Page 1 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 B E F O R E : HON CHRISTOPHER S. SONTCHI U.S. BANKRUPTCY JUDGE ECR OPERATOR: LESLIE MURIN VERITEXT REPORTING COMPANY www.veritext.

com May 31, 2012 2:12 PM United States Bankruptcy Court 824 North Market Street Wilmington, Delaware - - - - - - - - - - - - - - - - - - - - - - - - - - - - x Debtors. ALLIED SYSTEMS HOLDINGS, INC., UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE Case No. 12-11564(CSS) - - - - - - - - - - - - - - - - - - - - - - - - - - - - x In the Matter of:

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Page 2 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 Transcribed by: Sheri Monroe HEARING RE: Motion of Alleged Debtors to File Unrelated HEARING RE: Motion of Alleged Debtors to Transfer Venue of

these Cases to the United States Bankruptcy Court for the Northern District of Georgia, Atlanta Division.

Version of the Motion of Alleged Debtors to Transfer Venue of these cases to the United States Bankruptcy Court for the Northern District of Georgia, Atlanta Division.

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A P P E A R A N C E S : RICHARDS, LAYTON & FINGER, P.A. Attorneys for the Debtors One Rodney Square 920 North King Street Wilmington, DE 19081

BY:

CHRISTOPHER M. SAMIS, ESQ. MARK D. COLLINS, ESQ.

TROUTMAN SANDERS Attorney for the Debtors 600 Peachtree Street, NE Suite 5200 Atlanta, GA 30308-2216

BY:

JEFFREY W. KELLY, ESQ.

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LANDIS RATH & COBB, LLP Attorney for Petitioning Creditors 919 Market Street Suite 1800 Wilmington, DE 19801

BY:

KERRI K. MUMFORD, ESQ.

SCHULTE ROTH & ZABEL, LLP Attorney for Petitioning Creditors 919 Third Avenue New York, NY 10022

BY:

ADAM HARRIS, ESQ. VICTORIA LEPORE, ESQ.

LATHAM & WATKINS, LLP Attorney for Yucaipa 355 South Grand Avenue Los Angeles, CA 90071

BY:

ROBERT KLYMAN, ESQ.

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YOUNG CONAWAY STARGATT & TAYLOR, LLP Attorney for Yucaipa Rodney Square 1000 North King Street Wilmington, DE 19801

BY:

JOSEPH BARRY, ESQ.

FRIED, FRANK, HARRIS, SHRIVER & JACOBSON, LLP Attorney for The CIT Group One New York Plaza New York, NY 10004

BY:

GARY KAPLAN, ESQ.

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APPEARANCES:

(Telephonically)

CATHY COPPAGE, Paul Hastings, LLP SARAH BOEHM, McGuire Wood, LLP PEG BRICKLEY, Dow Jones & Co. THEO CIUPITU, Jack Cooper EZRA H. COHEN, Troutman Sanders, LLP RICHARD EHRLICH, Black Diamond Capital Management ERIN KIM, Pension Benefit Guaranty Corp. STEPHEN S. LAPLANTE, Miller Canfield Padock & Stone DANIELLE SALTZ, Ford Motor Company JEFFREY A. SCHAFFER, Spectrum Group DEREX WALKER, Derex Walker

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Page 7 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 THE COURT: MR. SAMIS: P R O C E E D I N G S Please be seated. Good afternoon. Your

Your Honor, good afternoon.

Honor, for the record, Chris Samis of Richards, Layton & Finger here today on behalf of the alleged debtors. Your

Honor, with me at counsel table is my colleague, Mr. Collins as well as our co-counsel, Mr. Jeffrey Kelly of the Troutman Sanders firm. Your Honor, also in the courtroom is Mr. John

Blount, the general counsel and chief administrative officer of the debtors. Your Honor, todays agenda only has one item of any moment. The matter is a motion to transfer venue,

however, Your Honor, it is probably important to note that Agenda Item Number 2 Your Honor entered the order on that, that was the seal motion that was related to the motion to transfer venue. And the order actually covers several other

seal motions as well that arent calendared for the hearing today. But, Your Honor, with that I turn the podium over to Mr. Kelly. THE COURT: MR. KELLY: All right. Thank you. May it

Good afternoon, Your Honor.

please the court, Jeff Kelly, for the record. has already been introduced by Mr. Samis.

Mr. Blount

The alleged debtors evidence today, Your Honor, in

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Page 8 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 their support of their motion to transfer venue will consist of facts set forth in the declaration of Scott Macaulay, which was filed on May 21st. Its Docket Number 30, as

supplemented by my proffer of certain facts that Mr. Blount would testify to if called as a witness. I will mention that Mr. Harris and I spoke prior to the hearing and Ive agreed that the facts that hes set forth in his response are stipulated to and he need not call any witnesses to establishes those facts and hes agreed that I need not have Mr. Macaulay present today to back up his declaration. Mr. Macaulay is, in fact, back in Atlanta

working on other issues related to this matter. Your Honor, what I propose to do is proffer the alleged debtors evidence in summary form and secondly, to show that due to the still pending Allied Chapter 11 cases in Atlanta under Bankruptcy Rule 1014B, it is up to Judge Mullens (phonetic) in Atlanta to decide where these cases should proceed. THE COURT: MR. KELLY: Well then why havent you asked him? Well, Your Honor, we havent asked him

because the situation that was presented to us was a motion for appointment of a trustee with a motion to shorten time. And we thought it prudent to go ahead and just raise with Your Honor, immediately, the venue issue rather than having competing motions going on in two different courts.

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Page 9 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 And then at the status conference last week, Your Honor, I think indicated that you would take up the issue of venue today and decide whether or not 1014B applied, because there were certain factual issues you wanted to have addressed, which Im prepared to do today. THE COURT: MR. KELLY: Okay. Basically, the short answer is for us

not to set up competing motions in two different bankruptcy courts. Now, the last thing I intend to do today is to show how the facts in any event demonstrate that both the convenience of the parties and interest of justice lead to the conclusion that venue of these cases should be transferred to the bankruptcy court in Atlanta. Your Honor, a unique circumstance that we have intertwined in this situation is the alleged debtors desire to maintain confidentiality of certain information for the time being. Thats information thats been redacted from Were doing that in order to try to

our public filings.

limit the damage to the alleged debtors business, we believe caused by these precipitous and unexpected, involuntary filings. I will refer, from time to time, during my

presentation, to redacted information for that reason. Your Honor, I would proffer through Mr. Blount, who is here, and his first hand knowledge --

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Page 10 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 THE COURT: Lets stop here just a second. Is

there any objection to, at least from an evidentiary basis, proceeding as Mr. Kelly has outlined? MR. HARRIS: THE COURT: None?

I have no objection. All right. So, well admit the

declaration of Mr. Macaulay, Docket Item 30, into evidence without objection. MR. KELLY: And you may proceed with the proffer. Thank you, Your Honor.

Mr. Blount, who is here in court today, has firsthand knowledge of the redacted facts and he would support those facts if called as a witness. I do need to be clear, however, that Mr. Blount does not have firsthand knowledge as to whether the petitioning creditors were aware of the alleged debtors redacted facts at the time that they filed the involuntary petitions. Your Honor, turning to the facts that are public, with respect to Mr. Macaulays declaration, I would like to just go to that declaration and make a summary proffer or the pertinent parts. The alleged debtor, Allied Systems Holding is the ultimate parent of about 20 other companies including the other alleged debtor, Allied Systems, Ltd. Allied Systems Holdings, which Im going to refer to as -- simply as Holdings, is a privately held Delaware

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Page 11 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 Corporation headquartered in Atlanta. Holdings has three

direct subsidiaries, Allied Automotive Group, Inc., which is a Georgia corporation, Access Group, which is also a Georgia corporation and a captive insurance company incorporated under the laws of the Cayman Islands. Allied System Ltd., which is the other alleged debtor aside from Holdings is a Georgia limited partnership and is a subsidiary of Allied Automotive Group. Holdings, itself, Your Honor, does not directly engage in Allieds line of business. Allieds major line of

business is carried out by Georgia Corporation -- Allied Automotive Group, Inc. and its direct and indirect subsidiaries again, including the other alleged debtor Allied Systems. This major line of business is the car haul business, basically its the transport of light vehicles, such as automobiles from port -- the points of manufacturer or other points of drop off, such as train railheads to automobile dealerships throughout the United States and in Canada. Allieds major customers are automobile manufacturers, including primarily Ford at this point. Allied Automotive Group transports these vehicles by means of specialized tractor trailers which are rigs. As of the

end of 2011, Allied owned about 2,400 rigs operated out of

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Page 12 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 about 44 terminals, most of which are leased and located within and throughout the United States and in Canada. None

are located in Delaware, two of the terminals are located in Georgia, although one of those is used primarily as place where parts are kept and stored for repairing or refurbishing rigs. Allied Automotive Groups drivers and most of its terminal employees are unionized. These employees are

called the Teamster employees, Ill refer to them that way are members of the local unions affiliated with the International Brotherhood of Teamsters, which negotiates on behalf of these local unions. Allied employs about 1,835

people of whom about 1,000 or so are Teamster employees. Theres a smaller line of business that Allied is in carried about by another Georgia Corporation, Access. Access is essentially a logistics business for the automotive industry in the United States and Canada, with some yards service management carried out in Mexico. The access group operates from 39 terminals located in the United States, Canada, Mexico, none in Delaware. Turning to the first case, briefly, Your Honor, the pending case thats ready to be closed. The alleged

debtors and most of their direct and indirect subsidiaries were reorganized in Chapter 11 cases that were filed in the

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Page 13 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 Northern District of Georgia in July of 2005, according to a plan that was confirmed by Bankruptcy Judge, Ray Mullens in May of 2007. And when I say the alleged debtors were reorganized, holdings as set forth in Mr. McCaulays declaration is the successor by merger to the original holding company, Allied Holding, Inc., that was the ultimate parent at the time the Chapter 11 case was filed. When the

plan and reorganization was confirmed, Holding was created as the subsidiary of the original holding company and then merged into Holding, which is the surviving corporation. In it, I mentioned, although the original Chapter 11 case is, in fact, ready to be closed, in fact, it is still pending by Allied at this time. THE COURT: Is Allied Systems Holdings, Inc. a

debtor in possession in the Chapter 11 in Georgia with a known case number? MR. KELLY: It is not a debtor in possession, it It was

is a successor to the original holding company.

created under the plan and its stock was issued under the plan to general unsecured creditors of Allied -THE COURT: Have those been operating free and

clear of any jurisdiction of the bankruptcy court? MR. KELLY: THE COURT: Allied Systems Holding? Yes.

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Page 14 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 MR. KELLY: Except to the extent that its -- Im

sorry, Your Honor, I brushed up against the microphone. THE COURT: MR. KELLY: Its okay. Except to the extent that the ongoing

administration, which is one of the reasons that its taken so long, has included issuing its stock to general unsecured creditors. But, its -- in fairness, it was not a debtor in possession, it is the entity created under the plan as a successor to a debtor in possession. Your Honor, in the original case Chapter 11 case, the goals were three fold, to increase revenue by increasing customer pricing, to deleverage by conversion debt to equity, which was I referred to a moment ago when I said that Allied -- the current holding stock has been issued to debt -- thus converting debt to equity. And the third goal was to reduce labor costs through reductions in compensation and changes in the work rules with respect to the Teamsters, not to mention shared sacrifice by non-union employees. These goals were largely achieved in the first case, Your Honor, with aid to Yucaipa Private Equity Funds. During the original Chapter 11 case, Yucaipa, among other things, was the catalyst for obtaining an agreement with the teamsters to reduce labor costs for three years and finance

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Page 15 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 the acquisition of additional rigs for Allied. It supported a plan, this plan that converted general unsecured debt into equity and aided Allied in obtaining exit financing which it had to have to emerge from bankruptcy, thats the same exit financing that we currently -- that Black Diamond Spectrum and Yucaipa are both members of. Yucaipa and the Teamsters, Your Honor, joined the

debtors as proponents of Allieds plan and Ive already stated that the stock with issued to creditors and so forth. Your Honor, turning to some of the more -- the dryer venue related facts, Allied does not own any real estate of other tangible outsets in Delaware and it has no creditors doing business with it from Delaware. Upon information and belief none of our employees reside in Delaware, our headquarters are located in Atlanta, with a smaller satellite office in Detroit. We currently

have 73 employees working out of our Atlanta headquarters, another 55 employees working out of the Atlanta area terminal that I mentioned, in Georgia. Allied does own and lease real estate in Georgia. None of our members of the board reside in Delaware. One

member of our board does split his residence between Georgia and Michigan. Virtually, and Ill come back to this in a moment, virtually all of our key employees reside in Atlanta.

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Page 16 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 Outside counsel, me are located in Atlanta. Given the

international presence of Allied, our creditors are spread out over a wide geographic area. Theres a lot of real

estate to Michigan in that regard because of our ties to the automotive industry. We do not think any of our creditors interact with us from locations in Delaware, Your Honor. We fully respect to Mr. McCaulays statement that Allieds key employees reside in Atlanta, Mr. Blount, who again, is here today, would testify that it would fall to him and Mr. Macaulay, both of whom reside in Atlanta, to be witnesses for the alleged debtors in bankruptcy court hearings. Mr. Blount would further testify that due to cost cutting moves necessitated by the recession as it has impacted Allieds business in particular, the executive team is currently stretched very thin as evidenced by the numerous titles that Mr. Blount, himself has. And that it

would be and is a significant disruption to Allieds day to day business for either or both him and/or Mr. Macaulay to consume a day or more to travel to Delaware for court hearings, as opposed to the far less oneness trip, if you will, of getting in their car and driving 20 minutes from the headquarters to the bankruptcy court in Atlanta. Your Honor, those facts, along with the redacted

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Page 17 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 facts that Mr. Blount also supports are the basis of our venue transfer motion. I believe that in order of logical

progression, I would first take up the issue of the impact of Bankruptcy Rule 1014B on the situation before the court. THE COURT: Well, lets -- do you -- Mr. Harris,

do you want to cross-examine or with to cross-examine the witness? MR. HARRIS: THE COURT: can keep going. MR. KELLY: Thank you, Your Honor. To paraphrase I do not, Your Honor. Okay. Very good. All right. You

Rule 1014B with respect to the present situation provides that if cases are filed in different districts against a debtor or an affiliate on motion filed in the district where the petition first filed is pending, that court, that is the court where the petition first filed is pending, may determine in the interest of justice or for the convenience of the parties in which district the case should proceed. THE COURT: MR. KELLY: Uh-huh. Here, Your Honor, the facts are that

the Atlanta Chapter 11 case of one of the alleged debtors, which is the Georgia corporation, Allied Systems Ltd., which was a debtor in possession, Your Honor, in the first case, is still pending. be closed. In all candor, the case is ready to

Judge Mullens recently signed an order resolving

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Page 18 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 all that. a very large administrative claim in that case. The Central

States claim, its a multi-employer fund thats related to the Teamsters, that was one of the last large matters that was left undone. month or so. I think that was resolved within the last

The case, thus in all candor, is ready to be

closed, but it is still pending, it has not been closed. With respect to the other situation, moreover the still pending Atlanta cases are clearly cases of affiliates and that word does appear in the rule, as that word is used in 1014B, of the other alleged debtor, Holdings. So, in other words, the still pending cases are cases of affiliates of Holdings. So, to summarize, one of the alleged debtors is a debtor in possession and is still pending cases in Atlanta, the other is an affiliate of those debtors in possession and its still a pending case. THE COURT: Well, if you look at 1014 -- granted

So, lets assume that -- I think fairly assume

that for purposes of 1014B, at least initially, that both of the purported debtors in this case have -- are related to cases pending in Georgia that are open. It says that, in that case, it says that the court may determine -- and it doesnt really -- so let me ask you, which court? MR. KELLY: Well, its just a matter of -- the way

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Page 19 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 I read it is, its the court where the petition first filed is pending. THE COURT: MR. KELLY: Right. Thats the way I -- I think the clear

reading of the ruling is. THE COURT: All right. So, the Georgia court may

determine -- so, two questions, what if the Georgia court is never asked or the Georgia court is asked and never makes a decision, what happens? And why thats important is, you have two pending cases -- and what it really comes down to the last sentence, which is sticky, that says the proceedings on other petitions shall be stayed by the courts in which they have been filed until the determination is made by the first court. So, in this instance and, again, it is what it is, you havent asked Judge Mullens or its -- since its, they determine, I suppose its possible you could ask a judge and that judge simply never make a determination or say its not going to make a determination. And were stuck in a

situation where we dont know what the determination is and this court is stayed from doing anything further, so what happens? MR. KELLY: Ill respond directly. In partial

response, my experience with Judge Mullens is he promptly

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Page 20 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 rules on everything thats brought before him, that particular judge. And again, it was my intention -- and I

considered filing something in front of Judge Mullens until we had our status conference last week -THE COURT: MR. KELLY: Right. -- where Your Honor -- I think Your

Honor, appropriately, said you wished to consider whether 1014B, in fact, had application here because of some factual questions here. I think you present a difficult hypothetical if the other judge is asked and never rules. As I read the

statute, I dont think the stay becomes affective unless I ask the other court. THE COURT: MR. KELLY: THE COURT: Well, yeah -- and thats my question. I dont think there is a stay. It says, if positions are commenced --

it says upon motion filed in the district where its first pending. So, if you havent filed that motion, in effect, Which leads us to the situation

1014B is inapplicable.

where basically the answer would be, I dont have to worry about whats going on or has gone on and what the situation is in Georgia, I can simply make a decision on the merit of the transfer venue motion, based on the normal transfer venue rules as opposed to whatever rules might be -- might be more focused on 1014B.

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Page 21 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 MR. KELLY: conclusion, Ill -THE COURT: Well no, youre here to argue with me I mean, Im not Well, Your Honor, if thats your

if you want or agree with me if you want. trying to -MR. KELLY:

Well, I think the way I understood the

result of the status conference was that, Your Honor was going to consider what -- a factual issue relating to 1014B, which probably resolved -- revolved around what is -THE COURT: Well, we had a discussion at the

status conference about whether they were actually -- you know, one of the debtors was not a debtor in Georgia and whether that debtor might be considered a debtor because it was a successor by merger and then, frankly, I dont remember much of a discussion about the other debtor, the limited -MR. KELLY: THE COURT: MR. KELLY: THE COURT: We didnt talk about that one. -- liability company. Right. So, were kind of -- if were talking Right.

about the factual issue -- and I did say this, Im trying to whip saw you, that according to the factual issue, at this point I think its fair to say that there are existing cases, ie a debtor and a debtor affiliate in Georgia, that would seem, at least to imply 1014B was applicable.

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Page 22 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 coming up. So, then, assuming that is the case and you havent asked Judge Mullens and again, I understand why, what do I do? Do I just say, well, I dont do anything and

send you to Georgia, which seems like a big waste of time and effort, but if the rule says thats what I have to do, thats what I have to do. Or do I have some sort of

discretion to make a decision on the merits of the motion? MR. KELLY: Your Honor, as we stand here today,

you have the discretion to make the decision on the merits because Ive not asked Judge Mullens, Ive not filed anything in front of Judge Mullens. the situation is. I believe thats what

Its a fair reading of the rule.

Again, Im reacting to in part -- in terms of the path Ive chosen to the courts and there was just a status conference to the courts statement that you wanted to consider 1014B and if you decided to move it to Atlanta maybe your observations on venue would be of value to Judge Mullens so on and so forth. So, it just didnt seem to me judicially economical, if thats the right way to say it, for me to go off after that status conference and file a motion in front of Judge Mullens -THE COURT: MR. KELLY: Yeah. And Im not --

-- knowing that this hearing was

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Page 23 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 THE COURT: Im getting the impression you feel

like Ive set you up and now Im -MR. KELLY: No, I dont. I dont -- I dont --

Im trying to answer your question. THE COURT: Yeah. And I wasnt intending to do

that, Im just trying to flush out the -MR. KELLY: And I in all candor expect Your Honor

to make a decision or if Your Honors prepared to, on the merits of the venue transfer motion. THE COURT: MR. KELLY: Okay. It is what it is, but the situation

that we have is that we have 1014B -THE COURT: about 1014B for now. Right. So, lets assume -- forget

So, lets talk about the merits of the

venue transfer motion and the argument made by the petitioning creditors that I simply, until theres an order for relief entered, cant go forward with the transfer venue motion anyway. Although, I would point out, by the way, that 1014B talks about petitions, it doesnt talk about orders for relief, but anyway -MR. KELLY: Yes, thats one of the things I was With respect to that argument

going to say, Your Honor.

that they -- as a preliminary matter argue that Your Honor cannot consider the motion because no order for relief has

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Page 24 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 yet been granted. They first raise Bankruptcy Rule 1011E,

which provides that quote, that no pleadings other than an answer may be filed in response to an involuntary petition. Your Honor, the petitioning creditors, I submit, are just flat wrong on that assertion, because a motion which is what is before the court today is not a quote, pleading. Pleadings have a specific meaning under Federal Rules Procedure 7, incorporated by Bankruptcy Rule 7007, theyre listed there. Pleadings are a complaint, an answer, This

an answer to a counter-claim, so on and so forth. motion is not a pleading.

This conclusion is made even more

clear, Your Honor, by the very next sub-section of Bankruptcy Rule 1011B, petitioning creditor cites 1011E for the proposition, which I think is incorrect. But 1011F, the

very next sub-section acknowledges that if entities respond to involuntary petitions by a pleading, a motion or other response, they must file a designated statement. In other words, Rule 1011 itself expressly differentiates between pleadings and the motion thats before this court, so I dont think, for that reason, 1011E prohibits Your Honor from considering this motion. They next cite a couple of cases, which Ill move to just very briefly. The David J. Ross case, which they

cite on this point, is off the mark because that case considered only the issue of whether a counter-claim, which

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Page 25 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 is a pleading, a counter-claim for attorneys fees, was permissible -- was a permissible type of response to an involuntary petition. Again, what we have here is a motion,

not a pleading, before the court today. The footnote from the Raytech (phonetic) case that they cite, is a 1998 opinion from the Bankruptcy Court in Connecticut. They cite that on Page 6 of their response, is

the only case they cite to support this proposition, that the venue motion is premature. Raytech does touch on this The court in

issue, Your Honor, but only in passing.

Raytech was not ruling on a motion to transfer venue, but on whether a venue challenge had been waived by a creditors committee in a previous case where no order for relief had been entered. On that point, I can speculate with some confidence, Your Honor, that if I had not raised the venue motion when I did in this court, in response to the emergency motion for an appointment of a trustee, I believe the alleged debtors would have been faced with an assertion from the petitioning creditors that we had waived venue, by not raising it while we were engaging on the trustee motion. So, Your Honor, as I said at the status conference, this is a -- the filing of this petition commenced the case, under 303 -- I believe its 303B. talks about transferring cases. 1412

I believe a case is before

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Page 26 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 premature. Id like to turn, finally, to -- if I may to what Ill call the merits of the venue transfer motion. THE COURT: MR. KELLY: Okay. The issues of convenience of the I submit in favor of a Your Honor that 1412 applies to and it seems to me at least that common sense dictates an a gating issue in this case is to determine which court should handle the case from this point forward. So, thats my response on their issue that its

parties and interest of justice. venue transfer to Atlanta.

The petitioning creditors take

issue in their papers with alleged debtors reliance upon the 12 part test set forth in the 3rd Circuit Case of Jamara (phonetic), and instead point to the six part test in the 5th Circuit Commonwealth Oil opinion. However, as cited in our papers, Your Honor, both Judge Fitzgerald who is sitting as a Delaware judge, once you made the ruling and Judge Walrath have analyzed venue transfer motions under the Jamara standards. Judge Fitzgerald even stated in her innovative communications opinion that the Commonwealth Oil test was a case decided under the Bankruptcy Act, which applied a stricter test of venue transfer then was currently the situation under the code.

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Page 27 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 Your Honor, I submit that the transfer motion should be granted under either the Jamara test or the Commonwealth Oil standards. As Ill get to in a moment, very briefly, I believe that the factors that are applicable here under both tests are either neutral or favor transfer. As we pointed out in our motion, these issues, these venue transfer motions are -- seem to be decided on a case by case basis. In fact, many of the opinions say its

a case by case analysis and the test of convenience to the parties and interest of justice are to be broad and flexible standards as set forth in the Manville opinion that we cite. The interest of justice standard, in particular, contemplates a consideration of whether transferring venue would promote the efficient administration of the estate and judicial economy. The factors that favor transfer in this case are Number 1, that Delaware is more costly, Your Honor, and more disruptive due to travel -- for the presence of Mr. Blount and Mr. Macaulay, to be present as witnesses at sustentative hearings in this case. Theres reference in the petitioning creditors papers to lawyers only appearing at most hearings. The

attendance of witnesses for the debtor at hearings is somehow not necessary. Thats not the way Ive ever run a

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Page 28 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 debtors case, Your Honor. In my experience Im always

going to have -- in this particular case, either Mr. Macaulay or Mr. Blount present with me to support evidence at any substantive hearing. Moreover, its my experience that having the gentlemen in those positions present, knowledgeable key employees, promotes efficient administration of the case because the opportunity to act with other -- interact with other constituents and their counsel before and after the hearings. Moreover, Your Honor, contrary to the petitioning creditors statement in their papers, its not necessary that employees attend hearings, I would just point out that in Allied 1, on more than one occasion we had courtroom packed with employees, mostly Teamster employees who took a great interest in that case. And we dont think we have any

Teamster employees in Delaware. THE COURT: Well, where did the Teamster guys that

attended the hearing from Atlanta come from, do you know? MR. KELLY: drove from Kentucky. Most of them were from Atlanta, some There was a fair number from Kentucky,

because that was one of the more, shall I say interested, local unions in what we were trying to do. They may have

come from other locations, but as I recall we were talking about Kentucky and Atlanta.

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Page 29 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 It was Kentucky because of a large facility located there that manufactured a certain kind of vehicle that was being transported by Allied. THE COURT: MR. KELLLY: THE COURT: MR. KELLY: THE COURT: Corvettes? It was Corvettes. Bowling Green, then? Yes. Very good. I have a good friend --

two good friends who used to be managers -- senior managers in that plant. Thats the only reason I know. And the Teamster official that we

MR. KELLY:

interacted with primarily during that first case was actually from Kentucky, I think originally came from that union, if Im -- that local union, if Im not mistaken. thats why there was such a Kentucky connection at that time. THE COURT: MR. KELLY: Okay. Now, the Jamara court expressed the So,

convenience of the parties test with a modifier, and Im quoting, as indicated by the relative financial condition. As I read that, I argue the following; here the alleged debtors relative financial condition as compared to the petitioning creditors, which, by the way, I believe, are the only parties that are opposing this motion -- parties of interest that are opposing this venue transfer motion. Im

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Page 30 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 not aware of anybody else opposing this. We have two

minority members of our first lien group who are opposing this venue transfer, nobody else to my knowledge. But the relative financial condition militates in favor of a transfer. In other words, under the Jamara test,

as I read it, the inconvenience to Allied is more important than the inconvenience to the petitioning creditors, because of our relative financial condition. The parties choice of forum is also important under Jamara and Your Honor indicated in the Saab ruling, which Ive read, and you know better than any of us here what you meant when you said it, but you said generally its the debtors choice of where to file. I know thats a case

where you didnt grant the debtors motion because it was primarily a liquidation case and you said it was a coin flip even in that situation as I read the transcript. Here, were not looking at that kind of a case, Your Honor. Clearly, the alleged debtors choice is Atlanta, Theres also

where their first Chapter 11 case took place.

redacted information, Your Honor, that is pertinent to the choice of forum issue. Your Honor. And finally, the fact that we already have a bankruptcy judge, Judge Mullens, familiar with Allied and most of the parties in interest, Yucaipa, the Teamsters. Im near the end of my presentation,

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Page 31 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 Hes familiar with the exit loan facility and so forth, means that efficient administration of these cases would be promoted by the transfer. In our motion, we did say that Judge Mullens would probably, I use the word probably be assigned to this case if transferred. I said that out of not wanting to appear,

frankly, to the Bankruptcy Court in Atlanta, in a public filing, as being presumptuous as to case assignments in Atlanta. But the petitioning creditors made an issue out of that in their responsive papers saying I only said probably. I will state unequivocally, its my understanding, I practice in Atlanta, obviously, that the way case assignment is handled in Atlanta, that this, in effect, Chapter 22 case of Allied would be assigned to Judge Mullens. Hes now the

chief judge, I dont know how it works, I suppose if he doesnt want it he wouldnt keep it. But under case

assignment rules, as I understand them, they would assigned to Judge Mullens. There is also redacted material raised by the petitioning creditors regarding the similarity of issues in the second case as to what transpired in the first case, Your Honor. And I would take issue that that is a

distinction with a difference. I think, Your Honor, that the other factors to the

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Page 32 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 extent that theyre applicable be it under Jamara or Commonwealth Oil, are neutral. is neutral. Proximity of the creditors

Our creditors are spread out, none of them are

in Delaware, I might add, but our creditors are spread out. The Teamsters, Your Honor, and the other parties in interest and our creditors in the first case, had no problem that Im aware in appearing and being heard and having their claims handled in Allied 1 in Atlanta. I have

no reason to think that the Teamsters or other parties in interest or our creditors will have any different result -or any problem appear in Atlanta in the second case. As to the petitioning creditors themselves, Your Honor, they knew when they bought into this first lien facility after the plan was confirmed, that they were buying -- becoming lenders to an operation headquartered in Atlanta, subject to still pending Chapter 11 cases, which were then very much more active when they bought the debt and being administered in Atlanta. Your Honor, I submit the location of the debtors assets is a neutral factor and I really cant think of any other factors that I need comment on, although I will if asked, but nothing else occurs to me. Its primarily, Your Honor, efficient, economic administration of the estate due to my -- the location of my witnesses, coupled with Judge Mullens familiarity with the

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Page 33 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 basic situation. So, Your Honor, for all those reasons, we respectfully request that the court grant the motion and transfer venue of these cases to Atlanta under 28 USC 1412. THE COURT: MR. KLYMAN: Thank you. Mr. Klyman. For the

Good afternoon, Your Honor.

record, Robert Klyman of Latham Watkins, LLP on behalf of the Yucaipa companies, which as Mr. Kelly mentioned are significant lenders to the current alleged debtor. Your Honor, Yucaipa, for the record, is the holder of 135,000,000 of the 235,000,000 principle amount of first lien debt. Those numbers are principle amount numbers, not

accrued and unpaid interest numbers. Yucaipa also holds 20,000,000 in principle amount of the 30,000,000 second lien debt. Yucaipa holds all the

preferred stock and 63 percent of the common stock and I rise in support of the debtors motion to transfer venue. What this motion boils down to is essentially the following; should Black Diamond, which appears in cases throughout the country be compelled to have its lawyers appear in Atlanta? And I should note, Your Honor, that before this hearing I Googled Black Diamond and bankruptcy cases and discovered that in recent years theyve appeared in California, Shreveport, Louisiana, Tennessee, New York,

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Page 34 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 Delaware and elsewhere. But could Allied stretch management, which now has two day jobs, running the business and dealing with a bankruptcy case, be compelled to participate in a case and attend hearings in Delaware as opposed to a court in Atlanta thats 20 minutes away? This is about keeping a management team focused and in Atlanta to conduct the business of the debtor and maximize value for all stakeholders, of which Yucaipa is by far the largest. In addition, as Mr. Kelly mentioned, the debtor seeks to have its bankruptcy occur in a forum before a judge that knows most of the players and the history and the status of claims that were recently resolved. As you can see from the hearing today with the long list of people who are appearing by phone, Black Diamonds representatives are perfectly able, even though in this matter, theyre located very close to Delaware, to appear by phone. And Black Diamonds counsel, Im sure, has

many frequent flyer miles and has no issue getting on a plane. Your Honor, while the facts here are a little different than some of the cases that were cited by Black Diamond, a number of the cases and precedent in this court, uniformly, hold that the debtors choice of forum should not

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Page 35 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 theyre -THE COURT: MR. KLYMAN: case, Your Honor -THE COURT: Im sorry, Im -- but they havent, at Okay. Okay. -- choosing a venue. And in that be lightly disturbed. Thats what Judge Walsh held in the

Safety Clean opinion that was attached to the papers by Black Diamond. And in the Enron case, another case cited by Black Diamond, the court held that a debtors choice of forum is entitled to great weight if venue is otherwise proper. Citing Ocean Properties of Delaware, which is a 1998 Delaware Bankruptcy case. THE COURT: Well, I mean, as we sit here today, I mean, the choice has basically

have they chosen a forum? been, not here. MR. KLYMAN: to Atlanta. THE COURT: MR. KLYMAN:

Well, theyve moved to transfer venue

All right. So, I think by virtue of that motion,

least as we sit here today, they havent agreed necessarily to go into bankruptcy. That was sort of what I was saying.

Its a -- being a purported debtor -- an alleged debtor with the involuntary petition in Delaware versus being an alleged debtor with an involuntary position in Georgia.

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Page 36 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 should be. MR. KLYMAN: Your Honor, I dont represent the MR. KLYMAN: THE COURT: May I have a moment, Your Honor? Uh-huh. And -- I -- my -- my point

there is not -- my point there is more along the lines of -and perhaps this is what Mr. Harris is going to say, which is, maybe thats why this motion is premature because we simply dont know at this point whether there will -whether well definitely have a case or if we definitely have a case when well definitely have a case. MR. KLYMAN: THE COURT: Well, Your Honor, I -Before we decide where that case

debtor, Im happy to see the podium to Mr. Kelly on that particular point. THE COURT: MR. KLYMAN: Okay. You can move on, Im sorry.

Your Honor, Enron further went on to

say that where a transfer would merely shift the inconvenience from one party to the other, the debtors choice of a forum should not be disturbed. And here thats

exactly whats at issue, whether its more convenient for the lawyers representing Black Diamond to be in Atlanta or more convenient for the debtors to be in Atlanta or whether it should be flipped and instead of Mr. Harris taking an hour and a half train ride down from New York, the debtors management which is struggling to keep the business afloat,

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Page 37 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 should be compelled to get on a plane and fly here. Your Honor, the debtor and Yucaipa, by moving to transfer venue, and not immediately contesting the involuntary petition, intend to reserve all rights. And Im

speaking for Yucaipa here, Mr. Kelly can speak for Allied, but you have all rights against Black Diamond Spectrum in connection with a timing and nature of the filing. I dont

want there to be any sort of admission through silence or acquiescence that the business was not damaged by Black Diamonds actions and when theres an appropriate venue and a case is -- and a case is fixed, then that issue will be joined. And Your Honor, with respect to the procedural issue about whether or not the case can be filed, I just want to speak to that briefly. Black Diamond and Spectrum filed their involuntary petition and then in disregard of the rule that theyre currently citing, they filed an emergency motion to appoint a trustee. If we were to follow their logic, neither the debtors no Yucaipa would have been able to a oppose that motion. They then participated in a scheduling conference about this hearing -THE COURT: No, but Rule 1011 is about responsive

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Page 38 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 section -THE COURT: MR. KLYMAN: THE COURT: My point is really as to responsive. Okay. My point being that because the code pleadings -MR. KLYMAN: THE COURT: MR. KLYMAN: THE COURT: MR. KLYMAN: Honor, its pleadings. THE COURT: But its titled, responsive pleading Yes. -- and responsive motions -Yes. -- by the purported debtor. Yes. But its not motions, Your

or motion in involuntary and across the border cases. MR. KLYMAN: Thats correct, Your Honor, but the

specifically contemplates the ability to seek a trustee in the gap period. So, it cant be the rule at least to the

extent it purports to be Rule 1011 that says you cant file a motion to seek appointment of a trustee even though code section says you can. MR. KLYMAN: That rule cant be applicable. Youre right. Your Honor, that

argument would be illogical just as though under 1014, which is a different rule, a rule says once a petition is filed, either the debtor on its own motion or the court on its own motion, may transfer venue. In one of the cases that were cited by Black

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Page 39 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 Harris? (no verbal response) THE COURT: MR. HARRIS: Mr. Harris. Thank you, Your Honor. Im going to Diamond, a case called BL of Miami, which was a 2003 District of Nevada case, in that case the court held that 1014 does not, in fact, prohibit a sua sponte transfer of venue by the court, which was dealing with petition and the statute and the rule itself actually speaks to that. So, for those reasons, Your Honor, we believe that the debtors motion should be granted. For me, Im going to

get on a plane to come to Delaware or to Atlanta, its not my inconvenience, its not Mr. Harris inconvenience thats at issue, whats at issue is whether or not the debtor should remain in Atlanta in order to maximize value for all the stakeholders. Thank you. Anyone else before I turn to Mr.

THE COURT:

stick to the substance of whats before Your Honor today and avoid my natural tendency, which is to respond to people who like to take pot shots at my clients in open court without any foundation and without any evidence and without any support and testimony. Mr. Klyman -THE COURT: MR. HARRIS: So, without poisoning anyone? I thought that was pretty well said,

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Page 40 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 actually. THE COURT: I wont respond to the threat of a Non-response of

murder, by saying -- all right, go ahead. response noted. MR. KLYMAN:

Your Honor, I am going to pick up on

a theme that, you know, youve already identified here, which is we have involuntary cases filed by petitioning creditors, not just Black Diamond, in this court, in which by all admissions is a proper venue for these cases. 1408 makes it absolutely clear, domiciled, (indiscernible), this is a legitimate place for these cases to be. that. Theyre properly filed here, nobody has challenged You havent heard that from either Yucaipa and you

havent heard that from the debtors. We dont have a debtors choice of forum, Your Honor, other than to say we dont want it here. And that is

an issue because from our perspective, what that basically is saying is that we want the cases transferred in their status as involuntary petitions to another court where we dont know whats going to happen next. be contested? Are they going to Are we

Are they going to be consented to?

going to be litigating in a place that is not the selected forum of the petitioned creditors at that time and when you read Judge Walshs decision, when you talk about the preferred filing place -- I would submit to Your Honor, that

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Page 41 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 filing. anything. in this instance, the preferred filing place is that of the petitioning creditors, not of the debtors proposed choice of forum when the debtor actually hasnt made that choice. Were we in a different situation then I think that the analysis might be a little bit different, but thats not where we are and this is not your Saab case where the debtors had informed the petitioning creditors before they ever filed that they, in fact, were going to be filing in Detroit in a day or two and the petitioning creditors turned around and ran off and went someplace else. matter of fact. We had no knowledge that there was going to be a We had no knowledge that they were contemplating Theres a lot of redacted information that is not And for Here, as a

appropriate for this record, but we didnt know.

people to get up and call it precipitous or unwise or anything else, again, Im not going to respond to that, but were here, its a legitimate forum, 1408 says its a legitimate forum and we should be moving on to the more substantive part of this. THE COURT: Yeah. And as an aside, I mean, you

often here sort of -- this sort of, you know, weve got a potential debtor and the case gets filed against them and they sort of like, oh my gosh, I cant believe anyone would do something so un-torrid and so wrongful and, you know,

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Page 42 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 dont they believe us? And my response to that is, you Heres the reality,

know, the invective gets you nowhere.

people are owed money, the code allows them to file a voluntary case. They filed a voluntary case, I dont think Simply somebody exercising

that makes anyone a bad actor. their legal rights.

So, its more an aside, because they

didnt really focus a lot on this, but this comment that Black Diamond has somehow wronged the debtor by filing this motion, I dont think that gets you anywhere one way or the other. And it also relates to the fact that I think that the petitioning creditors choice must have some merit because the code gives the petitioning creditor the right to exercise that choice. MR. KLYMAN: I appreciate that, Your Honor and I I want to throw one more

wholeheartedly agree with it.

piece of reality onto the comment you just made, which is as we mentioned in the motions we had filed with the court originally, the maturity date of the first lien debt was March 29th, it has now come and gone and had we been paid I wouldnt be standing before you today. It has not been paid So, obviously,

and theres no expectation that it will be.

if there is a contested hearing on a petition, that will be just one more fact to -- or a piece of wood to throw on the otherwise burning embers.

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Page 43 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 But, Your Honor, Im not going to dwell a lot on the 1011E issue, I think, frankly, the comments weve made, we think that having venue transformations dealt with in the context of involuntary filings opens a whole host of issues of the sort we were just discussing about changing the petitioners chosen forum for litigation for the involuntary itself. We think the way you read the two statutes together, frankly, is that -- that there should be no consideration venue transfer motion by any court until you know you have a case to transfer. You shouldnt be

transferring, you know, open litigations, if you will, regarding involuntary petitions until theres a determination of whether an order really should or should not be entered. This is not a situation where somebody is looking to reopen the old case that was extant down in Georgia such that theyre trying to enforce and old plan or claim that it wasnt substantially consummated and therefore, you know, this should be dealt with before an order to (indiscernible) is necessarily entered, its a whole new case. subject Ill get to in a couple minutes. Let me talk about what the real import would be of Judge Mullens historical knowledge and familiarity and so forth, but Ill come to that in a couple of minutes. And thats a

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Page 44 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 Your Honor, as I said before, I mean, theres no dispute, 1408 says we can be here. This company should be

here and frankly, one interesting fact, Your Honor, to note is that when these companies were in bankruptcy before, they are from the parenting company Allied Holdings, which was merged out of existence into Allied Systems Holdings as part of the plan, that was a Georgia corporation. When Yucaipa put the plan together and decided to create Allied Systems Holdings, Inc. as the new parent company, it affirmatively chose to make it a Delaware Corporation. It wanted the rights and benefits and all the

things that go along with the fact that its a Georgia company, the corporate governance issues, you know the body and case law that goes along with fiduciary duties, all those items. They affirmatively chose that law and frankly,

if you look at Judge Walshs decision of PWS, he says having made that choice, domicile becomes a very valid basis for a case. Whether they choose to do it or whether an

involuntary creditor -- petitioning creditor chooses to put them in. That is a valid basis to be here. They chose

Delaware as the jurisdiction they wanted to incorporate this company. And they affirmatively took it out of Georgia.

The parent company was a Georgia corporation, Allied Systems Holding is a Delaware corporation, theyre the ones who decided to make it so.

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Page 45 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 Now, Your Honor, if you took the arguments that have been made by both the company and Yucaipa relative to why this case should be transferred -- and again, I would condition that on should be transferred, assuming an order for relief is entered. But if you take their arguments at

face value, Your Honor, domicile means nothing in every case in which a venue of transfer motion is filed, should be granted. Because, frankly, a lot of the debtors who come here dont have creditors here, dont have their headquarters here, dont have very many contacts with this jurisdiction independent -- as part of their business, but there are other reasons they file here and they do and theres good reasons for it. Again, look at Judge Walshs

decision in PWS, in the final paragraph he has there, which talk about companies that operate nationally, internationally, people should expect, among other things that if there is a filing that the filing would occur in the place where the parent company or one of its affiliates is domiciled. You cant just read it out of the statute, which is what it effectively, I think both the debtors and Yucaipa are trying to do by saying, since we are elsewhere we shouldnt be here. But, even if you move beyond that, Your Honor, and

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Page 46 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 you get to the substance of the particulars here, you know, the statute in 1412 talks about the interest of justice or the further convenience of the parties. It doesnt talk

about just the convenience of the debtors, it talks about the convenience of the parties. And here weve also got

case law which suggests that the movant bears the burden of showing by a preponderance of the evidence that the transfer of the venue is necessary in order to achieve the statutory purposes of the venue transfer statute. So, we go through the factors and whether you use the Jamara factors or whether you use the six point test, I think, effectively, Your Honor, the analysis comes out at almost exactly the same place. But when you look at it and,

you know, you go through the limited analysis weve been able to do and we dont have schedules or statements or access to books and records or any of those things, but what we come up with Your Honor is that there are substantial parties and creditors who have absolutely no association with Georgia for whom this court is imminently more convenient or at least neutral. The PBGC, which is,

obviously, a very substantial creditor here, a continued creditor here, is located in the District of Columbia. Teamsters headquarters are in DC, although they do have locals, obviously, throughout the country. Yucaipa is, The

obviously, in California and New York and Mr. Klyman says

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Page 47 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 hes happy to go anywhere, so I guess that becomes a neutral factor. The petitioning creditors are in New York and Connecticut. Jersey. CIT who is owed about $35,000,000 is in New

The chairman of the board of the company, Derex There are other directors

Walker resides in California.

other than the one they refer to who splits his time and residence between Michigan and Georgia. By implication, all

reside some place other than Georgia, we dont know where. And the CO of the company, its our understanding, splits his time and maybe the board member, who splits his time between Michigan and Georgia. I found it interesting that, you know, the debtors didnt suggest their CO would ever be somebody who would be coming to hearings. But, thats, obviously, their choice.

With respect to proximity, Your Honor, of the debtor to the courthouse, the extent to which employees of the company need to be in attendance at hearings and my experience and I think in many peoples experiences, depends on a number of factors. The most important of which is, can

the parties get on the same page with respect to how the case is going to proceed? If the case is going to proceed in the manner such as Mr. Kelly and I have at least started off in some respects today, of cooperation, where he comes to me and

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Page 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 says, do I need to bring Scott Macaulay to Delaware to testify to the facts in his declaration? No. I mean, Im

not going to sit here and force a man to fly, you know, a couple of hours and spend a couple thousand bucks to do that, it doesnt make any sense. And reciprocally, Mr.

Kelly was nice enough to say, were not going to contest the facts in your petition, we understand them, theyre true. We dont need to cross-examine anybody, you dont need to find a witness to come down here. Frankly, had he suggested the same with the limited testimony of Mr. Blount, I would have said, Mr. Blount, in my view, doesnt need to be here either. Whether

he decides to bring him or not is, obviously, his choice. But if you can get people on the same page and this case is -- if it goes it in, should be one where people are on the same page with respect to a reorganization. Then

the need for employees of the company to leave their posts and travel for hearings to be would be limited and, in fact, in many experiences it turns out to be the financial advisor or investment banker for the company who does most of the testifying while the employees, chief financial officer, chief administrative officer, so forth, dont have to. Obviously, theyre involved in a number of things including preparation of budgets and forecasts and presentations and things like that, but that wouldnt

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Page 49 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 necessarily require them to leave Atlanta. But, again, how the overall need for them to travel for purposes of hearings is dictated in large part by the means by which the case is going to be conducted and I think that at least so far, we got the ball rolling here, theres no question about that and we did file the trustee motion, but I think we have been reaching out and trying to be as cooperative as possible to avoid the need for unnecessary costs and expense and travel and were hopeful that will be -- bear fruit, going forward. With respect to books and records, Your Honor, I mean, theyre all electronic and available, in fact, when the State Court in New York directed Yucaipa to have the company send us historical financial records that they hadnt produced under the terms of the credit agreement for a couple of years, within 72 hours the company had absolutely no problem delivering them to us. So, I think

locations of books and records as an issue relative to venue is not particularly relevant. On the location of assets issue, Your Honor, as the case law suggests, location of assets in cases like this is really a neutral factor at best. Yes, they have

headquarters in Atlanta and real estate there, they have 44 terminals around the country, but this is not a liquidation, we dont need local administration or foreclosure laws and

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Page 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 things like that. At least as we sit here today, everybodys intention would be that if orders for relief were entered these would be either reorganizations or potentially sales. I dont know which way its going to go, but I dont think anybody here has any interest in pressing for any kind of a liquidation. That certainly wouldnt maximize value for my

client or anybody else. And that takes us to the issue of deficient and economic administration and heres, Your Honor, I have the most issue with the prior pending case and everybodys, the debtors and Yucaipas statements about the helpfulness, if you will, of Judge Mullens prior experience with this case. Im sure Judge Mullens is an excellent judge. Ive never met the man, but by reputation he is a wonderful man and an excellent jurist. But last time he saw this case and the substance of this case was five years ago, other than claims administration which may have been occurring until now, until recently when the case became ready to ultimately close. A lot has happened as Your Honor well knows in the last five years, given the number of cases that have come through this particular courtroom and this courthouse as a whole. All of which bear on what is going to happen next

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Page 51 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 with respect to this debtor. The familiarity with parties with Yucaipa, with the debtors, with their counsel is to somebody who was not there the last time, in some respects, a double edged sword. I mean, judges who have seen cases before, potentially, have memories of what happened the last time, what they knew about the business previously, which frankly should not be brought to bear on a new case with a new set of facts, with a new set of players and all new circumstances that have, frankly, nothing to do with what happened in the last case. And Im sure that if we were in Atlanta that Judge Mullens would do his very best to segregate out those pieces of information which he garnered through the last case, from those which are relevant to what would be before him today, but, Your Honor, the fact of the matter is, theyre not particularly relevant. Judges see debtors every day, they

dont know a thing about them and they learn very quickly everything they need to know in order to basically preside over the case. Historical knowledge of what happened in a

case thats been over for five years is not a reason to transfer venue. Just give me a second, Your Honor, I just want to take a look at my notes with respect to the presentations by debtors counsel and Yucaipa. (Pause)

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Page 52 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 Id be happy to answer any questions. THE COURT: MR. HARRIS: much for your time. THE COURT: MR. KELLY: Youre welcome. Mr. Kelly? I have none. Thank you. Thank you very

Great, Your Honor.

Briefly, Your Honor, I thought Id

made it clear, but maybe I should make it clear on the record, there will not be -- these petitions will not be contested. Our response today is not until June 8th. The

company is operating under a time table, however. table has been accelerated by the filing of the

The time

involuntaries, but just to be clear, the involuntary petitions will not be contested. If its -- you know, I dont think its premature to rule, but if Your Honor believes its premature to rule on the issue because we dont yet have orders for relief or because these entities are not yet in bankruptcy, then one option I respectfully suggest would be to hold the ruling in advance. is. Looking through my notes, I really dont know that theres much else I need to respond to Your Honor. In terms Were not that far off from when our response date

of the cost, I wasnt talking about the cost of coming to Delaware, I was talking about the time thats involved in, I believe, in my experience with this case, Im not trying to

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Page 53 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 say anything about the CEOs lack of involvement, he may well be involved as well, but based on my experience with this case, it would be Mr. Blount and Mr. Macaulays time, thats what were talking about, not expense. Honor. THE COURT: Thank you. Anything else? Thank you, Your

(no verbal response) THE COURT: All right. Were going to clear the And as its

brush a little bit and talk about Rule 1014B.

written, I think its obvious, but Ill say it, that the two alleged debtors in this case, one is a debtor of a case currently pending in Georgia and the other is an affiliate of that debtor with a case currently pending in Georgia. So, Rule 1014 would appear to be applicable as there have been cases opened in Georgia and a later case opened here in Delaware. And the technicalities of 1014B

have arguably not been met here, which is that a request should have been made to the judge in Georgia and the judge in Georgia would make a decision on where the venue should be and then until that happens this court would basically hold this case in abeyance, pending a decision. That has happened currently because the statements I made at the status conference, partly and I think chiefly because this is an involuntary petition, which has sort of forced the issue in connection with where the debtor, which

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Page 54 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 closed. states how it wont oppose the -- or wont respond, I guess, to the involuntary petition and thus allowing a case to be opened at some point in the future. That issue was forced a

bit by the fact we have an involuntary in play here. I dont think its constructive to get lost in the technicalities of the rule. And as far as Im concerned to

stick to Rule 1014B in this case would really be to promote form over substance. The case in Atlanta for all intensive purposes, The final decree has been requested, a certificate

of no objection has been filed, the order just hasnt been signed. And to hold up a decision here on whether to transfer venue you or not, a decision here perhaps on whether an order for relief will be entered et cetera, based on the fact that a CNO hasnt worked its way through chambers yet, I think is just counterproductive. So, as far as Im concerned, for purposes of making this decision today, 1014B is simply inapplicable because the cases -- the case in Georgia is so substantially consummated and for all intensive purposes closed that it would be not constructive or helpful to push the technicalities of who decides what and when. Talking about 1011, I agree with the debtor on this one, that 1011 is not applicable to a motion to

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Page 55 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 transfer venue. 1011 really deals with the substance of There

whether or not an order for relief should be entered.

are for example, other motions that can be brought before the court in the interim, including as we discussed a motion for appointment of a trustee, specifically contemplated by the code. I think responsive is important and its the adjective that starts the rule and I think what that case is designed to do is to focus -- excuse me that rule is designed to focus the hearing on the merits of the involuntary petition and to provide a specific framework for deciding that issue. It does not think about venue, it

doesnt deal with the venue issue. Again, backing up to 1014, it talks about petitions, it doesnt talk about cases where order for relief has been granted or anything along those lines, so I just think 1011 is simply inapplicable. All right. That gets us to the merits of the Basically, its an equitable

motion to transfer venue.

consideration, the court takes the facts and circumstances of the case in front of it and decides for the interest of justice where a case should be. There are 12 factor tests, there are six factor tests, I think those types of tests are helpful to focus the court on the types of issues that really should be

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Page 56 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 of forum. considered. We dont play scorecard with them, its not --

you know, you dont get a transfer venue if its seven to five or four to two, thats not helpful. I find that every time you add a factor to a test you complicate it by an order of magnitude and to go from a two factor test to a 12 factor test is really, frankly, not helpful, because it just continues to throw in items that cloud the ultimate decision that should be in front of the court. All that said, youve got situations like choice Well, we have two parties that disagree. The

petitioning creditors have chosen Delaware by filing here, as theyre allowed to do under the law. venue for these cases. This is proper

The debtor has said no, he would So, theres a

like the case, if any case, to be in Georgia. disagreement there.

Professionals are going to fly in from

all over the country, that happens in every case, thats a neutral factor. Employees and -- let me back up a little bit, issues that can kind of go beyond that, I think are sort of case specific issues, for example, if we had a liquidation here, if we had a hotel in Las Vegas that was being foreclosed on. be in Nevada. I mean, the case, arguably, very much should If we have a piece of undeveloped land in New Those are strong

Mexico, the case should be in New Mexico.

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Page 57 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 factors that would push a case to one place or another. We had an industrial case where there was one factory and it was in Georgia and it was going to be shut down and liquidated under the case, I think theres a much stronger argument that that case should be in Georgia. Well, the employees are really going to care a lot, the employees are there, theyre in Georgia, theyre going to have a real stake in the matter. The Teamsters issue, Im Why?

sure that the local and Bowling Green would have been happy if that case had been filed in Kentucky. It wasnt and they

wanted to be heard and they got to Atlanta because it was an important issue for them. And it was wholly appropriate.

You dont know where a case is going to go at the beginning when you have a transfer of venue motion, especially in a case here where you dont even have an order for relief. So, its a little hard to kind of predict. This looks

Some cases are easier to predict than others.

like a rehabilitation, even if its done through some sort of sale process, it would be on a going concern process, so its a rehabilitation. assets. Its not a liquidation of specific

Its not a shutdown of specific factories. So, all that basically comes to the conclusion

that its a bit of a wash.

I mean, every factor of what we We have a

kind of focus on here is in effect neutral.

argument that the loss of time for management to come back

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Page 58 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 3:35 PM) and forth to cases in Delaware is really the distinguishing factor that puts this case where -- that it should be in Atlanta. Thats pretty much it, thats pretty much the distinguishing factor. And I dont think thats sufficient. Remember

that the debtor is the movant and has the burden of proof. And one thing Ive learned since Ive been on the bench is that if you cant figure out what to do or if its a tie the movant loses. And I think in this situation the facts

simply dont support with any preponderance or any sort of weight that this case should be anywhere other than where it is. Its proper to be in Delaware, it was filed in Delaware by the petitioning creditors appropriately. The

debtor sought to move it to Georgia, has the burden of proof and I think simply hasnt met it on the merits. going to deny the motion to transfer venue. Ill enter an order. MR. HARRIS: MR. KELLY: THE COURT: Were adjourned. Thank you, Your Honor. Thank you, Your Honor. All right. Anything else? All right. So, Im

And Im just --

Thank you.

(Whereupon these proceedings were concluded at

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Page 59 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 DESCRIPTION Motion to transfer venue RULINGS PAGE 58 LINE 17 I N D E X

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Page 60 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Date: 16 17 18 19 20 21 22 23 24 25 th June 4 , 2012 Veritext 200 Old Country Road Suite 580 Mineola, NY 11501 I, Sheri Monroe, certify that the foregoing transcript is a true and accurate record of the proceedings. C E R T I F I C A T I O N

Sheri Monroe

Digitally signed by Sheri Monroe DN: cn=Sheri Monroe, o=Veritext, ou, email=digital1@veritext.com, c=US Date: 2012.06.04 16:00:22 -04'00'

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UNITED STATES BANKRUPTCY COURT District of Delaware

In Re: Allied Systems Holdings, Inc. 2711 Centerville Road Suite 400 Wilmington, DE 19808 EIN: 580360550

Chapter: 11

Case No.: 1211564CSS

NOTICE OF FILING OF TRANSCRIPT AND OF DEADLINES RELATED TO RESTRICTION AND REDACTION A transcript of the proceeding held on 5/31/12 was filed on 6/5/12 . The following deadlines apply: The parties have 7 days to file with the court a Notice of Intent to Request Redaction of this transcript. The deadline for filing a request for redaction is 6/26/12 . If a request for redaction is filed, the redacted transcript is due 7/6/12 . If no such notice is filed, the transcript may be made available for remote electronic access upon expiration of the restriction period, which is 9/4/12 unless extended by court order. To review the transcript for redaction purposes, you may purchase a copy from the transcriber (see docket for Transcriber's information) or you may view the document at the clerk's office public terminal.

Clerk of Court Date: 6/5/12

(ntc)

Notice Recipients
District/Off: 03111 Case: 1211564CSS User: Leslie Form ID: ntcBK Date Created: 6/5/2012 Total: 8

Recipients of Notice of Electronic Filing: ust United States Trustee USTPREGION03.WL.ECF@USDOJ.GOV ust David L. Buchbinder david.l.buchbinder@usdoj.gov aty Christopher M. Samis samis@rlf.com aty Christopher M. Samis samis@rlf.com aty Mark D. Collins collins@rlf.com TOTAL: 5 Recipients submitted to the BNC (Bankruptcy Noticing Center): adb Allied Systems Holdings, Inc. 2711 Centerville Road Suite 400 Wilmington, DE 19808 aty Ezra H. Cohen Troutman Sanders LLP Bank of America Plaza 600 Peachtree Street Suite 5200 Atlanta, GA 303082216 aty Jeffrey W. Kelley Troutman Sanders LLP 600 Peachtree St. NE, Suite 5200 Atlanta, GA 30308 TOTAL: 3