[00:00:02] Speaker 04:
Good morning.

[00:00:03] Speaker 03:
Good morning, Your Honors.

[00:00:04] Speaker 03:
May it please the court, Corey Weber of BG Law for Appellant Michael Burkhart, Chapter 11 Plaint Administrator.

[00:00:11] Speaker 04:
You want to reserve some time?

[00:00:12] Speaker 03:
Yes, Your Honor, four minutes.

[00:00:14] Speaker 03:
Four minutes, okay.

[00:00:14] Speaker 04:
Go ahead, please.

[00:00:16] Speaker 03:
Good morning, Your Honors.

[00:00:17] Speaker 03:
So we're here to talk about several issues in regard to two motions to dismiss the original complaint and then the first amended complaint.

[00:00:26] Speaker 03:
First issue I'd like to focus on is the turnover claim.

[00:00:30] Speaker 03:
Now, Judge Montali in bankruptcy court dismissed the turnover claim on the basis of his theory that turnover only regard undisputed property.

[00:00:44] Speaker 03:
So if appellees raise the issue that this is regarding disputed property, we can't pursue a turnover claim.

[00:00:52] Speaker 04:
What exact property did you seek to have turned over?

[00:00:56] Speaker 03:
So the turnover concern, the totality of the funds, VLGI in the 2006 through... Who had those funds?

[00:01:06] Speaker 04:
Physically who had them?

[00:01:07] Speaker 03:
The appellees.

[00:01:09] Speaker 04:
Nobody else?

[00:01:10] Speaker 04:
They had made a distribution to the other partners?

[00:01:13] Speaker 03:
There were distributions to other members of the funds.

[00:01:18] Speaker 03:
What the distributions were, we're not entirely sure, but it does appear there were distributions.

[00:01:24] Speaker 03:
And the turnover claim asserted a right as to both the funds and their assets, as well as all distributions that had been made before, whatever they were.

[00:01:35] Speaker 04:
How would you turn over property you don't have anymore?

[00:01:39] Speaker 04:
Does the turnover go to proceeds, or does it require the turnover E to pursue people downstream?

[00:01:46] Speaker 03:
Potentially so it would require the police to file suit against their members or make a demand on their members to return the funds as to the as to the proceeds that have been distributed to the extent that they have been or to the extent that information was provided to the plan administrator if the plan administrator were to succeed on the turnover claim the plan

[00:02:13] Speaker 04:
In one respect, I tend to agree with you that turnover is kind of a remedy and it can wait until the underlying claim of ownership is decided.

[00:02:22] Speaker 04:
On the other hand, I think it's overused.

[00:02:25] Speaker 04:
I mean, oftentimes it's said, well, I'm entitled to damages for a breach of contract.

[00:02:30] Speaker 04:
Therefore, turnover to me the money you owe me, which I don't think is an appropriate use of that because that, the damages money is not property, identifiable property that's subject to turnover.

[00:02:42] Speaker 03:
Yeah, and Thor's prior case law, as the court's aware of, where it talks about turnover not being appropriate for breach of contract claims, masquerading as turnover claims, that's not what this was.

[00:02:56] Speaker 03:
There are detailed allegations, including attached emails, by certain of the appellees talking with each other about how their greatest fear going into this bankruptcy case

[00:03:09] Speaker 03:
where the funds and the assets of the funds would be considered property of the bankruptcy estate, that the trustee, if one was appointed, would essentially take all the funds and their assets and that they'd get paid a nickel on the dollar at most.

[00:03:25] Speaker 04:
They're entitled to assert their own interests, aren't they?

[00:03:28] Speaker 04:
I didn't read those emails as being at all anything extraordinary.

[00:03:33] Speaker 04:
I mean, they're protecting their own interests.

[00:03:35] Speaker 03:
They were protecting their own interests, but they are also fiduciaries.

[00:03:40] Speaker 03:
So to the extent for the funds.

[00:03:43] Speaker 03:
So my client, the plan administrator, is a member on behalf of Heller Airmen of the funds.

[00:03:50] Speaker 03:
The appellees, or at least the individuals, were managers of the funds.

[00:03:55] Speaker 03:
So they're not only required, they are entitled to protect their own interests.

[00:04:01] Speaker 03:
But as fiduciaries, they have to go beyond that.

[00:04:03] Speaker 03:
They have to protect the interests of the funds and all their members, not simply act for their own self-interest.

[00:04:10] Speaker 03:
And that was the issue here.

[00:04:12] Speaker 03:
Not only were there emails and detailed discussions about what indicia of the funds could cause creditors or other people to consider the funds to be assets of the bankruptcy estate,

[00:04:27] Speaker 03:
One of the app, I believe, sent an email, and this is in the allegations and the complaint and an attached exhibit saying, we should keep things as verbal as possible.

[00:04:37] Speaker 03:
Why keep things as verbal as possible?

[00:04:41] Speaker 04:
Why create evidence?

[00:04:43] Speaker 00:
You're lawyers, as well as fiduciaries, and you think like a lawyer.

[00:04:49] Speaker 00:
Why do I care about turnover today?

[00:04:51] Speaker 00:
Don't I care more about the nexus of the claim, the attempts to recover part of the SpaceX money?

[00:05:02] Speaker 00:
Because the turnover, it's like the tail wagging the dog, it seems to me right here.

[00:05:06] Speaker 00:
Your big issue is overcoming the motion to dismiss without leave as to the core facts supporting your claim and the plausibility possibility argument.

[00:05:18] Speaker 03:
So Your Honor, I think both are just as applicable.

[00:05:22] Speaker 03:
So we cited in both of our briefs, I think it was in the footnote one that Los Angeles or Lacey versus Maricopa County preserves the issues in the original complaint for purposes of appeal.

[00:05:38] Speaker 03:
to directly address Your Honor's points about the SpaceX proceeds and what Judge Montale ruled was the... Tell me if I'm wrong, but it seems to me you have to win that part in order to even get to the turnover, and that was the point of my question.

[00:05:54] Speaker 03:
I don't think that... I would disagree with that, Your Honor.

[00:05:58] Speaker 03:
So for turnover, we're just looking at the plain language of the statute.

[00:06:03] Speaker 03:
So these are funds.

[00:06:06] Speaker 03:
The funds and the assets of the funds are amounts that the plan administrator could use, sell.

[00:06:15] Speaker 03:
They're not of inconsequential value.

[00:06:17] Speaker 03:
So that's as to the turnover issues.

[00:06:21] Speaker 03:
And this court, as well as the Ninth Circuit, have repeatedly stated, including recent panels with Judge Farris and Judge Corbett,

[00:06:30] Speaker 03:
that we start with the playing language of the statute, that we presume that Congress acted intentionally.

[00:06:36] Speaker 03:
If Congress wanted a gatekeeping function in terms of someone raising their hand and saying, I dispute this, and that's not a turnover claim, Congress could have said that.

[00:06:46] Speaker 03:
That's not what Congress said.

[00:06:48] Speaker 04:
Let me jump you ahead to another question.

[00:06:52] Speaker 04:
The appellees say that the firm had no common stock.

[00:06:57] Speaker 04:
How much common stock do you think the firm had?

[00:07:00] Speaker 03:
So it's unclear based on the documents and this goes also to... Don't you have to say eventually we think we had X shares?

[00:07:09] Speaker 03:
So it should be equal to the preferred shares to the extent that the plan administrator is successful on the prior distributions were done.

[00:07:19] Speaker 04:
Is that the basis?

[00:07:20] Speaker 03:
So prior in the first amended complaint, we included detailed allegations as to prior distributions being based on both common and preferred stock.

[00:07:29] Speaker 04:
Have anything besides the prior distributions to support the contention it ought to be equal?

[00:07:35] Speaker 03:
So the issue, Your Honor, is with the agreement, the one that the 2002 sub-fund appendix, and this goes also to Judge Brand's question, that Judge Montali relied on in dismissing the first amendment complaint.

[00:07:50] Speaker 04:
I understand the questions you have about that agreement, but it seems to me eventually you're going to have to come forward and say, this was the deal.

[00:07:57] Speaker 04:
And I think your idea of the deal is it ought to be proportional.

[00:08:00] Speaker 04:
And my question is, do you have anything besides, at this point, besides the prior distributions to show that the deal was, in fact, equal, common, and preferred?

[00:08:11] Speaker 03:
No, and this is just the complaint part.

[00:08:14] Speaker 03:
So there's detailed allegations in the complaint as to, during the 2004 process, FLEs taking steps to Stonewall.

[00:08:22] Speaker 03:
So there was detailed financial information requested that wasn't provided.

[00:08:28] Speaker 03:
There were spreadsheets that were locked, redacted.

[00:08:31] Speaker 03:
The answer is you don't, but you hope to get some.

[00:08:35] Speaker 03:
During discovery, Your Honor, correct.

[00:08:37] Speaker 03:
Yeah, so just for pleading purposes, we pleaded what the plan administrator could discover in the course of 2004 discovery before determining that there was stonewalling and dragging the process out.

[00:08:54] Speaker 03:
And so there was enough to state a claim, a plausible claim, and that's what the plan administrator did.

[00:09:03] Speaker 04:
How different would the prior distributions have been in dollar terms if the firm had no common stock and only preferred it?

[00:09:13] Speaker 04:
Have you done that calculation?

[00:09:15] Speaker 03:
Yes, Your Honor.

[00:09:16] Speaker 03:
It's in the millions, although... I'm talking about the prior distributions, not the SpaceX.

[00:09:23] Speaker 04:
Those are hundreds of thousands in total, right?

[00:09:26] Speaker 03:
Yeah, I think the SpaceX was the big one.

[00:09:28] Speaker 03:
The prior distributions I think were less.

[00:09:31] Speaker 03:
I don't recall the exact amounts.

[00:09:34] Speaker 03:
I don't want to give a specific dollar figure as to the SpaceX based on the protective order in this case.

[00:09:42] Speaker 04:
I'm thinking more of the prior distributions.

[00:09:45] Speaker 04:
And I think one of their arguments is, well, that was a mistake.

[00:09:47] Speaker 04:
We did it wrong.

[00:09:48] Speaker 04:
And if that were a small dollar amount, that would be consistent with their theory.

[00:09:53] Speaker 04:
a rounding error, so to speak?

[00:09:55] Speaker 03:
Well, it goes even beyond the prior distributions by VLGI.

[00:10:00] Speaker 03:
In terms of the 2006 through 2008 funds, there are significant distributions that have been made, but zero dollars have been made to the plan administrator, Heller Ehrman.

[00:10:11] Speaker 03:
And they're basing that on unsigned, incomplete agreements for those funds, which Judge Montale appears to have also relied on

[00:10:21] Speaker 03:
in dismissing without prejudice claims regarding the 2006 through 2008 funds without leave to amend saying that it was a discovery dispute.

[00:10:31] Speaker 03:
But meanwhile, attached to the complaints, I think it's Exhibit 7, is a unanimous consent by the individual members, the individual appellees that say that Heller-Earman is a member and was the manager of the 2006 through 2008 funds.

[00:10:50] Speaker 03:
All the distributions that have gone out to the 2006 through 2008 fund members, we don't know how much, but it looks like it's significant amounts.

[00:11:00] Speaker 03:
So we're talking about millions and millions of dollars here.

[00:11:03] Speaker 03:
And these claims haven't seen the light of day yet.

[00:11:06] Speaker 03:
We haven't been allowed to proceed with discovery, just two successive motions to dismiss.

[00:11:12] Speaker 03:
And the court appears to have been relying on, and this goes up to the plausibility argument,

[00:11:18] Speaker 03:
You're down to your four minutes.

[00:11:20] Speaker 03:
I just want to point that out.

[00:11:21] Speaker 03:
Go ahead.

[00:11:21] Speaker 03:
On an appendix that has a dispute as to it being a real document that's admissible.

[00:11:30] Speaker 03:
It was repeatedly alleged that it was cobbled together after the fact, included exhibits to it that were taken from different places, signatures from a prior agreement

[00:11:44] Speaker 03:
It can't pass FRE 201 muster.

[00:11:49] Speaker 03:
So with that, I'll reserve the remainder of my time.

[00:11:52] Speaker 03:
Thank you, Your Honors.

[00:11:53] Speaker 00:
Thank you.

[00:12:00] Speaker 02:
Good morning.

[00:12:01] Speaker 02:
For the record, John Lucian of Blank Rome on behalf of the Appellees.

[00:12:04] Speaker 02:
It's an honor to appear before this esteemed panel today.

[00:12:09] Speaker 02:
The plaintiffs had not won, but two bites at the apple.

[00:12:13] Speaker 02:
Three, if you count the interlocutory, appeal.

[00:12:17] Speaker 02:
All were unsuccessful.

[00:12:19] Speaker 02:
Why?

[00:12:21] Speaker 02:
Because they lacked plausibility.

[00:12:24] Speaker 02:
This is about plausibility, not possibility.

[00:12:28] Speaker 02:
Why are they not plausible?

[00:12:31] Speaker 02:
Because, and I will quote the documents, the common interest of VOGI will equal zero.

[00:12:39] Speaker 02:
This case starts and ends with that document.

[00:12:43] Speaker 02:
What about the prior distributions with that with the distribution on those prior distributions have been the same if there had been zero common stock interest I believe your honor is referring to the two distributions referenced in the amended complaint from 2006 Yes, the minute mid five figure number actually what the complaint again the burden is on the plaintiff with the complaint fails to

[00:13:09] Speaker 02:
alleged, and Judge Montali correctly noted, is the reason for that and whether there was any basis or any documents at all to support it.

[00:13:18] Speaker 02:
There are a variety of theories.

[00:13:20] Speaker 02:
It could have simply been, and the problem is it's something from two decades ago almost, that was the, as happens a lot, preferred shares converted to common so that it had become common.

[00:13:32] Speaker 02:
Was it a Scrivener's error, the person doing it because it was such a small dollar amount, made a mistake and no one caught it?

[00:13:38] Speaker 02:
Nothing nefarious about that at all.

[00:13:40] Speaker 02:
But to rely on that, it'd be like saying I have a 20-year lease and I pay $100,000 a month in rent.

[00:13:46] Speaker 02:
In 2007, I paid $92,000.

[00:13:49] Speaker 02:
We don't have a record.

[00:13:50] Speaker 02:
No one remembers why.

[00:13:51] Speaker 02:
Oh, but it should be $92,000 for the next 17 years because of that one payment.

[00:13:57] Speaker 02:
That's why Judge Montale was on proper footing.

[00:14:00] Speaker 02:
And I will quote from his opinion with respect to the first amended complaint.

[00:14:06] Speaker 02:
This is the core of what this is about.

[00:14:08] Speaker 02:
He cites to the complaint again.

[00:14:10] Speaker 02:
It's a motion to dismiss.

[00:14:11] Speaker 02:
So everything was viewed in the late most favorable to the plaintiff He says in paragraph 56 of the complaint the plaintiff quotes directly the critical language in the critical document that summarizes succinctly what this dispute is all about quote if you look at the 2002 appendix

[00:14:31] Speaker 02:
to the Heller-Erman VLG Investments LLC agreement, there are common interests and preferred interests.

[00:14:40] Speaker 02:
VLG had a preferred interest.

[00:14:44] Speaker 02:
VLG did not have a common interest.

[00:14:47] Speaker 02:
Parenz see the language in the appendix that says, quote, the common interest of VLG will equal zero.

[00:14:54] Speaker 02:
That is in section 4A of the 2002 appendix.

[00:15:00] Speaker 02:
Plaintiff's problem is that very appendix that says the common interest will equal zero.

[00:15:08] Speaker 02:
It's true in the signed versions that were eventually located and provided, and it's true in the earlier unsigned versions that the plaintiff makes much of.

[00:15:16] Speaker 02:
They're identical.

[00:15:17] Speaker 02:
Plaintiff doesn't dispute that.

[00:15:20] Speaker 02:
Plaintiff does not allege any other version of the documents.

[00:15:25] Speaker 02:
Any other agreement that says to the contrary, here's contract one and contract two,

[00:15:29] Speaker 02:
The court needs to interpret them.

[00:15:30] Speaker 02:
We have a dispute.

[00:15:32] Speaker 02:
None of that here.

[00:15:33] Speaker 02:
He ignores the integration clause in that agreement that says any modifications have to be in writing.

[00:15:41] Speaker 02:
What you're hearing from the plaintiff, they do a very good job, is, well, maybe this, or maybe that, or maybe some more discovery will show us something.

[00:15:52] Speaker 02:
Well, they had extensive discovery.

[00:15:54] Speaker 02:
This is bankruptcy litigation.

[00:15:55] Speaker 02:
They used their 2004 powers.

[00:15:58] Speaker 02:
They acknowledged it, again, in the complaint.

[00:16:00] Speaker 02:
Thousands of emails and pages of documents produced.

[00:16:03] Speaker 02:
Deposition of VLGI.

[00:16:05] Speaker 02:
That's why Judge Montali, I think, properly pointed out, you have to look at plausibility.

[00:16:11] Speaker 02:
We live in the post-Iqbal and post-Twambli world.

[00:16:14] Speaker 02:
It's been the law for two decades.

[00:16:16] Speaker 02:
It has to be plausibility.

[00:16:18] Speaker 02:
It can't just be, well, give me a third bite or a fourth bite at the apple.

[00:16:21] Speaker 02:
Let me keep going, Judge.

[00:16:23] Speaker 02:
Another chance.

[00:16:23] Speaker 02:
I'll finally find something and get it right.

[00:16:25] Speaker 02:
That's not how our judicial process works.

[00:16:28] Speaker 02:
And then you add to it the Ninth Circuit's opinion in Century Aluminum, which Judge Motali also aptly pointed out, that two possible explanations are just that.

[00:16:39] Speaker 02:
It's possibility.

[00:16:40] Speaker 02:
It doesn't rise to the level of plausibility.

[00:16:46] Speaker 02:
I think a summary of the key facts and chronology here is helpful to the panel, and I'm impressed you're already very well versed, which is something that took me many months to figure out.

[00:16:57] Speaker 02:
VLG was, formed VLGI to invest in their startup clients.

[00:17:02] Speaker 02:
It's the benefit of representing them.

[00:17:04] Speaker 02:
Every now and then, you get a SpaceX for every 100 that's a dud.

[00:17:08] Speaker 02:
VLG merged into Heller in 2003, five years before Heller's bankruptcy.

[00:17:14] Speaker 04:
I'd like to move you ahead because the time is short.

[00:17:17] Speaker 04:
Sure, please.

[00:17:17] Speaker 04:
I'd like you to talk about the releases.

[00:17:20] Speaker 02:
Absolutely.

[00:17:20] Speaker 04:
That gives me difficulty because we're not talking about this typical case where you give a release and you say, I'm releasing you, I may not know everything, but I'm still releasing you.

[00:17:32] Speaker 04:
But this release was interpreted to apply to things that didn't even happen yet.

[00:17:37] Speaker 04:
You know, these distributions, the SpaceX distribution didn't even come about until 12 years later.

[00:17:42] Speaker 04:
And I have real difficulty seeing how a release in 2011 could apply to conduct that didn't happen until 2023 or thereabouts.

[00:17:50] Speaker 02:
I may have the years wrong.

[00:17:51] Speaker 02:
I respectfully disagree, Your Honor.

[00:17:53] Speaker 02:
I don't believe that's what Judge Montale did here.

[00:17:56] Speaker 02:
What Judge Montale did is he said the releases are not prospective in that regard.

[00:18:01] Speaker 02:
The releases were broad and included everything up until that point of time.

[00:18:05] Speaker 02:
That's precisely why

[00:18:07] Speaker 02:
when he granted our first motion to dismiss, he did it with leave to amend with respect to the 2021 distributions.

[00:18:14] Speaker 02:
So I think if you go back and look at it, and I understand where you're coming from, he preserved that, and that's why we had an amended complaint.

[00:18:21] Speaker 02:
He said, if you think you have something there, because that's not part of the releases, we argued that it was, and we didn't win that, that you have the opportunity to do it.

[00:18:30] Speaker 02:
And they did come forward

[00:18:31] Speaker 02:
with that complaint.

[00:18:33] Speaker 04:
The release wasn't part of the dismissal of the first amended complaint?

[00:18:37] Speaker 02:
It was for all of the claims covered at the time of the release and it released all, there were eight directors and officers who had been, or partners had been sued under that.

[00:18:48] Speaker 02:
The amended complaint was, and all were released as to claims up to that time.

[00:18:52] Speaker 02:
The amended complaint only per the court's order was only allowed as to the 2021

[00:18:57] Speaker 02:
SpaceX distributions.

[00:18:59] Speaker 04:
Do we know when the 2006 to 2008 funds made their distributions?

[00:19:06] Speaker 02:
Well, for motion to dismiss purposes, they were not in there.

[00:19:09] Speaker 02:
But let me talk about that then, because that's important.

[00:19:12] Speaker 02:
That's not with the plaintiff alleged in its complaint.

[00:19:15] Speaker 02:
The plaintiff alleged in its complaint with respect to the 2006 and 2008 funds

[00:19:20] Speaker 02:
No injury at all.

[00:19:22] Speaker 02:
We think we may own something in it.

[00:19:24] Speaker 02:
We're back to it again.

[00:19:24] Speaker 02:
Well, maybe some more discovery.

[00:19:26] Speaker 02:
Maybe some more of this.

[00:19:27] Speaker 02:
Maybe we'll get somewhere.

[00:19:30] Speaker 02:
It's not how the law works.

[00:19:30] Speaker 02:
You don't get seven bites at the apple and keep going until maybe you find something that gets passed a motion to dismiss to then force the other side to say it's going to cost a million dollars to litigate, pay me something.

[00:19:41] Speaker 02:
That's why we have motions to dismiss.

[00:19:43] Speaker 02:
We've already spent significant funds.

[00:19:45] Speaker 02:
You may be aware from the docket and it's in our appendix, I mean the record,

[00:19:49] Speaker 02:
When the other defendants the other four were dismissed the plaintiff chose not to appeal their dismissal on the releases only the three that I represent and Was it error for Judge Montelli not to have allowed leave to amend?

[00:20:03] Speaker 00:
regarding the VLGI distributions, because he dismissed that without leave to amend for the reasons that you stated.

[00:20:11] Speaker 00:
There's no allegations.

[00:20:12] Speaker 00:
There's nothing here in this complaint.

[00:20:14] Speaker 00:
Should he have granted leave to amend and allowed that to be included in the first amended complaint?

[00:20:19] Speaker 02:
No, Your Honor, for several reasons.

[00:20:20] Speaker 02:
First, there's a serious statute of limitations problem when you're talking about things that were done in 2006 to 2008 for a lawsuit filed in 2023, I think we were here.

[00:20:31] Speaker 02:
this statute is there for a reason.

[00:20:34] Speaker 02:
And I point that out, because I hope it's not lost on this court, Gerald Bangerstein judges, this is a case from 2008.

[00:20:40] Speaker 02:
And a lawsuit filed 13, 14, 15 years later, that is extraordinary.

[00:20:45] Speaker 02:
This is not something filed within the 546 limitations period and, hey, judge, we need some more time or extensions.

[00:20:51] Speaker 02:
You all deal with that on a regular basis.

[00:20:54] Speaker 02:
This is something way after the fact, and only because, as they say, no good deed goes unpunished.

[00:21:00] Speaker 02:
Ironically, had my clients been nefarious and never told the trustee he was entitled to several million dollars of SpaceX distributions, wouldn't be here.

[00:21:07] Speaker 02:
But they did it by the book, by the penny, and the complaint acknowledges that they did it.

[00:21:12] Speaker 02:
So to that point, and the 2021 alleged breach of fiduciary duty, what Judge Montale said is, OK, I'll give you a chance.

[00:21:19] Speaker 02:
If you think you have something there, because that's not time barred, I'll let you amend and bring it.

[00:21:24] Speaker 02:
And what they brought utterly failed to be plausible.

[00:21:28] Speaker 02:
Because to the breach of fiduciary duty, as to the individuals taking that apart from VLGI,

[00:21:33] Speaker 02:
There's no allegation that they did anything untoward, nefarious, or breach of fiduciary duty.

[00:21:39] Speaker 02:
To the contrary, the complaint acknowledges, again, that they made the distributions exactly as the documents say.

[00:21:46] Speaker 02:
Now, the trustee disputes that that's correct, thinks he should also get common shares.

[00:21:52] Speaker 02:
But to bring the argument full circle, the reason he doesn't is why this was created in the first instance, which is the partners of VLGI created this fund for their own

[00:22:03] Speaker 02:
benefit.

[00:22:03] Speaker 02:
And then they decided that they would set some of it aside through preferred shares to create an employee bonus pool.

[00:22:11] Speaker 02:
No obligation otherwise to do anything.

[00:22:14] Speaker 02:
And the trustee is trying to leapfrog from the employee pool, because he inherited the employee rights through the Heller bankruptcy, to becoming a partner of the firm.

[00:22:24] Speaker 02:
Nothing anywhere in the documents to support what is correctly noted by Judge Montali, mere conjecture.

[00:22:34] Speaker 02:
I would sort of sum that argument up with what I think... Let me just look at my notes here to make sure I addressed Your Honor's question.

[00:22:41] Speaker 02:
I think I did.

[00:22:42] Speaker 02:
And this statute of limitations problem, again, Your Honor, is obvious.

[00:22:47] Speaker 02:
You're talking about an appendix from 2002.

[00:22:49] Speaker 02:
You're talking about disbursements made in 2006 through 2008.

[00:22:54] Speaker 02:
You're talking about releases from a 2010 document.

[00:22:58] Speaker 02:
All of that, I think, troubled Judge Montale at where we are.

[00:23:01] Speaker 02:
And I think

[00:23:02] Speaker 02:
It's very apt conduct most of it most of the conduct the biggest dollars is 2023 right 2021 your honor on SpaceX correct and again What is the complaint say I think we've gone through that and judge Montali sums it up.

[00:23:15] Speaker 02:
This is page five of his opinion on the first amendment complaint because the trustee brought you know, I think seven claims in the first and

[00:23:25] Speaker 02:
Complaint and Judge Mattali expected something much more narrow maybe Bruce your future a duty if you can prove it and it became eight claims And he said quote for all of those claims of course the court must take all the facts as true It does so and comes to the same conclusion the facts presented for an alternative to the literal meaning of the words of the 2002 appendix are merely conjecture and thus nothing more than a possibility that there is an explanation to contradict

[00:23:53] Speaker 02:
the specific recital that, quote, the common interest of Heller will equal zero.

[00:24:00] Speaker 02:
As such, the amended complaint simply is not plausible under the traditional pleading standards for FRCP 12b6 motions such as this.

[00:24:08] Speaker 02:
I would urge this court for those reasons to affirm Judge Mentale on that point.

[00:24:14] Speaker 02:
A couple of three minutes left, a couple of the points to hit on to the panel.

[00:24:20] Speaker 02:
First, there's an argument in the brief

[00:24:22] Speaker 02:
Well, as to unjust enrichment and declaratory judgment, that was waived because it wasn't in the motion to dismiss.

[00:24:29] Speaker 02:
Well, the reason it's not in there is simple.

[00:24:31] Speaker 02:
We have a page limit.

[00:24:33] Speaker 02:
And when you're dealing with a complaint the size of the old Yellow Pages phone book with thousands of pages of exhibits,

[00:24:38] Speaker 02:
You have to pick and choose and be judicious as a lawyer as to the arguments you can address.

[00:24:43] Speaker 02:
Judge Montale actually admonished us about excessive footnotes to squeak into that.

[00:24:47] Speaker 02:
And the law is clear that a reply brief can also raise issues because we were responding to there.

[00:24:52] Speaker 02:
So I would urge the court to disregard that point as well.

[00:24:58] Speaker 02:
On the turnover claims, again, I think Judge Montale got it right.

[00:25:01] Speaker 02:
I'm aware of the Northern District opinion that counsel cited.

[00:25:06] Speaker 02:
It applies at all here to the facts of this case.

[00:25:08] Speaker 02:
This is turnover in the context of a breach of contract.

[00:25:13] Speaker 02:
It's not an independent claim in and of itself under 542.

[00:25:16] Speaker 02:
And I think that Judge Montali dealt with that properly.

[00:25:31] Speaker 02:
And the last point on discovery.

[00:25:34] Speaker 02:
Here, again, I just emphasize for the Court the extensive Rule 2004 opportunities that the Trustee, that the Planned Administrator had here and used.

[00:25:44] Speaker 02:
And there's an argument in the briefs that, well, this is like Judge Montali said it was a discovery dispute.

[00:25:50] Speaker 02:
Well, it was not a discovery dispute, and he didn't say that.

[00:25:53] Speaker 02:
He observed that it was like a discovery dispute because they're asking for more.

[00:25:57] Speaker 02:
I think this Court actually got it right, and I'll end with a quote that this Court had denying the interlocutory appeal.

[00:26:03] Speaker 02:
It was, quote, the bankruptcy court's comments regarding discovery were not the basis for dismissal of the appellant's claims.

[00:26:10] Speaker 02:
That's correct.

[00:26:10] Speaker 02:
The basis for the dismissal was the failure to plausibly plead any claims.

[00:26:17] Speaker 02:
Thank you.

[00:26:17] Speaker 04:
Thank you.

[00:26:18] Speaker 04:
Thank you.

[00:26:25] Speaker 04:
Weber, go ahead.

[00:26:26] Speaker 03:
Thank you, Your Honor.

[00:26:27] Speaker 03:
I'd like to start with the releases issue that you mentioned, Judge Farris.

[00:26:35] Speaker 03:
So my colleague on the other side mentioned that Judge Montale preserved the 2021 Ford.

[00:26:43] Speaker 03:
There is no discussion in Judge Montale's opinion as to why there is a date of 2021.

[00:26:49] Speaker 03:
If the releases were signed in 2010, which is when the settlement agreements took place

[00:26:55] Speaker 03:
What happens with that gap between 2010 and 2021?

[00:26:59] Speaker 04:
Does it matter?

[00:27:00] Speaker 04:
Is anything you know of happened during that period that's actionable?

[00:27:03] Speaker 03:
It appears that there were distributions in the 2006 through 2008 funds.

[00:27:10] Speaker 03:
I don't know what they are, but it may be impactful.

[00:27:15] Speaker 03:
In addition, the releases that were enforced by Judge Montali in the settlement agreements, it bears note that

[00:27:22] Speaker 03:
The settlement agreements were by defendants in their individual capacities as to avoidance action claims regarding prepetition compensation.

[00:27:32] Speaker 03:
And there were de minimis settlement values.

[00:27:35] Speaker 03:
It wasn't anything in relation to their status as managers of the funds, as fiduciaries of the funds.

[00:27:42] Speaker 03:
If the court will forgive a monopoly reference, the appellees and the bankruptcy court have assumed that this is a get out of jail free

[00:27:52] Speaker 03:
card where appellees don't have any requirement as managers going forward to do anything that at least between 2010 and 2021, they could do whatever they want because they signed a release that doesn't mention any of the funds at all.

[00:28:11] Speaker 03:
And according to settled Ninth Circuit case law, the settlement agreements in each of the terms, each of the recitals have to be looked at together.

[00:28:20] Speaker 03:
with each being used to help interpret the other.

[00:28:23] Speaker 03:
If you look at the court's opinion that discusses the releases, it talks about how the court was very familiar with the releases in the settlement agreement, that the court had presided over the case for a long time, and used that to say, well, the releases are essentially all encompassing.

[00:28:43] Speaker 03:
But there is no actual analysis either in the record

[00:28:47] Speaker 03:
or in the written opinion that talks about an actual analysis of each of the clauses, including the recitals, which specifically refer to 2007 through 2008 compensation and avoidance action claims and repaying a certain portion of that, rather than anything regarding what we're talking here today.

[00:29:06] Speaker 03:
And then I'd also like to just go back to the plausibility argument that my colleague discussed

[00:29:14] Speaker 03:
Because his plausibility argument relies squarely on the 2002 appendix being enforceable for the purposes of a motion to dismiss.

[00:29:24] Speaker 01:
Was there anything, there was discovery, whether it was 2004 or whatever else, was there anything in that discovery that was inconsistent with that unsigned document?

[00:29:36] Speaker 03:
So the document itself omits a schedule that's attached.

[00:29:43] Speaker 03:
that lists the members' amounts of membership interest.

[00:29:48] Speaker 03:
The appellees pulled that from a different document in a different location and attached it and then used signature pages from a different document.

[00:29:57] Speaker 01:
What about the people that you were asking these questions of?

[00:30:01] Speaker 01:
Did they say that their memory was different or that something else was different or inconsistent or that there was some common stock that the VLG or Heller-Erman could... No, so we only got to answer Your Honor's question.

[00:30:15] Speaker 03:
For the 2004 actual depositions or examinations that took place, we took the examination of Mark Royer for two or three days.

[00:30:25] Speaker 03:
And I don't recall what he specifically said to that regarding that.

[00:30:29] Speaker 03:
He said that his understanding, I think, was that the third amended agreement was in place.

[00:30:35] Speaker 03:
But I don't recall his exact response.

[00:30:37] Speaker 03:
We were going to take the examinations of the individual APIs that are currently managers, but we're waiting on them providing the unredacted versions of Excel spreadsheets and locked documents, which they never provided.

[00:30:55] Speaker 03:
And upon reviewing the information that had been accessible, we determined there was enough to pursue a claim.

[00:31:02] Speaker 03:
And I think as Judge Kaufman said in one of the cases that were cited in the brief, if there's enough to go forward, if there are colorable claims, then you go forward and you don't continue to pursue 2004 discovery at that point based on public policy.

[00:31:19] Speaker 04:
You're past your time.

[00:31:21] Speaker 04:
I apologize, your honor.

[00:31:22] Speaker 04:
Quite all right, quite all right.

[00:31:23] Speaker 04:
Thank you very much.

[00:31:24] Speaker 04:
Thanks both of you for your good arguments.

[00:31:26] Speaker 04:
The matter is submitted.

[00:31:27] Speaker 04:
Thank you, your honors.