court with respect to the first issued honors and that is whether or not the court erred in failing that we feel to prove the value the asset was that was transferred as the court may recall from looking at the briefs what happened was in april  a right to prevent or block the sale of certain patents they were held by harris corporations that formally been tronics and had been conveyed to here is a corporation in connection with a transaction between the parties in two thousand and four these were valuable patent rights and at the time told tronics had a license to use them and have the right to block a sale of those patents to anyone up through july thirty first two thousand  and then after july thirty first two thousand and ten it actually had a right of first refusal to purchase those patents if there is determined that it was going to sell the patents so what happened in two thousand and nine was that harris decided it was going to that that that better kept that business except for the pats situation we're talking about yes around there was a it was in two thousand that tronics purchased a division from harris and that division including the rights to those yeah motivation to harris that's correct and the patterns are we conveyed as part of the restructuring of the debt arising from that initial transaction in two thousand and four that's correct or are and but and so after that point what it put them out for sale and in late two thousand and eight in their discussions with r p x about a sale that knew pretty quickly and ultimately they they agreed upon a price of twelve million dollars for the sale that patent portfolio however sell the patents free and clear the blocking right through april of two thousand and nine at the time they did that the sale was already arranged p x it was a done deal and it was going to be a sale for the twelve million dollars and what happened it what the what judge williamson said alone with the district court agreed with was that what was lost by toll tronics at that time was the blocking right not a right of first refusal because that had not matured yet the problem is the two are tied together harris could not sell what his want to do was sell patents and he couldn't do it unless it got rid of the blocking right in because it already had a cell lined up and ready to go what it affectively did was eliminate any chance of a right of first refusal knowing it had a cell lined up by take by eliminating the blocking right for a period of time to lead sell those assets free and clear of anything in return what tel traumas got was five thousand dollars ok kind of what can we say that at the end of the but they could not realize that value unless a blocking write was released that was the only way they could do it and the person that held that blocking right was told tronics tronics received five thousand dollars for the release of the locking rights that resulted in twelve million dollars being realized by harris and if you look at the objective value of the patents that were sold which is what the case law says you must do you don't look at the subjective motivations of the parties or the subjective valuations of the parties the only evidence as to the value of those patents was that of mr goldman of the trial which was fourteen million dollars so what tel tronics lost was fourteen million dollars less what it would have cost to obtain those patents that's the option what i'll call the option price what had to be paid to acquire those which was about one point six million dollars i think the exact amount was that was calculated and presented at trial was one point one million six hundred fifty two thousand dollars and of course the five thousand dollars so that was that's what they lost out on by allowing the elimination of the right to tell tronics had to block the sale or purchase ultimately the assets but i look at the economics of and  dynamics of this when harris went to tell tronics to try to negotiate their way out of the blocking was told tronics asked whether there was a deal out there and based on what i've read they got what was possibly a very cute and possibly not entirely candid answer but even putting that to one side the only reason harris would come to them was that they were contemplating at least a sale of the patch right there trying to complete the sale of patents i'm sorry that they were  and a minimum contemplating the there was a sale of the patent portfolio yes and so knowing that that was the game tell tronics gives up the blocking position for five thousand dollars it  i'm really puzzled by that and about what its implications are for this case because tel tronics certainly knew what the patents were certainly knew in some sense that they were worth more than five thousand dollars it makes no difference for fraudulent transfer action what they were thought about the assets whether they thought what they thought the value was and what they thought the acquirer was receiving or that it's not an element of a fraudulent think construct a fraudulent transfer of either party into that you can't you don't look to whether or not the debtor could have afforded it at the time because it's the very idea behind a fraudulent transfer that you're taking advantage of a debtor who is a week in financial position or have put the question i ask you i mean i've read the cases to the question i asked you was really about what's really going on in this dynamic i'd like to understand that well what was really going on in the dynamic was you had what i think the evidence shows and there's not a lot of evidence about what the party state of mind was at the time was that there was a longstanding relationship and business relationship between these parties harris went to tell tronics and said we need a favor do  these things from time to time we'd like the flexibility to monetize them for whatever reason tell tronics i believe maybe they were only concerned with having a license and not owning the not have the ultimate right to own the patents so they let it go for a song that's all we really know what happened in this case and that fact story again what harris thought they were worth but told tronics thought they were worth is not relevant to you know what really happened with respect to the de at least an item of evidence on the question of whether there was fair consideration paid i don't believe it is because it's the objective i the case law is a very specific on this and that side of our brief that the subjective views of the parties is not the measure in a fraudulent transfer case so how would i look at it what i willing buyer will pay to willing seller is irrelevant what it is is a contest of experts well in a willing buyer willing seller is the fair market value an what we are saying is the debtor did not receive fair market value for these assets which goes to whether or not there was a reasonable equivalent value in the fraudulent transfer case so willing buyer willing seller when you have a distressed seller who apparently doesn't really know what's going on and doesn't know what the value is that's what they construct a fraudulent transfer action is designed to protect against i'm jake and i didn't know what my house was worth and someone came to me and said you know i'm going to give you one hundred thousand dollars for your house that person knowing that there were valuable mineral rights i'm in texas that were in the backyard where they could frack and make millions of dollars i transfer that at the time that renders means all that or am and saul that then that is the bit that is a a classic construct a fraudulent transfer case and so what the what the sell er knows or thinks about the value of what is being transferred is not relevant it's what the what is the objective value because the whole idea is you're trying to benefit the estate and benefit the creditors the way you do that is you get back into the estate the value of what was transferred out of the estate for less than a reasonably quick one and that is the very essence of a contract fraudulent transfer life and that's why the he fought so motivations of the parties are not relevant in that regard this is an actual fraudulent transfer case where we're looking about whether or not there was intent to deceive or intent to hide assets it's whether or not they were transferred at a time when the debt it was insolvent for less than reasonably good at with respect t qualified and we don't argue he was qualified but here's the problem with what he did so there were certain maintenance contracts that weren't reflected on the balance sheet because it's not a gap accounting item so you have to go in value those m contracts if you want to say they have value and then add those into the asset side of the balance sheet see whether or not the debtor was solving at the time of the transfer the problem with what mr issue did is that he didn't do any analysis and he admits that and  that's through the trial transcript of this testimony starting on page twenty six through page thirty eight and it's very clear that what he did is he looked at a couple of other valuations that are the people did which an expert can do and one is our standard or view that  deciding the bankruptcy court value no pun intended the testimony of us or more than new come on this point what is our standard of review and evaluating that decision by going to be the use of discretion standard and the methodology utilized i think you can look  at as a matter of law the admission of the testimony in the court's consideration of the test and just areas of discretion standard what's your best argument given that broad standard why bankruptcy court abused its discretion because because this witness did nothing to make sure that the underlying opinions on which he based his opinion which in his words was an opinion for demonstration purposes that's exactly what he said i've been in this thirty years i have no idea what in the union for demonstration belonged in the solvency analysis they should have been reflected on the bank on the asset side of the balance sheet component number two was opinion as to value of those contracts now as i understand it the bankruptcy judge accepted asher's testimony that the contracts whatever their value belonged on the asset side of the balance sheet for the solvent so you now and then proceeded i read it not to accept his testimony as to value which is the point to which your argument about his not having made an independent analysis of value goes and then say your client lost because your client was obliged to insolvency and given the acceptance of asha's testimony that these were assets and the lack of any proof on your side as to what their value was you lost so that the argument that he had an inadequate basis in fact and analysis to value the contracts ultimately doesn't matter here as i understand it belonged on the balance sheet was no good or erred in saying that your side had the burden of proof on insolvency and there was a failure of proof because you didn't prove what the value of the contract was and taking that failure into account never proved insolvency now am i not right about the an here i think you are correct on the analysis your honor and what mr move from all our experts said was yes you can have an intangible asset that you value in place of the balance sheet for insolvency purposes but in this context in looking at the maintenance contracts you can't value those without taking into account the burdens that are associated with those two main to service the maintenance contracts to have the goods on file to provide to the people under the manus contracts t have the administrative staff to maintain two services administrative burdens relate to the maintenance contracts and what he testified to and this is in his testimony both on page fifty eight and page seventy four and on from the his trial testimony is that that is a flawed analysis because it fails to take into account the burdens associate with those contracts and if you didn't do that on an enterprise valuation basis of this debt or that or had a negative enterprise valu at the time and had thirty three million dollars of the cumulated deficit in other words accumulated losses from these maintenance contracts that were supposedly so there you go but what do you do with the fact that the trial judge didn't credit that i don't know why one judge williamson didn't credit face a case showing that the debtors in salt the other side says wait a minute you have to take this into account and we think this amount should be added then there has to be a credible basis for that argument to overcome provocation case of insolvency and there was no credible case for that argument because the fundamental flaws in mr rogers analysis where he did no one else is he did nothing but that all went to what the number was in the last analysis both and then the question is what's the number and then disputed osher use number the judge did not accept asha's number and the judge didn't accept move testimony that it got you into negative territory if you took into account all the burdens associated with the contract and why isn't that should not have been that doesn't matter this is a trial a bench trial or a jury trial is fundamentally flawed analysis should it mid if it matters a lot i mean suppose you have a trial it's always dangerous to make  we want you to dismiss now they could have done that and if the judge was of that view you would have lost right the difference here is what they wanted to do was add something to the balance sheet to change the solvency analysis and when they want to add something to the balance sheet to change the solvency analysis the burdens on them to come forth with credible at miscible evidence to show what that number is and they failed to do it but i think that is what the differences well the i don't accept that i think maybe you can persuade me i'm mistaken but they came in with credible evidence that the right accounting and now the right solvency analysis was that the value of those contracts what ever it was bill to prove up a few constructive fraudulent conveyance case a plaintiff must show that there was a transfer made by the debtor for less than reasonably equivalent value at a time when the debtor was in appellant cited to several cases that identified the measure of damages in a fraudulent transfer case where the subject of the transfer was an option or property subject to it as being the value of the property less the strike price on the option the problem here is that the debtor didn't have an option but the debtor had was a blocking wri parties a call to the blocking right throughout this case it was essentially the right to stop a sale of the patents by harris testimony at trial concerning the blocking write was that tell tronics real concern was that the technology not be passed on to a competitor that was their concern that's why the blocking right came into place the cases cited by the appellant define an option as giving the holder of the option the right to unilaterally compel a sale at any time that's not what the debtor had in this case mr mcdonald's let me tell you where i am ok the debtor had this business that bought from harris correct were part of the value of the business at that time correct yeah that's what that was in the blocking or losing the blocking right and so so the way i look at it is what did that do to the business and  to decide what giving up that had whether or not that was for lack of competence adequate compensation but not to take into account the whole business i would think well yes i think and i still could use  to harris a part of the bible of state ok i accept that ok i mean that that's my approach to this problem right and so to figure out you have to have some estimate of that whole the whole business and what was given up i would think well that what you would what the what the bankruptcy judge was wrestling with well the bankruptcy judge was wrestling with what was the transfer made by the debtor yeah i understand that and so yes the last transfer say again i'm sorry it was the last transfer as i understand it right that the transaction that's challenged by the plaintiff the appellant in this case was the release of the blocky right that's the last thing that happened to this this business right there were sent to block and that's the transaction that's challenge here i understand that and so the question was one of the one of the ways i look at it is what what effect that that have on the value of the bed we believe it had not that that happened if i can see it didn't have any effect on it and we can demonstrate that a couple of different ways first of all if the court considers what the remedy for a plaintiff in a fraudulent transfer case is under eleven u s c five fifty a court should avoid the transfer return the parties to the original condition and then attempt to value the result so it's helpful to go through that exercise so let's avoid the transfer if you avoid it put it back where it started harris what on the what's that worth we don't know because there was never any proof offered on account of that now second way we can look at what we do know one thing there were sophisticated parties and both companies were publicly traded at the time of the alleged fraudulent transfer both parties were highly sophisticated and completely understood the transactions they were making tektronix had to know what that what had an ethical or what that would do to its business i s right in fact this testimony a trial the president the now former president and c e o of tell tronics testified that from his perspective the blocking right didn't have any value other than say to ensure  that no competitors would be formed as a result of the transfer and they preserve that right in the transaction they did indeed so that that right was never way there was some discussion of the why not argue that it certainly didn't affect business mines as long as a competitor didn't get these rights they had five thousand ten thousand whatever that's correct you make an argument the other way that they could have struck us tougher bargain that hair would have paid a lot more than five thousand dollars to be out from under the blocking right the argument could be made but there's no evidence to support it on this record the only evidence the only evidence with respect to what the blocking right was worth was what harris paid for five parties arrived at in order to clear that impediment but the second thing but the reason i mention that is more not dealing with a situation which they're not dealing at arm's length and they're not sophisticated they were certainly sophisticated thousand was in the ballpark absolutely so do you disagree with your adversary then who argues that this was a transaction between a willing buyer in a willing seller neither under any  compulsion to engage in the transaction and he says nevertheless it's not any evidence proper evidence as to what the value was of the blocking right i take it you disagree with  that i do i think that there's evidence that the blocking right first it's as the blocking where it was completely separate from the options from a potential option that's not what they held but there's plenty of evidence as to why tel tronics thought that was the right why they thought they'd already gotten the economic benefit from the series of transactions that preceded it and ultimately that's how they arrived at the deal as long as there was no competitor it no longer had any value to it i mean there was testimony that even if a right of first refusal had been in effect they wouldn't have been in an in a position to monetize that lacked the wherewith all they lack the resources they lack the knowledge tronics was exposed to counter claim risk which harris was not your adversary says it doesn't matter that they could have never heard purchase the option they didn't have the wherewithal my colleagues argument goes to the question of it still doesn't resolve the question of what is it that you are valuing when you value something what is it that you're value and i mean in essence our argument is they value the wrong asset it ultimately i believe that persuaded judge williams in that that they had indeed valued the wrong asset the fundamental flaw in the plaintiff's case is that they assumed to be equal the rights of an option holder and the rights of protect their customers by taking patents off the market and they would have been able to do that with the form of license that was proposed but both harris and r p x testified that that form of transaction would have been accepted and so at the end of the day what effect did the loss of the blocking write have there's no evidence in the record to suggest that the effect was anything other than nothing and so to suggest that there's an  at fair valuation in this case both experts adopted essentially the same methodology they started with the balance sheet they made certain adjustments to it both of them increased inventory and tori's held on a balance sheet it cost not value we know that tronics made a significant margin on its inventory and reduced the liabilities by certain obligations owed to equity inside the only question that that they disagreed on was these maintenance contracts and these maintenance contracts that represented that significant make significant revenue source for tell tronics over a period of years never credibly explained why not and on that basis judge williamson accepted the portion of testimony that went to inclusion now i just heard counsel argue that somehow there's a burden of persuasion a burden of proof shift what harish is evidence did was point out and asset that the plaintiff had left off of its computation set me as question yes or as i see it all the experts were doing was monday morning quarterbacking i'm sorry your honor the experts were gauged in monday morning quarterbacking you know i mean by  that i understand the expression that they had a transaction before them that went through some adjustments that's right and they're looking at what these sophisticated arm's length dealers were doing as experts took it to the extent simply if they didn't have money experts we'd wouldn't have anything you'd have an assumption that all these things were done for a fair value as well i think you would still have the  fair right as experts that in this case so how what i'm what i'm driving out of what's the problem of value of the monday morning quarterback referring to here was going to the question of insolvency but yeah i mean yeah that's that's what happens is the experts look retrospectively at a point in time and they say yeah they the world were not insolvent and in this case the the and again i think it's important to emphasize that mr ocean never mr oceans number was never relied on in any material way by the court he never got to a number in fact as williamson never put a number on the maintenance contracts only said that yeah the plaintiff left him out and that's the essence of his his testimony a point about enterprise value the testimony that mr luker ball attempted to give with respect  about the inclusion of the asset as it related to enterprise by that was the gist of it because because you had to consider it in conjunction with the other attributes of the business that you should by that analysis leave the asset out that was exactly the testimony that judge williamson found to be not credible and your honor that your honors that's the essence of the of our primary issues on appeal i'll speak only briefly about our cross appeal it's filed as a protective matter as an argument that what we believe is correct would apply in the circumstances if your honor is found reason which  we urge you not to but if if you found reason to reverse that this argument would need to be considered and your honour's can let you have more questions i'm not going to spend any more time i think we understand your position thank you  transfer that's right here's the here's the reason the reason you have the statute is true is exactly to prevent that from happening when it works to the detriment of the creditors and cooperate of the bankruptcy judge was faced with the proposition of whether or not this was so bad whether that was fraudulent use whether there was reason to believe that to say it would give it away that's correct they didn't have to do that whether there was a reasonably equivalent value that's the would have a claim for corporate negligence i think today might you have known right it's a similar idea this one is a cause of action that runs to the creditors of course for a loss of assets and it's not based upon any parties from an objective standpoint did you get enough for what you gave up because the persons that are harmed by that are the creditors of the estate and that's who this remedy is designed to protect and benefit or the creditors of the state and it's not as mr mcdowell was to tell you that you just return what was given away with the statute says is he returned it's given away or the value there of and that's what we're looking for is that what to get a return of the value of what was given up and go back to judge kap question at the end we were discussing i went back and looked at the opinion and i thought this is what judge williamson that said if you look on page fourteen of judge whims winston's opinion what he says that what he says that mr  mugabe all never credibly explained was mr move him all statement that you can't just take this off the balance sheet and not consider what the attendant costs are and the effect on the business of taking that off the balance sheet he never addresses in his opinion at all mr macmall statement on pages seventy four and seventy five of his testimony from the feb twelfth transcript where he says that ok i'm going to use mr rogers analysis and that results in a negative enterprise value and i've asked the court to look at that because that testimony came in without objection i know there was one part of the testimony mr newcome all that the court disallowed that testimony came in without objection and that testimony was that there was a negative enterprise value and he if  you're what your argument is there aren't any well in here's bennett yes and here's what i mean the fact that he doesn't talk about something that doesn't mean they guarded well here's here's why i think that's important this case because what judge williamson concludes in or the argument that the judge ignored avodah altogether i don't know what i don't know what he did it appears if you look at page sixteen of his opinion what he says is there was it doesn't say there was not credible evidence presented by the appellant and so there was no evidence presented as to the value those maintenance contracts and there was evidence presented i don't know why it wasn't considered and there's no discussion of it but in my opinion i'm looking at the river the opinion the bankruptcy reporter so what my pagination is different but right near the end of the opinion the judge said because the court conclude the maintenance contract should be included in the balance sheet it is the plaintiff's burden to prove the value of the maintenance contract when he added to the other assets do not exceed the liabilities and he then goes on to say that you failed to meet that burden implicitly he said i don't buy mocha moms testimony well i wasn't any other way to read that i think there is particular the context of where he  specifically says i don't buy mr make mauls analysis and that's when the analysis where he says he did not credible explain why you can't take these assets off the balance sheet value them and then just stick them back in without considering the attendant cost i think if the court is going to make that if the court is going to go down that road to the proper course would be to remanded to judge williamson to make specific findings on that testimony because it is simply not addressed it was briefed it was presented to the court it was argued to the insolvency that address isn't it it addresses it if you consider the evidence i will agree with you with that you know sometimes i make mistakes all the time and sometimes judges make mistakes and i think the judge williams great as good of a judge as i found him to be during the course of this case and he doesn't need me to tell him that but i think he simply missed that testimony and it's not addressed and not taken into consideration but the problem is that we review judgments we don't grade opinions but you're on top of look at the evidence was presented if you look at it you look at what he wrote in total to take into account the evidence was presented at trial to see if the conclusions he reach were supported by the evidence and the evidence in this case where he were judge williamson says that appellant didn't put on the evidence of the value the maintenance contracts that simply wrong that is not a correct statement of what was presented at the trial and if you look at mr moody most testimony where he said if i adopt mr ocean's analysis which i disagree with but if i adopt his methodology what he do and what he need to do in this case in this company has a negative enterprise value which means that it's insolvent and so we did put on evidence mr move them all that in some way or shape was not considered by judge williams if he did consider it and if you did analyze it and simply didn't find that credible he didn't say it and the reason i think that's important is again where he did find the not credibly explained by the part of his opinion he made the effort to say that so what that says to me as i read this opinion is he didn't consider that evidence because he overlooked it and if at a minimum i believe that what should happen as should be remanded for judge gain that's that's in our brief he took the high point in a low point and divided by two and said i'm going to use that for demonstrative purposes did no analysis of whether or not the underlying opinions had any validity no analysis of whether the objections that were utilized were valid of whether the high point and the low point where the appropriate high low point to begin with in just parroted an opinion that was given by someone else without doing any of his own analysis not just his own analysis but making sure that their analysis was fundamentally sound of the case law says you just can't do that it's very clear that under under dahlberg that is not a proper opinion that's not a proper way for an expert to testify and it's not a proper way for an expert to utilize and other experts opinions and deriving their own opinions you have to test the opinions of the other experts and see if they're valid person on the protective cross appeal that's briefed the way i read the case law is if you when you can't complain about something that the judge didn't rule on at t court level which is what they're doing if the concern is that they think that they would have waived it by not bringing the protective cross appeal that's not our argument this gets remanded for some reason we don't think that way that argument fundamentally there was no executive or a contract in existence at this time because there are no remaining obligations under that agreement that would make it that had made the executive henri it was assumed under the plan protectively in the case and there were multiple findings made about how that was not judicial stop or that been done what the apple he would be here arguing is they can't sue on it because they breached the contract and so it was done as a protective measure and that's the only reason that was done in this case thank you all for your time today