IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: MERVYN'S HOLDINGS, LLC, et al. Debtors.

Chapter 11 Case No. 08-11586 (KG) Jointly Administered

Objection Deadline: November 15, 2011 at 4:00 p.m. (ET) Hearing Date: November 18, 2011 at 11:00 a.m. (ET)

Ref. No. 6252 OBJECTION OF MDS ENTITIES TO CREDITORS' COMMITTEE'S MOTION TO MODIFY COOLEY RETENTION APPLICATION AND REQUEST FOR MEDIATION MDS Realty Holdings I LLC, MDS Realty Holdings II LLC, MDS Realty I LLC, MDS Realty II LLC, MDS Realty III LLC, MDS Realty IV LLC, MDS Texas Properties I LLC, MDS Texas Properties II LLC, MDS Texas Realty I LLC, MDS Texas Realty I LP, MDS Texas Realty II LLC, and MDS Texas Realty II LP, as unsecured creditors and defendants in the so-called "2004 Transaction Litigation" (collectively, the "MDS Entities") oppose the motion of the Official Committee of Unsecured Creditors (the "Committee") to modify the compensation terms of its retention of Cooley LLP (the "Motion") [D.I. 6252], request that the Court direct the parties to mediation pursuant to Local Rule 9019-5 in advance of any ruling on the Motion, and represent as follows: PRELIMINARY STATEMENT The Committee has been prosecuting the so-called "Committee-Controlled Litigation" for nearly three years. The litigation is still in the document discovery phase, no fact depositions have been scheduled, and trial is at least two years away. After paying professionals close to $40 million, including more than $21 million to Cooley, the estates are projected to run out of cash well before trial. The Committee now seeks authority to modify Cooley's existing compensation arrangement from its traditional hourly basis to a complex contingency fee structure because
{331.003-W0017801.}

Cooley wants a premium in exchange for assuming the risk that there will not be sufficient cash in the estates to continue paying 100% of the firm's fees at its hourly rates on a going forward basis. The Committee asserts that it would be unable to continue to prosecute the litigation "in the absence of an alternative compensation arrangement." Motion 15. The Motion should be denied because Cooley can (and should be) compelled to continue to prosecute the case under the terms of its existing compensation structure. Cooley voluntarily and knowingly assumed the risk that it might not be paid its full hourly rates for its post-petition services when it agreed to represent the Committee in 2008. Moreover, there is no legal or factual basis to modify the previously-approved compensation structure. The MDS Entities fully understand that the Committee must have counsel and only oppose the request to enhance Cooley's fee arrangement. To evaluate the modification request, the Court should first consider the circumstances of the case. The Debtors' cases were filed three years ago, in July 2008, in the midst of the worst economic crisis since the Great Depression. The Great Recession and historic drop in consumer spending caused the Debtors to file chapter 11 and contributed the Debtors' determination in October 2008 (less than three months after the filing) that reorganization was not feasible. The Court approved the liquidation and substantially all the Debtors' assets were sold during the fourth quarter of 2008. In the face of these extraordinary and uncertain times, the estates incurred post-petition administrative liabilities to hundreds of trade creditors without committed funds to pay those expenses. These administrative expenses, in an amount close to $90 million, remain unpaid. Cooley was retained in 2008 under section 328(a) and 1103(a) of the Bankruptcy Code. An estate professional retained under section 328(a) is bound by the terms of its engagement and cannot, as a matter of law, change those terms prior to the conclusion of its engagement. Even if the request is not premature, the Committee offers no evidence of developments that were
{331.003-W0017801.}

"incapable of being anticipated" at the time of Cooley's original retention. The proposed

modification is complex and generally provides for a multiplier of Cooley's hourly rates up to four times its regular rate, or a percentage of the recovery (depending upon when the litigation is resolved) and the subordination of all other administrative claims to Cooley's enhanced fees. Thus, the proposal is unreasonable because, among other things: (i) there is no legal basis to support the request that Cooley's fees prime all other administrative expense creditors; (ii) the proposed structure creates conflicts of interest; (iii) there is no evidence that the renegotiated terms are the product of arms-length negotiations; (iv) the proposal unfairly deprives the Court and parties in interest of the opportunity to evaluate the fees relative to results (if any) actually achieved; and (v) there is no evidence that the fee arrangement is market, or that it is necessary to minimize Cooley's risk that it will not be paid 100% of its fees based on its hourly rates. Additionally, the proposal is unreasonable when evaluated in light of the merits of the 2004 Transaction Litigation. As the Court is aware, Mervyn's was acquired from Target Corporation in September 2004. Mervyn's operated for nearly four years after the acquisition. As the Great Recession began to impact the national economy, and the financial crisis was worsening in the banking industry and affecting many retailers, Mervyn's was ultimately forced to file for bankruptcy on July 29, 2008. The 2004 Transaction Litigation claims are based on the allegations that Mervyn's was rendered insolvent and/or inadequately capitalized as a result of the 2004 Transaction, and remained insolvent and/or inadequately capitalized throughout the four-year period between the acquisition and Mervyn's bankruptcy filing. The Committee has already spent millions of dollars to attempt to support these allegations. Further litigation, however, will not alter the key historical facts, including that Mervyn's operated profitably for years after the 2004 Transaction, with positive EBITDA for fiscal years 2004, 2005, 2006 and 2007 and positive net income for fiscal years 2004, 2005, 2006 through the last-twelve months
{331.003-W0017801.}

for April 2007. Mervyn's also had millions of dollars of cash availability under its working capital facility and cash on its balance sheet for at least 46 consecutive months after the 2004 Transaction. Indeed, Mervyn's only began to face liquidity challenges when the Great Recession began affecting California's housing and retail markets (Mervyn's core market) in mid-2007 and CIT, a principal provider of factoring support for Mervyn's suppliers, abruptly withdrew that support in the Spring of 2008 (apparently for reasons relating to CIT's own financial crisis), forcing Mervyn's into bankruptcy. The MDS Entities recognize that as defendants in the 2004 Transaction Litigation their motives for objecting to the Motion undoubtedly will come under attack. There is no question , however, that the proposed fee structure will serve as a significant impediment to resolution of this case because, if approved, Cooley will likely become the single-largest stakeholder in the litigation it controls, vested with a super-priority administrative expense claim. The MDS Entities submit that the Court should deny the Motion, or alternatively defer ruling on the Motion and attempt to facilitate a prompt resolution of the matters for the benefit of all stakeholders by directing the parties to mediation.
I.

PROPOSED MODIFICATION IS PROHIBITED BY SECTION 328(a) 1. This Court previously approved Cooley's retention in 2008 pursuant to section

328(a) of the Bankruptcy Code.' [D.I. 513] Section 328(a) provides in pertinent part that: a committee appointed under section 1102 of this title, with the court's approval, may employ or authorize the employment of a professional person under section 327 or 1103 of this title, as the case may be, on any reasonable terms and conditions of employment, including in a retainer, on an hourly basis, on a fixed or percentage fee basis, or on a contingent fee basis. Notwithstanding such terms and conditions, the court may allow compensation different from the compensation provided under such terms and conditions, after the conclusion of The original retention was also approved under section 1103(a) of the Bankruptcy Code.
{331.003-W0017801.}

such employment, if such terms and conditions prove to have been improvident in light of developments not capable of being anticipated at the time of the fixing of such terms and conditions. (Emphasis added.)

2.

The statute's plain language provides that previously approved retentions under

328(a) may be altered, if at all, "after the conclusion of such [professional's] employment." Thus, the Motion is premature because Cooley has not concluded its employment.
See In re

Yablon, 136 B.R. 88, 91 (Bankr. S.D.N.Y. 1992) ("Because [law firm] has not concluded its

employment as special counsel to the debtor, section 328(a) does not permit the court to change the terms and conditions of a professional person's employment. The statute, by its own terms, requires this result."). The Committee cannot avoid the statute's plain language by relying on the court's equitable powers under section 105(a) of the Bankruptcy Code. Section 105(a) cannot be used to "trump the specific provisions of the Bankruptcy Code, and must be exercised within the parameters of the Code itself" In re Combustion Eng'g, Inc., 391 F.3d 190, 236 (3d Cir. 2004) (citing Northwest Bank Worhington v. Ahlers, 485 U.S. 197, 206 (1998)). 3. Furthermore, the terms of a previously approved retention under section 328(a)

"may only be altered if proven 'to have been improvident in light of developments not capable of being anticipated at the time" of the earlier retention. In re Smart World Tech., LLC, 552 F.3d 228, 234 (2d Cir. 2009); In re Federal Mogul-Global, Inc., 348 F.2d 390, 397 (3d Cir. 2003). This is a "high hurdle to clear." Smart World, 552 F.3d at 235. The legal standard requires more than the occurrence of "merely unforeseen" developments; the intervening circumstances "must have been incapable of anticipation, not merely unanticipated." In re Barron, 325 F.3d 690, 693 (5th Cir. 2003); see also Smart World, 552 F.3d at 235; In re Nucentrix Broadband Networks,
Inc., 314 B.R. 574, 579-81 (Bankr. N.D. Tex. 2004) (even though estate professional "ably

served" debtors who sold their assets for three times original stalking horse bid, because its retention was approved under section 328, no upward departure for professional's fees because
{331.003-W0017801.}

"possibility of an increased bid was certainly capable of being anticipated"). The Committee, as the movant, bears the burden of establishing the developments that were incapable of being anticipated at the time Cooley was retained in 2008. See Unsecured Creditors' Committee v.
Pelofsky (In re Thermadyne Holdings, Corp.), 283 B.R. 749, 756 (B.A.P. 8th Cir. 2002); Yablon,

136 B.R. at 91 ("Because [law firm] seeks payment pursuant to different terms and conditions than those it is subject to under its retention order, it has the burden of proof under section 328(a)."). The Committee has not and cannot meet its burden. 4. The Committee represents that the "breadth, complexity and pace of the

Committee-Controlled Litigations raised concerns among members of the Committee that there may not be sufficient estate funds to compensate Cooley on an hourly basis through the conclusion of the litigations." Motion at p. 3. A vague assertion of "concerns among the members of the Committee" is not evidence of intervening developments that were incapable of anticipation at the time Cooley was originally retained. Thus, there is no justification for changing Cooley's Court approved, hourly-based retention. A. 5.
"Breadth and Complexity" of Litigation

The Committee and Cooley understood the "breadth and complexity" of the 2004

Transaction Litigation when Cooley was retained in 2008. Cooley is a sophisticated and knowledgeable law firm with extensive experience in bankruptcy law. In 2008, the Committee and Cooley had actual knowledge of the alleged "breadth" and "complexity" of the 2004 Transaction Litigation because the complaint already had been filed by the Debtor. After obtaining standing to prosecute the complaint, the Committee and its counsel made no material changes in the allegations; the core issues in the case i.e., Mervyn's solvency and capitalization remain the same today as they were when the 2004 Transaction Litigation was commenced and when Cooley subsequently took it over.
{331.003-W0017801.}

B. 6.

"Pace" of the Litigation

Similarly, the "pace" of the litigation was capable of being anticipated when

Cooley was retained in 2008. As an experienced bankruptcy litigation firm, Cooley surely expected that an adversary proceeding commenced against approximately forty parties, seeking to avoid transfers valued in excess of $1 billion would take years to litigate. Indeed, having negotiated the original joint scheduling order, Cooley and the Committee were in a position to control the litigation's pace; in all events, they certainly were well aware that dispositive motions were not to be fully submitted to the Court until July 2012, nearly four years after the adversary proceeding was commenced. 2
C.

"Sufficiency" of Funding

7.

The "sufficiency" of estate funds to pay for the costs of prosecuting the litigation

also was capable of being anticipated when Cooley was originally retained. Based on public filings, it was known in 2008 that the estates were administratively insolvent and had finite resources. Indeed, the Committee itself cited the estates' administrative insolvency as a basis to argue in 2008 that the chapter 11 cases should be converted to chapter 7. See Conversion Motion 31 [D.I. 644]. Cooley and the Committee thus assumed control over the litigation armed with a

Moreover, to the extent there have been delays in the litigation, the Committee and Cooley not only could have anticipated them, but they were a material factor in causing those delays to occur. On behalf of the Committee, Cooley served extraordinarily broad discovery requests on the defendants, seeking documents from dozens of custodians, and requesting application of scores of search terms. As a result of the Committee's requests, millions of pages of documents were required to be produced and analyzed, at great expense (the vast majority of which have no material impact on the litigation). In July, the Court granted the parties a further extension of the case management schedule in no small part because of the time required to complete production in response to Cooley's extensive requests In addition, Cooley also continues to insist that it needs to take sixty-five fact depositions, which necessitated an extension of the fact deposition period by four months. The Court gave Cooley the option to limit the number of its proposed depositions to avoid the need to expand the deposition period, but Cooley declined to do so.
{331.003-W0017801.}

known and foreseeable risk that estate cash might be insufficient to fund all of the costs of prosecuting the litigation. 8. Given their knowledge of Mervyn's administrative insolvency and the need for

funding, the Committee negotiated for a "war-chest." As part of a settlement for withdrawing its conversion motion, the parties negotiated a wind-down budget and the DIP Lender made a loan to the Debtors "in the amount of $3,000,000 . . . to be used for payment of the fees and expenses incurred in pursuit of the Causes of Action which are not otherwise paid for by the Debtors' estates." Stipulation and Order at p. 7 [D.I. 1330]. The Committee's counsel described the settlement to the Court at a hearing on October 30, 2008, stating that "it was absolutely essential that there be funds in the budget that would provide for the [Committee-Controlled Litigations] to proceed . . . and through the negotiations, we have established this litigation reserve which

gives us some comfort that we have an ability to do what we need to do in order to try to enhance recoveries for other creditors in this case." Hearing Transcript [D.I. 917] at p. 11
(emphasis added). 9. At the time Cooley took the lead in prosecuting the litigation, the estates had a

cash balance of more than $19.5 million (as of November 1, 2008). Op. Report as of November 1, 2008 [D.I. 1849]. The cash position peaked at approximately $45.5 million as of January 31, 2009 (as the result of "going out of business" sale proceeds) and steadily diminished month after month due, in large part to payments of Cooley's fees. Op. Report as of January 31, 2009 [D.I. 3552]. Now, there is only $12.5 million remaining 3 Op. Report as of September 30, 2011 [D.I.

This amount is the estates' cash balance of $11 5 million (as of September 30, 2011), less accrued and unpaid professional fees and expenses of approximately $2 million plus the $3 million litigation reserve.
{331.003-W0017801.}

6263]. A chart showing Cooley's professional fees each month during the case is attached hereto as Exhibit A.4 10. In sum, the "breadth, complexity and pace" of the litigation and the "sufficiency"

of funds to prosecute the litigation was known and capable of being anticipated when Cooley was retained in 2008. The Motion should be denied because the Committee has failed to provide evidence of an intervening development that was "not capable of being anticipated." II.
MODIFIED FEE PROPOSAL IS UNREASONABLE

11.

The legal standard for approving a retention under section 328(a) is

reasonableness. See 11 U.S.C. 328(a) ("a committee . . . with the court's approval, may employ . . . a professional person . . . on any reasonable terms and conditions") (emphasis added); In re Fed. Mogul-Global, Inc., 348 F.3d 390, 397-98 (3d Cir. 2003); In re Insilco Techs.,
Inc., 291 B.R. 628, 633 (Bankr. D. Del. 2003). In assessing reasonableness, the Court should

consider the totality of circumstances, especially here when the modification is requested more than three years into the case. In the oft-cited decision of Insilco Technologies, Judge Carey observed that a court's inquiry about what is "reasonable" must be "tailored to the Bankruptcy Code requirements, including the particular circumstances of a chapter 11 proceeding, the court's

It is also worth noting that no garden-variety preference complaints were filed, despite the fact that the Debtors' Amended Statement of Financial Affairs identified more than $468 million of transfers to more than 1,200 creditors (other than the defendants) during the 90-day preference period, including more than $97 million of transfers to Committee members and their affiliates during the 90-day preference period. Additionally, DDR (a Committee member) and Macerich (a Committee chair) were not named as defendants in the 2004 Transaction Litigation despite the fact that they are transferees of certain of the assets alleged to have been fraudulently transferred by Mervyn's. As transferees, DDR and Macerich have potential exposure to the estates that could exceed $838 million Yet, the claims of DDR and Macerich were "allowed" despite the fact that any recovery on account of their unsecured claims (in excess of $118 million pursuant to the official claims registry) may be disallowed under Code section 502(d). At some point, allowance of those claims should be reconsidered under section 502(j) of the Bankruptcy Code, although it appears that the Committee may be either incapable of or conflicted from doing so.
{331.003-W0017801.}

supervisory role and the interests of the various constituents." Insilco, 291 B.R. at 634. As part of this analysis, Judge Carey identified a non-exhaustive list of factors to be considered, including: (1) whether terms of an engagement agreement reflect normal business terms in the marketplace; (2) the relationship between the Debtor and the professionals, i.e., whether the parties involved are sophisticated business entities with equal bargaining power who engaged in an arms-length negotiation; (3) whether the retention, as proposed, is in the best interests of the estate; (4) whether there is creditor opposition to the retention and retainer provisions; and (5) whether, given the size, circumstances and posture of the case, the [proposed retention terms are] reasonable, including whether the [retention terms] provide[] the appropriate level of "risk minimization," especially in light of the existence of any other "risk-minimizing" devices, such as an administrative order and/or a carve-out.
Id.; see also In re Energy Partners, Ltd., 409 B.R. 211, 226-32 (Bankr. S.D. Tex. 2009)

(applying Insilco test and denying application due to lack of evidence regarding: the reasonableness of the compensation compared to the marketplace, whether the negotiations were arms' length, and whether the retentions would benefit the estate); In re High Voltage Eng'g
Corp., 311 B.R. 320, 335 (Bankr. D. Mass. 2004) (citing Insilco factors; held, application to

approve contingency fees for debtors' financial advisor denied because of insufficient information as to reasonableness). The Third Circuit Court of Appeals has repeatedly held that "a Bankruptcy Court need not approve or reject an application as presented, but may approve an application with modified terms that the Court finds necessary to render the proposed employment reasonable." Mogul-Global, 348 F.3d at 398. The Committee bears the burden of establishing the reasonableness of Cooley's proposed employment terms and "evidence, not
{331.003-W0017801.} 10

conclusory statements, is required to satisfy that burden." also Thermadyne Holdings, 283 B.R. at 756. A. 12.

High Voltage, 311 B.R. at 330; see

Committee Has Failed to Satisfy its Burden

The material terms of the fee proposal, as outlined above, provides for Cooley to

have its fees "enhanced" and the amount of the multiplier depends upon when the litigation is resolved. If resolved before May 31, 2012, then Cooley's fees incurred after September 1, 2011 through May 31, 2012 are multiplied by only 1.5 times; resolution after that date requires the estates to pay a premium of up to four times Cooley's accrued fees or 20% of the recovery. In all cases, Cooley's fees are paid on a super priority basis, such that Cooley's fees must be satisfied in whole before any distribution to other administrative, priority or the general unsecured creditors. 13. The application of the proposed fee enhancement formula demonstrates the effect

of its application. For example, given that Cooley's fee applications reflect a burn rate of approximately $1 million per month, if the litigation is resolved in May 2012, Cooley would be entitled to a fee of approximately $13.5 million (nine months at $1 million per month times 1.5). Significantly, this fee is not reduced by the fees Cooley has already received through August 31, 2011, and thus represents a 50% premium on any fees accrued by Cooley after September 1, 2011 and an incentive for Cooley to continue to litigate rather than settle this matter.

{331.003-W0017801.}

11

14.

If the litigation is resolved after June 1, 2012, Cooley receives the lesser of 20%

of the amount of the recovery by the estates or a multiple of its hourly fees, ranging from four times to three times, applied to fees earned from September 1, 2011 through the date of a Successful Resolution (as defined in the Motion). This amount is then reduced by a credit to the estates of $11 5 million s (representing Cooley's accrued fees through August 31, 2011) plus any amounts charged to the estates for contract attorney expenses (which have been approximately $81,000 per month based on Cooley's fee applications). Significantly, in most scenarios, this complex hybrid fee structure guarantees that Cooley will be incentivized by the prospect of lucrative fees if it continues to litigate, rather than settle the pending litigation on reasonable terms. 15. The Committee has not demonstrated why -- or how -- the terms of Cooley's

proposed compensation structure is reasonable under section 328(a). Instead, it relies upon the following conclusory statements: o "Members of the Committee have spent substantial time over the past several months meeting with and without Committee professionals to analyze and discuss the merits of the litigations, the likelihood that their continued prosecution will achieve a distribution to creditors, the estimated cost and expense of the continued prosecution and potential alternatives to the existing attorney compensation arrangement with Cooley." Motion at p. 2; 16. "The Committee submits" that the proposal "is reasonable and appropriate under the circumstances." Motion 17. "The Committee has determined that the best interests of these estates and creditors will be served if Cooley continues to represent Mervyn's as plaintiffs in the Committee-Controlled Litigations on a contingent fee basis." Motion at p. 3; frif 16, 19. "The terms of the proposed contingent fee compensation structure were negotiated by Cooley at arms' length and in good faith with the members of the Committee." Motion at p. 3; 16.

o o

There is ambiguity surrounding the amount of the credit. The litigation fees incurred to date
{331.003-W0017801.}

appear to be $12,786,000 and not $11,500,000.

12

The Committee believes that the proposal "properly balances the significant time investment that will be required of Cooley and the substantial amount of risk assumed in a structure that offers no guarantee of payment, with a compensation arrangement that places a cap on the hourly fee multiple used to calculate the contingent fee award." Motion 17. The Committee's conclusory assertions are not evidence and they fail to provide the Court or
o

parties in interest with a basis to assess whether the proposal is reasonable.

B.

Proposal is Unreasonable

16.

The proposed arrangement is unreasonable for a number of reasons, including: (i)

there is no legal basis for Cooley's fees to prime all other administrative expense creditors without their consent and without notice and an opportunity to be heard; (ii) the proposed structure creates conflicts of interest; (iii) there is no evidence that the re-negotiated terms are the product of arms-length negotiations; (iv) the proposal unfairly deprives the Court and parties in interest an opportunity to evaluate the fees relative to results (if any) actually achieved; (v) the proposal is unreasonable relative to the low likelihood that the Committee will succeed in the litigation; and (vi) there is no evidence that the fee arrangement is market, or that it is necessary to minimize Cooley's risk. Each of these issues is discussed below.
i. No Basis to Prime Administrative Creditors

17.

The proposal contemplates that Cooley's fees will prime all other administrative
See Motion 11(d)

expenses without notice to such creditors and without their consent.

("Cooley's right to payment . . . shall have priority in payment over any and all claims" except secured claims). This provision is legally unsupportable. All administrative expenses are afforded the same priority under section 507(a)(2) and there is no basis to grant super-priority status for attorneys fees. In re Columbia Ribbon Co., 117 F.2d 999, 1001-02 (3d Cir. 1941) ("Since Congress has set up no order of priority within the [administrative expense] class the court may not fix priorities within the class. Consequently all administration expenses, .. .
{331.003-W0017801.}

13

whether for costs and expenses or for services, must share pro rata in the funds available for payment." (citations omitted) (applying Bankruptcy Act)).
ii.

Proposed Structure Creates Irreconcilable Conflicts of Interest

and Impediments to Settlement

18. The fee proposal, if approved, would make the 2004 Transaction Litigation more

difficult to settle because Cooley's role would change from its current status as independent counsel to an estate fiduciary to one of a stakeholder with a significant economic interest in the outcome. Thus, the practical reality is that the proposal will make it more difficult to consensually resolve the case because (i) Cooley will naturally consider its own economic interests in evaluating the merits of any settlement (in terms of dollars and timing) and (ii) the incremental payments to Cooley (e.g., fee multiple or percentage recovery) will serve only to increase the hurdle amount before any value can be distributed to unsecured creditors or even administrative creditors. These types of conflicts provide the Court with a basis, pursuant to section 328(c) of the Bankruptcy Code, to deny allowance of compensation for an estate professional when, as here, the professional "holds an interest adverse to the interest of the estate with respect to the matter on which such professional is employed." Although the meaning of holding "an adverse interest" is not defined in the Bankruptcy Code, it generally "includes any interest or relationship, however slight, 'that would even faintly color the independence and impartial attitude required by the [Bankruptcy] Code and Bankruptcy Rules.'" In re Granite

Partners, L.P., 219 B.R. 22, 33 (Bankr. S.D.N.Y. 1998) (internal citation omitted). Because the proposal will unreasonably incentivize Cooley to delay resolution to advance its own economic interests it should be rejected.

{331.003-W0017801.}

14

iii.

Re-Negotiated Terms Are Product of Cooley's Unfair Leverage

19.

The proposed modification also is unreasonable because there is no evidence that

the proposal was the product of an arms-length negotiation between the Committee and Cooley. The Committee asserts in its Motion that it would have to abandon the litigation "in the absence of an alternative compensation arrangement." Motion 15. In this context, the Court should consider whether the Committee (without counsel) was able to fairly negotiate with Cooley. The court recognized the dangers of unequal bargaining power in In re Intelogic Trace, Inc., 188 B.R 557, 561-62 (Bankr. W.D. Tex. 1995), and reduced the success fee sought by a debtor's professional. In support of its reduction, the court noted "a quality of the debtor's being 'over a barrel' that no doubt affected the ultimate fee agreed to between the parties, suggesting that no one else was available to carry this matter through to conclusion." Id. at 562. In evaluating the arms-length nature of the negotiations, the Court should consider whether the Committee was aware that Cooley could not freely resign under the Delaware Rules of Professional Conduct (the
"Ethical Rules"). 6 Ethical Rule 1.16(b)(1) prohibits withdrawal by counsel if it will have a

material adverse effect on the interests of the client. ? Given the stage of the litigation and the expenses already borne by administrative creditors, the only conclusion is that Cooley's withdrawal would have a significant material adverse impact on the Committee, and the estates.

Cooley's professionals have sought admission pro hac vice in which they have submitted to the disciplinary authority of the Bankruptcy Court. Although the threat of resignation may give an estate professional leverage to extract additional concessions from its client, such concessions should not survive a court's independent review. See In re Mortgage & Realty Trust, 123 B.R. 626, 631 (Bankr. C.D. Cal. 1991) (denying indemnification for debtor's financial advisor, even though firm stated it would otherwise have to withdraw and "cause great harm to the debtor"; "[The firm] may decide that it does not want to do bankruptcy work. If it does want to do bankruptcy work, it must live with the terms of employment as authorized by the court in which the case is pending. Furthermore, [the firm] may not withdraw without Court approval, which could be denied at this point in the case."). {331.003-W0017801.} 15

iv. 20.

Proposal Unfairly Deprives Parties the Opportunity

to Evaluate Fees Relative to Result

The proposed modification is unreasonable because it unfairly deprives the Court

and other parties in interest from evaluating whether the payment to Cooley is reasonable in light of the results achieved. Indeed, courts often review contingent fee applications under section 330 of the Bankruptcy Code at the conclusion of the case, when they can better assess what amount is reasonable. See, e.g., In re Intelogic Trace, Inc., 188 B.R. at 562 (awarding success fee to professional in a reduced amount under Code 330 at the conclusion of the retention); In
re Mortgage & Realty Trust, 123 B.R. at 632 ("The Court does not consider it improper for a

professional to ask for a bonus in an appropriate case, or for a court to award a bonus based upon a showing that it has been earned. However, such a determination must await the writing of a success story in this case, and a showing that a professional seeking a bonus has earned it."). v. 21. Proposal is Unreasonable in Light of the Low
Likelihood of Success in Litigation

The proposal is unreasonable when evaluated in light of the merits of the 2004

Transaction Litigation. As the Court is aware, Mervyn's was acquired from Target Corporation in September 2004. Mervyn's thereafter operated for nearly four years. As the Great Recession began to impact the national economy, and the financial crisis was worsening in the banking industry and affecting many retailers, Mervyn's was forced to file for bankruptcy on July 29, 2008. 22. In September 2008, the estates commenced the 2004 Transaction Litigation

seeking to avoid and recover certain transfers of property valued at more than one billion dollars, 8 including transfers of real estate made as part of the financing arrangements for the
It is misleading to refer to this as a billion dollar action because the maximum recovery cannot exceed the amount of administrative and unsecured claims See In re Foxmeyer Corp., 296 B.R. 327, 342 (Bankr. D. Del. 2003) ("[O]nly net amounts diverted from, that is damages consequently suffered by the {331.003-W0017801.} 16
8

acquisition of the stores at the time of the Mervyn's acquisition. The claims asserted in the Second Amended Complaint are based primarily on the allegation that Mervyn's was rendered insolvent and/or inadequately capitalized as a result of the 2004 Transaction, and remained insolvent and/or inadequately capitalized throughout the four-year period between the acquisition and Mervyn's bankruptcy filing. 23. As Cooley's fee applications reflect, the Committee has retained (and paid

millions of dollars to) litigation experts in an attempt to support its allegations. However, the opinions of hired litigation experts whose valuation work is performed from an advocates' point of view will never change the historical fact that Mervyn's was financially sound: KPMG independently concluded, at the time of the 2004 Transaction, that the "fair value" of Mervyn's assets exceed its liabilities by a margin of $151 million; Duff and Phelps concluded, at the time of the transaction, that Mervyn's was not rendered insolvent and had sufficient capital to operate; Upon consummation of the 2004 Transaction, third party lenders provided Mervyn's with a working capital revolver in the aggregate principal amount of up to $550 million; Sophisticated creditors (including every member of the Creditors' Committee) continued to provide credit support to Mervyn's for years after the 2004 Transaction; Mervyn's had millions of dollars of availability under its working capital facility in every single month after the 2004 Transaction (46 consecutive months); Mervyn's generated millions of dollars of cash on its balance sheet every single month after the 2004 Transaction (46 months); Mervyn's generated positive EBITDA for the periods of fiscal years 2004, 2005, 2006, and 2007; Mervyn's had positive net income for fiscal years 2004, 2005, 2006 and the last-twelve months for period ending April 2007;

creditor body of, a debtor may be recovered via a fraudulent transfer action."). See also In re Murphy, 331 B.R. 107 (Bankr. S.D.N.Y. 2005) (Trustee "has the right to avoid the transfer of the Property as fraudulent but only to the extent necessary to satisfy allowed prepetition and administrative creditor claims, i.e. those legally harmed by the transfer.").
{331.003-W0017801.} 17

Mervyn's total accounts payable for periods covering 2004, 2005, 2006, and 2007 reflect that it was generally paying its debts as they became due; Mervyn's received unqualified audit opinions from its independent auditor with no going concern qualifications for fiscal years 2004, 2005, 2006, and 2007; Mervyn's liquidity was impacted long after the 2004 Transaction by the Great Recession; and Mervyn's financial performance began to decline only in May 2007 as the first signs of the Great Recession began to appear in California's housing and retail markets (Mervyn's core market). In addition, contrary to the Committee's allegations that Mervyn's was ignored by

24.

ownership after the 2004 acquisition, it is indisputable that significant efforts were made to enhance Mervyn's operations and make it more successful throughout the four-year period prior to the bankruptcy filing. Among other things, ownership recruited first-class executive talent, creating a management team that was largely successful and operated Mervyn's profitably for almost four years. Ownership closed stores that were outside the target market and underperforming, while opening new stores in Mervyn's core market to increase the company's profitability and performance And, ownership approved, and made, an investment of $182 million for a state of the art information technology system to provide a platform for improved efficiency and long term viability. 25. Finally, it is indisputable that significant factors outside of Mervyn's own

performance and ownership's control led to Mervyn's collapse. The retail sector in general was dramatically impacted by the financial crisis and subprime mortgage meltdown, The onset of the Great Recession affected Mervyn's core territory of California earlier and harder than in most other parts of the country. Indeed, Mervyn's Executive Vice President and Chief Financial and Administrative Officer, Charles Kurth, cited to external economic factors, such as the decline in the housing market and the tightening of credit markets as leading to Mervyn's decline. Affidavit of Charles R. Kurth in Support of First Day Motions [D.I. 2] TT 12-13. The fact is that
{331.003-W0017801.}

18

hundreds of companies failed at the same time as Mervyn's, 9 most of them like Mervyn's falling victim to the Great Recession and forces beyond their control. 26. Moreover, Mervyn's fell victim to Committee co-Chair CIT's own financial

difficulties in the spring of 2008. Following the 2004 acquisition until approximately May 2008, just a few months before Mervyn's bankruptcy filing, CIT was a "factor" of receivables created by Mervyn's, and over time, became Mervyn's largest factor, providing credit support to more than 150 of Mervyn's vendors. Because CIT was lending money based on Mervyn's financial condition, CIT studied Mervyn's solvency, liquidity and all aspects of its financial condition. Beginning at some point in 2007, CIT came under severe financial pressure due to its own credit decisions, the management of its operations, and external economic factors.' Because of its own accelerating financial distress and liquidity concerns, CIT made a concerted effort to reduce its credit exposure generally. As a result, in early 2008, even though CIT' s rating of Mervyn's remained substantially similar to prior years, CIT abruptly decided to significantly reduce its credit exposure to Mervyn's, imposed additional significant burdens on its clients dealing with Mervyn's, and ultimately ceased factoring orders by Mervyn's to its suppliers altogether. The loss to Mervyn's of CIT's credit support at a time when the credit markets were severely constrained due the banking crisis and the deepening economic recession resulted in a deep loss of confidence and a lack of necessary credit support from Mervyn's suppliers and its other factors. Thus, after CIT pulled its factoring, many of Mervyn's suppliers refused to ship the quantities of retail goods Mervyn's needed to operate its business and build up inventory for the

At least 74 retailers filed for bankruptcy in 2008/2009, including household names like: Gottschalks, Boscov's, Filene's Basement, Goody's, Linens 'n Things, Sharper Image, Circuit City, Fortunoff, Steve & Barry's, Lillian Vernon and Eddie Bauer. Ultimately, CIT was not able to solve its own liquidity crisis and was forced to file its own bankruptcy case in November 2009.
{331.003-W0017801.}
10

19

upcoming back to school season. The loss of CIT's factoring caused real financial and liquidity challenges that Mervyn's was not able to overcome, and was a primary factor for the bankruptcy filing. vi. 27.
No Evidence That Proposal is Market

The proposed modification is unreasonable because there is no evidence on

"whether the terms of [the] engagement agreement reflect normal business terms in the marketplace." Insilco Techs., 291 B.R. at 634; see also United Artists Theatre Co. v. Walton (In
re United Artists Theatre Co.), 315 F.3d 217, 229-30 (3d Cir. 2003) (reference to the

marketplace is needed when determining if a retention is reasonable in the bankruptcy context). The Committee states that it "has spent significant time over the past several months meeting with and without its professionals to analyze and discuss . . . potential alternatives to the existing attorney compensation arrangement with Cooley." Motion 16. But the Motion is devoid of any indication that the Committee endeavored to procure a more favorable fee structure from alternate counsel. The proposed modification is unreasonable because there is no precedent cited for the proposition that a Committee can pay its counsel a multiple of their fees (as opposed to a percentage of the distributive value that would otherwise be payable to general unsecured creditors). 28. The sole precedent cited by the Committee is an order (with no written decision)

from Judge Walrath in In re Magna Entertainment Corp., No. 09-10720 (MFW) [D.I. 1144] (Bankr. D. Del. Sept. 15, 2009). The Committee represents that Judge Walrath granted an unopposed "application of [a] creditors' committee to amend counsel's retention to allow for contingent fee arrangement in connection with certain litigation proceedings." Motion 14. The facts and circumstances are completely distinguishable. Unlike here, in Magna the fee proposal did not seek to prime administrative and priority creditors. Instead, the contingent fee was
{331.003-W0017801.}

20

"payable solely from recoveries to unsecured creditors."

Magana Application 10(a) [D.I.

1107] (Sept. 10, 2009). Additionally, the Magna structure did not authorize paying counsel a multiple (1.5 times to 4 times) of its normal hourly rates, as requested here. The contingent fee, instead, was a sliding scale based on a percentage of the recovery to unsecured creditors. Magna Application 10(b). In Magna, the committee sought to amend the terms of its counsel's

retention structure at the inception of the adversary proceeding; not three years into the case after spending millions of dollars. Finally, the application in Magna was unopposed. 29. Moreover, the proposed fee structure is not needed to minimize Cooley's risk of

going forward with the litigation. Unlike a typical contingency fee arrangement entered into at the outset of the action, Cooley has been paid its fees and expenses on an as-accrued basis for the past three years. These fees and expenses have exceeded $21 million. Thus, even if the litigation were to end with a zero recovery for the estates, Cooley still will have received $21 million. Accordingly, any risk to Cooley of not being paid its fully hourly rates does not justify a structure that pays Cooley a multiple of its fees going forward. 11
III.

MDS STANDING AND COMMITTEE'S ANTICIPATED REPLY 30. The Committee likely will urge the Court to ignore the material issues raised in

this objection because the MDS Entities are defendants in the 2004 Transaction Litigation and are (in the Committee's view) lodging the objection to gain a strategic advantage in the litigation. Any attempt to avoid the merits by attacking the messenger should be counter-balanced by the

Cooley also will continue to be compensated monthly out of estate funds for its accrued expenses, which average hundreds of thousands of dollars a month. The Committee has failed to show how having the estate carrying the risk of litigation expenses is reasonable in such a contingency arrangement and consistent with market rates.
{331.003-W0017801.}

21

fact that MDS is an unsecured creditor with a claim in the amount of at least $54 million 12 and is consequently a "party in interest" with standing to be heard pursuant to section 1109(b) of the Bankruptcy Code. Moreover, the Court has the power and obligation to independently consider the issues raised by the Committee in its Motion. E.g., In re Busy Beaver Bldg. Ctrs., Inc., 19 F.3d 833, 841 (3d Cir. 1994) ( "[T]he integrity of the bankruptcy system . . . is at stake in the issue of a bankruptcy judge's performance of the duty to review fee applications sua sponte. The public expects, and has a right to expect, that an order of a court is a judge's certification that the result is proper and justified under the law . . . ." (internal quotation marks omitted)). A court's gatekeeper function with respect to contingency fees is specifically addressed in Canon 13 of the Canons of Professional Ethics, promulgated by the American Bar Association, which provides that "a contract for a contingent fee where sanctioned by law, should be reasonable under all circumstances of the case, including the risk and uncertainty the compensation, but should always be subject to the supervision of the a Court, as to its reasonableness." 13 IV. REQUEST FOR MEDIATION 31. The defendants in the 2004 Transaction Litigation request that this Court direct

the parties to participate in mandatory mediation pursuant to Local Rule 9019-5. Local Rule 9019-5 provides broad authority for the Court to order mediation and mediation is often The MDS Entities filed 43 administrative and unsecured claims. They negotiated a settlement with the Debtors allowing the claims for an aggregate amount of $54,256,012.95 and reclassifying administrative claims as general unsecured claims. An agreed order was never submitted formally allowing this claim because the Committee requested that the Debtors abandon the stipulation. Additionally, there is no evidence that it is consistent with market contingency fee arrangements to allow Cooley to continue to be reimbursed from the estates for its expenses, including "the fees and costs of litigation vendors, consultants, and contract attorneys." Motion 11(f). In evaluating the reasonableness of this particular provision, the Court should be aware that Cooley's expenses have exceeded $5.8 million (from January 2009 to September 2011) at an average monthly rate of over $375,000 since March 2011.
{331.003-W0017801.}
13 12

22

encouraged, if not directed, in cases.

See, e.g., In re Washington Mut., Inc., No. 08-12229

(MFW), 2011 Bankr. LEXIS 3361, at *169 (Bankr. D. Del. Sept. 13, 2011) (directing, sua
sponte, "that the parties go to mediation"); In re AES Thames, L.L.C., No. 11-10334 (KJC), Tr. p.

23:16-18 [D.I. 378] (Bankr. D. Del. July 26, 2011) (stating that "given how our case load has developed here, I've become, well, a little pushier about [mediation], and I think I'd prefer that you [mediate]."); In re Tribune Co., No. 08-13141 (KJC), Order Appointing Mediator [D.I. 5591] (Bankr. D. Del. Sept. 1, 2010) (ordering the appointment of a mediator after determining that such appointment was in the best interests of the debtors, their estates, creditors and stakeholders); In re Semcrude, L.P., No. 08-11525 (BLS), Tr. pp. 15:10-11; 16:11-13 [D.I. 5749] (Bankr. D. Del. Sept. 9, 2009) (finding that "the interest of all parties are best served by at least attempting [mediation]" and stating that "I'm going to ask that the parties wouldactually, I'm not going to ask. I'm going to order that the parties [mediate] on the 13th"). 14 32. Given the extraordinary litigation costs already borne by the defendants and the

Debtors' estates (and in light of Committee counsel's even more extraordinary request to recast entirely the terms of its engagement), the Committee, as an estate fiduciary, would be hard pressed to articulate a reason why mediation is not appropriate at this stage. Millions of pages of document discovery have been exchanged and analyzed and the parties' theories of recovery and
The MDS Entities recognize that although in some instances the court has refused to order mediation over a participant's objection, those cases are distinguishable. See In re Washington Mut., Inc., No. 08-12229 (MFW), Tr. p. 85:21-23 [D.I. 8774] (Bankr. D. Del. Oct. 6, 2011) (directing parties to proceed to mediation but carving out certain parties, whose claims were resolved, expressed objections to participating in the mediation); In re Premier Intl Holdings Inc., No. 09-12019 (CSS), Tr. pp. 6:12-7:7 [D.I. 1646] (Bankr D. Del. Feb. 23, 2010) (declining to grant the committee's contested motion to compel mediation two weeks prior to confirmation where no one was available to handle the mediation and after determining that there was "very likely no marginal benefit whatsoever of getting a mediator involved in this case on the eve of this trial" and explaining that "[i]f the parties are going to reach an agreement, they are professionals, they have plenty of factual preparation to say the least. They know the other side's case as well as their own, and they can make their judgment. And I don't really see a mediator bringing anyone together."). Here, all of the Defendants are willing to mediate a resolution, and the Committee has a fiduciary obligation to maximize value, which will be served by participating in mediation.
{331.003-W0017801.}
14

23

defense are fully formed. The 2004 Transaction Litigation is ripe for a neutral third party to attempt to resolve the disputes. WHEREFORE, the MDS Entities request that the Court (i) deny the Committee Motion; (ii) direct the parties to mediation and (iii) grant such other and further relief that is just and proper. Dated: November 15, 2011 Wilmington, Delaware LAN S RATH & COBB LLP

Ad . Landis (No. 3407) Kerni K. Mumford (No. 4186) 919 Market Street, Suite 1800 Wilmington, Delaware 19801 Telephone: (302) 467-4400 Facsimile . (302) 467-4450 -andDavid M. Hillman Robert J. Ward SCHULTE ROTH & ZABEL LLP 919 Third Avenue New York, New York 10022 Telephone: (212) 756-2000 Facsimile: (212) 593-5955 Counsel to MDS Entities

{331.003-W0017801.}

24

Exhibit A COOLEY FEES AND EXPENSES, FILING TO SEPTEMBER 30, 2011

Period Aug-2008 Sep-2008 Oct-2008 Nov-2008 Nov-2008 Jan-2009 Feb-2009 Mar-2009 Apr-2009 May-2009 Jun-2009 Jul-2009 Aug-2009 Sep-2009 Oct-2009 Nov-2009 Dec-2009 Jan-2010 Feb-2010 Mar-2010 Apr-2010 May-2010 Jun-2010 Jul-2010 Aug-2010 Sep-2010 Oct-2010 Nov-2010 Dec-2010 Jan-2011 Feb-2011 Mar-2011 Apr-2011 May-2011 Jun-2011 Jul-2011 Aug-2011 Sep-2011` TOTALS

Fees $ 404,357.00 $ 476,215.00 $ 402,458.50 $ 177,033.50 $ 224,322.50 $ 348,364.50 $ 263,507.50 $ 249,875.75 $ 468,128.50 $ 438,972.50 $ 445,265.00 $ 220,258.00 $ 274,144.00 $ 287,512.00 $ 373,281.50 $ 582,014.50 $ 432,300.50 $ 427,640.50 $ 345,446.00 $ 381,577.50 $ 374,710.50 $ 326,742.50 $ 358,954.00 $ 393,508.00 $ 478,694.50 $ 439,003.50 $ 458,138.50 $ 326,914.00 $ 337,951.50 $ 324,698.00 $ 604,363.50 $ 890,796.50 $ 652,197.00 $ 660,177.50 $ 651,982.00 $ 487,288.50 $ 595,149.00 $ 64,380.00 $ 15,648,323.75
TOTAL FEES & EXPENSES

Expenses $ 8,059.25 $ 7,614.23 $ 17,924.56 $ 8,302.56 $ 41,965.82 $ 12,587.22 $ 14,050.42 $ 23,150.59 $ 19,054.14 $ 36,172.44 $ 37,521.81 $ 15,360.25 $ 24,160.92 $ 11,607.78 $ 4,140.35 $ 22,238.83 $ 19,706.50 $ 26,673.46 $ 25,809.52 $ 26,865.64 $ 250,680.85 $ 195,925.47 $ 243,501.30 $ 219,453.58 $ 238,262.42 $ 226,112.72 $ 355,168.85 $ 424,633.17 $ 156,073.06 $ 267,511.86 $ 201,266.52 $ 642,436.59 $ 336,712.08 $ 395,423.77 $ 432,808.41 $ 139,112.89 $ 426,525.67 $ 343,833.67 $ 5,898,409.17 $ 21,546,732.92

Cooley excluded its fees related to the litigation in its September 2011 fee application. {331.003-W0017801.} 25

IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: MERVYN'S HOLDINGS, LLC, et al. Debtors. Chapter 11 Case No. 08-11586 (KG) Jointly Administered

AFFIDAVIT OF SERVICE

STATE OF DELAWARE ) ) SS NEW CASTLE COUNTY ) Michelle M. Dero, being duly sworn according to law, deposes and says that she is employed by the law firm of Landis Rath & Cobb LLP, attorneys for the MDS Entities in the above referenced cases, and on the 15 th day of November, 2011, she caused a copy of the following: OBJECTION OF MDS ENTITIES TO CREDITORS' COMMITTEE'S MOTION TO MODIFY COOLEY RETENTION APPLICATION AND REQUEST FOR MEDIATION to be served upon the parties identified on the attached list in the manner indicated.

Michelle M. Dero SWORN TO AND SUBSCRIBED before me this 15th da November, 2011.
oir
O

0111111110, .0014 :4(1

A.

04i
0

00

:X EXPIRES = OCT. 5, 2013 : =

IS>

tt PAett

//lit SF. De-

/4/11111110

{331.003-W0017803.}

Via Hand Delivery

MERVYN'S LLC Kimberly E.C. Lawson, Esquire Morris, Nichols, Arsht Et Tunnel( LLP 1201 North Market Street, Suite 1500 Wilmington, DE 19801 (Counsel for Bart M. Schwartz, Receiver for Defendant Gabriel Capital, L.L.P.)

SERVICE LIST/LABELS

Via Hand Delivery

Pauline K. Morgan, Esquire Sharon M. Zieg, Esquire Young Conaway Stargatt Et Taylor, LLP The Brandywine Building 1000 West Street, 17 th Floor Wilmington, DE 19801 (Counsel for SCSF Mervyn's (Offshore), Inc.)

Via Hand Delivery

Alissa T. Gazze, Esquire Derek Abbott, Esquire Morris, Nichols, Arsht Et Tunnell LLP 1201 North Market Street, 18 th Floor Wilmington, DE 19801 (Counsel for Defendant Citigroup Global Markets Realty Corp.)

Via Hand Delivery

Francis A. Monaco, Jr., Esquire Womble Carlyle Sandridge Et Rice, PLLC 222 Delaware Avenue Wilmington, DE 19801 (Counsel for Bank of America, N.A., success-by-merger to LaSalle Bank, National Association)

Via Hand Delivery

William P. Bowden, Esquire Amanda M. Winfree, Esquire Ashby Et Geddes, P.A. 500 Delaware Avenue, 8 th Floor Wilmington, DE 19801 (Counsel for the Official Committee of Unsecured Creditors)

Via Hand Delivery

Neil B. Glassman, Esquire Ashley B. Stitzer, Esquire Bayard, P.A. 222 Delaware Avenue, Suite 900 Wilmington, DE 19801 (Counsel for the Plaintiff)

Via Hand Delivery

Jeffrey M. Schlerf, Esquire Fox Rothschild LLP 919 North Market Street, Suite 1300 Wilmington, DE 19801 (Counsel for Ad Hoc Consortium of Administrative Claims)

Via Hand Delivery

Laurie Selber Silverstein, Esquire Stephen C. Norman, Esquire Potter Anderson & Corroon LLP 1313 North Market Street, 6 th Floor Wilmington, DE 19801 (Counsel for Defendant RBF Financial Products f/k/a Greenwich Capital Products, Inc.)

Via First Class Mail

Michael F. Doty, Esquire Wendy J. Wildung, Esquire Dennis M. Ryan, Esquire Faegre Et Benson LLP 2200 Wells Fargo Center 90 South Seventh Street Minneapolis, MN 55402-3901 (Counsel for Defendant Target Corporation)

Via First Class Mail

Jeffrey S. Powell, Esquire Thomas A. Clare, P.C. Jonathan D. Brightbill, Esquire Kirkland Et Ellis LLP 655 Fifteenth Street, N.W. Washington, DC 20005-5793 (Counsel for Defendants Sun Capital Securities Offshore Fund, Ltd., Sun Capital Securities Fund, LP, etc.)

Via First Class Mail

Ronald R. Sussman, Esquire Ian Shapiro, Esquire Jay R. Indyke, Esquire Seth Van Aalten, Esquire Cooley LLP The Grace Building 1114 Avenue of the Americas New York, NY 10036-7798 (Counsel for the Plaintiff)

Via First Class Mail

Natalie D. Ramsey, Esquire Montgomery, McCracken, Walker Et Rhoads, LLP 123 South Broad Street Philadelphia, PA 19109-1030 (Counsel for Defendant Target Corporation)

Via First Class Mail Laurie A. Krepto, Esquire Montgomery, McCracken, Walker Et Rhoads, LLP 123 South Broad Street Philadelphia, PA 19109-1030 (Counsel for Defendant Target Corporation)

Via First Class Mail

James C. McCarroll, Esquire John L. Scott, Jr., Esquire Reed Smith LLP 599 Lexington Avenue New York, New York 10022 (Counsel for Defendant, Gabriel Capital, L.P.)

Via First Class Mail

Richard G. Haddad, Esquire Randolph E. White, Esquire Otterbourg, Steindler, Houston Et Rosen, P.C. 230 Park Avenue New York, NY 10169 (Counsel for Bank of America, N.A., success-by-merger to LaSalle Bank, National Association)

Via First Class Mail Via First Class Mail

Aaron Rubinstein, Esquire Peta Gordon, Esquire Phillip A. Geraci, Esquire Kaye Scholer LLP 425 Park Avenue New York, NY 10022-3598 (Counsel for Defendants Citigroup Global Markets Realty Corp.; RBF Financial Products f/k/a Greenwich Capital Products, Inc.) Via First Class Mail Adam C. Harris, Esquire David M. Hillman, Esquire Robert J. Ward, Esquire Schulte Roth Et Zabel LLP 919 Third Avenue New York, NY 10022 (Counsel for Defendants Cerberus Mervyn's Investors, LLC, Cerberus Partners, L.P., etc.) Paul M. Basta, Esquire Kirkland Et Ellis LLP 601 Lexington Avenue New York, NY 10022 (Counsel for Defendants Sun Capital Securities Offshore Fund, Ltd., Sun Capital Securities Fund, LP, etc.)

Via First Class Mail

Jennifer L. Stewart, Esquire Cooley LLP 500 Boylston Street Boston, MA 02116-3736 (Counsel for the Plaintiff)

Via First Class Mail

Jeffrey L. Jonas, Esquire Steven D. Pohl, Esquire Brown Rudnick LLP One Financial Center Boston, MA 02111 (Counsel for Ad Hoc Consortium of Administrative Claims)