10000001118

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE

In re: )
)
CORDILLERA GOLF CLUB, LLC,
1
) Case No. 12-11893 (CSS)
dba The Club at Cordillera, )
) Chapter 11
Debtor. )
) Hearing Date: To be determined.
Obj. Deadline: To be determined.

MOTION OF CHERYL M. FOLEY, THOMAS WILNER,
JANE WILNER, CHARLES JACKSON, MARY JACKSON AND KEVIN
B. ALLEN, INDIVIDUALLY AND AS REPRESENTATIVES OF A
CERTIFIED CLASS OF MEMBERS, TO TRANSFER VENUE

Cheryl M. Foley, Thomas and Jane Wilner, Charles and Mary Jackson and Kevin B.
Allen, as representatives of a certified class in Case Number 11CV552, pending in the District
Court of Eagle County, Colorado (collectively, Member Representatives), by their attorneys
Appel & Lucas, P.C. and Richards, Layton & Finger, P.A., hereby move the court to transfer
venue of this case to the District of Colorado. This motion (this Motion) is supported by the
Declaration of Cheryl M. Foley, which is attached hereto as Exhibit A. In support of this
Motion, the Member Representatives state as follows.
INTRODUCTION
Cordillera is a residential community located in the heart of the Vail Valley in Eagle
County, Colorado. Except for the fact that the Debtor is incorporated in Delaware, everything
about the case is centered in Colorado. The Cordillera community consists of several hundred
single family homes. Integrated with the homes throughout the Cordillera community are a

1
The Debtor in this chapter 11 case, and the last four digits of its employer identification number, is Cordillera Golf
Club, LLC (1317). The address of the Debtors corporate headquarters is 97 Main Street, Suite E202, Edwards, CO
81632.
2

variety of recreational amenities, including golf courses, restaurants, swimming pools and the
like. The Debtor, Cordillera Golf Club, LLC (the Debtor), owns the recreational amenities in
the Cordillera community.
The Debtor and the homeowners, including the Member Representatives, are inextricably
bound to one another. The amenities owned by the Debtor greatly affect the value of the
homeowners homes and lifestyle. Moreover, the homeowners are the primary members of the
Cordillera Club and hence its primary source of revenue. More than 600 Cordillera homeowners
are or were members of the Debtor's club and each paid a substantial deposit to join, which the
Debtor is contractually obligated to repay to the member. The members are the most numerous
creditors of Debtor and, in aggregate, by far the largest.
Unfortunately for everyone involved, the relationship between the Debtor and its major
constituents has become greatly strained over the past few years. That has resulted in ongoing
litigation between the Debtor and different groups of members, concerning a variety of different
issues. The Member Representatives are the court certified representatives of the members in the
litigation. The deteriorating relationship has also lead to disputes between the Debtor and its
principal lender, Alpine Bank.
The issues arising in this case are of a uniquely local character, affecting the entire
Cordillera Community. The Debtor filed its Chapter 11 case in Delaware, although venue was
clearly proper in Colorado, with the transparent purpose of making it more difficult and
expensive for the major constituencies affected by the Debtors operation of the Cordillera
amenities, to have a meaningful role and voice in the Chapter 11 case. For the reasons argued in
this Motion, venue should be transferred to Colorado, where all the voices can more easily and
economically be heard.
3

BACKGROUND FACTS
The Debtor filed this Chapter 11 case on June 26, 2012. No statutory committees have
been formed, and no trustee or examiner has been appointed. There has been one brief hearing
on several first day motions. No other matters have been considered by the Court.
The Debtor is a Delaware limited liability Company. Other than being the State under
whose laws the Debtor was formed, this bankruptcy case has no connection whatsoever to
Delaware. The Debtors only place of business is in Edwards, Colorado. The Debtor owns and
operates The Club at Cordillera (the Club), located in the Vail Valley. This is the Debtors
only asset and only business. The Club comprises four golf courses and the Trailhead and
Summit Facilities. The Mountain, Summit and Valley Course facilities each also have
restaurants, with the Timber Hearth restaurant at the Mountain Course being the Clubs main
restaurant. The Valley Course facilities include a swimming pool and two tennis courts. The
Short Course is a ten-hole golf course with a driving range and putting greens. The Trailhead
Facility comprises a family lodge including a great room, exercise area, locker rooms and
swimming pools. The Summit Club Facility includes a meeting room, an exercise room, two
tennis courts and a swimming pool and jacuzzi. The foregoing are referred to collectively as the
Club Facilities.
The Member Representatives, Cheryl Foley, Thomas and Jane Wilner, Charles and Mary
Jackson and Kevin Allen, are court-appointed representatives of a certified class of club
members in Case Number 11CV552, pending in the District Court of Eagle County, Colorado.
There are approximately 609 members of the class and they hold non-contingent unsecured
claims against the Debtor for deposits paid and which the Debtor is obligated to pay back that
4

total $62,092,000. A couple of the deposits are only $7,500, but the vast majority are $20,000
(for social memberships) and above (for full golf memberships). The deposit claims average
approximately $103,000. The largest individual member deposit claim is $205,000. The
smallest is $20,000. The member deposit claims are by far the largest claims in this case,
dwarfing all other secured and unsecured creditors. The majority of the class members own a
home in Colorado that is adjacent to the Club facilities.
The Member Representatives have been involved in state court litigation (Class Action
Lawsuit) with the Debtor and parties related to the Debtor. A copy of the Third Amended
Complaint in the Class Action Lawsuit is attached hereto as Exhibit B. Among other things, the
Class Action Lawsuit seeks redress for the Debtors violation of the express commitments it
made to induce members to pay 2011 dues and the subsequent misuse of the dues that were then
paid. An affiliate of the Debtor attempted to remove the Class Action Lawsuit to Federal Court.
However, the lawsuit was recently remanded by the Federal District Court in Denver to the Eagle
County District Court.
The Class Action Litigation has given rise to sanctions against the Debtor and other
Defendants for their failure to produce required discovery and contempt proceedings against the
Debtor and other Defendants for their blatant and repeated violation of a temporary restraining
order entered by the State Court. A copy of the Motion regarding that matter is also attached
hereto as Exhibit C. The Court issued an order to show cause why the Defendants, including the
Debtor, should not be held in contempt and that matter is set for hearing on July 20, 2012, in
Colorado, although it will not proceed against the Debtor.
The Debtor has not yet filed its liability Schedules pursuant to Bankruptcy Rule 1007(b).
However, it has filed its list of Twenty Largest Unsecured Creditors and a creditor matrix.
5

Remarkably, the Debtor neglected to list any member on its Schedule of Twenty Largest
Unsecured Creditors, despite the fact that the members non-contingent, undisputed and
liquidated deposit claims are each greater than all but one of the parties the Debtor lists as its
twenty largest unsecured creditors. The Debtor should have shown the members non-contingent
claims for return of their deposits as at least nineteen of the twenty largest unsecured creditors.
Looking at the list of Twenty Largest Creditors, as filed by the Debtor, the claims range from
about $65,000 for personal property taxes to about $5,000 for a motor parts vendor. Half of the
listed twenty largest unsecured creditors are located in Colorado and consist primarily of local
suppliers, vendors and utilities.
ARGUMENT
The United States Bankruptcy Court for the District of Colorado is the proper forum for
this bankruptcy case. Pursuant to 28 U.S.C. 1412, transferring the venue of this bankruptcy
case to Colorado would serve the interests of justice and the convenience of the parties for the
following reasons:
(a) The only assets of the Debtor are the Club Facilities which are located in
Colorado;

(b) the day-to-day business operations of the Debtor occurs only in Colorado;

(c) Nearly all of the representatives of the Debtor and of the major creditor
constituencies are located in Colorado and allowing the case to remain in
Delaware will unnecessarily increase the costs of administration and the
cost to individual creditors;

(d) the majority of creditors are located in Colorado, including the Debtors
secured Creditor, Alpine Bank;

(e) The agreements between the Debtor and most of its creditors are governed
by and will need to apply Colorado law;

(f) there is ongoing litigation pending in Colorado;
6

(g) Colorado law governs many important issues involving the Debtor and the
Club operations; and

(h) The only basis the Debtor had for filing this case in Delaware was the fact
that the Debtor is a Delaware limited liability company;
The convenience of the parties and the interests of justice require that venue of this
bankruptcy case should be transferred to the United States Bankruptcy Court for the District of
Colorado.
Applicable Statutes
Venue for bankruptcy cases is governed by 28 U.S.C. 1408, which provides:
Except as provided in section 1410 of this title, a case under title
11 may be commenced in the district court for the district --

(1) In which the domicile, residence, principal place of business in
the United States, or principal assets in the United States, of the person or
entity that is the subject of such case have been located for the one
hundred and eighty days immediately preceding such commencement, or
for a longer portion of such one-hundred-and eighty-day period than the
domicile, residence, or principal place of business, in the United States, or
principal assets in the United States, of such person were located in any
other district; or

(2) In which there is pending a case under title 11 concerning such
person's affilliate, general partner, or partnership.

In its Petition the Debtor asserts that venue is proper in the District of Delaware because
it is the Debtors domicile. See, e.g., In re Innovative Communication Co., 358 B.R. 120, 125
(Bankr. D. Del. 2006) ("Venue is appropriate in the state of incorporation"). Although this may
be a proper basis for venue of a bankruptcy case, that is not the end of the inquiry.
Even when venue is proper under 28 U.S.C. 1408, a court may transfer venue in the
interest of justice or for convenience of the parties pursuant to 28 U.S.C. 1412. In re B.L. of
Miami, Inc., 294 B.R. 325, 328 (Bankr. D. Nev. 2003). See also, Fed. R. Bankr. P. 1014(a)(1).
7

28 U.S.C. 1412 provides: A district court may transfer a case or proceeding under title 11 to a
district court for another district, in the interest of justice or for the convenience of the parties.
The venue transfer provision is thus disjunctive, permitting the transfer of venue of a case either
because of the interest of justice or for the convenience of the parties. See In re Pinehaven
Associates, 132 B.R. 982, 989-90 (Bankr. E.D.N.Y. 1991).
The burden of proof in connection with a motion to transfer venue is with the moving
party. In re Centennial Coal, Inc., 282 B.R. 140, 143-44 (Bankr. D. Del. 2002)("Although the
moving party bears the burden of demonstrating by a preponderance of the evidence that a
transfer is appropriate, the ultimate decision to transfer venue lies within the sound discretion of
the bankruptcy court.").
Applicable Case Law
On motion to transfer venue, the place of the debtors incorporation is not the controlling
factor. Innovative Communication, supra, 358 B.R. at 127. It is instead just one of many factors
to be considered. The interest of justice ground of 1412 is a broad and flexible standard that is
applied based on the unique facts of each case. In applying that standard, the Court must
consider whether a transfer of venue will promote the efficient administration of the bankruptcy
case, promote judicial economy and fairness to the parties. In re Manville Forest Products Corp.
896 F.2d 1384, 1391 (2d Cir. 1990); See In re Eclair Bakery Ltd, 255 B.R. 121, 141 (Bankr.
S.D.N.Y. 2000) (interests of justice is "a broad and flexible standard that must be applied on a
case by case basis"); In re Condor Exploration, LLC, 294 B.R. 370, 378 (Bankr. D. Colo. 2003)
("When considering the interests of justice standard for purposes of determining whether to
transfer the venue of a bankruptcy case, the court applies a broad and flexible standard,
8

considering whether the transfer of venue will promote the efficient administration of the estate,
judicial economy, timeliness, and fairness.").
The factors courts often consider when evaluating the convenience of parties include the
proximity of creditors of every kind to the court, the proximity of the debtor, the proximity of
witnesses who are necessary to the administration of the estate, the location of the debtor's assets,
the economic administration of the estate, and the necessity for ancillary administration in the
event of liquidation. Innovative Communication, 358 B.R. at 126 (citing In re Commonwealth
Oil Refining Co., 596 F.2d 1239, 1247 (1979). These factors are both related to the private
interests of the parties and the public interests. Id.
When considering the alternative ground for a transfer of venue, the convenience of the
parties, courts typically evaluate the following factors: (1) the proximity of creditors to the
Court; (2) the proximity of the debtor; (3) the proximity of the witnesses necessary to the
administration of the estate; (4) the location of the assets; (5) the economic administration of the
estate; and (6) the necessity for ancillary administration if liquidation is needed. In re
Commonwealth Oil Ref. Co., 596 F.2d 1239, 1247 (5th Cir. 1979); see also, In re Boca Raton
Sanctuary Associates, 105 B.R. 273, 274 (Bankr. E.D. Pa. 1989).
In determining whether to transfer venue of a particular case, the Third Circuit has
identified factors to determine whether "on balance the litigation would more conveniently
proceed and the interests of justice be better served by transfer to a different forum." Jumara v.
State Farm Insurance Co., 55 F.3d 873, 879 (3d Cir. 1995) (determining standard for transfer of
venue under 28 U.S.C. 1404); see also In re Innovative Commun. Co., LLC, 358 B.R. 120, 126
(Bankr. D. Del. 2006) (applying the Jumara test to approve a transfer of venue of Chapter 11
proceedings under 28 U.S.C. 1412 and Fed. R. Bankr. P. 1014). These factors include:
9

1) plaintiff's choice of forum; 2) defendant's forum preference; 3)
whether the claim arose elsewhere; 4) the location of books and
records and/or the possibility of viewing premises if applicable; 5)
the convenience of the parties as indicated by their relative
physical and financial condition; 6) the convenience of the
witnesses, but only to the extent that the witnesses may actually be
unavailable for trial in one of the fora; 7) the enforceability of the
judgment; 8) practical considerations that would make the trial
easy, expeditious, or inexpensive; 9) the relative administrative
difficulty in the two fora resulting from congestion of the courts'
dockets; 10) the public policies of the fora; 11) the familiarity of
the judge with applicable state law; and 12) the local interest in
deciding local controversies at home.

Giuliano v. Harko, Inc. (In re NWL Holdings, Inc.), 2011 Bankr. LEXIS 580 (Bankr. D. Del.
Feb. 24, 2011) (citing Jumara, 55 F.3d at 879-80).
Finally, most bankruptcy courts considering the issue have concluded that venue for a
case involving real estate should be in the state where the real estate is located. See, e.g., In re
B.L. of Miami, Inc., 294 B.R. 325, 332 (Bankr. D. Nev. 2003) ("Where a debtor's assets consist
solely of real property, as with Debtor in this case, courts 'have held that transfer of venue is
proper because "[m]atters concerning real property have always been of local concern and
traditionally are decided at the situs of the property."'); In re Pinehaven Assocs., 132 B.R. 982,
989 (Bankr. E.D.N.Y. 1991) ("There is ample authority for the proposition that a real estate case
... can be most efficiently and economically administered in the bankruptcy court closest to its
major asset, and that the Chapter 11 case can best unfold there."); Condor Exploration, 294 B.R.
at 379 (noting that venue should be in the jurisdiction where debtor's oil and gas leases are
located). See also In re Midland Associates, 121 B.R. 459, 462 (Bankr. E.D. Pa. 1990); In re
Oklahoma City Associates, 98 B.R. 194, 199 (Bankr. E.D. Pa. 1989). In nearly all of the real
estate cases where venue has been transferred, the venue selected by the Debtor was remote from
the location of the real estate.
10

Application of Factors
Several courts have observed that when considering the factors in analyzing the two
separate statutory grounds for transferring venue, the interest of justice and the convenience of
the parties, there is often considerable overlap. See In re Laguardia Assocs., L.P., 316 B.R. 832,
839 (Bankr. E.D. Penn. 2004), citing Matter of Continental Airlines Inc., 133 B.R. 585, 587-88
(Bankr. D. Del. 1991). Therefore, to avoid repetition, the factors are often considered together.
That is the approach taken below.
(a) Matters of Local Concern to Colorado Predominate in this Case.
The Cordillera Club is not merely a country club, it is a community that is home to its
many members. The management and financial problems that have beset the Cordillera
community in the past couple of years have affected the members more than any other
constituency and have affected livability of the community and the value of the members homes
in Cordillera. These are issues of distinctly local concern. The interests of justice favor venue
in the jurisdiction whose substantive law governs the issues in the case. See, e.g., DHP
Holdings II Corp. v. The Home Depot, Inc. (In re DHP Holdings II Corp.), 435 B.R. 264, 275-76
(Bankr. D. Del. 2010).
Delaware bankruptcy courts have consistently held that a debtor's choice of forum must
give way to the interests of justice and convenience of the parties when other relevant factors
favor venue in another jurisdiction. This is particularly so in a case like this where the Debtors
sole assets and business are located in Colorado. For example, in a recent ruling in this District
on a motion to transfer venue, the Court observed in the Allied Systems Holdings, Inc. case, Case
No. 12-11564(CSS) as follows if we had a hotel in Las Vegas that was being foreclosed on. I
mean, the case, arguably, very much should be in Nevada. If we have a piece of undeveloped
11

land in New Mexico, the case should be in New Mexico. Those are strong factors that would
push a case to one place or another. Transcript of Ruling, pp. 56-7, attached hereto as Exhibit
D. Similarly, in the Saab Cars of North American, Inc. case, Case No. 12-10344 (CSS), in
ruling on a motion to transfer venue of the case, the Court observed that So, for example, in a
real estate, single asset real estate case, you know, the management company may be in Dallas,
but the tract of land is in New Mexico. That case should be in New Mexico because land is
something really unique. Obviously, clearly land is unique. And the strongest interest for a piece
of property is where that property is. Transcript of hearing, pp. 26-7, attached hereto as Exhibit
E.
In this case, the most important factor for the Court to consider is that the Debtors assets
consist solely of real property and related personal property that is an integral part of the
Cordillera community located in Colorado. There can be little question that the bankruptcy case
therefore belongs in Colorado.
(b) Proximity of the Debtor.
Courts often look to the location of the debtors primary assets in analyzing the debtors
location. See B.L. of Miami, 294 B.R. at 331. In addition, Court typically determine a debtor's
principal place of business based upon an "operational test," which focuses on the location of the
debtors day-to-day activities. See Condor Exploration, 294 B.R. at 374. The Debtors' assets are
located solely in Colorado and its business operations are conducted solely in Colorado. The
Debtor has no assets or business operations in any location other than Colorado.
In addition, the Debtor has no connections to Delaware other than the fact that Delaware
is the State in which the Debtor was formed. Numerous cases have held that where the Debtors
single contact is its incorporation in the state and all its assets and operations are elsewhere, a
12

transfer of venue should be granted. See e.g., In re Dunmore Homes, Inc., 380 B.R. 663. 673
(S.D.N.Y 2008)(transferring venue and noting that the Debtors only connection to New York
was its state of incorporation and that it had sought financing there).
(c) Proximity of Witnesses.
Because Debtor's business, real estate and operations are located solely in Colorado and
many creditors are located in Colorado, the witnesses who can be expected to testify concerning
issues that will likely arise in connection with the case are located in Colorado. The Member
Representatives are not aware of any likely witness who is located in Delaware. Although the
Debtor has retained professionals in Delaware and California, the location of Debtors'
professionals is not entitled to any significant consideration on a motion to transfer venue. Son v.
Coal Equity, Inc. (In re Centennial Coal, Inc.), 282 B.R. 140, 146 (Bankr. D. Del. 2002)
(convenience of counsel is not relevant to the determination of whether to transfer venue).
(d) Most Creditors are Located in Colorado.
Overwhelmingly, the Debtors principal creditors are based in Colorado, including the
Debtors members and the Debtors principal secured creditor, Alpine Bank.
(e) The Estate can be Administered Most Efficiently in Colorado.
Based on the location of the Debtors' assets, creditors, and witnesses, including the fact
that the substantive law that will govern many of the issues in this case, this bankruptcy case will
be administered most efficiently in Colorado. There is also a substantial likelihood that a trustee
will be appointed in this case because of present managements fraud, dishonesty, incompetence
or gross mismanagement of the affairs of the Debtor. A Colorado trustee would be vastly more
efficient than a Delaware trustee. See In re Abacus Broadcasting Corp., 154 B.R. 682, 684
13

(Bankr. W.D. Tex. 1993) (noting the difficulty of a trustee administering assets in a distant
location).
This bankruptcy case is not a "national case." The case is clearly centered in Colorado.
In addition, this is not a large case. According to the Debtors most optimistic analysis, the value
of the Estates assets are, at best, $33 million. It will be far less expensive to administer the case
in Colorado, where most of the creditors are located and already have counsel, then in Delaware,
which is far from the locus of the Debtors assets and business.
CONCLUSION
The Debtor owns and operates a country club in Colorado. It has no connections to
Delaware, other than being its place of incorporation. This case unquestionably belongs in the
Colorado Bankruptcy Court, a much more convenient location that would facilitate involvement
by the parties most affected by the Debtors bankruptcy filing. The case satisfies each of the
standards that courts have applied in considering motions to transfer venue. No factors, other
than the State of incorporation, favor venue in Delaware. In the interest of justice and for the
convenience of the parties, the Court should exercise its discretion and transfer venue of this case
to Colorado.
14

WHEREFORE, for the above-mentioned reasons, the Member Representatives
respectfully request that this Court enter an order, substantially the form attached hereto as
Exhibit F, granting the relief requested herein and such other and further relief as the Court
deems just and proper.

Dated: July 3, 2012
Wilmington, Delaware

/s/ Zachary I. Shapiro
Mark D. Collins (No. 2981)
Zachary I. Shapiro (No. 5103)
RICHARDS, LAYTON & FINGER, P.A.
One Rodney Square
920 North King Street
Wilmington, Delaware 19801
Telephone: (302) 651-7700
Facsimile: (302) 651-7701
Email: collins@rlf.com
shapiro@rlf.com

- and -

Garry R. Appel
APPEL & LUCAS, P.C.
1660 17th Street, Suite 200
Denver, Colorado 80202
Telephone: (303) 297-9800
Email: Appelg@appellucas.com

Attorneys for the Member Representatives

RLF1 6214027v. 1

In re: )
)
1
) Case No. 12-11893 (CSS)
) Chapter 11
Debtor. )
) Hearing Date: To be determined.
Obj. Deadline: To be determined.

NOTICE OF MOTIONS AND HEARING

PLEASE TAKE NOTICE that, on July 3, 2012, Cheryl M. Foley, Thomas and Jane
Wilner, Charles and Mary Jackson and Kevin B. Allen, as representatives of a certified class in Case
Number 11CV552, pending in the District Court of Eagle County, Colorado (collectively, Member
Representatives), by their attorneys Appel & Lucas, P.C. and Richards, Layton & Finger, P.A.,
filed (i) the Motion of Cheryl M. Foley, Thomas Wilner, Jane Wilner, Charles Jackson, Mary
Jackson and Kevin B. Allen, Individually and as Representatives of a Certified Class of Members, to
Transfer Venue (the Venue Transfer Motion) and (ii) a motion to shorten the notice and objection
periods in connection with the Venue Transfer Motion (the Motion to Shorten) with the United
States Bankruptcy Court for the District of Delaware, 824 North Market Street, 3
rd
Floor,
Wilmington, Delaware 19801 (the Bankruptcy Court).
PLEASE TAKE FURTHER NOTICE that, if the Bankruptcy Court grants the relief
requested in the Motion to Shorten, (i) a hearing to consider the Venue Transfer Motion will be held
before The Honorable Christopher S. Sontchi, United States Bankruptcy Judge for the District of
Delaware at the Bankruptcy Court, 824 N. Market Street, 5
th
Floor, Courtroom 6, Wilmington,
Delaware 19801 on a date to be set by the Bankruptcy Court (the Hearing Date), and (ii) a

1
81632.

2
RLF1 6214027v. 1
deadline will be set by the Bankruptcy Court by which parties-in-interest may object to the relief
requested in the Venue Transfer Motion (the Objection Deadline). You will receive separate
notice of the Hearing Date and Objection Deadline once set by the Bankruptcy Court.

Dated: July 3, 2012
Wilmington, Delaware
/s/ Zachary I. Shapiro
Mark D. Collins (No. 2981)
Zachary I. Shapiro (No. 5103)
RICHARDS, LAYTON & FINGER, P.A.
One Rodney Square
920 North King Street
Telephone: (302) 651-7700
Facsimile: (302) 651-7701
Email: collins@rlf.com
shapiro@rlf.com

- and -

Garry R. Appel
APPEL & LUCAS, P.C.
1660 17th Street, Suite 200
Denver, Colorado 80202
Telephone: (303) 297-9800
Email: Appelg@appellucas.com

Attorneys for the Member Representatives

Exhibit A

RLF1 6210385v. 3

In re: )
)
1
) Case No. 12-11893 (CSS)
) Chapter 11
Debtor. )

DECLARATION OF CHERYL M. FOLEY

I, Cheryl M. Foley, declare under penalty of perjury, the following:

1. I am, among other things, a resident of Edwards, Colorado, one of the Member
Representatives
2
and Club Members (as defined below). In such capacities, I am familiar
with Cordillera Golf Club, LLC, a Delaware limited liability company and the debtor in
the above-captioned case (the Debtor), including its business, operations, assets and
liabilities. Unless otherwise stated, I have personal knowledge of the facts stated herein.

2. I have read, and am familiar with, the Motion, which I incorporate herein by reference.

3. Cordillera is a residential community located in Edwards, Colorado (the Community),
which consists of several hundred single family homes.

4. The Debtor owns and operates the Club at the Community (the Club), which consists
of certain recreational amenities in the Community, including, among other things, golf
courses, restaurants and swimming pools. The Debtors only assets and principal and
only place of business are located in Edwards, Colorado.

5. The Member Representatives (as defined in the Motion) are court-appointed
representatives of a certified class of the Clubs members in Case Number 11VC552,
pending in the District Court of Eagle County, Colorado (the Class Action Litigation).
3

1
81632.
2
Capitalized terms used herein and not otherwise defined have the meanings given to them in the Motion of Cheryl
M. Foley, Thomas Wilner, Jane Wilner, Charles Jackson, Mary Jackson and Kevin B. Allen, Individually and as
Representatives of a Certified Class of Members, to Transfer Venue (the Motion).
3 A copy of the Third Amended Complaint in the Class Action Litigation is attached to the Motion as Exhibit B
thereto. The Class Action Litigation, among other things, seeks redress for the Debtors violations of the express
commitments it made to induce the Club Members (as defined herein) to pay 2011 dues and the subsequent misuse
of the dues that were then paid. The Class Action Litigation has also given rise to sanctions against the Debtor and
other defendants for their failure to produce required discovery and contempt proceedings against the Debtor and
other defendants for their blatant and repeated violations of a temporary restraining order entered by the State Court.
A copy of the motion regarding that matter is attached to the Motion as Exhibit C thereto. The State Court issued an

2
RLF1 6210385v. 3
The Class Action Litigation has 609 class members, including the Member
Representatives (collectively, the Club Members). The majority of the Club Members
own a home in Edwards, Colorado that is adjacent and/or in very close proximity to the
Club.

6. In order to be accepted into the Club, all Club Members were required to, among other
things, sign an agreement (collectively, the Membership Agreements) and deposit
funds with the Debtor (collectively, the Deposits). The average amount of the Deposits
is $103,000 but the amount of the Deposits ranges from $7,500 to $205,000. Upon
information and belief, all of the Club Members hold non-contingent unsecured claims
against the Debtor on account of the Deposits in the aggregate amount of $62 million and
the Club Members are, by far, the Debtors largest creditors.

7. Upon information and belief, (i) nearly all of the Debtors representatives and creditors
are located in, or have strong connections with, Colorado, including, among others, the
Club Members and the Debtors prepetition secured creditor, Alpine Bank Vail, and (ii)
none of the Debtors representatives and creditors are located in, or have any significant
connections with, Delaware.

8. Upon information and belief, the Debtor is party to numerous agreements, including the
hundreds of Membership Agreements, which are governed by Colorado law.

9. Upon information and belief, the Debtor has no connections with Delaware other than the
fact that Delaware is the state in which it was formed.

Dated: July 3, 2012 /s/ Cheryl M. Foley
Name: Cheryl M. Foley
Title: Member Representative and Club Member

order to show cause why the Debtor and other defendants should not be held in contempt and that matter is set for
hearing on July 20, 2012, in Colorado, although it will not proceed against the Debtor.

Exhibit B
District Court, Eagle County, Colorado
P. O. Box 597, Eagle, Colorado 81631
_____________________________________________
Plaintiffs: CHERYL M. FOLEY, THOMAS WILNER,
JANE WILNER, CHARLES JACKSON and
MARY JACKSON and KEVIN B. ALLEN individually and
on behalf of all others similarly situated,
v.
Defendants:
CORDILLERA GOLF CLUB, LLC, a Delaware
limited liability company; CORDILLERA GOLF
HOLDINGS, LLC, a Delaware limited liability company;
CORDILLERA F & B, LLC, a Delaware limited liability
company; WFP CORDILLERA, LLC, a Delaware limited
liability company; WFP INVESTMENTS, LLC, a Delaware
limited liability company; CGH MANAGER, LLC, a
Delaware limited liability company; DAVID A. WILHELM,
individually; and PATRICK WILHELM, individually
v.
Intervenor-Defendant/Counterclaimant and
Cross-Claimant: ALPINE BANK
_____________________________________________
Attorney for Plaintiffs
Brett Steven Heckman
HECKMAN & OCONNOR, P.C.
P. O. Box 726
Edwards, Colorado 81632
Tel.: (970) 926-5991
Fax: (970) 926-5995
Reg. No. 15330
Allan L. Hale, No. 14885
Peter J. Krumholz, No. 27741
Hale Westfall, LLP
1445 Market St., Suite 300
Denver, CO 80202
Tel.: (720) 904-6010
Fax: (720) 904-6020
COURT USE ONLY
Case Number: 2011CV552
Division: ______
EFILED Document
CO Eagle County District Court 5th JD
Filing Date: Dec 15 2011 3:03PM MST
Filing ID: 41427113
Review Clerk: Karen Frederick
THIRD AMENDED CLASS ACTION COMPLAINT
Plaintiffs, through counsel, bring this class action under C.R.C.P. 23 on behalf of
members of The Club at Cordillera (the Club), and complain against defendants as follows:
FIRST CLAIM FOR RELIEF
(Breach of Contract Class and Subclass)
1. Plaintiff Cheryl M. Foley is a resident of Edwards, Colorado.
2. Plaintiff Thomas Wilner is a resident of Washington, D.C.
3. Plaintiff Jane Wilner is a resident of Washington, D.C.
4. Plaintiff Charles Jackson is a resident of Lincolnshire, Illinois.
5. Plaintiff Mary Jackson is a resident of Lincolnshire, Illinois.
6. Plaintiff Kevin B. Allen is a resident of Cherry Hills Village, Colorado.
7. Defendant Cordillera Golf Club, LLC (CGC) is a Delaware limited liability
company with its principal place of business in Edwards, Colorado.
8. Defendant WFP Cordillera, LLC (WFP) is a Delaware limited liability
company with its principal place of business in Edwards, Colorado.
9. Defendant Cordillera Golf Holdings, LLC ("Holdings"), is a Delaware limited
liability company with its principal place of business in Edwards, Colorado. Upon
information and belief, Holdings has an ownership interest in the Club Facilities as the "Club
Facilities" are described in paragraph 13 hereinbelow.
10. Defendant Cordillera F & B, LLC ("F & B") is a Delaware limited liability
company with its principal place of business in Edwards, Colorado. Upon information and
belief, F & B has an ownership interest in the Club Facilities as the "Club Facilities" are
described in paragraph 13 hereinbelow.
11. WFP Investments, LLC, is a Delaware limited liability company and is
signatory to Alpine Bank loan documents relating to defendants acquisition of The Club at
Cordillera.
12. CGH Manager, LLC, is a Delaware limited liability company and is signatory
to Alpine Bank loan documents relating to defendants acquisition of The Club at Cordillera.
13. Defendant David A. Wilhelm resides in Basalt, Colorado.
14. Defendant Patrick Wilhelm at pertinent times resided in Edwards, Colorado. .
15. David A. Wilhelm and Patrick Wilhelm are referred to collectively as the
Wilhelms. Upon information and belief, and subject to discovery, Patrick Wilhelm is a
beneficiary of a trust arrangement that may be financially responsible for the wrongdoing
asserted herein.
16. CGC owns and operates The Club at Cordillera (the Club). The Club
comprises four golf courses and the Trailhead and Summit Facilities. The Mountain,
Summit and Valley Courses are each 18-hole championship golf courses with clubhouses,
locker rooms, golf shops and grille rooms. The Mountain and Valley Course facilities each
also have restaurants. The Valley Course facilities include two tennis courts. The Short
Course is a ten-hole golf course with a driving range and putting greens. The Trailhead
Facility comprises a family lodge including a great room, exercise area, locker rooms and
swimming pools. The Summit Club Facility includes a meeting room, an exercise room, two
tennis courts and a swimming pool and jacuzzi. The foregoing are referred to collectively as
the Club Facilities.
17. Upon information and belief, WFP is the manager and sole member of CGC,
Holdings and F & B. Upon information and belief, David A. Wilhelm and Patrick Wilhelm
are, or at pertinent times were, members of WFP, and at pertinent times shared management
responsibilities for the Club.
18. Upon information and belief, at pertinent times, WFP, Holdings, F & B,
David Wilhelm and Patrick Wilhelm were in positions of management and control of CGC
and the Club, and in fact exercised management responsibilities and control over CGC and
the Club in connection with matters set forth herein. The roles of WFP Investments, LLC
and CGH Manager, LLC are not yet fully known. Defendants are fiduciaries to plaintiffs and
all members of the Club ("Club Members").
19. Plaintiffs are Club Members. Plaintiffs and all Club Members paid
membership deposits upon joining the Club. Upon acceptance into the Club, each Club
Member was required to sign an agreement (the Membership Agreement) and deposit
funds in amounts as large as $175,000 (Membership Deposits) with the promise and
expectation of being provided the highest quality amenities and use of all Club Facilities.
Pursuant to the Membership Agreement and other membership documents described
hereinbelow, the Membership Deposits are refundable and as such are liabilities of
defendants and, upon information and belief, exceed $100 million.
20. The rights of Club Members are stated in the Membership Plan, which the
Club Members relied upon in joining the Club and paying the substantial deposits that were
required for them to join. The Club and the Club Members are bound by the terms and
conditions of the Membership Plan.
21. The Membership Plan explicitly provides that Club Members, such as
plaintiffs, are entitled to use the Club Facilities, including the Mountain Course, Summit
and Valley Courses and the Short Course an unlimited number of times each year The
Membership Plan explicitly provides that the Owner will pay all operating
deficits...resulting from operation of the Club.
22. In or around June 2009, the Wilhelms and entities under their direction and
control acquired ownership of the Club, including all of the assets, properties and Club
Facilities from its previous owner, the Posen Group. At or about that time defendants
distributed to Club Members a document entitled Addendum To Application For
Membership Privileges ("Addendum"). In the Addendum, the Club Facilities are defined to
include the aforementioned four golf courses, golf practice facilities, tennis courts, club
houses, athletic club, Trailhead center, and related Club Facilities.
23. Plaintiffs Thomas Wilner, Jane Wilner and Kevin B. Allen are also Premier
Club Members ("Premier Members" or "Premier Memberships"). Defendants first offered
Premier Memberships to Club Members who were "Signature Members" in or around June
2009. "Signature Members" are Club Members with full golf privileges. Two letters (dated
June 26 and July 1, 2009, respectively, together with a brochure titled Cordillera 20/20 (the
"20/20 brochure" or the "brochure") were sent by defendants promoting Premier
Memberships. The 20/20 brochure promotes Premier Memberships by stating there will be
almost certain increase in value of the Premier Memberships as well as your Cordillera real
estate connected to these benefits. The brochure also states a separate wait list will be
created to accommodate the greater demand for Premier Memberships.
24. There are approximately 160 Premier Members. Premier Members paid an
additional $30,000 to convert to a Premier Membership. In return, Premier Members
received additional rights and benefits that supplement the rights they originally acquired as
Signature Members. These purported rights and benefits are more particularly detailed in
paragraphs 66 to 95 hereinbelow which paragraphs are incorporated herein by reference.
25. Defendants represented to plaintiffs and Club Members in letters and
promotional material used to sell Premier Memberships that, based upon defendants
management and operation of the Club, Premier Members would almost certainly profit
from the acquisition of a Premier Membership. Defendants also represented that Premier
Memberships would be in great demand because of the valuable rights a Premier Member
acquired, and that Premier Memberships would be easily saleable because, among other
things, a separate wait list would be created by defendants to accommodate the greater
demand for Premier Memberships. Defendants also represented that when a Premier
Member sold his/her membership, the Premier Member would lose no money because, at a
minimum, a Premier Member would receive a full refund of the deposits paid for the Premier
Members Signature Membership plus the additional deposit paid for the Premier
Membership.
26. On July 30, 2010, David Wilhelm sent Club Members a letter entitled
Restructuring the Club at Cordillera in which he announced that he was losing money
operating the Club and would immediately take steps to lessen the shortfall. He
announced that he was planning a 25 percent reduction of expenditures for 2011.
27. The Cordillera Property Owners Association (CPOA) appointed an informal
group of property owners to study the alternatives that were available and to explore
solutions with the Wilhelms. On October 20, 2010 this group incorporated as the Cordillera
Transition Corporation (CTC).
28. In December 2010, the Wilhelms indicated to the CTC that they did not intend
to open all the golf courses and Club Facilities during 2011 unless they were assured of
sufficient revenues, and that they intended to open only the number of golf courses and other
Club Facilities in 2011 that they believed they could afford.
29. Annual membership dues for 2011 were payable in February 2011. Before
paying those dues, Club Members sought assurances from the Wilhelms and CGC that, in
accordance with the Membership Plan, all of the golf courses and other Club Facilities would
be open for use in 2011.
30. On January 10, 2011, CGC sent an e-mail to Club Members expressly
providing those assurances. The e-mail stated, among other things, as follows:
2011 Dues: Club Facilities Open in 2011.
This has been a hot topic over the past couple of months. Here is
our official position on the subject..
(a) We will open and provide Members access to all four golf
courses, clubhouses and related facilities in 2011. We understand
this has been a concern for many of you and we trust that this will
allay any fears or reservations you may have. This serves as a
response to the Members who have requested assurances of
services.
(b) The annual dues for 2011 will be $18,000 for each golf
membership. As in years past, we are offering an early payment
discount.[and] the golf Annual Dues are $13,800 if the Member
pays before February 4, 2011.
The discounted golf member dues of $13,800 represented a 25 percent increase over the 2010
dues. The e-mail further assured Club Members as follows:
y A special annual dues account is established at a local bank . . .
y All FY 2011 dues will be deposited in this account.
y [N]o portion of the dues or other Club revenues shall be used
for any purpose other than to pay for valid Club expenditures.
y An independent CPA will review and confirm to the Club on a
monthly basis that all funds [are] used for valid Club
purposes.
31. On January 20, 2011 David Wilhelm and Patrick Wilhelm in their individual
capacities sent another e-mail to Fellow (Club) Members stating, among other things, We
are . . . committed to open all the facilities in 2011.
32. Based on those assurances, plaintiffs and, upon information and belief,
approximately 586 other Club Members paid their 2011 annual dues. Upon information and
belief, the revenue received by CGC for the 2011 dues is an estimated $7,760,868.
33. Despite the January 10 and 20 assurances, on May 24, 2011, after he had
collected the annual dues for 2011, David Wilhelm announced in an e-mail to Club Members
that he would not open all the golf courses but would close three of the four golf courses and
their associated clubhouses, the Clubs main restaurant (the Timberhearth), and the
Trailhead facility to preserve cash flow. Wilhelm admitted that his action is particularly
unfair and burdensome to our loyal members who have paid dues in expectation of having
access to all facilities. On July 21, 2011, approximately 30 days after the original complaint
in this case was filed, defendants opened one additional golf course, but have opened no
other Club Facilities.
34. Plaintiffs and the other Club Members performed their obligations under the
Membership Plan and otherwise by paying their 2011 dues and did so based on the express
entitlement under the Membership Plan to use all four golf courses and other Club Facilities
and on the express representations of CGC and the Wilhelms that all four golf courses and
other Club Facilities would remain open in 2011.
35. In violation of the Membership Plan and their January 2011 assurances, CGC
and the Wilhelms have failed to provide plaintiffs with the use of three of the four golf
courses, the Timberhearth, the Trailhead facility, and related Club Facilities and amenities.
The Membership Plan and Amended Membership Plan obligate the Clubs owners to fund all
deficits and allow the owners to retain all profits.
36. Defendants have also violated their commitments to Premier Members, having
reneged on their agreement in exchange for the additional payment of $30,000 each to
provide additional benefits to Premier Members as described above.
37. On August 19, 2011, plaintiffs completed a court-ordered audit of defendants
finances from January 1, 2011 through July 31, 2011 (the audit period).
38. The audit indicates that defendants, during the audit period, collected
$7,760,868 in dues revenues, and that at least $6,600,533 of those dues was received in
January 2011.
39. The audit indicates that David Wilhelm, from April through July 2011, paid
himself $842,536 from Club Members dues as purported interest expense and management
fees.
40. The audit indicates that Patrick Wilhelm, in June 2011, was paid $50,000
from Club Members dues as purported severance and accrued vacation pay.
41. The audit indicates that in July 2011 WFP paid itself from Club Members'
dues $60,000 as a purported reimbursement for severance pay paid to David Wilhelms son,
Nicholas Wilhelm.
42. The audit indicates that as a result of not opening all of the golf courses and
Club Facilities, CGCs cash flow was approximately $1,300,000 greater than CGC had
forecast in January 2011. Defendants utilized this cash to pay themselves instead of opening
all golf courses and Club Facilities as they had agreed and were obligated to do.
43. Defendants also paid $323,483 from March through July 2011 to architects
and lawyers for matters not necessary for the operation of golf courses and Club Facilities,
and have since made additional payments of approximately $340,000 for matters not
necessary for the operation of golf courses and Club Facilities.
44. Plaintiffs were damaged as stated below.
SECOND CLAIM FOR RELIEF
(Promissory Estoppel Class and Subclass)
45. Plaintiffs incorporate by reference all previous allegations.
46. All Club Members reasonably relied to their detriment on the January 10,
2011 e-mail from CGC and the January 20, 2011 e-mail from the Wilhelms and paid their
2011 annual dues.
47. Premier Members reasonably relied to their detriment on the promotional
materials provided in connection with the sale of Premier Memberships. Premier Subclass
incorporates additional Premier allegations at paragraphs 66 to 95 hereinbelow.
THIRD CLAIM FOR RELIEF
(False Representation - Class)
50. The Wilhelms and CGC made false representations making the firm
commitment that all four golf courses and Club Facilities would be open in 2011 to induce
Club Members to pay their 2011 dues to the Club.
51. The said representations were material to Club Members.
52. The Wilhelms and CGC made the said representations knowing them to be
false or aware that they did not know whether the representations were true or false inasmuch
as they at all times intended to close all or some of the golf courses and Club Facilities in
their discretion (which they did not possess).
53. Plaintiffs relied on the representations.
54. Plaintiffs reliance was justified.
FOURTH CLAIM FOR RELIEF
(Constructive Trust Class and Subclass)
57. Upon information and belief, CGC is insolvent.
58. The three golf courses which have been closed by the Club are unique and
impossible of duplication.
59. Upon information and belief, the said three golf courses, if not properly
maintained, will be irreparably damaged.
60. Upon information and belief, the $7,760,868 (or what is left of it) will be
dissipated if not immediately protected by the Court, and the said funds, in any event, must
be recovered to maintain the Club Facilities.
FIFTH CLAIM FOR RELIEF
(Breach of Duty of Good Faith and Fair Dealing Class )
61. Plaintiffs incorporate by reference all previous allegations. .
62. Plaintiffs reasonably expected that their 2011 annual dues would be used to
open, operate and maintain the golf courses and Club Facilities.
63. Defendants expressly agreed to open, operate and maintain the golf courses
and Club Facilities, and to pay operating deficits.
64. Defendants had a duty to act in good faith and to deal fairly with plaintiffs and
to act consistent with the reasonable expectations of plaintiffs.
65. Defendants breached their duty of good faith and fair dealing when they chose
to not open all golf courses and Club Facilities and instead paid David Wilhelm, Patrick
Wilhelm, Nicholas Wilhelm and others the payments referenced in paragraphs 39 through 43
hereinabove.
ADDITIONAL ALLEGATIONS AS TO PREMIER MEMBERS
Promotional Representations and Material Omissions in Connection With the Offer and
Sale of Premier Memberships
66. Following its acquisition of the Club, CGC amended the Membership Plan in
a restated agreement entitled The Club at Cordillera Membership Plan as Amended and
Restated in Its Entirety (Amended Membership Plan). The Amended Membership Plan
was drafted solely by defendants with no input or comment by Club Members or Premier
Members. Among other things, the Amended Membership Plan provides for a new category
of memberships called Premier Memberships. The Amended Membership Plan states that
in addition to the rights, privileges, and benefits granted to Signature Members as set forth in
the Amended Membership Plan, Premier Members are entitled to the additional rights and
privileges as described in more detail herein.
67. From June through December 2009, CGC through WFP, Holdings, David
Wilhelm and Patrick Wilhelm instituted a campaign to market and sell Premier Memberships
to existing Signature Members. The sale of Premier Memberships was designed and
intended by defendants to raise risk capital for CGCs use in enhancing, operating, and
maintaining the Club Facilities by obtaining additional investments from existing Signature
Members.
68. Defendants represented to Club Members and Premier Members in letters and
promotional material used to sell Premier Memberships, that based upon defendants'
management and operation of the Club, Premier Members would almost certainly profit
from the acquisition of a Premier Membership. Defendants also represented that Premier
Memberships would be in great demand because of the valuable rights a Premier Member
acquired, and that Premier Memberships would be easily saleable because a separate wait list
would be created by defendants to accommodate the greater demand for Premier
Memberships. Importantly, defendants also represented that when a Premier Member sold
his/her membership, the Member would lose no money because, at a minimum, a Premier
Member would receive a full refund of the deposits paid for the Premier Members Signature
Membership plus the additional deposit paid for the Premier Membership. Documents
identifying these representations and contractual obligations are identified with specificity
below.
69. Upon information and belief, Signature Members each paid an initial deposit
of up to $150,000 for their Signature Membership.
70. In June and July, 2009, defendants promoted Premier Memberships in letters
and documents that were either written by and/or approved by all defendants before the
letters and documents were provided to all potential Premier Members. Three specific
documents are identified below, and the pertinent representations include the following:
a. In the June 1, 2009 brochure entitled Cordillera
20/20, the Premier Membership was described as follows:
Premier Members will receive the following direct benefits:
Premier Memberships will include Legacy Privileges
which provides that all children of existing members will be
considered as full members of the club without payment of
additional dues, guest fees or charges not paid by the existing
member.
There will be no transfer fee assessed in connection with
re-issuance of a Premier Membership.
Upon the sale or transfer of their Premier Membership,
Premier Members will have the right to receive the greater of: (a)
the original membership deposit paid by the Premier Member
(including the additional $30,000 membership deposit paid in
connection with the conversion to a Premier Membership); or (b)
the resale price of the Premier Membership. In other words,
Premier Members will have the right to receive 100% of the
increase in the value of their Premier Memberships. Premier
Members will essentially own 100% of their membership equity.
A separate wait list for Premier Memberships will be
created to accommodate the greater demand for these
memberships.
Premier Memberships will be non-assessable.
In the event of a future equity conversion of the Club,
Premier Members will not be required to pay any conversion price
or any similar amount in connection with the equity conversion of
the Club.
Premier Members will have the right to acquire a Cordillera
Mountain Club Membership at a 50% discount off the initial price
at which Cordillera Mountain Club Memberships are offered to the
general public.
ASSOCIATE CLUB PRIVILEGES
Since the Wilhelm Family Partnership owns or controls Mayacama
Golf Club in Sonoma County California and The Roaring Fork
Club in Basalt Colorado; Premier Members will be offered
associate club privileges at these fine clubs as a further
enhancement to the Premier Membership. The associate club
program will also be extended to our clubs in New York and Los
Cabos which are in preliminary stages of development.
The most significant by-product of the associate club program will
be the almost certain increase in the value of the Premier
Memberships as well as your Cordillera real estate connected to
these benefits. . . . (Emphasis added)
b. In a letter dated June 26, 2009, and signed by David
Wilhelm, the following statement was made:
Cordillera is the largest and most diverse mountain golf franchise
in North America. However, without a deep sense of community
where members and families are connected as part of the
Cordillera Family it is just a beautiful collection of real estate
assets without a real soul. It is this soul that is missing and our job
along with your help, is to renew the spirit and sense of pride that
brought you to this club in the beginning; a reinvigoration of the
community spirit of Cordillera. The attached outline of Cordillera
20/20 represents our initial thoughts to achieve these goals.
When fully developed, property owners at Cordillera will have
over three billion invested and yet the golf and social amenities
represent less than 3% of this amount. The amenities, however,
and their operating philosophy have a huge impact on property
values. Our collective efforts at restoring the golf and social
infrastructure will have the most positive impact on our
membership and your real estate.
Premier Members will also be granted certain access and use
privileges at various affiliate clubs. Current affiliate clubs include
Mayacama Golf Club in Sonoma County California and The
Roaring Fork Club in Basalt Colorado. In the future, the affiliate
club program may also be extended to other clubs, including those
which are in the preliminary stages of development in New York
and Los Cabos. Access to these affiliate clubs at very highly
desirable locations will provide a multiple vacation experience that
is totally unique, financially sensible, and will enhance the lifestyle
of the Premier Members. (Emphasis added)
c. In a letter dated July 1, 2009, and signed by Patrick
Wilhelm and David Wilhelm, Defendants made by the following
statement:
Accordingly, we will be seeking your assistance in completing the
membership roster at the Club. As we restore new pride in the
Cordillera community we will ask you to embrace this privilege
and responsibility of membership. By recommending your friends
we can be assured of a compatible and like-minded group of
members who share the Cordillera vision. Moreover, within the
next few days you will be receiving an invitation to enroll in
Premier Membership. You will read more about Premier
Membership in the enclosed Cordillera 20/20. We view this
initiative as one of the single most important developments for
Cordilleras future and ask that you consider this membership
choice very carefully.
71. In making the foregoing representations and promises, defendants, and those
acting under their control, omitted to disclose the following material facts known to them,
and also made the materially false statements set forth in subparagraph (e):
a. that defendants chose to provide positive and
favorable information about David Wilhelms past experience
while intentionally omitting relevant negative information
regarding his past. The omitted information was particularly
material given the importance David Wilhelm had to the success or
failure of the Premier Membership program. Undisclosed were the
facts that David Wilhelms real estate development history
included a civil fraud claim in connection with a real estate
development; that a firm controlled by David Wilhelm, the Forsyth
Group, pled guilty to lying to the government in 1992 in
connection with the sale of a building in St. Louis to the U.S.
Postal Service, and David Wilhelm later agreed to pay
approximately $3 million to settle a civil lawsuit brought by the
government concerning the same sale;
b. that defendants representations that they would
upgrade and run the Club as the premier mountain golf club in
North America were dependent on unduly optimistic and
unreasonable assumptions and projections defendants developed,
including but not limited to unreasonable assumptions regarding
attracting new members, and unreasonable projections that
members would provide significant additional revenue to the Club;
c. that in acquiring the Club, defendants anticipated
receiving over $5 million in deposits from the Posen Group, and
the funds were not received;
d. that notwithstanding the express obligation in the
Amended Membership Plan that required the owners to fund
operating deficits, defendants believed the Club had the right to
pledge its assets to David Wilhelm for operating loans; and
e. At page 7 of the Cordillera 20/20 brochure, on
information and belief defendants misrepresent their relationship
with Lubert-Adler as their long term financial partner and the
circumstances for an alleged new joint venture to develop Battle
Mountain and rename it Cordillera Mountain.
72. Based on the total mix of information available to them through the common
representations made to each of them and to all Members of the Subclass, and also the false
representations set forth above, and in the absence of disclosure of the omitted material facts
described above, plaintiffs accepted CGCs offer to sell Premier Memberships in the Club by
executing the Agreement and making the required Premier Membership Deposit.
73. In addition to the named plaintiffs, approximately 160 other Signature
Members accepted CGCs offer of Premier Membership, based on the common
representations, promises and omissions set forth above.
74. Defendants actions and statements in promoting and selling the Premier
Memberships constituted the offer and sale of a security under the Colorado Securities Act.
The Premier Memberships were an investment contract because the funds paid by plaintiffs
and all Members of the Class for their Premier Memberships were paid with the expectation
that financial benefits would result from the efforts of defendants; and, Premier Memberships
were sold by defendants with the intention and purpose of raising risk capital to finance
defendants proposed operation and enhancement of the Club.
75. In promoting and selling the Premier Membership, Premier Members of the
Subclass reasonably placed their trust and confidence in each defendant, and each defendant
agreed and/or assumed responsibility to act for the benefit of each Premier Member.
Accordingly, a fiduciary relationship existed between defendants and the Premier Members.
76. The contract between Premier Members on the one hand, and CGC on the
other hand, imposed the requirement that CGC acted in good faith.
Premier Membership Rights
77. The Amended Membership Plan sets forth part of the contract between CGC
on the one hand and Club Members and Premier Members on the other hand. In addition to
the contract rights set forth in the Amended Membership Plan, as supplemented and
explained by the representations and promises identified above, CGC made material
representations and promises to Club Members including Premier Members in the
Addendum to Application for Membership.
78. The Amended Membership Plan obligates the Clubs owners to fund all
deficits and it allows the owners to retain all profits. Because the Amended Membership
Plan required the owners to fund deficits, Premier Members had a reasonable expectation
when they acquired their Premier Memberships that notwithstanding the potential for future
operating deficits, the Club would operate as the premier mountain golf community in North
America consistent with the representations in the Cordillera 20/20 brochure and in the June
26 and July 1, 2009 letters identified above.
79. The Amended Membership Plan also obligates CGC to operate all Club
Facilities for the benefit of Premier Members, their adult children (pursuant to the Legacy
Privileges) and for the benefit of Signature Members.
80. Paragraph 1 of the Addendum identifies nine additional contract rights and
benefits that Premier Members acquired when they became Premier Members. It is because
of these additional rights and benefits that reasonably assumed their Premier Memberships
and Cordillera property would almost certainly increase in value, and at a minimum they
would lose no money.
81. The rights included in Paragraph 1 of the Addendum are as follows: Legacy
Privileges, the representation that Premier Memberships are non-assessable, the
representation that a separate wait list would be created for the sale of Premier Memberships,
the right to transfer Premier Memberships with a Cordillera home or home site, the rights of
Premier Members regarding resignation payments, the representation that no transfer fee will
be charged to Premier Members, the representation that no payment is required from Premier
Members in the event of an equity conversion, the right to a fifty percent discount for a
Cordillera Mountain Club Membership, and the right to use Affiliate Clubs.
82. The first claim for relief, breach of contract, involves material breaches,
anticipatory repudiations, disregard of the duty of good faith, and other wrongful conduct by
CGC regarding the contract provisions identified above.
Wrongful Conduct Following Sale of Premier Memberships
83. In a letter signed by David Wilhelm dated July 30, 2010, titled Restructuring
The Club At Cordillera, all Premier Members and Signature Members were advised that
defendants intended to implement immediate cost reductions, including a 2011 cost
reduction of 25 percent. The July 30 letter reflected a material change in CGCs operating
philosophy. Defendants stated in the letter that prudent financial steps were necessary to
lessen the anticipated shortfall. The letter further indicated the shortfall occurred because
revenues were $4 million less than defendants goal.
84. The July 30, 2010 letter constituted a material breach, and an anticipatory
repudiation of CGCs contract obligations to Club Members including Premier Members. As
of July 30, 2010, defendants reneged on the obligation set forth in the Amended Membership
Plan that the owners must fund deficits. The July 30, 2010 letter also constitutes a
repudiation of the representations under which Premier Memberships were sold, including
the operating philosophy that defendants would run Cordillera as the premier mountain golf
community in North America.
85. The July 30, 2010 letter constitutes a breach of fiduciary duties by defendants.
The restructuring described in the July 30 letter was adopted to benefit defendants to the
detriment of Club Members including Premier Members, thereby breaching defendants
fiduciary duties. Importantly, defendants acknowledge in the July 30 letter that defendants
have always considered themselves as custodians and trustees of Cordillera, thereby
recognizing their fiduciary relationships with plaintiffs and Members of the Subclass.
86. Additionally relevant is the statement in the July 30, 2010 letter that
defendants intend to work together in an open, transparent atmosphere of trust to solve the
problems. The quoted statement by defendants was false. In fact, one of the primary
reasons defendants caused the damages identified herein is because of the enormous distrust
the Cordillera community has of defendants. As the result of the omissions,
misrepresentations of fact, and because defendants reneged on representations and
assurances, the Cordillera community views defendants as untrustworthy. The distrust has
caused Premier Memberships to have little to no value and caused Cordillera property owned
by Club Members including Premier Members to decline in value.
87. On information and belief, by a deed of trust dated June 23, 2010 ("Deed of
Trust"), and signed by Patrick Wilhelm on behalf of CGC, Holdings, F & B, and WFP, the
identified defendants pledged Club assets to David Wilhelm as collateral for a revolving loan
securing past and future advances by David Wilhelm. The Deed of Trust was not authorized
by the parties contract and is inconsistent with the requirement that owners advance
operating deficits. Alternatively, if the Deed of Trust was authorized by the parties contract,
defendants should have disclosed that Club assets could be pledged to David Wilhelm before
the Premier Memberships were sold.
88. Largely because of the Restructuring announced by defendants in the July
30, 2010 letter, Premier Members and Signature Members demanded assurance before dues
for 2011 were paid, that all golf courses and Club Facilities would be open for use in 2011.
89. In a letter dated October 27, 2010, approximately 50 Premier Members raised
numerous concerns regarding the Premier Membership Program and the Club. The October
27, 2010 letter noted the fact, after the discovery by Premier Members of the Deed of Trust
executed for the benefit of David Wilhelm, that the Posen Group failed to transfer
approximately $5 million in deposits. Among other points, the letter requested assurance that
the rights of Premier Members would be honored, and defendants would bear the cost of
preserving Premier Memberships in the event of a restructuring or transaction involving the
Club.
90. By letter dated November 5, 2010, David Wilhelm and Patrick Wilhelm, on
behalf of CGC, responded to some of the issues raised in the October 27, 2010 letter.
Notably, the response is silent regarding the discoveries by Premier Members that defendants
failed to disclose the Deed of Trust, or that funds were not received from the Posen Group.
The November 5 response did, however, provide assurance that the rights of Premier
Members would continue for an indefinite period of time in accordance with the
Membership Plan and the Agreement.
91. By email dated January 10, 2011, CGC advised both Premier Members and
Signature members that all four golf courses, clubhouses and related facilities would be open
in 2011. Thereafter, on January 20, 2011, similar assurances were provided by David
Wilhelm and Patrick Wilhelm on behalf of the remaining defendants.
92. Based upon the specific assurances referenced above that all Club Facilities
would be open for the benefit of Premier Members in 2011, and also relying on the contract
provisions that obligate CGC to operate all Club Facilities in 2011, plaintiffs and Members of
the class paid their 2011 dues. The amount each person paid was $13,800, if an early
payment discount was received, or $18,000 if no discount was received.
93. Thereafter, notwithstanding the contract obligations, express assurances, and
fiduciary duties, defendants reneged, and did not open most Club Facilities for 2011.
Instead, the only Club Facilities that were opened were the Valley Golf Course and limited
service at the Valley Club House.
94. The failure to open all Club Facilities in 2011 is a material breach of contract
by CGC, and wrongful conduct by all defendants, thereby providing a basis for liability on
all claims asserted herein.
95. In addition, all of the alleged wrongful conduct by defendants as set forth
above is the direct, legal, and proximate cause of all damages requested by plaintiffs and
each Member of the Subclass.
SIXTH CLAIM FOR RELIEF VIOLATION OF COLORADO SECURITIES ACT
(C.R.S. 11-51-501(1)(b) and 11-51-604(4))
(Against CGC - Subclass)
97. Plaintiffs Premier Memberships are investment contracts, and therefore they
are securities as defined by the Colorado Securities Act, C.R.S. 11-51-201(17).
98. In connection with the offer and sale of a security, and as alleged with
specificity herein, CGC made material misstatements of fact, and also omitted to state
material facts necessary to make the statements made, in light of the circumstances under
which they were made, not misleading.
99. Plaintiffs and Members of the Subclass did not know the truth of the material
misstatement of facts or the material omissions of fact.
100. CGC knew, or in the exercise of reasonable care should have known, of the
material misrepresentations and/or omissions of fact.
101. Plaintiffs and Members of the Subclass sustained damages as a proximate
result of CGCs actions in an amount proved at trial.
102. Plaintiffs and Members of the Subclass are entitled to recover their attorneys
fees under the Colorado Securities Act for the prosecution of this class action.
SEVENTH CLAIM FOR RELIEF VIOLATION OF COLORADO SECURITIES ACT
(C.R.S. 11-51-501(1)(a) and (b) and 11-51-604(3))
(Against CGC - Subclass)
103. Plaintiffs incorporate by this reference all previous allegations.
104. In connection with the sale of Premier Memberships, CGC (a) employed a
device, scheme or artifice to defraud, and/or (b) engaged in an act, practice, or course of
business that operated as a fraud or deceit upon plaintiffs and Members of the Class.
105. CGC engaged in this conduct recklessly, knowingly, or with an intent to
defraud.
106. Plaintiffs and Members of the Subclass relied on CGCs device, scheme,
artifice, practice, and/or course of business in purchasing their Premier Memberships.
107. Plaintiffs and Members of the Subclass sustained damages as a direct and
proximate result of CGCs action in an amount proved at trial.
108. Plaintiffs and Members of the Subclass are entitled to recover their attorneys
fees under the Colorado Securities Act for the prosecution of this Class Action.
EIGHTH CLAIM FOR RELIEF AIDING AND ABETTING VIOLATION OF
COLORADO SECURITIES ACT
(C.R.S. 11-51-501(1) and 11-51-604(5)(c))
(Against WFP, Holdings, David Wilhelm and Patrick Wilhelm - Subclass)
110. WFP, Holdings, F & B, David Wilhelm, and Patrick Wilhelm knew that CGC
was engaged in conduct constituting a violation of C.R.S. 11-51-501, and gave substantial
assistance to such conduct.
111. WFP, Holdings, F & B, David Wilhelm and Patrick Wilhelm are jointly and
severally liable to the same extent as CGC to plaintiffs and Members of the Subclass for
damages proved at trial and for attorneys fees incurred by plaintiffs and Members of the
Subclass.
NINTH CLAIM FOR RELIEF CONTROLLING PERSON LIABILITY FOR
VIOLATION OF COLORADO SECURITIES ACT
(C.R.S. 11-51-501(1) and 11-51-604(5)(b) - Subclass)
(Against WFP, Holdings, David Wilhelm, and Patrick Wilhelm)
113. WFP, Holdings, F & B, David Wilhelm, and Patrick Wilhelm, by virtue of
their relationships with and positions with CGC as alleged herein, had the ability to control,
directly or indirectly, the actions of CGC alleged herein.
114. WFP, Holdings, F & B, David Wilhelm, and Patrick Wilhelm did in fact
exercise control, directly or indirectly, over the actions of CGC alleged herein by, among
other things, authorizing the creation and sale of Premier Membership interests, determining
the terms of those interests, and determining and authorizing the representations, promises,
and omissions made in offering and selling those interests to plaintiffs.
115. WFP, Holdings, F & B, David Wilhelm and Patrick Wilhelm are jointly and
severally liable to the same extent as CGC for the damages proved at trial including
attorneys fees.
TENTH CLAIM FOR RELIEF FRAUDULENT REPRESENTATIONS AND
OMISSIONS OF FACT
(Against All Defendants - Subclass)
117. As more particularly alleged with specificity above, each of the all defendants
made material misrepresentations and also failed to disclose one or more material fact that he
or it had a duty to disclose with respect to Premier Memberships.
118. Defendants made the misrepresentations, and/or failed to disclose the material
facts, with the intent to create a false impression of the actual facts in plaintiffs minds and
the minds of the Members of the Subclass.
119. Defendants made the misrepresentations, and/or failed to disclose the material
facts, with the intent that plaintiffs and Members of the Subclass purchase the Premier
Memberships.
120. Plaintiffs and members of the Subclass purchased the Premier Memberships
relying on the truth of the material misrepresentation, and also the assumption that the
undisclosed facts did not exist, or was different from what was actually stated.
121. The plaintiffs and Members of the Subclass reliance was justified.
122. This reliance caused damages to the plaintiffs and Members of the Subclass in
an amount proved at trial.
ELEVENTH CLAIM FOR RELIEF BREACH OF FIDUCIARY DUTY
(Against All Defendants Class and Subclass)
123. Plaintiffs and Members of the Class and Subclass incorporate by reference all
previous allegations.
124. Defendants were acting as a fiduciary to plaintiffs and Members of the Class
with respect to their assurances provided to all Club members that all Club facilities would
open in 2011 if plaintiffs and the Class paid 2011 dues.
125. Defendants were acting as a fiduciary to plaintiffs, and Members of the
Subclass, with respect to the promotion, sale, and operation of the Club regarding the
Premier Memberships.
126. Defendants breached their fiduciary duties as outlined in more detail above.
127. Defendants wrongful conduct has also caused a diminution of the real estate
values in the Cordillera community, to the financial detriment of Members of the Class and
Subclass.
128. Defendants fiduciary breaches are a cause of the damages sustained by
plaintiffs and Members of the Class and Subclass in an amount proved at trial.
129. Plaintiffs and Members of the Subclass are also entitled to recover their
attorneys fees as authorized by Colorado law for breach of fiduciary duty claims.
TWELFTH CLAIM FOR RELIEF COLORADO CONSUMER PROTECTION ACT
(C.R.S. 6-1-105 Against All Defendants Class and Subclass)
130. Plaintiffs and Members of the Subclass incorporate by reference all previous
allegations.
131. Defendants engaged in an unfair or deceptive trade practice in marketing
Premier Memberships.
132. The deceptive trade practices perpetrated by defendants occurred in the course
of defendants business.
133. Defendants deceptive trade practices significantly impacted the public as
actual or potential customers of the defendants business.
134. The Premier Subclass suffered an injury to their legally protected interests
which were caused by defendants deceptive trade practices.
135. Plaintiffs and Members of the Subclass are entitled to recover three times the
amount of actual damages together with reasonable attorney fees.
CLASS ALLEGATIONS
136. Paragraphs 1 through 135 are incorporated herein.
137. Class Definition. Plaintiffs bring this action pursuant to C.R.C.P.
23(b)(1)(A), on behalf of themselves and the following Classes:
(1) All Club Members who paid Membership Deposits upon joining the Club
and who also paid their 2011 annual dues (the Dues/Deposit Class); and
(2) All Club Members who paid Premier Membership deposits (the Premier
Subclass).
138. Numerosity. The members of the Class and Subclass are so numerous that
joinder of all members is not practicable or necessary. As set forth above, there are at least
586 Club Members who paid their 2011 annual dues and 160 Club Members who paid
Premier Deposits.
139. Commonality. As to the members of the Dues/Deposit Class, this case
presents, inter alia, the following common questions of law and fact:
a. Did defendants breach their contractual obligations,
reasserted in uniform publications by defendants to all Club
Members in January 2011, to make all Club facilities available in
2011 to Club Members who paid 2011 dues?
b. Did defendants breach their contractual obligations
by failing to provide additional promised benefits to Premier
Members?
c. Are defendants estopped from reneging on their
contractual obligation to make all Club facilities available to Club
Members in 2011, and to provide promised additional benefits to
Premier Members?
d. Did defendants falsely represent to the class that all
Club facilities would be open in 2011 if class members paid their
2011 dues?
e. Should the Court impose a constructive trust on the
estimated $7,760,868 in dues paid by Club Members to prevent
defendants from dissipating monies paid by Club Members?
f. What remedies should the Court impose on
defendants for their breaches of the Premier Membership
Agreements?
g. With respect to Premier Members, did defendants
violate the Colorado Securities laws, abet such violations, make
fraudulent misrepresentations, violate the Colorado Consumer
Fraud Act and commit fiduciary breaches?
140. Typicality. Plaintiffs claims are typical of those of the Class they seek to
represent because (a) to the extent plaintiffs seek relief for defendants breaches of contract
and on estoppel grounds, their claims are not only typical of, but the same as any claim that
might be brought by any other Club Member; (b) defendants made uniform, false statements
to the plaintiff Class as a whole upon which the class members reasonably relied in deciding
to pay their 2011 dues; (c) to the extent plaintiffs seek equitable relief, that relief would
affect all class members equally; (d) all of the Class members were injured and continue to
be injured in the same manner by defendants breaches of contract and other violations. As
to defendants breaches of the Premier Membership Agreements, the claims of Thomas
Wilner, Jane Wilner and Kevin Allen are similarly typical of the claims of the Subclass.
141. Adequacy. Plaintiffs will fully and adequately protect the interests of all
members of the Class and Subclass. Plaintiffs have retained counsel who are experienced in
the claims presented and in class actions generally, certain named plaintiffs themselves have
experience in class action litigation, and plaintiffs have no interests antagonistic to or in
conflict with the interests of the Class and Subclass. In addition, plaintiffs have already
obtained a Temporary Restraining Order which the Court entered on June 24, 2011 against
defendants and obtained a court-ordered audit of defendants books.
142. Rule 23(b)(1) Requirements. Class action status is warranted and appropriate
under Rule 23(b)(1) because prosecution of separate actions by the members of the Class and
Subclass would create a risk of establishing incompatible standards of conduct for defendants
and create a risk of adjudications with respect to individual members of the Class and
Subclass that would, as a practical matter, be dispositive of the interests of the other members
not parties to the actions, or substantially impair or impede their ability to protect their
interests.
143. Rule 23(b)(3) Requirements. If the Class is not certified under Rule
23(b)(1), then certification under (b)(3) is appropriate because questions of law or fact
common to members of the Class and Subclass predominate over any questions affecting
only individual members and a class action is superior to the other available methods for the
fair and efficient adjudication of this controversy.
RELIEF REQUESTED
WHEREFORE, plaintiffs request the following relief:
a. a refund of the 2011 dues paid by the Dues/Deposit
class, or damages equivalent thereto;
b. a refund of the Membership Deposits paid by the
Dues/Deposit class, or damages equivalent thereto;
c. specific performance of the Membership plan, i.e.,
that the Club maintain, and the Club Members be provided use of,
all Club Facilities;
d. imposition of a constructive trust or equitable lien
upon the 2011 dues;
e. a refund to the Premier Subclass of Premier
Membership deposits, or damages as provided by law.
f. prejudgment interest and all interest allowable by
law;
g. costs, expert witness fees and attorney fees;
h. and such other relief as the court deems proper,
including exemplary and statutory damages, .and damages for
injury to home values of Cordillera homeowners.
PLAINTIFFS REQUEST A TRIAL OF ALL ISSUES SO TRIABLE TO A JURY
OF SIX.
HECKMAN & OCONNOR, P.C.
Signature on File
By: /s/Brett Steven Heckman
CERTIFICATE OF SERVICE
I hereby certify that on the 15th day of December, 2011, I served the foregoing document
via Lexis Nexis to:
Peter W. Thomas
Thomas | Genshaft, LLP
Aspen Highlands
0039 Boomerang Road, Suite 8130
Aspen, Colorado 81611
Robert P. Ingram
Michelle PrudHomme
Dickinson, PrudHomme, Adams & Ingram, LLP
730 Seventeenth Street, Suite 730
Denver, CO 80202-3504
David L. Lenyo
Garfield & Hecht, P.C.
601 East Hyman Avenue
Signature on file
/s/ Margaret E. Barry
Margaret E. Barry, Legal Assistant
Exhibit C
P. 0. Box 597, Eagle, Colorado 81631
<:FIT .F.O
0 Eagle County District Court 5th Jl
'iling Date: Dec 2 2011 1:37PM i\IST
iling ID: ~ 1 1 9 7 3 6 5
cview Clerk: Karen Frederic!\.
Plaintiffs: f f
CHERYL M. FOLEY, THOMAS WILNER, JANE WILNER,
CHARLES JACKSON, MARY JACKSON and KEVIN B.
ALLEN individually and on behalf of all others similarly COURT USE ONLY
situated,
Defendants:
CORDILLERA GOLF CLUB, LLC, a Delaware limited
liability company; WFP CORDILLERA, LLC, a Delaware
limited liability company; DAVID A. WILHELM,
v.
Cross-Claimant:
ALPINE BANK
HECKMAN & O'CONNOR, P.C.
P. 0. Box 726
Tel.: (970) 926-5991
Fax: (970) 926-5995
Reg. No. 15330
Div./Ctrm.:
VERIFIED MOTION FOR ISSUANCE OF CONTEMPT CITATION
TO DAVID WILHELM, CORDILLERA GOLF CLUB, LLC, AND WILHELM
FAMILY PARTNERSHIP, LLC
Plaintiffs, through counsel and pursuant to C.R.C.P. 107, move the court to order the
issuance of a contempt citation to defendants David Wilhelm, Cordillera Golf Club, LLC
("CGC"), and WFP Cordillera, LLC ("WFP") and as grounds state:
1. On June 24, 2011 the court entered an amended temporary restraining order
("TRO") which, in part, provides:
"The court orders that defendants shall not use funds from
2011 annual dues received from Club at Cordillera ("Club")
members for any purpose other than the necessary maintenance
and operation of the Club's four golfcomses and related facilities."
2. Defendants were represented by and served through counsel. The TRO has been
continuously in effect and extended by stipulation of the parties until further order of the court.
3. On June 30, 2011 CGC paid Foley & Lardner, LLP, a law firm, $33,250 for legal
work for, according to CGC's internal accounting, "restructuring" Club ownership and "equity
conversions."
4. On July 7, 2011 CGC paid David Wilhelm $104,066 as an "interest expense" on a
loan taken out by David Wilhelm ("the Wilhelm note"). The 2011 CGC budget published in
March 2011 ("CGC 2011 budget") did not include payments to David Wilhelm for interest on
the Wilhelm note.
5. On July 20, 2011 CGC paid Zehren & Associates, an architectural firm, $73,420
for plans to renovate the Cordillera Valley Club clubhouse. The Cordillera Valley Club is one of
the Club's four golf courses. This payment also was not in the 2011 CGC budget.
6. On July 27, 2011 CGC paid WFP $60,000 as a purported reimbursement for a
2010 "severance payment" to David Wilhelm's son, Nicholas Wilhelm. This payment also was
not in the CGC 2011 budget.
7. On August 12, 2011 CGC paid David Wilhelm $53,797 for interest on the
Wilhelm note.
8. On August 15, 2011 CGC paid Thomas & Genshaft, LLP, a law firm, $20,012 for
legal work in connection with defendant David Wilhelm's lawsuit against a Cordillera civic
organization and individual Cordillera residents, CGC, el a/. v. Cordillera Transition
Corporation, Inc., eta/., Eagle County District Court Case No. 2011CV456 (the "CTC lawsuit").
9. On August 31, 2011 CGC paid Foley & Lardner $5,445 for restructuring Club
ownership.
10. The above payments total $349,990. Clearly, none of the payments were for
necessary maintenance and operation of golf courses and related facilities as required by the
TRO entered by this Court.
11. All of the foregoing payments are disobedient to the TRO and are offensive to the
authority and dignity of the Court. The payment of $20,012 to the law firm of Thomas &
Genshaft to fund the defendants' lawsuit against the CTC and individual Cordillera residents
directly offends the explicit purpose for which the TRO was entered. The TRO explicitly refers
to such a payment as follows:
2
"The court notes that a lawsuit has been filed by some of
the named defendants against Club members and Club-related
entities and that an adversarial and acrimonious relationship l1as
developed between the factions. In light of this and plaintiffs'
showing that defendants have failed to perform under their
promises to open all golf comses and to account for the 2011
dues, the court finds that the 2011 dues may be dissipated to fund
defendants' said lawsuit and for other non-Club-related
expenditures if notice were provided to defendants prior to the
court granting this order."
12. Moreover, the offensive nature of the payments is aggravated by the fact that
neither David Wilhelm nor CGC general manager, Cathy Kulzer, informed the CGC chief
financial officer, Monica Borsch, that a TRO had been entered. Mr. Borscsh authorized most of
the foregoing payments and did so without considering whether she was abiding by the TRO.
Ms. Borsch's deposition testimony to this effect is attached as Exhibit 1.
13. C.R.C.P. 107(a)(1) defines contempt as follows:
Contempt: Disorderly or disruptive behavior, a breach of
the peace, boisterous conduct or violent disturbance toward the
court, or conduct that unreasonably interrupts the due course of
judicial proceedings; behavior that obstructs the administration of
justice; disobedience or resistance by any person to or interference
with any lawful writ, process, or order of the court; or any other act
or omission designated as contempt by the statutes or these rules.
14. There are two types of civil contempt. The first type of civil contempt consists of
a present refusal to perform. The second type of civil contempt consists of conduct derogatory to
the court. Punitive and remedial sanctions for contempt are set forth in C.R.C.P. 107(a)(4) and
(5) as follows:
Punitive Sanctions for Contempt: Punishment by
unconditional fine, fixed sentence of imprisonment, or both, for
conduct that is found to be offensive to the authority and dignity of
the court.
Remedial Sanctions for Contempt: Sanctions imposed to
force compliance with a lawful order or to compel performance of
an act within the person's power or present ability to perform.
15. Plaintiffs request that both remedial and punitive sanctions be imposed. These
sanctions are specified in C.R.C.P. 107( d) as follows:
3
Trial and Punishment. (1) Punitive Sanctions. In an indirect
contempt proceeding where punitive sanctions may be imposed,
the court may appoint special counsel to prosecute the contempt
action. If the judge initiates the contempt proceedings, the person
shall be advised of the right to have the action heard by another
judge. At the first appearance, the person shall be advised of the
right to be represented by an attorney and, if indigent and if a jail
sentence is contemplated, the court will appoint counsel. The
maximum jail sentence shall not exceed six months unless the
person has been advised of the right to a jury trial. The person
shall also be advised of the right to plead either guilty or not guilty
to the charges, the presumption of innocence, the right to require
proof of the charge beyond a reasonable doubt, the right to present
witnesses and evidence, the right to cross-examine all adverse
witnesses, the right to have subpoenas issued to compel attendance
of witnesses at trial, the right to remain silent, the right to testify at
trial, and the right to appeal any adverse decision. The court may
impose a fine or imprisonment or both if the court expressly finds
that the person's conduct was offensive to the authority and dignity
of the court. The person shall have the right to make a statement in
mitigation prior to the imposition of sentence.
Remedial Sanctions. In a contempt proceeding where
remedial sanctions may be imposed, the court shall hear and
consider the evidence for and against the person charged and it
may find the person in contempt and order sanctions. The court
shall enter an order in writing or on the record describing the
means by which the person may purge the contempt and the
sanctions that will be in effect until the contempt is purged. In all
cases of indirect contempt where remedial sanctions are sought, the
nature of the sanctions and remedies that may be imposed shall be
described in the motion or citation. Costs and reasonable
attorney's fees in connection with the contempt proceeding may be
assessed in the discretion of the court. If the contempt consists of
the failure to perform an act in the power of the person to perform
and the court finds the person has the present ability to perform the
act so ordered, the person may be fined or imprisoned until its
performance.
16. C.R.C.P. 107(e) provides that remedial and punitive sanctions may be combined
by the court. Plaintiffs request as a remedial sanction that defendants be ordered to pay into the
court registry the $349,990 which was disbursed in violation of the TRO, and that plaintiffs be
awarded their costs and attorney fees. Plaintiffs request as punitive sanctions, especially for
defendants' payment to Thomas & Genshaft, that the court expressly find that defendants'
4
conduct was offensive to the authority and dignity of the court, and impose an appropriate fine,
in an amount not less than $10,000, therefore.
17. This motion is directed against improper payments defendants have made to
themselves since the entry of the TRO on June 24. These infractions are only the tip of the
iceberg. The audit of the membership account that the Court authorized in its June 24 order
revealed that, since January 1, 2011, defendants have diverted $1,275,919 from the dues they
collected from members to make payments that benefitted the defendants and were unrelated to
the maintenance and operation of the golf courses and related facilities. Among other things,
defendants paid themselves $315,000 in "management fees" on May 23 (the day before they
announced the closure of golf courses and other Club facilities), another $110,000 for "severence
and accrued vacation" payments, and another $527,536 to David Wilhelm as alleged "interest
expense. "
1
WHEREFORE, petitioner requests this court to issue an order to defendants to appear
before the court at a specific date and time for a hearing to show cause why there has been a
failure and/or refusal to comply with the order of this court; that this court find defendants in
both remedial and punitive contempt and impose the sanctions requested above; and for such
other relief the court deems proper.
On their face, defendants' actions not only violate the assurances that defendants gave to nil Club members
in January 2011 that all Club facilities would be open in 2011 (to induce their payment of 2011 dues), They also
violate the express terms of the Membership Plan that require Hthe Owner[ to] pay all opemting deficits ... resulting
fiom operation of the Club." Membership Plan all0-11 (Assessments). lly shulling down facilities lo pay
thcntsclvcs, defendants failed in their obligations to operate all Club facilities and, as a praclical malter, shifted the
burden of paying operating deficits lo Club members by depriving them of enjoyment of Club facilities thai the
Owner was required to support.
5

I, Charles Jackson, am a plaintiff in this lawsuit, an h:?;: revi wed the foregoing
factual allegations and believe them to be true to thfldf m no1 dge and belie;.
STATE OF COLORADO )
) ss.
COUNTY OF EAGLE )
Notary Public ,
f,;J Brett Steven Heckman
Signature on File
By::::-----::---=--:-------
Brell Steven Heckman
6
1
2
Q.
Q.
I'm sorry.
At any point in time were you made aware
3 that a temporary restraining order had been
4 entered by Judge Gannett at Eagle County District
5 Court?
6
7
A. I had heard there was a temporary
restraining order. I don't the second part of
8 your question, I'm not sure if it had been entered
9 by the judge dah, dah, dah, dah, dah. But I had
10 been made aware that there was a temporary
11 restraining order being filed or something. I
12 don't know the correct terminology.
13 Q. And how were you made aware of that?
14 A. Cathy Kulzer forwarded me -- well, first
15 we had a conversation that I needed to contact the
16 auditors, EKS&H, because we needed to revise the
17 scope of their original agreed-upon procedures
18 from earlier in 2011 because of the TRO that was
19
20
filed.
Q.
And I'm using my basic terminology.
And is that the only thing that Cathy
21 told you about the TRO, was that it required you
22 to go back to EKS&H regarding their audit?
23
24
25
A. It wasn't their audit. It was the
agreed-upon procedures. Two different things.
Q. Okay.
102
1
2
3
4
5
A.
Q.
Okay.
Well, let's back up. EKS&H as of March
2011 had certain agreed-upon procedures, correct?
A.
Q.
Correct.
And that included disbursement testing
6 procedures?
7
8
9
Correct. A.
Q. And why did EKS&H have these agreed-upon
procedures as of March 2011? For purposes of
10 certain audit work that EKS&H was doing?
11
12
13
A.
Q.
A.
No.
Okay.
It was -- my understanding was it was
14 conversations with, I'm going to say, Patrick from
15 my impression, in early 2011, perhaps working with
16 the CTC because the -- whatever different
17 direction from the escrow agreement or the escrow
18
19
20
21
22
23
24
25
agreement didn't go through. So there was efforts
on the Club's side to agree to these agreed-upon
procedures and have independent auditors or
auditors come in and perform these agreed-upon
procedures to review our disbursement testing.
So the Club engaged EKS&H. That
might have been February or March. It certainly
wasn't January. And then the first time EKS&H
103
1 came out was in -- we actually combined it with
2 their audit work because they were physically
3 going to be here, and they tested January through
4 March disbursements.
5 Q. And then at some point, if I'm
6 understanding your testimony, Cathy Kulzer tells
7 you that the procedure is now going to change?
8
9
A. Yes. She wanted -- I put her in contact
with -- with Joe Adams, the partner. She wanted
10 to expand the agreed-upon procedures to include
11 the trade revenue and then also needed to extend
12 the date for whatever was going on with the TRO.
13 And I believe EKS&H provided a
14 revised agreed-upon procedures agreement that
15 would need to be signed, and that was never signed
16 or executed.
17
18
19
20
21
22
23
24
I then was told that the auditors
representing the members would be coming out to
the Club at some point later. I don't remember
the dates, but maybe a month later.
Q. And then when do you remember when you
received a copy of a TRO?
A. I was forwarded an e-mail from Cathy. My
recollection was to forward that to the partner,
25 Joe Adams just because I didn't quite understand
104
105
what was going on. 1
2
3
4
Q. Well, were you told that the TRO governed
or affected what type of disbursements or payments
that CGC could make?
5 A. My understanding was that was the goal of
6 the TRO. I even had a conversation with Walter
7 when he came to the Club to perform this review.
8 I was definitely beginning to be increasingly
9 concerned because of the way the if this TRO
10 was going to govern. But I did not understand
11 that it was governing, and I remember asking that
12 question.
13
14
15
To whom? Q.
A. With Walter and Cathy when we were
wrapping up this meeting. That if it is governed
16 or executed, somebody needs to tell me.
17
18
19
20
21
22
23
24
Q. So as of August 2011 you did not
understand that the TRO was in effect?
A. In effect? I did not understand that the
TRO had been approved.
Q.
A.
Q.
By the court?
Correct.
Okay.
(Exhibit No. 11 was marked.)
For the record, I've marked as
25 Exhibit 11 a copy of an Amended Temporary
1
2
3
Restraining Order. Do you see that?
A. Yes.
Q. And then in the right upper corner it
4 says e-filed document, Eagle County District
5
6
7
8
9
10
11
12
Court, and then a filing date, a filing ID,
reviewing clerk.
A.
Q.
Yes.
Okay.
Do you see that?
Now, bear with me.
(Exhibit No. 12 was marked.)
and a
Q. I've marked as Exhibit 12 a copy of the
same order, but the top part says Granted In Part,
and it has Judge Gannett's signature. Do you see
13 that?
14
15
A.
Q.
Yes.
Okay. Now, I'll represent to you that
16 they're the same documents, with the exception of
17 the top and a note on the final page of
18 Exhibit 12, okay?
19
20
21
22
A. Okay. Yes.
Q. Do you recall when you were e-mailed a
copy of the Amended Temporary Restraining Order
whether you received the copy that says it was
23 granted, which is Exhibit 12, or did you receive
24 the copy which does not have such an indication,
25 which is Exhibit 11?
106
107
1
2
3
4
A. My recollection would be not this part
that says Granted In Part.
that.
I don't recall seeing
Q. Okay. Because if you saw a TRO which
5 said it's granted in part, is it fair to say that
6 you would believe that that was actually a
7 governing document or a document which had been in
8 effect?
9 A. If I understood that this TRO was granted
10 and, therefore, it was governing how account --
11 how items should be accounted for, I would have
12 absolutely abided by it.
13 Q. Okay. And I want you to read the first
14 sentence of Exhibit 12 out loud.
15 A. The first sentence of Exhibit 12. ''The
16 court orders that defendants shall not use funds
17 from 2011 annual dues received from the Club at
18 Cordillera (Club) members for any purpose other
19 than the necessary maintenance and operation of
20 the Club's four golf courses and related
21 facilities.''
22 Q. So when you received Exhibit 11, what
23 effect on your job performance did that first
24 sentence have on you?
25 A. Well, when I first read this, I was
1
2
-
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
concerned. But my understanding and through
communications was this wasn't -- this was, I
guess, the essence of the lawsuit to be
determined.
Q. But it wasn't governing you or the
payments you made or the accounting entries that
you made as of June 24, 2011?
A. No. As of?
Q. Well, or subsequently.
A. And subsequently. I became increasingly
concerned you through my conversation with Walter,
as he made me a little -- I guess he helped me
understand this a little better, that there was
the other side to this that perhaps, you know, I
should be paying more attention. And I was, I
guess, trusting and relying on my employers to
communicate to me.
Q. So no one communicated to you that the
first sentence of Exhibit 11 was in full force and
effect?
A. And should be governing our accounting?
Q. Yes.
A. No.
Q. When did you first learn that?
A. Now.
108
CERTIFICATE OF SERVICE
I hereby certify that on the 2nd day of December, 2011, I served the foregoing document
via Lexis Nexis to:
Peter W. Thomas
Thomas I Genshaft, LLP
Aspen Highlands
0039 Boomerang Road, Suite 8130
Robert P. Ingram
Michelle Prud'Homme
Dickinson, Prud'Homme, Adams & Ingram, LLP
730 Seventeenth Street, Suite 730
Denver, CO 80202-3504
David L. Len yo
Garfield & Hecht, P.C.
601 East Hyman Avenue
7
Is/ Margaret E. Barry
Signafllre on file
By: Is/ Margaret E. Barry
Margaret E. Barry, Legal Assistant
District Comi, Eagle County, Colorado
EFILED Document
0 Eagle County District Court 5th JD
iling Date: Dec 2 2011
iling ID:
cview Clerk: Karen Frederic!\.
Plaintiffs: t t
CHARLES JACKSON, MARY JACKSON and KEVIN B. COURT USE ONLY
ALLEN individually and on behalf of all others similarly
situated,
Defendants:
v.
lntervenor-Defendant/Counterclaimant and
Cross-Claimant:
ALPINE BANK
P. 0. Box 726
Tel.: (970) 926-5991
Fax: (970) 926-5995
Re!!. No. 15330
Div./Ctrm.:
ORDER FOR ISSUANCE OF CONTEMPT CITATION
IT IS SATISFACTORILY APPEARING TO THE COURT that sufficient grounds
exist for an Order to issue to defendants David A. Wilhelm, Cordillera Golf Club, LLC and
Wilhelm Family Partnership, LLC directing them to appear before this Court and show cause
why they should not be fined and/or imprisoned for contempt of Court for violating the
Amended Temporary Restraining Order entered by the Comi on June 24, 20 II by making
certain prohibited payments.
IT IS SO ORDERED by the Court that the Clerk of the Eagle County District Court shall
issue Citations directed to David A. Wilhelm, Cordillera Golf Club, LLC and Wilhelm Family
Partnership, LLC on the grounds alleged to this Comi, to appear before this Court on
______ , 2012 at the hour of _.m., and show cause why they or any of them
should not be punished for the contempt and neglect in refusing to com-ply with the Order of this
Comt entered on June 24, 2011.
IT IS FURTHER ORDERED that the Contempt Citation may be served by the Sheriff
or a private process server and that whomever serves the Citation will file a return of service
with this Court.
DONE AND ENTERED THIS DAY OF _______ , 2011.
BY THE COURT
District Court Judge
District CoUtt, Eagle County, Colorado
EFILED llocumcnt
I iling Date: Dec 2 2011 1:37PM
iling ID:
I cvicw Clerk: Karen Fredel'icli
Plaintiffs: t t
situated,
Defendants:
v.
Cross-Claimant:
ALPINE BANK
P. 0. Box 726
Tel.: (970) 926-5991
Fax: (970) 926-5995
Reg. No. 15330
CONTEMPT CITATION
Case Number: 20 II CV552
Div ./Ctrm.:
THE PEOPLE OF THE STATE OF COLORADO, TO THE SHERIFF OF EAGLE
COUNTY, and TO THE SHERIFF OF ANY OTHER COUNTY, GREETINGS:
WHEREAS, in cettain cause in said court, DAVID A. WILLHELM, defendant, has
violated cettain terms of an Amended Restraining Order entered June 24, 2011 by, among other
things, making prohibited payments from certain bank accounts.
WHEREAS, it appears to the court from the plaintiffs' motion, a copy of which is
attached, that the defendant has failed to comply with the court order;
THESE ARE THEREFORE TO COMMAND YOU, that you cite and give notice to the
said defendant, DAVID A. WILHELM, to be and appear before the Honorable Frederick
Gannett, of this court on the __ day of , 2012, at the hour of .m., to
show cause, if any, he has, why he should not be punished for contempt, for neglect and refusal
to comply with orders of the Court heretofore entered herein, and why that to vindicate the
dignity of the Court, a fine or imprisonment should not be imposed upon him and why he should
not be ordered to pay $349,990 into the Comt registry.
DONE this __ day of _______ ,, 2011.
District Court Clerk
2
District Coutt, Eagle County, Colorado
P. 0. Box 597, Eagle, Colorado 8I63I
EFILEO Document
I iling Date: Dec 2 2011 1 : 3 7 P ~ I i\IST
I iling ID: 41197365
C\'icw Clerk: Karen Frederick
Plaintiffs: t t
situated,
Defendants:
v.
Cross-Claimant:
ALPINE BANK
P. 0. Box 726
Edwards, Colorado 8I632
Tel.: (970) 926-599I
Fax: (970) 926-5995
Reg. No. I5330
CONTEMPT CITATION
Case Number: 20IICV552
Div./Ctrm.:
WHEREAS, in certain cause in said coutt, CORDILLERA GOLF CLUB, LLC,
defendant, has violated certain terms of an Amended Restraining Order entered June 24, 20 II
by, among other things, making prohibited payments from certain bank accounts.
attached, that the defendant has failed to comply with the coutt order;
said defendant, CORDILLERA GOLF CLUB, LLC, to be and appear before the Honorable
Frederick Gannett, of this court on the __ day of , 2012, at the hour of-:----:
_.m., to show cause, if any, it has, why it should not be punished for contempt, for neglect and
refusal to comply with orders of the Court heretofore entered herein, and why that to vindicate
the dignity of the Cowi, a fine or imprisonment should not be imposed upon it and why it should
not be ordered to pay $349,990 into the Court registry.
DONE this __ day of _______ , 2011.
2
EFILED Documcn
iling Date: Dec 2 2011 l:37Pi\I i\IST
iling ID: ~ 1 1 9 7 3 6 5
C\'icw Clerk: Karen Frcc.lcricl<
Plaintiffs: t t
situated,
Defendants:
v.
Cross-Claimant:
ALPINE BANK
P. 0. Box 726
Tel.: (970) 926-5991
Fax: (970) 926-5995
Reg. No. 15330
CONTEMPT CITATION
Div./Ctrm.:
WHEREAS, in cetiain cause in said court, WILHELM FAMILY PARTNERSHIP, LLC,
defendant, has violated cetiain terms of an Amended Restraining Order entered June 24, 20 II
by, among other things, making prohibited payments from certain bank accounts.
attached, that the defendant has failed to comply with the court order;
said defendant, WILHELM FAMILY PARTNERSHIP, LLC, to be and appear before the
Honorable Frederick Gannett, of this coutt on the __ day of , 2012, at the hour of
---;-- _.m., to show cause, if any, it has, why it should not be punished for contempt, for
neglect and refusal to comply with orders of the Court heretofore entered herein, and why that to
vindicate the dignity of the Court, a fine or imprisonment should not be imposed upon it and why
it should not be ordered to pay $349,990 into the Coutt registry.
DONE this __ day of _______ , 2011.
2
Exhibit D

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
DISTRICT OF DELAWARE

IN RE: ) Case No. 12-10344 (CSS)
) Chapter 11
SAAB CARS NORTH AMERICA INC., )
) Courtroom No. 6
Debtor. ) 824 Market Street
) Wilmington, Delaware 19801
)
) February 23, 2011
) 2:00 P.M.

TRANSCRIPT OF HEARING
BEFORE HONORABLE CHRISTOPHER S. SONTCHI
UNITED STATES BANKRUPTCY JUDGE

APPEARANCES:

For the Debtors: Stevens & Lee, P.C.
BY: JOSEPH H. HUSTON, JR., ESQ.
1105 N. Market Street, Suite 700
Wilmington, DE 19801
(302) 425-3310

For Ally Financial: Cohen & Seglias
By: JAMES HARKER, ESQ.
Nemours Building
1007 North Orange Street, Suite 1130
(302) 425-5089

ECRO: LESLIE MURIN

Transcription Service: Reliable
1007 N. Orange Street
Telephone: (302) 654-8080
E-Mail: gmatthews@reliable-co.com

Proceedings recorded by electronic sound recording:
transcript produced by transcription service.
2
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25

INDEX
Page
NOTICE OF AGENDA MATTERS:
For the Debtors, by Mr. Huston 4
For Ally Financial, Mr. Harker 5
For the Debtors, by Mr. Sendek 5
For Caterpillar, by Mr. Duhig 13
For Creditors, by Mr. Snyder 14
For Ally Financial, Mr. Tatelbaum 18
For U.S. Trustee, by Ms. Leamy 19
For the Debtors, by Mr. Random 24

3
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
THE CLERK: All rise.
THE COURT: Please be seated. Sorry for the delay,
good morning.
MR. HUSTON: Good afternoon, Your Honor, may I please
the Court, Joseph -
THE COURT: Good afternoon. Sorry, I said good
morning. I promise Im awake, were good.
MR. HUSTON: Well good morning, Your Honor, may I
please the Court, Joseph Huston of Stevens & Lee on behalf of
Saab Cars North America. And with me, I have Thomas Radom
and Bruce Sendek of Butzel Long, and also Mr. Tim Colbeck,
who is the President Chief Operating Officer of Saab Cars
North America. Your Honor has scheduled this as a status
conference, and I noticed that that entry is noticeably
absent from our agenda, but we have on the agenda, and I
dont know if Your Honor wants a status conference on this,
but we also have going forward our motion to transfer venue
to the Eastern District of Michigan.
THE COURT: Well I think I do that with Chapter 7
cases for corporations because if people dont put anything
on the docket, I dont know whats going on.
MR. HUSTON: Very good.
THE COURT: Having read all the venue issues I think
I have a real good clear of this idea of this status of the
case.
4
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
MR. HUSTON: Okay, very good.
THE COURT: You can go right into the motions, a
motion --
MR. HUSTON: With your permission, Your Honor, Mr.
Sendek will conduct the merits of the motion to transfer.
THE COURT: Very good.
MR. HUTSON: Thanks.
MR. HARKER: Your Honor, may I just speaking James
Harker. I am local counsel for Ally Bank, and I would like
to introduce to the Court Mr. Charles Tatelbaum. Hes
appeared in this District on a number of occasions, but he
has not had the honor of appearing before you. And he has
been admitted pro hac vice in this case.
THE COURT: Very good; welcome, sir.
MR. SENDEK: Good morning, Your Honor, Bruce Sendek
from the firm of Butzel Long from Detroit. I am pleased to
be here. First time I have ever been in the Bankruptcy Court
in Delaware, and its a privilege.
THE COURT: Okay.
MR. SENDEK: Im here today with my partner, Tom
Radom. Hes the chief bankruptcy counsel for Saab Cars North
America who is also with Butzel Long Firm. And also with me
today is Tim Colbeck. He is the President and Chief
Operating Officer for Saab Cars North America.
Both Mr. Radom and Mr. Colbeck submitted affidavits
5
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
in connection with the motion for the Court which is a motion
to transfer venue, of course, to the Eastern District of
Michigan, the Bankruptcy Court there. Under Rule 1014(a)
which Im sure the Court is well familiar with the standard
which should be allowed if in the sound discretion of the
Court, the convenience of the parties, or the interest of
justice sole provide. And in this situation, we clearly feel
that both prongs, although one or the other may be met.
Theyre both met here, Your Honor.
This is a situation that I think is well suited for
the transfer. In the interest of justice, Ill speak to that
first of all. Saab Cars North America, sometimes referred to
as SCNA, S-c-n-a, is a wholly owned subsidiary of Saab
Automobile AB, a Swedish Company. Saab AB filed for the
Swedish version of a Chapter 7 in December. I believe the
date was December 19
th
. Saab AB was the manufacturer of Saab
brand automobiles. And, of course, when that occurred there
was no more supply coming to Saab Cars North America which is
in the business of distributing cars in North America,
attending to warranty needs, service needs, and marketing
needs and interacting with the dealers among many others.
So at that point, SCNA began looking toward
liquidating the company. And they, on December 20
th
, entered
into a trust mortgage with McTevia Associates to conduct the
liquidation, and that proceeded, and it was actually going
6
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
fairly well. The point that had to be crossed in order to
continue was to deal with Ally. Ally Financial, formerly
GMAC, asserted a lien and sought to foreclose on the lien on
vehicles that were held in ports across the country; three
ports, actually: New Jersey, Georgia and California. They
started three separate actions. And, at first, we began to
defend those actions and as critical dates in the nature of
claimant delivery, replevin in some states.
And as those dates appeared closer, it appeared as
though we would either have to work out an arrangement with
Ally, or we would have to file a bankruptcy proceeding. At
all times, as reflected in the affidavit of Tom Radom, the
counsel for dealers who represents the petitioner which is a
part, which is a portion of the dealer group, was advised of
what was proceeding. And we did try to reach an accord with
Ally. That fell through and, of course, the dealer group was
immediately notified of that. With that in mind, there was,
the road ahead was rather clear. We were going to file for
bankruptcy in the Eastern District of Michigan.
And, in fact, we had already had the board resolution
from SCNAs board to do just that. Its attached to Mr.
Radoms affidavit. It was also, I think, on December 20
th
,
2011, executed by the Board. And it gave McTevia the
authority to do so if it became necessary in his judgment.
So we were going to do that, and Tom Radom advised, counsel
7
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
for the dealer for the petitioners, that the following week,
likely Tuesday, we would file the petition, and asked them to
keep that confidential, and asked them - well that was asked
the point, asked them to keep that confidential, and thats
what the plan was.
And then, of course, as reflected in the affidavit in
our papers, counsel for the dealer acted on that confidential
communication and brought the proceeding here, which is why
we are here today. If it hadnt been for the involuntary
petition filed on January 30
th
, Monday morning early following
the conversation on Friday with Tom Radom, we would have been
in the Eastern District of Michigan, because the plan was as
exactly as stated to file that Tuesday. So here we are, and
it is a classic dash to the Courthouse by a counsel for
petitioners.
And when Tom Radom, as reflected in this
declaration, called the counsel for the petitioners on
Monday, or I think it was the other way around because the
petitioners counsel called Tom Radom to tell him what he had
done, and said sorry but its a closer train ride for me to
be here in Delaware from my office in New York then to fly to
Detroit. And no doubt it is more convenient for petitioners
counsel, but thats not a factor that the Court should weigh,
or ought to weigh in determining convenience.
It happens to be, I think, the only factor that the
8
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
petitioners can point to that really weighs in favor of
keeping the case here as opposed to the many factors that are
outlined in our motion and in the declarations. In Michigan,
there is a significant number of contacts, events that will
relate to the bankruptcy proceeding. SCNAs headquarters is
there. Petitioners make a point of saying that were going
to close that office, which is true, to save the rent on it.
Were moving operations, most likely, to the offices of
McTevia and Associates.
SCNAs employees which numbered about 50 are all
Detroit area residents, except for -- excuse me, SCNAs
employees who worked in the offices in the Detroit area,
there were some field employees, they are all residents of
Michigan except for Mr. Colbeck who is a resident of New
Jersey and commuted to Detroit. Our books and records are in
Detroit. Significant creditors of SCNA are in Detroit.
There is one marketing consultant who has made a claim for a
half a million dollars. Theres other marketing type
consultants who have made claims, substantial claims also
here in Detroit. The secured, one of the principal secured
Debtor who claims that they are owed $61 million dollars from
SCNA is Ally. And Allys headquartered in Detroit.
THE COURT: Ally can go anywhere.
MR. SENDEK: Im sorry.
THE COURT: Ally can go anywhere. I see Ally all the
9
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
time. Theyre a national concern.
MR. SENDEK: Right.
THE COURT: Wheres the workout guy thats working on
the case, where is he?
MR. SENDEK: The individuals that SCNA dealt with in
terms of financing, I believe, are all in the Detroit area.
THE COURT: Okay.
MR. SENDEK: And I dont know who the workout guy, if
they assigned a workout guy to it as well. The other
principal secured creditor is Caterpillar Logistics. Theyre
headquartered outside of Chicago. They actually support this
motion. And the reason, again, has to do with the interest
of justice.
SCNA does not have a lot of cash to work through what
its doing now as part of its liquidation and bankruptcy
proceeding. It has very limited funds, but it is doing work
thats very important, and work that will benefit the entire
creditor group including the dealers, including customers of
Saab vehicles. At this very time, I mean, today, yesterday
and ongoing, Mr. Colbeck is trying to work out arrangements
to provide customers with the ability to get warranty
coverage on the vehicles that they purchased from the dealers
-- excuse me, from dealers that were the Saab AB automobiles.
They are covered by General Motors. General Motors
covers warranties for pre, for 2009 model year cars and
10
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
before, but not for after. So its a big issue, and Mr.
Colbeck is trying to accomplish something there for the
benefit of all the creditors. Assets are being sold for the
benefit of all creditors. Theres an important work being
done by Mr. McTevia right now in terms of securing parts for
the benefit of all creditors and enhancing the value of the
vehicles and into the benefit of the customers as well.
One asset that SCNA has is, are a ship of parts.
Theyre held by Caterpillar Logistics, but there are parts.
And SCNA has made arrangements to sell those parts to dealers
so that they can service their customers, and thats some of
the work thats being done right now. And there needs to be
longer term solutions in place which theyre trying to do in
order to secure an ongoing source of parts, which will in
order to the benefit of many. It will bring additional cash
and assets to the estate and value to the estate, and thats
an important thing and with more value, and more assets, and
more cash which we are realizing right now by virtue of this
arrangement with Caterpillar.
We have an arrangement right now that were receiving
$68,000.00 a week from Caterpillar through our sales, which
ultimately will enter into the benefit of all creditors.
That work is being done in Detroit by McTevia and Associates,
and will be ongoing. Those are just a few examples, but
again, to the extent that this action continues there will be
11
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
a likely confrontation with General Motors. There is a 20
plus million dollar receivable on SCNA books for warranty
reimbursement which GM is denying. It has an obligation to
pay. The dealers have a definite interest in seeing that
pursued and will probably be part of any subsequent
litigation.
General Motors and all the people that SCNA dealt
with at General Motors are in Detroit area, in Renaissance
Center in Detroit. The SCNA people who worked on the
warranty issues are employees, ex-employees of SCNA, maybe a
couple of them have been maintained for now, but they are
Michigan residents all in the Detroit area. And, well I
think thats, I think theres just a host of reasons, Your
Honor, why in the interest of justice it should be
transferred, and for the convenience of the party. And yes
they won the race to the Courthouse, but they shouldnt have.
There was no good reason to bring this action in
Delaware. Had counsel allowed things to progress as told to
him by Mr. Radom, we would be in Detroit, and everyone could
pursue their claims and rights. The dealer groups that are
represented that makes up the petitioner group, theyre
scattered. Sure, there are some in this - theyre some
within driving range to Delaware, but theyre across the
country. There are dealers in Texas, California, Indiana,
Michigan, Illinois, throughout the country. Interestingly,
12
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
theres one Saab dealer in the state of Delaware who is not a
part of the petitioner group. So what we have is no assets
here. We do have assets in Detroit.
There was a statement made in the response that there
are no assets here. The assets are in Pennsylvania held by
Caterpillar or held in the warehouse. Theyre our assets,
but thats not entirely correct. There are accounts
maintained in Detroit area.
THE COURT: Bank accounts?
MR. SENDEK: Theyre bank accounts. There are
vehicles in the Detroit area. Theres something in the
neighborhood of 60 vehicles in Detroit and personal property
in Detroit; again, weighed against nothing in Delaware.
Thank you, Your Honor.
THE COURT: Okay, anyone else in support of the
motion?
MR. DUHIG: Good afternoon, Your Honor, Peter Duhig
of Buchanan Ingersoll & Rooney on behalf of Caterpillar
Logistics Services. Your Honor, Caterpillar Logistics is a
secured creditor. It filed a response in support of SCNAs
motion to transfer venue. Basically to highlight that, if
this case stays here, the administrative costs are likely to
be much higher. It would require long distance travel for
the Debtors, McTevia who is the mortgage Trustee, officers
and witnesses. Its also going to require local counsel.
13
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
And, Your Honor, this is a liquidating case. There arent a
lot of assets that are going to be available to distribute to
creditors. So its our position that the most efficient,
cost effective venue for this case is the Eastern District in
Michigan. So with that we ask that the Court approve SCNAs
motion.
THE COURT: Where are the parts inventory that your
client is in possession of?
MR. DUHIG: They are in a warehouse in Pennsylvania.
THE COURT: Where in Pennsylvania?
MR. DUHIG: It is in Allentown; thank you.
THE COURT: All right, thank you.
MR. DUHIG: Thank you.
THE COURT: Well hear from the movants, or excuse
me, the petitioning creditors.
MR. SNYDER: Thank you, Your Honor. Good afternoon,
Eric Snyder of Wilk Auslander for the 82 petitioning
creditors, and the opposition was filed on behalf of the
dealer network which is 165 dealers. I would like to thank
Your Honor for moving this hearing up. It was originally
schedule for next Friday so that it could be heard today.
After hearing counsel and reviewing the reply, Your Honor, I
believe there are certain facts and evidence that remain
undisputed.
One, that the dealers, 165 of them in 39 states with
14
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
potential claims in excess of $30 million dollars favor venue
here. Two, that only one potential creditor Caterpillar
whose claim is least related, and who the Debtor admits in
the liquidation analysis that was in next to our opposition
is owed no more than $662,000.00. And the reason, Your
Honor, I point out that its least related is if, in fact,
the Debtor is successful in its objective of selling the
parts distribution business, than that claim which is secured
might be nothing more than a lease cure claim, that would be
cured upon assumption and assignment of the lease.
Three, Ally, who the Debtor suggested in his motion
supported the transfer of venue, filed two motions the next
day in this Court seeking substantive relief does not support
transfer, and does not come out in favor in of transfer. And
I would suggest that silence speaks volumes. Substantially,
all the new vehicles undisputed, Your Honor, and the parts
are located in this Circuit. Theyre not located in
Michigan, and there are no assets other than this cash weve
heard about, and some used cars that counsel referred to that
are located in Michigan.
The Debtors CEO, as weve heard, resides in New
Jersey and is here today on behalf of the movant, not Mr.
McTevia. And a little bit about the filing, Your Honor. In
the motion they state that they had the authority since
December 20
th
to seek bankruptcy relief. That was their
15
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
choice, business judgment or, otherwise, to do nothing for
the intervening six week period. SCNA doesnt suggest it
shouldnt be in bankruptcy. In fact, it annexes a petition
to its motion saying that if the Court grants its motion to
transfer venue, then it will file right away in Detroit. So
the issue isnt whether venue is convenient or inconvenient,
its simply that SCNA doesnt want to be here.
Theyve now pointed to any factors relying on
convenience of the parties. Theyve said whoops. They filed
here before we could file in Detroit, and just let us out,
and thats not the appropriate test. With respect to the
fact is, Your Honor, I believe the opposition, as I set forth
above, remains undisputed.
Just one point that I believe was omitted from the
opposition, and thats with respect to what law applies.
While it is true that the dealers sales and service
agreements contemplate that Michigan law applies to
interpretations of the dealers sales and service agreement,
theres little doubt at this stage of SCNAs life that the
issue is going to be about the termination of these franchise
agreements.
As weve heard the Debtor is liquidating. There is
no warranty support. There is no parts support, and there
are new vehicles. And as Im sure the Court is well aware,
the rights of each of the dealers upon termination of their
16
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
franchises are determined under the applicable law of the
state where the franchise is located. So we believe that
although Michigan law is stated to be with respect to
interpretations of the dealers sales and service agreement,
that the ultimate rights -- and what I mean rights, I mean
the claims of each of the dealers -- are going to be relying
on applicable state law regarding the ultimate rejection and
termination of their franchise agreements.
I understand the Debtor is in a bit of a box because,
on one hand, they say they dont really have the assets to
come to Detroit and, the other hand, then the reply in
paragraph six they point to in what I quote is substantial
legal liquid assets in Michigan, and refer to over $3 million
dollars in cash sitting in Michigan accounts. They also
state in there liquidation analysis that Allys claims is
about $300,000.00, but, of course, now they claim that Allys
claims is potentially $61 million dollars.
The test itself is fairly clear, and Im aware that
Your Honor recently applied the test in Visteon to a similar
situation. The opposition goes through the points, and in
light of the number of creditors and the amount of creditors
that comprise of both the dealer network, in general, and the
petitioning creditors, in particular, we believe that SCNA
has not met its heavy burden to demonstrate convenience of
the parties that would warrant transfer. Thank you, Your
17
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Honor.
THE COURT: Youre welcome; hear from Ally.
MR. TATELBAUM: Thank you, Your Honor. I guess in 45
years in practicing bankruptcy law Ive never had a case
where Ive taken no position where my client has been
referenced so much. We did not file anything on purpose. We
take no position on the motion. To answer Your Honors
question if your Court is interested, there are two workout
people. One divides his time between the United Kingdom and
Sweden, and one is in Detroit, counsel is in Florida. So
its a big triangle.
Because there have been some statements made, and
this is a status conference as well, I would just like to
make a couple of positions clear.
THE COURT: Please.
MR. TATELBAUM: There is no question that Ally has a
first priority perfected security interest in the vehicles in
the ports. There is no question that we have not only a
first priority perfected security interest, we have an
assignment of the $20 million dollar account that GM
purportedly owes. So those two assets are subject. We do
not have a security interest in the parts. We have vehicles
and vehicle related receivables.
We have a cross collateralization agreement, cross
guaranties with the Swedish Company, and the UK Company and
18
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
the France Company, and all. And our debt is currently about
$61 million dollars, all across collateral-wise. I just
wanted to make that clear to the Court, so that the Court
understands the global because theres a lot of - I feel
like the orphan child, and everybody uses us to their
advantage, fine. You know, Your Honors going to make the
decision.
THE COURT: Where are the vehicles now? Theyre
still in the port?
MR. TATELBAUM: Majority of them are in Port Newark.
There is a much smaller group in Savannah Georgia, and then a
little bit larger than Savannah in Oxnard Ventura California,
just north of Los Angeles.
THE COURT: Okay.
MR. TATELBAUM: And we did have replevin proceedings
pending against because its in (indiscernible), each one of
those three states, pending which were stayed by the
bankruptcy filing.
THE COURT: Okay.
MR. TATELBAUM: Thank you, sir.
THE COURT: Youre welcome.
MR. SENDEK: May I reply briefly, Your Honor?
THE COURT: Ms. Leamy do you wish to take a position?
MS. LEAMY: Your Honor, Jane Leamy for the United
States Trustee. Our office does not have a position on the
19
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
motion, and were just here to see the outcome.
THE COURT: Okay, yes Ill hear a reply.
MR. SENDEK: Thank you, Your Honor. First, Your
Honor, the reason we said Ally was in support of this motion
because that was our understanding at the time that weve
filed, and now weve learned that they take no position. And
I heard reference to the Visteon case, and Im familiar with
the factors that the Court applied in that case, which I
think weigh in our favor because those factors where we
pointed to a number of factors that demonstrate that the
Eastern District of Michigan is a more convenient venue.
I dont see those factors existing here, nor have I
heard any, nor have I heard any dispute from counsel, or in
their papers for the affidavit signed by Tom Radom and Mr.
Colbeck. And theyre both here if the Court would like to
take any testimony from them. They are available to do so,
but I have heard no disagreement with those positions.
Now Ive heard, and in the Visteon case who also say
a significant difference. There is that that was the Debtor.
These are a number of unsecured creditors trying to change
the landscape, and I cite to the Court to the case we cited
in our reply brief the Hunt vs. Bankers Trust case. It says
unsecured creditors whoever have no right to dictate venue,
although they do have the right to be heard on issues of
propriety of transfer.
20
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
The business judgment of the Debtor, I think, is
entitled to a significant amount of weight here. Theres
been a number of numbers tossed around by counsel for the
Debtors, but the fact is that -- excuse me, the fact is that
the dealer group is only represented of unsecured creditors
and only a small part of them. Our schedules show that are
$12 million dollars of unsecured claims made by various
parties. Of that group, the dealers represent $4 million
dollars.
And, of course, then theres the secured creditors
which are Ally which makes a significant claim. And then
there is Caterpillar. And the fact Caterpillar has made
known to SCNA that it has a contingent claim of $3.5 million
dollars for its, for the obligations under its agreements
with Caterpillar.
THE COURT: (indiscernible) here is the purported
Debtor has to do here is 1) resolve the issue with the cars;
2) resolve the issue on any accounts receivable; 3) resolve
the issue with the dealers; I guess 4) resolve the issue with
the parts. Thats pretty much what youre going to do in
bankruptcy.
MR. SENDEK: And try to make an accommodation for
ongoing warranty service for the vehicles, thats another
important aspect.
THE COURT: Okay, so very good. Okay, thank you.
21
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Yes warranty service, all right. Well, let me just run
through it. Caterpillar which is the parts issue supports
you. Ally which is the car issue takes no position. The
warranty claimants, obviously, want to stay here, and the
people who got the assignment for the accounts receivable
from GM, which is Ally, take no position.
You know, Im a little unclear on what, and maybe you
could flush out to me what the status of or how you intend to
proceed with the attempt to get warranty service for the post
2009 cars.
MR. SENDEK: Okay, yes as to warranty if I may just
add this, Your Honor, the customers, the ultimate buyers of
the Saab vehicles have an interest in the warranty claims
and, of course, in a warranty disposition. Of course,
theyre scattered all across the country. And weve heard
from a number of Attorney Generals in various states asking
about how cars are going to be serviced.
THE COURT: Thats not in front of me unless youve
got some evidence.
MR. SENDEK: No, Your Honor, thats not in front of
you. And as far dealing with the warranty -- first of all,
thats going to be handled through McTevia Associates, and
probably relying on Mr. Colbeck, as well and his assistants.
And I do need to correct something. McTevia Associates is
the management of the company now, not Mr. Colbeck under the,
22
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
well under agreements that were made. How will that be done?
Well I dont know. Hopefully, its going to be a negotiated
arrangement with General Motors that theyll cover the - so
that they will cover warranty obligations under new Saab
vehicles or Saab vehicles sold since they sold the company.
We do believe that there is some leverage and, as I
say, we have a 20 plus million dollar receivable from General
Motors. So can that be negotiated? I dont know yet, but --
THE COURT: [indiscernible] negotiation.
MR. SENDEK: -- it could be.
THE COURT: Okay. Sorry I interrupted you. You can
go ahead.
MR. SENDEK: Okay and as I say, Your Honor, theres
no assets in Delaware, but there are assets, albeit accounts.
There are assets in Michigan. We have an operating account
$400,000.00, and that was my point earlier. We have limited
funds in which to run this. We have more funds coming in
through our arrangements that we have with Caterpillar, but
theyre limited, and we have to use them wisely. Its
expensive; extremely expensive for us to hire local counsel,
to make trips back and forth to Delaware to bring people into
this Court as may be needed. Its just an expensive
administration. Thats why the plan was always to move
forward in Detroit. Again, we would be there except for the
race to the Courthouse which I dont think ought to be
23
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
rewarded. Thank you, Your Honor.
THE COURT: Youre welcome; yes sir.
MR. RADOM: Hi, Your Honor, Tom Radom for SCNA. Im
not going to repeat what Mr. Sendek said. Its just that the
Ally motions are --
THE COURT: Are you with the same firm?
MR. RADOM: Yes.
THE COURT: All right.
MR. RADOM: The Ally motions are basically on my
docket, and I just didnt want the record to reflect that
there was no response to statements made by Mr. Tatelbaum,
this counsel to Ally in connection with the validity of their
security interest, the nature of their claims against this GM
receivables and so forth. Those items are in dispute, and I
just want the record to reflect that.
THE COURT: Im sorry, anyone else; anything further?
MR. SNYDER: No, Your Honor, thank you.
THE COURT: Okay, Ill take a short recess.
(Recess 2:49:03 to 3:17:23)
THE COURT: Again, sorry for the delay. Okay, we
have before the Court a motion to transfer venue of a Chapter
11 case. The facts are important, I think, to put on the
record for the support of the Courts reasoning. This was
filed as an involuntary case. The time to contest entry of
order for relief has past, so I dont think technically an
24
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
order is on the docket yet, but the response was due by the
23
rd
which is, is that today? So its due today; there you
go. Ill assume youre not going to contest entry of an
order for relief, is that correct?
MR. RADOM: We were certainly hoping that the Eastern
District of Michigan would be the Court to have order of
relief, but --
THE COURT: Well I know that.
MR. RADOM: But, no. I mean, our intentions all
along was to pursue a Chapter 11.
THE COURT: Okay, well I think that fact is
significant. Obviously, there was a race to the Courthouse
here. I dont think there anything pejorative about racing
to the Courthouse. It happens all over the country every
day. And thats one of the things bankruptcys designed to
stop. The filing is certainly part of a race to the
Courthouse. So, obviously, there was a filing on Monday, and
there was going to be a subsequent filing a day or so later
by the Debtor.
But, the Debtor has acknowledged its going to be in
bankruptcy. And I think thats important in the context of
the weight that the Court would give to the desire of the
filing creditors or the plaintiff; however, you want to think
about it. Its not a question of whether there will be a
bankruptcy. Its a question of where. And, I think, that
25
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
does a lot to alleviate the weight of the choice of the
petitioning creditors because, ultimately, generally, the
choice is of the Debtor whether to file and where to file
bankruptcy.
There is nothing on the record here that indicates
they werent going to file, and it was just a question of
timing and location. So for purposes of deciding the motion,
I think the issue of great weight of choice of the first
filer is, basically, neutral. I acknowledge very much that
the involuntary creditors have a strong position, and they
were the first to the Courthouse, but I think thats
alleviated enough by the fact that the Debtor acknowledges it
will be in bankruptcy wherever it will be; that that really
becomes a neutral factor for the Court.
I could go through the various factors that the
Courts have applied, the (indiscernible), of course, in
Visteon which was more in the case of a traditional adversary
proceeding; the six factor case then applied in the
bankruptcy venue -- excuse me, in the actual bankruptcy case,
transfers more generally. But in my mind in this case goes
really to competing factors.
One is where are the Debtors, and whats going to be
going on in connection with the Debtors operations. Well,
first of all, its a liquidation. So traditional issues of
willing to have the bankruptcy in a convenient forum for
26
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
management, for instance, just dont really apply. Its not
like you have a 150 people in the corporate headquarters
running a company. Youve got a liquidation. There are
certainly limited fixed assets. Theyre going to be run
through some of these conference rooms in Detroit or in the
Detroit Metro area. Its not particularly moving in the
context of where should the bankruptcy be filed.
And talk about what the Debtor has to do; whats on
its plate. And I think it is significant that Ally Financial
does not take a position. They are a very large creditor,
secured and some value of collateral. We dont know what it
is, but at least for purposes of today its nine hundred and
something new vehicles. And its a $20 million dollar
account receivable from GM.
Two huge pieces of the assets of the Debtor, and the
party that has the best interest in them doesnt really care
whether its here or Detroit. You all right? Okay. The
parts; well the parts are in Pennsylvania, in Allentown. And
when you look at a liquidation of a case, you really look
more at where the asset is then where the asset may be being
managed.
So, for example, in a real estate, single asset real
estate case, you know, the management company may be in
Dallas, but the tract of land is in New Mexico. That case
should be in New Mexico because land is something really
27
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
unique. Obviously, clearly land is unique. And the
strongest interest for a piece of property is where that
property is.
The property were talking about is up in Allentown,
not in this District, some other Circuit, and about a two
hour drive, if not less. So that gives some weight to
keeping it here. Now at the same time, the party that is in
charge of the parts wants to transfer venue. So I dont
really think of that as a wash too, but the actual assets are
closer here. The person managing the assets is, you know,
wants it to be in Michigan, really kind of makes it a neutral
issue. So weve got the accounts receivable, the cars and
the parts all neutral; future warranties is in negotiation.
That can happen in a conference room anywhere from
(indiscernible) to keep its gain. It doesnt necessarily
matter where it is.
Now I have the dealers, and thats what it really
comes to down to, I think. Youve got the dealers versus
management, and he gets to control, in effect, where the case
will go forward. The dealers are all over the country,
obviously, but the unsecured creditors, they only have power
if they are able, somehow, to form together and act as one.
And theyve dont that, and theyve done that with counsel in
the State of New York. And that counsel supports keeping the
case here in Delaware. Management wants it in Michigan
28
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
primarily to make it convenient for its CRO. They are no
real assets in Michigan.
Theres a lease thats going to be rejected. There
are a few employees. Theres a CRO, and theres cash. None
of that is really substantial for purposes of having to be in
Detroit. The president of the company is in New Jersey, hes
the guy you brought today. The CRO is in Michigan, I dont
see him here. Its an important hearing. Since this is such
an important hearing I think it indicates with some
significance what their motivations might be. So its a long
way of saying its a kind of a coin flip. And if its a coin
flip it should stay where its at, you know, they tell me
this in Judge school if you dont who should win, then if you
move it then both sides loses.
I think the choice of the dealers here is got to
carry the day, as far as I can tell from this case the
primary activity here is really going to be the dealers
versus the Debtor. And theres nothing that hurts the
Debtor, really, coming to Delaware, staying in Delaware. The
costs arent really very significant. Mr. Huston wont cost
you a fortune. Hes a very good attorney. You know, where
the lawyers are we generally dont think about that pretty
much. Although, again, in a liquidating case where the
assets are much less than in a reorganization it probably has
more swing. So long story short I just wanted to go through
29
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
my various factors.
In a very close decision, Im sorry, in a very close
decision the dealers win in eight rounds to seven, and get or
maintain their, maintain where their want to be. So Im
going to deny the motion to transfer venue. Thats all we
have on the agenda for today, but does Ally want to talk
about whats coming up, I think its next week?
MR. TATELBAUM: Yes, sir. Next Friday we have a
motion to modify the automatic stay with respect to the
vehicles only, not on the receivables. And a motion to
prohibit use of cash collateral based upon an anticipation
that an order for relief is going to be entered, I wanted to
tee that up so that it would be an early issue, if there is
going to be an attempt. We believe there is because during
the gap period, the Debtor has sold some vehicles that we
believe are our collateral. Counsel has said its in escrow
which is fine, I take that representation. But we hear about
the dire straits so that, well something that needs to be
teed up for next Friday I hope.
THE COURT: Okay. Are there any traditional first
day, or emergency relief that you really need to get on the
Courts docket?
MR. TATELBAUM: Your Honor, may I raise one more
thing maybe for Friday?
THE COURT: Yes.
30
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
MR. TATELBAUM: Having heard what I heard today we
will probably be filing an objection to the McTevia entity as
CRO. Under the Michigan procedure which is like an
assignment for the benefit of creditors which we have in the
east, they actually do whats called a trust mortgage where
the assets are delivered to the Trustee, and the Trustee is
given a lien on those assets. Weve been after Mr. McTevia
and his company to release their lien. They havent so that
are a lien creditor, and were going to take the position
unless he does something that as a lien creditor hes not a
disinterested party that can - because he - if hes running
the business, how is he going to move to set aside his own
lien, among other things, and investigate the acts and
conduct. So I just wanted to - since that would normally be
a first day thing, I wanted to alert the Court that its not
a rubber stamp.
THE COURT: Okay, well usually, I mean, you can
usually we dont hear the actual retention on the first day.
Wed send that out on full notice.
MR. TATELBAUM: Okay, thank you.
THE COURT: Attention to professionals, etc. Usually
only a claims agent would be something we would look at if
necessary.
MR. TATELBAUM: Thank you, sir.
THE COURT: So what I was going to say, and Ill let
31
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
counsel speak, but I was going to say if you need a sort of
traditional first day type relief you can tee it up for March
2
nd
.
MR. RADOM: I appreciate that, were going to need in
order for use of cash collateral, but that will be my
stipulation between SCNA and Caterpillar Logistics, thats
the only cash collateral were using is subject to the lien
of Caterpillar Logistics.
THE COURT: Okay.
MR. RADOM: I dont, I mean, we already have an
agreement in place. I dont think that we need emergency
relief at this point in time, but we will tee that up. And
to the extent that we can bring it on for hearing by March
2
nd
, well do so. But because the operation itself has been
reduced substantially, its not like we need DIP financing,
you know, well have the traditional employment applications,
but as far as I can tell probably just the cash collateral
order. Getting that entered is probably the first priority
here. And then with respect to, we will be asking the Court
to approve Mr. McTevias retention as the Chief Restructuring
Officer.
I will address, I mean, I wasnt expecting to have to
address it today, but Mr. Tatelbaums client has already been
furnished with a termination statement of a security interest
that had been granted under the trust mortgage. The trust
32
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
mortgage itself has been terminated. To that extent Mr.
McTevias not a secured party here and the trust mortgage
itself was just designed to give Mr. McTevia the full
authority to wind down and liquidate the business for the
benefit of all creditors. The lien itself was really for the
benefit of all creditors, and didnt represent anything more
than that, it has been terminated.
THE COURT: Okay, all right. Go ahead and prepare an
order and yeah, the Court will prepare an order, sorry,
anything else?
MR. SNYDER: No, Your Honor.
THE COURT: All right, thank you. Were adjourned.
(Court Adjourned)
CERTIFICATE

I certify that the foregoing is a correct transcript from the
electronic sound recording of the proceedings in the above-
entitled matter.

/s/Mary Zajaczkowski March 19, 2012
Mary Zajaczkowski, CET**D-531 Date

Exhibit E
1 UNITED STATES BANKRUPTCY COURT
2 DISTRICT OF DELAWARE
3 Case No. 12-11564(CSS)
4 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
5 In the Matter of:
6
7 ALLIED SYSTEMS HOLDINGS, INC.,
8
9 Debtors.
10
11 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
12
13 United States Bankruptcy Court
14 824 North Market Street
15 Wilmington, Delaware
16
17 May 31, 2012
18 2:12 PM
19
20
21
22 B E F O R E :
23 HON CHRISTOPHER S. SONTCHI
24 U.S. BANKRUPTCY JUDGE
25 ECR OPERATOR: LESLIE MURIN
Page 1
VERITEXT REPORTING COMPANY
212-267-6868 www.veritext.com 516-608-2400
1 HEARING RE: Motion of Alleged Debtors to Transfer Venue of
2 these Cases to the United States Bankruptcy Court for the
3 Northern District of Georgia, Atlanta Division.
4
5 HEARING RE: Motion of Alleged Debtors to File Unrelated
6 Version of the Motion of Alleged Debtors to Transfer Venue
7 of these cases to the United States Bankruptcy Court for the
8 Northern District of Georgia, Atlanta Division.
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25 Transcribed by: Sheri Monroe
Page 2
212-267-6868 www.veritext.com 516-608-2400
1 A P P E A R A N C E S :
2 RICHARDS, LAYTON & FINGER, P.A.
3 Attorneys for the Debtors
4 One Rodney Square
5 920 North King Street
6 Wilmington, DE 19081
7
8 BY: CHRISTOPHER M. SAMIS, ESQ.
9 MARK D. COLLINS, ESQ.
10
11 TROUTMAN SANDERS
12 Attorney for the Debtors
13 600 Peachtree Street, NE
14 Suite 5200
15 Atlanta, GA 30308-2216
16
17 BY: JEFFREY W. KELLY, ESQ.
18
19
20
21
22
23
24
25
Page 3
212-267-6868 www.veritext.com 516-608-2400
1 LANDIS RATH & COBB, LLP
2 Attorney for Petitioning Creditors
3 919 Market Street
4 Suite 1800
6
7 BY: KERRI K. MUMFORD, ESQ.
8
9 SCHULTE ROTH & ZABEL, LLP
10 Attorney for Petitioning Creditors
11 919 Third Avenue
12 New York, NY 10022
13
14 BY: ADAM HARRIS, ESQ.
15 VICTORIA LEPORE, ESQ.
16
17 LATHAM & WATKINS, LLP
18 Attorney for Yucaipa
19 355 South Grand Avenue
20 Los Angeles, CA 90071
21
22 BY: ROBERT KLYMAN, ESQ.
23
24
25
Page 4
212-267-6868 www.veritext.com 516-608-2400
1 YOUNG CONAWAY STARGATT & TAYLOR, LLP
2 Attorney for Yucaipa
3 Rodney Square
4 1000 North King Street
6
7 BY: JOSEPH BARRY, ESQ.
8
9 FRIED, FRANK, HARRIS, SHRIVER & JACOBSON, LLP
10 Attorney for The CIT Group
11 One New York Plaza
12 New York, NY 10004
13
14 BY: GARY KAPLAN, ESQ.
15
16
17
18
19
20
21
22
23
24
25
Page 5
212-267-6868 www.veritext.com 516-608-2400
1 APPEARANCES: (Telephonically)
2 CATHY COPPAGE, Paul Hastings, LLP
3 SARAH BOEHM, McGuire Wood, LLP
4 PEG BRICKLEY, Dow Jones & Co.
5 THEO CIUPITU, Jack Cooper
6 EZRA H. COHEN, Troutman Sanders, LLP
7 RICHARD EHRLICH, Black Diamond Capital Management
8 ERIN KIM, Pension Benefit Guaranty Corp.
9 STEPHEN S. LAPLANTE, Miller Canfield Padock & Stone
10 DANIELLE SALTZ, Ford Motor Company
11 JEFFREY A. SCHAFFER, Spectrum Group
12 DEREX WALKER, Derex Walker
13
14
15
16
17
18
19
20
21
22
23
24
25
Page 6
212-267-6868 www.veritext.com 516-608-2400
1 P R O C E E D I N G S
2 THE COURT: Please be seated. Good afternoon.
3 MR. SAMIS: Your Honor, good afternoon. Your
4 Honor, for the record, Chris Samis of Richards, Layton &
5 Finger here today on behalf of the alleged debtors. Your
6 Honor, with me at counsel table is my colleague, Mr. Collins
7 as well as our co-counsel, Mr. Jeffrey Kelly of the Troutman
8 Sanders firm. Your Honor, also in the courtroom is Mr. John
9 Blount, the general counsel and chief administrative officer
10 of the debtors.
11 Your Honor, todays agenda only has one item of
12 any moment. The matter is a motion to transfer venue,
13 however, Your Honor, it is probably important to note that
14 Agenda Item Number 2 Your Honor entered the order on that,
15 that was the seal motion that was related to the motion to
16 transfer venue. And the order actually covers several other
17 seal motions as well that arent calendared for the hearing
18 today.
19 But, Your Honor, with that I turn the podium over
20 to Mr. Kelly.
21 THE COURT: All right. Thank you.
22 MR. KELLY: Good afternoon, Your Honor. May it
23 please the court, Jeff Kelly, for the record. Mr. Blount
24 has already been introduced by Mr. Samis.
25 The alleged debtors evidence today, Your Honor, in
Page 7
212-267-6868 www.veritext.com 516-608-2400
1 their support of their motion to transfer venue will consist
2 of facts set forth in the declaration of Scott Macaulay,
3 which was filed on May 21st. Its Docket Number 30, as
4 supplemented by my proffer of certain facts that Mr. Blount
5 would testify to if called as a witness.
6 I will mention that Mr. Harris and I spoke prior
7 to the hearing and Ive agreed that the facts that hes set
8 forth in his response are stipulated to and he need not call
9 any witnesses to establishes those facts and hes agreed
10 that I need not have Mr. Macaulay present today to back up
11 his declaration. Mr. Macaulay is, in fact, back in Atlanta
12 working on other issues related to this matter.
13 Your Honor, what I propose to do is proffer the
14 alleged debtors evidence in summary form and secondly, to
15 show that due to the still pending Allied Chapter 11 cases
16 in Atlanta under Bankruptcy Rule 1014B, it is up to Judge
17 Mullens (phonetic) in Atlanta to decide where these cases
18 should proceed.
19 THE COURT: Well then why havent you asked him?
20 MR. KELLY: Well, Your Honor, we havent asked him
21 because the situation that was presented to us was a motion
22 for appointment of a trustee with a motion to shorten time.
23 And we thought it prudent to go ahead and just raise with
24 Your Honor, immediately, the venue issue rather than having
25 competing motions going on in two different courts.
Page 8
212-267-6868 www.veritext.com 516-608-2400
1 And then at the status conference last week, Your
2 Honor, I think indicated that you would take up the issue of
3 venue today and decide whether or not 1014B applied, because
4 there were certain factual issues you wanted to have
5 addressed, which Im prepared to do today.
6 THE COURT: Okay.
7 MR. KELLY: Basically, the short answer is for us
8 not to set up competing motions in two different bankruptcy
9 courts.
10 Now, the last thing I intend to do today is to
11 show how the facts in any event demonstrate that both the
12 convenience of the parties and interest of justice lead to
13 the conclusion that venue of these cases should be
14 transferred to the bankruptcy court in Atlanta.
15 Your Honor, a unique circumstance that we have
16 intertwined in this situation is the alleged debtors desire
17 to maintain confidentiality of certain information for the
18 time being. Thats information thats been redacted from
19 our public filings. Were doing that in order to try to
20 limit the damage to the alleged debtors business, we believe
21 caused by these precipitous and unexpected, involuntary
22 filings. I will refer, from time to time, during my
23 presentation, to redacted information for that reason.
24 Your Honor, I would proffer through Mr. Blount,
25 who is here, and his first hand knowledge --
Page 9
212-267-6868 www.veritext.com 516-608-2400
1 THE COURT: Lets stop here just a second. Is
2 there any objection to, at least from an evidentiary basis,
3 proceeding as Mr. Kelly has outlined? None?
4 MR. HARRIS: I have no objection.
5 THE COURT: All right. So, well admit the
6 declaration of Mr. Macaulay, Docket Item 30, into evidence
7 without objection. And you may proceed with the proffer.
8 MR. KELLY: Thank you, Your Honor.
9 Mr. Blount, who is here in court today, has
10 firsthand knowledge of the redacted facts and he would
11 support those facts if called as a witness.
12 I do need to be clear, however, that Mr. Blount
13 does not have firsthand knowledge as to whether the
14 petitioning creditors were aware of the alleged debtors
15 redacted facts at the time that they filed the involuntary
16 petitions.
17 Your Honor, turning to the facts that are public,
18 with respect to Mr. Macaulays declaration, I would like to
19 just go to that declaration and make a summary proffer or
20 the pertinent parts.
21 The alleged debtor, Allied Systems Holding is the
22 ultimate parent of about 20 other companies including the
23 other alleged debtor, Allied Systems, Ltd.
24 Allied Systems Holdings, which Im going to refer
25 to as -- simply as Holdings, is a privately held Delaware
Page 10
212-267-6868 www.veritext.com 516-608-2400
1 Corporation headquartered in Atlanta. Holdings has three
2 direct subsidiaries, Allied Automotive Group, Inc., which is
3 a Georgia corporation, Access Group, which is also a Georgia
4 corporation and a captive insurance company incorporated
5 under the laws of the Cayman Islands.
6 Allied System Ltd., which is the other alleged
7 debtor aside from Holdings is a Georgia limited partnership
8 and is a subsidiary of Allied Automotive Group.
9 Holdings, itself, Your Honor, does not directly
10 engage in Allieds line of business. Allieds major line of
11 business is carried out by Georgia Corporation -- Allied
12 Automotive Group, Inc. and its direct and indirect
13 subsidiaries again, including the other alleged debtor
14 Allied Systems.
15 This major line of business is the car haul
16 business, basically its the transport of light vehicles,
17 such as automobiles from port -- the points of manufacturer
18 or other points of drop off, such as train railheads to
19 automobile dealerships throughout the United States and in
20 Canada.
21 Allieds major customers are automobile
22 manufacturers, including primarily Ford at this point.
23 Allied Automotive Group transports these vehicles by means
24 of specialized tractor trailers which are rigs. As of the
25 end of 2011, Allied owned about 2,400 rigs operated out of
Page 11
212-267-6868 www.veritext.com 516-608-2400
1 about 44 terminals, most of which are leased and located
2 within and throughout the United States and in Canada. None
3 are located in Delaware, two of the terminals are located in
4 Georgia, although one of those is used primarily as place
5 where parts are kept and stored for repairing or
6 refurbishing rigs.
7 Allied Automotive Groups drivers and most of its
8 terminal employees are unionized. These employees are
9 called the Teamster employees, Ill refer to them that way
10 are members of the local unions affiliated with the
11 International Brotherhood of Teamsters, which negotiates on
12 behalf of these local unions. Allied employs about 1,835
13 people of whom about 1,000 or so are Teamster employees.
14 Theres a smaller line of business that Allied is
15 in carried about by another Georgia Corporation, Access.
16 Access is essentially a logistics business for the
17 automotive industry in the United States and Canada, with
18 some yards service management carried out in Mexico.
19 The access group operates from 39 terminals
20 located in the United States, Canada, Mexico, none in
21 Delaware.
22 Turning to the first case, briefly, Your Honor,
23 the pending case thats ready to be closed. The alleged
24 debtors and most of their direct and indirect subsidiaries
25 were reorganized in Chapter 11 cases that were filed in the
Page 12
212-267-6868 www.veritext.com 516-608-2400
1 Northern District of Georgia in July of 2005, according to a
2 plan that was confirmed by Bankruptcy Judge, Ray Mullens in
3 May of 2007.
4 And when I say the alleged debtors were
5 reorganized, holdings as set forth in Mr. McCaulays
6 declaration is the successor by merger to the original
7 holding company, Allied Holding, Inc., that was the ultimate
8 parent at the time the Chapter 11 case was filed. When the
9 plan and reorganization was confirmed, Holding was created
10 as the subsidiary of the original holding company and then
11 merged into Holding, which is the surviving corporation.
12 In it, I mentioned, although the original Chapter
13 11 case is, in fact, ready to be closed, in fact, it is
14 still pending by Allied at this time.
15 THE COURT: Is Allied Systems Holdings, Inc. a
16 debtor in possession in the Chapter 11 in Georgia with a
17 known case number?
18 MR. KELLY: It is not a debtor in possession, it
19 is a successor to the original holding company. It was
20 created under the plan and its stock was issued under the
21 plan to general unsecured creditors of Allied --
22 THE COURT: Have those been operating free and
23 clear of any jurisdiction of the bankruptcy court?
24 MR. KELLY: Allied Systems Holding?
25 THE COURT: Yes.
Page 13
212-267-6868 www.veritext.com 516-608-2400
1 MR. KELLY: Except to the extent that its -- Im
2 sorry, Your Honor, I brushed up against the microphone.
3 THE COURT: Its okay.
4 MR. KELLY: Except to the extent that the ongoing
5 administration, which is one of the reasons that its taken
6 so long, has included issuing its stock to general unsecured
7 creditors.
8 But, its -- in fairness, it was not a debtor in
9 possession, it is the entity created under the plan as a
10 successor to a debtor in possession.
11 Your Honor, in the original case Chapter 11 case,
12 the goals were three fold, to increase revenue by increasing
13 customer pricing, to deleverage by conversion debt to
14 equity, which was I referred to a moment ago when I said
15 that Allied -- the current holding stock has been issued to
16 debt -- thus converting debt to equity.
17 And the third goal was to reduce labor costs
18 through reductions in compensation and changes in the work
19 rules with respect to the Teamsters, not to mention shared
20 sacrifice by non-union employees.
21 These goals were largely achieved in the first
22 case, Your Honor, with aid to Yucaipa Private Equity Funds.
23 During the original Chapter 11 case, Yucaipa, among other
24 things, was the catalyst for obtaining an agreement with the
25 teamsters to reduce labor costs for three years and finance
Page 14
212-267-6868 www.veritext.com 516-608-2400
1 the acquisition of additional rigs for Allied.
2 It supported a plan, this plan that converted
3 general unsecured debt into equity and aided Allied in
4 obtaining exit financing which it had to have to emerge from
5 bankruptcy, thats the same exit financing that we currently
6 -- that Black Diamond Spectrum and Yucaipa are both members
7 of. Yucaipa and the Teamsters, Your Honor, joined the
8 debtors as proponents of Allieds plan and Ive already
9 stated that the stock with issued to creditors and so forth.
10 Your Honor, turning to some of the more -- the
11 dryer venue related facts, Allied does not own any real
12 estate of other tangible outsets in Delaware and it has no
13 creditors doing business with it from Delaware.
14 Upon information and belief none of our employees
15 reside in Delaware, our headquarters are located in Atlanta,
16 with a smaller satellite office in Detroit. We currently
17 have 73 employees working out of our Atlanta headquarters,
18 another 55 employees working out of the Atlanta area
19 terminal that I mentioned, in Georgia.
20 Allied does own and lease real estate in Georgia.
21 None of our members of the board reside in Delaware. One
22 member of our board does split his residence between Georgia
23 and Michigan.
24 Virtually, and Ill come back to this in a moment,
25 virtually all of our key employees reside in Atlanta.
Page 15
212-267-6868 www.veritext.com 516-608-2400
1 Outside counsel, me are located in Atlanta. Given the
2 international presence of Allied, our creditors are spread
3 out over a wide geographic area. Theres a lot of real
4 estate to Michigan in that regard because of our ties to the
5 automotive industry.
6 We do not think any of our creditors interact
7 with us from locations in Delaware, Your Honor.
8 We fully respect to Mr. McCaulays statement that
9 Allieds key employees reside in Atlanta, Mr. Blount, who
10 again, is here today, would testify that it would fall to
11 him and Mr. Macaulay, both of whom reside in Atlanta, to be
12 witnesses for the alleged debtors in bankruptcy court
13 hearings.
14 Mr. Blount would further testify that due to cost
15 cutting moves necessitated by the recession as it has
16 impacted Allieds business in particular, the executive team
17 is currently stretched very thin as evidenced by the
18 numerous titles that Mr. Blount, himself has. And that it
19 would be and is a significant disruption to Allieds day to
20 day business for either or both him and/or Mr. Macaulay to
21 consume a day or more to travel to Delaware for court
22 hearings, as opposed to the far less oneness trip, if you
23 will, of getting in their car and driving 20 minutes from
24 the headquarters to the bankruptcy court in Atlanta.
25 Your Honor, those facts, along with the redacted
Page 16
212-267-6868 www.veritext.com 516-608-2400
1 facts that Mr. Blount also supports are the basis of our
2 venue transfer motion. I believe that in order of logical
3 progression, I would first take up the issue of the impact
4 of Bankruptcy Rule 1014B on the situation before the court.
5 THE COURT: Well, lets -- do you -- Mr. Harris,
6 do you want to cross-examine or with to cross-examine the
7 witness?
8 MR. HARRIS: I do not, Your Honor.
9 THE COURT: Okay. Very good. All right. You
10 can keep going.
11 MR. KELLY: Thank you, Your Honor. To paraphrase
12 Rule 1014B with respect to the present situation provides
13 that if cases are filed in different districts against a
14 debtor or an affiliate on motion filed in the district where
15 the petition first filed is pending, that court, that is the
16 court where the petition first filed is pending, may
17 determine in the interest of justice or for the convenience
18 of the parties in which district the case should proceed.
19 THE COURT: Uh-huh.
20 MR. KELLY: Here, Your Honor, the facts are that
21 the Atlanta Chapter 11 case of one of the alleged debtors,
22 which is the Georgia corporation, Allied Systems Ltd.,
23 which was a debtor in possession, Your Honor, in the first
24 case, is still pending. In all candor, the case is ready to
25 be closed. Judge Mullens recently signed an order resolving
Page 17
212-267-6868 www.veritext.com 516-608-2400
1 a very large administrative claim in that case. The Central
2 States claim, its a multi-employer fund thats related to
3 the Teamsters, that was one of the last large matters that
4 was left undone. I think that was resolved within the last
5 month or so. The case, thus in all candor, is ready to be
6 closed, but it is still pending, it has not been closed.
7 With respect to the other situation, moreover the
8 still pending Atlanta cases are clearly cases of affiliates
9 and that word does appear in the rule, as that word is used
10 in 1014B, of the other alleged debtor, Holdings.
11 So, in other words, the still pending cases are
12 cases of affiliates of Holdings.
13 So, to summarize, one of the alleged debtors is a
14 debtor in possession and is still pending cases in Atlanta,
15 the other is an affiliate of those debtors in possession and
16 its still a pending case.
17 THE COURT: Well, if you look at 1014 -- granted
18 all that. So, lets assume that -- I think fairly assume
19 that for purposes of 1014B, at least initially, that both of
20 the purported debtors in this case have -- are related to
21 cases pending in Georgia that are open.
22 It says that, in that case, it says that the court
23 may determine -- and it doesnt really -- so let me ask you,
24 which court?
25 MR. KELLY: Well, its just a matter of -- the way
Page 18
212-267-6868 www.veritext.com 516-608-2400
1 I read it is, its the court where the petition first filed
2 is pending.
3 THE COURT: Right.
4 MR. KELLY: Thats the way I -- I think the clear
5 reading of the ruling is.
6 THE COURT: All right. So, the Georgia court may
7 determine -- so, two questions, what if the Georgia court is
8 never asked or the Georgia court is asked and never makes a
9 decision, what happens?
10 And why thats important is, you have two pending
11 cases -- and what it really comes down to the last sentence,
12 which is sticky, that says the proceedings on other
13 petitions shall be stayed by the courts in which they have
14 been filed until the determination is made by the first
15 court.
16 So, in this instance and, again, it is what it is,
17 you havent asked Judge Mullens or its -- since its, they
18 determine, I suppose its possible you could ask a judge and
19 that judge simply never make a determination or say its not
20 going to make a determination. And were stuck in a
21 situation where we dont know what the determination is and
22 this court is stayed from doing anything further, so what
23 happens?
24 MR. KELLY: Ill respond directly. In partial
25 response, my experience with Judge Mullens is he promptly
Page 19
212-267-6868 www.veritext.com 516-608-2400
1 rules on everything thats brought before him, that
2 particular judge. And again, it was my intention -- and I
3 considered filing something in front of Judge Mullens until
4 we had our status conference last week --
5 THE COURT: Right.
6 MR. KELLY: -- where Your Honor -- I think Your
7 Honor, appropriately, said you wished to consider whether
8 1014B, in fact, had application here because of some factual
9 questions here.
10 I think you present a difficult hypothetical if
11 the other judge is asked and never rules. As I read the
12 statute, I dont think the stay becomes affective unless I
13 ask the other court.
14 THE COURT: Well, yeah -- and thats my question.
15 MR. KELLY: I dont think there is a stay.
16 THE COURT: It says, if positions are commenced --
17 it says upon motion filed in the district where its first
18 pending. So, if you havent filed that motion, in effect,
19 1014B is inapplicable. Which leads us to the situation
20 where basically the answer would be, I dont have to worry
21 about whats going on or has gone on and what the situation
22 is in Georgia, I can simply make a decision on the merit of
23 the transfer venue motion, based on the normal transfer
24 venue rules as opposed to whatever rules might be -- might
25 be more focused on 1014B.
Page 20
212-267-6868 www.veritext.com 516-608-2400
1 MR. KELLY: Well, Your Honor, if thats your
2 conclusion, Ill --
3 THE COURT: Well no, youre here to argue with me
4 if you want or agree with me if you want. I mean, Im not
5 trying to --
6 MR. KELLY: Well, I think the way I understood the
7 result of the status conference was that, Your Honor was
8 going to consider what -- a factual issue relating to 1014B,
9 which probably resolved -- revolved around what is --
10 THE COURT: Well, we had a discussion at the
11 status conference about whether they were actually -- you
12 know, one of the debtors was not a debtor in Georgia and
13 whether that debtor might be considered a debtor because it
14 was a successor by merger and then, frankly, I dont
15 remember much of a discussion about the other debtor, the
16 limited --
17 MR. KELLY: We didnt talk about that one.
18 THE COURT: -- liability company. Right.
19 MR. KELLY: Right.
20 THE COURT: So, were kind of -- if were talking
21 about the factual issue -- and I did say this, Im trying to
22 whip saw you, that according to the factual issue, at this
23 point I think its fair to say that there are existing
24 cases, ie a debtor and a debtor affiliate in Georgia, that
25 would seem, at least to imply 1014B was applicable.
Page 21
212-267-6868 www.veritext.com 516-608-2400
1 So, then, assuming that is the case and you
2 havent asked Judge Mullens and again, I understand why,
3 what do I do? Do I just say, well, I dont do anything and
4 send you to Georgia, which seems like a big waste of time
5 and effort, but if the rule says thats what I have to do,
6 thats what I have to do. Or do I have some sort of
7 discretion to make a decision on the merits of the motion?
8 MR. KELLY: Your Honor, as we stand here today,
9 you have the discretion to make the decision on the merits
10 because Ive not asked Judge Mullens, Ive not filed
11 anything in front of Judge Mullens. I believe thats what
12 the situation is. Its a fair reading of the rule.
13 Again, Im reacting to in part -- in terms of the
14 path Ive chosen to the courts and there was just a status
15 conference to the courts statement that you wanted to
16 consider 1014B and if you decided to move it to Atlanta
17 maybe your observations on venue would be of value to Judge
18 Mullens so on and so forth.
19 So, it just didnt seem to me judicially
20 economical, if thats the right way to say it, for me to go
21 off after that status conference and file a motion in front
22 of Judge Mullens --
23 THE COURT: Yeah. And Im not --
24 MR. KELLY: -- knowing that this hearing was
25 coming up.
Page 22
212-267-6868 www.veritext.com 516-608-2400
1 THE COURT: Im getting the impression you feel
2 like Ive set you up and now Im --
3 MR. KELLY: No, I dont. I dont -- I dont --
4 Im trying to answer your question.
5 THE COURT: Yeah. And I wasnt intending to do
6 that, Im just trying to flush out the --
7 MR. KELLY: And I in all candor expect Your Honor
8 to make a decision or if Your Honors prepared to, on the
9 merits of the venue transfer motion.
10 THE COURT: Okay.
11 MR. KELLY: It is what it is, but the situation
12 that we have is that we have 1014B --
13 THE COURT: Right. So, lets assume -- forget
14 about 1014B for now. So, lets talk about the merits of the
15 venue transfer motion and the argument made by the
16 petitioning creditors that I simply, until theres an order
17 for relief entered, cant go forward with the transfer venue
18 motion anyway.
19 Although, I would point out, by the way, that
20 1014B talks about petitions, it doesnt talk about orders
21 for relief, but anyway --
22 MR. KELLY: Yes, thats one of the things I was
23 going to say, Your Honor. With respect to that argument
24 that they -- as a preliminary matter argue that Your Honor
25 cannot consider the motion because no order for relief has
Page 23
212-267-6868 www.veritext.com 516-608-2400
1 yet been granted. They first raise Bankruptcy Rule 1011E,
2 which provides that quote, that no pleadings other than an
3 answer may be filed in response to an involuntary petition.
4 Your Honor, the petitioning creditors, I submit, are just
5 flat wrong on that assertion, because a motion which is what
6 is before the court today is not a quote, pleading.
7 Pleadings have a specific meaning under Federal
8 Rules Procedure 7, incorporated by Bankruptcy Rule 7007,
9 theyre listed there. Pleadings are a complaint, an answer,
10 an answer to a counter-claim, so on and so forth. This
11 motion is not a pleading. This conclusion is made even more
12 clear, Your Honor, by the very next sub-section of
13 Bankruptcy Rule 1011B, petitioning creditor cites 1011E for
14 the proposition, which I think is incorrect. But 1011F, the
15 very next sub-section acknowledges that if entities respond
16 to involuntary petitions by a pleading, a motion or other
17 response, they must file a designated statement.
18 In other words, Rule 1011 itself expressly
19 differentiates between pleadings and the motion thats
20 before this court, so I dont think, for that reason, 1011E
21 prohibits Your Honor from considering this motion.
22 They next cite a couple of cases, which Ill move
23 to just very briefly. The David J. Ross case, which they
24 cite on this point, is off the mark because that case
25 considered only the issue of whether a counter-claim, which
Page 24
212-267-6868 www.veritext.com 516-608-2400
1 is a pleading, a counter-claim for attorneys fees, was
2 permissible -- was a permissible type of response to an
3 involuntary petition. Again, what we have here is a motion,
4 not a pleading, before the court today.
5 The footnote from the Raytech (phonetic) case that
6 they cite, is a 1998 opinion from the Bankruptcy Court in
7 Connecticut. They cite that on Page 6 of their response, is
8 the only case they cite to support this proposition, that
9 the venue motion is premature. Raytech does touch on this
10 issue, Your Honor, but only in passing. The court in
11 Raytech was not ruling on a motion to transfer venue, but on
12 whether a venue challenge had been waived by a creditors
13 committee in a previous case where no order for relief had
14 been entered.
15 On that point, I can speculate with some
16 confidence, Your Honor, that if I had not raised the venue
17 motion when I did in this court, in response to the
18 emergency motion for an appointment of a trustee, I believe
19 the alleged debtors would have been faced with an assertion
20 from the petitioning creditors that we had waived venue, by
21 not raising it while we were engaging on the trustee motion.
22 So, Your Honor, as I said at the status
23 conference, this is a -- the filing of this petition
24 commenced the case, under 303 -- I believe its 303B. 1412
25 talks about transferring cases. I believe a case is before
Page 25
212-267-6868 www.veritext.com 516-608-2400
1 Your Honor that 1412 applies to and it seems to me at least
2 that common sense dictates an a gating issue in this case is
3 to determine which court should handle the case from this
4 point forward.
5 So, thats my response on their issue that its
6 premature.
7 Id like to turn, finally, to -- if I may to what
8 Ill call the merits of the venue transfer motion.
9 THE COURT: Okay.
10 MR. KELLY: The issues of convenience of the
11 parties and interest of justice. I submit in favor of a
12 venue transfer to Atlanta. The petitioning creditors take
13 issue in their papers with alleged debtors reliance upon the
14 12 part test set forth in the 3rd Circuit Case of Jamara
15 (phonetic), and instead point to the six part test in the
16 5th Circuit Commonwealth Oil opinion.
17 However, as cited in our papers, Your Honor, both
18 Judge Fitzgerald who is sitting as a Delaware judge, once
19 you made the ruling and Judge Walrath have analyzed venue
20 transfer motions under the Jamara standards.
21 Judge Fitzgerald even stated in her innovative
22 communications opinion that the Commonwealth Oil test was a
23 case decided under the Bankruptcy Act, which applied a
24 stricter test of venue transfer then was currently the
25 situation under the code.
Page 26
212-267-6868 www.veritext.com 516-608-2400
1 Your Honor, I submit that the transfer motion
2 should be granted under either the Jamara test or the
3 Commonwealth Oil standards.
4 As Ill get to in a moment, very briefly, I
5 believe that the factors that are applicable here under both
6 tests are either neutral or favor transfer.
7 As we pointed out in our motion, these issues,
8 these venue transfer motions are -- seem to be decided on a
9 case by case basis. In fact, many of the opinions say its
10 a case by case analysis and the test of convenience to the
11 parties and interest of justice are to be broad and flexible
12 standards as set forth in the Manville opinion that we cite.
13 The interest of justice standard, in particular,
14 contemplates a consideration of whether transferring venue
15 would promote the efficient administration of the estate and
16 judicial economy.
17 The factors that favor transfer in this case are
18 Number 1, that Delaware is more costly, Your Honor, and more
19 disruptive due to travel -- for the presence of Mr. Blount
20 and Mr. Macaulay, to be present as witnesses at sustentative
21 hearings in this case.
22 Theres reference in the petitioning creditors
23 papers to lawyers only appearing at most hearings. The
24 attendance of witnesses for the debtor at hearings is
25 somehow not necessary. Thats not the way Ive ever run a
Page 27
212-267-6868 www.veritext.com 516-608-2400
1 debtors case, Your Honor. In my experience Im always
2 going to have -- in this particular case, either Mr.
3 Macaulay or Mr. Blount present with me to support evidence
4 at any substantive hearing.
5 Moreover, its my experience that having the
6 gentlemen in those positions present, knowledgeable key
7 employees, promotes efficient administration of the case
8 because the opportunity to act with other -- interact with
9 other constituents and their counsel before and after the
10 hearings.
11 Moreover, Your Honor, contrary to the petitioning
12 creditors statement in their papers, its not necessary that
13 employees attend hearings, I would just point out that in
14 Allied 1, on more than one occasion we had courtroom packed
15 with employees, mostly Teamster employees who took a great
16 interest in that case. And we dont think we have any
17 Teamster employees in Delaware.
18 THE COURT: Well, where did the Teamster guys that
19 attended the hearing from Atlanta come from, do you know?
20 MR. KELLY: Most of them were from Atlanta, some
21 drove from Kentucky. There was a fair number from Kentucky,
22 because that was one of the more, shall I say interested,
23 local unions in what we were trying to do. They may have
24 come from other locations, but as I recall we were talking
25 about Kentucky and Atlanta.
Page 28
212-267-6868 www.veritext.com 516-608-2400
1 It was Kentucky because of a large facility
2 located there that manufactured a certain kind of vehicle
3 that was being transported by Allied.
4 THE COURT: Corvettes?
5 MR. KELLLY: It was Corvettes.
6 THE COURT: Bowling Green, then?
7 MR. KELLY: Yes.
8 THE COURT: Very good. I have a good friend --
9 two good friends who used to be managers -- senior managers
10 in that plant. Thats the only reason I know.
11 MR. KELLY: And the Teamster official that we
12 interacted with primarily during that first case was
13 actually from Kentucky, I think originally came from that
14 union, if Im -- that local union, if Im not mistaken. So,
15 thats why there was such a Kentucky connection at that
16 time.
17 THE COURT: Okay.
18 MR. KELLY: Now, the Jamara court expressed the
19 convenience of the parties test with a modifier, and Im
20 quoting, as indicated by the relative financial condition.
21 As I read that, I argue the following; here the alleged
22 debtors relative financial condition as compared to the
23 petitioning creditors, which, by the way, I believe, are the
24 only parties that are opposing this motion -- parties of
25 interest that are opposing this venue transfer motion. Im
Page 29
212-267-6868 www.veritext.com 516-608-2400
1 not aware of anybody else opposing this. We have two
2 minority members of our first lien group who are opposing
3 this venue transfer, nobody else to my knowledge.
4 But the relative financial condition militates in
5 favor of a transfer. In other words, under the Jamara test,
6 as I read it, the inconvenience to Allied is more important
7 than the inconvenience to the petitioning creditors, because
8 of our relative financial condition.
9 The parties choice of forum is also important
10 under Jamara and Your Honor indicated in the Saab ruling,
11 which Ive read, and you know better than any of us here
12 what you meant when you said it, but you said generally its
13 the debtors choice of where to file. I know thats a case
14 where you didnt grant the debtors motion because it was
15 primarily a liquidation case and you said it was a coin flip
16 even in that situation as I read the transcript.
17 Here, were not looking at that kind of a case,
18 Your Honor. Clearly, the alleged debtors choice is Atlanta,
19 where their first Chapter 11 case took place. Theres also
20 redacted information, Your Honor, that is pertinent to the
21 choice of forum issue. Im near the end of my presentation,
22 Your Honor.
23 And finally, the fact that we already have a
24 bankruptcy judge, Judge Mullens, familiar with Allied and
25 most of the parties in interest, Yucaipa, the Teamsters.
Page 30
212-267-6868 www.veritext.com 516-608-2400
1 Hes familiar with the exit loan facility and so forth,
2 means that efficient administration of these cases would be
3 promoted by the transfer.
4 In our motion, we did say that Judge Mullens would
5 probably, I use the word probably be assigned to this case
6 if transferred. I said that out of not wanting to appear,
7 frankly, to the Bankruptcy Court in Atlanta, in a public
8 filing, as being presumptuous as to case assignments in
9 Atlanta.
10 But the petitioning creditors made an issue out of
11 that in their responsive papers saying I only said probably.
12 I will state unequivocally, its my understanding, I
13 practice in Atlanta, obviously, that the way case assignment
14 is handled in Atlanta, that this, in effect, Chapter 22 case
15 of Allied would be assigned to Judge Mullens. Hes now the
16 chief judge, I dont know how it works, I suppose if he
17 doesnt want it he wouldnt keep it. But under case
18 assignment rules, as I understand them, they would assigned
19 to Judge Mullens.
20 There is also redacted material raised by the
21 petitioning creditors regarding the similarity of issues in
22 the second case as to what transpired in the first case,
23 Your Honor. And I would take issue that that is a
24 distinction with a difference.
25 I think, Your Honor, that the other factors to the
Page 31
212-267-6868 www.veritext.com 516-608-2400
1 extent that theyre applicable be it under Jamara or
2 Commonwealth Oil, are neutral. Proximity of the creditors
3 is neutral. Our creditors are spread out, none of them are
4 in Delaware, I might add, but our creditors are spread out.
5 The Teamsters, Your Honor, and the other parties
6 in interest and our creditors in the first case, had no
7 problem that Im aware in appearing and being heard and
8 having their claims handled in Allied 1 in Atlanta. I have
9 no reason to think that the Teamsters or other parties in
10 interest or our creditors will have any different result --
11 or any problem appear in Atlanta in the second case.
12 As to the petitioning creditors themselves, Your
13 Honor, they knew when they bought into this first lien
14 facility after the plan was confirmed, that they were buying
15 -- becoming lenders to an operation headquartered in
16 Atlanta, subject to still pending Chapter 11 cases, which
17 were then very much more active when they bought the debt
18 and being administered in Atlanta.
19 Your Honor, I submit the location of the debtors
20 assets is a neutral factor and I really cant think of any
21 other factors that I need comment on, although I will if
22 asked, but nothing else occurs to me.
23 Its primarily, Your Honor, efficient, economic
24 administration of the estate due to my -- the location of my
25 witnesses, coupled with Judge Mullens familiarity with the
Page 32
212-267-6868 www.veritext.com 516-608-2400
1 basic situation.
2 So, Your Honor, for all those reasons, we
3 respectfully request that the court grant the motion and
4 transfer venue of these cases to Atlanta under 28 USC 1412.
5 THE COURT: Thank you. Mr. Klyman.
6 MR. KLYMAN: Good afternoon, Your Honor. For the
7 record, Robert Klyman of Latham Watkins, LLP on behalf of
8 the Yucaipa companies, which as Mr. Kelly mentioned are
9 significant lenders to the current alleged debtor.
10 Your Honor, Yucaipa, for the record, is the holder
11 of 135,000,000 of the 235,000,000 principle amount of first
12 lien debt. Those numbers are principle amount numbers, not
13 accrued and unpaid interest numbers.
14 Yucaipa also holds 20,000,000 in principle amount
15 of the 30,000,000 second lien debt. Yucaipa holds all the
16 preferred stock and 63 percent of the common stock and I
17 rise in support of the debtors motion to transfer venue.
18 What this motion boils down to is essentially the
19 following; should Black Diamond, which appears in cases
20 throughout the country be compelled to have its lawyers
21 appear in Atlanta?
22 And I should note, Your Honor, that before this
23 hearing I Googled Black Diamond and bankruptcy cases and
24 discovered that in recent years theyve appeared in
25 California, Shreveport, Louisiana, Tennessee, New York,
Page 33
212-267-6868 www.veritext.com 516-608-2400
1 Delaware and elsewhere.
2 But could Allied stretch management, which now has
3 two day jobs, running the business and dealing with a
4 bankruptcy case, be compelled to participate in a case and
5 attend hearings in Delaware as opposed to a court in Atlanta
6 thats 20 minutes away?
7 This is about keeping a management team focused
8 and in Atlanta to conduct the business of the debtor and
9 maximize value for all stakeholders, of which Yucaipa is by
10 far the largest.
11 In addition, as Mr. Kelly mentioned, the debtor
12 seeks to have its bankruptcy occur in a forum before a judge
13 that knows most of the players and the history and the
14 status of claims that were recently resolved.
15 As you can see from the hearing today with the
16 long list of people who are appearing by phone, Black
17 Diamonds representatives are perfectly able, even though in
18 this matter, theyre located very close to Delaware, to
19 appear by phone. And Black Diamonds counsel, Im sure, has
20 many frequent flyer miles and has no issue getting on a
21 plane.
22 Your Honor, while the facts here are a little
23 different than some of the cases that were cited by Black
24 Diamond, a number of the cases and precedent in this court,
25 uniformly, hold that the debtors choice of forum should not
Page 34
212-267-6868 www.veritext.com 516-608-2400
1 be lightly disturbed. Thats what Judge Walsh held in the
2 Safety Clean opinion that was attached to the papers by
3 Black Diamond.
4 And in the Enron case, another case cited by Black
5 Diamond, the court held that a debtors choice of forum is
6 entitled to great weight if venue is otherwise proper.
7 Citing Ocean Properties of Delaware, which is a 1998
8 Delaware Bankruptcy case.
9 THE COURT: Well, I mean, as we sit here today,
10 have they chosen a forum? I mean, the choice has basically
11 been, not here.
12 MR. KLYMAN: Well, theyve moved to transfer venue
13 to Atlanta.
14 THE COURT: All right.
15 MR. KLYMAN: So, I think by virtue of that motion,
16 theyre --
17 THE COURT: Okay. Okay.
18 MR. KLYMAN: -- choosing a venue. And in that
19 case, Your Honor --
20 THE COURT: Im sorry, Im -- but they havent, at
21 least as we sit here today, they havent agreed necessarily
22 to go into bankruptcy. That was sort of what I was saying.
23 Its a -- being a purported debtor -- an alleged debtor with
24 the involuntary petition in Delaware versus being an alleged
25 debtor with an involuntary position in Georgia.
Page 35
212-267-6868 www.veritext.com 516-608-2400
1 MR. KLYMAN: May I have a moment, Your Honor?
2 THE COURT: Uh-huh. And -- I -- my -- my point
3 there is not -- my point there is more along the lines of --
4 and perhaps this is what Mr. Harris is going to say, which
5 is, maybe thats why this motion is premature because we
6 simply dont know at this point whether there will --
7 whether well definitely have a case or if we definitely
8 have a case when well definitely have a case.
9 MR. KLYMAN: Well, Your Honor, I --
10 THE COURT: Before we decide where that case
11 should be.
12 MR. KLYMAN: Your Honor, I dont represent the
13 debtor, Im happy to see the podium to Mr. Kelly on that
14 particular point.
15 THE COURT: Okay. You can move on, Im sorry.
16 MR. KLYMAN: Your Honor, Enron further went on to
17 say that where a transfer would merely shift the
18 inconvenience from one party to the other, the debtors
19 choice of a forum should not be disturbed. And here thats
20 exactly whats at issue, whether its more convenient for
21 the lawyers representing Black Diamond to be in Atlanta or
22 more convenient for the debtors to be in Atlanta or whether
23 it should be flipped and instead of Mr. Harris taking an
24 hour and a half train ride down from New York, the debtors
25 management which is struggling to keep the business afloat,
Page 36
212-267-6868 www.veritext.com 516-608-2400
1 should be compelled to get on a plane and fly here.
2 Your Honor, the debtor and Yucaipa, by moving to
3 transfer venue, and not immediately contesting the
4 involuntary petition, intend to reserve all rights. And Im
5 speaking for Yucaipa here, Mr. Kelly can speak for Allied,
6 but you have all rights against Black Diamond Spectrum in
7 connection with a timing and nature of the filing. I dont
8 want there to be any sort of admission through silence or
9 acquiescence that the business was not damaged by Black
10 Diamonds actions and when theres an appropriate venue and
11 a case is -- and a case is fixed, then that issue will be
12 joined.
13 And Your Honor, with respect to the procedural
14 issue about whether or not the case can be filed, I just
15 want to speak to that briefly.
16 Black Diamond and Spectrum filed their involuntary
17 petition and then in disregard of the rule that theyre
18 currently citing, they filed an emergency motion to appoint
19 a trustee.
20 If we were to follow their logic, neither the
21 debtors no Yucaipa would have been able to a oppose that
22 motion.
23 They then participated in a scheduling conference
24 about this hearing --
25 THE COURT: No, but Rule 1011 is about responsive
Page 37
212-267-6868 www.veritext.com 516-608-2400
1 pleadings --
2 MR. KLYMAN: Yes.
3 THE COURT: -- and responsive motions --
4 MR. KLYMAN: Yes.
5 THE COURT: -- by the purported debtor.
6 MR. KLYMAN: Yes. But its not motions, Your
7 Honor, its pleadings.
8 THE COURT: But its titled, responsive pleading
9 or motion in involuntary and across the border cases.
10 MR. KLYMAN: Thats correct, Your Honor, but the
11 section --
12 THE COURT: My point is really as to responsive.
13 MR. KLYMAN: Okay.
14 THE COURT: My point being that because the code
15 specifically contemplates the ability to seek a trustee in
16 the gap period. So, it cant be the rule at least to the
17 extent it purports to be Rule 1011 that says you cant file
18 a motion to seek appointment of a trustee even though code
19 section says you can. That rule cant be applicable.
20 MR. KLYMAN: Youre right. Your Honor, that
21 argument would be illogical just as though under 1014, which
22 is a different rule, a rule says once a petition is filed,
23 either the debtor on its own motion or the court on its own
24 motion, may transfer venue.
25 In one of the cases that were cited by Black
Page 38
212-267-6868 www.veritext.com 516-608-2400
1 Diamond, a case called BL of Miami, which was a 2003
2 District of Nevada case, in that case the court held that
3 1014 does not, in fact, prohibit a sua sponte transfer of
4 venue by the court, which was dealing with petition and the
5 statute and the rule itself actually speaks to that.
6 So, for those reasons, Your Honor, we believe that
7 the debtors motion should be granted. For me, Im going to
8 get on a plane to come to Delaware or to Atlanta, its not
9 my inconvenience, its not Mr. Harris inconvenience thats
10 at issue, whats at issue is whether or not the debtor
11 should remain in Atlanta in order to maximize value for all
12 the stakeholders. Thank you.
13 THE COURT: Anyone else before I turn to Mr.
14 Harris?
15 (no verbal response)
16 THE COURT: Mr. Harris.
17 MR. HARRIS: Thank you, Your Honor. Im going to
18 stick to the substance of whats before Your Honor today and
19 avoid my natural tendency, which is to respond to people who
20 like to take pot shots at my clients in open court without
21 any foundation and without any evidence and without any
22 support and testimony.
23 Mr. Klyman --
24 THE COURT: So, without poisoning anyone?
25 MR. HARRIS: I thought that was pretty well said,
Page 39
212-267-6868 www.veritext.com 516-608-2400
1 actually.
2 THE COURT: I wont respond to the threat of a
3 murder, by saying -- all right, go ahead. Non-response of
4 response noted.
5 MR. KLYMAN: Your Honor, I am going to pick up on
6 a theme that, you know, youve already identified here,
7 which is we have involuntary cases filed by petitioning
8 creditors, not just Black Diamond, in this court, in which
9 by all admissions is a proper venue for these cases.
10 1408 makes it absolutely clear, domiciled,
11 (indiscernible), this is a legitimate place for these cases
12 to be. Theyre properly filed here, nobody has challenged
13 that. You havent heard that from either Yucaipa and you
14 havent heard that from the debtors.
15 We dont have a debtors choice of forum, Your
16 Honor, other than to say we dont want it here. And that is
17 an issue because from our perspective, what that basically
18 is saying is that we want the cases transferred in their
19 status as involuntary petitions to another court where we
20 dont know whats going to happen next. Are they going to
21 be contested? Are they going to be consented to? Are we
22 going to be litigating in a place that is not the selected
23 forum of the petitioned creditors at that time and when you
24 read Judge Walshs decision, when you talk about the
25 preferred filing place -- I would submit to Your Honor, that
Page 40
212-267-6868 www.veritext.com 516-608-2400
1 in this instance, the preferred filing place is that of the
2 petitioning creditors, not of the debtors proposed choice of
3 forum when the debtor actually hasnt made that choice.
4 Were we in a different situation then I think that
5 the analysis might be a little bit different, but thats not
6 where we are and this is not your Saab case where the
7 debtors had informed the petitioning creditors before they
8 ever filed that they, in fact, were going to be filing in
9 Detroit in a day or two and the petitioning creditors turned
10 around and ran off and went someplace else. Here, as a
11 matter of fact.
12 We had no knowledge that there was going to be a
13 filing. We had no knowledge that they were contemplating
14 anything. Theres a lot of redacted information that is not
15 appropriate for this record, but we didnt know. And for
16 people to get up and call it precipitous or unwise or
17 anything else, again, Im not going to respond to that, but
18 were here, its a legitimate forum, 1408 says its a
19 legitimate forum and we should be moving on to the more
20 substantive part of this.
21 THE COURT: Yeah. And as an aside, I mean, you
22 often here sort of -- this sort of, you know, weve got a
23 potential debtor and the case gets filed against them and
24 they sort of like, oh my gosh, I cant believe anyone would
25 do something so un-torrid and so wrongful and, you know,
Page 41
212-267-6868 www.veritext.com 516-608-2400
1 dont they believe us? And my response to that is, you
2 know, the invective gets you nowhere. Heres the reality,
3 people are owed money, the code allows them to file a
4 voluntary case. They filed a voluntary case, I dont think
5 that makes anyone a bad actor. Simply somebody exercising
6 their legal rights. So, its more an aside, because they
7 didnt really focus a lot on this, but this comment that
8 Black Diamond has somehow wronged the debtor by filing this
9 motion, I dont think that gets you anywhere one way or the
10 other.
11 And it also relates to the fact that I think that
12 the petitioning creditors choice must have some merit
13 because the code gives the petitioning creditor the right to
14 exercise that choice.
15 MR. KLYMAN: I appreciate that, Your Honor and I
16 wholeheartedly agree with it. I want to throw one more
17 piece of reality onto the comment you just made, which is as
18 we mentioned in the motions we had filed with the court
19 originally, the maturity date of the first lien debt was
20 March 29th, it has now come and gone and had we been paid I
21 wouldnt be standing before you today. It has not been paid
22 and theres no expectation that it will be. So, obviously,
23 if there is a contested hearing on a petition, that will be
24 just one more fact to -- or a piece of wood to throw on the
25 otherwise burning embers.
Page 42
212-267-6868 www.veritext.com 516-608-2400
1 But, Your Honor, Im not going to dwell a lot on
2 the 1011E issue, I think, frankly, the comments weve made,
3 we think that having venue transformations dealt with in the
4 context of involuntary filings opens a whole host of issues
5 of the sort we were just discussing about changing the
6 petitioners chosen forum for litigation for the involuntary
7 itself.
8 We think the way you read the two statutes
9 together, frankly, is that -- that there should be no
10 consideration venue transfer motion by any court until you
11 know you have a case to transfer. You shouldnt be
12 transferring, you know, open litigations, if you will,
13 regarding involuntary petitions until theres a
14 determination of whether an order really should or should
15 not be entered.
16 This is not a situation where somebody is looking
17 to reopen the old case that was extant down in Georgia such
18 that theyre trying to enforce and old plan or claim that it
19 wasnt substantially consummated and therefore, you know,
20 this should be dealt with before an order to (indiscernible)
21 is necessarily entered, its a whole new case. And thats a
22 subject Ill get to in a couple minutes.
23 Let me talk about what the real import would be of
24 Judge Mullens historical knowledge and familiarity and so
25 forth, but Ill come to that in a couple of minutes.
Page 43
212-267-6868 www.veritext.com 516-608-2400
1 Your Honor, as I said before, I mean, theres no
2 dispute, 1408 says we can be here. This company should be
3 here and frankly, one interesting fact, Your Honor, to note
4 is that when these companies were in bankruptcy before, they
5 are from the parenting company Allied Holdings, which was
6 merged out of existence into Allied Systems Holdings as part
7 of the plan, that was a Georgia corporation.
8 When Yucaipa put the plan together and decided to
9 create Allied Systems Holdings, Inc. as the new parent
10 company, it affirmatively chose to make it a Delaware
11 Corporation. It wanted the rights and benefits and all the
12 things that go along with the fact that its a Georgia
13 company, the corporate governance issues, you know the body
14 and case law that goes along with fiduciary duties, all
15 those items. They affirmatively chose that law and frankly,
16 if you look at Judge Walshs decision of PWS, he says having
17 made that choice, domicile becomes a very valid basis for a
18 case. Whether they choose to do it or whether an
19 involuntary creditor -- petitioning creditor chooses to put
20 them in. That is a valid basis to be here. They chose
21 Delaware as the jurisdiction they wanted to incorporate this
22 company. And they affirmatively took it out of Georgia.
23 The parent company was a Georgia corporation, Allied Systems
24 Holding is a Delaware corporation, theyre the ones who
25 decided to make it so.
Page 44
212-267-6868 www.veritext.com 516-608-2400
1 Now, Your Honor, if you took the arguments that
2 have been made by both the company and Yucaipa relative to
3 why this case should be transferred -- and again, I would
4 condition that on should be transferred, assuming an order
5 for relief is entered. But if you take their arguments at
6 face value, Your Honor, domicile means nothing in every case
7 in which a venue of transfer motion is filed, should be
8 granted.
9 Because, frankly, a lot of the debtors who come
10 here dont have creditors here, dont have their
11 headquarters here, dont have very many contacts with this
12 jurisdiction independent -- as part of their business, but
13 there are other reasons they file here and they do and
14 theres good reasons for it. Again, look at Judge Walshs
15 decision in PWS, in the final paragraph he has there, which
16 talk about companies that operate nationally,
17 internationally, people should expect, among other things
18 that if there is a filing that the filing would occur in the
19 place where the parent company or one of its affiliates is
20 domiciled.
21 You cant just read it out of the statute, which
22 is what it effectively, I think both the debtors and Yucaipa
23 are trying to do by saying, since we are elsewhere we
24 shouldnt be here.
25 But, even if you move beyond that, Your Honor, and
Page 45
212-267-6868 www.veritext.com 516-608-2400
1 you get to the substance of the particulars here, you know,
2 the statute in 1412 talks about the interest of justice or
3 the further convenience of the parties. It doesnt talk
4 about just the convenience of the debtors, it talks about
5 the convenience of the parties. And here weve also got
6 case law which suggests that the movant bears the burden of
7 showing by a preponderance of the evidence that the transfer
8 of the venue is necessary in order to achieve the statutory
9 purposes of the venue transfer statute.
10 So, we go through the factors and whether you use
11 the Jamara factors or whether you use the six point test, I
12 think, effectively, Your Honor, the analysis comes out at
13 almost exactly the same place. But when you look at it and,
14 you know, you go through the limited analysis weve been
15 able to do and we dont have schedules or statements or
16 access to books and records or any of those things, but what
17 we come up with Your Honor is that there are substantial
18 parties and creditors who have absolutely no association
19 with Georgia for whom this court is imminently more
20 convenient or at least neutral. The PBGC, which is,
21 obviously, a very substantial creditor here, a continued
22 creditor here, is located in the District of Columbia. The
23 Teamsters headquarters are in DC, although they do have
24 locals, obviously, throughout the country. Yucaipa is,
25 obviously, in California and New York and Mr. Klyman says
Page 46
212-267-6868 www.veritext.com 516-608-2400
1 hes happy to go anywhere, so I guess that becomes a neutral
2 factor.
3 The petitioning creditors are in New York and
4 Connecticut. CIT who is owed about $35,000,000 is in New
5 Jersey. The chairman of the board of the company, Derex
6 Walker resides in California. There are other directors
7 other than the one they refer to who splits his time and
8 residence between Michigan and Georgia. By implication, all
9 reside some place other than Georgia, we dont know where.
10 And the CO of the company, its our understanding, splits
11 his time and maybe the board member, who splits his time
12 between Michigan and Georgia.
13 I found it interesting that, you know, the debtors
14 didnt suggest their CO would ever be somebody who would be
15 coming to hearings. But, thats, obviously, their choice.
16 With respect to proximity, Your Honor, of the
17 debtor to the courthouse, the extent to which employees of
18 the company need to be in attendance at hearings and my
19 experience and I think in many peoples experiences, depends
20 on a number of factors. The most important of which is, can
21 the parties get on the same page with respect to how the
22 case is going to proceed?
23 If the case is going to proceed in the manner such
24 as Mr. Kelly and I have at least started off in some
25 respects today, of cooperation, where he comes to me and
Page 47
212-267-6868 www.veritext.com 516-608-2400
1 says, do I need to bring Scott Macaulay to Delaware to
2 testify to the facts in his declaration? No. I mean, Im
3 not going to sit here and force a man to fly, you know, a
4 couple of hours and spend a couple thousand bucks to do
5 that, it doesnt make any sense. And reciprocally, Mr.
6 Kelly was nice enough to say, were not going to contest the
7 facts in your petition, we understand them, theyre true.
8 We dont need to cross-examine anybody, you dont need to
9 find a witness to come down here.
10 Frankly, had he suggested the same with the
11 limited testimony of Mr. Blount, I would have said, Mr.
12 Blount, in my view, doesnt need to be here either. Whether
13 he decides to bring him or not is, obviously, his choice.
14 But if you can get people on the same page and
15 this case is -- if it goes it in, should be one where people
16 are on the same page with respect to a reorganization. Then
17 the need for employees of the company to leave their posts
18 and travel for hearings to be would be limited and, in fact,
19 in many experiences it turns out to be the financial advisor
20 or investment banker for the company who does most of the
21 testifying while the employees, chief financial officer,
22 chief administrative officer, so forth, dont have to.
23 Obviously, theyre involved in a number of things
24 including preparation of budgets and forecasts and
25 presentations and things like that, but that wouldnt
Page 48
212-267-6868 www.veritext.com 516-608-2400
1 necessarily require them to leave Atlanta.
2 But, again, how the overall need for them to
3 travel for purposes of hearings is dictated in large part by
4 the means by which the case is going to be conducted and I
5 think that at least so far, we got the ball rolling here,
6 theres no question about that and we did file the trustee
7 motion, but I think we have been reaching out and trying to
8 be as cooperative as possible to avoid the need for
9 unnecessary costs and expense and travel and were hopeful
10 that will be -- bear fruit, going forward.
11 With respect to books and records, Your Honor, I
12 mean, theyre all electronic and available, in fact, when
13 the State Court in New York directed Yucaipa to have the
14 company send us historical financial records that they
15 hadnt produced under the terms of the credit agreement for
16 a couple of years, within 72 hours the company had
17 absolutely no problem delivering them to us. So, I think
18 locations of books and records as an issue relative to venue
19 is not particularly relevant.
20 On the location of assets issue, Your Honor, as
21 the case law suggests, location of assets in cases like this
22 is really a neutral factor at best. Yes, they have
23 headquarters in Atlanta and real estate there, they have 44
24 terminals around the country, but this is not a liquidation,
25 we dont need local administration or foreclosure laws and
Page 49
212-267-6868 www.veritext.com 516-608-2400
1 things like that.
2 At least as we sit here today, everybodys
3 intention would be that if orders for relief were entered
4 these would be either reorganizations or potentially sales.
5 I dont know which way its going to go, but I dont think
6 anybody here has any interest in pressing for any kind of a
7 liquidation. That certainly wouldnt maximize value for my
8 client or anybody else.
9 And that takes us to the issue of deficient and
10 economic administration and heres, Your Honor, I have the
11 most issue with the prior pending case and everybodys, the
12 debtors and Yucaipas statements about the helpfulness, if
13 you will, of Judge Mullens prior experience with this case.
14 Im sure Judge Mullens is an excellent judge.
15 Ive never met the man, but by reputation he is a wonderful
16 man and an excellent jurist.
17 But last time he saw this case and the substance
18 of this case was five years ago, other than claims
19 administration which may have been occurring until now,
20 until recently when the case became ready to ultimately
21 close.
22 A lot has happened as Your Honor well knows in the
23 last five years, given the number of cases that have come
24 through this particular courtroom and this courthouse as a
25 whole. All of which bear on what is going to happen next
Page 50
212-267-6868 www.veritext.com 516-608-2400
1 with respect to this debtor.
2 The familiarity with parties with Yucaipa, with
3 the debtors, with their counsel is to somebody who was not
4 there the last time, in some respects, a double edged sword.
5 I mean, judges who have seen cases before, potentially, have
6 memories of what happened the last time, what they knew
7 about the business previously, which frankly should not be
8 brought to bear on a new case with a new set of facts, with
9 a new set of players and all new circumstances that have,
10 frankly, nothing to do with what happened in the last case.
11 And Im sure that if we were in Atlanta that Judge
12 Mullens would do his very best to segregate out those pieces
13 of information which he garnered through the last case, from
14 those which are relevant to what would be before him today,
15 but, Your Honor, the fact of the matter is, theyre not
16 particularly relevant. Judges see debtors every day, they
17 dont know a thing about them and they learn very quickly
18 everything they need to know in order to basically preside
19 over the case. Historical knowledge of what happened in a
20 case thats been over for five years is not a reason to
21 transfer venue.
22 Just give me a second, Your Honor, I just want to
23 take a look at my notes with respect to the presentations by
24 debtors counsel and Yucaipa.
25 (Pause)
Page 51
212-267-6868 www.veritext.com 516-608-2400
1 Id be happy to answer any questions.
2 THE COURT: I have none. Thank you.
3 MR. HARRIS: Great, Your Honor. Thank you very
4 much for your time.
5 THE COURT: Youre welcome. Mr. Kelly?
6 MR. KELLY: Briefly, Your Honor, I thought Id
7 made it clear, but maybe I should make it clear on the
8 record, there will not be -- these petitions will not be
9 contested. Our response today is not until June 8th. The
10 company is operating under a time table, however. The time
11 table has been accelerated by the filing of the
12 involuntaries, but just to be clear, the involuntary
13 petitions will not be contested.
14 If its -- you know, I dont think its premature
15 to rule, but if Your Honor believes its premature to rule
16 on the issue because we dont yet have orders for relief or
17 because these entities are not yet in bankruptcy, then one
18 option I respectfully suggest would be to hold the ruling in
19 advance. Were not that far off from when our response date
20 is.
21 Looking through my notes, I really dont know that
22 theres much else I need to respond to Your Honor. In terms
23 of the cost, I wasnt talking about the cost of coming to
24 Delaware, I was talking about the time thats involved in, I
25 believe, in my experience with this case, Im not trying to
Page 52
212-267-6868 www.veritext.com 516-608-2400
1 say anything about the CEOs lack of involvement, he may well
2 be involved as well, but based on my experience with this
3 case, it would be Mr. Blount and Mr. Macaulays time, thats
4 what were talking about, not expense. Thank you, Your
5 Honor.
6 THE COURT: Thank you. Anything else?
7 (no verbal response)
8 THE COURT: All right. Were going to clear the
9 brush a little bit and talk about Rule 1014B. And as its
10 written, I think its obvious, but Ill say it, that the two
11 alleged debtors in this case, one is a debtor of a case
12 currently pending in Georgia and the other is an affiliate
13 of that debtor with a case currently pending in Georgia.
14 So, Rule 1014 would appear to be applicable as
15 there have been cases opened in Georgia and a later case
16 opened here in Delaware. And the technicalities of 1014B
17 have arguably not been met here, which is that a request
18 should have been made to the judge in Georgia and the judge
19 in Georgia would make a decision on where the venue should
20 be and then until that happens this court would basically
21 hold this case in abeyance, pending a decision.
22 That has happened currently because the statements
23 I made at the status conference, partly and I think chiefly
24 because this is an involuntary petition, which has sort of
25 forced the issue in connection with where the debtor, which
Page 53
212-267-6868 www.veritext.com 516-608-2400
1 states how it wont oppose the -- or wont respond, I guess,
2 to the involuntary petition and thus allowing a case to be
3 opened at some point in the future. That issue was forced a
4 bit by the fact we have an involuntary in play here.
5 I dont think its constructive to get lost in the
6 technicalities of the rule. And as far as Im concerned to
7 stick to Rule 1014B in this case would really be to promote
8 form over substance.
9 The case in Atlanta for all intensive purposes,
10 closed. The final decree has been requested, a certificate
11 of no objection has been filed, the order just hasnt been
12 signed.
13 And to hold up a decision here on whether to
14 transfer venue you or not, a decision here perhaps on
15 whether an order for relief will be entered et cetera, based
16 on the fact that a CNO hasnt worked its way through
17 chambers yet, I think is just counterproductive.
18 So, as far as Im concerned, for purposes of
19 making this decision today, 1014B is simply inapplicable
20 because the cases -- the case in Georgia is so substantially
21 consummated and for all intensive purposes closed that it
22 would be not constructive or helpful to push the
23 technicalities of who decides what and when.
24 Talking about 1011, I agree with the debtor on
25 this one, that 1011 is not applicable to a motion to
Page 54
212-267-6868 www.veritext.com 516-608-2400
1 transfer venue. 1011 really deals with the substance of
2 whether or not an order for relief should be entered. There
3 are for example, other motions that can be brought before
4 the court in the interim, including as we discussed a motion
5 for appointment of a trustee, specifically contemplated by
6 the code.
7 I think responsive is important and its the
8 adjective that starts the rule and I think what that case is
9 designed to do is to focus -- excuse me that rule is
10 designed to focus the hearing on the merits of the
11 involuntary petition and to provide a specific framework for
12 deciding that issue. It does not think about venue, it
13 doesnt deal with the venue issue.
14 Again, backing up to 1014, it talks about
15 petitions, it doesnt talk about cases where order for
16 relief has been granted or anything along those lines, so I
17 just think 1011 is simply inapplicable.
18 All right. That gets us to the merits of the
19 motion to transfer venue. Basically, its an equitable
20 consideration, the court takes the facts and circumstances
21 of the case in front of it and decides for the interest of
22 justice where a case should be.
23 There are 12 factor tests, there are six factor
24 tests, I think those types of tests are helpful to focus the
25 court on the types of issues that really should be
Page 55
212-267-6868 www.veritext.com 516-608-2400
1 considered. We dont play scorecard with them, its not --
2 you know, you dont get a transfer venue if its seven to
3 five or four to two, thats not helpful.
4 I find that every time you add a factor to a test
5 you complicate it by an order of magnitude and to go from a
6 two factor test to a 12 factor test is really, frankly, not
7 helpful, because it just continues to throw in items that
8 cloud the ultimate decision that should be in front of the
9 court.
10 All that said, youve got situations like choice
11 of forum. Well, we have two parties that disagree. The
12 petitioning creditors have chosen Delaware by filing here,
13 as theyre allowed to do under the law. This is proper
14 venue for these cases. The debtor has said no, he would
15 like the case, if any case, to be in Georgia. So, theres a
16 disagreement there. Professionals are going to fly in from
17 all over the country, that happens in every case, thats a
18 neutral factor.
19 Employees and -- let me back up a little bit,
20 issues that can kind of go beyond that, I think are sort of
21 case specific issues, for example, if we had a liquidation
22 here, if we had a hotel in Las Vegas that was being
23 foreclosed on. I mean, the case, arguably, very much should
24 be in Nevada. If we have a piece of undeveloped land in New
25 Mexico, the case should be in New Mexico. Those are strong
Page 56
212-267-6868 www.veritext.com 516-608-2400
1 factors that would push a case to one place or another.
2 We had an industrial case where there was one
3 factory and it was in Georgia and it was going to be shut
4 down and liquidated under the case, I think theres a much
5 stronger argument that that case should be in Georgia. Why?
6 Well, the employees are really going to care a lot, the
7 employees are there, theyre in Georgia, theyre going to
8 have a real stake in the matter. The Teamsters issue, Im
9 sure that the local and Bowling Green would have been happy
10 if that case had been filed in Kentucky. It wasnt and they
11 wanted to be heard and they got to Atlanta because it was an
12 important issue for them. And it was wholly appropriate.
13 You dont know where a case is going to go at the
14 beginning when you have a transfer of venue motion,
15 especially in a case here where you dont even have an order
16 for relief. So, its a little hard to kind of predict.
17 Some cases are easier to predict than others. This looks
18 like a rehabilitation, even if its done through some sort
19 of sale process, it would be on a going concern process, so
20 its a rehabilitation. Its not a liquidation of specific
21 assets. Its not a shutdown of specific factories.
22 So, all that basically comes to the conclusion
23 that its a bit of a wash. I mean, every factor of what we
24 kind of focus on here is in effect neutral. We have a
25 argument that the loss of time for management to come back
Page 57
212-267-6868 www.veritext.com 516-608-2400
1 and forth to cases in Delaware is really the distinguishing
2 factor that puts this case where -- that it should be in
3 Atlanta. Thats pretty much it, thats pretty much the
4 distinguishing factor.
5 And I dont think thats sufficient. Remember
6 that the debtor is the movant and has the burden of proof.
7 And one thing Ive learned since Ive been on the bench is
8 that if you cant figure out what to do or if its a tie the
9 movant loses. And I think in this situation the facts
10 simply dont support with any preponderance or any sort of
11 weight that this case should be anywhere other than where it
12 is.
13 Its proper to be in Delaware, it was filed in
14 Delaware by the petitioning creditors appropriately. The
15 debtor sought to move it to Georgia, has the burden of proof
16 and I think simply hasnt met it on the merits. So, Im
17 going to deny the motion to transfer venue. And Im just --
18 Ill enter an order.
19 MR. HARRIS: Thank you, Your Honor.
20 MR. KELLY: Thank you, Your Honor.
21 THE COURT: All right. Anything else? All right.
22 Were adjourned. Thank you.
23 (Whereupon these proceedings were concluded at
24 3:35 PM)
25
Page 58
212-267-6868 www.veritext.com 516-608-2400
1 I N D E X
2
3 RULINGS
4 DESCRIPTION PAGE LINE
5 Motion to transfer venue 58 17
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Page 59
212-267-6868 www.veritext.com 516-608-2400
1 C E R T I F I C A T I O N
2
3 I, Sheri Monroe, certify that the foregoing
4 transcript is a true and accurate record of the proceedings.
5
6
7
8
9
10 Veritext
11 200 Old Country Road
12 Suite 580
13 Mineola, NY 11501
14
15 th
Date: June 4 , 2012
16
17
18
19
20
21
22
23
24
25
Page 60
212-267-6868 www.veritext.com 516-608-2400
Sheri
Monroe
Digitally signed by Sheri Monroe
DN: cn=Sheri Monroe, o=Veritext,
ou, email=digital1@veritext.com,
c=US
Date: 2012.06.04 16:00:22 -04'00'

10000001118

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

10000001118

Uploaded by

Copyright:

Available Formats

UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF DELAWARE

You might also like