Catz' recap from Court on 8/24/11 - Part #1
Well, I'm back from Court -- a bit more rested and now reflecting on the experience and what I heard.
While I remain cognizant of how dicey this has all been, I walked away from court with a better feeling than I walked into court with.
I was reasonably sure that I would hear little from THJMW during the hearing. And I was, honestly, pleasantly surprised that I was wrong. And even more pleasantly surprised with my reads on her – both verbal and facial and non-verbal stylings.
Of course, it all began with Rosen stating why he prepared the sequence the way it was. That since the SNHs were effectively rebutting the charges by the EC and others that the SNHs were slated to go after the EC and others had said their piece. Folse argued that the “burden” on proposing a Plan and it’s confirmation falls on the Debtors and other plan proponents, and therefore they – collectively – should go first, and that includes the SNHs who want the plan confirmed.
The court agreed. And when Rosen suggested that he wasn’t going to re-hash the written arguments, she not-so-humorously jumped on that and basically said then he could sit down now. That, combined with the court stating that they were already far along with their decision and opinion, was telling. While a humorous exchange, it set the stage that the court had already read the written closings, and was re-telegraphing to the parties that they ought to be sticking to ‘new’ information and not a re-hash and re-presentation of their already-on-file written closing arguments.
Rosen presented a powerpoint with lots of details in long paragraph form. The key two slides were the “waterfall” – which had an actual waterfall background, and varying (and dropping) amounts of monies covering some and of course not reaching equity. Later on, he attacked the Marshall valuations as a “house of cards” – and used a really cheesy (and badly drawn) powerpoint sequence to slowly build up a house of cards (ya know, one card leaning on another, then topped of by a slab of cards, and then building up more) – and as he talked, one card after another was put up on the powerpoint and then when it was done, the entire house-of-cards were shown “collapsed” on the ground, scattered about.
It was cheesy. And the court, I feel, saw it as such. A demonstrative gone awry. Trying to use a visual to make up for an argument that was hard to make.
Of course, the SNHs got up and basically tried to make the case, over and over, that they didn’t Insider Trade. And why they didn’t. And how that even if they had done some questionable things, it didn’t rise to Insider Trading. And even if it looked like insider trading, that they hadn’t harmed the debtors and that somehow was the law to be applied. And even if they had accidentally done something, it was an accident and not with scienter (willful intent) and that was a requirement for them to have done anything bad. And even on top of all of that, if they even had IT’d, then the court couldn’t really do anything bad like disallow their claims. And plus, even if Fried Frank had shared information they shouldn’t have shared, that it wasn’t a case of “Misappropriation” for that particular instance. And of course, the whole logic of “it was a bad time in the marketplace” as somehow justifying what went on, well, the court didn’t seem to buy it.
And the whole “it’s so hard to set up an ethical wall for a long period of time” arguments fell like a lead balloon and the floor shook when it hit. It came across as “Ethical Walls are for Sissies” and we don’t have to build them since we are sophisticated. And the court clearly felt otherwise. If you get privileged information, you don’t trade. And if you trade, you don’t get privileged information. It was clear the court was quite upset with the concept of “ethical walls can’t be built when a case might go on for a year or more”. “We have a right to get the most out of our investment by both negotiating and trading”. Nope, the judge didn’t buy it.
Bull. The look on the courts face was one of “you have got to be kidding me” with your arguments. And when the arguments came that she didn’t have “disallowance” authority, I thought it was highly telling that she didn’t just let that go. She challenged them on “why do you think I don’t have that authority” --- telling that she actually had done the research, and read the written arguments against disallowance, and was challenging the SNHs to explain further why they thought she didn’t have that authority. Telling to me that she’d be actually considering it, otherwise “why bother” asking the questions. Now, the pessimist in me says, she may have just been irked at the attitude of the SNHs and wanting it to be a remedy available in cases “in general” and was making her point. But I did feel it was applicable to this case, and the challenge by the court was one specific to this case, and not a general challenge to the concept of disallowance.
The overriding feeling I got was there was very little “here’s why you should confirm the plan” discussions. And entirely too much (“methinks they doth protest too much”) about defending the Insider Trading charges. Somehow arguing the truth is an easy sell. Arguing vociferously, trying to sway the court against seeing that truth --- well, at some point, you realize that the arguments are getting so arcane that it’s just dozens of darts being randomly thrown – hoping that the court feels compelled to not rule on that IT occurred because just one of those darts “stuck” on the dart board.