Case KJC Doc 1098 Filed 11/20/15 Page 1 of 7 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE.

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IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

In re

CORINTHIAN COLLEGES, INC., et al.,1 Debtors.

Chapter 11

Case Nos. 15-10952 (KJC), et seq.

Hearing Date: December 10, 2015 at 1:00 p.m. Objection Deadline: December 3, 2015 at 4:00 p.m.

QUALITY INVESTMENT PROPERTIES

SACRAMENTO, LLC’S MOTION FOR ALLOWANCE AND PAYMENT OF ADMINISTRATIVE EXPENSE CLAIM PURSUANT TO 11 U.S.C. §503(b)(1)(A)

Quality Investment Properties Sacramento, LLC (“QTS”), by and through its undersigned

counsel, pursuant to 11 U.S.C. §§ 105(a) and 503(b)(1)(A), respectfully moves the Court to enter

an Order allowing QTS a priority administrative expense claim against the Debtors’ estates in the

amount of $31,306.10 and directing payment thereof as requested herein. In support of this

Motion, QTS respectfully states as follows:

INTRODUCTION

1. After the Debtors’ bankruptcy cases were filed, QTS continued to provide

valuable services to the Debtors by providing power, connectivity and safely and securely storing

the Debtors’ servers and related equipment at its Sacramento, California data center. QTS’s data

centers provide customers with fully-redundant, high-density power and cooling capacities and

integrated UPS systems linked by site-wide security and fire protection systems in order to

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The Debtors in these cases, along with the last four digits of each Debtor’s federal tax identification number, are: Corinthian Colleges, Inc. (7312), Corinthian Schools, Inc. (0525), Rhodes Colleges, Inc. (7311), Florida Metropolitan University, Inc. (7605), Corinthian Property Group, Inc. (2106), Titan Schools, Inc. (3201). Career Choices, Inc. (1425), Sequoia Education, Inc. (5739), ETON Education, Inc. (3608), Ashmead Education, Inc. (9120), MJB Acquisition Corporation (1912), ECAT Acquisition, Inc. (7789), Pegasus Education, Inc. (2336), Grand Rapids Educational Center, Inc. (2031), Rhodes Business Group, Inc. (6709); Everest College Phoenix, Inc. (6173), CDI Education USA, Inc. (0505), SP PE VII-B Heald Holdings Corp. (0115), SD III-B Heald Holdings Corp. (9707), Heald Capital LLC (6164), Heald Real Estate, LLC (4281), Heald Education, LLC (1465), Heald College, LLC (9639), QuickStart Intelligence Corporation (5665) and Socle Education, Inc. (3477). The Debtors’ corporate headquarters is at 6 Hutton Centre Drive, Suite 400, Santa Ana, California 92707.

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provide secure, dependable infrastructure. QTS provided those storage and data services

pursuant to a Master Space Agreement. Maintaining a secure environment for the Debtors’ IT

equipment and applications is obviously a top priority and QTS benefited the estate and its

creditors by providing those services, which resulted in costs that were both actual and necessary

for the preservation of the Debtors’ estates. For these reasons, and others set forth below, QTS

respectfully asks the Court to enter an order allowing QTS an administrative expense claim in

the amount of $31,306.10, and directing payment in accordance with the terms of the confirmed

Plan.

JURISDICTION

2. The statutory basis for the relief sought herein is 11 U.S.C. § 503(b). The Court

has jurisdiction over QTS’s Motion pursuant to 28 U.S.C. §§ 157(b) and 1334(b), this is a core

proceeding under 28 U.S.C. § 157(b)(2), and the Court constitutes the proper venue both for this

proceeding and for QTS’s Motion pursuant to 28 U.S.C. §§ 1408 and 1409.

BACKGROUND

3. On May 4, 2015 (the “Petition Date”), Corinthian Colleges, Inc. and its affiliated

debtors (collectively, the “Debtors”) filed voluntary petitions for relief under chapter 11 of the

Bankruptcy Code. The Debtors thereafter continued in possession of their respective properties

pursuant to sections 1107 and 1108 of the Bankruptcy Code.

4. Both prior to and following the Petition Date, QTS provided power, connectivity

and a secure location for the Debtors’ IT equipment and applications and safely and securely

stored the Debtors’ servers and related equipment at its data center. QTS provided those services

pursuant to a Master Space Agreement dated February 4, 2014 (the “Agreement,” which includes

an addendum to the Agreement that is not attached for proprietary reasons), attached hereto as Case 15-10952-KJC Doc 1098 Filed 11/20/15 Page 2 of 7

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Exhibit A. QTS continued to provide such services during the pendency of the Debtors’ bankruptcy cases.

5. This Agreement was rejected by the Debtors pursuant to the order dated June 30,

2015 (D.I. 505). While the order provided for rejection nunc pro tunc to June 2, 2015, it did so

based on the Debtors’ assertion that such relief was appropriate because contract counterparties,

including QTS “will not be unduly prejudiced if the Executory Contracts are rejected nunc pro

tunc because the Debtors have advised them of their intent to reject the Executory Contracts.”

(D.I. 378) QTS, however, was not made aware of the Debtors’ intent to reject the contract until

after the motion to reject was filed on June 9, 2015. Accordingly, QTS requests allowance of an

administrative expense through and including June 8, 2015.

6. QTS continued to provide such services during the pendency of the Debtors’

bankruptcy cases both before and after the Debtors sought to reject the Agreement. Specifically,

in the period following the Petition Date to the date the motion to reject the Agreement was filed,

QTS provided $21,332.10 worth of services to the Debtors pursuant to the Agreement. See

Invoice # SAC-INV06754 dated April 28, 2015 attached hereto as Exhibit B (QTS provided

$16,331.77 in services from May 5, 2015 through and including May 31, 2015); and Invoice #

SAC-INV06865 dated May 27, 2015 attached hereto as Exhibit C (QTS provided $5,000.33 in

services from June 1 through and including June 8).

7. Additionally, until August 19, 2015, QTS safely and securely stored a

considerable amount of the Debtor’s servers and related IT equipment. That equipment took up

valuable space and resources that QTS could have re-sold to other customers. QTS attempted to

contact the Debtors and its Chief Restructuring Officer multiple times to facilitate the removal of

the Debtors’ equipment post-rejection. However, it took considerable time to facilitate its Case 15-10952-KJC Doc 1098 Filed 11/20/15 Page 3 of 7

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removal and the Debtors’ equipment was ultimately not removed from QTS’s data center until

August 19, 2015–more than two months after the Debtors sought to reject the Agreement. During

that time period, QTS nevertheless stored the Debtors’ servers and IT equipment at its data

center facility in Sacramento, California, providing an additional $8,804.00 worth of services

that were both actual and necessary for the preservation of the Debtors’ estates. See e.g.,

Exhibit B (per diem value of storage space is $124.00, and QTS continued to store the Debtors’ equipment from June 9, 2015 through August 19, 2015 (71 days), providing an additional

$8,804.00 of value to the Debtors’ estates).

8. Lastly, as the Debtors’ Chief Restructuring Officer is aware, QTS’s

representatives assisted the Chief Restructuring Officer’s representative with the removal of the

equipment on August 19, 2015. QTS submits an additional modest administrative expense of

$1,170.00 is appropriate for the labor and assistance QTS supplied to the Debtors’ representative

in recovering the servers and other IT equipment from QTS’s data center. See Invoice #

SAC-INV07509 dated August 24, 2015 attached hereto as Exhibit D ($1,170.00 for services rendered

to facilitate the Debtors’ equipment removal on August 19). QTS’s assistance provided further

value to the estate, and QTS believes this modest expense is reasonable under the circumstances.

ARGUMENT

9. QTS is entitled to an administrative expense claim in the amount of $31,306.10

pursuant to section 503 of the Bankruptcy Code. Section 503 states, in relevant part:

(b) After notice and a hearing, there shall be allowed administrative expenses, other than claims allowed under section 502(f) of this title, including—

(1)(A) the actual, necessary costs and expenses of preserving the estate . . .

11 U.S.C. § 503(b)(1)(A).

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10. Administrative expense priority “is available to contract parties when the debtor

enjoys the benefits of the contract pending assumption or rejection.” In re ID Liquidation One,

LLC, 503 B.R. 392, 399 (Bankr. D. Del. 2013) (citations omitted). See also In re Goody’s Family Clothing Inc., 610 F.3d 812, 817 (3rd Cir. 2010) (“Post-petition obligations are ordinarily

given payment priority as administrative expenses” so long as such obligations are deemed to be

“actual, necessary expenses of preserving the estate”). The test to determine whether a party is

entitled to allowance of an administrative expense claim pursuant to Section 503(b)(3) is

“whether the efforts of the applicant resulted in an actual and demonstrable benefit to the

debtor’s estate and the creditors.” See, e.g., In re AM Intern., Inc., 203 B.R. 898, 904 (D. Del.

1996) (citing Lebron v. Mechem Financial, Inc., 27 F.3d 937, 944 (3rd Cir. 1994) (citations

omitted)).

11. In instances where a debtor-in-possession “elects to continue to receive benefits

from the other party to an executory contract pending a decision to reject or assume a contract,

the debtor-in-possession is obligated to pay for the reasonable value of those services.” NLRB v.

Bildisco & Bildisco, 465 U.S. 513, 531 (1984) (noting that the reasonable value of those services

often is the amount specified in the applicable contract). See also ID Liquidation One, 503 B.R.

at 399 (“Pending assumption or rejection, a debtor must pay the ‘reasonable value of the services

received’” and, “there is a presumption that the contract terms and rate represent the reasonable

value of the services or goods provided under the contract”).

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12. Additionally, QTS is entitled to an administrative expense following the rejection

of the Agreement where the Debtors continued to utilize QTS’s secure storage space and

services, and assisted the Debtors’ representative with the removal of the substantial servers and

related IT equipment. See, e.g., In re DVI, Inc., 308 B.R. 703, 708 (Bankr. D. Del. 2004) (where

holdover lessee continued to use premises post-rejection, “a benefit has been conferred upon the

estate which constitutes an administrative expense under section 503(b)”). It cannot be disputed

that the safety and security of the Debtors’ servers and other IT equipment is an actual, necessary

cost and expense and that QTS’s services benefited the estate and its creditors by keeping the

servers and other IT equipment in a secure and controlled environment until the Debtors chose to

retrieve it. QTS is entitled to an administrative expense based on the fair market value of the

post-rejection storage as well as the costs of assisting the Debtors’ representative with the

equipment’s removal.

13. Based on the foregoing, QTS is entitled to an allowed priority administrative

expense claim against the Debtors’ estate in the amount of $31,306.10.

WHEREFORE, QTS respectfully requests that this Court enter an order, substantially in

the form attached hereto, allowing QTS’s Administrative Expense Claim as an administrative Case 15-10952-KJC Doc 1098 Filed 11/20/15 Page 6 of 7

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expense in the amount of $31,306.10 under § 503(b) of the Bankruptcy Code, directing payment

to QTS pursuant to the terms of the confirmed Plan, and granting such further relief as this Court

deems just and proper.

Dated: November 20, 2015 Respectfully submitted,

Wilmington, Delaware

HILLER & ARBAN, LLC

/s/ Adam Hiller

Adam Hiller (DE No. 4105) Brian Arban (DE No. 4511)

1500 North French Street, 2nd Floor Wilmington, Delaware 19801 (302) 442-7676 telephone

ahiller@hillerarban.com

-and-

Edwin H. Caldie, Esquire Amanda K. Schlitz, Esquire Stinson Leonard Street LLP 150 South Fifth Street, Suite 2300 Minneapolis, MN 55402

(612) 335-1404

amanda.schlitz@stinson.com

Attorneys for Quality Investment Properties Sacramento, LLC

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In re

Chapter 11

Hearing Date: December 10, 2015 at 1:00 p.m. Objection Deadline: December 3, 2015 at 4:00 p.m.

NOTICE OF MOTION TO: All parties listed on the Certificate of Service.

Quality Investment Properties Sacramento, LLC has filed the attached Motion for Allowance and Payment of Administrative Expenses Claim Pursuant to 11 U.S.C. §503(b)(1)(A), which seeks the following relief: Allowance of an administrative expense claim in the amount of $31,306.10.

You are required to file a response to the Motion on or before December 3, 2015 at 4:00 p.m. At the same time, you must also serve a copy of the response upon the following persons:

Adam Hiller, Esquire Brian Arban, Esquire Hiller & Arban, LLC

1500 North French Street, 2nd Floor Wilmington, DE 19801

PLEASE TAKE FURTHER NOTICE that the movant will present the Motion on December 10, 2015, 1:00 p.m. Eastern Time before the Honorable Kevin J. Carey, United States Bankruptcy Court for the District of Delaware, 824 North Market Street, 5th Floor, Courtroom No. 5, Wilmington, Delaware 19801.

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The Debtors in these cases, along with the last four digits of each Debtor’s federal tax identification number, are: Corinthian Colleges, Inc. (7312), Corinthian Schools, Inc. (0525), Rhodes Colleges, Inc. (7311), Florida

Metropolitan University, Inc. (7605), Corinthian Property Group, Inc. (2106), Titan Schools, Inc. (3201). Career Choices, Inc. (1425), Sequoia Education, Inc. (5739), ETON Education, Inc. (3608), Ashmead Education, Inc. (9120), MJB Acquisition Corporation (1912), ECAT Acquisition, Inc. (7789), Pegasus Education, Inc. (2336), Grand Rapids Educational Center, Inc. (2031), Rhodes Business Group, Inc. (6709); Everest College Phoenix, Inc. (6173), CDI Education USA, Inc. (0505), SP PE VII-B Heald Holdings Corp. (0115), SD III-B Heald Holdings Corp. (9707), Heald Capital LLC (6164), Heald Real Estate, LLC (4281), Heald Education, LLC (1465), Heald College, LLC (9639), QuickStart Intelligence Corporation (5665) and Socle Education, Inc. (3477). The Debtors’ corporate headquarters is at 6 Hutton Centre Drive, Suite 400, Santa Ana, California 92707.

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IF YOU FAIL TO RESPOND IN ACCORDANCE WITH THIS NOTICE, THE RELIEF REQUESTED IN THE MOTION MAY BE GRANTED BY THE COURT WITHOUT FURTHER NOTICE OR HEARING.

Dated: November 20, 2015 Respectfully submitted,

Wilmington, Delaware

HILLER & ARBAN, LLC

/s/ Adam Hiller

Adam Hiller (DE No. 4105) Brian Arban (DE No. 4511)

1500 North French Street, 2nd Floor Wilmington, Delaware 19801 (302) 442-7676 telephone ahiller@hillerarban.com

-and-

(612) 335-1404

amanda.schlitz@stinson.com

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Exhibit

A

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02/04/14

DocuSign Envelope ID: 458F786E-6538-46AC-A4E5-694C772186A5

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Exhibit

B

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Work Order # Description Qty Rate Amount

CORINCOLL.SAC.01R Space: Cage 05/01/2015 to 05/31/2015 230 $ 14.00 $3,220.00 CORINCOLL.SAC.01R Power: 208V 30A Primary 05/01/2015 to

05/31/2015 17 $ 625.00 $10,625.00

CORINCOLL.SAC.01R Connectivity: IP Bandwidth 05/01/2015 to

05/31/2015 20 $ 20.00 $400.00

CORINCOLL.SAC.01R Connectivity: Bandwidth Overage 05/01/2015

to 05/31/2015 0 $ 30.00 $0.00

CORINCOLL.SAC.01R Space: Office Space 05/01/2015 to 05/31/2015 1 $ 500.00 $500.00 CORINCOLL.SAC.01R Site Operations: Remote Hands & Eyes

05/01/2015 to 05/31/2015 1 $ 0.00 $0.00

CORINCOLL.SAC.01R Connectivity: IP Address 05/01/2015 to

05/31/2015 256 $ 1.00 $256.00

CORINCOLL.SAC.01R Holdover Fee 05/01/2015 to 05/31/2015 0.25 $ 15,001.00 $3,750.25

Subtotal $18,751.25

$0.00 Sales Tax

$18,751.25 Total

Account and payment inquiries, please email ARDept@qtsdatacenters.com Billing inquiries, please email Billing@qtsdatacenters.com

Corinthian Colleges Inc

Invoice 4/28/2015 SAC-INV06754 Date Bill To: Santa Ana, CA 92779-5115 PO Box 25115

Please Remit to:

Quality Technology Services Sacramento II, LLC. PO Box 74455 Cleveland, Ohio 44194-4455 PO Number Terms Service Date 05/01/2015 - 05/31/2015 0.00% Finance Charge % RECEIPT Page 1

Data Centers Powered by People

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Exhibit

C

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Work Order # Description Qty Rate Amount

CORINCOLL.SAC.01R Space: Cage 06/01/2015 to 06/30/2015 230 $ 14.00 $3,220.00 CORINCOLL.SAC.01R Power: 208V 30A Primary 06/01/2015 to

06/30/2015 17 $ 625.00 $10,625.00

CORINCOLL.SAC.01R Connectivity: IP Bandwidth 06/01/2015 to

06/30/2015 20 $ 20.00 $400.00

CORINCOLL.SAC.01R Connectivity: Bandwidth Overage 06/01/2015

to 06/30/2015 0 $ 30.00 $0.00

CORINCOLL.SAC.01R Space: Office Space 06/01/2015 to 06/30/2015 1 $ 500.00 $500.00 CORINCOLL.SAC.01R Site Operations: Remote Hands & Eyes

06/01/2015 to 06/30/2015 1 $ 0.00 $0.00

CORINCOLL.SAC.01R Connectivity: IP Address 06/01/2015 to

06/30/2015 256 $ 1.00 $256.00

CORINCOLL.SAC.01R Holdover Fee 06/01/2015 to 06/30/2015 0.25 $ 15,001.00 $3,750.25

Subtotal $18,751.25

$0.00 Sales Tax

$18,751.25 Total

Corinthian Colleges Inc

Invoice 5/27/2015 SAC-INV06865 Date Bill To: Santa Ana, CA 92779-5115 PO Box 25115

Please Remit to:

Quality Technology Services Sacramento II, LLC. PO Box 74455 Cleveland, Ohio 44194-4455 PO Number Terms Service Date 06/01/2015 - 06/30/2015 1.50% Finance Charge % RECEIPT Page 1

Data Centers Powered by People

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Exhibit

D

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Qty RECEIPT

Amount

1

SAC-INV07509

Corinthian Colleges Inc

8/24/2015 PO Number Terms Description Rate Date Page Santa Ana CA 92779-5115 Invoice

Invoice

Bill To: Service Date 8/24/2015 - 8/24/2015 Work Order # 0.00% Finance Charge % PO Box 25115

Please Remit to:

Quality Technology Services Sacramento II, LLC. PO Box 74455

Cleveland, Ohio 44194-4455

D a t a C e n t e r s P o w e r e d b y P e o p l e

$80.00000 $320.00 4.00

Facilities- Custom One Time charge

$100.00000 $700.00 7.00

DCO - Custom One Time charge

$50.00000 $150.00 3.00

Security Services Custom - One Time charge

$1,170.00 $0.00 $1,170.00 Subtotal Sales Tax Total

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In re

Chapter 11

ORDER GRANTING QUALITY INVESTMENT PROPERTIES SACRAMENTO, LLC'S MOTION FOR ALLOWANCE AND PAYMENT OF ADMINISTRATIVE EXPENSE CLAIM PURSUANT TO 11 U.S.C. § 503(b)(1)(A)

UPON CONSIDERATION OF the Motion for Allowance and Payment of

Administrative Expense Claim (the “Motion”) filed by Quality Investment Properties

Sacramento, LLC (“QTS”) pursuant to 11 U.S.C. §§ 105(a) and 503(b)(1)(A); the Court having

considered the Motion, the record in this case and the arguments presented at any hearing

conducted in connection with the Motion; the Court finds that (a) any responses to the Motion

have either been withdrawn or are hereby denied on the merits; (b) the Court has jurisdiction

over this matter pursuant to 28 U.S.C. §§ 157 and 1334; (c) this is a core proceeding pursuant to

28 U.S.C. § 157(b); (d) the Court may enter a final order consistent with Article III of the United

States Constitution; (e) venue of this Motion is proper pursuant to 28 U.S.C. §§ 1408 and 1409;

(f) notice of the Motion was sufficient under the circumstances and no other or further notice

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The Debtors in these cases, along with the last four digits of each Debtor’s federal tax identification number, are: Corinthian Colleges, Inc. (7312), Corinthian Schools, Inc. (0525), Rhodes Colleges, Inc. (7311), Florida Metropolitan University, Inc. (7605), Corinthian Property Group, Inc. (2106), Titan Schools, Inc. (3201). Career Choices, Inc. (1425), Sequoia Education, Inc. (5739), ETON Education, Inc. (3608), Ashmead Education, Inc. (9120), MJB Acquisition Corporation (1912), ECAT Acquisition, Inc. (7789), Pegasus Education, Inc. (2336), Grand Rapids Educational Center, Inc. (2031), Rhodes Business Group, Inc. (6709); Everest College Phoenix, Inc. (6173), CDI Education USA, Inc. (0505), SP PE VII-B Heald Holdings Corp. (0115), SD III-B Heald Holdings Corp. (9707), Heald Capital LLC (6164), Heald Real Estate, LLC (4281), Heald Education, LLC (1465), Heald College, LLC (9639), QuickStart Intelligence Corporation (5665) and Socle Education, Inc. (3477). The Debtors’ corporate headquarters is at 6 Hutton Centre Drive, Suite 400, Santa Ana, California 92707.

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need to be given; and (g) the legal and factual bases set forth in the Motion establish cause for

the relief granted herein. Therefore, it is HEREBY ORDERED as follows:

1. The Motion is GRANTED. All capitalized terms not otherwise defined herein

shall have the respective meanings set forth in the Motion.

2. QTS is determined to hold an allowed priority administrative claim against the

Debtors’ estates in the amount of $31,306.10 (“Allowed Administrative Claim”).

3. The Debtors shall satisfy the Allowed Administrative Claim no later than the date

on which payment of other allowed administrative claims is made in these Chapter 11 cases.

4. This Court shall retain jurisdiction to interpret and/or enforce this Order to the

extent necessary or appropriate.

Dated: __________, 2015 _______________________________________

THE HONORABLE KEVIN J. CAREY UNITED STATES BANKRUPTCY JUDGE Case 15-10952-KJC Doc 1098-3 Filed 11/20/15 Page 2 of 2

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CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on November 20, 2015, I caused a true and correct copy of the

foregoing Motion for Allowance and Payment of Administrative Expenses to be served, via

first-class mail, postage prepaid, upon the parties listed on the attached matrix.

Dated: November 20, 2015 /s/ Adam Hiller

Wilmington, Delaware Adam Hiller (DE No. 4105)

HILLER & ARBAN, LLC

1500 North French Street, 2nd Floor Wilmington, Delaware 19801 (302) 442-7676 telephone

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Mark D. Collins, Esq. Michael J. Merchant, Esq. Marisa A. Terranova, Esq. Amanda R. Steele, Esq.

RICHARDS, LAYTON & FINGER, P.A. 920 N. King Street

Wilmington, Delaware 19801

Frederick Rosner, Esq. The Rosner Law Group LLC 824 N Market Street, Suite 810 Wilmington, DE 19801

Timothy Jay Fox, Jr., Esq. Office of the United States Trustee U.S. Department of Justice 844 King Street, Suite 2207 Lockbox #35

Wilmington, DE 19801

Bennett S. Silverberg, Esq. Brown Rudnick LLP Seven Times Square New York, NY 10036

Rust Consulting/Omni Bankruptcy 5955 DeSoto Avenue

Suite 100

Woodland Hills, CA 91367

Richard L. Schepacarter, Esq. Office of the United States Trustee U. S. Department of Justice 844 King Street, Suite 2207 Lockbox #35

Wilmington, DE 19801

Chistopher A. Ward, Esq. Polsinelli PC

222 Delaware Ave, Suite 1101 Wilmington, DE 19801

Scott F. Gautier, Esq Robins Kaplan LLP

2049 Century Park East, Suite 3400 Los Angeles, CA 90067