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 385 Entered on FLSD Docket 12/06/2013 Page 1 of 4

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Miami Division
CASE NO.: 09-2106-MD-GOLD/GOODMAN
IN RE:
FONTAINEBLEAU LAS VEGAS
CONTRACT LITIGATION
MDL NO. 2106
This document relates to all actions.
______________________________________/
NOTICE OF FILING ON THE PUBLIC RECORD
DOCUMENTS PREVIOUSLY FILED UNDER SEAL
RELATED TO BANA’S MOTION FOR SUMMARY JUDGMENT
Defendant Bank of America N.A. (“BANA”) hereby gives notice that it is filing on the
public record certain documents, previously filed under seal related to BANA’s Motion for
Summary Judgment in the above-titled case.
On October 4, 2013, this Court issued an Order Upon Mandate [D.E. #368] requiring the
parties to specify, by district court docket entry number, which documents previously filed under
seal could be unsealed. 1 However, because the parties could not view the sealed entries on the
electronic CM/ECF docket in this case—and therefore, could not determine which district court
docket entry numbers corresponded to each sealed document—the Court later issued a Sua
Sponte Order Regarding Mandate and Documents Filed Under Seal [D.E. #370] requiring the
parties to make a recommendation by November 1, 2013 regarding how they proposed to comply

1

The parties previously filed with the Eleventh Circuit a letter dated December 14, 2012,
identifying documents and testimony that should remain sealed. Since that time, the parties have
determined that certain evidence included on that list no longer needs to remain sealed and, upon
further review of the record, the parties have identified other evidence that should remain sealed
which was inadvertently omitted from the letter.

Case 1:09-md-02106-ASG Document 385 Entered on FLSD Docket 12/06/2013 Page 2 of 4

with this Court’s October 4, 2013 Order Upon Mandate.
On November 1, 2013, the parties filed a Joint Notice Regarding Proposal for Partially
Unsealing Summary Judgment Filings [D.E. #373]. The parties proposed submitting to the
Court redacted copies of all memoranda of law and statements of material facts, in addition to
one copy of each exhibit and a single compilation of each witness’s deposition transcript
excerpts cited in all memoranda of law. On November 5, 2013, this Court entered an Order
Approving Joint Proposal [D.E. #374], approving the parties’ joint proposal and ordering the
parties to file via CM/ECF redacted copies of the summary judgment memoranda of law,
statements of facts, and exhibits, on or before December 6, 2013.
BANA previously filed under seal the documents listed below on August 5, 2011,
September 27, 2011, and October 17, 2011. In compliance with this Court’s Order Approving
Joint Proposal, BANA now files the following documents on the public record:2
BANA’S MOTION FOR SUMMARY JUDGMENT AND RELATED FILINGS
No.
Document
Date Filed
Filing Status
Under Seal
BANA’s Motion for Summary Judgment
1
BANA’s Motion for Summary Judgment
August 5, 2011
Publicly filed with
and Incorporated Memorandum of Law
redactions (attached)
2
BANA’s Statement of Undisputed Material August 5, 2011
Publicly filed with
Facts in Support of its Motion for Summary
redactions (attached)
Judgment
3
Declaration of Daniel L. Cantor (without
August 5, 2011
Publicly filed with
exhibits)
redactions (attached)

2

Additional documents previously filed under seal related to BANA’s Motion for Summary
Judgment and Plaintiffs’ Motion for Partial Summary Judgment, including exhibits to the Cantor
Declarations, deposition exhibits, and other memoranda of law and statements of facts, will be
filed under separate cover.
2

Case 1:09-md-02106-ASG Document 385 Entered on FLSD Docket 12/06/2013 Page 3 of 4

BANA’S MOTION FOR SUMMARY JUDGMENT AND RELATED FILINGS
No.
Document
Date Filed
Filing Status
Under Seal
BANA’s Reply to Plaintiffs’ Opposition to Motion for Summary Judgment
4
BANA’s Reply Memorandum of Law in
September 27, 2011 Publicly filed with
Further Support of its Motion for Summary
redactions (attached)
Judgment
5
BANA’s Reply to Plaintiffs’ Response to
September 27, 2011 Publicly filed with
Defendant’s Statement of Undisputed
redactions (attached)
Material Facts and Statement of Additional
Material Facts in Opposition to Defendant’s
Motion for Summary Judgment
6
Declaration of Daniel L. Cantor in Support
September 27, 2011 Publicly filed with
of BANA’s Reply Memorandum of Law in
redactions (attached)
Further Support of its Motion for Summary
Judgment (without exhibits)
BANA’s Opposition to Plaintiffs’ Request for Judicial Notice
7
BANA’s Opposition to Plaintiffs’ Request
September 27, 2011 Publicly filed
for Judicial Notice in Support of Term
(attached)
Lender Plaintiffs’ Opposition to BANA’s
Motion for Summary Judgment
BANA’S Reply to Plaintiffs’ Response to BANA’s Evidentiary Objections
8
BANA’s Reply to Term Lender Plaintiffs’
October 17, 2011
Publicly filed with
Response to BANA’s Evidentiary
redactions (attached)
Objections

Date: Miami, Florida
December 6, 2013
By: /s/ Jamie Zysk Isani
Jamie Zysk Isani
Jamie Zysk Isani (Florida Bar No. 728861)
HUNTON & WILLIAMS LLP
1111 Brickell Avenue, Suite 2500
Miami, Florida 33131
Telephone: [phone]
Facsimile: [phone]
E-mail: [e-mail]
-and-

3

Case 1:09-md-02106-ASG Document 385 Entered on FLSD Docket 12/06/2013 Page 4 of 4

Bradley J. Butwin (pro hac vice)
Jonathan Rosenberg (pro hac vice)
Daniel L. Cantor (pro hac vice)
William J. Sushon (pro hac vice)
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.

CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing was served by transmission
of Notice of Electronic Filing generated by CM/ECF on December 6, 2013 on all counsel or
parties of record on the Service List below:
J. Michael Hennigan, Esq.
Kirk Dillman, Esq.
Robert Mockler, Esq.
MCKOOL SMITH, P.C.
865 South Figueroa Street, Suite 2900
Los Angeles, California 90017
Telephone: [phone]
Facsimile: [phone]
E-mail:
[e-mail]
[e-mail]
[e-mail]

David A. Rothstein, Esq.
Lorenz Michel Pruss, Esq.
DIMOND KAPLAN & ROTHSTEIN, P.A.
2665 South Bayshore Drive
Penthouse 2-B
Miami, Florida 33133
Telephone: [phone]
Facsimile: [phone]
E-mail:
[e-mail]
[e-mail]

Attorneys for Plaintiffs Avenue CLO Fund, Ltd. et al.
By:

4

/s/ Jamie Zysk Isani
Jamie Zysk Isani, Esq.

Case 1:09-md-02106-ASG Document 385-1 Entered on FLSD Docket 12/06/2013 Page 1 of 46

UNITED STATES DISTRICT COURT
SOliTHERN DISTRICT OF FLORIDA
:VIiami Division
CASE NO.: 09-2106-MD-GOLD/GOODMAN
IN RE:
FONTAINEBLEAU LAS VEGAS
CONTRACT LITIGATION
MDL NO. 2106
This document rdates to all actions.

DEFENDANT BANK OF AMERICA, N.A. 'S
\110TION FOR SUM\IlARY JUDGMENT AND
INCORPORATED MEMORANDUM OF LAW

CY:VlELVENY & MYERS LLP
Bradley J. Butwin (pro hac
.I onathan Rosenherg (pro hac vice)
Daniel L. Cantor (pro hac vice)
William J. Sushon (pro hac vice)
Times Square Tower
7 Times Square
New York, New York 10036
Telephone: [phone]
Facsimile: 12) 326-2061
-andHCNTON & WILLIAMS LLP
Christopher N. Johnson (Fla. Bar No. 69329)
Matthew Mannering (Fla. Bar No. 39300)
1111 Brickell A venue, Suite 2500
Miami, Florida 33131
Telephone: ( 305) 810-2500
Facsimile: [phone]

Auomeysj(Jr Bank o{America, N.A.
CONTAINS INFORMATION THAT IS "CONFIDENTIAL" AND "HIGHLY
CON~FIDENTIAL" UNDER PROTECTIVE ORDER

FILED UNDER SEAL

Case 1:09-md-02106-ASG Document 385-1 Entered on FLSD Docket 12/06/2013 Page 2 of 46

TAHLE OF CONTENTS
Page
TABLE OF AUTHOR ITI ES .. ........... ........ ................ ............................ ................................. .... . iv
DEFENDANT BANK OF AMER ICA, N.A. 'S MOTION FOR
SUMMARY JUDGMENT .................... .. ...... ...................... -. ............... ......... .. ...... .. .. ..... ... ........... 1
PRELIM INARY STATEMENT ............... ...................... ........ .................. ........ ............................ 1
TH E UNDISPUTED MATER IA L FACTS ........... ......... .. ........ .... ............................................... ..4

l.

THE PA Rrf IES .................. ...................... ·»· ... .. .. . . .. . .... . .... . . . ....... .. . . ..... ........ . . . ....... . 4

I f.

T I-l E PR.C) JECT ............. ...... ............ .... ................................. ...................................4

III.

THE PR OJECT'S FINANC ING ... ....... ........................................................... ....... 4
A.

The Senior C redit Fac il ity ................ ..........................................................5

B.

The Rl:tail Facility ...... ........................................ ............ ...... ........... ... ........ 5

C.

The Disbursement Agree ment ....................... ........................... ..................6

D.

BANA Recei ved The Rcqui.rcd Certificarions For Each
t\d vance Request That Fontai nebleau Submitted During
The Relevant Per iod ..................... .... .................................................... ......8

IV .

CONTRACTUAL PR OT ECTIONS FOR DISB URSEMENT AG ENT
AND ADM INISTRAT IV E ACiENT ............................. .... ..................................... 9

V.

THE EVENTS UNDERLYING PL AI NT IFFS' CLA IMS .................................. ! 0
!\.

The Lehman Bankruptcy ................. ..... ...................................... ...... ........ I I
I.

2.

BANA dc>fermin es that the Seprember 2008 Advance Requesc 's
conditions precedent were sa ti.~/ied ............................................ .. I l

Fontaiueh/eau conceals rha r its uffiliates jl.t nded Lehman's portion
September 2008 Advance Requ.es·t ...................................... 12

f.~(lhe

3.

Frm taineh/eau erovides repeated assurances rhat the Ad1
•ance
Request conditions precedent are sutisfied despite Lehman ·s
hankrttptcy .................................. .... .............................................. l3

4.
.. ... ... .. . ...... ...... .. [4

S.
6.
B.

BANA evaluates Highlwu/'s claim that Lehman 's bankruptcy was
a default under the loan documents ........ .. ................ .... ................ l5

Lenders could, and did, seek il·! fomwtion about Lehman directly
from Fontainebleau ...................................................................... 16

Fontainebleau's Fai lure to Disclose Anticipated Project Costs ................ l7

FILED UNDER SEAL

Case 1:09-md-02106-ASG Document 385-1 Entered on FLSD Docket 12/06/2013 Page 3 of 46

TABLE OF CONTENTS
tconlinued)

Page
I.

2.

lVI re viewed Fonrainehfeafl's cost disclosures in certif)1
ing and
aprwm ·ing the Ad vance Requests ............ ... .. ............................... 17

Fontainebleau reassured BANA and the Lenders that Anticip(lted
Co.\·ts remained within hudget.. .......... .... ........................ .. 18

Pr(~ject

3.

BANA Clf>prm:ed the March 2009 Advance Request onLy after IV/
Jinully issued ll "clean·· Cm zstruc/.ion Consult<J.Itl Advance
Ce rrificate ....................... ...... .. .. ....... ....... .. ...................... .......... .... 19

4.

...20

5.

!VI disc.:m:ers !lwt Fontainebleaufals(iled the Anticipated Cost
Repo rts ..... ......... .. ... ..... .... ...... .... .... .. .. .. .. .... .. .. .... .... ...... ...... ..... ... .... 2 1

6.

Fontainebleau and TWC keet t1vo sets of books to cmu.:eal cost
increases j i·om lVI and BANA ....................................................... 22

C.

First N ational Bank of Nevada Repudimes its Cornrnitment ................ .... 22

D.

Certain Delay Draw Term Lenders Fail to Fund the March 2009
Ad vance Request .................... .......................... ........................................ 23

ARGUNI CN"r .............. .................................................................................................................. 24

I.

SANA PROPERLY APPROVED AND FUNDED FONTA £NEBLEAU'S
ADVANCE REQUESTS AFTER RECEIVING THE REQUIRED
CERTIFICATlONS .............................................................. ...................... .. ........ 24

IL

THERE IS NO EVIDENCE THAT BANA WAS GROSSLY
NEG I.JGENT .......................... ................................................................ .............. 28

lll.

PLAlNTlFFS' BREACH ALLEGATIONS ARE FACTUALLY
BASELESS AND LEGALLY DEFICIENT .................................. ................ .-.... 31
A.

The Lehman Bankruptcy Was Not a Retail Facility Agreement
[)efault ... ................................. .. ........ .. ...... ...... .. ........................ ................ 3 1

B.

BANA Did Not Know that FBR Funded for Lehman in September. ....... 32

C.

ULUCO Pern1issibl.y Funded For Lehman .............................................. 33

D.

BANA Did Not Know that Fontainebleau Concealed the
Anticipated Costs to Complete the Project.. ............................... ..............34

E.

The FDIC s Repudiation of FNBN's Commitment was not an
Advance Request Condition Precedent Fai lure .................... .... .. .............. 34

F.

Guggenheim and Z Capitar s March 2009 Failure to Fund was not
an Advance Request Condition Precedent Failure ............... .................... 35

II

FILED UNDER SEAL

Case 1:09-md-02106-ASG Document 385-1 Entered on FLSD Docket 12/06/2013 Page 4 of 46

TABLE OF CO;\;TENTS
(continued)
Page
G.

The Supplemental March 2009 Advance Request Was Not
lJntin1ely ................................................................................................... 36

CONCLUSIC)N ............................................................................................................................. 37

Ill

FILED UNDER SEAL

Case 1:09-md-02106-ASG Document 385-1 Entered on FLSD Docket 12/06/2013 Page 5 of 46

TABLE OF AllTHORITIES

Page
CASES
85th .)'trect Reswumnt Corv v..':awll:'rs.
600 N.Y.S.2d 1 (N.Y. App. Div. 1st lkp't 1993) ................................................. ..
:\!ita/hi Lince Acrl:'e lta!iane v. Airline Tariff Puh/'g Co.,
580 F. Supp. 2d 285 (S.D.N. Y. 2008) ............................................................................. 29
Amaican l:'xpress Bank Lid v. Uniroval, Inc..
562 N.Y.S.2d 613 (N.Y. App. Div 1st Dcp't 1990) ...................................................... ..
Anderson v. Lihertv Lohhv. Inc..
477 U.S
( t'986) ... ·........................................................................................................... 24
Berger v. Board of Regent·; of the State of
York,
577 0i.Y.S.2d 500 (N.Y. App. Div 3d Dcp't 1991 ) .......................................................... 29
Celotex Corp. v. Catretf,
477lJ.S. 317 (1986) .......................................................................................................... ..
Centurv-lvlaxim Construction Corp. v. One Urvant Park, LLC .
2009 N.Y. Slip. Op. 50858U, 2009 WL 1218895 (N.Y. Sup. Ct. Apr. 7, 2009) ............. ..
Chemical Bank v. Stahl,
637 N.Y.S.2d 65 (N.Y. App. Div. 1st Dcp't 1996) ............................................................ ..
Colnaghi, U.5,'.A., Ltd. v. JeH·elcrs Protection S'ervices,
611 N.E.2d
(N.Y. 1993) ......................................................................................... 28.29
Cordoba v. Dillard's. Inc.,
419 F.3d I I 69 (I I th Cir. 2005) .......................................................................................... 32
Curlev v. AMR Corf> ..
153 F.3d 5 (2d Cir. 1998) ..................................................................................................... 28
David Gutter Furs v. Jewelers Protection Services. Ltd.,
594 N.E.2d 924 (N.Y. 1992) ................................................................................................. 29
ECA & Local 134 IBEW Joint Pension Trust of' Chicago. v. .IP tv/organ Chase
Co., 553 F. 3d I 87 (2d Cir. 2009) .......................................................................................... 35
Ercess Insurance Co. v. Factorr AJutuallnsurance Co.,
822 N.E.2d 768 (N.Y. 2004) ................................................................................................. 27
In re Fontainebleau Las Vegas Contract Litigation,
716 F. Supp. 2d. 1237 (S.D. Fla. 2010) ................................................................................ 25

Ill re Fontainebleau Las Vegas Holdings, LLC.
417 B.R. 651 (S.D. Fla. 2009) .............................................................................................. 25
Franconero v. Universal A1usic Corp.,
No. 02 Civ. 1963,2011 WL 566794 (S.D.N.Y. Feb. 11, 2011) ........................................... 25
Gerard v. Board of Regents oj'State o{Gerogia,
324 Fed. Appx. 818 ( ll th Cir. 2009) .................................................................................... 32

lV

FILED UNDER SEAL

Case 1:09-md-02106-ASG Document 385-1 Entered on FLSD Docket 12/06/2013 Page 6 of 46

TABLE OF ALTHORITIES
(continued)
Pa~e

Telecommunication, Inc. v. CCT Commcuciations. Inc.,
07-1942,2011 WL 3023501 (Bankr. S.D.N.Y. July
Greenfield
780 N.

i'.

2011 )................. .

Phi/lies Records.
166 (N.Y. 2002

HSH Non/hank AGNew York Branch v. Street,
No. I 0-1684,
II U.S. App. LEX IS 9316 (2d Cir. May 4, 20 II) ..................................... '

Kate/ Limited Liahilty Co. v. AT&T Corp.,
607 F. 3d 60 ( 2d Cir.
I 0) ............................................................................................... .
Law Dehenture Trust Co. o{
York v. l'vfaverick Tuhe Corp.,
595 F.3d
(2d Cir. 2010) .............................................................................................. ..
Lipper Holdings. LLC v. Trident Holdings, LLC,
766 N. Y.S.2d
I (N . App. Div. 1st Dep't 2003) .......................................................... ..
lvfetropolitan Ule Insurance Co. v. Noble Lowndes International, Inc.,
643 N
504 (:.J'.Y. 1994) ........................................................................................... 28,29
Mu::ak Corp. \'. Hotel Taft Corp.,
133 N.E.2d 688 (N.Y. 1956) ................................................................................................ 28

Net2Giohe International, Inc. v. Time Warner Telecom o/New York
F. Supp. 2d 436 (S.D.N.Y. 2003) ............................................................................ 29, 31
Pame5; v. Gatewa)· 2000. Inc.,
l
F.3d 539 (8th Cir. 1997) ............................................................................................... .
Peak Partners, LP v. Republic Bank,
191 Fed. App'x 118 (3d Cir. 2006) ................................................................................. 28
Pharmaceutical Hori::ons, Inc. v. Sterling Drug, Inc.,
512 N.Y.S.2d 30 (N.Y. App. Div. 1st Dep't 1987) ............................................................. .
Progress Rail Services Corp. v. Hillsbrough Regional Transit Authority.
No. 8:04-CV-200-T-23EAJ, 2005 U.S. Dist. LEXIS 37729
(M.D. Fla. Apr. l 2005.) .................................................................................................... 24
Ruttenberg v. Davidge Data S}'S'tem Corp.,
626 N.Y.S.2d 174 (N.Y. App. Div. lst Dq)t 1995) ........................................................... .
Stuart Rudnick, Inc. v. Jewelers Protection Services,
598 N.Y.S.2d 235 (N.Y. App. Div. lst Dep't 1993) ............................................................ 29

Toma:·;ini v. l'vfowzt Sinai Medical Center o/Florida Inc.,
315 F. Supp. 2d 1252 (S.D. Fla. 2004) ................................................................................. 24

In re Westinghouse Securities Litigation,
90 F.3d 696 (3d Cir. 1996) ............................................................................................. 25,26
White v. Contintental Casualty Co.,
9 N.Y.3d 264 (N.Y. 2007) .............................................................................................. 29, 30
v

.FILED UNDER SEAL

Case 1:09-md-02106-ASG Document 385-1 Entered on FLSD Docket 12/06/2013 Page 7 of 46

TABLE OF AlJTHORITIES
(continued)

Page

STATUTES AND RULES

Federal Rule uf Civil Procedure 'i6(a) ..................................................................................... .

TREATISES

RESTATI\1E"lT (SECO:-.JD) OF CO!\TRACTS ~ 203(a) ................................................................... .

VI

.FILED UNDER SEAL

Case 1:09-md-02106-ASG Document 385-1 Entered on FLSD Docket 12/06/2013 Page 8 of 46

DEFEN DANT HANK OF AMERI CA, N.A.'S
MOTION FOR SUM MARY JUJ)(;MENT
Defendant Bank of Ame rica, N.A. ("BANA"), hereby mo ves under Federal Rule of C iv il
Procedure 56 for summary j udgment. The racb and legal argumen ts upon w hich this motion is
based arc set forth i n this memorandum of law. the statement of undisputed rnaterial facts. and
the declarations

or Robert W. Barone. Brandon Bolio, Dan iel L. Cantor and Jeff Su:-;man filed in

support hereo !'.

PRELI MI NARY STATEMENT
BANA is cmitl cd to -;u mmary judgment dismissi ng Plainliffs' breach of contract claim
because the undisputed evidence shows that BANA did not breach it:; ob li g ati on~ under the
governi ng Disbursement A greement and Credit A greerneru in per forming its rn inisceri al dut ies as

Disbu rsement Age nt and Bank Agent. Plainti
rt
that BANA shoul d not have approved Fontainebleau 's Adva nce Req uests because there were
various events that BA NA allegedl y '·knew or should have known" caused the cond it ions
prececlent to fai l. But Plaintiffs' 20/20 hindsight not only i mpermissibly seeks to expand

BANA ' s contractua l obligations by drafting into the agreements a vague duty to investi gate. it

turns a blind eye to tile massive fraud that Fontainebleau perpetrated on both BAN A and
Plai ntiffs (or their predecessors-in-interest). Indeed , the very sa me facts that Pl aintiffs here
claim BANA ·'knew or should have known" are the foundation for their recentl y filed action in
Nevada state court action asserting that Fontaineblea u' s officers , directors and affili ates
committed fraud and breached their fiduciary duties by knowingly making false and mi sleading
statements in Acivance Requests and other disclosu res to the Lenders. Plaintiffs ' clai. ns fai l for
r

three c ategories of re asons.

First, the undispute.d fact.s establish that BANA approved and f unded Advance Requests
only after recei ving all requ ired documentation, representations, warranties and certifications.
Under the clear and unambiguous terms of the Disbursement Agreement and C red it Agreement,
those facts bar Pl aintiffs' claims. The agreements limit BANA ' s duties in approving
Fontainebleau 's Advance Requests to (i) determining w hether Fontainebleau, the Contractor, the
Construction Consultant and the A rchi tect had submitted "all required documents'': and
( i i) reviewing the Advance Requests to ensure thJt they contained all re presentations, warranties,
and cenifica[io ns necessary to satisfy the conditions precedent to an Advance. Those agreemems

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also provided that BANA (i) could

in performing its duties, "including approving Advance

Requests," on the representations, warranties and certifications it received from Fontainebleau
and others, and {it) had no obligation ''to conduct any independent investigation as to the
accuracy, veracity or completeness of any such items or to investigate any other facts or
circumstances to

compliance by the Project Entities with their obligations hereunder."

Plaintiffs cannot usc Section 9.1 of the Disbursement Agreement-which requires BANA to
"exercise commercially reasonable efforts and utilize commercially prudent practices in the
performance of its duties hcreunder"-to impose a duty to investigate. Section 9.1 simply
describes how BANA should perform its contractual duties; it does not define those duties. Nor
can Section 9.1 nullify the more specific Section 9.3.2 and 9.10 provisions relieving BANA of
any duty to investigate.

Second, both the Disbursement Agreement and the Credit Agreement limit BANA 's
liability as

to acts of

negligence is a high standard under

had faith, fraud. or willful misconduct. Gross
York law, requiring proof that defendant acted \Vith

reckless indifference or intent to harm plaintiff. There is no evidence in the factual record
mdicating that BANA's actions were intended to harm Plaintiffs, or that it recklessly disregarded
their rights. To the contrary, BANA conscientiously performed its duties in a challenging
financial environment to try to protect all the Lenders' varied interests.

Third, apart from being legally irrelevant, Plaintiffs' allegations that BANA ''knew or
should have known" that Advance Request conditions precedent were not satisfied fail for the
following additional reasons:
•

Lehman's September 2008 bankruptcy filing was not, in and of itself, a Default under
the Retail Facility Agreement. And even if it were, it would not have prevented
BANA from funding an Advance Request because BANA never received the
required Default notice.

•

BANA did not know that FBR had funded the September 2008 Advance on
Lehman's behalf. Immediately before funding the September 2008 Advance, BANA
requested and received written and oral assurances from Fontainebleau CFO Jim
Freeman that, despite Lehman's bankruptcy, Fontainebleau's representations.
warranties and certifications were still correct-including funding by the Retail
Lenders. Plaintiffs' allegation that a TriMont employee told a BANA employee that
FBR funded for Lehman is not supported by either employees' testimony. And
BANA's knowledge of a Merrill Lynch research analyst's email repeating a rumor
about FBR funding does not constitute knowledge of the underlying facts.

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•

•

There is absolutely no evidence that BANA knew of Fontainebleau' s dece it in

concealing the true ant icipated costs to complete the Projec t. As discussed above,
Plaintiffs have acknowledged that Fonwincbleau rnadc false and misleading
'>tatcmcn ts about the Project 's fi nancing, budget and costs.
•

The FD IC's December 2008 repud i<ttion of First Nati onal Bank of Nevada's loan
comm it ments did rwt render mt./.lerially fa lse Fontainebleau's representation that
"rtlherc is no default or event of default under any
the Financing A greements."
FN BN 's unfunded commitments totaled j ust 0.6% of the $l.85 bi Ilion Senior Credi t
Facility. and when BANA removed them from the In Balance Test, the Project
remained ·' fn Bal ance" by approximately S 107.7 million. Thus, no reasonable factfinder cou ld conclude that FNBN's repud iated commitments rendered Section 4.9.1' s
representation materially fabe.

or

•

Plaintiffs' argument regarding Guggenheim and Z Capital' s March 2009 fai lure to
fund their D elay D raw Term L oan conunitrnents fails for the same reason- those
knckrs' commitments were not material. Guggenheim and Z Capital's unfunded
comm itments totaled just $21.67 mi l lion, or rough ly 1% of the Sen ior Credit Facility.
And thei r failure to rund had no immediate impact on the Project because BANA
collected $327 million in Delay D raw Term Loan comm itments in March 2009
against a $ 138 m ill ion Advance Request. Tl1us, again, Section 4.9.1 's representation
was not moterially false.

•

Plaintiffs' suggestion that BANA should have rejec ted the March 2009 Advance
Request because Fontainebleau submitted a suppl.emental Advance Request less than
three days before the scheduled March 25., 2009 Advance Date is not supported the
Disbursement Agreement's terms. The Disbursement Agreemenl has no deadline for
supplementing an Advance Request. And neither Section 2.4.6 (Advance
Confirmation Notice) nor Section 2.5.1 (Stop Funding Notices) refers to rhe A dvant:e
Request being approved three days before the Advance Dare. Thus, the supplemental
March 2009 Advance Request was not untimely.

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THE UN DISPUTED MATEIUAL FACTS'
TH E PART IES

l.

BANA is a nationally charreretl bank with ils main ol'l'ice in Charlotte, North Carolina.
(SOUF•II I.) Plaintirrs art: a group of sophisticated financial institutions who were lenders- or
in most cases. s uccessors-in- imercsl to le nde rs- to Fontainehleau Las Vegas, L LC and
Fontainebleau Las Vegas I I, LLC (collectivdy , '' Bo rrowers·· or "Fontainebleau"). (SOUF(l[ 5.)

(SOUF < 7. >
II

H.

THE PROJECT
This case involves a partially com pleted hote l and casino development on an

approximalely 24.4-acrc pared at the Las Vegas Strip's north end (the ''Project"). (SOUF 11 8.)
[
The Project's developer \vas the Borrowers· parent, Fontainebleau Resorts, LLC (" Fontainebleau

Resorts'' or ''FBR''). (SOUF 1!!9.) FBR was led by Jeff Soffer (Chairman) and Glenn Schaeffer
(CEO), who together had decadt:s o f experience developing major casino, resort and residential
project:-. in Las V egas and elsewhere. (SOUF tl! I 0. II.) The Project's general contractor was

Turnbcrry West Construction ("TWC'' or ··contractor''), a member of the Turnberry grou p of
companies. (SOUF ~~ 12.) The Turn berry group of companies had a 40-year track record
bu i !ding high-end hotels and residemial deve lopments acro;;s the United States. including ~everal
prominent Las Vegas projects. (SOUF<IIJ3.)

III.

THE PROJECT S FINANCI NG
The Project's initial budget was $2.9 billion, which inc luded approximatel y $ l. 7 billion

of hard construction cos ts. (SOUF <II L4.) The Project was financed Lhn;mgh a combination of

debt and equity capital, including $ !.85 billion in sen ior secured debt ("Senior Credit Facility''),
~q uity

con tributions by Fontainebleau and its affiliates, $675 million in Second Mortgage Notes,

and a $3 15 million loan emmarked fo r the Project' s retail space ("Retail Facility"). (SOUF
(1[11[

15. 16.)

This s tatement sum marizes the undisputed facts set forth in BANA 's Local Rule 7 .5
Statement of Undisputed Material Facts ("SOUF'") and that are established by the
Declarations of Robert W . Barone, Brandon Bolio, Daniel L. Cantor and Jeff Susman. ail of
which are being filed simultaneously wi th this memorandum.

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A.

The Senio•· Credit Fatilit.y

Fontainehkau . BANA, Plaintiff.:; (or their predecessors-in -interest). and other non- party
lenders entered into a June 6, 2007 C redit Agreement creating the Senior Credit Faci lity. which
comprised th ree senior secured loans: ( l ) a $700 mi llion term Loan (the ·· tnitial Term Loan'');

(2) a $J50 million delay draw term loan (the " Delay Draw Term Loan") : and (3J an $800 mi llion
revo lving loan (the " Revolvt~r Loan"). (SOUF 11! 17.) Plai nt iffs own on ly Initi al Term Loan and

Delay Draw Term Loan notes. (S OUF 11[ 18.) BANA was a Revolver Loan lender and was
Administrative Agent under the Credit A greement for the Senior Cred it Fac il ity lenders
(together, " Lenders"). (SOU F <1[111 2, 4 .)

B.

The Retail Facility

The Project'<> retai l space was to be developed by Fonta inebleau Las Vegas Retail , LLC
(the "Retai l A f filiate"). another FBR subsidiary. (S0Uftll1 9.) FBR specifically designed the

retail space' s financing to he clistincr from the Senior Credi t Faci lity. (SOUF <J 2 1.) Thus, the
[
$3 15 million Retail Facility was

s u~jcct

to a separate June 6, 2007 agreement between the Retai l

Al"filial"e and Lehman Brothers Holdings, Inc. (the "Retail Facil ity Agreement "). (SOU F (If 22 .)
BANA was not a kmder under the Retail Facility Agreement or otherwise a party to that
agreernent. (SOUF til 23.) But whi le the Project's resort and retail components each had their
own separate credit raci litiGs and construc tion budgets. the resort buuget included $83 million in

costs that were to be funded through the Retail Facility ("Sha red Costs"). (SOUF 1ll111. 2 I, 24.)
The Shared Costs were used to fund constructi on of the portions o f the Project's retail space that

were :-;tructurally inseparable from the resort. (S O UF 1!125.)
Lehman Brothers Holding, Inc. ("Lehman") signed the Retail Facil ity Agreement as a
lender and as the agent for one or more co-lenders (each a ''Retall Co-Lender' '). (SOUF <JI 26.)

Tl1c Retail Facility was syndicated under a ~eparate confidential agreement, the terms of which
were not disclosed to BANA or the Lenders. (SOU F ~~<j[ 28, 29.) Indeed, even the identity of the
Retail Co- L enders was confidential and unknown to BANA and the Lenders until the Borrowers
revealed the participants in late 2008. (SOUF 11!30.) The Retail Facility Agreement permitted
Lehman to "delegate all or any portion of its responsibi lities under [the Retail Facility
Agreement] and the other Loan Documents to tbe Servicer." (SOUF q[. 3 1.)
(SOUP]!32.)

5

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C.

The Disbursement Agreement

The Borrower's acce-." to the construction fina ncing was governed by a June 6. :2007
Mas ter Disbursement

Agrc~men t

(" Disbursement Agreement"). (S OUP '!I 34.) Together \v ith

the Credi t Agreement, the Disbursement A greement establ ished a two-step funding proccs~ for
the Senior Credit Faci lity. No more than once per month, Fontainebleau submitted a Notice of
Borrowing that. subject to certain terms and conditions, required Lenders to
designated bank account (the

"B~mk

tran~fer

funds into a

Proceeds Account.. ). (SOUF t[[ 35. ) Fontainebkuu could

not wi thdraw funds di rectly from the Bank Proceeds Account. (SOUF t![ 36.) To access funds to
pay Project costs (an ·'/\dvance''), Fontaineb leau was required to submit a monthly Advance

Request, the form and conten ts of which were prescribed by the Disbu rsement Agreement.
(SOUF < 37.)
J
!

BANA was appointed as

Di sbur~emcnt

Agent under the Disbursement Agree rnent.

(SOU F r][3.) After Fontainebleau submitted an Advance Request, BANA \Vas required to

··review the Advance Request and attachments thereto to determine whether al l required
documentation has been provided.'' (SOUF tfi 38.) It was abo required to confi rm that the
Advance Request con tained all the representations. warranties. and certifications necessary to
satisfy Dis bursement Agreement Section 3.3 's cond itions precedent to an Advance. (SOU F

!1 39.) Section 3.3 had twenty-four separate rnu lti-part cond itions precedent, including:

1

•

'"Representations and Warranties. Each representation and warranty of ... L
eJach
Proj<Xt Entity set forth in Artic le 4 ... shall be true and correct in all materia l respects
as if made on such date."

•

'"Default. No Default or Event of Default shall have occurred and be continuing."

•

" fn Balance Requ irement. The Project Entities shall have subtni ttcd an In Balance
Report demonstrating that the 1n Balance Test is satisfied." The In Balance Test was
satisfied when Available Funds equal or exceed the Project' s Remaining Costs.

•

" Material Adverse Effect. Since the Closing Date, there shall not have occurred any
change in the economics or feasibili ty of constructing and/or operating the Project, or
in the financial condition, business or property of the Project Entities, any of wh ich
could reasonably be expected to l1ave a Material Adverse Effect.''

•

"Retail Advances. In 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 d< specified in the
tte
relevant Advance Request, make any Advances required of them pursuant to that
Advance Request."

6

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•

(SOlH~

In the case of each Advance from the Bank Proceeds
Account made concurrently with or
Exhaustion of the Second Mortgage
Proceeds
the Construction Consultant .'>hall to the extent set forth in the
Construction Consultant Advance Certificate have approved all Plans and
Specifications whtch, as of the date of the rekvant Advance Request, constitute Final
Plans and Specifications to the extent not theretofore approved."

(I[ 4l.)

Each Advance Request required Fontainebleau, among other things, to "'represent,
warrant and certify" that
Agreement arc satisfied as of

conditions set forth in Section! I 3.3 ... of the Disbursement
Rcquc:-.ted Advance Date." (SOUF <1[40.) The Advance

Request also included multiple specific representations that generally tracked the substance of
Section 3.3's conditions precedent. (SOUF(I!(I! 4L

In addition, Fontainebleau certified that

each of the seventeen Advance Request attachments

what it purports to be, is accurate in all

material respects, ... and

the information rcqutred by the Disbursement Agreement to be

reflected therein." !SOUF (I[ 42.) Each Advance Request also included certifications from the
Project architect and the Contractor. Bergman, Walls & Associates Ltd., the Project architect
C'BWA" or "Architect'') certified, among other th1

that "[t]he construction performed on the

Project ... is in general accordance with the ·Drawings and Specifications."' (SOUF(I! 43.) And
TWC certified, among other things. that ''[t Jhe Control Estimate ... reilccts the costs expected to
he mcurred hy [TWC] to complete the remaining ·work' ... on the Project." (SOUF (I[ 44.)
BANA was assisted in reviewing the Advance Requests by a Construction Consultant
appointed under the Disbursement Agreement-Inspection and Valuation fnternational, Inc.
("IVT'). (SOUF (I[ 45.) lVI also performed monthly site visits, reviewed information disclosed
by Fontainebleau at the site visits. and summarized its findings in Project Status Reports. (SOUF
<j[ 46.) After reviewing an Advance Request, IVI was required to "deliver to the Disbursement

Agent ... a Construction Consultant Advance Certificate either approving or disapproving the
Advance Request." (SOUF <I[ 47.) Specifically, lVI would certify, among other things, that
based on its review of ·'the material and data made available" by the Borrowers, Contractor,
Architect and others, as well as other specified information (including its site walk-through and
construction observations) that "ltlhe Project Entities have properly substantiated, in all material
respects, the Project Costs for which payment is requested in the Current Advance Request," and
"lt]he Remaining Cost Report attached to the Current Advance Request accurately retlects, in all
material respects, the Remaining Costs required to achieve Final Completion.'' (SOUF <![ 48.)

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part of th monthly Advance Request, Fontainebleau also requested that the Retail
Affiliate advance Shared Costs from the Retail Facility. Lehman delegated to TriMont the
re-.;ponstbility for

ll'cting the Retail

Co~Lcnders'

respective Shared Costs obligations in

rcspor1'->C to an Advance Rcqucst and tran-.;ferring those funds to BANi\, as Disbursement Agent.
(SOUl: {U 33.) Once it received the Retail

Co~ Lenders'

funds, TriMont sent a single wire transfer

for the entire requested Shared Cost amount to BANA-it did not identify the specific amounts
funded by each Rctatl

Co~Lcndcr.

requested Shared

(SOUF 111 49.) The Disbursement Agent's receipt of the

was an Advance Request condition precedent under Section

If an Advance Request's conditions precedent were satisfied, BANA (as Disbursement
Agent) and Fontainebleau were required to execute an Advance Confirmation Notice. (SOUF

'I! 51 ) In the Advance Confirmation Notice, Fontainebleau expressly confirmed "that each of the
repn:scntations, warrantie'-> and certifications made in the Advance Request ... (including the
various Appendices attached thereto). ... are true and correct as of the Requested Advance Date
and Di-.;hursement Agent is entitled to rely on the foregoing in authori1ing and making the
Advances herein requested" and "that the [Advance Request! representations, warranties and
certifications are correct as of the Requested Advance Date.'' (SOUF <II 52.) The Advance
Confirmation !\iutice instructed the Bank Agent (also BANA) to transfer the requested funds
from the Bank Proceeds Account to payment accounts on the Scheduled Advance Date for
further disbur-.;ement to Fontainebleau. (SOUF <j[ 53.) If the conditions precedent were not
satisfied, the Disbursement Agent was required to issue a Stop Funding Notice. (SOUF (II 54.) A
Stop Funding Notice temporarily suspended the Lenders' obligations to fund loans under the
Credit Agreement.

~SOUF

til 56.) A Stop Funding Notice would also be issued if "the [Funding

Agent I notifies the Disbursement Agent that a Default or an Event of Default bas occurred and is
continuing." (SOUF tj[

D.

BA~A

Received The Re<tuired Certifications For Each Advance Request
That Fontainebleau Submitted During The Relevant Period.

For each Advance Request from September 2008 through March 2009, BANA received
all the required Advance certifications from Fontainebleau, TWC, IVI and BW A:
•

Fontainebleau certified the satisfaction of all conditions precedent and accuracy of all
representations and warranties, including the absence of defaults under the Loan
Documents;

8

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•

TWC certitic.xi and confirmed that the Control Esttmate reflected the costs it expected
!o he incurred to complete the Project:

•

BW 1\ certified that the construction performed on the Project to date was in
accordance with the Project's plans and specifications: and

•

lVI ccrttficd that the Remaini
Cost Report accompanying the Advance Request
accurately reflected the remaining costs required to compktc the Project.

(SOUF(fl

IV.

CONTRACTUAL PROTECTIONS FOR DISBURSEMENT AGENT AND
ADMINISTRATIVE AGENT
Both the: Disbursement Agreement and the Credit Agreement contain multiple provisions

establishing thal, consistent with industry practice, the Disbursement Agent and Administrative
Agent positions arc purely ministerial and do not mvolvc making analytical determinations about
the Project or the Borrower's status. The scope of these contractual protections is unsurprising:
in exchange for managing the S 1.85 billion Scmor Credit Facility, the Disbursement Agent and
Administrative Agent earned just '540,000 and $1

,000 per year, respectively. (SOUF (I[ 58.)

Disbursement Agreement Article 9 sets forth the Disbursement Agent's rights and
responsibilities. Section 9.3.2 expressly provides, among other things, that BANA "'may rely and
shall he protected in acting or refraining from acting upon" certifications and other statement:-> by
Fontainebleau and [VI, and that'"[ n jotwithstanding anything else in this Agreement to the
contrary, in ... approving any Advance Requests, ... [BANAl shall be entitled to rely on
certifications from the Project Entities ... as to satisfaction of any requirements and/or
conditions imposed by this Agreement." (SOUF<1!59.) Section 9.3.2 also states that BANA
"shall not be required to conduct any independent investigation as to the accuracy, veracity or
completeness of any such items [in the Advance Request] or to investigate any other facts or
circumstances to verify cnmpliance by the Project Entities with their [Disbursement Agreement]
obligations.'' (!d.)
Thus, BANA had no obligation to assess independently whether Disbursement
Agreement Section 3.3 · s conditions precedent or Article 4' s representations and warranties were
satisfied by Fontainebleau before approving an Advance Request. Indeed, if a default occurred
under the Disbursement Agreement. it was Fontainebleau that was required to "'provide to the
Disbursement Agent, the Construction Consultant and the Funding Agents written notice of:
Any Default or Event of Default of which the Project Entities have knowledge, describing such

9

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lkfault or Event ol Default and any action being taken or proposed to he taken with respect
thereto." (SOUl· 11[60.)
Section 9.10 builds on

pmtections to limit BANA's duties as Disbursement Agent,

providing, among other things, that:
•

" ... [BANAl shall have no duties or obligations Iunder the Disbursement Agreement!
except as expressly set forth herein, shall he responsible only for the performance of
such duties and obligations and shall not
required to take any action otherwise than
111 accordance with the terms hereof";

•

" ... nothing in this Agreement, expressed or implied, is intended to or shall be so
construed as to impose upon [BANA I any obligations in respect of this Agreement
except as expressly set lorth herein or therein"; and

•

··.. [BANA I shall have no duty to inquire of any Person whether a Default or an
Event of Default bas occurred and is continuing."

In addition, Section 9.1 (J's broad exculpatory provision limits BANA's potential liability
to had faith, fraud,

ncgl igencc, or

\Vi llfu I

misconduct:

Neither the Disbursement Agent nor any of its officers, directors,
employees or agents -;hall be in any manner liable or responsible
tor any loss or damage arising by reason of any act or omission to
act by it or them hereunder or in connection with any of the
transactions contemplated hereby, including, but not limited to,
any loss that may occur by reason of forgery, false representations,
the exercise of its discretion, or any other reason, except as a result
of their bad faith, fraud, gross negligence or willful misconduct as
finally judicially determined by a court of competent jurisdiction.
(SOUF (ll 62.)
The Credit Agreement conferred similarly broad protections to BANA as Administrative
Agent, including provisions expressly permitting BANA to rely on representations by
Fontainebleau and others, relieving it of any obligation to investigate those representations,
placing the burden on Fontainebleau to report defaults, and limiting BAN A's liability to gross
negligence or worse. (SOUF <J163.)

V.

THE EVENTS UNDERLYING PLAINlTFFS' CLAIMS
Plaintiffs identify several events that they claim prevented Fontainebleau from satisfying

the Advance Request conditions precedent: (i) Lehman's failure to fund advances required of it
under the Retail Facility in September 2008, and between December 2008 and March 2009:
(ii) Fontainebleau's fmlure to disclose all anticipated costs required to complete the Project;

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(lit) the FDIC-; repudiation of FiN National Bank of 1'\evada's commitmenh: and (ivl two small
lenders· failure to fund their Credit Agreement commitments.:'

A.

The Lehman Bankruptcy.

On September I

2001), just four

after Fontainebleau submitted its September 2001)

Advance Request, Lehman filed for bankruptcy. (SOUF (1164.) As the Retail Facility's lead
lender, Lehman's bankruptcy created potential financial problems for the Project Of immediate
concern to Fontainehlcau was the nearly

.X million in Retail Facility fumb it had requested as

part uf its $103.7 million September 2001-1 Advance Request. (SOUF (1165.) If the Retail Facility
did not fund its entire Advance Request portion, no funds would he disbursed to Fontainebleau
from the Bank Pmcceds Account, and Fontainebleau might be unable to pay that month· s Project
construction costs. (SOUF 11[(1!66-67.)

l.

BAN;l determines that the September 2008 A.dvance Request's
conditions precedent were satisfied.

In the days follo\ving Lehman's bankruptcy filing, BANA held a series of calls with
Fontainebleau to obtain additional information regardi

the Lehman bankruptcy's irnplications

for the September 200X Advance Request. (SOUF (I[ 68.) Those discussions focused on whether
Lehman would fund its portion of the Advance Request and on potential alternative financing
arrangements if Lehman did not fund, including funding by the other Retail Facility Lenders or
Fontainebleau. (SOUF (II 69.) BANA. listened to Fontainebleau discuss its options, hut did not
make any recommendations. (SOUF (II 70.) Internally, however, BAN A concluded that
Fontainebleau funding Lehman's share would not satisfy the Advance Request's conditions
precedent. (SOLiF (I[ 71.) On the other hand, if the entire requested Shared Costs were received
from TriMont, and the Advance Request certifications remained m effect, BANA believed that it
\Vas required to honor Fontainebleau's September 2008 Advance Request. (SOUF !l[ 72.)
On September 26, 2001-1, TriMont sent BANA a single wire transfer for the entire
requested Shared Costs. (SOUF 1![73.) Later that day, hut before disbursing funds to
Fontainebleau, BANA received oral and written representations from Fontainebleau CFO Jim
Freeman re-affirming the Advance Request's certifications that all conditions precedent to
funding-including funding by the Retail Lenders-were satisfied. (SOUF tl[ 74.) In addition to

2

See A venue Term Lender Pis.' Responses to Second Set of Interrogatories from De f. Bank of
Am., N.A. ('"Pis. 2d Intcrrog. Rcsp.''), at 2, 6-12.
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Frccrnan \, assurances, there had bct:n no annou ncemcnt that Lehman would reject the Retail
Faci lity Agreement in bankruptcy ami , thus, BANA be lieved (correctly) that the agreement was
"i n fu ll force and effect.'' lSOUF 11[ 75 .) Indeed, based on inforrmll ion from Fontainebleau and
BANA'-; own involvement in other syndicated loans. BANA understood that Lehman was

cominu ing to honor some loan commiuncnts. (SOUF 11176.) Consequently, BANA conc luded
that the conditions prcccc..lent were satisfied and disbursed Fontainebleau's September 2008

Advance Request. (SOUF 1[ 77.)
2.

Fontainebleau conceals that its affiliates funded Lehman 's portion of
the September 2008 Advance Requ est.

Contrary to Jim Freeman's representations to BANA, Lehman's September 2008
Advance Request portion was funded not by Lehman or a Retail Co-Lender. but by
Fontainebleau Resorts, which made a $2,526,184 "equity contribution" to "prevent an overall
project funding tlc lay and resulting disruption of its Las Vegas project" after Lehman failed to

rune! ih req uired Septernber 2008 Shared Costs port ion. (SOUF 11[ 78 .) Fontainebleau actively
concealed this fact. l nc:ked, contemporaneous internal BANA documents reflect BANA' s belief

that Lehm an had funded the September 2008 Shared Costs. (SOOF 11[ 79.) And Freeman
testified that he was instructed by counsel not to revea l that FBR had funded for Lehman ancl,
thus, he deliberately misled BANA and the Lenders in written and oral commun ications during

September and October 2008. (SOUF '1[80.)
Plaintiffs' allegation that TriMont's Mac Rafeed ie informed BANA in a phone call that
F BR had funded for Lehman is not s upported by Rafeed ie's testimony. ·' Rafeedie testified that
he could not " recall the exact things that were discussed in that call" and speculated that
·'consistent with [his! practice.'' h~ ''could have'' told BANA th~lt FBR funded for Lehman; but

he also testified thar the discussion "could have been just that Lehman's dollars were funded, not
necessarily who funded what." (SOUF r11 81.) Moreover, Plaintiffs ignore that the BANA
participant on the cal l testified that she did not recall ever having discussed with Rafeedie
whether Lehman itself funded in September 2008 . (SOUFq[ 82.)
Fontainebleau 's deceptions were not li mited to BANA and the Lenders. For example. o n
October 6, 2008, Freeman told Moody's that " Retail funded its small portion last month.''
(SOUF 1 ~

.\

83 .) Freeman did not tel l Moody's that FBR had funded for Lehman because "[b]ased

See Ex pert Report of Shepherd V. Pryor IV, (ll48.a (May 23, 20 11) ("Pryor Rpt.").
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on the discussion that 1 had. the advice of counsel. I was
source of funding." (SOUf·

'II

~4.)

specifically informed

I \vas not talking to people about

th~o'

In addition, on at least two occasions. Fontainebleau

BA~;\

that the Retail Lenders (either Lehman or its

had funded the September 2008 Advance Request. BANA · s Jeff Susman testified that Freeman
told him the Retail Lenders had funded the September Shared Costs. (SOUF 'II

.)

And

fontainebleau CEO Glenn Schadler told Bill Newby that Lehman itself had funded in
September 2001'S. ( SOUF (ll g6.)

3.

Fontainebleau provides repeated assurances that the A.dvance Requevt
conditions precedent are satisfied despite Lehman's bankruptcy.

The Lehman Bankruptcy also had potential implications for the Project's financing
beyond the Septemher 2008 Advance Request because Shared Costs were due each rnonth. But
following the September disbursement, Fontainebleau went to great lengths to assuage
concerns that the Lehman bankruptcy would prevent it from satisfying future Advance Request
conditions precedent.
For example, Fontainebleau provided numerous written assurances that the Retail Facility
remained viable notwithstanding Lehman's bankruptcy. On September

2008, BANA asked

Fontainebleau to schedule a call with Lenders to address their Lehman-related questions. (SOUF

(ll 87.) A week later, in anticipation of that call. BANA sent Fontainebleau a list of potential
Lender questions, including whether Lehman funded its September 2008 Shared Costs portion,
the identity of any entity that funded on Lehman's behalf, and the Lehman bankruptcy's effect

lm Fontainebleau'-., ability to complete the Project. (SOUF (1[88.) Fontainebleau agreed to the
call, but later backed out and instead, on October 7, 2008, sent BANA and the Lenders a
memorandum addressing the Retail Facility's status. (SOUF (ll(ll 89-90.) The memorandum
assured the Lenders that the August and September Shared Costs had been funded in full.
(SOUF(I! 91.) But the memorandum subtly-and (as discussed above) deliberately-avOided
revealing that Lehman had not funded its Shared Costs portion. The memorandum also stated
that Fontainebleau was "continuing active discussions with Lehman Brothers to ensure that,
regardless of the Lehman bankruptcy filing and related acquisition by Barclay's, there is no
slowdown in funding for the project." tSOUF <I[ 92.) Fontainebleau added that it did not
"believe there will be any interruption in the retail funding of the project." (SOUF <!193.)
On October 22, 2008, Fontainebleau provided the Lenders a further written update,
stating that "Lehman Brothers· commitment to the Retail Facility had not been rejected in

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bankruptcy court and rcrnained in full force and effec t." (SOUF(l\ 94 .) Fomainehleau added that
" Lch rnan Brothers has indicated to us that it has sought the necessary appro vals to fund its
cnmmitment this month." ' and it had received a~surances from the~ "co- lenders to the retail

racil it y" that "[ i Ir Lehman BrOthers is not in a position to perform . .. that they \V()Li ld

rund

Lehman 's portion o f the draw." (SOUF til 95.)
On December 5, 2008, FBR issued financial statements for the period ended
Septernber 30. 2008 that inc luded disdosures regarding the Retail Facility's status. (S O UF

(1196.) FBR represented that ·'[t!hc Compan y has been w orking dili gently with Lclunan Brothers
and the co- lenders to ensure that there is no interrupti on in funding for the retail component."

(SOUF 'H97 .) A nd FBR 's "Equity Contribll[ions'" disclosure made no ment ion of its September
2008 equ ity contribution on Lehman's behalf. (SOUF 11[ 98.)
Fontainebleau ' s assurances appeared to be well founded because Lehman actually funded
its Shared Costs portion for the October and November A d vances . (SOUF '!199.) In addition.

eath month t·rom October 2008 thro ugh March 2009, Fontainebleau submiu.ed Advance

Requests containing all o f the required ccrtificmions, representations and warranties. (SOUr
'![57 .) And although SA NA lcm·ncd in Dece mber 2008 tbat the U nion Labor Li fe Insurance

Company ("U LUCO'') would be funding Lehman· s Shared Costs portion, that arrangement
satisfied St:ction 3.3.2.3's condition precedent that ''the Retail Agent and the Retail L enders shall
... make any Advances required of them'' because ULUCO was a Retail Co-L ender. (SOU F

'1!'!1100- 10!. ) Each month fro m

Oc tobe r 200~ through March 2009, TriMont wired BANA the

full requested Shared Costs. (SOU F (K 102.)

I n December 2008, ULLICO entered an agreement with Soffer, FBR and T R L P under which

U LLICO would pay L ehman' s D ecember 2008 Shared Costs portion, and Soffer. FBR and
TRLP would guarantee repayment wi thin ninety days. (SOUF tll L04.)

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5.

BANA evaluates Highland's claim that Lehman's bankruptcy was a
default under ihe loan documents.

On September 26. 200~. Highland Capital Management (" Highland")- an Initial Term

Loan and Delay Draw Term Lt)an Lender- sent BANA an e- mail claiming that
·'[a ]s a result of

[Lehrnan]'~ bankruptcy ftling earlier th i<;

month.

the financi ng agreeme nts are no longer in ful l force and effect,

triggering a number or breaches under the Loan Facility - resulting
in the following consequences: (i) No disbursements may be made
under the Loan Facility: and (ii) The Borrower should be sent a
notice or breach imrnediately to protect the Lenders' rights and
ensure !hat any cu re period commence as soon as possible.''
(SOUF<ft 110.)

BA NA, through its oubide counsel Sheppard Mullin Richter & Hampton LLP, to ld
H ighland that the Bankruptcy Code spec ifi cally provides that "no ~xec utory contract may be
terminated or modified solely based on the commencement of a Chapter I l case,'' and asked
High land to identi fy any ' 'authori ty or documents supporting a contrary conclusion ." (SOUF
1

j[ Ill .) Fo llowing discuss ions with Hi ghl and and further internal analysis, BANA concluded

that Lehman\ bankruptcy did not prov ide a basis for rejecting fon tainebleau 's September 2008
Advance Request. (SOUP lll I 12.) BANA provided add itional information to Highland in a
September 29, 2008 Sheppard Mullin e-rnail. expl ain i ng that it had been ··monitoring all
[Lehman] cou rt orders'' and w as "u naware of a restriction on performance of this agreement. ··
(SOUF 11[113.) The e-mail al so debunked Highland's claim that Lehman's bankruptcy was an
" anticipatory repudiation of the contract." (Id.)
On September 30, 2008, H ighland sent BANA another e-mail, this time claiming that
Lehman's bankruptcy constituted a Material Adverse Effect ("MAE"). (SOUF<I[ 114 .) Again,
BA NA concluded that Highland's claim was incorrect because there was no indication that there
wou ld be a Retail Funds shortfall or that Lehman would be unable to honor its obligations under
the Retail Facility. (SOUF r![ 115.)

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(SOUF<IIll6.) On Octohcr U. Highland forwarded to BAN/\ a Merrill
Lynch research analyst's

e~mail

that discussed nine different mdustry developrnents and, in the

only sentence referring to Fontainebleau, stated: "We understand that FBLEAU equity sponsors
have funded the amount requtrcd from Lehman on the retail credit facility due this month
million)." tSOUF 'II 117.) The

e-mail did not identify a source or basis for the

statement, and it significantly overstated Lehman's Shared Costs portion. (/d.)

(SOLJF <j[ 120.) Nonetheless, Highland claimed that
this market rumor created "a breach concern under the Disbursement Agreement" and that
''Lehman [was] in breach of the [Retail]lAlgreement because it failed to fund and thus the
agreement [was] not in full force ami effect." (SOlJF<I[ 118.) BANA evaluated Highland's
claim, but reJected it in view of the numerous representations and warranties made hy
Fontainebleau in the September and October 2008 Advance Requests, the continued receipt of
the requested Shared Costs from TriMont, and the other statements hy Fontainebleau. (SOUF
<ii 121.)

While BANA ultimately rejected the various Highland assertions on their merits, it had
good reason to view Highland's claims skeptically. In September 2008, numerous credible
publications reported that certain Highland funds had suffered staggering losses and faced a
liquidity crunch. (S0lJF<IIl22.)

-

(SOUF(![ 123.) Highland

longer a plaintiff. (SOUF '[ 198.)

6.

Lenders could, and did, seek information about Lehman directly from
Fontainebleau.

If Lenders had questions about Lehman's bankruptcy filing, the Lenders could contact
Fontainebleau management directly-as many did. (SOUF (ll 124.) But there is no evidence that
Fontainebleau disclosed to these Lenders that Lehman did not fund its September 2008 Retail
Advance portion, or that ''equity sponsors" funded for Lehman.

(SOUF 91 125.)

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, Highland never submitted a formal Notice of Default ur raised any
further concerns with B/\NA regarding the Lehman bankruptcy. (SOUF 'II I

B.

Fontainebleau's Failure to Disclose Anticipated Project Costs.

Many

development projects

cost increases during the construction

process, and the Fontainebleau Project was no exception. (SOUF 'll l:?.l).) Throughout the
Project's life,

Bi\NA~working

with and

the Construction Consultant,

IVI~pushcd

Fontainebleau to confirm its cosHdated disclosures' accuracy and completeness. In response to
BANA 's questioning, Fontainebleau provided repeated assurances that the Project's finances
remained within the loan documents' limits. Moreover, as required under the Disbursement
Agreement, lVI consistently
lacked evidence that the disclosures \vere inaccurate. But what BANA, lVI and Plaint

did

not, and could not, know was that they were the victims of a massive fraud by Fontainebleau and
its affiliates that involved falsified reports and fake budgets, all designed to conceal the Project's
true construction costs from BANA and the Lenders. Indeed, after uncovering this fraud during
discovery in this action, Plaintiffs filed suit against FBR, the Contractor CfWC), Jeff Soffer,
Glenn

Schacllt~r,

Jim Freeman and others, asserting claims for fraud and breach of fiduciary duty

based on the knowingly false and misleading statements made to BANA and lVI. (SOUF

l.

lVI reviewed Fontainebleau's cost disclosures in certifying and
approving the A.dvance Requests.

As Construction Consultant, IVI prepared monthly Project Status Reports for the
Lenders. Each month, the Contractor provided lVI with an Anticipated Cost Report ("ACR")an estimate of additional costs that might be incurred in the future based, in part, on change
orders submitted by subcontractors. In the January 30, 2009 Project Status Report (''PSR 2! "),
IV I became concerned that Fontainebleau's cost disclosures might not be accurate because it
appeared that construction would need to be accelerated to meet the scheduled opening date and
that related costs, such as overtime, were not retlected in the latest ACR. PSR 21 stated that
although ''the Anticipated Cost Report indicates the Project is expected to stay within budget,
IV I is concerned that all the subcontractor claims have not been fully incorporated into the report
and potential acceleration impact to meet the schedule has not been included." (SOUF (II 134.)

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lVI

raised concerns about LEED credit savings. LEED ("Leatkrship m

Environmental

) credit-. reduce construction costs through Nevada

and
tax credits on

building materials for construction meeting certain sustainability standards. IVI stated that ''it
crL~dits

appears that the LEED

are tracking behind projections and the Developer has begun a

detailed audit." noting that it would ''continue to discuss this with the Developer:' (SOUF

(II 136.)
But the concerns IVI raised in PSR 21 were only
supporting its suspicions. (SOUF 1![ I

feelings, and lVI had no evidence

) Accordingly, IVI issued its momhly Construction

Consultant Advance Certificate, in which it affirmed, among other things, that "[tlhc
undersigned has not discovered any material error in the matters set forth in the Current Advance
Request or Current Supporting Certificates." (SOUF (![ l

2.

Fontainebleau reassured BA.NA and the Lenders that A.nticipated
Costs remained within budget.

Prt~ject

The Lenders raised questions about PSR 21. For example, on February 12, 2009.
JPMorgan

,L,,.--.. Revolver Lender-sent BANA a letter noting that "[i Jn the Report, lVI

makes certain observations ... which were not included in prior reports," and asking BANA to
provide additional mformation regarding the Project's budget and the Retail Facility Status.
(SOUF (I[ 138.) BANA promptly raised the Lenders' concerns with Fontainebleau. On
February 20, 2009, BANA sent Fontainebleau a letter seeking mformation regarding the issues
raised by IV l~-including the ACR · s accuracy, the existence of actual or potential cost overruns,
and LEED credit shortfalls-as well as the Retail Facility's status. (SOUF <II 139.)
Fontainebleau responded three days later, emphatically denying that there were "any cost
overruns or acceleration costs that arc not reflected in the Anticipated Cost Report." (SOUF

(l! 140.) Fontainebleau also stated that "we believe that the full amount of the [LEED l credits
reflected in the Budget

~viii

in fact be realized," and that it was "in the process of engaging

auditors to investigate and audit the subcontractors." (/d.) And Fontainebleau assured BANA
that it was '·continuing active discussions with Lehman Brothers and the co-lenders to ensure that
funding for the Project will continue on a timely basis;· and that the "Retail Facility is in full
force and effect, [and] there has not been an interruption in the retail funding of the Project to
date." (SOUF(I[ 141.)
On February 23, 2009, in response to Lender requests, BANA asked Fontainebleau to
schedule a Lender call to "permit questions about the Project and [Fontainebleau's I response to

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I BANA

February :,:olldter." (SOUF 111 I

) But Fontainebleau refused, assert!

that 1! had

no contractual obligation to do so, objecting to having a call on short noti..:c, and rai

concerns

that sensitive Project-related information might bt.: leaked to the press by Lenders. (SOUF

'![ l
Dc,pite the assurances in Fontainebleau's February
Status Report ("PS R

letter, lVI's March 3. 200l) Project

1

repeated its previous concern that there were unreported Project cost

) But lVI also indicated that the Project remained within budget
II had no facts or evidence to support its hunch, IV[ c.xecuted the Construction

and, because it

Consultant Advance Certificate for the February 200l) Advance Request. (SOUF 11! I

146.)

IM.Mi approved the l~Jarch 2009 A.dvance Request on(y after lVI finally
is.<mell a "clean" Construction Consultant A.dvance Certificate.

3.

Throughout March 200l), BANA and lVI monitored the Project's costs and continued to
press Fontainebleau for cost-related information in response

to

Lenders' requests. On March

200lJ. BANA requested that Fontainebleau arrange for a Lender meeting hccause it was "critical
that the Company meet and mtcract with its Lenders." (SOUF <]!<![ 147, 148.) BANA also sent

Fontainebleau a list of Lender information requests concerning Project costs, which mirrored
BANA's own previous requests. (SOUF (II 148.) In addition, lVI sent Fontainebleau its own
information requests regarding the Project budget. On March 5, 200l), lVI asked Fontainebleau
for "a submission of the future potential claims heing made by the subcontractors against (the

Contractor! and any overruns related to the un-bought work" and for an updated ACR "to show
the potential exposures to FBLV and a better indication of the current contingency." (SOUF
<1[149.) On March 10, BANA followed up with a renewed meeting and information request.

(SOlJF;<i[ 150.)
On
<II

~1arch

II, 2009, Fontainebleau submitted its March Advance Request. (SOUF

151.) In the Remaining Cost Report annexed to the Advance Request Fontainebleau disclosed

that it had increased Project costs by approximately $64.8 million. (SOUF <II 152.) And at a
March 12 meeting with IVI, Fontainebleau disclosed more than S30 million in cost increases.
(SOUF<J! I

) Based on the Advance Request and Fontainebleau's March ll and 14

disclosures, IVI issued a Construction Consultant Advance Certificate that, for the first time,
declared that it had discovered material errors in the Advance Request and supporting
documentation. (SOUF <Jl 154.) IV I stated that it believed that "an additional $50.000,000 will
be required for Construction Costs," and that "November I, 2009 is the likely Opening Date,"
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tnstcad of October I, 2009 as originally planned. (SOUF 111 I
BA0lA that it had been

) A few days later. lVI told

with the developer to updatt:: their most recent antictpatcd cost

report" and that Fontainebleau had "'provided an ACR that they state represents their
understanding

or the hard cost exposures to

the project." (SOUF (II 156.) lVI advised that

"I wjhilc we have not conducted an audit of the inforrnation presented (it would take weeks), the
information presented appears reasonable at this

in the project." (!d.) lVI added that

"[ w lhile we believe the developer has done a credible job of projecting the potential costs, it is
prudent to include some additional funds for what is not known or expected at this time." (!d.)
On March

200<J, two days before the scheduled Advance Date. Fontainebleau

submitted an unsigned draft '\upplemcntal Advance Request reflecting its discussions vv ith IV L
(SOUF (I[ 161) Later that day. after reviewing Fontainebleau's documentation, lVI signed otT on
Fontainebleau's revisions and issued a Construction Consultant Advance Certificate approving
the Advance. (SOUF (II l fl2.) That same evening. after BANA informed Fontainebleau that IV!
"signed off on the revised draw with a clean certificate (assuming the attached reports arc
). " Fontainebleau :-.ubmittcd an executed supplemental Advance Request. (SOU F 11[ 163.)
BANA made available the supplemental Advance Request to the Lenders the next morning
(March 24) along with, among other things, !VI's Certificate and a chan Fontainebleau prepared
at the Lenders' rcquc:-.l ;.,bowing the changes to the Remaining Cost Report and In Balance
Report. (SOUF 1!1 I

) The supplemental Advance Request represented that the Project was In

Balance by '513,785, 184. On March

2009, the scheduled Advance Date, Fontainebleau

further revised its Advance Request to correct an error in the In Balance Report's debt service
commitment portion that increased the margin by which the Project was "In Balance" to
$14,084,701. (SOUF 111 165) On March 26, 2009, having received all required documentation,
including IVI's Certificate, and after receiving the Retail Shared Costs, BANA transferred the
Advance to Fontainebleau. (SOUF (11166.)

4.
On April 13, 2009, Fontainebleau notified the Lenders that one or more events had
·'occurred which reasonably could he expected to cause the In Balance test to fail to be satisfied."
(SOUF (I[ 167.) The notice explained that the "Project Entities have learned that (i) the /\pril
Advance Request under the Retail Loan may not be fully funded, and (ii) as of today, the
Remaining Costs exceed Available Funds." (!d.) BANA and lVI immediately contacted

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Funtamcbleau lo seck additional infonnatton. (SOU F 'I! l6K.) On April 14, 2009. Fontainebleau
provided IV I \vith a schedule

or Antictpated Costs dated "as or April

14, 2009" revealing more

than 'i;IK6 million in previously unreported Anticipated Costs. (SOUF 1l! 169.)

Based on the information disclosed by Fontainebleau at the Lender meeting, the Revolver
Lenders determined that one or more Events o!' Default had occurred and terminated the
Revolver Loan on April 20, 2009. (SOLJF 'I! I 73.)

5.

lVI discovers that Fontainebleau falsified the A.nticipated Cost Reports.

After the Revolver Loan was terminated, Fontainebleau and the Lenders attempted to
restructure the Senior Credit Facility to enable Fontainebleau to complete the Project. (SOUF
'I[ 174.) Toward that end, in May 2009. BANA commissioned lVI to "perform a cost-to-

complete review'' of the Project's construction costs
. As part of its analysis, IVI received additional information from
Fontainebleau and the Contractor regarding the Project budget including an April 30, 2009
ACR. (SOUF {![ 176.) This ACR included $298,053,918 in pending change orders for additional
work by subcontractors. (ld.) After reviewing the documentation supporting these pending
change urders, lVI concluded that Fontainebleau had intentionally concealed costs from IVI,
BANA and the Lenders by omitting them from the ACRs: ''[i]t is clear from the number and
scope of pending items, [that] the claims were made by the subcontractors some time ago,
possibly as far back as a year, and were never included on prior ACRs submitted to IVI."
(SOLJF (![ 177.)

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6.
The

Fontainebleau aml TWC kept two .'iets
from lVI and IM.N;L

ol books to conceal cost incn~ases

prohlem:-. lVI identified in May 2009 were confirmed when BAN;\

learned in

that Fontainchlcau and TWC had made numerous misrepresentations and

omissions regarding the Project's true cost. For months, Fontainchlcau and TWC concealed that
the costs re4uired to complete the Project were hundreds of millions of dollars higher than the
construction budget disclosed to BANA and the Lenders. To conceal the truth, Fontainchleau
and TWC used two separate sets of books: one for their own internal use that allowed them to
keep track of the actuai progress, scope and cost of the Proj.::ct and a second set shown to BANA
and IVL which disclos.::d only a subset

1.Jf

the actual costs. (SOUF ([ 17'8..) For example,

Fontainehlcau and TWC kept a "'bank" ACR that was disclos.::d to BANA and IV!, and an
"internal" ACR that included additional costs. (SOUF (II 179.) Before an ACR was provided to
BANA and lVI, Fontainebleau edited the ACR to conform with the construction hudgct that had
been disclosed to the Lenders. (S0UF 1!llr\0.) Dcspit.:: BANA and IVI's repeated 4uestioning,
Fontainebleau ami TWC faded to di;;closc massiv.:: budget overruns and continued providing
falsified financial information and certifications in the Advance Requests, ACRs, pre...;entations
and letters provided to BANA and the Lenders.

C.

First National Bank of Nevada Repudiates its Commitment.

On July

2008, the First National Bank of Nevada ("FNBN'') was closed by the Office

of the Cornptroller of the Currency, and the Federal Deposit Insurance Company ("FDIC') was
appointed as receiver. (SOUF (U l '8. 1-182.) Despite well-publicized worldwide economic
turmoiL FNBN was the only Project Lender, out of hundreds, to fail.

In late-December 2008,

the FDIC formally repudiated FNBN's unfunded Senior Credit Facility commitments. (SOUF 1]!
183.) Those unfunded commitments were quite small-S l ,666,666 under the Delay Draw Loan
and S I 0,000,000 under the Revolver Loan-totaling less than 0.6% of the S 1.85 billion Senior
Credit Facility. (SOUF'I[ 184.) In response to the FDlCs repudiation, BANA directed
Fontainebleau to remove FNBN's unfunded commitments from the [n Balance Test's "Available
Sources" component. (SOUF(j[l85.) Even without FNBN's commitments, the Project was still
"In Balance" by approximately S 107.7 million. (SOUP![ 186.)

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D.

Certain Delay Draw Term Lenders Fail to Fund the March 2009 Advance
Request.

On March 2. 2009, Fontainebleau submitted a Notice of Borrowing under the Credit
Agreement requesti

a Delay Draw Term Loan for the ent1re $350 million racility and,

simultaneously, a $670 milhon Revolver Loan (which was reduced to

million the next day).

(SOUF (II I H7.) On March 3. 2009, BANA notified Fontamebleau that it would not process the
Notice of Borrowing because it violated Credit Agreement Section 2.1 (c)(iti)'s provtso that
"unless the Total Delay Draw Commitments have been fully drawn, the

outstanding

principal amount of all Revolving Loans and Swing Line Loans shall not exceedS 150,000.000."

On March 0. 2009, Fontainebleau submitted a revised Notice of Borrowing
the S350 million Delay Draw Loan. (SOUF <I[ I

only

) BANA approved the Notice of Borrowing

and nearly all of the Delay Dravv· Term Loan Lenders funded their respective commitments~
totaling

million. <SOUF

190, 191.) But two

did not immediatelY fund their collective

knders~Z

Capital and

Guggenheim~

1.6 7 million commitment. (SOUF <II 191.) After

reaching out to hoth Z Capital and Guggenheim, BANA decided to continue including the
Guggenheim and Z Capital commitments as "Available Funds" for In Balance Test purposes
because there was no conclusive evidence that they would not fund. (SOUF (H 192.) Indeed,
Guggenheim advised BANA that it was ''rounding up all the parties'' and intended to fund its $10
million

commitment~\Nhich

it did several weeks later. (SOUF ll[ 193.)

On March ll, 2009, Fontainebleau submitted an Advance Request for $137.9 millionfar less than the S327 million BANA collected that month from the Delay Draw Term Loan
Lenders. (SOLJF <![ 194.) Before approving the March 2009 Advance Request, BANA sent the
Lenders a March

2009 letter explaining why it intended to disburse the requested funds.

(SOUF t![ 195.) BANA disclosed to the Lenders that Z Capital and Guggenheim had not yet
funded their respective Delay Draw Term Loan commitments and that excluding those amounts
"from Available Funds would result in a failure to satisfy the In- Balance test." (!d.) But BANA
advised the Lenders that it was "willing to include" the unfunded commitment amounts in the In
Balance Test's Available Funds component for the March Advance "pending further information
about whether these lenders \vill fund." (hi.) BANA invited "any Lender which does not
support these interpretations [to] immediately inform [BANA] in writing of their specific

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position ." {ld.) Not a single Lender contacted BANA to dispute its analysis or otherwise direct

BANA not to fund the March 2
.009 Advance Request, which it did. (SOUF 'U I 96.)

ARGUMENT
BANI\ is entillcd to su mmary judgment dismissing Plaintiff::;' breach of contract claim
because there is "no genuine issue as to any material fact " concerning BANA' s proper
4

performance as Disbursement Agent. To

oe materiaL an issue must be ··a legal c l.cment of the

claim under the applicab le suhstantivc law whic h might affect the ourcome of the case_ ~ And
..
" [aJ fac tual dispute is genuine on ly if the e vidence is such that a reasonable fact finder could
return a verdict for the non -rnoving pany." 6 Summary judgment is appropriate here because the
undisputed facts demonstrate that (i) BANA performed its duties under the Disbursement and
Credit Agreement by approving and funding Fontaineb leau Advance Requests on ly after
receiving the required certifications, and had no flllther duty to investigate; (ii ) BANA 's actions
were not grossly negligent, as the Disbursement Agreement requires to impose liability; and
(iii) BAN A did not otherw ise breach the Disbursement Agreement.

I.

BA NA PROPERLY APPROVED AND FUNDED FONTAINEBLEAU'S
ADVANCE REQUESTS AFTER RECEIVING THE REQUIRED
CE RTIFlCATIONS.
Plainri ffs ' claim that BANA breached the D.i sbursement Agreement by approving

Fontainebleau Advance Requests and failin g to issue Stop Funding Notices fails as a matter of
law. The Disbursement Agreement and C redit Agreement limit BANA 's duties in approving and
funding Advance Requests to (i) determining whether Fontainebleau, fVI, the Contractor and the
Architect had submitted "all required documents" and (ii) reviewing Advance Requests to
confirm th:.tt Fontaine bleau made all representations, warranties, and certifications necessary to

Fed. R. C iv. P. 56( a); see also Celotex Corp v. Catrell. 477 U.S . 3 17. 322 ( 1986); Anderson
v. Liberty Lohby, Inc., 477 U.S 242,248 (1986); Prof?ress f?ail Servs. Corp. v. Hillsbrough
Reg ' l Transi1 Aurh .. No. 8:04-CV-200-T-23EAJ, 2005 U.S . Dist. LEXIS 37729, at *7 (M.D.
Fla. Apr. 12, 2005.)

Tomasini v. Mt. Sinai i'vfed. Ctr. o( Fla. Inc. , 3 15 F. Supp. 2d 1252, 1256 (S.D. Fta. 2004 ):
see also Anderson, 477 U.S. at 248 (On.ly disputes over facts that m ight affect the outcome
of the suit under the governing law will properly preclude the entry of summary judgment.'').

See In re Fontainebleau Las Vegas Holdings, LLC, 4 17 B.R. 65 l, 659 (S.D. Fla. 2009).

24

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establish that Disburs<.:mcnt Agreement Scuion J.Ys conditions pn.::ccdcnt to Advance were

s;u isficcl.

7

Under <~pplicab le New York Ja1..v,x a court mu:-.t enforce a contract provision thar. i~
·'complete. clear and Ltn:.llllbigunus on its face" ac<.:ording to ''the plain meaning of its terms."'>
"Where the intent

or the part ies cun be determined rmm the face of rhe ag reement, in terpretation

is a matter 1)1' law and the case is ripe

ror summary j uugment.'' 1° Courts applying New York law

routinely grant sum trwry judgment dismiss ing co ntract claims where the contract is unambiguous

and the unci isputed facts demonstrate that dcfcnclanl performed its contrJctual dutics.

11

Here. the relevant Disbursement Agree ment and Credit Agreement provisions are
·'cornplete, c.lear and unambiguou~" First, BANA 's duties in approv ing and runding Advance
Requests were limited to confirrning th<tt it had received the contractual ly required documents
and that. the Advance Request conditions precedent were satisfied. (See pp. 6-8, supra) Second,
the agreements pcrrnit BANA ro rely on the doc uments it received from Fontainebleau. fYL the
Contractor and the Architect " in perforrning its duties hereunder, including approving a11y

Advance Relptests . . .. as to sat i ~·Jac lion ot any requirements and/or conditions imposed by this
7

Disbursement Agmt. ~~ 2.4.4(a), 2.4.6, 0.3.2; Credit Agmt. ~* 9.3, 9.4.

See In re Fontaineh/eau Las Vegas Contract Litig., 7 16 F. Supp. 2J 1237, 1248 (S.D. Fla.
20 I 0); see also Disburscrnent A gmt. ~ I 1.6.

Greenfield v. Phi/lies Ret..:ords. 780 N.E.2d 166. 170 (N. Y. 2002).
10

Am. Express Bank Ltd. v. Uniroyal, In c., 562 N. Y.S.2d 6 13, 6 14 (N.Y. App. Div. I st Dep' t
1990): sec also Pharm. Horiz:ons, inc. v. Szerling Orut;. Inc., 5 12 N . Y.S.2d 30. 3 1 (N.Y. App .
Div. l$t Dep't 1. 987) (" [Wjhen, as here, the court can determine the parties' inrent by looking
at the agreement , the issue is one of law and should be decided by summary judgment. ");
HSH Non/hank AG N.Y. Branch v. Street. No. I 0-1684, 20 I I U.S. App. LEX IS 9316. at *3
(2J Cir. May 4, 20 I I ) (affirming summary judgment in contract dispute); Kate/ Ltd. Liab.
Co. v. AT&T Corp., 607 F.3d 60, 64 (2cl Cir. 20 I 0) (affirming summary judgment where
contract was unambiguous).

11

See, e.g .. White v. Cont'/ Cas. Co., 9 N.Y.3J 264,268 (N.Y. 2007) (affirming summary
j udgment where defendant carried out plain meaning of insurance policy); Kate!, 607 F.3d at
64-65 (affirming summary judgment where defenuant complied with telecommunications
agreement's unambiguous ter ms); Law Debenture Tmst Co. ofN. Y. v. Ma verick Tube Corp.,
595 F.3cl458, 472 (2cl Cir. 2010) (affirming summary judgmen t where defendant acted in
accordance w ith indenture's unambiguous terms); Franconero v. Universal Music Corp.,
No. 02 Civ. 1963,20 11 W L 566794, at 'r-2-3 (S.D.N. Y. Feb. II , 20 11) (granting summary
judgment where defendant complied 'vvith agreement' s unambiguous recording agreement's
terms).

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Agreement," wi thou t "conduct[i ngl any independent i nvest igation as to the accuracy, verm.:ity nr
C~)lnp l etc ncss of any such it~ms or ... investigat [ingl any ot her fac ts or circumstances to verify
1

compliance by the Project Entities with their obligations hereunde r ... ~

The undisputed facts demonstrate that. BANA performed ir:-, contractual duties. There can
be no legitimate dispute that for each Advance Request from September 2008 through M<lrch

2009. f o ntaincbkau subm itted (i) al l documentation required by the D isbursement Agreement
and (ii) a certifi cation that all conditions precedent man Advance were sati sfied as

rcquc:-;ted Advance Dates. There is a lso no dispute that B ANA

rccciv~d

ort.he

the required

certifications rrom IV Lthe Contractor and £he Architect ror each Advance Reque:,t. And rhcre is
likewise no dispute that Fontaineb leau unfailingly executed and deli vered an Advance
Confirmation Notice "confirm ring! that each of the re presentation s, warranties and certi f icati ons
1

made in the 1\dvance Request . . . rwerc l correct as of the Requested Advance Date." ~ Having
received all the necessary documents. the D isbursement Agreement req uired B ANA to approve
Fontai ncbleau· s AJ vance Requc..;ts. l<l BAN A thus properl y perfor med its Disbursement
Agreement duties. and is entitled to summary judgmen t.

15

Plaintills' argument that BANA " had a duty to deter111inc the true fac ts'' and ··should
have known'' various circumstances regarding FBR , Fontai nebleau. Lehman, and ULLIC0.

16

is

refuted hy Sections 9.3 .2 and 9. 10 of the D isbursement Agreement. under which BANA had no
ob ligation " to conduct any independem investigation as to the accuracy , veracity or
completeness of any such items or to investigate any other fac ts or ci rcu mstances to verify
compliance by the Project Entities wi th their obligations hereunder," or ''to inqu ire of any Person
whether a Defau lr or an Event of Defau lt has occu rred and is continu i ng."

12

,:;

17

These clear and

!d.~ 9.3.2 (emphas is added) : see also C red it A gmt. ~ 9.4.
Di sbursement Agrnt. ~ 2.4.6: Ex. E.

11
"

See id. ~ 2.4.6.

1
5

See, e.g .. White, 9 N. Y.3d at 268 (affirm ing summary judgment w here defendant carried out
pl <li n meaning of contract) .

16

See Pis. 2d lnterrog. Resp., at 6-l 6:see also Pryor Rpt., < 7(e).
IJ

17

Disbursement Agmt.
9.3.2, 9.10: see also Credit Agmt. § 9.3 (Bank Agent has no duty to
·'ascertain or inquire into (i) any . tatement, warranty or representation made in or .in
connection wi th this Agreement or any other L oan Document, (ii) the contents of any
ceni f icme. report or other documen t del ivered [under the C redit A gree ment or Disbursement

**

26

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unambiguous provisions must be cnforc~d according to their terms .

1
1l

BAN I~ cannot he held

I iablc for an ~)bl igat ion that is inconsistent with the Disbursement A greement's tcrrns. 1'J
Plaintiffs incorrectl y rely on Secti()l1 9. 1's direc tive that the Disbursement ;..\ gent
'·exercise commerciall y reasonable efforts and utilize com merc ial l y prudent practices i n the
perforrnance of its duties hereunder." That provis ion ca nnot t ru mp Sections 9.3.2

i tlld

I.J . l0. ~0

First, Section t). l does not create additional duties, rather, it merely describes the standard
app licable to BANA's exi sting "duties hereunder.'' Second, contnKl:-> should not be read so as lO
render provisions ..withou t force and effect."

in vestigatt: the accuracy

21

Reading Section 9. 1 to require BANi\ to

or fo ntainebleau representations, warranties and certification:-, or

w hether a Default or an Evcm of De fault has occurred. would impermissibly nullify Section

9 .1.2 and 9. IO's unambiguously contrary provisions. Third, speci ric provis ions control general

Agreement!, ( i ii) the performance or obser vance of any of the covenants, agreements or other
terms o r conditions set for1h herein or therein or the occurrence of any D~fault.. ') .
IX
19

See Gree,~field. 780 N.E. at 170.
See Rultenherg v. Davidge Data Sys. Cnrp., 626 N. Y .S.2d 174, 178 (N .Y . App. Di v. I -;t
Dep ' t 1995) (granting defendant summary judgment where plaintiff sought to i rnpose ..a righ t
tbat [the contractJ sirnp.ly docs not bestow upon plaintiff' because "[t]his Court will not
rewrite the terms uf an agreement under the guise of interpretation"); 85th St. Nest. Corp. v.
Sanders . 600 N. Y .S.2d I , 5 (N.Y. A pp. Div . I st Dep't 1993) (holding court should .. not
rewrite the terms of an agreement under the guise of interpretation" on a motion for summ.ary
judgment).

:w See Pis. 2d lnterrog. Resp., at 9; Pryor Rpt. 1\1111 30-3 1; Am. Cornpl. 11[ 122.
21

See Excess fns. Co. [[(/. v. Factory Mut. Inc;. Co., R22 N .E.2d 768, 77 1-72 (N.Y. 2004)
(rejecting interpretation of contract provision that ''would render [another provision 1 a
nul.lity"); Century-il4axim Const. Corp. v. One Bryant Park, LLC. , 2009 N.Y. Slip. Op.
50858U, 2009 WL 12 18895 at * I l ( N .Y. Sup. Ct. Apr. 7, 2009) ("'(Tlhe rules o f construction
of contracts require the court to adopt an inr.erpretation which g ives meaning to every
provision of a contract or, in the negative, no provision of a contract should be left without
force and effect.'') ( internal quotation marks and brackets omitted) (granting motion to
d ismiss); see also RESTATEMENT (SECOND) OF C ONTRACTS ~ 203(a) (''(A ln interpretation
which gives a reasonable, lawful , and effective meaning to all terms is preferred to an
interpretation which leaves a part unreasonable, un lawful, or of no effect.''); id. cmt. b
("Where an integrated agreement has been negotiated w ith care and in detail and has been
expertly drafLecl for the particular transaction, an interpretation is very srronJdY negated if it
would render some provision superfluous.'' (Emphasis added).)

27

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un~:s.

Section 9.1

IS

a general provision broadly discuss1ng the Disbursement

s

performance of its duties. while Sections 9.3.2 and 9.10 contain more specific provisions limiting
those dut

Accordi

Sections 9.3.2 and 9.1 crs speci

prmhi0!1S eliminating any duty to

investigate control over Section 9.1 · gcncrali""ed discussion.'

II.

THERE IS NO EVIDENCE THAT BANA \VAS GROSSLY NEGLIGENT.
BANA is entitled to summary judgment for the additional and independently sufficient

reason that

is no evidence that BANA was grossly negligent in perforrni

its

duties.

Under both the Disbursement Agreement and the Credit Agreement, BANA has no liability other
than for its own gross negligence, bad faith, fraud or willful misconduct.

2

t

Those provisions arc

fully enforceable under established New York lmv.
In the commercial context, the gross negligence standard under New York law is high: it
requires conduct that "evinces a reckless disregard for the rights of others or 'smacks' of
intentional wrongdoing." 2!' A similarly high standard applies to willful misconduct, requiring

Mu-:ak Corp. v. Hotel Taft Corp., !33 N.E.2d 688, 690 (N.Y. 1956) ("Even if there was an
mconsistency between a specific provision and a general provision of a contract (we find
none), the specific provision controls."); Peak Parrners. LP \'. Repuhlic Bank, 191 Fed.
App'x 118, l
n.8 (3d Cir. 2006) (New York law) \"Under New York rules of contact
interpretation, where a contract employs contradictory language, specific provisions control
over general provisions and it should be interpreted in a way which reconciles all its
provisions if possible.") (internal quotation marks omitted).
2'

Chem. Bank v. 5;ralzl, 637 N.Y.S.2d 65,66 (N.Y. App. Div. 1st Dep't 1996) (affirming
dismissal because contract's ''specific provisions that defendant had no obligation to remove
the Atrium were controlling over any inconsistent general provisions regarding compliance
with, e.g., mning regulations"); see ahw Peak Partners, 191 Fed. App · x at l
(to the
extent general provision permitting trustee to be held liable for negligent acts created "a
general duty not to be negligent, that duty is limited ... by [the trustee's] right to rely on any
document believed by it to be genuine" "without the need to investigate any fact or matter
stated in the document") (affirming summary judgment) (internal quotation marks ornitted).

21

Disbursement Agmt. § 9.l0; Credit Agmt. § 9.3.

2S

16

J'vfetro. Li{e Ins. Co. v. Nohle Lmvndes lnt'l, Inc., 643 N.E.2d 504,509 (N.Y. 1994)
(enforcing contract provision "limiting defendant's liability for consequential damages to
injuries to plaintiff caused by intentional misrepresentations, willful acts and gross
negligence" because it "represents the parties' Agreement on the allocation of the risk of
economic loss in the event that the contemplated transaction is not fully executed, \vhich the
courts should honor.").

Curler\'. Ai'v1R Corp., 153 F3d 5, 12 (2d Cir. 1998) (internal quotation marks omitted) (New
York law): Colnaghi. U.S.A,, Ltd. v. Je~velers Prot. Servs., 611 N.E.2d 282,284 (N.Y. 1993)
28

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Plaintills to sh(,W more than simp ly that H1-\ NA knevv· it was hrc:u.:hin g tlw c ontract.n .. Wi ll ful
rnisconduct" refer~ to ''conduct which is tortious in nature . i.e .. wrongful conuuct in which
defendant wil(jii//,· intends 10 il(/lictlwrm mi{Jfointiff'ot least in J!Orf tlrrough the mer111s l~/'

hreoching !he contract h ell-recn the fHtrlies ... ~r. Cou n s routindy grant summary judgment
enforcing excu lpatory prov isions like those llere where there is no evidence from which a

reasonabl e fact- finder could conclude that defendant acted vvith reck less indifference or intent to
harm plaint if'f. 2'>
There is no evidence in the record that BANA intended to harm Plainti f fs , or that it
recklessly disregarded their rights. To the contrary, the undisputed fac ts demonstrate that BAN A

("'[G]ros-; negligence' differs in kind, not only degree. frorn claims of ordinary negligence.
It is conduct that evinces a reckless disregard for the ri ghts of others or 's macks' of
intentional wrongdoing."); Berger v. Bd. of' Regents(~/ the Stole ~~IN Y., 577 N. Y.S.2d 500.
503 (N.Y . ;\pp. Div. Jd Dep't 199 1) (" In order to support a finding of gross ncgli.gc nce, the
conduct must be 'egregious. "').
27

See G!ohal Crossing Tclecomm .. In c. v. CCT Com me 'n. Inc. (In re CCT Cum me.-· 'n ), Adv.
Proc . No. 07-1942,201 1 WL 302350L, at * 5 (B<lnkr. S.D.N .Y. Ju ly 22, 2011) (''[W jillful
misconduct does nor include the. voluntary and intentional failure or refusal to perform a
contract for economic reasons.").

2

x Metro. L({e. 643 N.E.2d ar 507 (emphasis adclecl): see also Global Crossing, 20 1 1 WL
302350 I, at '!'5 ("'Willfu l misconduct' in this context requires tort ious intent, such as fraud,
mal ice. a di shonest purpose or bad faith.").

2

c.;

Colnaghi. 611 N .E.2d at 283- 84 (granting summary judgment where plaintiff lacked
evidence demonstrating gross negligence); David Guuer Furs v. Jewelers Prot. Servs .. Ltd..
594 N .E.2cl 924. 1)24-25 (N.Y. 1992) (granting summary judgment because ''[r]aken together.
these allegations do not raise an issue of fact whether the defendant performed its duties wit h
reckless indifference to p laintiffs rights .''); Stuart Rudnick, Inc. v. Jewelers Prot. Servs., 598
N. Y.S.2d 235, 236 (N.Y. App. Div. 1st Dep't I 993) (granting summary judgment enforcing
excu lpatory provision where no evidence of " co nduct t hat evinces a reckless d isregard fur
the rights of o thers or 'smacks' of i.ntentional wrongdoing''); Alitalia Linee Aeree ltaliane v.
Airline Tarifj'Puh/'g Co .. 580 F. Supp. 2d 285,294 (S.D.N.Y. 2008) (granting summary
judgment because "no reasonable ju ry could conclude that [defendant[ acted in conduct akin
io intentional wrongdoing or reckless indifference"); Net2Globe lnt'l, Inc. v. Time Warner
Telecom of N.Y., 273 F. Supp. 2d 436,450 (S.D.N. Y. 2003) (''While issues of malice,
willfu lness, and gross negligence often present questions of fact, courts have sustai ned
limitation of l iability provisions in the cont.exl
a summary judgment motion when t.he
surrounding facts compel such a result."); Global Crossing, 20 l l WL 302350 I , at * 13
(granting summary judgment for defendanL.:; on gross negligence or wi ll fu l misconduct where
"nothing in the record su pports the contention that [defendant] acted our of malice towa rd
[plaintiff], or for the purpose of inflicting harm .") .

or

29

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wok its role

a~

agen t seriously and carefully pcrfonned its duties under lhe Di sbursement and

Credit Agreemen ts. Arnnng ul her thing~. BANA closely reviewed each Advance Request to
ensure it contained all documents, certifications, representations and warranties required to
approve the Advance Request. (SOUF (I[ 39,) [n each instance. Fon tainebleau, IV l, the
Contractor, and the Architect certified to BANA that all conditions precedent to di sbursement

were satisfied, no default had occurred, and the information concerning the Project' s status,
des ign and budget was correct and s uffi cie nt to complete the Project. (SOUP (11 57) When is"ues

arose concernin g L ..~hrnan or Project costs, BA NA cons ulted (i) internall y, (ii) with counsel ,
(iii) with lVI, and (i v) with fontainebleau. (SOUfCIJ<I[68-7 1. 74, Ill. 112, 12 1. 139, 142. 147,
148, I 56, 168, 169.) BA A was respons ive to ques tions from L enders, and pushed
Fontainebleau to provide addi tional. information 10 fV [ and the L enders concerning both Lehman

and the Project. (SOLIF'J 87- 89, 110- 114, .
I<R

11 7 , 12 1, 138, 139, 142. 147, 148, 150. 164.)

And unbeknownst to BANA, Fonta inebleau was misrepresenting the Project's finances and
prospects.
The undisputed facLS ali-io show that when BAN A took action, or dec ided not to do so, il
gave proper consideration to the Lenders' rights and interests. for example. in addressing

fNBN's commi tment re pudiation , BANA adopted a solution-removing fN BN 's comrnitment

from the [n Balance Test-that was consistent with all pa11ics' reasonable commercia l
expectations:
•

lnitial Term Loan Lenders, who funded at closing, would not have expected that the
Project could collapse simply because a sin gle srnulllender (0.6% of the Senior
Credi.t f acilit y) was seized by the FDIC;

•

Lenders who had not yet funded wanted to be sure that, before doing so, there were
sufficient funds to complete co nstruction. which the revised Ln Balance Test would
reflect; and

•

Fontainebleau's reasonable expectation was that a single lender' s failure to fund
would not relieve the other Lenders of their obligations.30 Thus, BANA' s sol ution
also avoided potentiai costly litigation for the Lenders .

BANA 's decision regarding FNBN was shared with the Lenders via Intralinks, and no
L ender protested. Nor did any L ender object when BA NA announced its intention

tO

include Z

Capital and Guggenheim' s unfunded commitments in the In Balance tes t fo r the March 2009
30

See Credit Agent. S 2.23(g) .
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Adv anct:

Rc:qu c~t.

BANA ·.., Jccision to Jisclo'>c and invite com ment on its intended course of

action in cadi instance is tile hal llllark

or good

faith and the ant it hes is of gross negligl:ncc or

reck lcssncss.
Thus, hccause there is no cvitkncc that BANA was gn. ssly negli gent, the Court shou ld
1
enforce the Di sbursement A greement's exc ulpatory provisions and di smiss the contrac t breach
claim against BANA.~ 1

lll.

PLAINTl.FFS' BREACH ALLEGATIONS ARE FACTUA I_. LY BASE LESS AND

LEGALLY DEFICIENT.
Plaintil'fs assert that there were severa l even ts that, notwi thstanding Fontainebleau's
repealed ce rtifications to t:hc contrary. BAN!\ alkgeclly ''knew or shou ld have known'' caused

the Advance Rcyucst: conditions precedent to fail. A':> demonstrated above, those claims fail
because ( i ) BANA performed its l imited mini steri al duties as agent and had no duty to
investi gate; and (i i) there is no evidence that BANA was gross ly negligent And as demonstrated
below . each of those claims is also independent ly merilless under the undisputed !'acts and

governing agreements.

A.

The Lehman Bankruptcy Was Not a Reta il Facility Agreement Default.

Plaintiffs claim that Lehman' s September 200R bankruptcy filing. in and o f itself, was a

Default under the Retail Facility that prevented Br\NA from funding any Advance Requests and
requi red it to issue a Stop Funding NoLice.-~

2

Plai nti ffs are factually incorrect because w hi le

Lehman's bankruptcy fil ing made it a ·'Defaulting L ender" under the Retail Fac ili ty
Agreement- a designation that came w ith certain consequences- that filing was not a Default.-''
But in any event, under the Credit Agreement, BANA is "deemed not to have any knowledge of
any Default un less and until notice describing such Default is given to (BANA-l by Borrowers, a

Lender or the issuing Lender."·"~ BANA never received any no rice from Fontainebleau, the
Retail Co-Lenders, Tri . ont. or the Lenders that there was a Default under the RetaiJ Facility
M
Agreemen.t.

\I

See Net2Giobe Ira'!, 273 F. Supp. 2d at 450 (enforcing excu lpatory provision and granting
summary judgment for defendant where plaintiff lacked any ev idence of gross negl igence or
willful misconduct).

y~

.n
~-~

Pryor Rpt. <1!55 .
Retail A gmt. ~ L at 7, 8, 15.
Credit Agrnr.

*9.3.
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Plaintit"t\; cannot rely on Highland's Scplernher -OL:tober e-ma ils to BAN!\ because none

qualifies as a "'noticc ." 15 High land's September 26, 200k e- mail si mply <bsc rtcd that Lchman· s
bankruptcy tdggcred ·'a nun1hcr

or hreache" under the Loan Faci li ty: · hut did not identify rhe

claimed breaches, much less any Event of Dcraull as uel"incd in the loa n documents. And while
rhis e-mai l also claimed Lhat Lehman's bankruptcy rendered the Relail Facility ··no longer in full
force and dTcct:· BANA concluded that Hi ghland\. assertion was erroneous as <I matter of
bankruptcy law-and BANA 's conclusion was confirmed hy. among other things, Lchnmn ·s
fundin~ of the October and Novem ber

200R Advances. (SOUF 11[<11 99, I I 0-1 12.) BANA

similarly rejected Highland's baseless asserrion that Lehman's bankruptcy h<Ld cau;:..ed a Material
Adverse Effect. (S OUF '!191114-I l 5.) And Hi ghland's rernaininge- mails do not as"ert Defaults.

rather they raise '·questions and concerns" and seek additional information from Fontainebleau.
(SOUF 'll<ll .

119.) A request for information was not a notice of ddault upon which BANA

could issue a Stop Funding Notice. Thu::->. Plaintiffs' assertion that Lehman ·s bankruptcy
precluded BA NA frorn approving Advance Requests fails as a matter of law.

B.

BANA Did Not Know th at FBR Funded for Le hma n in Septe mber.

Plaintiff~ c lai m that BANA breached the Disbursement Agreernent by approving

t\dvance Requests even though it

alleg~dly

knew that FBR had funded Lehman' s September

2008 Retai l /\dvance- which it asserts was a Default, an Event of Default and causc:cl nurncrous
condit ions precedent to fail.

1

f>

But as detailed above, there is no support t"or Plaintiffs' allegation

that BANA knew that Lehman did not fund. Immediately before funding the Septernber 2008
Advance, BANA requested and received written and oral assurances from Fontainebleau CFO

Jim Freeman that even though Lehman bad fi led for bankruptcy, Fontainebleau's
representations, warranties and certifications remained correcl. (SOUF en 74) Plaimitfs'
assertion that T riMont told BANA that FBR funded for Lehman is based entirely o n inadmissible
17

-;peculation by TriMont's Rafecdic. which cannot create an issue of material Cact. ·

Nor can

5

See Pis. 2d T
nterrog. Resp., at 21.

36

See Pis. 2d lnterrog. Resp., at 6-9 .

.n

Cordoba v. Dillard's. Inc., 4 19 F.3d ll69, 1181 (lith Cir. 2005) ("[U'Insupported

:\

specul ation ... does not meet a party's burden or producing some defense to a summary
judgment motion. Speculation does not create a ge nuine issue of fact: instead. it creates a
false issue, the demolition of which is a primary goal of summary judgment.'') (internal
quocatio n marks omitted); see also Gerard v. Bd. of Regents o.fState o{Ga.. 324 Fed . App'x.

32

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Pla.im l rf~ c-.;tahl isll
analyst· ~

BANA ·.., knowkdge based on Hi ghland forwarding a Merril l Lynch

n.:~c;m.: h

e-mail reporting the analyst's .. understand[ingl" that ··equity '-ponsors.. had funded

Lehman's September Advance Request portion.'x The e-mai l did not identify a source or basis
for the statement. and its credibility was suspect because it si gnificantly overstated LchJnan·s
September Shared Costs portion. The e-mail simply repeated an unsubstunt iatcd market
rumor
rca~onable

fact- finder could conc lude based purely on this rumor, buried in a long email, that

BANA knew that FBR had funded for Lehman.

C.

UL LICO Permissibly Funded For Lehman.

Plaintiffs argue that ULUCO's decision to fund Lehman's Dcccrnher 2008 -

-

Shared Costs port ions should have prevented BANA from approving those Advance

Requests h!.:!causc ULUCO' s funding somehow failed to satisfy Disbursement Agreement
Section

3 . ~ . 23 · s

condition preceden t that " li In the case of each t\dvance from rhe Bank Proceeds

Account[, I .. . the Retail Agent anJ the Retai l Lenders shalL on the date specified in the relevant
Advance request. make any Advances rcq u ired of them pursuant to that Advance Request." '

9

But Plaintiffs ignore that ULUCO was a Retail Lender and that Lehman had delegated to
ULLICO the Retail Agent's duty to deliver the Shared Costs to BANA."m Therefore, ''the Retail

Agent and the Retail Lenders" made the requ ired Advances- - i. e., the funds carne only from
Retail Lenders. Plaintiff:·: assertion that Section 3.3.23 requires each Rclail Lender to fu nd a
specific portion or rhe Advance is inconsistent with the condition's terms. And it makes no
sense , because SANA had no ability to determine the amount of each individual Retail Co-

Lenders' required contribution ."+~ It is undisputed that the Retail Facility was syndicated under a

confidential process. and that BANA and the Lenders did not know the Retail Co-Lenders'

8 18. '8.26-27 ( II th Cir. 2009) (affirm ing summary judgment because witness's ' ·specularion"
about what facts defendant was aware of "does not create a genuine issue of material fact").
·'

8

See Pis. lnterrog. Resp. , at 7- 10; Pryor Rpt. 'U'Il 48-49 .

.19

Pryor Rpt. i[55.

-.10

Retail Agmt. § 9.., .
.~}

11

LipeerHolclings, LLC v. Trident Holdings, LLC, 766 N.Y.S.2d 56 1,562 (N.Y . .App. Div. 1st

'

Dep' t 2003) (''A contract should not be interpreted to produce a result that is absurd.
co mmercially unreasonable, or contrary to the reasonable expectations of the parries .").

33

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identities or com mitment amounts. Thu ~ , Section

the t.otal Shared

Co~i ts

be received from the Retail

3.3.23 -;hould he read as simply requiring Lhat
Co ~ Lenders

as a group.

Plaintiffs also suggest that ULUCO's funding for Lehman was an i ndependent Default
under the Retail Facility (anu not just a condition precedent failure unucr Section 3.3.23).'11 But

as discu~sed above, the Credit Agreement provides that BANA is not deemed lo have knowledge
of a Default unless and until it receives a forma l notice (sec pp. at 9- 10. supra). and BANA
indisputably never received a Notice of Defau lt concerning UL.UCO's funding. Moreover, there
is not a shrecl of evidence supporting Plaintiffs' allegation that BANA knew that. Soffer. FBR and

TRLP agreed t.o repay ULU CO's funding t'or Lehman.
D.

BANA Did Not Know t hat Fontainebleau Concealed the Anticipated Cosls to
Complete the Project.

Plaintiffs' allegation that BANA " knew ... that the Borrowers were concealing change

orders and fai l ing to provide bt~dget s and other requ ired reports for the Project that accurately
1

reflected the anticipated costs to complete construction'' is basckss.- :; No evidence even
suggests that BANA or !VI knew of Fontainebleau 's deception. To the contrary, it is undisputed ,

as detailed ahove. that Fontainebleau went to great lengths to conceal the budget overruns from

both BANA and I V L BANA and lVI were victims of the same misn. presenlations and
:
omi ssions underlying Pl aintiffs' own Nevada fraud c laim against Fontainebleau officers.
directors and affiliates:1-1

E.

The FDlCs Repudiation of FNBN's Commitment was not an Ad va nce
Re<lttest Condition Precedent Failure.

Plaintiffs assert that the FD lC's December 2008 repudiation of FNBN's loan
commitments prevented Fontainebleau from satisfying Disbursement Agreement Section 3.3.2's
condition that ''leJach representation and warranty .. . set f01th in Article 4 ... shall be true and
correct in all material respects as if made on such elate" becau~e Section 4.9.1 's representation
that ''[tlhere is no default or e vent of default under any of the Financing Ag reements" was

42

Sec Pryor Rpt. at 'U 55.

4.'

See Pis. 2cl lnterrog. Resp., at 10.

44

See generally Cantor Decl.11 29 (Brigade Cornpl. for l'vl isrepresentation , Breach of Fiduciary
Duty, Negligence and Conspiracy. Brigade Leveraged Capital Structures Fund, Ltd., et al v.
Fontainebleau Resorts, LLC. et al. (Clark. Co. Nev. 20 11 ) (No. A - 11-637835-B) (Mar. 25,

20 11)).
34

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false.

But Plamtiffs ignore that Section 3.

only requires the representatiuns to he true

"material respects." No reasonable fact-finder could conclude that

unfunded Delay Draw Term Loan and Revolver commitments totaled just
Credit Facility: and (ii)

F.

FNBN'

of the Sl.85

the Project remained "In Balance" by

6

107.7 million.' Therefore. Section

material respects and Section

(!)

BN' commitments were so ins1gnificant that when

BANA removed them from the In Balance
approximately

all

BN"s repudiated

commitments rendered Section 4.lJ.I"s representation materiallv false.

billion

111

9.1 's representation was correct in all

· s condition precedent was satisfied.

Guggenheim and Z Capital's March 2009 Failure to Fund was not an
Advance Request Condition Precedent Failure.

Plaintiffs repeat their erroneous argument regarding Section 3.3.2 with respect to
Guggenheim and Z Capital's March 2009 failure to fund their Delay Draw Term Loan
commitments, claiming that BA!'JA should not have approved the March 200<) Advance Request
as a result.

But as with FNBN, those lenders' commitments were not material because

(il Guggenheim and Z Capital's unfunded commitments totaled just S21.67 million, or roughly

I r;;., of the Senior Credit Facility (SOUF t1[ 191 ); (ii) their failure to fund had no immediate impact
because BAN/\ collected S327 million in Delay Draw Term Loan commitments in March 2009
against aS 138 million Advance Request (SOUF ru Jl)4 ); and (iii) BANA contacted Guggenheim
in March 200<) and was told that Guggenheim expected to fund its S I0 million commitment
within a few weeks-which it did (SOUF rl[ 193).
Moreover, Plaintiffs-or their predecessors-in-interest-never objected to the March
200<) Advance despite Guggenheim and Z Capital's failure to fund. As detailed above, BAN/\
posted a letter on Intralinks informing Lenders that it intended to include Guggenheim and Z

45

See Pls. 2d Interrog. Resp., at 13, 18; Pryor Rpt.

46

See ECA & Local I J4 IBEW Joint Pen\ion Trust of Chicago. v. JP Morgan Chase Co., 553
F.3d 187, 204 (2d Cir. 2009) (affirming complaint's dismissal because false statements
impacting only 0.3% of assets were immaterial as a matter of law); Parnes v. Gate~vay 2000,
Inc., 122 F.3d 539, 547 (8th Cir. 19<)7) (affirming complaint's dismissal because false
statements impacting only 1.7% of assets were '·immaterial as a matter of law"); In re
Westinghouse Sec. Litig., <)0 F. 3d 6<)6, 715 (3d Cir. 1<)96) (affirming complaint's dismissal
because false statements impacting only 0.54% of net income were immaterial as a matter of
law).

(II 90.

Pis. 2d Interrog. Rcsp., at 14; Pryor Rpt. (U 99.
35

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Capital's unfunded commitments in the In Balance
~larch

200!) Advance.

(SOla~·

a

lahlc Funds component fllr

(II 195) BANA requested that any

BANA's mterprctalion or believed that
BANA. (!d.)

s

Advance Request

Lemler notil ..

L~:nder

that did not

\\tth

ld not he approved notify

BANi\ that tt disagreed with BANA's

or

communicated to BANA that it shnuld not fund the March 2009 Advance Request. Thus, even if
there had been a condition precedent failure here, BANA indisputably was not indifferent to
Plaintiffs'

G.

or intentionally

to inflict harm on them.

The Supplemental March 2009 Advance Re(1uest \Vas Not Untimely.

Plaintiffs' suggestion that BANA should have rejected the March 2009 Advance Request
hecause Fontainebleau submitted the supplemental Advance Request less than three days before
the scheduled March 25, 2009 Advance Date is not supported the Disbursement Agreement's
terms.

Contrary to Plaintiffs' assertion, the Disbursement Agreement has no deadline for

supplementing an Advance Request. Disbursement Agreement Section 2.4.5 permits
Fontainebleau "with the approval of the Disbursement Agent and the Construction Consultant,
ltol revise and resubmit" Advance Request at any time "prior to the Scheduled Advance Date."
And while BA0IA is to "usc reasonable diligence to review and approve such supplemental
Advance Request" three days before the Scheduled Advance Date (id.), that simply means that
BANA had to make reasonable efforts under the

circumstances~it

does not create a hard

deadline. Indeed, if BANA had denied the March 2009 Advance simply because Fontainebleau,
apparently working to address !VI's cost concerns, had submitted a supplemental Advance
Request on March

correcting a $300,000 understatement of the In Balance amount that

would have been contrary to Section 2.4.5's requirement that BANA "consider [Fontainebleau's!
submission in good faith." Moreover, neither Section 2.4.6 (Advance Confirmation Notice) nor
Section 2.5.1 (Stop Funding

~otices)

refers to the Advance Request heing approved three days

before the Advance Date. Thus, the supplemental March 200!J Advance Request was not
untimely.

IS

See Pis. 2d lnterrog. Resp., at 29; Pryor Rpt.

<I[

36

llO(c)(l).

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CO:"'CLlJSION
BANA and Plaintiffs were both vtctims ot Fontaim:bleau'
tncludcd,

other th

(i)

Shared

tailing to

widc~rangin12

fraud, which

that H3R funded Lehman's Scptcmhcr 2001'\

Anticipated Cost Reports to conceal massive construction

cost overruns, and ( i i 1

- · But Plamti

of \vhom mvcsted only

f) now daun that BANA

this litigation's outcome, not the Project

or should have known'' these and other

!acts~~~

damages from BANA for not uncovenng Fontatnehlcau'-, deception,

opportunic-.tically
\vhilc

111

~-,imultaneously

pursumg fraud and breach of fiduciary duty claims against Fontainehkau

m another forum based on the

same facts. As demonstrated above, Plaintiffs' cynical

gambit fails to establish a breach of contract claim for three independently sufficient reasons.
F

the undi.sputcd facts -,bow that BANA fully performed its ministerial Disbursement

and Bank Agent duties hy approving and funding Advance Requests only after

all

required documentation, reprc-,entations, warranties, and certifications from Fontainebleau and
others. The Dishur:-,cment Agreement and Credit Agreement unambiguously permitted BANA to
rely on those

fications and, comrary to Plaintiff-,' assertion, imposed no obligation on

BANA to confirm or investigate the certifications' accuracy. Second, BANA can only he held
liahlc as

fur acts of

negligence, bad faith, fraud or willful misconduct-a high

standard under New York law requiring proof of reckless indifference or intent to harm
Plaintiffs. But there is absolutely no evidence that BANA sought to harm Plaintiffs or recklessly
disregarded their rights. To the contrary, the factual record is replete with evidence of BAN A's
good faith efforts to perform its agent duties. Third, Plaintiffs' allegations that BANA ''knew or
should have known·· that various events caused the Advance Request conditions precedent to fail
are independently meritless because they are inconsistent with the undisputed facts and the
governing agreements' unambiguous terms. Accordingly, BANA is entitled to summary
judgment dismissing Plaintiffs' breach of contract claim.

37

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Case 1:09-md-02106-ASG Document 385-1 Entered on FLSD Docket 12/06/2013 Page 45 of
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Dated: August 5. 20 ll

Respectfully submitted,

/~
,/1 0
By:.~LCL~~
O'MELVENY & MYERS LLP
Bradley J. Butwin (pro hac vice)
Jonathan Rosenberg (pro hac vice)
DanielL. Cantor (pro hac vice)
William J. Sushon (pro hac vice)
7 Times Square
New York, New York l0036
Telephone: [phone]
Facsimile: [phone]
E-mails: [e-mail];
[e-mail]; [e-mail];
wsushon @omm.com
-and-

HUNTON & WILLIAMS LLP
Christopher N. Johnson (Fla. Bar No. 69329)
Matthew Mannering (Fla. Bar No. 39300)
llll Brickell Avenue, Suite 2500
Miami. Florida 3 3131
Telephone: [phone]
Facsimile: [phone]
E-mail: cjohnson@ hunton.com;
mmannering@ hunton.com
Attomeysfor Bank OfAmerica. N.A.

38

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CERTIFICATE OF SERVICE
f. A::;her L. Rivner, hereby certify that o n August 5, 2011. 1served by electronic means

pursuant to an agreement between the parties a true and correct copy o f the forego ing Defendant
Bank of America, N.A.'s Motion for Summary Judgment and Incorporated Memorandum of Law
upon the below-listed counsel of record and that the original and a paper copy of the fo regoing
doc ument will be fi led with the C le rk o f Court under seal.
Kirk D illman. Esq.
Robert Mockler, Esq.

HENNIGAN DORMAN LLP
865 South Figueroa Street, Suite 2900
Los Angeles, California 900 17
T elephone: (2 13) 694-1 200
F asci mile: (2 13) 694-1234
E-mail: [e-mail]
[e-mail]

Artorneysfor Plaim(fjs A venue CLO Fund. Ltd. et al.

C/41_

/}

.

.(. /~

Asher L. Rivner

Case 1:09-md-02106-ASG Document 385-2 Entered on FLSD Docket 12/06/2013 Page 1 of 30

UNITED STATES DISTRICT COlJRT
SOUTHERN DISTRICT OF FLORIDA
\liami Division
CASE NO.: 09-2W6-MD-GOLD/GOODMAN
IN RE:
FONTAINEBLEAU LAS VEGAS
CONTRACT LITIGATION

:VIOL NO. 2106
Tlus document relates to all actions.

DEFENDANT BANK OF AMERICA. N.A.'S
OF UNDISPUTED \1/\TERIAL FACTS
IN SlJPPORT OF ITS MOTION FOR SUMMARY JUDGMENT
STATE~MENT

O'MELVENY & MYERS LLP
Bradley J. Butv,:in (pro hac
Jon at han Rosenberg (pro hac t·ice)
Daniel L Cantor (pro hac vice)
William J. Sushon (pro /we vice)
Times Square To\vcr
7 Ti mcs Square
New York, New York 10036
Telephone: [phone]
Facsimile: [phone]
-and-

IIUNTON & WILLIAMS LLP
Christopher N. Johnson (Fla. Bar No. 69329)
Matthew Mannering (Fla. Bar No. 39300)
Ill! Brickell Avenue. Suite 2500
Miami, Florida 33131
Telephone: [phone]
Facsimile: [phone]

Attomeysfor Bank ofAmerica, N.A.

CONTAINS INFORMATION THAT IS "CONFIDENTIAL" AND "HIGHLY
CONFIDENTIAL" UNDER PROTECTIVE ORDER

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Case 1:09-md-02106-ASG Document 385-2 Entered on FLSD Docket 12/06/2013 Page 2 of 30
Ca:-.c. No. lY)-2 106-MD-COL!)/GOODMAN

T ABLE OF CONT EN TS
Page
I.

THE P.ARTIES .......... .................................................................... ........ .... ............. ............ !

I I.

THE PR()JECT .... ........ ..... ................. .......... ........ ....-..................................... ..................... 2

I l l.

T H E PROJ ECT"S FIN!\NC ING ..... .......... .................. .... ................ ...... .......... .. .. ............... 3

A.

The Se ni or Cred it Fac ility ................................. .. ............ ... . ............... ........... ..... . .1

B.

The Retail Faci l it y ........... ........................ ...................................... .........................3

C.

The D isbursl!rncnt Ag rcemcnt ................................... .............. .......................... .....5

IV .

CONTRACT UA L PROT ECTIONS FOR DISBU RSEM ENT AGENT AND
ADM IN ISTRAT IV E A GENT. .................. .. .................... .............. .. .... .. .............................Y

V.

THE EVENTS UNDERLYING PLA INT IFFS' CLA IMS ................... ........................... 10
A.

T he Lehman Bankruptcy ............................. ........ ...... ........ ... ........... ..................... 10
I.

!JANA delt'mlines that the Sepremher 2008 Advance Request's
coJldi timzs {Jtl!cl:'den t were sotis/led ......... ...... ........... ... ................. ........... I 1

2.

Fonrainehfeau conceals that ils c!f.fi!ia tes jiuuled Lehman 's eortion
(?f' the S eplember 2008 Advonce Request .................................................. 12

J.

Fonloinehleau (Jrol ·ides repeated assurances !hal the Advance
!?eqaesl conditions precedent a re sati.~fi ed d esJ>ife Lehman ·s
hankruptcy ...... ........... ...... ... ... ....... ..... .......... ......... ...... ........ ... ... .... ...... ...... t J

4.
.. .......... 14

5.
6.

B.

BA NA e 1
·aluates H if? hlund','\ claim that Lehman 's hankmetcy was
a d ejuult under 1he luwt documents ................... ...... ................................. I S
Lenders could, cuul did. seek il!f'ormatirm ahour Leh.nwn directly
ji-om Fonrainehleau ..... .. ..... ....... .... .. ... .. ........... .... .... .............. ....... ..... .. .... . 17

Fontainebleau' s failure to Disc lose Anticipated Project Costs ...................... ...... l8
I.

IV! re1·iewed Fontainehleuu 's cost disclosures in cerr((ying and
app roving tlte Advance Re,tuests ............................................... ... ........... 18

2.

Fontainebleau reassured BANA amltltc Lenders that Anticipated
Projecl Costs remaitU::d within lmdget .................. .................... ................ l9

3.

BANA aeproved the March 2009 Advance Request only qfter /VI
finally issued a "clean ·· ConsTruction Consultant Advance
Cert!flcate ... ..... ......... ... .............. ....................... .. ......................... ............. 20

4.

.. ............. 22

-I -

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I 06

MD~GOLD/Ci(lODMAN

TABLE OF CONTENTS
(Continued)
Page

5.
C.
D.

IV!
that Fontainehlcauj(dsifled the A,nticifwted Cost
Reports........ . ....... ..... ................................................................. .
National Bank uf Nevada Repudiates

Commitment.. ...................... .

Delay Draw Term Lenders Fail to Fund the March 2009 Advance
Request ............................................................................................................. 24

-II-

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Case No. 09 -2106-MD-GOLD/GOODMAN

Pu rsu<ult m Loca l Ruk 7.5(cl. defendant Ba11k of An1crica. N.A. C' BANA'')
subm its this statement of material fac ts as to which there can he no dispute:

l.

THE PARTIES
I.

BANA is a national ly chartered bank w ith its main office in Charlotte, North

Carolina. (See Cantor Dccl. Ex. 90 at
,..,

11[

120.)

BANA acted as Adm inistrative A gent under the Credit Agreement for the Senior

Secured Facility k ndcrs. (Cn.::dit 1
\gmt.. ~

3.

1 1. 1)
).

BANA acted as Disbursement Agent under the Master Disbursement Agreement.

(Disbursemem Agm t. Ex. A. 2 )

4.

BANA was a Revo lver L oan lender to Fomaineblcau Las V egas. LLC and

Fonta inebleau Las Vegas II. LLC (col lective ly. the "Borrowers" o r "Fontaincbleatl'') under the
Credit Agreement. <.See Cantor Dccl. Ex. 90 at 1!1120.)

S.

Plaint iffs are a group of so phisticated financial institutions who were lenders- or

in most cases. SLh.:ccssors-in-intercst

to lenclc rs-lo

Fontainebleau under the Credit Agreement.

(See Cantor Dec!. Ex. 25 ar1jlj[ l 13 . 117).

All references to the '·Credit Agreement" or ''Credit Agmt." are to the C redil Agreement
dated as o f June 6, 2007 attac hed as Exhibi t 2 to the Declaration of Danie l L. Cantor
("Cantor Dec!.'').
2

U nless otherw ise specified. all references to the "D isbursement Agreement" or
"Disbursement Agmt." are to the Master D isbu rsement Agreement dated as of June 6 . 2007
attached as Exhibi t I to the Cantor Declaration.

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I 06~:V1D~GOLD/GO< >DMA:\

II.

THE PROJECT

X.

The Fontainebleau Las

is a partially completed resort and casino

development on an approximately 24.4 acre parcel at the Las Vegas Strip's north end (the
·'Project"). (See Cantor Dec!. Ex.

9.

)

The Project's developer was the Borrowers' parent, Fontainebleau Resorts, LLC

(''Fontainebleau Resorts" or ''FBR"). (Cantor Dec!. Ex. 34 at 23, 34.)
10.

FBR Chairman Jeff Soffer was a developer with years of experience developing

major residential and commercial projects across the United States. (Cantor Dec!. Ex. 34 at
79.)
ll.

FBR's Chief Executive Officer and President. Glenn Schaeffer, had overseen

numerous major Las Vegas development projects. (Cantor Dec!. Ex. 34 at
12.

58~59,

79-80.)

The Project's general contractor was Turn berry West Construction ("TWC" or

''Contractor"), a member of the Turnberry group of compamcs. (Cantor Dec!. Ex. 34 at 57.)
13.

The Turnbcrry group of companies had a 40-ycar track record building high-end

hotels and residential developments across the United States. including several prominent Las
Vegas projects. (Cantor Decl. Ex. 34 at 57-58.)

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Ca!-.e No. 09-2 106- MD-GO L D/GOODM t\N

Ill.

THE PROJECT 'S FI NANCI NG
lA .

bi ll ion

T"he Projt~c t ' s initial budget wa:-. $2.9 hillinn. w hkh included approximatel y $ 1. 7

or lwrd construction costs.
I :1.

(See

Bolio Del.:l. '!16. Ex . :2 (Disbursement Agrnt.. Ex.. C- 1J.' )

The largc~t indi v idua l financin g component for the Project's resort cornponcnt

was a 'S 1.85 billion senior s~eurcd debt facility ("Sen ior Credit Facility''). (See Dishurscrncnt

Agmt.. Recital B.)

16.

Additional financing sources included equity contributions by Fontainebleau and

its affi liates . $675 mill ion in

S~::coml

Mortgage Note:-. . and a $3 15 m illion loan earmarked for the

Project 's retail space ('"Retai l Facility''). (ld.)

A.

The Senior Cred it Facilitv

17.

Fontainebleau, BANA, Plaint iffs (or their pre d ecessors - in - intere~t), and other

non- party lenders entered into a June 6, 2007 Credit A greement creat ing the Senior Credit
Fuc i liry wh ich comprised three senior secured loans: (I) a $700 million rcrm loan (the ·'Initial

Term Loan"); (2) a $.150 million delay draw term loan (the " Delay Draw Term Loan") ; and (3 )
an $))00 m ill ion revolving loan (t he " Revol ver Lnan" ). {Credit Agmt. ~* 1. 1. 2. t. )
18.

Plat ntiffs ow n on ly Initial Term Loan and Delay Draw Term Loan notes. (Sec

Cantor Dec!. Ex. 25 (Second Am. Term Lende r Camp i. , A venue CLO Fund, LTD.. eta/. vs. Bank
o/A merica. N.A ..

l!f.

of., Case No. 09-CV-01047- KJD-PAL (S.D. Fla.) (filed Jan. 15, 2010 )

["D .E. 151 at 11 117).)

B.

T he Retail Facility

19.

The Project's retail space was to be developed by Fontainebleau Las V egas

Retail, LLC (the "Retail Affili ate''), an FBR subs idiary. (See CantOr Dec!. Ex. 34 at 28.)

::w.

The Project's resort and retail components each had their own separate cred it

facilities and const ruct ion bud gets. (See Cantor Dccl. Ex. 23 (SuMnan Dcp. at 17 3: 18- 174:3);

see also Disbursement Agmt. , Recital C.)
2 1.

FBR speci fically designed the reta il space 's financing to be separate and distinct

from the Senior Credit Facility. (See Cantor Decl. Ex. 23 (Susman Dep. at 173: 18- 174 :3).)

22.

The $315 million Retail Facil ity was subject to a separate June 6, 2007 agreement

between the Retail Affiliate and L ehman Brothers Holdings, Inc. (the "Retail Facility
Agreement") . (See Cantor Dec!. Ex.. 35 (Retail Agmr.

4

).)

All references to the '' Bol io Dec!.' ' are to the Declaration of Brandon Bolio.

-3-

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Case No. 09- 2 106-MD-GOLD/GOODMAN

23.

BANA was not a party to the Retail Cn-Lcnder Agree ment o r the Retail Fac ility

A greement. BAN A did not recei ve a cory of the Retai I Co- Lender A greement. (.'·)ee Retai I
A gmt.: see also Susman Dec I. <I[ 9. ~ )
24.

T he resort budget included $~3 mi lli0n in costs that were to be funded through the

Reta il Facility ("Shared Costs" ). (See Disbursement /\gmt .. Recital C.)

25.

T he Shared Co~ts were used to fund construcLion of portions of the ProJect 's retai l

space that were structural ly inseparable from the resort. (Susman Dccl. < 12.)
I[
26.

Lehman Brothers Holding, Inc. ("Lehman ") signed the Retail Faci lity A greernent

as<\ lender and as the

age nt for one or rnore co- lenders (each a '"Retail Co- Lender' ') . (See Retai l

Agn1L. at I .)

27 .

The Retail Facility A greement permitted Lehman to syndicate some or all of the

Retai l Facility to other lenders. (See Retail Agmt. ~ 9.7.2.)

28 .

The Retai l

F<~ci l ity was syndicated under

a separate confidential agreement' among

the Retail Co- Lenders (the ·'Retail Co-Lend ing Agreement"). (See Canto r Dccl. Ex. 85 [Dep Ex .

91.)
29 .

The terms under which the Retail Fac ility was syndicated to the Retail Co-

Lenders were not disclosed to BANA. (S usman Decl. (I!~ 8, 9.)

30.

The identity of the Retail Co-Lenders was unk.nown to BANA until the Borrowers

revea led the participants in late 2008.

3 1.

(Susm~tn

Decl. (II 10.)

The Retail Facility Agreement permitted Lehman to "de legate all o r any port ion

of its responsibilities under [t he Retail Faci li ty Agree ment] and the other Loan Documents to the
Servicer." (See Remi.l A gmt. ~ 9.3.)

32.

Lehman desi gnated TriMont Real Estate Advisors, lnc. (''TriMont'') a..'> the

Servi cer for the Retail Facility. (Cantor Decl. Ex.
33 .

Lehman delegated to TriMont the responsibility for collectin g the Retail Co ..

Lenders' respective Shared Costs obligations in response to an Advance Request and transferring
those funds to BANA, as Disbursement Agent. (See Can tor D ecl. Ex. 5 (Rafeedie Dep. at 18:2219:8).)

A ll references ro the ''Retail Agreement" or "Retail A gmt." are to the Retail Facility
Agreemen t dated as of June 6, 2007 auached as Exh ibit 35 to the Cantor Declaration.
A ll references to the "Susman Decl. '' are to the Declaration of Jeff Susman.

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Case Nn. 09-2 106-MD-(IOLD/GOODM AN
C.

The Dis bursement Agreemt•nt

~4.

Thl: Borro\ver·s access to the <.:1
mstruction financ in g was governed by a June 6.

2007 Master Dishu rse mcm /\grcen\cnt (''Dishursc rnent 1\grcc nh.:nt .. ). (See generally Cantor

Dec!. Ex. 6 (Yunker Dcp. a! 20:3- 2 1:5).)
No nwre than once per month. Fontn inchleau suhmilted a Noricc of L3nrr0\ving

. 5.
1

that. subject to certain terms and conditions, wou ld require Lender;.; to transfer funds into a
designated bank account (the " Bank Proceeds Accoum"). (See Credit !\gmt..~ * 2. 1(c). 2.4(c).)

Fontaineb leau could not withdraw funds directl y from the Bank Proceeds

36.

Account. (See Disbu rsement Agrnt. *~ 2.2.2. 2.J(d).)
To access funds to pay Project costs (an " Advance .. ), Fontainebleau was required

37.

to submit a monthly Adv:Jncc Request, the form unci contents o f which were prescribed hy the
D isbu rsemen t Agreement. (See D isbursement A gml.
:1~ .

**

2. 1. 2. 2.4. 2.4. 1.)

l\ftcr Fontainebleau submitted an Advance Request, BA A was requ ired Lo

"review the Adv(Jncc Request and attachments thereto to determ ine whether all required

docUJn.cntatinn has been provided." (See Disbursement

!\ gm t., ~

2.4.4 (a).)

BANA was required to confirm that each Advance Req uest contained all the

39.

representations, warranties, and certifications necessary to sat isfy Disbu rsement Agreement

Section 3.3') conditions precedent to an Advance. (See Disburse men t Agnu. § 2.4.6.)
Each Advance Request required Fontaineble<lll, among other things. to " represent.

40.

warrant und certify" that "the conditions set forth in Section 3.3 ... of the Disbursement

Agreement are satisfied as
Bo lio Decl.

(II 6, Ex. 2 (Disbu rsement

c~ I.

•

or the Reques ted Advance Date."

(See

Disbursement Agmr. § 2.4 . I:

Agmt. Ex. C-l at l, 8).)

Section 3.3 had twent y-four separate multi-part conditions precedent, including:
"Representations and Warranties. Each representation and warranty of ... [ejach
Project Entity set forth in 1\rti.clc 4 ... shall be true and correct in all material respects

as if made on such date,. (See Disbu rsemen t Agml. ~ 3.3.2.)
•

"Default. No Default or Event of Def<lult shall bave occurred and be continu ing." (!d.
~

•

3.3.3.)

''(:onsultant Certificates and Reports. Delivery to e:Jch of the applicable Fund ing
Agents and the Disbursement Agent, of (a) the Construction Consultant Advance
Certificate approving the corresponding Advance Req uest, and (b) the Archi tec t's
Advance Certificate with respect lO the Advance, and (c) the General Contractor
Advance Certificate with respect to the Advance.'' (!d. § 3.3 .5.)

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Cas~

•

No. 09-21 Oh-MD-GOIJ)/GOODM

suhrmtt~d an In Balance
The Project l:ntit
(!d. ~ 3.3.~.) The In
In Balanc~ Test h
the Project's
Funds equal or
i\ va1
R~main·

•

Smcc the Clo-.,i
Date. there shall nut hav~.: occurred any
the economics or fcasihiltty or constructing and/or operating the Pro1cct. or
Ill
financial condition, businc-.,s or property of the Project Entities, any of which
could reasonahly be expected to have a Material Adverse
" (/d.
.II.)
111

*

•

case of each Advance from the Bank Proceeds Account
In
made concurrently with or after Exhaustion of the Second Mortgage Proceeds
fied in the
Account, the Retail Agent and the Retail Lenders shall, on the date
Advance Request, make
Advances required of them pursuant to that
.)
Advance Request." (/d. 3.3

*

•

In the case of each Advance from the Bank Proceeds
Account made concurrently with or after Exhaustion of the Second :Vlortgage
Account,
Construction Consultant shall to the extent set forth in the
Construction Consultant Advance Certificate have approved all Plans and
fications which, as of the date of the relevant Advance RequesL constitute Final
Plans and Specifications to the extent not theretofore approved." (!d.~
.19.)
Each Advance Request required Fontainebleau, among other thing-.,,

warrant and ccrti

"represent.

that ''the conditions set forth in Section[] 3.3 ... of the Disbursement

Agreement arc satisfied as of the Requested Advance Date."
(Disbursement

to

Ex. C-1, at

Bolio Decl. 'I[ 6, Ex. 2

) The Advance Request also included multiple specific

representations that generally tracked the substance of Section 3.3's conditions precedent. (!d. at
) In addition, Fontainebleau certified that each of the seventeen Advance Request
attachments "is \Vhat it purports to he. is accurate in all material respects, ... and retlects
information required by the Disbursement Agreement to he reflected therein." (ld. at

I.)

Each Advance Request included certifications from the Project architect
Bergman, Walls & Associates Ltd. CBWA" or "Architect"), which certified, among other
things, that "ltJhe construction performed on the Project ... is in general accordance with the
'Drawings and Specifications.''' (See Bolio Dec!. (If 8. Ex. 4 (Disbursement Agmt. Ex. C-3 ).)

44.

Each Advance Request included certifications from TWC, which certified, among

other things, that

"It jhe Control Estimate ... reflects the costs expected to be incurred by [TWC]

to complete the remaining 'Work' ... on the Project.'' (See Bolio Dec!. (![7,

3 (Disbursement

A gmt. Ex. C-4 l.)

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106~MD~GOLD/GOODMAN
45.

IVI")~~-who

Inspection and Valuation International, Inc

Construction Consultant under the Dishursement

was appointed

the Advance Requests.

Dep. at 7: I
lVI performed monthly
Fontainebleau at the site

47.

After

information disclosed

and summarized its

in Project Status Reports. <Cantor

lVI was required to "deliver to

an Advance

. . a Construction Consultant Advance Certll"icate'' either approving or

Disbursement
disapproving

Advance Request.

48.

Disbursement A gmt.

Construction Consultant

nther things,

based on its

of

~

2.4.4(b ). )
IVI

amonn
tJ

material and data made available" by the Borrowers.

Contractor, Architect and others, as well as the relevant invoices. Plans and specifications, its
walk~through

and construction observations, and all prior Advance Requests and suppmting

documentation:
•

'"The Project Entities have properly substantiated, mall marerial respects, the Project
Costs for which payment is requested in the Current Advance Request";

•

"The Remaining Cost Report attached to the Current Advance Request accurately
reflect, in all material respects, the Remaining Costs required to achieve Final
by each Line Item Category";
Completion

•

"The Unallocated Contingency Balance is substantially as set forth in the Detailed
Remaining Cost Report attached to the Current Advance Request and docs not equal
or exceed the Required Minimum Contingency":

•

·'The Opening Date is likely to occur on or before the Scheduled Opening Date set
forth in the Current Advance Request and the Completion Date is likely to occur
within 180 days thereafter'';

•

"The Advances requested in the Current Advance Request arc, in our reasonable
judgment, generally appropriate in light of the percentage of construction completed
and the amount of Unincorporated Materials"; and

•

"The undersigned has not discovered any material error in the matters set forth in the
Current Advance Request or Current Supporting Certificates."

(See Bolio Decl. (J[ lO, Ex. 5 (Disbursement Agmt. Ex. C-2).)

49.

After receiving the Retail Co-Lenders' funds. TriMont sent a single wire transfer

for the entire requested Shared Cost amount

to

BANA-it did not identify the specific arnounts

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<N<~ I 06~MD~GOLD/GOODMAN
funded

I Co-l

Cantor I

. 5 ( Rafeedie Dcp. at

~0:

1:9):

( Su~man Dep. at 204:9-1 OJ. l

Cantor Dec!

Di~hur~cment

Shared Costs was an

s receipt of the

Di~bursement

3.3

Request condition precedent under Dishursemt:nt

* .3
Reque~t' s

If an

51.

conditions

and Fontaint::hleau were required to execute an Advance Confirmation

Disbursement

*2.4.6.)

Di~bursL~ment

In the Advance Confirmation Notice, Fontainebleau

expre~sly

confirmed "that

warranties and certifications made in the Advance Request ...

each

Appendices attached thereto) .... arc true and correct as of

(including the

Requested

and Disbursement Agent is entitled to rely on the foregoing in authorizing and

Advance

the Advances herein requested" and "that
warranties and certifications arc correct as

(ll 14,

led, B

were

[Advance Request I representations,

the Requested Advance Date."

Bolio Dec!.

20 (Disbursement Agmt. Ex. E).)
53.

The Advance Confirmation Notice instructed the Bank

capacity as Administrative

Agent~to

Account to payment accounts on

If

in its

transfer the requested funds from the Bank Proceeds

Scheduled Advance Date for further disbursement to

Fontainebleau. (S'ee Disbursement Agrnt.

54.

Agent-~BANA

~

2.4.6.)

conditions precedent were not satisfied, the Disbursement Agent was

required to Issue a Stop Funding Notice. (See Disbursement Agmt.

*2.5.1.)

A Stop Funding Notice would be issued if "the [Funding Agent] notifies the
Disbursement Agent that a Default or an Event of Default has occurred and is continuing." (See
Disbursement Agmt.
56.

*2.5.

L)

A Stop Fundi

Notice temporarily suspended the Lenders' obligations to fund

loans under the Credit Agreement. (See Disbursement Agmt.

*2.5.2.)

For each Advance Request from September 2008 through March 2009, BANA
received aU the required advance certifications from Fontainebleau, TWC, lVI and BW A:
•

Fontainebleau certified the satisfaction of all conditions precedent and accuracy of all
representations and warranties, including the absence of defaults under the Loan
Documents. (See Bolio Dec!. (ll 13, Exs. 19);

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•

T\VC certified
cnnfirmed that the Control Estimate rdkcted the costs 11 expected to
incurred to complete the Project. (1£/. );

•

BWA certified that the construction performed on the
with
Project" s plans and specifications. (!d.);

•

lVI certified that the Remaining Cost Report accompanyi

IV.

to date \Vas in accordance

the Advance Request
accurately reflected the remaining costs required to complete the Project.
Bolio
Dec I. (II 15,
2I
l
CO~TRACTOAL

PROTECTIONS FOR THE DISBORSE:VIE:"lT AGENT
ADMINISTRATIVE AGE~T
In

for managing

Disbursement

S 1.85 hill ion Senior Credit Facility, the
earned just S40.000 and S I

and Admini .
.;,trative
Bolio Dec!. (II 12,

respectively.

shall

,000 per year.

. 17 (Naval Dep. at 17:17-IH.

Cantor Decl

).)

0 sets forth the Disbursement Agent's rights and

Disbursement
responsibil

A~D

provides. among

Section

things. that BANA ''may rely and

protected m acting or refraining from acting upon" certifications and other statements hy

l,'ontaineblcau and !VL and that "[n lotwithstanding anything
contrary, in ... approv1ng

in this Agreement to the

Advance Requests, ... [BANA I ''shall be entitled to rely on

certifications from the Project Entities ... as to satisfaction of any requirements and/or
conditions imposed by this Agreement:· Section 9.3.2 also states that BANi\ "shall not be
reqUired to conduct any independent investigation as to the accuracy, veracity or completeness of
any such items [in the Advance Request] or to investigate any other facts or circumstances to
verify compliance hy the Protect Entities with their [Disbursement Agreement] obligations."
(Disbursement Agmt. § 0.3.2.)
60.

If a default occurred under the Disbursement Agreement, Fontainebleau was

required to "provide to the Disbursement Agent, the Construction Consultant and the Funding
Agents written notice of: Any Default or Event of Default of which the Project Entities have
knowledge, describing such Default or Event

or Default and any action being taken or proposed

to he taken with respect thereto." (Disbursement Agrnt.
61.

~

5.4.1.)

Section 0.10 limits BANA's duties as Disbursement Agent, providing, among

other things, that:
•

" ... [BANAl shall have no duties or obligations [under the Disbursement Agreement]
except as expressly set forth herein, shall be responsible only for the performance of
such duties and obligations and shall not be required to take any action otherwise than
in accordance with the terms hereof';

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30 Ctsi.:: No. OtJ- 2 106- MD-GOLD/GOODMr\N
•

·· . . ntllhing in this Agre ,~ mcnL expressed or implied. is intended tn or shall he so
con:>lrucd <is tn irnpo:-,e upon [BANAl any obligatit)nS in respect or this Agreeme nt
cxct:pt as t:xprcssly set forth herein or then.:in"; and

•

•· . . . 1 BANA 1 s hall have no

Event of Dc f~lll l t

duty to inquire of any Person whether a Default or an
has occ urred and is cont inuing."

(Disbursement Agmt. ~ 9 . 10.)
62.

Section 9.1.0 limits BANA 's poten ti al liability to bad faith. fraud, gros-;

neg ligence o r wi llful mi sconduct:
Neither the Disbursement Agent nor any of its officer<>, directors.
employees or agents sha ll be in any manner liable or res po nsible
for any loss o r damage arising by reason of any act or omissi o n to
an by il or them hereunder o r in connection with any of the
transactions con templated hereby, tncluding, but not limited to,
any lo~s that may oc.:c.:ur by reaso n of fo rge ry, fal se representations.
the exercise of i t:-- di:>cretion, or any other reason, except as a result
o f their bad faith. fraud. gross negligence o r w i llful misconduct as
finally judicially determined by a court of competent jurisdiction.

(!d.

63 .

*9. I 0.)

The C redit Agreement contained sirni lar provisions to the Disburse rnem

Agreement that expressly permitted BANA , as Administrative Agenr. to rely on representations
by Fontaineb leau and others, did not require RANA

to

invesligate those represematlons, placed

rhe burden on Fontainebleau to report defaults, and l imited SANA's liability to gross negligence
or worse. (C redit A g mt. *~ 6.7, 9.3, 9.4.)

V.

T HE EVENTS UN DERLYING PLAINTIFfS' CLAIMS
A.

The Lehman Bankruptcy

64.

Lehman riled for bankruptcy on September 15. 2008. (See Cantor Dec!. Ex . 91 .)

65 .

Fontainebleau requested nearly $3.8 million in Retail Faci.lity funds as part of its

$ 103.7 rnillion September 2008 Advance Request. (See Bolio Dec !. (ff 13, Ex . 7.)
66.

I f the Retail Facility did not fund its eniire portion of the Advance Req uest, no

funds would be disbursed to Fontainebleau from the Bank Pmceeds Account, and could cause
Fontainebleau to be unable to
~

pay that month' s Project construction costs. (Disbursement A g mt.

3.3.23.)

67.

ft was understood that Fontainebleau's failure to remain timely in paying

subcontractors could adversely impact the Project. (See Susman Dec!. 1!121.)

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I.
In

/MN;t determines that the September 200H ;\dvance Request's
conditions precedent were sati~fied.
fnllowi

Lehman's hankruptcy fil1

Fontainchleau to obtain additional information

BAf\:A held a series

the Lehman bankruptcy's

implications for the September 2008 Advance Request. (See Cantor Decl. Ex. 6 (Yunker Dep. at

Is that BANA held \vith 1-;·ontainebleau after Lehman's bankruptcy filing

69.

on whether Lehman would fund its portion
alternative financing
Facil

the Advance Request and on potential

if Lehman did not fund. includi

Lenders or Fontainebleau. (Cantor Decl.

fundi

by the other Retail

6 (Yunker Dep. at 81: I

14).)

During the phone calls \vith Fontainebleau after Lehman· s bankruptcy filing,
BANA listened to Fontainebleau discuss its financing options if Lehman did not fund, but did
6 (Yunker Dep. at'

not make any recomm.:ndations. (Cantor Dec!.
I.

:X~

I

Internally. BANA concluded that Fontainebleau funding Lehman's share would

not satisfy the Advance Reque:-,t's Conditions Precedent. (Cantor Dec!. Ex. 6 (Yunker Dep. at

96: II

).)
BANA believed that it \vas required to honor Fontainebleau's September 2008

Advance Request if the entire requested Shared Costs were received from TriMont, and the
Advance Request certifications remained in effect. (Cantor Decl. Exs.
173:

174:3; Howard Dep. at

I 0 (Susman Dep. at

80:21~81:1'\).)

On September 26, 2008, Tri\llont sent BANA a single wire transfer for the entire
Retail Shared Costs requested amount. (Cantor Dec!. Ex. 38 [Dep. Ex. 241]; see also Cantor
Decl. Ex. 12 (Brown Dep. at 78:20-79:5).)

74.

On September 26, 2008, before disbursing funds to Fontainebleau, BANA

recencd repre:-,entations from Fontainebleau CFO Jim Freeman re-affirming the Advance
Request's certifications that all conditions precedent to funding-including funding by the Retail
Lenders-were satisfied. (Cantor Dec!. Ex. 39 [Dep.

751; see also Cantor Dec!. Exs. 6, U

(Yunker Dep. at 143:23-145:2; Freeman Dcp. at 215:18-217:14).)
As of September 26. 2008, Lehman had not announced that it would reject the
Retall Facility Agreement as a result of its bankruptcy and, thus, BANA had no reason to believe
that agreement was mvalid. (Susman Decl. (J[ 19.)

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76.

Based on Information from Fnntainehlcau and BANA's own involvement

syndicated

BANA

111

Susman Dec!.

other

and thereafter that Lehman was

Septemher

continuing to honor some loan commitments. (Cantor Dec!

.I ); see

tn

1

(Susman Dcp. at I

(II

BANA concluded that the Lehman hankruptcy did not provide a

for

Fontainehlcau· September 200R Advance Request and disbursed the funds. (Susman
Decl. <I! 16.)

Fontainebleau conceals that its affiliates funded Lehman's portion of
the September 2008 Advance l?,equest.

2.

Lehman's portion

or the September 200R

Fontainebleau Resorts, vvhich made a
project funding delay and

Request was funded

184 "equity contribution" to "prevent an overall

disruption of its Las Vegas project" after Lehman failed to

fund its required Scptcmher 200X Retail Shared

portion. (Cantor Dec!.

40 [Dep. Ex.

14].)

79.

Internal

September 2008.

80.

documents rdlcct BANi\ 'she lief in 2008 that Lehman
, e.g., Cantor Dec!.

56!Dcp.

ll1

]. )

Jim Freeman was instructed by Fontainebleau's counsel not to reveal that

Fontainebleau Resorts had funded for Lehman. (Cantor Decl.

13 (Freeman Dep. at

.8-20;

II) )

81.

Mac Rafccdie testified that he could nut "recall the exact things that v.. ere

discussed in that call" with BANA but that "consistent with [his! practice," he "could have" told
BANA that FBR funded for Lehman; but

also testified that the discussion ''could have been

just that Lehman's dollars vverc funded, not necessarily \vho funded what." (Cantor Dccl. Ex. 5
: 13-58: 19).)

(Rafccdie Dcp. at

BANA 's Jeanne Brown testified that she did not recall ever having discussed with
Mac Rafecdic whether Lehman itself funded in September 2008. (Cantor Decl.
Dep. at

1-8; 64: I

X3.

12 tBrown

:3; 66: 15-24).)

On Octohcr 6, 2008, Jim Freeman told Moody's that "Retail funded its small

portion last month." (See Cantor Decl. Ex. 44 [Dep. Ex. 283].)

J

Freeman did not tell Moody's that FBR had funded for Lehman in September

because "[b ]ased on the discussion that I had, the advice of counsel, I was -- I was not talking to
people about the source of funding.''

Cantor Dec!. Ex. l3 (Freeman Dep. at 250: I 0-12).)

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IOODMAN
Jim Freeman told BANA's kiT Susman that Retail Lenders had funded the
September 200H Shared
X6.

(Cantor Dec!. Ex. '

19...J.:4).)

(Susman lkp. at

Fontainebleau's CEO (ilcrm

Bill

r had

that Lehman

Dep. at 64: 11-65· 3 ). )

funded in September 200X. (Cantor Dtxl.

Folltainebleau provides repeated w;surances that the i\d~·ance Request
condition"' precedent are satisfied despite Lehman's bankruptcy.
>!.7.

BANA

On September

Fontameblcau to schedule a call with

Lenders to address their Lehman-related questions. (Cantor Dec!.

In anticipation
questions. including

!Dcp.

. lJOlJ.)

Lender call, BANA sent Fontainebleau a list of potential
Lehman funded its

200/S Shared

portion.

identity of any entity that funded on Lehman's behalf, and the Lehman bankruptcy's effect
on Fontainebleau's ability to complete the Project. (Cantor Decl. Ex. 42 [Dep. Ex. 76J.)
Fontainebleau
later hacked out.
90.

to participate in the Lender call that BANA requested hut

Cantor Dec!. Ex . ...J.J [Dep. Ex. 205J.)

On October 7.

Fnntaineblcau sent BANA and the Lenders a memorandum

addressing the Retail Facility's status. (Cantor Dec!. Ex . ...J.7 I Dep. Ex. 771.)
lJ I.

The October 7, 200X memorandum assured the Lenders that the August and

September Shared Costs had hecn funded in full. (ld.)
The October 7. 200H memorandum stated that Fontainebleau was "continuing
active discussions with Lehman Brothers to ensure that. regardless of the Lehman bankruptcy
filing and related acquisition by Barclay's, there is no slowdown in funding for the project."

(/d.)
lJ3.

The October

2008 memorandum stated that Fontainebleau did not "believe

there will he any interruption in the retail funding of the project." Ud.)
lJ4.

On October 22, 200X. Fontainebleau provided the Lenders with another update,

stating that "Lehman Brothers' commitment to the Retail Facility had not been rejected in
bankruptcy court and remained in full force and effect." (Cantor Dec!. Ex. 51 [Dep. Ex. 285].)

95.

Fontainebleau's October

2008 update stated that ''Lehman Brothers has

indicated to us that that it has sought the necessary approvals to fund its commitment this
month," and it had received assurances from the "co-lenders to the retail facility'' that "[i]f
Lehman Brothers is not in a position to perform ... that they would fund Lehman's portion of the
draw.'' (/d.)

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96.
September
Dec!.

On December 5. 200X. FBR i:-.-.;ued financial 'ilatements for the period ended
200X that included di'iclosures
!Dep.

status. (Cantor

the Retail Facdi

!. )

FBR's financtal statements represented that "'[tjhe Company
co-lenders to en-,ure that

diligently \\'ith L.:hman Brother\ and

been

1s no nterruption in

funding for the retail component." (/d.)
The FBR financial statement\' "'Equity Contributions" disclosure made no
mention of its September 2008 equity contribution on Lehman's behalf. (ld. at FBROI

99.
Advances.

100.

Lehman funded its Shared Costs portion for the October and November
Cantor Decl.

5 . •(Rafeedie Dep. 63: I

I.

In December 2008. BAN!\ learned that Union Labor Life Insurance Company

(''ULLICO") \vould fund Lehman's Shared Costs portion. (Cantor Dec!. Ex.

269:24-270: 19): Cantor Ded. Ex.
l 0 l.

(Susman Dep. at

]. )

!Dep.

ULLICO was a Retail Co~ Lender under the Retail Co~ Lending

(Cantor DecL Ex. 4 (Kolhen Dep. at I 0: 17-ll: 16); see also Cantor Dee!. Ex. 85 [Dep Ex. 9].)
102.

Each month from October 2008 through Ylarch 2009, TriMont wired BANA the

full requested Shared Costs. (Bolio Dec!. 11[ 16. Ex. 2<)-34. J

I 04.

In December 2008, ULLICO entered an agreement with Soffer, FBR and TRLP

under which ULLICO would pay Lehman's December 2008 Retail Advance portion, and Soffer,
FBR and TRLP would guaranty repayment within ninety days. (See Cantor Dec!. Ex.

[Dcp.

24].)

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09~_1 06~l\ilD~< IOLD/GOODM

4 ( Kolhen Dep. at 95:
There is no

16~96:

that

I X).)

L!uaranties were ever disclosed to

A or

R4.N;\ evaluates Highland's claim that Lehman's bankruptcy was a

default under the loan documents.
109.

Funds managed by Highland Capital Management ("Highland'') were Initial Term
Cantor Decl. Ex.

Loan and Delav Draw Term Loan Lenders.

Complaint

Breach

or Contract, Breach of the

(Sccond Amended

Implied Cnvcnant

Good Faith and Fair

Dealing. and Declaratory Relief (Jan. 15. 2010) at'1!'1[3XAO, 117).

110.

On September

2008, Highland sent BANA an

e~mail

claiming that

'·lals

a result
[Lehman]'s bankruptcy filtng earlier this month. the financing
arc no longer in full force and effect, triggering a number of breaches
under
Loan Facility~ resulting in the following consequences: (i) :-.io
dishursements may he made under the Loan Facility; and (ii) The Borrower
should be sent a notice of breach immediately to protect the Lenders' rights and
ensure th:1t any cure period commence as soon as possible."

(Cantor Dec!.

Ill.

41 [Dep. Ex. 4.55].)
BANA, through its outside counsel Sheppard :V1ullin Richter & Hampton LLP.

told Highland that the Bankruptcy Code specifically provides that "no executory contract may be
terminated or modified solely based on the commencement of a Chapter II case." and asked
Highland to identify any ''authority or documents supporting a contrary conclusion.'' (Cantor
Dec!. Ex. 49 [Dep. Ex. 904j.)

112.

Following communications with Highland and further internal analysis, BANA

concluded that Lehman's bankruptcy did not provide a basis for rejecting Fontainebleau· s
September 2008 Advance Request. (Susman Dec I. tll 16.)
I I~-

BANA provided additional information to Highland in a September 29. 2008

Sheppard Mullin e-mail, explaining that it had been ··monitoring all !Lehman I court orders" and
was "unaware of a restriction on performance of this agreement." (Susman Dec!. (I[ 22, Ex. 5.)
e-mail also rejected Highland's suggestion that Lehman's bankruptcy was an "anticipatory
repudiation of the contract." (!d.)

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I 06- M D-CIO LD/CiOO D M i\ N
114.

On September

.~0.

2008. Highland sent BANi\

that Lehman's bankruptcy constituted a Material

e-mad, this time claimi

M

). (Susman Dec!.

(II

. 5.)
115.

BANA concluded that Highland's September

2008 claim was incorrect

because there was no indication that there would be a shortfall in Retail Funds, or that Lehman
under the Retatl Facility. (Susman Dccl. (II

1

.)

116.

117.

On October 13, Highland forwarded to BANA a Merrill Lynch research analyst's

e-mail that discussed nine industry developments ami, in the only sentence referring to
Fontainebleau. stated:

understand that FBLEAU equity sponsors have funded the amount

required from Lehman on the
. 50 [Dep.

I credit facility due this month ($4 million)." (Cantor Ded .

459j.) The Merrill Lynch research e-mail that Highland forwarded to BANA

did not identify a source or basis for the statement, and it overstated Lehman's Shared Costs
portion. (!d.)
118.

Highland claimed that the market rumor created "a breach concern under the

Disbursement Agreement" and that "Lehman [was] in breach of the [Retail] [A]greement
because it failed to fund and thus the agreement [was! not in full force and effect." (fd.)
119.

[n its October 13. 2008 e-mail, Highland also requested that because of these

concerns, BANA "confirm" certain matters concerning the Retail Facility, including: (i) "wiring
confirmations from the Retail Lenders or funding certificates from the Retail Lenders to confirm
that funding is made by the Retail lenders (rather than other sources)" and tii) a legal opinion
from the ''borrower's legal counsel ... that the Lehman funding agreement is in full force and
effect." (!d.) Highland cited no provision of any agreement requiring such information be
provided to the agent or the lenders. Ud.)

120.

(Cantor Dec!. Ex. 16 (Rourke Dep. at 103

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121.

Bt\N;\

representattons and

evalualt.~d

Highlamfs chum. hut

made hy Fontainebleau in the September and October 200X
the continued receipt

other statements

it in view of the numerou:-.

requested Shared Cost:-. from TriMont, and the

Fontainehleau. (Susman Dcd. (II

ln September :2008. numerous credthlc publications reported that certain Highland
and faced a liqUidity crunch. (Cantor Dec!.

had suiT

Paulden, Highland Shuts Funds Amid ·unprecedented' Disruption, BLOO\tBUW (

(P.

16.

2008) ). )

6.

Lenders could, and did, seek
Fontainebleau.

ir~formation

about Lehman directly from

l\tany Lenders contacted Fontainebleau management directly in the fall of 2008 to
questions. among other things, about the Lehman bankruptcy's implications for the Project.

(Cantor Dcel. Ex. 16 (Rourke

Cantor Dec!. Ex. 16 (Rourke Dep. at 137:8-12); Cantor Dec!. Ex.

128.

There is no evidence that Highland ever submitted a formal Notice of Default or

raised any further concerns with BANA regarding Lehman's bankruptcy.

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\
B.

Fontainebleau's Failurl' to Disd nsc Anti cip uted Pro ject Costs.

129.

Man y large-scale deve lopment projects cxp~·r i c ncc co:-.t increases during the

const ru ction process, and the Fontai nebleau ProJect wa:; no exception. (See Barone Dec!.

130.

<
il

6

11 .

)

After uncoveri ng Fontainebleau' s fraud during discovery in th is action, Plainti f fs

fi led -.;u it aga inst FBR , the Contractor (TWC). Jell Soffer, Gknn Schaeffer, .lim Freeman and
others. asserting claims for f raud and hreach of fiduciary duty based on the knowing ly false and
misleading SLatcments made to BANA and lVI. (Cantor Dec !. Ex. 27 .)

l.

13 1.

/ VI reviewed Pontainebleau 's cost disclosures in certifyittf? and
approving tlte Advance Requests.

Eac h monrh. the Contractor rrovidcd lV I wi th an Anticipated Cost Report

(" ACR'")-an estimate of additional costs that might be incurred in the future based, in part, on
change orders submitted by subcontractors. (CanlOr Decl. Ex . 22 (Barone D~ p. at 16:6-20): see

also Barone Dec!. 111 U .)
132.

On January 1 2009. IV I issued its C on:-;truc tion Consultant Advance Ce-rtifi cate
.3.

for the January ?.009 Advance. in wh ich it affirmed , among other things, th:lt "(!]be undersigned
has not discovered any material error in rhe m atters set forth in the Current Advance Request or
C urrent Supporti ng Certificates." (Barone Decl. 1][ 15. Ex. 3: Bolio Dec!. 11 15, Ex . 25.)
1

133.

In ib January 30, 2009 Project Status Report ('"PSR 21 "), lVI stated that it was

concerned that Fontainebleau' s cost disclosures might not be accurate because it appeared lhat

w ork on the Project woul.d need to be accelerated to meet the schedu led open ing date and that
related cos ts, such as over1ime. were not re fl ected in the latest ACR. (Canror Dec!. Ex. 59 at 22
[ Dep. Ex. R
OY}.)
134.

PS R 21

~ tated that although ' 'the Antic ipated Cost Report indicates

lhe Project

i~

ex pected to stay wi thin budget, TV l is conccrnct.l that all the subcontractor clai ms have not been
fully incorporalCd into the report and potential acceleration im pac t to meet the schedule has not
been included." (/d. at 7.)
135.

LEED ("Leadership in Energy and Environmental Des ign") credits reduce

const ruc tion costs through Nevada st<1te sales t<Lx credits on building materials for new
construction meeting certain sustain ab ility standards. (See Cantor Dec!. Ex . 84 [ Dep. Ex. 808] at
<
J[

10). )

A ll references to the " Barone Dec!." are to the D ec laration of Robert W. Barone.

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I 06-MD-GOIJ)/(!OODM
PSR

1

I stated that

appears that the I

projections and

a dctallcd audit."

this with the

·· !Cantor Decl.

2.

would '"continue to

j.

IDcp.

and lVI had no

Pontainebleau rea.>:sured BANA. and the Lenders that A.nticipated
Project Costs remained within bmlget.

On February 12,

JPMorgan Chase-a Revolver

BANAa

"[ i In the Report, lVI makes certain observations ... \\hich \Verc not included

"and

budget and the

hehind

(Barone Dec!. (ll 17 )

evidence support

!elter noting that

I[

in PSR 21 were only

The concerns IV I

m pnor

credits arc track·

BANA to provide additional information

I Facility Status. (Cantor Decl.

61 [Dep.

the Project's
~IOI.l

On February 20, 2009, BANA sent a letter to Fontainebleau
the

raised by

IVI~~including

the ACR's accuracy, the existence of actual or

potential cost overruns. and LEED credit shortf

t Cantor Dccl
140.

IDep.

information

I as the Retail Facil

s status.

498].)

Fontainehleau responded to BANA 's letter on February

2009, denying that

there were ··any cost overruns or acceleration costs that arc not reflected in the Anticipated Cost
Report" and
offsetting cost

that "[tlf all of these anticipated costs materialized and there were no
In Balance test would continue to he satisfied" and that ''\ve believe

that the full amount of the [ LEED] credits reflected in the Budget will inj"act be realized," and
that it was '"in the process of engaging auditors to ·

and audit the subcontractors.,. (See

Cantor Dec!. Ex. 63 [Dcp. Ex. 811].)
141.

Fontamebleau' s Fehruary

2009 letter assured BANA that it was "continuing

active discussions with Lehman Brothers and the co-lenders to ensure that funding for the Project
will continue on a timely basis:· and that the '·Retail Etcility is in full force and effect [and]
there has not been an interruption in the retail funding of the Project to date." (!d.)
142.

On February 23, 2009, in response to Lender requests, BANA asked

Fontainebleau to schedule a Lender call to "permit questions about the Project and
[Fontainebleau's! response to [BANA's February 20]lctter." (See Bolio Dec!. (U 17, Ex. 35.)
143.

In a February 24, 2009 letter, Fontainebleau refused BANA's request to schedule

a Lender calL asserting that it was under no contractual obligation to do so, objecting to having a

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tve ProjccHelated inlormatton might

I on short notice. ami ratstng concerns that
leaked to

144.

press

Lenders. (

IV I sent

(Cantor Decl.

Cantor Dec!. Ex. 64 [Dep. Ex.

!\ Project Status Report No.

661Dep.

!VI's PSR

("PSR

1

10l.J
r ) on

146.

concern that there were unreported Project

repeated its

(II

20,

'1

.)

February 2009 Advance Request. (Barone

6.)

3.
147.

(!d. at

Because lVI still had no facts or evidence to support its hunch, it executed the

Construction Consultant Advance Certificate for
Dec!.

2009.

6001.)

hut also mdicated that the Project remained wtthin

cost

\!larch

BiiN4. approved the March 2009 ;idvance Request only ajter IV/ finally
issued a ''clean" Construction Consultant Advance Certificate.

On March 4. 2009, BANA requested that Fontainebleau arrange a Lender meeting

because it \\aS "critical that the Company meet and interact with its Lenders." (Cantor Dec!.

6X [Dep. Ex. X14!.)
14X.

BANA's ;..larch 4, 20091etter included a list of Lender information requests

concerning Pro1cct costs, which mirrored BANA 'sown previous requests. (!d.)
149.

On March

potential claims

2009. lVI asked Fontainebleau for "a submission of the future

made by the subcontractors against [the Contractor] and any overruns

related to the un-hought

and for an updated ACR "to show the potential exposures to

FBLV and a better indication of the current contingency." (Cantor Dec!. Ex. 69 [Dep. Ex. 604].)

150.
request.

On March I 0, BAN A sent Fontainebleau another meeting and information
Cantor Decl. Ex. 71 [Dep.

IS I.

R19].)

On March II, 2009, Fontainebleau submitted its March Advance Request. (See

Bolio Dec!. (1118, Ex. 16.)

I 52.

In the Remaining Cost Report annexed to the \!larch II. 2009 Advance Request,

Fontainebleau disclosed that it had mcrcased construction costs by approximately S64.R million.
(/d.)

153.

On March 12,2009 IVI's Robert Barone met with Deven Kumar in Las Vegas

and Kumar informed Barone that the Project was S35 million over budget.

Barone Decl.

(l[ 24.)
154.

Based on the March II, 2009 Advance Request and Fontainebleau's March 12

disclosures, IVI issued a Construction Consultant Advance Certificate on March 19. 2009 that,
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that lVI had di . . covercd material errors 1n the Advance Requc"-.t and

first time.

lor

L

supporting documentation. (Cantor
IV l's \larch 19. 2009

tevcd '·an additional S50,000J)00 wtll
I, 2009 is the I

planned.

Cantor Dec!.
A few days

!Dep.
ton

required

t:x. 6 IOJ: Barone Dec I.
It ant

'll

lJ.)

Certificate stated that IV!

Construction Costs." and that

Openmg Date," instead of (ktoher I. 2009 as originally
. 73 [Dcp. · . 61 OJ: Barone Dec!. <I!
IV! tssucd

.

9 )

\1arcl1 19. 2009 Construction Consultant Advance

lVI told BANA that it had hecn

with the developer to update their most

recent anticipated cost report" and that Fontainchleau had "provided an ACR that they state
of the hard cost exposures to the project." (Sec Cantor Decl.

their
[Dep. Ex. 6llj.) In that

audit

or the in

e~mail,

lVI

BANA that "[wjhile we have not conducted an

presented (it would take weeks), the information presented appears

at

the

this

in the project." (h/.) The e-mail further c.tatcd that "[w]hile we hclieve

has

reasonable

a credible job of projecting the potential costs, it is prudent to include

some additional funds for what is not known or expected at this time." (h/.)
On March 20, 2009. Fontainebleau held a Lender meeting in Las V egac. where it
delivered a presentation updating the Lenders on the Project's construction budget and other
issues relating to the Project's financial condition.
151-\.

Cantor Decl. Ex. 74[Dep. Ex. 97].)

Dunng the March 20, 2009 Lender meeting, Fontainebleau presented a slideshow

to the attendees. Ud.)
159.

Fontainehleau's March 20, 2009 Lender Presentation stated, among other things,

that Fontainebleau had retained KPMG to conduct a LEED credit audit. (fd. at BGD 000353.)

160.

Fontainebleau's March 20, 2009 Lender Presentation provided an update on the

Project's statue.. (.")ee Cantor DecL Ex. 74 [Dep. Ex. 97j.)
161.

On !\'larch 23, 2009, Fontainehleau submitted an unsigned draft supplemental

Advance Request reflecting its discussions with lVI. (See Bolio Dec!.
162.

'I[ 20, Ex. 38.)

On March 23, 2009, after reviewing Fontainebleau's documentation, IVI signed

off on Fontainebleau's revisions and issued a Construction Consultant Advance Certificate
approving the Advance. !Bolio Dccl. 'I[ 21, Ex. 39; Barone Decl.

163.

On .\i1arch

'l!

29, Ex. 13.)

2009, after BANA informed Fontainebleau that IVT "signed off on

the revised draw with a clean certification (assuming the attached reports are signed),''

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F,mtainehlcau submitted an executed supplemental Advance Request.

'I!

I X: see also Barone Decl.

C'v1arch

2-~)

(II 22.

14.)

BANA made available the -;upplemental

morm

Bolio Decl.

Request to the

the next

along with, among other things, !VI's Certificate and a chart Fontainebleau

prepared at the Lenders· request showing the

Bolio Dec! (II

Balance Report. (

that the Project was In Balance hy
On :VIarch

1

S 13

2009, the

to the Remaining Cost Report and In
supplemental Advance Request represented
Bolio Dccl.

'II'

. ! K.)

Advance Date. Fontamchleau f

revised

the Advance Request to correct an error in the In Balance Report's debt service commitment
portion that mcreascd
DecL <!!

margin by vvhich the Project was "In Balance" to<!; 14.()~4.70 I.

Bolio

41.)
166.

On March

Certificate, and after recei

2009, having received all required documentation, including IVI's
the Retail Shared Costs, BANA transferred the Advance to

Fontai

4.
167.

On April 13, 2009. hmtainebleau notified the Lenders that one or more events

had ·'occurred which reasonably could he expected to cause the In Balance test to fail to be
satisfied." (Cantor Dec!. Ex. 79 [Dep. Ex. 41 O].J The notice explained that the "Project Entities
have learned that (iJ the April Advance Request under the Retail Loan may not he fully funded,
and (ii) as of today. the Remaining Costs exceed Available Funds." (/d.)
168.

Upon receiving the April 13, 2009 notice from Fontainebleau, BANA and lVI

unmediatdy contacted Fontainebleau to obtain additional information. (Cantor Dec!.

:I

Dep. at
169.

19 (Yu

).)
On April 14,2009, Fontainebleau provided IVI with a schedule of Anticipated

Costs dated '"as of April 14, 2009" revealing more than Sl86 million in previously unreported
Anticipated Costs. (Cantor Dec!. Ex. 80 [Dep. Ex. 613 ]). )
170.

On April 17, 2009, Fontainebleau held a Lender meeting to discuss sudden

construction cost increases. (Cantor Dec I. Ex. 19 (Yu Dep. at 236:22-237: ll ).)

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XI at U,

(Cantor Dcd.

l 1: see also Cantor Dec!.

!Dcp.
10 ( Y u Dcp. at

(Freeman Dep. at

Cantor Dec!.

16~24

. 1.1

).)

l at JPivLFBOOOO I

RIIDep.

Based on the information disclosed by Fontainchleau at the Lender meeting, the
that one or more Events of Default had occurred and terminated
Loan on April 20, 2000. (See Cantor Dec!.

the

X2 [ Dep. Ex.

J)

Ill/ discovers that Fontainebleau fals~fied the ;\nticipated Cost Reports.
174.

After the Revolver Loan was terminated, Fontainehleau and the Lenders

attempted to restructure the Senior Credit Facility to enahle Fontainebleau to complete the
Project.

Cantor Dec!. Ex. 10 tYu Dcp. at

247:7~15).)

In Nfay 2000, BA01A commissioned IVI to "perform a

cost~to-complcte

review"

of the Project' construction costs
Cantor Dccl. Ex. 10 (Yu Dep. at
176.

As part of IVI's

cost~to~complctc

248:3~6).)

review, IVI received additional information

from Fontainebleau and the Contractor regarding the Project budget, including an April 30, 2000
ACR. C)'ee Cantor Decl. Ex.

[Dcp. Ex. 29R].) The April 30, 2000 ACR included

'529X.O.:D. 918 in pending change orders for additional work by subcontractors. (lei.)
After reviewing the documentation supporting the pending change orders in the
April 30. 2000 ACR, IVI concluded"[ i lt is clear from the number and scope of pending items,
[that] the claims were made by the subcontractors some time ago, possibly as far back as a year,
and were never included on prior ACRs submitted to IVI." (/d. at 20.)
178.

To conceal that the costs required to complete the Project were hundreds

millions dollar higher than the construction budget disclosed to BANA and the Lenders,
Fontainebleau and T\VC used two separate sets of books: one for their own internal usc. which
allowed them to keep track of the actual progress, scope and cost of the Project,; and a second set
shown to BANA and IVl, which disclosed only a subset of the actual costs. (See Cantor Dec!.
18 (Ambridge Dep. at 73: 15-74:7; see also Ambridge Dep. at 78:3-24).)

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179 .

F(lnlainchlc;tu and TWC kept a "b~tnk" /\CR that w a~ di ...;c l o~ cd tn B ANA and

l V I. and an .. internal" /\ C R that i ncluded additional cost..;. (See Ca ntor D el'! . Ex . 18 (Am bridge

Dcp. at 7J :9 -75: 14).)
I XO.

Before an ACR w as provided to BANA and lVI, Font airrc bkau ed ited the

·· internal '' AC Rs to contonn with the construct inn budget th at had been disclosed to the Lenders.

(See Cantor D ccl. Ex. I X U\ mhridgc Dcp. at I 28:2.1- 1'29: I I : 2.15: 16-23() : 2: 231\:20-239: I I ).)

C.

The Fl>I C's Re pudiation of FNHN's Commitment was not a n Advance
Request Cond ition P reccdt~ nt Failure.

I XI .

On Ju ly 25 . 200(') , tbc First National Bank of Nevada ("FN B N .. ) was c ln..;cd hy the

Offi ce of the Co mptroller or the Currency. (Ctnt or Dec!. Ex . 87 I D cp. Ex. KK~ 1. )
182.

T he Federa l D c po-.it lnsurancc Company ("FD IC' ) was appo inted a. rective r.
..,

I XJ.

In late-December 2008 , the FD IC fo rma lly repuuiated FNBN ' -; unfunded Sen io r

(/d.)

Credit Facil ity co mmit m e n t~. (Ca ntor Decl. Ex . 57 lDcp. Ex. 486].)
184.

FN BN's unfunded commitmen ts were S I ,()66,666 under the Delay Draw Loan

and S I 0,000,000 under rhe Revol ver Loan. (It!.)

185.

In res ponse to the FD IC"s repudiatio n. BANA directed Fontai nebleau to rem ove

FNB N 's unl'unded

comn1 itmems from t.he In Balance Test 's "Availab le Sources" component.

(!d.)

186.

Even without FNBN' s un fu nded commitments, the Project

\Ni.IS

.st ill ·'In Balance "

by approximatel y $ 107.7 m il lion. (Bolio Dec!. c!l l 3, Ex. 13.)

D.

Ce rtain Delav Draw Term Lenders Fail to F und the March 2009 Adva nce

Re(tuest.
187.

On March 2. 2009, Fonta inebleau submitted a Notice of Borrmving und er the

Credit A g reement requesting a D el ay D raw Term Loan for the entire $350 million facility

<l nd,

simultaneousl y, a $670 mi lli on Revolver Loan (which was reduced to $652 mill ion the next day).

(Cantor Decl. Ex. 65 fDep. Ex. 2881. >
188 .

On ivfarch 3, 2009. BANA notified Fontainebleau that it wou ld not process the

Norice o f Borrowing because it viol ared Credit A g reement Section 2.1 (c)(i ii)' s proviso that
'·unless the Total D elay Draw Commitments have been f ull y drawn , th e aggregate outstanding
principal amount of all Revolv ing L oans and Sw ing Line L oans -;hall not exceed S 150,0 00,000.''

(Cantor Dec!. Ex 67 [Dep. Ex. 8 131 : see also Can tor D ec!. Ex . 2o (Arn. MDL Order No. 18

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No~
I 06~iV1D~GOLD/CiOODMAN
in Part and Dcnytng in Part MoL to Dismi...,s) (Gold, J) (

Granti

I at

D~ Fla~) (JurL

I,

10) IDE

6~ 7 ~)

On :V1an::h 9, 2009, Fontainebleau submitted a revised
seeking

the
190.

nullion Delay Draw Loan. (Cantor Dcd.

70 !Dcp.

BANA approved Fontainebleau' revised March

all of the

191

. I

[Dep.
Capital and

Borrowing and nearly

IJ

Guggcnhcim~~did

1.67 million commitrnent. (Cantor Dccl.

collective

. ~16j.)

commitments~total'

Draw Term Loan Lenders funded their

$326.7 million. !Cantor Dec!.

of Borrowmg

not immediately fund their

. 19 (Yu Dep. at 168:21 169: 14).)

After reaching out to both Z Capital and Guggenheim. BANA decided to continue
including the Guggenheim and Z Capital commitments as "Available Funds" for In Balance Test
purposes because there was no conclusive evidence that
!9(YuDep.
193.

).)
Guggenheim advised BANA that it was "rounding up all the parties" and mtendcd

to fund its $10 million
:I

Dep. at

would not fund. (Cantor Decl. Ex.

194.

million-far

cornmitmcnt~\vhich

Cantor Dec!.

it d1d several

19 (Yu Dcp. at 168:1

later. (Cantor Dec!.

19 (Yu

169:14).)

On March II, 2009, Fontainebleau submitted an Advance Request for S 137.9

than the $327 million BANA collected that month from the Delay Draw Term

Loan Lenders. (Bolio Dec!.(![ 18, Ex. 16.)
195.

Before approving the March 2009 Advance Request, BANA sent the Lenders a

March 23. 2009 letter explaining why it intended to disburse the requested funds. BANA
disclosed to the Lenders that Z Capital and Guggenheim had not yet funded their respective
Delay Draw T crm Loan commitments and that excluding those amounts "from A vail able Funds
would result in a failure to satisfy the In-Balance test [sic]." BANA advised the Lenders that it
was "willing to include" the unfunded commitment amounts in the In Balance Test's Available
Funds component for the March Advance "pending further information about whether these
lenders will fund." BANA invited "any Lender which does not support these interpretations [to]
immediately inform [BANA] in writing of their specific position." (Cantor Decl. Ex. 76 [Dep.
Ex. 104!.)

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30
No. 09-2106-MD-GOLD/GOODMAN

196.
March

There is no

that any Lender contacted BANA to dispute its analysis in

2009 letter or otherwise direct BANA not to fund the March 2009 Advance

197.

BANA funded the March 2009 Advance Request. (Bolio Decl. ,125.)

198.

Highland

and is no longer a

plaintiff. (See Cantor Dec!.

see also Order Dismissing

Parties Without Prejudice Pursuant to Notice of Voluntary Dismissal [DE 65]; Directing Clerk to
Take Action (May 3, 201 0) [D.

.)

Dated: August 5, 2011

O'MELVENY & MYERS LLP
Bradley J. Butwin (pro hac vice)
Jonathan Rosenberg (pro hac vice)
Daniel L. Cantor (pro hac vice)
William J. Sushon (pro hac vice)
7 Times Square
New York, New York 10036
Telephone: [phone]
Facsimile: [phone]
E-mails: [e-mail];
[e-mail]; [e-mail];
[e-mail]
-and-

HUNTON & WILLIAMS LLP
Ch1istopher N. Johnson (Fla. Bar No. 69329)
Matthew Mannering (Fla. Bar No. 39300)
1111 Brickell A venue, Suite 2500
Miami, Florida 33131
Telephone: [phone]
Facsimile: [phone]
E-mail: [e-mail];
[e-mail]
Attorneys for Bank Of America, N.A.

26

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Case 1:09-md-02106-ASG Document 385-2 Entered on FLSD Docket 12/06/2013 Page 30 of
30

CERTIFICATE OF SERVICE
(, Asher L. Rivner. hereby cert ify that on August 5, 2011 , I served by electronic means
pursuant to an agreement between the parties a true and correct copy of the forego ing Defendant
Bank of America. N.A.'s Statement of Undisputed Material Facts in Support of its Motion For
Summary Judgment upon the below- listed counsel of record and that the original and a paper
copy of the foregoing document will be filed with the Clerk of Court unde r seal.
Kirk D illman. Esq.
Robert Mockler, Esq.

HENNIGAN DORMAN LLP
865 South Figueroa Street, Suite 2900
Los Angeles , California 90017
Telephone: [phone]
Fascimile: (21 3) 694- 1234
E-mail: [e-mail]
mock len@ hdl itigation.com

Alforneysfor Plaintiff~; Avenue CLO Fund, Ltd. et al.

cth---i. ~ /
Asher L. Rivner

Case 1:09-md-02106-ASG Document 385-3 Entered on FLSD Docket 12/06/2013 Page 1 of 11
Case No. 09-2106-MD-GOLD/GOODMAN

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Miami Division
CASE NO.: 09-2106-MD-GOLD/(;OODMAN
IN RE:
FONTAINEBLEAU LAS VEGAS
CONTRACT LITIGATION
1\!IDL NO. 2106
This document relates to all actions.

DECLARATION OF DANIEL L. CANTOR
I, Daniel L. Cantor, hereby declare as follows:
I am a member of the law firm of O'Melveny & Myers LLP, counsel for

1.

defendant Bank of America, N.A. ("BANA"), and I am familiar with the facts and circumstances
in this action.
2.

I make this declaration in support of BANA's Motion for Summary Judgment.

3.

Attached as Exhibit 1 is a true and correct copy of Deposition Exhibit 72, the

Master Disbursement Agreement dated June 6, 2007, produced in this lawsuit by BANA as
BANA_FB00204948-5092.
4.

Attached as Exhibit 2 is a tme and correct copy of Deposition Exhibit 658, the

Credit Agreement dated June 6, 2007, produced in this lawsuit by BANA as
BANA_FB003420 12-385.
5.

Attached as Exhibit 3 is a tme and correct copy of excerpts from the transcript of

the Febmary 17, 20 ll William S. Newby deposition.
6.

Attached as Exhibit 4 is a true and correct copy of excerpts from the transcript of

the February 22, 2011 Herbert Kolben deposition.
7.

Attached as Exhibit 5 is a true and correct copy of excerpts from the transcript of

the February 24, 2011 McLendon P. Rafeedie deposition.
8.

Attached as Exhibit 6 is a true and correct copy of excerpts from the transcript of

the March 1, 2011 Bret Yunker deposition.

CONTAINS "CONFIDENTIAL" AND "HIGHLY CONFIDENTIAL"
INFORl\IIATION AL'lD DOCUMENTS UNDER PROTECTIVE ORDER
FILED UNDER SEAL

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Case No. 09-2106-MD-GOLD/GOODMAN
9.

Attached as Exhibit 7 is a true and correct copy of excerpts from the transcript of

the March 8, 2011 Scott Macklin deposition.
10.

Attached as Exhibit 8 is a true and correct copy of excerpts from the transcript of

the March I 0, 2011 Mitchell Sussman deposition.
11.

Attached as Exhibit 9 is a tme and correct copy of excerpts from the transcript of

the March 11, 2011 Roger Schmitz deposition.
12.

Attached as Exhibit 10 is a true and correct copy of excerpts from the transcript of

the March 11, 2011 David Howard deposition.
13.

Attached as Exhibit 11 is a true and correct copy of excerpts from the transcript of

the March 18, 2011 Chaney Sheffield deposition.
14.

Attached as Exhibit 12 is a tme and correct copy of excerpts from the transcript of

the March 20, 2011 Jeanne Brown deposition.
15.

Attached as Exhibit 13 is a tme and correct copy of excerpts from the transcript of

the March 23, 2011 Jim Freeman deposition.
16.

Attached as Exhibit 14 is a tme and correct copy of excerpts from the transcript of

the March 23. 20ll Stephen Blauner deposition.
17.

Attached as Exhibit 15 is a tme and correct copy of excerpts from the transcript of

the March 25, 2011 Michael Scott deposition.
18.

Attached as Exhibit 16 is a tme and correct copy of excerpts from the transcript of

the March 29, 2011 Kevin Rourke deposition.
19.

Attached as Exhibit 17 is a tme and correct copy of excerpts from the transcript of

the April 1, 2011 Ronalda Naval deposition.
20.

Attached as Exhibit 18 is a tme and correct copy of excerpts from the transcript of

the April 4, 2011 Robert Ambridge deposition.
21.

Attached as Exhibit 19 is a true and correct copy of excerpts from the transcript of

the April 7, 2011 Henry Yu deposition.
22.

Attached as Exhibit 20 is a tme and correct copy of excerpts from the transcript of

the April 7. 2011 Todd Miranowski deposition.
23.

Attached as Exhibit 21 is a tme and cmTect copy of excerpts from the transcript of

the April 8. 2011 David Corleto deposition.

2

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Case No. 09-2106-MD-GOLD/GOODMAN
24.

Attached as Exhibit 22 is a true and correct copy of excerpts from the transcript of

the April ll, 20 ll Robert Barone deposition.
25.

Attached as Exhibit 23 is a true and correct copy of excerpts from the transcript of

the April 28, 2011 Jeff Susman deposition.
26.

Attached as Exhibit 24 is a true and correct copy of Pierre Paulden. Highland

Shuts Funds Amid 'Unprecedented' Di5·ruption, Bloomberg (Oct. 16, 2008),
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=agiw6VSt2gol (last visited Aug.
4, 2011).

27.

Attached as Exhibit 25 is a true and correct copy of the Second Amended

Complaint for Breach of Contract, Breach of the Implied Covenant of Good Faith and Fair
Dealing, and Declaratory Relief, dated January 15, 2010 [DE 15], filed in the matter of In re:

Fontainebleau Las Vegas Contract Litigation, Case No. 09-MD-02106-CIVGOLD/BANDSTRA (S.D. Fla.).
28.

Attached as Exhibit 26 is a true and correct copy of Amended MDL Order

Number Eighteen; Granting in Part and Denying in Part Motions to Dismiss tDE 351; [DE 36];
Requiring Answer to Complaints; Vacating Final Judgment IDE 80], entered on May 28, 2010 in
the matter of In re: Fontainebleau Las Vegas Contract Litigation, Case No. 09-MD-02106-CIVGOLD/BANDSTRA (S.D. Fla.).
29.

Attached as Exhibit 27 is a true and correct copy of the Complaint and Jury

Demand for Fraud, Breach of Fiduciary Duty, Negligence and Conspiracy filed in the District
Court of Clark County, Nevada on or about March 25, 2011 in Brigade Leveraged Capital

Structures Fund, Ltd., et al v. Fontainebleau Re5wrts, LLC, et al, No. A-11-637835-B.
30.

Attached as Exhibit 28 is a true and correct copy of the Expert Report of

Shepherd G. Pryor IV, dated May 23, 2011.
31.

Attached as Exhibit 29 is a true and correct copy of the Avenue Term Lender

Plaintiffs' Amended Responses to Second Set of Interrogatories From Defendant Bank of
America, N.A., dated June 6, 2011.
32.

Attached as Exhibit 30 is a true and correct copy of

, produced in this lawsuit by plaintiff
Monarch Master Funding, Ltd. as MON 000044-45.

3

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Case No. 09-2106-MD-GOLD/GOODMAN
33.

Attached as Exhibit 31 is a true and correct copy of

produced in this lawsuit by plaintiff Yenor Capital Master Fund Ltd. as YEN
000803-06.
34.

Attached as Exhibit 32 is a true and correct copy of

produced in this lawsuit by plaintiff SPCP Group, LLC as SPT 000179-81.
35.

Attached as Exhibit 33 is a true and correct copy of

produced in this lawsuit by plaintiffs Brigade Leveraged Capital Structures Fund,
Ltd. and Battalion CLO 2007-I Ltd. as BGD 004016-18.
36.

Attached as Exhibit 34 is a true and correct copy of Deposition Exhibit 4, the

March 2007 Offering Memorandum, produced in this lawsuit by BANA as
BANA_FB00291925-20 18.
37.

Attached as Exhibit 35 is a true and correct copy of Deposition Exhibit 8, the

Retail Facility Agreement dated June 6, 2007, produced in this lawsuit by Union Labor Life
Insurance Company as ULL-FLVR0002046-207.
38.

Attached as Exhibit 36 is a true and correct copy of Deposition Exhibit 278, a

September 18, 2008 e-mail from Albert Kotite to Glenn Schaeffer and Jim Freeman and copied
to Carole Parker, produced in this lawsuit by Fontainebleau as FBROO 151117-18.
39.

Attached as Exhibit 37 is a tme and correct copy of Deposition Exhibit 901, a

September 22, 2008 e-mail from Ronaldo Naval to Jim Freeman and Whitney Thier, copied to
David Howard, Bill Scott and Jeff Susman, produced in this lawsuit by BANA as
BANA_FB0040 1793-95.
40.

Attached as Exhibit 38 is a true and correct copy of Deposition Exhibit 241, a

September 26,2008 e-mail from Jeff Susman to Jon Varnell, Bret Yunker, Kyle Bender, David
Howard and Peter Fuad, produced in this lawsuit by BANA as BANA_FB00462092.
41.

Attached as Exhibit 39 is a tme and correct copy of Deposition Exhibit 75, a

September 26, 2008 e-mail from Jim Freeman to Jeff Susman, copied to \Vhitney Thier and Bill
Scott, produced in this lawsuit by BANA as BANA_FB00884060.

4

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Case No. 09-2106-MD-GOLD/GOODMAN
42.

Attached as Exhibit 40 is a true and correct copy of Deposition Exhibit 14, a

September 26, 2008 e-mail from Albert Kotite to McLendon Rafeedie, forwarding FBR's letter
to ''Retail Co-Lenders" Union Labor Life Insurance Company, National City Bank and
Sumitomo Mitsui Trust Company, produced in this lawsuit by TriMont Real Estate Advisors as
TRIM 028440-41.
43.

Attached as Exhibit 41 is a true and correct copy of Deposition Exhibit 455, a

September 26, 2008 e-mail from Andrei Dorenbaum to Jeff Susman and copied to Andrei
Dorenbaum, Brad Means, Carl Moore and Kevin Rourke, produced in this lawsuit by BANA as
BANA_FB00422664-65.
44.

Attached as Exhibit 42 is a true and correct copy of Deposition Exhibit 76, a

September 30, 2008 letter from Ronaldo Naval to Jim Freeman, produced in this lawsuit by
BANA as BANA_FB00402019-20.
45.

Attached as Exhibit 43 is a true and correct copy of Deposition Exhibit 205, an

October 3, 2008 e-mail from David Howard to Charles Blanton and Robyn Roof, copied to Jeff
Susman, produced in this lawsuit by BANA as BANA_FB00735299-301.
46.

Attached as Exhibit 44 is a true and correct copy of Deposition Exhibit 283, an

October 6, 2008 e-mail from Jim Freeman to Margaret Holloway, produced in this lawsuit by
Fontainebleau as FBRO 1287548.
47.

Attached as Exhibit 45 is a true and correct copy of Deposition Exhibit 458,.
produced in this lawsuit by

plaintiff Highland Capital Management, L.P. as Highland() 10419-20.
48.

Attached as Exhibit 46 is a true and correct copy of Deposition Exhibit 281, an

October 6, 2008 e-mail from Jim Freeman to Ryan Falconer, produced in this lawsuit by
Fontainebleau as FBR01284009.
49.

Attached as Exhibit 47 is a true and correct copy of Deposition Exhibit 77, an

October 7, 2008 memorandum from Jim Freeman to the "Las Vegas Bank Group," produced in
this lawsuit by BANA as BANA_FB00358870.
50.

Attached as Exhibit 48 is a true and correct copy of Deposition Exhibit 280, an

October 9, 2008 e-mail from Jim Freeman to James Freeland, produced in this lawsuit by
Fontainebleau as FBR01274590-92.

5

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Case 1:09-md-02106-ASG Document 385-3 Entered on FLSD Docket 12/06/2013 Page 6 of 11
Case No.
51.

09~2106-MD~GOLD/GOODMAN

Attached as Exhibit 49 is a true and correct copy of Deposition Exhibit 904, an

October 10, 2008 e-mail from David Howard to Jeff Susman, produced in this lawsuit by BANA
as BANA_FB00869927-30.
Attached as Exhibit 50 is a tme and correct copy of Deposition Exhibit 459, an
October 13, 2008 e-mail from Andrei Dorenbaum to Bill Scott and copied to Brad Means and
Kevin Rourke, produced in this lawsuit by Sheppard Mullin Richter & Hampton LLP as
SMRHOOO 16771-73.
53.

Attached as Exhibit 51 is a true and correct copy of Deposition Exhibit 285, an

October 22, 2008 e-mail from Jim Freeman to Jeff Susman, copied to Bill Scott, Jon Varnell and
David Howard, forwarding an October 22, 2008 memorandum to the "Las Vegas Bank Group,"
produced in this lawsuit by BANA as BANA_FB00400510-ll.
54.

Attached as Exhibit 52 is a true and correct copy of Deposition Exhibit 465, an

October 23, 2008 e-mail from Jim Freeman to Whitney Thier, produced in this lawsuit by
Fontainebleau as FBR01266769.
55.

Attached as Exhibit 53 is a true and correct copy of Deposition Exhibit 282, a

November 7, 2008 e-mail from Jim Freeman to Vivian Smith, produced in this lawsuit by
Fontainebleau as FBROI282119.
56.

Attached as Exhibit 54 is a tme and correct copy of Deposition Exhibit 286, a

December 5, 2008 e-mail from Jim Freeman to Cory Davis forwarding financial statements,
produced in this lawsuit by Fontainebleau as FBR01280952-1008.
57.

Attached as Exhibit 55 is a tme and correct copy of Deposition Exhibit 24, the

Guaranty Agreement between Fontainebleau and ULLICO, dated December 29, 2008, produced
in this lawsuit by Union Labor Life Insurance Company as ULL-FLVR0004483-88.
58.

Attached as Exhibit 56 is a true and correct copy of Deposition Exhibit 905, a

December 30, 2008 e-mail from Jeff Susman to Phillip Lynch and Douglas Keyston, produced in
this lawsuit by BANA as BANA_FB00798940-41.
59.

Attached as Exhibit 57 is a tme and correct copy of Deposition Exhibit 486, a

January 2, 2009 e-mail from Bill Scott to Jim Freeman and others, produced in this lawsuit by
BANA as BANA_FB00334820-24.

6

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Case 1:09-md-02106-ASG Document 385-3 Entered on FLSD Docket 12/06/2013 Page 7 of 11
Case No.
60.

09-2106~MD-GOLD/GOODMAN

Attached as Exhibit 58 is a true and correct copy of Deposition Exhibit 3 0 .
produced in this lawsuit by

Union Labor Life Insurance Company as ULL-FLVR0004249-53.
61.

Attached as Exhibit 59 is a true and correct copy of Deposition Exhibit 809, IV I' s

Project Status Report No. 21 dated January 30, 2009, produced in this lawsuit by BANA as
BANA~FB002l5227-73.

Attached as Exhibit 60 is a tme and correct copy of Deposition Exhibit 3 6 .
produced in this lawsuit by Union
Labor Life Insurance Company as ULL-FLVR0007582.002960-63.
63.
February l

Attached as Exhibit 61 is a true and correct copy of Deposition Exhibit 810, a
2009 letter from Marc E. Constantino to Donna Kimbrough, produced in this

lawsuit by BANA as BANA_FB00810764-65.
64.

Attached as Exhibit 62 is a true and correct copy of Deposition Exhibit 498, a

February 20, 2009 letter from Maurice Washington to Jim Freeman, produced in this lawsuit by
BANA as BANA_FB00376889-91.
65.

Attached as Exhibit 63 is a true and correct copy of Deposition Exhibit 81 L a

February 23, 2009 letter from Jim Freeman to Maurice Washington.
66.

Attached as Exhibit 64 is a true and correct copy of Deposition Exhibit 210, a

February 23, 2009 e-mail from Jim Freeman to Ronaldo Naval, copied to David Howard, Jon
Varnell, Brian Corum and Brandon Bolio, produced in this lawsuit by BANA as
BANA_FB00283993-96.
6 7.

Attached as Exhibit 65 is a true and correct copy of Deposition Exhibit 288, a

March 2, 2009 e-mail from Jim Freeman to Anna Finn and others, produced in this lawsuit by
Fontainebleau as FBR01291242.
68.

Attached as Exhibit 66 is a tme and correct copy of Deposition Exhibit 600, IV I' s

Project Status Report No. 22 dated March 3, 2009, produced in this lawsuit by BANA as
BANA_FB00235206-73.
69.

Attached as Exhibit 67 is a tme and correct copy of Deposition Exhibit 813, a

March 3, 2009 e-mail from Ronaldo Naval to Jim Freeman and others attaching a March 3, 2009
letter, produced in this lawsuit by BANA as BANA_FB00810800.

7

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Case 1:09-md-02106-ASG Document 385-3 Entered on FLSD Docket 12/06/2013 Page 8 of 11
Case No. 09-2106-MD-GOLD/GOODMAN
70.

Attached as Exhibit 68 is a true and correct copy of Deposition Exhibit 814, a

March 4, 2009 letter from Henry Yu to Jim Freeman, produced in this lawsuit by BANA as
BANA_FB0081 0803-05.
71.

Attached as Exhibit 69 is a true and correct copy of Deposition Exhibit 604, a

March 5, 2009 letter from Robert Barone to Deven Kumar, copied to Paul Bonvicino and
Brandon Bolio, produced in this lawsuit by BANA as BANA_FB00897758-59.
72.

Attached as Exhibit 70 is a true and correct copy of Deposition Exhibit 816, a

March 9, 2009 letter from Jim Freeman to Henry Yu, produced in this lawsuit by plaintiff
Genesis CLO 2007-1 Ltd. as ORE 004010-13.
73.

Attached as Exhibit 71 is a true and correct copy of Deposition Exhibit 819, a

March 10, 2009 letter from Henry Yu to Jim Freeman, produced in this lawsuit by BANA as
BANA_FB0081081
74.

18.

Attached as Exhibit 72 is a true and correct copy of Deposition Exhibit 608, a

March 16, 2009 e-mail from Robert Barone to Brandon Bolio, produced in this lawsuit by
Sheppard Mullin Richter & Hampton LLP as SMRH00134814.
75.

Attached as Exhibit 73 is a true and correct copy of Deposition Exhibit 610, a

March 19, 2009 e-mail from Brandon Bolio to Henry Yu and others, produced in this lawsuit by
BANA as BANA_FB00216536-40.
76.

Attached as Exhibit 74 is a true and correct copy of Deposition Exhibit 97, a

March 20, 2009 Fontainebleau Lender Update, produced in this lawsuit by plaintiffs Brigade
Leveraged Capital Structures Fund, Ltd. and Battalion CLO 2007-I Ltd. as BGD 000331-57.
77.

Attached as Exhibit 7 5 is a true and correct copy of Deposition Exhibit 611, a

March 22, 2009 e-mail from Robert Barone to Bill Scott and others, produced in this lawsuit by
Sheppard Mullin Richter & Hampton LLP as SMRH00105442-44.
78.

Attached as Exhibit 76 is a true and correct copy of Deposition Exhibit 104, a

March 23, 2009letter from Henry Yu to the Fontainebleau Las Vegas Lenders.
79.

Attached as Exhibit 77 is a tme and correct copy of Deposition Exhibit 348, a

March 24, 2009 e-mail from Robert Wilson to PPR Ops forwarding an Intralinks Notice,
produced in this lawsuit by the ING Plaintiffs as ING 000187-88.

8

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Case 1:09-md-02106-ASG Document 385-3 Entered on FLSD Docket 12/06/2013 Page 9 of 11
Case No. 09-2106-MD-GOLDiGOODMAN
80.

Attached as Exhibit 78 is a true and correct copy of Deposition Exhibit 42, the

Third Amendment to Guaranty Agreement, dated March 25, 2009, produced in this lawsuit by
Union Labor Life Insurance Company as ULL-FL VR0004468-73.
81.

Attached as Exhibit 79 is a true and correct copy of Deposition Exhibit 410, an

April 13, 2009 e-mail from Carole Parker forwarding a message from Whitney Thier, produced
in this lawsuit by Fontainebleau as FBR0063570 1-05.
82.

Attached as Exhibit 80 is a true and correct copy of Deposition Exhibit 613, an

April 14, 2009 e-mail from Robert Barone to Brandon Bolio and others, produced in this lawsuit
by Sheppard Mullin Richter & Hampton LLP as SMRH00105581-85.
83.

Attached as Exhibit 81 is a true and correct copy of Deposition Exhibit 268,

I

produced in this lawsuit by defendant J.P. Morgan
Chase Bank, N.A. as JPM __ FB 00001711-48.
84.

Attached as Exhibit 82 is a tme and correct copy of Deposition Exhibit 827, an

April 20, 2009 letter from Ronalda Naval to Jim Freeman, produced in this lawsuit by Sheppard
Mullin Richter & Hampton LLP as SMRHOOl35086-88.
85.

Attached as Exhibit 83 is a true and correct copy of Deposition Exhibit 298, a

Cost-to-Complete Review dated May 15, 2009, produced in this lawsuit by BANA as
BANA FB00808826-955.
86.

Attached as Exhibit 84 is a true and correct copy of Deposition Exhibit 808, a

copy of the Declaration of Henry Yu dated July 1, 2009 in Fontainebleau Las Vegas LLC v.

Bank ofAmerica, N.A., et al., Adv. No. 09-01621-AP-AJC (S.D. Fla.).
87.

Attached as Exhibit 85 is a true and correct copy of Deposition Exhibit 9, a copy

of the Co-Lending Agreement, dated September 24, 2007.
88.

Attached as Exhibit 86 is a true and correct copy of excerpts from the transcript of

the March 30, 20 II Brandon Bolio deposition.
89.

Attached as Exhibit 87 is a true and correct copy of Deposition Exhibit 888, an

August 5, 2008 e-mail from Brandon Bolio to Bill Scott and others, produced in this lawsuit by
BANA as BANA FB00873653-54.
90.

Attached as Exhibit 88 is a true and correct copy of the Order Dismissing Parties

Without Prejudice Pursuant to Notice of Voluntary Dismissal [DE 65]; Directing Clerk to Take

9

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Case 1:09-md-02106-ASG Document 385-3 Entered on FLSD Docket 12/06/2013 Page 10 of
11
Case No. 09-2106-MD-GOLD/GOODMAN
Acton IDE 681, entered on May 3, 2010 in the matter of In re: Fontainebleau Las Vegas

Contract Litigation, Case No. 09-MD-02106-CIV-GOLD/BANDSTRA (S.D. Fla.).
91.

Attached as Exhibit 89 is a true and correct copy of Innee Tong and Joe Bel

Bruno, Lehman Brothers Files for Chapter 11 Protection, ASSOCIATED PRESS, September 16,
2008, downloaded from LexisNexis.
92.

Attached as Exhibit 90 is a true and correct copy of the Answer of Defendant

Bank of America. N.A .. dated June 18, 20 lO I DE 881, filed in the matter of In re: Fontainebleau

Las Vegas Contract Litigation, Case No. 09-MD-02106-CIV-GOLD/ BANDSTRA (S.D. Fla.).
93.

I declare under penalty of perjury and 28 U.S.C. § 1746 that the foregoing is true

and correct to the best of my knowledge, information, and belief.
Date: August 4, 20 11
New York, New York

DANIEL L. CANTOR

10

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Case 1:09-md-02106-ASG Document 385-3 Entered on FLSD Docket 12/06/2013 Page 11 of
11

CERTIFICATE OF SERVICE
I, Asher L. Rivner, hereby certify that on August 5, 2011, I served by electronic means
pursuant to an agreement between the parties a true and correct copy of the foregoing
Declaration of Daniel L. Cantor, and the attached exhibits thereto, upon the below-listed counsel
of record and that the original and a paper copy of these documents will be filed with the Clerk
of Court under seal.
Kirk Dillman, Esq.
Robert Mockler, Esq.
HENNIGAN DORMAN LLP
865 South Figueroa Street, Suite 2900
Los Angeles, California 90017
Telephone: [phone]
Fascimile: [phone]
E-mail: [e-mail]
mocklerr@ hdlitigation.com
Attorneys for Plaintiff> Avenue CLO Fund, Ltd. et al.

Asher L. Rivner