UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION In re: ) ) COLLINS & AIKMAN CORPORATION, et al.

, ) ) Debtors. ) Chapter 11 Case No. 05-55927-SWR (Jointly Administered) Honorable Steven W. Rhodes

BRIEF IN SUPPORT OF MOTION OF COLLINS & AIKMAN FLOORCOVERINGS, INC. FOR ENTRY OF AN ORDER DEEMING PROOF OF CLAIM TIMELY FILED Collins & Aikman Floorcoverings, Inc. (Floorcoverings) files this brief in support of its Motion of Collins & Aikman Floorcoverings, Inc. for Entry of an Order Deeming Proof of Claim Timely Filed (the Motion). Background Floorcoverings is a former wholly-owned subsidiary of Collins & Aikman Floorcoverings Group, Inc, which was a wholly-owned subsidiary of Collins & Aikman Products Co., which in turn was a wholly-owned subsidiary of Collins & Aikman Corporation. Collins & Aikman Floor Coverings Group, Inc., Collins & Aikman Products Co., and Collins & Aikman Corporation are each now a debtor in the above-captioned bankruptcy cases (hereafter, the Debtor or Debtors). On or about December 9, 1996, the Debtors, as sellers, entered into an Acquisition Agreement dated December 9, 1996 (the Agreement), with Floorcoverings, as the buyer, whereby the Debtors spun off Floorcoverings into a separate company. On February 6, 1997, under the terms of the Agreement, Floorcoverings became a wholly separate company from the Debtors. Section II of the Agreement contains certain representations and warranties of the Sellers (the Debtors) and the Purchaser (Floorcoverings). In section 2.1.16 of the Agreement, which addresses tax issues associated with the divestiture, the Debtors warrant that all appropriate taxes
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related to the divestiture of Floorcoverings and the normal operations thereof before the divestiture, have been properly paid and/or withheld. Section V of the Agreement addresses the indemnification obligations of the parties. Specifically, section 5.3 provides, in part, as follows: (a) Subject to Sections 5.1, 5.2 and 5.4, each [of the Debtors] will jointly and severally indemnify, defend and hold harmless [Floorcoverings] and their respective Affiliates and their respective directors, officers, partners, shareholders, employees, agents and representatives (including without limitation, any predecessor or successor to any of the foregoing) from and against any and all Indemnifiable Losses relating to, resulting from or arising out of: (i) Any Breach by [the Debtors] of any of the representations or warranties of [the Debtors] contained in this Agreement In or about August 10, 2001, the Florida Department of Revenue informed Floorcoverings that it believed Floorcoverings owed $172,038 in unpaid corporate income taxes to the State of Florida (the Florida Tax Claim). Pursuant to the terms of the Agreement, the matter was referred to Eugene White, Director of Tax for Collins and Aikman Products Co., and the Debtors indicated that they would step in and defend the assessment on behalf of Floorcoverings. After the Debtors stepped in to defend the Florida Tax Claim, Floorcoverings did not receive any further notice of the proceedings related thereto. On May 17, 2005 (the Petition Date), Collins & Aikman Corporation, and its affiliated debtors each filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code. Floorcoverings was not listed as a creditor in the Debtors bankruptcy schedules. On November 22, 2005, the Court entered a Notice setting January 11, 2006 at 5:00 P.M. (Prevailing Eastern Time) as the deadline for the filing of proofs of claim (the Claims Bar Date).

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To the best of Floorcoverings knowledge, information, and belief, the Debtors had resolved the Florida Tax Claim prepetition. Much to Floorcoverings surprise, however, on March 7, 2006, Floorcoverings received a Warrant for the Collection of Delinquent Corporate Income Tax, from the State of Florida Department of Revenue (the Warrant), demanding payment of the Florida Tax Claim plus interest, together totaling $256,183.69. A copy of the Warrant is attached hereto as Exhibit A. But for their bankruptcy, under the terms of the Agreement, the Debtors would be obligated to indemnify Floorcoverings for the cost of defending the Florida Tax Claim and the amount of any taxes ultimately due. Accordingly, Floorcoverings is entitled to assert a claim against the Debtors in that amount. Since, however, the Debtors failed to list Floorcoverings as a creditor, and Floorcoverings did not receive notice of the Florida Tax Claim from April 10, 2001 to March 2006, Floorcoverings did not know it held a claim against the Debtors until after the Claims Bar Date. See Affidavit of Leonard F. Ferro attached hereto as Exhibit B. Upon learning of the claim, Floorcoverings promptly filed a Proof of Claim in the Debtors above-captioned jointlyadministered bankruptcy cases, concurrently with the filing of its Motion and this brief. A copy of the Proof of Claim is attached as Exhibit C. Accordingly, by this Motion, Floorcoverings seeks entry of an order deeming its Claim timely filed. Floorcoverings failure to file a proof of claim prior to the Claims Bar Date was the result of excusable neglect, and therefore, under Bankruptcy Rule 9006, the Court may enlarge the time for Floorcoverings to file its Claim. Argument Bankruptcy Rule 9006(b)(1) provides: In General. Except as provided in paragraphs (2) and (3) of this subdivision, when an act is required or allowed to be done at or
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within a specified period by these rules or by a notice given thereunder or by order of court, the court for cause shown may at any time in its discretion (1) with or without motion or notice order the period enlarged if the request therefor is made before the expiration of the period originally prescribed or as extended by a previous order or (2) on motion made after the expiration of the specified period permit the act to be done where the failure to act was the result of excusable neglect. In Pioneer Investment Services Co. v. Brunswick Associates Limited Partnership, 507 U.S. 380 (1993), the Supreme Court held that late-filed proofs of claim may be allowed if the failure to file the proof of claim was the result of excusable neglect. The Court in Pioneer found that neglect encompassed simple, faultless omissions to act, and more commonly, omissions caused by carelessness. Id. at 388. As to whether the partys neglect was excusable, the Court concluded that the determination is at bottom an equitable one, taking account of all relevant circumstances surrounding the partys omission. Id at 389. The Court articulated a four-factor test to determine what types of neglect are excusable. Those factors are: (i) (ii) (iii) (iv) The Pioneer Factors As set forth below, application of the facts at issue to the Pioneer factors shows that Floorcoverings failure to file a timely Proof of Claim was a simple, faultless act, and the result of excusable neglect. Accordingly, entry of an order deeming Floorcoverings Proof of Claim timely filed is appropriate. the danger of prejudice to the debtor; the length of the delay and its potential impact on judicial proceedings; the reason for the delay, including whether it was within the reasonable control of the movant; and whether the movant acted in good faith. Pioneer 507 U.S. at 395.

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(i)

The Danger of Prejudice to the Debtors

Deeming Floorcoverings Proof of Claim timely filed presents no danger of prejudice to the Debtors. Upon information and belief, the Debtors have not completed (and are by no means even close to completing) their claims reconciliation process, nor have the Debtors made any distribution to unsecured creditors or filed a motion to do so. Allowing Floorcoverings to file its Proof of Claim will not prejudice the Debtors in any way. (ii) The Length of the Delay and its Potential Impact on Judicial Proceedings

Floorcoverings has not unduly delayed filing its Motion. Floorcoverings has promptly filed its Motion and Proof of Claim after receiving the Warrant from the State of Florida. The Claims Bar Date expired approximately six months ago, and the Debtors have only just begun the claims objection and reconciliation process. Further, the amount of Floorcoverings claim is small relative to the Debtors total unsecured debt and, as such, will not have any significant impact on the overall administration of the case or the judicial proceedings. No plan of

reorganization has yet been filed by the Debtors or any other party in interest, and the size of Floorcoverings claim could not conceivably affect the formulation or negotiation of any such plan. (iii) The Reason for the Delay, Including Whether it was Within the Reasonable Control of the Movant

As mentioned above, Floorcoverings did not file a Proof of Claim before the Claims Bar Date because it was not on notice that it was a creditor of the Debtors. Floorcoverings

acknowledges that it was aware of the bankruptcy of its former parent, but only because its own customers called for reassurances that Floorcoverings itself was not in a chapter 11 proceeding. After its divestiture from the Debtors in 1997, Floorcoverings has operated as a wholly separate company. Floorcoverings is not a party to any contracts with the Debtors, nor does it have any commercial dealings with the Debtors. Floorcoverings was not listed by the Debtors as
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a creditor in their bankruptcy schedules. In sum, Floorcoverings had no reason to believe it was a creditor of the Debtors or that it needed to file a proof of claim. (iv) Whether the Movant Acted in Good Faith

Floorcoverings has acted in good faith at all times in this matter. As of the Petition Date, Floorcoverings had no reason to believe it was a creditor of the Debtors. Shortly after

Floorcoverings received the Warrant, Floorcoverings contacted its counsel to ascertain whether the Claims Bar Date had passed. Learning that the Claims Bar Date had passed, Floorcoverings took appropriate steps to seek permission from the Court to file its late-filed Proof of Claim. Conclusion In conclusion, Floorcoverings failure to file a timely proof of claim was clearly the result of excusable neglect. Deeming Floorcoverings Proof of Claim timely filed will not prejudice the Debtors, nor will it impact the administration of these bankruptcy cases in any significant way. CLARK HILL PLC

By: /s/ Robert D. Gordon Robert D. Gordon (P48627) Susanna C. Brennan (P67018) 500 Woodward Avenue, Suite 3500 Detroit, Michigan 48226-3435 rgordon@clarkhill.com (313) 965-8572 - and WOMBLE CARLYLE PLLC G. Donald Johnson 1201 W. Peachtree Street Atlanta, GA 30309 (404) 888-7456 Attorneys for Collins & Aikman Floorcoverings, Inc. -6-

Dated: July 10, 2006

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UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION ) ) COLLINS & AIKMAN CORPORATION, et at., ) ) ) Debtors. ) In re: Chapter 11 Case No. 05-55927-SWR (Jointly Administered)

Honorable Steven W. Rhodes

AFFIDAVIT OF LEONARD F. FERRO STATE OF GEORGIA COUNTY OF WHITFIELD ) ) SS )

Leonard F. Ferro of Collins and Aikman Floorcoverings, Inc. ("Floorcoverings"), being first duly sworn, deposes and states as follows: 1. I have been the Chief Financial Officer of Floorcoverings since June 2004, and I

am authorized to make this Affidavit on behalf of Floorcoverings. 2. I am more than 18 years of age and of sound mind. I make this Affidavit of my

own personal knowledge. 3. 4. Floorcoverings manufactures vinyl-based commercial floor coverings. On or about March 6, 2006, Floorcoverings received a Warrant for Collection of

Delinquent Corporate Income Tax from the State of Florida Department of Revenue (the "Warrant"). 5. During my tenure as Chief Financial Officer, prior to receiving the Warrant, to the
neither I nor any other representative of Floorcoverings any of the Debtors received any in the above-

best of my knowledge, correspondence

or other notice from the State of Florida,

captioned bankruptcy

cases, or any other person or entity regarding

any potential tax liability

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which is the subject of the Warrant, and Floorcoverings was not aware of such potential tax liability. COLLINS & AIKMAN FLOORCOYERINGS, INC.

BY:~-:/
Subscribed and sworn to before me on July JO~ , 2006

I~

Leonard F. Ferro Its: Chief Financial Officer

~()/Ihit

, Notary Public

~~

County, Georgia
Notary Public, Whitfield County, Georgia My Commission Expires March 2, 2010

My commission expires:

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