good morning your owners peter habilis on behalf of the palin try excessive management here i like to see yours i'd like to start with a few a few basic observations here first there is no case law that says indentures trump other agreements you have to look at the agreements one and made its ruling based on one sentence in the middle of sub kara graf b of section twelve point one and its interpretation is it based exclusively on that on the ground that that provision is specific and everything else is general and nothing else can be looked at in determining the manner in which everything else say that it's subject to more specific provisions actually no your honor and that's the point that i want to get you going to the text of the provisions if you go through the text first line right you get you are the issue we do not on this issue we're not questioning whether or not there is an obligation to sell the question this is kind of in the middle of the boilerplate doesn't mean it is no no no that my focus is on paragraphs a paragraph a because try x unlike the note holders that withdrew their appeal do you not does not take the position that there is not an obligation to sell the issue is made the collateral manager exercise its  judgment in accordance with the standard of care set forth in section two way reasonable and the commercially reasonable in terms of the manner in which this is so we have never that's interesting because you do have this twelve point one b says the collateral manager shall use commercially reasonable efforts to sell yes did they use commercially reasonable efforts to sell that they use any efforts to sell your art or their record that happens here is that in the summer of two thousand fourteen fifteen tri x begin the process of getting ready to sell the securities a pretty notice after being reached out by trial and there after other notes holders complained that they were they should not sell because it would violate duties tri x consulted with the trustee there was going to then be discussions amongst all the no holders and the trustee commenced this into peter action in the course we're here to decide whether that what what their obligation was the issue that we've raised on appeal your honor is whether the commercial because the collateral manager may exercise its judgment in the best way to sell these her argument is they can use their reasonable commercially reasonable judgment to decide not to sell at all no that's not really that is not the position tri x takes in this appeal your honor we made that clear both before the district court in our briefs we did not say there's no duty to sell what we have said is that the collateral manager needs to be able to exercise its judgment to be able to for instance to make sure that the prices are not sold for an absurdly low value that's below its intrinsic value to be able to interpretation is that after the three years the kalat where the collateral manager must sell at the collateral managers should be given the discretion determine the best way to achieve its duties that are specifically only corporates going beyond the three year period  exactly absolutely is we're talking about after the three year period because before the three year period it's discrete it's discretionary does not have to sell anything before the three year period if it chooses not to so we are for sure talking about the post three year period  to it's discretionary beyond the three period three year period because there are certain factors that limit that discretion but it can be exercised beyond the three or four yes and in the yes and that's because of the ambiguity created by the provisions and here's the problem with the analysis that we have by the district court about this being specific in trucking the others if you start with section two a in the collateral management agreement which appears  page three ninety of the appendix it specifically says incorporates language that says that this section applies to the sale of securities under article twelve article twelve is where section twelve point one appears and in that section it them precisely provides its very specific duty of care section two b of the collateral management agreement specifically then goes on to say that the studio  all the performance of the obligations under the operating agreements which includes both with the collateral management agreement and the indenture is subject to the duty of care and section two a that duty of care imposes a much greater standard on the collateral manager than what the district courts at the district court basically except the notion that the work commercially reasonable and twelve point one b means choosing what day of the week you can sell it on and beyond that there is no judgment that can be exercised and the reality is if that provision stood in isolation that might be that might be the only interpretation of the agreement but here there is ambiguity because to a specifically says it applies trial when it talks about it it drops the first roman at from that clause into b which says the standard of care set forth in section two way or point here is sure there is impurities because these agreements clash in terms of what is the extent of the commercially reasonable judgment and the standard of care to protect all note holders that the collateral managers to exercise in selling these securities for instance under the district court's analysis if i had three bids they came in and offered using the pricing for bonds of zero to one hundred five when there is an intrinsic value of sixty or seventy if i was the highest bid i would have to sell that even though that wipes out and destroys the interest of all the no holders and clearly would not be consistent with the standard of care that nationally recognized that is lateral issue really in this case i thought the issue in this case was that the  collateral manager when you're asking quote all managed to do is to make a judgment as to whether the actual market value is not a good time to sell we should sell some other time  the principle issue we raised before the district court was the ability to use reserve prices to make sure that we weren't selling to people who were coming in and bidding below the intrinsic value of the securities and district court said we couldn't do that just sell the securit and so it came down to how we exercise our here and the problem is this i will not argue with how you can stew the one sentence and twelve in some paragraph b but that's not the issue the issue is when you read these two agreements to gether as you must because they are integrated they're right places through slitter through both agreements that make these one integrated document they were signed the same time can you say that that now reading of sub para one sentence and sub bonafide the issue is not collusion here what is the problem the problem is your honor because these securities had substantial value imbedded in them because of the security of the settlements that had been agreed to but not yet publicly announced because it was still subject to confidentiality orders the collateral major was able to look at in value what the impact of those dollar values were to the securities in question just like you've seen after the fact was some of the rating agencies that have changed the ratings of some of these securities that have publicly now benefited from the securities this information is not necessarily available to the market they can't disclose it yet because it's subject to confidentiality order so they can do some intrinsic value ation when these securities were sold in after the it's as we point out in our brief it stores the record but the collateral manager believe that they were selling it for probably ten or fifteen fifteen basis points below what the intrinsic i was in forfeiting the litigation recoveries that went with those securities because they try they stayed with the securities they were partitioned off and so whoever bought those securities were to get the benefit of that litigation recovery that was not in the collateral damages mind after the fact was not priced in it but the order was not stay by this court we had to sell we couldn't take that into account and we that evidence is not in for the district court of this court so i don't want to that's open ended that's the kind of argument as to what commercially reasonable efforts to  sound would be under the context of sections two a into b of the collateral management agreement absolutely your honor because and that's the problem the issue here is not for us because the district court never reached the question of what is commercially and the question here is not what's the right way to sell the securities today that's an issue from the fact finder the question is is there any ambiguity in these contracts that prevented the district court from saying the one sentence in sub paragraph b overro it please the court jonathan picard from quinn emanuel urquhart and sullivan on behalf of the f l e south try on l l c your honour's the manager in this case in fact did not take any efforts to not commercially reasonable or otherwise  to try to sell assets prior to them reaching their three year anniversary under the being defaulted securities and we agree that the issue here is whether the contract unambiguous requires that assets be sold within that three year period this is the fourth time that a court is considering the arguments that are being raised here the court below judge poly found the contract to be unambiguous  in his summary judgment order he denied a motion to stay pending appeal and a three judge panel of this court also just denied a stay pending appeal as well the district court correctly ruled that the architecture under this agreement is clear and unambiguous section twelve point one of the indenture includes two relevant provisions twelve point one a includes a number of sup provisions that direct when securities may be sold and when securities shall be sold twelve point one a two says that securities shall be sold when they are defaulted prior to their third year contains no commercially reasonable portion to that to that provision it says unambiguously that they shall be sold within three years the purpose of the three year limitation with the purpose of the three year limitation is that this transaction was originally created to hold highly rated prime r m b s it was not set up as a transaction that was supposed to be investing in distressed securities so when securities become distressed through as a number of different ways that they can be considered a defaulted security in order to protect the senior investors in the transaction my clients are senior investors it requires that the manager not hold on to those securities thus turning this into a distressed investment but has a period of time in which they must be sold in the district court properly found that that was a protection for the senior investors in this structure now section twelve point one b then sets forth when twelve point one a says securities must be sold how they must be sold and it says that in that section that the manager shall use commercially reasonable efforts to sell pursu laid out in the indenture in fact there was a bid list that was put out for for those securities they were you know shopped out to at least three approved dealers so they went out to a broad enough market place there was at least at least five days given so what is the result of the ongoing litigation over the over those underwriting standards standards not being applied to the trenches that were involved here on the sale of the forty nine securities your honor some of those litigations that actually ben dismissed and the litigations that are out there are known they are known by sophisticated investors in this marketplace as your honour's are all certainly aware there has been a lot of litigation over r and b s securities the notion that there is some intrinsic value that that takes into account litigation recoveries that bidders in the marketplace don't know about is simply a fallacy there certainly is nothing in this record to suggest that there are that bidders in this bid on the r b s when they when they are auctioned they will take into account what the anticipated cash flows are in that security and if they are going to be a beneficiary of litigation recoveries they can take that into account as well in making their b and no one has raised a complaint subsequent to these forty nine assets being sold that somehow an unfair price was obtained in fact this is how it works every day these c d o structures exist and there are provisions under the c d o structures where assets get sold out of the portfolio when they are sold they get sold pursuant to an auction process the indentures can you include certain terms related to what must be done in that auction process and then there are other aspects of the auction process that are left to the discretion of the manager to exercise their their their their good standards of care as set forth in the collateral management agreement like here as well as the expectation that they would be commercially reasonable one example is you would certainly not expected to be commercially reasonable that the manager would set one of these sales to occur on christmas day the contract doesn't say that but that would be the type of application where they couldn't do that because that would not be commercially reasonable but there is nothing to suggest here that the commercially reasonable standard allows them to override the express in clear and unambiguous requirements b explicitly provides that the issuer shall sell such defaulted security to the highest bidder it sets it sets it very clearly and look when investors these are sophisticated investors who are investing in these securities they invest understanding what the terms are pursuant to which how defaulted securities will be handled you know if the sense says you should use commercially reasonable efforts but then sets out a fairly specific procedure for once to take was that that's exactly right your honor and what is being argued here is that if you have a commercially reasonable standard in a contract that that essentially provides the contracting party carte blanc to come in and say well i'm going to decide that it's not commercially reasonable therefore i am not subject to the express strictures of the agreement and that is exactly what the court rejected in the in the good hill case in that instance that was a case where bank came in and argued that because they considered to be commercially unreasonable that they didn't have to perform certain calculations based upon a particular report and the court there called it leisure germane to argue that you can take one provision that says you have to act or mercial reasonable and use that to override your clear and unambiguous and express obligations i also would like to know your honor that the argument was made that section twelve section two a of the collateral management agreement expressly acknowledges that it applies to section twelve point one what section two a actually says is that the collateral manager agrees in this is on j a three ninety the actually says the collateral manager agrees to direct the sale terminations or assignment of collateral debt securities in equities equity securities in accordance with article twelve of the indenture it doesn't say suggest you have some standard of care that gets to override those provisions down towards the bottom of that same section it says the collateral manager shall perform its duties here under which includes what you just referenced selling under well articled well and like size reasonable care a commercially reasonable manner consistent with practices and procedures followed by institutional managers that's that is that is correct your honor but the provision also in the end sentence after that says the collateral manager shall comply in all material respects with all of the terms and conditions of the indenture so just right so your hear is this is another one of those general provisions that says in general you have to act more fully reasonably and doing everything but it's rather specific that you have to comply with the terms of the indenture that's that's absolutely right your honor and certainly this court's precedent in error monye and capital ventures and there are plenty of other cases that you know that control here with respect to specific provisions governing general provisions and there's no colorable argument here that this is not a more specific provision in the in the indenture when it talks about the sale of defaulted securities and when those sales must must occur then the  agreement that describe a general requirements to to apply certain state you know levels of standard of care in the collateral managers duties overall unless your arms have any further questions i'll wrap up the let me make a number of quick points in my time for you first with respect to all of what we heard about and what investors knew and how the sale was conducted there is no evidence that trying ever put in the record in this the only evidence that's in the record is on pages seven forty and forty three of the record from mr kalam mary's affidavit in which he says that collateral damage or consulted with other professionals including the firm it hired to sell these securities and they were told they should put in the reserve price so that is consistent with the notion of the industry standard of care here and that evidence was never ribeye that everything you heard from mr pickard was his testimony that's not one place in the record secondly getting now to section two way your honor picked up a portion of the language but tellingly what mr card omitted when he quoted the first sentence section two way of the collateral management agreement on page three ninety one is the introductory clause that qualified the whole thing which said subject to and in accordance with the terms of the indenture in this agreement it show sell securities under article twelve and then it goes on to talk about not subject to the indenture and the sec the checks to judge whole read but it said subject to the operating agreement and if you look at the top of page three ninety operating agreements are defined to include both the collateral management agreement and the indenture the reality is unlike an era monye where the court was looking at it sidled up at the very beginning saying where as where the court said that's a general vague preparatory statement of parties which is an intense we're dealing with a specific operative contract provision and the only issue on this appeal is are the terms that the court has to wrestle with is not what was really commercially reasonable but whether these terms are ambiguous as to what's the scope of the commercially reasonable judgement the standard of care to be exercised by the construe commercially reasonable can that clash be resolved as a matter of law the answer we respectfully submit is no because the standard of care which mr kalam area this affidavit talks about what they did consulting with other professionals says how's the best way to deal with this and reserve prices is the best way let me just deal with the last point before my time expires the settlements yes everyone knows about settlements but the amount the dollar amount is going to flow to the security until they are publicly announced is not known in most of these settlements is mr keller mary said in his dec affidavit are still confidential and the numbers have not been disclosed only one settlement was publicly disclosed because it was after a hearing before the state supreme court under article seventy seven and that was the bank of america settlement everything else is subject to confidentiality agreements until the monies are distributed and publicly disclosed in accordance with the terms of confidentiality orders that's why i reserve prices according to the professionals to which is tri x referred are within the exercise of judgment if you apply section two way and that's why we have to say