please a court order thank you for giving me the opportunity to address you on this matter as an initial matter i think it's important to keep in mind the confines of what we're talking about in this appeal today which is what us within the four corners of the contract all the parties have agreed in both judges who have ruled on this matter have found that the created by lifting a sentence out of the contract and ignoring a defined term in that sentence which is what has happened and what i'll address to you can create an ambiguity but if you read the contract and in its entirety and apply the defined terms when you read the contract the ambiguity disappears that's that's where the matter has gone astray and why there's an ambiguity i want to ask a challenge all assumptions question you know everybody is assuming that because it's contract interpretation if it's an ambiguous it's a question of law review de novo all of which i understand and agree with but i wonder if there's a little bit of a different layer here by virtue of the fact that the original agreement had to be approved by the bankruptcy court and that same bankruptcy court then construes e agreement does that make any difference to our analysis of it or maybe should it make any difference because the bankruptcy court then is sort of part of the formation of the contract by preventing it i think i'm not aware of any authority that would hold that your honor that give the bankruptcy court when and interpret in a contract one is discerning the intent of the parties in the contract this contract is not unlike any other contract in that regard the bankruptcy court did approve it he found that it was an appropriate commercial transaction and approved it but his his interpretation of the contract if there were only yes and at odds with what the left parties expressly agreed to in the contract would still be subject to the novo review to me without the bankruptcy courts approval there would be no express intent of the parties and i don't think the bankruptcy court would even have been in a position to compel a party to do something in the context of the bankruptcy proceedings which seems at odds with what they express the contract agreed they would and would not do so i wanted to bring up initially that it's important to keep in mind that so much has happened that's outside the con confines of the agreement that i hope we can stay confined to the four corners of the agreement now the four corners of the agreement do tell us what was going on here and very briefly to give context to do this obviously valence was in bankruptcy it had a large restrict had a large secured debt which it would have to figure out what it was going to do with that debt and restructure that had a lot of experts working on that the contract says and it wanted to see if it could raise new money so they engaged these investment bankers in the engagement agreement you'll see it's a three month contract they engaged in for it was subsequently extended but it was a three month contract it laid out what they were supposed to do the scope of their duties that provides for a five hundred thousand dollars fee if it's a sale transaction but says that it's not going to apply if it's in satisfaction of debt so this doesn't qualify under that for that reason and would i think you can argue that it was because it's a transfer of voting can can it in effect what happened when they gave all this talk was that they transferred majority voting control which is what the sale provision provides  and the significance of the to me that's the primary significance of the sale provision in the context of this agreement and the parties intent is it's the it's the other place where they're talking about something may happen it may be a sale maybe a sale stock it may be a sale of all the assets of the company it may be a sale of voting control but if any of that happens the contract consistently says you're not going to get this fee bankers if this is just done in exchange for existing debt because that's just have to restructure so they know how to specifically accept something out and then they don't use that same language in paragraph two is it doesn't that lend some credence to ly right now the important thing here and and what has not been done is to follow you have to follow the trail of the defined terms and every time you see the defined term put it in the district courts analysis almost got percentage of any private placement value that the bankers may create their hard to do a private placement if they create private placement value for the company they get it you're a difference between private placement and private placement value there is a difference and i think a fair argument to communicate that the transaction that occurred here was a private placement i don't think that that's dispositive but the issue you have to have a private placement that creates private placement than a minimum success for your five hundred thousand right but if you had a private place with no private placement value wouldn't you be owed five hundred thousand five hundred thousand dollars and i don't think this is been contested the five hundred thousand dollars minimum successfully is not it is if you earn a successful it will be at least five hundred thousand dollars it doesn't answer the question of did you earn a successful but it's has the success be shall be payable with respect to the private placement upon conservation not to the private placement value so i'm sorry where i met up so it's to nineteen at the bottom and then it says so you have your a b c you were quoting from c then two paragraphs down a says the success he shall be payable right that seems to suggest it's payable on a private placement and then the question is did there was a private place for value and if there wasn't you still if you're a you're hired as an investment banker if you create private placement value force will give you a successful we'll give you a percentage a cut of the action you're predating new money that's what you're hired to do here then in the parties agreed that the only time that happens is if you create for us private placement value if all you're doing is removing the decks around the chairs around on the deck we're restructuring debt you're not creating any new money for us out of which to take a contingent fee you've created no private placement value force so the parties very clearly defined that successfully as a percentage has to be a percentage of private placement value now the minimum was that clear i mean when to be here on the problem i realize nobody thinks it's contracts ambiguous but it's not well written in retrospect most contracts i've litigated in my career when you're focusing and you can always make an argument that you could put two more paragraphs in and make everything more clear than clear i argue that this is clear and that the private in in the following paragraph which is defining what private placement value is that private placement value doesn't include forgiven debt you're not giving us any new money if we just forgive existing debt that's not private placement value and that's there's no there's no dispute that what happened here of the transaction happened here falls with thing in the language of excluding any consideration received by the company's creditors in satisfaction of claims or de so there's no question that what happened is carved out where the ambiguity is created as is that the the athletes have the bankers have lifted from the rest of that paragraph the sentence any consideration received from bergen burke will be subject to a success feed of one point two five not two point five not if you take that sentence out and you don't read the definition of successfully that sentence is capitalist success couple of feet if you take that out they they say well you can read that sentence alone to say any money we get from mr berger these other five parties we get a success feet of one point two five percent there are two problems with that and it's not an ambiguity it with all due respect and as i say the district court came all the way to the end and i think it's helpful to trek through with the district court did the district court correctly analyzed that if you take that sentence out you still have to satisfy the fact that you've successful you see as the district court said you still have to find that there was a transaction that created private placement value then the district court just went on in the next breath said and this this transaction create a private placement value without any analysis and that's that's where forgiveness but don't you have a minimum of five hundred thousand dollars are a minimum of five hundred thousand dollars wouldn't that encompass a situation where you have of no value but you do have a private placement no no your honor because the minimum success to just says if you're entitle to a success feat at all it's going to be this percentage or five hundred thousand dollars whichever is greater that the minimum successfully just goes to the amount of a success feat if any success feed is you don't get to the successfully the contingency fee you don't get to that unless these bankers assisted in closing a transaction that created some private placement value for the company when the whole contract was structured from the beginning carved out from the banker's duties was we don't want you to do any debt restructuring work you're not going to do that and carved out expressly in the private placement fees and in the sales fees carved out both places is the fact that if we do any of these transactions and all we're doing is a reorganization of debt we're not creating private placement value for the company there's no new money you're not going to get paid for that you're not going to you're going to get your thirty thousand dollars but i'm not going to get your contingency ask because it seems like you know you read a contract in whole and if languages use one place but not elsewhere and you're saying success be with capital less and all that has to be construed a certain way if you look at this paragraph or it's very clear first of all it says you don't get both a private place a fee and a cell transaction fee and it has this provided that language a cell transaction shall not include so you know how to be clear in paragraph or and that's missing from paragraph three which to me lend support to the idea that k p m g n rather on top of the something be it the minimum five hundred thousand or this one point two five percent of the fifty million honor if you look at the definition of private placement in paragraph three it just as clearly excludes any consideration received by the company's creditors in satisfaction of claims or debts existing on the received by the company's creditors sorry are you saying that means we exclude the value of the stock now that the what the the company's creditors in this case mr berger bergen b received stock in satisfaction of existing debts that's what i'm asking so that we look at the excluding in consideration received at the company's creditors we're talking about the value of the stock they recite which is the only the only thing that's at issue on th placement out of the grave for the sake of argument yes and that and if the aggregate good are then weeks going from that private placement the fifty million dollars of of stock in that leaves there's ninety million dollars of debt still left when nobody's saying they actually earn anything in banks so it's clipping the twenty million dollar loan just looking at the equity transaction so if we subtract fifty million from fifty million you've got zero so there was no private placement value and your argument is they get one point twenty five percent of zero because the set because there was no private placement value in the just a contingency fee if you create private places just like you know contingency fees in other  point i mean you're centered in on the contractual language so i w berg and identify parties specifically identified in this contract is appropriate under the circumstances and that judge guardado the bankruptcy judge to approve the retention administered the bankruptcy case and approved the plan and awarded fees to both roth and k p and g for the reasons that we argued here is correct we also do we give any deference to the judge or is  how the contract in the statutory provisions should be interpreted in the context of what they were presented to the court i'm just wondering whether the bankruptcy court by virtue of having to approve this again some greater stake in this than the typical court would have been considering a contract or not i think it does and i think it's part of the argument that i'd like to go into a little bit about why the circumstances surrounding the execution of the contract i just  contracts specifically you're saying since is the bankruptcy court we give deference to his de novo read i think your honor that because of the approval of the in the contract under section three twenty eight eleven u s c three twenty eight is done by the bankruptcy court with that approval process his view of what he approved should be given some deference but i don't have any other statutory that he says i'm sorry or where is the case that i'm not currently aware of a case that says that specifically no i think it's just a matter of the approval process of the living u s c thirty three twenty eight circumstances surrounding the execution of the agreement is not whole levels under new york law it is clear that contract should be given its plain meaning given due consideration to surrounding circumstances and the apparent purpose which the party sought to accomplish we cited the palmeri versus all state case the thompson case and also a as decided by the district court the cable service case for the proposition even showing t actual subjective intent was not permissible the court did examine the circumstances surrounding the execution of that agreement to determine what the parties intent was not based upon her all evidence but based on those more to it than them because they make this argument about gas somebody is correct weight and when a big stuffed toy any guess of the family members wait turns a small to a not a big one and they said your construction would be i can just g family member weighs five hundred pounds even though they weigh one hundred and when a small toy it doesn't have to be a correct gas that's how they're viewing your construction here what is your response to their thank you i don't think that's where the contract leads at all and actually if the court looks at par graph three the idea of the private placement value had to be determined i think is wrong so if paragraph three of the find the quote successfully and then goes on to talk about the circumstances where that additional fee might be determined to two point five percent over a certain product placement and then also talks about the minimum you had drafted this to relate it back how would you have drafted this to make it read the way violence says it reads the question what i would have said has any consideration from berg and burke excluding any consideration received by the company's creditors and satisfaction of claims or debts existing on the date here of shall be subject to a successful scheme right that seems awkward to have to say it twice in two sentences in the same paragraph i think your honor what what the it's clear from the circumstances of the parties intent is that the success to be defined as an additional say was going to be paid if there was what happened here it validated the transaction that mr berg wanted to accomplish remember that at the time the bankruptcy filing bergen bird was owed ninety million dollars was the largest majority stockholm and mr b chair if the intent was to have a transaction with a restructure where bergen berg wiped out all of the existing minority shareholders which is what happened and then converted his herd that were partially got him here in january and specifically commented in interaction with counsel for valence where he said everybody knew from the beginning of this case that actually he is out of the m unless you have mr birth control mr bird's cooperation and his control this case was d o a there was nothing that was to happen and this this matter was over i thought that's what these people were brought in to see to see if there iraq or not i mean so that's why it doesn't make sense to me i think what it did was for mr berg and it's achieving that goal it validated the pricing of the transaction we ended up controlling all of the  and i do think it is interesting if you think about what actually occurred which is represented in the disclosure statement that was approved by the court as the prerequisite to the point is what happened yes there were offers to come in and provide new to take out the creditors to pay money to the creditors that actually those offers were recommended by the c e o but were rejected by mr burke and his board so the purpose of that was to validate th transaction that actually occurred which was was one of the only two things that could have occurred from the beginning of the case that alan suggest another way wants her found out other people wanted it it was more valuable to him and it allowed him to validate his conversion of debt to equity at that price because there were other offers that made that number up here to be a valid number so that the court would approve it you're exactly correct and i think it's also  suggest well that surely one of the possibilities was that mr burr who was already owed ninety million dollars of that and had all of the ad or majority of the equity he was going to come in and take money out of his pocket and he was going to make a new equity contribution in the words that's what really this specific provision of the lower fee if you decide to do it well that's just absurd there's no way in the world that that was going to happen based on th circumstances not with ninety million dollars worth of that which forty million based upon the you ation that was provided to the court in the disclosure sample was actually secured and forty million was unsecured there is no  that mr burke was going to create and provide new equity that that was financially would have been financially irresponsible in suicide everybody knew that byrd knew that the debtors knew what was present all of the factors the debt factors the equity factors the control factors the court's observation about what the case was like at the time that these contracts were approved there all circumstances surrounding the execution of the agreement which the case last justice should be consulted to determine in addition to the four corners of the instrument the parties intent and subject to the various rules of construction for looking at an ambiguous contract that's why i think it's all the miscible and what the case law suggests that you don't just look in a vacuum and you have to look at the subjective sort of the circumstances surrounding  execution to avoid what the new york courts also suggest would be irresponsible a ridiculous or absurd result and the absurd result here is that everybody having known what the circumstances were the debt the control the equity position that hey p m g and roth would have signed up to get a success see if you will that would have been absolutely impossible like ours were but how can we way this i mean in other words i'm thinking thirty thousand dollars at k p m g you rob probably doesn't buy a whole lot of hours what can you give me any is there any evidence to the other reports that they did which i suggest to the court led to the approval of this transaction in other words soliciting bringing other offers to the table as they were they were request what they did was they work with these other parties to validate the transaction the burgen bir ultimately pushed through in contravention of what their c e o suggested they present thank you thank you may please the court i am going to talk about statutory or other i'm sorry the contractual construction as mr todd indicated i do want to briefly start just by touching on your last question judge haynes were you asked if there's anything in the record that can tell us of the record on appeal which is part of the approved disclosure statement this is a statement that is proffered and probably gated by the debtor and approved by the bankruptcy court in trying to solicit approval for the plan and what  represented to the court and to all the interested parties was that during the process of trying to get third party investor the debtor contacted thirty two financial and seventy four strategic investors sent management presentations to thirteen entities and content conducted diligence reviews with five strategic investors so more than thirty thousand dollars worth of our lives certainly more than thirty thousand dollars worth and i for a comparison because  each each that would have been the one point two five percent as opposed to the six hundred twenty five last the thirty thousand dollars that they had already retain which is what is being requested in which has been approved by the bankruptcy court and that is to ask you something on this construction of the contract if we were to determine that your clients the two companies are only entitled to the middle of success fee is that a flat five hundred thousand or is that five hundred thousand minus thirty thousand i believe that would be five hundred thousand minus the thirty thousand i don't i don't know that it's explicit in the contract and i'm and i think honestly it's not something that anybody had argued that we've really looked at but i think that consistent with the subtraction of the retainer and the additional fee from a larger and that private placement pursuant to this the success be shall be payable with respect to the private placement language is what triggers the fee then that would yield the minimum successful anything anybody has argued but we've all heard this  start there because the any consideration language is more specific than the language that perceives it and you want to offer your rewrite to get so you're now hired to represent valence in the future to get these things right how would you rewrite the second sentence to avoid the mishap as they see you take out the second sentence completely if you take out that second side but you want to get to this one point the notion is if this private placement value is created with berg we don't want to pay two point five on pay one point two five where would you put how would you rewrite this to accomplish what valence said they were trying to accomplish which is a success be on berg only if there's new money and not repayment of to not stock for debt and on this new money we all want to pay one point two five rather than two point five because this isn't a wholly new guy that you have to go out and get and i think i think you have to write it the way that mr top suggested also which is including that exclusion of consideration for preexisting debt success of a shall not include you could you know where you could potentially use that provided that language in the definition of private placement or private placement value but again given well they think they d use it on private place value because they say it excludes debt forced debt retired by consideration right and you got to dress me at least for one vote you know i understand the reason i think it's kind of a silly analogy is because it presumes as does their entire statutory construction argument that everybody is ignoring all the circumstances and everything that you know bringing to the table when you're constructing your contract and walking down the boardwalk if you're going to play this game the their knowledge does make sense it makes sense that you wouldn't get to say inconsistent with the analogy that it's not helpful and exactly the presumption that you could walk up make a completely wild guess that you know is completely inaccurate i think this thing i guess that you know is completely inaccurate and still get a prize maybe a better analogy for me would be we're not giving everybody participation trophies here i think that's how they view our argument is that we're standing up and saying well we showed up we showed up at practice we shut up for the games we weren't very good which i would the transaction most likely would have occurred but to satisfy eleven twenty nine a seven and get the plan approved and show that the creditors were getting more from this transaction than they would in a chapter seven liquidation they needed some point you guys are coming in and taking money for nothing if i thought your colleague said well we did all this out of the law and without that it wouldn't happen but now you're saying it would have happened i can't no i can't say that without with or without that that are the only support they could have tried to make an aren't you know they could have tried to make an argument that luck no one else wants this and if the equity must be worth fifty million dollars because he's already put ninety million dollars in they they may have been able to drum up some other evidence but in bankruptcies of companies this size it is i would suggest the best practice to really back to the bankruptcy court and ask them to approve the restructuring plan well this agreement specifically says that roth u k p and you were not hard to restructure or give advice represent been in the bankruptcy regarding restructuring and now you're saying that's exactly what they were hard to do to go out and create this value so that you could come into the bankruptcy court in our view on this bird deal that it was a good restructuring thing you said that you made yourself coming around it seems to me you know i think the exclusion from the scope of duties in the restructuring means that k p in general are not going to negotiate with burke to determine the amounts or the the structure of the restructuring they're not going to draft a plan they're not going to draft a disclosure saying they're not going to all the exhibits that are necessarily part of the plan like the liquidation analysis they're not going to do any of the work to do the consummation documents are going to argue to the but i did all the works of the other large could argue the bankruptcy court that the value of the bergen bird transaction was good yes and this isn't unusual in that goes back to again what we were talking about before and white balance wants to call laminates is that these this is the universe that these bankruptcy professionals operate in and it's kind of and it's an understood rule in the bankruptcy universe that if you're going to if you want to do a restructuring and you want to do a debt for equity swap you're going to have to show the court that you're giving the creditors at least a good deal as they would get in a charge is occasionally great to these guys  they're doing is going around trying to help you have deals that will look good to get the ultimate restructuring done why not just charge an hourly rate that that seems like what that is rather than a success for you which suggests you know you need to go be successful because the hourly rate i think can get astronomical and it could get astronomical in a case where maybe you don't get enough money to really pay for it well they're available saying they didn't get enough money to pay for this because all they got was nothing they got a cancellation of debt they didn't get money in their pocket so they're having to go in and root around in the ground to find the money to pay hey you guys if we affirm this respect your honor actually in the balance represented that they had two million dollars from the twenty million dollar new infusion of operating capital to pay private that's not the fifty million we're talking about they're saying we we got nothing out of the fifty million we had anticipated in the typical contingency fee in a personal karaka settle for one hundred thousand dollars the lawyer gets a third so he had thirty three thousand at of a check written by the defendant and here there is no check written by the defendant analogy for the fifty million that's what they're saying so had the thirty thousand thirty thousand had already been paid yet so that was the six hundred twenty five minus the thirty five ninety five i'm running a very very short time i didn't really get to the construction is more reasonable manner it's not if they're both three homes in the u s makes it the correct response i don't think you can apply all the circumstances and all the facts of this case to the new york rolls of construction and after a month and then if you get a successful if you were to interpret the way you are it's in addition to the two again if teens needless to say we don't agree with that interpretation so there's the admission and there's the language  contract itself which i think if you if you just take the time to read three c you will see that it doesn't come into play at all unless there's a success feed or the second issue that you honor raised was asking questions about the reasonableness and how much work they have done and so forth inquiry in that area i would i would point out there are two standards under which professionals can be in this is in the briefing under which professionals can be a ppointed one one and i always get i'm not a bankruptcy lawyer once through twenty eight ones three thirty and i get them mixed up three thirty i believe is the one that allows for the court to make determinations as to the reasonableness of a fee when it's interpreting fee that's that one is not and you know i mean clearly it rises or falls on this contract instruction my point was simply for looking at the surrounding circumstances if we're imagining how much work is likely to be involved and i thirty thousand you know going to compensate for that and then this other thing is really kind of a windfall an incentive feet or is this other thing really like you had to go to trial on the car wreck and say you really need this money to make up for the time it was more to try to understand that i agree they're not going to win or lose based on it but would you answer the question of what is wrong with the argument that there was a private placement it made it did not yield a private placement value and therefore the minimum success fees because because successful is always the percent is a percentage of the private placement i say it's simply an additional fee because that's where the quote successful than a minimum c s t of five hundred that the minimum the minimum amount if the parties wanted to say your interest to to accept your interpretation of that agreement you would just have a provision that a you get fifteen thousand and mediately b you get fifteen thousand a month and see you get you get at least five hundred thousand a matter what happens and that's clearly not what the contract says the contract says you get an additional successfully if there's a private placement and there's  suggestion in three c that any of those other entities are creditors those are all parties you know the suggestion that mint that was made an argument that mr burke would have never put in any new money mr burke put in twenty million dollars of new  money had they structured this deal so that the twenty million dollars of new money was the end of the contract said that the stock he got was also in consideration for that amount there would have been a success feet on the twenty million dollars right it would have qualified because it would have been in exchange for equity for equity would have an equity transaction which is what this covers but that didn't happen so so we have six parties here who were potential investors which is why but they were already known so you know the investment bankers were hard to go out and beat the bushes and find potential investors we already know these people so we're not going to give you a full contingency fee if we close a deal with the six people but don't we need to know if there's other creditors to understand whether their construction would render the that cla possible one there certainly were other creditors in the bankruptcy one thing i do know for example is our firm was a creditor in the bank to the research there were certainly other creditors in the bankruptcy  whether they were secured creditors in the position of bergen bergen a position of trading and coming out of the agreement because they're making equity trades is what i did i don't know the answer to that thank you thank you mr room thank you as well counsel and court will be