UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWAR E In Re: MERVYN S HOLDINGS, LLC, et al.,1 Debtors.

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

Objection Deadline: November 18, 2008 at 4:00 p.m. Hearing Date: November 25, 2008 at 10:00 a.m.

MOTION OF PILOT POWER GROUP, INC. FOR ALLOWANCE AND IMMEDIATE PAYMENT OF ITS ADMINISTRATIVE CLAIM PURSUANT TO 11 U.S.C. 503(b)(9) Pilot Power Group, Inc. ( Pilot ), by and through its undersigned counsel, hereby respectfully submits this Motion of Pilot Power Group, Inc. for Allowance and Immediate Payment of Its Administrative Claim (the Motion ), and requests entry of an Order, pursuant to 11 U.S.C. 503(b)(9), directing the allowance and payment of its administrative expense claim under 11 U.S.C. 503(b)(9) in the amount of $578,825.06. In support of this Motion, Pilot respectfully asserts the following: JURISDICT ION 1. This Court has jurisdiction to consider this Motion pursuant to 28 U.S.C. 157

and 1334. This is a core proceeding pursuant to 28 U.S.C. 157(b). Venue of this Motion is proper pursuant to 28 U.S.C. 1408 and 1409. 2. The statutory predicate for relief requested herein is 503(b)(9) of the Bankruptcy

Code directing allowance as an administrative claim of the value of goods delivered to the Debtor during the twenty (20) days preceding the Petition Date.

The Debtors in these cases, along with the last four digits of their federal tax identification numbers, are Mervyn s Holdings, LLC (7931), Mervyn s LLC (4456) and Mervyn s Brands, LLC (8850).

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BACKGROUND 3. On July 29, 2008, (the Petition Date ) the Debtors filed with this Court their

voluntary petitions for relief under Chapter 11 of title 11 of the United States Code ( Bankruptcy Code ). 4. Pursuant to 1107 and 1108 of the Bankruptcy Code, the Debtors are continuing

to operate their businesses and manage their properties and assets as debtors in possession. 5. Pilot Power is an Electricity Service Provider ( ESP ) in California and a Retail

Electric Provider ( REP ) in Texas (each state uses its own unique names, although the functions of ESP and REP are essentially identical). In essence, rather than the Debtors being compelled to purchase their electricity from a monopoly Investor Owned Utility, the Debtors have the ability to purchase their electricity in California and Texas from a number of competing electricity providers, including Pilot. Since approximately May 2008, Pilot has been the

electricity provider for Debtors eligible stores in California, providing the electricity consumed at such stores. PILOT S 503(b)(9) ADMINISTRATIVE EXPENSE CLAIM 6. During the twenty (20) days preceding the Petition Date, Pilot provided electricity

to the Debtors for which Pilot has not been paid. 7. The total amount due and owing to Pilot on account of the electricity ( Goods )

received by the Debtors in the twenty (20) days preceding the Petition Date is $578,825.06. Attached hereto as Exhibit A is the Affidavit of Ian M. Middleton In Support Of Motion Of Pilot Power Group, Inc. For Allowance And Immediate Payment Of Its Administrative Claim, detailing the Goods received by the Debtors during the twenty days preceding the Petition Date. 8. The power sold and delivered by Pilot, and received by Mervyns, was in the

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ordinary course of both the Debtors and Pilot s business, pursuant to the Electricity Service Contract (the Contract ) dated March 27, 2008, by and between Pilot and Mervyns LLC. RELIEF REQUESTED 9. By this motion, Pilot seeks allowance and payment of its administrative claim in

the amount of $578,825.06, pursuant to 11 U.S.C. 503(b)(9) and 507(a)(2). 10. Section 503(b)(9) provides [a]fter notice and a hearing, there shall be allowed (9) the value of any goods received by the debtor within

administrative expenses including,

twenty (20) days before the date of commencement of a case under this title in which the goods have been sold to the debtor in the ordinary course of such debtors business. 11. 12. Pilot satisfies each statutory requirement for a Section 503(b)(9) claim. First, that the electricity delivered by Pilot to the Debtors constitutes goods is

beyond dispute. The Bankruptcy Code does not define the term goods . Where the Bankruptcy Code is silent, and no uniform bankruptcy rule is required, the rights of the parties are governed by the underlying non-bankruptcy law. See Butner v. United States, 440 U.S. 48, 55, 99 S.Ct. 914, 918, 59 L.Ed.2d 136 (1979). The applicable non-bankruptcy law includes the Contract, as well as California law. Paragraph 11 of the Contract between Pilot and the Debtors states: THE CONTRACT MUST BE CONSTRUED AND ITS PERFORMANCE ENFORCED UNDER THE LAWS OF THE STATE OF CALIFORNIA, EXCLUDING ANY CHOICE OF LAW RULES THAT WOULD OTHERWISE REQUIRE THE APPLICATION OF LAWS OF ANOTHER JURISDICTION. Notwithstanding the laws of the State of California to the contrary, the Parties agree that (i) Power is a good as such term is defined in the Uniform Commercial Code of the State of California, and (ii) all of the provisions of the Uniform Commercial Code of the State of California shall apply to this Transaction. Each Party further agrees that the other Party is not a utility as such term is used in 11 U.S.C. Section 366, and each Party agrees to waive and not to assert the applicability of the provisions of 11 U.S.C. Section 366 in any bankruptcy proceeding involving such Party. Thus, the Parties have agreed that electricity is a good. 3
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13.

In addition, however, California law is well settled on this issue: electricity is a

product and a good. See In re Pacific Gas & Electric Company, 271 Bankr. 626, 639 (N.D. Cal. 2002) ( The Court here finds that the U.C.C. does apply California courts have consistently found that electricity is a product or good. ); see also Pierce v. Pacific Gas & Elec. Co., 166 Cal.App.3d 68, 82, 212 Cal.Rptr. 283 (Cal.Ct.App. 1985) ( As the Supreme Court of Wisconsin Aptly put it, The distribution might well be a service, but the electricity itself, in the contemplation of the ordinary user, is a consumable product. ); Id. at 86 fn.12 ( In light of our holding in part I, ante, that electricity is a product for purposes of strict liability in tort we assume arguendo that electricity may also be considered a good for purposes of the California Uniform Commercial Code ); Mancuso v. Southern California Edison Co., 232 Cal.App.3d

88, 100-101, 283 Cal.Rptr. 300 (Cal.Ct.App. 1991) ( We also reject Edison s claim that electricity is solely service and not a product. This issue was put to rest in California by Pierce, Electricity which has passed through the consumer s meter has been sold and delivered.

It is in the stream of commerce. It has been marketed. Such a transaction constitutes the sale of a product 14. ). The electricity sold by Pilot which passed through the Debtors meters and was

consumed by the Debtors during the twenty (20) days preceding the Petition Date constitutes goods received by the Debtors during such 20-day period giving rise to a Section 503(b)(9) administrative claim. 15. Second, the value of the electricity or goods received by Debtors during the 20-

day period preceding the Petition Date is established by the Affidavit of Ian M. Middleton, attached hereto as Exhibit A , as $578,825.06. As explained by Mr. Middleton, the electricity provided by Pilot to the Debtors that is the subject of this Motion was procured by Pilot from the

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imbalance energy market operated by the California Independent System Operator ( CAISO ). The CAISO sets the market price for imbalance energy and the related ancillary services required to move all electricity through the transmission and distribution system to the Debtors facilities. Pilot s administrative expense claim in the amount of $578,825.06, therefore, includes all the relevant charges for the electricity consumed by the Debtors during the 20-day period preceding the Petition Date. 16. Third, the electricity/goods sold to the Debtors were sold in the ordinary course of

the Debtor s business. For as long as the Debtors have been operating their business, they have been procuring electricity as a necessary component of their business either from the local utility, or from an alternate retail electricity provider such as Pilot. Without electricity, it would be virtually impossible for the Debtors to conduct their business. As noted above, the Debtors entered into the Contract in March 2008 in the ordinary course of their business in order to obtain the benefits of the electricity procurement model offered by Pilot. 17. Thus, Pilot easily satisfies all the requirements for the allowance of their claim

under 11 U.S.C. Section 503(b)(9). 18. In addition, however, the Court should require the Debtors to make immediate

payment of Pilot s administrative priority claim. As noted by this Court in In re Global Home Products, LLC, 2006 Bankr. LEXIS 3608, at *10 (Bankr. D. Del. Dec. 21, 2006), the timing of the payment of [an] administrative expense claim is left to the discretion of the Court. In In re

Garden Ridge Corp., 323 Bankr. 136, 143 (Bankr. D. Del. 2005), the court considered three factors in determining how to exercise its discretion on the timing of payment of an administrative expense claim: a) the prejudice to the debtors; b) the hardship to the claimant; and c) potential detriment to other creditors.

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19.

Pilot is informed and believes that the Debtors would not be prejudiced by The Debtors are not reorganizing, but

immediate payment of Pilot s administrative claim.

instead are liquidating all of their assets. The Debtors, therefore, do not need to hoard cash for reorganization efforts. 20. Pilot, on the other hand, has already been required to pay approximately

$571,000.00 in hard costs to the CAISO and to various tax authorities on account of the electricity delivered to the Debtors during the 20-day period preceding the Petition Date. Pilot is a small, closely held company of 9 total employees. The outlay by Pilot of the above sums, without receiving the corresponding payment owed from the Debtors, wipes out the net profits earned by Pilot for the first six months of 2008. 21. Pilot is further informed and believes that immediate payment of its

administrative expense claim would neither prejudice nor be detrimental to other claimants. As this Court is aware, the Debtors have already paid numerous 503(b)(9) claimants in full as critical vendors . Other administrative claimants also receive payments from the Debtors on a regular and frequent basis. Payment of Pilot s administrative expense claim now would merely put Pilot in the same position as these other claimants. NOTICE 22. Notice of this Motion has been given to counsel for the Debtors, the Office of the

United States Trustee, and to all other parties required to receive notice. In light of the nature of the relief requested herein, no further notice is required. NO PRIOR REQUEST 23. No previous application for the relief sought herein has been made to this or to

any other Court.

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WHEREFORE, Pilot requests entry of an Order (a) pursuant to Section 503(b)(9) of the Bankruptcy Code allowing the sum of $578,825.06 as an Allowed Administrative Expense Claim and directing immediate payment by the Debtors.

Dated: November 6, 2008

MONZACK MERSKY McLAUGHLIN AND BROWDER, P.A

/s/ Rachel B. Mersky Rachel B. Mersky, Esquire (DE #2049) 1201 N. Orange Street, Suite 400 Wilmington, DE 19801 Tel: (302) 656-8162 Fax: (302) 656-2769 Email: rmersky@monlaw.com Attorneys for Power Pilot Group, Inc.

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UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWAR E In Re: MERVYN S HOLDINGS, LLC, et al., Debtors. Chapter 11 Case No. 08-11586 (KG) Jointly Administered
Objection Deadline: November 18, 2008 at 4:00 p.m. Hearing Date: November 25, 2008 at 10:00 a.m.

NOTICE OF MOTION

TO:

THE PARTIES ON THE ATTACHED SERVICE LIST PLEASE TAKE NOTICE that the Motion of Pilot Power Group, Inc. for Allowance and

Immediate Payment of Its Administrative Claim Pursuant to 11 U.S.C. Section 503(b)(9) (the Motion ) was filed on November 6, 2008. PLEASE TAKE FURTHER NOTICE that responses to the Motion, if any, must be filed no later than November 18, 2008 at 4:00 p.m.. At the same time, you must also serve a copy of the response upon the undersigned counsel at the following address: Rachel B. Mersky, Esquire (DE #2049) Monzack Mersky McLaughlin & Browder, P.A. 1201 N. Orange Street, Suite 400 Wilmington, DE 19801 PLEASE TAKE FURTHER NOTICE that the hearing on the Motion will be held on November 25, 2008, at 10:00 a.m., before the Honorable Kevin Gross in the United States Bankruptcy Court for the District of Delaware, 824 Market Street, Courtroom 3, 6th Floor, Wilmington, DE 19801.

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IF NO RESPONSES ARE FILED AND SERVED IN ACCORDANCE WITH THIS NOTICE, THE COURT MAY GRANT THE RELIEF DEMANDED BY THE MOTION WITHOUT FURTHER NOTICE OR HEARING. Dated: November 6, 2008 MONZACK MERSKY McLAUGHLIN AND BROWDER, P.A. /s/ Rachel B. Mersky Rachel B. Mersky, Esquire (DE #2049) 1201 N. Orange Street, Suite 400 Wilmington, DE 19801 Tel: (302) 656-8162 Fax: (302) 656-2769 Email: rmersky@monlaw.com Attorneys for Power Pilot Group, Inc.

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UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWAR E In Re: MERVYN S HOLDINGS, LLC, et al.,1 Debtors. Chapter 11 Case No. 08-11586 (KG) Jointly Administered Related to Docket No. _____ ORDER GRANTING MOTION OF PILOT POWER GROUP, INC. FOR ALLOWANCE AND IMMEDIATE PAYMENT OF ITS ADMINISTRATIVE CLAIM PURSUANT TO 11 U.S.C. 503(b)(9) Upon consideration of the Motion of Pilot Power Group, Inc. for Allowance and Immediate Payment of Its Administrative Claim Pursuant to 11 U.S.C. Section 503(b)(9) (the Motion ), filed on November 6, 2008; and upon consideration of any and all objections and/or responses, if any, that were filed to the Motion; and it appearing that due and proper notice of the Motion has been given to all interested parties in this case; and after due deliberation and sufficient cause appearing therefore; IT IS HEREBY ORDERED THAT: 1. 2. The Motion is hereby granted. Pilot Power Group, Inc. s administrative claim (the Twenty Day Claim ) under

Section 503(b)(9) of the Bankruptcy Code is hereby allowed in the amount of $578,825.06. 3. 4. The Twenty Day Claim shall not be subject to objection or reduction. Pilot Power Group, Inc. shall not be required to file any proof of claim to perfect

its Twenty Day Claim which is hereby allowed.

The Debtors in these cases, along with the last four digits of their federal tax identification numbers, are Mervyn s Holdings, LLC (7931), Mervyn s LLC (4456) and Mervyn s Brands, LLC (8850).

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5.

The Debtors are directed to pay the Twenty Day Claim without delay.

SO ORDERED this ___ day of ______________________, 2008.

The Honorable Kevin Gross United States Bankruptcy Court Judge

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