IN THE 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

DAVID A. STOCKMANS RESPONSE TO COLLINS & AIKMAN LITIGATION TRUSTS SIXTY-EIGHTH OMNIBUS OBJECTION TO CLAIMS (INSUFFICIENT BOOKS AND RECORDS) (Re: Docket No. 9833) David A. Stockman (Mr. Stockman), by and through his undersigned attorneys, hereby responds (the Response) to the Collins & Aikman Litigation Trusts (the Trust) Sixty-Eighth Omnibus Objection to Claims (Insufficient Books and Records) (Docket No. 9833) (the Objection), and respectfully states as follows: 1. Mr. Stockman is a former officer and director of Collins & Aikman

Corporation (C&A) and, from time to time, may have also served as an officer and/or director of certain of C&As debtor and non-debtor affiliates. 2. Under Article VIII of C&As by-laws (attached as Exhibit A to Mr.

Stockmans proof of claim (as defined below, the POC)) and section 145 of Delawares General Corporate Law, C&A is required to indemnify its officers and directors against expenses incurred by them in, or any liability resulting from, any legal action or proceeding to which any officer or director is made a party as a result of such officers or directors serving in such capacity.

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3.

Mr. Stockman is also entitled to indemnification and/or advancement of

defense costs under the terms of that Services Agreement by and among Debtors and Heartland Industrial Partners, L.P. dated February 23, 2001 (as amended on August 7, 2001, March 15, 2004, and May 6, 2004) (the Services Agreement, attached as Exhibit B to the POC). In the Services Agreement, the Debtors agreed to indemnify and hold harmless Heartland, its affiliates and their respective partners (both general and limited), members (both managing and otherwise), officers, directors, employees, agents and representatives . . . from and against any and all losses, claims, damages and liabilities . . . related to, arising out of or in connection with the advisory and consulting services contemplated by the Services Agreement. (Services Agreement, 5.) Accordingly, Mr. Stockman is entitled to indemnification and/or advancement of defense costs under the Services Agreement against any and all losses, claims, damages and liabilities that have been or will be asserted against him based on services he provided as agent of Heartland Industrial Partners L.P. 4. As a result of serving as an officer and director of C&A and any other of

the Debtor entities, Mr. Stockman is or was a defendant in the following legal actions: (a) MacKay Shields LLC v. Heartland Industrial Partners, L.P. et al., Case No. 2:05-CV-74912, formerly pending before the United States District Court for the Eastern District of Michigan, originally filed as case number 05-520229 in the Wayne County Circuit Court in Michigan and removed to federal court by the defendants on November 9, 2005; (b) In re Collins & Aikman Securities Litigation, Case No. 2:03-CV-71173, currently pending before the United States District Court for the Eastern District of Michigan; (c) Collins & Aikman Corporation and Collins & Aikman Products Co. v. Heartland Industrial Partners, L.P., Heartland Industrial Associates, L.L.C., Heartland Industrial Group, L.L.C., David Stockman and Jane and John Doe

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Nos. 1-50, Adv. Pro. No. 07-05650 (SWR), currently pending in this Bankruptcy Court; (d) Collins & Aikman Corporation and Collins & Aikman Products Co. v. David A. Stockman, et al., Case No. 07-CV-265, currently pending in the United States District Court for the District of Delaware; (e) Aurelius Capital Master, LTD v. Stockman, et al., Case No. 08/601483, currently pending in the Supreme Court of the State of New York, County of New York; (f) Mainstay High Yield Corporate Bond Fund v. Heartland Industrial Partners, L.P., et al., Case No. 2:07CV-10542, currently pending before the United States District Court for the Eastern District of Michigan; (g) Securities Exchange Commission v. Collins and Aikman, et al., Case No. 1:07-CV02419 (SAS), currently pending before the United States District Court for the Southern District of New York; (h) United States v. David A. Stockman, et al., Case No. 07-CV-220 (BSJ), currently pending before the United States District Court for the Southern District of New York; and (i) Kleinpeter-Fleck v. Collins and Aikman Corporation, et al., Case No. 2:06-CV-13555GER-SDP, currently pending before the United States District Court for the Eastern District of Michigan.1 5. Mr. Stockman has incurred and continues to incur litigation-related

expenses, including attorneys fees, in defense of the above-mentioned litigations, and perhaps in such other cases yet-to-be-filed in which Mr. Stockman is a party. Mr. Stockman has also incurred and expects to incur additional costs and expenses, including attorneys fees, from his Kleinpeter-Fleck v. Collins and Aikman Corporation, et al. originated as the following four separate actions in the United States District Court for the Southern District of New York: Kleinpeter-Fleck v. Collins and Aikman Corporation, Case No. 05 Civ. 3791 (MBM), Egleston v. Mosingo, Case No. 05 Civ. 4950 (MBM), Akerman v. Collins and Aikman Corporation, Case No. 05 Civ. 5098 (MBM), and Gariddi v. Mosingo, Case No. 05 Civ. 5251 (MBM). The United States District Court for the Southern District of New York consolidated the cases and, on August 8, 2006, transferred the consolidated case to the United States District Court of the Eastern District of Michigan, where it is currently pending.
1

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participation in various governmental investigations concerning C&A. Pursuant to the C&A bylaws, section 145 of Delawares General Corporate Law, and/or the Services Agreement, Mr. Stockman is entitled to indemnification and/or advancement of defense costs for his participation in these litigations and investigations. In the event a money judgment is rendered against him in one of the litigations, Mr. Stockman is also entitled to indemnification for the amount of any such judgment. 6. On January 11, 2006, Mr. Stockman timely filed the POC (Claim No.

6878) in accordance with Federal Rule of Bankruptcy Procedure 3001. The POC detailed the nature of and, to the extent calculation was then possible, the amount of his claim. The amount of Mr. Stockmans non-contingent claim has since increased as he has continued to accrue Costs (as that term is defined in his POC). 7. On July 30, 2008, the Trust filed its Objection to the POC, in which it

requests that the Court disallow and expunge Mr. Stockmans POC. Without offering any evidence in support of its position, the Trust merely asserts that Mr. Stockmans POC should be disallowed because the Trust cannot verify that the Debtors had any obligation to pay [the] claim[] . . . . (Objection 6.) 8. Because Mr. Stockmans POC was executed and filed in accordance with

Federal Rule of Bankruptcy Procedure 3001, it constitute[s] prima facie evidence of the validity and amount of the claim. Fed. R. Bankr. P. 3001(f). 9. In objecting to a claim, the objecting party carries the burden of going

forward with evidence to overcome the prima facie validity and amount of the claim. In re Johnson, 384 B.R. 763, 769 (Bankr. E.D. Mich. 2008). Accordingly, the objecting party must produce evidence which would refute at least one of the allegations that is essential to the legal

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sufficiency of the [claimants] proof of claim. In re Dow Corning Corp., 250 B.R. 298, 321 (Banrk. E.D. Mich. 2000). Formal objections unsupported by evidence and conclusory statements denying liability are routinely overruled. See In re Garner, 246 B.R. 617, 623 (B.A.P. 9th Cir. 2000); In re Brown, 221 B.R. 46, 48 (Banrk. S.D. Ga. 1998). 10. The Trust has not met its burden of producing evidence to overcome the

prima facie validity and amount of Mr. Stockmans POC. Rather than producing evidence to refute even one of Mr. Stockmans allegations, the Trusts insufficient books and records objection ignores the factual basis for Mr. Stockmans POC entirely and instead emphasizes the Trusts utter lack of evidence regarding Mr. Stockmans POC. Indeed, the Trusts Objection wholly ignores the documents attached to Mr. Stockmans POC, which plainly and undeniably provide the basis for his POC. 11. Therefore, the Rule 3001 presumption of validity stands, the Objection

must be overruled, and Mr. Stockmans POC must be allowed.

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WHEREFORE, Mr. Stockman respectfully requests that the Court enter an order (i) denying the Trusts Objection, (ii) allowing Mr. Stockmans POC in full, and (iii) granting such other and further relief as the Court deems fair and equitable.

Dated: November 10, 2008

HOWARD & HOWARD ATTORNEYS, P.C. /s/ Patrick M. McCarthy Patrick M. McCarthy P49100 Local Counsel for David A. Stockman 101 N. Main Street, Suite 300 Ann Arbor, MI 48104 (734) 222-1097 pmm@h2law.com - and Lisa S. Gretchko P29881 Local Counsel for David A. Stockman 39400 Woodward Avenue, Suite 101 Bloomfield Hills, Michigan 48340 (248) 723-0396 lgretchko@howardandhoward.com Local Counsel for Defendant David A. Stockman WILMER CUTLER PICKERING HALE AND DORR LLP Andrew N. Goldman 399 Park Avenue New York, New York 10022 (212) 230-8800 Andrew.Goldman@wilmerhale.com - and Eric R. Markus 1875 Pennsylvania Ave., N.W. Washington, DC 20006 (202) 663-6000 Eric.Markus@wilmerhale.com Lead Counsel for Defendant David A. Stockman

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