You're viewing Docket Item 594 from the case Arrow Air, Inc.. View the full docket and case details.

Download this document:




Case 10-28831-AJC Doc 594 Filed 06/03/11 Page 1 of 4

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE SOUTHERN DISTRICT OF FLORIDA

MIAMI DIVISION
www.flsb.uscourts.gov




In re:

ARROW AIR, INC. AND
ARROW AIR HOLDINGS CORP.




Debtors.











)
)
)
)
)
)
)
)
)



Chapter 11
Case No. 10-28831-AJC
Case No. 10-28834-AJC

(Jointly Administered under
Case No. 10-28831-AJC)










RESPONSE AND OBJECTION TO MOTION FOR TURNOVER
OF SECURITY DEPOSIT IN AID OF IMPLEMENTATION OF

THE AMENDED JOINT PLAN OF THE DEBTORS



JW Acquisition, Inc. ("JWA"), by and through undersigned counsel, hereby files this

Response and Objection (the "Objection") to the Motion for Turnover of Security Deposit in Aid

of Implementation of the Amended Joint Plan of the Debtors [ECF No. 582] (the "Motion"). In

support hereof, JWA respectfully submits as follows:

1.

The Motion must be denied for at least two independent reasons. First, the

Motion is procedurally deficient. By the Motion, Reorganized Holdings1 and MP III seek

turnover of the Security Deposit pursuant to, among other sections, section 542 of the

Bankruptcy Code. See Motion, ¶15. It is beyond dispute that actions for turnover of estate

property must be brought by the commencement of an adversary proceeding pursuant to Fed. R.


1 Capitalized terms used, but not defined herein, shall have the meanings set forth in the Motion.

Case 10-28831-AJC Doc 594 Filed 06/03/11 Page 2 of 4

Bank. P. 7001(1).2 See In re Perkins, 902 F.2d 1254, 12458 (7th Cir. 1990); In re Estes, 185 B.R.

745 (Bankr. W.D. Ky 1995). Thus, the Motion must be denied on this ground alone.3

2.

Second, JWA, as assignee of the MIA Ground Lease, obtained all of the Debtors'

right, title and interest in and to such Lease, including the Security Deposit. The attempt by

Reorganized Holdings and MP III to suggest that the Bid Proposal limited JWA's rights in and to

the Security Deposit is belied by the Assumption Order and the Consent Agreement attached

thereto.

3.

The Assumption Order explicitly approved the Consent Agreement and

authorized the Arrow Air, Inc. to enter into such Agreement. See Assumption Order, ¶3.

Pursuant to Paragraph 7 of the Consent Agreement, and subject to the terms and conditions of

the Consent Agreement, JWA agreed to replenish the security deposit in respect of the Bldg 711

Lease pursuant to section 3.04 of the Bldg 711 Lease in the amount of $179,720.25. With

respect to the MIA Ground Lease, JWA agreed to "maintain with MDAD the security deposit

required by [MIA] Ground Lease, as such security deposit may change under the terms of the

[MIA] Ground Lease." See Ex. A. to Assumption Order, ¶7 (emphasis added).

4.

Thus, whereas JWA was obligated to affirmatively pay (i.e., replenish) the

security deposit with respect to the Bldg 711 Lease, which was necessary because the lessor


2 Fed. R. Bankr. P. 7001(1) provides that "a proceeding to recover money or property" is an adversary proceeding.
3 Indeed, under 11th Circuit law, turnover proceedings may be used only in respect of "money due to the debtor
without dispute which are fully matured and payable on demand." See In re Charter Co., 913 F.2d 1575 (11th Cir.
1990).

MIAMI 2566861.1 7906833426

2

Case 10-28831-AJC Doc 594 Filed 06/03/11 Page 3 of 4

thereunder applied the security deposit as a result of the Debtors' pre-petition default, JWA was

only obligated to maintain the Security Deposit on the MIA Ground Lease.4

5.

The distinction in the selection of words in paragraph 7 of the Consent Agreement

is critical to the analysis. Under the terms of the MIA Ground Lease, the required security

deposit is equal to two times the monthly rental as determined based upon the annual rental

charge (the "Annual Rental"), which may fluctuate on a yearly basis. See §§4.1 and 4.2 of the

MIA Ground Lease. Thus, by the terms of the Consent Agreement, JWA agreed, and is required

to pay any additional amounts in respect of the Security Deposit as it is calculated over the term

of the MIA Ground Lease. However, there was simply no agreement by JWA, nor the Debtors

for that matter, for the Security Deposit to be returned to MDAD and to have the full amount

"replenished" by JWA

6.

Lastly, pursuant to the terms of the Plan, the Collateral Assets assigned to MP III

were those owned by the Debtors "as of the Effective Date" of the Plan. The Assumption Order

and the Consent Agreement were approved prior to the Effective Date of the Plan and, thus, by

the time of the assignment to MP III, the Debtors no longer held any right, title or interest in or to

any property comprising the MIA Ground Lease.





[Signature Page Follows]


4 It is also worth noting that while JWA has paid its 50% share of the Cure in respect of the MIA Ground Lease,
Reorganized Holdings and MP III have failed to pay their 50% share.

MIAMI 2566861.1 7906833426

3

Case 10-28831-AJC Doc 594 Filed 06/03/11 Page 4 of 4

WHEREFORE, JWA respectfully requests that the Court deny the Motion and for such

other relief that the Court deems just and appropriate.


Dated: June 3, 2011
















































































BILZIN SUMBERG BAENA
PRICE & AXELROD LLP
Jay M. Sakalo
1450 Brickell Avenue, Suite 2300
Miami, Florida 33131-2336
Telephone: (305) 374-7593

By:
/s/ Jay M. Sakalo
Florida Bar No. 0156310
[email protected]



MIAMI 2566861.1 7906833426

4