Hearing Date: August 25, 2010, at 11:00 a.m.

Eastern time

DECHERT LLP 1095 Avenue of the Americas New York, New York 10036-6797 Telephone: (212) 698-3500 Facsimile: (212) 698-3599 Michael J. Sage Brian E. Greer Nicole B. Herther-Spiro Attorneys for Lehman ALI Inc. UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ------------------------------------------------------------ X : In re: : Chapter 11 : INNKEEPERS USA TRUST, et al. : Case No.: 10-13800 : Debtors. : Jointly Administered : ------------------------------------------------------------ X LEHMAN ALI INC.S RESPONSE TO THE MOTION OF THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF INNKEEPERS USA TRUST, ET AL. FOR AN ORDER PERMITTING THE COMMITTEE TO CONDUCT RULE 2004 DISCOVERY OF INNKEEPERS USA TRUST ET AL. AND OTHER PARTIES

Lehman ALI Inc. (Lehman), submits this Response (this Response) to the Motion of the Official Committee of Unsecured Creditors of Innkeepers USA Trust, et al. (the Committee) for an Order Permitting the Committee to Conduct Rule 2004 Discovery of Innkeepers USA Trust et al. and Other Parties [Dkt. No. 222] (the 2004 Motion), and respectfully states as follows: Preliminary Statement By the 2004 Motion, the Committee is primarily seeking to conduct discovery related to the transaction that took place in 2007, through which Apollo Investment Corporation (AIC) acquired ownership of the Debtors (the 2007 Transaction). The Committee is also seeking

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discovery regarding all secured claims to evaluate the validity, priority and extent of all security interests claimed by the Debtors major secured creditors to determine if any deficiencies are present. 2004 Motion, pp.2-3. Lehmans role in the 2007 Transaction was as a new lender to the Debtors as an originator of certain loans. 1 Although it is the prerogative of the Committee to investigate potential causes of action of the estate pursuant to Rule 2004, Lehman does not believe that this particular fishing expedition will yield any catch. Nevertheless, Lehman is prepared to consent to reasonable discovery pursuant to Rule 2004, so long as the scope is not overbroad and the request is not unduly burdensome. As such, Lehman submits this response to the 2004 Motion requesting that (i) the scope of discovery sought by the Committee shall be narrowed and (ii) the Committee shall be required to first seek production from the Debtors and AIC before turning to Lehman (as Lehmans document production would be mostly if not wholly duplicative of the document production of the Debtors and AIC). Background 1. On July 19, 2010 (the Petition Date), the Debtors filed voluntary petitions for

relief under chapter 11 of Title 11 of the United States Code (the Bankruptcy Code) in the United States Bankruptcy Court for the Southern District of New York. These chapter 11 cases (the Chapter 11 Cases) are being jointly administered in this Court. 2. The Debtors have remained debtors in possession under sections 1107 and 1108

of the Bankruptcy Code since the Petition Date. The Committee was appointed on July 28, 2010. As of the date of this filing, no trustee or examiner has been appointed in the Chapter 11 Cases.

With the exception of the obligations under the Floating Rate Loan Agreement, these loans were either sold to securitization trusts on the commercial mortgage-backed securities market or pledged to certain collateralized debt obligation trusts.

3.

Twenty 2 of the Debtors (each, a Floating Rate Debtor and together, the

Floating Rate Debtors) are borrowers under that certain Loan Agreement, dated as of June 29, 2007, in the original principal amount of $250,000,000.00, between and among the Floating Rate Debtors, as borrowers, and Lehman, as lender (as amended, the Floating Rate Loan Agreement).3 The Floating Rate Debtors obligations under the Floating Rate Loan Agreement are secured by 20 separate mortgages that each grant Lehman a first lien mortgage on the applicable hotel property, a lien on all cash, accounts and proceeds of the applicable borrower, and an absolute assignment of rents of the applicable hotel property. Response 4. The scope of discovery under Rule 2004 is broad, but it is not without limits. The

bankruptcy court has the discretion to carefully limit or define the scope of examination and narrow over-reaching discovery requests. See In re Drexel Burnham Lambert Group, Inc., 123 B.R. 702, 712 (Bankr. S.D.N.Y. 1991) (although Rule 2004 has been compared to a fishing expedition, the net, in the discretion of the Court, can be carefully stitched to limit its catch). A Rule 2004 discovery request should not encompass matters that will be unduly burdensome . . . and duplicative of previously furnished information. In re Texaco, Inc., 79 B.R. 551, 553 (Bankr. S.D.N.Y. 1987). In cases where the cost and disruption to the examinee

The Floating Rate Debtors are: (1) KPA/GP Valencia LLC; (2) Grand Prix West Palm Beach LLC; (3) KPA/GP Ft. Walton Beach LLC; (4) Grand Prix Ft. Wayne LLC; (5) Grand Prix Indianapolis LLC; (6) KPA/GP Louisville (HI) LLC; (7) Grand Prix Bulfinch LLC; (8) Grand Prix Woburn LLC; (9) Grand Prix Rockville LLC; (10) Grand Prix East Lansing LLC; (11) Grand Prix Grand Rapids LLC; (12) Grand Prix Troy (Central) LLC; (13) Grand Prix Troy (SE) LLC; (14) Grand Prix Atlantic City LLC; (15) Grand Prix Montvale LLC; (16) Grand Prix Morristown LLC; (17) Grand Prix Albany LLC; (18) Grand Prix Addison (SS) LLC; (19) Grand Prix Harrisburg LLC; (20) Grand Prix Ontario LLC. The Floating Rate Loan Agreement originally included three additional borrowers (Grand Prix Wichita LLC, Grand Prix Columbus LLC and Grand Prix Tallahassee LLC), which borrowers were subsequently released from their obligations under the Floating Rate Loan Agreement, in accordance with the terms of the Floating Rate Loan Agreement.

attendant to a requested examination outweigh the benefits to the examiner, the request should be denied. In re Express One Intl, Inc., 217 B.R. 215, 216 (Bankr. E.D. Tex. 1998). 5. Although Lehman does not object to submitting to a Rule 2004 examination or

producing documents in response to a Rule 2004 document request, the scope of such exam or document request must be reasonable and not unduly burdensome. Lehman is willing to

promptly produce the closing binder related to the 2007 Transaction and subsequent executed documentation related to the Floating Rate Loan. However, given Lehmans role, as a new thirdparty lender, in the 2007 Transaction, before the Committee seeks any further document production from Lehman, it would be reasonable and appropriate to require the Committee to first pursue document requests issued to the Debtors and AIC. A Rule 2004 document request should not be duplicative of previously furnished information, and there can be very little relevant documentation that Lehman possesses that would not also be in the Debtors or AICs possession. 6. Any Rule 2004 document request directed to Lehman must be narrowed to

include only documents relevant to the particular issues the Committee is seeking to investigate and documents that the Committee cannot obtain from the Debtors or AIC. The proposed Lehman document request attached to the Committees 2004 Motion is unjustifiably broad. For example, in the first of nine proposed requests, the Committee seeks: All documents relating to the 2007 Transaction or any agreements relating thereto. Given the two-page definition of document, this single request could easily result in tens of thousands of pages, and it would be unduly burdensome for Lehman to comply with such a request. 7. The Committee also proposes to examine Lehman regarding both (i) [t]he

negotiation and financing (debt and equity) of the 2007 Transaction, and (ii) [a]ny loan

agreements between Lehman and the Debtors including, but not limited to the Fixed Rate Mortgage Loan Agreement dated June 29, 2007 and the Floating Rate Mortgage. Lehman objects to the scope of examination to the extent it seeks information not reasonably known by Lehman. For example, the Fixed Rate Mortgage Loan Agreement referred to in the request was

sold in the commercial mortgage-backed securities market shortly following the 2007 Transaction, and Lehman would have no knowledge about the loan after such sale. 8. Lehman reserves the right to assert further and additional arguments in response

to the 2004 Motion, including at the hearing, and reserves its right to object in any way to any Rule 2004 subpoena directed at Lehman. WHEREFORE, for the foregoing reasons, Lehman respectfully requests that the Court (i) limit the scope of permissible discovery under the 2004 Motion, (ii) require the Committee to first seek production from the Debtors and AIC before seeking production from Lehman, and (iii) grant Lehman such other and further relief as the Court deems appropriate. Dated: New York, New York August 24, 2010 DECHERT LLP

By:/s/ Michael J. Sage Michael J. Sage Brian E. Greer Nicole B. Herther-Spiro 1095 Avenue of the Americas New York, New York 10036 Telephone: (212) 698-3500 Facsimile: (212) 698-3599