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 385-4 Entered on FLSD Docket 12/06/2013 Page 1 of 27
U~ITED
STATES DISTRICT COURT
SOUTHER:'f D.ISTRJCT OF FLORIDA
Miami Division
CASE NO.: 09-2106-MD-GOLD/GOODMAN
lNRE:
FONTAlNE BL EAU LAS VEGAS
CONTRACT LLTIGATION
MDL NO. 2106
This document relates to all actions.
_______________________________!
DEFENDANT BANK OF AMERICA, N.A.'S REPLY
MEMO RANDUM OF LAW IN FURTHER SUPPORT OF ITS
MOTION FOR SUMMARY JUDGMENT
O'MEL VENY & MYERS LLP
Bradley J. Butwin (pro hac vice)
Jonathan Rosenberg (pro hac vice)
Dan:iel L. Cantor (pro hac vice)
William J. Sushon (pro hac vice)
Times Square Tower
7 Times Square
New York, New York 10036
Telephone: (2 12) 326-2000
Fa(;simile: (2 12) 326-2061
-andHUNTON & WILLIAMS LLP
Jamie Zysk Isani (Fla. Bar No. 728861)
Matthe·.v Mannering (Fla. Bar No. 39300)
II II Brickell Avenue, Suite 2500
Miami , Florida 33131
Telephone: (305) 810-2500
Facsimi le : (305) 810- 1675
Attorneys for Bank o_fAmerica, N.A.
CONTAI~S
INFORMATION THAT IS " CONFID ENTIAL" A~D "HIGI-lLY
CONFIDENTIAL" UNDER PROTECTIVE ORDE.R
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Case 1:09-md-02106-ASG Document 385-4 Entered on FLSD Docket 12/06/2013 Page 2 of 27
TABLE OF CONTE:"JTS
Page
TABLE OF AUTHORITIES ........................................................................................................ iii
PRELIMINARY STATEMENT ................................................................................................... 1
i\RCiUMENT ................................................................................................................................. 3
L
THERE IS NO EVIDENCE THAT BANA BREACHED ITS DUTIES
AS DISBURSEMENT AGENT OR BANK AGENT ........................................... 3
A.
The Disbursement Agreement Expressly Permitted BANA to Rely
on Fontainebleau's Representations, Certifications, and Statements
for the Specific Purpose of Approving Advance Requests ........................ 3
B.
Plaintiffs' Authorities Arc Inapposite ........................................................ 8
C.
Plaintiffs' Extrinsic Evidence Cannot Modify BANA's
Disbursement Agent Duties ....................................................................... 9
IL
THERE IS NO EVIDENCE THAT BANA WAS GROSSLY
NEGLIGENT ......................................................................................................... 9
III.
PLAINTIFFS' BREACH: ALLEGATIONS ARE FACTUALLY
BASELESS AND LEGALLY DEFICIENT BECAUSE THERE IS NO
EVIDENCE THAT BANA KNEW THE CONDITIONS PRECEDENT
\VERE NOT Sr\ TISFIED .................................................................................... 11
A.
BANA Properly Approved Post-Lehman Bankruptcy Advance
Requests ................................................................................................... 11
l.
'
BANA Did Not Know That the Retail Lenders
Had Failed to Make Advances in Violation
of Section 3.3.23 .......................................................................... 13
3.
Lehman's Bankruptcy Was Not an MAE .................................... 14
4.
B.
BANA Did Not Know That Fontainebleau Resorts Funded for
Lehman in September 2008 ......................................................... l l
Lehman's Bankruptcy Did Not Result in a
Failure of Sections 3.3.2(a), 3.3.3, 3.3.21 or
3.3.24's Conditions Precedent. .................................................... 14
BANA Did Not Know That Fontainebleau Had Concealed the
Anticipated Costs to Complete the Project .............................................. 15
I.
The May 2008 Change Order Claim is Baseless ......................... 15
!VI's Uncommunicated "Gut Feelings" Did Not Provide a Basis
for Rejecting Fontainebleau's Advance Requests ....................... 17
C
The FDIC Closure of First National Bank ofNevada Did
Not Cause Conditions Precedent to Fail .................................................. 18
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TABLE OF CONTE~TS
(continued)
Page
D.
Guggenheim and Z Capital's March 2009 Failure To Fund Did Not
Cause Conditions Precedent to Fail ......................................................... 18
E.
BANA Properly Accepted the March 2009 Supplemental Advance
Request. .................................................................................................... 19
CONCLUSIC)N ............................................................................................................................ 20
11
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TABLE OF AUTHORITIES
Page
Cases
Aguirre v. City o(
York,
625 N.Y.S.2d 597 (N.Y. App. Div. 2d Dcp't 1995) ............................................................... 5
Bank Brussels Lambert v. Chase ivfanhattan Bank, N.A.,
1996 U.S. Dist. LEXIS 15631 (S.D.N.Y. Oct. , 1996) ....................................................... 8
BNP Parihas /vfortgage Cmp. v. Bank ofAmerica, N.A.,
2011 U.S. Dist. LEXIS 31362 (S.D.N.Y. Mar. 23, 2011) .................................................. 8, 9
Camaiore v. Paranee,
50 A.D.3d 471 (N.Y. App. Div. 1st Dcp't 2008) .................................................................... 6
CFIP Alaster Fund, Ltd v. Citibank,
738 F. Supp. 2d450(S.D.N.Y. 2010) ................................................................................... 10
Cha...,·e Manhattan Bank v. /vfotorola, Inc.,
184 F. Supp. 2d 384 (S.D.N.Y. 2002) .................................................................................... 8
In re Citric Achl Litigation,
191 F.3d 1090 (9th Cir. 1999) .............................................................................................. 16
Corhil! Corp. v. S.D. Plants. Inc.,
176 N.E.2d 37 (N.Y. 1961 ) ..................................................................................................... 5
DRS Optronics. Inc. v. North Fork Bank,
843 N.Y.S.2d 124 (N.Y. App. Div. 2d Dcp't 2007) ............................................................. I I
Estate ofParsons v. Palestinian AuthorilJ',
715 F. Supp. 2d 27 (D.D.C. 2010) ........................................................................................ 16
Excess Insurance Co. v. Factory lvfutual Insurance Co.,
822 N.E.2d 768 (N.Y. 2004) ................................................................................................... 5
Glohal Crossing Telecommunications, Inc. v. CCT Communications. Inc.,
2011 WL 3023501 (Bankr. S.D.N.Y. July
2011) ........................................................... 10
Gutierrez v. State,
871 N.Y.S.2d 729 (N.Y. App. Div. 2d Dcp't 2009) ............................................................. 18
Haves v. Ci(v oj'Afiami,
52 F.3d 918 (11th Cir. 1995) ................................................................................................ 15
International Stamp Art, Inc. v. United States Postal Service,
456 F.3d 1270 (lith Cir. 2006) ............................................................................................ 10
JPMorgan Chase Bank v. Winnick,
350 F. Supp. 2d 393 (S.D.N.Y. 2004) ..................................................................................... 8
Ill
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TABLE OF AUTHORITIES
(continued)
Page
In re Lake States Commodities, Inc.,
B.R.
(Bankr. N.D. Ill. 2002) ................................................................................... 16
LaSalle Bank.
v. Citicorp Real Estate. Inc.,
2002 U.S. Dist. LEXIS 23323 (S.D.N.Y. Dec. 5, 2002) .................................................... 8, 9
Jlanhattan Med. Diagnostic & Rehab., P.C. v. Wachovia. Nat'! Bank, N.A.,
2006 WL 3026294 (N.Y. Sup. Ct. 2006) .............................................................................. 10
Merrill (vnch & Co. v. Allegheny Energy, Inc.,
500 F.3d 171 (2d Cir. 2007) .................................................................................................... 8
vfuzak Corp. v. Hotel Taft Corp.,
133N.E.2d688(N.Y. 1956) ................................................................................................... 5
Ransom v. Equilax Inc.,
2010 WL 1258084 (S.D. Fla. Mar. 30, 2010) ....................................................................... 16
Red Ball Interior Demolition Corp. v. Palmade.Y.WI,
173 F .3d 481 (2d Cir. 1999) .................................................................................................... 6
Shannon v. Potter,
2008 WL 4753732 (S.D. Fla. 2008) ..................................................................................... 16
Stan{ord Seed Co. v. Ba!ji:JUr, Guthrie & Co.,
27 Misc. 2d 147 (N.Y. Sup. Ct. 1960) .................................................................................... 6
Vickers v. Federal Express Corp.,
132 F. Supp. 2d 1371 (S.D. Fla. 2000) ................................................................................. 16
Walton-Horton v. f(vundai ojAlahama,
402 Fed. Appx. 405 (lith Cir. 2010) ................................................................................... 12
Other Authorities
MERRIAM-WEBSTER'S COLLEGIATE DICTIONARY (1Oth Ed. 1998) ............................................... 6
RESTATEME'.JT (SECOND) OF CO'iTRACTS § 203(a) ....................................................................... 5
WEBSTER'S THIRD NEW l'.JTER'iATIO'iAL DICTIONARY UN;\BRIDGED .......................................... 6
Rules
S.D. Fla. L.R. 7.1(c) .................................................................................................................... 15
IV
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PRELL\1INARY STATE:VIENT
BANA demonstrated in its opening brief ('"BANA Br. ")that it is entitled to summary
judgment dismissing PlaintitTs' breach of contract claim for two independently sufficient
reasons: (i) the undisputed facts establish that BANA properly approved and funded
Fontainebleau's Advance Requests after receiving the required certifications. and (ii) there is no
evidence that BANA was grossly negligent. In their opposition brief ("Pis. Opp."), Plaintiffs fail
to meet their obligation to come forward with evidence sut1icient to create a genuine factual
dispute on either issue, much less both. Accordingly, BANA's motion for summary judgment
should be granted.
Plaintitfs' opposition brief is based on a false premise. Their myriad arguments tor
holding BANA responsible for Fontainebleau's fraud and ultimate failure all incorrectly assume
that every action BANA took as Disbursement Agent was subject to a tort-like objective
"commercial reasonableness'' duty, regardless ofthe express limitations the Disbursement
Agreement places on BANA's obligations. Plaintiffs' sole textual support tor this argument is
BANA's agreement under Section 9.1 "to exercise commercially reasonable eftorts and utilize
commercially prudent practices in the pertormance of its duties hereunder." But both the
Disbursement Agreement's structure and terms establish that Section 9.1 does not impose any
additional duties on BANA.
BANA's promise to "exercise commercially reasonable efforts" is in Article 9's
introductory section, rather than in the sections setting forth the ''Duties and Liabilities of the
Disbursement Agent Generally" (Section 9.2) and ''Particular Duties and Liabilities of the
Disbursement Agent" (Section 9.3). Under black-letter New York law, Section 9.3.2's specific
provisions limiting BANA's duties-including the directive that it applies "[n]otwithstanding
anything else in this Agreement to the contrary"-control over Section 9.1 's general discussion
of the Disbursement Agent's performance of its duties. :\foreover, reading Section 9.1 to restrict
BAN A's ability to rely on Fontainebleau's certifications would nullify Section 9.3.2 and 9.1 O's
unambiguous provisions and violate the maxim that contracts should not be read so as to render
provisions "without force and etTect. '' Section 9. l 's general directive only applies to those duties
(such as determining that the Advance Requests arc complete and genuine) that are not addressed
by the contract's more specific, on-point provisions.
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Plaintitfs' incorrect premise that BANA 's principal contractual obligation is "to exercise
commercially reasonable ctTorts" is the foundation for their many arguments designed to show
that Section 9.3.2 docs not mean what it
But Plaintiffs do not dispute that before disbursing
any funds to Fontainebleau, BANA received all the documentation, representations, warranties
and certifications required under the Disbursement Agreement, including Fontainebleau's
certification that all conditions precedent to disbursement had been satisfied. And PlaintitTs
acknowledge that Section 9.3.2 permits BANA to rely on Fontainebleau's certification in
'"approving any Advance Requests.'' These concessions lead to the inescapable conclusion that
BANA did not breach the Disbursement Agreement.
Similarly, Plaintiffs' focus on whether BANA exercised commercially reasonable efforts
also results in a
f~tulty
(and cursory)
negligence analysis. Instead of coming forward with
admissible evidence that BANA was recklessly indifferent towards or intended to harm them, as
they arc required to do, Plaintiffs essentially argue that BANA's supposed failure to exercise
commercially reasonable efforts was not only an alleged breach of contract, it was grossly
negligent. But the law is clear that a mere breach of contract docs not constitute gross
negligence. And Plaintiffs' claim that BANA's actions were not commercially reasonable-a
negligence allegation-docs not change the gross negligence standard.
Because Plaintiffs do not have admissible evidence sufficient to raise a genuine dispute
on either of BANA' s two case-dispositive arguments, they devote their brief to second-guessing
BANA 's approval of Fontainebleau's Advance Requests with notice of facts that Plaintiff<> claim
should have alerted BANA that conditions precedent had not been satisfied. (Pis. Opp. at 1137.) These arguments arc inconsistent, of course, with Plaintitfs' acknowledgement that
Fontainebleau deliherately deceived BANA and the other lenders. But more importantly, these
arguments are simply irrelevant given BANA's showing that it fully performed its limited duties
as agent and that the record contains no evidence that BANA was grossly negligent. Moreover,
as demonstrated in detail below, Plaintiffs cannot establish that BANA actually knew that these
conditions precedent had failed.
2
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ARGU:viENT
I.
THERE IS ~0 EVIDE~CE THAT BANA BREACHED ITS DUTIES AS
DISBURSEMENT AGENT OR BA~K AGE~T.
BANA has demonstrated that its duties as agent under the Disbursement Agreement and
Credit Agreement in approving Advance Requests were limited to: (i) determining whether
Fontainebleau, the General Contractor, the Construction Consultant, and the Architect had
submitted "all required documents," and (ii) reviewing Advance Requests to confirm that
Fontainebleau made all representations, warranties, and certifications necessary to establish that
Disbursement Agreement Section 3.3 's conditions precedent to Advance were satisfied. (BANA
Br. at 24-26.) BANA has also proved-and Plaintiffs do not dispute-that:
•
For each Advance Request, BANA received all required documentation from
Fontainebleau, lVI, the Contractor, and the Architect before disbursing any
funds. (BANA Br. at 8-9; BANA SOUF ~57.)
•
With each Advance Request, Fontainebleau "'was required to and did represent
and warrant that all conditions precedent to disbursement ... had been satisfied."
(Pis. Opp. at 20.)
•
Disbursement Agreement Section 9.3.2 "provides that the Disbursement Agent
'shall be entitled to rely' upon certificates provided by the Project Entities and
'shall not be required to conduct any independent investigation as to the
accuracy, veracity or completeness' of any such certificate." (!d. at 6-7.)
Despite these undisputed facts and unambiguous provisions, Plaintiffs claim that BAN A
could not "disburse loan proceeds where it has information inconsistent with [the] certificates."
(!d. at 7.) But this is simply another way of saying that Section 9.3.2's protections-which apply
"[n]otwithstanding anything else in this Agreement to the contrary"-are somehow narrowed by
the Disbursement Agreement's general requirement that BANA's actions be "commercially
reasonable." Plaintitls' attempt to limit SANA's rights under Section 9.3.2 fails because it is
inconsistent with (i) the Disbursement Agreement's structure and unambiguous terms, (ii) the
case law Plaintiffs cite, and (iii) the extrinsic evidence Plaintiffs improperly ask the Court to
consider.
A.
The Disbursement Agreement Expressly Permitted BA~A to Rely on
Fontainebleau's Representations, Certifications, and Statements for the
Specific Purpose of Approving Advance Requests.
Plaintiffs start with a straw man argument in attempting to rebut SANA's showing that it
properly approved Fontainebleau's Advance Requests after receiving the required certitications.
3
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BANA has never argued that the onZv conditions to disbursement were its "receipt of an Advance
Request and associated certificates." (Pis. Opp. at 4.) There is no dispute that Fontainebleau
was required to satisfy all twenty-four of Section
's conditions before receiving loan
funds~
if it had failed to do so, any Lender \vould have been free to provide BANA with a Default
notice. which would have required BANA to issue a Stop Funding Notice. But Fontainebleau's
obligation to satisfy the Disbursement Agreement's conditions precedent is irrelevant here.
Section 9.3.2 unambiguously limited BANA's duty with respect to those conditions' satisfaction
to reviewing the Advance Request documentation, and permitted BANA ''in ... approving any
Advance Requests ... to rely on certifications from the Project Entities ... as to satisfaction of
any requirements and/or conditions imposed by this Agreement" (emphasis added). BANA had
no duty to verify independently the accuracy of the information Fontainebleau, TWC, IVI, and
the architect submitted, or to ·'investigate any other facts or circumstances to verity compliance
by the Project Entities with their obligations hereunder." (Disbursement Agmt. § 9.3.2.) Nor did
BANA have any duty "to inquire of any Person whether a Default or an Event of Default has
occurred and is continuing." (ld. § 9.1 0.)
Plaintiffs' multiple attempts to circumvent Section 9.3.2's plain meaning arc all
unavailing. BAN A's opening brief demonstrated that Disbursement Agreement Section 9.1 's
·'commercially reasonable" language docs not impose any additional obligations on BANA nor
docs it override Section 9.3.2 and 9.1 O's more specific provisions. (BANA Br. at 27-28.)
Plaintiffs have no response to this argument. (Pis. Opp. at 8.) Rather, they simply repeat the
same discredited arguments addressed in BAN A's brief But Section 9.1, contained in
Article 9's introductory section, merely describes the general standard applicable to BANA 's
existing ''duties hereunder." Thus, it applies, for example, to BAN A's "review [ot] the Advance
Request and attachments thereto to determine whether all required documentation has been
provided" (Section 2.4.4(a)) or its determination that a document submitted by Fontainebleau
was "genuine and ... signed or presented by the proper party" (Section 9.3.2). In contrast, it
docs not apply in the face of specific contractual limitations on BANA's obligations, such as
those in Sections 9.2 entitled ''Duties and Liabilities of the Disbursement Agent Generally" and
in Section 9.3 entitled ·'Particular Duties and Liabilities of the Disbursement Agent." Indeed, it
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1
is well settled that speci fie provis ions control general ones . And Section 9.1 's "commerci ally
reasonable" L
anguc1ge cannot impose a duty to investigate on BANA that \VOuld impem1issibly
leave s~ct ion 9.3.2 and 9. 10's unambiguous provisions to the contrary "without fo rce and
effcct." 2
Plaintiffs' mistaken belief that Section 9.3.2's provisions are subject to a ·'commercially
reason ab l ~"
limitation underlies and, thus, underm ines Plaintiffs' otJ1cr arguments regarding
Section 9.3. 2. Those arguments also f.ai I fo r the following additional reasons:
Firsr, Plaintiffs' argument that Section 9.3.2 "did not relieve BofA of its obligation
tO
determine the satis t:1ction of conditions precedent that were not covered by certificates'' (Pis.
Opp. at 7) is a non sequitur because Plaintiffs do not identify any conditions precedent not
covered by certificates. Rather. Fontainebleau was required to certifY that all "the conditions set
forth in Section 3.3 . . . of the Disbursement Agreement are satisfied" and identify any that were
n.ot. (D is bursement Ag.mt. Ex. C- 1. .)
Second. even though they acknowledge that BANA has no duty " to investigate the
accuracy of [Fontainebleau's1 representations," Plaintiffs nevertheless assert that BA , A had an
obligation not to disburse funds after receiving the required certifications. " until it resolved
kJlown inconsistencies." (See Pls. Opp. at 7, 8- 9 n.26.) This is a distinction without difference.
"Resolving a known inconsistency,'' is indistinguis hable from " investigat[ing] the accuracy of
[fontainebleau's1 representations" and ·'veri fy[ ing] compliance by the Proj ect Entities with their
[Disbursement Agreement] obligations"- the very things the Dis bursement Agreement says
BANA need not do. ( Dis bursement Agmt. § 9.3 .2.) Tellingly, Plaintiffs do not explain (i ) w hat
a ·'known inconsistency'' is, (ii) how significant an ''inconsistency'' must be to trigger BANA 's
Muzak. Corp. v. Hotel Tajt Corp., 133 N.E.2d 688, 690 (N.Y. 1956) ("Even if there was an
2
inconsistency between a specific prov ision and a general provision of a contract (we find
none), the specific provision controls. "); Aguirre v. City ofNew York, 625 , .Y.S.2d 597, 598
(N .Y. App . Div . 2d Dep't 1995 ) ("Where there is an inconsistency between a s pec ific
provision and a general provision of a contract, the specific provision controls.").
See Excess Ins. Co. Ltd. v. FactoJy lvfut. Ins. Co. , 822 N .E.2d 768,771-72 (N.Y. 2004)
(rejecting interpretation of contract provision that '·would render [another provision] a
nullity"); Corhill Cmp. v. S.D. Plants. Inc., 176 N.E.2d 37, 38 (N.Y. 196 1) ("It is a cardinal
rule of construction that a court s hould not ' adopt an interpretation' which wil l operate to
leave a ' provis ion of a contract . . . without force and effect. "'); see also RESTATEMENT
(SECON D) OF CONTRACTS § 203(a) ("[A]n interpretation which gives a reasonable, lawfu l,
and effective meaning to all terms is preferred to an interpretatioo which leaves a part
5
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27
alleged duty to withhold funds, or (iii) what BANA was required to do to "resolve" the alleged
inconsistency. Indeed, the parties would have had to negotiate entirely new contract provisions
to delineate those rcquircmcnts. 1 Instead, they mandated that BANA has no duty to investigate
or verify. Given the unambiguous terms of Disbursement Agreement Sections 9.3.2 and 9.10
and Credit Agreement Sections 9.3 and 9.4, the Court cannot impose the vague extra-contractual
obligations Plaintiffs advocate. 4
( BANA
Br. at
)
Third, Plaintiffs' argument that BANA could not rely on certifications that it has "reason
to believe" may not be "trustworthy" (Pis. Opp. at 7) improperly imports the tort concept of
"reasonable reliance" into a contract interpretation dispute. As Plaintiffs note, "rely" means to
"place faith without reservation; trust." (!d. at 7 n.2l.) But Section 9.3.2 unambiguously
provides that BANA was permitted to ·'trust" and ''place faith without reservation" in
Fontainebleau's certifications when determining whether the conditions precedent to an Advance
vvere satisfied. Plaintiffs' attempt to redefine "genuine" as "factually correct" (id.) also misses
the mark. The dictionary defines ''genuine" as ''actually produced by or proceeding from the
alleged source or author"-as in, "the signature is [gcnuinc]."5 Section 9.3.2 merely required
BANA to "rcasonabl[y] believe[]" that a certification was authentic, meaning that it came from
Fontainebleau (or lVI, TWC, or the Architect) and that the signature was not forged. Plaintiffs'
lone authority-a 1960 Buffalo, New York trial court opinion that has never been cited by
another court-is inapposite because it addresses only the narrow (and irrelevant) question of
what constitutes a "genuine receipt" under the Uniform Warehouse Receipts Act.li
5
unreasonable, unlawful, or of no effect.").
Camaiore v. Farance, 50 A.D.3d 471, 471~72 (N.Y. App. Div. 1st Dcp't 2008) ("In
adjudicating the rights of parties to a contract, courts may not fashion a new contract under
the guise of contract construction. Nor may they imply a condition which the parties chose
not to insert in their contract.'') (quotations omitted).
See Red Ball Interior Demolition Gnp. v. Palmadessa, 173 F.3d 481, 484 (2d Cir. 1999) ("l f
a contract is clear, courts must take care not to alter or go beyond the express terms of the
agreement, or to impose obligations on the parties that arc not mandated by the unambiguous
terms of the agreement itself.").
MERRIAM- WEBSTER'S COLLEGIATE DICTIONARY 486 (1Oth Ed. 1998); see also WEBSTER's
THIRD NEW lNTERNATIO'-JAL DICTIONARY U'-JABRIDGED 948 (1993) ("actually produced by or
proceeding from the reputed or alleged source or author; not faked or counterfeit").
See Stanford Seed Co. v. Ballour. Guthrie & Co., 27 Misc. 2d 147 (N.Y. Sup. Ct. 1960)
(holding that a document was not ''genuine" receipt under the Uniform Warehouse Receipts
Act because it was not signed by a warehouseman under Oregon law).
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Fourth, Plaintiffs' reliance on Section 7.\.3(c) is misplaced (Pis. Opp. at
7~~8)
because
that provision merely identifies one Event of Dcnmlt under the Disbursement Agreement. And
while Fontainebleau was expressly required to provide notice to BANA and the Lenders of
"[a]ny Default or Event
Agmt.
~
ofDct~mlt
of which the Project Entities have knowledge" (Disbursement
5.4.1 ), BANA was deemed not to have knowledge of any Default or Event of Dctlmlt
unless it received notice (Credit Agmt. ~ 9.3), which it never did. (See BANA Br. at 32.)
7
Moreover, Section 7.1.3( c) is inc] evant in interpreting Section 9.3.2 because it docs not even
mention the Disbursement Agent, much less impose any duties on it.
Fifth, Plaintitfs cont1atc BANA's dual roles as Disbursement Agent under the
Disbursement Agreement and Bank Agent under the Credit Agreement. They incorrectly assert
that it is ''fundamentally inconsistent" with Section 9.3.2 for BANA, as Disbursement Agent, to
rely on Fontainebleau's certification that all conditions precedent had been satisfied because two
of those conditions-Sections 3.3.21 and 3.3.24-involved facts known to BANA as Bank
Agent. (Pis. Opp. at 8.) Plaintiffs' argument ignores that the parties anticipated this situation
and addressed it in Disbursement Agreement Section 9.2.5:
Notwithstanding anything to the contrary in this Agreement, the
Disbursement Agent shall not be deemed to have knowledge of
any fact known to it in any capaci~v other than the capacity of
Disbursement Agent or b.v reason olthefact that the Disbursement
Agent is also a Funding Agent or Lender (emphasis added).
There is nothing contradictory about Section 9.3.2 permitting BANA, as Disbursement Agent, to
rely on Fontainebleau's certifications regarding facts of which the Disbursement Agent is
deemed to have no knowledge under Section 9.2.5. Moreover, as demonstrated below, Plaintiffs
have presented no evidence that BANA-in any
capacity~posscssed
information that it knew to
be "inconsistent in a material and adverse manner with the information or other matter disclosed
to them ... taken as a whole." (See Disbursement Agmt. §3.3.21.) Nor do Plaintiffs offer any
evidence that BANA failed to receive any requested information from Fontainebleau that was
"customary for transactions of this type," let alone identify such information. (See id., § 3.3.24.)
Sixth, Plaintiffs' tortured reading of Section 9.10 docs not alter Section 9.3.2's plain
meaning. (See Pis. Opp. at 9.) Contrary to Plaintiffs' suggestion, Section 9.10's expansive list
Plaintiffs' argument that Section 9.3 only applies to "Defaults"~and not "defaults"~(Pls.
Opp. at 22) ignores that "defaults" arc themselves "defined Defaults" under the Credit and
7
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of losses for which. absent gross negligence, BANA will not be liable (including losses caused
by false representations) cannot be transformed into an exception to BANA 's right to rely on
certifications under Section 9.3.2.
B.
Plaintiffs' Authorities Are Inapposite.
The cases Plaintiffs cite (Pis. Opp. at
7~9)
do not support their assertion that BANA's
straightforward reading of the Disbursement and Credit Agreements' clear and unambiguous
terms is somehow contrary to New York law. None of those cases involved the unequivocal
protective language found in Section 9.3 ·
•
•
In Chase i'yfanhattan Bank v. /vfotorola, Inc., the court prohibited a loan guarantor from
relying on a borrower's financial certification that the guarantor knew or should have
known was f~1lse. Unlike here, there was no contractual provision permitting the
guarantor to rely on the borrower's certification, while the agreement explicitly
authorized the lenders' agent to rely on such a certificate even if the agent knew it to be
11
inaccurate.
•
11
In Bank Brussels Lambert v. Chase ;V!anhattan Bank, N.A., the loan agreement required
Chase -.to satisfy itself that the materials it received [from the borrower] conformed in
9
form and substance" to what the loan agreement required. The court relied on the
phrase "in substance," absent trom the contract here: "'if Chase knew, or was grossly
negligent in not knowing, that the materials it delivered prior to and at closing were
materially inaccurate, it cannot argue that those materials were satisfactory in
'substance."' 10 In contrast, Section 9.3.2 unambiguously provides that BANA "shall not
be required ... to investigate any other tltcts or circumstances to verity compliance by the
Project Entities with their obligations." The contract in Bank Brussels contained no such
language.
•
10
/vferri/1 Lynch & Co. v. Allegheny Energv, Inc. and JP Aforgan Cha:.;e Bank v. Winnick
both merely addressed the standard for proving a fraud claim's justifiable reliance
clement, a tort concept that is irrelevant to the contract issue here.
BNP Paribas /vfortg. Gnp. v. Bank ofAmerica, NA. and LaSalle Bank, NA. v. Citicmp
Real Estate, Inc. arc inapposite because they were both Rule 12(b )( 6) decisions that dealt
Disbursement Agreements. (See id. at 22 n.117.)
Aferrill Lynch & Co., 500 F.3d 171, 181 ~82 ( 2d Cir. 2007) (holding "sophisticated business
entities" failed to meet ''burden in showing justit1able reliance"); JPJ\Iorgan Chase Bank,
350 F. Supp. 2d 393,413 (S.D.N.Y. 2004) (denying motion to dismiss where defendants
could not show that plaintiffs' reliance was unjustified).
Bank Brussels Lambert, 1996 U.S. Dist. LEXIS 15631, at *19 (S.D.N.Y. Oct. 23, 1996)
(emphasis added) (quotations omitted).
!d. at 1 (emphasis added).
Chase /vfanhattan Bank, 184 F. Supp. 2d 384, 394~95 (S.D. N.Y. 2002).
8
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with very different types of agrecmcnts~an indenture and a pooling and servicing
agrccmcnt~that had provisions not f(mnd in the Disbursement Agreement. i
C.
Plaintiffs' Extrinsic Evidence Cannot Modify BANA 's Disbursement Agent
Duties.
Plaintiffs' argument that industry standards somehow support their "commercially
reasonable" argument (Pls. Opp. at 11) is merely a truncated version of an argument from their
own summary judgment motion, relying on precisely the same out-of-context quotations from
expert and lay witnesses and a leading industry treatise. As demonstrated in SANA's opposition
to Plaintiffs' motion, expert and lay testimony and treatises arc inadmissible parol evidence that
cannot alter the Disbursement and Credit Agreements' unambiguous terms, and cannot be used
to manuflH.:turc an ambiguity. Moreover, PlaintifTs mischaractcrizc the testimony and the
treatise, which both fully support SANA's position that Section 9.3 .2 controls over Section 9.1 's
generalized ·'commercially reasonable" language. Thus, Plaintiffs' extrinsic evidence fails to
create a genuine issue of fact regarding the scope of SANA's Disbursement Agent duties. (See
Dcf. SANA's Opp. to Tem1 Lender Pis. Mot. for Partial Summ. J. at 20-24.)
II.
THERE IS
~0 EVIDE~CE
THAT
BA~A
WAS GROSSLY NEGLIGENT.
Plaintiffs acknowledge, as they must, that their breach of contract claim fails if they
cannot meet their burden of proving that SANA was grossly negligent in performing its agent
duties. (Pis. Opp. at 37.) In its opening brict~ SANA demonstrated that there is no evidence in
the factual record indicating that SANA's actions were intended to harm Plaintiffs, or that it
recklessly disregarded their rights. (SANA Sr. at 28-3 I.) To the contrary, SANA presented
evidence establishing that it took its role as agent seriously and carefully performed its duties
under the Disbursement and Credit Agreements by, among other things, (i) closely reviewing
each Advance Request to ensure it contained the certifications and representations necessary to
establish that the conditions precedent to disbursement were satisfied, and (ii) discussing key
issues internally, as well as with the Lenders, Fontainebleau, IVI and outside counsel. D (SANA
12
l:l
BNP Parihas /vfortg. Corp., 2011 U.S. Dist. LEXIS 31362, at **41-55 (S.D.N.Y. Mar. 23,
20 II) (addressing provision requiring indenture trustee to take action if it had "actual
knowledge'' of a dctault); LaSalle Bank. N.A., 2002 U.S. Dist. LEXIS 23323, at **l 13
(S.D.N.Y. Dec. 5, 2002) (addressing provision requiring loan seller to represent and vvarrant
that it employed practices that were "legal and prudent" and "met customary standards
utilized by prudent ... scrviccrs.'').
Contrary to Plaintiffs' suggestion (Pls. Opp. at 38 n.214), even in the absence of an "advice
9
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Sr. at
1.)
Plaintiffs were therefore required to respond with admissible evidence that SANA
was recklessly indifferent towards or intended to harm them. 14 They have not done so, and
therefore cannot defeat SANA's summary judgment motion.
Indeed, Plaintiffs' two-page gross negligence argument cites no evidence at aiL offering
only a conclusory legal argument and citing a single inapposite case. Plaintiffs' naked assertion
that SANA ''fail[ cd] to 'exercise even slight diligence"' in disbursing funds to Fontainebleau
(Pis. Opp. at 38) lacks factual support and is belied by the copious testimonial and documentary
evidence discussed above, and cited in SANA's Statement ofUndisputcd Facts, detailing the
steps SANA took before advancing funds to the Borrowers. And Plaintiffs' allegation that
BANA "elected to disregard the knowledge it had and the warnings it had received" (id.) simply
restates their baseless breach of contract argument that it was not commercially reasonable for
BANA to disburse funds in the face of alleged "known inconsistencies.'' As demonstrated above
(see supra at
4~5),
BANA's decision to disburse funds is subject to Section 9.3.2's provisions,
not Section 9.1 's "commercially reasonable" language. But even if Plaintiffs could establish a
Disbursement Agreement breach based on a "commercial reasonableness" standard, that
negligence-based assertion would not be evidence of gross negligence. 15 New York law requires
that Plaintiffs do more than just prove there was a Disbursement Agreement brcach~cvcn one
that was knowing and intentional-Plaintiffs must show reckless inditTerencc towards or an
intent to harm Plaintiffs. 16
i4
16
of counsel" defense, a party's consultation with counsel can be evidence of good fl1ith. CFIP
\,/aster Fund, Ltd. v. Citihank, N.A., 738 F. Supp. 2d 450,474 n.27 (S.D.N.Y. 2010) (a party
docs not ·'assert[] an 'advice of counsel' defense ... by referring to the fact of its
communication with counsel in the context of demonstrating its good faith ... [because] [t]he
focus of[the] 'good faith' defense is on the nature ofthc inquiry ... not the substance ofthe
legal advice that was eventually provided.").
lnt'l Stamp Art, Inc. v. United States Pos·tal Serv., 456 F.3d 1270, 1274 (11th Cir. 2006)
("Once the moving party has properly supported its motion t()r summary judgment the
burden shifts to the non-moving party to come forward with specific facts showing that there
is a genuine issue for trial.") (quotation omitted).
Afanhattan lvfed. Diagnostic & Rehah., P.C. v. Wachovia, Nat'! Bank, N.A., 2006 WL
3026294, at *l (N.Y. Sup. Ct. 2006) (equating a failure to act ''in a commercially reasonable
manner" with ordinary negligence), aff'd 857 A.D.2d 55 (N.Y. App. Div. 1st Dep't 2008).
See SANA Br. at 29 (citing Global Crossing Te/ecomm., Inc. v. CCT Commc 'n, Inc. (In re
CCT Cummc 'ns, Inc.), 2011 WL 3023501, at *5 (Bankr. S.D.N.Y. July
2011)).
10
FILED U:"<vould not be evidence of knowledge, nor would their failure to tollow-up on an evasive
answer constitute gross negligence. And Plaintiffs again misstate the record in assct1ing that
Highland rold BANA thal the October 7, 2008 memorandum " n1iled to directly answer S ofA's
question regard ing the source of the fund ing." (Pis. Opp. at 16 n.75 .) Highland ' s e-mail simply
stated that the ·' memo ... doesn' t address our [i. e., Highland ' s] concerns,'' but did not identify
the concerns or expla.in why they were not addressed. (Dep . Ex. 903.)
(BANA Br. at 16- 17.)
2.
BANA Did Not Know T hat th e Retail Lender s Had Failed to Ma ke
Advances in Viola tion of Section 3.3.23.
Plain tiffs have t:ailed to rebut BAN A' s showing that, bet(xe making the September 2008
through March 2009 Advances, BANA did not know that (i) Lehman had not funded the
September 2008 Shared Costs. and (ii)
(See BANA Br. at 32- 34.) And Plaintiffs'
assertion that BANA "was aware that there was no permanent solution to the Lehman po1iion of
the Retail Facility'' (P is. Opp. at 19) distorts the factual record because the evidence shows that
in October and Nove mber 2008 Lehman funded its Shared Costs portion . (BANA SOUF ~f 99.)
Moreover, in an October 22 memorandum to Lenders, Fontainebleau represented that " Lehman
Brothers has indicated to us that it bas sought the necessary approvals to fund its commitment
this month,'' and Fontaineb leau had received assurances fi·om the " co-lenders to the retail
faci lity' ' that ''[i]f Lehman Brothers is not in a position to perform . .. that they wou ld fund
Lehman's portion oft11e draw ." (BANA Br. at 14.) Thus, BAN A had good reason to believe
that the Lehman situation was being addressed prior to December 2008. Indeedcombined with
Fontainebleau 's statem ent in the October 22 memorandum and Fontainebleau ' s February 23,
2009 rcspo11Se to BANA 's February 20, 2009 letter. created the impression that a solution had
been fou nd .
Recognizing their ar~:,rtnnen t's factual deficiencies, Plaintiffs also claim that
Section 3.3 .23 can only be satis:fied if each Retail Lender funds a specific portion o f the
Advance. (Pis. Opp. at t9.) But as demonstrated in BANA ·s opening brief, this assertion is
inconsistent witb Section 3 .3 .23 's plain terms. (See BANA Br. at 33-34.) P laintiffs' only
1
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rL:sponse is to argue that in determining whether 3.3.23 was satisfied, the "critical question was
. . tvho made [the Retail Advances]." (Pis. Opp. at 19 (emphasis in original).) But the answer to
that question here is that (as far as BANA knew) the Retail Lenders had made the Retail
Advances-just as Section 3.3.23 's plain terms require. Thus, Plaintiffs have failed to show that
this condition precedent was not satisfied.
3.
Lehman's Bankruptcy Was
~ot
an :VIAE.
Plaintiffs claim that Section 3.3.11 was not satisfied because the Lehman bankruptcy
filing alone "had a Material Adverse Effect on the Project ... crcat[ing] a hole in the financing
that could have caused the Entire Project to shut down." (Pis. Opp. at 19~20.i
0
But there was
no "financing hole'': the undisputed fact is that every month from September 2008 through
March 2009, TriMont wired BANA thefz1!1 amount of the requested Retail Shared Costs.
(BANA SOUF
,l~
102.) Nor can Plaintiffs establish an MAE by mischaracterizing an out-of-
context snippet from an e-mail BANA's Bret Yunker sent when Lehman filed for bankruptcy.
(Pls. Opp. at 20; Pis. Add. SOUMF
~
31.) Yunker did not, as Plaintiffs claim, conclude that the
Lehman bankruptcy was the Project's "death nail''; he simply speculated that ''Lehman may be
the death nail for FB.'' (See BANA Reply to Pis. Add. SOUMF
~
31; Dep. Ex. 67.) As Yunker
testified, that was merely his uninformed initial reaction to the event. (Cantor Reply Decl. Ex. 4
(Yunker Dcp. at 40: I
19); see also BANA Reply to Pis. Add. SOUMF ~ 31.) BANA
ultimately determined that the Lehman bankruptcy was not an MAE based on (among other
things) (i) internal deliberations, (ii) discussions with counsel, other Lenders, and Fontainebleau,
(iii) Jim Freeman's reaffirmation, and (iv) receiving all Shared Costs. (BANA Br. at 11 17.)
4.
Lehman's Bankruptcy Did :"lot Result in a Failure of Sections 3.3.2(a),
3.3.3, 3.3.21 or 3.3.24 's Conditions Precedent.
Plaintiffs' assertions that the Lehman bankruptcy and FBR's undisclosed funding of the
September Advance resulted in the failure of Sections 3.3.2(a), 3.3.3, 3.3.21 or 3.3.24's
conditions precedent (Pis. Opp. at
20~23)
simply repeat arguments from Plaintiffs' summary
judgment motion. As demonstrated in BANA's opposition brief, Plaintiffs cannot establish
either that the conditions precedent had not been satisfied or BANA 's knowledge, let alone both.
(See Def. BANA 's Opp. to Term Lender Pis. Mot. for Partial Summ. J. at
14
29~32.)
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B.
BA~A Did ~ot Know That Fontainebleau Had Concealed the Anticipated
Costs to Complete the Project.
BANA's opening brief demonstrated that BANA did not know that there were
undisclosed additional costs to complete the Project. (BANA Br. at 1
34.) Plaintiffs offer
no evidence to the contrary. Indeed, conspicuously absent from Plaintiffs' brief is any mention
of the great effo11s-including maintaining two separate sets ofbooks-that Fontainebleau and
TWC took to hide budget overruns from BANA and IVI. (See BANA Br. at 22.) This same
deception forms the basis for Plaintiffs' fraud claims against Fontainebleau, TWC, Soffer,
Freeman, and other Fontainebleau-afl11iated officers and directors. (ld. at 34.) Plaintiffs' claim
that BANA nevertheless should have known of Fontainebleau's fraud is based on (i) a
misleading interpretation of inadmissible third-party documents concerning a single change order
and (ii) lVI's uncommunicated "gut" feeling that there were hidden costs-a feeling that IVI
itself believed \Vas insutlicient to reject Fontainebleau's Advance Requests. (See Pis. Opp. at
.) This meager showing docs not create a genuine dispute regarding BANA's ignorance ofthe
concealed costs.
1.
1
The May 2008 Change Order Claim is Baseless.
Faced with the indisputable (and admitted) fact that BANA received all required
certifications before advancing funds to Fontainebleau, Plaintiffs attempt to manufacture a
factual dispute by asserting that in May 2008 Fontainebleau ''was substantially under-reporting
the anticipated cost to complete the Project'' and failing to disclose change orders that were
nearly a year old. (Pis. Opp. at 23.) But Plaintiffs fail to provide any factual support for this
claim. The only factual support Plaintiffs offer for their allegation that there were $201 million
in under-reported costs is an inadmissible $41 million May 23, 2008 Fontainebleau Change
Order executed by non-parties FBR and TWC. (Pis. Add. SOCMF c 72; Pis. Opp. at 23 n.l24.)
No fact witness has authenticated this document or testified to its contents. Plaintiffs did not
question any Fontainebleau or Tumberry witnesses about it, and when BAN A's Jeff Susman was
20
21
Plaintitfs' argument that BANA cannot respond to their arguments concerning conditions
precedent not specifically addressed in BANA's opening brief(Pls. Opp. at 18 n.94) is
absurd. Local Rule 7.l(c) expressly permits BANA to rebut Plaintiffs' arguments.
See Haves v. City ol /vliarni, 52 F.3d 918, 921 (11th Cir. 1995) ('"A genuine issue of material
fact docs not exist unless there is sufticient evidence favoring the nonmoving party for a
reasonable jury to return a verdict in its favor.").
15
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shown the document, he testified that it was "not a document that [he had] previously seen.'' 22
Thus, the document is hearsay and cannot be considered for the truth.
And even if the change
order were admissible, it still would be unavailing. There is nothing on its face indicating that
Fontainebleau was aware of (and concealed) the change order before May 2008.
24
To the
contrary, the change order is accompanied by numerous letters, both from TWC to FBR and the
subcontractor to TWC, demonstrating that the proposed change was still being negotiated as late
as May 8, 2008.
Plaintiffs compound this factual distortion by ignoring that in June 2008, Fontainebleau
increased the Project's budget and injected approximately $190 million in new equity to cover
the costs.
Cost increases arc a normal occurrence on projects ofthis size. 26 This is precisely
why the Disbursement Agreement permitted Fontainebleau to cover cost increases with new
equity. (Disbursement Agmt.
9 6.9.1.)
Both the increase in anticipated costs and the equity
injection were disclosed to Lenders in, among other places, every IVI report beginning in June
Cantor Reply Dec!. Ex. 14 (Susman Dep. at 100: 12~14); see also BANA Reply to Pis. Add.
SOUMF ~~
Plaintiffs cite the testimony of Peter Badala, BAN A's expert witness, to
establish that BANA received the document. But expert opinion testimony cannot be used to
establish facts.
Ransom v. Equif'ax Inc., 2010 WL 1258084, at *4 (S.D. Fla. Mar. 30, 2010) (disregarding
as hearsay letters offered by plaintiff opposing summary judgment); Shannon v. Potter, 2008
WL 4753732 at
(S.D. Fla. 2008) (rejecting exhibits attached to plaintiff's affidavit
because plaintiff was not competent to authenticate memorandum authored by another
individual); Vickers v. Fed. Express Corp., 132 F. Supp. 2d 1371, 1381 (S.D. Fla. 2000)
(disregarding as hearsay letters submitted by plaintiffbecause they were not authenticated or
corroborated by testimony from their authors).
24
Plaintiffs' citation to their own expert's report to establish the change order's veracity and
contents is unavailing. ''The Law is clear ... that an expert report cannot be used to prove
the existence of facts set forth therein." In re Citric Acid Litig., 191 F.3d 1090, 1102 (9th
Cir. 1999); see also Estate ofParsons v. Palestinian Auth., 715 F. Supp. 2d 27, 32-33
(D.D.C. 2010) (disregarding expert's affidavit and granting summary judgment to the
defendant because "[e]xpert opinions may be based on hearsay, but they may not be a
conduit tor the introduction of factual assertions that arc not based on personal knowledge");
In re Lake States Commodities. Inc., 272 B.R. 233, 242-43 (Bankr. N.D. Ill. 2002) (''[T]he
inadmissible evidence relied on by the expert is not somehow transmogrified into admissible
evidence simply because an expert relies on it.") (internal citation omitted).
25
See Dec!. of Robert W. Barone, dated Aug. 4, 2011 ("Barone Decl.") Ex. 2 at 22 ("During
the June 2008 PC, the Developer increased the Owner Equity Funds by S 190,265,021.").
:y, See Barone Dec!. ~ ll.
16
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2008. 27 Indeed, severa l Plaintiffs who were Lenders at the time testified that they viewed the
equity infusion JS a ''positive'' "(b]ecausc [Fontainebleau wasl covering their cost overrun and
iojecting additional liquidity on top of that.'
Plaintiffs likewise have no evidence to substantiate their claim that BANA "believed that
there were additional change orders" not reported in May 2008. (Pls. Opp . at 23.) Plaintiffs
offer only a June 10, 2008 BANA e-mail stating that IVI believed there were "addi tional knmvn
cost increases.'' (See Pis. Opp. at 23 n.l26; Pts. Add. SOUMF ,-r 76.) But that e-mail also states
that BANA contacted Fontainebleau's Jim Freeman to ensure that IVI received all information it
needed regard ing additional change orders. JVl promptly investigated the issue (Dcp. Ex. 892).
and its next construction consultant report (dated June 2 5, 2008), concluded "[a]t th is time, the
construction costs are anticipated to increase but not exceed !'be Developer's revised direct cost
budget of $1,909,734,213 plus $190,265,021 in equity with tbe new direct cost budget of
$2,099,999,234." (Dep. Ex. 868. at 14.) Thus, the record is clear that BANA addressed with lVI
its concerns about "additional change orders" (and re lated undisclosed costs) in early-June 2008.
And Plaintiffs ignore that BANA continued pressing Fontainebleau for construction cost-related
disclosures in 2008-2009, disbursing fuods only after receiving information that appeared correct
and that Fontainebleau had certified as accurate and truthful. (See BANA SOVF ~,] 147-166.)
2.
IV l's U ncommunic ~•ted "Gut Feelings" Did Not Provide a Basis for
Rej ecting Fontain eblea u's Advance Requests.
Pla intiffs also argue that lV I's cost concerns in late 2008- early 2009- which IVI's
Robert Barone described as only ·'gut feel ings" unsupp01ied by substantiating evidence (BANA
Br. at 18; Barone Decl. ~i«i 15, 17)- were sufiicient to permit it to reject Fonta.inebl.eau's
Advance Requests. (Pis. Opp. at 24- 29.) But Plaintiffs ignore that lVI-the construction
27
2
R
29
See, e.g., Cantor Reply Dec!. Ex. 19 [Dep. Ex. 868 at BANA_ FB000329743, 329755];
Cantor Dec!. Ex. 59 [Dep. Ex. 809 at BANA _FB00215230, 215245]; id. Ex. 66 [Dep. Ex.
600 at BANA_FB00235209, 235225]; Cantor Reply Dccl. Ex. 36 [Dep. Ex. 828 at
BANA_ FBOOI04510, 104525).
Cantor
Dccl. Ex. 34
see also icl. Ex. 38 [Dep. Ex. 175].
Cantor Reply Dec!. Ex
17
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expert-continued certifying Fontainebleau's Advance Requests despite its alleged '"concerns,''
belying Plaintiffs' claim that those same concerns were sufficient for BANA to determine that
Fontainebleau was concealing costs in violation of Sections 3.3.2, 3.3.4(a), 3.3.11, 3.3.21, and
3.3.24. Plaintiffs also again substitute fabrication for fact, claiming that IVI "suggested an audit"
in March 2009. (Pis. Opp. at 26.) In fact, !VI observed that although it had not ''conducted an
audit of the information presented,'' it believed that the ·'information presented [by Borrowers]
appears reasonable at this stage in the Project." (BANA Reply to Pis. Add. SOUMF • 112.)
C.
The FDIC Closure of First ~ational Bank of Nevada Did
Conditions Precedent to Fail.
~ot
Cause
Plaintiffs strain credulity in arguing that a lender default-even one involving
commitments totaling just 0.6%) of the S 1.85 billion Senior Credit Facility (and leaving an In
Balance cushion of more than $107.7 million)-is ·'ahvays material." (Pis. Opp. at 31 (emphasis
added).) Not surprisingly, Plaintiffs cite no legal authority for this assertion. And their factual
citations arc
inapposite~ncithcr
addresses lender
det~tults.
the cited portions of Pryor's report nor Badala's testimony
(See BANA Reply to Pis. Add. SOUMF .- 122.) Plaintiffs' assertion
is also inconsistent with the loan documents-if the parties had intended that any Lender's
failure to fund would be a Dctault, they would have included it as an Event of Default in Credit
Agreement Section 7 and Disbursement Agreement Section 8. Moreover, as BANA's opening
brief demonstrated (BANA Br. at 30), Plaintiffs' bright-line rule would be inconsistent with the
parties' commercial expcctations. 30 Neither the Initial Term Loan Lenders nor a sophisticated
developer like FBR would have invested hundreds of million of dollars in the Project at its
inception if the collapse of a lender with an indisputably insignificant (OB%) commitment would
cause the Project to fail. Plaintiffs have no response to this argument.
D.
Guggenheim and Z Capital's :Vlarch 2009 Failure To Fund Did
Conditions Precedent to Fail.
~ot
Cause
Plaintiffs acknowledge that their arguments concerning Guggenheim and Z Capital's
March 2009 failure to fund Delay Draw Term Loans arc the same as their arguments regarding
FNBN. (Pis. Opp. at 32.) They tail for the same reasons. Moreover, Plaintiffs concede that no
]II
See Gutierrez v. State, 871 N.Y.S.2d 729, 731 (N.Y. App. Div. 2d Dep't 2009) ("In
interpreting a contract, the court must read the document as a whole to determine the parties'
purpose and intent, giving a practical interpretation to the language employed so that the
parties' reasonable expectations arc realized.") (quotations omitted).
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Lender disputed SANA's Disbursement Agreement analysis at the time or instructed BANA not
to fund. (!d. at
BANA Br. at
35~36.)
Plaintiffs' assertion that two Lenders, Highland
and Deutsche Bank, "replied" to BAN A's letter (Pis. Opp. at 33-34) misses the point: there is
no evidence that those Lenders disagreed with SANA's position. As Plaintiffs point out,
Highland refused to "state a position" and reserved its right to sue BANA regardless of whether
it funded the March Advance. (See Dep. Ex. 471.) And the Deutsche Bank e-mail simply asked
BANA to schedule a call to discuss certain Advance-related issues. (Dcp. Ex. 832.) Contrary to
Plaintiffs' claim. BANA held that call, which addressed Deutsche Bank's concerns. (See Pls.
Ex. 1505.)
E.
BA:'
cannot circumvent Dcp. Ex. 891 's hearsay and foundation issues by having their expert put his
spin on its
contents.~
Response to Paragraph 73: Disputed. This statement is not material or relevant to the
resolution ofBANA's motion for summary judgment. To the extent a response is required, this
statement lacks any support in the evidence. Dep. Ex. 891 is inadmissible as explained in
See Fed. R. Evid. 80l(c), 802; see also 1\;/arvellYorldwide, Inc. v. Kirhy, 777 F. Supp. 2d
720, 729 (S.D. N.Y. 2011) (striking expert reports because they were "merely factual
narratives based on their review of secondary sources and interviews that attempt to
reconstruct events about which neither has first-hand knowledge. Although Rule 703 of the
Fcdcral Rules of Evidence permits an expert to rely on hearsay in reaching his own opinion,
a party cannot call an expert simply as a conduit for introducing hearsay under the guise that
the testifying expert used the hearsay as the basis of his testimony.") (quotations omitted);
Estate ofParsons v. Palestinian Auth., 715 F. Supp. 2d 27,32-33 (D.D.C. 2010)
(disregarding expert's affidavit and granting summary judgment to the defendant because
expert opinions "may be based on hearsay, but they may not be a conduit for the introduction
of factual assertions that arc not based on personal knowledge").
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BANA's response to paragraph
supra. In addition, Plaintiffs' expert's testimony sheds no
light on when the Borrowers learned about the OCO and should be disregarded as explained in
BANA 's response to paragraph
supra.
Response to Paragraph 74: Disputed. This statement is not material or relevant to the
resolution ofBANA's motion for summary judgment. To the extent a response is required, the
cited testimony docs not support this statement. Plaintiffs offer no admissible evidence
establishing that BANA was furnished with documentation relating to a structural steel change
order in mid-2008. Plaintiffs attempt to cite BANA's expert Peter Badala's testimony in support
of their statement, but Mr. Badala's expert opinion cannot be used to establish facts about which
he has no personal knowledge any more than Mr. Boykcn's expert opinion, as explained in
BANA's response to paragraph 72, supra.
Response to Paragraph 75: Disputed. This statement is not material or relevant to the
resolution ofBANA's motion for summary judgment. To the extent a response is required, the
cited evidence docs not support this statement. Neither the cited document nor testimony
supports Plaintiffs' statement that learning about $201 million in additional costs was important
to BANA.
Response to Paragraph 76: Disputed. The cited evidence docs not support this
statement. Dcp. Ex. 217-an internal BANA e-mail-states IVI believed there were ''additional
known cost increases," but it says nothing about BANA's
belief~
or unreported change orders.
Moreover, the record is clear that BANA promptly followed up with lVI on the construction cost
increases disclosed by Fontainebleau, and gained closure on the issue. (Cantor Reply Dccl.
Ex. 18 [Dep. Ex. 892].) And in IVl's next project status repoti, dated June 25, 2008, IVI further
stated that"[ a ]t this time, the construction costs arc anticipated to increase but not exceed the
Developer's revised direct cost budget of $1,909,734,213 plus $190,265,021 in equity with the
new direct cost budget of $2,099,999234." (!d. Ex. 19 [Dcp. Ex. 868].) Thus any concerns that
may have existed were limited to early June 2008, and were addressed by Fontainebleau and IVI.
Response to Paragraph 77: Disputed. The cited evidence and testimony do not support
this statement. !VI's Robert Barone stated that he raised concerns about the completeness and
accuracy of the additional costs in the fourth quarter of 2008, but he did not mention raising
concerns about the timeliness of reporting, or to whom the concerns were raised. (Dcp. Ex. 851
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at,! 14.) BANA 's Jeff Susman testified that he did not recall whether lVI raised concerns with
BANA in Q4 2008. (Cantor Reply Dccl.
14 (Susman Dcp. at
134:10~135:14).)
Response to Paragraph 78: Disputed. This is a nonsensical statement to which no
response is required. This statement docs not indicate or provide any context as to what
concerns of BANA and the other Lenders arc at issue. To the extent a response is required, the
statement docs not support that BANA had concerns about the accuracy and timeliness of the
Borrowers' reporting anticipated construction costs. Mr. Newby's testimony docs not specify
when the concerns arose, and Mr. Susman testified that he did not recall whether lVI raised
concerns with BANA in Q4 2008. (Cantor Reply Dec\. Ex. 14 (Susman Dcp. at l 34: I 0~
135:14).) While Messrs. Howard and Bolio testified that Deutsche Bank c-mailcd BANA about
Project costs, its questions were unsubstantiated. When Deutsche Bank asked BANA in
December 2008, about Project costs, BANA responded by asking Deutsche Bank to provide
additional information because BANA was unaware of any such issues. (ld. Ex. 11 (Bolio Dep.
at 171
172:7.) There is no evidence that BANA received a response from Deutsche Bank.
Response to Paragraph 79: Undisputed.
Response to Paragraph 80: Disputed. IVI's Robert Barone raised concerns about the
completeness and accuracy of the additional costs in the fourth quarter of 2008, but did not raise
concerns about the timeliness of reporting. Moreover, Plaintiffs have offered no evidence as to
whom IVI's concerns were raised. (Dcp. Ex. 851
at~[
14.) BAN A's Jeff Susman testified that he
did not recall whether lVI raised concerns with BANA in the fourth quarter of 2008. (Cantor
Reply Dccl. Ex. 14 (Susman Dep. at 134: 10~135: 14).)
Response to Paragraph 81: Disputed. The statement mischaractcrizcs the evidence.
IVI's January 30,2009 Project Status Report No. 21 identified as concerns "that all the
subcontractor claims have not been fully incorporated into the [Anticipated Cost Report] and
potential acceleration impact to meet the schedule has not been included" and ·'that the LEED
credits arc tracking behind projects." (Cantor Dec!. Ex. 59 at 7 [Dcp. Ex. 809].)
Response to Paragraph 82: Disputed. The cited testimony docs not support this
statement. The cited Jeanne Brown testimony makes no reference to concerns raised by IVI.
(Cantor Reply Dec!. Ex. 7 (Brown Dep. at
96:3~7).)
Response to Paragraph 83: Disputed. The cited evidence docs not support this
statement. The evidence makes no reference to the accuracy of LEED credit reporting. (See
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at~
Cantor Decl.
84
Reply Dec!.
12 (Yu Dep. at 105: I
20 [Dcp. Ex. 808 (Dec!. of Henry Yu)]; Dep. Ex. 851 at«' 15; Cantor
)
Response to Paragraphs 84 and 85: Undisputed.
Response to Paragraph 86: Disputed. The cited evidence and testimony do not support
this statement. While lVI continued to be concerned that there were unreported costs, IVI's
March and April 2009 Project Status Reports stated that the Anticipated Cost Reports issued by
the Developer indicated the project was expected to stay within budget. (Dep. Exs. 600 at 23;
828 at 22.) IVI also reported a potential issue with LEED credits tracking behind projections,
but was awaiting an audit by Fontainebleau that would provide additional information. (Dep.
Exs. 600 at 23; 828 at 22.) The cited Bolio testimony consists solely of his interpretation of
IV I' s February 2009 report, and docs not address his view of whether BANA received
satisf~1ctory
information from the Borrowers. (Cantor Reply Dec!. Ex. 11 (Bolio Dcp. at 204:9-
206: 19).) The cited Henry Yu testimony recounts Mr. Freeman's initial refusal to meet with
BANA around March 2009, but again contains no assessment of whether BANA was receiving
satisfactory information at the time. (ld. Ex. 12 (Yu Dcp. at 49:24-51 :5).)
Response to Paragraph 87: Undisputed.
Response to Paragraph 88: Undisputed. but the cited testimony docs not support this
statement.
Response to Paragraph 89: Disputed. Plaintiffs mischaractcrizc the cited evidence.
The letter is a request for elaboration on issues that were raised in !VI's January 2009 report
rather than an indication of concern by JP Morgan Chase. (Cantor Dec!. Ex. 61 [Dcp. Ex. 81 0].)
Response to Paragraph 90: Undisputed.
Response to Paragraph 91: Disputed. The cited testimony docs not reflect that BANA
thought it was a "bad sign" that Fontainebleau refused to meet with Lenders in February 2009.
(See Cantor Reply Dec!. Ex. 12 (Yu Dep. at 128: I 13).)
In tact, Mr. Yu testified that he
understood in February 2009 that Fontainebleau was meeting with other Lenders, but refused to
meet with him. (!d. at 127:4-12; 129:6-15.)
Response to Paragraph 92: Undisputed.
Response to Paragraph 93: Disputed. The cited evidence docs not support this
statement. The cited evidence concerns Mr. Yu's opinion as of March 4, 2009 concerning
Fontainebleau's answer to the questions posed in its February 23, 2009lcttcr. (Cantor Reply
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Dccl.
12 (Yu Dcp. at 143:1
144:4).)
Response to Paragraph 94: Undisputed.
Response to Paragraph 95: Disputed. Plaintiffs mischaractcrizc the evidence.
According to the letter, IVI's concerns were based on a review of the TWC Requisition for
February 2009 and the January 2009 ACR. (Cantor Dec!. Ex. 69 [Dcp.
604].)
Response to Paragraph 96: Undisputed that, upon being asked during his deposition
whether IVI's concerns about unreported project costs were a "pretty big deal," Brandon Bolio
responded, "[i]t
" (See Cantor Reply Dec!. Ex. II (Bolio Dcp. at
229:20~230:5).)
Response to Paragraph 97: Disputed. The cited evidence docs not support the
statement. There was no ''refusal" by Fontainebleau to meet. During the weekend of March
7~
8, 2009, BANA offered to meet with Fontainebleau, but as of March I 0, 2009, Fontainebleau
had "still not agreed to meet" with BANA. (See Cantor Dccl. Ex. 71 [Dcp. Ex. 819].)
Response to Paragraphs 98 and 99: Undisputed.
Response to Paragraph 100: Disputed. The cited evidence docs not support the
statement. There were no discussion between Borrowers and IVI in mid-2009. The cited
evidence rctlccts that in mid-March 2009, following discussions with IVI, the Borrowers
acknowledged that there were outstanding costs in addition to the S35 million in costs initially
disclosed, and agreed to increase the Project's budget by a further S50 million. (Dcp. Ex. 851 at
• 26; see also BANA SOUF • 153; Cantor Reply Dec!. Ex. 9 (Kumar Dcp. at
165:22~166:24).)
Response to Paragraph 101: Disputed. The cited evidence docs not support this
statement. The cited evidence rcf1ccts that IVI sent an update to BANA about anticipated costs,
and noted that IVI expected to receive a summary of the construction budget exposure based on
updated projections from the general contractor. (Cantor Dec!. Ex. 72 [Dcp. Ex. 608].) IVI's
Robert Barone testified that he remained skeptical about whether all subcontractor claims were
incorporated into the disclosed costs. (Cantor Reply Dccl. Ex. 13 (Barone Dcp. at 75: 19~24).)
Response to Paragraph 102: Disputed. The cited evidence docs not support this
statement. Mr. Yu testified that lVI held this belief in early-March 2009. (See Cantor Reply
Dec!. Ex. 12 (Yu Dep. at 145 :6~24 ). )
Response to Paragraph 103: Disputed. This statement mischaractcrizcs the evidence.
On February 23, 2009, Fontainebleau wrote to BANA and explained that it was engaging
auditors with respect to the Project's LEED credits. (See Cantor Dccl. Ex. 63 [Dcp. Ex. 811].)
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On March 5, 2009, lVI requested that the audit be expedited.
Dep.
March 20, 2009, the Borrowers infonncd the Lenders that it had retained KPMG to conduct the
LEED audit, and that an internal LEED review was ongoing. (See Cantor Reply Dccl. Ex. 29 at
ING014067 [Dcp.
346].) But before the results of the LEED audit vverc disclosed, the
revolving lenders terminated the Revolver Loan under the Credit Agreement and litigation
commenced. (See Cantor Decl. Ex. 82 [Dep. Ex. 827].)
Response to Paragraph 104: Disputed. The statement mischaracterizes the cited
evidence. Henry Yu testified that he told Mr. Freeman that the LEED audit should be completed
as soon as possible, but could not remember whether BANA gave Mr. Freeman a deadline for
completion ofthe LEED audit. (See Cantor Reply Dec!. Ex. 12 (Yu Dep. at 121:6-15).)
Response to Paragraph 105: Disputed. The statement mischaracterizes the cited
evidence. The March ll, 2009 Advance Request did not reflect certain additional costs that
Fontainebleau's Deven Kumar disclosed to IVI on March 11, 2009. (See Dep. Ex. 851
at~
27.)
Response to Paragraph 106: Disputed. The statement mischaracterizes the stated
evidence. lVI refused to approve the Borrowers' March 11, 2009 Advance Request because of
material errors in the Request, and did so through a Construction Consultant Advance Certificate
that identified those errors. (Bolio Decl. Ex. 36 [Dep. Ex. 860]; Cantor Reply Dec!. Ex. 12 (Yu
Dep. 193:5-9).) Mr. Barone testified that IVI refused to certifY the Advance Request because it
"no longer believed it" (see Cantor Reply Decl. Ex. 13 (Barone Dep. at 60:24-62: 16) ), but this
was not retlected in the IVI Construction Consultant Advance Certificate provided to BANA.
(See Bolio Dec!. Ex. 36 [Dep. Ex. 860].)
Response to Paragraph 107: Disputed. The cited evidence docs not support the
statement. The March 11 Advance Request contained errors that were resolved through
negotiations between the Borrowers and IVI. (Cantor Reply Decl. Exs. 30 [Dep. Ex. 861]; 13
(Barone Dep. at 65:6-66:2).) These negotiations added costs and shifted the Project's opening
date. The cited evidence does not establish that the March 11 Advance Request "failed to
include all of the cost overruns that had been identified and failed to indicate that the opening
date for the Resort would have to be moved back by a month" because it implies that such facts
were known to Borrowers as of March 11, 2009, an assertion for which the cited evidence lends
no support.
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Response to Paragraph 108: Disputed. The statement is not supported by the cited
evidence. The cited evidence makes no mention of cost overruns. IVI's concerns were limited
to Fontainebleau's representations regarding disclosure of subcontractor claims. (See Dep.
Ex. 828 at 7. 21
·Cantor Reply Dccl. Ex. 13 (Barone Dcp. at
75:19~24).)
Moreover, IVI also
concluded that ''construction costs arc anticipated to increase but not exceed the Developer's
revised direct cost budget." (Dep. Ex. 828 at 22.)
Response to Paragraph 109: Disputed. Mr. Barone's testimony concerns subcontractor
claims in late March 2009. (See Cantor Reply Decl.
13 (Barone Dep. at
:19-24).)
Response to Paragraph 110: Disputed. The cited evidence docs not support this
statement. While it is true that lVI expressed concerns about Fontainebleau's cost disclosures in
January and February 2009, IVI executed the Construction Consultant Advance Certificates for
the January and February 2009 Advance Requests indicating that it had identified no material
errors in the Borrowers' Advance Request. (Barone Dccl. nT 15. 20. Exs. 3, 6; Cantor Dec!.
59 at 7 [Dep. Ex. 809]; 66 at 23 [Dcp. Ex. 600].) lVI also executed a Constmction
Consultant Advance Certificate approving the Borrowers' Revised March 2009 Advance
Request. (Cantor Reply Dec!.
31 (Dcp. Ex. 862).) Moreover, lVI indicated that the Project
vvas expected to remain within budget in both of its Project Status Reports for January 2009 and
February 2009. (Cantor Dec!. Exs. 59 at 7 [Dcp. Ex. 809]; 66 at 23 [Dep. Ex. 600].) Any
concerns lVI may have had were based only on its "gut'' feelings, and IVI lacked evidence
supporting its suspicions. (Barone
Dec!.~
17.) Moreover, IVJ pressed the Borrowers for
additional information and received responses the Borrowers represented were accurate and that
IVI believed to be "credible." (Barone Dec!. ,!28; Cantor Reply Dec!. Ex. 30 [Dcp. Ex. 861].)
Response to Paragraph Ill: Disputed. The cited evidence docs not support the
statement. Henry Yu testified that the Borrower did not answer some of IVI's questions that had
been pending since January 2009. (Cantor Reply Dec!. Ex. 12 (Yu Dep. at 195
10).)
Response to Paragraph 1 12: Disputed. Plaintiffs mischaracterize the evidence. IVI
never raised the possibility of an audit ofthe Borrower's construction costs. Rather, lVI
acknowledged that it had not "conducted an audit of the information presented," but it
nonetheless believed that "the inforn1ation presented appears reasonable at this stage in the
project." (Dcp. Ex. 861.) Undisputed that BANA never conducted an audit of information
presented by the Borrowers.
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Response to Paragraph 113: Disputed. BANA's acquisition of Merrill Lynch & Co.,
Inc. is not material to the resolution of any issue. In addition, the cited evidence docs not support
this statement. While BANA was aware of Merrill Lynch's involvement in fundraising efforts
by Turnbcrry (not Fontainebleau), it did not know for what purpose. (Dcp. Ex.
Reply Dccl.
4 (Y unkcr Dcp. at
· Cantor
19).) The cited evidence docs not rctlcct that Borrowers
were trying to raise hundreds of mill ions of dollars in added capital for the Project.
Response to Paragraph 114: Disputed. The Notice of Borrowing was originally
submitted on March 2, 2009, and a corrected version was submitted on March 3, 2009. (See Pis.'
Ex. 1507 at
BANA~FB0021594().)
The Notice of Borrowing submitted on March 3, 2009
requested an aggregate amount of S1,006,522,698.00, composed of $350,000,000.00 under the
Delay Draw Loan, and $656,522,698.00 undcrthc Revolver. (See iJ. at
BANA~FB00215942.)
Response to Paragraph 115: Disputed. The statement mischaractcrizcs the cited
evidence. Mr. Yu did not testify that the Borrowers' proposal to enter into a pre-negotiation
agreement "increased BofA's concern that the Borrowers were not providing accurate or
complete information about the Project." Mr. Yu testified that he found the standstill provision
of the proposed pre-negotiation agreement to be '"objectionable" and that he viewed it as a
''continuation of [the Borrowers'] behavior of not providing information." (Cantor Reply Dec!.
Ex. 12 (Yu Dep. at
179:7~22).)
Response to Paragraph 116: Disputed. The cited evidence docs not support the
statement. Plaintiffs cite to IVI's May 15,2009 Cost-to-Complete Report and an April 13,2009
e-mail from Henry Yu to Robert Barone and others. Neither document references anticipated
change orders totaling over S350 million, nearly S 190 million of which were admitted to be for
previously committed construction costs.
Response to Paragraph 117: Disputed. Mr. Barone testified that he was "stunned" to
learn of the additional unreported costs revealed by the Borrowers in mid-April 2009. (See
Cantor Reply Dec!. Exs. 13 (Barone Dep. at 81 :3~82:7; 85: I 0-86:8); 32 at., 33 [Dep. Ex. 851]
("I was stunned to see such an enormous increase in anticipated costs, which had not been
previously reported to us, despite our repeated requests that all such information be disclosed.").)
Response to Paragraph 118: Disputed. Plaintiffs mischaractcrizc the cited evidence.
BANA docs not dispute that the evidence cited is an e-mail from Mr. Bonvicino stating, "Pretty
close to my !50 mil.'' But when Mr. Barone was asked if he recalled '·Mr. Bonvicino
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predict[ing] or ... know[ing] that there were 150 million dollars in cost overruns," he stated only
that he remembered Mr. Bonvicino ''speculating" about cost overruns. (Cantor Reply Dec!.
13 (Barone Dcp. at
85:1~5).)
Response to Paragraph 119: Disputed. The statement is not a ''fact;" rather it is a
conclusion of law.
Response to Paragraphs 120 and 121: Undisputed.
Response to Paragraph 122: Disputed. This statement is a legal conclusion, not a
factual statement. Moreover, the cited evidence offers no suppmi for this statement. Plaintiffs'
Exhibit 1503 is a report by PlaintitTs' expert Shepherd Pryor IV. Paragraph 35 deals with
borrower representations and makes no reference to lender dct~mlts. And even if it did,
Mr. Pryor (vvho retired from banking in 1991) is not quali ficd to testify about current practices
concerning widely held and actively traded syndicated loans. (See Cantor Reply Dec!. Exs. 16
(Pryor Dcp. at 75:24-76:3 (testifying that he did not rely on anything "other than [his]
experience and the ... materials that appear in [Pryor Report] Ex. B.''); id. at l I :25-12: l 0
(testifying that he did not recall working as an agent on any construction loans); id. at 12:7-9;
l 9:19-24 (testifying typically served as agent on credits with" 15 or 20 participating lenders"
and at most, 30 banks)); 33 [Dep. Ex. 932 (Pryor Rep. Ex. B)]; supra Rcsp. to Para. 20.) Peter
Badala ·s deposition testimony likewise makes no reference to lender defaults. Nor could it, as
Mr. Badala is BANA's cxpcti on construction-related issues.
Response to Paragraph 123: Undisputed.
Response to Paragraph 124: Disputed. The cited evidence docs not support the
statement. Dcp. Ex. 291 -B is a March 30, 2009 e-mail from Whitney Thier to Albert Kotitc,
Sony Bcn-Moshc, Jed Bergman, Michael Krictzcr, Jim Freeman, Augusto Sasso and Todd
Kaplan attaching letters from Fontainebleau Las Vegas, LLC-signcd by Ms. Thicr-to Z
Capital Partners, L.L.C. and the Guggenheim lenders. Neither the e-mail, nor the attached letters
usc the phrase "defaulting lender" or reference Mr. Howard. And to the extent Plaintiffs imply
that Mr. Howard testified that a lender's failure to fund constituted a "default" under any of the
loan agreements, that would be inaccurate. Mr. Howard tcstiticd: "we had lots of cases where
Lehman was involved, other transactions where it didn't constitute a default under the
agreement, it just created a shortfall ... Jt didn't necessarily create a default under the
document." (Cantor Reply Dec!. Ex. 5 (Howard Dcp. at 193:3-15).)
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Response to Paragraph 125: Disputed. None of the cited evidence refers to "defaulted
DDTL Loans." Dep.
I 04 is a March 23, 2009 letter from BANA to Lenders stating:
"Several L:nders ... have not funded the S350MM Delay Draw Term Loan requested by the
Borrower. ... Bank of America's position is that it is willing to include the S21 ,666,667 for the
March 25 Advance, pending further information about whether these lenders will fund. Absent
any other changes, note that the exclusion of the $21,666,66 7 amount from Available Funds
would result in a failure to satisfy the In-Balance Test. ... We request that any Lender which
docs not support these interpretations immediately inform us in writing of their specific
position." (Cantor Dec!.
76 [Dep. Ex. 104].)
Response to Paragraph 126: Disputed. The statement is not supported by the cited
evidence. Ms. Brown's testimony was limited to receipt of the retail funds. She testified that
BANA "wouldn't go forward [and disburse the funds] unless [it] had [the retail] part. That was
part of the protocol. Each step had to come in order." (Cantor Reply Dec!. Ex. 7 (Brown Dep. at
72:16~73:1).)
And as for the Term Lenders' funds, Ms. Brown testified "I don't even remember
anything about the term lenders." (ld at 109:22-110:3.)
Response to Paragraph 127: Disputed. '"Defaulting DDTL Lenders" is not a defined
tem1 in any of the loan agreements. Moreover, Mr. Yu did not testify that he was "never sure"
that certain DDTL lenders would make payments. He testified only that he did not want to
represent to the other Lenders in writing "don't worry, the Guggenheim money is coming in, so
that's going to be okay" because, in general, ''[u]ntil the money comes in, you're never sure" and
"until something happen[s], there's alvvays a chance that it's not going to happen." (Cantor
Reply Decl. Ex. 12 (Yu Dep. at 232:3-23; 233:8-23).)
Response to Paragraph 128: Disputed. "Defaulting DDTL Lenders" is not a defined
term under any of the loan agreements. Undisputed that in early April 2009, the Guggenheim
lenders funded SIO,OOO,OOO in Delay Draw Tem1 Loan funds. (Dep.
643.)
Response to Paragraph 129: Disputed. ''Defaulting Delay Draw Lenders" is not a
defined term under any of the loan agreements. The cited evidence docs not support this
statement. Mr. Yu's testimony concerned a Lender disagreement over whether the Borrowers
would be permitted to borrow under the Revolver in April2009-not whether the unfunded
Delay Draw funds should be included in the A vail able Sources for purposes of the In Balance
Test as suggested by Plaintiffs. Mr. Yu was testifying about the March 23, 2009 letter from
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BANA to the Lenders stating that there was ·'a divergence of opinions as to the reading of
2.1(c)(iii) ofthe Credit Agreement." (Cantor Dec!.
76 [Dep.
104].) Section 2.1(c)(iii)
concerns borrowings under the Revolver. nut the In Balance Test's computation.
Response to Paragraphs 130, 131 and 132: Undisputed.
Response to Paragraph 133: Disputed. The statement is unsupported by the cited
evidence. None of the cited testimony supports an assertion that"[ e ]arly 2009 was a time of
stress in ... the Las Vegas market in particular." Undisputed that early-2009 was a time of
economic stress in the financial markets in general.
Response to Paragraph 134: Disputed. This statement is overly broad and ambiguous,
and not material or relevant to the resolution of BAN A's motion for summary judgment. The
cited evidence ret1ects only that BANA internally monitored the Project as a Lender in 2008 and
2009. a role that was distinct from its agent roles.
Response to Paragraph 135: Disputed. This statement is not material nor relevant to
the resolution of BAN A's motion for summary judgment because BANA 's internal analysis of
its future post-construction credit risk exposure as a lender is irrelevant in determining its good
faith as agent. (See Cantor Reply Decl. Ex. II (Bolio Dcp. at II
16:25).)
Response to Paragraphs 136 and 137: Disputed. (See Rcsp. to£ 135.)
Response to Paragraph 138: Disputed. This statement is not material nor relevant to
the resolution of BANA 's motion for summary judgment because BANA 's internal analysis of
its future post-construction credit risk exposure as a lender is irrelevant in determining its good
faith as agent. (See Resp.
to~
l35.)This statement is also unsupported by the cited evidence.
Dcp. Ex. 831 is a Scheduled Exposure Rep011 ("SER") dated April 6, 2009 and docs not rctlcct
any "continuing concern" by BANA regarding condo sales. Moreover, while Dcp. Ex. 831 states
that "it is unlikely that the Company will sell the 933 condo units," it notes that ·'the Company
has the ability to convert the unsold condos into hotel rooms." (Dep. Ex. 831 at 4.)
Response to Paragraph 139: Disputed. This statement is not material nor relevant to
the resolution of BANA 's motion for summary judgment because BAN A's internal analysis of
its future post-construction credit risk exposure as a lender is irrelevant in determining its good
faith as agent. (See Rcsp.
to~
135.) To the extent a response is required, the cited evidence docs
not support PlaintitTs' statement. Credit Agreement§ 2.ll(a)(ii) refers to "mandatory
prepayments," not repayments'. While some of the cited documents indicate that condo sales
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vvould be a source of debt repayment they do not indicate that that condo sales would
"substantially repay outstanding debt." Similarly, Messrs. Varnell and Yunker testified that both
condo sales and operating cash tlows from the casino and hotel would service the debt, but he
did not testify that they would substantially repay outstanding debt after the Project's opening.
(Cantor Reply Decl. Exs. 4 (Yunker Dep. at
43:16~44:17):
6 (Varnell Dcp. at
67:6~11).)
Response to Paragraph 140: Disputed. This statement is not material nor relevant to
the resolution ofBANA's motion for summary judgment because BANA's intemal analysis of
its future post-construction credit risk exposure as a lender is irrelevant in determining its good
faith as agent. (See Resp.
to~
135.) To the extent a further response is required, it is
unsupported by the cited evidence. Mr. Bolio did not testify that the Project could be "in
dct1mlt" upon opening. Mr. Bolio testified that while Fontainebleau Las Vegas"[ c ]ould have a
difficulty meeting its covenants when it opened," that"[ w ]as not the expectation. Tt was
something that could happen, and it was [COP's] job to factor that in." (Cantor Reply Decl.
Ex. ll (Bolio Dcp. at 35: 14~36:2).)
Response to Paragraph 141: Disputed. This statement is not material nor relevant to
the resolution of BAN A's motion for summary judgment because BANA's internal analysis of
its future post-construction credit risk exposure as a lender is irrelevant in determining its good
faith as agent. (See Rcsp.
to~
1
.) To the extent a response is required, the statement is not
supported by the cited evidence. Moreover, the cited evidence is inadmissible because it was
never authenticated and contains hearsay. Pls.' Ex. 1508 is an October 18, 2007 e-mail from Jon
Varnell to BAS' Michael Malone and others at BAS, stating that Mr. Varnell had heard that
Fontainebleau's Jeff Soffer told Mr. Malone that the Borrowers had decided not to sell condos.
The e-mail also states that Jim Freeman told Mr. Varnell that although Mr. Soffer had raised the
idea of not selling condos "internally," his idea bad "no support from any other FB or Tum berry
executive, particularly Glenn." Neither the sender, nor any of the recipients that were deposed
were questioned about the e-mail during their depositions. Messrs. Freeman and Varnell did not
testify about the purported conversations and Messrs. Soffer and Malone have not been deposed
in this case. Because no witnesses with personal knowledge of the e-mail or conversations have
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testified about them, the speculative statements contained in Pis.' Ex. 1508 purporting to
describe those conversations arc inadmissible hcarsay. 9
Response to Paragraph 142: Disputed. This statement is not material nor relevant to
the resolution of BANA 's motion for summary judgment because BANA's internal analysis of
future post-construction credit risk exposure as a lender is irrelevant in determining its good
faith as agent
Rcsp. tor 135), and is not supported by the cited evidence. Plaintiffs offer no
evidence of a condo sale schedule or projections. Moreover, Pis.' Ex. 1509 is inadmissible
because it contains hearsay statements. It is a March 27, 2008 e-mail from Kyle Bender to Jon
Varnell and Bret Yunker forwarding a Barclays Capital analyst report that purports to summarize
conversations that Barclays had with Fontainebleau "management." The report's contents lack
foundation and constitute inadmissible hearsay because tbe analyst was never deposed and
Plaintiffs cite the report for the truth of its contcnts. 10 Because no witnesses with personal
knowledge of the analyst report or purported conversations testified about them, the speculative
statements contained in Pis.' Ex. 1509 arc inadmissible hearsay.
Response to Paragraph 143: Disputed. This statement is not material nor relevant to
the resolution of BAN A's motion for summary judgment because BANA's internal analysis of
its future post-construction credit risk exposure as a lender is irrelevant in determining its good
faith as agent (see Resp. tor 135). and is not supported by the cited evidence. Dcp. Ex. 831, an
internal BANA report dated April 6, 2009, states "'it is unlikely that the Company will sell the
933 condo units.'' (Dep. Ex. 831 at p. 4 (emphasis added).)
II.
DEFENDANT'S REPLY TO PLAINTIFF'S RESPO~SE TO
STATEVIE~T OF U~DISPUTED VIATERIAL FACTS
BA~A'S
Pursuant to Fed. R. Civ. P. 56 and S.D. Fla. L.R. 7.5(c) and (d), BANA submits this reply
to Plaintiffs' Response to Defendants' Statement of Undisputed Material Facts. BAN A's initial
statement establishes that the facts arc undisputed and arc supported by the cited evidence.
Constrained by page limitations, BANA writes to address certain issues raised by Plaintiffs'
10
See Fed. R. Evid. 80 1-802; Design X iv!fg., Inc. v. ABF Freight Sys., Inc., 584 F. Supp. 2d
464, 468 (D. Conn. 2008) (refusing to consider on summary judgment an e-mail recounting
vvhat one non-deponent witness purportedly told another non-deponent witness because the
e-mail was inadmissible hearsay within hearsay).
See UnUed States v. Baker, 432 F.3d 1189, 121 l (11th Cir. 2005) (news report inadmissible
as hearsay).
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Response.. BANA does not concede that any statement to which Plaintiffs bave objected is either
disputed or not material and rel.e.vant.
ln a transparent attempt to manufacture the appearance of dis puted issues of ma terial tact
where none exists, Plaintiffs' response mischaracterizes the evidence on several key points:
•
Pis.' Resp. to B A~A SO UF Paras. 72, 75, 118. Plaintiffs do nothing more than repeat
their basdess c laim that BANA knew that fontainebleau Resorts Jl.mded Lehman 's share
of the Retail Shared Costs in September 2008. Plaintiffs fail to offer any evidence
s upporting their assertions. As cxpl.a incd in SANA's Response to PlaiDtiffs ' Statement
of Undisputed Material Facts, the tactual record s hows Plaintiffs' assertions to be false.
•
Pis.' Resp. to BA~A SOUF Para. 79. There are no documents supporting Plaintiffs'
conclusory assertion tbat BANA was aware that Lehman d id not fund its share of Shared
Costs in September 2008. Dep. Ex. 204 is an e-mail sent a week before the Shared Costs
were received by BANA fi·om TriMont. And Dep. Ex. 475- Bolio's undated
handwritten notes- are clearly irrelevant as the noted dollar amounts- "25 mm" and
''2mm Lcbman" -do not correspond to U September 2008 Shared Costs. 1e
Cantor Reply Dccl. Ex. 20 [Dep. Ex. I l].)
•
Pis. ' Resp. to BANA SOUF Para. 73. Plaintiffs ' claim that BANA received more tban
one wire from TriMont, the Retail Servicer, is contradicted by the evidence they cite.
Bolio Dec!. Ex. 29 is a December 30, 2008 .Jeanne Brown e-mail clearly reflecting that a
single wire was received that day by BANA from TriMont for the Retail Costs requested
by Fontainebleau in the December 2008 Advance Request. Ms. Brown writes ''The wire
in the amount of$4,969, 1
.35.00 has been received." The accompanying Advance
Request states that the "Amounts to be Advanced From the Retail Facility for Shared
Costs'' are $4.969.1 35.00. The cited Brown testimony is likewise on-point- it refers
only to when she learned there were multiple Retail L enders. and not about whether
multiple wires were sent by TriMont to BANA.
•
Pis.' Resp . to .BANA S O UF Para. 83 . .Jeanne Brown 's testimony is unambiguous that
she did not recall discussing with TriMont's Mac Rafeedie whether Lehman funded in
September 2008: "Q. And in September 2008, which as l stated was the month Lehman
tiled bankruptcy, so the month Lehman filed bankruptcy, did Mr. Rafccdie tell you that
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Lehman was not funding? Wou ld that l1ave been one of your sources of information? A.
1 don't remember him telling me that." (Cantor Reply Dec!. Ex. 7 (Brown Dep. at 57:1 8) (emphasis added).) Plaintiffs nonetheless attempt to manufacture a factual dispute.
•
J>ls.' Resp . to BANA SOUF Paras. 100 and 103.
•
Pls.' Resp. to BANA SO UF Para. 115. Plaintiffs dispute that BANA concluded that
H ighland's September 30, 2008 claims were incorrect. While they cite an evidentiary
k itchen sink, almost none of the cited evidence has anything to do with Highland 's email. Indeed, most of it consists of documents and testimony conccming events that
occurred long after September 30, 2008. Incredib ly, Plaintiff-s even cite a September
2009 fi ling in the Lehman bankJuptcy by Fontainebleau Las Vegas Retail, LLC (Pis.'
Ex. 1504), a document created more than a year after the events at issue. P lainti1:I.5
clearly lack any good faith basis for their response to Paragraph 115 .
•
Pis.' Rcsp . to
BA~A
SOUF Paras. 121 and 123. Plainti ffs' assertion that BANA " did
not evaluate Highland 's claims but turned a blind eye to ihem" or that it "dismissed
Highland's claims out of hand" is shown to be false by the evidence that Plaintiffs
themselves have submitted. Plaintiffs introduced numerous e-mails between BANA and
Highland reflecting BANA 's attempts to address Highland's Lehman-re lated concems.
(See Cantor Reply Decl. Exs. 21 lDcp. Ex. 81 ]; 22 [Dcp. Ex . 80]; Cantor Decl. Ex. 49
[Dep. Ex. 904}; see also Susman Decl. Ex. 5: id. ~~ 14- 16, 22- 24; Cantor Reply Decl.
Exs.
•
5 (Howard Dcp. at 52:19- 53: 19).)
Pls.' Resp. to BANA SOUF Pnas. 137 and 146. There is no material dispute that
concerns raised by IVI in Project Status Rep01t 2 1 were only ·'gut'' feelings, and IVT bad
no evidence supporting its suspicions. In fact, the documents Plaintiffs rely upon make
clear that lVI 's concerns were only a "gut" feeling and there was nothing concrete that
IVl could point to as evidence of problems.
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•
Pls.' R esp. to BANA SO UF Para. L93 . Plaintiffs ignore the unambiguous deposition
testimony cited by SANA where Henry Yu explained that Guggenheim informed him
that it was "rounding up all the parties" and intended to fund its $ 10 million. Delay Draw
commitment in March 2009: "I believe I bad a conversation with Guggenheim . with
Guggenheim saying, ·· v cs, we' re rounding up all the parties, all our investors, and we
intend to send those funds, and as they come in, we have been sending them, that's why
you already got some and the rest are coming." (Cantor Reply Dec!. Ex. 12 (Yu Dcp. at
228: 15- 229:4).)
In addition. while claiming to dispute cc1tain statements, Plaintiffs concede certain key
fac ts:
•
Pis.' R esp. to BANA SOUF Pat·a. 57. Pla intiffs do not dispute that SANA received all
required certifications from Fontaineb leau, TWC, and BWA for September 2008 through
March 2009 or from IVI for September 2008 through February 2009. Plainti ffs admit in
response to Paragraph 162 that IVl provided SANA with a certificate for March 2009
before SANA approved funding of the March 2009 Advance Request.
•
Pls.' R esp. to BANA SOUF Para. 74. Plaintiffs do not dispute that on Seprember 26,
2008, before disbursing fu nds to Fontainebleau, SANA recei ved representations from
Fontainebleau CFO Jim Freeman re-affirming the Advance Request's certifications that
conditions pn.:cedcnt lo funding were satisfied.
•
Pis.' Resp. to
BA~ A
SOU F Para. 76. Plaintiffs do not dispute that SANA understood
in September 2008 and thereafter that Lehman was continuing to honor some loan
commi.tmcnts. The Susman testimony cited by Plaintiffs is entirely consistent with this
statement.
•
Pis.' Resp. to BANA SOUF Para. 120.
•
Pis.' Resp. to BANA SO UF Para. 154. Plaintiffs admit that the
~:larch
19, 2009
Construction Consultant Certificate was the first time that lVI declared it had discovered
material errors in the Advance Request and supporting documentation.
•
Pis.' Resp. to BANA SO UF Para. 196. Plaintiffs' assertion that tvvo Lenders, Highland
and Deutsche Bank, "replied" to SANA's l.etter misses the point: there is no evidence
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that those Lenders disagreed with BANA's position. As Plaintiffs point out, Highland
refused to "state a position" and reserved its right to sue BANA regardless of whether it
funded the March Advance. (See Dep. Ex. 471.) And the Deutsche Bank e-mail simply
asked BANA to schedule a call to discuss certain Advance-related issues. (Dep. Ex.
832.) Contrary to Plaintiffs' claim, BANA did hold that that call, which addressed
Deutsche Bank's concerns. (See Pls.' Ex. 1505.)
Dated: September 27, 2011
::~;(;Cd0-z
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: (212) 326-2000
Facsimile: (212) 326-2061
E-mails: bbutwin@omm.com;
jrosenberg@omm.com; dcantor@omm.com;
wsushon@omm.com
-andHUNTON & WILLIAMS LLP
Jamie Zysk Isani (Fla. Bar No. 728861)
Matthew Mannering (Fla. Bar No. 39300)
1111 Brickell Avenue, Suite 2500
Miami, Florida 33131
Telephone: (305) 810-2500
Facsimile: (305) 810-1675
E-mail: jisani@hunton.com;
mmannering@hunton.com
Attorneys for Bank ofAmerica, NA.
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EXHIBIT A- DEFINED TERMS
ACR
Anticipated Cost Report
BANA- Bank of America, N.A, Defendant
Bank Proceeds Account
funds.
The designated hank account into which Lenders transferred Project
BAS- Bane of America St:curities, LLC
COP
BAN A's Corporate Debt Products Group
Credit Agreement or Credit Agmt.- Credit Agreement dated as of June 6, 2007 attached as
Exhibit 2 to the Declaration of DanielL. Cantor in Support of BANA's Opposition to Plaintiffs'
Motion for Partial Summary Judgment.
Delay Draw Term Loan- The S350 million delay draw term loan under the Credit Agreement.
Disbursement Agreement or Disbursement Agmt. Master Disbursement Agreement dated as
of June 6, 2007 attached as Exhibit I to the Declaration of Daniel L. Cantor in Support of
BANA's Opposition to Plaintiffs' Motion tor Partial Summary Judgment.
FBR or Fontainebleau Resorts
Fontainebleau Resorts. LLC
Fontainebleau or Borrowers- Fontainebleau Las Vegas, LLC and Fontainebleau Las Vegas II,
LLC
Guarantors- Jeffrey Soffer, Fontainebleau Resorts, LLC, and Turnberry Residential Limited
Partner, L.P., together.
Highland- Highland Capital Management
Initial Term Loan
The $700 million initial term loan under the Credit Agreement.
lVI or Construction Consultant
LEED
Lehman
Inspection and Valuation International, Inc.
Leadership in Energy and Environmental Design.
Lehman Brothers Holdings, Inc.
Lenders- Lenders under the Credit Agreement for the Senior Credit Facility.
MAE- Material Adverse EfTect
National City
National City Bank
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OCO
~
Owner Change Order
Pro.iect ~The Fontainebleau Las Vegas, a partially completed resort and casino development on
an approximately
acre parcel at the Las Vegas Strip's north end.
Retail
Affiliate~
Fontainebleau
Vegas RetaiL LLC
Retail Co-Lending Agreement~ The confidential Retail Co-Lending Agreement dated as of
September 24, 2007 attached as Exhibit 49 to the Declaration of Daniel L Cantor in Support of
BANA's Opposition to Plaintiffs' Motion for Partial Summary Judgment.
Retail Facility Agreement or Retail Agmt. ~Retail Facility Agreement dated as of June 6,
2007 attached as Exhibit 43 to the Declaration of Daniel L Cantor in Support of BAN A's
Opposition to Plaintiffs' Motion for Partial Summary Judgment
Retail
Facility~
The S315 million in loans eam1arked for the Project's retail space.
Retail Lenders Lenders among whom the Retail Facility was syndicated under the Retail CoLending Agreement
Revolver Loan
The $800 million revolving loan under the Credit Agreement.
Senior Credit Facility
Shared Costs
The S 1.85 billion senior secured facilities under the Credit Agreement.
The $83 million in resort costs to be funded through the Retail Facility.
S:VIRH ~Sheppard Mullin Richter & Hampton LLP
Sumitomo
TriMont
Sumitomo Mitsui Banking Corp.
TriMont Real Estate Advisors, Inc.
TRLP ~ Turnberry Residential Limited Partners
T\VC or
Contractor~
ULLICO
Turnbcrry West Construction
Union Labor Life Insurance Company
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CERTIFICATE OF SERVICE
I, Asher L. Rivner, hereby certify that on September 27, 2011, I served by electronic
means pursuant to an agreement between the parties a true and correct copy of the foregoing
Defendant Bank of America, N.A. 's Reply to Plaintiffs' Response to Defendant's Statement of
Undisputed Material Facts and Statement of Additional Material Facts in Opposition to
Defendant's Motion for Summary Judgment 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.
MCKOOL SMITH HENNIGAN
865 South Figueroa Street, Suite 2900
Los Angeles, California 90017
Telephone: (213) 694-1200
Fascimile: (213) 694-1234
E-mail: kdillman@mckoolsmithhennigan.com
rmockler@rnckoolsmithhennigan.com
Attorneys for Plaintiffs A venue CLO Fund, Ltd. et al.
Asher L. Rivner
Case 1:09-md-02106-ASG Document 385-6 Entered on FLSD Docket 12/06/2013 Page 1 of 6
Case No. 09-2106-MD-GOLD/GOODMAN
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Miami Division
CASE NO.: 09-2106-MD-GOLD/GOODMAN
INRE:
FONTAINEBLEAU LAS VEGAS
CONTRACT LITIGATION
MDLN0.2106
This document relates to all actions.
DECLARATION OF DANIELL. CANTOR IN SUPPORT OF
BANK OF AMERICA, N.A.'S REPLY MEMORANDUM OF LAW
IN FURTHER SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT
I, Daniel L. Cantor, hereby declare as follows:
I am a member of the law firm ofO'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 Reply Memorandum of Law in
Further Support of its Motion for Summary Judgment.
3.
Attached as Exhibit 1 is a true and correct copy of excerpts from the transcript of
the February 17, 2011 WilliamS. Newby deposition.
4.
Attached as Exhibit 2 is a true and correct copy of excerpts from the transcript of
the February 22, 2011 Herbert Kolben deposition.
5.
Attached as Exhibit 3 is a true and correct copy of excerpts from the transcript of
the February 24, 2011 McLendon P. Rafeedie deposition.
6.
Attached as Exhibit 4 is a true and correct copy of excerpts from the transcript of
the March 1, 2011 Bret Yunker deposition.
7.
Attached as Exhibit 5 is a true and correct copy of excerpts from the transcript of
the March 11, 2011 David Howard deposition.
CONTAINS "CONFIDENTIAL" AND "HIGHLY CONFIDENTIAL"
INFORMATION AND DOCUMENTS UNDER PROTECTIVE ORDER
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Case No. 09-21 06-MD-GOLD/GOODMAN
8.
Attached as Exhibit 6 is a true and correct copy of excerpts from the transcript of
the March 17, 2011 Jon Varnell deposition.
9.
Attached as Exhibit 7 is a true and correct copy of excerpts from the transcript of
the March 20, 2011 Jeanne Brown deposition.
10.
Attached as Exhibit 8 is a true and correct copy of excerpts from the transcript of
the March 23, 2011 Jim Freeman deposition.
11.
Attached as Exhibit 9 is a true and correct copy of excerpts from the transcript of
the March 24, 2011 Deven Kumar deposition.
12.
Attached as Exhibit 10 is a true and correct copy of excerpts from the transcript of
the March 29, 2011 Kevin Rourke deposition.
13.
Attached as Exhibit 11 is a true and correct copy of excerpts from the transcript of
the March 30, 2011 Brandon Bolio deposition.
14.
Attached as Exhibit 12 is a true and correct copy of excerpts from the transcript of
the April 7, 2011 Henry Yu deposition.
15.
Attached as Exhibit 13 is a true and correct copy of excerpts from the transcript of
the April11, 2011 Robert Barone deposition.
16.
Attached as Exhibit 14 is a true and correct copy of excerpts from the transcript of
the April28, 2011 Jeff Susman deposition.
17.
Attached as Exhibit 15 is a true and correct copy of excerpts from the transcript of
the July 21, 2011 Daniel Lupiani deposition.
18.
Attached as Exhibit 16 is a true and correct copy of excerpts from the transcript of
the August 17, 2011 Shepherd Pryor deposition.
19.
Attached as Exhibit 17 is a true and correct copy ofDeposition Exhibit 382,
undated handwritten meeting notes, produced in this lawsuit by plaintiffs Caspian Capital
Partners, L.P. and Caspian Select Credit Master Fund, Ltd. as CASP 061714.
20.
Attached as Exhibit 18 is a true and correct copy ofDeposition Exhibit 892, a
June 11, 2008 e-mail from Brandon Bolio to Jeff Susman, Kyle Bender, Bret Yunker and Jon
Varnell, copied to Paul Bonvicino, produced in this lawsuit by BANA as BANA_FB0035872728.
2
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Case No. 09-2106-MD-GOLD/GOODMAN
21.
Attached as Exhibit 19 is a true and correct copy of Deposition Exhibit 868, IVI's
Project Status Report No. 14, dated June 25, 2008, produced in this lawsuit by BANA as
BANA FB00329740-811.
22.
Attached as Exhibit 20 is a true and correct copy ofDeposition Exhibit llJ
produced in this lawsuit by ULLICO as ULL-FL VR0007582.002706-18.
23.
Attached as Exhibit 21 is a true and correct copy of Deposition Exhibit 81, an
October 6, 2008 e-mail from Kevin Rourke to David Howard, copied to Andrei Dorenbaum,
produced in this lawsuit by BANA as BANA_FB00735454-55.
24.
Attached as Exhibit 22 is a true and correct copy of Deposition Exhibit 80, an
October 13, 2008 e-mail from Bill Scott to Jeff Susman, Bret Yunker, Jon Varnell, David
Howard and Peter Fuad, copied to Richard Brunette and Fred Puglisi, produced in this lawsuit by
BANA as BANA_FB00884074-76.
25.
Attached as Exhibit 23 is a true and correct copy of Deposition Exhibit 158, an
October 29, 2008 e-mail from Vincent Fu to John Casparian, Steve Ahearn and Kevin Hickam,
produced in this lawsuit by plaintiff Churchill Pacific Asset Management LLC as CRCH 000866.
26.
Attached as Exhibit 24 is a true and correct copy of Deposition Exhibit 377, an
October 29, 2008 e-mail from Philip Mule to David Corleto, produced in this lawsuit by
plaintiffs Caspian Capital Partners, L.P . and Caspian Select Credit Master Fund, Ltd. as CASP
053298-99.
27.
Attached as Exhibit 25 is a true and correct copy of a November 5, 2008 e-mail
from Fontainebleau Resorts LLC's Albert Kotite to Douglas Pardon, copied to Glenn Schaeffer
and Jim Freeman, produced in this lawsuit by plaintiffs Brigade Leveraged Capital Structures
Fund, Ltd. and Battalion CLO 2007-1 Ltd. as BGD 000845-49.
28.
Attached as Exhibit 26 is a true and correct copy of Deposition Exhibit 379, a
November 12, 2008 e-mail from Philip Mule to John Maxwell, produced in this lawsuit by
plaintiffs Caspian Capital Pa.rtners, L.P. and Caspian Select Credit Master Fund, Ltd. as CASP
053803-04.
3
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Case No. 09-2106-MD-GOLD/GOODMAN
29.
Attached as Exhibit 27 is a true and correct copy ofDeposition Exhibit381,
handwritten meeting notes dated November 18, 2008, produced in this lawsuit by plaintiffs
Caspian Capital Partners, L.P. and Caspian Select Credit Master Fund, Ltd. as CASP 061712.
30.
Attached as Exhibit 28 is a true and correct copy ofDeposition Exhibit 160, a
December 4, 2008 e-mail from Martin Kim to John Casparian, Kevin Hickam and Steve Ahearn,
copied to Vincent Fu, produced in this lawsuit by plaintiff Churchill Pacific Asset Management
LLC as CRCH 001013.
31.
Attached as Exhibit 29 is a true and correct copy of Deposition Exhibit 346, a
March 20, 2009 lender presentation, produced in this lawsuit by plaintiffiNG Investment
Management as ING 014045-71.
32.
Attached as Exhibit 30 is a true and correct copy of Deposition Exhibit 861, a
March 22, 2009 e-mail from Bill Scott to Alan Martin and Eric Sieke, copied to Henry Yu,
produced in this lawsuit by BANA as BANA_ FB008997 69-71.
33.
Attached as Exhibit 31 is a true and correct copy ofDeposition Exhibit 862, a
March 23, 2009 e-mail from Robert Barone to Brandon Bolio, Paul Bonvicino, Henry Yu, Alan
Martin, Brian Corum, Bill Scott, Ronaldo Naval, Jeanne Brown and Eric Sieke forwarding an
executed Construction Consultant Advance Certificate, produced in this lawsuit by IVI as
IVI 080500-21.
34.
Attached as Exhibit 32 is a true and correct copy of Deposition Exhibit 851, a
copy of the Declaration of Robert W. Barone dated June 30, 2009 in Fontainebleau Las Vegas
LLC v. Bank ofAmerica, NA., et al., Adv. No. 09-01621-AP-AJC (S.D. Fla.).
35.
Attached as Exhibit 33 is a true and correct copy of Deposition Exhibit 932, the
Expert Report of Shepherd G. Pryor IV, dated May 23, 2011.
36.
Attached as Exhibit 34 is a true and correct copy of excerpts from the transcript of
the March 17, 2011 Vincent Fu deposition.
37.
Attached as Exhibit 35 is a true and correct copy of excerpts from the transcript of
the March 18, 2011 Chaney Sheffield deposition.
38.
Attached as Exhibit 36 is a true and correct copy of Deposition Exhibit 828, IVI's
Project Status Report No. 23, dated April23, 2009, produced by BANA as
BANA FB00104507-579.
4
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39.
Attached as Exhibit 37 is a true and correct copy ofDeposition Exhibit 151, a
June 5, 2008 e-mail from Vincent Fu to Steve Ahearn, John Casparian, Kevin Hickam and James
Eustice, produced in this lawsuit by plaintiff Churchill Pacific Asset Management LLC as
CRCH 001031.
40.
Attached as Exhibit 38 is a true and correct copy of Deposition Exhibit 175, a
June 2, 2008 e-mail from Henry Chyung to Patrick Dooley, produced in this lawsuit by plaintiffs
CanPartners Investments IV, LLC, Canyon Special Opportunities Master Fund (Cayman), Ltd.,
Canyon Capital CLO 2004 1 Ltd., Canyon Capital CLO 2006 1 Ltd., and Canyon Capital CLO
2007 1 Ltd. as CNY 044601.
41.
I declare under penalty ofpetjury and 28 U.S.C. § 1746 that the foregoing is true
and correct to the best of my knowledge, information, and belief.
Date: September 27, 2011
New York, New York
5
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CERTIFICATE OF SERVICE
I, Asher L. Rivner, hereby certify that on September 27, 2011, I served by electronic
means pursuant to an agreement between the parties a true and correct copy of the foregoing
Declaration of DanielL. Cantor in Support ofBank of America, N.A.'s Reply Memorandum of
Law in Further Support of its Motion for Summary Judgment, and the exhibits attached 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.
MCKOOL SMITH HENNIGAN
865 South Figueroa Street, Suite 2900
Los Angeles, California 90017
Telephone: (213) 694-1200
Fascimile: (213) 694-1234
E-mail: kdillman@mckoolsmithhennigan.com
rmockler@mckoolsmithhennigan.com
Attorneys for Plaint(ffs Avenue CLO Fund, Ltd. et al.
01
Asher L. Rivner
Case 1:09-md-02106-ASG Document 385-7 Entered on FLSD Docket 12/06/2013 Page 1 of 5
Case No. 09-2106-MD-GOLD/GOODMAN
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Miami Division
CASE NO.: 09-2106-MD-GOLD/GOODMAN
INRE:
FONTAINEBLEAU LAS VEGAS
CONTRACT LITIGATION
MDL NO. 2106
This document relates to all actions.
DEFENDANT BANK OF AMERICA, N.A.'S OPPOSITION
TO PLAINTIFFS' REQUEST FOR JUDICIAL NOTICE
IN SUPPORT OF TERM LENDER PLAINTIFFS'
OPPOSITION TO BANK OF AMERICA N.A'S MOTION
FOR SUMMARY JUDGMENT
Defendant Bank of America, N.A. ("BANA") respectfully submits this Opposition to
Plaintiffs' Request for Judicial Notice in Support of Term Lender Plaintiffs' Opposition to Bank
of America N.A's Motion for Summary Judgment. As demonstrated below, the document
designated by Plaintiffs as Exhibit 1504 to the Declaration of Robert W. Mockler and Request
for Judicial Notice is not a proper subject of judicial notice. At most, the Court should take
judicial notice solely of the document's existence, but not its truthfulness or Plaintiffs'
interpretation of it.
ARGUMENT
To be judicially noticed, a fact must be "one not subject to reasonable dispute." Fed. R.
Evid. 201(b). Exhibit 1504 does not meet this requirement because it is not "(1) generally
known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready
determination by resort to sources whose accuracy cannot reasonably be questioned." !d.
Exhibit 1504 is a filing by Fontainebleau Las Vegas Retail, LLC ("FBLV Retail") in the Lehman
Brothers Holdings Inc. bankruptcy. The filing's contents are nothing more than FBLV Retail's
allegations in a court filing. No FBLV Retail witness or attorney has been deposed to
corroborate the basis for the averments set forth in the court filing. Courts "may take judicial
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notice of a document filed in another court not for the truth of the matters asserted in the other
litigation, but to establish the fact of such litigation and related filings." Autonation, Inc. v.
O'Brien, 347 F. Supp. 2d 1299, 1310 (S.D. Fla. 2004) (citations omitted). To the extent
Plaintiffs seek to introduce a proof of claim filed in a bankruptcy court as evidence of the
disputed facts contained therein-and not merely to establish the fact that such a document was
filed-judicial notice of Ex. 1504 should be denied.
CONCLUSION
For the foregoing reasons, the Court should deny Plaintiffs' request for judicial notice of
Exhibit 1504 or, in the alternative, take judicial notice solely of the document's existence. A
proposed Order is attached hereto as Exhibit A.
::s~l2L£
Dated: September 27, 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: (212) 326-2000
Facsimile: (212) 326-2061
E-mails: bbutwin@omm.com;
jrosenberg@omm.com; dcantor@omm.com;
wsushon@omm.com
-andHUNTON & WILLIAMS LLP
Jamie Zysk Isani (Fla. Bar No. 728861)
Matthew Mannering (Fla. Bar No. 39300)
1111 Brickell Avenue, Suite 2500
Miami, Florida 33131
Telephone: (305) 810-2500
Facsimile: (305) 810-1675
E-mails: jisani@hunton.com;
mmannering@hunton.com
Attorneys for Bank ofAmerica, NA.
2
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CERTIFICATE OF SERVICE
I, Asher L. Rivner, hereby certify that on September 27, 2011, I served by electronic
means pursuant to an agreement between the parties a true and correct copy of the foregoing
Defendant Bank of America, N.A.'s Opposition to Plaintiffs' Request for Judicial Notice in
Support of Term Lender Plaintiffs' Opposition to Bank of America N.A's Motion for Summary
Judgment 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.
MCKOOL SMITH HENNIGAN
865 South Figueroa Street, Suite 2900
Los Angeles, California 9001 7
Telephone: (213) 694-1200
Fascimile: (213) 694-1234
E-mail: kdillma,n@mckoolsmithhennigan.com
rmockler@mckoolsmithhennigan.com
Attorneys for Plaintiffs Avenue CLO Fund, Ltd. et al.
Asher L. Rivner
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Case No. 09-21 06-MD-GOLD/GOODMAN
EXHIBIT A
3
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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Miami Division
CASE NO.: 09-2106-MD-GOLD/GOODMAN
INRE:
FONTAINEBLEAU LAS VEGAS
CONTRACT LITIGATION
MDLN0.2106
This document relates to all actions.
ORDER DENYING PLAINTIFFS'
REQUEST FOR JUDICIAL NOTICE
THIS CAUSE is before the Court on Defendant Bank of America, N.A.' s ("BANA")
Opposition to Plaintiffs' Request for Judicial Notice dated September 27, 2011. Having
reviewed Plaintiffs' Request for Judicial Notice, BANA's Opposition to Plaintiffs' Request for
Judicial Notice in Support of Term Lender Plaintiffs' Opposition to Bank of America N.A's
Motion for Summary Judgment, the record and otherwise being duly advised, it is hereby
ORDERED AND ADJUDGED that:
1. Plaintiffs' Request for Judicial Notice of the document designated by
Plaintiffs as Exhibit 1504 is DENIED.
2. The document designated by Plaintiffs as Exhibit 1504 is STRICKEN.
DONE and ORDERED in Chambers in Miami, Florida this_ day of _ _ __
2011.
THE HONORABLE ALAN S. GOLD
UNITED STATES DISTRICT JUDGE
cc:
Counsel of Record
Magistrate Judge Goodman
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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Miami Division
CASE NO.: 09-2106-MD-GOLD/GOODMAN
INRE:
FONTAINEBLEAU LAS VEGAS
CONTRACT LITIGATION
MDL NO. 2106
This document relates to all actions.
------------------------------~/
DEFENDANT BANK OF AMERICA, N.A.'S REPLY TO TERM LENDER PLAINTIFFS'
RESPONSE TO BANK OF AMERICA, N.A.'S EVIDENTIARY OBJECTIONS
Defendant Bank of America, N.A. ("BANA") respectfully submits this Reply to Term
Lender Plaintiffs' Response to BANA's Evidentiary Objections Included in its Response to
Plaintiffs' Statement of Additional Undisputed Material Facts in Opposition to Defendant's
Motion for Summary Judgment ("Pls. Resp."), filed under seal on October 7, 2011. As an initial
matter, the Court should disregard Plaintiffs' "Response," as it is not provided for by the Federal
Rules of Civil Procedure or the Southern District of Florida's Local Rules and is clearly
improper. Moreover, Plaintiffs' Response is unavailing because it fails to establish that
Deposition Exhibits 19, 80,274, 399, 891, and 915, Plaintiffs' Exhibits 1502, 1503, 1504, 1508,
and 1509, or the Donald Boyken and Peter Badala deposition excerpts are admissible evidence
that can be considered in opposition to BANA's Motion for Summary Judgment. 1
ARGUMENT
I.
THE CITED PORTIONS OF SHEPHERD PRYOR'S EXPERT REPORT (PLS.'
EX. 1503) ARE INADMISSIBLE.
Plaintiffs improperly cite portions of Shepherd Pryor's expert report to support their legal
conclusions that (1) "it would not be commercially reasonable for a bank agent to disburse funds
when it knew facts that contradicted or were materially inconsistent with certifications provided
BANA's reply addresses only the evidentiary issues raised by Plaintiffs' arguments. There
are additional issues with Plaintiffs' mischaracterization of the cited documents and
testimony as detailed in BANA's Response to Plaintiffs' Statement of Additional Undisputed
Material Facts in Opposition to Defendant's Motion for Summary Judgment.
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by a borrower" (Pis.' Opp. SOUMF, Add. Facts at ,-r 20), and (2) a "lender default is always
material" (id. at ,-r 122). Plaintiffs' assertion that these are "fact[s], and not a legal conclusion"
fails for several reasons. (See Pis. Resp. at 1, 12.)
First, the cited excerpts are inadmissible under the Federal Rules of Evidence because
they are nothing more than an attempt to have Plaintiffs' purported expert offer his interpretation
of the Disbursement Agreement and Credit Agreement's terms. Expert opinions interpreting a
contract's provision are routinely excluded, particularly where the expert essentially testifies that
a party has breached an agreement. 2 Thus, the cited excerpts from Mr. Pryor's opinion regarding
the reasonableness ofBANA's funds disbursements to Fontainebleau should be excluded
because they amount to nothing more than an opinion that BANA breached the Disbursement
Agreement. 3 Mr. Pryor's opinion concerning the materiality of purported lender defaults is a
legal conclusion that should likewise be excluded. 4
Second, even if Mr. Pryor's opinions regarding the loan documents' terms are deemed
facts, they are irrelevant to the resolution ofBANA's summary judgment motion because under
New York's parol evidence rule, expert and lay witnesses' subjective views cannot trump the
unambiguous contractual terms that define the parties' duties. 5
2
3
4
5
Plaintiffs' reliance on Gans v. Mundy, 762 F.2d 338, 342 (3d Cir. 1985) is misplaced because
it concerns the use of an expert's testimony in establishing the duty of care in a tort case, not
a breach claim based on an unambiguous contract.
See Montgomery v. Aetna Cas. & Surety Co., 898 F.2d 1537, 1541 (11th Cir. 1990) (holding
" [t]he district court abused its discretion by allowing [expert] to testify about the scope of
Aetna's duty under the policy."); In re FedEx Ground Package Sys., Inc. Employment
Practices Litig., 2010 WL 1838400, at *5 (N.D. Ind. May 4, 2010) (granting defendant's
motion to exclude plaintiffs expert's report for summary judgment purposes because the
expert's interpretation of contract terms was not a "proper subject for expert testimony.");
Smith v. Cont'l Cas. Co., 2008 WL 4462120, at *1 (M.D. Pa. Sept. 30, 2008) ("It is wellsettled that expert testimony regarding legal conclusions, such as the interpretation of an
insurance policy, is impermissible.").
See Hoefer & Arnett, Inc. v. Lehigh Press, Inc., 1988 WL 12505, at *1 (E.D. Pa. Feb. 16,
1988) (holding "plaintiffs' experts are precluded from testifYing to legal conclusions of
'materiality', or what constitutes a fiduciary's duty. Those are questions oflaw, to be
charged by the court."); see also US. v. Mavashev, 2010 WL 234773, at *4 (E.D.N.Y. Jan.
14, 2010) ("[N]o witness, expert or otherwise, may testify as to legal conclusions, including
whether a ... statement is material or not.").
See Excess Ins. Co. v. Factory Mut. Ins. Co., 769 N.Y.S.2d 487, 489 (N.Y. App. Div. 1st
Dep't 2003) ("[T]he expert affidavit submitted by defendant regarding industry custom is
extrinsic evidence which should not be considered in interpreting this clear and unambiguous
2
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II.
FBLV RETAIL'S SEPTEMBER 2009 FILING IN THE LEHMAN BANKRUPTCY
(PLS.' EX. 1504) IS INADMISSIBLE HEARSAY.
Plaintiffs' Exhibit 1504 is a September 2009 filing by non-party Fontainebleau Las Vegas
Retail, LLC in the Lehman bankruptcy. Plaintiffs concede (as they must) that this document is
not in evidence and cannot be introduced to prove the truth of any matter asserted in the filing.
(Pls. Resp. at 4.) But contrary to Plaintiffs' assertion that they are merely offering the document
to prove that it was filed (id.), they cite to the filing to establish the truth of facts set forth therein
regarding Lehman's role as a Retail Lender. (See Pls.' Opp. SOUMF, Add. Facts
at~
25.) The
document is hearsay and it is inadmissible to prove the truth of the matters set forth therein.
III.
6
E-MAILS FROM MR. MAXWELL (DEP. EXS. 274 AND 399) ARE
INADMISSIBLE HEARSAY.
Deposition Exhibits 274 and 399 are e-mails from a Merrill Lynch analyst-John
Maxwell-to undisclosed recipients stating, among other things, "[w ]e spoke with Company
management." To the extent Plaintiffs cite these e-mails to demonstrate that Mr. Maxwell was in
direct communication with Fontainebleau, they are inadmissible hearsay. (See Pls. Resp. at 7.)
Mr. Maxwell was never deposed and no Fontainebleau deponents testified to speaking with
Mr. Maxwell. Plaintiffs falsely assert that Fontainebleau's Jim Freeman "testified that he, and
potentially Glenn Schaeffer, communicated with Mr. Maxwell." To the contrary, Mr. Freeman
merely testified that he or Mr. Schaeffer "may have" spoken with Mr. Maxwell before
September 2008 but stated, "I don't remember ifl did or I didn't," and when asked if he
communicated with Mr. Maxwell in connection with a September 2008 analyst report, he
responded "I can't remember." (Freeman Dep. at 228:12-229:24.) Accordingly, the contents of
Deposition Exhibits 274 and 399 are hearsay and they are inadmissible to support Plaintiffs'
claim that Mr. Maxwell spoke with Fontainebleau before October 2008.
6
document."); Hess v. Zoological Soc y of Buffalo, Inc., 521 N.Y.S.2d 903, 904 (N.Y. App.
Div. 4th Dep't 1987) (affirming refusal to consider expert opinion where contract was "clear
and unambiguous"). New York's parol evidence rule applies here because it is a substantive
law. See Clanton v. Inter. Net Global, L.L. C., 435 F.3d 1319, 1326 n.8 (11th Cir. 2006).
See Autonation, Inc. v. O'Brien, 347 F. Supp. 2d 1299, 1310 (S.D. Fla. 2004) (Courts "may
take judicial notice of a document filed in another court not for the truth of the matters
asserted in the other litigation, but to establish the fact of such litigation and related filings.").
3
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IV.
PARAGRAPHS 56 AND 119 OF PLAINTIFFS' ADDITIONAL FACTS ARE
CONCLUSIONS OF LAW-NOT FACTS.
Plaintiffs improperly characterize legal conclusions as "facts" in Paragraphs 56 and 119
of their Statement of Additional Material Facts in Opposition to BANA's Statement of
Undisputed Material. Conclusions oflaw are not facts, thus, they cannot be used to create a
disputed issue of material fact on summary judgment. 7
First, Plaintiffs' claim that "BofA was entitled to take over Lehman's remaining
commitment under an Intercreditor Agreement with Lehman and the Retail Borrower" is clearly
a legal conclusion regarding BANA's rights under the Intercreditor Agreement, not a statement
of fact. (See Pls.' Opp. SOUMF, Add. Facts at 'If 56.) Moreover, even ifthe statement were
factual, it would lack foundation. As demonstrated in BANA's Response to Plaintiffs'
Additional Statement of Undisputed Material Facts, Plaintiffs offer no any evidence supporting
their statement. Intercreditor Agreement Section 7.1 grants "the Bank Agent the right (without
any obligation) to purchase, at any time after the occurrence of a Retail Purchase Option Event,
all ... of the principal of and interest on the Retail Secured Obligations," but states that for a
"Retail Purchase Option Event" to occur, there must be a "failure of the Retail Agent to fund any
Advance requested by the Project Credit Parties for Shared Costs, which the Retail Agent is
required to fund in accordance with the terms of the Disbursement Agreement." (Dep. Ex. 884
at 4.) Plaintiffs fail to offer any evidence that a Retail Purchase Option Event occurred.
Moreover, the David Howard deposition testimony Plaintiffs cite is unavailing because it makes
no reference to the Intercreditor Agreement. Thus, Paragraph 56 of Plaintiffs' Additional
Statement of Undisputed Material Facts is an unsupported legal conclusion that cannot be used to
create an issue of material fact on summary judgment.
Second, Plaintiffs' statement that "Mr. Susman recognized that the FDIC's repudiation
resulted in FNBN defaulting on its obligations" is also a legal conclusion that does not create a
disputed issue of material fact. (See BANA's Resp. to Pls.' Add. SOUMF 'If 119.) Plaintiffs
attempt to salvage their purported "fact" by arguing that the statement is a "factual recitation of
7
See Bellsouth Adver. & Publ 'g Corp. v. Donnelley Info. Publ 'g, Inc., 999 F .2d 14 36, 148485 (11th Cir. 1993) ("As a non-moving party opposing a motion for summary judgment ...
[the non-moving party] could not simply rely on legal conclusions or evidence which would
be inadmissible at trial in order to meet its burden of coming forward with relevant and
competent evidence.").
4
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Mr. Susman's testimony" reflecting his "understanding." (Pis. Resp. at 11.) But to the extent
Plaintiffs use Mr. Susman's testimony to support a conclusion that the First National Bank of
Nevada "default[ed]" on its obligations, this attempt fails because it is a legal conclusion. Thus,
Paragraph 119 of Plaintiffs' Additional Statement ofUndisputed Material Fact is an improper
legal conclusion and cannot be used to create an issue of material fact on summary judgment.
V.
THE OWNER CHANGE ORDER (DEP. EX. 891), DONALD BOYKEN'S
EXPERT REPORT (DEP. EX. 915) AND THE CITED BOYKEN AND BADALA
DEPOSITION TESTIMONY ARE INADMISSIBLE.
Plaintiffs' response regarding Deposition Exhibits 891 and 915 does not address the
grave foundational and hearsay problems with those documents. Plaintiffs' claim that these
documents have been authenticated by the testimony of lay and expert witnesses is false.
A.
Deposition Exhibit 891 Has Not Been Authenticated, and Its Contents Are
Hearsay.
Deposition Exhibit 891 is an unauthenticated Owner Change Order ("OCO") signed by
non-parties Fontainebleau Resorts ("FBR") and Tumberry West Construction ("TWC") on
May 23,2008, and accompanied by numerous letters from TWC to FBR or from WW Steel to
TWC. No fact witness has authenticated Deposition Exhibit 891 or testified about its contents.
Moreover, although the documents' signatories-TWC's Robert Ambridge and Fontainebleau's
Deven Kumar-were both deposed, Plaintiffs failed to ask either witness about this document.
Accordingly, the document is inadmissible and may not be considered for the truth of its
contents. (BANA's Resp. to Pis.' Add. SOUMF ,-[,-[ 72-73.)
Each of Plaintiffs' explanations for why this document should be admitted fails.
•
Plaintiffs' assertion that Deposition Exhibit 891 was included as page 60 ofiVI's
Cost-to-Complete Review (Dep. Ex. 298) is false. (Pis. Resp. at 9.) The OCO is not
included in the Cost-to-Complete Review. Page 60 contains a chart titled "Owner
Change Order Contract Log", which lists the OCO as a single line among numerous
change orders but does not otherwise include the contents or a copy of the OCO.
Thus, while Mr. Barone authenticated the Cost-to-Complete Review during his
deposition (Dep. Ex. 298), he never authenticated Deposition Exhibit 891.
•
Plaintiffs falsely claim that Mr. Barone testified that he recalled the structural steel
change order in connection with IVI Status Report No. 14. (Pls. Resp. at 9.) But his
testimony makes no reference to the OCO at issue.
•
Plaintiffs' reliance on the deposition testimony of BANA's expert Peter Badala does
not remedy Deposition Exhibit 891 's foundational and hearsay problems because Mr.
Badala lacks personal knowledge of its contents or how or whether BANA received a
copy of it.
5
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Moreover, Plaintiffs ignore that even if Deposition Exhibit 891 were authenticated-and
it was not-it still would not be admissible for the truth of its contents because the contents of
the communications between FBR, TWC and WW Steel that comprise the OCO are hearsay.
B.
Deposition Exhibit 915 Cannot Be Used to Introduce Deposition
Exhibit 891's Hearsay Contents into Evidence.
Deposition Exhibit 915, Plaintiffs' expert Donald Boyken's report, should also be
disregarded. Plaintiffs cite Mr. Boyken's report and his testimony in support of their unfounded
assertion that the OCO "had been known (but undisclosed) since the weeks following closing of
the credit facilities in June 2007." (Pis. Opp. SOUMF, Add. Facts at~ 73.) But Mr. Boyken
cannot authenticate Deposition Exhibit 891 or resolve the hearsay problem simply by referring to
it in his opinion. 8 And Plaintiffs' claim that Deposition Exhibit 891 only formed part of the
support for Mr. Boyken's opinion is fallacious. His report's discussion of steel costs cites only
the OCO, and the cited testimony does not refer to IVI's Project Status Report No. 14 or explain
how it addresses the foundational and hearsay problems presented by Deposition Exhibit 891.
VI.
THE SEPTEMBER 2008 HIGHLAND CAPITAL E-MAILS (DEP. EX. 80 AND
PLS.' EX.l502) ARE INADMISSIBLE HEARSAY.
Plaintiffs' claim that Deposition Exhibit 80 and Plaintiffs' Exhibit 1502 are admissible
for the truth of their contents should be rejected because Plaintiffs fail to lay the required
evidentiary foundation. Plaintiffs' Exhibit 1502 is an October 13, 2008 e-mail from BANA's
outside counsel Bill Scott to BANA recipients, forwarding an e-mail from non-party Highland
Capital Management L.P. 's ("Highland") Andrei Dorenbaum. Mr. Dorenbaum' s e-mail purports
to "confirm" a conversation with Mr. Scott that took place "last week" regarding the Lehman
bankruptcy's implications for the Fontainebleau Project. Mr. Dorenbaum's e-mail attaches an email to Mr. Dorenbaum and Highland's Brad Means from Highland's Kevin Rourke, which, in
tum, forwards an e-mail from a Merrill Lynch analyst that, among several other topics,
8
See In re Citric Acid Litig., 191 F .3d 1090, 1102 (9th Cir. 1999) ("The law is clear ... that an
expert report cannot be used to prove the existence of facts set forth therein."); see also
Estate of Parsons v. Palestinian Auth., 715 F. Supp. 2d 27, 32-33 (D.D.C. 2010)
(disregarding expert's affidavit and granting summary judgment to the defendant because
"[e]xpert opinions may be based on hearsay, but they may not be a conduit for the
introduction of factual assertions that are not based on personal knowledge."); In re Lake
States Commodities, Inc., 272 B.R. 233, 242-43 (Bankr. N.D. Ill. 2002) ("[T]he inadmissible
evidence relied on by the expert is not somehow transmogrified into admissible evidence
simply because an expert relies on it.") (internal citations omitted).
6
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speculates that a Fontainebleau affiliate funded Lelunan's September Shared Costs portion.
Deposition Exhibit 80 is a copy of the Bill Scott e-mail without the attached Highland e-mail.
Plaintiffs' assertion that the contents of (i) Mr. Dorenbaum' s e-mail to Mr. Scott, and (ii) the
Merrill Lynch report are admissible as adoptive admissions because BANA "fail[ed] to respond
or contradict Highland's statement" fails for several reasons. (See Pis. Resp. at 5.)
First, Plaintiffs offer no evidence that BANA acquiesced in Highland's assertions or the
Merrill Lynch Report's contents, or that BANA did not respond to Highland. As the party
seeking to admit the documents into evidence, Plaintiffs bear the burden of demonstrating that
BANA acquiesced to the statements in the e-mail- i.e., that it did not respond to
Mr. Dorenbaum's e-mail. 9 But Plaintiffs cannot point to any evidence that BANA agreed with
Highland's assertions or the Merrill Lynch Report. Indeed, as demonstrated in BANA's
Statement of Undisputed Material Facts in Support of its Motion for Summary Judgment
(''BANA's SOUMF"), BANA understood that Lehman funded its share ofthe Shared Retail
Costs in September 2008 (see BANA's SOUMF ~ 79; see also Susman Dec!. at~ 20) and did not
acquiesce in or adopt Highland's assertions (see BANA's SOUMF ~ 121; see also Susman Decl.
at~ 24).
Moreover, Plaintiffs point to no evidence to support their naked claim that BANA
"fail[ed] to respond or contradict Highland's statement." (Pls. Resp. at 5.) Nor are there any
documents or testimony supporting Plaintitis' claim. Indeed, Plaintiffs made no effort during
discovery to establish this fact- failing to ask any deponent (including BANA' s Brandon Bolio,
David Howard, Jeff Susman, Jon Varnell and Bret Yunker) whether BANA responded to
Mr. Dorenbaum' s e-mail, and choosing not to depose Bill Scott or Highland' s Andrei
Dorenbaum.
It
is too late for Plaintiffs to attempt to fill in their evidentiary vacuum with unfounded speculation.
9
See White Indus., Inc. v. Cessna Aircraft Co., 611 F. Supp. 1049. 1063 (W.O. Mo. 1985)
("First, and quite obviously, the fact of silence or non-response must itself be shown as a part
of the proponent's proof. It is not sufficient merely to establish that a communication was
received by a party-opponent, or to suggest that the party-opponent should prove the fact of a
response if it claims there was one.").
7
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Case No. 09-2106-MD-GOLD/GOODMAN
Moreover, Plaintiffs simply ignore documents produced by BANA in this litigation ref1ecting
that, in fact, BANA did respond to Mr. Dorenbaum's e-mail. 10 (See Exs. A and B.)
Second, even if Plaintiffs' groundless assertion that BANA did not respond were
credited, thee-mails would still be inadmissible because Plaintiffs do not explain why BAN A' s
silence would have been unreasonable. 11
(See BANA's SOUMF ~~ 125-126; see also BANA Opp. SOUMF, Add. Facts at
~~
120- 122.) Thus, it would have been completely reasonable for BANA to assume that
Highland would resolve its concerns directly with Fontainebleau. Accordingly, Plaintiffs' claim
that Deposition Exhibit 80 and Plaintiffs' Exhibit 1502 are adoptive admissions fails. 12
VII.
THE NATIONAL CITY SPECIAL ASSETS COMMITTEE REPORT (DEP.
EX. 19) IS INADMISSIBLE HEARSAY.
Deposition Exhibit 19 appears to be an internal memorandum prepared by non-party
National City and obtained through non-party discovery from PNC Bank. This docmnent was
never authenticated during depositions and, in any event, its contents are hearsay. 13 Plaintiffs
10
11
12
13
Plaintiffs' authorities are inapposite. US. v. Central GulfLines, 974 F.2d 621 (5th Cir.
1992) is off-point because the adoptive admissions concerned survey reports prepared with
the extensive involvement of the party against whom the survey reports were introduced at
trial, and there was no evidence that the party objected to the survey reports. And Hellenic
Lines Ltd. v. Gulf Oil Cotp., 340 F.2d 398 (2d Cir. 1965), lends no support to PlaintitTs
because the court did not find that the unanswered letter there was an adoptive admission.
See Tober v. Graco Children 's Prods., Inc., 431 F. 3d 572, 576 (7th Cir. 2005) ("The burden
is on the party seeking to introduce the Jetter to establish that under the circumstances the
failure to respond is so unnatural that it supports the inference that the party acquiesced to the
statements contained in the letter.") (citations omitted); S. Stone Co. v. Singer, 665 F.2d 698,
703 (5th Cir. 1982) ("[T)he mere failure to respond to a letter does not indicate an adoption
unless it was reasonable under the circumstances for the sender to expect the recipient to
respond and to correct erroneous assertions.").
SeeS. Stone, 665 F.2d at 703 (rejecting claim that defendant's failure to respond to letter was
an admission where plaintiff"fail[ed] to Jay a foundation for the introduction of the letter
more solid than [defendant's] mere failure to respond").
See TLT-Babcock. Inc. v. Emerson Elec. Co. , 33 F.3d 397,401 (4th Cir. 1994) (excluding as
hearsay memorandum purporting to summarize meeting); Cortezano v. Salin Bank & Trust
Co., 2011 WL 573755, at* 11 (S.D. Ind. Feb. 15, 2011) (excluding as hearsay meeting
minute e-mail sent by a non-party to plaintiff because "there [was] no indication of who
prepared these notes, when they were prepared, or whether they were taken in the normal
course of business.").
8
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and that BANA's Bret Yunker said the exhibit was
"generally consistent" with what he recalled from that meeting. (Pis. Resp. at 7.) But neither
-
nor Mr. Yunker was competent to authenticate the document.
and Mr. Yunker' s
statement was vague (Yunker Dep. at 174: 16-1 75:9). Moreover, Plaintiffs could have deposed a
National City or PNC Bank witness but elected not to do so. Thus, the document is hearsay and
should be disregarded.
Vlll. THEE-MAILS REGARDING CONDOMINIUM SALES (PLS.' EXS.1508 AND
1509) ARE INADMISSIBLE.
Plaintiffs' Exhibits 1508 and 1509 are internal BANA e-mails containing inadmissible
hearsay statements. The fact that the documents were produced by BANA does not remedy the
issue that the documents contain hearsay statements and are, therefore, inadmissible for the truth
of their contents. 14
Plaintiffs' claim that the e-mails are not being offered for the truth of their contents is
false. (See Pis. Resp. at 12- 13, 14.) Plaintiffs' Exhibit 1508 is an October 18,2007 e-mail from
Jon Varnell to BAS' Mike Malone and others at BAS, stating that Mr. Varnell had heard that
Fontainebleau's Jeff Soffer told Mr. Malone that the Borrowers had decided not to sell condos.
(See Pis. Ex. 1508.) Plaintiffs cite Exhibit 1508 to show that "BofA knew as early as October
2007 that the deteriorating real estate market caused the Borrowers to consider eliminating the
sale of condos from the Project." (Pis.' Opp. SOUMF, Add. Facts at 1f 141.) This document is
inadmissible to the extent it is offered for the truth of the statement that the Borrowers were
considering el iminating condo sales as early as October 2007 because Mr. Soffer's alleged
statement is hearsay and is inadmissible. 15
14
15
See Read v. Teton Springs Golf & Casting Club, LLC, 08 Civ. 99,2010 WL 5158882, at *6
(D. Idaho Dec. 14, 2010) (striking e-mail attached to plaintiff's opposition to summary
judgment motion because although the e-mail was produced by the defendant, it "contains
hearsay statements not based on the affiant's personal knowledge.").
Even if the statements in Exhibit 1508 were not hearsay, they do not show that BANA
"knew" the Borrowers were considering eliminating the condo sales. In the e-mail,
Mr. Varnell explains that Fontainebleau 's Jim Freeman denied the rumor that the Borrowers
were considering eliminating condo sales.
9
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Case No. 09-21 06-MD-GOLD/GOODMAN
Plaintiffs' argument likewise fails with respect to Plaintiffs' Exhibit 1509, a March 27,
2008 e-mail from Kyle Bender to Jon Varnell and Bret Yunker forwarding a Barclays Capital
analyst report that purports to summarize conversations that Barclays had with Fontainebleau
"[m]anagement," offered in Paragraph 142 of Plaintiffs' Additional Facts in support ofthe
purported "fact" that"[ c]ondo sales lagged well behind schedule and below projections." The
statements contained in the e-mail are hearsay, as they are quotations from the Barclays report,
which purports to convey alleged statements by Fontainebleau management regarding a
timetable for condominium sales. (See Pis. Ex. 1509.) The alleged statements by Fontainebleau
"[m]anagement" contained in the Barclays report are themselves hearsay because no witnesses
with personal knowledge of those purported conversations has testified about them. 16
Recognizing that the hearsay statements in Exhibit 1509 cannot be used to show whether
condominium sales were on schedule, Plaintiffs now argue that they were using the document
"to show BofA's knowledge of the statements in the report, not the truth of those statements."
(Pis. Resp. at 14.) But this argument is patently false because Paragraph 142 of their Additional
Facts has nothing to do with what BANA supposedly knew.
Because the hearsay contents of Plaintiffs' Exhibits 1508 and 1509 are offered for the
truth of the matters asserted therein they should be disregarded.
CONCLUSION
For the foregoing reasons, the Court should not consider as evidence Deposition Exhibits
19, 80,274, 399, 891, and 915, Plaintiffs' Exhibits 1502, 1503, 1504, 1508, and 1509, or the
Donald Boyken and Peter Badala deposition excerpts.
16
See United States v. Baker, 432 F.3d 1189, 1211 (11th Cir. 2005) (news report inadmissible
as hearsay).
10
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Case No. 09-2106-MD-GOLD/GOODMAN
Dated: October 17, 2011
Respectfully submitted,
By:
~ ~-"----
O'MEENY & 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: (212) 326-2000
Facsimile: (212) 326-2061
E-mails: bbutwin@omm.com;
jrosenberg@omm.com; dcantor@ornrn.com;
wsushon@ornrn.com
-andHUNTON & WILLIAMS LLP
Jamie Zysk Isani (Fla. Bar No. 728861)
Matthew Mannering (Fla. Bar No. 39300)
1111 Brickell A venue, Suite 2500
Miami, Florida 33131
Telephone: (305) 810-2500
Facsimile: (305) 810-1675
E-mails: jisani@hunton.com;
rnrnannering@hunton.com
Attorneys for Bank ofAmerica, NA.
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CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing was served by electronic
means pursuant to an agreement between the parties on October 17, 2011, on all counsel or
parties of record listed below.
Kirk Dillman, Esq.
Robet1 Mockler, Esq.
MCKOOL SMITH HENNIGAN
865 South Figueroa Street, Suite 2900
Los Angeles, California 90017
Telephone: (213) 694-1200
Fascimile: (213) 694-1234
E-mail: kdillman@mckoolsmithhennigan.com
rmockler@mckoolsmithhennigan.com
Attorneys for Plaintiffs Avenue CLO Fund, Ltd. et al.
Case 1:09-md-02106-ASG Document 385-8 Entered on FLSD Docket 12/06/2013 Page 13 of
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EXHIBIT A
Case 1:09-md-02106-ASG Document 385-8 Entered on FLSD Docket 12/06/2013 Page 14 of
19
From:
Susman, Jeff.
To:
Bill Scott; Varnell, Jon M; Bill Scott; Varnell, Jon M.
Sent:10/16/2008 9:57AM.
Cc:
Bee:
Subject:
RE: Fontainebleau Resorts.
Bill, I am fine with your reply.
From: Bill Scott [mailto:bscott@sheppardmullin.com]
Sent: Monday, October 13, 200810:17 PM
To: Varnell, Jon M; Susman, Jeff
Subject: FW: Fontainebleau Resorts
Redacted--Privileged
Sheppard Mullin 333 South Hope Street
48th Floor
Los Angeles, CA 90071 -1448
213.620.1780 office
fax
www. sheppardmullin. com
William M. Scott IV
213.617.4276 direct 1213.443.2717 direct fax
818.515.3679 cell
bscott@sheppardmullin. com 1 Bio
HIGHLY CONFIDENTIAL
BANA_FB00880015
Case 1:09-md-02106-ASG Document 385-8 Entered on FLSD Docket 12/06/2013 Page 15 of
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Circular 230 Notice: In accordance with Treasury Regulations we notify you that any tax advice given
herein (or in any attachments) is not intended or written to be used, and cannot be used by any
taxpayer, for the purpose of (i) avoiding tax penalties or (ii) promoting, marketing or recommending to
another party any transaction or matter addressed herein (or in any attachments).
Attention: This message is sent by a law firm and may contain information that is privileged or
confidential. If you received this transmission in error, please notify the sender by reply e-mail and
delete the message and any attachments.
From: Andrei Dorenbaum [mailto:ADorenbaum@hcmlp.com]
Sent: Monday, October 13, 2008 9:37AM
To: Bill Scott
Cc: Brad Means; Kevin Rourke
Subject: RE: Fontainebleau Resorts
Bill,
This e-mail follows-up our conversation from last week. We would like to confirm the following matters:
1. Under section 3.3.23 of the Master Disbursement Agreement, the borrower cannot request
disbursements without demonstrating that the Retail Lenders made required advances under the
relevant financing agreements.
2. We are unaware and understand that the agent is unaware of any facts that would support that
Lehman, as a Retail Lender, made any disbursements while in bankruptcy. In fact, as we discussed, it
is both your understanding and our understanding that Lehman has not made any disbursements while
in bankruptcy.
3. It does not appear that Retail Lenders made the Sept. payment, but rather equity investors. Please
see attached report from Merrill Lynch. This would indicate that the reps the company made for that
funding request were false.
4. Given the above, we believe that the agent should request the borrower to provide 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). This includes confirmation for the
Sept. payment as this issues raises a breach concern under the Disbursement Agreement.
HIGHLY CONFIDENTIAL
BANA F 800880016
Case 1:09-md-02106-ASG Document 385-8 Entered on FLSD Docket 12/06/2013 Page 16 of
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5. The borrower's legal counsel should provide an opinion that the Lehman funding agreement is in full
force and effect. This issue is a legal question and should be certified by qualified bankruptcy counsel,
rather than the borrower's CFO. Our position is that Lehman is in breach of the agreement because it
failed to fund and thus the agreement is not in full force.
Please let me know if you have any additional questions.
Best regards,
Andrei Dorenbaum
Assistant General Counsel
Highland Capital Management, L.P.
13455 Noel Road, Suite 800
Dallas, Texas 75240
office: 972-419-2573
fax: 972-628-4147
adorenbaum@hcm lp.com
Highland Capital Management is growing. Check out Careers at www.hcmlp.com.
DISCLAIMER- This email is intended for the recipient(s) only and should not be copied or reproduced
without explicit permission. The material provided herein is for informational purposes only and does not
constitute an offer or commitment, a solicitation of an offer, or any advice or recommendation, to enter
into or conclude any transaction. It may contain confidential, proprietary or legally privileged information.
If you receive this message in error, please immediately delete it.
HIGHLY CONFIDENTIAL
BANA FB00880017
Case 1:09-md-02106-ASG Document 385-8 Entered on FLSD Docket 12/06/2013 Page 17 of
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EXHIBITB
Case 1:09-md-02106-ASG Document 385-8 Entered on FLSD Docket 12/06/2013 Page 18 of
19
From:
Howard, David.
Sent:10/17/2008 5:24PM.
------------~-------------------------------------------------To:
KRourke@hcmlp.com; KRourke@hcmlp.com.
Cc:
Susman, Jeff; Susman, Jeff.
Bee:
Subject:
Re: Fontainebleau - follow up.
I had called Jim after we spoke and he was planning to call you. I just called him and he said he
definitely would call you today or Monday. You might shoot him an email with some good times.
I'll check Bill Scott's status and get back.
Sent from my BlackBerry Wireless Handheld
----- Original Message ---From: Kevin Rourke
To: Howard, David
Cc: Andrei Dorenbaum
Sent: Fri Oct 17 16:03:09 2008
Subject: Fontainebleau -follow up
David-
To follow up on our conversation yesterday, we are still awaiting a response from Bill Scott regarding
Bank of America's position on the contractual points we raised previously. In addition, please advise
status of either i) and all lender call or ii) a call with Highland.
The continued silence of both Fontainebleau Management and Agent's counsel on these matters as we
approach another draw funding date is a source of growing concern for Highland. I appreciate your
assistance in resolving these matters.
Regards,
Kevin Rourke
Highland Capital Management, LP
13455 Noel Road, Su ite 800
(972) 628-41 00
krourke@hcmlp. com
HIGHLY CONFIDENTIAL
BANA_FB00424602
BANA_FB00424602
Case 1:09-md-02106-ASG Document 385-8 Entered on FLSD Docket 12/06/2013 Page 19 of
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Highland Capital Management is growing. Check out Careers at www.hcmlp.com.
DISCLAIMER- This email is intended for the recipient(s) only and should not be copied or reproduced
without explicit permission. The material provided herein is for informational purposes only and does not
constitute an offer or commitment, a solicitation of an offer, or any advice or recommendation, to enter
into or conclude any transaction. It may contain confidential, proprietary or legally privileged information.
If you receive this message in error, please immediately delete it
HIGHLY CONFIDENTIAL
BANA_FB00424603
BANA_FB00424603