10000000051

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
·------------------------------------------------------------------------------------------X

In re:
Chapter 11
ALLIED SYSTEMS HOLDINGS, INC.,
Case No. 12-11564 (CSS)
Alleged Debtor.

·------------------------------------------------------------------------------------------X
Chapter 11
In re:
Case No. 12-11565 (CSS)
ALLIED SYSTEMS, LTD. (L.P.),
Objection Deadline: May 29, 2012 at 5:00p.m.
Alleged Debtor. Hearing Date: May 31, 2012, 2:00p.m.
Ref. No. 29
·------------------------------------------------------------------------------------------X

OBJECTION OF THE PETITIONING CREDITORS
TO MOTION OF THE ALLEGED DEBTORS TO TRANSFER VENUE OF THESE
INVOLUNTARY CASES TO THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF GEORGIA, ATLANTA DIVISION

The Petitioning Creditors, BDCM Opportunity Fund II, LP, ("BDCM"), Black Diamond

CLO 2005-1 Ltd. ("Black Diamond"), and Spectrum Investment Partners, L.P. ("Spectrum"

collectively with BDCM and Black Diamond, "Petitioning Creditors"), by and through their

undersigned counsel, hereby object to the motion of Allied Systems Holdings, Inc. ("Allied") and

Allied Systems, Ltd. (L.P.) ("Systems", collectively with Allied, the "Alleged Debtors") to

transfer venue of the above-captioned involuntary bankruptcy cases (the "Involuntary Cases") to

the Atlanta Division of the Bankruptcy Court for the Northern District of Georgia (the "Georgia

Bankruptcy Court"), dated May 21, 2012 (the "Transfer Motion"), and respectfully represent as

follows:

{935.000-W0021082.}

PRELIMINARY STATEMENT

1. The Petitioning Creditors filed involuntary chapter 11 petitions against the

Alleged Debtors on May 17, 2012. It is undisputed that venue of these Involuntary Cases is

proper in Delaware because Allied is domiciled in Delaware. The Alleged Debtors have not

responded to the involuntary petitions. At a status conference before this Court on May 22,

2012, counsel for the Alleged Debtors informed the Court, "it does appear ... subject [to] board

approval ... that Allied will likely, in the future, convert these cases to voluntary Chapter 11

cases, but the timing is not ripe today for that. rtl However, until the Alleged Debtors decide to

consent to the orders for relief or there is a trial on the merits on the involuntary petitions, the

Alleged Debtors are not subject to court supervision. It is an untenable and unstable situation for

both the Alleged Debtors and their creditors.

2. The Petitioning Creditors object to the Transfer Motion on two grounds. First, the

Transfer Motion is procedurally defective because it is premature to address venue until an order

for relief is entered. Second, the Transfer Motion is substantively objectionable because the

Alleged Debtors' arguments in favor of the Georgia Bankruptcy Court are not sufficient to meet

the Alleged Debtors' burden of showing, by a preponderance of the evidence that such a transfer

would be "in the interests of justice or for the convenience of the parties."

3. Both the Bankruptcy Rules and principles of judicial economy require that this

Court first address whether an order for relief should be entered before addressing a request to

transfer venue. Rule 1011 (b) of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy

Rules") provides a short and exclusive list of permitted responses to an involuntary petition, and

Bankruptcy Rule 1011(e) unambiguously states "that no other pleading shall be permitted." A

1
Transcript of Status Conference, May 22,2012 at 12:1-6. A copy is attached hereto as Exhibit A.

{935.000-W0021082.} 2

request for a transfer of venue is not on the list of responses permitted by Rule 1011 (b), and is

thus prohibited until an order for relief is entered. Further, it makes little sense to undertake a

hearing on venue until an order for relief has been entered, either on consent or after a hearing on

the merits. Finally, a venue dispute now would prevent the Court from consideration of the

"contested petition at the earliest practicable time." Bankruptcy Rule 1013(a).

4. The Transfer Motion should be denied because venue is appropriate in this

District. Given the national and international scope of the Alleged Debtors' businesses, the

location of their assets, the geographical location of the Alleged Debtors' creditors, professionals

and major parties-in-interest, the Petitioning Creditors' decision to commence involuntary

chapter 11 cases in Delaware, is in conformity with the venue provisions of 28 U.S.C. § 1408,

should not be disturbed.

5. As shown below, the Alleged Debtors' arguments in favor of the Georgia

Bankruptcy Court are not sufficient to satisfy the Alleged Debtors' burden of showing, by a

preponderance of the evidence, that such a transfer would be "in the interests of justice or for the

convenience of the parties." For these reasons, the Petitioning Creditors request that the Court

deny the Transfer Motion in its entirety.

BACKGROUND
6. Allied is incorporated in Delaware, having filed its certificate of incorporation

with the Secretary of State of Delaware on May 8, 2007. Allied and its direct and indirect

subsidiaries are providers of distribution and transportation services to the automotive industry,

specializing in the delivery of new vehicles from automobile manufacturing plants to automobile

dealerships in the United States and Canada.

7. On July 31, 2005, Allied Holdings, Inc. and certain of its direct and indirect

subsidiaries commenced voluntary chapter 11 bankruptcy cases in the Georgia Bankruptcy Court
{935.000-W0021082.} 3

that resulted in a plan of reorganization ("Plan"), which was confirmed in May 2007 and became

effective soon thereafter. In re Allied Holdings Inc., Case No. 05-12515 (the "Georgia

Bankruptcy Case").

8. According to statements filed by the Alleged Debtors, Allied was specifically

excluded as a "Debtor" under the Plan in the Georgia Case. (Declaration of Scott Macaulay,

dated May 21, 2012 [D.I. 30] ~ 8 n.1) ("Macaulay Decl.") ("Thus, in connection with the

Original Chapter 11 Case, the terms "Allied" and "Debtors" exclude Allied Systems Holdings,

Inc. and include Allied Holdings Inc.").

9. On April 24, 2012, the debtors in the Georgia Bankruptcy Case filed an

application for a final decree closing the case. In re Allied Holdings Inc., Case No. 05-12515

[D.I. 4182]. On May 21, 2012, the United States Trustee filed a statement of no objection to

entry ofthe final decree. !d. [D.I. 4184]. The Alleged Debtors concede "the Original Chapter 11

Case is ready to be closed." (Macaulay Decl. ~ 8).

10. On May 17, 2012, the Petitioning Creditors filed involuntary petitions against the

Alleged Debtors. No trustee or examiner has yet to be appointed in these cases. The Alleged

Debtors have not filed an answer or responsive pleading to the involuntary petitions, although

the Alleged Debtors have indicated that they are planning to either consent to the entry of orders

for relief or file voluntary chapter 11 bankruptcy cases. (Transfer Motion ~ 19); Transcript of

Status Conference, May 22,2012 at 12:1-6?

2
The Alleged Debtors assert without any basis that the Petitioning Creditors were "well aware" of a potential
voluntary filing. (Transfer Motion ~ 19). The Alleged Debtors have never advised the Petitioning Creditors of a an
intent to file a case nor can they point to any evidence supporting such an assertion nor does the Transfer Motion
state that they informed the Petitioning Creditors of such a potential voluntary filing. Rather, the Alleged Debtors
are the ones that have long been aware of the Petitioning Creditors' desire to resolve the Alleged Debtors' financial
issues outside of the bankruptcy process.

{935.000-W0021082.} 4

ARGUMENT

I. The Relief Requested in the Transfer Motion is Prohibited Until an Order for Relief
is Entered.

11. The Alleged Debtors seek entry of an order from the Court (i) transferring these

cases to the Georgia Bankruptcy Court "in the interest of justice or for the convenience of the

parties," and (ii) staying the adjudication of all motions and other matters until the "relief

requested in this Transfer Motion has been adjudicated and the proper venue of these Chapter 11

cases has been determined on a final basis." (Transfer Motion~ 16). Importantly, the Alleged

Debtors do not argue that Delaware is an improper venue for these Involuntary Cases.

12. The relief requested by the Alleged Debtors is clearly prohibited by Bankruptcy

Rule 1011 which provides a short and exclusive list of responses that may be filed to an

involuntary petition. A request to transfer venue is not on that list. Bankruptcy Rule 1011 states

in relevant part:

Rule 1011. Responsive Pleading or Motion in Involuntary and Cross-Border Cases

(b) Defenses and objections; When presented Defenses and
objections to the petition shall be presented in the manner
prescribed by Rule 12 F. R. Civ. P. and shall be filed and served
within 21 days after service of the summons, except that if service
is made by publication on a party or partner not residing or found
within the state in which the court sits, the court shall prescribe the
time for filing and serving the response.

(e) Other pleadings. No other pleadings shall be permitted, except
that the court may order a reply to an answer and prescribe the
time for filing and service.

13. Bankruptcy Rule 1011(b) authorizes the Alleged Debtors to do only two things--

either (a) file an answer contesting the petition, or (b) make a motion asserting defenses and

objections to the petitions as provided for under Rule 12 of the Federal Rules of Civil Procedure

("Federal Rules" or "FRCP"). Further, Bankruptcy Rule 1011(e) unambiguously states that "no

{935.000-W0021082.} 5

other pleading shall be permitted." See In re David J Ross, 135 B.R. 230, 233 (Bankr. E.D. Pa

1991) (scope of a debtor's answer to an involuntary petition is limited to those issues which

address the merits of granting involuntary relief); COLLIER ON BANKRUPTCY ,-r 1011.05 (16th ed.

2012) ("In general, the involuntary petition ... and the responsive answer or motions filed by the

debtor ... are the only pleadings permitted").

14. The relief sought in the Transfer Motion is not prescribed by FRCP 12:

(b) How to Present Defenses. Every defense to a claim for relief in
any pleading must be asserted in the responsive pleading if one is
required. But a party may assert the following defenses by motion:
(1) lack of subject-matter jurisdiction; (2) lack of personal
jurisdiction; (3) improper venue; (4) insufficient process; (5)
insufficient service of process; (6) failure to state a claim upon
which relief can be granted; and (7) failure to join a party under
Rule 19.

15. Federal Rule 12(b) provides grounds for dismissal of a case, including dismissal

for "improper venue." The Transfer Motion neither requests dismissal for improper venue nor

does it assert any other defenses or objections to the petitions as provided in FRCP 12(b).

Because the Alleged Debtors' motion to transfer is not permitted under FRCP 12(b), it is

prohibited by Bankruptcy Rule 1011 (e). Therefore, the Transfer Motion is prohibited until an

order for relief is entered either on consent or after a hearing on the merits. See In re Raytech

Corp., 222 B.R. 19, 22 n.l (Bankr. D. Conn. 1998) (venue transfer motion premature until court

first determines whether the case would be administered in that court).

16. Further, consideration of the Transfer Motion prior to entry of an order for relief

or trial on the merits of the involuntary would prevent "consideration of the contested petition at

the earliest possible practicable time" as required by Bankruptcy Rule 1013. Bankruptcy Rule

1013(a) ("The court shall determine the issues of a contested petition at the earliest practicable

{935.000-W0021082.} 6

time and forthwith enter an order for relief, dismiss the petition, or enter any other appropriate

order") (emphasis supplied).

17. Finally, if the relief sought in the Transfer Motion was granted, the Petitioning

Creditors would be denied the right to litigate, if necessary, the involuntary petition in the

jurisdiction oftheir choice. See In re PWS Holding Corp., 1998 Bankr. LEXIS 549, *4-5 (Bankr.

D. Del. Apr. 28, 1998) (SLR) ("when venue is proper, a debtor's/plaintiffs choice of forum is to

be accorded substantial weight and deference").

18. The Federal Rules require that the Alleged Debtors must wait until after an order

for relief is entered in these cases before they can request a transfer of venue under Bankruptcy

Rule 1014. The Alleged Debtors have indicated in papers and before this Court that they were

planning ;;t voluntary chapter 11 filing or are "likely" to consent to the entry of orders for relief in

the within cases. (Transfer Motion ~ 19). Until the Alleged Debtors commit to a plan of action

or a judicial determination on the propriety of the involuntary petitions is made, the Transfer

Motion must be denied.

II. Venue is Proper in Delaware Pursuant to 28 U.S.C. § 1408.

19. Venue in chapter 11 cases is governed by section 1408 of title 28 of the United

States Code. Pursuant to § 1408(1 ), the venue of a chapter 11 case is proper when the case is

commenced in the district in which the debtor is domiciled or maintains its principal place of

business. See In re Segno Communications, Inc., 264 B.R. 501, 506, 511 (Bankr. N.D. Ill. 2001)

(debtor's state of incorporation was proper venue for involuntary case). A corporation is

domiciled in the state where it is incorporated. See Fourco Glass Co. v. Transmirra Products

Corp., 353 U.S. 222, 226 (1957) (equating terms "resident" and "domicile" in respect of

corporations to state of incorporation). As a Delaware corporation, Allied is domiciled in

{935.000-W0021082.} 7

Delaware.

20. The Alleged Debtors do not dispute that venue is proper in Delaware. Having

chosen to incorporate in Delaware, and reap the attendant benefits, Allied must now live with the

rights and responsibilities that come with its choice. Instead, the Alleged Debtors cite to a string

of cases for the argument that the "mere fact that Allied [Systems Holding, Inc.] is incorporated

in Delaware is not a compelling factor for retaining venue." (Transfer Motion ~ 22). The

Alleged Debtors are incorrect: in each of the cases they cite, the balancing of equities were

wholly distinguishable and therefore are not applicable to our case. E.g., In re Innovative

Commcn's Co., 358 B.R. 120 (Bankr. D. Del. 2006) (debtors owned companies that operated

telephone, newspaper and other public communication vehicles, thereby giving the U.S. Virgin

Islands a great public interest in being the venue for the case); In re B.L. ofMiami, Inc., 294 B.R

325, 331 (Bankr. D. Nev. 2003) (debtor's primary asset, a nightclub, was subject of extensive

state court litigation in Florida, the outcome of which would have had a large effect on the

administration of the debtor's estate); In re Malden Mills Indus., Inc., 361 B.R. 1, 10 (Bankr. D.

Mass. 2007) (counsel opposing transfer "made no attempt to deal with the traditional factors,"

while the movant's counsel "discussed them at length").

21. This Court and others have found the domicile or place of incorporation entirely

sufficient to support venue on its own. In In re PWS Holding Corp., this Court found that it was

entirely "just" that the chapter 11 case be prosecuted in the state of incorporation of only one of

the family of corporations that had filed petitions. See 1998 Bankr. LEXIS 549, *14 (Bankr. D.

Del. Apr. 28, 1998) ("[i]t is undisputed that American businesses which choose to operate in a

corporate form may choose their state of incorporation. With the choice of citizenship comes

various rights and responsibilities"). In In re Segno Communications, the alleged debtor was a

{935.000-W0021082.} 8

dissolved Illinois corporation, whose principal place was business was in Indiana. See 264 B.R.

501 (Bankr. N.D. Ill. 2001). Despite these facts, the bankruptcy court concluded that the

petitioning creditors' choice of venue, based solely on the alleged debtor's state of incorporation,

was proper and permitted the case to proceed in Illinois. Id. at 506, 511.

III. Transfer of the Alleged Debtors' Involuntary Cases Would Neither Be in the
Interest of Justice Nor for the Convenience of the Parties.

A. The Alleged Debtors Fail to Show that Transferring Venue is Warranted by
a Preponderance of the Evidence.

22. A bankruptcy court may transfer venue of a bankruptcy case "in the interest of

justice or for the convenience of the parties." 28 U.S.C. § 1412; Bankruptcy Rule 1014(a)(l).

The Alleged Debtors bear the burden of demonstrating by a preponderance of the evidence that a

transfer of venue is necessary to achieve the statutory purposes of the Bankruptcy Code. See

PWS, 1998 Bankr. LEXIS 549 at *4-5.

23. When venue is proper, deference is given to the venue selection and should only

be changed based on a strong showing that the interest of justice or convenience of the parties

would be served by transfer. See id. ("when venue is proper, a debtor's/plaintiffs choice of

forum is to be accorded substantial weight and deference") (citing In re Del. and Hudson

Railway Co., 96 B.R. 469 (D. Del 1988)); In re Enron Corp, 274 B.R. 327, 342 (Bankr.

S.D.N.Y. 2002) ("Transferring venue of a bankruptcy case is not to be taken lightly."); In re

Walbridge, 51 B.R. 137, 139 (Bankr. D. Mass. 1985) ("Where a transfer would merely shift the

inconvenience from one party to the other or where after the balancing all the factors, the

equities lean but slightly in favor of the movant the ... choice of forum should not be disturbed.")

{935.000-W0021082.} 9

(omission in original) (citing Moore's Federal Practice ,-r 145(5) at 1616, n.5 (2d ed. 1979)). The

Alleged Debtors have not made any such a showing. 3

24. Although the standard in the applicable rule and statute allows for significant

discretion, courts have adopted six factors, among others, to guide the use of that discretion. The

six factors are:

(a) proximity of creditors of every kind to the court;

(b) proximity of the debtor;

(c) proximity of witnesses who are necessary to the administration of the
estate;

(d) location of the debtors' assets;

(e) economic administration of the estate;

(f) necessity for ancillary administration in the event of liquidation.

Matter ofCommonwealth Oil Refining Co., 596 F.2d 1239, 1247 (5th Cir. 1979); see also In re

Safety-Kleen Corporation, 2001 Bankr. LEXIS 1296, *6-7 (D.Del. 2001); PWS, 1998 Bank.

LEXIS 549 at *5. 4

3
The Alleged Debtors cite In re Rehoboth Hospitality, LP, 2011 WL 5024267, *3 (Bankr. D. Del. Oct. 19, 2011) in
support of the argument that there is a presumption in favor of maintaining the debtor's choice of forum. (Transfer
Motion~ 19). However, the Alleged Debtors' reliance on this proposition and case is misplaced for two reasons.

First, such a presumption necessarily presumes that the debtor was the one that first selected the venue, i.e., that
there is a presumption in maintaining the debtor's choice of forum. Second, Rehoboth only confirms that any
presumption in favor of a debtor's choice of venue may be overcome. In Rehoboth, this Court granted a creditors'
motion to transfer venue of the case to Texas even though the debtor, which owned and operated a single hotel in
Texas, chose to file its voluntary petition in Delaware. There, the creditor presented compelling evidence and
satisfied its evidentiary burden; here, as presented below, the Alleged Debtors have presented no convincing
evidence in support of its burden.
4
The Alleged Debtors' reliance on the factors articulated in Jumara v. State Farm Insurance Company (an
underinsured motorist case governed by Pennsylvania law) is misplaced because Jumara was decided under the
general federal venue transfer statute, 28 U.S.C. § 1404(a), not the specific statute dealing with transfer of venue in
bankruptcy cases, 28 U.S.C. § 1412. See Jumara v. State Farm Insurance Company, 55 F.3d 873 (3d Cir. 1995).
While motions to transfer venue generally tum on similar issues, the test articulated with respect to bankruptcy
venue statute more properly focuses on the interest of the estate and its creditors rather than only on the interest of
the plaintiff and defendants.

{935.000-W0021082.} 10

B. Proximity of Court to Parties-in-Interest Supports Venue in Delaware.

(a) Creditors, Debtors and Other Parties-in-Interest

25. The Alleged Debtors have not demonstrated either significant (in amount or

number) creditor presence in Georgia or that the convenience of the Alleged Debtors' creditors

and other parties-in-interest would be best served by transfer of venue to the Georgia Bankruptcy

Court. While the Petitioning Creditors do not have the benefit of the Alleged Debtors'

statements or schedules, the Alleged Debtors by their own admission, acknowledge that because

of its "international presence . . . its creditors are spread over a wide geographic area" and not

concentrated in Georgia. (Macaulay Decl. ~ 17). Further, the Alleged Debtors admit that

because 60% of their business is tied to American automobile manufacturers, their creditors are

more heavily concentrated in Michigan, not Georgia. (!d. ~ 17).

26. In addition to the many customers, vendors, and creditors in Michigan, many of

the Alleged Debtors' major creditors are not located in Georgia, and upon information and belief,

Allied's chief executive officer and Allied's chairman of the board of directors, do not reside in

Georgia. More specifically,

• The Pension Benefit Guaranty Corporation ("PBGC") one of Allied's
largest creditors, is located in Washington, D.C.; 5

• The International Brotherhood of Teamsters (the "Teamsters") is
headquartered in Washington D.C. and has locations across the United
States· 6
'

5
Pension Benefit Guaranty Corp., http://www.pbgc.gov/about/pg/other/pbgc-office-locations.html (last visited May
29, 2012). The PBGC has previously appeared in the Georgia Bankruptcy Case and listed the PBGC's Office of the
General Counsel located in Washington, DC as its principal contact information.
6
Teamsters, http://www.teamster.org/?splash=off(last visited May 29, 2012). Several Teamster entities appeared in
the Georgia Bankruptcy Case and listed counsel or locations in the following cities: (1) Central Pennsylvania
Teamsters Pension Fund c/o Stevens & Lee in Philadelphia, PA; (2) International Brotherhood of Teamsters c/o
Previant Goldberg in Milwaukee, WI; (3) New England Teamsters and Trucking Industry Pension Funds in Boston,
MA; (4) Teamsters Pension Fund of Philadelphia & Vicinity c/o Stevens & Lee in Philadelphia, PA; (5) Teamsters
Union 25 Health Services & Insurance Plan in Charlestown, MA; and (6) Western Conference of Teamsters Pension
Fund c/o Reid, Pendersen, McCarthy, eta!. in Seattle, W A.

{935.000-W0021082.} 11

• Yucaipa American Alliance Fund I, LP and Yucaipa American Alliance
(Parallel) Fund I, LP (collectively, "Yucaipa"), the alleged largest lender
and controlling shareholder, has offices in New York and California;

• The Petitioning Creditors have offices in New York and Connecticut;

• The CIT Group/Business Credit, Inc., another major secured lender, is
headquartered in New Jersey/

• Derex Walker, the Chairman of the Alleged Debtors' Board of Directors,
resides in California; and

• Mark Gendregske, the Alleged Debtors' Chief Executive Officer, either
resides in Michigan or has a home in Michigan where he spends
significant time.

27. The Alleged Debtors' argument that venue should be transferred based on the

proximity of the Alleged Debtors to the Georgia Bankruptcy Court is equally unconvincing.

(Transfer Motion~ 21). A debtor's employees are rarely required to participate in chapter 11

cases. Even if these cases were to proceed in Delaware, the vast majority of the Alleged Debtors'

management and other key employees will not often, if ever, be required to travel to Delaware to

testify or otherwise appear in Court. The Alleged Debtors' other employees, the majority of

whom are unionized drivers and terminal employees (approximately 1062 out of 1835 people),

operate out of the numerous terminals owned by Allied located across the United States and

Canada. (Macaulay Decl. ~~ 5, 6). Thus, it appears from the Alleged Debtors' papers that only

128 of 1835 employees or approximately seven percent of its workforce is located in Georgia.

(Macaulay Decl. ~~ 5, 6, 17); see Pic 'N Pay Stores, Inc., Case No. 96-182 (PJW), bench

decision at 16 (Bankr. D. Del. Mar. 8, 1996) ("my experience suggest[s] that rank and file

employees do not participate in a bankruptcy proceeding"). 8

7
CIT, http://www.cit.com/contact-us/index.htm (last visited May 29, 2012).
8
A copy of the Pic 'N Pay bench decision is attached hereto as Exhibit B.

{935.000-W0021082.} 12

28. Rather, practice shows that it is the professionals who are routinely required to

appear in court. See In re Safety-Kleen Corp., Case No. 00-2303 (PJW), bench decision at 48

(Bankr. D. Del. July 11, 2000) ("the vast majority of activities in this court involve lawyering

and only a very, very limited number of principals have to appear on very, very limited

occasions "); 9 Enron, 274 B.R. at 347 ("While substantially all of the Debtors' officers are

located in Houston, most will not be required to attend hearings before this Court. Rather, the

certain participants in the proceedings before this Court will be the professionals retained in

these cases."). To that end, it appears that the professionals engaged to date have offices in or

around the Northeast corridor:

• The Alleged Debtors' lead counsel, Troutman Sanders LLP, has offices in
New York, Washington D.C. and New Jersey as well as Georgia.

• Yucaipa's lead counsel, Latham & Watkins, LLP has offices in New York
and Washington, D.C.

• The Petitioning Creditors' lead counsel, Schulte Roth & Zabel LLP, has
offices in New York and Washington D.C.

29. Finally, as a practical matter, any travel costs incurred by the Alleged Debtors'

management, counsel and other professionals will ultimately be borne by the bankruptcy estates

and their creditors. In effect, the Alleged Debtor's secured creditors are underwriting any costs

the Alleged Debtors will incur in travelling to Delaware. The lenders, however, must bear their

own costs.

30. Based upon the foregoing, the proximity of creditors prong does not support the

Transfer Motion.

9
A copy of the Safety-Kleen bench decision is attached hereto as Exhibit C.

{935.000-W0021082.} 13

C. Location of the Alleged Debtors' Assets Offers Little Weight to Venue
Transfer Analysis.

31. The Alleged Debtors have failed to show that the location of their assets supports

transfer of venue to Georgia. The Alleged Debtors' business is national and international in

scope. Thus, the location of their assets offers little, if any weight, to the venue transfer analysis.

See, e.g., Pic 'N Pay, bench decision at 4 ("Unlike the number of reported decisions in this

district and elsewhere and unreported decisions in this district which resulted in a transfer of

venue, this case does not involve a debtor whose principal asset is commercial real estate located

in a district other than this one."); PWS, 1998 Bankr. LEXIS 549 at *12-13 (denying transfer of

venue, recognizing that "bankruptcy practice and jurisdiction reflect American business" and that

"most American businesses (certain those with assets and liabilities counted in the hundreds of

millions of dollars) are truly interstate in practice, national in character" thereby diminishing the

importance ofthe 'convenience' factor).

32. Even if the location of Alleged Debtors' assets favored Georgia as the appropriate

venue, (which it does not), courts have found that the location of the Alleged Debtors' assets is

not a significant factor in deciding whether venue should be transferred where, as here, the goal

of the Chapter 11 case is rehabilitation, not liquidation. See Enron, 274 B.R. at 347-48 ("The

location of the assets is not as important where the ultimate goal is rehabilitation rather than

liquidation.... [W]hile a debtor's location and the location of its assets are often important

considerations in single asset real estate cases, these factors take on less importance in a case

where a debtor has assets in various locations.") (internal citation omitted); Commonwealth Oil,

596 F.2d at 1248 (location of the debtor's assets has greater weight in liquidation proceeding).

33. Likewise, the location of the principal place of business is not conclusive. In

Safety-Kleen, Judge Walsh denied a request to transfer venue to South Carolina despite the fact

{935.000-W0021082.} 14

that the debtor's corporate headquarters, assets, books, records and employees were located there.

See Case No. 00-2303 (PJW), bench decision. There, Judge Walsh concluded that:

[t]he issue of convenience of the parties is not where the headquarters may be or
what operations come out of those headquarters ... [The principals] don't have to
move out of South Carolina [to Delaware] to continue the cash management
system, to continue the day-to-day management and operations, and none of that
has anything in particular to do with appearances in this court .... [R]arely do we
have extended hearings in this court which would require any significant
dislocation from one's operating services in a headquarters.

Id. at 47-48. Similarly in Pic 'N Pay, transfer was denied even where there was "no doubt" that

the debtor's contacts in North Carolina were "much more significant" than those within Delaware

and debtor had most of its stores in the Southeast (including over 100 of approximately 800

stores in North Carolina) and most of the debtor's assets and landlords were located in the

Southeast. See Case No. 96-182 (PJW), bench decision at 3-5, 7.

34. The fact that the Alleged Debtors' books and records are located in Georgia is also

of minor relevance to the venue transfer analysis. With modern technology that information,

which is ordinarily computerized, can be readily transported electronically. See In re Enron

Corp., 284 B.R. 376 (Bankr. S.D.N.Y. 2002) (financial data can be easily transported from

Houston to New York if there was a need for the information). 10

35. The objective of the present cases, if an order for relief is entered, is

reorganization and not liquidation. (Transfer Motion ,-r 8). Thus, the location of the Alleged

Debtors' assets and its headquarters have little significance to the venue transfer analysis.

10
Indeed, in a state court action pending in the New York Supreme Court, the Court directed Yucaipa, the Alleged
Debtors' purported largest lender and controlling shareholder, to share with the Petitioning Creditors, within 72
hours, two years of financial information that Yucaipa had caused Allied to withhold from other lenders. BDCM
Opportunity Fund II LP v. Yucaipa Am. Alliance Fund I, LP, Case No. 65105/2012, Transcript of2/28/2012 Hearing
at 3:6-23; 6:11- 7:13 (a copy is attached hereto as Exhibit D). The Alleged Debtors were able to comply with the
electronic transfer.

{935.000-W0021082.} 15

D. The Alleged Debtors Failed to Show that Transfer to the Georgia
Bankruptcy Court would Promote the Efficient and Economic
Administration of these Cases.

36. The Alleged Debtors have failed to show by a preponderance of the evidence that

transfer of these cases to the Georgia Bankruptcy Court would promote the efficient and

economic administration of the Alleged Debtors' involuntary cases. The vast majority of

negotiations concerning financing and reorganization will take place among the legal and

financial advisors retained in these cases. Experience shows that these negotiations can and will

take place telephonically, through in person meetings in mutually convenient locations, and via

e-mail. The location of the Court in which the cases are pending is generally not relevant.

37. The Alleged Debtors also rely on the argument that assignment of these cases to

Judge Mullins of the Georgia would be the "most economically efficient option for the Alleged

Debtors." (Transfer Motion ~ 25). However, the Alleged Debtors' acknowledge that there is no

guaranty that Judge Mullins would be assigned to these cases. (Transfer Motion ~ 25)

("transferring these Involuntary Petitions to the Georgia Bankruptcy Court, where they would

probably, under the rules of case assignment, be administered by a [sic] Bankruptcy Judge

(Judge Mullins) who is already familiar with Allied and most of the rest of the parties-in-

interest .... ") (emphasis supplied).

- E v e n if Judge Mullins were to be assigned to these cases, the Plan in the Georgia

Case was confirmed five years ago and thus the Georgia Bankruptcy Court, like the Delaware

Court, would need to be educated by counsel on changes to the Alleged Debtors' capital

structure, business operations, as well as the events resulting in the Alleged Debtors need for

Chapter 11

{935.000-W0021082.} 16

E. Transfer to the Georgia Bankruptcy Court is Not Necessary.for Ancillary
Administration.

IV. The Alleged Debtors Improperly Rely on Bankruptcy Rule 1014(b).

A. The Alleged Debtors Elevate Form Over Substance to Conclude that the
Georgia Bankruptcy Case is Still Open.

40. The Alleged Debtors' argument that the Georgia Bankruptcy Case is still pending

elevates form over substance and should be given little weight in the venue transfer analysis.

Bankruptcy Rule 10 14(b) states in relevant part: 11

If petitions commencing cases under the Code . . . are filed in
different districts by, regarding, or against (1) the same debtor ...

11
While the Alleged Debtors rely on Bankruptcy Rule 1014(b) to support their venue transfer request (arguing that
the Georgia Bankruptcy Case is still technically open), the Alleged Debtors have actually failed to comply with
Bankruptcy Rule 1014(b). Technical compliance would have required that the Transfer Motion be filed in the
Georgia Bankruptcy Court.

{935.000-W0021082.} 17

on motion filed in the district in which the petition filed first is
pending and after hearing on notice to the petitioners, the United
States Trustee, and other entities as directed by the court, the court
may determine, in the interest of justice or for the convenience of
the parties, the district or districts in which the case or cases should
proceed. (emphasis supplied).

41. A confirmation order was entered in the Georgia Bankruptcy Case in 2007, over

five years ago. On April 24, 2012, the debtors in the Georgia Bankruptcy Case filed an

Application for Final Decree. In re Allied Holdings, Inc., Case No. 05-12515-CRM (Bankr.

N.D. Ga., Aug. 1, 2005) [D.I. 4182]. The United States Trustee filed a Statement of No

Objection to the final decree on May 21, 2012. The Alleged Debtors concede in their papers "the

[Georgia Bankruptcy Case] is ready to be closed (indeed, a motion for a final decree was

recently filed)." (Transfer Motion ~ 9).

42. Bankruptcy Rule 1014(b) is permissive and requires the Court to evaluate the

same standard (and therefore the same analysis) for transfer as in Bankruptcy Rule 10 14(a). As

set forth above, the Alleged Debtors' have failed to meet their burden of showing that transfer

would be "in the interests of justice or for the convenience of the parties."

B. Allied Systems Holding, Inc. is not a "Debtor" under
Bankruptcy Rule 1014(b).

43. The Alleged Debtors argue that "[b]oth of the Alleged Debtors, [Allied Systems

Holdings, Inc.] and Allied Systems [Ltd. (L.P.)] are debtors in the Chapter 11 cases pending in

the Northern District of Georgia, Atlanta Division. Therefore, petitions against the same Debtor

have been commenced in different districts, triggering the application of Fed. R. Bank. P.

1014(b)." (Transfer Motion~ 28).

44. The Alleged Debtors' argument is contradicted by their acknowledgement that

Allied was specifically excluded from the Plan confirmed in the Georgia Bankruptcy Case:

{935.000-W0021082.} 18

Allied Systems Holdings, Inc. is the successor by merger with
Allied Holdings, Inc., which was the ultimate parent when the
Original Chapter 11 Case was filed. When the Allied Plan of
Reorganization became effective, Allied Systems Holdings, Inc.
was created as a subsidiary of Allied Holdings, Inc. which was
merged into Allied Systems Holdings, Inc., the surviving
corporation. Thus, in connection with the Original Chapter 11
Case, the terms "Allied" and Debtors" exclude Allied Systems
Holdings, Inc. and include Allied Holdings Inc. Also, in
connection with the Original Chapter 11 Case, the term "Debtors"
includes certain indirect Allied subsidiaries that no longer exist.
Certain indirect Allied subsidiaries formed under the law of
Mexico and Bermuda were not Debtors.

(Transfer Motion at 4, n.1) (emphasis supplied). Under the Bankruptcy Code a "debtor" means a

"person ... concerning which a case under this title has been commenced." 11 U.S.C. § 101(33).

Allied is not a debtor since it was formed post confirmation and is not a "person concerning

which a case under this title has been commenced." Thus, Allied should not be considered a

"debtor" pursuant Bankruptcy Rule 1014(b).

45. Finally, while the Alleged Debtors may argue that Allied Systems Ltd. (L.P.) was

a debtor in a prior pending proceeding, the test under Bankruptcy Rule 1014(b) is nevertheless

permissive ("the court may determine"), and for the reasons set forth above venue of these cases

should remain in Delaware.

CONCLUSION

46. The Alleged Debtors have failed to sustain their burden to show by a

preponderance of the evidence that a transfer of venue is "in the interests of justice or for the

convenience of the parties." Rather, the only thing the Alleged Debtors have shown is that

transfer to the Georgia Bankruptcy Court might be more convenient for the Alleged Debtors and

their counsel. That, however, is not the criteria. Thus, the Petitioning Creditors' choice of proper

venue in Delaware should not be disturbed. See In re Enron Corp, 274 B.R. 327, 343 (Bankr.

{935.000-W0021 082.} 19

S.D.N.Y. 2002) (where transfer would merely shift the inconvenience from one party to the

other, choice of venue should not be disturbed).

WHEREFORE, the Petitioning Creditors request that the Court (i) deny the relief

requested in the Transfer Motion, and (ii) grant such other and further relief as is proper.

Dated: May 29,2012
Wilmington, Delaware

A am G. Landis (No. 3407)
Kerri K. Mumford (No. 4186)
919 Market Street, Suite 1800
Wilmington, Delaware 19801
Telephone: (302) 467-4400
Facsimile: (302) 467-4500

-and-

Adam C. Harris
Robert J. Ward
SCHULTE ROTH & ZABEL LLP
919 Third Avenue
New York, New York 10022
Telephone: (212) 756-2000
Facsimile: (212) 593-5955

Attorneys for BDCM Opportunity Fund II, LP,
Black Diamond CLO 2005-1 Ltd, and
Spectrum Investment Partners, L.P.

{935.000-W0021082.} 20

ALLIED SYSTEMS HOLDINGS, INC.

Page 1

1 UNITED STATES BANKRUPTCY COURT

2 DISTRICT OF DELAWARE

3 - - - - - - - - - - - - - - - - - X

4 In re:

5 Chapter 11

6 ALLIED SYSTEMS HOLDINGS, INC., Case No. 12-11564(CSS)

7

8 Alleged Debtor.

9 - - - - - - - - - - - - - - - - - - - - - - - - - - - - X

10 In re:

11 Chapter 11

12 ALLIED SYSTEMS LTD. (L.P.), Case No. 12-11565(CSS)

13

14 Alleged Debtor.

15 - - - - - - - - - - - - - - - - - - - - - - - - - - - - X

16

17 United States Bankruptcy Court

18 824 North Market Street

19 Wilmington, Delaware

20

21 May 22, 2012

22 4:13 P.M.

23

24

25

VERITEXT REPORTING COMPANY
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1 BEFORE:

2 BON CHRISTOPHER S. SONTCHI

3 U.S. BANKRUPTCY JUDGE

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25 ECR OPERATOR: LESLIE MURIN

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1 HEARING re Expedited Motion of Petitioning Creditors for the

2 Appointment of a Trustee Pursuant to 11 U.S.C. §§ 105(a),

3 1104(a) (1) and 1104(a) (1) (Filed May 17, 2012, Docket No. 13)

4

5 HEARING re Petitioning Creditors' Motion Pursuant to Del.

6 Bankr. L.R. 9006-1(e) for an Order Shortening Time for

7 Notice of the Hearing to Consider the Expedited Motion of

8 Petitioning Creditors for the Appointment of a Trustee

9 Pursuant to 11 U.S.C. §§ 105(a), 1104(a) (1) and

10 1104(a) (2) (Filed May 17, 2012, Docket No. 12)

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25 Transcribed by: William J. Garling

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1 APPEARANCES

2 TROUTMAN SANDERS , LLP

3 Attorney for Allied Systems Holdings, Inc., Debtor

4 600 Peachtree Street, NE, Suite 5200

5 Atlanta, GA 30308

6

7 BY: EZRA H. COHEN, ESQ. (TELEPHONIC)

8 JEFFREY W. KELLEY, ESQ. (TELEPHONIC)

9 MICHAEL JOHNSON, ESQ. (TELELPHONIC)

10

11 RICHARDS, LAYTON & FINGER, P.A.

12 Attorney for Allied Systems Holdings, Inc., Debtors

13 One Rodney Square

14 920 North King Street

15 Wilmington, DE 19081

16

17 BY: CHRISTOPHER M. SAMIS, ESQ. (TELEPHONIC)

18

19 OFFICE OF THE UNITED STATES TRUSTEE

20 Attorney for the United States Trustee

21 844 King Street, Suite 2207

22 Lockbox 35


24

25 BY: DAVID L. BUCHBINDER, ESQ. (TELEPHONIC)

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1 SCHULTE, ROTH & ZABEL, LLP

2 Attorney for BDCM Opportunity Fund II, LP, Creditor

3 919 Third Avenue

4 New York, NY 10022

5

6 BY: ADAM C. HARRIS, ESQ. (TELEPHONIC)

7 ROBERT J. WARD, ESQ. (TELEPHONIC)

8

9 YOUNG CONAWAY STARGATT & TAYLOR, LLP

10 Attorney for Yucaipa, Interested Party

11 Rodney Square

12 1000 North King Street


14

15 BY: MICHAEL R. NESTOR, ESQ. (TELEPHONIC)

16

17 LATHAM & WATKINS, LLP


19 355 South Grand Avenue

20 Los Angeles, CA 90071

21

22 BY: ROBERT A. KLYMAN, ESQ. (TELEPHONIC)

23

24

25

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1 KASOWITZ, BENSON, TORRES & FRIEDMAN LLP


3 Two Midtown Plaza, Suite 1500

4 1349 West Peachtree Street, N.W.

5 Atlanta, GA 30309

6

7 BY: DAVID E. SPALTEN, ESQ. (TELEPHONIC)

8

9 KASOWITZ, BENSON, TORRES & FRIEDMAN LLP

11 1633 Broadway

12 New York, NY 10019

13

14 BY: DAVID E. ROSS, ESQ. (TELEPHONIC)

15

16 APPEARED TELEPHONICALLY:

17 ROBERT WARD, ESQ.

18 MICHAEL JOHNSON, ESQ.

19

20

21

22

23

24

25

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1 P R 0 C E E D I N G S

2 THE CLERK: All rise.

3 THE COURT: Please be seated.

4 Good afternoon, counsel, this is Judge Sontchi and

5 we're here on a status conference in Allied System Holdings

6 and Allied Systems Limited.

7 There are quite a few people on the telephone and

8 I would urge you to please -- to mute your phones if you're

9 not actively speaking, to do your best not to talk over each

10 other, and to remember to identify yourself prior to every

11 time you speak.

12 And I would like to start by hearing from the

13 petitioning creditors.

14 MR. HARRIS: Good afternoon, Your Honor.

15 Adam Harris and Robert Ward from Schulte, Roth &

16 Zabel.

17 Your Honor, would you like to take appearances

18 from everybody before we get started or

19 THE COURT: That would take -- that would take

20 longer than the hearing.

21 MR. HARRIS: Thank you, Your Honor.

22 Your Honor, we filed the involuntary petitions

23 last week as Your Honor knows, and the summons have been

24 served upon the alleged debtors in the case -- in the cases,

25 I should say.

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1 In conjunction with the filing of the

2 involuntaries we've also filed a motion for the appointment

3 of a trustee, as well as a motion of entering an order

4 shortening time -- to set a hearing with respect to that

5 motion.

6 Last night, Your Honor, I believe, received a

7 response to the motion shortening time by the alleged

8 debtors as well as a motion to transfer venue of the cases

9 to the Northern District of Georgia.

10 Your Honor, since the responses were filed last

11 night, since the involuntaries were filed last week, we've

12 had an opportunity to speak with counsel for the alleged

13 debtors, Mr. Collins from Richards Layton, as well as

14 Messrs. Kelley and Cohen from Troutman Sanders.

15 Your Honor, the purpose of our suggestion of a

16 status conference, which we brought up late last week or

17 Monday, I can't remember which i t was, was that we thought

18 i t would be helpful to Your Honor in making decisions about

19 entering orders shortening time or otherwise setting

20 calendars to hear from the various parties as to the issues

21 that were likely to be brought before the Court and on which

22 the Court would be asked to rule.

23 Given certain of the statements that were made in

24 the alleged debtor's filings last night in some instances in

25 the redacted portion -- so I'm not going to talk about them

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1 specifically -- I think that the -- many of the issues

2 related to whether orders could be -- relief could be

3 entered based upon the involuntary petitions and the issues

4 under 303 have in some sense been muted by intentions of the

5 company as expressed in their filings. And, obviously, I

6 would like to let Mr. Collins or his co-counsel from

7 Troutman Sanders address those issues.

8 To the extent those intentions are carried out in

9 the manner that they were described in both the filings and

10 as we discussed them with the alleged debtor's counsel

11 today, we think that the cases can move forward on --

12 hopefully on a more cooperative and consensual track. And

13 that there might not need to be any particular order or

14 scheduling order entered by Your Honor relative to our

15 trustee motion at this time.

16 I would like Your Honor to hear from Mr. Collins

17 or his co-counsel from Troutman Sanders on those issues and

18 would then like to have an opportunity to speak thereafter

19 based upon what they say.

20 THE COURT: All right. Let me hear from the

21 purported debtor.

22 MR. SAMIS: Good afternoon, Your Honor.

23 This is Chris Samis from Richards, Layton & Finger

24 on behalf of the alleged debtors.

25 Your Honor, with me on the phone are my co-counsel

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1 in this matter, Jeffrey Kelley, Ezra Cohen, and Michael

2 Johnson, all with the Troutman Sanders firm.

3 Your Honor, pro hac vice motions are in process

4 for these gentlemen and we expect to submit them shortly.

5 In advance of these motions being reviewed by the Court and

6 pro hac orders being entered, for the limited purpose of

7 today's status conference, I would request that the Court

8 permit them to speak.

9 THE COURT: I'd be happy to do so; and I'd like to

10 express my personal thanks to you, Mr. Samis, for your

11 yeoman's work in getting the Court the documents I needed to

12 be prepared for today, but I'll hear from them.

13 MR. SAMIS: Your Honor, no problem. I was happy

14 to do so, and I also -- wanted to thank Your Honor for

15 accommodating us this afternoon in reviewing a pretty

16 voluminous docket on very short notice for this status

17 conference.

18 Your Honor, just very briefly, with respect to why

19 we're here today, the alleged debtors believe it's

20 appropriate to use this status conference to address not

21 only the motion to shorten on the trustee motion, but more

22 importantly in our view, the scheduling of our own venue

23 transfer motion, which we think deals with a real gating

24 issue in these cases.

25 So, Your Honor, with that as background, I turn

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1 the balance of our presentation over to Mr. Kelley.

2 THE COURT: Very good.

3 Thank you.

4 MR. KELLEY: Good afternoon, Your Honor.

5 This is Jeff Kelley with Troutman Sanders in

6 Atlanta. Ezra Cohen is also, I think, on the line with us

7 now, but I'll do all the speaking, I believe.

8 By way of background, both Ezra and I were counsel

9 to Allied in the first Chapter 11 case of Allied in front of

10 Judge Mullins, here in Atlanta.

11 Your Honor, the filing of these petitions has

12 caused what Allied believes to be, as we set forth in our

13 papers, some unnecessary disruptions and potentially

14 significant damage to Allied's business and its value.

15 Our perspective on how this possibly could have

16 happened and the motives may be driving the petitioning

17 creditors is set forth in particular in the redacted

18 portions of our response to the motion to shorten time for

19 the hearing on the appointment of a trustee where we, among

20 other things, argue that we don't think that any emergency

21 has been shown and that the issues raised have been the

22 subject of the State Court litigations among the various of

23 the parties going back several years.

24 However, Your Honor, due to the filing that's

25 taken place, their -- the actions in this involuntary

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1 petition -- involuntary petitions being filed, i t does

2 appear very likely the subject to bankruptcy -- subject the

3 board approval, I should say, Allied's board approval, that

4 Allied will likely, in the future, convert these cases to

5 voluntary Chapter 11 cases, but the timing is not ripe today

6 for that. Allied needs a little time to make sure i t has

7 adequate financing and cash collateral before i t files its

8 other subsidiaries, its many other subsidiaries, along with

9 these two. Those subsidiaries are identified in our

10 response.

11 But, Your Honor, Allied's preferred forum is

12 Atlanta. That's where, as I mentioned, Allied's first case

13 was administered by Judge Mullins. That case is still open.

14 Although it's ready to be closed, i t is still open. The

15 reasons that we think a transfer is appropriate are set

16 forth in the venue motion. I'm not going to argue that at

17 this point, but it's primarily the convenience of Allied's

18 very, very stretched-thin executive team, which is located

19 in Atlanta, not to mention Judge Mullins' familiarity with

20 most of the players in this case.

21 The first case was a very large case by Atlanta

22 standards, very intense, a lot of activity in that case, and

23 Judge Mullins had ample opportunity to learn a lot about

24 Allied, and for that matter, Yucaipa.

25 So, Your Honor, we ask that you rule on the venue

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1 transfer motion as a gating matter before anything else gets

2 ruled on in this case, because we take the position and

3 believe and submit, that everything else that happens in

4 this case, including the trustee motion, should heard by the

5 Court that ultimately has the case, whether is that Your

6 Honor or a bankruptcy judge in Atlanta, probably Judge

7 Mullins.

8 Your Honor, due to the petitioning creditors'

9 actions we need to get these cases moving along in the right

10 direction, so we respectfully ask that the Court give

11 Allied's transfer motion consideration as soon as the

12 Court's schedule permits, and that's our position as to the

13 status of matters and proposed scheduling.

14 THE COURT: Well, the decision is Judge Mullins';

15 is i t not?

16 MR. KELLEY: Would that be -- are you referring,

17 Your Honor this is Jeff Kelley, again -- to Bankruptcy

18 Rule 10014 (sic)?

19 THE COURT: (Indiscernible - 4:22:23).

20 MR. KELLEY: Yes, we did raise that, Your Honor,

21 in our papers, and technically that is correct because the

22 first case is still pending.

23 THE COURT: Okay.

24 Anyone else?

25 MR. HARRIS: Adam Harris -- sorry to interrupt.

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1 I guess that would depend on whether the company

2 that was the subject of the case there is, in fact, the same

3 legal entity, which is the subject to the involuntary.

4 My understanding is that Allied Systems Holdings,

5 Inc. is a successor by merger to what was the reorganized

6 debtor, I guess, but i t is not the same legal entity that

7 was the debtor in the case down there.

8 Now, that all being said, Your Honor, we've had a

9 conversation with Mr. Kelley and Mr. Cohen and Mr. Samis

10 earlier today where we told them that we would be happy to

11 sit with them and try to better understand their views on

12 Atlanta as an appropriate venue versus -- versus Delaware

13 and take into account and discussing with them the interests

14 of all of the parties involved here, only one of which

15 really is located in Atlanta, the rest of whom are located

16 mostly in the Northeast corridor, but also in California and

17 Detroit and elsewhere.

18 And to the extent the Court is inclined to set a

19 hearing in connection with the venue transfer request, we

20 would only ask that we be given an opportunity to get with

21 the purported debtors and others to discuss this, and that

22 if a hearing need be held, that i t would be held sometime

23 late next week rather than between now and the Memorial Day

24 weekend. I don't think that would prejudice the debtors at

25 all given the timetable they seem to be operating on

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1 relative to their thoughts on when they would ultimately,

2 potentially convert these cases to voluntary Chapter 11s.

3 THE COURT: Do I take i t

4 MR. HARRIS: I

5 THE COURT: I'm sorry.

6 Do I take i t that you would were that to be the

7 case, you would hold your trustee motion in abeyance pending

8 the decision on the venue motion?

9 MR. HARRIS: We would, Your Honor.

10 THE COURT: Okay.

11 MR. NESTOR: Yes, Your Honor. Michael Nestor ,

12 Young Conaway on behalf of Yucaipa, and I'm on with Robert

13 Klyman from Latham & Watkins.

14 May we be heard briefly?

15 THE COURT: I'm sorry. I missed your client,

16 Mr. Nestor.

17 MR. NESTOR: It's Yucaipa.

18 THE COURT: Oh, very good.

19 Yes, Mr. Klyman.

20 MR. KLYMAN: Thank you, Your Honor.

21 For the record, Robert Klyman of Latham & Watkins,

22 LLP, on behalf of Yucaipa.

23 Your Honor, by way of background, Yucaipa is the

24 largest lender and shareholder and member of the board of

25 the alleged debtors and we have a direct economic material

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1 economic interest in the outcome.

2 We would echo what Mr. Kelley said, that it's,

3 from our vantage point, very important to have the venue

4 determined first and foremost. If Your Honor determines

5 that it's appropriate for Judge Mullins to make the initial

6 decision we would be happy to go down there and get that

7 teed up on an expedited basis.

8 I believe that the debtor chose to file the motion

9 to transfer venue before your Court only because what's left

10 to be resolved in Atlanta is a motion to close the case, but

11 under the plain reading of the statute that may be the

12 more appropriate place for determination as to venue. We

13 just thought that since there was a trustee motion on an

14 expedited basis filed this was the natural venue to first

15 raise the issue. But as I said, at least from Yucaipa's

16 perspective, having the issue determined by Judge Mullins

17 would be a perfectly fine result on an expedited basis.

18 I would just add two other points. The first is

19 while my colleague, Mr. Harris, says that he needs more time

20 to sit down with the debtors, and maybe Yucaipa to

21 understand all there is about the venue in Atlanta, the fact

22 of the matter is that they did have sufficient time to do

23 that before they filed an involuntary. The filing of the

24 involuntary was their timing, not the debtor's, and the

25 reasons why venue's appropriate in Atlanta, I believe, are

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1 spelled out in great detail in the motion to transfer venue.

2 So, although on behalf of Yucaipa, and I believe

3 Mr. Kelley would echo the sentiment, we are always happy to

4 sit down with Black Diamond and Mr. Harris. We do not

5 believe that that is a reason to delay a resolution of the

6 venue motion.

7 The alleged debtors are suffering, you know,

8 potential business issues while they are in limbo. They

9 want to tee up a process for obtaining financing and getting

10 on with the case in a manner that preserves value, both for

11 the enterprise as a whole and the secured lenders, including

12 Black Diamond in particular.

13 We would also ask Your Honor that while the venue

14 issue is being decided that Black Diamond actually withdraw

15 the trustee motion without prejudice with the ability to

16 refile it on an expedited basis if they'd like, with all

17 parties reserving their rights with respect to whether or

18 not the request for expedited hearing is appropriate before

19 whatever judge ultimately hears the case.

20 The -- it's, you know, tough enough for the

21 business and management to be dealing with an involuntary

22 and scrambling to catch up to make sure that the business

23 doesn't suffer the unnecessary stigma of a trustee motion,

24 which is not going to be heard for some period of time, is

25 something that, at least on Yucaipa's behalf, we would like

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1 to avoid hanging over when we meet with customers and

2 vendors and the like, recognizing that this would not

3 prejudice Black Diamond's ability to refile at any time in

4 the future.

5 THE COURT: Well, I think that from what I had

6 read in the papers Black Diamond might take issue with your

7 comment that you're willing to sit down and talk to them,

8 but that wasn't my impression from what I read.

9 All right. Does anyone else care to make

10 comments?

11 MR. BUCHBINDER: Your Honor, this is Dave

12 Buchbinder from the U.S. Trustee's Office.

13 We are concerned about Rule 1014(b) and how i t

14 applies here. If we do have the same debtor the rule would

15 seem to imply that anything pending here is stayed until the

16 Court in Atlanta rules otherwise or orders otherwise.

17 To the extent that an issue has been raised as to

18 whether or not this is the same debtor, Rule 1014(b),

19 Subdivision 4, says that if petitions commencing cases are

20 filed in different districts by regarding or against and Sub

21 4 is a debtor and an affiliate, if the new debtor is a

22 successor they may or may not be an affiliate.

23 And so what I'm getting at is I agree with the

24 parties that the threshold matter here is a ruling on either

25 Rule 1014(b) 's applicability or a ruling on the venue

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1 motion, and i t may be that the venue motion, if i t were to

2 proceed here, requires the consent of the judge in Atlanta

3 because that's the case first filed, and the last thing I

4 think any of the parties on line would want would be a

5 ruling from this Court and then someone going back to

6 Atlanta saying the ruling here was void because of Rule

7 1014 (b) .

8 THE COURT: Thank you. I understand your

9 position.

10 I think it's less than clear whether this Court

11 has, without authority, to enter any order pending that

12 decision as opposed to simply making a decision on venue,

13 but I certainly appreciate your (Indiscernible - 4:30:31) I

14 think that's the most sophisticated response to some of the

15 complications that the Court is looking at in this case.

16 Anyone else?

17 MR. KELLEY: Yeah, this is Jeff Kelley, again, for

18 the alleged debtors.

19 I -- I would will also like to reiterate and state

20 for the alleged debtors that we're certainly willing -- I

21 don't know about -- you know, we are not Yucaipa, and

22 whatever was alleged and whether it's true or not about

23 Yucaipa's willingness to cooperate -- of course the alleged

24 debtors are willing to sit down and cooperate and talk with

25 their lenders at any time. We don't have to be subject to

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1 an involuntary bankruptcy petition to do that; we're always

2 willing to do that, and we need -- and we know we need to

3 cooperate.

4 So, I just wanted to address the cooperation

5 issue, and to reiterate that however we do it, we would like

6 to try to get a decision as soon as the Court's calendar

7 permits on the venue transfer motion.

8 If I needed to go file something in front of Judge

9 Mullins I would. I don't want to unduly complicate this by

10 doing that. We did think that under the circumstances of

11 this case, this was the appropriate place to bring up the

12 venue transfer motion.

13 THE COURT: All right. What's the debtor's

14 position -- presuming I will schedule the venue transfer

15 motion to be heard expeditiously what's the debtor's

16 position on when that should occur?

17 MR. KELLEY: As soon as Your Honor's calendar

18 permits.

19 THE COURT: Okay. Can I --

20 MR. KELLEY: (Indiscernible - 4:32:09.)

21 THE COURT: -- can I transfer the case before

22 entry of an order for relief?

23 MR. KELLEY: We believe you can, Your Honor. This

24 is a --under the strict ruling reading of 303(b) a case was

25 commenced

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1 THE COURT: Uh-huh.

2 MR. KELLEY: -- when the petitions were filed, and

3 we are seeking -- we filed a motion seeking the transfer of

4 a case.

5 THE COURT: Mr. Harris, anything?

6 MR. HARRIS: Your Honor, I mean I understand the

7 strict reading -- the way they're looking at it; on the

8 other hand, what would be the purpose of transferring venue

9 if the only thing the Court who is receiving i t would do

10 would be then to be ruling on whether or orders for relief

11 should be entered or not unless there's going to be a ruling

12 that Your Honor can make if there's going to be a contested

13 involuntary. If there's not going to be a contested

14 involuntary and the debtors were to affirm that, then, you

15 know, there wouldn't be any issue with dealing with the

16 venue transfer in my mind.

17 But there seems to be a timing issue in some

18 respects as to the desire to go to a forum and then deal

19 with the involuntary and conversion at a later date, and not

20 even, frankly, confirmed, but they said subject to board

21 approval -- and I think the word used was "likely" convert,

22 where that would basically put us in a position of

23 litigating the involuntaries in a jurisdiction in which we

24 didn't file them.

25 THE COURT: All right. So, what I'm -- I'm going

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1 to see if I can make sure I understand what I'm hearing.

2 And what I'm hearing from Mr. Harris is, at least

3 for the immediate future, he's not pressing the trustee

4 motion, and again, would like to open and we'll continue in

5 a dialogue concerning how this case will go forward, whether

6 i t go forward here in Delaware or whether i t get filed or

7 transferred to some other jurisdiction.

8 What I'm hearing from the debtor is that and

9 its supporters -- that the only thing they want me to decide

10 what venue the case should (indiscernible - 4:34:18) once

11 that decision has been made they'll be in a position,

12 perhaps, to make a decision on whether agree to agree to an

13 entry of order for relief or not.

14 Is that right -- I want to make sure -- is that a

15 gating issue or do you (indiscernible- 4:34:39)?

16 MR. KELLEY: This is Jeff Kelley.

17 It's my opinion that the two are unrelated in my

18 view. Allied Systems needs to make a decision, and the

19 (indiscernible - 4:34:50), Your Honor, is I just don't have

20 the board sitting here with me, that -- which because of the

21 filing of the involuntary petitions we will be consenting,

22 we just do not wish to have a crash landing into a voluntary

23 Chapter 11. We want to make sure that our financing is all

24 lined up and we want to do i t as neatly as possible with the

25 right message to all of our constituencies, many of whom are

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Page 23

1 on the phone.

2 So, I don't think the two are related, Your Honor.

3 The fiduciary decision of deciding to go ahead and enter

4 into a voluntary 11 is independent of the venue motion.

5 THE COURT: Right.

6 MR. KELLEY: We just -- we wanted to make -- to

7 bring the venue motion before your Court in a very early

8 time to let you know that i t was an issue. We were faced

9 with an emergency filing for appointment of a trustee. We

10 didn't think that if Your Honor was not going to keep the

11 case, not presupposing at all what Your Honor's decision

12 will be, that Your Honor would want to be the one deciding

13 whether to appoint a trustee

14 THE COURT: Okay.

15 MR. KELLEY: -- so we brought this motion to your

16 attention promptly.

17 THE COURT: Very good. And I understand you would

18 like Mr. Nestor to withdraw, but, of course, I can't make

19 him withdraw it.

20 I will offer a comment. I think as presented in

21 its -- or in the papers that the trustee motion is not

22 particularly persuasive, of course, all those motions

23 require a development of facts and it's somewhat difficult

24 to figure i t out from the actual papers.

25 What I'd like to do in this case and what I will

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1 do is let's have a hearing on the venue transfer motion on

2 Thursday, May 31st. (Indiscernible - 4:36:44 reschedule

3 that, I'm available throughout the day with -- I do have to

4 take a break in the late morning, so I won't be available

5 until say 10:30, if we started in the morning, or I'm

6 available 12:30 going forward whether we take a break or we

7 start in the afternoon.

8 I know there are a lot of people who are going to

9 be interested and when the timing on that is going to be, so

10 if people want me to simply state a time I will and we'll

11 basically try to figure i t out.

12 But, I think regardless of whether this is going

13 to be withdrawn or filed an 11 or what have you, I have a

14 responsibility to decide very quickly where -- what the

15 venue should be. And i t very well may be at the end of that

16 Mullin hearing my answer is going to be, I can't make that

17 decision because Judge Mullins is going to make that

18 decision.

19 But if i t is appropriate for this Court to have a

20 hearing on transfer venue, then one of the possibilities may

21 be that this Court doesn't have the power, or the

22 possibility is this Court decides i t has that power and

23 makes a decision. Either way, I need to hear from the

24 parties and the facts and law to make that call.

25 Is there any comment on that?

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1 MR. HARRIS: Your Honor, it's Adam Harris.

2 That's all fine with us, just two

3 questions/comments.

4 One is, can we set a time for filing responses of

5 maybe a day before the hearing? And that ties into my

6 suggestion that we hold the hearing, if Your Honor's

7 available, at 2 o'clock in the afternoon. That way parties

8 can get in and out the same day, including potentially

9 flying up from Atlanta to the extent they need to do that,

10 rather than doing something early in the morning where

11 people may feel compelled to come in the night before

12 just the cost issue. I think if we do the 2 o'clock, then

13 we can try to get the responses by noon the day before. If

14 that's too tight, we can probably do i t a little sooner than

15 that.

16 THE COURT: All right.

17 MR. KELLEY: Your Honor

18 THE COURT: Go ahead. Sorry, go ahead.

19 MR. KELLEY: this is Jeff Kelley.

20 The date of the hearing is fine, and we would ask

21 that, if possible, the response date be set a little sooner

22 than that to give us a little bit more time to read it, and

23 we appreciate and agree with Mr. Harris' suggestion that the

24 hearing start at 2 o'clock.

25 THE COURT: All right.

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1 MR. HARRIS: Your Honor, we can do the response

2 5:00p.m., Tuesday, the 29th, I guess that would be.

3 THE COURT: Well, that's what I was about to say.

4 All right. We'll have a hearing May 31st at

5 2:00 p.m. on the venue motion.

6 Responses are due to -- by no later than 5:00 p.m.

7 on the 29th, which is Tuesday. (Indiscernible - 4:39:46)

8 transfer motion and no other motions.

9 Anything else?

10 And -- I'm sorry, in the pending, at least the

11 (indiscernible - 4:40:00) I'm going to hold the trustee

12 motion in abeyance.

13 MR. HARRIS: That's fine, Your Honor.

14 Thank you.

15 THE COURT: Okay.

16 MR. SAMIS: Your Honor, this is Chris Samis.

17 For the record, just to be absolutely clear, we do

18 actually have a pending motion to seal in connection with

19 our venue motion, so I would ask that that be heard at the

20 hearing, as well.

21 THE COURT: Well, I was about to say that.

22 UNIDENTIFIED SPEAKER: (Indiscernible - 4:40:19)

23 Your Honor, with respect to certain matters that were

24 contained in our statement in support of trustee motion.

25 MR. HARRIS: Your Honor, I don't think there's any

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1 opposition from either side to those -- Chris, unless you

2 guys have some issues with ours -- so we might be able to

3 submit orders and not -- and avoid a hearing on those.

4 THE COURT: All right. Well, here's where we'll

5 go with that. I was about to say this actually, but I

6 appreciate being reminded.

7 To the extent there are (indiscernible 4:40:46)

8 confidentiality or seal of motions, obviously, we'll hear

9 those motions in relation to the venue motions, and if there

10 aren't any objections and you want to send out a stipulated

11 order, that's fine with the Court; however you want to play

12 it.

13 But let's limit i t to the venue motion and the

14 related file under seal motions, et cetera.

15 MR. SAMIS: Thank you, Your Honor.

16 I'll --we'll discuss that with Mr. Harris and

17 we'll get i t worked out.

18 MR. HARRIS: All right. Great. Thank you.

19 THE COURT: Very good.

20 Anything else?

21 MR. BUCHBINDER: Your Honor, this is Dave

22 Buchbinder, again.

23 It might be -- I'm sort of concerned about 1014(b)

24 here, as I know everyone else is, and I wouldn't want

25 everyone to end up in another forum and fighting about what

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1 applied here or didn't apply here.

2 It seems to me that that threshold issue in the

3 venue motion is whether or not Rule 1014(b) applies based

4 upon the comment that we maybe are not dealing with the same

5 debtor.

6 If the Court were to find that we weren't, then we

7 we'd be looking at what I'll call a traditional change of

8 venue motion, the motion that was filed. But if the Court

9 were to find that one of the four types of entities

10 described in Rule 1014(b) is the --and type of entity we're

11 dealing with, I think the rule doesn't give the Court any

12 discretion except to move the case back to Atlanta.

13 So we might want to deal with 1014(b) first, and

14 as further backup, the parties might all want to agree, and

15 at least for purposes of the venue motion, they're not going

16 to invoke this rule or the Court may want to independently

17 consult with Judge Mullins, who may want to issue an order

18 allowing this Court to rule on the venue motion so that the

19 record is clear and that a lot of unnecessary time is

20 perhaps not wasted downstream litigating these matters.

21 It's just a suggestion.

22 THE COURT: Well, I'm not at all sure that I agree

23 that if there's a pre-existing case there is no choice but

24 to transfer venue. I'm not sure I agree with your

25 interpretation of the statute.

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1 And the point I was trying to make in connection

2 with the hearing is that I intend to consider the 1014

3 issues in connection with the venue transfer motion, but I

4 think I have to do so based on the facts, and i t sounds to

5 me like there may be a factual issue at play here about

6 1014.

7 If I find that I have a situation where there's a

8 pre-existing case and that Judge Mullins, or whoever has

9 that case has the decision, I mean, I think i t would be

10 nonetheless helpful to combine the motions, because if I

11 decide no then I can decide i t on the merits; if I decide

12 yes I can kick i t to Judge Mullins, but I can also make,

13 perhaps, observations that he would find helpful.

14 So I'm going to have the whole hearing the same

15 day, okay?

16 MR. BUCHBINDER: Well, I wasn't -- this is Dave

17 Buchbinder.

18 I wasn't suggesting to not have the hearing the

19 same day.

20 THE COURT: Oh, okay.

21 Thank you, I'm sorry. I --

22 MR. BUCHBINDER: I was just simply suggesting that

23 in terms of order, the 1014(b) issue might be first.

24 THE COURT: Well, that's something for the parties

25 to work out in how they're going to run their hearing, but I

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1 certainly would hope that the parties -- and I know they

2 will, because I know you all will figure out a

3 professional and logical way to do it.

4 Okay. So the hearing will be May 31st at

5 2:00p.m.

6 Responses due by 5:00 on the 29th, which is

7 Tuesday.

8 All right. Anything else?

9 All right. We're adjourned.

10 MR. HARRIS: That's i t from the petitioning

11 creditors, Your Honor.

12 Thank you.

13 THE COURT: Okay. We're adjourned then.

14 Thank you.

15 MR. KELLEY: The debtors thank you, Your Honor.

16 MR. BUCHBINDER: On behalf of the U.S. Trustee,

17 thank you, Your Honor.

18 (Whereupon these proceedings were concluded at

19 4:44 P.M.)

20

21

22

23

24

25

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1 C E R T I F I C A T I 0 N

2

3 I, William J. Garling, certify that the foregoing transcript

4 is a true and accurate record of the proceedings.

5

6
William J. Digitally signed by William J. Garling
,,, DN: cn=William J. Garling, o=Veritext,
/ )!J, email=digital@veritext.com, c=US

7
Garling . /· ··Date: 2012.05.25 15:15:20 -o4'oo·
/,l

8

9

10 Veritext

11 200 Old Country Road

12 Suite 580

13 Mineola, NY 11501

14

15 Date: 5/24/2012

16

17

18

19

20

21

22

23

24

25

212-267-6868 www.veritext.com 516-608-2400

1

1 IN THE UNITED STATES BANKRUPTCY COURT

2 FOR THE DISTRICT OF DELAWARE

3

4
In Re:
5
PIC 'N PAY STORES, INC., Case No . 9 6 - 1 82 ( P JW)
6
Debtor.
7

8

9

10 United States Bankruptcy Court
824 Market Street - Sixth Floor
11 Wilmington, Delaware

12

13 Friday, March 8, 1996
1:30 p.m.
14

15

16

17 BEFORE: HONORABLE PETER J. WALSH,
United.States Bankruptcy Judge
18

19

20

21

22

23 WILCOX & FETZER
1330 King Street - Wilmington Delaware 19801
24 (302) 655-0477
Wilcox & Fetzer
Registered Professional Reporters

ORIGNAL

Wilcox & Fetzer

2

1 THE COURT: Please be seated. This is

2 the matter of Pic 'N Pay Stores. I apologize for

3 the continuance from yesterday, but I had

4 administrative problems that made it impossible for

5 me to try to put something on paper that I could

6 hopefully present in a more organized fashion, and I

7 have been able to do that.

8 And in making the ruling, from time to

9 time I may ad lib in addition to what I have been

10 able to put on paper. Unfortunately given the

11 additional day, I did what lawyers do and made it

12 longer than it should be.

13 The matter before me is the motion

14 filed by NationsBank, N.A. pursuant to 28 USC,

15 Section 1412 to transfer venue of this case to the

16 Western District of North Carolina located in

17 Charlotte, North Carolina. The motion was, of

18 course, heard on March 6, 1996.

19 Having considered the evidence

20 presented by the affidavits and live testimony and

21 other matte~s of record in this case, and having

22 heard extensive argument by parties in favor and

23 those opposed, I find that while this is a close

24 question, as I view Section 1412 and the relevant
Wilcox & Fetzer

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