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Bankruptcy #08-11586 (KG) ............................................................. IN RE: Wilmington, DE June 15, 2011 3:02 p.m. TRANSCRIPT OF OMNIBUS HEARING AND INTERIM FEE APPLICATIONS BEFORE THE HONORABLE KEVIN GROSS UNITED STATES BANKRUPTCY JUDGE APPEARANCES: For The Debtors: Christopher Samis, Esq. Richards Layton & Finger, PA One Rodney Square 920 North King St. Wilmington, DE, 19801 Julie Finocchiaro, Esq. Richards Layton & Finger, PA One Rodney Square 920 North King St. Wilmington, DE, 19801 For The Sun Entities: Morgan Seward, Esq. Young Conaway Stargatt & Taylor, LLP 1000 North West St., 17th Fl. Wilmington, DE 19801
2 (Via Telephone) For The Debtors: Annie Wells, Esq. Morgan Lewis & Bockius, LLP 101 Park Ave. New York, NY 10178 Dustin Branch, Esq. Katten Muchin Rosenman, LLP 2029 Century Park East Suite 2600 Los Angeles, CA 90067 Stephen Tetro, Esq. Latham & Watkins, LLP 233 South Wacker Dr.-Ste. 5800 Chicago, IL 60606 Katherine A. Traxler, Esq. Paul Hastings Janofsky & Walker 515 South Flower St., 25th Fl. Los Angeles, CA 90071 Dana Moore Writer's Cramp, Inc. 6 Norton Rd. Monmouth Jct., NJ 08852 732-329-0191
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: THE COURT: please be seated. Please rise. Good afternoon everyone, thank you and
Finocchiaro, and, of course, Mr. Samis. MR. SAMIS: THE COURT: MR. SAMIS: Good afternoon, Your Honor. Good afternoon. Your Honor, for the record, Chris Samis Your
Honor did the introductions of the other individuals in the room, but for the record, with me in the courtroom is Ms. Finocchiaro. THE COURT: Finocchiaro. Finocchiaro.
Finocchiaro.
Duly corrected, Your Honor. See, there we go. And Ms. Seward. And Ms. Seward. And also on the phone
is my co-counsel, Ms. Annie Wells, from Morgan Lewis. THE COURT: MS. WELLS: THE COURT: Yes, Ms. Wells, good afternoon. Good afternoon to you, Your Honor. And I know there are other parties on
phone as well, and as necessary, you will certainly be free to speak up.
objections on the calendar for today, but none of them are going forward on a -- relief matter thats proceeding on a contested basis today, although I do not believe the Movants intend to appear. With Your Honors permission Id just like
to move through the agenda in sequential order, if possible. Its probably the most efficient way to proceed. THE COURT: keep up with you. mean move. MR. SAMIS: I do intend to move and make it as I think so. Yes, that way I can sort of
painless as possible, Your Honor. THE COURT: Thank you, I appreciate that. But take
your time, in all seriousness, or as much time as you need because we have ample time today. MR. SAMIS: Absolutely. Thank you, Your Honor.
Your Honor, agenda items 1 through 5 are all continued or resolved as set forth on the agenda. I would like to thank
Your Honor, I do understand that you recently entered the order that we submitted under Certification of Counsel this morning that dealt with the Thirtieth and Thirty-First Omnibus Objections and the Lusung, Moda and Dynasty claims. THE COURT: MR. SAMIS: Yes. They will finally be off the agenda, so
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 with counsel to those parties. entering that order. THE COURT: matters resolved. MR. SAMIS: Thank you, Your Honor. Your Honor, And well done to you for getting those And thank you, Your Honor, for
agenda item 6, thats the Debtors Fifty-Second Omnibus Objections to Claims. this objection. We havent received any responses to
hand up to, Your Honor. do that at the end -THE COURT: MR. SAMIS: everything.
thats the Debtors Fifty-Third Omnibus Objection to Claims. The Debtors did receive a response from Millwork Trading to this objection, and the Debtors have adjourned the objection as it relates to the Millwork claims and extended Millworks response deadline while the parties discuss resolving the matter amicably. We are hopeful that we will be able to do
that between now and the next omnibus date. THE COURT: MR. SAMIS: All right. Your Honor, as for the uncontested
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 Wells. MS. WELLS: Hello. For the record, Annie Wells with Its always nice to Debtors do intend to move forward with that today, and I also have a Form of Order here with me that approves the same. THE COURT: the relief. MR. SAMIS: Thank you, Your Honor. Your Honor, that Very well. And I am prepared to grant
objections, with status conferences going forward on the various Macerich, DDR and other landlord claims. I think
these are probably best handled in groups by Ms. Wells, so at this time I would cede the podium to her, or at least her disembodied voice. THE COURT: Absolutely. Thank you, Mr. Samis. Ms.
Morgan Lewis on behalf of the Debtors. appear before the Court. THE COURT: court with us today. MS. WELLS: Thank you.
counsel, Mr. Samis, for the lead in and the always very efficient process. THE COURT: MS. WELLS: Oh, yes. I thought, again, that as we had done
last time I would sort of group the claims on the agenda by the landlord claimant party, instead of the sequence of the
start with the claims from Macerich Washington Square Petaluma Holdings, LLC, and those are claim #6506 from the Debtors Second Omnibus Objection, which is item #8 on the agenda, claim #5099, which is the Debtors Fourth Omnibus Objection, and thats item #9 on the agenda, and then claim #5078 from the Debtors Ninth Omnibus Objection with is agenda item #10. Your Honor, if youll recall at the last Omnibus Hearing in May, you had actually set June 27th, which is a Monday, at 1 p.m. for a hearing on the merits on the omnibus objection to these Petaluma or Washington Square claims, and the parties were to submit a consensual Scheduling Order in advance of that June 27th hearing. And since the last May hearing, I
have spoken with Mr. Branch regarding the Petaluma claim and the June 27th hearing date, and I think weve agreed, and I believe Mr. Branch is on the line if thats not that case, that any substantive hearing we have on these claims does not need to become some sort of extensive and costly mini-trial thats going to involve witnesses or discovery for either party. So I dont think a Scheduling Order per se is You know, these are very run of the mill claims
necessary.
objections, and the Debtors existing omnibus objections are really motions or pending contested matters before the Court that should be governed by Delaware Local Rule 9006 and 6007, which provides that objections, and I guess in this case 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 landlord or Macerich would be the objectant to the Debtors omnibus motion, would be due no later then seven days before any hearing, and any further replies due by the Debtor no later then three days before any hearing date. But all that
being said, we are still trying to reach a mutual resolution, and I think were very close. And in my discussions with Mr.
Branch, he had originally agreed to provide the Debtors with some additional documentation we had requested in respect of the Petaluma claims by June 20th, which is whats going to be, you know, this Monday, but then Mr. Branch and I had another call this morning, and due to some medical reasons, is the best way I guess to update, the June 20th date may not be possible. So what that means, I think, is that we will not
likely be able to go forward at the June 27th hearing, and what Id like to propose, Your Honor, is that maybe we keep the June 27th hearing at 1 oclock. Again, thats sort of our
second mini-status conference for the parties to report to the Court as to the status of the additional documentation to be provided by Macerich. And then we will reserve the July 13th
omnibus date for a substantive hearing on the claims if we dont reach consensus by then. And, you know, if we go
forward on the July 13th date, then I think the timetable that I just discussed a second ago under the Local Rule with respect to deadlines for the parties papers would still apply. But I would like to keep the July 13th date as a
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 Branch? possible hearing on the claims so that it sort of keeps the parties feet to the fire and move these claims forward. But
of course, you know, I guess if anything extraordinary comes up, our rights are reserved to seek further adjournment. THE COURT: Let me ask you this, Ms. Wells, what in There
the - what would be the nature of the presentation? wont be witnesses at the hearing? MS. WELLS:
can tell for the time being -- again, I wont - it may differ depending on the form of the documents that I get. I believe
right now theres currently is a disagreement as to how the damages are calculated. So I would say its more -- you know,
there may be some documents involved; you know, maybe a copy of the lease to show what the (indiscern.) payment schedule is and, you know, some basic arithmetic. So its not - you
know, unless Mr. Branch has a different view, I dont believe its going to involve any kind of witnesses or extensive discovery. And I think to the extent that documents are
needed that underlies they claims and support the claims or the parties perspective calculation, I think those can certainly be appended as exhibits, and, you know, I dont foresee anybody contesting their admission or anything like that. THE COURT: Is that your understanding as well, Mr.
Wells has said is generally correct, and I believe we would have had these resolved by the 27th, but unfortunately the person who is the keeper of the records for us in this case and as you may recall, Macerich was the largest landlord here, there are numerous files and documents THE COURT: MR. BRANCH: Yes. - (indiscern.) case. Her spouse has She has been
And I certainly do not want to burden her with As soon as shes available or as
soon as I can get back to LA, I will probably be able to track down -- I think were only talking about a couple of documents for this matter that will either resolve it one way or another. If it does not, and Ms. Wells said its gonna be a Itll be either the
nature of the rejection claim or the amount of the claim, which will be, you know, easily decided on the face of the documents, I believe. THE COURT: MR. BRANCH: Okay. Its a matter of the availability to
get to those documents and track those down, which I thought was gonna be able to happen in the next couple of weeks, but do to the extenuating circumstances unfortunately we just do not have a way to get to them right now.
and concerned for the well being of the person involved in gathering the documents, but is it possible through perhaps your good offices that we could get a date certain for production of those documents? MR. BRANCH: I have made that request, and I have
represented to Ms. Wells that to the extent I cant get them before the 27th, I will be back in Los Angeles after that, and I will do whatever it takes to track them down myself. THE COURT: MR. BRANCH: Okay. So that we will have an answer one way
or another before the July 13th hearing. THE COURT: All right. I just dont want to see Ms.
Wells, you know, handicapped here in any respect in getting the matter - or you, for that matter, in getting a resolution in advance of the 13th. But I understand the circumstances,
and I have no doubt that you will use your best efforts. MR. BRANCH: THE COURT: MS. WELLS: the Debtor. Thank you, Your Honor. Certainly, sure. Okay.
The next Macerich claim on the agenda is claim This is a claim filed by the
Macerich Company in respect of 22 of their landlord entities leases that were assumed and assigned to Forever 21 or Kohls back in December of 2008. And for todays purposes, the
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 Debtor simply wanted to put the claim back on the calendar because it had been off for a while, you know, adjourned on consent by the parties, I guess, since July of 2009. So I
wanted to give the Court just a quick update and sort of inform the Court that we are still - you know, we recognize that its been continued, and were still working on trying to reach a consensus, like many of these other claims, and are in the process of gathering some documents. So just sort of
similar - I mean, its -- I apologize because I guess we keep having these status conferences and I keep sort of requesting for dates to tee these things up. What Id like to propose is
a similar sort of structure, because I think sort of having deadlines and dates would be helpful to make sure that progress is made that, as with the other claims, we finish exchanging whatever documents we need to exchange on these claims. Again, I recognize that its a bit of a burden
because these - there are, you know, 22 leases, or this one Proof of Claim represents the asserted damages under 22 separate leases, but Id like to propose that perhaps we finish exchange of documents by the next Omnibus Hearing date, which is July 13th, so that when we appear before Your Honor again we can, you know, indicate the status of our discussions and our progress. And if it turns out by then that either,
you know, were - theres some other delay or were just not making any headway, then I think we need to sort of just draw
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 a line and have a substantive hearing on claim 6508 by the, I guess, the following omnibus date after the July 13th date. And I think that date is September 15th, because we dont have an August date. THE COURT: MS. WELLS: Okay. I had discussed this with, I think, Mr.
Branch a little bit, but he is on the line. MR. BRANCH: Macerich Company. Your Honor, Dustin Branch here for the
September date as an outside date to have a hearing. Unfortunately, again, were under the same issue as far as getting documents, and I dont know that I can represent that I can go track down the documents for these leases by that date. If unfortunately the person who is in charge of these
is not able to return to the office in the next few days, I dont know that I can confirm that I can get that done by the 13th. I know that some of these documents have been exchanged
before, and over time, unfortunately, weve had an attrition problem, both with the people at Morgan Lewis who originally handled the claim and all thats happened with the liquidating Debtor. So I can not represent to the Court exactly what There is certainly
gonna be some overlap when we produce any more documents that may have gone out in the first place. Unfortunately, just due
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 information on our end, who has been the same person for the entire process, Im just not certainly when shell be back in the office. So I think that the September date is reasonable I just due to the circumstances
cant say for sure right now that I can get the documents that are necessary by the 13th. THE COURT: Well, let me make this suggestion, or
throw out a thought, because for example that September 15th hearing date, we only have an hour allotted at the moment, and Im just wondering if it will be helpful if I could give you a date for all of these claims issues that were now starting to discuss some time in August. It seems to me that would allow
more than sufficient time to complete the document production, to have extensive discussions in an effort to resolve the matters. And if you cant, then at least we have a date a
little bit earlier then that September date when I might not have time really to hear it in total anyway. MS. WELLS: That is acceptable to the Debtors,
subject to Mr. Branchs views also. THE COURT: little bit. MR. BRANCH: (Indiscern). I mean, I think I just Just to move things forward here a
have to reserve the ability to request a continuance if for whatever reason were - either the person thats in charge of documents now is not available to come back and we have to get
happened and everything is resolved with the situation quickly and she - her husbands okay. to that right now. August date. THE COURT: All right. I certainly am very Tell me if I just dont know the answer
there are -- if theres a particular week or weeks that arent good for you. MS. WELLS: Annie Wells with Morgan Lewis. I am out
And I want to
backtrack a little bit, and in light of Mr. Branchs comment, if for some reason August does not work out well for the parties, he seemed to be sort of more amenable to a date in September and maybe, as an alternative, a September hearing date that is, you know, more than the allotted an hour for the usual Omnibus Hearing, if that would help, you know, with Mr. Branchs personnel. THE COURT: Ive got a -- Septembers a little August is a little bit easier,
I guess because of vacation schedules, and everybody comes back in September and is raring to go. So it seems to me
were talking about over two months now from this date, and if theres difficulty because of the personal problems that the Macerich employee is having, that would be ample time to get
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 happens. August. THE COURT: MR. BRANCH: THE COURT: Okay. I believe its the 10th to the 17th. Good. Good for you. Okay, lets set someone else involved, and so Im going to pick a date and -I didnt hear from you, Mr. Branch, as to any vacation issues. MR. BRANCH: I am out the week of the 10th of
this, then, for 1 p.m. on August 24th. Macerich. THE CLERK: 2 oclock. THE COURT:
You have a
11 on the books, but thank goodness for Ms. Scaruzzi. THE CLERK: THE COURT: Theres a 2 oclock. Lets see. Now were in real trouble
because Im going to go to the calender here on the computer. Let me see. This is a scary thing. Ill move -No, no, no. Lets see. What did I just
THE CLERK: THE COURT: THE COURT: say, August 24th? THE CLERK: THE COURT: Okay.
THE CLERK:
Samis, I didnt ask you about your vacation schedule. MR. SAMIS: Oh, no, Your Honor. All I as going to
add is that your 11 oclock on that day, I believe, is Midway, and I can say with reasonable certainty that theres a likelihood that hearing will be cancelled -- a high likelihood -THE COURT: MR. SAMIS: THE COURT: Okay. -- if that helps. Very well. Thank you. Is 1 oclock
Macerich, and youll have all afternoon if need be, and I think we need to move, you know, these particular claims forward a little more. Previously, it hasnt been quite as But
significant because there was still a lot, a lot, to do. my sense is were sort of winding it down. Samis? MR. SAMIS:
We are scraping the bottom of the barrel as it comes to claims. We think we have, you know, at least a couple more
omnibus objections to tee up to capture them all, but we are almost at the end of this process, so -THE COURT: MR. SAMIS: Okay. -- finality, I think, is in everyones
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 oclock. MR. BRANCH: THE COURT: MS. WELLS: Thank you, Your Honor. Thank you. Next on the agenda -- again this is interest to, you know, to stem, you know, unnecessary fees and expenses. THE COURT: Thats right. Okay. So August 24th at
1 p.m., and that certainly doesnt preclude anyone from contacting me with any particular problems, or we can have another status conference on the 13th of July. In fact, why
dont we plan on doing that, and that way well all have, I think, a better sense of where we are at that time. MS. WELLS: THE COURT: MR. BRANCH: Thank you, Your Honor. All right. Your Honor, Dustin Branch. Im sorry. What time
is the status conference on the 13th? THE COURT: MR. BRANCH: THE COURT: MR. SAMIS: THE COURT:
That is at 10 oclock, I believe. Thank you. Let me make sure. Im checking myself. Yes. Yes, it is, Mr. Branch, 10
Annie Wells from Morgan Lewis for the record -- pertain to the last Macerich claims, which are claims #6491 and 5082, which are items #8(c) and 9(b), respectively. THE COURT: All right.
like the assumed leases of these, the earlier claims that we had been talking about, you know, we had initially filed in our objections back in 2009 and wanted to use this opportunity just to get these claims back on everyones radar. two, I guess, are a little bit more complicated. And these By way of
background, the claims relate to a Mervyns location in San Bernardino, California, but this location never actually opened as a retail store. Instead -- this is now going back
several years -- Mervyns was in the process of building it out -THE COURT: Yes, I remember this as an issue in an So Im familiar.
component, when it filed for bankruptcy, the build out was stopped, the construction was stopped, and the general contractor that had been working on the build out, which was Fisher Development, also filed a claim against the Debtors, as well as a mechanics lien on the property. Fisher Development
then filed a lawsuit -- or initiated a mechanics lien action, a real property action, against WM Inland in the California State Court, and I believe there were also some other subcontractor actions at the same time. So WM Inland then
filed a cross-complaint against the Debtors, and that action was severed into a separate adversary proceeding, which is
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 pending before Your Honor, and I think that is case #09-50920. So all of these claims include -- and I guess including the adversary proceeding, the Inland claim and the Fisher claim, they are also interrelated; but again, they have been adjourned, not for lack of, you know, progress or discussion, but because we wanted -- we were waiting for the various California State Court actions to be completed. And I
understand that last year, in maybe late 2010, the parties had reached a settlement; parties meaning WM Inland, the landlord, and the general contractor, Fisher, had reached an agreement - a settlement. So, you know, the Debtors think that sort of
now is the time for us to tee up these claims again for, you know, for resolution. I note that the Fisher claim is not on
the agenda, but we will be -- we intend to object to it and add it to the July 13th Omnibus Hearing, and similarly with the adversary proceeding, it is a separate action, so its not part of todays agenda, but, you know, we would like to have all of these matters resolved together. And again, I dont
know if, for these claims, it makes sense to have an August or even a September date because theyre a little bit more complicated. THE COURT: And you have the adversary proceeding
that seems to me youll want to resolve all of the matters together. MS. WELLS: That is correct. So what I was thinking
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 is -- again, this is just sort of a precursor to refresh the parties and the Courts memory with respect to these actions. What Id like to propose is that for the next -- for the July Omnibus that we also add the adversary proceeding to the agenda, as well as the Fisher claim, and use this time until the July hearing to engage in some fruitful discussions and report back to the Court. THE COURT: Yes. So the July 13 hearing, Ms. Wells,
we would have basically a status conference on the Fisher claim and adversary? MS. WELLS: THE COURT: MR. BRANCH: Correct. Okay. Thats fine. Thats a good idea. We
have had preliminary discussions with Morgan Lewis on this issue. We have no problem with that. It probably would make
sense at some point to go forward with both the adversary and the claim objection, but as long, you know, we get one resolved, we are happy to move forward in either direction. THE COURT: MS. WELLS: Okay. Thank you. Again, Annie
there are various different locations, and the claim numbers are 4540, 4543, and 6588, which are item 10 on the agenda from the Debtors Ninth Omnibus Objection; Claim #7384, which is
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 item 12 on the agenda and from the Debtors Eighteenth Omnibus Objection; and then claim #4243, which is item 13 on the agenda from the Debtors Twenty-First Omnibus Objection. the locations for the DDR leases are Superstition Springs, Deer Valley, and Mission Plaza. With these, Your Honor, Mr. And
LeHane and I had actually appeared before you at the May Omnibus, and, you know, we had both agreed that these claims, you know, have to continue this in time, and, you know, I think both sides want to reach a consensus. And we have
committed to, you know, a firm date to help move the parties along. And you had given us, again, that June 27th hearing
date at 1 oclock, as that hearing date to consider the claims on the merits. And again, with the -- similar to the Macerich
claims, we had initially discussed at that May hearing the submission of a consensual Scheduling Order in advance, but, you know, in discussions with Mr. LeHane, we have concluded that it, again, it isnt very -- it isnt necessary because of the nature of these standard claims objections. And I think
that, you know, going by Rule -- the Delaware Local Rule 9006 regarding the seven-day and three-day timeline makes more sense. So I guess with DDR, the landlord being the objecting
-- or being the respondent, their response would be due by Monday, June 20th, and our response, the Debtors response, will be due by June 22nd, in advance of the 27th hearing at 1 oclock. (Indiscern.) on the phone.
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 THE COURT: but I may be wrong. MS. WELLS: THE COURT: the phone for DDR? ALL: (No verbal response). No. Oh, I apologize. I had spoken to Mr. Oh. Or DDR, Im sorry. Is there anyone on I dont see anyone on the phone for DDR,
LeHane earlier in the week, and perhaps I misunderstood him. Certainly I hope I have represented our conclusions correctly. In any case, the Debtors do intend to move forward on the 27th unless by some miracle, you know, we reach a settlement and stipulation and submit it before that time. THE COURT: All right. Well, then I will keep you
on the schedule for the 27th. MS. WELLS: That is consistent with Your Honors
instructions at the last hearing. THE COURT: MS. WELLS: THE COURT: Yes. And then the next set of claims -So, Im sorry, Ms. Wells, let me just Is this another situation
where there -- its unlikely there will be witnesses? MS. WELLS: THE COURT: That is correct. Okay. Mr. LeHane and I had -- there
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 documentation -- documents that need to be referred to, you know, for figuring out what rent amounts are or, you know, the taxes that are asserted -- invoices for tax assessments and the like, that it would -- they could be attached as exhibits to the parties papers, and we wouldnt have any objections to the entry of those documents. THE COURT: MS. WELLS: Okay. Very well.
the claims of WRI Alliance Riley Venture, which is also represented by Mr. LeHane, and those are claims 7472 and 1275, which is item #11 on the agenda. hearing when And again, at the last
scheduling conference, so its not a substantive hearing on the 27th, but a separate scheduling conference for these claims on the theory that these claims may be a little more involved in terms of some of the legal analysis, and we might want to discuss, I guess, more formally some sort of briefing schedule. And since Mr. LeHanes not here, I believe that
that still sort of remains the case, that we would appear before Your Honor on the 27th, and we can schedule some dates for briefs and/or for the production of documents by WRI Alliance, because we have requested some documentation in anticipation of teeing this up for resolution. So maybe we
can also address some deadlines for document exchange on the 27th with Your Honor.
last hearing, or subsequent to the last hearing, it seems that WRI Alliances claim #7472 was inadvertently included on an exhibit to an order sustaining the Debtors Fifty-First Omnibus Objection, I think, and Richards Layton has prepared a copy of a corrective order to unexpunge that claim. And weve
shown Mr. LeHane at Kelley Drye a copy of that order, and we had agreed that it was not meant to be expunged because we were, in fact, having it heard before Your Honor. So with the
Courts permission, I think Mr. Samis has a copy of that, if he can just hand that up in person. THE COURT: MR. SAMIS: All right. Your Honor, that is correct. We do have
a copy of the corrective order in Court. THE COURT: MS. WELLS: Wonderful. Thank you, Mr. Samis.
presentation for today Your Honor. THE COURT: All right, Ms. Wells, well, I may see
you then on the 27th, unless -- and I will, unless you resolve the matters certainly with DDR. If you are able to resolve
those matters, certainly you can participate by telephone for the scheduling conference on the WRI matter, or appear in person as you choose.
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 hearing. hearing. -THE COURT: MR. SAMIS: Yes. -- had alluded to at the outset of the MS. WELLS: THE COURT: MR. SAMIS: on those -THE COURT: MR. SAMIS: THE COURT: MR. SAMIS: Of course. -- scheduling matters. Of course. Your Honor, that brings us actually, Okay. Thank you, Your Honor. And thank you.
Its a pleasure.
once we cut through items 8 through 13 with Ms. Wells, to agenda item #14 -THE COURT: MR. SAMIS: Yes. -- thats the Stay Relief Motion that I
that was filed by Mr. Balbuena and Ms. Felix on behalf of their minor daughter. background. Your Honor, just a little bit of
December of 2010 -THE COURT: MR. SAMIS: Right. -- but it was never noticed for a
Ms. Felix, as well as their former attorney, Mr. Herb Ely, the Debtors have determined that the Movants lack the ability to
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 prosecute the motion. Specifically, Mr. Ely withdrew as The Movants have
not associated with new counsel, and the Movants have limited fluency in English and little grasp of the purpose of their proceeding in Bankruptcy Court. Accordingly, the Debtors have Now,
the Debtors do understand that given Mr. Elys withdrawal as counsel and the issues surrounding the Movants competence to proceed that even with the Debtors giving Mr. -- or Im sorry, even with the Debtors giving Mr. Ely and the Movants proper notice of the response and the hearing, it is difficult for the Court to deny the motion with prejudice solely on procedural grounds. Inasmuch, the Debtors response explains
not only the procedural deficiencies of the Movants motion, but also the substantive problems with their request for stay relief. And we believe that between the response and the
record that we intend to build here today that the Court will have enough ultimately to deny the motion with prejudice, despite the unusual circumstances that we face. THE COURT: MR. SAMIS: All right. So Your Honor, at this time, I would
like to turn the podium over to Ms. Finocchiaro to make her Delaware Bankruptcy Court debut -THE COURT: MR. SAMIS: Its a pleasure to be here for it. -- and I will cede the podium to her
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 now. THE COURT: MR. SAMIS: THE COURT: Thank you, Mr. Samis. Thank you, Your Honor. Congratulations, Ms. Finocchiaro. Thank you, Your Honor, and thank You have the Movants
MS. FINOCCHIARO:
you, Mr. Samis, for that introduction. motion, as well as our objection. THE COURT: I do.
MS. FINOCCHIARO:
Samis said, you know, this is the Motion for Relief From Stay. Ms. Balbuena filed a personal injury action against Debtor, Mervyns Holdings, LLC in Arizona State Court. THE COURT: Yes. And then according to her motion,
MS. FINOCCHIARO:
when finding out about the bankruptcy, as well as the automatic stay, that action was dismissed without prejudice. And then on December 8th of 2010, Ms. Balbuena filed the Motion for Relief From Stay that were here for today. And as
Mr. Samis said, it was not noticed for a hearing, nor was an objection deadline set. not properly served. And in actuality, the Debtors were
the Cert of Service, was not served directly; we found about it through CMEFC and the online notifications. And then since
that time of December 2010, Mr. Balbuena has not moved forward
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 with the motion and to prosecute the action. Now, we ask the Court today to deny the motion for three main reasons: First, for her failure to comply with the
procedural requirements, as well as her failure to prosecute; second, her failure to timely file a Proof of Claim in this case; and third, her failure to demonstrate cause for why relief should be granted under Section 362(d). So first with the procedural requirements and the failure to prosecute, pursuant to Rule 41(b) of the Federal Rules of Civil Procedure, as Im sure Your Honor is aware, if a Movant fails to prosecute or comply with the Bankruptcy Rules, the Debtors may move to have the action dismissed pursuant to Local Rule 9013(e) that requires the Movant to notice a motion for a hearing, set an objection deadline, provide the name and address of the parties to be served with the objection, as well as provide the statement that if an objection is not entered that an order may be entered without hearing. Specifically with Motions for Relief From Stay, Section 362(d) states that the Motion for Relief From Stay may only be granted after notice and a hearing, and as Mr. Samis had said earlier, the motion was filed in December, it was not noticed for a hearing, nor was an objection deadline set. And since
that time, shes failed to really move forward with a motion, despite the Debtors contact with her former counsel, and with her as well.
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 Second, Your Honor, Ms. Balbuena has failed to timely file a Proof of Claim in this case. According to the Bar Date
Order entered by this Court on October 22nd, 2008, if an entity fails to timely file a Proof of Claim, then shes barred or estopped from receiving a distribution or voting for the plan. And in this case, she hasnt filed a claim, nor has
the Debtor scheduled a claim on her behalf, and so at this point, shes really enjoined from pursuing a claim or receiving a distribution, and so if the motion were granted and the action were to go forward, its really a moot issue at this point. And finally, Your Honor, pursuant to Section 362(d), as Your Honor is aware, relief may be granted from the stay for cause. However, the Bankruptcy Code does not define cause,
but leaves it to the Courts to determine based on the totality of the circumstances. And it seems in this Court that we
follow a balancing test under Rexine Products, the three factor test: Tthe first being the prejudice that the Debtor
or the estate would suffer if the automatic stay were lifted; second, the balance of hardships facing the parties; and third, the likelihood of success on the merits. And in this
Court, Your Honor, of course the Movant has the burden to establish those three factors and that there is cause for lifting the automatic stay, and specifically showing that the balance of hardship weighs significantly in her favor in order
Movant has not met the three factors or her burden. First, in regards to prejudice to the estate, as Your Honors aware, the Debtors are currently working to resolve the 2004 litigation and really determine if a plans going to be feasible in this case. In addition, as Mr. Samis said a
couple minute ago, were really moving forward with the claims reconciliation process and trying to get that wrapped up, and so if this motion were granted and the action were permitted to go forward, it would divert the Debtors attention from those goals. In addition, it may invite other personal injury
claimants to try to get relief from stay, as opposed to going through the settlement process, which weve done successfully with a lot of personal injury claimants to fix their claim without litigation. So Your Honor, the Movants failed to
satisfy the first factor of the Rexine test. Second, in regards to balance of hardships, the Movants really failed to show any harm that she would suffer from the continuation of the stay. Her motions kind of devoid of any And so shes
kind of failed to meet the second factor of the Rexine test. And third, in regards to likelihood of success on the merits, this Courts found that she -- requires the Movant to do some showing of success on the merits, but like with the second prong, shes really failed to show any support for
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 success, no facts that would demonstrate the claim or her injuries or any real likelihood. meet the third factor as well. For all those reasons, Your Honor, the Movant has not met the three factor test to show cause as to why the Motion for Relief From Stay should be granted, and those reasons, along with the procedural deficiencies, the failure to file the Proof of Claim, the Debtors really ask the Court to deny the motion at this time. THE COURT: So if Your Honor -Thank you. -- has any questions? So shes really failed to
to this, the nature of the injuries, do you know what they are? MS. FINOCCHIARO: THE COURT: Were not aware --
have a direct communication with Mr. Ely on at least a couple of occasions. He informed me that the complaint had been
He didnt specify what the injury actually was, and basically informed me in short order thereafter that he intended to withdraw as counsel. THE COURT: MR. SAMIS: Okay. Okay.
that fact or some elucidation on that fact before making a decision on the motion, I can certainly go back to Mr. Ely and try to acquire a copy of the complaint. THE COURT: Well, heres what Im thinking. Its a
sensitive issue when were dealing with a pro se litigant, and particularly when a childs injuries are involved. absolutely right, youve presented it very well, Ms. Finocchiaro, and but for those factors, I would really -- I would grant the motion right now. But my sense is that -- I Youre
think that fairness dictates that I issue a Rule to Show Cause why I should not dismiss their motion with prejudice and give them until that July 13th hearing. And at that point, if
theyre not prepared to proceed, they should have counsel, and we have a situation as we have today, then I will dismiss their motion. here. But I just want to be a little bit sensitive
would prefer to proceed. MS. FINOCCHIARO: Okay, thank you, Your Honor.
34 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 done. THE COURT: MR. SAMIS: Yes. Your Honor, if youd like us to draft up
an Order to Show Cause under Certification of Counsel and provide it to your Chambers, we can certainly do so. THE COURT: appreciate that. MR. SAMIS: THE COURT: MR. SAMIS: Very well, Your Honor -All right. -- well provide it by Certification of That would be helpful, I would greatly
Counsel, and if Your Honor then executes the order, we can certainly serve it. THE COURT: All right, thank you. Thank you, Mr.
Samis, thats much appreciated. MR. SAMIS: THE COURT: Thank you, Your Honor. Yes. Ms. Finocchiaro, thank you. Thank you, Your Honor. It was a wonderful
MS. FINOCCHIARO: THE COURT: presentation. MS. FINOCCHIARO: THE COURT: MR. SAMIS:
Thank you.
It was.
Its hard to return to the podium after that. THE COURT: MR. SAMIS: Im telling you. But Your Honor, the only other item on
35 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 on today. MR. SAMIS: Relief Order -THE COURT: Okay, thank you, yes. And also in Im going to withhold the Balbuena Stay now. THE COURT: Great, thank you. And we will get those Interim Fee Application. THE COURT: MR. SAMIS: Your Honors entered the order --
business before the Court is at an end. THE COURT: All right. Well, Im sorry to see you
go, but well stand in recess. MR. SAMIS: THE COURT: Thank you. And I thank you. Thank you very much,
and you have the orders for me? MR. SAMIS: I do, Your Honor, and Ill pass them up
there, I take it, is that motion correcting the expungement of the one claim? MR. SAMIS: THE COURT: MR. SAMIS: That is correct, Your Honor, Im just -Great. -- sifting through them, and Ill be --
36 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. SAMIS: THE COURT: MR. SAMIS: It certainly is, Your Honor. Take the long way back to the office. I think were going to have to. And Im
going to do this the old fashioned way. write original on this last copy. THE COURT: MR. SAMIS: THE COURT: Oh, wonderful. There you go. You bet.
Im just going to
greatly appreciate the efficiency. MR. SAMIS: THE COURT: MR. SAMIS: THE COURT: MR. SAMIS: THE COURT: MR. SAMIS: THE COURT: (Indiscern.). Okay. (Indiscern.). Oh, excuse me, yes. And (indiscern.). Wonderful. Thank you very much. Thank you, thank you. And everyone
have a good rest of the afternoon, a good evening, and well stand in recess. Thank you. Good to see you all.
(Court adjourned)
37 1 2 3 4 5 6 7 8 CERTIFICATION I certify that the foregoing is a correct transcript from the electronic sound recording of the proceedings in the aboveentitled matter.
Lewis Parham
___________________________ Signature of Transcriber
Chapter: 11
NOTICE OF FILING OF TRANSCRIPT AND OF DEADLINES RELATED TO RESTRICTION AND REDACTION A transcript of the proceeding held on 6/15/2011 was filed on 6/24/2011 . The following deadlines apply: The parties have 7 days to file with the court a Notice of Intent to Request Redaction of this transcript. The deadline for filing a request for redaction is 7/15/2011 . If a request for redaction is filed, the redacted transcript is due 7/25/2011 . If no such notice is filed, the transcript may be made available for remote electronic access upon expiration of the restriction period, which is 9/22/2011 unless extended by court order. To review the transcript for redaction purposes, you may purchase a copy from the transcriber (see docket for Transcriber's information) or you may view the document at the clerk's office public terminal.
(ntc)
Notice Recipients
District/Off: 03111 Case: 0811586KG User: Brandon Form ID: ntcBK Date Created: 6/24/2011 Total: 21
Recipients of Notice of Electronic Filing: ust United States Trustee USTPREGION03.WL.ECF@USDOJ.GOV aty Christopher M. Samis samis@rlf.com, rbgroup@rlf.com TOTAL: 2 Recipients submitted to the BNC (Bankruptcy Noticing Center): db Mervyn's Holdings, LLC 22301 Foothill Boulevard Hayward, CA 95541 aty Alexis L. Allen Morgan, Lewis &Bockius LLP 101 Park Avenue New York, NY 10178 aty Ashley B. Stitzer Bayard, P.A. P.O. Box 25130 Wilmington, DE 19899 aty Charles R. Ekberg Lane Powell PC 1420 Fifth Ave Suite 4100 Seattle, WA 981012338 aty Christopher M. Samis Richards, Layton &Finger, P.A. 920 N. King Street One Rodney Square Wilmington, DE 19801 aty Christopher M. Samis Richards, Layton &Finger, P.A. 920 N. King Street One Rodney Square Wilmington, De 19801 aty Daniel A. O'Brien Bayard, P.A. 222 Delaware Ave. Suite 900 Wilmington, DE 19801 aty Daniel J. DeFranceschi Richards, Layton &Finger One Rodney Square, P.O. Box 551 Wilmington, DE 19899 aty Henry S. David Snell &Wilmer LLP Two California Plaza 350 South Grand Avenue Suite 2600 Los Angeles, CA 90071 aty Henry S. David Snell &Wilmer LLP Two California Plaza 350 South Grand Avenue Suite 2600 Los Angeles, CA 90071 aty Julie A Finocchiaro Richards, Layton &Finger, PA 920 North King Street Wilmington, DE 19801 aty Justin R. Alberto Bayard, P.A. 222 Delaware Avenue Suite 900 P.O. Box 25130 Wilmington, DE 19899 aty Katisha D. Fortune Richards, Layton &Finger, P.A. 920 North King Street Wilmington, DE 19801 aty Kristine GrigorianManoukian Richards Layton &Finger One Rodney Square, 920 N. King Street Wilmington, DE 19801 aty L. Katherine Good Richards, Layton &Finger, P.A. 920 North King Street Wilmington, DE 19801 aty Marc J. Phillips Connolly Bove Lodge &Hutz LLP The Nemours Building 1007 North Orange Street Wilmington, DE 19801 aty Mark D. Collins Richards Layton &Finger One Rodney Square PO Box 551 Wilmington, DE 19899 aty Neil B. Glassman Bayard, P.A. 222 Delaware Avenue Ste 900 Wilmington, DE 19801 aty Tyler D. Semmelman Richards, Layton &Finger, P.A. 920 N. King Street Wilmington, DE 19801 TOTAL: 19