Case MFW Doc 3394 Filed 02/01/17 Page 1 of 7 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

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1 Case MFW Doc 3394 Filed 02/01/17 Page 1 of 7 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: TSAWD Holdings, Inc., et al., 1 Debtors. Chapter 11 Case No (MFW) (Jointly Administered) Ref. Docket No DEBTORS OBJECTION TO SECOND MOTION OF 1050 HAMPDEN, LLLP FOR ALLOWANCE AND PAYMENT OF ADMINISTRATIVE EXPENSE CLAIM FOR POST-PETITION EXPENSES ARISING UNDER LEASES TSAWD Holdings, Inc. and its affiliated debtors and debtors in possession in the abovecaptioned chapter 11 cases (collectively, the Debtors ) hereby file this objection (this Objection ) to the Second Motion of 1050 Hampden, LLLP for Allowance and Payment of Administrative Expense Claim for Post-Petition Expenses Arising Under Leases [Docket No. 3360] (the Hampden Motion ). 2 In further support of this Objection, the Debtors respectfully represent as follows: OBJECTION 1. In the Hampden Motion, the landlord for the Debtors former corporate headquarters, located at 1090 W. Hampden Avenue, Englewood, Colorado (the North 1 2 The Debtors and the last four digits of their respective taxpayer identification numbers are as follows: TSAWD Holdings, Inc. (9008); Slap Shot Holdings, Corp. (8209); TSAWD, Inc. (2802); TSA Stores, Inc. (1120); TSA Gift Card, Inc. (1918); TSA Ponce, Inc. (4817); and TSA Caribe, Inc. (5664). The headquarters for the abovecaptioned Debtors is located at 2305 East Arapahoe Road, Suite 234, Centennial, CO The Debtors were formerly known as: Sports Authority Holdings, Inc. (9008); Slap Shot Holdings, Corp. (8209); The Sports Authority, Inc. (2802); TSA Stores, Inc. (1120); TSA Gift Card, Inc. (1918); TSA Ponce, Inc. (4817); and TSA Caribe, Inc. (5664). Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Hampden Motion. 01:

2 Case MFW Doc 3394 Filed 02/01/17 Page 2 of 7 Building ), seeks allowance and payment of the following amounts as costs of administration of the Debtors estates: $103, in property taxes related to the North Building for the period January 1, 2016 to July 31, 2016; $2, in property taxes related to a parcel adjacent to the North Building for the period January 1, 2016 to July 31, 2016; 3 and $30, in alleged attorneys fees incurred by the landlord for its own benefit. 2. The lease for the North Building and the applicable adjacent parcel was rejected effective July 31, See Docket No A. Section 365(d)(3) of the Bankruptcy Code Does Not Require the Debtors to Pay the Taxes 3. Section 365(d)(3) of the Bankruptcy Code requires a debtor to timely perform all the obligations of the debtor... arising from and after the order for relief under any unexpired lease of nonresidential real property, until such lease is assumed or rejected U.S.C. 365(d)(3) (emphasis added). Thus, under the plain language of section 365(d)(3), a debtor need not perform obligations that arise under a lease prior to the petition date or after the lease is rejected. See, e.g., In re Pac-W. Telecomm, Inc., 377 B.R. 119, 123 (Bankr. D. Del. 2007) ( In simpler terms, the bankruptcy trustee must fulfill any obligation that arises under a non-residential lease after the filing of the bankruptcy petition but before either assumption or rejection occurs. ) (holding that section 365(d)(3) did not compel payment of an obligation that came due under the applicable lease prior to the petition date); see also In re Sportsman s Warehouse, Inc., 436 B.R. 308, 316 (Bankr. D. Del. 2009) (holding that section 365(d)(3) did not 3 01: In the Hampden Motion, it is asserted that these property taxes relate to 1050 W. Hampden Avenue, which the Debtors also leased pursuant to a separate lease. However, the Debtors believe that these taxes actually relate to the property leased pursuant to the 1090 W. Hampden lease. 2

3 Case MFW Doc 3394 Filed 02/01/17 Page 3 of 7 compel payment of an obligation that came due under the applicable lease after the date that the lease was rejected). 4. Here, with respect to real estate taxes that relate to the North Building, the 1090 W. Hampden Lease provides that the taxes are to be paid prior to delinquency W. Hampden Lease The taxes in question will become due on February 28, 2017, at the earliest. See Hampden Motion Ex. A. This is after the 1090 W. Hampden Lease was rejected effective July 31, See Docket No Because the due date for the taxes will occur after the Lease was rejected, section 365(d)(3) does not obligate the Debtors to pay the taxes. See, e.g., In re Sportsman s Warehouse, Inc., 436 B.R. 308, 316 (Bankr. D. Del. 2009) ( [T]he obligation to pay the Wichita real estate taxes did not arise until after the lease was rejected. Thus, SP Wichita is not entitled to an administrative claim. ) (holding that section 365(d)(3) did not compel payment of an obligation that came due under the applicable lease after the date that the lease was rejected). It does not matter that the Debtors could have paid the taxes sooner. See, e.g, id. ( The plain meaning of the Wichita lease and tax invoice indicates that the real estate taxes may be paid upon receipt of the invoice [which was pre-rejection] but the Debtor was not legally obligated to pay those taxes until the due date, which was post-rejection.... In effect, the lease provides a window for payment.... It is not until that window is closed, i.e., when a penalty arises, that the [tenant] has a legally enforceable duty to pay the taxes. ) (emphasis in original). 4 01: A copy of the 1090 W. Hampden Lease, previously filed by the landlord, is annexed hereto as Exhibit A for the Court s convenience. 3

4 Case MFW Doc 3394 Filed 02/01/17 Page 4 of 7 B. Section 503(b)(1)(A) of the Bankruptcy Code Does Not Require the Debtors to Pay Taxes that Were Incurred Prior to the Petition Date 5. Section 503(b)(1)(A) of the Bankruptcy Code authorizes the allowance of administrative expense claims for the actual, necessary costs and expenses of preserving the estate U.S.C. 503(b)(1)(A). For a claim in its entirety to be entitled to first priority under [ 503(b)(1)(A)], the debt must arise from a transaction with the debtor-in-possession... [and] the consideration supporting the claimant s right to payment [must be] beneficial to the debtor-in-possession in the operation of the business. O Brien Envtl. Energy, Inc. v. Calpine Corp., 181 F.3d 527, (3d Cir. 1999) (citations omitted). 6. The burden of proof with respect to allowance of an administrative expense claim falls on the claimant. See, e.g., In re Goody s Family Clothing, Inc., 610 F.3d 812, 817 (3d Cir. 2010) ( For a commercial lessor s claim to get administrative expense treatment under 503(b)(1), the debtor s occupancy of the leased premises must confer an actual and necessary benefit to the debtor in the operation of the business.... Proving this is the lessor s burden. ) (citations omitted); In re WCI Communities, Inc., No KJC, 2010 WL , at *4 (Bankr. D. Del. Sept. 2, 2010) ( Fremont offered neither argument nor evidence in support of its claim for an administrative expense under Bankruptcy Code 503(b). Fremont has not demonstrated that the Debtors occupancy of the leased premises without more warrants treating the ad valorem taxes as an actual and necessary cost of preserving the estate.... ). 7. Here, the landlord is seeking allowance and payment, as an administrative expense under section 503(b)(1)(A) of the Bankruptcy Code, of taxes that relate to the period January 1, 2016 to July 31, The landlord has not presented any argument or evidence as to why payment of the taxes in question would constitute an actual or necessary cost of preserving the estates. Indeed, because a portion of the taxes in question relates entirely to the prepetition 01:

5 Case MFW Doc 3394 Filed 02/01/17 Page 5 of 7 period, the Debtors respectfully submit that the landlord cannot make such a showing. Therefore, the landlord s request for allowance of an administrative expense claim under section 503(b)(1)(A) of the Bankruptcy Code related to the 2016 taxes must be denied. C. Section 503(b)(1)(A) of the Bankruptcy Code Does Not Require the Debtors to Pay the Landlord s Attorneys Fees 8. As noted above, the burden of proof with respect to allowance of an administrative expense claim falls on the claimant. See, e.g., In re Goody s Family Clothing, Inc., 610 F.3d 812, 817 (3d Cir. 2010) ( For a commercial lessor s claim to get administrative expense treatment under 503(b)(1), the debtor s occupancy of the leased premises must confer an actual and necessary benefit to the debtor in the operation of the business.... Proving this is the lessor s burden. ) (citations omitted). 9. Here, the landlord has not presented any argument or evidence as to why its purported incurrence of attorneys fees to protect its own interest conferred an actual and necessary benefit to the [Debtors] in the operation of the business. Id. Indeed, although the landlord made the blanket assertion that under the terms of the Leases, TSA is liable for Hampden s attorneys fees and [sic] relating to the enforcement of the Leases, Hampden Mot. 5, the landlord did not cite the provisions of the Leases that allegedly confer such a right on the landlord. Nor did the landlord attach any purportedly applicable invoices to demonstrate what legal services were performed, how much was charged for such services, and whether those costs incurred fees were or are reasonable. 10. Put simply, the landlord has failed to meet its burden to establish that it should be reimbursed by the Debtors for its incurrence of attorneys fees to protect the landlord s interests in the Debtors chapter 11 cases. Even if it had attempted to satisfy its burden (which it did not), the landlord s request for attorneys fees should be denied because a creditor s attorneys fees are 01:

6 Case MFW Doc 3394 Filed 02/01/17 Page 6 of 7 not recoverable as a cost of administration of the Debtors estates. See, e.g., In re Highway Techs., Inc., 2015 Bankr. LEXIS 308, at *20-21 (Bankr. D. Del. Jan. 30, 2015) ( [C]ourts have declined to allow recovery of attorneys fees as part of an administrative expense claim, because those fees are not an actual and necessary cost of preserving the estate as required by Bankruptcy Code 503(b)(1)(A). ); see also In re Juvennelliano, 464 B.R. 651, 655 (Bankr. D. Del. 2011) ( Generally a creditor s legal fees are not allowable as an administrative expense claim unless the creditor can demonstrate that the legal services provided a benefit to the estate. ) (quoting In re Sports Shinko (Florida) Co., Ltd., 333 B.R. 483, 499 (Bankr. M.D. Fla. 2005)). 11. To the extent that the landlord does present argument or evidence in support of its alleged right to recoup attorneys fees, the Debtors respectfully reserve their rights to appropriately respond to such arguments and/or evidence. [Remainder of Page Intentionally Left Blank] 01:

7 Case MFW Doc 3394 Filed 02/01/17 Page 7 of 7 WHEREFORE, the Debtors respectfully request that the Court deny the Hampden Motion to the extent it seeks payment of claims in excess of the amounts agreed by the Debtors. Dated: February 1, 2017 Wilmington, Delaware /s/ Andrew L. Magaziner Michael R. Nestor (No. 3526) Andrew L. Magaziner (No. 5426) YOUNG CONAWAY STARGATT & TAYLOR, LLP Rodney Square 1000 North King Street Wilmington, Delaware Telephone: (302) Facsimile: (302) mnestor@ycst.com amagaziner@ycst.com - and - Robert A. Klyman (CA No ) Matthew J. Williams (NY No ) Jeremy L. Graves (CO No ) Sabina Jacobs (CA No ) GIBSON, DUNN & CRUTCHER LLP 333 South Grand Avenue Los Angeles, CA Telephone: (213) Facsimile: (213) rklyman@gibsondunn.com mjwilliams@gibsondunn.com jgraves@gibsondunn.com sjacobs@gibsondunn.com Counsel to the Debtors and Debtors in Possession 01:

8 Case MFW Doc Filed 02/01/17 Page 1 of 60 Exhibit A 1090 W. Hampden Lease 01:

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