that that's a bad thing and in and of itself your honor i don't think there is anything wrong with that i think in fact in many circumstances there's actually nothing wrong with borrowing money for the benefit of third party here however the case is very different because of the surrounding circumstances  surrounding circumstances for fraudulent transfer claims being the debtors intent and for purposes the eating in it that he claims is being preferred banks additional knowledge for the purposes of the debtors intent which is all that matters the purpose the actual intent project transfer party to wrongdoing wrongdoing which amounts to fraud although as you noted it could delay that your allegations are all about fraud and yet your assertion is it doesn't matter what they knew or didn't know if i you confusing me and i hope i hope i don't go off track here but doesn't this all depend upon collapsing the transactions into one no your honor it doesn't end there in the reason the reason the bankruptcy court saying that you are playing it's claims rests upon collapsing the transactions our actual intent is to be inferred from also stances when you're looking at the intent and borrowing money you have to love this whole business about collapsing the transaction is a red herring no you know your honor it's an alternative theory to the extent that a court is not allowed to look beyond the intent in borrowing money with these the proces that was your theory right ye is a theory an alternative we are very explicit in the reason below that we say that actual intent is established regardless of collapsing and the alternative why loves why would you worry about collapsing the transactions is that clear incurring an obligation you're not allowed to look beyond the actual fact that money was transferred to s b c's bank how our position as a debtor doesn't borrow money to just sit in the bank account and you're ascertaining all of the surrounding circumstances as you know is long in comes in because then what collapsing would do it would shift the focus from the intent incurring the obligation to the intent in making the transfer of kind of shift the focus to the colon factions intent which is the debtors intent for purposes of t rests in our in our belief knowledge of the economic reality knowledge of the total structure of the transaction should be enough this is consistent with a policy balance struck by congress and in acting the problem transfer laws and which protection of the  and i'm not sure what the voice in that quite sure who you say case name we're the language seems to say you do have to have knowledge on the part of that third party in order to put them on the hook in a class transaction you're on i think that the key question there is knowledge of what our position is that if you have if your knowledge of the underlying substance of the transaction which i think is clearly esta pleadings especially drawing all the inference is in our favorite pleading stage that every party here including prefer bank knew that the money was going to poland so the question then becomes why why should you treat the transaction is something different when everyone knows that it's a transaction d the banks also feel the place claims ok read that pretty fast sorry but i'm sure you've thought about that well if everybody's involved with this including silver point who certainly had an interest fashionable finding as to other matters outside the pleadings as to what these other parties that or do not know short court can take you dish will notice of what is disclosed but to take a step beyond that and say ok i'm going to find these parties must have known that enough itself is  and the thirty third point your honor is that a bank as i just prefer bank is in a unique position to see information that the other party is dealing with his company that thirty thousand foot level were not specifically preferred bank is providing trust they actually do have that knowledge and the reason i will give me an it ball tuam least something to hang my hat on if i were to agree with you what do you have other than a conclusion reallocation being you that shows they knew detail how amendment after amendment after amendment takes place because that you trust receive financing limits going up in the in the reason as we allege in paragraph sixty six in the sixty nine of our complaint is on each individual transaction they're not making the obligation to the bank ok the bank that obligation to the bank is secured by the underlying underlying collateral so they're seeing on a no by no basis that the collateral is not being repaid they have a whole bunch of those the you kept lending to us and so it's your fault that we got deeper and deeper and if you hadn't been so bad to lend to us we could be gotten this far in the red is the gist of the complaint no no your honor i don't think we're saying th actual aiding and abetting claim itself and the delaware of law applies to whether or not there is a breach so it's whether or not you knew of actual conduct is the term by california law whether or not there is actual conduct as a term of by delaware i want this it is somewhat of a strange we no problem have you to answer questions we have argued in our briefing that delaware law flies based on the fact that it is a matter of internal affairs that fishery duties is governed by delaware law because these are delaware corporations doesn't really matter too much because if you look to california law you then find the financial code provisions that the bankruptcy court relied on to determine that the bank could not have liability for aiding and abetting without pleading actually construct all that disagree with the fact that if properly pled there could be an aiding and abetting case our position is that the financial code protects the bank from aiding and abetting unless you can plea the type of knowledge that's required for many of the other causes again the takeaway point from my standpoint is that it doesn't matter which law you apply because if you apply california law and you have the chasen case and the casey case which was cited in the briefing if you applied delaware law they cited a case called hospitals of delaware  that we were asking mr yoder that is sort of what i take it is the trusts first line of argument which is you know i have to worry about collapsing you have to worry about knowledge knowledge is relevant only the debtors knowledge is what matters here my response that would be is that is an argument that under five forty eight a the bankruptcy code says that if a debtor transfers assets with the actual intent to hinder delay or provide the fraud that the trust trust can avoid that transfer that's certainly what the statute says they played that in one place in their complaint in the actual paragraph dealing with the cow and all other places where they plead in their complaint actual intent they plead the actual intent of the colon action they don't actually plead the intent of the debtor so they've made a leap and arguments in their briefing that the colon factions intent is equal to the debtors and but if you look at the actual cleanings in the complaint they also talk about innocent decision makers who were unaware of what was happening and they talk about in january of two thousand and eight after a merger there was an independent board member appointed mr raeburn from f b i consulting and that he had no knowledge of this going on so i'm not sure that under it well in tuam way they've actually satisfy the pleading standard that the debtor intended to do these things then does it matter that there are other corporate officers who didn't know what well i think it does on the face of these pleadings i think that they on page sixteen of their reply brief cite to several where they talk about the that corporations don't have intent only their officers and directors do they cite in these cases they talk about the intent of officers and directors but from my review of those cases all of the officers and directors who were involved in fraud here on the face of the pleadings they're drawing a line between the cohen faction and the innocent decision even if they call them that's not good that's that's a new one on the i'm not aware of any law maybe you could say to me where you have to have all the potential agents of a corporation on the same page in order to have a corporation bound by what happened i mean if you've got controlling agents of the corporation whose intent is to do bad things and and that's and they have alleged that about the so called colon faction why isn't that enough to say under the bankruptcy code this of intent to hinder delay or defraud which is sufficient under the code well your honor i think you didn't go into the question that judgment asked yes about collapsing the the w the obligation between the debtor and the bank to borrow money under loan documents doesn't and it doesn't on its face express an intent to defraud there are more steps in that transaction according to their allegations we have to you're saying that collapsing these essential here yes i'm suggesting that in order for essentially what h b leasing says is is that when you have an apparent first step in a series of transactions that's valid on its face would normally be actually fraudulent would normally be constructively fraudulent it's a matter of equity a court can look at that and say well there are other steps in this transaction and if collapse together i can find that intent and so well then what's what's there to point out the flaw in their theory because they're saying miners stand a briefing mr yoder is argument they're saying we don't really sure we put collapse collapsing out there  true but it's only an alternative under the bankruptcy code it's a nuff for us to plead that the debtor had an intent to hinder or delay or fraud and we have pled out through the bad actions of the colon faction so you don't have to get to collapse in the transaction for the purposes of those pieces of your complaint what's wrong with that assertion the law that works the flaw in that argument is that when a bank loans money to a corporation and actually gives money and takes a lien in exchange there's nothing inherent in that transaction that's from happens every day in order to get to the point where that transaction becomes actually fraudulent there has to be additional intent in the debtors mine that leads to that and the way you get there is through collapsing because you've got to get to there the transaction the transaction the second transaction what they do with the money is is  that it was going to be used to pay the dividends and so without that knowledge may not be liable and and h b leasing then relies on taber for its statement that in order to take what is apparently an otherwise valid transfer between a bank and a borrower you have to find this heightened knowledge level actual knowledge or constructive and of the fraud fraud didn't we just say you had to know about the transactions bankruptcy court reach a determination that it's more likely than not that the that the plaintiff could recover on their action right and what i'm saying then on top of that is that applying h p leasing there leasing followed taber and even so i'd learned from it if they really quote it from the wrong part however they were they were quoting from an area where we were talking about something else thing i don't have are i don't know the case well enough to be able to argue the point with you but my view is that the is that the second circuit relied on that and created this standard that courts follow all across the country in tax five forty eight ok if i understand the trust's musician correctly there that's their first approach and their first approach is forget about collapsing you know you have to get to that five forty eight is plane on its face if the debtor has an intent to hinder delay or differ on then that's anough to avoid the transaction it now they can speak for themselves but my articulating their position the way you understand it to be yes ok what if that's true just assume for the sake of discussion for a moment that that's true do you agree that that would make collapsing irrelevant because the intent of the debtor here is alleged to be to delay hinder the fraud through the actions of senior officers of s b c and syntax before i have a hard time conceding that i can understand why you're asking the question the way you're asking and i think my response would be that  there's and that ok and and what judge shannon found here in the bankruptcy court started with the bankruptcy court found is that based on the complaint as pled and i don't mess with that in the record that he could take additional notice of there were there was not a plausible basis to allege that the bank should be liable for an actually fraudulent transfer well that's and that's the question i guess i'm having the hardest time with it  strikes me that it's a hard thing to say that the bank is on the hook here what does it mean to avoid a transaction in this context i think what they would say it means is that the obligations were never valid in so that when we were repaid those obligations we received money that we should keep them i've actually been asking myself that question for several days what happens if they succeed as your honor pointed out silver point it's in the complaint came in and took out those obligations and presumably thought that they were valid obligations when they took out the prior lender so i don't know what happens if you say that those obligations were invalid in the first place because then we don't have valid obligations and so the obligations that silver point created also wouldn't be valid and so now you have kind of least tripping chain of invalidating transfers all the way to i don't know where that gets you and you'd be required to repay the principal interest they misuse under under section five fifty they've pledged that we would be able to but as mr yoder pointed out in five forty eight there is a good faith defense that if we could prove that we acted in good faith and value we would have a lien on the on that to secure ourselves so we would potentially net that out and we wouldn't have to pay anything back and what and what would how would as a practical matter how would silver figure into this silver point comes in a third party no allegations of wrongdoing or involvement by them in any form or fashion they become the lender what's the fallout to them if suddenly you guys are on the hook anything i see my time is up and i'm happy to answer questions you know i have to be honest with you i've had a hard time answering that question i don't know if if you  reverse today and you send this back down we never answered the complaint we have in the sort of counter claims you know i don't know where the case goes from here and what they're involved in is i can tell you that they are on the on the oversight board for the trust and have a financial interest in the outcome of the lawsuit i suspect that that would be vigorously contested and there would be lots of issues with that but it's a hard very hard question thanks very much it is an unusual circumstance in which money advanced by a bank goes directly to our our bank account if the money going straight to the lender there'd be you know that anybody would be this potential argument collapsing is really a way of kind of again as an alternative the extent that a court is putting on the guys how you got to a clean preferred bank is on the hook and it seems you know fundamentally i'll confess really i'm not a bankruptcy code expert but it seems passing strange to me that you've got a claim for what amounts to fraud against somebody you say has you know that their intent is actually irrelevant you know you say forty eight what they know doesn't make any difference at all now make them give us a bunch of money how does that work it's from a defense comes in your honor and essentially it's a balance that was struck in the structure of the code where void answers from the debtors perspective in the debtor's perspective alone once a transfer an obligation is avoided then the defendant has the have come to that conclusion judge judge very very knowledgeable thoughtful bankruptcy judge how to be how did he get it in his mind that this was a case all about collapsing of the discussion below seems to be about collapsing i'm not really sure on our cause in our brief we specifically raise the argument before we even get to collapse and here's the reasons why we should win before you get to collaps and again i think fundamentally and to just not draw all the inference is in our favor this is the pleading stage we've alleged pages after pages of pages supporting already what he's trying to recover by this last one is that we're paid to the bank and to avoid these obligations yes if we succeed in avoiding the obligations and the recovery would be the amount of the obligations and again it's important focus on just a few of the transactions that are really at issue we're not contesting all the obligations in the four party factoring arrangement for purposes of the deal it's the cowen secured line the any other lump sum payments that are made outside of the terms of the regular credit agreement the normal process how much money are we talking about here and i think there's thirty one million december a six fifteen million september a seven and roughly twenty eight million for the coal and secure line described in pages one twenty one one thirty three the next and where you see this working out is you should be able to argue even if even if the bankruptcy court is correct about the collapsing piece you should be able to go back and say hey under five forty eight we alleged now action by the colon insiders now let us proceed with that