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Richard M. Pachulski (CA Bar No. 90073) James I. Stang (CA Bar No. 94435) Dean A. Ziehl (CA Bar No. 84529) Linda F. Cantor (CA Bar No. 153762) Debra I. Grassgreen (CA Bar No. 169978) PACHULSKI STANG ZIEHL & JONES LLP 10100 Santa Monica Blvd., Suite 1300 Los Angeles, CA 90067-4114 Telephone: 310/277-6910 Facsimile: 310/201-0760 E-mail: rpachulski@pszjlaw.com jstang@pszjlaw.com dziehl@pszjlaw.com lcantor@pszjlaw.com dgrassgreen@pszjlaw.com Proposed Attorneys for Debtor and Debtor in Possession UNITED STATES BANKRUPTCY COURT CENTRAL DISTRICT OF CALIFORNIA SANTA ANA DIVISION In re: Case No.: 12-_____( ) Chapter 11 MOTION OF DEBTOR FOR ORDER (A) PROHIBITING UTILITY COMPANIES FROM ALTERING, REFUSING, OR DISCONTINUING SERVICE, AND (B) DETERMINING ADEQUATE ASSURANCE OF PAYMENT FOR FUTURE UTILITY SERVICES; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF [Declaration of M. Freddie Reiss, Proposed Chief Restructuring Officer, in Support of Emergency First Day Motions Filed Concurrently Herewith] [Hearing To Be Set]

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13 14 15 Debtor. 16 17 18 19 20 21 22 23 24 25 26 27 28
The last four digits of the Debtors federal tax identification number are 8739. The Debtors address is: 3251 East Imperial Highway, Brea, CA 92821.
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American Suzuki Motor Corporation,1

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TO THE HONORABLE UNITED STATES BANKRUPTCY JUDGE, PREPETITION AND POSTPETITION SECURED LENDER, THE CREDITORS APPEARING ON THE LIST FILED IN ACCORDANCE WITH RULE 1007(D) OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE, UTILITY COMPANIES, PARTIES REQUESTING SPECIAL NOTICE, AND THE OFFICE OF THE UNITED STATES TRUSTEE: American Suzuki Motor Corporation, the above-captioned debtor and debtor in possession (the Debtor), hereby moves (the Motion) this Court for entry of an order: (i) prohibiting the Debtors utility providers (collectively the Utility Companies and each individually a Utility Company) from altering, refusing, or discontinuing service without further order of the Court and (ii) determining adequate assurance of payment for future utility services. The Debtor receives essential utility services from several Utility Companies. A list of the Utility Companies and the Debtors account numbers is attached hereto as Exhibit A.1 Pursuant to section 366 of title 11 of the United States Code (the Bankruptcy Code), the Debtor seeks a determination that (a) a deposit made by the Debtor to each Utility Company in an amount equal to approximately two weeks of the Debtors estimated average postpetition monthly cost2 for prepetition services provided to the Debtor by such Utility Company (the Utility Deposit), (b) the ability of any Utility Company to obtain an initial hearing on the adequacy of the Utility Deposit, and (c) the ability of any Utility Company to obtain an expedited hearing regarding further adequate assurance if the Debtor fails to cure a postpetition payment default within twenty-one (21) days after written notice of such default constitute adequate assurance of payment for future utility services. At this critical time, uninterrupted electricity, gas, telephone, and similar services are essential to the Debtors ongoing operations. Any interruption, however brief, in utility services to the Debtors businesses will result in a serious disruption of the Debtors business operations when it can least afford such interruption. It is critical that the Court prohibit the Utility Companies from altering, refusing or discontinuing service to the Debtor without further order of this Court. The Utility Deposit for each
Although the Debtor believes that the list of Utility Companies set forth in Exhibit A hereto is complete, the Debtor reserves the right to supplement such list if it determines that any Utility Company has been omitted. The Debtor further reserves all rights to challenge the status of any entity listed in Exhibit A as a utility falling within the scope of section 366 of the Bankruptcy Code. The average monthly cost amount was determined by averaging the amounts of the twelve most recently received monthly bills from each Utility Company.
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of the Utility Companies, coupled with the streamlined mechanism for requesting further adequate assurance described in the attached Memorandum of Points and Authorities, will provide adequate assurance of payment to the Utility Companies as well as safeguard the Debtors continuing operations. Furthermore, the Debtor expects to have sufficient cash to pay its postpetition utility bills as they come due and has specifically budgeted for such payments. The Court should therefore grant the relief requested in the Motion in its entirety. The Debtor requests that the relief sought herein be granted on an emergency basis because uninterrupted utilities are essential to the survival of the Debtors business. In addition, certainty as to the amount of the deposits will provide the Debtors business with much-needed stability at this critical time. Furthermore, section 366 of the Bankruptcy Code sets forth a short time frame for resolving disputes with utility companies, and finally, pursuant to Rule 2081-1(a)(3) of the Local Bankruptcy Rules of the United States Bankruptcy Court for the Central District of California (the Local Bankruptcy Rules),3 the Court is specifically authorized to hear the Motion on an emergency basis. The Motion is based on the circumstances described in this Motion, the attached Memorandum of Points and Authorities, the Declaration of M. Freddie Reiss, Proposed Chief Restructuring Officer, in Support of Emergency First Day Motions (the Reiss Declaration) filed concurrently herewith, and the arguments of counsel and other admissible evidence properly brought before the Court at or before the hearing on this Motion. In addition, the Debtor requests that the Court take judicial notice of all documents filed with the Court in this case. The Debtor will serve this Motion, the Memorandum of Points and Authorities annexed hereto, and the Reiss Declaration on (a) the Office of the United States Trustee, (b) the creditors appearing on the list filed in accordance with Fed. R. Bankr. P. 1007(d) by the Debtor unless and until an official committee of unsecured creditors (the Committee) is appointed, then in that event, to counsel to the Committee, (c) counsel to Suzuki Motor Corporation, the Debtors prepetition and postpetition lender, and (d) parties that file with the Court and serve upon the Debtor requests for notice of all matters in accordance with Bankruptcy Rule 2002. To the extent necessary, the Debtor
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Pursuant to Local Bankruptcy Rule 9075-1(a)(3), no separate motion for an expedited hearing is required.

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requests that the Court waive compliance with Local Bankruptcy Rule 9075-1(a)(5) and approve service (in addition to the means of service set forth in such Local Bankruptcy Rule) by overnight or electronic delivery. In addition, upon scheduling of a hearing on this and other noticed motions filed contemporaneously herewith, the Debtor will serve a notice of hearing on this Motion, which will set forth the deadline for objections hereto. In the event that the Court grants the relief requested by the Motion, the Debtor shall provide notice of the entry of the order granting such relief upon each of the foregoing parties and any other parties in interest as the Court directs. The Debtor submits that such notice is sufficient and that no other or further notice be given. WHEREFORE for all the foregoing reasons and such additional reasons as may be advanced at or prior to the hearing on this Motion, the Debtor respectfully requests that the Court enter an order providing the following relief: (a) a determination that (i) a Utility Deposit made by the Debtor to each Utility Company in an amount equal to two weeks of the Debtors estimated average postpetition monthly cost for prepetition services provided to the Debtor by such Utility Company; (ii) the ability to obtain an initial hearing on the adequacy of the Utility Deposit; and (iii) the ability to obtain an expedited hearing regarding additional adequate assurance upon the Debtors failure to cure a default within twenty-one (21) days after written notice of such default constitute adequate assurance of payment for future utility services as contemplated by sections 366(b) and (c)(3)(A) of the Bankruptcy Code; (b) a prohibition barring the Utility Companies from altering, refusing, or discontinuing services to the Debtor without further order of this Court; and (c) such other and further relief as the Court deems just and proper. Dated: November 5, 2012 PACHULSKI STANG ZIEHL & JONES LLP By: /s/ Debra I. Grassgreen Richard M. Pachulski James I. Stang Dean A. Ziehl Linda F. Cantor Debra I. Grassgreen Proposed Attorneys for Debtor and Debtor in Possession

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Richard M. Pachulski (CA Bar No. 90073) James I. Stang (CA Bar No. 94435) Dean A. Ziehl (CA Bar No. 84529) Linda F. Cantor (CA Bar No. 153762) Debra I. Grassgreen (CA Bar No. 169978) PACHULSKI STANG ZIEHL & JONES LLP 10100 Santa Monica Blvd., Suite 1300 Los Angeles, CA 90067-4114 Telephone: 310/277-6910 Facsimile: 310/201-0760 E-mail: rpachulski@pszjlaw.com jstang@pszjlaw.com dziehl@pszjlaw.com lcantor@pszjlaw.com dgrassgreen@pszjlaw.com Proposed Attorneys for Debtor and Debtor in Possession UNITED STATES BANKRUPTCY COURT CENTRAL DISTRICT OF CALIFORNIA SANTA ANA DIVISION In re: Case No.: 12-_____( ) Chapter 11 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION OF DEBTOR FOR ORDER (A) PROHIBITING UTILITY COMPANIES FROM ALTERING, REFUSING, OR DISCONTINUING SERVICE, AND (B) DETERMINING ADEQUATE ASSURANCE OF PAYMENT FOR FUTURE UTILITY SERVICES [Declaration of M. Freddie Reiss, Proposed Chief Restructuring Officer, in Support of Emergency First Day Motions Filed Concurrently Herewith]

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The last four digits of the Debtors federal tax identification number are (8739). The Debtors address is: 3251 East Imperial Highway, Brea, CA 92821.
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American Suzuki Motor Corporation,1

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Page I. BACKGROUND ...................................................................................................................... 1 A. B. II. III. Jurisdiction and Venue .................................................................................................. 1 General Background ..................................................................................................... 1

RELIEF REQUESTED ............................................................................................................. 3 THE DEBTORS UTILITY COMPANIES AND PROPOSED UTILITY PROCEDURES .................................................................................. 4 The Debtors Utility Companies ................................................................................... 4 The Adequate Assurance Procedures............................................................................ 4

ARGUMENT ............................................................................................................................ 7 A. Basis for Relief ............................................................................................................. 7

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V. 13 VI. 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

NOTICE .................................................................................................................................. 12 CONCLUSION ....................................................................................................................... 12

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Page Cases Best Products, 203 B.R. 51 (Bankr. E.D. Va. 1996) ............................................................................................... 10 In re Adelphia Business Solutions, 280 B.R. 63 (Bankr. S.D.N.Y. 2002) .............................................................................................. 11 In re Agrifos Fertilizer, L.P., 2002 WL 32054779 (Bankr. S.D. Tex. Nov. 25, 2002).................................................................. 10 In re Crystal Cathedral Ministries, 454 B.R. 124 (C.D. Cal. 2011) ................................................................................................... 9, 11 In re Magnesium Corp. of America, 278 B.R. 698 (Bankr. S.D.N.Y. 2002) ............................................................................................ 10 In re Pacific Gas & Elec. Co., 271 B.R. 626 (N.D. Cal. 2002) ......................................................................................................... 9 In re Penn Jersey Corp., 72 B.R. 981 (Bankr. E.D. Pa. 1987) ........................................................................................... 9, 11 In re Steinbach, 303 B.R. 634 (Bankr. D. Az. 2004) .................................................................................................. 9 Massachusetts Electric Co. v. Keydata Corp. (In re Keydata Corp.), 12 B.R. 156 (B.A.P. 1st Cir. 1981) ................................................................................................. 10 Virginia Elec. & Power Co. v. Caldor, 117 F.3d 646 (2d Cir. 1997) ........................................................................................................... 11 Statutes 11 U.S.C. 105 ................................................................................................................................... 11 11 U.S.C. 366 ................................................................................................................................. 8, 9 Other Authorities H.R. Rep. No. 595, 95th Cong., 1st Sess. 350, reprinted in 1978 U.S.C.C.A.N. 5963, 6306 .................................................................................... 8 Treatises

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2 COLLIER ON BANKRUPTCY 105.01, at 105-5 to 105-6 (15th rev. ed. 2009) .................................. 12 26 27 28
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1 American Suzuki Motor Corporation, the above-captioned debtor and debtor in possession 2 (the Debtor), hereby files this Memorandum of Points and Authorities in support of the Motion of 3 Debtor for Order (A) Prohibiting Utility Companies From Altering, Refusing, or Discontinuing 4 Services and (B) Determining Adequate Assurance of Payment for Future Utility Services, and 5 respectively represents as follows: 6 I. 7 BACKGROUND 8 A. 9 The Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334. This is a 10 core proceeding pursuant to 28 U.S.C. 157(b)(2). The venue is proper pursuant to 28 U.S.C.
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Jurisdiction and Venue

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B. 13 14

General Background On the date hereof (the Petition Date), the Debtor filed a voluntary petition for relief under

chapter 11 of title 11 of the United States Code (the Bankruptcy Code). The Debtor continues to 15 operate and manage its affairs as a debtor in possession pursuant to sections 1107(a) and 1108 of the 16 Bankruptcy Code. No trustee, examiner, or committee has been appointed in this chapter 11 case. 17 The Debtor was established in 1986 as the sole distributor in the continental United States of 18 Suzuki automobiles, motorcycles, all-terrain vehicles, and marine outboard engines (the Suzuki 19 Products). Suzuki Motor Corporation (SMC), the 100% interest holder in the Debtor, 20 21 insolvency proceeding. As of the Petition Date, the Debtor has approximately 295 employees across 22 three divisions: automotive (the Automotive Division), motorcycles and all-terrain vehicles (the 23 Motorcycles/ATV Division), and outboard marine motors and related products (the Marine 24 Division). 25 26 27 28
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manufacturers substantially all of the Suzuki Products1 and is not a debtor in this or any other

The ATVs are manufactured by an 80% owned affiliate of the Debtor. An overview of the Suzuki Products manufactured by SMC, its affiliates, and certain unaffiliated entities is included in the Declaration of M. Freddie Reiss, Proposed Chief Restructuring Officer, in Support of Emergency First Day Motions.

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In the operation of its business, the Debtor purchases Suzuki Products from SMC and certain other non-debtor affiliates. In turn, the Debtor wholesales virtually its entire inventory through a network of independently owned and unaffiliated dealerships located throughout the continental United States. The dealers then market and sell the Suzuki Products to retail customers. As of the Petition Date, there are approximately 220 automotive dealerships, over 900 motorcycle/ATV dealerships, and over 780 outboard marine dealerships. Through dealers, the Debtor also sells a portion of its automotive inventory (less than 10%) to car rental companies and others (less than 2%) that lease the vehicles to retail customers. The Debtor also purchases the majority of its automotive parts from SMC and certain unaffiliated companies and resells them to the automotive dealers and authorized warranty service providers. The Debtor determined that its Automotive Division is facing and will continue to face a number of serious challenges in the highly regulated and competitive automotive industry in the continental U.S. market. The challenges include unfavorable foreign exchange rates, disproportionally high and increasing costs associated with meeting more stringent state and federal automotive regulatory requirements unique to the continental U.S. market, low sales volumes, a limited number of models in its line-up, and existing and potential litigation costs. The Debtor has exhausted all available means to reduce the cost of operating the Automotive Division for it to operate profitably. Accordingly, the Debtor determined that the best way to preserve and enhance the value of its overall business is to wind down new sales of the Automotive Division in the continental U.S. and realign its business focus on the long-term growth of its Motorcycles/ATV and Marine Divisions. Contemporaneous with the filing of this case, the Debtor filed a plan of reorganization (the Plan). Under the proposed Plan, the Motorcycles/ATV and Marine Divisions will remain largely unaffected including the warranties associated with such products. As part of its restructuring, NounCo, Inc., a wholly owned subsidiary of SMC, will purchase the Motorcycles/ATV and Marine Divisions and the parts and service components of the Automotive Division. The restructured Automotive Division intends to honor automotive warranties and authorize the sale of genuine

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Suzuki automotive parts and services to retail customers through a network of parts and service only dealerships that will provide warranty services. The Debtors Motorcycles/ATV Division is strong and competitively positioned in its market, allowing for long-term growth as economic conditions improve. Similarly, the Marine Division has remained competitive during the recent challenging economic times and the Debtor is working to further build its market share in the marine industry through continued investment in new product development and resuming large-scale marketing events focused on attracting new marine customers. The strategy embodied in the proposed Plan returns the business to its roots in the U.S. market, which began with motorcycles, and is intended to position the overall business for success in the continental U.S. for the benefit of all parties in interest. The Suzuki name is recognized around the world as a brand of quality products that offer reliability and originality. SMC has informed the Debtor that it continues to invest in its operations, improve its overall performance worldwide, and remains committed to manufacturing Suzuki Products for customers around the world. SMCs manufacturing and world-wide distribution of Suzuki automobiles will continue despite the Debtors wind down of the continental U.S. Automotive Division. Additional factual background regarding the Debtor, including its current and historical business operations and the events precipitating its chapter 11 filing, is set forth in detail in the Declaration of M. Freddie Reiss, Proposed Chief Restructuring Officer, in Support of Emergency First Day Motions (the Reiss Declaration) filed contemporaneously with this Motion and incorporated herein by reference. II. RELIEF REQUESTED By this Motion, the Debtor seeks entry an order, pursuant to section 366 of the Bankruptcy Code, providing the following relief: (a) a determination that (i) a determination that (i) a Utility Deposit made by the Debtor to each Utility Company in an amount equal to two weeks of the Debtors estimated average postpetition monthly cost for prepetition services provided to the Debtor by such Utility Company; (ii) the ability to obtain an initial hearing on the adequacy of the Utility
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Deposit; and (iii) the ability to obtain an expedited hearing regarding additional adequate assurance upon the Debtors failure to cure a default within twenty-one (21) days after written notice of such default, constitute adequate assurance of payment for future utility services; (b) prohibiting the Utility Companies from altering, refusing, or discontinuing services to the Debtor without further order of this Court; and (c) such other and further relief as the Court deems just and proper. A proposed form of order is annexed hereto as Exhibit B. III. THE DEBTORS UTILITY COMPANIES AND PROPOSED UTILITY PROCEDURES A. The Debtors Utility Companies The Debtor receives one or more of its essential utility services from various utility providers (each a Utility Company and collectively the Utility Companies). At this critical time, uninterrupted electricity, gas, local and long distance telephone services, internet services, and other utility services are essential to the ongoing operations of the Debtors business and to the preservation of the value thereof. Any interruption, however brief, in utility services to the Debtor will severely disrupt the Debtors operations. The Debtor routinely pays its regular monthly utility obligations when due. In addition, the Debtors chapter 11 filings occurred during the billing cycles for many, if not all, of the Utility Companies. As a result, there are likely outstanding prepetition amounts owed to the Utility Companies. The Debtor has and will have adequate cash to meet all of its necessary postpetition operating expenses on a current basis, including payments to the Utility Companies. The Debtor has specifically included in its budget amounts for payments to Utility Companies, including the payment of the Utility Deposits. B. The Adequate Assurance Procedures The Debtor proposes to give each of the Utility Companies that requests adequate assurance of payment a cash deposit (the Utility Deposit). The Utility Deposit will equal approximately two weeks of the Debtors estimated average postpetition monthly cost of prepetition services provided to the Debtor by each Utility Company. The average monthly invoice amount was determined by
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averaging the amounts of the twelve most recently received monthly bills from each Utility Company. If the Debtor has not received utility services from the added Utility Company for the twelve months prior to the Petition Date, then the Utility Deposit will be equal to approximately two weeks of the Debtors estimated average postpetition monthly cost for utility consumption from that particular Utility Company. As so calculated, the average monthly invoice amount is listed on Exhibit A (as shown next to each Utility Companys name). The Debtor proposes to pay the Utility Deposits within twenty-one (21) days after the Courts entry of an order granting this Motion. The Debtor seeks to establish reasonable procedures (the Procedures) by which a Utility Company may request adequate assurance of future payment in the form of a Utility Deposit or object to the Procedures in the event the Utility Company believes it is entitled to something different than the Utility Deposit. Such Procedures would provide that: (a) The Debtor will provide a Utility Deposit to any Utility Company that makes

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a request (the Request) for assurance of future payment within twenty-one (21) days after service of an Order granting this Motion. (b) The Request must be filed with the Court and actually received by the

Debtors counsel, Debra I. Grassgreen and John W. Lucas, Pachulski Stang Ziehl & Jones LLP, 10100 Santa Monica Boulevard, 13th Floor, Los Angeles, California 90067, dgrassgreen@pszjlaw.com and jlucas@pszjlaw.com, within twenty-one (21) days after the entry date of the order (the Order) granting this Motion (the Request Deadline). (c) If a Utility Company is not satisfied with the Utility Deposit proposed by the

Debtor, such Utility Company must serve and file with the Court a written response or objection (an Objection) upon the Debtor setting forth the location(s) for which the Utility Company provides services, the account number(s) for such location(s), the outstanding balance for each account, a summary of the Debtors payment history on each account and an explanation of why the Utility Deposit is inadequate assurance of payment; (d) The Objection must be filed with the Court and actually received by the

Debtors counsel, Debra I. Grassgreen and John W. Lucas, Pachulski Stang Ziehl & Jones LLP, 150
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California Street, 15th Floor, San Francisco, California 94111, within twenty-one (21) days after the entry date of the order (the Order) granting this Motion (the Objection Deadline); (e) Without further order of this Court, the Debtor may enter into agreements

granting additional adequate assurance to a Utility Company serving a timely Request if the Debtor, in its discretion, determines that the Request is reasonable; (f) If the Debtor believes that a Request or Objection is unreasonable, it shall,

within fourteen (14) days after the Objection Deadline, file a response (the Response), pursuant to section 366(c)(3) of the Bankruptcy Code, seeking a determination by the Court that the Utility Deposit, plus additional consideration offered by the Debtor, if any, constitutes adequate assurance of payment. (g) Pending entry of an order by the Court resolving the dispute relating to any

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Objection and Response, the Utility Company that is the subject of the unresolved Request may not alter, refuse, or discontinue services to the Debtor or recover or setoff against a prepetition deposit, if any; and (h) The Debtors assurance of future payment shall be deemed satisfied for any

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Utility Company that fails to make a timely Request or Objection. The Debtor reserves the right, without further order of the Court, to supplement the list of Utility Companies attached as Exhibit A if any Utility Company has been omitted. If the Debtor adds a Utility Company to the list after the Court enters the proposed Order, the Debtor will serve a copy of this Motion and the signed Order on any Utility Company that is added to the list (the Supplemental Service). Concurrently with the Supplemental Service, the Debtor will file with the Court a supplement to Exhibit A showing the name of the Utility Company that is being added to the list. In addition, the Utility Company subject to the Supplement Service will have twenty-one days from the date of the Supplemental Service to request a Utility Deposit. If the added Utility Company does not believe that the Utility Deposit received from the Debtor is adequate, the added Utility Company shall deliver a Request by the Request Deadline as it pertains to the Utility Company. If such Request is made, the Procedures outlined above shall apply to its consideration and resolution.
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Additionally, the Debtor proposes that if the Debtor defaults on an obligation to pay a Utility Company for postpetition services and such default is not cured within twenty-one (21) days of the Debtors receipt of written notice of default, then the applicable Utility Company may file a motion requesting that the Debtor furnish further adequate assurance of future payment, and such motion shall be heard on appropriate notice at the next regularly scheduled omnibus hearing before the Court. The Debtor further requests that the order prohibit any Utility Company from altering, refusing, or discontinuing services to the Debtor without further order of this Court. Finally, the Debtor requests that the Order provide that Utility Companies must immediately refund any Utility Deposit (without offset for prepetition claims) in the event that the Debtor terminates the services of any Utility Company and after all postpetition invoices owed by the Debtor to that Utility Company have been paid. The Debtor believes that the immediate refund of a Utility Deposit by a Utility Company whose services have been terminated and whose postpetition bills have been paid is fair and appropriate under the circumstances because the Utility Company would no longer require adequate assurance of the Debtors future performance. Under the circumstances of this case in which the Debtor has no significant outstanding prepetition utility obligations and has already arranged to maintain current payment for postpetition services, the Debtor believes that the proposed Utility Deposits constitute adequate assurance of payment under section 366(c) of the Bankruptcy Code. The Debtor also proposes to further protect the Utility Companies by agreeing to a process whereby the Court will resolve any disputes regarding the adequacy of Utility Deposits or a default by the Debtor, pursuant to which any Utility Company can request additional adequate assurance by demonstrating facts and circumstances with respect to its postpetition services to the Debtor that merit greater protection. IV. ARGUMENT A. Basis for Relief Under section 366(c)(2) of the Bankruptcy Code, utilities may alter, refuse, or discontinue service to the debtor if the debtor has not furnished adequate assurance of payment that is
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satisfactory to the utility within thirty days of the filing of the petition. 11 U.S.C. 366(c)(2).2 This Court, however, has the power to modify the form and amount of the assurance of payment after notice and a hearing. 11 U.S.C. 366(c)(2), (3)(A). The policy underlying section 366 of the Bankruptcy Code is to protect a debtor from utility service cutoffs upon the filing of a bankruptcy case and provide utility companies with adequate assurance that a debtor will in fact pay for postpetition services. See H.R. Rep. No. 595, 95th Cong., 1st Sess. 350 (1978), reprinted in 1978 U.S.C.C.A.N. 5963, 6306. Section 366 of the Bankruptcy Code requires a cash deposit or other enumerated form of security that is adequate, but the Bankruptcy Code does not define what is adequate, except that

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Section 366 of the Bankruptcy Code provides as follows: (a) Except as provided in subsections (b) and (c) of this section, a utility may not alter, refuse, or discontinue service to, or discriminate against, the trustee or the debtor solely on the basis of the commencement of a case under this title or that a debt owed by the debtor to such utility for service rendered before order for relief was not paid when due. (b) Such utility may alter, refuse, or discontinue service if neither the trustee nor the debtor, within 20 days after the date of the order for relief, furnishes adequate assurance of payment, in the form of a deposit or other security, for service after such date. On request of a party in interest and after notice and a hearing, the court may order reasonable modification of the amount of the deposit or other security necessary to provide adequate assurance of payment. (c)(1)(A) For purposes of this subsection, the term assurance of payment means--(i) a cash deposit; (ii) a letter of credit; (iii) a certificate of deposit; (iv) a surety bond; (v) a prepayment of utility consumption; or (vi) another form of security that is mutually agreed on between the utility and the debtor or the trustee. (B) For purposes of this subsection an administrative expense priority shall not constitute an assurance of payment. (2) Subject to paragraphs (3) and (4), with respect to a case filed under chapter 11, a utility referred to in subsection (a) may alter, refuse, or discontinue utility service, if during the 30-day period beginning on the date of the filing of the petition, the utility does not receive from the debtor or the trustee adequate assurance of payment for utility service that is satisfactory to the utility. (3)(A) On request of a party in interest and after notice and a hearing, the court may order modification of the amount of an assurance of payment under paragraph (2). (B) In making a determination under this paragraph whether an assurance of payment is adequate, the court may not consider-(i) the absence of security before the date of the filing of the petition; (ii) the payment by the debtor of charges for utility service in a timely manner before the date of the filing of the petition; or (iii) the availability of an administrative expense priority. (4) Notwithstanding any other provision of law, with respect to a case subject to this subsection, a utility may recover or set off against a security deposit provided to the utility by the debtor before the date of the filing of the petition without notice or order of the court.

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11 U.S.C. 366.
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administrative priority is not sufficient as a form of adequate assurance of payment. 11 U.S.C. 366(c)(1)(B)(C), (3)(B)(iii); see In re Crystal Cathedral Ministries, 454 B.R. 124, 130 (C.D. Cal. 2011) (rejecting the utilitys position that it should be the party to decide which of the enumerated forms of assurance the debtor is required to provide under section 366(c)(1)(A)).. While the form of adequate assurance of payment may be limited under subsection 366(c) of the Bankruptcy Code to the types of security enumerated in subsection 366(c)(1)(A), the amount of the deposit or other form of security remains fully within the reasonable discretion of the Court, subject only to three specific factors that may not be considered by the Court, as listed in subsection 366(c)(3)(B) of the Bankruptcy Code. See 11 U.S.C. 366(b) (On request of a party in interest and after notice and a hearing, the court may order reasonable modification of the amount of the deposit or other security necessary to provide adequate assurance of payment.) and (c)(3)(A) (On request of a party in interest and after notice and a hearing, the court may order modification of the amount of an assurance of payment under paragraph (2).). Accord In re Pacific Gas & Elec. Co., 271 B.R. 626, 644 (N.D. Cal. 2002) (The use of the word may in the second sentence [of section 366(b)] contemplates that the decision of whether to order security lies within the discretion of the Bankruptcy Court.); In re Steinbach, 303 B.R. 634, 641 (Bankr. D. Az. 2004) (Bankruptcy courts are afforded reasonable discretion in determining what constitutes adequate assurance.). Under such subsection, when determining whether an assurance of payment is adequate, the Bankruptcy Court may not consider: (1) whether the debtor had a prepetition deposit; (2) whether the debtor paid its utility bills on time prepetition; or (3) the administrative expense priority afforded utilities postpetition. 11 U.S.C. 366(c)(3)(B). Nothing in section 366(c) of the Bankruptcy Code, however, precludes the Bankruptcy Court from considering other factors that could minimize the amount of the deposit, including (without limitation): (a) the right of the utility to terminate service upon nonpayment,3 (b) the chapter 11 estates liquidity,4 and (c) the estates net worth and ability to pay its postpetition obligations.5
See In re Penn Jersey Corp., 72 B.R. 981, 985 (Bankr. E.D. Pa. 1987) (We note, in this regard that the Court of Appeals has stated that a utility is well-protected, after establishment of adequate assurance, by its remedy to disconnect service as its remedy for non-payment without recourse to the bankruptcy court, even though the debtor is provided with an additional layer of protection arising from any available state utility commission Regulations limiting a utilitys termination rights.).
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For example, the bankruptcy court in Best Products took an approach that appears to parallel the requirements of section 366 of the Bankruptcy Code: A question remains, however, as to [the security deposits] form and amount in this case. The objecting utilities each have demanded a deposit equal to the debtors bill for two months of service. Under section 366, the utilities have a right to the deposit as demanded unless the debtor can show cause to reduce it. Once the debtor proffers a sufficient objection, the court must fix a reasonable security after notice and a hearing. In doing so, the court should consider the debtors payment history, the debtors net worth, and the debtors present and future ability to pay postpetition obligations. Best Products, 203 B.R. 51, 54 (Bankr. E.D. Va. 1996). The court in Best Products approved a deposit of one-half the average monthly bill for the past twelve months for each of the debtors facilities because of factors such as the debtors net worth and present and future ability to pay postpetition obligations. Id. The court in Best Products permitted the debtor to apply prepetition deposits and prepayments to the postpetition deposits required by the courts ruling. Id. at 54 n.2. The Bankruptcy Appellate Panel for the First Circuit approved an apparently one-month deposit that the utility argued would not cover the 13-day period between billing and payment of each months rent even excluding the administrative expense priority from consideration. Massachusetts Electric Co. v. Keydata Corp. (In re Keydata Corp.), 12 B.R. 156, 158 (B.A.P. 1st Cir. 1981) (citation and footnote omitted). The amount of the deposit or other security could be even lower than a two-week amount. Bankruptcy courts should be conservative in providing deposits or other security to utilities to conserve the estates scarce financial resources. See In re Magnesium Corp. of America, 278 B.R. 698, 714 (Bankr. S.D.N.Y. 2002) (In deciding what constitutes adequate assurance in a given case, a bankruptcy court must focus upon the need of the utility for assurance, and to require that the debtor supply no more than that, since the debtor almost perforce has a conflicting need to conserve scarce financial resources.), quoting Virginia Elec. & Power Co. v. Caldor, 117 F.3d 646,

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See In re Agrifos Fertilizer, L.P., 2002 WL 32054779, at *5 (Bankr. S.D. Tex. Nov. 25, 2002) (If a debtor demonstrates . . . evidence of postpetition liquidity, a deposit may not be necessary.) (emphasis added). See Best Products, 203 B.R. at 54 (the court should consider the debtors payment history, the debtors net worth, and the debtors present and future ability to pay postpetition obligations.) (emphasis added).

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650 (2d Cir. 1997) (emphasis in original); Penn Jersey, 72 B.R. at 985 (We believe that, in analysis of what adequate assurance is required of any particular debtor to retain utility service, it is significant to focus upon the need of the utility for assurance, and to require that the debtor supply no more than that, since the debtor almost perforce has a conflicting need to conserve scarce financial resources.). By its terms, section 366 of the Bankruptcy Code, as amended, does not require that the deposit or other security be more than a nominal amount. See Crystal Cathedral, 454 B.R. at 131 (Adequate assurance is not to be confused with actual payment or an absolute guarantee of payment.). Accordingly, the Debtor proposes to make a cash deposit to each of the Utility Companies in an amount equal to approximately two weeks of the Debtors estimated average postpetition monthly cost as to the respective Utility Company. The Debtor believes that such a deposit is more than adequate under the totality of the facts and circumstances. See In re Adelphia Business Solutions, 280 B.R. 63, 82-83, 86 n.127 (Bankr. S.D.N.Y. 2002) (adequate assurance of payment is a fact-driven analysis based on the totality of the facts and circumstances of the case). The Debtor cannot continue to operate without continued utility services. If any of the Utility Providers alter, refuse or discontinue service, even for a brief period, the Debtors business operations would be severely disrupted. In contrast, the Utility Companies will not be prejudiced by the continuation of their services. The Debtor is current on payment to the Utility Companies and continued payment of the Utility Companies is provided for in the Debtors budget. The Utility Companies are further protected by the Utility Deposits and the provisions granting them an expedited hearing if the Debtor fails to cure a payment default within twenty-one (21) days after written notice of such default. Finally, the rights of the Utility Companies will not be prejudiced should the relief requested in this Motion be granted because the Utility Companies are permitted to come before this Court and seek relief according to the Procedures proposed. Additionally, this Court has the authority to grant the relief requested herein pursuant to section 105(a) of the Bankruptcy Code which provides that the Court may issue any order, process or judgment that is necessary or appropriate to carry out the provisions of this title. 11 U.S.C. 105(a). The purpose of section 105(a) is to assure the bankruptcy courts [sic] power to take
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whatever action is appropriate or necessary in aid of the exercise of their jurisdiction. 2 COLLIER ON BANKRUPTCY 105.01, at 105-5 to 105-6 (15th rev. ed. 2009). Because the proposed procedures protect the Debtor without materially prejudicing the Utility Providers, they carry out section 366 in a manner fully consistent therewith and are an appropriate exercise of this Courts authority under section 105(a) of the Bankruptcy Code. V. NOTICE As set forth in the Motion, the Debtor will serve the Motion, this Memorandum of Points and Authorities, and the Reiss Declaration on (a) the Office of the United States Trustee, (b) the creditors appearing on the list filed in accordance with Fed. R. Bankr. P. 1007(d) by the Debtor unless and until an official committee of unsecured creditors (the Committee) is appointed, then in that event, to counsel to the Committee, (c) counsel to Suzuki Motor Corporation, the Debtors prepetition and postpetition lender, and (d) parties that file with the Court and serve upon the Debtor requests for notice of all matters in accordance with Bankruptcy Rule 2002. To the extent necessary, the Debtor requests that the Court waive compliance with Local Bankruptcy Rule 9075-1(a)(5) and approve service (in addition to the means of service set forth in such Local Bankruptcy Rule) by overnight or electronic delivery. In addition, upon scheduling of a hearing on this and other noticed motions filed contemporaneously herewith, the Debtor will serve a notice of hearing on this Motion, which will set forth the deadline for objections thereto. In the event that the Court grants the relief requested by the Motion, the Debtor shall provide notice of the entry of the order granting such relief to each of the foregoing parties and any other parties in interest as the Court directs. The Debtor submits that such notice is sufficient and that no other or further notice be given. VI. CONCLUSION Based upon the foregoing, the Debtor respectfully requests that the Court enter an Order providing the following relief: (a) a determination that a deposit equal to approximately two weeks of the Debtors estimated average postpetition monthly cost prior to the filing of the Case, the ability to obtain an expedited hearing twenty-one (21) days after the Debtor receives notice of a default and
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does not cure that default, and the other Procedures outlined in the Motion and this Memorandum constitute adequate assurance of payment for future utility services as contemplated by sections 366(b) and (c)(3)(A) of the Bankruptcy Code; (b) prohibiting each of the Utility Companies from altering, refusing, or discontinuing services to the Debtor without further order of this Court; (c) requiring any Utility Company whose services are terminated by the Debtor to immediately refund a Utility Deposit (with no offset for prepetition claims) provided that all postpetition invoices have been paid, and (d) such other and further relief as the Court deems just and proper. Dated: November 5, 2012 PACHULSKI STANG ZIEHL & JONES LLP By: /s/ Debra I. Grassgreen Richard M. Pachulski James I. Stang Dean A. Ziehl Linda F. Cantor Debra I. Grassgreen Proposed Attorneys for Debtor and Debtor in Possession

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EXHIBIT A (Utility Companies)

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UTILITY COMPANIES
TYPE OF UTILITIES PROPOSED ADEQUATE ASSURANCE PAYMENT

VENDOR NAME
AT&T PO BOX 769 ARLINGTON, TX 76004 Attn: BANKRUPTCY DEPARTMENT T: 800-404-4474 F: 888-826-0132 CITY OF BREA 1 CIVIC CENTER CIRCLE BREA, CA 92822-2237 Attn: CAROL HOFSTEDDER T: 714-990-7687 F: 714-671-4484 CITY OF ORANGE 300 E. CHAPMAN ORANGE, CA 92866 Attn: CUSTOMER SERVICE T: 714-744-2233 F: 714-744-2273 CITY OF WIXOM 2041 CHARMS WIXOM, MI 48393 Attn: RICHARD BACON T: 248-624-6421 F: 248-960-6586 COBB COUNTY WATER SYSTEM 660 SOUTH COBB DRIVE MARIETTA, GA 30060 Attn: STEVE McCULLERS T: 770-423-1000 F: 770-419-6224 COBB ELECTRIC MEMBERSHIP CORPORATION 1000 EMC PARKWAY MARIETTA, GA 30060 T: 770-429-2100 CONSUMERS ENERGY 3201 E. Court Street Flynt, MI 48506 Attn: MARY T: 810-760-3346 F: 810-760-3534 DTE ENERGY 1 ENERGY PLAZA 2120 WCB DETROIT, MI 48226 T: 800-332-9164 F: 313-235-4595

ACCOUNT NUMBER

831-000-1349 001 831-000-1416 139

Telephone

$300.00

132-4780-00 132-4790-00

Water

$2,100.00

00056483-00

Water

$45.00

183336010

Water

$60.00

000300225-02339289 000300225-02339263

Water

$475.00

2447380000

Electric

$3,500.00

1000 0012 3883

Gas

$725.00

0002-1717-4

Electric

$2,050.00

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VENDOR NAME
GAS SOUTH LLC P O BOX 530552 ATLANTA, GA 30353-0552 Attn: CUSTOMER SERVICE T: 877-472-4932 F: 888-994-5233 MERRILL & ASSOCIATES INC. P.O. BOX 279 BREA, CA 92822-0279 T: 800-253-3111 F: 888-437-1433 PENNSYLVANIA-AMERICAN WATER CO PO BOX 578 ALTON, IL 62002 T: 800-565-7292 F: 618-433-4677 PPL ELECTRIC UTILITIES 827 HAUSMAN ROAD ALLENTOWN, PA 18104-9392 Attn: CUSTOMER SERVICE T: 800-342-5775 F: 484-634-3484 SOUTHERN CALIFORNIA EDISON CO. 1551 SAN BERNADINO ROAD COVINA, CA 91722 Attn: BANKRUPTCY GROUP T: 800-655-4555 F: 626-967-8236 THE GAS COMPANY PO BOX 30337 LOS ANGELES, CA 90030 Attn: BANKRUPTCY DEPARTMENT T: 800-427-1167 F: 213-244-8344 UGI UTILITIES, INC 225 MORGANTOWN ROAD READING, PA 19611-1049 Attn: VICKIE OR JUDY T: 800-276-2722 F: 610-736-5803 UPPER ALLEN TOWNSHIP 100 GETTYSBURG PIKE MECHANICSBURG, PA 170550756 Attn: LOU FAZEKAS T: 717-766-0756 F: 717-796-9833

ACCOUNT NUMBER

TYPE OF UTILITIES

PROPOSED ADEQUATE ASSURANCE PAYMENT

9657551000

Gas

$1,050.00

AME016

VOIP Telephone

$25,000.00

24-1540842-2

Water

$650.00

12888-36001

Electric

$3,000.00

2-10-441-0048 (Brea HQTR) 2-30-972-4789 (Manzanita house) 2-33-323-9242 (Hillman house) 2-34-185-5773 (Cerritos land)

Electric

$11,650.00

102 312 0600 3 (Brea HQTR) 071 010 4704 6 (Manzanita house) 037 710 0151 2 (Hillman house)

Gas

$435.00

212703929907

Gas

$785.00

5100256008

Sewer

$785.00

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VENDOR NAME
YORBA LINDA WATER DISTRICT 1717 E. MIRALOMA AVE. PLACENTIA, CA 92870 Attn: RACHAEL PADILLA T: 714-701-3000 F: 714-701-3058

ACCOUNT NUMBER

TYPE OF UTILITIES

PROPOSED ADEQUATE ASSURANCE PAYMENT

966268-117600

Water

$55.00

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EXHIBIT B (Proposed Order)

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Richard M. Pachulski (CA Bar No. 90073) James I. Stang (CA Bar No. 94435) Dean A. Ziehl (CA Bar No. 84529) Linda F. Cantor (CA Bar No. 153762) Debra I. Grassgreen (CA Bar No. 169978) PACHULSKI STANG ZIEHL & JONES LLP 10100 Santa Monica Blvd., Suite 1300 Los Angeles, CA 90067-4114 Telephone: 310/277-6910 Facsimile: 310/201-0760 E-mail: rpachulski@pszjlaw.com jstang@pszjlaw.com dziehl@pszjlaw.com lcantor@pszjlaw.com dgrassgreen@pszjlaw.com Proposed Attorneys for Debtor and Debtor in Possession UNITED STATES BANKRUPTCY COURT CENTRAL DISTRICT OF CALIFORNIA SANTA ANA DIVISION In re: Case No.: 12-_____ ( ) Chapter 11 ORDER APPROVING DEBTORS MOTION FOR ORDER (A) PROHIBITING UTILITY COMPANIES FROM ALTERING, REFUSING, OR DISCONTINUING SERVICE, AND (B) DETERMINING ADEQUATE ASSURANCE OF PAYMENT FOR FUTURE UTILITY SERVICES Upon the motion (the Motion)2 of the above-captioned debtor and debtor in possession (the Debtor) for entry of an order (this Order), pursuant to section 366 of the Bankruptcy Code, providing the following relief: (a) a determination that (i) a Utility Deposit (as defined below) provided by the Debtor to a Utility Company (as defined below) that makes a timely request for such deposit; (ii) the ability to obtain an initial hearing on the adequacy of the Utility Deposit; and (iii) the ability to obtain an expedited hearing regarding additional adequate assurance upon the Debtors failure to cure a default within twenty-one (21) days after written notice of such
The last four digits of the Debtors federal tax identification number are 8739. The Debtors address is: 3251 East Imperial Highway, Brea, CA 92821.
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13 14 15 Debtor. 16 17 18 19 20 21 22 23 24 25 26 27 28 American Suzuki Motor Corporation,1

Capitalized terms not defined herein shall have the meanings used in the Motion.

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default, constitute adequate assurance of payment for future utility services; (b) prohibiting the Utility Companies from altering, refusing, or discontinuing services to the Debtor without further order of this Court; and (c) such other and further relief as the Court deems just and proper, as set forth in greater detail in the Motion; and the Court having jurisdiction to consider the Motion and the relief requested therein pursuant to 28 U.S.C. 157 and 1334; and consideration of the Motion and the relief requested therein being a core proceeding pursuant to 28 U.S.C. 157(b)(2); and venue being proper pursuant to 28 U.S.C. 1408 and 1409; and it appearing that the relief requested in the Motion is in the best interests of the Debtors estate, its creditors, and all other parties in interest; and the Debtor having provided appropriate notice of the Motion and the opportunity for a hearing on the Motion under the circumstances and no other or further notice need be provided; and the Court having reviewed the Motion and having heard the statements in support of the relief requested therein at a hearing before the Court (the Hearing); and the Court having considered the Motion, all pleadings and papers filed in connection with the Motion, including the Declaration of M. Freddie Reiss, Proposed Chief Restructuring Officer, in Support of Emergency First Day Motions and the Memorandum of Points and Authorities filed in support of the Motion, and the arguments of counsel and evidence proffered at the hearing on the Motion; after due deliberation and sufficient cause appearing therefor, it is HEREBY ORDERED THAT: 1. 2. The Motion is GRANTED. Utility Companies are hereafter prohibited from altering, refusing, or discontinuing

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service to the Debtor unless the Court issues an order authorizing such action. 3. Deposits made by the Debtor to the Utility Companies within twenty-one (21) days

after entry of this order (the Utility Order) in an amount equal to equal to approximately two weeks of the Debtors estimated average postpetition monthly cost prior to the filing of the Case along with the Procedures (defined below), constitute adequate assurance of payment for future utility services from the Utility Companies. 4. In the event that a Utility believes that its Utility Deposit does not provide

satisfactory adequate assurance, the Court approves the following procedures by which such Utility may request further adequate assurance of future payment (the Procedures):
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(a)

The Debtor will provide a Utility Deposit to any Utility Company that makes

a request (the Request) for assurance of future payment within twenty-one (21) days after service of an Order granting this Motion. (b) The Request must be actually received by the Debtors counsel, Debra I.

Grassgreen and John W. Lucas, Pachulski Stang Ziehl & Jones LLP, 150 California Street, 15th Floor, San Francisco, California 94111, within twenty-one (21) days after the entry date of the Utility Order (the Request Deadline). (c) If a Utility Company is not satisfied with the Utility Deposit proposed by the

Debtor, such Utility Company must serve and file with the Court a written response or objection (an Objection) upon the Debtor setting forth the location(s) for which the Utility Company provides services, the account number(s) for such location(s), the outstanding balance for each account, a summary of the Debtors payment history on each account and an explanation of why the Utility Deposit is inadequate assurance of payment; (d) The Objection must be filed with the Court and actually received by the

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Debtors counsel, Debra I. Grassgreen and John W. Lucas, Pachulski Stang Ziehl & Jones LLP, 10100 Santa Monica Boulevard, 13th Floor, Los Angeles, California 90067, dgrassgreen@pszjlaw.com and jlucas@pszjlaw.com, within twenty-one (21) days after the entry date of the Utility Order granting this Motion (the Objection Deadline); (e) Without further order of this Court, the Debtor may enter into agreements

granting additional adequate assurance to a Utility Company serving a timely Request, if the Debtor, in its discretion, determines that the Request is reasonable; (f) If the Debtor believes that a Request or Objection is unreasonable, it shall,

within fourteen (14) days after the Objection Deadline, file a response (the Response), pursuant to section 366(c)(3) of the Bankruptcy Code, seeking a determination by the Court that the Utility Deposit, plus additional consideration offered by the Debtor, if any, constitutes adequate assurance of payment. (g) Pending entry of an order by the Court resolving the dispute relating to any

Request or Objection and Response, the Utility Company that is the subject of the unresolved
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Request or Objection may not alter, refuse, or discontinue services to the Debtor or recover or setoff against a prepetition deposit, if any; and (h) The Debtors assurance of future payment shall be deemed satisfied for any

Utility Company that fails to make a timely Request or Objection shall be deemed. 5. The Utility Companies are prohibited from altering, refusing, or discontinuing

services to the Debtor without further order of this Court. 6. Any Utility Company whose services are terminated by the Debtor shall

immediately refund the Utility Deposit (with no offset for prepetition claims) provided that all postpetition invoices have been paid. 7. This Court shall retain jurisdiction with respect to all matters arising from or related

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to the implementation of this Order. ###

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