i'm sorry the ad hoc committee of unsecured creditors and the o p c o note holders we have a lot of twenty minutes of time each i understand mr clement you're going to argue first is that correct ok all counsel you should assume that we are completely familiar with the written material you've submitted and the key cases that you have cited in connection with that material mr clement if you'd like to begin thinking your honour's may please court pulp lament for the counts when a play and proposes giving a class everything for their claims that the law including the bankruptcy code in titles them to receive the classes unimpaired and cannot vote against the plan or hold out for more than the code the poll provides that is true even when provisions of the code reduce the value of the claims relative to their worth outside bankruptcy instead the relevant question under the plaintext of eleven u s c eleven twenty four sub one is not whether the code impairs the value of the claims but whether the plan leaves the claims unimpaired the third circuit adopted this commonsense rule of plan impairment time i understand that your honor but i don't think the bankruptcy code the court purported to adopt an interpretation of eleven twenty four sub one that's limited to the solvent debtor context i mean that the tax is the t it applies whenever you have somebody who so so you can think about is the difference between claims and allowed claims i think the way most courts have thought about it is the difference between plan impairment and statutory impairment but however you think about the dichotomy i don't think it really there's there's any basis in the tax to have one rule for solvent debtor cases and a different rule for insolvent debtor cases which are i mean the whole purpose of bankruptcy is to divide up when and when that all  could be paid divided up that it would be equitable well i think i would disagree to this extent that maybe it's sort of the main purpose of bankruptcy but i think more broadly the purpose of bankruptcy is to take debtors that are in a situation of financial distress who take advantage of the bankruptcy code provisions in order in good faith to address that financial distress and then they get the benefits of those rules and that's true even even if they you know you can go into bankruptcy even if you're not technically insolvent you can certainly have a situation like this where because of changes in commodity prices my clients were solvent at insolvent at the point they went into bankruptcy but afterwards by the time the plan was proposed they were actually saw now obviously i can understand why you might have a concern in the back your head that well maybe somebody could manipulate the bankruptcy code in a way that they aren't really in financial distress and they really are just filing to get the benefit of the sort of hundred cents on the dollar for everything the code allows and they're also going to get post petition interest and we had a debate about what's the right rate for that i'm happy to talk about that in due course but they are absolutely going to get post petition interest and so i don't think there's anything unfair about that or maybe to put it differently if there's anything unfair the source of the unfairness is the code not the plane it's the code after all that says that if you are legitimately invade privacy then there are certain claims where there they are reduced they're reduced to you know a lender doesn't get everything that the lender was going to get under the contract outside of bankruptcy that's the p p i set of facts here you have a situation where the lender doesn't get everything they would have gotten outside of bankruptcy because the operation of five a to b two yet same thing with you know heaven for fend lawyers who think they have contractual right to all of their fees but hadn't creditors contract rather than some other disposition well we're under i think that would be a concept in my friend certainly argue for the idea that there's some sort of solvent debtor exception that would operate sort of independent of the provisions of the code we don't think there's any support in the law for that certainly courts have applied these provisions to solvent debtors before and i think this is a classic situation where the code provides an answer and i don't think that the code allows you to essentially either skip back to the the prehistoric days of the bankruptcy act and draw that's a solvent debtor principle from those looking here at the this is the description of the class for op cofounded claims that your clients proposed to the bankruptcy court and there's a description of classification and then there's a description of the allowance and the allowance is the principal amount and then there's the pre partition interest and as you alluded to earlier post petitions what if what if at the end of the allowance your clients had said and also the may call them out what would a bankruptcy judge have done with that i'd obviously i don't know for sure i mean i think the bankruptcy court might have said you know pointed out that if that's a mature interest there is a dispute over whether that's a mature interest and if it is the plan doesn't need to provide that i'm not sure there's like an absolute rule that says that the play in can't provide it but i don't think the plan with the plan provides that unnecessary delta or not comes within the meaning of impairment that's that's injured i thought you would have said that fiber to be two and it's our own and treat interest operates as some sort of automatic prohibition against the power of the bankruptcy court to confirm such a plan is that not  may be true i think our argument would be that whether or not that's true because i am just i guess on my reading five a to b to you i'm not sure it addresses that in those terms but i think that the point would be that a plan that doesn't provide for that delta leads the claims unimpaired so if we get it this way what if instead of saying you can also get we also allow them a call them out what if it said we also allow in the church interest is same answer that they could have done it and who knows with a bankruptcy judge who didn't i think structurally should be the same interest and maybe just if i could offer one more a possibility they could have said in one hundred thousand dollars without specifying what that extra bonus payment was for i'm not sure that as i stand here i know if there's something in the bankruptcy code that would prevent them from putting that in the plan especially for all the other classes get paid with they're supposed to be paid maybe there's some principle that would otherwise do it but if the plan happened to just got a bonus payment just because they were feeling really great that morning i don't think you would say the fact that the plan doesn't provide that anywhere in any way impaired the claims and i think the same analysis applies to make color and maturity interest or anything else if there is something that the code doesn't require you to pay but doesn't absolutely prohibit you from paying it may be the cause the plan is what's providing it but the plan is not impairing your claim in any way by not providing that which code doesn't require you to provide and i think it's helpful for context for this you know in other cases this case this issue about whether the make whole is a mature interest was essentially deferred but that under the bankruptcy rules that could allowance instead of saying we provide this thing that the code may or may not provide what if it just said we bracket the make whole amount in the creditors can fight about that in new york state court under new york law and i know you have arguments about whether it's a double dip and all the rest of it but what if the allowance you just said we carve out the make whole amount and we're not discharging that in this plan that you could have written a plan that way right i think as i'm standing here i don't know of anything that would have prevented us from writing the plan in those terms but but but i think as long as the plan provides everything that the law entitles the class of claim holders to provide and when i say the law in that context i include the bankruptcy code then i think you would include conclude as a matter of law and consistently with p p i that the plan is not what is doing the impair in this is the thing i'm struggling with if if you could have written a plan to say we provide you the make or now you could have written a plan to say we provide you w you could have written a plan to say which is going to let you go fight about in new york state court and there's nothing in the bankruptcy code itself that would prohibit either writing a play in that way or a bankruptcy court from confirming a plan that way then it really sounds like the plan is doing the work right it's not like the code has some sort of over the top you know legal effect on on the the rights of the creditors with all due respect i don't think that's right i mean the plan to be doing some work but it's not doing the work of impairment and that is the critical thing and if you look at the statutory tax you know eleven twenty four one it asks whether the play in leaves the claims and the rights under those claims essentially since whether they continue to get everything to which they're entitled but it's this alter of the legal rights  in of the creditor so and it will talk about the exact text for talking about that's the plane leaves an altered the legal equivalent contractual rights to which such claim or interest in titles the holder and so under circumstances where the plan does or doesn't does not provide something that the holder is not entitled to as a matter of law the plan is not compare not a plan like said maybe the plane could provide a bonus  but if it doesn't it is not impairing the legal rights to which the holders entitle to on the day before play in confirmation the plane's been proposed but the day before it's confirmed is there any legal right to the part because the automatic stay and other things and so it's sort of have to wait until plane confirmation before you can do anything anyways but if the day before playing confirmation for the contract obviously says equal amount is due and payable what if the day before plan confirmation the bankruptcy judge dismisses it under chapter three right in the good of going to court and enforce that legal right absolutely but but the plain still wouldn't have done any impair so that you know because at that point the plan sort of goes away and i think it's worth understanding that you know certainly congress when they passed this statutory provision if where they were concerned about the action taking place was the confirmation of the plan or the discharge i think they would have used those words i think the reason they created the separate concept of impairment and plan impairment i think is the correct view is because they were really trying to have a process for ascertaining who gets to vote on the plane and i think what they recognize is if you are getting everything to which you are entitled under the law including the bankruptcy code you're not in a position where he should be able to vote on the plan or hold out for a premium because when indeed holding out for would be by definition something more than the bankruptcy code or the law otherwise allows have and so i think if you sort of think about kind of where eleven twenty four fits into the overall code it makes even more sense that the provision is at that point something that applies to what the plan is being proposed by the debtor at that time and it's not sort of looking forward to what might happen with confirmation or the like not to want to take another edition of three minutes i know we had a lot of questions and will give each of your opponents an extra minute and a half to go with their presentations if you would continue you know i've we see that your honor and i think if if you are with us on the issue of it being planned impairment and not statutory impairment and i do think it's worth emphasizing that would mean being with the third circuit basically every other court that has cited this case then it's really a question for this court whether it wanted to go on and address the questions that the bankruptcy court did not address in the first instance because he adopted  statutory impairment we think that the answers to those questions are actually quite straightforward and we think there be some benefit in terms of the development of the law for this court to address those issues but obviously you would have the option of remaining i'm going to start with the observation that's relevant something i said in my colloquy with judge davis really or which is neither of these next two issues really lend themselves to a completely different rule for solving debtors so the question about make whole payments the question about what's the right interest rate both of those are going to arise in solvent and insolvent debtor cases and probably arise more frequently in insolvent solvent debtor cases and so i think it is probably right to decide those issues without sort of an overhang from the fact that in this particular case you have a solvent that as to the make whole amount it seems to me that this court has already held that under five a to b two you're looking not just for interest but the economic equivalent of interest and it seems to me that that describes the amount to a t if you look at what the make whole amount is it is literally the future payments that would be made under the note backing out the the the principal and then discounting to present value seems to me that is simply interest or at least the economic equivalent of interest and that's what the make whole amount provides i mean part of the reason there's this whole double counting issue with the post petition interest is because they may call them out in the post petition interest are both providing for interest are ones directly i would include boat if it's from the same concept as you all describe in the briefs that this is for deprivation of use of the money while it has been lent why would why would the documents provide for both the make whole amount and an accelerated interest i think there's an excellent answer to that question which is in the main the make whole amount is going to apply or certainly lots of it's applications it's going to apply when there's actual  prepayment and when there's actual prepayment as opposed to acceleration in the nonpayment for some period of time there's no double count so the double counting here really has two critical ingredients that is relatively unique to this situation and is not true of other ma payments in the the typical make all pain in the situation we calculate the make whole from the point that you actually pay off the amount this particular may call actually calculates the make whole payment amount at least in cases of acceleration at the point of the default event and then the problem here is the default the fent happens then there's five hundred thirty two days in bankruptcy the post petition interest provides interest for the five hundred thirty two bit days in bankruptcy and the provides compensation for interest from the date of think of c to the end of the notes including that first five hundred thirty two days so there's double payment for interest for those five hundred thirty two days and in the normal application of it when somebody actually pre pay is there's no double counting problems that's why i think it was written the way it was you can now is write a contract better than i was write a statute better but i think that's why the state that the contract was written with ok all right thank you mr well  just think he's mis reading the text on them twenty four what is impairment by definition it is alteration of what a claim not allowed police allowed claim is a phrase used throughout the code not here a claim is a set of state law and rights so we are in the bankruptcy code of those get altered they never get altered until a plane is confirmed and the power of the bankruptcy court conferred by congress is exercised to make those state activating they don't change claims until and unless there has been confirmation and the power under eleven forty one days no proper motion made to the bankruptcy court have discretion to dismiss that the move on foot have to show proper grounds for dismissal i don't know if those grounds existed here unless the plan were to be construed as  wishes it to be construed now which gets us to the point your honor of eleven twenty four what is the purpose of this statute as an impairment concept it's central to bankruptcy that creditor voting is essential to chapter eleven creditors negotiate they form groups deals are made and they can vote for them including the example you gave they could have given us a make a we could have voted  but the debtor has an election the debtor can exclude a creditor or a class of creditors from the process entirely you can't vote you won't have the power to negotiate that is conferred by voting but in exchange we w you undisturbed by this entire chapter eleven process that's that's what eleven twenty four is about that's why the phrase allowed claim isn't there to talk about a provision of texas a different statutory provision that uses both the power to vote and allowed claims and that's a living twenty six yes so it says the holder of a claim or interest allowed under section five a to suppose i believe that the may call amount is a class you deny us the make hole in that class that makes us impaired we vote now if we assess accept it because the debtors insolvent and this is the best we're going to do life goes on the plans concern if we vote to reject then you go to a cram down here and in a crane down here and you have to consider whether the plans fair and equitable which gets right back to judge davis question how can it be fair and equitable when they take three hundred eighty six million dollars of the creditors and co insolvent corporate parent shots what would happen in the event and i'm trying to understand the interaction between eleven twenty four impairment and eleven twenty six a which talks about voting because if if in fact you've been allowed everything that five of two two and the power of voting and i'm just trying to understand how those two provisions interact with each i believe the way that works your honor is that if if you haven't allowed claim you can vote you can reject it and it's in tension but there is so much in your brief about the distinction between claims and allowed claim it strikes me as an interesting provision of text that very specifically talks about both the power to vote which i understand to be the principle argument for the no holders and also the concept of allowed claims under five to right there's there's no other place to look for this your honor is right in the first sentence is a five zero two b what happens when someone objects to the filing of a proof of claim it says that the court will determine the claim claim not a locally and then we'll allow it except to the extent of one two three four five so they're teaching you right their claims are different than allowed claims and if we had any doubt of that this we would just look hundred ninety four men congress was so offended by the fairness problem the judge davis identified or a solvent debtor is avoiding post petition entries that congress just struck in about six months just struck that allowed claim reference right out of the statute and i know people disagree about the relevance of legislative history but legislative history is never more powerful than when congress was reacting by name to a specific court decision so p p i obviously deals with that legislative history and in would suggest that your argument is overbreeding if i i'm sorry if i may p p i is careful to distinguish the post petition interest situation says we're not addressing that here making a distinction from landlord claims people can argue whether that's a valid distinction but my friend has to nail its colors to the mast of p p i he's going to thing else or p p i carves out post petition entries he also has colliers in every case that's ever from his reply all those cases that you refer to have more of repetition than analysis about them and colliers just says this is what the rule has been none of those cases are dress eleven forty one the none of them explains what is it in five and two that could alter a claim before a plan is confirmed now if i may your i want to come back to one of judge davis's questions earlier you asked my colleague for his best case i'll tell you what his worst cases is worst case is the case decided by your colleagues in the sixth circuit in dow corning where you had almost this same situation here you had a solvent debtor acting under the bankruptcy code which sought to avoid paying creditors the default rate of interest now in that case they impaired the class the class voted no they went to a cram down hearing the court said it's not fair and equitable you don't take solvent and we don't have a bankruptcy system so that solvent and indies can take money from creditors and give it to their equity holders so the rule that my colleague advocates here would leave ironically an unpaired class of creditors in a worse position than an impaired claims there's nothing in their brief that explains why that could ever be so i know that my colleague mr dunne will have time to address some of the other issues in the case but i do want to take just a moment to say two things first with regard to this double counting issue the formula here which is designed to pay you nothing in an environment where you're not harmed  prepayment and pay you something where you are on the formula depends that you actually have the money as of the relevant date of calculation and so that's why judges care was correct to say that there's a distinction between making you whole as of that date here the petition date and compensating you for the five hundred and thirty two days that he referred to and the last last point i did want to touch on is just this notion of windfall it's in the first line of their brief that this is a windfall it's a huge amount of money we never asked for a dollar more than is owed to us under our contracts there are if this is a windfall it would be a windfall and a reversal that they're looking for you issue no i don't i don't think so what were the rain man for i know there were issues in the case i'll try to take a quick look and i don't think there was any remain on your honor on the question of the allow ability of interest at the default rate i know there were other issues in the case that had to be considered on remand i just don't recall at the moment what they were thank we can give additional time if that says and i'm here and i know it given some additional time to the appellant that's fine good morning court since the abrogation of section eleven twenty four three to deny an unimpaired creditor post petition interest at the contractor it we cite numerous cases such as the ninth circuit case in pacifica that concluded that unemployment demanded payment of post titian interest and was at the contract rate at that case there is not a case that that shows you can do what they seek to do today why because in essence that's precisely what eleven twenty four three allowed they talked in terms of paying allowed claims in full in cash once congress used the term allowed claim that runs it right through five a to b and if you then reduce it by whatever the cap is under respect to the same fact pattern that justified the reversal of the obligation of eleven twenty four three by congress and even the third circuit in p p i said we wouldn't touch that if this was dealing with post fishing interest of contract rate congress could have i think that there's there's further evidence for this in sexual in twenty six where eleven twenty six eight talks in terms of allowed claims vote yes when they're impaired in voting you're of course one through section five  right to pima recognized under state law so in essence the best textual reading of eleven twenty four one is that the plan has to give us everything due and owing under state law because it uses the word claim and picking up to statutory reduction in claims and in that case there was a chapter eleven case that was pending for months and then dismissed the secured creditor foreclosed on his collateral the borrower said wait a minute i spend six months or described i don't know if it's that in respect to the extent that it is and it's before us that sounds like you're saying that's contrary to the distinction drawn by the third circuit that what i say what i said that the third circuit itself said recognize it's dicta they would come out differently had we been dealing with post vision interest because congress could have spoken more clearly i think this court doesn't need to decide statutory impairment versus planning period but you if you're asking me i think that this the straight up application of father to be unimpaired claims didn't survive the deletion of section eleven twenty fourth rate but there's a number of cases this is really to your point that don't do it father to be the american king case deals with five ten b which is a treatment section there's a number of other cases that deal with the treatment of tax claims under section eleven twenty nine a again not five twenty nine and doesn't get to the distinction between allowed claims and claims that we're talking about now that's ok you have your claim what does what does the statute say in terms of the treatment i can stretch out my tax claims for five years and pay them equal installments does that render them impaired that doesn't get to the point we're talking about and i submit that most of the cases  cited deal with five ten b and the eleven twenty nine a tax and not this direct tension between five a to b and eleven twenty four one which by the way is really highlighted by the landlord opponents believed their position on section five a to b they should have provided no interest instead they say on page twenty of their reply brief that they must provide police petition interest on our claims in order to own a paris and is referenced in chapter eleven cases only in the best interest of creditors test section eleven twenty nine and seven which only on its face deals with impaired creditors so you can never get there on that but their point is it was a bridge too far to actually say you get zero interest and they're looking for this court to make a new law on that basis because as i've said there's been no court that has done anything but provide close petition interest at the contract rate for a b was was applying to appear creditors there were two ways for an interest to be paid in a chapter eleven case unimpaired claims notwithstanding the prohibition and five a to b two kept it we never get to this if i vote to put him down we get to the cramdown sections of the bankruptcy code which say that the plan has to be fair and equitable and there is a score of cases both under the code and under the former bankruptcy act that have said for a plan to be fair and equitable between a creditor class and old equity the creditors need to receive everything due and owing to the contract why because it's not accountable to stockholders voted in the board of directors the board of directors where their agents who went to the market negotiated and executed that bond document that provided for that interest or that nicole or that charge or that fate and here i want you heard was to comment basically say we never have to get to eleven twenty nine b which is true because he didn't imperious but what he's also saying is he wants the court to get to a result where if we were unimpaired we could have a worse result the federal judgment really is there a supposition then if they appear to us and i had to act and i voted the plan down and i had access to that line of cases with respect to fair and equitable let me talk quickly about the may call we heard mr clement talk about  naval being interest a reminder of the court but i think we all know is that our rights are determined by state law and we should look at state law when it when interpreting the make whole and we cite both new york state case as well as texas for the proposition that a medical is not interest it's liquidated damages for determination of the contract and that is the feldman case lion's case in new york state court and this court should just adopt that but if you thought no let me look at the reasoning you can look at the fifth circuit case and actually holdings three forty two federal appendix nine forty three where that w that is when judges gear down below was asking the debtors counsel are you sure you want to own a pair of them because if you appear them i can kind of get into the bankruptcy goss's i can get into whether or not you know this is something other than state law has determined it too big i still think we would win if we did that but the four raise precluded by the fact that they unimpaired us and as the supreme court said you have to give us what our state law right to payment was in that in that circumstance but not your bankruptcy could make a payment it could this is the thing i'm i'm struggling with it you get this this concept when claims and allow claims so you you want to say that the word claim in eleven twenty four one means the broad definition of claim that in section one of one of the bankruptcy code it's just what we're entitled to it's the air it's everything that we say we say come forward in but they're perfectly in determining that we look outside of just contract right like us judges for did we have to look at for example new did move on to that analysis we still we have i mean the butler case in the supreme court says even in connection with the peer claims you look to the state law characterization of those rights and you'd and you would they're asking again to be the first court to kind of overrule that line of new york and texas and fifth circuit and second circuit cases that have held them a call not to be interest for these purposes one last one last point if i may the two separate breaches let's had day we would have gotten the make whole quantum and the principal quantum and had that year to redeploy it in the market and receive the return what they're saying now is you don't get the return the interest on that amount because we kept it we breached a second time and the consequence of that which is that you continue to run interest on it but we don't want to pay that interest because we think it's somehow double counting and we want you to be a forced lender for that period of time instead of getting the money back and we investing it which is is actually a solvent debtor case it doesn't say it in those terms but if you look at footnote five of that opinion and you look at the amount of the claim i actually think p p i was a situation very much like this where maybe when bankruptcy started they thought the value of their own ass it was less than the value of this claim but footnote five suggests that as the bankruptcy went on their only asset the stock was worth more than the value of the claim the most important thing though i think is we can actually debate whether p p i is a solvent better case because to mention it one way or another it's nothing in its analysis i think properly turns on that another question you ask judge davis was whether or not the other side could have sought dismissal in the district court in the bankruptcy court and got the benefit of their state law rights back without the effect of five a to b the answer is they absolutely could have asked for it i don't think they did not because they're not with tensions but because they would have no basis to ask for that there's no question year and i don't think any real dispute that when we went into bankruptcy that was a good faith effort and we were taking we were not taking advantage of five a to b or anything other untoward we were there because the price nash natural gas made it untenable and frankly these creditors were forcing us into bankruptcy by demanding immediate payments and  and questioning whether we had sufficient sort of capital so we were in bankruptcy in complete good faith and were entitled to those provisions you ask also my friends on the other side whether they could make an argument that five a to b does not apply to solvent debtors they went on to address a different issue but they didn't offer him a theory that there's nothing in the text if i go to be that suggests it applies differently to solving or insolvent debtors and i would state as i did earlier that there's nothing in eleven twenty four seven one the suggest it applies differently in a solvent versus an insolvent debtor contacts i want to make a point about one point about double counting and then maybe talk about sort of the issue of whether there's some inconsistency with  allowing interest as a claim but nonetheless recognizing that they are entitled to some amount of post petition interest but before i say that i'm double counting there's a suggestion that somehow under the contract they should have gotten this payment earlier and they didn't and i want to be clear that our position is if they are entitled to a make home payment which we don't think they are but if they are we don't take issue with the fact that they're entitled to post petition interest on the call amount for the five hundred thirty two days in a bankruptcy so they can't sort of say well it's not double counting because we should have gotten the may call in an earlier and the reason there is double counting here and there's just no way of getting around it is that the  because it's triggered by the moment they enter bankruptcy does give them the equivalent of interest for that period till the very end of the note and then the post petition interest on the unpaid principle not in the  nothing but interest for the first five hundred thirty two days so they were compensated for the interest they didn't get and then they got the interest that's where the double counting comes from now my friend on the other side would like you to believe that this is new valley the case that congress responded to in repealing eleven twenty four sub three all over again it is not in new valley the the plan their games zero post petition interest whatsoever to the holders of the allowed claims who are paid the cash value of those claims and the day of the plants effective date zero post petition interest it is precisely because congress responded to that and repealed it that we are not trying to get new valley all over again we say we will pay them post petition interest and there's really no dispute between the parties here that we need to pay post petition interest in order to leave their claims unimpaired the only question is what's the rate now there's nothing inconsistent in our position because there is a difference between interest as a claim which is what you cannot have a mature interest and the like under an under five a to b but you also have a different concept which is interest on a cla which you are allowed and the code isn't very specific about what the right rate is for that post petition interest but i do think it's important to focus on the question which is the question is what is the minimum rate that we can provide them that will leave their claims unimpaired and although it takes work we think the code does provide an answer to that the code basically says in those situations we're going to provide post petition interest if there's enough money in the state we're going to do that based on the legal rate and although it doesn't match up perfectly with the tax to this case i think if the question is what's the amount we need to pay to leave them unimpaired the answer the code provides is the same amount that you need to provide to provide an appropriate amount of post petition interest in the chapter seven context or the case of impaired creditors and that is the legal rate and we think that the ni remarks here today and your answers to the questions that the panel has posed will take the case under advisement render decision in due course and court will be adjourne