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

In re: COLLINS & AIKMAN CORPORATION, et al. Debtors.

Chapter: 11 Case No. 05-55927 (SWR) Jointly Administered Hon. Steven W. Rhodes
Hearing Date: September 11, 2008 Objection Deadline: August 20, 2008 (extended by agreement with counsel for Post-Consummation Trust)

MAINSTAY HIGH YIELD CORPORATE BOND FUND'S LIMITED OBJECTION TO POST-CONSUMMATION TRUST'S MOTION FOR AN ORDER APPROVING DOCUMENT RETENTION POLICY MainStay High Yield Corporate Bond Fund (MainStay or Lead Plaintiff),1 a party in interest and creditor, hereby submits this limited objection (the Objection) to the PostConsummation Trusts Motion for an Order Approving Document Retention Policy (the Motion) and, respectfully states the following: BACKGROUND 1. On February 5, 2007, MainStay, on behalf of itself and all other persons or

entities (the Putative Class) who purchased or otherwise acquired (through their investment advisor, MacKay Shields LLC (MacKay Shields)), 12.875% Notes (the Senior Subordinated Notes) and 10.75% Notes (the Senior Notes) (the Senior Subordinated Notes and the Senior Notes are the C&A Notes) of Collins & Aikman (C&A or the Debtor) during the period August 11, 2004 through May 17, 2005, inclusive (the Class Period), filed a Class Action Complaint and Jury Demand (the Complaint) entitled MainStay High Yield Corporate Bond Fund v. Heartland Industrial Partners, L.P., et al, Case No. 07-CV-10542 (DAS) (the
1

MainStay was appointed Lead Plaintiff on April 27, 2007.

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Noteholder Litigation), in the United States District Court for the Eastern District of Michigan (the District Court).2 2. The Complaint alleges violations of Sections 20(a) and 10(b) of the

Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder against Heartland Industrial Partners, L.P., and Heartland Industrial Associates, L.L.C. (collectively, the Heartland Defendants)3 and David A. Stockman, J. Michael Stepp, Timothy D. Leuliette, Daniel P. Tredwell, W. Gerald McConnell, Samuel Valenti, III, John A. Galante, Bryce M. Koth, Robert A. Krause, Gerald E. Jones, David R. Cosgrove, Elkin B. McCallum, Paul C. Barnaba, Thomas V. Gougherty and Christopher M. Williams (collectively, the Individual Non-Debtor Defendants);4 the Heartland Defendants and the Individual Non-Debtor Defendants are, collectively, the Defendants. The Complaint describes both (i) the relationship between the Debtor and the Heartland Defendants and (ii) the Individual Non-Debtor Defendants positions with and duties and responsibilities to the Debtor and the Heartland Defendants. 3. The Debtor was not named as a defendant in the Noteholder Litigation

pursuant to the dictates of the automatic stay. However, the Noteholder Litigation proceeded against the Defendants. 4. The Defendants filed separate motions to dismiss the complaint in the

Noteholder Litigation. On March 19, 2008, the District Court entered an Order granting or denying, in whole or in part, the various motions to dismiss. As a result, the Noteholder Litigation is proceeding with respect to those causes of action that were not dismissed. 5. On May 17, 2005, C&A, together with certain of its affiliated entities

(collectively, the Debtors), filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code (the Bankruptcy Code).

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MainStay filed an Amended Complaint on May 4, 2007. References to the Complaint include the Amended Complaint. The current case number is 07-CV-15042-AJT-SDP. The Heartland Defendants owned approximately 41% of the Debtors common stock as of January 1, 2005. The Individual Non-Debtor Defendants include former officers and directors of the Debtor and the Heartland Defendants.

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6.

The Debtors First Amended Joint Plan was confirmed on July 18, 2007,

and became effective on October 12, 2007. 7. The Post-Consummation Trust was established under the Plan, which

provides that the Post-Consummation Trust shall retain and preserve those documents and records of the Debtors reasonably believed to be relevant to the defense of any pending Tort Claims and/or Potentially Insured Claims.5 See Motion, 11. 8. Upon information and belief, the Post-Consummation Trust has volumes

of [unidentified] documents relating to the Debtors operations, both pre and post bankruptcy. See Motion, 12. 9. Because of the cost incurred to store the documents, the Post-

Consummation Trust seeks approval of the proposed Document Retention Policy to preserve only those documents specified in the Plan and certain additional documents described in the Motion (collectively, the Documents). See Motion, 14, and Exhibit 6 to the Motion. 10. Those documents not specifically identified in the Motion, 14, and in

Exhibit 6 to the Motion, will be destroyed by the Post-Consummation Trust upon entry of the proposed Order approving the Document Retention Policy. See Motion, 15. Thereafter, on a quarterly basis, and upon the written consent of the Litigation Trust (also established under the Plan), the Post-Consummation Trust will destroy documents related to closed claims that the Post-Consummation Trust deems are no longer necessary for the administration of the Plan or the Bankruptcy Cases. See Motion, 15. Indeed, by this Motion, the retention, preservation and destruction of Documents are intended to be within the sole discretion of the PostConsummation Trust, with the approval of the Litigation Trust.

Tort Claims and Potentially Insured Claims are defined terms under the Confirmed Plan. See Plan, Art. I. A. 158 and 115, respectively.

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OBJECTION 11. The Motion provides that parties in interest who believe that other

documents should be retained will have the opportunity to make such a request to this Court. To the extent any such request or objection impacts documents relevant in any way to the Securities Litigation, such requests and/or objections are incorporated herein. 12. Lead Plaintiff does not object to some document retention policy, but

believes that certain additional documents must be retained and preserved by the PostConsummation Trust and that additional notice of the future destruction or abandonment of documents must be established and, if an objection is interposed, such destruction or abandonment should only take place upon further order of the Bankruptcy Court. 13. The Post-Consummation Trust proposes to retain documents reasonably

believed to be relevant to the defense of any pending Tort Claims and/or Potentially Insured Claims [as defined in the Plan]. See Motion, 14 e; Exhibit 6 to the Motion. 14. As relevant to this Objection, a Potentially Insured Claim is any Claim or

demand for which any of the Debtors . . . may claim coverage under one or more Insurance Contracts, other than a Claim under a workers compensation or automobile liability insurance policy. Plan, Art. I. A. 115. Potentially Insured Claims include Insured Claims which are Claims arising from an incident or occurrence alleged to have occurred prior to the Effective Date [of the Plan] that any Insurer: (a) is obligated . . . to pay any judgment, settlement or contractual obligation with respect to the Debtors. Plan, Art. I. A. 74. 15. Plaintiff believes that the claims asserted in the Noteholder Litigation are

Potentially Insured Claims because such claims are covered under the applicable directors and officers liability policies. Therefore, any documents in the possession of the Post-Consummation Trust relevant to the claims in the Noteholder Litigation (the Relevant Documents) should be

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preserved and maintained under the proposed Document Retention Policy.6 To the extent the Post-Consummation Trust has a duty or obligation to preserve documents in any format, including electronic data, the Document Retention Policy must acknowledge and comply with that duty and/or obligation. If the Post-Consummation Trust expressly agrees to the foregoing, Lead Plaintiff has no objection to the Motion, provided that notice of the destruction (or abandonment, if applicable) of the Documents is given to counsel for Lead Plaintiff with an opportunity to be heard. In the event an objection to such destruction (or abandonment) is asserted, the issue should be submitted to the Bankruptcy Court for determination.
16.

However, in the event the Post-Consummation Trust disputes that the

Relevant Documents are among those subject to the proposed Document Retention Policy, Lead Plaintiff objects to the Motion.
17.

Indeed, the conduct of the Debtors, their affiliates and certain of their

directors and officers (among the Defendants in the Noteholder Litigation) leading up to the filing of the Debtors petitions (which conduct also led to the Noteholder Litigation) requires that before the Relevant Documents are abandoned or destroyed, Lead Plaintiff be given the opportunity to access and examine such documents and information. To do otherwise would result in severe prejudice to Lead Plaintiff and the Class. 18. Some mechanism providing for the preservation of the Relevant

Documents, as well as for accessing them, must be established in order to avoid their destruction and prejudice to Lead Plaintiff and the Class. 19. The proposed Document Retention Policy must be extended to ensure that

the Relevant Documents are properly preserved and available to Lead Plaintiff, and that notice of any attempt to destroy such Relevant Documents be given to counsel for Lead Plaintiff with an opportunity to object and obtain possession thereof.

Upon information and believe, criminal and other investigations of the Debtors and the Defendants may be ongoing. Documents related to those investigations may be relevant to the claims in the Noteholder Litigation and therefore should also be preserved.

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CONCLUSION 20. Based on the foregoing, Lead Plaintiff respectfully requests that unless

and until some further protocol or other mechanism to safeguard, preserve, protect and make available the Relevant Documents is put in place, an Order be entered (i) denying approval of the Document Retention Policy and (ii) granting such other and further relief as the Court deems just and proper.

Dated: August 19, 2008

Respectfully submitted, LOWENSTEIN SANDLER PC By: /s/Michael S. Etkin Michael S. Etkin, Esq. (ME-0570) Ira M. Levee, Esq. (IL-9958) 65 Livingston Avenue Roseland, New Jersey 07068 (973) 597-2500 (Telephone) (973) 597-2481 (Facsimile)
Bankruptcy Counsel for Lead Plaintiff

BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP Steven B. Singer, Esq. John C. Browne, Esq. Jeremy Robinson, Esq. 1285 Avenue of the Americas, 38th Floor New York, New York 10019-6031 (212) 554-1400 (Telephone) (212) 554-1444 (Facsimile)
Lead Counsel for Lead Plaintiff

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

In re: COLLINS & AIKMAN CORPORATION, et al. Debtors.

Chapter: 11 Case No. 05-55927 (SWR) Jointly Administered Hon. Steven W. Rhodes

CERTIFICATION OF SERVICE

Gina C. Buccellato, certifies as follows: 1. I am a legal assistant employed by the law firm of Lowenstein

Sandler PC, Bankruptcy Counsel to the Lead Plaintiff, in the above captioned matter. 2. On August 19, 2008, I caused to be served a copy of the Mainstay

High Yield Corporate Bond Funds Limited Objection to Post-Consummation Motion for an Order Approving Document Retention Policy, filed with the Clerk of the Court using the U.S. Bankruptcy Court Eastern District CM/ECF System and that copies will be provided to all Attorneys of Record via the CM/ECF system. A hard copy has been forwarded to the following via First Class Mail: Carson Fischer, P.L.C. Joseph M. Fischer, Esq. Patrick J. Kukla, Esq. 4111 Andover Road, West 2nd Floor Bloomfield Hills, Michigan 48302 I certify that the foregoing statements made by me are true. I am aware that if any of the foregoing statements made by me are willfully false, I am subject to punishment.

Dated: August 19, 2008 /s/ Gina C. Buccellato Gina C. Buccellato

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