UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION In Re: COLLINS & AIKMAN

CORPORATION, et al, Case No. 05-55927-swr (Jointly Administered) (Tax ID #13-3489233) HON. STEVEN W. RHODES Chapter 11

Debtors. _________________________________________/

CELADON TRUCKING, INC.S RESPONSE TO COLLINS & AIKMAN LITIGATION TRUSTS SEVENTY-NINTH OBJECTION TO CLAIMS Celadon Trucking, Inc. (Celadon), through its counsel, responds to The Collins & Aikman Litigation Trusts (Trust) Seventy-Ninth Omnibus Objection to Claims dated August 7, 2008 (Docket #9878) (Seventy-Ninth Omnibus Objection) insofar as it objects to Celadons Proof of Claim, No. 498 filed in the amount of $162,271.91 (Celadon Claim) and states as follows: 1. The Celadon claim is based on unpaid invoices for trucking services provided by

Celadon to the Debtor. 2. The sole basis for objection to the Celadon Claim in the Seventy-Nine Omnibus

Objection is that there is an adversary proceeding brought by the Debtors to recover property or an avoidable transfer under Chapter 11 of the Bankruptcy Code, and for that reason, the Celadon Claim should be disallowed and expunged pursuant to 11 U.S.C. 502(d), Bankruptcy Code. 3. The Trust is correct that the Debtors have commenced an Adversary Proceeding

against Celadon and related companies which is pending in this Court as Adversary Case No. 07GOLDSTEIN BERSHAD FRIED & LIEBERMAN
Professional Corporation

05522 which seeks recovery of alleged preferential transfers totaling $1,288,541.10 (the Preference Action). 4. The Seventy-Ninth Omnibus Objection is premature, however, and 502(d) is not

4000 Town Center Suite 1200 Southfield, MI 48075 (248) 355-5300

applicable, as there has been no adjudication or other finding that Celadon is liable on the Preference Claim or that any money is recoverable from it. Celadon is defending against the Preference Claim and believes that it has a complete defense to the preference claims.
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Nevertheless, the parties have voluntarily exchanged documents and engaged in settlement discussions, and expect to have the case settled and resolved soon. 5. Section 502(d) provides in pertinent part that: . . . the court shall disallow any claim

of any entity from which property is recoverable under section . . . 550 . . . of this title or that is a transferee of a transfer avoidable under section . . . 547 . . .of this title, unless such entity or transferee has paid the amount . . . for which such entity or transferee is liable under section . . . 550 . . . of this title. 6. The Debtors, or in this case the Trust, in order to avail itself of the benefits of

502(d) to disallow a claim, must first obtain a judicial determination that the claimant is liable. See, In re Lids Corp, 260 B.R. 680, 684 (Bankr.D.Del. 2001); see also, Creditors of Mellon Produce, Inv. v. Braunstein, 112 F.3d 1232, 1237 (1st Cir. 1997) (the key phrase in this inquiry is the amount. . . for which such entity or transferee is liable). In re Davis, 889 F.2d 658, 662 (5th Cir.1989) ( 502(d) is designed to be triggered after a creditor has been afforded reasonable time in which to turn over amounts adjudicated to belong to the bankruptcy estate); In re Mountaineer Coal Co., Inc., 247 B.R. 633, 641 (Bankr.W.Va.2000) ( 502(d)) (would not appear applicable unless and until a finding under one of the cited sections had been made and then the claimant had failed to comply with such ruling). 7. Merely commencing an adversary proceeding is not enough to determine Celadon

is liable. See In re Lids Corp., supra, B.R. at 684. The allegation of a preference alone cannot act to defeat a claim against the Debtor. A determination is needed on the preference matter. The preference matter must be adjudicated prior to the Court determining if the claim can be allowed
GOLDSTEIN BERSHAD FRIED & LIEBERMAN
Professional Corporation

or disallowed. In re Southern Air Transport, Inc., 294 B.R. 293, 296-97 (Bankr. S.D. Ohio 2003). See also, In re Metiom, Inc., 301 B.R. 634, 641-42 (Bankr.S.D.N.Y. 2003) (trustee cannot prevail on objection to claim without first obtaining determination, governed by Part VII Bankruptcy Rules, that creditor received avoidable preference).

4000 Town Center Suite 1200 Southfield, MI 48075 (248) 355-5300

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8.

The legislative history and policy behind 502(d) illustrates that the Section is

intended to have the coercive effect of insuring compliance with judicial orders. See, In re Davis, supra, 889 F.2d at 661-62. In this case, there has been no judicial order entered against Celadon. WHEREFORE, Celadon prays for relief that the Seventy-Ninth Omnibus Objection as it pertains to Celadon be overruled and denied. Alternatively the Seventh-Ninth Omnibus Objection should be held in abeyance until such time as there is an adjudication of liability of Celadon for a recoverable preference, and failure to pay any such liability within a reasonable period, and for such other relief as may be just and equitable. Respectfully submitted, GOLDSTEIN, BERSHAD, FRIED & LIEBERMAN, P.C. By: /s/ Michael D. Lieberman Michael D. Lieberman P38529 Attorneys for Celadon Trucking Services and Celadon Group, Inc. 4000 Town Center, Suite 1200 Southfield, MI 48075 (248) 355-5300 Dated: 8/29/08

GOLDSTEIN BERSHAD FRIED & LIEBERMAN

Professional Corporation

4000 Town Center Suite 1200 Southfield, MI 48075 (248) 355-5300

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