UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION * * * * * * * * * * * * * * * * * * * In re: * * COLLINS & AIKMAN CORP.

, et al * * Debtors * * * * * * * * * * * * * * * * * * * * * * *

Chapter 11 Case No. 05-55927 (SWR) (Jointly Administered) (Tax ID #13-3489233) Honorable Steven W. Rhodes

VERIFIED RESPONSE OF GROSSMAN, TUCKER, PERREAULT & PFLEGER, PLLC TO DEBTORS NINTH OMNIBUS OBJECTION TO CLAIMS (RECLASSIFY SECURED CLAIMS) NOW COMES Grossman, Tucker, Perreault & Pfleger, PLLC (Grossman), by and through counsel, Kilpatrick & Associates, P.C. and Preti, Flaherty, Beliveau & Pachios, PLLP, and respectfully submits the within Response to Debtors Ninth Omnibus Objection to Claims (Reclassify Secured Claims) (Ninth Omnibus Objection), and states as follows: PROCEDURAL BACKGROUND 1. On or about May 17, 2005, Debtors filed a Voluntary Petition under

Chapter 11, Title 11 of the U.S. Bankruptcy Code. 2. On or about August 16, 2005, Grossman filed a Proof of Claim, claim

number 1310, asserting a secured claim in the amount of $313,960.99. Grossman has asserted a secured claim in various patent and IP rights of Debtors pursuant to New Hampshire Revised Statute (N.H. RSA) 311:13.

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On January 9, 2007, Debtors filed its Ninth Omnibus Objection to Claims

(Reclassify Secured Claims), wherein the Debtors Objection was based solely on, no evidence of collateral. BACKGROUND 4. Grossman is a law firm located in Manchester, New Hampshire with an

exclusive focus on intellectual property matters: trademarks, patents, copyright, strategy counseling and expert opinions. 5. Grossman has been actively pursuing and protecting the Debtors

intellectual property rights for many years, including seeking intellectual property rights for Collins & Aikman inventors operating in Collins & Aikman facilities in New Hampshire.. 6. On the date of the filing of this case, the Debtors were indebted to

Grossman for attorneys fees and disbursements directly related to various US and foreign intellectual property matters. Grossman can break down its claim further as follows: IP fees $90,630.00; U.S. IP disbursements $146,411.39; and Foreign IP disbursements $58,597.28.1 7. Intellectual property rights, especially foreign IP rights, require much

timely attention, lest they be forfeited for late filing or non-payment of foreign fees. Grossman expended substantial time and out-of-pocket funds to preserve the Debtors international and domestic IP. 8. The Debtors have always valued Grossmans services, requesting, for

example, that Grossman continue to provide services post-petition.

Grossman acknowledges that due to an accounting error their claim is actually $295,638.67 and will amend their claim accordingly.

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9.

Attached as Exhibit A hereto is an example of a foreign patent office

decision obtained by Grossman for the benefit of the Debtors. 2 LAW 10. NH RSA 311:13 Lien on Verdict, states in its entirety:

From the commencement of an action, bill in equity or other proceeding in any court, the filing of a counterclaim or plea in set-off or recoupment, or appearance in any proceeding before any state or federal department, board, or commission, the attorney who appears for a client in such proceeding shall have a lien for reasonable fees and expenses upon the client's cause of action, upon the judgment decree or other order in the client's favor entered or made in such proceeding, and upon the proceeds derived therefrom. The lien cannot be affected by any settlement between the parties before or after the judgment decree or other order. Upon the request of the client or the attorney, the court in which the proceeding is pending, or, if the proceeding is not pending in a court, the superior court, may determine and enforce the lien; provided that this section shall not apply to matters arising under RSA 282-A and any case where the method of determination of attorneys' fees is otherwise expressly provided by statute.

DISCUSSION A. New Hampshire Law governs the secured status of Grossmans claim. 11. While not yet affirmatively raised by Debtors, Grossman would prefer to

head off a choice of law clash and point out that the court in In re Engage, Inc., performed an extensive choice of law analysis in determining whether the Virginias attorney lien statute [the location of the U.S. Patent & Trademark Office (USPTO)] or the attorney lien statute of the creditors state would be controlling. 330 B.R. 5, 9-14 (D.Mass. 2005). 12. The court ultimately found, pursuant to the most significant relationship

choice of law analysis that USPTO proceedings are governed by the attorneys lien statute of the creditors state. Id at 14. The court succinctly noted that if Virginia law
2

Although Textron is listed as the owner, Collins & Aikman purchased the Textron IP rights.

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controlled then such a holding potentially would give nationwide effect, at least within this federal field of practice, to the policy determination of a single state regarding the tools available for attorneys to collect fees for worked performed. Id at 11. 13. Accordingly, there should be no dispute that New Hampshire law governs

and NH RSA 311:13 is applicable. B. Grossman has a valid, enforceable lien pursuant to N.H. RSA 311:13. 14. It is clear from the unambiguous language of N.H. RSA 311:13 that the

statute is intended is to be over-inclusive rather than restrictive in nature. One need look no further than the first sentence, From the commencement of an action, bill in equity or other proceeding in any court, the filing of a counterclaim or plea in set-off or recoupment, or appearance in any proceeding before any state or federal department, board, or commission (Emphasis added). 15. Further, the Legislative History of N.H. RSA 311:13 similarly reflects the

intention that the statute was intended as a broad protective piece of legislation aiding any attorney who has brought a case to a successful conclusion and then is not able to collect his fee. N.H. Senate Journal 1963 at 487. 16. The breadth of N.H. RSA 311:13 is reflected in the fact that it covers both

legal and equitable matters. New Hampshire is one of a very few jurisdictions that has not consolidated actions in equity and actions at law. Actions in law and in equity are governed by different civil rules of procedure and are treated as separate and distinct actions. While New Hampshires adherence to antiquated English common law terms of art might seem quaint, these terms are based in common law and often cause confusion and bewilderment among legal practitioners from different jurisdictions. Therefore, a

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brief explanation and overview is appropriate in order for the Court to understand exactly how wide a net N.H. RSA 311:13 casts and how it ensnares every conceivable legal action. N.H. RSA 311:13 includes within its scope: i. Actions at Law Under New Hampshire law, the common law

forms of legal action are still used: ASSUMPSIT for an action based upon contract for an unliquidated amount; TRESPASS for an action based upon intentional tort; CASE for an action based upon negligent tort; and LAW for an act based upon some statutory right. New Hampshire Practice and Procedure Handbook, Civil Litigation, p. CL-17 (Volume 1, 2002 ed.). ii. Bills in Equity In describing the breadth of Bill in Equity

proceedings, the New Hampshire Practice series enumerates on a non-exclusive basis no less than nineteen specific types of equity actions: (1) (2) Accident and Mistake a superior court will correct a mistake in a deed or writ to make it confirm to the parties true intentions; Cases in which there is not a plain, adequate and complete remedy at law such as to compel a creditor to account, to set aside an arbitrators award for fraud or misconduct, to enjoin interference with an established right, to reform a deed and to protect the rights of minority shareholders; Charitable uses; Contribution; Discovery the superior courts equity powers may be applied to discover and recover personal property unlawfully withheld from the owner; Fraud where a party seeks to seeks to be relieved from the effects of another persons fraud rather than to be awarded damages for that fraud; Injunctions; Mineral Rights (extinguishment); Mortgages (redemption and foreclosure); Nuisance; Partnerships, joint tenancies, and tenancies in common actions for accounting and partition pf the affairs or property. Recovery of Personal Property; 5
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(3) (4) (5)

(6)

(7) (8) (9) (10) (11) (12)

(13) (14) (15) (16) (17) (18) (19)

Specific Performance of oral and written contracts for the conveyance of land; Tax abatement; Tax collection; Title (Petitions to Quiet Title and to Remove Clouds on Title); Trusts the superior court may require a trustee to account and to take certain actions in their performance of the trustees duties; Waste a remainderman may apply to the superior court for protection against waste by a life tenant; and Water rights.

New Hampshire Practice, Civil Practice and Procedure 63.03 (2d ed., 2006). iii. Other proceeding in any court this catch-all phrase includes any

possible court proceeding not covered by actions in law or equity. iv. v. Filing of a counterclaim self explanatory. Plea in set-off is a debt or demand arising from different facts

and circumstances but existing at the time the plaintiffs writ is filed. New Hampshire Practice, Civil Practice and Procedure, section 11.02. Importantly, a plea in set-off cannot result in an affirmative money judgment in favor of a defendant. Ellsworth v. Brown, 55 N.H. 396 (1875). vi. Plea in recoupment is a claim arising from the same facts and

circumstances as the plaintiffs claim that diminishes plaintiffs claim. Id. vii. The appearance in any proceeding before any state or federal

department, board, or commission these catch-all phrases clearly include all non-court proceedings. Similar language in another statute has been interpreted to include prosecution actions before the USPTO. See In re Engage, Inc., 330 B.R. at 15-16. 17. The Debtors attempt to avoid the logical outcome in favor of Grossman

under New Hampshire law by pointing to a Massachusetts case interpreting the 6

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Massachusetts attorneys lien statute. See In re Engage, Inc. As there are great differences between liberal Massachusetts and live free or die New Hampshire, so too are there great and determinative differences in their respective attorneys lien statutes. 18. In In re Engage, Inc., the Court ultimately held that the Massachusetts

attorneys lien statute required the existence of a monetary award or cash fund. 330 B.R. at 16-20. See also In re Leading Edge Products, Inc., 121 B.R. 128, 129 (Bankr. D. Mass. 1990). 19. The decision relied on by the Debtor under Massachusetts law does not

control in New Hampshire and offers little guidance given the more restricted nature of the Massachusetts statute, which only provides for a lien in a subset of actions described in the broader New Hampshire statute. N.H. RSA 311:13. 3 The New Hampshire statute specifically includes bills in equity actions and pleas in set-off, wherein no cash fund or monetary award is contemplated or in fact can be created under N.H. law. See Paragraph 16 above. The Debtors, in effect, ask this Court to rewrite the N.H. statute and ignore the N.H. Legislatures stated goal to provide a remedy when an attorney gets no fee for his services. N.H. Senate Journal 1963 at 487. 20. None of the enumerated equity actions covered by N.H. RSA 311:13

envision the creation of a cash fund or monetary award. These equitable actions often do involve property rights - such measures as reformation of a deed, injunctions, specific performance, etc. Under the New Hampshire common law system monetary damages are almost solely the provenance of actions at law. 21. The New Hampshire Legislature, by constructing the attorneys lien

statute to include equitable actions and recoupment pleas, explicitly distinguished it from the Massachusetts attorneys lien statute, thereby giving it a broader reach. The inclusion
3

The Massachusetts statute is not nearly as inclusive, it only covers, the authorized commencement of an action, counterclaim or other proceeding in any court, or appearance in any proceeding before any state or federal department, board or commission. Mass. Gen. Laws ch. 221 50.

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of these non-monetary causes of action indicates that the Legislature considered and rejected the much older and more limited Massachusetts attorneys lien statute. See Pennelli v. Town of Pelham, 148 N.H. 365, 367-68, (2002) (the legislature is presumed not to have used superfluous or redundant words). 22. Furthermore, the creation of an attorneys liens on patents and related

intellectual property is not a novel concept. The USPTO, in its own rules expressly recognizes such a right in favor of intellectual property practitioners such as Grossman. Rule 10.64 provides that: (a) A practitioner shall not acquire a proprietary interest in the subject matter of a proceeding before the Office which the practitioner is conducting for a client, except that the practitioner may: (1) Acquire a lien granted by law to secure the practitioners fee or expenses; or 37 C.F.R. 10.64 (2005). 23. With respect to Grossmans foreign prosecutions and foreign

disbursements on behalf of the Debtor, Grossman efforts did produce decisions/orders in favor of the Debtors. Hence, even under the narrowest of interpretations of N.H. RSA 311:13, Grossman remains entitled to a lien against the Debtors foreign IP, as detailed in Grossmans proof of claim. CONCLUSION 24. Grossman performed valuable services and expended significant amounts

of monies directly related to the enforcement and maintenance of Debtors intellectual property rights. Pursuant to N.H. RSA 311:13, Grossman has a secured interest upon those intellectual property rights and any proceeds derived from the sale of those rights. 25. Assuming arguendo that the Court declines to interpret N.H. RSA 311:13 to cover U.S. intellectual property matters, Grossman has a secured interest upon those foreign intellectual property rights and all proceeds therefrom where Grossman was able to obtain pre-petition a decision in the Debtors favor. 8
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WHEREFORE, Grossman, Tucker, Perreault & Pfleger, PLLC respectfully requests that the Court: A. Schedule such other and further evidentiary hearings as may be required to resolve this matter; and B. Allow a secured claim in the amount of $295,638.67; and C. Require immediate payment of any and all proceeds derived by Debtors from Grossmans collateral; and D. Order such other and further relief, as it deems just and equitable. Respectfully submitted; GROSSMAN, TUCKER, PERREAULT & PFLEGER, PLLC By its Attorneys, Kilpatrick & Associates, P.C. /s/Leonora K. Baughman Leonora K. Baughman (P33534) 903 North Opdyke Road, Suite C Auburn Hills, MI 48326 ecf@kaalaw.com (248) 377 0700 Preti, Flaherty, Beliveau & Pachios, PLLP /s/ John M. Sullivan (via electronic consent) John M. Sullivan, Esq, Joshua E. Menard, Esq. 57 North Main Street PO Box 1318 Concord, NH 03302-1318 Tel.: 603-410-1500

Dated: April 12, 2007

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VERIFICATION OF CREDITOR The undersigned, a duly elected officer of Grossman, Tucker, Perreault & Pfleger, PLLC, attests to the veracity of the factual allegations contained in this Verified Response.

Dated: April 12, 2007

/s/ Steven J. Grossman (via scanned consent) Steven J. Grossman

STATE OF NEW HAMPSHIRE COUNTY OF Hillsborough Signed and sworn to before me on April 12, 2007 by Steven J. Grossman. /s/Lisa Pelletier (via scanned consent) Notary Public My Commission Expires: 03-05-08

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