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UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE

In re: MERVYNS HOLDINGS, LLC, et al., Debtors.

Chapter 11 Case No. 08-11586 (KG) Jointly Administered


Hearing Date: November 25, 2008, at 10:00 a.m. (EST) Objections Due: November 24, 2008, at 12:00 p.m. (EST) Relates to Docket No. 973

LIMITED OBJECTION OF LASALLE BANK NATIONAL ASSOCIATION, AS TRUSTEE; AND WELLS FARGO BANK, N.A., AS TRUSTEE, TO MOTION OF DEBTORS AND DEBTORS IN POSSESSION FOR ORDERS (I) ESTABLISHING AUCTION AND BID PROCEDURES FOR SALE OF DEBTORS INTERESTS IN THEIR REMAINING REAL PROPERTY LEASES; (II) APPROVING AND AUTHORIZING SALE OF LEASES TO WINNING BIDDERS FREE AND CLEAR OF ALL LIENS, INTERESTS, CLAIMS AND ENCUMBRANCES; AND (III) GRANTING RELATED RELIEF; AND JOINDER IN LANDLORDS OBJECTIONS TO SUCH MOTION LaSalle Bank National Association, as Trustee for the Certificateholders of Banc of America Commercial Mortgage, Inc., Commercial Mortgage Pass-Through Certificates Series 2005-5 (in such capacity, the Series 2005-5 Trustee); Wells Fargo Bank, N.A., as Trustee for the Certificateholders of Deutsche Mortgage Commercial Mortgage Pass-Through Certificates 2005-FL11 (in such capacity, the Series 2005-FL11 Trustee); Wells Fargo Bank, N.A., as Trustee for the Certificateholders of GE Commercial Mortgage Corporation Commercial Mortgage Pass-Through Certificates Series 2005-C4 (in such capacity, the Series 2005-C4 Trustee); Wells Fargo Bank, N.A., as Trustee for the Certificateholders of GMAC Commercial Mortgage Securities, Inc., Mortgage Pass-Through Certificates Series 2006-C1 (in such capacity, the Series 2006-C1 Trustee); and LaSalle Bank National

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Association, as Trustee for the Certificateholders of ML-CFC Commercial Mortgage Trust 2007-7 Commercial Mortgage Pass-Through Certificates Series 2007-7 (in such capacity, the Series 2007-7 Trustee; and the Series 2005-5 Trustee, the Series 2005-FL11 Trustee, the Series 2005-C4 Trustee, the Series 2006-C1 Trustee, and the Series 2007-7 Trustee, collectively, the Trustees), acting by and through Midland Loan Services, Inc., their respective Special Servicer, and appearing by and through their undersigned counsel, respectfully object, on a limited basis, to the Motion of Debtors and Debtors in Possession for Orders (I) Establishing Auction and Bid Procedures for Sale of Debtors Interests in Their Remaining Real Property Leases; (II) Approving and Authorizing Sale of Leases to Winning Bidders Free and Clear of All Liens, Interests, Claims and Encumbrances; and (III) Granting Related Relief dated November 14, 2008 (the Motion) [Docket No. 973], filed in the above-captioned jointlyadministered Chapter 11 case* (the Case). Further, the Trustees join as set forth herein in the objections to the Motion filed in the Case by certain landlords, to wit: (i) the Limited Objection of General Growth Management, Inc., Centro Properties Group, and Kimco Realty Corporation to the Motion, dated November 20, 2008 [Docket No. 1004] (the General Growth Objection); (ii) the Limited Objection of The Macerich Company, The Prudential Insurance Company of America, and Watt Management Company to the Motion, dated November 21, 2008 [Docket No. 1016] (the Macerich Objection); and (iv) the Limited Objection of Safeway, Inc. to the Motion, dated November 21, 2008 [Docket No. 1033] (the Safeway Objection; and the General Growth Objection, the Macerich Objection, and the Safeway Objection, collectively, the Objections). SUMMARY 1. The Trustees are the holders of more than $300 million in loans that are

secured by mortgages encumbering thirty-nine (39) real properties leased by Mervyns under

All capitalized terms used but not defined herein have the meanings ascribed to such terms, whether directly or by reference, in the Motion.

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certain of the Leases from the respective landlords thereof, these being the owners of such properties and the borrowers under such loans. These mortgages and related security documents encumber these Leases as well as the underlying real properties and limit the rights of the respective borrowers under such loans from taking various actions with respect to such Leases without the consent of the respective Trustee, such as agreeing to modify or terminate, or consenting to the assignment of, a Lease. 2. The Procedures Order is deficient in that (i) it does not afford a sufficient

mechanism to protect the rights of the Trustees with respect to the Leases that are their collateral, such as providing how a Trustee is to become an Assumption Notice Party (as defined in the Expedited Order) so as to receive an Assumption Notice of the intention of Mervyns to assume and assign such a Lease to a Winning Bidder; (ii) it does not provide that adequate information about a Winning Bidder will be provided in conjunction with an Assumption Notice to the Assumption Notice Parties in order for them to evaluate the adequate assurance of further performance of the Lease by such Winning Bidder under Bankruptcy Code 365(f)(2)(B), including, as to any of the real properties that are or are in shopping centers, under Bankruptcy Code 365(b)(3); and (iii) it does not provide a reasonable and adequate time within which to evaluate such information and object thereto, ten (10) calendar days from the giving of the Assumption Notice being simply, in the context of significant commercial shopping center leases and other leases, too little time. 3. The Procedures Order also seeks an inappropriate waiver of the ten (10) day

stay provided by Bankruptcy Rule 6006(d) following entry of orders authorizing the assignment of an unexpired lease under Bankruptcy Code 365(f). FACTUAL BACKGROUND 4. The Trustees are trustees for five commercial mortgage pools (collectively, the

Mortgage Pools). The Mortgage Pools contain multiple commercial mortgage loans that are secured by mortgages or deeds of trust and related security documentation that encumber real properties leased by Mervyns for thirty-eight retail stores and its headquarters facility (the
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Mervyns Headquarters) located in Hayward, California (such retail store properties and the Mervyns Headquarters, collectively, the Mervyns Pool Properties; the mortgages or deeds of trust and related security documentation encumbering the Mervyns Pool Properties and related property, collectively, the Mervyns Pool Mortgages; and the loans secured by the Mervyns Pool Mortgages, collectively, the Mervyns Pool Loans). 5. Each of the Mervyns Pool Properties is owned by one or more special purpose

entities (collectively, the Mervyns Pool Property Owners), and such Mervyns Pool Property Owner is the borrower under the Mervyns Pool Loan secured by the Mervyns Pool Mortgage encumbering such Mervyns Pool Property. The Mervyns Pool Property Owners are listed on Appendix A hereto. 6. Each of the Mervyns Pool Properties is leased to Mervyns under one of the

Leases (the Leases for the Mervyns Pool Properties, collectively, the Mervyns Pool Property Leases) with respect to which the Mervyns Pool Property Owner thereof is the landlord and Mervyns is the tenant. 7. Each of the Mervyns Pool Mortgages (i) includes an absolute assignment of

leases and rents by the respective Mervyns Pool Property Owner, whether as part of a mortgage or deed of trust, in a stand-alone document, or both, that encumbers the respective Mervyns Pool Property Lease of the Mervyns Pool Property encumbered by such mortgage; and (ii) limits the rights of the Mervyns Pool Property Owner of such Mervyns Pool Property from taking various actions with respect to such Mervyns Pool Property Lease without the consent of the respective Trustee with respect thereto, such as agreeing to modify or terminate, or consenting to the assignment of, a such Mervyns Pool Property Lease. 8. For example, the Mervyns Pool Mortgage encumbering the Mervyns

Headquarters provides that the Mervyns Pool Property Owner thereof may not, without the Trustees prior written approval (which shall not be unreasonably be withheld), inter alia, (i) cancel, terminate, or accept a surrender of the Mervyns Pool Property Lease thereof; or (ii) consent to an assignment of such Mervyns Pool Property Lease except in accordance with

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the terms thereof. Such Mervyns Pool Property Lease, in turn, provides that (i) Mervyns may not, without the prior written consent of such Mervyns Pool Property Owner (the landlord), inter alia, assign such lease (other to a wholly-owned subsidiary in connection with certain transactions), whether by operation of law or otherwise, to any person or entity; (ii) if Mervyns wishes to do so, it must provide, not fewer than fifteen (15) business days prior to the date it wishes to make such assignment, to the landlord (A) information regarding the creditworthiness, capital structure, management experience and expertise, and operating history of the proposed assignee (the Review Criteria); and (B) information regarding and certifications of the proposed assignee and its principals that will permit compliance with the regulations administered by the United States Treasurys Office of Foreign Asset Control, 31 C.F.R. Part 500 (including the Specially Designated and Blocked Persons List); and any statute, order, or government action regarding persons or entities with whom United States persons are restricted from doing business (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism (collectively, the Terrorism Regulations); and (iii) if Mervyns submits such information, the landlord and the Trustee shall review such information and approve or disapprove such assignment in good faith based on the Review Criteria using their prudent business judgment within such fifteen (15) business day period. 9. Accordingly, for the matters covered by the Motion, the Trustees, by and large,

stand in the shoes of the Mervyns Pool Property Owners, the landlords under each of the Mervyns Pool Property Leases. ARGUMENT A. The Trustees Have an Interest in the Mervyns Pool Property Leases and Are Entitled to Notice with Respect Thereto. 10. Since the Trustee are the mortgagees and absolute assignees of the Mervyns

Pool Property Owners interests in the Mervyns Pool Property Leases, they are parties-in-

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interest entitled to notice of any assumption and assignment thereof and to be heard on the issue of adequate assurance of future performance with respect thereto under Bankruptcy Code 365(f)(2)(B), including, as to any of the Mervyns Pool Properties that are or are in shopping centers, under Bankruptcy Code 365(b)(3). 11. In bankruptcy proceedings, both debtors and creditors have a constitutional

right to be heard on their claims, and the denial of that right to them is the denial of due process which is never harmless error. In re Boomgarden, 780 F.2d 657, 660-661 (7th Cir. 1985) (internal quotations and citations omitted). 12. The Supreme Court has stated that strict fulfillment of notice requirements are

central to our system of jurisprudence: due process of law in any proceeding which is to be accorded finality [requires] notice reasonably calculated, under all circumstances, to apprise interested parties of the pendency of the action and to afford them an opportunity to present their objections. Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 94 L.Ed. 865 (1950). 13. Bankruptcy Code Section 1109(b) is the codification of this right in a

Chapter 11 case: A party in interest, including ... a creditor, ..., may appear and be heard on any issue in a case under this chapter. As the absolute assignees of the Mervyns Pool Property Leases, the Trustees hold the respective Mervyns Pool Property Owners rights in respect of any assumption and assignment of those leases, subject to the respective terms thereof and, hence, stand in the shoes of the respective Mervyns Pool Property Owners to such extent with respect thereto. 14. Accordingly, the Procedures Order should provide a formal mechanism

whereby a Trustee can identify itself to Mervyns as a party in interest with respect to a particular Mervyns Pool Property Lease so as to become an Assumption Notice Party and, thus, be served with an Assumption Notice with respect to such Mervyns Pool Property Lease if it is to be assumed and assigned so that it can object to any such assumption and assignment if it determines that it is appropriate to do so and otherwise protect its rights vis--vis the Mervyns

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Pool Property Owners, such as to object to any attempted prohibited termination of a Mervyns Pool Property Lease by such an owner by entry of such owner and the Mervyns into a Lease Termination Agreement. B. The Adequate Assurance of Future Performance Information Is Inadequate. 15. As is set out in the Macerich Objection, in which the Trustees join, the

Procedures Order (and its incorporated Expedited Order) does not require provision of adequate information about a Winning Bidder sufficient to enable the Trustees (or any landlords) meaningfully to evaluate the adequate assurance of future performance under Bankruptcy Code 365(f)(2)(B), including, as to any of the Mervyns Pool Properties that are or are in shopping centers, under Bankruptcy Code 365(b)(3), with respect to Mervyns Pool Property Leases that are to be assumed and assigned. 16. Not only should much more detailed financial information about a Winning

Bidder be required than appears to be contemplated by the Procedures Ordernote the Review Criteria of the Mervyns Headquarters Lease and the information items addressed by the Macerich Objectionbut now, information sufficient to enable compliance by the Trustees with the Terrorism Regulations as to any potential assignee. C. The Response Deadline for an Assumption Notice Is Inadequate. 17. There is no basis for proceeding with such rapidity with respect to assumptions

and assignments as contemplated by the Procedures Order. A mere ten (10) calendar days during the holiday season at thatis altogether inadequate to provide sufficient opportunity to receive and evaluate adequate assurance of future performance information regarding a Winning Bidder and make further inquiries if warranted. It is unduly burdensome on the Trustees, inconsistent with the objectives of Bankruptcy Code Section 365(f), and denies the Trustees due process. 18. As noted above, the Mervyns Headquarters Lease, to which, of course,

Mervyns is a party, provided that the landlord thereunder and the respective Trustee would have

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fifteen (15) business days within which to evaluate information regarding a proposed assignee of that Lease. No less time should be warranted in connection with the Procedures Order. 19. Again, notice [must be] reasonably calculated, under all circumstances, to Mullane v. Central

afford [interested parties] an opportunity to present their objections.

Hanover Bank & Trust Co., supra, 339 U.S. at 314. The ten (10) calendar days notice to object to an assumption and assignment, which, the Court should note, runs from the giving thereof, not its receipt, is not, in these circumstancescomplex commercial real property leases, mostly in shopping centersreasonably calculated to afford the Trustees a reasonable opportunity to object. 20. D. The Macerich Objection makes this same point, and the Trustees join therein.

There Is No Basis to Waive the Ten (10) Day Stay Provided by Bankruptcy Rule 6006(d). 21. As set out in the Objections, in which the Trustees join, there is no basis in the

Motion for the Procedures Order to waive the ten (10) day stay provided by Bankruptcy Rule 6006(d) following entry of orders authorizing the assignment of an unexpired lease under Bankruptcy Code 365(f). This stay exists for the express purpose of protecting landlords (and, thus, their assigns). Advisory Committee Note to Bankruptcy Rule 6006(d) (1999 Amendment). Such a waiver is inappropriate in the circumstances of this matter. This short time may be essential to preventing a fait accompli by mootness in the event of a significant dispute about the adequate assurance of future performance of the Winning Bidder or some other matter with respect to the approval by the Court of an assumption and assignment of one of the Mervyns Pool Property Leases. This may be particularly important to the Trustees as there may also be disputed issues between one of them and a Mervyns Pool Property Owner, such as to the authority of one or the other of them to act with respect to a Mervyns Pool Property Lease. RESERVATION OF RIGHTS 22. The Trustees reserve the right to make such other and further objections to the

assumption and assignment of a Mervyns Pool Property Lease when a Winning Bidder with

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respect thereto is identified, including as to adequate assurance of future performance under Bankruptcy Code 365(f)(2)(B), including, as to any such lease with respect to a Mervyns Pool Property that is or is in a shopping center, under Bankruptcy Code 365(b)(3), with respect to such Winning Bidder. GENERAL JOINDER 23. To the extent not inconsistent herewith, the Trustees join in the Objections. CONCLUSION WHEREFORE, the Procedures Order should be modified to meet the objections set forth above, and the Court should grant such other and further relief as it deems appropriate based hereon.

[Signature on Following Page]

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Dated: November 24, 2008 Wilmington, Delaware

MCCARTER & ENGLISH LLP /s/ William F. Taylor, Jr. William F. Taylor, Jr. (DE No. 2936) Renaissance Center 405 North King Street, Suite 8th Floor Wilmington, Delaware 19899 Telephone: (302) 984-6300 Facsimile: (302) 984-6399 email: wtaylor@mccarter.com JEFFER, MANGELS, BUTLER & MARMARO LLP Robert B. Kaplan (CA No. 076950) (pro hac vice application in progress) Nicolas De Lancie (CA No. 84934) (pro hac vice application in progress) Two Embarcadero Center, Fifth Floor San Francisco, California 94111-3824 Telephone: (415) 398-8080 Facsimile: (415) 398-5584 email: rbk@jmbm.com nde@jmbm.com Attorneys for LaSalle Bank National Association, as Trustee for the Certificateholders of Banc of America Commercial Mortgage, Inc., Commercial Mortgage Pass-Through Certificates Series 2005-5; Wells Fargo Bank, N.A., as Trustee for the Certificateholders of Deutsche Mortgage Commercial Mortgage Pass-Through Certificates 2005-FL11; Wells Fargo Bank, N.A., as Trustee for the Certificateholders of GE Commercial Mortgage Corporation Commercial Mortgage Pass-Through Certificates Series 2005-C4; Wells Fargo Bank, N.A., as Trustee for the Certificateholders of GMAC Commercial Mortgage Securities, Inc., Mortgage Pass-Through Certificates Series 2006-C1; and LaSalle Bank National Association, as Trustee for the Certificateholders of ML-CFC Commercial Mortgage Trust 2007 7 Commercial Mortgage Pass-Through Certificates Series 2007-7, acting by and through Midland Loan Services, Inc., their respective Special Servicer

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APPENDIX A MERVYNS POOL PROPERTY OWNERS DDR MDT MV Anaheim Hills LP DDR MDT MV Antioch LP DDR MDT MV Carson City LLC DDR MDT MV Chandler LLC DDR MDT MV Chino LP DDR MDT MV Clovis LP DDR MDT MV Folsom LP DDR MDT MV Foothills Ranch LP DDR MDT MV Garden Grove LP DDR MDT MV Ingram LP DDR MDT MV Lompoc LP DDR MDT MV Madera LP DDR MDT MV Nellis Crossing LLC DDR MDT MV North Fullerton I LP DDR MDT MV Palmdale LP DDR MDT MV Porterville LP DDR MDT MV Redding LP DDR MDT MV Santa Maria LP DDR MDT MV Santa Rosa LP DDR MDT MV Silver Creek LLC DDR MDT MV Slatten Ranch LP DDR MDT MV Sonora LP DDR MDT MV South San Diego LP DDR MDT MV Superstition Springs LLC DDR MDT MV SW Las Vegas LLC DDR MDT MV Tucson LLC DDR MDT MV Tulare LP DDR MDT MV Ukiah LP DDR MDT MV West Las Vegas LLC DDR MDT Deer Valley LLC DDR MDT Reno LLC Laguna Dundee One LLC Laguna Dundee Two LLC North 3 Holdings LLC Palm Dundee One LLC Palm Dundee Two LLC Palm Dundee Three LLC Pinole Dundee One LLC Pinole Dundee Two LLC Pinole Dundee Three LLC Pinole Dundee Four LLC

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CERTIFICATE OF SERVICE I, William F. Taylor, Jr., Esquire, do hereby certify that a true and correct copy of the Limited objection of lasalle bank national association, as trustee; and wells fargo bank, n.a., as trustee, to motion of debtors and debtors in possession for orders (i) establishing auction and bid procedures for sale of debtors interests in their remaining real property leases; (ii) approving and authorizing sale of leases to winning bidders free and clear of all liens, interests, claims and encumbrances; and (iii) granting related relief; and joinder in landlords objections to such motion foregoing was caused to be served upon the persons listed below as indicated on November 24, 2008. Upon penalty of perjury, I declare that the foregoing is true and correct. VIA HAND DELIVERY Mark D. Collins Daniel J. DeFranceschi Christopher M. Samis RICHARDS, LAYTON & FINGER One Rodney Square 920 North King Street Wilmington, DE 19801 VIA FACSIMILE Howard S. Beltzer Wendy S. Walker MORGAN LEWIS & BOCKIUS LLP 101 Park Avenue New York, NY 10178 212.309.6001 MCCARTER & ENGLISH, LLP

/s/ William F. Taylor, Jr. William F. Taylor, Jr. (DE Bar I.D. #2936) Renaissance Centre 405 N. King Street, 8th Floor Wilmington, DE 19801 (302) 984-6300 (302) 984-6399 Facsimile Dated: November 24, 2008

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