[00:00:08] Speaker 01:
Do we have Appellants' Council on Zoom or?

[00:00:13] Speaker 03:
There we go.

[00:00:14] Speaker 03:
Sorry, Your Honor, I forgot to turn the video on.

[00:00:16] Speaker 01:
OK.

[00:00:17] Speaker 03:
Go ahead and make your comments.

[00:00:19] Speaker 03:
Reagan Powers from Davis Wright for Bank United.

[00:00:22] Speaker 01:
OK.

[00:00:23] Speaker 01:
As Appellants' Council, do you want to reserve a little time for rebuttal?

[00:00:26] Speaker 03:
Yeah, I'll reserve five minutes.

[00:00:28] Speaker 03:
And if we approach the 10-minute mark and the court has questions, we'll run over.

[00:00:34] Speaker 01:
It's up to you.

[00:00:35] Speaker 01:
It's up to you to dispose of the time as you like, but if you're getting close to that five minutes, we'll probably try to give you a heads up, okay?

[00:00:42] Speaker 03:
Thank you very much.

[00:00:43] Speaker 01:
Okay, you may proceed.

[00:00:43] Speaker 03:
Okay.

[00:00:46] Speaker 03:
May I please support that the debtors in these administratively insolvent cases entered into a settlement agreement that provided them with a million dollars in cash to pay professionals, along with the share of Bank United's other proceeds, which included indirect proceeds from the sale of four multifamily complexes.

[00:01:04] Speaker 03:
The agreement was set up to ensure that the sharing arrangement encompassed all of the funds the debtors received in connection from the sales or from the properties, including 506C claims and other administrative claims.

[00:01:17] Speaker 03:
Had the sales proceeded as anticipated, the sharing arrangement would have solved the administrative insolvency.

[00:01:22] Speaker 03:
Unfortunately, it did not.

[00:01:24] Speaker 03:
This appeal centers on the debtor's attempt to circumvent the terms of the settlement agreement.

[00:01:31] Speaker 03:
and take an extra 25% off the top of the proceeds from one of the properties known as Tanglewild.

[00:01:38] Speaker 03:
This morning, I plan to discuss four topics.

[00:01:40] Speaker 03:
The first is the standard of review.

[00:01:43] Speaker 03:
Second is the unambiguous language of the contract.

[00:01:47] Speaker 03:
Third, the errors in the bankruptcy court's decision.

[00:01:51] Speaker 03:
And fourth, the debtor's argument that by labeling the $300,000 payment as a carve-out,

[00:01:56] Speaker 03:
for a professional fund somehow meant that the settlement agreement did not apply.

[00:02:03] Speaker 03:
Let me turn first to the standard of review.

[00:02:04] Speaker 03:
The settlement agreement is a contract.

[00:02:07] Speaker 03:
Section 19 of the settlement agreement says Washington law applies to the extent federal law does not.

[00:02:15] Speaker 03:
This is a Washington contract, basically, and under Washington law, a motion to enforce a settlement agreement is de novo review.

[00:02:24] Speaker 03:
And under Washington law, it is not within the court's purview to very contradict or modify the written words in a contract.

[00:02:31] Speaker 03:
And that is what the bankruptcy court did in a couple of areas that we will discuss.

[00:02:38] Speaker 03:
With respect to the settlement agreement, the debtors gave a million dollars in cash that would otherwise not have been available to paid professionals, plus a share of the proceeds from Bank United's collateral.

[00:02:51] Speaker 03:
Section three of the settlement agreement governed proceeds from the sale of the four multifamily properties.

[00:02:57] Speaker 03:
Section 3A2 dealt with Tanglewild.

[00:03:00] Speaker 03:
And it said proceeds are to be dispersed as follows.

[00:03:03] Speaker 03:
First was closing costs.

[00:03:05] Speaker 03:
Second was amounts due to Buchanan, which was the secured creditor and which was the source of the $300,000 that is at issue here.

[00:03:18] Speaker 03:
Buchanan agreed to accept $38 million in satisfaction of its claim, and it was paid $38 million plus some additional interest at the closing, and the closing statement that is in the record confirms that.

[00:03:32] Speaker 03:
$300,000 of the proceeds came out

[00:03:38] Speaker 03:
and went from the sale and went to the debtors.

[00:03:42] Speaker 03:
That's undisputed, went from Tanglewild to HCDI, which was the parent.

[00:03:50] Speaker 03:
And our position is that the amount due to Buchanan after entry of that stipulation was $38 million.

[00:04:01] Speaker 03:
Section three goes on to provide for payment of lien claims, and then section four of that

[00:04:07] Speaker 03:
Section 3A2 provides for payment of unsecured claims of Tanglewild, which included $12.7 million owed to HCBI, which was Bank United's collateral and which was to be paid to Bank United.

[00:04:22] Speaker 03:
Bank United agreed to share the proceeds of that collateral with HCBI so that it would have enough money to pay its or have money to pay its professionals.

[00:04:33] Speaker 03:
And that sharing arrangement is in Section 12 of the agreement.

[00:04:37] Speaker 03:
Section 12 of the agreement provides for division of the proceeds, including 50% of the first 200 going to the profession, to the debtor.

[00:04:46] Speaker 03:
In the middle of the paragraph, there is language that is the focus of this appeal, which says for the multifamily parties, which includes Tanglewild, any net proceeds received by the debtors on account of 506C claims or other administrative claims against Belfair, Apartments, Tanglewild, Bridgeview, or Pacific Ridge shall be

[00:05:06] Speaker 03:
subject to the same carve-out, essentially, an 80-20 split.

[00:05:12] Speaker 03:
How does the agreement work after that?

[00:05:15] Speaker 03:
Proceeds left for distribution under subparagraph four, what was paid after payment of costs, what was paid to Buchanan and a reserve for lean claims, which turned out not to be much of a reserve, went into this sharing arrangement between first the Tanglewild estate and then between Bank United and HDDI.

[00:05:37] Speaker 03:
The debtor's argument is that no Buchanan was paid $38.3 million and gave $3,300,000 to HCDI for a professional fund.

[00:05:47] Speaker 03:
If one- Excuse me, Council.

[00:05:49] Speaker 02:
Council.

[00:05:50] Speaker 02:
That's because the claim was $40 million and was settled for $38 million plus a carve out.

[00:05:56] Speaker 02:
That's what the debtor's position is.

[00:05:58] Speaker 03:
That is the debtor's position.

[00:06:00] Speaker 02:
And what's your position why that can't be correct?

[00:06:04] Speaker 03:
Our position is that the agreement says, under the agreement, Buchanan was paid $38 million.

[00:06:10] Speaker 02:
But it settled a $40 million claim for payment of $38 million with a carve-out.

[00:06:15] Speaker 03:
That's right, because there was a big dispute with Buchanan over the amount of interest that they were really entitled to.

[00:06:22] Speaker 02:
So you're saying that if there was any proceeds above whatever their main claim was, whether it was

[00:06:29] Speaker 02:
300,000 or something more than 300,000 as long as they were agreed to release their lien for 38 million Everything else has to be considered proceeds net proceeds So how about the fact that it's not paid to the debtors it's paid to a professional fund and

[00:06:49] Speaker 03:
It was paid to the debtors, actually.

[00:06:52] Speaker 03:
And the term professional fund is actually nowhere defined in the plan.

[00:06:56] Speaker 02:
I appreciate that, but it isn't received by the debtors, is it?

[00:07:00] Speaker 02:
It's paid to a fund that is maybe controlled by the debtors, but it's not their money to work with at that point.

[00:07:08] Speaker 03:
That's not what's reflected in the plan or in the confirmation order, Your Honor.

[00:07:13] Speaker 03:
And in fact, this issue came up earlier in the case.

[00:07:16] Speaker 03:
At the very beginning of the case, the debtors wanted to establish a professional fund, which would be have a kind of a super senior priority over all other administrative claims and the court denied that and said that was property of the estate.

[00:07:31] Speaker 03:
The other point I would make is that the plan itself.

[00:07:35] Speaker 02:
Confirmed that all assets were property of the estate So I'm sorry to interrupt you I'll move to the next point which was that then can you help me with the issue that it was requirement under the split that the account that the money be paid on account of 506 C claims or other administrative claims against the Tangle wild property

[00:08:04] Speaker 02:
And how were they asserted by virtue of a car vow?

[00:08:09] Speaker 03:
Well, I think you just hit on one of the significant errors in the court's decision, because the court assumed and said that the debtors actually had to assert a claim for a 5060 surcharge or for administrative expenses.

[00:08:25] Speaker 03:
That's not what the agreement says.

[00:08:27] Speaker 03:
And we all know that people all the time negotiate for

[00:08:32] Speaker 03:
payment of administrative expenses or for 506C surcharges without filing a proceeding.

[00:08:40] Speaker 03:
And that's actually one of the errors in the court's decision.

[00:08:44] Speaker 03:
She assumed, and because the debtors had suggested that was a requirement, that they had to have actually filed a motion or an adversary proceeding or some other proceeding to collect that money.

[00:08:57] Speaker 03:
That's not what the agreement says.

[00:09:01] Speaker 02:
Can you quote from that section?

[00:09:03] Speaker 02:
I think it's 12 isn't it?

[00:09:05] Speaker 02:
It says it says for multifamily properties any net proceeds received by the debtors on account of 506 claims or other administrative claims She didn't she didn't make that up.

[00:09:16] Speaker 02:
That's in the agreement.

[00:09:18] Speaker 03:
That's in this that's in the carve-out provision That's right, and that's what it says, but it doesn't say That the debtors had to bring a proceeding for that right he had to assert a claim Didn't they have to?

[00:09:30] Speaker 03:
It doesn't say they had to assert a claim.

[00:09:34] Speaker 02:
It says on account of a 506 claim, so how do you get to a 506 claim without somebody asserting a claim?

[00:09:41] Speaker 03:
You can go sit down and have a discussion with somebody, right, and say, I want you to pay a portion of administrative expenses and look.

[00:09:48] Speaker 01:
Well, you can't include the judge in that discussion.

[00:09:51] Speaker 01:
It's part of the problem, right?

[00:09:55] Speaker 01:
I mean, I don't know what the metaphysical, you know, you can look into the soul of the person next to you to see whether they have a claim or not.

[00:10:00] Speaker 01:
It's got to be asserted, doesn't it?

[00:10:03] Speaker 03:
In what fashion, though?

[00:10:05] Speaker 01:
You tell me.

[00:10:06] Speaker 03:
Well, I think people all the time sit down and that's people sit down all the time and negotiate carve outs without without without court authority.

[00:10:14] Speaker 03:
No, without.

[00:10:16] Speaker 03:
There is court authority here because this agreement was approved by the court, but people all the time don't negotiate for

[00:10:22] Speaker 03:
payment of administrative.

[00:10:24] Speaker 01:
I'm not getting the significance of your argument here at all.

[00:10:28] Speaker 03:
The argument, the point here is the judge said that in order for this section to apply, the debtors had to file a motion to surcharge collateral.

[00:10:41] Speaker 03:
That is not what the agreement says.

[00:10:43] Speaker 03:
The agreement says any recoveries on account of 506C claims or administrative claims.

[00:10:50] Speaker 03:
This was a recovery on account of administrative claims, i.e.

[00:10:54] Speaker 03:
money for the payment of professionals, which is administrative claims.

[00:10:59] Speaker 03:
There's nothing in this agreement that says, that required as a precondition to that applying, that the debtors had to go file a motion.

[00:11:08] Speaker 03:
And in fact, that would not have ever been part of an agreement.

[00:11:14] Speaker 03:
Nobody would ever agree to that because

[00:11:16] Speaker 03:
What it means is the debtor can go negotiate, or as long as the debtor doesn't file a motion, it can circumvent this agreement and go collect administrative claims and administrative expenses with people and not have the agreement apply.

[00:11:30] Speaker 03:
That wouldn't make any sense.

[00:11:32] Speaker 01:
Okay.

[00:11:34] Speaker 01:
You're at four minutes.

[00:11:35] Speaker 01:
Do you want to reserve at this point?

[00:11:37] Speaker 01:
Sure.

[00:11:38] Speaker 01:
Okay.

[00:11:44] Speaker 00:
Good morning, Honors.

[00:11:45] Speaker 00:
Bina Young here on behalf of the appellees, the debtor in this chapter 11 matter, Harvard custom.

[00:11:51] Speaker 00:
If it pleases the court, I'll just go ahead and start by addressing some of the comments made by Mr. Powers as well as the questions from the bench.

[00:12:00] Speaker 00:
And I think the thing that I would like to start with is this idea, this argument that's been made over and over again in the briefing by Bank United that

[00:12:10] Speaker 00:
They were entitled to a cut of all of the funds debtors received and they say it multiple times.

[00:12:16] Speaker 00:
They say that's what the settlement agreement was about.

[00:12:18] Speaker 00:
This is how it was set up.

[00:12:20] Speaker 00:
We were entitled to some cut, you know, the 80-20 split of all of the funds the debtors received.

[00:12:27] Speaker 00:
That is not correct.

[00:12:29] Speaker 00:
If you look at the language of Section 3 and Section 12, which apparently everyone has, there's two components to the definition of what gets subject to the Bank United split.

[00:12:42] Speaker 00:
And the way I think about it is you can look at the source of the funds and you can look at the destination of the funds.

[00:12:48] Speaker 00:
As to the destination of the funds, it's funds that the debtor receives.

[00:12:52] Speaker 00:
Okay, I get that.

[00:12:54] Speaker 00:
If it wasn't money that the debtor got, we wouldn't be here fighting about it.

[00:12:58] Speaker 00:
But that can't be the only factor.

[00:13:00] Speaker 00:
That can't be the only thing that we look at, because then truly any money that the debtor received from any source would be subject to this Bank United split, and that simply is not supported by this agreement.

[00:13:15] Speaker 00:
and it's not what the debtor agreed to or would have agreed to.

[00:13:19] Speaker 00:
So then you have to look at the source of the funds and that's where the rest of the language in section 12 comes into play.

[00:13:25] Speaker 00:
And it's been read before, it's any net proceeds received by the debtors on account of 506C claims or other administrative claims against the properties and that includes this Tanglewild property.

[00:13:41] Speaker 00:
So let's look at the source.

[00:13:44] Speaker 00:
Judge Heston made a finding in her ruling that the funds that we're fighting about here were a carve out, aka voluntary payment, these are her words, that Buchanan agreed to contribute out of its secured claim to the debtor's professional fund from its collateral.

[00:14:06] Speaker 00:
That is a factual finding, and that's a factual finding made by Judge Heston.

[00:14:11] Speaker 00:
It's subject to review based on clear error.

[00:14:14] Speaker 00:
I don't think that there's any way that this panel here can find clear error in that finding because her finding is based on her read of the record as well as the confirmed plan.

[00:14:25] Speaker 00:
And the confirmed plan, as has been stated many times before, references a $300,000 carve out from the Buchanan claim.

[00:14:34] Speaker 00:
And Judge Gan, you made a really great point, which is we compromised a $40 million claim for $38 million.

[00:14:42] Speaker 00:
And if you look at the chart that's in the appendix, the $300K that we're talking about here actually did come out of the $38 million compromise claim amount.

[00:14:55] Speaker 00:
And so there's plenty of support in this record, including this confirmed plan for Judge Heston to find that the money at issue was sourced from a secured creditor carve-out.

[00:15:07] Speaker 00:
To me, frankly, that's kind of the end of the discussion.

[00:15:12] Speaker 00:
If this creditor, if Buchanan had decided to do this carve-out and then donate it to the SPCA, would Bank United have any standing to raise issue with that?

[00:15:24] Speaker 00:
No, it wouldn't.

[00:15:25] Speaker 00:
It can't have any say into what another creditor does with its secured claim, its collateral, proceeds of its collateral.

[00:15:33] Speaker 00:
And so really the only difference between Buchanan taking those funds and donating it to the SPCA versus contributing it to the debtor's professional fund is that it is money that ultimately went to pay the debtor's professionals.

[00:15:49] Speaker 00:
And that's a destination issue.

[00:15:53] Speaker 00:
as I've discussed, the destination of the funds cannot be the determinative factor under this agreement.

[00:16:02] Speaker 00:
So that's the first thing I'd like to address.

[00:16:04] Speaker 00:
And I really think that is the biggest thing.

[00:16:06] Speaker 00:
If this court has any questions about whether Buchanan as a secured creditor could determine the disposition of proceeds from its own collateral, I'm happy to ask them.

[00:16:15] Speaker 00:
But I think that's a pretty well-settled concept both

[00:16:19] Speaker 00:
under the law, as well as in everyday practice in bankruptcy courts.

[00:16:27] Speaker 00:
Next, I'd like to just briefly address this argument that the monies were paid to the debtor, it wasn't paid to the professional fund.

[00:16:37] Speaker 00:
How do we know that?

[00:16:39] Speaker 00:
I don't think that there's anything in this record that actually tracks the specific routing of the money

[00:16:45] Speaker 00:
out of escrow either to an earmarked account that we are referring to as the professional fund or directly to the debtors or, you know, to Buchanan and then subsequently to the debtors.

[00:16:58] Speaker 00:
So I don't think that there's anything in the record on that specific fact.

[00:17:02] Speaker 00:
But I don't think it matters.

[00:17:05] Speaker 00:
I don't think it matters what route those funds took because,

[00:17:11] Speaker 00:
The fact that those funds are from a creditor carve out means that the very first step had to be that it went from the property to the secured creditor on account of their claim.

[00:17:25] Speaker 00:
And whether you're tracking the specific routing of funds through different bank accounts, it doesn't matter because ultimately it had to be going to Buchanan first as the senior secured lender on this property

[00:17:38] Speaker 00:
And then subsequently, whether it goes to the debtors or to the professional fund doesn't make a difference.

[00:17:44] Speaker 00:
It's money that came out of that creditor's claim.

[00:17:48] Speaker 00:
And so to me, that's a distinction without a difference.

[00:17:52] Speaker 00:
Third, I want to address the language that Judge Hessen used in her oral ruling.

[00:17:58] Speaker 00:
And she did make reference that there was no motion filed here.

[00:18:03] Speaker 00:
There was no adversary proceeding.

[00:18:05] Speaker 00:
And I think your honors are exactly right.

[00:18:08] Speaker 00:
What's a claim if it's not asserted and Bank United is here trying to tell us that oh claims not really a claim You know it could just be a feeling that you talk about with others that that's that's not what a claim is But I want to shift.

[00:18:24] Speaker 00:
I think the focus from that just a little bit because again.

[00:18:26] Speaker 00:
I don't think it really matters the language of paragraph 12 is very clear the net proceeds need to be received on account of

[00:18:38] Speaker 00:
Okay, let's set aside for a minute, you know, is it a claim if you don't make it?

[00:18:43] Speaker 00:
Is it a claim if you don't file a motion or file an adversary proceeding?

[00:18:47] Speaker 00:
And let's talk about on account of.

[00:18:49] Speaker 00:
On account of means causation.

[00:18:52] Speaker 00:
It means that something happened first and then on account of that, because of that, something happened later.

[00:18:59] Speaker 00:
And what's described in this paragraph is that the first thing that needs to happen is you have a claim.

[00:19:05] Speaker 00:
And then on account of that claim, you've got some net proceeds that you can later fight about.

[00:19:10] Speaker 00:
Regardless of whether a claim was asserted or by motion or adversary proceeding or surcharge, anything like that, which again, I think it's in the record what happened.

[00:19:23] Speaker 00:
No claim was filed against this subsidiary entity.

[00:19:26] Speaker 00:
But again, it doesn't matter.

[00:19:28] Speaker 00:
The timing here cannot support the position that Bank United is taking because

[00:19:34] Speaker 00:
The carve-out was negotiated first.

[00:19:37] Speaker 00:
The carve-out with Buchanan was negotiated from the very beginning.

[00:19:44] Speaker 00:
From the very moment this debtor started to put together its plan, its disclosure statement, started talking to its creditors, it had contemplated that Buchanan carve-out.

[00:19:53] Speaker 00:
And I believe that was in March of 2024, and that's in the record.

[00:19:57] Speaker 00:
So you've got the carve out that comes first and then later on you have an application for payment of professional fees, which is not an administrative claim filed against Tanglewild.

[00:20:10] Speaker 00:
It's not a 506C claim filed against Tanglewild.

[00:20:13] Speaker 00:
It's not a surcharge against the property.

[00:20:15] Speaker 00:
It's the application for professional fees made at the parent company level.

[00:20:21] Speaker 00:
How can this thing that happened later in time, the debtor's fee application,

[00:20:27] Speaker 00:
cause the carve-out that happened months earlier.

[00:20:31] Speaker 00:
That causation is simply not there.

[00:20:34] Speaker 02:
Is it possible that you negotiated a settlement with B Bank United?

[00:20:39] Speaker 02:
Then you decided that you needed to have money paid for administrative expenses.

[00:20:46] Speaker 02:
You negotiated a carve-out in order to avoid the agreement.

[00:20:51] Speaker 02:
You put it in a plan as a carve-out, knowing that the administrative claims would be made later

[00:20:57] Speaker 02:
And that way you preserved your right to use the funds but avoid the application of the settlement.

[00:21:04] Speaker 02:
I think that's what their argument is.

[00:21:05] Speaker 00:
Sure.

[00:21:06] Speaker 00:
And I believe that the carve out itself, that concept came up before any resolution was reached with Bank United.

[00:21:16] Speaker 00:
And so I still don't think that the timing really tracks.

[00:21:19] Speaker 00:
But that's a great point because let's say hypothetically it does.

[00:21:23] Speaker 00:
Okay.

[00:21:25] Speaker 00:
What was Bank United's remedy?

[00:21:28] Speaker 00:
And I think Mr. Powers made a comment that, you know, if the debtors are going to get away with this, then they can be out there negotiating whatever they want with all of their creditors, and they can circumvent the settlement agreement, and they can cut all sorts of side deals, and that's a huge problem.

[00:21:47] Speaker 00:
Okay, that's not what happened, first of all, and it's not in the record.

[00:21:51] Speaker 00:
Let's say hypothetically that is a possibility.

[00:21:55] Speaker 00:
Your remedy is to object to the plan.

[00:21:58] Speaker 00:
It was stated in every iteration of the plan that's clear from the record.

[00:22:02] Speaker 00:
Bank United filed a generic reservation of rights.

[00:22:06] Speaker 00:
If it had real objections, those were not sustained.

[00:22:10] Speaker 02:
Even if it wanted clarification, all it had to do was file an objection and say, we don't understand whether we're going to get the money or not.

[00:22:17] Speaker 00:
Exactly and it didn't do that it didn't do that and the court confirmed this plan and the fact that we're dealing with not just a settlement agreement between Bank United and the debtor here but also implications and impacts on a confirmed plan that's huge because in order to upset what's already happened you would have to go back and then say okay the terms of this confirmed plan they're not actually

[00:22:44] Speaker 00:
what Judge Heston said they were in the order.

[00:22:46] Speaker 00:
We're going to redo this completely.

[00:22:49] Speaker 00:
I don't know what Buchanan's going to do about that.

[00:22:51] Speaker 00:
I mean, we take the position that if these funds don't come to the professional fund, they're actually going back to the secured creditor that carved them out in the first place.

[00:23:00] Speaker 00:
And so I think the sanctity of a confirmed plan is a huge component of this, because that was Bank United's chance to raise its objections.

[00:23:10] Speaker 00:
It had multiple opportunities.

[00:23:11] Speaker 00:
It didn't do it.

[00:23:12] Speaker 00:
The Buchanan carve-out was clearly laid out.

[00:23:15] Speaker 02:
So, and also, two steps also is confirmation where they could have objected if there's a form of order that's presented that they could have also objected to if they wanted to.

[00:23:23] Speaker 00:
Multiple opportunities that were not taken here.

[00:23:27] Speaker 00:
You know, they might say, well, we filed a reservation of rights and, you know, we filed this objection, but we can't operate that way, right?

[00:23:35] Speaker 00:
We can't have creditors just filing these two-page generic reservations that don't actually raise the issue.

[00:23:41] Speaker 02:
And they didn't prevent the confirmation of the plan or the order from being final by virtue of whatever reservation they had.

[00:23:50] Speaker 02:
Those things occurred.

[00:23:51] Speaker 00:
Yeah, they occurred.

[00:23:53] Speaker 00:
The time for appeal on confirmation of the plan has passed.

[00:23:57] Speaker 00:
It's long passed.

[00:23:59] Speaker 00:
And so truly from the debtor's perspective, this is a little bit of an end run around a dispute about plan confirmation.

[00:24:08] Speaker 00:
They're framing it as

[00:24:10] Speaker 00:
Section 12 of the settlement agreement, but more is implicated.

[00:24:14] Speaker 00:
And it's implicated by virtue of the fact that this money, as Judge Heston found based on the record, was sourced from a secured credit or carve out.

[00:24:24] Speaker 00:
And they can do whatever they want with it.

[00:24:26] Speaker 00:
That, I think, is a settled principle.

[00:24:31] Speaker 00:
And to me, that's really the end of the analysis.

[00:24:37] Speaker 00:
I was determined to make the most of my time over here and answer any questions that you have, but I really don't want to beat a dead horse because I think that truly is the crux of what we're dealing with here.

[00:24:47] Speaker 00:
And so if the panel doesn't have any further questions, I would just ask that you.

[00:24:51] Speaker 00:
Okay.

[00:24:53] Speaker 01:
Thank you very much.

[00:24:54] Speaker 00:
Thank you.

[00:24:59] Speaker 01:
Okay.

[00:24:59] Speaker 01:
Okay.

[00:24:59] Speaker 01:
A little over four minutes.

[00:25:03] Speaker 01:
And you're muted.

[00:25:07] Speaker 03:
There we go.

[00:25:07] Speaker 03:
There you go.

[00:25:08] Speaker 03:
Let's go back and talk about the claim, the quote-unquote claim issue.

[00:25:13] Speaker 03:
Claim is defined in the bankruptcy code, right?

[00:25:16] Speaker 03:
We all know that, in section 1015, I think.

[00:25:20] Speaker 03:
A claim doesn't mean that you have to file a lawsuit.

[00:25:25] Speaker 03:
To assert the claim, you just have a claim, right?

[00:25:29] Speaker 03:
The language in paragraph 12 refers to claims.

[00:25:32] Speaker 03:
It doesn't refer to lawsuits or motion 506C surcharge motions

[00:25:37] Speaker 03:
It's just on account of a claim.

[00:25:39] Speaker 03:
These payments, regardless of whether you call them a carve out or something else entirely, they were on account of administrative expenses, right, for payment of the professionals.

[00:25:50] Speaker 03:
And it says it goes into professional fund, which is designated for the professionals.

[00:25:55] Speaker 03:
So it was a claim on account of administrative expenses.

[00:25:59] Speaker 03:
And Judge Heston got it wrong when she said that you had to actually file a lawsuit or bring an adversary proceeding.

[00:26:07] Speaker 03:
That's point number one.

[00:26:10] Speaker 03:
And by the way, Section 20 of the Claim Treatment Agreement refers to words used in the agreement as being defined, if not otherwise defined in the agreement, as defined in the bankruptcy code, not in some other fashion.

[00:26:26] Speaker 03:
So then let's talk about the timing issue.

[00:26:30] Speaker 03:
The debtors, I mean, Council talked about the timing of the discussion of a carve-out with Buchanan.

[00:26:37] Speaker 03:
The debtors didn't ask for exclusion of that from the claim treatment agreement.

[00:26:42] Speaker 03:
The claim treatment agreement seems to me pretty clear that it covers what they were talking to Buchanan about, which was recovery of some administrative expenses for the professionals.

[00:26:53] Speaker 03:
Okay.

[00:26:54] Speaker 03:
So I think that addresses that timing issue.

[00:26:56] Speaker 03:
They didn't ask to have it excluded.

[00:26:58] Speaker 03:
I think the agreement covers it.

[00:27:01] Speaker 03:
Let's talk about the confirmation.

[00:27:02] Speaker 03:
That was the other point that the court raised.

[00:27:06] Speaker 03:
Plan says in Section 1H, I believe, it says that we will get the distributions provided for in the Claim Treatment Agreement.

[00:27:23] Speaker 03:
That's what it says.

[00:27:24] Speaker 03:
And the Claim Treatment Agreement was actually incorporated into the plan.

[00:27:29] Speaker 03:
So there's nothing in the plan.

[00:27:31] Speaker 02:
Well, but the council, didn't the plan specifically indicate that there was a carve out of 300,000 in one of the exhibits that was attached?

[00:27:39] Speaker 02:
In other words, it didn't label it as a payment.

[00:27:41] Speaker 02:
It didn't label it as a claim satisfaction.

[00:27:44] Speaker 02:
It labeled it specifically as a carve out.

[00:27:47] Speaker 03:
Absolutely.

[00:27:48] Speaker 03:
And the debtors in their page 18 of their brief, I mean, they basically say that they thought they could get around

[00:27:55] Speaker 03:
the claim treatment agreement by labeling something a carve out so but if you weren't sure wouldn't require you to object to clarify no because because our agreements are very clear right our we didn't need to object whether they called it a carve out or a moonshot or whatever they called it it was paid to the estate on account of administrative expenses that that's what it was and that so I have so I agree that doesn't refer to the Buchanan carve out

[00:28:25] Speaker 02:
So I have one other question, and that is, you assert that a claim could be ethereal, so to speak.

[00:28:31] Speaker 02:
When I say that, I mean that somebody could believe they have a right to payment.

[00:28:35] Speaker 02:
They could call you up and say they have a right to payment.

[00:28:37] Speaker 02:
But doesn't the concept of claim under the code contemplate either filing of a proof of claim or a motion to assert a claim?

[00:28:46] Speaker 02:
In other words, somebody doesn't have to deal with claims in a bankruptcy case that are either not asserted or filed, but are simply

[00:28:54] Speaker 02:
claims that somebody believes they might have.

[00:28:57] Speaker 03:
I think that we are misusing the word claim here because the term claim in the administrative claims means recoveries for payment of administrative claims of the estate.

[00:29:12] Speaker 03:
That's what that refers to.

[00:29:14] Speaker 01:
It doesn't it doesn't refer to having to somebody having to file a lawsuit to collect administrative I'm sorry go ahead, but I think what judge Gann is getting at is the notion of a claim definition is to set forth the broadest possible Analytical basis for it doesn't tell you how to assert a one way or the other Right right so so but that I mean I don't think that helps you I mean if one on one five says a claim is any right to payment and

[00:29:41] Speaker 01:
That is the basis of the claim.

[00:29:43] Speaker 01:
It doesn't tell you, it doesn't say, oh, by the way, if you have that, you don't have to file a proof of claim.

[00:29:47] Speaker 03:
But the language in this, again, I think the court's confused.

[00:29:50] Speaker 03:
The language in this contract is that we're recovering, making recoveries for administrative claims, payments for professionals.

[00:30:01] Speaker 03:
That somebody is making a recovery for payment of administrative claims.

[00:30:05] Speaker 03:
That's what that language is directed to.

[00:30:08] Speaker 03:
Not that somebody has to go assert a claim.

[00:30:10] Speaker 03:
It's that we are getting recoveries for claims.

[00:30:15] Speaker 01:
Anybody have any?

[00:30:16] Speaker 01:
No.

[00:30:16] Speaker 01:
Okay.

[00:30:16] Speaker 01:
Yeah.

[00:30:17] Speaker 01:
All right.

[00:30:17] Speaker 01:
Thank you very much.

[00:30:18] Speaker 01:
Thanks for your good arguments.

[00:30:19] Speaker 01:
We will take it under submission and get you a written decision as fast as we can.

[00:30:24] Speaker 01:
Thank you.

[00:30:26] Speaker 01:
Thank you.