UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: MERVYNS HOLDINGS, LLC, et al.

1 Chapter 11 Case No. 08-11586 (KG) Jointly Administered

RESPONSE OF CISCO SYSTEMS CAPITAL CORPORATION TO DEBTORS FIFTY-FIRST OMNIBUS OBJECTIONS (SUBSTANTIVE) TO CERTAIN OVERSTATED CLAIMS AND MOTION TO REDUCE OR EXPUNGE SUCH CLAIMS Cisco Systems Capital Corporation (CSCC) hereby responds (the Response) to the Debtors Fifty-First Omnibus Objection (Substantive) To Certain Overstated Claims And Motion To Reduce Or Expunged Such Claims [Docket No. 5835] (the "Objection") filed by the abovecaptioned debtors and debtors-in-possession (collectively, the Debtors). The Objection seeks, in pertinent part, entry of an order reducing, disallowing and/or expunging various claims (individually, a Claim and, collectively, the Claims) including, without limitation, disallowance of Proof of Claim No. 447, Proof of Claim No. 6404 and Proof of Claim No. 7321 (collectively, the CSCC Proofs of Claim) filed by CSCC on the ground that the Debtors Books and Records do not show any amounts due and owing on account of the Claim represented by these proofs of claim. See Objection at 4, Exhibit A at pages 1, 3, and 4, respectively.2

The Debtors in these cases, along with the last four digits of their federal tax identification numbers, are Mervyns Holdings, LLC (3405), Mervyns LLC (4456), and Mervyns Brands, LLC (8850).

All Capitalized terms shall have the meaning set forth in this pleading and, to the extent not defined herein, then first as defined in the Plan (as hereinafter defined).

CSCC Response To Fifty-First Omnibus Objection To Overstated Claims

RELIEF SOUGHT BY CSCC Pursuant to 11 U.S.C. 502, 503(b), 506(a), and 507(a)(2), and Rule 3007 of the Federal Rules Bankruptcy Procedure, CSCC requests entry of an order by the Court: (a) denying the relief sought by the Objection in its entirety; (b) allowing a Claim in favor of CSCC (the "Allowed CSCC Claim"), in the aggregate amount of $4,553,848.86 pursuant to the CSCC Lease,3 (c) classifying the Allowed CSCC Claim as (i) an administrative expense priority in the amount of not less than $2,643,869.70 (the CSCC Administrative Claim) for the Debtors use of the Equipment,4 from and after the Petition Date5 through the Rejection Date6 and (ii) a remaining Claim in an amount not less than $2,334,441.91 for damages arising from rejection of the CSCC Lease (the CSCC Remaining Claim), (d) classifying the CSCC Remaining Claim as (i) a secured claim in the amount of $419,427.79 and (ii) an unsecured claim in the amount of not less than $2,203,842.16, (e) directing the Debtors to deliver to CSCC all Equipment remaining in the care, custody and/or control of the Debtors (if any); and (f) providing such further and other relief appropriate at law or equity. CSCC further requests that the Court take judicial notice of the pleadings filed in this case including, without limitation, Proof of Claim No. 447, Proof of Claim No. 6404 and Proof of Claim No. 7321, and the facts set forth in the Courts orders, findings of fact and conclusions of law as permitted by Rule 9017 of the Federal Rules of Bankruptcy Procedure (FRBP 9017) incorporating Rule 201 of the Federal Rules of Evidence (FRE 201).

3 4 5 6

As hereinafter defined. As hereinafter defined. As hereinafter defined. As hereinafter defined.

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CSCC Response To Fifty-First Omnibus Objection To Overstated Claims

This Response is based on the matters set forth herein, the files and records in this case and such other and further relief as may be submitted at or before the trial on this matter. JURISDICTION AND VENUE 1. This Court has jurisdiction to consider this matter pursuant to 28 U.S.C. 157

and 1334, this matter a core proceeding pursuant to 28 U.S.C. 157(b) (2), and venue is proper before this Court pursuant to 28 U.S.C. 1408 and 1409. BACKGROUND Equipment Lease and Perfection of Security Interest 2. On or about December 28, 2005, the Mervyns, LLC (one of the Debtors) and

CSCC entered into that certain executory contract entitled Master Agreement To Lease Equipment No. 5508, Schedule 001-000, Amendment No. 1 Schedule No. 001-000, Amendment No. 2 to Schedule No. 001-000, and Certificate of Acceptance (effective on July 26, 2006) (collectively, the "CSCC Lease") whereby CSCC leased certain equipment (the "Equipment") to the Debtors. A true and accurate copy of the CSCC Lease (including each of the aforementioned documents) is attached as Exhibit "A" to Proof of Claim No. 447, which has been filed in this case 7 3. To secure the payment and performance of the CSCC Lease, Mervyns, LLC (as

Lessee) granted CSCC (as Lessor) a security interest in Lessee's right, title and interest, now existing and hereinafter arising, in and to, (a) all Equipment subject to such Lease, (b) all insurance, warranty, rental and other claims and rights to payment and chattel paper arising out of such Equipment, and (c) all books, records and proceeds relating to the foregoing." See 5.13

Proof of Claim No. 447 filed in this case on or about October 17, 2008, and the Court has been requested to take Judicial Notice of its files and records in this matter.

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CSCC Response To Fifty-First Omnibus Objection To Overstated Claims

of the Master Agreement To Lease Equipment No. 5508 attached as part of Exhibit "A" to Proof of Claim No. 447. 4. On January 5, 2006, CSCC recorded Financing Statement No. 067054268664 (the

"UCC-1") naming Mervyns LLC as "Debtor" and Cisco Systems Capital Corporation as "Secured Party with the California Secretary of State and, thereby, CSCC perfected its security interest in all of the Debtors right, title and interest, then, existing and there after arising, in and to certain property, wherever located: (i) all Equipment from time to time between Debtor as lessee and Secured Party as Lessor and any and all Schedules from time to time entered into or prepared in connection with any Master Agreement, (ii) all insurance, warranty, rental and other claims and rights to payment and chattel paper arising out of such Equipment, and (iii) all books, records and proceeds relating to the foregoing. A true and accurate copy of the UCC-1 is attached as Exhibit "B" to the Proof of Claim No. 447, which previously has been filed in this case. Status Of Bankruptcy Cases. 5. On July 29, 2008 (the Petition Date), the Debtors filed their separate voluntary

petitions for relief under chapter 11 of title 11 of the United States Code (the Bankruptcy Code). Since the Petition Date, the Debtors have operated their respective bankruptcy estates as debtors-in-possession. On July 30, 2008, the above captioned Court entered its order jointly administering the Debtors bankruptcy cases. 6. CSCC understands that the Debtors conducted various "going out of business

sales" from and after the Petition Date. In or about January, 2009, the Debtors notified CSCC (and, presumably, other equipment lessors) that the Debtors intended to abandon all remaining equipment in its possession without further court order.

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CSCC Response To Fifty-First Omnibus Objection To Overstated Claims

CSCC Proofs of Claim Filed 7. On October 17, 2008, CSCC filed a proof of claim with the duly appointed

Claims Agent (and designated thereby as Proof of Claim No. 447) against Mervyns LLC and thereby asserted a secured claim in the amount of $5,267,139.65 and, further, that such claim was entitled to administrative expense priority pursuant to 11 U.S.C. 507(a)(2). 8. On February 12, 2009, CSCC filed a proof of claim with the duly appointed

Claims Agent (and designated thereby as Proof of Claim No. 6404) against Mervyns LLC and thereby asserted an administrative expense priority claim in the amount of $932,332.18 for Lease payments due, but unpaid, for the period commencing July 29, 2008 through November 30, 2008. 9. On or about July 3, 2009, CSCC filed a proof of claim with the duly appointed

Claims Agent (and designated thereby as Proof of Claim No. 7321) against Mervyns LLC, and thereby asserted an administrative expense priority claim in the amount of $293,763.27 for Lease payments due, but unpaid, for of the period commencing November 30, 2008 through December 31, 2008. Post-Petition Lease Payment Received By CSCC 10. On or about October 5, 2008, CSCC received $293,763 from the Debtors pursuant

to the CSCC Lease for use of the Equipment from October 1, 2008 through October 31, 2008. No other payments have been received by CSCC with regard to use and/or retention of the Equipment from and after the Petition Date through the Rejection Date. Recovery of Equipment 11. Subsequent to the Debtors going out of business sales, CSCC recovered

possession of the Equipment (the "Recovered Equipment") with the Debtors permission. Thereafter, CSCC prepared an inventory of the Recovered Equipment identifying and -5CSCC Response To Fifty-First Omnibus Objection To Overstated Claims

determining the FMV for each item of the Recovered Equipment (the Recovered Equipment Summary).8 Based thereon, CSCC has determined that the aggregate fair market value (FMV) of the Recovered Equipment is $419,427.79. Rejection Of The CSCC Lease 12. On June 3, 2009, the Debtors served their Notice Of Rejection Of Unexpired

Cisco Equipment Lease (the "Rejection Notice") advising that the CSCC Lease was to be rejected (effective on June 12, 2009). On or about June 8, 2009, the above-captioned Court entered its order9 approving the rejection of the CSCC Lease effective on June 12, 2009 (the "Rejection Date"). The Debtors 51st Omnibus Objection To Claims 13. On April 19, 2011, the Debtor filed their Objection contending that the Claims

evidenced by Proof of Claim No. 447, Proof of Claim No. 6404 and Proof of Claim No. 7321 each is an Overstated Claim and, accordingly, each of the CSCC Proofs of Claim should be disallowed in their entirety. See Objection at 4, Exhibit A at page 1, 3 and 4. 14. In support of the Objection, the Debtors assert that "after review of their books

and records and of the claims listed on Exhibit A thereto, that the Claims were filed by the claimant in an amount greater than the liabilities owed to such claimants. . . Therefore, the Debtors object to the Overstated Claims and seek an order reducing such Claims to the amounts listed on Exhibit A to the Order under the column entitled "Allowed Amount." To the extent the amount in the column "Allowed Amount" is $0.00, the Debtors seek an order disallowing and

The Recovered Equipment Summary is 45 pages long and, in light of the current efforts to resolve this matter by stipulation, the Parties have agreed that it will be filed with the Court only if this matter proceeds to an evidentiary hearing. See Order, Pursuant To Sections 105, 363, And 365 Of The Bankruptcy Code And Bankruptcy Rules 2002, 6004 And 6006, Approving The Rejection Of The Unexpired Cisco Equipment Lease entered on or about June 8, 2009.

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CSCC Response To Fifty-First Omnibus Objection To Overstated Claims

expunging such Claims." See Declaration Of David Robson In Support Of Debtors Fifty-First Omnibus Objection (Substantive) To Certain Overstated Claims And Motion To Reduce Or Disallow cap and Expunged Such Claims (the "Robson Declaration") at 3. 15. Each of the CSCC Proofs of Claim is listed on Exhibit "A" to the Objection as

$0.00 in the column entitled Modified Claim Amount." Neither the Robson Declaration nor the Exhibit "A" to the Objection includes any additional information regarding any of the CSCC Proofs of Claim except for the statement that the "[c]laim amount is modified to reflect Debtors Books and Records [.] Reconciliation Of The CSCC Claim Amount 16. Subsequent to being served with the Objection, CSCC reviewed its books and

records with respect to the CSCC Proofs of Claim that asserted, together, an aggregate Claim in the amount of $5,267,139.65. Based on this review, CSCC determined the amount of the Claim should be adjusted by (a) deducting $293,763.00 paid by the Debtors (for amounts due for period commencing October 1, 2008 and ending October 31, 2008 under the CSCC Lease) from the amount of the administrative expense claim, and (b) by allocating $419,427.79 (i.e., the FMV of the Recovered Equipment) as the amount of the secured claim. CSCCs review of its books and records did not disclose that any other payments were received from the Debtors on account of the CSCC Lease or that any additional Equipment was recovered by CSCC. 17. CSCC represents that, based on the foregoing, the Allowed CSCC Claim should

be allowed in the aggregate amount of $4,553,848.86. More particularly, CSCC contends that (a) the CSCC Administrative Claim should be allowed in an amount not less than $2,643,869.70 and accorded administrative expense priority status pursuant to 11 U.S.C. 503(b), and (b) the CSCC Remaining Claim should be allowed in an amount not less than $2,334,441.91 for damages arising from rejection of the CSCC Lease, and it shouod be classified as (i) as a secured -7CSCC Response To Fifty-First Omnibus Objection To Overstated Claims

claim in the amount of $419,427.79 and (ii) an unsecured claim in the amount of not less than $2,203,842.16. See Exhibit A, entitled Cisco Systems Capital Corporation, Reconciliation Of Administrative Expenses And Proofs of Claim, attached hereto and incorporated by reference as is fully set forth. Informal Response 51st Omnibus Objection To The CSCC Proofs of Claim 18. On May 11, 2011, CSCC provided the Debtors counsel with a written Informal

Response indicating that the amount sought by the CSCC Proofs of Claim should be reduced to $4,553,848.86 to account for (a) the $293,763 post-petition payment made by the Debtors pursuant to the CSCC Lease and (b) the Recovered Equipments FMV of $419,472.79. CSCC understands that the Debtors are treating the Informal Response as satisfying the requirement that any response to the Objection must be filed by May 12, 2011 and, further, the hearing on the Objection will be adjourned and the matter rescheduled to the next hearing date in June 2011. Additionally, CSCC provided the Debtors counsel with a Recovered Equipment Summary identifying the Recovered Equipment by item and the FMV assigned to each such item.10 LEGAL AUTHORITY A. 19. The CSCC Proofs of Claim Constitute Prima Facie Evidence Of The Validity And Amount Of The CSCC Allowed Claim A proof of claim constitutes prima facie evidence of the amount and validity of

the claim evidenced by that pleading. In re Planet Hollywood International, 274 B.R. 391 394 (D. Del. 2001) citing In re Allegheny Intl, Inc., 954 F.2d 167, 173 (3rd Cir. 1992); see Fed. R. Bankr. P. 3001(f). Pursuant to the express language of Rule 3001(f), [a] party objecting to a claim has the initial burden of presenting a substantial factual basis to overcome the prima facie
The Recovered Equipment Summary is 45 pages long and, in light of the current efforts to resolve this matter by stipulation, the Parties have agreed that it will be filed with the Court only if this matter proceeds to an evidentiary hearing.
10

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CSCC Response To Fifty-First Omnibus Objection To Overstated Claims

validity of a proof of claim [and] [t]his evidence must be of a probative force equal to that of the creditors proof of claim. In re Hinkely, 58 B.R. 339, 348 (Bankr. S.D. Tex. 1986), affd, 89 B.R. 608 (S.D. Tex. 1988), affd 879 F.2d 859 (5th Cir. 1989) (emphasis added).11 20. In order to overcome this prima facie evidence, the objecting party must come

forth with evidence which, if believed, would refute at least one of the allegations essential to the claim. In re Reilly, 245 B.R. 768, 773 (2rd Cir. B.A.P. 2000), affd 242 F.3d 362 (2rd Cir. 2000). Where a debtor simply makes a pro forma objection without any evidentiary support, a court may summarily overrule such objections. See e.g., Garner v. Shier (In re Garner), 246 B.R. 617, 620, 623 (B.A.P. 9th Cir. 2000). Simply put: the prima facie validity of a proof of claim is strong enough to carry over a mere formal objection without more. In re Schlehr, 290 B.R. 387, 395 (Bankr. D. Mont. 2003). Therefore, [u]nless the trustee, as objector, introduces evidence as to the invalidity of the claim or the excessiveness of the amount, the claimant need offer no further proof of the merits of the claim. In re Brown, 82 F.3d 801 (8th Cir. 1996) cited in 4 Collier on Bankruptcy, 15th Ed. Revised (2006), 502.02[3] [f] at pg. 502-18 n. 38. 21. Here, the CSCC Proofs of Claim establish the existence of the Claims asserted:

their validity, the amounts due and owing pursuant to the CSCC Lease, and the secured status of the Claims. Specifically, each of the CSCC Proofs of Claim includes a complete copy of the CSCC Lease (and the UCC-1 that perfected CSCC's security interest in the Equipment) and, thereby, establishes the Claim. Additionally, each of the CSCC Proofs of Claim includes a calculation showing the amounts due and owing under the CSCC Lease from and after the Petition Date. This evidence establishes the Claims validity, enforceability and amount.

11

Accord, Mellon Bank, N.A. v. Metro Communications, Inc., 945 F.2rd 635 (3rd Cir. 1991); In re Allegheny Intl, Inc., supra; In re Lewis, 80 B.R. 39, 40 (E.D. Pa. 1987).

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CSCC Response To Fifty-First Omnibus Objection To Overstated Claims

22.

In stark contrast, the Objection is a mere pro forma objection that makes no effort

to substantiate its bald assertion that the CSCC Proofs of Claims should be disallowed. In support of the Objection, the Debtors offer only a generalized statement to the effect that after reviewing its books and records they concluded that "the claims listed on Exhibit A . . . were filed by the claimant in an amount greater than the liabilities owed to such claimants. . . [and t]o the extent the amount in the column "Allowed Amount" is $0.00, the Debtors seek an order disallowing and expunging such Claims." See Robson Declaration at 3. Neither the Objection nor the Hobson Declaration includes any statements whatsoever addressing any of the CSCC Proofs of Claim -- beyond this generalized statement that its books and records do not agree with the amounts asserted by the CSCC Proofs of Claim. 23. Simply put, the Debtors have failed to submit any substantial factual basis to

overcome the prima facie validity of the CSCC Proofs of Claim, or the amounts asserted thereby. In re Hinkely, supra. As in Garner, the Debtors have asserted merely that there is no obligation to pay . . . and their bare conclusionary statements certainly do not overcome th[e] prima facie evidence . . . [set forth in CSCC Proofs of Claim because they do not constitute] evidence which, if believed, would refute at least one of the allegations essential to the claim. In re Reilly, 245 B.R. at 773. Simply asserting that the Debtors books and records do not support the amount of the Claims standing alone certainly does not satisfy the Debtors burden to provide a substantial factual basis to overcome the prima facie validity of the Claims asserted. Both the Objection and the Robson Declaration are silent with respect to any facts bearing specifically on the CSCC Proofs of Claims or the Claims asserted thereby. In this case, the Court should summarily deny the Debtors pro forma objection because it is devoid of any meaningful evidentiary support. Cf. Garner, 246 B.R. at 623. Under these circumstances, the prima facie

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CSCC Response To Fifty-First Omnibus Objection To Overstated Claims

validity of each of the CSCC Proofs of Claim is strong enough to carry over a mere formal objection without more. In re Schlehr, 290 B.R. at 395. B. Administrative Expenses Are Allowed For Actual, Necessary Costs And Expenses Of Preserving The Estate. 24. The Bankruptcy Code provides administrative status to claims for "the actual,

necessary costs and expenses of preserving the estate, including wages, salaries, or commissions for services rendered after the commencement of the case." In re Pinnacle Brands, Inc., 259 B.R. 46, 50 (Bankr. D.Del. 2001) citing 11 U.S.C. 503(b); accord, In re Valley Media, Inc., 279 B.R. 105, 141 (Bankr. D. Del. 2002). Determining whether a creditor has an administrative expense is a two-prong test: the expense must have arisen from a post-petition transaction between the creditor and the trustee (or debtor-in-possession), and the transaction must have substantially benefitted the estate. In re Pinnacle Brands, Inc., supra. 25. It is well-established law that if a debtor-in-possession elects to continue to

receive benefits from the non-debtor counterparty pursuant to a pre-petition, executory contract pending a decision whether to reject or assume the contract, the debtor-in-possession is obligated to pay for the reasonable value of the services or property used when such services or use contributes to the value of the estate. N.L.R.B. v. Bildisco, 465 U.S. 513, 104 S. Ct. 1188, 1199, 70 L.Ed.2d 482 (1984). For purposes of establishing a right to an administrative expense claim, a claimant may show that a post-petition transaction exists even if the services or goods provided by the non-debtor are based on a pre-petition executory contract between the parties. See In re Lease-A-Fleet, 140 B.R. 840, 845 (Bankr. E.D. Pa. 1992); In re Valley Media, Inc., supra. 26. Admittedly, the CSCC Lease was executed prior to the Petition Date.

Nonetheless, the Equipment clearly was possessed and utilized by the Debtors continually after -11CSCC Response To Fifty-First Omnibus Objection To Overstated Claims

commencement of their bankruptcy cases in July, 2008 as part of their "going out of business sales and orderly liquidation. This possession and use of the Equipment conferred substantial benefit on these estates after these Chapter 11 cases were commenced. Therefore, pursuant to 11 U.S.C. 503(b), the Administrative Claim should be allowed in the amount of not less than $2,643,869.70. C. The CSCC Remaining Claim Is A Secured Claim Up To The Fair Market Value Of The Recovered Equipment And An Unsecured Claim To The Extent It Exceeds The Fair Market Value Of The Recovered Equipment Section 506(a) of the Bankruptcy Code provides, in pertinent part, that [a]n

27.

allowed claim of a creditor secured by a lien on property in which the estate has an interest . . . is a secured claim to the extent of the value of such creditors interest in the estates interest in such property . . . and is an unsecured claim to the extent that the value of such creditors interest . . . is less than the amount of such allowed claim." Essentially, a claim is divided into secured and unsecured portions, with the secured portion limited to the value of the collateral. Associates Commercial Corp. v. Rash, 520 U.S. 953, 117 S. Ct. 1879, 138 L. Ed. 2d 148 (1997). 28. To determine if a claim is a secured claim requires consideration of three issues.

First, it must be shown that the claim12 is secured by a lien on some specific item of property in which the estate has an interest . . ." and a creditor satisfies this requirement if it shows that it holds a "lien"13 created by agreement . . . . 4 Collier on Bankruptcy (15th ed. Revised 2006), 506.03 [1] at page 506 10. Second, the creditor must show the existence of an allowed claim pursuant to (for example) Section 502 of the Bankruptcy Code. Id. Third, section 506(a)

Under the Bankruptcy Code, a "claim" includes any (a) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured . . . ." 11 U.S.C. 101(5) (A).
13

12

Under the Bankruptcy Code, a lien includes any "charge against or interest in property to secure payment of a debt or performance of an obligation," 11 U.S.C. 101(37).

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CSCC Response To Fifty-First Omnibus Objection To Overstated Claims

directs a determination of (i) the estates interest in the collateral to be valued, and (ii) the creditors interest in that interest. See United States v. Taffi (In re Taffi), 96 F.3d 1190, 1192 (9th Cir. 1996) (en banc), cert. denied, 521 U.S. 1103, 117 S. Ct. 2478, 138 L.Ed2d 987 (1997). 29. Here, the CSCC Proofs of Claim clearly satisfy the three-prong test for

determining that the Claims are secured claims. First, each of the CSCC Proofs of Claim include (a) a copy of the CSCC Lease that granted a security interest to CSCC in the Equipment and (b) a copy of the UCC-1 recorded with the California Secretary of State's office that perfected this security interest. Accordingly, these documents prove that CSCC' holds a lien that was created by agreement and, further, that this lien has been perfected with regard to the Equipment. Second, as discussed previously, each of the CSCC Proofs of Claim establish the existence of a Claim within the meaning of 11 U.S.C. 502. Third, the Debtor had an interest in the Equipment pursuant to the CSCC Lease and, CSCC, in turn has an interest in the Equipment (as Lessor and owner). 30. After the court has identified the creditors interest in the estates interest in the

relevant collateral, the court must then determine the relevant valuation standard to be applied in valuing the creditors interest. In general, the courts agree that the relevant standard is one of fair market value. 4 Collier on Bankruptcy (15th ed.), 506.03 [6] at page 506 37; cf. In re Taffi, 96 F.3d 1190, 1192 (9th Cir. 1996) (en banc) (recognizing different ways to establish fair market value and leaving the precise disposition to the trial court), cert. denied, 521 U.S. 1103, 117 S. Ct 2478, 138 L.Ed2d 987 (1997).14 31. CSCC submits that, in this case, the fair market value standard typically is used

by equipment lessors (such as CSCC) to establish the value of leased equipment recovered and,
14

Cf. Associates Commercial Corp. v. Rash, 520 U.S. 953, 117 S. Ct. 1879, 138 L. Ed. 2d 148 (1997) (In determining the appropriate valuation standard to use a court must make two fundamental determinations: first, identify the purpose of the valuation and, second, identify the proposed disposition or use of the property at issue.)

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CSCC Response To Fifty-First Omnibus Objection To Overstated Claims

thereby, to determine the outstanding amount remaining due and owing under an equipment lease (i.e., in mitigating their damages). Therefore, CSCC contends that its use of the fair market value methodology was proper in establishing the amount of the Allowed CSCC Claim that should be classified as secured. Here, as represented to the Debtors previously, CSCC has determined that the fair market value of the Recovered Equipment on which it holds a lien is $419,427.79.15 32. Accordingly, CSCC contends that the secured portion of the CSCC Allowed

Claim should be set in the amount of $419,427.79 (subject to increase in the event any additional Equipment is returned to CSCC pursuant to the relief sought by this Response) and the Remaining CSCC Claim should be allowed in the amount of $2,203,842.16 as a general, unsecured claim (again, subject to recover of any additional Equipment whose fair market value would be applied against the unpaid balance of the Remaining CSCC Claim and thereby reduce the amount of this unsecured claim). RESERVATION OF RIGHTS 33. Notwithstanding the foregoing, CSCC expressly reserves all (and does not hereby

waive any) of its (a) all rights, claims, counterclaims, defenses, and remedies related to assumption of the CSCC Proofs of Claim, the CSCC Administrative Claim and/or the CSCC Remaining Claim, including without limitation the right to a judicial determination of the amount(s) due and owing with regard to such claims, (b) the right to assert such rights, claims, counterclaims defenses , and remedies in any appropriate manner or forum whatsoever (including, without limitation, arbitration, the United States District Courts, any state court, any
15

The Recovered Equipment Summary compiling the details of CSCCs fair market value analysis is 45 pages long and was provided to the Debtors on May 11, 2011. In light of the current efforts to resolve this matter by stipulation, the Parties have agreed that it will be filed with the Court only if this matter proceeds to a an evidentiary hearing. This FMV is set forth in Exhibit A, entitled Cisco Systems Capital Corporation, Reconciliation Of Administrative Expenses And Proofs of Claim, attached hereto.

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CSCC Response To Fifty-First Omnibus Objection To Overstated Claims

administrative proceeding and/or any other tribunal), and (c) its rights (i) to raise the issues contained in this Request for Administrative Claim and any other related issues in any contested matter and/or adversary proceeding, (ii) to amend, modify or supplement this Response to, or as a result of, any submission by any party-in-interest and (iii) to adopt any other pleadings filed by any other party related to the Objection (collectively, the Reservation of Rights). CONCLUSION Based on the foregoing, CSCC seeks entry of an order (a) denying the relief sought by the Objection in its entirety; (b) allowing a Claim in favor of CSCC in the aggregate amount of $4,553,848.86 (the Allowed CSCC Claim) pursuant to the CSCC Lease, (c) classifying the Allowed CSCC Claim as (i) an administrative expense priority in the amount of not less than $2,643,869.70 and (ii) a remaining Claim in an amount not less than $2,334,441.91 (the CSCC Remaining Claim), (d) classifying the CSCC Remaining Claim as (i) a secured claim in the amount of $419,427.79 and (ii) an unsecured claim in the amount of not less than $2,203,842.16, (e) directing the Debtors to deliver to CSCC all Equipment remaining in the care, custody and/or control of the Debtors (if any); and (f) providing such further and other relief appropriate at law or equity. Dated: May 16, 2011 WHITE AND WILLIAMS LLP /s/ James S. Yoder James S. Yoder (DE# 2643) 824 N. Market Street, Suite 902 P.O. Box 709 Wilmington, DE 19899-0709 Phone: 302-467-4524 Fax: 302-467-4554 Email: [email protected] AND

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CSCC Response To Fifty-First Omnibus Objection To Overstated Claims

BIALSON, BERGEN & SCHWAB, A PROFESSIONAL CORPORATION /s/ Thomas M. Gaa_________________________ Thomas M. Gaa (Calif. Bar No. 130720) 2600 El Camino Real, Suite 300 Palo Alto, California 94306 Phone (650) 857-9500 Facsimile: (650) 494-2738 Email: [email protected]

Attorneys for CSCC

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CSCC Response To Fifty-First Omnibus Objection To Overstated Claims

EXHIBIT "A" CISCO SYSTEMS CAPITAL CORPORATION RECONCILIATION: ADMINISTRATIVE EXPENSES AND PROOFS OF CLAIM

Proof of Aggregate Proof of Claim No. Claim Amount 447 $

Claim Details

Payments & Equipment Recoveries

Administrative Expense Amount*/ $ 2,937,632.70 (293,763.00) 2,643,869.70

Rejection Damage Claim Amount*/

5,267,139.65 Equipment Use: 7/28/08 - 6/12/09** - October, 2010 Payment Net Administrative Expense:

$ $

Remaining Rejection Damage Claim Secured Claim Unsecured Claim FMV Recovered Equipment = $419,427.79

$2,623,269.95 $419,427.79 $2,203,842.16

6404

932,332.18 Equipment Use: 7/28/08 -- 11/30/08

Included in POC No. 447

N/A

7321

293,763.27 Equipment Use: 11/30/08 - 12/31/08

Included in POC No. 447

N/A

*Amount Shown Does Not Include Interest CSCC Proofs of Claim Reserve Right To Charge 14% Default Interest Permitted Per Lease No. 5508, 5.10 , From Due Date To Rejection Date ** Rejection Date

C:\Users\randalls\AppData\Local\Microsoft\Windows\Temporary Internet Files\Content.Outlook\FC8FS9LR\Ex A - Reconciliation-AdmExp Proofs of Claim.xls

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UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: MERVYNS HOLDINGS, LLC, et al. Chapter 11 Case No. 08-11586 (KG) Jointly Administered

CERTIFICATE OF SERVICE I, James S. Yoder, hereby certify that on May 16, 2011, I caused one copy of the foregoing document to be served upon the parties on the attached service list via first class mail.

/s/ James S. Yoder James S. Yoder (DE# 2643)

7640921v.1