Avenue CLO Fund, Ltd. et al v. Bank of America, N.A., et al

Filing 79

CERTIFIED REMAND ORDER. MDL No. 2106. Signed by MDL (FLSD) on 1/14/14. (Attachments: # 1 Transmittal from FLSD, # 2 1 09-md-02106 Designation of Record, # 3 1 09-md-02106 Dkt. Sheet - flsd, # 4 09-MD-2106 DE 1, 2, 4-30, # 5 0 9-MD-2106 DE 32-36, # 6 09-MD-2106 DE 37 part 1 of 3, # 7 09-MD-2106 DE 37 part 2 of 3, # 8 09-MD-2106 DE 37 part 3 of 3, # 9 09-MD-2106 DE 38, 39, 41-47, 49, 50, # 10 09-MD-2106 DE 51, # 11 09-MD-2106 DE 52-59, 61-65, 68, 70, 72-76, # (1 2) 09-MD-2106 DE 78-84, 86-91, # 13 09-MD-2106 DE 93, 95-103, 106-108, # 14 09-MD-2106 DE 110-115, # 15 09-MD-2106 DE 116-125, 127-129, 132-134, # 16 09-MD-2106 DE 136-140, 142-158, # 17 09-MD-2106 DE 160-162, 164-167, 170-175, 177-190, # ( 18) 09-MD-2106 DE 191-199, 201-215, # 19 09-MD-2106 DE 217-229, 232-247, # 20 09-MD-2106 DE 248, # 21 09-MD-2106 DE 249 part 1 of 2, # 22 09-MD-2106 DE 249 part 2 of 2, # 23 09-MD-2106 DE 251-253, 262-266, 284-287, 300, 301, 310, 319, 326-3 31, # 24 09-MD-2106 DE 335, 336, 338-344, 346-349, # 25 09-MD-2106 DE 350, # 26 09-MD-2106 DE 351-358, # 27 09-MD-2106 DE 360-366, 368-374, # 28 09-MD-2106 DE 375 part 1 of 3, # 29 09-MD-2106 DE 375 part 2 of 3, # 30 09-MD-2106 DE 375 p art 3 of 3, # 31 09-MD-2106 DE 376 part 1, # 32 09-MD-2106 DE 376 part 2, # 33 09-MD-2106 DE 376 part 3, # 34 09-MD-2106 DE 376 part 4, # 35 09-MD-2106 DE 376 part 5, # 36 09-MD-2106 DE 376 part 6, # 37 09-MD-2106 DE 376 part 7, # 38 09-MD-2106 DE 376 part 8, # 39 09-MD-2106 DE 376 part 9, # 40 09-MD-2106 DE 377 part 1, # 41 09-MD-2106 DE 377 part 2, # 42 09-MD-2106 DE 378, # 43 09-MD-2106 DE 379, # 44 09-MD-2106 DE 380, # 45 09-MD-2106 DE 381 part 1, # 46 09-MD-2 106 DE 381 part 2, # 47 09-MD-2106 DE 382 part 1, # 48 09-MD-2106 DE 382 part 2, # 49 09-MD-2106 DE 382 part 3, # 50 09-MD-2106 DE 382 part 4, # 51 09-MD-2106 DE 383 part 1, # 52 09-MD-2106 DE 383 part 2, # 53 09-MD-2106 DE 383 part 3, # 54 09-MD-2106 DE 383 part 4, # 55 09-MD-2106 DE 383 part 5, # 56 09-MD-2106 DE 383 part 6, # 57 09-MD-2106 DE 383 part 7, # 58 09-MD-2106 DE 383 part 8, # 59 09-MD-2106 DE 383 part 9, # 60 09-MD-2106 DE 383 part 10, # 61 09-MD-2106 DE 383 part 11, # 62 09-MD-2106 DE 384 part 1, # 63 09-MD-2106 DE 384 part 2, # 64 09-MD-2106 DE 384 part 3, # 65 09-MD-2106 DE 384 part 4, # 66 09-MD-2106 DE 384 part 5, # 67 09-MD-2106 DE 384 part 6, # 68 09-MD-2106 DE 384 part 7, # ( 69) 09-MD-2106 DE 384 part 8, # 70 09-MD-2106 DE 384 part 9, # 71 09-MD-2106 DE 384 part 10, # 72 09-MD-2106 DE 384 part 11, # 73 09-MD-2106 DE 385 part 1, # 74 09-MD-2106 DE 385 part 2, # 75 09-MD-2106 DE 386 part 1, # 76 09-MD-2106 DE 386 part 2, # 77 09-MD-2106 DE 386 part 3, # 78 09-MD-2106 DE 386 part 4, # 79 09-MD-2106 DE 386 part 5, # 80 09-MD-2106 DE 386 part 6, # 81 09-MD-2106 DE 386 part 7, # 82 09-MD-2106 DE 387 part 1, # 83 09-MD-2106 DE 387 part 2, # 84 09-MD-2106 DE 388, # 85 09-MD-2106 DE 389 part 1, # 86 09-MD-2106 DE 389 part 2, # 87 09-MD-2106 DE 389 part 3, # 88 09-MD-2106 DE 389 part 4, # 89 09-MD-2106 DE 390, 392-394, # 90 1 10-cv-20236 Dkt. Sheet - flsd, # 91 10cv20236 DE #1-27, 29-31, 45, 53, 60-65, 67-70, 73, # 92 1 09-cv-23835 Dkt. Sheet - flsd, # 93 09cv23835 DE 112, 115-126, # 94 09cv23835 DE 130, 134, 135 and 145)(Copies have been distributed pursuant to the NEF - MMM)

Case 1:09-md-02106-ASG Document 377-5 Entered on FLSD Docket 12/04/2013 Page 25 of
35

INTERROGATORY NO. 7:
Do You contend that any Advance by the Disbursement Agent was improper because
there was a failure of a condition precedent to an Advance?
RESPONSE TO "INTERROGATORY NO.7:
Plaintiffs object to Interrogatory No. 7 because the information sought by this
interrogatory is encompassed within the information sought in response to Interrogatory Nos. 1,
3 and 5. Plaintiffs further object that their claims and contentions are set out in the operative
ComplaiD:t in this action, which is incorporated herein. Subject to the foregoing general and
specific objections, Plaintiffs respond as follows:
Yes.
INTERROGATORY NO.8:
If Your response to Interrogatory-No. 7 is anything other tJ;tan an unqualified «No":
(a)

identify each Advance for which there was a failure of a condition precedent and
each failed condit~on precedent; and

(b)

identify. all notifications from a Lender to the Bank Agent or Disbursement Agent
of a failure of a condition precedent.

RESPONSE TO INTERROGATORY NO.8:
Plaintiff objects to Interrogatory No. 8 on the grounds that it is compound and overbroad.
Plaintiffs also object to Interrogatory No.8 to the extent it calls for the revelation of information
protected by the attorney-client privilege, ~ttorney work product doctrine or any other applicable
privilege or doctrine. Plaintiffs further object to Interrogatory No. 8 on the grounds that it seeks
information that is more readily available to BofA than Plaintiffs or information that is available
from other, more convenient, sources. Plaintiffs fmther object to Interrogatory No. 8 because the

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Case 1:09-md-02106-ASG Document 377-5 Entered on FLSD Docket 12/04/2013 Page 26 of
35

information sought by this interrogatoty is encompassed within the information sought in
response to Interrogatory Nos. 2, 4 and 6. Subject to the foregoing general and specific
objections, Plaintiffs respond as follows:
Plaintiffs incorporate their response to Interrogatory No.2 herein by ryference.
INTERROGATORY NO.9:

Do·You contend there was a Material Adverse Effect?
RESPONSE TO INTERROGATORY NO. 9:

Plaintiffs object to Interrogatory No.9 as vague and ambiguous to the extent it is not
limited in time. Plaintiffs further object to Intenogatory No. 9 because the information sought
by this interrogatory is encompassed within the information sought in response to Interrogatory
Nos. 1, 3, 5 and 7 . . Plaintiffs further object that their claims and contentions are set out in the
operative Complaint in this action, which is incorporated herein. Subject to the foregoing
general and specific objections, Plaintiffs respond as follows:
Yes. ·
INTERROGATORY NO.lO:

If Your response to Interrogatory No. 9 is anything otl_'ler than an unqualified "No,"
identify the Material Adverse Effect, identify each event or circumstance giving rise to that
Material Adverse Effect, provide a aetailed explanation of how that event or circumstance
resulted in the claimed Material Adverse Effect and state the Date each Material Adverse Effect
occurred.
RESPONSE TO INTERROGATORY NO. 10:

Plaintiff objects to Intenogatory No." 10 on th~ grouncls that it is compound and
overb~oad.

Plaintiffs also object to Interrogatory No. 10 to the extent it calls for the revelation of

infoimation protected by the attorney-client privilege, attorney work product doctrine or any

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Case 1:09-md-02106-ASG Document 377-5 Entered on FLSD Docket 12/04/2013 Page 27 of
35

other applicable privilege or doctrine. Plaintiffs further object to Interrogatory No. 10 on the
grounds that it is unduly burdensome to the extent it requires Plaintiffs to provide every month,
day and year on whi"ch a Material Adverse Effect occurred to the extent such an occurrence was
'· continuing in nature. Plaintiffs further object to Interrogatory No. ' 10 because the ·information
sought by this interrogatory is encompassed within the information sought in response to
Interrogatory Nos. 2, 6, and 8. Subject to the foregoing general and specific objections, Plaintiffs
respond as follows:
Plaintiffs incorporate their re.sponse to Inten:ogatory No. 2 herein by reference.

INTERROGATORY NO. 11:
Do you contend that BANA acted with bad faith or gross negligence, or committed fraud
or willful misconduct, in·performing its duties as Disbursement Agent?

RESPONSE TO INTERROGATORY NO.l.l:
Plaintiffs object that their claims and contentions are .s et out in the operative Complaint in
this action, which is incorporated herein. Subject to the foregoing general and specific
objections, Plaintiffs respond as follows:
Yes.

INTERROGATORY NO. 12:
If Your response to Interrogatory No. 11 is anything other than an unqualified "No,"
identify each event or incident supporting your contention, the Date of each such event or
incident, and identify all documents supporting your contention.

RESPONSE TO INTERROGATORY NO. 12:
Plaintiff objects to Inte1rogatory No. 12 on the grounds that it is compound and
overbroad. Plaintiffs also object to Interrogatory No. 12 to the extent it calls for the revelation of
information protected by the attorney-client privilege, attorney work product doctrine or any

-27-

Case 1:09-md-02106-ASG Document 377-5 Entered on FLSD Docket 12/04/2013 Page 28 of
35

other applicable privilege or doctrine. Plaintiffs further object to Interrogatory No. 12 on the
grounds that it seeks information that is·more readily available to BofA than Plaintiffs or
information that is available from other, more convenient, sources. Plaintiffs object to
Interrogatory No. 12 on the grounds that it is unduly burdensome to the. extent it purports to
re·quire Plaintiffs to provide every month, day and year of all incidents supporting Plaintiffs
cqntention when BofA.'s bad faith, gross negligence, fraud and/or willful misconduct was
continuing in nature. Plaintiffs object to Interrogatory No. 12 as oppressive and unduly
burdensome to the extent it purports to require Plaintiffs to identify.all documents supporting
their contention. Plaintiffs will provide a list of categories of documents supporting their
contention; BofA. has access to all such documents. Subject to the foregoing general and specific
.

.

objections, Plaintiffs respond as follows:
In the face of the Defaults, Events of Default and the failure of multiple conditions
precedent, BofA. continued to advance funds and failed _ issue Stop Funding' Notices. In doing
to
so, BofA. acted with bad faith, gross negligence, and/or willful misconduct. As set forth in
Plaintiffs'. response to Interrogatory No. 2 above, incorporated herein by reference, BofA. at all
times knew (and, consistent with its obligation under the Disbursement Agreement to exercise
commercially reasonable efforts and to utilize commercially prudent practices in administering.
the constmction loan and in disbursing funds, should have known) of the Defaults and the
failures of the conditions precedent.
BofA continued to process Advance Requests containing known false certifications in
order to maintain a profitable relationship with the directors and officers of the Fontainebleau
entities so long as BofA's own money was not on the line. Once.BofA risked any significant
exposure as a Revolver Lender, BofA terminated its commitments under the Credit Facility and
thereby doomed the Project to failure.

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- - - - ···------·--·-- - --··------ Case 1:09-md-02106-ASG Document 377-5 Entered on FLSD Docket 12/04/2013 Page 29 of
35

In addition t9 knowing of the Defaults, as eaily as 2008, BofA had information, through
IVI and otherwise, indicating that the Borrowers were not presenting all relevant information
regarding project costs to BofA. BofA, however, ignored the information it had and failed to
.
.
reconcile the inconsistent and/or contradictory' information that was being prqvided by the
Borrowers and continued to ·disburse funds, acti?g with gross negligence and bad·faith.
·By March 2009 BofA knew of several defaults, failed conditions precedent, and events
that called into question the Borrowers' ability to complete the Project and their honesty in
dealing with BofA. Despite this knowledge, BofA processed the Mar~h Advance· Request that
did not even meet the deadlines for submission of Advance Requests. The March 11,2009
Advance Request, with a Scheduled ~dvance Date of March 25, 2.009, was rejected by IVI
because IVI did not believe the information contained in the Request was accurate. The
Borrowers then submitted a revised Advance Request on March 24, 2009, which IVI approved.
Following additional discussions with BofA, the Borrowers further revised the Advance Request
on March 25, 2009, the same day as the Scheduled Advance Date. The _In Balance Report
included with this Advance Request showed that the Project was in· balance by a razor thin
margin of $14,084,701. BofA then rushed to approve the Advance Request on the same day the
Advance was scheduled.
This was not permitted under the Disbursement Agreement. Under Section 2.4.1, "[e]ach
Advance Request shall be delivered to the Disbursement Agent, each Funding Agent and 'the
Construction Consultant not later than the 11th day of each calendar month, but in any event not ·
later than ten Banking Days prior to the Scheduled Advan~e Date." The Advance Request
delivered on March 11, 2009 met this deadline but it was rejected. Under Section 2.4.4, BofA as
Disbursement Agent was required to assure that IVI's review and its own review of the materials
"is finalized, in each case not less than three Banking Days prior to the

-29-

Schedule~ Advance

Case 1:09-md-02106-ASG Document 377-5 Entered on FLSD Docket 12/04/2013 Page 30 of
35

Date." The subJ]lission of the Advance Request on March 24, with a Scheduled Advance Date of
March 25., precluded BofA and IVI from reasonably approving the Advance Request as they
could not do so within the required time.
In breach of th:ese sections, BofA, with gross negligence and

ba~

faith, approved the

second revised Advance Request on the same day as the Scheduled Advance Date. BofA's
actions were particul,arly egregious given that by this time, BofA knew that the likelihood of the
Borrowers being able to complete the Project had significantly decreased given that there were
significant cost overruns, the Borrowers had not been forthright with BofA or IVI about the costs
being incurred, several lenders had failed to fund creating holes in the financing, the Borrowers
were having trouble arranging replacement financing, and there was a recession. Despite this
information, and despite the fact that the Project was only purportedly in balance by a razor-thin
•

0

cushion, BotA. disbursed the Term Lenders'· funds. These :funds repaid the outstanding loans
under the Revolver, including BofA's portion.
At the same time BofA internally recognized the serious risks of investing in the Project
as demonstrated by the involvement ofBofA's Special Assets Group, the downgrading of the
risk rating of the Project in February 2009 to 8 (which·corresponds to the "special mention"
category in United States banking regulations), and then projecting on March 21, 2009 ~
downgrade to 9 (which corresponds to the "substandard" designation), which was implemented
in early April, 2009.
Documents supporting this contention include all exhibits attached to the Expe1i"Report
of Donald R. Boyken and the following deposition e~ibits: 8, 11-46, 49-51, 53, 54, 56, 58-83,
201-206,209-212, 214-224, 229-234, 2J6, 237, 239-256, 258-274,277, 279,284-288, 290, 291B, 294-298,400, 401; 404-408, 411,412,455, 45'6, 458-460, 469-482,484-496,498, 499, 600-

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Case 1:09-md-02106-ASG Document 377-5 Entered on FLSD Docket 12/04/2013 Page 31 of
35

604, 606-616, 618-642, 644, 646-655,658, 660, 664-699,"800-835,. 851-862, 864-868, 875-878,
882, 884-886, 888.

INTERROGATORY NO. 13:
State the amount of Initial Term Loan and Delay Draw Term Loan You own, the date on.
which you acquired Initial Teim Loans and Delay Draw Term Loans, and identifY. each Term.
Lendyr to whom You are a successor-in-interest.

RESPONSE TO INTERROGATORY NO. 13:
Plaintiffs object to Interrogatory No. 13 on the grounds that it is overbroad and unduly
burdensome. Plaintiffs further object to Interrogatory No. 13 on the grounds that it seeks
information that is readily available to BofA or information that is available from other, more
convenient, sources. As the former Administrative Agent, BofA has knowledge of the
· information requested by Interrogatory No. 13 because, pursuant to Section 10.6(c) of the Credit
Agreement, it was required to "maintain at its office a copy of each Assignment and Assumption
delivered to it and a register for the recordatio~ of the names and addresses of the Lenders, and
the Commitments of, and principal amounts of the loans and LIC Obligations owing to, each
Lender pursuant to the terms" of the Credit Agreement. Further, the information sought by
Interrogatory No. 13 is contained in the documents produced in this action.

INTERROGATORY NO. 14:
State the amount of damages You are seeking, and identify all documents supporting
your claimed damages.

RESPONSE TO INTERROGATORY NO. 14:
Plaintiffs object to Interrogatory No. 14 on the grounds that it is overbroad and unduly
burdensome. Plaintiffs further object to Interrogatory No. 14 on the grounds that it seeks
information ~at is readily available to BofA or informatfon that is available from other, more

-31-

Case 1:09-md-02106-ASG Document 377-5 Entered on FLSD Docket 12/04/2013 Page 32 of
35

convenient, sources. Plaintiffs object to· Interrogatory No. 14 as oppressive to the extent it
purports to require Plaintiffs to identify all documents supporting their claimed damages. All
such documents ha,ve been or will be produced in this action and are equally available to BofA.
Plaintiffs further object that the time for submission of expert reports bas not come and therefore
presentation of expert damages analysis at this point is premature. Subject to the foregoing
general and specific objections, Plaintiffs respond as follows:
Damages for each type of claim (i.e. Term Loan and Delayed Draw) are based on t~e
difference between the value that Term Loan Lenders and Delay Draw Lenders would have
received, and or retained, ifBofA had fulfilled its obligations under the Fontainebleau Las Vegas
Credit Facility transaction documents and the value that Term Loan Lenders and Delay Draw
Lenders actually received. Damages attributable to a- specific plaintiff shall be based upon the·
difference described in the preceding sentence and such plaintiff's Term Loan claim amount and

II
II
II
II
II
II
II
II
II
II
II

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Case 1:09-md-02106-ASG Document 377-5 Entered on FLSD Docket 12/04/2013 Page 33 of
35

Delayed Draw claim amount. Damages shall include prejudgment interest and attorney's fees
and costs where applicable. The calculation of the actual amount of each party's damages is the
subject of expert analysis and testimony and will be provided in connection with expmt reports
and testimony.
DATED: June 6, 2011

BY

c~ \_A.JJ)l

J. Michael Hennigan
Kirk D. Dillman
Caroline M. Walters

HENNIGAN DORMAN LLP
865 S. Figueroa St., Suite 2900
Los Angeles, CA 90017
Telephone: [phone]
Facsimile: [phone]
:..andLorenz M: Priiss
David A. Rothstein
DIMOND KAPLAN & ROTHSTEIN PA
2665 S. Bayshore Dr., PH-2B
Coconut Grove, FL 3 313 3
Telephone: [phone]
Facsimile: [phone]

Attorneys for Plaintiffs Avenue CLO Fund,
LTD., eta!.

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Case 1:09-md-02106-ASG Document 377-5 Entered on FLSD Docket 12/04/2013 Page 34 of
35

PROOF OF SERVICE
.I declare as follows:
I am a resident of the State of California and over the age of eighteen years, and not a
party to the within action; my business address is 865 South Figueroa Street, Suite 2900; Los
Angeles, California 90017.
JW1e 6, 2011, I served the foregoing document described as
. A VENUE TERM LENDER PLAINTIFFS' RESPONSES TO SECOND SET OF
INTERROGATORIES BY BANK OF AMERICA, N.A. on the interested parties in this
action as follows:

On

[g[

by· placing the document listed above in a sealed envelope with postage thereon
fully prepaid, in the United States mail at Los Angeles, California addressed as set
forth belpw.

I:8J

by electronic transmission. I caused the document(s) listed above to be
transmitted by electronic mail to the individuals on the service list as set forth
below.

VL4 EMAIL SERVICE
Bradley J. Butwin, Esq.
Daniel L. Cantor, Esq.
Jonathan Rosenberg, Esq.
William J. Sushon, Esq.
Ken Murata, Esq.
Asher Rivner, Esq.
O'MELVENY & MYERS LLP
Times Square Tower
7 Times Square
New York, NY 10036
Tele: [phone]
·Fax: . [phone]
Email: [e-mail]
[e-mail]
[e-mail]
[e-mail]
[e-mail]
[e-mail]

Attorneys for Defendant
Bank of America, N.A.

-1-

Case 1:09-md-02106-ASG Document 377-5 Entered on FLSD Docket 12/04/2013 Page 35 of
35

VIA U.S. MAiL SERVICE
Craig V. Rasile, Esq.
Kevin Michael Eckhardt, Esq.
HUNTON & WILLIAMS

Attorneys for Defendant
Bank of America, N.A.

1111 Brickell A venue ·

Suite 2500
Miami, FL 33131
[phone]
Fax:
[phone]
Email:· [e-mail]

Tele:

keckhardt~huntort.com

I am readily familiar with the firm's practice of collection and processing correspondence
for.mailing. Under that practice it would be deposited with the U.S. Postal Service on that same
day with postage thereon fully prepaid in the ordinary course of business. I am aware that on
motion of the party served, service is presumed invalid if postal cancellation date or postal meter
date is more thari one day after date of deposit for mailing in affidavit.
Executed on June 6, 2011 at Los Angeles, California.

D I declare under penalty of perjury under the laws of the State of California that the
above is true
correct.

and

. IZI I declare under penalty of perjury under the laws of the United States of America that
the abov.e is true and correct.

-2-

Case 1:09-md-02106-ASG Document 377-6 Entered on FLSD Docket 12/04/2013 Page 1 of 1

Cantor Declaration Ex. 30
Filed Under Seal

Case 1:09-md-02106-ASG Document 377-7 Entered on FLSD Docket 12/04/2013 Page 1 of 1

Cantor Declaration Ex. 31
Filed Under Seal

Case 1:09-md-02106-ASG Document 377-8 Entered on FLSD Docket 12/04/2013 Page 1 of 1

Cantor Declaration Ex. 32
Filed Under Seal

Case 1:09-md-02106-ASG Document 377-9 Entered on FLSD Docket 12/04/2013 Page 1 of 1

Cantor Declaration Ex. 33
Filed Under Seal

Case 1:09-md-02106-ASG Document 377-10 Entered on FLSD Docket 12/04/2013 Page 1 of 2
1:09-md-02106-ASG Document 68

Entered on FLSD Docket 05/03/2010 Page 1 of 2

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO 09-MD-02106-CIV-GOLD/BANDSTRA
This document relates to Case No.: 09-23835-C/V-GOLD/McAL/LEY
IN RE: FONTAINEBLEAU LAS VEGAS
CONTRACT LITIGATION
MDL No. 2106

ORDER DISMISSING PARTIES WITHOUT PREJUDICE PURSUANT TO NOTICE
OF VOLUNTARY DISMISSAL [DE 65]; DIRECTING CLERK TO TAKE ACTION
THIS CAUSE is before the Court upon a Notice of Voluntary Dismissal [DE 65]
filed by certain Plaintiffs regarding their participation in Case Number 09-CV-23835
("the Nevada action"). Having considered the Notice, the record, and being otherwise
duly advised, it is hereby ORDERED AND ADJUDGED that:
1.

The following parties are hereby DISMISSED WITHOUT PREJUDICE from the
Nevada Action:
a.

Aberdeen Loan Funding, Ltd.;

b.

Armstrong Loan Funding, Ltd.;

c.

Brentwood CLO, Ltd.;

d.

Eastland CLO, Ltd.;

e.

Gleneagles CLO, Ltd;

f.

Grayson CLO, Ltd;

g.

Greenbriar CLO, Ltd.;

h.

Highland Credit Opportunities COO, Ltd.;

i.

Highland Loan Funding V, Ltd.;

j.

Highland Offshore Partners, L.P.;

k.

Jasper CLO, Ltd.;

Case 1:09-md-02106-ASG Document 377-10 Entered on FLSD Docket 12/04/2013 Page 2 of 2
Case 1:09-md-02106-ASG Document 68

I.

Loan Funding IV LLC;

n.

Loan Funding VII LLC;

0.

Loan Star State Trust;

p.

Red River CLO, Ltd.;

q.

Rockwall COO, ltd.;

r.

Rockwall COO II, ltd.;

S.

Southfork LLO, ltd.;

t.

Stratford CLO, ltd.; and

u.
2.

Liberty CLO, ltd.;

m.

Entered on FLSD Docket 05/03/2010 Page 2

Westchester CLO, Ltd ..

The clerk is directed to correct the dockets so that the above-referenced parties
are no longer listed as plaintiffs in the Nevada Action.
DONE and ORDERED IN CHAMBERS at Miami, Florida this 30th day of April,

2010.

THE,HONORAi3LALAN S. GOLD
UNITED STATES DISTRICT JUDGE
cc: Magistrate Judge Bandstra
Counsel of record

2

Case 1:09-md-02106-ASG Document 377-11 Entered on FLSD Docket 12/04/2013 Page 1 of 3
Page I

LexisNexis~
3 of 32 DOCUMENTS

Copyright 2008 Associated Press
All Rights Reserved
The Associated Press
September 15, 2008 Monday
SECTION: BUSINESS NEWS
LENGTH: 1352 words
HEADLINE: Lehman Brothers files for Chapter II protection
BYLINE: By YINNEE TONG and JOE BEL BRUNO, AP Business Writer
DATELINE: NEW YORK
BODY:
Lehman Brothers, a 158-year-old investment bank choked by the credit crisis and falling real estate values, filed for
Chapter II protection in the biggest bankruptcy tiling ever on Monday and said it was trying to sell off key business
units.
The filing was made in the U.S. Bankruptcy Court in the Southern District of New York by Lehman Brothers Holdings Inc., the bank's holding company. The case had been assigned to Judge James M. Peck.
Lehman fell under the weight of $60 billion in soured real estate holdings, and the credit market's dislocation ultimately forced it to seek court protection. The credit crisis has caused global banks to write down more than $300 billion
in asset value since last year, and caused the shotgun sales of Merrill Lynch & Co. and Bear Stearns Cos.
Lehman's bankruptcy filing marks the end of a Wall Street firm that started the U.S. cotton trade before the Civil
War and financed the railroads that built a nation.
The company's roots began in 1844 when Henry Lehman immigrated from Rimpar, Germany, to Alabama, where
he established a dry goods store that catered to local cotton farmers in Montgomery. Lehman Brothers evolved from
merchandising to a commodities broker, and then later into underwriting where the firm helped finance construction of
the Pennsylvania Railroad, among others.
Chairman and Chief Executive Richard S. Fuld, who joined Lehman as a college student in 1969 and was the longest serving CEO on Wall Street, now has the dubious task of winding down the company's $639 billion of assets. It has
about 25,000 employees worldwide, joining the swell of unemployed bankers and traders hurt by the credit crisis.
Many Lehman employees seen entering its headquarters in midtown Manhattan tucked their chins down to avoid
talking to the media and others who had lined up behind metal barriers in front of the building.
Some carried empty shopping, tote bags or gym bags in to the office. Some walked in with ties undone or wore
more casual clothes like polo shirts than they may have otherwise.
Lehman's filing is the biggest corporate bankruptcy in history in terms of assets held, Mike Bickford of Jupiter
eSources said. The next biggest bankruptcy was Worldcom Inc., with $126 billion in assets, and Enron Corp., with $81
billion. The figures are not adjusted for inflation.

Case 1:09-md-02106-ASG Document 377-11 Entered on FLSD Docket 12/04/2013 Page 2 of 3
Page 2
Lehman Brothers files for Chapter II protection The Associated Press September 15, 2008 Monday

Lehman plans an orderly liquidation of its assets in the coming months, and possibly years.
"It is going to be big, it's going to be complicated, it's going to involve a phenomenal number of professionals and it
will be very expensive," John Penn of Haynes & Boone LLP said about the case.
Martin Bienenstock, a partner at Dewey & LeBoeuf who was the lead lawyer on the Enron case, said that while
Lehman's case was is the largest ever in terms of asset size. it could end up being far less complicated than Enron and
get wrapped up within three to four months.
"It's in a race against time because its franchise is really its people," Bienenstock said, adding that Lehman's main
mission would be to sort out its case before its employees tinct new jobs and move on.
In Washington, the Securities and Exchange Commission said its examiners will remain at the offices of Lehman
Brothers to oversee an "orderly transfer" of assets in retail customer accounts to one or more brokerage firms that are
insured by the Securities Investor Protection Corp.
The SEC noted in a statement that Lehman's decision to file for bankruptcy protection does not affect the SIPC protection covering the firm's retail securities customers.
The SEC also said it is coordinating with overseas regulators to protect Lehman's customers and to maintain orderly
markets.
"We are committed to using our regulatory and supervisory authorities to reduce the potential for dislocations from
Lehman's unwinding, and to maintain the smooth functioning of the financial markets," SEC Chairman Christopher Cox
said in a statement.
In London, the administrators who have taken control of key Lehman Brothers' businesses in the United Kingdom
said it could take years to dispose of the company's assets to pay off creditors.
Tony Lomas of PriceWaterHouseCoopers said liquidating those assets will be more complex than disposing of Enron's European assets, which took six years after the U.S. energy company's 2001 bankruptcy.
Lehman's last hope of surviving outside of court protection faded Sunday after British bank Barclays PLC withdrew its bid to buy the investment bank. The troubled investment bank learned at a last-minute meeting on Friday with
federal officials that it would not be getting any emergency funding to give it the liquidity it needed, Chief Financial
Officer Ian Lowitt said in an affidavit.
Lowitt said the company had hoped to "restructure operations, reduce overall cost structure, and improve performance." There was a plan in place to sell a majority stake in its investment management business, which includes money
manager Neuberger Berman, and to spin-off of its troubled real estate assets into a publicly traded company. It says it is
exploring the sale of its broker-dealer operations and is in "advanced discussions" to sell its investment management
unit.
"Management believed that divorcing the real estate assets from the rest of the company would relieve the pressure
on the company," he said in the affidavit.
Investors didn't buy the plan, sending shares down 75 percent last week. The stock was worth pennies in electronic
trading on Monday, an astonishing descent from the $67.73 it was worth one year ago.
"It's a weird case because ordinarily you think of bankruptcy as giving you breathing space it's not clear it will
here," said David Skeel, a bankruptcy law historian at the University of Pennsylvania. "They've used up a lot of their
lives already. They desperately tried to find a solution. They've tumbled into bankruptcy kind of having run out of nearterm options. This is a company that is in free-fall."
The filing had been made so hastily that the company had not yet tiled motions by Monday morning that are typically made on the tirst day, such as asking the court for permission to continue paying employees.
Filing for Chapter II protection allows a company to restructure while creditor claims are held at bay. The company most likely chose to file under Chapter II, rather than a Chapter 7 liquidation, so that it could retain more control
over the selling off of assets, said Stephen Lubben, the Daniel J. Moore professor of law at Seton Hall Law School. In a
Chapter 7 filing, the court would immediately appoint a trustee to take over the case.
"I'm sure they think they could conduct a better liquidation themselves, and that's probably true," Lubben said.

Case 1:09-md-02106-ASG Document 377-11 Entered on FLSD Docket 12/04/2013 Page 3 of 3
Page 3
Lehman Brothers files for Chapter II protection The Associated Press September 15, 2008 Monday

The investment bank had said earlier that none of its broker-dealer subsidiaries or other units would be included in
the Chapter II filing. That means customers of its broker-dealers will not be subject to claims by creditors in the bankruptcy case.
Penn of Haynes & Boone said leaving some entities out of the bankruptcy filing allows the market to deal with
them contractually rather than have the bankruptcy case "walk in and stop everything."
"There are so many types of securities vehicles that are carved out of bankruptcy protection completely," he said.
In its bankruptcy petition, Lehman listed Citigroup among its biggest unsecured creditors, with about $138 billion
in bonds as of July 2. The Bank of New York Mellon Corp. was listed as holding about $17 billion in debt.
Citi and Bank of New York both said Monday they serve as trustees for Lehman debt, not that they are creditors
themselves. Citi issued a statement to say that its role is "administrative in nature and does not represent exposure for
Citi to Lehman." Bank of New York said, "In this situation, our role has been to serve as a trustee for certain Lehman
Brothers bond otferings. We have no outstanding loans to Lehman."
Lehman said that as of May 31, it had assets of $639 billion and debt of $613 billion.
AP Business Writers Candice Choi and Sara Lepro in New York, Marcy Gordon in Washington, and Bob Barr in
London contributed to this report.
LOAD-DATE: September 16, 2008

Case 1:09-md-02106-ASG Document 377-12 Entered on FLSD Docket 12/04/2013 Page 1 of
32

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA

Miami Division
CASE No.: 09-02106-MD-GOLD/BANDSTRA

IN RE:
FONTAINEBLEAU LAS VEGAS
CONTRACT LITIGATION
MDL NO. 2106
This document relates to Case Number:
09-CV-23835-ASG

ANSWER OF DEFENDANT BANK OF AMERICA, N.A.
Defendant Bank of America, N.A. ("BANA"), by its undersigned attorneys, hereby
answers the Second Amended Complaint for Breach of Contract, Breach of the Implied
Covenant of Good Faith and Fair Dealing, and Declaratory Relief(the "Avenue Complaint") and
responds, with knowledge as to its own acts and upon information and belief as to the acts of
others, as follows:
I.

BANA admits that the United States District Court for the Southern District of

Florida has jurisdiction over this matter under 12 U.S.C. § 632, and that BANA is a national
banking association organized under the laws of the United States. BANA denies knowledge or
information sufficient to form a belief as to the truth of paragraph I 's remaining allegations.
2.

BANA admits that the United States District Court for the District of Nevada is a

proper venue for this action.

Case 1:09-md-02106-ASG Document 377-12 Entered on FLSD Docket 12/04/2013 Page 2 of
32

3.

BANA states that no response is necessary because Avenue CLO Fund, Ltd. has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 3 's allegations.
4.

BANA states that no response is necessary because Avenue CLO Fund II, Ltd.

has filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to torm a belief as to the truth of paragraph 4's allegations.
5.

BANA states that no response is necessary because Avenue CLO Fund III, Ltd.

has filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 5's allegations.
6.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 6's allegations.
7.

BANA denies knowledge or information sufficient to torm a belief as to the truth

of paragraph 7' s allegations.
8.

BANA denies knowledge or information sufticient to form a belief as to the truth

of paragraph 8's allegations.
9.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 9' s allegations.
I 0.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 10' s allegations.
11.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 11 's allegations.

12.

BANA denies knowledge or into1mation sufficient to form a belief as to the truth

of paragraph 12 's allegations.

2

Case 1:09-md-02106-ASG Document 377-12 Entered on FLSD Docket 12/04/2013 Page 3 of
32

13.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 13 's allegations.
14.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 14's allegations.
15.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 15 's allegations.
16.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 16's allegations.
17.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 17's allegations.
18.

BANA denies knowledge or information sufficient to form a belief as to the truth

ofparagraph 18's allegations.
19.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 19's allegations.
20.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 20's allegations.
21.

BANA states that no response is necessary because Sands Point Funding Ltd. has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 21's allegations.
22.

BANA states that no response is necessary because Copper River CLO Ltd. has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 22's allegations.

3

Case 1:09-md-02106-ASG Document 377-12 Entered on FLSD Docket 12/04/2013 Page 4 of
32

23.

BANA states that no response is necessary because Kennetott Funding Ltd. has

tiled a Notice ofVoluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 23's allegations.
24.

BANA states that no response is necessary because NZC Opportunities (Funding)

II Limited has tiled a Notice of Voluntary Dismissal. To the extent a response is required,
BANA denies knowledge or information sufficient to form a belief as to the truth of
paragraph 24's allegations.
25.

BANA states that no response is necessary because Green Lane CLO Ltd. has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 25's allegations.
26.

BANA states that no response is necessary because 1888 Fund, Ltd. has filed a

Notice of Voluntary Dismissal. To the extent a response is required, BANA denies knowledge
or information sufficient to form a belief as to the truth ofparagraph 26's allegations.
27.

BANA states that no response is necessary because Orpheus Funding LLC has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to torm a belief as to the truth of paragraph 27's allegations.
28.

BANA states that no response is necessary because Orpheus Holdings LLC has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to fom1 a belief as to the truth of paragraph 28's allegations.
29.

BANA states that no response is necessary because LFCQ LLC has filed a Notice

of Voluntary Dismissal. To the extent a response is required, BANA denies knowledge or
information sufflcient to form a belief as to the truth of paragraph 29's allegations.

4

Case 1:09-md-02106-ASG Document 377-12 Entered on FLSD Docket 12/04/2013 Page 5 of
32

30.

BANA states that no response is necessary because Aberdeen Loan Funding, Ltd.

has filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 30's allegations.
31.

BANA states that no response is necessary because Am1strong Loan Funding,

Ltd. has tiled a Notice of Voluntary Dismissal. To the extent a response is required, BANA
denies knowledge or information sufficient to torm a belief as to the truth of paragraph 31's
allegations.
32.

BANA states that no response is necessary because Brentwood CLO, Ltd. has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 32's allegations.
33.

BANA states that no response is necessary because Eastland CLO, Ltd. has filed a

Notice of Voluntary Dismissal. To the extent a response is required, BANA denies knowledge
or information sufficient to form a belief as to the truth of paragraph 33's allegations.
34.

BANA states that no response is necessary because Emerald Orchard Limited has

tiled a Notice of Voluntary Dismissal. To the extent a response is required. BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 34's allegations.
35.

BANA states that no response is necessary because Gleneagles CLO, Ltd. has

tiled a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or intormation sufficient to form a belief as to the truth of paragraph 35's allegations.
36.

BANA states that no response is necessary because Grayson CLO, Ltd. has filed a

Notice of Voluntary Dismissal. To the extent a response is required, BANA denies knowledge
or information sufficient to form a belief as to the truth of paragraph 36's allegations.

5

Case 1:09-md-02106-ASG Document 377-12 Entered on FLSD Docket 12/04/2013 Page 6 of
32
1

37.

SANA states that no response is necessary because Greenbriar CLO, Ltd. has

filed a Notice of Voluntary Dismissal. To the extent a response is required, SANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 37's allegations.
38.

SANA states that no response is necessary because Highland Credit Opportunities

COO, Ltd. has tiled a Notice of Voluntary Dismissal. To the extent a response is required,
SANA denies knowledge or infom1ation sufficient to form a belief as to the truth of paragraph
38's allegations.
39.

SANA states that no response is necessary because Highland Loan Funding V,

Ltd. has tiled a Notice of Voluntary DismissaL To the extent a response is required, BANA
denies knowledge or information sufficient to form a belief as to the truth of paragraph 39's
allegations.
40.

BANA states that no response is necessary because Highland Offshore Partners,

L.P. has tiled a Notice of Voluntary Dismissal. To the extent a response is required, BANA
denies knowledge or intonnation sufficient to form a belief as to the truth of paragraph 40's
allegations.
41.

BANA states that no response is necessary because Jasper CLO, Ltd. has filed a

Notice of Voluntary Dismissal. To the extent a response is required, BANA denies knowledge
or information sufficient to form a belief as to the truth of paragraph 41's allegations.
42.

BANA states that no response is necessary because Liberty CLO, Ltd. has filed a

Notice ofVoluntary Dismissal. To the extent a response is required, BANA denies knowledge
or information sufficient to form a belief as to the truth of paragraph 42's allegations.

6

Case 1:09-md-02106-ASG Document 377-12 Entered on FLSD Docket 12/04/2013 Page 7 of
32

43.

BANA states that no response is necessary because Loan Funding IV LLC has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 43's allegations.
44.

BANA states that no response is necessary because Loan Funding VII LLC has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 44's allegations.
45.

BANA states that no response is necessary because Loan Star State Trust has filed

a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies knowledge
or intormation sufficient to form a belief as to the truth of paragraph 45's allegations.
46.

BANA states that no response is necessary because Longhorn Credit Funding,

LLC has filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA
denies knowledge or information sufficient to form a belief as to the truth of paragraph 46's
allegations.
47.

BANA states that no response is necessary because Red River CLO, Ltd. has filed

a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies knowledge
or information sufficient to form a belief as to the truth ofparagraph 47's allegations.
48.

BANA states that no response is necessary because Rockwall CDO, Ltd. has filed

a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies knowledge
or information sufticient to form a belief as to the truth ofparagraph 48's allegations.
49.

BANA states that no response is necessary because Rockwall CDO II, Ltd. has

filed a Notice of Voluntary DismissaL To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 49's allegations.

7

Case 1:09-md-02106-ASG Document 377-12 Entered on FLSD Docket 12/04/2013 Page 8 of
32

50.

BANA states that no response is necessary because Southfork CLO, Ltd. has filed

a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies knowledge
or information sufficient to fonn a belief as to the truth of paragraph 50's allegations.
51.

BANA states that no response is necessary because Stratford CLO, Ltd. has filed

a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies knowledge
or information sufficient to form a belief as to the truth of paragraph 51's allegations.
52.

BANA states that no response is necessary because Westchester CLO, Ltd. has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 52's allegations.
53.

BANA denies knowledge or infonnation sufficient to tonn a belief as to the truth

of paragraph 53's allegations.
54.

BANA denies knowledge or information sufficient to tonn a belief as to the truth

of paragraph 54's allegations.
55.

BANA denies knowledge or infonnation sufficient to form a belief as to the truth

of paragraph 55's allegations.
56.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 56's allegations.
57.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 57's allegations.
58.

BANA denies knowledge or infonnation sufficient to tonn a belief as to the truth

of paragraph 58's allegations.
59.

BANA denies knowledge or information sufficient to fonn a belief as to the truth

of paragraph 59's allegations.

8

Case 1:09-md-02106-ASG Document 377-12 Entered on FLSD Docket 12/04/2013 Page 9 of
32

60.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 60's allegations.
61.

BANA states that no response is necessary because Carlyle High Yield Partners

2008-l, Ltd. has filed a Notice ofVoluntary Dismissal. To the extent a response is required,
BANA denies knowledge or information sufficient to form a belief as to the truth of paragraph
61's allegations.
62.

BANA states that no response is necessary because Carlyle High Yield Partners

VI, Ltd. has filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA
denies knowledge or information sufficient to form a belief as to the truth of paragraph 62's
allegations.
63.

BANA states that no response is necessary because Carlyle High Yield Partners

VII, Ltd. has filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA
denies knowledge or information sufficient to form a belief as to the truth of paragraph 63's
allegations.
64.

BANA states that no response is necessary because Carlyle High Yield Partners

VIII, Ltd. has filed a Notice of Voluntary Dismissal. To the extent a response is required,
BANA denies knowledge or information sufficient to form a belief as to the truth of paragraph
64's allegations.
65.

BANA states that no response is necessary because Carlyle High Yield Partners

IX, Ltd. has filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA
denies knowledge or information sufficient to form a belief as to the truth ofparagraph 65's
allegations.

9

Case 1:09-md-02106-ASG Document 377-12 Entered on FLSD Docket 12/04/2013 Page 10 of
32

66.

BANA states that no response is necessary because Carlyle High Yield Partners

X, Ltd. has filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA
denies knowledge or information sufficient to form a belief as to the truth of paragraph 66's
allegations.
67.

BANA states that no response is necessary because Carlyle Loan Investment, Ltd.

has filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to fom1 a belief as to the truth of paragraph 67's allegations.
68.

BANA states that no response is necessary because Centurion CDO VI, Ltd. has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth ofparagraph 68's allegations.
69.

BANA states that no response is necessary because Centurion CDO Vll, Ltd. has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 69's allegations.
70.

BANA states that no response is necessary because Centurion CDO 8, Limited

has filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth ofparagraph 70's allegations.
71.

BANA states that no response is necessary because Centurion CDO 9, Limited

has tiled a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 71's allegations.
72.

BANA states that no response is necessary because Cent CDO 10 Limited has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BAN A denies
knowledge or information sufficient to form a belief as to the truth of paragraph 72's allegations.

10

Case 1:09-md-02106-ASG Document 377-12 Entered on FLSD Docket 12/04/2013 Page 11 of
32

73.

BANA stales that no response is necessary because Cent CDO XI Limited has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 73's allegations.
74.

BANA states that no response is necessary because Cent CDO 12 Limited has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 74's allegations.
75.

BANA states that no response is necessary because Cent CDO I 4 Limited has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 75's allegations.
76.

BANA states that no response is necessary because Cent CDO 15 Limited has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 76's allegations.
77.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 77's allegations.
78.

BAN A denies knowledge or information sufficient to form a belief as to the truth

of paragraph 78's allegations.
79.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 79's allegations.
80.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 80's allegations.
81.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 81's allegations.

II

Case 1:09-md-02106-ASG Document 377-12 Entered on FLSD Docket 12/04/2013 Page 12 of
32

82.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 82's allegations.
83.

BANA denies knowledge or information sufficient to form a belief as to the truth

ofparagraph 83's allegations.
84.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 84's allegations.
85.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 85's allegations.
86.

BANA denies knowledge or information sufficient to form a belief as to the truth

ofparagraph 86's allegations.
87.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 87's allegations.
88.

BANA states that no response is necessary because ARES Enhanced Loan

Investment Strategy III, Ltd. has filed a Notice ofVoluntary Dismissal. To the extent a response
is required, BANA denies knowledge or information sufficient to form a belief as to the truth of
paragraph 88's allegations.
89.

BANA states that no response is necessary because Primus CLO I, Ltd. has filed a

Notice of Voluntary DismissaL To the extent a response is required, BANA denies knowledge
or information sufficient to form a belief as to the truth of paragraph 89's allegations.
90.

BANA states that no response is necessary because Primus CLO II. Ltd. has filed

a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies knowledge
or information sufficient to form a belief as to the truth of paragraph 90's allegations.

12

Case 1:09-md-02106-ASG Document 377-12 Entered on FLSD Docket 12/04/2013 Page 13 of
32

91.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 91's allegations.
92.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 92's allegations.
93.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 93's allegations.
94.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 94's allegations.
95.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 95's allegations.
96.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 96's allegations.
97.

BANA states that no response is necessary because Rosedale CLO, Ltd. has filed

a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies knowledge
or information sufficient to form a belief as to the truth of paragraph 97's allegations.
98.

BANA states that no response is necessary because Rosedale CLO II Ltd. has

tiled a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 98's allegations.
99.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 99's allegations.
100.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph IOO's allegations.

13

Case 1:09-md-02106-ASG Document 377-12 Entered on FLSD Docket 12/04/2013 Page 14 of
32

I 0 I.

BANA denies knowledge or inf01mation sufficient to form a belief as to the truth

of paragraph lO 1's allegations.
I 02.

BANA denies paragraph I 02's allegations, except admits that (i) BANA is a

national banking association with its main office in Charlotte, North Carolina, (ii) BANA is a
Revolving Facility lender, an Issuing Lender and a Swing Line Lender, (iii) BANA served as
Administrative Agent under the Credit Agreement and as Disbursement Agent under the
Disbursement Agreement, and (iv) BANA agreed to fund $100 million under the Revolving
Facility. BANA respectfully refers the Court to the governing loan agreements for their true and
correct contcnts. 1
I 03.

BANA denies paragraph l 03's allegations, except admits that (i) Merrill Lynch

Capital Corporation is a Delaware Corporation with a principal place of business in New York
and is indirectly owned by Bank of America Corporation, and (ii) that Merrill Lynch Capital
Corporation agreed to fund $I 00 million under the Revolving Facility. BANA respectfully
refers the Court to the governing loan agreements for their true and correct contents.
I 04.

BANA denies knowledge or information sufficient to f01m a belief as to the truth

of paragraph l04's allegations, except admits that J.P. Morgan Chase Bank, N.A. agreed to fund
$90 million under the Revolving Facility.
I 05.

BANA denies knowledge or infonnation sufficient to form a belief as to the truth

of paragraph lOS's allegations, except admits that Barclays Bank PLC agreed to fund
$100 million under the Revolving Facility.

Capitalized terms not othenvise de tined herein have the meaning used in the Credit Agreement or, if applicable,
the Disbursement Agreement.

I4

Case 1:09-md-02106-ASG Document 377-12 Entered on FLSD Docket 12/04/2013 Page 15 of
32

I 06.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph I 06's allegations, except states that Deutsche Bank Trust Company Americas
agreed to fund $100 million under the Revolving Facility.
I 07.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph l 07's allegations, except admits that The Royal Bank of Scotland PLC agreed to
fund $90 million under the Revolving Facility.
l 08.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph I 08's allegations, except admits that Sumitomo Mitsui Banking Corporation agreed
to fund $90 million under the Revolving Facility.
109.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 109's allegations, except admits that Bank of Scotland agreed to fund $72.5 million
under the Revolving Facility.
II 0.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph IIO's allegations, except admits that HSH Nordbank AG agreed to fund
$40 million under the Revolving Facility.
Ill.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph Ill's allegations, except admits that MB Financial Bank, N.A. agreed to fund
S7.5 million under the Revolving Facility.
112.

BANA denies knowledge or information sufficient to form a belief as to the truth

ofparagraph 112's allegations, except admits that Camulos Master Fund, L.P. agreed to fund
S20 million under the Revolving Facility.
113.

BANA denies paragraph ll3's allegations, except admits that the Project is being

constructed on the north end of the Las Vegas Strip on approximately 24.4 acres and includes a

15

Case 1:09-md-02106-ASG Document 377-12 Entered on FLSD Docket 12/04/2013 Page 16 of
32

63-story skyscraper, a 100-foot high three-level podium and a 353,000 square-foot convention
center.
114.

BANA denies paragraph 114 's allegations and respectfully refers the Court to the

goveming loan agreements for their true and correct contents.
115.

BANA admits that on June 6, 2007, numerous lenders, including Plaintiffs and

Defendants entered into the Credit Agreement. BANA denies paragraph liS's remaining
allegations, and respectfully refers the Court to the govcming loan agreements tor their true and
correct contents.
116.

BANA denies the allegations in paragraph ll6's first sentence, and respectfully

refers the Court to the governing loan agreements for their true and correct contents. BANA
states that paragraph I 16' s second and third sentences contain legal conclusions as to which no
response is required. To the extent a response is required, BANA denies the allegations in
paragraph 116's second and third sentences and respectfully refers the Court to the Disbursement
Agreement for its true and correct contents.
117.

BANA denies knowledge or information sufficient to form a belief as to the

allegations in paragraph l17's first sentence. BANA states that no response is required for the
allegations in paragraph ll7's second sentence. BANA admits the allegations in paragraph
ll7's third sentence. BANA states that no response is required for the allegations in paragraph
ll7's fourth sentence. BANA denies knowledge or information sufficient to form a belief as to
the truth of the allegations in paragraph ll7's fifth sentence, and states that BANA was a Term
Lender. BANA denies paragraph 117's remaining allegations, except admits that BANA was
Administrative Agent under the Credit Agreement and Disbursement Agent under the
Disbursement Agreement.

16

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32

118.

BANA denies paragraph liS's allegations and respectfully refers the Court to the

Credit Agreement for its true and correct contents.
I 19.

BANA denies paragraph 119's allegations and respectfully refers the Court to the

governing loan agreements for their true and correct contents.
120.

BANA denies paragraph I 20's allegations and respectfully refers the Court to the

governing loan agreements for their true and correct contents.
121.

BAN A denies paragraph 121 's allegations and respectfully refers the Court to the

Disbursement Agreement for its true and correct contents.
122.

BANA denies paragraph 122 's allegations and respectfully refers the Court to the

governing loan agreements for their true and correct contents.
123.

BANA denies paragraph I 23's allegations and respectfully refers the Court to the

Disbursement Agreement for its true and correct contents.
124.

BANA denies paragraph !24's allegations and respectfully refers the Court to the

Credit Agreement and Disbursement Agreement tor their true and correct contents.
125.

BAN A denies paragraph 125 's allegations and respectfully refers the Court to the

Disbursement Agreement for its true and correct contents.
126.

BANA denies paragraph !26's allegations and respectfully refers the Court to the

governing loan agreements for their true and correct contents.
127.

BANA denies the allegations in paragraph !27's first sentence, except admits that

Lehman Brothers Holdings, Tnc. was a Retail Lender and Retail Agent and respectfully refers the
Court to the governing loan agreements for their true and correct contents. BANA admits that as
of the Closing Date, approximately $125 million ofthe Retail Facility was advanced leaving

S 189.6 million to be advanced. BANA denies the allegations in paragraph 127's third sentence.

17

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32

BANA denies knowledge or information sufficient to form a belief as to the truth of the
allegations in paragraph !27's last sentence.
128.

BANA admits that in September 2008, Lehman filed tor bankruptcy protection.

BANA denies knowledge or information sufficient to form a belief as to the truth of paragraph
!28's second sentence. BANA denies the allegations in paragraph I 28's third sentence. BANA
denies the allegations in paragraph I 28's first bullet point and respectfully refers the Court to the
Disbursement Agreement tor its true and correct contents. BANA states that the allegations in
paragraph I 28's sub-bullet point to the first bullet point contain a legal conclusion as to which no
response is required. To the extent that a response is required, BANA denies the allegations in
paragraph !28's sub-bullet point to the first bullet point. BANA denies the allegations in
paragraph !28's second bullet point and respectfully refers the Court to the governing loan
agreements tor their true and correct contents, except denies knowledge or information sufficient
to form a belief as to the truth ofthe final sentence in paragraph !28's second bullet point.
BANA states that the allegations in paragraph I 28's sub-bullet point to the second bullet point
contain a legal conclusion as to which no response is required. To the extent that a response is
required, BANA denies the allegations in paragraph I 28's sub-bullet point to the second bullet
point. BANA denies the allegations in paragraph 128's third bullet point and respectft!lly refers
the Court to the Disbursement Agreement for its true and correct contents. BANA states that the
allegations in paragraph I 28's sub-bullet point to the third bullet point contain a legal conclusion
as to which no response is required. To the extent that a response is required, BANA denies the
allegations in paragraph I 28's sub-bullet point to the third bullet point. BANA denies the
allegations in paragraph l28's fourth bullet point and respectfully refers the Court to the
Disbursement Agreement for its true and correct contents. BANA states that the allegations in

18

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32

paragraph I 28's sub-bullet point to the fourth bullet point contain a legal conclusion as to which
no response is required. To the extent that a response is required, BANA denies the allegations
in paragraph !28's sub-bullet point to the fourth bullet point.
129.

BANA denies paragraph L29's allegations.

130.

BANA denies paragraph l30's allegations, except admits that BANA was the

agent and a lender under a loan facility for the Fontainebleau Hotel in Miami. BANA also
admits that BANA made loans to Turnberry Associates (of which Soffer is a principal), and the
Borrower's chief financial officer, prior to taking that position, worked for eight years at Bane of
America Securities.
131.

BANA denies paragraph 131 's allegations, except denies knowledge or

information as to whether on November 6, 2008, Moody's announced that it had downgraded the
Project's debt facilities.
132.

BANA denies paragraph !32's allegations.

133.

BANA denies knowledge or information sufficient to form a belief as to the truth

of the allegations in paragraph 133 's first and second sentences, except admits that First National
Bank of Nevada was closed on or around July 25, 2008. BANA admits that First National Bank
of Nevada had made a commitment of $1,666,666.67 under the Delay Draw and a commitment
of$3,333,333.33 under the Initial Term Loan. BANA denies knowledge or information
sufficient to form a belief as to the truth of paragraph 133 's remaining allegations.
134.

BANA states that paragraph 134 contains legal conclusions as to which no

response is required. To the extent that a response is required, BANA denies paragraph 134 's
allegations, and respectfully refers the Court to the governing loan agreements for their true and
correct contents.

19

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32

135.

BANA denies paragraph !35's allegations.

136.

BANA denies paragraph !36's allegations, except admits that Merrill Lynch

Capital Corporation is a wholly-owned indirect subsidiary of Bank of America Corporation and
that it was a Revolving Facility Lender.
137.

BANA denies paragraph I 37's allegations, except denies knowledge or

information sufficient to form a belief as to the truth of whether the Borrowers used proceeds of
the Initial Term Loan Facility, Second Lien Facility and other proceeds to pay Project Costs, and
BANA admits that prior to February 2009, Borrowers did not request any advances under the
Revolving Facility and respectfully refers the Court to the February 13, 2009 Advance Request
for its true and correct contents.
138.

BANA denies paragraph !38's allegations, except admits that BANA, as

Administrative Agent, sent a February 20, 2009 letter to the Borrower and respectfully refers the
Court to that letter for its true and correct contents.
139.

BANA denies paragraph 139' s allegations, except admits that the Borrower sent

to BANA, as Administrative Agent, a letter on February 23, 2009 and respectfully refers the
Court to that Jetter for its true and correct contents.
140.

BANA denies paragraph 140' s allegations, except admits that BAN A, as

Disbursement Agent, approved the Borrower's February 24, 2009 Advance Request.
141.

BANA denies paragraph 141 's allegations, except admits that the Borrower

issued Notices of Borrowing on March 2, 2009 and March 3, 2009, and respectfully refers the
Court to the Notices for their true and correct contents.
142.

BANA denies paragraph !42's allegations and respectfully refers the Court to the

Credit Agreement for its true and correct contents.

20

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32

143.

BANA admits paragraph !43's first sentence. BANA states that paragraph !43's

second sentence contains legal conclusions as to which no response is required and avers that the
Court has already determined, in its May 28, 20 I0 Amended MDL Order Number Eighteen;
Granting in Part and Denying in Part Motions to Dismiss [DE 35]; [DE 36]; Requiring Answer to
Complaints; Vacating Final Judgment ("Amended MDL Order Number Eighteen"), that '"fully
drawn ... unambiguously means 'fully funded'; and ... the Delay Draw Term Loans had not
been 'fully drawn' at the time Fontainebleau submitted the March Notices of Borrowing." To
the extent that a response is required, BANA denies the allegations in paragraph l43's second
sentence. BANA denies paragraph !43's remaining allegations, except admits that BANA
participated in an ad hoc steering committee made up of certain Revolving Lenders and
respectfully refers the Court to the correspondence between BANA and the Lenders for its true
and correct contents.
144.

BANA denies paragraph !44's allegations, avers that the Court has already

determined in Amended MDL Order Number Eighteen that "'fully drawn' ... unambiguously
means 'fully funded'; and ... the Delay Draw Term Loans had not been 'fully drawn' at the time
Fontainebleau submitted the March Notices of Borrowing" and respectfully refers the Court to
the correspondence between BANA and the Borrower for their true and correct contents.
145.

BANA denies paragraph I 45's allegations, except admits that BANA, as

Administrative Agent, sent the Borrowers letters on March 3, 2009 and March 4, 2009, and
respectfully refers the Court to those letters for their true and correct contents.
146.

BANA denies the allegations in paragraph I 46's first sentence. BANA states that

paragraph 146' s remaining allegations contain legal conclusions as to which no response is
required. To the extent that a response is required, BANA denies

21

para~raph

!46's remaining

Case 1:09-md-02106-ASG Document 377-12 Entered on FLSD Docket 12/04/2013 Page 22 of
32

allegations and respectfully refers the Court to the Credit Agreement and Disbursement
Agreement for their true and correct contents.
147.

BANA denies paragraph I 47's allegations and respectfully refers the Court to the

Advance Requests and In Balance Reports for their true and correct contents.
148.

BANA states that paragraph 148 contains legal conclusions as to which no

response is required and avers that the Court has already determined in Amended MDL Order
Number Eighteen that "'fully drawn' ... unambiguously means 'fully funded'; and ... the Delay
Draw Tenn Loans had not been 'fully drawn' at the time Fontainebleau submitted the March
Notices of Borrowing." To the extent that a response is required, BANA denies paragraph !48's
allegations.
149.

BANA states that paragraph 149 contains legal conclusions as to which no

response is required and avers that the Court has already determined in Amended MDL Order
Number Eighteen that "'fully drawn' ... unambiguously means 'fully funded'; and ... the Delay
Draw Term Loans had not been 'fully drawn' at the time Fontainebleau submitted the March
Notices of Borrowing." To the extent that a response is required, BANA denies paragraph I 49's
allegations, except BANA denies knowledge or information sufficient to form a belief as to the
parties' intent in drafting the Credit Agreement and other loan documents.
!50.

BANA denies paragraph !50's allegations, except admits that BANA did not

issue a Stop Funding Notice on or after March 3, 2009.
151.

BANA denies paragraph 151 's allegations, except admits that on March 9, 2009,

the Borrower submitted a Notice of Borrowing and respectfully refers the Court to the Notice
and the attached letter for its true and correct contents.

22

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32

152.

BANA denies paragraph I 52's allegations, except admits that $68,000,000.00

was advanced to the Borrowers in February 2009, and respectfully refers to the Court to the
Credit Agreement and the February Notice of Borrowing for their true and correct contents.
153.

BANA denies the allegations in paragraph I 53's first sentence. BANA denies the

allegations in paragraph 153 's second sentence and respectfully refers the Court to the March l 0,
2009 Delay Draw Update posted on Intralinks for its true and correct contents. BANA states that
paragraph 153 's remaining allegations contain legal conclusions as to which no response is
required. To the extent that a response is required, BANA denies paragraph I 53's remaining
allegations.
154.

BANA states that the allegations in paragraph I 54's first sentence contain legal

conclusions as to which no response is required. To the extent that a response is required,
BANA denies the allegations in paragraph 154' s first sentence. BANA denies paragraph 154' s
remaining allegations, except admits that the Revolving Lenders were repaid $68 million
outstanding under the Revolver Facility.
155.

BANA denies paragraph I 55's allegations, except admits that (i) the Borrower

sent BANA a letter on March 16, 2009, and (ii) certain Term Lenders sent BANA a letter on
March 19, 2009, and respectfully refers the Court to the letters for their true and correct contents.
156.

BANA denies paragraph 156 's allegations, except admits that (i) the Borrowers

sent BANA, as Administrative Agent, the March 25, 2009 Advance Request on March II, 2009,
(ii) BANA, as Administrative Agent, sent the Borrower a letter on March 16, 2009, and (iii) that
none of the March 25 Advance Request funds were Revolving Loan proceeds, and respectfully
refers the Court to those documents for their true and correct contents.

Case 1:09-md-02106-ASG Document 377-12 Entered on FLSD Docket 12/04/2013 Page 24 of
32

157.

BANA denies the allegations in paragraph !57's first sentence. BANA denies the

allegations in paragraph 157's second sentence and respectfully refers the Court to the Credit
Agreement for its true and correct contents. BANA admits the allegations in paragraph !57's
third sentence. BANA states that the allegations paragraph !57's last sentence contains legal
conclusions as to which no response is required. To the extent that a response is required,
BANA denies the allegations paragraph !57's last sentence.
158.

BANA states that paragraph 158 contains legal conclusions as to which no

response is required. To the extent that a response is required, BANA denies paragraph !58's
allegations, and respectfully refers the Court to the governing loan agreements for their true and
correct contents.
!59.

BANA states that paragraph !59 contains legal conclusions as to which no

response is required. To the extent that a response is required, BANA denies paragraph I 59's
allegations and respectfully refers the Court to the governing loan documents for their true and
correct content.
160.

BANA denies paragraph !60's allegations.

161.

BANA states that the allegations in paragraph 161 's first sentence contain a legal

conclusion as to which no response is required. To the extent that a response is required, BANA
denies paragraph 161 's allegations. BANA denies paragraph 161 's remaining allegations, except
admits that on March 23, 2009, the Borrower submitted the March 25, 2009 Advance Request
showing the In Balance Test to be positive $13,785,184 and respectfully refers the Court to that
Advance Request and the Disbursement Agreement for their true and correct contents.
162.

BANA denies paragraph !62's allegations.

24

Case 1:09-md-02106-ASG Document 377-12 Entered on FLSD Docket 12/04/2013 Page 25 of
32
1

163.

BANA denies paragraph !63's allegations, except admits that BANA, as

Administrative Agent, sent a March 23, 2009 letter and respectfully refers the Court to that letter
for its true and correct contents.
164.

BANA denies paragraph I 64's allegations, except admits that the Borrower sent

to the Lenders on April 3, 2009, a letter and attached Interim Agreement, and respectfully refers
the Court to the March 23, 2009 letter and April 3, 2009 letter for their true and correct contents.
165.

BANA denies paragraph I 65's allegations.

166.

BANA denies paragraph 166' s allegations, except admits that the Borrowers sent

BANA, as Disbursement Agent and Bank Agent, and others, a letter on April 13, 2009, and
respectfully refers the Court to that letter for its true and correct contents.
167.

BANA denies paragraph !67's allegations, except admits that BANA, as

Administrative Agent, sent a letter to the Borrower on April 20, 2009, and respectfully refers the
Court to that letter for its true and correct contents.
168.

BANA denies paragraph !68's allegations, except admits that BANA, as

Administrative Agent, sent a letter to the Borrower on April 20, 2009, and respectfully refers the
Court to that letter for its true and correct contents.
169.

BANA denies paragraph !69's allegations, except admits that the Borrower

submitted Notice of Borrowing on April 21, 2009, the Borrower's counsel sent a letter to BANA
on April 2 I, 2009, and Defendants did not provide funding in response to the April 21 Notice,
and respectfully refers the Court to those documents for their true and correct contents.
170.

BANA denies paragraph !70's allegations.

l 71.

BAN A denies paragraph I 71's allegations, except admits that on May 7, 2009,

BANA, as Administrative Agent and Disbursement Agent, sent a letter to the Borrower and

25

Case 1:09-md-02106-ASG Document 377-12 Entered on FLSD Docket 12/04/2013 Page 26 of
32
1

others announcing its resignation as Administrative Agent and Disbursement Agent and
respectfully refers the Court to the May 7, 2009 letter for its true and correct contents.
172.

BANA denies paragraph !72's allegations.
COUNT I
Breach of the Disbursement Agreement Against BofA

173.

BANA repeats and incorporates by reference all the answers set forth in

paragraphs I through 172 as if fully set forth herein.
174.

BANA states that paragraph 174 contains legal conclusions as to which no

response is required. To the extent that a response is required, BANA denies paragraph I 74's
allegations, except admits that BANA acted as Bank Agent and Disbursement Agent under the
Disbursement Agreement and respectfully refers the Court to the Disbursement Agreement for
its true and correct contents.
175.

BANA states that paragraph 175 contains legal conclusions as to which no

response is required. To the extent that a response is required, BANA denies paragraph !75's
allegations and respectfully refers the Court to the Disbursement Agreement for its true and
correct contents.
176.

BANA denies paragraph !76's allegations.

177.

BANA denies paragraph I 77's allegations.

178.

BANA denies paragraph !78's allegations.
COUNT II
Breach of the Credit Agreement Against All Defendants

179-188.

BANA states that no response is required to the allegations in paragraphs

179- I 88 because the Court has dismissed Count II by Amended MDL Order Number Eighteen.

26

Case 1:09-md-02106-ASG Document 377-12 Entered on FLSD Docket 12/04/2013 Page 27 of
32

COUNT III
For Breach of the Implied Covenant of Good Faith and Fair Dealing Against BofA
189-193.

BANA states that no response is required to the allegations in paragraphs

189 through 193 because the Court has dismissed Count HI by Amended MDL Order Number
Eighteen.

COUNT IV
Breach of the Implied Covenant of
Good Faith and Fair Dealing Against All Defendants
194-200.

BANA states that no response is required to the allegations in paragraphs

194 through 200 because the Court bas dismissed Count IV by Amended MDL Order Number
Eighteen.

COUNTY
For Declaratory Relief Against BofA
201.

BAN A repeats and incorporates by reference all the answers set forth in

paragraphs I through 172 as if fully set forth herein.
202.

BANA denies paragraph 202's allegations, except admits there is a dispute

between the Plaintiffs and BANA, and that BANA contends that it has acted in good faith and in
compliance with its obligations under the Disbursement Agreement.
203.

BANA states that paragraph 203 contains legal conclusions as to which no

response is required. To the extent a response is required, BANA denies paragraph 203's
allegations.

27

Case 1:09-md-02106-ASG Document 377-12 Entered on FLSD Docket 12/04/2013 Page 28 of
32

COUNT VI
For Declaratory Relief Against All Defendants
204-206.

BANA states that no response is required to the allegations in paragraphs

204 through 206 because the Court bas dismissed Count VI by Amended MDL Order Number
Eighteen.

DEFENSES
First Defense
The A venue Complaint fails to state a claim upon which relief can be granted.

Second Defense
The Avenue Plaintiffs' claims against BANA are barred, in whole or in part, by the
doctrines of laches, waiver, and/or acquiescence.

Third Defense
The Avenue Plaintiffs' claims against BANA are barred or limited, in whole or in part,
by their failure to mitigate, minimize, or avoid their alleged damages.

Fourth Defense
The Avenue Plaintiffs' claims against BANA are barred, in whole or in part, by the
doctrine of equitable estoppel.

Fifth Defense
The Avenue Plaintiffs' claims against BANA are barred by the doctrine of unclean hands.

Sixth Defense
The Avenue Plaintiffs' claims against BANA arc barred or limited, in whole or in part,
because their own acts and/or omissions caused, or in the alternative, contributed to their alleged
damages.

28

Case 1:09-md-02106-ASG Document 377-12 Entered on FLSD Docket 12/04/2013 Page 29 of
32
1

Seventh Defense
The Avenue Plaintiffs' claims may be barred or limited, in whole or in part, by the
doctrine of frustration of purpose.

Eighth Defense
To the extent that the Avenue Plaintiff<> failed to mitigate, minimize or avoid any loss or
damage referred to in the Avenue Complaint, any recovery against BANA must be reduced by
that amount.

Ninth Defense
The Avenue Complaint does not describe the claims made against BANA with sufficient
particularity to enable BANA to determine all defenses (including defenses based upon the terms
of the Credit Agreement and/or Disbursement Agreement and related documents) it has to this
suit. BANA reserves the right to assert other defenses as discovery proceeds.

WHEREFORE, BANA respectfully requests that the Court enter an order:
I.

dismissing the Avenue Plaintiffs' claims with prejudice and entering judgment in

BANA's favor;
2.

awarding BANA its reasonable attorney's fees and costs of suit; and

29

Case 1:09-md-02106-ASG Document 377-12 Entered on FLSD Docket 12/04/2013 Page 30 of
32

3.

awarding such other, different, or further relief as the Court may deem just and

proper.
Date: Miami, Florida
June 18, 2010
Respectfully submitted,
By: _Is! Craig V. Rasile
Craig V. Rasile
Florida Bar Number: 613691
Kevin M. Eckhardt
Florida Bar Number: 412902
HUNTON & WILLIAMS LLP
I Ill Brickell Avenue, Suite 2500
Miami, Florida 33131
Telephone: [phone]
Facsimile: [phone]
E-mail: [e-mail]
[e-mail]

-andBradley J. Butwin (limited appearance)
Jonathan Rosenberg (limited appearance)
Daniel L. Cantor (limited appearance)
William J. Sushon (limited appearance)
O'MELVENY & MYERS LLP
7 Times Square
New York, New York 10036
Telephone: [phone]
Facsimile: [phone]
E-mail: [e-mail]
[e-mail]
[e-mail]
[e-mail]
ATTORNEYS FOR DEFENDANT BANK
OF AMERICA, N.A.

30

Case 1:09-md-02106-ASG Document 377-12 Entered on FLSD Docket 12/04/2013 Page 31 of
32

CERTIFICATE OF SERVICE

The undersigned hereby certifies that a copy of the foregoing document was filed with
the Clerk of the Court using CM/ECF. I also certify that the foregoing document is being served
this day on all counsel of record or prose parties identified on the attached Service list either via
transmission of Notices of Electronic Filing generated by CM/ECF or in some other authorized
manner for those counsel or parties who are not authorized to receive electronically the Notice of
Electronic Filing.

Dated: June 18, 2010
By: Is Craig V. Rasile

Craig V. Rasile

Case 1:09-md-02106-ASG Document 377-12 Entered on FLSD Docket 12/04/2013 Page 32 of
32

SERVICE LIST
09-MD-02106

Sarah A. Harom
Bailey Kennedy
8984 Spanish Ridge Ave
Las Vegas NV 89148

Scott Louis Baena
Jeffrey L Snyder
Bilzin Sumberg Baena Price & Axelrod
200 S Biscayne Blvd. Ste 2500
Miami, FL 33131

Lorenz M. Pruss
David A. Ruthstein
Dimond Kaplan & Rothstein PA
2065 S. Bayshon: Dr .. PH-213
Coconut Grove. Fl, 33133

Alvin S. Goldstein
Furr & Cohen
2255 Glades Road, Ste 337-W
Onc Boca Place
Boca Raton, FL 33431

Mark D. Bloon
John B. Hutton, Ill
Greenberg Traurig
1221 Brickell Ave
Miami, FL 33131

Brett Michael Amron
Bast Amron LLP
150 W. Flagler St.. Penthouse 2X50
Miami, FL 33130

Jean-Marie L. Atamian
Jason I. Kirschncr, Frcdcrick Hyman
Mayer-Brown LLP
1675 Broadway
New York, NY 10019

Bruce Bennett, Kirk Oilman
J. Michael Hennigan, Sidney P. Levinson
Hennigan Bennett & Dorman LP
865 S Figueroa St., Ste 2900
Los Angeles, CA 90017

Peter J. Most. LarenA. Smith
Michael C. Schneidcn:it
Hennigan Bennett & Dornu1n LP
865 S Figuern<J St., Stc 2900
Los Angeles. CA <JOO 17

Jed I. Bergman, David M. Friedman
Marc E. Kasowitz, Seth A. Moskowitz
Kasowitz Benson Torres & Friedman
LLP
1633 Broadway
New York NY 10019

Arthur Linker, Kenneth E. Noble
Anthony L. Paccione
Katten Muchin Rosenman LLP
575 Madison Ave.
New York, NY I 0022

i\aron Ruhenstein. Philip A. Geraci
Andrew A Kress, W. Stewart Wallace
Kaye Scholer LLP
425 Park Avc, 12'" Floor
New York NY [()022

Laury M. Macauley
Lewis and Roca LLP
50 West Liherty Street
Reno NV 8950 I

Michael R. lluttonlocker
Bruce Judson Berman
McDermott Well & Emery LLP
201 S. Biscayne Blvd., Ste 2200
Miami, FL 33131

John D. Byars.
Vincent S. J. Buccola
Hartlet Dick Human Palenchar &
Scott
54 W Huhhard St. Ste 300
Chicago, 1L 60()54

Marc R. Rosen
David Parker
Kleinberg, Kaplan Wolf & Cohen
551 Fifth Ave., 18 111 Floor
New York, Ny 10176

Nicholas J. Santoro
Santoro, Driggs, Walch
Kearner, Johnson & Thompson
1
400 S 4 ' St., Third Floor
Las Vegas, NV R9101

Daniel L Cantor
Bradley .1. Butwin, William J. Sushon
O'Melveny & Myers LLP
Times Square Tower, 7 Times Square
New York NY 10036

Arthur H. Rice
Rice Pugatch Robinson & Schiller
101 NE 3 Avenue, Ste 1800
Fort Lauderdale. FL 33301

Peter J. Roberts
Shaw Gussis Fishman Glantz Wolfson &
Towbin LLC
321 N. Clark Street, Suite 800
Chicago, IL 60654

Robert G. Fracasso, Jr.
Shutts & Bowen
201 S. Biscayne Blvd. Ste 1500
Miami, FL 33131

Thomas C. Rice. Lisa Ruhin
David Woll
Simpson Thacher & Bartlett LLP
425 Lcxington Ave
New York Ny 10017-3954

Harold D. Moorefield Jr
Stearns Weaver Miller
Alhadeff & Sitterson
150 W. Flagler St., Ste 2200
Miami, FL 33130

Aaron R. Maurice
Woods Erickson Whitaker &
Maurice LLP
1349 Gallcria Driv.:. Ste 200
Henderson, NV S<JO 14

Harley E. Riedel, Esq.
Stichter Riedel, Blain & Prosser, P.A.
1 10 East Madison Street, Ste 200
Tampa. FL 33602-4 700

Gregory S. Grossman, Esq.
Astigarraga Davis Mullins & Grossman
1
701 Brickell Avenue, 16 Flr
Miami, FL 33131-2847

Soneet R. Kapila. Chapter 7 Trustee
Kapila & Company
100 S. Federal Highway, Ste 200
Fort Lauderdale. FL 33316

4612-Ul00911 EMF_ US 29905061vl

°

Page 1 of
·Case 1:09-md-02106-ASG 'Unpreceq.ented' Disruption (Update3)- Bloomberg12/04/2013 Page 1 of3 3
Highland Shuts Funds Amid Document 377-13 Entered on FLSD Docket

om berg
Highland Shuts Funds Amid 'Unprecedented'
Disruption (Update3) ·
By PietTe Paulden- Oct 16, 2008

bet. 16 (Bloomberg) -- Highland Capital Management LP will close its flagship Highland Crusader
Fund and another hedge fund after losses on high-yield, high-risk loans and other types of debt,
according to a person with knowledge of the decision.
Highland, whose total assets under management has shrunk to about $35 billion from $40 billion
.in March, will wind down the Crusader fund and the Highland Credit Strategies Fund over the next
three years, said the person, who declined to be named because the decision isn't public. The hedge
funds had combined assets of more than $1.5 billion.
The Highland Credit Strategies fund suffered from ' 'unprecedented market volatility and
disruption," according to a letter to investors that was obtained by Bloomberg News. Barclays
Capital Inc. seized $642 million of leveraged loans from Highland yesterday and is offering the
debt for sale in an auction today, according to a person with knowledge of the situation.
Highland, founded by ,Tames Dondero and Mark Okada in Dallas in 1993, follows firms including
Sailfish Capital Partners LLC and Peloton Partners LLP in closing funds after the seizure in
financial markets choked off credit and sent asset values plummeting. The average price of actively
traded high-yield, or leveraged, loans has dropped to 71.2 cents on the dollar from 100 cents in
June last year, according to Standard & Poor's.
CLOs
Highland, the world's largest non-bank buyer ofleveraged loans last year, also manages
collateralized loan obligations and in March raised $1 billion to buy distressed loans. CLOs are
created by bundling together loans and repackaging them into new securities. Leveraged loans· are
rated below Baa3 by Moody's Investors Service and BBB- by S&P and are used to fund privateequity acquisitions.
The Markit LCDX, a benchmark credit-default swap index used to hedge against losses on
leveraged loans, dropped 1.5 percentage point to a mid.:.price of 82.5 percent of face value today,

http://www .bloomberg.com/apps/news?pid=21 070001 &sid=agiw6VSt2goi

7/28/2011

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according to Goldman Sachs Group Inc. The index falls as credit risk increases. The index series
fell to a record low of 81 on Oct. 10.
Bids for the Barclays auction were due by 2 p.m. today in NewYork,according to documents
obtained by Bloomberg News. The sale will close at 4:30p.m.
Barclays spokesman Brandon Ashcraft declined to comment.
'Highly Constrained'
The firm plans to sell 20 percent of the Highland Credit Strategies Fund's assets in the next six
months and a further 20 percent in the following six months, the letter said. Closing the fund will
avoid forced sales that would result in lower prices, the person said.
' 'The environment is one where the fundamental tools to manage the Credit Strategies funds'
trading, hedging, shorting and financing are highly constrained, and in some cases unavailable;"
the letter said.
Highland has a separate closed-endretail fund that is also called the Highland Credit Strategies
Fund, which isn't being shut down, the person said. The investment firm manages about $7 billion
in mutual funds, including the Highland Distressed Opportunities fund.
The Crusader fund is dowii more than 30 percent thisyear, the person said. The fund slumped 14
percent in January after reporting 40 percent gains in 2006 and a 4-5 percent loss in 2007.
Hedge Funds Fall
Hedge funds fell4.7 percent in September, the worst month for the $1.9 trillion industry since the
collapse of Long-Term Capital Management LP in 1998, according to Hedge Fund Research Inc.
The drop has dragged the Chicago-based research firm's Weighted Composite Index down 9·4
percent so far this year, on pace for the biggest annual loss since HFR started keeping records in
1990 ..
Citadel Investment Group Inc.'s biggest hedge fund fell as much as 30 percent this year because of
losses on convertible bonds, stocks and corporate debt, two people familiar with the Chicago-based
firm said yesterday. Kenneth Griffin, who founded Citadel in 1990, said in a letter to investors this
week that returns for the $10 billion Kensington Global Strategies Fund may swing wildly as·
markets are battered by the global credit crunch.
To contact the reporter on this story: Pierre Pauldctl. in New York at ppaulden(ivbloombcrg.net

http://www.bloomberg.com/apps/news?pid=21.070001&sid=agiw6VSt2gol

7/28/2011

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To contact the editor responsible for this story: .Emma .Moodv at emoodvCiDbloomberg.net
©2010 BLOOMBERG L.P. ALL RIGHTS RESERVED.

http://www. bloomberg.com/apps/news ?pid=21 070001 &sid=agiw6VSt2goi

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Page 1 of 39

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO.: 09-MD-02106-CIV-GOLD/MCALILEY
· [original SDFL action 09-21879]

IN RE: FONTAINEBLEAU LAS VEGAS
CONTRACT LITIGATION.

) Case No. 09-CV-01047-KJD-PAL
)
)

MDL No. 2106

)
)

AVENUE CLOFUND, LTD., et al.,

)
)

Plaintiffs,

· )
)

vs.

)
)

BANK OF AMERICA, N.A., et al.,

)
)

Defendants.

_________________________________

)
)

SECOND AMENDED COMPLAINT FOR BREACH OF CONTRACT,
BREACH OF THE IMPLIED COVENANT OF GOOD FAITH
AND FAIR DEALING, AND DECLARATORY RELIEF
. JURY TRIAL DEMANDED
This action is brought by the Plaintiffs, each of which is a lender under a June 6, 2007
Credit Agreement (the "Credit Agreement"), by and am.ong, inter alia, Fontainebleau Las Vegas,
LLC and Fontainebleau Las Vegas II, LLC (together, the "Borrower"), the lenders referred to
therein, and Bank of America N.A, in various capacities (in all capacities, "BofA"), against
Defendants Bankof America, N.A., Merrill Lynch Capital Corporation, J.P. Morgan Chase
Bank, N.A., Barclays Bank PLC, Deutsche Bank Trust Company Americas, The Royal Bank of
Scotland PLC, Sumitomo Mitsui Banking Corporation, Bank of Scotland, HSH Nordbank AG,
MB Financial Bank, N.A., and Camulos Master Fund, L.P. ("Defendants"), in their capacities as
lenders under the Credit Agreement, as well as Bank of America, NA, in its capacities as

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Administrative Agent tmder the Credit Agreement and as Disbursement Agent under the related
1

Master Disbursement Agreemc:nt. Plaintiffs allege for their complaint as follows:
JURISDICTION AND VENUE

1.

This Court has jurisdiction over the subject matter of this action pursuant to

12 U.S.C. § 632 because defendants BofA, JPMorgan Chase Bank, N.A. and MB Financial
Bank, N.A. are national banking associations organized under the laws of the United States and
the action arises out of transactions involving international or foreign banking or other
international or foreign financial operations, within the meaning of 12 U.S.C. § 632.
2.

Venue in the United States District Court for the District of Nevada is proper

because the Project is located in Nevada and many of the acts and transactions at issue occurred
in Nevada.
PARTIES

Plaintiffs
3.

Plaintiff Avenue CLO Fund, Ltd. is a company with limited liability

incorporated under the laws of the Cayman Islands.
4.

Plaintiff A venue CLO II, Ltd. is a company with limited liability incorporated

under the laws of the Cayman Islands.
5.

Plaintiff Avenue CLO III, Ltd. is a company with limited liability incorporated

under the laws of the Cayman Islands.
6.

Plaintiff Avenue CLO IV, Ltd. is a company with limited liability incorporated

under the laws of the Cayman Islands.
7.

Plaintiff Avenue CLO V, Ltd. is a company with limited liability incorporated

under the laws of the Cayman Islands.

1

Capitalized terms not otherwise defmed herein have the meaning used in the Credit Agreement
or, if applicable, the Disbursement Agreement.

-2-

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8.

Plaintiff Avenue CLO VI, Ltd. is a company with limited liability incorporated

under the laws of the Cayman Islands.
9.

Plaintiff Brigade Leveraged Capital Structures Fund, Ltd. is an exempted

company with limited liability incorporated under the laws of the Cayman Islands.
10.

Plaintiff Battalion CLO 2007-I Ltd. is an exempted company with limited

liability incorporated under the laws of the Cayman Islands.
11.

PlaintiffCanpartners Investments IV; LLC is a limited liability company formed

under the laws of California.
12.

Plaintiff Canyon Special Opportunities Master Fund (Cayman), Ltd. is an

exempted company with limited liability incorporated under the laws of the Cayman Islands.
13.

Plaintiff Canyon Capital CLO 2004 1 Ltd. is an exempted company with limited

liability incorporated under the laws of the Cayman Islands.
14.

Plaintiff Canyon Capital CLO 2006 1 Ltd. is an exempted company with limited

liability incorporated under the laws of the Cayman Islands ..
15.

Plaintiff Canyon Capital CLO 2007 1 Ltd. is an exempted company with limited .

liability incorporated under the laws of the Cayman Islands.
16.

Plaintiff Caspian Corporate Loan Fund, LLC is .a limited liability company

formed under the laws of Delaware.
17.

Plaintiff Caspian Capital Partners, L.P. is a limited partnership formed under· the

laws of Delaware.
18.

Plaintiff Caspian Select Credit Master Fund, Ltd. is a company with limited

liability formed under the laws .of the Cayman Islands.
19.

Plaintiff Mariner Opportunities Fund, LP is a limited partnership formed under

the laws of Delaware.
20.

Plaintiff Mariner LDC is company with limited duration formed under the laws

of the Cayman Islands.

-3-

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21.

Entered on FLSD Docket 01/15/2010 Page 4 of 39

Plaintiff Sands Point Funding Ltd. is a company with limited liability

incorporated under the laws of the Cayman Islands.
22.

Plaintiff Copper River CLO Ltd. is a company with limited liability incorporated

under the laws of the Cayman Islands.
23.

Plaintiff Kennecott Funding Ltd. is a company with limited liability incorporated

under the laws of the Cayman Islands.
24.

PlaintiffNZC Opportunities (Funding) II Limited is a company with limited

liability incorporated under the laws of the Cayman Islands.
25.

Plaintiff Green Lane CLO Ltd. is a company with limited liabil{ty incorporated

under the laws of the Cayman Islands.
26.

Plaintiff 1888 Fund, Ltd. is a company with limited liability incorporated under

the laws of the Cayman Islands.
27.

· Plaintiff Orpheus Funding LLC is a limited liability company formed under the

laws of Delaware.
28.

Plaintiff Orpheus Holdings LLC is a limited liability company formed under the

laws of Delaware.
29,

PlaintiffLFCQ LLC is a limited liability company formed under the laws of

Delaware.
30.

Plaintiff Aberdeen Loan Funding, Ltd. is a company with limited liability

incorporated under the laws of the Cayman Islands.
31.

Plaintiff Armstrong Loan Funding, Ltd. is a company with limited liability

incorporated under the laws of the Cayman Islands.
32.

Plaintiff Brentwood CLO, Ltd. is a company with limited liability incorporated

under the laws of the Cayman Islands.
33.

PlaintiffEastland CLO, Ltd. is a company with limited liability incorponi.ted

under the laws of the Cayman Islands.

-4-

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34.

Entered on FLSD Docket 01/15/2010 Page 5 of 39

Plaintiff Emerald Orchard Limited is a company with limited liability

incorporated under the laws of the Cayman Islands.
35.

PlaintiffGleneagles CLO, Ltd. is a company with limited liability incorporated

under the laws of the Cayman Islands.
36.

Plaintiff Grayson CLO, Ltd. is a company with limited liability incorporated

under the laws of the Cayman Islands.
37.

PlaintiffGreen.briar CLO, Ltd. is a company with limited liability incorporated

under the laws of the Cayman Islands.
38.

PlaintiffHighland·Credit Opportunities CDO, Ltd. is a company with limited

liability incorporated under the laws of the Cayman Islands.
39.

Plaintiff Highland Loan Funding V, Ltd. is a company with limited liability

incorporated under the laws of the Cayman Islands.
40.

Plaintiff Highland Offshore Partners, L.P. is a limited partnership formed under

the laws of Bermuda.
41.

. Plaintiff Jasper CLO, Ltd. is a company with limited liability incorporated under

the laws of the Cayman Islands.
42.

Plaintiff Liberty CLO, Ltd. is a company with limited liability incorporated

under the laws of the Cayman Islands.
43.

Plaintiff Loan Funding IV LLC is a limited liability company formed under the

laws of Delaware.
44.

Plaintiff Loan Funding VII LLC is a limited liability company formed under the

laws of Delaware.
45.

Plaintiff Loan Star State Trust is a trust formed under the laws of the Cayman

Islands.
46.

Plaintiff Longhorn Credit Funding, LLC is a limited liability company formed

under the laws of Delaware.

-5-

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47.

Plaintiff Red River CLO, Ltd. is a company with limited liability incorporated

under the laws of the Cayman Islands.
48.

Plaintiff Rockwall CDO, Ltd. is a company with limited liability incorporated

under the laws of the Cayman Islands.
49.

Plaintiff Rockwall CDO II, Ltd. is a company with limited liability incorporated

under the laws of the Cayman Islands.
50.

Plaintiff Southfork CLO, Ltd. is a company with limited liability incorporated

under the laws of the Cayman Islands.
51.

Plaintiff Stratford CLO, Ltd. is a company with limited liability incorporated

under the laws of the Cayman Islands.
52.

Plaintiff Westchester CLO, Ltd. is a company with limited liability incorporated

under the laws of the Cayman Islands.
53.

PlaintiffiNG Prime Rate Trust is a business trust formed under the laws of

. Massachusetts.
54.

PlaintiffiNG Senior Income Fund is a statutory trust formed under the laws of

Delaware.
55.

PlaintiffiNG International (II)- Senior Bank Loans Euro is a SICAV (Societe

d'Investissement a Capital Variable) formed under the laws of Luxembourg.
56.

PlaintiffiNG Investment Management CLO I, Ltd. is a company with limited

liability incorporated under th~ laws of the Cayman Islands.
57.

PlaintiffiNG Investment Management CLO II, Ltd. is a company with limited

liability incorporated under the laws of the Cayman Islands.
58.

PlaintiffiNG Investment Management CLO III, Ltd. is a company with limited

liability incorporated under the laws of the Cayman Islands.
59.

PlaintiffiNG Investment Management CLO IV, Ltd. is a company with limited

liability incorporated under the laws of the Cayman Islands.

'-6-

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60.

Entered on FLSD Docket 01/15/2010 Page 7 of 39

PlaintiffiNG Investment Management CLO V, Ltd. is a compan:Y with limited

liability incorporated under the laws of the Cayman Islands.
61.

Plaintiff Carlyle High Yield Partners 2008-1, Ltd. is an exempted company with

limited liability incorporated under the laws of the Cayman Islands.
62.

Plaintiff Carlyle High Yield Partners VI, Ltd. is an exempted company with

limited liability incorporated under the laws of the Cayman Islands.
63. ·

Plaintiff Carlyle High Yield Partners VII, Ltd. is an exempted company with

limited liability incorporated under the. laws of the Cayman Islands.
64.

Plaintiff Carlyle High Yield Partners VIII, Ltd. is an exempted company with'

limited liability incorporated under the laws of the Cayman Islands. ·
65.

Plaintiff Carlyle High Yield Partners IX, Ltd. is an exempted company with

limited liability incorporated under the laws of the Cayman Islands.
66.

Plaintiff Carlyle High Yield Partners X, Ltd. is an exempted company with

limited liability incorporated under the laws of the Cayman Islands ..
67.

Plaintiff Carlyle Loan Investment, Ltd. is an exempted company with limited

liability incorporated under the laws of the Cayman Islands.
68.

Plaintiff Centurion CDO VI, Ltd. is a company with limited liability

incorporated under the laws of the Cayman Islands.
69.

Plaintiff Centurion CDO VII, Ltd. is a company with limited liability

incorporated under the laws of the Cayman Islands.
70.

Plaintiff Centurion CDO 8, Limited is a company with limited liability·

incorporated under the laws of the Cayman Islands.
71.

Plaintiff Centurion CDO 9, Limited is a company with limited liability

incorporated under the laws of the Cayman Islands.
72.

Plaintiff Cent CDO 10 Limited is a company with limited liability incorporated

under the ·laws of the Cayman Islands.

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73.

Entered on FLSD Docket 01/15/2010 Page 8 of 39

Plaintiff Cent CDO XI Limited is a company with limited liability incorporated

under the laws of the Cayman Islands.
74.

Plaintiff Cent CDO 12 Limited is a company with limited liability incorporated

under the laws, of the Cayman Islands.
75.

Plaintiff Cent CDO 14 Limited is a company with limited liability incorporated

under the laws of the Cayman Islands.
76.

Plaintiff Cent CDO 15 Limited is a company with limited liability incorporated

under the laws of the Cayman Islands.
77.

PlaintiffVenture II CDO 2002, Limited is a company with limited liability

incorporated under the laws of the Cayman Islands.
78.

PlaintiffVenture III CDO is a company with limited liability incorporated under

the laws of the Cayman Islands.

79.

PlaintiffVenture IV CDO Limited is a company with limited liability

incorporated under the laws of the Cayman Islands.
80.

PlaintiffVenture V CDO Limited is a company with limited liability

incorporated under the laws of the Cayman Islands.
81.

Plaintiff Venture VI CDO Limited is a company with limited liability.

incorporated under the laws of the Cayman Islands.
82.

PlaintiffVenture VII CDO Limited is a company with limited liability

incorporated under the laws of the Cayman Islands.
83.

PlaintiffVenture VIII CDO Limited is a company with limited liability

incorporated under the laws of the Cayman Islands.
84.

PlaintiffVenture IX CDO Limited is a company with limited liability

incorporated under the laws of the Cayman Islands.
85.

Plaintiff Vista Leverag;ed Income Fund is a company with limited liability

incorporated under the laws of the Cayman Islands.

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86.

Entered on FLSD Docket 01/15/2010 Page 9 of 39

Plaintiff Veer Cash Flow, CLO, Limited is a company with limited liability

incorporated under the laws of the Cayman Islands.
87.

Plaintiff Genesis CLO 2007-1 Ltd. is a company with limited liability

incorporated under the laws of the Cayman Islands.
88.

Plaintiff ARES Enhanced Loan Investment Strategy III, Ltd. is a company with

limited liability incorporated under the laws of the Cayman Islands.
89.

Plaintiff Primus CLO I, Ltd. is an exempted company with limited liability

incorporated ·under the laws of the Cayman Islands.
90.

Plaintiff Primus CLO II, Ltd. is an exempted company with limited liability

incorporated under the laws ofthe Cayman Islands.
91.

Plaintiff Cantor Fitzgerald Securities. is a general partnership formed under the

laws ofNew York.
92.

i

Plaintiff Olympic CLO I Ltd. is a company.with limited liability incorporated

under the laws of the Cayman Islands.
93.

. Plaintiff Shasta CLO I Ltd. is a company with limited liability incorporated

under the laws of the Cayman Islands.
94.

Plaintiff Whitney CLO I Ltd. is a company with limited liability incorporated

under the laws of the Cayman Islands.
95. .

Plaintiff San Gabriel CLO I Ltd. is a company with limited liability incorporated

under the laws of the. Cayman Islands.
96.

Plaintiff Sierra CLO II Ltd. is a company with limited liability incorporated

under the laws of the Cayman Islands.
97.

Plaintiff Rosedale CLO, Ltd. is a company with limited liability incorporated

under the laws of the Cayman Islands, BWI.
98.

Plaintiff Rosedale CLO II Ltd. is a company with limited liability incorporated

under the laws of the Cayman Islands, BWI.

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99.

Entered on FLSD Docket 01/15/2010 Page 10 of 39

PlaintiffSPCP Group, LLC is a limited liability company formed under the laws

.of Delaware.
100.

Plaintiff Stone Lion Portfolio L.P. is a limi.ted partnership formed under the laws

of the Gayman Islands.
101.

Plaintiff Venor Capital Master Fund, Ltd. is a company with limited liability

incorporated under the laws of the Cayman Islands.
Defendants
102.

Defendant BofA is a nationally chartered bank with its main office in Charlotte,

North Carolina. Under the Credit Agreement and other Loan Documents, BofA acted in several.
capacities, including as a Revolving Facility lender, as Issuing Lender, and as Swing Line
Lender. In addition, BofAserved as Administrative Agent to all of the Lenders under the. Credit
Agreement and as Disbursement Agent to all of the Lenders under the Disbursement Agreement.
BofA agreed to fund $100 mil.lion under the Revolving Facility.
103.

Defendant Merrill Lynch Capital Corporation is a Delaware corporation with a

principal place of business inN ew York. Merrill Lynch Capital Corporation, which is now
indirectly owned byBofA, agreed to fund $100 million under the Revolving Facility.
104.

Defendant J.P. Morgan Chase Bank, N.A. is a nationally chartered bank with its

headquarters in New York, New York. J.P. Morgan Chase Bank, N.A. agreed to fund
$90 million under the Revolving Facility.
105.

Defendant Barclays Bank PLC is a public limited company in the United

Kingdoni with its principal place of business in London, England. Barclays Bank PLC agreed to
fund $100 million under the Revolving Facility.
106.

Defendant Deutsche Bank Tmst Company Americas is a New york State-

chartered bank with its principal office, in New York, New York. Deutsche Bank Tmst
Company Americas agreed to fund $80 million under the Revolving Facility.

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107.

Defendant The Royal Bank of Scotland PLC is a banking association organized

under the laws of the United Kingdom with a branch in New York, New York. The Royal Bank
of Scotland PLC agreed to fund $90 million under the Revolving Facility.
108.

Defendant Sumitomo Mitsui Banking Corporation is a Japanese corporation with

offices in New York, New York. Suniitomo Mitsui Banking Corporation agreed to fund
$90 million under the Revolving Facility.
109.

Defendant Ballk of Scotland is chartered under the laws of Scotland, with its

principal place of business in Edinburgh, Scotland. Bank of Scotland agreed to fund
$72.5 million under the Revolving Facility.
110.

Defendant HSH Nordbank AG is a German banking corporation with a branch in

New York, New York. HSH Nordbank AG agreed to fund $40 million under the Revolving
Facility.
111.

Defendant MB Financial Bank, N.A. is a nationally chartered bank with its main

office iri Chicago, Illinois. MB Financial Bank, N.A. agreed to fund $7.5 million under the
Revolving Facility.
U 2.

Defendant Camulos Master Fund, L.P: is a Delaware corporation with its

principal place of business in Stamford, Connecticut. Camulos Master Fund LP agreed to fund
$20 million under the Revolving Facility.
FACTUAL BACKGROUND
THE FONTAINEBLEAU PROJECT

113.

Between March and June 2007, Plaintiffs or their predecessors were approached

by a syndicate of investment bankers, led by Bane of America Securities and including other
affiliates of the Defendants, to participate in a $1.85 billion bank financing (the "Credit
Agreement Facility") for the development and construction of the Fontainebleau Resort and
Casino in Las Vegas, Nevada (the "Project"). The Project is designed to be a destination casinoresort on the north end of the Las Vegas Strip, situated on approximately 24.4 acres. The Project
.consists of a 63 -story glass skyscraper featuring over 3,800 guest rooms, suites and

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condominium units; a 100-foot.high three-level podium complex (the "Podium") ho~sing
casino/gaming areas, restaurants and bars, a spa and salon, a live entertainment theater and
rooftop pools; a parking garage with space for more than 6,000 vehicles; and a 353,000 squarefoot convention center. The Project is also designed to feature retail space (the "Retail Space")
of approximately 286,500 square-feet, including retail shops, restaurants, and a nightclub. The
Retail Space is being developed by indirect subsidiaries of the Borrower's parent company (the
"Retail Borrowers").
114.

The total Project costs were to be funded primarily from cash provided by the

developers of the Project, the proceeds of the $1.85 billion bank financing, the proceeds of a
$675 million 2nd Mortgage Note offering (the "Second Lien Facility"), and proceeds of a
$315 million facility (the "Retail Facility") provided to the Retail Borrowers to finance
construction of the retail portion of the Project (including $83 million in certain ''Shared Costs"
for construction improvements to the Podium which was to be owned by Borrower following
completion of construction).
THE CREDIT AGREEMENT AND DISBURSEMENT AGREEMENT
ll5.

On June

6, 2007, the Credit Agreement was entered into among numerous

lenders, including Plaintiffs and Defendants, and the Borrower. BofA and its counsel served as
the principal architects of the Credit Agreement and related Loan Documents, including the
Disbursement Agreement. The Credit Agreement included commitments for three kinds of
loans: (a) a $700 million initial term loan facility (the "Initial Temi Loan Facility"); (b) a
$350 million delay draw term facility (the "Delay Draw Facility," and together with the Initial
Term Loan Facility, the "Term Loan Facility"); and $800 million revolving loan facility (the
"Revolving Facility"). The Initial Term Loan Facility was funded upon the closing of the Credit·
Agreement in June 2007. The related Second Lien Facility and Retail Facility closed at the same
time.
116.

Obligations outstanding under the Term Loan Facility and the Revolving Facility

are equally and ratably collateralized by mortgages on the real property comprising the Project

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and by security interests on all personal property of the Borrower. The personal property
security interests as well as statutory and/or common law rights of setoff also extend to deposit
accounts, including the Bank Proceeds Account and the Bank Funding Account established
pursuant to the terms of a Master Disbursement Agreement (the "Disbursement Agreement").
The Disbursement Agreement governs disbursement of all funds under the Credit Agreement,
the Second Lien Facility and the Retail Facility.
117.

Plaintiffs are each lenders under the Term Loan Facility. Lenders under the

Term Loan Facility are referred to herein as "Term Lenders." Defendants, including BofA, are
each lenders under the Revolving Facility. Lenders under the Revolving Facility are referred to
herein as "Revolving Lenders." Although certain of the Revolving Lenders are also Term
Lenders, BofA is not a Term Lender. In addition to ,its capacity as a Revolving Lender, BofA
also served as Administrative Agent to all of the Lenders under the Credit Agreement, and as
Disbursement ~gerit to all of the Lenders under the Disbursement Agreement.
118.

Each ofthe lenders who agreed to providing financing under the Credit

Agreement relied upon the obligation ofthe other lenders to comply with their funding
obligations under the Credit Agreement. The loans available under the Credit Agreement were
the principal source of construction financing for the Project and, along with a completion
guaranty and the Retail Facility, were intended to be virtually the oniy source of construction
financing remaining after junior sources (equity and second mortgage bonds) were utilized.
Because all lenders would suffer if the amount of financing available for construction proved to
be insufficient to complete the Project (and, as a result, their collateral value would be
destroyed), the Credit Agreement requires that, in the absence of a Stop Funding Notice
(described below) or the termination of a Facility by the Required Lenders following an Event of
Default, each Lender is required to continue to make Loans into the Bank Proceeds Account.
119.

Consistent with that agreement among the Lenders, the Credit Agreement and

other Loan Documents create a two-step mechanism for the Borrower to obtain loan proceeds
under the Term Loan Facility and the Revolving Facility prior to the Opening Date of the

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Project. Under the first step, the Borrowers must submit to the Administrative Agent a notice of
borrowing (the "Notice of Borrowing") specifying the requested loans and designated borrowing
date; The Credit Agreement requires that the Administrative Agent promptly notify each lender
of aN otice of Borrowing. Once notified, each lender is contractually required to make its prorata share of the requested loans available to the Administrative Agent prior to 10:00 AM on the
designated borrowing date, subject only to identified conditions precedent. Although Revolving
Loans made after construction is completed (referred to in the Credit Agreement as "Direct
Loans") are expressly subject to conditions precedent in Section 5.3 of the Credit Agreement.
(including the requirement that each representation and warranty under the Loan Documents be
true and correct and the absence of aDefault or Event of Default), Revolving Loans made during
construction (referred to as "Disbursement Agreement Loans") and Delay Draw Term Loans are
expressly conditioned "only" upon the conditions precedent inSection 5.2 of the Credit
Agreement (which, unlike Section 5.3, does not include the requirement that each representation
and warranty under the Loan Documents be true and correct, nor the absence of a Default or
Event of Default). The proceeds ofDe1ay Draw Term Loans and Revolving Loans are, under the
first step, deposited into the Bank Proceeds Account.
120.

2

Under the second step, in order to access those funds from the Bank Proceeds

Account to pay for the cost of the Project, the Borrowers must submit an advance request
(typically monthly) pursuant to the Disbursement Agreement (the "Advance Request"). The
Disbursement Agreement establishes: (a) the conditions precedent, which are set forth in Section
3.3 of the Disbursement Agreement, to be satisfied prior to approval of the Advance Request by
the Disbursement Agent; (b) the relative sequencing of disbursements from the proceeds of

2

With respect to the $700 million Initial Term Facility, the funds were deposited into the Bank
Proceeds Account on the Closing Date (June 6, 2007), and thus, were made subject to different
conditions precedent that those applicable to the Delay Draw Term Loans and Revolving Term
Loans.

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various facilities and debt

inst~ments;

and (c) the obligations of the various agents to make

disbursements to the Borrowers of loan proceeds from the Bank Proceeds AccoUnt.
12L

The Term Lenders are intended third-party beneficiaries of the Disbursement

Agreement, which, in pertinent part, governs the disbursement of the funds loaned by the Term
Lenders. The Disbursement Agreement expressly provides that BofA is granted security
interests in the Bank Proceeds Account, for the benefit of the lenders. (Disbursement
Agreement, § 2.3). ·The Disbursement Agreement states that the provisions of Article 9 (which
governs the duties and obligations ofBofA as Disbursement Agent) are for the benefit ofthe
Lenders (which includes the Plaintiffs), and that BofA is responsible and liable to the Term
Lenders as a consequence of its performance under the Disbursement Agreement.
(Disbursement Agreement, § 9.1 0).
122.

As Disbursement Agent and Administrative Agent, BofA assumed responsibility

for the proper administration of the construction loans and disbursement of funds to be used by
the Borrower to construct the Project. BofA agreed to exercise commercially reasonable efforts
and utilize commercially prudent practices in the performance of its duties. Disbursement
Agreement, § 9.1. BofA's duties included ensuring that funds were disbursed to the Bank
Funding Account only if all of the conditions precedent to disbursement of funds under Section 3
of the Disbursement Agreement were satisfied, including that, as of the Advance Date: (a) each
representation and warranty of each Project Entity in Article 4 was true and correct as if made on
such date; (b) there was no Default or Event of Default under any of the Financing Agreements;
(c) the In Balance Test was satisfied; (d) there had been no development or event since the
Closing Date that could reasonably be expected to have a Material Adverse Effect on the Project;
and (e) the Retail Agent and Retail Lenders under the Retail Facility had made all Advances
required of them under the Advance Request. (Disbursement Agreement,§§ 3.3.2, 3.3.3, 3.3.8,
3.3.11, 3.3.23).
123.

If all of the applicable conditions precedent for the advance of funds were

satisfied, the Disbursement Agreement provided fo~ the Disbursement Agent and the Borrower

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to execute an Advance Confirmation Notice and, with respect to the use of funds in the Bank
Proceeds Account advanced by the Term Lenders, to deliver the notice to BofA as
Administrative Agent. Upon receipt of such notice, BofA would make the advances
contemplated under the Advance Confirmation Notice. (Disbursement Agreement,§ 2.4.6).
124.

If not all of the conditions precedent to an Advance were satisfied, or if the

Administrative Agent notified the Disbursement Agent that a Default or Event of Default had
occurred, then the Disbursement Agent was required to provide notice (a "Stop Funding Notice")
to theBorrowers and each Funding Agent, including the Administrative Agent. (Disbursement
Agreement,§ 2.5.1). If a Stop Funding Notice were issued, no disbursements could be made,
and the funds would remain safely in the Bank Proceeds Account until all of the conditions
precedent were satisfied, including the absence of any Default or Event of Default. In addition,
the lenders have no obligation to fund until the circumstances associated with the Stop Funding
Notice have been resolved. (Credit Agreement§ 2.4(e)).
125.

Under Section 9.2.3 of the Disbursement Agreement, "if the Disbursement

Agent is notified that an Event of Default or a Default has occurred and is continuing, the
Disbursement Agent shall promptly and in any event within five Business Days provide notice to
each of the Funding Agents of the same and otherwise shall exercise such of the rights and
powers vested in it by this Agreement and the documents constituting or executed in connection
with this Agreement, and use the same degree of care and skill in their exercise, as a prudent
person would exercise or use under the circumstances in the reasonable administration of its own
affairs." As noted above, among the powers and duties vested in BofA under the Disbursement
Agreement upon receiving notice of a Default or Event of Default was the power and duty to
issue a Stop Funding Notice.
LEHMAN'S FAILURE TO FUND UNDER THE RETAIL FACILITY
126.

As evidenced by the terms of the Disbursement Agreement, the three "Financing

Agreements" covered by that agreement-'- the Credit Agreeme~.t, the Second Mortgage
Indenture, and the Retail Facility Agreement- are closely interrelated, and the proceeds

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available under each facility were integral to the construction, completion and ultimate success
of the Project.
127.

As a result ofthe·syndication of the Retail Facility, Lehman Brothers Holdings,

Inc. ("Lehman"), which served as Retail Agent, was .the largest Retail Lender, responsible for
$215 million, or 68.25%, of the Retail Facility. As ofthe Closing Date, $125.4 million of the
Retail Facility was advanced, leaving $189.6 million to be advanced. Much ofthatsum was
earmarked to pay Shared Costs to complete the Podium and to complete the Retail component of
the Project. Thus, the successful completion of the overall Project depended heavily on .the
proceeds to be made available pursuant to Lehman's commitment under the Retail Facility.
128.

In September 2008, Lehman filed for bankruptcy protection. According to a

proof of claim filed by the Retail Borrower in Lehman's bankruptcy case, beginning in
September 2008 and on four occasions thereafter, Lehman failed to honor "its obligation to fund
a total of$14,259,409.74 under the Retail Facility," and the.rehy defaulted in its lending
obligations under the Retail Facility Agreement (the "Lehman Defaults"). Those defaults
prevented satisfaction of numerous conditions precedent to the approval of Advance Requests,
including the following:
•

Section 3.3.23 of the Disbursement Agreement requires that "[i]n the case of each
Advance from the Bank Proceeds Account made concurrently with or after
Exhaustion of the Second Mortgage Proceeds Account, the Retail Agent and the
Retail Lenders shall, on the date specified in the relevant Advance Request, make
any Advances required of them pursuant to that Advance Request."
•

Lehman, as Retail Agent and as a Retail Lender, did not make the
Advances required of it pursuant to at least five Advance Requests
between September 2008 and March 2009.

•

Section 3.3.3 of the Disbursement Agreement provides that "[n]o Default or
Event of Default shall have occurred and be continuing." A "Default" or "Event
of De~ault" under the Credit Agreement constitutes a "Default" or "Event of

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Default" under the Disbursement Agreement. (Disbursement Agreement, Ex. A).
Under Section 8G) of the Credit Agreement, the breach by "any Person" of a
"Material Agreement" constitutes an Event of Default (and, prior to the expiration
of any notice or other grace period, a Default) if such breach could reasonably be
expected to result in a Material Adverse Effect. Schedule 4,24 of the Credit
Agreement lists, as Material Agreements, "[t]he 'Financing Agreements' as
defined in the Disbursement Agreement." Credit Agreement, Schedule 4.24.
That definition of"Financing Agreements" includes the "Facility Agreements,"
which in tum includes the "Retail Facility Agreement." As stated above, the
failure of the Project Entities to receive material amounts of funding and the
resulting uncertainty over receiving the balance of Lehman's commitment
threatened completion of the Project.
•

Accordingly, Lehman's breach of the Retail Facility was a Default, based
upon Section 8G) of the Credit Agreement.

~

Section 3.3.2 requires that each representation and warranty by each Project
Entity in Article 4 be true and correct as if made on ·such date. One such
representation is that "[t]here is no default or event of default under any of the
Financing Agreements." (Disbursement Agreement, at§ 4.9.1).
•

That representation was not true and correct when made on or. after
September 2008, based upon the Lehman Defaults under the Retail
Facility (one ofthe Financing Agreements).

•

Section 3.3 .11 requires that, prior to any disbursement, there has been no change
in the economics or feasibility of constructing and/or operating the Project, or in
the financing condition, business or property of the Borrowers, any of which
could reasonably be expected to have a
•

Mater~al

Adverse Effect.

Lehman's bankruptcy filing, and the uncertainty that Lehman would fulfill
its loan commitment or that any other lender would assume Lehman's

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commitment under the Retail Facility, threatened the successful
completion of the Project and thus could reasonably be expected to have a
Material Adverse Effect.
129.

BofA, as Disbursement Agent, received notice of the Lehman Defaults from one

or more of the Term Lenders. In September and October 2008, at least one of the Term Lenders
wrote to BofA and expressed the position that Lehman's failure to comply with its funding
obligations under the Retail Facility meant that certain of the conditions precedent to
disbursement of funds under Section 3.3 of the Disbursement Agreement were not satisfied. In
response, BofA refitsed to do anything, instead asserting that its function as Disbursement Agent.
was purely administrative in nature.
130.

BofA refused to address the Lehman Defaults in large part because it wished to

preserve its ongoing business relationship with the Borrower and its principal indirect owners,
including Jeffrey Soffer. For example, BofA was the agent and a lender tmder a loan facility
used to renovate the Fontainebleau Hotel in Miami, which was indirectly owned by the
Borrower's indirect parent. BofA also made loans to Tumberry Associates (of which Soffer is a
principal) or its affiliates. The close relationship between BofA on the one hand, and the
Borrower and related parties on the other, was further evidenced by the fact that the Borrower's
chief financial officer, priorto taking that position, worked for eight years at Bane of America
Securities (which served as an co-lead arranger and joint underwriter of the Credit Agreement).
131.

BofA' s refusal to address the Lehman Defaults continued even after Moodys

Investment Service announced on November 6, 2008 that it had downgraded the Credit
Agreement Facility to B3 from B 1. In that announcement, Moodys expressed its opinion that the
outlook was "negative" in recognition of the challenges faced by the Borrowers' parent in
resolving the. potential fimding shortfall related to the Lehman Default.
132.

In wrongful and willful derogation of its duties and responsibilities as

Disbursement Agent and Administrative Agent, BofA approved Advance Requests and issued
Advance Confirmation Notices after, and despite notice of, the Lehman Defaults. Likewise,

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BofA, as Administrative Agent, made Advances to the Borrowers pursuant to the Advance
Requests. In total, those Advances (excluding debt service paid to the Lenders) exceeded
$680 million, the last made on or about March 25, 2009 (the "March 25 Advance"). Each
approval and/or Advance by BofA following the date it received notice of the Lehman Defaults
was improper and constituted bad faith, gross negligence and/or willful misconduct on the part of
BofA.
DEFAULT BY FIRST NATIONAL BANK
OF NEVADA UNDER CREDIT AGREEMENT
133.

On July 25, 2008, First National Bank ofNevada, was closed by the Office of

the Comptroller of the Currency. The Federal Deposit Insurance Company ("FDIC")
subsequently was appointed as receiver. First National Bank of Nevada had made a commitment
of $1,666,666 under the Term Loan Facility and a commitment of $10,000,000 under the
Revolving Facility. According to the Borrower, FDIC has repudiated the commitments of First
National Bank of Nevada under the Credit Agreement. As a result, beginning in January 2009,
the Borrower's calculation of Available Funds under the In Balance Test was therefore reduced
by the amount of the total commitment by First National Bank ofNevada ($11,666,666):
134.

The FI>IC's repudiation of First National Bank ofNevada's commitment

constituted, as a matter of law, a breach of that bank's obligation under the Credit Agreement.
Such a breach by a party to a MaterialAgreerrient (which the Credit Agreement was) was a
Default, based upon Section 8(j) of the. Credit Agreement. It also prevented the Borrower from
satisfying Section 3.3.2 of the Disbursement Agreement, which conditioned any disbursement
upon the truth of the Borrower's representations and warranties under Article 4, in particular the
rypresentation and warranty pursuant to Section 4.9.1 that there existed no defaults or events of
default under any of the Financing Documents.
135.

Notwithstanding the fact that the conditions precedent for disbursement under

Section 3.3 of the Disbursement Agreement by virtue of the Default resulting from the FDIC' s
repudiation of the Credit Agreement were not satisfied, BofA wrongfully and willfully continued

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to issue Advance Confirmation Notices, and failed to issue a Stop Funding Notice. Instead, the
amounts requested by the Borrower continued to be disbursed by BofA.
BofA'S CHANGE OF APPROACH AS DISBURSEMENT AGENT
136.

As a result ofBofA's acquisition of Merrill Lynch that closed in December

2008, BofA effectively (through its indirect ownership of Merrill Lynch) doubled its level of
commitment as a Revolving Lender, and became responsible for $200 million- or 25% - of the
total original Revolving Loan commitment.
137.

Prior to February 2009, the Borrowers did not request any advances under the

Revolving Facility (other than for letters of credit), and instead used proceeds of the Initial Term
Loan Facility, the Second Lien Facility and other proceeds to pay Project Costs. As explained
above, during that period of time, BofA willfully and wrongfully disregarded its obligations as
Disbursement Agent and Administrative Agent, taking the position that its role was purely
administrative in nature. That passive approach changed dramatically after February 13, 2009,
when the Borrower submitted an Advance Request that included the first request for an Advance
under the Revolving Facility, in the amount of $68 million.
138.

As a Revolving Lender, BofA was required to

financ~

a portion of that Advance

Request, and thus for the first time faced the prospect of sharing loan exposure with the Term
Lenders if the Project failed. In response to the Advance Request in February 2009, BofA wrote
a detailed letter to the Borrower on Friday, February 20, 2009. BofA began the letter by insisting
upon "strict compliance" wi~h the deadline of the 11th day of the month to submit Advance
Requests established under Section 2.4.1 of the Disbursement Agreement, despite the fact that
three of the previous four Advance Requests, each of which had been accepted, were submitted
late, including as recently as October 16, 2008 and November 17, 2008. Commenting on the
submission of the Advance Request "at a time of continued deterioration of both the national
economy and the Las Vegas marketplace," BofA also raised numerous questions. Among those
questions was a request to "comment on the status of the Retail Facility, and the commitments of
the Retail Lenders to fund under the Retail Facility, in particular, whether you anticipate that

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Lehman Broth~rs Holdings, Inc. will fi..md its share of requested loans, and whether the other
Lenders under the Retail Facility intend to cover any shortfalls." With the Borrower insisting.
upon disbursement of funds no later than February 25, 2009, BofA demanded that the Borrower
supply detailed written responses to the questions by no later than Monday, Febmary 23, 2009the very next business day.
139.

On Febmary 23,2009, the Borrower sent a response to BofA. In that letter, the

Borrower sidestepped BofA's request for comment on whether it anticipated that Lehman would
fi..md its share of the Retail Facility, or on whether the other Retail Lenders intended to cover any
shortfalls. But the J?orrower did not (nor could it) deny that Lehman was in default of its
obligations .
. 140.

Not<.vithstanding the unanswered questions, and the fact that numerous

conditions to approval of the Advance Request were not satisfied, BofA did not issue a Stop
Funding Notice. Instead, it approved the Advarice Request and issued an Advance Confirmation
Notice. The amounts requested by the Borrower accordingly were disbursed.
THE MARCH 2 AND MARCH 3 NOTICES OF BORROWING
141.

On March 2, 2009, the Borrowers issued a notice of borrowing to borrow the

.

entire amount of $350 million available under the Delay Draw Facility and to borrow
$670 million available lmder the Revolving Facility (the "March 2 Notice"). The next day, the
Borrowers issued another notice ofborrowing to correct a "scrivener's error" made in calculating
the amount sought under the Revolving Facility (the "March 3 Notice"), reducing the requested
amount to approximately $656 million. Both notices caused the Delay Draw Facility to be fully
drawn.
142.

As described above, the lenders under the Credit Agreement expressly agreed

among themselves and with the Borrower that the Revolving Loans (those that were
Disbursement Agreement Loans) and Delay Draw Loans are not; at the time of the borrowing
request, conditioned on the absence of any Defaults or Events of Default (as that term is defined
in the Credit Agreement), nor conditioned on the tmth and correctness of the representations and

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warranties in the Loan Documents. Rather, the Delay Draw Facility knders and the Revolving
Facility lenders could refuse to fund their obligations orily if their commitments were validly
terminated by the Required Lenders of a loan facility in accordance with section 8 of the Credit
Agreement following an Event of Default, or pursuant to Section 2.4 of the Credit Agreement, if
BofA as Disbursement Agent issued a Stop Funding Notice to the Administrative Agent.
143.

As of March 2 and March 3, the Revolving Lenders had not terminated their

commitment, and BofA had not issued a Stop Funding Notice. Accordingly, because the Delay
Draw Facility was fully drawn, the Revolving Lenders were obligated to fund their commitment.
Although BofA submitted the March 2 Notice and the March 3 Notice to the Lenders, it stated
that the notices did not comply with the terms of the Credit Agreement. BofA advised the
lenders that an ad hoc steering committee formed by BofA supported BofA's position.
144.

In its correspondence to the Borrowers, BofA took the position that the March 2

Notice and the March 3 Notice did not comply with the Credit Agreement because they
contained simultaneous requests for borrowing under both the Delay Draw Facility and the
Revolving Facility. A simultaneous request for loans under the two facilities, however, is not
prohibited under and is consistent with the Credit Agreement.
145.

The pretext for BofA's position was Section 2.1(c)(iii) of the Credit Agreement,

which provides that no more than $150 million of Revolving Loans can be outstanding unless the
Delay Draw Facility has been "fully drawn." BofA asserted that "fully drawn" meant "fully
funded" rather than "fully requested." According to BofA, borrowing under the Revolving
Facility is limited to $150 million unless and until each of the Term Lenders fully funded its
commitment under the Delay Draw Facility.
146.

Significantly, the interpretation of Section2.1 (c)(iii) put forward by BofA in

early March 2009 was completely at odds with BofA's historical approval of each prior Advance
Request. As noted above, a condition precedent to BofA 's approval of any Advance Request is
the satisfaction of the "In Balance Test," a critical calculation that demonstrates whether the
remaining available financing is sufficient to cover the remaining anticipated costs required to

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__ complete the Project. The In Balance Test is satisfied when "Available Funds" exceed
"Required Costs." (Disbursement Agreement, Ex. A). One component of"Available Funds" is
"Bank Revolving Availability," defined to mean "as of each date of determination, the
aggregate principal amount available to be drawn on that date under the Bank Revolving
Facility." (Disbursement Agreement, Ex. A) (emphasis added).
147.

Each ofthe prior Advance Requests approved byBofA was supported by an Iri

Balance Report that included "Bank Revolving Availability" equal to the full amount of the
Revolving ,Facility- $800 million (reduced to $790 million in Jaimary 2009 after First National
Bank ofNevada went into receivership) -·despite the fact that, at such time, the Delay Draw
Facility was not fully funded. Had the full amount of the Revolving Facility not been included in
each of the prior In Balance Report calculations, the resulting calculations would have
demonstrated that the Project was at all times enormously out of balance. As a result, BofA
would have been prevented from making any of the prior Advance Requests, and the Project
never could have been constructed.
148.

In order to allow the full amount of the Revolving Facility to be included in the

In Balance calculation, however, BofA had to conclude that the entire Revolving Facility was
"available to be drawn on th[e] date" of the In Balance Test determination. BofA could not
reach this conclusion unless it interpreted "drawn" to mean "requested." "Drawn" could not
mean "funded" because, by virtue of the fact that the Borrower had never previously requested
the full amount of the Revolving Facility (an obvious condition precedent to its funding), that
amount was never available to be funded as of the date of any Advance Request. On the other
hand, because the Revolving Facility at all times remained unfunded, the entire amount was
always available to be requested. Thus, the term "drawn," as used in the definition of Bank
Revolving Availability, and as applied by BofA when it approved all prior Advance Requests,
can only mean "requested."
149.

Similarly, only ifBofA understood the term "drawn," as used under Section-

2.1 (c )(iii) in referring to the Delay Draw Facility, to mean "requested" rather than "funded,"

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would it have been justified in concluding (as it repeatedly did) that the full amount of the
Revolving Facility was "available to be drawn" as of the date of each Advance Request. IfBofA
understood "drawn" as used in Section 2.1 (c)(iii) to mean "funded" rather than "requested," then.
the Bank Revolving Availability- the amount "availabfe to be drawn on th[ e] date" of each In
Balance Test- could not have exceeded $150 million unless and until the Delay Draw Loans
were fully funded. Until that occurred (which it never did), the In Balance Test would never be
satisfied, and there would never be disbursements to fund constmction of the Project. That was
· not the intent of the parties who drafted the Credit Agreement and other Loan Documents.
150.

Notwithstanding the fact that satisfaction of the In Balance Test is a condition

precedent to any Advance (past, present or future) under the Disbursement Agreement, BofA did
not issue a Stop Funding Notice on March 3 or at aliy time thereafter. Under BofA's new, afterthe-fact position that "drawn" means "funded," however, the Borrower had never satisfied the In
Balance Test and all prior disbursements were improper. BofA was therefore obligated to (but
did not) issue a Stop Funding Notice.
151.

· Faced with BofA's refusal to process the March 2 Notice and the March 3

Notice, the Borrower issued a revised Borrowing Notice on March 9, 2009, directed s·olely to the
Delay Draw Facility lenders for the full amount of their $350 million commitment (a figure that
included the $1,666,666 portion committed by First National Bank ofNevada). That Borrowing
Notice was attached to a letter from the Borrower to BofA in which the Borrower asserted that
the Lenders were, by their actions or inactions in response to the March 2 Notice and March 3
Notice, in default of the Loan Documents. The Borrower also reiterated its concern that BofA
was acting in its own self-interest and against the interest of the Borrower and several of the
other lenders.
152.

Under section 2.1 (b )(iii) of the Credit Agreement, any proceeds of the Delay

Draw Facility must be used first to repay any "then outstanding" Revolving Loans. At the time
of the March 9 Borrowing Notice, $68 million had been advanced by the Revolving Lenders in
Febmary 2009. Thus, as a Revolving Lender, BofA stood to benefit by failing to issue a Stop

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Funding Notice prior to March 9, 2009, because such notice would have suspended any Delay
Draw Loans otherwise to be used to repay BofA's 25% share of the $68 million of then
"outstanding" Revolving Loans.
153.

Acting at all times in bad faith and with gross negligence and willful

misconduct, BofA processed the March 9 Notice and sent it to all Delay Draw Facility lenders.
BofA advised the Lenders that the revised Borrowing Notice complied with the Credit
Agreement and that the Delay Draw Lenders were required to ftmd. In the absence of any Stop
Funding Notice that would have suspended their obligation to fund, the Delay Draw Term
Lenders could not rely on the failure to fund by the Revolving Lenders, or by any individual
Delay Draw Term Lenders or upon the Lehman default. That is because, under Section 2.23(g)
of the Credit Agreement, "the obligations of the Lenders to make Term Loans and Revolving
Loans ... are several and not joint. The failure of any Lender to make any Loan ... shall not
relieve any other Lender of its corresponding obligation to do so .... " Thus, the Delay Draw
Term Lenders were left with no choice but to fund, or else face·a claim for breach of contract.
154.

Accordingly, on or about March 10, 2009 or thereafter, Plaintiffs complied with

their Delay Draw Facility commitments and honored their obligations to fund the Delay Draw
Facility. BofA used a portion of those funds to immediately repay itself and the other Revolving
Lenders the then-outstanding balance of the $68 million under the Revolving Facility, thereby
unjustly emiching BofA and the other Defendants, to the detriment of the Plaintiffs.
155.

On March 16, 2009, the Borrower sent another .letter to BofA in which it stated .

its continued belief that the lenders who had not funded were in default of their funding
obligations. Shortly thereafter, on March 19, 2009, certain Term Lenders wrote to BofA to
demand that the Revolving Lenders, including BofA, honor the March 2 and 3 Notice of
Borrowing. They explained why BofA's newly-minted interpretation of"fully drawn" was
wrong. They also noted the conflict of interest that BofA had as a result of its Revolving
Commitment exposure. The Term Lenders demanded that BofA either correct its conduct or
resign. At that time, BofA refused to do either.

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THE MARCH 25 ADVANCE

156.

On March 11,2009, the Borrowers sent BofA the March 25 Advance Request,

requesting disbursement in the amount of$138 million (ofwhich about $4 million was for debt
service under the Credit Agreement). In response, BofA sent correspondence in which it once
again reserved the right to demand "strict conformity" with the Disbursement Agreement, and
expressed to the Borrower the need to conclude "our review of the substance of those
documents." Because BofA used the proceeds of the Delay Draw Loans to repay to itself and the
other Revolving Lenders the full amount of the then-outstanding $68 million in Revolving
Loans, none of the funds to be disbursed under the March 25 Advance Request included funds to
be loaned by the Revolving Lenders. Without its own money on the line; BofA reverted to the
laissez-faire approach that it had employed before Febmary 2009, prior to the Borrowers' first
request for Revolving Loans.
157.

As of no later than March 23,2009, BofA was on notice, from the Borrower and

otherwise, that certain of the Delay Draw Lenders had not funded their portion of the
commitment under the Delay Draw Facility in response to the March 9 Notice. Section 1.1 of
the Credit Agreement defines a "Lender Default" as "the failure or refusal (which has not been
retracted in writing) of a Lender to make available (i) its portion of any Loan required to be made
by such Lender hereunder .... " As of March 25, the amount of the unfunded commitment
totaled about $23.3 million (of which $1.67 million was attributable to First National Bank of
Nevada). 3 That unfunded commitment precluded BofA from disbursing any funds pursuant to
the March 25 Advance Request for a number of independent reasons.
158.

First, because the Credit Agreement, along with the Retail Facility, is one of the

Material Agreements on Schedule 4.24, the failure of any Delay Draw Lender to fund its
commitment was a Default by virtue of Section 8(j) of the Credit Agreement. (The same was, of

.\ A portion of that amount was subsequently funded, thereby curing any breach with respect to
those Term Lenders.

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course, true of the failure of the Revolving Lenders to fund on March 3 ). That meant that at least
one of the conditions precedent for disbursement of funds, Section 3.3 .3 of the Disbursement
Agreement, clearly had not been satisfied.
159.

Second, the Borrower could not, based on the failure as of March 25 to fund the

$23,333,333 in Term Loans, represent and warrant to be true and correct that no default existed
under.the Financing Agreements (here, the Credit Agreement), as required under Section 4.9.1 of
the Disbursement Agreement. (The same is true based on the failure of the Revolving Lenders to
fund). Thus, the Borrower could not satisfy the conditions under Section 3.3.2 of the
Disbursement Agreement.
160.

Third, under the new interpretation of Section 2.1(c)(iii) of the Credit Agreement

adopted by BofA and the other Revolving Lenders, the Revolving Lenders claimed to be relieved
of any obligation to fund more than $150 million of their $800 million commitment until the
Delay Draw Facility was fully ":fi.mded." The position ofBofA and the other Revolving Lenders
that no more than $150 million of the Revolving Facility was available to fund the Project if any
Delay Draw Lender failed to fund its commitment, and the Revolving Lenders' ongoing refusal
to fund, dearly constituted a change in the economics or feasibility of constructing the Project
that couldreasonably be expected to have a Material Adverse Effect, thereby precluding
satisfaction of Section 3.3.11 of the Credit Agreement.
161.

Fourth, the Borrower could not satisfy the In Balance Test. On March 23, 2009,

the Borrowers advised BofA that it would be submitting a calculation of the In Balance Test
reflecting arazor-thin cushion of only $13.8 million. That cushion included Available Funds
with two components that are, as explained below, incompatible: (a) $750 million in "Bank
Revolving Availability"; and (b) $21,666,666 under "Delay Draw Term Loan Availability,"
which represented the unfunded portion of the Delay Draw Loans (excluding First National Bank
ofNevada's portion). Depending on whether "fully drawn" was interpreted to mean "fully
funded" of"fully requested," either the $750 million or the $21,666,666 could be included as
Available Funds- but not both. If "fully qrawn" meant "fully funded," then the "Bank

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Revolving Availability" under the In Balance Test could not exceed $150 million unless and
until the Delay Draw Facility was in fact fully funded, thereby causing the In Balance Test to fail
by a spectacular margin. If, on the other hand, "fully drawn" meant "fully requested," then the
$21,666,666 in Term Loans that were requested but not funded would be excluded. That is
because "Delay Draw Term Loan Availability" is defined to mean, "as of each date of
determination, the then undrawn portion of the Delay Draw Term Loans." (Disbursement
Agreement, Ex. A)( emphasis added). If"drawn" meant "requested," then the "undrawn portion
of the Delay DrawTerm Loans" was zero as of March 25,2009. Either way, the Borrower could
not satisfy the In Balance Test, a condition to disbursement under Section 3.3.8 of the
Disbursement Agreement.
162.

In short, there was a myriad of facts - all known to BofA, and none requiring

any investigation, additional facts, or exercise of discretion by BofA - that precluded satisfaction
of the conditions precedent necessary for BofA to approve the March 25 Advance Request and
disburse the proceeds that had been advanced by the Term Lenders. Yet BofA knowingly and
intentionally chose to disregard those facts and to shirk its obligations as Disbursement Agent.
163.

Instead, in a March 23 letter to Fontainebleau lenders posted on Intralinks, BofA

flip-flopped yet again and took an entirely new position: "since the Borrower had requested all
of the Delay Draw Term Loans and almost all of the loans had funded," the Borrowers could
now request Revolving Loans in excess of$150 million. Under BofA's new position, "fully
drawn" now meant "almost fully funded." Because "almost all" of the Delay Draw Term Loans
had funded, BofA opined the entire amount of the Revolving Loan Facility could be used to
calculate "Bank Revolving Availability." The letter read in pertinent part:
Bank of America's position is that since the Borrower has requested all of the
Delay Draw Term Loans, and almost all of the loans have funded (whether or
not the outstanding $21,666,667 is ultimately received), Section 2.1 (c)(iii) now
permits the Borrower to request Revolving Loans which result in the aggregate
amount outstanding under the Revolving Commitments being in excess of
$150,000,000. As a result, we would permit the relevant portion of the Revolving
Commitment to be reflected in Available Funds. (Emphasis added)

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Notably, in its third interpretive iteration, BofA proposed to redefine "fully

drawn" to mean "almost fully funded" even though few, if any, of the other Revolving Lenders
had indicated that they agreed with BofA's position, let alone unconditionally waived any
argument that they were not required to fund the full amount of their commitment because of the
failure of certain Delay Draw Term Lenders to fund. The March 23 letter itself recognizes the
"divergence of opinions" as of that date among the Revolving Lenders. Indeed, within a week of
the disbursement under the March 25 Advance Request, BofA negotiated an Interim Agreement
with the Borrower, dated April1, 2009 and circulated to Term Lenders on April3, 2009, under
which any consent of the Revolving Lenders to treat the Delay Draw T~rm Loans as "fully
drawn" was conditioned upon the Borrowers' agreement to limit any requests under the
Revolving Loans in April and May 2009 to the amount of the Advance Requests plus $5 million
for each month. Under the Interim Agreement, "Bank Revolving Availability" on the dates of
those Advance Requests would have been capped at an amount far less than the total amount of
the Commitment.
165.

By virtue of the inability of the Borrowers to satisfY numerous conditions under·

Section 3.3 of the Disbursement Agreement, BofA was not authorized to approve the March 25
Advance Request nor issue an Advance Confirmation Notice, and was instead obligated to issue
a Stop Funding Notice. In breach of its duties as Disbursement Agent, BofA issued the Advance
Confirmation Notice and, as Administrative Agent, disbursed $134 million in proceeds that had
been advanced by the Term Lenders, including Plaintiffs.
EVENTS SUBSEQUENT TO THE MARCH 25 ADVANCE
166.

On or about Aprill3, 2009, shortly after Plaintiffs' funding of the Delay Draw

Facility and the release of approximately $134 million of those funds from the Bank Proceeds
Account, the Borrowers advised BofA and the Lenders that it could not meet the In Balance Test,
based upon a substantial increase in the figure they used to calculate Required Costs.
167.

On April20, 2009, BofA, in its capacity as Administrative Agent, sent a letter to

the Borrower, the Lenders and other parties, in which BofA advised that "the Required Facility

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Lenders under the Revolving Credit Facility have determined that one or more Events of Default
have occurred and are continuing .... " ·BofA did not, in that 'letter or in response to a letter sent
by certain Term Lenders the following day, identify those Events of Default that had been
determined to have occurred .. To the extent any Events of Default (or Defaults) had in fact
occurred and were continuing on that date, any such Events of Default (or Defaults) were known
or should have been known to BofA long before March 2009, and BofA breached its duties as
Disbursement Agent and Administrative Agent by failing to communicate them to the Tem1
Lenders, failing to issue a Stop Funding Notice, or failing to take any other required action.
168.

Pursuant to Section 8 of the Credit Agreement, BofA provided notice that the

Revolving Facility commitment was "terminated effectively immediately." Notably, BofA did
not purport to make its termination retroactive to a date prior to the March 2 Notice and March 3
Notice, ret1ecting BofA's understanding that such retroactive termination was not a remedy
available under the Credit Agreement or applicable law.
169.

On April21, 2009, the Borrower submitted a Notice of Borrowing (the "April21

Notice") to BofA, drawing $710 million under the Revolving Facility. In a separate letter sent
that same day by Borrower's counsel to BofA, the Borrower disputed the existence of any Events
..

of Default under the Credit Agreement. If the Borrower were able to demonstrate that no Events
of Default under the Credit Agreement had occurred or were continuing as of April20, 2009,
then Defendants were not authorized to terminate the commitment, and were obligated to fund
$710 million in response to the April21 Notice. Defendants did not provide such funding.
170.

BofA's failure to issue a Stop Funding Notice and its approval ofthe prior

Advance Requests was in bad faith and constituted gross negligence and willful misconduct. .
BofA promoted its own self-interest, to the detriment of the Term Lenders, by: 1) causing the
Revolving Lenders to refuse to fund their Revolving Loans, thereby reducing the collateral
available to the Temi Lenders; 2) causing the Delay Draw Lenders to fund their Loans, thereby
enabling the repayment of $68 million in Revolvin~ Loans and increasing the collateral available
to the Revolving Lenders on account of their existing claims arising from previously issued

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letters of credit under the Revolving Facility; and 3) causing disbursements to be made from the
Bank Proceeds Account to allow for construction to continue on the Project. All of those events
dramatically improved the negotiating leverage of BofA and other Revolving Lenders and
reduced the negotiating leverage of the Term Lenders, thereby positioning BofA to seek
concessions from both the Borrower and the Term Lenders in exchange for providing the funds
that already had been committed. Indeed, BofA applied that leverage to negotiate a term sheet
with the Borrower, circulated to the Term Lenders in mid-May 2009, under which the Revolving
Lenders would have obtained numerous concessions adverse to the interests of the Term
Lenders. That proposal failed only because certain of the Revolving Lenders other than BofA
were unwilling to advance funds even on those concessionary terms.
171.

On or about May 6, 2009, after having succeeded in maximizing its leverage

against the Term Lenders, BofA notified the lenders of its resignation as Disbursement Agent
and Administrative Agent.
172.

As a consequence of Defendants' wrongful and willful refusal to fund and their

termination of the Revolving Facility commitments, the Project has been derailed and the value
of the collateral securing Plaintiffs' loans has been substantially diminished. Moreover, BofA's
failure to perform its obligations as Disbursement Agent and Administrative Agent not only
reduced the amount and value of the collateral securing Plaintiffs' loans, but also required
Plaintiffs to advance Delay Draw Loans that, but for BofA's failure to satisfy its duties, would
have been suspended and ultimately terminated. Accordingly, Plaintiffs have suffered
substantial damages in an amount based upon their pro rata share of the funds wrongfully
disbursed from the Bank Proceeds Account and their pro rata share of the Delay Draw Loans for
which they seek compensation.
COUNT I
Breach of the Disbursement Agreement Against BofA

173.

. Plaintiffs reallege and incorporate each andevery allegation set forth in

paragraphs 1 through 172 herein.

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174.

The Disbursement Agreement is a valid and binding contract, pursuant to which

BofA agreed to act as Bank Agent and Disbursement Agent. The Disbursement Agreement was
intended to directly benefit Plaintiffs.
175.

Pursuant to the terms ofthe Disbursement Agreement, BofA had a duty to

exercise commercially reasonable efforts and use commercially prudent practices in performing
its obligations under the Disbursement Agreement, including its duty to fund Advance Requests
if, but only if, all conditions precedent to such funding were met and its corresponding duty to
issue Stop Funding Notices if all such conditions were not met or ifthere existed any Defaults

or

Events of Default.
176.

Beginning with Advance Requests made in September 2008, and continuing

through the March 25 Advance Request, BofA materially breached its duties under the
Disbursement Agreement by improperly approving Advance Requests that failed to meet one or
more of the conditions precedent under Section 3.3 of the Disbursement Agreement, improperly
issuing Advance Confirmation Notices, improperly failing to issue Stop Funding Notices as a
result of the failure of conditions precedent to these Advance Requests and Defaults, and
improperly disbursing funds from the Bank Proceeds Account pursuant to such deficient
Advance Requests.
177.

In breaching its duties under the Disbursement Agreement as· set forth herein,

BofA's actions constituted bad faith, gross negligence and willful misconduct, and favored its
own interests over those of the Term Lenders.
178.

Plaintiffs have suffered injury as a result of those breaches because, as a result of

BofA's approval of the Advance Requests and failure to issue Stop Funding Notices, the amount
and value of Plaintiffs' collateral has been and continues to be diminished, and Plaintiffs have
been required to fund the Delay Draw Loans. BofA's liability to Plaintiffs is not limited·under
Section 9.10 of the Disbursement Agreement by virtue of the fact that: (a) the limitation of
liability does not apply to claims asserted by Plaintiffs; (b) the limitation of liability does not

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apply to the conduct ofBofA for which BofA is liable; and (c) BofA's bad faith, gross
negligence and willful misconduCt are not subject to any limitation on liability.
COUNT II
.Breach of the Credit Agreement Against All Defendants

179.

Plaintiffs reallege a:nd incorporate each and every allegation set forth in

paragraphs 1 through 172 herein.
180.

The Credit Agreement is a valid and bipding contract, pursuant to which the

Defendants agreed to fund $790 million under the Revolving Facility.
181.

The March 2 Notice and March 3 Notice complied with all applicable conditions

under the Credit Agreement. Plaintiffs have performed all obligations required of them under
the Credit Agreement.
182..

The Revolving Loan Lenders had an obligation, not just to the Borrowers, but

also to their co-lenders, to fund in response to the Notices of Borrowing.
183.

Pursuant to the terms of the Credit Agreement, the Defendants were, and

continue to be, obligated to honor the Notices of Borrowing ..
184.

In the alternative, in the event that it is judicially determined that, prior to

April21, 2009, no Events of Default underthe Credit Agreement occurred that would authorize
termination of the Revolving Facility commitment, then Defendants also were required to fund
the sum of $710 million under the April 21 Notice.
185.

The Defendants' failure to honor the Notices of Borrowing constitutes a material

breach of their obligations mider the Credit Agreement.
186.

By repudiating their obligations to fund under the Revolving Facility, the

Defendants have breached the Credit Agreement.
187.

Plaintiffs, as parties to the Credit Agreement, are entitled to seek damages

against Defendants for their breach of the Credit Agreement.

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Plaintiffs hav~ suffered injury as a result of the breach because, as a result of the

Defendants' refusal to honor their obligation to fund the Revoiving Facility, the amount and
value ofPlaintiffs' collateral has been and continues to be diminished.
COUNT III
For Breach of the Implied Covenant of Good Faith and Fair Dealing Against BofA

189.

Plaintiffs reallege and incorporate each and every allegation set forth in

paragraphs 1 through 172 herein.
190.

The Disbursement Agreement contained an implied covenant of good faith

which prohibited BofA, in its capacities as Administrative Agent and Disbursement Agent, from
preferring its own interests and the interests of the Revolving Lenders over the interests of the
Term Lenders ..
191.

Defendants owed the implied covenant of good faith to Plaintiffs, who are

intended third-party beneficiaries under the Disbursement Agreement.
192.

BofA breached the implied covenant of good faith by: (a) preferring its own

interests and the interests of the Revolving Lenders (including BofA) over the interests of Term
Lenders when it improperly approved Advance Requests, issued Advance Confirmation Notices,
failed to issue Stop Funding Notices, and caused the disbursement of funds from the Bank
Proceeds Account; and (b) failing to communicate information to the Term Lenders regarding
Events of Default that were known of should have been known to BofA.
193.

Plaintiffs have suffered injury as a result ofBofA's breach of the implied

.covenant of good faith. BofA's liability to Plaintiffs is not limited under Section 9.10 of the
Disbursement Agreement by virtue of the fact that: (a) the limitation ofliability does not apply
to claims asserted by Plaintiffs; (b) the limitation of liability does not apply to the conduct of
BofA for which BofA is liable; and (c) BofA's bad faith, gross negligence and willful
misconduct are not subject to any limitation on liability.

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COUNT IV
Breach of the Implied Covenant of
Good Faith and Fair Dealing Against All Defendants

194.

Plaintiffs reallege and incorporate each and every allegation set forth in

paragraphs 1 through 172 herein.
.

195.

.

The Credit Agreement is a valid and binding contract, pursuantto which the

Defendants agreed to fund $790 million under the Revolving Facility.
196.

The Credit Agreement contains an implied covenant of good faith and fair

dealing. The covenant is intended to prevent parties to a contract from destroying or injuring the
right of other parties to enjoy the fruits of the contract.
197.

Defendants owed Plaintiffs a duty of good faith and fair dealing as parties to the

same Credit Agreement.
198.

BofA as Administrative Agent and the other Defendants breached the implied

covenant by adopting a contrived construction of the Credit Agreement in order to justify their
refusal to fund the March 2 Notice and the March 3 Notice.
199.

Plaintiffs have performedall obligations required of them under the Credit

Agreement.
200.

Plaintiffs have suffered injury as a result of the breach of the covenant because,

as a result of the Defendants' refusal to honor their obligation to fund under the Revolving
Facility, the amount and value of Plaintiffs' collateral has been and continues to be diminished.
Furthermore, Plaintiffs have been prevented from receiving the benefits of their bargain under
the contract because their ability to obtain repayment on their loans has been endangered.

COUNTY
· For Declaratory Relief Against BofA

201.

Plaintiffs reallege and incorporateeachand every allegation set forth in

paragraphs 1 through 172 herein.

202.

A dispute has arisen between Plaintiffs and BofA regarding BofA's obligations

to Plaintiffs as intended third-party beneficiaries under the Disbursement Agreement. Plaintiffs

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contend that BofA has breached that agreement by approving the Advance Requests and by
failing to issue a Stop Funding Notice. Plaintiffs are informed and believe and thereon allege
that BofA contends that it has acted in good faith and in compliance with its obligations under
the Disbursement Agreement.
203.

A judicial determination is therefore necessary to resolve this dispute and

ascertain the respective rights of the parties with regard to the actions and agreements referenced
in this complaint.
COUNT VI
For Declaratory Relief Against All Defendants

204.

Plaintiffs reallege and incorporate each and every allegation set forth in

paragraphs 1 through 172 herein.
205.

A dispute has arisen between Plaintiffs and Defendants regarding their

respective rights and obligations under the Credit Agreement. Plaintiffs contend that Defendants
have breached this agreement by failing to fund and by terminating their loan commitments
under the Revolving Facility. Plaintiffs are informed and believe and thereon allege that
Defendants contend that they have acted in good faith and in compliance of their obligations
under the Credit Agreement.
206.

A judicial determination is therefore necessary to resolve this dispute and

ascertain the respective rights of the parties with regard to the actions and agreements referenced
in this complaint.
PRAYER FOR RELIEF
WHEREFORE, Plaintiffs pray for judgment against the Defendants, and each of them,

(a)

For compensatory damages in an amount subject to proof at trial.

(b)

For a declaration that BofA has breached its contractual duties under the

Disbursement Agreement as set forth above entitling Plaintiffs to damages in an amount subject·
to proof at trial.

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(c)

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For a declaration that Defendants have breached their contractual duties under the

Credit Agreement as set forth above entitling Plaintiffs to damages in an amount subject to proof
at trial.
(d)

For a declaration thatPlaintiffs are excused from performance of any obligations

owing to Defendants under the Credit Agreement.
(e)

For a declaration that any claims asserted by Defendants against the Borrower

should be disallowed pursuant to 11 U.S. C. § 502(b).
(e)

For an award of the costs of suit including attorneys' fees to the extent available.

(f)

For any further relief as this Court deems just and proper.

JURY DEMAND
Plaintiffs demand a trial by jury for all issues so triable.

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DATED: January 15, 2010

Respectfully submitted,
/s/ David A. Rothstein
David A. Rothstein
Fla. Bar No.: 056881
DRothstein(a1dkrpa.com
DIMOND KAPLAN & ROTHSTEIN, P.A.
2665 South Bayshore Drive
Penthouse 2B
Miami, FL 331343
[phone]
Telephone:
Facsimile:
[phone]
-andHENNIGAN BENNETT & DORMAN LLP
. J. Michael Hennigan (pro hac vice)
Kirk D. Dillman (pro hac vice)
865 S Figueroa Street
Suite 2900
Los Angeles, CA 900 17
Email: [e-mail]
[e-mail]
Attorneys for Plaintiffs,
Avenue CLO Fund, Ltd., et al.

771957

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA

Miami Division
CASE No.: 09-02106-MD-GOLD/BANDSTRA

IN RE:
FONTAINEBLEAU LAS VEGAS
CONTRACT LITIGATION
MDL NO. 2106
This document relates to Case Number:
09-CV-23835-ASG

ANSWER OF DEFENDANT BANK OF AMERICA, N.A.
Defendant Bank of America, N.A. ("BANA"), by its undersigned attorneys, hereby
answers the Second Amended Complaint for Breach of Contract, Breach of the Implied
Covenant of Good Faith and Fair Dealing, and Declaratory Relief(the "Avenue Complaint") and
responds, with knowledge as to its own acts and upon information and belief as to the acts of
others, as follows:
I.

BANA admits that the United States District Court for the Southern District of

Florida has jurisdiction over this matter under 12 U.S.C. § 632, and that BANA is a national
banking association organized under the laws of the United States. BANA denies knowledge or
information sufficient to form a belief as to the truth of paragraph I 's remaining allegations.
2.

BANA admits that the United States District Court for the District of Nevada is a

proper venue for this action.

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3.

BANA states that no response is necessary because Avenue CLO Fund, Ltd. has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 3 's allegations.
4.

BANA states that no response is necessary because Avenue CLO Fund II, Ltd.

has filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to torm a belief as to the truth of paragraph 4's allegations.
5.

BANA states that no response is necessary because Avenue CLO Fund III, Ltd.

has filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 5's allegations.
6.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 6's allegations.
7.

BANA denies knowledge or information sufficient to torm a belief as to the truth

of paragraph 7' s allegations.
8.

BANA denies knowledge or information sufticient to form a belief as to the truth

of paragraph 8's allegations.
9.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 9' s allegations.
I 0.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 10' s allegations.
11.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 11 's allegations.

12.

BANA denies knowledge or into1mation sufficient to form a belief as to the truth

of paragraph 12 's allegations.

2

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13.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 13 's allegations.
14.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 14's allegations.
15.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 15 's allegations.
16.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 16's allegations.
17.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 17's allegations.
18.

BANA denies knowledge or information sufficient to form a belief as to the truth

ofparagraph 18's allegations.
19.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 19's allegations.
20.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 20's allegations.
21.

BANA states that no response is necessary because Sands Point Funding Ltd. has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 21's allegations.
22.

BANA states that no response is necessary because Copper River CLO Ltd. has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 22's allegations.

3

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23.

BANA states that no response is necessary because Kennetott Funding Ltd. has

tiled a Notice ofVoluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 23's allegations.
24.

BANA states that no response is necessary because NZC Opportunities (Funding)

II Limited has tiled a Notice of Voluntary Dismissal. To the extent a response is required,
BANA denies knowledge or information sufficient to form a belief as to the truth of
paragraph 24's allegations.
25.

BANA states that no response is necessary because Green Lane CLO Ltd. has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 25's allegations.
26.

BANA states that no response is necessary because 1888 Fund, Ltd. has filed a

Notice of Voluntary Dismissal. To the extent a response is required, BANA denies knowledge
or information sufficient to form a belief as to the truth ofparagraph 26's allegations.
27.

BANA states that no response is necessary because Orpheus Funding LLC has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to torm a belief as to the truth of paragraph 27's allegations.
28.

BANA states that no response is necessary because Orpheus Holdings LLC has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to fom1 a belief as to the truth of paragraph 28's allegations.
29.

BANA states that no response is necessary because LFCQ LLC has filed a Notice

of Voluntary Dismissal. To the extent a response is required, BANA denies knowledge or
information sufflcient to form a belief as to the truth of paragraph 29's allegations.

4

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30.

BANA states that no response is necessary because Aberdeen Loan Funding, Ltd.

has filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 30's allegations.
31.

BANA states that no response is necessary because Am1strong Loan Funding,

Ltd. has tiled a Notice of Voluntary Dismissal. To the extent a response is required, BANA
denies knowledge or information sufficient to torm a belief as to the truth of paragraph 31's
allegations.
32.

BANA states that no response is necessary because Brentwood CLO, Ltd. has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 32's allegations.
33.

BANA states that no response is necessary because Eastland CLO, Ltd. has filed a

Notice of Voluntary Dismissal. To the extent a response is required, BANA denies knowledge
or information sufficient to form a belief as to the truth of paragraph 33's allegations.
34.

BANA states that no response is necessary because Emerald Orchard Limited has

tiled a Notice of Voluntary Dismissal. To the extent a response is required. BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 34's allegations.
35.

BANA states that no response is necessary because Gleneagles CLO, Ltd. has

tiled a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or intormation sufficient to form a belief as to the truth of paragraph 35's allegations.
36.

BANA states that no response is necessary because Grayson CLO, Ltd. has filed a

Notice of Voluntary Dismissal. To the extent a response is required, BANA denies knowledge
or information sufficient to form a belief as to the truth of paragraph 36's allegations.

5

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1

37.

SANA states that no response is necessary because Greenbriar CLO, Ltd. has

filed a Notice of Voluntary Dismissal. To the extent a response is required, SANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 37's allegations.
38.

SANA states that no response is necessary because Highland Credit Opportunities

COO, Ltd. has tiled a Notice of Voluntary Dismissal. To the extent a response is required,
SANA denies knowledge or infom1ation sufficient to form a belief as to the truth of paragraph
38's allegations.
39.

SANA states that no response is necessary because Highland Loan Funding V,

Ltd. has tiled a Notice of Voluntary DismissaL To the extent a response is required, BANA
denies knowledge or information sufficient to form a belief as to the truth of paragraph 39's
allegations.
40.

BANA states that no response is necessary because Highland Offshore Partners,

L.P. has tiled a Notice of Voluntary Dismissal. To the extent a response is required, BANA
denies knowledge or intonnation sufficient to form a belief as to the truth of paragraph 40's
allegations.
41.

BANA states that no response is necessary because Jasper CLO, Ltd. has filed a

Notice of Voluntary Dismissal. To the extent a response is required, BANA denies knowledge
or information sufficient to form a belief as to the truth of paragraph 41's allegations.
42.

BANA states that no response is necessary because Liberty CLO, Ltd. has filed a

Notice ofVoluntary Dismissal. To the extent a response is required, BANA denies knowledge
or information sufficient to form a belief as to the truth of paragraph 42's allegations.

6

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43.

BANA states that no response is necessary because Loan Funding IV LLC has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 43's allegations.
44.

BANA states that no response is necessary because Loan Funding VII LLC has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 44's allegations.
45.

BANA states that no response is necessary because Loan Star State Trust has filed

a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies knowledge
or intormation sufficient to form a belief as to the truth of paragraph 45's allegations.
46.

BANA states that no response is necessary because Longhorn Credit Funding,

LLC has filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA
denies knowledge or information sufficient to form a belief as to the truth of paragraph 46's
allegations.
47.

BANA states that no response is necessary because Red River CLO, Ltd. has filed

a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies knowledge
or information sufficient to form a belief as to the truth ofparagraph 47's allegations.
48.

BANA states that no response is necessary because Rockwall CDO, Ltd. has filed

a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies knowledge
or information sufticient to form a belief as to the truth ofparagraph 48's allegations.
49.

BANA states that no response is necessary because Rockwall CDO II, Ltd. has

filed a Notice of Voluntary DismissaL To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 49's allegations.

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50.

BANA states that no response is necessary because Southfork CLO, Ltd. has filed

a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies knowledge
or information sufficient to fonn a belief as to the truth of paragraph 50's allegations.
51.

BANA states that no response is necessary because Stratford CLO, Ltd. has filed

a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies knowledge
or information sufficient to form a belief as to the truth of paragraph 51's allegations.
52.

BANA states that no response is necessary because Westchester CLO, Ltd. has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 52's allegations.
53.

BANA denies knowledge or infonnation sufficient to tonn a belief as to the truth

of paragraph 53's allegations.
54.

BANA denies knowledge or information sufficient to tonn a belief as to the truth

of paragraph 54's allegations.
55.

BANA denies knowledge or infonnation sufficient to form a belief as to the truth

of paragraph 55's allegations.
56.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 56's allegations.
57.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 57's allegations.
58.

BANA denies knowledge or infonnation sufficient to tonn a belief as to the truth

of paragraph 58's allegations.
59.

BANA denies knowledge or information sufficient to fonn a belief as to the truth

of paragraph 59's allegations.

8

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60.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 60's allegations.
61.

BANA states that no response is necessary because Carlyle High Yield Partners

2008-l, Ltd. has filed a Notice ofVoluntary Dismissal. To the extent a response is required,
BANA denies knowledge or information sufficient to form a belief as to the truth of paragraph
61's allegations.
62.

BANA states that no response is necessary because Carlyle High Yield Partners

VI, Ltd. has filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA
denies knowledge or information sufficient to form a belief as to the truth of paragraph 62's
allegations.
63.

BANA states that no response is necessary because Carlyle High Yield Partners

VII, Ltd. has filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA
denies knowledge or information sufficient to form a belief as to the truth of paragraph 63's
allegations.
64.

BANA states that no response is necessary because Carlyle High Yield Partners

VIII, Ltd. has filed a Notice of Voluntary Dismissal. To the extent a response is required,
BANA denies knowledge or information sufficient to form a belief as to the truth of paragraph
64's allegations.
65.

BANA states that no response is necessary because Carlyle High Yield Partners

IX, Ltd. has filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA
denies knowledge or information sufficient to form a belief as to the truth ofparagraph 65's
allegations.

9

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66.

BANA states that no response is necessary because Carlyle High Yield Partners

X, Ltd. has filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA
denies knowledge or information sufficient to form a belief as to the truth of paragraph 66's
allegations.
67.

BANA states that no response is necessary because Carlyle Loan Investment, Ltd.

has filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to fom1 a belief as to the truth of paragraph 67's allegations.
68.

BANA states that no response is necessary because Centurion CDO VI, Ltd. has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth ofparagraph 68's allegations.
69.

BANA states that no response is necessary because Centurion CDO Vll, Ltd. has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 69's allegations.
70.

BANA states that no response is necessary because Centurion CDO 8, Limited

has filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth ofparagraph 70's allegations.
71.

BANA states that no response is necessary because Centurion CDO 9, Limited

has tiled a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 71's allegations.
72.

BANA states that no response is necessary because Cent CDO 10 Limited has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BAN A denies
knowledge or information sufficient to form a belief as to the truth of paragraph 72's allegations.

10

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73.

BANA stales that no response is necessary because Cent CDO XI Limited has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 73's allegations.
74.

BANA states that no response is necessary because Cent CDO 12 Limited has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 74's allegations.
75.

BANA states that no response is necessary because Cent CDO I 4 Limited has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 75's allegations.
76.

BANA states that no response is necessary because Cent CDO 15 Limited has

filed a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 76's allegations.
77.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 77's allegations.
78.

BAN A denies knowledge or information sufficient to form a belief as to the truth

of paragraph 78's allegations.
79.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 79's allegations.
80.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 80's allegations.
81.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 81's allegations.

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82.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 82's allegations.
83.

BANA denies knowledge or information sufficient to form a belief as to the truth

ofparagraph 83's allegations.
84.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 84's allegations.
85.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 85's allegations.
86.

BANA denies knowledge or information sufficient to form a belief as to the truth

ofparagraph 86's allegations.
87.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 87's allegations.
88.

BANA states that no response is necessary because ARES Enhanced Loan

Investment Strategy III, Ltd. has filed a Notice ofVoluntary Dismissal. To the extent a response
is required, BANA denies knowledge or information sufficient to form a belief as to the truth of
paragraph 88's allegations.
89.

BANA states that no response is necessary because Primus CLO I, Ltd. has filed a

Notice of Voluntary DismissaL To the extent a response is required, BANA denies knowledge
or information sufficient to form a belief as to the truth of paragraph 89's allegations.
90.

BANA states that no response is necessary because Primus CLO II. Ltd. has filed

a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies knowledge
or information sufficient to form a belief as to the truth of paragraph 90's allegations.

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91.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 91's allegations.
92.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 92's allegations.
93.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 93's allegations.
94.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 94's allegations.
95.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 95's allegations.
96.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 96's allegations.
97.

BANA states that no response is necessary because Rosedale CLO, Ltd. has filed

a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies knowledge
or information sufficient to form a belief as to the truth of paragraph 97's allegations.
98.

BANA states that no response is necessary because Rosedale CLO II Ltd. has

tiled a Notice of Voluntary Dismissal. To the extent a response is required, BANA denies
knowledge or information sufficient to form a belief as to the truth of paragraph 98's allegations.
99.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 99's allegations.
100.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph IOO's allegations.

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I 0 I.

BANA denies knowledge or inf01mation sufficient to form a belief as to the truth

of paragraph lO 1's allegations.
I 02.

BANA denies paragraph I 02's allegations, except admits that (i) BANA is a

national banking association with its main office in Charlotte, North Carolina, (ii) BANA is a
Revolving Facility lender, an Issuing Lender and a Swing Line Lender, (iii) BANA served as
Administrative Agent under the Credit Agreement and as Disbursement Agent under the
Disbursement Agreement, and (iv) BANA agreed to fund $100 million under the Revolving
Facility. BANA respectfully refers the Court to the governing loan agreements for their true and
correct contcnts. 1
I 03.

BANA denies paragraph l 03's allegations, except admits that (i) Merrill Lynch

Capital Corporation is a Delaware Corporation with a principal place of business in New York
and is indirectly owned by Bank of America Corporation, and (ii) that Merrill Lynch Capital
Corporation agreed to fund $I 00 million under the Revolving Facility. BANA respectfully
refers the Court to the governing loan agreements for their true and correct contents.
I 04.

BANA denies knowledge or information sufficient to f01m a belief as to the truth

of paragraph l04's allegations, except admits that J.P. Morgan Chase Bank, N.A. agreed to fund
$90 million under the Revolving Facility.
I 05.

BANA denies knowledge or infonnation sufficient to form a belief as to the truth

of paragraph lOS's allegations, except admits that Barclays Bank PLC agreed to fund
$100 million under the Revolving Facility.

Capitalized terms not othenvise de tined herein have the meaning used in the Credit Agreement or, if applicable,
the Disbursement Agreement.

I4

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I 06.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph I 06's allegations, except states that Deutsche Bank Trust Company Americas
agreed to fund $100 million under the Revolving Facility.
I 07.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph l 07's allegations, except admits that The Royal Bank of Scotland PLC agreed to
fund $90 million under the Revolving Facility.
l 08.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph I 08's allegations, except admits that Sumitomo Mitsui Banking Corporation agreed
to fund $90 million under the Revolving Facility.
109.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph 109's allegations, except admits that Bank of Scotland agreed to fund $72.5 million
under the Revolving Facility.
II 0.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph IIO's allegations, except admits that HSH Nordbank AG agreed to fund
$40 million under the Revolving Facility.
Ill.

BANA denies knowledge or information sufficient to form a belief as to the truth

of paragraph Ill's allegations, except admits that MB Financial Bank, N.A. agreed to fund
S7.5 million under the Revolving Facility.
112.

BANA denies knowledge or information sufficient to form a belief as to the truth

ofparagraph 112's allegations, except admits that Camulos Master Fund, L.P. agreed to fund
S20 million under the Revolving Facility.
113.

BANA denies paragraph ll3's allegations, except admits that the Project is being

constructed on the north end of the Las Vegas Strip on approximately 24.4 acres and includes a

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63-story skyscraper, a 100-foot high three-level podium and a 353,000 square-foot convention
center.
114.

BANA denies paragraph 114 's allegations and respectfully refers the Court to the

goveming loan agreements for their true and correct contents.
115.

BANA admits that on June 6, 2007, numerous lenders, including Plaintiffs and

Defendants entered into the Credit Agreement. BANA denies paragraph liS's remaining
allegations, and respectfully refers the Court to the govcming loan agreements tor their true and
correct contents.
116.

BANA denies the allegations in paragraph ll6's first sentence, and respectfully

refers the Court to the governing loan agreements for their true and correct contents. BANA
states that paragraph I 16' s second and third sentences contain legal conclusions as to which no
response is required. To the extent a response is required, BANA denies the allegations in
paragraph 116's second and third sentences and respectfully refers the Court to the Disbursement
Agreement for its true and correct contents.
117.

BANA denies knowledge or information sufficient to form a belief as to the

allegations in paragraph l17's first sentence. BANA states that no response is required for the
allegations in paragraph ll7's second sentence. BANA admits the allegations in paragraph
ll7's third sentence. BANA states that no response is required for the allegations in paragraph
ll7's fourth sentence. BANA denies knowledge or information sufficient to form a belief as to
the truth of the allegations in paragraph ll7's fifth sentence, and states that BANA was a Term
Lender. BANA denies paragraph 117's remaining allegations, except admits that BANA was
Administrative Agent under the Credit Agreement and Disbursement Agent under the
Disbursement Agreement.

16

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118.

BANA denies paragraph liS's allegations and respectfully refers the Court to the

Credit Agreement for its true and correct contents.
I 19.

BANA denies paragraph 119's allegations and respectfully refers the Court to the

governing loan agreements for their true and correct contents.
120.

BANA denies paragraph I 20's allegations and respectfully refers the Court to the

governing loan agreements for their true and correct contents.
121.

BAN A denies paragraph 121 's allegations and respectfully refers the Court to the

Disbursement Agreement for its true and correct contents.
122.

BANA denies paragraph 122 's allegations and respectfully refers the Court to the

governing loan agreements for their true and correct contents.
123.

BANA denies paragraph I 23's allegations and respectfully refers the Court to the

Disbursement Agreement for its true and correct contents.
124.

BANA denies paragraph !24's allegations and respectfully refers the Court to the

Credit Agreement and Disbursement Agreement tor their true and correct contents.
125.

BAN A denies paragraph 125 's allegations and respectfully refers the Court to the

Disbursement Agreement for its true and correct contents.
126.

BANA denies paragraph !26's allegations and respectfully refers the Court to the

governing loan agreements for their true and correct contents.
127.

BANA denies the allegations in paragraph !27's first sentence, except admits that

Lehman Brothers Holdings, Tnc. was a Retail Lender and Retail Agent and respectfully refers the
Court to the governing loan agreements for their true and correct contents. BANA admits that as
of the Closing Date, approximately $125 million ofthe Retail Facility was advanced leaving

S 189.6 million to be advanced. BANA denies the allegations in paragraph 127's third sentence.

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BANA denies knowledge or information sufficient to form a belief as to the truth of the
allegations in paragraph !27's last sentence.
128.

BANA admits that in September 2008, Lehman filed tor bankruptcy protection.

BANA denies knowledge or information sufficient to form a belief as to the truth of paragraph
!28's second sentence. BANA denies the allegations in paragraph I 28's third sentence. BANA
denies the allegations in paragraph I 28's first bullet point and respectfully refers the Court to the
Disbursement Agreement tor its true and correct contents. BANA states that the allegations in
paragraph I 28's sub-bullet point to the first bullet point contain a legal conclusion as to which no
response is required. To the extent that a response is required, BANA denies the allegations in
paragraph !28's sub-bullet point to the first bullet point. BANA denies the allegations in
paragraph !28's second bullet point and respectfully refers the Court to the governing loan
agreements tor their true and correct contents, except denies knowledge or information sufficient
to form a belief as to the truth ofthe final sentence in paragraph !28's second bullet point.
BANA states that the allegations in paragraph I 28's sub-bullet point to the second bullet point
contain a legal conclusion as to which no response is required. To the extent that a response is
required, BANA denies the allegations in paragraph I 28's sub-bullet point to the second bullet
point. BANA denies the allegations in paragraph 128's third bullet point and respectft!lly refers
the Court to the Disbursement Agreement for its true and correct contents. BANA states that the
allegations in paragraph I 28's sub-bullet point to the third bullet point contain a legal conclusion
as to which no response is required. To the extent that a response is required, BANA denies the
allegations in paragraph I 28's sub-bullet point to the third bullet point. BANA denies the
allegations in paragraph l28's fourth bullet point and respectfully refers the Court to the
Disbursement Agreement for its true and correct contents. BANA states that the allegations in

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paragraph I 28's sub-bullet point to the fourth bullet point contain a legal conclusion as to which
no response is required. To the extent that a response is required, BANA denies the allegations
in paragraph !28's sub-bullet point to the fourth bullet point.
129.

BANA denies paragraph L29's allegations.

130.

BANA denies paragraph l30's allegations, except admits that BANA was the

agent and a lender under a loan facility for the Fontainebleau Hotel in Miami. BANA also
admits that BANA made loans to Turnberry Associates (of which Soffer is a principal), and the
Borrower's chief financial officer, prior to taking that position, worked for eight years at Bane of
America Securities.
131.

BANA denies paragraph 131 's allegations, except denies knowledge or

information as to whether on November 6, 2008, Moody's announced that it had downgraded the
Project's debt facilities.
132.

BANA denies paragraph !32's allegations.

133.

BANA denies knowledge or information sufficient to form a belief as to the truth

of the allegations in paragraph 133 's first and second sentences, except admits that First National
Bank of Nevada was closed on or around July 25, 2008. BANA admits that First National Bank
of Nevada had made a commitment of $1,666,666.67 under the Delay Draw and a commitment
of$3,333,333.33 under the Initial Term Loan. BANA denies knowledge or information
sufficient to form a belief as to the truth of paragraph 133 's remaining allegations.
134.

BANA states that paragraph 134 contains legal conclusions as to which no

response is required. To the extent that a response is required, BANA denies paragraph 134 's
allegations, and respectfully refers the Court to the governing loan agreements for their true and
correct contents.

19

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135.

BANA denies paragraph !35's allegations.

136.

BANA denies paragraph !36's allegations, except admits that Merrill Lynch

Capital Corporation is a wholly-owned indirect subsidiary of Bank of America Corporation and
that it was a Revolving Facility Lender.
137.

BANA denies paragraph I 37's allegations, except denies knowledge or

information sufficient to form a belief as to the truth of whether the Borrowers used proceeds of
the Initial Term Loan Facility, Second Lien Facility and other proceeds to pay Project Costs, and
BANA admits that prior to February 2009, Borrowers did not request any advances under the
Revolving Facility and respectfully refers the Court to the February 13, 2009 Advance Request
for its true and correct contents.
138.

BANA denies paragraph !38's allegations, except admits that BANA, as

Administrative Agent, sent a February 20, 2009 letter to the Borrower and respectfully refers the
Court to that letter for its true and correct contents.
139.

BANA denies paragraph 139' s allegations, except admits that the Borrower sent

to BANA, as Administrative Agent, a letter on February 23, 2009 and respectfully refers the
Court to that Jetter for its true and correct contents.
140.

BANA denies paragraph 140' s allegations, except admits that BAN A, as

Disbursement Agent, approved the Borrower's February 24, 2009 Advance Request.
141.

BANA denies paragraph 141 's allegations, except admits that the Borrower

issued Notices of Borrowing on March 2, 2009 and March 3, 2009, and respectfully refers the
Court to the Notices for their true and correct contents.
142.

BANA denies paragraph !42's allegations and respectfully refers the Court to the

Credit Agreement for its true and correct contents.

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143.

BANA admits paragraph !43's first sentence. BANA states that paragraph !43's

second sentence contains legal conclusions as to which no response is required and avers that the
Court has already determined, in its May 28, 20 I0 Amended MDL Order Number Eighteen;
Granting in Part and Denying in Part Motions to Dismiss [DE 35]; [DE 36]; Requiring Answer to
Complaints; Vacating Final Judgment ("Amended MDL Order Number Eighteen"), that '"fully
drawn ... unambiguously means 'fully funded'; and ... the Delay Draw Term Loans had not
been 'fully drawn' at the time Fontainebleau submitted the March Notices of Borrowing." To
the extent that a response is required, BANA denies the allegations in paragraph l43's second
sentence. BANA denies paragraph !43's remaining allegations, except admits that BANA
participated in an ad hoc steering committee made up of certain Revolving Lenders and
respectfully refers the Court to the correspondence between BANA and the Lenders for its true
and correct contents.
144.

BANA denies paragraph !44's allegations, avers that the Court has already

determined in Amended MDL Order Number Eighteen that "'fully drawn' ... unambiguously
means 'fully funded'; and ... the Delay Draw Term Loans had not been 'fully drawn' at the time
Fontainebleau submitted the March Notices of Borrowing" and respectfully refers the Court to
the correspondence between BANA and the Borrower for their true and correct contents.
145.

BANA denies paragraph I 45's allegations, except admits that BANA, as

Administrative Agent, sent the Borrowers letters on March 3, 2009 and March 4, 2009, and
respectfully refers the Court to those letters for their true and correct contents.
146.

BANA denies the allegations in paragraph I 46's first sentence. BANA states that

paragraph 146' s remaining allegations contain legal conclusions as to which no response is
required. To the extent that a response is required, BANA denies

21

para~raph

!46's remaining

Case 1:09-md-02106-ASG Document 377-15 Entered on FLSD Docket 12/04/2013 Page 22 of
32

allegations and respectfully refers the Court to the Credit Agreement and Disbursement
Agreement for their true and correct contents.
147.

BANA denies paragraph I 47's allegations and respectfully refers the Court to the

Advance Requests and In Balance Reports for their true and correct contents.
148.

BANA states that paragraph 148 contains legal conclusions as to which no

response is required and avers that the Court has already determined in Amended MDL Order
Number Eighteen that "'fully drawn' ... unambiguously means 'fully funded'; and ... the Delay
Draw Tenn Loans had not been 'fully drawn' at the time Fontainebleau submitted the March
Notices of Borrowing." To the extent that a response is required, BANA denies paragraph !48's
allegations.
149.

BANA states that paragraph 149 contains legal conclusions as to which no

response is required and avers that the Court has already determined in Amended MDL Order
Number Eighteen that "'fully drawn' ... unambiguously means 'fully funded'; and ... the Delay
Draw Term Loans had not been 'fully drawn' at the time Fontainebleau submitted the March
Notices of Borrowing." To the extent that a response is required, BANA denies paragraph I 49's
allegations, except BANA denies knowledge or information sufficient to form a belief as to the
parties' intent in drafting the Credit Agreement and other loan documents.
!50.

BANA denies paragraph !50's allegations, except admits that BANA did not

issue a Stop Funding Notice on or after March 3, 2009.
151.

BANA denies paragraph 151 's allegations, except admits that on March 9, 2009,

the Borrower submitted a Notice of Borrowing and respectfully refers the Court to the Notice
and the attached letter for its true and correct contents.

22

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32

152.

BANA denies paragraph I 52's allegations, except admits that $68,000,000.00

was advanced to the Borrowers in February 2009, and respectfully refers to the Court to the
Credit Agreement and the February Notice of Borrowing for their true and correct contents.
153.

BANA denies the allegations in paragraph I 53's first sentence. BANA denies the

allegations in paragraph 153 's second sentence and respectfully refers the Court to the March l 0,
2009 Delay Draw Update posted on Intralinks for its true and correct contents. BANA states that
paragraph 153 's remaining allegations contain legal conclusions as to which no response is
required. To the extent that a response is required, BANA denies paragraph I 53's remaining
allegations.
154.

BANA states that the allegations in paragraph I 54's first sentence contain legal

conclusions as to which no response is required. To the extent that a response is required,
BANA denies the allegations in paragraph 154' s first sentence. BANA denies paragraph 154' s
remaining allegations, except admits that the Revolving Lenders were repaid $68 million
outstanding under the Revolver Facility.
155.

BANA denies paragraph I 55's allegations, except admits that (i) the Borrower

sent BANA a letter on March 16, 2009, and (ii) certain Term Lenders sent BANA a letter on
March 19, 2009, and respectfully refers the Court to the letters for their true and correct contents.
156.

BANA denies paragraph 156 's allegations, except admits that (i) the Borrowers

sent BANA, as Administrative Agent, the March 25, 2009 Advance Request on March II, 2009,
(ii) BANA, as Administrative Agent, sent the Borrower a letter on March 16, 2009, and (iii) that
none of the March 25 Advance Request funds were Revolving Loan proceeds, and respectfully
refers the Court to those documents for their true and correct contents.

Case 1:09-md-02106-ASG Document 377-15 Entered on FLSD Docket 12/04/2013 Page 24 of
32

157.

BANA denies the allegations in paragraph !57's first sentence. BANA denies the

allegations in paragraph 157's second sentence and respectfully refers the Court to the Credit
Agreement for its true and correct contents. BANA admits the allegations in paragraph !57's
third sentence. BANA states that the allegations paragraph !57's last sentence contains legal
conclusions as to which no response is required. To the extent that a response is required,
BANA denies the allegations paragraph !57's last sentence.
158.

BANA states that paragraph 158 contains legal conclusions as to which no

response is required. To the extent that a response is required, BANA denies paragraph !58's
allegations, and respectfully refers the Court to the governing loan agreements for their true and
correct contents.
!59.

BANA states that paragraph !59 contains legal conclusions as to which no

response is required. To the extent that a response is required, BANA denies paragraph I 59's
allegations and respectfully refers the Court to the governing loan documents for their true and
correct content.
160.

BANA denies paragraph !60's allegations.

161.

BANA states that the allegations in paragraph 161 's first sentence contain a legal

conclusion as to which no response is required. To the extent that a response is required, BANA
denies paragraph 161 's allegations. BANA denies paragraph 161 's remaining allegations, except
admits that on March 23, 2009, the Borrower submitted the March 25, 2009 Advance Request
showing the In Balance Test to be positive $13,785,184 and respectfully refers the Court to that
Advance Request and the Disbursement Agreement for their true and correct contents.
162.

BANA denies paragraph !62's allegations.

24

Case 1:09-md-02106-ASG Document 377-15 Entered on FLSD Docket 12/04/2013 Page 25 of
32
1

163.

BANA denies paragraph !63's allegations, except admits that BANA, as

Administrative Agent, sent a March 23, 2009 letter and respectfully refers the Court to that letter
for its true and correct contents.
164.

BANA denies paragraph I 64's allegations, except admits that the Borrower sent

to the Lenders on April 3, 2009, a letter and attached Interim Agreement, and respectfully refers
the Court to the March 23, 2009 letter and April 3, 2009 letter for their true and correct contents.
165.

BANA denies paragraph I 65's allegations.

166.

BANA denies paragraph 166' s allegations, except admits that the Borrowers sent

BANA, as Disbursement Agent and Bank Agent, and others, a letter on April 13, 2009, and
respectfully refers the Court to that letter for its true and correct contents.
167.

BANA denies paragraph !67's allegations, except admits that BANA, as

Administrative Agent, sent a letter to the Borrower on April 20, 2009, and respectfully refers the
Court to that letter for its true and correct contents.
168.

BANA denies paragraph !68's allegations, except admits that BANA, as

Administrative Agent, sent a letter to the Borrower on April 20, 2009, and respectfully refers the
Court to that letter for its true and correct contents.
169.

BANA denies paragraph !69's allegations, except admits that the Borrower

submitted Notice of Borrowing on April 21, 2009, the Borrower's counsel sent a letter to BANA
on April 2 I, 2009, and Defendants did not provide funding in response to the April 21 Notice,
and respectfully refers the Court to those documents for their true and correct contents.
170.

BANA denies paragraph !70's allegations.

l 71.

BAN A denies paragraph I 71's allegations, except admits that on May 7, 2009,

BANA, as Administrative Agent and Disbursement Agent, sent a letter to the Borrower and

25

Case 1:09-md-02106-ASG Document 377-15 Entered on FLSD Docket 12/04/2013 Page 26 of
32
1

others announcing its resignation as Administrative Agent and Disbursement Agent and
respectfully refers the Court to the May 7, 2009 letter for its true and correct contents.
172.

BANA denies paragraph !72's allegations.
COUNT I
Breach of the Disbursement Agreement Against BofA

173.

BANA repeats and incorporates by reference all the answers set forth in

paragraphs I through 172 as if fully set forth herein.
174.

BANA states that paragraph 174 contains legal conclusions as to which no

response is required. To the extent that a response is required, BANA denies paragraph I 74's
allegations, except admits that BANA acted as Bank Agent and Disbursement Agent under the
Disbursement Agreement and respectfully refers the Court to the Disbursement Agreement for
its true and correct contents.
175.

BANA states that paragraph 175 contains legal conclusions as to which no

response is required. To the extent that a response is required, BANA denies paragraph !75's
allegations and respectfully refers the Court to the Disbursement Agreement for its true and
correct contents.
176.

BANA denies paragraph !76's allegations.

177.

BANA denies paragraph I 77's allegations.

178.

BANA denies paragraph !78's allegations.
COUNT II
Breach of the Credit Agreement Against All Defendants

179-188.

BANA states that no response is required to the allegations in paragraphs

179- I 88 because the Court has dismissed Count II by Amended MDL Order Number Eighteen.

26

Case 1:09-md-02106-ASG Document 377-15 Entered on FLSD Docket 12/04/2013 Page 27 of
32

COUNT III
For Breach of the Implied Covenant of Good Faith and Fair Dealing Against BofA
189-193.

BANA states that no response is required to the allegations in paragraphs

189 through 193 because the Court has dismissed Count HI by Amended MDL Order Number
Eighteen.

COUNT IV
Breach of the Implied Covenant of
Good Faith and Fair Dealing Against All Defendants
194-200.

BANA states that no response is required to the allegations in paragraphs

194 through 200 because the Court bas dismissed Count IV by Amended MDL Order Number
Eighteen.

COUNTY
For Declaratory Relief Against BofA
201.

BAN A repeats and incorporates by reference all the answers set forth in

paragraphs I through 172 as if fully set forth herein.
202.

BANA denies paragraph 202's allegations, except admits there is a dispute

between the Plaintiffs and BANA, and that BANA contends that it has acted in good faith and in
compliance with its obligations under the Disbursement Agreement.
203.

BANA states that paragraph 203 contains legal conclusions as to which no

response is required. To the extent a response is required, BANA denies paragraph 203's
allegations.

27

Case 1:09-md-02106-ASG Document 377-15 Entered on FLSD Docket 12/04/2013 Page 28 of
32

COUNT VI
For Declaratory Relief Against All Defendants
204-206.

BANA states that no response is required to the allegations in paragraphs

204 through 206 because the Court bas dismissed Count VI by Amended MDL Order Number
Eighteen.

DEFENSES
First Defense
The A venue Complaint fails to state a claim upon which relief can be granted.

Second Defense
The Avenue Plaintiffs' claims against BANA are barred, in whole or in part, by the
doctrines of laches, waiver, and/or acquiescence.

Third Defense
The Avenue Plaintiffs' claims against BANA are barred or limited, in whole or in part,
by their failure to mitigate, minimize, or avoid their alleged damages.

Fourth Defense
The Avenue Plaintiffs' claims against BANA are barred, in whole or in part, by the
doctrine of equitable estoppel.

Fifth Defense
The Avenue Plaintiffs' claims against BANA are barred by the doctrine of unclean hands.

Sixth Defense
The Avenue Plaintiffs' claims against BANA arc barred or limited, in whole or in part,
because their own acts and/or omissions caused, or in the alternative, contributed to their alleged
damages.

28

Case 1:09-md-02106-ASG Document 377-15 Entered on FLSD Docket 12/04/2013 Page 29 of
32
1

Seventh Defense
The Avenue Plaintiffs' claims may be barred or limited, in whole or in part, by the
doctrine of frustration of purpose.

Eighth Defense
To the extent that the Avenue Plaintiff<> failed to mitigate, minimize or avoid any loss or
damage referred to in the Avenue Complaint, any recovery against BANA must be reduced by
that amount.

Ninth Defense
The Avenue Complaint does not describe the claims made against BANA with sufficient
particularity to enable BANA to determine all defenses (including defenses based upon the terms
of the Credit Agreement and/or Disbursement Agreement and related documents) it has to this
suit. BANA reserves the right to assert other defenses as discovery proceeds.

WHEREFORE, BANA respectfully requests that the Court enter an order:
I.

dismissing the Avenue Plaintiffs' claims with prejudice and entering judgment in

BANA's favor;
2.

awarding BANA its reasonable attorney's fees and costs of suit; and

29

Case 1:09-md-02106-ASG Document 377-15 Entered on FLSD Docket 12/04/2013 Page 30 of
32

3.

awarding such other, different, or further relief as the Court may deem just and

proper.
Date: Miami, Florida
June 18, 2010
Respectfully submitted,
By: _Is! Craig V. Rasile
Craig V. Rasile
Florida Bar Number: 613691
Kevin M. Eckhardt
Florida Bar Number: 412902
HUNTON & WILLIAMS LLP
I Ill Brickell Avenue, Suite 2500
Miami, Florida 33131
Telephone: [phone]
Facsimile: [phone]
E-mail: [e-mail]
[e-mail]

-andBradley J. Butwin (limited appearance)
Jonathan Rosenberg (limited appearance)
Daniel L. Cantor (limited appearance)
William J. Sushon (limited appearance)
O'MELVENY & MYERS LLP
7 Times Square
New York, New York 10036
Telephone: [phone]
Facsimile: [phone]
E-mail: [e-mail]
[e-mail]
[e-mail]
[e-mail]
ATTORNEYS FOR DEFENDANT BANK
OF AMERICA, N.A.

30

Case 1:09-md-02106-ASG Document 377-15 Entered on FLSD Docket 12/04/2013 Page 31 of
32

CERTIFICATE OF SERVICE

The undersigned hereby certifies that a copy of the foregoing document was filed with
the Clerk of the Court using CM/ECF. I also certify that the foregoing document is being served
this day on all counsel of record or prose parties identified on the attached Service list either via
transmission of Notices of Electronic Filing generated by CM/ECF or in some other authorized
manner for those counsel or parties who are not authorized to receive electronically the Notice of
Electronic Filing.

Dated: June 18, 2010
By: Is Craig V. Rasile

Craig V. Rasile

Case 1:09-md-02106-ASG Document 377-15 Entered on FLSD Docket 12/04/2013 Page 32 of
32

SERVICE LIST
09-MD-02106

Sarah A. Harom
Bailey Kennedy
8984 Spanish Ridge Ave
Las Vegas NV 89148

Scott Louis Baena
Jeffrey L Snyder
Bilzin Sumberg Baena Price & Axelrod
200 S Biscayne Blvd. Ste 2500
Miami, FL 33131

Lorenz M. Pruss
David A. Ruthstein
Dimond Kaplan & Rothstein PA
2065 S. Bayshon: Dr .. PH-213
Coconut Grove. Fl, 33133

Alvin S. Goldstein
Furr & Cohen
2255 Glades Road, Ste 337-W
Onc Boca Place
Boca Raton, FL 33431

Mark D. Bloon
John B. Hutton, Ill
Greenberg Traurig
1221 Brickell Ave
Miami, FL 33131

Brett Michael Amron
Bast Amron LLP
150 W. Flagler St.. Penthouse 2X50
Miami, FL 33130

Jean-Marie L. Atamian
Jason I. Kirschncr, Frcdcrick Hyman
Mayer-Brown LLP
1675 Broadway
New York, NY 10019

Bruce Bennett, Kirk Oilman
J. Michael Hennigan, Sidney P. Levinson
Hennigan Bennett & Dorman LP
865 S Figueroa St., Ste 2900
Los Angeles, CA 90017

Peter J. Most. LarenA. Smith
Michael C. Schneidcn:it
Hennigan Bennett & Dornu1n LP
865 S Figuern<J St., Stc 2900
Los Angeles. CA <JOO 17

Jed I. Bergman, David M. Friedman
Marc E. Kasowitz, Seth A. Moskowitz
Kasowitz Benson Torres & Friedman
LLP
1633 Broadway
New York NY 10019

Arthur Linker, Kenneth E. Noble
Anthony L. Paccione
Katten Muchin Rosenman LLP
575 Madison Ave.
New York, NY I 0022

i\aron Ruhenstein. Philip A. Geraci
Andrew A Kress, W. Stewart Wallace
Kaye Scholer LLP
425 Park Avc, 12'" Floor
New York NY [()022

Laury M. Macauley
Lewis and Roca LLP
50 West Liherty Street
Reno NV 8950 I

Michael R. lluttonlocker
Bruce Judson Berman
McDermott Well & Emery LLP
201 S. Biscayne Blvd., Ste 2200
Miami, FL 33131

John D. Byars.
Vincent S. J. Buccola
Hartlet Dick Human Palenchar &
Scott
54 W Huhhard St. Ste 300
Chicago, 1L 60()54

Marc R. Rosen
David Parker
Kleinberg, Kaplan Wolf & Cohen
551 Fifth Ave., 18 111 Floor
New York, Ny 10176

Nicholas J. Santoro
Santoro, Driggs, Walch
Kearner, Johnson & Thompson
1
400 S 4 ' St., Third Floor
Las Vegas, NV R9101

Daniel L Cantor
Bradley .1. Butwin, William J. Sushon
O'Melveny & Myers LLP
Times Square Tower, 7 Times Square
New York NY 10036

Arthur H. Rice
Rice Pugatch Robinson & Schiller
101 NE 3 Avenue, Ste 1800
Fort Lauderdale. FL 33301

Peter J. Roberts
Shaw Gussis Fishman Glantz Wolfson &
Towbin LLC
321 N. Clark Street, Suite 800
Chicago, IL 60654

Robert G. Fracasso, Jr.
Shutts & Bowen
201 S. Biscayne Blvd. Ste 1500
Miami, FL 33131

Thomas C. Rice. Lisa Ruhin
David Woll
Simpson Thacher & Bartlett LLP
425 Lcxington Ave
New York Ny 10017-3954

Harold D. Moorefield Jr
Stearns Weaver Miller
Alhadeff & Sitterson
150 W. Flagler St., Ste 2200
Miami, FL 33130

Aaron R. Maurice
Woods Erickson Whitaker &
Maurice LLP
1349 Gallcria Driv.:. Ste 200
Henderson, NV S<JO 14

Harley E. Riedel, Esq.
Stichter Riedel, Blain & Prosser, P.A.
1 10 East Madison Street, Ste 200
Tampa. FL 33602-4 700

Gregory S. Grossman, Esq.
Astigarraga Davis Mullins & Grossman
1
701 Brickell Avenue, 16 Flr
Miami, FL 33131-2847

Soneet R. Kapila. Chapter 7 Trustee
Kapila & Company
100 S. Federal Highway, Ste 200
Fort Lauderdale. FL 33316

4612-Ul00911 EMF_ US 29905061vl

°

Case 1:09-md-02106-ASG Document 377-16 Entered on FLSD Docket 12/04/2013 Page 1 of
33

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO.: 09-MD-02106-CIV-GOLD/MCALILEY

IN RE: FONTAINBLLEAU LAS VEGAS
CONTRACT LITIGATION
MDL No. 2106
AVENUE CLO FUND, LTD., et al.,
Plaintiffs,
vs.
BANK OF AMERICA, N.A., et al.,
Defendants.

§
§
§
§
§
§
§
§
§
§
§
§
§
§
§

Case No. 09-CV-01047-KJD-PAL

EXPERT REPORT OF SAUL SOLOMON

I have been retained by Hennigan Dorman LLP on behalf of the Plaintiffs in the above
referenced matter to provide an analysis of economic damages due to the alleged wrongful acts
of BofA (as defined below). I am a Managing Director with Berkeley Research Group, LLC A
copy of my current curriculum vita is attached as Exhibit A, and a listing of trial testimony and
depositions during the past five years is attached as Exhibit B. Berkeley Research Group, LLC is
being compensated for time I devote to this engagement at my standard hourly rate of $685 per
hour. This compensation is not contingent upon either the substance of my opinions or the
outcome of this dispute.
SUMMARY OF OPINIONS
Based upon my review and analysis of the documents provided, it is my opinion that the
Plaintiffs incurred economic damages and prejudgment interest of approximately

or

Case 1:09-md-02106-ASG Document 377-16 Entered on FLSD Docket 12/04/2013 Page 2 of
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Expert Report of Saul Solomon
May 23, 2011
$763 million (under different assumptions) due to the alleged wrongful conduct of Bank of
America, N.A. (in all capacities, “BofA”). I understand that the total damages and prejudgment
interest would be shared pro-rata among the Plaintiffs commensurate with their participation
interest in the $1.85 billion June 6, 2007 Credit Agreement (“Credit Agreement”) 1 whether
assumed, assigned or otherwise acquired. The Credit Agreement was entered into among
Fontainebleau Las Vegas, LLC and Fontainebleau Las Vegas II, LLC (“Borrowers”). BofA
served as Administrative Agent, Issuing Lender and Swing Line Lender; Banc of America
Securities LLC, Deutsche Bank Trust Company Americas, Barclays Bank PLC, and Merrill
Lynch, Pierce, Fenner & Smith Incorporated served as Joint Lead Arrangers and Joint Book
Managers; Deutsche Bank Trust Company Americas served as Syndication Agent and Barclay’s
Bank PLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated served as Documentation
Agents for the Credit Agreement. 2
My analysis is based on my review of documents listed in Exhibit C. I reserve the right to
supplement this report should additional information become available.
BACKGROUND
It is my understanding that between March and June 2007, the Plaintiffs or their predecessors
were approached to participate in a $1.85 billion bank financing arrangement for the
development and construction of the Fontainebleau Resort and Casino in Las Vegas, Nevada
(“Project”). 3 The Project consists of a 63-story glass skyscraper with over 3,800 guest rooms,
suites and condominium units; a 100-foot high three-level podium complex housing
casino/gaming areas, restaurants, bars, a spa and salon, live entertainment theater, and rooftop
pools; a 6,000 space parking garage; and a 353,000 square-foot convention center. 4 The Project
was also designed to feature a 286,500 square-foot retail space that includes retail shops,

1

June 6, 2007 Credit Agreement, p. 22, 38
June 6, 2007 Credit Agreement, p.1
3
Second Amended Complaint for Breach of Contract, Breach of the Implied Covenant of Good Faith and Fair
Dealing, and Declaratory Relief, p. 11
4
Second Amended Complaint for Breach of Contract, Breach of the Implied Covenant of Good Faith and Fair
Dealing, and Declaratory Relief, p. 11-12
2

Page 2

Case 1:09-md-02106-ASG Document 377-16 Entered on FLSD Docket 12/04/2013 Page 3 of
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Expert Report of Saul Solomon
May 23, 2011
restaurants and a nightclub. 5 The Project costs were to be paid primarily from cash provided by
the developers of the Project, proceeds from the Credit Agreement, proceeds from a $675 million
2nd Mortgage Note Offering and proceeds from a $315 million credit facility provided to the
Retail Borrowers to finance the construction of the retail space (“Retail Facility”). 6 The Credit
Agreement includes a $700 million commitment from an Initial Term Loan facility (“Initial
Term Loan”), 7 a $350 million commitment from a delay draw term loan facility (“Delay Draw
Term Loan”) 8 and an $800 million commitment from a revolving loan facility (“Revolving
Facility”) 9 with the proceeds of the Initial Term Loan facility fully funded but not advanced to
the Borrowers when the Credit Agreement was executed. 10 It is my understanding that the
obligations under the Initial Term Loan and the Revolving Facility were equally and ratably
collateralized by mortgages on the real property comprising the Project and security interests on
all personal property of the Borrower. 11 It is also my understanding that the personal property
security interests extend to deposit accounts including the Bank Proceeds Account and the Bank
Funding Account established under the terms of the Master Disbursement Agreement. 12 The
Bank Proceeds Account and the Bank Funding Account were maintained by BofA. 13 BofA
served as the Disbursement Agent under the Master Disbursement Agreement and
Administrative Agent under the Credit Agreement. The Plaintiffs fully funded the Initial Term
Loan sending $700 million to the Bank Proceeds Account on June 6, 2007. 14
Moody's Investors Service (“Moody’s) is a provider of credit ratings, research, and risk analysis
covering debt instruments and securities. 15 On July 17, 2008, Moody’s changed the rating
outlook for Fontainebleau Las Vegas Holdings, LLC and Fontainebleau Las Vegas, LLC
(collectively, “Fontainebleau”) to negative due to slowing demand for condo-hotel units and
5

Second Amended Complaint for Breach of Contract, Breach of the Implied Covenant of Good Faith and Fair
Dealing, and Declaratory Relief, p. 12
6
Second Amended Complaint for Breach of Contract, Breach of the Implied Covenant of Good Faith and Fair
Dealing, and Declaratory Relief, p. 12
7
June 6, 2007 Credit Agreement, p. 22
8
June 6, 2007 Credit Agreement, p. 38
9
June 6, 2007 Credit Agreement, p. 38
10
June 6, 2007 Credit Agreement, p. 41
11
June 6, 2007 Credit Agreement Exhibit F-2, p. 3, 4, 6-7
12
June 6, 2007 Master Disbursement Agreement, p. 5-6
13
June 6, 2007 Master Disbursement Agreement Exhibit A, p. 3
14
June 6, 2007 Credit Agreement, p. 41
15
www.moodys.com

Page 3

Case 1:09-md-02106-ASG Document 377-16 Entered on FLSD Docket 12/04/2013 Page 4 of
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Expert Report of Saul Solomon
May 23, 2011
noted the Las Vegas real estate market was under significant stress. 16 Moody’s maintained
Fontainebleau’s credit rating of B2 based upon the liquidity in restricted cash balances (Initial
Term Loan proceeds and other sources), access to $350 million Delay Draw Term Loan, and
availability under its committed $800 million revolver to complete the project. 17
On September 15, 2008, Lehman Brothers Holdings Inc. (“Lehman”) who served as the Retail
Agent for the Retail Facility, filed for Chapter 11 Bankruptcy protection (“Lehman
Bankruptcy”). 18 The Plaintiffs allege that after Lehman declared bankruptcy, Lehman failed to
fund approximately $14 million under the Retail Facility thus defaulting on their obligations
under that agreement. 19 The Plaintiffs further allege that BofA, as Disbursement Agent and
Administrative Agent, did not adequately address the Lehman defaults and continued to approve
Advance Requests, issued Advance Confirmation Notices and made Advances to the
Borrowers. 20
On November 6, 2008, Moody’s downgraded by two notches the Corporate Family rating and
Probability of Default rating for the Borrowers from B2 to Caa1, the second mortgage notes were
downgraded to Caa3 from Caa1, and first lien bank facilities (Credit Agreement) for
Fontainebleau Las Vegas II, LLC were lowered from B1 to B3 while maintaining the negative
rating outlook. 21 Moody’s states:
“The negative rating outlook recognizes the challenges faced by a subsidiary of FLVH's
[Fontainebleau Las Vegas Holdings, LLC] parent (Fontainebleau Resorts, LLC) to resolve a
potential funding shortfall for the retail component of the project. A Lehman Brothers affiliate,
16

Moody’s Investors Service: Global Credit Research, Moody's changes Fontainebleau's rating outlook to negative:
Approximately $2.4 billion of rated debt affected, July 17, 2008
17
Moody’s Investors Service: Global Credit Research, Moody's changes Fontainebleau's rating outlook to negative:
Approximately $2.4 billion of rated debt affected, July 17, 2008
18
Lehman Brothers Press Release, Lehman Brothers Holdings Inc. announces it intends to file Chapter 11
bankruptcy petition; No other Lehman Brothers’ U.S. subsidiaries or affiliates including its broker-dealer and
investment management subsidiaries, are included in the filing, September 15, 2008
19
Second Amended Complaint for Breach of Contract, Breach of the Implied Covenant of Good Faith and Fair
Dealing, and Declaratory Relief, p. 17
20
Second Amended Complaint for Breach of Contract, Breach of the Implied Covenant of Good Faith and Fair
Dealing, and Declaratory Relief, p. 19-20
21
Moody’s Investors Service: Global Credit Research, Moody's downgrades Fontainebleau's CFR to Caa1; outlook
negative: Approximately $2.5 billion of rated debt affected, November 6, 2008

Page 4

Case 1:09-md-02106-ASG Document 377-16 Entered on FLSD Docket 12/04/2013 Page 5 of
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Expert Report of Saul Solomon
May 23, 2011
currently in bankruptcy, is a large lender under the retail credit facilities. A failure to fund the
retail loan could ultimately result in a default under FLVH's credit facilities.” 22
I understand the Plaintiffs allege multiple defaults occurred starting September 2008 with the
Lehman Bankruptcy and extending through March 2009 all of which BofA had knowledge of
prior to disbursing funds. The alleged defaults include:
Lehman filed for bankruptcy and did not fund its share of advances required of it under
the Retail Facility; 23
The Borrower had not fully disclosed all costs It anticipated would be required to
complete the Project; 24
First National Bank of Nevada had repudiated and failed to fund its lending commitments
under the Credit Agreement; 25 and
Certain Delayed Draw Term Lenders had failed to fund their commitments under the
Credit Agreement. 26
Further, it is my understanding that on April 20, 2009, BofA sent a letter to the Borrowers,
Lenders and other parties indicating that the Required Facility Lenders under the Revolving
Credit Facility had determined to terminate their commitments because of the occurrence and
continuance of events of default. 27 It is also my understanding that on May 6, 2009, BofA
resigned as Disbursement Agent and Administrative Agent for the Credit Agreement. 28

22

Moody’s Investors Service: Global Credit Research, Moody's downgrades Fontainebleau's CFR to Caa1; outlook
negative: Approximately $2.5 billion of rated debt affected, November 6, 2008
23
Avenue Term Lender Plaintiff’s Responses to Second Set of Interrogatories From Defendant Bank of America,
N.A., p. 6
24
Avenue Term Lender Plaintiff’s Responses to Second Set of Interrogatories From Defendant Bank of America,
N.A., p. 9
25
Avenue Term Lender Plaintiff’s Responses to Second Set of Interrogatories From Defendant Bank of America,
N.A., p. 9-10; March 23, 2009 Letter from Henry Yu to Fontainebleau Las Vegas Lenders
26
Avenue Term Lender Plaintiff’s Responses to Second Set of Interrogatories From Defendant Bank of America,
N.A., p. 10
27
Second Amended Complaint for Breach of Contract, Breach of the Implied Covenant of Good Faith and Fair
Dealing, and Declaratory Relief, p. 30-31
28
Second Amended Complaint for Breach of Contract, Breach of the Implied Covenant of Good Faith and Fair
Dealing, and Declaratory Relief, p. 32

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Expert Report of Saul Solomon
May 23, 2011
On June 9, 2009, Fontainebleau filed for Chapter 11 Bankruptcy protection resulting in Moody’s
withdrawing their ratings coverage. 29
DISBUREMENT OF INITIAL TERM LOAN AND DELAY DRAW TERM LOAN
PROCEEDS UNDER CREDIT AGREEMENT AND MASTER DISBURSEMENT
AGREEMENT
The Credit Agreement and Disbursement Agreement created a two-step mechanism for the
Borrowers to obtain proceeds from the Initial Term Loan Facility and the Delay Draw Term
Loan Facility prior to the opening date of the Project.
Under the first step, the Borrowers must submit a notice of borrowing (“Notice of Borrowing”)
specifying the requested loans and borrowing date. 30 The Administrative Agent then notifies
each lender of the borrowing and each lender was contractually required to make its pro-rata
share of the requested loans available by 10:00 AM for funding on the designated borrowing date
as long as the conditions to lend were met. 31
Under the second step, the Borrowers must submit an advance request pursuant to the
Disbursement Agreement (“Advance Request”). 32 The Disbursement Agreement outlined: a) the
conditions precedent that had to be satisfied prior to the approval of the Advance Request by the
Disbursement Agent; 33 b) the sequencing of disbursements from the proceeds of various
facilities and debt instruments; 34 and c) the obligations of agents to make disbursements to
Borrowers from the Bank Proceeds Account. 35

29

Moody’s Investors Service: Global Credit Research, Moody's downgrades Fontainebleau's PDR to D:
Approximately $2.53 billion of rated debt securities affected, June 10, 2009
30
June 6, 2007 Credit Agreement, p. 43
31
June 6, 2007 Credit Agreement, p. 43
32
June 6, 2007 Master Disbursement Agreement, p. 7
33
June 6, 2007 Master Disbursement Agreement, p. 33
34
June 6, 2007 Master Disbursement Agreement, p. 16-19
35
June 6, 2007 Master Disbursement Agreement, p. 12

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Expert Report of Saul Solomon
May 23, 2011
It is my understanding that part of BofA’s duties as the Disbursement Agent and Administrative
Agent was to ensure the conditions precedent, as outlined in the Disbursement Agreement, were
satisfied before the disbursement of funds. 36 These conditions include:
1. Each representation and warranty of each Project under Article 4 was true and correct, 37
including that there were no defaults or events of default under the Financing
Agreements, there was no Defaults or Events of Default under the Disbursement
Agreement; 38 the In Balance Test was satisfied, 39 and each Remaining Cost Report was
true and correct with respect to Project Costs previously incurred and set forth the amount
of all reasonably anticipated Project Costs required to achieve Final Completion; 40
2. there was no Default or Event of Default under any of the financing arrangements; 41
3. an Advance Request, together with all the required attachments, exhibits and certificates,
was delivered to the Disbursement Agent, each Funding Agent and the Construction
Consultant; 42
4. the In Balance Test was satisfied; 43
5. there had been no development or event since the Closing Date that could reasonably
expect to have a Material Adverse Effect on the Project; 44
6. the Bank Agent was not aware of any information or other matter affecting any Loan
Party, Turnberry Residential, the Project or the transactions contemplated that was
inconsistent in a material and adverse manner with the information or other matter
disclosed to it; 45
7. the Retail Agent (Lehman) and Retail Lenders under the Retail Facility had made all
Advances required; 46 and
36

Second Amended Complaint for Breach of Contract, Breach of the Implied Covenant of Good Faith and Fair
Dealing, and Declaratory Relief, p. 15
37
June 6, 2007 Master Disbursement Agreement, p. 33
38
June 6, 2007 Master Disbursement Agreement, p. 54
39
June 6, 2007 Master Disbursement Agreement, p. 56
40
June 6, 2007 Master Disbursement Agreement, p. 58-59
41
June 6, 2007 Master Disbursement Agreement, p. 33
42
June 6, 2007 Master Disbursement Agreement, p. 34
43
June 6, 2007 Master Disbursement Agreement, p. 34
44
June 6, 2007 Master Disbursement Agreement, p. 34-35
45
June 6, 2007 Master Disbursement Agreement, p. 38
46
June 6, 2007 Master Disbursement Agreement, p. 40

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Expert Report of Saul Solomon
May 23, 2011
8. the Bank Agent received documents and evidence as are customary as the Bank Agent
reasonably requested in order to evidence the satisfaction of the other conditions. 47
If any of the conditions were not satisfied, the Disbursement Agent was required to issue notice
to the Borrowers, each Funding Agent and the Administrative Agent (“Stop Funding Notice”). 48
If a Stop Funding Notice was issued, no disbursement from the Bank Proceeds Account could be
made until all conditions precedent were satisfied, including the absence of any Default or Event
of Default. 49
It is my understanding that after the Lehman Bankruptcy in September 2008, several of the
conditions precedent had not been satisfied. At this time, the Plaintiffs alleged that BofA should
have issued a Stop Funding Notice and not disbursed funds from the Bank Proceeds Account.50
Further, I have noted that Moody’s Investor Service issued two (2) press releases first
downgrading the outlook for Project from stable to negative on July 17, 2008 then later
downgrading the credit ratings on November 6, 2008. Additionally, in the November 6, 2008
press release, Moody’s recognized the liquidity challenges caused by the Lehman Bankruptcy.
I have been asked to determine damages to the Plaintiffs related to the improper disbursement to
the Borrowers from the Bank Proceeds Account and the Revolving Facility.
ANALYSIS OF ECONOMIC DAMAGES
The Plaintiffs allege BofA, as Disbursement Agent and Administrative Agent, was responsible
for the proper administration of the construction loans and the disbursement of proceeds from the
Bank Proceeds Account. 51 The Plaintiffs allege that multiple defaults occurred, and the
conditions precedent could no longer be met for BofA to approve Advance Requests, issue

47

June 6, 2007 Master Disbursement Agreement, p. 40
June 6, 2007 Master Disbursement Agreement, p. 10
49
June 6, 2007 Master Disbursement Agreement, p. 10-11
50
Second Amended Complaint for Breach of Contract, Breach of the Implied Covenant of Good Faith and Fair
Dealing, and Declaratory Relief, p. 16, 19-20
51
Second Amended Complaint for Breach of Contract, Breach of the Implied Covenant of Good Faith and Fair
Dealing, and Declaratory Relief, p. 15
48

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Expert Report of Saul Solomon
May 23, 2011
Advance Confirmation Notices, make Advances and disburse funds to the Borrowers. 52 From
September 2008 through March 2009, BofA is alleged to have improperly disbursed
approximately $788 million of which $720 million came from the Bank Proceeds Account and
$68 million from the Revolving Facility (see Schedule 2 and 3). Had BofA not made these
allegedly improper disbursements, these funds would have been available to disburse to the
secured parties in the event of default, subject to the security interest of the Credit Agreement
Lenders.
I have also calculated prejudgment interest related to damages for the Plaintiffs as of the date of
disbursement until the date of trial at a rate of 9% simple interest (under different scenarios).
I have calculated damages and prejudgment interest incurred by the Initial Term Loan Lenders
and Delay Draw Lenders under two scenarios.
SCENARIO I
Under Scenario I, assuming damages began in September 2008 with the Lehman Bankruptcy and
Lehman’s failure to fund causing defaults, I have assumed the Delay Draw Lenders would not
have been requested to fund the Delay Draw Term Loan. Therefore, the Delay Draw Lenders
would be due 100% of their funded amounts net of any principal repayments already received.
The Delay Draw Lenders are due approximately $284 million, which is the outstanding balance
of the Delay Draw Term Loans net of any principal repayments already received outside this
litigation (see Schedule 2), and approximately

in prejudgment interest, which is net

of any interest or fees received outside this litigation (see Schedule 2). The related prejudgment
interest is calculated as of the date of funding of the Delay Draw Term Loan. After the
allocation to the Delay Draw Term Lenders, the remaining improper disbursement amounts and
prejudgment interest of approximately $503 million and

, respectively, are to be

shared pro-rata by the Initial Term Lenders (see Schedule 2).

52

Second Amended Complaint for Breach of Contract, Breach of the Implied Covenant of Good Faith and Fair
Dealing, and Declaratory Relief, p. 33

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Expert Report of Saul Solomon
May 23, 2011
The Plaintiffs hold approximately $487 million or 82.36% of the outstanding Initial Term Loans
and approximately $210 million or 73.73% of the outstanding Delay Draw Term Loans (see
Schedule 4). Accordingly, the Plaintiffs holding Initial Term Loans are due their pro-rata share
of damages and prejudgment interest which total approximately $415 million and

,

respectively (see Schedule 2). The Plaintiffs holding Delay Draw Term Loans are due their prorata share of damages and prejudgment interest which total approximately $210 million and
respectively (see Schedule 2).
SCENARIO II
Under Scenario II, the Initial Term Loan Lenders and Delay Draw Lenders share pro-rata in the
improper disbursements and prejudgment interest which totals approximately $960 million (see
Schedule 3). The Plaintiffs hold approximately $697 million or 79.56% of the approximately
$876 million outstanding Initial Term Loans and Delay Draw Term Loans, which is net of any
principal repayments already received outside this litigation (see Schedule 4). As such, the
Plaintiffs are due their pro-rata share of damages and prejudgment interest which total
approximately $627 million and $137 million, respectively (see Schedule 3).
Should additional information become available, I reserve the right to supplement this report.

*

*

*

Page 10

*

*

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EXHIBIT A

Curriculum Vita
SAUL SOLOMON
BERKELEY RESEARCH GROUP, LLC
700 Louisiana Street, Suite 1750
Houston, Texas 77002
Direct: [phone]

Mobile: [phone]
[e-mail]

Fax: [phone]

EDUCATION
B.B.A. in Accounting with Highest Honors

University of Texas at Austin, 1977

PRESENT EMPLOYMENT
Director, Berkeley Research Group, LLC

PREVIOUS POSITIONS
Managing Director, UHY Advisors FLVS, Inc., 1981-2010
National Practice Leader of the Forensic, Litigation and Valuation Services Group and a member
of its Executive Committee. Also a member of the Management Committee for UHY Advisors,
Inc. and a Partner with UHY LLP, a licensed CPA firm
Senior Auditor, Ernst & Young, Houston Texas, 1977-1981
Planned, supervised, and conducted audits on a diverse range of companies and industries

CERTIFICATIONS AND DESIGNATIONS
Certified Public Accountant (CPA)
Certified Fraud Examiner (CFE)
Certified in Financial Forensics (CFF)
Accredited in Business Valuation (ABV)
Certified Valuation Analyst (CVA)

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EXHIBIT A
PROFESSIONAL AFFILIATIONS
American Institute of Certified Public Accountants
Texas Society of Certified Public Accountants
Houston Chapter of TSCPA
National Association of Certified Valuation Analysts
Association of Certified Fraud Examiners

BUSINESS AND NOT-FOR-PROFIT AFFILIATIONS
Member, Finance Committee and Investment Committee, Children’s Museum of Houston, 2009 –
Present

SELECTED SPEAKING ENGAGEMENTS AND PROFESSIONAL PUBLICATIONS
“Calculating Lost Profits for Emerging Companies: A Case Study,” presented for the AICPA,
September 2004
“Case Studies, Calculating Damages for Emerging Businesses,” presented for the NLSSA,
May 2004
“Case Studies, Damage Calculations,” presented for the NLSSA (November 2002)
“Claims Against Fiduciaries – The CPA’s Role, American Institute of CPAs,” presented at
the National Advanced Litigation Services Conference, October 1999
Business Valuations Seminar, NLSSA, January 1999

PROFESSIONAL EXPERIENCE
In connection with his previous employment in public accounting over a 33 year time, Mr.
Solomon has been responsible for the financial reporting of privately owned, public, and
nonprofit organizations in a variety of industries including energy, manufacturing and
distribution, retail, construction and real estate, healthcare, financial, professional services, and
technology. He served as prior local practice leader for audit and financial reporting
engagements, developed an audit and financial reporting department and was primarily
responsible for technical compliance on financial reporting engagements, including compliance
with the peer review process.
Mr. Solomon has also provided a variety of financial consulting to corporate clients, including:
Financial Analysis, Budgeting, and Forecasting
Tax Planning
Assistance with Financing
Merger and Acquisition Services, Including Financial Due Diligence
Establishing Inventory Control and Desired Levels
Internal Accounting Controls and Development of Policies and Procedures
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33
EXHIBIT A
Analysis of Budgetary Controls and Compliance
Mr. Solomon specializes in forensic financial investigations, financial and economic analysis in
disputes, and valuation of businesses. His experience includes the following areas:
Damages Calculations – Lost Profits, Fraud, Punitive
Forensic and Investigative Accounting, Fraud Investigations
Valuation of Business Entities
Intellectual Property, Trade Secrets Matters
Evaluation of Accounting and Auditing Issues, Financial Reporting, Application of
Generally Accepted Accounting Principles, and Auditing Standards
Bankruptcy Matters – Forensic and Fraud Investigations, Solvency Analysis
Securities Fraud Including State and Federal Class Action
Class Certifications Financial Analysis
Purchase Price and Earnout Disputes
ERISA Class Action Damages
Accounting and Financial Reporting Fraud
Oil and Gas Royalty Disputes
Class Action Claims Administration
Alter Ego and Piercing the Corporate Veil Investigations
Personal Injury, Wrongful Death, Wrongful Termination, Discrimination and Damage
Calculations
Family Law and Estate Matters

TESTIMONY EXPERIENCE
Mr. Solomon has provided testimony in State District Courts, Family Law Courts, and Federal
Courts and has testified in excess of 175 times in over 125 cases, involving a variety of financial,
accounting, forensic, or economic issues. Mr. Solomon has also served as a third party neutral
arbitrator and has actively participated in mediations and arbitration proceedings, both as an
expert and consultant.

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EXHIBIT C
33
DOCUMENTS REVIEWED

1 Second Amended Compliant for Breach of Contract, Breach of the Implied Covenant of Good Faith
and Fair Dealing, and Declaratory Relief
2 Avenue Term Lender Plaintiffs' Responses to Second Set of Interrogatories From Defendant Bank of
America, N.A.
3 Master Disbursement Agreement
4 Loan Agreement Dated June 6, 2007
5 Credit Agreement Dated as of June 6, 2007
6 Collateral Account Notification and Acknowledgment (Bank Proceeds Account)
7 Various documents related to the acquisition of interests in the Initial Term Loans and Delayed Draw
Term Loans by the following entities:
Battalion CLO 2007-I Ltd
Brigade Leveraged Capital Structures Fund, Ltd
Canpartners Investments IV, LLC
Cantor Fitzgerald Securities
Canyon Special Opportunities Master (Cayman) Ltd.
Caspian Alpha Long Credit Fund, L.P.
Caspian Capital Partners, L.P.
Caspian Corporate Loan Fund, LLC
Caspian Select Credit Master Fund, Ltd.
Caspian Solitude Master Fund, L.P.
Genesis CLO 2007-1 Ltd.
ING International (II) - Senior Bank Loans
ING Investment Management CLO I, Ltd
ING Investment Management CLO II, Ltd
ING Investment Management CLO III, Ltd
ING Investment Management CLO IV, Ltd
ING Investment Management CLO V, Ltd
ING Investment Management CLO VI, B.V.
ING Prime Rate Trust
ING Senior Income Fund
Mariner LDC
Monarch Master Funding Ltd
Normandy Hill Master Fund L.P.
Olympic CLO I Ltd.
Phoenix CLO I, Ltd. (fka Avenue CLO IV, Ltd.)
Phoenix CLO II, Ltd. (fka Avenue CLO V, Ltd.)
Phoenix CLO III, Ltd. (fka Avenue CLO VI, Ltd.)
San Gabriel CLO I Ltd.
Scoggin International Fund, LTD.
Scoggin Capital Management II LLC
Scoggin Worldwide Fund, Ltd.
Shasta CLO I Ltd.
Sierra CLO II Ltd.
Sola, Ltd.
Solus Core Opportunities Master Fund Ltd.
SPCP Group, LLC
Stone Lion Portfolio L.P.
Veer Cash Flow CLO, Ltd.
Veer Loan Opportunity Fund
Venor Capital Master Fund Ltd.
Venture II CDO 2002

1 of 4

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EXHIBIT C
33
DOCUMENTS REVIEWED

8
9

10

11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34

Venture III
Venture IV CDO Limited
Venture IX CDO Limited
Venture V
Venture VI CDO Limited
Venture VII
Venture VIII CDO Limited
Vista Leveraged Income Fund
Whitney CLO I Ltd.
Plaintiffs' Holdings Summary
Cash Journal Report of Initial Term Loan for the following participants:
Whitney CLO I Ltd.
Shasta CLO I Ltd.
Sierra CLO II Ltd.
Olympic CLO I Ltd.
Cash Journal Report of Delayed Draw Term Loan for the following participants:
Whitney CLO I Ltd.
Shasta CLO I Ltd.
Sierra CLO II Ltd.
Olympic CLO I Ltd.
June 20, 2008 letter to Jeanne Brown
July 21, 2008 letter to Jeanne Brown
February 24, 2009 Notice of Borrowing
February 13, 2009 Notice of Borrowing
March 23, 2009 from Bank of America to Fontainebleau Las Vegas
Estimated Debt Service - October 2009
Fontainebleau Las Vegas Invoice Summary for Advance Dates from July 2007 and September 2008
through March 2009
Construction Consultant Advance Certificate (Exhibit C-2) for Advance Dates from August 2007, July
2008, October 2008, and January 2009 through March 2009
Advance Request (Exhibit C-1) for Advance Dates from July 2007 through May 2008 and August
2008 through March 2009
Requested Cost Report for Advance Dates from July 2007 through March 2009
Shared Cost Allocation Report for Advance Dates from December 2007 through March 2009
Current Available Sources Report for Advance Dates from July 2007 through March 2009
Funding Order Report for Advance Dates from July 2007 through March 2009
Advance Request Transfer Report for Advance Dates from July 2007 through March 2009
Detailed Remaining Cost Report for Advance Dates from July 2007 through March 2009
Remaining Cost Report for Advance Dates from July 2007 through March 2009
Retail Remaining Cost Report for Advance Dates from July 2007 through March 2009
In Balance Report for Advance Dates from July 2007 through March 2009
Lien Release Summary for February 25, 2009 Advance Date
Title Insurance Endorsement Chart for Advance Dates from August 2007 and October 2007 through
March 2009.
Inventory of Unincorporated Materials for Advance Dates from July 2007 through August 2008,
October 2008, February 2009, and March 2009
Architect Advance Certificate for Advance Dates from August 2007 through August 2008 and October
2008 through March 2009
General Contractor's Advance Certificate for Advance Dates from July 2007 through June 2008,
August 2008, and October 2008 through March 2009
List of Additional Contracts for Advance Dates from July 2007 through April 2008 and September
2008 through March 2009

2 of 4

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EXHIBIT C
33
DOCUMENTS REVIEWED

35 List of Scope Changes for Advance Dates from July 2007 through March 2009
36 Advance Confirmation Notice (Exhibit E) for Advance Dates from July 2007 through May 2008 and
August 2008 through March 2009
37 Budget/Schedule Amendment Certificate (Exhibit M-4) for Advance Dates from February 2008 and
June 2008 through March 2009
38 Amendment 1 to Resort Budget (Appendix I of Budget/Schedule Amendment Certificate) for Advance
Dates from February 2008 and June 2008 through March 2009
39 Existing Resort Budget (Appendix II of Budget/Schedule Amendment Certificate) for Advance Dates
from February 2008, June 2008, July 2008, and September 2008 through March 2009
40 Revised Resort Budget (Appendix III of Budget/Schedule Amendment Certificate) for Advance Dates
from February 2008 and June 2008 through March 2009
41 Revised Remaining Cost Report (Appendix VI of Budget/Schedule Amendment Certificate) for
Advance Dates from February 2008, June 2008, July 2008, and September 2008 through March 2009
42 GC Budget Amendment Certificate (Attachment A of Budget/Schedule Amendment Certificate) for
Advance Dates from February 2008 and June 2008 through March 2009
43 Moody’s Investors Service: Global Credit Research, Moody's assigns B2 CFR to Fontainebleau Las
Vegas Holdings, LLC; ratings outlook stable: Approximately $1.8 billion of rated debt affected , April
3, 2007.
44 Moody’s Investors Service: Global Credit Research, Moody's changes Fontainebleau's rating outlook
to negative: Approximately $2.4 billion of rated debt affected , July 17, 2008.
45 Moody’s Investors Service: Global Credit Research, Moody's downgrades Fontainebleau's CFR to
Caa1; outlook negative: Approximately $2.4 billion of rated debt affected, November 6, 2008.
46 Moody’s Investors Service: Global Credit Research, Moody's downgrades Fontainebleau to Caa3:
Approximately $2.4 billion of rated debt affected, March 4, 2009.
47 Moody’s Investors Service: Global Credit Research, Moody's downgrades Fontainebleau's PDR to D:
Approximately $2.53 billion of rated debt securities affected, June 10, 2009.
48 Finnegan, Amanda. "Moody's: Fontainebleau could default on debt." Las Vegas Sun, March 4, 2009.
49 Lehman Brothers Press Release, Lehman Brothers Holdings Inc. announces it intends to file Chapter
11 bankruptcy petition; No other Lehman Brothers’ U.S. subsidiaries or affiliates including its brokerdealer and investment management subsidiaries, are included in the filing, September 15, 2008.
50
51
52
53

March 10, 2009 email from Mr. Brandon Bolio regarding funding of Delayed Draw Term Loan
April 9, 2009 email from Mr. Ronaldo Naval regarding funding of Delayed Draw Term Loan
February 26, 2009 email from Mr. Brandon Bolio regarding funding of Revolving Loan
February 25, 2009 email from Mr. Brandon Bolio regarding funding of Revolving Loan

Bank Statements
54 Columbia Funds account

(Liquidity Account)

55 Columbia Funds account

3 of 4

Beg Date End Date
6/1/07
7/31/07
9/1/07
9/30/07
1/1/08
5/31/08
10/1/08 10/31/08
12/1/08
1/31/09
6/1/07
7/31/07
9/1/07
9/30/07
1/1/08
5/31/08
10/1/08 10/31/08
12/1/08
1/31/09
3/1/09
3/31/09

Case 1:09-md-02106-ASG Document 377-16 Entered on FLSD Docket 12/04/2013 Page 26 of
EXHIBIT C
33
DOCUMENTS REVIEWED

56 Columbia Funds account

57 Columbia Funds account

(Bank Proceeds Account)

58 Columbia Funds account

(Equity Funding Account)

59 Columbia Funds account

60 Columbia Funds account
61 Columbia Funds account

62 Columbia Funds account
63 Columbia Funds account

4 of 4

6/1/07
9/1/07
1/1/08
10/1/08
12/1/08
3/1/09
6/1/07
9/1/07
1/1/08
10/1/08
12/1/08
3/1/09
6/1/07
6/1/08
10/1/08
12/1/08
3/1/09
4/1/08
10/1/08
12/1/08
3/1/09
4/1/08
3/1/09
4/1/08
10/1/08
12/1/08
3/1/09
4/1/08
3/1/09
4/1/08
3/1/09

7/31/07
9/30/07
5/31/08
10/31/08
1/31/09
3/31/09
7/31/07
9/30/07
5/31/08
10/31/08
1/31/09
3/31/09
7/31/07
6/30/08
10/31/08
1/31/09
3/31/09
5/31/08
10/31/08
1/31/09
3/31/09
5/31/08
3/31/09
5/31/08
10/31/08
1/31/09
3/31/09
5/31/08
3/31/09
5/31/08
3/31/09

Case 1:09-md-02106-ASG Document 377-16 Entered on FLSD Docket 12/04/2013 Page 27 of
Schedule 1
33

Avenue CLO Fund, Ltd., et al. vs. Bank of America, N.A., et al
Summary of Damages
Scenario I - Delay Draw Does Not Fund

Damages owed to Initial Term Lenders
Disbursements
Prejudgment Interest
Subtotal

$

414,665,484.69

$

Damages owed to Delay Draw Term Lenders
Disbursements
Prejudgment Interest

$

Subtotal

$

Total

209,750,767.44

$
Scenario II - Delay Draw Funded

Damages owed to all Initial Term and Delay Draw Lenders
Disbursements
Prejudgment Interest
Total

$

626,904,307.67
136,545,795.71

$

763,450,103.38

Case 1:09-md-02106-ASG Document 377-16 Entered on FLSD Docket 12/04/2013 Page 28 of
Schedule 2
33
Avenue CLO Fund, Ltd., et al. vs. Bank of America, N.A., et al
Analysis of Disbursements from Bank Proceeds Account after 9/1/08
Scenario I - Delay Draw Does Not Fund

Prejudgment Interest Rate: 1
Estimated Trial Date:

9.00%
May 31, 2011

Date of Improper
Disbursement to Borrowers2
September 25, 2008
October 28, 2008
November 25, 2008
December 30, 2008
January 28, 2009
February 25, 2009
March 26, 2009

Disbursement
Amount
$
99,332,189.81
101,914,293.51
143,838,250.93
102,800,125.34
88,801,951.38
50,241,078.79
32,925.87

Source
Initial Term Loan
Initial Term Loan
Initial Term Loan
Initial Term Loan
Initial Term Loan
Initial Term Loan
Initial Term Loan

Prejudgment
Interest
$
23,988,723.84
23,771,508.96
32,579,363.84
22,359,027.26
18,715,011.25
10,249,180.07
6,461.70
26,101,911.75
157,771,188.67

159,105,283.74
877,735,376.29

13,855,000.00

81,855,000.00

March 26, 2009

Delay Draw Term Loan
Subtotal

133,003,371.99
719,964,187.62

February 26, 2009

Revolving Loan

68,000,000.00

Total

$

3

787,964,187.62

$

$

171,626,188.67

$

Allocation to Delay Draw Term Lenders 4
Plaintiffs' Participation
Other Delayed Draw Term Lenders
Total Allocation to Delay Draw
Term Lenders

73.73%
26.27%

5

100.00%

209,750,767.44
74,734,201.28
$

284,484,968.72

$

414,665,484.69
88,813,734.21
503,479,218.90

6

$

6

$

Allocation to Initial Term Lenders
Plaintiffs' Participation
Other Initial Term Lenders
Total Allocation to Initial Term
Lenders

82.36%
17.64%
100.00%

7

$

Notes:
1) Assumed New York statutory prejudgment interest rate of 9%.
2) Disbursement date as reflected in the account statement. To the extent that account statements were not provided, disbursement
date is assumed to be the same as the Requested Advance Date.
3) The Revolver Draw Loan was requested on the February 25, 2009 Advance Date and assumed to have been distributed on February 26, 2009.
4) Assumes Delay Draw Term Loan proceeds would not have been funded into Bank Proceeds Account.
$284,484,968.72 is the net amount owed to Delayed Draw Lenders.
5) See Schedule 4.
6) See Schedule 6.
7) See Schedule 4.

$

Total
123,320,913.65
125,685,802.47
176,417,614.77
125,159,152.60
107,516,962.63
60,490,258.86
39,387.57

959,590,376.29

Case 1:09-md-02106-ASG Document 377-16 Entered on FLSD Docket 12/04/2013 Page 29 of
Schedule 3
33
Avenue CLO Fund, Ltd., et al. vs. Bank of America, N.A., et al
Analysis of Disbursements from Bank Proceeds Account after 9/1/08
Scenario II - Delay Draw Funded

Prejudgment Interest Rate: 1
Estimated Trial Date:

Date of Improper
Disbursement to Borrowers2
September 25, 2008
October 28, 2008
November 25, 2008
December 30, 2008
January 28, 2009
February 25, 2009
March 26, 2009
March 26, 2009

February 26, 2009

9.00%
May 31, 2011

Source
Initial Term Loan
Initial Term Loan
Initial Term Loan
Initial Term Loan
Initial Term Loan
Initial Term Loan
Initial Term Loan
Delay Draw Term Loan
Subtotal

Disbursement
Amount
$
99,332,189.81
101,914,293.51
143,838,250.93
102,800,125.34
88,801,951.38
50,241,078.79
32,925.87
133,003,371.99
719,964,187.62

Revolving Loan
Total

Plaintiffs' Participation in the Term Loans 4

68,000,000.00

Prejudgment
Interest
$
23,988,723.84
23,771,508.96
32,579,363.84
22,359,027.26
18,715,011.25
10,249,180.07
6,461.70
26,101,911.75
157,771,188.67
3

13,855,000.00

Total
123,320,913.65
125,685,802.47
176,417,614.77
125,159,152.60
107,516,962.63
60,490,258.86
39,387.57
159,105,283.74
877,735,376.29
81,855,000.00

$

787,964,187.62

$

171,626,188.67

$

959,590,376.29

$

626,904,307.67

$

136,545,795.71

$

763,450,103.38

Notes:
1) Assumed New York statutory prejudgment interest rate of 9%.
2) Disbursement date as reflected in the account statement. To the extent that account statements were not provided, disbursement
date is assumed to be the same as the Requested Advance Date.
3) The Revolver Draw Loan was requested on the February 25, 2009 Advance Date and assumed to have been distributed on February 26, 2009.
4) Plaintiffs' participation in the Term Loans 79.56% (see Schedule 4)

$

2)

1) See Schedule 5.

Notes:

Initial Term Loan
Delayed Draw Loan
Total

Plaintiffs' Percentage Participation
Plaintiffs'
1
Participation
$ 487,147,428.44
209,764,757.85
$ 696,912,186.29

Outstanding
2
Balance
$ 591,503,400.14
284,484,968.72
$ 875,988,368.86

Avenue CLO Fund, Ltd., et al. vs. Bank of America, N.A., et al
Supporting Calculations

Plaintiffs'
Percentage Participation
82.36%
73.73%
79.56%

Schedule 4
Case 1:09-md-02106-ASG Document 377-16 Entered on FLSD Docket 12/04/2013 Page 30 of
33

Case 1:09-md-02106-ASG Document 377-16 Entered on FLSD Docket 12/04/2013 Page 31 of
Schedule 5
33
Avenue CLO Fund, Ltd., et al. vs. Bank of America, N.A., et al
Summary of Plaintiffs' Holdings
Initial Term Loan $591,503,400.14 Outstanding
Balance
Plaintiff
Brigade Leveraged Capital Structures Fund, Ltd
Battalion CLO 2007-I Ltd
Canpartners Investments IV, LLC
Canyon Special Opportunities Master (Cayman) Ltd.
Caspian Alpha Long Credit Fund, L.P.
Caspian Capital Partners, L.P.
Caspian Select Credit Master Fund, Ltd.
Caspian Solitude Master Fund, L.P.
Mariner LDC
Olympic CLO I Ltd.
San Gabriel CLO I Ltd.
Shasta CLO I Ltd.
Sierra CLO II Ltd.
Whitney CLO I Ltd.
Genesis CLO 2007-1 Ltd.
Cantor Fitzgerald Securities
ING Senior Income Fund
ING Prime Rate Trust
ING Investment Management CLO I, Ltd
ING Investment Management CLO II, Ltd
ING Investment Management CLO III, Ltd
ING Investment Management CLO IV, Ltd
ING Investment Management CLO V, Ltd
ING International (II) - Senior Bank Loans Euro
Phoenix CLO I, Ltd. (fka Avenue CLO IV, Ltd.)
Phoenix CLO II, Ltd. (fka Avenue CLO V, Ltd.)
Phoenix CLO III, Ltd. (fka Avenue CLO VI, Ltd.)
Venture II CDO 2002
Venture III
Venture IV CDO Limited
Venture V
Venture VI CDO Limited
Venture VII
Venture VIII CDO Limited
Venture IX CDO Limited
Veer Cash Flow CLO, Ltd.
Vista Leveraged Income Fund
Monarch Master Funding Ltd
Normandy Hill Master Fund L.P.
Scoggin International Fund, LTD.
Scoggin Worldwide Fund, Ltd.
Scoggin Capital Management II LLC
SPCP Group, LLC
Sola, Ltd.
Solus Core Opportunities Master Fund Ltd.
Stone Lion Portfolio L.P.
Venor Capital Master Fund Ltd.
Total

Delayed Draw Term Loan $284,484,968.72 Outstanding
Balance

Amount
Percentage
$ 80,950,857.23 13.685611476%
2,496,202.56 0.422009841%
32,580,148.94 5.508023949%
17,869,409.82 3.021015570%
2,936,320.21 0.496416456%
19,594,673.22 3.312689867%
37,568,179.98 6.351304144%
7,121,250.64 1.203923872%
4,927,441.80 0.833036936%
1,513,441.53 0.255863539%
2,017,922.04 0.341151385%
2,270,162.30 0.383795308%
2,017,922.04
0.341151385%
2,270,162.30 0.383795308%
1,675,642.04 0.283285276%
54,576.39 0.009226724%
1,690,009.72
0.285714287%
1,070,339.49 0.180952381%
845,004.86 0.142857143%
1,126,673.14 0.190476190%
1,126,673.14 0.190476190%
1,126,673.14 0.190476190%
1,690,009.71
0.285714286%
5,070,029.15 0.857142859%
3,098,351.15 0.523809524%
4,506,692.58 0.761904763%
3,380,019.43 0.571428571%
1,690,009.71 0.285714286%
2,253,346.29 0.380952381%
2,535,014.57 0.428571429%
2,253,346.29 0.380952381%
2,253,346.29 0.380952381%
2,816,682.85 0.476190476%
3,098,351.15 0.523809524%
2,253,346.28 0.380952380%
563,336.57 0.095238094%
1,690,009.71 0.285714286%
95,766,371.47 16.190333216%
18,139,281.92 3.066640347%
3,000,000.00 0.507182207%
1,666,666.67 0.281767893%
2,000,000.00 0.338121471%
35,553,471.60
6.010696065%
13,449,088.74 2.273712837%
13,431,940.19
2.270813691%
12,778,574.04 2.160355128%
27,360,455.55 4.625578745%

Amount
Percentage
$ 28,419,770.23 9.989902226%
1,248,101.28 0.438723106%
16,290,074.49 5.726163522%
6,822,192.77 2.398085495%
1,695,873.24 0.596120508%
8,640,243.09 3.037152763%
15,289,064.93 5.374296226%
3,468,792.34 1.219323593%
2,983,622.20 1.048780263%
756,720.77 0.265996749%
1,008,961.03 0.354662335%
1,135,081.15 0.398995123%
1,008,961.03 0.354662335%
1,135,081.15 0.398995123%
844,901.20 0.296993265%
457,409.97 0.160785288%
845,004.86 0.297029703%
535,169.74 0.188118811%
422,502.43 0.148514851%
563,336.57 0.198019803%
0.000000000%
563,336.57 0.198019803%
281,668.28 0.099009900%
2,535,014.56 0.891089106%
1,549,175.56 0.544554451%
2,253,346.28 0.792079206%
1,690,009.72 0.594059406%
845,004.86 0.297029703%
1,126,673.14 0.396039603%
1,267,507.29 0.445544555%
1,126,673.14 0.396039603%
1,126,673.14 0.396039603%
1,408,341.43 0.495049506%
1,549,175.57 0.544554455%
1,126,673.15 0.396039606%
281,668.29 0.099009903%
845,004.86 0.297029703%
47,223,507.03 16.599649269%
11,393,405.51 4.004923551%
1,500,000.00 0.527268631%
833,333.33 0.292927016%
1,000,000.00 0.351512421%
6,629,069.69 2.330200333%
6,550,911.23 2.302726664%
6,568,059.84 2.308754613%
0.000000000%
14,919,660.90 5.244446115%

$ 487,147,428.44 82.357502640%

$ 209,764,757.85 73.734917812%

Case 1:09-md-02106-ASG Document 377-16 Entered on FLSD Docket 12/04/2013 Page 32 of
33

Description
Accrued Unfunded Fee

3

September 30, 2008
December 31, 2008
March 10, 2009
March 31, 2009
March 31, 2009
March 31, 2009
April 28, 2009
May 28, 2009
June 29, 2009
July 6, 2009
November 10, 2009
December 28, 2009

6,865.67
6,865.67
(1,343,283.58)
5,149.25
3,864.24
74.63
3,936.85
4,880.60
5,153.73
220.81
20,314.87
208,202.43

Amount
To
Whitney 3
$
6,791.04

9.00%
May 31, 2011

0.398995123%

Whitney CLO I, Ltd.

Total

0.398995123%
0.398995123%
0.398995123%
0.398995123%
0.398995123%
0.398995123%
0.398995123%
0.398995123%
0.398995123%
0.398995123%
0.398995123%
0.398995123%

Whitney's
Participation
0.398995123%

$

52,181,697.96

(336,666,666.68)

$

$

1,290,554.62
968,493.04
18,704.49
986,691.26
1,223,222.97
1,291,677.44
55,341.53
5,091,508.35

280,555.49
1,720,740.33

Implied Total Amount to All Lenders
Draw/Paydown
Fee/Interest

Total Amount has been prorated to reflect the amount of Unfunded Fee accrued between September 15, 2008 and September 30, 2008.

4) It is assumed that the Unfunded Fee will cease to accrue on September 15, 2008, the date of the Lehman Bankruptcy. The Implied

3) Per Cash Journal Report of Delayed Draw Term Loan for Whitney CLO I LTD.

2) Assumed New York statutory prejudgment interest rate of 9%.

1) See Schedule 5.

Notes:

Accrued Unfunded Fee
Accrued Unfunded Fee
Prime Borrowing
Accrued Unfunded Fee
Prime Interest
Unused fee
LIBOR Interest
LIBOR Interest
LIBOR Interest
Prime Interest
Prime Interest
Prime Paydown

Date
June 30, 2008

3

Prejudgment Interest Rate:
Estimated Trial Date:

2

Plaintiff:
Delayed Draw Term Loan Participation: 1

Avenue CLO Fund, Ltd., et al. vs. Bank of America, N.A., et al
Transactions Related to Delayed Draw Term Loan Since September 15, 2008

4

Schedule 7

Case 1:09-md-02106-ASG Document 377-16 Entered on FLSD Docket 12/04/2013 Page 33 of
33

Case 1:09-md-02106-ASG Document 377-17 Entered on FLSD Docket 12/04/2013 Page 1 of 1

Cantor Opp. Declaration Ex. 32
Filed Under Seal

Case 1:09-md-02106-ASG Document 377-18 Entered on FLSD Docket 12/04/2013 Page 1 of 1

Cantor Opp. Declaration Ex. 33
Filed Under Seal

Case 1:09-md-02106-ASG Document 377-19 Entered on FLSD Docket 12/04/2013 Page 1 of 1

Cantor Opp. Declaration Ex. 34
Filed Under Seal

Case 1:09-md-02106-ASG Document 377-20 Entered on FLSD Docket 12/04/2013 Page 1 of 5
From:
To:

CC:
Sent:
Subject:

Albert Kotite
Doug Pardon
Glenn Schaeffer; Jim Freeman
11/5/2008 6:43:32 PM
RE: Miami Grand Opening

Doug,
Consider it done. my pleasme. Just make sme you RSVP for acconunodations for Friday and Satmday nights. I hope you saw the great a1iicle
that appeared on the front page of the Style Section of last Sunday's Times. In case you didn't. a copy is pasted below.
Look forward to seeing you on the 1-J.tlt
Best regards.
Sonny
Albert E. Kotite I EVP Corporate Development & Acquisitions
Fontainebleau Resorts LLC
[e-mail] I fontainebleau.com
0 305 682 4200 I C 917 499 2626 I F 305 682 4201
19950 West Country Club Drive I Aventura FL 33180
THE STAGE IS YOURS. LIVE YOUR PART.

please take note of my new email address

From: Doug Pardon [mailto:[e-mail]]
Sent: Wed 11/5/2008 3:25 PM
To: Albert Kotite
Subject: Miami Grand Opening
Sonny,
Hope things are well. Was very pleased to see the 02 financials get reported and we also appreciated Glenn being on the call.
Don and I found it very helpful and I think the market appreciated it as well. I thought the call went as well as can be expected
given the current state of the economy/las vegas and the Lehman issue.
On a more positive note I'm coming down for the grand opening so just wanted to say thanks once again for including me. I did
have one additional request (if possible). The invitation to the fashion show is a separate invite according to the firm handling the
reservations so just thought I'd ask if there is anything you could to get me an invite for that as well. There's no doubt it's highly
sought after so I understand if its not doable but figured there was no harm in trying. Anything you could do would be hugely
appreciated.
Thanks again and good luck w/ the grand opening and continued good luck in Las Vegas.
Best,
Doug
Doug Pardon
Brigade Capital Management
1

717 5 h Avenue, Suite 1301
New York, NY 10022
212-745-9784 (P)
212-745-9701 (F)
[e-mail]

CONFIDENTIAL

BGD 000845

Case 1:09-md-02106-ASG Document 377-20 Entered on FLSD Docket 12/04/2013 Page 2 of 5
This email is confidential. If you are not the intended recipient, please notify the sender
immediately at [phone]. You are not authorized to, and must not disclose, copy, distribute, or
retain this message or any part of it. Internet communications are not secure and are subject to
possible data corruption, either accidentally or on purpose, and may contain viruses. Please note that
the contents of this email should not be construed as investment advice unless explicitly stated as
such in the text of the email. Further, it should be noted that this email (and any attachments)
should not be construed as the solicitation of an offer to purchase or an offer to sell an interest in
any private investment fund managed by Brigade Capital, LLC. Any such offer or solicitation will be
made only to qualified investors by means of a Confidential Private Offering Memorandum and only in
those jurisdictions where permitted by law. Finally, please note that (to the extent that performance
information is contained in this email) - past performance is not necessarily indicative of future
returns and all figures are estimated and un-audited unless otherwise noted.

Flamboyance Gets A Face-Lift

Barbara P. Fernandez for The New York Times

FAUX FRENCH Built in 1954. the Fontainebleau hotel in Miami Beach has recently undergone a $500 million restoration.
By RUTH LA FER LA

Published: October 31. 2008
E-MAIL

Miami Beach

PRINT

MARILYN RUBINSON recalls her stays at the Fontainebleau

REPRINTS

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hotel as a series of high-fashion snapshots. There were

SAVE

Times Topics: Morris Lapidus

afternoons at the cabana, "a blue hotel towel wrapped around

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my head like a turban and wearing high-heeled Lucite shoes,"
Enlarge This Image

she said. There were evenings at the Gigi Room, rubbing
shoulders with New York's dashing mayor, John V. Lindsay;
and she remembers sweeping down the dramatic lobby
staircase in a form-fitting, stone-colored gown. "In those days everyone made an
entrance," Mrs. Rubinson, 84, said. "I made lots of entrances."
In that heady era the hotel was the diadem of Miami resorts, a 560-foot-long,
sickle-shaped showplace dominating the Collins Avenue waterfront, where

CONFIDENTIAL

BGD 000846

Case 1:09-md-02106-ASG Documentthe Rubinsons, whoon FLSD Docket 12/04/2013 and well-to-do
Miamians like 377-20 Entered own a chain of clothing stores, Page 3 of 5
snowbirds came in the winter to roost.
"Everyone who was anyone was there," Mrs. Rubinson said. "People wore black
tie and jewelry. Everyone was young."
And everyone lived large at the flamboyant resort, conceived from its outset to
evoke a modern Versailles. "It was the place for entertainment, for glamour- an
icon even among the locals," said Cathy Leff, the director of the Wolfsonian
museum of design here. "Even now if one asks, 'Within the city of Miami Beach,
what is the most important landmark in the popular imagination?' it would be the
Fontainebleau."
Barbara P. Fernandez for The New York
Times. top; Sam Shere/Hulton Archive/Getty
Images

THEN AND NOW The new lobby of
the Fontainebleau. top. echoes
highlights of the original. bottom. like
the bow tie floor pattern and the
striated columns.

Can an icon of the past be restored to its former glory? New owners and
architects of the Fontainebleau have invested $1 billion to buy and restore it in the
conviction that it can. Its original fusion of Modernist rigor and Hollywood cheek,
dreamed up by the maverick architect Morris Lapidus, was derided as Bronx
baroque, until the singular style of Miami Beach was rediscovered by the Ian

"In its day in the '50s and '60s, the Fontainebleau was state of the art in glamour,"
said Jeffrey Beers, the New York architect responsible for an extensive update of
the interior. "We would like to restore that in spirit."
When the refurbished resort is officially unveiled on Nov. 14 with a series of
20th Century Fox/Everett Collection

Frank Sinatra and Jill St. John visited
in the 1967 film "Tony Rome."

parties and a taping for television of a Victoria's Secret fashion show- perfect!
-visitors will be able to judge for themselves if the mission succeeded. Even
recently, as the hotel was still a construction site, it was clear that the old duchess

"How many places like this can you go in America that are not in the desert?" said
Jeffrey Soffer, executive chairman and majority partner of Fontainebleau Resorts,
which is building a Fontainebleau in Las Vegas. Indeed, as he strolled the raised
oceanfront walkway that overlooks the property, it was obvious the resort had
much in common with over-the-top hotels on the Strip.
Fontainebleau Resorts, LLc

A rendering of one of the V.I. P.
cabanas.

Visible from the walkway is a pool complex fanning out across the lawns, and a
new 40,000-square-foot glass-walled spa, its steam rooms and reflecting pools
worthy of the emperor Hadrian. Crescent-shaped rows of cabanas edge the pools

and echo the undulating outlines of the Chateau, the hotel's original building.
Several towers, two of them new, flank the Chateau, for a combined 1,500 guest rooms, twice the number of the
Fontainebleau's largest competitor, Loews in South Beach. There are also shops, 11 restaurants and lounges,
and about 200,000 square feet of meeting and convention space- all sprawling over 22 acres.
The three-year renovation was conceived, in part, to lure back fashionable crowds, which have drifted down to
South Beach.

CONFIDENTIAL

BGD 000847

Case 1:09-md-02106-ASG Document 377-20 the Fontainebleau is reopening at a challenging time
With renovated rooms from $399 and suites from $509,Entered on FLSD Docket 12/04/2013 Page 4 of 5for
tourism. Hotel occupancy rates in Miami-Dade County were down by 6 percent in September from a year earlier,
and room revenues fell by 4 percent, said John Lancet, a senior executive in Miami for HVS, a national hotel
consulting company.
But Mr. Lancet viewed the Fontainebleau development as only mildly risky. "It is my impression that the owners
went through adequate planning so that the risk could be mitigated," he said.

THE hotel has some $30 million in bookings through early next year, said Howard C. Karawan, the chief
operating officer of Fontainebleau Resorts, who was brought in by the new owners to oversee renovations and
operations for the company.
Rumors are widespread that the $500 million face-lift was made in anticipation that the city would legalize casino
gambling. The developers deny this, and gambling has yet to win acceptance with local lawmakers.
At the hub of the resort is the Chateau's 45,000-square-foot lobby, an elaboration on the original free-form
elliptical shape completed by Lapidus in 1954.
Its original curvaceous outlines were accentuated by three enormous chandeliers, striated Greek-style columns,
swirling carpets and a mural of a Piranesi print. The lobby's famous focal point was a "staircase to nowhere,"
which actually led from a discreet cloakroom, where ladies could shed their wraps before descending divalike
down the white marble steps.
The new lobby, like its predecessor, is a chambered nautilus, all undulating walls and recesses. Mr. Beers
stripped away '70s-era carpeting to expose the original marble floor with its signature bow tie design. He covered
the wall at the staircase in gold tile and added a light installation by the artist James Turrell and a lounge with a
blue reflective floor. The staircase to nowhere is back, the jewel in a set piece expected to draw crowds who want
to see and be seen.
And perhaps to retrace the footsteps of previous guests. Those who stayed at the hotel in Miami Beach's golden
age recall a resort that Lapidus, who died in 2001 at 98, had envisioned as a laboratory. It was a place, he wrote,
"where I could enlarge upon all the theories I had been developing about human nature and the emotional hunger
that the average man had for visual excitement."
At bars and supper clubs- the Gigi Room, the Poodle Lounge- "women would sit with their little fur stoles and
white gloves on to eat," recalled Deborah Desilets, a Miami architect and former associate of Lapidus. Sheathed
in slinky gowns, "they would stop at the mezzanine, put on their jewelry and wave at their husbands in the lobby
below," she said.
Michelle Oka Doner, an artist and a frequent guest as a girl- her father, Kenneth Oka, was mayor of Miami
Beach in the late '50s and early '60s- remembers the resort, where she had a prom and her wedding, "as my
stage and my launching pad."
The Fontainebleau was a decadent paradise of "flashy diamonds, illicit sex and overflowing ice cream sodas,"
she said. To get to her family's cabana, "you had to walk through the downstairs shops and past a dance studio
where they had all these gorgeous guys giving cha-cha lessons to all these overdressed matrons from

CONFIDENTIAL

BGD 000848

Case 1:09-md-02106-ASG Document 377-20 Entered on FLSD Docket 12/04/2013 Page 5 of 5
Scarsdale."
"People came for the half-naked girls and the revues," she said. And, of course, for trysts. "I knew something illicit
was going on, but I couldn't put my finger on what it was."
The lobby was a hub for celebrity spotting, the hotel itself a backdrop against which the Rat Pack played poker
and James Bond sprang from the high dive in "Goldfinger."
"The floor was like a mirror, so shiny you could see yourself," said Levi Forte, a bellman at the Fontainebleau
since the '60s. "Danny Thomas couldn't keep his eyes off that floor. He'd sit there and comb his hair and ask,
'Levi, how do I look?'"
Mel Dick, who moved to Miami from Brooklyn in the '60s, visited on his honeymoon. He recalled being drawn to a
sign outside the hotel barbershop that beckoned, "Come and have your shoes shined by the former lightweight
champion of the world." It was Sidney Walker, known as Beau Jack, recalled Mr. Dick, a wine company
executive. "I sat down in the seat and I gave him five dollars. I told him: 'I don't want you to shine my shoes. I just
want to look at you.' "
Mrs. Rubinson was just as enthralled by her frequent star sightings. "How many times driving up to the
Fontainebleau I would see Frank Sinatra walking up the drive with a glass in his hand," she said.
"We had a more glamorous lifestyle in those days," she added wistfully. "But then, of course, things changed."
In succeeding decades the resort lost its sparkle. Like other supersize hotels lining Collins Avenue north of 44th
Street, including the neighboring Eden Roc, another shiny Lapidus edifice, it became as dated as Grandma's
minaudiere.
Fast forward to the current renovation. "We kept asking ourselves, 'What would Morris do?'" Mr. Karawan said.
John Nichols, a Miami architect responsible for the adjacent Fontainebleau residential towers, the second of
which has just been completed, was hired to gut and redesign the hotel. He preserved Lapidus embellishments
like the perforated "Swiss cheese" outer walls. "We had to get down into a very high level of detail," Mr. Nichols
said. "You don't just go in there and take off the eyebrows."
Ms. Oka Doner admires the renovation, to a point. "The property is kind of post-postmodern," she said. "Morris
Lapidus had real passion," but in its current incarnation, "irony has trumped passion."
But Ms. Desilets, the former Lapidus associate, who visited the site last month, was over the moon. "They used
incredible engineering to laser trace what was there and rebuilt it with accuracy," she said. "It's going to be like a
Ravenna mosaic. It's a wow type of extravagance."
The exuberant aesthetic of the original has been resurrected in three ballrooms, lavish restaurants and five
swimming and reflecting pools.
The pool cabanas have wraparound sofas and flat-panel televisions. Perched on the property's topmost tier is a
V.I.P. pool deck with six additional teak cabanas, a bar and a D.J. booth.
Mr. Forte, the bellman, recently viewed the improvements. "The place is so pretty, the first time I saw it I thought I
was in the wrong hotel," he said. "I said to my wife, 'Just take a look at what money can do.'"

CONFIDENTIAL

BGD 000849

Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 1 of
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Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 2 of
46

1
2
3

4

COMP
TAYLORL. RANDOLPH
Bar No. 10194
RANDOLPH LAW FIRM, P.C.
2045 Village Center Circle, Suite 100
Las Vegas, Nevada 89134
Tel. [phone]
[e-mail]

Electronically Filed

03/25/2011 01:05:08 PM

5

CLERK OF THE COURT

Attorney for Plaintiffs

6
7
8
9

DISTRICT COURT

10

CLARK COUNTY, NEVADA

11

12
BRIGADE LEVERAGED CAPITAL
STRUCTURES FUND, LID.; BATTALION CLO
2007-I LTD.; CANPARTNERS INVESTMENTS
14 IV, LLC; CANYON SPECIAL OPPORTUNITIES
MASTER FUND (CAYMAN), LTD.; CASPIAN
15
CORPORATE LOAN FUND, LLC; CASPIAN
CAPITAL PARTNERS, L.P.; CASPIAN SELECT
16 CREDIT MASTER FUND, LTD.; MARINER
LDC; CASPIAN ALPHA LONG ·cREDIT FUND,
17
L.P.; CASPIAN SOLITUDE MASTER FUND,
L.P.; OLYMPIC CLO I LTD.; SHASTA CLOI
18
LTD.; WHITNEY CLO I LTD.; SAN GABRIEL
CLO I LTD.; SIERRA CLO IT LID.; ING PRIME
19 RATE TRUST; lNG SENIOR INCOME FUND;
ING INTERNATIONAL (II)- SENIOR LOANS;
20 · lNG INVESTMENT ·MANAGEMENT CLO I,
LTD.; lNG INVESTMENT MANAGEMENT CLO
21
II, LTD.; lNG INVESTMENT MANAGEMENTCLO ITI, LTD.; ING INVEStMENT
22
MANAGEMENT CLO IV, LTD.; ING
.
INVESTMENT MANAGEMENT CLO V, LTD.;
23
PHOENIX CLO I, LTD.; PHOENIX CLO II, LTD.;
PHOENIX CLO III, LTD.; VENTURE II CDO
24
2002 LIMITED; VENTURE III CDO LIMITED;
VENTIJRE IV CDO LIMITED; VENTURE V
25
CDO LIMITED; VENTURE VI CDOLIMITED;
VENTIJRE VII CDO LIMITED; VENTURE VID
26
CDO LIMITED; VENTURE IX CDO LIMITED;
VISTA LEVERAGED INCOME FUND; VEER
27
CASH FLOW, CLO, LIMITED; MONARCH
MASTER FUNDING LID.; NORMANDY HILL
28
MASTER FUND, L.P.; GENESIS CLO 2007-1
LID.· SCOGGIN CAPITAL MANAGEMENT II

Case No. A - 11 - 6 3 ·7 8 3 5 - B

13

iManage\1708231.5

Dept, No.

XI

COMPLAINT AND JURY DEMAND
. FOR FRAUD~ BREACH OF
FIDUCIARY DUTY, NEGLIGENCE
AND CONSPIRACY

BUSINESS COURT REQUESTED

Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 3 of
46

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3

LLC; SCOGGIN INTERNATIONAL FUND LTD;
SCOGGIN WORLDWIDE FUND J.,TD; SPCP
GROUP, LLC; SOLA LTD; SOLUS CORE
OPPORTUNITIES MASTER FUND LTD.;
STONE LION PORTFOLIO L.P.; VENOR
CAPITAL MASTER FUND, LTD.,

4
Plaintiffs,

5

vs.
6

7

8
9

10
11

12

FONTAINEBLEAU RESORTS, LLC;
TIJRNBERRYLTD.; TURNBERRY
RESIDENTIAL LIMITED PARTNER, L.P.;
TURNBERRY WEST CONSTRUCTION, INC.;
JEFFREY SOFFER; ANDREW KOTITE; RAY
PARELLO; BRUCE WEINER; GLENN
SCHAEFFER; JAMES FREEMAN; DEVEN
KUMAR; HOWARD KARAWAN; WIDTNEY
THIER; UNION LABOR LJEE INSURANCE
COMPANY; CROWN LIMITED; CROWN
SERV1CES (US) LLC; JAMES PACKER; and .
DOES 1 through20,
Defendarits.

13
14

15
16

17

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19

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21

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27
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iManage\1708231.5

Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 4 of
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1

COMPLAINT FOR MISREPRESENTATION, BREACH OF FIDUCIARY DUTY;
NEGLIGENCE AND CONSPIRACY

2
Plaintiffs, by and through the1r undersigned counsel, allege upon personal knowledge as to

3
themselves and their own acts, and upon information and belief as to all other matters, as follows:

4
I. .

INTRODUCTION

5
1.

This action seeks to recover for the misrepresentations, negligence and breaches of

6

("Plaintiffs").

8
2.

Plaintiffs are lenders under a June 6, 2007 Credit Agreement (the "Credit Agreement")

9
for the development and construction of the Fontainebleau Resort and Casino in Las Vegas, Nevada

10
(the "Project"). The Project was to include a sixty-three story glass skyscraper featuring over 3,800
11

guest rooms, suites and condominium units; a 100-foot high, three level podium complex housing

12
casino/gaming areas, restaurants and bars, a spa and salon, a live entertainment theater and rooftop

13
pools; a 353,000 square-foot convention center; a high-end reta4 space including shops and

~f~

restaurants; and a nightclub.

15
3.

The borrowers under the Credit Agreement were Fontainebleau Las Vegas, LLC

16
("FBLV') and Fontainebleau Las Vegas II, LLC (the "Borrowers"). The Borrowers were wholly17
owned. indirect subsidiaries of Defendant Fontainebleau Resorts, LLC (''FBR"), a company founded
18
and substantially. owned by.Defendant Jeffrey Soffer to develop and operate the Fontainebleau hotels

19
in Miami and Las Vegas. Soffer, FBR and the other individual Defendants who were officers,

20
directors and/or managers ofFBR and FBLV (collectively, the "FBR Defendants") directed and
21
controlled the activities of the Borrowers.

22
4.

The general contractor r~sponsible for the construction of the Project was Defendant

23
Tu.rnberry West Construction ("TWC"), an affiliate ofDefendant Turnberry Residential Limited

24
Partners, L.P. {"TRLP"). TWC and TRLP were also founded and substantially owned by Soffer and

25
controlled by Soffer, the FBR Defendants and the officers and the ipdividual Defendants who were

26
officers, directors and/or managers ofTWC and TRLP (the "Tumberry Defendants").
27
5.

Beginning in March 2007, Soffer and the FBR Defendants solicited Plaintiffs to

28
-1iM.anage\1708231.5

Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 5 of
46

1

participate in the Credit Agreement. In various oral arid written communications, Soffer and the FBR

2

Defendants repeatedly misrepresented the status of the Project and its anticipated costs~ In particular,

3

Defendants represented that the Project budget provided to the lenders, including Plaintiffs,

4

accurately represented all of the anticipated costs to complete the Project, that the construction

5 . drawings for the Project were substantially complete, and that Defendants had committed
6

construction contracts in hand for the majority ofthe work to complete the Project. In fact, none of

7

this was true. As Defendants knew but failed to disclose, their own internal budget for the Project

8

was nearli$100 million more than what was reflected in the budgets provided to the Plaintiffs, the

9

construction drawings were not substantially complete (indeed were never complete), and that the

10 . "committed contracts" provided to the Plaintiffs substantially understated the known costs for f:he
11

work. Had Plaintiffs knovm the true facts, they would not have agreed to participate in the Credit

12

Agreement.

13
14
· 15

6.

Defendants' breaches of their duties to Plaintiffs continued after the Credit Agreement

closed. Defendants had a duty to exercise reasonable care to ensure that the Project was managed
competently, that it accurately reported the financial condition and progress of construction and that

16

the Project was completed in accordance with the budgets and cost reports provided to Plaintiffs_

17

Defendants did not do so. Instead, Defendants failed to oversee the Project and failed to ensure that

18

lenders received accurate infomiation about its financial condition.

19

7.

By 2008, Defendants knew or should have known that the actual cost to complete the

20

Project had escalated by h~dreds· of millions of dollars, well in excess of the financing available to

21

complete the Project. As Defendants knew, these cost ·overruns caused numerous conditions

22

precedent to disbursement of funds under the Credit Agreement to fail. Rather than apprise the

23

'lenders of these cost overruns and thereby eliminate future funding, the FBR and Turnberry

· 24

Defendants and others, including defendants James Packer and his oompanies ·crown Limited and

25

Crown Services (US) LLC (the "Packer Defendants"), conspired and agreed to keep this information

26

from the lenders. They accomplished this, in part, through false certifications to the lenders and an

27

elaborate set of double books that hid the true progress, scope and cost of the Project from the

28

lenders.

-2-

Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 6 of
46

1

8.

When Lehman Brothers Holdings, Inc. ("Lehman;'), the biggest lender under the

and Tumberry Defendants further

2

Retail Facility, filed for b~ptcy in September 2008, the FBR

3

conspired with each other and with Union Labor Life Insurance Company ("ULLICO") to have

4

ULLICO front Defendants' payment of Lehman's portion of draw requests under the Retail Facility

5

in order to create the false impression that an existing, institutional lender had or would be willing to

6

step in to take over Lehman's commi1ment. As Defendants knew, such payments by Defendants

7

caused additional conditions precedent to disbursem~t of funds under the Credit Agreement to fail.

8

Again, had the true facts been disclosed to the lenders, financing under the Credit Agreement would

9

have come to a halt.

10

9.

Defendants committed these acts and engaged in these con.Spiracies at a time when the

11

Borrowers were inSolvent and thus when their controlling entities,officers and directors owed

12

:fiduciary duties to the creditors of the Borrowers, including Plaintiffs. In reliance on Defendants'

13

misrepresentations, Plaintiffs funded hundreds of millions of dollars of Loans that they would not

14

have fuilded, and would not have been required to :fimd, had they known the true facts.

15

10.

In ecu·~y 2009, Defendants' scheme began to unraveL fu April2009, certain of the

16

lenders declared a default under the Credit Agreement, and the Borrowers filed for bankruptcy

17

protection shortly thereafter.

18

11.

Plaintiffs bring this action to recover the damages they have incurred as a result of

19

Defendants' misrepresentations and breaches of :fiduciary duties.

20

II.

21

12.

JURISDICTION AND VENUE

Jurisdiction is proper in this court because it is a case that is excluded by law from the

22

original jurisdiction of justices' courts. Nev. Const. Art. 6, § 6. The amount in controversy exceeds

23

$1 0,000; the jurisdictional threshold for District Court. Nev. Rev. Stat. Ann. § 4.370.

24

25

13.

Venue is.properbecause at least one ofthe defendants resi~es in this county. Nev;

Rev. Stat. Ann. § 13.040.

26

Ill.

PARTIES

27

A.

Plaintiffs

28

14.

Unless otherwise noted, the term ''Plaintiff' and "Plaintiffs" shall include Plaintiffs'

-3-

Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 7 of
46

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2

3
4

5
6
7

8
9
10
11

12

13
14
15
16
17
18
19

predecessors in interest.
15.

PlaintiffBrigade Leveraged Capital Structures Fund, Ltd. is an exempted company

with limited liability incorporatt;:d under the laws o:f the Cayman Islands.
16.

Plaintiff Battalion CLO 2007-I Ltd. is an exempted company with limited liability

incorporated under the laws of the Cayman Islands.
17.

.Plaintiff Canpartners Investments IV, LLG is a limited liability company fonned

under the laws of California.
18.

Plaintiff Canyon Special Opportunities Master Fund (Cayman), Ltd. is an exempted

company with limited liability incorporated under the laws of the Cayman Islands.
19.

Plaintiff Caspian Corporate Loan Fund, LLC is a limited liability company formed

under the laws of Delaware.
20.

Plaintiff Caspian Capital Partners, L.P. is a limited partnership formed under the laws

of Delaware.
21.

Plaintiff Caspian Select Credit Master Fund, Ltd. is a company with limited liability

formed· under the laws of the Cayman Islands.
22.

Plaintiff Mariner LDC is company with limited duration formed under the laws of the

Cayman Islands.
23.

Plaintiff Caspian Alpha Long Credit Fund, L.P. is a limited partnership formed under

the laws of Delaware.

20

24.

21

laws ofDelaware.

22

25.

23
24

25
26
27
28

Plaintiff Caspian Solitude Master Fund, L.P. is a limited partnership .fonned under the

Plaintiff Olympic CLO I Ltd. is a company with limited liability incorporated under

the laws of the Cayman Islands.
26.

Plaintiff Shasta CLO I Ltd. is a company with limited liability incorporated under th~

Iavrs of the Cayman Islands.
·27.

· Plaintiff Whitney CLO I Ltd. is a company with limited·Hability incorporated under

the laws of the Cayman Islands.
28.

Plaintiff San Gabriel CLO I Ltd. is a company with limited liability incorporated

-4-

Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 8 of
46

1
2

3
4
5

under the laws of the Cayman Islands.
Plaintiff Sierra CLO II Ltd. is a company with limited liability incorporated under the

29.

laws of the Cayman Islands.
30.

PlaintiffiNG Prime Rate Trust is a business trust formed under the laws of

Massachusetts.

6

31.

7

Delaware.

8

32.

PlaintiffiNG Senior Income Fund is a statutory trust formed under the laws of

9

10
11
12

13
14

15
16
17

18
19
20

21
22
23

24
25

26
27

28

PlaintiffiNG International (II)- Senior Loans is a SICAV (Societe d'Investissement a

Capital Variable) fonned under the laws of Luxembourg.
;B.

PlaintiffiNG Investment Management CLO I, Ltd. is a company with limited liability.

incorporated under the laws of the Cayman Islands.
34.

PlaintiffiNG Investment Management CLO II, Ltd. is a company with limited

liability incorporated under the laws of the Cayman Islands.
35.

Plainti.ffiNG Investment Management CLO III, Ltd. is a company with limited

liability incorporated under the laws of the Cayman Islands.
36.

Plaintiff ING Investment Management CLO N, Ltd. is a company with limited

liability incorporated under the .laws of the Cayman Islands.
37.

PlaintiffiNG Investment Management CLO V, Ltd. is a company with limited

liability incorporated under the laws of the c·ayman. Islands.
38.

. Plaintiff Phoenix CLO I, Ltd. is a company with limited liability incorporated under

the laws of the Cayman Islands.
39.

PlaintiffPhoenix CLO II, Ltd. is a company with limited liability incorporated under

the laws of the Cayman Islands.
40.

Plaintiff Phoenix CLO III, Ltd. is a company with limited liability incorporated under

the laws of the Cayman Islands.
41.

Plaintiff VentUre II CDO 2002 Limited is a company with limited liability

incorporated under the laws of the Cayman Islands.
42.

Plaintiff Venture III CDO Limited is a company with limited liability incorporated

-5-

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2
3

4
5
6

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8
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12
13
14
15
16

17
18
19
20
21
22

23
24

25
26
27
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under the laws of the Cayman Islands.
43.

PlaintiffVenture IV CDO Limited is a company with limited liability incorporated

under the laws of the Cayman Islands.
44.

Plaintiff Venture V CDO Limited is a company with limited liability incorporated

under the laws of the Cayman Islands.
45.

Plaintiff Venture VI CDO Limited is a company with limited liability incorporated

under the laws of the Cayman Islands.
46.

PlaintiffVenture VII CDO Limited is a company with limited liability incorporated

under the laws of the Cayman Islands.
47.

PlajntiffVenture VIII CDO Limited is a company with limited liability incorporated

under the laws of the Cayman Islands. ·
48.

Plaintiff Venture IX CDO Limited is a company with limited liability incorporated

under the laws of the Cayril.an Islands.
49.

Plaintiff Vista Leveraged Income Fund is a company with limited liabxlity

incorporated under the laws of the Cayman Islands.
50.

PlaintiffVeer Cash Flow, CLO, Limited is a company with limited liability

incorporated under the laws of the Cayman Islands.
51.

Plaintiff Monarch Master Funding Ltd. is a· company with limited liability

incorporated under the laws of the Cayman Islands.
52.

PlaintiffNormandy Hill Master Fund, L.P. is an e~empted limited partnership formed

under the laws of the Cayman Islands.
53.

Plaintiff Genesis CLO 2007-1 Ltd. is a company with limited liability incorporated

under the laws of the CaJI?lan Islands.
54.

Plaintiff Scoggin Capital Management II LLC is a limited liability company formed

under the laws of Delaware.
55.

Plaintiff Scoggin International Fund Ltd is a limited liability company formed under

the laws of the Cayman Islands.
56.

Plaintiff Scoggin Worldwide Fund Ltd is a limited liability company formed under the

-6-

Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 10 of
46

I
2 ·

laws of the Cayman Islands.
57.

3

Delaware.

4

58.

Plaintiff SPCP Group, LLC is a limited liability company formed under the laws of

5

6
7
8

Plaintiff Sola Ltd is an exempted company with limited liability incorporated under

the laws of the Cayman Islands.
59.

Plaintiff Solus Core Opportunities Master Fund Ltd. is an exempted company with

limited liability incorporated under the laws of the Cayman Islands.
60.

Stone Lion Portfolio L.P. is a limited p3rtnership formed under the laws of the

9

Cayman Islands.

I0

6I.

11

Plaintiff V enor Capital Master Fund, Ltd. is a company with limited liability

incorporated under the laws of the Cayman Islands.

12

B.

·nerendanu

13

62.

Defendant Fontainebleau Resorts, LLC ("FBR") is a Delaware corporation with its

14
15
16

principal place ofbusiness in Florida.
63.

Defendant Turnberry Residential Limited Partner, L.P. (''TRLP") is a Delaware

limited partnership.

17

64.

Defendant Tumberry West Construction, Inc. ("TWC") is a _Nevada corporation.

· 18

65.

Defendant Turnberry Ltd. is a Florida limited partnership.

19

66.

Defendant Jeffrey Soffer is a citizen of the State ofFlorida. Soffer was, at all relevant

20

times, the Chairman and CEO ofFBR and a. member of its Board of Managers. Soffer is also one of

21

two members of the Board of Directors ofFontainebleau Las Vegas Corp. Soffer owns or controls

22

the Tumberry companies. He was, at all relevant times, President, Treasurer, Secretary and Director

23

ofTWC~ Soffer is the manager of the general partner of both TRLP ari.d Tumberry Ltd.

24

67.

Defendant Albert Kotite is a citizen of the State of Florida. Kotite is the Executive

25

Director ofFBR and a member of its Board of Managers. Kotite is also one of two members of the

26

Board ofDirectors ofFontainebleau Las Vegas Corp.

27
28

68.

Defendant Ray Parella is a citizen of the State of Florida. Parello is a member of the

Board ofManagers ofFBR. Parello currently serves as Director of Finance forTurnberry

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1

Associates.

2

69.

3
4
5

6
7

8
9
10
11
12

13
14
15
16
17

Defendant Bruce Weiner is a citizen of the State of Florida. Weiner is a member of

the Board of Managers ofFBR.

70.

Defendant Glenn Schaeffer is a citizen of the State of Nevada. Schaeffer was a

member of its Board ofManagers ofFBR until May2009.

71.

Defendant James Freeman is a citizen of the State ofNevada. Freeman was the Senior

Vice President and ChiefFinanci!ll Officer or FBR.

72.

Deffm:dant Deven Kumar is a citizen ofNevada. Kumar was the Senior Vice ):>resident

Of Development and Finance at FBR.
73.

Defendant Howard Karawan is a citizen of the State of Nevada.. Karawan was the

Chief Operating Officer ofFBRand was later ChiefRestructuring Office ofFBLV.

74.

Defendant Whitney Tiller is a citizen of the State ofNevada. Thier was the general

counsel ofFBR and later counsel to FBLV.
75.

Defendants FBR, Soffer, Kotite, Parello, Weiner, Schaeffer, Freeman, Kumar,

Karawan and Thier are collectively referred to as the FBR Defendants.
76.

Defendant. Union Labor Life Insurance Company ("ULLICO") is a Maryland

Corporation, headquartered in Washington, DC.

18

77.

Defendant Crown Limited ("Crown") is an Australian company.

19

78.

Defendant Crown Services (US) LLC ("Crown Services") is a limited liability

20
21

company formed under the laws ofNevada. Defendallt Crown controls Crown Services.
79.

Defendant James Packer ("Packer'') is a citizen of Australia. Packer is the Executive

22

Chairman of Crown and owns a controlling interest in Crown. Defendants Crown, Crown Services

23

and Packer are collectively referred to as the "Packer Defendants".

24

80.

Each of the Defendants has directly or indirectly conducted substantial~ continuous,

25

and systematic business in this district, and/or has caused or directed acts to occur in this district out

26

of which Plaintiffs' claims !Uise. The individual defendants personally participated in the unlawful

27

acts and misconduct asserted herein.

28

81.

Plaintiffs are ignorant of the true names and capacities of Doe Defendants 1 through

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Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 12 of
46

1

25, inclusive, and therefore sue such defendants by such :fictitious names. The Plaintiffs will amend

2

this Complaint to allege their true names and capacities when ascertained. Each of the fictitiously

3

named defendants is responsible in some manner for the occurrences herein all~ged, and the

4

Plaintiffs' harm and damages as herein alleged was proximately caused by such defendants. Each of

5

the Doe Defendants is a joint venturer, co-conspirator, and/or participant in the violations and

6

unlawful and tortious actions alleged herein.

7

82.

Each of the Defendants acted as the agent, co-conspirator and co-venture partner

8

and/or alter ego of each other Defendant in the furtherance of the joint venture, and each shared in the

9

control and management of the conspiracy alleged herein and in furtherance of the joint venture in a

10

common course of conduct alleged herein .. Eac~ .Qefendant was a direct, necessary and substantial

11

participant in the common enterprise and common course of conduct complained of herein and at all

12

relevant times knew (or was deliberately reckless in not knowing) of its overall contribution to, and

13

furtherance of, their illicit common enterprise, and acted within the scope of its agency as a co-

14

venturer. Each Defendant mutually agreed with every other Defendant on an objective, purpose and

15

course of action to accomplish the wrongful conduct set forth herein, with the intent of injuring

16

Plaintiffs, or with reekless disregard toward Plaintiffs, knowing that such injuries would certainly

17

result.

IV.

18
19

83.

THE FONTAJNEBLEAU PROJECT AND ENUTIES

Defendant Soffer is the son of Donald Soffer, a prominent real estate developer who

20

developed, among other projects, the City of Aventura, Florida. In 2005, Soffer and his partners

21

purchased the iconic Fontainebleau Miami Hotel. Soffer conceived of The Fontainebleau Resort and

22

Casino in Las Vegas, Nevada as the first step in the development of upscale Fontainebleau resorts

23

throughout the world.

24

84.

The Project was designed to be a destination casino-resort on the north end of the Las

25

Vegas Strip, situated on approximately 24.4 acres. It was to include a 63-story glass skyscraper

26

featuring over 3,800 guest rooms, suites and condomiriirim units; a 1 00-foot high three-level podium

27

complex housing casino/gaming areas, restaurants and bars, a spa and salon; a live entertainment

28

theater and rooftop pools; a parking garage with space for more than 6,000 vehicles; and a 353,000

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Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 13 of
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1

square-foot convention center. The Project also was to include approximately 286,500 square-feet of

2

retail space, including retail shops, restaurants, and a nightclub.
85.

3

Soffer and Defendant Schaeffer founded FBR in2005 to develop and operate the

4

Fontainebleau hotels in Miami and Las Vegas. FBR was controlled by a Board of Managers

5

consisting of Defendants Soffer, Schaeffer, Kotite, Parello and Weiner (the ''FBR Board of

6

Managers"). The officers ofFBR included Defendants Soffer, Freeman, Karawan, Kumar and Thier

7

(the "FBR Ds & Os" and, collectively with FBR and the FBR Board of Managers, the "FBR

8

Defendants").

9

86.

FBR c:r:eated several subsidiaries to develop the Project, including the Borrowers,

10

Fontainebleau Las Vegas Capital Corp. and Fontainebleau Las Vegas Holdings, LLC (the "Project

11

Entities"). Each of the Project Entities was wholly owned, directly or indirectly, by FBR and largely

12

controlled by the FBR Board of Managers. The board of directors of Fontainebleau Las Vegas

13

Capital Corp. consisted of Soffer and Kotite.

14

The general contractor for the Project was Defendant Turnberry West Construction ·

87.

15

('"'WC'~.

16

affiliate of Defendants TRLP and Tumberry Ltd., and was created for the purpose of overseeing the

17

construction of the Project

18

TWC (collectively with TRLP and Tumberry Ltd., the "Tumberry Defendants") is an

88.

Through his position on the Board of Managers and in the Turnberry Defendants, as

as his ownership interests in the Fontainebleau and Turnberry entities, Soffer personally

19.

well

20

exercised substantial control over the Project, including decisions regarding Project development,

21

financing and consbuction.

22

V.

23

89.

THE CREDIT AGREEMENT FACILITY

The Project costs were funded primarily from cash provided by the developers of the

24

Project and the proceeds of three facilities: a $1.85 billion bank financing (the "Credit Agreement

25

Facility"), a $675 million 2nd Mortgase Note offering, and a $315 million facility to finance

26

construction of the retail portion of the Project (the "Retail Facility"). Each of these facilities closed

27

in June 2007.

28

90.

The Credit Agreement included the following commitments: a $700 million initial

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46

.

.

1

term loan facility (the "Initial Term Loan Facility"); a $350 million delay draw term facility (the

2

"Delay Draw Facility," and together with the Initial Term Loan Facility, the "Term Loan Facility'');

3

and an $800 million revolving loan facility. Plaintiffs are each lenders under the Term Loan Facility

4

and are assignees (direct or indirect) of the original Term Lender, Bank of America, N.A. The Initial

5

Term Loan Facility was funded upon the closing of the Credit Agreement in June 2007.
The Credit Agreement and other loan documents created a two-step mechanism for

91.

6

7

the Borrowers to obtain access to loan proceeds for the payment of"Project Costs" to construct the

8

Project. The Borrowers first were required to submit to the Administrative Agent a Notice of

9

Borrowing specifying the requested loans and designated borrowing date. A proper Notice of

10

Borrowjng obligated the lenders to transfer the requested funds into a Bank Proceeds Account. In

11

order to access the funds in the Bank Proceeds· Account-to pay for the costs of the Project, the

12

Borrowers were required to submit an Advance Request to the Disbursement Agent pursuant to the

13

terms of a Master Disbursement Agreement, which was executed concurrently with the Credit

14

Agreement.

15

92.

Each Advance Request was required to. contain, among other things, certifications by

16

the Project Entities~ TWC, and others attesting to the accuracy of various information and

17

representations, including: that there was no Default or Event of Default under any of the Financing

18

Agreements; that the Remaining Cost Report set forth all "reasonably anticipated Project Costs

19

required to" complete the Project; that the In Balance Test was satisfied, the critical calculation to

20

determine whether the Borrowers' available resources exceeded the remaining costs to complete the

21

Project, which was the primary secmity for the loans; that there had been no devt?lopment or event

22

since the Closing :Oate that could reasonably be expected to have a Material Adverse Effect on the

23

Project; and that each of the Retail Lenders, including Lehman, had made all advances required of

2.4

them under the Retail Facility.

25
26

VI.

DEFENDANTS' PRE-CLOSING MISREPRESENTATIONS AND OMISSIONS
93.

In March 2007, Soffer and the other FBR Defendants approached Plaintiffs and their

27.

predecessor lenders to secure their participation in the Credit Agreement Facility. In connection with

28

these efforts, Defendants repeatedly represented that (i) the Project budget provided to the lenders

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1

was an accurate, good faith and consentative estimate of the amounts needed to complete the Project,

2

including all Proje.ct costs, and that the budget allowed for a financial cushion sufficient to complete

·3

the Project even if debt and equity sources were insufficient; (ii) the ProjeCt Entities had "committed

4

construction con:tracts" for a large percentage of the work for the Project; and (iii) the construction

5

drawings for the Project, the documents that would define every aspect of the construction, were

6 · substantially complete. Without the representations and assurances provided by the FBR Defendants,
7

Plaintiffs and their predecessor lenders never would have agreed to participate in the Credit

8

Agreement Facility.

9

94.

Defendants knew or should have known that these representations were not true. The

10

FBR Defendants' made these representations both orally and in writing, including in the following

11

written materials provided to prospeetive lenders, including Plaintiffs (collectively, the "Offering

12

Materials"):

13

•

March 2007 Offering Memorandum. FBR and its arranging banks prepared and

14

provided to potential lenders, including Plaintiffs, a Confidential Offering

15

Memorandum outlining the material facts concerning the Project and related

16

fmancings. The Offering Memorandum included a letter from FBR, signed by its

17

Senior Vice President and Chief Financial Officer, Jim Freeman, stating in pertinent

1.8

part that "the infOJ;rnation contained in the Confidential Offering Memorandum does

19

not contain any'untrue statement of material factor omit to state a material fact

20

necessary in order to make the statements contained therein, in light of the

21

circumstances under which they were made as part of the overall transaction, not

72

materially misle~g."

23

•

March 6, 2007 Lender Presentation. On March 6, 2007, FBR and its arranging banks

24

held a Prospective Lenders Meeting at the Intercontinental The Barclay Hotel in New

25

York. The meeting was attended by, among others, Defendants S(_)ffer, Schaeffer,

26

Kotite, Freeman 'and Weiner. During that meeting, Defendants described the Project

27.

and the proposed financing to prospective lenders and provided a written Lender

28

Presentation to meeting participants.

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1

95.

Defendants knew or should have known that·these representations were not true.

2

A.

Defendants Misrepresented that the Budget for the ProJect Was Sufficient to
Complete Construction

96.

In the Off~ng Materials, the FBR Defendants presented a budget for the hard and

3
4

soft costs to construct the Project of $1.829 billion (the "Construction Budgef'). Defe~dant Freeman

5
presented the Construction Budget at the Lender Meeting. FBR and Freeman represented thatthe

6
Construction Budget was sufficient to cover all anticipated construction costs, excluding the retail

7
compOnents. FBR explained in the Offering Memorandum that the Construction Budget was the

8
product of"a detailed budgeting and design process" and represented that it was "conservative~" with
9
substantial allowance for contingencies.
10

97.

At the closing of the Credit Agreement Facility, the FBR Defendants caused FBLV to

11

deliver budgets, including the Cons~ction Budget, to Plaintiffs and the other lenders. FBLV, as

12

.

"

directed by Defendants, rei.Jeatedly attested to the accuracy of these Budgets, including in the

13
Disbursement Agreement executed by FBLV, among others. Thus, Red.ta:l C of the Disbursement
14
Agreement states that the "Construction Budget includes the costs of all elements of the Project,"
15
with certain limited enumerated exceptions. The Disbursement Agreement further provides:

16
Each of the Budgets delivered on the Closing Date:
17

18

(a) are, to the Project Entities' [including FBLV's] knowledge~ as ofthe date oftheir
delivery, based on reasonable assm;nptions as to all legal and factual matters material to the
estimates set forth therein;

19
(b}are, as of the date of their delivery, consistent with the provisions of the Operative
·
Documents in all material respects;

20
21
22

23

(c) set forth (for each Line Item Category, and in total), as of the date of their delivery, the
amount of all reasonably anticipated Project Costs required to achieve Final Completion;
and
(d) fairly represent, as of the date of their delivery, the Project Entities expectations as to
the matters covered fh:ereby.

24

Disbursement Agreement, § 4.17.1.

25
98.

The FBR Defendants also caused FBLV to deliver at closing a Remaining Cost Report

26
based upon the Construction Budget. The Remaining Cost Report, as defined in the Credit

27
Agreement and Disbursement Agreement, set forth, line by line, the anticipated budgets for the

28
construCtion of the Project. The Remaining Costs set forth in this Report provide a key input into the

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1

"In Balance Test."

2

99.

The In Balance Test measures whether the Available Funds for the project exceed the

3

Remaining Costs. In other words, the In Balance Test establishes whether there are sufficient funds,

4

from cash on hand and funds available from the various loan facilities, to complete the Project. The

5

higher the anticipated costs to complete, as reflected in the Remaining Cost Report, the more cash or

6

financing would be needed to ensure that the In Balance Test did not fail. Thus, the Remaining Cost

7

Report was a crucial document that allowed lenders, including the Plaintiffs, to assess the financial

8

viability and progress of the Project. A failure of the In Balance Test meant that the Lenders'

9

primary source of security was .impaired. Accordingly, satisfying the In Balance Test was a

!-.

10
11

12
13

condition precedent to Closing and to any Advances under the Disbursement Agreement.
100.

At Closing and at the direction of the FBR Defendants, FBLV attested to the accuracy

of the Remaining Cost Report. Among other things, FBLV represented that:
•

the budget line items included "for each Line Item Category, an amoUn.t no less than

14

the total anticipated Project Costs from the commencement through the completion of .

15

the work contemplated by such Line Item Category, as determined by the Project

16

Entities";

17

•

Completion as d~terrnined by the Project Entities";

18
19

•

the listing of costs previously incurred "is true and accurate in all material respects";
and

20
21

the other line items included "the associated anticipated exp~nses though Final

•

the Construction Budget portion of the Remaining Cost Report "sets forth, as of the

22

date of their delivery, and based on reasonable assumptions as to all legal and factual

23

matters material to the estimates set forth therein, the amolllit of all reasonably

24

anticipated Project Costs required to achieve Final Completion."

25
26
27
28

Disbursement Agreement, § 4.17 .2.
101. . Further, upon Closing, FBLV, at the direction of the FBR Defendants, submitted the
Project Entity Closing Certificate, which included similar representations, including:
•

aU of the representations FBLV had made in the financing documents, including the

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46

1

2

Credit Agreement and the Disbursement Agreement, were true;
•

«The Project Entities have made available to the Construction Consultant true, correct

3

and complete copies of' documents including the Budgets and Plans and that "[s]uch

4

documents contain all material information (and do not contain any misstatements of

5

material information) pertaining to the Project reasonably necessary for the

6

Construction ConsUltant" to evaluate the project and prepare its own closing

7

certificate;

8

•

"accurately reflect the status of the Project as of that date"; and

9

10

•

11

102.

12

the Remaining Cost Report and other cost reports submitted by FBLV on Closing

"the In Balance Test is satisfied.''
Soffer and the other FBR Defendants were responsible for ensuring that these

representations were accurate and that there had been no change in the economic feasibility of

13 . cortstructing and/or operating the Project, or in the :financial condition, business or property of the
14

Project entities, any of which could reasonably be expected to have a material adverse effect on the

15

Project_ They did not do so.

16

103. . The FBR Defendants knew or should have known, but failed to disclose to the

17

Lenders, that the representations on Closing were.false. Internal cost estimates available to the FBR

18

Defendants, including those set forth in a report FBR conunissioned from Cummins LLC in late

19

2006, showed that the actual costs needed to construct the Project were at least $100 million higher

20

than the budgets provided to the Lenders. The FBR Defendants internally referred to the budget

21 . J?rQvi<led to the Lenders as the "Bank Budget'' and the actual, higher budget that they hid from the
22

Lenders as "Jeff's Budget," "Soffer's Budget," or the ''Real Budget."
I

23

104.

Soffer told the other FBR Defendants and the Turnberry Defendants that he intended

24

to raise additional equity at some point in the future to cover the anticipated $1 00 million shortfalL

25

He said that he wanted to wait to do so, however, because he believed that it would be easier and less

26

dilutive ofhis own equity to raise funds after the financing deal had closed and substantial

27

construction on the Project had been completed.

28

105.

Had the true costs of the Project been reflected in the Remaii:ring Cost Report and the

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Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 19 of
46

1

In Balance Test, the Project would hl;}.Ve been out of balance as of the Closing Date, and the Credit

2

Facility would not have closed.

B.

Defendants Misrepresented that the Construction Drawings for the Project Were
_Substantially Complete.

106.

3

In the Offering Materials and at the Lender Meeting, Soffer and the oilier FBR

4
5
Defendants also made specific representations about the status of the construction drawings for the

6
Project. Construction drawings are architectural drawings that are used by the contractors to define

7
the work to be done. The drawings typically include renderings of all aspects oftheproject,
8
including mechanical, structural, electrical, and interior design elements. Construction drawings are

9
used, among other things, to obtain permitS and other approvals. Because theY define what will

10

actu~Ily be built, .completed construction drawings is a critical step

11

in the project budgeting and

development process. Construction drawfugs allow contractors to understand exactly what they will
12
be required. to do and so eruiure that the construction bids and contracts finalized on the basis of the

13
drawings are accurate and complete, which in tum reduces the likelihood of additional, unanticipated

14
costs. As Defendants knew, representing that the construction drawings were substantially complete

15
would give prospective lenders like Plaintiffs :further comfort that the Project was well planned and

16
would stay on budget and on schedule.
17
107.

The Offering Memorandum represented the construction drawings for the project as

18
substantially complete:
19
Construction Drawings ("COs'') at the Fontainebleau Las Vegas are
substantially complete with 80% CDs for tower and garage/convention
issued onFebruary 1, 2007. 100% CDs for the tower are expected
March 12,2007. 100% COs for garage/convention are expected April
4, 2007 and 80% CDs for the podium are expected in April/May 2007.

20
21
22
108.

At the March 6; 2007 lender presentation, Soffer and his team again represented that

23
the co:o.struction drawings were "substantially complete," with 80-100% of the drawings to be

24
completed before closing. A ''Transaction Update" issued .April 18, 2007 confirmed that

25
"Construction Drawings ("CDs")" were "substantially complete."
26
109.

At the time of Closing; the FBR Defendants caused FBLV to make further

27
representations regarding the progress and accuracy of construction drawings:
28
The Plans and Specifications (a) are, to the Project Entities'
knowledge, based on reasonable assumptions as to all legal and factual
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Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 20 of
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1

matters material thereto) (b) are, and except to the extent permitted
under Sections 6.1 and 6.2 will be from time to time, consistent with
the provisions of the Operative Documents in all material respects, (c)
have been prepared in good faith with due care, and (d) fairly represent
the Project Entities' expectation as to the matters covered thereby. The
Final Plans and Specifications (i) have been prepared in good faith with
due care, and (ii) are accurate in all material respects and fairly
represent the Project Entities' expectation as to the matters covered
thereby.

2
3
4
5
6
7

Disbursement Agreement, § 4.31.
110.

Contrary to the repeated representations by the FBR Defendants, the construction

8

drawings were not ''substantially complete." As the FBR Defendants knew or should have known,

9

delays in the design process prior to Closing caused significant delays in the preparation of

10

completed construction drawings. At the tiine the Offering Memorandum was issued, less than 50%

11

of the drawings for the podium portion of the Project were complete. Indeed, final construction

12

drawings were not complete even as late as 2009.

13

111.

Instead of acknowledging the delay in development of :final construction drawings, the

14

FBR Defendants directed the architect for the ·Project "to produce false sets of drawings to maintain

15

the permit process" so that Defendants "could commence construction in order to meet the opening

16

date ofNovember 2009." According to the .architects, Bergman, Walls and Associates, Ltd.

17

("BWA"): "Extensive and useless hours were spent by BWA to create these false documents. For

18

more than 12 months BWA was updating and revising two separate and distinct sets of Construction

19

Documents thus doubling our man-hours. These sets consisted of false permit documents and

20

Construction Documents for the Contractor." The FBR Defendants knew or should have known, but

21

failed to disclose to the Lenders that the construction drawings presented to the Lenders were nut the

22

actual construction.drawings and that the actual construction drawings were not "substantially

23

complete."

c.

Defendants Misrepresented that they Had Substantial Committed Contracts for
the Construction of the Project.

112.

24

To provide further assurances that the Project would remain on budget and on

25
26
schedule, Soffer and the other FBR Defendants represented that the Project would enter into
27
"committed contracts" with subcontractors for large portions of the anticipated costs of the Project.

28
The existence of committed contracts was important to prospective lenders because committed

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Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 21 of
46

1

contracts reduce the risk of cost overruns by locking in the cost for those elements.

2

113.

The Offering Materials stated that the Borrowers would "enter into committed

3

contracts totaling no less than 60% of hard costs prior to closing and 95% ofhard costs and 50% of

4

certain FF&E costs prior to the initial advance under the Credit Facilities." In the "Transaction

5

Update" issued Apri118, 2007, Defendants again reiterated.the promise to enter into committed

6

contracts "totaling no less than 60% of hard costs prior to closing and 95% of hard costs and 50% of

7

certain FF&E costs prior to the initial advance."

8

114.

The financing agreements repeated Defendants' representations regarding the
I

· 9

committed contracts that the Borrower and its general contractor, Defendant TWC, had entered into.

1()

Upon closing, Defendants provided a schedule of the contracts that showed committed contracts

11

t9taling more thari 60% of Total Hard Costs.

12

115.

But as the FBR Defendants knew or should have known, but failed to disclose to the

13

Lenders, there were not committed contracts in place that covered 60% of the hard costs of the

14

Project, at the Closing Date or at any time prior.

15

116.

For example, two of the largest contracts listed in the schedule of committed contracts

16

included with the Closing documents were with W & W Steel. W & W Steel had two large

17

subcontracts for steel for different parts of the Project, which, taken together, were worth $231

18

million. Prior to the Closing Date, however, FBLV and TWC lmew or should have known that W &

19

W Steel had made crucial miscalculations in the amount of steel need~ for the Project, failing to

20

include in their bid ten thousand tons of structural steel needed for construction. Adding the cost of

21·

that steel, which was a necessary component of the Project, raised the cost of theW & W Steel

22

contracts by tens of millions of dollars. The FBR Defendants and the Tumberry Defendants had a

23

duty to disclose this information to the lenders prior to Closing, but failed to do so.

24

VII.

DEFENDANTS' POST-CLOSING MISREPRESENTATIONS AND OMISSIONS

25

A.

Defendants' Scheme

26

117.

After the Closing Date, the cost to complete the Project increased dramatically as a

27

result of Defendants' unilateral and undisclosed decisions to upgrade and expand various aspects of

28

the Project. By mid-2008, Soffer, Kumar and others at FBR and TWC calculated the costs required

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46

1

to complete the construction of the Project at :more than $300 million in excess of the ConstrUction

2

Budget provided to the Lenders.

3

118.

The FBR Board of Managers was aware of the substantial cost overruns and, in

4

November 2008, required Soffer to provide a "comfort letter'' pursuant to which Soffer agreed (1) not

5

to transfer or dispose of specified assets prior to the completion of the Project, including a yacht

6

valued at $178 million, a Boeing 737 jet valued at $57 million and interests in various companies

7

valued at $116 million, and (2) to invest, at the request of the Board of Managers, ''in FBR or an

8

affiliate thereof, an aggregate amount [up to $75 million], which investment shall be used solely to

9

fund the costs of[the Project].''

10

119.

As a result ofthe cost overruns, the anticipated cost to fund the Project significantly

11

exceeded the funds available to pay these costs. Had these increases been disclosed to the Lenders, it

12

would have revealed, among other things, that the In Balance Test could not be satisfied. This would

13

have prevented Defendants from accessing any funds under the Credit Agreement and brought the

14

Project to an immediate halt. Instead, those funds would have remained in the Bank Proceeds

15

Account and ultimately been returned to the Plaintiffs and other Lenders who maintained a valid,

16

perfectedpriority lien on those funds while they remained on deposit.

17
18

120.

Defendants knew or should have known about the substantial cost overruns.

Defendants kept the true cost of the Project from the Lenders through two sets of books: one for their

19 . own internal use that allowed them to keep track of the actual progress, scope and cost of the- Project;
20

and a second set for use with the Lenders that disclosed only the progress, scope and costs that would

21

cause the Project to appear "in balance." In this way, the Defendants were able to secure continued

22

funding under the Credit Agreement Facility while failing to infonn the Lenders of the mounting cost

23

overruns.

24

121.

Defendants' scheme involved, first and foremost, the manipulation of change orders

25

for the Project. Change orders are directions from a project owner or a general contractor to perform

26

work that is different from and!or in addition to the original scope. In the normal course, change

27

orders are formally approved and reflected in the project budget before the additional or revised work

.28

is begun, and certainly before it is completed.

-19-

Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 23 of
46

1

122.

Defendants were required to inform the lenders of all approved change orders.

2

·Accordingly, if Defendants formally approved the change orders required for the expanded Project,

3

the lenders would discover the enormous cost incn:ases, and Defendants' scheme would be revealed.

4 · Defendants knew or should have knovm, but failed to disclose to Plaintiffs, that there were hundreds
5

of millions of dollars of change orders for work required to complete the Project that were not

6

reflected in the various reports and certifications Defendants made to the lenders. Defendants

7

''pocketed" these change orders, prevailing upon subcontractors to perform the additional work

8

required to complete the Project before a formal change order was approved while, atthe same time~

9

delaying th~ change order approval process so as not to alert the lenders to the additional scope and

10

11

costs.
123.

Defendants failed to inform the LeiJtders of the actual scope and increased cost ofthe

12

Project by keeping a duplicate set of books and entries, one for their own internal use to track the

13

actual scope, progress and cost of the Project and another for presentation to the Lenders to secure

14

advances from the Credit Agreement Facility:

15

•

Change Order Logs. Defendants maintained two sets of change order logs. One set
accurately tracked all change orders that Defendants had directed subcontractors to

16

((xecute, regardless of whether the change orders had been put through the formal

. 17
18

approval process (the "Actual Change Order Log"). The Actual Change Order Log

19

was used by the Defendants to plan and monitor the progress of the construction of the

20

Project. Defendants did not provide the Actual Change Order Log to the Lenders.

21

Instead, they provided the Lenders a partial change order log that included only those

22

change orders that would continue to misrepresent the Project to be in balance and

23

within the Bank Budget (the "Bank Change Order Log'').

24

•

Anticipated Cost ReQorts. To track the costs required to complete the Project,

25

Defendants maintained Anticipated Cost Reports ("ACRs"). As with the change order

26

logs, Defendants kept two sets of ACRs. The Real ACRs reflected all of the costs

27

Defendants knew would be required to complete the Project, including the ''pocketed"

28

change orders. The Bank ACRs consisted of a subset of the Real ACRs.

-20_;

Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 24 of
46

1

•

Budgets. The Defendants' manipulation of the change orders and ACRs carried over

2.

into their calculation of the Project budgets. The Bank Budget, based on the Bank

3

ACRs, reflected the original budget presented to the Lenders, as modified by formally

4

approved and disclosed change orders. The Soffer Budget or Real.Budget, showed all

5

of the items included in the Bank Budget, plus all of the "pockc;eted" change orders and

6

real anticipated costs reflected in the Real ACR.

7

124.

Defendants tracked the status of the change orders, anticipated costs and budgets in

8

detailed Microsoft Excel spreadsheets. The spreadsheets showed, column by column: (i) the Bank

9

Budget, including .changes to the budget that had been formally approved by the lenders; (ii) the

10

additional changes to the Bank Budget contemplated in the Soffer Budget and refl.ecting the

11

"pocketed" change orders; and (iii) the difference between the two budgets.

12

B.

Defendants' Misrepresentations and Omissions

13

125.

Each month, to obtain release of funds, the Credit Agreement and other loan

14

documents required the Borrower to submit to Plaintiffs' agent, BofA, a "Draw Request,'' which

15

included :budgets, cost reports and various certifications. If the materials provid~ in the Draw

16

Request showed that the applicable conditions precedent for the advance of funds were satisfied,

17 . BofA, the Disbursement Agent, could (assuming it did not have contrary or inconsistent information)
18

19

release. the requested funds to the Borrower. (Disbursement Agreement, § 2.4.6).
126.

Beginning no later than mid-2007, in connection with the Draw Requests, Defendants

20

made material misrepresentations regarding the status of the Project and provided false, misleading

21

and incomplete information about change order logs, cost reports and budgets, which they

22

represented to be true and eomplete. These misrepresentations were contained in documents and

23

reports including the following.

24

•

Advance Request. The Advance Request was the Borrowers' formal request for :funds

25

under the financing agreements. Defendant Freeman executed the Advance Requests

26

on behalf of the Borrowers. In the Advance Request, at the Defendants' direction, the

27

Borrowers attested to the accuracy and completeness of the information regarding

28

budgets and costs that were provided with the Draw Request, including the Remaining

-21-

Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 25 of
46

1

Cost Reports, the In Balance Report and the General Contractor's Advance

2

Certificate. Because the information provided by the Borrowers did not disclose the

3

true anticipated costs and budgets for the Project but instead showed the incorrect cost

4

information reflected in the Bank Budget, the Bank Change Order Log and the Bank

5

ACR, Defendants' representations in the Advance Requests were false and omitted

6

material information about the Project.

7

•

Remaining Cost Reports. The Remaining Cost Reports were spreadsheets that were

8

supposed to show the anticipated costs to complete the Project. The Remaining Cost

9

Reports did not reflect Defendants' true estimates of Project costs but instead reflected

10

11

the false information contained in the Bank Change Order Logs and the Bank ACR.

•

In Balance Report. The In Balance Reports were supposed to show the difference

12

between funds available to the Project (from the Credit Agreement Facility and other

13

sources) and the anticipated remaining costs on the Project, as reflected in the

14

Remaining Cost Reports. Defendants submitted In Balance Reports that reflected

15

incorrect budgets and estimates of anticipated costs and failed to show the actual costs

16

Defendants knew would be needed to complete the Project. Accordingly, the In

17

Balance Reports continue4 to show that the Project was in balance when in fact the

18

anticipated costs greatly exceeded the available funds to pay for them.

19

•

General Contractor Advance Certificate. In the General Contractor Advance

20

Certificates, which were submitted with each Draw Request, TWC certified that its

21

budgets were accurate and complete. Defendant Soffer executed the General

22

Contractor Advance Certificates for October and November 2008. The budgets TWC

23

submitted to the Lenders we~e based on Defendants' false change orders and cost

24

reports, and the General Contractor Advance Certificates were therefore false and

25

misleading.

26

•

Budget Amendment Certificate. The Borrowers were required to request approval for

27

amendments to the Project budgets by submitting Budget Amendment Certificates:

28

The Budget Amendment Certificates, which Defendant Freeman signed, certified that

-22-

Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 26 of
46

1

the budgets and cost estimates contained therein were accurate and complete, and

2'

based on good faith asswnptions. The Budget Amendment Certificates did not reflect

3

Defendants' real budgets (i.e., the Soffer Budget) or their actual good faith estimates

4

of project costs but instead reflected the incorrect Bank Budgets, Bank Change Order

5

Logs and Bank ACRs. In fac~ the Soffer Budget was hundreds of millions of dollars

6

higher than the budgets Defendants certified as correct in the Budget Amendment

7

Certificates.

8

•

Lender Updates. Defendants periodically held conference calls with Plaintiffs and

9

other lend~s in connection with the Draw Requests. On those calls, and in the written

10

"Lender Updates" that Defendants distnbuted to lenders, Defendants represented that

11

the Bank Budget was the actual budget and failed to infonn the lenders of the
. existence of the Soffer Budget and the fact that, according to Defendants' true cost

12
13

information, the Project had experienced hundreds of millions of dollars in

14

undisclosed change orders and cost overruns. On these calls, Defendants consistently

15

stated, incorrectly, that the Project was "on time and on budget."

. 16

127.

If Defendants had incorporated accurate and complete information regarding the

17

budgets and costs to complete the Project into the materials submitted in connection with the Draw

i8

Requests, they would have shown that the Project was well over budget and could not be completed

19

without significant additional funds. As a result, the In Balance Test would have failed and

20

Borrowers would not have been able·to access additional funding under the Credit and Disbursement

21

Agreements.

22

Vlll. PACKER CONSPIRES WITH SOFFER TO CONCEAL THE COST OVERRUNS ON

23

THE PROJECT

24

128.

Defendant Crown

is an Australian gaming and entertainment company that is

25

controlled by Defendant Packer, who is reported to be the wealthiest man in Australia. Defendant

26

Crown Services is aN evada-based affiliate of Crown that acted on behalf of Crown in connection

27

wi1;h the Project. Todd Nisbet, the Executive Vice President for Design and Construction of Crown,

28

and a principal in Crown Services, along with Packer, had primary responsibility for the Packer

-23-

Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 27 of
46

1

Defendants' participation in the Project and was involved on a regular basis in the management and

2

oversight ofthe Project.·

3

129.

In April2007, Crown purchased a 19.6% interest

in FBR for $250 million.

4

Thereafter, the Packer Defendants learned that the Project was significantly over budget, that the

5

existing funding for the Project was insufficient to complete the Project and that the FBR and

6

Tumberry Defendants had been misrepresenting the facts concerning the acfual status of the Project

7 · to the Lenders in order to secure continued funding for the Project under the. Loans. The Packer
8

Defendants recognized that if the Lenders learned the truth about the Project, the Lenders would

9

cease funding, and the value of Crown's investment in FBRwould plummet.

10

130.

Accordingly, in late 2007 or early 2008, the Packer Defendants, including Packer,

11

convened a meeting in Las Veg~ with the FBR Defendants, including Soffer, to determme how

12

jointly to proceed. At that meeting and thereafter, and at the direction of Packer, the Packer

13

Defendants agreed and conspired with the FBR Defendants to continue to misrepresent the financial

14

status of the Project to the Lenders and to conceal from the Lenders, including the Plaintiffs, the truth

15

regarding the cost overruns on the Project in order to secure the continued financing for the Project.

16 ·

131.

Thereafter, the Packer Defendants continued their involvement in the management and

17

oversight of the Project, including efforts to reduce the cost of the known overruns that were beillg

18

concealed from the Lenders so as to help delay the Lenders' ultimate discovery of the true facts. As

19

a result, the Packer Defendants actively assisted the FBR Defendants and the Turnberry Defendants

20

in misrepresenting the true financial condition of the Project and in concealing from the lenders the

21

existence and magnitude of the Soffer Budget and the cost overruns.
IX.

22
23

132.

DEFENDANTS' SCHEME UNRAVELS

Without financing sufficient to pay for the true costs of constructing the Project, it was

24

only a matter of time before Defendants' scheme wa~ exposed. Defendants forestalled this result by

25

delaying payment to subcontractors-in some cases until subcontractors threatened to walk off the

26

jo~and by raising

27

should have known, the Proje~t was facing a deficit of more than $300 million dollars.

28

133.

additional equity. By the smnmer of 2008, however, as Defendants knew or

At a meeting at Soffer's home in Aspen, Colorado held in October 2008 and attended

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Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 28 of
46

1

by Kumar and TWC's Chief Executive Officer, Bob Ambridge, Soffer acknowledged that an

2

additional $325 million above and beyond all existing financing and equity contributions would be

3

required to complete the Project. Kumar and Ambridge informed Soffer that they believed the

4

shortfall was much greater, as much as $375 million.

5

134.

Again, in January 2009, Soffer acknowledged. the existence of the shortfall in a

6

telephone call with Ambridge and Kumar. By mid-February 2009, Kumar and Ambridge explained

7

to Soffer in a meeting in Las Vegas that the shortfall had increased by another $100 million.

8
9

135.

To make matters worse, in September 2008 Lehman Brothers Holdings, Inc.

(''Lehman") filed for bankruptcy protection. Lehman was the largest lender under the Retail Facility

10

that provided financing for the construction of the retail portion of the Project. Lehman's

11

bankruptcy, its resulting failure to pay its portion of draws under the Retail Facility as they came due

12

and the prospect that Lehman would fail to fund its remaining commitment under the Retail Facility

13

prevented s·atisfaction of numerous conditions :Precedent to the approval of Advance Requests and the

14

disbursement of funds under the Loans. Had disbursements stopped in September 2008, as they

15

should have, all or nearly all of th~ funds advanced by Plaintiffs would have remained safely in the

16

Bank Proceeds Account and ultimately been recovered.

17

136.

Unfortunately, this did not happen. Bank of America ("BofA") failed to take the steps

18

required of it as Administrative and Disbursement Agent under the Credit Agreement to ensure that

19

funding and disbursements did not continue in the face of Lehman's breaches and defaults. And

20

while BofA's breaches were not thereby excused or mitigated, the FBR Defendants, aided by

21

ULLiCO, actively concealed the full extent of Lehman's impact on the Project fr?m the Lenders in

22

an effort to increase the likelihood that Loans would continue to be :fu.llded and disbursed.

23

137.

In September 2008, the FBR Defen_dants caused FBR (ot an affiliate) to pay Lehman's

24

portion of the September 2008 draw request under the Retail Facility. Defendants knew that payment

25

of Lehman's portion of draw requests by FBR would highlight the funding gap created by Lehman's

26 . banlcruptcy and increase the likelihood that the Lenders would refuse to continue funding.
27

Accordingly, although Freeman advised BofA that FBR had funded Lehman's portion, Thier and the

28

other FBR Defendants took steps to ensure that documents filed publicly during that period,

-25-

Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 29 of
46

1

including documents submitted in connection with the Lehman bankruptcy proceedings, concealed

2

that fact from the other lenders.

3
4

138.

In December, Lehman notified the FBR Defendants that it would ~ake no further

payments under the Retail Facility.

5

139.

In order to further conceal FBR's payment of Lehman's draws, FBR initiated

6

discussions with ULLICO, one of the other lenders under the Retail Facility. ULLICO invested on

7

behalf of union interests and was committed "to serving the needs of unions, union leaders, union

8

employers and union members and their families." Thus, ULLICO's interest in the Project included

9

both its financial commitment as well as the preservation of the jobs of the 3,000 union members

10

working on the Project Those jobs all would be lost if disbursements under the Loans ceased and the

11

Project was shut down. Although ULLICO was unwilling to take over Lehman's funding obligations

12

under the Retail Facility; in whole or in part, it was willing to make it appear that it had or would in

13

the hopes that BofA might thereby overlook Lehman's breaches and defaults and continue disbursing

14

funds for the Project.

15

140.

In order to accomplish this scheme, beginning in December 2008, ULLICO entered

16

into a series of Guaranty Agreements with Soffer, FBR and TR.LP. These agreements provided that

17

ULLICO would pay Lehman's portion of the Retail Facility in the first instance but that Soffer, FBR

18

and TRLP would guaranty such payments and reimburse ULLICO within 30 days. By "fronting" .

19

payments on behalfofFBR and Soffer, ULLICO helped create a false impression that an existing,

20

institutional lender had or would be willing to step in to take over Lehman's commitment.

21

141.

ULLICO fronted Lehman's draw obligations under the Retail Facility in December

22 . 2008, and January, February and March 2009. Defendants did not disclose the "frontirig''
23

arrangement to the Plaintiffs and actively concealed the existence of the Guaranty Agreement from

24

them.

25

142. . Had DI.rLICO, the FBR Defendants and the Tumberry Defendants disclosed the true

26

nature of their scheme to the Lenders, BofA could not have hidden from the conclusion that the

27

conditions precedent to funding under the Loans had not been satisfied~ and the Borrowers would not

28

have been able to access Plaintiffs' funds.

-26-

Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 30 of
46

1

143.

By early2009, Defendants were unable to access additional equity fundirig, and

2

subcontractors were in revolt over delayed payments for cOmpleted work. To access additional

3

·needed funds, Defendants were forced to disclose some of the additional change orders they had

4

''pocketed" and kept from the Lenders. But while Defendants at this point revealed some of the

5

additio!lal costs, they expressly decided not to expose what TWC's ChiefExecutive Officer, Bob

6

Ambridge, characterized to Kumar as the "big lie," namely that the Project WaS massively over

7

budget. Instead, Defendants informed the Lenders of only $60 million in change orders and

8
9
10

· additional costs and continued to conceal the remaining undisclosed change orders and additional
costs and to submit Draw Requests that they new to be materially false.
144.

As 2009 wore on, however, Defendants could no longer conceal that the budgets were

11

inaccurate and that the costs to complete the Project were not in line with the incorrect estimates they

12

had provided to the Lenders. On April 13,2009, the Borrowers advised the Lenders that they could

13

not meet the In Balance Test, based upon an increase of $157 million in the figure they used to

14

calculate anticipated costs on the Project. OnApril20, 2009, BofA, acting on behalf of certain of the .

15

Lenders, declared a default under the financing agreements. The Borrowers and certain affiliates

16

filed for bankruptcy on June 10, 2009, which i~self constitutes a default under the financing

17

agreements.

18.

COUNTI

19

Fraud/Aiding and Abetting Against the FBR Defendants and the Tumberry Defendants

20

145.

Plaintiffs reallege and incorporate the preceding paragraphs as though fully set out.

21

146.

To induce Plaintiffs to provide funding for the Project and to enter into the Credit

22

Agreement and Disbursement Agreement, the FBR Defendants misrepresented facts and failed to

23

disclose material facts, as more fully described above. Among other things, the FBR Defendants

24

represented or perriritted to be represented:

25

•

would incur to completion and was a "conservative" estimate of such costs;

26
27
28

that the Bank Budget was an accurate and good faith estimate of the costs the Project

•

that the Bank Budget would support payment of all anticipated construction costs for
the Project;

-27-

Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 31 of
46

1

•

2

complete"; and

3

•

4
5

that the construction drawings for the Project were accurate and "substantially

that FBLV and TWC had entered into committed contracts for 60% of hard costs for
the Project.

147.

These representations were false. The FBR Defendants omitted the true facts about

6

the Project, including those regarding the existence and nature of the Real Budget, the additional

7

anticipated costs they expected to incur in bringing the Project to completion, the delay~ in

8

completion of the construction drawings, the fact that the drawings presented to the Plaintiffs were

9

false drawings, and the additional costs that would be incurred under the so-called committed

10
11

contracts.

148.

The Tumberry Defendants were aware of the misrepresentations and omissions made

12

by the FBR Defendants. The Turnberry Defendants intended to and did assist and provide material

·13

assistance to the FBR Defendants in making misrepresentations and failing to disclose material facts

14

to Plaintiffs.

15

149.

Unaware of the true facts, and in reliance on the misrepresentations and omissions of

i6

the FBR Defendants and the Turnberry Defendants, Plaio.tiffs provided funding to the Project

17

pursuant to the Credit Agreement and Disbursement Agreement. If Plaintiffs had been aware of the

18

true facts, they would not have agreed to provide the funding and would not have executed the Credit

19

Agreement or the Disbursement Agreement.

20

150.

As a direct and proximate result of the misrepresentations and omissions by the FBR

21

Defendants and the Tumberry Defendants' assistance in these misrepresentations and omissions,

22

Plaintiffs have incurred and continue to incur damages in excess· of$1 0,000.

23
24

151. · Defendants' acts were performed with oppression, fraud and malice, thereby entitling
Plaintiffs to punitive rl;amages in excess of$10,000.

25

COUNTII

26

Fraud!Aiding and Abetting Fraud Against the FBR Defendants~ the Tli.rn.berry Defendants and
the Packer Defendants

27
152.

Plaintiffs reallege and incorporate the preceding paragraphs as though fully set out.

153.

To induce Plaintiffs to provide funding for the Project through provision of Advances

28

-28-

Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 32 of
46

1

in response to Notices of Borrowing and Draw Requests, the FBR Defendants and the Tumberry

2

Defendants made intentional misrepresentations of fact and failed to disclose material facts, as more

3

fully described above. Among other things, the FBR Defendants and the Turnberry Defendants

4

represented to Plaintiffs or their agents, in connection with Draw Requests and in other oral and

5

written communications, that:
•

6

the Remaining Cost Reports submitted to lenders, including the Plaintiffs, accurately
presented all of the costs they expected the Project to incur to completion;

7

8

•

they were not aware of additional anticipated costs on the .Project;

9

•

the In Balance Report was accurate and the In Balance Test was satisfied;

10

•

the Bank Budget was the true budget that accurately presented the Defendants' .good

11

faith estimate of all Project costs; and
•

12

the Project was "on time and on budget."

13

These repreSentations were false. The FBR Defendants and Turnberry Defendants omitted and

14

concealed the true facts regarding the existence and magnitu<Je of the Real B1,1dget, the additional

15 - costs they incurred and expected to incur on the Project; and th~ existence and dollar valu~ of change
16

orders that had been agreed to without formal approval or disclosure to the lenders, including

17

Plaintiffs.

18

154.

Each of the FBR Defendants, the Turnberry Defendants and the Packer Defendants

19

was aware of the misrepresentations and omissions made by the other Defendants. Each of the FBR

20

Defendants, the Turnberry Defendants and the Packer Defendants intended to assist the others in

21

defrauding Plaintiffs and did in fact provide material assistance to them in making misrepresentations

22

and failing to disclose material facts to Plaintiffs.

23

155.

Unaware of the true facts, and in reliance on the misrepresentations and omissions of

24

Defendants, Plaintiffs continued to provide funding to the Project through Advances pursuant to the

25

Credit Agreement and Disbursement Agreement. If at any time Plaintiffs and their agents had been

26 · aware of the true facts, the conditions precedent to further Advances would not have been satisfied
27
28

and Plaintiffs would not have been required to provide further funds to the Project.
156.

As a direct and proximate result ofDefendants' fraud and aiding andabetting fraud,

-29-

Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 33 of
46

1
2

3

Plaintiffs have incurred and continue to incur damages in excess of $10,000.

157.

Defendants' acts were performed with oppression, fraud and malice, thereby entitling

Plaintiffs to punitive damages in excess of$10,000.

4

COUNTill

5

Fraud!Aiding and Abetting Fraud.Re Retail Facility Against the FBR Defendants, the
Turnberry Defendants and ULLICO

6
158.

Plaintiffs reallege and incorporate the preceding paragraphs as though fully set out.

159.

To induce Plaintiffs to provide funding for the Project through provision of Advances

7

8
in response to Notices of Borrowing and Draw Requests, the FBR Defendants and the Turnberry
9

Defendants made intentional misrepresentations of fact and failed to clisclose material facts regarding
10
the funding of Lehman's portion ofthe Retail Facility, as more fully described above. Among other

11
things, ULLICO, the FBR Defendants and the Turnberry Defendants or their agents represented that
12
ULLICO funded the Lehmanportion of the Retail Facility. These representations were false.

13
160.

ULLICO, the FBR Defendants and the Tumberry Defendants omitted and concealed

14

the fact that, through the "fronting'' arrangement, FBR and Soffer were funding Lelunan's portion of

15

.

.

the Retail Facility while making it appear that ULLICO was providing such funding.
16
-161.

ULLICO, the FBR Defendants and the Tumberry Defendants were aware of the

17
misrepresentations and omissions made by each other. Each ULLICO, the FBR Defendants and the
18
Tuinberry Defendants intended to assist each other in defrauding Plaintiffs and did in fact provide
19
material assistance to them in making mi,srepresentations and failing to disclose material facts to

20
Plaintiffs.
21
162.

Unaware of the true facts, and in reliance on the misrepresentations and omissions of

22
Defendants, Plaintiffs continued to provide funding to the Project through Advances pursuant to the
23

25.
further Advances would not have been satisfied and Plaintiffs would not have provided further funds

26
to the Project.
27
163.

As a direct and proximate result ofDefendants' fraud and aiding and abetting fraud,

28
Plaintiffs have incurred and continue to incur damages in excess of $10,000.
-30-

Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 34 of
46

1
2

164.

Defendants' acts were performed with oppression, fraud and malice, thereby entitling

Plaintiffs to punitive damages in excess of $10,000.

3

COUNTIV

4

Negligent Misrepresentation Against All Defendants

S

165.

Plaintiffs reallege and incorporat~ the preceding paragraphs as though fully set out.

6

169.

In making the representations described above, and in failing to disclose the matetjal

7

information, Defendants acted with the intent to induce, and did induce, Plaintiffs to provide funding

8

to the Project, to enter fnto the Credit Agreement and the Disbursement Agreement, and to continue

9

to provide funding pursuant to Advances.

10
11

12
13

14
15

167.

Defendants made the representations negligently and recklessly, with no reasonable

grounds for believing the statements to be true.
168.

As a direct result of Defendants' negligent and reckless misrepresentations, Plaintiffs

have incurred and continue to incur damages
169.

in excess of $10,000.

Defendants' acts were perform~d with oppression, fraud and malice, thereby entitling

Plaintiffs to punitive damages in excess of$10,000.

16

COUNTV

17

Negligence Against the FBR Defendants and the Turnberry Defendants

18

170.

Plaintiffs reallege and incorporate the preceding paragraphs ·as though fully set out.

19

171.

Defendants were responsible for ensuring that the terms and conditions precedent to

20

funding were being met, that the Project was being managed and administered such that the cost of

21

work would not exceed what was budgeted and financially available, and that the Project would be

22

completed within the approved schedule.

23

172.

Defendants also had a duty to ensure that the Project progress was· accurately reported,

24

both in tenns of cost and schedule, and that the projected cost to complete the work was accurately

25

reflected in the reports to lenders, including the Plaintiffs. Defendatits had a duty to ensure accurate .

26

reflection of any cost increases or change orders in the. various reports provided to Plaintiffs in

27

connection with Draw Requests_

28

173.

Defendants failed to exercise reasonable or ordinary care in the discharge of their

.:.31-

Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 35 of
46

1

duties in connection with the Project, and; in fact, were negligent and/or reckless in the performance

2

of their duties and/or acted in bad faith.

3

174.

As described in more detail above, among other things, Defendants:

4

•

Failed to ensure that the statements made to Plaintiffs in connection with Draw

5

Requests were accurate and complete;

7

•
•

Failed to ensure the timely reporting of changes to the Project and change orders;

8

•

Failed to monitor· subcontractors;

9

•

Failed to exercise reasonable diligence, oversight, monitoring and review ofTWC'~

6

project administration and management;

10
11

Failed to accurately monitor and report on project budgets and costs;

•

Failed to ensure that Project drawings and plans were substantially complete and

12

updated and that the plans were sufficient to build the Project in accordance with the

13

existing budgets; and

14

•

15
16
17

Failed to ensure that the Project had committed contracts as represented to Plaintiffs,
and that the comnritted contracts were in fact "committed."

175.

As a dir~ct and proximate result of Defendants failure to exercise due care, Plaintiffs

have been damaged in an amount in excess of $10,000.

18

COUNTVI

19

Conspiracy to Commit Fraud/Aiding and Abetting Fraud Against All Defendants

·20

176.

Plaintiffs reallege and incorporate the preceding paragraphs as though fully set out.

21

177.

Beginning in 2007, Defendants entered into a conspiracy in which they agreed to

22

misrepresentand omit material facts regarding the Project, and to conceal the true facts. Pursuant to

23

that conspiracy, Defendants engaged in the misrepresentations, omissions and other wrongful

24

conduct, as set out above. Each of the Defendants had knowledge of the object and purpose of the

25

conspiracy and intended to and did materially assist the conspiracy.

26
27
28

178.

As co-conspirators, Defendants are jointly and severely liable for the damages

incurred by Plaintiffs as a result oftheir conduct, in
179.

an amount in excess of $10,000.

Defendants' acts were performed with oppression, fraud and malice, thereby entitling

-32-

Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 36 of
46

1

Plaintiffs to punitive damages in excess of$10,000.

2

COUNTVll

3

Breach of Fiduciary Duty- Duty of Loyalty Against the FB D&O Defendants

4

180.

Plaintiffs reallege and incorporate the precedingparagraphsas though fully set out.

5

181.

Defendants Soffer, Kotite, Parello, Weiner, Schaeffer, Freeman, Kumar, Karawan and

·6

Thier ("FB D&O Defendants") were directors, managers and/or senior executive officers of the

7

Resort Entities, with management responsibility for those entities. As managers, directors and/or

8

senior executive officers of the Resort Entities, the FB D&O Defendants owed :fiduciary_duties to the

9

Resort Entities, which fiduciary duties included the duty ofloyalty. Additionally, as the Resort

10

Entities were insolvent or within the zone of insolvency, these defendants also owed fiduciary duties

11

to the Resort Entities' creditors, including Plaintiffs.

12

182.

As fiduciaries, the FB D&O Defendants were obligated by their duty ofloyalty to act

13

in a manner consistent with the best interests of the Resort Entities and its creditors, and with the

14

highest degree of good faith. By virtue of the acts and omissions described herein, the FB D&O

15

Defendants failed to act honestly and in good faith, thereby violating the duty of loyalty to the Resort

16

Entities. Among other things, the FB D&O Defendants misrepresented the financial condition of the

17

Resort Entities, misstated the budgets and anticipated costs of the Project, and concealed the true

18

facts about the budgets and financial condition of the Project

19

183.

·

As a direct and proximate result of the FB D&O Defendants' actions and omissions,

20

the Plaintiffs have been injured and suffered damages in an amount in excess of$1 0,000. The FB

21

D&O Defendants are jojntly and severally liable for Plaintiffs' losses.

22

23

184.

Defendants'· acts were performed with oppression; fraud and malice, thereby entitling ·

Plaintiffs to punitive damages in excess of$10,000.

24

COUNT VIII

25

Breach of Fiduciary Duty- Duty of Care Against the FB D&O Defendants

26

185.

Plaintiffs reallege and incorporate the preceding paragraphs as though fully set out

27

186.

The FB D&O Defendants were directors, managers aitd/or senior executive officers of

28

the Resort Entities, with mamigement responsibility for those entities. As managers, directors and/or ·

-33-

Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 37 of
46

1

senior executive officers of the Resort Entities, the FB D&O Defendants owed fiduciary duties to the

·2

Resort Entities, which fiduciary duties included the duty of care. Additionally, as tJ::!e Resort Entities

3

were insolvent or within the zone of insolvency, these defendants also owed fiduciary duties to the

4

Resort Entities' creditors, including Plaintiffs.

5

187.

As fiduciaries, these defendants were obligated by their duty of care to act at all times

6

.on an informed basis, using the·amount of care that a reasonable person would use under similar

7

circumstances, and to act with the highest degree of good faith. The FB D&O Defendants failed to

8

exercise the care, diligence, and skill that reasonable persons would exercise under comparable

9

circumstances, and instead acted in a grossly negligent manner, thereby violating their fiduciary

10

duties to the Resort Entities. Among other things, the FB D&O Defendants: failed to oversee the

11

construction of the Project in a manner that contained cost overrUn.s; approved and allowed TWC and

12

others to approve, informally and without proper oversight or disclosure, changes to the Project that

13

greatly increased the Resort Entities' liabilities; operated the Project in accordance with the

14

undisclosed Real Budget, which was hundreds of millions of dollars higher than what was presented

15

to the Plaintiffs and the other lenders, thus making it virtually impossi.ble.for the Project to be

16

completed with the funds that were available; and repeatedly misrepresented and omitted material

17

facts regarding budgets~ cost overruns and anticipated costs to completion.

18

188.

As a direct and proximate result of the FB D&O Defendants' actions and omissions,

19

the Plaintiffs have been injured and suffered damages in an amount in excess of$10,000. The FB

20

D&O Defendants are jointly and severally liable for :Plaintiffs' losses.

21
22

189.

Defendants' acts were performed with oppression, fraud and malice, thereby entitling

Plaintiffs to punitive damages in excess of $10,000.

23

PRAYER FOR RELIEF

24

WHEREFORE, Plaintiffs pray thatthis Court enter judgment in favor of Plaintiffs and

25

against Defendants, and each of them, as follows:

26

(a)

For damages in excess of$10,000.

27

(b)

For punitive damages in excess of$10,000.

28

(c)

For prejudgment interest.

-34-

Case 1:09-md-02106-ASG Document 377-21 Entered on FLSD Docket 12/04/2013 Page 38 of
46

1

(d)

For an award of the costs of suit inCluding attorneys' fees to the extent available.

2

(e)

For any further relief as this Court deems just and proper_

3

JURY DEMAND

4

Plaintiffs demand a trial by jury for all issues so triable.

5

DATED this 25th day of March, 201 L

6
7

Respectfully submitted,

8

9
10

11
12

13

\\
--Ey. ~=.::::--_--,.......

-;:____-===

TAYLOR L. RANDOLPH
Bar No. 10194
RANDOLPH LAW FIRM, P.C.
2045 Village Center Circle, Suite 100
Las Vegas, Nevada 89134
TeL [phone]
[e-mail]
Attorney for Plaintiffs .

14
15

16
17

18
19
20

21
22

23
24
-25
26

27

28
-35-

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U.S. Bankruptcy Court
District of Nevada (Las Vegas)
Adversary Proceeding#: 11-01130-mkn·
Assigned to: MIKE K. NAKAGAWA
Demand:

Date Filed: 05/02/11

Nature[s} of Sui( 01 Determination of removed claim or cause

Plaintiff
BRIGADE LEVERAGED CAPITAL
STRUCTURES FUND, LTD_.
X
X, X

BATTALION CLO 2007-I, LTD.
X
X, X
CANPARTNERSINVESTMENTS
IV,LLC.
X
X, X
CANYON SPECIAL
OPPORTUNITIES MASTER FUND
(CAYMAN), LTD.
X
X, X
CASPIAN CORPORATE LOAN
FUND,LLC.
X
~,X

CASPIAN CAPITAL PARTNERS,
L.P;
X
X, X
CASPIAN SELECT CREDIT
. MASTER FUND, LTD.
X

X; X
MARINERLDC
X
X, X

represented by TAYLOR L. RANDOLPH
RANDOLPH LAW FIRM, P .C.
2045 VILLAGE CENTER CR., SUITE
100
LAS VEGAS, NV 89134
702-877-1313
Fax : [phone]
Email: [e-mail]
LEAD ATTORNEY
represented byTAYLORL. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by
TAYLORL. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH.
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH.
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY ·
represented byTAYLORL. RANDOLPH
(See above for address)
LEAD ATTORNEY

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CASPIAN ALPHA LONG CREDIT
FUND,L.P.
X

X, X
CASPIAN SOLITUDE MASTER
FUND,L.P.
X

X, X
OLYMPIC CLO I LTD.
X

X, X
SHASTA CLO I LTD.
X

X, X
WHITNEY CLO I LTD.
X

X, X
SAN GABRIEL CLO I LTD.
X
X, X
SIERRA CLO II LTD.
X

X, X
lNG PRIME RATE TRUST
X

X, X
lNG SENIOR INCME FUND
X

X, X
lNG INTERNATIONAL (II)SENIOR LOANS
X

X, X
lNG INVESTMENT
MANAGEMENT CLO I, LTD.
X

X, X
lNG INVESTMENT
MANAGEMENT CLO II, LTD.
X
X, X
lNG INVESTMENT
MANAGEMENT CLO III, LTD.
X
X, X
lNG INVESTMENT
MANAGEMENT CLO IV, LTD.

represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
-represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY.
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by SAN GABRIEL CLO I LTD.
PROSE
.
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY·
represented by TAYLOR L. RANDOLPH
(See above for address)

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LEAD ATTORNEY

X

X, X
lNG INVESTMENT
MANAGEMENT CLO V, LTD.
X
X, X
PHOENIX CLO I, LTD.
X
X, X
PHOENIX CLO II, LTD.
X
X, X
PHOENIX CLO III, LTD.
X
X, X
Venture II CDO 2002 Limited
X
X, X
Venture III CDO Limited
X
X, X
VENTURE IV CDO LIMITED
X
X, X
Venture V CDO Limited
X
X, X
Venture VI CDO Limited
X
X, X
Venture VII CDO .Limited
X
X, X
Venture VIII CDO Limited
X
X, X
Venture IX CDO Limited
X.
X, X
Vista Leveraged Income Fund
X
X, X
VEER CASH FLOW CLO, LIMITED

X
X, X
MONARCH MASTER FUNDING,

represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented byTAYLORL. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented byTAYLORL. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented byTAYLORL. RANDOLPH
·
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by

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46

LTD.
X
X, X
NORMANDY HILL MASTER
FUND,L.P.
X
X, X
GENESIS CLO 2007-1 LTD.
X
X, X
SCOGGIN CAPITAL
MANAGEMENT II, LLC.
X
X, X
SCOGGIN INERNATIONAL FUND,
LTD.
X
X, X
SCOGGIN WORLDWIDE FUND,
LTD.
X
X, X
SPCP GROUP, LLC.
X
X, X
SOLA, LTD.
X
X, X
SOLUS CORE OPPORTUNITIES
MASTER FUND, LTD.
X
X, X
STONE LION PORTFOLIO LP.
X
X, X
VENOR CAPITAL MASTER FUND,
LTD.
.
X
X, X

TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY
represented by TAYLOR L. RANDOLPH
(See above for address)
LEAD ATTORNEY

v.
Defendant
FONTAINEBLEAU RESORTS, LLC.
X

represented by
STEVE MORRIS
MORRIS PICKERING & PETERSON
300 S. 4TH ST #900

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LAS VEGAS, NV 89101
(702) 474-:9400
Fax: [phone]
Email: [e-mail]

X, X

TURNBERRYLTD.
X

X, X
TURNBERRY RESIDENTIAL
LIMITED PARTNER, L.P.
X

represented by STEVE MORRIS
(See above for address)
represented by
STEVE MORRIS
(See above for address)

·x,x

TURNBERRY WEST
CONSTRUCTION, INC ..
X
. X, X
JEFFREY SOFFER
X
X, X
ANDREW KOTITE
X
X, X
RAYPARELLO
X

X, X
BRUCE WEINER
X
X, X
GLENN SCHAEFFER
X
X, X
JAMES FREEMAN
X
X, X
DEVENKUMAR
X
X, X
HOWARD KARAWAN
X
X, X

WHITNEY THIER
X
X, X
UNION LABOR LIFE INSURANCE

represented by
STEVE MORRIS
(See above for address)
represented by STEVE MORRIS
(See·above for address)
represented by ANDREW KOTITE
PROSE
represented by RAY P ARELLO
PROSE
represented by BRUCE WEINER
PROSE
represented by GLENN SCHAEFFER
PROSE
represented by JAMES FREEMAN
PROSE
represented by DEVEN KUMAR
PROSE
represented by JEFFREY R. SYLVESTER
7371 PRAIRIE FALCON RD., SUITE
120
LAS VEGAS, NV 89128
[phone]
Fax : [phone]
Email: [e-mail]
represented by WHITNEY THIER
PROSE
represented by uNION LABOR LIFE INSURANCE

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COMPANY
PROSE

·COMPANY
X

X, X
CROWN LIMITED
X

represented by CROWN LIMITED
PROSE

X, X
CROWN SERVICES (US) LLC.
X

X, X

JAMES PACKER
X

represented by CRAIG S. DUNLAP
FENNEMORE CRAIG, P.C.
300 S. FOURTH STREET #1400
LAS VEGAS, NV 89101
[phone]
Email: cdunlap@fclaw,com
represented by JAMES PACKER
PROSE

X, X
'

Filing Date

#

Docket Text
Notice of Removal of BRIGADE LEVERAGED CAPITAL
STRUCTURES FUND, LTD., BATTALION CLO 2007-I, LTD.,
CANPARTNERS INVESTMENTS IV, LLC., CANYON
SPECIAL OPPORTUNITIES MASTER FUND (CAYMAN),
LTD., CASPIAN CORPORATE LOAN FUND, LLC.,
CASPIAN CAPITAL PARTNERS, L.P., CASPIAN SELECT
CREDIT MASTER FUND, LTD., MARINER LDC, CASPIAN
ALPHA LONG CREDIT FUND, L.P., CASPIAN SOLITUDE
MASTER FUND, L.P., OLYMPIC CLO I LTD., SHASTA CLO
I LTD., WHITNEY CLO I LTD., SAN GABRIEL CLO I LTD.,
SIERRA CLO II LTD., ING PRIME RATE TRUST, ING
SENIOR INCME FUND, ING INTERNATIONAL (II)SENIOR LOANS, ING INVESTMENT MANAGEMENT CLO
I, LTD., ING INVESTMENT MANAGEMENT CLO II, LTD.,
ING INVESTMENT MANAGEMENT CLO III, LTD., ING
INVESTMENT MANAGEMENT CLO IV, LTD., ING
INVESTMENT MANAGEMENT CLO V, LTD., PHOENIX
CLO I, LTD., PHOENIX CLO II, LTD., PHOENIX CLO III,
LTD., Venture II CDO 2002 Limited, Venture III CDO Limited,
VENTURE IV CDO LIMITED, Venture V CDO Limited,
Venture VI CDO Limited, Venture VII CDO Limited, Venture
VIII CDO Limited, Venture IX CDO Limited, Vista Leveraged
Income Fund, VEER CASH FLOW CLO, LIMITED,
MONARCH MASTER FUNDING,LTD., NORMANDY HILL
MASTER FUND, L.P., GENESIS CLO 2007-1 LTD.,
SCOGGIN CAPITAL MANAGEMENT II, LLC., SCOGGIN
INERNATIONAL FUND, LTD., SCOGGIN WORLDWIDE
FUND, LTD., SPCP GROUP, LLC., SOLA, LTD., SOLUS
CORE OPPORTUNITIES MASTER FUND, LTD., STONE
LION PORTFOLIO LP., VENOR CAPITAL MASTER FUND,

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05/02/2011

1

LTD. against FONTAINEBLEAU RESORTS, LLC.,
TURNBERRY LTD., TURNBERRY RESIDENTIAL LIMITED
PARTNER, L.P., TURNBERRY WEST CONSTRUCTION,
. INC., JEFFREY SOFFER, ANDREW KOTITE, RAY
PARELLO, BRUCE WEINER, GLENN SCHAEFFER, JAMES
FREEMAN, DEVEN KUMAR, HOWARD KARAWAN,
WIDTNEY TillER, UNION LABOR LIFE INSURANCE
COMPANY, CROWN LIMITED, CROWN SERVICES (US)
LLC.; JAMES PACKER. Fee Amount $250. (Attachments: # l
Exhibit A (coversheet)# ~Exhibit A# J Exhibit B (coversheet)# :!:
Exhibit B) (01 (Determination of removed claim or cause)
(DUNLAP, CRAIG) (Entered: 05/02/2011) .

Certificate of Service Filed by CRAIG S. DUNLAP on behalf of
CROWN SERVICES (US) LLC. (Related document(s) l Notice
ofRemoval filed by PlaintiffVenture II CDO 2002 Limited,
Plaintiff Venture III CDO Limited, Plaintiff Venture V CDO
Limited, Plaintiff Venture VI CDO Limited, Plaintiff Venture VII
CDO Limited, PlaintiffVentuni VIII CDO Limited, Plaintiff
Vista Leveraged Income Fund, Plaintiff Venture IX CDO
Limited, PlaintiffBRIGADE LEVERAGED CAPITAL
STRUCTURES FUND, LTD., PlaintiffBATTALION CLO
2007-I, LTD., PlaintiffCANPARTNERS INVESTMENTS IV,
LLC., Plaintiff CANYON SPECIAL OPPORTUNITIES
MASTER FUND (CAYMAN), LTD., PlaintiffCASPIAN
CORPORATE LOAN FUND, LLC., Plaintiff CASPIAN
CAPITAL PARTNERS, L.P., Plaintiff CASPIAN SELECT
CREDIT MASTER FUND, LTD., PlaintiffMARINER LDC,
Plaintiff CASPIAN ALPHA LONG CREDIT FUND, L.P.,
Plaintiff CASPIAN SOLITUDE MASTER FUND, L.P ., Plaintiff
OLYMPIC CLO I LTD., Plaintiff SHASTA CLO I LTD.,
PlaintiffWIDTNEY CLO I LTD., Plaintiff SAN GABRIEL CLO.
I LTD., Plaintiff SIERRA CLO II LTD., PlaintiffiNG PRIME
RATE TRUST, PlaintiffiNG SENIOR INCME FUND,.Plaintiff
ING INTERNATIONAL (II)- SENIOR LOANS, PlaintiffiNG
INVESTMENT MANAGEMENT CLO I, LTD., PlaintiffiNG
INVESTMENT MANAGEMENT CLO II, LTD., PlaintiffiNG
INVESTMENT MANAGEMENT CLO III, LTD., PlaintiffiNG
INVESTMENT MANAGEMENT CLO IV, LTD., PlaintiffiNG
INVESTMENT MANAGEMENT CLO V, LTD., Plaintiff
PHOENIX CLO I, LTD., PlaintiffPHOENIX CLO II, LTD.,
Plaintiff PHOENIX CLO III, LTD., PlaintiffVENTURE IV CDO
LIMITED, Plaintiff VEER CASH FLOW CLO, LIMITED,
PlaintiffMONARCH MASTER FUNDING, LTD., Plaintiff
NORMANDY HILL MASTER FUND, L.P., Plaintiff GENESIS
CLO 2007-1 LtD~, Plaintiff SCOGGIN CAPITAL
MANAGEMENT II, LLC., Plaintiff SCOGGIN
INERNATIONAL FUND, LTD., Plaintiff SCOGGIN
WORLDWIDE FUND, LTD., PlaintiffSPCP GROUP, LLC.,

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2

3

05/10/2011

05/10/2011

Certificate of Service Filed by JEFFREYR. SYLVESTER on
behalf of HOWARD KARAWAN (Related document(s) §
Answer to Complaint filed by Defendant HOWARD
KARAWAN.) (SYLVESTER, JEFFREY) (Entered: 05/10/2011) ·

1i

05/09/2011

Answer to Complaint Filed by JEFFREY R. SYLVESTER on
behalf of HOWARD KARAWAN (Related document(s) 1 Notice
ofRemoval(SYLVESTER, JEFFREY) Modified on 5/10/2011 to
relate to #1 (DeVaney, HA). (Entered: 05/09/2011)

1

05/06/2011

Scheduling Conference scheduled for 9/30/2011 at 09:30AM at
MKN-Courtroom 2, Foley Federal Bldg. (l<:sh) (Entered:
05/06/2011)

Q

05/05/2011

Stipulation By FONTAINEBLEAU RESORTS, LLC., JEFFREY
SOFFER, TURl'IDERRY LTD., TURNBERRY RESIDENTIAL
LIMITED PARTNER,.L.P., TURNBERRY WEST
CONSTRUCTION, INC. and Between All Parties Filed by
STEVE MORRIS ori behalf of FONTAINEBLEAU RESORTS,
LLC., JEFFREY SOFFER, TURNBERRY LTD., TURNBERRY
RESIDENTIAL LIMITED PARTNER, L.P., TURNBERRY
WEST CONSTRUCTION, INC. (MORRIS, STEVE) (Entered:
05/05/2011)

5

05/03/2011

Receipt of Filing Fee for Notice ofRemoval(11-01130)
[cmp,ntcrmvl] ( 250.00). Receipt number 10642511, fee amount$
250.00. (U.S. Treasury) (Entered: 05/03/2011)

1

05/03/2011

Plaintiff SOLA, LTD., PlaintiffSOLUS CORE
OPPORTUNITIES MASTER FUND, LTD., PlaintiffSTONE
LION PORTFOLIO LP., PlaintiffVENOR CAPITAL MASTER
FUND, LTD ..) (Attachments: #l Mailing Matrix) (DUNLAP,
CRAIG) (Entered: 05/03/2011).

Order Approving Stipulation To Extend Time To Answer Or
Otherwise Respond To The Complaint (Related document(s) 1
Stipulation filed by Defendant TURNBERRY WEST
CONSTRUCTION, INC., Defendant TURNBERRY LTD.,
Defendant JEFFREY SOFFER, Defendant FONTAINEBLEAU
RESORTS, LLC., Defendant TURNBERRY RESIDENTIAL
LIMITED PARTNER, L.P .. ) (had) (Entered: 05/10/2011)

PACER Service Center

II
https://ecf.nvb. uscourts.gov/cgi-bin/DktRpt.pl?69913 7846734481-L_ 618_ 0-1

511112011

Case 1:09-md-02106-ASG Document 377-22 Entered on FLSD Docket 12/04/2013 Page 1 of 5
From:
To:

CC:
Sent:
Subject:

Albert Kotite
Doug Pardon
Glenn Schaeffer; Jim Freeman
11/5/2008 6:43:32 PM
RE: Miami Grand Opening

Doug,
Consider it done. my pleasme. Just make sme you RSVP for acconunodations for Friday and Satmday nights. I hope you saw the great a1iicle
that appeared on the front page of the Style Section of last Sunday's Times. In case you didn't. a copy is pasted below.
Look forward to seeing you on the 1-J.tlt
Best regards.
Sonny
Albert E. Kotite I EVP Corporate Development & Acquisitions
Fontainebleau Resorts LLC
[e-mail] I fontainebleau.com
0 305 682 4200 I C 917 499 2626 I F 305 682 4201
19950 West Country Club Drive I Aventura FL 33180
THE STAGE IS YOURS. LIVE YOUR PART.

please take note of my new email address

From: Doug Pardon [mailto:[e-mail]]
Sent: Wed 11/5/2008 3:25 PM
To: Albert Kotite
Subject: Miami Grand Opening
Sonny,
Hope things are well. Was very pleased to see the 02 financials get reported and we also appreciated Glenn being on the call.
Don and I found it very helpful and I think the market appreciated it as well. I thought the call went as well as can be expected
given the current state of the economy/las vegas and the Lehman issue.
On a more positive note I'm coming down for the grand opening so just wanted to say thanks once again for including me. I did
have one additional request (if possible). The invitation to the fashion show is a separate invite according to the firm handling the
reservations so just thought I'd ask if there is anything you could to get me an invite for that as well. There's no doubt it's highly
sought after so I understand if its not doable but figured there was no harm in trying. Anything you could do would be hugely
appreciated.
Thanks again and good luck w/ the grand opening and continued good luck in Las Vegas.
Best,
Doug
Doug Pardon
Brigade Capital Management
1

717 5 h Avenue, Suite 1301
New York, NY 10022
212-745-9784 (P)
212-745-9701 (F)
[e-mail]

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This email is confidential. If you are not the intended recipient, please notify the sender
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retain this message or any part of it. Internet communications are not secure and are subject to
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Flamboyance Gets A Face-Lift

Barbara P. Fernandez for The New York Times

FAUX FRENCH Built in 1954. the Fontainebleau hotel in Miami Beach has recently undergone a $500 million restoration.
By RUTH LA FER LA

Published: October 31. 2008
E-MAIL

Miami Beach

PRINT

MARILYN RUBINSON recalls her stays at the Fontainebleau

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hotel as a series of high-fashion snapshots. There were

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Times Topics: Morris Lapidus

afternoons at the cabana, "a blue hotel towel wrapped around

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my head like a turban and wearing high-heeled Lucite shoes,"
Enlarge This Image

she said. There were evenings at the Gigi Room, rubbing
shoulders with New York's dashing mayor, John V. Lindsay;
and she remembers sweeping down the dramatic lobby
staircase in a form-fitting, stone-colored gown. "In those days everyone made an
entrance," Mrs. Rubinson, 84, said. "I made lots of entrances."
In that heady era the hotel was the diadem of Miami resorts, a 560-foot-long,
sickle-shaped showplace dominating the Collins Avenue waterfront, where

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Case 1:09-md-02106-ASG Documentthe Rubinsons, whoon FLSD Docket 12/04/2013 and well-to-do
Miamians like 377-22 Entered own a chain of clothing stores, Page 3 of 5
snowbirds came in the winter to roost.
"Everyone who was anyone was there," Mrs. Rubinson said. "People wore black
tie and jewelry. Everyone was young."
And everyone lived large at the flamboyant resort, conceived from its outset to
evoke a modern Versailles. "It was the place for entertainment, for glamour- an
icon even among the locals," said Cathy Leff, the director of the Wolfsonian
museum of design here. "Even now if one asks, 'Within the city of Miami Beach,
what is the most important landmark in the popular imagination?' it would be the
Fontainebleau."
Barbara P. Fernandez for The New York
Times. top; Sam Shere/Hulton Archive/Getty
Images

THEN AND NOW The new lobby of
the Fontainebleau. top. echoes
highlights of the original. bottom. like
the bow tie floor pattern and the
striated columns.

Can an icon of the past be restored to its former glory? New owners and
architects of the Fontainebleau have invested $1 billion to buy and restore it in the
conviction that it can. Its original fusion of Modernist rigor and Hollywood cheek,
dreamed up by the maverick architect Morris Lapidus, was derided as Bronx
baroque, until the singular style of Miami Beach was rediscovered by the Ian

"In its day in the '50s and '60s, the Fontainebleau was state of the art in glamour,"
said Jeffrey Beers, the New York architect responsible for an extensive update of
the interior. "We would like to restore that in spirit."
When the refurbished resort is officially unveiled on Nov. 14 with a series of
20th Century Fox/Everett Collection

Frank Sinatra and Jill St. John visited
in the 1967 film "Tony Rome."

parties and a taping for television of a Victoria's Secret fashion show- perfect!
-visitors will be able to judge for themselves if the mission succeeded. Even
recently, as the hotel was still a construction site, it was clear that the old duchess

"How many places like this can you go in America that are not in the desert?" said
Jeffrey Soffer, executive chairman and majority partner of Fontainebleau Resorts,
which is building a Fontainebleau in Las Vegas. Indeed, as he strolled the raised
oceanfront walkway that overlooks the property, it was obvious the resort had
much in common with over-the-top hotels on the Strip.
Fontainebleau Resorts, LLc

A rendering of one of the V.I. P.
cabanas.

Visible from the walkway is a pool complex fanning out across the lawns, and a
new 40,000-square-foot glass-walled spa, its steam rooms and reflecting pools
worthy of the emperor Hadrian. Crescent-shaped rows of cabanas edge the pools

and echo the undulating outlines of the Chateau, the hotel's original building.
Several towers, two of them new, flank the Chateau, for a combined 1,500 guest rooms, twice the number of the
Fontainebleau's largest competitor, Loews in South Beach. There are also shops, 11 restaurants and lounges,
and about 200,000 square feet of meeting and convention space- all sprawling over 22 acres.
The three-year renovation was conceived, in part, to lure back fashionable crowds, which have drifted down to
South Beach.

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Case 1:09-md-02106-ASG Document 377-22 the Fontainebleau is reopening at a challenging time
With renovated rooms from $399 and suites from $509,Entered on FLSD Docket 12/04/2013 Page 4 of 5for
tourism. Hotel occupancy rates in Miami-Dade County were down by 6 percent in September from a year earlier,
and room revenues fell by 4 percent, said John Lancet, a senior executive in Miami for HVS, a national hotel
consulting company.
But Mr. Lancet viewed the Fontainebleau development as only mildly risky. "It is my impression that the owners
went through adequate planning so that the risk could be mitigated," he said.

THE hotel has some $30 million in bookings through early next year, said Howard C. Karawan, the chief
operating officer of Fontainebleau Resorts, who was brought in by the new owners to oversee renovations and
operations for the company.
Rumors are widespread that the $500 million face-lift was made in anticipation that the city would legalize casino
gambling. The developers deny this, and gambling has yet to win acceptance with local lawmakers.
At the hub of the resort is the Chateau's 45,000-square-foot lobby, an elaboration on the original free-form
elliptical shape completed by Lapidus in 1954.
Its original curvaceous outlines were accentuated by three enormous chandeliers, striated Greek-style columns,
swirling carpets and a mural of a Piranesi print. The lobby's famous focal point was a "staircase to nowhere,"
which actually led from a discreet cloakroom, where ladies could shed their wraps before descending divalike
down the white marble steps.
The new lobby, like its predecessor, is a chambered nautilus, all undulating walls and recesses. Mr. Beers
stripped away '70s-era carpeting to expose the original marble floor with its signature bow tie design. He covered
the wall at the staircase in gold tile and added a light installation by the artist James Turrell and a lounge with a
blue reflective floor. The staircase to nowhere is back, the jewel in a set piece expected to draw crowds who want
to see and be seen.
And perhaps to retrace the footsteps of previous guests. Those who stayed at the hotel in Miami Beach's golden
age recall a resort that Lapidus, who died in 2001 at 98, had envisioned as a laboratory. It was a place, he wrote,
"where I could enlarge upon all the theories I had been developing about human nature and the emotional hunger
that the average man had for visual excitement."
At bars and supper clubs- the Gigi Room, the Poodle Lounge- "women would sit with their little fur stoles and
white gloves on to eat," recalled Deborah Desilets, a Miami architect and former associate of Lapidus. Sheathed
in slinky gowns, "they would stop at the mezzanine, put on their jewelry and wave at their husbands in the lobby
below," she said.
Michelle Oka Doner, an artist and a frequent guest as a girl- her father, Kenneth Oka, was mayor of Miami
Beach in the late '50s and early '60s- remembers the resort, where she had a prom and her wedding, "as my
stage and my launching pad."
The Fontainebleau was a decadent paradise of "flashy diamonds, illicit sex and overflowing ice cream sodas,"
she said. To get to her family's cabana, "you had to walk through the downstairs shops and past a dance studio
where they had all these gorgeous guys giving cha-cha lessons to all these overdressed matrons from

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Scarsdale."
"People came for the half-naked girls and the revues," she said. And, of course, for trysts. "I knew something illicit
was going on, but I couldn't put my finger on what it was."
The lobby was a hub for celebrity spotting, the hotel itself a backdrop against which the Rat Pack played poker
and James Bond sprang from the high dive in "Goldfinger."
"The floor was like a mirror, so shiny you could see yourself," said Levi Forte, a bellman at the Fontainebleau
since the '60s. "Danny Thomas couldn't keep his eyes off that floor. He'd sit there and comb his hair and ask,
'Levi, how do I look?'"
Mel Dick, who moved to Miami from Brooklyn in the '60s, visited on his honeymoon. He recalled being drawn to a
sign outside the hotel barbershop that beckoned, "Come and have your shoes shined by the former lightweight
champion of the world." It was Sidney Walker, known as Beau Jack, recalled Mr. Dick, a wine company
executive. "I sat down in the seat and I gave him five dollars. I told him: 'I don't want you to shine my shoes. I just
want to look at you.' "
Mrs. Rubinson was just as enthralled by her frequent star sightings. "How many times driving up to the
Fontainebleau I would see Frank Sinatra walking up the drive with a glass in his hand," she said.
"We had a more glamorous lifestyle in those days," she added wistfully. "But then, of course, things changed."
In succeeding decades the resort lost its sparkle. Like other supersize hotels lining Collins Avenue north of 44th
Street, including the neighboring Eden Roc, another shiny Lapidus edifice, it became as dated as Grandma's
minaudiere.
Fast forward to the current renovation. "We kept asking ourselves, 'What would Morris do?'" Mr. Karawan said.
John Nichols, a Miami architect responsible for the adjacent Fontainebleau residential towers, the second of
which has just been completed, was hired to gut and redesign the hotel. He preserved Lapidus embellishments
like the perforated "Swiss cheese" outer walls. "We had to get down into a very high level of detail," Mr. Nichols
said. "You don't just go in there and take off the eyebrows."
Ms. Oka Doner admires the renovation, to a point. "The property is kind of post-postmodern," she said. "Morris
Lapidus had real passion," but in its current incarnation, "irony has trumped passion."
But Ms. Desilets, the former Lapidus associate, who visited the site last month, was over the moon. "They used
incredible engineering to laser trace what was there and rebuilt it with accuracy," she said. "It's going to be like a
Ravenna mosaic. It's a wow type of extravagance."
The exuberant aesthetic of the original has been resurrected in three ballrooms, lavish restaurants and five
swimming and reflecting pools.
The pool cabanas have wraparound sofas and flat-panel televisions. Perched on the property's topmost tier is a
V.I.P. pool deck with six additional teak cabanas, a bar and a D.J. booth.
Mr. Forte, the bellman, recently viewed the improvements. "The place is so pretty, the first time I saw it I thought I
was in the wrong hotel," he said. "I said to my wife, 'Just take a look at what money can do.'"

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