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  1. 1. UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE·------------------------------------------------------------------------------------------XIn re: Chapter 11ALLIED SYSTEMS HOLDINGS, INC., Case No. 12-11564 (CSS) Alleged Debtor.·------------------------------------------------------------------------------------------X Chapter 11In 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 DiamondCLO 2005-1 Ltd. ("Black Diamond"), and Spectrum Investment Partners, L.P. ("Spectrum"collectively with BDCM and Black Diamond, "Petitioning Creditors"), by and through theirundersigned counsel, hereby object to the motion of Allied Systems Holdings, Inc. ("Allied") andAllied Systems, Ltd. (L.P.) ("Systems", collectively with Allied, the "Alleged Debtors") totransfer venue of the above-captioned involuntary bankruptcy cases (the "Involuntary Cases") tothe Atlanta Division of the Bankruptcy Court for the Northern District of Georgia (the "GeorgiaBankruptcy Court"), dated May 21, 2012 (the "Transfer Motion"), and respectfully represent asfollows:{935.000-W0021082.}
  2. 2. 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 11cases, but the timing is not ripe today for that. rtl However, until the Alleged Debtors decide toconsent to the orders for relief or there is a trial on the merits on the involuntary petitions, theAlleged Debtors are not subject to court supervision. It is an untenable and unstable situation forboth the Alleged Debtors and their creditors. 2. The Petitioning Creditors object to the Transfer Motion on two grounds. First, theTransfer Motion is procedurally defective because it is premature to address venue until an orderfor relief is entered. Second, the Transfer Motion is substantively objectionable because theAlleged Debtors arguments in favor of the Georgia Bankruptcy Court are not sufficient to meetthe Alleged Debtors burden of showing, by a preponderance of the evidence that such a transferwould 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 thisCourt first address whether an order for relief should be entered before addressing a request totransfer venue. Rule 1011 (b) of the Federal Rules of Bankruptcy Procedure (the "BankruptcyRules") provides a short and exclusive list of permitted responses to an involuntary petition, andBankruptcy Rule 1011(e) unambiguously states "that no other pleading shall be permitted." A1 Transcript of Status Conference, May 22,2012 at 12:1-6. A copy is attached hereto as Exhibit A.{935.000-W0021082.} 2
  3. 3. 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 thisDistrict. Given the national and international scope of the Alleged Debtors businesses, thelocation of their assets, the geographical location of the Alleged Debtors creditors, professionalsand major parties-in-interest, the Petitioning Creditors decision to commence involuntarychapter 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 GeorgiaBankruptcy Court are not sufficient to satisfy the Alleged Debtors burden of showing, by apreponderance of the evidence, that such a transfer would be "in the interests of justice or for theconvenience of the parties." For these reasons, the Petitioning Creditors request that the Courtdeny the Transfer Motion in its entirety. BACKGROUND 6. Allied is incorporated in Delaware, having filed its certificate of incorporationwith the Secretary of State of Delaware on May 8, 2007. Allied and its direct and indirectsubsidiaries are providers of distribution and transportation services to the automotive industry,specializing in the delivery of new vehicles from automobile manufacturing plants to automobiledealerships in the United States and Canada. 7. On July 31, 2005, Allied Holdings, Inc. and certain of its direct and indirectsubsidiaries commenced voluntary chapter 11 bankruptcy cases in the Georgia Bankruptcy Court{935.000-W0021082.} 3
  4. 4. 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 theOriginal 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 anapplication 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 toentry ofthe final decree. !d. [D.I. 4184]. The Alleged Debtors concede "the Original Chapter 11Case is ready to be closed." (Macaulay Decl. ~ 8). 10. On May 17, 2012, the Petitioning Creditors filed involuntary petitions against theAlleged Debtors. No trustee or examiner has yet to be appointed in these cases. The AllegedDebtors have not filed an answer or responsive pleading to the involuntary petitions, althoughthe Alleged Debtors have indicated that they are planning to either consent to the entry of ordersfor relief or file voluntary chapter 11 bankruptcy cases. (Transfer Motion ~ 19); Transcript ofStatus 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 potentialvoluntary filing. (Transfer Motion ~ 19). The Alleged Debtors have never advised the Petitioning Creditors of a anintent to file a case nor can they point to any evidence supporting such an assertion nor does the Transfer Motionstate that they informed the Petitioning Creditors of such a potential voluntary filing. Rather, the Alleged Debtorsare the ones that have long been aware of the Petitioning Creditors desire to resolve the Alleged Debtors financialissues outside of the bankruptcy process.{935.000-W0021082.} 4
  5. 5. 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 thesecases to the Georgia Bankruptcy Court "in the interest of justice or for the convenience of theparties," and (ii) staying the adjudication of all motions and other matters until the "reliefrequested in this Transfer Motion has been adjudicated and the proper venue of these Chapter 11cases has been determined on a final basis." (Transfer Motion~ 16). Importantly, the AllegedDebtors 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 BankruptcyRule 1011 which provides a short and exclusive list of responses that may be filed to aninvoluntary petition. A request to transfer venue is not on that list. Bankruptcy Rule 1011 statesin 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 andobjections 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
  6. 6. other pleading shall be permitted." See In re David J Ross, 135 B.R. 230, 233 (Bankr. E.D. Pa 1991) (scope of a debtors 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 dismissalfor "improper venue." The Transfer Motion neither requests dismissal for improper venue nordoes 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 isprohibited by Bankruptcy Rule 1011 (e). Therefore, the Transfer Motion is prohibited until anorder for relief is entered either on consent or after a hearing on the merits. See In re RaytechCorp., 222 B.R. 19, 22 n.l (Bankr. D. Conn. 1998) (venue transfer motion premature until courtfirst determines whether the case would be administered in that court). 16. Further, consideration of the Transfer Motion prior to entry of an order for reliefor trial on the merits of the involuntary would prevent "consideration of the contested petition atthe earliest possible practicable time" as required by Bankruptcy Rule 1013. Bankruptcy Rule1013(a) ("The court shall determine the issues of a contested petition at the earliest practicable{935.000-W0021082.} 6
  7. 7. 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 thejurisdiction 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 debtors/plaintiffs choice of forum is tobe accorded substantial weight and deference"). 18. The Federal Rules require that the Alleged Debtors must wait until after an orderfor relief is entered in these cases before they can request a transfer of venue under BankruptcyRule 1014. The Alleged Debtors have indicated in papers and before this Court that they wereplanning ;;t voluntary chapter 11 filing or are "likely" to consent to the entry of orders for relief inthe within cases. (Transfer Motion ~ 19). Until the Alleged Debtors commit to a plan of actionor a judicial determination on the propriety of the involuntary petitions is made, the TransferMotion 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 UnitedStates Code. Pursuant to § 1408(1 ), the venue of a chapter 11 case is proper when the case iscommenced in the district in which the debtor is domiciled or maintains its principal place ofbusiness. See In re Segno Communications, Inc., 264 B.R. 501, 506, 511 (Bankr. N.D. Ill. 2001)(debtors state of incorporation was proper venue for involuntary case). A corporation isdomiciled in the state where it is incorporated. See Fourco Glass Co. v. Transmirra ProductsCorp., 353 U.S. 222, 226 (1957) (equating terms "resident" and "domicile" in respect ofcorporations to state of incorporation). As a Delaware corporation, Allied is domiciled in{935.000-W0021082.} 7
  8. 8. Delaware. 20. The Alleged Debtors do not dispute that venue is proper in Delaware. Havingchosen to incorporate in Delaware, and reap the attendant benefits, Allied must now live with therights and responsibilities that come with its choice. Instead, the Alleged Debtors cite to a stringof cases for the argument that the "mere fact that Allied [Systems Holding, Inc.] is incorporatedin Delaware is not a compelling factor for retaining venue." (Transfer Motion ~ 22). TheAlleged Debtors are incorrect: in each of the cases they cite, the balancing of equities werewholly distinguishable and therefore are not applicable to our case. E.g., In re InnovativeCommcns Co., 358 B.R. 120 (Bankr. D. Del. 2006) (debtors owned companies that operatedtelephone, newspaper and other public communication vehicles, thereby giving the U.S. VirginIslands a great public interest in being the venue for the case); In re B.L. ofMiami, Inc., 294 B.R325, 331 (Bankr. D. Nev. 2003) (debtors primary asset, a nightclub, was subject of extensivestate court litigation in Florida, the outcome of which would have had a large effect on theadministration of the debtors 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 movants counsel "discussed them at length"). 21. This Court and others have found the domicile or place of incorporation entirelysufficient to support venue on its own. In In re PWS Holding Corp., this Court found that it wasentirely "just" that the chapter 11 case be prosecuted in the state of incorporation of only one ofthe 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 acorporate form may choose their state of incorporation. With the choice of citizenship comesvarious rights and responsibilities"). In In re Segno Communications, the alleged debtor was a{935.000-W0021082.} 8
  9. 9. 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 debtors 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 ofjustice 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 atransfer of venue is necessary to achieve the statutory purposes of the Bankruptcy Code. SeePWS, 1998 Bankr. LEXIS 549 at *4-5. 23. When venue is proper, deference is given to the venue selection and should onlybe changed based on a strong showing that the interest of justice or convenience of the partieswould be served by transfer. See id. ("when venue is proper, a debtors/plaintiffs choice offorum is to be accorded substantial weight and deference") (citing In re Del. and HudsonRailway 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 reWalbridge, 51 B.R. 137, 139 (Bankr. D. Mass. 1985) ("Where a transfer would merely shift theinconvenience from one party to the other or where after the balancing all the factors, theequities lean but slightly in favor of the movant the ... choice of forum should not be disturbed."){935.000-W0021082.} 9
  10. 10. (omission in original) (citing Moores 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 significantdiscretion, courts have adopted six factors, among others, to guide the use of that discretion. Thesix 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 reSafety-Kleen Corporation, 2001 Bankr. LEXIS 1296, *6-7 (D.Del. 2001); PWS, 1998 Bank.LEXIS 549 at *5. 43 The Alleged Debtors cite In re Rehoboth Hospitality, LP, 2011 WL 5024267, *3 (Bankr. D. Del. Oct. 19, 2011) insupport of the argument that there is a presumption in favor of maintaining the debtors choice of forum. (TransferMotion~ 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., thatthere is a presumption in maintaining the debtors choice of forum. Second, Rehoboth only confirms that anypresumption in favor of a debtors choice of venue may be overcome. In Rehoboth, this Court granted a creditorsmotion to transfer venue of the case to Texas even though the debtor, which owned and operated a single hotel inTexas, chose to file its voluntary petition in Delaware. There, the creditor presented compelling evidence andsatisfied its evidentiary burden; here, as presented below, the Alleged Debtors have presented no convincingevidence in support of its burden.4 The Alleged Debtors reliance on the factors articulated in Jumara v. State Farm Insurance Company (anunderinsured motorist case governed by Pennsylvania law) is misplaced because Jumara was decided under thegeneral federal venue transfer statute, 28 U.S.C. § 1404(a), not the specific statute dealing with transfer of venue inbankruptcy 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 bankruptcyvenue statute more properly focuses on the interest of the estate and its creditors rather than only on the interest ofthe plaintiff and defendants.{935.000-W0021082.} 10
  11. 11. 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 becauseof its "international presence . . . its creditors are spread over a wide geographic area" and notconcentrated in Georgia. (Macaulay Decl. ~ 17). Further, the Alleged Debtors admit thatbecause 60% of their business is tied to American automobile manufacturers, their creditors aremore heavily concentrated in Michigan, not Georgia. (!d. ~ 17). 26. In addition to the many customers, vendors, and creditors in Michigan, many ofthe Alleged Debtors major creditors are not located in Georgia, and upon information and belief,Allieds chief executive officer and Allieds chairman of the board of directors, do not reside inGeorgia. More specifically, • The Pension Benefit Guaranty Corporation ("PBGC") one of Allieds 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 May29, 2012). The PBGC has previously appeared in the Georgia Bankruptcy Case and listed the PBGCs Office of theGeneral 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 inthe Georgia Bankruptcy Case and listed counsel or locations in the following cities: (1) Central PennsylvaniaTeamsters Pension Fund c/o Stevens & Lee in Philadelphia, PA; (2) International Brotherhood of Teamsters c/oPreviant 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) TeamstersUnion 25 Health Services & Insurance Plan in Charlestown, MA; and (6) Western Conference of Teamsters PensionFund c/o Reid, Pendersen, McCarthy, eta!. in Seattle, W A.{935.000-W0021082.} 11
  12. 12. • 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 theproximity of the Alleged Debtors to the Georgia Bankruptcy Court is equally unconvincing. (Transfer Motion~ 21). A debtors employees are rarely required to participate in chapter 11cases. Even if these cases were to proceed in Delaware, the vast majority of the Alleged Debtorsmanagement and other key employees will not often, if ever, be required to travel to Delaware totestify or otherwise appear in Court. The Alleged Debtors other employees, the majority ofwhom 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 andCanada. (Macaulay Decl. ~~ 5, 6). Thus, it appears from the Alleged Debtors papers that only128 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), benchdecision at 16 (Bankr. D. Del. Mar. 8, 1996) ("my experience suggest[s] that rank and fileemployees do not participate in a bankruptcy proceeding"). 87 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
  13. 13. 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. • Yucaipas 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 Debtorsmanagement, counsel and other professionals will ultimately be borne by the bankruptcy estatesand their creditors. In effect, the Alleged Debtors secured creditors are underwriting any coststhe Alleged Debtors will incur in travelling to Delaware. The lenders, however, must bear theirown costs. 30. Based upon the foregoing, the proximity of creditors prong does not support theTransfer Motion.9 A copy of the Safety-Kleen bench decision is attached hereto as Exhibit C.{935.000-W0021082.} 13
  14. 14. 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 supportstransfer of venue to Georgia. The Alleged Debtors business is national and international inscope. 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 thisdistrict and elsewhere and unreported decisions in this district which resulted in a transfer ofvenue, this case does not involve a debtor whose principal asset is commercial real estate locatedin a district other than this one."); PWS, 1998 Bankr. LEXIS 549 at *12-13 (denying transfer ofvenue, recognizing that "bankruptcy practice and jurisdiction reflect American business" and that"most American businesses (certain those with assets and liabilities counted in the hundreds ofmillions of dollars) are truly interstate in practice, national in character" thereby diminishing theimportance ofthe convenience factor). 32. Even if the location of Alleged Debtors assets favored Georgia as the appropriatevenue, (which it does not), courts have found that the location of the Alleged Debtors assets isnot a significant factor in deciding whether venue should be transferred where, as here, the goalof the Chapter 11 case is rehabilitation, not liquidation. See Enron, 274 B.R. at 347-48 ("Thelocation of the assets is not as important where the ultimate goal is rehabilitation rather thanliquidation.... [W]hile a debtors location and the location of its assets are often importantconsiderations in single asset real estate cases, these factors take on less importance in a casewhere a debtor has assets in various locations.") (internal citation omitted); Commonwealth Oil,596 F.2d at 1248 (location of the debtors assets has greater weight in liquidation proceeding). 33. Likewise, the location of the principal place of business is not conclusive. InSafety-Kleen, Judge Walsh denied a request to transfer venue to South Carolina despite the fact{935.000-W0021082.} 14
  15. 15. that the debtors 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] dont 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 ones operating services in a headquarters.Id. at 47-48. Similarly in Pic N Pay, transfer was denied even where there was "no doubt" thatthe debtors contacts in North Carolina were "much more significant" than those within Delawareand debtor had most of its stores in the Southeast (including over 100 of approximately 800stores in North Carolina) and most of the debtors assets and landlords were located in theSoutheast. 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 alsoof minor relevance to the venue transfer analysis. With modern technology that information,which is ordinarily computerized, can be readily transported electronically. See In re EnronCorp., 284 B.R. 376 (Bankr. S.D.N.Y. 2002) (financial data can be easily transported fromHouston 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, isreorganization and not liquidation. (Transfer Motion ,-r 8). Thus, the location of the AllegedDebtors 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 AllegedDebtors purported largest lender and controlling shareholder, to share with the Petitioning Creditors, within 72hours, two years of financial information that Yucaipa had caused Allied to withhold from other lenders. BDCMOpportunity Fund II LP v. Yucaipa Am. Alliance Fund I, LP, Case No. 65105/2012, Transcript of2/28/2012 Hearingat 3:6-23; 6:11- 7:13 (a copy is attached hereto as Exhibit D). The Alleged Debtors were able to comply with theelectronic transfer.{935.000-W0021082.} 15
  16. 16. 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 ofnegotiations concerning financing and reorganization will take place among the legal andfinancial advisors retained in these cases. Experience shows that these negotiations can and willtake place telephonically, through in person meetings in mutually convenient locations, and viae-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 toJudge Mullins of the Georgia would be the "most economically efficient option for the AllegedDebtors." (Transfer Motion ~ 25). However, the Alleged Debtors acknowledge that there is noguaranty that Judge Mullins would be assigned to these cases. (Transfer Motion ~ 25)("transferring these Involuntary Petitions to the Georgia Bankruptcy Court, where they wouldprobably, 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 GeorgiaCase was confirmed five years ago and thus the Georgia Bankruptcy Court, like the DelawareCourt, would need to be educated by counsel on changes to the Alleged Debtors capitalstructure, business operations, as well as the events resulting in the Alleged Debtors need forChapter 11{935.000-W0021082.} 16
  17. 17. 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 pendingelevates 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 thatthe Georgia Bankruptcy Case is still technically open), the Alleged Debtors have actually failed to comply withBankruptcy Rule 1014(b). Technical compliance would have required that the Transfer Motion be filed in theGeorgia Bankruptcy Court.{935.000-W0021082.} 17
  18. 18. 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 anApplication 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 NoObjection 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 wasrecently filed)." (Transfer Motion ~ 9). 42. Bankruptcy Rule 1014(b) is permissive and requires the Court to evaluate thesame standard (and therefore the same analysis) for transfer as in Bankruptcy Rule 10 14(a). Asset forth above, the Alleged Debtors have failed to meet their burden of showing that transferwould 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 SystemsHoldings, Inc.] and Allied Systems [Ltd. (L.P.)] are debtors in the Chapter 11 cases pending inthe Northern District of Georgia, Atlanta Division. Therefore, petitions against the same Debtorhave 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 thatAllied was specifically excluded from the Plan confirmed in the Georgia Bankruptcy Case:{935.000-W0021082.} 18
  19. 19. 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 concerningwhich 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.) wasa debtor in a prior pending proceeding, the test under Bankruptcy Rule 1014(b) is neverthelesspermissive ("the court may determine"), and for the reasons set forth above venue of these casesshould remain in Delaware. CONCLUSION 46. The Alleged Debtors have failed to sustain their burden to show by apreponderance of the evidence that a transfer of venue is "in the interests of justice or for theconvenience of the parties." Rather, the only thing the Alleged Debtors have shown is thattransfer to the Georgia Bankruptcy Court might be more convenient for the Alleged Debtors andtheir counsel. That, however, is not the criteria. Thus, the Petitioning Creditors choice of propervenue in Delaware should not be disturbed. See In re Enron Corp, 274 B.R. 327, 343 (Bankr.{935.000-W0021 082.} 19
  20. 20. 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
  21. 21. EXHIBIT A
  22. 22. 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 - - - - - - - - - - - - - - - - - - - - - - - - - - - - X10 In re:11 Chapter 1112 ALLIED SYSTEMS LTD. (L.P.), Case No. 12-11565(CSS)1314 Alleged Debtor.15 - - - - - - - - - - - - - - - - - - - - - - - - - - - - X1617 United States Bankruptcy Court18 824 North Market Street19 Wilmington, Delaware2021 May 22, 201222 4:13 P.M.232425 VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  23. 23. ALLIED SYSTEMS HOLDINGS, INC. Page 2 1 BEFORE: 2 BON CHRISTOPHER S. SONTCHI 3 U.S. BANKRUPTCY JUDGE 4 5 6 7 8 910111213141516171819202122232425 ECR OPERATOR: LESLIE MURIN VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  24. 24. ALLIED SYSTEMS HOLDINGS, INC. Page 3 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) and10 1104(a) (2) (Filed May 17, 2012, Docket No. 12)111213141516171819202122232425 Transcribed by: William J. Garling VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  25. 25. ALLIED SYSTEMS HOLDINGS, INC. Page 4 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)1011 RICHARDS, LAYTON & FINGER, P.A.12 Attorney for Allied Systems Holdings, Inc., Debtors13 One Rodney Square14 920 North King Street15 Wilmington, DE 190811617 BY: CHRISTOPHER M. SAMIS, ESQ. (TELEPHONIC)1819 OFFICE OF THE UNITED STATES TRUSTEE20 Attorney for the United States Trustee21 844 King Street, Suite 220722 Lockbox 3523 Wilmington, DE 198012425 BY: DAVID L. BUCHBINDER, ESQ. (TELEPHONIC) VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  26. 26. ALLIED SYSTEMS HOLDINGS, INC. Page 5 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, LLP10 Attorney for Yucaipa, Interested Party11 Rodney Square12 1000 North King Street13 Wilmington, DE 198011415 BY: MICHAEL R. NESTOR, ESQ. (TELEPHONIC)1617 LATHAM & WATKINS, LLP18 Attorney for Yucaipa, Interested Party19 355 South Grand Avenue20 Los Angeles, CA 900712122 BY: ROBERT A. KLYMAN, ESQ. (TELEPHONIC)232425 VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  27. 27. ALLIED SYSTEMS HOLDINGS, INC. Page 6 1 KASOWITZ, BENSON, TORRES & FRIEDMAN LLP 2 Attorney for Yucaipa, Interested Party 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 LLP10 Attorney for Yucaipa, Interested Party11 1633 Broadway12 New York, NY 100191314 BY: DAVID E. ROSS, ESQ. (TELEPHONIC)1516 APPEARED TELEPHONICALLY:17 ROBERT WARD, ESQ.18 MICHAEL JOHNSON, ESQ.19202122232425 VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  28. 28. ALLIED SYSTEMS HOLDINGS, INC. Page 7 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 were 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 youre 9 not actively speaking, to do your best not to talk over each10 other, and to remember to identify yourself prior to every11 time you speak.12 And I would like to start by hearing from the13 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 appearances18 from everybody before we get started or19 THE COURT: That would take -- that would take20 longer than the hearing.21 MR. HARRIS: Thank you, Your Honor.22 Your Honor, we filed the involuntary petitions23 last week as Your Honor knows, and the summons have been24 served upon the alleged debtors in the case -- in the cases,25 I should say. VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  29. 29. ALLIED SYSTEMS HOLDINGS, INC. Page 8 1 In conjunction with the filing of the 2 involuntaries weve 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 last11 night, since the involuntaries were filed last week, weve12 had an opportunity to speak with counsel for the alleged13 debtors, Mr. Collins from Richards Layton, as well as14 Messrs. Kelley and Cohen from Troutman Sanders.15 Your Honor, the purpose of our suggestion of a16 status conference, which we brought up late last week or17 Monday, I cant remember which i t was, was that we thought18 i t would be helpful to Your Honor in making decisions about19 entering orders shortening time or otherwise setting20 calendars to hear from the various parties as to the issues21 that were likely to be brought before the Court and on which22 the Court would be asked to rule.23 Given certain of the statements that were made in24 the alleged debtors filings last night in some instances in25 the redacted portion -- so Im not going to talk about them VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  30. 30. ALLIED SYSTEMS HOLDINGS, INC. Page 9 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 and10 as we discussed them with the alleged debtors counsel11 today, we think that the cases can move forward on --12 hopefully on a more cooperative and consensual track. And13 that there might not need to be any particular order or14 scheduling order entered by Your Honor relative to our15 trustee motion at this time.16 I would like Your Honor to hear from Mr. Collins17 or his co-counsel from Troutman Sanders on those issues and18 would then like to have an opportunity to speak thereafter19 based upon what they say.20 THE COURT: All right. Let me hear from the21 purported debtor.22 MR. SAMIS: Good afternoon, Your Honor.23 This is Chris Samis from Richards, Layton & Finger24 on behalf of the alleged debtors.25 Your Honor, with me on the phone are my co-counsel VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  31. 31. ALLIED SYSTEMS HOLDINGS, INC. Page 10 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 todays status conference, I would request that the Court 8 permit them to speak. 9 THE COURT: Id be happy to do so; and Id like to10 express my personal thanks to you, Mr. Samis, for your11 yeomans work in getting the Court the documents I needed to12 be prepared for today, but Ill hear from them.13 MR. SAMIS: Your Honor, no problem. I was happy14 to do so, and I also -- wanted to thank Your Honor for15 accommodating us this afternoon in reviewing a pretty16 voluminous docket on very short notice for this status17 conference.18 Your Honor, just very briefly, with respect to why19 were here today, the alleged debtors believe its20 appropriate to use this status conference to address not21 only the motion to shorten on the trustee motion, but more22 importantly in our view, the scheduling of our own venue23 transfer motion, which we think deals with a real gating24 issue in these cases.25 So, Your Honor, with that as background, I turn VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  32. 32. ALLIED SYSTEMS HOLDINGS, INC. Page 11 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 Ill 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 of10 Judge Mullins, here in Atlanta.11 Your Honor, the filing of these petitions has12 caused what Allied believes to be, as we set forth in our13 papers, some unnecessary disruptions and potentially14 significant damage to Allieds business and its value.15 Our perspective on how this possibly could have16 happened and the motives may be driving the petitioning17 creditors is set forth in particular in the redacted18 portions of our response to the motion to shorten time for19 the hearing on the appointment of a trustee where we, among20 other things, argue that we dont think that any emergency21 has been shown and that the issues raised have been the22 subject of the State Court litigations among the various of23 the parties going back several years.24 However, Your Honor, due to the filing thats25 taken place, their -- the actions in this involuntary VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  33. 33. ALLIED SYSTEMS HOLDINGS, INC. Page 12 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, Allieds 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 our10 response.11 But, Your Honor, Allieds preferred forum is12 Atlanta. Thats where, as I mentioned, Allieds first case13 was administered by Judge Mullins. That case is still open.14 Although its ready to be closed, i t is still open. The15 reasons that we think a transfer is appropriate are set16 forth in the venue motion. Im not going to argue that at17 this point, but its primarily the convenience of Allieds18 very, very stretched-thin executive team, which is located19 in Atlanta, not to mention Judge Mullins familiarity with20 most of the players in this case.21 The first case was a very large case by Atlanta22 standards, very intense, a lot of activity in that case, and23 Judge Mullins had ample opportunity to learn a lot about24 Allied, and for that matter, Yucaipa.25 So, Your Honor, we ask that you rule on the venue VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  34. 34. ALLIED SYSTEMS HOLDINGS, INC. Page 13 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 right10 direction, so we respectfully ask that the Court give11 Allieds transfer motion consideration as soon as the12 Courts schedule permits, and thats our position as to the13 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 Bankruptcy18 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 the22 first case is still pending.23 THE COURT: Okay.24 Anyone else?25 MR. HARRIS: Adam Harris -- sorry to interrupt. VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  35. 35. ALLIED SYSTEMS HOLDINGS, INC. Page 14 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, weve had a 9 conversation with Mr. Kelley and Mr. Cohen and Mr. Samis10 earlier today where we told them that we would be happy to11 sit with them and try to better understand their views on12 Atlanta as an appropriate venue versus -- versus Delaware13 and take into account and discussing with them the interests14 of all of the parties involved here, only one of which15 really is located in Atlanta, the rest of whom are located16 mostly in the Northeast corridor, but also in California and17 Detroit and elsewhere.18 And to the extent the Court is inclined to set a19 hearing in connection with the venue transfer request, we20 would only ask that we be given an opportunity to get with21 the purported debtors and others to discuss this, and that22 if a hearing need be held, that i t would be held sometime23 late next week rather than between now and the Memorial Day24 weekend. I dont think that would prejudice the debtors at25 all given the timetable they seem to be operating on VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  36. 36. ALLIED SYSTEMS HOLDINGS, INC. Page 15 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: Im 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 Im on with Robert13 Klyman from Latham & Watkins.14 May we be heard briefly?15 THE COURT: Im sorry. I missed your client,16 Mr. Nestor.17 MR. NESTOR: Its 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 the24 largest lender and shareholder and member of the board of25 the alleged debtors and we have a direct economic material VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  37. 37. ALLIED SYSTEMS HOLDINGS, INC. Page 16 1 economic interest in the outcome. 2 We would echo what Mr. Kelley said, that its, 3 from our vantage point, very important to have the venue 4 determined first and foremost. If Your Honor determines 5 that its 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 whats left10 to be resolved in Atlanta is a motion to close the case, but11 under the plain reading of the statute that may be the12 more appropriate place for determination as to venue. We13 just thought that since there was a trustee motion on an14 expedited basis filed this was the natural venue to first15 raise the issue. But as I said, at least from Yucaipas16 perspective, having the issue determined by Judge Mullins17 would be a perfectly fine result on an expedited basis.18 I would just add two other points. The first is19 while my colleague, Mr. Harris, says that he needs more time20 to sit down with the debtors, and maybe Yucaipa to21 understand all there is about the venue in Atlanta, the fact22 of the matter is that they did have sufficient time to do23 that before they filed an involuntary. The filing of the24 involuntary was their timing, not the debtors, and the25 reasons why venues appropriate in Atlanta, I believe, are VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  38. 38. ALLIED SYSTEMS HOLDINGS, INC. Page 17 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 getting10 on with the case in a manner that preserves value, both for11 the enterprise as a whole and the secured lenders, including12 Black Diamond in particular.13 We would also ask Your Honor that while the venue14 issue is being decided that Black Diamond actually withdraw15 the trustee motion without prejudice with the ability to16 refile it on an expedited basis if theyd like, with all17 parties reserving their rights with respect to whether or18 not the request for expedited hearing is appropriate before19 whatever judge ultimately hears the case.20 The -- its, you know, tough enough for the21 business and management to be dealing with an involuntary22 and scrambling to catch up to make sure that the business23 doesnt suffer the unnecessary stigma of a trustee motion,24 which is not going to be heard for some period of time, is25 something that, at least on Yucaipas behalf, we would like VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  39. 39. ALLIED SYSTEMS HOLDINGS, INC. Page 18 1 to avoid hanging over when we meet with customers and 2 vendors and the like, recognizing that this would not 3 prejudice Black Diamonds 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 youre willing to sit down and talk to them, 8 but that wasnt my impression from what I read. 9 All right. Does anyone else care to make10 comments?11 MR. BUCHBINDER: Your Honor, this is Dave12 Buchbinder from the U.S. Trustees Office.13 We are concerned about Rule 1014(b) and how i t14 applies here. If we do have the same debtor the rule would15 seem to imply that anything pending here is stayed until the16 Court in Atlanta rules otherwise or orders otherwise.17 To the extent that an issue has been raised as to18 whether or not this is the same debtor, Rule 1014(b),19 Subdivision 4, says that if petitions commencing cases are20 filed in different districts by regarding or against and Sub21 4 is a debtor and an affiliate, if the new debtor is a22 successor they may or may not be an affiliate.23 And so what Im getting at is I agree with the24 parties that the threshold matter here is a ruling on either25 Rule 1014(b) s applicability or a ruling on the venue VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  40. 40. ALLIED SYSTEMS HOLDINGS, INC. Page 19 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 thats 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 its less than clear whether this Court11 has, without authority, to enter any order pending that12 decision as opposed to simply making a decision on venue,13 but I certainly appreciate your (Indiscernible - 4:30:31) I14 think thats the most sophisticated response to some of the15 complications that the Court is looking at in this case.16 Anyone else?17 MR. KELLEY: Yeah, this is Jeff Kelley, again, for18 the alleged debtors.19 I -- I would will also like to reiterate and state20 for the alleged debtors that were certainly willing -- I21 dont know about -- you know, we are not Yucaipa, and22 whatever was alleged and whether its true or not about23 Yucaipas willingness to cooperate -- of course the alleged24 debtors are willing to sit down and cooperate and talk with25 their lenders at any time. We dont have to be subject to VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  41. 41. ALLIED SYSTEMS HOLDINGS, INC. Page 20 1 an involuntary bankruptcy petition to do that; were 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 Courts 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 dont want to unduly complicate this by10 doing that. We did think that under the circumstances of11 this case, this was the appropriate place to bring up the12 venue transfer motion.13 THE COURT: All right. Whats the debtors14 position -- presuming I will schedule the venue transfer15 motion to be heard expeditiously whats the debtors16 position on when that should occur?17 MR. KELLEY: As soon as Your Honors calendar18 permits.19 THE COURT: Okay. Can I --20 MR. KELLEY: (Indiscernible - 4:32:09.)21 THE COURT: -- can I transfer the case before22 entry of an order for relief?23 MR. KELLEY: We believe you can, Your Honor. This24 is a --under the strict ruling reading of 303(b) a case was25 commenced VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  42. 42. ALLIED SYSTEMS HOLDINGS, INC. Page 21 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 theyre 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 do10 would be then to be ruling on whether or orders for relief11 should be entered or not unless theres going to be a ruling12 that Your Honor can make if theres going to be a contested13 involuntary. If theres not going to be a contested14 involuntary and the debtors were to affirm that, then, you15 know, there wouldnt be any issue with dealing with the16 venue transfer in my mind.17 But there seems to be a timing issue in some18 respects as to the desire to go to a forum and then deal19 with the involuntary and conversion at a later date, and not20 even, frankly, confirmed, but they said subject to board21 approval -- and I think the word used was "likely" convert,22 where that would basically put us in a position of23 litigating the involuntaries in a jurisdiction in which we24 didnt file them.25 THE COURT: All right. So, what Im -- Im going VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  43. 43. ALLIED SYSTEMS HOLDINGS, INC. Page 22 1 to see if I can make sure I understand what Im hearing. 2 And what Im hearing from Mr. Harris is, at least 3 for the immediate future, hes not pressing the trustee 4 motion, and again, would like to open and well 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 Im hearing from the debtor is that and 9 its supporters -- that the only thing they want me to decide10 what venue the case should (indiscernible - 4:34:18) once11 that decision has been made theyll be in a position,12 perhaps, to make a decision on whether agree to agree to an13 entry of order for relief or not.14 Is that right -- I want to make sure -- is that a15 gating issue or do you (indiscernible- 4:34:39)?16 MR. KELLEY: This is Jeff Kelley.17 Its my opinion that the two are unrelated in my18 view. Allied Systems needs to make a decision, and the19 (indiscernible - 4:34:50), Your Honor, is I just dont have20 the board sitting here with me, that -- which because of the21 filing of the involuntary petitions we will be consenting,22 we just do not wish to have a crash landing into a voluntary23 Chapter 11. We want to make sure that our financing is all24 lined up and we want to do i t as neatly as possible with the25 right message to all of our constituencies, many of whom are VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  44. 44. ALLIED SYSTEMS HOLDINGS, INC. Page 23 1 on the phone. 2 So, I dont 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. We10 didnt think that if Your Honor was not going to keep the11 case, not presupposing at all what Your Honors decision12 will be, that Your Honor would want to be the one deciding13 whether to appoint a trustee14 THE COURT: Okay.15 MR. KELLEY: -- so we brought this motion to your16 attention promptly.17 THE COURT: Very good. And I understand you would18 like Mr. Nestor to withdraw, but, of course, I cant make19 him withdraw it.20 I will offer a comment. I think as presented in21 its -- or in the papers that the trustee motion is not22 particularly persuasive, of course, all those motions23 require a development of facts and its somewhat difficult24 to figure i t out from the actual papers.25 What Id like to do in this case and what I will VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  45. 45. ALLIED SYSTEMS HOLDINGS, INC. Page 24 1 do is lets have a hearing on the venue transfer motion on 2 Thursday, May 31st. (Indiscernible - 4:36:44 reschedule 3 that, Im available throughout the day with -- I do have to 4 take a break in the late morning, so I wont be available 5 until say 10:30, if we started in the morning, or Im 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, so10 if people want me to simply state a time I will and well11 basically try to figure i t out.12 But, I think regardless of whether this is going13 to be withdrawn or filed an 11 or what have you, I have a14 responsibility to decide very quickly where -- what the15 venue should be. And i t very well may be at the end of that16 Mullin hearing my answer is going to be, I cant make that17 decision because Judge Mullins is going to make that18 decision.19 But if i t is appropriate for this Court to have a20 hearing on transfer venue, then one of the possibilities may21 be that this Court doesnt have the power, or the22 possibility is this Court decides i t has that power and23 makes a decision. Either way, I need to hear from the24 parties and the facts and law to make that call.25 Is there any comment on that? VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  46. 46. ALLIED SYSTEMS HOLDINGS, INC. Page 25 1 MR. HARRIS: Your Honor, its Adam Harris. 2 Thats 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 Honors 7 available, at 2 oclock 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 where11 people may feel compelled to come in the night before12 just the cost issue. I think if we do the 2 oclock, then13 we can try to get the responses by noon the day before. If14 thats too tight, we can probably do i t a little sooner than15 that.16 THE COURT: All right.17 MR. KELLEY: Your Honor18 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 ask21 that, if possible, the response date be set a little sooner22 than that to give us a little bit more time to read it, and23 we appreciate and agree with Mr. Harris suggestion that the24 hearing start at 2 oclock.25 THE COURT: All right. VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  47. 47. ALLIED SYSTEMS HOLDINGS, INC. Page 26 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, thats what I was about to say. 4 All right. Well 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 -- Im sorry, in the pending, at least the11 (indiscernible - 4:40:00) Im going to hold the trustee12 motion in abeyance.13 MR. HARRIS: Thats 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 do18 actually have a pending motion to seal in connection with19 our venue motion, so I would ask that that be heard at the20 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 were24 contained in our statement in support of trustee motion.25 MR. HARRIS: Your Honor, I dont think theres any VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  48. 48. ALLIED SYSTEMS HOLDINGS, INC. Page 27 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, heres where well 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, well hear 9 those motions in relation to the venue motions, and if there10 arent any objections and you want to send out a stipulated11 order, thats fine with the Court; however you want to play12 it.13 But lets limit i t to the venue motion and the14 related file under seal motions, et cetera.15 MR. SAMIS: Thank you, Your Honor.16 Ill --well discuss that with Mr. Harris and17 well 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 Dave22 Buchbinder, again.23 It might be -- Im sort of concerned about 1014(b)24 here, as I know everyone else is, and I wouldnt want25 everyone to end up in another forum and fighting about what VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  49. 49. ALLIED SYSTEMS HOLDINGS, INC. Page 28 1 applied here or didnt 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 werent, then we 7 wed be looking at what Ill 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 entities10 described in Rule 1014(b) is the --and type of entity were11 dealing with, I think the rule doesnt give the Court any12 discretion except to move the case back to Atlanta.13 So we might want to deal with 1014(b) first, and14 as further backup, the parties might all want to agree, and15 at least for purposes of the venue motion, theyre not going16 to invoke this rule or the Court may want to independently17 consult with Judge Mullins, who may want to issue an order18 allowing this Court to rule on the venue motion so that the19 record is clear and that a lot of unnecessary time is20 perhaps not wasted downstream litigating these matters.21 Its just a suggestion.22 THE COURT: Well, Im not at all sure that I agree23 that if theres a pre-existing case there is no choice but24 to transfer venue. Im not sure I agree with your25 interpretation of the statute. VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  50. 50. ALLIED SYSTEMS HOLDINGS, INC. Page 29 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 theres 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 be10 nonetheless helpful to combine the motions, because if I11 decide no then I can decide i t on the merits; if I decide12 yes I can kick i t to Judge Mullins, but I can also make,13 perhaps, observations that he would find helpful.14 So Im going to have the whole hearing the same15 day, okay?16 MR. BUCHBINDER: Well, I wasnt -- this is Dave17 Buchbinder.18 I wasnt suggesting to not have the hearing the19 same day.20 THE COURT: Oh, okay.21 Thank you, Im sorry. I --22 MR. BUCHBINDER: I was just simply suggesting that23 in terms of order, the 1014(b) issue might be first.24 THE COURT: Well, thats something for the parties25 to work out in how theyre going to run their hearing, but I VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  51. 51. ALLIED SYSTEMS HOLDINGS, INC. Page 30 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. Were adjourned.10 MR. HARRIS: Thats i t from the petitioning11 creditors, Your Honor.12 Thank you.13 THE COURT: Okay. Were 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 at19 4:44 P.M.)202122232425 VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  52. 52. ALLIED SYSTEMS HOLDINGS, INC. Page 31 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 -o4oo· /,l 8 910 Veritext11 200 Old Country Road12 Suite 58013 Mineola, NY 115011415 Date: 5/24/201216171819202122232425 VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400
  53. 53. EXHIBITB