of alter ego law the trial court imposed alter ego liability despite the fact there was no harm to the alter ego claimant software and there was no benefit to the  would own this seat the company basically and they didn't because all the stock was spurted out all of it either this roughly sixty percent that was transferred for dollar to or the was that if that bankruptcy occurred all the equity sitting in m p o canada which is the equity that sopping could have executed against would have been wiped out by the bankruptcy court that was all undisputed so the only alternative for bankruptcy in the record before the trial court was that these transactions which were implemented to keep that bankruptcy from happening the americas was in default on sixty million dollars with a record of the silty it was the fault on those loans it was losing money at the rate of several million dollars a month all testimony was completely consistent that if these transactions had not it happened america would have gone bankrupt these transactions were  administered to avoid that from happening the bank syndicate who was owed sixty million dollars and who was threatening to foreclose on that debt which could not be paid only agreed and would only agree to extend its credit facility and in fact to allow another sixty million dollars of financing to come into the company to allow for reorganization and turnaround are you suggesting that all of this that took place the reorganization had absolutely nothing to do with  litigation absolutely your honor absolutely and there's no evidence to the contrary and the district court had to make a finding make findings in relationship to that and found to the contrary the district court made it once the district court and the answer to that was the individuals who are agreeing to come in and constitute the turnaround scene the three individuals who are being asked and were given the stock in order to do that said no we won't do it that way we're not going to voluntarily take we're already taking on now soft bank and it's very incendiary briefing says will you see the transaction was specifically structured to avoid that six million dollars debt no that's not what happened the individuals who were being asked that were independent completely independent from france continental us or m p s they the other shareholder refused to accept the term which would voluntarily give them another six million dollars a day we receive no benefit of that and we didn't ask for that that was asked for by these new managers who are going to come in and be the turnaround team for this if i understand your argument findings made by the district court are clearly iranian they are clearly erroneous in fact essentially all of the findings describing the transactions are clearly erroneous we focused on three of those findings in our briefing and those were the findings that all of the stock was transferred which the trial court says your honor mentioned the pledging the trial court never mentions the pledging and all talk about the pledge your honor wants to but but the trial court never mentions reading it in full term way that we're obligated to under clearly erroneous review i think we have to assume that he understood the difference but regarded it as immaterial because pledging the stock meant all the stock was gone just as selling the stock for a nominal amount would make it gone well the stock isn't on its forty percent the stock remains in the company and has never been executed against but it's pleasure honor but if you think that through with that means you know a company the fact that the stock was pleasure only to secure an existing debt of america's so americans had a sixty million dollars we're going to see only who are the people who were induced now to do the turnaround but a lonely do it if they don't have to take on the debt that was the three individuals two of them were existing officers of america still all the other officers had fled because the company was about to go bankrupt and one was an outside turn around artist that was brought in to do this and those three individuals were being asked to implement the reorganization plan that the could be paid americans didn't have money to go give them big cash  and that has been successful on the trial court is essentially saying it is the session that these business individuals don't have the authority to make those kinds of judgment couldn't first think turnaround of been accomplished if the creditors softbank had gotten all the stock and then made the deal with the two officers of america skin turnaround artist that's it that's a great art that's a great point and i like to talk about that because if you think about it because they've made noise in the course of the trial court made no findings about the play so we don't know what the trial court was thinking about the play but this was death that existed in america and if you take the example of let's say the company was worth one hundred million dollars because it had fifty million dollars of assets they had a hundred fifty fifty million dollars worth of value in it it had buildings and equipment that were worth fifty million dollars and it had an operating value ongoing concern value of fifty million dollars meaning that an investor would be willing to come in and pay say was making a profit of five million dollars a month might be willing to come and say that's worth to me to pay fifty million dollars now to get that going concern value of the company of a profit of five million dollars a month those two things combined come to one hundred million dollars now an investor who might come in and buy those shares and let's also say that that same company has sixty million dollars a day and now that company pledges that that the shares of the company to secure that sixty million dollars and investor who comes in to buy those shares doesn't care because the investor can come in and buy the company in two ways one you can pay that that's sixty publicly traded company which is subject to a lien i mean it has a minority interest on traded companies subject to a lien is worthless even if the fact is that no effort was ever made to execute on the shares we don't know what the court would have done in forcing a company to be sold teachin in fairbanks alaska organized this corporation are you going to pay a nickel for twenty shares of it that's in they have to they would have gotten some benefit don't there's not have to be some evidence that but for these actions softbank would have been able to recover its judgment and there at the evidence isn't there because the company had no value by definition those shares aren't worth anything until they have positive value on top of their existing debt and that has never occurred yet it's starting to happen because of the business decisions that were made to do these things and the millions and tens of millions of dollars that my client put into this reorganization to make it work that company may return a value and soft bank may be able to recover its judgment but the trial court saying that private business persons don't have the opportunity to make those choices and that's that what's where the fault lies and that's where the real danger of the court's decision is if there  evidence of harm in the record to the party seeking alter ego that they're worse off because of the of the transactions or question then there's not any fraud and there's not any justice and that is what all the cases  there's another thing that all the cases say all the cases that involve fraudulent transfers and there are other cases the saw thanks so much as well as the cases that we cite and they said you have to follow the money and that only makes sense because  if if shares that something's transferred out of a company and that something had value and now the the judgment creditor can't go and get that something it only makes sense that the party who has received that benefit of that is the party who the alter ego and this case there is no evidence that that trance continental my client received any of these this value there was a pledge to a bank syndicate five independent canadian bankers who negotiated for a pledge on the basis that there was a sixty million dollar quote credit facility in in the fault and they were going to keep that going unless they got something they had to be secured that was the only way to get that in place to keep this company alive doctrine alter ego that allows a trial court to dean have a party was already there all along and judge where in this case applied that doctrine to hold that the shareholders transcontinental and in pos they were essentially de facto in the litigation all along but that finding if it's not supported by the evidence and we don't believe it is to believe that essentially yes there has to be a there has to be perjury that sitting in the court and saying yes i'm going to i'm the one that owns that apartment building that you were her dad and then in fact it was somebody else who owned that building and we don't find that out until after the you have a parent company that has been  and no difference between the two parties and that there be a fraud or injustice and that's universal in all the cases tell me if i have this right structurally at the district judge think that what said don't consent to the judgement until we get america this guy out of there at the france continental argument on appeal is it doesn't matter because america  value when they got america's had of their district judge makes a finding of fact yes it did it had very substantial value it's close to the site and is at the testimony about the book value i don't know exactly what the value was it was not value less and that the response of prince continental was that's point me erroneous it was value list if i got it right well there's that's that's plenty of erroneous the all the stock was not transferred so there's still retain if there was value if it was worth eleven million if that's true then there remains to be about five million dollars sitting in that in fact it's increased because the company's got more valuable so it's internally inconsistent with the trial court found but that's correct there was no compton evidence of value and we extensively brief that issue the only compton evidence that was admitted and it was overwhelming was that nobody would pay a penny for this case or this company the only offer that was got received from america's shares during a year long effort to sell those shares with the only hard offer that was received was we will give you sixty cents on the dollar for your debt in other words if you can talk your banks into writing off sixty percent of the debt or forty percent of their debt will take your company for free that was the only offer they got in effect and that they had an investment banker trying to sell this company for a year and it was just getting worse the company was losing more and more money and the again the evidence is an contradicted that it would have gone bankrupt so the question that the trial court never asked and had to ask under these cases is would soft bank have been better off had these individuals who were involved in this transaction allowed americans to go bankrupt and the answer is under the evidence before the court absolutely not thank you counsel you know you want to save some time think your it please the court my name is michael steinberg of sullivan and cromwell and i represent softbank content services i'd like to focus in my argument to discuss three separate items first i'd like to put the chronology together of what happened and why it was so imperative transcontinental to play a shell game with the assets of n p o candidate frustrate softbank second i'd like to describe the transactions that transcontinental orchestrated with a focus on the most remarkable document in this case the so called shareholders agreement of america disk that was entered into that entered into on the very same day that n p o canada consented to the judgment shareholders agreement that is particularly ironic in view of the fact that two of its signatories supposedly are not even shareholders of america disk and yet it is a shareholders agreement of america this third the district court correctly interpreted the law and applied them to the facts that it observed in a live hearing where america and trans continental appeared and were cross examined first been set up to this address certain accounting issues m p o canada's counter claims have been dismissed by the trial court on motion m p s request for an unlocked tory appeal have been denied and the trial court set a further conference to discuss n p o canada's failure to pay the special master the trial that was rapidly approaching the day of judgement was upon n p o canada on october thirty first m p o canada consented to a judgement on that very same day a series of transactions were consummated and completed first m p o canada cancelled the preferred stock holdings that it had in america disk which had a face value of eighteen million dollars plus an accrued dividend of one point two million dollars for that cancellation not a nickel went to m p o canada even though it held that debt second despite the fact that m p o canada was one hundred percent shareholder of america this america disc itself the subsidiary issue greater than four hundred seventy five thousand shares of stock outside of m canada directly to trans continental and its partner all for the purchase price to transcontinental of one dollar transcontinental in turn turned around and sold those shares for two dollars to  supposedly new investors who were neither new nor truly investors second trans continental and its partner kept for themselves an option to repurchase all of those shares for just one america that m p o canada was directed by trans continental and its partner to use those shares that it held of americas as collateral for this loan that it was never a party to ever closing on october thirty first there was not an arm's length transaction in sight here and despite the references to investment bankers and the like there was not a single appraisal there was not a fairness opinion there was nothing there was a reshuffling of these assets with the direct goal of impeding soft bank and soft bank of course was kept entirely out of the loop carefully you seem to be a little short of questions from the bench on the points you've been raising so far as i wonder if i could ask you about a different point than in trees in the case on the attorneys fees yes about all i know about them is that yours were three times as high  as the other sides i don't know how many hours for the different ranks of lawyers and paralegals and i don't know what the hourly rate was is that right know the hours were actually identified  didn't see any any final compilation so many hours for this paralegal so many for that attorney but you're saying if i went through the bills i could at least figure out well let me let me say what was provided to the district court on the issue of fees there was a there have been three principal lawyers working on this case since its inception me mr parris who's with me and who was at the time a associate and at sometimes a junior associate those items we gave you had a partner you had an associate who was third with another associate who was on for some of the case partner and to associates since the paralegal says that there were there was one paralegal principly ok and to the rate of each of these persons losed sullivan and cromwell does not have hourly rates which was what we explained to the district court oh did you have an affidavit or something we just don't have hourly rates yes we indicated that we we indicated the total amount of hours that were billed we indicated the total amount we indicated the client had paid if you don't do it the old fashioned way for legal services fifty thousand dollars we really don't do it the seventy's way point three tenths of an hour eighty dollars an hour it is not sold and cuomo does not believe that it is the amount of hours spent but it is the result that she that should be valued so you disclose the hours but you don't have a great now so there can't really be a lodestar calculation and a rule sixty nine the trial we're talking about a practice in procedure under california practice and why shouldn't the judge then in terms of figuring a reasonable rate look at the roughly half million dollars that the lawyers for the other side charge and figure that the way litigation works is somebody hits the ball to you you have to hit it back and the pose you have to prepare  cross examine you depose same deal it tends to be roughly equivalent you won maybe that means you did better maybe it means you actually did less work because you had an easier case at maybe the results justify a higher rate but still look at their half a million dollars as a way to start certainly or are you can start with that but mr slice of it is firm was only one of four different firms that had represented mr slate that half a million isn't adding all of the firms know it's not and it's no it's not and it's unclear if those amounts were even paid or what was billed it was the affidavit that was filed specifying that figure was very opaque on that and i would i don't know if it matters whether it's built if you do twenty thousand dollars worth of work and your client then get around the pay and it's still twenty thousand dollars worth of work although the client might say that it wasn't worth that much which may be a relevant consideration but let me address one other slight point your honor made it takes much more work to uncover a fraud than it does to defend it and in this case all of the documents that were provided after four separate motions to compel were written in french this required  somewhat of an ok restaurant order but this required some greater assistance and require some greater time to go through these documents and to figure them out we did not have access to any of the principals except through deposition so we had to literally try to place to put together the series of transactions all written in french documents and trying to understand the money flow between them and trying to understand the corporate issues that each of those transfers would relate to we had to engage a forensic accountant they would not have to engage such it was a time consuming task and one not made easy by their lack of cooperation in discovery let me back up to something before law firms the way i understood it the defendants in this case changed law firms several times yes we're not talking about different law firms for different defendants we're talking last berman line exhorts the half million bucks exactly and wang watt sounds like they would know french they do know french and they were from come back and they were trying to interfere with our ability to obtain  there was a series of french people who showed up and told us that we were crazy and that we should not proceed happens a lot of good it does and in this case we were able to expose the multiple different hats and the non arm's length is very clear in footnote eleven of that case that indicates that california has ace had a split or is actually still does have a split whether on a motion to amend after judgment one must actually prove all three go in the ninth circuit in vandar indicated that it's prediction of what the california supreme court would do on that point was that it would not require actual alter ego civil vandar has a somewhat lower standard than actually finding alter ego and in fact and is that it is made up for that by the contemporaneous requirement that control of the litigation by the parent be shown people those one thousand people for a dollar those one thousand people in turn transferred it to a partnership that partnership in turn transferred it to somebody else so by the time the court was dealing with the issue the partnership added to the amended judgment in love vander had also sold its interest so we do not have to go after three eight five eight that is not what it says and the reliance upon the fraud on the court element of love vand was an independent and different basis that was a question of whether or not this court has the inherent authority to transfer to amend the judgment because of a fraud committed in the court that there was a second ground under sixty nine a and the amendment provision of california law that was an independent basis for that determination with vandar and i would say as well the notion that i'd like to address one factual point that is nowhere in the record this is like that says that and i believe he said that there was tens of millions of dollars put into america disc and the way in which he said it i took it to indicate that this was this all of that was completed months before the transactions at issue here months before the shell game that we was played so the in this case judge the district court had significant evidence of value there was the notion that this company was valueless was not borne out by the record and it wasn't borne out by american disks own financial statements while they want to strike the evidence provided by mr strong who was certainly qualified to read these financial statements even if you toss out mr strong's testimony and there's absolutely no basis to do that mr strong was amply supported by their own auditor miss your valor on who testified in his deposition that the reason why the write downs had occurred just a few months before these transactions was there had been a reorganization and it was the obligation of the company in this case america is to provide its best estimate of its value and there's a record cites for that and i've pollard as for not having it but it's the valar on testimony as quoted extensively in our brief i didn't want to focus on one particular element because it is transcontinental suggestion in this case that judge where was completely out to lunch and nothing could have been further from the truth and i'd like to point your honour's to as i said in the beginning of my argument the most remarkable document in the case which is the agreement among shareholders it judgment and this is an agreement of the shareholders of america this now i would remind the court that as of october thirty first because of the two transfers the only shareholders literally of america  at that moment in time were m p o canada who still held forty percent of that and three eight five eight the so called new investors who had sixty percent roughly sixty percent but this agreement among shareholders which i've mar what is so first of all the parties to this shareholders agreement were not even shareholders and but that isn't that didn't give them any pause whatsoever because they defined shareholders in that paragraph to to signify quote all the people who hold shares in the company including one context so permits transcontinental and m p o hold co and who are parties to the present agreement now what is particularly amazing about this shareholder agreement aside from wapping in people who want shareholders was that the control of m p oh canada which transcontinental did not have any interest in supposedly nor did m p o hold co each of them got to elect to each of them got to elect one member of the three member board of directors of america this so the two parties who didn't have any interest whatsoever in americus were actually be national and then they get actually a majority of the board of directors but again it gets worse than that because not only do they have the a power to control but they have the power to di loot m p o canada's remaining forty percent interest at will paragraph eight of this shareholder agreement has a series of preemptive rights in other words if america is to issue any more stock you've got to give stock to the existing shareholders and that's set forth in the paragraph eight point one of this agreement and remarkably with paragraph eight point one says is that i'm sorry it's actually paragraph eight point two the shareholders again a defined term that includes transcontinental undertake not to subscribe to any additional shares in the capital stock of the company america does unless the preemptive rights is granted to all the shareholders now that's a remarkable thing you're ormiston having preemptive rights they're no longer going to the shareholders but what is worse is m p o canada has because they've stripped it no assets so if all of a sudden do this until we're whittled down to a zero interest point zero zero one they could they have the absolute power to dilute the interest down further so why did we not i mean going back to your full why not go after and seize them because they had the power to wipe us out at any moment whatsoever and that's why this document is so remarkable i will also mention one other thing they indicated before the district court that the spring option in the option to repurchase the all of the shares provided to three eight five eight didn't exist and then it was a drafting error and then who knows what else it was but i would i would take your honor to paragraph seven six of the shareholder agreement which deals has three point six seven point six it's an s u r two six nine and now again this is an agreement among all the shareholders and paragraph six of a letter of understanding is where that springing option occurred and they testified at the hearing and in prior submissions to the court that that option just never existed but because the transaction slightly changed and they say  transaction slightly changed therefore the option went out of existence but in paragraph seven point six it's to clarify the rights conferred to the shareholders in light of the present article seven are subordin rights detail in paragraph six of the letter of understanding the only way that they would trust three eight five eight to get the stock was if they had the right to recapture it and they say that this right didn't exist now it's possible that this right laughs maybe they changed their plans maybe they were successful but the fact is is that they had this right and they had the ability to dilute they own and control america just taking that control taking those ownership interests out of the hands of m p o canada which was saw fakes saw think if you believe their tale the five million dollar judgment that softbank had would have been sufficient for something to own all of the stock of m p o canada and therefore own all of the stock of america this council your time is expired so you don't want to go i would just say that what m p o transcontinental did in this case was take its subordinate position as equity holders to a legitimate judgment creditor and did everything they could to wipe out that judging credit thank you are thank  before i get into the merits your honor i have i've talked with a court before we have a motion to strike and much of the record that your owners have from softbank is not was not actually before the trial court and we filed a motion to strike those portions of the record  you know that ok i don't know what the with what the outcome or what happens with that at this stage but he ruled on it when we were on the i was hoping to hear some some response to the point which you've made throughout this case of ho soft bank was worse off because of the transfer how it would have been better off for the bankruptcy to have happened and i didn't hear an answer and it never has been an answer because the evidence in the record before the trial court was undisputed that if a there was forty million dollars more debt than there was assets in america just that is undisputed that the record that's at one thirty and if at liquidation this came from the banks ind liquidation specialist who was giving this information to the bank if bankruptcy happened because what happens in a bankruptcy is that your creditors are paid off with you sell the assets whatever creditors are paid off forty million dollars of the creditors would not have been paid off and all the equity being held one hundred percent of the equity being held in fuel canada would have for ever been wiped out all that evidence is undisputed and i was hoping to hear some to keep the company finance and to keep it from going to bankruptcy where we're organizing it and i didn't hear an answer that is a fatal problem for upholding the trial court's decision because what it says is that trial courts can get into the business of micromanaging business persons who are doing something that wasn't there there was evidence that you disagree with mr strong as to the value of the company of eleven million there was some evidence you said there's no evidence  understand is different than them market value of such of eleven million dollars but mr strong did not refute that the bankruptcy would have happened and that's the evidence that nowhere is refuted in the record the trial court has no attention to by the way all these things that were just effectively drove a guarantee the guarantee in this case was issued by n p o canada and the court effectively by his decision extended that guarantee up to the shareholders now at the time that he was executed softbank as a sophist it sophisticated commercial entity could have put terms into that guarantee which prevented all the things that happened in this case the transfer this year plus could have said you can't pl you can't transfer shares out of if you're candidate very common term and it guaranteed you can't touch the assets that are backing pregnancy you didn't do that and now the trial courts coming in after a whole series of individuals in companies