[00:00:00] Speaker 01:
Case in Ray, I tell an international LLC, Jacob, it's quits appearing for appellant.

[00:00:09] Speaker 01:
Randy S. Snyder appearing for appellee.

[00:00:12] Speaker 02:
Okay, Mr, it's good.

[00:00:13] Speaker 02:
You want to reserve some time for rebuttal?

[00:00:15] Speaker 00:
Yes, your honor.

[00:00:16] Speaker 00:
Please.

[00:00:17] Speaker 00:
Three minutes.

[00:00:17] Speaker 00:
Three minutes.

[00:00:18] Speaker 00:
Okay.

[00:00:19] Speaker 00:
Go ahead.

[00:00:20] Speaker 00:
Thank you.

[00:00:20] Speaker 00:
Good morning.

[00:00:21] Speaker 00:
And may it please the court.

[00:00:23] Speaker 00:
Appreciate your time.

[00:00:23] Speaker 00:
This is a fairly straightforward case.

[00:00:27] Speaker 00:
The issue is that appellee grateful eggs.

[00:00:31] Speaker 00:
Request for allowance and payment was granted by the court.

[00:00:35] Speaker 00:
And the order that the bankruptcy court issued was done without notice or a hearing, which was error.

[00:00:40] Speaker 00:
We are simply asking that this court.

[00:00:43] Speaker 00:
Vacate the bankruptcy court's order denying reconsideration and remand the matter back to the bankruptcy court with instructions to grant the motion for reconsideration and allow us to have a hearing on the claim that was granted.

[00:00:57] Speaker 00:
I'll give you a little bit of the back story and then let me jump in.

[00:01:01] Speaker 02:
Wouldn't you agree that grateful egg did everything that was required under the administrative bar order?

[00:01:07] Speaker 00:
Uh, no, your honor, I would not.

[00:01:10] Speaker 00:
Um, the administrative bar order states that if there is a dispute between the parties as to the, the claim and they're not able to resolve it, then the debtor is to set a hearing.

[00:01:21] Speaker 00:
Um, there was an initial effort to resolve the claim.

[00:01:24] Speaker 00:
In January of 2024, I believe, and then there was never an indication that there was an impasse between the parties.

[00:01:31] Speaker 00:
Nor is there notice provided to the debtors or to the liquidating trustee that there was an impasse that there was a failure to resolve the claim.

[00:01:39] Speaker 03:
And then with that result in order being entered.

[00:01:42] Speaker 00:
Well, you're on the, it would, but the next step was that there was supposed to be notice of that order being provided to us, which, uh, opposing council where it's in the, where did that, where did that requirement come from?

[00:01:55] Speaker 02:
It's not in the bar order, is it?

[00:01:56] Speaker 02:
It's not a notice.

[00:01:58] Speaker 00:
No, it's in the bankruptcy procedures, as my understanding is, under the Ninth Circuit bankruptcy procedures, you file, under the Lue system, a notice of lodgement of an order, which then would have given us notice and an opportunity to object.

[00:02:12] Speaker 00:
As opposing counsel notes in the transcript, there was a clerical error and that notice of lodgement was never entered, so we never had notice that the pending order was before the judge, so we never had an opportunity to object or request a hearing.

[00:02:25] Speaker 02:
But you had notice, I mean, it was on the file, right?

[00:02:29] Speaker 02:
The request was on file.

[00:02:30] Speaker 02:
So you had at least constructive notice that it was there, correct?

[00:02:35] Speaker 00:
So this is an important point.

[00:02:36] Speaker 00:
The claim, the request for allowance and payment was on the record.

[00:02:39] Speaker 00:
And we did have notice, excuse me, of the claim.

[00:02:42] Speaker 00:
We did not have notice of a pending order.

[00:02:44] Speaker 00:
And that's an important distinction that was conflated at the bankruptcy court in the, yes, go ahead.

[00:02:49] Speaker 03:
Let's pause on that for a second.

[00:02:50] Speaker 03:
I mean, doesn't that suggest

[00:02:52] Speaker 03:
that the problem is not really a notice problem, it's sort of a triggering problem, but if I'm hearing you correctly, then something else, I mean, it's not, this is not maligned notice.

[00:03:01] Speaker 03:
You fully knew what the possibilities were, right?

[00:03:04] Speaker 03:
You just didn't know it was being triggered.

[00:03:06] Speaker 03:
Is that a fair assessment?

[00:03:07] Speaker 03:
Yes, that's a good way to put it.

[00:03:09] Speaker 03:
That's not a maligned issue, right?

[00:03:10] Speaker 03:
That's something else.

[00:03:11] Speaker 03:
That's kind of an internal administrative mistake or something.

[00:03:15] Speaker 03:
I don't know what.

[00:03:16] Speaker 00:
Yeah, I think, I think opposing counsel put it well in the transcript at the bankruptcy court.

[00:03:20] Speaker 00:
There was a clerical error and the notice was never lodged via the loose system.

[00:03:24] Speaker 00:
Um, yes.

[00:03:25] Speaker 00:
I mean, if you look at the timeline, right, the, the, um, the request for allowance and payment.

[00:03:33] Speaker 00:
So essentially the claim, the grave leg file on the docket was filed in January of, uh, 20 to 24 and 10 or 11 months passed.

[00:03:42] Speaker 00:
And then all of a sudden the order was issued in November of 2024.

[00:03:45] Speaker 00:
granting the claim.

[00:03:46] Speaker 03:
That's not all of a sudden if it's 11 months later, but anyway.

[00:03:49] Speaker 00:
Well, as far as we were concerned, it was all of a sudden.

[00:03:52] Speaker 03:
It might have been abrupt.

[00:03:53] Speaker 03:
It wasn't sudden, right?

[00:03:55] Speaker 03:
Yes.

[00:03:57] Speaker 00:
At the same time, there were 60 odd other administrative claims on the docket.

[00:04:03] Speaker 00:
None of those claimants moved for an order.

[00:04:06] Speaker 00:
The judge did not issue an order on any of those for payment.

[00:04:10] Speaker 00:
And this is important.

[00:04:10] Speaker 00:
The estate at the time was administratively insolvent, and there was no deadline in the administrative claim bar order for us to file objections.

[00:04:19] Speaker 00:
So when we, the liquidating trustees council took over in May,

[00:04:23] Speaker 00:
There was no reason for us to believe that any claim on the docket was pending or that there would be an abrupt issuance of an order that we needed to be aware of.

[00:04:31] Speaker 02:
All you had to do was set them all for hearing, right?

[00:04:37] Speaker 02:
I mean, the bar order contemplates that if the debtor or the committee, and I think probably the liquidating trustee steps into the shoes of the debtor, if there's a dispute that can't be resolved, you give notice and set it for hearing.

[00:04:48] Speaker 02:
And that's going to forestall the entry of an order, right?

[00:04:51] Speaker 00:
Yes, we, in fact, did that coincidentally, the day after the order was granted for grateful eggs claim, we filed our required report as interested.

[00:05:03] Speaker 00:
Just that's just how the dates were calendar.

[00:05:05] Speaker 00:
And in that report, we noted that we were reconciling and reviewing administrative claims and would be shortly filing.

[00:05:10] Speaker 00:
Objections and in fact, since that date have filed the number of omnibus individual objections and resolved.

[00:05:18] Speaker 00:
Every single, I believe every single other claim, administrative claim in the on the docket, except for this one.

[00:05:23] Speaker 00:
So we were in the process of figuring out.

[00:05:26] Speaker 00:
How much money the estate had what we could pay what we could object to and have since resolve those, but we were not.

[00:05:33] Speaker 00:
We were not aware because we had no notice that we needed to be on alert for this particular claim to be paid without notice or a hearing.

[00:05:42] Speaker 00:
And so because there was no notice of, of lodgement filed via the loose system, we had no opportunity to object.

[00:05:48] Speaker 00:
And we believe there are significant grounds to object.

[00:05:50] Speaker 00:
And I don't think we need to get into the merits of the claim at this point, unless the court would like to, but we believe there are significant grounds to object to at least portions of grateful legs claim.

[00:06:01] Speaker 00:
Um, and therefore we believe there'd be prejudice if it's allowed to be paid out, um, you know, without hearing and without notice.

[00:06:14] Speaker 00:
I mean, I'm happy to, I'm happy to dive into a little bit more if you'd like, or I'm happy to reserve the balance of my time.

[00:06:20] Speaker 02:
Um, I saw that we don't have any questions for you at this point.

[00:06:23] Speaker 02:
So maybe you should just reserve.

[00:06:25] Speaker 02:
That sounds good.

[00:06:26] Speaker 02:
Thank you.

[00:06:26] Speaker 02:
Okay.

[00:06:27] Speaker 02:
Mr. Snyder, please go ahead.

[00:06:31] Speaker 01:
I did thank the panel for taking the time to hear this.

[00:06:34] Speaker 01:
Thank you.

[00:06:35] Speaker 01:
And, um.

[00:06:37] Speaker 01:
This is this is actually, I think, is Mr. it's it's pretty straightforward.

[00:06:42] Speaker 01:
We have the order of the court which set forth the process for the hearing on administrative claims.

[00:06:53] Speaker 01:
The administrative claim was timely filed.

[00:06:56] Speaker 01:
Notice was given to debtors council.

[00:06:58] Speaker 01:
Debtors council acknowledges that they knew about the claim.

[00:07:03] Speaker 01:
No action was taken.

[00:07:05] Speaker 01:
The administrative

[00:07:09] Speaker 01:
problem that Mr. Itzkovic refers to is that the order wasn't filed through the loose system as fast as it should have been.

[00:07:19] Speaker 01:
A lot of time did pass.

[00:07:22] Speaker 02:
It's not so much that it wasn't as fast as it should have been, but there wasn't notice of the lodgement given.

[00:07:28] Speaker 02:
Why wasn't notice of lodgement given?

[00:07:33] Speaker 01:
It wasn't done.

[00:07:34] Speaker 01:
I can't answer it.

[00:07:35] Speaker 01:
I'd like to know the answer myself, but that would probably be a problem on our end.

[00:07:40] Speaker 01:
But I think it's a problem without a distinction here because debtor and their council knew of this.

[00:07:48] Speaker 01:
They had months to take action.

[00:07:52] Speaker 01:
Prior council, Todd Arnold, who has acknowledged that he received the administrative claim and who set up the whole administrative claim process.

[00:08:02] Speaker 01:
knew about this.

[00:08:03] Speaker 01:
And this case has been troubled since the day it was filed vis-a-vis this creditor.

[00:08:11] Speaker 01:
This creditor has been abused to no end.

[00:08:15] Speaker 01:
And this is just more continuing abuse, which is why we have this entire, which is why we had the entire process.

[00:08:22] Speaker 01:
The process was the lease should have been rejected.

[00:08:26] Speaker 01:
lease wasn't rejected.

[00:08:27] Speaker 01:
The debtor wanted to use the lease beyond the rejection period.

[00:08:31] Speaker 01:
If they had timely rejected, we wouldn't be here.

[00:08:34] Speaker 01:
The issues that are a challenge under the administrative claim would never have triggered.

[00:08:41] Speaker 01:
So it's the debtor who basically set all of this up.

[00:08:45] Speaker 01:
And then the liquidating trustee comes in and says, oh no, we're surprised by this.

[00:08:50] Speaker 01:
And we shouldn't have to pay an agreed upon administrative claim that was the subject of, which was the subject of a lot of litigation and the subject of a essentially settlement by virtue of a stipulation.

[00:09:10] Speaker 01:
Creditor did everything it was required to do.

[00:09:14] Speaker 01:
The other was on notice liquidating trustee comes in much later and says, oh, no, this isn't correct.

[00:09:21] Speaker 01:
I think it's all pretty simple from on the procedural aspect.

[00:09:25] Speaker 01:
I think that the court got that the trial judge had it right on as to whether or not this is the timeliness of the.

[00:09:33] Speaker 01:
timeliness.

[00:09:35] Speaker 01:
This is not a 59D motion to alter or amend judgment.

[00:09:41] Speaker 01:
It's something different.

[00:09:43] Speaker 01:
They're seeking relief from a final judgment under 60B.

[00:09:47] Speaker 02:
You know, I have to confess, you both use the term the LUE system, and I'm not familiar with that.

[00:09:52] Speaker 02:
Can you tell me what that means, where it comes from?

[00:09:54] Speaker 01:
Yes, that's the lodge or in the

[00:09:59] Speaker 01:
Central district, there's a 9, there's a requirement that we upload, um, proposed judgments via the, uh, via a lodgement, um, as opposed to the general filing.

[00:10:10] Speaker 01:
And I think we lodge using, um.

[00:10:13] Speaker 01:
Word copies instead of PDFs.

[00:10:16] Speaker 01:
Oh, I see.

[00:10:17] Speaker 02:
So it goes sort of outside of CMECF.

[00:10:19] Speaker 01:
It's a separate... It's part of CMECF, but it's just a different branch, if you will, as I understand it.

[00:10:31] Speaker 02:
Do the notices of lodgement end up on the main case docket or are they maintained someplace else?

[00:10:36] Speaker 02:
Do you know?

[00:10:37] Speaker 01:
I would really have to look at it.

[00:10:42] Speaker 01:
To double check, but as far as I, I can, as far as I know, um, at least Todd Arnold should have received notice of this debtors council.

[00:10:54] Speaker 01:
And let me and there was, there was no attempt to hide this from debtors council.

[00:11:01] Speaker 01:
Or, you know, the debtor, this was really, uh, just.

[00:11:05] Speaker 01:
Trying to finish something up where.

[00:11:10] Speaker 01:
or liquidating trustee to set their own rules.

[00:11:15] Speaker 01:
And now they're complaining that they've been, you know, posted on their own petards, so to speak.

[00:11:21] Speaker 01:
This was their request that they, and the burden fell strictly upon the debtor to file a motion and challenge.

[00:11:30] Speaker 01:
And we've already established that they knew about it.

[00:11:33] Speaker 01:
So it is pretty straightforward.

[00:11:36] Speaker 01:
I believe that the trial court was absolutely right in its ruling.

[00:11:42] Speaker 01:
If we want, I don't know if the court is inclined to delve into anything more, or if we're only going to address the procedural aspects, because there's two aspects to the appeal.

[00:11:56] Speaker 01:
The first is whether or not it was set on 14 days notice.

[00:12:02] Speaker 01:
And the second question is the submission of the communications between the debtor

[00:12:11] Speaker 01:
Between the debtors council and my office, and I don't know if we need to address that.

[00:12:15] Speaker 01:
I think we briefed it.

[00:12:17] Speaker 01:
I think that.

[00:12:19] Speaker 01:
That will far away takes care of it.

[00:12:22] Speaker 01:
We're not submitting it for the truth of the matter asserted.

[00:12:25] Speaker 01:
It just goes to whether or not there was notice.

[00:12:28] Speaker 01:
So the communication itself is immaterial.

[00:12:31] Speaker 01:
And I think the court, the trial court was correct in that also.

[00:12:34] Speaker 01:
It's been briefed.

[00:12:36] Speaker 01:
And I do believe that this appeal, in my estimation, is bordering on frivolous.

[00:12:43] Speaker 04:
Yeah, counsel, let me pick that up then.

[00:12:45] Speaker 04:
Because the problem with the claim bar notice is it imposes is don't set any matter for hearing.

[00:12:55] Speaker 04:
It doesn't really go into when the objection is due.

[00:12:58] Speaker 04:
And it doesn't really address when the order should be entered.

[00:13:02] Speaker 04:
Does it?

[00:13:04] Speaker 01:
I would say that it doesn't set a time, but I think that it required everybody to act expeditiously.

[00:13:13] Speaker 04:
Where is that imposed?

[00:13:14] Speaker 04:
Is that rule, statute, order?

[00:13:17] Speaker 04:
Where do we find that?

[00:13:19] Speaker 01:
I don't think you're going to find it except for common practice imposes upon attorneys

[00:13:26] Speaker 01:
a requirement that we act and not let something stick.

[00:13:31] Speaker 04:
Part of my problem is the other side of the coin to your argument that this is simple and they could have said it.

[00:13:40] Speaker 04:
The other side of it is you could have set fordager order prior to confirmation, apparently, and never had to deal with.

[00:13:51] Speaker 04:
Why wasn't it filed much earlier?

[00:13:57] Speaker 04:
And when should it happen?

[00:14:01] Speaker 01:
It should have been filed earlier.

[00:14:05] Speaker 01:
It would have been much better if it had been filed earlier.

[00:14:07] Speaker 01:
And I don't know that it would change anything.

[00:14:10] Speaker 01:
It kind of does though, doesn't it?

[00:14:12] Speaker 04:
Because I think from hearing your argument, you're arguing that the liquidating trustee is bound in a complete overlap to the debtor.

[00:14:22] Speaker 04:
And that's not quite true though, is it?

[00:14:24] Speaker 01:
I'm not sure that it's quite true, but the liquidating trustee was on notice of the court's bar dates.

[00:14:33] Speaker 01:
They tried to suggest in their papers that we blew the bar date.

[00:14:37] Speaker 01:
The liquidating trustee makes no mention of the stipulation on the bar date in any of their moving papers until

[00:14:46] Speaker 01:
Until much later on, and really in this in this hearing.

[00:14:50] Speaker 01:
And they didn't even cited in their original moving papers that were filed with the court.

[00:14:56] Speaker 01:
At some point, I think the problem with what the debtor set up.

[00:15:02] Speaker 01:
Is this was the debtors own request and we were.

[00:15:08] Speaker 01:
We followed the court order that said.

[00:15:11] Speaker 01:
If there's no obligate, if they don't oppose, then it's deemed admitted.

[00:15:18] Speaker 04:
Isn't there something inherently problematic with the structure?

[00:15:22] Speaker 04:
I mean, it says don't do anything until you try to work it out and then set it on.

[00:15:30] Speaker 04:
But it never gives the rest of the story.

[00:15:32] Speaker 04:
It never says the objection and the conclusion.

[00:15:36] Speaker 04:
Within such time, then file a certificate of no objection or whatever is the local rule there to say that's unopposed.

[00:15:43] Speaker 01:
Well, I don't know that there is anything.

[00:15:45] Speaker 01:
And again, all we have to work off of is the courts or is the proposal from... I think we have to come back to the fact that this was a

[00:15:55] Speaker 01:
This was a methodology laid out by the debtor.

[00:16:00] Speaker 01:
This was not the court's order.

[00:16:01] Speaker 01:
This was done by stipulation or by request of the debtor.

[00:16:06] Speaker 01:
The debtor set up their own procedure and debtors council sends one email saying, well, we want to apply the letter of credit.

[00:16:21] Speaker 01:
They never take any action.

[00:16:24] Speaker 01:
By the way, the stipulation for the turnover order

[00:16:32] Speaker 01:
was heavily contested as I pointed out.

[00:16:36] Speaker 01:
So there was no surprise as to what the administrative claim was, debtors council was well aware of it.

[00:16:46] Speaker 01:
If there's gonna be fault, it's at debtors council for not filing a motion and for letting this sit out there.

[00:16:54] Speaker 01:
Now, Mr. Iskowitz and his firm and the liquidating trustee certainly came along much later, but by then,

[00:17:01] Speaker 01:
You know, the horse was out of the barn.

[00:17:03] Speaker 01:
I'm sorry.

[00:17:03] Speaker 03:
And I, well, are you, are you, I hear what you're saying.

[00:17:06] Speaker 03:
Are you suggesting that somewhere out there in practice or we should come up with a rule that after X months, it's just late?

[00:17:14] Speaker 03:
And that's kind of what I hear you saying.

[00:17:16] Speaker 01:
No, I wouldn't, I would never be that bold to say that, but maybe you need to be.

[00:17:22] Speaker 01:
So think about it.

[00:17:24] Speaker 01:
It was, well, let me, I will respond in this way.

[00:17:29] Speaker 01:
If there was such a rule, it would certainly it would certainly be beneficial to everybody not to have an open ended procedure like this, because everybody would know what the rules were.

[00:17:41] Speaker 03:
It's really it could be based on like the time prejudice.

[00:17:44] Speaker 03:
I don't think that's the case here necessarily.

[00:17:46] Speaker 03:
You know, you could base it on other things.

[00:17:48] Speaker 01:
I. I'm just I'm just a practitioner.

[00:17:52] Speaker 01:
I know I try to stay away from some of those more lofty

[00:17:57] Speaker 01:
Concerns that that when when was the when was the order presented to the court.

[00:18:02] Speaker 03:
Do you remember?

[00:18:04] Speaker 03:
The original order.

[00:18:05] Speaker 01:
Yeah, well, the order the order allowing your claim the judges inbox for a few months or did no actually the judge turned it in a couple of days.

[00:18:13] Speaker 01:
Okay, that I can tell that I can.

[00:18:15] Speaker 01:
Okay.

[00:18:16] Speaker 01:
Is that is that in the record?

[00:18:18] Speaker 01:
I can't tell you, I can represent to this court though that the lodged order was submitted on approximately the 9th of November in 2024.

[00:18:29] Speaker 02:
You know, thanks to the miracles of modern technology, my law clerk has sent me some provisions from the local rules and the central guide.

[00:18:39] Speaker 02:
And there is a provision in the central guide that describes the lose system.

[00:18:43] Speaker 02:
And it says, among other things, a proposed order or judgment must be served on other parties only when parties filed an opposition to the motion or other request or in other certain other circumstances.

[00:18:56] Speaker 02:
If these conditions do not exist, there is no reason to serve the proposed order before lodging it with the court.

[00:19:03] Speaker 02:
Now, I think Mr. Iskowitz is going to say, well, that's that's all well and good, but

[00:19:07] Speaker 02:
there's no deadline to file an objection.

[00:19:09] Speaker 02:
So it doesn't really solve the question.

[00:19:11] Speaker 02:
I think my point is that it doesn't seem to me that the local rules, the Lue system local rules really help much on the specific case in this problem in this case.

[00:19:24] Speaker 01:
And of course, Your Honor, I would say that they help a lot because under the provision provided to you by your clerk,

[00:19:31] Speaker 01:
we adhered because there was no, we didn't have anything pending.

[00:19:36] Speaker 01:
The stipulation, again, put the burden on the debtor to take action.

[00:19:47] Speaker 01:
And when they didn't, all we were required to do was to upload the order.

[00:19:52] Speaker 02:
Let me put it this way.

[00:19:53] Speaker 02:
Suppose you'd uploaded the order the day after you filed the request.

[00:19:59] Speaker 02:
That'd be a problem, right?

[00:20:02] Speaker 01:
I would have to believe that it would be, Your Honor.

[00:20:06] Speaker 02:
So there has to be some opportunity for this meet and confer process kind of played by the order to play out, right?

[00:20:12] Speaker 01:
But in this case, sure, but in this case, it occurred.

[00:20:16] Speaker 01:
I mean, we know that because there was communications.

[00:20:20] Speaker 03:
I don't want to get too deeply into the weeks here, but the way I read those communications wasn't there at least an open question about something wasn't the communication, not just the letter of credit, but we've got some questions about 2 aspects of this.

[00:20:35] Speaker 01:
There were, unfortunately, it's not in the record, but there were oral discussions, and there were oral discussions for months between my office and Mr. Arnold regarding this.

[00:20:49] Speaker 01:
What suggests it wasn't a result?

[00:20:52] Speaker 01:
The resolution was the stipulation that said that anything, all the expenses would be paid.

[00:21:00] Speaker 01:
Unfortunately, again, debtors council set this up.

[00:21:03] Speaker 03:
Okay, then let me give you more precisely my question.

[00:21:06] Speaker 03:
Maybe I have the timeline wrong here.

[00:21:08] Speaker 03:
The way I read it was the claim gets filed and then I thought there was a communication which I thought you referenced

[00:21:14] Speaker 03:
which you make reference to the letter of credit.

[00:21:17] Speaker 03:
I thought that communication also said, we're not so sure about a couple of these categories.

[00:21:21] Speaker 03:
Is that fair or not?

[00:21:22] Speaker 01:
I think that's a fair, I do believe that that is.

[00:21:24] Speaker 03:
Okay, and then we don't know what happened after that.

[00:21:25] Speaker 03:
I mean, it doesn't sound like that's resolved.

[00:21:28] Speaker 01:
The resolution was that they, my time's burning down, but the resolution was that they- Didn't follow the objective.

[00:21:37] Speaker 01:
Basically by going silent, they decided from my point of view, by not taking action when they were on notice,

[00:21:45] Speaker 01:
they made an election not to challenge.

[00:21:48] Speaker 01:
Now, granted, the liquidating trustee walks into this, but by the time, as I said, by the time the liquidating trustee gets there, it's pretty much, it's already, the time has already passed from our point of view because,

[00:22:09] Speaker 01:
It was on the debtors council to challenge this.

[00:22:11] Speaker 01:
And I know, I understand that the panel's a little bit troubled by this, but we were happy, but I would have happily brought a motion if we needed to.

[00:22:22] Speaker 01:
Unfortunately, we were not in a position to do that.

[00:22:25] Speaker 01:
That was the debtors burden by its own rules.

[00:22:29] Speaker 02:
Okay.

[00:22:29] Speaker 02:
All right.

[00:22:29] Speaker 02:
Thank you.

[00:22:30] Speaker 02:
You've gone through your time.

[00:22:31] Speaker 02:
Thank you very much.

[00:22:33] Speaker 02:
Let's go back to Mr. Iskowitz.

[00:22:36] Speaker 02:
I think you've heard, well, go ahead.

[00:22:38] Speaker 00:
You've got about nine minutes.

[00:22:40] Speaker 00:
Yeah, no, as you can imagine, I have a couple of points to make.

[00:22:46] Speaker 00:
I just want to start on a couple of things.

[00:22:49] Speaker 00:
Judge Harris, I think you made a good point that the Lew system doesn't necessarily answer the question here.

[00:22:59] Speaker 00:
and doesn't really let us know whether notice was required because it doesn't tell us where the status of the claim was.

[00:23:04] Speaker 00:
But as Judge Lafferty pointed out, if you look at the record, the last communication we have in the written record is the January 23rd email correspondence where opposing counsel, Mr. Snyder says, I'll get back to you.

[00:23:15] Speaker 00:
Let me talk to my client.

[00:23:18] Speaker 00:
Which does not suggest to us as counsels to liquidate and trustee that there is an impasse that requires the setting of a hearing.

[00:23:24] Speaker 00:
We were not at the point where-

[00:23:27] Speaker 04:
I agree with Mr. Steiner.

[00:23:29] Speaker 04:
At some point, common sense has to... So it sits in stasis, and 10 years down the line, it's still out there.

[00:23:39] Speaker 04:
That can't be the case, and 10 years turns into 10 months.

[00:23:43] Speaker 04:
I mean, there is a reasonable aspect of this, isn't there?

[00:23:46] Speaker 00:
You're absolutely right, Your Honor.

[00:23:47] Speaker 00:
And as you pointed out, there is no deadline here to object, and there was no deadline to come.

[00:23:52] Speaker 04:
That's debtor's call.

[00:23:53] Speaker 04:
I mean, of course.

[00:23:54] Speaker 04:
The other one is that you file your application, you just set it for hearing, and there's a deadline for objection.

[00:23:59] Speaker 04:
The debtor chose not to do that, and it wasn't like this was the first thing that happened upon the liquidating trustee's appointment.

[00:24:08] Speaker 04:
I mean, there was several months played out.

[00:24:10] Speaker 00:
That's absolutely true.

[00:24:11] Speaker 00:
We did take some time to review all the admin claims.

[00:24:13] Speaker 00:
As I noted, the state was insolvent and so we didn't feel we were in a position to object to anybody or pay anybody until we had our arms around all the claims.

[00:24:23] Speaker 00:
I do think there is a reasonableness limit to

[00:24:26] Speaker 00:
how long a claim can sit there before a claimant is paid, before a creditor gets paid, but I don't think that this, in this case, we were pushing so far up against the limit of reasonableness that it made sense for us to anticipate this.

[00:24:39] Speaker 04:
Does the judge implicitly disagree with that?

[00:24:42] Speaker 00:
I'm not sure that she did.

[00:24:44] Speaker 00:
I will take a look.

[00:24:45] Speaker 00:
That's not my recollection that she, I mean, I guess the fact that she issued it, but she issued it.

[00:24:48] Speaker 00:
You didn't say that, I don't think, but isn't that kind of the necessary inference for what she did?

[00:24:52] Speaker 00:
But she didn't issue the orders to respond to her.

[00:24:55] Speaker 00:
I mean, she

[00:24:56] Speaker 00:
as we have discovered, she issued it in response to a lodged proposal.

[00:24:59] Speaker 04:
That's not how things generally work.

[00:25:01] Speaker 04:
I mean, you have to get, but something has to trigger it for us as bankruptcy judges, eventually, you've got other things to deal with.

[00:25:09] Speaker 03:
Can I ask you a slightly different question that's now bugging me?

[00:25:14] Speaker 03:
Of course.

[00:25:15] Speaker 03:
Like Judge Sparrows, I just took advantage of my second screen here.

[00:25:18] Speaker 03:
The appellate briefs are blessedly short.

[00:25:23] Speaker 03:
And one thing I noticed is that the lodgement argument that you're making now first occurs in your reply brief.

[00:25:30] Speaker 03:
It's not in your opening brief.

[00:25:31] Speaker 03:
If you think there's any significance to that or if you recall what it was in the responsive brief that caused you to bring up the lodgement issue for the first time in the reply, I'd be grateful for Miller.

[00:25:43] Speaker 00:
I mean, I think one answer to that is that I'm not always a bankruptcy practitioner.

[00:25:49] Speaker 00:
I have a fairly varied practice.

[00:25:51] Speaker 00:
And so I was getting immersed in the record and the case as I was drafting.

[00:25:58] Speaker 00:
But I think the other is that as we sort of peeled the layers of the onion here and discovered some of the issues, we realized that there was a failure to notify not only on the fact that they were seeking

[00:26:10] Speaker 00:
Action on their claim, but also that they had they had we sort of occurred to me and to us that they had there must have been a triggering event.

[00:26:17] Speaker 00:
There must have been a proposed order filed, which we realized was not filed via the loose system.

[00:26:22] Speaker 03:
Well, I mean, look, you may not be able to answer this, but was there something in particular in the responsive brief that reminded you, oh, gosh, yeah, this is an issue?

[00:26:31] Speaker 03:
Because it's just nowhere in your opening break.

[00:26:33] Speaker 00:
Yeah, not that I recall, but I will try to look briefly.

[00:26:35] Speaker 00:
A couple of other points I wanted to touch on.

[00:26:38] Speaker 00:
I think that it is important briefly to get into the merits of the claim.

[00:26:41] Speaker 00:
I know that I

[00:26:43] Speaker 00:
Declined to do so at the beginning, but you know, Mr. Schneider did raise some points.

[00:26:48] Speaker 00:
There is a significant dispute as to the value and the appropriateness of pre-elected administrative claim.

[00:26:55] Speaker 00:
And in particular, as he alluded to, there's a half a million dollar letter of credit that they applied to their general unsecured claim and not to their admin claim.

[00:27:04] Speaker 00:
Which is a significant chunk of their payment that they're seeking that we don't think was appropriately applied to their non priority claims and should be applied to their admin claim, which would significantly reduce the value of that claim and therefore provide additional resources for other creditors and other admin creditors.

[00:27:25] Speaker 00:
That's a pretty important point that

[00:27:27] Speaker 00:
Was not fully discussed, was fully briefed on the motion to reconsider, but was not fully discussed because there was no hearing on the on the request for allowance and payment.

[00:27:38] Speaker 00:
So, you know, that is an important issue that we think should be kicked back to the bankruptcy court so that there can be a full and fair hearing on whether that is an appropriate amount of that admin claim.

[00:27:47] Speaker 00:
And Mr. Snyder does point out that the parties reached an agreement by stipulation to resolve some of the issues.

[00:27:53] Speaker 00:
That stipulation does not include the amount of the claim to be paid.

[00:27:57] Speaker 00:
It states that it is rent and other costs to be paid through the end date, so through the rejection date and the date that the debtors vacated the premises.

[00:28:06] Speaker 00:
we don't agree that the amount in the claim is the amount of costs up through the end date as stipulated by the parties.

[00:28:14] Speaker 00:
So that is another material issue that needs to be heard at a hearing.

[00:28:17] Speaker 00:
And that's the proration of the insurance issue, is that what you're alluding to there?

[00:28:20] Speaker 00:
Exactly.

[00:28:20] Speaker 02:
But didn't the landlord pay the full amount of the insurance prior to the end date?

[00:28:25] Speaker 00:
But under Ninth Circuit law, the accrual rule applies.

[00:28:29] Speaker 00:
And so what was accrued for the 16 days of January

[00:28:33] Speaker 00:
that the debtor held the premises is one small percentage of the annual, whether or not it was paid.

[00:28:39] Speaker 02:
That even includes an out-of-pocket expense that the landlord incurred without any evidence that the landlord could get a return premium back from the insurer to whom it paid that premium?

[00:28:50] Speaker 00:
They need to pay that premium for that property regardless.

[00:28:52] Speaker 00:
And the flip side of that- Maybe they don't.

[00:28:55] Speaker 00:
We don't know whether they carry the same insurance that the lease requires.

[00:28:59] Speaker 00:
The flip side of that coin is that they also profited from rent paid by stipulation by the debtors while they held the premises, which they would not have benefited from had we not been in possession.

[00:29:09] Speaker 00:
So I don't think that you can take the one without the other.

[00:29:15] Speaker 00:
And to answer your question earlier, I can't remember who asked the question, but the notice of lodgement orders are filed essentially via UCF.

[00:29:22] Speaker 00:
I think it's a slightly different system, but the partners received the same notice via email.

[00:29:26] Speaker 00:
So we would have received it.

[00:29:30] Speaker 02:
I think that system, we don't have it.

[00:29:32] Speaker 02:
The central district has these very well thought out processes and we're a little more informal than that.

[00:29:37] Speaker 02:
In my court anyway, the reason for that whole process is to make sure that the order conforms to what the court did, you know, what the motion reflects and what the court ruled on that motion.

[00:29:48] Speaker 02:
It's not meant to trigger an opportunity to object or argue again.

[00:29:52] Speaker 02:
I mean, it's all about the form of the order, not about whether there should be an order or should be the motion granted at all.

[00:30:00] Speaker 02:
I mean, isn't that normally the case in the lodgement process?

[00:30:07] Speaker 00:
Yes, but the fact that a proposed order had been lodged would have given us notice that that 1 of the creditors was moving forward in a way that the others were not and would have expedited our review as we as the liquid interestee to make sure that we were reviewing all the claims and objecting to those that we didn't think should be paid.

[00:30:23] Speaker 00:
I know I'm running short on time.

[00:30:25] Speaker 00:
I just want to end.

[00:30:26] Speaker 00:
I think is an important point, which is again, the lack of prejudice, right?

[00:30:29] Speaker 00:
If.

[00:30:30] Speaker 00:
If this court vacates the bankruptcy courts, denial of motion to reconsider and and remand this back to the bankruptcy court with orders to.

[00:30:40] Speaker 00:
Grant the order of reconsideration and either order a hearing on great place claim or do nothing and allow us to file objections to great place claim as would be the normal course of business.

[00:30:52] Speaker 00:
Grateful Egg will have an opportunity to make their case on the merits as to whether they are entitled to payment on all of their admin claim, that the stipulation language covers the full value of the claim, and that this is an appropriate payment.

[00:31:04] Speaker 00:
And if they are correct, they will be paid 100 cents on the dollar of their claim.

[00:31:09] Speaker 00:
There is funding in the estate to pay all the admin claims, including this one.

[00:31:13] Speaker 00:
And there will be no prejudice, aside from Mr. Snyder's time, to that process.

[00:31:18] Speaker 00:
If the bankruptcy court does not vacate the motion to reconsider,

[00:31:22] Speaker 00:
or the order denying motion to reconsider, then the amount of the claim that should not have been paid will be removed from the estate and no longer available to pay other creditors.

[00:31:34] Speaker 02:
Okay.

[00:31:34] Speaker 02:
All right.

[00:31:34] Speaker 02:
Thank you very much.

[00:31:35] Speaker 02:
You're exactly at the end of your time point.

[00:31:37] Speaker 02:
So thank you for that.

[00:31:39] Speaker 02:
The matter is submitted.

[00:31:41] Speaker 01:
Thank you, Your Honor.