Case BLS Doc 150 Filed 08/18/13 Page 1 of 12 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

Transcription

1 Case BLS Doc 150 Filed 08/18/13 Page 1 of 12 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: ) Chapter 11 ) REVSTONE INDUSTRIES, LLC, et al., ) Case No (BLS) ) (Jointly Administered) Debtors. ) ) Related to Docket No. 888 In re: ) Chapter 11 METAVATION, LLC, ) Case No (BLS) ) (Joint Administration Requested) Debtor. ) ) Related to Docket No. 63, 64 DEBTORS OBJECTION TO MOTION OF OFFICIAL COMMITTEE OF UNSECURED CREDITORS FOR AUTHORIZATION TO PROSECUTE CERTAIN CLAIMS ON BEHALF OF REVSTONE S ESTATE Revstone Industries, LLC ("Revstone"), on behalf of itself and its jointly administered debtors, and Metavation, LLC (collectively, the "Debtors") hereby file this objection to the Motion of Official Committee of Unsecured Creditors for Authorization to Prosecute Certain Claims on Behalf of Revstone s Estate [Docket No. 888] (the "Motion") filed by the Official Committee of Unsecured Creditors appointed in the case of Revstone (the "Revstone Committee") with respect to the case of Metavation, LLC ("Metavation"), Revstone s affiliated debtor in possession. 1. The Motion is an unfortunate continuation of the highly aggressive litigation tactics employed by the Revstone Committee and its co-chair, Boston Financial Group, The Debtors in these Chapter 11 Cases and the last four digits of each Debtor s federal tax identification numbers are: Revstone Industries, LLC (7222); Spara, LLC (6613); Greenwood Forgings, LLC (9285); US Tool & Engineering, LLC (6450) and Metavation, LLC (5884). The location of the Debtors headquarters and the service address for each of the Debtors is 2250 Thunderstick Dr., Suite 1203, Lexington, KY Unless otherwise noted, capitalized terms used herein have the meanings ascribed to them in the Motion. DOCSSF:83625, /001

2 Case BLS Doc 150 Filed 08/18/13 Page 2 of 12 in these cases. Debtor Metavation s case was only filed on July 22, 2013, yet, with no real attempt at discussion (or effort to minimize costs to these estates) the Revstone Committee has already filed its Motion seeking derivative standing to prosecute intercompany claims on behalf of Revstone against Metavation. For the reasons more fully set forth below, the Motion is devoid of merit and should be denied. Preliminary Statement 2. The alleged basis of the Motion is that derivative standing is required in this case because "the professionals employed by Revstone, which professionals are also proposed to be employed by Metavation and owe fiduciary obligations to Metavation cannot pursue the Metavation Claims." Motion, 11. As a preliminary matter, there is nothing in the Motion to support the extraordinary proposition that the Revstone Committee has any "standing" to serve on a creditors committee for Metavation, which is an insider affiliate of Revstone. Insiders of a debtor do not normally serve on creditors committees and the Motion has offered no justification to depart from that general premise. Second, there is nothing novel or extraordinary about the existence and reconciliation of intercompany claims by and among affiliates, whether those affiliates are debtors or non-debtors, to justify granting derivative standing to the Revstone Committee to prosecute the Metavation Claims. By its Motion, and through the unsubstantiated allegations contained therein, the Revstone Committee has sought to transform this everyday state of affairs, common in chapter 11 cases, into something unique. The situation, however, is not unique. These are large chapter 11 cases with a number of debtor and non-debtor affiliates that, like many other chapter 11 cases (and as the Revstone Committee has known for many months), have intercompany claims by and against one another. Those DOCS_SF: /001 2

3 Case BLS Doc 150 Filed 08/18/13 Page 3 of 12 claims will be reconciled, liquidated and administered in the ordinary course of these chapter 11 cases. The reconciliation of intercompany claims by and among debtors is routine in all chapter 11 cases of this size. Contrary to the Motion, nothing in the Metavation Interim DIP Order or Metavation Cash Management Motion, nor the rejection of the Revstone Committee s highly unusual demand for standing to serve on a committee for indirect subsidiary Metavation, will adversely affect the nature, extent or priority of any intercompany claims. Moreover, the Debtors have previously engaged professionals to reconcile accounts and review transactions between Revstone and other parties, including the other Debtors and related non-debtor affiliates. There are no circumstances to support the extraordinary relief requested in the Motion. While the Motion lodges several red herrings that relate to (a) limited issues concerning certain information on the Metavation Schedules, which were filed just days after the Petition D, which information the Debtors have already addressed and supplemented by amending the Metavation Schedules and (b) unfounded concerns regarding the scope of the relief approved at the Metavation First Day Hearing, none of these assertions justifies the substitution of the Revstone Committee to carry out the pursuit and reconciliation of intercompany claims. B. Nothing in the Motion Supports the Revstone Committee s Highly Unusual Request for "Standing" to Serve on the Metavation Creditors Committee Nothing in the Motion supports the Revstone Committee s very unusual demand for "standing to serve on any committee that may be formed in Metavation s bankruptcy case..." See July 26, 2013 demand letter from Revstone Committee counsel to Debtors counsel attached hereto as Exhibit A (the "Demand Letter). As set forth in the response to the Demand Indeed, on August 6, 2013, Metavation filed its Notice of Filing of Debtor Metavation, LLC s Amended Schedules [Docket No. 896] (the "Amended Schedules") pursuant to which Metavation listed the various intercompany claims against it and also listed Revstone as a co-debtor on amended Schedule H. D005_SF: /001 3

4 Case BLS Doc 150 Filed 08/18/13 Page 4 of 12 Letter transmitted on July 29, 2013 (the "Response") and attached hereto as Exhibit B, the Debtors requested that the Revstone Committee clarify this request. As Revstone is Metavation s upstream indirect parent, it is unclear on what basis the Revstone Committee could sit on a committee of unsecured creditors on behalf of an insider of the applicable debtor. Although not explicitly prohibited by the Bankruptcy Code, insiders of a debtor are generally not appointed to the official committee of creditors for that debtor because their insider status may be at odds with the committee s fiduciary duties to maximize returns for unsecured creditors. For that reason, insiders are not included on the list of a debtor s top twenty unsecured creditors filed with the court and used by the Office of the United States Trustee to solicit committee members. In addition to noting the reasons why this Motion should not have been filed, the Response requested that the Revstone Committee clarify its request for standing to sit on any committee of unsecured creditors appointed in Metavation s case. However, rather than reply to this request, the Debtors were simply served with the Motion. 4. Not surprisingly, the Motion fails to provide any authority for the extraordinary proposition that the Revstone Committee could be appointed to serve a committee of creditors (assuming that one is even appointed) for Metavation. The Revstone Committee appears to conflate the issue of whether or not it has standing to appear and be heard on matters in the Metavation case pursuant to section 1109(a) of the Bankruptcy Code with whether or not the Revstone Committee has standing to serve on a committee of unsecured creditors of Metavation, which is an insider affiliate of Revstone. The sole case cited by the Revstone The Office of the United States Trustee declined to appoint the Revstone Committee to a committee of unsecured creditors in the Metavation chapter 11 case at the formation meeting conducted on August 1, 2013 and also did not form a committee of unsecured creditors at that meeting. Motionll 16. DOCS_SF: /001 4

5 Case BLS Doc 150 Filed 08/18/13 Page 5 of 12 Committee is Unofficial Committee of Zero Coupon Noteholders v. Grand Union Company, 179 B.R. 56 (D. Del. 1995), in which the District Court held that bondholders of a debtor s parent corporation had standing under section 1109(a) to appear and be heard on issues relating to the debtor s motions to approve debtor in possession and exit financing. Id. at Grand Union did not address the issue of whether or not a committee of a debtor could itself be appointed to a creditors committee as an insider affiliated debtor, and is therefore completely inapplicable to whether the Revstone Committee may serve on any creditors committee appointed in the Metavation case. Thus, even if the Revstone Committee has a right to be heard on certain matters in the Metavation chapter 11 case, that does not equate to the same thing as conferring it standing to appear on a committee of unsecured creditors in Metavation s chapter 11 case. C. The Intercompany Claims Between Metavation and Revstone Are Common in Affiliated Cases of This Size and Will Be Addressed in the Ordinary Course 5. The Motion is premised on the erroneous assertion of an alleged conflict of management and the Debtors professionals in representing affiliates Revstone and Metavation, which representation would allegedly prevent the administration and prosecution of intercompany claims by and against each debtor. This novel claim, which is belied by numerous large chapter 11 cases pending in this District at any given time, is groundless. The representation of jointly administered debtors by a single group of management and professionals is routine in large bankruptcy case in this District and nationwide. It is also routine in chapter 11 cases for affiliated debtors to reconcile and address intercompany claims against one another, which is exactly what is happening in these cases and which the Revstone Committee has known about for many months. DOCS_SF: /001 5

6 Case BLS Doc 150 Filed 08/18/13 Page 6 of Although the Bankruptcy Code does not specifically authorize statutory creditors committees to initiate derivative adversary proceedings, where specific conditions are met, sections 503(b)(3)(B), 1103(c), and 1109(b) of the Bankruptcy Code are interpreted to allow an implied, qualified right for such committees to prosecute claims for the benefit of a debtor s estate, with bankruptcy court permission. See Official Comm. of Unsecured Creditors of Cybergenics Corp. ex rel. Cybergenics Corp. v. Chinery, 330 F.3d 548, 567 (3d Cir. 2003). 7. At a minimum, derivative standing to prosecute claims belonging to a debtor s estate requires a committee to affirmatively establish: "(1) a colorable claim; (2) that the trustee unjustifiably refused to pursue the claim, and (3) permission of the bankruptcy court to initiate the action [has been obtained]." In re Centaur, LLC, 2010 Bankr. LEXIS 3918, *13 (Bankr. D. Del. 2010). See also Infinity Investors Ltd. v. Kings borough (In re Yes! Entm t Corp.), 316 B.R. 141, 145 (D. Del. 2004); Official Comm. Of Unsecured Creditors v. Cablevision Sys. Corp. (In re Valley Media, Inc.), 2003 Bankr. LEXIS 940, at *5..6 (Bankr. D. Del. Aug. 14, 2003). 8. As set forth below, the Revstone Committee cannot meet this standard because the Debtors have taken, and will continue to take the appropriate steps to ensure that the intercompany claims by and against debtors and non-debtor affiliates will be reconciled and addressed in the ordinary course of business. Indeed, the Revstone Committee does not even attempt to discuss whether its request meets the Cybergenics standard, asserting instead that the The Motion also contains the peculiar request to that existing evidentiary privileges related to the Metavation Claim "be transferred" to the Revstone Committee. Motion 126. The Debtors believe that any existing attorney client privileged arises under applicable law and cannot be expanded or altered by virtue of this Motion. The Debtors reserve any and all rights on the scope and nature of any existing privilege between themselves and their professionals. DOCSSF: /001 6

7 Case BLS Doc 150 Filed 08/18/13 Page 7 of 12 Debtors "obvious" conflict of interest supports the Committee s derivative standing without further analysis. See Motion, The Debtors will work to reconcile the various intercompany claims and liquidate the various obligations between them. The Revstone Committee, which is clearly well aware of the intercompany claims at issue (primarily as a result of information provided by the allegedly "conflicted" debtor management and professionals), as well as other parties in interest, will then have an opportunity to review and object to any proposed intercompany claims at the appropriate time. No party in interest has been, or will be, prejudiced. In addition, the Debtors have already engaged professionals to perform accounting and financial services on behalf of Revstone for the specific purpose of reconciling and reviewing transactions between Revstone and other parties. 10. The remainder of the allegations in the Motion are equally without merit. With respect to postpetition intercompany claims, the Motion falsely alleges that the proposed interim financing approved by the Court with respect to the Metavation DIP Motion contains "additional obligations that [the Revstone] estate would incur under the terms of the proposed financing being provided to Metavation by Wells Fargo." Motion 12. Nothing in the Metavation DIP Motion sought or obtained relief against Revstone. This point was also the subject of an exchange between the parties at the Metavation First Day Hearing: MS. DAVIS JONES: Your Honor, just in case we need confirmation on the record of that I have no plans on incurring debt at Revstone Industries without [indiscernible] this Court. THE COURT: Yes. And - MR. BROWN: And so if we silo this DIP to everyone other than Revstone Industries I do not object to that, Your Honor. D0055F: /001 7

8 Case BLS Doc 150 Filed 08/18/13 Page 8 of 12 See Transcript of Metavation First Day Hearing, pg. 57. Moreover, the Motion s claim that the Debtors failed "to provide any notice... to the creditors of the Revstone estate of additional obligations that such estate would incur under the terms of the proposed financing being provided to Metavation by Wells Fargo." (Motion 2) is patently false. The Debtors filed their notice of hearing of the motion to approve the Metavation Interim DIP Order on July 23, 2013 (the "Metavation DIP Notice") [Docket No. 26]. Counsel for the Revstone Committee (among other parties), was served a copy of the Metavation DIP Notice (which notice included a copy of the proposed Metavation DIP Order and related agreement) by facsimile on July 23, 2013, as evidenced by the affidavit of service filed by the Debtors [Docket No. 31]. 11. The Motion s further claim that Metavation has not "provided basic protections for the post-petition claims that Revstone and other debtor or non-debtor affiliates of Metavation may have as a result of intercompany obligations under the Cash Management Order" is also factually and legally incorrect. See Motion, 24. It is not apparent what "basic protections" the Revstone Committee believes need to be addressed and, despite the fact that the Revstone Committee expressly addressed the Metavation Cash Management Order at Metavation s First Day Hearing (and has extensively negotiated prior cash management orders in these cases), no such concerns over intercompany claims were raised by the Revstone Committee at the Metavation First Day Hearing. At the Metavation First Day Hearing, the Debtors agreed to continue to abide by the same provisions previously approved in the prior cash management order entered in the Revstone case on June 28, 2013 [Docket No. 711]. More fundamentally, there is nothing in the Metavation Cash Management Order that affects or otherwise impacts postpetition intercompany claims by and between debtor and non-debtor affiliates, or that affects DOCS_SF: /001

9 Case BLS Doc 150 Filed 08/18/13 Page 9 of 12 the allowance or priority of any postpetition intercompany claims. Postpetition intercompany claims will be analyzed and treated in the same way as any other claims with respect to administrative priority under section 503(b) of the Bankruptcy Code. Nothing in the Cash Management Order is intended to alter this fundamental construct on the administrative priority of postpetition claims. 12. Finally, to further ensure the efficiency of the processing of intercompany claims, the Debtors engaged UHY Advisors MI, Inc. ("UHY") as an ordinary course professional to provide general accounting and financial analysis services for Revstone, which services include, inter alia, the reconciliation of accounts and review of transactions between Revstone and related parties (which includes intercompany claims. See Disclosure Affidavit of Ordinary Course Professional [Docket No. 582] filed on May 17, UHY s efforts on the intercompany account reconciliations and analyses continue. In contrast to the Revstone Committee s baseless claims to the contrary, these Debtors have done exactly what they should: taken steps to insure that intercompany claims are appropriately reconciled and addressed. D. There Is No Basis to Justify the Relief Requested in the Motion 13. Even if the Motion had any factual or legal merit (which it does not), there is simply no basis by which the Motion should have been filed. The Metavation case was filed on July 22, As explained above, the Debtors have taken the appropriate steps to ensure that nothing will affect the preservation or the administration of prepetition and postpetition intercompany claims. In an attempt to distract attention from these existing safeguards, the Motion takes potshots at certain information in the Metavation Schedules regarding the amounts due from Metavation to Revstone and the inadvertent omission on the Metavation Schedules of DOCSSF: /001 9

10 Case BLS Doc 150 Filed 08/18/13 Page 10 of 12 Revstone as a co-debtor on the Wells Fargo obligations (Motion 12), each of which has already been addressed in the Amended Schedules filed with the Court on August 6, The Metavation Schedules were filed two days after the Petition Date, on July 24, While Metavation believes that the aggregate amount of intercompany claims set forth on Schedule F to the Metavation Schedules was an accurate presentation of how Metavation carried the balance in its general ledger, it has further addressed and reconciled the specific amounts and claims held by the various debtors and non-debtors in these cases that comprise the total, as reflected in Metavation s books and records and presented this detail, as reflected in the Amended Schedules. With respect to the Wells Fargo obligations, the Debtors submit that this was an oversight of facts that are well known to the Revstone Committee based on various public filings in the Debtors cases noting the existing of the Wells Fargo claim against Revstone. 7 Revstone s proposed Disclosure Statement, filed on July 8, 2013 [Docket No. 736] (the "Revstone Disclosure Statement"), specifically identifies Wells Fargo s claim as follows: On or about July 23, 2010, four affiliates Contech Castings, LLC ("Contech"), Metavation, LLC ("Metavation"), MPI, LLC and MW Texas Die Casting, Inc. (the "Primary Wells Obligors") entered into a Credit Agreement with Wells Fargo Capital Finance, LLC ("Wells") that provided revolving credit facilities in the original aggregate principal amount of up to $45 million (as amended, modified or supplemented from time to time, the "Pre-Petition Wells Credit Agreement," which created the "Pre-Petition Wells Facilities"). The obligations of the Primary Well Obligors under the Pre-Petition Wells Facilities are purportedly secured by (i) certain guarantees of 11 other affiliates (the "Wells Guarantors" and together with the Primary Wells Obligors, the "Wells Obligors") and (ii) that certain Security Agreement, originally entered into on or about July The unsecured claim of Revstone against Metavation was not included in the list of Metavation s top twenty unsecured creditors because insider claims are excluded from this list. The Motion makes a passing reference to a formula developed by Revstone with respect to the allocation and accrual of restructuring charges among the affiliated entities. The Revstone Committee has known about this formula for months, yet is conveniently only raising any issue now. The Debtors do not understand the relevance of this late blooming issue to the Motion. DOCS_SF: /001 10

11 Case BLS Doc 150 Filed 08/18/13 Page 11 of 12 23, 2010, by the Wells Obligors, which purportedly creates liens on, and security interests in, substantially all of the unencumbered assets of the Wells Obligors. Revstone Disclosure Statement at pg The Revstone Disclosure Statement also provides the estimated amount of such claim as $17,284,622. See Revstone Disclosure Statement at pg. 5. Conclusion 15. The Motion represents an ill-conceived attempt by the Revstone Committee to turn an everyday state of affairs in large chapter 11 cases (the existence of significant intercompany claims between entities) into something extraordinary. This situation is not extraordinary. First, there is no justification to appoint the Revstone Committee to any committee of unsecured creditors appointed in Metavation, which is an insider affiliate of Revstone. Second, the Revstone Committee has not even come close to satisfying its necessary burden to pursue the Metavation Claims. The Debtors have already taken the necessary steps to reconcile and administer the routine intercompany claims that exist between them and nondebtor entities, just like in any other chapter 11 case with affiliated debtors. There is nothing in the Motion to justify the extraordinary relief requested by the Revstone Committee. No parties have been, or will be, prejudiced. Rather, the Motion is nothing more than a transparent attempt by the Revstone Committee to control, or at the very least influence, any Committee appointed in the Metavation bankruptcy case. That effort should go unrewarded. DOCS_SF: /001 11

12 Case BLS Doc 150 Filed 08/18/13 Page 12 of 12 WHEREFORE, the Debtors respectfully request that the Court enter an order denying the Motion and granting such other and further relief deemed just and proper. Dated: August PAC LSKI STANG ZIEHL & JONES LLP K Laura Davis Jones (Bar No. 2436) David M. Bertenthal (CA Bar No ) Timothy P. Cairns (Bar No. 4228) Cohn R. Robinson (Bar No. 5524) 919 N. Market Street, 17th Floor Wilmington, DE Telephone: Facsimile: Ijones@pszjlaw.com dbertenthal@pszjlaw.com tcairns@pszjlaw.com crobinson@pszjlaw.com Counsel for the Debtors and Debtors in Possession DOCSSF: /001 12

13 Case BLS Doc Filed 08/18/13 Page 1 of 4 EXHIBIT A The Demand Letter

14 Case BLS Doc Filed 08/18/13 Page 2 of 4 \IOMBLE 222 Delaware Avenue CARLYLE Pr Wilmington, DE SANDRIDGE Mark L. Desgrosseilliers & RICE Attorney A PROFESSIONAL LIMITED Direct Dial: (302) LIABILITY COMPANY Direct Fax: (302) MDesgrossei1lierswcsr.com July 26, 2013 By Electronic Mail Laura Davis Jones, Esquire Pachuiski Stang Ziehi & Jones LLP 919 North Market Street 17th Floor Wilmington, DE Re: In re Revstone Industries, LLC, et al. Case No (BLS) In re Metavation, LLC Case No (BLS) United States Bankruptcy Court for the District of Delaware Dear Ms. Jones: I write this letter as counsel to the Official Committee of Unsecured Creditors (the "Committee") of Revstone Industries, LLC ("Revstone"). By this letter, as set forth herein, the Committee demands that Revstone grant the Committee standing to pursue the claims of Revstone in the bankruptcy case filed by its affiliate, Metavation, LLC ("Metavation"), including but not limited to standing to serve on any committee that may be formed in Metavation s bankruptcy case, for the reasons set forth herein. On December 3, 2012 (the "Revstone Petition Date"), Revstone filed a petition under chapter 11 of 11 U.S.C (as amended, the "Bankruptcy Code"), case number (the "Revstone Bankruptcy Case") in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"). Thereafter, on January 16, 2013, Revstone filed its Schedules of Assets and Liabilities (Docket No. 116) (the "Revstone Schedules") in the Revstone Bankruptcy Case. As set forth in Schedule B of the Revstone Schedules, as of the Revstone Petition Date, Metavation owed Revstone three million six hundred and sixty-eight thousand dollars, nine hundred and ninety-five dollars ($3,668,995.00). See Revstone Schedule B16. No amount was listed on the Revstone Schedules for any claims of Metavation against Revstone. Thereafter, on or about June 28, 2013 (the "Revstone Bar Date"), Mr. Daniel V. Smith, Secretary of Metavation and General Counsel of Revstone, filed a claim against Revstone, Claim number 400 (the "Metavation Claim"), on behalf of Metavation. The Metavation Claim failed to specify any amount of the alleged claim by Metavation against Revstone and similarly failed to provide any basis for such purported claim and instead indicated GEORGIA / SOUTH CAROLINA / NORTH CAROLINA / VIRGINIA / WASHINGTON D.C. / DELAWARE

15 WOMBLS CARLYLE Pr SANDRIDGE & RICE PLLC Case BLS Doc Filed 08/18/13 Page 3 of 4 Laura Davis Jones, Esq. July 26, 2013 Page 2 that Metavation would "provide documentation supporting its Claims upon reasonable request." See Metavation Claim Rider 3. To the extent that Metavation or Revstone, both of which entities your firm represents, have evidence of such claim, the Committee hereby demands documentation supporting such claim. To the extent that no such documentation exists, the Committee demands that Metavation immediately withdraw such claim in the Revstone Bankruptcy Case. On July 22, 2013, Metavation, LLC ("Metavation") filed a petition under chapter 11 of the Bankruptcy Code, case number (the "Metavation Bankruptcy Case"), in the Bankruptcy Court. Thereafter, on July 24, 2013, Metavation filed its Schedules of Assets and Liabilities (Docket No. 811) (the "Metavation Schedules"). The Metavation Schedules fail to list any claim of Revstone and also fail to list any amounts due from Revstone to Metavation. See Metavation Schedule B16 and Metavation Schedule F. On July 25, 2013, the Office of the United States Trustee scheduled an organizational meeting (the "Metavation Organizational Meeting") in the Metavation Bankruptcy Case for the purpose of determining if an official committee of unsecured creditors will be formed in such case for August 1, 2013 at 10:00 a.m. (Eastern). Based upon its review of the financial information and reports filed in the Revstone Bankruptcy Case and in the Metavation Bankruptcy Case, or otherwise provided to the Committee s advisors, it appears that Metavation, in fact, has no claim against Revstone. In contrast, Metavation owes Revstone at least $3.6 million as of the Revstone Petition Date. In addition, Metavation owes Revstone potentially more than $3.1 million in additional claims based on Revstone s own Restructuring Cost Allocation as of June 30, Notwithstanding this significant claim owed by Metavation to Revstone, which claim appears to be larger than any other claim set forth in the list of Metavation s Twenty Largest Unsecured Claims (attached to Metavation s petition), Metavation has failed entirely to list Revstone as a creditor of its estates. Moreover, the professionals that Metavation seeks to employ in the Metavation Bankruptcy Case, including but not limited to your law firm and Huron Consulting Services LLC, are already employed by Revstone in the Revstone Bankruptcy Case. Such professionals are, therefore, hopelessly conflicted and structurally incapable of representing the interests of Revstone in the Metavation Bankruptcy Case and/or otherwise pursuing the claims that Revstone holds against Metavation, as evidenced by, among other things, the failure to schedule the significant claims of Revstone at all in the Metavation Bankruptcy Case.

16 WOMBLE CARLYLE Pr SANDR1DGE & Rics PLLC Case BLS Doc Filed 08/18/13 Page 4 of 4 Laura Davis Jones, Esq. July 26, 2013 Page 3 For the reasons set forth above, the Committee demands that Revstone agree, on or before Monday July 29, 2013, at 12:00 (noon), that the Committee may have standing to pursue Revstone s claims against Metavation. It is critical that such claims be pursued and that an entity without the conflicts that Revstone s retained professionals have be granted standing with respect to such claims in advance of the Metavation Organizational Meeting. The Committee, therefore, intends to seek emergency relief from the Bankruptcy Court requesting such standing absent the agreement of Revstone by the time set forth herein. The Committee further demands that Metavation and/or Revstone promptly provide the documentation supporting any alleged claim that Metavation asserts against Revstone or that Metavation immediately withdraw such claim. If the Committee does not receive such documentation on or before Monday, July 29, 2013, at 12:00 (noon) or if the Metavation Claim is not withdrawn by such time, the Committee intends to seek discovery on an emergency basis from both Revstone and Metavation with respect to the Metavation Claim. Sincerely, Mark L. Des cc: Jane M. Leamy, Esquire (by electronic mail) WCSR v1

17 Case BLS Doc Filed 08/18/13 Page 1 of 4 EXHIBIT B The Response

18 Case BLS Doc Filed 08/18/13 Page 2 of 4 PACHULSKI STANG ZJEHL (1) JONES (302) July 29, 2013 ljones@pszjlaw.com LAW OFFICES LIMITEI) i.iai3iliiy PARTNERSHIP WILMINGTON, DE LOS ANGELES, CA SAN FRANCISCO, CA NEW YORK, NY VIA AND HAND DELIVERY Mark L. Desgrosseilliers, Esquire Womble Carlyle Sandridge & Rice, LLC 919 NORTH MARKET STREET 17th FLOOR 222 Delaware Avenue P.O. BOX 8705 Wilmington, DE WILMINGTON DELAWARE Re: Revstone Industries, LLC, et al. (Courier Zip Code 19801) Case No (BLS) TELEPHONE 302/ / Metavation, LLC Case No (BLS) United States Bankruptcy Court for the District of Delaware Dear Mark: We received your demand letter dated July 26, 2013 (the "Demand Letter") regarding the Committee s request for standing to pursue the claims of Revstone Industries, LLC ("Revstone") against LOS ANGELES Metavation, LLC ("Metavation") and to seek discovery on the claim SANTA MONICA BLVD. filed by Metavation in the Revstone case. The Debtors do not agree 13th FLOOR that Committee assistance is necessary to resolve the intercompany LOS ANGELES claims that may exist between Revstone and Metavation. CALIFORNIA Furthermore, the Debtors do not agree that any resolution of such TELEPHONE 310/ FACSIMILE: 310/ claims creates an emergency that justifies immediate relief. While we recognize that your Committee co-chair Boston Finance Group SAN FRANCISCO ("BFG") has threatened litigation over all aspects of these cases 150 CALIFORNIA STREET (and, apparently, the Committee has now adopted the same 15th FLOOR approach), we believe that approach is not productive and, in fact, SAN FIZANCISCO CALIFORNIA we believe that this is an issue that could be best addressed with a TELEPHONE: 415/ phone call between counsel, rather than the delivery of demand 415/ letters creating artificial deadlines. NEW YORK Specifically with regard to the claims of Revstone as against 780 THIRD AVENUE Metavation, Metavation is reviewing its books and records to 36th FLOOR confirm the accuracy of the schedules as filed. We will update the NEW YORK NEW YORK Committee of the results of this review. If necessary to conform the schedules to Metavation s books and records, Metavation will TELEPHONE: 212/ FACSIMILE: 212/ WEB: DOCSDE: /001

19 Case BLS Doc Filed 08/18/13 Page 3 of 4 PACHULSKI a ZIEHL S TANG JONES Mark L. Desgrosseilliers July 29, 2013 Page 2 LAW OFFICES LIMITED LIABILITY PARTNERSHIP supplement and/or amend the existing schedules. Regardless of the results of such review, an unsecured claim of Revstone in the Metavation bankruptcy case will not be included in the list of Metavation s top twenty unsecured creditors because "insiders" as defined by section 101(31) of the Bankruptcy Code are excluded from this list. The Demand Letter also asserts that the Debtors professionals are "hopelessly conflicted and structurally incapable" of resolving any claims that exist as between Revstone and Metavation. Contrary to these assertions, and the repeated assertions and objections from BFG, there is no fundamental conflict of interest for counsel to represent related Debtors in jointly administered cases. As Judge Shannon recognized at the first day hearing in Metavation, the representation of jointly administered debtors (often with competing intercompany claims) by a single group of professionals is routine in large bankruptcy cases. This illusory issue, raised more than six months after the professionals began representation of multiple Debtors in these jointly administered cases, does nothing to advance the interests of the estate and serves only to distract the Debtors professionals at this critical juncture for these cases The Demand Letter is also confusing as to the request for Revstone to grant the Committee "standing to serve on any committee that may be formed in Metavation s bankruptcy cases." The Debtors are uncertain what you are seeking. Is the Revstone Committee seeking to serve as a member of any committee formed at Metavation on behalf of Revstone, Metavation s upstream affiliate? Can you please clarify this request? DOCS_DE: /001

20 Case BLS Doc Filed 08/18/13 Page 4 of 4 PACHULSKI STAN G Q Z EHL JONES LAW 0FF[CES LIMITED LIABILITY PARTNERSHIP Mark L. Desgrosseilliers July 29,2013 Page 3 This issue simply does not justify the attention of the Court or the Debtors professionals on an emergency basis. The intercompany claims will be resolved through a plan or claims resolution process, without prejudice to the Committee or any of the estates creditors. No immediate grant of standing or expedited discovery is necessary cc: John C. DOCS_DE: