Free Designation of Record on Appeal - District Court of Delaware - Delaware

Case 1 :05-cv-00218-GIVIS Document 2-10 Filed 04/13/2005 Page 1 of 4
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
)
)
In re: ) Chapter 11
)
CONE MILLS CORPORATION, et ai., ) Case N0. 03-12944 (MFW)
)
Debtors. ) (jointly Administered)
J
Hearing Date: February 28, 2005 at 10:30 a.m. (EST)
Ref. Docket Nos. 998 and 1137
COMMITTEE’S CONSOLIDATED OBJECTION TO WLR RECOVERY FUND II L.P.,
WLR CONE MILLS ACQUISITION LLC AND INTERNATIONAL- TEXTILE GROUP,
INC’S MOTIONS SEEKING (1) ENFORCEMENT OF THE COURT’S SALE ORDER
INJUNCTION OR, (2) ALTERNATIVELY, (i) ALI.OWANCE OF ANDMINISTRATIVE
CLAIMS, OR (ii) RESCISSION OF THE DEBTORS’ ASSET SALE
DOCKET NOS. 998 AND 1137
The Official Committee of Unsecured Creditors (the "Committee") ot` Cone Mills
Corporation ("Cone Mills"), et ai., the debtors and debtors-in-possession herein (the "Debtors"),
by and through its co-counsel Hahn & Hessen LLP and Cozen O’Connor, hereby tiles this
objection (thc "Objection") to the two Motions filed by the purchasers ofthe Debtors‘ assets and
their affiliates, captioned: (IU Motion of WLR Recovery Fund H LP. and WLR Cone Mitts
Acquisition LLC for (I) Order Enforcing Safe Order injunction Against the Debtor and the
Pension Benefit Guaranty Corporation, or Alternatively (2) for Aiiowance of an Administrative
Claim pursuant to ii US.C.§§ i05(a), 363 and 503(a) or (3)for Rescission ofthe Safe (the
“PBGC" Motion) and (H) Motion ofthe Internationai Textile Group, Inc. for an Order (J)
Granting it an Administrative Ciairn Against the Debtors pursuant to I I U.S, C,§§ iO5(a), 363
and 503(a), orAZternativet`y (2) to Set Aside the Sale Order and Rescind the Sale (the “Crompton
Motion" and together with the PBGC Motion, collectively, the “Motion"). In support ot` the
Objection, the Committee respectfully states as follows:

Case 1:O5—cv—OO218-Gl\/IS Document 2-10 Filed O4/13/2005 Page 2 of 4
BACKGROUND
l. On September 24, 2003 (the "Petition Date”), the Debtors each filed voluntary
petitions for relief with this Court (collectively, the "Case") under Chapter ll of Title ll of the
United States Code (the “Bankruptcy Code"). The Debtors continue to manage their properties
as debtors in possession pursuant to Sections ll07(a) and 1108 ofthe Bankruptcy Code. No
trustee or examiner has been appointed in the Case.
2. On October 7, 2003, the U.S. Trustee appointed seven (7) members to the
Creditors Committee, including the Debtors’ largest unsecured creditors and employces’ union. l
The following creditors were appointed to the Creditors Committee: Parkdale Mills Inc., Union
ot`Needletraders Industrial & Textile Employees ("UN ITE"), Dunavant Enterpri ses, Inc.,
Spectrum Textured Yarns, Inc., Brenntag Southwest, Inc., Sunstate Maintenance Corp., and
Clariant Corp.1
3. On October 7, 2003, the Creditors Committee selected Hahn & Hessen LLP and
Cozen & O’Connor to sewe as co-counsel to the Creditors Committee.
ARGUMENT
4. By their Motions, WLR Recovery F und II L.P. and Intemational Textile Group
Inc. t7lo‘a/ WLR Cone Mills Acquisition LLC ("ITG") (collectively, the "Movants"`) seek (i) to
force the Debtors to comply with this Court’s order, dated February 12, 2004, authorizing the
sale of substantially all of the Debtors’ assets to WLR Cone Mills Acquisition LLC (the "Sale
Order”), (ii) to enjoin certain non-debtor parties from pursuing certain alleged environmental
liabilities against ITG based on a theory of successor liability, (iii) to assert administrative
expense claims for any damages that they may be required to pay to the PBGC, NJDEP andfor
I Spectrum, Sunstate and Clariant have subsequently resigned from the Creditors Committee.
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Case 1 :05-cv-00218-GIVIS Document 2-10 Filed 04/13/2005 ‘ Page 3 of 4
Crompton,2 and (iv) to request the Court to rescind the Sale Order if the administrative claims are
unavailable to the Movants.
5. The Committee has discussed the Motions with Debtors’ counsel and agrees that
it is necessary to object to same. ln order to avoid duplication of efforts it was agreed that the
Debtors would take the laboring ore in drafting an objection that would address all of the issues
that the Debtors and the Committee raised with respect to the Motions. Contemporaneously
herewith, the Debtors are filing such an objection (the “Debtors’ Objection"). The Committee
has reviewed a draft of the Debtors’ Objection and agrees with the arguments set forth therein.
As such, the Committee adopts and incorporates fully, by reference herein, each of the
arguments set forth in the Debtors’ Objection.
6. As stated in the Debtors’ Objection, there are substantial reasons for denying the
Motion. The Debtors have complied with the Sale Order and it is the Court, not the Debtors,
who is capable of enforcing the Sale Order as against the PBGC, NJ DEP and Crompton. ln
addition, the Debtors should not be held liable for any administrative expense claims asserted by
Movants to indemnify them against the claims asserted by the PBGC, NJ DEP and Crompton
pursuant to certain lawsuits or to reimburse them for the cost of defending such suits. As clearly
set forth in the Debtors’ Objection, the Debtors did not breach the APA or the terms ofthe Sale
Order and should not be held liable for disputes between third party non-debtors.
7. Even assuming Ross’ indemnification claim had some merit, a claim for breach of
the APA is not ripe as the PBGC, NJ DEP and Crompton must first succeed in their litigations
against the Movants. For example, with respect to Crompton’s claims, it has come to light that
Crompton had in fact received notice. Therefore, the Debtors should not be liable to Movants on
2 All capitalized terms not defined herein shall have thc meaning ascribed to them in the Debtors’ Objection.
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Case 1:O5—cv—OO218-GI\/IS Document 2-10 Filed 04/13/2005 Page 4 of 4
a claim that Crompton did not receive notice ofthe sale.
8. Finally, as more fully set forth in the Dcbtors’ Objection, thc Debtors have not
engaged in any tortious conduct and it would not be "equitable" to grant Movants relief by
forcing the Debtors to indemnify Movants when no indemnity provision ever existed in the APA.
CONCLUSION
WHEREFORE, the Committee respectfully requests that (i) the Motions be dismissed in
their entirety, and (ii) this Court grant such other and further relief as it deems just and proper
under the circumstances.
Dated: February 22, 2005
Wilmington, Delaware COZPN 0’CONNOR
[
f
M E. Felger o. 3919)
J Frey R. Waxman (No. 4I59)
201 N. Market Street
Suite 1400
Wilmington, DE 19801
(302) 295-2000 - telephone
(302) 295-2013 - fax
-and-
HAHN & HESSEN LLP
Mark S. lndelicato
Mark T. Power
488 Madison Avenue
New York, New York 10022
(212) 478-7200 - telephone
(212) 478-7400 - fax
Co-Counsel to the Official Committee of
Unsecured Creditors of Cone Mills Corporation, etal.
w||.M1x2ss06x1 144954.000
222.*05
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