seaver who is the chapter seven trustee in the underlying bankruptcy case and the plaintiff in the underlying adversary case the trustee has appealed the bankruptcy courts determination that the defendant congress in regards to the insider statute congress is stated in its report an insider is one who has a sufficiently close relationship with the daughter that his conduct is made subject to closer scrutiny than those dealing at arm's length with the d congress and courts have picked up on two considerations for an insider relationship one being a closeness of the relationship into being the arm's length whether or not that the transaction was conducted at arm's length concerned can you talk about the significance of the transaction being at arm's length because we're not we're talking here about a payment which was some years after the transaction so even if we assume that the  transaction itself the original transaction was not an arm's length and even if we assume that that makes the defendants insiders at that time why would that mean that they're insiders at the still insiders at the time of the payment yes that's a good question thank you you're welcome i think we're looking at the transaction we're looking at it as a whole i mean the time of the payment is relevant and in this case the transaction was entered into in march of two thousand and eleven but the defendant was paid in april of two thousand and fourteen so it's just over a year from which the timing was perry we're looking at the relationship between the parties and the court did look at the facts at the time the transaction was entered into in the terms that the misclassify received in that transaction in establishing that it wasn't arm's length now the question your question being well how does that translate to the time that the payment class or entered into this transaction she became an employee of the debtor and this was shortly after the transaction centered in two she had not been an employee prior to that time not prior to the transaction so after that why we keep using the word transaction apologise no i agree not no you're fine using it because that's what the legislative history says it says that the transaction between apple e and better was not at arm's length that they got that out but what transaction is the transaction the payment i believe that that is by making a law it's part of a transaction and i don't mean to confuse it but that's consistent with it with the a circuit precedent to the limited a circuit precedent that we have and other cases as well you look at and they looked at the parties dealings before entering into their green mint and how that affected you know the ultimate payments in a case because ultimately if we're trying to establish what the relationship is between the parties is your point then that she became an insider because she was the the owner of the company or because she was an employee that had made a loan and i guess i'm not clear on that in our argument that it agreement and we are asserting that that is because of their preexisting relationship that was close enough to result in that non arm's length transaction and what part of their preexisting relationship the fact that she was an employee and expounds she even an employee at the time of the loan i do you understand and i say that and that's why argued that her becoming employee just creates one additional nexus to her becoming an insider or being an insider at the time of the payment but as an employee is there any evidence that she had any influence over what payments were made and when they were made as an employee alone know what it doesn't stablish is just another connection with the debt or the amount of contacts she worked eleven feet from the president of the company i bet but isn't the isn't that the goal here in congress didn't help very much but isn't isn't the goal here really to determine whether  a person is in a position to influence the the the the payment of of the debt or the payments of the debt or and if that's true then what evidence is there that she conduct is meant subject to closer scrutiny than those dealing at arm's length with the daughter it doesn't mention influence we can assume that if they have a close relationship there's going to be an affinity and the daughter is more likely to favor or give preferential treatment to that creditor but as an employee you know just your garden variety employee doesn't that isn't presume they have an influence that's correct and someone who had been divorced from the owner of the debtor for i think it was fifteen years isn't presume they have that influence yes so you're really relying on the original loan as is being the basis for the insider status aren't you  i'm not i rely on the loan being evidence that an insider status already existed but a close relationship between the parties already existed but isn't there also a knowledge requirement at the back with regard to payment and  there is evidence in the record one by the fact that her repayment terms were ninety days and she didn't receive repayment on this agreement for over a year she also testified that it wouldn't surprise her that if she didn't get repaid she just prove the opposite of your position she wouldn't have been surprised so how could she have exercised influence and well the problem is in this case and it does go to whether or not she can influence the timing of the payment which was an argument raised by the appellee is the daughter was very cash tight the only way anyone was going to get paid was if there was an infusion of capital into the debtor and when that infusion that happened right four million dollars came in an early april or in april of two thousand and twelve and what happened with that four million dollars and that's when the mr palmer j made the decision to pay certain categories of creditors how did she influence that decision by him to pay certain creditors well if we sto her up against other creditors in the case even insiders position to receive preferential trade treatment we can look at one the history history of transactions with mr palmer she's invested with him a number of times and they've failed  ut she had also had one success i think it was fun calander something exactly when and didn't she was it wasn't her testimony that because he had been successful before and because he was willing to pay good interest rate they wanted to make this investment i don't know if she said pick an interest rate but she did say she was saying he did have one i think she said investments but the only evidence in the record is the fungal investment which was in the early to mid ninet then she'd invested in in two other companies in the debtor and lost her money on both of those deals one of which was very recent to her investment with the daughter that would be the second swing investment were mr palmer to guarantee that loan as well and never repaid her so if he had a sketchy record of repayment isn't that a justification for only lending him money at a higher interest rate with more favorable terms it would you consideration if she'd reviewed the financials of the debt or you know well she knew she hadn't gotten paid on prior loans isn't that good enough and that's were you look at the turkoman decision or the bankruptcy court decision in re terror gone we're looking out a personal guarantee and how used by a creditor in a transaction where she hasn't reviewed the financials of the debt or she hasn't reviewed the financials of the guarantor and she's using that guarantee i mean her only expectancy is that she's creating a situation where m incentivized to repay her or her other creditors because he would otherwise be penalized and have that personal life and i switch gears on you for just a moment with respect to the first bridge loan which i think i think she was this  loan was part of the first the first series of bridge notes could you could you help me out with the record as far as which of those lenders got paid in which did  no note lender outside party that did not get repaid that is correct and then you have yes glasser who is getting repaid obviously and then there was an example set forth class or funds came in he was only repaid a portion of his loan whereas ms classrooms repaid the full amount of travelling and sight it was and he was true an insider yes and it brought this up because the bankruptcy court found that mr more poised to exert control over the debtor than miss class or whoever when the funds came in he clearly did not get repaid and she did so this was the bankruptcy court held that fact against us cutting against our position that she was receiving preferential tr treatment when that is just not a logical conclusion if she's getting payment over mr women's skirts and you know how how does that show that she doesn't have some sort of affinity or preferential treatment over mr worm scripts maybe it just shows that mr pandey didn't believe she was an insider so he was paying those folks first i don't think there's any evidence in the record that he was paying non insiders you know so help us square the  fact that the court found that there wasn't a sufficient closeness between the parties but yet the court also found that the won't itself was not  t arm's length how do those two go together short of a quick so my time is running out but that is the issue there is a clear disconnect in this case the bankruptcy courts examination of misc lasser's relationship with m was simply clouded by his focus on control the bankruptcy court stated that actually stated in a footnote that you don't need control in order to find non statutory insider status over the bankruptcy court went on to state ten times that she didn't have control over the debt or so somehow he's saying on one hand you don't need control but then using control as the element to and so what you're saying is that the nature of the relationship itself can create the status of an insider correct right and the court here specifically found that they did not have a sufficiently close relationship so i guess my question is why shouldn't that be the end of the case because we look at the transaction the actual transfer and the the  found that it was an arm's length transaction and you can't get to a non arm's length transaction without the close without having closeness right i mean that's the same argument i know but you can have closeness and have an arm's length transaction you can't have a non arm's length transaction and not have closeness that's why i'm saying the bankruptcy court committed error in finding out there wasn't closeness and examining all those factors in light of the fact that it found clearly found that it wasn't an arm's length transaction good morning your honour's oh we'll my name is alex b b i represent ms glasser the defendant in this matter and we are cross appealing merely to protect our interests in case of an adverse ruling have focused on on the core of this issue there are two aspects there's relationship and timing that we're concerned with the relationship and both of these aspects actually go to the core of why do we've advised the bankruptcy court have this extended preference period it's protect legitimate creditors from creditors who have a special relationship and would use that relationship to bypass or prefer themselves in distribution and their bankruptcy quote the bankruptcy court here found that ms glass was just simply did not have that kind of relationship she didn't have that kind of relationship throughout the entire transaction their individual findings there were additional findings particularly relevant at the time of the transfer in fact the court based its finding that there was no influence in part on the aspect that several times multiple people when she was going to paid and she stated that she was rebuffed when she made ask these questions this certainly does not indicate any sort of influence whatsoever and these are i was just going to say she had made prior loans that she had not been repaid is that correct yes that is correct and so did she become a squeaky will only after she became an employee or was she also attempting to focused on but i do not believe that the bank or the record reflects that and i guess back on this whole issue of what is the transaction i keep focusing on the transaction being the payment not the making of the loan and with that focus somewhere in your brief you say indeed the evidence shows that the classers were repaid at the same time as the other bridge note holders that there was a private placement memorandum that went out to all investors and potential investors and that specifically listed misc lasser's loan and stated that that loan would be repaid when the capital funding came in and that's typical for a bridge loan and i was that was part of the private placement memorandum for the new for the funding that came in for the bridge l i'm not completely clear exactly when that went out i believe it was definitely out for the for the funding that came in and i'm not sure exactly whether that private placement memorandum was out evidence on the record of that what it is that the court decided and how they made their determination on the arm's length aspect of things this wasn't a slam dunk arm its length fighting for one the court looked at one last of potential factors listed how those what those factors were made no analysis whatsoever and then just came to the conclusion that it was not an arm's length transaction and when the court was referring to time  was made and that was exactly and i and particularly the findings that appellant focuses on are all relevant at the time the law was entered into which was not the relevant time for for when the repayments were actually made which is what we're concerned about that's what the preference period is concerned about with regard to the transaction issue when you talk about the totality of the transaction and the note and the terms that were negotiated on the the finding that this was not an arm's length transaction whatever the transaction is is it necessary for us to find that the that that that portion of the decision was clearly erroneous no in order to affirm in our opinion it's all about the relationship was she an insider or not and that focuses on the closeness aspect and court after court after court has just looked at closely if they don't find closeness they don't even deal with the arm's length it's kind of a fail safe haven has we've extended this non statutory  insider preference period since we've extended beyond the statutory list i think courts of looked at the legislative language and and and considered that ok we're only concerned if they're both an insider and the transaction itself the repayment issue was not at arm's length if the relationship wasn't close then we really and so and so what so  i just want to share with you saying are you are you saying that the goal here is to determine closeness and then nature of the transaction whatever that is can be a factor in determining closeness but little bit more complicated but you know court after court after court i mean even the terror cone court says that you have to find closeness i mean appellate said that you can't have an arm's a non arm's length relationship without closeness and i think on the surface that might make some logical sense when you actually look at what the arm's length relationship was the non arm's length relationship was that the court that the bankruptcy court found its all concerned about stuff that happened at the beginning of  it's not concerned about what happened at the actual payment and the nature of the relationship is the important piece in the not in the non statutory insider preference period and so i mean i think that other investors that were not paid in full was that based on i mean were all of these bridge loans did they come at the same time or was repayment based on the timing of the original load or how were those decisions made is there anything that clarif that in the record or is it just that other people didn't get paid in full your honor honestly my familiarity with that aspect of things is not clear my reading of the record did not doesn't provide me any insights into that so i don't i'm not sure if that was really reflected in the record i know it was certainly was not a concern by the court and regardless of what the bankruptcy court found they certainly did not find that insider by definition is not operating at arm's length with the debtor the bankruptcy court made this determination that this was an arm's length transaction because of the parties relationship that's alternately what it comes down to  at the time of the loan exactly and miss glasser stated she testified regardless of who negotiated the loan or the terms of the loan class or stated that the loan was made as a result of her relationship with david palmer shea so they had that relationship entering into the transaction will be open isn't that true i'm sorry i'm going to use more of your time isn't isn't that true in a lot of lending relationships that aren't insiders you had you've had good results from a loan to someone previously so you make them another loan that doesn't make you an insider does it could be and that's what you have an erosion where there is a course of conduct where he's getting repaid on time with interest we don't have that here i mean she doesn't have a history and the recent history i mean in the past when she made three loans with them and one one was a big success right now that really wasn't even a loan i mean she was married to him at the time that he owned fungal land and received part of that you know the following transactions were all failures and so she came into this deal willing to give the d two hundred thousand the debt or two hundred thousand dollars without performing any due diligence whatsoever i mean that was the relationship at the time that the transaction was entered into and as i argued before if anything the relationship only became closer as  proceeded to the actual payment date i mean nothing changes no intervening incidents that changed from that time to when she was paid the relationship only became closer as a result of her becoming employee of the daughter and therefore we say that the