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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 B E F O R E: HON. SHELLEY C. CHAPMAN U.S. BANKRUPTCY JUDGE VERITEXT REPORTING COMPANY www.veritext.com August 31, 2011 11:10 AM Debtors. - - - - - - - - - - - - - - - - - - - - -x INNKEEPERS USA TRUST, et al., Plaintiffs, - against CERBERUS SERIES FOUR HOLDINGS, LLC, et al., Defendants. - - - - - - - - - - - - - - - - - - - - -x U.S. Bankruptcy Court One Bowling Green New York, New York UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK Lead Case No. 10-13800(SCC) Adv. Proc. No. 11-02557 (SCC)
- - - - - - - - - - - - - - - - - - - - -x In the Matters of: INNKEEPERS USA TRUST, et al.,
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Transcribed by: Linda Ferrara HEARING re Adversary proceeding: 11-02557(SCC) Innkeepers USA Trust, et al. v. Cerberus Series Four Holdings, LLC, et al. Doc #2 Notice of Hearing/Notice of Status Conference Scheduled for August 31, 2011 at 11:00 A.M. Doc# 2049 Notice of Hearing/Notice of Status Conference Scheduled for August 31, 2011 at 11:00 A.M. Status Conference
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Page 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BY: LORENZO MARINUZZI, ESQ.

A P P E A R A N C E S : KIRKLAND & ELLIS LLP Attorneys for Debtors 655 Fifteenth Street N.W. Washington, DC 20005
BY:
DANIEL T. DONOVAN, ESQ. PATRICK M. BRYAN, ESQ. ANUP SATHY, ESQ.
SCHULTE ROTH & ZABEL LLP Attorneys for Cerberus Series Four Holdings 919 Third Avenue New York, NY 10022
BY:
ADAM C. HARRIS, ESQ. HOWARD O. GODNICK, ESQ.
MORRISON & FOERSTER LLP Attorneys for Official Creditors' Committee 1290 Avenue of the Americas New York, NY 10104
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HAYNES AND BOONE, LLP Attorneys for Midland Loan Services 30 Rockefeller Plaza 26th Floor New York, NY 10112
BY:
LENARD PARKINS, ESQ. (TELEPHONICALLY)
PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP Attorneys for AIC 1265 Avenue of the Americas New York, NY 10019
BY:
LAUREN SHUMEJDA, ESQ.
KASOWITZ, BENSON, TORRES & FRIEDMAN LLP Attorneys for Five Mile 1633 Broadway New York, NY 10019
BY:
DANIEL A. FLIMAN, ESQ.
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BY: DAVID C. BRYAN, ESQ. SCOTT CHARLES, ESQ. WACHTELL, LIPTON, ROSEN & KATZ Attorneys for Chatham Realty Trust 51 West 52nd Street New York, NY 10019 BY: VINCENT INDELICATO, ESQ. DEWEY & LEBOEUF Attorneys for Ad Hoc Preferred Shareholders' Committee 1301 Avenue of the Americas New York, NY 10019
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 debtors. THE COURT:
P R O C E E D I N G S Good morning. Please have a seat. All
right, Mr. Sathy are you the master of ceremonies this morning? Mr. Donovan? MR. DONOVAN: THE COURT: Sure, Your Honor. Okay. Well, normally, I would say it's
good to see you all, but -MR. DONOVAN: THE COURT: MR. DONOVAN: We won't take that personally. Right. Daniel Donovan, Kirkland & Ellis for the
Your Honor, we're here this morning to update the
Court on the status of the transaction with Cerberus and Chatham, as well as to seek a schedule to permit Your Honor to rule whether a material adverse effect has occurred on the fixed and floating debtors that would permit Cerberus and Chatham to not close on their binding and irrevocable commitment to close this deal. And to be clear, there has not been any MAC, no material adverse effect. Chatham, Cerberus' calling, has been
employed -- it's been employed to renegotiate the price that they agreed to after the auction. Cerberus' to date, had been
unable to tell us what the material adverse effect has been -THE COURT: MR. HARRIS: Hold on. Excuse me, Your Honor. Are we here on
the status update or are we arguing the motion to expedite,
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because -- which was served at 8 o'clock this -- filed at 8 o'clock this morning -THE COURT: MR. HARRIS: THE COURT: MR. DONOVAN: All right. -- served at 9. All right. Well, two points, Your Honor. First, we
are here to seek a schedule. THE COURT:
We discussed it yesterday. And
We're -- this is a status conference.
my hope is that Im going to hear from each of you somewhat, but not extensively, about your positions on the merits. read a little bit about that in those papers. What I've received so far are a motion to extend exclusivity and approve modifications to the plan -MR. DONOVAN: THE COURT: Yes. -- and a motion to expedite the I've
proceedings on the merits with regard to the debtors' complaint against Cerberus and Chatham with respect to the termination. So those are the two things. MR. DONOVAN: And with -- that's correct, Your Honor. We
And with respect to the first motion, that's not up today. just filed it. just on file. We've been talking with constituents.
That's
But we are asking today, consistent with what
you've done in other adversaries, to start setting a schedule. THE COURT: MR. HARRIS: Right. This is largely scheduling.
Your Honor, we received -- we did have
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two conversations last night.
One at approximately 6 o'clock
and a follow-up call I had with Mr. Sathy around 7 o'clock last night, where the issue of scheduling was first raised with us. THE COURT: MR. HARRIS: Okay. At no time did debtors' counsel advise us
they were filing a motion to expedite the hearing with respect to -- have a hearing this morning with respect to scheduling. We gave -THE COURT: MR. HARRIS: THE COURT: All right. Well, let's --
-- him certain information --- let's break it down though. Because we
have, with respect to -- we have a gating date here; the September 15th date. MR. HARRIS: Your Honor, it's not a gating date. We
told Mr. Sathy last night unequivocally, we were not holding him to that date. MR. DONOVAN: unequivocally. Well, Your Honor, we haven't been told
But even if -Mr. Donovan wasn't on the phone. All right. No, no, no. I now here a stipulation
MR. HARRIS: THE COURT: MR. DONOVAN:
but that's one thing -THE COURT: have a seat, okay? to do it this way. Look guys. Guys, we're not -- Mr. Harris, We're not going I'm not
You know me well enough.
You're each going to have a turn.
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going to sandbag anybody.
If there's an agreement on a date
that allows us to impose a rationale -- more rationale schedule, but there needs to be speed surrounding this situation, given the fact that it's not a garden-variety lawsuit and that the assets and the value of the assets are hanging in the balance. Okay? So, I think that for the purposes of this morning though, it would be most productive to refrain from extensive commentary on whether there's a material adverse effect or not, et cetera. MR. DONOVAN: Sure. Let me do two things then. Let me give you a brief Let So let's just walk before we run.
me split it up this way, Judge.
background, just to update you on how we got here. THE COURT: Hold on one minute. Just let me
acknowledge or confirm that Mr. Parkins, you're on the phone? MR. PARKINS: THE COURT: Yes, Your Honor. Good morning. Good morning.
Is anyone else appearing on
the phone this morning? MR. PARKINS: THE COURT: MR. DONOVAN: THE COURT: MR. DONOVAN: Mr. Elmore is here with me, Judge. All right. Thank you.
Your Honor, may I approach? Sure. Your Honor, just to finish my thought
and then I'll just walk through the chronology and the schedule
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we're asking for. THE COURT: MR. DONOVAN: MR. HARRIS: Okay. Is -I'm sorry, Your Honor. You know, I
haven't seen this before and I've just looked at the chronology, this is their version of the world which I don't think is really appropriate for the status conference. THE COURT: version after. Okay. Mr. Harris, you can tell me your
It's just a bunch of dates on a page. Well with representations of new
MR. HARRIS:
currencies which we dispute. THE COURT: MR. HARRIS: MR. DONOVAN: were saying -I mean look, I just have to comment. Okay. Fine. Your Honor, to finish the thought is, we You can dispute them after.
THE COURT:
You'll remember, we were here together for the Five Mile substantial contribution argument. MR. HARRIS: THE COURT: closing. MR. HARRIS: THE COURT: Yes, we did, Your Honor. So things have come out differently than I Yes, Your Honor. And you and I had a colloquy about
think you and I thought they would that day. MR. HARRIS: To all of our surprises, Your Honor.
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THE COURT: the bottom of it.
All right.
Well, we're going to get to
Go ahead, Mr. Donovan. And, Your Honor, just to finish is, one
MR. DONOVAN:
of the issues that you'll see that came up is Cerberus and Chatham has called a material adverse effect. And to date, we
have not gotten or having them articulate what it is, whether it's on calls, in letters or even their press release. And
that's going to come into why we need this resolved quickly because to be clear, as we've said in our complaint, there has been none and I anticipate you will hear this morning from Cerberus' counsel, I'm sure they will tell you the basis for that but we haven't heard it yet. So against that background, why do we need this schedule, and then I'll walk through the chronology. We need
the schedule, first of all, Your Honor, you already hit it; the clock is ticking. Okay? And I appreciate Mr. Harris' on the
record representation that he won't enforce any of the September 15 dates, for a lot of good reasons we're going to need that in writing, but we do need that and we need that date. But that isn't the end of it, Judge. As you know,
you've been shepherding this, Innkeeper's been in bankruptcy for a year. But more importantly, they have announced to the That's false.
world that there is a material adverse effect.
But we are entitled to resolution by this court, a ruling that
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that's false.
We can't have that out there and continue a pace
because people, if they become interested and we hope they will, are going to ask questions that we have to and there is at least an apparent potential that there's a taint. We don't
think that's fair and we shouldn't have to live with that. So against that background, Judge, on page 1, we do list the chronology and the key dates, I won't go through them all, but that there was a commitment letter executed after a twelve-round auction that Cerberus won. And I move forward to August 2, the same week where we were planning to close that Friday. Cerberus' counsel
represented to this court, we obviously want to get this deal closed and want to close this week. literally at the one yard line. set. Wires were ready. On August 5, we were
Funds flow memorandums were We have We
Everybody was ready to go.
e-mails from Chatham's counsel, they're saying think it's going to be 2 o'clock.
2 o'clock.
Suddenly we find out because we're copied on an e-mail from Cerberus' counsel to the title company, that they're not going to close. out why. They can't till Monday. Okay? We can't find
Subsequently, we hear we're investigating a MAC but
then also what comes up, coincidentally is well, we want to renegotiate the price. What are you willing to do? We asked
why -- this is why it's important -- why was there a MAC? THE COURT: Was that the day of the S&P downgrade, was
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August 5? MR. DONOVAN: close of business. August 5 was, Your Honor, after the
Cerberus raised the potential MAC issue on They then
the 9th which was the Tuesday, I believe after that.
raised the price adjustment and then they said we're still investigating and on August 19, after the close of business on a Friday evening, they sent us the termination letter calling the MAC, but before that again, asking for a price adjustment. So against that background, Judge, we don't think there's any evidence. We haven't been provided any. We don't
think there's going to be any.
All you have to do, Your Honor,
to resolve this which is why we believe this can be done quickly, is rule whether or not the clause on page 2, whether there has been a material adverse effect on the fixed floating debtors taken as a whole. unequivocally no. The answer is going to be
That then can lead us to the damages phase.
And to be clear, Cerberus, because this was a termination event, has the burden and the case law is clear, who does, which is why we think discovery on the MAC issue can be pretty narrow. What did Cerberus and Chatham have in their
possession when they made the decision and announced in a press release that there's been a MAC and terminated? And the evidence, Your Honor, is going to be pretty straightforward and this is where I won't walk through it but I just gave it to you, it's in our complaint. This isn't
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anything new.
On page 4, Cerberus hasn't identified any -- our We've met or exceeded budget. And,
performance has been good.
in fact, August 15 -- so this is days before they actually terminated but they told us there was a MAC, we got updated projections from Island Management -- just bookmark that for a second -- Island Management said actually, substantially unchanged for the rest of the year. Well, who is Island Management? next page. Let's turn to the Mr. Fisher is
That's Chatham, one of the buyers.
the CEO of Chatham who obviously runs Extended Stay Hotels. Mr. Fisher, who also owns Island Management, our management company. ours? So, what did he say about the market in hotels and
As you could see, and we have this in our complaint,
he's the one who was out there August 8 after they told us they thought there was a MAC or at least they were about to tell us, said "Look, we want this. venture". We think this is a great joint
And, in fact, he said, "We don't see any effect of
what's happening in the financial markets at the hotel level". He goes further, he says, "We are bullish and we remain bullish". That's not evidence of a MAC, Your Honor. Now, Your Honor, there's also going to be a dispute that Cerberus has raised with us. They believe the relief They've
we're entitled to at max is twenty million dollars.
said that's all you're entitled to because that was -THE COURT: That's their deposit?
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MR. DONOVAN:
Yes, that's the deposit, Your Honor. Our
And they say that's what's in the bid procedures order.
position is we're not limited to the twenty million dollars. Why? Because after the bid procedures order, after the
auction, after further negotiation, the parties entered into the written commitment letter which Your Honor then later approved. The commitment letter is an integrated agreement Why? Because it was There was
with no limit on relief or damages; none.
actually taken out during the negotiations in part. a limitation. It was taken out.
That agreement is integrated
and it says commitment letter and the term sheet is the entire agreement and supersedes any prior understanding on these issues. It's under New York law. It's unambiguous. It must
be enforced as is. So those are going to be the two main issues, Your Honor, for you to resolve. It's on page 6. So what's the schedule we proposed?
We believe this is a narrow issue because on
the MAC, they know whatever their basis is or they don't have one. And on the damages issue, same thing. We can argue and
brief it for the Court. We propose that discovery gets served this week. Answers get due next week on the 7th. document productions. disclosures. There's then rolling
September 13 would be witness
Any depositions which we think are limited here
would be September 15 or 16th with a two-day trial, which I
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understand we haven't checked with the court clerk but that's our proposal. Your Honor, I want to come back. resolved. We need this
We think it's narrow, which I think is important for This is a narrow issue. It's a big issue
everyone to keep.
but it's a narrow legal issue for you to resolve and we need that resolved in order to continue because this isn't just a free market transaction. This is a transaction within your So we need to keep
jurisdiction and the bankruptcy process. moving. Thank you, Your Honor. THE COURT: All right.
Mr. Harris, I want to hear
from you, of course, but I also want to be mindful of protecting the assets. So to the extent that there's going to
be things that are said that have a negative -- cast a negative shadow over the assets, then I'd prefer to go into a closed session. MR. HARRIS: Your Honor, I am very mindful of that. I
have no intention of saying anything detrimental. THE COURT: MR. HARRIS: Okay. Your Honor, I am also going to try to
limit my remarks frankly to about the issue which is I thought we were here on which is scheduling and not -THE COURT: MR. HARRIS: THE COURT: Okay. -- start arguing the merits -And you're speaking on behalf of the
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tenants? MR. HARRIS: I'm speaking on behalf of Cerberus Series
Four and the two Inc. entities, the Wachtell folks are here but I believe their comments are going to be consistent with mine and if they have anything to add, they can certainly do so when I conclude. THE COURT: MR. HARRIS: Okay. Your Honor, the issue that's before you
today really is just about scheduling and I understand the issue about the assets. And given the circumstances we're --
the company now finds itself, I suspect and would hope frankly that the company is trying to figure out what process they should put in place to remarket those assets to maximize value for the benefit of the constituents. THE COURT: MR. HARRIS: THE COURT: But I think that that's not -And -The point is and let me just interject,
because I think they've made their view clear as to what they think the process is. you to perform. I think they think the process is to get
And that they want to do that before they put
their assets back on the market because if they put the assets back on the market, I think it's not a surprise that they're not going to fetch the same price that you had committed to. MR. HARRIS: points there. Well, Your Honor, there's a couple of
One is, if their position here is we're going to
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litigate this in the hope that we can get the Court to determine that we're entitled to specific performance, which is obviously a very difficult item under any applicable law, that's throwing a lot of eggs into one basket here, as opposed to arguing it as a damages case. But more importantly, Your Honor, the comment that Mr. Donovan made and he ended with, frankly I think is the more important one for purposes of the company which is this is a liquidated damages case. The order Your Honor entered
approving the bid procedures specifically says that, and I can quote the language to you right out of the -- paragraph 8 of the bid procedures which basically says, "In the event the successful bidder fails to consummate the restructuring transaction contemplated in the successful bid because of a breach or failure to perform on the part of such successful bidder, the debtors will not have any obligation to return the deposit deposited by such successful bidder. Retention of the
deposit plus accrued interest as liquidated damages shall be the fixed floating debtors sole remedy at law and in equity against the successful bidder". Now, Mr. Donovan's argument, Your Honor, is that somehow the commitment letter we signed supersedes that in that we took out the deposit provision that was in the Five Mile deal and replaced it with our own. Well, what Mr. Donovan
relying on the integration clause doesn't tell you is that the
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deposit provision or a commitment letter says very specifically, "In accordance with the bid procedures order, the plan sponsors have deposited cash in an amount equal to twenty million dollars". So if his argument is that the integration, somehow by virtue of change in the original language, and relying instead on the order that Your Honor had already entered by the time we entered the picture that we've waived the right to take liquidated damages, that's just wholly irrelevant. THE COURT: All right. For folks that are not talking
about the merits, we're talking about the merits an awful lot. MR. HARRIS: No, I understand but it goes to the issue
of scheduling, Your Honor, because -THE COURT: MR. HARRIS: Right. -- to the extent this is a twenty million
dollar liquidated damages case, this whole issue about the overhang on the value isn't going to change. twenty million dollar case. assets. Right? This is a
They need to be out marketing the We
We need to go out and find somebody to buy it.
know they received offers for substantial amounts of money for these assets. Midland and Lehman said they don't want it.
Fine, but, you know -THE COURT: view of the world. MR. HARRIS: I understand that, Your Honor, but to But Mr. Harris, they don't agree with your
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just -THE COURT: MR. HARRIS: So we have to have a litigation over that. But we're going to have a litigation over
a lot of things, Your Honor, and basically what the debtors are asking you to do is have a litigation on an action which is potentially a 1.2 billion dollar litigation in twenty days. That's what they're asking. THE COURT: Well it has a big dollar amount but the So we've now identified two
reason we're here is very narrow.
issues; one, you terminated due to alleged material adverse effect. MR. HARRIS: THE COURT: Correct. Right? Which presumably you knew what you
were talking about at the time and their position is that they don't know what you were talking about; right? facts that led to your conclusion. MR. HARRIS: THE COURT: pretty narrow. Right. And then we have applicable law. That's So we have
Big dollars but pretty narrow issue; my view. In concept, you can see it as a narrow
MR. HARRIS: issue; yeah. THE COURT: MR. HARRIS: THE COURT:
Okay. In terms of -If we're going to have a trial about
market volatility and impact on hotels and I -- yes.
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MR. HARRIS: THE COURT:
Right, but -I mean lawyers have great ability to make But for what it is, it's a fairly
things more complicated.
well-circumscribed issue and then now we've got the legal issue over whether or not it's a liquidated damages claim or whether or not there survives an entitlement to more damages, specific performance, et cetera. MR. HARRIS: Well the part I am missing, Your Honor,
is it sounds like from what the debtors are saying is that they're going to put the rest of the case on hold until this is over and I don't know why anybody would do that. be clear, Your Honor. I mean let's
They have a series of assets that are They have financial statements. The company is taking the
income-producing assets.
They've got performance measures. position there's -Right.
THE COURT: MR. HARRIS: THE COURT: MR. HARRIS:
-- nothing wrong with these. Right, they're taking that position but -And they think the rest of the world is
going to be looking at what I said about -THE COURT: They sure are. You went into the auction.
You bid for these assets. bidder -MR. HARRIS: THE COURT:
You outbid another very serious
We did. -- whose request for substantial
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contribution I turned down partially based on your complaining about it. And now, you're telling the debtors do over. Go
back out and get it again.
And great if somebody shows up with
the same amount of money but people are going to make the observation as every piece of paper that I pick up says, Cerberus' walked from the deal. So, whether you walked for or whatever reasons, we'll find out eventually why you did, it's out there and I have to at least at the moment respect the debtors' decision to pursue the litigation option rather than to put the assets back on the market. It may be at a certain point they determine to do both
but we're here today to schedule and I think we should schedule. There is a September 15 date in the plan and the confirmation order. I mean two things; there is that date. If
you're going to consent to the relief from that date, that's great. We'll enter an order to that effect but that doesn't
take away the urgency because of the lingering potential taint, if you will. MR. HARRIS: THE COURT: Well -So look, am I going to -- I'm not going to
-- you're not going to go on trial tomorrow but it's not going to be January. MR. HARRIS: I understand, Your Honor. Just a couple
of things; with respect to --
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THE COURT:
I mean you're welcome to take away some of
the mystery if you want to explain on the record or off the record what the MAC is. MR. HARRIS: Your Honor, let me just address a couple Number one, we had two
of things and I may get to that.
conversations last night to start a discussion about scheduling with debtors' counsel. Their original proposed schedule was We got off
based upon the adherence to the September 15 date. that call.
They asked us if we would waive it, in which case We asked them what
they would consider an extended schedule. they meant by that.
We didn't get a lot of clarity on it.
I then spoke to the general counsel at Cerberus with Mr. Godnick who said absolutely we'll waive it. I relayed that I got -- I
to Mr. Sathy on a call about 7 o'clock last night.
simply said to him, "Before the hearing tomorrow morning, we go in there," on what I thought was to be a conference and not a formal hearing or any motion, "I'd like to know what schedule you're proposing" because we're open to having a conversation about an appropriate schedule, Your Honor. have somebody come to court. I don't need to
You've seen us in action enough
including an hour and a half ago to know that we can be very accommodating and we understand the circumstances that we find ourselves in. So we were hoping to have a conversation, not to have the motion dropped on us at 8 o'clock this morning with
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basically no prior notice.
So we didn't really actually come
here today anticipating we were going to have a full hearing on whether or not an expedited trial or what might be the right schedule would be appropriate. But putting that aside, the one thing we need to put in context to Your Honor and it goes to this sort of timeline that was presented to you by Mr. Donovan, when you look at this timeline, the -- I mean I am not -- I don't dispute any of the dates, May 16, May 20, June 29, the August 5 date, or what I said to you, Your Honor, on August 2 because at the time I believed that to be the case and that was based on every piece of information I had available as I stood here in this very spot. And I don't deny that on August 5, we decided that we were not in a position to close that day or that on August 9, we convened a conference call of all the professionals who are represented in court today to tell them that we believed that there may be a basis to declare an MAE. We were evaluating
that and that we would get back to them as soon as we could. That's where my agreement with the schedule ends because at no time on August 10 did we ever ask for any kind of price adjustment. In fact, our guys were under very strict
orders not to talk about price adjustments until we had determined whether or not we were prepared to terminate; very strict orders from the general counsel and from outside
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counsel. true.
So any statement to the contrary is just simply not
So I -THE COURT: I take you at your word, although I do
think I do recall and I only see the headlines when they scroll on all my screens -- there was a headline in the Wall Street Journal that said, "Cerberus seeks lower price". where it came from -MR. HARRIS: It did not come from us which gets to Whether --
another issue which I can get to in a minute about, a statement about -- in the papers from this morning about repeatedly informing the press about the MAE. The repeated information, I
think is summed up in the SEC filings that were done by Chatham in accordance with applicable law where they had to basically disclose the fact that the termination letter had been sent. What we did do, Your Honor, is that once we had made the determination that we were prepared to declare the MAE, we tried to engage the parties in a discussion about whether there were adjustments to the deal that could be made, that would allow us to close by the September 14 date. We were told by
the company that they were not interested in having that conversation. Lehman sent a letter to Midland saying do not
have that conversation with Cerberus because we will view that is a violation of your commitment to support the deal as written. And Midland, in the face of those two thing, didn't So we terminated. And
want to have a conversation with us.
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that's what brings us to where we are today, Your Honor. But in the context of that, there were several conversations between the principals at Cerberus and Mr. Beilinson during which -- before we had declared the MAE, during which we were told look, don't do anything precipitous. Take your time and figure this out. 14. So in light of that, Your Honor, all of the sudden when we do pull the trigger and decide that this is the appropriate thing from our perspective understanding that it's disputed and we knew at the time it would be, all of the sudden we said -- they're saying, oh, we have to have an answer tomorrow. We have to have this decided right away. I understand there's a need for expedition. We're not You have until September
going to debate that point but to put together a schedule that basically says we're going to have a soup to nuts trial in twenty days in the midst of the Jewish holidays and Labor Day weekend when they waited three weeks to basically start this action -- Your Honor, on August 5, when we decided not to close, they could have sent us a letter the next day saying we're ready, willing and able to close. You have a time is of We demand
the essence of provision in your commitment letter. that you close Monday morning. THE COURT: MR. HARRIS:
They never sent the letter.
Oh, Mr. Harris, come on. Seriously, they never sent the letter.
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THE COURT: ready to close. MR. HARRIS: THE COURT:
Come on.
The wires were -- they were
Right. I had an expedited hearing to give the
comfort orders on the leases. MR. HARRIS: THE COURT: I understand. I heard the substantial contribution
motion to make sure you didn't have to pay the extra -MR. HARRIS: THE COURT: I understand. -- three-quarters of a million dollars.
They didn't have to -- it's not like asking a girl at a dance to dance. I mean they were ready to go. MR. HARRIS: THE COURT: But if -They were ready. You didn't need to hear They were dressed up.
from them the next day saying, we're really, really ready to close. MR. HARRIS: No, my point is, Your Honor, they could
have demanded that we either close or terminate and make a decision back in early August. They didn't need to wait three
weeks and eleven days after we actually sent the termination notice to file the complaint and then come in here and ask for an expedited hearing. All that being said, Your Honor, what I am telling the Court is that we're prepared to sit down with Kirkland and the company and work through a scheduling order with respect to a
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hearing on this that makes some sense. THE COURT: Well, I think that -- all right. But
we're going to do that today. MR. HARRIS: Your Honor. THE COURT: MR. HARRIS: You have a phone? Maybe here but I don't think Mr. Neporent Well, I can't do that without clients,
has one in Armonk unless his power's come back. THE COURT: Does he have a cell phone? I bet Mr.
Neporent has a cell phone. MR. HARRIS: Honor. I understand he's got a cell phone, Your
He's been very difficult to reach because of the
problems they're having up in Westchester with the Hurricane stuff. But look, obviously we will try and get a hold of him. Your Honor, I'm happy to leave here, go sit down with them and try and work out a schedule and if we can't do it, come back tomorrow morning to work it out. But to basically
throw this at me at 8 o'clock in the morning, you know where I was this morning. THE COURT: We're going to -- first thing I want on
the record, confirmation to be followed by an order with respect to the September 15 date. Full status quo, no -- in
other words, I don't want there to be any additional argument that because the September 15 date has been lifted, somehow that that relieves you of any of your obligations under the
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commitment letter. MR. HARRIS: THE COURT: MR. HARRIS: THE COURT: We confirm that -Right. -- we confirm that right now. So work on an appropriate order and let's
just take that off the table -MR. HARRIS: THE COURT: urgency, so-to-speak. quantitative urgency. Fine. -- all right, as a matter of fixed Then we have the kind of -- that's the Now we have the qualitative urgency of
trying to figure out how to do this. I think, you know, you're all here. to sit down. out. I think you ought
I'll give you the room and try to work things And I think you ought to try to I know I'm putting
Get people on the phone.
work it out before you leave the building.
a lot of pressure on you but I think you ought to work it out. We're heading into Labor Day weekend and we are heading into the Jewish holidays which is -- you all know that I respect them, on everybody's behalf, including my own. to have to work this out. And I will tell you today's an indication of what things are like around here. 9 o'clock, 10 o'clock, 11 So, I And we're going
o'clock, 12 o'clock, 2 o'clock and 3 o'clock, I have.
will always find time for you but it's going to be a challenge and I'd rather slot you in sooner rather than later.
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So I am going to ask you to hang around. you some rooms and try to work it out here.
We'll get
And if you can't,
we'll go back on the record later today or we'll do it off the record. that. MR. HARRIS: We're happy to try and work it out, Your We'll hash out a schedule. I feel very strongly about
THE COURT:
Yes.
I mean if you represent to me that
you can't reach your client, I understand but I'm guessing that you can probably reach him at some point today. MR. HARRIS: THE COURT: MR. DONOVAN: with Mr. Harris. Yes, I understand. Mr. Donovan? Your Honor, thank you and we'll work
The one issue that generally -- all the
interim dates generally work themselves out but I think before we leave here, if we have the date, a trial date, we'll work out the interim date. THE COURT: But I think that that's what he wants to Obviously, that's the key date and
have the negotiation about. the dates work.
So why don't I just tell you what absolutely And then you can work around
doesn't work for me; all right? that. (Pause) THE COURT: All right.
Here's the situation.
The
20th and the 21st, although I have full calendars, I can move
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those.
So those dates work.
The 27th and the 28th, I have a
judicial conference and then the 29th and the 30th are Rosh Hashanah. So the last week of September does not work at all. MR. HARRIS: And, Your Honor, may we inquire as to the
first week or two weeks of October? THE COURT: (Pause) THE COURT: All right. October 3 and 4 work. The Yes, I'm looking at that.
rest of that week is reserved for Ambac and then it's Yom Kippur and then it's Columbus Day. And then I go on the road
for a week for NCBJ and another conference after that. (Pause) THE COURT: Can't give you the 20th and the 21st. I can give you
That's the confirmation hearing for Sbarro. October 24 and 25th. to wait that long.
I suspect Mr. Donovan's not going to want So I apologize. It is what it is. I hate
to bring it up but we could do it on a weekend.
The weekend
between -- well, we can't be here on Saturdays for religious observance reasons but -- right? MR. HARRIS: going to raise it -THE COURT: MR. HARRIS: Go ahead. -- because I think I have to. Under a I hesitate to bring this up but I am just
traditional breach of contract claim, I'm not entirely sure and I haven't thought about the impact of Stern.
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THE COURT:
You're not going to tell me about Stern v.
MR. HARRIS: just saying -THE COURT:
I'm not going to tell you about it.
I'm
You just better like duck behind that
MR. HARRIS:
Your Honor, I just felt compelled to say
I'm not doing anything about it right now but obviously, I
just have to think about it because I haven't yet. THE COURT: MR. DONOVAN: consented, waived. here. THE COURT: MR. DONOVAN: THE COURT: All right. Don't worry about Stern here. All right. Look, everybody who comes here My view is, Let me tell you my view. Judge, that's one's easy. They've
We've all read Stern.
That one is done
has to tell me something about Stern v. Marshall.
this is my plan, this is my confirmation order and I've got not only the jurisdiction but the constitutional authority to enforce it. And to the extent that I don't, we consent
findings and conclusions (skip in audio) serve it here on Pearl Street. MR. HARRIS: As I said, Your Honor, I hadn't really
thought about; just felt compelled to raise it as a reservation but I understand you completely.
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Your Honor, where would you like us to adjourn to? THE COURT: Unfortunately, all of my breakout rooms Can you use my backroom?
are used by trial parties. MR. HARRIS: THE COURT: MR. HARRIS: THE COURT: MR. HARRIS:
Sure, that's fine. And I've got a hearing at 12 o'clock. We'll keep it quiet. All right. Thank you. Thank you, folks.
(Recess from 11:45 a.m. until 1:17 p.m.) THE COURT: MR. DONOVAN: We're going back on the record now. For the record, Daniel Donovan, Kirkland The good news is we We don't
Your Honor, good news-bad news.
agree on kind of the steps that need to be taken. agree on the trial date. THE COURT: MR. DONOVAN: November 13 or 14th. 15 -MR. HARRIS: MR. DONOVAN: THE COURT: MR. DONOVAN: MR. HARRIS: Your Honor. Agreed. We agree. Okay.
So briefly I originally proposed That was before we had the September
What did I say? You said November. Oh, September. September. We're done,
We're agreed, Your Honor.
Thank you very much. September 13 or 14, after we had our
MR. DONOVAN:
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discussion, we moved that back to the 20th and 21st.
Based on
the dates you offered, it looks like we have the 20th and 21st, the 3rd or 4th or the 24th or 25th. want to tell me what Cerberus picked? THE COURT: MR. DONOVAN: THE COURT: MR. DONOVAN: unacceptable. I can guess. Okay. Okay. The 24th and 25th. That's just Not surprisingly, do you
First of all, we don't think it's necessary. Right. We don't think it's workable. Okay. I proposed the 3rd and 4th. So that's
THE COURT: MR. DONOVAN: THE COURT: MR. DONOVAN:
my third move and the dates in the interim, I think Mr. Harris and I agree on what needs to be done and I'll say it for the record but the discovery should be served by September 2 with initial document productions on September 9. The document
production completed by September 14 with a good faith safety valve, if people find additional documents. Witness designations and any expert reports, September 16. Depositions, September 21 or 22nd. Pretrial briefs,
September 27 and trial beginning and ending October 3 and 4th. Judge, I won't repeat why I think that's completely workable based on these narrow issues but I think 3rd and 4th is our third move to address narrow issues. And we think
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narrow discovery.
The discovery is going to be what did they They either had or
have in their possession to call the MAC. hadn't. people. We'll get that.
We'll depose Mr. Fisher and Cerberus And then we're going
That's all you need for the MAC.
to have a legal argument.
I think they're going to be arguing
other issues regarding damages that's going to end up, we're going to have to have discovery. this all at once. So look, we should resolve
Let's get briefs all at once, discovery.
3rd and 4th, Judge, we'd ask. THE COURT: you? MR. HARRIS: practical matter. case. The 3rd and 4th doesn't work for us as a Mr. Harris, 3rd and 4th doesn't work for
Let me just explain why I think that's the
First of all, I mean we're talking about even if we have
a trial date on the 24th and 25th, we're talking about doing a soup to nuts trial on a matter of substantial consequence obviously, in what is probably less than fifty days which is -I'm not even comparing it to what we'd have ordinarily required by the rules but it's a substantial reduction in the time that would normally be allowed for this. But we're prepared to work
within that time there but we're really talking about fifty days when you take into account Jewish holidays and other things, between now and October 24, 25th. As a practical matter, Your Honor, being in private practice, you know what discovery is like. You serve document
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requests.
You expect to produce e-mails and other things. You need to search routines.
It
does not turnaround overnight.
You need to cull through what could be hundreds or thousands of these things. It can't happen in a day. But I agree with you, but this is not --
THE COURT:
this in many ways is so much simpler than the matter I just got done hearing which involves fifteen years of stuff; right? This is a very narrow window of time that involves e-mails among presumably a very small group of people. I'm talking
about on the MAC-side and I know it's an MAE and not a MAC but it's easier to call it a MAC. So on the MAC-side. And then on the legal issue that I heard for the first time today of the liquidated damages or not, right, the documents say what they say; right? MR. HARRIS: THE COURT: lot at stake. Well, Your Honor -I mean I don't want to -- look, there's a So, we'll adopt that convention.
I don't quarrel with that at all. Your Honor, they've raised in their
MR. HARRIS:
complaint the negotiation history with respect to the commitment letter. We are entitled, as a matter of law, to
take discovery regarding the allegations relating to that negotiation history. year, Your Honor. That goes back to March and April of this
Us asking them, asking them, asking Moelis,
their clients to produce documents relative to their -- in
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valuation of the bids, their views with respect the changes that were made. THE COURT: anything? MR. HARRIS: Your Honor, it is our view, strongly Wait. What does all that have to do with
held, that this whole idea that the liquidated damages provision was written out of the contract, was devised last week. They never raised it in any bid procedure or any
analysis that was provided to any party about how somehow this was a tactic -- this was an advantage of the Cerberus bid compared to anybody else's, that they should be valuing as part of their deliberation process; didn't come up at the auction. I don't think it's included in any Moelis analysis. I don't
think it's in any Kirkland analysis and I think we're entitled to inquire into that because I think they made this up last week. THE COURT: anything that -MR. HARRIS: And as a result, Your Honor -- let me All right. Well, I still haven't heard
just lay out the schedule that we had proposed to do the 25th. THE COURT: MR. HARRIS: Go ahead. Because we are perfectly happy to serve We
our document requests on this Friday, by close of business. would file an answer, any counterclaims by the following Friday, the 9th.
We would begin rolling production by the same
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date, the 9th.
But we think that production -What's your counterclaim? Your Honor, we've had the complaint for a
THE COURT: MR. HARRIS: day and a half. through all this. damages.
I really haven't sat down to think about -There may be issues regarding mitigation of I don't know.
There may be other issues. THE COURT:
That you're going to tell me I can't hear;
right? MR. HARRIS: that. Please. THE COURT: MR. HARRIS: Okay. I heard somebody else you couldn't hear No, no, I didn't say that. I didn't say
it about ten minutes ago. THE COURT: MR. HARRIS: closely, as well. THE COURT: MR. HARRIS: Okay. Keep going. You heard how well that went. Yes. Duly noted. I was listening
That we would start the rolling
production the same date as Mr. Donovan suggests, which is the 9th. We think as a practical matter given what needs to get
done here and our knowledge of our client's systems and what they're likely to be asking for and what we need to ask for, we think completing that production by the 26th which is basically two weeks, which is still an expedited basis with respect to this type of discovery, we would designate witnesses and
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experts at the conclusion of the document production, do depositions the week of the 3rd to the 12th. Expert
depositions at the conclusion of that and then have our trial on the 24th, 25th. Your Honor, I don't think this is a one-witness, two-witness case. I think there are multiple witnesses here
that they're going to want to talk to, given what we know about what's been going on inside our client and what the documents are likely to show. And we also are going to have our own
witnesses obviously that we're going to need to prepare and probably have expert testimony, as well. So, I think, Your Honor, a soup to nuts trial on a 1.2 billion claim in fifty-four days or fifty days, is extraordinarily fast and I understand the exigencies that the Court perceives here and whether I agree with them or not, doesn't really matter, but I think we're working, Your Honor, to meet those exigent circumstances here in a manner which is more than in good faith, given our entitlement to what I think would be fair due process. THE COURT: All right. I'm going to make a proposal
to try to make you both -- to satisfy both sets of concerns. Court is closed on Monday the 10th, but I can get it opened. I'll give you the 10th, the 11th and the 12th until I So Mr.
have to leave for my flight to NCBJ on the 12th.
Harris, that was good under what you said, you'd have to --
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you're going to have to compress the deposition schedule but it doesn't impair your document production schedule. And it just
shaves off -- it shaves two weeks off from your start of your trial date but I think the key elements that you were concerned about was the document production and I am pretty confident you could staff the depositions. There is Yom Kippur on that Saturday, the 8th but then people can get -- people can work on Sunday to prepare. The
problem with the earlier dates, besides the concerns that you raised which I'm sensitive to, was that you had Rosh Hashanah in there and I think that that would -- that made trial preparation a little difficult. It certainly would have made And I think
my preparation difficult for the 3rd and the 4th. that pushes it a little too tightly. MR. HARRIS:
Your Honor, we'll obviously, if those are
the dates that Your Honor would like to move forward on, we'll -THE COURT: I think that's the best -- you know,
there's not a perfect solution. MR. HARRIS: And, Your Honor, I would just say that if
things are not moving along at the pace they need to in order to hit that date, we obviously reserve the right to come back and ask -THE COURT: MR. HARRIS: Well, let me know. -- you to move it out. There's one other
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aspect of this, Your Honor, that I wanted to propose because I think it is important for this case and that is that we had suggested to debtors that we actually do parallel briefing on the issue of whether there is a liquidated damages provision in here or whether other remedies may be available. We had
suggested that the parties actually do simultaneous opening briefs and submit them to Your Honor on the 9th. And then
simultaneous replies on the 16th with an opportunity to supplement those with respect to any matters that came up in document discovery. And then to actually have oral argument on
that motion on October 3 before we actually start the trial. Now we had anticipated a longer period between the two and maybe we can pull that argument back to the extent Your Honor had time to do it. But we do need a little bit of time
between the close of discovery and when we -- to do the supplements. But we think that that issue shouldn't wait until It is a very important And
we get to the ultimate trial here. issue in the case.
I think everybody would concede that.
frankly, under other circumstances, it would make sense just as the way people would conduct a trial to know whether or not we're talking about a twenty million dollar issue or a 1.2 billion dollar issue but given this timetable, I'm not sure we'll ever get to that resolution. But we do think that the briefing on that should occur simultaneously with the parallel discovery and the trial
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preparation and not wait to the ultimate trial itself. THE COURT: MR. DONOVAN: suggested briefing. THE COURT: MR. DONOVAN: issue; right? interrelated. Okay. But not on separate tracks. Here's the Let me hear from Mr. Donovan. Your Honor, as part of our proposal, we
All these things are going to be somewhat First of all, he's getting to what relief?
Well, it depends kind of by October 10, 11th and 12th or leading up to that, what's happened, whether we got any additional bids. He also raised the negotiations of the documents. So
we're going to file briefs and there's going to be discovery. Look, I know there's a lot going on but I believe it's narrow. So let's just do one briefing schedule. We'll show you the evidence. the limitation. We'll address the MAC.
We'll address the legal issue on Well, let's do it
We don't think it applies.
in one brief, rather than we're going to have separate tracks of briefing, expert reports, discovery. of briefing. So I'd suggest one set
You're going to hear oral argument, whether it's
at, like we've done in our other hearings at the beginning or the end. So that's my proposal, Your Honor. THE COURT: Bryan or Mr. Charles. MR. BRYAN: Your Honor, we think it would make perfect All right. I'd like to hear from Mr.
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sense to have the briefing on the question of whether or not there's a liquidated damages heard early. most important issue in the case. THE COURT: We think that's the
The commitment letter --
Do you want to comment at all on the
statements made by Mr. Fisher? MR. BRYAN: I don't have anything to add to the My only addition would be to say
statements that he's made.
that, Your Honor, that the commitment letter incorporates the bid procedures and if Your Honor were to find that your own order is unambiguous and limits the damages to twenty million dollars, that that would substantially limit the questions to be litigated in dispute. And if Your Honor found that the bid
procedures as incorporated in the commitment letter was unambiguous as a matter of New York law, it would also obviate the need to take massive discovery of the type that has been discussed on those issues going back many months of negotiations because my view is that it's very clear that the bid procedures are incorporated in the commitment letter and therefore, so is the liquidated damages clause. Other than that, I don't think unless Mr. Charles has anything, I would just highly recommend that we move forward with expedited briefing on that issue and try to get that decided first, so we can see what the scope of this dispute is. Thank you. MR. DONOVAN: Your Honor, if I may just reply briefly.
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THE COURT: MR. DONOVAN: integration clause.
Sure. One is, the commitment letter has an It integrates a lot of documents but it So I think that All these
doesn't integrate the bid procedures.
argument, again though, can all be laid out at once.
arguments are going to come at you and I'm not sure you're going to want separate briefing on that. Under that theory,
we would move the MAC ahead because yet to this day, nobody knows what the MAC is. So under that, with their burden, you We've had this before, Judge I'd
get summary judgment briefing.
and we've had well I don't want three streams of briefing. suggest we brief them all at once. I'm happy to do it in
advance of the hearing and I actually suggested that, kind of a week and a half because obviously Your Honor has to digest that. But try to have that and then we do supplements based on discovery of what people say, that's not efficient, Judge. I thought we crossed that road on account we were going to do this all at once. MR. HARRIS: And, Your Honor, if Mr. Donovan wants to
do it that way and have briefing submitted a week or a week and a half in front of the trial date, I'm happy to do that but we can leave the discovery schedule the way we've basically laid it out right now and then we do that, you're going to have to push the trial back to the 24th, 25th.
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MR. DONOVAN: it on the 27th.
No, I propose a week and a half -- I had
Now that we've moved it to the 10th, 11th and We'll file ours. The Judge will And we think we're
12th, file your brief. decide.
That's what she does every day.
right, plain, ambiguous. ambiguous. THE COURT:
You think you're right, plain
I think we're going to do it all at once. You know, part of this is
We're going to do it all at once.
obviously strategic and tactical and I want to do my best to keep that away from the merits and I think the best way to do that is just to have it done at all once. It also puts
extraordinary pressure on the Court to make, in essence, a threshold decision and I think we'll do it all at once. If the
issue is as you say it is, then that will come clear from the papers and we won't have to have a trial on facts -- on the facts of the MAC; right? I'll have all your briefs on
everything before we start; right? MR. HARRIS: You'll certainly have briefs on
everything, Your Honor. THE COURT: MR. HARRIS: Right. Obviously with respect to the factual
issues regarding the MAE, I don't think unless it settles, there's any contemplation that it can get decided on papers rather than on testimony. THE COURT: Oh, no.
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MR. HARRIS:
There may be legal issues relative to the
liquidated damages which can be decided on the papers. THE COURT: MR. HARRIS: Yes, that's what I mean. But in the meantime, I think we're going
to end up taking a lot of discovery about the negotiation history which might otherwise have been avoided. THE COURT: MR. HARRIS: THE COURT: Well -But we'll just do it. You can hammer out the contours of that. I'm just truly not sure that But look, this is But I
As I am sitting here, I hear you.
there's going to be that much of that.
all -- everybody's kind of digesting this in real time. am unclear on what briefing schedule you want. agreement on a briefing schedule? MR. DONOVAN:
Do you have an
I'd suggest, now that we have the trial
dates, Mr. Harris and I talk and submit an order to you tomorrow. I think we have the interim dates or if you want to I'd
talk through it now, I'm happy to do that as well. proposed originally 9/27. date.
That's when we had a 10/3 trial So
I think it needs to be after the close of discovery. Pretrial
maybe now I would push we file the briefs on 10/3. briefs on all issues on October 3. MR. HARRIS: be closed.
Well I don't think discovery's going to
Your Honor, we'll work out something. All right.
THE COURT:
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MR. HARRIS: THE COURT:
If we have an open issue -So you're just going to do simultaneous
opening briefs and then just reply. MR. DONOVAN: MR. HARRIS: THE COURT: MR. HARRIS: Yes. We'll figure out the dates. Okay. And hopefully submit something to you
that we can all agree on. THE COURT: unavailability. All right. I mean I apologize for my
I have these two back to back speaking things
that I'd rather be here with all of you but I suspect some of you are going to be down there. MR. HARRIS: Can I share a car with you to the airport
THE COURT: let you pay for me. MR. DONOVAN: THE COURT: MR. HARRIS:
Yes, just can't go the other way.
I can't
Thank you, Your Honor. All right? Thank you, Your Honor. Your Honor?
MR. MARINUZZI: THE COURT:
Yes, Mr. Marinuzzi? One other aspect of this I want to
MR. MARINUZZI: bring to the Court's -THE COURT:
Yes, wait.
Before we go, I want to talk
about -- we've got to talk about the order with respect to the
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15th but there's another issue that you raised in your modification motion, right, that we have to deal with? MR. DONOVAN: of the 15th. THE COURT: MR. DONOVAN: Mr. Harris -THE COURT: MR. DONOVAN: THE COURT: the -MR. DONOVAN: We need a couple of days because we need Right. -- on the modification issue, I think -Then we have the modification issue on Right. I'm going to give a proposed order to I think there's two issues on the waiver
to confer with other constituents on that. THE COURT: MR. DONOVAN: Right. So I think we would ask for a couple of
days before we come back to the Court. THE COURT: Right. And that's on the relationship
between the fixed and floating and the remaining, remaining debtors that haven't gone effective yet. UNIDENTIFIED SPEAKER: not gone effective. THE COURT: Right. The remaining, remaining debtors. Correct. We divided into two The remaining debtors that have
UNIDENTIFIED SPEAKER: groups themselves. THE COURT: Right.
Right.
Okay.
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MR. DONOVAN: THE COURT:
Thank you, Your Honor. Okay. Currently the committee intends to We've requested that Cerberus permit We'll make the same
MR. MARINUZZI: intervene in the action.
it, so we don't have to file briefs. request of Chatham.
We just don't want to waste any more of
the Court's time having to brief -THE COURT: Okay. -- our authority to intervene on this.
Okay. Thank you. Does Lehman and Midland want
All right.
to say anything as long as we're all together? (No response) THE COURT: you, folks. ALL COUNSEL: Thank you, Your Honor. No. Okay. I think we have a plan. Thank
(Whereupon these proceedings were concluded at 1:38 PM)
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Date: September 1, 2011 Veritext 200 Old Country Road Suite 580 Mineola, NY 11501 I, Linda Ferrara, certify that the foregoing transcript is a true and accurate record of the proceedings. C E R T I F I C A T I O N
Linda Ferrara
LINDA FERRARA
___________________________________
Digitally signed by Linda Ferrara DN: cn=Linda Ferrara, o=Veritext, c=US Date: 2012.02.17 15:37:07 -05'00'
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Main Document Page 1

- - - - - - - - - - - - - - - - - - - - -x In the Matters of: INNKEEPERS USA TRUST, et al.,

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Page 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BY: LORENZO MARINUZZI, ESQ.

DANIEL T. DONOVAN, ESQ. PATRICK M. BRYAN, ESQ. ANUP SATHY, ESQ.

ADAM C. HARRIS, ESQ. HOWARD O. GODNICK, ESQ.

Filed 02/17/12 Entered 02/29/12 15:50:32 Pg 4 of 50

LENARD PARKINS, ESQ. (TELEPHONICALLY)

LAUREN SHUMEJDA, ESQ.

DANIEL A. FLIMAN, ESQ.

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 debtors. THE COURT:

P R O C E E D I N G S Good morning. Please have a seat. All

Your Honor, we're here this morning to update the

the status update or are we arguing the motion to expedite,

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are here to seek a schedule. THE COURT:

We discussed it yesterday. And

We're -- this is a status conference.

But we are asking today, consistent with what

Your Honor, we received -- we did have

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two conversations last night.

One at approximately 6 o'clock

-- him certain information --- let's break it down though. Because we

MR. HARRIS: THE COURT: MR. DONOVAN:

You know me well enough.

You're each going to have a turn.

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going to sandbag anybody.

If there's an agreement on a date

me split it up this way, Judge.

Is anyone else appearing on

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It's just a bunch of dates on a page. Well with representations of new

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THE COURT: the bottom of it.

Well, we're going to get to

world that there is a material adverse effect.

But we are entitled to resolution by this court, a ruling that

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We can't have that out there and continue a pace

Funds flow memorandums were We have We

Everybody was ready to go.

Subsequently, we hear we're investigating a MAC but

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Cerberus raised the potential MAC issue on They then

the 9th which was the Tuesday, I believe after that.

think there's going to be any.

All you have to do, Your Honor,

That then can lead us to the damages phase.