Free Response to Motion - District Court of Delaware - Delaware

Case 1:04-cv-00951-JJF

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE ___________________________________________________________________________ In re: Oakwood Homes Corporation, et al., Bankruptcy Case No. 02-13396 (PJW) Debtors. ___________________________________________________________________________ JPMorgan Chase Bank, as Trustee, Appellant, v. Civil Action No. 04-CV-951 (JJF) Chapter 11

U.S. Bank National Association, as Indenture Trustee, Appellee. ___________________________________________________________________________ RESPONSE OF U.S. BANK NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, IN SUPPORT OF THE MOTION OF THE OHC LIQUIDATION TRUST FOR PARTIAL RELIEF FROM THE COURT'S SEPTEMBER 28, 2004 ORDER GRANTING APPELLANT'S MOTION FOR A STAY PENDING APPEAL ___________________________________________________________________________ U.S. Bank National Association, in its capacity as indenture trustee ("U.S. Bank"), files this Response ("Response") in Support of the Motion of the OHC Liquidation Trust for Partial Relief from the Court's September 28, 2004 Order Granting Appellant's Motion for a Stay Pending Appeal ("Motion") [D.I. 47]. All terms not otherwise defined herein shall have the meanings given to them in the Motion. In support of its Response, U.S. Bank states as follows: FACTUAL BACKGROUND 1. More than 15 months ago, the United States Bankruptcy Court for the District

of Delaware ("Bankruptcy Court") entered orders ("Claims Orders") granting, in part, and

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denying, in part, the objections of U.S. Bank to numerous claims filed by JPMorgan Chase Bank ("JPMorgan") against Oakwood Homes Corporation ("OHC"), one of the above-captioned debtors ("Debtors"). 2. Shortly thereafter, on May 17, 2004, JPMorgan filed notices of appeal relating This Court affirmed the Claims Orders on February 17, 2005.

to the Claims Orders.

JPMorgan appealed the February 17th ruling to the United States Court of Appeals for the Third Circuit ("Third Circuit"). 3. In connection with its appeal of the Claims Orders, JPMorgan also filed

numerous pleadings with the Bankruptcy Court to set aside $61,017,425 in cash under the Debtors' plan of reorganization ("Plan") pending resolution of the appeal. The Bankruptcy Court concluded that the Claims Order appeal had no merit; and accordingly, set the reserve under the plan for the disputed claims of JPMorgan at zero. Mindful that its decision could moot JPMorgan's appeal of the Claims Orders, the Bankruptcy Court granted JPMorgan a stay, conditioned on the posting of a bond, pending the appeals ("Reserve Order"). The Bankruptcy Court calculated the amount of damages for the first year at $4,722,749 (7.74% times $61,017,425), less any earnings on the reserve amount earned by the liquidation trust. The Bankruptcy Court held that any relief after the one-year period should be sought in the District Court. The Reserve Order properly placed the economic harm to creditors of the delay in distributing funds under the Plan on the appealing party. JPMorgan made demand on the OHC Liquidation Trust to withhold the full $61,017,425 reserve. 4. On July 9, 2004, JPMorgan filed a notice of appeal relating to the Bankruptcy

Court's Reserve Order. JPMorgan also filed several emergency motions, both with this Court and the Third Circuit, seeking to stay distributions under the Debtors' Plan pending its

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appeal of the Claims Orders absent a bond. At a July 29, 2004 hearing, this Court denied JPMorgan's request for relief. By its order dated September 10, 2004, the Third Circuit dismissed JPMorgan's request for stay and appeal from this Court's order regarding the same for lack of jurisdiction. 5. Thereafter, in response to a second emergency motion filed by JPMorgan, this

Court concluded, despite its earlier ruling, that JPMorgan was entitled to a stay pending appeal absent a bond. On October 8, 2004, U.S. Bank filed a motion with the Court to reconsider its order granting the stay. On November 5, 2004, the Court entered an order establishing a briefing schedule relating to JPMorgan's appeal of the Reserve Order. The appeal is fully briefed. U.S. Bank's motion for reconsideration and the appeal are currently pending before the Court. RESPONSE 6. JPMorgan initially appealed the Claims Orders to the extent that the

Bankruptcy Court both disallowed its claims for post-petition interest and discounted the principal portion of its claims to present value as of the petition date. However, on appeal to the Third Circuit, JPMorgan has chosen to appeal only that portion of its claims for discounted principal ("The bankruptcy court disallowed the postpetition interest component of Appellants' Claims and this aspect of the Claims Orders is not at issue here." (Appellants' Brief at 8, attached as Exhibit E to the Motion.)) 7. As noted in the Motion, the amount of JPMorgan's claims in dispute has

decreased from $411.6 million to $73.4 million. As a result, even if JPMorgan is successful on appeal, nearly $50 million of the current reserve will not be needed to make distributions

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on the remaining claims in dispute. A disputed claim reserve of more than $61 million is no longer necessary.1 8. The liquidating trustee made an initial distribution to the Debtors' unsecured

creditors on or about October 1, 2004, almost one year ago. As of September 30, 2005, the Debtors' unsecured creditors will have lost approximately $4,722,749 (7.74% of $61,017,425), less any amounts earned by the liquidating trustee, as a result of the $61,017,425 reserve. 9. Given that JPMorgan has chosen not to appeal a substantial portion of its

disallowed claims, the reserve should be reduced accordingly. Moreover, the release of the funds would mitigate any claim against JPMorgan arising out of the Reserve Order.

CONCLUSION
10. For all of the above-stated reasons, U.S. Bank requests that this Court approve

the Motion of the OHC Liquidation Trust for Partial Relief from the Court's September 28, 2004 Order Granting Appellant's Motion for Stay Pending Appeal.

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As noted in the Motion, to date, the OHC Liquidation Trust has only been able to distribute to unsecured creditors and into other disputed claims reserves 15.5% of the claimed amount, which in JPMorgan's case would equal a reserve of only about $11.4 million.

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Dated: August 18, 2005 Wilmington, Delaware By /s/ Marc J. Phillips Karen C. Bifferato (No. 3279) Christina M. Thompson (No. 3976) Marc J. Phillips (No. 4445) CONNOLLY BOVE LODGE & HUTZ LLP The Nemours Building 1007 N. Orange Street P.O. Box 2207 Wilmington, DE 19899 Telephone: (302) 658-9141 - and FAEGRE & BENSON LLP Michael B. Fisco, MN Bar No. 175341 Abby E. Wilkinson, MN Bar No. 0313981 2200 Wells Fargo Center 90 South Seventh Street Minneapolis, MN 55402-3901 Telephone: (612) 766-7000 Facsimile: (612) 766-1600 ATTORNEYS FOR U.S. BANK NATIONAL ASSOCIATION, IN ITS CAPACITY AS INDENTURE TRUSTEE

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