American court hearing recordings and interviews - Season 3. Episode 14. December 1, 2023. In re Core Scientific, Inc et al chapter 11 bankruptcy case number 22-90341, audio of hearing held in bankruptcy proceedings pending before the U.S. Bankruptcy Court for the Southern District of Texas #crypto

Episode Date: December 1, 2023

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Okay, good morning. This is Judge Lopez. Today is December 1st. I'm going to call the 9 o'clock case. Core Scientific here on a hearing case number 2290341. The line is completely unmuted. Right, I'm going to, there's a little over 40 people. I'm going to mute. I'm going to enable the voice feature. I'm going to wish to make an appearance. you hit five star conference muted I take appearances in the courtroom and then we will see where we are good morning your honor Ashley Harper and Brandon Bell on behalf of sphere 3d court and we're joined on the phone by Greg Wolfe who'll be taking the lead from our side okay thank you and your honor Jennifer Hardy of Wilkie far on behalf of the

official committee of unsecured creditors okay morning anyone I'm just going to go in the order in which I see them here is a two-and-two number your honor it's a I've said Securides from La Gatchel. I've not seen the courtroom on my go-to meeting. I don't see you as well, Mrs. Secretes, but if I can hear you, we're in good shape. I apologize. I am dressed appropriately.

No worries. There's a 9-17 number. I believe that will be me, Judge. Great Wolf. Oh, for sure. You got it. Good morning. Anyone else, please.

I wish to make an appearance. Just hit five star. Okay, who do I turn this over to? I guess that would be me. It's Mr. Secretides. And again, I apologize, and I don't know what's happened here, but it's okay with you. I'll proceed without the video.

Not a problem at all. Okay, well, first of all, thank you for hearing us on an emergency basis. We appreciate that the court has a lot going on and making the time for us is very much appreciated. The motion that we filed is one to vacate the scheduling order in a contested matter between the debtors and a company called Sphere 3D that has been pending for a few months and consolidating that with an adversary proceeding that the debtors filed, I guess, about a week or so ago. And sort of a corollary to that would be to have either today or at some other point in the near future

some kind of scheduling to allow the party defendants to file an answer or to move as some have indicated that they're intended to do so with respect to the complaint. By way of some background, which I'm sure you've had some limited opportunity to review the papers, but this is a matter that arises out of a master services agreement that the debtors signed with Griffin, and it's Griffin Digital Mining. Sphere is not a signatory to any of those contracts. the agreement ultimately had two what they call orders. The first one was like a test order to see if minors that were going to be supplied by Griffin

could actually work and that they were appropriate. There was about a hundred of those. And then the other order is really the meat of what's at issue here was for 70,000 minors to be delivered by Griffin and hosted by the debtors. It's our view that Griffin breached that when they either didn't have them or some of these minors didn't even really exist, but they never delivered the miners. And our view was that that was a breach and no further obligations were owed. At the time, there were still roughly 639, don't home any the exact number, but it's around there, of the miners that Griffin supplied that were at court. Those miners are still there, and as an accommodation, given the party's history, the debtors have been hosting those miners and Ag Griffin's direction, you know, sending wherever the Bitcoin is supposed to go.

And the reason I raised that is because it ties into something that's important both for the adversary proceeding, but also as relates to some immediate issues that the parties have to deal with. that immediate issue is that our view is that those contracts are not executory. We're not, it's not part of our business plan to continue hosting these minors. We have no intention to continue hosting these minors. And in fact, I think attached to either the complaint or, you know, it's on motion, was a letter that the debtor sent to Griffin, again, as the only party that we feel we have a contract with, that affected December 18th, we are decommissioning and turning off those minors, and they should come pick them up.

And I understand that folks from Griffin have been in touch with the debtors about that, and I want to stress on this call that communications relating to that should flow through counsel at this point. This is something that the debtors feel very strongly about. The only entity we have a contract with is Griffin, and we don't want any miscommunications that can result in any unwarranted conduct. So since Sphere has made some statements that they had asked for these minors apparently in the past, and we refused to return them. And just on that note, we have no record of that ever happening, but it's moot at this point. Spear should have no issue with what we're saying either, but this is very important. December 18th, those miners will be turned off.

If Griffin and Speer had issues as to whose they are between them, they should work it out. That's not our issue, but the two of them need to get together. We're going to deal with Griffin, and we're going to get the miners back to them. And the reason why that's important for the adversary proceeding is because Griffin and Spear may have different views. about whether or not what I just said is right in terms of whether these are executory contracts or not. So that's one of the claims that we have. We think that they're not, but regardless, even if they are, we're rejecting them.

And if I have to make that motion like right now, then I'm doing it. Not part of our business plan, business judgment to get rid of these. Plus, they say they want them back anyway. But if they then were to prevail that it was an executory contract and then file, and then file claims for rejection damages, those are quintessential 365 bankruptcy issues that would have to be heard in this court. And the response from the debtor to that will be the same facts and circumstances that are at issue in the sphere contested matter. This all comes down to what happened after these contracts were signed, does Speer have rights? did Griffin breach, did the debtor's breach, what happened?

All of those issues permeate the adversary proceeding, issues relating to the contract claim in the rejection context, or we say not executory to begin with, and in the sphere contested matter. And for that reason alone, frankly, Your Honor, the adversary proceeding and the sphere of contested matter should be consolidated. I know Spear has different views. I know Griffin wants to file a motion to arbitrate. We think that would fail.

But, okay, I mean, they're entitled to file the motion and we'll deal with it in the appropriate briefing. But what we don't want to have happened is we have a fight with Spear. Griffin, who signed the contract, is not there. Either Speer loses that they had no rights, in which case, I guess the case would be over except for our damage. and I don't have to go after a party like Speer who claims that don't have any money, I may be able to go after, or I am able to go after a party like Griffin.

But I can decide that at that point. But what if we lose and Speer has rights? Well, then all of the damages, all of the issues relating to breach of contract are based on Griffin's conduct. So let's say we litigate that, and I win, and the debtors win, is that rest judicata collateral estoppel against Griffin? I would say I shouldn't have to litigate that again. And this is the conundrum that we have. I can see it's a very complicated, complex issue.

But I think the way to slice through it, have the defendants respond to the complaint, will deal with it in appropriate briefing, either a motion for stay, a motion dismiss, whatever they file, and we can have an appropriate schedule based on that. What we shouldn't do is go down a pass. that would generate two different types of lawsuits about the very same operative nucleus of facts. They're virtually identical. The conundrum that we have is what do we do about Griffin? And if we win, we don't want to have to litigate against them again.

And that's really the driver at this point with, you know, hopefully emergence around the corner. We don't have, we're making reserves for these claims. We don't have to have them resolved before emergence. we just want to have it done once in front of you with all the facts and the parties in one place. And that really at the end of the day is what we're asking for, Your Honor, vacating the schedule in the contestant matter, consolidating it with the adversary proceeding, and then have the schedule for them to file whatever motions they're going to file. So, Mr. Secreese, let me just ask you a couple of clarifying questions, at least clarifying for me.

what I guess when everybody appeared in front of me in October everybody was telling me how important keeping deadlines was and this fear of litigation was mentioned but I don't remember hearing about Griffin and potentially this adversary proceeding coming up so what type of timetable

are you know are you thinking may work and two, what thoughts do you have about, I guess, what I'm sure, Sphere is going to tell me is that, you know, now we're going to open them up to a whole other round of discovery and a whole bunch of expenses when there was a scheduling order saying they were ready to go in January. So how do I, and you can take them up in any order. I just want to know kind of what your thoughts are with respect to kind of preserving what's

already happened in terms of scheduling. and, you know, assuming there was a schedule, you know, kind of how quickly do you think all these issues could get teed up? Sure. And look, all fair points, obviously, Your Honor. And I think, you know, the debtors like any litigant, and look, litigation is a contact for it. We weren't going to let everybody know what we were thinking, but clearly when things were

coming together with the plan mediation discussions and we kind of started to see where things were going to go, me candidly, without getting into. to details about obviously attorney-client discussion. We were thinking about, well, what about the claims that we have and what about we have these contracts with Griffin? We need to do something. So we were thinking about it, but it would have been premature for anybody to stand up. And frankly, at that point, it wasn't a done deal what we were going to do. You've finally broken loose from work. Three friends, one tea time, and then the text. Honey, there's water in the basement. Not exactly how you pictured your Saturday. That's when

you call us, Cincinnati Insurance. We always answer the call because real protection means showing up, even when things are in the rough. Cincinnati Insurance, let us make your bad day better. Find an agent at CINFIN.com. To say anything about it. So I totally appreciate that there were schedules out there and this motion is to vacate that schedule. But I think the way we were looking at it, putting aside for a moment, Griffin's apparent desire to arbitrate, our thought was, look, this discovery does not go to waste. We both subpoenaed Griffin. They produced documents.

Frankly, if anything else we did with Griffin would be maybe some interrogatories and requests for admission. But it's not like the documents we produce the sphere, and that sphere produced to us get thrown away and we start over. Like we have them in relativity, we can easily just produce. them to Griffin. And I can't imagine with very small pieces of evidence on maybe the damages, maybe on some more Griffin issues, it's the same documents. It's not like the issues all of a sudden change. They're the same issues. So I really don't, I don't buy the argument that we have to start

over because we don't. We both have the documents. We give them to Griffin. Griffin's already produced documents to both of us in response to subpoenas. So, let me. frankly, I would say they should file, I mean, if they're due to the 21st, if they need a short extension, that's fine. They should file whatever motions they want to file, and we'll brief them as we would any case. So the discovery is not lost. Yeah, I'm sure people prepared binders to take depositions, but that's not really prejudice. And we did too. But nobody took a deposition.

And this is important. We think it was the right thing to do to not go down the path of depositions first and then file the adversary. proceeding because that would have been a mess because then Griffin would have had right. So nothing's really lost. One of my answers to your questions is nothing's lost. The discovery is there and can be provided to Griffin. And in terms of like the schedule, I would treat it like any other adversary proceeding. They should file whatever motions they want to file or frankly just file an answer and let's

litigate. But then we could have this wrapped up, I'm sure, in three months. putting aside the motion. The motion practice I concede will add some delay. But if we just had a straight-up litigation at this point, we already have a head start with the documents that were produced. So I don't see it taking that long from ready to go or starting discovery to a trial taking more than three months.

I hope that answered all your questions. No, no, no, it did. I just wanted to try to get a feel for, you know, whether you all were contemplating kind of a February, March, or a July, August, trial date with respect to these matters. I just didn't have a good feel for timing. Yeah, I'm thinking like April, April, May, I'm sorry, Your Honor. April May I was thinking, something like that. Okay.

Okay. Let me hear from Sphere. Thank you, Your Honor. I neglected to Mitchell. Actually, Mr. Wolf, just one question. I'm looking at my notes here. I had one more question for Mr. Secretes, and then I'll turn to you, and I'm going to ask you all the same question. So December 18th happens, you know, December 19th, are we all smarter on December 19th, or do you think not?

In other words, in terms of kind of the state of play and kind of the way the pieces are going to get moved on the chess board, Are we all smarter on December 19th or not? Well, unless the parties, and I don't want to put the lawyers on the spot, but unless they're going to tell me, like, right now, that they don't think the contracts are executory, then we will have solved, and they're not going to file proofs of claim for rejection damages, then we're not smarter in the sense that we know what they're going to do,

but we have removed one more potential issue, which was fear's point that apparently we've been withholding minors that they asked for. So that would be mooted, and then the miners get picked up by whoever. We would say Griffin, and then Griffin can do whatever they want with the miners. And so then they'd at least be out. We'd have that done, Your Honor. And assuming that goes away, then what's left to try, from with respect to sphere?

Well, you're talking about just this contract rejection point? Yeah, yeah, yeah. Yeah, so if Griffin were to say today that their executory contracts, they take the miners back, there's no rejection damages, then we would not have that issue of rejection damages in front of the court. We would still have like the meat of the fight, which is basically a sphere. proof of claim.

But my guess is, I'm not going to speak for the other parties, that they're not going to tell us that. They're going to say at a minimum that they're reserving their rights to bring rejection damages claims and or fight us on whether they're executory. And then the same issues that are involved in fighting those damages claims are the issues that are involved in the sphere of proof of claim. Got it. Thank you.

Mr. Wolf. Sure. Thank you, Your Honor. And I was remiss before not mentioning that also present in the courtroom is Ms. Trompeter, who is Sear CEO. I must have joined by my associate. The Whole Street of Oz, who I think will be putting a demonstrative up as I speak, if that's okay, Your Honor. I'm sorry. Who do I turn it over to?

I'll be talking, but we'll be putting up a demonstrative while we talk. That's what I'm saying. Who do I give the – is it a Spirrhus presenter? Rahul Shrinvost, if you don't. I hope. I got the video. Pardon me. This actually.

We could also hand up a printed copy, and I could just direct you as I go, if that would be easier. Your Honor, I do have a printed copy as well if you'd like me to hand it, but also – but on the screen, I think the person has – named themselves sphere presenter okay I see yeah yep yep I saw them a second again let me find them again and I will give them the power oh I see it I see yep person put both names up like you can find me either way hold on always prepared yeah if you got a hand cut that'd be great too okay and also before I really get into the need of things as a housekeeping matter I move all these exhibits are exhibit listed to evidence for purposes of this hearing and record only.

And those are docket numbers 1482-1 through 30 in the main case, and docket numbers 20 through 24-1 through 30 in the adversary proceeding. And since we had this one time before, I'll give my friends on the other side the chance to do the same before I get into it. Yeah, Your Honor, we really don't, we have a relevant the objection for the emergency motion. These documents really don't, I mean, there's some back and forth from our discovery disputes, which are not before the court, and then some documents from the case about the merits,

which are not before the court. If the court wants to take them for purposes of consideration, we don't think there should be in evidence, because they're not evidence relevant to these proceedings, but if the court, now it's not a jury issue, if the court wants to feel that it has a benefit from looking at them, that's fine, but we don't think this should be in evidence. Yeah, I agree. I'm not going to admit them into evidence, and then they approve them up anyway in the courtroom.

So, but I, it's okay. I want to make sure that Mr. Secreides, it sounds like you're okay with me looking at them for purpose of consideration, but not into the record, and I think that serves the same purpose. Correct. That's fine, Your Honor. Thank you.

All right. So, Your Honor, I'll just begin with Mr. Secreides, begin with a short background. I'll just begin with a short background in our view of the case, and then I'll jump to the motion. So our perspective is that over the course of a little over half a year, you have provided Core with $35.1 million in deposit funds in contemplation of future hosting services. And Core recognizes the deposit payments for revenue. When Core does not recognize this payment in actual revenue,

unless until it delivers hosting services. Cor also, Corr has provided, although we've provided $35.1 million in deposit funds, Corps has provided a few hundred thousand dollars, maybe a million worth of services, and before it made clear that we no longer uphold its end of the bargain and host our minors.

And it's undisputed that Corps has retained the bulk of the deposit funds, so we're talking 33 to 34, million dollars without delivering those services, which remain fitting on their books as deferred revenue. And the other issue that's going to take Paramount in the case is court also plugged in Spears miners as its own and used them to mine Bitcoin for its own benefit. We say wrongfully taking at least $500,000 for itself that should have gone towards sphere. these are questions that should be addressed at a trial and you'll be ultimately deciding whether court is entitled to a $33, $34 million windfall at his expense. And as I'm sure your honor is now aware, it was in our briefing and you have likely read the court transcript and the briefing under the motion for summary judgment,

the court actually moved for summary judgment on what it viewed as the dispositive issues in the case, namely whether there was this assignment and whether certain limitations of liability would have reduced serious claims to the point that it really wouldn't have been worth it to prosecute the case. And the court denied that motion for summary judgment after a complete briefing and a hearing on the merits. And so here we are. turn to the motion our position is that these are issues that should be addressed at trial in January in 2024 which is exactly what court asked for and you mentioned at the beginning the importance of meeting deadlines and we have taken those deadlines seriously and we don't think our adversary did

for strategic reasons I would start with slide 12 and given what was said to the core during the summary judgment and scheduling hearing. Sorry, the next one, please. 12. Your Honor, would it be possible for them to send us this deck so we can at least go through it and not have to rely on sure. We're happy to do that.

Yeah, why don't we do that? But, Mr. Secretides, why don't I can step off for about five minutes, make sure that you've got it? And maybe you can, counsel can also send it to Ms. Hardy That she's got it. She can, so just so she's got it. It sounds like she's got a hard copy. here as well.

Why don't want to come back on in five minutes and then just want to make sure that you, everyone who needs to get a copy of it can get it and we can go through it. Sure, and we'll send it to Dennis as well. All right. Thank you. I'll come back on in five minute. Okay. We are back on the record. Mr. Secretides, just want to make sure you got the deck.

We have the deck. We've had a chance to quickly peruse it. Okay. All righty. Let's proceed. Mr. Wall. Thank you, Your. So we saw with slide 12, given what was said to the court during the summary judgment hearing before your honor took over and given the course of the proceedings, we were very surprised to receive the unilateral notice from course counsel last week. The depositions that should have begun this week two days ago and the trial scheduled to begin in two months would no longer proceed. and if Justice 514, what we were also surprised by was that some of the things that we read in my adversaries in motion did not account for their prior positions before this court, again, before your honor took over this case in which my friend on the other side really glossed over in his presentation.

during the August 7th hearing, my adversaries informed the court the trial should be completed, Your Honor, this month by December, but it just has to be. And I mean, it has to be completed by January with all the expedition and expense that entails and that we have already borne. And my adversaries were clear that a trial in April, 2024, was a non-starter. Now we're in limbo, Your Honor. maybe we have a trial in March, maybe we have a trial in July. Who knows? And it's still a real problem for us.

And it's not even clear that Griffith would be ready to have a trial in April or May or July. And it's unlikely that they're even going to be a part of the case, given that their case is likely to be said to arbitration or these will be subject to pending appeals. It's an issue from our planning purposes, and it's also an issue for our CEO, Ms. Trompeter, who has been scheduling her treatments around the trial date. She had originally her next treatment scheduled for April.

Now, with the pendency of this motion, she's looking to see if she could get that push back to January. It's not clear that she will be able to. She's on a waiting list. Next, if we could go to the next slide. During the hearing, the court acts. that my adversaries would be pursuing any other actions, including for damages against Griffith or Speer. And I'm going to quote what the court said before you took over. You're objecting to the proof of claim. And so if you win, you're not pursuing anything else. You're just done

with that. Is that right? And my adversary's response was that they would not be pursuing another action that would mess up the schedule. Yeah. My adversary continued. And so if we won, at the end of the day, all of that, that would be it. We wouldn't be pursuing anybody else for money because we'd be resolving that issue here in this context. That statement is ignoring my friend's brief, and it's ignoring my friend's presentation. And if we could go to the next slide.

Again, during the hearing, before you took over, the court explicitly asked whether it made sense to join Griffin to the proceeding because there's worries that adding Griffin later, might result in the exact situation you're in, that it would just mess up the case schedule. My adversary explicitly said they do not want to add Griffin to the proceedings. Now we're hearing a whole lot of mumbo-jumbo about how they're terrified

that they're going to have inconsistent results with the question, if the contracts are declared to be executory or not. Release that it's speculative that either party, Griffin, or sphere, is going to seek. And during the course of the proceedings to account from Ms. Trumpers' health, we specifically asked if trial could be moved by two weeks to the week of January 17th. My adversaries initially refused and only had relented when we made clear the severity in this Trumpers' situation. But Your Honor, the situation was never about moving the trial date a matter of months.

It was always about an adjustment of a few weeks, given what they had said about the urgency of completing them. and there is no reasonable explanation for the delay in filing. I haven't heard it. You haven't heard it. In their opening brief, they did not try to offer any sort of brief reasonable estimation. Instead, they offered an explanation that I've never heard, and I don't think any court has ever said would be good cause,

that they want to try and settle the contested matter, and apparently plans would possibly file an ad procuring proceeding, if they couldn't secure a settlement. And, Your Honor, the reasonable conclusion is they never took the expedited case schedule seriously. And the reasonable conclusion is that Corps was trying to exhaust Spears resources, which because Spear is publicly traded, Corps has known to be limited. Your Honor, they have our $35 million. Those are $35 million we desperately need.

And, Your Honor, this is about as bad as it gets. court used the case schedule as a weapon to try to extract the settlement from us. Having gotten the expedited schedule it wanted, CORE does not get to rewrite the case schedule because, keeping your honor, court is willing to settle, but just for a bit more than court has offered. And in fact,

court has just never given a resolution a serious chance. It has refused several invitations to mediate before Judge Isgrove. We offer to mediate on August 11, of 2021. Of course said no. Who did not even make a counteroffer to us until late October, which belies the notion that they were just trying to settle this and would have filed the adversary proceeding earlier if only they had been able to settle this action.

This trumpeter proposed mediation on October 26th. Of course said no. And although the parties were not that far apart, we again proposed mediation number number six. Of course, said no, and we finally proposed mediation, another number 17, and instead of mediating whole reactives by filing the adversary proceeding. Your Honor, this is not the conduct of a party who's looking to find a reasonable settlement. A mediation does not necessarily only push them up, and they push fear down. That's by parties mediates.

And after we made clear in our brief that the settlement point was nonsensical, they've shifted attacks and arguing it was simply the case. My friends on the other side has said, you know, we were thinking about this in October, but I can't reveal anything because of attorney-client privilege. This is just a post-talk explanation, Your Honor. The court explicitly invited this proceeding in August, and my adversary knew the efficient thing to do would be to file it immediately. They're seeking a break on the case. They, in fact, opposed moving the case schedule on October 25th. At the same time, they were telling your honor that they take scheduling seriously and

that apparently they were considering this adversary proceeding very seriously. Now, sending aside motive, which we think is highly relevant, let's put up to slide 18, please. The fact remains that the adversary proceeding and contested matter are in very different faces. And the case law is clear that that on its own is ground to maintain the present schedule and retract the motion. As your honor knows, the case is on the eve of that position. They were supposed to begin on Wednesday, and the trial is less than two months away. The adversary's proceeding is just getting off the ground. My adversary makes it sound like the febury will be minimal. Perhaps if it were just fear in greater than late, or excuse me, fear in core living in

against each other, that might be so. We will need to serve additional discovery on their new damages claims, but as my adversary said, that will not be the most burdensome thing. However, the presence of Griffin makes this different. Griffin will need to serve interrogatories and we need to respond to interrogatories. It will need to serve RFAs and will need to respond to RFAs. Griffin responded to a subpoena and made document productions pursuant to a, subpoena. Its obligations were accordingly much smaller than it would have been if it were

parties. Griffin has not disclosed its search parameters to us. It has not filed a privilege law. These are things it will have to do. It would be, and my adversaries, they can say, well, we'll just accept Griffin's production. I don't know that we would, Your Honor. There's likely to be cross-motion discovery. So all that's the way of saying is there will be a substantial delay, and if there is significant delay, fear will suffer prejudice. We are deposition and trial ready, and as our adversaries know, because we're publicly traded, short on resources. We need the contested matter to go forward, and we need to know whether a claim will be allowed or disallowed. And because the schedule

was expedited, we incurred additional expense and had to front-mode these expenses on the expectation that we would just have an expeditious trial, and we made business decisions to prioritize this litigation over other revenue-generating activities. Court asked for an expeditious schedule and it's very much to it. And at bottom, Your Honor,

grants under the request relief to reward deemanship. We've been preparing for depositions and trial preparation that is going to go out the window due to the passage of time. Meanwhile, Quote will have achieved this apparent goal of delaying, definitions while we incur additional costs.

And, Your Honor, I think discovery has gone well for us. I don't need to go into the merits on that because all you need to know is that court proposed dropping motions for summary judgment. That's not something defendants do if discovery is going well for them. A court cannot seriously believe in this adversary proceeding, which poorly seeks $100 million in damages. Parties don't sit on those types of claims if they think they are worth something. Of course, it would be relevant to all the predators to have known that court had these

apparently great $100 million claims that are going to be collectible. That's very relevant to the state, especially when court is saying it does not have any money to pay out its predators and instead must pay them out through equity. And there's certainly no reason for them to have delayed assuring the claims against Griffin, given that they believe that that's who they are prudy with and a settlement with fear would not have resolved their claims against Griffin and finally your honor I just want to address this argument about efficiency the efficient thing to do would have been with the adversary speeding at the outset when the court invited it and because Griffin intends to me for arbitration

there will be no efficiency gain if Griffin prevails on its promotion the case will be sent to the arbitral forum accordingly there will be one case against Speer in this court and one against Griffin in the arbitral form. If it loses, Griffin will have the option seeking three levels of pilot review. District District District and Supreme Court. The proceedings will be automatically stayed during that time. The case against Griffin could drag out for years. I'm not sure of the exact, um, the Supreme Court decision in the Coinbase DLC case is very

recent. I'm not sure if that will also mandate a stay against, as between fear. in court as well if the case is consolidated. So when will lose the motion for arbitration, it will simply be no efficiency gain. Now, to maximize efficiency, what we've proposed is that the court for, defer consideration of the adversary proceeding and any offset issues until after trial. Instead, at trial, deal with the allowance issue and the amount of the allowance.

Maybe this prompts the parties to finally do what they should have got to, the very beginning, which is radiate, but no matter what, it will focus in streamline deficits in trial. It'll reduce the matters in dispute. And if we have to have a second proceeding down the road, so be it. We're prepared for it, Your Honor. And in sum, I urge you to reject course with custody relief. Thank you.

Mr. Secretia, I'll give you an opportunity to respond. Do you want me to do that now? How do you want, Mr. Tracy to receive sort of with me and half a percent? Oh, I apologize. Mr. Tracy. I'm sorry. Now I can see all the cameras again. I apologize.

You may be on mute. I don't know if I've unmuted your line. If you can, just hit five star. Oh, there you are. I think my line is now on mute. Can you hear you? Just fine. Great.

Thank you. I apologize for technical difficulties at the outset and wasn't able to make our appearance on Dennis Tracy from Hogan Lovell with my colleague Richard Wynn, and we represent Griffin Digital MIA. Thank you for having us. No worry. Please. Anything you wish to say? I'll be brief, Your Honor.

As you know, Griffin entered into the MSA agreement with Corps. We specifically negotiated the agreement to assign that agreement to fear. That was the whole purpose of it. We then entered into the sublicensed and delegation agreement, and pursuant to that sphere deposit of $35 million. And so we are leaving it to sphere to litigate that issue. And we've recently been brought into the case first thing we did, of course, was to ask for mediation of both parties.

That request was not responded to, and shortly thereafter, the adversary proceeding was filed. We, as we informed the court, the MSA, under which is the contract under which the adversary proceeding was brought, as a very broad arbitration clause, which requires that any dispute relating to the MSA must be brought in arbitration in Seattle. And the parties having agreed to that, we intend to move to compel arbitration. And that said, we have no objection to the continuation of the claim. by sphere and resolution of that by the court. But any claim by a core for damage against Griffin must be resolved in arbitration.

And I would say the last thing is with respect to the executory contract, we have not taken any position on that and aren't prepared yet to do that. Most of those discussions have been between the parties, but at the request of the debtors, we can certainly jump into those conversations and do it for counsel going forward. Thank you. Mr. Securides. Yes, thank you, Your Honor. First, let me start with, you know, we didn't want to get too into this,

but we do object to the serious accusations and the gamesmanship. I mean, this is, as your honor knows, Chapter 11, do have a cadence. And in August, it didn't make sense to do it. It made sense to do things in November. So I'm sure the court knows how things operate. There was no bad faith intent. This was a litigation. And we had different set and bigger fish to fry in August than we do now.

But I think the bigger issue is what do we do now? And I've just heard Mr. Tracy say he wants to have Spears issues decided by your honor. Well, if Spears issues say that Gressman breached the contract, then he's bound by. that. So we have to figure out a way, I'm not going to litigate against Sphere and win, let's say this is the first I've heard that the purpose of the MSA was to signage, that the facts will not bear that out. But even if sphere has right, we then have defenses that they were breaches and the breaches were by Griffin's conduct. So if we prevail at a trial and some

re-judgment motions get denied not on the merits, it's because there are fact issues and dispute. That's why we didn't think we should have a summary judgment motion because there are fact issues in dispute. But if we have a trial with Spear and we win that there was a breach of that contract, I don't want to hear from Griffin that they weren't there or that they're not gone by that. That's our concern.

Because that's what's that issue on the Sphere POC. It's not just that they entitled to money back. We think they forfeited that money. We don't think they're entitled to that money. And we think we have claims and defenses with respect to that. So if we win, what's Griffin going to do? I haven't heard anything about that. That's our concern.

I understand. So, Let me just note November 25th, there was an emergency motion to vacate the scheduling order in the sphere-contested matter and to consolidate the sphere-contested matter with the adversary proceeding that was filed on November 21st. I'm going to find certainly a core proceeding today, and I have jurisdiction to resolve the issue. The court has considered the arguments. of counsel. There have been a number of documents that have been not admitted into the record, but have been used, quite frankly, when I'll call as demonstratives to kind of, so the court can take notice of the record as to kind of where we are. Note, there is currently a scheduling order in place that contemplates a trial in the sphere matter as a contested matter in

in January. Based upon what I've heard, I'm going to make a couple of, I'm going to rule on the issue, and then I'm going to make a couple of observations. I'm going to deny the emergency motion.

We're going to stay on the schedule that we are. It's been currently scheduled that way. I reject, and I don't find any bad faith by bringing the motion And I think cases are complicated. Cases always have moving pieces. People don't always have to tell judges what they want to do and when they choose to do them.

And I think certainly the debt has had every right to bring the motion to seek to vacate. And there really is an efficiency argument here. And there's also kind of a practical ramifications as to what happens because they could have legal consequences for parties who aren't involved. And so I think there was a good faith basis to bring it. I just think we're so far along into the scheduling as to where things are where a trial was scheduled to begin, quite frankly, originally in about 30 days. And now it looks like it's just going to go to the end of January. I think the schedules should continue along that path. There's a lot of unopened doors. I think we need to remember.

remain unopened now in terms of what a scheduling would look like if taking a briefing on arbitration, potential motion practice, this could easily slip into the middle of the year. And I want to make sure that this case stays on the tight timeline. I reserve the right, however, to revisit if it starts to look like, you know, things make a lot more sense later down the road. I think we'll all be a little smarter in January. I reserve the right. But I will say this. And I am only saying it because it's said, you know, I intend to take the trial up. I intend to try to rule on this if I can right there at the hearing. If not, I'm going to make very detailed factual findings.

And the legal effect of those findings will have whatever they are. So I really want the parties to really focus on making a robust evidentiary record because I'm certainly going to be expecting it if we have the trial in January. and the legal effect of what those are will be what they are. I think with respect to the, I don't want to comment on motions that I haven't seen, so I will reserve all rights with respect to Griffin and the arguments that could be made with respect to arbitration. I appreciate the heads up that it's coming,

and I think it would be, I ought to reserve everything until I read something on those points. So I think we stay on the schedule that we are, that we're on, if it starts to become highly impractical, I reserve the right to kind of come back and revisit where we are, but I think the depositions that are schedule should go forward, and let's just stay on the schedule, and we'll see where we go. Your Honor, on that point, we never had a, but we have a schedule that has a trial date. I've moved in the interim, and we don't have an actual revised order.

So I think we'll either have to talk among ourselves Because there is no actual schedule right now So I don't, and I'm not suggesting I hear what you're saying I know what you mean You want to lock some dates in so that I got it I got it I think it makes a lot of sense I was going to end by saying I hope the parties can kind of work together And try to figure something out if not then Monday we need to all get get back

And and I'll just I'll make the call if we have to. Right, because either, I'm just talking out loud here at the risk of doing that, either we're going to leave, or leave the trial base in with 30th to the second, whatever it was, and then work back from there to get the depositions done between now and some reasonable time in advance of that. Or, again, like Don't want to be freaking out that, you know, maybe we need to move that a week or two to make up for the depositions.

So we don't have to decide that today, but hopefully counsel. I think that's right. I think that's right. I think that's exactly right because, you know, we've got to look at schedules and we've got to make sure that it makes sense in light of kind of where we are. So I don't want anyone to, you know, I, if you all get together. I will make the time. I will lock it out.

I won't be the hold up in terms of my scheduling on that. So let's just figure out what makes sense. I want to lock things in by no later than Monday. And if there's an order, I won't get in the way of it. But if we need to, and I will just tell parties, for the contested matter, unless there's a real reason why someone can't appear in person, I just think all the witnesses and anyone who's going to examine the witnesses, I want you here live primarily.

I just, the technical issue sometimes come in, and I just want to avoid all of that to the extent possible. Your Honor, we will meet in control with our adversaries promptly an open weekend if need be. And if it is the case that in planning it, we need to add two weeks, I'll need to talk to my witnesses and make sure everyone's available. But we were playing on everyone being in the courtroom. Okay. No, no, I'm just throwing it out just so it's really clear kind of the way I think this should play out. So I would ask if someone can just, quite frankly, if the parties, Mr. Wolf and Mrs.

Secretides, if someone, you can email my case manager on Monday, let me know if we need to schedule some time for, to kind of hammer out some dates if you need time of the court to do it. Just Monday morning, just email her or email her on Sunday or Monday and let her know. And we'll figure out of time on Monday if we need to kind of get together in the afternoon to talk. If not, I'll let the parties work through the issues. But it's just a kind of a heads out. Okay, that's great. We might have a few by deposition, so we'll see. We'll set that up, you know, the evidence would be non-parties.

Okay. All right, folks. Thank you very much. Have a good day. Oh, Mr. Hold on a second. Ms. Hardy, wanted to tell me something. Your Honor, Jennifer Hardy of Volky Far on behalf of the official Unsecured Creditors Committee.

I just wanted to give the court a heads up. As you heard at the disclosure statement hearing, the committee still has an ongoing objection to the plan and reserved discussion. and we serve discovery promptly after the disclosure statement hearing. We have one party that we still have a remaining discovery dispute with. We do expect to have to file a motion to compel in front of your honor, perhaps as early as today, and we'll reach out to Ms. Aldania to get a hearing date on that on an emergency basis. We would likely ask for something early next week because the confirmation hearing is three weeks from today.

Okay. And just depending on the time on that one, I will, if, depending on when you file and depending on when I set it, to the extent someone needs to appear by video on that one, I'm fine with that because we've been done an emergency basis. I don't want someone, but I got it. I appreciate the heads out. Thank you, Your Honor. Thank you. All right. Thank you very much.

I'm going to just give everyone, I'm going to step off for two minutes, and then I will come back on with the 10 o'clock. Thank you.