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)
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Case 1:09-cv-23835-ASG Document 130 Entered on FLSD Docket 03/22/2012 Page 1 of 1
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Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 1 of 113
1
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
MIAMI DIVISION
Case 09-MD-02106
IN RE:
FONTAINEBLEAU LAS VEGAS HOLDINGS, LLC,
et al.,
Debtors.
FONTAINEBLEAU LAS VEGAS
HOLDINGS, LLC, et al.,
COURTROOM 11-1
Plaintiffs,
MIAMI, FLORIDA
vs.
NOVEMBER 18, 2011
BANK OF AMERICA, N.A., et al.,
(Pages 1 - 113)
Defendants.
__________________________________________________________________
TRANSCRIPT OF ORAL ARGUMENT
BEFORE THE HONORABLE ALAN S. GOLD
SENIOR UNITED STATES DISTRICT JUDGE
__________________________________________________________________
APPEARANCES:
FOR THE PLAINTIFFS:
TOTAL ACCESS
J. MICHAEL HENNIGAN, ESQ.
KIRK D. DILLMAN, ESQ.
McKool Smith Hennigan
865 South Figueroa Street, Suite 2900
Los Angeles, CA 90017
213.694.1002
(Fax) 213.694.1234
hennigan@mckoolsmithhennigan.com
kdillman@mckoolsmithhennigan.com
NETWORK COURTROOM REALTIME TRANSCRIPTION
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 2 of 113
2
1
FOR THE DEFENDANTS:
2
3
Bank of America
Merrill Lynch Capital
4
5
DANIEL L. CANTOR, ESQ.
KEN MURATA, ESQ.
O'Melveny & Myers LLP
Times Square Tower, Times Square
New York, NY 10036
212.408.2483
dcantor@omm.com
kmurata@omm.com
6
7
JAMIE ZYSK ISANI, ESQ.
Hunton & Williams LLP
1111 Brickell Avenue, Suite 2500
Miami, FL 33131
305.536.2724
(Fax) 305.810.1675
jisani@hunton.com
8
9
10
11
12
13
14
REPORTED BY:
JOSEPH A. MILLIKAN, RPR-CM-NSC-FCRR
Official United States Court Reporter
Federally Certified Realtime Reporter
400 North Miami Avenue, Suite 11-1
Miami, FL 33128
305.523.5588
(Fax) 305.523.5589
josephamillikan@gmail.com
15
16
17
18
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20
21
22
23
TABLE OF CONTENTS
24
Page
25
Reporter's Certificate ..................................... 104
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 3 of 113
Oral Argument
3
MR. HASBUN: All rise.
The Honorable Alan S. Gold
09:00:24
1
09:00:26
2
09:00:28
3
THE COURT:
09:00:33
4
MR. HENNIGAN:
09:00:34
5
MR. CANTOR:
09:00:56
6
THE COURT:
09:00:58
7
please.
09:01:14
8
your family a very happy holiday to come.
09:01:17
9
09:01:17
10
MR. CANTOR:
09:01:18
11
THE COURT:
09:01:20
12
Case 09-MD-02106, and let me start with appearances, please, on
09:01:32
13
that side.
09:01:33
14
09:01:34
15
09:01:35
16
09:01:37
17
don't mind, since I can only hear and Mr. Millikan can only
09:01:43
18
hear, to speak directly in a microphone.
09:01:46
19
MR. HENNIGAN:
09:01:48
20
MR. DILLMAN:
09:01:50
21
on behalf of the plaintiffs.
09:01:53
22
THE COURT:
09:01:55
23
09:01:58
24
09:02:00
25
presiding.
This Court is in session.
Good morning.
Good morning, Your Honor.
Good morning, Your Honor.
Please be seated.
I need just one moment,
So, let me begin by welcoming everyone.
MR. HENNIGAN:
I wish you and
Thank you.
Thank you, Your Honor.
And at this time I will call
MR. HENNIGAN:
Good morning, Your Honor.
Michael
Hennigan on behalf of the plaintiffs.
THE COURT:
I'm only going to ask everybody, if you
I forgot.
Good morning.
Good morning, Your Honor.
All right.
Thank you.
Kirk Dillman
Would you like to
introduce who else is present today?
MR. CANTOR:
Good morning, Your Honor.
O'Melveny & Myers on behalf of Bank of America.
November 18, 2011
Dan Cantor from
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 4 of 113
Oral Argument
4
Ken Murata also from O'Melveny & Myers for
09:02:04
1
09:02:09
2
09:02:10
3
THE COURT:
09:02:11
4
MS. ISANI:
09:02:16
5
of Bank of America.
09:02:17
6
THE COURT:
09:02:20
7
I know you've prepared PowerPoints® and I'll listen to them -- by
09:02:25
8
the way, I do have others who are listening by telephone.
09:02:33
9
me get the calls transferred in now, although they're muted,
09:02:46
10
09:02:46
11
09:02:46
12
09:02:46
13
09:02:48
14
has now transferred in on the telephone.
09:02:57
15
from counsel, and I understand that your participation is muted.
09:03:05
16
It would help me, before I hear your specific arguments
09:03:11
17
and get into the PowerPoint®, to walk through some of the matters
09:03:18
18
that I'm trying to figure out and, if you don't mind, have more
09:03:24
19
of a conversation about these matters where I can engage both
09:03:27
20
sides, rather than start with the formal presentations, counter,
09:03:35
21
then, you know, the rest of it.
09:03:39
22
09:03:45
23
frame the issues.
09:03:49
24
stay seated and you'll have your papers in front of you -- that
09:03:54
25
will be helpful -- and you may consult with each other as you
MR. MURATA:
Bank of America.
Thank you.
Jamie Isani of Hunton & Williams on behalf
All right.
What I would like to do -- and
Let
right?
MR. HASBUN:
They should be, but let me go inside,
Judge.
THE COURT:
Okay.
Let me welcome everybody else who
I've had appearances
Often this gives me more clarity on positions and helps
So I'm going to invite you for the moment to
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 5 of 113
Oral Argument
5
09:03:57
1
need in addressing some of these questions.
09:04:00
2
Fair enough?
09:04:01
3
MR. CANTOR:
09:04:03
4
THE COURT:
09:04:11
5
in the following way:
09:04:17
6
to focus on the key agreement which is before me in this aspect
09:04:27
7
of the litigation and that's the Master Disbursement Agreement,
09:04:32
8
correct?
09:04:32
9
09:04:33
10
09:04:41
11
questions are not trying to lead one side or another down a
09:04:46
12
rabbit hole and into admissions or a trap, so please understand
09:04:53
13
I don't have an agenda for that purpose in starting to ask these
09:04:57
14
questions.
09:05:01
15
09:05:06
16
to, starting with the plaintiffs' summary judgment motions, that
09:05:12
17
the motions are directed against Bank of America solely in its
09:05:19
18
capacity as Disbursement Agent under the Master Disbursement
09:05:25
19
Agreement?
09:05:26
20
Would you agree to that or not?
09:05:29
21
MR. HENNIGAN:
09:05:32
22
THE COURT:
09:05:33
23
MR. HENNIGAN:
09:05:37
24
09:05:43
25
Yes, Your Honor.
All right.
What I would like to try to start with is
Correct, Your Honor.
MR. CANTOR:
THE COURT:
So let's go through the matter
Okay.
And let me preface this:
My
It's really to help me clarify everybody's position.
But is it a correct statement of position with regard
And as Administrative Agent, Your Honor.
And as what?
Administrative agent under the Credit
Agreement.
THE COURT:
Okay.
But that's a different phase of the
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 6 of 113
Oral Argument
6
09:05:45
1
case, isn't it?
09:05:47
2
In terms of what we're here for today, aren't we
09:05:52
3
focusing on what Bank of America did or did not do as the
09:06:06
4
administrating agent under the Master Disbursement Agreement?
09:06:09
5
09:06:11
6
09:06:17
7
Their role as Administrative Agent becomes relevant in
09:06:20
8
terms of their knowledge of the Credit Agreement and aspects of
09:06:23
9
the Credit Agreement, but their conduct, actions and inactions
09:06:28
10
09:06:33
11
THE COURT:
09:06:34
12
MR. CANTOR:
09:06:37
13
thought it was more simple and straightforward than that; that
09:06:40
14
this is about whether Bank of America complied with its duties
09:06:43
15
as Disbursement Agent full stop.
09:06:49
16
09:06:53
17
this, so help me understand a little bit more about how their
09:07:00
18
role as Administrative Agent under the Credit Agreement
09:07:07
19
interplays here.
09:07:12
20
09:07:14
21
there are interlocking agreements, that one agreement refers to
09:07:17
22
the other agreement; but I agree with counsel that the conduct
09:07:20
23
at question in these motions is conduct as Disbursement Agent.
09:07:24
24
09:07:27
25
MR. HENNIGAN:
Your Honor, absolutely what we're
focusing on is the conduct of BofA as Disbursement Agent.
absolutely as Disbursement Agent.
THE COURT:
Any comments?
My only comment would be that I just
I really do want to hear your position on
MR. HENNIGAN:
THE COURT:
Only to the extent, Your Honor, that
Okay.
That's what I'm trying to focus on
and see if my understanding of the matters before me were just
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 7 of 113
Oral Argument
7
09:07:34
1
that and, yet, I do want further to ask questions about the
09:07:41
2
interrelationships of agreements because there are times when
09:07:46
3
Bank of America refers to the Credit Agreement, such as on
09:07:52
4
notice requirements, and there are no comparable requirements
09:07:57
5
that I saw written in the same way in the Disbursement
09:07:59
6
Agreement.
09:08:02
7
09:08:11
8
09:08:13
9
09:08:15
10
MR. HENNIGAN:
09:08:16
11
THE COURT:
09:08:19
12
09:09:00
13
MR. DILLMAN:
09:09:01
14
THE COURT:
09:09:03
15
me know when you get there.
09:09:16
16
MR. HENNIGAN:
09:09:18
17
THE COURT:
09:09:22
18
moment, let me rephrase that.
09:09:32
19
how I am supposed to read the Disbursement Agreement in
09:09:37
20
relationship to the Credit Agreement?
09:09:40
21
09:09:43
22
the Credit Agreement that are referred to in Bank of America's
09:09:47
23
briefs, from the plaintiffs' standpoint, do those notice
09:09:55
24
provisions apply and sort of fill in a gap with regard to how
09:10:00
25
notice is given in the Disbursement Agreement?
So let me ask both sides about some of these matters.
Do you have the Disbursement Agreement in front of you?
I do, Your Honor.
MR. CANTOR:
Page 80?
About to.
Yes.
If you don't mind, can you turn to
Take a moment.
Sorry for the delay, Your Honor.
No.
That's all right.
Take a moment.
Let
We're there.
All right.
Before I focus on 9.1 for a
What is each side's position on
In other words, where there are notice provisions in
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 8 of 113
Oral Argument
8
09:10:05
1
Do both sides agree that these agreements are one and
09:10:09
2
09:10:14
3
09:10:15
4
that they are one and the same.
09:10:18
5
they are intertwined.
09:10:20
6
09:10:23
7
points in each of the agreements they are referred to as the
09:10:29
8
loan agreements or other terms that make it clear that this was
09:10:34
9
a complete set of documents that was meant to be referred to in
09:10:38
10
09:10:40
11
That said, Your Honor, you know, I will --
09:10:42
12
THE COURT:
09:10:46
13
to refer to the Disbursement Agreement, § 11.5, which talks
09:10:52
14
about the entire agreement.
09:10:55
15
09:10:58
16
instrument attached hereto, or referred to herein,
09:11:02
17
integrate all the terms and conditions mentioned herein, or
09:11:07
18
incidental hereto, and supersede all oral negotiations,
09:11:11
19
prior writings," et cetera.
09:11:16
20
So what am I to make of that?
09:11:21
21
MR. HENNIGAN:
09:11:24
22
that regard need to be read, from the disbursement agreement's
09:11:28
23
perspective, as integrated documents, remembering that the
09:11:31
24
lenders that we represent are not signatories to the
09:11:34
25
Disbursement Agreement.
the same and intertwined?
Your Honor, I don't know that I would say
MR. CANTOR:
I certainly would agree that
They were all executed at the same time.
At various
an integrated fashion.
Well, let me not mislead anybody.
I want
It says:
"This agreement, and any agreement, document or
Your Honor, I believe the agreements in
They're signatories to the Credit
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 9 of 113
Oral Argument
9
09:11:38
1
Agreement only.
09:11:41
2
THE COURT:
09:11:53
3
me turn to Bank of America.
09:11:56
4
09:12:02
5
the Disbursement Agent, has responsibilities to the Term
09:12:05
6
Lenders --
09:12:08
7
MR. CANTOR:
09:12:09
8
THE COURT:
09:12:11
9
09:12:12
10
09:12:14
11
Agent for the process of disbursing funds and in that sense they
09:12:21
12
have obligation -- let me put a finer point on it.
09:12:26
13
09:12:28
14
Term Lenders are not signatories to the Disbursement Agent that
09:12:31
15
they don't have the right to sue Bank of America for breaching
09:12:36
16
its duties as Disbursement Agent.
09:12:40
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argument.
09:12:40
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09:12:47
19
09:12:52
20
09:12:57
21
an authorized Disbursement Agent to act on its behalf
09:13:01
22
hereunder and under the control agreements."
09:13:06
23
09:13:09
24
the record.
09:13:18
25
summary judgment motions that we've missed here?
Okay.
But there's no argument -- well, let
Under the Disbursement Agreement, Bank of America, as
Yes, Your Honor.
-- independent, even if they're not
signatories to it.
MR. CANTOR:
Well, they are appointed as Disbursement
We have never contended, Your Honor, that because the
THE COURT:
All right.
We've never raised that
So let's go back to 9.1 for a
minute and just the beginning of that section:
"Each of the funding agents hereby irrevocably appoints
I've never seen anything called "control agreements" in
Did anybody put any control agreements in their
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 10 of 113
Oral Argument
10
The control agreements -- that's
09:13:22
1
09:13:26
2
interesting.
09:13:30
3
seem to be defined.
09:13:32
4
09:13:37
5
agreements included, among other things, the Credit Agreement,
09:13:41
6
and this would be one place where there's an interplay.
09:13:45
7
THE COURT:
09:13:47
8
MR. CANTOR:
09:13:48
9
THE COURT:
09:13:50
10
09:13:50
11
09:13:52
12
believe "control agreement" is a defined term referring to other
09:13:54
13
agreements.
09:13:59
14
09:14:04
15
Is there something independent that was signed called "control
09:14:09
16
agreement?"
09:14:15
17
that in a moment.
09:14:16
18
09:14:23
19
09:14:35
20
09:14:38
21
09:14:38
22
09:14:43
23
09:14:47
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09:14:51
25
MR. CANTOR:
I'm looking at the definitions, and it doesn't
I think everyone had always understood that the control
My question is very narrow.
Okay.
Is there a document called "control
agreement"?
I do not believe so, Your Honor.
MR. CANTOR:
THE COURT:
I
What about from the plaintiffs' standpoint?
I'll give you something specific in reference to
What's your understanding of that?
Doesn't that have
some significance to that clause which is an issue in this case?
MR. HENNIGAN:
Your Honor, we've never focused on that
issue.
THE COURT:
Well, if you turn to your appendix of
definitions on Page 9, it says:
"'Control agreements' means the control agreements of
even date herewith, executed by the project entities, in
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 11 of 113
Oral Argument
11
09:14:56
1
respect of the accounts in favor of the Disbursement
09:14:59
2
Agent," et cetera, et cetera.
09:15:02
3
09:15:08
4
definitions, a document which was executed at the time of the
09:15:13
5
Disbursement Agreement called the control agreement which is
09:15:18
6
referenced in 9.1 and seems to have perhaps some significance
09:15:25
7
and, yet, I can't find it in the materials referenced by either
09:15:32
8
party.
09:15:32
9
09:15:36
10
slightly imperfect answer but in the definition there, it refers
09:15:40
11
to § 2.2.
09:15:44
12
09:15:50
13
agreement, I think what you will see is that the control
09:15:53
14
agreements seem to refer to agreements that essentially allow
09:15:56
15
the Disbursement Agent to move funds from bank accounts which
09:16:04
16
are in the name of the project entities.
09:16:09
17
09:16:14
18
example of one of the problems that I'm having trying to
09:16:20
19
understand the document that is at issue here.
09:16:24
20
09:16:34
21
notices, and look at subpart 2, it refers to the controlling
09:16:47
22
person notifying the Disbursement Agent that a default or Event
09:16:51
23
of Default has occurred.
09:16:53
24
Isn't "controlling person" and all of its
09:16:59
25
responsibilities defined in the control agreement?
So I beg to differ.
MR. CANTOR:
There is, according to the
Your Honor, I think this is going to be a
If you turn to § 2.2, which is Pages 3, 4, and 5 of the
THE COURT:
Okay.
But let me give you a specific
If you turn to Page 10 under § 2.5.1, the stop funding
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 12 of 113
Oral Argument
12
No, Your Honor.
It is defined in this
09:17:01
1
09:17:03
2
agreement as until the exhaustion of the second mortgage
09:17:09
3
proceeds -- I am looking at Page 10 of the appendix -- as until
09:17:13
4
the exhaustion of the second mortgage proceeds account, the
09:17:18
5
trustee and thereafter the Bank Agent.
09:17:25
6
09:17:30
7
here, Bank of America, I get back to which hat is Bank of
09:17:35
8
America wearing where it is being sued?
09:17:43
9
the Disbursement Agent?
09:17:46
10
09:17:48
11
09:17:50
12
09:17:53
13
well, although the Bank Agent is the Bank of America under
09:17:59
14
2.2 -- 2.5.1, subpart 2.
09:18:05
15
09:18:12
16
into a discussion about is some of the later language under
09:18:18
17
Article 9 where Bank of America is wearing one hat other than
09:18:27
18
Disbursement Agent and gains certain information, and then under
09:18:36
19
certain language it's not obligated to recognize that
09:18:41
20
information under the other half as Disbursement Agent.
09:18:46
21
09:18:57
22
is Bank of America acting at any particular point in time
09:19:01
23
factually, but I don't want to get there quite yet.
09:19:04
24
09:19:09
25
MR. CANTOR:
THE COURT:
So when we're discussing who is being sued
Is it only its hat as
That's my understanding, Your Honor, and
MR. CANTOR:
that's how we've approached the case.
MR. HENNIGAN:
THE COURT:
I think that's the way we look at it as
Okay.
So one of the things we will get
I'm trying to sort all that out as to in which capacity
So let's continue our discussion of the structure of
the agreement itself.
Now, is it the parties' position that in
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 13 of 113
Oral Argument
13
09:19:28
1
interpreting this language in 9.1, I don't need to worry about
09:19:38
2
or look at anything called control agreements?
09:19:42
3
09:19:43
4
09:19:43
5
MR. HENNIGAN:
09:19:45
6
THE COURT:
09:19:47
7
MR. CANTOR:
09:19:48
8
THE COURT:
09:19:54
9
Does either party contend that the Disbursement
09:20:00
10
09:20:04
11
MR. CANTOR:
09:20:04
12
THE COURT:
09:20:06
13
MR. CANTOR:
09:20:16
14
MR. HENNIGAN:
09:20:19
15
09:20:19
16
THE COURT:
09:20:21
17
MR. HENNIGAN:
09:20:24
18
THE COURT:
09:20:29
19
09:20:32
20
So let me give you a question about that.
09:20:48
21
sentence -- let's see -- of 9.1 talks about the Disbursement
09:20:55
22
Agent accepts such appointments and agrees to exercise
09:21:01
23
commercially reasonable efforts and utilize commercially prudent
09:21:05
24
practices in the performance of its duties hereunder, consistent
09:21:10
25
with those of similar institutions holding collateral,
Yes, Your Honor, that would be our
MR. CANTOR:
position.
That's our position as well.
Okay.
So I should ignore all that --
Yes, sir.
-- right?
That's your mutual position.
Agreement contains an ambiguity -Defendants --- under New York law?
Defendants do not, Your Honor.
There is a potential ambiguity, Your
Honor.
Well, how did you argue it in your briefs?
We have argued no ambiguity.
Okay.
Thank you.
That's what I'm trying
to find out, everybody's position.
November 18, 2011
The second
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 14 of 113
Oral Argument
14
09:21:15
1
et cetera, and disbursing control funds.
09:21:22
2
09:21:30
3
How do I know what that standard is?
09:21:36
4
agreement as a specific definition.
09:21:40
5
09:21:44
6
comes time to apply that definition to specific conduct, it's a
09:21:53
7
determination that one, you know, will make.
09:21:59
8
09:22:01
9
09:22:05
10
to whether something is or is not commercially reasonable,
09:22:10
11
recognizing, Your Honor, our position that § 9.1 is just sort of
09:22:16
12
a general introductory provision.
09:22:19
13
THE COURT:
09:22:20
14
MR. CANTOR:
09:22:20
15
THE COURT:
09:22:22
16
MR. CANTOR:
09:22:23
17
THE COURT:
09:22:29
18
09:22:34
19
09:22:36
20
check-the-box provision.
09:22:40
21
commercially reasonable or was it not commercially reasonable.
09:22:43
22
09:22:46
23
ambiguity under New York law that invites extrinsic evidence as
09:22:52
24
to what that is, to the extent it's material?
09:22:58
25
Doesn't that refer necessarily to extrinsic evidence?
MR. CANTOR:
It is not defined in the
Well, I think, Your Honor, that when it
Obviously, it has to be based on the evidence before
you, and the trier of fact is entitled to apply its judgment as
We will talk about that.
Correct.
I am only talking about 9.1.
Okay.
It references something outside of the four
corners of the agreement as a standard, does it not?
MR. CANTOR:
THE COURT:
MR. CANTOR:
It does in the sense that it is not a
Okay.
You need to say was something
So as to that section, is there an
To the extent it's material and leaving
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 15 of 113
Oral Argument
15
09:23:03
1
that question aside, I think I am struggling with how to answer
09:23:07
2
it because it is an odd provision in the sense that it is
09:23:10
3
essentially imposing a tort standard into a contract.
09:23:16
4
09:23:20
5
sense that it's a contract interpretation point and thus it is
09:23:25
6
an ambiguous contract provision.
09:23:29
7
09:23:32
8
acting commercially reasonable is necessarily going to be a
09:23:37
9
judgment that's committed to the trier of fact.
09:23:45
10
09:23:59
11
Bank of America says, well, you know, that shouldn't be
09:24:02
12
considered, but it raised the question of extrinsic evidence in
09:24:11
13
terms of this motion for summary judgment.
09:24:20
14
New York law, as best as my independent research
09:24:24
15
discloses, is different than Florida law in terms of when
09:24:29
16
extrinsic evidence is permitted and how it determines ambiguity.
09:24:37
17
09:24:41
18
York law as I understand it.
09:24:42
19
MR. CANTOR:
09:24:47
20
THE COURT:
09:24:51
21
law that in the face of ambiguity, recourse to extrinsic
09:24:56
22
evidence is permissible insofar as that evidence tends to
09:25:00
23
clarify the meaning of the language employed by the parties.
09:25:03
24
So here the parties employed language which by its very
09:25:12
25
nature refers to a standard that is not defined in the agreement
I don't know that it requires extrinsic evidence in the
The determination as to whether someone is or is not
THE COURT:
Well, I have this expert submission which
There's no latent versus patent distinction under New
Right.
There seems to be some language in the case
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 16 of 113
Oral Argument
16
09:25:17
1
itself and adds somewhat to the confusion here as to what that
09:25:23
2
actually is and means.
09:25:26
3
MR. CANTOR:
09:25:28
4
I guess my point from a contract interpretation
09:25:31
5
perspective would be that -- and you are right, New York law
09:25:36
6
does not allow the Court to consider extrinsic evidence for the
09:25:39
7
purpose of proving that there is an ambiguity in the first
09:25:42
8
place.
09:25:45
9
09:25:51
10
what the contract sets up as its standard under 9.1, to the
09:25:57
11
extent that 9.1 applies in any given situation.
09:26:03
12
09:26:07
13
party has complied with that standard, I think, like any other
09:26:13
14
contract determination, that's going to be based on the evidence
09:26:16
15
and that will be within the province of the finder of fact.
09:26:21
16
09:26:24
17
correctly, Your Honor, I don't believe that that makes the
09:26:26
18
agreement ambiguous or requires a reference to extrinsic
09:26:34
19
evidence in the way that one normally talks about it in the
09:26:38
20
contract interpretation context if I'm understanding you.
09:26:42
21
THE COURT:
09:26:45
22
MR. HENNIGAN:
09:26:50
23
09:26:51
24
09:26:55
25
Yeah, I see your point, Your Honor.
There is no ambiguity as to what the contract says and
When the time comes for someone to determine whether a
But I don't think, if I am understanding your question
Any comments from plaintiffs' side?
If I followed Mr. Cantor along, I think
I agree with him.
THE COURT:
So let's talk -- I know there is a lot of
discussion about this in the briefing, but I'd like to talk
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 17 of 113
Oral Argument
17
09:27:01
1
about 9.1 and then the other parameters under 9.2 and 9.3.
But
09:27:11
2
before getting into that discussion, I'd like to go back into
09:27:16
3
structure again.
09:27:19
4
09:27:29
5
and please help me with your own thoughts on this -- is the
09:27:39
6
borrowers make an advance request, along with retail affiliates,
09:27:52
7
in the form specified in Exhibit C-1, and this is in accordance
09:27:55
8
with § 2.4 of the agreement and that's what kicks off the
09:28:02
9
process, correct?
09:28:03
10
MR. HENNIGAN:
09:28:04
11
MR. CANTOR:
09:28:06
12
THE COURT:
09:28:16
13
09:28:23
14
09:28:33
15
09:28:35
16
MR. CANTOR:
09:28:36
17
THE COURT:
09:28:42
18
MR. HENNIGAN:
09:28:44
19
09:28:45
20
THE COURT:
09:28:46
21
MR. HENNIGAN:
09:28:48
22
THE COURT:
09:28:54
23
excuse me, a drafted document incorporated into the Disbursement
09:28:57
24
Agreement.
09:28:58
25
So the way the agreement works as I understand it --
Yes.
Yes, Your Honor.
Let me see if I can impose upon my staff to
bring in some water.
Oh, thank you very much.
C-1 is pretty much a complete document in and of itself
drafted by the parties -Yes, Your Honor.
-- correct?
Drafted by the parties to the
Disbursement Agreement.
Right.
BofA and the borrowers.
Yes.
MR. HENNIGAN:
I mean, it is a drafted agreement,
Correct.
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 18 of 113
Oral Argument
18
It contains all of these affirmative
09:29:03
1
09:29:07
2
statements and representations and the like so that the request
09:29:18
3
is made in accordance with this C-1 document and in the C-1
09:29:26
4
document on all these representations --
09:29:29
5
MR. CANTOR:
09:29:31
6
THE COURT:
09:29:35
7
09:29:37
8
MR. CANTOR:
09:29:38
9
THE COURT:
09:29:54
10
submitted, under 2.4.4, the Disbursement Agent and the
09:30:00
11
construction consultant have to review and determine whether all
09:30:08
12
the documentation was provided.
09:30:13
13
09:30:17
14
reasonable efforts to notify project entities of any
09:30:21
15
deficiency."
09:30:23
16
So that's the next step in this process, correct?
09:30:30
17
MR. CANTOR:
09:30:36
18
THE COURT:
09:30:40
19
and ask about it because in regard to Bank of America's role
09:30:52
20
wearing the hat of Disbursement Agent, of course Bank of America
09:30:57
21
says, "Look, our job here is ministerial.
09:31:04
22
going through the checklist," right?
09:31:07
23
MR. CANTOR:
09:31:08
24
THE COURT:
09:31:13
25
THE COURT:
Yes, Your Honor.
-- there are blanks to be filled in, date,
amount, signatures, things like that.
Right.
Okay.
So after the request, C-1, is
Then here are these words again, "and use commercially
Yes, Your Honor.
I wanted to note one thing in this process
We are, in effect,
Yes, Your Honor.
"We're doing this and, by the way, we're
only paid a relatively small amount of money for this function."
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 19 of 113
Oral Argument
19
Yes, Your Honor.
09:31:20
1
MR. CANTOR:
09:31:21
2
THE COURT:
09:31:27
3
obligation or the like for Bank of America to carry some type of
09:31:35
4
insurance for its function.
09:31:41
5
There wasn't any insurance criteria, right?
09:31:44
6
MR. CANTOR:
Not that I'm aware of, Your Honor, no.
09:31:47
7
THE COURT:
In fact, did it have sort of malpractice
09:31:50
8
09:31:50
9
09:31:53
10
somewhere within the organization there would be a policy that
09:31:58
11
might cover this, but there was no insurance specifically
09:32:01
12
obtained for this role.
09:32:03
13
09:32:07
14
09:32:08
15
MR. CANTOR:
09:32:09
16
THE COURT:
09:32:10
17
So turn to Page 9 for a moment.
09:32:19
18
debt service notifications, do you see that paragraph that
09:32:24
19
begins with "the Disbursement Agent shall"?
09:32:26
20
MR. CANTOR:
09:32:35
21
THE COURT:
09:32:38
22
agreement where there is an affirmative obligation on the
09:32:42
23
Disbursement Agent to do more than just ministerial acts.
09:32:47
24
has to use reasonable diligence to assure the construction
09:32:53
25
consultant performs its review of the materials required,
I didn't see anywhere in the agreements any
insurance?
MR. CANTOR:
THE COURT:
Not specifically.
I don't know whether
It probably wouldn't cover gross negligence
anyway, right?
Probably not.
All right.
In the paragraph below
Uh-huh.
Here is an example of one place in the
November 18, 2011
It
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 20 of 113
Oral Argument
20
09:33:02
1
et cetera.
09:33:02
2
09:33:10
3
09:33:12
4
Would you agree from Bank of America's side?
09:33:15
5
MR. CANTOR:
09:33:20
6
09:33:22
7
09:33:25
8
the way, this would be an instance where the commercial
09:33:27
9
reasonableness requirement would apply.
09:33:29
10
09:33:32
11
the construction consultant performs its review of the
09:33:35
12
materials, I don't think that it is a terribly high standard.
09:33:38
13
09:33:42
14
09:33:44
15
09:33:48
16
09:33:50
17
MR. CANTOR:
09:33:51
18
THE COURT:
09:33:56
19
09:34:00
20
MR. CANTOR:
09:34:01
21
THE COURT:
09:34:04
22
MR. CANTOR:
09:34:05
23
THE COURT:
09:34:12
24
09:34:13
25
I noted this as a higher standard of obligation than
just ministerial checklists.
It certainly is more than just a
checklist.
I think, though, that using reasonable diligence -- by
But I think using reasonable diligence to assure that
It's not checking a box; it's making sure that the
construction consultant is doing its job.
THE COURT:
Let me back up.
The construction
consultant files its own piece of paper -Right.
-- Saying, "We looked at everything and the
advance is within the projected budget" -Right.
-- "and the projected construction cost."
Right.
So it files its piece of paper and it
certifies that.
MR. CANTOR:
Right.
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 21 of 113
Oral Argument
21
Now, you have all your Article 9 things
09:34:14
1
09:34:20
2
which you point out and argue.
09:34:22
3
don't have to do anything more than accept representations.
09:34:29
4
MR. CANTOR:
09:34:30
5
THE COURT:
09:34:32
6
agreement that seemed to me to impose, trying to read these
09:34:38
7
things together, a higher standard on Bank of America to do
09:34:44
8
reasonable diligence.
09:34:45
9
09:34:47
10
way.
09:34:51
11
is use reasonable diligence to make sure that the construction
09:34:55
12
consultant is doing the work and is doing it in a way that will
09:34:59
13
allow the advance request ultimately to be processed in a timely
09:35:04
14
fashion.
09:35:04
15
09:35:09
16
construction consultant performs, that's where § 9.3.2 would
09:35:15
17
kick in and says that Bank of America is entitled to rely on the
09:35:21
18
certification that the construction consultant provides in
09:35:26
19
determining that the things that the construction consultant is
09:35:29
20
responsible for have been satisfied.
09:35:31
21
09:35:34
22
reviews as required by § 2.4 is just to make sure that the
09:35:40
23
process is moving forward and is moving forward in a timely
09:35:43
24
fashion.
09:35:45
25
THE COURT:
MR. CANTOR:
You say, we, Bank of America,
Right.
I'm pointing out one other part of the
I think, Your Honor, it works the other
What Bank of America is required to do in this provision
When it comes to the substance of the review that the
The reasonable diligence to assure that it performs its
THE COURT:
All right.
Well, let me hold on that for a
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 22 of 113
Oral Argument
22
09:35:47
1
second and turn to the plaintiffs' side.
09:35:52
2
09:36:00
3
there, by this provision -- and I know this isn't the issue
09:36:04
4
which is on summary judgment.
09:36:10
5
costs per se.
09:36:15
6
09:36:18
7
your position with regard to this aspect?
09:36:25
8
Agent have a higher standard with regard to reviewing the
09:36:34
9
construction consultant's performance, et cetera, than it does
09:36:42
10
09:36:47
11
09:36:48
12
come back and catch something that was part of the colloquy on
09:36:52
13
the other side.
09:36:52
14
THE COURT:
09:36:53
15
MR. HENNIGAN:
09:36:56
16
the same, which is commercially reasonable, and I believe that
09:37:00
17
this articulation of reasonable diligence, I don't read it
09:37:05
18
different from commercially reasonable efforts to make sure the
09:37:08
19
construction consultant is doing his job.
09:37:10
20
THE COURT:
09:37:10
21
MR. HENNIGAN:
09:37:13
22
say, plenary obligations throughout the agreement that Bank of
09:37:19
23
America use commercially reasonable diligence, efforts,
09:37:22
24
whatever, to make sure that the conditions are fulfilled.
09:37:27
25
I'd like to have your comments on the question.
Is
It is not about the construction
In terms of the structure of the agreement, what is
Does the Disbursement
with regard to other obligations?
MR. HENNIGAN:
Let me answer that and I would like to
Go ahead.
I think their standard remains roughly
Okay.
So I think there are, you know, I would
The part I wanted to bounce back to, Your Honor, was
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 23 of 113
Oral Argument
23
09:37:32
1
the point that you referred to, the relatively modest fee that
09:37:37
2
Bank of America was earning for this.
09:37:41
3
underwriter of these loans, Your Honor.
09:37:45
4
tens of millions of dollars in putting this package together.
09:37:50
5
This Disbursement Agreement was an essential part of
09:37:56
6
the comfort assurances that lenders look to in order to put
09:38:01
7
their money into the deal and so, yeah, they may have only made
09:38:04
8
$40,000 on this one, but it was an integral part of the overall
09:38:10
9
financing package.
09:38:13
10
09:38:15
11
09:38:18
12
some debate on this issue but in terms of the Disbursement Agent
09:38:24
13
hat and function, there is no dispute that Bank of America was
09:38:31
14
being paid a limited amount of money for that job.
09:38:37
15
09:38:40
16
earmarked specifically for that job, it was a very modest amount
09:38:44
17
of money.
09:38:46
18
THE COURT:
09:38:47
19
MR. HENNIGAN:
09:38:49
20
THE COURT:
09:38:54
21
relations to this deal other than Disbursement Agent, but I
09:39:00
22
don't want to go there yet.
09:39:02
23
09:39:12
24
to understand the general introductory language in 9.1 on
09:39:19
25
commercial reasonableness with regard to other aspects of the
Bank of America was the
Bank of America earned
It had to be here and it had to be performed
by somebody that people trusted.
THE COURT:
All right.
MR. HENNIGAN:
I knew I was going to invite
I would say in terms of funds that were
Yes.
That was my only point.
It was part of the overall deal.
I understand that Bank of America has other
My main point in trying to address this issue is to try
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 24 of 113
Oral Argument
24
09:39:23
1
agreement.
09:39:25
2
09:39:33
3
diligence has to be done with regard to the construction
09:39:39
4
consultant's obligations.
09:39:42
5
09:39:48
6
the Disbursement Agent and the construction consultant shall
09:39:52
7
review the advance requests and attachments thereto to determine
09:39:56
8
whether all required documentation has been provided and shall
09:39:59
9
use commercially reasonable efforts, et cetera.
09:40:02
10
09:40:08
11
integrate the whole, one of the points that is of concern to me
09:40:18
12
is how do you apply that introductory language in 9.1 with
09:40:27
13
regard to the other parts of the agreement where there is
09:40:29
14
specific reference then to the commercial diligence or
09:40:32
15
equivalent and then the rest of Article 9 that seems to limit
09:40:41
16
how that is exercised or the conditions under which it is
09:40:46
17
exercised.
09:40:47
18
09:40:49
19
about this is if you start with Article 9 as a whole.
09:40:56
20
essentially a contract within a contract.
09:41:04
21
most part, the rest of the Disbursement Agreement deals with
09:41:09
22
mechanics for disbursing funds, but Article 9 is specifically
09:41:14
23
limited to the retention, the rights, the responsibilities of
09:41:16
24
the Disbursement Agent.
09:41:19
25
I pointed out to you this one matter where reasonable
Also, under 2.4.4(A) under general review, here again
So when I am looking at the document and trying to
MR. CANTOR:
Your Honor, I think the best way to think
It is
You know, for the
So you can look at 9.1, I think, as like a whereas
November 18, 2011
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Oral Argument
25
09:41:23
1
09:41:26
2
It sets forth the general purpose of the agreement for
09:41:33
3
retaining the Disbursement Agent, and it leaves the details for
09:41:38
4
the paragraphs that follow.
09:41:40
5
09:41:42
6
of America is going generally to perform its duties in a manner
09:41:47
7
that is consistent with similarly situated institutions like
09:41:52
8
indenture trustees and the like, and it provides a general
09:41:56
9
standard of care for those Disbursement Agent obligations that
09:42:01
10
09:42:06
11
09:42:10
12
this question, and I want to get back to the plaintiffs'
09:42:13
13
response, what you said in a second, but let me take one step
09:42:19
14
further in our discussion and set up the question and then get
09:42:24
15
back to what we're talking about.
09:42:27
16
09:42:29
17
Disbursement Agreement on 2.5.1?
09:42:46
18
important aspect of the flow of obligations under this
09:42:56
19
Disbursement Agreement, so let's go over this together.
09:43:05
20
"In the event that:
09:43:07
21
"1.
22
clause for this agreement within an agreement.
So what it says is it is an acknowledgement that Bank
are not otherwise subject to more specific provisions.
THE COURT:
But I have a specific purpose in asking
Could you turn your attention to Page 10 of the
This is, to me, a very
The conditions precedent to an advance have not
been satisfied; or,
09:43:11
23
"2.
The controlling person notifies the Disbursement
09:43:13
24
Agent that a default or an Event of Default has occurred
09:43:18
25
and is continuing, then the Disbursement Agent shall notify
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Oral Argument
26
09:43:24
1
the project entities, and each funding agent thereof as
09:43:29
2
soon as reasonably possible, a stop funding notice,"
09:43:33
3
et cetera, et cetera.
09:43:34
4
09:43:41
5
of that, the controlling person, whoever that is -- and I assume
09:43:47
6
that has to be somebody defined under the control agreement.
So let's go back and break that down.
Under subpart 2
7
No?
09:43:53
8
MR. CANTOR:
09:43:55
9
09:44:00
10
09:44:02
11
THE COURT:
09:44:06
12
MR. CANTOR:
09:44:06
13
THE COURT:
09:44:13
14
09:44:21
15
09:44:26
16
a formal demand to Bank of America as the Disbursement Agent
09:44:33
17
that there's a notice of default?
09:44:35
18
09:44:36
19
agreement contemplates for purposes of making sure that
09:44:40
20
everything is papered in case there is a later litigation and,
09:44:44
21
by the way, Your Honor, this --
09:44:45
22
THE COURT:
09:44:50
23
MR. CANTOR:
09:44:55
24
performing the agent functions at Bank of America were all part
09:44:59
25
of the same specific group, the credit debt products group in
No, Your Honor.
The controlling person is
defined in this agreement as, for purposes of our discussion,
the Bank Agent.
get to.
Well, the Bank Agent being Bank of America?
Yes, Your Honor.
Okay.
Okay.
How does this work?
So this is what I'm trying to
Bank of America notifies itself?
Bank of America, as the controlling person, then writes
MR. CANTOR:
That would be the process that the
Which portion of Bank of America does this?
Your Honor, the individuals who were
November 18, 2011
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Oral Argument
27
09:45:09
1
Dallas, and, yes, Your Honor, it is a formulistic requirement.
09:45:16
2
09:45:19
3
who are the controlling person at Bank of America are also the
09:45:20
4
same people who are disbursement agents?
09:45:22
5
09:45:27
6
specific individuals who actually press the button and move the
09:45:32
7
money, but the people who are performing this function and
09:45:34
8
making the decisions are the same group of people.
09:45:36
9
09:45:39
10
Somebody under the definition of controlling person has to make
09:45:44
11
a decision to pull the trigger --
09:45:46
12
MR. CANTOR:
09:45:47
13
THE COURT:
09:45:51
14
09:45:56
15
MR. CANTOR:
09:45:57
16
THE COURT:
09:46:01
17
today about how Bank of America is being sued here, is it sued
09:46:10
18
as only Disbursement Agent, or is it sued as controlling agent
09:46:20
19
or controlling person, and how do you divide up the knowledge
09:46:26
20
that Bank of America has as controlling person from that which
09:46:30
21
it has as Disbursement Agent?
09:46:33
22
MR. CANTOR:
09:46:37
23
09:46:40
24
09:46:43
25
THE COURT:
MR. CANTOR:
THE COURT:
Let me narrow this down.
The same people
Yes, Your Honor, with the exception of the
I'm talking about the decision-makers.
Yes, Your Honor.
-- and then notifies itself, wearing a
different hat, that such a decision has been made.
Right, Your Honor.
Okay.
So when I started our discussion
Well, Your Honor, let me answer that
somewhat obliquely, but I think you'll see where I'm going.
This actually goes back to one of your original
questions about what is the relevance of the Credit Agreement
November 18, 2011
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Oral Argument
28
09:46:46
1
here because the Credit Agreement which governs the Bank Agent,
09:46:53
2
which is synonymous with Administrative Agent, that is where you
09:46:57
3
get the provision that Your Honor alluded to earlier this
09:47:00
4
morning about knowing whether there has been a default or an
09:47:04
5
Event of Default.
09:47:05
6
09:47:08
7
specifically provides that Bank of America is not deemed to have
09:47:10
8
notice of an Event of Default or a default unless it receives an
09:47:13
9
actual notice to that effect.
09:47:16
10
09:47:21
11
America as Bank Agent is not required to notify the Disbursement
09:47:26
12
Agent under this provision here and so therefore you --
09:47:31
13
09:47:39
14
does controlling person, namely Bank of America wearing a
09:47:43
15
different hat, have an independent duty and responsibility to
09:47:51
16
review whether there has been a default and pull the trigger?
09:47:54
17
09:47:58
18
09:48:02
19
09:48:07
20
09:48:13
21
09:48:18
22
plaintiffs in this discussion -- but let me stick with them for
09:48:21
23
a second because I'd like to hear their response before
09:48:25
24
plaintiffs' response.
09:48:28
25
There is a provision in the Credit Agreement that
So until it receives that actual notice, Bank of
THE COURT:
But my question is:
Controlling person,
I'm not sure what you mean by "review."
MR. CANTOR:
I
think that -- I'm sorry --
THE COURT:
Well, here's where I'm having difficulty
with the agreement before we get into the facts.
Your position -- and I am not trying to exclude
Your position is that Bank of America as Disbursement
November 18, 2011
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29
09:48:34
1
Agent has certain protections?
09:48:39
2
MR. CANTOR:
09:48:41
3
THE COURT:
09:48:43
4
controlling person, under some authority, seems to me to have
09:48:55
5
more obligation, if you will, to monitor what's going on in this
09:49:02
6
deal.
09:49:03
7
MR. CANTOR:
09:49:05
8
THE COURT:
09:49:09
9
MR. CANTOR:
09:49:15
10
Agreement which mirror the provisions in the Disbursement
09:49:18
11
Agreement about the Bank Agent or the Administrative Agent,
09:49:23
12
which again is synonymous, being allowed to rely on the same
09:49:28
13
types of certifications, representations and warranties that the
09:49:33
14
Disbursement Agent relies upon.
09:49:36
15
09:49:43
16
09:49:45
17
09:49:50
18
issue about controlling person notifying the Disbursement Agent
09:49:54
19
that there has been a default or an Event of Default, the Credit
09:49:58
20
Agreement specifically provides that Bank of America doesn't
09:50:01
21
have knowledge of an Event of Default or a Default, capital D
09:50:06
22
default, unless it has received notice from someone of that
09:50:10
23
event.
09:50:10
24
So what you get is, if you focus specifically on 2.5.1,
09:50:17
25
it is undisputed that Bank of America never received a notice of
Yes.
All right.
But Bank of America as
I would disagree with that, Your Honor.
Okay.
Tell me why you disagree with that.
Okay.
There are provisions in the Credit
That would be § 9.4 of the Credit Agreement, and § 9.3
of the Credit Agreement all deal with that.
When you get specific to 2.5.1, Your Honor, and the
November 18, 2011
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Oral Argument
30
09:50:21
1
default here, and so therefore this second portion of 2.5.1
09:50:28
2
which focuses on the controlling person as opposed to the
09:50:32
3
Disbursement Agent is not part of our discussion here this
09:50:34
4
morning, Your Honor.
09:50:35
5
THE COURT:
09:50:38
6
MR. CANTOR:
09:50:39
7
THE COURT:
09:50:42
8
One of the issues raised by plaintiffs is, well, they
09:50:46
9
09:50:56
10
09:51:00
11
09:51:02
12
They received an email from one of the Term Lenders who is not a
09:51:07
13
party here that expressed their views as to whether the Lehman
09:51:14
14
bankruptcy had certain consequences, but what it didn't do was
09:51:17
15
say this is an event of -- we hereby declare an Event of
09:51:20
16
Default.
09:51:21
17
09:51:23
18
09:51:25
19
09:51:29
20
provisions on notice as to what is formal notice, leaving aside
09:51:36
21
who has to give it for a moment, does the Credit Agreement
09:51:43
22
notice requirements apply here?
09:51:46
23
09:51:53
24
given in a written, certified way that creates a triggering
09:52:00
25
event, or is it enough that it be electronically transmitted?
Well, you are saying a lot of things.
Okay.
So let me go back to what you just said.
did receive notice from one of the Term Lenders that the Lehman
bankruptcy was a triggering Event of Default.
MR. CANTOR:
THE COURT:
I would say that is a mischaracterization.
Let me interrupt for a second and turn to
plaintiffs.
Since the Disbursement Agreement does not itself have
Is there a formal process where that notice has to be
November 18, 2011
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Oral Argument
31
If I am tracking it, Your Honor, it
09:52:08
1
09:52:09
2
seems to me that the unity of control agent and -- I am using
09:52:14
3
the right word, right, control agent?
MR. HENNIGAN:
Control person.
4
THE COURT:
09:52:19
5
MR. HENNIGAN:
09:52:20
6
being the Bank Agent and that same person being the disbursing
09:52:25
7
agent makes notice under that circumstance self-executing.
09:52:29
8
Notice to one is notice to the other automatically.
09:52:32
9
THE COURT:
09:52:34
10
The unity of the controlling person
Yes.
But let's say one of the Term
Lenders, like in this situation -Gotcha.
11
MR. HENNIGAN:
09:52:37
12
THE COURT:
09:52:43
13
notice in this formal sense under the Credit Agreement which
09:52:50
14
then is notice of appropriate communication for purposes of the
09:52:54
15
Disbursement Agreement?
09:52:55
16
MR. HENNIGAN:
09:52:59
17
MR. CANTOR:
09:53:01
18
09:53:05
19
09:53:09
20
09:53:13
21
09:53:16
22
09:53:21
23
09:53:27
24
09:53:28
25
-- sends an email.
Does that qualify as
It is absolutely a notice of default.
Your Honor, the issue is not the means of
transmission; the issue is the content of the transmission.
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 32 of 113
Oral Argument
32
So let me get back to 2.5.1.
We talked
09:53:30
1
09:53:37
2
about controlling person notifies, which is a triggering event
09:53:43
3
if that provision was met, but it wasn't met here.
09:53:47
4
MR. CANTOR:
09:53:48
5
THE COURT:
09:53:51
6
09:53:52
7
MR. CANTOR:
09:53:55
8
THE COURT:
09:53:57
9
09:54:02
10
person to Disbursement Agent that would meet that requirement,
09:54:09
11
is there?
09:54:09
12
09:54:11
13
since they are the same entity, notice to one is by definition
09:54:17
14
notice to the other.
09:54:17
15
THE COURT:
09:54:19
16
MR. CANTOR:
09:54:21
17
The contract specifically requires -- and, again, it
09:54:24
18
might seem overly formalistic as you sit here today, but you can
09:54:29
19
imagine a litigation situation where the failure to have all of
09:54:34
20
these specified boxes checked could be important.
09:54:37
21
09:54:41
22
notifying the disbursing agent, and there is no evidence in the
09:54:45
23
record that that ever happened.
09:54:48
24
09:54:51
25
THE COURT:
Correct.
So I don't have to pay any attention to
that subpart 2, right?
different?
That's my position, Your Honor.
And I don't know.
Do you have a position
There isn't any formal notice from controlling
MR. HENNIGAN:
As I said, Your Honor, I believe that
What do you say about that?
That is not what the contract says.
What 2.5.1 talks about is the controlling person
THE COURT:
All right.
But let's go back to Part 1:
In the event, 1, the conditions precedent to an advance have not
November 18, 2011
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Oral Argument
33
09:54:56
1
been satisfied.
09:55:06
2
09:55:10
3
this Disbursement Agreement to see who triggers that, who says
09:55:17
4
that.
Well, one thing I know is that Fontainebleau can say
09:55:24
5
that.
Fontainebleau can give notice and eventually later in the
09:55:28
6
deal did give notice that the conditions precedent were not
09:55:37
7
satisfied.
09:55:37
8
MR. CANTOR:
09:55:38
9
THE COURT:
09:55:40
10
09:55:50
11
as Disbursement Agent is doing its checklist and it
09:55:56
12
determines -- and I'm going to use something which is really not
09:55:59
13
our situation here -- but it determines that the construction
09:56:06
14
consultant has not adequately, reasonably been diligent in the
09:56:15
15
project costs and that condition has not been satisfied, or
09:56:18
16
something of that nature, that would be an event where the
09:56:28
17
Disbursement Agent is required to notify the project entities,
09:56:34
18
right?
09:56:34
19
09:56:38
20
put them might not work, but let me tie it to something that
09:56:41
21
happened here.
09:56:42
22
09:56:48
23
consultant, initially reviewed the advance request, it was
09:56:50
24
unwilling to sign off on the advance request.
09:56:53
25
Now, what I have tried very hard to do is look through
Right.
So that is one situation.
Another situation seems to me to be if Bank of America
MR. CANTOR:
Yeah.
I think the facts as you actually
For example, in March 2009, when IVI, the construction
Ultimately that got resolved, but if it had not, then
November 18, 2011
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Oral Argument
34
09:56:56
1
Bank of America would not have been allowed --
09:56:59
2
THE COURT:
09:57:01
3
MR. CANTOR:
09:57:02
4
THE COURT:
09:57:05
5
under your ministerial checklist theory, the construction
09:57:08
6
consultant refuses to sign the document.
09:57:11
7
MR. CANTOR:
09:57:12
8
THE COURT:
09:57:19
9
09:57:26
10
09:57:30
11
Would you agree?
09:57:32
12
MR. CANTOR:
09:57:32
13
THE COURT:
09:57:42
14
Disbursement Agent has an obligation, "shall" -- mandatory --
09:57:47
15
notify the project entities, et cetera.
09:57:50
16
MR. CANTOR:
09:57:51
17
THE COURT:
09:57:57
18
to me -- and I want to have more argument from both sides on
09:58:01
19
this -- and I'm going to have more questions to you as you go
09:58:07
20
through this -- is another type of situation, and that has to do
09:58:23
21
where it is not a matter of determining whether C-1 has been
09:58:31
22
submitted correctly with all certifications.
09:58:35
23
09:58:40
24
the other conditions precedent have been met and what I'm trying
09:58:53
25
to get at is the structure of the agreement as to various
I'm trying to use a simple example.
Yeah.
I'm trying to use a simple example where
Yes, Your Honor.
Then in the ministerial review of the
paperwork, the Disbursement Agent would determine that a
condition precedent to an advance has not been satisfied.
Yes, Your Honor.
Okay.
And in that event, under 2.5.1, the
Right.
Okay.
Now, where this does get confusing
It's a more subjective determination of whether or not
November 18, 2011
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Oral Argument
35
09:59:01
1
alternative circumstances.
09:59:04
2
09:59:13
3
Disbursement Agent shall use reasonable diligence to make sure
09:59:17
4
that each condition precedent to an advance has been satisfied,
09:59:24
5
the way it has been with the construction side, is there an
09:59:29
6
affirmative duty in any way on the part -- under the
09:59:33
7
agreement -- on the part of Bank of America to do that?
09:59:37
8
MR. CANTOR:
09:59:38
9
THE COURT:
09:59:42
10
09:59:49
11
09:59:55
12
through, you know, all the Article 9 limitations that would be
10:00:02
13
consistent with.
10:00:07
14
checklisting.
10:00:09
15
MR. CANTOR:
10:00:12
16
THE COURT:
10:00:19
17
10:00:20
18
MR. CANTOR:
10:00:23
19
THE COURT:
10:00:30
20
which is, I think, the subject of this summary judgment, as to
10:00:39
21
if Bank of America knew or should have known in the course of
10:00:47
22
its dealings with the loan as controlling person or Disbursement
10:00:56
23
Agent that a condition precedent has not been satisfied, okay,
10:01:08
24
and it -- not that it is imputed knowledge.
10:01:11
25
Number 1, since there is no specific language saying
No, Your Honor.
Okay.
I know your position is no, but let
me just phrase these things and then we will get back to them.
Okay.
In support of your position, you would go
We don't have the obligation.
Okay.
We are just
I understand that.
Yeah, in particular 9.3.2.
And you would also rely on 9.2.5, no
imputed knowledge.
Yes, Your Honor.
So now we get to the much harder question
I mean, under the best of circumstances, let's say it
November 18, 2011
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Oral Argument
36
10:01:13
1
is a clean-cut advance.
You are doing your checklist.
10:01:17
2
don't know anything.
10:01:21
3
approved.
10:01:25
4
agreement.
10:01:27
5
10:01:36
6
and Lehman's bankruptcy, and then the question is, well, what
10:01:43
7
did Bank of America know or what should it have known?
10:01:50
8
If it either should have known or knew, did it have an
10:01:54
9
affirmative duty at that point, under commercial reasonableness
10:02:03
10
language, to do more and, in fact, didn't it do more by looking
10:02:10
11
into the question, having its lawyer look into the question or
10:02:14
12
other thing?
10:02:15
13
10:02:19
14
that Bank of America did more, that's not the way that you
10:02:25
15
define the standard, the minimum standard of what they were
10:02:28
16
required to do.
10:02:31
17
things, shows that they weren't grossly negligent here.
10:02:35
18
10:02:37
19
think you need to split "knew or should have known" into two
10:02:44
20
parts.
10:02:44
21
10:02:50
22
and unambiguous language of 9.3.2 says, Bank of America is
10:02:58
23
entitled to rely without further investigation on
10:02:59
24
Fontainebleau's certifications that conditions precedent had
10:03:02
25
been met.
There is nothing at issue.
Off it goes.
You
You stamp it
You are covered by everything in this
But here you have this issue with the retail facility
MR. CANTOR:
Well, let me start by saying to the extent
The fact that they did more, among other
But in determining what it is that they need to do, I
The premise of our argument here is that, as the clear
November 18, 2011
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37
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If Bank of America actually knew that a condition
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precedent had not been satisfied, then it would not be relying
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on Fontainebleau's certifications at that point, and we would
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concede that they had an obligation to not allow the funding to
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go forward but actually knew.
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THE COURT:
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So for purposes of the summary judgment, your position
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is if Bank of America had actual knowledge that a condition
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precedent had not been met -- in this case, I guess that
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translates to the equivalent of actual knowledge that Lehman was
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not funding the retail facility, right?
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MR. CANTOR:
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THE COURT:
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MR. CANTOR:
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because there are other people that could have funded that it
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would have been permissible.
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THE COURT:
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MR. CANTOR:
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THE COURT:
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that Lehman did not fund and none of the other lenders within
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the retail structure funded and that Fontainebleau funded, that
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is a different situation and then Bank of America did have,
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notwithstanding Article 9, an affirmative duty to initiate a
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default notice.
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MR. CANTOR:
Hold right there.
Right.
Okay.
If it knew that --
Well, that Fontainebleau Resorts was,
Let me rephrase that.
Yeah.
If Bank of America had actual knowledge
Right.
Bank of America in that instance
November 18, 2011
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would know that the conditions precedent have not been satisfied
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and, thus, it would be required under 2.5.1 to issue a stop
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funding notice.
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like more discussion -- is there a material issue of fact about
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actual knowledge?
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no action taken.
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Wouldn't that be gross negligence under New York law?
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MR. CANTOR:
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MR. CANTOR:
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THE COURT:
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received some new information, other discovery, is there a
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material issue of fact on actual knowledge?
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issue of fact that Bank of America had actual knowledge.
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Plaintiffs have not submitted sufficient evidence in admissible
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form to establish actual knowledge by Bank of America.
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So let's hold on that for a second and
THE COURT:
switch back to the factual issues here.
Is there from the plaintiffs' standpoint -- and I would
Let's assume there was actual knowledge, but
It would not, Your Honor, under these
circumstances.
THE COURT:
Okay.
So let's divide the two up.
Let's
start with Question 1, actual knowledge.
MR. CANTOR:
Yes, Your Honor.
Based upon all these emails, and I've now
Let me make sure I phrase it correctly,
Your Honor.
Your Honor, we don't believe that there is a material
When you add up all of the emails, many of which, I
November 18, 2011
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believe, they have mischaracterized -- a lot of the evidence
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that they rely on they both mischaracterized and it is
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inadmissible.
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When you add all that up, Your Honor, all that adds up
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to is, at best, a finding that Bank of America should have been
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suspicious, that Bank of America should have asked more
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questions.
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THE COURT:
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Does plaintiff contend that Bank of America had actual
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MR. HENNIGAN:
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THE COURT:
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That's not actual knowledge.
Let me hold up for a second.
knowledge?
Yes.
What evidence are you relying on that
creates at least a material issue of fact of actual knowledge?
MR. HENNIGAN:
The evidence that I am relying on, Your
Honor, that I think disposes of the question is
November 18, 2011
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were met?
25
MR. HENNIGAN:
request.
They made it with the original advance
I'll get to that in a second.
November 18, 2011
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there is not a jury or a court anywhere in the country that
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wouldn't understand in that context that he was saying it was
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made in a way that violates the condition.
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that point.
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In other words, when you answer the question that way,
Everyone knew it at
What they were doing was looking for cover.
So we think it is not that it raises a triable issue of
November 18, 2011
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fact.
We think there is no credible evidence on this record
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that Bank of America did not know that that funding was made by
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Fontainebleau and not by Lehman Brothers and now let's look at
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whether or not they have denied it.
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story.
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interpretation of the evidence.
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evidence will show.
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The answer is they have mealy-mouthed their way through
this thing.
They never squarely say.
Instead,
THE COURT:
Okay.
So, let me ask for responses on
that.
MR. CANTOR:
Sure, Your Honor.
That was a really nice
It would sound great at closing, but it is an
It is not, in fact, what the
What the evidence does show is that the conversations
November 18, 2011
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that were held between Bank of America and Fontainebleau --
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MR. CANTOR:
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THE COURT:
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MR. CANTOR:
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THE COURT:
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MR. CANTOR:
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THE COURT:
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to your motion, before I get to their motion -- the question is
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whether they have generated enough through these emails to
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trigger a material issue of fact of actual knowledge.
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emails themselves don't show actual knowledge.
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Mr. Hennigan gets a chance to spin them that he even gets close.
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THE COURT:
Let me ask you to rephrase this in a
different way.
Okay.
We're not here on closing argument either.
Right.
The issues have to be addressed in terms of
the standards for summary judgment --
MR. CANTOR:
THE COURT:
Uh-huh.
-- and whether or not there is a material
issue of fact on this.
MR. CANTOR:
Right.
So the question is -- at least in response
They have not, Your Honor, because the
November 18, 2011
It is only when
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told Bank of America, If Lehman doesn't fund, we are going to
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fund for them.
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no --
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bank in the United States and among its thousands and thousands
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of clients is Fontainebleau Las Vegas.
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Just as if when Jeff Soffer goes to the ATM machine,
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there is a record generated somewhere in Bank of America that
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that happens.
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There is no testimony in the record that Fontainebleau
That conversation never happened.
There is
THE COURT:
I don't understand quite the mechanics of what
happened there.
MR. CANTOR:
Basically, Bank of America is the largest
But there is absolutely no evidence in the record that
November 18, 2011
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anyone with any connection to the Fontainebleau Las Vegas
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project had any knowledge that this wire transfer took place nor
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would there have been any reason for them to know about that.
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THE COURT:
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Your response to that?
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plaintiffs are relying on that shows that anyone within the Bank
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of America controlling person, disbursing agent side, knew of
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that wire transfer, knew of the wire transfer?
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conceptual issues about the different hats that want to be worn
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here.
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able to determine in any manner, and where is it, that someone
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within the structure, a controlling person, Administrative
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Agent, somewhere in that pecking order of who pulls the trigger
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down to who is working on the account had actual knowledge of
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that transfer?
10:19:50
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MR. HENNIGAN:
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THE COURT:
Tell me specifically.
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THE COURT:
I am not talking about
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MR. HENNIGAN:
10:20:12
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Okay.
MR. HENNIGAN:
THE COURT:
Hold on that.
Is there anything of record
Your Honor, I always have these
My question is very specific.
Were you
The answer is yes.
I am talking about what his testimony
is.
November 18, 2011
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THE COURT:
Okay.
Go ahead.
THE COURT:
Well, you know, that's not quite going to
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cut it.
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there was an objection --
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MR. CANTOR:
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THE COURT:
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MR. HENNIGAN:
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THE COURT:
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MR. HENNIGAN:
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THE COURT:
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that somebody from Trimont actually remembered directly telling
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someone in the structure that that funding occurred, is there?
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I mean, that sounds like, at best, speculative.
If
There was.
-- made to that, I would grant it because
it's an assumption unless established as something in terms of
habit and course of practice and all that.
That is exactly what it is.
But I don't think that is what I am asking
you.
THE COURT:
Well, --
There is nothing in the record that said
Okay.
That's not the question I asked.
November 18, 2011
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Okay.
But that doesn't mean others didn't,
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so that's Bank of America's point in terms of other lenders.
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is different than Fontainebleau made it.
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is that if I were Bank of America and I wanted to know really
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whether Fontainebleau funded,
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category of studied ignorance.
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point.
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evidence in the record that, in fact, they had induced this
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default and therefore were in error for having disbursed the
10:23:20
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funds.
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THE COURT:
MR. HENNIGAN:
It
That's true.
What occurs to us as we are preparing for this argument
So, the fact they don't puts them, I think, into the
They didn't want to know at that
They wanted to cover their tracks.
THE COURT:
Okay.
November 18, 2011
They did not want
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I don't think there is another
10:23:21
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explanation for it.
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THE COURT:
10:23:25
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MR. CANTOR:
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THE COURT:
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is equivalent to the criminal concept of deliberate ignorance,
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that Bank of America, in analyzing this question which it was
10:23:51
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discussing and asking for affirmations or explanations from
10:23:58
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Fontainebleau about, deliberately did not verify the answer
10:24:09
14
within the confines of records it controlled.
10:24:12
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10:24:14
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go and check the records.
10:24:17
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when Mr. Hennigan says that Bank of America induced
10:24:21
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Fontainebleau Resorts to fund, that's just false and not based
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on any testimony or documents that are in the record.
10:24:29
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considering a variety of options in the event that Lehman didn't
10:24:37
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fund.
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MR. HENNIGAN:
But let's turn back -Okay.
-- and then we will take a break in a
minute.
MR. CANTOR:
There has been so much thrown out that I
am not sure I am going to be able to hit all of it.
THE COURT:
MR. CANTOR:
What is being argued, as I understand it,
Your Honor, it didn't have any reason to
As I was starting to explain before,
What Bank of America knew is that Fontainebleau was
November 18, 2011
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Fontainebleau that if Fontainebleau wanted to do that, it would
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be okay.
10:25:06
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There is no evidence in the record of that, no testimony by Jim
10:25:09
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Freeman, no testimony by anyone from Bank of America that that
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happened.
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There is no evidence that they ever communicated to
That's an assumption that Mr. Hennigan has made.
November 18, 2011
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that is a criminal concept that I don't think applies when
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you've got a contract that specifically says you can rely
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without investigation, but there just was no reason for Bank of
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America to have to do that.
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THE COURT:
10:27:07
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we'll take a break.
17
18
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THE COURT:
Yes
24
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sentences?
23
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Could I respond in just a couple of
22
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MR. HENNIGAN:
21
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Let me toss out two more matters and then
20
10:27:10
So there is no studied ignorance here and, as you say,
Number 2, they didn't have to know what the exact
November 18, 2011
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amount was.
They just needed to ask one question:
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of September 2008, did Fontainebleau transfer funds to Trimont?
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Your Honor, when they don't have a contractual obligation to do
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so?
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few minutes, but let me pose a couple of questions to you to
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consider during our break.
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Lehman did fund in October and November?
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fact by and between the parties that that funding occurred from
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Lehman.
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how I should hear the evidence on summary judgment?
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picture issue which is troubling to me so I'll mention it -- the
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Term Lenders are wearing different hats, too, it seems to me.
10:29:02
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funded their share of the deal, when is it, in March?
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should have funded it all.
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funded, and why is that?
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continue in order to protect our investment.
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Why would they have asked that question,
MR. CANTOR:
THE COURT:
On the 26th
Well, we're going to discuss this more in a
What significance does it have that as a matter of fact
There is no dispute of
How is that put into this factual equation in terms of
The second thing is -- and this is like a bigger
One hat is, Ahhh, look at this, revolvers should have
They
Because we funded, you should have
Because we wanted this project to
Right?
Isn't that a fair way of looking at your first
position?
MR. HENNIGAN:
Our first position on that subject, Your
Honor, is we absolutely, categorically wanted their money into
November 18, 2011
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Oral Argument
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1
the bank proceeds account because we have a lien on it and we're
10:29:49
2
going to thereby share the pain with them as was contemplated by
10:29:53
3
the overall funding agreements.
10:29:55
4
10:30:01
5
10:30:07
6
10:30:10
7
been a default all and there would have been a stoppage, if you
10:30:16
8
would, of the project for every lender back in September, right,
10:30:32
9
'08?
10:30:34
10
10:30:37
11
have pulled the plug on the whole project because of this retail
10:30:47
12
issue involving Lehman.
10:30:51
13
something.
10:30:52
14
10:30:55
15
10:30:59
16
10:31:03
17
10:31:03
18
10:31:05
19
remember what the whole requested that month.
10:31:08
20
like $100 million or something.
10:31:16
21
10:31:22
22
10:31:25
23
10:31:31
24
doesn't really make sense to me for the Term Lenders to take a
10:31:37
25
position that the Revolvers were obligated to fund in March if,
We did not want this money, ours and theirs, to go down
this rat hole.
We wanted them to fund.
THE COURT:
But if there was a default, it would have
If your theory is correct, then Bank of America would
MR. CANTOR:
What did you say?
It was one point
The amount of the issue for Lehman in that
September advance was $4 million total, 2.5 from Lehman.
THE COURT:
2.5 for Lehman and the whole advance was
for?
MR. CANTOR:
THE COURT:
The whole retail advance was 4.
Okay.
I don't
It was probably
What bothers me is two-fold looking
at this from a broader perspective.
One is, notwithstanding your statement to me, it
November 18, 2011
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Oral Argument
55
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1
in fact, your position is that none of the lenders should have
10:31:50
2
been obligated to fund anything and Bank of America shouldn't
10:31:55
3
have advanced anything, sorry, back in September.
10:32:00
4
Number 1.
10:32:00
5
10:32:16
6
every effort being made to try to make it work to protect
10:32:23
7
everybody's money.
10:32:27
8
10:32:33
9
back retroactively to a situation in September where there is no
10:32:39
10
question that money was coming forward to do the retail part and
10:32:49
11
that was moving forward and, in fact, Lehman did continue after
10:32:56
12
that.
10:32:56
13
10:33:00
14
money was being protected, at least up to that point in time,
10:33:07
15
until it was discovered about all these cost overruns which
10:33:14
16
nobody here claims anybody knew at the time.
10:33:19
17
10:33:28
18
could see, is in a bit of a dilemma.
10:33:32
19
plug on the whole project, based upon what you are arguing from
10:33:36
20
the Term Lenders looking in retrospect, would it have had a
10:33:44
21
massive lawsuit from Fontainebleau as well as potentially others
10:33:53
22
who were dependent upon this project going forward?
10:33:57
23
10:34:03
24
standard, what was done, was that commercially unreasonable to
10:34:08
25
allow that project go forward and maybe not look at the question
That's
Number 2, this project was well underway and there was
So what is being done here, it seems to me, is to look
So the project was being protected and everybody's
So here you have an Administrative Agent that really, I
I mean, if it pulled the
So even if I applied a commercial reasonableness
November 18, 2011
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Oral Argument
56
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1
too closely?
Those are a couple of things that are of concern
10:34:21
2
to me on this issue.
10:34:24
3
10:34:35
4
November and the like, where Lehman didn't fund and there were
10:34:42
5
continuing questions and whatever, it would be a tougher call
10:34:46
6
here but, I mean, we are dealing with one month which is
10:34:51
7
squirrelly, followed by two months where no one contests that
10:34:56
8
Lehman actually did fund.
10:34:59
9
10:35:09
10
but I also think that in the real world sense it is necessary to
10:35:16
11
take a look at what was going on in this project at that time in
10:35:25
12
terms of the Term Lenders' argument on commercial reasonableness
10:35:27
13
and gross negligence.
10:35:31
14
time to all respond to this.
10:35:34
15
10:35:39
16
summary judgment that there may have been this funding, they
10:35:48
17
knew or should have known or deliberately ignorant in not
10:35:54
18
knowing that Fontainebleau actually directly or indirectly
10:35:57
19
funded, is that, under the standard of the agreement, gross
10:36:11
20
negligence as a matter of law?
10:36:14
21
10:36:21
22
10:36:25
23
MR. CANTOR:
10:36:26
24
THE COURT:
10:36:31
25
You know, if the situation repeated itself in October,
So I know I'm looking at this in terms of this record,
I am going to take a break and give you
Then, even if you accept as true for purposes of
When we return, can we deal with some of these issues?
I'll give both sides an opportunity to address it.
Thank you.
Let's take fifteen minutes.
In fact, I
have to break by no later than noon, so let's reconvene at 10 of
November 18, 2011
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Oral Argument
57
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1
11:00.
10:36:44
2
10:36:48
3
much as you want to make them.
10:36:51
4
detailed slides and all, but I think we have covered a lot and
10:36:54
5
I'm trying to get as close to the heart of the controversy as I
10:37:00
6
can.
10:37:00
7
10:37:03
8
10:37:06
9
10:37:08
10
10:37:11
11
have posed to you.
10:37:15
12
Thank you.
10:37:16
13
10:37:18
14
will reconvene because we're not going to call everybody or have
10:37:22
15
people call in again.
10:37:24
16
I want to hear your arguments from this point on, as
I know you have prepared
So whatever you want to do in the remaining time, I'm
going to be quiet and let you do your thing.
Thank you, Your Honor.
MR. CANTOR:
THE COURT:
But keep in mind some of these questions I
All right.
10 of 11:00 we will be back.
Those on the phone, please remain on the phone and we
[There was a short recess taken at 10:37 a.m.]
17
AFTER RECESS
10:54:10
18
[The proceedings in this cause resumed at 10:54 a.m.]
10:55:11
19
THE COURT:
10:55:15
20
Just so everybody knows, during the interim there was a
10:55:21
21
problem with the call-in.
10:55:29
22
which created a necessity to hang up and require everybody to
10:55:35
23
call in again, so you may hear about that later from those who
10:55:41
24
are interested, but I don't want to delay the proceedings
10:55:45
25
waiting for everybody to come in.
All right.
Are we back on the record, Joe?
Someone on the line did something
November 18, 2011
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58
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So let me open the argument again to some of the
10:55:58
2
issues.
10:56:05
3
would argue in point and counterpoint.
10:56:08
4
10:56:10
5
any kind of a formal presentation because so much of what I
10:56:14
6
would have done has been covered earlier today, but I do want to
10:56:21
7
try and address some of the issues that have been raised this
10:56:25
8
morning as well as the questions that you left us with.
10:56:30
9
I think, Your Honor, what I will do as to the more
10:56:34
10
specific factual issues that opposing counsel has raised, I
10:56:39
11
think I'm going to leave them either for the end or for further
10:56:43
12
rebuttal because where the argument has taken us, I have got
10:56:48
13
lots to say about the factual issues and, in particular, the
10:56:53
14
inability of plaintiffs to create a triable issue of fact on
10:56:57
15
actual knowledge.
10:56:59
16
10:57:01
17
discussed has been mischaracterized and is inadmissible, but
10:57:07
18
unless Your Honor wants me to, I think that may be something
10:57:10
19
that I'll come to a little later on.
10:57:14
20
10:57:17
21
just briefly on the basic issue of breach of contract because we
10:57:21
22
have covered so much of it.
10:57:23
23
10:57:26
24
a very simple case, that the obligations of Bank of America as
10:57:33
25
Disbursement Agent are limited.
Why don't you start and then I would appreciate if you
MR. CANTOR:
Sure, Your Honor.
I am not going to do
I think a lot of the factual material that they have
What I would like to focus on, Your Honor, first is
Just to reiterate, Your Honor, our position is this is
Your Honor pointed out the two
November 18, 2011
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59
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1
obligations essentially:
determining that the required
10:57:40
2
documentation has been submitted with each advance request and
10:57:43
3
confirming that all of the conditions precedent to disbursement
10:57:48
4
have been met.
10:57:48
5
From our perspective, in performing the obligation to
10:57:52
6
ensure that the conditions precedent to disbursement have been
10:57:56
7
met, the key provision is obviously 9.3.2 which in relevant part
10:58:03
8
provides, notwithstanding anything else in this agreement to the
10:58:07
9
contrary, in performing its duties hereunder, including
10:58:11
10
approving advance requests or making other determinations or
10:58:14
11
taking other actions hereunder, the Disbursement Agent shall be
10:58:18
12
entitled to rely on certifications from the project entities as
10:58:23
13
to the satisfaction of any requirements and/or conditions
10:58:26
14
imposed by this agreement.
10:58:28
15
10:58:35
16
entitled to rely without further investigation on the
10:58:38
17
representations that it received from Fontainebleau.
10:58:42
18
10:58:44
19
correctly pointed out that the record at that point was
10:58:46
20
incomplete because plaintiffs' complaint had not alleged whether
10:58:50
21
or not Fontainebleau had submitted all of the necessary
10:58:52
22
certifications.
10:58:55
23
10:58:59
24
that's at issue in this case, Bank of America received all of
10:59:02
25
the required certifications, representations and warranties from
So it's clear, Your Honor, that Bank of America was
At the motion to dismiss hearing, Your Honor, you
That's no longer an issue here, Your Honor.
It is undisputed that for every single advance request
November 18, 2011
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1
Fontainebleau; and from our perspective, Your Honor, that should
10:59:10
2
be the end of the case.
10:59:11
3
Bank of America has done everything that the
10:59:15
4
Disbursement Agreement expressly required it to do and § 9.10
10:59:19
5
leaves no doubt that unless the agreement specifically says that
10:59:23
6
Bank of America has to do something, it does not have any
10:59:27
7
additional duties.
10:59:28
8
10:59:32
9
10:59:36
10
obligations hereunder except as expressly set forth herein,
10:59:40
11
shall be responsible only for the performance of such duties and
10:59:43
12
obligations and shall not be required to take any action
10:59:46
13
otherwise in accordance with the terms hereof.
10:59:49
14
10:59:54
15
contract argument, Your Honor, is that their entire case is
10:59:56
16
premised on ignoring 9.3.2 and 9.10 and imposing additional
11:00:02
17
unwritten obligations on Bank of America.
11:00:05
18
11:00:08
19
America is entitled to summary judgment here, Your Honor, and I
11:00:12
20
think it ties into some of the issues that you raised just
11:00:16
21
before the break.
11:00:17
22
11:00:22
23
contract limits Bank of America's liability to gross negligence
11:00:26
24
or worse.
11:00:27
25
9.10, as Your Honor probably knows, in relevant part
provides that the Disbursement Agent shall have no duties or
That is the fundamental flaw with plaintiffs' breach of
There is a second independent reason why Bank of
It is undisputed, as Your Honor mentioned, that the
There is no dispute between the parties that such
November 18, 2011
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Oral Argument
61
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1
clauses are fully enforceable under New York law, and plaintiffs
11:00:35
2
have acknowledged in their papers that gross negligence is a
11:00:37
3
very high standard requiring either reckless disregard for the
11:00:41
4
rights of others or conduct that smacks of intentional
11:00:44
5
wrongdoing or, as the one that they cite in their papers, as
11:00:47
6
that case put it, an absence of even slight diligence.
11:00:51
7
11:00:55
8
culpable conduct here, especially when Bank of America's actions
11:00:59
9
are considered in context and without hindsight and that is, I
11:01:02
10
11:01:07
11
11:01:11
12
against asking too much and giving you a chance, but I asked you
11:01:17
13
before if it is assumed there is a material issue of fact on
11:01:41
14
actual knowledge, is there a further question that if there was
11:01:47
15
actual knowledge, that that would equate to gross negligence and
11:01:52
16
not following through with the terms of the agreement.
11:01:55
17
11:02:00
18
knowledge of what we are talking about is the Lehman issue, for
11:02:04
19
example.
11:02:05
20
11:02:09
21
11:02:13
22
MR. CANTOR:
11:02:14
23
THE COURT:
11:02:15
24
11:02:17
25
There is nothing even approaching that level of
think, what Your Honor was alluding to just before the break.
THE COURT:
MR. CANTOR:
THE COURT:
Well, I am violating my own prohibition
In these circumstances, Your Honor, actual
Right.
was doing the funding.
Yes, that Fontainebleau actually
If there were actual knowledge --
Yeah.
-- I think you have conceded that would
have been a default.
Would it then be gross -- would it necessarily follow
November 18, 2011
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Oral Argument
62
11:02:25
1
that as -- it is at least a jury question at that point on
11:02:29
2
whether or not Bank of America was grossly negligent in not
11:02:37
3
declaring the default.
11:02:37
4
11:02:39
5
think what you have got, as you have alluded to, is a situation
11:02:43
6
where you have got, you know, Bank of America was the
11:02:44
7
Disbursement Agent for all of the different lenders to the
11:02:48
8
Senior Credit Facility, the initial Term Loan Lenders who had
11:02:52
9
money already in the project, the Delay Draw Term Lenders who
11:02:56
10
were going to be the next ones asked to fund and the Revolving
11:02:58
11
Lenders.
11:02:59
12
11:03:02
13
determination as to whether the September funding should go
11:03:08
14
forward in light of the fact that there was no failure of
11:03:13
15
funding here -- as Your Honor pointed out, the money showed up.
11:03:16
16
11:03:19
17
supposed to get X dollars and it ended up getting X minus $2.5
11:03:26
18
million.
11:03:27
19
11:03:31
20
level of a question of fact to say that Bank of America was
11:03:37
21
recklessly disregarding the rights of all of the lenders if it
11:03:43
22
had actual knowledge, which we say they did not, of
11:03:49
23
Fontainebleau Resorts funding for Lehman, given everything else
11:03:54
24
that was going on with the project, given the amount of money
11:03:58
25
that was involved, given that there were undoubtedly numerous
MR. CANTOR:
I don't think it is, Your Honor, because I
So when Bank of America was asked to make a
This is not a situation where Fontainebleau was
The money was there.
I don't think, Your Honor, that it even rises to the
November 18, 2011
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Oral Argument
63
11:04:01
1
lenders who would have wanted to see the project go forward
11:04:05
2
especially since the money actually showed up.
11:04:06
3
11:04:11
4
reckless to pull the plug in terms of all the lenders'
11:04:17
5
investment up to that point --
11:04:19
6
MR. CANTOR:
11:04:21
7
THE COURT:
11:04:22
8
MR. CANTOR:
11:04:23
9
You can imagine what Fontainebleau's reaction would
11:04:27
10
have been.
11:04:31
11
knew this, but the facts are that an affiliate of the borrower
11:04:35
12
put in money as equity, in other words, it wanted the project to
11:04:40
13
go forward and it was willing to put its money where its mouth
11:04:43
14
is.
11:04:43
15
11:04:45
16
have been if Bank of America had come to it and said that $2.5
11:04:50
17
million came from the wrong place.
11:04:55
18
that it showed up, but it came from the wrong place and
11:04:57
19
therefore we are pulling the plug on this project and you don't
11:05:01
20
get the $100 some odd million in Term Lender money that you
11:05:06
21
otherwise requested and that you need to pay ongoing
11:05:09
22
construction costs.
11:05:11
23
11:05:16
24
Revolving Lenders for closing down the Revolver facility after
11:05:22
25
Fontainebleau admitted publicly that there were hundreds of
THE COURT:
Well, in effect, would it have been
I would say --- when, in fact, the money was there?
Absolutely, Your Honor.
Remember, again, we dispute that Bank of America
You can imagine what the reaction of the borrower would
I am glad -- it is great
Fontainebleau sued Bank of America and the other
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 64 of 113
Oral Argument
64
11:05:25
1
millions of dollars of undisclosed costs.
11:05:27
2
11:05:29
3
can being sure that if Bank of America had stopped the funding
11:05:32
4
to this project in September 2008, because $4 million didn't
11:05:37
5
come from the right place, that there would have been a lawsuit.
11:05:40
6
Bank of America would have also been in the middle of a
11:05:42
7
lawsuit from any lender that decided that they wanted the
11:05:48
8
project to continue, or any lender that decided, Gee,
11:05:51
9
Fontainebleau is suing us.
11:05:55
10
Fontainebleau suing us is for us to claim over against Bank of
11:05:59
11
America.
11:05:59
12
I think that when you are talking about a payment of
11:06:02
13
this magnitude that it absolutely would have been reckless in
11:06:10
14
the other direction for Bank of America to simply shut down the
11:06:15
15
project at that point.
11:06:17
16
11:06:19
17
11:06:22
18
11:06:28
19
their -- I want to say -- I can't remember whether it was $700
11:06:31
20
or $800 million at closing, and so it was sitting in the bank
11:06:38
21
proceeds account and a couple of hundred million of it had
11:06:41
22
already been disbursed to Fontainebleau for project costs.
11:06:46
23
11:06:51
24
in an account that was under the control of Bank of America.
11:06:55
25
Some of it had been spent on project costs; some of it had not.
If they were going to sue someone at that point, you
THE COURT:
How much did the Term Lenders have in the
deal by September '08?
MR. CANTOR:
One way for us to get out from
Do you remember?
Well, the initial Term Lenders had put up
So the money was out of their pocket.
November 18, 2011
It was sitting
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 65 of 113
Oral Argument
65
11:06:59
1
I can get you the exact figures.
I don't have them at
11:07:01
2
11:07:06
3
11:07:08
4
11:07:12
5
11:07:17
6
working off of the Disbursement Agreement as it was written,
11:07:22
7
okay, which has, as we have discussed, multiple different
11:07:26
8
provisions telling it that it can rely on representations and
11:07:32
9
warranties from Fontainebleau and that it doesn't need to
11:07:36
10
11:07:38
11
11:07:41
12
this part of the argument, that as a matter of law that it would
11:07:45
13
not be sufficient for Bank of America to allow funding if it had
11:07:49
14
actual knowledge, but that's not what Bank of America's state of
11:07:54
15
mind was at the time.
11:07:57
16
consideration in determining whether Bank of America was
11:08:00
17
recklessly disregarding the rights of others.
11:08:04
18
11:08:06
19
that shutting down the project as soon as possible was going to
11:08:09
20
be consistent with all of the lenders' rights and interests.
11:08:13
21
11:08:15
22
extent that Bank of America is taking all of these different
11:08:19
23
views into account, I don't think you can say that they were
11:08:23
24
recklessly disregarding anybody's rights even if at the end of
11:08:27
25
the day someone's rights were handled in a way that that party
the tip of my fingers at the moment, Your Honor.
This all goes back to the point I am making, Your
Honor, that you need to view all of this in context.
Okay.
Bank of America, you have to remember, was
investigate them further.
We are going here on the assumption, for purposes of
I think that has to be an important
In addition, as we have just discussed, it wasn't clear
They could have had different views on this and to the
November 18, 2011
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Oral Argument
66
11:08:31
1
doesn't agree with.
11:08:32
2
In addition, Your Honor, and, again, you sort of
11:08:35
3
alluded to this prior to the break, in evaluating Bank of
11:08:39
4
America's conduct here, it is important to consider what the
11:08:42
5
Term Lenders were doing or, more importantly, what the Term
11:08:45
6
Lenders were not doing.
11:08:47
7
11:08:50
8
even a party here, not a single Term Lender ever demanded that
11:08:55
9
Bank of America take any kind of action here, much less did any
11:09:01
10
of these Term Lenders actually stick their neck out and put
11:09:05
11
themselves on the line by issuing a Notice of Default which
11:09:09
12
would have left them in the position of potentially being sued
11:09:13
13
by Fontainebleau.
11:09:14
14
Obviously, Your Honor, the events that we're all
11:09:16
15
talking about here that resulted in the failed conditions
11:09:19
16
precedent, particularly Lehman, but really everything else that
11:09:23
17
is a part of the parties' papers, these are facts that were
11:09:26
18
well-known to all of the Term Lenders and yet the Term Lenders,
11:09:30
19
for whatever reasons, chose not to act.
11:09:33
20
had the right to act, but they chose not to.
11:09:36
21
11:09:39
22
Bank of America to have recklessly disregarded plaintiffs'
11:09:43
23
rights when they were unwilling to assert those rights
11:09:47
24
themselves.
11:09:47
25
With the sole exception of
who is not
They could have.
They
So you have to consider whether it is even possible for
I think one of the most telling incidents here, Your
November 18, 2011
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11:09:50
1
Honor, is from March 2009, but it certainly illustrates the
11:09:57
2
position that Bank of America was in and which you, yourself,
11:09:59
3
alluded to earlier this morning.
11:10:02
4
11:10:05
5
11:10:09
6
11:10:12
7
11:10:18
8
11:10:21
9
11:10:25
10
11:10:28
11
11:10:29
12
figuring out what made the most sense, made the decision that
11:10:32
13
they were going to go ahead and allow funding that month; that
11:10:36
14
they were going to continue to include those entities' money in
11:10:42
15
the in balance test because they had had conversations with
11:10:45
16
these entities and,
11:10:49
17
11:10:52
18
these entities were ultimately going to fund and one of them
11:10:54
19
ultimately did.
11:10:55
20
11:10:59
21
11:11:03
22
11:11:06
23
11:11:09
24
11:11:12
25
Bank of America, after studying the situation and
, it was unclear whether, in fact,
Here
November 18, 2011
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11:11:16
1
11:11:18
2
11:11:23
3
forward any kind of an objection whatsoever to what Bank of
11:11:27
4
America --
11:11:28
5
THE COURT:
11:11:35
6
MR. CANTOR:
11:11:37
7
Not a single one of the Term Lenders put forward any
11:11:39
8
11:11:41
9
11:11:43
10
11:11:45
11
11:11:48
12
11:11:49
13
11:11:52
14
just in March but throughout.
11:11:56
15
Lenders out there.
11:11:59
16
out there.
11:12:02
17
there, and they all conceivably have differing views on what the
11:12:07
18
right thing to do is.
11:12:08
19
11:12:10
20
been more public, but all of the events that are at issue here
11:12:13
21
are either public or were available to the lenders through the
11:12:16
22
interlinks system and none of the lenders ever come forward to
11:12:20
23
Bank of America and say Do this, don't do that, with the one
11:12:24
24
exception being
11:12:26
25
Your Honor, not a single one of the Term Lenders put
I'm sorry.
'09.
March 23, '08?
Excuse me.
kind of an objection.
So this is what Bank of America is dealing with not
It's got all of these Term
It's got all of these Delayed Term Lenders
It's got all of these Revolver Term Lenders out
All of these events are public.
Lehman couldn't have
.
So how could it be that Bank of America is recklessly
November 18, 2011
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1
disregarding these lenders' rights when these lenders aren't
11:12:33
2
even standing up for their rights on their own, as they had the
11:12:37
3
right to do and certainly they had knowledge of what was going
11:12:39
4
on.
11:12:40
5
11:12:43
6
diligence, it is clear that Bank of America's actions here were
11:12:47
7
much more than slight diligence.
11:12:49
8
11:12:52
9
11:12:55
10
answers to questions that they raised, that it pressed
11:12:58
11
Fontainebleau for additional information when the lenders had
11:13:02
12
questions, that it facilitated direct communications between the
11:13:05
13
lenders and Fontainebleau.
11:13:07
14
11:13:11
15
11:13:14
16
11:13:17
17
11:13:22
18
11:13:25
19
thinking through these issues, vetting them, discussing them
11:13:28
20
internally, including discussing them with counsel, and that all
11:13:32
21
of their actions here are the result of careful and
11:13:36
22
contemplative deliberation before they take an action.
11:13:40
23
11:13:43
24
that Bank of America was not in any way acting with ill will
11:13:47
25
towards the Term Lenders.
If you look at gross negligence in terms of slight
The record is clear that Bank of America was responsive
to questions that were raised by the lenders, attempted to get
On an internal basis Bank of America, it is clear, is
There can be no legitimate dispute here, Your Honor,
November 18, 2011
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1
Bank of America wanted to do the right thing here.
We
11:13:53
2
can argue about whether they ultimately did the right thing or
11:13:55
3
not, but the bottom line is they wanted to try to do the right
11:13:59
4
thing and that, of course, is the complete antithesis of
11:14:03
5
recklessly disregarding the lenders' rights.
11:14:06
6
11:14:11
7
negligence.
11:14:15
8
have come forward showing that Bank of America acted properly,
11:14:19
9
they are going to have to come forward with evidence sufficient
11:14:23
10
to establish gross negligence, their own evidence, and for the
11:14:26
11
most part they have not bothered to do that.
11:14:29
12
11:14:33
13
breach of contract argument and argue that Bank of America
11:14:36
14
ignored facts and ignored warnings but, Your Honor, those are
11:14:41
15
negligence arguments.
11:14:41
16
11:14:44
17
didn't act as a reasonable Disbursement Agent should have acted.
11:14:50
18
Even if such arguments aren't foreclosed by § 9.3.2, as we say
11:14:55
19
they are, they are insufficient without more to establish this
11:15:00
20
added degree of culpability that you have to have here to find
11:15:04
21
Bank of America liable.
11:15:06
22
The bottom line is that the Term Lenders have
11:15:10
23
completely failed to satisfy their burden on summary judgment of
11:15:14
24
creating a triable issue of fact on the issue of gross
11:15:20
25
negligence, Your Honor.
The plaintiffs here bear the burden of proof on gross
They have to not only refute the evidence that we
Their briefs -- essentially all they do is repeat their
Those are arguments that say that Bank of America
November 18, 2011
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All right.
Thank you.
11:15:21
1
THE COURT:
11:15:23
2
MR. HENNIGAN:
11:15:26
3
I think I'm -- I was inclined to start, I think I am
11:15:30
4
still going to start with Your Honor's questions prior to the
11:15:35
5
break.
11:15:36
6
THE COURT:
11:15:39
7
MR. CANTOR:
11:15:42
8
11:15:45
9
11:15:46
10
11:15:48
11
11:15:52
12
that something that plays a part in this equation; and, if so,
11:15:56
13
how?
11:15:56
14
11:15:58
15
equation, Your Honor, in a couple of ways.
11:16:02
16
thing, to the extent that reasonableness somehow comes into this
11:16:06
17
on the breach issue -- and again our position is that all you
11:16:09
18
need to know is 9.3.2 and that 9.1 does not in any way limit our
11:16:16
19
rights under that agreement -- but to the extent that
11:16:19
20
reasonableness comes into it,
11:16:23
21
11:16:30
22
what I was discussing earlier this morning, which is that it was
11:16:34
23
not clear to anybody in September that Lehman was not going to
11:16:39
24
fund.
11:16:43
25
discussions that everyone was having was about options if Lehman
Thank you, Your Honor.
Nobody mentioned the Lehman funding.
I don't want to cut Mike off.
If you'd
like me to, I could do it in two seconds.
THE COURT:
Let him mention that because I would like
you to respond to that.
What is your position?
MR. CANTOR:
Should I consider that?
Is
Well, I think it plays a part in the
I think for one
demonstrates the reasonableness of
That was not a forgone conclusion and thus, all of the
November 18, 2011
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1
didn't fund, but maybe Lehman will fund.
11:16:52
2
11:16:54
3
11:16:58
4
11:17:03
5
11:17:05
6
11:17:08
7
11:17:12
8
11:17:17
9
11:17:19
10
11:17:22
11
11:17:24
12
11:17:25
13
11:17:25
14
MR. CANTOR:
11:17:29
15
negligence point, Your Honor.
11:17:30
16
11:17:33
17
and, again, let's start with the assumption that I don't accept,
11:17:36
18
that Bank of America knew that Fontainebleau was going to fund
11:17:40
19
for Lehman in September.
11:17:42
20
11:17:44
21
be a one-time occurrence because it was still possible that
11:17:48
22
Lehman was going to step back in -- remember, this is all
11:17:51
23
happening within ten days of, you know, one of the most
11:17:56
24
monumental bankruptcy filings in American business history.
11:18:00
25
were
other loans where it was not going to be stepping up.
THE COURT:
Does that play into the gross negligence
issue?
I think it absolutely plays into the gross
Again, if Bank of America believed that at worst --
But if Bank of America believed that this was going to
IF Bank of America believed that it was still a
November 18, 2011
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1
possibility that as we go forward and as things calm down that
11:18:07
2
Lehman was going to continue to fund here,
11:18:11
3
11:18:13
4
11:18:17
5
11:18:20
6
11:18:23
7
11:18:28
8
11:18:32
9
11:18:36
10
11:18:40
11
bankruptcy filings and uncertain business situations of all
11:18:43
12
time.
11:18:43
13
11:18:45
14
ended up that you would say that it is grossly negligent for
11:18:51
15
Bank of America to allow the borrower essentially to put up more
11:18:55
16
of its own money to close that gap if it was going to be a
11:18:59
17
one-time gap.
11:19:00
18
11:19:01
19
11:19:04
20
MR. CANTOR:
11:19:05
21
THE COURT:
11:19:06
22
MR. HENNIGAN:
11:19:09
23
that they were assured by Lehman Brothers that they were going
11:19:12
24
to continue funding.
11:19:16
25
record at all.
in the face of one of the most monumental
It is only with hindsight and knowing where this case
THE COURT:
All right.
Thank you.
I want to make sure
I have plenty of time on the plaintiffs' side.
Sure.
Go ahead, sir.
I thought I just heard Mr. Cantor say
I do not believe that that is in this
November 18, 2011
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74
That is not what I said, actually.
11:19:17
1
MR. CANTOR:
11:19:19
2
MR. HENNIGAN:
11:19:20
3
THE COURT:
11:19:22
4
MR. CANTOR:
11:19:25
5
11:19:28
6
MR. HENNIGAN:
11:19:29
7
THE COURT:
11:19:29
8
MR. HENNIGAN:
11:19:32
9
11:19:35
10
11:19:35
11
11:19:39
12
11:19:43
13
11:19:46
14
11:19:51
15
11:19:56
16
pick that date because that is the date of the Lehman Brothers
11:19:59
17
bankruptcy filing.
11:20:01
18
11:20:03
19
filing on the 14th, because there were emails that were circling
11:20:07
20
throughout the Bank of America team about the magnitude of that
11:20:14
21
funding early, 1:00 a.m. in the morning on September 15th.
11:20:16
22
11:20:23
23
11:20:27
24
11:20:34
25
That's what you said.
Okay.
Well, let's continue.
If it is what I said, I apologize because
it is not what I meant.
I want to put a point on that.
Go ahead.
There is a lot of discussion as though
this was a two-and-a-half million dollar issue on a multibillion
dollar project.
This was not a two-and-a-half million dollar issue on a
multibillion dollar project.
Let's put it in context.
I am going to focus on the time period between
September 15, 2008 and the middle of October 2008.
Here is what had happened.
On September 15, 2008 -- I
It actually probably happened late with an electronic
November 18, 2011
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11:20:38
1
11:20:42
2
11:20:50
3
11:20:54
4
11:20:58
5
11:21:00
6
11:21:03
7
11:21:08
8
11:21:13
9
11:21:18
10
files for bankruptcy.
11:21:22
11
bankruptcy in American history.
11:21:24
12
11:21:26
13
$2.5 million payment per se.
11:21:31
14
count on them for their substantial portion of the $190 million
11:21:36
15
that was still left to be funded on the retail facility.
11:21:39
16
11:21:45
17
The filing of bankruptcy -- let us make no mistake about it --
11:21:49
18
put that $190 million piece in question.
11:21:53
19
11:21:57
20
precedent, which is that there has been no Material Adverse
11:22:01
21
Effect.
11:22:07
22
come to Bank of America's attention that could reasonably be
11:22:11
23
expected to have a Material Adverse Effect.
11:22:14
24
11:22:20
25
Now, we move toward September 15th.
Lehman Brothers
We have just heard it was the largest
The issue wasn't whether they were going to make their
The issue was whether we could
Lehman Brothers had over $65 million committed to that.
Let me read you the operative phrase from the condition
The requirement is nothing has happened, nothing has
So when Lehman Brothers files on the 15th, everybody
knows that it could reasonably be expected to have a Material
November 18, 2011
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76
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1
Adverse Effect.
The issue isn't whether they are going to make
11:22:27
2
the $2.5 million payment; it is whether they are going to remain
11:22:31
3
committed to their share of the retail portion of this lending
11:22:34
4
facility because without it there is hole that is unlikely to be
11:22:40
5
filled.
11:22:40
6
11:22:46
7
11:22:50
8
11:22:52
9
11:22:56
10
11:23:00
11
11:23:02
12
two months they did make the required draws and indeed they did.
11:23:06
13
They never made up the draw from September and they never made
11:23:11
14
another payment.
11:23:13
15
11:23:17
16
11:23:22
17
11:23:26
18
11:23:30
19
11:23:38
20
11:23:42
21
11:23:45
22
11:23:50
23
11:23:51
24
11:23:53
25
Now, Your Honor referenced the fact that in the next
So by the time we get to the March draw, they are out
of the picture.
Well, we have looked at that.
That is perfectly all
right to keep those funding commitments in the in balance test
November 18, 2011
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1
so long as there is a reasonable expectation that they are going
11:24:01
2
to be made in the future.
11:24:03
3
of the ledger.
11:24:04
4
11:24:08
5
continue to fund this project despite the fact that there are
11:24:13
6
enormous numbers of mounting breaches.
11:24:15
7
11:24:19
8
argument that the Lehman bankruptcy was well known to everybody,
11:24:25
9
including the Term Lenders, and if the Term Lenders believed, or
11:24:31
10
any of them, that there was a default as a result, the Term
11:24:37
11
Lenders could have given formal notification to Bank of America
11:24:47
12
as the Administrative Agent to initiate the proceedings under
11:24:54
13
the stop order.
11:24:58
14
11:25:01
15
signatures to the Disbursement Agreement and most of our clients
11:25:05
16
didn't have access to it.
11:25:09
17
what we call public side and private side where information was
11:25:14
18
made available through an Internet access to people who were
11:25:18
19
willing to receive confidential information, but the public side
11:25:22
20
lenders were not.
11:25:26
21
made public.
11:25:26
22
11:25:32
23
11:25:34
24
11:25:36
25
So it is okay to put it on that side
He didn't say is it okay with you that we are going to
THE COURT:
Well, let me ask you to respond to the
MR. HENNIGAN:
Recalling that we didn't -- we were not
There was a division here between
They only got information that was generally
So what we do have here is we have
on
September -- right in this time period --
THE COURT:
trying to clarify.
Let me go back because this is what I am
The Term Lenders under the Credit Agreement
November 18, 2011
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Oral Argument
78
11:25:42
1
made payments.
11:25:43
2
MR. HENNIGAN:
11:25:44
3
THE COURT:
11:25:54
4
11:25:57
5
MR. HENNIGAN:
11:25:57
6
THE COURT:
11:26:04
7
question that the Term Lenders themselves, if concerned that
11:26:12
8
there was a default, could have sufficiently made a demand on
11:26:19
9
Bank of America as the Administrative Agent under the
11:26:28
10
Disbursement Agreement or Bank Agent under the Credit Agreement
11:26:34
11
not to fund because of the default, but didn't.
11:26:38
12
11:26:41
13
of my clients are not privy to the information that would have
11:26:46
14
demonstrated the magnitude of the problem.
11:26:49
15
11:26:53
16
Bank of America claims it didn't know how much Lehman Brothers
11:26:56
17
was committed to on the retail facility, but my clients
11:26:59
18
certainly didn't know how much Lehman Brothers was committed to
11:27:04
19
under the retail facility.
11:27:05
20
11:27:09
21
11:27:13
22
11:27:15
23
11:27:19
24
11:27:22
25
Yes.
And the issue, if I understand it, was
whether the payments that were made should have been disbursed.
Correct.
Okay.
MR. HENNIGAN:
So Bank of America is raising the
Again remembering, Your Honor, that most
For example, not knowing what the retail lending --
November 18, 2011
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79
11:27:29
1
11:27:31
2
11:27:35
3
11:27:37
4
MR. HENNIGAN:
11:27:38
5
THE COURT:
11:27:41
6
11:27:47
7
11:27:50
8
11:27:50
9
11:27:53
10
11:27:54
11
11:27:57
12
11:28:02
13
11:28:06
14
11:28:14
15
MR. HENNIGAN:
11:28:16
16
THE COURT:
11:28:17
17
MR. HENNIGAN:
11:28:19
18
protocol in the Credit Agreement.
11:28:23
19
but I don't think there is a protocol to do that.
11:28:26
20
Agreement contemplated that we would make our funding
11:28:30
21
commitments.
11:28:31
22
11:28:35
23
at the time of closing.
11:28:38
24
proceeds account.
11:28:41
25
authority to disburse it unless all of the conditions precedent
THE COURT:
Can your clients rely on that when Highland
is not even a party here?
agree.
We demand.
Well --
And your clients then join in and said we
Can you do that after the fact?
MR. HENNIGAN:
There is no protocol for us to do that,
Your Honor.
THE COURT:
Well, what about the notice provisions that
we have discussed?
MR. HENNIGAN:
The notice provision, that BofA is
required to give notice to itself to stop funding?
THE COURT:
Under the credit agreements, notice to Bank
of America of default by any of the Term Lenders.
Other than
, it would --
Well, yeah.
I don't think there is actually a
I could be misremembering it,
The Credit
We made $700 million worth of commitments, or funding,
That money was sitting in the bank
It could not be disbursed.
November 18, 2011
There was no
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Oral Argument
80
11:28:44
1
were met.
11:28:45
2
11:28:50
3
record that would suggest that anybody was sitting on their
11:28:54
4
rights there.
11:28:59
5
fulfilling its responsibilities.
11:29:00
6
THE COURT:
11:29:02
7
MR. HENNIGAN:
11:29:06
8
spent a lot of time, because I do like that issue, about the
11:29:13
9
Fontainebleau funding for Lehman Brothers.
11:29:15
10
11:29:18
11
going to be a fun issue to try, but I also like that issue
11:29:22
12
because I think they can't hide from the fact that they looked
11:29:26
13
squarely at that default and ignored it and then tried to cover
11:29:30
14
it up.
11:29:31
15
11:29:37
16
11:29:41
17
11:29:47
18
It is also --
11:29:49
19
THE COURT:
11:29:50
20
MR. HENNIGAN:
11:29:52
21
THE COURT:
11:29:53
22
11:30:01
23
11:30:05
24
11:30:09
25
I am not aware of either a protocol or anything in the
They were relying upon the Disbursement Agent
Go ahead, sir.
Okay.
So in the earlier session we
I like that issue because, Number 1, I think it is
Aware of when?
In June.
Of when?
November 18, 2011
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1
11:30:14
2
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3
11:30:19
4
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5
11:30:28
6
11:30:31
7
11:30:34
8
11:30:37
9
11:30:42
10
borrower on subjects like budgeting, is itself a default.
11:30:47
11
not receiving information that it has requested is itself a
11:30:52
12
default.
11:30:55
13
We have talked about this Lehman Brothers funding issue
11:30:59
14
as though it is okay for a retail lender to make the payment for
11:31:05
15
it, and there is indeed an interpretation of one of the
11:31:10
16
conditions precedent that might make it okay for another retail
11:31:14
17
lender to cover for it, but it is still a default as defined in
11:31:17
18
the agreement for any lender, retail or otherwise, to miss
11:31:25
19
payments.
11:31:25
20
11:31:28
21
Fontainebleau funds and therefore doesn't default on those
11:31:30
22
payments, but then defaults on every other payment after that,
11:31:33
23
so we've got mounting numbers of defaults.
11:31:36
24
11:31:41
25
BofA, being aware of misinformation coming from the
BofA
So, we have got, yes, October and November
Now, I am still sort of marching -- I realize I am
being a little discursive, but I am marching through the early
November 18, 2011
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Oral Argument
82
11:31:45
1
days of September.
11:31:46
2
11:31:52
3
Poor's downgrades the Fontainebleau facility to B minus with an
11:32:00
4
indication that further downgrades are probable.
11:32:04
5
11:32:11
6
the Las Vegas market for gaming was collapsing; that they could
11:32:16
7
no longer expect repayment to come from cash flow the way they
11:32:20
8
had originally budgeted, and they were concerned about that
11:32:22
9
requiring further degradation; that $700 million of these loans
11:32:28
10
was going to be repaid from sales of condominiums and that
11:32:32
11
market was drying up and looked like it was going to be bleak
11:32:36
12
going into the future; and oh, by the way, Fontainebleau
11:32:42
13
declared bankruptcy -- I'm sorry -- Lehman Brothers declared
11:32:46
14
bankruptcy and that piece is substantially in jeopardy.
11:32:50
15
11:32:53
16
other than the fact that it downgraded it, that BofA didn't
11:32:58
17
already know.
11:32:59
18
11:33:03
19
11:33:08
20
11:33:12
21
11:33:16
22
11:33:18
23
So the context in which this occurs is a nightmare of
11:33:24
24
negative information, all of which is known to the BofA at the
11:33:28
25
time it is making this decision about is the Fontainebleau
On September 18th, I may be off a day, Standard &
What it points to is what BofA also knew, which is that
There's nothing in the Standard & Poor's downgrade,
November 18, 2011
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Oral Argument
83
11:33:37
1
bankruptcy an MAE?
11:33:38
2
11:33:42
3
budgets itself a default?
11:33:46
4
missed a payment strong evidence that our fears are going to
11:33:50
5
come to fruition, that indeed we can't count on that piece?
11:33:54
6
11:34:00
7
inability to make payments itself mounting?
11:34:04
8
about condominium sales?
11:34:07
9
11:34:11
10
adverse information that, taken as a whole -- I am kind of
11:34:16
11
remembering what it says -- taken as a whole, places in doubt
11:34:19
12
the other information that it has from the lender.
11:34:22
13
11:34:24
14
get a response.
11:34:31
15
argument that puts a duty on Bank of America to determine
11:34:38
16
default.
11:34:39
17
What's your response?
11:34:40
18
MR. CANTOR:
11:34:46
19
downgrade that Mr. Hennigan just talked about is evidence of
11:34:49
20
what we were talking about earlier, that all this information
11:34:52
21
was out there in the public.
11:34:54
22
11:34:56
23
went through all of these points that Mr. Hennigan considers so
11:34:59
24
significant, they were out there for all the lenders to see.
11:35:04
25
Is the fact that they have been distorting their
Isn't the fact that Lehman Brothers
Isn't the failure of other banks and their refusal or
By the way, what
So it is itself a default if Bank of America has
THE COURT:
Let me stop that part of the argument and
It is like a cumulative set of circumstances
Well, first of all, the Standard & Poor's
So to the extent that the Standard & Poor's downgrade
The idea that Bank of America was the one responsible
November 18, 2011
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Oral Argument
84
11:35:10
1
for determining whether there was an MAE or not is just not
11:35:15
2
consistent with the --
11:35:16
3
THE COURT:
11:35:17
4
MR. CANTOR:
11:35:23
5
THE COURT:
11:35:25
6
MR. CANTOR:
11:35:28
7
What you got in the contract is a condition that says
11:35:32
8
that there shall have been no Material Adverse Event.
11:35:38
9
Fontainebleau that is required to rep that all of the conditions
11:35:43
10
precedent are met.
11:35:46
11
that all of its other representations and warranties are met.
11:35:50
12
11:35:57
13
is going to be the one determining whether there has been an MAE
11:36:01
14
or not.
11:36:06
15
certainly under these circumstances, is one of the most
11:36:10
16
subjective and speculative determinations that one can make.
11:36:16
17
11:36:19
18
11:36:23
19
11:36:28
20
risen to the level of an MAE is always going to be a subjective
11:36:33
21
determination.
11:36:34
22
11:36:38
23
America had actual knowledge that there was an MAE because there
11:36:42
24
is always going to be some difference of opinion as to whether
11:36:46
25
those facts as they stood at that time constituted an MAE.
MAE?
A Material Adverse Event.
I'm sorry.
It is not consistent with what?
With the contract, Your Honor.
It is
It is Fontainebleau that is required to rep
So Fontainebleau is the one that in the first instance
Declaring an MAE, okay, under most circumstances, and
If a meteor had hit the project, yes, that would have
been an MAE, and I don't think anyone could disagree with that.
But to determine that a set of economic factors has
You are never going to be able to say that Bank of
November 18, 2011
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Oral Argument
85
11:36:51
1
Therefore, under the way the contract works, Bank of
11:36:59
2
America was allowed to rely without further investigation on
11:37:04
3
Fontainebleau's representation that, in fact, this amalgam of
11:37:08
4
events was not an MAE.
11:37:11
5
11:37:13
6
inconsistent with their role under the contract as it is
11:37:17
7
written, for them to be the one to make that determination and
11:37:21
8
say, yes, there has been an MAE here as a result of all these
11:37:26
9
occurrences.
11:37:27
10
11:37:30
11
11:37:33
12
THE COURT:
11:37:35
13
MR. CANTOR:
11:37:38
14
THE COURT:
11:37:44
15
under the Credit Agreement or the Disbursement Agreement are you
11:37:49
16
relying on that would allow the lenders, as compared to the
11:37:54
17
controlling person, to trigger a default notice?
11:38:00
18
11:38:02
19
I'll get it for you before we are done here this morning, Your
11:38:05
20
Honor, but the lenders obviously had the right to declare two --
11:38:08
21
THE COURT:
11:38:10
22
MR. CANTOR:
11:38:12
23
have got the provisions that provide that if Bank of America has
11:38:16
24
been notified of an Event of Default, it is required to take
11:38:20
25
certain action.
Bank of America was not required, and it would be
You know who could?
The lenders.
Again, the lenders
never did that.
MR. CANTOR:
How could the lenders do that?
The lenders, according to Mr. -Let me be more specific.
What provisions
I don't have the specific number for you.
Well, it is not so obvious to me.
Well, because what you have got is you
November 18, 2011
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Oral Argument
86
11:38:20
1
So, therefore that allows the lenders --
11:38:23
2
THE COURT:
11:38:28
3
saw, that we discussed, was notification by the controlling
11:38:35
4
person of the Event of Default.
11:38:37
5
11:38:44
6
11:38:48
7
11:38:50
8
Honor, it provides that -- and we have argued the other side of
11:38:56
9
this, but it addresses the same issue -- the agreement provides
11:39:00
10
that the Administrative Agent shall be deemed not to have
11:39:02
11
knowledge of any Default, capital D default, unless and until
11:39:07
12
notice describing such default is given to the Administrative
11:39:10
13
Agent by borrowers, a lender or the Issuing Lender.
11:39:14
14
11:39:18
15
give notice of an Event of Default to Bank of America as
11:39:24
16
Administrative Agent and then Bank of America, as Administrative
11:39:27
17
Agent, would have knowledge of it and would have to act.
11:39:29
18
11:39:34
19
11:39:37
20
11:39:40
21
11:39:40
22
11:39:42
23
11:39:45
24
11:39:48
25
But the only notification provision that I
Where does it say that any of the lenders, Revolvers,
Term Lenders, could trigger --
MR. CANTOR:
In 9.3 of the Credit Agreement, Your
So that is the provision that allows the lenders to
THE COURT:
But here's my question.
Plaintiffs argue
that they are not parties to the Disbursement Agreement.
MR. CANTOR:
But they are parties to the Credit
Agreement, Your Honor.
THE COURT:
They are parties to the Credit Agreement,
but they are not parties as such to the Disbursement Agreement.
MR. CANTOR:
Right.
But the point is the provision I
just read to you is from the Credit Agreement.
November 18, 2011
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Oral Argument
87
So your point is that where they are
11:39:51
1
11:39:56
2
11:39:58
3
MR. CANTOR:
11:39:59
4
THE COURT:
11:40:02
5
11:40:03
6
11:40:08
7
11:40:11
8
THE COURT:
11:40:12
9
MR. CANTOR:
11:40:13
10
11:40:16
11
to initiate a default process under the Credit Agreement,
11:40:20
12
correct?
11:40:20
13
MR. CANTOR:
11:40:21
14
THE COURT:
11:40:22
15
MR. CANTOR:
11:40:23
16
THE COURT:
11:40:27
17
MR. CANTOR:
11:40:28
18
THE COURT:
11:40:35
19
11:40:36
20
MR. CANTOR:
11:40:37
21
THE COURT:
11:40:42
22
Agreement then tie into the responsibilities and the protections
11:40:46
23
under the Disbursement Agreement?
11:40:46
24
11:40:56
25
THE COURT:
parties --
Yeah.
-- they have an express right to initiate a
default process.
MR. CANTOR:
Right, and the contract defines that if
Bank of America knows it, it has to act on it.
THE COURT:
Let me finish.
Sorry.
Let me finish.
They have an express right
Yes.
And give notice.
Right.
Now, the money is sitting in the account.
Right.
Then Bank of America has to deal with the
Credit Agreement and Disbursement Agreement.
MR. CANTOR:
Right.
So how does that notice under Credit
You go to 2.5.1, Your Honor, and you have
the provision that says that if the controlling agent gives
November 18, 2011
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Oral Argument
88
11:41:03
1
notice of an Event of Default or notice of default, the stop
11:41:09
2
funding notice is going to be issued.
11:41:11
3
11:41:19
4
provides that if the Disbursement Agent is notified of an Event
11:41:21
5
of Default or a Default has occurred, is continuing, that the
11:41:27
6
Disbursement Agent shall promptly, and in any event within five
11:41:31
7
banking days, provide notices to each of the funding agents of
11:41:37
8
the same.
11:41:37
9
11:41:39
10
if the lenders, which they clearly had the right to do, gave
11:41:42
11
Bank of America a formal notice of an Event of Default, Bank of
11:41:46
12
America, both in its Disbursement Agent and Bank Agent capacity
11:41:53
13
had obligations to act.
11:41:58
14
11:42:04
15
11:42:06
16
MR. CANTOR:
11:42:07
17
THE COURT:
11:42:11
18
an Event of Default -- which is capitalized, so that means that
11:42:15
19
is a defined term?
11:42:16
20
MR. CANTOR:
11:42:17
21
THE COURT:
11:42:20
22
continuing.
11:42:27
23
Agreement?
11:42:30
24
Is that notification only by the controlling person?
11:42:34
25
MR. CANTOR:
There is also 9.2.3 of the Disbursement Agreement which
So the bottom line is, Your Honor, one way or another
THE COURT:
Okay.
So let me get back to 9.2.3 for a
moment.
Okay.
If the Disbursement Agent is notified that
Right.
-- or a default has occurred and is
So, how do I read that in terms of the Disbursement
No, I don't believe so, Your Honor.
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 89 of 113
Oral Argument
89
Or if you read the two agreements together
11:42:36
1
11:42:39
2
the way we started our discussion, is that notification by
11:42:42
3
lenders, other lenders?
11:42:44
4
11:42:46
5
if the Disbursement Agent is notified, Your Honor.
11:42:49
6
how I can credibly argue to you that that notice has to come
11:42:52
7
from --
11:42:53
8
11:42:58
9
11:43:05
10
where there are provisions for Term Lenders, among others, to
11:43:08
11
give formal notice of default to Bank of America and then that
11:43:16
12
would be sufficient under 9.2.3 to trigger those provisions?
11:43:22
13
11:43:23
14
referred to in the Credit Agreement where lenders have the
11:43:27
15
opportunity to give notice is a capital D default under the
11:43:30
16
Credit Agreement.
11:43:31
17
11:43:33
18
defaults under the Credit Agreement.
11:43:36
19
conditions or failures of conditions under the Disbursement
11:43:40
20
Agreement.
11:43:44
21
11:43:50
22
default hole in the Credit Agreement and come back over here to
11:43:55
23
the Disbursement Agreement and say, you know, this is a question
11:43:59
24
of knowledge and information that is flowing toward BofA from
11:44:03
25
whatever source.
THE COURT:
I would read that -- I mean, it just says
MR. CANTOR:
THE COURT:
I don't see
So let me ask from the plaintiffs' side:
In reading that, do I not go back to the Credit Agreement itself
MR. HENNIGAN:
Your Honor, the Default that was
We are not talking about any of these things being
These are defaults of
So we don't -- you kind of fall into the capital D
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 90 of 113
Oral Argument
90
You are saying that once the Term Lenders
11:44:04
1
11:44:10
2
put their money up, that there was no right on the part of the
11:44:14
3
Term Lenders to notify Bank of America that, in the opinion of
11:44:21
4
the Term Lenders, there was a formal Default and to say to Bank
11:44:28
5
of America, "Don't disburse"?
11:44:33
6
11:44:34
7
a defined term called "Required Lenders."
11:44:37
8
talked about earlier today the fact that BofA considered at one
11:44:41
9
point going and getting consents from the lenders for the
11:44:47
10
11:44:49
11
11:44:54
12
lenders, if that procedure is invoked by Bank of America, gives
11:44:58
13
the required -- the quote-unquote Required Lenders authority to
11:45:03
14
take action.
11:45:10
15
lender democracy never happened.
11:45:12
16
11:45:17
17
of $700 million sitting in a bank proceeds account subject to
11:45:24
18
the diligence of our Disbursement Agent making sure that at each
11:45:29
19
level of disbursement the right conditions have been satisfied.
11:45:32
20
11:45:34
21
11:45:36
22
The position is that Bank of America can't rely on that
11:45:43
23
argument because the default at issue would have to be a Default
11:45:49
24
under the Credit Agreement, which means that the Term Lender
11:45:53
25
wouldn't have had to fund into the account that was subject to
THE COURT:
MR. HENNIGAN:
I am going to say two things.
There is
You will recall we
Fontainebleau disbursement.
If there is -- that protocol does give the required
That was never invoked so that sort of issue of
So, what we're dealing with in September is almost all
THE COURT:
Okay.
So let me turn back to Bank of
America on this.
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 91 of 113
Oral Argument
91
11:45:58
1
the Disbursement Agreement.
11:46:01
2
11:46:02
3
here, Your Honor, is an Event of Default, both under the
11:46:06
4
Disbursement Agreement and under the Credit Agreement.
11:46:09
5
11:46:13
6
9.2.3 or 2.5.1 in any way says that only certain events of
11:46:25
7
default give rise to a stop funding notice.
11:46:28
8
11:46:31
9
11:46:34
10
they wanted to make sure that the money that they had funded
11:46:37
11
into the bank proceeds account didn't find its way into the
11:46:40
12
project.
11:46:40
13
11:46:43
14
have the right somehow to stop that by issuing a notice of an
11:46:47
15
Event of Default or a Notice of Default, all of these things
11:46:51
16
that they are claiming, all of these things that they had equal
11:46:55
17
knowledge with Bank of America, are all things that are defaults
11:47:02
18
under all of the loan documents, both the Credit Agreement and
11:47:07
19
the Disbursement Agreement.
11:47:08
20
THE COURT:
11:47:13
21
minutes to complete your argument on the plaintiffs' side
11:47:16
22
because there is another issue I have to discuss before we
11:47:19
23
adjourn.
11:47:21
24
11:47:27
25
MR. CANTOR:
Everything that they are talking about
If there are events of default -- nothing in either
Indeed, it is completely inconsistent with what their
practical business position has been all along, which is that
So the idea that it is their position that they didn't
Let me do this.
Let me give you a few more
Any other points you want me to note that address
issues that were raised here during oral argument or from the
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 92 of 113
Oral Argument
92
11:47:32
1
papers?
11:47:35
2
MR. HENNIGAN:
11:47:39
3
I've got a short list but I want to get to it.
11:47:44
4
to read for you -- I realize that there is a lot of information
11:47:48
5
here.
11:47:50
6
you the condition for disbursement that is 3.3.21.
11:47:57
7
THE COURT:
11:47:59
8
MR. HENNIGAN:
11:48:01
9
THE COURT:
11:48:08
10
11:48:10
11
MR. HENNIGAN:
11:48:11
12
THE COURT:
11:48:12
13
MR. HENNIGAN:
11:48:14
14
Basically, you know, nobody could be certifying to BofA
11:48:22
15
that this condition was complied with because it has to do with
11:48:27
16
BofA subjectively being unaware of information or other matter
11:48:32
17
affecting the project or transactions in an adverse manner
11:48:37
18
inconsistent with the other information.
11:48:41
19
11:48:46
20
to rely upon the representations of the borrower.
11:48:54
21
have any credible information in front of you in which they
11:48:57
22
attempt to say that, in fact, they did rely.
11:49:01
23
11:49:03
24
never said it.
11:49:07
25
representation from the borrower that they didn't have adverse
Okay.
Yes, Your Honor.
Thank you.
It is hard to keep it all straight.
I want
I want to read to
Now we are in the Disbursement Agreement.
The Disbursement Agreement.
3.3.21.
Let me just catch up with you.
The adverse information?
Yes.
Yeah, I've read that.
Okay.
You know what it says.
We've heard BofA now repeatedly say they were entitled
It would have been easy enough to say it.
You don't
They have
They have never said that they relied upon a
November 18, 2011
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Oral Argument
93
11:49:11
1
information, that no Material Adverse Effect had occurred, that
11:49:14
2
Lehman Brothers had funded.
11:49:18
3
THE COURT:
11:49:21
4
MR. CANTOR:
11:49:24
5
contract as written allows us to rely on all of the
11:49:29
6
representations and warranties that are made.
11:49:33
7
11:49:36
8
11:49:45
9
11:49:47
10
about the Bank Agent, so again you have got this dichotomy
11:49:52
11
between the two roles of Bank of America.
11:49:56
12
But the bottom line is under the contract, this is a
11:50:01
13
contract set up by sophisticated parties that is specifically
11:50:04
14
intended to limit the liability of the Disbursement Agent.
11:50:08
15
one is hiding behind that fact.
11:50:10
16
11:50:12
17
11:50:14
18
11:50:17
19
11:50:18
20
MR. CANTOR:
11:50:20
21
THE COURT:
11:50:24
22
Agent for violation of 3.3.21, would it have to be sued under
11:50:32
23
the Credit Agreement where it was the Bank Agent?
11:50:41
24
MR. CANTOR:
11:50:42
25
THE COURT:
THE COURT:
Okay.
Quick response on that?
Your Honor, the bottom line is that the
Right.
But how do I reconcile the language
in 3.3.21 with Bank Agent with the other language?
MR. CANTOR:
First of all, again, you are talking there
No
This contract was designed to limit the liability of
the Disbursement Agent.
THE COURT:
Let me interrupt.
This is where it gets
confusing.
Yeah.
If Bank of America was to be sued as Bank
I -Where was Bank of America a Bank Agent?
November 18, 2011
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Oral Argument
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11:50:45
1
Wasn't it under the Credit Agreement?
11:50:47
2
11:50:49
3
technically -- and I realize how complicated and sometimes
11:50:53
4
counterintuitive this seems -- Bank of America was actually the
11:50:55
5
Administrative Agent under the Credit Agreement.
11:50:59
6
Bank Agent under the Disbursement Agreement.
11:51:03
7
11:51:12
8
11:51:15
9
11:51:17
10
11:51:21
11
11:51:21
12
11:51:24
13
term that is used only in the Disbursement Agreement.
11:51:28
14
that is used to describe Bank of America in the Credit Agreement
11:51:32
15
is the Administrative Agent.
11:51:33
16
THE COURT:
11:51:39
17
MR. CANTOR:
11:51:39
18
THE COURT:
11:51:44
19
11:51:47
20
11:51:50
21
of America, as Disbursement Agent, is relying on all of the
11:51:54
22
certifications by Fontainebleau that all of the conditions
11:51:57
23
precedent are satisfied.
11:52:00
24
11:52:05
25
MR. CANTOR:
THE COURT:
No.
Actually, I believe that
I'm sorry.
It was the
Bank of America was the
Disbursement Agent under the Disbursement Agreement.
MR. CANTOR:
THE COURT:
Yes.
Was it not the Bank Agent under the Credit
Agreement?
MR. CANTOR:
"Bank Agent," Your Honor, is a defined
Okay.
The term
This is where we started.
Right.
Is Bank of America being sued as
Disbursement Agent or Bank Agent?
MR. CANTOR:
Disbursement Agent, Your Honor.
So Bank
9.2.5, Your Honor, which you talked about a little bit
earlier -November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 95 of 113
Oral Argument
95
So where does 3.3.21 come in?
11:52:06
1
THE COURT:
11:52:13
2
MR. CANTOR:
11:52:15
3
11:52:15
4
THE COURT:
11:52:22
5
terms of Article 9?
11:52:25
6
11:52:26
7
have got both 9.3.2, which allows us to rely without
11:52:31
8
investigation on the certification from Fontainebleau that every
11:52:35
9
single one of the conditions precedent, regardless of who, if
11:52:39
10
you will, is the action person under that condition precedent,
11:52:44
11
Fontainebleau certifies that every single one of those
11:52:46
12
conditions precedent is satisfied as of the disbursement date
11:52:53
13
and Bank of America, as Disbursement Agent, is entitled to rely
11:52:57
14
on that certification without further investigation.
11:53:00
15
11:53:06
16
specifically provides that the Disbursement Agent shall not be
11:53:09
17
deemed to have knowledge of any fact known to it in any capacity
11:53:13
18
other than the capacity of Disbursement Agent or by reason of
11:53:16
19
the fact that the Disbursement Agent --
11:53:18
20
THE COURT:
11:53:18
21
MR. CANTOR:
11:53:21
22
-- is also a funding agent.
11:53:22
23
THE COURT:
11:53:26
24
Agent is a defined term in the Disbursement Agreement that says
11:53:31
25
the Bank Agent is Bank of America in its capacity as
I'm not sure I am following your question,
Your Honor.
MR. CANTOR:
Okay.
How do I read this paragraph in
In terms of Article 9, Your Honor, you
9.2.5, which is entitled no imputed knowledge,
But -I need to finish this, I apologize.
Pardon me.
Pardon me.
November 18, 2011
Pardon me.
Bank
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 96 of 113
Oral Argument
96
11:53:34
1
Administrative Agent under the Credit Agreement.
11:53:36
2
MR. CANTOR:
Yes, Your Honor.
11:53:37
3
THE COURT:
So my question is:
11:53:40
4
of 3.3.21 as to Bank of America as Bank Agent, wouldn't it have
11:53:50
5
to be a suit under the Credit Agreement against Bank of America?
11:53:54
6
11:53:58
7
phrased, yes, I would say you're right, Your Honor, but to be
11:54:01
8
fair, that is not how the claim is phrased.
11:54:04
9
11:54:05
10
Agent, shouldn't have allowed the funding to go forward because,
11:54:09
11
among other things, this condition precedent was not satisfied.
11:54:12
12
11:54:15
13
condition precedent was not satisfied or that Bank of America
11:54:18
14
was not entitled to rely on the certification by Fontainebleau
11:54:23
15
that it was satisfied.
11:54:26
16
11:54:28
17
that both parties have, but we have been at it for almost three
11:54:32
18
hours, so let me get to one other issue which is important that
11:54:38
19
we discuss and, that is, I had entered back in January 2010,
11:54:49
20
which seems like a long time ago, MDL order number 3 which set
11:54:56
21
dates, among other thing, for a pretrial conference in January
11:55:00
22
2012.
11:55:06
23
11:55:16
24
role as an MDL Judge and what my options are here depending on
11:55:22
25
what I do on these motions.
MR. CANTOR:
If there is a violation
If that is how the claim was going to be
The claim is that Bank of America, as Disbursement
The problem is that they can't establish that this
THE COURT:
All right.
I know there is so much more
That seemed like a very long time back in 2010.
But let's talk about the posture of the case and my
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 97 of 113
Oral Argument
97
11:55:24
1
Right now there is before the Eleventh Circuit -- and I
11:55:28
2
think the briefing is done.
11:55:31
3
Circuit has set oral argument yet.
11:55:33
4
11:55:35
5
11:55:35
6
11:55:38
7
11:55:42
8
MR. CANTOR:
Yes.
11:55:43
9
THE COURT:
Okay.
11:55:48
10
11:55:51
11
MR. CANTOR:
11:55:52
12
THE COURT:
11:55:55
13
11:56:00
14
11:56:11
15
the Eleventh Circuit affirms on fully funded.
11:56:18
16
disappears in terms of what I have in this district.
11:56:24
17
leaves, if there is a trial on what we are discussing today, the
11:56:31
18
cases in Las Vegas and New York, right?
11:56:34
19
11:56:37
20
to tell you -- I think the New York case no longer exists
11:56:41
21
because -- and you signed some orders to this effect -- but
11:56:44
22
effectively all of the Term Lenders that were plaintiffs in the
11:56:48
23
New York case had sold their interests to Term Lenders who are
11:56:51
24
plaintiffs in the Nevada case and I think -- it has never been
11:56:56
25
actually dismissed, I don't think.
MR. CANTOR:
I don't know if the Eleventh
There has been no argument date yet, Your
Honor.
THE COURT:
But the briefing has been done before the
Eleventh Circuit on the fully funded questions, right?
The only case that I actually had
was the one that Fontainebleau brought -Right.
-- which deals with the fully funded
aspect, although Term Lenders raise this in this suit.
So let's assume for the sake of just a discussion that
MR. CANTOR:
My case
That
Well, I think -- and these guys will have
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 98 of 113
Oral Argument
98
11:56:59
1
MR. DILLMAN:
Actually, it has.
11:57:00
2
MR. CANTOR:
Has it been dismissed?
11:57:02
3
MR. DILLMAN:
I believe so.
11:57:02
4
THE COURT:
11:57:05
5
11:57:06
6
MR. CANTOR:
11:57:07
7
THE COURT:
11:57:15
8
issues, it is going to be in Las Vegas because, as an MDL Judge,
11:57:22
9
I have to send this bank to the federal court there.
11:57:29
10
11:57:31
11
sure my worthy adversary will chime in momentarily -- that is
11:57:38
12
correct.
11:57:40
13
the parties agreed, for Your Honor to keep it here.
11:57:44
14
But I don't think -- I think that is a moot point.
11:57:47
15
THE COURT:
11:57:51
16
interpretation, I, as the MDL Judge, have to stop my work and
11:57:58
17
send it back to the original court once I complete this phase of
11:58:06
18
it.
11:58:06
19
Now, whether the parties can convince the Court in Las
11:58:13
20
Vegas that I ought to try this thing and transfer it back to me
11:58:16
21
for some reason, whether I accept it, because I don't have a
11:58:19
22
case here, is a whole other issue.
11:58:23
23
MR. CANTOR:
11:58:23
24
THE COURT:
11:58:29
25
Well, let's assume it has.
That leaves the
Las Vegas case --
MR. CANTOR:
Right.
-- right?
So, if there is a trial on the
I think as a practical matter -- and I am
I believe that it is permissible for Your Honor, if
Under the MDL statute and all and
Right.
But it appears to me that my obligation, if
I determine that there are material issues of fact and a trial
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 99 of 113
Oral Argument
99
11:58:34
1
is necessary -- and, by the way, it has to be a nonjury trial
11:58:40
2
according to the papers, right?
11:58:42
3
MR. HENNIGAN:
11:58:43
4
THE COURT:
11:58:47
5
So then I have to say, Well, wait a minute.
11:58:52
6
have to wait to see what the Eleventh Circuit does on the fully
11:58:57
7
funded questions to see whether I have a case that goes forward
11:59:03
8
with Fontainebleau because if I do have that case and all these
11:59:09
9
other matters are related, then, you know, should I, you know,
11:59:16
10
11:59:18
11
11:59:20
12
if -- and obviously, you know, we hope and believe that it won't
11:59:24
13
happen, but if the fully funded case were to come back as to
11:59:29
14
both entities, there is going to be further discovery on that
11:59:32
15
issue.
11:59:33
16
11:59:38
17
that and Fontainebleau has an issue in that, in the fully funded
11:59:43
18
side.
11:59:43
19
MR. CANTOR:
11:59:44
20
THE COURT:
11:59:51
21
all of these issues then also relate, plus there are going to be
11:59:57
22
all kinds of other claims, I assume, against Fontainebleau based
12:00:01
23
on the discovery that has come out here.
12:00:05
24
12:00:07
25
Correct, Your Honor.
That goes back to Las Vegas.
Don't I
integrate everything if the parties want that?
MR. CANTOR:
THE COURT:
MR. CANTOR:
Well, I think so, Your Honor, because
Right.
The Term Lenders have an issue in
Right.
Okay.
So then I still have a case to which
I will let them speak.
There are
litigations pending against Fontainebleau that these folks have
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 100 of
113
Oral Argument
100
12:00:11
1
filed.
There is still stuff going on in the bankruptcy, Your
12:00:14
2
Honor, litigations relating to lien priority and things like
12:00:18
3
that.
12:00:19
4
THE COURT:
12:00:21
5
MR. CANTOR:
12:00:24
6
fraud claim against Fontainebleau and the Soffer entities in
12:00:29
7
bankruptcy court here.
12:00:32
8
12:00:36
9
12:00:43
10
in abeyance, at least at the moment, until I determine the
12:00:50
11
issues on this case that are before me and hear further from the
12:00:55
12
Eleventh Circuit because I can't take you to trial in any event?
12:01:00
13
12:01:02
14
at a minimum, it makes sense for us to wait until you rule on
12:01:05
15
these motions.
12:01:07
16
12:01:13
17
a pretrial stipulation which will take you a lot of time when
12:01:17
18
you don't know all the issues that would be going to trial?
12:01:24
19
12:01:27
20
12:01:31
21
THE COURT:
12:01:34
22
MR. HENNIGAN:
12:01:38
23
think Your Honor needs to decide these motions.
12:01:42
24
is a sufficient overlap with the Eleventh Circuit case and this
12:01:46
25
one, I think there's not.
THE COURT:
Well, I haven't begun to -The trustee actually has filed its own
Okay.
So the bottom line is that in terms
of the MDL order that I have issued, should I not hold anything
I would say, Your Honor, that certainly,
MR. CANTOR:
THE COURT:
Why should I require everybody to file here
MR. HENNIGAN:
Your Honor, first of all, I need two
more minutes on the substance of this argument.
Let me get my answer first.
The answer is I don't know.
November 18, 2011
Certainly I
Whether there
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 101 of
113
Oral Argument
101
12:01:50
1
I think once we're done with these motions, this case
12:01:52
2
ought to be liberated to go to Vegas for its trial and I think
12:01:59
3
at that point the case that is pending before Your Honor will
12:02:03
4
probably be a stand-alone version here.
12:02:07
5
But, honestly, I hadn't really thought it through.
12:02:13
6
THE COURT:
12:02:13
7
MR. CANTOR:
12:02:14
8
could be.
12:02:19
9
counts.
12:02:24
10
that went up to the Eleventh Circuit.
12:02:27
11
case.
12:02:27
12
THE COURT:
12:02:30
13
MR. HENNIGAN:
12:02:30
14
THE COURT:
12:02:32
15
MR. HENNIGAN:
12:02:34
16
THE COURT:
12:02:39
17
MR. HENNIGAN:
12:02:41
18
First of all, Your Honor before the break suggested
12:02:44
19
that, you know, why would they pull the plug, quote-unquote, for
12:02:48
20
a two-and-a-half million shortfall.
12:02:52
21
one of their options.
12:02:54
22
12:02:57
23
order, perhaps call the lenders together to discuss it and have
12:03:02
24
lender clarification on some of these issues, but stop funding
12:03:06
25
doesn't mean stop the project.
All right.
Your Honor, I don't understand how that
Essentially, they filed a complaint with multiple
We won on the fully drawn counts.
Over our objection,
It is still part of this
I think I heard -That's right.
You have got two minutes.
I forgot.
That's true.
Use them wisely.
I will talk fast.
Pulling the plug was not
What they needed to do was to issue a stop funding
It means that once the
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 102 of
113
Oral Argument
102
12:03:10
1
conditions can be resolved, they can be resolved and move
12:03:15
2
forward largely consensually.
12:03:17
3
My second point was on the --
12:03:19
4
THE COURT:
12:03:22
5
12:03:24
6
12:03:28
7
moment and certainly the project in terms of a funding sense
12:03:31
8
stops at that moment until these issues can be resolved and
12:03:34
9
perhaps consensually.
12:03:37
10
12:03:40
11
order was issued, that this project wouldn't have imploded at
12:03:47
12
that point?
12:03:47
13
12:03:50
14
was doomed at that moment, Your Honor.
12:03:54
15
matter --
12:03:55
16
THE COURT:
12:03:57
17
Are you trying to tell me that if a stop funding order
12:04:01
18
was issued, the project would not have imploded at that point
12:04:06
19
because of the contractors not getting paid and all the rest of
12:04:10
20
this thing given the Lehman bankruptcy and all the other --
12:04:13
21
12:04:16
22
believe that had the democracy protocols taken effect, it would
12:04:21
23
have ultimately -- look, make no mistake about it.
12:04:25
24
the right thing been done in September, this project would have
12:04:28
25
ended on that date.
Well, what do you mean?
In reality, if you
are not paying the contractors, the project stops.
MR. HENNIGAN:
THE COURT:
You stop paying the contractors at that
Are you trying to tell me that if a stop
MR. HENNIGAN:
I think without any doubt this project
Just as a technical
That is not my question.
MR. HENNIGAN:
I am saying not at that moment.
I
I think had
The $700 million would still be in the bank
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 103 of
113
Oral Argument
103
12:04:33
1
account and people would have been much better off than they
12:04:39
2
ultimately became.
12:04:41
3
12:04:44
4
on the cases with respect to gross negligence, it occurred to me
12:04:47
5
reviewing them on the way here that we need to put them into
12:04:50
6
three categories in the group contract cases that have gross
12:04:56
7
negligent provisions.
12:04:57
8
12:05:01
9
12:05:06
10
breached as long as there is payment of direct damages.
12:05:09
11
are what I call the efficient breach cases.
12:05:14
12
example, Global Crossing.
12:05:20
13
12:05:23
14
property, which is banks with conditions on funding and alarm
12:05:28
15
companies that, under certain conditions, are required to take
12:05:31
16
action to protect properties, in those cases where the
12:05:35
17
conditions have occurred that require affirmative action, the
12:05:39
18
courts have routinely held that gross negligence is a triable
12:05:44
19
fact.
12:05:45
20
In the one case that we cited, which is DRS, when the
12:05:50
21
bank has actively participated in the loss of property, it was
12:05:55
22
held to be gross negligence as a matter of law.
12:06:04
23
12:06:07
24
Your Honor, at this point I am not going to belabor why DRS is
12:06:12
25
completely factually inapposite here.
Now, the last point -- I am trying to speak quickly --
Category Number 1 are contracts for the provision of
goods and services.
Those contracts can be intentionally
Those
That is, for
In the case of contracts that provide for protection of
MR. CANTOR:
For the most part it is in our papers.
November 18, 2011
I think the showing in
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 104 of
113
12:06:16
1
12:06:18
2
12:06:20
3
morning.
12:06:25
4
you and hear your input.
12:06:27
5
MR. HENNIGAN:
12:06:28
6
MR. CANTOR:
12:06:32
7
104
our paper on gross negligence is sufficient.
THE COURT:
I found it very helpful to discuss these issues with
10
I always enjoy being here, Your Honor.
Thank you, Your Honor.
[The proceedings conclude at 12:06 p.m., 11/18/11.]
8
9
Thank you for your participation this
CERTIFICATE
I hereby certify that the foregoing is an accurate transcription of the
proceedings in the above-entitle d matter.
11
12
13
14
15
________________
11.19.11
DATE
______________________________________
JOSEPH A. MILLIKAN, RPR-CM-NSC-FCRR
Official United States Court Reporter
Federally Certified Realtime Reporter
400 North Miami Avenue, Suite 11-1
Miami, FL 33128
305.523.5588
(Fax) 305.523.5589
josephamillikan@gmail.com
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Quality Assurance by Proximity Linguibase Technologies
November 18, 2011
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 105 of
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A
abeyance 100:10
able 47:13 50:8 84:22
about 4:19 6:14,17 7:1,7,10 8:14
10:14 12:16 13:1,20,21 14:13,15
16:19,25 17:1 18:19 22:4 24:19
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32:2,15,21 38:7 46:13 47:3,10,23
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74:20 75:17 76:8 79:9 80:8 81:13
82:8,25 83:8,19,20 89:17 90:8 91:2
93:10 94:24 96:23 102:23
above-entitled 104:10
absence 61:6
absolutely 6:5,10 31:16 40:21 46:25
53:25 63:8 64:13 72:14
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access 1:25 77:16,18
accordance 17:7 18:3 60:13
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account 12:4 46:24 47:16 54:1 64:21
64:24 65:23 79:24 87:16 90:17,25
91:11 103:1
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act 9:21 66:19,20 70:17 86:17 87:7
88:13
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38:22,24 39:7,9,13 40:24 45:16,18
45:20 46:13 47:16 58:15 61:14,15
61:17,21 62:22 65:14 84:23
actually 16:2 27:6,24 33:19 37:1,5
47:21 48:16 49:7 56:8,18 61:20
63:2 66:10 67:22 74:1,18 79:17
94:2,4 97:9,25 98:1 100:5
add 38:25 39:4
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81:7
address 23:23 56:22 58:7 91:24
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administrating 6:4
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29:11 47:14 55:17 77:12 78:9 86:10
86:12,16,16 94:5,15 96:1
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32:25 33:23,24 34:10 35:4 36:1
40:12 41:2 42:5,5 51:24 54:15,16
54:18 59:2,10,23 67:9
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adversary 98:11
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92:10,17,25 93:1
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affecting 92:17
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affirmative 18:1 19:22 35:6 36:9
37:23 103:17
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after 18:9 45:22 49:9,9 55:11 57:17
63:24 67:11 79:6 81:22
again 17:3 18:13 24:5 29:12 32:17
40:14 51:12 57:15,23 58:1 63:10
66:2 68:8 71:17 72:16,17 78:12
85:10 93:9,10
against 5:17 61:12 64:10 96:5 99:22
99:25 100:6
agenda 5:13
agent 5:18,21,23 6:4,6,7,10,15,18,23
9:5,11,14,16,2 1 11:2,15,22 12:5,9
12:13,18,20 13:22 18:10,20 19:19
19:23 22:8 23:12,21 24:6,24 25:3,9
25:24,25 26:1,10,11,16,2 4 27:18,18
27:21 28:1,2,11,1 2 29:1,11,11,14,18
30:3 31:2,3,6,7 32:10,22 33:11,17
34:9,14 35:3,23 40:17,19 42:6 47:7
47:15,21 55:17 58:25 59:11 60:9
62:7 70:17 77:12 78:9,10 80:4
86:10,13,16,1 7 87:25 88:4,6,12,12
88:17 89:5 90:18 93:8,10,14,17,22
93:23,25 94:5,6,8,10,12,15,19,19,20
94:21 95:13,16,18,19,22,24,2 5 96:1
96:4,10
agents 9:20 27:4 88:7
ago 81:2 96:20
agree 5:20 6:22 8:1,4 16:23 20:4 34:11
66:1 79:6
agreed 98:13
agreement 5:6,7,19,24 6:4,8,9,18,21
6:22 7:3,6,8,19,20,22,2 5 8:13,14,15
8:15,25 9:1,4 10:5,10,12,1 6 11:5,5
11:13,25 12:2,25 13:10 14:4,18
15:25 16:18 17:4,8,19,22,2 4 19:22
21:6 22:6,22 23:5 24:1,13,21 25:1,1
25:2,17,19 26:6,9,19 27:25 28:1,6
28:20 29:10,11,15,16,2 0 30:19,21
31:13,15 33:3 34:25 35:7 36:4
42:11 56:19 59:8,14 60:4,5 61:16
65:6 71:19 77:15,25 78:10,10 79:18
79:20 81:18 85:15,15 86:7,9,19,21
86:22,23,25 87:11,19,19,22,2 3 88:3
88:23 89:9,14,16,18,20,22,2 3 90:24
91:1,4,4,18,1 9 92:7,8 93:23 94:1,5
94:6,8,11,13,1 4 95:24 96:1,5
agreements 6:21 7:2 8:1,7,8,21 9:22
9:23,24 10:1,5,13,24,2 4 11:14,14
13:2 19:2 31:24 54:3 79:13 89:1
agreement's 8:22
agrees 13:22
ahead 22:14 48:1 67:13 73:21 74:7
80:6
Ahhh 53:17
al 1:6,9,12
Alan 1:15 3:2
alarm 103:14
alleged 59:20
allow 11:14 16:6 21:13 37:4 55:25
65:13 67:13 73:8,9,15 85:16
allowed 29:12 34:1 85:2 96:10
allows 86:1,14 93:5 95:7
alluded 28:3 62:5 66:3 67:3
alluding 61:10
almost 90:16 96:17
along 16:22 17:6 91:9
already 42:18 62:9 64:22 76:17 82:17
alternative 35:1
although 4:9 12:13 97:13
always 10:4 47:9 84:20,24 104:5
amalgam 85:3
ambiguity 13:10,14,17 14:23 15:16,21
16:7,9
ambiguous 15:6 16:18
America 1:12 2:2 3:25 4:2,5 5:17 6:3
6:14 7:3 9:3,4,15 12:7,8,13,17,22
15:11 18:20 19:3 21:2,7,10,17
22:23 23:2,2,3,13,2 0 25:6 26:11,14
26:15,16,22,2 4 27:3,17,20 28:7,11
28:14,25 29:3,20,25 33:10 34:1
35:7,21 36:7,14,22 37:1,8,19,22,25
38:22,24 39:5,6,9,17,1 7 41:3,11,13
41:16,22 42:14,23 44:2,18 45:1,23
46:4,10,14,16,20,23,2 4 47:7 48:19
49:15 50:11,17,20 51:7,9,14,19
52:4,14 54:10 55:2 58:24 59:15,24
60:3,6,17,1 9 62:2,6,12,2 0 63:10,16
63:23 64:3,6,11,14,2 4 65:5,13,16,22
66:9,22 67:2,11 68:4,9,13,23,25
69:8,18,24 70:1,8,13,16,2 1 72:3,8
72:16,18,20,2 5 73:4,8,9,15 74:20,22
77:11 78:6,9,16,2 3 79:14 83:9,15
83:25 84:23 85:2,5,23 86:15,16
87:7,18 88:11,12 89:11 90:3,5,12
90:21,22 91:17 93:11,21,25 94:4,7
94:14,18,21 95:13,25 96:4,5,9,13
American 72:24 75:11
America's 7:22 18:19 20:4 44:7 49:2
50:24 60:23 61:8 65:14 66:4 69:6
75:22
among 10:5 36:16 46:17 52:8 89:10
96:11,21
amount 18:7,25 23:14,16 41:14 51:22
52:6 53:1 54:14 62:24 67:7 75:4
81:7
ample 69:14
analysis 76:22
analyzing 50:11
and/or 59:13
Angeles 1:22
another 5:11 33:10 34:20 42:22 50:1
76:14 81:16 88:9 91:22
answer 11:10 15:1 22:11 27:22 43:12
43:17,20 44:5 47:18 50:13 100:21
100:22
answers 69:10
antithesis 70:4
anybody 8:12 9:24 55:16 71:23 80:3
anybody's 65:24
anyone 47:1,6 51:7 84:18
anything 9:23 13:2 21:3 36:2 47:5
55:2,3 59:8 80:2 100:9
anyway 19:14
anywhere 19:2 43:21
apologize 74:4 95:21
apparent 75:3 81:6
appearances 1:19 3:12 4:14
appears 98:24
appendix 10:22 12:3
applied 55:23
applies 16:11 52:11
apply 7:24 14:6,9 20:9 24:12 30:22
appointed 9:10
appointments 13:22
appoints 9:20
appreciate 58:2
approached 12:11
approaching 61:7
appropriate 31:14
approved 36:3
approving 59:10
argue 13:16 21:2 58:3 70:2,13 86:18
89:6
argued 13:17 50:9 86:8
arguing 55:19
argument 1:15 9:2,17 34:18 36:21
45:5 49:14 56:12 58:1,12 60:15
65:12 70:13 77:8 83:13,15 90:23
91:21,25 97:3,4 100:20
arguments 4:16 57:2 70:15,16,18
around 44:17
Article 12:17 21:1 24:15,19,22 35:12
37:23 95:5,6
articulation 22:17
aside 15:1 30:20
asked 39:6 41:3 48:21 51:14 53:3
61:12 62:10,12 69:16
asking 25:11 48:12 49:11 50:12 61:12
aspect 5:6 22:7 25:18 97:13
aspects 6:8 23:25
assert 66:23
assume 26:5 38:8 97:14 98:4 99:22
assumed 61:13
assuming 73:8
assumption 48:9 51:5 65:11 72:17
assurances 23:6
assure 19:24 20:10 21:21
assured 73:23
ATM 46:19
attached 8:16
attachments 24:7
attempt 92:22
attempted 69:9
attention 25:16 32:5 75:22
authority 29:4 79:25 90:13
authorized 9:21
automatic 78:24
automatically 31:8
available 68:21 77:18
November 18, 2011
105
Avenue 2:8,12 104:14
aware 19:6 74:23,23 80:2,17,19 81:9
a.m 57:16,18 74:21
B
B 82:3
back 9:18 12:7 17:2 20:15 22:12,25
25:12,15 26:4 27:24 30:7 32:1,24
35:10 38:5 50:3 54:8 55:3,9 57:11
57:19 65:3 68:9 72:22 75:6 77:24
78:23 88:14 89:9,22 90:20 96:19,22
98:17,20 99:4,13
balance 40:6,11 67:15 76:22,25
bank 1:12 2:2 3:25 4:2,5 5:17 6:3,14
7:3,22 9:3,4,15 11:15 12:5,7,7,13
12:13,17,22 15:11 18:19,20 19:3
20:4 21:2,7,10,1 7 22:22 23:2,2,3,13
23:20 25:5 26:10,11,11,14,15,16,22
26:24 27:3,17,20 28:1,7,10,11,14,25
29:3,11,20,2 5 31:6 33:10 34:1 35:7
35:21 36:7,14,22 37:1,8,19,22,25
38:22,24 39:5,6,9,17,1 7 40:17 41:3
41:11,13,16,2 2 42:14,23 44:2,6,18
45:1,23 46:3,10,13,16,17,20,22,24
47:6 48:18 49:2,15,17 50:11,17,20
50:24 51:7,9,13,1 9 52:4,13 54:1,10
55:2 58:24 59:15,24 60:3,6,17,18
60:23 61:8 62:2,6,12,2 0 63:10,16
63:23 64:3,6,10,14,20,2 4 65:5,13,14
65:16,22 66:3,9,22 67:2,11,16 68:3
68:9,13,23,2 5 69:6,8,18,2 4 70:1,8
70:13,16,21 72:3,4,8,16,18,20,25
73:4,7,9,15 74:20,22 75:22 76:17
77:11 78:6,9,10,16,2 3 79:13,23
80:15 83:9,15,25 84:22 85:1,5,23
86:15,16 87:7,18 88:11,11,12 89:11
90:3,4,12,17,20,2 2 91:11,17 93:8,10
93:11,21,21,23,25,2 5 94:4,6,7,10,12
94:14,18,19,2 0 95:13,23,25,2 5 96:4
96:4,5,9,13 98:9 102:25 103:21
banked 46:22
banking 88:7
bankruptcy 30:10,14 36:6 45:22
72:24 73:11 74:17 75:10,11,17 77:8
78:21,24 82:13,14 83:1 100:1,7
102:20
banks 83:6 103:14
barely 81:4
based 14:8 16:14 38:16 50:18 55:19
99:22
basic 58:21
Basically 31:25 46:16 92:14
basis 69:18
bear 70:6
became 103:2
becomes 6:7
before 1:15 4:16 5:6 6:25 7:17 14:8
17:2 28:20,23 45:14 50:16 60:21
61:10,13 69:22 85:19 91:22 97:1,6
100:11 101:3,18
beg 11:3
begin 3:7 39:16
beginning 9:19 50:24
begins 19:19
begun 100:4
behalf 3:15,21,25 4:4 9:21 41:14,16
42:25 44:7,18 51:11
behind 93:15
being 12:6,8 23:14 26:11 27:17 29:12
31:6,6,22 42:23 49:9 50:9 52:23
55:6,8,13,1 4 64:3 66:12 68:8,24
81:9,25 89:17 92:16 94:18 104:5
belabor 103:24
believe 8:21 10:11,12 16:17 22:16
31:20 32:12 38:21 39:1 44:9 73:24
88:25 94:2 98:3,12 99:12 102:22
believed 44:7,8,14,1 5 72:16,20,25
77:9
believing 72:9
below 19:17
best 15:14 24:18 35:25 39:5 48:5
better 103:1
between 41:18 45:1,23 53:11 60:25
69:12 74:13 77:16 93:11
bigger 53:14
billion 51:24
bit 6:17 55:18 94:24
Case 1:09-cv-23835-ASG Document 134 Entered on FLSD Docket 04/02/2012 Page 106 of
113
blanks 18:6
bleak 82:11
BofA 6:6 17:21 48:3 49:6,18 78:21
79:11 81:9,10 82:5,16,18,2 4 89:24
90:8 92:14,16,19
Bolio's 48:23
borrower 63:11,15 73:15 81:10 92:20
92:25
borrowers 17:6,21 86:13
both 4:19 7:7 8:1 31:25 34:18 39:2
56:22 88:12 91:3,18 95:7 96:17
99:14
bothered 70:11
bothers 54:21
bottom 67:9 70:3,22 88:9 93:4,12
100:8
bounce 22:25
box 20:13
boxes 32:20
breach 58:21 60:14 70:13 71:17
103:11
breached 103:10
breaches 77:6
breaching 9:15
break 26:4 50:5 52:16 53:8 56:13,25
60:21 61:10 66:3 71:5 101:18
Brickell 2:8
bridge 73:10
briefing 16:25 97:2,6
briefly 58:21
briefs 7:23 13:16 70:12
bring 17:13 42:3
broader 54:22
Brothers 39:18 41:15 43:1,11 44:3,7
52:22 73:23 74:16 75:9,16,24 76:9
78:16,18,21 80:9 81:13 82:13 83:3
93:2
brought 81:1 97:10
Brown's 48:18
budget 20:19
budgeted 82:8
budgeting 81:10
budgets 74:25 83:3
burden 70:6,23
business 72:24 73:11 91:9
button 27:6
C
C 104:8,8
CA 1:22
call 3:11 40:18 56:5 57:14,15,23 77:17
101:23 103:11
called 9:23 10:9,15 11:5 13:2 90:7
calls 4:9
call-in 57:21
calm 73:1
came 41:13 46:23 51:12 52:1 63:17,18
Cantor 2:2 3:5,10,24,2 4 5:3,9 6:12 7:9
8:3 9:7,10 10:1,8,11 11:9 12:1,10
13:3,7,11,1 3 14:5,14,16,19,2 5 15:19
16:3,22 17:11,16 18:5,8,17,2 3 19:1
19:6,9,15,2 0 20:5,17,20,22,2 5 21:4
21:9 24:18 26:8,12,18,2 3 27:5,12
27:15,22 28:17 29:2,7,9 30:6,11
31:17 32:4,7,16 33:8,19 34:3,7,12
34:16 35:8,15,18 36:13 37:12,14,18
37:25 38:11,15,19 44:21 45:4,6,9
45:12,17 46:16 48:7 50:4,7,15
52:20 53:3 54:14,18 56:23 57:9
58:4 61:17,22 62:4 63:6,8 64:18
68:6 71:7,14 72:14 73:20,22 74:1,4
83:18 84:4,6 85:13,18,22 86:7,20
86:24 87:3,6,9,13,15,17,20,2 4 88:16
88:20,25 89:4 91:2 93:4,9,20,24
94:2,9,12,17,2 0 95:2,6,21 96:2,6
97:4,8,11,1 9 98:2,6,10,2 3 99:11,19
99:24 100:5,13 101:7 103:23 104:6
capacity 5:18 12:21 88:12 95:17,18,25
capital 2:3 29:21 66:7 67:9 74:24
77:22 78:20,25 86:11 89:15,21
capitalized 88:18
care 25:9
careful 69:21
carry 19:3
case 1:3 3:12 6:1 10:19 12:11 15:20
26:20 31:19 37:9 58:24 59:24 60:2
60:15 61:6 73:13 96:23 97:9,15,20
97:23,24 98:5,22 99:7,8,13,20
100:11,24 101:1,3,11 103:13,20
cases 97:18 103:4,6,11,16
cash 82:7
catch 22:12 92:9
categorically 40:21 53:25
categories 103:6
category 49:20 82:21 103:8
cause 57:18
certain 12:18,19 29:1 30:14 85:25
91:6 103:15
certainly 8:4 20:5 67:1 69:3 78:18
84:15 100:13,22 102:7
Certificate 2:25
certification 21:18 40:25 95:8,14
96:14
certifications 29:13 34:22 36:24 37:3
59:12,22,25 94:22
certified 2:12 30:24 104:13
certifies 20:24 95:11
certify 104:9
certifying 92:14
cetera 8:19 11:2,2 14:1 20:1 22:9 24:9
26:3,3 34:15
chance 45:19 61:12
change 40:10
changed 41:22 42:14 51:9
charade 49:11,12
check 31:21 50:16
checked 32:20
checking 20:13
checklist 18:22 20:6 33:11 34:5 36:1
checklisting 35:14
checklists 20:3
check-the-box 14:20
chime 98:11
choose 50:25
chose 66:19,20
circle 48:24
circling 74:19
Circuit 97:1,3,7,15 99:6 100:12,24
101:10
circumstance 31:7
circumstances 35:1,25 38:12 61:17
83:14 84:14,15
cite 61:5
cited 50:23 103:20
claim 64:10 96:6,8,9 100:6
claiming 91:16
claims 55:16 78:16 99:22
clarification 101:24
clarify 5:14 15:23 77:25
clarity 4:22
clause 10:19 25:1
clauses 61:1
clean-cut 36:1
clear 8:8 36:21 39:16 40:13 45:21
59:15 65:18 69:6,8,18 71:23
clearly 43:6 73:7 88:10
clients 46:18 77:15 78:13,17 79:2,5
close 45:19 48:22 57:5 73:16
closely 56:1
closing 44:22 45:5 63:24 64:20 79:23
collapsing 82:6
collateral 13:25
colloquy 22:12 43:14
come 3:8 22:12 51:20 57:25 58:19
63:16 64:5 68:22 70:8,9 75:22 81:5
82:7 83:5 89:6,22 95:1 99:13,23
comes 14:6 16:12 21:15 42:22 71:16
71:20 72:10
comfort 23:6
coming 55:10 81:9
comment 6:12
comments 6:11 16:21 22:2
commercial 20:8 23:25 24:14 36:9
55:23 56:12
commercially 13:23,23 14:10,21,21
15:8 18:13 22:16,18,23 24:9 55:24
commitment 67:6,7,17
commitments 76:17,22,25 79:21,22
committed 15:9 75:16 76:3,9 78:17,18
communicated 51:3
communication 31:14
communications 41:21 69:12
companies 42:4 103:15
company's 40:11
comparable 7:4
compared 85:16
complaint 59:20 101:8
complete 8:9 17:14 70:4 80:17 91:21
98:17
completely 70:23 91:8 103:25
complicated 94:3
complied 6:14 16:13 92:15
concede 37:4
conceded 41:12 61:23
conceivably 68:17
concept 50:10 52:11
conceptual 47:10
concern 24:11 56:1
concerned 76:8 78:7 82:8
conclude 104:7
conclusion 71:24
conclusively 49:6
condition 33:15 34:10 35:4,23 37:1,8
41:23,24 42:13 43:23 75:19 84:7
92:6,15 95:10 96:11,13
conditions 8:17 22:24 24:16 25:21
32:25 33:6 34:24 36:24 38:1 40:25
59:3,6,13 66:15 79:25 81:16 84:9
89:19,19 90:19 94:22 95:9,12 102:1
103:14,15,17
condominium 83:8
condominiums 82:10
conduct 6:6,9,22,23 14:6 61:4,8 66:4
conference 96:21
confidential 77:19
confines 50:14
confirm 51:15
confirmation 42:5
confirming 59:3
confusing 34:17 93:19
confusion 16:1
connection 47:1
consensually 102:2,9
consent 40:20
consents 90:9
consequences 30:14 67:24
consider 16:6 53:8 66:4,21 71:11
consideration 65:16
considered 15:12 61:9 90:8
considering 45:25 50:21
considers 83:23
consistent 13:24 25:7 35:13 65:20
84:2,5
constituted 84:25
construction 18:11 19:24 20:11,14,15
20:21 21:11,16,18,1 9 22:4,9,19
24:3,6 33:13,22 34:5 35:5 63:22
consult 4:25
consultant 18:11 19:25 20:11,14,16
21:12,16,18,1 9 22:19 24:6 33:14,23
34:6 75:2
consultant's 22:9 24:4
contains 13:10 18:1
contemplated 54:2 79:20
contemplates 26:19
contemplating 82:19
contemplative 69:22
contend 13:9 39:9
contended 9:13
content 31:18
CONTENTS 2:23
contests 56:7
context 16:20 42:10 43:22 44:13
51:12 61:9 65:4 74:12 82:23
continue 12:24 53:21 55:11 64:8
67:14 73:2,6,24 74:3 77:5
continuing 25:25 56:5 88:5,22
contract 15:3,5,6 16:4,9,10,14,20
24:20,20 32:16,17 52:12 58:21
60:15,23 70:13 84:6,7 85:1,6 87:6
93:5,12,13,1 6 103:6
contractors 102:5,6,19
contracts 103:8,9,13
contractual 53:4
contrary 59:9
contribution 43:1 73:9
control 9:22,23,24 10:1,4,9,12,15,24
10:24 11:5,13,25 13:2 14:1 26:6
31:2,3,4 49:17 64:24
controlled 50:14
controlling 11:21,24 25:23 26:5,8,15
27:3,10,18,19,2 0 28:13,14 29:4,18
30:2 31:5 32:2,9,21 35:22 47:7,14
November 18, 2011
106
85:17 86:3 87:25 88:24
controversy 43:5 57:5
conversation 4:19 42:24 43:4,6 46:11
conversations 42:22 44:25 67:15
69:15
convince 98:19
corners 14:18
correct 5:8,9,15 14:14 17:9,17,25
18:16 32:4 54:10 78:5 87:12 98:12
99:3
correctly 16:17 34:22 38:19 59:19
cost 20:21 55:15 74:23 75:3,6,8 80:17
81:7
costs 22:5 33:15 39:24 51:25 63:22
64:1,22,25 80:25
counsel 4:15 6:22 43:6 58:10 69:20
count 75:14 83:5
counter 4:20
counterintuitive 94:4
counterpoint 58:3
country 43:21
counts 101:9,9
couple 52:17 53:7 56:1 64:21 71:15
81:2
course 18:20 35:21 42:18 48:10 70:4
court 1:1 2:11 3:2,3,6,11,16,2 2 4:3,6
4:13 5:4,10,22,2 5 6:11,16,24 7:11
7:14,17 8:12 9:2,8,18 10:7,9,14,22
11:17 12:6,15 13:6,8,12,16,18
14:13,15,17,2 2 15:10,20 16:6,21,24
17:12,17,20,2 2 18:1,6,9,18,24 19:2
19:7,13,16,2 1 20:15,18,21,2 3 21:1,5
21:25 22:14,20 23:11,18,20 25:11
26:11,13,22 27:2,9,13,1 6 28:13,19
29:3,8 30:5,7,17 31:4,9,12 32:1,5,8
32:15,24 33:9 34:2,4,8,13,1 7 35:9
35:16,19 37:6,13,17,1 9 38:4,13,16
39:8,12 40:24 43:21 44:19 45:2,5,7
45:10,13 46:13 47:4,12,19,2 3 48:1
48:4,8,12,15,2 1 49:1,25 50:3,5,9
52:15,19 53:6 54:6,16,21 56:24
57:10,19 61:11,20,23 63:3,7 64:16
68:5 71:1,6,9 72:12 73:18,21 74:3,7
77:7,24 78:3,6 79:2,5,9,13,1 6 80:6
80:19,21 83:13 84:3,5 85:12,14,21
86:2,18,22 87:1,4,8,10,14,16,18,21
88:14,17,21 89:1,8 90:1,20 91:20
92:7,9,12 93:3,7,18,21,2 5 94:7,10
94:16,18 95:1,4,20,2 3 96:3,16 97:6
97:9,12 98:4,7,9,15, 17,19,24 99:4
99:16,20 100:4,7,8,16,2 1 101:6,12
101:14,16 102:4,10,16 104:2,13
courtroom 1:10,25 3:1 41:9 67:21
courts 103:18
cover 19:11,13 43:24 49:21 80:13
81:17
covered 36:3 57:4 58:6,22
co-lenders 52:9
create 41:24 58:14 78:24
created 57:22
creates 30:24 39:13
creating 70:24
credence 72:8
credible 44:1 92:21
credibly 89:6
credit 5:23 6:8,9,18 7:3,20,22 8:25
10:5 26:25 27:25 28:1,6 29:9,15,16
29:19 30:21 31:13 62:8 77:25 78:10
79:13,18,19 82:20 85:15 86:7,20,22
86:25 87:11,19,21 89:9,14,16,18,22
90:24 91:4,18 93:23 94:1,5,10,14
96:1,5
criminal 50:10 52:11
criteria 19:5
Crossing 103:12
culpability 70:20
culpable 61:8
cumulative 83:14
current 42:3
cut 48:5 71:7
C-1 17:7,14 18:3,3,9 34:21
D
D 1:21 29:21 86:11 89:15,21
dah-dah 44:12,12,12
Dallas 27:1
damages 103:10
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Dan 3:24
DANIEL 2:2
date 10:25 18:6 40:24 41:4 74:16,16
95:12 97:4 102:25 104:12
dates 96:21
day 65:25 82:2
days 42:21 72:23 82:1 88:7
dcantor@omm.com 2:5
dead 76:16
deal 23:7,19,21 29:6,16 33:6 53:18
56:21 64:17 87:18
dealing 56:6 68:13 90:16
dealings 35:22
deals 24:21 97:12
debate 23:12
debt 19:18 26:25
Debtors 1:7
decide 100:23
decided 64:7,8
decision 27:11,14 67:12 82:25
decisions 27:8
decision-makers 27:9
declaration 44:14
declare 30:15 31:23 85:20
declared 82:13,13
declaring 62:3 84:14
deemed 28:7 86:10 95:17
default 11:22,23 25:24,24 26:17 28:4
28:5,8,8,16 29:19,19,21,21,22 30:1
30:10,16 31:16,23 37:24 41:25
49:23 54:6,7 61:24 62:3 66:11
77:10 78:8,11,22 79:14 80:13 81:10
81:12,17,21 82:22,22 83:3,9,16
85:17,24 86:4,11,11,12,1 5 87:5,11
88:1,1,5,5,11,18,2 1 89:11,13,15,22
90:4,23,23 91:3,5,7,15,15
defaulted 80:16
defaults 81:22,23 89:18,18 91:17
Defendants 1:13 2:1 13:11,13
deficiency 18:15
define 36:15
defined 10:3,12 11:25 12:1 14:3 15:25
26:6,9 81:17 88:19 90:7 94:12
95:24
defines 87:6
definition 11:10 14:4,6 27:10 32:13
definitions 10:2,23 11:4
degradation 82:9,19
degree 70:20
delay 7:13 57:24 62:9
Delayed 68:15
deliberate 50:10
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demand 26:16 78:8,20 79:6
demanded 66:8
democracy 90:15 102:22
demonstrated 74:24 76:9 78:14
demonstrates 49:6 71:21
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dependent 55:22
depending 96:24
deposition 43:14
DEPUTY 3:1
describe 49:5 94:14
describing 86:12
designed 93:16
despite 77:5
detailed 57:4
details 25:3
determination 14:7 15:7 16:14 34:23
50:25 51:1 62:13 84:21 85:7
determinations 59:10 84:16
determine 16:12 18:11 24:7 34:9
47:13 83:15 84:19 98:25 100:10
determines 15:16 33:12,13
determining 21:19 34:21 36:18 59:1
65:16 84:1,13
dichotomy 93:10
differ 11:3
difference 84:24
different 5:25 15:15 22:18 27:14
28:15 32:9 37:22 45:3 47:10 49:3
52:8 53:16 62:7 65:7,21,22
differing 68:17
difficulty 28:19
dilemma 55:18
diligence 19:24 20:7,10 21:8,11,21
22:17,23 24:3,14 35:3 61:6 69:6,7
90:18
diligent 33:14
Dillman 1:21 3:20,20 7:13 43:14 98:1
98:3
direct 69:12 103:10
directed 5:17
direction 64:14
directly 3:18 48:16 56:18
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disburse 79:25 90:5
disbursed 47:22 49:23 64:22 78:4
79:24
disbursement 5:7,18,18 6:4,6,10,15
6:23 7:5,8,19,25 8:13,22,25 9:4,5
9:10,14,16,2 1 11:1,5,15,2 2 12:9,18
12:20 13:9,21 17:19,23 18:10,20
19:19,23 22:7 23:5,12,21 24:6,21
24:24 25:3,9,17,19,2 3,25 26:16
27:4,18,21 28:11,25 29:10,14,18
30:3,19 31:15 32:10 33:3,11,17
34:9,14 35:3,22 42:6 58:25 59:3,6
59:11 60:4,9 62:7 65:6 70:17 77:15
78:10 80:4 85:15 86:19,23 87:19,23
88:3,4,6,12,17,2 2 89:5,19,23 90:10
90:18,19 91:1,4,19 92:6,7,8 93:14
93:17 94:6,8,8,13,19,20,2 1 95:12,13
95:16,18,19,2 4 96:9
disbursing 9:11 14:1 24:22 31:6 32:22
47:7
disclosed 75:4 81:8
discloses 15:15
disclosure 75:7
discovered 55:15
discovery 38:17 99:14,23
discursive 81:25
discuss 53:6 91:22 96:19 101:23 104:3
discussed 52:24 58:17 65:7,18 79:10
86:3
discussing 12:6 39:17 50:12 69:19,20
71:22 97:17
discussion 12:16,24 16:25 17:2 25:14
26:9 27:16 28:22 30:3 38:7 46:7
74:8 80:25 89:2 97:14
discussions 45:23 71:25
dismiss 59:18
dismissed 97:25 98:2
disposes 39:15
dispute 23:13 53:10 60:25 63:10
69:23
disregard 61:3
disregarded 66:22
disregarding 62:21 65:17,24 69:1
70:5
distinction 15:17
distorting 83:2
district 1:1,1,16 97:16
divide 27:19 38:13
division 1:2 77:16
document 8:15 10:9 11:4,19 17:14,23
18:3,4 24:10 34:6
documentation 18:12 24:8 59:2
documents 8:9,23 50:19 52:2 91:18
doing 18:24 20:14 21:12,12 22:19
31:23 33:11 36:1 43:24 61:21 66:5
66:6 68:11
dollar 74:9,10,11,12
dollars 23:4 62:17 64:1
done 24:3 55:8,24 58:6 60:3 85:19
97:2,6 101:1 102:24
doomed 102:14
doubt 41:18,20 60:5 83:11 102:13
Doug 40:4
down 5:11 26:4 27:2 39:25 47:16 54:4
63:24 64:14 65:19 73:1
downgrade 82:15 83:19,22
downgraded 82:16
downgrades 82:3,4
drafted 17:15,18,22,23
draw 62:9 76:13,15
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DRS 103:20,24
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during 45:21,21 53:8 57:20 82:18
91:25
duties 6:14 9:16 13:24 25:6 59:9 60:7
60:9,11
duty 28:15 35:6 36:9 37:23 83:15
E
E 104:8,8
each 4:25 7:18 8:7 9:20 26:1 35:4 59:2
88:7 90:18
earlier 28:3 42:6 58:6 67:3 71:22 72:2
74:25 75:1 80:7 83:20 90:8 94:25
early 74:21 81:25
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earned 23:3
earning 23:2
easy 92:23
economic 84:19
effect 18:21 28:9 63:3 75:21,23 76:1
93:1 97:21 102:22
effectively 97:22
efficient 103:11
effort 55:6
efforts 13:23 18:14 22:18,23 24:9
either 11:7 13:9 36:8 45:5 58:11 61:3
68:12,21 69:15 80:2 91:5
electronic 74:18
electronically 30:25
Eleventh 97:1,2,7,15 99:6 100:12,24
101:10
email 30:12 31:12 39:21 40:8 41:12
42:2 49:6 68:9 75:2 80:22
emails 38:16,25 39:16,20 40:14 45:15
45:18,20 50:23 74:19
employed 15:23,24
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ended 45:25 62:17 73:14 102:25
enforceable 61:1
engage 4:19
enjoy 104:5
enormous 77:6
enough 5:2 30:25 45:15 92:23
ensure 59:6
entered 96:19
entire 8:14 60:15
entities 10:25 11:16 18:14 26:1 33:17
34:15 59:12 67:14,16,18 99:14
100:6
entitled 14:9 21:17 36:23 59:12,16
60:19 92:19 95:13,15 96:14
entity 32:13
equal 91:16
equate 61:15
equation 53:12 71:12,15
equity 51:1 63:12 73:9
equivalent 24:15 37:10 50:10
error 49:23
especially 61:8 63:2
ESQ 1:20,21 2:2,3,7
essential 23:5
essentially 11:14 15:3 24:20 59:1
70:12 73:15 101:8
establish 38:24 70:10,19 96:12
established 48:9
et 1:6,9,12 8:19 11:2,2 14:1 20:1 22:9
24:9 26:3,3 34:15
evaluating 66:3
even 9:8 10:25 45:19 51:14 52:6 55:23
56:15 61:6,7 62:19 65:24 66:8,21
69:2 70:18 79:3
event 11:22 25:20,24 28:5,8 29:19,21
29:23 30:10,15,15,2 5 31:23 32:2,25
33:16 34:13 50:21 84:4,8 85:24
86:4,15 88:1,4,6,11,1 8 91:3,15
100:12
events 66:14 68:19,20 85:4 91:5,6
eventually 33:5 72:7
ever 32:23 51:3 66:8 68:22
every 54:8 55:6 59:23 81:22 95:8,11
everybody 3:16 4:13 57:14,20,22,25
75:24 77:8 100:16
everybody's 5:14 13:19 55:7,13
everyone 3:7 10:4 41:9 43:23 71:25
everything 20:18 26:20 36:3 60:3
62:23 66:16 91:2 99:10
evidence 14:2,8,23 15:4,12,16,22,22
16:6,14,19 32:22 38:23 39:1,12,14
40:14,22 41:7 44:1,23,24,2 5 46:25
49:22 51:3,6 53:13 69:14 70:7,9,10
November 18, 2011
107
83:4,19
exact 41:14 52:25 65:1
exactly 48:11 78:20
example 11:18 19:21 33:22 34:2,4
61:19 78:15 103:12
except 60:10
exception 27:5 66:7 68:24
exchange 43:15
exclude 28:21
excuse 17:23 68:6
executed 8:6 10:25 11:4
exercise 13:22
exercised 24:16,17
exhaustion 12:2,4
Exhibit 17:7 39:21 40:14 41:12 42:6,8
80:22
exists 97:20
expect 82:7
expectation 77:1
expected 75:8,23,25
expert 15:10
explain 50:16
explanation 50:2
explanations 50:12
express 87:4,10
expressed 30:13
expressly 60:4,10
extent 6:20 14:24,25 16:11 36:13
65:22 71:16,19 83:22
extrinsic 14:2,23 15:4,12,16,2 1 16:6
16:18
F
F 104:8
face 15:21 73:10
face-to-face 69:16
facilitated 69:12
facility 36:5 37:11 52:8 62:8 63:24
75:15 76:4 78:17,19 82:3,20
fact 14:9 15:9 16:15 19:7 36:10,16
38:7,18,22 39:13 41:9 42:21 44:1
44:17,23 45:11,16,25 46:1 49:19,22
51:13 52:6 53:9,11 55:1,11 56:24
58:14 61:13 62:14,20 63:7 67:17
70:24 71:20 72:7 74:24 76:11 77:5
79:6 80:12,15,16 82:16 83:2,3 85:3
90:8 92:22 93:15 95:17,19 98:25
103:19
factors 84:19
facts 28:20 33:19 63:11 66:17 67:23
70:14 84:25
factual 38:5 53:12 58:10,13,16
factually 12:23 103:25
fail 41:24
failed 66:15 67:5 70:23 76:20
fails 40:1
failure 32:19 62:14 83:6
failures 89:19
fair 5:2 53:22 96:8
fall 89:21
false 50:18 75:1
family 3:8
fashion 8:10 21:14,24
fast 101:17
favor 11:1
Fax 1:23 2:9,13 104:15
fears 83:4
federal 98:9
Federally 2:12 104:13
fee 23:1
few 42:21 53:7 91:20
fifteen 56:24
Figueroa 1:22
figure 4:18
figures 65:1
figuring 67:12
file 100:16
filed 45:22 100:1,5 101:8
files 20:16,23 75:10,24
filing 74:17,19 75:17 78:23
filings 72:24 73:11
fill 7:24
filled 18:6 76:5
financing 23:9
find 11:7 13:19 70:20 73:3 91:11
finder 16:15
finding 39:5
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finer 9:12
fingers 65:2
finish 87:8,10 95:21
first 16:7 41:11 45:21,22 53:22,24
58:20 67:16 83:18 84:12 93:9
100:19,21 101:18
five 88:6
FL 2:8,13 104:14
flaw 60:14
Florida 1:1,11 15:15
flow 25:18 82:7
flowing 89:24
focus 5:6 6:24 7:17 29:24 58:20 74:13
focused 10:20 49:6
focuses 30:2
focusing 6:3,6
folks 99:25
follow 25:4 61:25
followed 16:22 56:7
following 5:5 61:16 95:2
Fontainebleau 1:5,9 33:4,5 37:14,21
39:18,19,23,2 5 40:5,18,23,25 41:8
41:10,23 42:12 44:3,9,15 45:1,23
45:24 46:6,7,8,9,18,2 2 47:1 48:3
49:3,10,16,1 7 50:13,18,20,25 51:4,4
51:11,15,18 52:2,24 53:2 55:21
56:18 59:17,21 60:1 61:20 62:16,23
63:23,25 64:9,10,22 65:9 66:13
69:11,13 72:18 73:4 80:9 81:21
82:3,12,20,2 5 84:9,10,12 90:10
94:22 95:8,11 96:14 97:10 99:8,17
99:22,25 100:6
Fontainebleau's 36:24 37:3 41:14,16
44:18 63:9 85:3
foreclosed 70:18
foregoing 104:9
forgone 71:24
forgot 3:19 101:15
form 17:7 38:24
formal 4:20 26:16 30:20,23 31:13 32:9
58:5 77:11 88:11 89:11 90:4
formalistic 32:18
formulistic 27:1
forth 25:2 60:10
forward 21:23,23 37:5 55:10,11,22,25
62:14 63:1,13 68:3,7,22 70:8,9 73:1
96:10 99:7 102:2
found 104:3
four 14:17
frame 4:23
fraud 100:6
Freeman 39:25 42:2,8,11,15,2 5 43:3
43:12,15 51:7 69:16
Freeman's 42:19
from 3:24 4:1,15 7:23 8:22 10:14
11:15 16:4,21 20:4 22:18 27:20
29:22 30:9,12 32:9 34:18 38:6
39:24,25 40:2 42:23 46:3 48:16,18
50:12 51:7 53:11 54:15,22 55:19,21
57:2,23 59:5,12,17,2 5 60:1 63:17
63:18 64:5,7,9 65:9 67:1 72:2,3
74:22 75:2,19 76:13 80:12 81:9
82:7,10 83:12 86:25 89:7,8,24 90:9
91:25 92:25 95:8 100:11
front 4:24 7:8 92:21
fruition 83:5
fulfilled 22:24
fulfilling 80:5
full 6:15
fully 61:1 97:7,12,15 99:6,13,17 101:9
fun 80:11
function 18:25 19:4 23:13 27:7
functions 26:24
fund 37:20 40:1 42:12,17,18,2 0 46:2
46:10,11 48:24 50:18,22 51:1,11,13
53:10 54:5,25 55:2 56:4,8 62:10
67:5,10,18 71:24 72:1,1,18 73:2
77:5 78:11 90:25
fundamental 60:14
funded 37:15,21,21 44:12 48:3 49:16
53:18,19,19,2 0 56:19 71:20 72:7,10
73:3 74:24 75:15 91:10 93:2 97:7
97:12,15 99:7,13,17
funding 9:20 11:20 26:1,2 37:4,11
38:3 40:6,18,19,2 3 41:5,8,15,25
44:2 45:25 46:5,13 48:17,20 51:17
52:23,24 53:11 54:3 56:16 61:21
62:13,15,23 64:3 65:13 67:13 71:6
73:7,24 74:21 76:22,25 79:12,20,22
80:9 81:13 88:2,7 91:7 95:22 96:10
101:22,24 102:7,17 103:14
fundings 75:1
funds 9:11 11:15 14:1 23:15 24:22
46:23 47:22 49:24 53:2 81:21
further 7:1 25:14 36:23 51:19 52:3
58:11 59:16 61:14 65:10 82:4,9
85:2 95:14 99:14 100:11
future 77:2 82:12
G
gains 12:18
gaming 82:6
gap 7:24 40:1 41:18 73:10,16,17
gave 88:10
Gee 64:8
general 14:12 23:24 24:5 25:2,8
generally 25:6 77:20
generated 45:15 46:20
gets 45:19,19 93:18
getting 17:2 62:17 90:9 102:19
give 10:16 11:17 13:20 30:21 33:5,6
56:13,22 79:12 86:15 87:14 89:11
89:15 90:11 91:7,20
given 7:25 16:11 30:24 62:23,24,25
77:11 86:12 102:20
gives 4:22 87:25 90:12
giving 61:12
glad 63:17
Global 103:12
go 4:11 5:4 9:18 17:2 22:14 23:22
25:19 26:4 30:7 32:24 34:19 35:11
37:5 48:1 49:11,16 50:16 52:4 54:4
55:25 62:13 63:1,13 67:13 73:1,21
74:7 75:6 77:24 80:6 87:24 89:9
96:10 101:2
goes 27:24 36:3 42:14 46:19 65:3 99:4
99:7
going 3:16 4:23 11:9 15:8 16:14 18:22
23:11 25:6 27:23 29:5 33:12 34:19
42:12 45:21 46:2,4,6,10 48:4,22
50:8 51:13 53:6 54:2 55:22 56:11
56:13 57:8,14 58:4,11 62:10,24
64:2 65:11,19 67:13,14,18,2 5 68:10
69:3 70:9 71:4,23 72:5,6,18,20,22
73:2,6,16,2 3 74:13 75:12 76:1,2,21
77:1,4 80:11 82:10,11,12 83:4
84:13,20,22,2 4 88:2 90:6,9 96:6
98:8 99:14,21 100:1,18 103:24
Gold 1:15 3:2
Good 3:3,4,5,14,19,20,24
goods 103:9
Gotcha 31:11
governs 28:1
grant 48:8
great 44:22 63:17
gross 19:13 38:10 56:13,19 60:23 61:2
61:15,25 69:5 70:6,10,24 72:12,14
103:4,6,18,2 2 104:1
grossly 36:17 62:2 73:7,14
group 26:25,25 27:8 103:6
guess 16:4 37:9 43:18,18
Guggenheim 67:10
guys 97:19
H
habit 48:10
half 12:20
hand 67:8
handled 65:25
handwritten 48:23
hang 57:22
happen 42:22 99:13
happened 32:23 33:21 41:21 46:11,15
51:8 74:15,18 75:21 90:15
happening 72:23
happens 43:3 46:21
happy 3:8
hard 33:2 44:13 92:5
harder 35:19
HASBUN 4:11
hat 12:7,8,17 18:20 23:13 27:14 28:15
53:17
hats 47:10 53:16
having 11:18 28:19 36:11 49:23 69:15
71:25
hear 3:17,18 4:16 6:16 28:23 53:13
57:2,23 100:11 104:4
heard 73:22 75:10 92:19 101:12
hearing 46:4 59:18 72:3
heart 57:5
held 45:1 103:18,22
help 4:16 5:14 6:17 17:5
helpful 4:25 104:3
helps 4:22
Hennigan 1:20,21 3:4,9,14,15,1 9 5:21
5:23 6:5,20 7:10,16 8:21 10:20
12:12 13:5,14,17 16:22 17:10,18,21
17:25 22:11,15,21 23:15,19 31:1,5
31:11,16 32:12 39:11,14 41:2 45:19
47:9,18,20,2 4 48:2,11,14,18,22 49:4
50:1,17,23 51:5 52:17,20 53:24
71:2 73:22 74:2,6,8 77:14 78:2,5,12
79:4,7,11,15,1 7 80:7,20,22 83:19,23
89:13 90:6 92:2,8,11,1 3 99:3
100:19,22 101:13,15,1 7 102:6,13,21
104:5
hennigan@mckoolsmithhennigan....
1:23
Henry 67:20
her 48:20
hereof 60:13
hereto 8:16,18
hereunder 9:22 13:24 59:9,11 60:10
herewith 10:25
hide 80:12
hiding 93:15
high 20:12 61:3 82:21
higher 20:2 21:7 22:8
Highland 31:22 66:7 68:8,8,9,24
77:22 78:20,25 79:2,15
him 16:23 69:16 71:9
hindsight 61:9 73:13
history 72:24 75:11
hit 50:8 84:17
hold 21:25 37:6 38:4 39:8 47:4 100:9
holding 13:25
HOLDINGS 1:5,9
hole 5:12 54:5 76:4 89:22
holiday 3:8
honestly 101:5
Honor 3:4,5,10,14,20,2 4 5:3,9,21 6:5
6:20 7:9,13 8:3,11,21 9:7,13 10:11
10:20 11:9 12:1,10 13:3,13,15 14:5
14:11 16:3,17 17:11,16 18:5,17,23
19:1,6 21:9 22:25 23:3 24:18 26:8
26:12,21,23 27:1,5,12,15,2 2 28:3
29:7,17 30:4 31:1,17 32:7,12 34:7
34:12 35:8,18 38:11,15,20,2 1 39:4
39:15 44:21 45:17 47:9 49:5 50:15
53:4,25 57:9 58:4,9,18,20,23,25
59:15,18,22 60:1,8,15,19,2 2 61:10
61:17 62:4,15,19 63:8 65:2,4 66:2
66:14 67:1 68:2 69:14,23 70:14,25
71:2,15 72:15 76:11 78:12 79:8
84:6 85:20 86:8,21 87:24 88:9,25
89:5,13 91:3 92:2 93:4 94:12,20,24
95:3,6 96:2,7 97:5 98:12,13 99:3,11
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Honorable 1:15 3:1
Honor's 71:4
hope 99:12
hours 81:3 96:18
hundred 64:21
hundreds 63:25
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idea 83:25 91:13
if/when 40:1
ignorance 49:20 50:10 52:10
ignorant 56:17
ignore 13:6
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ignoring 60:16
ill 69:24
illustrates 67:1
imagine 32:19 63:9,15
imperfect 11:10
imploded 102:11,18
important 25:18 32:20 41:5 65:15
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impose 17:12 21:6
imposed 59:14
imposing 15:3 60:16
imputed 35:17,24 95:15
inability 58:14 83:7
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incorporated 17:23
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indenture 25:8
independent 9:8 10:15 15:14 28:15
60:18
indication 82:4
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individual 69:15
individuals 26:23 27:6
induced 49:22 50:17
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77:17,19,20 78:13 81:1,4,11 82:24
83:10,12,20 89:24 92:4,10,16,18,21
93:1
informed 48:3
initial 40:5 51:1 62:8 64:18
initially 33:23
initiate 37:23 77:12 87:4,11
input 104:4
inside 4:11 39:16
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instance 20:8 37:25 84:12
Instead 44:11
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insufficient 70:19
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Internet 77:18
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81:15 98:16
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85:2 95:8,14
investment 53:21 63:5
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irrevocably 9:20
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issue 10:19,21 11:19 22:3 23:12,23
29:18 31:17,18 36:2,5 38:2,7,18,22
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josephamilli kan@gmail.com 104:15
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magnitude 64:13 74:20 78:14
main 23:23
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makes 16:17 31:7 40:7 41:23 100:14
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mealy-mouthed 44:5
mean 17:22 28:17 35:25 48:5 49:1
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meaning 15:23 39:23
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memo 42:22,24 43:8,9 73:5
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mentioned 8:17 60:22 71:6 72:2
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met 32:3,3 34:24 36:25 37:9 41:1 59:4
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meteor 84:17
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mid-November 73:5
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minutes 53:7 56:24 81:4 91:21 100:20
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mischaracterization 30:11
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misremembering 79:18
miss 81:18
missed 9:25 76:6 83:4
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misstatements 80:16
mistake 75:17 102:23
modest 23:1,16
moment 3:6 4:23 7:12,14,18 10:17
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monitor 29:5
month 39:24 40:6 42:6 54:19 56:6
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monumental 72:24 73:10
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motion 15:13 44:13 45:14,14 59:18
motions 5:16,17 6:23 9:25 96:25
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move 11:15 27:6 40:12 75:9 102:1
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necessarily 14:2 15:8 61:25
necessary 56:10 59:21 99:1
necessity 57:22
neck 66:10
need 3:6 5:1 8:22 13:1 14:20 36:18,19
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NETWORK 1:25
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occurred 11:23 25:24 48:17 53:11
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occurrence 72:21
occurrences 85:9
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over 25:19 64:10 75:16 89:22 101:9
overall 23:8,19 54:3
overlap 100:24
overly 32:18
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package 23:4,9
Page 2:24 7:12 10:23 11:20 12:3 19:17
25:16
Pages 1:13 11:12
paid 18:25 23:14 102:19
pain 54:2
paper 20:16,23 104:1
papered 26:20
papers 4:24 61:2,5 66:17 92:1 99:2
103:23
paperwork 34:9
paragraph 19:17,18 95:4
paragraphs 25:4
parameters 17:1
Pardon 95:23,23,23
part 21:5 22:12,25 23:5,8,19 24:21
26:24 30:3 32:24 35:6,7 48:25
55:10 59:7 60:8 65:12 66:17 70:11
71:12,14 83:13 90:2 101:10 103:23
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particularly 66:16
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60:25 66:17 86:19,20,22,2 3 87:2
93:13 96:17 98:13,19 99:10
partner 43:14
parts 24:13 36:20
party 11:8 13:9 16:13 30:13 65:25
66:8 68:9 79:3
passive 49:12
patent 15:17
pause 42:10
pay 32:5 63:21
paying 102:5,6
payment 39:18 41:10,17,24 43:11
44:8,9,10,15,16,1 7 48:25 49:7,10
64:12 75:13 76:2,6,14,2 1 81:14,22
83:4 103:10
payments 78:1,4 81:19,22 83:7
pecking 47:15
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57:15 72:4 77:18 103:1
per 22:5 75:13
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perform 25:6
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performing 26:24 27:7 59:5,9
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perhaps 11:6 101:23 102:9
period 74:13 77:23 82:18
permissible 15:22 37:16 51:10 98:12
permitted 15:16
person 11:22,24 25:23 26:5,8,15 27:3
27:10,19,20 28:13,14 29:4,18 30:2
31:4,5,6 32:2,10,21 35:22 47:7,14
85:17 86:4 88:24 95:10
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64:5
places 83:11
plain 41:21
plaintiff 39:9
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10:14 16:21 22:1 25:12 28:22,24
30:8,18 38:6,23 47:6 58:14 59:20
60:14 61:1 66:22 70:6 73:19 86:18
89:8 91:21 97:22,24
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play 72:12
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57:13
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plus 99:21
pocket 64:23
point 9:12 12:22 15:5 16:3,4 21:2 23:1
23:18,23 36:9 37:3 41:22 43:24
46:1 49:2,21 51:20 52:7 54:12
55:14 57:2 58:3 59:19 62:1 63:5
64:2,15 65:3 72:15 74:6 86:24 87:1
90:9 98:14 101:3 102:3,12,18 103:3
103:24
pointed 24:2 58:25 59:19 62:15 78:21
pointing 21:5
points 8:7 24:11 82:5 83:23 91:24
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Poor's 82:3,15 83:18,22
portion 26:22 30:1 43:10 75:14 76:3
pose 53:7
posed 57:11
position 5:14,15 6:16 7:18 12:25 13:4
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13:5,8,19 14:11 22:7 28:21,25 32:7
32:8 35:9,11 37:7 42:19 51:9 53:23
53:24 54:25 55:1 58:23 66:12 67:2
71:11,17 78:22 90:22 91:9,13
positions 4:22
possibility 73:1
possible 26:2 65:19 66:21 72:9,21
posture 96:23
potential 13:14
potentially 55:21 66:12
PowerPoint 4:17
PowerPoints 4:7
practical 76:16 91:9 98:10
practice 48:10
practices 13:24
precedent 25:21 32:25 33:6 34:10,24
35:4,23 36:24 37:2,9 38:1 59:3,6
66:16 75:20 79:25 81:16 84:10
94:23 95:9,10,12 96:11,13
preface 5:10
premise 36:21
premised 60:16
prepared 4:7 57:3 80:24
preparing 49:14
present 3:23
presentation 50:24 58:5
presentations 4:20
presiding 3:2
press 27:6
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pretty 17:14
previous 51:15
principal 47:21
prior 8:19 66:3 71:4
priority 100:2
private 77:17
privileged 41:20
privy 78:13
probability 82:22
probable 82:4
probably 19:13,15 54:19 60:8 74:18
101:4
problem 49:8 52:22 57:21 78:14 96:12
problems 11:18 31:21
procedure 90:12
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90:17 91:11
process 9:11 17:9 18:16,18 21:23
26:18 30:23 87:5,11
processed 21:13
products 26:25
prohibition 61:11
project 10:25 11:16 18:14 26:1 33:15
33:17 34:15 40:3 47:2 51:24 53:20
54:8,11 55:5,13,19,22,2 5 56:11
59:12 62:9,24 63:1,12,19 64:4,8,15
64:22,25 65:19 74:10,12,25 76:18
77:5 84:17 91:12 92:17 101:25
102:5,7,11,13,18,24
projected 20:19,21
promptly 88:6
proof 70:6
properly 70:8
properties 103:16
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protected 55:13,14
protection 103:13
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protocols 102:22
provide 85:23 88:7 103:13
provided 18:12 24:8 81:2
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60:9 86:8,9 88:4 95:16
province 16:15
proving 16:7
provision 14:12,20 15:2,6 21:10 22:3
28:3,6,12 32:3 59:7 79:11 86:2,14
86:24 87:25 103:8
provisions 7:21,24 25:10 29:9,10
30:20 65:8 79:9 85:14,23 89:10,12
103:7
prudent 13:23
public 68:19,20,21 77:17,19,21 83:21
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publicly 63:25
pull 27:11 28:16 63:4 101:19
pulled 54:11 55:18
pulling 63:19 101:20
pulls 47:15
purpose 5:13 16:7 25:2,11
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65:11 76:16
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53:12 61:6 63:12,13 64:18 66:10
68:2,7 73:15 74:6,12 75:18 77:2
90:2 103:5
puts 49:19 82:21 83:15
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p.m 104:7
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qualify 31:12
question 6:23 10:7 13:20 15:1,12
16:16 22:2 25:12,14 28:13 35:19
36:6,11,11 38:14 39:15 43:10,13,17
43:20 45:13,14 47:12 48:21,25
49:13 50:11 53:1,3 55:10,25 61:14
62:1,20 75:18 78:7 86:18 89:23
95:2 96:3 102:16
questions 5:1,11,14 7:1 27:25 34:19
39:7 53:7 56:5 57:10 58:8 69:9,10
69:12 71:4 97:7 99:7
Quick 93:3
quickly 103:3
quiet 57:8
quite 12:23 46:14 48:4
quote-unquote 90:13 101:19
quoting 39:22
R
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rabbit 5:12
Rafitti 47:20
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69:9,10 91:25
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88:22 89:1,4 92:4,5,12 95:4
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Realtime 1:25 2:12 104:13
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76:19 95:18 98:21
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70:17 72:9 77:1
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Recalling 77:14
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73:25 80:3
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23:25 24:3,13
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52:3,12 59:12,16 65:8 79:2 85:2
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64:17,19 65:5 72:22
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Reporter 2:11,12 104:13,13
Reporter's 2:25
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42:4,16 51:16 52:1,3 59:17,25 65:8
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40:12 41:3 42:5 59:2,23 67:9
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84:10 85:5,24 90:7,11,13,1 3 103:15
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Resorts 37:14 50:18 51:11 62:23
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49:13 83:14,17 93:3
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87:22
responsibility 28:15
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retail 17:6 36:5 37:11,21 39:24 40:19
44:8,16 51:17,24 52:8 54:11,18
55:10 75:15 76:3 78:15,17,19 81:14
81:16,18
retaining 25:3
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return 56:21
review 18:11 19:25 20:11 21:15 24:5,7
28:16,17 34:8
reviewed 33:23
reviewing 22:8 103:5
reviews 21:22
Revolver 63:24 68:16
revolvers 53:17 54:25 86:5
Revolving 62:10 63:24
right 3:22 4:6,10 5:4 7:14,17 9:15,18
13:8 15:19 16:5 17:20 18:8,22 19:5
19:14,16 20:17,20,22,2 5 21:4,25
23:11 27:15 29:3 31:3,3 32:6,24
33:8,18 34:16 37:6,11,12,2 5 45:6
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61:20 64:5 66:20 68:11,11,18 69:3
70:1,2,3 71:1 73:18 76:25 77:23
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88:10,20 90:2,19 91:14 93:7 94:17
96:7,16 97:1,7,11,1 8 98:6,7,23 99:2
99:16,19 101:6,13 102:24
rights 24:23 61:4 62:21 65:17,20,24
65:25 66:23,23 69:1,2 70:5 71:19
80:4
rise 3:1 91:7
risen 84:20
rises 62:19
risk 82:21
role 6:7,18 18:19 19:12 85:6 96:24
roles 93:11
roughly 22:15
routinely 103:18
RPR-CM -NSC-FCRR 2:11 104:12
rule 100:14
S
S 1:15 3:2
sake 97:14
sales 82:10 83:8
same 7:5 8:2,4,6 22:16 26:25 27:2,4,8
29:12 31:6,22 32:13 40:8 81:1 86:9
88:8
satisfaction 59:13
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35:4,23 37:2 38:1 40:12 90:19
94:23 95:12 96:11,13,15
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saw 7:5 86:3
saying 20:18 30:5 31:22 35:2 36:13
43:22 90:1 102:21
says 8:14 10:23 15:11 16:9 18:21
21:17 25:5 32:16 33:3 36:22 42:8
42:15,24 43:3 48:19,23 50:17 52:12
52:20 60:5 68:10 83:11 84:7 87:25
89:4 91:6 92:18 95:24
scheduled 81:3
se 22:5 75:13
seated 3:6 4:24
second 12:2,4 13:20 22:1 25:13 28:23
30:1,17 38:4 39:8 41:3 53:14 60:18
102:3
seconds 71:8
section 9:19 14:22
see 6:25 11:13 13:21 16:3 17:12 19:2
19:18 27:23 33:3 41:20 52:5 55:18
63:1 83:24 89:5 99:6,7
seek 40:19
seem 10:3 11:14 32:18
seemed 21:6 96:22
seems 11:6 15:20 24:15 29:4 31:2
33:10 53:16 55:8 94:4 96:20
seen 9:23
self-executing 31:7
send 42:2 43:7 98:9,17
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sends 31:12 42:23 68:9 76:7
Senior 1:16 62:8
sense 9:11 14:19 15:2,5 31:13 40:7
54:24 56:10 67:12 100:14 102:7
sent 67:21 76:7,20
sentence 13:21
sentences 52:18
September 39:16 41:4 48:20 52:21
53:2 54:8,15 55:3,9 62:13 64:4,17
71:23 72:5,10,10,1 9 74:14,15,21
75:9 76:13 77:23 82:1,2 90:16
102:24
series 39:15,20 42:22
service 19:18
services 103:9
session 3:2 80:7
set 8:9 25:14 60:10 83:14 84:19 93:13
96:20 97:3
sets 16:10 25:2
share 40:23 48:24 53:18 54:2 76:3,10
shock 76:7
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show 44:24,25 45:18
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showing 70:8 103:25
shows 36:17 47:6
shut 64:14
shutting 65:19
side 3:13 5:11 16:21 20:4 22:1,13 35:5
46:4 47:7 72:3 73:19 77:2,17,17,19
86:8 89:8 91:21 99:18
sides 4:20 7:7 8:1 34:18 56:22
side's 7:18
sign 33:24 34:6
signatories 8:24,25 9:9,14
signatures 18:7 77:15
signed 10:15 97:21
significance 10:19 11:6 53:9
significant 75:8 83:24
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similarly 25:7
simple 6:13 34:2,4 58:24
simply 64:14
since 3:17 30:19 32:13 35:2 63:2
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sir 13:7 73:21 80:6
sit 32:18
sitting 64:20,23 79:23 80:3 87:16
90:17
situated 25:7
situation 16:11 31:10 32:19 33:9,10
33:13 34:20 37:22 55:9 56:3 62:5
62:16 67:11,23 69:17
situations 73:11
Skipping 40:10
slides 57:4
slight 61:6 69:5,7
slightly 11:10
smacks 61:4
small 18:25 51:22
small-term 67:5
Smith 1:21
Soffer 46:19 100:6
sold 97:23
sole 66:7
solely 5:17
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some 4:17 5:1 7:7 10:19 11:6 12:16
15:20 17:13 19:3 23:12 29:4 38:17
44:8,15 46:5 52:5 56:21 57:10 58:1
58:7 60:20 63:20 64:25,25 72:4
76:19 84:24 97:21 98:21 101:24
somebody 23:10 26:6 27:10 48:16
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someone's 65:25
something 10:15,16 14:10,17,20
22:12 33:12,16,20 40:11 48:9 54:13
54:20 57:21 58:18 60:6 71:12
sometimes 94:3
somewhat 16:1 27:23
somewhere 19:10 46:20 47:15
soon 26:2 65:19
sophisticated 93:13
sorry 7:13 28:18 55:3 68:5 82:13 84:5
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sort 7:24 12:21 14:11 19:7 44:11 66:2
81:24 90:14
sorts 31:20
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SOUTHERN 1:1
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specific 4:16 10:16 11:17 14:4,6 24:14
25:10,11 26:25 27:6 29:17 35:2
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specifically 19:9,11 23:16 24:22 28:7
29:20,24 32:17 47:19 52:2,12 60:5
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specified 17:7 32:20
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Square 2:4,4
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20:2,12 21:7 22:8,15 25:9 36:15,15
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58:2 71:3,4 72:17
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States 1:1,16 2:11 46:17 104:13
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81:17,24 99:20 100:1 101:10
102:25
stipulation 100:17
stood 84:25
stop 6:15 11:20 26:2 38:2 41:25 77:13
79:12 83:13 88:1 91:7,14 98:16
101:22,24,2 5 102:6,10,17
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Street 1:22
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47:14 48:17
struggling 15:1
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90:25
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subpart 11:21 12:14 26:4 32:6
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93:21,22 94:18
sufficient 38:23 65:13 70:9 89:12
100:24 104:1
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suggest 80:3
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suit 96:5 97:13
Suite 1:22 2:8,12 104:14
summary 5:16 9:25 15:13 22:4 35:20
37:7 45:8 53:13 56:16 60:19 70:23
supersede 8:18
support 35:11 75:1
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sure 20:13 21:11,22 22:18,24 26:19
28:17 35:3 38:19 44:21 50:8 58:4
64:3 73:18,20 90:18 91:10 95:2
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Susman 40:2,14 42:11 44:14
Susman's 80:22
suspicious 39:6
switch 38:5
synonymous 28:2 29:12
system 68:22
T
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TABLE 2:23
take 7:12,14 25:13 50:5 52:16 54:24
56:11,13,24 60:12 66:9 69:17,22
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taken 38:9 57:16 58:12 83:10,11
102:22
taking 59:11 65:22
talk 14:13 16:24,25 96:23 101:17
talked 32:1 73:6 81:13 83:19 90:8
94:24
talking 14:15 25:15 27:9 47:23,24
51:22,23 52:21 61:18 64:12 66:15
83:20 89:17 91:2 93:9
talks 8:13 13:21 16:19 32:21
team 74:20
technical 102:14
technically 94:3
telephone 4:8,14
tell 29:8 47:19 68:10 97:20 102:10,17
telling 48:16 65:8 66:25 73:4
ten 72:23
tends 15:22
tens 23:4
term 9:5,14 10:12 30:9,12 31:9,19
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November 18, 2011
113
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03.29.12
03.29.12
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80
03.29.12
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305.523.5588
04.02.12
04.02.12
11/18/2011, one volume
/s/ Joseph A. Millikan
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Case 1:09-cv-23835-ASG Document 145 Entered on FLSD Docket 05/16/2013 Page 1 of 1
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