American court hearing recordings and interviews - Season 6. Episode 26. April 25, 2024 11:27 am. In re BlockFi Inc. et al., chapter 11 bankruptcy case no. 2022-19361, audio of hearing held in the BlockFi bankruptcy proceedings pending in NJ, USA #crypto

Episode Date: April 28, 2024

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Good morning. This is Judge Kaplan, and I'll be starting my 1130 calendar with respect to Blockby matters. We have counsel both in court and appearing remotely. For those, bear with me, for those appearing remotely, if I have not called upon you and you wish to be heard, please make sure you use the raise hand function. Good morning. Good morning, Your Honor. Kenneth Ollette of Brown Rudnick for the plan administrator. I'm joined by my partner, Justin Axelrod, and Associate Matt Sawyer, as well as my co-counsel from Genova Burns, Don Clark.

And my partner, Dan Healy, as well. All right, thank you. We have several matters on the agenda. I will ask those who are appearing on these matters to enter their appearances when we get to each particular matter. I want to make sure we're actually a couple minutes early. Do you want to begin setting the stage for this morning, Ms. Rolla? Yes, thank you, Your Honor. So this morning, if it works for Your Honor, what I propose is that we give a short status update on the progress of the case.

And then we have essentially two different matters. We have the Van Tubergen motion, and then we have essentially a number of matters that are all related to the D&O litigation. And what I propose, Your Honor, is that we handle the Van Tubergen motion first, and then for the D&O litigation, we thought the order that made the most sense would be the motion to enforce the plan, then the motion for remand that was filed by the plan administrator, and then finally the motion to lift the stay that was filed by certain directors and officers. All right. I somewhat anticipated hearing them all together and they're so interrelated. I think that would make the most sense. What about the omnibus objections? So, Your Honor, we have received no responses to the 18th and 19th omnibus objections,

and we would propose that those be heard on the papers. All right. Now, there was one of the claims for... which counsel requested an adjournment I believe I resolved yesterday was with Mr. Straffi's client to – do you have the matter on the papers? MR. Yes, Your Honor, and you gave us a week to file a reply since I believe his opposition is filed yesterday, so we will get that on file as well.

MR. All right. So with respect to those motions – the 18th to nymphous motions, the Court will – the adjudicate those on the papers and will apprise parties of the resolutions. Thank you, Your Honor. And then there's also – and one other unopposed motion – the Wind Down Debtors motion for the entry of an order extending the period to file and serve objections to claims. That's Docket 2210.

And again, there were no objections to that motion so that we would propose that as well, being heard on the papers. all right let me just check that here that's number 19 on chat and that that will be granted so numbers on today's calendar my count the court's calendar 21 and 20 will be on the papers with the exception of the single claim that has been carved out for well it's still on the papers but we're allowing an additional week for the wind down debtor to respond. I think that brings us current, correct?

Correct. Thank you, Your Honor. All right, so we would move to the Van Tubergen. Oh, I'm sorry, you wanted to give the update. Yes, Your Honor. So the plant administrator has been working to get the first interim distribution out to all customers. For Crypto, as Your Honor knows, we are making distribution. we are making distributions of certain cryptocurrencies through Blockby's platform and other

distributions in cash via a number of partners. The crypto distributions continue, and we urge that all people who are eligible to withdraw do so as quickly as possible because the deadline is submitted withdrawal is coming up. There will be a short window for people to fill out the required identity verification, which again, we urge everybody to pay close attention to the emails they receive on identification, they may get one email per withdrawal, not per account, and they need to fill out all of them for certain regulatory reasons. And that's a deadline we're not going to be able to extend further.

We do have plans in the works to transition potentially to a third party to allow further crypto distributions, but there's no guarantee that that will be a quick process, so we'd like everybody who can submit a withdrawal to do so as quickly to do so. possible because we will be shutting the platform down and not have the ability to continue to process those with respect to cash distributions we have run into certain regulatory roadblocks it had been quite difficult and we understand quite frustrating for number of customers those can be separated into US-based distributions and international base with respect to US-based distributions we have

resolved those issues this week we expect that withdrawals that had been requested in cash previously will start going out early next week. Again, we'd urge everyone who is eligible for those withdrawals to submit them as quickly as possible, but because they're not being done through Block VICE platform, there is less of an urgency to get those done by the end of the form. With respect to international cash distributions, there are significantly more complex regulatory issues, due to non-U.S. law. We anticipate that we will be able to release a large amount of those in the near future, but there will be a certain group of those that we likely need

to request re-verify their identity even for distributions that would seem relatively small. So we will give creditors further updates on those. There are also a small group of creditors where we have had to freeze distributions for certain more complex regulatory issues. Plaintiffs who have contacted us, we've been able to tell them their regulatory issues, but we have not been able to go into detail on those, and for those customers, we are not able to make distributions at all on those until that is resolved. We may be coming to your honor with more information on that and a proposal on how to resolve, certain of those issues appear extremely thorny and may be difficult to resolve.

We will, of course, reserve all funds so that anybody who is not able to get their funds now will not be prejudiced by this delay and will be able to receive the same distributions that are entitled to. All right, that's fair enough. And with that, I would turn it over to my associate Matt Sawyer, who has done a great deal of the work in this case that you haven't done. this case that you haven't seen your honor and we'd now like him to address the Van Tubergen motion all right then first let me hear take the appearance for counsel for mr. Van Tubergen mr. Maggaly's you there yes your honor good morning good morning how are you fairly well judge thank you all right this is

your motion for reconsideration as I've often admonish all sides I've read the the motion papers as well as the opposition and the replies, and the replies of the replies. So let me have you supplement or highlight any portions of your motion that you wish. I appreciate the opportunity to do that, Judge, and I came in with that mindset, Your Honor. I know the court's time is precious. It's big case. A lot to be heard today. Judge, as I hope we made clear, we're not looking to re-argue. You know, we explicitly noted that in our memorandum of law, and I hope that the ensuing framework reflected that, Your Honor. The procedural standards for the motion, they are what they are, and I don't think that's in dispute.

They informed our approach. We're mindful, Your Honor, that courts should not lightly undo their prior, very recent, rulings. The legal system couldn't function that way. But thankfully, as we say, we have a rule scheme that does take account of situations like we believe are presented by the instant one where there are genuine grounds to alter and amend whether on the basis of cause under Rule 3008 and 502J or under, I'll call it the catch-all, any other reason that justifies relief under federal rule 60p.6, and the full framework, and set forth in the papers, Judge. But my initial point here, Your Honor, is that we're looking to work within the latitude afforded

and equally important within the reasoning of the decision, because we're not looking to re-argue. And therefore, our arguments, Judge, have been premised on evidentiary considerations and also other legal theories outside of a breach of contract theory that we believe. 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. We warrant some additional consideration. And as to our evidentiary points, there was stuff worth in the papers, Your Honor.

You're aware. We believe that value was only proven by claimant. We know that, Your Honor, in the world, cash is king, but perhaps we can say that in bankruptcy, see, value is the coin of the realm. And I believe that my client, Mr. Ventubergen, is the only party here that proved value. BlockFi spoke as to their general processes.

And they did, as we say, you know, somewhat tongue-in-cheek. We always keep our humor, Your Honor. You know, they submitted numbers on a page, but what are they backed by, right? I'm not insinuating that they made them up, but we're in a legal proceeding. They have to prove them. only Mr. Von Tubergen submitted a verifiable form of market data through the Gemini data, which we've spoken enough about and made the point that they were the depository reference.

But, you know, my client and I were speaking yesterday, and he made the point to me. You know, we've read and reread Ms. Marcus' testimony, which is obviously our other evidentiary argument that she was more of a corporate spokesperson, not a fact witness per se. And we saw that she said, you know, they took best in class pricing. Well, Gemini is best in class. And as a matter of justice and equity, capital E, Your Honor, we're the ones seeking to have this court look to all of the world's major exchange platforms to see what they would have to say about the pricing metrics at the liquidation points in question. As we said in our papers, our pricing metric that we submitted as our evidence was time-stamped. And we will stand by that.

And I am confident that if the court were to indulge us and take judicial notice of the information on these other platforms, the court would find that to be the case. And also, those other platforms would be able to account for what we believe is a smoke screen being put up by BlockFi that. well, you know, you have to look at the timing when it was sold. You have to look at the volume of the sales. As the timing, as I said, our pricing metric was time stamped. And as to the volume, we believe that these other exchange platforms will be able to account for that and support our pricing, our valuation evidence. And at the end, at the end, support our contention that the liquidation. were not authorized. And just, but also, Your Honor, as I said before, as I read the decision, to me, it was heavy on the breach of contract theory, which we have our disagreements on that front, obviously, but that would be a matter for appeal and not a reconsideration motion.

And I saw Your Honor's decision, and we cited about how it's not really a reconsideration motion, all that. But we saw very little in the way of the discussion of good faith and fair dealing and unconscionability. And I get, normally those types of arguments are afterthoughts. And a lot of times when parties make those arguments, they make them in a almost half-committed fashion. It's very vague. It's very amorphous. Here, Your Honor, we have statutory complications in Michigan, which their law applies of good faith and fair dealing, of inconscionability. And we have various facets of this case, Your Honor, that I think would be a freestanding significance, meaning even taken in isolation, they would be very concerning.

But then when you add them together and you put them under the penumbra of Michigan's statutory codifications of good faith and fair dealing and conscionability, that the overwhelmingly warrant a ruling or some kind of relief in Mr. Von Tubergen's favor. And I'm referring, Your Honor, to what is plainly a oppressively one-sided contractual term. And I'll say something on the record, Your Honor, that I hope is not controversial. I think that if Blockfly continued business in the manner that they did, that these types of contracts would have become an issue at the government agency level. But, again, that's neither here nor there because it's not really in play.

the manner in which they executed liquidations, Your Honor, was, I think we called it strip mining. You know, it was just so over-the-top aggressive. Again, agency law considerations, Your Honor, that I didn't really see in the decision in terms of you had multiple BlockFi agents making certain representations as to how the liquidations would be conducted in terms of their extent. Assurances were given. Mr. von Turbergen, we argued reasonably relied.

I'm thinking that he was good to go with regard to the, he was in the safe harbor when he posted that additional collateral in that side account, and that additional collateral was, in fact, posted. We get to the notices, Judge. Even if this court continues to accept Exhibit J, it doesn't serve to prove the form and content of the underlying notices. And, again, I trust the court will permit some humor, Judge. I know my client and I need it in this matter, but again, even if the court accepts Exhibit J, how do we know that each instance in Exhibit J wasn't Block 5 forwarding a Michael's coupon? You know, we don't because the actual stuff wasn't produced. The notices that were produced, however, raised concerns.

And we've mentioned this now a couple times, Judge. I don't believe that it was in the decision. The first liquidation that we made a part of our request for relief in connection with a loan. number 558-207-85, we refer to loosely as 558, we don't believe that a 72-hour notice period was given. We provided a notice that was dated May 18th, blocked by claims liquidation occurred in May 19th. We believe it occurred May 20th. But in either scenario, the 72-hour notice period wasn't met, and it has to be of some consequence,

Judge. And then we get to, and I'll mention this very briefly, Judge, our prior attempts to, documents and information. And we were, with regards to Block 5, we resolved those attempts by withdrawing the subpoena. We then issued a subpoena to their, to a third-party service provider of their scratch services. They didn't comply.

And I think at the last hearing, Your Honor said something to the effect of the music has to stop eventually. And I get it, right? It's just that when you add all these different things, Judge, and, you know, being mindful that at the end of the day, Mr. Von Tubergen was a consumer. BlockFi was a behemoth, and you take account that Michigan has codified, good faith and fair dealing, codified unconscionability. I believe that all of that summoned substance warrants reconsideration and a ruling in Mr. Von Tubergen's favor.

All right. Thank you, Mr. Magalese. Let me hear from the Windown Deserts Council. Good morning, Your Honor. Good morning. I think it's still morning. Matthew Sawyer with Brown Rudnick on behalf of the Wind Outtenders. I will take, I think, cues from Your Honor. I will try to be brief. There has been a plethora of submissions and argument, and so I will try my best to be short and sweet. Your Honor, we think that this boils down to really one issue.

The issue is what the terms of the agreement that Mr. Van Tubergen and BlockFi entered into say. Mr. Van Tubergen, as I believe your decision notes, was a sophisticated party. He sought to make fairly leveraged bets on the price of cryptocurrencies. Blockfi was willing to lend to Mr. Van Tubergen. BlockFi was not willing to accept the price risk that Mr. Van Tubergen was willing to accept. BlockFi was not willing to ensure those bets. The LSAs that these parties entered into reflect that agreement. The LSAs provide BlockFi with the ability to liquidate collateral at its discretion upon certain thresholds in the LTVs being met, and BlockFi did that.

the agreements themselves are clear, block size compliance with the agreements is evident, and I believe your decision and your order reflect that and found that. With respect to the Michigan law issue, I believe that the LSAs are again informative on that issue. Michigan doesn't acknowledge a violation of good faith and fair dealing, excuse me, where a contract party followed the contract. Block five follow the contract. There is no violation of good faith. There is no violation of fair dealing.

In terms of whether the LSAs were unconscionable, the LSAs, again, were entered into by two sophisticated parties. They were clear. Mr. Van Tubergen wanted to make the kind of bets on crypto that he made. he could have taken that business elsewhere. He chose to take it to BlockFi. And BlockFi was willing to, again, lend, but not unconditionally. And the LSAs are reflective, again, of that agreement that the two parties entered into. And in terms of agency, for fear of beating the proverbial dead horse, the LSAs are clear.

Mr. Van Tuergen is sophisticated. He can read them. He knows what they said. The LSAs provide a window upon certain thresholds being met in the LTV. After 72 hours, Lachthai can liquidate collateral. Upon a higher LTV threshold, Lachfai does not need to provide notice to liquidate collateral. Notwithstanding what the LSAs say... You've finally broken loose from work.

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Find an agent at CINFIN.com. I think the record is pretty clear that Mr. Van Tubergen received. adequate notice in every instance prior to the liquidation of the collateral. So not only should he have been on notice based on what the LSAs say, but he received from BlockFi and its employees' adequate notice. So, again, I think that the record more or less speaks for itself. I will rest unless Your Honor has any questions for me. No, I understand. Thank you.

Thank you. Mr. Maggaly, anything else you wish to add? No, Your Honor. All right. Well, I thank you for your argument. I'm going to take some time, not too much time, but I'm going to reserve and consider the argument together with the pleadings that have been filed, the submissions. And I'll have an order I would anticipate in short order. All right.

Thank you. That concludes my involvement, Your Honor. I wish everyone's celebrating Passover a good holiday. Thank you. Take care. Bye-bye. All right. That motion is on reserve.

We can proceed to, we'll call generally the D&O issues. And we have counsel for the carriers and movements come up as well. Thank you, Tristan Axelrod Brown-Rudnik, for the wind-down debtor. I believe it's just one of them, black-fite ink, on these matters. Your Honor, Rachel Ehrlich-Albenese of DLA Piper, on behalf of several insurers which I'll identify. I'll identify once I have my notes and I'm organized. Absolutely. Go, this is the time.

Thank you. Good morning, Your Honor. Stacey Ruth, on behalf of Excel Specialty, U.S. Specialty, Arch Insurance Company, Berkshire Hathaway Specialty, and Berkeley Insurance Company. Good morning, Your Honor. Robert Benjamin, Borgas, and Ryan, on behalf of National Union Fire Insurance Company of Pittsburgh, Pennsylvania. Thank you. Good morning, Your Honor.

Mark Eriko of Sifier Patent Boggs for Access Insurance Company. Thank you. MS. Before we start with oral argument, let me first see. Is there anybody appearing remotely which is going to enter an appearance at this time on this matter? MS. Good morning, Your Honor.

Catherine Heidson-Rader from Dwayne-Morris-L-L-L-P for ACE American Insurance Company. All right, thank you. Good morning, Your Honor. Jessica Lalonde, from Dwayne Morris, also on behalf of ACE American Insurance Company. All right. Welcome, thank you. Good morning, Your Honor. South Grief from Kaufman-Dalovich for Endurance American Specialty Insurance Company,

and also with me as Kevin Wendell's, who's our Pro Hoc Council, also from my office. Great. Thank you. Welcome. Anyone else? Before we start, there was mentioned made, I believe, in the last reply on behalf of the insurers that there is a mediation schedule. I always like to make sure that I don't put my thumb down on the scales one way or the other.

Is this a situation, and I throw this out collectively, the wall size, where there would be a preference for the court to reserve on these pending motions, pending the mediation, or the contrary? I don't know if you've discussed it, but it kind of informs me as to how aggressive to start asking questions too without trying to nudge the scales. Thank you, Your Honor. We did have a meeting confer on these issues yesterday. We did float that and the wind-down debtors conferred with their clients. Afterwards, we actually feel like a ruling on these issues would be helpful in advance of mediation. Do you all concur or what are your thoughts?

Your Honor, on behalf of the move-in insurers, we do not have authority to agree to an adjournment beyond mediation so we'd like to go forward today well no I meant I was listening to argument the question is do you whether I reserve a decision or not pending the mediation I'm not what is the mediation scheduled for I'm not sure I can I'll reach a decision in time for the mediation it's May 22nd May 22nd all right so it gives us about three weeks okay then we'll go ahead I'm not sure I'm prepared today to issue a ruling on either of the or I guess there are three motions might on some of them and if not I'll just move

forward with consideration in the ordinary course if there comes a point in time where the parties agree collectively to ask me to defer so be it I usually try to If not, mediation sometimes lasts longer than people anticipate. Sometimes it takes longer from either issue of rulings that I'd like. But we'll see where we go. All right. Council? Thank you, Your Honor.

And I'll give a brief introduction and also reintroduce the facts here. As we understand, it's... Excuse me, Your Honor. It's we are the move-ins for the motion to enforce. I was wondering which one are we arguing? We'd actually like to begin with the remand motion, if that's all right. But the motions are interesting. intertwined.

Well, I was going to listen to them both collectively. So we have a remand. We have the motion to enforce. I'm not sure it makes the difference to the court which one we hear first. You all haven't discussed this, I gather. We have not discussed with opposing counsel. All right. Is there a problem with the down debtor?

on their motion for remand first. I'm not going to be deciding it before we hear the motion to enforce. We agreed with Your Honor at the beginning when you said that the proposed order that you anticipated was the motion to enforce the remand motion and then the D&O, the individual's motion. Your Honor, maybe some confusion on this issue. If they would like to be heard first on plan enforcement, we can do that. Well, why don't we accede to that?

I don't even think I made an order. I assumed I would hear them collectively. So it doesn't make a difference of the court, but why don't we hear from the insurers on the motion to enforce? Thank you, Your Honor. Again, for the record, actually almost good afternoon. Rachel Albany's D.LA Piper on behalf of Arch Insurance Company, Berkeley Insurance Company, Berkshire Hathaway,

specialty insurance company, U.S. specialty insurance company, and Excel specialty insurance company. I'm here today with my co-counsel, Stacy Roof, of Werner, Ahari, Mangel, and Gregory Juhl from DLA Piper. Your Honor, the motion, the move-ins filed this motion docket 2,221 to enforce the terms of black-size plan and confirmation order. On the eve of black-size bankruptcy, which was widely and publicly anticipated, Loxi purchased $30 million of D&O coverage under a policy issued by Ace American Insurance, which covered the period November 18, 2022 to November 18, 2023. Ace American issued the policy, and the movements and several other insurance companies

serve as quota share insurers on the policy. The move-ins seek to enforce the unambiguous language of the plan and the confirmation order, which make clear that the debtors and time, to assume all obligations under their insurance contracts are unaltered, including their D&O policies, and to remain fully liable under those policies after the effective date. The assumption and continuation of the D&O insurance is expressly and carefully spelled out in Article 5F of the plan. Your Honor, it's a long provision, but if the court will indulge me, I will read the key parts of it because it's dispositive here. Notwithstanding anything to the contrary in the disclosure statement to plan, the plan supplement, the confirmation order, any bar date notice, or claim objection, or any other documents related to any of the foregoing or any other order of the bankruptcy court.

And here's the key part, including without limitation any other provision that purports to be preemptory or supervening. Grants and injunction discharge or release confers bankruptcy court jurisdiction or requires a party to opt out of any releases. A. Each of the insurance contracts, including without limitation, any D&O insurance policies, which identify one or more of the debtors as first-named insured or counterparty thereto, shall be assumed in their entirety by the applicable wind-down debtor, without the need for any further notice to or action, order or approval of the bankruptcy court as of the effective date pursuant to sections 105 and 365 of the bankruptcy code. B, on and after the effective date, the wind-down debtors shall become and remain liable in full for all of their and the debtor's obligations under the insurance contracts, regardless of when any such obligations arise, and all insurance contracts shall revest in the applicable wind-down debtors unaltered. C. In all insurance contracts and all legal, equitable, or contractual rights, obligations, and defenses of the insurers, the debtors, or after the effective date, the wind-down debtors, or any other individual or entity as applicable under any insurance contracts, whether

arising before or after the effective date, shall survive and shall not be amended, modified, waived, released, discharged, or impaired in any respect. And D, the debtors, there's some language I think that was elipsed there, and DEDDERS or the one down debtors as applicable shall not terminate or otherwise reduce the coverage under any DNO liability insurance policy, including without limitation, any tail policy, and any current and former directors, officers, managers, and employees of the debtors who served in such capacity at any time before or after the effective date shall be entitled to the full

benefits of any such policy for the full term of the policy subject in all respects to the terms and conditions thereof, regardless of whether such directors, officers, managers, and employees remain in such positions after the effective date. Thank you for that indulgence. The confirmation order reiterates this protective language in paragraphs 87 and 88, and similarly provides

that the debtors shall continue to satisfy their obligations under their insurance policies in full and continue such programs in the ordinary course of business. Your Honor, as I mentioned, the lead-in to that plan language is really important because it provides that notwithstanding literally anything else. Any provision that purports to be preemptory or supervening simply does not impact the sanctity of insurance contracts and especially D&O coverage under the plan. Anything else includes the notwithstanding carve-out language regarding vested causes of action that the wind-down debtors rely on so heavily. This is because the plan's express assumption of the insurance contracts, including the policy under Section 365 of the Bankruptcy Code, precludes the wind-down debtors from bringing any claims against their insurers, including the movements. There's no such thing as the conditional assumption that the wind down debtors argue for here. They're telling the court that the debtors can assume the policy in the reasonable exercise of their business judgment

and obtain its benefits while reserving the right to turn around and sue the insurers months after with claims seeking to rescind the policy and recover the premium as a fraudulent transfer. Let me ask a question for me. Assumption by a debtor, well, let's back up, rejection serves as a breach of the underlying executory agreement. I don't think anybody's willing to contest that. It's a rejection. It's a breach as of the date of the filing.

The assumption is intended to allow the debtor to take, to have the advantages of the contract, and in essence places that contract as if the bankruptcy did not occur. did not occur. In some respects, even better. All defaults are cured. You have adequate assurance of future performance, which is something you don't necessarily have outside of a bankruptcy. But the contract continues. If there's a basis within the contract to rescind or to bring a claim that exists, why is that inconsistent with assumption? The assumption just puts the contract back in place. Or in this case, there were no defaults, to my understanding, pre-petition.

The premium had been paid. There was no monetary. There's no monetary default. It's an executory contract, which the debtor has to either assume or reject. One or the other. It assumed the agreement, which now takes it out of that province of the bankruptcy code it's now mutual obligations going forward but why does that mean that within the contract itself there cannot be a basis to rescind I'm not

ruling one way or the other as to whether there is a basis to rescind but just as there might be breaches post-assumption there's language it if there are provisions within the contract or if there's a basis outside of the contract to bring the suit for a fraudulent transfer. How is that inconsistent with the assumption? That answer is easy because that basis existed prior to assumption. If they had a problem with the terms, with the way that the policy was arranged, with the cost of the policy, with any of the other arguments that they make,

they could have chosen not to assume the contract to reject it and pursue those claims. They could have brought the lawsuit prior to confirmation, which required assumption. they specifically incorporated assumption as an element of their committee settlement, and assumption, Your Honor, the cases are clear the contract assumption defense is claims that are existing before assumption are waived in connection with assumption. You can't cure and then pursue claims. And this is actually pretty clearly demonstrated in the terra-com. case that we cited because there the court, the court refused to allow the debtor to

conditionally assume a lease by paying rent into escrow and continuing to litigate fraud and rescission claims against the landlord. And the court said, if the debtor wishes to pursue its cause of action for a rescission of a lease, it obviously should not assume this contract in this court. This is exactly the situation, different facts, but exactly the same legal principle, the committee, you know, now the wide-down debtors, were aware of their complaints about the policy early on in the case. So by choosing to assume the policy, they then gave up the right to pursue those claims. And that would also apply to fraudulent transfer claims?

Correct, Your Honor. Because in the Network Access Solutions case, the court found that authorizing that authorized assumption as an exercise of sound business judgment as was the case here was the law of the case and it demonstrated reasonably equivalent value which precluded claims for fraudulent transfer and the court noted if the Congress had intended to deprive contracting parties of money and benefits they received I added benefits they received pre-petition why would Congress require that all defaults be cured prior to assumption since 365 requires all amounts due

under a contract to be paid in order for the contract to be assumed, the pre-petition payment cannot be cured if it's avoided. And there, the payment concept is, you know, you can substitute benefit. And the Centrix case makes this clear as well in that the majority of courts have recognized the contract assumption defense as a complete bar to the trustees' avoidance powers and noted that the reasoning behind the defense applies with even greater force to fraudulent conveyance claims. And similarly in the Vision Metals case, the court would not condone the debtor's fraudulent

transfer claims against a counterparty to an assumed contract because at the time the contract was assumed the debtor's right to pursue fraudulent claims had arisen, just as I said before, and by assumption of the agreement, it waived those claims. MS. Continue. Okay, thank you. So you actually anticipated the next section of my outline, but essentially, you It's clear from these cases, Your Honor, that the wind-down debtors convoluted theory of conditional assumption has no merit.

And even if, Your Honor, we're willing to entertain this theory, the carve-out language at the end of Article 5S doesn't help the wind-down debtors with respect to the movements. There are no vested or retained causes of action preserved against my clients' movements. And to the extent the wind-down debtors rely on the general catch-all language of the schedule in the retained causes of action, preserving any and all causes of action, it's trumped by the very specific language in the plan, requiring the debtors to pay for and maintain their insurance policies in full and to remain liable under those policies. There's ample and uncontroversial case law supporting this canon of interpretation. You're going to recognize this in the Crumb's Fakeshop case, and Judge Dorsey's Malincrot decision from April 2nd collects cases on this issue, the specific controls over the general. How do you address the language included in the plan provisions and the order of confirming the plan, use the phrase including, which is not one of the limitation. I can point to most authorities that advise that including.

need to even have the language but not limited to it simply included avoidance actions or the vested causes of action does that why is that a bar to other types of claims because your honor that entire carve out is subject to the initial language in article 5 of the plan which says notwithstanding anything else including anything that purports to be peremptory or supervening that carve out says notwithstanding anything else in the plan but that's subject to the the other language which says that everything has to continue and and that the benefits of the of the policy are

there and available for the for the post effective date and doesn't the language that the wind down debtors rely upon which preserve their ability to pursue against the insurers relative to the D&O policies the various claims also have the similar notwithstanding anything in the plan language? Yes. Because we're dealing with two provisions. Two notwithstanding. That's a notwithstanding.

But the language in the lead in to Article 5F is double supervening because it says notwithstanding any other language that purports to be supervening, this language takes precedence. But, Your Honor, also they listed one insurance company or two insurance companies in the carve-out. If they wanted to list all of them, if they wanted to pursue their claims against all of the insurers, they could have listed them. This is a classic example of specific controlling over the general. So, and I think in your papers you indicated that it didn't reference to your clients. That's because they didn't identify each and every insurer under the policies? They did not identify each.