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

: : : ---------------------------------------------------------------

Chapter 11 Case No. 05-55927 (SWR) (Jointly Administered)

MEMORANDUM OF LAW IN SUPPORT OF THE MOTION OF INNOVENE USA LLC FOR RELIEF FROM THE AUTOMATIC STAY TO TERMINATE CONTRACT WITH DEBTOR Innovene USA LLC, as successor in interest to BP Amoco Chemical Company (Innovene), by and through its undersigned counsel, hereby files this Memorandum of Law in support of the Motion for entry of an order, pursuant to 11 U.S.C. 362(d)(1), providing relief from the automatic stay to provide written notice to Collins & Aikman Corporation, one of the above-captioned debtors (the Debtor) of Innovenes intention to terminate the Contract (defined below) as of December 31, 2005. JURISDICTION AND VENUE 1. This Court has jurisdiction over this matter pursuant to 28 U.S.C.

1334(b). Venue is proper in this Court pursuant to 28 U.S.C. 1409(a). This matter is a core proceeding pursuant to 28 U.S.C. 157(b)(2)(G). The statutory predicate for the relief sought in the Motion is section 362(d)(1) of the Bankruptcy Code.

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BACKGROUND 2. On May 17, 2005 (the Petition Date), the Debtor and

substantially all of its domestic operating subsidiaries each filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. 3. The Debtor continue s to operate its businesses and manage its

properties as a debtor- in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. 4. BP Amoco Chemical Company (Amoco) and the Debtor entered

into a contract (the Contract), dated June 23, 2004, for the purchase and sale of four grades of polypropylene, which the Debtor uses in the production of bumpers for automobiles. 1 In June 2005, Amoco spun off certain assets to form Innovene. The Contract was among the assets Innovene received from Amoco. 5. The Contract provides that it will remain in effect from year-to-

year unless either party gives written notice of termination at least ninety days prior to December 31 of each calendar year. In this case, Innovene must give the Debtor written notice of termination on or before October 3, 2005. 6. Prior to the Petition Date, Innovene sold polypropylene to the

Debtor on credit, including net sixty-day payment terms after invoice. The Debtors credit limit was $500,000. Nevertheless, the Debtor routinely failed to pay its invoices timely or only partially paid its invoices. On the Petition Date, the Debtors account was in arrears in the amount of $1,141,232.

A copy of the contract is attached hereto as Exhibit 1.

7.

Since the Petition Date, Innovene has continued to sell

polypropylene to the Debtor pursuant to terms and conditions of the Contract. Innovene will continue to sell polypropylene to the Debtor to December 31, 2005. ARGUMENT 8. The filing of a bankruptcy petition operates as a stay against an

entity with an interest in property of the debtors estate. 11 U.S.C. 362(a)(1). A party with an interest in property of the debtors estate may request relief from the automatic stay for cause. 11 U.S.C. 362(d). 2 The Code does not define cause, but cause has been viewed as a broad and flexible concept. In re Holly, Inc. 140 B.R. 643, 687 (Bankr. W.D. Mich. 1992). The Bankruptcy Court must determine whether sufficient cause exists to grant relief from the automatic stay on a case-by-case basis. Mazzeo v. Lenhart (In re Mazzeo), 167 F.3d 139, 142-143 (2d Cir. 1999). The Court has discretion to decide whether to lift the automatic stay. Sonnax Indus., Inc. v. Tri Component Prods. Corp. (In re Sonnax Indus., Inc.), 907 F.2d 1280, 1286 (2d Cir. 1990). In determining whether cause exists, the Court should weigh the hardships imposed on both parties. In re C & S Grain Co., 47 F. 3d 233, 238 (7th Cir. 1995).

Section 362(d)(1) of the Bankruptcy Court states, in relevant part: On request of a party in interest and after notice and hearing, the Court shall grant relief from the stay provided under section (a) of this section, such as by terminating, annulling, modifying, or conditioning such stay: (i) for cause, including the lack of adequate protection of an interest in property of such party in interest . . . . 11 U.S.C. 362(d)(1).

9.

The movant bears the burden of proving cause to vacate the

automatic stay. In re First Cincinnati, Inc., 286 B.R. 49 (6th Cir. BAP (Ohio) 2002). 10. Filing a bankruptcy petition does not entitle a debtor to greater

substantive legal rights than it previously had under non-bankruptcy law. In re Penn Traffic Co., 2005 WL 613310 * 78 (Bankr. S.D.N.Y. March 11, 2005); Valley Forge Plaza Assocs. v. Schwartz, 114 B.R. 60, 62 (E.D. Pa. 1990). In Valley Forge, the court held that the ability to terminate a contract on its terms survives bankruptcy and the automatic stay does not prevent a party from terminating a contract according to its terms. See Valley Forge Plaza, 114 B.R. at 62; In re Bolin Oil Co., 51 B.R. 936, 939 (Bankr. N.D. Ohio 1985). 11. In this case, the Contract expressly authorizes Innovene to

terminate the Contract by giving written notice at least ninety days in advance of December 31, 2005. Preventing Innovene from giving a notice of termination would deprive Innovene of its right under the Contract and would impermissibly enlarge the Debtors substantive legal rights under the Contract. On the contrary, the relief requested by Innovene will not injure the Debtor because the Debtor will have until December 31, 2005 to seek a new supplier of polypropylene. 12. Moreover, the Debtors payment history provides additional cause

to terminate the Contract. Prior to the Petition Date, the Debtor routinely paid Innovene late or only partially paid its invoices. On the Petition Date, the Debtor had an outstanding balance of $1,141,232, which exceeded its credit limit by $641,232. Thus, due to the Debtors delinquent payment history, cause exists to terminate the Contract.

WHEREFORE, Innovene respectfully requests that the Court enter the Order vacating the automatic stay to allow Innovene to give written notice of its intention to terminate the Contract, and granting such other and further relief as the Court deems just and proper.

Southfield, Michigan August 25, 2005 By:

KUPELIAN ORMOND & MAGY, P.C. /s/ Terrance A. Hiller, Jr. Terrance A. Hiller, Jr. (P55699) 25800 Northwestern Highway Suite 950 Southfield, Michigan 48075
Tel: 248.357.0000 Fax: 248.357.7488 tah@kompc.com

and KELLEY DRYE & WARREN LLP James S. Carr Denver G. Edwards 101 Park Avenue New York, New York 10178 (212) 808-7800 ATTORNEYS FOR INNOVENE USA LLC

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