Hearing Date and Time: August 2, 2010, 2:00 p.m.

DECHERT LLP 1095 Avenue of the Americas New York, New York 10036-6797 Telephone: (212) 698-3500 Facsimile: (212) 698-3599 Michael J. Sage Kevin J. OBrien Brian E. Greer Attorneys for Lehman ALI Inc. UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ------------------------------------------------------------ X : In re: : Chapter 11 : INNKEEPERS USA TRUST, et al.1 : Case No.: 10-13800 : Debtors. : Jointly Administered : ------------------------------------------------------------ X OBJECTION OF LEHMAN ALI INC. TO MIDLANDS MOTION FOR AN ORDER PURSUANT TO FED. R. BANKR. P. 7034 AND 9006, MODIFYING CERTAIN DISCOVERY RESPONSE DEADLINES FOR THE DEBTORS AND ESTABLISHING A DEPOSITION SCHEDULE IN CONNECTION WITH THE SEPTEMBER 1, 2010 HEARINGS Lehman ALI Inc. (Lehman), as and for its objection (this Objection) to the Motion of Midland Loan Services, Inc., Special Servicer for the Fixed Rate Trustee, (Midland) for an Order Pursuant to Fed. R. Bankr. P. 7034 and 9006, Modifying Certain Discovery Response Deadlines for the Debtors and Establishing a Deposition Schedule in Connection with the September 1, 2010 Hearings (the Motion) [Dkt. No. 87], respectfully states as follows:
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The Debtors in these Chapter 11 Cases, along with the last four digits of each Debtors federal tax identification number, are: GP AC Sublessee LLC (5992); Grand Prix Addison (RI) LLC (3740); Grand Prix Addison (SS) LLC (3656); Grand Prix Albany LLC (3654); Grand Prix Altamonte LLC (3653); Grand Prix Anaheim Orange Lessee LLC (5925); Grand Prix Arlington LLC (3651); Grand Prix Atlanta (Peachtree Corners) LLC (3650); Grand Prix Atlanta LLC (3649); Grand Prix Atlantic City LLC (3648); Grand Prix Bellevue LLC (3645); Grand Prix Belmont LLC (3643); Grand Prix Binghamton LLC (3642); Grand Prix Bothell LLC (3641); Grand Prix Bulfinch LLC (3639); Grand Prix Campbell / San Jose LLC

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Preliminary Statement Before the Court on for hearing on September 1, 2010 are two contested matters: the Debtors Motion for an Order (A) Authorizing the Debtors to (i) Use the Adequate Protection Parties Cash Collateral and (ii) Provide Adequate Protection to the Adequate Protection Parties Pursuant to 11 U.S.C. 361, 362, and 363, and (B) Scheduling a Final Hearing Pursuant to Bankruptcy Rule 4001(b) (the Cash Collateral Motion) [Dkt. No. 13] and the Debtors Motion for an Order (A) Authorizing the Debtors to Assume the Plan Support Agreement (the PSA) and (B) Granting Related Relief (the PSA Assumption Motion) [Dkt. No. 15].

(3638); Grand Prix Cherry Hill LLC (3634); Grand Prix Chicago LLC (3633); Grand Prix Columbia LLC (3631); Grand Prix Denver LLC (3630); Grand Prix East Lansing LLC (3741); Grand Prix El Segundo LLC (3707); Grand Prix Englewood / Denver South LLC (3701); Grand Prix Fixed Lessee LLC (9979); Grand Prix Floating Lessee LLC (4290); Grand Prix Fremont LLC (3703); Grand Prix Ft. Lauderdale LLC (3705); Grand Prix Ft. Wayne LLC (3704); Grand Prix Gaithersburg LLC (3709); Grand Prix General Lessee LLC (9182); Grand Prix Germantown LLC (3711); Grand Prix Grand Rapids LLC (3713); Grand Prix Harrisburg LLC (3716); Grand Prix Holdings LLC (9317); Grand Prix Horsham LLC (3728); Grand Prix IHM, Inc. (7254); Grand Prix Indianapolis LLC (3719); Grand Prix Islandia LLC (3720); Grand Prix Las Colinas LLC (3722); Grand Prix Lexington LLC (3725); Grand Prix Livonia LLC (3730); Grand Prix Lombard LLC (3696); Grand Prix Louisville (RI) LLC (3700); Grand Prix Lynnwood LLC (3702); Grand Prix Mezz Borrower Floating 2, LLC (9972); Grand Prix Mezz Borrower Fixed, LLC (0252); Grand Prix Mezz Borrower Floating, LLC (5924); Grand Prix Mezz Borrower Term LLC (4285); Grand Prix Montvale LLC (3706); Grand Prix Morristown LLC (3738); Grand Prix Mountain View LLC (3737); Grand Prix Mt. Laurel LLC (3735); Grand Prix Naples LLC (3734); Grand Prix Ontario Lessee LLC (9976); Grand Prix Ontario LLC (3733); Grand Prix Portland LLC (3732); Grand Prix Richmond (Northwest) LLC (3731); Grand Prix Richmond LLC (3729); Grand Prix RIGG Lessee LLC (4960); Grand Prix RIMV Lessee LLC (4287); Grand Prix Rockville LLC (2496); Grand Prix Saddle River LLC (3726); Grand Prix San Jose LLC (3724); Grand Prix San Mateo LLC (3723); Grand Prix Schaumburg LLC (3721); Grand Prix Shelton LLC (3718); Grand Prix Sili I LLC (3714); Grand Prix Sili II LLC (3712); Grand Prix Term Lessee LLC (9180); Grand Prix Troy (Central) LLC (9061); Grand Prix Troy (SE) LLC (9062); Grand Prix Tukwila LLC (9063); Grand Prix West Palm Beach LLC (9065); Grand Prix Westchester LLC (3694); Grand Prix Willow Grove LLC (3697); Grand Prix Windsor LLC (3698); Grand Prix Woburn LLC (3699); Innkeepers Financial Corporation (0715); Innkeepers Financing Partnership II LP (9546); Innkeepers Morristown LLC (7834); Innkeepers RI Altamonte LP (3243); Innkeepers RI General LP (3244); Innkeepers RI Northwest LP (7740); Innkeepers Schaumburg LP (9822); Innkeepers Summerfield Gen. II LP (5954); Innkeepers Summerfield Gen. LP (3856); Innkeepers Westchester LP (9618); Innkeepers USA Limited Partnership (3956); Innkeepers USA Trust (3554); KPA Ft. Walton, LLC (4502); KPA HI Ontario LLC (6939); KPA HS Anaheim, LLC (0302); KPA Leaseco II, Inc. (6868); KPA Leaseco Holding Inc. (2887); KPA Leaseco, Inc. (7426); KPA RIGG, LLC (6706); KPA RIMV, LLC (6804); KPA San Antonio, LLC (1251); KPA Tysons Corner RI, LLC (1327); KPA Washington DC, LLC (1164); KPA/GP Ft. Walton LLC (3743); KPA/GP Louisville (HI) LLC (3744); KPA/GP Valencia LLC (9816). The location of the Debtors corporate headquarters and the service address for its affiliates is: c/o Innkeepers USA, 340 Royal Poinciana Way, Suite 306, Palm Beach, FL 33480.

The expedited discovery sought by Midland from Lehman through the Motion, however, goes far beyond the narrow issue raised by the PSA Assumption Motion2 specifically, whether the Debtors have properly exercised their business judgment and reveals Midlands strategy to turn the September 1st hearing into a hearing on plan confirmation. Midland will have ample opportunity to conduct plan-related discovery and raise whatever confirmation objections it may see fit once a plan is actually filed, solicited and before the Court for confirmation. The Court should therefore reject Midlands overbroad discovery strategy at this early stage of these cases as premature, and limit discovery to the issues at hand. To that end, the Court should deny all discovery against Lehman, which necessarily has nothing relevant to offer with respect to whether the Debtors reasonably exercised their business judgment in determining to assume the PSA. Because the issue is the Debtors business

judgment, it is the Debtors that should properly bear the burden of Midlands discovery requests. Indeed, upon information and belief, the Debtors have, over the last several months, provided thousands of pages of documents and many gigabites of data to Midland and its advisors covering all aspects of the Debtors operations. Lehman should not be required to provide discovery unless and only to the extent that such discovery would not be duplicative of the significant amount of discovery already produced, or to be produced, by the Debtors. In the event that the Court does order discovery against Lehman, it should tailor that discovery solely to the issues raised by the PSA Motion. In that case, Lehman will work with Midland towards agreement on a reasonable and mutually acceptable discovery schedule and scope.
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For purposes of its Objection, Lehman has assumed that Midland is seeking discovery from Lehman only related to the Debtors PSA Assumption Motion. Although the Motion is somewhat unclear on the point, Lehman cannot imagine what information it could possess that would relate to Midlands objection to the Debtors Cash Collateral Motion.

Lehman also objects to Midlands noticing both a Rule 30(b)(6) deposition and depositions of three specifically identified individuals. To the extent the Court determines that discovery from Lehman is relevant, Lehman will consent to a single deposition under Rule 30(b)(6). Additional depositions are unnecessary, especially in light of the limited issues to be considered at the September 1st hearing, and would be unduly burdensome to Lehman. Further, depositions of individually named employees, who are not themselves parties to the contested matters, can only be achieved by subpoena, not notice. Also, as one of the individuals named is not, in fact, a Lehman employee, Lehman cannot compel her appearance. Argument A. Midlands Discovery Is Properly Directed to the Debtors 1. The hearing on the PSA Assumption Motion will revolve around the solitary

question of whether the Debtors have exercised sound business judgment in determining to assume the PSA, nothing more. For that reason, discovery in connection with the September 1st hearing should be directed not at Lehman, but rather at the Debtors, whose business judgment is at issue here. 2. Moreover, because the Debtors have already provided Midland with substantial

discovery on a consensual, informal basis, a fact Midland neglected to mention in its Motion, and will provide additional discovery in connection with the Motion, any information that Lehman could produce relevant to the Debtors business judgment at this point would likely be superfluous. Accordingly, Lehman should not be required to produce any discovery unless and until Midland can demonstrate that it could not obtain such information directly from the Debtors.

B. Midlands Discovery Must Be Limited to Matters Relevant to the Issue of the Debtors Business Judgment 3. If the Court does determine that discovery from Lehman is appropriate here, it

should limit Midlands discovery solely to the maters currently before the Court. The contested matter regarding which Midland is seeking discovery of Lehman is the Debtors PSA Assumption Motion, in which the Debtors seek permission under section 365 of the Bankruptcy Code to assume an executory contract the PSA. i. 4. The Only Relevant Issue is Whether the Debtors Have Reasonably Exercised Their Business Judgment

A debtors decision to assume or reject an executory contract or unexpired lease

under section 365(a) of the Bankruptcy Code is subject to review by the bankruptcy court under a business judgment standard. If a debtors business judgment has been reasonably exercised, the bankruptcy court should approve the assumption or rejection of the executory contract or unexpired lease. See NLRB v. Bildisco & Bildisco, 465 U.S. 513, 523 (1984); In re Market Square Inn, Inc., 978 F.2d 116, 121 (3d Cir. 1992). see also In re Johns-Manville Corp., 60 B.R. 612, 615-16 (Bankr. S.D.N.Y. 1986) ([T]he Code favors the continued operation of a business by a debtor and a presumption of reasonableness attaches to a debtors management decisions.). 5. The business judgment rule is the presumption that in making a business

decision the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company. In re Integrated Res., Inc., 147 B.R. 650, 656 (S.D.N.Y. 1992) (quoting Smith v. Van Gorkom, 488 A.2d 858, 872 (Del. 1985); see also In re Riodizio, Inc., 204 B.R. 417, 424 (Bankr. S.D.N.Y. 1997) ([A] court will ordinarily defer to the business judgment of the debtors management). 6. In determining whether to approve the assumption or rejection of an executory

contract, courts generally follow the principle that the debtors business judgment should not be 5

interfered with, absent a showing of bad faith or abuse of business discretion. In re Chipwich, Inc., 54 B.R. 427, 430-31 (Bankr. S.D.N.Y. 1985); see also In re Health Science Products Inc., 191 B.R. 895, 909 n.15 (Bankr. N.D. Ala. 1995) (the issue before the court is whether the decision of the debtor is so manifestly unreasonable that it could not be based on sound business judgment, but only on bad faith, whim, or caprice). ii. 7. Discovery Must Be Relevant and Not a General Fishing Expedition

The discovery permitted by the Federal Rules is broad, but not without limits.

Jones v. Goord, 2002 WL 1007614, *5 (S.D.N.Y. May 16, 2002). Although under Rule 26, a requesting party may obtain discovery regarding any non-privileged matter that is relevant to the subject matter of the action, courts will not permit requests that are patently overbroad or amount to nothing more than a fishing expedition, which the Court is not willing to permit. Sadofsky v. Fiesta Products, LLC, 252 F.R.D. 143, 152 (E.D.N.Y. 2008) (citing City of New York v. Republic of Philippines, 2004 WL 2710026, *8 (S.D.N.Y. Nov. 23, 2004).3 8. Federal Rule of Civil Procedure 26 vests the trial judge with broad discretion to

tailor discovery narrowly and to dictate the sequence of discovery. Crawford-El v. Britton, 523 U.S. 574, 118 S. Ct. 1584, 140 L. Ed. 2d 759 (1998); see also In re Agent Orange Product Liability Litigation, 517 F.3d 76, 103 (2d Cir. 2008) (A district court has wide latitude to determine the scope of discovery . . . .). Under Rule 26, the trial court has an obligation to ensure that discovery requests are reasonable. The Court must limit the extent of discovery if it determines that the discovery sought is unreasonably cumulative or duplicative or overly

Although examinations under Fed. R. Bankr. P. 2004 are more akin to fishing expeditions; if the traditional discovery tools are available the potential examiner is required to use them and may not take advantage of Rule 2004. In re J&R Trucking, 2010 WL 2839543, *2 (Bankr. N.D. Ind. June 18, 2010).

burdensome. Rubinow v. Ingelheim, 2010 WL 1882320, *2 (D. Conn. May 10, 2010); see also Fed. R. Civ. P. 26(b)(2), (c)(1) (made applicable through Fed. R. Bankr. P. 9014, 7026). 9. Given the narrow issue and the broad discretion afforded debtors seeking to

assume or reject executory contracts, courts have concluded that the discovery propounded in connection with a motion to assume should be limited. A motion to assume or reject an

executory contract should be considered a summary proceeding, intended to efficiently review the trustees or debtors decision to adhere to or reject a particular contract in the course of the swift administration of the bankruptcy estate. It is not the time or place for prolonged discovery or a lengthy trial with disputed issues. In re Old Carco LLC, 406 B.R. 180, 188 (Bankr. S.D.N.Y. 2009) (quoting In re Orion Pictures Corp., 4 F.3d 1095, 1098-99 (2d Cir. 1993) (The bankruptcy judge, in presiding over a motion to assume, sits as an overseer of the wisdom with which the bankruptcy estates property is being managed . . . and not, as it does in other circumstances, as the arbiter of disputes between creditors and the estate.)). iii. 10. Midlands Document Requests Must be Limited To the Relevant Issue

The only issue that will be before this Court at the September 1st hearing is

whether the Debtors have reasonably exercised their business judgment in seeking to assume the PSA. Midland is seeking4 broad discovery that goes far beyond the issue of whether the Debtors have reasonably exercised their business judgment in seeking to assume the PSA. For example, any discovery seeking confidential (and potentially privileged) information regarding Lehmans internal decision-making process as regards the PSA is not proper because, among other things, it is completely irrelevant to the issue of the Debtors exercise of their business judgment.

Midlands document requests directed to Lehman were not originally attached to the Motion, presumably as the result of a clerical mistake. Lehman was provided with the document requests by email late on Saturday night and this Objection is directed at those requests, which were subsequently filed by Midland.

11.

The assumption of the PSA will allow the Debtors to remain on the path of the

pre-negotiated restructuring of the Debtors, nothing more. The PSA contemplates as required by the Bankruptcy Code that the proposed restructuring will be entirely subject to court approval at confirmation. 12. The Debtors will be in default of the PSA and the agreement will terminate

automatically if it is not assumed on or before September 2, 2010 (absent an affirmative decision to waive default by Lehman in its sole and absolute discretion). Accordingly, assumption of the PSA is necessary to keep the Debtors on the path that is, at present, their most concrete option for a successful and expeditious restructuring. C. Midland Cannot Both Notice a 30(b)(6) Deposition and Notice Depositions On Individual Lehman Employees 13. Midland has delivered a notice of Rule 30(b)(6) deposition on Lehman, but has

also noticed three further depositions on Michael Lascher and Susanne Frey, who are Lehman employees, and Nancy Shanik, who is an employee of Alvarez & Marsal, a restructuring advisory firm assisting Lehman in connection with, among other things, these cases. None of those individuals is a party in this case in his or her individual capacity. Under Fed. R. Civ. P. 30(b)(6), a notice of deposition may be directed to a corporate party, who will then designate an individual to serve as the corporate party for purposes of the deposition. 14. However, [o]ther corporate representatives and employees are treated as non-

parties for purposes of depositions. W.R. Grace & Co. v. Pullman Inc., 74 F.R.D. 80, (W.D. Okla. 1977). Accordingly, if a party wishes to designate a specific individual as a corporate representative for deposition, it must issue a subpoena under Rule 30(a)(1) as it would for any non-party witness, and may not simply notice a deposition. Cummings v. General Motors Corp., 365 F.3d 944, (10th Cir. 2004), abrogated on other grounds by Unitherm Food Systems, Inc. v.

Swift-Eckrich, Inc., 546 U.S. 394, 126 S. Ct. 980, 163 L. Ed. 2d 974 (2006). Moreover, since Ms. Shanik is not even a Lehman employee, Lehman could not be compelled to produce her for a deposition under any circumstances, and Midlands request that Lehman do so is flagrantly improper. 15. To the extent the Court requires discovery from Lehman, Lehman will consent to

a single deposition issued under Rule 30(b)(6). The notices of deposition directed at specific individuals are not proper, are unnecessary, and are unduly burdensome on Lehman. Especially considering the limited scope of the relevant issues, a single deposition of a Lehman corporate representative is reasonable. Indeed, Midland is seeking only a Rule 30(b)(6) deposition from the Debtors. Lehman should not be subjected to a more onerous discovery burden than the Debtors, whose business judgment is the central issue for the September 1st hearing. 16. Lehman reserves the right to assert any other or further objections, including at

the hearing on the Motion.

WHEREFORE, for the foregoing reasons, Lehman respectfully requests that the Court (i) deny the Midland discovery requests against Lehman; (ii) to the extent the Court determines discovery from Lehman is relevant, (a) limit the scope of discovery to matters relating to the narrow issue of whether the Debtors have reasonably exercised their business judgment in seeking to assume the PSA; (b) limit the discovery to information not already provided or to be provided by the Debtors; and (c) limit the number of Lehman depositions to a single deposition under Federal Rule 30(b)(6); and (iii) grant Lehman such other and further relief as the Court deems appropriate. Dated: New York, New York August 2, 2010 Respectfully Submitted, DECHERT LLP By:/s/ Kevin J. OBrien Michael J. Sage Kevin J. OBrien Brian E. Greer 1095 Avenue of the Americas New York, New York 10036 Telephone: (212) 698-3500 Facsimile: (212) 698-3599

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