IN THE UNITED

STATES BANKRUPTCY OF DELAWARE Chapter

COURT

FOR THE DISTRICT In re: New Century TRS Holdings; Inc.; a Delaware Corporation; et aI, Debtors. UBS Real Estate Securities Inc.,

11 (KJC)

Case No. 07-10416 Jointly Administered

Plaintiff,

Adv, No. 07-50875

(KJC)

v.
New century Mortgage Corporation, NC Asset Holding, L.P., Home123 Corporation, New Century Credit Corporation and New Century Financial Corporation, Defendants.
MEMORANDt~

Hearing Date: Hearing Time: Re:

April 12, 2007 3:00 p,m.

Docket Nos. 3, 5-7

IN SUPPORT OF DEFENDANTS' OPPOSITION FOR TEMPORARY RESTRAINING ORDER

TO MOTION

RICHARDS, LAYTON AND FINGER, P.A. Mark D, Collins (No. 2981) Robert J. Stearn, Jr. (No. 2915) Marcos A. Ramos (No. 4450) One Rodney Square Wilmington, Delaware 19800 Te I. : (302 ) 651 -7700 Fax: (302) 651-7701

HENNIGAN, BENNETT & DORMAN LLP Bruce Bennett Jeanne E. Irving A. Brent Truitt (admitted in N.Y. and D.C. only) 865 S. Figueroa Street Suite 2900 Los Angeles, California 90017 Te I .: (213 )694 -12 a a Fax: (213) 694-1234

Dated: April 10; 2007 Wilmington, Delaware

Proposed Attorneys for Defendants New Century Mortgage Corporation, NC Asset Holding, L.P., Homes 123 Corporation, New Century Credit Corporation and New Century Financial Corporation

RLFl- 313 73 5 1 - 1

TABLE OF CONTENTS I. II. III . IV. INTRODUCTION AND SUMMARY OF ARGUMENT 1 4 5

NATURE AND STAGE OF PROCEEDINGS STATEMENT OF FACTS. .

LEGAL STANDARDS APPLICABLE TO CONSIDERATION OF A REQUEST FOR A TEMPORARY RESTRAINING ORDER. . UBS HAS NOT MET THE STANDARDS NECESSARY SUPPORT A TEMPORARY RESTRAINING ORDER A. TO

,

7 10

V.

UBS Has Not Demonstrated That It Is Likely To Succeed On The Merits Of Its Claims. . 1. UBS Has Not Established That The Debtors Are In Possession Of Property Belonging To UBS There Are Substantial Legal Questions As To Whether The Transactions Between The Debtor And UBS Constitute Sales Or Loans

10

,'" .11

2,

13

B.

UBS Cannot Demonstrate That Irreparable Injury Would Result From The Denial Of Its Temporary Restraining Order None Of The Cases Cited By UBS Support The Relief It Has Requested, The Public Interest Does Not Support The Issuance Of The Temporary Restraining Order. , ,', ,.,',

16 ,' .18

C. D.

26 27

VI.

CONCLUSION

-i-

TABLE OF AUTHORITIES FEDERAL A. 0, Smith Corp. v. F.T.C.,
530 F,2d 515 (3d Cir. 1976) "",, 25

CASES

Acierno

v. New Castle County,
645 (3rd Cir. 1994)." "" 23, 26

40 F.3d

Bertucci's

Rest. Corp. v. New Castle County,
515 (DeL Ch , 2003)
&

836 A.2d

"

9

Brown v . Houston
2000

Ventures
{Del.

Hughlett,
2000) 9

WL 713761

Ch.

Campbell

Soup Co. v. ConAgra,
86 (3d Cir,

Inc.,
" , .. "." 16

977 F.2d

1992)

Cr issman v.
289

Dover Downs En tertainmen t,
231 (3d Cir. 2002)

Inc"
" ".22, 23

F.3d

Elliott

v. Kiesewetter,
(3rd Ci r. 1996) ,.",., 18 , 19, 20, 21

98 F. 3d 4 7

Farberware,

Inc. v. Mr. Coffee,
291 (D.Del.1990)

Inc.,
8

740 F.Supp.

Frank's GMC Truck Center, Inc. v. General Motors Corp. 84 7 F. 2d 10 0 {3d Ci r. 1988)........................
I

17

Gerardi

v. Pelullo,
1363 (3rd Cir. 1994) .. , 18, 19, 20

16 F.3d

GlaxosmithKline Consumer Pharm. Corp.,
197 Fed.Appx. 120

Healthcare,
2006)
&

L.P. v. Merix
'" " .. , " 24

(3d Cir.

Hoxworth

v , Blinder,
186

Robinson
Cir.

Co.,
18, 21, 26

903 F.2d

{3rd

1990)

Instant Air Freight
882 F.2d 797

Co. v. C.F. Air Freight,
1989) .. " ""

Inc.,
1,8,16

{3d Cir.

In re Northwes tern Corp ,,
No. 05-52525 (JLP) 2005 {Bankr. D. DeL Oct. 25,
I

Bankr. 2005)

LEXIS 2146 25

Morton

v. Beyer,
364 (3d Cir. 1987)""
-ii-

822 F.2d

17

Novartis Consumer Health, Inc. v. Johnson Merck Consumer Pharmaceuticals Co ,, 290 F.3d 578 (3d Cir. 2002)

& Johnson1, 7 8 v.

Phillips Petroleum Co. v. u.s. Steel Corp.; 616 F.Supp. 335 (D.Del. 1985)." Pre-Petition Committee of Select Asbestos Claimants Combustion Engineering, Inc. (In re Combustion Engineering, Inc.), 292 B. R. 515 ( Barik r . D. De 1. 2003} Punnett v. Carter, 621 F.2d 578 (3d Cir. 1980) Sampson v . Murray, 415 U.S" 61, 39 L. Ed. 2d 166, 94 S. CL 937 (1974)

8, 24 9; 24, 26

,'""

25

Simon & Schuster, Inc. v. Advanced Marketing Services, Inc. (In re Advanced Marketing Services, Inc.) 2007 WL 162685 (Bankr. D. Del. 2007} Shubert, Inc. v. Premier Paper Products, (In re American Tissue, Inc.), No 06-50929(KG), 2006 WL 3498065 (Bankr. D. Del., Dec. 4, 2006}"" Virginia Petroleum Jobbe i s Ass' n v. FPC, 259 F.2d 921 (D.C. Cir. 1958) STATUTES 11 U.S.C. 11 U.S.C. 11 U.S.C. 11 U.S.C. 11 U.S.C.
§ § § §

8,

17

LLC,

"

21, 22 25

101 362 502 559 561 " " " , , _ ,

14 13,14 " 13
13 ,.13

s

-iii-

I.

INTRODUCTION

AND

SUMMARY OF ARGUMENT.

1.

A temporary

restraining

order

II'is an only in
Inc.

extraordinary

remedy, which should be granted
!

limi ted circumstances,
Johnson
&

II

Novar tis

Consume.r Hea1 t.b , Co" 290 Co,

v.

Johnson-Merck

Consumer Pharms. Air

F.3d 578,
v. C.F.

586
Air

(3d Cir. 2002) (quoting Instant
Freight, Lnc, ,

Freight (3d CiL

882 F.2d

797,

800

1989)),

Ignoring

the extraordinary

nature of its request, Inc. ("UBSlI), a does

plaintiff, not merely hearing.

UBS Real Estate securities seek to maintain Instead,

the status quo pending restraining injunction

the temporary

order sought from the New

by UBS is in actuality Court directing Century Mortgage Home123 Century

a mandatory

the payment

of money from Defendants, NC Asset Holding, L.P.,

Corporation!

Corporation, Financial

New Century

Credit Corporation to UBS.

and New UBS

Corporation

("Debtors")

offers no basis distribution instead,

for the Court to ignore the ordinary applicable to chapter 11 cases and, payment is truly

procedures

asserts

that it is entitled

to immediate Its request

in preference extraordinary.

to all other creditors. Moreover,

UBS has not cited a single case the relief it seeks here. to entitle

in which a court granted 2.

UBS's allegations relief.

are not sufficient The reasons

it to any injunctive

for this fit into show that it is

three main categories. likely to succeed of or in preference fails to identify

First, UBS cannot

in proving

that it should be paid ahead Indeed, it

to any other creditors.

any provision

of the Bankruptcy

Code that

would authorize complaint

such exalted

treatment.

Instead,

UBS's own of

reveals

that it seeks money damages

for breach

a contract. 3. already Second, if monies collected by the Debtors restraining have

been commingled,

a temporary

order

cannot reverse absence

that reality.i

In other words, property assets,

in the

of proof that specific among the Debtors'

of UBS can be

identified restraining property

a temporary

order cannot transform estates

undifferentiated property of

of the Debtors'

into specific

UBS even if, for the sake of argument, UBS's legal theory. adjudicate actually

one were to accept

Thus, UBS has asked this Court to It would have this Court property in the absence in fact belongs

this case in reverse. to UBS specific

transfer

of any showing

that that specific property the threshold question

to UBS and decide later.

of ownership relief,

But UBS is not entitled or otherwise,

to any equitable

preliminary property

until it identifies that this property

specific

and establishes withheld Finally,

has been

wrongfully 4.

from it. UBS's claims that the Debtors
ll

may

IIcommingle or dissipate asserted injury.

funds necessary

to pay the claims irreparable relief to

by it does not constitute If all creditors

cognizable

were entitled

to equitable

on the basis of such claims,

there would be no assets

To be clear, UBS has not established that the Debtors violated any term of an agreement that required them to segregate collections on the mortgage loans pledged to UBS.
-2-

administer necessary asserted resources

in any bankruptcy

case"

But even if it were

to focus on DBSts claims apart from all others in these cases, the Debtors to respond to a judgment will have sufficient event claim

in the unlikely

that DBS someday to specific the Debtors precipitous their funds.

demonstrates

that it has a superior

property

now held by the Debtors.

Fortunately,

are no longer subject creditor collection

to the risk of that could deplete

efforts

Moreover,

as set forth in the of Holly Felder Etlin in Restraining

contemporaneously Support Order

filed Affidavit to Motion

of Opposition

for Temporary the Debtors

(the REtlin Affidavit"), including

have substantial

assets and property $40 million);

cash

(currently approximately facility in the no

a newly approved

credit

amount of $50 million outstanding expected advances)
i

(under which there are currently and anticipated sales of assets

to yield between

$50 and $200 million. injury or remedy of a

Accordingly,

there is no risk of irreparable that warrants order. are working diligently

other emergency temporary 5" accounting

the extraordinary

restraining The Debtors

to complete not only on but

an

of funds that have been collected

the mortgage

loans in which DBS claims an interest on other mortgage

funds that have been collected were originated enormous Debtors' stretched and serviced

loans that

by the Debtors.

This is an strain on the

undertaking accounting

which puts a substantial

staff at the same time that it is

to deal with a host of other issues. But in any
-3-

event, preparation

of this accounting

is underway

and has have

been given a very high priority. informed DBS, when the accounting

As the Debtors is completed,

the Debtors

will be able to report received,

to UBS the amounts

that were loans in which

if any, on account

of the mortgage

UBS claims an interest identifiable. amount,

and whether

any such funds remain is completed, the

until this accounting

if any, that may be due to DBS

(even if one were to and the the

accept DBS's legal theories) grant of the temporary payment 6. of money

cannot be determined

restraining

order compelling

from the Debtors

to UBS is unwarranted. to have the Court

Of course, UBS would prefer

simply order the Debtors preference necessary evaluate

to pay over money to UBS in without completing the to

to other creditors, accounting

and without the complex

an adequate

opportunity

and consider

legal issues surrounding However,

the transactions

between

UBS and the Debtors.

there is no basis for the Court to issue such a mandatory injunction at this time. Such an order would not preserve state of affairs other

the status quo; it would alter the current to the prejudice creditors. II. of the Debtors

and their numerous

NATtrnE AND STAGE OF PROCEEDINGS. 11 cases were commenced on April 2,

These chapter 2007. On April this adversary

5, 2007, DBS filed its Complaint proceeding.

commencing

On the same day, UBS filed its Inc. 's Motion For Temporary (the

!lUBS Real Estate Securities Restraining

Order and Preliminary
-4 -

Injunction"

"Motion")

and sought an expedited to consider 12.

hearing

on its Motion.

The hearing Thursday, opposition

the Motion has been set for is submitted in

April

This memorandum

and response

to the Motion. OF FACTS. a Maryland

III. STATEMENT New Century corporation investment
("NCF")

Financial

Corporation,

and publicly

owned real estate specialty Through mortgage its

trust,

is one of the largest in the United States.

finance businesses subsidiaries New Century originates, nationwide. lending,

and its primary TRS Holdings, purchases,

holding

company

subsidiary, NCF

Inc., a Delaware

corporation,

sells, and services mortgage focused on "subprime whose borrowing
ll

loans

NCF historically

or lending

to individuals

needs

were generally institutions documentation conventional September

not fulfilled

by traditional

financial

because

they did not satisfy

the credit, prescribed In also by

or other underwriting mortgage
1

standards

lenders and loan buyers.

2005

NCF through conventional

some of its subsidiaries mortgage

began offering

loans, including:

"Alt-A" mortgage

loans, loans insured by the Federal ("FHAII), and loans guaranteed (I'VN/). During by the

Housing Administration Veterans Administration
1

the fiscal year or loans
l

ending December' 31 purchased

2006, the Debtors $60 billion

originated

approximately

of mortgage market.

most

of which were sold in the secondary inception, billion the Debtors

Since their over $220 of

have issued or enabled

in loans.

These loans have helped millions
-5-

homebuyers and realize

and homeowners the benefits

across

the nation

access

credit many

of home ownership,

including

who might not otherwise

have been able to do so. in detail in the Debtors' firstby

As has been outlined

day filings with the Court, a series of announcements NCF, beginning events in February of this year, together with

that followed defaults market

those announcements

and increased the subprime impact on the

borrower mortgage Debtors'

that have adversely

affected

nationwide,

had a devastating

business.

Among other things,

the financial facilities loans (each

institutions

that provide

the short term credit and purchase

that the Debtors a "Warehouse against

need to originate commenced

Lender"),

exercising

remedies

the Debtors, Lenders

thereby

threatening

their viability. of $150 fully. and by

The Warehouse million,

made margin

calls in excess to satisfy

which the Debtors the Warehouse

were unable Lenders

Thereafter, ultimately

began restricting

ceased providing

funding

for loans originated Lenders has declared

the Debtors. the Debtors

Each of the Warehouse

in default under its credit

facility. Lenders with the

As a result of the defaults, have exercised Debtors, remedies

the Warehouse

under their agreements control

including

asserting

of the cash flow from exercising sales of the

the loans they financed strict foreclosure loans.

and in some instances foreclosure

or commencing

Debtors'

The lack of cash flow from these loans has the Debtors' liquidity situation.

further exacerbated

-6-

On April

2, 2007, the Debtors bankruptcy

filed petitions

for

relief and the Debtors' administered Debtors affairs pursuant

cases are being jointly The their

to an order of the Court. their business and managing

are operating as debtors

and debtors

in possession.

Only three days into the case, one of the Warehouse Lenders, DBS, launched its attempt to have its claims paid and, moreover, directing such asks

ahead of those of all other creditors this Court for a mandatory payments attempts now. injunction

For the reasons

set forth below, UBS's of bankruptcy law

to circumvent now,

the fundamentals

must be stopped IV.

LEGAL STANDARDS REQUEST

APPLICABLE

TO CONSIDERATION RESTRAINING injunction

OF A

FOR A TEMPORARY

ORDER. a moving

In order to obtain a preliminary party must meet a four part test:

"In order to grant a temporary restraining order, the Court "must be convinced that the following factors favor granting preliminary relief: (1) the likelihood that the moving party will succeed on the merits; (2) the extent to which the moving party will suffer irreparable harm without injunctive relief; (3) the extent to which the nonmoving party will suffer irreparable harm if the injunction is issued; and (4) the public interest,/I Novartis Consumer Health, Inc. v. Johnson & Johnson-Merck Consumer Pharms. Co" 290 F.3d 578, 586 (3d Cir. 2002) _

- 7-

Simon & Schuster, Inc.,

Inc. v. Advanced Marketing

Marketing

Services,

(In re Advanced

Services,

Inc.), 2007 WL

162685, at *3 (Bankr. D. Del., Jan. 22, 2007).J A moving party bears a heavy burden temporary restraining to obtain a only

order and it is a remedy granted

in extraordinary

circumstances:

The Court of Appeals for the Third Circuit, in addressing preliminary injunctive relief, stated that it is an "extraordinary remedy, which should be granted only in limited circumstances." Instant Air Freight Co. v. C.F. Air Freight, Inc., 882 F.2d 797, 800 (3d Ci.r , 1989). Pre-Petition Combustion Committee Inc. of Select Asbestos (In re Combustion Claimants Eng'g, v.

Eng'g,

Inc.), 292

B.R. SIS, 518 injunctive probability Phillips 335, 337

(Bankr. D. Del. 2003).

"In order to obtain a 'strong

relief,

the movant must demonstrate

of success on the merits

of the litigation.'

Petroleum

Co. v. U.S. Steel Corp., 616 F.Supp. Simon & Schuster, 2007 WL

(D. Del. 1985) ,"

162685, at *3.

In applying this test courts sometimes discuss the second and third prongs of the test together as a balancing of the relative harm to the moving party of not granting the injunctive relief against the harm to the opposing party that will result from the requested injunction. Simon & Schuster, 2007 WL 162685, at *5 ("The third factor in the preliminary injunction analysis is the balancing of equities. In applying this factor, 'a court should consider whether granting the requested relief will result in greater harm to the party on whom it is imposed than its denial will have on the party who seeks it,' Farberware, Inc. v. Mr. Coffee, Inc., 740 F.Supp. 291, 304 (D.Del. 1990)" (internal citations omitted)).
-8 -

Furthermore, mandatory burden

where, as here, the movant

seeks a

injunction,

beyond pre se'rv i.nq the status quo, the greater. The Third circuit has injunction is directed not

is significantly

noted that "when the preliminary merely at preserving

the status quo but, as in this case, relief, heavy.
It

at providing

mandatory

the burden Punnett v,

on the moving Carter, 621 F.2d for

party is particularly 578, 582

(3d Cir. 1980)

(affirming denial of request

preliminary

injunction) i see also Bertucci's 836 A.2d SIS, 519

Rest. Corp. v. (liThe

New Castle County, extraordinary sparingly. preliminary demanding. applied

(Del. Ch. 2003) is granted

remedy

[of an injunction]

only

[TJhe standard injunction

for issuing a mandatory reasons, even more

iS

I

for obvious

The Court of Chancery standard, requiring injunctive

has consistently that an applicant relief clearly or the duty

an exacting

seeking mandatory establish

preliminary

the legal right he seeks to protect (internal quotations Ventures

he seeks to enforce. 11) omitted); 713761,

and citations 2000 WL

Brown v. Houston

& Hughlett,
("in order

*1 (Del. Ch. May 10, 2000) to prevail on a request

for a injunctive facts

petitioner relief,

for mandatory

the petitioners

must establish to judgment

on undisputed

that they are entitled

as a matter

of law on

the merits of their claim. proceedings, the Court

At this stage of the the merits of the
!

Imust evaluate

claim as if the petitioner As is discussed

seeJcs summary

judgment.

II).

in detail below, UBS cannot meet this restraining
-9-

burden and a temporary

order is not appropriate

in this case" Its Motion
V.

In fact, UBS fails this test on every count.

should be denied. NECESSARY ORDER. To TO SUPPORT A

UBS HAS NOT MET THE STANDARDS TEMPORARY
A.

RESTRAINING

UBS Has Not Demonstrated Succeed On The Merits

That It Is Likely

Of Its Claims.

UBS has not shown that it is likely to succeed on the merits of any of its claims. reveals Indeed, the evidence UBS has

presented prevail

that UBS has no idea whether Despite its argument any evidence

it can

on any claim.

to the that is of its have

contrary, sufficient asserted

UBS has not presented to establish

the most basic element

claims"

UBS complains

that the Debtors

"absconded"

or "converted" evidence

or "commingled"

funds, but UBS were by

has only submitted "scheduled the Debtors underlying Therefore, fundamental

of what the Debtors

to receive";

not what was actually for defaults

collected in the

given the potential mortgages

in which UBS claims an interest. no evidence on the most

it has submitted point

in its argument. and provides no

Moreover, authorities

UBS has not established, the proposition,

to support

that its agreement other than a prebased on

with the Debtors petition

gives rise to anything the Debtors.

claim against submitted

Accordingly,

the evidence

by UBS, the Court cannot find that of (a) its

UBS has a likelihood

of success on the merits (b) its contention

claim for money damages, Debtors have converted

that the

UBS's propertYr
-10-

(c) its claim that

the Debtors

have breached

any fiduciary

duty to DBS

(or (d) its

that the Debtors argument

acted as fiduciaries

for DBS); or

that it is entitled

to a constructive

trust.

It is obviously payment

inappropriate

for UBS to request of its

in full of its claims at the commencement proceeding, when it cannot establish Moreover,

adversary

even the in addition

most basic elements to its numerous presented

of its claims.

factual deficiencies,

DBS has not even

a legal theory, much less a showing of likelihood to justify its demand for immediate payment in

of success, preference

to other creditors proceeding,

at this very early stage of are

this adversary discussed

These deficiencies

in detail below. 1. UBS Has Not Established In Possession That The Debtors To Are

Of Property Belonging done so in its affidavits,

{ms.

While it has not specifically Memorandum

of Law or in its supporting

DBS may

argue that it holds some form of interest Debtors. However, the affidavits

in funds of the by DBS are are in In the Banks In For

submitted

insufficient possession relevant Support

to establish

that the Debtors

of specific

funds belonging

to UBS.

portion

of the "Affidavit

Of Jonathan Inc.
IS

Of DBS Real Estate Securities Restraining

Motion

Temporary

Order And Preliminary Mr. Banks testifies to receive

Injunction" that the in Banks

(the "Banks Affidavit"), Debtors "were scheduled

$3,089,653.83

principal Affidavit,

and interest payments paragraph 11.

in March 2007".

However, -11-

Mr. Banks does not

provide

any

testimony

as to the amount

actually

collected no of

by the Debtors. information the mortgage omission

For example,

Mr. Banks has provided defaults

regarding

potential

by the obligors which

loans in which UBS claims an interest, glaring

is particularly

in light of the fact that downturn affecting

one of the main reasons the subprime incidence testimony virtually mortgage

for the economic

industry generally defaults.

is the increased

of borrower

This renders Mr. Banks' and his surmise

on this point rank speculation meaningless. Moreover,

Mr. Banks goes on to

admit that, even according unable to determine whether

to UBS's legal theory, UBS is there is any money in the to UBS's

possession

of the Debtors

that, even according

legal theory, testified

is due to or owned by UBS.

Mr. Banks

that: UBS cannot accurately determine whether the amounts currently retained by the Debtors are the full extent of those amounts due and payable to UBS, and whether the ... Debtors have failed to deposit additional amounts into the Blocked Account,

Banks Affidavit, Accordingly, only to amounts to receive.

paragraph

13.-

1

the evidence

submitted

by UBS relates were scheduled of the amounts, and not

that it claims the Debtors no evidence

UBS has provided

if any, that were actually

received

by the Debtors

4

Other aspects of the Banks affidavit are plainly inadmissible. For example, in paragraph 24 Mr. Banks states that "UBS has recently received information that indicates" that the Debtors may have received certain funds. This is hearsay at best and is inadmissible.
-12-

deposited

in the Blocked Account

or in the Escrow Account are

or, if there are any such funds, where any such monies today" As a factual matter, that the Debtors therefore,

UBS has failed to of any

establish specific

are in possession of UBS.

funds that are the property to the affidavit working

Contrary Debtors

submitted to produce

by UBS, the the necessary

are diligently

accounting available

and when completed to UBS.

will make the accounting paragraph 5. However,

Etlin Affidavit, is complete, whether

until the accounting

it is clearly premature the Debtors should be

for the Court to consider required

to pay any funds to UBS. 2. There Are Substantial Whether Legal Questions Between As To

The Transactions

The Debtors

And UBS Constitute

Sales Or Loans. that the Debtors are

Even if it could submit evidence in possession

of funds that are proceeds

of the mortgage in order to property, UBS is

loans upon which UBS claims an interest, establish its claim of ownership

of specific

must convince the property enough

the Court that the property

in question It is not

of UBS and not of the Debtors.

that UBS has a claim for money against Particularly in the chapter

one or more 11 context, secured, to

of the Debtors.

the mere existence unsecured entitle payment. sections

of a claim for money, whether

or administrative,

would be insufficient injunction compelling

UBS to a mandatory

immediate Code to

If rms holds unsecured 362 and 502 prohibit

claims, Bankruptcy

UBS from taking any action

-13-

collect claim.

such loans and permit If UBS has a secured from the automatic Code" 5

only the filing of a proof of claim, its remedy is a motion 362 of the

for relief Bankruptcy

stay under section

Given the nature Agreement" between

and terms of the "Master Repurchase that governs the transactions the

(the "Agreement")

UBS and the Debtors entered

it is not clear whether

transactions

into under the Agreement

were true

sales of mortgage such transactions

loans by the Debtors are more properly which mayor

to UBS or whether as loans

characterized may not be loans

by UBS to the Debtors collateralized purportedly

by interests
6

in the mortgage the Agreement

sold.

Indeed,

itself recognizes

Even if the Agreement qualifies as a "rel?urchase agreement" as defined in Bankruptcy Code sectlon 101(47), none of the special provisions of the Bankruptcy Code governing repurchase agreements (or other financial contracts of this sort) authorizes UBS to obtain cash held by the Debtors. For example, Bankruptcy Code section 362(b) (7) allows a repo participant to set off mutual debts or to set off against cash or other property held by, pledged to or under the control of the repo participant. Similarly, section 559 allows a repo participant to liquidate mortgage loans pledged to it and to accelerate repurchase obligations, while section 561 allows the same redress for master netting agreements. But nothing in the Bankruptcy Code allows UBS the relief sought in its complaint or application for a TRO, even assuming for the sake of argument that the Agreement fits the definition of a repurchase agreement set out in section 101(47). Whether the Agreement fits the definition of a repurchase agreement set forth in Bankruptcy Code section 101(47), as described in the immediately preceding footnote, is not at all clear. But that is a different question than the nature of UBS's rights, if any, in cash collected on mortgage loans pledged to it. The latter question turns on whether the Agreement is a true sale or a financing. -14-

this ambiguity.

Section

6.02 provides

for a springing

lien

in favor of UBS "in the event that a court or other forum recharacterizes the Transactions hereunder as loansu•
7

Indeed there are several aspects the nature of the transactions Accordingly, Debtors although

of the Agreement

that call
K

thereunder

into question.

UBS may have asserted of property belonging

that the to it, DBS

are in possession

has not demonstrated likely to succeed specific property claiming unsecured

as a matter

of fact or law that it is that it is an owner of

in demonstrating rather

than, at best, a secured creditor property and more likely an cash.

a lien on specific creditor

with respect

to undifferentiated

This lien does not arise until a condition precedent the recharacterization of the transactions - occurs. since this condition did not occur and the lien was, therefore, not created prior to the filing of these chapter 11 cases, it is entirely possible that in the event of a recharacterization of the transactions, the springing lien would not be valid against the Debtors in Possession, leaving UBS with an unsecured claim for the amounts owed by the Debtors. For example, while styled as a purchase of loans by UBS, the ultimate credit rlsk falls on the Debtors because of their obligation to repurchase the loans from UBS. Agreement, section 2.05. Although each purchase by UBS carries with it a nominal repurchase obligation on the part of the Debtors one year from the original purchase, when that date arrives and the loan is repurchased by the Debtors, the very same loan is automatically purchased again by UBS. Agreement, section 2.04(g). Accordingly, the one year repurchase date is nothing more than window dressing. While payments on the underlying mortgages are to be placed in the Blocked Account, the Agreement permits the Debtors to have access to those funds in the absence of a contrary instruction by UBS much like a typical cash collateral account might function. Agreement, section 4.01(a). Numerous other similar provisions exist in the Agreement making the economic substance of the transactions virtually indistinguishable from a loan transaction.
-15-

Factually, actually

UBS cannot establish specific

that the Debtors

have of

collected

funds that are the proceeds and
I

the mortgage cannot

loans in which it claims an interest payments to the Debtors that the

trace the specific Legally,

cash

balances.

UES cannot establish

transactions rather

under the Agreement

constitute

true sales in

than, at best,

loan transactions,

particularly

the expedited restraining B.

context of a motion

for a temporary

order_ That Irreparable Injury

UBS Cannot Demonstrate Would Result Restraining

From The Denial Order.

Of Its Temporary

In order to obtain a temporary

restraining harmed

order, UES

must show that it will be irreparably of such relief. is UES's concern,

in the absence injury

The only basis for such irreparable unsupported by evidence, in damages

that the Debtors is

will not be able to respond entered against basis to support them.

if a judgment

The concern

is not a sufficient order.

a temporary

restraining

"In order to demonstrate irreparable harm the plaintiff must demonstrate potential harm which cannot be redressed by a legal or an equitable remedy following a trial. The preliminary injunction must be the only way of protecting the plaintiff from harm." Instant Air Freight Co. v. C.F. Air Freight, Inc., 882 F. 2d 797 801 (3d eir. 1989). " [I]njunctions will not be issued merely to allay the fears and apprehensions or to soothe the anxieties of the parties." Campbell Soup Co. v. ConAgra, Inc" 977 F.2d 86, 92 (3d eir. 1992) (citations omitted) Further, "[t]he availability of adequate monetary damages belies a
I

-16-

claim of irreparable injury." Frank's GMC 'Truck Center, Inc, v. General Motors Corp., 847 F,2d 100, 102 (3d cir. 1988). The Third Circuit has also noted "that a purely economic injury, compensable in money, cannot satisfy the irreparable injury requirement./I Ld . (citing Morton v , Beyer, 822 F.2d 364,372 (3dCir. 1987).) Simon
&

Schuster,

Inc, v . Advanced Services,

Marketing

Services,

Inc.

(In re Advanced

Marketing

Inc.), 2007 WL 162685,

at *5 (Bankr. D. Del., .. Tan. 22, 2007) (emphasis added) . UBS asserts from a breach temporary Debtors' respond a simple claim for money damages arising

of contract.

Its only stated basis for a

restraining

order is its worry that all of the and the Debtors unable to

funds will be dissipated in damages. paragraph Memorandum 25.

of Law, pages 26-29; Banks no evidence that the

Affidavit, Debtors

UBS provides

will be unable

to respond

to a judgment discussions

for damages of the

if one is issued other than general decline in the Debtors' 11 cases. financial

position

that led to UBS is

these chapter not entitled order.

Under these circumstances, of a temporary

to the issuance

restraining

The fact is that, in the event a judgment in favor of DBS, the Debtors respond Debtors' to such a judgment. current cash balance

is entered to

have ample cash resources See Etlin Affidavit, The

is in excess of $40 million. recently approved by the of

In addition, Court,

through the financing

the Debtors

have availability Finally,

of $50 million

additional

liquidity.

the Debtors

have stalking

horse bids for the sale of assets that are unencumbered -17-

(other than by the DIP Facility) produce million. aggregating possession at least $50 million

that are expected

to $200

and up to an additional that specific

Id.

If it is determined

monies

approximately

$5.5 million

in the Debtors' will be risk of

are the property

of UBS, the Debtors

able to deliver irreparable Because

such funds to UBSi no immediate

injury to UBS exists now or in the near future. will be unable to respond in

the risk that the Debtors for money damages

to a judgment

that might be rendered

favor of UBS is the only basis cited by UBS for the granting of the temporary restraining order, UBS's request

must be denied. C. None Of The Cases Cited By UBS Support It Has Requested. UBS attempted extraordinary to locate authority for a mandatory restraining for its injunction However, in the none of The Relief

request

guise of a temporary its authorities

order.

support

its requested
v.

reliefc
Pelullo,

For example, 1363

UBS cites Gerardi

16 F.3d

(3rd Cir. 1994), Hoxworth
(3
rd

v . Blinder,

Robinson

s

Co., 98

903 F.2d 186

Cir. 1990), and Elliott

v , Kiesewetter,

F.3d 47 (3rd Cir. 1996), contending proposition

that they stand for the of a money However, different judgment

that the unsatisfiability irreparable injury. vastly

can constitute

those cases from that

arose in procedural before this Court. a request

contexts Moreover,

none of these cases

considered

for the type of relief sought by UBS

-18-

here, and none of these cases provides relief. In Gerardi, summary judgment the district

support

for that

court had already

granted

to the plaintiffs

on their unjust the injunction

enrichment request. neither

claim before Furthermore,

the court considered the plaintiffs

did not seek, and approved,

the district

court nor the Third Circuit

the mandatory directing contrary,

injunctive

relief sought by UBS here, transfer of money. To the

the affirmative

the relief addressed

in Gerardi was an injunction the funds that the judgment The the would

that the defendants

not dissipate

dd s t rLct; court had already

ruled on summary

constituted

unjust

enrichment

of the defendants.

Gerardi court also found that absent an injunction judgment the plaintiffs had already obtained

probably

go unsatisfied insubstantial

in light of the corporate existence. Id. at 1373.

defendant's On the flip side of would them

that same coin, the court found that the defendants not be harmed by the preliminary from dissipating constitute unjust injunction

preventing

the funds that had already been enrichment.

found to

In sum, the Gerardi case transfer to UBS of funds,

does not support particularly UBS property. Elliott accounting

a TRO requiring

funds that have not been found to constitute

v. Kiesewetter

involved one suit for an conveyance between at

and another

for fraudulent assets.

family members

over inherited

The injunction

issue was not requested

or granted until after a jury
-19-

verdict

(including punitive action,

damages)

had been rendered that the plaintiffs

in

the accounting owned interests defendant(s) . accounting,

establishing

in property Id. at 51.

held in the name of one or both Pending the completion of the

the court entered

a freeze order prohibiting their assets. However,

the defendants

from transferring stated:

the Third Circuit

We emphasize that this is an extraordinary case that demanded extraordinary measures by the district court to preserve what was left of the family assets. Given that a jury had already concluded that Mr. Kiesewetter has unconscionably lied to and stolen from his family members, the district court properly entered the Freeze Order

Id. at 58.
None of these extraordinary connection circumstances exist in

with UES' s reques t for a TRO, and no such measures are warranted. Moreover, the relief

extraordinary

that UBS requests involved

is, in fact, more extreme

than that did

in Elliott.

As with the Gerardi case, Elliott injunction to the

not address requiring

and did not approve a mandatory to transfer no support money

the defendants and provides

plaintiffs, requested

for the relief case, by virtue an

by UES.

Indeed,

in the present

of the facts that the Debtors have already undertaken accounting as to funds they have collected of the bankruptcy process

and that the ensures that

transparency

virtually

that funds will not be dissipated,

relief approaching

-20 -

sought

in the Gerardi UBS.

and Elliott

cases has already

been

afforded

Similarly,

in Hoxworth

the plaintiffs a mandatory

did not seek, injunction

and the court did not approve, requiring plaintiffs. the defendants

to transfer

money to the district court had

The order that the Hoxworth the defendants abroad,

issued required been transferred transferring

to repatriate

funds that had from

and enjoined

the defendants

funds abroad without

order of the court and course.

from transferring

funds other than in the ordinary found the injunction

Even so, the Third Circuit overbroad because

fatally

it was not limited to the amount due to the injunction, remanding for

the plaintiffs further

and so vacated

proceedings.

Hoxworth,

903 F.2d at 189.

Moreover, "in

in Elliott, Hoxworth exists

the Third Circuit

explicitly

stated that, injury

we did not hold.

. that irreparable

in every case in which a judgment absent an injunction,ff

will probably

go

unsatisfied

Other cases on which DBS relies arise from factual circumstances relationship in denials example, that have no bearing on the contractual and/or resulted For

between UBS and the Debtors, of the requested injunctive

relief.

DBS's brief erroneously

contends

that in Shubert,

Inc. v. Premier

Paper Prods., LLC,

(In re Arner ican Tissue,
(Bankr. D. Del., for from

Inc.), No 06-50929(KG},
Dec. 4, 2006), the court preliminary auctioning injunction debtor's

2006 WL 3498065

"grant [ed] a motion

to prevent

third-parties

machinery

because

they would use sale

-21-

proceeds

to pay auction Memorandum

costs and satisfy of Law, page 27, equipment Debtors

their own While a decision

creditors,"

to halt a sale of a debtor's the order UBS seeks directing UBS on a TRO application, court actually potential defendants *13-14, refused

would not support to transfer funds to

the reality

is that the Shubert of the

to enjoin the sale because

harm that enjoining and third parties.

the sale might cause the Shubert, 2006 WL 3498065, at

Instead,

the Court allowed

the auction

to proceed in to in

and directed escrow. direct

that certain before

of the proceeds

be placed

Moreover,

the court found it appropriate in escrow, that the trustee [the to

that the funds be placed

Schubert had "established defendants]

conclusively

would not have the financial judgment."
Id,

capacity

satisfy a money

at *13,

(Emphasis added.)

DBS has made no such showing here, In another Downs Entm't, majority case relied upon by UBS, Crissman v. Dover the

Inc., 289 F.3d 231, 253 did not even address
I}

(3d Cir. 2002),

opinion

the issue of whether of that case on Moreover, even

an injunction

should issue.

The portion

which DBS relies the circumstances

is found in the dissent, that the dissenting

judge would have from

found to support an injunction those here.

are quite distinct

The Crissman dissenting

judge thought a

9

In light of its ruling on motion, the Third Circuit held address the Crissmans' request Court1s denial of their motion injunction. Id. at 247.
II

a pending summary judgment that "we do not need to that we reverse the District for a preliminary

-22-

preliminary

injunction

would have been appropriate

because

he felt there was no adequate two horse trainers/owners reputation sustained

remedy at law to compensate

for losses to income and suspension. (3rd

from an unlawful

In Acierno Cir. 1994) the district injunction building

v , New Castle Coun ty, 40 F. 3d 645, 653
,10

(also cited by UBS) court's

the Third Circuit

reversed

grant of a mandatory the County

preliminary a

directing

to issue a developer

permit

and enjoining

the County

from interfering The

with the developer's

right to develop

the parcel.

Third Circuit based its reversal delay in issuance could be decided of the building

on the grounds

that a

permit until the case

on its merits would not cause irreparable

harm to the developer.

DBS cites Acierno to support UBS's argument that, despite the four-factor test applicable to preliminary injunction motions, UBS only has the burden of establishing two of those factors. While UBS acknowledges that it must establish a likelihood of success on the merits and irreparable harm, it attempts to characterize the last two factors applicable to the injunction evaluation (i.e., the possibility of harm to other interested persons from the grant or denial of the injunction, and the public interest) as optional by contending that they "may" be considered by the court. Memorandum of Law, page 19. Actually, the Acierno decision is not as dismissive of these last two factors as DBS's brief suggests. That decision directs that the court "should" consider these factors in evaluating a preliminary injunction motion. In a more recent decision also cited by DBS, the Third Circuit was unambiguous in holding that a court "must" consider all four factors in assessing an application for a preliminary injunction. Crissman, 289 F.3d 231, 253. See also, Schubert, 2006 WL 3498065, at *9 ("The Third Circuit requires this Court to apply four factors in determining whether to grant the drastic remedy of a preliminary injunction.") -23-

IU

UBS cites Pre-Petition Claimants Eng'g,

Committee Inc.

of Select Asbestos (In re Combustion for

v. Combustion

Eng'g,

Inc.), 292 B.R. 515, 518

(Bankr. D. Del. 2003),

the proposition claimants settlement

that a group of lawyers for asbestos irreparable harm if funds from a preferentially or

might suffer

trust were distributed to other claimants to recover

fraudulently the ability avoided pages

because,

once distributed, are

those funds if the transfers Memorandum

would become more difficult.

of Law,

27-28.

In that case, the court held that the the standards for a TRO, of

plaintiffs including

had failed to satisfy

the failure to demonstrate

a likelihood

success on the merits, to the potential the trust assets, such distributions distribution

and the TRO was denied.

In response of

for irreparable

harm from distribution

the most the court did was to order that be accompanied by notices that the "the in

is contested

and subject

to disgorgement to have been

the event the court finds the transfer(s) avoidable." support
Ld . at 521.

This result does not serve as any for a transfer basis.
II

for UBS's request on an expedited

to it of millions

of dollars

UBS cites GlaxoSmithKline Consumer Healthcare, L.P. v. Merix Pharm. Corp., 197 Fed. Appx. 120, 124 (3d CiL 2006), although the Third Circuit has designated that opinion as unpublished. ("Because we write only for the parties, our discussion of the facts is limited to those necessary to adjudication of the case. Id. at 121.) Like the majority of the cases on which UBS relies, that decision addressed facts having little to no similarity to those presented by UBB's TRO application. There, plaintiff Glaxo sought a preliminary injunction prohibiting a competitor from making claims that Glaxo contended constituted false advertising.
1I

II

-24-

In sum, not one of the cases cited by DBS includes court's transfer approval money of what UBS seeks here: an order to

a

to the plaintiff

on a TRO application. UBS must from the to pay

Like all other creditors

of these estates,

file its proof of claim and await distribution estate. money Even if the Debtors have an obligation

to DBS, whether

secured or unsecured, restraining order.

UBS is not

entitled

to a temporary

"The key word in this consideration is irreparable. Mere injuries, however substantial, in terms of money, time and energy necessarily expended in the absence of a stay, are not enough. The possibility that adequate compensatory or other corrective relief will be available at a later date, in the ordinary course of litigation, weighs heavily against a claim of irreparable harm."

Sampson v. MurraYr 415 U.S. 61, 90, 39 L. Ed. 2d 166, 94 S. Ct. 937 (1974) (footnotes omitted) (quoting Virginia
F.2d 921, 925 (D.C. eir. 1958)). Thus, in order to warrant a preliminary injunction, the injury created by a failure to issue the requested injunction must "'be of a peculiar nature, so that compensation in money cannot atone for it . .'" A. O. Smith Corp. v. F.T,C.r 530 F.2d 515, 525 (3d Cir. 1976) (quoting Gause v.

Petroleum Jobbers Ass'n v. FPC, 259

In re Northwestern Corp., No. 05- 52525 (JLP) , 2005 Bankr. LEXIS 2146 (Bankr. D. Del. Oct. 25, 2005), also involved facts distinct from those at issue here. In that case, the bankruptcy court enjoined a lawsuit originally filed in state court on the grounds that the plaintiffs in that action could not be permitted to "end run" the confirmation process and order confirming the plan by erroneously asserting in the state court action an equitable interest in the assets which were a necessary and essential part of the confirmed plan of reorganization. Id. at *23.

-25-

728 (1857)). The word irreparable connotes "'that which cannot be repaired, retrieved, put down again, atoned for. .'" Id. (quoting Ga use, 3 Jones Eq. 177, 69 Am. Dec. 728). A party seeking a mandatory preliminary injunction that will alter the status quo bears a particularly heavy burden in demonstrating its necessity. Punnett v, Carter, 621 F.2d 578, 582 (3d Cir. 1980) .

Perkins, 3 Jones Eq. 177, 69 Am, Dec.

Acierno,

40

F.3d at 653. UBS has not cited any authority request for a mandatory to support

In summary, its extraordinary restraining D.

temporary

order.

Its motion must be denied. Interest Does Not Support The Issuance Order. order seeks of the interest

The Public

Of The Temporary DES's request to disrupt Bankruptcy

Restraining

for a temporary

restraining mechanisms the public

the normal distributive Code. In this respect

weighs heavily

against

the issuance

of the TRO.

-26-

VI.

CONCLUSION. the standards for the

UBS has failed to satisfy issuance of a temporary Its motion

restraining should,

order or preliminary be denied.

injunction.

therefore,

DATED:

April 10, 2007 Wilmington, Delaware Robert J. Stearn, Jr. (No. 2915) Marcos A. Ramos (No. 4450) RICHARDS, LAYTON AND FINGER, P.A. One Rodney Square Wilmington, Delaware 19800 Te 1" : (3 02 ) 651 -7700 Fax: (302) 651-7701 - and Bruce Bennett Jeanne E. Irving A. Brent Truitt (admitted in N.Y. and D.C. only) HENNIGAN { BENNETT & DORMAN LLP 865 S. Figueroa Street Suite 2900 Los Angeles{ California 90017 TeL: (213)694 -1200 Fax: (213) 694-1234 Proposed Attorneys for Defendants New Century Mortgage Corporation, NC Asset Holding, L.P., Homes 123 Corporation, New Century Credit Corporation and New Century Financial Corporation

-27-

Exhibit A

Page.2 of.3

Westlaw.
Not Reported in A.2d
(Cite as: Not Reported

Page I
in A.2d)

Not Reported in A2d, 2000 WL 713761 (DeLCh)

H

Brown v Houston Ventures DelCh ,2000. Only the Westlaw citation is currently available UNPUBLISHED OPINION. CHECK COURT RUL.ES BEFORE CITING Court of Chancery of Delaware BROWN
v.

Daycare Center et al v Director oj Department oj . ' Services [or Chil dren Yout I1 &c t f Jell' F anu '/'tes fN I ren and Page v Kopj FN2 both the Chancellor and Vice

HOUSTON VENTURES & HUGHL.ETT
No. CA.2046-S,

May 10,2000 Barbara-Cherrix O'Leary, Rehoboth Beach, John A Sergovic, Jr., Sergovic, Ellis & Shirey, Georgetown Larry W. Fifer, Lewes. STEELE, Vice Chancellor. *1 Counsel: This morning plaintiffs presented their argument and affidavits in support of mandatory preliminary injunctive relief For the reasons that follow, the request for relief must be denied. I The plaintiffs seek mandatory removal of a fence erected by or at the direction of defendants on the parties' property line It is uncontested that the fence is placed on the record title line Plaintiffs contend that by adverse possession they are entitled to a prescriptive easement over a gravel driveway which is now blocked by the fence in a way that prohibits ingress and egress to a garage owned by plaintiffs in a manner consistent with what the plaintiffs allege to be their pI act ice for at least the last 12 years. The Hughlett defendants deny in a verified answer that the fence blocks a "common driveway," that the driveway was shared for twenty OJ more years, and place in contention by their denial all facts that plaintiffs suggest support adverse possession. 2 Under the standards announced in Joyland

Chancellor Jacobs have made it clear that in order for a petitioner to prevail on a request for mandatory injunctive relief, the petitioners must establish on undisputed [acts that they are entitled to judgment as a matter of law on the merits of their claim At this stage of the proceedings, the Court" must evaluate the merits of the claim as if the petitioner seeks summary judgment." FN3 Here, material facts are genuinely in dispute and I cannot say as a matter of law that the plaintiffs are entitled to judgment tantamount to ultimate relief I need not reach the other two prongs necessary for granting mandatory injunctive relief in a preliminary proceeding

FN I Joyland Daycare Center v Director oj Services [or Children, Youth & Their Families, Del. Ch, C A No. 1782, Mem Op at 6-7, Chandler, V.C (Jan 22, 1996). FN2. Page v Kopf, DeL Ch., C.A No 12721, Mern. Op at 7, Jacobs, vC. (Sept
28, 1992).

FN3. Page, at 7 I note the practical difficulties that will exist for a period of time until the matter can be set down, heard and decided at a hearing for permanent injunctive relief. Hardships will be suffered on both sides as a result of the fence being erected before this dispute was resolved One would ordinarily hope that the issues touching upon adverse possession, ejectment or injunctive relief could be presented to an appropriate court before a substantial physical alteration of the premises in dispute I note also that an action is pending for compensatory damages in the Justice of the Peace Court and see no reason why it cannot proceed contemporaneously with this action if the parties so

© 2007 Thomson/West

No Claim to Orig U.S Govt. Works

http://web2.westlaw.com/print/printstream.aspx?prfi=HTMLE&destination=atp&sv=Split..,

4/10/2007

Page 3 of 3

Not Reported in A 2d Not Reported in A2d, 2000 WL 713761 (DelCh)
(Cite as: Not Reported in A.2d)

Page 2

desire Defendant Houston Ventures asks to be dismissed from this proceeding Because Houston Ventures no longer owns the property or the fence allegedly improperly erected, there is no basis for a grant of mandatory injunctive relief against it Plaintiffs have elected to seek compensatory damages against it in the Justice of the Peace Court Just as the Justice of the Peace Court cannot grant injunctive relief for mandatory removal of the fence, I should not entertain a claim for money damages against a defendant against whom no equitable relief may be obtained
*2

Plaintiffs' motion for preliminary mandatory injunctive relief is denied Defendant Houston Ventures' motion to dismiss is granted Please call Chambers to schedule a hearing for permanent injunctive relief as soon as is convenient to the parties
[T IS SO ORDERED

De1Ch,2000 Brown v Houston Ventures Not Reported in A2d, 2000 WL 713761 (DeICh) END OF DOCUMENT

© 2007 Thomson/West

No Claim to Orig U S Govt Works,

http://web2,westlawcom/print/printstream,aspx?prft=HTMLE&destination=atp&sY""'SpliL"

4/10/2007

Page2of5

Westlaw.
197 Fed Appx: 120
(Cite as: 197 Fed.Appx,

Page I Trade Cases P 75,351
120)

197 Fed.Appx, 120,2006 WL 1792856 (CA3 (N .1)),2006·2

H

GlaxoSmithKline Consumer Healthcare, L P v Merix Pharmaceutical Corp CAJ (N.J.),2006 This case was not selected for publication in the Federal ReporterNOT PRECEDENTIAL Please use FIND to look at the applicable circuit court rule before citing this opinion, Third Circuit Local Appellate Rule 28 3(a) and Internal Operating Procedure 53 (FIND CTA3 Rule 28.0 and CTA3 lOP APP I 53) United States Court of Appeals, Third Circuit GLAXOSMITHKUNE CONSUMER HEALTH CARE, LP
v

MERIX PHARMACEUTICAL CORP, Appellant. No. 05-4566. Submitted pursuant to Third CircuitL.AR. June 29, 2006 Filed: June 29, 2006. 34 I(a)

29Tk380 Injunction 29Tk383 Preliminary or Temporary Relief, Grounds, Subjects, and Scope 29Tk383(2) k. Particular Cases Most Cited Cases District court did not commit clear error in finding that competitor's advertising claims falsely implied a cure by characterizing its cold sore product as a " I day treatment" and showing before and after photos indicating that product sped healing rather than merely relieved symptoms, that competitor's false advertising about its product would damage and divert sales of drug manufacturer's product, and that manufacturer would suffer irreparable harm absent the injunction; thus, district court did not abuse its discretion in issuing the preliminary injunction against competitor. Lanham Act, § 43(a), 15 US,CA § I I25 (a). On Appeal from the United States District Court for the District of New Jersey, (D.C Civil No. 05-cv-00898). District Court Judge: Honorable Dickinson R. Debevoise.
& Florn, New York, NY, for AppelJee James S Richter, Winston & Strawn, Newark, NJ,

Background: Drug manufacturer brought action against a competitor for false advertising under the Lanham Act, the New Jersey Consumer Fraud Act The United States District Court for the District of New Jersey, Dickinson R Debevoise, J., 2005 WL 22303 I 8, issued preliminary injunction against competitor, and competitor appealed. Holding: The Court of Appeals, Van Antwerpen, Circuit Judge, held that court did not abuse its discretion in issuing the prelim inary injunction. Affirmed West Headnotes Antitrust and Trade Regulation

Kenneth A Plevan, Skadden, Arps, Slate, Meagher for Appellant.

Before: BARRY, VAN ANTWERPEN R, GIBSON,FN* Circuit Judges

and JOHN

FN* Honorable John R. Gibson, United States Court of Appeals fOI the Eighth Circuit, sitting by designation OPINION OF THE. COURT VAN ANTWERPEN, Circuit Judge **1 Appellant Merix Pharmaceutical Corporation (" Merix"), defendant below, brings this interlocutory appeal to challenge the preliminary injunction entered against it following the motion of

29T C;:;::::>383(2} and

29T Antitrust and Trade Regulation 29TIII Statutory Unfair Trade Practices Consumer Protection 29TIII{E) Enforcement and Remedies 29TIIl{E)7 Relief
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4/10/2007

Page 3 of 5

197 Fed.Appx

120 (N J ),2006-2 Trade Cases P 75,351

Page 2

197 Fed .Appx. 120,2006 WL 1792856 (CA3 (Cite as: 197 Fed.Appx, t 20)

plaintiff-appellee GlaxoSmithKline Consumer Healthcare, L P ("Glaxo") Glaxo sought the preliminary injunction incident to its lawsuit against Merix for false advertising under § 43(a) of the Lanham Act, 15 USC § 1125(a), and the New Jersey Consumer Fraud Act, NJ.SA § 56:8-2 The District Court granted the injunction, and for the reasons set forth herein, we wi II affirm.
L

before the National Advertising Division ("NAD") of the Better Business Bureau. Participation in NAD proceedings is voluntary, and the *122 results are non-binding. Merix participated The NAO found in favor of Glaxo on all issues presented; Merix appealed to the NAD Review Board. Glaxo abandoned the proceedings there and commenced the present action on February 16, 2005 in the United States District Court for the District of New Jersey As set forth by the District Court, Glaxo challenged, and sought a prel iminary injunction against, a number of Merix's claims, including, inter alia "I Releev has been "clinically proven": (a) to be a "I Day Cold Sore Treatment" and (b) to "prevent
outbreaks'{t]

Because we write only for the parties, our discussion of the facts is limited to those necessary to adjudication of the case Glaxo produces and markets a number of over the counter ("OTC") pharmaceuticals, including Abreva Abreva is an FDA-approved, non-prescription medication that shortens the duration of the healing time for cold sores It has been publicly available since late 2000, and retails for roughly $15 to $18 a tube Merix markets its cold sore product, Releev, online and in drug stores for toughly $ I5 to $20 a tube Drug stores often stock Releev adjacent to or nearby Abreva. Meryl Squires formed Merix after discovering that a blend of a common topical antiseptic, benzalkonium chloride and the herb Echinacea relieved the symptoms of the cold sores she frequently suffered. Her friends who tried the compound agreed that it was helpful She obtained two patents on the substance, and ultimately marketed it as Releev Merix is a small company, with a total of four employees Merix started out selling Releev on the internet, and in June 2003, began retailing it in national drug store chains where it competed directly with Abreva. Merix's annual revenues have recently run to several million dollars. Glaxo brought the instant suit against Merix because it believed the claims Merix made about Releev were false and misleading, and Releev would thereby unfairly compete with Abreva This is 110t the first time Glaxo challenged Merix's claims about Releev In 2003, Glaxo informed the FDA of the claims, which resulted in the agency sending a warning letter to Merix In July 2004, Glaxo brought an advertising challenge against Merix
© 2007 Thomson/West

2 Releev is endorsed by the University of Chicago; **2 3, Clinical research by Releev's Principal Clinical Investigator has been published; 4 Releev uses the product name Vira Medx; 5 The Releev package bears "before and after" photographs purportedly showing marked improvement after I day, after 3 days, and after 5 days" App 5. At the inception of the preliminary injunction hearing, counsel for Merix reported that Merix had altered its packaging and promotional material to remove the problematic claims, and pressed that Glaxo's motion for injunctive relief be denied as moot Its new claims, modified in time for the preliminary injunction hearing, consist of redesigned packaging that asserts:" 1 Day Cold Sore Treatment Relieves Symptoms in Just a Day!" Supp.App 198. The top line is displayed in a more prominent typeface than the second The packaging also offers "before and after" photos on the back. The prospective purchaser is referred to them by an exhortation on the front of the package to "See actual Before and After Photos on back panel" Three photos show a cold sore at one, three, and five days; it is progressively improved The District Court concluded that both sets of claims-those prior to the preliminary injunction proceedings, and those made as a result of theii institution-were false Indeed, it found that "[tjhe

No Claim to Orig US Govt Works,

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197 Fed Appx. 120, .2006 WL 1792856 (C A 3 (NJ »), .2006~2 Trade Cases P 75,351 (Cite as: 197 Fed.Appx. 120) only claim that Merix can truthfully make for RELEEV is that it provides relief from cold sore symptoms " App 14 (emphasis added} It concluded that the new set of claims still impl ied a cure by characterizing Releev as a "I Day Treatment" and showing before and after photos indicating Releev speeds healing rather than merely relieving symptoms Without belaboring the point, Merix has essentially conceded, for purposes of proceedings on the prel iminary injunction, that it could not prevail in its defense of its product claims With respect to the preliminary injunction, the District Court concluded that G laxo had proved its case The Court found that Glaxo had a high likelihood of success on the merits where it would have to prove that the claims violated § 43(a) of the Lanham Act, 15 U.SC § 1125(a)FN! *123 The District Court also concluded that Glaxo would suffer irreparable harm absent the injunction In particular, the Court concluded that Releev and Abreeva competed head-to-head because they were the only two cold sore products sell ing in the $15 to $20 range, and stores placed them on shelves in close proximity to each other Accordingly, given the unanswered testimony of Glaxo Vice President Jeffrey Brown, Glaxo had lost, and would continue to lose, sales to Releev because of Merix's false advertising. Furthermore, when customers found that Releev did not Iive up to its prom ises, its failures might also tar the reputation and goodwill of Abreva, which is the only other cold sore product in the same price range. To the extent the failure to seek interlocutory relief as soon as absolutely practicable weighs against a finding of irreparable harm, the District Court concluded that Glaxo shou ld not have been faulted for initially attempting to resolve its dispute by gentler means The District Court went on to complete its preliminary injunction analysis, holding that the injury to Merix of granting it did not outweigh the injury to Glaxo of withholding it, and that prevention of false advertising and promotion of lawful competition would serve the public interest FN2 misleading statements as to his own product [or another's]; 2) that there is actual deception or at least a tendency to deceive a substantial portion of the intended audience; 3) that the deception is material in that it is likely to influence purchasing decisions; 4) that the advertised goods traveled in interstate commerce; and 5) that there is a likelihood of injury to the plaintiff in terms of declining sales, loss of good will, etc," Ditri v Coldwell Banker Residential Affiliates. Inc, 954 F. 2d 869, 872 (3d Cit 1992) (quoting US Healthcare v Bille Cross of Greater Phila , 898 F 2d 914, 922-2.3 (3d Cir 1990». FN.2. The parties do not dispute the District Court's findings on these latter two issues, and we do not review them II. **3 The District Court had jurisdiction under 28 US.C §§ 1331 and 1367 We have jurisdiction to review grants or denials of preliminary injunctions as interlocutory matters pursuant to 28 U .S.C § 1292(a)(I). I'N3 Examining the District Court's findings of fact, conclusions of law, and analysis, we discern neither error nor abuse of discretion. We will affirm for essentially the same reasons set forth by the learned Court in its September 13, 2005 opinion and order, and therefore do not recapitulate its analysis here,

FN I The elements of a Lanham Act claim for false advertising are: "I) that the defendant has made false or © 2007 Thomson/West No Claim to Orig

FN3. The test for a preliminary injunction requires the district court to consider four now-familiar factors: "(I) whether the movant has shown a reasonable probabil ity of success on the merits; (2) whether the movant will be irreparably injured by denial of the relief; (3) whether granting prel iminary relief will result in even greater harm to the nonmoving party; and (4) whether granting the preliminary relief will be in the public interest" Am Civil Uberties Union of N.J l' Black US Govt Works

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197 Fed Appx. 120,2006 WL [792856 (C.A 3 (N] )),2006-2 Trade Cases P 75,351

Pike, 84 F 3d 147[, 1477 n 2 (3d Cir 1996) (citations and quotations omitted) We review orders granting 01" denying preliminary injunctions for abuse of discretion, but examine the underlying findings of fact for clear error and afford plenary review to questions of law Doe l' National Bd of Medical Examiners, 199

F.3d 146, 154 (3d Cir1999) We have only the following to add, The parties make much of the evidence adduced by G laxo to support its claim of irreparable harm Among other things, Merix argues both that it is speculative, and shows no injury that post hoc damages could not redress: Assuming, without deciding, that this evidence was less than optimal, we briefly note two points First, Merix points to 110 evidence to rebut the testimony of Brown that Merix's false advertising about Releev would damage divert sales of Abreva The District Court was justified in relying on it, and we discern no clear error in its factual finding in this respect; that is, we are not" left with the definite and finn conviction that a mistake has been committed," Anderson v Bessemer cu« 470 US, 564, 573, 105 S.Ct 1504, 84 LEd 2d 518 (1985); see United States v Westmghouse Elec Corp, 788 F 2d 164, 169 (3d Cir 1986) (no clear error where court relied on unrebutted testimony) Second, any other result would set an unworkably high bar for a district court's fact finding under these circumstances Given the time-is-of-the-essence nature of prelim inary injunction proceedings, courts and parties cannot develop the same depth in the factual record they can at trial. See US Sleet Corp 11 Fraternal Ass'n of Steelhaulers, 431 F.2d 1046, 1048 (3d Cir. I970), "[T]he grant or denial of a preliminary injunction is almost always based on an abbreviated set of facts, requiring a delicate balancing of the probabilities of ultimate success at final hearing with the consequences of immediate irreparable injury." Id In deciding a motion for a preliminary injunction, a district court must weigh the appropriate factors, rather than mechanically apply them See id (" delicate balancing"); Gerardi v PelIiI/O, 16 F.3d 1363, 1373 (3d cu 1994)
*124 © 2007 Thomson/West

Here, there is no denying the formidable strength of Glaxo's merits case Merix concedes as much for purposes of this appeal in its summary of its argument in its brief Br. of Appellant at 14, The District Court has made adequate-and uncontroverted-findings on the issue of irreparable injury to support its conclusion, and it properly considered and balanced those concerns pertinent to the interlocutory relief requested by G laxo. Accordingly, the District Court did not abuse its discretion in issuing the preliminary injunction III. As just discussed, we will affirm for the reasons set forth herein and in the September 13, 2005 opinion of the District Court CA.3 (N 1.),2006. GlaxoSmithKline Consumer Healthcare, LP v Merix Pharmaceutical Corp 197 Fed.Appx. 120, 2006 WL 1792856 (CA3 (N .J »), 2006-2 Trade Cases P 75,351 END OF DOCUMENT

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LEX SEE 2005 BANKR.

LEXIS 2146

Analysis As of: Apr 10,2007 In re: NORTHWESTERN CORI)ORA TION, Debtor. NORTHWESTERN CORPORATION and CLARl( FORK AND BLACKFOOT, LLC, Plaintiffs, -vs- MARGARET A. MCGREEVEY, JO ANN BARKELL, and JOSEPH MARTELLI, on behalf of themselves and the class of similarly situated individuals, Defendants. Chapter UNITED STATES 11, Case Nos. 03-12872 (JLP), Adv, No. 05-52525 (JLP) BANKRUPTCY COURT WARE FOR THE DISTRICT OF DELA-

10

2005 Bankr. LEXIS 2146 October CASE SUMMARY: Civil Procedure> Judgments> Entry oj Judgments> Enforcement & Execution > Fraudulent Transfers [HNI] In order for a party to seek the remedies under Mont Code AI1I1 § 31-2-339, by the express definition of Mont. Code Ann § 31-2-328(3) and (4) the creditor/plaintiff must have a claim, i.e, right to payment, as a predicate to maintain the action 25, 2005, Decided

PROCEDURAL POSTURE: Plaintiff debtor filed an adversary proceeding against defendant creditors, which sought a preliminary injunction to enjoin an action relating to a constructive trust. OVERVIEW: The creditors, former shareholders, filed an action seeking to impose a constructive trust or equitable trust on the assets of the debtor The creditors had filed a proof of claim in the debtor's Chapter 11 case, which had been confirmed. The debtor filed an adversary proceeding seeking a preliminary injunction In granting relief, the court first noted that the debtor/creditor relationship between the parties had been terminated by the time bankruptcy relief was sought. As such, there was no cause of action under Mont Code Ann § 3J-2-339. Next, the court found that the creditors should have asserted their action during the bankruptcy proceeding, pursuant to / IUS C S § 1141 Based on this reasoning, the creditors had no chance to establish a constructive trust under Montana law, As such, the debtor would have suffered immediate and irreparable harm if the creditors were permitted to continue to prosecute their pending action in any forum OUTCOME: LexisNexis(R) A preliminary Headnotes

Bankruptcy Law> Claims> General Ol'erl'iell' [HN2] An alleged creditor which files a claim in a bankruptcy case triggers the process of allowance and disallowance of claims, thereby subjecting that person to the bankruptcy court's equitable powers. A creditor who proves a claim submits himself to the summary jurisdiction of the bankruptcy court in respect of preferences or voidable transfers, including the jurisdiction of the bankruptcy court to enter a monetary judgment or order a return.

injunction was issued

Bankruptcy Law> Practice & Proceedings > General Overview Bankruptcy Law> Reorganizations > Plans > CoufirIllation> General Overview [HN3] A bankruptcy court possesses the inherent authority to enforce its own orders, such as an order confirming a Chapter 11 plan of reorganization To preserve a plan post-confirmation by a bankruptcy court, the essential

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inquiry appears to be whether there is a close nexus to the bankruptcy plan or proceeding sufficient to uphold jurisdiction over the matter

Estate, Gift & Trust Lalli> Trusts > Constructive Trusts [HN4] A person subject to constructive trust which arises under Montana state law, being involuntary in nature, has a duty to convey it to another on grounds that the person holding bare legal title would be unjustly enriched if he were permitted to retain it

Bankruptcy Law> Practice & Proceedings > General Ol'erview Civil Procedure> Remedies> Injunctions > Elements > Irreparable Harm [HNS] Where a party unilaterally violates a bankruptcy court order, that violation, standing alone, constitutes the only harm necessary for an injunction. COUNSEL: [*1] For Northwestern Corporation and Clark Fork and Blackfoot LLC, Plaintiff: Dennis A Meloro, Greenberg Traurig, Wilmington, DE; William E Chipman, Jr , Greenberg Traurig, LLP, Wilmington, DE For McGreevey Class Action Claimants, Defendant: Steven K, Kortanek, Klehr Harrison Harvey Branzburg & Ellers, Wilmington, DE For Northwestern Corporation and Clark Fork and Blackfoot LtC, Counter-Defendant: Dennis A. Meloro, Greenberg Traurig, The Nemours Building, Wilmington, DE For Northwestern Corporation aka Northwestern Public Service aka The Montana Power, LL.C aka Northwestern Energy, LLC aka Northwestern Energy-SDINE aka Northwestern Energy-Montana, Debtor: Charles Michael Terribile, William E. Chipman, Jr, Greenburg Traurig rtp, The Brandywine Building, Wilmington, DE; Dennis A Meloro, Scott D. Cousins, Victoria Watson Counihan, Greenberg Traurig, The Nemours Building, Wilmington, DE; Evelyn J Meltzer, Pepper Hamilton LLP, Hercules Plaza, Wilmington, DE; Monica Leigh Loftin, Paul D, Brown, Greenberg Traurig, Lt.P, The Nemours Building, Wilmington, DE; Robert Lee Striker, Leonard Street and Deinard, Minneapolis, MN; William Pierce Bowden, Ashby & Geddes, Wilmington, [*2]

Bankruptcy Law> Claims> Proof> Effects & Proce(lures Bankruptcy Law> Reorganizations > Platts> PostCOI1flrmation > Effects of Confirmation CiI'i1 Procedure> Judgments > Elltt:)' of Judgments > Enforcement & Execution > Fraudulent Transfers Estate, Gift & Trust Law> Trusts> Constructive Trusts [HN5] Where a creditor or person files a proof of claim and has the opportunity to contest a disclosure statement or proposed plan of reorganization particularly to assert a constructive trust or fraudulent conveyance action and does not do so in the bankruptcy case, when it could or should have done so, is barred from asserting that claim in another forum The confirmed plan and order control under / I US C S § J J" J, defining the effect of confirmation, and acts like a contract that binds the parties who participate in the bankruptcy case or should have participated in the case.

Bankruptcy Law> Reorganisations flrmatlon > Effects of Confirmation [HN6] See // usc S § II4J(b)

> Plans > Postcon-

DE.
Mark S Kenney, US tee, Wilmington, DE Trustee, Office of the U,S, Trus-

Civil Procedure> Remedies> Injunctions > Prelim inary & Temporary Injunctions [HN7J To determine whether a preliminary injunction should issue, a court balances the plaintiffs likelihood of success against the relative hardship to the parties To receive a preliminary injunction, a plaintiff is required to show either a likelihood of success on the merits and the possibility of irreparable injury, or that serious questions going to the merits were raised and the balance of hardships tips sharply in its favor These two alternatives represent extremes of a single continuum, rather than two separate tests To establish a substantial likelihood of success on the merits, a party must show that it will have a fair chance of success on the merits

For OFFICIAL COMMITTEE OF UNSECUR.ED CREDITORS, Creditor Committee: Charlene D Davis, Eric Michael Sutty, GianClaudio Finizio, The Bayard Firm, Wilmington, DE; Donna L. Harris, Cross & Simon, LLC, Wilmington, DE; John C Phillips, Jr, Phillips, Goldman & Spence, Wilmington, DE. JUDGES: JOHN I ruptcy Judge. OPINION OPINION: MEMORANDUM OF DECISION and ORDER PETERSON, United States Bank-

BY: John L Peterson

Page 3 2005 Bankr LEXIS 2146, *

In Cause No 05-52525, Plaintiff Northwestern Corporation ("NOR") filed an adversary complaint and objections to claims against the defendants Margaret A McGreevey, et (II, who represent a class of former shareholders of the Montana Power Company ("MPC") which seek damages and other relief against a number of individuals and entities arising out of the divestiture of MFC The McGreevey class filed an action on August II, 2005, styled Mctlreevey, et (If l' MPC, NOR and the Clark Fork and Blackfoot LLC ("CFB"), as defendants, Cause No DV -05199, Montana Second Judicial District Court, Butte-Silver Bow County, Montana, seeking a judgment to impress a constructive or equitable trust on utility assets [*3] of the NOR purchase in 2002 from MPC, as more fully explained herein NOR has removed the action to the United Stales District COUll for the District of Montana, where it is now pending on McGreevey's motion for 1 emand The present action seeks to enjoin the McGreevey state court action on the basis that it violates provisions of the confirmed chapter 11 plan of reorganization of NOR, has no basis in law or fact and seek an award of attorney's fees and costs The matter is before this Court on NOR's Motion for Order to Show Cause why a Permanent or Preliminary Injunction should not be issued enjoining the continued prosecution of the cause DV05199, Hearing on the Motion was held October 19, 2005, with counsel for each party present Each party has filed pre-hearing memoranda in support of their respective positions and oral argument was made by counsel at the hearing. At the conclusion of the hem ing the Court took the matter under advisement and is now prepared to rule The gravamen of the dispute is based on NOR's purchase of the utility assets, namely the transmission and distribution system of the MPC, under a Unit Purchase Agreement ("UP A") dated September 29, 2000, between [*4] NOR, as Buyer and Touch America Holdings, Inc, MPC and MPC LLC as sellers One of the provisions of the UPA (sec 223) required the sellers to obtain the affirmative vote of the holders ofrecord of at least 2/3rds of the outstanding common stock of MPC approving the sale. While the McGreevey stale court complaint alleges MPC wrongfully sold "all or some of its assets without obtaining shareholders approval in violation of § 35-/823, MCA", that allegation is not true as to the purchase of the utility assets of MPC by NOR because on October .2, 2000, MPC and NOR announced the sale, and MPC represented in its 8-K filing with the SEC that purchase needed approval of MPC's shareholders, which MPC sought and received n I.

!111m ica Holdings,

from Plan Trmt of Touch Inc. 1'. Goldman, Sachs et (11 (DV-04-250), attached as an agenda item

nl Allegations

In the McGreevey class Fourth Amended Complaint, Cause No DV-01-141, Montana Second Judicial District, Butte Silver Bow County, now pending in US. District Court, [*5] attached as a hearing agenda item, the plaintiff alleges as true allegations in paragraph 6, p. 7, and paragraph 9(c), p 9, as follows:

7. The final step of the original integrated plan to exit the energy business involved selling defendant Montana Power company's gas and electric distribution system to Northwestern Corp for more than $ 1 billion, and then converting the old company into Touch America, Defendant Montana Power Company's telecommunication subsidiary. Defendant Montana Power Company has merged Defendant Montana Power Company into a Montana Power L.L.c., a subsidiary of Touch America Holding with Montana Power LLC being the surviving entity The Montana Power LtC. entity has been sold to Northwestern Corp., leaving Touch America Holdings with only two companies, those being Touch America, Inc. And Tctragcnics Co" which develops computer based monitoring systems Under the scheme, shareholders of Defendant Montana Power Company have or will become shareholders of Touch America Holdings *** 9 (C) As a final phase, Defendant Montana Power agreed to sell its transmission facilities to Northwestern Corp. and guaranteed that Montana Power Company would [*6] either obtain shareholder approval or pay $ 10 million liquidated damage sum to Northwestern Corp (Emphasis added) It is noteworthy this Complaint notes lack of shareholder's approval on divestiture of the generation, coal and oil and gas businesses, and independent power production licenses as a prime claim for relief, but does not assert such lack of shareholder approval on the Northwestem sale of the energy component Moreover, nothing is alleged that the Northwestern purchase was somehow clouded with fraud. In the Memorandum of Under-

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standing ("MOU") in Cause DV·01-141, contained in NOR's Motion for Order under Rule 9019, NOR noted it was joined ill cause DV-01-141 to cover any judgment against NWE, because the McGreevey class had filed Proof of Claim No 744 against NOR asserting the assets of NWE LLC were transferred to NOR in violation of fraudulent transfer law The MOU covered the 0 & 0 policies of Montana Power Company, which were to contribute $ 67,000,00000 to the settlement fund with attendant full release of the claims It was not approved, but the reason is not in this record Thereafter, upon stipulation of the parlies, the Bankruptcy Court approved a stipulation [*7] that the McGreevey claimants "shall have until 4:00 p.m (EDT") on August 13,2004, to file their objections to the Debtor's proposed plan" The stipulation was signed by the parties on August 2, 2004 The class failed to file any objection The amended plan was confirmed with this provision (p 62):

tablishing the McGreevey class in Cause DV05199 pursuant to Mont R Civ P (Mont) Rule 23 01 23.1 Certainly it could not certify as a violation of§ 35-1-823 The UP A provided that NOR would pay for the utility assets the sum of $ 602 million dollars cash and assume MPC liabilities of just under $ 500 million, for a total consideration of $ 1 I billion dollars [*9] NOR made the payment pursuant to the UPA and assumed the debt in 2002 and on November 15, 2002, transferred the assets from CFB and NWE LLC to NOR The structure used to facilitate the transfer of the utility assets by MPC involved the creation of MPC LtC by MPC, and CFB together with Northwestern Energy LtC (NWli) by NOR, so that MPC LLC merged with CFB to take the assets to pass on to NOR through NWE This has been called a "going fiat" transaction or upstreaming the assets to NOR McGreevey argues that when the CFBIN WE merger took place, CFB received no consideration for the transfer, except for the assumption of some debts, which thus len CFB insolvent McGreevey contends that such structure invoked the provision of § 35-8-1203 A-IeA which provides "all debts, liabilities and other obligations of each [merging party] that are party to the merger become the obligations of the surviving entity", namely CFB, a limited liability company in which the shareholders ofMPC never had an ownership interest. After MPC utility assets were merged in MPC LtC, that entity was joined in the UP A State court legal action by McGreevey has ensued against a number of entities, but as to NOR, it [*10] joined that action as party defendant so that it would be responsible for any judgment which McGreevey might recover against NWE to the extent NWE is liable to satisfy the judgment NOR's joinder by stipulation retained all legal defenses of NOR Thus, the McGrccvcy class contends it has creditor status against NOR NOR filed for chapter 11 bankruptcy relief in September, 2004 In the case, McGreevey filed two proofs of claim, to which objection has been filed by NOR. Moreover, McGreevey moved the bankruptcy court for relief from the automatic stay under II US C § 362 so it could file an adversary proceeding against NOR to establish the constructive trust. McGreevey's motion attached a specimen Adversary Complaint under the heading "In the United Stales Bankruptcy Court for the District of Delaware" After objection to the motion was filed by NOR claiming the claims allowance and disallowance procedure would govern and resolve the matter, the bankruptcy court, based upon the stipulation made by NOR when added as a defendant in the class action suit filed in 200 I, would survive and thus the proper method to resolve the issues of alleged fraudulent transfer [*11]

.1 Binding Effect In accordance with section 1141 (a) oj the Bankruptcy Code, the Plan and its provisions shall be, and hereby are, binding upon the Debtor, any Person acquiring or receiving a distribution under the Plan, any entity issuing securities under the Plan, any lessor of property to the Debtor, any lessee from the Debtor, any creditor of the Debtor and any holder of a claim against or Equity interest in the Debtor, and their respective successors and permitted assigns, whether or not the Claim or Equity Interest of such holder is impaired under the Plan and whether or not such holder has accepted or rejected the Plan, or will or will not receive a distribution under the Plan" (Emphasis added). Thus the MPC shareholders, now represented by the McGreevey class, approved the sale by over 2/.3rd of the outstanding shares voting affirmatively [*8] in favor of the UP A, thus satisfying the provisions of § 35-1-823 n2 Nevertheless, the McGreevey class now seeks an order avoiding the transfer and directing the return of the utility assets as being fraudulent, with an intentional hindrance of creditors, unjust enrichment, rendering CFB insolvent, so as to impose under the provisions of the Montana Uniform Fraudulent Transfer Act, §§ 31-2328(3) and (4), 333 (l )(a) and (b), and 334(1), an actual and constructive trust in the Montana utility assets held by NOR for the benefit ofthe MPC shareholders n2 No basis is alleged in the state court complaint which resulted in an order in that court es-

Page 5 2005 Bankr LEXIS 2146, *

would be to allow McGreevey to file the adversary complaint attached to their motion. However, that complaint was never filed Moreover, the McGreevey class never filed any objections to the Second Amended Plan of Reorganization asserting the constructive trust to the utility assets, and thereby preserving their legal position. Ironically, another creditor, Magten Asset Management Corp ("Magten") a holder of "QUIP" debentures assumed by NOR pre-petition, asserted the very same constructive trust/fraudulent conveyance position as McGreevey In the order confirming the plan, the presiding Bankruptcy Judge Case stated:

constructive trust from the "going flat" transaction, in the bankruptcy court, pre-confirmation McGreevey now claims under fraudulent conveyance/constructive trust theory that claim survived the plan process and passed through unaffected due to a provision in the confirmed plan, sec. 5:13b, which provides:

"The court hereby finds that the going transaction is all of one transaction but for the going flat' transaction Debtor would have no liability on QUIPS notes"

flat' and the the

Judge Case found that Magten, like McGrccvcy in the state court action, asserted "in rem" property interests in the Montana assets and that such assets were being held in a constructive trust for the benefit of the QUIPS holders Judge Case found that Magten

In addition,

"Except as otherwise [* 1.3] expressly provided in this plan, effective automatically on the Effective Date, the Released Parties, their respective representatives and one Additional Indemnities, shall not be released from any and all claims and causes of action arising under Sections 544, 545, 547, 548, 54~ 55~ 551, and 553 of the Bankruptcy code or similar claims or cause of action arising under state or any other law, including, if applicable, claims in the nature of fraudulent transfer, successor liability, corporate veil piercing, or alter ego claims, as a consequence of transactions, events or circumstances involving 01 affecting the Debtor {or any of its predecessors or any of their respective businesses or operations that occurred or existed prior to the Effective Date." The McGreevey argument may carry some weight if they had a viable fraudulent conveyance action under the Montana Fraudulent Conveyance Act. They do not The corporate mechanisms established by the seller MPC and the buyer NOR, mat is, the creation of MPC LLC, CFB and NWR LtC, were established to separate the MPC utility assets from the telecommunication assets of Touch America ("TA") so as to allow MPC to divest and sell the utility [*14] assets separate and apart from the telecommunication assets, which were retained by TA and MPC. McGreevey's argument that CFB was left insolvent is a fiction which exalts form over substance The substance of the transaction, under the UPA, concurred in by the MPC shareholders, plainly provided for the sale and purchase of the utility assets between MPC and NOR for $ 1.1 billion dollars. That sum was paid and received by MPC for its benefit and the benefit of its concurring shareholders That feet is a given! Thus, when the transaction was completed by November 15, 2002, and the assets passed on to NOR through the various limited liability companies, the debtor/creditor relationship between NOR and MPC and its shareholders was satisfied, and therefore terminated. As a result, when NOR sought bankruptcy relief under chapter 11, MPC and its shareholders were no longer a creditor of NOR This situation is fatal to the McGreevey class's state court

"took no action to impose a constructive trust in the Montana assets and presented no evidence whatsoever [*12] as to why they should be entitled to a constructive trust with respect to the Montana assets Moreover Magten , failed to cite a statute or case in support of their in rem property interest The court finds persuasive Section 7 of the Uniform Fraudulent Transfer Act, as adopted in Montana, which contemplates that money damages are an adequate remedy for fraudulent transfer claims Accordingly, the court finds no constructive trust has bcen established and money damages are an appropriate remedy for the holders of the QUIPS Litigation Claims"

The COUlt concluded the QUIPS notes were nothing more than general unsecured claims under section 75 of the plan, and indeed the confirmed plan specifically provides for such treatment in Class 8 ofthe plan It is noteworthy here, that unlike Magren, McGreevey made no effort whatsoever to establish a

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action under the Montana Fraudulent Transfer Act as a matter of law It is clear that [HN 1] in order for a party to seek the remedies under § 31-2-339, by the express definition of§ 31-2-328(3) and (4) the creditor/plaintiffmust have a claim, [* 15] i e , right to payment, as a predicate to maintain the action It is further clear from the undisputed facts here that the McGreevey class does not have such claim, and is thus not a creditor because the UP A was satisfied by NOR's payment As Judge Case held, ancl as 1 adopt, the "going flat" transaction is "all one transaction" The mechanism of creation of Ll.C's to effect the transfer and payment was indeed all one transaction, and it defies logic to argue otherwise The McGreevey class simply cannot parse one aspect of the transfer and call it fraudulent. That would stand the confirmed plan of reorganization on its head, for the entire basis of the chapter 11 plan rested upon the utilization, implementation and consummation of the acquired MOlltana utility assets The Montana court litigation now pending in the U ,S District COUlt has thus no basis for relief in law or fact. The claims filed by the McGreevey class in the bankruptcy case have no merit It is a well established principle of bankruptcy jurisprudence that [HN2] an alleged creditor which files a claim in a bankruptcy case triggers the process of "allowance and disallowance of claims", thereby subjecting that person to the bankruptcy [*16] court's equitable powers Langenkamp l' Culp, 498 US 42, 44 (/990); Gardner l' Nell' Jersey. 329 US 565, 573, 67 S Ct 467, 91 L Ed 504 (1947) III te Carnell Construction Corp, 424 F 2d 296, 298 Old Cit 1970) (quoting III re Beasley-Gilbert's, Inc, 285 F SIiPP 359, 361 (S D Ohio /968)) plainly holds:

bankruptcy plan or proceeding sufficient to uphold jurisdiction over the matter. Not only is there a close nexus in the cause sub judice, there is complete nexus for this Court to entertain jurisdiction to preserve the implementation and consummation of the plan for the plan creditors where, <lS here, the MctIreevey class seeks erroneously, and without legal basis, to upset the entire underpinnings of the confirmed plan or reorganization by asserting a constructive trust over the Montana utility assets which form the bases of the success of the plan and are assets of the bankruptcy estate, This is so, because [HN4] a person subject to constructive trust which arises under Montana state law, being involuntary in nature, has a duty to convey it to another on grounds that the person holding bare legal title would be unjustly enriched if he were permitted to retain it /11 re Estate oj Mcbennott, 2002 MT 164, 51 P 3d 486, 3/0 Mont 435 (2002). That would be an unjust result in this case where full consideration under the UPA was paid by NOR.
It

"It is settled that a creditor who proves a claim submits himself to the summary jurisdiction of the Bankruptcy court in respect of preferences 01 voidable transfers, including the jurisdiction of the Bankruptcy Court to enter a monetary judgment 01' order a return,"
Moreover, it is axiomatic that [HN.3] a bankruptcy court possesses the inherent authority to enforce its own 01ders, such as an order confirming a chapter 11 plan of reorganization /11 t e Continental Ail lilies, 11IC, 236 B R 318, 325-26 (Balik! Del 1999); see, aha, F R B P Rille 3020(d) Finally, to preserve the plan post-confirmation by the bankruptcy court, Binder l' PI ice Walel house & Co, UP (/11 t e Reset ts Int'l, 11Ic), .1 72 F 3d /54 (31d Cit 2004) and III t e Pegasus Gold Corporation, 394 F 3d / /89 (9th a. 2(04) [* 17] hold "the essential inquiry appears to be whether there is a close nexus to the

It is also well established that [HNS] where a creditor or person files [* 18] a proof of claim, and has the opportunity to contest the disclosure statement or proposed plan of reorganization particularly to assert a constructive trust or fraudulent conveyance action and does not do so in the bankruptcy case, when it could or should have done so, is barred from asserting that claim in another forum The confirmed plan and order control under / / USC § / / "}, defining the effect of confirmation, and acts like a contract that binds the parties who participate in the bankruptcy case or should have participated in the case. Knupfei v Wolfberg (III re Wolfberg), 255 B R 879 (Ball/a 9th Or 2000); Eastern Air Lilies, Inc. v. BI'O\1II1 & Williamson Tobacco Corp (111 re Ionosphere Clubs, /IIC), 262 B R 604 (Bankr, SD NY 200}). It is undisputed that the McGreevey class participated in the debtor's chapter 11 case by filing proofs of claim and a motion for relief from stay to file an adversary proceeding in the bankruptcy case, which they did not pursue Consequently, now asserting after confirmation of the plan in a state COUl t forum, that the Montana utility assets were not property of the bankruptcy estate n3, the McGreevey class is precluded from litigating that issue in the state court action because [* 19] they failed to take any steps to raise the issue before the court and litigate to conclusion their contentions prior to confirmation Millet v US, 363 F 3d 999 (9th Cir 2004): 111 re PWS Holding Corp, 303 F 3d 308, 3}5 Ord Or 2002); Celotex Corp l' Edwards, 514 US 300, 313 (1995) ("Respondents chose not to pursue this cause of action [appeal of the bankruptcy court's decision], but instead to collaterally attack the Bankruptcy Court's section /05 injunction in the federal COUlt of Texas This they cannot be permitted to do without undercutting the orderly process of law "); Haskell v Goldman, Sachs & Co (/11 re Genesis Health Ventures. IIlC), 324 B R .5 10, 52/ (Bania De! 200.5)

2005 Bankr. tEXIS 2146,

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("The application of res judicata, or claim preclusion, bars a party from litigating a claim that it would have raised or did raise in a prior proceeding in which it raised another claim on the same cause of action"). The excuse for not pursing the adversary proceeding, filing objection to plan so as to raise the constructive trust issue, as Magten did, was that a proposed settlement was on the table dealing with the availability of MPC D & 0 insurance policy proceeds [*20] to be funneled to the McGreevey class, which proposal was later rejected by the Montana US, District Court since title to the PIOceeds is in issue Such is a weak and unacceptable excuse at best since the McGreevey class could still have pursued its adversary proceeding if it truly believed it had merit, or at a minimum requested a delay in the confirmation process until the settlement issue was resolved It did neither n3 Section 1/4/ (b) provides: [HN6] "Except as otherwise provided in the plan 01 order confirming the plan, the confirmation of a plan vests all property of the estate in the debtor
11

[HN7] To determine whether a preliminary injunction should issue, a court balances the plaintiffs likelihood of success against the relative hardship to the parties To receive a preliminary injunction, [a plaintiff is] required to show either a likelihood of success on the merits and the possibility of irreparable injury, or that serious questions going to the merits were raised and the balance of hardships tips sharply in its favor, These two alternatives represent extremes of a single continuum, rather than two separate tests Microsystems, lnc v Microsoft Corp. 188 F 3d 1115, / I /9 (9/h Or /999) (internal citations and quotations omitted)

51111

It is the position of NOR that plan provisions also the pending state court action because the Mcflreevey class claims were channeled into a D & 0 Trust, and the claims are thus discharged as to NOR with an attendant injunction against the McGreevey class allowing it to pursue their remedy in another forum Arguing that the McGreevey class disagreement with that position is misplaced, NOR states if the McGreevey class [*21] did not like such plan treatment it should have filed an appropriate objection to confirmation of the plan, which it did not do NOR's argument, based on the plan language of the plan provisions (provisions LO,5(a) and (e), 13.1,5 13(b), 1A7 and 412) has merit, particularly where the McUreevey class was served with the second amended plan, and did not seek any clarification from the court during the confirmation hearing by way of objection, as to the plan's intent, and how it would affect its constructive trust claim, particularly in light of NOR's position that the MPC D & 0 policies were not property of NOR's estate In sum, the McGreevey class slept on its rights. However, due to my finding and conclusion that the MeGreevey class was not and is not a creditor of NOR pre-petition I need not pass on NOR's position This is particularly true since the Bankruptcy Court specifically found that the "Montana assets are property of the estate" in confirming the plan bar Pringle (111 re Focus Media Inc ), 387 F 3d 2004), involving a fraudulent conveyance action by a bankruptcy trustee to freeze potential estate assets, the court adopted the traditional test for [*22] preliminary injunction as follows:
l'

Rubin

/077.

1085 (9(h Cir

To establish a substantial likelihood of success on the merits, NOR must show that it will have a fair chance of success on the merits Id By reason of my conclusion that the McGreevey class was not and could not be a prepetition creditor of NOR, it has no chance to establish a constructive trust under Montana's Fraudulent Transfer Act NOR and its creditors and shareholders in the reorganized company will suffer immediate and irreparable harm if the McGreevey class [*23] is permitted to continue to prosecute the stale court action in any forum Under settled law, [HN8] where a party unilaterally violates a bankruptcy court order, that violation, standing alone, constitutes the only harm necessary for an injunction American Gen. Fill v. Tippins (//1 re Tippins), 221 B R I I, 27-28 (Bank, N D. Ala 1998); 111 Steffan, 97 re B R 741, 746 (Bankr ND NY /989); III re Mcbleil, 128 B R 603. 6/5 (Bankr ED Pa. /99l) In sum, the McGreevey class cannot be permitted to "end run" the confirmation process and order confirming the plan by erroneously asserting an equitable interest in the Montana utility assets which were and are a necessary and essential pal t of the confirmed plan of reorganization The preliminary injunction will preserve the rights of the debtor and creditors who relied upon the plan and thus preserve the status quo, If the McGreevey class wishes to preserve its alleged pre-petition claims, it must do so in the bankruptcy forum where it initially sought relief by filing their proofs of claim and seeking permission to tile an adversary proceeding to assert its rights It is in the public interest to preserve the integrity of the bankruptcy [*24] process from collateral attack post-confirmation. Accordingly, for all the above reasons, a preliminary injunction must be issued against the McGreevey class enjoining the class from continuing the litigation in

2005 Bankr LEXIS 2146,

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Cause No DY -05 J 99, presently pending on removal in the Montana U.S District Court n4 114 While 110t raised as an issue, by either party, since the alleged McGreevey class claims exceed $ 5 million dollars in value, the jurisdiction of state court is highly questionable due to the passage of the "Class Action Fairness Act of 2005", P t 109-2, February 18, 2005, 119 Stat 4, Sec. 4 Federal District Court Jurisdiction fOJ Interstate Class Actions.
IT IS ORDERED: I. The plaintiffs Margaret A McGreevey, 10 Ann

liminarily enjoined from further prosecution of Cause No DY-OS] 99, filed against Montana Power company, a Montana corporation, Northwestern Corporation, a Delaware corporation [*25] and the Clark Fork and Blackfoot LtC, a Montana Limited Liability company, defendants, presently pending in the Montana U.S. District Court, until further Order of this Court, with leave of the plaintiffs NOR and CFB to seek an award of attorneys' fees and costs. DATED this 25th day of October, 2005,
BY THE COURT

HON JOHN L PETERSON United States Bankruptcy Judge District of Delaware

Barkell and Joseph Martelli, on behalf of themselves and the class of similarly situated plaintiffs, are hereby pre-

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Send To:

DEWDNEY, WAVERLEY RICHARDS LAYTON & FINGER PA 920 N KING ST WILMINGTON, DE 19801-3361

Page 2 of 8

Westlaw.
292 BR 515 292BR 515,40 BankrCt Dec 275 (Cite as: 292 RR. 515) Page [

H

In re Combustion Engineering, Inc. Bkrtcy D Del.,2003 United States Bankruptcy Court.D. Delaware In Ie COMBUSTION ENGINEERING, INC, Debtor Pre-Petition Committee of Select Asbestos Claimants and Victor Trinchese, Plaintiffs,
v.

turned over to trustee; but (3) claimant failed to establish likelihood of success all merits, as required to obtain temporary restraining order Motion denied. West Headnotes

III Bankruptcy

51 ~2159.t

Combustion Engineering, Inc" Hasbrouck Haynes, Jr., CPA as Regular Trustee of tile CE Settlement Trust dated November 22,2002, Wilmington Trust Company, a Delaware Banking Corporation, as the Delaware Trustee of the CE Settlement Trust dated November 22,2002, Joseph F Rice, Claimant Representative, the CE Settlement Trust dated November 22,2002, and John and Jane Docs Nos 1-75,000 (being unknown persons and/or entities to whom payment was made from the Trust and those unknown persons and entities for whose benefit such payments were made within ninety (90) days prior to Debtor's bankruptcy petition), Defendants Bankruptcy No" 03-10495(JKF).
Adversary No. 03-50995.

51 Bankruptcy 5111 Courts; Proceedings in General 5111(B) Actions and Proceedings in General 51 k2159 Parties 5 [k2159.1 k In General Most Cited Cases
Bankruptcy 51 ~2701

March 7,2003 Group of law firms that specialized in representing asbestos plaintiffs and asbestos claimant who had entered into pre petition settlement with debtor, but who had not yet received any payment thereon, moved for temporary injunction to prevent distribution of funds from prepetition settlement trust established by debtor, on theory that debtor's payments into trust were preferential or fraudulent, and that corpus of trust was property of the estate that had to be turned over to trustee The Bankruptcy Court, Judith K Fitzgerald, J, held that: (1) law firms did not have standing to seek temporary injunction; (2) asbestos claimant was creditor of estate, with standing to seek determination as to whether certain assets were included in "property of the estate" and had to be
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51 Bankruptcy 51 V The Estate 51 V(H) Avoidance Rights 51 V(H) I In General 51 k270 I k Avoidance Rights and Limits Thereon, in General Most Cited Cases Group of approximately 17 law firms that specialized in representing asbestos plaintiffs, but that did not, per se, represent any creditors with claims against Chapter I I estate, did not have standing to seek temporary injunction to prevent distribution of funds from preperition settlement trust established by debtor, on theory that debtor's payments into trust were preferential or fraudulent, and that corpus of trust was property of the estate that had to be turned over to trustee

121 Bankruptcy

51 ~2159.t

51 Bankruptcy 5111 Courts; Proceedings in General 5111(B) Actions and Proceedings in General 51 k2159 Parties 51 k.2159 I k In General Most Cited Cases Asbestos claimant who had entered into prepetition settlement with debtor, but who had not yet

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received any payment thereon, was creditor of Chapter II estate, with standing to seek determination as to whether certain assets were included in "property of the estate" and had to be turned over to trustee.
131Injunction 212 £='132

212 Injunction 2121V Preliminary and Interlocutory Injunctions 2121V(A) Grounds and Proceedings to Procure 212IV(A) I In General 212k 132 k Nature and Scope of Provisional Remedy Most Cited Cases Preliminary injunction is extraordinary remedy, which should be granted only m limited circumstances.
14111ljulictioll 212 £='138.1

restrairung order to prevent distributions from settlement trust that Chapter II debtor established prepetition to fund payments to asbestos claimants participating in settlement trust, on theory that debtor's payments into trust were preferential or fraudulent, and that corpus of trust was property of the estate which had to be turned over to trustee, where creditor failed to establish probability of success on merits in showing that trust corpus, which debtor had irrevocably transferred prepetition, was included in Chapter II estate, or that settlement payments, which relieved debtor of liability on claims for pennies on dollar, were preferential or fraudulent as to creditors Bankr.Code, 11 U S.CA §§ 54l(a), 542, 547(b), 548 Curtis A Helm, Lama Davis Jones, Michael Paul Migliore, Pachulski, Stang, Ziehl, Young & Jones, Wilmington, DE, for Combustion Engineering, Inc Michael R, Lastowski, Richard W. Riley, William K. Harrington, Duane Morris LLP, Wilmington, DE, for Official Committee of Unsecured Creditors. Elizabeth Wall Magner, New Orleans, LA, Natalie D Ramsey, Philadelphia, PA, Noel C Burnham, Montgomery, McCracken, Walker & Rhoads, Wilmington, DE, Dean A. Hanley, Paul, Hanley & Harley, LLP, Berkeley, CA, lead attorneys for plaintiffs, Daniel R Butz, Morris, Nichols, Arsht & Tunnell, Daniel K Hogan, Hogan & Veith, Brett Fallon, Morris, James, Hitchens & Williams, Wilmington, DE, for defendants JUDITH K, FITZGERALD, Bankruptcy Judge This Memorandum Opinion constitutes the court's findings of fact and conclusions of law pursuant to Federal Rules of Bankruptcy Procedure 7052 and 9014. Before the court is the motion of the plaintiffs, Pre-petition Committee of Select Asbestos Claimants (SAC) and Victor Trinchese, for a Temporary Restraining Order (TRO). Plaintiffs seek to enjoin distributions from the CE Settlement Trust on grounds that one of the defendants, Hasbrouck Haynes, Jr., Regular Trustee of that
*517 MEMORANDUM OPINION AND ORDER

21.2 Injunction 2121V Prel irninary and Interlocutory Injunctions 212IV(A) Grounds and Proceedings to Procure 212IV(A)2 Grounds and Objections 212k1381 k In General Most Cited Cases To obtain preliminary injunction, moving party must show a reasonable probability of success on merits and irreparable injury if relief is not granted; if movant succeeds in doing so, then court must consider whether potential harm to movant in denying relief is outweighed by potential for harm to his opponent and must determine whether injunctive relief is in public interest
151Bankruptcy 51 £='2374

51 Bankruptcy 511V Effect of Bankruptcy Relief; and Stay 51IV(A) In General 51 k236.3 Protection Discrimination or Collection Efforts in Fresh Start" 51k2374 k Preliminary and Restraining Orders Most Cited Cases Creditor was not entitled to entry of

Injunction Against General; " Injunctions temporary

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trust, is actually a custodian required to tum over the trust assets to the bankruptcy estate of Combustion Engineering, Inc, (Debtor) under § 543 of the Bankruptcy Code; that the trust corpus is property of the estate subject to turnover under § 542 of the Bankruptcy Code; and that the transfers to the trust that established the corpus and from the trust to its beneficiaries or their agents were preferential transfers subject to avoidance under § 547 and § 548 of the Bankruptcy Code The defendants object to entry of the TRO, asserting that the SAC has no standing to commence the action, that the plaintiffs have not met the strict standards entitling them to this extraordinary relief, that Haynes is not a custodian, that the trust corpus is not property of the estate subject to turn over, and that the transfers were not preferential The defendants also note that not all persons with an interest in the trust corpus were served with notice of this motion and request that relief be denied on that basis. The bankruptcy case was f led on February l7, 2003. Debtor filed the case as a voluntary chapter II after receiving information that an involuntary would be commenced against it, in whole at in part to preserve the 90-day presumption of insolvency period for preferential transfer s An involuntary action would have created certain issues that Debtor wished to avoid, and it elected to proceed in a voluntary case The filing occurred only a few days before the voting deadline was set to expire on a prepackaged plan of reorganization that Debtor put together pre-petition, primarily to deal with its asbestos liabilities, On about November 22, 2002, Debtor funded the CE Settlement Trust, which was authorized to pay certain claims against Debtor for asbestos-related injury. Distributions have begun Plainti Ffswish to enjoin future distributions
Standing

[I] The self-styled "Pre-petition Committee of Select Asbestos Claimants" acknowledged in court during the hearing on the TRO that it is not, in fact, an official committee, does not hold claims against or interests in the estate, and is not a group of creditors Rather, it is a group of approximately 17 law firms specializing in representing asbestos plaintiffs who have contracted cancers, allegedly from their exposure to asbestos The SAC has not tiled a Bankruptcy Rule 2019 statement indicating what it is or who it represents. The court interprets the information presented during the hearing to mean that the SAC cannot file a Rule 2019 statement because it does not, per se, represent any creditors Rather, the law firms which comprise the SAC have clients (as yet largely unidentified on this record) with interests perceived to be similar to the interests of clients (also largely unidentified)*518 of other law firms in the SAC This type of arrangement, while expedient for the participants, does not satisfy the prudential standing requirements of federal jurisprudence See Federal Rule of Bankruptcy Procedure 7017 ("Every action shall be prosecuted in the name of the real party in interest.") Thus, the Complaint filed by the Pre-petition Committee of Select Asbestos Claimants will be dismissed with prejudice, on grounds of lack of standing and the court will not address the other defenses raised to the SAC's participation as a plaintiff in this Adversary action [2] The issue does not end there, however. Victor Trinchese is also a named plaintiff The parties agree that Me Trinchese is an individual who has contracted a fatal disease caused by his exposure to asbestos and who, pre-petition, settled his claim against Debtor for $45,000. Although the parties agreed upon an amount to be paid to Mr Trinchese, the claim has not been satisfied Mr Trinchese, therefore, is a creditor of this estate and has standing to appear before the court and raise certain issues. Thus, the Complaint filed by Victor Trinchese will not be dismissed on grounds of lack of standing

The defendants request dismissal of the Adversary action, or in the alternative, dismissal of the Adversary commenced by the SAC for lack of standing to request a TRO or any other form of relief

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292 BR 515,40 Bankr.Ct.Dec (Cite as: 292 R.R. 515) Notice

Prot, 274 F3d 771, 777 (3d Cir .200 I) [5] For the reasons which follow, the court finds that the plaintiff has not met the standards for issuance of a TRO but will issue an order addressing disbursal of *519 trust funds, pending plan confirmation or further order

Rule 7065 of the Federal Rules of Bankruptcy Procedure indicates that a TRO cannot be granted without notice to the adverse party or that party's attorney unless certain conditions are satisfied, among them a certification to the court, in writing, of the efforts made provide notice and the reasons why notice should not be required In this Adversary, the trustee of the CE Settlement Trust has been named and served as a defendant The TRO requests an order prohibiting the trustee hom making further distributions to the beneficiaries of the trust-all of whom me individuals with asbestos related illnesses who have settled their claims against the Debtor and agreed to a reduced payment from the trust Not all of the individuals have been named OJ served At the hearing, counsel for the plaintiff argued that service on all individuals is nearly impossible since the plaintiff does not know the identity of all the individuals and that he has sued Jane Does and John Does in their stead. The court has not located an affidavit or a writing with this explanation. However, inasmuch as the court will not grant the motion for a TRO, the omission of a written certification is of no effect

Property of the estate and CE Settlement Regular Trustee Haynes as Custodian Prior to the commencement of the bankruptcy but within the preference period, Debtor transferred to the CE Settlement Trust certain assets consisting of over $100,000 through a prom issory note owed by its parent and which has allegedly been paid and converted into cash and an assignment of a note in favor of Debtor by the parent in the amount of $402 million, with a balance payable of $300 million The proceeds of the trust are to be used to pay asbestos claimants The trust document establishes that the transfer of legal title to the trustee was irrevocable and Debtor retained no beneficial interest in the proceeds under the terms of the trust agreement, § 2.6. Moreover, equitable title lies with the beneficiaries who settled their claims are entitled to payment from the trust. Unless and until the conveyance is avoided and recovered for the benefit of the estate, it appears from the trust document that the trust proceeds are not estate property, the corpus having been irrevocably conveyed to the trust pre-petition, To the extent Debtor has any interest in the trust corpus, the interest would be restricted under § 541 (d) and could be used only as directed by the trust terms A fortiori, if the assets conveyed to the trust are not estate property, then Haynes is not a custodian required to turn over that same property to the bankruptcy estate under § 543. He is not in possession of estate property, Thus, it is not likely that Mr. Trinchese will succeed on the merits of the litigation concerning whether the trust corpus is property of the estate or whether Mr Haynes is a custodian subject to turning over property to the estate

The burden of proof [3][4] The parties argue the same standards for granting relief but disagree as to the outcome when those standards are appl ied to this case The Court of Appeals for the Third Circuit, in addressing prelim inary injunctive relief, stated that it is an " extraordinary remedy, which should be granted only in limited circumstances." Instant Ail heigh, Co v C F Air heigh" Inc, 882 F 2d 797, 800 (3d Cir.1989) To obtain a preliminary injunction, the moving party must show a reasonable probability of success on the merits and irreparable injury if the relief is not granted In re Arthur Treacher's Franchisee Litig , 689 F.2d 1137, 1143 (3d Ci11982) If the applicant prevails, then the court must consider whether the potential harm to the appl icant in denying the relief is outweighed by the potential for harm to the opponent and determine that injunctive relief is in the public interest South Camden Citizens in Action v N J Dept of Env © .2007 Thomson/West

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Preference and Fraudulent Conveyance Avoidance Actions

The initial hearing on this request for a TRO was without production of evidence On the understandably scant record before the court, plaintiff has not shown a basic element of preference litigation, and one that is necessary to succeed on the merits: i.e., that the beneficiaries of the CE Settlement Trust will receive more through the distributions they obtain from the trust than they would get if the case were liquidated in Chapter 7, the transfer had not been made, and the creditor received payment of the debt to the extent provided by the Bankruptcy Code. 11 US C § 547(b)(5) The liabilities of the estate in chapter 7 would include the present asbestos claims (approximately 195,000 of them, of which 145,000 have elected to be part of the CE Settlement Trust process with additional claimants requesting to be added to the tIUSt) but not the future claims which would be contingent, unliquidated, disputed and disallowed There are miscellaneous other creditors and one environmental liability that may be as much as $100 million The total liabilities Debtor would have to address in a chapter 7, as estimated by counsel to Debtor's parent,FNI would approximate $760,000, FN I Debtor's counsel, Mr Brendel, joined in the argument of Mr Bernick, counsel to Asea Brown Boveri, Inc, which is Debtor's parent, The assets conveyed to the CE Settlement Trust have a present, non-discounted value of approximately $400 million There are additional assets of the bankruptcy estate that will be liquidated and paid to creditors through a plan The *520 total assets that would be available through the chapter 7, as estimated by counsel to Debtor's parent would total $800 million Based upon these estimates it is theoretically possible, all things being equal and without factoring in the delays in liquidation of assets, the cost and delays attendant on claims and other litigation, chapter 7 administrative fees, etc, that

the Debtor could pay a 100% dividend to all of its creditors The CE Settlement Trust will not pay any of its beneficiaries 100 cents on the dollar, although it provides for three levels of distributions, ranging from a high of 95 cents to a low of 37 5 cents on the dollar Thus, the record before the court does not establish a reasonable likelihood of success on the merits in that plaintiff has not shown that § 547(b)(5) is likely to be established such that a TRO should issue The court makes no inferences as to what ruling may result after evidence adduced at a preliminary injunction hearing or trial on the Complaint Further, the Complaint filed in this Adversary itself states in paragraphs 101, 102 and 103 (concerning alleged fraudulent conveyances) that discovery is needed to demonstrate certain elements necessary to avoiding transfers under § 548. Plaintiff has not met a threshold showing that Debtor received less than reasonably equivalent value in exchange for the transfers to the CE Settlement Trust or "made with the actual intent to hinder, delay or defraud non-settling current asbestos personal injury creditors of [Debtor] and future asbestos personal injury creditors of [debtor]." Complaint, paragraph 101 The parties do not dispute that all of the law firms that comprise the SAC and several hundred other law firms that represent asbestos personal injury plaintiffs with claims against Debtor were aware of the negotiation and inception of the trust and provided an opportunity to have their clients participate in it An additional issue must be addressed The bankruptcy community in this Circuit awaits the decision of the Court of Appeals on the reargument en bane in Cybergenics with great anticipation Whether the court can authorize a committee to use the estate's avoidance powers is a matter of great significance to bankruptcy lawyers and judges Regardless of the outcome, however, this court is asked to go one step beyond Cybergenics and is asked to predict that either the SAC (which has been determined not to have standing to appear and be heard on its own behalf) or an individual

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creditor, MI Trinchese, will be perm itted to exercise avoidance powers in {jell of the Debtor At this time, while there is such uncertainty in this Circuit as to whether even an official committee can be granted such powers, this court cannot go so far as to state that it could or wou Id authorize either the SAC or an individual creditor to do so Moreover, this case is less than one month old Although Debtor concedes that if its plan of reorganization is confirmed, it will not bring avoidance actions, it also asserts that if the plan is not confirmed, it has done noth ing to waive its initial right to commence them, Also at this time, an official committee of unsecured creditors has not yet been formed and the court is without the benefit of the views of an official committee as to the viability or economic wisdom of commencing avoidance actions, FN2 Thus, assertion *521 that the transfer s in question are avoidable preferences begs the initial question of whether avoidance actions will be brought by the Debtor or another approved entity when the time arises and the effort by an individual creditor to assume the role of the Debtor is, at best, premature FN2 If the plan is confirmed as proposed, avoidance actions will be waived and none will be commenced by any party in interest The motion suggests that in lieu of the plaint] ff's commencing avoidance actions, a chapter I I trustee should be appointed to pursue them. That request is preserved for consideration when the issues can be more fully litigated
Immediate

court will issue an order requmng the CE Settlement Regular Trustee and all lawyers and law firms who make a distribution of trust proceeds or assets to provide written notice to the person or entity receiving the distribution that the distribution is contested and subject to disgorgement in the event the Court finds the transfens) to have been avoidable.
The balance of harm and the public interest

The plaintiff having failed to satisfy the initial burden of a likelihood of success on the merits, the court need not examine the balance of harm or the public interest at this time For these reasons, the motion Restraining Order will be denied Order will be entered. ORDER AND NOW, TI-lIS 7TH OF MARCH, 2003, THE REASONS EXPRESSED IN FOREGOING MEMORANDUM OPINION, ORDERED TI-IAT THE MOTION TEMPORARY RESTRAINING ORDER
DENIED for

Temporary An appropriate

FOR THE IT IS FOR IS

and Irreparable

Harm

HOWEVER, THE COURT FINDING THAT NOTICE TO PERSONS AND ENTITIES WHO MAY RECEIVE DISTRIBUTIONS UNDER THE PLAN OF THE POSSIBILITY THAT THEY MA Y BE REQUIRED TO RETURN THE PAYMENT TO THE ESTATE IS REQUIRED IN THE INTEREST OF JUSTICE, IT IS FURTHER ORDERED THAT HASBROUCK HAYNES, JR, CE SETTL,EMENT REGULAR TRUSTEE AND ALL LAWYERS AND LAW FIRMS WHO MAKE A DISTRIBUTION OF TRUST PROCEEDS OR ASSETS SHALL PROVIDE WRITTEN NOTICE TO THE PERSON OR ENTITY RECEIVING THE DISTRIBUTION THAT fI-IE DISTRIBUTION IS CONTESTED AND SUBJECT TO DISGORGEMENT IN THE

Despite the fact that the plaintiff has not shown a likelihood of success on the merits at this stage of the proceedings, there is indication that immediate and irreparable harm may result if some relief is not entered regarding distributions out of the CE Settlement Trust Once the trustee pays funds to the law firms and/or the injured asbestos victims, the ability to recover those funds if the transfers are avoided becomes male difficult Nonetheless, having failed to satisfy the standards for a TRO, plaintiff will not receive that relief However, the
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EVENT THE COURT FINDS THE TRANSFER(S) TO HA VE BEEN AVOIDABLE IT IS FURTHER ORDERED THAT THE COMPLAINT FILED BY THE PRE-PETITION COMMITTEE OF SELECT ASBESTOS CLAIMANTS IS DISMISSED WITH PREJUDICE A PRETRIAL CONFERENCE HAS BEEN SET BY PRIOR ORDER ON *522 THE COMPLAINT FILED BY VICTOR TRINCHESE. Bkrtcy. D, Del,2003
In re Combustion Engineering, Inc. 292 B R 515,40 BankrCt. Dec 275

END OF DOCUMENT

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H In re Advanced Marketing Services, Inc Bkrtcy.D,Del,2007 Only the Westlaw citation is currently available United States Bankruptcy Court.D Delaware, ln re: ADVANCED MARKETING SERVICES, [NC, a Delaware corporation, et al., Debtors Simon & Schuster, Inc, Plaintiff;
v,

Procure 2 I 2IV(A)4 Proceedings 2 I 2k 150 k. Restraining Order Pending Hearing of Application, Most Cited Cases Generally, courts apply the standards for granting a preliminary injunction in determining the propriety of issuing a temporary restraining order (TRO) [21 Injunction 212 £=150

Advanced Marketing Services, Inc, Defendant Bankruptcy No. 06-11480 (CSS), Adversary No, 07-50004(CSS).

Jan 22,2097
Background: Publisher brought adversary proceeding to reclaim goods, and filed emergency application for temporary restraining order (TRO), Debtors and debtors' secured lenders opposed emergency application,

Holdings: that:
(I)

The Bankruptcy

Court,

Sontch i, J " held

publisher did not establish probability that it would establish its goods under Bankruptcy Code;

requisite strong right to reclaim

212 Injunction .212lV Prelim inary and Interlocutory Injunctions 212[V(A) Grounds and Proceedings to Procure 212JV(A)4 Proceedings 212k 150 Ie Restraining Order Pending Hearing of Application. Most Cited Cases To grant a temporary restraining order (TRO), court must be convinced that the following factors favor granting preliminary relief: (I) the likelihood that the moving party will succeed on the merits, (2) the extent to which the moving party will suffer irreparable harm without injunctive relief, (3) the extent to which the nonmoving party will suffer irreparable harm if the injunction is issued, and (4) the public interest [31 Injunction 212 ~]38,]8

(2) publ isher did not establish (3) balancing granting TRO, of the

irreparable

harm; and against

equities

weighed

Application for temporary without prejudice
[11 Injunction

restraining

order

denied

.212 Injunction llllV Prelim inary and Interlocutory Injunctions 212IV(A) Grounds and Proceedings to Procure 212IV(A}2 Grounds and Objections 212kl3818 k Likelihood of Success on Merits. Most Cited Cases To obtain preliminary injunctive relief, the movant must demonstrate a strong probability of success on the merits of the litigation [4[ Bankruptcy 51 £=2745

2]2 ~150

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to

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--- B"R ------ BR ----, 2007 WL 162685 (Bkrtcy DDel) (Cite as: --- B.R. ----) 5 IV(I) Reclamation 51 k2744 Proceedings 51k2745 k. Evidence and Fact Questions. Most Cited Cases Reclaim ing seller has the burden of establishing each element of claim for reclamation of goods by a preponderance of the evidence 1 1 US .CA § 546(c)

Page 2

161 Debtor and Creditor ll7T €:=13.l
1 J 7T Debtor and Creditor 117Tk 13 Marshaling Assets and Securities 117Tk 13 I k. In General Most Cited Cases "Marshaling of assets" applies when a senior secured creditor can collect on its debt against more than one property or fund held by debtor but a junior secured creditor can only proceed against one of those sources; assuming certain elements are met, the process requires the senior secured creditor to first collect its debt against the collateral other than that in which the junior secured creditor holds an interest, thereby leaving that collateral for the junior secured creditor's benefit [71 Debtor and Creditor 117T <8=15

151 Bankruptcy 51 £:=2374
51 Bankruptcy 511 V Effect of Bankruptcy Relief; Injunction and Stay 51IV{A) In General 51 k2363 Protection Against Discrim ination or Collection Efforts in General; " Fresh Start" 5 I k23 74 k Preliminary Injunctions and Restraining Orders Most Cited Cases Bankruptcy 51 £:=2742 51 Bankruptcy 51 V The Estate 51 V(I) Reclamation 51 k2742 k Seller's Most Cited Cases Bankruptcy 51 <8=2971 51 Bankruptcy 51VIl Claims 51 VIl(F) Priorities 51 k297 1 k. Marshaling Most Cited Cases Books supplied by publisher to Chapter II debtor-book wholesaler were subject to first priority preperition and postpetition liens and claims of senior lenders of debtor and its debtor-affiliates, which, under Bankruptcy Code's express language, were superior to publisher's reclamation claim, and publisher, as unsecured creditor, could not assert marshaling doctrine, and therefore publisher, in seeking temporary restraining order (TRO) in its adversary proceeding to reclaim its goods, did not establish requisite strong probability that it would establish right to reclaim under Code. 11 USCA § 546(c)(I)

li7T Debtor and Creditor 1 J 7Tk J 3 Marshaling Assets and Securities I 17Tkl5 k Nature of Property or Funds and Claims or Liens Most Cited Cases Unsecured CI editors cannot invoke the equitable doctrine of marshaling,

181 Bankruptcy 51 <8=2374
Reclamation Rights. 51 Bankruptcy 5 J IV Effect of Bankruptcy Relief; Injunction and Stay 511 YeA) In General 51 k2363 Protection Against Discrimination or Collection Efforts in General; " Fresh Start ." 51 k23 74 k Preliminary Injunctions and Restraining Orders. Most Cited Cases Publisher that supplied books to Chapter II debtor-wholesaler on fully returnable basis did not establish irreparable harm supporting its request for temporary restraining order (TRO) in its adversary proceeding for reclamation of goods provided to debtor, given that publisher could not argue that it would be irreparably harmed by exercise of debtor's right to return goods by either debtor or its assignee, and its alleged harm, which included incurrence of wrongful credits and additional expenses, could be remedied by monetary compensation 11 U,5 C A § 546(c)(l ) Govt Works.

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--- B R ------ R R ----, 2007 WL 162685 (Bkrtcy D Del) (Cite as: --- B.R. ----)

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191 Injunction 212 €:=138.6
212 Injunction 212lY Preliminary and Inter locutory Injunctions 212IY(A) Grounds and Proceedings to Procure 212IY(A)2 Grounds and Objections 212k1386 k Nature and Extent of Injury; Irreparable Injury Most Cited Cases To demonstrate irreparable harm supporting preliminary injunction, plaintiff must demonstrate potential harm which cannot be redressed by a legal or an equitable remedy following a trial; the preliminary injunction must be the only way of protecting plaintiff from harm.

212k138.15 k Balancing Hardships or Equities Most Cited Cases In applying third factor in the preliminary injunction analysis, requiring the balancing of equities, court should consider whether granting the requested relief will result in greater harm to the party on whom it is imposed than its denial will have on the party who seeks it

1131 Bankruptcy

51 €:=2374

1101 Injunction 212 €:=I32
2 J 2 Injunction 2121Y Preliminary and Interlocutory Injunctions 212IY(A) Grounds and Proceedings to Procure 212IY(A) I In General 212k 131 k. Nature and Scope of Provisional Remedy. Most Cited Cases Preliminary injunctions will not be issued merely to allay the fears and apprehensions or to soothe the anxieties of the parties

1111

Injunction

212 (:;:;:::;>138.6

212 Injunction 1121Y Preliminary and Interlocutory Injunctions 212IY(A) Grounds and Proceedings to Procure 212IY(A)2 OJ ounds and Objections 212k 138.6 k. Nature and Extent of Injury; Irreparable Injury. Most Cited Cases Availability of adequate monetary damages belies a claim of irreparable injury supporting request fOJ preliminary injunction

51 Bankruptcy 511Y Effect of Bankruptcy Relief; Injunction and Stay 51IY(A) In General 51 k2363 Protection Against Discrimination or Collection Efforts in General; " Fresh Start" 51 k23 74 k Preliminary Injunctions and Restraining Orders Most Cited Cases Balancing of the equities weighed against granting of temporary restraining order (TRO) sought by book publisher in publisher'S adversary proceeding against Chapter 11 debtor- book wholesaler for reclamation of goods provided to debtor, even though factor was neutral in the sense that debtor and its debtor-affiliates would be harmed by imposition of TRO, while allowing debtors to continue selling publisher's goods would likely result in reclamation claim being rendered worthless, given that publisher bore burden of establishing that balance of equities favored granting ofTRO II U.SCA § 546(c)(I) Mark D Collins, Russell C. Silberglied (Argued), Paul N. Heath, Marcos A. Ramos, Richards, Layton & Finger, PA, Wilmington, Suzzanne S Uhland, Austin K Barron, Alexandra B Feldman, O'Melveny & Myers LLP, San Francisco, CA, Proposed Counsel for Debtors and Debtors in Possession. Kurt F Gwynne (Argued), Kimberly EC Lawson, Reed Smith LLP, Wilmington, Paul S Arrow, Buchalter Nemer, Los Angeles, CA, Counsel for Wells Fargo Foothill, Inc Mark Minuti, Jeremy W Ryan, Saul Ewing LLP, Wilmington, Craig A Wolfe (Argued), Robert L LeHane, Kelley Drye & Warren LLP, New York,

1121 Injunction 212 €:=138.1S
212 Injunction 2121V Prel iminary and Interlocutory Injunctions 212IY(A) Grounds and Proceedings to Procure 212IV(A)2 Grounds and Objections
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--- B.R. """" --- BR, "--",2007 wr 162685 (Bkrtcy.D. Del.) (Cite as: --- B.R. ---) NY, Counsel for Plaintiff, Simon & Schuster, Inc. Bruce Buechler (Argued), Lowenstein Sandler PL, Roseland, NJ, Proposed Counsel for the Official Committee Of Unsecured Creditors OPINION FNI SONTCHI, J. *1 This is an adversary proceeding brought by Simon & Schuster, Inc. ("S & S") to reclaim goods, pursuant to section 546(c) of the Bankruptcy Code Before the Court is the Emergency Application oj Sill/on & Schuster /01 Temporary Restraining
Order Pursuant /0 Bankruptcy Rille 7065 [Docket No 8] (the "TRO Motion "), which is opposed by

Page 4

retailers, e-COl11l11erCe companies, traditional bookstores and bookstore chains, AMS obtains most of its inventory directly from publishers, primarily on a fully returnable basis. It also sells such books primarily on a fully returnable basis S & S is one of the largest third-party publishers from whom AMS obtains books. As with most of its suppliers, AMS obtains books from S & S on a fully returnable basis, The Debtors and the lenders (the "Senior Lenders") are parties to that certain Loan and Security Agreement, dated as of April 27, 2004 (as amended from time to time, the "Senior Facility'} Wells Fargo Foothill, Inc ("Foothill") is the Senior Lenders' agent under the Senior Facility. The Debtors' obligations under the Senior Facility are secured by a floating lien on substantially all of the Debtors' assets, including inventory As a result, the Senior Lenders' first priority security interest extends to the Goods that are the subject of the Complaint The Senior Facility is an asset-based lending agreement that provides for a revolving line of credit (the "Revolving Loans") up to a maximum commitment level of $90 million Availability under the Senior Facility is determined by a borrowing base formula based upon the Debtors' accounts receivable and inventory subject to adjustments and reserves established by Foothill and the Senior tenders, The Senior Lenders assert, and the Debtors have stipulated and agreed, that, as of the Petition Date, the Debtors were obligated to the Senior Lenders for the principal amount drawn on the Revolving Loans plus accrued and unpaid interest and certain additional unpaid fees and expenses in an amount not less than $41,514,347,58 (collectively, the "Senior Indebtedness") The Senior Facility imposed numerous restrictions on the Debtors' ability to access their cash Prior to the Petition Date virtually all of the Debtors' cash from operations was swept daily into an account controlled by Foothill and applied to the loans outstanding, then readvanced as loans in accordance with the borrowing base formula. *2 On December 29, 2006, the Debtors filed a motion seeking an interim order for post-petition financing On January 3, 2007, this Court entered an interim order authorizing the Debtor s to obtain

the Debtors and the Debtors' secured lenders. FN2 Because the goods that S & S seeks to reclaim are subject to prior secured liens, S & S is unable at this time to establish a likelihood of success on the merits of its reclamation claim FN3 Thus, for the reasons stated below, the TRO Motion is denied without prejudice
I Statement oj Facts
I:N4

On December 29, 2006, Advanced Marketing Services, Inc. (HAMS") and two of its affiliates (collectively, the "Debtors") filed voluntary petitions for relief under Chapter II of the Bankruptcy Code That same day, S & S sent a reclamation demand to AMS On January 5, 2007, S & S commenced this adversary proceeding by filing a Complain! for Reclamation of Goods Pursuant to 11 usc § 546(c) and Related Relief (the "Complaint") The Complaint seeks (i) reclamation of goods in the aggregate amount of $5, I05,629 65 that S & S alleges were received pre-petition by AMS (the "Goods"), eli) immediate payment to S & S of certain administrative expense claims, and (iii) an accounting of the Goods rNS As of January 16, 2007, approximately $808,000 of inventory subject to S & S's reclamation claim remained in the Debtors' possession On January 17, 2007, the Court held a hearing on the TRO Motion AMS is a wholesaler of general membership warehouse clubs, Wholesale Corporation, SAM's Wholesale Club, as well as interest books to including Costco Club, and Bl's certain specialty

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--- HR --- HR ----,2007 WL [62685 (Bkrtcy D Del) (Cite as: --- B.R ----) post-petition financing (the "Interim DIP Older"). Pursuant to the Interim DIP Order and the related DIP Loan Agreement (as defined in the Interim DIP Order), the Debtors are able to continue to receive financing from Foothill and the other Senioi Lenders, including cash advanced and other extensions of credit, but now in an aggregate principal amount of $75 million (the "DIP Loan") The DIP Loan is governed by the DIP Loan Agreement and the Interim DIP Order. The terms of the Debtors' post-petition financing did not extinguish the Debtors' obligations tinder the Senior Facility or discharge or release any related security interests Instead, the DI P Loan Agreement is a " creeping roll up" and contemplates the Debtors' satisfaction of their pre-petition obligations to the Senior Lenders through application of Cash Collateral (as defined in the Interim DIP Order), which is derived primarily from the proceeds from the sale of the Debtors' inventory, all before payment of Debtors' post-petition obligations under the DIP Loan The DIP Loan is secured by a lien on all of the Debtors' pre-petition, present and future assets Pursuant to sections 364(c)(2) and 364(c)(3) of the Bankruptcy Code, this lien is senior to all other liens other than validly perfected Pre-Petition Liens (as defined in the Interim DIP Order) In addition, pursuant to section 364(c){ I) of the Bankruptcy Code, the Senior Lenders are granted a superpriority administrative expense claim senior to all other adm inistrative claims The DIP Loan Agreement also provides that the Pre-Petition Liens granted to the Senior Lenders continue in full force and effect, and secure repayment of all obligations owed to the lenders under the DIP Loan Agreement Specifically, Section 17 10 provides that: Each Borrower hereby ratifies, adopts, confirm and agrees that (i) the Senior Agreement and each document comprising the Senior Facility is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects in relation to this Agreement except that on and after the Closing Date all references in any such document comprising the Senior Facility to "the Agreement", "thereto", "thereof", "thereunder" OJ © 2007 Thomson/West.

Page 5

words of like import referring to the Senior Agreement shall mean this Agreement; and (ii) to (he extent that an)' such document comprising the Senior F acility purports to assign or pledge to the Senior Agent oj the benefit of the Senior Lenders a seem ity interest in or lien on, {II~}' collateral as security [or the Senior Obligations, SIIeh pledge, assignment 01 grant oj the security interest or lien is hereby ratified and confirmed in aff respects in favor oj Agent [or the benefit oj Lenders in connection with this Agreement and the Loan Documents to secure the Obligations *3 DIP added) Loan Agreement at § 17 10 (emphasis

As of January 16, 2007, the Debtors' aggregate indebtedness under the Senior Facility and the DIP Loan is approximately $26.5 million That amount is comprised of approximately $13 million under the Senior Facility and $13.5 million under the DIP Loan

[I. Jurisdiction

The Court has jurisdiction over this adversary proceeding, pursuant to 28 USC. § 1334(b) This is a core proceeding, pursuant to 28 U .S.C § I57(b)(2)(A), (E), (H), and (0)

III Discuss ion

[J ][2] "Generally speaking, courts apply the standards for granting a preliminary injunction in determining the propriety of issuing a temporary restraining order" Tootsie Roll industries, Inc v Sothers, inc, 666 F.Supp 655, 658 (0 De1.l987). In order to grant a temporary restraining order, the Court "must be convinced that the following factors favor granting preliminary relief: (I) the likelihood that the moving party will succeed on the merits; (2) the extent to which the moving party will suffer irreparable harm without injunctive relief; (3) the extent to which the nonmoving party will suffer irreparable harm if the injunction is issued; and (4) the public interest" Novartis Consumer Health, Inc v Johnson & Johnson-Merck Consumer

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--- B.R ------ BR ----,2007 WL 162685 (Bkrtcy DDel) (Cite as: --- B.R. ----) Pharms Co. 290 F 3d 578, 586 (3d Cir 2002)

Page 6

A Probability OJ Success 011 The Merits [3][4][5] In order to obtain injunctive relief, the movant must demonstrate a "strong probability of success on the merits of the litigation." Phillips Petroleum Co v US Steel Corp, 616 F Supp 335, 337 (D. Del 1985). "The reclaiming seller has the burden of establishing each element of section 546(c) by a preponderance of the evidence"
Allegiance Healthcare Corp. v Primary Health Sys (In re Primary Health Sys ), 258 BR. Ill, 114

establish when that will occur and, more importantly, whether any of the Goods subject to its reclamation claim will still be in the Debtors' possession at that time Second, this argument ignores the terms of the Interim DIP Order, which provide, among other things, that the pre-petition liens secure the post-pennon indebtedness under the DIP Loan While this "cross-collateralization" provision may or may not be included in the final order approving the DJP Loan, it is contained in the Interim DIP Order, which was entered after notice to S & S Thus, as the matter stands today, the satisfaction of the Senior Facility is of no moment Even if the Senior Facility is satisfied, the Senior Lenders' pre-petition and post-petition 1iens on the Debtors' inventory are superior to S & S's reclamation claim
rN7

(Bankr D Del 200 1) Thus, S & S must establish that there is a strong probability that it will establish it has a right to reclaim the Goods under section 546(c) of the Bankruptcy Code S & S has not met this burden

The Goods are subject to the Senior Lenders' first priority pre-petition and post-petition liens and claims. Section 546(c)( I), as amended in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"), explicitly provides that the rights of a seller of goods are " subject to the prior rights of a holder of a security interest in such goods or the proceeds thereof." I I U.S.C § 546(c)(I). Accordingly, under the express language of § 546(c)(I) of the Bankruptcy Code, as amended, the Senior Lenders' pre-petition and post-petition liens on the Debtors' inventory are superior to S & S's reclamation claim. FN6 For this reason alone, S & S has failed to establish it any likelihood of success in establishing it has a valid reclamation right under section 546(c) of the Bankruptcy Code Nonetheless, S & S argues that its reclamation claim is only subject to Foothill's pre-petition liens under the Senior Facility and since the Senior Facility will soon be satisfied through the "creeping rollup" under the DIP Loan, S & S ultimately will succeed on the merits of its reclamation claim, This argument fails for three reasons *4 First, it ignores the fact that the Senior Facil ity is still in place Although the Senior Facility may be satisfied at some future date, S & S has failed to
© 2007 Thomson/West

Third, S & S's reliance on In re Pha/-MOI, Inc, 30 I BR 482 (BankLNDOh2003) in support of its argument is not persuasive. Phar-Mor is easily distinguished from the case at hand In Phar-Mor, the prior secured lenders had already been paid in full from collateral other than the reclaimed goods. hi The court in Phar-Mor, sped fically stated these Vendors had reclamation claims that were subject to and not extinguished by the prior security interest of Pre-Petition Lenders, When a seller's right of reclamation is subject to the interest of a prior secured creditor, the value of that seller's claim depends on the actual disposition of the subject goods. Pre-Petition Lenders chose to release their security interests and were paid in full through the Interim and Final DIP Orders by the DIP Facility. Thus, the value of the Vendors' reclamation claims is not affected by the interests of Pre-Petition Lenders
Id at 497 That is simply not the case here As set forth above, the Senior Lenders have not been paid in full, and S & S's reclamation claim is still subject to their interests, Moreover, the Senior Facility is being paid down, in part, through the sale of the Goods

[6][7] At the end of the day, S & S is doing little more than urging the Court to apply the doctrine of

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--- B R. ------ B.R ----, 2007 WL 162685 (Bkrtcy D Del) (Cite us: -- R.R. ----) marshaling FN8 However, "unsecured creditors cannot invoke the equitable doctrine of marshaling" Pittsburgh-Canfield CO/P, 309 B R. at 291 Moreover, the Senior Facility and the DIP Loan Agreement specifically provide that the lenders have no duty to marshal Because marshaling does not apply to an unsecured creditor such as S & S, they cannot direct the Senior Lenders to satisfy their claim out of collateral other than the Goods Based on the foregoing, S & S has failed to establish there is a strong probability it will succeed on the merits of its reclamation claim. Thus, this factor weighs heavily against granting the TRO Motion.

Page 7

harmed by the exercise of the AMS's contractual rights in the future by either AMS or its assignee. Further, S & S's harm is capable of being remedied by monetary compensation By its own statement, S & S is trying to prevent itself from incurring wrongful credits and additional expenses Therefore, because S & S has failed to establish the existence of any irreparable harm, this factor weighs against granting the TRO Motion

C Balance of Equities

B Irreparable Harm
[8][9][1 OJ[ 11] "In order to demonstrate irreparable harm the plaintiff must demonstrate potential harm which cannot be redressed by a legal or an equitable remedy following a trial. The preliminary injunction must be the only way of protecting the plaintiff from harm" Instant Air Freight Co v C F Ail' Freight, Inc, 882 F .2d 797, 80 I 93d Cir 1989) "[ljnjunctions will not be issued merely to allay the fears and apprehensions or to soothe the anxieties of the parties" Campbell Soup Co v ConAgra, Inc, 977 F2d 86, 92 (3d Cir.1992) (citations omitted) Further, "[t]he availability of adequate monetary damages belies a claim of irreparable injury" Frank's GMC Truck Center, Inc v General Motors Corp, 847 F.2d 100, 102 (3d Cir 1988) The Third Circuit has also noted " that a purely economic injury, compensable in money, cannot satisfy the irreparable injury requirement" lei (citing Morton v. Beyer, 822 F .Zd 364,372 (3d Cir.1987).) S & S argues that the relief it requests is necessary in order to prevent any buyer of AMS's assets from returning the Goods to S & S and demanding a credit, and to prevent S & S from incurring additional expenses for replacement goods to other distributors who are working to satisfy the demands of AMS's customers. AMS, under its contract with S & S, has obtained the Goods on a fully returnable basis-S & S cannot argue that it will be irreparably © 2007 Thomson/West

*5

[12][ 13] The third factor in the preliminary injunction analysis is the balancing of equities. In applying this factor, "a court should consider whether granting the requested relief will result in greater harm to the party on whom it is imposed than its denial wi II have 011 the party who seeks it" Farberware, Inc v Mr Coffee, IIlC, 740 F .Supp 29 1,304 (D,DeI.1990) (internal citations omitted) This factor is neutral in this case. There can be no question that the Debtors would be harmed by the imposition of an injunction. Similarly, allowing the Debtors to continue to sel! the Goods will probably result in rendering S & S's reclamation claim worthless Because S & S has the burden to establish that the balance of equities is in favor of granting the TRO Motion, however, the balancing of the equities weighs against granting the TRO Motion

D The Public interest S & S argues that the TRO has an impact on the public interest by "preserving the value of the Goods and Plaintiff's right to reclaimation." The Court does not find this argument persuasive S&S further argues that "the public interest benefits when all parties expect that courts require compliance with the express textual requirements of statutory law" This statement has absolutely no bearing all the case at hand. S & S has not met their burden of proving that they do in fact have any statutory fights As discussed above, S & S's Motion does not establish the likelihood that S & S US. Govt Works

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--- B R ---(Cite as: --- B.R. ----)

Page 8

--- BR ----, 2007 WL. 162685 (Bkrtcy D Del)

will succeed on the merits of the claim, The Court finds that the public interest is simply not

FN4 The facts set forth herein are derived from the: (i) Affidavit of Donald F
England In SIiPPOIf oj the Emergency Application oj Simon & Schuster /01 Temporary Restraining Order Pursuant to Bankruptcy Rille 7065 [Docket No 9}. (ii) Affidavit oj Curtis R. Smith Submitted in Support oj Advanced Marketing Services, Inc ~~ Opposition to the Emergency Application oj Simon & Schuster for Temporary Restraining Order Pursuant fa Bankruptcy Rule 7065 [Docket No 18}. and (iii) Declaration of Daniel Whitwer oj We/Is Fargo Foothill. lnc Pursuant to 28 USc. § 1746(2), all of which were

implicated in this soph isticated parties.

commercial

dispute

among

IV Conclusion

This is a simple case. Under the express language of § 546(c)(1) of the Bankruptcy Code, as amended, the Senior Lenders' pre-petition and post-petition liens on the Debtors' inventory are superior to S & S's reclamation claim For this reason, S & S has failed to establish it has any likel ihood (let alone a probability) of success in establish ing it has a val id reclamation right under section 546(c) of the Bankruptcy Code. Moreover, S & S has failed to establish the existence of any irreparable harm Finally, S & S has failed to meet its burden of proof of establishing that the balance of equities support granting an injunction. In short, all of the factors relevant in this case weigh against entering an injunction FN9 Thus, the TRO Motion is denied without prejudice
*6

admitted into evidence at the hearing on the TRO Motion

ORDER For the reasons set forth in the Court's Opinion of this date, the Emergency Application of Simon &
Schuster Pursuant

reclamation of goods in the aggregate amount of $6,014,311 .97. S & S did not submit any evidence, however, in support of the statement of counsel Thus, for purposes of the TRO Motion, S & S is seeking reclamation of goods in the aggregate amount of$5, 1 05,629 ,65. FN6 The Court would reach the same result under section 546(c) as it existed prior to BAPCPA. See Yenkin-Majestic re Pittsburgh-Canfield Corp). 309 B R 277, 283-88 (BA p, 6th Cir.2004) (pursuant to pre-BAPCPA section 546(c) of the Bankruptcy Code and UCC section 2-702, sellers' reclamation claims in respect of goods to debtors were subject to senior secured lenders' floating lien on such goods); In te Primm), Health S),S, Inc, 258 BR at 114 ("a creditor with a prior perfected security interest in inventory which contains an after-acquired property clause is a good faith purchaser under the UCC"); and Gayle)' & Lord Inc. II Arley COIP (In re Arico, Inc ), 239 BR 261,270-71 (BankrS D N Y.1999) (same)
([/1

& S's counsel stated that S & S now seeks

FN5 At the hearing on the TRO Motion, S

/01

10

is DENIED without prejudice

Tempo/my Restraining Order Bankruptcy Rille 7065 [Docket No 8]

Paint Corp

Corp

v

Wheeling-Pittsburgh

Steel

FN 1. This Opinion constitutes the Court's findings of fact and conclusions of law pursuant to Federal Rule of Bankruptcy Procedure 7052 FN2 The Official Committee of Unsecured Creditors takes no position in connection with the TRO Motion FN3 In addition, S & S has failed to establ ish the existence of any irreparable harm 01 that the balance of equities favors entering an injunction.
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FN7

In addition, the adequate protection

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--- B R ------ SR. ----, 1007 WL [62685 (Bkrtcy.DDe[) (Cite as: --- RR. ----)

Page 9

liens attach 10 the pre-petition including the Goods

collateral,

FN8. "Marshaling of assets applies when a senior secured creditor can collect on its debt against more than one property or fund held by the debtor but a junior secured creditor can only proceed against one of those sources Assuming certain elements are met, the process then requires the senior secured creditor to first collect its debt against the collateral other than that in which the junior secured creditor holds an interest, thereby leaving that collateral for the junior secured creditor's benefit." Ptttsburgh-Canfield Corp, 309 B.R at 291 (citations and emphasis omitted) FN9. As discussed above, the public interest factor is simply inapplicable to this case Bkrtcy DDeL,2007, In re Advanced Marketing Services, Inc --- BR ----, 2007 WL 162685 (Bkrtcy.o.Del) END OF DOCUMENT

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Westlaw.
Slip Copy
(Cite

Page I
Slip Copy)

Slip Copy, 2006 WL 3498065 (Bkrtcy 0 Del.)
3S:

H

In re American Tissue, Inc Bkrtcy D Del.,2006 Only the Westlaw citation is currently available. United States Bankruptcy Court.D Delaware AMERICAN TISSUE, INC, et al., Debtors Christine C Shubert, Chapter 7 Trustee for the Estates of American Tissue, Inc., et al., Plaintiff,
v.

Premier Paper Products, LLC, Wipes Industries, LLC, Koster Industries, Inc, and Does 3 through .20, Defendants.
Bankruptcy

Adversary

No, OI-10370(KG). No. 06·S0929(KG).

Dec. 4, 2006. Brian Rich, Beger Singerman, Miami, FL., Sheldon K Rennie, Fox Rothschild L.LP, Wilmington, DE, for Debtors/Plaintiff Amy Elizabeth Evans, Cross & Simon L.tC, Bruce Grohsgal, Pachulski, Stang, Ziehl, Young, Jones, James F. Harker, Cohen Seglias Pallas Greenhall & Furman, Laura Davis Jones, Pachulski, Stang, Ziehl Young, Jones & W, Michael C Heyden, Richard I-I, Cross, Jr., Cross & Simon, L.LC, Rosalie L Spelman , Janssen Keenan & Ciardi PC, Sheldon K Rennie, Fox Rothschild LLP, Wilmington, DE, Anthony J Carriuolo, Berger Singerman, Fort Lauderdale, FL, Paul Steven Singerman, Beger Singerman, Miami, FL, Craig Evan Freeman, Alston & Bird LLP, New York, NY, for Debtors Bernard George Conaway, Fox Rothschild L.L.P, Wilmington, DE, for Plaintiff KEVIN GROSS, Bankruptcy Judge Re: Docket No.4
Summary oj file Case MEMORANDUM OPINION

*1 The matter before the Court is the Chapter 7 Trustee's Motion for Temporary Restraining Order Without Notice and Ex Parte Application for Extension of Temporary Restraining Order and Order to Show Cause Why Temporary Restraining Order Should Not be Converted to a Preliminary Injunction ("the TRO Motion") OJ> 4 whereby the Trustee seeks to enjoin the sale of machinery and equipment at an auction scheduled for December 6, 2006 (Hthe Auction"). On November 22, 2006, the Court granted the TRO Motion for the issuance of a temporary restraining order (UTRO"). D I. 6 The TRO temporarily restrained defendants from selling or otherwise disposing of machinery and equipment pending a hearing on whether a preliminary injunction should issue. The Court held a hearing on December 1, 2006, to determine whether to issue a preliminary injunction. The record consisted of declarations, deposition testimony and the live testimony of a witness The application for the preliminary injunction arises in an adversary proceeding in which the Trustee has filed an Amended Complaint for Turnover of Estate Property, Imposition of a Constructive Trust and Replevin ("the Complaint"). D.I 3 The Trustee is seeking the return of equipment and machinery which the Trustee alleges was owned by American Tissue Corporation ("ATC") and maintained at its site in Mexico, and wrongfully taken by defendants and included among the items for sale at the Auction. For reasons explained within, the Court will grant the motion for a preliminary injunction on a limited basis
JII risdiction

The Court has jurisdiction over the adversary proceeding pursuant to 11 USC §§ 105 and 542, and 28 USC §§ 157(a) and (b) and 1334 Venue is proper because the adversary proceeding arises out of the jointly administered bankruptcy cases No Claim to Orig US Govt Works.

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Slip Copy Slip Copy, 2006 WL 3498065 (BkrtcyDDel) (Cite as: Slip Copy) pending before the Court, In re American Tissue, et al. Case No O/-J0370(KG) Further, this adversary proceeding is a COle proceeding and therefore the Court has authority to hem and determine all matters pursuant to 28 USC §
J57(b)(2)(rl), (£) and (F)

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Inc,

Statement

of Relevant Facts

The facts giving rise to the pending adversary action are complicated and, with minimal discovery taken at this early stage of the litigation, not fully developed. With the time constraints necessarily imposed upon the Court in the setting of an emergency application the Court will not be able to fully recite all of the facts but instead will summarize the facts it believes are most relevant The support for these factual findings comes from the record which the parties submitted, namely, declarations, documents and the live testimony of the principal of two of the defendants I, On April 26, 2004, the Office of the United States Trustee appointed the plaintiff to serve as the Chapter 7 Trustee ("the Trustee") for the estate of American Tissue, Inc.("ATC"), and other debtor entities ("the Debtors"), pursuant to J 1 USC § 701 , 0.1. 3447. The Trustee, as such, has standing to bring claims on behalf of the Debtors' estates, *2 2. In the Complaint, the Trustee named as defendants Premier Paper Products, LlC, a Delaware limited liability company ("Premier"), Wipes Industries, LlC, a Delaware limited liability company ("Wipes") and Koster Industries, Inc., a New York corporation ("Koster") 3. Premier and Wipes are in the business of buying and selling machinery and equipment and are in possession of the machinery and equipment identified in the Complaint and which the Trustee claims belong to Debtors' estates. The Premier and Wipes limited liability companies are owned and controlled by Mr John Gabayzadeh. Mr. Gabayzadeh is the son of Mehdi Gabayzadeh, the former Chief Executive Officer of ATe who was indicted and convicted of fraud for activities at
ATC © 2007 Thomson/West

4 Koster is a New York based auctioneer which specializes in the disposition of industrial machinery and equipment It contracted with Wipes to conduct a commission sale of machinery and equipment designated by Wipes, The Koster-Wipes agreement provides that Koster is to receive commissions of a 13% buyer's premium and 5% seller's commission. In addition, Koster and Global Equipment and Machinery Sales, Inc. ("Global"), a non-party entity, were to advance the costs related to the Auction Thus far, Koster and Global have advanced more than $300,000 in costs and have other obligations to advance up to $62,000. These advanced costs are to be reimbursed flam the Auction proceeds equipment lease with American Tissue de Mexico, SA de CV ("AT Mexico"), whereby ATC agreed to lease property and equipment ("the ATC Property ") to AT Mexico, and the leased property was to remain at AT Mexico's facilities in Mexicali, Mexico The lease, as later modified, established that the ATC Property was to remain the sale and exclusive property of ATC AT Mexico issued a memorandum to ATC on December 18, 2000, listing the ATC Property located at AT Mexico's facility in Mexicali, Mexico The memorandum and list of the A TC Property are attached to the Complaint as Exhibit C
6. On September 5 On or about April I, 1995, ATC entered into an

10, 200 I, A TC and related entities filed in this Court petitions for bankruptcy protection under Chapter I I of the Bankruptcy Code, 1/ USC §§ lI01-r/ The Court entered an Order on April 23, 2004, converting the Debtors' cases from Chapter II to Chapter 7 under the Bankruptcy Code D I 3449 7. Prior to the conversion to Chapter 7, ATC brought suit against AT Mexico in the United States District Court for the Eastern District of New York ( "the New York Action") for replevin, breach of lease agreement, to prevent unjust enrichment, and for conversion and negligence. On March 29, 2006, ATC obtained entry of a default judgment against AT Mexico in the New York Action in the sum of $10,445,346.35 AT Mexico has not satisfied any portion of the default judgment.

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Slip Copy Slip Copy, .2.006 WL 3498065 (Cite as: Slip Copy) (Bkrtcy 0 Del)

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8. In preparing for the preliminary injunction hearing, the Trustee and the defendants, with the assistance of the Trustee's expert, inspected the equipment and machinery which is listed for sale at the Auction ("the Auction Items") and they categorized the Auction Items into four categories which the parties refer to as "buckets" The inventory of the Auction Items with the "bucket" annotations was introduced at the hearing as Plaintiffs Exhibit 3 and because of its helpfulness and significance to the Court's ruling, a copy is attached as an exhibit to the Order giving effect to this Opinion *3 A. Bucket I consists of Auction Items that are not the subject of the Complaint, i e., are not included in Exhibit C to the Complaint, and the Trustee is not contesting their sale at the Auction B Bucket 211 contains one item which, unlike the equipment in Bucket 2B, has a serial number The Trustee seeks a preliminary injunction against the sale of this bucket item However, at the preliminary injunction hearing, the Trustee conceded that the Bucket 2A item may be sold at the Auction provided that the proceeds of the sale are escrowed C Bucket 2B contains seven pieces of equipment and, as noted previously, these items do not bear a serial number Again, the Trustee is willing to allow these seven items to be sold at the Auction if the sale proceeds me escrowed Premier and Wipes contend they have good title to these items and contest the imposition of any conditions on their sale D Bucket 3 includes equipment and machinery which Premier and Wipes recently moved flam a warehouse in EI Centro, California, which are clearly the subject of the Complaint and title to which is uncertain The Trustee and Wipes and Premier are in agreement that these items may be auctioned, provided that minimum reserve sell ing prices are set with the Trustee's approval and the sale proceeds are placed into escrow

now determine whether to convert the TRO to a preliminary injunction The issuance of a preliminary injunction is an extraordinary remedy and the standards for issuance are well settled under Third Circuit law The Third Circuit requires this Court to apply four factors in determining whether to grant the drastic remedy of a preliminary injunction They are: (1) the reasonable likelihood that the movant, here the Trustee, will prevail on the merits at the final hearing; (2) the extent that irreparable harm will result without injunctive relief; (3) the balancing of the harm the defendants will suffer if the Court issues the preliminary injunction; and (4) the public interest. See, e g, Kos Pharms, Inc V Andrx Corp, 369 F 3d 700 (3d Cit 2004), In re Carekdatrix Corp, 306 BR 478 (Bankr D De12004) The duty of the Court is to preserve the relative positions of the parties pending a trial on the merits Univ OJ Tex V Camensich, 451 US 390, 395 (/98 /) In the bankruptcy setting, the Court should be especially sensitive to situations which could result in the dissipation of estate assets, In re Focus Media Inc, 387 F 3d 1077 (9th Cir 2004), and the Court's responsibility to prevent a wrongful taking of the bankrupt's assets provides it with a broader equitable power. Grupo Mexicano Desarrollo, SA. v. Alliance Bond Fund, Inc, 527 US 308, 331 (1999), and In re Owens Coming, 419 F 3d 195, 208-209 fn 14 (3d Cir2005) ("had the company in Grupo Mexicano been in bankruptcy, the bankruptcy court would have had the authority to implement the remedy the district court lacked authority to under general equity power outside the bankruptcy context ") *4 The Court now turns to the application of the facts to the standards for determining the issuance of a preliminary injunction The concessions by the Trustee and agreements with respect to the treatment of the "buckets" of the Machinery have reduced the contested motion for injunctive relief to the items in Bucket .2A and 2B, since the Trustee has agreed to the sale of Bucket I items without limitation or condition, and the parties have agreed to conditions which will permit the sale of Bucket 3 items Therefore, the remaining discussion is limited to Buckets 2A and 28. Works.

Discussion

(111 d

Ruling

The Court previously entered the TRO on the Trustee's e., pal te application and the Court must © 2007 Thomson/West

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Likelihood oj Success The burden is on the Trustee (0 establish a reasonable likelihood of success on the merits Decision 011 the item in Bucket 2A is not difficult This item has a serial number which matches the serial number of all item previously sold by Debtors on notice pursuant to an Order of this Court. 011 July 10, 2002, the Court signed an Order Establishing Procedures for the Sale Free and Clear of Liens and Encumbrances or Abandonment of Certain Machinery and Equipment. D.I 1341 Pursuant to the Order, Debtors noticed the sale of the machine which in fact is the Bucket 2A item There is no evidence that the sale was not at ann's length The reasonable likelihood that the Trustee will be able to prove that the sale was improper and that ATC retained title is small and the Trustee presented no facts which give the Court pause in permitting the sale of the 2A item at the Auction without conditions

success at trial would be an empty one and the Debtors' estate will therefore be irreparably harmed if the assets are sold without imposing safeguards.
*5 3. Hal/II to Defendants from the Issuance of the Injunction The Court is also required to determine

whether and what harm Premier and Wipes might suffer from a preliminary injunction. The Court finds that they would be harmed if the Auction is outright enjoined. Specifically, Premier and Wipes have entered into a settlement with their landlord and if the Auction is enjoined that settlement will be disrupted or worse which would expose Wipes and Premier to substantial financial risk The Court will therefore permit the sale of Bucket .2B items to proceed but will fashion a remedy which protects all of the parties Furthermore, if the Auction does not proceed, Koster as auctioneer will remain at risk, having advanced over $300,000 which Koster may be at risk in collecting. Koster is also entitled to payment of its commissions to prevent unjust enrichment to either Premier, Wipes or Debtors. Here again, the Court's contemplated remedy will eliminate harm to Koster which is necessary and appropriate because the Trustee did not produce any evidence of any wrongdoing whatsoever by Koster. 4 Public Interest The public interest is served when the Court imposes relief which maintains integrity in financial and business dealings and protects bankrupt estates from misappropriation of assets, Here, granting relief to the Trustee while eliminating or reducing harm to the defendants satisfies the final requirement for the issuance of a preliminary injunction.
Remedy

The items in Bucket 2B require a different analysis and result The record amply shows that ATC was the owner of the 2B items and leased those items to AT Mexico which defaulted on its obligations On the present record and given the minimal opportunity the Trustee has had to take discovery in this expedited proceeding, the Court is satisfied that there is a reasonable likelihood that the Trustee will prevail in establish ing that title never passed from ATC and therefore no other entity can now hold title The Trustee has established that irregularities in the disposition of ATC machinery and equipment abound Testimony at the heating established that Wipes and Premier's business operations and relationships are suspect Therefore, regarding the Bucket 2B items, the Trustee has satisfied the first prerequisite for a prelim inary injunction to issue 2 Irreparable Harm At the hearing, the Trustee established conclusively that Prem ier and Wipes would not have the financial capacity to satisfy a money judgment, and if the Bucket 2B items are sold and Premier and Wipes use the sale proceeds to pay the Auction costs and to satisfy theh creditors as represented at the hearing, little if any money will remain to pay the Trustee for the estate's losses arising from a wrongful taking and sale of Debtors' machinery and equipment It is clear that in the absence of injunctive relief, the Trustee's
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The Auction will proceed on December 6, 2006, as scheduled, on the following terms and conditions: A Bucket I items may be sold and the proceeds paid to Wipes and Premier, subject to payment to Koster of costs and cornm issions on the terms of the agreement with Koster B Bucket 3 items may be sold subject to the Trustee's right to establish price minimums and the
Orig

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Slip Copy Slip Copy, 2006 WL 3498065 (Bkrtcy.DDel.)
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proceeds will be escrowed pending trial and the Court's luling C. Bucket 2A item may be sold and the proceeds, net of paying Koster, will be paid to Wipes and Premier. D Bucket 2B items may be sold and the proceeds will be paid into escrow If the funds paid to Wipes and Premier from the sale of Bucket I and 2A are insufficient to pay Koster, Wipes' landlord under the settlement agreement or to perm it the sale of equipment and machinery free and clear of liens, Koster, Premier and/or Wipes may apply on notice to the Court for relief on an expedited schedule An appropriate Older giving effect to the Court's ruling will issue with this opin ion Bkrtcy D Del ,2006 In re American Tissue, Inc Slip Copy, 2006 WL. 3498065 (Bkrtcy D Del) END OF DOCUMENT

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3 Jones Eq 177 3 Jones Eq 177,56 NC. 177, 1857 WL 1693 (NC), (Cite as: .3 Jones Eq. 177) 69 Am Dec 728

Page I

N.c. 1857.

C WILLIAM GAUSE v CHURCHILL PERKINS, Supreme Court of North Carolina WILLIAM GAUSE
v,

action at law for the trespasses above-mentioned, and that the same was still pending, but that no amount of damages he may recover, at law, will compensate for the injury threatened to his property. The prayer of the bill is for an injunction and for an account The answer of the defendant denies that the plaintiff has title to any part of the land used by him, but says that all thereof is his own property by a valid title, He denies that the process of cultivation, as conducted by him, is calculated irreparably to injure the land, but that he is pursuing the business in a prudent manner He avers also, that he is entirely solvent, and worth much more than the whole value of the land claimed by the plaintiff, so that there would be no difficulty in obtaining remuneration, at law, for whatever he might recover from defendant by the way of damages, Defendant moved to dismiss the bill for want of equity, which motion was refused by his Honor, Judge DICK; whereupon the defendant appealed to this Court West Headnotes
Injunction 212 €=S2

CHURCHILL PERKINS, June Term, 1857 *1 A bill alleging that a trespasser was about to commit irreparable injury by boxing and working turpentine trees, and by cutting timber and making staves on land fit only to be cultivated for these products, without an averment of the defendant's insolvency, will be dismissed on motion APPEAL from the Court of Equity of Brunswick county, Judge DICK presiding The plaintiff in his bill alleged that he was the owner in fee simple of the land in question, and that for several years past he has been in possession of a part of it by building, fencing, and cultivating such part continually up to the date of his bill; that the most of the land is fit for the production of turpentine, staves and timber, and for but little else; that the defendant, in 1852, by his agents and servants, against the wiII of the plaintiff, entered upon the premises and boxed the pine trees for procur ing turpentine, and has carried on the business of making turpentine on this land, and carrying it off and selling the same in large quantities; that he has boxed some 25,000 trees; that he is overworking these trees, and that in a few years they will be worn out, useless and unfit for making turpentine; that "he is now engaged in committing other waste, spoil and destruction upon the said land, and is thus doing an irreparable injury to the said land, and will render the same utterly useless and valueless, un less he is restrained by the injunction of this Honorable Court." It also charges, that the defendant has no interest or title in the land, or any part of it; that the plaintiff had instituted an

212 Injunction 21211 Subjects of Protection and Relief 21211(8) Matters Relating to Property 212k45 Trespass or Other Injury to Real Property 212k52 k. Cutting or Removal of Timber Most Cited Cases A bill alleging that a trespasser was about to commit irreparable injury by boxing and Walking turpentine trees, and by cutting timber, and making staves on land fit only to be cultivated for these products, without an averment of the defendant's insolvency, will be dismissed on motion
Strange, for plaintiff

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3 Jones Eq 177 3JonesEq 177,56NC.I77, 1857WL 1693 (NC),69AmDec
728 (Cite as: 3 Jones Eq. 177) London and Moore, for defendant PEARSON, J *2 The general rule is, Equity does not extend its

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jurisdiction either to offences against the public, or to civil trespasses In reference to the fanner no exception has ever been made; but in reference to the latter an exception has been allowed after much hesitation, and jurisdiction assumed for the prevention of (0111' or injuries to property, by means of the writ of injunction, under certain restrictions, namely, two conditions must concur in order to give jurisdiction=the plaintiffs title must be admitted, or be established by a legal adjudication, and the threatened injury must be of such a nature as will cause irreparable damage. The ground of the first restriction is obvious; a court of Equity cannot pass upon the legal title; to do so would convert a bill in Equity into an action of ejectment. It is not necessary, however, that the legal title should be established before the aid of a court of Equity is asked for, because the injury may be committed before a trial at law can be had, and when the bill sets out that an action has been, or is about to be, instituted for the purpose of establ ishing the title, Equity will exert its power of injunction in aid of the action at Law, by taking care of the subject-matter of the action, but without assuming jurisdiction to decide the question of title Irwin v Davidson, .3 Ire Eq. 316. The ground of the second restriction is equally obvious. I f a court of Equity interfered to prevent an alleged trespasser from doing ordinary acts of ownership, such as cultivating the land, clearing and opening new fields, &c., a bill for an injunction would accompany a declaration in ejectment, almost as a matter of course, causing not only much private loss, but great detriment to the public Fields already cleared would lie idle, woodland that, in a country like ours, ought to be cut down and cultivated, would stand wild and unproductive, and the valuable products of our forests would no longer swell the tide of trade In the application of this restriction, much difficulty occurs in defining what injury is irreparable The word means that which cannot be repaired, retrieved, put back again, atoned for The most
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absolute and positive instance of it is the cutting down "ornamental trees," such as the noble oaks in our State-House grove. "A tree that is cut down cannot be made to grow again." But the meaning of the word "irreparable" pointed at by this example, is not that which has been adopted by the courts either in England or in this State. Grass that is cut down cannot be made to grow again, but the injury can be adequately atoned for in money. The result of the cases fixes this to be the rule: the injury must be of a peculiar nature, so that compensation in money cannot atone for it; where, from its nature, it may be thus atoned for, if in the particular case the party be insolvent, and on that account unable to atone for it, it will be considered irreparable
*3 In England, analogies drawn from the doctrine of destructive waste are resorted to for the purpose of aiding in the application of the rule It is there held,

that if an alleged trespasser is about to pull down the dwelling-house, an injunction will lie, without an averment that he is insolvent; for, although with money enough, as good, or a better house can be built, still it involves a matter of feeling--there is an attachment to the house in which our ancestors lived. This feeling is certainly not as vivid in this country as it is in England How far our courts will follow their decisions, is not now for consideration There may be a distinction between pulling down a house merely for destruction, and doing so for the purpose of improvement So, it is there held, that if an alleged trespasser is about to work a mine, an injunction will lie without an averment of insolvency, because it is destruction, and takes away the substance of the land, and there is no mode of ascertaining the value, or the quantity of the copper, tin, or other mineral that is extracted from the bowels of the earth Our courts have shown a disposition not to interfere, unless there be an averment of insolvency. In Falls 11 Mc/ffee, 2 Ire. 239, it is suggested that instead of an injunction, the proper course was to appoint a receiver, so as not to stop the working of a gold mine; for that was alike "opposed by public policy and private justice." This suggestion is adopted in the Deep River Gold Mining Camp any v. Fox, 4 Ire. Eq 61; in which case, as well as in Irwin v Davidson, supra, there is an averment of insolvency. The subject of working mines is, however, not now under consideration.

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3 Jones Eq 177

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(N C), 69 Am Dec 728

3 Jones Eq 177,56 N C. 177, 1857 WL. 1693 (Cite as: 3 Jones Eq, 177)

So, it is there held, that if an alleged trespasser is about to cut down timber trees, as distinguished from ornamental trees, an injunction will lie, without an averment of insolvency; because it is destruction, and takes away the substance of the land, and would be waste if committed by a particular tenant Our question is, how far the English doctrine is applicable here in regard to clearing the land, cutting timber for shingles, and staves and working trees for turpentine? The analogy taken from the doctrine of destructive waste fails; for it is settled with us that a widow, or other tenant for life, may clear a reasonable quantity of land, and is not confined to the use of timber as " house-bote," "fire-bote," "hay-bote," but may sell or otherwise dispose of the wood on the land so cleared So, the widow may cultivate the pine-trees in her dower-land for the purpose of getting turpentine, and if dower is assigned on land fit for nothing but to afford staves and shingles, it is difficult to conceive what other use she can make of it. Putting this analogy out of the way, the naked question is: in the present condition of our country, does the cultivation of pine-trees for turpentine, or the cutting down of oak-trees for staves, or cypress trees for shingles, cause an irreparable injury?--one which cannot be compensated for in damages? The very purpose for wh ich these trees ai e used by the owners of land is to get from them turpentine, staves and shingles, for sale It follows, therefore, as a matter of course, that if the owner of the land recovers from a trespasser the full value of the trees that are used for these purposes, he thereby receives compensation for the injury, and it cannot, in any sense of the word, be deemed irreparable So that private justice and public policy, which calls for a full development of the resources of the country, alike forbid the interference of a court of Equity, except in cases where, from the insolvency of the alleged trespasser, the compensation in money cannot be had Accordingly in Lloyd v Heath, Bus Eq. 41, the bill avers the insolvency of the defendant, and it is Heated of in the opinion as a necessary part of the plaintiff's equity. So, in the other cases in reference to timber, and in the gold-mining cases, this averment is always made as © 2007 Thomson/West

a necessary part of the plaintiff's equity Indeed, in Thompson v Williams, I Jones' Eq 178, it is said that an injunction against clearing and opening land, as is usual among farmers, would not be sustained, although there is an averment of insolvency "If in such a case a defendant can be enjoined, we see no good reason why, in every case where he is a poor man, possessed only of the land for which he is contending, he may not be stopped by an injunction from opening and clearing the ground"

*4 In our case, the injury, against which the plaintiff asks for the protection of an injunction, consists in the cultivation of trees in procuring turpentine, and in getting staves for barrels It is not necessary to decide whether the cultivation of turpentine and, as an incident thereto, the getting of staves and hoop-poles for the barrels necessary to put it in, is not such an ordinary use of it, in the course of agriculture, as does not come with in the jurisdiction assumed by the courts of Equity in reference to the prevention of civil trespasses, even although there be an averment of insolvency, for the bill does not make that averment, and on that account is fatally defective. The bill contains a general allegation that the acts complained of will be productive of irreparable injury, but the allegation must be attended with such a statement of facts, as enables the court to see that such would be the result; Bogey v. Shute, 1 Jones' Eq. 180. As instances where there is such a statement of facts as enables the court to see that the damage will be irreparable, and where an averment of insolvency is not necessary, we may refer to Purnel v Daniel, 8 Ire. Eq 9; Troy v. Norment, 2 Jones' Eq 3 18. The injuries complained of in these cases were, in their natures, destructive. But ours is a new country; our policy is to subdue the forest and develope its resources, and we decide, that to work trees for turpentine, or to cut down trees for staves, is not destruction, and the court cannot see that the injury will be irreparable, unless there be an averment of the insolvency of the defendant
Upon the coming in of the answer, a motion was made to dissolve the injunction, which was allowed Afterwards, at a subsequent term, a motion was made to dismiss the bill, which was disallowed, and the defendant appealed to this Court, We have seen Works

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3 Jones Eq 177 3 Jones E.q 177,56 N.C. 177, 1857 WL 1693 (NC ), 69 Am Dec 728 (Cite as: 3 Jones Eq" (77)

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that, upon the plaintiffs own showing, he had no equity After the answer came in, alleging the defendant's solvency, and the consequent dissolution of the injunction, there was an additional ground for dismissing the bill It could only then be held over as an original bill for discovery, and 011 account of the turpentine and staves which the defendant had disposed at; in other words, as a bill fOJ an account against a trespasser. This would certainly be a bill of the "first impression." Where Equity has jurisdiction to prevent a wrong by injunction, if there has been loss before the injunction is sued, the court will direct an account of the profit that the defendant has made, as incident to the jurisdiction assumed for the purpose of injunction, so as to prevent circuity and expense A fter a plainti ff has established his right to come into one court for an injunction, he will not be required to resort to an action in another court to recover his damages. But the equity for the account is stric(/}, incident to the injunction, and therefore, if an injunction is refused, an account cannot be given, but the plaintiff must resort to a court of law, Adams' Eq. 2 J 9 *S The motion in the court below ought to have been allowed.
10

dismiss the bill,

PER CURIAM, Decree accordingly. N,C. 1857 Gause v . Perkins 3 Jones Eq. 177, 56 N.C 177, 1857 WL 1693 (HC), 69 Am Dec 728 END OF DOCUMENT

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Official Form 1 (04/07) United States Bankruptcy for the
Name of Debtor (if individual, enter Last, First, Middle):

Court Delaware
Name of Joint Debtor (Spouse) (Last, First, Middle)

District of

Voluntary

Petition

New Century TRS Holdings, Inc.
All Other Names used by the Debtor in the last 8 years (include married, maiden, and trade names): All Other Names used by the .Joint Debtor in the last 8 years (include married, maiden. and trade names) Last four digits of Soc. Sec./Complete one, state all) Street Address of Joint Delror (No. & Street, City, and State): EIN or other Tax ID. No. (if more than

f/k/a New Century Financial Corporation
Last four digits of Soc. Sec./Complete all) EIN or other Tax !D. No. (if more than one, state

33-0683629

Street Address of Debtor (No. & Street, City, and State):

18400 Von Karman Ave. Suite 1000 Irvine, California
IZIPCODE County of Residence or of1he Principal Place of Business:

92612

I

IZIPCODE County of Residence or of1he Principal Place of Business: Mailing Address of Joint Debtor (if different from street address):

I

Orange County, California
Mailing Address of Debtor (if different from street address):

j

ZIPCODE

Location of Principal Assets of Business Debtor (if different from street address above):

I

I ZIPCODE

1
I

I ZIPCODE
Chapter of Bankruptcy Code Under Which the Petition is Filed (Check one box)

Type of Debtor (Form of Organization) (Check one box.) 0 Individual (includes Joint Debtors) See Exhibit D an page 2 a/this/arm. Corporation Partnership Other (If debtor is not one of the above entities, check this box and state type of entity below.) (includes LLC and LLP)

Nature (Check one box.) 0 0 0 0 0 0

of Business

Health Care Business Single Asset Real Estate as defined in II U.S.C § 101 (SIB) Railroad Stockbroker Commodity Broker Clearing Bank

~
0 0

o o o o
~

Chapter 7 Chapter 9 Chapter II Chapter 12 Chapter 13

0

Chapter 15 Petition for Recognition of a Foreign Main Proceeding Chapter 15 Petition for Recognition of a Foreign Nonmain Proceeding

0

~

Other
Tax-Exempt Entity (Check box, if applicable.)

o

Nature of Debts (Check one box) Debts are primarily consumer debts, defined in II U.s.C § 101(8) as "incurred by an individual primarily for a personal, family, or household pUII>0se" Chapter II Debtors

~

0

Debtor is a tax-exempt organization under Title 26 of the United States Code (the Internal Revenue Code).

Debts are primarily business debts.

Filing Fee (Check one box)

~
0

Full Filing Fee attached. Filing Fee to be paid in installments (applicable to individuals only). Must attach signed application for the court's consideration certifying that the debtor is unable to pay fee except in installments. Rule 1006(b). See Official Form 3 A. Filing Fee waiver requested (applicable to chapter 7 individuals only). Must attach signed appl ication for the court's consideration. See Official Form 3 B.

o
~

Check one box: Debtor is a small business debtor as defined in II U.S.C § 101(5ID). Debtor is not a small business debtor as defined in II U.S.C § 101 (51 D)

0

Check if: Debtor's aggregate noncortingent liquidated debts (excluding debts owed to insiders or affiliates) are less than $2,190,000. -- -------------_--------_-----_ ----Check all applicable boxes: A plan is being filed with this petition.

o

o o

Acceptances of the plan were solicited prepetition from one or more classes of creditors, In accordance with II U .S.C § 1126(b).
THIS SPACE IS FOR COlJRT USE ONLY

Statistical! Administrative

Information

~
0

Debtor estimates that funds will be available for disribution to unsecured creditors. Debtor estimates that, after any exempt property is excluded and administrative expenses paid, there will be no funds available for distribution to unsecured creditors. 200999 0 1,0005,000 0 5,00110,000 0 $100,000 to $1 million 10,00125,000 0 25,00150,000 0 ~ 50,001 100,000 0 Over 100,000 0

Estimated Number of Creditors Iso10099 49 199

~ 0 Estimated Assets
0 $0 to $10,000 $0 to $50,000 Estimated Liabilities 0

0

0$10,000 to $100,000 0$50,000 to $100,000

o

o
0$1

$1 million to $100 million million to $100 million

More than $100 million

0$100,000 to $1 mi IIion

~

More than $100 million

Official Form 1 (04/07) Voluntary Petition Prior Bankruptcy Location Where Filed: Location Where Filed: Pending Name of Debtor: Bankruptcy Case Filed by any Spouse, Partner or Affiliate of this Debtor (If more than one, attach additional sheet) Case Number: Relationship: Date Filed: Judge: Name of Debtors):

Form BI, Page 2

(This page must be completed and filed in every case)

New Century TRS Holdings, Inc.
Case Filed Within Last 8 Years (If more than one, attach additional sheet) Case Number: Case Number: Date Filed: Date Filed:

See Attached Rider I
District:

Exhibit A
(To be completed if debtor is required to file periodic reports (e.g., forms 10K and 10Q) with the Securities and Exchange Commission pursuant to Section 13 or IS(d) of the Securities Exchange Act of 1934 and is requesting relief under chapter II.)

Exhibit B
(To be completed if debtor is an individual whose debts are primarily consumer debts.) I, the attorney for the petitioner named in the foregoing petition, declare have informed the petitioner that [he or she] may proceed under chapter 12, or 13 of title II, United States Code, and have explained the available under each such chapter. I further certify that I have delivered debtor the notice required by II U.S,c. § 342(b), X Signature of Attorney for Debtors) (Date) that I 7, I I, relief to the

0

Exhibit A is attached and made a part of this petition.

Exhibit C Does the debtor own or have possession of any property that poses or is alleged to pose a threat of imminent and identifiable harm to public health or safety?

0
l2SJ

Yes, and Exhibit C is attached and made a part of this petition, No,

Exhibit D (To be completed by every individual debtor. If a joint petition is filed, each spouse must complete and attach a separate Exhibit D.)

0 0

Exhibit D completed and signed by the debtor is attached and made a part of this petition.

If this is ajoint petition: Exhibit D also completed and signed by the joint debtor is attached and made a part of this petition.
Information Regarding the Debtor - Venue (Check any applicable box.)

l2SJ

Debtor has been domiciled or has had a residence, principal place of business, or principal assets in this District for 180 days immediately preceding the date of this petition or for a longer part of such 180 days than in any other District. There is a bankruptcy case concerning debtor's affiliate, general partner, or partnership pending in this District. Debtor is a debtor in a foreign proceeding and has its principal place of business or principal assets in the United States in this District, or has no principal place of business or assets in the United States but is a defendant in an action or proceeding [in a federal or state court] in this District, or the interests of the parties will be served in regard to the relief sought in this District. Statement by a Debtor Who Resides as a Tenant of Residential (Check all applicable boxes) Property

0 0

0

Landlord has a judgment against the debtor for possession of debtor's residence.

(If box checked, complete the following.)

(Name of landlord that obtained judgment)

(Address of landlord)

0 0

Debtor claims that under applicable nonbankruptcy law, there are circumstances under which the debtor would be permitted to cure the entire monetary default that gave rise to the judgment for possession, after the judgment for possession was entered, and Debtor has included with this petition the deposit with the court of any rent that would become due during the 30-day period after the filing of the petition.

Official

Form t (04/07) Name of Debtor(s): and filed in every case)

Form

BI, Page 3

Voluntary Petition (This page must be completed

New Century TRS Holdings, Inc.
Signatures

Signaturc{s)

of Debtorfs) (Individual/Joint) provided in this petition debts is true

Signature

of a Foreign

Representative

I declare under penalty of pcrjury that the information and correct. [If petitioner
is an individual whose debts

are primarily

consumer

and has

I declare under penalty of perjury that the information provided in this petition is true and correct, that I am the foreign representative of a debtor in a foreign proceeding, and that I am authorized to file this petition. (Check only one box.)

chosen to file under chapter 7]1 am aware that I may proceed under chapter 7, II, 12 or

13 of title II, United States Code, understand

the relief available preparer

under each such

chapter, and choose to proceed under chapter 7. t If no attorney represents me and no bankruptcy petition have obtained I request specified and read the notice required in accordance by II U.Sc.

signs the petition

1I

§ 342(b).
II, United States Code,

D D
x

I request relief in accordance with chapter 15 of title II, United States Code. Certified copies of the documents required by II U.S.C. § 1515 are attached. Pursuant to II U.S.C. § 1511, I request relief in accordance with the chapter of title 11 specified in this petition. A certified copy of the order granting recognition of the foreign main proceeding is attached.

relief

with the chapter

of title

in this petition.

X~
Signature

~
of Debtor

__

~
(Signature of Foreign Representative)

__

X
Signature of Joint Debtor

__
(Printed Name of Foreign Telephone Number (If not represented by attorney) Date Date Representative)

-_.-:::

X

Sign~tor(s) Mark One

'_
Esq.
& Finger,
P.O. P.A. Layton Square, Delaware

.

Signature

of Non-Attorney

Bankruptcy

Petition

Preparer

I declare under penalty of perjury that: (I) I am a bankruptcy petition preparer as defined in II U.S.C. § 110; (2) I prepared this document for compensation and have
provided required guidelines the debtor under II with a copy of this document U.S.C. §§ I IO(b), and the notices and information

D. Collins, Rodney

Richards,

Wi Imington, Telephone and Suzzannc O'Melveny Embarcadero

Box 551 19899 (302) 651-7700 and Fax (302) 651-7701

have been promulgated chargeable amount

11O(h), and 342(b); and, (3) if rules or pursuant to II U.S.C. § IIO(h) setting a maximum
petition preparers, any document I have given the debtor for filing for a debtor Official Form 198

fee for services or accepting is attached.

by bankruptcy

notice of the maximum

before preparing as required

any fee from the debtor,

in that section.

Uhland, Center

Esq.
LLP West,

Printed Name and title, if any, of Bankruptcy

Petition Preparer

& Myers

275 Battery

Street

San Francisco, Telephone April Date

CA 94111-3305

(415) 984-8700 and Fax (415) 984-870 I

Social Security number (If the bankruptcy petition preparer is not an individual, state the Social Security number of the officer, principal, responsible person or partner of the bankruptcy petition preparer.) (Required by II U.S.C. § lID.)

2, 2007
Signature

or Debtor

(Corporation/Partnership)

Address

I declare under penalty of perjury that the information provided in this petition is true and correct, and that I have been authorized to file this petition on behalf of the debtor. The debtor re'::~ln~e ~ode, specifie~

X

_

vr
..

foi cl;~

accordance

with the chapter of title II, United States

Date Signature of bankruptcy petition preparer or officer, principal, partner whose Social Security number is provided above. responsible person, or

Signature Stergios

of Authorized Theologides

Individual Individual Assistant Secretary and Director

Printed Name of Authorized Executive April Date Vice President, Individual

Names and Social Security numbers of all other individuals who prepared in preparing this document unless the bankruptcy petition preparer individual. If more than one person prepared this document, to the appropriate official form for each person. attach additional

or assisted is not an

Title of Authorized

2, 2007

sheets conforming

A bankruptcy petition preparer's failure to comply with the provisions of title I I and the Federal Rules of Bankruptcy Procedure may result in fines or imprisonment or both 11 § 110; 18 § 156.

u.s.c.

u.s.c.

Rider 1: Pending Bankruptcy Cases Filed By This Debtor and Affiliates: Each Concurrently Filed in United States Bankruptcv Court, District of Delaware

1. 2. 3.

New Century Financial Corporation (f/k1a New Century REIT, Inc.), a Maryland corporation New Century TRS Holdings, Inc. (f/k1a New Century Financial Corporation), a Delaware corporation New Century Mortgage Corporation (f/k1a JBE Mortgage) (d/b/a NCMC Mortgage Corporation, d/b/a New Century Corporation, d/b/a New Century Mortgage Ventures, LLC), a California corporation NC Capital Corporation, a California corporation Home123 Corporation (f/k1a The Anyloan Corporation, 1800anyloan.com, Anyloan.com), a California corporation New Century Credit Corporation (f/k1a Worth Funding Incorporated), a California corporation NC Asset Holding, L.P. (f/k1a NC Residual II Corporation), a Delaware limited partnership NC Residual III Corporation, a Delaware corporation NC Residual IV Corporation, a Delaware corporation New Century R.E.O. Corp., a California corporation New Century R.E.O. II Corp., a California corporation New Century R.E.O. III Corp., a California corporation New Century Mortgage Ventures, LLC (d/b/a Summit Resort Lending, Total Mortgage Resource, Select Mortgage Group, Monticello Mortgage Services, Ad Astra Mortgage, Midwest Home Mortgage, TRA TS Financial Services, Elite Financial Services, Buyers Advantage Mortgage), a Delaware limited liability company NC Deltex, LLC, a Delaware limited liability company NCoral, L.P., a Delaware limited partnership

4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

14. 15.

RLFl-3133723-1

IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: New Century TRS Holdings, Inc., a Delaware corporation, Debtor. Chapter 11

Case No. 07- ---

LIST OF CREDITORS HOLDING 50 LARGEST UNSECURED CLAIMS The above captioned debtor in this chapter 11 case (the "Debtor") filed a voluntary petition in this Court on April 2, 2007 (the "Petition Date") for relief under chapter 11 of the United States Bankruptcy Code, 11 U.S.C. §§ 101-1532. The list has been prepared on a consolidated basis, from the books and records of the debtor and certain affiliated entities that have simultaneously commenced Chapter 11 cases in this Court (the "Debtors")'. The Top 50 List was prepared in accordance with Rule 1007(d) of the Federal Rules of Bankruptcy Procedure for filing in the Debtors' chapter 11 case. The Top 50 List does not include: (1) persons who come within the definition of an "insider" set forth in 11 U.S.C. § 101(31); or (2) secured creditors, unless the value of the collateral is such that the unsecured deficiency places the creditor among the holders of the 50 largest unsecured claims. The information presented in the Top 50 List shall not constitute an admission by, nor is it binding on, the Debtors. The failure to list a claim as contingent, unliquidated or disputed does not constitute a waiver of the Debtors' rights to contest the validity, priority, and/or amount of any such claim.

Creditor listing begins on Page 2

I The Debtors are the following entities: New Century Financial Corporation (f/k/a New Century REIT, Inc.), a Maryland corporation; New Century TRS Holdings, Inc. (f/k/a New Century Financial Corporation), a Delaware corporation; New Century Mortgage Corporation (f/k/a JBE Mortgage) (d/b/a NCMC Mortgage Corporate, New Century Corporation, New Century Mortgage Ventures, LLC), a California corporation; NC Capital Corporation, a California corporation; Home 123 Corporation (£Ik/a The Anyloan Corporation, 1800anyloan.com, Anyloan.com), a California corporation; New Century Credit Corporation (f/k/a Worth Funding Incorporated), a California corporation; NC Asset Holding, L.P. (f/k/a NC Residual II Corporation), a Delaware limited partnership; NC Residual III Corporation, a Delaware corporation; NC Residual IV Corporation, a Delaware corporation; New Century R.E.O. Corp., a California corporation; New Century R.E.O. II Corp., a California corporation; New Century R.E.O. III Corp., a California corporation; New Century Mortgage Ventures, LLC (d/b/a Summit Resort Lending, Total Mortgage Resource, Select Mortgage Group, Monticello Mortgage Services, Ad Astra Mortgage, Midwest Home Mortgage, TRA TS Financial Services, Elite Financial Services, Buyers Advantage Mortgage), a Delaware limited liability company; NC Deltex, LLC, a Delaware limited liability company; NCoral, L.P., a Delaware limited partnership.

Page 1 of 10

(Continuation
(1) (2) NAME, TELEPHONE NAME OF CREDITOR AND COMPLETE MAILING ADDRESS, INCLUDING ZIP CODE COMPLETE NUMBER

Sheet)
(3) AND NATURE OF CLAIM (trade debt, bank loan, government contract) C"l 0 (4) (5) 0

MAILING

ADDRESS,

INCLUDING ZIP CODE, OF EMPLOYEE, AGENT, OR DEPARTMENT OF CREDITOR FAMILIAR WITH CLAIM WHO MAY BE CONTACTED.

Z
t'"l

:z ..,

2! til r- "':l ZC ..,

,...
C

C"l

:z ..,

.. ..,
S
t'"l

AMOUNT CLAIM

OF

t'"l

(if secured

1:1

also state value of security)

1:1

Goldman Sachs Mortgage Company Marc Flamino 85 Broad Street New York. NY 10004

Goldman Sachs Mortgage Company Marc Flamino 85 Broad Street New York, NY 10004 Tel: (212) 357-4727 Fax: (212) 902-1691 Goldman, Sachs & Co. Cindy Sanford 100 Second Avenue South Suite 200S St. Petersburg, FL 3370 I Tel: (727) 825-3865 Fax: (646) 835-3145

Warehouse and Repurchase Obligation

X

Unliquidated

Credit Suisse First Boston Mortgage Capital LLC Gary Timmerman 302 Carnegie Center, 2nd Floor Princeton, NJ 08540

Credit Suisse First Boston Mortgage Capital LLC Gary Timmerman 302 Carnegie Center, 2nd Floor Princeton, NJ 08540 Tel: (609) 627-5026 Fax: (609) 627-5080 Credit-Based Asset Servicing and Securitization LLC Marc Rosenthal 335 Madison Ave, 19th Floor New York, NY 10017 Tel: (212) 850-7700 Fax: (212) 850-7733 Morgan Stanley Mortgage Capital Inc. Andy Neuberger 1585 Broadway, 10th Floor New York, NY 10036 Tel: (212) 762-6401 Fax: (212) 507-4137, (212) 762-9495 DB Structured Products, Inc. Glenn Minkoff 60 Wall Street, 19th Floor New York, NY 10005 Tel: (212) 250-3406 Fax: (212) 797-5160 Deutsche Bank Ryan Stark 31 West 52nd Street 3rd Floor NYCOI-0304 New York, NY 10019 Tel: (212) 250-8473 Fax: (212) 969-1698 Deutsche Bank Securities, Inc. Jennifer McGuinness-Rizzo 60 Wall St. New York, NY 10005 Tel: (212) 250-7675 Fax: (212) 797-0521

Warehouse and Repurchase Obligation

X

Unliquidated

Credit-Based Asset Servicing and Securitization LLC Marc Rosenthal 335 Madison Ave, 19th Floor New York, NY 10017

Repurchase Obligation

X

Unliquidated

Morgan Stanley Mortgage Capital Inc. Andy Neuberger 1585 Broadway, 10th Floor New York, NY 10036

Warehouse and Repurchase Obligation

X

Unliquidated

DB Structured Products, Inc. Glenn Minkoff 60 Wall Street, 19th Floor New York, NY 10005

Warehouse and Repurchase Obligation

X

Unliquidated

Deutsche Bank Ryan Stark 31 West 52nd Street 3rd Floor NYCO 1-0304 New York, NY 10019

Repurchase Obligation

X

Unliquidated

Page 2 of 10

(Continuation
(1) NAME, NAME OF CREDITOR AND (2) TELEPHONE NUMBER

Sheet)
(3)
("'j

(4)

(5)
C)

AND NATURE OF CLAIM (trade debt, bank loan, government contract)

COMPLETE

MAILING

ADDRESS,

COMPLETE MAILING ADDRESS, INCLUDING ZIP CODE

INCLUDING ZIP CODE, OF EMPLOYEE, AGENT, OR DEPARTMENT OF CREDITOR FAMILIAR WITH CLAIM WHO MAYBE CONTACTED.

c:: 0 :z :z e- 00 "CI -J Z c:: -J 2 o @ t"l 1::1 t"l z -J
-J

AMOUNT CLAIM

OF

...
t"l

(if secured

also state value of security)

1::1

Bank of America, N.A. Maureen Macan 901 Main St, 66th Floor Dallas, TX 75202

Bank of America, N.A. Maureen Macan 901 Main St, 66th Floor Dallas, TX 75202 Tel: (214) 209-9170 Fax: (214) 209-0338 Bank of America, N.A. Sean A. Tobias 901 Main St, 66th Floor TXI-492-66-01 Dallas, TX 75202-3714 Tel (214) 209-1584 Fax: (214) 530-2657 Bank of America, N.A. Christopher Young 901 Main St, 66th Floor TXI-492-66-01 Dallas, TX 75202-3714 Tel: (704) 388-8403 Fax: (704) 409-0593

Warehouse and Repurchase Obligation

X

Unliquidated

UBS Real Estate Securities Inc. George Mangiaracina 1251 Avenue ofthe Americas New York, NY 10019

UBS Real Estate Securities Inc. George Mangiaracina 1251 Avenue of the Americas New York, NY 10019 Tel (212) 713-3734 Fax: (212) 882-3597 Lehman Brothers Bank FSB Diane Rinnovatore 745 Seventh Ave. New York, NY 10019 Tel: (212) 526-5460 Fax: (646) 885-9123 Countrywide Dana Headlee 20 N. Acoma Blvd. Lake Havasu City, AZ 86403 Tel: (928) 505-1628 Fax: (928) 505-4466 Citigroup Global Markets Realty Corp. Susan Mills, Bobbie Theivakumaran 390 Greenwich Street, 6th Floor New York, NY 10013 Tel: (212) 723-6376 Fax: (212) 723-8604 Residential Funding Corporation Mike Bugbee 1646 N. California Blvd. #400 Walnut Creek, CA 94596 Tel: (925) 988-2339 Fax (925) 979-0926

Warehouse and Repurchase Obligation

X

Unliquidated

Lehman Brothers Bank FSB Diane Rinnovatore 745 Seventh Ave. New York, NY 10019

Repurchase Obligation

X

Unliquidated

Countrywide Dana Headlee 20 N. Acoma Blvd. Lake Havasu City, AZ 86403

Repurchase Obligation

X

Unliquidated

Citigroup Global Markets Realty Corp. Susan Mills, Bobbie Theivakumaran 390 Greenwich Street, 6th Floor New York, NY 10013

Warehouse and Repurchase Obligation

X

Unliquidated

Residential Funding Corporation Mike Bugbee 1646 N. California Blvd. #400 Walnut Creek, CA 94596

Repurchase Obligation

X

Unliquidated

Page 3 of 10

(Continuation
(I) NAME, NAME OF CREDITOR AND COMPLETE MAILING ADDRESS, INCLUDING ZIP CODE (2) TELEPHONE NUMBER

Sheet)
(3) AND NATURE OF CLAIM (trade debt, bank loan, ~overnment contract)
("'J

(4)

(5)

0

COMPLETE

MAILING

ADDRESS,

INCLUDING ZIP CODE, OF EMPLOYEE, AGENT, OR DEPARTMENT OF CREDITOR FAMILIAR WITH CLAIM WHO MAYBE CONTACTED.

2 C .., oS~ 0 ~ :z > .., .., ~

:z

..,

C

5
0

z0 c;; t"'
C

."

AMOUNT CLAIM

OF

(if secured

also state value of security)

SG Mortgage Finance Corp Frank Nunnari 1221 Avenue of the Americas New York, NY 10020

SG Mortgage Finance Corp Frank Nunnari 1221 Avenue of the Americas New York, NY 10020 Tel: (212) 278·6000 Fax: (212) 278·6705 IXIS Real Estate Capital, Inc. Tony Malanga 9 West 57th Street, 36th Floor New York, NY 10019 Tel: (212) 891·5814 Fax: (212) 891·6288 lXIS Real Estate Capital, Inc. Ray Sullivan 9 West 57th Street, 36th Floor New York, NY 10019 Tel: (212) 891·5815 Fax: (212) 891·3347 IXIS Real Estate Capital, Inc. AI Zakes 9 West 57th Street, 36th Floor New York, NY 10019 Tel: (212) 891·6137 Fax: (212) 891·1922 lXIS Real Estate Capital, Inc. Michael Friedman 9 West 57th Street, 36th Floor New York, NY 10019 Tel: (212) 891·6261 Fax: (212) 891·6143

Repurchase Obligation

X

Unliquidated

IXIS Real Estate Capital, Inc. Tony Malanga 9 West 57th Street, 36th Floor New York, NY 10019

Warehouse and Repurchase Obligation

X

Unliquidated

Barclays Bank PLC Paul Menefee, Joseph O'Doherty 200 Park Avenue New York, NY 10166

Barclays Bank PLC Paul Menefee, Joseph O'Doherty 200 Park Avenue New York, NY 10166 Tel: (212) 412·5271 Fax: (212) 412·6846 Barclays Bank PLC Glen Greeley, Harry Ahlin 200 Park Avenue New York, NY 10166 Tel: (212) 412·5271 Fax: (212) 412·6846 Barclays Bank PLC Mary Logan, Janette Lieu c/o Asset Securitization Group 200 Park Avenue New York, NY 10166 Fax: (212) 412·6846

Warehouse and Repurchase Obligation

X

Unliquidated

Page 4 of 10

(Continuation
(I) (2)

Sheet)
(3) (4) (5) 0 I';i
M

NAME OF CREDITOR COMPLETE MAILING INCLUDING

AND ADDRESS,

NAME, TELEPHONE NUMBER AND COMPLETE MAILING ADDRESS, INCLUDING EMPLOYEE, ZIP CODE, OF OR DEPARTMENT AGENT,

o~
NATURE OF CLAIM Z

ZIP CODE

(trade debt, bank loan, government contract)

::l Z ~ ..,
Z C'l Z

0Z

e-

..,
0

OF CREDITOR FAMILIAR WITH CLAIM WHO MAYBE CONTACTED.

.., ..,
M

~ S
0
M

..

AMOUNT OF CLAIM (if secured also state value of security)

Indymac Bank FSB 888 East Walnut St. Pasadena, CA 91101

Indymac Bank FSB 888 East Walnut St. Pasadena, CA 91101 Tel: (626) 535-5901 Fax: (626) 535-8203 IndyMac Bank Tony Gamban 155 North Lake Avenue 6th floor Pasadena, CA 91101 Tel: (800).669-2300 ext. 5741

Repurchase Obligation

X

Unliquidated

Carrington Securities, LP Bruce Rose Seven Greenwich Office Park 599 West Putnam Avenue Greenwich, CT 06830

Carrington Securities, LP Bruce Rose Seven Greenwich Office Park 599 West Putnam Avenue Greenwich, CT 06830 Tel: (203) 661-6186 Fax: (203) 661-6378 Washington Mutual Bank, FA Michael McCauley 3200 Southwest Freeway Houston, TX 77027 Tel: (713) 543-6141 Fax: (713) 543-6727 Alaska Seaboard Partners Limited Partnership William Fogleman 4150 S. Sherwood Forest Blvd. Baton Rouge, LA 70816 Tel: (225) 293-0095 Fax: (916) 231-2500
jp Morgan Chase Bank, NA

Repurchase Obligation

X

Unliquidated

Washington Mutual Bank, FA Michael McCauley 3200 Southwest Freeway Houston, TX 77027

Repurchase Obligation

X

Unliquidated

Alaska Seaboard Partners Limited Partnership William Fogleman 4150 S. Sherwood Forest Blvd. Baton Rouge, LA 70816

Repurchase Obligation

X

Unliquidated

jp Morgan Chase Bank, NA

Fran Stec 194 Wood Avenue South Floor 3 Iselin, N.T 08830-2710

Fran Stec 194 Wood Floor 3 Iselin, NJ Tel: (732) Fax (732)

Secondary Sale Adjustment

Avenue South 08830-2710 452-8781 352-7511 Repurchase Obligation

X

$2,458,872.81

Greenwich Capital Financial Products, Inc. Frank Skibo 600 Steamboat Road Greenwich, CT 06830

Greenwich Capital Financial Products, Inc. Frank Skibo 600 Steamboat Road Greenwich, CT 06830 Tel: (203) 625-6678 Fax: (203) 618-2163

X

Unliquidated

HSBC Bank USA, N.A. .ToeLittle 452 5th Ave l Oth Floor New York, NY 10018

HSBC Bank USA, N.A. .ToeLittle 452 5th Ave 10th Floor New York, NY 10018 Tel: (212) 525-5040 Fax: (646) 366-3826

Repurchase Obligation

X

Unliquidated

Page 5 of 10

(Continuation
(I) (2) NAME, TELEPHONE NAME OF CREDITOR COMPLETE MAILING INCLUDING AND ADDRESS, COMPLETE EMPLOYEE, OF CREDITOR INCLUDING NUMBER

Sheet)
(3) AND NATURE OF CLAIM (trade debt, bank loan, government contract)
(j

(4) 0

(5)

MAILING AGENT,

ADDRESS,

...,
2.

t:: 2.

ZIP CODE, OF OR DEPARTMENT WITH CLAIM

ZIP CODE

FAMILIAR

WHO MAY BE CONTACTED.

..., ..., l'l
2. 1:1

Z Z t:: oS M ;..

en r- '-.l

s
l'l

C ..., 1:1

AMOUNT OF CLAIM (if secured also state value of security)

Aurora Loan Services Giovanni Manocchio 10350 Park Meadows Dr 4th Floor Littleton, CO 80124

Aurora Loan Services Giovanni Manocchio 10350 Park Meadows Dr 4th Floor Littleton, CO 80124 Tel: (720) 945-3835 Fax: (720) 945-5920 EMC Mortgage Corporation Tom Tarantino 383 Madison Ave. New York, NY 10179 Tel: (212) 272-6458 Fax: (212) 272-7382 General Electric Capital Corporation 44 Old Ridgebury Road Danbury, CT 06810 Tel: (203) 796-1000 Stein & Lubin LLP Dennis D. Miller 600 Montgomery Street, 14th Fl. San Francisco, CA 94111 Tel: (415) 955-5026 Fax: (415) 981-4343 GE Capital Commercial Equipment Financing Stephanie Richards 311 North Bayshore Drive Safety Harbor, FL 34695 Tel: (727) 216-4237 Fax: (727) 216-400 I

Repurchase Obligation

X

Unliquidated

EMC Mortgage Corporation Tom Tarantino 383 Madison Ave. New York, NY 10179

Litigation & Repurchase Obligation

X

XX

Unliquidated

General Electric Capital Corporation 44 Old Ridgebury Road Danbury, CT 06810

Trade Debt X $1,411,373.52

Lowermybills.com Rod Pasion 2401 Colorado Avenue Suite 200 Santa Monica, CA 90404

Lowermybills.com Rod Pasion 2401 Colorado Avenue Suite 200 Santa Monica, CA 90404 Tel: (310) 998-6319 Fax: (310) 496-2663 Affiliated Computer Services Todd Green PO Box 201322 Dallas, TX 75320 Tel: (801) 553-6103 Fax: (801) 553-6178

Trade Debt $1,273,594.00

Affiliated Computer Services Todd Green PO Box 201322 Dallas, TX 75320

Trade Debt $1,139,676.28

Page 6 of 10

(Continuation
(I) (2) NAME, TELEPHONE NAME OF CREDITOR COMPLETE MAILING INCLUDING AND ADDRESS, COMPLETE EMPLOYEE, OF CREDITOR INCLUDING NUMBER

Sheet)
(3) AND NATURE (trade OF CLAIM debt, bank (4) (5)

MAILING AGENT,

ADDRESS,

ZIP CODE, OF OR DEPARTMENT

ZIP CODE

loan, £overnment contract)

FAMILIAR

WITH CLAIM

WHO MAY BE CONTACTED.

e .., ~ t"l o ~ t"l ~ Z .., .., t"l ~
..... ,0

0 Z ..,
Z

I"'l

r .....

e~ 2: en "CI

AMOUNT CLAIM

OF

(if secured

also state value of security)

Nomura Securities James Depalma, Jeane Leschak 2 World Financial Center Building B New York, NY 10281

Nomura Securities James Depalma, Jeane Leschak 2 World Financial Center Building B New York, NY 10281 Tel: (212) 667-9300 Fax: (212) 667-1058 Nomura Credit & Capital, Inc. Kara Stairiker 2 World Financial Center Building B New York, NY 10281 Tel: (212) 667-9701 Fax (646) 587-9701

Repurchase Obligation

X

Unliquidated

Aspen Funding Corp. Doris Hearn, Evelyn Echevarria clo Amacar Group LLC 6525 Morrison Blvd Suite 318 Charlotte, NC 28211

Aspen Funding Corp. Doris Hearn, Evelyn Echevarria clo Amacar Group LLC 6525 Morrison Blvd Suite 318 Charlotte, NC 28211 Tel: (704) 367-1555 Fax: (704) 365-1362 Galleon Capital Corporation R. Douglas Donaldson P.O. Box 4024 Boston, MA 02101 Fax: (617) 951-7050 Gemini Securitization Corp., LLC R. Douglas Donaldson clo Ropers & Gray, LLP I International Place Boston, MA 02110 Tel: (214) 360-4892 Fax: (214) 360-2837 Gemini Securitization Corp., LLC Glenn Minkoff clo Deutsche Bank AG New York Branch, Administrator 60 Wall Street New York, NY 10005 Tel: (212) 250-3406 Fax: (212) 797-5160

Warehouse and Repurchase Obligation

X

Unliquidated

Galleon Capital Corporation R. Douglas Donaldson P.O. Box 4024 Boston, MA 02101

Warehouse and Repurchase Obligation

X

Unliquidated

Gemini Securitization Corp., LLC R. Douglas Donaldson clo Ropers & Gray, LLP I International Place Boston, MA 02110

Warehouse and Repurchase Obligation

X

Unliquidated

Guaranty Bank Jenny Ray Stilwell 8333 Douglas Ave. Dallas, TX 75225

Guaranty Bank Jenny Ray Stilwell 8333 Douglas Ave. Dallas, TX 75225 Tel: (214) 360-4892 Fax: (214) 360-2837

Warehouse and Repurchase Obligation

X

Unliquidated

Page 7 of 10

(Continuation
(1) (2) NAME, TELEPHONE NAME OF CREDITOR COMPLETE MAILING INCLUDING AND ADDRESS, COMPLETE NUMBER

Sheet)
(3) AND NATURE OF CLAIM (trade debt, bank loan, government contract)

(4)

(5) 0

MAILING

ADDRESS,

Z

ZIP CODE

INCLUDING ZIP CODE, OF EMPLOYEE, AGENT, OR DEPARTMENT OF CREDITOR FAMILIAR WITH CLAIM WHO MAYBE CONTACTED.

Ze Z e .., oSM 0 M
"0

..,

oe
t'"

0 Z (;i
AMOUNT CLAIM OF (if secured

..., ..,
Z 0
M

also state value of security)

Newport Funding Corp. Glenn Minkoff, Doris Hearn, Evelyn Echevarria c/o Amacar Group 6525 Morrison Blvd. Suite 318 Charlotte, NC 28211

Newport Funding Corp. Glenn Minkoff, Doris Hearn, Evelyn Echevarria c/o Amacar Group 6525 Morrison Blvd. Suite318 Charlotte, NC 28211 Tel: (704) 365-0569 Fax: (704) 365-1362 Sheffield Receivables Corporation Glenn Pearson, Hansel Nieves, Shelby Robins c/o Barclays Capital Services 200 Cedar Knolls Road Whippany, NJ 07981 Fax (212) 412-6846 State Street Global Markets, LLC Todd Meringoff Attn: Galleon Funds 225 Franklin St Boston, MA 02110 Tel: (617) 664-4019 Fax: (617) 350-4020 Tucson Funding LLC Glenn Minkoff c/o DB Structured Products, Inc. 60 Wall Street New York, NY 10005 Tel: (212) 250-3406 Fax: (212) 797-5160 National Field Representatives Melanie LaRocque PO Box 1440 Claremont, NH 03743 Tel: (800) 639-2151 x290 Fax: (800) 543-1818 Assurant Specialty Property Insurance Kelly Chin 260 Interstate N. Circle SE Atlanta, GA 30339-2110 Tel: (770) 763-1115 Fax: (770) 859-400 I System Source, Inc. Brooke Hergesell 2100 Main St. Ste 100 Irvine, CA 92614 Tel: (949) 910-0533 Fax: (949) 475-5923 GMAC Commercial Finance, LLC Tarija Barner 600 Galleria Parkway 15th Floor Atlanta, GA 30339 Tel: (678) 324-2146 Fax: (770) 859-0148

Warehouse and Repurchase Obligation

X

Unliquidated

Sheffield Receivables Corporation Glenn Pearson, Hansel Nieves, Shelby Robins c/o Barclays Capital Services 200 Cedar Knolls Road Whippany, NJ 07981

Warehouse and Repurchase Obligation

X

Unliquidated

State Street Global Markets, LLC Todd Meringoff Attn: Galleon Funds 225 Franklin St Boston, MA 02110

Warehouse and Repurchase Obligation

X

Unliquidated

Tucson Funding LLC Glenn Minkoff c/o DB Structured Products, Inc. 60 Wall Street New York, NY 10005

Warehouse and Repurchase Obligation

X

Unliquidated

National Field Representatives Melanie LaRocque PO Box 1440 Claremont, NH 03743

Trade Debt $607,535.00

Assurant Specialty Property Insurance Kelly Chin 260 Interstate N. Circle SE Atlanta, GA 30339-2110

Trade Debt $504,506.60

System Source, Inc. Brooke Hergesell 2100 Main St. Ste 100 Irvine, CA 92614

Trade Debt $498,748.83

GMAC Commercial Finance, LLC Tanj a Barner 600 Galleria Parkway 15th Floor Atlanta, GA 30339

Trade Debt $493,819.58

Page 8 of 10

(Continuation Sheet)
(I) (2) NAME, TELEPHONE NAME OF CREDITOR COMPLETE MAILING INCLUDING AND ADDRESS, COMPLETE NUMBER AND NATURE OF CLAIM (trade debt, bank loan, government contract) (3) Ii

(4) 0

(5) 1:1

MAILING

ADDRESS,

ZIP CODE

INCLUDING ZIP CODE, OF EMPLOYEE, AGENT, OR DEPARTMENT OF CREDITOR FAMILIAR WITH CLAIM WHO MAYBE CONTACTED.

Z~ oS z ... .., ..,
t"j

..,
:z

:z (;i ." Z; ~ ..,
t""
t"j

~

AMOUNT CLAIM

OF

(if secured

1:1

1:1

t"j

also state value of security)

Sprint Frank Quattroccup 18200 Von Karman Ave Irvine, CA 92612

Sprint Frank Quattroccup 18200 Von Karman Ave Irvine, CA 92612 Tel: (949) 251-7240 Fax: (949) 623-5615 Low.com Fred Hsu 818 W 7th St. Suite 700 Los Angeles, CA 90017 Tel: (866) 237-9328 Fax: (213) 402-5918 Suntrust Tony D. Atkins 303 Peachtree St., 23rd Floor Atlanta, GA 30308 Tel: (404) 813-5244 Fax: (404) 813-5000 Suntrust Woodruff A. Polk 303 Peachtree St., 23rd Floor Atlanta, GA 30308 Tel: (404) 813-7094 Fax: (404) 581-1637 Suntrust .Tames Bennison 303 Peachtree Street, 23rd Floor Mail Code 3950 Atlanta, GA 30308 Tel: (404) 813-5244 Fax: (404) 813-5000

Trade Debt $468,685.07

Low.com
Fred Hsu 818 W 7th St. Suite 700 Los Angeles, CA 90017

Trade Debt $467,190.00

Suntrust Tony D. Atkins 303 Peachtree St., 23rd Floor Atlanta, GA 30308

Repurchase Obligation

X

Unliquidated

Harbor Asset Management Services Shari Macedo 1407 Foothill Blvd Ste 246 La Verne, CA 91750

Harbor Asset Management Services Shari Macedo 1407 Foothill Blvd Ste 246 LaVerne,CA 91750 Tel: (909) 392-0430 Fax: (909) 912-8076 Adteractive Blake Simon 303 Second Street, Suite 375 Second Tower San Francisco, CA 94107 Tel: (415) 762-2266 Fax: (415) 543-2513 Fiserv CCS Geno Hoover 912 Ft Dubuesne Blvd Pittsburgh, PA 15222 Tel: (412) 577-3842 Fax: (412) 577-3995

Trade Debt $447,235.00

Adteractive Blake Simon 303 Second Street, Suite 375 Second Tower San Francisco, CA 94107

Trade Debt $441,132.00

Fiserv CCS Geno Hoover 912 Ft Dubuesne Blvd Pittsburgh, PA 15222

Trade Debt $424,155.08

Page 9 of 10

(Continuation
(I) NAME, NAME OF CREDITOR AND COMPLETE MAILING ADDRESS, INCLUDING ZIP CODE (2) TELEPHONE NUMBER

Sheet)
(3) AND NATURE OF CLAIM (trade debt, bank loan, government contract)
("')

(4)

(5)
I:)

COMPLETE

MAILING

ADDRESS,

INCLUDING ZIP CODE, OF EMPLOYEE, AGENT, OR DEPARTMENT OF CREDITOR FAMILIAR WITH CLAIM WHO MAY BE CONTACTED.

e :z r;; z t'"' ..., '"'l Ze 2: e '"'l o S t"'l I:) t"'l z :.0
'"'l '"'l t"'l
I:)

AMOUNT CLAIM

OF

(if secured

also state value of security)

ChoicePoint Precision Marketing Scott Walkins 2525 Meridian Parkway, Suite 125 Durham, NC 27713

ChoicePoint Precision Marketing Scott Walkins 2525 Meridian Parkway, Suite 125 Durham, NC 27713 Fax: (919) 806-1989 Choice Point Precision Marketing Lynn Ann Boone 8600 N. Industrial Road Peoria,IL 61615-1513 Tel: (309) 689-1000 Fax (309) 693-0173

Trade Debt $365,442.79

Pricewaterhouse Coopers LLP Sear Yagana 300 Madison Avenue New York, NY 10017

Pricewaterhouse Coopers LLP Sear Yagana 300 Madison Avenue New York, NY 10017 Tel: (464) 471-3000 Fax: (813) 329-1129 Nextag Dan Tsuchiya 1300 S. EI Camino Real San Mateo, CA 94402 Tel: (650) 645-4700 Fax: (650) 341-3779 Catarina Mortgage Services Inc. Ron Harpole 22485 Tomball Highway Houston, TX 77070 Tel (281) 205-2270 Fax: (28 I) 205-2405

Trade Debt $363,935.00

Nextag Dan Tsuchiya 1300 S. EI Camino Real San Mateo, CA 94402

Trade Debt $329,107.37

Catarina Mortgage Services Inc. Ron Harpole 22485 Tomball Highway Houston, TX 77070

Trade Debt $317,015.63

Page 10 of 10

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
In re:

Chapter 11 Case No. 07(_)

NEW CENTURY TRS HOLDINGS, INC., a Delaware corporation,

Debtor. DECLARATION CONCERNING THE DEBTOR'S LIST OF CREDITORS HOLDING THE 50 LARGEST UNSECURED CLAIMS
I, Stergios Theologides, Executive Vice President, Assistant Secretary and Director of New Century TRS Holdings, Inc., a Delaware corporation, and the entity named as the debtor in this case, declare under penalty of perjury under the laws of the United States of America that I have reviewed the foregoing List of Creditors holding the 50 Largest Unsecured Claims submitted herewith and that the information contained therein is true and correct to the best of my information and belief.

Date:

April 2, 2007

Executive Vice President, Assistant Secretary and Director

RLFl-3133830-1

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: NEW CENTURY TRS HOLDINGS, INC., a Delaware corporation, Chapter 11 (__)

Case No. 07-

Debtor. LIST OF CREDITORS The debtor and its debtor affiliates set forth on Rider 1 to the petition (collectively, the "Debtors"), each filed a petition in this Court on April 2, 2007 for relief under chapter 11 of the United States Bankruptcy Code, 11 U.S.C. §§ 101-1532. Contemporaneously with the filing of their petitions, the Debtors filed a single consolidated list of creditors (the "Consolidated Creditor List"), in lieu of separate lists. Due to its voluminous nature, the Consolidated Creditor List is being submitted to the Court electronically along with the petition. [information provided in electronic format]

RLFI-3133754-1

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: NEW CENTURY TRS HOLDINGS, INC., a Delaware corporation, Chapter 11 Case No. 07_

Debtor. DECLARATION REGARDING CREDITOR LIST
I, Stergios Theologides, the authorized officer of the above-captioned debtor, declare under penalty of perjury that I have reviewed the Consolidated Creditor List submitted herewith and that it is true and correct to the best of my information and belief.

Dated: April 2, 2007

Stergios The~gides
Executive Vice President, Assistant Secretary and Director

i£~/

RLFI-3133778-1

ACTION

BY UNANIMOUS WRITTEN CONSENT OF THE BOARD OF DIRECTORS OF NEW CENTURY TRS HOLDINGS, INC.

(Adopted by the Board of Directors on April 1,2007)

The undersigned, being all of the directors of New Century TRS Holdings, Inc., a Delaware corporation (the "Company"), and constituting the entire board of directors of the Company (the "Board of Directors"), acting pursuant to applicable law, hereby waive any and all requirements for the holding of a meeting, including, without limitation, any requirements as to call and notice thereof, and consent to the adoption of the following recitals and resolutions and to the actions set forth herein as of the date set forth above, which actions shall have the same force and effect as if taken by unanimous affirmative vote at a meeting of the Board of Directors duly called and held: WHEREAS, the Board of Directors has considered the business and financial conditions and results of operations of the Company and its subsidiaries, if any (the "Subsidiaries"), on the date hereof, including the assets and liabilities of the Company and its subsidiaries; WHEREAS, the Board of Directors has reviewed, considered, and received the recommendations of the senior management of the Company and the Company's legal, financial and other advisors as to the relative risks and benefits of pursuing a bankruptcy proceeding under chapter 11 of the United States Bankruptcy Code ("Chapter 11"); and WHEREAS, New Century Financial Corporation and certain of its direct and indirect subsidiaries (collectively, "New Century") has been notified by certain of the counterparties to its financing arrangements, or other financial arrangements under which it is or may be obligated, that it is in default of its obligations under those arrangements for failure to comply with certain other of New Century's obligations thereunder, and New Century lacks sufficient liquidity or other resources to satisfy these obligations and lacks liquidity to fund operations of the Company. NOW THEREFORE, be it:

RESOLVED, that, based on factors and information deemed relevant by the Board of Directors, in the judgment of the directors of the Company, it is in the best interests of the Company and its stockholders, as well as the best interests of the Company's subsidiaries, creditors and other interested parties under the circumstances set forth herein, that a petition be filed pursuant to Chapter l l on behalf of the Company to preserve the value available to the creditors and stockholders of the Company and its subsidiaries.

SF1:667230.1

RESOLVED FURTHER, that the officers of the Company (the "Authorized Officers"), or any of them, be, and they hereby are, authorized and empowered on behalf of, and in the name of, the Company to file a petition pursuant to Chapter 11 after April 1,2007. RESOLVED FURTHER, that each of the Authorized Officers be, and hereby is, authorized to execute and file all petitions, schedules, statements of affairs, lists and other papers and to take any and all related actions which such Authorized Officer may deem necessary or proper in connection with such Chapter 11 cases, in each case with respect to the Company and with respect to any Subsidiary over which the Company exerts control and is entitled to do so under applicable law, including, without limitation, directly or indirectly, as the general partner, managing member or sole member. RESOLVED FURTHER, that the Authorized Officers be, and they hereby are, authorized and directed to employ the law finn ofO'Melveny & Myers LLP as general bankruptcy counsel to the Company and its subsidiaries, and the law finn of Richards, Layton & Finger, P.A. as local bankruptcy counsel to the Company and its subsidiaries, in each case to represent and assist the Company and its subsidiaries in filing under Chapter 11, and to take any and all actions to advance the Company's rights and the rights of its subsidiaries, and, in connection therewith, the Authorized Officers are hereby authorized and directed to pay appropriate retainers prior to and immediately upon the filing of the Chapter 11 case, and to cause to be filed an appropriate application for authority to retain the services ofO'Melveny & Myers LLP and of Richards, Layton & Finger, P.A. RESOL VED FURTHER, that the Authorized Officers be, and they hereby are, authorized and directed to employ additional professionals, including any attorneys, financial advisors or consultants to the Company and its subsidiaries as any Authorized Officer may deem necessary to advise, represent and assist the Company and its subsidiaries in carrying out their duties under Title 11 of the United States Code and other applicable law and to provide investigative, consulting, professional and other assistance in connection with the acts and transactions contemplated by these resolutions or related regulatory proceedings, and each Authorized Officer is authorized and directed to cause the Company to pay the fees and expenses of those so engaged (including appropriate retainers prior to and immediately upon the filing of the Chapter 11 case), to the extent any such Authorized Officer deems appropriate, to enter into agreements (including, without limitation, indemnity agreements) with such entities, and to cause to be filed one or more appropriate applications for authority to retain the services of such additional professionals and any such actions previously performed by any Authorized Officer of the Company are hereby approved and ratified. RESOLVED FURTHER, that each of the Authorized Officers is authorized to cause the Company to pay any and all expenses and fees, including, without limitation, professional advisor fees and expenses, incurred by or on behalf of the Company arising in connection with the acts and transactions contemplated, including, without limitation, the review and preparation of the petitions and other documents necessary or advisable in connection with the filings under Chapter 11, and any and all schedules, statements of affairs, lists and other papers, together with any amendments or supplements thereto, the preparation and filing of any and all regulatory, administrative or legal reports, forms or other documents that any Authorized Officer may deem necessary or desirable in order to facilitate or permit consummation of the acts

SFI:667230.1

and transactions contemplated hereby and related or incidental transactions and any obligations of the Company in connection with the acts and transactions contemplated hereby. RESOLVED FURTHER, that any Authorized Officer be, and hereby is, authorized, on behalf of the Company and its subsidiaries, to execute and verify voluntary petitions pursuant to Chapter l l on behalf of the Company and its subsidiaries and to cause the same to be filed with the United States Bankruptcy Court for the District of Delaware, or in such other jurisdiction or court as said Authorized Officer may deem necessary or appropriate. RESOL VED FURTHER, that the corporate sea] of the Company may be affixed to any instrument or document executed pursuant to the foregoing resolutions by impression or affixing the corporate seal or by imprinting or otherwise reproducing thereon a facsimile thereof. RESOL VED FURTHER, that the Authorized Officers and the other persons appointed to act on the Company's behalf in or pursuant to the foregoing resolutions are, and each of them hereby is, authorized, directed and empowered, in the name and on behalf of the Company, to execute any resolutions of any Subsidiary of the Company on behalf of the Company for the purposes of the authorization for filing a petition under Chapter 11 for such Subsidiary and any other related actions, to execute and deliver any other additional applications, certificates, agreements or any other instruments or documents or any amendments or supplements thereto, or to do or cause to be done any and all other acts and things, as they may in their discretion deem necessary or appropriate to carry out the intent and purposes of the foregoing resolutions, the taking of such actions and the execution, delivery and filing of such instruments or documents to be conclusive evidence of the necessity and appropriateness thereof. RESOLVED FURTHER, that any actions heretofore taken by any Authorized Officer that are consistent with the authority granted by the foregoing resolutions are hereby ratified, confirmed and approved in all respects as the acts and deeds of the Company. [Remainder of Page Intentionally Left Blank]

SF! :667230.1

IN WITNESS WHEREOF, the undersigned, being all of the members of the Board of Directors of the Company have hereunto signed their names and adopted the above resolutions as of the above date and hereby direct a fully signed copy of this Action by Unanimous Written Consent of the Board of Directors to be filed with the minutes of proceedings of the Board of Directors of the Company. This Action by Unanimous Written Consent of the Board of Directors may be executed in any number of counterparts, each of which shall be deemed an original, but all of which taken together shall constitute but one and the same Action by Unanimous Written Consent of the Board of Directors of the Company.

[Signature Page to Unanimous Written Consent]

SFl :667230. J

Exhibit

1

[Transcript]

LEGAL_US_W

# 56136272.6

UNITED STATES DISTRICT IN RE:

BANKRUPTCY COURT OF DELAWARE Case No. 07-10416-KJC

NEW CENTURY TRS HOLDINGS, INC., et al., Debtors.

824 Market Street Wilmington, DE 19801 April 12, 2007 3:09 p.m.

TRANSCRIPT OF HEARING BEFORE HONORABLE KEVIN J. CAREY UNITED STATES BANKRUPTCY COURT JUDGE APPEARANCES: For the Debtors: O'Melveny & Myers LLP By: SUZZANNE UHLAND, ESQ. Embarcadero Center West 275 Battery Street San Francisco, CA 94111-3305 O'Melveny & Myers LLP By: BRIAN METCALF, ESQ. 400 South Hope Street Los Angeles, CA 90071-2899 For Carrington Capital Management, LLC & Carrington Mortgage Services, LLC: Audio Operator: Mayer, Brown, Rowe & Maw LLP By: THOMAS S. KIRIAKOS, ESQ. SEAN SCOTT, ESQ. 71 S. Wacker Chicago, Illinois 60606-4637 Brandon McCarthy transcript

Proceedings

recorded by electronic sound recording, produced by transcription service.

J&J COURT TRANSCRIBERS, INC. 268 Evergreen Avenue Hamilton, New Jersey 08619 E-Mail: jjcourt@optonline.net (609) 586-2311 Fax No. (609) 587-3599

2

APPEARANCES

(Cont'd.) Womble Carlyle Sandridge & Rice By: JOHN A. THOMSON, JR., ESQ. One Atlantic Center 1201 West Peachtree Street Suite 3500 Atlanta, GA 30309 Blank Rome, LLP By: BONNIE GLANTZ FATELL, Chase Manhattan Centre 1201 Market Street Suite 800 Wilmington, DE 19801

For Carrington Capital Management, LLC & Carrington Mortgage Services, LLC:

For the Unsecured Committee:

Creditors

ESQ.

Hahn & Hessen LLP By: MARK S. INDELICATO, ESQ. MARK T. POWER, ESQ. 488 Madison Avenue 14th and 15th Floor New York, NY 10022 For the U.S. Trustee: Office of the U.S. Trustee By: JOSEPH McMAHON, ESQ. 844 King Street Suite 2313 Lockbox 35 Wilmington, DE 19801 Rosenthal, Monhait, Gross & Goddess, PA. By: NORMAN M. MONHAIT, ESQ. 919 Market Street Suite 1401 P.O. Box 1070 Wilmington, DE 19899 Weil, Gotshal & Manges LLP By: BRIAN ROSEN, ESQ. 767 Fifth Avenue New York, NY 10153

For Kochak:

For Lehman:

3

APPEARANCES

(Cont'd.): Hennigan, Bennett & Dorman, By: BRUCE BENNETT, ESQ. JOSHUA D. MORSE, ESQ. 601 South Figueroa Street Suite 3300 Los Angeles, CA 90017 Richards, Layton & Finger, By: MARCOS A. RAMOS, ESQ. MARK COLLINS, ESQ. One Rodney Square 920 N. King Street P.O. Box 551 Wilmington, DE 19899 LLP

For the Debtors:

P.A.

For CSFB:

Young Conaway Stargatt & Taylor, LLP By: MICHAEL R. NESTOR, ESQ. The Brandywine Building 1000 West Street 17th Floor P.O. Box 391 Wilmington, DE 19899 Chadbourne & Parke LLP By: JOSEPH SMOLINSKY, ESQ. 30 Rockefeller Plaza New York, NY 10112

For GECC:

Gebhardt & Smith LLP By: DAVID FONTANA, ESQ. 401 East Pratt Street Ninth Floor World Trade Center Baltimore, MD 21202 Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C. By: LAURA DAVIS JONES, ESQ. 919 North Market Street 17th Floor P.O. Box 8705 Wilmington, DE 19899 Kirkland & Ellis, LLP By: SHIRLEY CHO, ESQ. 777 South Figueroa Street Los Angeles, CA 90017

For Greenwich:

4 APPEARANCES For Deutsche Trust Co.: (Cont'd.): Bank National Nixon Peabody LLP By: MARK N. BERMAN, ESQ. 100 Summer Street Boston, MA 02110-1832 Nixon Peabody, LLP By: DENNIS J. DREBSKY, 437 Madison Avenue New York, NY 10022 Pepper Hamilton, LLP By: DAVID B. STRATTON, Hercules Plaza Suite 5100 1313 Market Street P.O. Box 1709 Wilmington, DE 19899 For Premier: Stevens & Lee By: JOSEPH GREY, ESQ. 1105 North Market Street Wilmington, DE 19801 Hunton & Williams By: PETER S. PARTEE, ESQ. J.R. SMITH, ESQ. JASON HARBOUR, ESQ. Riverfront Plaza East Tower 951 East Byrd Street Richmond, VA 23219 Morris, Nichols, Arsht & Tunnell By: MICHAEL BUSENKELL, ESQ. 1201 North Market Street P.O. Box 1347 Wilmington, DE 19899 For UBS: Paul, Hastings, Janofsky & Walker LLP By: RICHARD A. CHESLEY, ESQ. 191 North Wacker Drive 30th Floor Chicago, Illinois 60606 Paul, Hastings, Janofsky & Walker LLP By: KEITH W. MILLER, ESQ. 75 East 55th Street New York, New York 10022 ESQ.

ESQ.

For Wells

Fargo/C-Bass:

5 APPEARANCES For UBS: (Cont'd.) Ashby & Geddes By: WILLIAM P. BOWDEN, ESQ. GREGORY ALAN TAYLOR, ESQ. 500 Delaware Avenue 8th Floor P.O. Box 1150 Wilmington, Delaware 19899 of America, N.A.: Potter, Anderson & Corroon, LLP By: LAURIE SELBER SILVERSTEIN, ESQ. Hercules Plaza 1313 North Market Street Wilmington, DE 19801 Edwards & Angell, Palmer & Dodge, LLP By: WILLIAM CHAPMAN, ESQ. 919 North Market Street Wilmington, DE 19801 Campbell & Levine, LLC By: MARLA R. ESKIN, ESQ. 800 N. King Street Suite 300 Wilmington, DE 19801 Kirkland & Ellis, LLP By: JOSHUA SUSSBERG, ESQ. Citigroup Center 153 East 53rd Street New York, NY 10022

For Bank

For Countrywide

& GMAC

CF:

For Ci ti Corp.:

6 TELEPHONIC APPEARANCES: of Ohio: Ohio Attorney General's Office By: MICHELLE T. SUTTER, ESQ. (telephonically) Squire, Sanders & Dempsey, By: JOSEPH RODGERS, ESQ. 4900 Key Tower 127 Public Square Cleveland, OH 44114 Bingham McCutchen, LLP By: RICHARD AGINS, ESQ. One State Street Hartford, CT 06103 Kaye Scholer LLP By: MARGOT SCHONHOLTZ, 425 Park Avenue New York, NY 10022 L.L.P.

For the State

For Squire, Dempsey:

Sanders

&

For Deutsche

Bank:

For Bank of America:

ESQ.

For the Debtor:

O'Melveny & Myers LLP By: BEN LOGAN, ESQ. 400 South Hope Street Los Angeles, CA 90071-2899 Kirkland & Ellis, LLP By: RICHARD L. WYNNE, ESQ. 777 South Figueroa Street Los Angeles, CA 90017 Chadbourne & Parke LLP By: DOUGLAS DEUTSCHE, ESQ. 30 Rockefeller Plaza New York, NY 10112 Murray Capital Management, By: MARTI MURRAY Inc.

For Greenwich:

For CSFB Capi tal,

& DL Mortgage Inc.:

For Murray Capital Management, Inc.: For Union Bank California: of

Jeffer, Mangels, Butler & Marmaro LLP By: BARRY FREEMAN, ESQ. 1900 Avenue of the Stars Seventh Floor Los Angeles, California 90067

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