david bergstein, albert hallac

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Briggs Reporting Company, Inc.

UNITED STATES BANKRUPTCY COURT

CENTRAL DISTRICT OF CALIFORNIA

--oOo--

In Re: ) Case No. LA10-19912-BR)

THINKFILM, LLC and ALLARCO ) Los Angeles, CaliforniaENTERTAINMENT, INC., ) Monday, October 29, 2012

) 2:00 p.m.Debtor. )

______________________________))


R2D2, LLC, ) ) Debtor. )

______________________________))


CAPITOL FILMS DEVELOPMENT, ) LLC, )

) Debtor. )

______________________________))


CAPCO GROUP, LLC, ) ) Debtor. )

______________________________))


CT-1 HOLDINGS, LLC, ) ) Debtor. )

______________________________)

Proceedings recorded by electronic sound recording;transcript produced by transcription service.

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ii


HRG. RE MOTION FORAUTHORIZATION TO PURSUEBANKRUPTCY ESTATE LITIGATIONCLAIMS

HRG. RE MOTION TO ABANDONGRANTING TRUSTEE AUTHORITY-DESIGNATED PROPERTY

HRG. RE MOTION TO ABANDONDESIGNATED PROPERTY

HRG. RE MOTION FOR EXAMINATIONOF LEONARD GUMPORT, GUMPORT/MASTAN, RON DURKIN, CHAPTER 11TRUSTEE, DURKIN FORENSIC, INC.AND CLIFTON GUNDERSON, LLCPURSUANT TO FED. R. BANKR. P.2004; REQUEST FOR PRODUCTIONOF DOCUMENTS

TRANSCRIPT OF PROCEEDINGSBEFORE THE HONORABLE BARRY RUSSELLUNITED STATES BANKRUPTCY JUDGE

APPEARANCES:

For the Trustee Ronald L. LEONARD L. GUMPORT, ESQ. Durkin: Gumport Mastan, ALP

550 South Hope StreetSuite 825Los Angeles, California 90071(213) 452-4900

For the Guilds: DAVID E. AHDOOT, ESQ.Bush, Gottlieb, Singer, Lopez, Kohanski, Adelstein & Dickinson, ALC500 North Central AvenueSuite 800Glendale, California 91203(818) 973-3252

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iii


APPEARANCES: (cont'd.)

For the Levene, Neale DAVID B. PARKER, ESQ. Law Firm and David Neale, Parker, Shumaker, Mills, LLP Irvin Gross, and 801 South Figueroa Street Beth Young: Suite 1200

Los Angeles, California 90017 (213) 622-6985

For the Stroock Law Firm LISA J. DEMSKY, ESQ. and Daniel Rozansky: Munger, Tolles & Olson, LLP

355 South Grand Avenue 35th FloorLos Angeles, California 90071 (213) 683-9100

For Entertainment Fund, STEVEN M. GOLDSOBEL, ESQ. Cayman Fund and Aramid Law Offices of Steven M. Entertainment BV: Goldsobel 1900 Avenue of The Stars

Suite 1800Los Angeles, California 90067 (310) 552-4848

For Screen Capital, Genco MITCHELL J. LANGBERG, ESQ. Capital, Aramid Capital, Brownstein, Hyatt, Farber, and David Molner: & Schreck, LLP

2029 Century Park East21st FloorLos Angeles, California 90067 (310) 500-4631

For Susan Tregub, in Pro SUSAN H. TREGUB, ESQ. Per, and for Teri Zimon: 17554 Weddington Street Encino, California 91316

(818) 679-9278

For Aramid Entertainment DAVID L. NEALE, ESQ. and Screen Capitol: TODD M. ARNOLD, ESQ.

Levene, Neale, Bender, Yoo & Brill, LLP10250 Constellation BoulevardSuite 1700 Los Angeles, California 90067(310) 229-1234

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APPEARANCES: (cont'd.)

For David Bergstein: VICTOR A. SAHN, ESQ.Sulmeyer Kupetz, APC333 South Hope Street35th FloorLos Angeles, California 90071 (213) 626-2311

For David Bergstein: LUCIA E. COYOCA, ESQ. Mitchell, Silberberg & Knupp,

LLP11377 West Olympic BoulevardLos Angeles, California 90064 (310) 312-2000

Court Recorder: Wanda ToliverUnited States Bankruptcy CourtEdward R. Roybal Federal Building255 East Temple StreetLos Angeles, California 90012

Transcriber: Briggs Reporting Company, Inc.6336 Greenwich Drive, Suite BSan Diego, California 92122(310) 410-4151

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LOS ANGELES, CALIFORNIA MONDAY, OCTOBER 29, 2012 2:00 PM

--oOo--

(Call to order of the Court.)

THE RECORDER: Number one, ThinkFilm; two, R2D2;

three, Capitol Films; four, Capco; and five, CT-1 Holdings.

MR. GUMPORT: Good afternoon, your Honor. Leonard

Gumport of Gumport, Mastan for the trustee. The trustee is

the moving party on one matter and the responding party on

two others.

THE COURT: All right.

MR. AHDOOT: Good afternoon, your Honor. David

Ahdoot on behalf of the Directors Guild, the Writers Guild,

SAG-AFTRA, Motion Picture Industry pension plans and the

Guild plans.


MR. PARKER: Good afternoon, your Honor. David

Parker appearing specially on behalf of the Levene, Neale

firm and on behalf of three of the partners, David Neale,

Irv Gross and Beth Young. Thank you.


MS. DEMSKY: Good afternoon, your Honor. Lisa

Demsky of Munger, Tolles and Olson, appearing specially on

behalf of the Stroock law firm and one of its partners,

Daniel Rozansky.

THE COURT: All right. Thank you.

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MR. GOLDSOBEL: Good afternoon, your Honor. Steve

Goldsobel, also appearing specially on behalf of

Entertainment Fund Limited, Cayman Fund Holdings and Aramid

Entertainment BV.


MR. LANGBERG: Good afternoon, your Honor.

Mitchell Langberg, Brownstein, Hyatt, Farber, Schreck,

appearing specially on behalf of Screen Capital

International Corp., Genco Capital Corp., Aramid Capital

Partners and David Molner.

THE COURT: All right. Thank you.

MS. TREGUB: Good afternoon, your Honor. Susan

Tregub appearing in pro per and specially on behalf of Teri

Zimon.


MR. NEALE: Good afternoon, your Honor. David

Neale, Todd Arnold, Levene, Neale, Bender, Yoo and Brill on

behalf of Aramid Entertainment Fund, Aramid Entertainment

BV, and Screen Capital International Corp. on matters six

through 12.


MR. SAHN: Your Honor, good afternoon. Victor

Sahn of Sulmeyer Kupetz appearing for David Bergstein, the

moving party on two matters, and here as well on the

abandonment motion of the trustee.

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MS. COYOCA: Good afternoon, your Honor. Lucia

Coyoca, Mitchell, Silberberg and Knupp, specially appearing

on behalf of David Bergstein.


Mr. Gumport, briefly, your -- I don't know where

you're headed with your motion to abandon. It was amazing.

Good thing I was sitting down. For the first time I can

recall, there's actually an agreement between Mr. Bergstein

and everybody else on the other side. Maybe that was the

second time, I think.

But in any case -- and then you didn't respond

directly, but I did see rather unusual -- for me, anyway --

sort of a by-the-way comment, which I'm not used to what

those are, in your response to some other things.

I assume you're not wanting to go ahead with that?

MR. GUMPORT: Well, the position is, your Honor --

the short answer to your question is, I recommend.

THE COURT: No, I know your motion. But usually

you see an opposition. But the only thing I saw from you

was sort of an unusual thing, which is unusual in pleadings,

included in your opposition to the two motions of Mr.

Bergstein, sort of a by-the-way, which is sort of an unusual

heading but not in the caption. And you sort of talked

about it.

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But -- so I don't see any reply to the opposition.

MR. GUMPORT: Your Honor, there is -- all we said

is, and all I'm recommending is, particularly since we have

new schedules from Mr. Bergstein is -- well, let me break it

down.

I would suggest putting this over. I mean they

want to come --

THE COURT: No, I won't do that. I'm going to

deny it.

However, it's clear where everybody's coming from.

I understand your position and clearly at least about two-

thirds of the reasons were the same for Mr. Bergstein, but

clearly a third was not.

Rather than put it over -- it's obviously going to

be without prejudice if things change since you filed the

motion, but I'm not going to continue it.

MR. GUMPORT: Your Honor, just one item on that,

if I may, and I'm only going to talk about the accounts

receivable.


MR. GUMPORT: As you know, a lot of adversary

proceedings have been filed.

Mr. Bergstein filed a set of schedules as set

forth in the abandonment motion saying: Here are these

accounts receivable. I don't think they're worth more than

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10 cents face value. And not including collection costs, I

think that might bring in $250,000.

That was his schedules.

Then with the abandonment motion, we said: We've

contacted all these people, and they've turned over a total

of -- I forget what the numbers --

THE COURT: I don't think anybody actually

specifically objected to that portion of it.

MR. GUMPORT: Right, right.

THE COURT: I was focusing more on these other

things.

MR. GUMPORT: Right. And so we contacted all

these people and most of them have said "We don't have the

money" and the ones that have given us money have given us

between 10 and $15,000.

And then what happened was we were told there are

these amended schedules coming in. And we got the amended

schedules Friday night, and the representations about the

accounts receivable is exactly the same. They're --

THE COURT: Well, let me ask you before you

proceed.

I was really not focusing on that portion. I

gather that nobody really has any objection to those.

UNIDENTIFIED MALE SPEAKER: The accounts?

THE COURT: Yes, the accounts. I don't even

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recall seeing that in the reasons for objecting to the

abandonment. I saw the motion but not in the opposition.

So I assume if I don't hear anything that that

was -- nobody stated any reason why not. It was the other

things, causes of action and things of that sort.

So yes, why don't you prepare an order that --

MR. GUMPORT: Okay.

THE COURT: -- I'm going to deny without prejudice

the remainder, but I will grant that portion of it.

MR. GUMPORT: Okay. And, your Honor, for the

Court's information, that gets rid of 38 adversary

proceedings. And what we will do with those is --

THE COURT: I didn't realize that but --

MR. GUMPORT: Yeah.

THE COURT: -- that's always good news.

MR. GUMPORT: Yeah. And what we will do is we

will dismiss those without prejudice.

THE COURT: Because I know there were a number of

them filed, like about 100 or so --

MR. GUMPORT: Uh-huh.

THE COURT: -- at least according to my clerk. We

were talking about it. So those 30-something are of that

group?

MR. GUMPORT: Approximately 38 are of that group.

THE COURT: Okay. So there may be 60-something

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left?

MR. GUMPORT: I think there will be even fewer

left.

THE COURT: Well, whatever.

MR. GUMPORT: But in any event -- and those will

be dismissed without prejudice.

THE COURT: Okay. All right.

MR. GUMPORT: Okay. And that's all I wanted to

say. Thank you very much, your Honor.

THE COURT: Okay. Thank you very much.

I'll next take this motion to pursue bankruptcy

litigation.

Mr. Sahn, it's your motion. I have a few

questions about that. I have some questions about the

motion itself. I notice in firms, you have the top name and

the other name.

Who actually prepared these papers? Was it you --

I mean you would know, I assume, because your name is on

there.

MR. SAHN: Your Honor --

THE COURT: It wasn't meant as a trick question.

MR. SAHN: No. It's myself. Every motion is

prepared by Mr. Werth and myself.

THE COURT: Okay. And I assume you're familiar

with all the cases. You wouldn't cite any cases that you

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weren't familiar with, I assume.

MR. SAHN: I would certainly hope not, your Honor.

THE COURT: Well, I want to ask you a few things

about the motion.

First of all, the authority to do it, you've cited

a whole bunch of cases. And my question is: Are any of

those cases dealing with a trustee?

You say in your heading the trustee, but tell me

which of those cases actually are a case dealing with a

trustee abandoning things as opposed to a debtor in

possession.

You can take a minute if you want, but just tell

me which of those cases --

MR. SAHN: Your Honor, I wouldn't be able to

answer that question. I don't know.

THE COURT: Well, I thought you just told me a

minute ago you actually had read all the cases.

MR. SAHN: As to whether it was seeking authority

to pursue an action that a trustee was not pursuing versus

an action that a debtor in possession was not pursuing, I

don't know which of those cited --

THE COURT: You would have thought had you had one

of those, you would have highlighted it, I assume.

MR. SAHN: I would think so, your Honor.

THE COURT: Were there any highlighted?

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Take a minute. It's your motion.

(Pause.)

MR. SAHN: Your Honor, the cases that we cite are

primarily or principally on pages 12 and 13 of our motion.

THE COURT: Okay. I mean I don't know what page

number but I've read them.

MR. SAHN: I know you did.

THE COURT: Anything there highlighted about

trustees? I mean in the captions, in your headings you

say it.

MR. SAHN: Well, it certainly says here -- it

absolutely says here on -- and, again, page number is page

13 in the middle of the page.

THE COURT: Right.

MR. SAHN: Talking about the Ninth Circuit

granting creditors derivative standing to pursue litigation

on behalf of debtor's estates where the trustee or debtor in

possession fails to do so.

THE COURT: But specifically I didn't see any --

there may be, but I tried to read it best as I can. These

are all cases, are they not, where they're typically debtors

in possession either pursuing or not pursuing fraudulent

transfers, prefaces and the like against friends, relatives

and what have you. Isn't that the typical case?

MR. SAHN: I don't know that it's friends,

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relatives but it's certainly --

THE COURT: Whatever. But folks who --

MR. SAHN: It certainly is avoidable transfers

and --

THE COURT: That's what --

MR. SAHN: -- debtors in possession have no less

or different obligations than a trustee has.

THE COURT: No, absolutely. But the nature of

those cases, typically there's some reason why -- personal

reason.

In any case, I had some other questions about

your --

MR. SAHN: Your Honor, I agree with you that when

this comes up --

THE COURT: Because it's not exactly the same as

this case.

MR. SAHN: I will agree with you that in my

experience in the past, these situations have come up where

there is a relationship between the potential litigation

target and the debtor in possession or its principal.

THE COURT: Okay. I have --

MR. SAHN: And if that's your point, that's

usually when it comes up.

THE COURT: Right. And I have a couple questions

in here about your motion.

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One, on page three. This is your reply, the

omnibus reply. And that's on line six on page three.

I assume that that's an error. But it concerns me

because I found a few. Tell me what that says.

MR. SAHN: Page three.

THE COURT: This is your reply.

MR. SAHN: Yes, I'm looking at it.

THE COURT: And why don't you just read it. It's

just one line.

MR. SAHN: Line six?

THE COURT: Uh-huh.

MR. SAHN: "The settlement is set for hearing

January 30."

THE COURT: Yeah, keep going.

MR. SAHN: "Two thousand" -- I'm sorry. 2013.

THE COURT: Well, again, it's an obvious -- but I

found a few of those in here. But I'm going to ask you --

it was obviously meant "2013," I assume.

MR. SAHN: It was, your Honor. My apologies.

THE COURT: Okay. The next question I have -- not

to be ticky-tack about this. But I want to turn to another

one on page -- excuse me one second here.

On page seven -- excuse me one second. I don't

understand this. This is on page seven and it's starting on

line 16.

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MR. SAHN: Yes, your Honor.

THE COURT: And I'm going to read this to you and

I'd like you to tell me what it means.

It says -- well, I'll read the line before. Or

I'm going to read the entire thing. It says:

"Bergstein filed the motion

September 21, 2012. The motion is

attached as Exhibit 6, a form complaint

that Bergstein proposed filing against

certain defendants on behalf of the

estate. The motion indicated that the

proposed complaint was a draft and was

subject to further revision.

"On October 6, 2012, Bergstein

filed a revised exhibit to the motion,

that is revised proposed complaint. The

revised complaint" --

Now, this is the part I want to read. I want you

to tell me what this means. This says:

"The revised complaint omitted the

trustee and his professionals as

defendants and by this motion the

trustee does not seek authorization to

pursue litigation against those

parties."

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Why don't you read that over again and tell me

what that means.

MR. SAHN: Well, first of all, the words "the

trustee" are wrong and are --

THE COURT: Well, read it -- because I figured

that, but I wasn't sure.

MR. SAHN: What it means is that the --

THE COURT: So that -- so you didn't mean that the

trustee does not seek. You're talking about Mr. Bergstein

does not seek?

MR. SAHN: That's correct, your Honor.

THE COURT: Okay. Well, I was asking -- isn't

that pretty important? I mean I don't mean to be picky

about this, but --

MR. SAHN: You're not being picky.

THE COURT: But did you really read these over?

MR. SAHN: Your Honor, you're not being picky.

THE COURT: This is so far. I have a couple few

others. But what happened in your reviewing this?

MR. SAHN: I have no good answer. There's no

excuse.

THE COURT: All right. I have one --

MR. SAHN: Other than to make the point, your

Honor -- and to the extent that this is part of your

question, which is that the September 21st complaint or

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draft named the trustee and his counsel --

THE COURT: Well, I'm going to get to that in a

minute.

MR. SAHN: -- in the subsequently filed complaint.

THE COURT: No, I understand that.

MR. SAHN: Okay.

THE COURT: That part, I did understand. I've

read both of them.

MR. SAHN: Okay.

THE COURT: I understood that. But I'm just

trying -- I read these very carefully. There's a lot of

stuff here. And I want to make sure that everybody read it

as carefully as I do.

Then another question. Excuse me. Let's see. I

have a question about this at line seven, back to page

three.

So you now have -- this one says:

"There are additional meritorious

claims that are not specifically pled in

the draft complaint supplied as

Exhibit 6."

What is that all about? I mean to try to set the

stage here, we have a motion, and we've had this problem

before as far as filing motions and then adding things later

in a so-called reply. There's not really a proper reply.

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Are you really telling me at this stage -- it

seems obvious to me that you started off with a motion

asking for certain things. But now you're saying: And, by

the way, we also have a bunch of other things we also want

to do.

Is that a proper reply to an opposition to your

motion to say, oh, now we've got some other things?

MR. SAHN: Your Honor, if I can reply in a little

bit of a narrative.

There were half a dozen oppositions, all of which

stated -- and not to characterize them in any way but many

of which stated that many of the claims referenced probably

in both complaints, but certainly in the September 21st

complaint, were the subject of a demurrer in another

litigation matter that was sustained without leave to amend.

THE COURT: Right. That was in the Superior

Court.

MR. SAHN: And they argued to as the law requires

that order or that ruling meant that you should conclude

that there wasn't a colorable claim that could be pursued

and that therefore the motion as to that test should be

denied.

THE COURT: Okay.

MR. SAHN: And we wanted to respond and say: The

later filed complaint -- and Ms. Coyoca is here as the

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draftsperson to tell you exactly what the differences are.

But that there were differences between --

THE COURT: Well, I don't think you can do that

under the rules. I've never seen -- well, I shouldn't say

I've never seen it before. But you file a motion and what's

this, a moving target?

MR. SAHN: No, your Honor.

THE COURT: You file it and say: Well, we'll get

back to when we amend it. I mean --

MR. SAHN: No. That's not it at all. They made

an argument that the claims were barred.

THE COURT: That's right.

MR. SAHN: And we're trying to tell you how

they're incorrect in that by showing you how the complaint

that we have given to you as Exhibit 6 is distinguished from

the complaint on which the Superior Court --

THE COURT: But let me read you the title of what

you've said. I've read them both. And let me read it one

more time, to make sure I got your answer straight.

This is item number C here, page three. It says:

"There are additional meritorious

claims that are not specifically pled in

the draft complaint."

So what you're saying here -- these are your

words -- you're not talking about the demurrer, whether I'd

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agree or not, but you were saying in addition to those,

there are other ones. Isn't that what this is saying? This

is in bold print.

Have I read it wrong?

MR. SAHN: No. I agree with you. I understand

your question now, and I agree with you.

THE COURT: So is it proper -- what's that, a

moving target? You file a motion and they respond and you

say, well, by the way, we've got some more.

Is that really appropriate?

MR. SAHN: Your Honor, candidly, when I've seen

these motions filed, I've never seen a 30-plus-page detailed

complaint accompanying it that sets out with specificity

what the claims are going to be.

THE COURT: Well, what you do have --

MR. SAHN: And we were careful to say that the

claims were certainly included but that this was not a final

draft.

THE COURT: Well, but again, you hear what I'm

saying. It's like this moving target. This is not small

claims court and you just walk in and say: By the way,

Judge, we've got this -- and the reason that in other cases

you don't have this sort of thing, it's very

straightforward. Creditors come in, say you know, the

debtor in possession gave a preference to his whatever,

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relative, friend, or fraudulent transfer. So you knew

specifically what they are.

Here, you're not telling me anything. You're

saying: I've got these, but if you don't like these, I've

got some more.

Is that not -- that's what it says. Tell me if

I'm wrong. It appears what you're saying, and if I'm wrong,

tell me why.

MR. SAHN: Your Honor, I can certainly -- first of

all, I understand your question.

THE COURT: Have I mischaracterized it?

MR. SAHN: No, I don't think you have.

But I think at the same time, all that you can

rule upon is what's before you. And if you authorize this

to go forward, or if as and when this does go forward, there

may be other claims that are pled in addition to those that

are in the existing complaint.

THE COURT: Well, how would I -- assuming just for

argument's sake that I allow you to go forward with any of

this, how could that possibly be true what you just said?

I would never -- you know, your client has clearly

been opposed to virtually everything that the trustee and

the other side has said. I'm not saying that's good or bad,

but obviously they're in opposition -- Mr. Bergstein and Mr.

Tutor who is not represented here -- but clearly, there's

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been -- and the positions are fairly clear.

You wouldn't possibly think, I can't imagine, that

I would just basically make you in a sense, as Mr.

Bergstein, the trustee and you could say: Well, in addition

to anything else, pick any other?

What you have just said is my biggest concern

about if I --


THE COURT: -- were to have Mr. Bergstein saying

well, I'll allow it but he can decide that oh, maybe there's

some other things, and somehow in any authority that you're

asking today, that would be okay?

MR. SAHN: Your Honor, I would have no concern or

problem, because I think you raise a valid question that if

you were inclined to grant the motion but for this issue --

and I'm not saying, as you said, that that's your

inclination. But were it your inclination, that all that

could be filed is what is in the complaint, that is the

latest draft that's been put before you.

And to the extent that anything else would be

added, it couldn't be added without a further specific order

from your Honor.

THE COURT: Okay.

MR. SAHN: And so I think it's fair to say that I

should be governed and this motion should be governed by the

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four corners of the latest exhibit that's before you, and

that to the extent authority is given, it shouldn't be given

to do anything beyond what's in that complaint as drafted.


And then I have a few other questions. Some

interesting twists on our local rules.

Page 11 of your reply.

MR. SAHN: Your Honor, pardon me.

THE COURT: Sure. This is -- Zimon, if I

pronounce it -- Zimon, right? I know Tregub is representing

Zimon.

MS. TREGUB: Yes.

MR. SAHN: Page 11 did you say?

THE COURT: Yes, page 11. You say -- on page 11,

it says "The Zimon opposition."

Her opposition is really straightforward at least

on a procedural -- she says you never served the motion.

You served the notice of the motion and a complaint but you

never served the motion, and she cites -- by the way, quite

accurately -- our local rules.

You, in response, say, well -- never citing a

single local rule, you say -- I'm paraphrasing it but

essentially you say, which is accurate, that she got the

notice and the notice says -- and if you want to get the

motion, you've got to go on the website -- or the contents

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of the person.

That's pretty much what your opposition said,

right -- your reply to her opposition? That's on page 11,

12.

Am I accurate? I always like to be sure that I'm

accurately stating. That's pages 11, 12 and 13. That's

what you said.

And now I'm going to ask you again. Think very

carefully. Is that really your understanding of our local

rule?

MR. SAHN: Your Honor, in response to your

question, no, it isn't. She should have been served from

the start.

At the same time, we say at the beginning, and I'm

not sure I --

THE COURT: No, you've said -- but I'm asking you

a very straightforward question. We've had a number of

interesting interpretations by you of our local rules, and

that's why I would have asked you this anyway. But I want

to be sure.

Is it your position that you can file a notice but

it's not required under our local rules, the ones that she

cited, to actually file the motion? A simple yes or no will

do. I know what you've said: Well, she could have just

gone and got it.

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But that's not what the local rule says. And I

want to ask you: Is that your understanding of the local

rule? Did you comply or not?

MR. SAHN: No.

THE COURT: Why not? And how could you put that

in a reply? Why don't you just admit it, that you didn't

properly serve her? Why didn't you just say so? It would

have save me a lot of time spent on this.

Why wouldn't you just do that?

Any answer?

MR. SAHN: Your Honor, sometimes they say to ask

the question is to answer it, and I think you've answered

it.

THE COURT: Well, it is a rhetorical question, but

I always like to be sure to give you a fair opportunity to

answer it.

I don't understand.

MR. SAHN: She was served with the notice. She

was served with the amended complaint. She was not served

with the motion itself.

THE COURT: But yet you say that's okay. At least

you've said it in your papers.

Okay. I don't want to belabor the point, but I

wanted to give you -- if I'm missing something --

MR. SAHN: You're not, your Honor.

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THE COURT: -- I wanted to be sure of it.

Okay. I had a couple questions for you.

On page -- I'm moving to your original motion.

And I'd like you to turn to page one of your motion. And I

want to read you what you said here.

It's on page one, line 22. And this has to do

with the so-called -- the declining of the trustee to

respond or to take action as far as considering your --

giving you authority or seeking authority from this Court to

take these certain actions.

And I'll just read you -- this is page one, line

22. It says:

"Here, Bergstein has demanded that

the trustee take action against certain

of the identified defendants and it has

identified claims that Bergstein

believes are colorable and would benefit

the estate. However, the trustee has

declined to do so."

Now, just in reading that, that would tell me that

he told you, "No, I'm not going to do it."

But he never did that, did he? That's your

interpretation. Did he ever say -- at least at the time you

filed, did he ever say "No, I'm not going to do it"?

Because that tells me -- if I were the -- I am neutral in

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this matter, as I am in all, until of course I read all the

papers, then I'm no longer neutral on the merits.

But here, you say "the trustee has declined to do

so." I don't see that anywhere in the evidence here. I

know that's your take on it.

But when -- as an officer of the Court, when

you're saying something -- I read to mean that he said "No,

I'm not going to do it." Did he ever do that?

MR. SAHN: Your Honor, he said what he said in his

papers, which is --

THE COURT: I understand. I'm asking you a direct

question. Did he ever say he would not do it? That to me

means he declined.

He may not have taken the action, and you could

have said that. But you didn't say that.

What you said was "the trustee" --

MR. SAHN: I said he declined to do so.

THE COURT: Yeah, did he?

MR. SAHN: Yes.

THE COURT: When? Point out where he said in any

correspondence that he declined to do so. Did he ever say

"I'm not going to do it"?

He did ask for further information. But I'm

asking you a very straight (sic) question.

MR. SAHN: And then said specifically: Mr.

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Bergstein should never be permitted to bring on actions that

are property of this estate.

THE COURT: So when was that that he said that?

At the time you wrote this?

And I'd like you to read that to me, because I'm

concerned. I know what happened. I read it. And of course

I didn't just read this. I've read the rest of this. But

it doesn't seem to me that that's what actually happened,

and I'd like you to point out to me where he really said,

"No, I'm not going to do it" or "I'm not going to agree to

do it."

He never did agree, but that's different than

saying "I'm not going to agree." So I'd like you to find

that for me.

(Pause.)

MR. SAHN: Your Honor, his position was exactly as

stated in his papers, and that was --

THE COURT: And where are you reading from?

MR. SAHN: I'm reading on page nine.

THE COURT: Of?

MR. SAHN: Of the trustee's opposition to our

motion.

THE COURT: Okay. Wait a minute. But that's --

okay. Keep going. Page nine.

MR. SAHN: Line 17:

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"Should Bergstein be given control

of causes of action that he failed and

refused to schedule in the debtor's

bankruptcy schedules? To ask this

question is to answer it. There is no

set of circumstances in which Bergstein

can be entrusted with property of the

estates, especially property of the

estates that Bergstein concealed."

THE COURT: Okay. And that was filed -- let's

see, that's 10/22 I believe.

MR. SAHN: Your Honor, it was his position at the

time --

THE COURT: No, no. I'm asking you -- no.

MR. SAHN: -- and in his papers.

THE COURT: I asked you a very specific question

to point out something in writing, and you have, where he

said he's not going to agree.

Now, this of course was after you wrote this so --

your motion was on September 21st. His reply was obviously

after that.

So I'm asking you again. At the time you filed

this, show me something where he said that he would not --

MR. SAHN: I don't know that there's anything in

the emails he supplied that says that.

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THE COURT: Then why would you say it? Why would

you say "the trustee has declined to do so"?

MR. SAHN: Because it was true as is demonstrated

by his own pleading.

THE COURT: No, you're not answering my question.

At the time you wrote this, what did you base that on?

MR. SAHN: I based it on conversations we had

about the matter and about a history of dealing with the

trustee in this case --

THE COURT: Is it anywhere --

MR. SAHN: -- as it respects my client.

THE COURT: Well, clearly, there's animosity on

both sides.

MR. SAHN: It isn't a question of animosity.

That's not a here nor there.

THE COURT: Well, let me stop -- no, no. You're

changing the subject.

I'm asking a very specific question. I'm

concerned about statements that you made. At the time you

made this statement, "the trustee has declined to do so" --

and I'm asking you at that time, what was that based on?

And you've now referred me to something that

happened a month later. What about it?

MR. SAHN: Your Honor, the fact that it was put in

writing a month later doesn't mean --

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THE COURT: Tell me what you based it on that is

in your evidence.

MR. SAHN: There's nothing in writing I can point

you to --

THE COURT: Okay.

MR. SAHN: -- where the trustee says in writing "I

won't do it."

THE COURT: Okay. And in fact, what concerns me

about the way this all transpired, I'm looking at page --

let me see. I want to make sure. I think it's page 15 of

the reply. Let me -- because the facts are pretty unusual,

but again, I want to make sure I have them right.

On page -- I have it on page 15. Let me find it.

It was page 15 of something. Excuse me. I've got to find

it here. Just one second. I'm looking between your motion

and your reply.

Here we go. It was 15 but it was your original

motion. And it says -- again, and I gather this is what

happened only because I read yours. But also I've read --


THE COURT: -- the opposition.

MR. SAHN: Your Honor, I'm sorry, what page are

you on?

THE COURT: I'm on page 15 of your original

motion. And it's talking about the demand you placed on the

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trustee. And it says:

"Despite the presumptive futility

of making a formal written demand upon

the trustee, Bergstein did so anyway.

Bergstein's counsel" --

I'm reading now on page 15, line 13.

"Bergstein's counsel sent a demand email

to the trustee's counsel on September 5,

2012 requesting that the trustee consent

to Bergstein commencing and prosecuting

claims against Aramid, Molner* and

Levene and Stroock" --

And so forth.

"The demand email informed the

trustee that if the trustee did not

consent to granting its authority by

5:00 p.m. on September 7th, Bergstein

would treat it as a denial."

Were you really serious about that? I guess you

were. You did send the email. I saw a copy of it.

So you sent -- two days to --

MR. SAHN: I was extremely concerned.

THE COURT: No, but that's accurate, right? You

gave the trustee two days and you, in your own mind: If you

don't respond affirmatively in two days, you would deem it

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as a denial. That's what you said, right?

MR. SAHN: That's what I said.

THE COURT: What gave you the authority to do

that?

MR. SAHN: What gave me the authority?

THE COURT: Yeah. To give somebody -- or it could

have worked the other way around -- two days to say: If you

don't respond, I'm deeming it -- it sounds like one of these

bill collectors. I mean where do you think you have the

right to tell a trustee in a letter you've got two days to

agree or else I'm going to deem it a denial.

Where do you think you get the ability to do that?

MR. SAHN: Because the statute of limitations is

expiring in 30 days, your Honor, from that date --

THE COURT: Well, why didn't you --

MR. SAHN: -- arguably.

THE COURT: -- do it in July?

MR. SAHN: Your Honor, the trial didn't conclude

until the end of August. This was sent on September 5th.

THE COURT: Right. But again, I'll ask you --

MR. SAHN: The trial -- the jury verdict had been

maybe two weeks or two and a half weeks old at that point.

The matter wasn't ripe as far as we were concerned.

THE COURT: So you really -- you think -- and I

disagree with you -- that that trial somehow gave you the

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authority to give the trustee two days to respond because

the time was running; is that basically it?

MR. SAHN: I didn't say the trial did. I said the

expiration of the -- the possible expiration of the statute

of limitations.

THE COURT: Then again, I'll ask you again. If

the trial didn't have anything to do with it, why didn't you

do --

MR. SAHN: The trial had everything to do with it.

THE COURT: Well, okay, that's what I thought.

The trial had everything to do with it.

MR. SAHN: The trustee would have said the claims

are invalid. The matter hasn't gone to trial. There have

been no findings. We waited until we got the $50.7 million

verdict.

And after we got the verdict, we made the demand

on the trustee. We thought that was the appropriate time.

THE COURT: But even so, there was a problem with

the statute of limitations, but you felt that you have the

ability to deem it denied if they don't respond immediately

basically.

MR. SAHN: Well, I'm not a judge and I'm not

anything higher than a judge, so it was my position, your

Honor.

THE COURT: Well, do you think -- I'll ask you

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again. What gave you the authority to give him two days and

say if not, it's denied? What gave you the ability to do

it? I understand you might be under pressure, but in my

opinion, that was self-imposed pressure. You could have

made this well before.


THE COURT: But anyway that's what you did.

MR. SAHN: -- that's what it says and that is what

I did. That's accurate.

THE COURT: Okay. And I had one other question

about this. Excuse me. One second.

One second here. The -- I'm trying to find my

notes. I think it was in the original motion. Excuse me

just one second. I'll be right with you. I'm looking for

it and I'll find it in just a minute. One second here.

Here we go. I want to read you something. This

is your declaration, last page of your declaration that was

filed along with the original motion that was filed on

September 21st for authorization to pursue the litigation.

I want to read you something, this paragraph.

Quite frankly, I wondered what you meant by this. It says:

"The trustee responded to the

demand email promptly by email by

demanding that Mr. Bergstein undertake a

number of acts not required or having

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any relevance or relationship to the

demand sent on September 5th."

Of course, that was your opinion as to the relevance. And

then this next one, I want you to tell me, what does this

mean? It says:

"I have termed the trustee's

response as a refusal of our demand."

What does that mean? I know you use the word

"termed," but what does that mean in English?

MR. SAHN: I considered his response a refusal to

the demand.

THE COURT: That's what "termed" means?

MR. SAHN: Yes, sir.

THE COURT: I guess I'll have to look it up.


THE COURT: And then I want to read the rest of

this. "The trustee's response" --

"I informed the trustee that this

motion would be filed and I further

informed him that claims would be

requested to be pursued that were not

part of the demand email. Those

additional claims are the ones that

shall be brought against the trustee,

the trustee's professional firm, and the

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trustee's counsel and law firm."

Well, I must say that appears to me to be kind of

a threat. That is that he's denied your request and now you

are basically saying -- which surprised me that you would

actually put that in there -- that now, not only are you

going to request that you -- that you were going to sue

these other folks, but now you're going to go after the

trustee and that's what you're telling me you told the

trustee. Right?


THE COURT: What do you think that looks like from

my end of it?

MR. SAHN: I can't speak to how you perceive it.

THE COURT: Well --

MR. SAHN: The way I perceive it is that I

certainly was going to tell him up-front what we were going

to do and didn't want to mince any words about what that was

because if we then filed the motion and named the trustee

and included claims against the trustee, then the trustee

would say I hid something from him. So --

THE COURT: Right, but at the time --

MR. SAHN: -- I'm having trouble doing it --

THE COURT: Well, but at the time --

MR. SAHN: -- right as far as the trustee goes.

THE COURT: -- it seems to me like -- which

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happens a lot in this case -- threats of suit, not by -- I

know Mr. Tutor's threatened, that's why the trustee is

concerned or counsel for the trustee and the trustee. And

the Pangea matter is up before the Circuit and threats,

which apparently would be carried out, I assume with all the

lawsuits going on.

And it seems to me, when I read this, you can't be

serious, that you wrote him emails. You want to get these

claims and by the way, when you at least determined in your

mind that he's not agreeing, that now you're saying, by the

way, we're going to sue you too.

Is that how it -- you never discussed those claims

against the trustee in any of those emails before you

termed, as you say, the trustee's response as a refusal.

Would that be accurate?

MR. SAHN: I thought we told him right at the

time, your Honor, that this was something we would be doing.

THE COURT: Well, then why did you say, "I

informed the trustee that this motion" -- that further,

there would be additional claims?

"Additional" to me means in addition to something

you'd already talked about. Isn't that what it means?

MR. SAHN: Yes. And those would be the claims

against the trustee.

THE COURT: But you never -- show me, if you

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could -- the email string, I can't say that I have them all

because I don't know.

All I know is what people present to me in Court

so I don't know if I have all the emails but I have some of

them. And I didn't see in there -- correct me if I'm

wrong -- in the emails that you presented and the trustee

that talked about suing the trustee.

Show me if they're there. Because reading your

declaration under penalty of perjury, it looks like you had

this discussion and said: Oh, by the way, not only are we

going to do this, but we also may sue you.

That's how I read it. If you didn't mean that --

MR. SAHN: Your Honor, I don't have those emails

in front of me. My best recollection is that's what I said

via email. If I didn't --

THE COURT: Well, then why would you say here that

there would be additional claims? "Additional" means

something in addition to what you've been talking about. At

least to me, that's what it means.

I'm really just trying to understand. This is

your declaration.

MR. SAHN: The only additional claims I can think

of, your Honor, as I said, were the claims against the

trustee. Whether there were other claims besides those, if

I had any in mind at that time, I certainly don't remember

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now what they are.

THE COURT: But the word "additional." This is

what I'm trying to clarify. I've asked it two or three or

four times. Additional to the ones that had been discussed.

This appears to me -- and if I'm wrong -- this is saying

that in addition to the ones we talked to the trustee --

we're going to now sue you.

Is that correct or not? I mean I've asked it

several times. When you say --

MR. SAHN: I thought I've said it's correct, that

we were going to pursue the trustee.

THE COURT: But you don't recall now whether or

not you had actually talked to the trustee about that?

MR. SAHN: No, if I were to answer that question

from here, I would say that it was put in writing to him.

But I don't recall.

THE COURT: Then if you did put it in writing that

you were going to sue him, why would the sentence be: "the

trustee's" -- "refusal of our demand."

"I informed the trustee that this

motion would be filed and further

informed him that claims would be

requested to be pursued that were not

part of the demand email."

That's your email. That's your demand. Those

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additional claims would be the ones that were brought

against the trustee.

When would it have ever come up? You make a

demand. When would the other discussion come up about suing

the trustee, if it weren't in your demand email?

MR. SAHN: Your Honor, there -- in every issue in

this case, there's more than one email exchanged.

THE COURT: Well, I understand that. And that's

why I'm asking the question.

MR. SAHN: And so I would have to go back. As I

stand here, I don't know. But I would have to go back and

look at the emails that I wrote to see if as and when an

email was written which said to the trustee after the

initial demand, you know, besides these claims there will be

additional claims against the trustee and its counsel and

its accountants.


MR. SAHN: But I can't tell you as I stand here

that I recall such an email with specificity. But if I said

it in my declaration, it was surely discussed.

THE COURT: All right. Now, I've asked you a

bunch of questions. But do you have anything -- again, I've

read all your papers, as I always do in these cases.

But do you have anything else to say about your

motion?

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MR. SAHN: A few things, your Honor.


Oh, by the way, there were some evidentiary

objections actually related to the other motion. I'm going

to grant those evidentiary objections, just so you have that

on the record.

MR. SAHN: Your Honor, in the oppositions that

were filed, there were three issues that were raised by

these parties, as I read it, on a collective basis.

The first is that this does not meet the standards

of a colorable claim, as the cases require.

Second, that there's a settlement that is set for

hearing on January 30th between the trustee and Aramid,

which may dispose of the claims that are in the complaint

that we've asked for authority to pursue.

And, third, that Mr. Bergstein should not

personally be authorized to pursue these claims, which is

based upon page nine of the trustee's opposition that I read

to you a short time ago.

Your Honor, in terms of meeting the colorable

claim requirement, the document or documents put before you

are that there was in litigation not involving these debtors

a demurrer to claims filed against the Levene, Neale firm

and the Stroock firm -- no others who we asked to sue in

this case, just those two -- which sustained demurrers

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without leave to amend and that those somehow bar or prevent

any claims against them from going forward and thereupon the

colorable claim requirement.

I looked for a definition of a "colorable claim."

Had trouble finding it other than in non-bankruptcy cases.

I thought what we put before you about a Rule 12(b) standard

in terms of looking at the causes of action which a party

would plead without -- and looking at the complaint that's

been put before you in a manner that allows all inferences

as would be the case under Rule 12(b) --

THE COURT: This is not even in the same -- the

universe as a motion to dismiss. This is something much,

much different than that.

I understand colorable claim, but the issue here

is whether or not I would allow a third party to basically

bring a lawsuit. So this is not really a motion to dismiss.

I understand what colorable claim means. But in this

context, it's a little bit different. But it just means you

can show that there's really some reasonable claim, I guess.

MR. SAHN: Well, they're saying that regardless of

who the party is bringing it, that we failed to meet that

standard, and I was responding to that.

THE COURT: Yes, I understand.

MR. SAHN: Okay.

THE COURT: Remember all those cases where I say

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this may not really fit, all those cases and the whole

history of typically debtors in possession not wanting to

sue people they've either -- you know, given preferences and

fraudulent transfers, it's a different animal than what

we're dealing with here.


THE COURT: But, yes, I understand that that's

what the cases talk about --


THE COURT: -- but it's in the context they're

talking about it that you have to keep in mind what they are

talking about.

MR. SAHN: I don't agree with that, your Honor --


MR. SAHN: -- for this reason. The idea that

you're focusing factually, as you are I believe, on cases

that allow this to take place and the fact that factually

many, most, all of those cases -- I certainly didn't have

any disagreement with you on that -- arise in the context

that you've outlined doesn't mean that the principle of the

debtor in possession and trustee having the same obligations

would not therefore apply to a trustee who simply doesn't

want to bring on causes of action --

THE COURT: Yeah, right, if they have --

MR. SAHN: -- that are meritorious.

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MR. SAHN: And we think, as far as merit is

concerned -- we think the standard -- we're clear that the

standard isn't any different for a trustee than it would be

for a debtor in possession suing an insider for a preference

or a fraudulent transfer. The duties are identical. The

Code makes it clear that the duties are identical.

THE COURT: True, but in those cases, which you've

just put your finger on -- which are the vast majority of

all these -- you know when you see it. That is, you know --

there's a -- you know there's a preference, there's a

fraudulent transfer, you know who the transferee was,

transferor and you know those facts.

MR. SAHN: Your Honor, these are decisions by

courts of appeal and those cases, not one of them says that

this standard applies to debtors in possession against

insiders but doesn't apply to some other class. It applies

to everyone --


MR. SAHN: -- with equal validity. And I just

have to take issue with you creating a distinction --

THE COURT: Well, I haven't created it. It was

meant as a question. I get to do that. That's one of the

few perks I have. I get to ask questions.

MR. SAHN: One of your perks. I understand. I

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just want to take issue with it --

THE COURT: I understand.

MR. SAHN: -- and make it clear that I am doing

so.

THE COURT: I understand you would not agree. It

was meant just as a question.

MR. SAHN: Okay. Your Honor, Ms. Coyoca can speak

to the complaint that was put before you on I believe --

THE COURT: Well, you only have, unfortunately --

I think you know and this is true on each side -- you can't

split up your argument. This is your argument.

MR. SAHN: But, your Honor, in fairness, what you

have on the other side are the trial lawyers who are

defending these claims. You don't have the bankruptcy

lawyers here arguing against this.

And I think in fairness is her name on the

pleading, no. But did she draft the complaint that's the

entire basis of this motion? The answer to that is yes.

And I would think you would want to hear, notwithstanding --

THE COURT: Well, in this particular --

MR. SAHN: -- about what the merits are.

THE COURT: In this particular, I have to be very

strict about who gets to speak. It's only people that are

on the pleadings. So I'll stick with that.

I've read your papers. I know what the state

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court action was all about. So I don't need anybody to

explain more than the papers.

MR. SAHN: Your Honor, then to just give it to you

clearly.

There was opposition which talked about the fact

that three of the causes of action, which are based upon

violations of criminal statutes, do not give rise to private

causes of action. And among the cases cited was the Animal

Legal Defense Fund case. I believe that was cited by the

Levene, Neale firm's counsel.

And that case certainly talks about when a

criminal statute does and does not give rise to a private

cause of action. And it sets forth three instances, when

one reads that case, when bringing on such an action is

permitted.

And I would just tell you that first of all, we're

only talking about three of the causes of action that are

pled in this revised complaint that have not been passed

upon by the Superior Court, and that there is not a ruling

by any court which talks about whether or not the criminal

statutes which are being sued under with respect to the

private cause of action, either Penal Code 499(c) or the

Business and Professions Code provision -- I think that was

6128 but -- yes, 1628.

There are no cases which talk about whether or not

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a private cause of action exists under those statutes.

So the principle is accurate. The case cited is

certainly accurate in terms of the standard. And we would

just let you know that as to those causes of action there

are no decisions that speak to whether or not a private

cause of action exists or not.

In addition -- and, again, to distinguish the

existing complaint from the one that was passed upon by

Judge Linfield, there are causes of action for violation of

the California Trade Secrets Act. There is an invasion of

privacy claim.

There are claims of breach of fiduciary duty

against Susan Tregub and Teri Zimon that having already been

found against Ms. Tregub, it's hard to imagine she has any

defense to it other than her right of appeal.

So, again, these are all causes of action that

have been pled which have not been pled before or ruled on

before by any court.

We also plead causes of action for aiding and

abetting breaches of fiduciary duty against both Aramid and

Screen Capital and their related parties. And, again, no

ruling by any court that the litigation privilege or any

other dispositive kind of rule or statute applies to prevent

those claims from going forward.

And, finally, as to the claims that are pled

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against the two law firms, there is going to be an appeal of

that. And we believe based upon clear California law, the

appeal has merit. We do understand the issues with the law

firms, but those don't apply at all against any of the other

parties.

And certainly if the Court has any concern or

question about the law firms, there is no question about the

other parties and no basis by which the claims that are pled

against the other parties can be deemed or ruled upon by you

or argued to you as being claims that are not colorable

based upon their merits.

And we believe strongly that the two law firms

notwithstanding, the other causes of action against the

other parties should be allowed to go forward. The trustee

has made it absolutely clear 100 percent that those claims

which are predicated upon the Tregub ruling and what

happened factually with respect to that -- and, again, the

unanimous verdict completely supported by the trial judge,

as I understand it.

And so there's really no question with respect to

the merits, and there is equally no question with regard to

the trustee's position on this, which I've read to you.

And I have to add and will add that the trustee's

declaration in response to our motion where he talks about

the fact that there's no proper measure of damages, that I

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made misstatements to the Superior Court, that Mr. Bergstein

made misstatements to the Superior Court, that documents

were not introduced that would have disproved damages, these

are -- I mean these are just beyond anything I've ever seen.

If you read it, one would think that the $50.7

million jury verdict didn't happen or that it was obtained

by some undue means when Ms. Tregub was represented by

highly competent counsel, very experienced in these kinds of

matters.

If anything should convince this Court that the

trustee has no intention of ever pursuing these claims, what

the trustee says about his reading of the entire

transcript -- because he complains that he's spending a lot

of time on this case and not getting paid for it -- the

trial transcript is a few thousand pages and he read the

whole thing and characterized it in a way that is truly

untethered from reality as far as what happened versus what

he perceived to have happened.

And there were certainly lots of people to my

left. There have been lots of things said about my client

in this case.

And today this motion and the merits of this

motion and whether this motion should allow this complaint

to be brought because it will generate something for

everyone's benefit, it's something my client will pay for,

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it won't cost the estate anything other than paying him back

from any recovery but it won't cost them anything up-front.

If there's no recovery it won't cost the estate anything.

And last, your Honor, the trustee's objection that

there's a settlement. The settlement is set for hearing in

two months. I know you haven't looked at it. I certainly

have looked at it and have written about it in our

pleadings.

But that's in two months' time, and we're here

today two and a half years into a case in a situation where

in two and a half years, since all this started by these

involuntary filings instigated by Ms. Tregub who is here to

speak for her position, not a single trial has taken place,

not a single verdict has been rendered, not a single

judgment has been obtained, not a single asset has been

liquidated to any considerable or significant benefit to

creditors.

The only thing that's happened that speaks to

these cases and what happened with respect to them is this

jury verdict. And we think that's important.

We think it's significant with respect to this

motion, and based upon that, we would ask that it be

granted.


Any particular order?

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MR. GUMPORT: If I may. Your Honor, Leonard

Gumport for the trustee. I'd like to connect a few dots

here and circle back to some of the questions the Court

asked Mr. Sahn.

Mr. Sahn couldn't find or didn't remember what the

email about the demand was or how it happened. One of the

difficulties there would be that he did not give it to the

Court when he made his representations characterizing the

trustee's refusal, as he termed it, to act.

That email, among other places, appears at Exhibit

13 of the October 15, 2012 declaration that I filed on

behalf of the trustee in opposition to the motion for

authority to take control of causes of action. And at Bates

stamp pages 00063 through 00064, we can see the exchange on

September 5 between my firm and Mr. Sahn's firm.

The first thing we see at page 00064 -- and I'm

reading from docket number 1070-2 in the ThinkFilm case --

is the demand that Mr. Sahn made entitled "Privileged and

Confidential" where -- he subsequently, after instructing me

not to tell anybody about it, he took it upon himself to

characterize it but not show it to your Honor in his papers.

And what's quite clear from this demand is that

there isn't any statement in there saying, "We're going to

sue the trustee" or "We're going to sue your firm."

It's a demand that: We take over cause of action

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of the bankruptcy estates, quote, without limitation,

against David Molner; Aramid; SCIC; Levene, Neale, Bender,

Yoo and Brill; and Stroock, Stroock and Lavan.

It doesn't have the threat in it. He saved that

for later. This is the written demand that I'm reading

from, and then this is what Mr. Sahn terms a refusal to act.

On that same day where I had been given a 48-hour deadline

to respond, these are the things that Mr. Sahn told this

Court without giving the document were extraneous matters

that I attached to my refusal to act on behalf of the

trustee.

I say -- let me read it in the entirety because

it's just totally different from what Mr. Sahn told this

Court and he doesn't seem to remember it, but I do.

Quote:

"Dear Mr. Sahn, this afternoon on

September 5, I received your proposal

below. In your proposal, you gave the

trustee until September 7 to say yes or

no to your proposal. Your proposal's

last paragraph admits that there remains

some contingencies in respect to our

offer. Please provide the following

information as soon as possible to

permit the trustee to thoroughly and

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carefully evaluate your proposal.

"1. Please make your proposal in a

complete form without unaddressed

contingencies other than the trustee's

signature and Bankruptcy Court approval

on notice to creditors.

"2. Please explain why the causes

of action your client wishes to pursue,

plus other causes of action and R2D2's

ownership of Pangea do not appear in the

debtor's sworn bankruptcy schedules.

Please get the schedules amended and

corrected as quickly as possible.

"3. As to each of the debtors,

please identify the harmed assets and/or

lost profits of the debtors as a result

of the conduct that is the basis of

causes of action you wish to pursue.

Please explain whether those assets

and/or profits appear anywhere in the

debtor's tax returns that your client

signed and gave to the trustee. If not,

please explain whether the tax returns

should be corrected."

Et cetera, et cetera.

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In response to which -- those aren't extraneous,

your Honor. Those go to the heart of whether the trustee

should pursue causes of action.

THE COURT: No, I've read that. I've seen it.

MR. GUMPORT: And Mr. Sahn got it and he didn't

tell the Court about it. In fact, he mis-described it to

the Court in the motion.

All right. Now, the Court asked some questions

about how in the motion's reply -- on one page it seems --

we know there's a retraction that the trustee and his

counsel will be sued.

On another page, there's a statement in effect of:

This new complaint, which doesn't include the trustee and

his counsel, it doesn't set forth everything. There's

additional meritorious causes of action.

Okay. Well, there's one thing after that that

happened. The one thing after that that happened, as set

forth in our evidentiary objections -- two things.

First, in the reply which was submitted on the

deadline of October 22 or October 23, depending in which you

look at the docket, the statement is made, well, Mr.

Bergstein -- the trustee's complained that these causes of

action aren't scheduled and if ever they were going to be

scheduled, they should have been scheduled by the time of

the reply and certainly by the time of the motion, actually

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when you're saying: Trustee take action on causes of action

of the estate but I'm not scheduling them.

I mean it's reasonable for the trustee to say:

Excuse me? What's going on here?

So then we get this reply brief saying, well, Mr.

Bergstein's going to schedule this stuff. Well, what

happens on -- then there's another evidentiary objection I

submit on Friday afternoon. I say we still don't have these

schedules, they're still not here. And Friday at about

3:30, in come the schedules.

And they remove any question about the

reasonableness of the trustee's not pulling the trigger on

this cause of action just because he got a 48-hour demand

that he had to do it.

First, I will note, the summary of schedules,

they're submitted by a non-individual. No lawyer signs the

papers. Local rule 9011-2 says a company can't appear

without counsel. But these are amended schedules. They're

not the initial schedules. They're amended schedules. That

is, taking legal action in a judicial proceeding by a non-

individual.

THE COURT: You know, I haven't actually seen

those. Those are not signed? Or who are they signed by?

MR. GUMPORT: They're signed only by Mr.

Bergstein. No lawyer signs them.

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And what they say is this. On the first page is

causes of action. These amendments, without limitation,

identify causes of action of which Mr. Bergstein is aware

that exist in favor of the bankruptcy estates. Note the

careful phrasing. Identify causes of action. Not all

causes of action. Because that statement couldn't be made

because this additional stuff that Mr. Sahn talked about in

the reply brief, something other than a lawsuit against

Aramid and accounts receivable, something other than that,

that's not in these schedules.

So when Mr. Bergstein said he's identifying causes

of action, he deliberately didn't say all causes of action.

And then he explains to the Court and to me the

way the Bankruptcy Code works. Some lawyer wrote this. The

e-filing reflects Mr. Sahn e-filed this document. But,

again, his signature is not on it.

But this is the next sentence. Quote:

"The obligation to identify,

investigate, underwrite and commence

these causes of action rests entirely on

the trustee and his attorneys and

account Ronald L. Dirk and Chapter 11

trustee, Gumport Mastan, attorneys for

the Chapter 11 trustee, Clifton

Gunderson LLP, accountants for the

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Chapter 11 trustee."

That's what the schedules say. I'm reading

from -- this is R2D2's schedule which is docket number 1296,

but every single one of these schedules not signed by Mr.

Sahn but e-filed by him on Friday, October 26th, have the

same disclaimer on the first page of what's submitted.

And it makes clear, oh, the trustee and his

lawyers, exclusive responsibility to investigate and decide

what to do. But here he is in court. Mr. Bergstein is a

moving target, your Honor, because here we are in court.

We're being told: Take these causes of action away from the

trustee. Take them away. He's not acting properly. He

didn't respond properly. He's acting unreasonably.

But then when it's time to submit schedules, Mr.

Bergstein says I'm identifying causes of action. And the

responsibility is exclusively with the trustee.

Well, you see, but you know, that's for Friday

afternoon. That's not for this hearing. You weren't

supposed to see this now.

This is the other thing he says. Suddenly all

these debtors which have no assets -- in fact, the assets

range from this. $783,000 in ThinkFilm to unspecified or

zero in each of the other four debtors.

Now, each one of the debtors, according to Mr.

Bergstein under penalty of perjury with bizarre disclaimers,

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has $51 million in assets. That's on the summary of

schedules.

And what is that $51 million of assets, your

Honor? It's exclusively the commingled causes of action of

each of the five debtors. They have the same asset

scheduled.

So, of course, we were here on September 25 saying

these estates are different, they're separate. No

substantive consolidation. Everything's unclear. The

trustee should figure it out.

But Friday afternoon, when it doesn't matter

anymore, because Mr. Bergstein's moved on to something else

and this will help him, all of the debtors have the same $51

million commingled asset.

So, your Honor, the trustee's acted very

reasonably. He didn't refuse to act. All of that has been

misrepresented to this Court. And what I would say is -- I

just gave you a taste of the schedules. They get worse.

What I would say, though, is your Honor, this

motion should be denied. But you've gotten I think an

insight today into what the trustee is dealing with, and

it's -- I think it's disturbing.

The lawyers are the gatekeepers. They're not --

we're supposed to make sure that there's some kind of

reality check on what this Court gets.

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And I don't see how that description of the

September 5 email exchange could have been made without at

least counsel having the candor to give the email exchange

so the Court could see for itself -- and there was follow-up

where Mr. Sahn occasionally sent emails saying "You

refused."

And I wrote him back and I said, "Read what I

wrote you. I didn't refuse. Give me the information."

And to this day, your Honor, the first time the

schedules get fixed is after the deadline for reply papers,

and now they contradict what the Court was told at the

hearing on substantive consolidation.

Thank you. The motion should be denied.


MR. PARKER: Good afternoon again, your Honor.

David Parker for Levene, Neale and the various partners.

I want to focus on matters that arise from the

omnibus reply. Obviously, this is a case about retaliation.

You know, you can make a demand and tell somebody to respond

in two days, and if they don't you can file this motion and

then threaten them with a lawsuit.

Well, my clients have gone through the same thing.

They have been very, very successful in motion practice

before your Honor. And after two years of that, they

finally decide they're going to sue the Levene, Neale firm

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in state court.

I do want to correct something Mr. Sahn said. He

misrepresented to the Court that our motion in state court

was a demurrer. And while we filed a demurrer, the demurrer

was never ruled on. It was taken off calendar. It was

declared moot by the trial court. Why? Because we filed a

SLAPP motion with extrinsic evidence.

And it's the SLAPP motion that was granted. It's

the SLAPP motion that produced our right, which we will

exercise on Friday, to file a motion for prevailing party

attorneys' fees. And it's the SLAPP motion that they pray

they'll be able to overcome on appeal, though they don't

bother to tell you how they could possibly do it.

I know your Honor has seen the Superior Court

judge ruling. I won't belabor that point. I think you will

see how detailed it was in the context of a SLAPP motion.

Now, this verdict, they say it's everything. The

verdict is everything.

Well, as it relates to the conflict of interest

Mr. Bergstein, the man who can't be trusted -- as it relates

to him, I agree, it's everything, because what it tells us

is Bergstein has a massive conflict of interest on two

fronts.

And these are reasons alone, apart from the lack

of colorability, if there is such a word, for the denial of

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the motion.

Bergstein is a judgment creditor against Tregub.

Bergstein is a would-be -- currently defeated but would-

be creditor against the lawyers he was suing, Levene, Neale,

Stroock and so forth.

He's trying to collect money from them. They are

the same target that at the same time he proposes to go

after on behalf of the debtors.

That is a massive conflict of interest because

we're not talking about the U.S. Treasury. We're talking

about individuals and law firms.

And he's already claiming $51,000,000 based on a

verdict against Tregub. He wants the same damages against

the lawyers and he's going after it to put the money in his

own pocket and the pockets of his other affiliates.

But at the same time he wants to pick up the sword

and go after those same people, he's competing with the

debtors. That's a massive conflict of interest.

If we were in state court and we were talking

about a derivative plaintiff bringing a derivative action on

behalf of the corporation in which they own shares, that

would never be permitted.

And that's not the only conflict. Mr. Bergstein,

it's clear from the trustee's motion to approve the

settlement which is identified as Exhibit 15 on our request

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to take judicial notice -- it's very, very clear that he's

now in the sights, and has been for some time, of the

trustee.

And so on the one hand, the trustee has brandished

the sword. He says: I'm going after Bergstein on behalf of

the debtors.

That's in large part what the settlement is about,

and it's not the first time that's come up.

So Bergstein who is facing the sword of the

debtors, he wants to hold the sword and he's saying: Let me

be your champion.

How can he pursue the rights of the debtors when

the debtors have claims against him? Both of those are

irreconcilable conflicts. And that's grounds alone to deny

the motion.

Now, with respect to colorability, it seems like

we're all adopting the "I know it when I see it" kind of

standard. But I don't disagree with one point that was made

in the opposition, and that it that it tends to be a

pleading standard. Would it stand up on pleading.

Well, they had a dry run and they came up empty.

And the only defense -- because they don't talk about the

merits of the litigation privilege. They don't talk about

the merits of the statute of limitations except as to

section 108 which I'll come to.

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Their only argument is: Well, you know, we held

back a few claims from the Superior Court. He didn't get a

chance to test out those old Penal Code sections we came up.

And, by God, we've got the Business and Professions Code

section. Boy, Judge Linfield didn't have a chance to rule

on them.

Well, one wonders why they held those back. But

regardless, we've briefed and they've not really responded,

other than the brief argument today, that those Penal Code

sections -- you can read them until the cows come home.

They don't contain any private right of action.

And I credit Mr. Sahn for being candid enough to

say there's no law out there that says otherwise. He

couldn't cite a single case that upheld an implied right of

action for a private citizen to suddenly become a

prosecutor, to pursue civil damages under the banner of a

Penal Code section.

He couldn't even name an analogous Penal Code

section where an implied right of action existed.

And even if could, at bottom, no matter what label

he puts on them, we're talking about lawyers gathering

evidence, drafting pleadings and so forth.

One of the things about Judge Linfield's ruling --

and we didn't have the luxury of doing this because of page

limitations. But he went through the complaint and he found

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41 what I call sound bytes, but 41 allegations in their

complaint, most of which were the litigation war and all of

these things.

And their own pleading made it clear that

everything they seek to target, as it relates certainly to

the Levene firm that I represent, is conduct by lawyers,

just like Mr. Gumport acting as a lawyer for the trustee, as

a trustee, as a professional.

All of these people are threatened because why?

They got in the way of Mr. Bergstein, the man who can't be

trusted.

So the SLAPP motions were ruled on, and not one

reason has been given to you. There's not a case they came

up with or an argument that wasn't surfaced in the Superior

Court. They just want a do-over and they want to have a

do-over with the debtors.

They say they'll file in Superior Court if they're

given leave. I think we all know it will go to Judge

Linfield. But they don't offer a single reason why Judge

Linfield would do anything other than SLAPP the new case.

Let me turn briefly to just a few of the issues --

or one of the issues that's unique to my folks, and that's

collateral estoppel.

One of the things that I found almost humorous, if

it wasn't so outrageous, is that one of the offending acts

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charged against Mr. Gross, one of my clients, was that he

successfully argued before your Honor on the

disqualification motion.

Well, in that disqualification motion your Honor

made a finding. And while we were not successful in

Superior Court of making that stick, because they argued and

the judge agreed with them that Bergstein -- that there was

no privity. No privity.

We now have exact privity here, because it was

Bergstein who filed the motion to disqualify. It's

Bergstein who stuck with that finding. It's Bergstein who

now wants to champion -- wants to pursue these claims, all

of which are bottomed on that one common denominator and

that is the receipt and exploitation of confidential

information.

Your Honor found otherwise. It is binding under

federal civil procedure. Notwithstanding any appeals or

anything of that sort, it's entitled to collateral estoppel

treatment.

And unless we missed this, I went back over the

disqualification motion because in their reply they said,

"Well, here are four allegations that were not before the

Court on the motion to disqualify." And if take those four

and you line them up -- and I looked at pages six, 10, 12

and 16 of their motion to disqualify. All of that is

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pled -- is set forth in the motion to disqualify.

This is just simply an effort to take another run

at it, not with your Honor of course because you ruled

against them. But they want to take a shot in the Superior

Court.

Again, no substantive response on the litigation

privilege, just raising these Penal Code sections when there

isn't a private right of action.

In our opposition, we cited to the California

Supreme Court's rulings in Moradi-Shalal, Temple Community

Hospital, and Cedars-Sinai. And these are all cases where

the Supreme Court laid out state law as it relates to

implied rights of action.

They made no effort to try to establish that their

proposed claims would come within the rationale of any of

those decisions.

On the statute of limitations -- and I'll conclude

with that -- they don't argue again that it's not barred by

California's Code of Civil Procedure section 340.6. That's

the finding of Judge Linfield. That's the finding of

another Superior Court judge in the Laurie (phonetic) Zimon

case.

What they say is it's a new ball game here in

Bankruptcy Court because we've got 11 U.S.C. 108. But

108 -- and we've cited the case law -- is strictly pre-

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petition, not post-petition.

So consider what the claims are here. And, by the

way, these issues came up in one sense in the state court.

They came up in the sense that in order to have a cause of

action, you have to have damage of course.

But also, under 340.6 -- Code of Civil Procedure

section 340.6, there has to be actual injury as part of the

trigger -- one of the triggers for the one-year statute.

And so we had to establish in state court, and we

did, that the actual injury occurred more than a year before

they filed the complaint. And what we argued, without

opposition, was they claim that the filing of the

involuntary petitions caused harm and then additional harm

thereafter.

But there was never a suggestion, and their

pleadings certainly are clear, that there was any harm

before the petitions were filed. And so, by definition,

having filed it, then the damage occurs. That would be

post-petition. 108 would not apply.

Unless the Court has any questions, I would

submit.

THE COURT: Thank you.

MR. PARKER: Thank you.

THE COURT: Anybody else on this side?

MS. DEMSKY: Thank you, your Honor. Lisa Demsky

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on behalf of the Stroock law firm and its partner Dan

Rozansky.

I'll be brief. Most of my clients' positions are

identical to Mr. Parker's with the exception of the

collateral estoppel issue.

But just to emphasize a couple of points.

As Mr. Parker pointed out, the ruling which we

received in Superior Court from Judge Linfield was on a

SLAPP motion, and that's important not just because there

was an evidentiary presentation but also of course because

of the mandatory fees.

And under the statute, a prevailing defendant on a

SLAPP motion is entitled to mandatory fees. We have those

motions that will be filed later this week.

There's going to be hundreds of thousands of

dollars involved in those fees, and that's relevant here

because it doesn't just affect the colorability issue but

also --

THE COURT: I understand. Possible claims against

the estate.

MS. DEMSKY: Right, whether there is a benefit to

the estate. And permitting these claims to go forward is

subjecting the estate to the same fee motions which -- Mr.

Bergstein is saying he'll front the attorneys' fees for the

estate but says nothing about the attorneys' fees awards for

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the opposing parties that will be granted if the SLAPP

motions are successful, which there's no indication that

they won't be.

And to that point, again Mr. Parker addressed this

so I'll just be brief. But the way that they -- I mean the

amendment to the complaint is transparent. They filed one

draft complaint after the tentative, but before Judge

Linfield's ruling and then an amended proposed complaint

trying to get around Judge Linfield's ruling.

We know how -- we have a good idea at least of how

Judge Linfield will look at this if and when it comes back

before him because Mr. Bergstein's counsel argued vigorously

for leave to amend at the hearing. It was a very long

hearing.

THE COURT: And he said no.

MS. DEMSKY: And he said no. They said: Oh,

there's criminal statutes. There's ways we can get around

the litigation privilege. There's ways we can get around

SLAPP. And Judge Linfield said no, because you don't look

at how you plead the causes of action; you look at the

underlying conduct.

Here, you're suing lawyers for representing

clients who sued you. And that's -- litigation conduct is

always going to be barred.

I think your Honor gets it. Unless your Honor has

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any questions for me --

THE COURT: No. Thank you.

MS. DEMSKY: -- I'll let someone else argue.

Thank you.

MR. GUMPORT: Your Honor, this isn't argument.

I'll just say Ms. Demsky's arguing makes me aware that I

have an in-law connection with the Munger Tolles firm, and

I'll file something disclosing that. I just want the Court

to know it now.

THE COURT: Well, I heard what you said. I'm not

sure if I fully understand the --

MR. GUMPORT: I'm supposed to disclose all my

connections.

THE COURT: Anyway, file something, whatever

you're going to file.

MR. GUMPORT: That's fine. Just didn't want to

anyone to say trustee's counsel didn't disclose.

THE COURT: First time I've heard of it, but

anyway you'll file whatever you're going to file.

MR. GUMPORT: Thank you.

MR. LANGBERG: Your Honor, Mitchell Langberg for

David Molner, SCIC, Genco, and Aramid Capital.

I'm mindful that the Court's mindful of the entire

history, the relationship of the parties.

THE COURT: It's not a clean slate.

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MR. LANGBERG: So I would like to -- rather than

remind the Court of things it's already mindful about, I'd

like to address the legal issue that the Court started with,

the legal issue about whether or not this motion is the

trustee and not a debtor in possession.

THE COURT: I think conceivably -- I mean it's

clear it is possible, but it is a different dynamic I think

than when you have a debtor in possession, but yes.

MR. LANGBERG: One thing, of course, your Honor,

that's obvious is that the interest of the debtor in

possession in pursuing claims might be different than that

of the trustee.

THE COURT: Of course.

MR. LANGBERG: And so I'll point out that in our

papers we noted that there's some courts that, when looking

at the issue not only of whether the claims are colorable,

but once there's a determination that they're colorable,

also in deciding whether or not the appropriate discretion

has been exercised -- say, well, we need to look at the

probability of success, the relative benefits, potential

costs.

And I'd offer, your Honor, if the Court is willing

to determine that this type of motion is appropriate when

it's a trustee that's made the determination --

THE COURT: I've never seen one but I'm not saying

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it's not. This is the first, obviously.

MR. LANGBERG: So if the Court's going to decide

that it is an appropriate motion, I think that burden, if

ever, of showing the relative merits of the claim to the

costs should be applied.

And that's why your Honor commented about the

distinction between a colorable claim and then the pleading

stage and then counsel's talked about the fact that this was

an anti-SLAPP motion that the law firms dealt with.

But what the court did not in an issue preclusion

type of way -- but what the court has done in the state,

Superior Court -- and by all accounts this would be a

related case, we'd see the same judge -- is relevant I think

to deciding whether or not the trustee abused his

discretion, acted reasonably, because he is standing here

looking at that court.

And a motion for an anti-SLAPP, which your Honor

I'm sure knows -- it wasn't just that there was an

evidentiary showing. But all the plaintiff had to do was

show the court that there was prima facie evidence that

supported their claims that couldn't be overcome by the

privilege.

They failed to show that.

And while we're talking about lawyers, the

privilege is the same issue, because it wasn't that they

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were lawyers only but that the actions that were complained

about all arose out of litigated -- the gravamen was this

litigation.

So for the trustee to say to Mr. Bergstein,

"Please tell me why you think you have good claims," and get

no answer and then to look at what the Superior Court has

done in some of the same claims or claims that are similar

based on the same basically nucleus of facts, that certainly

isn't an abuse of his discretion.

It's another reason the motion should be denied.

Thank you, your Honor.

THE COURT: Thank you.

Anybody else?

MR. GOLDSOBEL: Good afternoon again, your Honor.

Steve Goldsobel on behalf of the Aramid entities.

I think everything that needs to be said about

this has probably been said, and I'll be brief just because

the Aramid entities are a little differently situated with

respect to the state court proceeding.

There was a motion for judgment on the pleadings

which came after the anti-SLAPP motions, but the court

essentially followed the same methodology and at the end of

the day, not in dicta, but on a separate, independent basis

for the adjudication and granting of the motion for judgment

on the pleadings, did find that the litigation privilege

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applied and again set out allegation upon allegation that

pretty much tracked the complaint that's before the Court.

But I think, as my predecessor just said, you

know, the threshold issue is whether or not the trustee and

his counsel have properly considered how to approach these

claims.

And as set out in our papers, the answer is yes.

Not only Mr. Gumport's comments today but the fact of the

tolling agreement and the settlement agreement and coming up

with a sound methodology for disposing of those claims and

moving this case forward.

And I think that's amply set out in the papers and

the motion should be denied.

THE COURT: All right. Anybody else?

All right.

MS. TREGUB: I just have a couple things, your

Honor.

First of all, I would like to reiterate that which

was stated in my opposition paper which is that the verdict

in my case, post-trial motions have been filed and there is

an upcoming hearing on them. And if those are not found in

my favor, then my case will be appealed.

So I know that Mr. Bergstein and his legal team

completely dismiss that, which I expect nothing different

than for them to do so. But I think that may be something

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that you should keep in mind or at least be aware of.

Additionally, I think it would be a disservice to

everyone here and to your assessment of the situation to

assume that because a verdict was found against me and my

professional corporation, that it was because Mr. Bergstein

was telling the truth or that the evidence that he provided

in my case was such that it was honest and truthful in a way

that he has yet to consistently show in any other situation.

It's not like he all of a sudden during one day

became an honest, truthful person. The reason why I did

what I did was because he isn't.

So I appreciate that Mr. Gumport read the trial

transcript. I feel sorry for him. And I'm sure that you

don't have the time, energy or disposition to read it.

But I would never presume that Mr. Bergstein has

become a changed person from the man that you know and have

experienced in this courtroom just because there is a

verdict rendered against me.

And lastly, I appreciate the obligations that I

had in my case. But having turned over what probably

amounts to several million pages of documentation, to read

the omnibus reply and basically have them say that -- I mean

they know I don't have any money so I don't know what -- in

doing a calculation of what the benefit would be to the

estate in pursuing me.

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There certainly isn't any cash benefit. So it

seems as though their preferred -- or their explanation is

that they're going to get a lot more discovery and so they

should put me through the rigamarole of a lawsuit against me

so that I can produce more discovery which they can then use

against other defendants that they're going to be suing.

And it would seem to me that that really -- I

don't have the law to quote to you, but it would seem to me

that that really isn't the purpose or the benefit of suing

somebody who otherwise has no assets and can bring nothing

else to the table if they are sued by the trustee and/or a

proxy for the trustee.

And the reference to the smell test in

colorability, it just makes me think -- and I'll just leave

you with this sense of things -- that to leave David

Bergstein as the proxy for the trustee, to bring claims in

order to leave the creditors who he intentionally did not

take care of while he was responsible as the manager or head

of the companies that are in this bankruptcy proceeding, who

he just left out there flailing, that he is now going to

become the person responsible to pursue claims on their

behalf in order to make them somewhat more whole?

That seems beyond absurd to me. And it hardly

seems like it's a colorable argument that he should be able

to sit in that seat and make those decisions, particularly

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when some of those claims that need to be made should be

against him.

Thank you.

THE COURT: Anybody else from the other side? Or

did we run out of people? Have we?

MR. NEALE: No, your Honor. We're represented.

THE COURT: No, I understand. All right.

Mr. Sahn.

MR. SAHN: Your Honor, I'll try to respond in the

order of appearance by those who opposed the motion.

Mr. Gumport asked -- or indicates that he believes

he asked a number of questions that were pertinent to the

claims that we asked him to bring.

And Mr. Gumport has also told you that he read the

transcript of the trial from beginning until end.

THE COURT: I can assure you I have not.

MR. SAHN: I know that. Nor would I ask you to.

My email to Mr. Gumport where the demand is made

states in the second or third sentence, and I'm reading from

page 0064 of any one of the declarations or oppositions that

he filed. This is line three:

"Previously, counsel for Mr. Tutor

demanded in consideration of the

$50,000,000 jury verdict in the Tregub

litigation that you immediately

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prosecute a claim on behalf of the

bankruptcy estates without limitation

against David Molner; SCIC; Levene,

Neale; and Stroock, Stroock and Lavan.

"You responded by indicating that a

proposal should be made to you to handle

the litigation and further indicated

that we should point you to parts of the

trial transcript that we wished for you

to review."

Well, he reviewed the transcript. He reviewed the

entirety of it. He did so, I believe before this motion was

filed and certainly at some point after it. Not before.

He is clearly unconvinced by that transcript,

notwithstanding the jury verdict, that the claims are not

meritorious. The damages expert was off base, that Mr.

Bergstein was off base, that I was off base, that documents

were not presented which should have been. Whatever it is

that didn't happen that should have in a 12-day trial before

12 jurors, according to Mr. Gumport.

If from the review of that record and transcript

he doesn't know what the claims are, there's nothing I can

do, present, argue or furnish him with.

THE COURT: Did you ever answer his question in

his email to you? I don't see any response. You heard Mr.

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Gumport, and I've read that email. I've seen it. It's in

here.

He asked you very specific questions. Have you

ever in writing either in your pleadings or to him ever

responded specifically to his questions? You deem them, as

I recall -- I'm paraphrasing -- as somehow irrelevant and so

forth.

You couldn't be more wrong on the relevance.

So my question is, you heard him just a few

moments ago -- well, whatever -- the last half hour or so.

Did you ever -- have you ever responded? You know what I'm

talking about.

His email that asks you to answer certain things

such as the damages and example to the debtors, et cetera.

There's some other questions.

Have you ever responded, either in your papers

here or to him?

MR. SAHN: In the papers here?

THE COURT: Well, anything, yeah, either to him or

here.

MR. SAHN: Other than to say that the facts --

many of the facts that -- when you're talking about the

papers versus the emails.

THE COURT: Wait. Do you want to state again

what -- I remember it. I mean it wasn't that long ago.

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He replied to your I think it was either the 5th,

or maybe it was the 6th, whatever, of September. He

replied.

Do you want to read it again, Mr. Gumport?

MR. GUMPORT: Yes.

THE COURT: I remember it.

MR. GUMPORT: 2 and 3. "2," quote:

"Please explain why the causes of

action your client wishes to pursue,

plus other causes of action and R2D2's

ownership of Pangea do not appear in the

debtor's sworn bankruptcy schedules.

Please get the schedules amended and

corrected as quickly as possible."

THE COURT: Was that September 6 or 5?

MR. GUMPORT: That's September 5 at --

THE COURT: 5.

MR. GUMPORT: -- 4:18 p.m.

THE COURT: Okay. All right.

MR. GUMPORT: And:

"3. As to each of the debtors,

please identify the harmed assets and/or

lost profits of the debtors as a result

of the conduct that is the basis of

causes of action you wish to pursue.

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Please explain whether those assets

and/or profits appear anywhere in the

debtor's tax returns that your client

signed and gave to the trustee. If not,

please explain whether the tax returns

should be corrected."

And it goes on.

THE COURT: Okay. Now, I understand, although I

haven't seen them, that you did file, what, Friday or

thereabouts, amended schedules.

But other than that, have you ever responded to

what he just read in your pleadings or to him?

MR. SAHN: Certainly in our pleadings we indicate

that based upon the record in the Tregub file that the

causes of action that we asked him -- remember the debtors

were originally --

THE COURT: Wait. Let me stop you. That does

not -- see, you put much too much credence in this trial.

By the way, these five debtors were plaintiffs and

were deleted because of a request of the trustee.

MR. SAHN: Right.

THE COURT: Therefore, none of the questions that

he asked could have been relevant at all in that trial as to

any damages to them, because they weren't parties.

So I'll ask you again. Did you ever respond

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specifically to the trustee, answering his questions? Which

I think are highly relevant. Did you ever bother to do

that?

MR. SAHN: I don't want to repeat myself, your

Honor. Other than --

THE COURT: Well, I think the answer is -- wait.

I don't want to put words in your mouth.

Did you ever respond? Is the answer --

MR. SAHN: The answer is in our moving papers,

we --

THE COURT: No. Did you ever respond to the

trustee? Is the answer yes or no? He sent you an email.

Did you --

MR. SAHN: We never responded to the points and

questions asked by the trustee in his email.

THE COURT: And why not?

MR. SAHN: Because we deemed the questions to be

not relevant.

THE COURT: Well, I totally agree (sic) with you

and I am astounded that you make that statement in your

papers and now that you don't think that. But that's -- I

don't mean to argue with you, but I can tell you what I

think of that argument.

All right.

MR. GUMPORT: Excuse me, your Honor. You said "I

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totally agree with you" and I think you misspoke.

MR. SAHN: We understood what you said. You said

you don't agree with what I said.

MR. GUMPORT: Thank you.

THE COURT: Well, okay.

MR. SAHN: You agree with what Mr. Gumport said.

THE COURT: Let me make it clear to anybody

sitting in this room. It's been a long afternoon.

You never replied to the trustee. And, quite

frankly, what you just told me is not an answer anyway, that

somewhere buried in that transcript, which I've not seen,

that relates to the specific questions that the trustee

asked you -- and indeed it couldn't have because those five

plaintiffs were no longer plaintiffs. Any damages to them

would have been totally irrelevant.

Now, I haven't read the transcript, but I imagine

that would be the case.

MR. SAHN: Your Honor, we have the same points

with regard to those oppositions that are claims with

respect to the demurrer or the anti-SLAPP order.

THE COURT: Well, let me stop you. I get to

ask --

MR. SAHN: I mean they don't get it both ways.

THE COURT: I get to ask -- I'm asking the

questions. It's not them.

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And it's clear to me, not only in your papers but

also to the trustee, you have never answered those

questions. And your referring me to somehow this massive

transcript doesn't do it.

MR. SAHN: I'm not referring you to the

transcript. I'm referring you to our papers as far as

answering --

THE COURT: Tell me specifically.

MR. SAHN: -- the questions about the value of

these claims.

THE COURT: And where is that in your papers?

MR. SAHN: Your Honor, first of all, we've given

you an entire complaint --

THE COURT: Oh, I --

MR. SAHN: -- that sets forth the claims.

THE COURT: By the way, a complaint, as we all

know, is just a complaint. There's no evidentiary effect at

all other than the fact it's been filed. So forget about

the complaint. It doesn't establish anything, as we all

know.

MR. SAHN: Other than they need to establish

colorable claims, your Honor. That's the standard.

THE COURT: No, I've asked you a very simple

question, and I haven't heard an answer yet.

You've never responded to the trustee, and I'd

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like you -- where, other than filing the complaint, is there

any evidence whatsoever that there was any damage to these

five debtors?

By the way, the same five debtors that Mr.

Bergstein over the period of time, depending on when you ask

him the question, there are no assets. Basically no assets.

Hasn't that been his position?

MR. SAHN: The last schedules that I saw were that

they were unspecified, your Honor.

THE COURT: Right. So I mean that's what this

case has been about, that -- okay. Why don't you go on

then.

MR. SAHN: Your Honor, I want to emphasize and

respond to a part of what was said about the actions under

the Penal Code.

The cause of action -- and just to be clear --

under California Penal Code 496 sub 2 regards receipts of

stolen property. And there is a specific right to assert a

civil cause of action based upon a violation of that

criminal statute.

So contrary to what was said, we believe that a

cause of action does lie definitely and clearly with respect

to that Penal Code section.

Secondly -- and again, these are with respect to

three of the causes of action in the revised complaint --

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under California Penal Code section 499(c) and Business and

Professions Code 6128(a), civil actions lie in favor of

crime victims, and violation of a criminal statute is

generally actionable.

We believe that's the law. We would cite your

Honor to the case of Angie M. vs. Superior Court at 37

Cal.App.4th 1217.

Your Honor, Mr. Parker argued that the actions

which are complained of did not arise, if I understood him

correctly -- and he was talking about section 108 of the

Code --

THE COURT: Yeah, the two-year statute.

MR. SAHN: Before the case was filed. This

conduct that is complained of all arose before the

bankruptcy cases were filed.

It is the conduct that is the subject of the

judgment that was rendered against Ms. Tregub, conduct where

she was working -- no dispute -- working in concert with the

Levene, Neale and Stroock law firms in arranging, if not

choreographing, these involuntary bankruptcy cases and the

motions for appointment of a trustee.

Conduct which, notwithstanding the pious

statements from Ms. Tregub, was termed by a person who is

the leading expert on ethics in California -- unless it's

Mr. Parker.

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It's one or the other -- as the most unusual

conduct she had ever seen in her career over hundreds of

cases testifying as an expert with respect to actions of a

lawyer.

She had never seen a lawyer act this way and that

it had breached every duty that she had as a lawyer: the

duty of loyalty, the duty of confidentiality. It was just

the most egregious conduct she had ever seen.

And coming from Ellen Pansky, that is, for those

who know her --

THE COURT: And you're asking me to authorize Mr.

Bergstein to allow the estates to sue her in this Court,

right or is that --

MR. SAHN: We're not going to sue in this Court,

your Honor.

THE COURT: Or to sue?

MR. SAHN: Correct.

THE COURT: For what purpose? I mean you got a

$50,000,000 judgment. Why would you -- why would --

MR. SAHN: Because her actions --

THE COURT: No. I'm asking you why would a

trustee, given these facts, why would he ever -- assuming

what you say is true, the way the state court ruled. They

did.

Why would a trustee using the trustee's judgment

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ever bring an action -- even if it was the best action in

the world -- assuming for argument's sake it's all affirmed

on appeal and -- so why in the world would the trustee do

that? For what purpose?

MR. SAHN: Because her actions were part of those

that occurred with a group that damaged these debtors and

she's never been called --

THE COURT: Why?

MR. SAHN: -- to account for her conduct as it

concerns these debtors.

THE COURT: You're bringing causes of action. The

trustee as opposed to the debtor in possession has to use

common sense and good business judgment.

Why in the world would he sue her?

Again, I'm assuming for argument's sake she did

everything and that $50,000,000 judgment is valid.

MR. SAHN: Your Honor, if the only standard is

whether or not the judgment is collectible, you're

absolutely correct.

THE COURT: Isn't that part of it?

MR. SAHN: It is part of it.

THE COURT: In fact, on any --

MR. SAHN: But it is not all that is considered.

THE COURT: It may not be all, but in fact both as

a trial judge and as a member of the Bankruptcy Appellate

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Panel for years, look at the judgment of trustees bringing

actions, be they preference actions, be they whatever and,

yes, the reality is it is important. Is this something

that, in the judgment of fiduciary duties of a trustee, they

could bring it.

I only use this as one example, but quite frankly,

I'm amazed at -- other than to punish her, and Mr. Bergstein

clearly would like to do --

MR. SAHN: Your Honor, it isn't --

THE COURT: Wait. I get my turn.

Clearly, that would do that. But I'm talking

about the judgment.

Why in the world would he want to sue her? The

trustee, I'm talking about.

MR. SAHN: Your Honor, she was determined by the

discovery referee, if I understand it correctly, in

discovery disputes in Superior Court to be --

THE COURT: About to be the computer in the pool,

you're talking about that?

MR. SAHN: No, not the computer in the pool.

THE COURT: Oh, okay.

MR. SAHN: To be an employee of Aramid, not a

lawyer. And that's why her emails got produced.

And she would be sued because Aramid is her

principal and she would have liability as an agent and that

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pertains --

THE COURT: But collectibility --

MR. SAHN: That pertains to the liability of

others, your Honor.

THE COURT: But collectibility has nothing to do

with it?

MR. SAHN: No, your Honor. I didn't say that. I

agree with you. But it is not the only factor.


MR. SAHN: Sometimes there are factors that relate

to the other parties who are also being sued that compel

moving forward against someone notwithstanding her claims

with respect to the collectibility of the judgment.

THE COURT: So you're talking about discovery

against her -- by her or from her?

MR. SAHN: It could be discovery, it could be

liability. I am not a seer, your Honor, and this is not my

complaint. That's why I wanted Ms. --

THE COURT: Well, but as I told you, your name is

on the pleadings. It's got to be somebody on the pleadings.

MR. SAHN: Well, it's not my name on the

complaint, your Honor, and if that's the focus of your

questions, that's why --

THE COURT: No, no. The focus of this is your

motion.

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MR. SAHN: I understand.

THE COURT: Okay.

MR. SAHN: I brought the lawyer here to answer

your question to make it easier.

THE COURT: And I appreciate that.

MR. SAHN: It's better than getting passed notes

every 10 to 20 seconds, but if that's the way we have to --

THE COURT: It's okay with me. I don't mind the

notes.

MR. SAHN: If that's the way we have to do it,

that's the way we'll do it.


MR. SAHN: Your Honor, I was talking about the

statute of limitations issue and the fact that the conduct

arose before the case was filed. And as we say, it did

arise beforehand.

The privileges were invaded and confidential

information was received improperly. So that is in

response, as I say, to the points made and there's certainly

no intention to misstate what happened in Superior Court.

I mean to state -- and I stated it incorrectly --

that a demurrer was granted without leave to amend. And I

do understand that the right to amend was argued and the

matter went on for quite a long time.

So if I misstated what happened, there was

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absolutely no intention to do so. And there certainly is a

huge distinction between an anti-SLAPP motion versus a

demurrer, and I understand that.

Your Honor, Mr. Langberg talked primarily about

the fact that these claims don't have merit. And again, we

would just point out to you that the gravamen or the

significant part of the opposition to this motion has been

brought with respect to the law firms.

And while we would like authorization to pursue

all of these parties, we certainly understand that there's a

distinction between the law firms and the balance of the

parties who are named.

And contrary to what counsel stated, when he

stated -- this is Mr. Goldsobel -- and if I butchered his

last name, I apologize. But Mr. Goldsobel, on behalf of

Aramid, indicated that there -- I believe he said there was

a demurrer that was granted as to the existing complaint, he

said on the same kinds of bases as was granted with respect

to the law firms.

And we'd just indicate to your Honor that with

respect to Aramid and SCIC and Mr. Goldsobel's other

clients, there was leave to amend granted with respect to

that one. And he may have forgotten to note that

distinction to you, but we certainly wanted to make you

aware of it.

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Your Honor, I'm not going to respond to Ms.

Tregub's statements. I think Ms. Pansky's words are far

more powerful and convincing than anything I could ever say,

and I would certainly urge you to disregard them at best.

Thank you, your Honor.


The -- I am going to deny your motion for a number

of reasons. This is a good example of I guess the old

adage, the best defense is an offense.

This case is really extraordinary.

Number one, he can't -- Mr. Bergstein, aside from

everything else, could not be trusted. You can't forget,

I'm the same judge who's heard all this. I don't have any

information about him other than in court.

But he's the same one who -- at least in three of

the five, the reason I granted the order for relief was

because of his constant changing and refusal to just come up

with the actual facts of the case.

That's the situation and it was quite accurately

described by Mr. Gumport. This is on the record of this

case.

And you put much too much on the state court

action that obviously had to do with Ms. Tregub but none of

these defendants.

The idea that you've shown a colorable claim, I

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guess usually in the courts of appeal -- you're talking

about always in the context -- I think it would, I suppose,

conceivably apply to a trustee but the context is dealing

with debtors in possession. But I would agree that it

probably applies to a trustee.

But in this case, you haven't shown anything. In

fact, for you to say, Mr. Sahn, that these questions were

irrelevant shows that you're -- I guess you would like me

and everybody else to forget what this case has been about

from day one.

This is about refusal of the information,

essentially from Mr. Bergstein and others to be candid and

come forward with the evidence.

There's no showing at all that there's any damage

to these debtors. It's clear to me. This is basically that

Mr. Bergstein -- apparently the approach is that anybody who

gets in his way, to simply bring actions. I guess that can

be effective, but it's not going to work in this Court.

So I don't think there's been any colorable

claims.

But even more important -- and I must admit, your

motion is less than candid on this point, Mr. Sahn --

there's been no unreasonable refusal of the trustee to not

want to go ahead with this. He asked legitimate questions,

which you basically just ignored, which shows me you're

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really -- Mr. Bergstein is -- it's clear, he's out to punish

these folks as much as he can.

And I'm not going to allow the powers of the

trustee to be used by him, given the history of this case

and the total lack of merits of the motion that is actually

before me. It just would be not wise to do that.

So in any case -- so I would like you on this

particular one, I don't' have to get in -- I have thoughts

on it, but I can't even get past the first two points, the

question of collateral estoppel or whether Rule 108 applies.

I have thoughts on those, but I don't need to get in to

complicate anything.

This is really simple. I just think there are no

appropriate claims to begin with. And just as important,

given the facts and admitted, at least begrudgingly by you,

Mr. Sahn, what actually happened, there's been no

unreasonable refusal from the trustee.

So I'd like you, if you would, just prepare,

Mr. -- Mr. Gumport, just prepare that.

We're not done yet today, because we do have -- I

purposely did it this way, depending on the outcome of this

hearing -- this Rule 2004. I'll make a quick hash of that.

I think you're wrong, Mr. Sahn. I think it is --

I've read the rule and particular when you know -- typically

these things are done ex parte, but when you know in advance

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there's going to be a problem, I do think the rule

requires it.

I'm not going to award any sanctions or anything

of that sort, but I want to clarify.

When you know going in, which is this case, that

there are clearly disputes, that I do believe that the rule

requires it.

And also, I've read your motion and the motion is

a brief declaration by you, in retrospect, that wouldn't

convince me at all to allow any 2004.

So I'm going to deny that motion and in view of

what I've done today, I suspect a good deal of that request

had to do with what we're talking about.

I will deny that without prejudice.

And I'd like you, if you would, Mr. Gumport,

prepare that order.

And then if you do decide to pursue that, and

you'll do whatever you deem appropriate, then given the fact

that I do know, I will already -- knowing that the

likelihood will be high that there will be a disagreement

from what I do know, that -- this rarely ever comes up

because these are always filed obviously beforehand.

But in this one, if you decide to file another

one, I will deem it to be a requirement that you will get

together with the trustee and get the stipulation as to the

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facts. And then we'll see.

There may be some things that are appropriate. I

know the trustee said he wanted some more depositions of Mr.

Bergstein. Of course, that's a different question of

course.

But -- so I have no firm view on that. I know

there's not going to be asking any questions about what

we're talking about today but there may be other things in

there. I think there might have been some.

But, whatever, I'm going to deny it without

prejudice. You can re-file it -- not re-file it. You can

file another one. But if you do, you can talk to the

trustee and then you're going to have to come up with this

stipulation required by the rules.

Any questions about any of this?

Okay. Thank you very much.

THE COURT: We're adjourned.

(Proceedings concluded.)

I certify that the foregoing is a correct

transcript from the electronic sound recording of the

proceedings in the above-entitled matter.

/s/ Holly Martens_________ 11-5-12________________Transcriber Date

david bergstein, albert hallac

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