[00:00:11] Speaker 02:
The next case for argument is 13-5110, ground improvement versus United States.

[00:00:48] Speaker 03:
Your Honor, I'm appearing on behalf of Ground Improvement Techniques and MK Ferguson Company for the use and benefit of Ground Improvement Techniques.

[00:00:58] Speaker 03:
On January 13, 2009, after 14 years of litigation, a second modified amended judgment was rendered in favor of Ground Improvement Techniques.

[00:01:10] Speaker 03:
It was not rendered in favor of any secured creditors.

[00:01:13] Speaker 03:
It was not rendered in favor of any other parties.

[00:01:16] Speaker 03:
It has never been transferred.

[00:01:17] Speaker 03:
It has never been assigned.

[00:01:19] Speaker 03:
That second modified amended judgment, which is in the appendix at 309, is in favor of ground improvement techniques.

[00:01:27] Speaker 03:
It was not, the claims, the benefits were not transferred from Ground Improvement Techniques eight years earlier during the course of its bankruptcy proceedings.

[00:01:39] Speaker 03:
It remained, those claims remained in Ground Improvement Techniques.

[00:01:42] Speaker 03:
They were never assigned, they were never transferred.

[00:01:45] Speaker 03:
GIT as the debtor in possession of those claims pursuant to its bankruptcy.

[00:01:51] Speaker 02:
Is all of this based on, I mean, so look at 8479 and this is the order clarified.

[00:01:57] Speaker 02:
And it doesn't say that the second parties have the option of signing.

[00:02:07] Speaker 02:
Secure parties have the option of having directing the debtor to assign it, or they have the option to continue prosecution in GIT's name in lieu of an assignment.

[00:02:17] Speaker 02:
So are you suggesting that you remain the debtor in interest because they didn't do it and they continued to prosecute?

[00:02:25] Speaker 02:
You're construing that last sentence to mean you retained your rights?

[00:02:28] Speaker 03:
That's correct, Your Honor.

[00:02:29] Speaker 03:
If you look at the second line of that order, it identifies the debtor in possession, ground improvement techniques, ink.

[00:02:37] Speaker 03:
They were the debtor in possession.

[00:02:38] Speaker 03:
They were identified in the plan at paragraph 1.24 as ground improvement techniques, a debtor in possession, pursuant to the plan.

[00:02:47] Speaker 03:
The plan initially envisioned an assignment, GIT will assign, which was then superseded by this order of clarifying, modifying the confirmed plan, that again, this is five and a half months after the confirmation of the plan,

[00:03:04] Speaker 03:
identifies GIT as continuing to be a debtor in possession, ground improvement techniques.

[00:03:11] Speaker 03:
And there has been no transfer either in 2001.

[00:03:15] Speaker 02:
I'm looking at the last sentence and just trying to understand how you can construe that in a way other than the government, I think, maintained to construe it, which is the secure parties are in control, right?

[00:03:26] Speaker 02:
They can make the choice.

[00:03:27] Speaker 02:
It's their discretion.

[00:03:28] Speaker 02:
They can direct the debtor to a sign.

[00:03:31] Speaker 02:
the claim or, if their option, meaning the option of the secured parties, they can continue to prosecute the case, i.e.

[00:03:40] Speaker 02:
the secured parties continue to prosecute the case, in GIT's name in lieu of an assignment.

[00:03:45] Speaker 03:
Well, but it's not that they continue to prosecute the case.

[00:03:50] Speaker 03:
It's in lieu of an assignment.

[00:03:51] Speaker 03:
So there's no transfer because the plan envisioned a transfer of the interest.

[00:03:57] Speaker 02:
So it says, at their option, continue prosecution of the case.

[00:04:00] Speaker 02:
Who's their option?

[00:04:03] Speaker 03:
Well, it's the option of the secured parties, but in this situation, the secured parties are not the ones pursuing the case.

[00:04:13] Speaker 03:
It's the debtor in possession, GIT.

[00:04:17] Speaker 02:
Well, it's in GIT's name, and that's what this says.

[00:04:20] Speaker 03:
Well, it's not just in GIT's name, it's a GIT continuing the prosecution of the case.

[00:04:27] Speaker 03:
Now they have the option of acting as GIT, but that was never done in this case.

[00:04:33] Speaker 03:
There was no assignment, there was no direction.

[00:04:35] Speaker 03:
GIT continued to pursue the case, continues to pursue the case to this date.

[00:04:42] Speaker 03:
Well, that's the rub here.

[00:04:45] Speaker 03:
Yeah, that's the rub.

[00:04:46] Speaker 03:
They don't want to comply with the bankruptcy plan that GIT has.

[00:04:50] Speaker 05:
The bankruptcy plan doesn't require that you do it.

[00:04:52] Speaker 05:
It says that secured creditors can make a decision as to which to do.

[00:04:58] Speaker 03:
As the debtor in possession, we have that fiduciary obligation to pursue and complete the plan.

[00:05:05] Speaker 03:
And we owe that to the secured creditors.

[00:05:07] Speaker 03:
We owe that to the unsecured creditors.

[00:05:10] Speaker 03:
We're the ones pursuing this case and have.

[00:05:13] Speaker 03:
We've been through five different federal forums pursuing this case.

[00:05:17] Speaker 03:
It hasn't been the secured creditors.

[00:05:19] Speaker 03:
The secured creditors haven't paid to have this case prosecuted.

[00:05:23] Speaker 03:
It's been GIT.

[00:05:25] Speaker 03:
And GIT is continuing to pursue this case.

[00:05:28] Speaker 03:
The only reason that the secured creditors even stepped up and got involved here is because the Court of Federal Claims, I think, incorrectly ruled that we're not a real party in interest.

[00:05:40] Speaker 05:
What about Huff and Kinghorn?

[00:05:42] Speaker 05:
Didn't they agree in the litigation agreement that this litigation would be controlled by the secured creditors holding whatever it is, 70% of the total interest?

[00:05:56] Speaker 03:
Yeah, that was an agreement between the creditors, but it didn't even involve GIT.

[00:06:03] Speaker 05:
Well, I'm putting aside GIT because Huff and Kinghorn are complaining that they should have been allowed to intervene under Rule 19 or whatever.

[00:06:13] Speaker 05:
They have an interest in this, but they don't have an interest in joining this litigation, do they?

[00:06:18] Speaker 03:
Well, not as enjoining what they did.

[00:06:21] Speaker 03:
If you take the with the Court of Federal Claims did and say the secured creditors now own the claim, which we contend they do not.

[00:06:31] Speaker 03:
If it's the secured creditors that own the claim, then Huss and Kinghorn

[00:06:35] Speaker 03:
have equal authority as do the other secured creditors, as each standing is the other secured creditors.

[00:06:41] Speaker 05:
Doesn't the agreements to which they were signatories, right?

[00:06:46] Speaker 05:
Right.

[00:06:47] Speaker 05:
Say that the litigation's gonna be managed by the secured creditors representing 70% or whatever it is of the claim.

[00:06:54] Speaker 03:
That's true, but it doesn't mean that they're without interest, where they could ratify

[00:07:00] Speaker 03:
GIT and MK to continue to pursue their interests because they have an interest and they should be permitted to have that interest represented by GIT and MK pursuant to Rule 20 or Rule 19 as a joiner to protect those interests because those interests are greater than the ones that currently and well-paid secure creditors have left in this case.

[00:07:26] Speaker 03:
I mean, they have no interest in pursuing this case or continuing this case because their only interest is for themselves.

[00:07:35] Speaker 03:
They have no duty, as GIT does as a debtor in possession, to maximize the recovery.

[00:07:41] Speaker 03:
The Nevada Bankruptcy Court authorized and directed GIT to seek recovery against the government in order to maximize the recovery against the government, which these secured creditors

[00:07:55] Speaker 03:
don't care whether it's maximized, contrary to the requirements of the GIT Bankruptcy Court and contrary to the objectives of the MK Bankruptcy Court.

[00:08:07] Speaker 03:
GIT is the only one that has that emphasis to go forward and maximize the recovery, and that should be permitted, and the interests of Keenhorn and Huff

[00:08:17] Speaker 03:
are greater than the interest of the future creditors.

[00:08:20] Speaker 03:
They want to maximize the recovery and their interest to do so under Rule 20 and Rule 19 should be recognized.

[00:08:28] Speaker 03:
And they ratified GIT to continue on as a plaintiff and to continue on if you take the position that the court of federal claims took

[00:08:37] Speaker 02:
that GIT isn't even a real party in interest?

[00:08:39] Speaker 02:
Well, are you going to get any share, is it your view that GIT could get, personally get share of any money judgments that might come your way?

[00:08:48] Speaker 03:
It's a possibility that it could, but they would have to succeed to recover more than what their secured claims are currently.

[00:08:56] Speaker 03:
They would have to have an excess amount of funds recovered beyond what their secured claims requirements are and beyond what the secured party's claims are.

[00:09:05] Speaker 03:
There's no question

[00:09:07] Speaker 03:
that GIT is going to recover more than what the secured party points are at this point in time.

[00:09:13] Speaker 03:
It's whether GIT can recover more.

[00:09:16] Speaker 05:
Why do you say that?

[00:09:17] Speaker 05:
Why is there no question?

[00:09:19] Speaker 03:
Because the amount of the claim exceeds the amount of what the secured party points are.

[00:09:27] Speaker 03:
Well, the claim at this point in time has already been adjudicated against MK.

[00:09:32] Speaker 03:
The only question is whether the government... That's true, but one portion of the claim has already been adjudicated against the United States in that Civilian Board of Contract Appeals case in which the government was found under a summary judgment liable for the $7.8 million that had already been paid to JIT from the bonding company.

[00:09:55] Speaker 03:
And MK brought that claim in the Civilian Board of Contract Appeals and succeeded on a summary judgment there.

[00:10:02] Speaker 03:
So that $7.8 million arises out of the same judgment that we're seeking the unsatisfied portion of.

[00:10:09] Speaker 03:
And there's no reason why the government would be responsible for the $7.8 million, but not the remaining $9.8 million plus accruing interest.

[00:10:18] Speaker 03:
There's just no reason why there would be a difference there.

[00:10:22] Speaker 03:
So GIT's claim should have been allowed to be ratified by Kinghorn and Huff if the court was going to take the position that GIT has no interest.

[00:10:33] Speaker 03:
And we don't agree with that at all.

[00:10:35] Speaker 03:
GIT has always had an interest and has always been the priority prosecuting its case.

[00:10:40] Speaker 03:
and continues to do so.

[00:10:42] Speaker 03:
That judgment is in the name of GIT.

[00:10:44] Speaker 03:
It doesn't say anywhere in it that it's GIT for the benefit of secured creditors or GIT for any of it.

[00:10:51] Speaker 03:
It's GIT as a debtor in possession pursuant to this order here.

[00:10:55] Speaker 03:
And it was stipulated, if you look at the stipulation at the time GIT recovered the 7.8 million on March 25th of 2009, this is the 8617.

[00:11:07] Speaker 03:
All of those

[00:11:08] Speaker 03:
creditor party stipulated that it would quote g i t judgment but the g a but the funds were distributed among those creditors in in the name of g i t and the predator g i t interest was recognized in their g i t received a hundred and thirty thousand dollars under the agreement of the party the g i t would seek full recovery or maximum recovery of the judgment

[00:11:37] Speaker 03:
They received $130,000 for that agreed to by all of these creditors.

[00:11:43] Speaker 03:
And now they come in because of the errant ruling of the Court of Federal Claims that GIT didn't even have an interest.

[00:11:51] Speaker 03:
If they didn't have an interest, why was the money being distributed by GIT?

[00:11:57] Speaker 03:
It's GIT's judgment funds.

[00:11:59] Speaker 03:
It's always been GIT's judgment funds.

[00:12:01] Speaker 03:
If you look at that speculation, GIT received far more than the $125,000 for its unsecured creditors that was set forth in that agreement.

[00:12:11] Speaker 03:
There was, I don't know that figure, but it was over a million dollars that was received by GIT to be dispersed, and GIT was funded to continue the litigation to full recovery or maximum recovery of the judgment, and continues to this day to do so.

[00:12:31] Speaker 03:
I mean, we received the judgment.

[00:12:33] Speaker 03:
We go to the Nevada Bankruptcy Judge.

[00:12:36] Speaker 03:
We got a ruling that says that we weren't entitled to recover interest.

[00:12:41] Speaker 03:
We took that up on appeal.

[00:12:42] Speaker 03:
The district court reversed.

[00:12:43] Speaker 03:
The Ninth Circuit has affirmed that GIT is entitled to recover interest against the government as well as the principal.

[00:12:50] Speaker 03:
And so the Nevada Bankruptcy Court authorized and directed GIT to pursue this case against the government

[00:12:58] Speaker 03:
in MK Ferguson's name for the use and benefit of GIT as a sponsored claim.

[00:13:03] Speaker 03:
And how would we not have real party and interest standing if we're complying with a bankruptcy court order that's directing and authorizing us to act against the government?

[00:13:17] Speaker 03:
We are the ones that have standing.

[00:13:20] Speaker 03:
Just on that alone, it would give us standing.

[00:13:23] Speaker 03:
We haven't lost anything.

[00:13:25] Speaker 03:
The bankruptcy court recognized that GIT, as a debtor in possession, I quoted in our brief, had a fiduciary duty to recover a complete amount of that for the benefit of creditors.

[00:13:41] Speaker 03:
And those creditors include these three secured creditors that are attempting to take the case, as well as the others, which includes Kinghorne Huss and the unsecured creditors.

[00:13:51] Speaker 03:
And to the extent that there is a recovery, which is a

[00:13:55] Speaker 03:
real possibility that all secured creditors would be paid off and all claims are satisfied?

[00:14:03] Speaker 03:
Including the unsecured creditors?

[00:14:04] Speaker 01:
Including, yes.

[00:14:06] Speaker 01:
Do you think there's a realistic problem?

[00:14:07] Speaker 01:
Absolutely, Your Honor.

[00:14:09] Speaker 01:
That the unsecured creditors will all be satisfied in full and there will still be a residue?

[00:14:15] Speaker 03:
I do believe that because of the length of time this case has been pending.

[00:14:18] Speaker 03:
This is the 20th year

[00:14:20] Speaker 03:
that this case has been pending.

[00:14:21] Speaker 03:
And right now, the amount of interest on it is accrued, I think the case is now worth right around $15 million.

[00:14:30] Speaker 05:
What is the amount of unsatisfied claims of unsecured credit?

[00:14:36] Speaker 03:
I don't really know that figure precisely, Your Honor.

[00:14:39] Speaker 05:
And how can you say that it will be more than that?

[00:14:41] Speaker 03:
Well, because it wasn't that much to begin with.

[00:14:45] Speaker 03:
It wasn't really that much to begin with.

[00:14:48] Speaker 05:
I mean, we don't know.

[00:14:54] Speaker 03:
I know that the claims are far less than what we expect to be recovering in this case.

[00:15:01] Speaker 02:
I'd like to reserve that.

[00:15:02] Speaker 02:
Well, but you point on the interest.

[00:15:03] Speaker 02:
I mean, if this is money that's owed to the secured and the unsecured creditors, and there's been a pile of interest piling up on that money, that's not extra money that can go to you all.

[00:15:12] Speaker 02:
That's money that would go to the secured and the unsecured creditors, right?

[00:15:16] Speaker 03:
Well, no, because the bankruptcy plan didn't provide that they would get interest.

[00:15:20] Speaker 03:
And for the same reason that

[00:15:24] Speaker 03:
MK doesn't have to pay interest to us, and we only get it against the government, would be why GIT wouldn't have any right to interest.

[00:15:32] Speaker 05:
So there were excess funds over and above the creditor claims that would go to the former equity helpers, right?

[00:15:38] Speaker 03:
That's correct.

[00:15:40] Speaker 03:
Including Mr. Kingwater.

[00:15:42] Speaker 02:
Will we store two minutes of rebuttal?

[00:15:51] Speaker 02:
Thank you.

[00:15:52] Speaker 02:
Thank you, Ragnar.

[00:15:53] Speaker 04:
Thank you.

[00:15:54] Speaker 04:
Good morning, and may it please the court.

[00:15:55] Speaker 04:
The preliminary issue, I think the only issue that the court has addressed is the real party interests, so I'll focus on that.

[00:16:00] Speaker 05:
Let me tell you one concern that I have.

[00:16:03] Speaker 05:
Your brief is written as though the only interested parties here in the past to claim are the secured creditors, but there are the unsecured creditors who, under the plan of reorganization, have an interest.

[00:16:15] Speaker 05:
Who is representing the interest of the unsecured creditors in the suit against the government?

[00:16:22] Speaker 05:
Is it the secured creditors who have a fiduciary obligation toward the unsecured creditors?

[00:16:28] Speaker 05:
How is their interest being represented?

[00:16:30] Speaker 04:
Yes, Your Honor, the unsecured creditors have an interest because of, if there's any excess, there's a possibility we dispute as to whether there will be any excess.

[00:16:39] Speaker 04:
But nonetheless, that is a possibility.

[00:16:41] Speaker 04:
Mr. Barber is representing the claim generally on behalf of the unsecured creditors who have the primary interest in recovery.

[00:16:47] Speaker 05:
So the unsecured creditors who are running losses have a fiduciary obligation to maximize the recovery for the unsecured creditors

[00:16:53] Speaker 04:
Well, I don't know whether it would be a fiduciary duty, Your Honor, but it would be certainly a contract duty that, because of the... Oh, there's no contract.

[00:17:01] Speaker 05:
There's an unsecured creditors committee?

[00:17:04] Speaker 05:
Is that, there was in the bankruptcy?

[00:17:06] Speaker 04:
I'm not aware of whether there was or not, Your Honor, whether there was an unsecured creditors committee, or even how many there were.

[00:17:11] Speaker 05:
What I'm saying is, I don't understand who's representing the interests of the unsecured creditors here.

[00:17:16] Speaker 05:
Because there, in terms of whether there was a privity claim against the government, the first three counts of the complaint or any excess with respect to count four of the complaint, I just don't see who's representing the interests of the unsecured creditors here.

[00:17:33] Speaker 04:
Well, the secured creditors, Your Honor, are going to try and get whatever they can get from the federal government based on this lawsuit.

[00:17:39] Speaker 05:
The excess, then... But the question, who authorized them to represent the interests of the unsecured creditors?

[00:17:45] Speaker 04:
Well, that was all part of the agreement concerning litigation.

[00:17:48] Speaker 05:
But the unsecured creditors weren't a part of that agreement?

[00:17:51] Speaker 04:
No, but the parties to that agreement included Mr. Kinghorn, who is the CEO of GIT, who we understand is being offered to somebody that does have an interest in protecting the unsecured creditors.

[00:18:03] Speaker 04:
Why?

[00:18:04] Speaker 04:
Well, that's the argument that Mr. Schooley is making this afternoon, is that they have that interest.

[00:18:10] Speaker 04:
And that if that is in fact the case, that there is a fiduciary duty there, then him standing in and making that agreement would then be protection.

[00:18:18] Speaker 04:
I don't understand that.

[00:18:19] Speaker 05:
I mean, it really seems to me that this whole proceeding sort of ignored the interests of the unsecured creditors.

[00:18:26] Speaker 05:
And I understand the argument that GIT has nothing to do with this.

[00:18:31] Speaker 05:
They're not a debtor in possession anymore.

[00:18:32] Speaker 05:
But it seems to me that a party here is not represented.

[00:18:38] Speaker 05:
They're not a party to the litigation agreement.

[00:18:41] Speaker 05:
They didn't agree to have the secured creditors represent them.

[00:18:44] Speaker 05:
The bankruptcy

[00:18:46] Speaker 05:
planet reorganization doesn't say that the secured creditors represent the unsecured creditors.

[00:18:51] Speaker 05:
It simply says that the excess goes to the unsecured creditors.

[00:18:55] Speaker 05:
I don't understand how you can have a litigation here that's going to determine the interests of the right of recovery of the unsecured creditors without having somebody represent their interests.

[00:19:06] Speaker 04:
Well, Your Honor, there's no indication that there will be any recovery for the... Well, that's a different question.

[00:19:11] Speaker 05:
There seems to be a dispute about that.

[00:19:13] Speaker 04:
Well, there certainly is.

[00:19:15] Speaker 04:
And the fact of the matter is that the secured parties are there.

[00:19:18] Speaker 04:
They have a contract agreement to resolve.

[00:19:23] Speaker 05:
Well, that's correct, Your Honor, but the way the bankruptcy plan is set up is that they had the sole right to pursue and under the... Why shouldn't somebody notify whoever represents the unsecured creditors, whether it's a committee or whatever, that this litigation is going on and their interests may be affected by it?

[00:19:40] Speaker 05:
So that if they want to participate, they can do it.

[00:19:43] Speaker 05:
Why, at a minimum, shouldn't that be done?

[00:19:46] Speaker 04:
Well, I don't know whether it needs to be done, Your Honor, because the secured creditors have the right to pursue this claim.

[00:19:51] Speaker 05:
They have the right to pursue the claim, but there's nothing that says that they're representing the interests of the unsecured creditors.

[00:19:59] Speaker 05:
I mean, I'm not sure that they would want to undertake a fiduciary obligation to the unsecured creditors.

[00:20:03] Speaker 04:
No, Your Honor, I think at most they have a contractual duty, but that whatever does get recovered will have to go to them, regardless.

[00:20:09] Speaker 04:
And they would have a right of action against the secured creditors if they're dissatisfied with the portion of the judgment, assuming there is excess.

[00:20:16] Speaker 01:
But the secured creditors bail out on the litigation as soon as they've collected whatever is due to them.

[00:20:21] Speaker 01:
There won't be any judgment.

[00:20:23] Speaker 01:
And the unsecured creditors will be left out in the courts, right?

[00:20:26] Speaker 04:
No, I don't think so, because the secured creditors, or the unsecured creditors rather, would still have a cause of action, I would assume, against the secured creditors if they choose to pursue it.

[00:20:34] Speaker 01:
What would be the basis of their cause of action?

[00:20:37] Speaker 04:
Well, they would say that you had an obligation to, based on, we had a right to the excess recovery, you denied us the excess recovery.

[00:20:46] Speaker 01:
Again, with respect to Judge Stein's question,

[00:20:48] Speaker 01:
You keep saying, well, that's not necessarily a fiduciary obligation arising in the essence of any kind of order or contract.

[00:20:55] Speaker 01:
But you say, well, it may be a contract-based obligation.

[00:20:58] Speaker 01:
What contract exactly is it that you're relying on when you say contract-based obligation?

[00:21:04] Speaker 04:
Well, I wouldn't say, and I may have misspoke, I believe if there is a contract that governs it, it would be the agreement concerning litigation, but I wouldn't confine their claims to simply a contract claim.

[00:21:15] Speaker 04:
They may very well have a tort claim against the secured parties in their conduct of the litigation.

[00:21:20] Speaker 04:
that by not pursuing it vigorously, you harmed them.

[00:21:22] Speaker 01:
There has to be a duty in order for there to be a tort.

[00:21:26] Speaker 01:
And that brings us back to, is there a fiduciary duty?

[00:21:30] Speaker 01:
You seem to be resisting the notion that there is a fiduciary duty.

[00:21:33] Speaker 01:
Some kind of duty, you're saying.

[00:21:35] Speaker 04:
Well, you're the wrong person to talk about the duty between the security and unsecured creditors, and so I don't want to represent that there is a duty, because I don't know whether either party would be willing to concede that.

[00:21:44] Speaker 04:
So that's my hesitation, is not because

[00:21:46] Speaker 04:
There is a reason of fiduciary duty, but what they can do... The problem is this.

[00:21:51] Speaker 05:
The GIT is here, and they say somebody needs to represent the interests of the unsecured creditors.

[00:21:56] Speaker 05:
And you say, well, the debtor in possession doesn't continue.

[00:21:59] Speaker 05:
You don't have an interest.

[00:22:00] Speaker 05:
You're not the one responsible.

[00:22:02] Speaker 05:
Fine.

[00:22:02] Speaker 05:
I mean, you've got a strong argument in that respect.

[00:22:05] Speaker 05:
But somebody has to represent their interest, and the question is, who is it?

[00:22:09] Speaker 05:
Well, I mean, either the secured creditors have an obligation to represent the interest of the unsecured creditors, or somebody should notify the unsecured creditors about this suit and give them the opportunity to become part of it if they wish.

[00:22:25] Speaker 04:
The question is not whether the unsecured predators are being represented or need to be represented.

[00:22:33] Speaker 04:
It's where they need to be represented.

[00:22:34] Speaker 04:
And under the rules of the court of federal claims, you only need to join parties if they are necessary to the resolution of the claims at hand.

[00:22:43] Speaker 04:
And those parties are not necessary for that purpose.

[00:22:45] Speaker 04:
And so we can have this case go forward on the Court of Federal Claims.

[00:22:49] Speaker 05:
Yeah, I don't agree with your suggestion that people with a contingent interest don't have a right to be joined under Rule 19.

[00:22:55] Speaker 05:
I think that's not correct.

[00:22:57] Speaker 05:
and the unsecured creditors are going to be directly affected by the outcome of this case.

[00:23:05] Speaker 05:
So somebody, just as a matter of due process, ought to provide notice to them that this is going on and that they have a right to come in if they wish.

[00:23:14] Speaker 05:
Maybe they say, fine, we're happy to see what the outcome is.

[00:23:19] Speaker 05:
We don't want to spend the lawyer's fees.

[00:23:20] Speaker 05:
We're happy to

[00:23:21] Speaker 05:
to see what the security creditors can come out of this, even though I have a conflict of interest, as Judge Bryson mentioned.

[00:23:28] Speaker 05:
Fine, but somebody ought to tell them that they can become part of it if they want to, so that either they're represented or they've chosen not to be represented.

[00:23:38] Speaker 04:
Well, I don't know whether that's the case, whether they've been notified or not.

[00:23:41] Speaker 04:
I can't speak to that.

[00:23:42] Speaker 04:
The government hasn't made that notification.

[00:23:44] Speaker 04:
I know that at least one of the unsecured parties is involved in this litigation through Mr. Kinghorn.

[00:23:48] Speaker 04:
But I disagree that they're a necessary party below, that I believe that it's sufficient to go forward just with the secured party.

[00:23:56] Speaker 01:
What was the provision in the original bankruptcy plan for protection of the unsecured?

[00:24:02] Speaker 04:
The original bankruptcy plan simply gave the excess.

[00:24:05] Speaker 04:
I don't know that there was a particular provision.

[00:24:09] Speaker 01:
Here's the situation.

[00:24:11] Speaker 01:
The secured creditors were specifically addressed in the original plan.

[00:24:15] Speaker 01:
And the unsecured creditors were basically left.

[00:24:18] Speaker 01:
If there's anything left over,

[00:24:20] Speaker 01:
You get it.

[00:24:22] Speaker 04:
Well, certainly with respect to this claim.

[00:24:23] Speaker 04:
I mean, with respect to each and every claim, I'm not prepared to talk.

[00:24:28] Speaker 04:
We're talking about this one.

[00:24:29] Speaker 04:
Yeah, with respect to this claim, it simply says that the remaining proceeds shall be distributed to the unsecured creditors on a pro rata basis, is what it says.

[00:24:37] Speaker 04:
And that's at 418 and 419.

[00:24:38] Speaker 02:
And it does continue to say in that paragraph that the secured creditors should have the sole discretion to enter an agreement to settle the MKKs, and such settlement should be subject to the add-on.

[00:24:48] Speaker 04:
Yes, Your Honor.

[00:24:49] Speaker 04:
I was alluding a little bit to that earlier, and that is part of the bankruptcy plan, that the secured creditors are sufficient because they have that ability to enter into a settlement.

[00:24:57] Speaker 01:
So presumably, if the unsecured creditors had been unhappy,

[00:25:00] Speaker 01:
with having the secured creditors being in complete control of the litigation, then the time to protest that would have been to protest the initial bankruptcy plan.

[00:25:11] Speaker 04:
Well, that's right, Your Honor.

[00:25:12] Speaker 04:
I mean, if there is going to be a cause of action, it would derive back to here, but the plan has already addressed that issue.

[00:25:18] Speaker 01:
Well, when you say it's already addressed that issue, what I'm saying is, if the secured creditors looked at the plan and said, whoa, we have no protection here because the secured creditors could pull up their stakes as soon as they've satisfied their needs and we get nothing as a result, if they're in complete control of the litigation.

[00:25:38] Speaker 01:
So the question would be, have the unsecured creditors forfeited their opportunity to protest their position in this case by not

[00:25:48] Speaker 01:
contesting the plan itself.

[00:25:50] Speaker 04:
I would agree with that statement of where the bankruptcy plan leaves the unsecured creditors and I believe that if there is a due process right they've had their day in court and that's been resolved.

[00:26:03] Speaker 02:
Can I go back to the question about the debtor?

[00:26:06] Speaker 02:
I mean, it is a little odd.

[00:26:07] Speaker 02:
I mean, this case was litigated for many, many, many years.

[00:26:10] Speaker 02:
And it seems like GIT was doing all the heavy lifting, pretty much independent of anything else.

[00:26:16] Speaker 02:
Is that not the circumstance?

[00:26:17] Speaker 04:
That is not the circumstance.

[00:26:19] Speaker 04:
And GIT stood up and started the beginning by saying exactly that, that the judgment in the district court was solely for GIT.

[00:26:27] Speaker 04:
But that was litigated in the district court in Colorado.

[00:26:30] Speaker 04:
And right after the bankruptcy,

[00:26:33] Speaker 04:
GIT bankruptcy, MK filed a motion.

[00:26:36] Speaker 04:
They characterized it as a motion for standing.

[00:26:38] Speaker 04:
But it was essentially the same thing we were arguing at the Court of Federal Claims, which is that the real party interest is no longer there.

[00:26:45] Speaker 04:
And the court there found the same thing that the Court of Federal Claims found here, that yes, in fact, GIT was no longer the real party in interest.

[00:26:52] Speaker 04:
And that's at A450 to 452 in the record.

[00:26:55] Speaker 04:
And what the district court in the GIT subcontract litigation found was that the secured creditors

[00:27:01] Speaker 04:
have succeeded to any and all of GIT's claims.

[00:27:05] Speaker 04:
And then it goes on to say, one of the primary features of the plan is confirmed and clarified, namely that all of GIT's interest in the MK case is assigned to the creditors.

[00:27:14] Speaker 04:
So by the time, and this is in 2002.

[00:27:16] Speaker 04:
So this is right after.

[00:27:18] Speaker 02:
I'm sorry, 2002.

[00:27:19] Speaker 04:
May 7 of 2002.

[00:27:21] Speaker 04:
So from that point on, it's now GIT and name only.

[00:27:25] Speaker 04:
And that's actually the words that the court used in that opinion, GIT and name only.

[00:27:29] Speaker 04:
It's the secured creditors that are going forward from that point on.

[00:27:33] Speaker 04:
And we see that again in the WGI bankruptcy, which was MK turned into WGI, turned into URS.

[00:27:39] Speaker 04:
And that court was addressing an issue, raises how do we deal with this claim on a going forward basis.

[00:27:47] Speaker 04:
And the bankruptcy court said, here's how I see it.

[00:27:50] Speaker 04:
GIT obtained the judgment.

[00:27:52] Speaker 04:
GIT filed chapter 11.

[00:27:54] Speaker 04:
GIT has a confirmed plan.

[00:27:56] Speaker 04:
That plan provides that the judgment is assigned to the consortium talking about the secured creditors, your client,

[00:28:02] Speaker 04:
If there are excess that goes to the unsecured creditors, GIT does not have any beneficial interest in the outcome.

[00:28:08] Speaker 04:
So over and over again, we see from 2002, that was in 2010, and again at the Court of Federal Claims last year, that GIT is involved in name only, at the real party.

[00:28:21] Speaker 05:
Your one problem is that the bankruptcy judge in the MK bankruptcy said that GIT was a debtor in possession and pursued these claims in that capacity, right?

[00:28:32] Speaker 04:
Well, the judge used that word, but it was not in the context of trying to determine who was the debtor in possession.

[00:28:38] Speaker 04:
What the bankruptcy court was struggling there with was the fact that MK would not certify the claim.

[00:28:44] Speaker 04:
MK simply didn't want to stand behind GIT's claim.

[00:28:47] Speaker 04:
And so it was struggling to find out, first order twice, MK, you've got to certify the claim.

[00:28:51] Speaker 04:
MK, like, no, we don't want to take that on.

[00:28:54] Speaker 04:
And then turned to GIT and said, OK, we'll try and let you certify the claim.

[00:28:59] Speaker 04:
The problem with that, of course, is that you've

[00:29:00] Speaker 04:
a jurisdictional problem at the Court of Federal Claims that it's got to be the contractor that certifies the claim, not the subcontractor or anybody else.

[00:29:10] Speaker 04:
And so that put a roadblock in their ability to certify the claim.

[00:29:14] Speaker 04:
But the language about debt and possession is not in connection with any ruling on who was the debtor in possession, what was GIT's role.

[00:29:22] Speaker 04:
It was simply trying to say, OK, who's left now to certify the claim since the general contractor doesn't want to stand behind it?

[00:29:33] Speaker 04:
And so for those reasons, you see it from the beginning to the end, through the plan, the plan modification, each time a court has touched this issue, GIT is not the real party in interest.

[00:29:42] Speaker 04:
The real party in interest here is the secured creditors.

[00:29:46] Speaker 02:
And for that reason...

[00:29:48] Speaker 02:
our proceeding going?

[00:29:50] Speaker 02:
Is it your view that we would need to affirm the Court of Claims on the real party of interest question and then we've got a pending motion for dismissal and then grant that and then it goes back to the Court of Claims?

[00:30:01] Speaker 04:
Yes, and then that would leave the dismissal of counts one through three standing.

[00:30:07] Speaker 04:
This court would not need to address the privity issue and then we would go forward with the issues on count four before the Court of Federal Claims that involve the secured parties as the real party in interest.

[00:30:18] Speaker 04:
Thank you.

[00:30:28] Speaker 03:
May it please the court.

[00:30:30] Speaker 03:
Well, with the question you raised, Judge Prost, with regard to what do we do with this case?

[00:30:37] Speaker 03:
It should reverse the Court of Federal Claims court and at a minimum allow the ratification of GIT and MK by Huff and Kinghorn

[00:30:48] Speaker 03:
to pursue as debtor in possession the interests of both Kinghorn and Huff and the other security creditors.

[00:30:55] Speaker 03:
At a minimum, that's what this court should allow to have happen.

[00:30:58] Speaker 03:
Otherwise, those interests will never be represented by the security creditors.

[00:31:04] Speaker 03:
The security creditors didn't even want us to bring the action in the court of federal claims.

[00:31:10] Speaker 03:
Because at the bankruptcy court, they have a trust

[00:31:14] Speaker 03:
for unsecured creditors that has an earmarked amount of money in it for GIT that more than satisfies the unsecured creditors.

[00:31:23] Speaker 03:
They had no interest in us bringing this case.

[00:31:26] Speaker 03:
The MK Bankruptcy Court had an interest in this case being brought forward because the recovery as the 10th Circuit and the 9th Circuit all ruled the obligation at the end of the day belongs to the government to pay these costs for a project that GIT did 20 years ago and the government got the benefit of.

[00:31:45] Speaker 03:
Those interests need to be represented for those people to get their recovery and Mr. Kinghorne is one of them to say that

[00:31:55] Speaker 03:
the unsecured creditors have no interest and they aren't in play any longer is just not true.

[00:32:01] Speaker 03:
I mean, Kingmore has asked for ratification of GIT and it should be granted.

[00:32:06] Speaker 03:
And with regard to the district court in Colorado with respect to the standing of GIT, the court in that case denied the motion that GIT didn't have standing.

[00:32:18] Speaker 03:
allowed GIT to continue, and GIT was ratified by the secured creditors as well as the unsecured creditor, Mr. Keenhorn, to continue the case forward.

[00:32:28] Speaker 03:
And they did, and the judgment was entered not for anybody else other than ground improvement techniques.

[00:32:33] Speaker 03:
It wasn't entered in the benefit of the secured creditors or anybody else.

[00:32:37] Speaker 01:
You're saying the secured creditors ratified GIT to continue the litigation.

[00:32:42] Speaker 01:
They, in effect, forfeited their rights to the benefits of the litigation.

[00:32:45] Speaker 01:
Is that what you're saying?

[00:32:46] Speaker 03:
Well, no.

[00:32:47] Speaker 03:
I'm saying that they allowed GIT to pursue the case.

[00:32:50] Speaker 03:
They didn't pursue the case.

[00:32:52] Speaker 03:
Right.

[00:32:52] Speaker 03:
Or pursue the case and GIT to name.

[00:32:54] Speaker 03:
They allowed GIT to continue forward.

[00:32:57] Speaker 01:
What was the consequence of that?

[00:32:58] Speaker 01:
with respect to their interests in the ultimate judgment.

[00:33:02] Speaker 03:
They continue to have a beneficial interest, which was recognized in that stipulation when the firms that were recovered were dispersed.

[00:33:11] Speaker 03:
But they didn't have any more interest than other than a beneficial interest in the recovery because GIT continued as a debtor in possession, which the MK Bankruptcy Court recognized.

[00:33:21] Speaker 03:
The GIT had a fiduciary obligation and is attempting to fulfill that fiduciary obligation.

[00:33:28] Speaker 02:
Thank you.

[00:33:28] Speaker 02:
We thank both parties in the case to submit it.