10000001520

Case:12-24882-ABC Doc#:343 Filed:08/07/12
Entered:08/07/12 16:34:01 Page1 of 43
UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF COLORADO
In re Case No. 12-24882 ABC
CORDILLERA GOLF CLUB, LLC dba The Club Chapter 11 at Cordillera, Tax ID / EIN: 27-0331317
Debtor.
DEBTORS OPPOSITION TO MOTION OF CHERYL M. FOLEY, THOMAS WILNER, JANE WILNER, CHARLES JACKSON, MARY JACKSON and KEVIN B. ALLEN, INDIVIDUALLY AND AS REPRESENTATIVES OF A CERTIFIED CLASS OF MEMBERS, TO APPOINT CHAPTER 11 TRUSTEE
The Debtor and Debtor-in-Possession, Cordillera Golf Club, LLC, dba The Club at Cordillera (the Debtor), by and through its undersigned counsel, hereby respectfully submits its Opposition to the Motion of Cheryl M. Foley, Thomas Wilner, Jane Wilner, Charles Jackson, Mary Jackson and Kevin B. Allen, Individually and as Representatives of a Certified Class of Members (the Movants), to Appoint Chapter 11 Trustee (the Motion). /// ///
1
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page2 of 43
TABLE OF CONTENTS Page INTRODUCTION .......................................................................................................................... 1 BACKGROUND ............................................................................................................................ 4 THE CORDILLERA CLUB............................................................................................... 5 THE MEMBERSHIP PLAN .............................................................................................. 6 THE DEBTORS ACQUISITION OF THE CORDILLERA CLUB................................. 7 SECURED DEBT OBLIGATIONS ................................................................................... 8 THE DEBTORS BUSINESS PLAN AFTER ACQUISITION OF CLUB..................... 10 TENSION WITH THE CLUB MEMBERS ..................................................................... 11 THE PENDING LITIGATION ........................................................................................ 13 CTC/COPA LITIGATION................................................................................ 13 MEMBER LITIGATION.................................................................................. 14 THE DEBTORS CHAPTER 11 FILING........................................................................ 16 ARGUMENT................................................................................................................................ 17 I. II. APPOINTMENT OF A TRUSTEE IS AN EXTRAORDINARY REMEDY NOT AVAILABLE UNDER THE FACTS OF THIS CASE ................................................... 17 THE MOVANTS HAVE NOT MET THEIR EXTRAORDINARY BURDEN REQUIREMENT TO ESTABLISH CAUSE FOR THE APPOINTMENT OF A CHAPTER 11 TRUSTEE UNDER SECTION 1104(A)(1). ............................................ 19 A. B. THE MOTION IS PREMATURE AND MUST FAIL BEFORE THERE IS A RULING ON THE COMTEMPT MOTION........................................................... 19 MOVANTS CANNOT MEET THEIR BURDEN OF PROOF TO ESTABLISH BEYOND A RESONABLE DOUBT THE EXISTENCE OF A LAWFUL ORDER OF THE COURT OR ANY WILLFUL REFUSAL TO COMPLY WITH IT. ...... 21 1. THERE WAS NO VIOLATION OF THE TRO BECAUSE ALL CHALLENGED EXPENDITURES CAME FROM THE CLUBS TRADE REVENUES.................................................................................................... 22 THERE WAS NO VIOLATION OF THE TRO BECAUSE ALL CHALLENGED EXPENDITURES FELL WITHIN ANY REASONABLE INTERPRETATION OF THE EX PARTE TRO........................................... 22 EVEN IF, ARGUENDO, THE EXPENDITURES DID NOT COMPLY WITH THE TRO, THERE WAS NO WILLFUL VIOLATION OF THE TRO....... 24
2.
3. C.
IT IS NOT MISMANAGEMENT TO DEFEND THE MEMBER LITIGATION........................................................................................................... 25 i
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page3 of 43
D.
CTC/CPOA LITIGATION IS VALID AND REPRESENTS A VALUABLE ASSET OF THE DEBTOR THAT IS ENTIRELY REASONABLE TO PURSUE. .................................................................................................................................. 25 MOVANTS HAVE NOT ASSERTED ANY POST-PETITION MISCONDUCT. ...................................................................................................... 31
E. III.
APPOINTMENT OF A TRUSTEE IS NOT IN THE INTERESTS OF CREDITORS UNDER SECTION 1104(a)(2)......................................................................................... 31 A. B. C. THE DEBTOR ENGAGED SEASONED PROFESSIONALS TO OVERSEE THE REORGANIZATION .................................................................. 32 THE PERCEIVED ACRIMONY AMONG WILHELM AND CERTAIN CLUB MEMBERS DOES NOT WARRANT APPOINTMENT OF A TRUSTEE .......... 33 THE DEBTOR WILL BE ABLE TO CONFIRM A PLAN EVEN IF MOVANTS CONTINUE TO BE PART OF THE PROBLEM RATHER THAN THE SOLUTION.............................................................................................................. 35
IV.
THE MOTION IS PREMATURE WHILE THE DEBTORS EXCLUSIVITY PERIOD IS PENDING ................................................................................................................... 36
CONCLUSION............................................................................................................................. 38
ii
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page4 of 43
TABLE OF AUTHORITIES Page FEDERAL CASES In re Allsun Juices, Inc., 34 B.R. 162 (Bankr. M.D. Fla. 1983) ................................................................................ 36-37 In re Bel Air Associates, Ltd., 4 B.R. 168 (Bankr. W.D. Okla. 1980) ...............................................................................18, 20 In re Colorado-UTE Electric Assn, 120 B.R. 164 (Bankr. D. Colo. 1990) .................................................................... 17-18, 32, 37 In re Crescent Beach Inn, Inc., 22 B.R. 155 (Bankr. D. Me. 1982)...........................................................................................34 In re Fisher & Son, Inc., 70 B.R. 7 (Bankr. S.D. Ohio 1986).................................................................................... 36-37 In re G-I Holdings, Inc., 385 F.3d 313 (3rd Cir. 2004) ...................................................................................................34 In re Oklahoma Refining Co., 838 F.2d 1133 (10th Cir. 1988) ...............................................................................................17 In re Sharon Steel Corp., 871 F.2d 1217 (3d Cir. 1989)...................................................................................................18 In re Sundale, Ltd., 400 B.R. 890 (Bankr. S.D. Florida 2009) .......................................................................... 34-35 Official Comm. of Asbestos Claimants v. G-I Holdings, Inc. (In re G-I Holdings, Inc.), 295 B.R. 502 (D.N.J. 2003) .....................................................................................................18 Sims v. Sims (In re Sims), 1997 Bankr. LEXIS 2112 (B.A.P. 10th Cir. N.M. Dec. 30, 1997).................................... 17-18 FEDERAL STATUTES 11 U.S.C. 101................................................................................................................................4 11 U.S.C. 1104(a) ................................................................................................................. 17-18 11 U.S.C. 1104(a)(1)......................................................................................................... 2, 19-21 11 U.S.C. 1104(a)(2)............................................................................................................. 31-32
iii
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page5 of 43
11 U.S.C. 1107(a) .........................................................................................................................4 11 U.S.C. 1108..............................................................................................................................4 RULES Colorado Rules of Civil Procedure, Rule 65 .................................................................................15
iv
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page6 of 43
INTRODUCTION1 1. The instant Motion for the appointment of a trustee is notable not as much for
what it says, but for what it does not say. To secure this extraordinary remedy, the grounds for appointment of a trustee require a strong showing of bad acts fraud, dishonesty, mismanagement and the like. Upon close inspection, the alleged bad acts complained about are obscured by the vitriolic words used to describe them. Although it is not clear, it appears that Movants contend that the involvement in litigation before another court appears to be a claim of mismanagement by the Debtor. Equally confusing is the unprovable allegation that payments made over one year ago that were allegedly in violation of a now-expired TRO a claim that has been pending in another court for more than six months have some bearing today regarding the Debtors professional management of its case, or its current discharge of it fiduciary duties to creditors. Debtor submits that the Movants cannot meet their burden to prove the alleged violations, that the evidence will establish that no such violations occurred, and that the alleged wrongdoing has little or nothing to do with the Debtors temporal discharge of its duties to the estate. Lastly, Movants boldly assert that the Motion is the right time for this Court to rule on the plan confirmation process, and that their expressed acrimony for the Debtor necessitates a finding today that there is no feasible plan possible in the case without Movants support. Debtor submits that such claims are not provable, and the request for appointment of a trustee based on such claims is premature, at best. Given that Movants do not even assert wrongdoing of any kind in the last year, much less post-petition,2 Debtor submits that a trial that will
Capitalized terms used but not otherwise defined in this section shall have the meanings ascribed to them Contrary to Movants statement, the Debtor submits that the filing of an adversary proceeding is not
below.
2
improper.
1
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page7 of 43
vindicate it from Movants unprovable charges, while satisfying, would be a waste of this Courts and this Debtors resources. Debtor welcomes a trial before this Court on the matters asserted in the Motion, notwithstanding that such matters are pending before another court. Debtor submits that the evidence will show that appointment of a trustee is not warranted in this case. 2. It is well-settled in this Circuit and elsewhere that the appointment of a trustee is
an extraordinary remedy. Indeed, there is a strong presumption that a debtor should be permitted to remain in possession and there is a high burden on the Movants to show clear and convincing evidence of cause to appoint a trustee. For all of the reasons described herein, the Movants have fallen woefully short of meeting this extremely high burden to justify such extraordinary relief and the Motion should be denied. 3. Movants first attempt to establish cause for the appointment of a trustee under
Bankruptcy Code 1104(a)(1) by arguing that the Debtors principal, David Wilhelm, allegedly engaged in pre-petition conduct, including violating the TRO issued in the Member Litigation pending before the Colorado District Court, and made certain expenditures that were allegedly improper. As an initial matter, such arguments are premature and must fail before the District Court rules on the pending Contempt Motion. Before there is a full evidentiary trial on the Contempt Motioneither before this Court or before the District Courtthe Movants have no evidence whatsoever to establish cause. As such, the Motion fails under 1104(a)(1). 4. Moreover, the evidence will show that the Contempt Motion is without merit and
nothing more than an effort by Movants to harass the Debtor and as used here, an attempt to thwart the Debtors reorganization efforts through the baseless Motion. As described in detail below, the Defendants in the Member Litigation never violated the TRO because they never used
2
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page8 of 43
Club Members 2011 dues for any of the challenged transactions. In addition, even if such dues were used, the challenged expenditures were still proper under the TRO because they fell within any reasonable definition of and fully complied with the Clubs Operating Agreement. Moreover, nothing in the TRO specifically prohibited Defendants from satisfying obligations of the Club for services rendered before entry of the TRO which is the case for the vast majority of challenged payments. Finally, even if there was a violation of the TRO, it was not intentional. For all of these reasons, among others, the Contempt Motion will fail and in any event there are no allegations of post-petition misconduct3 leaving no cause for the appointment of a trustee. 5. Movants also argue that Wilhelms engagement in certain litigation with the
Members constitutes mismanagement sufficient to warrant appointment of a trustee. However, as described in detail below, the allegations brought by certain Club Members in the Member Litigation will prove baseless, and it is not mismanagement for Wilhelm to defend himself against such false claims. In addition, the Movantswithout any evidentiary support whatsoeverallege that the CTC/CPOA Litigation initiated by Wilhelm and the Debtor is contrived and ask that the Court issue the extraordinary relief of appointing a trustee based solely on their word that the claims in the CTC/CPOA Litigation are baseless. As shown in detail below, Movants self-serving characterization of that litigation is irrelevant and is refuted by the evidence uncovered so far in that case. 6. Movants finally argue that the appointment of a trustee is in the interests of
creditors under section 1104(a)(2) based on the perceived acrimony between a few vocal Club Members that Movants argue makes it impossible for the Debtor to work with the various constituents to put forth a confirmable plan. Movants, again, offer no evidence whatsoever that
3
See Footnote 2, page 1, above.
3
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page9 of 43
would establish such assertions or otherwise show that no reasonable progress towards reorganization is possible because of such acrimony. 7. Indeed, contrary to Movants bald allegations, Wilhelm has done everything he
can to foster the successful reorganization of the Debtor. Wilhelm has, among other things, pursued claims of the Debtor and has brought in numerous professionals to oversee the Debtors operations and reorganization including a CEO, CRO, accounting firm, real estate broker/advisor and bankruptcy counsel, all approved or conditionally approved by this Court. As such, the oversight for this Debtor is beyond reproach. There is simply no evidence to support the need for a trustee. Moreover, no one has more reason to support the independence and a successful reorganization than Wilhelm given he also asserts a claim as a major secured creditor in this case. 8. For all of the reasons stated herein, the Movants arguments are baseless and the
Motion should be denied. BACKGROUND4 9. On June 26, 2012 (the Petition Date), the Debtor filed a voluntary petition (the
Petition) for relief under chapter 11 of title 11 of the United States Code, 11 U.S.C. 101 et seq (the Bankruptcy Code), in an effort to preserve and maximize the value of its chapter 11 estate. To that end, the Debtor intends to operate its business and to manage its properties as a debtor-in-possession under sections 1107(a) and 1108 of the Bankruptcy Code. 10. The club owned and operated by the Debtor (the Cordillera Club) is a renowned
and exclusive residential golf community located in Edwards, Colorado. Boasting some of the
Most of the facts set forth below were already presented in the Delaware Bankruptcy Court in connection with Debtors first day motions, and specifically contained in the DECLARATION OF DANIEL L. FITCHETT, JR. IN SUPPORT OF CHAPTER 11 PETITIONS AND FIRST DAY RELIEF filed in the Delaware Bankruptcy Court prior to that court transferring venue of the case to this Court.
4
4
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page10 of 43
most beautiful views in the world, golfers at the Cordillera Club enjoy some of the most exclusive golf amenities available anywhere. 11. Initially conceived in the early 1990s, Cordillera today has burgeoned into a
sprawling development spanning approximately 7,000 acres. The Cordillera community is governed by a homeowners association known as the Cordillera Property Owners Association (CPOA) and the Cordillera Valley Club Property Owners Association (CVCPOA). Cordillera is comprised of four distinct residential neighborhoods known as the Divide, the Ranch, the Summit, and the Cordillera Valley Club which collectively consist of 1087 privately owned residential lots, over half of which are improved with high-end custom and semi-custom single family homes. The Cordillera Club 12. The Cordillera Club lifestyle and experience are punctuated by private amenities
and facilities available to dues-paying members (collectively, Club Members) who join the exclusive Cordillera Club. The Club Members are not equity owners in the Cordillera Club, the Debtor or any of its property. The Cordillera Club boasts of three signature golf courses, a Dave Pelz designed short course, three tennis centers and fitness facilities, five indoor and outdoor pools, a summer camp with Trailhead clubhouse for children, and miles of maintained riding, hiking and Nordic ski trails (collectively, the Private Amenities or Club Facilities). 13. The Cordillera Club offers its members year-round opportunities to participate in
clubs, classes, parties, events, outings and tournaments. In addition, Club Members can purchase memberships granting direct access to alpine skiing through affiliation with the Cordillera Vail Club.
5
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page11 of 43
14.
Each property owner within the Cordillera Community is a voting member of the
CPOA and pays dues and assessments to CPOA. Ownership of property at Cordillera with the concomitant membership in CPOA does not include a right of access to or use of the Private Amenities offered by the Cordillera Club. 15. The Cordillera Club sells non-equity and non-voting memberships to the
Cordillera Club (the Club Memberships) by which its Club Members, if they are members in good standing, may access and use the Private Amenities. 16. The Cordillera Club Membership Plan (the Membership Plan) currently
provides that there shall be no more than 1085 golf memberships and up to 100 social memberships. Approximately one-half of all property owners within Cordillera are Club Members. 17. The primary source of revenue to fund the operations and management of the
extensive Club Facilities is derived from membership deposits, initiation fees and annual membership dues. Other sources of revenue include transfer fees, golf fees, guest fees, pro shop revenue, food and beverage revenues and operating department revenues. The Membership Plan 18. Membership at the Cordillera Club is governed by the terms and conditions of the
Membership Plan and the particular membership classification selected by any individual. The primary difference between the various Club Membership classifications is related to rights, benefits, privileges, transferability, reissue priorities and financial obligations. 19. The Membership Plan provides for different rights, privileges and obligations
based upon designated categories of Club Memberships.
6
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page12 of 43
20.
Initiation fees, membership deposits and membership dues at the Cordillera Club
are commensurate with the offerings of comparable private resort golf clubs and are generally in line with comparable clubs in the geographic region that themselves only one have golf course, compared to the four courses owned by the Cordillera Club. 21. The Membership Plan, which may be revised from time to time, grants the Debtor
and the Cordillera Club broad discretion in determining the annual dues, minimums, fees and other charges to be paid by Club Members. 22. The Membership Plan also grants the Debtor and the Cordillera Club discretion to
control the use of Club Facilities. 23. The Membership Plan does not obligate the Debtor and the Cordillera Club to
make Club Facilities available for use on any given date or during any given hours. 24. The Debtor believes that over sixty-five percent (65%) of the Members of the
Cordillera Club are not residents or citizens of Colorado. Those within this group who are homeowners within Cordillera do not own their home within Cordillera as their primary residence and for many, Cordillera is indeed their second or vacation home. The Debtors Acquisition of the Cordillera Club 25. 26. In June 2009, the Debtor acquired the Club Facilities. Prior to June 2009, the Debtors current equity owner David Wilhelm
(Wilhelm) owned an approximate 30% interest in the entities owning the Club Facilities, but held no management positions with such entities. Following a forensic audit completed at Wilhelms request, it was revealed that the such prior owners and their then-current management none of whom are associated in any way with the Debtor or its current management or ownership had diverted substantial funds away from the Cordillera Clubs
7
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page13 of 43
operations. This revelation lead to arbitration proceedings among Wilhelm (in his capacity as 30% owner) and the Cordillera Clubs owners and then-current management team, which also owned the remaining 70% interest in the Cordillera Club. As a result of Wilhelms victory in that arbitration, entities formed by Wilhelm acquired a 100% ownership interest in the Cordillera Club and the Club Facilities and anyone associated with the Cordillera Clubs former owners and then-current managements mismanagement of the Cordillera Club was relieved of their positions. No management team member involved in the arbitration holds any management position at the Debtor. The Cordillera Club is managed by a Chief Executive Office, and today also utilizes the services of the recently-appointed CRO. In fact, no member of the former majority owner has set foot on or been involved in the Cordillera Club since June of 2009. 27. An independent appraisal report dated as of May 1, 2009 prepared for the
Debtors senior lender, Alpine Bank (Alpine), valued the Club Facilities and property at approximately $50 million. Secured Debt Obligations 28. Or about June 26, 2009, Alpine and the Debtor entered into that certain Business
Loan Agreement (the Loan Agreement), pursuant to which Alpine loaned to the Debtor the original principal amount of $13,700,000 (the Alpine Loan). 29. The Alpine Loan is evidenced by a Promissory Note dated June 29, 2009 (the
Alpine Note). The Note matured on June 26, 2012. The Alpine Loan purports to be secured pursuant to a Deed of Trust dated June 26, 2009 and recorded in Eagle County Records Office on June 29, 2009 as Document No. 200912623 (the Alpine Deed of Trust). 30. As security for the Debtors obligations under the Alpine Note, the Alpine Deed
of Trust purports to encumber the real property described therein, including all or a portion of the
8
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page14 of 43
Facilities (the Real Property). The Alpine Deed of Trust also purports to encumber certain personal property described therein, including all equipment, fixtures, and other articles of personal property now or hereafter owned by Grantor, and now or hereafter attached or affixed to the Real Property. . . . The Alpine Note also purports to be secured pursuant to a Collateral Assignment of Contracts dated June 26, 2009 purporting to encumber certain water rights, and related contracts as listed therein; a Collateral Assignment and Security Agreement Covering Agreements, Permits and Contracts dated June 26, 2009, purporting to encumber the Collateral as defined therein, including contracts, licenses, and other agreements as described therein; a Collateral Assignment and Security Agreement Covering Golf Membership Revenues dated June 26, 2009, purporting to encumber Net Sales Revenues and Income from Dues as defined therein, including revenues from the sale of golf course memberships with respect to the Courses and dues, assessments, fees or other charges on account of memberships in the Club; a Commercial Pledge Agreement dated June 26, 2009 purporting to encumber all memberships in the Club; and a Commercial Security Agreement dated June 26, 2009 purporting to encumber furniture, fixtures, equipment, inventory, accounts receivable, general intangibles, contracts and contract rights, permits, goods, instruments, investment property, letter of credit rights, chattel paper, commercial tort claims, and all proceeds from the disposition thereof (all of the personal property purporting to be collateral for the Alpine Note (collectively, the Personal Property). On June 30, 2009, Alpine filed a UCC Financing Statement with the Delaware Secretary of State purporting to perfect its security interest in the Personal Property. The documents executed in connection with the Alpine Loan are collectively referred to as the Alpine Loan Documents. All collateral purported to secure the Alpine Note is collectively referred to as the Alpine Collateral.
9
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page15 of 43
31.
On or about June 23, 2010, Wilhelm made a loan to the Debtor in the original
principal amount of $6,500,000 (the Wilhelm Loan), evidenced by a Promissory Note dated June 23, 2010 (as at any time amended or modified, the Wilhelm Note). The Wilhelm Note purports to be secured by a Deed of Trust, Security Agreement, Assignment of Leases and Rents and Fixture filing dated June 23, 2010, and recorded with the Eagle County Recorders Office on August 12, 2010 as Document No. 20105834 (as at any time amended or modified, the Wilhelm Deed of Trust), purportedly encumbering the Real Property and portions of the Personal Property, as further described therein. The documents executed in connection with the Wilhelm Loan are collectively referred to as the Wilhelm Loan Documents. All collateral purported to secure the Wilhelm Note is collectively referred to as the Wilhelm Collateral. The Alpine Collateral and the Wilhelm Collateral is collectively referred to as the Collateral, and Collateral which is personal property is collectively referred to as the Personal Property Collateral. 32. As of the filing date, the Debtors books and records reflect the amount of the
outstanding amounts of the Alpine Loan and the Wilhelm Loan as approximately $12.7 million and $7.5 million, respectively. The Debtors Business Plan After Acquisition of Club 33. The Debtor envisioned transforming the Cordillera Club into one of the premier
private golfing and residential clubs in the country, hoping to further enhance the value of the property and brand that the Debtor had acquired. 34. The Debtor and its respective affiliates had developed an innovative and
proprietary business model known as the Wind Rose Collection of Private Clubs (including the Wind Rose Lodging Club). The Debtors business strategy was to create a new paradigm in the
10
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page16 of 43
way in which members of exclusive private clubs acquire and utilize second homes and vacation properties, essentially providing reciprocal membership privileges and lodging options across the collection of private clubs owned and operated by affiliates of the Debtor. 35. The Wind Rose Lodging Club model is visionary in its unique approach that sets
it apart from the high-end hotel, fractional, destination clubs and private residence clubs. Cordillera is one of few properties in North America that provided the size, zoning, infrastructure, cachet, seasons and amenities required of the Debtors business model. 36. In furtherance of its vision, the Debtor introduced new categories of membership
including the Premier and spent substantial sums of money into improving the Club Facilities, services and operations for its Club Members. Approximately 166 Club Members upgraded to the new Premier Memberships, lending validity to the widespread interest in and viability of the Wind Rose Lodging Club model. Tension With the Club Members 37. Starting in August 2010, a small but vocal minority of current and former Club
Members commenced tactical activities that represented an orchestrated and pervasive pattern of conduct and activities designed to create an environment that the Debtor believes was intended to result in a below-market transfer of ownership and control of the Cordillera Club and its Club Facilities to those current and former Club Members. 38. These activities included interfering with the Debtors and the Cordillera Clubs
business relations with its Club Members, inciting Club Members to resign in substantial numbers from the Cordillera Club, and to boycott the Club Facilities. Unfortunately, the actions of this sub-group of current and former Club Members resulted in a decrease in annual dues and similar revenue from Club Members and a decrease in revenue from pro shop sales, food and
11
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page17 of 43
beverage sales, guest fees, golf fees, special events, tournaments, banquets and other events. These revenue streams are vital to sustain and support the full-service operations and the Club Facilities at the Cordillera Club. 39. These current and former Club Members additionally leveled accusations (all
since proven false) against the Debtor and certain of its principals that the Debtor had diverted monies to other entities or purposes. 40. Taking these accusations seriously and in order to vindicate itself, the Debtor
retained the accounting firm of Ehrhardt Keefe Steiner & Hottman (EKS&H) to conduct a forensic audit of the Debtors books and records. The Debtor further agreed to authorize EKS&H to share the Debtors confidential financial data with an independent accounting firm to be hired by, inter alia, the CPOA. The CPOA designated its own auditor, Hein & Associates, who worked in concert with EKS&H in conducting the audit of the Debtors accounting records. 41. Neither EKS&H nor Hein & Associates found any evidence supporting the
former and current Club Members prior accusations that the Debtor had diverted monies to other entities or purposes. To the contrary, both accounting firms concluded that the Debtors internal accounting controls are sound and that all receipts and expenses were properly booked and utilized solely for operations of the Cordillera Club. 42. Despite the Debtor vindicating itself as to the former and current Club Members
accusations, the damage resulting from this small groups campaign including significant membership cancellations required the Debtor to dramatically cut back its planned operations for 2011. Coupled with a nationwide sluggish economy, these factors precipitated unprecedented loss of capital from operations of the Cordillera Club.
12
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page18 of 43
43.
In May 2011, the Club advised the Club Members that the mass exodus of Club
Members, coupled with certain Club Members apparent boycott of the Club Facilities, had severely and detrimentally impacted the Cordillera Club and, as a result, the Cordillera Club had no alternative but to open only one of the four club facilities the Valley Club. Later in 2011, the decision was made to also open the Summit Course. The Mountain Course and the Short Course were not opened in 2011. The Pending Litigation 44. The Debtor is a party in litigation matters pending in Colorado. CTC/CPOA Litigation 45. On May 24, 2011, the Debtor filed a complaint in the District Court for Eagle
County, Colorado against the CPOA and the Cordillera Transition Corporation (CTC) styled Cordillera Golf Club, LLC, et al. v. Cordillera Transition Corporation, Inc., et al. assigned case number 2011 CV 456 (the CTC/CPOA Litigation). The Debtors case turns upon a series of actions taken by a sub-group of Club Members who are officers of these entities in furtherance of an apparent strategy to discredit the Debtor, incite Club Member resignations, damage the Debtor financially and reputationally, and ultimately seize ownership of the Cordillera Club and the Club Facilities at a substantially discounted valuation. 46. The Complaint asserts seven causes of action for (1) Tortious Interference with
Contract; (2) Tortious Interference with Prospective Business Advantage; (3) Colorado Organized Crime Control Act; (4) Fraud; (5) Fraud in the Inducement; (6) Civil Conspiracy/Collusion; and (7) Defamation. The parties presently are in the midst of discovery. Written discovery has been exchanged by all parties with approximately 145,000 pages of documents produced in that case. The first series of depositions has recently commenced and
13
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page19 of 43
additional depositions are in the process of being scheduled. A three week jury trial is set for April 1-19, 2013. Member Litigation 47. Later on June 20, 2011, in response to the Debtors lawsuit, and as was part of the
plan hatched in August 2010, a class action suit was filed against the Debtor for, among other things, (1) Breach of Contract, (2) Promissory Estoppel, and (3) False Representation, alleging that management was required to open all facilities, despite the economic inability to do so. Foley v. Cordillera Golf Club LLC, 2011 CV 552 filed in Eagle County District Court, Colorado (the Member Litigation). Plaintiffs in the Member Litigation seek return of all 2011 membership dues paid, their membership deposits, decline in home values, exemplary damages, etc. The Court has certified this matter as a Class Action and has appointed the Movants as the Class Representatives. The Debtor believes it has multiple meritorious defenses to the claims. The Debtor has tendered its defense to its insurers, which is paying for defense of the action. 48. On May 4, 2012, the Debtor filed a motion to dismiss the securities claims that
were added by way of a third amended complaint. Two other defendants filed a separate motion to dismiss for failure to state facts upon which relief may be granted. A decision on both motions is pending. 49. On June 24, 2011, the District Court entered a TRO in the Member Litigation
which provided, among other things: that defendants shall not use funds from 2011 annual dues received from Club at Cordillera (Club) members for any purpose other than the necessary
14
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page20 of 43
maintenance and operation of the Clubs four golf courses and related facilities.5 On its face, the TRO did not require any segregation of members dues. 50. On December 2, 2011, the Class Representatives filed a Verified Motion for
Issuance of Contempt Citation alleging seven (7) payments made from June 30, 2011 to August 31, 2011, by CGC were in violation of the TRO (the Contempt Motion). The class members did not seek the appointment of a receiver or examiner as part of this motion. The TRO has now expired. 51. A hearing was scheduled to begin on the Contempt Motion on July 20, 2012. At a
pre-hearing status conference on July 17, 2012, presiding Judge Gannett disclosed to the parties that (a) an individual told him that another individual had attributed to the Judge certain statements about the case made during a golf game in which the Judge participated; (b) that the Judge was a member of a golf club that had been in bankruptcy for four (4) years. The Judge invited further inquiry by the parties in the areas of disclosure, and vacated the hearing. 52. After a preliminary inquiry, the defendants in the Member Litigation wrote a
letter to Judge Gannett concerning the initial concerns with his disclosures. At a status conference on July 25, 2012, Judge Gannett indicated he would recuse himself if so requested by motion based upon the Judges membership in the bankrupt golf club. On July 27, 2012, Judge Gannett entered his order of recusal.6 The case was reassigned as of August 3, 2012, but no hearing has been set on the Contempt Motion.
The Debtor believes the TRO was issued in violation of applicable state law, including multiple violations of Colorado Rules of Civil Procedure, Rule 65. Ultimately the parties stipulated to continue the TRO based upon the Debtors understanding of its scope and its limited duration. However, in light of the Contempt Motion (defined below) and now this motion for a trustee, the Debtor reserves the rights to challenge the validity of the TRO if the Court believes it proper to address the issue of whether Mr. Wilhelm or others violated the TRO. It is interesting to note that Judge Gannetts recusal order itself discloses a new ground for recusal recent disclosures and conversations among Alpine Bank officers with Judge Gannetts wife, who is also an Alpine
6
15
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page21 of 43
The Debtors Chapter 11 Filing 53. The Debtors 2010 budget estimated 50 additional Club Membership sales in
2010, well within statistical membership absorption and matriculation rates in comparable markets. However, due to economic, industry and other circumstances beyond the Debtors control, Club Membership sales for 2010 were not as robust as forecast. By mid-2010, it was clear that the Cordillera Club lacked the critical mass of Club Members necessary to maintain the high level of services and operations at the Club Facilities. 54. These conditions were exacerbated by the false statements and mass resignations
orchestrated by the sub-group of Club Members. The Debtor had attempted to work out a loan extension with Alpine Bank, but in light of the mass resignation of Club Members, Alpine Bank refused to extend the due date of the Debtors loan. 55. As a result of the foregoing, the Debtor determined that it would unable to make
the payment due to Alpine Bank by close of business on June 26, 2012. 56. In March 2012, the Debtor retained Daniel L. Fitchett Jr. as its CEO, and
Mr. Fitchett has been running the day-to-day operations of the Debtor since that date. The Debtor engaged Alfred Siegel as CRO on June 22, 2012, and the CRO and CEO have committed with ownership regarding the post-petition operations of the Debtor. To advance the foregoing goals, and to help cushion the conflict between Wilhelm and certain members of the Cordillera Club who have developed an adversarial relationship with Wilhelm, the Debtor in consultation with its management and professionals (including its CRO) has retained the services of an experienced real estate consultant and investment banker with significant experience in the golf
Bank officer; and is silent as to the previously articulated reasons Judge Gannett had provided to the parties as to his reasoning regarding his recusal.
16
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page22 of 43
and hospitality industries, GA Keen Realty Advisors, LLC. Not one allegation set forth in the Motion even asserts any questionable act of any kind7 since August 31, 2011, nearly one year ago. ARGUMENT I. APPOINTMENT OF A TRUSTEE IS AN EXTRAORDINARY REMEDY NOT AVAILABLE UNDER THE FACTS OF THIS CASE 57. In a chapter 11 case, the appointment of a trustee is governed by 11 U.S.C.
1104(a). In re Oklahoma Refining Co., 838 F.2d 1133, 1136 (10th Cir. 1988). 11 U.S.C. 1104(a) provides that: At any time after the commencement of the case but before confirmation of a plan, on request of a party in interest, and after notice and a hearing, the court shall order the appointment of a trustee (1) for cause, including fraud, dishonesty, incompetence, or gross mismanagement of the affairs of the debtor by current management, either before or after the commencement of the case, or similar cause, but not including the number of holders of securities of the debtor or the amount of assets or liabilities of the debtor; or (2) if such appointment is in the interests of creditors, any equity security holders, and other interests of the estate, without regard to the number of holders of securities of the debtor or the amount of assets or liabilities of the debtor. 58. It is well-established that the appointment of a trustee is an extraordinary
remedy. In re Colorado-UTE Electric Assn, 120 B.R. 164, 173-174 (Bankr. D. Colo. 1990) (citing In re Cardinal Industries, Inc., 109 Bankr. 755, 765 (Bankr. S.D. Ohio 1990)); see also Sims v. Sims (In re Sims), 1997 Bankr. LEXIS 2112, 9-10 (B.A.P. 10th Cir. N.M. Dec. 30, 1997) (Court noted that appointment of a trustee is an extraordinary remedy.). Further,
7
See Footnote at page 2.
17
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page23 of 43
[t]here is a strong presumption that the debtor should be permitted to remain in possession absent a showing of need for the appointment of a trustee. Id. (citing In re Ionosphere Clubs, Inc. (Eastern Airlines), 113 Bankr. l64, 167 (Bankr. S.D.N.Y. 1990)). 59. The courts decision whether to appoint a trustee is fact-intensive and
discretionary. Official Comm. of Asbestos Claimants v. G-I Holdings, Inc. (In re G-I Holdings, Inc.), 295 B.R. 502, 508 (D.N.J. 2003) (citing In re Marvel Entertainment Group, Inc., 140 F.3d 463, 473 (3d Cir. 1998)). [S]ection 1104(a) decisions must be made on a case-by-case basis. In re Sharon Steel Corp., 871 F.2d 1217, 1226 (3d Cir. 1989); see also Official Comm. of Asbestos Claimants v. G-I Holdings, Inc. (In re G-I Holdings, Inc.), 295 B.R. 502, 507 (D.N.J. 2003) (The decision to appoint a trustee must be made on a case-by-case basis.). 60. Under section 1104(a), [t]he burden is on the movant to show by clear and
convincing evidence that there is cause to appoint a trustee. In re Colorado-UTE Electric Assn, 120 B.R. at 173-174 (citing In re Evans, 48 Bankr. 46, 47 (Bankr. W.D. Tex. 1985)). Evidence is clear and convincing when: [it] produces in the mind of the trier of fact a firm belief or conviction as to the truth of the allegations sought to be established, evidence so clear, direct and weighty and convincing as to enable [the fact finder] to come to a clear conviction, without hesitancy, of the truth of the precise facts in issue. Official Comm. of Asbestos Claimants v. GI Holdings, Inc. (In re G-I Holdings, Inc.), 295 B.R. 502, 508 (D.N.J. 2003) (citing Matter of Jobes, 108 N.J. 394, 407, 529 A.2d 434 (1987) (quoted in Cruzan by Cruzan v. Director, Missouri Dept. of Health, 497 U.S. 261, 285 n. 11, 111 L. Ed. 2d 224, 110 S. Ct. 2841 (1990)). This requires more than mere naked allegations of fraud or mismanagement in actions pending in other courts to establish cause for the appointment of a trustee, or even an examiner. In re Bel Air Associates, Ltd., 4 B.R. 168, 172-174 (Bankr. W.D. Okla. 1980) (Court denied motion to
18
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page24 of 43
appoint a trustee or an examiner under Section 1104, holding that allegations of fraud made in action pending in district court, without further evidence, were not enough to establish cause.). 61. For the reasons described below, the Movants have not, and cannot, meet this
extraordinary burden and have fallen woefully short in establishing that a trustee is appropriate in this case. Indeed, on the facts as asserted by Movants, the Debtor submits it would be a waste of resources to pursue a trial on this Motion. II. THE MOVANTS HAVE NOT MET THEIR EXTRAORDINARY BURDEN REQUIRED TO ESTABLISH CAUSE FOR THE APPOINTMENT OF A CHAPTER 11 TRUSTEE UNDER SECTION 1104(A)(1) 62. Although not clear, Movants seek the appointment of a trustee on essentially three
grounds. First, they argue that the Debtor and/or its principal, Wilhelm, engaged in pre-petition conduct approximately one year ago, that Movants contend was a violation of a TRO that, as of today, has expired of its own terms. Second, they appear to argue that Wilhelms engagement in hotly-contested litigation constitutes mismanagement. Third, they argue that the animosity between vocal Club Members makes it impossible for the Debtor to work with the various constituents to put forth a confirmable plan. Movants arguments fail, as discussed below. A. 63. The Motion is Premature and Must Fail Before There is a Ruling on the Contempt Motion The Movants first argument for establishing cause under 1104(a)(1) appears to
be tied to the allegations made against Wilhelm through the Contempt Motion. Motion at 3639. Movants acknowledge that mandatory appointment of a trustee is required only if cause, including fraud, dishonesty, incompetence, or gross mismanagement of the debtors financial affairs is established. Id. at 34 (emphasis added). As described above, this is an extraordinary remedy requiring a high burden of proof.
19
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page25 of 43
64.
In support of their argument to establish cause, Movants raise issues already
raised in their Contempt Motion, as to which there have been no findings of any kind upon which Movants can rely. Those issues were poised to be determined before the bankruptcy filing and are now poised to be decided by this Court in light of Movants putting it at issue in connection with their Motion. 65. Movants have put forth no evidence whatsoever that would establish such cause,
but are instead asking this Court to order the appointment of a trustee based on highly-contested issues already pending in some capacity before another court. This is entirely improper. See In re Bel Air Associates, Ltd., 4 B.R. 168, 172-174 (Bankr. W.D. Okla. 1980) (Court denied motion to appoint a trustee or an examiner under Section 1104, holding that allegations of fraud made in action pending in another court, without further evidence, were not enough to establish cause.). 66. Indeed, Movants readily admit that all of their allegations against Wilhelm cited
in support of the appointment of a trustee will be considered by the Eagle County District Court at the contempt hearing now rescheduled to August 6-8, 2012. The contempt hearing is not and was never rescheduled to August 6-8, 2012. At the moment, there is no contempt hearing scheduled. 67. In light of the current status, nothing has been established to show cause under
1104(a)(1) and the Motion is, at best, premature before there has been any ruling or other findings related to the Contempt Motion that could even begin to implicate possible cause required for mandatory appointment under 1104. 68. To the extent the Movants are requesting that this Court entertain their Contempt
Motion against Wilhelm and decide the merits of that motion in order to determine whether cause exists under 1104(a)(1), the Debtor consents, but such a request requires a trial on the
20
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page26 of 43
merits that has never occurred. If this Court deems Movants end run around the pending litigation to be improper, then there can be no showing of cause under 1104(a)(1) and that portion of the Motion should be stricken. In any case, and as described in detail below, the evidence will show that the Contempt Motion is baseless, that there was no violation of the TRO, and there are no proper grounds to establish cause for the appointment of a trustee under 1104(a)(1). Indeed, the Debtor preserves its rights to recover its attorneys fees for the pursuit of a baseless motion. 69. If this Court decides to rule on the issues raised in the Contempt Motion, the
Debtor requests a full evidentiary hearing on the merits. At such hearing, the evidence will show that such Motion is without merit and is nothing more than a transparent effort to harass the Debtor, Wilhelm and Wilhelms affiliates (as discussed below). B. Movants Cannot Meet Their Burden of Proof to Establish Beyond a Reasonable Doubt The Existence of a Lawful Order of the Court or Any Willful Refusal to Comply With It. Punitive sanctions for contempt must be supported by findings of fact establishing
70.
beyond a reasonable doubt (1) the existence of a lawful order of the court; (2) the contemnors knowledge of the order; (3) the contemnors ability to comply with the order; and (4) the contemnors willful refusal to comply with the order. Id. at 497; C.R.C.P. 107(d)(1). As noted in footnote 2 above, Movants cannot meet the first element of their burden of proof for imposition of punitive sanctions against the Defendants in the Member Litigation because the TRO was void when entered, which issue the Debtor reserves the right to present to this Court. As is shown below, Movants also cannot demonstrate beyond a reasonable doubt that there was a willful violation of the TRO.
21
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page27 of 43
1. 71.
There was No Violation of the TRO Because All Challenged Expenditures Came From the Clubs Trade Revenues.
Simply put, the TRO was never violated because Club Members 2011 dues were
never used for any of the challenged transactions. Although Movants claim in their Contempt Motion that the expenditures they challenge must have been made from member dues, they ignore the Cordillera Clubs other revenue. Indeed, the Cordillera Club had $3,248,179 in available revenues during calendar year 2011, entirely exclusive of Club Members $8,534,348 in dues, from which such expenditures were made. The expenditures complained of, even if improper (which the Debtor denies), amount to only $349,000, well below the $3,248,179 available to pay them. And, even at that, given that the alleged expenditures complained of were made nearly one year ago, one wonders whether there is any probative value TODAY to the allegations made, even if the allegations were provable (which they are not). 2. There was No Violation of the TRO Because All Challenged Expenditures Fell Within Any Reasonable Interpretation of the Ex Parte TRO.
72.
Even if Movants were correct that the Cordillera Club had insufficient operating
revenues for the challenged expenditures without using Club Members 2011 dues, a contention they cannot prove, the expenditures were still proper under the TRO because they fell within any reasonable definition of, and fully complied with, the Clubs Operating Agreement. Moreover, all but three such payments were for services rendered before the TRO was entered. 73. Because the TRO does not define or explain the terms necessary maintenance
and operation, the Debtor interpreted the terms consistent with the Clubs Operating Agreement. The Operating Agreement defines operating expenses to include, inter alia, fees and expenses incurred for wages, salaries and other compensation and benefits, debt service payments, . . . repairs and maintenance, capital improvements or replacements, legal, and
22
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page28 of 43
expenses incurred in connection with forming the Company, expenses incurred in connection with preparing, revising, amending, converting, and modifying this Agreement. First Amended and Restated Limited Liability Company Operating Agreement of Cordillera Golf Club, LLC, Art. I, at p. 4. 74. categories: The $33,250 payment to Foley & Lardner LLP for restructuring Cordillera Club ownership and equity conversions was proper as a legal expense and proper as modifications to the Operating Agreement and corporate documents. The $104,066 interest expense payment to David Wilhelm was proper as a debt service payment based upon a June 23, 2010 Promissory Note; The $73,420 payment to Zehren & Associates for plans to renovate the Valley Club clubhouse was proper as an expense for capital improvement or replacement; The $60,000 severance payment to Nicholas Wilhelm was a proper payment for wages, salaries, and other compensation and benefits; The $53,797 payment to David Wilhelm for interest on a note was proper as a debt service payment upon a June 23, 2010 Promissory Note; The $20,012 payment to Thomas & Genshaft was proper as a legal expense; and 75. The $5,445 payment to Foley & Lardner was also proper as a legal expense. Each of the expenditures of which Movants complain clearly falls within these
Furthermore, even if the above payments had not complied with a subjective
interpretation of the terms necessary maintenance and operation different from that set forth
23
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page29 of 43
in the Clubs Operating Agreement, they still did not violate the TRO since nothing in the TRO specifically prohibited Defendants from satisfying obligations of the Cordillera Club for services rendered before entry of the TRO. With the exceptions of the $53,797 interest payment to David Wilhelm; the $20,012 payment to Thomas & Genshaft, LLP; and the $5,445 payment to Foley & Lardner, LLP (totaling $79,254), all other challenged payments were for services rendered or an obligation incurred before June 24, 2011. Under Generally Accepted Accounting Principles and the accrual basis of accounting, which the Cordillera Club follows, revenues are recognized when they are earned, not when they are received; and expenses are recognized when they are incurred, not when they are paid. 76. In fact, the Debtor will establish that it would have been commercially
unreasonable, and contrary to standard procedures in the golf industry, for the Debtor to have read into the Courts order a prohibition on paying such bills for pre-June 24, 2011 services as they came due, since failing to pay them would have harmed the Cordillera Club and its members by creating legal disputes that the Debtor had an obligation to avoid. 3. 77. Even if, Arguendo, The Expenditures Did Not Comply With the TRO, there was No Willful Violation of the TRO.
Finally, Movants cannot demonstrate beyond a reasonable doubt that the Debtor
willfully violated the TRO; in fact, the Debtor will establish that it took all reasonable steps in good faith to comply with it including, but not limited to, advising the Cordillera Clubs former Chief Financial Officer, Monica Borsch, of the existence and entry of the TRO immediately upon its entry. Moreover, the evidence will show the Debtors personnel took steps to comply with the TRO immediately after its issuance. Movants distortion of the deposition testimony of Ms. Borsch to suggest that the Debtor willfully violated the TRO by not notifying Ms. Borsch of its entry is patently false and will be disproven.
24
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page30 of 43
C. 78.
It is Not Mismanagement to Defend the Member Litigation. Movants claim that the Member Litigation was initiated to address an alleged
wrong committed by Wilhelm when he sent a letter to Club Members in January 2011 allegedly promising to open all four golf courses in exchange for timely payment of dues. What Movants fail to disclose is that Wilhelm made the representation at the behest of Mr. Wilner, one of the Movants, and the Debtor now believes that Mr. Wilners legal advice to the Debtor to make such a representation was itself wrongful advice. More importantly, the evidence will show that when Wilhelm sent the letter, he was hopeful that the financial situation of the Debtor would enable it to provide all the amenities, and that the letter was sent with the best of intentions. Unfortunately, due to many factors, including the mass resignations which formed a core element of the scheme to take over the assets of the Debtor (which actions are the subject of the CTC/CPOA Litigation), the Debtors financial circumstances required a reduction of services. The Debtor is confident that the Debtor will prevail in the Member Litigation and it will be determined that the Class Members are actually net debtors in this case. D. 79. The CTC/CPOA Litigation Is Valid and Represents a Valuable Asset of the Debtor that is Entirely Reasonable to Pursue Movants claim a trustee should be appointed because the Debtor filed a
contrived lawsuit against the CTC, the CPOA, and the individual members of those entities (collectively, the CTC/CPOA Litigation Defendants). (Motion at 36). The fact that a defendant believes a lawsuit filed against it is contrived is singularly unremarkable.8 What is remarkable, however, is that Movants ask this Court to accept the so-called contrived nature of the CTC/CPOA Litigation without a single piece of evidentiary support for their assertion, or
Here, Movants are not themselves defendants in the CTC/CPOA Litigation, but as members of the CPOA, they bear potential liability in that suit, and their interests are very closely aligned with the CTC/CPOA Litigation Defendants in that suit.
8
25
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page31 of 43
even a basic description of the claims in that suit.9 Movants request that this Court take the extraordinary step of appointing a trustee based on their word that the claims against the CTC/CPOA Litigation Defendants in the CTC/CPOA Litigation are baseless. Their self-serving characterization of that lawsuit is irrelevant, and moreover, it is refuted by the evidence uncovered so far in that case. 80. Since Movants assert that the CTC/CPOA Litigation is contrived, and since they
do not provide any other information about that suit or its merits, a summary of the claims in that suit is warranted. The Complaint alleges that the defendants in that action conspired together to engage in a campaign designed to financially squeeze Wilhelm and the affiliated entities that own and operate the Cordillera Club, including the Debtor. The purpose of this campaign was to put tremendous financial pressure on the Cordillera Clubs owners and drive the Cordillera Club into bankruptcy, which would allow certain of the Club Members to purchase the Cordillera Clubs assets at a greatly reduced market value. Certain of the Club Members had been actively seeking to purchase the Cordillera Club from its owners even before Wilhelm acquired the Cordillera Club assets in June 2009. When the economy soured and Wilhelm announced in 2010 that the Cordillera Club was in financial difficulty and would have to reduce services and cut expenses, the defendants saw an opportunity for certain of the Club Members to acquire the Cordillera Club assets at a substantial discount. 81. The CTC/CPOA Litigation sets out numerous tactics the CTC/CPOA Litigation
Defendants used to place coercive pressures on Wilhelm and the Debtor in furtherance of this scheme. One of the primary means of accomplishing their goal was to induce Club Members to
Putting aside their numerous pejorative and conclusory descriptions of the CTC/CPOA Litigation, the sole description of that lawsuit in Movants Motion is the statement that the suit alleges the defendants conspire[ed] to induce the Clubs members to leave the Club as the ostensible cause for his inability to operate the Club profitably. (Motion at 36)
9
26
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page32 of 43
seek assurances from the Debtor that it would open all of the golf courses and facilities in 2011 regardless of the Cordillera Clubs financial difficulties. The plan was for Club Members to threaten not to pay their dues unless the Debtor provided such assurances. Since the Debtor cannot pay the Cordillera Clubs expenses and operate the Cordillera Club unless the Members pay their dues, the CTC/CPOA Litigation Defendants knew they could use the threat of a member boycott to obtain the assurances they desired. 82. After filing the CTC/CPOA Litigation, the Debtor learned that the Debtors then
lawyer, Tom Wilner, advised that the assurances be provided by the Cordillera Club as requested by the CTC/CPOA Litigation Defendants even though Mr. Wilner knew the Cordillera Club could not afford to open all facilities.10 Once the Debtor provided the requested assurances, which it did in January 2011, the CTC/CPOA Litigation Defendants planned to close the trap, inciting Club Members both to resign their membership and not pay their dues. The resulting loss of member dues was designed to cripple the Cordillera Clubs finances, force the Debtor not to open facilities despite its assurances to the contrary, and drive the Debtor into bankruptcy, where the assets could be purchased at a reduced price. 83. The CTC/CPOA Litigation also alleges the defendants engaged in a wide variety
of other tactics to support their campaign against the Debtor. For example, the CTC/CPOA Litigation Defendants published defamatory statements about Wilhelm and the Debtor regarding imagined financial improprieties and made other false accusations designed to sow distrust of Wilhelm and the Debtor among the members. The purpose was to help induce Club Members to boycott the Cordillera Club, driving it to reduce services, which in turn would anger its members.
Shockingly, Debtors lawyer upon whose advice Debtor relied, Tom Wilner, subsequently became a class representative and is one of the Movants herein.
10
27
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page33 of 43
As another example, the complaint alleges the defendants orchestrated a campaign to disparage Wilhelm and the Debtor to the Debtors lender, Alpine Bank, and damage the banks relationship with the Debtor. The purpose of the scheme was to cause Alpine Bank to sell its note to the Club Members, after which the defendants could find a default under the note, causing the payment obligations to be accelerated. The CTC/CPOA Litigation Defendants could then foreclose on the Cordillera Club assets and obtain those assets for themselves. 84. Discovery in the CTC/CPOA Litigation is in its infancy. Production and review
of documents is ongoing, and only a handful of depositions have been taken. Yet even at this early stage of discovery, ample evidence is being uncovered that demonstrate the Debtors claims are valid and more than reasonable to pursue. For example, emails obtained in discovery reveal that after Wilhelm disclosed the Cordillera Clubs financial difficulties to the Club Members in 2010 and stated that the Cordillera Club would need to reduce expenses, CTC/CPOA Litigation Defendants considered the announcement to be a big opportunity, that the end-game of their strategy was a member-owned Cordillera Club, and that it would be detrimental to their end-game to help Wilhelm succeed in operating the Cordillera Club. The reasonable inference is that the CTC/CPOA Litigation Defendants intended to use the Cordillera Clubs financial difficulties as a tool, obstruct Wilhelms efforts to make the Cordillera Club a financial success, drive the Cordillera Club into bankruptcy, and accomplish the end-game of a member-owned club by purchasing the assets at fire-sale prices. 85. In accord with the allegations of the complaint, the discovery to date shows the
CTC/CPOA Litigation Defendants named in the CTC/CPOA Litigation also encouraged Club Members to seek assurances from the Debtor that it would open all the facilities in 2011 regardless of its financial condition, and the CTC/CPOA Litigation Defendants helped facilitate
28
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page34 of 43
the efforts to obtain such assurances. Moreover, the Cordillera Clubs data shows almost eighty percent of the Club Members who resigned did so after the Debtor issued the assurances requested by the Club Members, and before there was any change in anticipated services. This supports the allegation that the CTC/CPOA Litigation Defendants orchestrated a campaign to request the assurances, and then only after those assurances were issued, the CTC/CPOA Litigation Defendants incited the Club Members to resign, forcing the Cordillera Club to close facilities and not honor the assurances it had provided. With the mass resignations which appear to have been planned before any assurances were given, the Debtors image could be, and appears to have been, tarnished. 86. Discovery further reveals that the CTC/CPOA Litigation Defendants openly
discussed neutralizing Wilhelm and removing him from the Cordillera Club via a regime change that would put the Cordillera Clubs assets into the hands of the Cordillera community, just as the complaint alleged. It is undisputed that the CTC/CPOA Litigation Defendants did not seek to remove Wilhelm from managing the Cordillera Club through any reasonable offer to purchase the Cordillera Club from the Debtor during this time period. That means they must have pursued their strategy of removing Wilhelm and obtaining the Cordillera Clubs assets through other means; namely, the campaign against the Debtor detailed in the complaint. 87. There is also support for the allegation that CTC/CPOA Litigation Defendants
engaged in a campaign to spread defamatory allegations about Wilhelm and the Debtor. For example, there is no dispute that certain CTC/CPOA Litigation Defendants claimed Wilhelm and his entities misappropriated member dues for themselves, a vitriolic charge that naturally would spread resentment among members and help encourage a member boycott of the Cordillera Club.
29
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page35 of 43
The CTC/CPOA Litigation Defendants also fully acknowledge those charges were false and that there was in fact no misappropriation of funds. 88. Discovery also has uncovered support for the claim that the CTC/CPOA
Litigation Defendants sought to cause a default to be declared on the Alpine Bank note. For example, discovery has revealed that two of the CTC/CPOA Litigation Defendants, one of whom was a former banker, initiated contact with Alpine Bank shortly after Wilhelm disclosed the Cordillera Clubs financial difficulties to members in 2010. Those CTC/CPOA Litigation Defendants contacted Alpine Bank under the auspices of informing the bank of the subordinate debt Wilhelm recorded against the property, and a claim that the banks collateral was impaired. Their intent appears to have been that if the lender had not provided consent for that junior lien, the bank could declare the note in default and accelerate the obligations. That would permit the Club Members to either purchase the note themselves or acquire the Cordillera Clubs assets through a foreclosure. 89. These examples are just a sample of the information uncovered so far that
supports the claims made in the CTC/CPOA Litigation. Moreover, since discovery is in its early stages, additional supporting information almost certainly will be unearthed as the case proceeds. The discovery uncovered so far demonstrates that the Debtor did not engage in any fraud or dishonesty by filing the CTC/CPOA Litigation, and that its pursuit is justified by evidence produced by the CTC/CPOA Litigation Defendants themselves. While the Debtor is confident it will prevail after a full trial on the merits of its claims, at the very least, the discovery to date demonstrates the claims are reasonable and were brought in good faith. For Movants to satisfy their burden to appoint a trustee based on the CTC/CPOA Litigation, they would have to prove that the claims are so fundamentally unmeritorious that it constitutes fraud, dishonesty, or
30
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page36 of 43
mismanagement for the debtor to have pursued them. The discovery revealed to date demonstrates Movants could never satisfy that burden.11 In fact, since the claims alleged in the CTC/CPOA Litigation are supportable by evidence already produced by the CTC/CPOA Litigation Defendants themselves, and since the lawsuit is a valuable asset of the Debtors estate, it was not only reasonable, but an exercise of sound management for the Debtor to have pursued the claims. E. 90. Movants have not Asserted Any Post-Petition Misconduct As discussed more fully below, the Debtor has taken steps to restore confidence in
management (despite a plethora of false claims repeatedly asserted) and Movants have not and cannot assert any improprieties since the Petition Date. III. APPOINTMENT OF A TRUSTEE IS NOT IN THE INTERESTS OF CREDITORS UNDER SECTION 1104(a)(2) 91. Movants rely on the perceived acrimony between Wilhelm and creditors to
argue that appointment of a trustee is in the best interests of creditors under 1104(a)(2). Motion 41-43. However, no evidence has been asserted, much less established, that shows no reasonable progress towards reorganization is possible because of such acrimony. Rather, the Debtor is more than capable and perfectly situated to oversee the reorganization given its interest and experience in the Debtors business and goals that are entirely consistent with those of all creditors.12
Although the defendants in the CTC/CPOA Lawsuit have filed three motions to dismiss, those motions have been denied in their entirety, and not a single claim has been knocked out on any ground. The failure of these motions to dismiss further demonstrates that it is reasonable for the Debtor to pursue the claims in the CTC/CPOA Lawsuit. As a result of the pending litigation, both the Member Litigation and the CTC/CPOA Litigation, the Debtor believes that the Members will ultimately not be creditors of the Debtor after the Debtor prevails in both cases for the reasons described above. Thus, Movants may not even be affected parties entitled to bring the Motion.
12
11
31
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page37 of 43
92.
Section 1104(a)(2) provides that the Court shall order the appointment of a
Trustee . . . (b) if the appointment is in the interests of creditors, any equity security holders, and other interests in the estate, . . . . When considering whether to the appointment of a Trustee is in the interests of the foregoing groups courts consider four factors: (i) the trustworthiness of the debtor; (ii) the debtor in possessions past and present performance and prospects for the debtors rehabilitation; (iii) the confidence-or lack thereof-of the business community and of creditors in present management; and (iv) the benefits derived by the appointment of a trustee, balanced against the costs of appointment. In re Colorado Ute Elec. Assn. Inc., 120 B.R. 164, 176 (Bankr. D. Colo. 1990) quoting In re Ionosphere Clubs, Inc. (Eastern Airlines,) 113 B.R. 164, 167 (Bankr. E.D.N.Y. 1989. When evaluating these four factors, courts give the most weight to the second and fourth factors. Under the second factor, courts look to the overall management experience and ability to rehabilitate the debtor. Id. A. 93. The Debtor has Engaged Seasoned Professionals to Oversee the Reorganization. Unlike the Colorado-Ute case relied upon by the Movants, the Debtors
management has years of experience in the critical elements that will be necessary to rehabilitate the Debtor, including, most importantly, golf course management and operation. In ColoradoUte, the company was controlled by very inexperienced management who was relatively new to a company that had sustained massive losses (over $125,000,000 in the prior two years) and had over a billion dollars of debt. The new chairman of the Colorado-Ute board had a high school education and his business experience involved owning and operating a trucking business and a shopping mall. 94. By contrast, Wilhelm has done everything he can to foster the successful
reorganization of the Debtor. Wilhelm has pursued claims of the Debtor in the CTC/CPOA 32
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page38 of 43
Litigation, which, as discussed above, is a valuable asset of the estate and not a contrived litigation as claimed by Movants in their Motion. See Motion at 36. Additionally, the Debtor has brought in professionals, including Daniel L. Fitchett, Jr. as Chief Executive Officer (CEO) of the Debtor; Alfred Siegel as CRO, recently approved by this Court; the accounting firm of Price Waterhouse Coopers, also approved by this Court; a real estate broker/investment advisor, GA Keehn Realty Advisors, LLC, also approved by this Court; and Foley & Lardner, LLP as and Sender & Wasserman LLP as bankruptcy counsel, the former conditionally approved by this Court. The oversight for this Debtor is beyond reproach. There is simply no ongoing evidence to support the need for a Trustee. Moreover, no one has more reason to support the independence and a successful reorganization than Wilhelm given he also asserts a claim as a major secured creditor in the case. B. 95. The Perceived Acrimony Among Wilhelm and Certain Club Members Does Not Warrant Appointment of a Trustee. The Movants principal argument for the appointment of a Trustee under Section
1104(a)(2) is premised on their assertion that the level of acrimony between the Club Members and Mr. Wilhelm is at such an extreme level that there will be no revenues and the Club will cease to exist. (Docket No. 235, 42). This statement is inaccurate and not supported by the facts. First, the Cordillera Club continues to have 160 active paying members (the Existing Members). The Existing Members represent approximately 25% of the total number of members of the Cordillera Club. While certain of the Existing Members are constantly alleged to be members of the plaintiff class in the Member Litigation case, the evidence will show that they are either unwilling or unwitting members of the Class who thought that their continuing payment of dues and membership in the Club would exclude them from the Class. In addition, to the apparent confidence of the Existing Members, the Debtor continues to maintain the
33
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page39 of 43
confidence of Alpine Bank, the holder of an approximately $14,000,000 alleged first deed of trust and security interest in the Debtors assets. The Court has already approved interim debtorin-possession financing from Alpine Bank. The Debtor continues to build bridges toward reorganization in the case. The case law is replete with courts finding that mere acrimony alone is not grounds for the appointment of a Trustee. See In re Sundale, Ltd., 400 B.R. 890, 909 (Bankr. S.D. Florida 2009); In re G-I Holdings, Inc., 385 F.3d 313, 321 (3rd Cir. 2004); In re Crescent Beach Inn, Inc., 22 B.R. 155, 160 (Bankr. D. Me. 1982). 96. The Debtor has already begun the process of formulating a Plan of Reorganization
with the assistance of its management and professional team. To disrupt this process at the very beginning of this case will be costly not only in terms of money, but also will delay the eventual reorganization of the Debtor. The Debtor understands the need to move expeditiously in this case and intends to file its Plan within the exclusivity period. The total secured debt in this case is approximately $21,500,000, including an approximately $7,500,000 Note allegedly secured by a second deed of trust in favor of Wilhelm. There is no dispute that Wilhelm actually provided this money to the Debtor. There is a dispute raised by the Movants regarding the nature and extent of this claim. This dispute does not have to be resolved at this time. What should be noted is that the Debtor has substantial equity in the five golf courses that form its principal assets. A recent appraisal of the Debtor five golf courses valued the real property at the Cordillera Club at $33,000,000, exclusive of its substantial other assets. Contrary to the Movants assertion that there can be no feasible Plan of Reorganization in this case, the Debtor can pose numerous scenarios that would lead to a confirmed plan. There are a limited number of comparable clubs with membership opportunities in the Vail Valley. The Debtor asserts there are many members who are interested in re-joining the Cordillera Club if the vocal, disgruntled members ultimately
34
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page40 of 43
decide that it is in their interest to leave the Cordillera Club notwithstanding there ownership of multi-million dollars homes adjacent to the golf courses. 97. Since the Movants have made the issue of acrimony between Wilhelm as the
keystone of their Section 1104(a)(2) argument, the Debtor contends that the following quote from In re Sundale is particularly instructive. Neither loss of confidence, however reasonable, or acrimony, however bitter, necessarily results in appointment of a trustee. [T]here is no per se rule by which mere conflicts or acrimony between debtor and creditor mandate the appointment of a trustee. In re Marvel Entmt Group, 140 F.3d at 473. Or, as the Marvel court also noted a district court may find cause to appoint a trustee for acrimony only on a case-by-case basis, when the inherent conflicts extend beyond the healthy conflicts that always exist between debtor and creditor or, as is found in, when the parties begin working at cross-purposes. 140 F.3d at 472473. The mere existence of concerns or conflicts are not necessarily enough. Thus, for example, In re GI Holdings, Inc., the Third Circuit noted in dicta that while [t]here is unquestionably considerable acrimony between the debtor and the asbestos claimants ... some of the most contentious disputes will presumably be addressed in other pending litigation. 385 F.3d at 321. The court further noted that it did not appear the bankruptcy court had abused its discretion in determining that, notwithstanding such acrimony the debtor in possession would be able to discharge its fiduciary obligations with regard to other matters. Id. In re Sundale, Ltd., 400 B.R. at 909 (footnotes omitted). C. 98. The Debtor Will Be Able To Confirm A Plan Even If Movants Continue To Be Part of the Problem Rather Than The Solution Moreover, the acrimony complained of is beginning to dissipate. Each day the
Debtor is contacted by current and former members interested in working toward a consensual resolution rather than funding ongoing litigation. The evidence will establish that the acrimony is most acute with the Movants and less pervasive among other former members, and even less pervasive with the Existing Members of the Cordillera Club. If some ongoing disputes between 35
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page41 of 43
constituents were grounds for a trustee, there would be one in every bankruptcy case. Movants simply have not, and cannot show that the acrimony will prevent the Debtor from confirming a plan of reorganization in this case. The Debtor is confident it will have an impaired consenting class, and that it will demonstrate a fair and reasonable reorganization. The possibility that the plan confirmation process may involve a cram down proceeding is not grounds for a trustee but simply the reality of a chapter 11 bankruptcy proceeding. 99. Movants appear to have pre-judged a Plan not yet on file by noting that they do
not believe the Debtor can make meaningful progress towards reorganization. Movants argue that because of deep-rooted animosities between the Debtor and Movants the only hope for this case is an independent trustee. Even if the Court were to take this argument at face value, it is irrelevant at this stage of the proceeding. The fact that this case may be headed for a contested plan confirmation hearing is hardly reason for appointment of a trustee. Many debtors plans of reorganization are confirmed after contested hearings. The Debtor will be prepared, if necessary, for a trial at plan confirmation and the same has no bearing on the need for a trustee. Even the Movants are not so bold as to affirmatively state that they will refuse to vote for any plan proposed by the Debtor while Mr. Wilhelm is involved. The Debtor submits that the alleged acrimony is over-played by Movants, and does not justify the extraordinary remedy of a trustee in the first months of the case. IV. THE MOTION IS PREMATURE WHILE THE DEBTORS EXCLUSIVITY PERIOD IS PENDING 100. Multiple courts hold that a motion to appoint a trustee filed during the exclusivity
period is premature. See In re Fisher & Son, Inc., 70 B.R. 7, 9 (Bankr. S.D. Ohio 1986); In re Allsun Juices, Inc., 34 B.R. 162, 164 (Bankr. M.D. Fla. 1983). The court in In re Fisher & Son, Inc., 70 B.R. 7, 9 (Bankr. S.D. Ohio 1986), denied a motion to appoint a trustee as premature 36
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page42 of 43
where [t]he 120-day exclusive period within which only the debtor may file a plan ha[d] not yet expired and the court believed that the debtor deserved an opportunity to demonstrate its ability to continue its management of the reorganization. The court noted that the [c]reditors [we]re active in th[e] case and should be able to force maximization of the value of the debtors assets.13 The court added that the debtor was better able to accomplish this than a third party unacquainted with the attributes of the debtors business. Id. Similarly, the court in In re Allsun Juices, Inc., 34 B.R. 162, 164 (Bankr. M.D. Fla. 1983) held that the Motion for Appointment of a Trustee [wa]s premature where it would depriv[e] the Debtor of its right to the 120 days exclusivity period. In re Allsun Juices, Inc., 34 B.R. 162, 164 (Bankr. M.D. Fla. 1983). The court explained that if creditors desire to file a Plan, they certainly are entitled to do so after the expiration of the exclusivity period and they do not need a trustee for that purpose. Id. 101. Notwithstanding the courts finding in In re Colorado-UTE Electric Assn, 120
B.R. 164, 175 (Bankr. D. Colo. 1990), that if the facts and circumstances warrant the appointment of a trustee, it is not appropriate to wait to file the motion until the termination of the exclusive period, the Court should not appoint a trustee here where, as described above, the Debtor is better suited to maximize the Debtors assets and has made clear progress towards a successful business reorganization. /// ///
This case presents an interesting dilemma in that the Class Representatives and Class Members dominate (4-3) the OCC in this case. While an OCC normally seeks to force maximization of value, this class-controlled OCC seeks the opposite a sale to unnamed members at a discount.
13
37
4828-9438-5936.8
Entered:08/07/12 16:34:01 Page43 of 43
CONCLUSION 102. Appointment of a Chapter 11 trustee is an extraordinary remedy and Movants
have an extremely high burden in establishing clear and convincing evidence that such a remedy is justified. For all of the reasons described above, Movants have not, and cannot, meet this high burden and the Motion must be denied. Dated: Denver, Colorado August 7, 2012 SENDER & WASSERMAN, P.C. /s/ Harvey Sender SENDER & WASSERMAN, P.C. Harvey Sender (CO No. 7546) 1660 Lincoln Street, Sutie 2200 Denver, CO 80264 Telephone: 303-296-1999 Facsimile: 303-296-7600 Email: sender@sendwass.com Counsel for Debtor and Debtor-in-Possession -andChristopher Celentino (CA No. 131688) Mikel Bistrow (CA No. 102978) Dawn A. Messick (CA No. 236941) Admitted Pro Hac Vice 402 West Broadway, Suite 2100 San Diego, California 92101 Telephone: 619-234-6655 Facsimile: 619-234-3510 Email: ccelentino@foley.com Email: mbistrow@foley.com Email: dmessick@foley.com Proposed Counsel for Debtor and Debtorin-Possession
38
4828-9438-5936.8

10000001520

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

10000001520

Uploaded by

Copyright:

Available Formats

Case:12-24882-ABC Doc#:343 Filed:08/07/12

Entered:08/07/12 16:34:01 Page1 of 43

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF COLORADO

In re Case No. 12-24882 ABC

Case:12-24882-ABC Doc#:343 Filed:08/07/12

Entered:08/07/12 16:34:01 Page2 of 43

IT IS NOT MISMANAGEMENT TO DEFEND THE MEMBER LITIGATION........................................................................................................... 25 i

Case:12-24882-ABC Doc#:343 Filed:08/07/12

Entered:08/07/12 16:34:01 Page3 of 43

Case:12-24882-ABC Doc#:343 Filed:08/07/12

Entered:08/07/12 16:34:01 Page4 of 43

Case:12-24882-ABC Doc#:343 Filed:08/07/12

Entered:08/07/12 16:34:01 Page5 of 43

Case:12-24882-ABC Doc#:343 Filed:08/07/12

Entered:08/07/12 16:34:01 Page6 of 43

Case:12-24882-ABC Doc#:343 Filed:08/07/12

Entered:08/07/12 16:34:01 Page7 of 43

Case:12-24882-ABC Doc#:343 Filed:08/07/12

Entered:08/07/12 16:34:01 Page8 of 43

See Footnote 2, page 1, above.

Case:12-24882-ABC Doc#:343 Filed:08/07/12

Entered:08/07/12 16:34:01 Page9 of 43

Case:12-24882-ABC Doc#:343 Filed:08/07/12

Entered:08/07/12 16:34:01 Page10 of 43

Case:12-24882-ABC Doc#:343 Filed:08/07/12

Entered:08/07/12 16:34:01 Page11 of 43

based upon designated categories of Club Memberships.

Case:12-24882-ABC Doc#:343 Filed:08/07/12

Entered:08/07/12 16:34:01 Page12 of 43

Case:12-24882-ABC Doc#:343 Filed:08/07/12

Entered:08/07/12 16:34:01 Page13 of 43

Case:12-24882-ABC Doc#:343 Filed:08/07/12

Entered:08/07/12 16:34:01 Page14 of 43

Case:12-24882-ABC Doc#:343 Filed:08/07/12

Entered:08/07/12 16:34:01 Page15 of 43

Case:12-24882-ABC Doc#:343 Filed:08/07/12

Entered:08/07/12 16:34:01 Page16 of 43

Case:12-24882-ABC Doc#:343 Filed:08/07/12

Entered:08/07/12 16:34:01 Page17 of 43

Case:12-24882-ABC Doc#:343 Filed:08/07/12

Entered:08/07/12 16:34:01 Page18 of 43

Case:12-24882-ABC Doc#:343 Filed:08/07/12

Entered:08/07/12 16:34:01 Page19 of 43

Case:12-24882-ABC Doc#:343 Filed:08/07/12

Entered:08/07/12 16:34:01 Page20 of 43

Case:12-24882-ABC Doc#:343 Filed:08/07/12

Entered:08/07/12 16:34:01 Page21 of 43

Case:12-24882-ABC Doc#:343 Filed:08/07/12

Entered:08/07/12 16:34:01 Page22 of 43

See Footnote at page 2.

Case:12-24882-ABC Doc#:343 Filed:08/07/12

Entered:08/07/12 16:34:01 Page23 of 43

Case:12-24882-ABC Doc#:343 Filed:08/07/12

Entered:08/07/12 16:34:01 Page24 of 43

Case:12-24882-ABC Doc#:343 Filed:08/07/12

Entered:08/07/12 16:34:01 Page25 of 43

In support of their argument to establish cause, Movants raise issues already

Case:12-24882-ABC Doc#:343 Filed:08/07/12

Entered:08/07/12 16:34:01 Page26 of 43

Case:12-24882-ABC Doc#:343 Filed:08/07/12

Entered:08/07/12 16:34:01 Page27 of 43

Case:12-24882-ABC Doc#:343 Filed:08/07/12

Entered:08/07/12 16:34:01 Page28 of 43