Free Appendix - District Court of Delaware - Delaware

Case 1:04-cv-01565-SLR

Document 124

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Case 1:04-cv-01565-SLR

Document 124

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Case 1:04-cv-01565-SLR

Document 124

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Case 1:04-cv-01565-SLR

Document 124

Filed 04/17/2007

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IN

THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

ARL1N
the

ADAMS
Delaware

as

Chapter 11 Trustee of

Case

No

04-1

565SLR

Bankruptcy

Estates

of Coram Healthcare and

Jointly Administered

Corp
Inc

Corporation Corporation

Coram

Delaware

Plaintiff

DANIEL

CROWLEY
Defendant

THE CHAPTER 11 TRUSTEES ANSWERS TO DEFENDANT DANIEL CROWLEYS FIRST SET OF INTERROGATORIES TO PLAINTIFF ARLIN ADAMS

Plaintiff

Arlin

Adams

the

Chapter II Trustee the

Trustee

of the

Bankruptcy

Estates

of Coram Healthcare Corp and

Coram

Inc collectively

Coramhereby
to Plaintiff

responds

to

Defendant

Daniel

Crowleys

Crowley First Set

of Interrogatories

Arlin

Adams

as

follows

GENERAL OBJECTIONS
The Trustee
asserts the

following general

objections

all

of which

are

incorporated

in his specific

responses

The Trustee

objects

to

each interrogatory definition

and instruction

to the

extent

that

it

seeks to impose

an obligation

or

burden

beyond

that

required by the Federal Rules

of Civil Procedure

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The

Trustee

objects

to

each

interrogatory

to the

extent

that

it

seeks

infommtion

subject

to the attorney

client privilege

or the

work product

doctrine

or

any other

privilege

or doctrine

which

precludes

discovery

The

Trustee

objects

to

each interrogatory

to the

extent

that

responding

would

impose

an undue burden

on the Trustee

The

Trustee

objects

to

each

interrogatory

to

the extent

that the information

requested

is

equally

available

to

Crowley
each

The

Trustee

objects

to

interrogatory

to the

extent

it

seeks

infonnation

not relevant

to

this

litigation

and

not reasonably calculated

to

lead

to

the discovery

of admissible

evidence

PRESERVATION
The Trustees responses do
and
intend not

OF RIGHTS
and do not intend
to

waive

waive

but on

the

contrary preserve

to

preserve

All

objections

as

to

competency

relevancy

materiality

privilege

and

admissibility

for

any purpose

in

any subsequent

proceeding or the

trial

of

this

or

any other

actions

The

right to object

on any ground

to

the

use of any of these

responses or

the subject

matter

thereof in any subsequent

proceeding or

trial

of

this

or

any other actions

The

right to object

at

any time to

demand

for further responses

to these

or

any other

discovery requests

involving or reiating to the subject

matter

of these

interrogatories

and

The

right

at

any time to revise correct

supplement

clarify or

amend

the

answers

and responses set forth herein

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RESPONSES TO INTERROGATORIES
omission by Crowley forms the basis

Identify

and

describe

each

act or

that

for

your allegations

that

Crowley had

conflict

of interest with

Coram

SPECIFIC OBJECTIONS
that contains

The

Trustee

objects

to

Interrogatory

No
it

on the grounds

it

undefined terms

is

overly

broad

vague

and

ambiguous and

is

overly

burdensome

to identify

and

describe

undertook every act Crowley

or failed

to

undertake

over

several-year

period

that

underlies

the

Trustees

allegations

that

he had

conflict

of

interest

Subject

to these

objections

the

Trustee will provide

combined

response

to

Interrogatories

through

Identify

and describe

each

act or

omission by Crowley

that

forms the basis

for

your allegations

that

Crowley

breached

his

duty to Coram to act in good

faith

SPECIFIC OBJECTIONS
on the grounds
that

The

Trustee

objects

to Interrogatory

No
to

it

is

overly

broad

vague

and

ambiguous

and

it

is

overly

burdensome

identify

and

describe

every act Crowley undertook or failed

to

undertake over

several-year

period

that

underlies

the

Trustees

allegations

that

he breached

his

duty

to

Coram

to act in

good

faith

Subject

to these

objections the Trustee

will

provide

combined

response

to-

Interrogatones

through

Identify

and

describe

each

act

or

omission by Crowley that forms the basis

for

your allegations

that

Crowley

breached

his

duty

to

Coram

to act

with due

care

SPECIFIC OBJECTiONS
that

The Trustee

objects

to

Interrogatory

No
to

on the grounds

it

is

overly

broad

vague

and

ambiguous

and

it

is

overly

burdensome

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identify

and describe

every act Crowley

undertook or failed to undertake over

several-year

period

that

underlies

the

Trustees

allegations

that

he breached

his

duty

to

Coram

to act with

due

care

Subject

to these

objections the Trustee

will

provide

combined

response

to

Interrogatories

through

Identify

and

describe

each

act or

omission by Crowley

that

forms the basis

for

your allegations

that

Crowley

breached

his

duty of loyalty

to

Coram

SPECIFIC OBJECTIONS
on the grounds
that
it

The

Trustee

objects

to

Interrogatory

No
to

is

overly broad vague

and

ambiguous and

it

is

overly

burdensome

identify

and

describe

every act Crowley

undertook or failed to undertake over

several-year

period

that underlies

the

Trustees

allegations

that

he had

breached

his

duty of loyalty

to

Coram

Subject

to these

objections the Trustee

will

provide

combined

response

to

Interrogatories

through

COMBINED RESPONSE TO INTERROGATORIES

THROUGH

Subject

to

and without

waiving the foregoing

objectionsthe

Trustee

responds

to

Interrogatories

through

by
had

setting forth

this

summary of

facts

which

form the basis of his

allegations

that

Crowley

conflict

of interest and

breached

the

triad

of fiduciary

duties

that

he owed

to

Coram

as

an officer

and

director

From approximately Goldman Sachs

1997

on

Cerberus Partners L.P

Cerberus
the

together

with

Credit

Partners

L.P

and

Wells Fargo

Foothill

collectively

Noteholders
of numerous

owned

substantially

all

of Corams

debt

Cerberus

is

major investor

in the debt

distressed

companies

it

alone

held

approximately

36%

of Corams

debt

The chairman

of

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Cerberus Stephen

FeinbergFeinberg
filed

sat

on

Corams Board

from 1998

until

July

2000

shortly before

Coram

for

bankruptcy

Cerberus maintained

bench
on

of

CEO

consultants

who were

available

to

work

for

Cerberus with troubled

companies

project-by-project

basis

In

early

1999 Cerberus

retained

Crowley

as

turnaround consultant

In July

1999 Crowley and Cerberus work

entered

into

an oral agreement

under which

Crowley

agreed

to

exclusively

for

Cerberus for three years

at

salary

of $80000

per month plus

expenses

with the possibility of substantial

bonuses

In

August

1999

after

Crowley

and Cerberus had

entered

into their oral

agreement

Feinberg recommended to Corarns

Board

of Directors

the

Board

that

it

hire

Crowley

as

consultant

to

work with Corams

newly-elevated

CEO

Richard Smith

Smith

Feinberg

disclosed

to the directors that

Crowley

had

relationship

with Cerberus but provided

no

information

about that relationship

After

Smith

left

Coram

in

October

1999 Crowley wrote

to

Coram Chairman

Donald

Amaral

Amaral on
month
crisis

October

26 1999

In that

letter

Crowley

stated

that

he and

Smith had

six6
with

management

contract

in

place

and that he

would
and

like

to

help

you

this

project

and begin the restructuring

process

Crowley

Amaral began

negotiations

on

an employment

agreement

no

later

than

early

November 1999

At the same time as he was negotiating

with Amaral

to

be

Corams

CEO

Crowley sent

Personal

Confidential

letter

dated

November 12 1999

to

Feinberg stating

that

asked

me

to take

over the Coram operations

and

requesting

additional

compensation

from Cerberus

to

induce him

to

become

CEO

of

Coram

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The Noteholders

offered

Coram

six-month

interest accrual

holiday if Crowley

was

hired

as

CEO

On November 15 1999

Amaral

and

the

Noteholders

agreed

on the terms of

the interest forbearance

agreement

On November 17 1999
with Crowley which

the

Board

approved

three-year

employment

agreement

he signed the next day the Crowley/Coram

Employment

Agreement
benefits

The Crowley/Coram
bonuses

Employment Agreement
of between

provided for

base salary

of $650000

potential

$390000 and $1950000

depending

on

Corams

EBITDA
of Coram stock
at

minimum

24-month

severance

period

options

to

purchase

one million shares

then

market rates

and

an acquisition

bonus upon

change

in control

The day

after

he signed

the

Crowley/Coram

Employment Agreement

Crowley

executed

written

employment

agreement

with Cerberus

effective

August

1999 which

memorialized

the

terms of

their

July

oral

agreement

the Crowley/Cerberus

Employment
devote

Agreement
entire business

The Crowley/Cerberus Employment
and

Agreement

required

Crowley

to

his

time attention

skill

energy exclusively

to

the business

of

by

performing

duties

to

be assigned

by Feinberg

The Crowley/Cerberus

Employment Agreement

also

provided

that

Cerberus could

terminate

Crowley for cause

if

Crowley

did

not follow

Cerberus

reasonable

instructions

Neither

Crowley nor Feinberg disclosed

to the

Board

the

existence

or terms

of the Crowley/Cerberus

Employment Agreement

Corams

corporate

policy

provided that actual

conflicts

of interest must be

avoided

and

that

any action

creating

potential

conflict

of interest must be disclosed

and

approved

in

advance

Crowley failed

to

seek Board

approval

of his employment

contract

with

Cerberus

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Crowley

signed the management

letter

to

Corams

outside

auditors

for the year

ending December

31 1999

in

which

he stated that

are

no instances

where

any officer

or

employee

of

has an interest in

company with which
that has not

does business

that

would

be

considered

conflict

of interest

been

disclosed

or

waived

Such

an

interest

would

be

contrary

to

policy

Coram

retained

Crowley

wholly-owned

consulting

company Dynamic

Dynamic
paid fees to

Health Care Solutions L.L.C

Dynamic to

act as

consultant

to

Coram

which

Dynamic

in

excess of $1

million

On
from

February

28 2000

Crowley wrote to the Board

and

demanded

additional

compensation

Coram more

claiming that he was working

19-hour days and that

Coram we

will

take

longer

involve

and

will

need

me

to

stay

on

task

for

much

longer

than

envisioned

when

said

Yes

Crowley

did

not

disclose

to the

Board

that

while he was allegedly

working

19-hour days for

Coram

Cerberus was

paying him $80000

per month

In

response

to

Crowleys demand
an amendment

for additional

compensation

from

Coram

Feinberg and

Crowley

negotiated

to

the

Crowley/Coram

Employment Agreement new bonus

with

Coram
that

which

was

executed

as

of April

2000

The amendment provided

structure

was

far greater

than

the

maximum
that

$1.9

million

bonus

for

which

Crowley

was

eligible

under

the

employment agreement
could claim

he had

signed

just four

months

earlier

Under

the

new arrangement

Crowley

bonus

of up to

25%

of the amount

by which

Corams

EBITDA
exceeded

for

2000

exceeded

$14

million

and

an additional

$5 million bonus

if

EBITDA

$35

million

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At the time Crowley

and

Feinberg were negotiating

the

amendment

to the

Crowley/Coram

Employment

Agreement

Crowley

anticipated

that

Coram would

be restructured

by

filing

bankruptcy petition

under

Chapter 11 with

proposed

plan

of reorganization

that

would

eliminate

the public

shareholders

without

any payment to them

Nevertheless

between

November 30 1999

and

July

31 2000

Crowley

caused

Coram

to

pay the Noteholders

approximately

$60

million These

payments

included

much

of the proceeds

from Coranis

July

2000

sa of
and

its

specialty

pharmacy

division

Coram

Prescription

Services

CPS
to

nearly

$40

million

an additional

$6.3

million

payment

that

Crowley

made

the

Noteholders

just three

weeks

before

Coram

declared

bankruptcy

Although

the

CPS

division

was

losing

small

amount

of money

it

had

excellent

long-term profit potential

CPS

had

been

valued in excess

of $100

million

by Corams

investment bankers

but

was

sold

for

approximately

$40

million

On

August

2000 Coram

filed

Chapter Il petition

in

the

U.S

Bankruptcy

Court for the District of Delaware

together

with

proposed

plan of reorganization

the First
and

Plan

The

First

Plan provided

for the cancellation

of

all

of the shareholders

interests

for

the issuance

of

all

of the new

Coram

stock

to the

Noteholders

Corams

other

unsecured

creditors

would

receive

$2

million

and

Corams

shareholders

would

receive

nothing

On
of Equity Security

October

18 2000

the

United States Trustee

appointed

an Official Committee

Holders the Equity

Commiffee
obtained

to represent

the interests

of Coram

common

shareholders

The Equity Committee
documents

the

Crowley/Cerberus

Employment

Agreement

and

other

in discovery

in

connection with the

First

Plan which

the

Equity

Committee

opposed

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During

the

confirmation hearng Crowley

testified

that

the

Crowley/Cerberus

Employment Agreement
with Coram

--

which

provided

for

payments

significantly

greater

than did his

agreement

--

had

nothing to do with

Coram The
the

Court did not find Crowleys

position

credible

Rather

on December

21 2000

Bankruptcy

Court denied confirmation

holding that Coram had

not proposed

its

reorganization

plan in good

faith

as required

under

the

Bankruptcy

Code

In

its

oral

ruling the Bankruptcy

Court explained

that

it

could not confirm

the

plan

because

Crowley

had

an actual

conflict

of interest

by

virtue

of his contractual

relationship

with Cerberus

op

12/21/00

at

89 The Bankruptcy
of

Court found

that

that actual

conflict

of

interest

tainted the debtors

restructuring

its

debt

the

debtors

negotiations

towards

plan

even

the

debtors

restructuring

of

its

operations

Id

at

88

As

result

of Crowleys relationship

with Cerberus

Coram

did

not

emerge

from bankruptcy in December 2000

Despite the Bankruptcy

Courts ruling Crowley
be paid

did

not tenninate

his relationship

with Cerberus

In fact

Crowley

continued

to

$80000 per month by Cerberus throughout

2001

The Board formed

Special

Committee which

retained

Harrison

Goldin

Associates

L.L.C

001dm

as

restructuring

advisor

In

report

of

its

investigation

Goldin

concluded

that

Crowley

should have

disclosed

the

full

extent

of his employment

agreement

with

Cerberus and

that his failure to

do so was

breach

of his fiduciary

duties

to

Coram

Goldin also

concluded

that

Crowley

had

advanced

Cerberus

interests

at

Corams

expense by making cash

payments

to the

Noteholders prior

to

Corams

filing

for

bankruptcy

In

addition Goldin

determined that

as

of the date

of his report Crowleys conflict had

caused Coram

to

incur

at

least

$12

to

$15

million

in

business

losses

and professional

fees in the

bankruptcy proceedings

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Coram based

its

second proposed

plan

of reorganization

the Second
of

Plan

on

Goldins

report

The Second

Plan again

provided

for the cancellation

all

shareholders

interests

and

for the issuance

of new

Coram

stock

to the

Noteholders

including

Cerberus

Corams

shareholders

would

receive

$10

million

if

they

voted

to

approve

the

plan

Corams

other

unsecured

creditors

would

receive

$3 million amounting

to

less

than

40%

of

their

claims

In addition

the

Second

Plan

provided

that

Crowleys compensation

be reduced

by

$7.5

million

as

recommended by Goldin

During the confirmation

hearing

on the Second

Plan Crowley

testified

that

Cerberus was not paying him for his work

at

Coram

but instead

for his

work on non-Coram

matters

Again

the

Bankruptcy

Court rejected

Crowleys testimony

as

not credible

Op

12/21/01

at

16-17

On December 21 2001
confirmation

the

Bankruptcy

Court issued

written

opinion denying

The Bankruptcy

Court concluded

that

Crowleys agreement

with Cerberus

continued to present

an actual

conflict

of interest

As

the

Bankruptcy

Court put it

in

fact

has

changed

since

the

first

confirmation

hearing

Op.l2/2l/Ol

at

13

The Bankruptcy

Court explained

that

Crowleys
appearance

actual

conflict

of interest goes beyond Crowley
creditor cannot serve

the

mere
of

of impropriety
large

the interests the

both the Debtors and Consulting Agreement
if

Cerberus

Under
to

Cerberus has the discretion
instructions
to

fire

Crowley

he

fails

to

follow in

its

resulting

in the loss

of$1 over

million

per year

compensation
the

Crowley That
is

control

Crowley and

indirectly

Debtors

simply not proper

10

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op
every

12/21/01

at

15

The Bankruptcy

Court concluded

that

the

conflict

in

this

case

transcends

single

thing

Crowley

does on behalf of the Debtors

Op

12/21/01

at

24 As
in

result

of

Crowleys

relationship

with Cerberus

Coram

did

not

emerge

from bankruptcy

December

2001

Following

the rejection

of the Second

Plan

the

Bankruptcy

Court entered

an

order

appointing

the plaintiff

Arlin

Adams

as

Corams Chapter

11

Trustee

Shortly

after his

appointment

the Trustee

reviewed

the

Bankruptcy

Courts

two opinions

denying confirmation

of

each of Corams

proposed

plans

of reorganization

As

result

the

Trustee required

that

Crowley have

no continuing

conflict

of interest and that he not receive

any further compensation

from Cerbenis

The Trustee

elected

to

continue

Crowleys employment
he that he was no

with Coram only

after

Crowley

explicitly represented

to the Trustee

that

longer receiving

any

compensation

from Cerberus

Crowleys employment
Because

agreement

with

Coram

expired

on November

26 2002

the Trustee

was concerned

that terminating

Crowley could

possibly

lead to substantial

departures

of key employees

thereby

endangering

Corams

ability

to

promptly

reorganize

the

Trustee

filed

motion to extend his employment

for

limited

transition

period

as

well

as

motion to reject his employment agreement

The Equity Committee

opposed

the

Trustees

motion and

filed

motion to immediately

terminate

Crowleys employment

In the

course of discovery

on the motions

Crowley

produced

documents

that

made

clear

that his prior representations

to

the Trustee

were

false

These

documents

showed

that

Crowley

was

in fact

continuing

to

ask

Cerberus for millions

of dollars to be paid

after

the

confirmation when neither

he nor Coram would

be under

the jurisdiction

of the Bankruptcy

11

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Court

Specifically

an insert to

draft

letter

to

Feinberg dated

May
after

2002

states

expect

that

youll honor

the

commitment you made

to

me

over dinner

Corams

plan

is

confirmed

or

its

assets

sold Ill be reinstated

with Cerberus and receive

$5000000

from Cerberus

Also

Cerberus will indemnify

me for

all

of

my legal

fees plus

pay

me

the difference

between

what

ultimately

receive

from Coram by way of bonuses

and

$11200000
answers
that

In

another

part

of the

letter

Crowley

stated that

he didnt have

to

recite the

bankruptcy

lawyer

gave

to say

in

Court

The Bankruptcy
and rejected

Court denied the Trustees

motion

to

extend Crowleys

employment

Crowleys testimony

stating that

do not believe

he

is

honest

Tr

3/3/03

at

195

Referring

to

the draft

letter

from Crowley

to

Feinberg

the

Bankruptcy

Court

concluded

that the

letter

after the appointment of the Trustee

continue
to get

to

show what

believe

is

continuation

of

Mr

Crowley

continued

efforts

to continue

reimbursement

from

Cerberus for

efforts

undertaken

in

this

case

Id

at

196

Crowley

resigned

from Coram

effective

March 31 2003

The

Trustee

thereafter

proposed

reorganization

plan

as did

the

Equity

Committee

Following

extensive

discovery

and

lengthy confirmation

hearing

in

October

2004
Plan

the

Bankruptcy

Court confirmed

the

Trustees

Plan and rejected

the

Equity Committees

See In re Coram Healthcare

Corp

315

B.R

321

Bankr

Del

2004

The

Trustee

reserves

his right

to

amend

or

supplement

his

response

as discovery

continues

12

CHDATA

38155_i

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Document 124

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Page 16 of 33

Identify

and

describe

any harm or damage

to

Coram caused by each

act or

omission by Crowley

identified

in

response

to Interrogatory

No

including

but not limited

to

any valuation

of any such harm or damage

SPECIFIC OBJECTIONS
on the grounds
that
it

The

Trustee

objects

to Interrogatory

No
to

is

overly

broad

vague

and

ambiguous and
from

it

is

overly

burdensome

identify

and

describe

the

harm

or

damage

resulting

every act Crowley undertook or failed

to

undertake over

several-year

period

Subject

to these

objections

the Trustee

will

provide

combined

response

to Interrogatories

through

Identify

and describe

any harm or damage

to

Coram caused by each
but not limited

act or

omission by Crowley

identified

in

response

to

Interrogatory

No

including

to

any valuation

of any such harm or damage

SPECIFIC OBJECTIONS
on the grounds
that
it

The

Trustee

objects

to

Interrogatory

No
to

is

overly

broad

vague

and

ambiguous and

it

is

overly

burdensome

identify

and

describe

the

harm or damage

resulting

from

every act Crowley

undertook or failed

to

undertake over

several-year

period

Subject

to

these

objections

the

Trustee will provide

combined

response

to

Interro-gatories

through

--

Identify

and

describe

any harm or damage

to

Coram caused by each

act or

omission by Crowley

identified

in response

to

Interrogatory

No

including

but

not limited

to

any valuation

of any such harm or damage

SPECIFIC OBJECTIONS
on the grounds
that
it

The

Trustee

objects

to

Interrogatory

No
to

is

overly

broad

vague

and

ambiguous and

it

is

overly

burdensome

13

CHDATA38I5S_I

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identify

and

describe

the

harm

or

damage

resulting

from

every act Crowley undertook or failed

to

undertake over

several-year

period

Subject

to these

objections

the Trustee

will

provide

combined

response

to Interrogatories

through

Identify

and

describe

any harm or damage

to

Coram caused by each

act or

omission by Crowley identified

in

response

to

Interrogatory

No

including

but not

limited

to

any valuation

of any such harm or damage

SPECIFIC OBJECTIONS
on the grounds
that

The

Trustee

objects

to Interrogatory

No
to

it

is

overly

broad vague

and

ambiguous
from every

and

it

is

overly

burdensome

identify

and

describe

the

harm

or

damage

resulting

act

Crowley

undertook or failed

to

undertake over

several-year

period

COMBINED RESPONSE TO INTERROGATOftIES

ThROUGH

Subject

to

and

without

waiving the foregoing

objections

the Trustee

states that

Corams

emergence

from bankruptcy was delayed as

result

of Crowleys conflict of interest

and

his

breaches

of his fiduciary

duties

causing Coram to suffer damages

Coram

incurred

reorganization

costs

in excess

of $36

million directly

attributable

to

the

delay in

Corams

emergence

from bankruptcy

Coram

also

sustained

business

losses

as

result

of remaining

in

bankruptcy

The

calculation

of such damages

will

be provided in expert reports which

will

be

served

in

accordance

with the current

scheduling

order unless amended

The

sale

of CPS

deprived

Coram of

the increase

in value

CPS enjoyed
and was

following

the sale

CPS was

sold

to

management-led

buy

out

group

for

$40

million

sold

three

years

later

for

$335

million

14

CBDATA

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Page 18 of 33

Coram

is

also entitled to

disgorgement of the compensation

that

it

paid

Crowley

while he served

as

conflicted

CEO

The

Trustee

reserves

his right to

amend

or

supplement

his

answer

to

this

interrogatory

as discovery

continues

As

to

objections

Dated

December 20 2006

SCHNADER

HARRISON SEGAL

LEWIS LLP

By

Is Richard Richard Michael 824 Market

Barkasv Barkasy
Barrie Street

4683 4684
Mall
Suite

1001

Wilmington

DE

19801

302 302
-and-

888-4554 888-1696

telephone
facsimile

Wilbur Barry 1600

Kipnes
Bressler

Market

Street

Suite

3600

Philadelphia

PA

19103-7286

215 215
Counsel

751-2000 751-2205

telephone
facsimile

to Arlin

Adams

Chapter 11 Trustee

15

CHDATA38I55I

A15

Case 1:04-cv-01565-SLR

Document 124

Filed 04/17/2007

Page 19 of 33

IN

THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

ARLIN
the

ADAMS
Delaware

as

Chapter 11 Trustee

of

Case

No

04-1565SLR

Bankruptcy

Estates

of Coram Healthcare and

Jointly Administered

Corp Inc

Corporation Corporation

Coram

Delaware

Plaintiff

DANIEL

CROWLEY
Defendant

CERTIFICATE

OF SERVICE

Michael

Barrie

certif

that

am

not

less than

18

years

of age

and

that service

of the Chapter 11 Trustees

Answers

to

Defendant

Daniel

Crowleys

First

Set of

Interrogatories

to Plaintiff

Arlin

Adams was made
Mail and

on December

20

2006

upon

the

persons

listed

below

via

Electronic

United States First Class Mail

certify the

foregoing

to

be true and

correct

under

penalty

of perjury

Is Michael Michael

Bame
Ban-ic

Dated

December 20 2006 Served

Parties

Jeffrey Christina

Wisler

Esquire

Elliot Garrett

Peters Esquire

1007

Thompson Esquire Orange St P.O Box 2207

Lynch

Esquire

Keker 710

Van Nest LLP
Street

Wilmington

DE

19899

Sansome

Email jwislericbIh.com Email [email protected]

San Francisco

CA

94111

Email epeterskvn.com Email [email protected]

16

CHDATA

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CERTIELCATION
Thereby
certifr that the
facts set

forth in the

foregoing

interrogatory

answers

are

true

and

correct

to the best

of

my knowledge

information

and

belief

Arlin

Adams Ch

11

Trustee

Dated

December 20 2006

17

CHDATA38J55J

A17

Case 1:04-cv-01565-SLR

Document 124

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Page 21 of 33

IN

THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

ARLIN
The

ADAMS
Delaware

as

Chapter of Coram

11

Trustee

of

Case

No

04-1565

SLR

Bankruptcy

Estates

Healthcare

Jointly Administered

Corp
Delaware

Corporation

and

Coram Inc

Corporation

Plaintiff

DANIEL

CR0 WLEY
Defendant

THE CHAPTER 11 TRUSTEES ANSWERS TO DEFENDANT DANIEL CR0WLEYS SECOND SET OF INTERROGATORIES TO PLAINTIFF ARLIN ADAMS

Plaintiff

Arlin

Adams

the

Chapter

11

Trustee the

Trustee

of the Bankruptcy hereby responds Arlin
to

Estates

of

Coram
Daniel follows

Healthcare

Corp and

Coram Inc

collectively

Coram

Defendant

Crowleys

Crowley

Second Set of

Interrogatories

to Plaintiff

Adams

as

GENERAL
The Trustee
specific asserts the

OBJECTIONS
all

following

general objections

of which are incorporated

in his

responses

The Trustee
that
it

objects

to

each

interrogatory

definition

and

instruction
the

to the

extent

seeks

to

impose an

obligation

or

burden

beyond

that

required

by

Federal

Rules

of Civil

Procedure

The Trustee
subject to the attorney

objects

to

each

interrogatory

to

the

extent

that

it

seeks

information

client

privilege or the work

product

doctrine

or

any

other privilege

or

doctrine

which precludes The

discovery
objects to

Trustee

each

interrogatory

to the

extent

that

responding

would

impose an undue burden

on the Trustee

CI-IDATA

390062

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Page 22 of 33

The Trustee
requested
is

objects

to

each

interrogatory

to the

extent

that

the

information

equally available

to

Crowley
to

The Trustee
relevant to this litigation

objects

each

interrogatory

to

the extent

it

seeks

information

not

and

not reasonably

calculated

to

lead

to

the

discovery

of admissible

evidence

The Trustee
interrogatories

obj ects

to

each

interrogatory

to

the

extent

that

it

is

duplicative

of

contained

in

Crowleys

First Set

of Interrogatories

PRESERVATION
The
preserve and Trustees intend do not waive and do

OF RIGHTS
not intend to waive

responses
to

but on

the

contrary

preserve relevancy proceeding materiality privilege
or the
trial

All objections as to competency
admissibility for

and other

any

purpose

in

any

subsequent

of this or any

actions

The
subject

right to

object

on any ground

to the

use of any
trial

of these responses
other

or the

matter thereof

in

any

subsequent
at

proceeding time to

or

of this or any

actions

The
other

right to

object

any

demand
subject

for further

responses to these or any
interrogatories

discovery

requests

involving
at

or relating

to the

matter of these

and

The
and

right

any time to revise correct

supplement

clarify

or

amend

the

answers

responses set forth

herein

RESPONSES
Do you
or

TO INTERROGATORIES
original

agree

that

Corams
to

proposed and

plan of reorganization shareholders of

submitted

on

about

August
all

2000 was
documents

fair

both the debtholders

Coram

If

not

please identify

and

describe

all

facts

that

serve as

basis

for

your

disagreement

Response The
undefined Trustee
objects to Interrogatory

No

on

the

grounds

that

it

contains does not

terms and
the

is

vague and

ambiguous

Subject to this objection

the

Trustee

agree that

original

plan of reorganization as proposed

by Coram while Daniel
cdebtholdeI.s and

Crowley
of

Crowley

was

its

Chairman and

CEO

was fair

to the

shareholders

CHDATA

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Page 23 of 33

Coram

because with

the

Bankruptcy

Court

determined

that

the

plan was not submitted court found
that

in

good

faith

in

accordance

11

U.S.C

1129

a3
of
its

The Bankruptcy
created

Crowleys on
his part that

employment agreement
tainted
the

with cerberus

an actual
the

conflict

of interest

Debtors

restructuring

debt

Debtors

negotiations

towards

plan even
response
if

the

Debtors

restructuring

of

its

operations
that

12/21/00
proposed

Tr

at

88

By way of

further

the

Trustee states

that

it is

his position

the

plan would have

been confirmed

Mr

Crowley did not have

conflict

of interest

Do you
Goldin Report that
the

agree

with the conclusion

of Goldin

Associates

L.L.C
as
it

at

page

11

of the

Other
any

than the $6.3 million interest payment

which
that

turned

out did
conflict

not

cause

company

harm

there

is

no evidence

suggesting

had

he

had no
or that
that

Crowley would have managed
have have
identified

Coram

operations any

or finances

more

effectively

he would

let alone consummated

merger
If

sale

or

financing transaction

might describe
all

enabled
that

Coram

to

avoid

bankruptcy

not please

identify

documents

and

facts

serve as

basis

for

your disagreement

Response The
unduly Trustee
obj ects to Interrogatory

No

on

the

grounds
the

that

it

is

overly broad
that

burdensome

vague and
the

ambiguous

Subject to this objection Associates

Trustee states

he

does not agree with Goldin

conclusions

of Goldin

LLC

Goldin
its

at

page

11

of the

Report which were

rejected

by
a/ia

the

Bankruptcy

Court in

December

21

2001

Opinion
thing

The Bankruptcy
that

Court found

inter

that

Crowleys
and
that

conflict

transcends

every single

Crowley does on behalf of Debtors
impact

the

Debtors

given
any

the

actual

conflict

of interest which Debtors

the

CEO
on
the

has we
rights

are

unable to conclude taken

that

action

taken

by

the

which

may

of Cerberus were

without

any

undue consideration

of the interests

of Cerberus before

12/21/01

Opinion

at

18

24

The

plainly

improper
the

$6.3 million interest without and

payment

shortly

filing

bankruptcy

reflects

mind
as

set to

pay

Noteholders

any

consideration shareholders of thousands

of other constituencies

such

general unsecured of thousands

creditors

common
and hundreds and

The

record

in this

case consists and

of pages

of testimony

of pages
to identify

of documents

it

would be unduly
every fact
that

burdensome

expensive
that

time

consuming
influenced

every document

and

supports the assertion

the conflict

Crowleys

management

of

Coram

The

Bankruptcy

Courts December

21

2001

CHDATA

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opinion

states

the Trustees

position

By way

of further

answer

the

Trustee incorporates
first

by

reference

his

Combined

Response

to Interrogatories

through

of Crowleys

set

of

interrogatories

Do
Goldin cause
basis

you agree with

the

conclusion

of Goldin

Associates
the

L.L.C

at

page

11

of the

Report

that

the

6.3

million cash

interest

payment
all

to

Noteholders. describe
all

.turned

out
that

.not

to

Coram
for

any

harm

If

not please

identify

documents

and

facts

serve as

your

disagreement

Response The Trustee
unduly
objects to Interrogatory

No

on

the

grounds
the

that

it

is

overly broad Court concluded

burdensome

vague and

ambiguous
as

Subject to this objection

Bankruptcy

rejected

Goldins conclusion

finding

follows

Furthermore on
the

although

Mr

Goldin

that

the $6.3 Million payment

to the

Noteholders

eve

of bankruptcy

did not Cause harm to

the

Debtors we disagree recommend
that

All responsible conserved continue

advisors

to

companies
the

contemplating of bankruptcy of strength

bankruptcy

filing

cash be

not spent on
to

eve

Having

cash with

gives the debtor
creditors

the

ability

to

operate and

position

in negotiations

That
in

position of strength

was eroded
have

by Crowleys

directing

the

Debtors

to

pay The

the

Noteholders Trustee also

cash

when

they could

paid in

Notes

12/21/01

Opinion

at

19

incorporates

his

response

to Interrogatory

above

Do you deny
authority

that

Mr

Crowley was uninvolved
and
filing

and

had

no

decision-making

with regard to the proposing
If

of

Corams Second

Plan of Reorganization

on

July

31 2001

so

please describe the basis

for

your denial

Response The
undefined terms and Trustee
objects to Interrogatory

No

on

the

grounds

that

it

contains denies that

is

vague and

ambiguous

Subject to this objection authority

the

Trustee

Crowley was uninvolved and
and
filing

had

no

decision-making

with regard to the proposing

of

Corams Second
of

Plan of Reorganization

the Second
Plan called

Plan

Crowley was an
to

important part

Corams Second Plan The Second
and

for

Crowley

remain of

employed
per month

as

Corams Chairman

CEO

while he continued continue

to

receive

base salary

$80000

from Cerberus

Crowleys

decision

to

his

employment agreements

with both

CHDATA39006_2

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Document 124

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Page 25 of 33

Coram
severed

and

Cerberus

dictated

the

terms of the Plan
the

Had Crowley

resigned

from Coram
different

or

his relationship

with Cerberus an agreement

terms

of the Plan would have

been

The
in

Second Plan Crowleys

also

reflected

between

Coram and

Crowley

for

reduction

claimed

bonus compensation

Describe

the basis

for

your

decision to retain of

Mr

Crowley

as

CEO

of Coram after

you were appointed Response The
vague and

as

Chapter

11

Trustee

Coram

Trustee

objects

to

Interrogatory

No
the

on

the

grounds

that

it

is

overly broad
his

ambiguous Response
to

Subject to this objection through during

Trustee incorporates
first

by reference

Combined
his

Interrogatories

of Crowleys Chapter
11

set

of interrogatories case

and

deposition and

hearing

testimony

Corams

bankruptcy

Identify

all

documents and
First

describe

all

facts

supporting

your

contention offered

in

your

responses to six-month

Mr

Crowleys

Set of Interrogatories
if

that

The

Noteholders

Coram

interest

accrual holiday

Crowley was

hired

as

CEO
overly broad by the

Response The Trustee
vague and
objects to Interrogatory

No
the

on

the

grounds

that

it

is

ambiguous

Subject

to this

objection

Trustees

contention

is

supported

timing of the execution 1999

of the agreements
contract

The forbearance

agreement

is

dated

November

and Crowleys

employment
the Trustees

with Coram was signed on November
are the

18 1999
that board

Further supporting Smith was told
that

contention

statements in the Goldin $11

report

Rick
--

the Noteholders

would agree
as

to

forgive

million indebt

if the

brought
that the

Crowley

in to

run the company holiday

co-CEO

and

then director

Richard

Fink

recalled

interest/accrual

was conditioned

upon Crowley taking over

Do you
Goldin Report that
full

agree

with the conclusion

of Goldin

Associates

L.L.C
proceeds

at

page

107

of the

Coram
to

had no
pay

alternative

but to use the
Series

CPS

sale

to

pay down
all

the

revolver in

and

partially

down

the

Notes
for

If

not please

identify

documents

and

describe

all

facts

that

serve as

basis

your disagreement

CHDATA39006_2

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Response The Trustee
unduly
objects to Interrogatory

No

on

the

grounds
the

that

it

is

overly broad does not agree
to

burdensome

vague and
that

ambiguous Coram
had

Subject to this objection

Trustee

with Goldins conclusion

no

alternative

but to use the
Series

CPS

sale

proceeds had

pay of

down
other

the

revolver in

full

and

to

partially

pay down
to the

the

Notes

Coram
sell

number

options

including
the sale

but not limited

following consent
to

declining to

CPS
or

conditioning
the

of

CPS on

the

Noteholders
sale

Corams CPS

use of

all

portion of with

proceeds

for

other purposes

of less than and

100%

of

or the sale

of

CPS

retention

of an equity or upside

interest

completing

the

sale

of

CPS

in

its

Chapter

11

proceeding

which

it

filed

week

later

Do you
Deutsche

agree

with the June
the

2000 conclusion
sale

of

Corams
for

investment

bankers
financial

Bank
If

Alex Brown not please

that

CPS
all

was

fair

transaction

Coram from
that

perspective

identify

documents and

describe

all

facts

serve as

basis

for

your disagreement

Response The Trustee
undefined
objects to Interrogatory

No

on

the

grounds

that

it

contains

terms

is

overly broad unduly
financial

burdensome

vague

and

ambiguous
the sales

Whether
price
fell

the

transaction

was fair from
range

point of view means only that bankers

within

the

very broad

of values generated by the investment

fairness

opinion

suggests

only that

the sales

price

was above
major

the

lowest value

generated by the three having been

valuation

methodologies

with

component

the projections

provided
or that
it

by

Coram
balanced

Corams
the

investment

bankers of

did not state that various

the transaction

was wise

fairly

competing

interests

Corams

constituencies

Identify

all

documents
First Set

and

describe

all

facts

supporting
the

your

contention

in

your

responses to
alleged

Mr

Crowleys

of Interrogatories
sale

that

harm caused

by

Mr

Crowleys
the

breach

of fiduciary enjoyed

duties

includes

of

CPS

deprive

Coram of

increase

in

value

CPS

following

the

sale

CHDATA

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Case 1:04-cv-01565-SLR

Document 124

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Response The Trustee
unduly
objects to Interrogatory

No

on

the

grounds
in

that

it

is

overly broad Set of

burdensome

and

duplicative

of interrogatories
the

contained

Crowleys

First

Interrogatories

Subject
Interrogatories

to

this

objection

Trustee

incorporates

by reference

his

Combined Crowley
of

Response was under
paying growth and
the

to

through
to
sell

of Crowleys

First Set

of Interrogatories
did

Mr

no obligation
Noteholders

CPS

non-conflicted sold

CEO who
pharmacy
of health

not have

mindset

would not have
the

specialty

company
care

with tremendous

potential

at

time when
the

market

for the

sale

companies

was depressed

before

CPS had

opportunity to demonstrate

that

its

growth

projections

were accurate

10 judgment Response

Do you deny Coram

that

Crowley and

the

Board of
If

Directors

exercised
the

business denial

in selling

Prescription

Services

so please describe

basis

for

your

The Trustee
undefined and terms and
is

objects

to

Interrogatory

No

10 on the grounds
that

that

it

contains
conflicted

vague and

ambiguous

The Trustee admits
to
sell

Corams

CEO

grossly

negligent Board

made

business judgment

CPS

11
that

Identify

and

describe any
failed

fact relationship
to disclose

communication
to

document

or

contract

you contend

Mr

Crowley

adequately

Corams Board

of Directors

Response The
unduly Trustee
objects to Interrogatory

No

11

on

the

grounds

that

it

is

overly broad
in

burdensome

vague

ambiguous

and

duplicative

of interrogatories
the

contained

Crowleys
his

First Set

of Interrogatories

Subject to this objection through

Trustee incorporates
first

by reference

Combined

Response

to

Interrogatories

of Crowleys

set

of interrogatories

12
that

Identify

and describe any fact relationship communication Crowley
failed

document

or contract

you contend

Mr

adequately

to

disclose

to

Corams

bankruptcy

counsel

Response The Trustee
unduly
objects to Interrogatory

No

12 on the grounds
as

that

it

is

overly broad

burdensome

vague and

ambiguous

Subject to this objection

David Friedman

CHDATA39006_2

A24

Case 1:04-cv-01565-SLR

Document 124

Filed 04/17/2007

Page 28 of 33

testified

during

his

deposition in this matter

Crowley

failed

to

disclose

to

Corams

bankruptcy

counsel the nature

and terms of

his

employment agreement

with Cerberus

13 Crowley
independent
acts

Identify

all

documents and

describe

all

facts

supporting

your contention
to the

that

Mr

or omissions rather

than those of others

including but not limited

board

members of Coram Goldin Associates
in

L.L.C and

counsel for

Coram

caused

Coram not Response

to

emerge from bankruptcy

December

2001

The Trustee
unduly

objects

to

Interrogatory

No

13

on

the

grounds
the

that

it

is

overly broad Court

burdensome
that

vague and

ambiguous

Subject to this objection of interest 1129 precluded

Bankruptcy

determined second
the

Crowleys

continuing

conflict

Coram from proposing

its

plan in good faith as required by 11 U.S.C
conflict

a3
the

Crowley should have
his relationship-with

eliminated Cerberus

continuing

by resigning from Coram or by severing
not consider the continuing and breached
conflict

Goldin

Associates

did

independent duties and

Board members were

grossly

negligent and conflicted counsel testified that

their

own

fiduciary

Corams

bankruptcy Cerberus

Mr

crowley

made

clear

that

he was not resigning from the time and
it

Mr

Crowley was Chairman and
eliminate the conflict

CEO

of Coram

at

was

his

responsibility

to

14

Identify

all

documents

and

describe

all

facts

supporting

your contention
attributable to

that

Coram

incurred reorganization costs

in

excess

of $36 million directly each

the

delay in and

Corams emergence from bankruptcy
describe
its

In particular

identify

such

cost

or

expense

nature

when

it

was incurred and

when

it

was paid

Response The Trustee
unduly
First objects to Interrogatory

No

14 on the grounds of interrogatories

that

it

is

overly broad
in

burdensome

vague

ambiguous

and

duplicative

contained

Crowleys

Set of Interrogatories

Subject to this objection
Interrogatories

the

Trustee

incorporates
First Set

by

reference his

Combined

Response

to

through
are set forth

of Crowleys

of Interrogatories

The

reorganization costs Court and
the

incurred by

Coram

in fee applications

filed

with the Bankruptcy
are

Bankruptcy

Courts Orders approving

such

fee

applications

which

publicly

available

CHDATA

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Case 1:04-cv-01565-SLR

Document 124

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Page 29 of 33

15
Trustees Healthcare

Describe

how

any

proceeds

of this litigation

would be

distributed

pursuant to the
in In re

plan of reorganization

which was confirmed Bankr.D.Del.2004

by the bankruptcy

court

Coram

Corp

315

B.R

321

Response The proceeds
the

of the litigation

will

be distributed

in

accordance and
the

with the terms

of

Trustees

Second Amended
the Trustees

Plan of Reorganization

the

Plan

Bankruptcy incorporated

Courts by Order

Order Confirming reference

Plan the Confirmation
5.3

Order
50

which

are

As

set forth

in Article

of the Plan
as

and

paragraph
in the

of the Confirmation
the

the

proceeds
against

if

any

of the Causes

of Action
as

defined

Plan including
Reorganized
to the

Trustees

action

Crowley
to the

shall

be distributed Date

follows

first to

Coram
Causes
basis

in

an

amount equal

Post-Effective

Administrative

Claims Claims

relating

of Action
in

ii second

to

the

holders

of Allowed

General Unsecured

on
rate

apro rata
set forth in

an 1961 of

amount equal
Title

to

the

interest

accruing

at

the

statutory Petition

judgment
Date

Section Date

28

of the United

States

code

from the
Claims of

through

the

Effective

on account iii

of such

Allowed General Unsecured apro rata
basis to

until

such

interest

has been paid in full and

third on

the holders

CHC

Equity

Interests

CHDATA

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Case 1:04-cv-01565-SLR

Document 124

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Page 30 of 33

The

Trustee

reserves his right to amend

or

supplement

his

answer

to

this interrogatory

as

discovery

continues

As

to

objections

Dated

March

27

2007

SCHNADER HARRISON SEGAL

LEWISLLP

By

Is Richard
Richard Michael

Barkasy Barkasy

Barrie Street

4683 4684
Mall
Suite

824 Market Wilmington

1001

DE

19801

302 302
-and-

888-4554 888-1696

telephone facsimile

Wilbur Barry 1600

Kipnes Bressler Market Street Suite

3600

Philadelphia

PA

19103-7286

215 215

751-2000 751-2205

telephone facsimile

Counsel

to

Arlin
11

Adams

Chapter

Trustee

10

CHDATA

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A27

Case 1:04-cv-01565-SLR

Document 124

Filed 04/17/2007

Page 31 of 33

IN

THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

ARLIN Corp
Delaware

ADAMS
Delaware

as

Chapter of Coram

11

Trustee

of

Case

No

04-1565

SLR

The Bankruptcy

Estates

Healthcare

Jointly Administered

Corporation

and

Coram Inc

Corporation

Plaintiff

DANIEL

CR0

WLEY
Defendant

CERTIFICATE OF SERVICE

Richard of the Chapter
to

Barkasy Trustees
Arlin

certify

that

am

not less than

18

years of age

and

that

service

11

Answers

to

Defendant Daniel was made on March
First

Crowleys Second

Set

of Interrogatories
listed

Plaintiff

Adams
States

27

2007 upon

the

persons

below via Electronic Mail and United
certify the

Class Mail under of perjury

foregoing

to

be true

and

correct

penalty

Is Richard
Richard

Barkasy Barkasy

Dated

March 27 2007

Parties Served

Jeffrey

Wisler Esquire

Elliot

Peters

Esquire Esquire

Christina 1007

Orange

Thompson Esquire St P.O Box 2207

Warren Keker

Braunig

Van Nest LLP
Street

Wilmington Email Email

DE

19899

710 Sansome San Francisco Email Email

iwislercb1h.corn

CA

94111

cthompsonCcblh.com

[email protected] wbrauniglcvn.com

11

CHDATA

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Case 1:04-cv-01565-SLR

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Page 32 of 33

CERTIFICATION

hereby
true

certify

that

the

facts

set forth

in the

foregoing

interrogatory

answers

are

and

correct

to the

best of

my

knowledge

information

and belief

Arlin

Adams Ch

11

Trustee

Dated

2007

12

CHDATA39006_2

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Case 1:04-cv-01565-SLR

Document 124

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Page 33 of 33

EX-3.1

3rd Page

of

TOCI1stI
CERTIFICATE CHN HOLDING
OF-

Previous
INCORPORATION

Next

Bottom

Just

3rd

OF CORPORATION

FIRST
The

name

of

the

Corporation

is

CHM

Holding

Corporation

SECOND address of the Corporations registered Trust Center 1209 Orange StreetCorporation
The of

office
in the

in

the

State

of

Delaware

is

City of

County off ice

New

Castle

The

name Trust

of

the

Corporations

registered

Wilmington agent at that

is -The

Corporation

Company
THIRD

The for

purpose
as

which

Delaware

is to engage in any lawful act or activity of the Corporation under the General Corporation Law of corporation may be organized in effect or as it may hereafter be amended presently

POURTH AUTHORIZED Corporation
-which

shall

50000000
shall be COMMON

shares

CAPITAL STOCK The total number of shares which the have the-authority to issue shall be of 60000000 shares shares shall be Common Stock $.00l par value and 10000000 Preferred Stock $.00l par value

Directors is hereby authorized to cause from time to time for such consideration as of stock be fixed from time to time by the Board of Directors or by way may The Board of Directors may splIt pro rata to the holders Of the Common Stock from the sale of such also determine the proportion of the proceeds received stock which shall be credited upon the books of the Corporation to capital or
The of

STOCK

Board

shares

of

Common

Stock

to

be

issued

capital

surplus

Each share of the Common Stock shall be equal in all respects to every to any special other share of the Common Stock voting rights of the Subject holders of Preferred Stock fixed by or pursuant Lo the of Paragraph provisions of this Article Fourth th shares of Common Stock shall entitle the holders thereof to one vote for each share upon all matters upon which stockholders have
the

right to
No

vote

matter holder of shares of Common Stock shall be entitled as such as subscribe for or purchase any part of any new or additional issues whether convertible into stock of any class whatsoever of stock or securities services and whether issued for cash property or now or hereafter authorized otherwise
of

right to

After Stock

the

requirements
or

fixed by Fourth if any
complied
sums as

pursuant shall have

with all the accounts funds or redemption or purchase fixed by or pursuant sinking of Paragraph of this Article and subject further to to the provisions Fourth other conditions which may be fixed by or pursuant to the of provisions any the of this Article Fourth holders of Paragraph then but not otherwise

dividends on Preferred respect to preferential of Paragraph of this Article provisions shall have been met and after the Corporation if any with respect to the setting aside of requirements
-with

to

the

A30