good morning your honor in it please the court my name is david grace and i represent the appellant in denying cobalts motion to intervene the district court abused its discretion by making two basic errors of law the  serious was that the district court required more than a minimal showing that appaloosa would not adequately represent the interests of cobalt and the nd is that the district court mis applied the concept of prejudice when it denied the motion to intervene the most serious of these errors was that the district court require more than a minimal showing that appaloosa was let me just interject this it was so that the district court also considered the motion untimely do you  agree that it was untimely by not challenging that determination i do not your honor because the reason the district court determined that it was untimely is that it was prejudicial but the district court heard in thinking that it was prejudicial for the reasons that i had planned to address in a moment i'll be happy to was no longer able to leave cobalt on the sidelines by failing to notify the directors of the pendency of this litigation in which their interests were reversed once ochs if took an interest in cobalt it realize that the previous directors were conflicted installed on conflict twenty eight in the independence if you will happen at the latest in the summer of two thousand and seventeen and your reply brief refers to an investigation however isn't twelve c ruling a ruling on the merits and wouldn't a prudent company in the summer of two thousand and seventeen being aware at that time that it is now independent and able to intervene even though it may not be quite sure of the parameters of whether it will be able to protect its interest why did it wait from the summer of two thousand and seventeen all the wait till the end of march  to file the intervention motion after the twelve c it seems that was an awful long time and and to a twelve c being a motion on the merits they are well into the merits of the case at that and engendering a possibility at least procedurally of more of more prejudice to the existing parties now i think there are two reasons one is simply the complexity of what was required to be investigated and the other is the fact that the twelve c motion was made obviously before the beginning of discovery and i infer although i have not interviewed truck counsel that they decided that the likelihood of the twelve c motion being granted was small without discovery and that is indeed turned out to have happened and as soon as it was denied then they made their motion and it is quite unusual to make a motion that late is it not after a twelve c discovery had already begun the case had been going on for some time i don't think that much of any discovery had taken place or all right i think the purpose of the twelve c motion was to try to resolve the case without the need for discovery that failed discovery took off in earnest after  motions if the if cobalt had been allowed to intervene in it would have been able to participate in the discovery obviously if it's allowed to intervene now it's going to have to catch up on a lot of discovery that has already been taken but i would offer the court two points about that the st is that in the debate in the briefs about which arguments cobol would make if it were participating in the case cobol is at the disadvantage of having had no access to discovery materials until about a month ago and some of them are on sealed and actually two days ago one more of the ones and secondly the district court has ample power to ensure that if cobalt and its evil trial counsel participate now they do so only on issues on which appaloosas representation of their interests has truly been inadequate neither cobol nor the district court is going to be interested in proffering issues that have already been adequately put before the court but there are a lot that haven't and and upon the review of the discovery material cobol and its trial counsel are likely to find more than it helps just to follow up for a moment more on judge stance his point what investigation is needed to determine that at least a expression of interest are placeholder motion should be filed i thought the extent of the interests of your client being orders of magnitude larger secret to anybody was it the size of the holdings was no secret but as appaloosa has argued it lines it seems to think it has a plausible case for why the in its interests adequately protected cobalts and i can attest but again this into the amounts are part of the underlying theory about why appaloosa can't adequately protect your interests i would have thought also that you could have avoided substantial prejudice by filing in a timely way  because it seems to me that the the orders of the district court denying intervention largely substantially on the basis of your being protected by other litigants who have the same interest now you have a response to that that that is possible response that that could change and circumstances could change so that the persons who now appear the entities that now appear to have the same interest and protect your interests might in the future cease to cease to be so positions that they no longer adequately protect you if that happens would you not and then be in a position to go back to the district court and say now things have changed and now we are really exposed by having no one there who represents our interests if only it were so your honor the problem is that we have no way of knowing if evolution have undertaken as things are under seal no appaloosa has never undertaken to the district court that will it will look date disclosures about its holdings appaloosa trades internet we believe trades in and out of these securities fairly often but certainly we don't but nor does the district court have any idea what its holdings are and  its holdings change the risk of poor representation of cobalts interests increase we eluded to mention that in footnote six of our reply brief where interests will shift depending upon whether the distribution date is january  honor would be right if only appaloosas holdings were transparent but they're not and that is one of the major reasons why the district court heard in thinking that it represents their interests adequately the kernel of the district court's error in that respect was its assumption or its statement that the issue before it was binary that these the disputed amount was either all penalty interest or it was all gain on sale proceeds if that were true then yes it would be correct and cobalt would have only one side of that coin and obviously said c w would have the other but that is not true as the district judge recognized when the trustee petition for instructions it asked for instructions not about whether it was one or the other but how much of it was mine and how much of it was the other and once it became clear that the issue is not vinery but continuous then there opened up the possibility of manifold differences of interests and the district court's view of them was obscured by its undue fascination with the concept of the same ultimate object in litigation over half a trillion dollars between three sophisticated hedge funds everybody has the same ultimate objective which is to recover as much money as they can but that obscures the fact that that's really at that level just a platitude and at obscures the fact that below that level interest can be wildly adverse as they are here and in fact can't even say how wildly adverse there are for two reasons one as i just mentioned to your honor judge we don't know what the holdings are and the nd is we until recently have had no access to discovery materials and still have very incomplete access discovery materials so the parties are able to offer arguments based on their full knowledge of the discovered record appaloosa is able to offer arguments based on full knowledge of its holdings and cobalt is able to offer full arguments based on either one point which is the district court was apparently concerned that allowing you into the case might result in your raising things that would over complicate the case and send it into different  enter to head you and i think the answer to this is no but couldn't you have proposed to the district court and that you have access to the discovery materials even though not allowed to intervene so that you would be better aware of the possibility of of of their of of your needing your not having representation from other parties and also and but having access to discovery materials under under obligation to keep them confidential as other counsel do and also undertaking to give up any claims that you might make that that might go into the directions that the district court didn't want to to have this case complicated by well that's that's a large subset of the relief of intervention your honor and i believe that that is exactly what would happen if this court reversed now and sent the case and did permit cobol to intervene cobalt would of course have discover access to discovery materials only under the intervening that i mean shop intervention whelped but what that would not allow is for cobol to make whatever arguments if it needed make and it persuaded the district court that it needed to make i i would ask the court not to lose sight of the power of the district court to control the proceedings before it cobalt and its very able tribal council have no interest in offering arguments to the district court that ask the district court to consider arguments yes they may be prejudicial in the sense that it will be time and effort that that the current parties are required to expend for them but by definition there will be arguments that appaloosa has not previously put forth because other otherwise it wouldn't do so so the the concept of new issues being in or ject it in the case should be understood as only those new issues on which cobol believes that it hasn't been adequately represented why else would  discovery's closed expert discovery is closed we spent the summer briefing summary judgment in our august th summary judgment was full we submit it is in front of the trial court with respect to the two issues that cobalt v i'm going to refer to them as offsets is squarely in front of the court it was fully briefed by both sides whether the foreclosure judgment affected the calculation of interest is fully briefed in the motions for summary judgment and whether default interest accrues once a property becomes what's known as real estate  was fully briefed so both of the hypotheticals that would not be put before the district court are in fact squarely before the district court on summary judgment now i'd like to answer the question that you were posing why the delay well the reason we don't get an explanation for the delay is because it was purposeful and tactful there was no relationship nor is there anything in the record other than a statement in the request for judicial notice that my client in any way controlled the entity that o hijacked by replacing the directors the entity was merely a shell entity in the cayman islands which issued notes to facilitate a financing that's why we have the unfortunate overlap of names but there was no control by my client over those directors a separately a private equity fund acquired bonds and replace the directors under threat of litigation the existing directors never said that they had a conflict of interest they said that they were not adequately equipped to pursue litigation when that it when that private equity entity took over cobalt we are cobalt we are adopted in entirely different litigation plan and that litigation plan was we are entitled to half of whatever you w capital asset management and that's what the subject of the state court litigation was they wanted fifty percent of what c to be capital asset management was going to receive so they were more than happy to sit back and have us when they filed that case in december of two thousand and sixteen in federal court only when they saw that the case was going to be dismissed and that defenses that we were going to make did they suddenly change their mind and say we better hop on the other side and try and argue in this to proceeding and it's not a coincidence that on the day of the dismissal of the federal court case is the day that their intervention was denied now an additional fact that you can take  notice of is judge mays lee in the state court cases subsequently thrown out eleven of the fourteen counts including the one to the fifty percent and in doing so has set forth another collateral issue that would come up here she has found is not the registered owner of the bonds and the cobalt we are is not a party to the p s a so were this court to send the matter back down the very st issue we will be raising is that they have no standing to assert anything in this case because they're not an appropriate party to be heard in a to proceeding that's exactly the sort of complexity the judge failed us that she did not want to interject and that finding by the way was appealed on a preliminary injunction ruling to the st department and a also the premise of the argument in front of you is that cobol v r would receive in its a given all the proceeds that to is not necessarily true last month wells fargo as master service or for this trust initiated another to proceeding in minnesota and you can find that it case nineteen c v two thousand four hundred and sixteen and that to proceeding says that should additional proceeds be received by the master service or they should be distributed as of the the next distribution date not as of a retrospective date now but the request concerns other funds that are currently held but it will be binding on all certificate holders and control the distribution here their entire premise that they have a higher stake is that a distribution would be made as a bond ownership january two thousand and sixteen almost all their bonds have been written down appaloosa now has most of the bonds so the pleadings that are in front of you in the weight has actually shifted to the other into the table as to who has the greater interest but they still have an aligned interest the last thing that i want to say because it was brought up in a footnote in the reply is there was a cross that certainly allow no judge fail or said if you think you can meet the standards for an amicus come forward summary judgment briefing was not was not a mystery it's publicly filed yes there are some facts that are not disclosed they've never made a request if i want to make is quite brief and they didn't make the request because they can't satisfy the standard they'd have to show they weren't adequately represented and all the points they wanted to be raised are raised and they can't be an amicus because they haven't a financial interest and they shouldn't be allowed in amicus because it would be unduly prejudicial i mean they should not be rewarded for delay they slow roll this appeal because they were hoping for a last look i mean i would love to be able to try all my cases and come in after twenty depositions of occurred six expert reports have been appalled and look at all the briefs and say i'll choose that one everyone else in this case fought through what will be four years in december our clients had to take positions our experts had to take positions we produced millions of pages of documents and we should not be subjected to an after the fact let me have an amicus just because they don't meet the standards in the one case that they cite i have difficulty pronouncing it canton zano doesn't stand for that the judge had already allowed in the meekest in the case and the nd circuit was saying there's a new question posed and certainly we think the judge would allow you to upon on that new question which is exactly what judge  w said to in a soft sort of implicit a filip affiliate of cobol v r she said look if there's a new issue we'll address it then and the appropriateness then but nothing is new here we have the same issues in front of the court that we had in two thousand and fifteen cobalts view the district court committed an error of law in the way that it analyzed the adequacy of representation issue i never actually heard what the error of law was and i think if you read their briefs you will not find an argument that the district court made an error of law you'll find of fact what the district court found was that appaloosas and cobalts interests were aligned as to the fundamental question in the case which is is this part of seven hundred and fifty million dollars that was realized from the sale of stock town properly classified as penalty interest in your maintenance which is what c b c and the g s e's contend or is it properly characterized under the p s a as gain on sale proceeds and then floated cobalt absolutely agrees with that argument they love that argument they want us to press that argument to the max and as a result cobalt and appaloosa share the same ultimate objective and the case law in this circuit is crystal clear that we're to part with the proposed intervener and an existing party share the same ultimate objective so that i understand that argument but i understand them also to be arguing that that's the ultimate objective but then they have different nd best objectives but here's the yes but here's the crucial legal point that is their argument here's the crucial legal point once you concede that the parties share the same ultimate objectives then they have to overcome a presumption of adequacy of representation and the only way they can overcome that presumption under this circuit's law is by showing adversity of interest incompetence nonfeasance or actual collusion what about their argument though they don't really know they can't tell how large appaloosas interest is that changing it's not transparent and therefore appaloosas objectives we change over time and they don't know so they feel inadequately protected and represented so the primary response to that is that sure appaloosas positions have changed over time and they have in fact we have in fact as publicly disclose those at various points in time for example when we filed our amended cross claim against c d c in the district court last year we had as part of that to demonstrate we required as part of that to demonstrate that we satisfied the twenty five percent voting rights threshold in the no action clause in the in the p s a and at that time we disclosed what our holdings wore in the in the c thirty trust and i believe some of the other trusts however the more fundamental point with respect to that is that notwithstanding the fact that appaloosas holdings have changed over time periodical are the way that we have approached this litigation and the arguments that we have made have not we sued c w c in state court in new york back in new november of two thousand and fifteen before the stock town sale even took place and long before the trustee took action and our position all along has been that money that sea debussy's contending is pit penalty interest that belongs to the certificate holders and in our initial objection that we filed in minnesota to the to proceeding once it was once it was put forth we made the two arguments that cobalt is complaining we didn't make ok we made the argument that that penalty interest stops accruing upon the entry of the foreclosure judgment and once the deed in lieu comes in there then becomes a fact question as to whether or not that somehow constitutes a b and in many of the foreclosure that results in penalty interest starting to accrue again that is used in the case it's been in the case since our initial objection and in addition in our initial objection we made the argument that even if you ignore all of that other stuff still miscalculated penalty interest because they didn't account for interest on advances they didn't account for additional trust fund expenses and under the under section three hundred and eleven dollars do you the p s a that those items have to be offset against any amount of penalty interest so when they're sitting here saying in their reply that we never made these arguments it's just flat out on true we did and we have pressed both of them as mr cross indicated we have pressed both of them in our summary judgment briefing we affirm and if we moved for summary judgment on the on the interest on advances point under section three hundred and eleven dollars d and that issue is squarely before the district court the one other issue i want to hit which mr which my adversary mentioned is this concept of the risk of a collusive settlement ok st of all has from the very beginning again going all the way back to the state court litigation in november two thousand and fifteen has pursued this case very aggressively and is interested in magic going the recovery for the trust because appaloosa believes that even though we're aligned on this side of the table at the moment appaloosa believes that what happened here was a very clear breach of the of the p s a and appaloosas perspective in this case goes beyond simply this case appaloosa is an active c m b s investor and what happens in this case has implications for special service or behavior in other cases and that's very important appaloosa moreover there is no way there could be a clue some settlement under this case and the principal reason is that this is a tip proceeding which was brought initially by the trustee to trustee would have to sign off on any settlement and i will virtually guarantee you from my own dealings with c is that even if we reached a settlement the trustee would insist that notice be given to all certificate holders and that it be presented to the court for approval so if there if even if appaloosa wanted to engage in occlusive settlement it can't happen in this grace three quick points your honor with respect to this last point about the collusive settlement it's impossible for cobol to know what it would present to the trustee a what it would enable the trustee to present to the court when it has no access discovery materials and has will have no access to the history of the negotiation settled so the theoretical not theoretical but the actual possibility that the trustee will be involved in the final approval of the settlement is not protection against collusion because cobalt is left unable to know the facts that will tell it whether collusion took place and whether headed it would have negotiated a different settlement and the trustee may well also not have access to secondly just the attention of the trustee in the same way that the two settling parties will and realistically the way trustees work is by examining things that are brought before it and not by initiating their own investigations beyond what the settling parties bring to their attention with respect to notice to our client and its then directors c w is the asset manager for cobalt the or if it notified them of this case it would be in a position to prove that and it hasn't and most importantly i'd like to offer my last thirty three seconds on this question of the impending conflict over the issue of the distribution date if eventual gain on sale proceeds are distributed as though they received in january two thousand  if the distribution is made as of the date on which it's received the priority is likely to be completely reversed in footnote six as we've discussed we brought that attention to the possibility of the court if that happened today it would be reversed  and the mere fact that both counsel are now expecting the arrival of that issue in the case simply underscores the further prejudice that will accrue to cobalt from being forced to sit on the stand you have any opportunity to bring that observation to the attention of the district court you're out of the district court told in a soft that it could intervene again if that issue arose after the court decided whether or not any of the proceeds are going on sale proceeds we don't know now whether this issue is going to come up before the court reaches that decision all right thank you very much i think we have the arguments will take the matter under advisement