UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION

In re COLLINS & AIKMAN CORPORATION, et al Debtor. /

Case No. 05-55927-SWR Chapter 11 HON. STEVEN W. RHODES

UNITED STATES TRUSTEES OBJECTION TO CONFIRMATION OF FIRST AMENDED JOINT PLAN OF REORGANIZATION FILED BY COLLINS & AIKMAN AND ITS DEBTOR SUBSIDIARIES Saul Eisen, United States Trustee for Michigan/Ohio, Region 9, hereby objects to entry of an order confirming the First Amended Plan of Reorganization (the Plan) filed by Collins & Aikman and its debtor subsidiaries, and in support of this objection states: 1. The U.S. Trustee and the Debtor, through its counsel, Marc Carmel of Kirkland and

Ellis, agreed to an extension of time through May 14, 2007 for the filing of this objection. 2. Article XII of the Plan provides for various releases and injunctions (the Releases.)

The Releases (and the Injunctions) are complex and broad in scope, but are explained in more direct terms in the Objection to Confirmation filed by MainStay High Yield Corporate Bond Fund (Document #4628) at pp. 5-8, and so, for the sake of brevity, will not be described again here. The U.S. Trustees objection applies to both releases and injunctions to the extent that an injunction provided for in the Plan forever disables a potential claimant from taking action against a non-debtor third party, and, in essence, operates as a release. 3. The Plan cannot be confirmed with the inclusion of the Releases to the extent that a

vote in favor of the plan binds a non-consenting creditor to the terms of the Releases because:

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They violate Section 524(e) of the Bankruptcy Code;

B) They are unsupported by consideration; and C) They are unsupported by extraordinary circumstances which the Court must find in order to justify their inclusion in a plan of reorganization for which confirmation is sought. 4. In re Dow Corning Corp. 280 F. 3d 648 (6th Cir. 2002) held that while 524(e) does

not per se prohibit the enjoining of a non-consenting creditors claim against a non-debtor, enjoining third parties from suing non-debtor entities is a dramatic measure to be used cautiously and is only appropriate in unusual circumstances. Id. at 658. 5. The 6th Circuit articulated seven factors which the Court must find in order to approve

such drastic relief for non-debtors and to bind non-consenting creditors. These factors are: i) Identity of interests between the debtor and the third parties to be released such that the a suit against the third party is essentially a suit against the debtor or will deplete assets of the estate (often in an indemnity relationship); ii) The non-debtor has contributed substantial assets to the reorganization;

iii) The injunction is essential to the reorganization (the success of the plan depends upon the debtor being free from indemnity or contribution suits); iv) v) injunction; vi) recover in full; and The plan provides an opportunity for the claimants who choose not to settle to The impacted class overwhelmingly votes to accept the plan; The plan provides a mechanism to pay for all of the class(es) affected by the

vii) conclusions. 6.

There is a record of specific factual findings which support the courts

The Court should require the development of the record in this case as required by

the Sixth Circuit. The Court may also need to make amendments to prior orders of the Court which approved the form of ballot in this case as the ballot does not appear to provide for opting out of the release provisions, and there should be no inconsistency in the conclusion reached by the Court on this issue.. See In re Dow Corning Corp., supra. at 659.

WHEREFORE, the United States Trustee objects to confirmation of the Plan and specifically to the Releases in favor of non-debtor third parties, and respectfully requests that the Court deny confirmation of the Plan as proposed.

Respectfully submitted this 14th day of May, 2007.

SAUL EISEN UNITED STATES TRUSTEE Michigan/Ohio Region 9

By:

/s/ Stephen E. Spence (P32923) Steve.E.Spence@usdoj.gov Marion J. Mack, Assistant United States Trustee Stephen E. Spence, Trial Attorney Leslie K. Berg, Trial Attorney United States Department of Justice Office of the United States Trustee 211 West Fort Street - Suite 700 Detroit, Michigan 48226 313.226.7911