David Bergstein, Albert Hallac

1 2 3 4 In Re: 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
UNITED STATES BANKRUPTCY COURT CENTRAL DISTRICT OF CALIFORNIA --oOo-) ) THINKFILM, LLC and ALLARCO ) ENTERTAINMENT, INC., ) ) Debtor. ) ______________________________) ) In Re: ) ) R2D2, LLC, ) ) Debtor. ) ______________________________) ) In Re: ) ) CAPITOL FILMS DEVELOPMENT, ) LLC, ) ) Debtor. ) ______________________________) ) In Re: ) ) CAPCO GROUP, LLC, ) ) Debtor. ) ______________________________) ) In Re: ) ) CT-1 HOLDINGS, LLC, ) ) Debtor. ) ______________________________) Case No. LA10-19912-BR Los Angeles, California Monday, October 29, 2012 2:00 p.m.
Case No. LA10-19924-BR
Proceedings recorded by electronic sound recording; 25 transcript produced by transcription service.
Briggs Reporting Company, Inc.
ii 1 2 3 4 5 6 7 8 9 10 11 12 13 14 APPEARANCES: 15 For the Trustee Ronald L. Durkin: 16 17 18 19 For the Guilds: 20 21 22 23 24 25 DAVID E. AHDOOT, ESQ. Bush, Gottlieb, Singer, Lopez, Kohanski, Adelstein & Dickinson, ALC 500 North Central Avenue Suite 800 Glendale, California 91203 (818) 973-3252 LEONARD L. GUMPORT, ESQ. Gumport Mastan, ALP 550 South Hope Street Suite 825 Los Angeles, California 90071 (213) 452-4900 TRANSCRIPT OF PROCEEDINGS BEFORE THE HONORABLE BARRY RUSSELL UNITED STATES BANKRUPTCY JUDGE HRG. RE MOTION TO ABANDON DESIGNATED PROPERTY HRG. RE MOTION FOR EXAMINATION OF LEONARD GUMPORT, GUMPORT/ MASTAN, RON DURKIN, CHAPTER 11 TRUSTEE, DURKIN FORENSIC, INC. AND CLIFTON GUNDERSON, LLC PURSUANT TO FED. R. BANKR. P. 2004; REQUEST FOR PRODUCTION OF DOCUMENTS HRG. RE MOTION TO ABANDON GRANTING TRUSTEE AUTHORITYDESIGNATED PROPERTY HRG. RE MOTION FOR AUTHORIZATION TO PURSUE BANKRUPTCY ESTATE LITIGATION CLAIMS
iii 1 APPEARANCES: (cont'd.) DAVID B. PARKER, ESQ. Parker, Shumaker, Mills, LLP 801 South Figueroa Street Suite 1200 Los Angeles, California 90017 (213) 622-6985 LISA J. DEMSKY, ESQ. Munger, Tolles & Olson, LLP 355 South Grand Avenue 35th Floor Los Angeles, California 90071 (213) 683-9100 STEVEN M. GOLDSOBEL, ESQ. Law Offices of Steven M. Goldsobel 1900 Avenue of The Stars Suite 1800 Los Angeles, California 90067 (310) 552-4848 MITCHELL J. LANGBERG, ESQ. Brownstein, Hyatt, Farber, & Schreck, LLP 2029 Century Park East 21st Floor Los Angeles, California 90067 (310) 500-4631 SUSAN H. TREGUB, ESQ. 17554 Weddington Street Encino, California 91316 (818) 679-9278 DAVID L. NEALE, ESQ. TODD M. ARNOLD, ESQ. Levene, Neale, Bender, Yoo & Brill, LLP 10250 Constellation Boulevard Suite 1700 Los Angeles, California 90067 (310) 229-1234
2 For the Levene, Neale Law Firm and David Neale, 3 Irvin Gross, and Beth Young: 4 5 6 For the Stroock Law Firm and Daniel Rozansky: 7 8 9 10 For Entertainment Fund, Cayman Fund and Aramid 11 Entertainment BV: 12 13 14 For Screen Capital, Genco Capital, Aramid Capital, 15 and David Molner: 16 17 18 For Susan Tregub, in Pro Per, and for Teri Zimon: 19 20 21 For Aramid Entertainment and Screen Capitol: 22 23 24 25
iv 1 APPEARANCES: (cont'd.) VICTOR A. SAHN, ESQ. Sulmeyer Kupetz, APC 333 South Hope Street 35th Floor Los Angeles, California 90071 (213) 626-2311 LUCIA E. COYOCA, ESQ. Mitchell, Silberberg & Knupp, LLP 11377 West Olympic Boulevard Los Angeles, California 90064 (310) 312-2000 Wanda Toliver United States Bankruptcy Court Edward R. Roybal Federal Building 255 East Temple Street Los Angeles, California 90012 Briggs Reporting Company, Inc. 6336 Greenwich Drive, Suite B San Diego, California 92122 (310) 410-4151
2 For David Bergstein: 3 4 5 6 For David Bergstein: 7 8 9 10 Court Recorder: 11 12 13 14 Transcriber: 15 16 17 18 19 20 21 22 23 24 25
1 1 2 3 4 LOS ANGELES, CALIFORNIA MONDAY, OCTOBER 29, 2012 2:00 PM --oOo-(Call to order of the Court.) THE RECORDER: Number one, ThinkFilm; two, R2D2;
5 three, Capitol Films; four, Capco; and five, CT-1 Holdings. 6 MR. GUMPORT: Good afternoon, your Honor. Leonard
7 Gumport of Gumport, Mastan for the trustee.
The trustee is
8 the moving party on one matter and the responding party on 9 two others. 10 11 THE COURT: MR. AHDOOT: All right. Good afternoon, your Honor. David
12 Ahdoot on behalf of the Directors Guild, the Writers Guild, 13 SAG-AFTRA, Motion Picture Industry pension plans and the 14 Guild plans. 15 16 THE COURT: MR. PARKER: All right. Good afternoon, your Honor. David
17 Parker appearing specially on behalf of the Levene, Neale 18 firm and on behalf of three of the partners, David Neale, 19 Irv Gross and Beth Young. 20 21 THE COURT: MS. DEMSKY: Thank you.
All right. Good afternoon, your Honor. Lisa
22 Demsky of Munger, Tolles and Olson, appearing specially on 23 behalf of the Stroock law firm and one of its partners, 24 Daniel Rozansky. 25 THE COURT: All right. Thank you.
2 1 MR. GOLDSOBEL: Good afternoon, your Honor. Steve
2 Goldsobel, also appearing specially on behalf of 3 Entertainment Fund Limited, Cayman Fund Holdings and Aramid 4 Entertainment BV. 5 6 THE COURT: All right. Good afternoon, your Honor.
MR. LANGBERG:
7 Mitchell Langberg, Brownstein, Hyatt, Farber, Schreck, 8 appearing specially on behalf of Screen Capital 9 International Corp., Genco Capital Corp., Aramid Capital 10 Partners and David Molner. 11 12 THE COURT: MS. TREGUB: All right. Thank you. Susan
Good afternoon, your Honor.
13 Tregub appearing in pro per and specially on behalf of Teri 14 Zimon. 15 16 THE COURT: MR. NEALE: All right. Good afternoon, your Honor. David
17 Neale, Todd Arnold, Levene, Neale, Bender, Yoo and Brill on 18 behalf of Aramid Entertainment Fund, Aramid Entertainment 19 BV, and Screen Capital International Corp. on matters six 20 through 12. 21 22 THE COURT: MR. SAHN: All right. Your Honor, good afternoon. Victor
23 Sahn of Sulmeyer Kupetz appearing for David Bergstein, the 24 moving party on two matters, and here as well on the 25 abandonment motion of the trustee.
3 1 2 THE COURT: MS. COYOCA: All right. Good afternoon, your Honor. Lucia
3 Coyoca, Mitchell, Silberberg and Knupp, specially appearing 4 on behalf of David Bergstein. 5 6 THE COURT: All right.
Mr. Gumport, briefly, your -- I don't know where It was amazing.
7 you're headed with your motion to abandon. 8 Good thing I was sitting down.
For the first time I can
9 recall, there's actually an agreement between Mr. Bergstein 10 and everybody else on the other side. 11 second time, I think. 12 But in any case -- and then you didn't respond Maybe that was the
13 directly, but I did see rather unusual -- for me, anyway -14 sort of a by-the-way comment, which I'm not used to what 15 those are, in your response to some other things. 16 17 I assume you're not wanting to go ahead with that? MR. GUMPORT: Well, the position is, your Honor --
18 the short answer to your question is, I recommend. 19 THE COURT: No, I know your motion. But usually
20 you see an opposition.
But the only thing I saw from you
21 was sort of an unusual thing, which is unusual in pleadings, 22 included in your opposition to the two motions of Mr. 23 Bergstein, sort of a by-the-way, which is sort of an unusual 24 heading but not in the caption. 25 about it. And you sort of talked
4 1 2 But -- so I don't see any reply to the opposition. MR. GUMPORT: Your Honor, there is -- all we said
3 is, and all I'm recommending is, particularly since we have 4 new schedules from Mr. Bergstein is -- well, let me break it 5 down. 6 I would suggest putting this over. I mean they
7 want to come -8 9 deny it. 10 However, it's clear where everybody's coming from. THE COURT: No, I won't do that. I'm going to
11 I understand your position and clearly at least about two12 thirds of the reasons were the same for Mr. Bergstein, but 13 clearly a third was not. 14 Rather than put it over -- it's obviously going to
15 be without prejudice if things change since you filed the 16 motion, but I'm not going to continue it. 17 MR. GUMPORT: Your Honor, just one item on that,
18 if I may, and I'm only going to talk about the accounts 19 receivable. 20 21 THE COURT: MR. GUMPORT: All right. As you know, a lot of adversary
22 proceedings have been filed. 23 Mr. Bergstein filed a set of schedules as set Here are these
24 forth in the abandonment motion saying: 25 accounts receivable.
I don't think they're worth more than
5 1 10 cents face value. And not including collection costs, I
2 think that might bring in $250,000. 3 4 That was his schedules. Then with the abandonment motion, we said: We've
5 contacted all these people, and they've turned over a total 6 of -- I forget what the numbers -7 THE COURT: I don't think anybody actually
8 specifically objected to that portion of it. 9 10 11 things. 12 MR. GUMPORT: Right. And so we contacted all MR. GUMPORT: THE COURT: Right, right. I was focusing more on these other
13 these people and most of them have said "We don't have the 14 money" and the ones that have given us money have given us 15 between 10 and $15,000. 16 And then what happened was we were told there are And we got the amended
17 these amended schedules coming in.
18 schedules Friday night, and the representations about the 19 accounts receivable is exactly the same. 20 21 proceed. 22 I was really not focusing on that portion. I THE COURT: They're --
Well, let me ask you before you
23 gather that nobody really has any objection to those. 24 25 UNIDENTIFIED MALE SPEAKER: THE COURT: The accounts? I don't even
Yes, the accounts.
6 1 recall seeing that in the reasons for objecting to the 2 abandonment. 3 I saw the motion but not in the opposition.
So I assume if I don't hear anything that that It was the other
4 was -- nobody stated any reason why not.
5 things, causes of action and things of that sort. 6 7 8 So yes, why don't you prepare an order that -MR. GUMPORT: THE COURT: Okay. -- I'm going to deny without prejudice
9 the remainder, but I will grant that portion of it. 10 MR. GUMPORT: Okay. And, your Honor, for the
11 Court's information, that gets rid of 38 adversary 12 proceedings. 13 14 15 16 And what we will do with those is -I didn't realize that but -Yeah. -- that's always good news. Yeah. And what we will do is we
THE COURT: MR. GUMPORT: THE COURT: MR. GUMPORT:
17 will dismiss those without prejudice. 18 THE COURT: Because I know there were a number of
19 them filed, like about 100 or so -20 21 MR. GUMPORT: THE COURT: Uh-huh. -- at least according to my clerk. So those 30-something are of that We
22 were talking about it. 23 group? 24 25 MR. GUMPORT: THE COURT:
Approximately 38 are of that group. Okay. So there may be 60-something
7 1 left? 2 3 left. 4 5 THE COURT: MR. GUMPORT: Well, whatever. But in any event -- and those will MR. GUMPORT: I think there will be even fewer
6 be dismissed without prejudice. 7 8 9 say. 10 11 THE COURT: MR. GUMPORT: Okay. Okay. All right. And that's all I wanted to
Thank you very much, your Honor. THE COURT: Okay. Thank you very much.
I'll next take this motion to pursue bankruptcy
12 litigation. 13 Mr. Sahn, it's your motion. I have a few
14 questions about that. 15 motion itself. 16 the other name. 17
I have some questions about the
I notice in firms, you have the top name and
Who actually prepared these papers?
Was it you --
18 I mean you would know, I assume, because your name is on 19 there. 20 21 22 MR. SAHN: THE COURT: MR. SAHN: Your Honor -It wasn't meant as a trick question. No. It's myself. Every motion is
23 prepared by Mr. Werth and myself. 24 THE COURT: Okay. And I assume you're familiar
25 with all the cases.
You wouldn't cite any cases that you
8 1 weren't familiar with, I assume. 2 3 MR. SAHN: THE COURT: I would certainly hope not, your Honor. Well, I want to ask you a few things
4 about the motion. 5 First of all, the authority to do it, you've cited And my question is: Are any of
6 a whole bunch of cases.
7 those cases dealing with a trustee? 8 You say in your heading the trustee, but tell me
9 which of those cases actually are a case dealing with a 10 trustee abandoning things as opposed to a debtor in 11 possession. 12 You can take a minute if you want, but just tell
13 me which of those cases -14 MR. SAHN: Your Honor, I wouldn't be able to I don't know. Well, I thought you just told me a
15 answer that question. 16 THE COURT:
17 minute ago you actually had read all the cases. 18 MR. SAHN: As to whether it was seeking authority
19 to pursue an action that a trustee was not pursuing versus 20 an action that a debtor in possession was not pursuing, I 21 don't know which of those cited -22 THE COURT: You would have thought had you had one
23 of those, you would have highlighted it, I assume. 24 25 MR. SAHN: THE COURT: I would think so, your Honor. Were there any highlighted?
9 1 2 3 Take a minute. (Pause.) MR. SAHN: Your Honor, the cases that we cite are It's your motion.
4 primarily or principally on pages 12 and 13 of our motion. 5 THE COURT: Okay. I mean I don't know what page
6 number but I've read them. 7 8 9 trustees? 10 say it. 11 MR. SAHN: Well, it certainly says here -- it MR. SAHN: THE COURT: I know you did. Anything there highlighted about
I mean in the captions, in your headings you
12 absolutely says here on -- and, again, page number is page 13 13 in the middle of the page. 14 15 THE COURT: MR. SAHN: Right. Talking about the Ninth Circuit
16 granting creditors derivative standing to pursue litigation 17 on behalf of debtor's estates where the trustee or debtor in 18 possession fails to do so. 19 THE COURT: But specifically I didn't see any -These
20 there may be, but I tried to read it best as I can.
21 are all cases, are they not, where they're typically debtors 22 in possession either pursuing or not pursuing fraudulent 23 transfers, prefaces and the like against friends, relatives 24 and what have you. 25 MR. SAHN: Isn't that the typical case? I don't know that it's friends,
10 1 relatives but it's certainly -2 3 4 and -5 6 THE COURT: MR. SAHN: That's what --- debtors in possession have no less THE COURT: MR. SAHN: Whatever. But folks who --
It certainly is avoidable transfers
7 or different obligations than a trustee has. 8 THE COURT: No, absolutely. But the nature of
9 those cases, typically there's some reason why -- personal 10 reason. 11 12 your -13 MR. SAHN: Your Honor, I agree with you that when In any case, I had some other questions about
14 this comes up -15 16 this case. 17 MR. SAHN: I will agree with you that in my THE COURT: Because it's not exactly the same as
18 experience in the past, these situations have come up where 19 there is a relationship between the potential litigation 20 target and the debtor in possession or its principal. 21 22 THE COURT: MR. SAHN: Okay. I have --
And if that's your point, that's
23 usually when it comes up. 24 THE COURT: Right. And I have a couple questions
25 in here about your motion.
11 1 One, on page three. This is your reply, the
2 omnibus reply. 3
And that's on line six on page three. But it concerns me
I assume that that's an error.
4 because I found a few. 5 6 7 8 MR. SAHN: THE COURT: MR. SAHN: THE COURT:
Tell me what that says.
Page three. This is your reply. Yes, I'm looking at it. And why don't you just read it. It's
9 just one line. 10 11 12 MR. SAHN: THE COURT: MR. SAHN: Line six? Uh-huh. "The settlement is set for hearing
13 January 30." 14 15 16 THE COURT: MR. SAHN: THE COURT: Yeah, keep going. "Two thousand" -- I'm sorry. 2013.
Well, again, it's an obvious -- but I But I'm going to ask you --
17 found a few of those in here.
18 it was obviously meant "2013," I assume. 19 20 MR. SAHN: THE COURT: It was, your Honor. Okay. My apologies.
The next question I have -- not But I want to turn to another
21 to be ticky-tack about this.
22 one on page -- excuse me one second here. 23 On page seven -- excuse me one second. I don't
24 understand this. 25 line 16.
This is on page seven and it's starting on
12 1 2 MR. SAHN: THE COURT: Yes, your Honor. And I'm going to read this to you and
3 I'd like you to tell me what it means. 4 It says -- well, I'll read the line before. It says: Or
5 I'm going to read the entire thing. 6 7 8 9 10 11 12 13 14 15 16 17 18
"Bergstein filed the motion September 21, 2012. The motion is
attached as Exhibit 6, a form complaint that Bergstein proposed filing against certain defendants on behalf of the estate. The motion indicated that the
proposed complaint was a draft and was subject to further revision. "On October 6, 2012, Bergstein filed a revised exhibit to the motion, that is revised proposed complaint. revised complaint" -Now, this is the part I want to read. This says: I want you The
19 to tell me what this means. 20 21 22 23 24 25
"The revised complaint omitted the trustee and his professionals as defendants and by this motion the trustee does not seek authorization to pursue litigation against those parties."
13 1 Why don't you read that over again and tell me
2 what that means. 3 MR. SAHN: Well, first of all, the words "the
4 trustee" are wrong and are -5 THE COURT: Well, read it -- because I figured
6 that, but I wasn't sure. 7 8 MR. SAHN: THE COURT: What it means is that the -So that -- so you didn't mean that the You're talking about Mr. Bergstein
9 trustee does not seek. 10 does not seek? 11 12 MR. SAHN: THE COURT:
That's correct, your Honor. Okay. Well, I was asking -- isn't
13 that pretty important? 14 about this, but -15 16 17 18 19 others. 20 21 excuse. 22 23 THE COURT: MR. SAHN: MR. SAHN: THE COURT: MR. SAHN: THE COURT:
I mean I don't mean to be picky
You're not being picky. But did you really read these over? Your Honor, you're not being picky. This is so far. I have a couple few
But what happened in your reviewing this? MR. SAHN: I have no good answer. There's no
All right.
I have one --
Other than to make the point, your
24 Honor -- and to the extent that this is part of your 25 question, which is that the September 21st complaint or
14 1 draft named the trustee and his counsel -2 3 minute. 4 5 6 7 MR. SAHN: THE COURT: MR. SAHN: THE COURT: -- in the subsequently filed complaint. No, I understand that. Okay. That part, I did understand. I've THE COURT: Well, I'm going to get to that in a
8 read both of them. 9 10 MR. SAHN: THE COURT: Okay. I understood that. But I'm just
11 trying -- I read these very carefully. 12 stuff here.
There's a lot of
And I want to make sure that everybody read it
13 as carefully as I do. 14 Then another question. Excuse me. Let's see. I
15 have a question about this at line seven, back to page 16 three. 17 18 19 20 21 22 So you now have -- this one says: "There are additional meritorious claims that are not specifically pled in the draft complaint supplied as Exhibit 6." What is that all about? I mean to try to set the
23 stage here, we have a motion, and we've had this problem 24 before as far as filing motions and then adding things later 25 in a so-called reply. There's not really a proper reply.
15 1 Are you really telling me at this stage -- it
2 seems obvious to me that you started off with a motion 3 asking for certain things. But now you're saying: And, by
4 the way, we also have a bunch of other things we also want 5 to do. 6 Is that a proper reply to an opposition to your
7 motion to say, oh, now we've got some other things? 8 MR. SAHN: Your Honor, if I can reply in a little
9 bit of a narrative. 10 There were half a dozen oppositions, all of which
11 stated -- and not to characterize them in any way but many 12 of which stated that many of the claims referenced probably 13 in both complaints, but certainly in the September 21st 14 complaint, were the subject of a demurrer in another 15 litigation matter that was sustained without leave to amend. 16 17 Court. 18 MR. SAHN: And they argued to as the law requires THE COURT: Right. That was in the Superior
19 that order or that ruling meant that you should conclude 20 that there wasn't a colorable claim that could be pursued 21 and that therefore the motion as to that test should be 22 denied. 23 24 THE COURT: MR. SAHN: Okay. And we wanted to respond and say: The
25 later filed complaint -- and Ms. Coyoca is here as the
16 1 draftsperson to tell you exactly what the differences are. 2 But that there were differences between -3 THE COURT: Well, I don't think you can do that
4 under the rules.
I've never seen -- well, I shouldn't say But you file a motion and what's
5 I've never seen it before. 6 this, a moving target? 7 8 MR. SAHN: THE COURT:
No, your Honor. You file it and say: I mean -That's not it at all. They made Well, we'll get
9 back to when we amend it. 10 MR. SAHN: No.
11 an argument that the claims were barred. 12 13 THE COURT: MR. SAHN: That's right. And we're trying to tell you how
14 they're incorrect in that by showing you how the complaint 15 that we have given to you as Exhibit 6 is distinguished from 16 the complaint on which the Superior Court -17 THE COURT: But let me read you the title of what And let me read it one
18 you've said.
I've read them both.
19 more time, to make sure I got your answer straight. 20 21 22 23 24 This is item number C here, page three. "There are additional meritorious claims that are not specifically pled in the draft complaint." So what you're saying here -- these are your It says:
25 words -- you're not talking about the demurrer, whether I'd
17 1 agree or not, but you were saying in addition to those, 2 there are other ones. 3 is in bold print. 4 5 Have I read it wrong? MR. SAHN: No. I agree with you. I understand Isn't that what this is saying? This
6 your question now, and I agree with you. 7 THE COURT: So is it proper -- what's that, a
8 moving target?
You file a motion and they respond and you
9 say, well, by the way, we've got some more. 10 11 Is that really appropriate? MR. SAHN: Your Honor, candidly, when I've seen
12 these motions filed, I've never seen a 30-plus-page detailed 13 complaint accompanying it that sets out with specificity 14 what the claims are going to be. 15 16 THE COURT: MR. SAHN: Well, what you do have -And we were careful to say that the
17 claims were certainly included but that this was not a final 18 draft. 19 20 saying. THE COURT: Well, but again, you hear what I'm This is not small By the way,
It's like this moving target.
21 claims court and you just walk in and say:
22 Judge, we've got this -- and the reason that in other cases 23 you don't have this sort of thing, it's very 24 straightforward. Creditors come in, say you know, the
25 debtor in possession gave a preference to his whatever,
18 1 relative, friend, or fraudulent transfer. 2 specifically what they are. 3 4 saying: Here, you're not telling me anything. You're So you knew
I've got these, but if you don't like these, I've
5 got some more. 6 7 I'm wrong. 8 tell me why. 9 MR. SAHN: Your Honor, I can certainly -- first of Is that not -- that's what it says. Tell me if
It appears what you're saying, and if I'm wrong,
10 all, I understand your question. 11 12 13 THE COURT: MR. SAHN: Have I mischaracterized it? No, I don't think you have.
But I think at the same time, all that you can And if you authorize this
14 rule upon is what's before you.
15 to go forward, or if as and when this does go forward, there 16 may be other claims that are pled in addition to those that 17 are in the existing complaint. 18 THE COURT: Well, how would I -- assuming just for
19 argument's sake that I allow you to go forward with any of 20 this, how could that possibly be true what you just said? 21 I would never -- you know, your client has clearly
22 been opposed to virtually everything that the trustee and 23 the other side has said. I'm not saying that's good or bad,
24 but obviously they're in opposition -- Mr. Bergstein and Mr. 25 Tutor who is not represented here -- but clearly, there's
19 1 been -- and the positions are fairly clear. 2 You wouldn't possibly think, I can't imagine, that
3 I would just basically make you in a sense, as Mr. 4 Bergstein, the trustee and you could say: 5 to anything else, pick any other? 6 What you have just said is my biggest concern Well, in addition
7 about if I -8 9 MR. SAHN: THE COURT: Your Honor --- were to have Mr. Bergstein saying
10 well, I'll allow it but he can decide that oh, maybe there's 11 some other things, and somehow in any authority that you're 12 asking today, that would be okay? 13 MR. SAHN: Your Honor, I would have no concern or
14 problem, because I think you raise a valid question that if 15 you were inclined to grant the motion but for this issue -16 and I'm not saying, as you said, that that's your 17 inclination. But were it your inclination, that all that
18 could be filed is what is in the complaint, that is the 19 latest draft that's been put before you. 20 And to the extent that anything else would be
21 added, it couldn't be added without a further specific order 22 from your Honor. 23 24 THE COURT: MR. SAHN: Okay. And so I think it's fair to say that I
25 should be governed and this motion should be governed by the
20 1 four corners of the latest exhibit that's before you, and 2 that to the extent authority is given, it shouldn't be given 3 to do anything beyond what's in that complaint as drafted. 4 5 THE COURT: All right. Some
And then I have a few other questions.
6 interesting twists on our local rules. 7 8 9 Page 11 of your reply. MR. SAHN: THE COURT: Your Honor, pardon me. Sure. This is -- Zimon, if I I know Tregub is representing
10 pronounce it -- Zimon, right? 11 Zimon. 12 13 14 MS. TREGUB: MR. SAHN: THE COURT: Yes.
Page 11 did you say? Yes, page 11. You say -- on page 11,
15 it says "The Zimon opposition." 16 Her opposition is really straightforward at least
17 on a procedural -- she says you never served the motion. 18 You served the notice of the motion and a complaint but you 19 never served the motion, and she cites -- by the way, quite 20 accurately -- our local rules. 21 You, in response, say, well -- never citing a
22 single local rule, you say -- I'm paraphrasing it but 23 essentially you say, which is accurate, that she got the 24 notice and the notice says -- and if you want to get the 25 motion, you've got to go on the website -- or the contents
21 1 of the person. 2 That's pretty much what your opposition said, That's on page 11,
3 right -- your reply to her opposition? 4 12. 5 Am I accurate?
I always like to be sure that I'm That's
6 accurately stating. 7 what you said. 8 9 carefully. 10 rule? 11 MR. SAHN:
That's pages 11, 12 and 13.
And now I'm going to ask you again.
Think very
Is that really your understanding of our local
Your Honor, in response to your She should have been served from
12 question, no, it isn't. 13 the start. 14
At the same time, we say at the beginning, and I'm
15 not sure I -16 THE COURT: No, you've said -- but I'm asking you We've had a number of
17 a very straightforward question.
18 interesting interpretations by you of our local rules, and 19 that's why I would have asked you this anyway. 20 to be sure. 21 Is it your position that you can file a notice but But I want
22 it's not required under our local rules, the ones that she 23 cited, to actually file the motion? 24 do. I know what you've said: A simple yes or no will
Well, she could have just
25 gone and got it.
22 1 But that's not what the local rule says. And I
2 want to ask you: 3 rule? 4 5
Is that your understanding of the local
Did you comply or not? MR. SAHN: THE COURT: No. Why not? And how could you put that
6 in a reply?
Why don't you just admit it, that you didn't Why didn't you just say so? It would
7 properly serve her?
8 have save me a lot of time spent on this. 9 10 11 Why wouldn't you just do that? Any answer? MR. SAHN: Your Honor, sometimes they say to ask
12 the question is to answer it, and I think you've answered 13 it. 14 THE COURT: Well, it is a rhetorical question, but
15 I always like to be sure to give you a fair opportunity to 16 answer it. 17 18 I don't understand. MR. SAHN: She was served with the notice. She
19 was served with the amended complaint. 20 with the motion itself. 21 THE COURT:
She was not served
But yet you say that's okay.
At least
22 you've said it in your papers. 23 Okay. I don't want to belabor the point, but I
24 wanted to give you -- if I'm missing something -25 MR. SAHN: You're not, your Honor.
23 1 2 3 THE COURT: Okay. -- I wanted to be sure of it.
I had a couple questions for you.
On page -- I'm moving to your original motion. And I
4 And I'd like you to turn to page one of your motion. 5 want to read you what you said here. 6 It's on page one, line 22.
And this has to do
7 with the so-called -- the declining of the trustee to 8 respond or to take action as far as considering your -9 giving you authority or seeking authority from this Court to 10 take these certain actions. 11 12 22. 13 14 15 16 17 18 19 20 And I'll just read you -- this is page one, line It says: "Here, Bergstein has demanded that the trustee take action against certain of the identified defendants and it has identified claims that Bergstein believes are colorable and would benefit the estate. However, the trustee has
declined to do so." Now, just in reading that, that would tell me that
21 he told you, "No, I'm not going to do it." 22 But he never did that, did he? That's your
23 interpretation.
Did he ever say -- at least at the time you
24 filed, did he ever say "No, I'm not going to do it"? 25 Because that tells me -- if I were the -- I am neutral in
24 1 this matter, as I am in all, until of course I read all the 2 papers, then I'm no longer neutral on the merits. 3 4 so." But here, you say "the trustee has declined to do I don't see that anywhere in the evidence here. I
5 know that's your take on it. 6 But when -- as an officer of the Court, when
7 you're saying something -- I read to mean that he said "No, 8 I'm not going to do it." 9 MR. SAHN: Did he ever do that?
Your Honor, he said what he said in his
10 papers, which is -11 12 question. THE COURT: I understand. I'm asking you a direct That to me
Did he ever say he would not do it?
13 means he declined. 14 He may not have taken the action, and you could But you didn't say that.
15 have said that. 16 17 18 19 20
What you said was "the trustee" -MR. SAHN: THE COURT: MR. SAHN: THE COURT: I said he declined to do so. Yeah, did he? Yes. When? Point out where he said in any Did he ever say
21 correspondence that he declined to do so. 22 "I'm not going to do it"? 23
He did ask for further information.
But I'm
24 asking you a very straight (sic) question. 25 MR. SAHN: And then said specifically: Mr.
25 1 Bergstein should never be permitted to bring on actions that 2 are property of this estate. 3 THE COURT: So when was that that he said that?
4 At the time you wrote this? 5 6 concerned. And I'd like you to read that to me, because I'm I know what happened. I read it. And of course But
7 I didn't just read this.
I've read the rest of this.
8 it doesn't seem to me that that's what actually happened, 9 and I'd like you to point out to me where he really said, 10 "No, I'm not going to do it" or "I'm not going to agree to 11 do it." 12 He never did agree, but that's different than So I'd like you to find
13 saying "I'm not going to agree." 14 that for me. 15 16 (Pause.) MR. SAHN:
Your Honor, his position was exactly as
17 stated in his papers, and that was -18 19 20 21 22 motion. 23 24 okay. 25 THE COURT: Keep going. MR. SAHN: Okay. Wait a minute. But that's -THE COURT: MR. SAHN: THE COURT: MR. SAHN: And where are you reading from? I'm reading on page nine. Of? Of the trustee's opposition to our
Page nine. Line 17:
26 1 2 3 4 5 6 7 8 9 10 "Should Bergstein be given control of causes of action that he failed and refused to schedule in the debtor's bankruptcy schedules? To ask this There is no
question is to answer it.
set of circumstances in which Bergstein can be entrusted with property of the estates, especially property of the estates that Bergstein concealed." THE COURT: Okay. And that was filed -- let's
11 see, that's 10/22 I believe. 12 13 time -14 15 16 THE COURT: MR. SAHN: THE COURT: No, no. I'm asking you -- no. MR. SAHN: Your Honor, it was his position at the
-- and in his papers. I asked you a very specific question
17 to point out something in writing, and you have, where he 18 said he's not going to agree. 19 Now, this of course was after you wrote this so -His reply was obviously
20 your motion was on September 21st. 21 after that. 22 So I'm asking you again.
At the time you filed
23 this, show me something where he said that he would not -24 MR. SAHN: I don't know that there's anything in
25 the emails he supplied that says that.
27 1 THE COURT: Then why would you say it? Why would
2 you say "the trustee has declined to do so"? 3 MR. SAHN: Because it was true as is demonstrated
4 by his own pleading. 5 THE COURT: No, you're not answering my question.
6 At the time you wrote this, what did you base that on? 7 MR. SAHN: I based it on conversations we had
8 about the matter and about a history of dealing with the 9 trustee in this case -10 11 12 THE COURT: MR. SAHN: THE COURT: Is it anywhere --- as it respects my client. Well, clearly, there's animosity on
13 both sides. 14 MR. SAHN: It isn't a question of animosity.
15 That's not a here nor there. 16 THE COURT: Well, let me stop -- no, no. You're
17 changing the subject. 18 I'm asking a very specific question. I'm
19 concerned about statements that you made.
At the time you
20 made this statement, "the trustee has declined to do so" -21 and I'm asking you at that time, what was that based on? 22 And you've now referred me to something that What about it?
23 happened a month later. 24 MR. SAHN:
Your Honor, the fact that it was put in
25 writing a month later doesn't mean --
28 1 THE COURT: Tell me what you based it on that is
2 in your evidence. 3 4 you to -5 6 THE COURT: MR. SAHN: Okay. -- where the trustee says in writing "I MR. SAHN: There's nothing in writing I can point
7 won't do it." 8 THE COURT: Okay. And in fact, what concerns me
9 about the way this all transpired, I'm looking at page -10 let me see. 11 the reply. I want to make sure. I think it's page 15 of
Let me -- because the facts are pretty unusual,
12 but again, I want to make sure I have them right. 13 On page -- I have it on page 15. Excuse me. Let me find it.
14 It was page 15 of something. 15 it here. Just one second.
I've got to find
I'm looking between your motion
16 and your reply. 17 18 motion. Here we go. It was 15 but it was your original
And it says -- again, and I gather this is what But also I've read --
19 happened only because I read yours. 20 21 22 23 you on? 24 25 motion. THE COURT: MR. SAHN: THE COURT: MR. SAHN: Your Honor --
-- the opposition. Your Honor, I'm sorry, what page are
I'm on page 15 of your original
And it's talking about the demand you placed on the
29 1 trustee. 2 3 4 5 And it says: "Despite the presumptive futility of making a formal written demand upon the trustee, Bergstein did so anyway. Bergstein's counsel" --
6 I'm reading now on page 15, line 13. 7 8 9 10 11 12 "Bergstein's counsel sent a demand email to the trustee's counsel on September 5, 2012 requesting that the trustee consent to Bergstein commencing and prosecuting claims against Aramid, Molner* and Levene and Stroock" --
13 And so forth. 14 15 16 17 18 19 20 were. 21 22 23 "The demand email informed the trustee that if the trustee did not consent to granting its authority by 5:00 p.m. on September 7th, Bergstein would treat it as a denial." Were you really serious about that? You did send the email. I guess you
I saw a copy of it.
So you sent -- two days to -MR. SAHN: THE COURT: I was extremely concerned. No, but that's accurate, right? You If you
24 gave the trustee two days and you, in your own mind:
25 don't respond affirmatively in two days, you would deem it
30 1 as a denial. 2 3 4 that? 5 6 MR. SAHN: THE COURT: What gave me the authority? Yeah. To give somebody -- or it could If you That's what you said, right? That's what I said. What gave you the authority to do
MR. SAHN: THE COURT:
7 have worked the other way around -- two days to say:
8 don't respond, I'm deeming it -- it sounds like one of these 9 bill collectors. I mean where do you think you have the
10 right to tell a trustee in a letter you've got two days to 11 agree or else I'm going to deem it a denial. 12 13 Where do you think you get the ability to do that? MR. SAHN: Because the statute of limitations is
14 expiring in 30 days, your Honor, from that date -15 16 17 18 THE COURT: MR. SAHN: THE COURT: MR. SAHN: Well, why didn't you --- arguably. -- do it in July? Your Honor, the trial didn't conclude This was sent on September 5th. But again, I'll ask you --
19 until the end of August. 20 21 THE COURT: MR. SAHN:
Right.
The trial -- the jury verdict had been
22 maybe two weeks or two and a half weeks old at that point. 23 The matter wasn't ripe as far as we were concerned. 24 THE COURT: So you really -- you think -- and I
25 disagree with you -- that that trial somehow gave you the
31 1 authority to give the trustee two days to respond because 2 the time was running; is that basically it? 3 MR. SAHN: I didn't say the trial did. I said the
4 expiration of the -- the possible expiration of the statute 5 of limitations. 6 THE COURT: Then again, I'll ask you again. If
7 the trial didn't have anything to do with it, why didn't you 8 do -9 10 MR. SAHN: THE COURT: The trial had everything to do with it. Well, okay, that's what I thought.
11 The trial had everything to do with it. 12 MR. SAHN: The trustee would have said the claims There have
13 are invalid.
The matter hasn't gone to trial.
14 been no findings. 15 verdict. 16
We waited until we got the $50.7 million
And after we got the verdict, we made the demand We thought that was the appropriate time. But even so, there was a problem with
17 on the trustee. 18
THE COURT:
19 the statute of limitations, but you felt that you have the 20 ability to deem it denied if they don't respond immediately 21 basically. 22 MR. SAHN: Well, I'm not a judge and I'm not
23 anything higher than a judge, so it was my position, your 24 Honor. 25 THE COURT: Well, do you think -- I'll ask you
32 1 again. What gave you the authority to give him two days and What gave you the ability to do
2 say if not, it's denied? 3 it?
I understand you might be under pressure, but in my You could have
4 opinion, that was self-imposed pressure. 5 made this well before. 6 7 8 9 I did. 10 MR. SAHN: THE COURT: MR. SAHN: Your Honor --
But anyway that's what you did. -- that's what it says and that is what
That's accurate. THE COURT: Okay. And I had one other question
11 about this. 12 13 notes.
Excuse me.
One second. The -- I'm trying to find my Excuse me
One second here.
I think it was in the original motion. I'll be right with you.
14 just one second.
I'm looking for
15 it and I'll find it in just a minute. 16 Here we go.
One second here. This
I want to read you something.
17 is your declaration, last page of your declaration that was 18 filed along with the original motion that was filed on 19 September 21st for authorization to pursue the litigation. 20 I want to read you something, this paragraph. It says:
21 Quite frankly, I wondered what you meant by this. 22 23 24 25 "The trustee responded to the demand email promptly by email by demanding that Mr. Bergstein undertake a number of acts not required or having
33 1 2 any relevance or relationship to the demand sent on September 5th." And
3 Of course, that was your opinion as to the relevance.
4 then this next one, I want you to tell me, what does this 5 mean? 6 7 8 It says: "I have termed the trustee's response as a refusal of our demand." What does that mean? I know you use the word
9 "termed," but what does that mean in English? 10 MR. SAHN: I considered his response a refusal to
11 the demand. 12 13 14 15 16 17 this. 18 19 20 21 22 23 24 25 THE COURT: MR. SAHN: THE COURT: MR. SAHN: THE COURT: That's what "termed" means? Yes, sir. I guess I'll have to look it up. Yes, your Honor. And then I want to read the rest of
"The trustee's response" -"I informed the trustee that this motion would be filed and I further informed him that claims would be requested to be pursued that were not part of the demand email. Those
additional claims are the ones that shall be brought against the trustee, the trustee's professional firm, and the
34 1 2 3 a threat. trustee's counsel and law firm." Well, I must say that appears to me to be kind of That is that he's denied your request and now you
4 are basically saying -- which surprised me that you would 5 actually put that in there -- that now, not only are you 6 going to request that you -- that you were going to sue 7 these other folks, but now you're going to go after the 8 trustee and that's what you're telling me you told the 9 trustee. 10 11 Right? MR. SAHN: THE COURT: Yes, your Honor. What do you think that looks like from
12 my end of it? 13 14 15 MR. SAHN: THE COURT: MR. SAHN: I can't speak to how you perceive it. Well -The way I perceive it is that I
16 certainly was going to tell him up-front what we were going 17 to do and didn't want to mince any words about what that was 18 because if we then filed the motion and named the trustee 19 and included claims against the trustee, then the trustee 20 would say I hid something from him. 21 22 23 24 25 THE COURT: MR. SAHN: THE COURT: MR. SAHN: THE COURT: So --
Right, but at the time --- I'm having trouble doing it -Well, but at the time --- right as far as the trustee goes. -- it seems to me like -- which
35 1 happens a lot in this case -- threats of suit, not by -- I 2 know Mr. Tutor's threatened, that's why the trustee is 3 concerned or counsel for the trustee and the trustee. 4 the Pangea matter is up before the Circuit and threats, 5 which apparently would be carried out, I assume with all the 6 lawsuits going on. 7 And it seems to me, when I read this, you can't be You want to get these And
8 serious, that you wrote him emails.
9 claims and by the way, when you at least determined in your 10 mind that he's not agreeing, that now you're saying, by the 11 way, we're going to sue you too. 12 Is that how it -- you never discussed those claims
13 against the trustee in any of those emails before you 14 termed, as you say, the trustee's response as a refusal. 15 16 Would that be accurate? MR. SAHN: I thought we told him right at the
17 time, your Honor, that this was something we would be doing. 18 THE COURT: Well, then why did you say, "I
19 informed the trustee that this motion" -- that further, 20 there would be additional claims? 21 "Additional" to me means in addition to something Isn't that what it means? And those would be the claims
22 you'd already talked about. 23 MR. SAHN: Yes.
24 against the trustee. 25 THE COURT: But you never -- show me, if you
36 1 could -- the email string, I can't say that I have them all 2 because I don't know. 3 All I know is what people present to me in Court
4 so I don't know if I have all the emails but I have some of 5 them. And I didn't see in there -- correct me if I'm
6 wrong -- in the emails that you presented and the trustee 7 that talked about suing the trustee. 8 Show me if they're there. Because reading your
9 declaration under penalty of perjury, it looks like you had 10 this discussion and said: Oh, by the way, not only are we
11 going to do this, but we also may sue you. 12 13 That's how I read it. MR. SAHN: If you didn't mean that --
Your Honor, I don't have those emails
14 in front of me. 15 via email. 16
My best recollection is that's what I said
If I didn't -THE COURT: Well, then why would you say here that "Additional" means At
17 there would be additional claims?
18 something in addition to what you've been talking about. 19 least to me, that's what it means. 20 I'm really just trying to understand. This is
21 your declaration. 22 MR. SAHN: The only additional claims I can think
23 of, your Honor, as I said, were the claims against the 24 trustee. Whether there were other claims besides those, if
25 I had any in mind at that time, I certainly don't remember
37 1 now what they are. 2 THE COURT: But the word "additional." This is
3 what I'm trying to clarify. 4 four times.
I've asked it two or three or
Additional to the ones that had been discussed.
5 This appears to me -- and if I'm wrong -- this is saying 6 that in addition to the ones we talked to the trustee -7 we're going to now sue you. 8 Is that correct or not? When you say -I thought I've said it's correct, that I mean I've asked it
9 several times. 10
MR. SAHN:
11 we were going to pursue the trustee. 12 THE COURT: But you don't recall now whether or
13 not you had actually talked to the trustee about that? 14 MR. SAHN: No, if I were to answer that question
15 from here, I would say that it was put in writing to him. 16 But I don't recall. 17 THE COURT: Then if you did put it in writing that "the
18 you were going to sue him, why would the sentence be: 19 trustee's" -- "refusal of our demand." 20 21 22 23 24 25 "I informed the trustee that this motion would be filed and further informed him that claims would be requested to be pursued that were not part of the demand email." That's your email. That's your demand.
Those
38 1 additional claims would be the ones that were brought 2 against the trustee. 3 4 demand. When would it have ever come up? You make a
When would the other discussion come up about suing
5 the trustee, if it weren't in your demand email? 6 MR. SAHN: Your Honor, there -- in every issue in
7 this case, there's more than one email exchanged. 8 THE COURT: Well, I understand that. And that's
9 why I'm asking the question. 10 MR. SAHN: And so I would have to go back. As I
11 stand here, I don't know.
But I would have to go back and
12 look at the emails that I wrote to see if as and when an 13 email was written which said to the trustee after the 14 initial demand, you know, besides these claims there will be 15 additional claims against the trustee and its counsel and 16 its accountants. 17 18 THE COURT: MR. SAHN: All right. But I can't tell you as I stand here But if I said
19 that I recall such an email with specificity. 20 it in my declaration, it was surely discussed. 21 THE COURT: All right.
Now, I've asked you a
22 bunch of questions.
But do you have anything -- again, I've
23 read all your papers, as I always do in these cases. 24 25 motion? But do you have anything else to say about your
39 1 2 3 MR. SAHN: THE COURT: A few things, your Honor. All right.
Oh, by the way, there were some evidentiary I'm going
4 objections actually related to the other motion.
5 to grant those evidentiary objections, just so you have that 6 on the record. 7 MR. SAHN: Your Honor, in the oppositions that
8 were filed, there were three issues that were raised by 9 these parties, as I read it, on a collective basis. 10 The first is that this does not meet the standards
11 of a colorable claim, as the cases require. 12 Second, that there's a settlement that is set for
13 hearing on January 30th between the trustee and Aramid, 14 which may dispose of the claims that are in the complaint 15 that we've asked for authority to pursue. 16 And, third, that Mr. Bergstein should not
17 personally be authorized to pursue these claims, which is 18 based upon page nine of the trustee's opposition that I read 19 to you a short time ago. 20 Your Honor, in terms of meeting the colorable
21 claim requirement, the document or documents put before you 22 are that there was in litigation not involving these debtors 23 a demurrer to claims filed against the Levene, Neale firm 24 and the Stroock firm -- no others who we asked to sue in 25 this case, just those two -- which sustained demurrers
40 1 without leave to amend and that those somehow bar or prevent 2 any claims against them from going forward and thereupon the 3 colorable claim requirement. 4 I looked for a definition of a "colorable claim."
5 Had trouble finding it other than in non-bankruptcy cases. 6 I thought what we put before you about a Rule 12(b) standard 7 in terms of looking at the causes of action which a party 8 would plead without -- and looking at the complaint that's 9 been put before you in a manner that allows all inferences 10 as would be the case under Rule 12(b) -11 THE COURT: This is not even in the same -- the This is something much,
12 universe as a motion to dismiss. 13 much different than that. 14
I understand colorable claim, but the issue here
15 is whether or not I would allow a third party to basically 16 bring a lawsuit. So this is not really a motion to dismiss. But in this
17 I understand what colorable claim means. 18 context, it's a little bit different.
But it just means you
19 can show that there's really some reasonable claim, I guess. 20 MR. SAHN: Well, they're saying that regardless of
21 who the party is bringing it, that we failed to meet that 22 standard, and I was responding to that. 23 24 25 THE COURT: MR. SAHN: THE COURT: Yes, I understand. Okay. Remember all those cases where I say
41 1 this may not really fit, all those cases and the whole 2 history of typically debtors in possession not wanting to 3 sue people they've either -- you know, given preferences and 4 fraudulent transfers, it's a different animal than what 5 we're dealing with here. 6 7 MR. SAHN: THE COURT: Your Honor -But, yes, I understand that that's
8 what the cases talk about -9 10 MR. SAHN: THE COURT: Your Honor --- but it's in the context they're
11 talking about it that you have to keep in mind what they are 12 talking about. 13 14 15 MR. SAHN: THE COURT: MR. SAHN: I don't agree with that, your Honor -All right. -- for this reason. The idea that
16 you're focusing factually, as you are I believe, on cases 17 that allow this to take place and the fact that factually 18 many, most, all of those cases -- I certainly didn't have 19 any disagreement with you on that -- arise in the context 20 that you've outlined doesn't mean that the principle of the 21 debtor in possession and trustee having the same obligations 22 would not therefore apply to a trustee who simply doesn't 23 want to bring on causes of action -24 25 THE COURT: MR. SAHN: Yeah, right, if they have --- that are meritorious.
42 1 2 THE COURT: MR. SAHN: All right. And we think, as far as merit is
3 concerned -- we think the standard -- we're clear that the 4 standard isn't any different for a trustee than it would be 5 for a debtor in possession suing an insider for a preference 6 or a fraudulent transfer. The duties are identical. The
7 Code makes it clear that the duties are identical. 8 THE COURT: True, but in those cases, which you've
9 just put your finger on -- which are the vast majority of 10 all these -- you know when you see it. That is, you know --
11 there's a -- you know there's a preference, there's a 12 fraudulent transfer, you know who the transferee was, 13 transferor and you know those facts. 14 MR. SAHN: Your Honor, these are decisions by
15 courts of appeal and those cases, not one of them says that 16 this standard applies to debtors in possession against 17 insiders but doesn't apply to some other class. 18 to everyone -19 20 THE COURT: MR. SAHN: All right. -- with equal validity. And I just It applies
21 have to take issue with you creating a distinction -22 THE COURT: Well, I haven't created it. I get to do that. It was
23 meant as a question. 24 few perks I have. 25
That's one of the
I get to ask questions. One of your perks. I understand. I
MR. SAHN:
43 1 just want to take issue with it -2 3 4 so. 5 THE COURT: I understand you would not agree. It THE COURT: MR. SAHN: I understand. -- and make it clear that I am doing
6 was meant just as a question. 7 MR. SAHN: Okay. Your Honor, Ms. Coyoca can speak
8 to the complaint that was put before you on I believe -9 THE COURT: Well, you only have, unfortunately --
10 I think you know and this is true on each side -- you can't 11 split up your argument. 12 MR. SAHN: This is your argument.
But, your Honor, in fairness, what you
13 have on the other side are the trial lawyers who are 14 defending these claims. You don't have the bankruptcy
15 lawyers here arguing against this. 16 And I think in fairness is her name on the But did she draft the complaint that's the The answer to that is yes.
17 pleading, no.
18 entire basis of this motion?
19 And I would think you would want to hear, notwithstanding -20 21 22 THE COURT: MR. SAHN: THE COURT: Well, in this particular --- about what the merits are. In this particular, I have to be very It's only people that are
23 strict about who gets to speak. 24 on the pleadings. 25
So I'll stick with that. I know what the state
I've read your papers.
44 1 court action was all about. 2 explain more than the papers. 3 4 clearly. 5 There was opposition which talked about the fact MR. SAHN: Your Honor, then to just give it to you So I don't need anybody to
6 that three of the causes of action, which are based upon 7 violations of criminal statutes, do not give rise to private 8 causes of action. And among the cases cited was the Animal I believe that was cited by the
9 Legal Defense Fund case.
10 Levene, Neale firm's counsel. 11 And that case certainly talks about when a
12 criminal statute does and does not give rise to a private 13 cause of action. And it sets forth three instances, when
14 one reads that case, when bringing on such an action is 15 permitted. 16 And I would just tell you that first of all, we're
17 only talking about three of the causes of action that are 18 pled in this revised complaint that have not been passed 19 upon by the Superior Court, and that there is not a ruling 20 by any court which talks about whether or not the criminal 21 statutes which are being sued under with respect to the 22 private cause of action, either Penal Code 499(c) or the 23 Business and Professions Code provision -- I think that was 24 6128 but -- yes, 1628. 25 There are no cases which talk about whether or not
45 1 a private cause of action exists under those statutes. 2 So the principle is accurate. The case cited is And we would
3 certainly accurate in terms of the standard.
4 just let you know that as to those causes of action there 5 are no decisions that speak to whether or not a private 6 cause of action exists or not. 7 In addition -- and, again, to distinguish the
8 existing complaint from the one that was passed upon by 9 Judge Linfield, there are causes of action for violation of 10 the California Trade Secrets Act. 11 privacy claim. 12 There are claims of breach of fiduciary duty There is an invasion of
13 against Susan Tregub and Teri Zimon that having already been 14 found against Ms. Tregub, it's hard to imagine she has any 15 defense to it other than her right of appeal. 16 So, again, these are all causes of action that
17 have been pled which have not been pled before or ruled on 18 before by any court. 19 We also plead causes of action for aiding and
20 abetting breaches of fiduciary duty against both Aramid and 21 Screen Capital and their related parties. And, again, no
22 ruling by any court that the litigation privilege or any 23 other dispositive kind of rule or statute applies to prevent 24 those claims from going forward. 25 And, finally, as to the claims that are pled
46 1 against the two law firms, there is going to be an appeal of 2 that. And we believe based upon clear California law, the We do understand the issues with the law
3 appeal has merit.
4 firms, but those don't apply at all against any of the other 5 parties. 6 And certainly if the Court has any concern or
7 question about the law firms, there is no question about the 8 other parties and no basis by which the claims that are pled 9 against the other parties can be deemed or ruled upon by you 10 or argued to you as being claims that are not colorable 11 based upon their merits. 12 And we believe strongly that the two law firms
13 notwithstanding, the other causes of action against the 14 other parties should be allowed to go forward. The trustee
15 has made it absolutely clear 100 percent that those claims 16 which are predicated upon the Tregub ruling and what 17 happened factually with respect to that -- and, again, the 18 unanimous verdict completely supported by the trial judge, 19 as I understand it. 20 And so there's really no question with respect to
21 the merits, and there is equally no question with regard to 22 the trustee's position on this, which I've read to you. 23 And I have to add and will add that the trustee's
24 declaration in response to our motion where he talks about 25 the fact that there's no proper measure of damages, that I
47 1 made misstatements to the Superior Court, that Mr. Bergstein 2 made misstatements to the Superior Court, that documents 3 were not introduced that would have disproved damages, these 4 are -- I mean these are just beyond anything I've ever seen. 5 If you read it, one would think that the $50.7
6 million jury verdict didn't happen or that it was obtained 7 by some undue means when Ms. Tregub was represented by 8 highly competent counsel, very experienced in these kinds of 9 matters. 10 If anything should convince this Court that the
11 trustee has no intention of ever pursuing these claims, what 12 the trustee says about his reading of the entire 13 transcript -- because he complains that he's spending a lot 14 of time on this case and not getting paid for it -- the 15 trial transcript is a few thousand pages and he read the 16 whole thing and characterized it in a way that is truly 17 untethered from reality as far as what happened versus what 18 he perceived to have happened. 19 20 left. And there were certainly lots of people to my There have been lots of things said about my client
21 in this case. 22 And today this motion and the merits of this
23 motion and whether this motion should allow this complaint 24 to be brought because it will generate something for 25 everyone's benefit, it's something my client will pay for,
48 1 it won't cost the estate anything other than paying him back 2 from any recovery but it won't cost them anything up-front. 3 If there's no recovery it won't cost the estate anything. 4 And last, your Honor, the trustee's objection that The settlement is set for hearing in I certainly
5 there's a settlement. 6 two months.
I know you haven't looked at it.
7 have looked at it and have written about it in our 8 pleadings. 9 But that's in two months' time, and we're here
10 today two and a half years into a case in a situation where 11 in two and a half years, since all this started by these 12 involuntary filings instigated by Ms. Tregub who is here to 13 speak for her position, not a single trial has taken place, 14 not a single verdict has been rendered, not a single 15 judgment has been obtained, not a single asset has been 16 liquidated to any considerable or significant benefit to 17 creditors. 18 The only thing that's happened that speaks to
19 these cases and what happened with respect to them is this 20 jury verdict. 21 And we think that's important.
We think it's significant with respect to this
22 motion, and based upon that, we would ask that it be 23 granted. 24 25 THE COURT: All right.
Any particular order?
49 1 MR. GUMPORT: If I may. Your Honor, Leonard
2 Gumport for the trustee.
I'd like to connect a few dots
3 here and circle back to some of the questions the Court 4 asked Mr. Sahn. 5 Mr. Sahn couldn't find or didn't remember what the One of the
6 email about the demand was or how it happened.
7 difficulties there would be that he did not give it to the 8 Court when he made his representations characterizing the 9 trustee's refusal, as he termed it, to act. 10 That email, among other places, appears at Exhibit
11 13 of the October 15, 2012 declaration that I filed on 12 behalf of the trustee in opposition to the motion for 13 authority to take control of causes of action. And at Bates
14 stamp pages 00063 through 00064, we can see the exchange on 15 September 5 between my firm and Mr. Sahn's firm. 16 The first thing we see at page 00064 -- and I'm
17 reading from docket number 1070-2 in the ThinkFilm case -18 is the demand that Mr. Sahn made entitled "Privileged and 19 Confidential" where -- he subsequently, after instructing me 20 not to tell anybody about it, he took it upon himself to 21 characterize it but not show it to your Honor in his papers. 22 And what's quite clear from this demand is that
23 there isn't any statement in there saying, "We're going to 24 sue the trustee" or "We're going to sue your firm." 25 It's a demand that: We take over cause of action
50 1 of the bankruptcy estates, quote, without limitation, 2 against David Molner; Aramid; SCIC; Levene, Neale, Bender, 3 Yoo and Brill; and Stroock, Stroock and Lavan. 4 5 for later. It doesn't have the threat in it. He saved that
This is the written demand that I'm reading
6 from, and then this is what Mr. Sahn terms a refusal to act. 7 On that same day where I had been given a 48-hour deadline 8 to respond, these are the things that Mr. Sahn told this 9 Court without giving the document were extraneous matters 10 that I attached to my refusal to act on behalf of the 11 trustee. 12 I say -- let me read it in the entirety because
13 it's just totally different from what Mr. Sahn told this 14 Court and he doesn't seem to remember it, but I do. 15 16 17 18 19 20 21 22 23 24 25 Quote: "Dear Mr. Sahn, this afternoon on September 5, I received your proposal below. In your proposal, you gave the
trustee until September 7 to say yes or no to your proposal. Your proposal's
last paragraph admits that there remains some contingencies in respect to our offer. Please provide the following
information as soon as possible to permit the trustee to thoroughly and
51 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 carefully evaluate your proposal. "1. Please make your proposal in a
complete form without unaddressed contingencies other than the trustee's signature and Bankruptcy Court approval on notice to creditors. "2. Please explain why the causes
of action your client wishes to pursue, plus other causes of action and R2D2's ownership of Pangea do not appear in the debtor's sworn bankruptcy schedules. Please get the schedules amended and corrected as quickly as possible. "3. As to each of the debtors,
please identify the harmed assets and/or lost profits of the debtors as a result of the conduct that is the basis of causes of action you wish to pursue. Please explain whether those assets and/or profits appear anywhere in the debtor's tax returns that your client signed and gave to the trustee. If not,
please explain whether the tax returns should be corrected."
25 Et cetera, et cetera.
52 1 In response to which -- those aren't extraneous, Those go to the heart of whether the trustee
2 your Honor.
3 should pursue causes of action. 4 5 THE COURT: MR. GUMPORT: No, I've read that. I've seen it.
And Mr. Sahn got it and he didn't In fact, he mis-described it to
6 tell the Court about it. 7 the Court in the motion. 8 All right.
Now, the Court asked some questions
9 about how in the motion's reply -- on one page it seems -10 we know there's a retraction that the trustee and his 11 counsel will be sued. 12 On another page, there's a statement in effect of:
13 This new complaint, which doesn't include the trustee and 14 his counsel, it doesn't set forth everything. 15 additional meritorious causes of action. 16 17 happened. Okay. Well, there's one thing after that that There's
The one thing after that that happened, as set
18 forth in our evidentiary objections -- two things. 19 First, in the reply which was submitted on the
20 deadline of October 22 or October 23, depending in which you 21 look at the docket, the statement is made, well, Mr. 22 Bergstein -- the trustee's complained that these causes of 23 action aren't scheduled and if ever they were going to be 24 scheduled, they should have been scheduled by the time of 25 the reply and certainly by the time of the motion, actually
53 1 when you're saying: Trustee take action on causes of action
2 of the estate but I'm not scheduling them. 3 4 Excuse me? 5 I mean it's reasonable for the trustee to say: What's going on here? So then we get this reply brief saying, well, Mr. Well, what
6 Bergstein's going to schedule this stuff.
7 happens on -- then there's another evidentiary objection I 8 submit on Friday afternoon. I say we still don't have these And Friday at about
9 schedules, they're still not here. 10 3:30, in come the schedules. 11
And they remove any question about the
12 reasonableness of the trustee's not pulling the trigger on 13 this cause of action just because he got a 48-hour demand 14 that he had to do it. 15 First, I will note, the summary of schedules, No lawyer signs the
16 they're submitted by a non-individual. 17 papers.
Local rule 9011-2 says a company can't appear But these are amended schedules. They're That
18 without counsel.
19 not the initial schedules.
They're amended schedules.
20 is, taking legal action in a judicial proceeding by a non21 individual. 22 23 those. 24 25 Bergstein. THE COURT: You know, I haven't actually seen Or who are they signed by?
Those are not signed? MR. GUMPORT:
They're signed only by Mr.
No lawyer signs them.
54 1 And what they say is this. On the first page is
2 causes of action.
These amendments, without limitation,
3 identify causes of action of which Mr. Bergstein is aware 4 that exist in favor of the bankruptcy estates. 5 careful phrasing. 6 causes of action. Identify causes of action. Note the Not all
Because that statement couldn't be made
7 because this additional stuff that Mr. Sahn talked about in 8 the reply brief, something other than a lawsuit against 9 Aramid and accounts receivable, something other than that, 10 that's not in these schedules. 11 So when Mr. Bergstein said he's identifying causes
12 of action, he deliberately didn't say all causes of action. 13 And then he explains to the Court and to me the Some lawyer wrote this. But, The
14 way the Bankruptcy Code works.
15 e-filing reflects Mr. Sahn e-filed this document. 16 again, his signature is not on it. 17 18 19 20 21 22 23 24 25 But this is the next sentence. Quote:
"The obligation to identify, investigate, underwrite and commence these causes of action rests entirely on the trustee and his attorneys and account Ronald L. Dirk and Chapter 11 trustee, Gumport Mastan, attorneys for the Chapter 11 trustee, Clifton Gunderson LLP, accountants for the
55 1 2 Chapter 11 trustee." That's what the schedules say. I'm reading
3 from -- this is R2D2's schedule which is docket number 1296, 4 but every single one of these schedules not signed by Mr. 5 Sahn but e-filed by him on Friday, October 26th, have the 6 same disclaimer on the first page of what's submitted. 7 And it makes clear, oh, the trustee and his
8 lawyers, exclusive responsibility to investigate and decide 9 what to do. But here he is in court. Mr. Bergstein is a
10 moving target, your Honor, because here we are in court. 11 We're being told: 12 trustee. Take these causes of action away from the He's not acting properly. He's acting unreasonably. He
Take them away.
13 didn't respond properly. 14
But then when it's time to submit schedules, Mr. And the
15 Bergstein says I'm identifying causes of action. 16 responsibility is exclusively with the trustee. 17 18 afternoon.
Well, you see, but you know, that's for Friday That's not for this hearing. You weren't
19 supposed to see this now. 20 This is the other thing he says. Suddenly all
21 these debtors which have no assets -- in fact, the assets 22 range from this. $783,000 in ThinkFilm to unspecified or
23 zero in each of the other four debtors. 24 Now, each one of the debtors, according to Mr.
25 Bergstein under penalty of perjury with bizarre disclaimers,
56 1 has $51 million in assets. 2 schedules. 3 4 Honor? And what is that $51 million of assets, your It's exclusively the commingled causes of action of They have the same asset That's on the summary of
5 each of the five debtors. 6 scheduled. 7
So, of course, we were here on September 25 saying No The
8 these estates are different, they're separate. 9 substantive consolidation.
Everything's unclear.
10 trustee should figure it out. 11 But Friday afternoon, when it doesn't matter
12 anymore, because Mr. Bergstein's moved on to something else 13 and this will help him, all of the debtors have the same $51 14 million commingled asset. 15 So, your Honor, the trustee's acted very He didn't refuse to act. All of that has been
16 reasonably.
17 misrepresented to this Court.
And what I would say is -- I They get worse.
18 just gave you a taste of the schedules. 19
What I would say, though, is your Honor, this But you've gotten I think an
20 motion should be denied.
21 insight today into what the trustee is dealing with, and 22 it's -- I think it's disturbing. 23 The lawyers are the gatekeepers. They're not --
24 we're supposed to make sure that there's some kind of 25 reality check on what this Court gets.
57 1 And I don't see how that description of the
2 September 5 email exchange could have been made without at 3 least counsel having the candor to give the email exchange 4 so the Court could see for itself -- and there was follow-up 5 where Mr. Sahn occasionally sent emails saying "You 6 refused." 7 8 wrote you. 9 And I wrote him back and I said, "Read what I I didn't refuse. Give me the information."
And to this day, your Honor, the first time the
10 schedules get fixed is after the deadline for reply papers, 11 and now they contradict what the Court was told at the 12 hearing on substantive consolidation. 13 14 15 Thank you. THE COURT: MR. PARKER: The motion should be denied. All right. Good afternoon again, your Honor.
16 David Parker for Levene, Neale and the various partners. 17 I want to focus on matters that arise from the Obviously, this is a case about retaliation.
18 omnibus reply.
19 You know, you can make a demand and tell somebody to respond 20 in two days, and if they don't you can file this motion and 21 then threaten them with a lawsuit. 22 Well, my clients have gone through the same thing.
23 They have been very, very successful in motion practice 24 before your Honor. And after two years of that, they
25 finally decide they're going to sue the Levene, Neale firm
58 1 in state court. 2 I do want to correct something Mr. Sahn said. He
3 misrepresented to the Court that our motion in state court 4 was a demurrer. And while we filed a demurrer, the demurrer It was taken off calendar. Why? It was
5 was never ruled on.
6 declared moot by the trial court.
Because we filed a
7 SLAPP motion with extrinsic evidence. 8 And it's the SLAPP motion that was granted. It's
9 the SLAPP motion that produced our right, which we will 10 exercise on Friday, to file a motion for prevailing party 11 attorneys' fees. And it's the SLAPP motion that they pray
12 they'll be able to overcome on appeal, though they don't 13 bother to tell you how they could possibly do it. 14 I know your Honor has seen the Superior Court I won't belabor that point. I think you will
15 judge ruling.
16 see how detailed it was in the context of a SLAPP motion. 17 Now, this verdict, they say it's everything. The
18 verdict is everything. 19 Well, as it relates to the conflict of interest
20 Mr. Bergstein, the man who can't be trusted -- as it relates 21 to him, I agree, it's everything, because what it tells us 22 is Bergstein has a massive conflict of interest on two 23 fronts. 24 And these are reasons alone, apart from the lack
25 of colorability, if there is such a word, for the denial of
59 1 the motion. 2 Bergstein is a judgment creditor against Tregub.
3 Bergstein is a would-be -- currently defeated but would4 be creditor against the lawyers he was suing, Levene, Neale, 5 Stroock and so forth. 6 He's trying to collect money from them. They are
7 the same target that at the same time he proposes to go 8 after on behalf of the debtors. 9 That is a massive conflict of interest because We're talking
10 we're not talking about the U.S. Treasury. 11 about individuals and law firms. 12
And he's already claiming $51,000,000 based on a He wants the same damages against
13 verdict against Tregub.
14 the lawyers and he's going after it to put the money in his 15 own pocket and the pockets of his other affiliates. 16 But at the same time he wants to pick up the sword
17 and go after those same people, he's competing with the 18 debtors. 19 That's a massive conflict of interest. If we were in state court and we were talking
20 about a derivative plaintiff bringing a derivative action on 21 behalf of the corporation in which they own shares, that 22 would never be permitted. 23 And that's not the only conflict. Mr. Bergstein,
24 it's clear from the trustee's motion to approve the 25 settlement which is identified as Exhibit 15 on our request
60 1 to take judicial notice -- it's very, very clear that he's 2 now in the sights, and has been for some time, of the 3 trustee. 4 5 the sword. 6 the debtors. 7 That's in large part what the settlement is about, And so on the one hand, the trustee has brandished He says: I'm going after Bergstein on behalf of
8 and it's not the first time that's come up. 9 So Bergstein who is facing the sword of the Let me
10 debtors, he wants to hold the sword and he's saying: 11 be your champion. 12
How can he pursue the rights of the debtors when Both of those are
13 the debtors have claims against him? 14 irreconcilable conflicts. 15 the motion. 16
And that's grounds alone to deny
Now, with respect to colorability, it seems like
17 we're all adopting the "I know it when I see it" kind of 18 standard. But I don't disagree with one point that was made
19 in the opposition, and that it that it tends to be a 20 pleading standard. 21 Would it stand up on pleading.
Well, they had a dry run and they came up empty.
22 And the only defense -- because they don't talk about the 23 merits of the litigation privilege. They don't talk about
24 the merits of the statute of limitations except as to 25 section 108 which I'll come to.
61 1 Their only argument is: Well, you know, we held He didn't get a
2 back a few claims from the Superior Court.
3 chance to test out those old Penal Code sections we came up. 4 And, by God, we've got the Business and Professions Code 5 section. 6 on them. 7 Well, one wonders why they held those back. But Boy, Judge Linfield didn't have a chance to rule
8 regardless, we've briefed and they've not really responded, 9 other than the brief argument today, that those Penal Code 10 sections -- you can read them until the cows come home. 11 They don't contain any private right of action. 12 And I credit Mr. Sahn for being candid enough to He
13 say there's no law out there that says otherwise.
14 couldn't cite a single case that upheld an implied right of 15 action for a private citizen to suddenly become a 16 prosecutor, to pursue civil damages under the banner of a 17 Penal Code section. 18 He couldn't even name an analogous Penal Code
19 section where an implied right of action existed. 20 And even if could, at bottom, no matter what label
21 he puts on them, we're talking about lawyers gathering 22 evidence, drafting pleadings and so forth. 23 One of the things about Judge Linfield's ruling --
24 and we didn't have the luxury of doing this because of page 25 limitations. But he went through the complaint and he found
62 1 41 what I call sound bytes, but 41 allegations in their 2 complaint, most of which were the litigation war and all of 3 these things. 4 And their own pleading made it clear that
5 everything they seek to target, as it relates certainly to 6 the Levene firm that I represent, is conduct by lawyers, 7 just like Mr. Gumport acting as a lawyer for the trustee, as 8 a trustee, as a professional. 9 All of these people are threatened because why?
10 They got in the way of Mr. Bergstein, the man who can't be 11 trusted. 12 So the SLAPP motions were ruled on, and not one There's not a case they came
13 reason has been given to you.
14 up with or an argument that wasn't surfaced in the Superior 15 Court. They just want a do-over and they want to have a
16 do-over with the debtors. 17 They say they'll file in Superior Court if they're I think we all know it will go to Judge
18 given leave. 19 Linfield.
But they don't offer a single reason why Judge
20 Linfield would do anything other than SLAPP the new case. 21 Let me turn briefly to just a few of the issues --
22 or one of the issues that's unique to my folks, and that's 23 collateral estoppel. 24 One of the things that I found almost humorous, if
25 it wasn't so outrageous, is that one of the offending acts
63 1 charged against Mr. Gross, one of my clients, was that he 2 successfully argued before your Honor on the 3 disqualification motion. 4 Well, in that disqualification motion your Honor And while we were not successful in
5 made a finding.
6 Superior Court of making that stick, because they argued and 7 the judge agreed with them that Bergstein -- that there was 8 no privity. 9 No privity.
We now have exact privity here, because it was It's
10 Bergstein who filed the motion to disqualify. 11 Bergstein who stuck with that finding.
It's Bergstein who
12 now wants to champion -- wants to pursue these claims, all 13 of which are bottomed on that one common denominator and 14 that is the receipt and exploitation of confidential 15 information. 16 Your Honor found otherwise. It is binding under
17 federal civil procedure.
Notwithstanding any appeals or
18 anything of that sort, it's entitled to collateral estoppel 19 treatment. 20 And unless we missed this, I went back over the
21 disqualification motion because in their reply they said, 22 "Well, here are four allegations that were not before the 23 Court on the motion to disqualify." And if take those four
24 and you line them up -- and I looked at pages six, 10, 12 25 and 16 of their motion to disqualify. All of that is
64 1 pled -- is set forth in the motion to disqualify. 2 This is just simply an effort to take another run
3 at it, not with your Honor of course because you ruled 4 against them. 5 Court. 6 Again, no substantive response on the litigation But they want to take a shot in the Superior
7 privilege, just raising these Penal Code sections when there 8 isn't a private right of action. 9 In our opposition, we cited to the California
10 Supreme Court's rulings in Moradi-Shalal, Temple Community 11 Hospital, and Cedars-Sinai. And these are all cases where
12 the Supreme Court laid out state law as it relates to 13 implied rights of action. 14 They made no effort to try to establish that their
15 proposed claims would come within the rationale of any of 16 those decisions. 17 On the statute of limitations -- and I'll conclude
18 with that -- they don't argue again that it's not barred by 19 California's Code of Civil Procedure section 340.6. 20 the finding of Judge Linfield. That's the finding of That's
21 another Superior Court judge in the Laurie (phonetic) Zimon 22 case. 23 What they say is it's a new ball game here in But
24 Bankruptcy Court because we've got 11 U.S.C. 108.
25 108 -- and we've cited the case law -- is strictly pre-
65 1 petition, not post-petition. 2 So consider what the claims are here. And, by the
3 way, these issues came up in one sense in the state court. 4 They came up in the sense that in order to have a cause of 5 action, you have to have damage of course. 6 But also, under 340.6 -- Code of Civil Procedure
7 section 340.6, there has to be actual injury as part of the 8 trigger -- one of the triggers for the one-year statute. 9 And so we had to establish in state court, and we
10 did, that the actual injury occurred more than a year before 11 they filed the complaint. And what we argued, without
12 opposition, was they claim that the filing of the 13 involuntary petitions caused harm and then additional harm 14 thereafter. 15 But there was never a suggestion, and their
16 pleadings certainly are clear, that there was any harm 17 before the petitions were filed. And so, by definition, That would be
18 having filed it, then the damage occurs. 19 post-petition. 20 21 submit. 22 23 24 25 THE COURT: MR. PARKER: THE COURT: MS. DEMSKY: Thank you. Thank you. 108 would not apply.
Unless the Court has any questions, I would
Anybody else on this side? Thank you, your Honor. Lisa Demsky
66 1 on behalf of the Stroock law firm and its partner Dan 2 Rozansky. 3 I'll be brief. Most of my clients' positions are
4 identical to Mr. Parker's with the exception of the 5 collateral estoppel issue. 6 7 But just to emphasize a couple of points. As Mr. Parker pointed out, the ruling which we
8 received in Superior Court from Judge Linfield was on a 9 SLAPP motion, and that's important not just because there 10 was an evidentiary presentation but also of course because 11 of the mandatory fees. 12 And under the statute, a prevailing defendant on a We have those
13 SLAPP motion is entitled to mandatory fees. 14 motions that will be filed later this week. 15
There's going to be hundreds of thousands of
16 dollars involved in those fees, and that's relevant here 17 because it doesn't just affect the colorability issue but 18 also -19 THE COURT: I understand. Possible claims against
20 the estate. 21 MS. DEMSKY: Right, whether there is a benefit to
22 the estate.
And permitting these claims to go forward is
23 subjecting the estate to the same fee motions which -- Mr. 24 Bergstein is saying he'll front the attorneys' fees for the 25 estate but says nothing about the attorneys' fees awards for
67 1 the opposing parties that will be granted if the SLAPP 2 motions are successful, which there's no indication that 3 they won't be. 4 And to that point, again Mr. Parker addressed this But the way that they -- I mean the They filed one
5 so I'll just be brief.
6 amendment to the complaint is transparent.
7 draft complaint after the tentative, but before Judge 8 Linfield's ruling and then an amended proposed complaint 9 trying to get around Judge Linfield's ruling. 10 We know how -- we have a good idea at least of how
11 Judge Linfield will look at this if and when it comes back 12 before him because Mr. Bergstein's counsel argued vigorously 13 for leave to amend at the hearing. 14 hearing. 15 16 THE COURT: MS. DEMSKY: And he said no. And he said no. They said: Oh, It was a very long
17 there's criminal statutes. 18 the litigation privilege. 19 SLAPP.
There's ways we can get around There's ways we can get around
And Judge Linfield said no, because you don't look
20 at how you plead the causes of action; you look at the 21 underlying conduct. 22 Here, you're suing lawyers for representing And that's -- litigation conduct is
23 clients who sued you.
24 always going to be barred. 25 I think your Honor gets it. Unless your Honor has
68 1 any questions for me -2 3 4 Thank you. 5 MR. GUMPORT: Your Honor, this isn't argument. THE COURT: MS. DEMSKY: No. Thank you.
-- I'll let someone else argue.
6 I'll just say Ms. Demsky's arguing makes me aware that I 7 have an in-law connection with the Munger Tolles firm, and 8 I'll file something disclosing that. 9 to know it now. 10 THE COURT: Well, I heard what you said. I'm not I just want the Court
11 sure if I fully understand the -12 MR. GUMPORT: I'm supposed to disclose all my
13 connections. 14 THE COURT: Anyway, file something, whatever
15 you're going to file. 16 MR. GUMPORT: That's fine. Just didn't want to
17 anyone to say trustee's counsel didn't disclose. 18 THE COURT: First time I've heard of it, but
19 anyway you'll file whatever you're going to file. 20 21 MR. GUMPORT: MR. LANGBERG: Thank you. Your Honor, Mitchell Langberg for
22 David Molner, SCIC, Genco, and Aramid Capital. 23 I'm mindful that the Court's mindful of the entire
24 history, the relationship of the parties. 25 THE COURT: It's not a clean slate.
69 1 MR. LANGBERG: So I would like to -- rather than
2 remind the Court of things it's already mindful about, I'd 3 like to address the legal issue that the Court started with, 4 the legal issue about whether or not this motion is the 5 trustee and not a debtor in possession. 6 THE COURT: I think conceivably -- I mean it's
7 clear it is possible, but it is a different dynamic I think 8 than when you have a debtor in possession, but yes. 9 MR. LANGBERG: One thing, of course, your Honor,
10 that's obvious is that the interest of the debtor in 11 possession in pursuing claims might be different than that 12 of the trustee. 13 14 THE COURT: Of course. And so I'll point out that in our
MR. LANGBERG:
15 papers we noted that there's some courts that, when looking 16 at the issue not only of whether the claims are colorable, 17 but once there's a determination that they're colorable, 18 also in deciding whether or not the appropriate discretion 19 has been exercised -- say, well, we need to look at the 20 probability of success, the relative benefits, potential 21 costs. 22 And I'd offer, your Honor, if the Court is willing
23 to determine that this type of motion is appropriate when 24 it's a trustee that's made the determination -25 THE COURT: I've never seen one but I'm not saying
70 1 it's not. 2 This is the first, obviously. MR. LANGBERG: So if the Court's going to decide
3 that it is an appropriate motion, I think that burden, if 4 ever, of showing the relative merits of the claim to the 5 costs should be applied. 6 And that's why your Honor commented about the
7 distinction between a colorable claim and then the pleading 8 stage and then counsel's talked about the fact that this was 9 an anti-SLAPP motion that the law firms dealt with. 10 But what the court did not in an issue preclusion
11 type of way -- but what the court has done in the state, 12 Superior Court -- and by all accounts this would be a 13 related case, we'd see the same judge -- is relevant I think 14 to deciding whether or not the trustee abused his 15 discretion, acted reasonably, because he is standing here 16 looking at that court. 17 And a motion for an anti-SLAPP, which your Honor
18 I'm sure knows -- it wasn't just that there was an 19 evidentiary showing. But all the plaintiff had to do was
20 show the court that there was prima facie evidence that 21 supported their claims that couldn't be overcome by the 22 privilege. 23 24 They failed to show that. And while we're talking about lawyers, the
25 privilege is the same issue, because it wasn't that they
71 1 were lawyers only but that the actions that were complained 2 about all arose out of litigated -- the gravamen was this 3 litigation. 4 So for the trustee to say to Mr. Bergstein,
5 "Please tell me why you think you have good claims," and get 6 no answer and then to look at what the Superior Court has 7 done in some of the same claims or claims that are similar 8 based on the same basically nucleus of facts, that certainly 9 isn't an abuse of his discretion. 10 It's another reason the motion should be denied.
11 Thank you, your Honor. 12 13 14 THE COURT: Thank you.
Anybody else? MR. GOLDSOBEL: Good afternoon again, your Honor.
15 Steve Goldsobel on behalf of the Aramid entities. 16 I think everything that needs to be said about
17 this has probably been said, and I'll be brief just because 18 the Aramid entities are a little differently situated with 19 respect to the state court proceeding. 20 There was a motion for judgment on the pleadings
21 which came after the anti-SLAPP motions, but the court 22 essentially followed the same methodology and at the end of 23 the day, not in dicta, but on a separate, independent basis 24 for the adjudication and granting of the motion for judgment 25 on the pleadings, did find that the litigation privilege
72 1 applied and again set out allegation upon allegation that 2 pretty much tracked the complaint that's before the Court. 3 But I think, as my predecessor just said, you
4 know, the threshold issue is whether or not the trustee and 5 his counsel have properly considered how to approach these 6 claims. 7 And as set out in our papers, the answer is yes.
8 Not only Mr. Gumport's comments today but the fact of the 9 tolling agreement and the settlement agreement and coming up 10 with a sound methodology for disposing of those claims and 11 moving this case forward. 12 And I think that's amply set out in the papers and
13 the motion should be denied. 14 15 16 17 Honor. 18 First of all, I would like to reiterate that which THE COURT: All right. MS. TREGUB: I just have a couple things, your All right. Anybody else?
19 was stated in my opposition paper which is that the verdict 20 in my case, post-trial motions have been filed and there is 21 an upcoming hearing on them. And if those are not found in
22 my favor, then my case will be appealed. 23 So I know that Mr. Bergstein and his legal team
24 completely dismiss that, which I expect nothing different 25 than for them to do so. But I think that may be something
73 1 that you should keep in mind or at least be aware of. 2 Additionally, I think it would be a disservice to
3 everyone here and to your assessment of the situation to 4 assume that because a verdict was found against me and my 5 professional corporation, that it was because Mr. Bergstein 6 was telling the truth or that the evidence that he provided 7 in my case was such that it was honest and truthful in a way 8 that he has yet to consistently show in any other situation. 9 It's not like he all of a sudden during one day The reason why I did
10 became an honest, truthful person. 11 what I did was because he isn't. 12
So I appreciate that Mr. Gumport read the trial I feel sorry for him. And I'm sure that you
13 transcript.
14 don't have the time, energy or disposition to read it. 15 But I would never presume that Mr. Bergstein has
16 become a changed person from the man that you know and have 17 experienced in this courtroom just because there is a 18 verdict rendered against me. 19 And lastly, I appreciate the obligations that I But having turned over what probably
20 had in my case.
21 amounts to several million pages of documentation, to read 22 the omnibus reply and basically have them say that -- I mean 23 they know I don't have any money so I don't know what -- in 24 doing a calculation of what the benefit would be to the 25 estate in pursuing me.
74 1 There certainly isn't any cash benefit. So it
2 seems as though their preferred -- or their explanation is 3 that they're going to get a lot more discovery and so they 4 should put me through the rigamarole of a lawsuit against me 5 so that I can produce more discovery which they can then use 6 against other defendants that they're going to be suing. 7 And it would seem to me that that really -- I
8 don't have the law to quote to you, but it would seem to me 9 that that really isn't the purpose or the benefit of suing 10 somebody who otherwise has no assets and can bring nothing 11 else to the table if they are sued by the trustee and/or a 12 proxy for the trustee. 13 And the reference to the smell test in
14 colorability, it just makes me think -- and I'll just leave 15 you with this sense of things -- that to leave David 16 Bergstein as the proxy for the trustee, to bring claims in 17 order to leave the creditors who he intentionally did not 18 take care of while he was responsible as the manager or head 19 of the companies that are in this bankruptcy proceeding, who 20 he just left out there flailing, that he is now going to 21 become the person responsible to pursue claims on their 22 behalf in order to make them somewhat more whole? 23 That seems beyond absurd to me. And it hardly
24 seems like it's a colorable argument that he should be able 25 to sit in that seat and make those decisions, particularly
75 1 when some of those claims that need to be made should be 2 against him. 3 4 Thank you. THE COURT: Anybody else from the other side? Have we? We're represented. All right. Or
5 did we run out of people? 6 7 8 9 MR. NEALE: THE COURT: Mr. Sahn. MR. SAHN:
No, your Honor. No, I understand.
Your Honor, I'll try to respond in the
10 order of appearance by those who opposed the motion. 11 Mr. Gumport asked -- or indicates that he believes
12 he asked a number of questions that were pertinent to the 13 claims that we asked him to bring. 14 And Mr. Gumport has also told you that he read the
15 transcript of the trial from beginning until end. 16 17 18 THE COURT: MR. SAHN: I can assure you I have not. I know that. Nor would I ask you to.
My email to Mr. Gumport where the demand is made
19 states in the second or third sentence, and I'm reading from 20 page 0064 of any one of the declarations or oppositions that 21 he filed. 22 23 24 25 This is line three: "Previously, counsel for Mr. Tutor demanded in consideration of the $50,000,000 jury verdict in the Tregub litigation that you immediately
76 1 2 3 4 5 6 7 8 9 10 11 prosecute a claim on behalf of the bankruptcy estates without limitation against David Molner; SCIC; Levene, Neale; and Stroock, Stroock and Lavan. "You responded by indicating that a proposal should be made to you to handle the litigation and further indicated that we should point you to parts of the trial transcript that we wished for you to review." Well, he reviewed the transcript. He reviewed the
12 entirety of it.
He did so, I believe before this motion was Not before.
13 filed and certainly at some point after it. 14
He is clearly unconvinced by that transcript,
15 notwithstanding the jury verdict, that the claims are not 16 meritorious. The damages expert was off base, that Mr.
17 Bergstein was off base, that I was off base, that documents 18 were not presented which should have been. Whatever it is
19 that didn't happen that should have in a 12-day trial before 20 12 jurors, according to Mr. Gumport. 21 If from the review of that record and transcript
22 he doesn't know what the claims are, there's nothing I can 23 do, present, argue or furnish him with. 24 THE COURT: Did you ever answer his question in You heard Mr.
25 his email to you?
I don't see any response.
77 1 Gumport, and I've read that email. 2 here. 3 He asked you very specific questions. Have you I've seen it. It's in
4 ever in writing either in your pleadings or to him ever 5 responded specifically to his questions? You deem them, as
6 I recall -- I'm paraphrasing -- as somehow irrelevant and so 7 forth. 8 9 You couldn't be more wrong on the relevance. So my question is, you heard him just a few
10 moments ago -- well, whatever -- the last half hour or so. 11 Did you ever -- have you ever responded? 12 talking about. 13 His email that asks you to answer certain things You know what I'm
14 such as the damages and example to the debtors, et cetera. 15 There's some other questions. 16 Have you ever responded, either in your papers
17 here or to him? 18 19 20 here. 21 MR. SAHN: Other than to say that the facts -MR. SAHN: THE COURT: In the papers here? Well, anything, yeah, either to him or
22 many of the facts that -- when you're talking about the 23 papers versus the emails. 24 THE COURT: Wait. Do you want to state again
25 what -- I remember it.
I mean it wasn't that long ago.
78 1 He replied to your I think it was either the 5th, He
2 or maybe it was the 6th, whatever, of September. 3 replied. 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Do you want to read it again, Mr. Gumport? MR. GUMPORT: THE COURT: MR. GUMPORT: Yes. I remember it. 2 and 3. "2," quote:
"Please explain why the causes of action your client wishes to pursue, plus other causes of action and R2D2's ownership of Pangea do not appear in the debtor's sworn bankruptcy schedules. Please get the schedules amended and corrected as quickly as possible." THE COURT: MR. GUMPORT: THE COURT: MR. GUMPORT: THE COURT: MR. GUMPORT: "3. 5. -- 4:18 p.m. Okay. And: All right. Was that September 6 or 5? That's September 5 at --
As to each of the debtors,
please identify the harmed assets and/or lost profits of the debtors as a result of the conduct that is the basis of causes of action you wish to pursue.
79 1 2 3 4 5 6 7 8 Please explain whether those assets and/or profits appear anywhere in the debtor's tax returns that your client signed and gave to the trustee. If not,
please explain whether the tax returns should be corrected." And it goes on. THE COURT: Okay. Now, I understand, although I
9 haven't seen them, that you did file, what, Friday or 10 thereabouts, amended schedules. 11 But other than that, have you ever responded to
12 what he just read in your pleadings or to him? 13 MR. SAHN: Certainly in our pleadings we indicate
14 that based upon the record in the Tregub file that the 15 causes of action that we asked him -- remember the debtors 16 were originally -17 THE COURT: Wait. Let me stop you. That does
18 not -- see, you put much too much credence in this trial. 19 By the way, these five debtors were plaintiffs and
20 were deleted because of a request of the trustee. 21 22 MR. SAHN: THE COURT: Right. Therefore, none of the questions that
23 he asked could have been relevant at all in that trial as to 24 any damages to them, because they weren't parties. 25 So I'll ask you again. Did you ever respond
80 1 specifically to the trustee, answering his questions? 2 I think are highly relevant. 3 that? 4 5 Honor. 6 MR. SAHN: Other than -THE COURT: Well, I think the answer is -- wait. I don't want to repeat myself, your Did you ever bother to do Which
7 I don't want to put words in your mouth. 8 9 10 we -11 12 trustee? 13 Did you -14 MR. SAHN: We never responded to the points and THE COURT: No. Did you ever respond to the He sent you an email. Did you ever respond? MR. SAHN: Is the answer --
The answer is in our moving papers,
Is the answer yes or no?
15 questions asked by the trustee in his email. 16 17 THE COURT: MR. SAHN: And why not? Because we deemed the questions to be
18 not relevant. 19 THE COURT: Well, I totally agree (sic) with you
20 and I am astounded that you make that statement in your 21 papers and now that you don't think that. But that's -- I
22 don't mean to argue with you, but I can tell you what I 23 think of that argument. 24 25 All right. MR. GUMPORT: Excuse me, your Honor. You said "I
81 1 totally agree with you" and I think you misspoke. 2 MR. SAHN: We understood what you said. You said
3 you don't agree with what I said. 4 5 6 7 MR. GUMPORT: THE COURT: MR. SAHN: THE COURT: Thank you. Well, okay. You agree with what Mr. Gumport said. Let me make it clear to anybody It's been a long afternoon. And, quite
8 sitting in this room. 9
You never replied to the trustee.
10 frankly, what you just told me is not an answer anyway, that 11 somewhere buried in that transcript, which I've not seen, 12 that relates to the specific questions that the trustee 13 asked you -- and indeed it couldn't have because those five 14 plaintiffs were no longer plaintiffs. 15 would have been totally irrelevant. 16 Now, I haven't read the transcript, but I imagine Any damages to them
17 that would be the case. 18 MR. SAHN: Your Honor, we have the same points
19 with regard to those oppositions that are claims with 20 respect to the demurrer or the anti-SLAPP order. 21 22 ask -23 24 25 questions. MR. SAHN: THE COURT: I mean they don't get it both ways. I get to ask -- I'm asking the THE COURT: Well, let me stop you. I get to
It's not them.
82 1 And it's clear to me, not only in your papers but
2 also to the trustee, you have never answered those 3 questions. And your referring me to somehow this massive
4 transcript doesn't do it. 5 MR. SAHN: I'm not referring you to the
6 transcript. 7 answering -8 9
I'm referring you to our papers as far as
THE COURT: MR. SAHN:
Tell me specifically. -- the questions about the value of
10 these claims. 11 12 THE COURT: MR. SAHN: And where is that in your papers? Your Honor, first of all, we've given
13 you an entire complaint -14 15 16 THE COURT: MR. SAHN: THE COURT: Oh, I --- that sets forth the claims. By the way, a complaint, as we all There's no evidentiary effect at So forget about
17 know, is just a complaint.
18 all other than the fact it's been filed. 19 the complaint. 20 know. 21 MR. SAHN:
It doesn't establish anything, as we all
Other than they need to establish That's the standard.
22 colorable claims, your Honor. 23 THE COURT:
No, I've asked you a very simple
24 question, and I haven't heard an answer yet. 25 You've never responded to the trustee, and I'd
83 1 like you -- where, other than filing the complaint, is there 2 any evidence whatsoever that there was any damage to these 3 five debtors? 4 By the way, the same five debtors that Mr.
5 Bergstein over the period of time, depending on when you ask 6 him the question, there are no assets. 7 8 Basically no assets.
Hasn't that been his position? MR. SAHN: The last schedules that I saw were that
9 they were unspecified, your Honor. 10 THE COURT: Right. So I mean that's what this Why don't you go on
11 case has been about, that -- okay. 12 then. 13 MR. SAHN:
Your Honor, I want to emphasize and
14 respond to a part of what was said about the actions under 15 the Penal Code. 16 The cause of action -- and just to be clear --
17 under California Penal Code 496 sub 2 regards receipts of 18 stolen property. And there is a specific right to assert a
19 civil cause of action based upon a violation of that 20 criminal statute. 21 So contrary to what was said, we believe that a
22 cause of action does lie definitely and clearly with respect 23 to that Penal Code section. 24 Secondly -- and again, these are with respect to
25 three of the causes of action in the revised complaint --
84 1 under California Penal Code section 499(c) and Business and 2 Professions Code 6128(a), civil actions lie in favor of 3 crime victims, and violation of a criminal statute is 4 generally actionable. 5 We believe that's the law. We would cite your
6 Honor to the case of Angie M. vs. Superior Court at 37 7 Cal.App.4th 1217. 8 Your Honor, Mr. Parker argued that the actions
9 which are complained of did not arise, if I understood him 10 correctly -- and he was talking about section 108 of the 11 Code -12 13 THE COURT: MR. SAHN: Yeah, the two-year statute. Before the case was filed. This
14 conduct that is complained of all arose before the 15 bankruptcy cases were filed. 16 It is the conduct that is the subject of the
17 judgment that was rendered against Ms. Tregub, conduct where 18 she was working -- no dispute -- working in concert with the 19 Levene, Neale and Stroock law firms in arranging, if not 20 choreographing, these involuntary bankruptcy cases and the 21 motions for appointment of a trustee. 22 Conduct which, notwithstanding the pious
23 statements from Ms. Tregub, was termed by a person who is 24 the leading expert on ethics in California -- unless it's 25 Mr. Parker.
85 1 It's one or the other -- as the most unusual
2 conduct she had ever seen in her career over hundreds of 3 cases testifying as an expert with respect to actions of a 4 lawyer. 5 She had never seen a lawyer act this way and that the
6 it had breached every duty that she had as a lawyer: 7 duty of loyalty, the duty of confidentiality. 8 the most egregious conduct she had ever seen. 9
It was just
And coming from Ellen Pansky, that is, for those
10 who know her -11 THE COURT: And you're asking me to authorize Mr.
12 Bergstein to allow the estates to sue her in this Court, 13 right or is that -14 MR. SAHN: We're not going to sue in this Court,
15 your Honor. 16 17 18 THE COURT: MR. SAHN: THE COURT: Or to sue? Correct. For what purpose? I mean you got a
19 $50,000,000 judgment. 20 21 MR. SAHN: THE COURT:
Why would you -- why would -Because her actions -No. I'm asking you why would a
22 trustee, given these facts, why would he ever -- assuming 23 what you say is true, the way the state court ruled. 24 did. 25 Why would a trustee using the trustee's judgment They
86 1 ever bring an action -- even if it was the best action in 2 the world -- assuming for argument's sake it's all affirmed 3 on appeal and -- so why in the world would the trustee do 4 that? 5 For what purpose? MR. SAHN: Because her actions were part of those
6 that occurred with a group that damaged these debtors and 7 she's never been called -8 9 THE COURT: MR. SAHN: Why? -- to account for her conduct as it
10 concerns these debtors. 11 THE COURT: You're bringing causes of action. The
12 trustee as opposed to the debtor in possession has to use 13 common sense and good business judgment. 14 15 Why in the world would he sue her? Again, I'm assuming for argument's sake she did
16 everything and that $50,000,000 judgment is valid. 17 MR. SAHN: Your Honor, if the only standard is
18 whether or not the judgment is collectible, you're 19 absolutely correct. 20 21 22 23 24 THE COURT: MR. SAHN: THE COURT: MR. SAHN: THE COURT: Isn't that part of it? It is part of it. In fact, on any -But it is not all that is considered. It may not be all, but in fact both as
25 a trial judge and as a member of the Bankruptcy Appellate
87 1 Panel for years, look at the judgment of trustees bringing 2 actions, be they preference actions, be they whatever and, 3 yes, the reality is it is important. Is this something
4 that, in the judgment of fiduciary duties of a trustee, they 5 could bring it. 6 I only use this as one example, but quite frankly,
7 I'm amazed at -- other than to punish her, and Mr. Bergstein 8 clearly would like to do -9 10 11 MR. SAHN: THE COURT: Your Honor, it isn't -Wait. I get my turn. But I'm talking
Clearly, that would do that.
12 about the judgment. 13 Why in the world would he want to sue her? The
14 trustee, I'm talking about. 15 MR. SAHN: Your Honor, she was determined by the
16 discovery referee, if I understand it correctly, in 17 discovery disputes in Superior Court to be -18 THE COURT: About to be the computer in the pool,
19 you're talking about that? 20 21 22 23 lawyer. 24 MR. SAHN: THE COURT: MR. SAHN: No, not the computer in the pool. Oh, okay. To be an employee of Aramid, not a
And that's why her emails got produced. And she would be sued because Aramid is her
25 principal and she would have liability as an agent and that
88 1 pertains -2 3 THE COURT: MR. SAHN: But collectibility -That pertains to the liability of
4 others, your Honor. 5 6 with it? 7 MR. SAHN: No, your Honor. I didn't say that. I THE COURT: But collectibility has nothing to do
8 agree with you. 9 10
But it is not the only factor. All right. Sometimes there are factors that relate
THE COURT: MR. SAHN:
11 to the other parties who are also being sued that compel 12 moving forward against someone notwithstanding her claims 13 with respect to the collectibility of the judgment. 14 THE COURT: So you're talking about discovery
15 against her -- by her or from her? 16 17 liability. 18 complaint. 19 MR. SAHN: It could be discovery, it could be
I am not a seer, your Honor, and this is not my That's why I wanted Ms. -THE COURT: Well, but as I told you, your name is
20 on the pleadings. 21
It's got to be somebody on the pleadings. Well, it's not my name on the
MR. SAHN:
22 complaint, your Honor, and if that's the focus of your 23 questions, that's why -24 25 motion. THE COURT: No, no. The focus of this is your
89 1 2 3 MR. SAHN: THE COURT: MR. SAHN: I understand. Okay. I brought the lawyer here to answer
4 your question to make it easier. 5 6 THE COURT: MR. SAHN: And I appreciate that. It's better than getting passed notes
7 every 10 to 20 seconds, but if that's the way we have to -8 9 notes. 10 MR. SAHN: If that's the way we have to do it, THE COURT: It's okay with me. I don't mind the
11 that's the way we'll do it. 12 13 THE COURT: MR. SAHN: All right. Your Honor, I was talking about the
14 statute of limitations issue and the fact that the conduct 15 arose before the case was filed. 16 arise beforehand. 17 The privileges were invaded and confidential So that is in And as we say, it did
18 information was received improperly.
19 response, as I say, to the points made and there's certainly 20 no intention to misstate what happened in Superior Court. 21 I mean to state -- and I stated it incorrectly -And I
22 that a demurrer was granted without leave to amend.
23 do understand that the right to amend was argued and the 24 matter went on for quite a long time. 25 So if I misstated what happened, there was
90 1 absolutely no intention to do so. And there certainly is a
2 huge distinction between an anti-SLAPP motion versus a 3 demurrer, and I understand that. 4 Your Honor, Mr. Langberg talked primarily about And again, we
5 the fact that these claims don't have merit.
6 would just point out to you that the gravamen or the 7 significant part of the opposition to this motion has been 8 brought with respect to the law firms. 9 And while we would like authorization to pursue
10 all of these parties, we certainly understand that there's a 11 distinction between the law firms and the balance of the 12 parties who are named. 13 And contrary to what counsel stated, when he
14 stated -- this is Mr. Goldsobel -- and if I butchered his 15 last name, I apologize. But Mr. Goldsobel, on behalf of
16 Aramid, indicated that there -- I believe he said there was 17 a demurrer that was granted as to the existing complaint, he 18 said on the same kinds of bases as was granted with respect 19 to the law firms. 20 And we'd just indicate to your Honor that with
21 respect to Aramid and SCIC and Mr. Goldsobel's other 22 clients, there was leave to amend granted with respect to 23 that one. And he may have forgotten to note that
24 distinction to you, but we certainly wanted to make you 25 aware of it.
91 1 Your Honor, I'm not going to respond to Ms. I think Ms. Pansky's words are far
2 Tregub's statements.
3 more powerful and convincing than anything I could ever say, 4 and I would certainly urge you to disregard them at best. 5 6 7 Thank you, your Honor. THE COURT: All right.
The -- I am going to deny your motion for a number This is a good example of I guess the old
8 of reasons.
9 adage, the best defense is an offense. 10 11 This case is really extraordinary. Number one, he can't -- Mr. Bergstein, aside from You can't forget, I don't have any
12 everything else, could not be trusted. 13 I'm the same judge who's heard all this.
14 information about him other than in court. 15 But he's the same one who -- at least in three of
16 the five, the reason I granted the order for relief was 17 because of his constant changing and refusal to just come up 18 with the actual facts of the case. 19 That's the situation and it was quite accurately This is on the record of this
20 described by Mr. Gumport. 21 case. 22
And you put much too much on the state court
23 action that obviously had to do with Ms. Tregub but none of 24 these defendants. 25 The idea that you've shown a colorable claim, I
92 1 guess usually in the courts of appeal -- you're talking 2 about always in the context -- I think it would, I suppose, 3 conceivably apply to a trustee but the context is dealing 4 with debtors in possession. But I would agree that it
5 probably applies to a trustee. 6 But in this case, you haven't shown anything. In
7 fact, for you to say, Mr. Sahn, that these questions were 8 irrelevant shows that you're -- I guess you would like me 9 and everybody else to forget what this case has been about 10 from day one. 11 This is about refusal of the information,
12 essentially from Mr. Bergstein and others to be candid and 13 come forward with the evidence. 14 There's no showing at all that there's any damage It's clear to me. This is basically that
15 to these debtors.
16 Mr. Bergstein -- apparently the approach is that anybody who 17 gets in his way, to simply bring actions. I guess that can
18 be effective, but it's not going to work in this Court. 19 20 claims. 21 But even more important -- and I must admit, your So I don't think there's been any colorable
22 motion is less than candid on this point, Mr. Sahn -23 there's been no unreasonable refusal of the trustee to not 24 want to go ahead with this. He asked legitimate questions,
25 which you basically just ignored, which shows me you're
93 1 really -- Mr. Bergstein is -- it's clear, he's out to punish 2 these folks as much as he can. 3 And I'm not going to allow the powers of the
4 trustee to be used by him, given the history of this case 5 and the total lack of merits of the motion that is actually 6 before me. 7 It just would be not wise to do that. So in any case -- so I would like you on this
8 particular one, I don't' have to get in -- I have thoughts 9 on it, but I can't even get past the first two points, the 10 question of collateral estoppel or whether Rule 108 applies. 11 I have thoughts on those, but I don't need to get in to 12 complicate anything. 13 This is really simple. I just think there are no And just as important,
14 appropriate claims to begin with.
15 given the facts and admitted, at least begrudgingly by you, 16 Mr. Sahn, what actually happened, there's been no 17 unreasonable refusal from the trustee. 18 So I'd like you, if you would, just prepare,
19 Mr. -- Mr. Gumport, just prepare that. 20 We're not done yet today, because we do have -- I
21 purposely did it this way, depending on the outcome of this 22 hearing -- this Rule 2004. 23 I'll make a quick hash of that. I think it is --
I think you're wrong, Mr. Sahn.
24 I've read the rule and particular when you know -- typically 25 these things are done ex parte, but when you know in advance
94 1 there's going to be a problem, I do think the rule 2 requires it. 3 I'm not going to award any sanctions or anything
4 of that sort, but I want to clarify. 5 When you know going in, which is this case, that
6 there are clearly disputes, that I do believe that the rule 7 requires it. 8 And also, I've read your motion and the motion is
9 a brief declaration by you, in retrospect, that wouldn't 10 convince me at all to allow any 2004. 11 So I'm going to deny that motion and in view of
12 what I've done today, I suspect a good deal of that request 13 had to do with what we're talking about. 14 15 I will deny that without prejudice. And I'd like you, if you would, Mr. Gumport,
16 prepare that order. 17 And then if you do decide to pursue that, and
18 you'll do whatever you deem appropriate, then given the fact 19 that I do know, I will already -- knowing that the 20 likelihood will be high that there will be a disagreement 21 from what I do know, that -- this rarely ever comes up 22 because these are always filed obviously beforehand. 23 But in this one, if you decide to file another
24 one, I will deem it to be a requirement that you will get 25 together with the trustee and get the stipulation as to the
95 1 facts. 2 And then we'll see. There may be some things that are appropriate. I
3 know the trustee said he wanted some more depositions of Mr. 4 Bergstein. 5 course. 6 But -- so I have no firm view on that. I know Of course, that's a different question of
7 there's not going to be asking any questions about what 8 we're talking about today but there may be other things in 9 there. 10 11 prejudice. I think there might have been some. But, whatever, I'm going to deny it without You can re-file it -- not re-file it. You can
12 file another one.
But if you do, you can talk to the
13 trustee and then you're going to have to come up with this 14 stipulation required by the rules. 15 16 17 18 19 20 21 I certify that the foregoing is a correct Any questions about any of this? Okay. Thank you very much. We're adjourned.
THE COURT:
(Proceedings concluded.)
22 transcript from the electronic sound recording of the 23 proceedings in the above-entitled matter. 24 /s/ Holly Martens_________ Transcriber 25 11-5-12________________ Date

David Bergstein, Albert Hallac

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1 2 3 4 In Re: 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Case No. LA10-19924-BR

Case No. LA10-19938-BR

Case No. LA10-19929-BR

Case No. LA10-19927-BR

Proceedings recorded by electronic sound recording; 25 transcript produced by transcription service.

Briggs Reporting Company, Inc.

Briggs Reporting Company, Inc.

Briggs Reporting Company, Inc.

2 For David Bergstein: 3 4 5 6 For David Bergstein: 7 8 9 10 Court Recorder: 11 12 13 14 Transcriber: 15 16 17 18 19 20 21 22 23 24 25

Briggs Reporting Company, Inc.

7 Gumport of Gumport, Mastan for the trustee.

All right. Good afternoon, your Honor. Lisa

Briggs Reporting Company, Inc.

2 1 MR. GOLDSOBEL: Good afternoon, your Honor. Steve

Good afternoon, your Honor.

Briggs Reporting Company, Inc.

Mr. Gumport, briefly, your -- I don't know where It was amazing.

For the first time I can

20 you see an opposition.

But the only thing I saw from you

Briggs Reporting Company, Inc.

24 forth in the abandonment motion saying: 25 accounts receivable.

I don't think they're worth more than

Briggs Reporting Company, Inc.

5 1 10 cents face value. And not including collection costs, I

17 these amended schedules coming in.

Well, let me ask you before you

Yes, the accounts.

Briggs Reporting Company, Inc.

So I assume if I don't hear anything that that It was the other

4 was -- nobody stated any reason why not.

THE COURT: MR. GUMPORT: THE COURT: MR. GUMPORT:

22 were talking about it. 23 group? 24 25 MR. GUMPORT: THE COURT:

Approximately 38 are of that group. Okay. So there may be 60-something

Briggs Reporting Company, Inc.

I'll next take this motion to pursue bankruptcy

12 litigation. 13 Mr. Sahn, it's your motion. I have a few

14 questions about that. 15 motion itself. 16 the other name. 17

I have some questions about the

I notice in firms, you have the top name and

Who actually prepared these papers?

25 with all the cases.

You wouldn't cite any cases that you

Briggs Reporting Company, Inc.

6 a whole bunch of cases.

15 answer that question. 16 THE COURT:

Briggs Reporting Company, Inc.

I mean in the captions, in your headings you

20 there may be, but I tried to read it best as I can.

Briggs Reporting Company, Inc.

It certainly is avoidable transfers

And if that's your point, that's

25 in here about your motion.

Briggs Reporting Company, Inc.

11 1 One, on page three. This is your reply, the

And that's on line six on page three. But it concerns me

I assume that that's an error.

Tell me what that says.

17 found a few of those in here.

The next question I have -- not But I want to turn to another

21 to be ticky-tack about this.

24 understand this. 25 line 16.

This is on page seven and it's starting on