclude commissions owed, but the estate's other funds are to be tapped to satisfy in full all claims of public customers.)). The fees and expenses incurred by professionals retained by a customer committee are not lawful costs that are factored into the determination of a customers allowed net equity claim. Such fees and expenses, therefore, may not be charged to any customer.

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14.

In light of the above, there is no authority, statutory or otherwise, that permits the

Courts recognition of an official committee in a SIPA liquidation or ratably charging BFIs customer property for the fees and reimbursable expenses of such a committee. 15. It would appear, therefore, that the fees and expenses of the professionals to the

ad hoc customer committee must be paid by the members of that committee. If absent statutory or other authority, the ad hoc committee seeks the allowance and payment of compensation, such reasonable fees and reimbursable expenses could only be paid from a general estate, if any, and not be charged ratably against customer property. WHEREFORE, for the reasons set forth above, BFI respectfully requests that this Court enter an order: (i) denying any compensation of fees and expenses of the ad hoc customer committees professionals as administrative expenses of the commodity customer property estate, and (ii) granting such other and further relief as this Court deems to be just and proper under the circumstances.

Dated: New York, New York November 21, 2011

BAKER & HOSTETLER LLP By: s/Geraldine Ponto Geraldine Ponto 45 Rockefeller Plaza, New York, New York 10111 Telephone: (212) 589-4200 Facsimile: (212) 589-4201 E-mail: gponto@bakerlaw.com Attorneys for Bimbo Foods, Inc. and Bimbo Hungria Company the U.S. Branch of Bimbo Hungria, Zrt., a Hungarian corporation