UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION

In Re: COLLINS & AIKMAN CORPORATION, et al., Chapter 11 Case No. 05-55927-R Hon. Steven W. Rhodes

Debtor. _________________________________ CLAIMANTS REPLY BRIEF IN SUPPORT OF MOTION FOR RELIEF FROM AUTOMATIC STAY Wanda Patterson, Arie Schlegel, Dixie Akers, Edna Dawson, Paul Phillabaum, and Shelly Cornwell (the "Claimants") hereby submit the following reply to Debtors1 Objection to Patterson et. als Motion for Relief from the Automatic Stay. As discussed herein, the grounds for Debtors objections are either demonstrably false or unsupported speculation. As such, Debtors have failed to satisfy their burden of proving that cause does not exist for lifting the automatic stay. LEGAL STANDARD Section 362(d)(1) of the Bankruptcy Code permits this Court to grant relief from an automatic stay for cause. 11 U.S.C. 362(d)(1). Contrary to the contentions of the Debtors, 362(g) of the Code expressly places the burden of proof on the Debtors.2 While Claimants have an initial burden of production (which they have satisfied), it is the Debtors that have the burden

Debtors include Collins & Aikman Corporation, Collins & Aikman Products Co. and Collins & Aikman Accessory Mats, Inc. Section 362(g) states: In any hearing under subsection (d) or (e) of this section [ 362] concerning relief from the stay of any act under subsection (a) of this section (1) the party requesting such relief has the burden of proof on the issue of the debtor's equity in property, (2) the party opposing such relief has the burden of proof on all other issues. Since this is not an issue of the debtor's equity in property, the burden of proof is squarely on the Debtors.
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of proving that cause does not exist for lifting the automatic stay.

Id.; see also In re

Washtenaw Huron Inv. Corp. No. 8, 150 B.R. 31, 33 (Bankr. E.D. Mich 1992). GROUNDS OF LIFTING THE AUTOMATIC STAY I. The District Court is the Most Appropriate Forum for the District Court Action. The United States District Court for the Northern District of Ohio, Eastern Division (District Court) is the most appropriate forum for resolving Wanda Patterson, et. al. v. Heartland Industrial Partners, LLP, et. al., Case No. 5:03-CV-1596 (District Court Action). Congress specifically designated the U.S. District Courts as the forum for causes actions under 29 U.S.C. 186, and the District Court judge (Judge David Dowd, Jr.) is familiar with the issues involved in the case. See Claimants Br., 3-4. Debtors meager response that Bankruptcy Courts are sometimes forced to interpret federal labor law in bankruptcy proceedings, see Debtors Br., 12, does not refute the fact that the District Court is the most suitable forum for adjudicating the case. II. The District Court Can Timely Adjudicate the District Court Action. Upon the automatic stay being lifted, the District Court will be free to rule upon the cross motions for summary judgment that were almost fully briefed when the automatic stay was imposed. Since all parties (including the Debtors) agree that there are no issues of material fact in dispute, it is likely that the District Court will grant summary judgment. See Claimants Br., 4-5. Debtors claim that a full trial on the merits is likely, see Debtors Br., 10, is contrary to Debtors representation to the District Court that no genuine issues of material fact exist. Debtors reliance on the District Courts order denying, in part, Defendants Motions to Dismiss is misplaced because the order was issued prior to any discovery taking place. Id. Extensive

discovery has since been completed, and all parties agree that there are no issues of fact necessitating a trial. III. The District Court Action Will Not Adversely Effect Debtors Reorganization. The District Court Action does not seek any monetary relief from the Debtors, but instead seeks only declaratory and injunctive relief prohibiting Debtors from providing certain organizing assistance to the Union. Claimants Br., 5. This relief will not (and cannot) hinder Debtors effective reorganization. See e.g., In re Lamberjack, 149 B.R. 467, 470 (Bankr. N.D. Ohio 1992). Debtors do not dispute these facts, but rather claim that Debtors reorganization will be hindered by (1) the adjudication of the District Court Action, and (2) the possibility of future actions under the Racketeer Influenced and Corrupt Organization Act, 18 U.S.C. 1981 (RICO). Debtors Br., 9-11. Both claims are untenable. Adjudicating the District Court Action. Debtors claim that devoting significant time and resources to defending the Debtors interests in the District Court Action . . . would impede the administration of the Debtors bankruptcy estate. Id. at 9-10. This assertion would not support a stay of proceedings even if it were true, for the cost of litigating an action in and of itself should not and does not bar modification of the stay. In re Westwood Broadcasting Inc., 35 B.R. 47, 49 (Bankr. Hawaii 1983) citing In Re Gerald P. McGraw, 18 B.R. 140, 142 (Bankr. W.D.Wis. 1982). Moreover, the premises of Debtors assertion are not supported by the facts. In terms of time, the District Court Action has been progressing for over two years and is now nearing completion. Debtors focus on the time constraints of their bankruptcy

advisors (i.e., lawyers) is unavailing, id. at 9, because Debtors are represented by a different law firm in the District Court Action (McDonald, Hopkins, L.P.A.). Lifting the stay will not

distract Debtors bankruptcy counsel (Kirkland & Ellis LLP) from the bankruptcy issues before this Court. In terms of resources, Debtors claim that the amount of additional briefing and discovery that will be done by the parties is likely to be substantial, id. at 12, is belied by the fact that discovery has been completed. The deadline for further discovery has expired. Only reply briefs need to be filed for dispositive motions on the merits to be fully briefed. Debtors will likely expend more resources opposing Claimants motion to lift the stay than they will in concluding the proceedings before the District Court. Finally, Debtors offer no evidence or proof that the time or resources necessary for completing the District Court Action will impede the administration of the Debtors bankruptcy estate. Id. Debtors cannot satisfy their burden of proof with unsupported assertions. RICO Actions. Claimants did not raise a RICO claim in the District Court Action. Nonetheless, Debtors argue that a ruling for Claimants could support future RICO claims because 29 U.S.C. 186 is a RICO predicate. Id. at 3. Debtors cite no authority for their remarkable theory that a stay should not be lifted if a case could potentially be used as a precedent to support a different cause of action, brought by different parties, in a different case that could be filed in the future. To call this theory speculative does little justice to the full meaning of that term. But even if it were assumed arguendo that a final judgment in the District Court Action could be cited to support a RICO claim against Debtors, this would not effect Debtors reorganization. First, Debtors theory fails chronologically. A decision by the District Court may not itself be a binding precedent as both parties have indicated that they will seek a stay of the judgment, pending appeal of an adverse decision. An opinion by the Court of Appeals for the Sixth Circuit is likely years down the road. By this time, Debtors will likely be out of 4

bankruptcy and/or the four (4) year statute of limitations governing RICO actions will have expired with regard to actions at issue in the District Court Action. See Agency Holding Corp. v. Malley-Duff, 483 U.S. 143 (1987). Second, any RICO action brought against Debtors during their reorganization would be automatically stayed pursuant 11 U.S.C. 362. Debtors reorganization faces no threat from a RICO action unless this Court expressly permits such an action to proceed under 362(d). Similarly, any RICO action brought against Debtors post-confirmation is likely to be discharged under 11 U.S.C. 1141 and the Debtors' plan of reorganization as the predicate acts took place pre-petition. IV. The Continuance of the District Court Action is Necessary to Protect Claimants Rights and Interests. An injunction prohibiting the Debtors from unlawfully assisting Union organizing campaigns against Claimants is needed to protect their rights and interests. See Claimants Br., 6. Debtors claim that no future threat of harm exists because the USW campaign has already occurred at Movants facility and failed. Debtors Br., 11. However, Debtors fail to inform the Court that the Union intends to conduct another organizing drive at Claimants facility, and that Debtors will assist this campaign pursuant to its contractual agreement with Union unless enjoined for so doing. Union Director of Organizing Michael Yoffee states that not only is the USWA free to conduct another campaign at [Claimants facility] at any time, but moreover it intends to do so at some point in the future. Dec. of Yoffee, 2 (Ex. A) (emphasis added). Debtors admit that . . . Collins & Aikman have abided by and will continue to abide by their contractual obligations under the Side Letter and Framework Agreement (or similar documents). Debtors Answer, 34 (Ex. B) (emphasis added). Until Debtors are enjoined from assisting Union organizing

campaigns, Claimants will be subject to threat of future harm. The District Court Action must be allowed to proceed. CONCLUSION For all of reasons discussed, this Court should enter an order modifying the automatic stay and permitting the District Court Action to continue in the District Court. Respectfully submitted, VARNUM, RIDDERING, SCHMIDT & HOWLETTLLP Attorneys for Claimants

Date: October 7, 2005

By:

/s/ Mary Kay Shaver Michael McElwee (P-36088) Mary Kay Shaver (P-60411) Business Address: Bridgewater Place P. O. Box 352 Grand Rapids, MI 49501-0352 (616) 336-6000

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