good morning may please the court john siegel for the plaintiffs on every issue on this motion to dismiss the district court in gauged in hasty fact finding while applying an opposite law the court simply failed to review and understand the underlying bankruptcy proceeding so it applied chapter seven cases and reached a result contrary to the purpose of chapter eleven and contrary to the purpose and function of the plan of reorganization in this bankruptcy in this chapter eleven plan the full amount of citizens banks secured loan remained intact the secured lender took not a penny of haircut in this bankruptcy and the plan provided that the plaintiff that hers were to repay one hundred percent of the loan recovery on plaintiff's libr fraud claims here against r b s will under the plan go toward the deficiency owed to citizens as a secured lander counsel can speak to the fact that they're representing parties with different interests and that they're representing citizens here on a position that will deny citizens potentially the sixty seven million dollar value of their secured claim but under the plan the claim that the restructure debtors are prosecuting here will go toward the deficiency that remains even after the sale of the hotel portfolio years later what's going on here is that a nonparty a stranger to the bankruptcy is trying to crash this party to invoke judicial or stoppel to overturn the confirmed plan of reorganization in order to evade liability increased notice after the confirmation but before the proceeding was concluded yes and the district court also found that notice here arose post confirmation the court can decide this issue on one clear established issue of law that the district court totally missed and that is at the time of this bankruptcy under fifth circuit law this was an eastern district of texas bankruptcy under fi circuit law it's well established that there is no duty to update bankruptcy disclosures for claims that arise post confirmation courts in the fifth circuit have said that over and over again from two thousand and six inward vs talk away at all restaurants three or four times by the time this bankruptcy was discharged the in what district was the bankruptcy proceeding conducted texas the eastern district of texas and under fifth circuit law at that time post confirmation duty to disclose was uncertain at best according to the word or decision even the most versed in bankruptcy law are unclear on this issue it was an undecided issue that skilled experienced bankruptcy counsel here in texas understood under the fifth circuit law at the time that updated disclosures were not required now the issue of when the knowledge of the claim arose is most certainly a fact issue that as on every other fact issue in this case the district court jumped the gun on but we don't have to get to that and we don't have to to any other issue in the case because under the prevailing fifth circuit law there was no requirement to update the disclosures therefore under the plan both section eleven point five of the plan as well as well established bankruptcy law under chapter eleven that governs here not the chapter seven precedents that the district court applied a a all claims are for the restructure debtor now that's a question scattered through the papers are about four or five different possible dates for notice some as early as two thousand and eight and i am sympathetic to your concern that the record hasn't really been established factually and that if the notice was confirmation then would you agree that the defendants when the notice was not reconfirmation would just play with me if it was if the facts turned out that way that the notice was pretty confirmation and i saw two thousand and eight as a possible date then with the defendants win on this kind so if the case is remanded in the court actually does fact finding here and if the if it makes a finding of fact on a full record that notice was pretty confirmation then i would agree the law might be different however if that's clearly a fact issue and even this judge even this district court which has now twice entered syria autumn decisions on specific issues that it chose to decide on a vast motion that it reached its own analysis not submitted by any of the parties even disclose until the bankruptcy case is closed not just at confirmation it didn't reach the issue of watch the debtor knew and when they knew it updated disclosures were required up until the time the case closed not just a confirmation that that was a rony us legal conclusion but the issue for this court is what's the right remedy in this situation given that the fifth circuit law is ex is entirely clear that there was no duty to update disclosure given that this claim was reserved in sexual eleven point five of the bankruptcy plan given that under operation of chapter eleven this is a claim that the logs to the restructured that are given that the defendants had knowledge of their own lives or fraud and what they're saying to this court is that we should be denied our day in court because this global bank did not get the subsidiary of this global bank that we did not disclose back to citizens bank that its own parent had made certain disclosures in its own s e c filings that's what's the issue here this is a corporate family we are an outsider to that corporate family and their only claim is we should be denied our day in court for their defrauding us because we didn't had disclosed that it was cooperating with the subpoena it is not the law that a debtor asked to survey every public source of information and disclose in its bankruptcy filings that it might have a claim against any creditor who's been publicly reported that they responded to a government subpoena really with the fifth nor is it the law that we have to look at the docket and say oh there's an m a trust class action out there that involves the same parent of the same bank who were a borrower of therefore we have to disclose that in the future we might have a claim against them the articles in two thousand and eight they do not even mention r b s so it's not a rule of bankruptcy general put ability that you have to scour the world and throwing every strike suit every mention in a news article every piece of dirt you can find against against your creditor responding to the subpoena before confirmation of this chapter eleven bankruptcy they risk they disclose in an s e c filing that they were cooperating with a government investigation about live or that what that means whether we knew it whether we should have disclosed it is a fact issue that even the district court here did not rule that that was pretty confirmation notice the district fortress now that they were induced to enter interested if someone was investigating why bar form of confirmation these plaintiffs were prosecuting an adversary proceed against citizens bank on the firy that there was a mutual misunderstanding and lender liability over the larger fraud they believe that was because the world economy a gun self not because r b s had committed a fraud so and that adversary proceeding of course was dealt with in the pla that is the best evidence that at the time of confirmation they didn't know that they might have a libel frogmen but at any rate that is a felony assuming that they're that there is my poor fraud that affected  brewery during this particular time i'm not sure how that could possibly affect your client because the swap transaction basically makes the libel rate it just washes it out and you ended up paying a flat rate of interest just like everybody else why these transactions took place this way i don't know that they probably were laying off this book of business or that book of business but four of your clients consider libel was built in then it was a swap and libel was pulled out so that's the question that judge zack asked me last time we were here and the answer is he answered we were injured because a dishonest bank sold us a negotiate a fixed rate and you agreed to that fixed rate we just was not affected by live we were dealing with a bank that insisted that demanded that we take a swap which we didn't want that promised in the end that it was to do business with someone who has their thumb on the scale and sells us an interest instrument that they are manipulating the rate to their advantage or disadvantage to your disadvantage that's what i want to know why was it to your disadvantage because the difference between what we paid and what we would have paid but for the swap and the fraud was the difference between solvency and insolvency and that's why this experience highly successful developer for the first time in his life ended up in bankruptcy as same question that just jacobs asked because i'm not satisfied with the answer if i was on both sides of the trade what difference does it make if it's high on what the if we knew we were dealing with a bank that was manipulating the rate we would've done business with that bank we didn't want this instrument they demanded it as a as a condition of the deal based on their representations that it was honest and accurate and that the interest rates were going to be going up that was a straight out garden variety fraud which is a claim that even judge buchwald who dismissed the and i trust m t l said that's the claim that these borrowers should be bringing and that's the standing harm that the ninth circuit found of globe versus georgia bank trust that someone who does bank business with one of a lot of or annul banks that was engaged in fraud is per se injured because they've done business with a bank that's being dishonest to them about the interest rate what's the measure of damages didn't a measure of damages is the difference between what we paid under the swap and what we would have paid under a floating interest rate without a swap it's the difference between solvency and insolvency it's the difference between between this hotel portfolio pre bankruptcy and post bankruptcy and the recovery of this claim goes to the secured lender in the first instance thank you court and david lesser for the police and i'd like to pick up where mr siegel left off i was intending to speak mostly about bankruptcy but i do have a lot to say about about this this issue  library is a complete red herring in this case i want to quote mr siegel before that just district court quote the monthly payment netted out at a fixed rate that is it a seven fifty eight live or had absolutely no impact on this transaction theory in this case as we said we will sell you a silver tire with blue spots and he says now if i really want to read time that he doesn't have any injury  the case the issue there on appeal in the ninth circuit was whether the plaintiffs had article three standing based on the allegations which were roughly similar to the allegations here in the ninth circuit said that was sufficient for article three standing allege that you have a transaction you don't want on remand the district court analyzed the loan it was a loan that had a fixed rate term that would switch to a floating rate the district court determined that the loan had never switched to the floating just like this one called hylander it was similarly a plaintiff who had a lonely swap transaction at a pre determined fixed rate judge buchwald dismissed that case because the plaintiff had no injury there is mr siegel has not articulated any theory of injury in this case there is an ongoing argument that it was a fraud and they were per se damaged even if they can't prove a specific data loss that there is they're injured by dealing with  fraudulent bank that's not sufficient to plead an injury each of the causes of actions requires an injury they're just saying i wish you had told me something different if the bank told the borrower we will lend to you at a fixed rate we will lend to you at four point eight one two five percent it's a commercial arm's length transaction p p p knew that was the fixed rate it was getting there is there there is i'm after years of that there are two one is that the banks misrepresented that libel was an accurate and reliable rate which is irrelevant to somebody you who's entering into a fixed rate transaction also wouldn't dissuade someone from entering into a floating rate transaction papers and in court but what they allege is that they wanted a floating rate without a swap from from citizens bank ok but returning to york your question the other allegation is that b p will not be able to meet in the complaint if that's what they that that's what they were were told counsel i have two short questions you can see that we should look to the law for the appropriate level of knowledge a debtor has to law wasn't clear that you know i'm not going to i'm not going to stop under that circumstance but what your case actually says that the debtor was obligated to disclose but the court declined to to a stop as a as an equitable matter  also just to be clear those cases are concerned situations where the debtor was not on notice of where the claim didn't arise until post confirmation other words in  concerned a debtor who had a claim against the employer didn't even start working for that employer until after confirmation so it's a very different set of circumstances but to finish my response to to your question saying that  you will not be able to meet your obligations the classic forward looking statement that's in actionable in these circumstances is the agreement expressly disclaims any reliance or allegations in this case are that the the banks suppress libel or by a couple of basis points not that they knew whether a lie was going to go up or down this is at a january two thousand and eight meeting libel rates historical lab or rates are publicly available i did go up in october of two thousand and eight when i was much higher than it was in in january two thousand and eight and fell off a cliff where we were in the midst of a financial crisis now so my other question is what about the conflict of interest that mr siegel mentioned since if they prevail on this claim citizens bank would get some money and you are here to try to stop them from pursuing this claim and you represent citizens bank do you not   the arguments that mr siegel made was that if they prevail on this claim they would reimburse says bank for the on paid portion of the law so they would stay stand to gain surely in bankruptcy if if there's an asset that nobody wants it remains post bankruptcy with a good and why are we not looking at a situation whatever the merits of this underlying claim and i'm not sure i either understand it to appreciate but whatever it is nobody wants it and therefore what was the of what was the effect of failing to schedule it if they'd schedule it nobody would want it anyway they had they would end with it so here we are if they had scheduled it and i would like to march through what they actually knew and when because i think it's key but if they had scheduled that citizens bank would have had the opportunity to vote against the plan because had it then then p p p illinois released world bank of scotland and citizens released citizens bank which is why is not naming citizens bank with respect to these  claims it didn't release the affiliates that it so basically it had sued citizens bank in an adversary action it then released its claims against citizens bank a month after the bankruptcy closed it didn't disclose any claims related to libel or related to the loan link swap related to any affiliates pre war and it didn't cure the failure post confirmation failed to disclose and then a month after the bankruptcy closed it it's t the affiliates and the disclosure obligation is clear in the bankruptcy law there's a dispute about whether it continues post company you could have asked for a release well as well i mean that that have but that but the disclosure obligation and the release work hand in glove so you seek a release for for disclosed claims you don't need to seek a release for claims that aren't disclosed and and courts have you know held that the  general reservation of rights in history or points to regularly is ineffectual release that purports to reserve all claims reserves nothing if i could just go through what what they knew pre confirmation being manipulated or anything public about that they admit in their prior brief to this court at page twenty three that they they had notice of the fraud i did not have notice that this would be the esteemed panel that would be hearing this case today until the court released it to the panel on thursday i'm telling you that on thursday i knew that this would be the panel to hear this case a considerable period of time what happens if a major asset is discovered in that period of time and very often if you have a corrupt officers or that that could easily happen evaporates it's a it is a confusing concept in bankruptcy but evaporates it remains what if it's an asset an asset it is not a building the building doesn't evaporate somebody has to own it what happens if i don't i mean sure that you don't know because i don't know and i i know this is not exactly the facts in this case but but what if there were an answer to that i think we would crucial point here is that under jacobs said under the bankruptcy disclosure standard they didn't have to know that they had a particular type of fraud claim for libel or manipulation they had to know that they had a i'm pointing to this first circuit case as persuasive authority but the second circuit law on this is the same in the charge law case and many others the standard is is that you have to disclose possible claim however speculative these are very creative lawyers they have been litigating this case for years on a live more manipulation theory when they have a fixed rate loan so surely they could have speculated that they had some claim based on the swap against the people they say induce them into entering into the swap whether that theory is unjust enrichment or negligent his reputation misrepresentation or fraud and how it's close some claim they w dismiss let me start with your question of what happens with a post confirmation asset counsel was a mistake in section five fifty four does not apply in the chapter eleven what happens is under eleven point five of this ploy in and under eleven forty one of the code that asset is an asset of the restructured debtor the creditor or can move to reopen the bankruptcy the standard is what's in the best interests of the estate who was the estate here was the creditor can move to reopen knowing that this is contingent claim exists on this matter and the question of what would happen if it were disclosed the best ski the best in rest of the state here is three parties it's citizens bank which under the plan gets one hundred percent repayment of their loan they would have no interest in reopening the bankruptcy and indeed indeed didn't of the claim that we're talking about here yes the hotels their franchise agreements were assumed by the re organized that are reorganized that are wouldn't move to reopen the bankruptcy because it's prosecuting this claim the best interests of the estate are preserved here now on the injury question they lie to us they said we were getting an honest rate that was going up at a time when they knew they were actively pushing it down we were injured by that financially and in terms of the honesty and integrity of the bank we were dealing with we allege of paragraphs ninety three and ninety four of the complaint that there were alternative structures available that we wanted a floating rate loan that we had done that in the past from wells fargo and others and that that option was available but we were defrauded into this structure fifth circuit law has to apply how could a texas bankruptcy lawyer in two thousand and eleven and two thousand and twelve know that is decision of whether to amend schedules in a chapter eleven is going to be determined four or five years in the future under second circuit law a reservation of rights cannot explicitly and specifically reserve an unknown claim at the time of confirmation that's why there's all this case law that says a reservation of rights of future discovered claims belongs to the restructured debtor that's what happened here three and a half years litigating a long and tortured motion to dismiss to premature wrongful dismissals on fact issues it's time for this case to proceed it's enough erroneous one off dismissals and hasty fact finding these pla deserve a chance to prosecute their leibert point and let the guarantors who are involved in this transaction through the same executives wearing multiple hats amend the complete move to amend and at long last let's get this case going it's an interesting discussion but four years later we're on a motion to dismiss debating fact issues thank you both will resume decision the case of ten or eight sports versus