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FOX ROTHSCHILD LLP Yann Geron Kathleen Aiello 100 Park Avenue, 15th Floor New York, New

York 10017 (212) 878-7900 Counsel to Chapter 7 Trustee of the Estate of Thelen LLP

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK --------------------------------------------------------x In re : : THELEN LLP, : : Debtor. : --------------------------------------------------------x

Return Date June 29, 2010, at 10:00 a.m. Chapter 7 Case No. 09-15631 (ALG)

TRUSTEES OBJECTION TO APPLICATION OF IRON MOUNTAIN INFORMATION MANAGEMENT, INC. (A) FOR IMMEDIATE PAYMENT OF ADMINISTRATIVE EXPENSE; AND (B) FOR ORDER REQUIRING TRUSTEE TO REMOVE RECORDS FROM STORAGE OR PAY FOR SECURE DISPOSITION OF RECORDS TO THE HONORABLE ALLAN L. GROPPER, UNITED STATES BANKRUPTCY JUDGE: Yann Geron (the Trustee), the chapter 7 trustee of the estate of Thelen LLP, the above-captioned debtor (the Debtor or Thelen), by his attorneys, Fox Rothschild LLP, as and for his objection and memorandum of law (the Objection) in opposition to the application (the Application) of Iron Mountain Information Management Inc. (Iron Mountain) (A) for immediate payment of administrative expense; and (B) for order requiring Trustee to remove records from storage or pay for secure disposition of records, respectfully sets forth and represents as follows: PRELIMINARY STATEMENT 1. As detailed below, Trustee opposes Iron Mountains application for the

allowance of an administrative-priority claim for storage and destruction of former Thelen client

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files because Iron Mountain has not conferred post-petition benefit on the Debtors estate warranting such administrative priority treatment under Section 503(b) of the Bankruptcy Code. Furthermore, Iron Mountains recovery from proceeds of Citibanks collateral under an extant cash collateral stipulation and order is limited to those few files or services which directly provided a post-petition benefit to the Debtors estate. Finally, as further detailed below, Iron Mountain has provided no basis to compel the Trustee to remove the clients files from storage at the expense of the Debtors estate and its creditors and is premature in making this application when its claim is presently unliquidated and highly speculative. BACKGROUND 2. On September 18, 2009 (the Petition Date), the Debtor filed the above-

captioned case under chapter 7 of Title 11 of the United States Code (the Bankruptcy Code). Yann Geron was subsequently appointed as interim chapter 7 trustee of the Debtors estate. Mr. Geron has since qualified and is currently serving as permanent Trustee herein. 3. Prior to the Petition Date, the Debtor was a limited liability partnership,

operating as an international law firm with approximately 600 attorneys. In October 2008, the Debtor formally voted to dissolve the partnership and shortly thereafter ceased its operations as a law firm. Thereafter the Debtor began its wind-down process, which was coordinated by a committee designated to dissolve the partnership (the Dissolution Committee). Upon

information and belief, while in the wind-down stage, the Debtors largest lender ceased winddown financing, and the Debtor filed the instant bankruptcy proceeding. 4. The files at issue in Iron Mountains Application are principally comprised

of files related to specific client matters generated while Thelen was operating, and consist of client documents and legal work product created by the attorneys who formerly worked at

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Thelen. Notably, the files located in Debtors off-site storage, including Iron Mountain, are not the books and records relating directly to the operations of the Debtor. Those books and records were generally kept separately by Thelen, in electronic and paper form, on the Debtors premises. The Trustee has physical possession of the Debtors books and records. 5. After the Debtor ceased operating as a law firm, and prior to the Petition

Date, the Dissolution Committee initiated a process to allow former clients and attorneys to gain possession of their client files from the various off-site storage facilities. Citibank, the Debtors primary secured creditor, allowed the Debtor to use certain proceeds of Citibanks collateral to continue to store the client records pending disposition of those files. In implementing this process, the Thelen staff sought to collect payments directly from the clients for transmittal to the respective storage companies on account of the retrieval and delivery of those respective client files. It appears that this process was in its very initial stages at the time of the filing of the Debtors bankruptcy petition, and thus, most of the Thelen former client files were still in off-site storage facilities as of the Trustees appointment. 6. Thus, upon his appointment, the Debtor still had several hundred thousand

boxes of client files in nearly a dozen storage facilities throughout the country as of the Petition Date. The Trustee was faced with the same conundrum about Thelens former client files which the Debtors Dissolution Committee had started to address prior to the filing. Notably, the Trustee was aware that, although the files at issue could well be viewed as not being property of the Debtors estate, the issue was unclear, and client confidences were implicated in this process. The Trustee determined that stream-lined abandonment under Section 554, by service of a plain notice of abandonment, would have been confusing and disruptive to former clients, and could have given rise to significant claims against numerous parties, including former Thelen

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attorneys, the warehouses and other parties. In any event, Trustee recognized that such a plain notice of abandonment would also have engendered numerous objections, and would have engendered significant litigation among various third parties. Finally, the Trustee also

recognized that the Debtors records were in the Trustees possession and control, and therefore, that the Trustees estate professionals had access to the electronic databases necessary to allow the matching of clients to their records and the applicable warehouses. 7. Therefore, on November 20, 2009, the Trustee sought an order (the

Client File Motion) approving a protocol that would provide broad notice to the Debtors client and attorney constituents of the Trustees intent to abandon the client files under Section 554 of the Bankruptcy Code, and provide former clients and Thelen attorneys with a 90-day period during which they would be able to submit requests to retrieve their files. Several parties objected to the Trustees Client File Motion, including Iron Mountain. 8. On December 15, 2009, the Court conducted a hearing on the Client File

Motion (the File Protocol Hearing). A copy of the transcript of the File Protocol Hearing is annexed hereto as Exhibit A. At that hearing, the Court heard and considered arguments from numerous parties, including Iron Mountain, and received comments from Citibank. Further, the Court directly recognized that the former Thelen attorneys should receive direct notice of the Client File Protocol Order, so that they would be afforded a direct opportunity discharge their own ethical or legal duties to their respective clients. 9. On December 23, 2009, the Court entered an order authorizing the Trustee

to implement the proposed client file retrieval protocol (the Client File Protocol Order) [DE 60]. A copy of the Client File Protocol Order is annexed hereto as Exhibit B. In general, the Client File Protocol Order provides that former Thelen clients and attorneys would receive notice

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of the intent to dispose, as well as a request form, which could be submitted to the Trustee to retrieve their files from the storage company, at the expense of the respective clients and attorneys, which included any pre- and post-petition arrearages for storage of the relevant client files, among other costs. 10. Notably, none of the warehouses, including Iron Mountain, appealed the

Client File Protocol Order, and that order is now final and unappealable. 11. On January 7, 2010, the Trustee served notice on approximately 17,000 to

20,000 former clients and attorneys of Thelen, giving notice of the 90-day period within which to submit requests to the Trustee requisitioning their files (the Submission Period). A copy of the Trustees notice, along with the affidavit of service of such notice, is annexed hereto as Exhibit C. Also on January 7, 2010, the Trustee also served a special notice upon all known former

Thelen attorneys. 1 A copy of this special attorney notice, along with along with the affidavit of service of such notice, is annexed hereto as Exhibit D. 12. During the Submission Period, the Trustee received in excess of 1,000

requests2, many of which included requests for more than one client. Due to the large volume of requests received, the Trustee enlisted the assistance of Omni Management Group, LLC (the Trustees estate professional) to process the requests received using the Debtors client file database.

The special notice to attorneys was served by the Trustee in response to a recommendation from the Court at the File Protocol Hearing that the attorneys cooperate with the implementation of the Client File Protocol Order and incorporate a reservation of the Trustees rights. See Exhibit A at p. 44.
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At the December 15, 2009 hearing, the Trustee made no representations as to the number of requests he anticipated to receive and fully acknowledged that because this process had been initiated by the Dissolution Committee prepetition, the remaining files could be difficult to match with the respective clients or attorneys, since the easier or bulk matches had been completed pre-petition. Iron Mountain now complains that the Client File Protocol did not significantly reduce the number of client files remaining in its warehouses. Any reduction was a direct function of responses received by the Trustee, the number of responses was not assured by the Trustee, and any files removed is an improvement in Iron Mountains position from the Petition Date.

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13.

Not surprisingly given the number of parties receiving notices, a

significant portion of client file requests were delivered to the Trustee on or immediately before the last day of the Submission Period, April 7, 2010. Faced with an avalanche of last-minute file requests, on April 8, 2010, the day after the end of the Submission Period, the Trustee sent a letter to the storage company advising them that the estate professionals were still processing the newly-received and timely avalanche of requests, and suggested that the storage companies not commence the destruction of those files until the timely requests were fulfilled. 14. The Trustees implementation of the Client File Protocol Order has been a

grueling exercise. The sheer volume of requests and files at issue has strained estate resources. Throughout the Submission Period and to the present date, the Trustee has processed more than 1,000 requests received from the clients and attorneys, relayed detailed information about the requested files to the storage companies, processed countless invoices, collected payment from the requesting parties (which often required multiple attempts for collection), and forwarded those funds to the storage companies. The implementation of the Client File Protocol has required hundreds of hours of time by estate professionals. 15. On May 19, 2010, prior to Iron Mountain filing the instant motion, the

Trustee issued payment to Iron Mountain in the amount of $17,731.55. The Trustee is currently in the process of performing a second reconciliation of estate records of processed requests with those of Iron Mountain and will be issuing a second payment of approximately $20,000 shortly. These funds were collected by the Trustee under the Client File Protocol on account of client files which were recovered by former Thelen clients and attorneys from Iron Mountain storage facilities. Absent the Trustees efforts, those files would still be in storage at Iron Mountain, Iron

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Mountain would not have been paid these amounts, and Iron Mountain would have to dispose of those files at its own expense and exposure. 16. Presently, the Trustee is concluding implementation of Client File

Protocol Order, including finalizing the processing of former client and attorney requests for files, and identifying and recovering any remaining files necessary for the Trustees collection of estate accounts receivable (for which the estate will pay storage and retrieval costs exactly at the same rate as the former clients). These final steps are nearly concluded, and the Trustee is making every effort to conclude them expeditiously. 17. The next step under the Client file Protocol Order will be the destruction

and disposal of the remaining (unclaimed) client files. The Trustee has communicated with the storage companies about secure and cost efficient destruction methods, in an effort to minimize the costs to the storage facilities, much in the same vein as he has implemented the entire Client File Protocol. At no time has the Trustee proposed any direct estate payment of any of the warehouses post-petition expenses, including storage or destruction of client files. All rights in this regard have been reserved by all parties. 18. Iron Mountain has elected to file the instant motion before the Client File

Protocol Order has been fully implemented through the destruction of the former client files. Thus, even if a claim for Iron Mountain were warranted, the costs Iron Mountain alleges are speculative and unliquidated. Regardless, as detailed below, Iron Mountains costs are not derived from a post-petition benefit conferred on the Debtors estate.

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OBJECTION a. Iron Mountain Is Not Entitled To An Administrative Expense Priority Claim 19. Iron Mountain claims that is it entitled to immediate payment of an

administrative expense priority claim under Section 503(b) of the Bankruptcy Code for its continued storage of the client files and their eventual destruction. 20. Section 503(b) provides:

After notice and a hearing, there shall be allowed administrative expensesincluding: (1)(A) the actual, necessary costs and expenses of preserving the estate, including wages, salaries or commissions for services rendered after the commencement of the case. 11 U.S.C. 503(b)(1)(A). 21. To qualify for payment as an administrative expense, the claimant has the

burden of proving that the debt (1) arose from a transaction with the debtor-in-possession as opposed to the preceding entity (or, alternatively, that the claimant gave consideration to the debtor-in-possession); and (2) directly and substantially benefitted the estate. In re Chateaugay Corp., 177 B.R. 176, 182 (Bankr. S.D.N.Y. 1995); citing test from In re Mammoth Mart, Inc., 536 F.2d 950 (1st Cir. 1976). Generally, the determination of whether a claim qualifies for administrative priority treatment is narrowly construed because [t]o give priority to a claimant not clearly entitled thereto is not only inconsistent with the policy of equality of distribution; it dilutes the value of priority for those creditors Congress intended to prefer. In re Mammoth Mart, 536 F.2d at 953. i. The Trustee has Not Induced Iron Mountains Performance

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22.

The first part of the two-part test in Mammoth Mart may be satisfied upon

a showing that the debtor-in-possession induces the creditor to perform postpetition. In re Patient Education Media, Inc., 221 B.R. 97, 101 (Bankr. S.D.N.Y. 1998). 23. Clearly, the Trustee has not directly engaged Iron Mountain to store any of

the former client files. That relationship pre-dates the Trustees appointment. Iron Mountain argues that by obtaining the Client File Protocol Order, the Trustee affirmatively chose to keep the files at Iron Mountain and further induced Iron Mountain to continue storing the client files. This is false. The Client File Protocol Order was sought by the Trustee, and approved by this Court on notice and over the objection of Iron Mountain, in order to address myriad issues relating to the client files for the benefit of former clients, former Thelen attorneys, and the warehouses, including Iron Mountain. It is clear from the more than 1,000 requests received by the Trustee that the Client File Protocol Order was the appropriate and efficient response to those concerns, and indeed, that the Client File Protocol Order directly benefitted Iron Mountain and each of the other warehouses. 24. Nevertheless, Iron Mountain argues that the Trustee induced Iron

Mountains performance by retrieving client files from Iron Mountain. With the exception of a handful of files relating to estate accounts receivable (which are discussed further below), the only files that have been retrieved from Iron Mountain are those requested by former Thelen clients or attorneys, at their expense, under the Client File Protocol Order. Those files were not requisitioned by the Trustee or for the benefit of the estate, but rather were requested by Thelens former clients and partners pursuant to the Client File Protocol Order.

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25.

The Client File Protocol Order is final and unappealable, and the Trustee

has been implementing it for the benefit of Iron Mountain and the other parties who have a direct interest in the files at Iron Mountain. Iron Mountain is bound to implement the Client File Protocol Order, and Iron Mountains remonstrations about the Trustees inducement of Iron Mountain under that Order rings hollow, and in any are event rendered moot by Iron Mountains decision not to appeal that Order. 26. As purported evidence of the Trustees inducement of Iron Mountain to

store the records, Iron Mountain points to the Trustees letter of April 8, 2010, to the storage companies advising them that there were still outstanding numerous last-minute requests from the clients and attorneys that were being processed by Trustees professionals. Contrary to Iron Mountains charge, this letter is not an inducement or request to store, but rather, is a notice from the Trustee that the Client File Protocol Order, which binds the warehouses and the Trustee equally, was in the process of being implemented and that countless last-minute requests were still in process. The Trustees letter is not a contract with Iron Mountain, nor is it a promise to pay. It is a report on status and suggested course for complying with the Courts Order. ii. Iron Mountain Has Not Provided a Financial Benefit to the Debtors Estate Warranting an Administrative Priority Claim 27. Iron Mountain argues that it has met the second part of the test in

Mammoth Mart because Iron Mountain has provided a direct and substantial benefit to the estate. Iron Mountain cites no directly-applicable legal precedence in support of this proposition. Rather, Iron Mountain seeks to analogize the present situation with the facts of In re Patient Education Media, Inc., 221 B.R. 97 (Bankr. S.D.N.Y. 1998). In Patient Education, the Court determined that the claimant had provided a benefit to the estate by storing an asset of the estate

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on the claimants soundstage. Specifically, by storing its asset on the claimants soundstage, the debtor was attempting to maximize the future sale price of the estate asset. Id. 28. In contrast, in the present case, Iron Mountain is not storing assets which

will be sold by the Trustee in its warehouses. The Trustee cannot liquidate the stored files for the benefit of this estate and its creditors, and will derive no value from those files (with the exception of files relating to estate accounts receivable, for which the Trustee has and will pay all reasonable storage and transmittal fees). The files at issue are not assets of the estate whose post-petition preservation has or will benefit the estate at any point. Therefore, Iron Mountains reliance on Patient Education is misplaced. 29. Further, Iron Mountain argues that in maintaining the security and

confidentiality of the client files in its storage facilities, Iron Mountain has benefitted the Trustee from potential fines and lawsuits commenced by regulators or former Thelen clients and employees. There is no support for this proposition either. Indeed, Iron Mountains security protects a variety of parties other than the estate and the Trustee. Arguably, Iron Mountain is protecting the former clients and attorneys, who are paying for their requisitioned files, and thus, paying for Irons Mountains alleged security services. And Iron Mountains security has served to protect itself also from potential fines and lawsuits that may stem from disclosure of the client files. At no point in this chain are the Trustee and estate served directly. 30. In any event, even if Iron Mountain were deemed to be protecting the

Trustee and estate from potential fines and lawsuits, that protection service would at most be from potential claims, which are highly speculative, and would therefore not qualify as a benefit under the Mammoth Mart test. The mere potential for benefit to the estate does not satisfy the requirement of 503(b)(1) that the estate receive an actual benefit. In re Mainstream Access

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Inc., 134 B.R. 743, 750 (Bankr. S.D.N.Y. 1991); See also In re R.H. Macy & Co., Inc., 170 B.R. 69 (Bankr. S.D.N.Y. 1994) (holding that the potential to benefit from property is not benefit to estate); In re Kessler, 23 B.R. 722 (Bankr. S.D.N.Y. 1982) (claim with potential for value contingent upon other events not allowed as administrative expense); In re ICS Cybernetics, Inc., 111 B.R. 32 (Bankr. N.D.N.Y. 1989) (potential benefit to the estate provided by storage of equipment is not benefit to estate); In re Allen Care Centers, Inc., 175 B.R. 397, 399 (Bankr. D.Or. 1994) (protecting estate from potential tort liability is not a benefit to estate because potential benefit is insufficient). 31. The vast majority of the cases cited by Iron Mountain in support of its

request for Section 503(b) treatment are Chapter 11 cases, which recognize that the main purpose behind the allowance of an administrative claim is to facilitate the efforts of the trustee or debtor in possession to rehabilitate the business for the benefit of all the estates creditors. See, e.g., Trustees of the Amalgamated Insurance Fund v. McFarlins, Inc., 789 F.2d 98, 101 (2d Cir. 1986); In re Grand Union Co., 266 B.R. 621, 625 (Bankr. D.N.J. 2001); In re Great northern Forest Products, Inc., 135 B.R. 46, 59 (Bankr. W.D. Mich. 1991); In re United Trucking Service Inc., 851 F.2d 159, 161 (6th Cir. 1988). 32. The present case is not a chapter 11 case, and this distinction is important

to the Section 503(b) analysis because, in contrast with chapter 11, the chapter 7 Trustees mandate is to liquidate the Debtors business, not to rehabilitate its operations. The Trustee is not operating the Debtor. The files at issue are not being used in the operations of the Debtors business, will not be used in any future operations of the Debtors business, and will not be necessary for the sale of the Debtors business. Iron Mountain is in no way facilitating the efforts of the Trustee to rehabilitate the business operations of Thelen for the benefit of its

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creditors. In point of fact, the Client File Protocol process has served only to benefit former Thelen clients, former Thelen attorneys and the storage companies. The estate is not gaining anything, let alone value or resources, from the client file storage and destruction beyond the amounts which the clients and attorneys are paying and which are being delivered to the warehouses. 33. In sum, the process of returning the client files is providing a benefit

directly to Iron Mountain by allowing it the opportunity to collect outstanding storage costs from former Thelen clients and attorneys to offset accruing storage costs. Moreover, the broad notice given by Trustee in connection with the Client File Protocol Order may serve to provide Iron Mountain with some measure of protection against claims arising from Iron Mountains upcoming disposition of files. In either instance, there is no cognizable post-petition

administrative priority value being bestowed upon the estate by Iron Mountain. iii. The Trustees Abandonment Power Under the Bankruptcy Code Supersedes Applicable State Law 34. Iron Mountain argues that 28 U.S.C. 959(b) applies to the eventual

destruction of the client files by requiring the Trustee to manage the files stored at Iron Mountain in accordance with state law. Section 959(b) provides that [e]xcept as provided in section 1166 of title 11, a trustee, receiver or manager appointed in any case pending in any court of the United States, including a debtor in possession, shall manage and operate the property in his possession as such trustee, receiver or manager according to the requirements of the valid laws of the State in which such property is situated, in the same manner that the owner or possessor thereof would be bound to do if in possession thereof. 28 U.S.C. 959(b). 35. However, as Iron Mountain points out, 959(b) does not directly apply

to an abandonment under 554(a) of the Bankruptcy code-and therefore does not de-limit the 13
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precise conditions on an abandonment.

Midlantic Natl Bank v. New Jersey Dept. of

Environmental Protection, 474 U.S. 494, 505 (1986). 36. In Midlantic, the Supreme Court reasoned that although Section 959(b)

does not apply directly when the Trustee is liquidating the business of the debtor, Section 959(b) demonstrates that Congress did not intend for the Bankruptcy Code to pre-empt all state laws that otherwise constrain the exercise of a trustees powers. Id. The Court also reasoned that [t]his exception to the abandonment power vested in the trustee by 554 is a narrow one. Id at 507. Specifically, the exception only applies when dealing with a regulation designed to protect the public health or safety from identified hazards. Id. In other words, the power to abandon is not to be fettered by laws or regulations not reasonably calculated to protect public health or safety from imminent and identifiable harm. In re Guterl Special Steel Corp., 315 B.R. 843, 858 (Bankr. W.D.Pa. 2004). Thus, in order to trump the Trustees abandonment powers, the harm must pose a threat to the health or safety of the public at large. In re Chateaugay Corp., 177 B.R. 176, 181 (Bankr. S.D.N.Y. 1995). If the harm to public health and safety is not imminent, Section 554 abandonment is permitted, even in violation of state law statutes designed to protect public health and safety. Id at 858-859. 37. Here, Iron Mountain has asserted, without any applicable precedent, that

the state laws requiring the proper destruction of files are state laws designed to protect public health and safety. Iron Mountain looks to environmental protection issues as analogous to the client file confidentiality at play in this case. In fact, the only case cited to by Iron Mountain to support its position is the Midlantic case, in which the court held that the Trustee could not abandon toxic waste in a way that would contravene environmental protection laws. Midlantic, 474 U.S. 494. See

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38.

Iron Mountain overreaches when it seeks to analogize this case to the

environmental cases. Generally, Iron Mountain must recognize that there is particularly strong public policy supporting environmental protection, see In re Old Carco LLC, 424 B.R. 633, 649 (Bankr. S.D.N.Y. 2010), but that this policy is utterly absent in the present case. 39. More specifically, individual client rights to privacy, which is the most

that could be argued to be at stake in the present case, do not rise to the level of a public health and safety issue. First, there are no direct state laws which require the Trustee, as chapter 7 liquidating trustee of a non-operating law firm, to ensure destruction of the records. Those laws, if applicable, would apply to the former Thelen attorneys, not the Trustee. 40. Second, even if such laws somehow did constrain the Trustees

abandonment rights, Iron Mountain cannot point to any imminent and identifiable harm to the public at large from the issues surrounding the storage and destruction of the former Thelen client files. Nor can Iron Mountain point to any actual imminent and identifiable harm at issue to any party, let alone the public at large. The eventual destruction of the client files has the potential to affect, at best, solely the limited group of former Thelen clients. Unlike the

environmental protection scenarios cited to by Iron Mountain, the destruction of the client files has no conceivable bearing on the public at large. Thus, Iron Mountain cannot find any support in its effort to trump the Trustees Section 554 abandonment powers by citing to public policy concerns. 41. Finally, Iron Mountain implies that its services benefitted the Trustee and

estate because the Trustee or estate have a general ethical duty to maintain and preserve the former client files. However, as previously noted in the Client File Motion, which was

incorporated by the Court in the Client File Protocol Order, which is now final and unappealable,

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any ethical obligation of Thelen ceased when Thelen stopped operating as a law firm. At least from that point on, the ethical duty to preserve client files rested solely with the former Thelen attorneys. The Trustee does not have the same obligation to comply with the ABA Model Rules as do the former Thelen attorneys. Any ethical duty owed to former Thelen clients to maintain and preserve their file is a duty directly owed by the Thelen attorneys themselves, and remains with them. That is precisely why those attorneys each received their special notice from the Trustee. See 11 above. Therefore, Iron Mountains argument in this regard also fails. b. Iron Mountain Is Only Entitled to A Carve-Out From Citibanks Cash Collateral To the Extent It Can Demonstrate it Has Provided a Direct Benefit to the Estate 42. Iron Mountain cites to and exhibits the amended terms of the Cash

Collateral Stipulation between Citibank and the Trustee to further support its administrativepriority claim. As the Court knows, Citibank is the estates only secured creditor, with a blanket lien on all of the Debtors assets, including all of its accounts receivable. Citibank and the Trustee entered into the Cash Collateral Stipulation in order to allow for the estates use of Citibanks collateral to liquidate estate assets, initially (at least until Citibanks lien is paid in full), for the benefit of Citibank. 43. The first version of the Cash Collateral Stipulation allowed a carve-out for Paragraph 3 of the Cash

reasonable costs of administering the Debtors estate generally.

Collateral Stipulation specifically allowed a carve-out of Citibanks collateral for any reasonable costs of administering the Debtors estate. Following the hearing on the Client File Protocol Order and the Cash Collateral Order, Paragraph 3 was amended at the Courts direction to include a footnote which states that the reasonable costs of administering the Debtors estate includes, any administrative-priority claims that may be allowed by the Court for records

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storage. See Cash Collateral Order, Paragraph 3, Footnote 2. This amendment was made with the direct participation of Iron Mountains counsel. 44. Therefore, pursuant to the express terms of the Cash Collateral Order, for

the same reasons detailed above, Iron Mountain must demonstrate that any expense to be charged against Citibanks cash collateral provided a benefit to the estate. Iron Mountain knows that this amendment to the Cash Collateral Stipulation was expressly requested by, and negotiated with, the warehouses, including Iron Mountain directly. Iron Mountain also knows that this provision was expressly intended to address the rights of the warehousemen to seek allowance from this Court of administrative-priority claims specifically for client files which were stored by the warehousemen and then used by the Trustee to collect accounts receivable (which are Citibanks collateral). Those files, by their very nature, would have a value to the estate, and therefore, their storage and retrieval would need to be paid by the estate. This CarveOut covers only a fraction of the overall number of files and associated costs detailed in Iron Mountains application. 45. More importantly, the Trustee has and will requisition and remove all files

from storage with Iron Mountain and other facilities which may be utilized by the Trustee in the liquidation of remaining estate accounts receivable. In each instance, the Trustee has or will pay for the storage and transmittal of those files from estate funds, which are Citibanks cash collateral, in accordance with the provision of the Cash Collateral Stipulation. Iron Mountains storage of any files other than those files is not at issue. And as to those specific files, the Trustee is already making full use of the Cash Collateral Stipulations carve-out provision, and Iron Mountain will gain the full benefit of its implementation, when the Trustee recovers the

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accounts receivable files he needs and pays for their storage and transmission. None of the other files at issue qualify for treatment under this provision. c. Iron Mountains Motion for Payment of an Administrative Expense Priority Claim is Pre-mature 46. Even if this Court were to find that Iron Mountain is entitled to an

administrative claim under Section 503(b) of the Bankruptcy Code, Iron Mountains application is premature. Put plainly, the facts underlying Iron Mountains claim are not even available yet. Iron Mountains claim is unliquidated and highly speculative. The storage charges at issue have not been fixed or reviewed. Nor are any of the costs associates with the destruction of the files, since the destruction has not even occurred yet. The purported dollar value to the estate, if any, from the storage and destruction of the files at issue is not liquidated. Citibanks lien has not yet been satisfied, and the Cash Collateral Stipulation contemplates payment for storage of files that specifically confer a benefit on the Debtors estate and its administration. 47. Furthermore, Iron Mountain fails to demonstrate a basis for the immediate

payment of its administrative claim, and indeed, there is no authority to warrant such preferential treatment for Iron Mountains claim to the detriment of other creditors. 48. For all these reasons, Iron Mountains application must be denied.

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RESERVATION OF RIGHTS 49. The Trustee reserves the right to amend this Objection upon the discovery

of additional facts, documents and evidence. WHEREFORE, the Trustee respectfully requests that Iron Mountains application be denied with prejudice, and that trustee be granted such other and further relief as is just. Dated: New York, New York June 24, 2010 FOX ROTHSCHILD LLP Counsel to Yann Geron, Chapter 7 Trustee of the Estate of Thelen LLP By: s/ Yann Geron Yann Geron Kathleen Aiello 100 Park Avenue, 15th Floor New York, New York 10017 (212) 878-7900

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THELEN, LLP,

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK -------------------------X IN RE: Chapter 7 Case No. 09-15631 (ALG) One Bowling Green New York, New York Debtor. December 15, 2009 10:15 a.m. --------------------------X TRANSCRIPT OF MOTIONS BEFORE THE HONORABLE ALLAN L. GROPPER UNITED STATES BANKRUPTCY JUDGE A P P E A R A N C E S: For the Trustee: Yann Heron, Esq., FOX ROTHSCHILD, LLP 100 Park Avenue, Suite 1500 New York, New York 10017 Kathleen Aiello, Esq., FOX ROTHSCHILD, LLP 100 Park Avenue, Suite 1500 New York, New York 10017 Nicole N. Santucci, Esq., FOX ROTHSCHILD, LLP 100 Park Avenue, Suite 1500 New York, New York 10017 (Continued)

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REGENCY REPORTING, INC. Certified Court Reporters & Videographers 425 Eagle Rock Avenue 575 Madison Avenue Roseland, NJ 07068 New York, NY 10022 www.regencyreporting.net 1-866-268-7866

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Information Management: Greg A. Friedman, Esq., COLE, SCHOTZ, MEISEL, FORMAN & LEONARD, P.A. 900 Third Avenue, 16th Floor New York, New York 10022 For Iron Mountain Information Management: Leslie S. Barr, Esq., WINDELS, MARX, LANE & MITTENDORF 156 West 56th Street New York, New York 10019 For Citibank: Andrew B. Eckstein, Esq., BLANK ROME, LLP 405 Lexington Avenue New York, New York 10174 TRUSTEE 33 Whitehall Street, 21st Floor New York, New York 10004 For the Trustee: Marylou Martin, Esq., OFFICE OF THE UNITED STATES A P P E A R A N C E S:

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(Proceedings commence at 10:15 a.m.) THE COURT: appearances? MR. GERON: Your Honor, my name is Yann Geron. My firm is Fox I'm All right. Thelen, LLP. May I have

the Chapter 7 trustee of this estate.

Rothschild, and we represent -- the firm represents the trustee. With me is Kathleen Aiello and Nicole Santucci.

Both are associates with my firm. MS. AIELLO: THE COURT: MS. MARTIN: Good morning, Your Honor. Good morning. Anyone else?

Marylou Martin representing the Office

of the United States Trustee. MR. ECKSTEIN: Andrew Eckstein, Your Honor, Blank

Rome, counsel for Citibank, NA. MR. BARR: Good morning, Your Honor. Leslie Barr,

Winders, Marx representing Iron Mountain Information Management. MR. MENDELSON: Good morning, Your Honor. Lee

Mendelson, Moritt, Hock, Hamroff & Horowitz on behalf of Millennium Storage and Central Moving. MR. FRIEDMAN: Good morning, Your Honor. Greg

Friedman on behalf of the Robert Lewis Group. MR. GERON: THE COURT: MR. GERON: May I proceed, Your Honor? Please. Your Honor, this is a hearing on seven

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different motions. We lined them up because they're

interrelated and the efficiency of having them all heard at the same time. Thelen as Your Honor knows was a bicoastal firm with about 600 attorneys. In October of 2008, the firm formerly

voted to dissolve, and it took about eleven months to find its way into bankruptcy. During those eleven months, Thelen's

dissolution committee collected accounts receivable, paid down the Citibank debt, and then ultimately in September voted to file the case into Chapter 7 and that's how we find our way here. The motions that are being -- that are for consideration for the Court are a motion to approve the trustee's use of cash collateral pursuant to a stipulation; a motion to establish a protocol for the return, transfer and destruction of files of former Thelen clients, a motion for authority to file under seal; certain retention agreements with the trustee's accounts receivable professionals; a motion to retain -- actually, two motions to retain account professional -- collections -- accounts receivable collection professionals and then two motions to retain professionals in connection with the administration and the wind down of Thelen's employment benefits. A quick word about notice because then I can talk about the objections and what we really have as contested

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matters. Summary notice was served on all parties and all

known creditors and all interested parties by the trustee in mailing. The notice summarizes the motions, provides

deadlines and most importantly expressly references a web page that I set up for this estate. page. It's an informational web

It really has links to each of the motions and the

exhibits of the motions and deadlines, those kinds of things. Separately, a detailed and complete set of the motions was served upon all the parties who served notices of appearance, all the storage companies, the U.S. Trustee, Citibank, debtor's counsel, chief counsel for the PBGC and the Department of Labor. Just by way of information, Your Honor, I'm advised by the website host that as of December 7th, '09; that, is a week ago, the website alone has received nearly 2,000 hits. So we're definitely getting the word out there in an efficient manner. To date, as of the date of this hearing, there are

two objections, one by Iron Mountain, we'll hear that in a moment. That is the largest storage facility for the records

of the debtor -- the records of the clients, the former clients of the debtor, and one by Millennium Storage. I'm pleased to report that the Millennium Storage, and I'll report about the details of that in a moment, the Millennium Storage objection has been resolved subject to the Court's consideration. So what is left is one objection to

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one aspect of one motion. If I may, I'd like to proceed with the motions very briefly, Your Honor. THE COURT: all the time we need. MR. GERON: THE COURT: Okay. So first -- well, you came before me very All right. Not so briefly. We'll take

briefly one other time, and I'm sure you won't be back too soon. So we can take all the time we need. MR. GERON: Thank you, Your Honor. I lined these up

because they're interrelated as I said.

The very first motion

is the motion to approve a cash collateral stipulation between the debtor and Citibank. The stipulation's function are to

fix and allow Citibank's lien and claim and then to set parameters for the trustee's use of cash collateral. I have done -- I have outlined in my motion the investigation that's been undertaken, I have an exhibit to the motion in which I outline all the documents that were reviewed in connection with the due diligence of the review of Citibank's motion -- Citibank's claim and lien. As a result of that review, I have concluded that Citibank's lien as of the date of the filing was, in fact, perfected, is unassailable as a perfected lien against most of the assets of the estate. The only assets that are

unencumbered are the avoidance actions of the estate.

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Honor. Honor. actions. MR. GERON: Well, certainly no preferences, Your well taken. THE COURT: It's not likely there are any avoidance so -THE COURT: MR. GERON: So --- I don't think -- I think the point is Citibank alleges that its claim is -THE COURT: MR. GERON: THE COURT: If any. If any. I'm sorry, of course.

Since the filing of the case was delayed

for how many months, if not years? MR. GERON: Eleven months in the dissolution process

I don't know about post -- post-insolvency events, but

I do -- because I don't know where solvency occurred, but I do know that certainly preferences are probably not an issue in this case. THE COURT: MR. GERON: Okay. Citibank alleges that its lien -- its

claim, the amount of its claim as of the date of the filing was roughly $6.8 million. THE COURT: Right. And that had been paid down

during this dissolution period by how much? MR. GERON: Almost in excess of $40 million, Your

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THE COURT: All right. So I just think the record

should be clear that I saw the carve out for avoidance actions and I was very glad to see that, but I just think the record should be clear as to what happened in the -- in the circumstances. MR. GERON: THE COURT: MR. GERON: Right. What it is it is. Correct, Your Honor. What the

stipulation does further contemplate that the cash that is being collected from accounts receivable which will be the first order of business is to collect these receivables. That

cash will be distributed first to pay for the collection of the accounts receivable. the calendar -THE COURT: MR. GERON: Right. -- are motions are related for on The motions that are later down in

commission -- contingency-fee basis for those professionals. Then to the estate professionals; what -- the mechanic that has been set up in the stipulation is that the trustee may reserve up to 125 percent of the amounts that's accrued for professionals as of month-end, and then the balance that is cash-collateral would be paid on a monthly basis to Citibank as adequate protection. The replacement liens that are being

granted to Citibank come in two flavors. For the costs that are being incurred in the

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collection of accounts receivable, in the collection of Citibank's collateral, the replacement lien is just simply on -- it's just simply shifting over into Citibank's collateral on a going-forward basis. The only time that Citibank gets to encumber the otherwise unencumbered assets is for efforts by the trustee to collect unencumbered assets; that is, the investigation, for example, of claims that might be avoidance claims. Those

efforts to the extent that cash collateral is used to pay for those efforts, then there would be a shifting lien onto those unencumbered assets but in every other respect -THE COURT: MR. GERON: If the assets are acquired. Is that --

If the assets are -- it would have to be

-- because we would then become cash -THE COURT: MR. GERON: THE COURT: MR. GERON: I'm aware of. Are you priming anyone? No. I -Let's make that clear. You seem to.

All right.

There are no other secured creditors that

There are some leases. Well, there are warehousemen. There are warehousemen -And we have one objection, and we have

THE COURT: MR. GERON: THE COURT: other warehousemen. MR. GERON: THE COURT:

Right. You're not priming their rights.

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MR. GERON: THE COURT: No, Your Honor. All right. Let's make that perfectly

clear because the papers certainly are not. MR. GERON: THE COURT: I did not mean to -Well, I'm sure you didn't draft these. And Citibank realizes

I'm sure they were drafted by Citibank.

you'd have to pay for the ware -- you'd have to pay the warehousemen. If you -To the extent that the value of the

MR. GERON: liens, Your Honor.

I think there was -- I think I share To the extent

credit here with Citibank to a certain extent.

where we're going to get to with the warehouse is the value of the materials that in their -THE COURT: Well, we only have a lien up to the value

of whatever they have, sure. MR. GERON: Precisely, and that's the reason why it's As Your Honor will

set up in the way that it is, Your Honor.

see, one warehouse we were able to settle with because what's in their possession is artwork, which has value to the estate. It will be liquidated, the payment will be made for the accrued costs. The place where we are more troubled and there

is more difficulty is where the records of the former clients really have no known value to the estate, and that is where the lien -- well, it's not being primed, it's also not being paid because at least at this point there is no contemplation

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of value in those records. THE COURT: propose to do? MR. GERON: THE COURT: MR. GERON: THE COURT: Well, if I may, may I just -We're getting ahead -Yeah -Let's put that aside. I know -- I guess Well, we'll have to -- well, what do you

that's why Mr. Barr is here. MR. GERON: That's exactly right, Your Honor, and I

think that comes under the protocol -- if I could set the stage for the protocol in a moment. THE COURT: MR. GERON: THE COURT: MR. GERON: Okay. We'll see how that plays itself out. All right. Okay.

So the motion -- the cash collateral

motion drew one objection, and that is from the warehouse that -- in which the art was stored and that that is the objection that has, in fact, been settled, Your Honor. THE COURT: MR. GERON: All right. And how was that settled?

What we have proposed to do is the

objecting party in this has a claim for pre-petition and postpetition. art. The post-petition will be paid upon the sale of the

The pre-petition will be -- I'm sorry, pre-petition will Post-petition will be paid

be -- I misspoke, Your Honor. current.

The pre-petition will have a ten-percent discount

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associated with it, a ten-percent reduction on that claim and that will be paid upon the sale of the art. just -THE COURT: MR. GERON: All right. That was -- that was the contemplated I'm sorry, let me

settlement of that warehouse. THE COURT: MR. GERON: Okay. The numbers there are relatively small.

I think in total it's about $20,000 -MR. MENDELSON: That's correct, Your Honor. It's

about $20,000 of the post-petition fees including December of approximately 5,900 give or take and the pre-petition are about 14,000 and change. discount. We've agreed to that ten-percent

The post-petition will be paid, and to the extent

that the artwork continues to be stored, the post-petition storage fees which are about $1,700 a month will be continued to be paid up until the point that the artwork is removed -THE COURT: All right. -- but we're in agreement on that.

MR. MENDELSON: MR. GERON:

As I said, Your Honor, it was relatively

easy to digest and analyze the value -- the 506(c) value, if you will, of that warehouseman's lien because the assets in the warehouse -- in the warehouse and storage is artwork we now have a good grasp on what the values -- at least the anticipated values are and they far exceed the amount of the

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point. MR. GERON: No, no, no. I didn't mean to -- sorry, I motion. lien, and therefore, that was a relatively easy analysis. Where it becomes more difficult is in the second The first motion was cash collateral. As I said,

cash will be coming in.

There will be some payments made.

The rest will be reserved for administrative expenses and I think that was the only objection that I have. If Your Honor would like, I can move to the next motion at this -THE COURT: cash collateral. No. Let's look at the stipulation on

Now, Paragraph 3 provides for a carve out

for any reasonable costs of administering the debtor's estate but as follows, and I see individual disbursements not exceeding $500 each, but I don't see anything for warehouse costs. I don't know what other costs you're incurring. I --

we need at least to acknowledge that they exist, don't we? What do we do with them? MR. GERON: I think that's exactly the -- that's

exactly where we're going to get to with respect to the second motion, Your Honor. THE COURT: All right. Well, we'll come back to this

didn't mean to push it off -THE COURT: No, no, no. We'll come back to it. I'm

just -- we're on this motion but we've got to look then -- see

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proposing. how Paragraph 3 works out with regard to your next motion. MR. GERON: Well, it does not -- just in answer to

the Court's question, there is no contemplated payment made to the warehouses. Except for the one that I just outlined,

there are records -THE COURT: We'll get to your next motion. Let's --

let's -- let me go through my questions about this motion -MR. GERON: THE COURT: Okay. -- first so I can understand what you're

Paragraph 5 gives Citibank a lien that seems to be

a priming lien on valid and existing liens as of the petition date. You just told me that it doesn't so it's got to be It has to be subject to any valid and

revised to be clear.

existing liens in existence as of the petition date, and it would also have to be any -- subject to any -- you know, any liens that are accrued by virtue of law after the petition date as well. So let's be -- let's be precise here. And Paragraph

12 gives them relief from the stay on entry of the Bankruptcy Court of any order granting relief from the automatic stay. I'm not sure what that means in this context of a Chapter 7. Perhaps it doesn't mean anything; what do you think? I mean, there are some parties who could perhaps get relief from the stay. MR. GERON: It was contemplated that there might be

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some relief from the stay. THE COURT: MR. GERON: THE COURT: I suppose --

You could put in more material. Okay. If Citibank agreed. Order granting Then we can decide

material relief from the automatic stay. whether it's material or not. Okay.

Let's go onto your second motion. Your Honor, the second motion is the

MR. GERON:

trustee's motion to approve a protocol for the disposition of client files. THE COURT: MR. GERON: Okay. By way of background, and it will only

take a second, there are -- at the time of the filing, to my understanding there were 250 -- roughly 250,000 boxes of client files, client records. records of Thelen. sense. These are not the books and

These -- at least not in the operational

Those books and records have been secured by the

trustee and are in my storage facility. The total costs pre-petition of the storing of these files was running at a clip of about $80,000 per month. are six storage facilities to my understanding. There

The struggle

that I had as a trustee was what to do with these files and it is a pivotal aspect of what I need to do in the initial -it's something I have to go come to grips with right away. There's a continuum, there's an accruing cost, and I need to

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Honor. balance. try to balance the -- at least the inability or the potential inability of the estate to continue to pay these costs because I am working with cash collateral and I'll get back to that in a moment. The clients' right to have a say in the disposition of these files -THE COURT: MR. GERON: Uh-huh -- the attorneys' rights to have a say;

that is, the -- because I don't have a -- I don't -- at least nominally I don't have a -- I'm not operating a law firm. I

don't have a direct fiduciary obligation to those clients or at least not a legal obligation to those clients in the direct sense, but I do recognize that those clients have a right to say something about what happens to their files. And so there is this dynamic that I was trying to By the way, I do recognize that the warehouses

themselves have a lack of clarity about what happens to these files as well. -THE COURT: MR. GERON: THE COURT: Iron Mountain is just one of -One of six. And what's the total asserted obligation Leaving aside the payments from here to there

to the warehouses collectively? MR. GERON: I -- I don't have that figure, Your

I think that there -- it was running -- there were

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several defaults pre-petition on those numbers, and so I don't have a full breakdown. thousands of dollars. THE COURT: hundred and eleven. MR. GERON: Right. That's one of -- I mean, we're Well, Iron Warehouse seems to want a I think it's in the hundreds of

talking about -- that's by far the largest, by the way, for what it's worth but I think we're talking about two or three hundred thousand dollars minimum of arrears. The difficulty

was that the debtor -- it's not a criticism, rather simply an accounting issue, the debtor was engaged -- the wind-down committee was engaged in a similar exercise and I'm learning as I go that some payments were made, other payments were not made to the warehouses. There were some agreements with the

warehouse, not all were consummated, and so there's still some reconciliation to do with respect to those clients. THE COURT: committee in here. MR. GERON: Well, I spoke -- I have full contact and It's not an issue Well, we might have to see the wind-down

cooperation from the wind-down committee. of lack of cooperation.

It was purely a matter of

prioritizing what it was that I was reviewing in terms of accounting. There is as far as I know certainly nothing --

insofar as I have been able to tell Your Honor nothing suspicious with respect to their activity.

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THE COURT: I'm not talking about -- no, everything

is -- what happened is absolutely perfectly clear, but, you know, six months went by and expenses accrued and some -- you know, somebody is responsible and maybe it's the wind-down committee. MR. GERON: Well, what I was trying to distinguish in

my review of the -- an establishing of this protocol is a 503(b) analysis; that is, benefit to the estate post-petition versus the -THE COURT: Oh, I'm not saying you haven't done I'm just

exactly the right thing post-petition going forward. speculating -- I'm getting ahead of myself.

This is my first

big law firm Chapter 7, but it's certainly not the first. MR. GERON: No, and in fact, Your Honor, for what

it's worth one of the things that was guiding me is a review - what was going on in Heller and in some of the other law firms. I was -- I was mindful of those exercises. I do know,

for example, that in the Chapter 11s of those law firms where the committees have been in charge, the resolution of a file was a very big issue and is a troubling issue for a number of people. THE COURT: MR. GERON: Sure. No, I understand that.

And I was trying to be expedient about

it, but again, I mean, the legal theory that I was functioning under was that if those files had value, then clearly, the

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trustee, the people who value those files must pay for the storage, certainly post-petition and certainly to the return of those files or the retrieval of those files. THE COURT: MR. GERON: Right. And that is indeed the fundamental aspect

of the protocol as I'm suggesting. THE COURT: MR. GERON: Okay. So whether it's the trustee who pulls the

files out because I think that they're related to an account receivable and I need them for an account receivable or any client or any attorney when they pull those files out, they must pay for storage post -- anything from September 18th onward, they must pay for it, and the cost of retrieval so that if there is a -- for example, I've talked to some of the warehouses about what they call dirty files; that is, the files that have a box that might have two different clients in it, they have to be cold. Only the client that's being

requested has to be -- but those costs are significant, and all of that has to be paid. So insofar as the protocol, that is the fundamental aspect of the protocol. Where it gets more difficult is who

pays for storage from here on out and who pays for destruction, and again, I think that there's a difference between a 506(c) issue here and a 503(b) issue. Insofar as

value to the estate, the 503(b) issue is in effect something

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that can be -- I would suggest, Your Honor, can be tabled. It is the 506(c) issue that was the most difficult because I don't have cash collateral absent consent from Citibank. I don't have cash collateral to pay for what

arguably -- and I have to concede this, arguably are files that in the end are of no value to the estate, and that is my guiding point is, is there value from these files to the state or not, and I have to conclude that those files which will not be withdrawn from storage or they have been there dormant in storage forever, those files have no value, and absent value, it is -- it is a difficult if not impossible argument to make -- for me to make to Citibank let alone for Citibank to concede, I don't want to speak for them, that their collateral should be used in the payment of the storage of those files. So where the gap is and where the warehouses certainly where Mr. Barr will get to I'm sure on his -- his turn to the podium, the gap is what happens in two stages, what happens for the post-petition storage in those ninety days that I'm proposing would be my window on the protocol and then what happens after the ninety days to those files. I would suggest, Your Honor, that those ninety days balance a lot of interest and what I'd like to do is -- what I'm focusing on is what happens -- where are we at the end of the ninety days. Yes, there is -- there are accrued charges

in those ninety days that have not been paid for certain,

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perhaps even most of the files. I don't yet know because I

don't know who is going to claim their files. On the other hand, what we have is certainty or at least very clear -- we have a reduction in the files -whatever that is, there's a reduction in the files and a commensurate payment to the warehouses, just flows right through. It will just go right to the warehouses. So there's

a reduction in those 250,000 files. ninety days.

That's one benefit in the

The second benefit is that I have notice to all

the lawyers whose obligations -- legal obligations may very well be out there, and to all the clients. I plan to try to

track and try to make sure that as many of the clients that can be notified will be notified. So where are we at the end of the ninety days in connection with this unknown liability. I mean, if the

client's file winds up in the street, who -- what -- who are they going to point the finger to? Well, the trustee at least

I hope wants this protocol or a protocol that's put into place. issue. Hopefully, that's not the -- that's no longer the The warehouses quite candidly, and I don't want to be

presumptuous when I say this, but the warehouses benefit from this as well. Less volume of files to whatever extent and also clarity that the people who -- whose files these are had a chance to come and get them. to do anything. So the warehouses no longer have

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It's not a beautiful image. pretty picture. I'm not painting a

I know that there's a cost being incurred

post-petition that I'm not covering in my motion, but it is the lesser of bad circumstances and what it does I think is it balances all these various interests in the best way that I could. So that's where I was focusing is yes, it's ninety days, yes, it's -- there's a gap in terms of who is paying for the ninety days. There's not a gap. There's no -- there's no

-- no ability to pay, but it's better in the ninety -- after the ninety days than it is today. So that's the motion. Perhaps what I can do is we

can have -- we can just consider this motion and -THE COURT: Let me ask one question. In your view,

is Citibank under secured or over secured or do you know? MR. GERON: I believe, Your Honor, that at this Let me just -- if I

point, it appears to be over secured. could lay out what goes into that -THE COURT: MR. GERON:

I know we don't know. We don't know, but we have $27 million --

on face value, $27 million worth of receivables and there are $6.8 million of pre-petition claimed to Citibank. will not increase unless Citibank is over secured. That claim So that

number is fixed as of the petition date per the stipulation. That $27 million obviously if it were all collected

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it would be great, but I also recognize that the $27 million were -- are the last standing receivables after an elevenmonth project by the debtor to collect receivables. will be a fraction of those receivables in value. Further, in my analysis what I've seen is that some of the larger receivables, there's a large fee application in an estates matter and those kinds of things outlast the eleven months but are significant numbers. So -- and then finally So it

there are some other accounts that are collectible by the estate. I got for -- I received for example a tax refund.

That was fairly significant in the hundreds of thousands of dollars. THE COURT: MR. GERON: Sure. So it is those kinds of things that lead

me to believe that -- and I'm touching wood when I say this, but insofar as I can tell today Citibank appears to be over secured. It is an issue of timing, I'm hopeful, and I

certainly have every reason to expect it's an issue of timing rather than an issue of insecurity. THE COURT: Okay. Are we -- do we -- do we have a

exception to the turnover of files for those who have outstanding receivables that they haven't paid? MR. GERON: Yes, Your Honor. I have in my protocol a

requirement that -- two possibilities that I could anticipate going into that. One was it's a contingency-fee file, and

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they don't have -- the client or the lawyer will say I can't pay until I collect, and so there's a recognition of a lien on the file to the extent that the fee is outstanding. a contingency-fee scenario. In the non-contingency account receivable situation, there is the requirement of payment, and because of the way the protocol is designed, any payment that is received would go to the warehouses, not on the receivable, mind you, but it would go to the warehouses. So at least insofar as the 506(c) That's in

analysis; that is, the file has value, therefore, the warehouse should be paid, whether it's Citibank's cash collateral or not, it doesn't matter because the warehouse will get paid to the extent of the files that have been stored, even if it is ultimately to the benefit of Citibank for my retrieval of those files. One other part of that answer, there are certain files which I will be withdrawing from the warehouses that are connected to accounts receivable -THE COURT: MR. GERON: Right. -- that I will do myself. That is, I

just -- I have to do them. withdraw, I have to pay for.

Obviously, anything that I So that would be -- that would

be coming out of Citibank's cash collateral and that would be in answer to what are the costs that Paragraph 3 allows for. These would be some of the costs obviously that would be --

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clearer. MR. GERON: Okay. I thought -- we tried to get THE COURT: only up to $500. MR. GERON: there is an -THE COURT: Well, I think it ought to be a little Without consent, up to 500; with consent, Well, it does but it only -- I read it

there, but I'll take a look while I sit down and -THE COURT: MR. GERON: with respect to this? THE COURT: MR. GERON: THE COURT: MR. BARR: I think so. Okay. Mr. Barr? Morning, Your Honor. This really -- this Okay. Have I addressed the Court's questions

protocol sounds to me like an enormous cost-and-risk shifting technique to make Iron Mountain I suppose the other storage facilities pay for the administrative expenses of this state. I hear the trustee acknowledging that the files are property of the estate, that there are ethical obligations to preserve and deliver those files to clients or attorneys, that they were going to generate accounts receivable and that the storage and disposal of these files is a burden to the estate. So why not just have Iron Mountain pay for it all. We'll take ninety days. In addition to the time they've

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MR. BARR: THE COURT: MR. BARR: THE COURT: -- for -- for moving, for storage --- files. -- for -The normal charges. And I -- so I think costs -THE COURT: The contract costs for those particular already spent post-petition and if they get paid, they get paid; if they don't, they don't. And that's the sum and

substance to me of this protocol, and it's unacceptable. THE COURT: MR. BARR: So what do you want me to do? Your Honor, I'd like the Court to direct

the trustee to make current administrative expenses to make the payment of the storage charges and the trustee has acknowledged to the extent that there are going to be any files withdrawn or asked to be delivered that those contract costs be paid. THE COURT: MR. BARR: THE COURT: Well, I think that's clear. Yes. If anything -- nothing can be taken out

without payment or other satisfaction of your claim against those -- those boxes, if you will, how you allocate and -- but I assume -MR. BARR: Iron Mountain would charge the contract

that is understood, that that nothing -- your lien is not --

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to that. MR. BARR: Well, which is several months into the there's no priming. Your lien -- whatever lien rights you

have are preserved throughout and if anything is taken out, it's with your permission because you're satisfied that the costs have been paid, and I'm open for business if necessary. Does that make sense? Anybody object to that going

forward in terms of release of property? MR. BARR: THE COURT: I don't think so. All right. Now, with regard to what's

happened up to today, I gather there's a large arrearage -MR. BARR: THE COURT: MR. BARR: THE COURT: Your Honor --- but I don't know that that's -I'd like to make one point -No, no, make -- make all your points and

then we'll get to the arrearage. MR. BARR: THE COURT: Thank you. I just want -- I just want to clarify

each element of this and see where we really have a problem. MR. BARR: Remember, the trustee is asking for an

additional ninety days from this -THE COURT: Well, I got the ninety days, I'm coming

bankruptcy case already. THE COURT: MR. BARR: Yeah. But apparently --

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THE COURT: But I haven't heard -- you know, I I was remarking which I haven't heard

haven't heard from you or anybody else.

is -- please, Mr. Geron, I'm not complaining.

from anybody in this case about anything, which is fine with me, but I -- you know, I'm open for business most days. If

administrative costs accrue, you know, people do know what to do. MR. BARR: Well, that's my point, Your Honor, that

this -- this case has been in liquidation eleven month before the bankruptcy -THE COURT: MR. BARR: Ah, there's a point, too. -- certainly, the clients must know and

the lawyers must know that these files are out there and if they wanted them, they probably would have asked for them already -THE COURT: MR. BARR: One would think the lawyer -Why does the trustee need more time to be

certain that everyone has gotten what they want or entitled to and incur more costs on the backs of Iron Mountain to do that. THE COURT: Well, did you know -- do you know whether

in any of these other law firm disasters, if I can use that word, the firm has been found to have an obligation to deal appropriately with its clients' files -MR. BARR: THE COURT: Your Honor --- in the individual lawyers and been

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Aiello. THE COURT: -- but that's a question I have but -held individually responsible, not just to walk away and dump their clients' files in a warehouse some -- somewhere and say find them if you can? MR. BARR: I have not done that research, Your Honor.

I can't answer that question -THE COURT: MR. BARR: I don't know -It appears that the trustee --

not for today, but that's a question I had. Geron? MR. BARR:

Do you know, Mr.

But it's certainly not Iron Mountain's Iron

obligation, Your Honor, to preserve the client's files. Mountain is -THE COURT: some recourse. MR. GERON: I understand.

I'm trying to find you

Your Honor, I did some research with Ms.

We looked at not only what happened in the Robek The only guidance we had was

case, a couple of other cases.

not from case law itself, but rather from the model rules, the ABM model rules with respect to guidance on what attorneys' obligations are and we extrapolated -- the ninety days by the way was an extrapolation from those rules because the rule of safeguarding the files is a reasonable -- is basically guidance as reasonable with a maximum period of roughly five

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years and -- but if there is a transition of lawyers to another firm, there is the ninety days and that's how we came to the ninety days, but I have not seen specific -- we have not seen specific case law that says attorney allowed the file to go and therefore there is liability as a result of it. This is one of those that we are seeing a parade of horribles (sic) but we have not seen specific case law that tells us what those horribles are. THE COURT: Well, I'm not going to assume that we'll

have horribles in this case, but I'm certainly -- certainly something to keep in mind. The liquidation committee can't

just run this out for nine months without any concern about responsibility under the rules, under the professional rules to their clients and I would think that many of them are -wherever they are as lawyers, they're representing the same clients and they either want the files or they ought to let us know promptly that the client doesn't want the files or need the files. days. I was going to suggest that perhaps you -- we send something to the lawyers demanding their cooperation, or has that already been done? MR. GERON: It has not been -- notice of this was I am impressed, I note that there So we don't -- we don't even delay for the ninety

served on all the lawyers.

were -- there was one lawyer that responded with respect to

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certain files as far as I know. Maybe a couple -- a couple of

law firms that responded wanting the transfer of certain files. So there have been some responses but it has not been

an avalanche of responses that say we either don't do it -there's some dos, nobody said no. notice, but nobody has said no. MR. ECKSTEIN: Good morning, Your Honor. Andrew There's been negative

Eckstein, excuse me for chiming in, but maybe I can shed a little light on this. THE COURT: No. To my knowledge, what had happened

MR. ECKSTEIN:

during this dissolution period preceding the bankruptcy is that there was an ongoing contact between the dissolution committee and the attorneys and an encouragement that they get their files out and a protocol -- we call them successor firms without suggesting successorship that the firm -THE COURT: Subsequent firms. Subsequent firms to which attorneys

MR. ECKSTEIN:

went were encouraged to basically buy the files back from the warehouses, and in fact, I understand there was a protocol where monies were coming in and going to the warehouses, then files were being released in bulk. So that's my understanding

of what happened during the pre-petition dissolution period. So I think most of the attorney were very much aware of the fact that the files needed to be removed for the clients --

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liable. THE COURT: None of them. No. guaranties. THE COURT: But this was a partnership so that the THE COURT: hanging proof. So you feel that this is not the low-

This is the -- these are the difficult files

that probably nobody wants. MR. ECKSTEIN: These are probably the files that most That's

people already knew about and decided were not needed.

my personal view because I do know that this was an ongoing process and there was a period during which -- and I know the storage houses do know this very well because monies were coming in from other law firms to retrieve ongoing files. THE COURT: Does Citibank have any guaranties? No. Citibank does not have any

MR. ECKSTEIN:

partners are liable or are they not? MR. ECKSTEIN: THE COURT: This is an LLP.

This is an LLP? It's an LLP and the partners were not

MR. ECKSTEIN:

MR. ECKSTEIN: THE COURT:

And so your client then got some payment

on some -- released some files or -MR. BARR: THE COURT: MR. BARR: I have no information on that, Your Honor. You don't know. No, I do not.

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THE COURT: MR. GERON: Okay. I've got one more piece of information.

We have been contacted by some of the firms that were perhaps in transit who were looking to get their files in the last window before the filing of the bankruptcy, and those firms are awaiting the implementation if the -- there is other protocol because they will then comply, and so there will be some turnover. I am in agreement though that we're not We're talking

talking the low -- the low-hanging fruit here.

about the files that have been abandoned or not -- nobody seems to have an interest in, and that's the reason for the requirement of some form of notice for assurance. Again, the ninety days was picked not randomly; it was picked in reference to the ethical rules, but it is not a guidance for case law. THE COURT: the monthly charge? MR. BARR: THE COURT: thousand dollars. MR. BARR: some point -THE COURT: We're not at disposal yet. That would Plus the cost of disposal, Your Honor. At About thirty-four, $35,000. So three months is going to be a hundred And, Mr. Barr, your client is -- what's

still be an issue today.

It's not going to cost I don't think

materially more to dispose of -- dispose in ninety days as

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THE COURT: Okay, good. protocol? opposed to today. All right. Anything -- anything further on the Do you have a -- and you represent?

Someone else?

State your name and -MR. FRIEDMAN: My name is Greg Friedman. I'm from

Cole, Schotz, Meisel, Forman & Leonard.

We represent the

Robert Lewis Group, which is another warehouse storage facility, much like Iron Mountain. While we didn't file an

objection today, we're similarly situated and we request that the -THE COURT: How much are you owed up until today? Up through today, since the petition

MR. FRIEDMAN:

was filed, we're owed approximately $20,000 and each month my client incurs $6,500 per month and -THE COURT: Have you met Mr. Geron? Mr. Geron? The trustee.

MR. FRIEDMAN: THE COURT: MR. GERON: THE COURT: MR. GERON:

Yes.

I have -Okay. -- not only have we met but I've been

speaking with -- I'm sorry, no, with -MR. FRIEDMAN: MR. GERON: Oh, Komrower.

Komrower of his firm on a regular basis -

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MR. GERON: -- and I -- I, in fact, initiated a long

call yesterday with him to talk about what was going to be discussed today. MR. FRIEDMAN: So, in addition to the $20,000 already

incurred, the trustee is proposing that my client incur an additional $20,000 putting aside the destruction costs which we're putting aside to later and as Citibank's counsel had mentioned, these are probably files that nobody wants, yet the storage facilities have to carry and store all the files for an additional ninety days until value, if any, can be determined, and that's just simply an equitable. MR. GERON: Just in briefly reply, Your Honor, as I What happens in

said, I was focusing on the lesser of evils.

ninety days, where are we in ninety days, accrued storage charges, yes. No charge as the Court noted earlier, no change

or even a reduction in the destruction costs because some files will go out. Potential payments for files that will go

out, so recognition of the value of those files. So, on the whole, it was a balancing act. I think

that the -- obviously, the other -- there are lots of other alternatives. There's a shorter period, but one alternative

that we don't have and this is the reality I think of the warehouses doing business with a law firm is we don't have a clean way of disposing of these files. These are troubling --

troublesome, not troubling, but troublesome files and --

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THE COURT: Probably they're troubling files, too,

and somebody wants them. MR. GERON: How about this, they're troubling to me,

Your Honor, but they're troublesome files because of the nature of the information in those files, and some -- some notice, some negative notice was a way of protecting both the warehouses, the estate and -- and putting those attorneys on notice that if there is liability out there, it's their liability and that's an important aspect of all of this. THE COURT: All right. Yes, sir. If I may just add, I

MR. ECKSTEIN:

Yes, Your Honor.

don't know -- and I guess this is -- there's a balancing of risk and a balancing of burdens here. I think one thing

that's clear is that probably most of these files are not a benefit to the estate. the estate needs. They're probably not something that

We don't believe it's something that

Citibank needs or something that the estate needs to prosecute accounts receivable which would certainly be for Citibank's benefit, and that's one of the things the trustee will be reviewing, and certainly paying for the preservation at least post-petition of those files which are a benefit to the estate and ultimately the Citibank -- as far as ARs. As far as the other beneficiary, the other parties who benefit from the preservation of these records, that would be the clients and the successor -- counsel of the successor

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that today. MR. ECKSTEIN: THE COURT: Okay. firms and those will be paid. As to -- I hate to use the term I certainly

dregs, but the files that nobody wants.

understand there's a burden to the warehousemen, probably a burden that's part of their risk of doing business, but there's no benefit to the estate, no benefit to the lien holder and we don't see a basis for surcharging the estate. Again, it's not an administrative benefit that the estate yields, and certainly not Citibank. So we would

certainly object to surcharging our collateral for that. THE COURT: Well, I don't think we have to get to

I don't think we're -- we're not ruling

it out, we're not -- certainly not ruling it in, and it seems to me that as to what happened until today, clearly hopefully we don't have to ever deal with it because there will be enough money to satisfy everyone. with it, we'll deal with it. I think that the larger question to me is what do we do about the next ninety days because we -- that's the future, and we can deal with that today. MR. ECKSTEIN: THE COURT: MR. BARR: Thank you, Your Honor. If -- if we have to deal

Thank you. I heard what Your Honor just said, but I The

still have to respectfully disagree with Mr. Eckstein.

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days? MR. GERON: THE COURT: MR. GERON: I'm sorry. Because of the code or other -- other -The ethical -- the ABA ethical guides. I storage of the files is a benefit to the estate -THE COURT: Oh, I -- you reserve your argument, he

reserves his, and whose benefit it is, is another issue that I think is open. MR. BARR: And, as we stand here today, there are

costs being -- that have been incurred and we know will be incurred, and the trustee is proposing to incur those costs for ninety days as Your Honor pointed out. So if it's not a benefit to the estate, let him abandon them now and cut of those expenses. Otherwise, let

him assure that the estate is administratively solvent and able to make these payments. THE COURT: Mr. Geron, why did you pick the ninety

picked ninety days because when there is a successor law firm under the ABA when an attorney group leaves one law firm and moves to another, there is a ninety-day-notice window that they are required to give to advise that the clients of the transfer of the -- or the potential transfer or the anticipated transfer of their files. So it was -- it was

those -- that was the guidance that was I was using as the ninety days as being reasonable.

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for today. I have absolutely no -- I'm not committed to the ninety days. I proposed it because I thought that that was

the most rational but I could easily propose to -- to compromise that down to sixty days which would reduce significantly, not -- not completely, but significantly the drag post-petition. One other thing the Court has noted, I just want to say it myself as well and that is I'm not looking to preclude 503(b) claims. I came up here. That's - that was the first thing I said when

If and when the benefit to the estate can be

evaluated in a more wholesome considered way, we can get there. This is really about use of cash collateral today. THE COURT: Well, I don't know -- I -- I certainly

would agree with you as to the prior expenses under 503(b), but if we're going to be delaying things for another sixty days or ninety days, I don't know whether there's much of an issue under 503(b). MR. GERON: THE COURT: I just raise that. Well -Perhaps that's not -- perhaps that's not

Mr. Barr is standing again. MR. BARR: THE COURT: MR. BARR: THE COURT: MR. BARR: Withdrawn. All right. Anything else?

Oh, I do have a comment. All right. I understood Mr. Geron to say to Your

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Honor that this is -- today is solely about use of cash collateral. It's not solely about use of cash collateral.

It's about using cash collateral and -- and the services of Iron Mountain and the other storage facilities to help enhance this estate. It's a cash equivalent. It's a forced use of

the resources of Iron Mountain and the other storage facilities, Your Honor, to carry the administrative burden for this trustee. MR. GERON: I don't disagree that that there is a I just simply think that that's For example, when the I think

503(b) argument to be made.

something that we can do in retrospect.

destruction of the files, we're going to get to that. the Court has mentioned that already.

When those files are

destroyed, there will be an argument made, I'm sure, that this was for the benefit or some benefit derived to the estate. Those 503(b) issues are issues that are ahead of us. I'm not looking to preclude the 503(b) claims. this is not in anticipation of that. input a protocol now. This is not --

It is purely just to

It is a cash-flow-shifting issue, but I

recognize that the -- and I'm trying to be as explicit as I can. I recognize this is a shifting of cash flow, but it is

for the benefit -- an argument could be made as I said earlier that this is as much for the benefit of the estate as it is for the warehouses. For example, I had anticipated that if I were to just

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comment. MR. BARR: Thank you, Judge. Any notice of serve out a fifteen-day notice of abandonment or even do it on motion just to make sure that everything is clear and returnable before the Court, the warehouses then might send me a letter at the end when abandonment is effective, we are withdrawing the files. My sole recourse at that point is to say, I cannot authorize you to do that. You can do what you need to do, but

it's certainly not done with the authorization of the trustee. The warehouses then have a question to ask for themselves legally which I can't answer and that is what will clients do, what will happen and how do they destroy. All of

that is in some way being addressed to some level of comfort and some value. THE COURT: I understand. Anything further? Last

abandonment is going to have to go to the clients and the attorneys who are -- he's asserting are going to get notice of the ninety days. Obviously, if Iron Mountain is going to be

forced to bear the costs of future administrative expenses, fifteen days would be much more preferable to ninety. you. THE COURT: All right. All right. It seems to me Thank

that the trustee's motion is well taken as a matter of appropriate estate administration. It is essential that the

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trustee comply with all applicable obligations and the Supreme Court told us that in the Ohio against Kovacs case, which was the environmental case that the trustee purported to simply abandon the property and the court said no, you just can't abandon the property. Of course, the Supreme Court didn't

bother to tell us well, who pays for it and who pays for the cleanup and I don't know that anybody did, and I think the trustee here is in somewhat the same position. He can't just dump the stuff in the river, and I don't think that would particularly help the warehousemen either. The trustee has proposed a reasonable means for doing

two things; one, disposing of the property in a appropriate and relatively expeditious fashion, and two, trying to obtain payment from parties who might be interested in the property that would be benefit the warehousemen both for the expenses that will accrue over the next ninety days or as well as the past expenses which I believe are far more burdensome and far more expensive and create more of a potential burden on the estate and on the warehousemen. So we're really -- I realize involuntarily using the warehousemen as a mechanism for perhaps gaining more value for them as well as for the estate, but let me -- let me add that I'm not precluding the warehousemen from coming in and seeking payment for the costs of those ninety days at any time. As I said, I'm open for business. I don't think we

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should take any action today that would preclude them from demanding and obtaining payment for the accruing costs over the subsequent ninety days or further protection that those will be paid, but I'm not going to deal -- I don't think I need to deal with those today, and I should give the parties, the trustee, Citibank and other parties time to deal with it. Certainly though, I'm not going to require payment of the arrearages. I mean, we're talking about the additional

costs -- and I realize the additional costs for the next ninety days are substantial, but we may have spoken too quickly when we said that there weren't any preference claims, for example. Who knows what went out, what went in and out, what files were restored during the ninety days before the petition was filed and what -- you know, the preference statutes not only apply to those who receive the preference but those for whose benefit the preference was made. So all the trustee's rights are as far as I'm concerned reserved, and I'm not satisfied with a rule that would allow a law firm to close its door, hand the trustee hundreds of thousands of boxes of files and say catch me if you can. That's not -- that's not right, and so I would

suggest and it's only a suggestion that your procedures be -you consider revising your procedures. Rather than sending a

notice to former Thelen attorneys of your effort to -- of your notice to their clients, to the clients of the former clients

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me. MR. GERON: No, no. I agree with you. In fact, one of the -- I gather you have a list of the clients and you're ready to go. I don't want you not to go, but if you can, send a notice to the attorneys that the Court has directed you to reserve your rights against the attorneys, if any, or something to that -- I don't necessarily think -- I'm not suggesting it be provocative, but that the Court directs the attorneys or requests the attorneys to cooperate in locating the clients with you and the -- to the extent they haven't done so in contacting the attorney -- in contacting the clients and informing the Court if there are any files that can be disposed of today, and particularly to the case with regard to clients where the client is still the client for the lawyer involved and you might want to say the Court has directed that you reserve your rights to recover the -- there are substantial expenses that accrued over the period of time and the Court has directed you to reserve your rights with regard to those expenses and -- but that's for another day. Does that make sense? You don't have to agree with

of the things that I had initially contemplated for what it's worth was a notice in advance of all of this exercise was a notice to those lawyers saying I'm going to -- in sum and substance --

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506(c). THE COURT: MR. GERON: Against -- all right. I thought we were going to roll back into THE COURT: MR. GERON: THE COURT: MR. GERON: Yeah. -- I'm reserving my rights. Yeah. And, I mean, we're -- we're in effect

what the Court is suggesting is supplements this protocol very -- very wholesomely and adds this extra layer of protection. So an extra layer of accountability which is exactly what I need at this point so that works out well. THE COURT: have their rights. So -- and you have -- you know, everybody

Mr. Barr, your client has its rights

preserved, but I think this is -- and your 506(c) rights are preserved because you don't really have any but you certainly have 503(b) rights. rights I saw, is he? MR. GERON: In the stipulation -- in the cash The trustee is not waiving any 506(c)

collateral stipulation -THE COURT: MR. GERON: You are --- I think there is a waiver of the -- of

the cash collateral stipulation. THE COURT: Let's do that. MR. GERON: But, before we do that, if I could just We'll roll back into that. All right.

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agencies. Honor. THE COURT: MR. GERON: Okay. Those were the more complicated motions, The next motion is the motion to - the rest fortunately -- the rest of the motions -THE COURT: MR. GERON: THE COURT: MR. GERON: Yeah, I don't think there's any --- are not objected to. Right. I'll just cover them very quickly, Your

front-loaded as they were.

file proposed engagement agreements with the accounts -THE COURT: I got -- this is so that the defendants

in those suits don't know what -MR. GERON: Both that and so that the accounts

receivable agents don't -- don't play against, on my negotiations. I took -- took advantage -- I -If that's what's done in these cases,

THE COURT: that's fine. MR. GERON:

Okay.

Thank you, Your Honor.

The fourth motion is a motion to retain collection It is very much parallel to the fifth motion.

There are several -- the debtor used several pre-petition agencies. It's not objected to. I've streamlined it to two

agencies, one East Coast, one West Coast. THE COURT: MR. GERON: Okay. The only quirk here -- it's not a quirk

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but rather an expansion of the relief from pure retention, two aspects of it; one, the contemplated mechanics are that there will be money collected. The formula is the formula. All monies They're

getting X percentage on their receivables.

collected by those agencies will be remitted to the estate and fully accounted for. The contemplated retention would have

those commission as they are earned paid back out from the estate on a regular basis. That is different from the

attorneys because the attorneys -- it is not contemplated that the -- the agencies are contemplated as an estate agency if you will. It's not contemplated as an estate professional in

the sense that it is -- these are not subject to fee application. These are subject to approval and a strict

formula that has to be applied. I in the end as a trustee since all the gross funds are remitted to me, I am accountable for the monies coming in and monies coming out, and as I come in each quarter, I will have an accounting that would be -- that will fully flesh out everything that's coming in and everything that's gone back out and itemized it for U.S. Trustee review and obviously for the Court's review. That is the agencies. With respect to the attorneys,

which is -- which is Motion No. 5, I am looking for the same arrangement but those attorneys in the end must come in on a final fee application, fully account for their services and

48 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
motion. fully account for the monies that they have been paid on account of those services. So while there is a going process

where monies will be coming in, monies will be going out on account of specific commissions that are being sought for approval. At the end, the attorneys come in for a final fee application and we will have a further accounting in that regard. The fifth motion is -- I'm sorry, that was the fifth The sixth motion is -- and the seventh relate to the

debtor's pension plan, another one of those assets that in the old days I could run away from as a trustee by notice of abandonment and can no longer do that. specifically -THE COURT: MR. GERON: Okay. That -Section 704(a)(11)

-- requires me to administer it -- motion

-- the motion is -- the reason I served the PBGC and the Department of Labor is I want to make sure that they're on notice that Altman & Cronin which are the benefits consultants and administrators and then the law firm that I'm seeking to retain which is David Crutcher. He's an ERISA attorney that

was pre-petition working on these same pension plans, that those will be paid from the pension plan, that statutorily I'm authorized to do that under ERISA and the pension plan contract documents specifically say so.

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No estate funds, if you will, because while I'm required to administer these pension plans, they are not technically estate funds. No estate funds will be used to the

payment of those professionals absent a fee application and an advance on award by this Court. So this is -- the purpose of

this motion -- ordinarily, I would just simply retain professionals in the ordinary channels, but the reason I did it by motion is to make sure that everybody knew that the pension -- the plan assets themselves would be used as they would be outside of bankruptcy for the payment of the professional services that are incurred in the dissolution of those plans. Those are the last two motions; again, no

objections as far as I know. So I think that the only issue if -- unless the Court has questions, the only issue goes back to the cash collateral stipulation and trying to fold in the Court's concerns, perhaps propose a mechanism which is what I can do is perhaps meet with Citibank, try to address wording in the stipulation to address the Court's comments and then resubmit it perhaps on notice to the parties, I don't know, the U.S. Trustee, any party who is -THE COURT: I think just Mr. Barr is the only party

who really is particularly concerned, and you can call him up but I don't know that he's -- I'm not sure his concern is as

50 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
much with that order as with the other order, but -- and I -you know, he has leave to -- maybe you want to put a paragraph in the other order that basically, you know, reserves his rights with regard -- rights of all the warehousemen with regard to the ninety days or with regard to anything else as to future rights. MR. BARR: Well, as Your Honor astutely pointed out

that the priming lien, sure we'd like that -THE COURT: Right. That's got to be fixed in the

other order, but I think that can be fixed on Page 5 by just taking out on Line -- 1, 2, 3, 4 the words "of city." But you

can -- you should look at it and submit it another order. MR. ECKSTEIN: Your Honor, I would point out that

whatever lien they have is -- attaches to the files, it doesn't attach necessarily to -THE COURT: It's property, but you -- this is --

you're getting a lien on everything for your adequate protection and that would include property which I think is there, and if you're priming anybody these papers should be -I think should be clear, and I have no -- I have no record that would permit me to prime anybody. MR. BARR: Thank you, Judge. The trustee has said in

his papers that the files are property of the estate so I think it's -THE COURT: There's no question.

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MR. GERON: issue if I could. Your Honor, I skipped through one -- one

The two accounts receivable retention

applications, there is a request in those applications for the trustee to exercise business judgment in the compromise of accounts receivable. THE COURT: MR. GERON: Yes. As I said. And it is -- in a Chapter 11,

I might have considered it just ordinary course of business for the debtor-in-possession and as the trustee, I would have exercised that business judgment on a rolling-forward basis. I thought it would be prudent to request and to highlight that I'm looking for that authority because we're talking about $27 million worth of receivables and hundreds, literally hundreds, and what's -- of individual items, and what's happening is I'm getting calls on a daily basis from a collection agency or an attorney to make decisions, and what I thought would be -- I thought the only two other options would be come in every time for a motion which didn't seem practical or seek advance guidance from the Court and that too didn't seem practical. So I really kind of laid it out there -- I've done this for twenty years. Obviously I -I thought -- I have no -- no party has That's perfectly fine. Very good. So -- thank you, Your Honor.

THE COURT: filed an objection. MR. GERON:

So it seems -- we had a number of the orders --

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up. MR. GERON: I had them all together so if I could THE COURT: Why don't I -- let me -- you'll look at

and discuss with counsel for Citibank and the warehouse -warehouses the orders relating to cash collateral and -- and the program and perhaps you want to revise the program to give you a little bit more leeway with regard to the communication with the lawyers, but I'll leave that to you and if you want me to approve a notice or something, I can or just give you whatever -- whatever guidelines you think is -- what might be useful to you in the future. MR. GERON: THE COURT: Very well, Your Honor. May I --

The other ones, why don't you just hand

just bring them -- either send them later today after I've spoken with the parties or just send -THE COURT: two indicated. MR. GERON: THE COURT: MR. GERON: THE COURT: Very well, Your Honor. I'll sign those. Okay. Thank you. Thank you. I'll take all of the ones except for the

Thank you very much.

(Proceedings concluded at 11:20 a.m.) *****

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S/ Kathleen Price Kathleen Price, AAERT Cert. No. 325 Certified Court Transcriptionist Regency Reporting, LLC January 6, 2010 Date I certify that the foregoing is a correct transcript from the electronic sound recording of the proceedings in the above-entitled matter to the best of my knowledge and ability, except where, as indicated, the Court has modified the transcript. C E R T I F I C A T I O N

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ------------------------------------------------------x : In re: : : THELEN LLP, : : Debtor. : ------------------------------------------------------x

Chapter 7 Case No. 09-15631 (ALG)

ORDER ESTABLISHING PROCEDURES FOR DISPOSITION OF CLIENT FILES PURSUANT TO 11 U.S.C. 105, 541 AND 554 Upon the application of Yann Geron, Chapter 7 trustee (the Trustee) of the estate of Thelen LLP, the above-captioned debtor (the Debtor), dated November 19, 2009, (the Application) for an order establishing procedures for disposition of client files pursuant to 11 U.S.C. 105, 541 and 554; and upon the hearing on the Application; and with due consideration having been given to any responses received to the Application; and it appearing that proper and sufficient notice of the Application and Hearing have been given; after due deliberation and sufficient cause appearing therefore, it is hereby ORDERED, that the Application be, and is hereby, granted; and it is further ORDERED, that the following disposition procedures (the Disposition Procedures) be, and are hereby, approved in connection with the retrieval, transfer and/or abandonment of the files of the former clients of the Debtor: a. A Notice of Intent to Dispose of Client and/or Client Related Files (the Notice) will be served, by first class mail, upon the Debtors Former Clients using the most current contact information available in the Debtors records. The Notice shall be sent by first class mail and e-mail on all known former attorneys of Thelen at their last known professional addresses. In conjunction with the mailing, the Trustee shall post all information relevant to the Client File transfer process on the estates informational website, which can be accessed at http://omnimgt.com/SBLite/ThelenLLP.

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b. The Notice shall provide the Former Clients (and other parties receiving such Notice) with notice of the Trustees possession of Thelens client and client related files. A copy of the Notice and a separate notice to former Thelen attorneys with further instruction from the Court and a reservation of the Trustees rights, will be sent to former Thelen attorneys for the purposes of facilitating the disposition of the Client Files. c. The Notice shall advise the Former Clients of the Trustees intent to transfer and/or otherwise abandon and dispose of client and client related files within ninety (90) days of the date of the Notice (the Retrieval/Transfer Period). d. The Notice shall provide the Former Clients with information on how to retrieve their respective files from the subject warehouses under the supervision of the Trustee. In conjunction with the Notice, the Former Clients will be provided with a form to complete and sign for the retrieval or transfer of their files (the Retrieval/Transfer Form). e. In order to retrieve their file or to have such file transferred to another attorney or law firm, the Former Clients or their authorized representatives, must do the following: 1. Complete, sign and return the Retrieval/Transfer Form;

2. Remit payment to the Trustee for reasonable but no less than the actual contract costs associated with unpaid pre-petition and post-petition storage, retrieval, transfer or destruction of such file(s). All payments shall be made to the following: Yann Geron, as Chapter 7 Trustee of the Estate of Thelen LLP c/o Fox Rothschild LLP 100 Park Avenue, Suite 1500 New York, New York 10017; *Wire instructions will be made available upon written request to the Trustees counsel. 3. To the extent monies are owed by the Former Client to the Debtor in connection with pre-petition legal services, the Former Client shall pay all outstanding fees, or if the litigation involving such file is incomplete and payment is contingent upon completion, provide the Trustee with an acknowledgement of an attorneys lien in favor of the Debtor against such file and any monies recovered in connection with such legal matter; 4. To the extent that a completed Retrieval/Transfer Form is received and the Trustee is expressly requested to hold onto such file for any reasonable short-term period (within the 90-day window) because the Former Client is unable to take immediate possession of such files, then the Former Client shall be

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responsible to pay the Trustee in advance any and all reasonable but no less than the actual contract costs incurred to maintain such files for such period; 5. To the extent that a request is received by the Trustee from a former Thelen attorney to hold specific Client Files for a reasonable short period in order to enable that attorney to obtain completed Retrieval/Transfer Form(s), such attorney shall be responsible to pay in advance to the Trustee all reasonable costs, but not less than the actual contract costs, incurred in maintaining such files for such period; 6. To the extent a dispute exists as to the right of possession as to any Client Files, the disputing parties shall be jointly and severally responsible to pay the Trustee in advance any and all reasonable costs, but not less than the actual contract costs, incurred to maintain such files pending resolution of the dispute; and g. Upon the expiration of a ninety (90) day Retrieval/Transfer Period, to the extent a completed Retrieval/Transfer Form has not been timely received for any Client Files, such files shall be deemed abandoned by the Former Clients and the Trustee, and the Client Files may be promptly destroyed or disposed of at the Trustees discretion, and as the Trustee determines reasonably necessary at the lowest reasonable cost, and within Trustee business judgment, without further order of the Court pursuant to 11 U.S.C. 105, 541 and 554. The Trustee shall not be required to retain any Client Files in storage, notwithstanding any applicable non-bankruptcy laws, rules or regulations to the contrary. The Trustee may elect at his sole discretion to retain any abandoned files that the Trustee determines may be necessary for the administration of the estate. ORDERED, that the Disposition Procedures set forth herein provide an appropriate means of transferring or otherwise disposing of the Client Files; and it is further ORDERED, that the Disposition Procedures are in the best interests of the Debtors estate and are necessary to the Trustees administration of this estate; and it is further

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ORDERED, that nothing in this order shall be deemed to prejudice the monetary or any other claims of the warehouses in which the files are stored, or the Trustees rights to object to any such claims, and all such claims are preserved for later determination by this Court, which shall maintain jurisdiction over the implementation of this order and any warehouse claims. Dated: New York, New York December 23, 2009 /s/ Allan L. Gropper HONORABLE ALLAN L. GROPPER UNITED STATES BANKRUPTCY JUDGE

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FOX ROTHSCHILD LLP Yann Geron Kathleen Aiello 100 Park Avenue, 15th Floor New York, New York 10017 (212) 878-7900 Counsel to Yann Geron, Chapter 7 Trustee

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ------------------------------------------------------x : In re: : : THELEN LLP, : : Debtor. : ------------------------------------------------------x

Chapter 7 Case No. 09-15631 (ALG)

______________________________________________________________________________ NOTICE OF INTENT TO DISPOSE OF CLIENT AND/OR CLIENT RELATED FILES ______________________________________________________________________________

TO: FORMER CLIENTS OF THELEN LLP Thelen LLP was a limited liability partnership, operating as a law firm with approximately 600 attorneys. On September 18, 2009, Thelen filed a voluntary petition for relief pursuant to Chapter 7 of Title 11 of the United States Code. Yann Geron has been appointed Chapter 7 trustee (the Trustee) of Thelens bankruptcy estate. As Chapter 7 Trustee, Mr. Geron has access to Thelens client-related files, which Thelen LLP has in storage at the time of the bankruptcy filing. If you are a former client of Thelen and your files have not already been transferred or otherwise disposed of by Thelen prior to its bankruptcy filing, the Trustee may have access your files. On December 23, 2009, the United States Bankruptcy Court for the Southern District of New York entered the attached order (the Order), authorizing the Trustee to transfer or dispose of client and client related files (the Client Files) pursuant to approved procedures as addressed below and outlined in the attached Order. If the Trustee is in control or possession of your files and you would like to retrieve your files or have your files transferred to you or another law firm, please review and follow the retrieval procedures outlined below. PLEASE BE ADVISED THAT YOU ARE UNDER NO OBLIGATION TO RETRIEVE YOUR FILE(S). If you choose not to retrieve your file,

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please advise as soon as possible whether your files should be disposed of or destroyed. Please be advised that upon the expiration of ninety (90) days from the date of this notice, any Client Files that have not been transferred or retrieved, may be abandoned or destroyed at the discretion of the Trustee. File Retrieval Procedures 1. If you are interested in retrieving or transferring your files to yourself or another law firm, you or your representative must complete, sign and return the Retrieval/Transfer Form to the Trustee at the following address: Yann Geron, Chapter 7 Trustee of the Estate of Thelen LLP c/o Fox Rothschild LLP 100 Park Avenue, 15th Floor New York, New York 10017 (212) 878-7900 2. All completed and signed Retrieval/Transfer Forms must be received by the Trustee within ninety (90) days of the date of this notice (the Retrieval/Transfer Deadline). PLEASE BE ADVISED: 1. In connection with the retrieval and transfer of your files, by submitting a Retrieval/Transfer Form, you agree to pay the Trustee all reasonable but no less than the actual contract costs associated with the pre-petition and post-petition storage (actual unpaid storage costs incurred pursuant to the cost structure designated by the storage facility maintaining those specific files), as well as retrieval and transfer of such files incurred by the Trustee in connection with the retrieval and transfer of your files, including storage, retrieval, transfer and destruction fees. Information regarding payment may be accessed on the estates information website at http://omnimgt.com/SBLite/ThelenLLP, or by contacting Trustees counsel directly. All payments should be made payable and remitted as follows: Yann Geron, as Chapter 7 Trustee of the Estate of Thelen LLP c/o Fox Rothschild LLP 100 Park Avenue, Suite 1500 New York, New York 10017 * Wire instructions are available upon written request to Trustees counsel; kaiello@foxrothschild.com. 2. To the extent monies are owed by you to Thelen in connection with pre-petition legal services, you will be required to pay the outstanding fees, or if the litigation involving such file is incomplete and fees are contingent upon the completion of that litigation, provide the Trustee with an acknowledgement of an attorneys lien in favor of the bankruptcy estate against such file and any monies recovered in connection with such legal matter. Your file cannot be retrieved or transferred until either payment or acknowledgement are received. This acknowledgement must be received within one week from the date of the receipt by the Trustee of your Retrieval/Transfer Form. Please note that you will be responsible to pay the Trustee for

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reasonable fees incurred by the Trustee to maintain your files after the expiration of the oneweek time period. 3. To the extent that a completed Retrieval/Transfer Form is received and the Trustee is requested to hold onto your files or your authorized representative is unable to take possession of your files immediately, then you shall be responsible to pay the Trustee all reasonable but no less than the actual contract costs incurred to maintain your files until such a time when you authorize their transfer by notifying the Trustee, within the 90-day period. 4. To the extent that a request is received by the Trustee from a former Thelen attorney to hold specific Client Files until such time as they are able to obtain completed Retrieval/Transfer Forms from a former client, that attorney shall be responsible to pay the Trustee for all reasonable costs, but not less than the actual contract costs incurred in maintaining such files and shall provide the Trustee with an acknowledgement of same. Failure to pay the Trustee prior to the expiration of the Retrieval/Transfer Deadline will not extend the ninety (90) day deadline and may result in the Client File being destroyed or otherwise disposed of. 5. To the extent a dispute exists as to the right of possession of any Client Files, the disputing parties shall be jointly and severally responsible to pay the Trustee any and all reasonable or, at a minimum, the actual storage costs pursuant to the contract rates incurred to maintain such files pending resolution of the dispute. 6. Pursuant to the attached Order, upon the expiration of the ninety (90) day Retrieval/Transfer Period, to the extent a completed Retrieval/Transfer Form has not been timely received for any Client Files, such files shall be deemed abandoned and the Client Files may be abandoned or destroyed promptly, as the Trustee deems necessary within his business judgment, and without further order of the Court, pursuant to 11 U.S.C. 105, 541 and 554. The Trustee shall not be required to retain any Client Files, notwithstanding any applicable non-bankruptcy laws, rules or regulations to the contrary. Dated: New York, New York January 7, 2010 FOX ROTHSCHILD LLP Counsel to Yann Geron, Chapter 7 Trustee

By: /s/ Yann Geron Yann Geron Kathleen Aiello 100 Park Avenue, Suite 1500 New York, New York 10017 (212) 878-7900 ygeron@foxrothschild.com kaiello@foxrothschild.com

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UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ------------------------------------------------------x : In re: : : THELEN LLP, : : Debtor. : ------------------------------------------------------x

Chapter 7 Case No. 09-15631 (ALG)

CLIENT FILE RETRIEVAL/TRANSFER FORM MUST BE COMPLETED AND RETURNED WITHIN 90 DAYS OF THE DATE OF THIS NOTICE Name of Client(s) (include all names under which you believe you may have been listed): ___________________________________________________________________ Your Thelen LLP Client Number(s): ____________________________________________________________________ Provide your current address and any and all additional addresses that you may have had while a client of Thelen: _______________________________________________________ Current Address: House/Apt. No., Street, City, State and Zip Code ________________________________________________________ Additional Address: House/Apt. No., Street, City, State and Zip Code ________________________________________________________ Additional Address: House/Apt. No., Street, City, State and Zip Code Provide your current phone number and any and all phone numbers that you may have had while a client of Thelen: _____________________________________________________________________ Provide your current e-mail address: _____________________________________________________________________ Provide the name(s) of the former Thelen attorneys that were involved in your particular matter and the Thelen office in which they were resident: _____________________________________________________________________ Check the appropriate box indicating whether you want to retrieve your file or if you want the file transferred to another attorney or law firm. Retrieve/Pick Up
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Transfer Abandon/Destroy If you have selected to have your file transferred, please provide the name, address and phone number where you would like your file transferred.

_______________________________________________________________________ Name, Address, Phone Number


ACKNOWLEDGEMENTS: 1. I acknowledge that I am the Thelen client for whose benefit these Client Files were generated and that I have full authority to control these files and the information contained these files. I understand that these files may contain personal or confidential information assume full responsibility for the information. 2. I acknowledge that I am under no obligation to retrieve or transfer my file and that if I choose not to retrieve or transfer my file within ninety (90) days of the date of the Notice, such files shall be deemed abandoned and the Client Files may be destroyed and/or otherwise disposed of as the Trustee deems necessary within his business judgment and without further order of the Court. 3. I acknowledge by submitting a Retrieval/Transfer Form, that I agree to pay the Trustee all reasonable costs, which shall be no less than the actual contract costs, associated with the retrieval, transfer and/or destruction of my files. 4. I acknowledge that to the extent I owe monies to Thelen, I agree to pay the amount or, if my payment is contingent upon the results of the litigation, I will execute an acknowledgement of an attorneys lien (the Attorneys Lien Acknowledgement) in favor of the bankruptcy estate against such file and any monies recovered in connection with such legal matter and I understand that my file cannot be retrieved or transferred until such Attorneys Lien Acknowledgement is received. I further acknowledge that the Attorneys Lien Acknowledgement must be provided to the Trustee within one week from the date of the receipt by the Trustee of my Retrieval/Transfer Form. I further acknowledge that I am responsible to pay the Trustee for reasonable fees but no less than the actual contract fees incurred by the Trustee to maintain my files after the expiration of the one week time period. 5. I acknowledge that to the extent that a completed Retrieval/Transfer Form is received and the Trustee is requested to hold onto my file and/or my authorized representative is unable to take possession of my file sooner than one week from the date of the receipt by the Trustee of my Retrieval/Transfer Form, then I am responsible to pay the Trustee for all reasonable costs but no less than the actual contract fees incurred by the Trustee to maintain my files after the expiration of the one week time period. 6. I acknowledge that to the extent a dispute exists as to the right of possession as to any of my files, the disputing parties I am jointly and severally responsible to pay the Trustee all reasonable costs incurred to maintain such files pending resolution of the dispute.

Dated:

By: ___________________________________________
Signature (Signatures are required to retrieve or transfer your file)

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THELEN LLP UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK, CASE NO. 09-15631 (ALG) YANN GERON, CHAPTER 7 TRUSTEE IMPORTANT NOTICE TO ALL FORMER THELEN ATTORNEYS: AT THE DIRECTION OF THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, THIS IS TO ADVISE EACH OF THE FORMER THELEN LLP ATTORNEYS THAT AT A HEARING HELD IN THIS MATTER ON DECEMBER 15, 2009, THE COURT INSTRUCTED THE TRUSTEE TO ADVISE EACH OF THE FORMER THELEN LLP ATTORNEYS OF THE FOLLOWING: 1. All former Thelen LLP attorneys should cooperate in the Trustees efforts to transfer or dispose of former Thelen LLP client files currently in storage in various storage facilities. All recipients of this letter should have received notice of the Trustees motion to implement a protocol for the return or abandonment of these files (the File Protocol Motion). The File Protocol Motion was granted by the Court on December 15, 2009 . A copy of the File Protocol Motion is available at http://omnimgt.com/SBLite/ThelenLLP, and a copy of the order granting that motion will be posted on this website promptly after docketing by the Court. 2. Per the Courts instructions, to the greatest extent possible, attorneys should assist the Trustee by: a. Locating and contacting former Thelen clients, and advising them of the File Protocol Motion and of its implementation. b. Providing to the Trustee the most current contact information of those clients. c. Identifying to the Trustee the location of all files the former clients or attorneys are seeking to retrieve and transfer. d. Facilitating payment of all unpaid pre-petition and post-petition storage costs of the files, as well as all costs incurred in the retrieval, transfer or destruction of such files; and e. Notifying the Trustee promptly and in writing of any former client files currently in storage that can be abandoned by the Trustee immediately.

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3. Per the Courts express instruction, the Trustee reserves all estate rights to recover from former Thelen attorneys the expenses of implementing the relief granted pursuant to the File Protocol order. Dated: New York, New York January 7, 2010 FOX ROTHSCHILD LLP Counsel to Yann Geron, Chapter 7 Trustee

By: /s/ Yann Geron Yann Geron Kathleen Aiello 100 Park Avenue, Suite 1500 New York, New York 10017 (212) 878-7900 ygeron@foxrothschild.com kaiello@foxrothschild.com

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