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UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION In re: COLLINS & AIKMAN CORPORATION, et al.

, ) ) ) ) ) ) ) Case No. 05-55927 (SWR) Chapter 11 (Jointly Administered) (Tax Identification # 13-3489233) Honorable Steven W. Rhodes

Debtors. _________________________________________

RESPONSE OF GENERAL MOTORS CORPORATION IN OPPOSITION TO THE MOTION OF THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS FOR AN ORDER DIRECTING EXAMINATION AND PRODUCTION OF DOCUMENTS FROM DAIMLERCHRYSLER CORPORATION, GENERAL MOTORS CORPORATION, FORD MOTOR COMPANY, AND THEIR RESPECTIVE ADVISORS, PURSUANT TO RULE 2004 OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE

HONIGMAN MILLER SCHWARTZ AND COHN LLP Attorneys for General Motors Corporation Robert B. Weiss (P28249) E. Todd Sable (P54956) Tricia A. Sherick (P60384) ) 2290 First National Building 660 Woodward Avenue Detroit, MI 48226 (313) 465-7548

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TABLE OF CONTENTS

TABLE OF AUTHORITIES ......................................................................................................... iii INTRODUCTION ...........................................................................................................................1 A. B. C. D. E. These claims, if they exist at all, belong to the Debtors. .........................................1 There is no basis, in fact or law, for a fraudulent transfer claim against GM...............................................................................................................2 Even if a fraudulent transfer claim exists, no additional pre-litigation discovery is required. ...............................................................................................2 There is no basis, in fact or law, for an antitrust claim against GM. .......................3 The requested discovery is overbroad and unduly burdensome to GM...................3

PROCEDURAL BACKGROUND..................................................................................................4 ARGUMENT...................................................................................................................................4 I. II. THE APPLICATION AND SCOPE OF BANKRUPTCY RULE 2004 IS SUBJECT TO IMPORTANT LIMITATIONS. ......................................................4 THE COMMITTEES 2004 MOTION SHOULD BE DENIED BECAUSE THE COMMITTEE HAS FAILED TO MEET THE STANDARD NECESSARY TO OBTAIN STANDING TO PURSUE CLAIMS OF THE DEBTORS. ...................5 THE COMMITTEES 2004 MOTION SHOULD BE DENIED BECAUSE THERE IS NO MERIT TO ANY FRAUDULENT TRANSFER CLAIM AGAINST GM.........................................................................................................6 A. B. IV. No legally cognizable fraudulent transfer claim against GM exists. ...........6 Courts evaluate the totality of the circumstances to determine reasonably equivalent value. ....................................................................9

III.

THE COMMITTEES 2004 MOTION SHOULD BE DENIED BECAUSE, EVEN ASSUMING THAT A COLORABLE FRAUDULENT TRANSFER CLAIM EXISTS, THE COMMITTEE REQUIRES NO ADDITIONAL DISCOVERY TO ASSERT THE CLAIM............................................................10 THE COMMITTEES 2004 MOTION SHOULD BE DENIED BECAUSE THERE IS NO MERIT TO AN ANTITRUST CLAIM AGAINST THE CUSTOMERS. ......................................................................................................12

V.

A.

The 2004 Motion should be denied because there is no basis to support the Committees allegation of an antitrust claim against the customers. ..................................................................................................12 The 2004 Motion should be denied because the conduct alleged by the Committee does not constitute an actionable antitrust claim...............13

B. VI.

THE COMMITTEES 2004 MOTION SHOULD BE DENIED BECAUSE THE BURDEN TO GM IN COMPLYING WITH THE REQUESTS FAR EXCEEDS ANY POTENTIAL BENEFIT TO THE DEBTORS ESTATES.........................14 THE COMMITTEES 2004 MOTION SHOULD BE DENIED BECAUSE IT SEEKS DISCLOSURE OF GMS PRIVILEGED AND PROPRIETARY INFORMATION AND TRADE SECRETS. IF, HOWEVER, THE COURT GRANTS A BANKRUPTCY RULE 2004 EXAMINATION FOR ANY PURPOSE, A PROTECTIVE ORDER IS REQUIRED. ......................................15 A. B. C. The 2004 Motion should be denied because it seeks proprietary information and trade secrets of GM. .......................................................15 The 2004 Motion seeks information protected by the attorneyclient privilege and work product doctrine. ...............................................18 If the Court grants the Committees 2004 Motion for any purpose, a protective order is necessary to protect GMs rights and interests. ........18

VII.

CONCLUSION..............................................................................................................................19

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TABLE OF AUTHORITIES

Cases Advanced Semiconductor Prods., Inc. v. Tau Labs., Inc., No. 83-20412, 1986 LEXIS 30101 (N.D. Cal. Jan. 23, 1986).......................................................................... 16 Allen v. Howmedica Leibinger, GmhH, 190 F.R.D. 518 (D.Tenn. 1999)................................................................................................ 16 Canadian Pac. Forest Prods., Ltd. v. J.D. Irving, Ltd. (In re The Gibson Group, Inc.), 66 F.3d 1436 (6th Cir. 1995) ....................................................................................................... 5 Empire of Carolina, Inc. v. Mackle, 108 F.R.D. 323 (S.D.Fla. 1985)................................................................................................ 16 Falstaff Brewing Corporation v. New York Life Insurance Co. et al., 513 F. Supp. 289 (N.D. Cal. 1978) ........................................................................................... 13 In re Bakalis, 199 B.R. 443 (Bankr. S.D.N.Y. 1996)...................................................................................... 18 In re Benefit Funding Group, Inc., 203 B.R. 24 (Bankr. N.D.N.Y. 1996) ....................................................................................... 12 In re Chomakos, 69 F.3d 769 (6th Cir. 1995) ..................................................................................................... 7, 8 In re Coffee Cupboard, Inc., 128 B.R. 509 (Bankr. E.D.N.Y. 1991).................................................................................. 5, 14 In re Drexel Burnham Lambert Group, Inc., 123 B.R. 702 (Bankr. S.D.N.Y. 1991).................................................................................. 5, 14 In re Enron Corp., 281 B.R. 836 (Bankr. S.D.N.Y. 2002)...................................................................................... 12 In re Express One International, Inc., 217 B.R. 2157 (Bankr. E.D. Tex. 1998) ..................................................................................... 5 In re Fearn, 96 B.R. 135 (Bankr. S.D. Ohio 1989)....................................................................................... 14 In re Financial Corp. of America, 119 B.R. 728 (Bankr. C.D.Cal. 1990)................................................................................. 18, 19 In re GHR Energy Corp., 35 B.R. 534 (Bankr. D.Mass. 1983) ......................................................................................... 12

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In re Image Worldwide, Ltd., 139 F.3d 574 (7th Cir. 1998) ....................................................................................................... 9 In re Jewelers Shipping Association, 97 B.R. 149 (Bankr. D.R.I. 1989)....................................................................................... 14, 19 In re McDonald, 265 B.R. 632 (Bankr. M.D. Fla. 2001) ..................................................................................... 10 In re Ozark Restaurant Equip. Co. Inc., 850 F.2d 342 (8th Cir. 1988) ....................................................................................................... 9 In re Perry County Foods, Inc., 313 B.R. 875 (Bankr. N.D. Ala. 2004) ....................................................................................... 7 In re Richards & Conover Steel, Co., 267 B.R. 602 (B.A.P. 8th Cir. 2001) ........................................................................................... 9 In re Summit Corporation, 891 F.2d 1 (1st Cir. 1989).......................................................................................................... 19 In re Texaco, Inc., 79 B.R. 551 (Bankr. S.D.N.Y. 1987)........................................................................................ 14 In re Thurman Constr., Inc., 189 B.R. 1004, (Bankr. M.D. Fla. 1995) .................................................................................... 9 In re Vitamins Antitrust Litig., 267 F.Supp. 2d 738 (S.D.Ohio 2003) ....................................................................................... 16 Litton Indus., Inc. v. Chesapeake & O. R. Co., 129 F.R.D. 528 (E.D.Wis. 1990) .............................................................................................. 16 Microwave Research Corp. v. Sanders Assocs., Inc., 110 F.R.D. 669 (D.Mass. 1986).......................................................................................... 15, 17 Ray v. Allied Chem. Corp., 34 F.R.D. 456 (S.D.N.Y. 1964) ................................................................................................ 16 Sharon Steel Corp. v. The Chase Manhattan Bank, N.A. et al., 691 F.2d 1039 (2nd Cir. 1982)................................................................................................... 13 United States v. Serta Assocs., Inc., 29 F.R.D. 136 (N.D.Ill. 1961)................................................................................................... 16

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Statutes 11 U.S.C. 548(a)(1)(B) ............................................................................................................... 6 11 U.S.C. 548 (a)(1)(B)(i)............................................................................................................ 7 11 U.S.C. 548(a)(1)...................................................................................................................... 6 Other Authorities 7 Collier on Bankruptcy, 1103.05[1][d] (Alan N. Resnick & Henry J. Sommers eds., 15th ed. rev., 2005) ............................................ 13 Rules Fed. R. Bankr. P. 2004.................................................................................................................... 4

General Motors Corporation (GM), by its attorneys, Honigman Miller Schwartz and Cohn LLP, for its Response in Opposition to the Motion of the Official Committee of Unsecured Creditors for an Order Directing Examination and Production of Documents from DaimlerChrysler Corporation, General Motors Corporation, Ford Motor Company, and their Respective Advisors, Pursuant to Rule 2004 of the Federal Rules of Bankruptcy Procedure (the 2004 Motion), states: INTRODUCTION The Official Committee of Unsecured Creditors (the Committee) has filed its 2004 Motion seeking expansive discovery to investigate claims which can be described, at best, as specious. Indeed, the Committee seeks discovery to pursue a claim that the legal theory of fraudulent transfer should be expanded in an unprecedented and, in GMs opinion, unfounded manner, and to pursue a vaguely articulated antitrust claim, again, in GMs opinion, without basis in law or fact. The Committees motive could not be more clear and the claims amount to nothing more than a thinlyveiled effort to construct leverage in this case, where the unsecured creditors have no reasonable likelihood of recovery on the eve of the commencement of the reorganization plan proposal and confirmation process. Moreover, given that i) the Debtors retain exclusivity, and ii) the Debtors proposed plan of reorganization is premised on negotiating additional accommodations from the customers, it could not be clearer that the successful resolution of this case requires that the Debtors, and not the Committee, retain authority over the Debtors customer relationships. A. These claims, if they exist at all, belong to the Debtors.

On June 29, 2005, the Committee filed a Motion for Authorization to Commence Avoidance Actions on Behalf of the Debtors Estates [D.I. 537] (the Authorization Motion) seeking derivative standing and authority to pursue the same fraudulent transfer claims against the Debtors OEM customers which are, in part, the subject of the 2004 Motion. The Court has not yet adjudicated the

Authorization Motion and therefore, at this time, the Committee is without standing to pursue these claims. Furthermore, the Debtors are investigating the facts underlying the Committees allegations and analyzing the attenuated legal theory introduced by the Committee for which GM has been unable to identify any precedent in support of those claims. Clearly, the Court should not take the extraordinary step of divesting the Debtors of the right to pursue, settle or abandon such claims. This is especially so at this critical juncture in this case, where the Debtors are beginning a complex dialogue with their customers to determine what additional support will be required to advance a plan of reorganization the ultimate goal of these proceedings. B. There is no basis, in fact or law, for a fraudulent transfer claim against GM.

The Committees fraudulent transfer theory can be summarized as follows: if a debtor loses money on a contract with a third party that the debtor entered into at a time when it was insolvent, then, by definition, a debtor is entitled to collect the amount of the losses under such contract. Fundamentally, the Committees fraudulent transfer theory ignores the risks inherent in contracting in a free market, which risks include fluctuating raw material costs, rising labor costs and a myriad of other factors that impact upon a contracts ultimate profitability. If the law were really as the Committee suggests in its 2004 Motion, the courts would simply be deluged with parties claims seeking redress after entering into contracts that, after the fact, turn out unprofitably. C. Even if a fraudulent transfer claim exists, no additional pre-litigation discovery is required.

In the Authorization Motion, which the Committee filed some fourteen months ago, the Committee repeatedly advised the Court that it had sufficient evidence and was prepared to

immediately commence those actions. To ask now for multiple depositions and tens of thousands of pages of additional documents for the purpose of investigating those same fraudulent transfer claims

which the Committee characterized as being ready for immediate prosecution last July is troubling and smacks of disingenuousness, either then or now. Even assuming, arguendo, that a fraudulent transfer claim exists, which GM flatly denies, the Committee has sufficient information to assert that claim. In the 2004 Motion, the Committee argues that certain GM purchase orders and supply contracts with the Debtors (the Contracts) were unprofitable and the resulting loss shows that GM paid less than reasonably equivalent value for the subject component parts. If true, then the Committee has sufficient information to make its claim: the Committee already knows which Contracts the Debtors deemed unprofitable and what price relief was requested and granted. No further pre-litigation discovery of GM is necessary or required. D. There is no basis, in fact or law, for an antitrust claim against GM.

Like its fraudulent transfer claim, the Committees antitrust claim is sewn from whole cloth. The Committee has no basis whatsoever, and has asserted none, to claim that the OEM customers of the Debtors have improperly coordinated their activities, either pre- or post-petition. Indeed, no such basis exists. Courts unequivocally require that requests for examinations under Rule 2004 be made in good faith; the Committees request for 2004 examinations in support of its antitrust claim is not. E. The requested discovery is overbroad and unduly burdensome to GM.

As reflected in GMs attached affidavit, given the thousands of GM parts produced by the Debtors prepetition, production of the requested documents would require a three continent initiative requiring literally thousands of hours and costing GM hundreds of thousands of dollars. Given that the Committee has not even identified any actual claim against GM that goes beyond assertions which are both legally and factually theoretical, measuring the relative benefit of the requested discovery to the Committee against the substantial cost which would be incurred by GM in responding, militates against granting the relief requested by the Committee in the 2004 Motion. This burden is accentuated by the Debtors present negotiations with GM, and the other customers

who are targets of the Committees proposed investigation, with respect to the Debtors formulation of a plan of reorganization, which requires the intense focus of all constituencies. For those and other reasons set forth below, the relief sought in the 2004 Motion is without merit and should be denied. PROCEDURAL BACKGROUND On May 17, 2005 (the Petition Date), the Debtors each filed Voluntary Petitions for relief pursuant to chapter 11 of Title 11 of the United States Code (the Bankruptcy Code), thus commencing these jointly administered cases. On May 24, 2005, the Office of the United States Trustee appointed the Committee. On August 11, 2006, the Committee filed its 2004 Motion. ARGUMENT I. THE APPLICATION AND SCOPE OF BANKRUPTCY RULE 2004 IS SUBJECT TO IMPORTANT LIMITATIONS. Rule 2004 of the Federal Rules of Bankruptcy Procedure (Rule 2004) states, in pertinent part, as follows: (a) Examination on motion. On motion of any party in interest, the court may order the examination of any entity. (b) Scope of examination. The examination of an entity under this rule or of the debtor under 343 of the Code may relate only to the acts, conduct, or property or to the liabilities and financial condition of the debtor, or to any matter which may affect the administration of the debtor's estate, or to the debtor's right to a discharge. In a family farmer's debt adjustment case under chapter 12, an individual's debt adjustment case under chapter 13, or a reorganization case under chapter 11 of the Code, other than for the reorganization of a railroad, the examination may also relate to the operation of any business and the desirability of its continuance, the source of any money or property acquired or to be acquired by the debtor for purposes of consummating a plan and the consideration given or offered therefor, and any other matter relevant to the case or to the formulation of a plan. Despite the Committees attempt to portray the scope of a Rule 2004 examination as limitless, there are important restrictions to the nature and scope of such an examination. The party

seeking to conduct the examination bears the burden of showing good cause for the examination it seeks. In re Express One International, Inc., 217 B.R. 215, 217 (Bankr. E.D. Tex. 1998). Good cause requires a showing that the examination sought is necessary to establish the claim of the party seeking the examination, or that the denial of such examination would cause the proposed examiner undue hardship or injustice. Id.; see also In re Coffee Cupboard, Inc., 128 B.R. 509, 514 (Bankr. E.D.N.Y. 1991) (citing In re Drexel Burnham Lambert Group, Inc., 123 B.R. 702, 712 (Bankr. S.D.N.Y. 1991) (holding that Rule 2004 requires that [the court] balance the compelling interests of the parties, weighing the relevance of and necessity of the information sought by examination.)). II. THE COMMITTEES 2004 MOTION SHOULD BE DENIED BECAUSE THE COMMITTEE HAS FAILED TO MEET THE STANDARD NECESSARY TO OBTAIN STANDING TO PURSUE CLAIMS OF THE DEBTORS. In the Authorization Motion, the Committee identifies the prevailing standard in the Sixth Circuit for a creditor or creditors committee to obtain derivative standing to initiate an avoidance action as follows: (i) a demand has been made upon the statutorily authorized party to take action; (ii) the demand is declined; (iii) a colorable claim exists that would benefit the estate if successful, based on a cost-benefit analysis performed by the court; and (iv) the inaction is an abuse of discretion in light of the duties of a debtor-in-possession in a chapter 11 case. Authorization Motion, 22, citing Canadian Pac. Forest Prods., Ltd. v. J.D. Irving, Ltd. (In re The Gibson Group, Inc.), 66 F.3d 1436, 1446 (6th Cir. 1995). The Committee, however, fails to meet the Gibson Group standard articulated by the Sixth Circuit. While the Committee has demanded that the Debtors pursue the subject fraudulent transfer claim, GM has been informed both that the Debtors have not declined to commence an action on that claim and that the Debtors are, in fact, investigating the claims viability. Moreover, as discussed below, the Committee has failed to articulate a colorable claim against GM, either on the basis of fraudulent transfer or antitrust theories. Finally, having failed to assert a colorable claim in the first

instance, the Debtors alleged failure to pursue such claims, especially in the midst of its investigations, cannot be deemed an abuse of the Debtors discretion. Having failed to satisfy three of the four elements necessary to obtain the requisite standing, the Committees Authorization Motion must fail. Therefore, the Committee should not be granted expansive discovery rights under Rule 2004 to investigate claims that are currently within the Debtors control and are being investigated by the Debtors. III. THE COMMITTEES 2004 MOTION SHOULD BE DENIED BECAUSE THERE IS NO MERIT TO ANY FRAUDULENT TRANSFER CLAIM AGAINST GM. A. No legally cognizable fraudulent transfer claim against GM exists.

The Committee does not allege that the transfers at issue were made with the actual intent to hinder, delay or defraud creditors in accordance with 11 U.S.C. 548(a)(1). Instead, the

Committee, citing no legal authority for the existence of a claim under the facts of the instant case, seeks to conduct Rule 2004 discovery to establish a colorable constructive fraudulent transfer claim. Neither the facts nor the law support the Committees theory of a constructive fraudulent transfer claim, and absent a viable claim, no Rule 2004 discovery is appropriate. A constructive fraudulent transfer occurs when a debtor: (i) received less than a reasonably equivalent value in exchange for such transfer or obligation; and (ii) (I) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation; (II) was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with the debtor was an unreasonably small capital; or (III) intended to incur, or believed that the debtor would incur, debts that would be beyond the debtors ability to pay as such debts matured. 11 U.S.C. 548(a)(1)(B).

As a threshold matter, the Rule 2004 Motion fails conspicuously to cite any legal authority establishing a fraudulent transfer claim on facts similar to those presented here. Instead, the

Committee alleges that certain Contracts were unprofitable, as purportedly evidenced by the Customers agreement to re-negotiate certain of the Contracts, and presumably believes that, subject to demonstrating the Debtors insolvency at the time the Debtor entered into the Contracts, nothing further is required to prevail on the claim. This application of fraudulent transfer law is without support in the Bankruptcy Code or the case law applying its provisions. One bankruptcy court has already determined that the mere evidence of an accounting loss is insufficient to establishing a constructive fraud claim. In re Perry County Foods, Inc., 313 B.R. 875, 908 (Bankr. N.D. Ala. 2004). The Perry Court further noted that holding otherwise would transform all requirements contracts into the subject matter of a fraudulent transfer claim merely by providing evidence of an accounting loss. There is no legislative history or case law support for a claim premised on such a generalized proposition using only accounting losses to show a constructively fraudulent transfer under 11 U.S.C. 548 (a)(1)(B)(i). Id. Here, the Committee has nothing more than certain pre-petition Contracts on which GM agreed, in the context of a consensual, Court-approved, post petition agreement with the Debtors to grant pricing relief. Similar to the Perry case, there is simply no basis under which to construct a fraudulent transfer claim, and the Committee cannot assert a colorable claim. Moreover, controlling Sixth Circuit precedent requires the Debtors to show that, at the time they entered into the Contracts with GM, the Debtors (a) were insolvent and (b) received less than reasonably equivalent value for the component parts sold to GM under the Contracts. The

Committee, acting in the Debtors stead, cannot meet this fundamental requirement. According to the seminal Sixth Circuit decision on fraudulent transfer claims, reasonably equivalent value is measured at the time of the transfer, and the transfer occurs when parties gain legally enforceable contract rights. In re Chomakos, 69 F.3d 769, 771 (6th Cir. 1995). Subsequent depreciation or

appreciation in the value of the consideration does not affect the question of whether reasonably equivalent value was exchanged. Id.1 At the time of contracting, the Debtors secured the right to manufacture, as GMs sole source provider, GMs requirements of component parts that were projected to generate anywhere from $1.2 to $1.4 billion in revenue for the Debtors.2 That the Contracts were requirements contracts and releases were subsequently issued against the Contracts does not alter the fact that the parties gained their legally enforceable rights at the time they entered into the Contracts. Accordingly, under Chomakos, the fact that the customers subsequently agreed to provide the Debtors with pricing relief or face rejection of their contracts is simply not relevant to the fraudulent transfer inquiry here. Neither the Committee, nor the Debtors for that matter, can show that the rights that the Debtors received under the Contracts to be the exclusive provider to GM of over $1.4 billion of goods is not of substantial value. The Debtors subsequently performed under the Contracts and the Contracts generated substantial revenue for the Debtors. That the Contracts may have later become unprofitable, after years of performance, and taking into account other factors outside the parties control at the time at which they entered into the Contracts, is irrelevant under the Chomakos rule. In summary, and on a broader basis, GM cannot be held accountable, under the Committees putative constructive fraudulent transfer theory, for the Debtors entering into the Contracts on terms that, after the fact, turned out to be less than profitable. To ignore Chomakos and determine
1 The Chomakos trustee attempted to show that gamblers bets at a casino constituted constructive fraudulent conveyances

because the gamblers ultimately lost their wagers. The Sixth Circuit Court of Appeals disagreed, holding that the transfer took place at the time the debtors placed their bets for purposes of determining reasonably equivalent value because this is when contractual rights attached. Id. at 770. That Court stated: The time that counts is not the time when the bet is won or lost, but the time when the bet is placed. The investment may turn out badly, but unless and until it does, the contractual right to receive payment in the event that it turns out well is obviously worth something.

Id. at 771.

otherwise would effectively make GM financially responsible for the Debtors operation of their businesses. In other words, as the Committee would have it, any party to a contract must insure that the contracts terms are both at the time of the contract and later favorable to both parties. That is a remarkable proposition that defies the nature of the free market and which finds no support in the law. B. Courts evaluate the totality of the circumstances to determine reasonably equivalent value.

Reasonably equivalent value depends on the market conditions faced by a willing seller and a willing buyer and not on the financial demands of the seller. In re Ozark Restaurant Equip. Co. Inc., 850 F.2d 342, 345 (8th Cir. 1988). When determining whether reasonably equivalent value was exchanged, a court must include the value of both direct and indirect benefits. In re Image

Worldwide, Ltd., 139 F.3d 574, 578 (7th Cir. 1998). There is no requirement that consideration be something tangible that can be used to satisfy creditors claims. In re Richards & Conover Steel, Co., 267 B.R. 602, 612 (B.A.P. 8th Cir. 2001). Indirect benefits can include intangibles such as goodwill and an increased ability to borrow working capital. Image Worldwide, 139 F.3d at 579. Whether the debtor used the value it received to its best advantage is not relevant to the inquiry. In re Thurman Constr., Inc., 189 B.R. 1004, 1015 (Bankr. M.D. Fla. 1995). At the time the parties entered into the Contracts, in addition to the substantial sales revenue generated and other direct benefits, the Debtors received additional indirect benefits. The Contracts: (i) enabled the Debtors to borrow money for working capital purposes; (ii) generated substantial cash flow for the Debtors day-to-day operations; and (iii) enhanced the Debtors prospects of gaining additional contracts with GM and other OEMs, firmly establishing the Debtors reputation as a key North American supplier. The mere fact that the Debtors gained control of a particular

2 It is estimated that GMs sales generated approximately $600 to $700 million in annual sales to Debtors. Accordingly, for the two year period that is the subject of the Committees Rule 2004 inquiry, the Debtors sales to GM were approximately $1.2 to $1.4 billion.

Contract may also have had the added benefit of precluding that particular contract from being awarded to one of the Debtors competitors, thereby enabling a competitor to gain a critical competitive advantage and market share. A future opportunity for economic benefit is sufficient to confer value on a debtor, whether or not such benefit actually materialized. In re McDonald, 265 B.R. 632, 636 (Bankr. M.D. Fla. 2001). The Sixth Circuit has concluded that the fact that a debtor did not realize its expectations under a contract is insufficient to state a colorable fraudulent transfer claim. Simply put, the Committee has offered nothing to allege that at the time the Debtors and GM entered into the Contracts, the Debtors received less than reasonably equivalent value therefor. Controlling Sixth Circuit case law requires the Committee to so establish in order to assert a colorable fraudulent transfer claim. Having failed to establish the elements of a colorable fraudulent transfer claim, the Committee is not entitled to discovery under Rule 2004. IV. THE COMMITTEES 2004 MOTION SHOULD BE DENIED BECAUSE, EVEN ASSUMING THAT A COLORABLE FRAUDULENT TRANSFER CLAIM EXISTS, THE COMMITTEE REQUIRES NO ADDITIONAL DISCOVERY TO ASSERT THE CLAIM. Over a year ago, on June 29, 2005, the Committee filed its Authorization Motion in which it advanced precisely the same theory in support of a fraudulent transfer claim against GM (and other OEM customers) as it now does, again, in the 2004 Motion. In the Authorization Motion, the Committee pleaded that: The Committee seeks authority to prosecute viable [fraudulent transfer] claims against certain of the Debtors customers Authorization Motion, 1 (emphasis added). [T]he Committee has concluded that the [Debtors possess] viable causes of action against the Customers, pursuant to Bankruptcy Code sections 548(a)(2)[footnote omitted] and 544. Authorization Motion, 15 (emphasis added).

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The Fraudulent Transfer Actions clearly constitute colorable claims Authorization Motion, 28 (emphasis added). Accordingly, the Debtors have colorable claims against the Customers under Bankruptcy Code sections 544 and 548 for avoidable fraudulent transfers. Authorization Motion, 28 (emphasis added). In this case, the Debtors have not provided the Committee with adequate justification as to their refusal to pursue their colorable claims against the Customers. Indeed, no adequate justification exists. Authorization Motion, 30 (emphasis added). The Committee believes that the Fraudulent Transfer Actions will provide a substantial source of recovery for unsecured creditors Authorization Motion, 31 (emphasis added). As each of the factors set forth in Gibson Group have been satisfied, the Committee respectfully submits that this Court should grant the Committee authority to step in and prosecute the Fraudulent Transfer Actions for the benefit of the Debtors estates. Authorization Motion, 33 (emphasis added). These estates and their creditors would suffer significant prejudice if colorable viable claims are not pursued against the Customers as soon as possible. Authorization Motion, 36 (emphasis added). To have made these repeated statements in good faith, the Committee must have already determined that adequate factual and legal predicates existed to support the subject claims. To argue now that the Committee requires substantial, invasive discovery to position itself to simply commence the very same fraudulent transfer actions that it was poised to and insisted some fourteen months ago be commenced as soon as possible raises serious questions as to the veracity of the claims made in the Committees pleadings; either the Committee substantially embellished its position in the Authorization Motion or it has no need for the requested discovery in order to

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commence litigation now. It cannot, however, be the case that the Committee was both ready prepare a complaint in July 2005 and, now needs substantial, additional discovery to prepare the same complaint in August 2006. Accordingly, given the Committees insistence that fraudulent transfer claims exist, any additional discovery of GM should be subject to the protections afforded by the Federal Rules of Civil Procedure. It is well established that once an adversary proceeding or contested matter is commenced, discovery should be pursued under the Federal Rules of Civil Procedure and not under Rule 2004. In re Enron Corp., 281 B.R. 836, 840 (Bankr. S.D.N.Y. 2002) (citing In re Benefit Funding Group, Inc., 203 B.R. 24, 28 (Bankr. N.D.N.Y. 1996); see also In re GHR Energy Corp., 35 B.R. 534, 538 (Bankr. D.Mass. 1983) (While it is obvious that particular rights of a creditor are affected when one of its debtors files for protection under the Bankruptcy Code, it cannot be said that a creditor necessarily loses the protections afforded by the Federal Rules of Civil Procedure. . .). The fact that the Committee has not yet launched an action is a distinction without difference since the Committee has already pleaded that it has sufficient facts to file a complaint and has petitioned the Court for authority to do so, without further discovery. It is clear that the Committee does not need a Rule 2004 examination to determine if such actions are appropriate. V. THE COMMITTEES 2004 MOTION SHOULD BE DENIED BECAUSE THERE IS NO MERIT TO AN ANTITRUST CLAIM AGAINST THE CUSTOMERS. A. The 2004 Motion should be denied because there is no basis to support the Committees allegation of an antitrust claim against the customers.

The Committees unsupported allegation of a possible antitrust claim is nothing short of grossly irresponsible. The Committee has made neither an allegation of fact, nor advanced any legal theory whatsoever to support the existence of an antitrust claim. There is not a scintilla of evidence in the record of this case or otherwise which even suggests that, pre- or post-petition, the customers acted in an unlawful manner. Indeed, postpetition, the Debtors have established, and the Debtors and

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GM have carefully observed, a vigorous protocol designed to make sure that sensitive pricing information is not shared among the customers, and GM can attest that such information has neither been shared with GM nor by GM. B. The 2004 Motion should be denied because the conduct alleged by the Committee does not constitute an actionable antitrust claim.

In bankruptcy, joint activity by creditors facing a debtor is commonly in the interest of all parties. Sharon Steel Corp. v. The Chase Manhattan Bank, N.A. et al., 691 F.2d 1039, 1052 (2nd Cir. 1982); citing Falstaff Brewing Corporation v. New York Life Insurance Co. et al., 513 F. Supp. 289 (N.D. Cal. 1978). In Sharon Steel, certain creditors coordinated restructuring of defaulted obligations of the debtor, while Falstaff involved an agreement among the debtors lenders to share payments made to one or more of the lenders among all lenders on a pro rata basis. In both cases, the courts concluded that the lenders coordinated renegotiation of existing contracts does not constitute a market or form of competition, that the antitrust laws were intended to regulate. As in Sharon Steel and Falstaff, here, the OEM customers renegotiation of their contracts with the Debtors does not create or involve a market or a form of competition for new business that the antitrust laws were intended to regulate. The only market competition occurred years ago when the Debtors agreed to supply components to the customers. Moreover, collective efforts to resolve similar claims are common in the context of chapter 11 bankruptcy proceedings. Chapter 11 is intended to be a cooperative process. 7 Collier on Bankruptcy, 1103.05[1][d] at 1103-25 (Alan N. Resnick & Henry J. Sommers eds., 15th ed. rev., 2005). In fact, the Sharon Steel court described the debtors contentions that the antitrust laws forbid creditors to coordinate their positions in bankruptcy as border[ing] on the frivolous. Sharon Steel Corp., 691 F.2d at 1052. Accepting the Committees assertion, that any collaborative efforts by the Customers (which, again, did not exist with respect to the renegotiation of the supply contracts) represent a violation of antitrust law, would prevent the Debtors and similarly situated creditors and

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customers from efficiently resolving their common issues and advancing the case toward a viable plan of reorganization, instead forcing each constituent to participate in lengthy and potentially contentious negotiations. VI. THE COMMITTEES 2004 MOTION SHOULD BE DENIED BECAUSE THE BURDEN TO GM IN COMPLYING WITH THE REQUESTS FAR EXCEEDS ANY POTENTIAL BENEFIT TO THE DEBTORS ESTATES. A Rule 2004 examination is improper where the burden on the producing party outweighs the benefits which may be gained by the requesting party. In re Fearn, 96 B.R. 135, 138 (Bankr. S.D. Ohio 1989) (The examination should not be so broad as to be more disruptive and costly to the party sought to be examined than beneficial to the party seeking discovery.); Coffee Cupboard, 128 B.R. at 514 (Rule 2004 requires that we balance the compelling interests of the parties, weighing the relevance of and necessity of the information sought by examination.); In re Texaco, Inc., 79 B.R. 551, 553 (Bankr. S.D.N.Y. 1987); see also In re Jewelers Shipping Association, 97 B.R. 149, 150 (Bankr. D.R.I. 1989); Drexel Burnham, 123 B.R. at 712 (That documents meet the requirement of relevance does not alone demonstrate that there is good cause for their production.). The Court must balance the Committees request for information (which it advised the Court more than a year ago that it already possesses) against the very substantial and costly burden which would be imposed on GM in responding. As described in the Affidavit of General Motors

Corporation attached as Exhibit A (GMs Affidavit), during the two (and, in certain instances, four) year period for which the Committee seeks discovery from GM, the Debtors produced thousands of GM parts at as many as forty-seven manufacturing facilities located throughout North America, South America and Europe. GM anticipates that, if it is required to respond to the Committees request, it would be required to locate and review, at a minimum, tens of thousands of pages of documents. Potentially responsive documents are likely stored at various locations in North America, South America and Europe, in various formats (i.e., paper and electronic), and in several languages. To produce these documents, GM would be forced to spend literally thousands of hours

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gathering and reviewing potentially relevant documents, logging certain documents to be produced, and making responsive documents available to the Committee for review. This massive effort would involve each of GMs purchasing, accounting, engineering, quality control, logistics, and legal departments, among others. It cannot be disputed that the expense of such an undertaking would be in the hundreds of thousands of dollars. This undue burden to GM is highlighted by the fact that many of the requested documents should be available from the Debtors, although the Committee has not requested this information from the Debtors. The Committee is attempting to stand in the shoes of the Debtors and force its will upon the estates by bringing certain avoidance actions on the estates behalf. As such, the Committee should first look to the estates which possess the complete business records of the Debtors for the documents and the information requested. Accordingly, when measuring the outrageous cost and burden that GM would incur against the Committees supposed need for discovery which it should already have to pursue wholly specious claims, the balance substantially militates against granting the 2004 Motion. VII. THE COMMITTEES 2004 MOTION SHOULD BE DENIED BECAUSE IT SEEKS DISCLOSURE OF GMS PRIVILEGED AND PROPRIETARY INFORMATION AND TRADE SECRETS. IF, HOWEVER, THE COURT GRANTS A BANKRUPTCY RULE 2004 EXAMINATION FOR ANY PURPOSE, A PROTECTIVE ORDER IS REQUIRED. A. The 2004 Motion should be denied because it seeks proprietary information and trade secrets of GM.

For a party to discover anothers trade secrets, it must show that other evidence which it has gathered through discovery provides a substantial factual basis for its claim. Microwave Research Corp. v. Sanders Assocs., Inc., 110 F.R.D. 669, 674 (D.Mass. 1986) (emphasis added). This is so because the end result of disclosure, where ultimately it develops that the asserted claim is without substance, may be so destructive of the interests of the prevailing party that more is required than mere allegation to warrant pretrial disclosure. Ray v. Allied Chem. Corp., 34 F.R.D. 456, 457

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(S.D.N.Y. 1964). Indeed, where a party seeks confidential and trade secret information from a nonparty, this burden is even higher. Specifically, courts require that to discover trade secret information of a nonparty, it must be first established that the information sought is sufficiently relevant and necessary to his case to outweigh the harm disclosure would cause to the person from whom he is seeking the information. Litton Indus., Inc. v. Chesapeake & O. R. Co., 129 F.R.D. 528, 530 (E.D.Wis. 1990); Allen v. Howmedica Leibinger, GmhH, 190 F.R.D. 518 (D.Tenn. 1999) (a corporation would not be compelled to produce financial, marketing and licensing information where the requesting party had failed to demonstrate that the information sought was relevant and necessary to support a claim, when discovery would impose an undue burden on the nonparty and when there was a substantial risk of harm from the disclosure of confidential information). Applying this standard, courts routinely refuse to order nonparties to disclose confidential and trade secret information, particularly where the party seeking discovery is a competitor or has collateral interest in acquiring such information. See, e.g., In re Vitamins Antitrust Litig., 267 F.Supp. 2d 738, 742-43 (S.D.Ohio 2003) (quashing subpoena where information sought trade secrets of direct competitor); Advanced Semiconductor Prods., Inc. v. Tau Labs., Inc., No. 83-20412, 1986 LEXIS 30101, at *6-7 (N.D. Cal. Jan. 23, 1986) (the mere argument that a discovery inquiry of a competitor-adversary may lead to relevant evidence is not sufficient to overcome the inconvenience that can be caused by forcing the competitor to disclose areas of business or scientific sensitivity); United States v. Serta Assocs., Inc., 29 F.R.D. 136, 138 (N.D.Ill. 1961) (granting motion to quash subpoena since the court would be most reluctant to force a non-party competitor to divulge confidential information.); Empire of Carolina, Inc. v. Mackle, 108 F.R.D. 323, 326-327 (S.D.Fla. 1985) (if a parties financial strategy information were discoverable, the recipient would gain a tremendously unfair advantage in its negotiations and those negotiations could no longer be conducted at arms length; thus, such confidential financial strategy information should be protected from disclosure). In fact, some courts have delayed discovery of trade secrets until trial in order to

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address a partys right to be protected against devastating injury which may result if it turns out that the plaintiff's claim is without substance. See Microwave Research Corp., 110 F.R.D. at 672. Here, the Committee seeks highly confidential and proprietary documentation from GM including, but not necessarily limited to, the following: All documents, analyses, proposals or correspondence regarding a reduction in prices charged, or to be charged, by the Debtors for the provision of goods and/or services for the two year period prior to the Petition Date. 2004 Motion at Exhibit B, 2. All documents, analyses, proposals or correspondence relating to the valuation of any goods and/or services received from the Debtors. 2004 Motion at Exhibit B, 4. All financial projections created by, on behalf of, or furnished to the Principal Customer, relating to the purchase of any goods and/or services received from the Debtors. 2004 Motion at Exhibit B, 5. All documents, analyses and correspondence regarding contract bidding strategy and/or bidding procedures relating to the Debtors for the four year period prior to the date of this Order. 2004 Motion at Exhibit C, 3. GMs Affidavit attests unequivocally to the competitively sensitive nature of the information requested and the harm associated with its disclosure. Notwithstanding this clear precedent and GMs Affidavit, the Committee fails to explain how it has met its heightened burdens in this case. Nor can it where the internal analyses and strategies of GM are irrelevant to any issue related to the Committees putative fraudulent transfer and antitrust claims and are so highly confidential and proprietary. Requiring production of the requested documents and information would ignore GMs right to protect its confidential and proprietary information and trade secrets from other OEMs and suppliers, including the Debtors. If GMs suppliers, including the Debtors, were privy to GMs proprietary information and trade secrets, then GMs ability to negotiate effectively with its supplier

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base would be substantially and irreparably damaged since the information and documents sought go directly to the heart of GMs component parts pricing and the administration of its supply chain. B. The 2004 Motion seeks information protected by the attorney-client privilege and work product doctrine.

Much of the documentation and information requested by the Committee is protected from disclosure by the attorney-client privilege and work product doctrine. The Committees request encompasses both pre- and post-petition documents and information. GMs planning and

strategizing in this bankruptcy case has been in consultation with or at the advice of GMs inside and outside counsel. In fact, unlike general civil litigation which typically results from matters arising prior to the engagement of counsel, GM began consulting with counsel regarding the Debtors financial crisis before the commencement of these chapter 11 cases, and continues consulting with counsel on a regular, and at times, daily basis throughout the pendency of these cases. Any

testimony and/or documents which relate to such consultations with counsel, or analyses prepared at the direction of counsel, are not discoverable under the attorney-client privilege and work product doctrine, and must be protected from disclosure. See In re Bakalis, 199 B.R. 443, 448 (Bankr. S.D.N.Y. 1996) ([Examinations under Rule 2004] are subject to the doctrine of privileges, if applicable, including the attorney client privilege. . . .); In re Financial Corp. of America, 119 B.R. 728, 733 (Bankr. C.D.Cal. 1990) (Work product doctrine of Fed. R. Civ. P 26(b)(3) applies to Rule 2004 examinations through Bankruptcy Rule 9014). C. If the Court grants the Committees 2004 Motion for any purpose, a protective order is necessary to protect GMs rights and interests.

If the Court approves a Rule 2004 examination of GM for any purpose, no matter how limited, a protective order should be granted. As discussed above, a vast majority of the requested information and documents are highly confidential and proprietary, and/or are subject to the attorneyclient privilege and work product doctrine. Disclosure of such information and documents would irreparably harm GM.

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The Court may issue an appropriate protective order to preserve the rights of the party from whom discovery is sought. In re Financial Corporation of America, 119 B.R. 728, 733

(Bankr.C.D.Cal. 1990); In re Summit Corporation, 891 F.2d 1, 5 (1st Cir. 1989); see Jewelers Shipping, 97 B.R. at 150 (assurances that the requested information would be kept confidential were illusory given the adversary stance taken in the case). Accordingly, notwithstanding GMs absolute belief that a Rule 2004 examination is inappropriate in these circumstances, if it is granted, a protective order should be entered. CONCLUSION For these reasons, the Committees 2004 Motion should be denied. Respectfully submitted, HONIGMAN MILLER SCHWARTZ AND COHN LLP Attorneys for General Motors Corporation

By: /s/ E. Todd Sable Robert B. Weiss (P28249) E. Todd Sable (P54956) Tricia A. Sherick (P60384) ) 2290 First National Building 660 Woodward Avenue Detroit, MI 48226 (313) 465-7548 Dated: September 5, 2006
DETROIT.2305357.7

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EXHIBIT A

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