yes good morning and may please the court the debtor in this case great lakes quickly move held leasehold arise as its most significant property in the bankruptcy thieves leasehold rights could be assumed and then either retained by the debtor or assigned essentially sold to third parties for the benefit of the estate and the creditors here the property those two leases could not be retained or so he speak up i'm having trouble hearing you share the fear that the property in question two leases could not be retained or sold because the debtor rid itself of that property prior to the bankruptcy one creditor benefited from those leases t v investments the defendant the body of creditor suffered the act by which the debtor rid itself of the lease this was a transfer which is avoidable under sections five forty seven five forty eight the bankruptcy code and the bankruptcy court erred in determining that there was no avoidable transfer or that the committee otherwise could not pursue those avoidance actions well what are we supposed to do with terminated in a constructively fraudulent manner other words the provision in section three sixty five terminated that means finally and deemed we terminated the court always has the power to avoid a terminations and or the reinstatement of lease and if it does so then the terminations is annoying that way no explain what one hundred sixty five explain what put what it in is what would be an example of if something that would come within its provision if a debtor terminates at lease of nonresidential real property prior to the bankruptcy but under your reading three sixty five c three would mean that trustees cannot assume worthless expired leases that can never be revived so why would anyone ever try to assume such a lease in the first place they probably wouldn't the what the debtor would want to do was assume a lease that had some value and perhaps determine in the lease in a way that is not constructively fraudulent or not avoid in that scenario it could not assume that lease if there is no avoidance action possible then the terminations can't be undone and the debtor can't assume the lease and bankruptcy so as their lease here there was a lease and on the day that the terminations agreement was agreed to the debtor still enjoy its rights under the lease it was not until it agreed to the terminations that parted with that property interest it was not until what until it agreed to a voluntary terminations that it part of with its interest in the property reverted to the landlord which is the defendant in this case in the landlord lease the property to a different party mean this see through seems pretty clear the leases of nonresidential real property those true and was terminated under will not bankruptcy law prior to the bankruptcy proceeding correct so is that this case it is this case until the committee brings an  action the committee is seeking to nullify the terminations well it sounds like you're seeking in nullify c three well if there is no terminations then yes the three would cease to be applicable what do you mean there's no terminations the the result of an order of the court of voiding the transfer is to undo the transfer in this case undoing the transfer on does the terminations i don't know where where do you find that in the statute well this is the edward  interpret ing the interplay between three sixty five c three and the avoidance statutes i don't understand three sixty five three seems perfectly clear freestanding what's what's incomplete about it there's nothing incomplete about it but it exists within the larger bankruptcy code and within that bankruptcy code the trustee bankruptcy the way that that needs to be read is that the lease is finally irredeemably validly terminated because there's always a chance for an avoidance action in the case of an invalid of sections five forty seven the preference statute and five forty eight a fraudulent transfer no facts not section it was invalid because these leases motive it seems but the motive in this case was a desire to stop doing business with stop doing business with the landlord in this yeah ok so what's what's wrong with that well because when there's a their terminations if the if a company is insolvent or if it is if it files bankruptcy within ninety days after he makes a transfer then we get to look back recovery of the proper e recovery of the value of the property correct so even if three sixty five applies the leases can't be assumed and the property can't be recovered the but the value of the property can still be  some of the cases in turpin us have said if the leases can't be assumed then there's no real value to them anyway so are you asking a literary man for the court to determine whether the great lakes receive reasonably equivalent value that's right did the bankruptcy court actually find that great lakes received reasonably quickly value it did not and why is that important it's important because that is a requirement under the fraudulent transfer statute that was largely the subject of the trial the value but these leases could have provided versus what of that what the debtor got in return for handing over the property another way to look at the section three sixty five question is to look at the filer case the ninth circuit case because that case focuses on the extraordinary extent of the bankruptcy avoidance powers it's not a limitation on the void in its powers it's a limitation on the assumption of a lease which has been terminated and remains terminated well isn't that a limitation on right to courts power it's that it's a limitation on what the debtor can do with leases which it is terminated with the debtor the debtor would ask the bankruptcy court the show is that me just seeking damages yes yes that one of the leases was set to expire or did expire about a year ago as it is we're approaching three years since this transaction there's really no way to recover the property itself so the committee seeking to value and that's on remand under section by fifty that's what we would ask bankruptcy court to order so your argument is that if they hadn't  if they hadn't terminated they hadn't terminated the lease they would have had more assets when they went into bankruptcy yes these stores were and so the creditors would do better in the stores and how much are you s damages the testimony at trial place the value of these leases between three hundred and four hundred fifty thousand the debt forgiveness that the debtor received on the entire  terminated leases was it between forty and fifty thousand so the difference between those two  like any other business person that's why we're before this honorable court this morning we need to have a clear determination at three sixty five some three subsidies three clearly exams all volunt less see and you try to take the i mean the other side tries to take the take the lease away from the the person who would do it the new let's look at it from from the verse angle from backwards forwards we are talking about whether or not this voluntary lease terminations could be avoidable with the damages the final aspect of judge kelly's four part decision all which were in favor of t d m this case and each individually would stand to reaffirm it talked about the issue of a stop all this is a hot and peculiar case where the committee filed bankruptcy on  two thousand and twelve along with a motion to terminate number of lisa's four days later they moved to terminate all of the lisa's including those voluntarily terminated including those five by my client so four days later they're saying we've looked at all this and the document itself the moving paper is very clear that they're representing to the court there's no value in these leases it's a burden on the of state judge please relieve us  between three hundred forty and fifty thousand dollars well there so they said but that was nonsense the testimony was at the value given to not include the fact that the great lakes when they terminated the lease they not only left the propping left their debt more importantly they took all of their valvoline clients they took the valvoline franchises it's like leaving a mcdonald's and taking the mcdonald's franchise in the landlord saying well i've got an empty where we're taught we're arguing over how much how much the leases were worth after these after what you just described the issue but no i think the fundamental decided but three sixty five c three i mean it really applies when a lease is terminated by its own terms which was not our situation here or bank you to show action because here it was terminated by private agreement you're not disputing you can go back ninety days right your honor i believe the exception still applies in that case because this is a non residential transaction both of the parties are sophisticated businesspeople in this case we would say the tenant in this case was far more sophisticated great jim wheat from great lakes oil is on top ten business guys in the country he's got five bad stores he tries to get out of these  five because he's got a tough landlord what is tough landlord mean the landlord wasn't giving concessions the landlord did nothing illegal in this case he just wouldn't give concessions like the other forty five locations so these five he was to link when he was behind lots of property maintenance issues the one an arguably good lease only has the eighteen months left on it so he just says look take them all bad i'm going to leave but i'm with take my car and my franchises with me so you've got these five empty stores that you can immediately relax i can move on to better business and that's exactly what he represented to the bankruptcy court several months later one file for bankruptcy so yes so even if  debtor voluntarily terminated the lease in exchange for ten thousand dollars when in fact the lease was worth two million dollars he would say that that's no problem that wouldn't be a textbook example of preferential transfer well your honor i think that's where we talk about collusive agreements and fraudulent activities and there's no evidence of fraud or collusion except that the committee argues collusion as any voluntary agreement will that's not  to you i'm sorry you don't have to prove fraud in order to establish that it that the the debtor is made a preferential transfer well that's where i'd be perfectly open you know and this one falls under the protection of three sixty five of the argue the question i thought was if it was so abhorrently fraudulent we're now stop the horribly fraudulent preferential preferr creditor over the body of creditors now why and why would that be extinguished by three sixty five see now what you're saying that yes referen transfers are permitted by c three judge we agree with judge kelly who addressed this issue and she talked about there being saw a need for harmonious one when there is this business transaction the landlord who takes the property back in the pre bankruptcy nonresidential situation should not have to look back and worry about being sued a year or two in advance or in the future by a kurdish committee purposes law we talk about the the advent of our malls we have one acre tenant goes under a bankruptcy trustee or creditors committee gets involved the entire mall gets crippled for two or three years we have a lot of black dark buildings in this country where there's no business going on there are dark buildings and so this said this is part of them is that this case well yes you're on a three sixty five is to give landlords and business people broad authority against later bankruptcy actions if they have done a voluntary agreement and a non residential real estate type of a case we want to keep property acted out in the markets without this protection landlords can take properties back that is the that is the real impact of this case i ties up our property owners it prevents business people from making reasonable business decisions you can say that about any preferential transfer well you could your honor of congress has spoken in this regard  you floyd a transfer you complicate life for everybody that's here that's the logic of your position yes and congress acknowledged the public policy concern about allowing certain transactions not to be under the preference attack and to remove that clouds of property can remain open and be available well don't you let don't you eliminate the cloud if you can find the remedy that damages just the fact of litigation itself will tie the hands of most small business people all its life right but that you have a bankruptcy it's done for it's tough on the bankrupt right just like to mention the policy concern that was expressed with a hypothetical could a debtor terminate a lease that was worth ten million dollars get ten thousand and return but just say tough luck to the creditors the the bankruptcy on its head and it's the reason why there are a void in statutes in the bankruptcy code that transaction is constructive fraudulent or preferential and the code provides mechanisms for the estate to recover that value rather than just telling the body of creditors you're out of luck this one creditor gets to keep all that val