Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page1 of 46

IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE IN RE: . Chapter 11 . CORDILLERA GOLF CLUB, LLC, . Case No. 12-11893(CSS) d/b/a THE CLUB OF CORDILLERA, . . July 3, 2012(11 a.m.) Debtor. . (Wilmington)(Telephonic) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CORDILLERA GOLF CLUB, LLC, . d/b/a THE CLUB OF CORDILLERA, . . Plaintiff, . . v. . Adv.Pro.No. 12-50783(CSS) . CHERYL M. FOLEY, THOMAS . WILNER, JANE WILNER, CHARLES . JACKSON, MARY JACKSON, KEVIN . B. ALLEN, individually and on . behalf of all others similarly . situated, and ALPINE BANK, . . Defendants. . TRANSCRIPT OF PROCEEDINGS BEFORE THE HONORABLE KEVIN GROSS UNITED STATES BANKRUPTCY COURT JUDGE Appearances: For the Debtor: Joseph M. Barry, Esq. Donald J. Bowman, Jr., Esq. Young, Conaway, Stargatt & Taylor Mikel Bistrow, Esq. Michael McCloskey, Esq. Matthew Riopelle, Esq. Foley & Lardner LLP Tamara Seelman, Esq. Gordon & Rees

For CPOA, Cordillera Ricardo Palacio, Esq. Metropolitan Dist., and Ashby & Geddes Class Action Plaintiffs: Gary R. Appel, Esq. Appel & Lucas For Alpine Bank: Tobey M. Daluz, Esq. Vincent J. Marriott, III, Esq. Ballard Spahr

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page2 of 46

For Class Plaintiffs:

Mark Collins, Esq. Zachary Shapiro, Esq. Richards, Layton & Finger Richard Riley, Esq. James J. Holman, Esq. Duane Morris Zhonette M. Brown, Esq. Brownstein Hyatt Damien Tancredi, Esq. Cozen OConnor

For David Wilhelm:

For Creditor Foley: For Cordillera Transition Corp.:

Audio Operator: Transcriber:

Ginger Mace Elaine M. Ryan (302) 683-0221

Proceedings recorded by electronic sound recording; transcript produced by transcription service.

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page3 of 46 3

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

THE CLERK: Please rise. THE COURT: Good morning, everyone. please be seated. UNIDENTIFIED SPEAKER: Good morning, Your Honor. THE COURT: Its good to see you all and let me Thank you,

just preliminarily say, of course, this case is assigned to Judge Sontchi, but hes not available, and I thought that it was appropriate for me to hear it particularly since I heard the first days. But let me just ask a question at the outset

- maybe I should listen first, sometimes, I think, you know, its wrong but since its so hot out there maybe we can avoid more heat in the courtroom. Have you discussed perhaps

agreement on some of these terms or - Mr. Bowman, good morning to you, sir, Im sorry. MR. BOWMAN: Good morning, Your honor. THE COURT: Good morning, Mr. Bowman. MR. BOWMAN: Just for the record, Donald Bowman THE COURT: Yes. MR. BOWMAN: - with Young, Conaway, Stargatt & I believe

Taylor on behalf of the debtors in this case.

there were some discussions even as late as late last night. THE COURT: Yes. MR. BOWMAN: My co-counsel is on the phone, so, to the extent in how far those discussions went, maybe they can chime in here.

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page4 of 46 4

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 today.

THE COURT: I mean, my thoughts are, as long as its understood that this will not impact in any way the motion to transfer which Judge Sontchi will consider, and that Im certainly not going to enjoin the Judge in Colorado from issuing opinions that hes been working on, you know, I dont think that would be appropriate for me to do. Perhaps that

moves things along a little bit, I dont know, but Im willing to hear you. Its you, Mr. Collins.

MR. COLLINS: Yes. THE COURT: Good morning, sir. MR. COLLINS: Good morning, Your Honor. Mark

Collins the Class Plaintiffs, the members of the Club. THE COURT: Yes. MR. COLLINS: We certainly do want to go forward There is a hearing set up before Judge Gannett in the

Eagle County District Court on July 20th THE COURT: Yes. MR. COLLINS: - a contempt proceeding, and so an order to show cause that the Judge issued with respect to what Im going to call the insiders regarding potential affirmative violations of his prior order which sought to protect dues, members dues that were put into a segregated account. That matter has been on calendar for quite a while.

I believe the order to show cause was issued back in January of this year. If for whatever reason that matter cannot go

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page5 of 46 5

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

forward on July 20th, we likely would not get back before Judge Gannett until late fall, and given the seriousness of the allegations set forth in the order to show cause, the fact that the order primarily relates to the non-debtor insiders, we believe that matter must go forward. THE COURT: All right, thats helpful. Mr. Collins. MR. COLLINS: Thank you. THE COURT: All right, Mr. Bowman. I thought you Thank you,

were here for the lenders for some reason, Mr. Collins, and I hadnt really looked closely enough and now I see where you are. Thank you. MR. BOWMAN: Well, first of all, Your Honor, thanks again for making the time to fit us into your busy schedule. I especially appreciate it given the fact its the day before a holiday. As I said, we have co-counsel on the line,

Matthew Riopelle from Foley & Lardner, is on the line. THE COURT: Yes. MR. BOWMAN: He is the one thats most familiar with this particular issue and I believe he wants to address the Court with respect to our motion. THE COURT: Very well, all right. MR. RIOPELLE (TELEPHONIC): Good morning, Your Honor, Matt Riopelle of Foley & Lardner on behalf of the debtor and debtor-in-possession.

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page6 of 46 6

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

THE COURT: Yes, sir, good morning. MR. RIOPELLE (TELEPHONIC): Good morning. I would

like to again reiterate our appreciation for Your Honor accommodating our request to be heard on such short notice. THE COURT: Thats what Im here for. MR. RIOPELLE (TELEPHONIC): Well, we appreciate it. Given where this proceeding in Colorado is at, we believe it was critical that we get in front of Your Honor as soon as possible, particularly given the very limited relief that were seeking in the motion. Again, to be clear, all we are

asking for is the stay as to the non-debtor parties for three weeks, which would get us through the date of the hearing on the debtors CRO motion. This was originally sought, as Your

Honors well aware, at the first day and at the request of the United States Trustee we went forward by way of notice motion as opposed to a first day. I will first address what

Mr. Collins stated with respect to the contempt proceeding on July 20th and then get into my argument very briefly and respond to any questions Your Honor might have. With respect

to the contempt hearing, and there is counsel on the phone, Mike McCloskey of Foley & Lardner and Tamara Seelman of Gordon & Rees who are co-counsel in the state court action and may be able to provide more flavor, but as I understand the contempt hearing, Your Honor, that is with respect to the transfer of the property of the debtor, therefore, there is,

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page7 of 46 7

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

in our estimation, no way that the contempt hearing can go forward without the debtor and thus it would be a violation of the automatic stay regardless of the relief granted today. Nonetheless, as Your Honor saw in our papers, the five plaintiffs have filed a notice with the state court requesting that that action proceed as to all defendants other than the debtor including the contempt hearing which we believe again would violate the stay. And to avoid having to

go back and undo things that have been done, we figured preemptively we would come in front of Your Honor, see if we could get three weeks to get our CRO in place and decide what the appropriate course of action with respect to both the Colorado litigation in which the debtor is a defendant as well as the Colorado litigation in which the debtor is the plaintiff. Again, and Mr. Bowman explained, we had hoped to

reach an agreement on a standstill for this limited period of time prior to this hearing. We were unable to do so,

notwithstanding an offer to similarly stay our plaintiff action which includes many of the same class plaintiffs that are defendants in our action. By way of brief background,

Your Honor, the state court action involves claims against the debtor and various non-debtor parties which included sole member, its manager, and other indirect owners and officers of the debtor. These claims are for breach of contract,

promissory estoppel, breach of fiduciary duty, violation of

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page8 of 46 8

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Colorado security laws, and others. primary defendant in this action.

The debtor is really the All of the claims arise

out of the debtors operation and management of certain golf courses that are owned and each of the claims against the non-debtor parties directly or indirectly implicate the debtor, and the prosecution of any of those causes of action, even against the non-debtor parties, will have a material and potentially irreparable harm and impact on the debtor. particular, Your Honor, the securities claims require a finding of primary liability against the debtor before they can be asserted against the non-debtor party. causes of action THE COURT: Those are the state court securities law claims; is that right? MR. RIOPELLE (TELEPHONIC): That is right, Your Honor. THE COURT: Yes. MR. RIOPELLE (TELEPHONIC): And I believe the claims asserted against the non-debtor defendants include aiding and abetting, and troll person, et cetera. The other causes of In the other In

action which are not based on Colorado security law are so duplicative and overlapping as they are asserted against the debtor and the non-debtor parties that a finding with respect to the non-debtor party would either constitute a finding against the debtor, potentially subject the debtor to

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page9 of 46 9

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

arguments of collateral estoppel, or at a minimum create such negative precedent for the debtor that it will likely not be able to overcome such preventing the debtor from exercising the breathing spell to which its entitled under the Bankruptcy Code. For all of those reasons, Your Honor, we do

not believe the debtor can be a mere bystander in the state court action as it proceeds against the non-debtor parties. The emergency request that we sought in the motion was necessitated by the number of pending motions and proceedings in the state court action that could irreparably harm the debtor. As I already addressed, Your Honor, we had drew up

the July 20th contempt hearing at which we believe the debtor is a necessary party. There are several fully briefed

motions including a motion to dismiss filed by the debtor that are under submission as well as a host of other motions and proceedings that are either fully briefed and waiting a decision or require pleadings to be filed in short order. dont believe any of these can go forward without the inclusion of the debtor and the plaintiffs in that matter have requested that the Court receive with respect to all defendants other than the debtor which would cause irreparable harm to this debtor. Therefore, weve requested We

the Court to extend the stay again as to the non-debtor parties only through July 27th, which is the date of the hearing on our CRO motion. This will allow the management,

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page10 of 46 10

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

many of whom are either non-debtor parties or manage the nondebtor parties to focus on the critical path of moving this reorganization forward as well as to give the CRO an opportunity to determine the course of action with respect to both the state court actions. request lightly, Your Honor. We certainly dont take this We understand that this is

extraordinary relief, but it is well established with the Court and under its broad equitable powers of 105 to extend the stay as to non-debtor parties. The cases cited in our

brief, including Continental Airlines, A.H. Robbins, and American Film Technologies all explain that where the debtor is a real party defendant and the litigation will directly affect the debtor and its ability to pursue a successful reorganization, the stay can appropriately be applied to nondebtor parties. For all the reasons I explained earlier, it

is our position that any prosecution of the state court action against the non-debtor parties will impact this debtor. Finally, as set forth, again in detail, Your Honor,

in our papers, the circumstances necessitate the imposition of the stay as to non-debtor parties at least through the July 27th date. A ruling against the non-debtor defendants

will constitute or will likely constitute a finding against the debtor even if the debtors excluded. There is such a

sharing of identity of interest with respect to all of the defendants in that action that as today its necessary.

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page11 of 46 11

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Third, without the stay of the debtor, we believe well be required to participate in that action. The debtor will not

be able to sit idly by while the Court and the plaintiffs continue that action against the non-debtor parties. And

finally, Your Honor, the continuation of the class action would and could interfere with the debtors reorganization, particularly pending the appointment of the CRO. As Your

Honor may be aware, yesterday, the debtor filed a motion for DIP financing and is proceeding with other avoidance actions and things necessary to get this reorganization off on the right foot and hopefully get in and out of bankruptcy as quickly as possible. Therefore, we believe that the Courts

powers under 105 permit as to a grant of stay as to nondebtor parties and given the limited nature of the relief sought it would be appropriate to do so in these circumstances. Your Honor, I dont know if you would like me

to get into the injunction, the alternative relief sought, which is under Rule 65. Its largely duplicative. I believe

our papers clearly set out that we would succeed on the merits, which in this case is a successful reorganization. We would suffer irreparable harm and there is little harm to the defendants given the duration of the stay sought. Therefore, Im not sure if Your Honor has any questions. be happy to rest on the papers. THE COURT: All right. I read the papers carefully Id

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page12 of 46 12

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

and I certainly understand your arguments and concerns.

One

question on the motion to dismiss you have pending, did the debtor join in that or was that brought strictly by the individuals? MR. RIOPELLE (TELEPHONIC): Your Honor, I will defer to Mike McCloskey of our office who can probably answer that question better than I can. THE COURT: All right. Mr. McCloskey?

MR. McCLOSKEY (TELEPHONIC): Good morning, Your Honor. Mike McCloskey for the non-debtor moving parties.

Your Honor, I filed the motion to dismiss and to answer your discreet question, I filed it on behalf of both the debtor and the . . . (indiscernible) defendants. THE COURT: All right, thank you for the direct answer, I appreciate it. Mr. Collins.

MR. COLLINS: Thank you, Your Honor. THE COURT: Good morning, again. MR. COLLINS: Again, Mark Collins on behalf of the class members. Your Honor, before I begin, I want to note One

that we have two of my co-counsel on the line with us.

is Mr. Garry Appel, a Denver lawyer at the law firm of Appel & Lucas. Appel. We will be filing a motion pro hac vice for Mr. Also we have Zhonette Brown from the law firm of

Brownstein, Hyatt. THE COURT: Yes.

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page13 of 46 13

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Honor.

MR. COLLINS: She is litigation counsel in the Colorado action. THE COURT: Very well. Now, you realize youll from

now on be referred to a class action lawyer. MR. COLLINS: Im looking forward to my future, Your

THE COURT: Okay. MR. COLLINS: What I want to do, Your Honor, is to take a step back, kind of frame this case a little bit and then talk about the extraordinary relief that this debtor is seeking. First, this is a very unique bankruptcy case, one This It has

thats certainly unique for the District of Delaware. debtor owns a country club in Vail Valley, Colorado. no other business and no other assets. LLC, a same-member managed LLC. THE COURT: Yes.

It is a single member

MR. COLLINS: Which means that this debtor only acts by the managing member. THE COURT: Right. MR. COLLINS: Which, if you go up the ownership chain, ultimately power resides with an individual named David Wilhelm. He controls the ultimate managing member of

this debtor, this debtor cannot act without the actions by the managing member, which is a defendant, by the way, in the Colorado action.

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page14 of 46 14

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

THE COURT: Okay. MR. COLLINS: Okay. Im going to refer to the

affiliated LLCs and those are the direct and indirect ownership entities of Mr. Wilhelm as well as David Wilhelm and his brother Patrick Wilhelm as the insiders; its in my argument. And all of those insiders are defendants in the

Colorado action along with the debtor entity. THE COURT: Sure. MR. COLLINS: The members of the country club, about 600 or so, formed a class and brought suit against the debtor and the insiders of certain claims and causes of action including breach of contract, promissory estoppel, false representation, breach of the duty of good faith and fair dealing, constructive trust, violations of Colorados securities laws, and fraudulent representations and omissions of fact against not only the debtor but certainly against the insiders because they were instrumental in how the debtor acted. The action is currently stayed against the debtor,

trial on the lawsuit is scheduled to take place next spring, I believe several weeks of trial time have been reserved by Judge Gannett out in Eagle County. The litigation was

commenced in June of 2011 and is pending out in Eagle County. I will ask Ms. Brown in a moment to provide additional background about the litigation, claims at issue, the order to show cause hearing scheduled for about two weeks from now

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page15 of 46 15

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

with respect to the insiders and their alleged wrongful actions. What was blatantly apparent, however, Your Honor,

is that all of these disputes are entirely local to the community of Vail Valley, Colorado. This case involves a

single debtor and its controlling equity holder that own and operate a country club in Colorado and their disputes are, among others, the country club members and a locally owned and operated bank in Colorado called Alpine Bank. THE COURT: Yes. MR. COLLINS: Now following the various litigations between the insiders and the club members and on the eve, for all intents and purposes of the contempt hearing in Colorado against the insiders for violating expressed terms of an injunction order issued by the District Court of Eagle County, the insiders decided for the debtor and only the debtor in Chapter 11 in Delaware, thousands of miles away from the club, the members, and the ongoing litigation amongst the parties. And recall that the sole contact at

Delaware is that the debtor entity is a single-member Delaware limited liability company, thats it. Everything

else, the club, the residence, property, the operations at the single site are all in Vail Valley, Colorado. To add

insult to injury and throw in a little bit of hutzpa, the insiders now ask this Court, a Delaware Bankruptcy Court, a Court that has held one hearing in this case to date on less

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page16 of 46 16

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

than 24 hours notice and one day prior to a national holiday, all without any evidentiary support - theres not an affidavit on file, not a declaration, no one under penalty of perjury at all, asking this Court to extend the automatic stay to the controlling insiders which would cause a complete grinding halt of the sanctions hearing in a couple of weeks before Judge Gannett and they certainly cannot argue that they need to stay that proceeding and without doing so would protect the debtors estate from immediate and irreparable harm; thats the standard. Now, we have to ask the Court, Obviously its

ourselves, Why are they doing this now?

because of the actions that they took in violation of Judge Gannetts order. The order at issue, and I can hand Your

Honor a copy of the order to show cause order, required that the defendants, the debtor, the managing member, Mr. Wilhelm, segregate the members dues, the 2011 members dues, and to use those monies solely for necessary maintenance and operation of the clubs four golf courses and related facilities. Notwithstanding the Courts mandatory injunction

order, the insiders utilized members dues to pay, among others, David Wilhelm, the controlling insider, $104,000 in interest expense; incredibly, a severance payment to his son, Nicholas, of $60,000; and legal expenses to among others, legal counsel who brought suit against the clubs civic organization and individual residence in Colorado. Thats

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page17 of 46 17

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

pretty incredible stuff.

But nevertheless, thats why

theyre here today asking you to protect the insiders from appearing before the Eagle County District Court to explain their actions and in essence asking this Court to stay the District Court from enforcing its own order against these non-debtor defendants. This Court should not and cannot give

the legal standards necessary to issue the extraordinary order of extending the stay to non-debtor persons and entities given these circumstances and the lack of any evidentiary record. In addition, Your Honor, we are filing a

motion to transfer venue, but if it hasnt yet been filed, it will be filed momentarily, seeking the transfer of these cases immediately to the Colorado Bankruptcy Court. And, as

I said, we will be asking that motion to be heard by Judge Sontchi as soon as he is available. This is another reason

for the Court to deny the debtors request today so they can first rule on the venue motion and then let the court that will preside over these cases in the future to determine any future proceedings in this adversary proceeding. If there

were ever a case, Your Honor, that cries out for a motion to transfer venue from the District of Delaware, this is it. This case revolves around a local community issue, does not belong in the District of Delaware, and to do otherwise would simply gut the purpose and intent of 28 U.S.C. 1412. Now,

Your Honor, I also, before turning it over to Ms. Brown to

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page18 of 46 18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

provide a little more detail, we need to ask ourselves, What is todays hearing? Procedurally, what are we doing today?

Its certainly not a preliminary injunction hearing because theres no notice as required by our Local Rules and the Federal Rules. THE COURT: And theres no affidavit. MR. COLLINS: Theres no affidavit as required by 7065. THE COURT: Right. MR. COLLINS: There was no order on the docket shortening notice on a motion to extend the stay under 105. No evidence of why there is an emergency. TRO hearing; right? It must then be a

It has to be then, and under 7065, they

need to do two things, both of which they have failed to do. They need to file an affidavit or a verified complaint clearly showing that immediate and irreparable injury, loss, or damage will result to the movant before the adverse party can be heard in opposition. Indeed, the movants attorney

must certify in writing any efforts made to give notice and the reasons why it should not be required to do so. have failed to do both. They

As a result on that ground alone, But because of all

Your Honor, this motion must be denied.

of what is happening here, I think we would like to continue to provide the Court with some additional background and before I do so I would like to hand to Your Honor, a copy of

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page19 of 46 19

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

the order to show cause so that you can see THE COURT: Yes. MR. COLLINS: - the order relates not solely to the

debtor but calls specifically the non-debtor defendants to court on July 20th. THE COURT: All right. MR. COLLINS: May I approach, You Honor. THE COURT: Yes, you sure may, Mr. Collins. you. MR. COLLINS: Ill give Your Honor just a moment to read it, its a fairly short order. THE COURT: Yes. Does anyone by any chance have the Thank

earlier order that the Court issued, the restraining order itself? MR. COLLINS: What I do have, Your Honor, is a copy of the verified complaint seeking contempt, and it block quotes the primary paragraph of that order. May I approach?

THE COURT: That would be fine, yes, thank you, Mr. Collins. with. you. MR. COLLINS: Yes. And, Your Honor, just so I can That way Ill see precisely what were dealing Here we are. Good, thank

Thank you, Mr. Collins.

point out, it does say in that order the defendants. THE COURT: Yes. MR. COLLINS: I wanted to note that to Your Honor.

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page20 of 46 20

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

THE COURT: Exactly. MR. COLLINS: Yes.

Okay, thank you.

THE COURT: And Ive read, just so people will know, I read paragraph (1), the quoted language there and the quoted language in paragraph (11). MR. COLLINS: Thank you, Your Honor. THE COURT: Of the complaint, I mean. MR. COLLINS: Yes. And with that, Your Honor, Ill

turn the matter briefly over to Ms. Brown to provide some additional information and background that I may not have covered and the Court might find relevant in making your decision today. THE COURT: Thats fine. Ms. Brown, good morning. MS. BROWN (TELEPHONIC): Good morning, Your Honor. This is Zhonette Brown on behalf of the certified class and subclass in the Foley class action proceeding here in Colorado. THE COURT: Yes. MS. BROWN (TELEPHONIC)): Your Honor, Ill be very brief with my comments this morning but to provide a little bit of background, as Mr. Collins indicated, this matter has been pending since June 20th of 2011. until at least March of 2013. It is not set for trial Thank you, Mr. Collins.

The defendants in this case

have disputed that trial setting and seek to have the trial

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page21 of 46 21

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

delayed until after their April trial of the case they have brought against homeowners associations and community volunteers. There are no immediate pending deadlines in this

case other than the July 20th contempt hearing and then the plaintiffs have two or three briefs that are due to be filed this week and one brief that will be filed next week. extent that it would be useful to the debtor, we can certainly give them extensions if they wish on their replies, but other than that there are no other issues pending in the three-week period that the debtor is seeking to extend the stay and stay the state court action. What is relevant or To the

particularly relevant, I think, and informative with regard to this contempt hearing is the TRO was entered by Judge Gannett four days after the original complaint was filed back in June 24th of 2011. language from the TRO. Your Honor has now read the relevant That TRO was extended multiple times

by agreement of the parties through the use and dissipation of all of the 2011 dues. So, in other words, that order has

- or the effect of that order terminated by its own terms as it does not apply to, for example, 2011 dues. THE COURT: Or 2012 dues do you mean? MS. BROWN (TELEPHONIC)): Right, it does not apply to 2012 dues. THE COURT: Right, and thats what - I was going to ask how the TRO was still in effect, but thats -

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page22 of 46 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

MS. BROWN (TELEPHONIC)): It is not still in effect, Your Honor. What has not been resolved and has been pending

since January of this year is the issue of the conduct in 2011 that violated that order, and so, what happened after the entry of the order, immediately prior to the order, the defendants, David Wilhelm and Patrick Wilhelm, received funds for interest payments. for severance payments. fees, et cetera. Mr. Patrick Wilhelm received funds They received funds for management

The TRO entered became a preliminary

injunction and as Mr. Collins has indicated, Mr. David Wilhelm continued to collect money in the form of interest payments to himself and to direct the payments or reimbursement of a severance payment to another one of his children, Nicholas Wilhelm, as well as payments made to the attorney suing the community volunteers. The plaintiff, my

clients, the Foley Class discovered these violations through an audit they conducted in August and updated in September of 2011. They filed their verified motion for contempt in The motion for contempt was fully briefed The Colorado Court, Judge Gannett,

December of 2011.

in December of 2011.

originally issued a show cause order on January 17th and then the parties set the contempt hearing, which probably is, I assume, the January 20th order that youre looking at which set the contempt hearing for a one-day hearing in April of 2012. And what happened in the interim was that the

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page23 of 46 23

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

defendants then attempted to remove the action from the state court to the Federal District Court here on a class action fairness removal through the addition of some of the insider defendants. Ultimately, the federal court remanded that

action to the state court, however, in the interim, service had not been effected because of the removal, et cetera, and so on April 10th, after the remand, Judge Gannett held a status conference, addressed what needed to be done and remained for him to be done now that the case was back in the state court and at that time, on April 10th, reset the contempt hearing for the current setting of July 20 of 2012. Its difficult to get immediate settings in this Court. The

Court is extremely ladened as you can tell from the number of pending motions. The contempt hearing was set for a single

day, both originally in January of 2012 and then again in April of 2012. That remained the case until the day before

the debtor filed when the defendants counsel in the class action asked for an additional day on the contempt hearing. There have been no filings in that regard and we do not agree that this hearing, particularly now that it cannot apply to the debtor, would take more than a day, and so, we are concerned, as Mr. Collins indicated, if this TRO - or it would have to be an injunction, were to issue from your Court, the Colorado Court would not be able to give effect to its TRO and preliminary injunction from 2011 until sometime

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page24 of 46 24

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

into the late fall of 2012, and Mr. David Wilhelm and the non-debtor WFP Cordillera would not be required to stand before the Colorado State Court and explain as that Court has ordered them to show cause, why they should not be held in contempt of this Court. There are other issues similarly

that are pending before the Colorado State Court with regard to the integrity and affect of the Courts order against the defendants in the class action. For instance, there was a

motion to compel filed by the plaintiff back in February of 2012. The state court issued that order to compel in May of

2012 and required the defendants to produce all documents and pay sanctions. That issue ordered against the debtor,

against David Wilhelm, against Patrick Wilhelm, and against WFP Cordillera. Rather than to completely comply with that

order, Mr. David Wilhelm and Mr. Patrick Wilhelm on the date that compliance was due, filed a motion for a protective order to prevent disclosure of their personal financial information and the defendants have sought reconsideration of the state order requiring them to certify compliance with their discovery obligations and to pay sanctions. And so

there are currently multiple issues pending in front of the state court impacting the state courts ability to give effect to and demand integrity of its own orders. The other

point, Your Honor, as I said, Your Honor had indicated at the beginning of this hearing that you were not inclined to

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page25 of 46 25

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

interfere with the matters that are fully briefed and to stop a state court from its work in progress, if you will. There

are at least six to eight such matters, many of which have been fully briefed since at least May of 2012, some of which have been fully briefed just since June of 2012, but there are multiple issues with regard to the concerns about immediate impact, collateral estoppel, et cetera. indicated, there are no immediate deadlines. As I

There is no

discovery outstanding to which the defendants intend to file - there are no outstanding written discovery requests, and for the outstanding document requests, the defendants, in our case the debtor and the insiders, have indicated to the state court that they have produced all documents other than those that are subject to their motion for protective order for David and Patrick Wilhelm. pending. So theres no discovery thats

Were not asking for any discovery in the state There are no

court during this interim three-week period. depositions that were scheduled.

There is nothing thats

going to take place prior to July 27, 2012 other than potentially the state court ruling on pending motions that have been pending for a few months, the contempt hearing, and briefing of a few outstanding issues filed by the defendants for which I said we could give the defendants, i.e., the debtor and the insiders - well, the debtor is stayed, but the insiders an extension if thats at all helpful to them,

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page26 of 46 26

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

although I truly believe at this point this is really only counsel work. It is largely the work of Gordon & Rees who is

insurance counsel and not the work of the counsel who are involved in advising the debtor and the insiders regarding their restructuring efforts and the current matters that are pending before your Court, Your Honor. THE COURT: All right. Brown. MS. BROWN (TELEPHONIC)): Absolutely, Your Honor. MR. COLLINS: Your Honor, what I would then like to do to wrap this up is to quickly hit the four factors in Continental Airlines that the debtor would need to have satisfied in order to extend the stay. First they would have All right, thank you, Ms.

to show the involvement of the directors and the officers in the reorganization process and how the ongoing litigation would somehow affect that. Two quick things, Your Honor.

One is theres a new CEO, Dan Fitchett, I believe is his name. He is the CEO. He may have appeared at the first day

hearing.

He is not in any way related to this litigation.

So, hes fully free from involvement in the contempt proceedings. THE COURT: Right. MR. COLLINS: So he can focus all of his time and attention on the reorganization case. That is equally true

from the chief restructuring officer, Alfred Siegel, who

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page27 of 46 27

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

certainly is working today although his retention application will be considered at the end of the month, but as is typical, the CRO was retained pre-petition through an engagement letter and Im certain that he is on site and actively getting up to speed in anticipation of having an order entered. Another one of the non-debtor defendants,

Patrick Wilhelm, in the binder that I provided you, Your Honor, under Tab 1 is an affidavit of Patrick Wilhelm where he states under oath that for all intents and purposes he has no involvement in the debtor entities management, his interest was transferred over to David Wilhelm. Also

included, Your Honor, in this binder under Tabs 2, 3, and 4 is correspondence to the Cordillera members about David Wilhelm transferring his management role to Dr. Jeffrey Rush. And if I can point Your Honor to the third paragraph on Tab 2. THE COURT: Yes. MR. COLLINS: Second sentence. After lengthy

discussions and a great deal of soul searching, David Wilhelm has concluded and I agree that it is in the best interest of Cordillera, David and all involved, if he steps down as the managing member of Cordillera Golf Club and pursues other interests. Similar type state statements are in the Turning to Tab 3, Your

paragraph immediately below that.

Honor, second paragraph, second sentence, this is from David

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page28 of 46 28

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Wilhelm, Second, I want to affirm to you that as part of this recapitalization and restructuring, I, WFP will become a limited partner and will have no authority, control, or involvement in the clubs business. So even with David

Wilhelm, one questions how involved he is in the bankruptcy case and how his ongoing involvement in the litigation would somehow affect the reorganization case, and I think evidence to that can simply be seen by the docket in this case of how active this debtor is and certainly not being his time and attention taken away as a result of the litigation. filed for bankruptcy in Delaware. collateral. They

They have use of cash

They filed a motion for a TRO against my clients Last night

along with a complaint and a memorandum of law.

they filed a motion seeking priming financing against Alpine Bank, and they also filed a complaint against Alpine Bank with respect to avoidance of certain asserted liens on personal property. They have also filed a number of motions

to be heard on July 27th, if this case remains in Delaware, including retention applications, although Foley & Lardner has not yet filed their retention application. So that goes

to that involvement of the directors and officers in the reorganization case and how it will be impacted. believe it would be at all. We dont

Similarly, a second factor is

the burden imposed on the directors and officers if the litigation is not stayed. For all of these same reasons,

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page29 of 46 29

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Your Honor, we dont think there is any impact on the Ds and the Os who are involved in the litigation. A third factor,

the likelihood that the litigation would detract the officers and directors efforts to reorganize. cite the other factors. Again, I

We dont believe the litigation will

have any impact whatsoever on how these bankruptcy cases proceed, at least over the next three weeks, and thats what theyre asking for today, a TRO of the litigation between now and July 27th. Finally, a factor is whether the debtors

assets would likely be depleted as a result of the litigation. There is simply no evidence to that effect.

While the complaint and the memo of law, I think it pleads the memo of law, refers to an insurance policy. attach the insurance policy. They did not

In fact we believe that there So I

might a limitation on defense costs versus liability. dont think theyve satisfied that factor as well.

They

certainly have failed, Your Honor, in making a prima facie case showing a reasonable probability that theyll ultimately prevail on the merits, and theres certainly nothing in the record today that would satisfy that standard. So, Your

Honor, for all of those reasons, we would respectfully request that the motion be denied. THE COURT: All right, thank you. MR. RIOPELLE (TELEPHONIC): Your Honor, this is Matt Riopelle of Foley & Lardner.

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page30 of 46 30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

THE COURT: Would you like to be - Theres someone in the - Lets hear from, I guess, the opponents to the motion first and then you may respond, Mr. Riopelle. MR. RIOPELLE (TELEPHONIC): Your Honor, I just wanted to make sure you were aware I would like to reply. THE COURT: Oh, of course, yes, and you certainly will have that opportunity. MR. MARRIOTT: Good morning, Your Honor. THE COURT: Good morning, welcome back. MR. MARRIOTT: Vince Marriott, Ballard Spahr on behalf of the lender, Alpine Bank. Perhaps they should have

engaged Mr. Collins, but we got there first. THE COURT: Yes. MR. MARRIOTT: I think its worth talking a little bit about Alpine Banks involvement in this litigation. Although we are named as a defendant in the complaint seeking declaratory and injunctive relief along with the plaintiffs in the class action litigation, we are not a plaintiff in the class action litigation. We intervened as a defendant for

the limited purpose of seeking a declaratory relief that in the event the class plaintiffs had or were granted an equitable or other lien on any assets of the debtor. THE COURT: Certainly. MR. MARRIOTT: In all likelihood, you know the cash representing membership dues that that lien would be junior

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page31 of 46 31

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

to the prior granted lien of Alpine Bank. involvement in the case.

So thats our

THE COURT: And the contempt hearing is not at all directed toward your client. MR. MARRIOTT: Were not involved in the contempt hearing. For all intents and purposes, Your Honor, were

really not involved in any meaningful way in the material aspects of the case. THE COURT: You just want to be there, depending on what happens and whether or not it somehow impacts your clients rights. MR. MARRIOTT: Relative to the release that might be granted and the like. THE COURT: Sure. MR. MARRIOTT: Nothing is going to happen, at least to my knowledge, in the next three weeks that would have anything to do with anything that Alpine Bank is interested in or involved in well to that litigation. two reasons. I really rise for

One, theres no point in repeating Mr. Collins I think that he has comprehensively

fine presentation.

demonstrated that the debtors are not entitled to the TRO that they seek either as a procedural matter because of omissions from their filings or on the merits based upon the Continental standards for granting the relief that they seek. I also, as you know from the cash collateral hearing, Alpine

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page32 of 46 32

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Bank also believes that venue should be transferred in this matter to Colorado and that decisions of substance in this case should be made in Colorado to the extent at all possible and because a TRO is neither properly requested nor merited at this time, our view is it should not be granted, that the complaint for broader relief can be dealt with in Colorado when, as we believe should happen and hopefully will happen, venue has been transferred. Thank you. Mr.

THE COURT: All right, thank you, Mr. Marriott. Palacio. MR. PALACIO: Good morning, Your Honor, may it please the Court. THE COURT: Yes, good morning.

MR. PALACIO: Ricardo Palacio of Ashby & Geddes on behalf of the Cordillera Property Owners Association, also known as CPOA. THE COURT: Yes. MR. PALACIO: While not a party to the litigation, the class action, they are a party to a sister litigation, if I may, and Ill get into those details in a moment, but I want to echo not only Mr. Collins comments but Mr. Marriotts comments as well. I think the presentation was The

well taken and I think hit on all relevant points.

relevance of my joining in those things will become apparent in a moment, Your Honor, but I dont want to get aside from

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page33 of 46 33

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

that and then come back later.

Just a couple brief points on You heard the point

the points raised by both gentlemen. about the CRO. THE COURT: Yes.

MR. PALACIO: I certainly echo that, but Your Honor may recall that in fact the debtors represented that it would be nunc pro tunc to the petition date. So, it

certainly was understood by all parties and I think the Court as well that the CRO would commence working immediately. certainly take issue again with the insurance. evidence of that. Theres no We

We raised the same issues, we had the same

concerns, and I certainly didnt want that to be lost on Your Honor. The reason I rise now, Your Honor, is because again The debtor is a party to

of this sister related litigation.

other litigation pending in the District Court of Eagle County, Colorado against Cordillera Transition Corporation as well as certain other parties. And you may ask why is that

relevant and why should the CPOA be heard now if it is not a party to the class action litigation. The reason is, the

CPOA represents all the property owners, some of which are the members. More importantly, because they are a defendant

in that sister litigation, we think its important that the Court either stay both of them or allow both of them to go forward. And to give you some context to that point, Your

Honor, and I think this also addresses an argument you heard

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page34 of 46 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

earlier from the debtor with respect to potential collateral estoppel and other issues, is that the debtors filed a motion to consolidate the actions and in relevant part the debtors argued that the club, that is the debtors defense to the Foley lawsuit, the class action lawsuit, is in large part the CTC lawsuit as its been defined. litigation. In other words, the sister

They say the CTC lawsuit, the sister litigation, The

and the Foley lawsuit spring from the same well.

debtors, what they are effectively saying is, pre-petition, consolidate the actions. It makes sense, all the same facts,

were going to have to litigate the same matters, yet here theyre only looking to stay one litigation and have the other one go forward. Those same parties, or at least many

of them, are looking to go forward and the debtors are not looking to stay that one. So, I rise here, Your Honor, not

to advocate in furtherance of the motion or in opposition to the motion but rather to advise Your Honor that our clients position is, if you do one with respect to one action, it should be done with respect to the other because, again, even as the debtors have noted in their motion to consolidate, and I have a copy here if Your Honor would like to see it, that they say they rise from the, quote/unquote, same well. With that, Your Honor, I have no further comments. THE COURT: All right, thank you, Mr. Palacio. MR. PALACIO: Thank you, Your Honor.

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page35 of 46 35

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Honor. courtroom? courtroom?

THE COURT: Thank you. Good morning.

Anyone else in the

MR. TANCREDI: Good morning, Your Honor. Tancredi from Cozen OConnor on behalf of the CTC THE COURT: Yes, sir. MR. TANCREDI: litigation.

Damien

- who is a defendant in the sister

We rise to oppose the motion for stay in the

fact that we have discovery pending next week and we would like to go forward with that matter as a defendant in this action, and that is all, Your Honor. THE COURT: All right. MR. TANCREDI: Thank you. THE COURT: Thank you. Anyone else in the Is

All right, let me hear now from the debtor.

it pronounced Riopelle? MR. RIOPELLE (TELEPHONIC): Riopelle, yes, Your

THE COURT: Very well, Mr. Riopelle, yes. MR. RIOPELLE (TELEPHONIC): Thank you, Your Honor. Ill be very brief. First, we are not here for - there are

two things that the opposing parties wish for Your Honor to decide today that were not here for. The first is venue and If the

the second is the merits of the state court action.

parties wish to file a motion as to venue, thats certainly their prerogative. We certainly are properly before Your

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page36 of 46 36

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Honor as the debtor is a Delaware entity.

The venue statutes

permit us to be there and I think theres been frequent comments as made at the last hearing as well and certain papers filed that the venue should be transferred. Well, at

this time there is no motion before Your Honor, and the venue arguments are largely irrelevant. To the extent Your Honor

believes that the Colorado Court in the event that there is a transfer of venue motion granted, which we think is highly unlikely, we are only asking for a very limited stay. were going . . . (indiscernible) three weeks . . . something certainly that in the event this were transferred to Colorado, a Colorado bankruptcy judge could review at that time. We are not seeking, as in many other cases, a 105 We are only Again,

injunction for the duration of this case. seeking for the next three weeks.

The second thing were not I think whats

here to resolve is the contempt motion.

particularly interesting based on the presentations of both parties is that the contempt is so related to the debtor that it really cant go forward, Your Honor, and quite frankly, we would take the position that it would be a violation of the automatic stay notwithstanding a ruling on this motion. think as both Mr. Collins and Ms. Brown indicated, Your Honor, theyre talking about dues for memberships paid to the debtor and what happened to the dues that were paid to the debtor. Thats a bankruptcy question. That is an action I

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page37 of 46 37

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

that needs to be brought in front of the Bankruptcy Court. That is not something that can be resolved in a state court action, and proceeding as to Mr. Wilhelm . . . and to the Wilhelms and anyone else thats part of that hearing, would effectively rule against the debtor violating the automatic stay. Were talking about dues paid to the debtor by the So, again, I think that its clear that the

members.

contempt sharing cannot go forward without the debtor for all of the reasons discussed in our papers, and, Your Honor, Ill offer - I know were running up against our hour time limit here, so I will offer either Mr. McCloskey or Ms. Seelman if you have specific questions on the contempt. I would be

happy to defer to them to answer when I finish responding to the arguments that closing counsel . . . not here to litigate venue. state court action. So, again, were

Were not here to litigate a Again, we

All were seeking is a stay.

dont even think a stay is necessary as to - It may not be necessary as to the contempt hearing because it violates - it would be a violation of the automatic stay to proceed even without the debtor present. Next, going to the merits of the

105 injunction, and the TRO, and then Ill get to the procedural issues. As far as merits, Your Honor, Mr. Collins

at the onset of his presentation explained to you that this is a member - this debtor is member managed. That when you

follow the trail of a party and owners, et cetera, and

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page38 of 46 38

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

manager all the way to the top, you get to Mr. David Wilhelm. Mr. Wilhelm is in control of all of these entities. Mr.

Wilhelm is a subject of the state court litigation and the contempt. The letters that were provided to Your Honor,

which I dont have in front of me, but Im generally familiar with them, are outdated and given this litigation, given what has happened with the members, I understand that Mr. Wilhelm has remained in control of the debtors. The CRO application

is pending but the CRO does not currently have control to manage the debtor, to tell Mr. Wilhelm or any others how to proceed, and its Mr. Wilhelm that has to make those decision with respect to DIP financing, with respect to the action against the bank, all of the hearings that are pending on the 27th. Until we have that CRO, the relief sought in the motion

is necessary to prevent a distraction of Mr. Wilhelm and other managers and officers of the debtor who are likewise involved with the non-debtor parties to avoid distracting them and preventing them from the critical tasks at hand of the reorganized debtor. As Ms. Brown indicated, I believe

its Ms. Brown, we have filed a number of motions in this Court. Were working very diligently to proceed with this

reorganization to try to get it done as quickly and efficiently as possible and we do not believe that anyone is prejudiced by a three-week stay of the state court action to allow the debtor to get his CRO in place and determine the

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page39 of 46 39

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

best course of action with respect to the state court action filed by the class action debtors, Your Honor. THE COURT: Just so Im clear, Mr. Riopelle MR. RIOPELLE (TELEPHONIC): Yes, Your Honor. THE COURT: You do have a CRO. formally retained at this point; correct? MR. RIOPELLE (TELEPHONIC): Your Honor, I believe that the - my understanding, Your Honor, is that the CRO is not currently in control of the debtor. I believe he is in He just hasnt been

the process of getting up to speed pending his application, but at the request of the U.S. Trustee, he was not appointed on the first day and although relief may be sought for nunc pro tunc appointment, I dont believe he has assumed control of the debtor at this time. THE COURT: And how about - there was reference to a CEO. MR. RIOPELLE (TELEPHONIC): Yes, that is Mr. Fitchett, who submitted the first day affidavit. THE COURT: Right. MR. RIOPELLE (TELEPHONIC): He is involved, but Mr. Wilhelm has owned these courses for years. Mr. Wilhelm is

the person with the most knowledge of the club, the golf course, the membership, et cetera, and so he is working, as I understand it, hand in hand, Your Honor, with the CEO on the reorganization effort and the motions and other filings

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page40 of 46 40

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

before this Court. THE COURT: All right, thank you. I was just thanking you for that answer. MR. RIOPELLE (TELEPHONIC): Absolutely, happy to help, Your Honor. And lastly, with respect to the procedural Your may proceed,

issues raised, the first day affidavit admitted in the bankruptcy case which is referred to and incorporated in both the complaint and the motion and memo provide sufficient evidence for Your Honor to rule today and with respect to notice, Your Honor, our local counsel went above and beyond providing notice and you can see everyone is before Your Honor today and everyone clearly had time to prepare and present an argument, Your Honor. service. We have filed a proof of

I believe service was affected by email, FedEx, and

I believe phone calls were also made, Your Honor, to counsel for the class plaintiffs. So, procedurally we believe its In

proper given the exigencies of the circumstances.

summation, Your Honor, the pending actions in the state court which do include rulings on a motion to dismiss filed by the debtor which we dont believe can happen without a violation of the stay and couldnt happen by simply excluding the debtor from that ruling, all present a significant problem for this debtor in the event they go forward. We have sought

the most limited relief possible, only three weeks, which include, yes, the contempt hearing which involves property of

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page41 of 46 41

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

the debtor but also several motions under submission filed by the debtor or against the debtor that cant be ruled on because of the automatic stay. Again, we focused and

tailored our relief to prevent - have the minimal impact on the state court action, on the plan, and to allow the debtor to get its CRO in place and get the first thirty days of this reorganization up to a strong start to hopefully get out of Your Honors Court or in the event a transfer of venue motion is successful, which we doubt, get out of the Colorado Bankruptcy Court. With that, Your Honor, unless you have any

additional questions, thats all I have. THE COURT: All right, thank you, Mr. Riopelle. Collins. MR. COLLINS: Very briefly, Your Honor. Your Honor, Mr.

I think your questions about the CEO and CRO were on point. As stated by counsel to the debtor, it appears now that notwithstanding the correspondence that went out in the spring to all the members, David Wilhelm is still the managing member in full control of these debtor entities. The CEO apparently reports to Mr. Wilhelm as will a CRO. CRO cannot replace the Board of Directors, cannot become a responsible officer. corporate authority. THE COURT: Right. MR. COLLINS: So, the whole argument of, we need to The CRO reports in accordance with The

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page42 of 46 42

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

wait until July 27th to get the CRO in place so he can continue to be told what to do by David Wilhelm is a complete red herring. And as an aside, one now needs to question

whether a Chapter 11 Trustee should be appointed in these cases given how this debtor is operating, but thats for another day. Starting back to the original point, where

debtors counsel said, Your Honor, were only seeking a three-week stay. Whether its a stay for a day, a month, or

a year, the debtor needs to meet the legal requirements to obtain such an extraordinary remedy. failed to do so. They have utterly

The first day affidavit does not go into

any detail about the legal requirements and the factors in the controlling case law on this point. And to argue that

its a violation of the automatic stay for the Colorado Court to proceed with non-debtor defendants turns the entire Bankruptcy Code on its head. THE COURT: Well, we wouldnt be here today. MR. COLLINS: We wouldnt be here. THE COURT: Right. MR. COLLINS: I mean, it makes absolutely no sense. There was certainly a public policy reason for a court who has issued an injunction order to be able to enforce its order against non-debtor defendants and they are specifically named in that order to show cause that I handed to Your Honor. So, for all those reasons, Your Honor, and my prior

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page43 of 46 43

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

presentation and the record, we respectfully request that the motion be denied. THE COURT: All right, thank you, Mr. Collins. Well, you know, I was somewhat reluctant to schedule this hearing because, first of all, its not my case and secondly it falls on the eve of a holiday and I didnt know how available people would be, and it really is very short notice for a matter that wont be heard until July 20, but I kind have always taken the attitude that if people seek me, if I can, Im here, and thats what Im doing here, but I dont believe that the procedural requirements have been met. Thats clear to me under Rule 7065 and having been burned as a young lawyer in my failure to provide an affidavit in requesting a temporary restraining order, thats always the first thing that I look for and I dont think that the first day affidavit really does suffice under these circumstances. I think it would have to be very specific as to the immediate and irreparable harm that will result from this contempt hearing thats scheduled for July 20 and the first day affidavit does not in any way address the contempt hearing. So, I dont think that its sufficient and I think that - Im not going to opine on the transfer. You know, I have fairly

strong views on it, but Im not going to just provide my own opinion on that and probably it doesnt make a lot of difference because if this case had been filed in Colorado,

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page44 of 46 44

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

youd be before a Colorado bankruptcy judge instead probably seeking this kind of relief, but I do note that it is a matter, clearly, of interest to Colorado and the interested parties are located there, but more importantly, we have a Colorado State Court Judge, a learned judge, Judge Gannett, who has issued an order, an injunction order, and subsequently issued an order for a rule to show cause as to contempt and the defendants have filed their own litigation in Colorado. Theyre pursuing their rights in Colorado as

well, and I think it would be highly inappropriate for this Court to enjoin a Judge in Colorado from enforcing an order that he entered over a year ago now. So, I just dont think

that - first of all, I dont find that there is immediate and irreparable harm because, again, the debtor has been very much involved in the litigation in Colorado. The debtor does

have a CEO, does have a CRO in place although not officially appointed by the Court. Nonetheless, it was made clear at

the first day hearing that that retention would be nunc pro tunc, which says to me that the CRO must be working and active, and therefore, I dont find - and those parties are not defendants in the litigation. They are free to pursue

whatever reorganization efforts they deem appropriate, and therefore, the contempt hearing will not interfere with debtors reorganization efforts under these circumstances. So, for those reasons, I am going to deny the motion. I

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page45 of 46 45

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

understand it and its clear that it does have some impact on the debtor, but in balancing the hardships, if you will, I find that the weight is in favor of the - I dont know whether to call them defendants, but Ill call them the class action participants or members who are seeking to have the protections that they previously obtained in Colorado enforced and whether the Court in Colorado - I give no opinion as to the merits of that, obviously. I dont think

thats my place and certainly theres been no evidence presented, but I do think that in balancing the hardships that there would be a greater hardship under these circumstances were I to grant the motion for relief. will deny it. MR. COLLINS: Thank you, Your Honor. THE COURT: And the parties will be free to pursue their litigation in Colorado. The only thing that Im a So, I

little bit debating is whether or not to stay some of the ancillary proceedings that are going on in Colorado, but Im reluctant to do that. I think that the parties perhaps could

reach some agreement as to those and thats not really before me as much as the enjoining of the contempt hearing, and that Im denying. So, thats the Courts ruling. I appreciate

counsels appearing on short notice on the day before a holiday, but I dont know whether the parties would like me just to enter very brief - Ill do that.

Case:12-24882-ABC Doc#:196 Filed:07/19/12

Entered:07/19/12 12:10:37 Page46 of 46 46

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 you all.

MR. COLLINS: That would be fine, Your Honor. THE COURT: For the reasons stated on the record, Ill just simply say in the order, the motion is denied. MR. COLLINS: Thank you, Your Honor. THE COURT: All right. All right, counsel, thank

I wish you a good holiday and we will stand in

recess, and good day to all of you. ALL: Thank you, Your Honor. (Whereupon at 12:07 p.m., the hearing in this matter was concluded for this date.)

I, Elaine M. Ryan, approved transcriber for the United States Courts, certify that the foregoing is a correct transcript from the electronic sound recording of the proceedings in the above-entitled matter.

/s/ Elaine M. Ryan Elaine M. Ryan 2801 Faulkland Rd. Wilmington, DE 19808 (302) 683-0221

July 5, 2012