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case_no: "22-50073"
doc_number: 144
doc_type: "ORDER"
filed_date: "2022-03-30"
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# UNITED STATES BANKRUPTCY COURT DISTRICT OF CONNECTICUT BRIDGEPORT DIVISION In Re \* Case No. 22-50073 (JAM) \* HO WAN KW
> 原始法庭文件为英文；下方为英文全文，顶部为中文摘要。
Case 22-50073 Doc 144 Filed 03/30/22 Entered 03/30/22 15:41:05 Page 1 of 97
UNITED STATES BANKRUPTCY COURT DISTRICT OF CONNECTICUT BRIDGEPORT DIVISION In Re \* Case No. 22-50073 (JAM) \* HO WAN KWOK, \* Bridgeport, Connecticut \* March 22, 2022 Debtor. \* \* \* \* \* \* \* \* \* \* \* \* \* \* \* \* \* \* TRANSCRIPT OF CASE MANAGEMENT CONFERENCE/STATUS CONFERENCE MOTION OF PACIFIC ASIA OPPORTUNITY FUND L.P. FOR ENTRY OF AN ORDER CONFIRMING THE INAPPLICABILITY OF THE AUTOMATIC STAY OR, IN THE ALTERNATIVE, RELIEF FROM THE AUTOMATIC STAY PURSUANT TO SECTION 362(d)(2) OF THE BANKRUPTCY CODE BEFORE THE HONORABLE JULIE A. MANNING UNITED STATES BANKRUPTCY JUDGE APPEARANCES: For the Debtor: WILLIAM BALDIGA, ESQ. BENNETT SILVERBERG, ESQ. Brown Rudnick, LLP Seven Times Square New York, NY 10036 For the Creditor, Pacific PETER FRIEDMAN, ESQ. Alliance Asia Opportunity STUART M. SARNOFF, ESQ. Fund L.P., Creditor: DIANA PEREZ, ESQ. O'Melveny & Myers LLP Times Square Tower 7 Times Square New York, NY 10036 PATRICK M. BIRNEY, ESQ. Robinson & Cole LLP 280 Trumbull Street Hartford, CT 06103-3597 Proceedings recorded by electronic sound recording, transcript produced by transcription service. **Fiore Reporting and Transcription Service, Inc. 4 Research Drive, Suite 402 Shelton, Connecticut 06484 (203)929-9992**
APPEARANCES Cont'd: For Golden Spring, NY Ltd., SCOTT ROSEN, ESQ. Creditor: Cohen Birnbaum & Shea 100 Pearl Street Hartford, CT 06103 For Rui Ma, Creditor: CAROLLYNN CALLARI, ESQ. Callari Partners LLC 1 Rockafeller Plz Floor 10 New York, NY 10020-2073 PETER ZARELLA, ESQ. McElroy Deutsch 225 Liberty Street 36th Floor New York, NY 10281 For the U.S. Trustee: HOLLEY L. CLAIBORN, ESQ. Office of the United States Trustee The Giaimo Federal Building 150 Court Street, Room 302 New Haven, CT 06510
(Proceedings commenced at 2:11 p.m.) THE CLERK: Case Number 22-50073. Ho Wan Kwok. THE COURT: Okay. Good afternoon. If we could have appearances for the record, starting with the debtor's Case 22-50073 Doc 144 Filed 03/30/22 Entered 03/30/22 15:41:05 Page 3 of 97
MR. BALDIGA: Good afternoon, Your Honor. William Baldiga, Brown Rudnick for the debtor, with my partner, Ben Silverberg.
THE COURT: Good afternoon.
counsel, please?
MR. SILVERBERG: Good afternoon.
MR. ROSEN: Good afternoon, Your Honor. Scott Rosen, for Golden Spring New York Limited, the proposed DIP lender.
THE COURT: Okay. Let me stop you right there. Did you -- is there a motion for DIP financing that's been filed?
MR. ROSEN: Not on for today, Your Honor. It was just filed this morning.
THE COURT: Okay. Well, that's why I don't know what's going on. MR. BALDIGA: No relief today.
THE COURT: Attorney Rosen, did you -- I'm sure you did, but I'm asking. Did you file a notice of appearance?
MR. ROSEN: I was just retained and I will be filing a notice of appearance. THE COURT: Okay. Thank you. MR. ROSEN: By tomorrow morning. THE COURT: Thank you. Okay. Go ahead, counsel. MR. FRIEDMAN: Good afternoon, Your Honor. It's Peter Friedman, from O'Melveny & Myers, on behalf of PACS, and I'm joined by Diana Perez and Stuart Sarnoff, of O'Melveny & Myers, and my friend, Mr. Birney. THE COURT: Good afternoon. MR. FRIEDMAN: My friend, Mr. Birney of Robinson and Cole. THE COURT: Good afternoon. MS. PEREZ: Good afternoon, Your Honor. THE COURT: Couple of -- oh, I'm sorry. Go ahead, Attorney Claiborn. MS. CLAIBORN: Sorry. We ran out of seats, so -- THE COURT: That's okay. Sorry. MS. CLAIBORN: -- Holley Claiborn for the U.S. Trustee. THE COURT: Do you want another chair from over here? MS. CLAIBORN: That's okay. I'm good with the bench. THE COURT: Okay. Go ahead, counsel. If you can
just come forward, because you need to -- our record is only audio, so you have to speak into a microphone. MS. CLAIBORN: Do you want me to come that close? THE COURT: Sure, you can come wherever you're comfortable. MS. CALLARI: As long as you -- wherever you can hear me best. Good afternoon, Your Honor. Carollynn Callari with Callari Partners on behalf of Rui Ma and certain other creditors. You have, thankfully, approved my pro hac vice at Entry 89. I am here with sponsoring counsel. Kristen Mayhew was unable to be here, but her colleague, Peter Zarella from -- THE COURT: Okay. MS. CALLARI: -- McElroy and Deutsch is here with me. THE COURT: Okay. Thank you very much. And, you know, you don't have to sit all the way back there. I mean, you can sit closer. Whatever you might desire. Okay? I know we're trying to maintain social distancing as well, but whatever you're comfortable with. Sorry if there aren't enough chairs. MS. CALLARI: It's okay. Thank you. THE COURT: Okay. A couple of housekeeping matters before we start on anything today. And these are just things that are just how the
District of Connecticut works, which maybe is different from some of your experiences in other districts, but we don't take phone calls about questions for things on the calendar. If you have a question about something on the calendar, you take that question, you put it in an email to the appropriate courtroom deputy box and then that courtroom deputy will either respond or not respond depending upon your question. If your question is how is the judge going to rule, I would think that you're not going to get a response. If your question is, what time do I have to be there, you'll probably get a response, but you should know that regardless. We don't take phone calls. In the past, there have been counsel who have taken advantage of that situation and to a point where other people felt that those counsel and those parties were being treated with -- disparately or with more of an in, for lack of a better term. And so we don't do that here in Connecticut. So I just want to give everybody notice of that. Also, I think, you know, there's a lot going on in this case, which I understand and that's fine. We've got a lot of different motions that have been filed. Obviously, I didn't know -- I've been court all day, so I wouldn't know that there was a DIP financing
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motion filed, but we don't need people to submit any binders or any information of exhibits or anything unless you're asked to do so, okay? Because we do everything -- we essentially do everything paperless,and when we have hearings and exhibits, I require the parties to file those exhibits on the docket, and we use the docket to put together the exhibits, essentially, unless I say but you know what, I know you did that but I still need you to do X, Y, and Z, and then that's what you'll do. Okay? But we do not need any paper unless we ask for it. Everything on the computer. Okay? So those are just minor housekeeping issues. I do believe, although I could be completely wrong, that most of the motions for admission of visiting counsel have been granted in this case, so I don't think there's any outstanding motions from any of the parties here, but if there is an outstanding motion, would someone bring it to my attention right now? MR. FRIEDMAN: There are none outstanding for PACS, Your Honor. THE COURT: Okay. Thank you. Any for the debtor? MR. BALDIGA: We're good, Your Honor. Thank you. THE COURT: Okay. Okay. All right. That's helpful. Then, I don't -- oh, yes, there was one other
housekeeping matter for the debtor. We had asked during the last hearing, which I don't have my note in front of me but it was a few weeks ago, obviously, to supply a list of names of people that were referred to in what -- a presentation that counsel made -- debtor's counsel made during that hearing, and I don't think we've received that list. And I know that the person in the back is interpreting, but that's a little -- you've got to try to be a little softer because all I can hear is you, unfortunately, and I won't be able to hear the lawyers. Okay? We need that information, because our record is only audio. We don't have stenographers. There are not enough funds in a budget given to the judiciary for bankruptcy courts to have a stenographer. If you all want to bring in a stenographer, you're more than welcome to. I mean, you have to pay for it and you need to tell the Court in advance if you're interested in doing that, but otherwise, our official record -- and that wouldn't be an official record, even if you had a stenographer. Our official record is the audio, and therefore, when there's any kinds of issues with regard to not just people's names, but a name of a building or whatever, and
it's not clear, we're going to need the parties to submit that information to the courtroom deputy otherwise our record won't be clear, and that is obviously of utmost importance to the Court that the record be clear. Okay? So those are the housekeeping matters I have. Does anyone have any housekeeping matters before we start talking about the case today? Okay. Hearing none, then we have two matters on today's calendar. The first is the Chapter 11 case management conference that these -- that our court in the District of Connecticut has in every Chapter 11 case, and then there also is the motion of PACS that was filed and an expedited hearing was granted on that, a preliminary expedited hearing, on the motion of PACS for the entry of an order confirming the inapplicability of the automatic stay, or in the alternative for relief from the stay. I have looked at a number of the briefs and the replies and then the responses in the replies on that issue, and we'll talk about that when we get to it. I would make an assumption that I probably shouldn't make, but I will make an assumption that given that there has been, apparently, and I'm not suggesting I understand every of it -- every bit of it because there's no way I could at this point, but given that there appears to be protracted litigation between the creditors and the
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debtor, I would assume that there has been no discussions and certainly no resolution of the motion that's been filed by PACS. Am I correct on that assumption? Yes. I've got heads nodding? MR. FRIEDMAN: Yes. So, Your Honor, Peter Friedman. As it relates to the debtor, that's correct. We have reached an agreement with the creditors who filed conditional statements on language for -- with respect to a proposed order. THE COURT: Okay. MR. FRIEDMAN: Which we just were able to do moments before the hearing which, if the motion is granted, we will circulate to everybody before an order is settled. But we have not had discussions or -- with respect to the specific motion that was filed. THE COURT: Okay. That's fair. I'm just asking the question, because what I think I saw -- and we're not going to -- we're going to address a few things first before we really address your motion, counsel. But the -- what I believe I saw -- and I just would like you to tell me if I'm wrong or right, okay, which is all I'm asking you to do at this point, was that there was a statement, I think -- or, you know, not a -- it was a sentence in a paragraph or two, or maybe it was more than
one place, where I believe PACS said that you would agree to relief from the automatic stay for the limited purpose of getting the ship, for lack of a better term, I'm not sure if that's the proper term, into the jurisdiction of the United States, and specifically into the New York Court's jurisdiction. Am I correct that that's what your papers say? MR. FRIEDMAN: Yes, Your Honor. THE COURT: Okay. That's what I wanted to make sure I was reading that properly. Okay? Because as I'm sure you know, I've had a lot of things to read and that's fine. I have no problem with that but, you know, in this case there is -- obviously there is a lot of different interests at stake on -- in many different -- and many different stakeholders, so -- go ahead, counsel, I'm sorry. MR. FRIEDMAN: To be clear, Your Honor, or if the debtor refuses to do that, for an appropriate court to, you know, impose other nonmonetary sanctions. THE COURT: Okay. Thank you, Attorney Friedman. All right. So just see if you give me -- so, Attorney Baldiga or Attorney Silverberg, which of the two of you are going to make a presentation in connection with the Chapter 11 case management conference? MR. BALDIGA: I will, Your Honor. THE COURT: All right. Fine. Thank you.
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So as I'm sure you've reviewed, we have an order that -- in the District of Connecticut Bankruptcy Court, that we issue in all Chapter 11 cases, where we expect the debtor and -- and the debtor is here. I see him, correct? MR. BALDIGA: Yes, Your Honor. THE COURT: Okay. MR. BALDIGA: If I could introduce -- THE COURT: Sure. MR. BALDIGA: -- Ho Wan Kwok, the debtor. THE COURT: Yes. MR. BALDIGA: And you were right, Your Honor, that he has his interpreter with him. I think she's been quieter since your -- THE COURT: Yes, she has, and I appreciate that. MR. BALDIGA: -- comment. THE COURT: This room is odd. Sometimes the people in the back I can hear better than the people in the front. I don't know why, but I didn't -- you know, I don't really have any control over that, but I appreciate that. Thank you. MR. BALDIGA: Well, let us know if it's distracting and we'll -- THE COURT: And I agree that the interpreter is already speaking a little more softly and I'm not -- MR. BALDIGA: Thank you.
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THE COURT: -- hearing her, so I appreciate that. Thank you. MR. BALDIGA: Thank you, Your Honor. THE COURT: Okay. So in our order scheduling an initial Chapter 11 case management conference, we ask a series of question -- you know, we have a numbered paragraph with 18 things in it, I think -- yeah, 18 things, that the judge expects the debtor and the debtor's counsel to explain to the Court, just so that the Court can understand what's happening in this Chapter 11 case. So the first -- and I assume you were going to tell me this anyway. The first item on the list is the nature of the debtor's business and the reasons for the Chapter 11 filing. So I understand this is an individual case, and it may not be a business per se, but my understanding, and maybe I'm wrong, is that the individual debtor has been in business, I don't know if he is in business at the time, and operates and is a member of many -- well, I don't know about that. That's not fair. What I've heard is that he's a member of different corporate entities, and I want to understand that a little better, and then the reason for this Chapter 11 filing. I would like you to start there, please.
MR. BALDIGA: Certainly, Your Honor. And again,
for the record, William Baldiga, Brown Rudnick, for the debtor. All right. Your Honor, I do reference as well, because we took seriously the order, and we filed at Docket 107, Mr. Kwok's declaration, which went into in some detail under oath, all -- we think all of the 18 questions that are listed, at least those that relate to this case. For example, there is no cash collateral, so -- but all the ones that are referenced, and the declaration goes into great length to explain why we're here. I would like to make a presentation to that -- THE COURT: Sure. MR. BALDIGA: -- and to be fully responsive to you, but I think I would be remiss without referencing that. THE COURT: No, and I know it was filed, counsel. I do know it was filed, and I will tell you that I looked at it, but I didn't read it. I didn't have the opportunity to read it fully, okay? MR. BALDIGA: There's a lot there, and I think it will take some time to -- there's been a lot of paper filed in the case already from several parties, but I will step back then. And first, the debtor has no business. THE COURT: Okay. MR. BALDIGA: The debtor is one of a very large family that grew up in China. This debtor in his early 20s
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was supportive of the protest in Tiananmen Square, watched his brother be shot to death in connection with those protests, and from that time on has been a -- was arrested and tortured and for a while was able to maintain himself as part of a wide ranging family business in real estate development and other businesses in China.
After he was released from prison in 1991, the family had some significant success, which we lay out in the declaration as to the real estate development. In fact, the family's business was very successful.
Mr. Kwok, however, has been extremely committed to criticism, political speech, which in this country is recognized, in China, very much not so. He fled to Hong Kong in 2000 and continued to be very critical of the CCP, of the Chinese Communist Party. And in fact, on many websites and so forth is listed as the most vocal critic of the CCP in terms of the CCP's watch list and desires to be silenced.
He expanded his criticism in 2015. His family, his brothers, his wife, his daughter, were all arrested. Bruno Wu, who I'll come to later, closely affiliated with several top CCP officials and a foreign agent, entered into a very significant business transaction with PACS, or the parent of PACS. And Mr. Wu called -- in 2015, called my client, the debtor, to say that his family would be released
from prison if he would cease his political speech. He has not done that. In 2017, in fact -- and this is all in the declaration -- and all of the -- during this time, because he was on all of these political watch lists, he cannot maintain business activities. He cannot even have a bank account, and when he tried to have a bank account, most recently a few years ago, the bank terminated the account. In 2017, he was arranged -- there was arranged a Voice of America interview to be aired on April 19, 2017 in which he was going to be extremely critical of the CCP. During that week, PACS filed it's lawsuit. That is the significant driving effect -- event precipitating this Chapter 11 case. The CCP had Interpol Red Notice alerts based on fabricated charges seeking his arrest and extradition to China, and Mr. Wu and others sponsored many of the litigations that you see are in this -- that are part of the creditor body here. Almost all of that litigation, or much of that litigation is sponsored by the same foreign agents who are funding the litigation, admittedly. Since that time there have been several well publicized events in this country to target Mr. Kwok. Mr. Kwok, at paragraph 16, believes that if he were extradited to China, he would be killed. He believes that if he were
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imprisoned here, he would be killed. For that reason he has 24/7 physical security. Notwithstanding that, we have as exhibits to the declaration, Your Honor, three separate criminal proceedings in this country, federal criminal proceedings of convictions, one of a top DOJ lawyer, another one of Elliott Brody who has been a significant political operative for trying to -- he pled guilty and was convicted for lobbying efforts to have Mr. Kwok extradited to China, which Mr. Kwok believes would be for the purposes of his death. And then another separate criminal proceeding with Nickie Lum Davis, also for lobbying efforts to the Trump administration to have Mr. Kwok extradited and he believes, killed. This is not Mr. Kwok's nightmares, but these are criminal informations, guilty pleas and so forth attached to the declaration of public information. This is, Your Honor -- and I'll get to the business and financial aspects of these. I will be the first to acknowledge every individual Chapter 11 case, and I've been involved in a few, is unusual by its very nature. Not many Chapter 11 cases are individuals. This case is extraordinarily unusual. I'll be the first to admit. I won't come in and here and stand here and pretend anything that this case is -- I've been doing this 38 years. I've never had a case like this, and I was --
represented the creditor's committed in the Mike Tyson case, and this case is extraordinary even compared to the Mike Tyson case.
But extraordinary does not mean improper and we conditioned taking on this case for Mr. Kwok on the absolute agreement that he would do everything by the book as this Court and -- should and does expect. And as we should and do expect. The debtor will toe the line in this courtroom.
As an example in prior proceedings, the debtor did take Fifth Amendment protection from time to time. The debtor understands that while Chapter 11 debtors have from time to time exercised their rights, constitutional rights not to testify, a Chapter 11 case requires extraordinary transparency.
The debtor was examined for four hours yesterday by creditors and by the U.S. Trustee. There was no exercise of any Fifth Amendment privilege or any other privilege. Every single question was answered and there will be many more hours of testimony and every question will continue to be answered.
THE COURT: Was that at the 341 meeting? Is that what you're --
MR. BALDIGA: Yes, Your Honor.
THE COURT: Okay. Go ahead. I'm sorry. I just want to make sure --
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MR. BALDIGA: No, that -- that's okay. THE COURT: Yep. Okay. MR. BALDIGA: I am try -- and again -- but just to give an example, and this won't be the time and place for a full exposition of these issues, but on the theory that there are some things that you just couldn't make up, but just -- I want the Court to appreciate that we appreciate, and this debtor appreciates just how unusual this case is, and to know that we come before you appreciating the extraordinary burden we have to make this Court feel reasonably comfortable that this case will be conducted, again, to your full expectations. But just to give an example, a three-person creditor's committee was just formed yesterday. One member of that committee, Rui Ma, her lawyers, Arkin-Solbakken, confirmed by letter dated September 30, 2020, that her fees to sue Mr. Kwok are being paid by a Mr. Zheng Wu, also known as Bruno Wu. THE COURT: Known as who? Was -- you say, also known as who? I didn't hear you. MR. BALDIGA: Bruno Wu. THE COURT: Okay. Thank you. MR. BALDIGA: W-U. And I apologize for not providing to the Court the names from the last hearing. We will do that this week, as to the last hearing and this
week. THE COURT: Yeah. That would be -- that would be very helpful to the clerk's office. MR. BALDIGA: Well, I apologize we didn't do that. THE COURT: Yeah. MR. BALDIGA: The second member of the Committee, Sam Nunberg, it had been a person friend of Bruno Wu, he helped arranged Rui Ma's lawyers for her, Arkin-Solbakken. Mr. Nunberg, a member of the committee, is the subject of a publically filed, in the United States District Court for the Southern District of Florida, in Case No. 18- 20983, in Mr. Kwok's case against Roger Stone. That Roger Stone. Roger Stone's statement, as later published in the - - by him, in the *Wall Street Journal* and *New York Times*. I, Roger Stone, retract and apologizes for statements he has made regarding Guo Wen Gui, also known as Miles Kwok. Mr. Stone has publically stated that Mr. Guo has been found guilty and convicted of financial crimes in -- and the United States -- in the United States, and that Mr. Guo has violated U.S. election laws by making political donations to Hillary Clinton and financing a presidential run by Steven Bannon. All of these statements are not true. I failed to do proper research before making those statements and improperly relied on information conveyed to me by Sam Nunberg, this committee member, between early
September 2017 and the Fall of 2017. I believe the source of that information was Bruno Wu. So that's -- those are -- and Bruno Wu, Your Honor, just to complete the picture, in his registration as a foreign agent, he serves as Vice Chairman and Secretary General of the National Committee on China/US Relations, as an affiliate of the Charhar Institute, a Chinese governmental think tank, non-governmental think tank, most of the other members of which are senior CCP officials. That's our committee. I'm not disarranging the committee, I'm just saying that in and of itself makes this an extraordinary case. I will come to, later today -- while we've already reached out to the U.S. Trustee to say that even if the U.S. Trustee had not moved for the appointment of an examiner, we think an examiner is in order. We don't see how anyone, including the Court, could be comfortable with the amount of transparency demanded for a successful Chapter 11 case without a truly independent examination of this debtor. Not only do we consent to the appointment of an examiner, we will pay for it. Mr. Kwok has gone to his family and said if I'm going to have a transparent Chapter 11 case, we need to have an examiner and we need to pay for
it. And his family has agreed to do that. The reason I referenced the DIP motion earlier on -- and again, this -- I will put this on the list of things that I have never seen before in any other case, Mr. Kwok's son's family office, represented by Mr. Rosen, is committed to make a \$8 million DIP loan fully subordinated to all valid creditor claims. No security. No administrative priority. Not even on par with creditor claims, so that it doesn't come out of any creditor pocket. Millions of dollars of that are earmarked for an examiner, so that things can be done right, and so you don't need to just rely on me or Mr. Kwok telling you that we know this and we know that. So that's one other example of us intending to move this case in the right direction. We filed. We needed a couple extra days. The burdens of interpretation from back and forth to China when you absolutely insist that everything be done perfectly, the interpretation does present a timing challenge, but we filed our schedules of statement of affairs. Mr. Kwok has engaged, very experienced and truly independent counsel and financial advisor, that is -- none of us have had anything to do with Mr. Kwok or any of his creditors or family members or whatever until shortly before the case. A few days before the case. Truly independent. As I said, Mr. Kwok was examined yesterday for
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more than four hours, answered every single question, and has fully said you tell me when to come back, I'll do it again, and will, I'm sure, be examined for several more hours. Again, the interpretations make it a challenge, but that's -- he's committed to do that. We filed this comprehensive declaration. It's in a individual Chapter 11 case, we think it's extraordinary that the debtor goes under oath as to everything that has led up to the case and has done that in a fully transparent way, but we thought that was important. We consent to the appointment of an examiner. We will provide for the DIP financing to do that. Your Honor, we commit to file a plan in the next 20 days. A Chapter 11 case is all about treatment of creditors, and we will do that. This case will be too expensive to dwindle for months and months and months. We want -- in some ways, this case is extraordinary in many ways, but at the end of the day every Chapter 11 case is about money, or it should be. Mr. Kwok wants to pay his creditors and treat them fairly, and is committed to do that. And the way you do that, we've explained, and he accepts, is to file a plan and confirm a plan. All of this, including today, is to give us a chance to pay our creditors and treat them fairly. We will
find out, Your Honor, and you will find out whether our -- what our creditors want. If our creditors want to be paid fairly on their claims and have their claims allowed in fair amounts, then this is going to be a very successful Chapter 11 case. If on the other hand, PACS and the other creditors who filed their claims, most of them within a few week period around the Voice of America broadcast, all in an effort to silence -- and at the same time, Mr. Kwok's family was arrested in China. If their goal is to have him killed, which Mr. Kwok believes, or to otherwise exercise retribution or to silence his political speech, then this is going to be very difficult. But we will have that fairly presented in this Court, because a bankruptcy court is the time to reduce all of this to claims, to allowable claims, and to satisfy those claims. And you will have an opportunity to evaluate yourself what our creditors, such as PACS, really want. We hope they are going to be commercial. We have some doubts but we intend to find out. By this Chapter 11 case Mr. Kwok also admittedly wants to stay out of jail. If he goes to jail, he believes he will be killed. It is that simple. He intends to exercise his life and liberty to be able to administer this
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Chapter 11 case. He would not be able to do so in jail, and when we get to the PACS exact relief that they frame in a motion for relief, it will be ironic, I feel, to address exactly what they've asked for, but we'll come to that in due course.
To go to the issue of Mr. Kwok's business, he can't even have a bank account because of the campaign by the CCP. No bank will even allow him to have a bank account. On a full-time basis, he is a critic in memory of his brother, but also more broadly, of the CCP. That is his life's work.
All of his expenses, and we go into great detail in the declaration, are funded by -- his son is independently very wealthy and his son, through his son's family office, Golden Springs, which happens to be out DIP lender, funds everything. What he eats, what he wears, what he rides in. Mr. Kwok has nothing. He would be in the gutter or worse if he didn't have the generosity of his family.
But this is not -- and again, this is what it will take an examiner to show and to come to this Court and to report to you and to everyone else, this is not one of these cases where it's a self-settled trust or other creditor manipulation.
This is a product of 30 or more years of political
speech that has rendered him unable to work and unable to have his own assets. But he is fortunate. Indeed, extremely fortunate to have a wealthy family that satisfies his needs, without him being able to earn income. He has no income. And the reasons for the Chapter 11 filing, most succinctly put, is to stay alive so he can put these creditor claims behind him through the confirmation of a Chapter 11 plan. THE COURT: Okay. A couple of things. I mean, again, I haven't studied this because -- MR. BALDIGA: Understood. THE COURT: -- it was filed Sunday, I think. Right? MR. BALDIGA: Yes. THE COURT: Filed on Sunday and it has several attachments to it, which is fine. I just want to be clear, I haven't gone through it all. MR. BALDIGA: Understood, Your Honor. THE COURT: I haven't had the opportunity to do that, number one. Number two, you know, there's a few things that you said there, and I'm not -- I'm just asking questions of you and -- like I did -- MR. BALDIGA: Of course. THE COURT: -- I'm asking questions and getting
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answers. So you have no opposition. In fact, I think you said you consent to the United States Trustee's motion to appoint an examiner. MR. BALDIGA: Yeah. We haven't talked about the order, and there was a revised order that I haven't even had to -- been able to read, submitted this morning. But to the concept of an examination, one of an examiner, we agree. We would have asked for it if the U.S. Trustee didn't. And third, we'll pay for it. And I say we, our DIP lender will pay for it. THE COURT: Well, okay. I'm just asking questions right now. We'll get -- I'll have to speak with the U.S. Trustee's office in a little bit. Obviously, the motion is not on today's calender, but if was filed on, I think Saturday. There is a motion to expedite associated with it. If what you're telling me is, you consent, I guess I need to hear from the creditors, and I will -- not at the moment, but I will ask you, because I don't -- I mean, if there is an ability -- if there is an ability to agree on something without the need for a hearing and protracted findings and things of that nature, then that would obviously be an avenue that I would like to explore. MR. BALDIGA: Of course. THE COURT: If there is an opposition, we'll have
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to address that. With regard to the DIP financing, I think you said already today that you filed the motion today, but you're looking -- are you -- you're looking for expedited relief is what I'm looking at? I'm seeing some things here. You're looking that -- for that order to enter quickly. MR. BALDIGA: But not today, Your Honor, of course. THE COURT: Oh, I'm not suggesting it's going to enter today. I'm asking you, what are you looking for as far as timing and -- MR. BALDIGA: As more traditional, a preliminary hearing and then a final hearing. The -- THE COURT: Well, we do things a little differently on the preliminary and final hearing too, and I'll -- but it might work in your case, if what you've suggested as a road map works because we don't normally in a Chapter 11 case enter a final DIP financing order on -- as quickly as other courts might, because we want to see what's happening with a plan. Now, if you file a plan, I think you said -- I think I wrote down 20 days or something. MR. BALDIGA: Yes. THE COURT: Then maybe. Maybe there would be a final DIP order in the sooner -- sooner than a later. But just to be clear, we don't always enter those final orders
as quickly as some other jurisdictions do in the Chapter 11 context, because we want to see how the Chapter 11 case is developing. That doesn't mean it couldn't happen, I'm just giving you a heads up.
The same is true with cash collateral. You know, if we have a cash -- which I know you're not seeking. I'm just giving you an example so you understand what the Court's perspective is.
We often enter many interim orders of cash collateral before we ever get to a final, because of all the provisions that parties want parties to be bound by, other than themselves in many cases. So we don't always do that, number one.
Number two, I know that there's been a committee formed, because I saw the document and you just confirmed that.
I would assume, but I could be wrong, that the committee will want to retain counsel and I'll have to deal with that, and we'll have to deal with the committee's position too, on DIP financing, as -- in addition to some other issues.
So it's not a problem from the Court's perspective. Anything you've said, I'm just giving you -- I'm trying to set your expectations, I suppose in some respects.
MR. BALDIGA: And that's very appreciated, Your Honor. THE COURT: Okay. Which is that we will proceed with whatever we need to proceed with. But we don't always go to a final hearing on cash collateral or DIP financing in the same way some other courts do. Does that mean that -- as I said, but that -- it depends upon the facts and circumstances of each case. Okay? And so with regard to the DIP financing, I just want to understand what -- you're looking for a hearing in a week, less than a week, ten days, two weeks? What are you looking for? MR. BALDIGA: Well, I don't have the case calendar in front of me. There is a hearing, I think, coming up. I don't have it. THE COURT: I'll look. I can look for you. Hold on. MR. BALDIGA: April 12th? UNIDENTIFIED SPEAKER: Your Honor, they asked for next Monday. They asked for four and a half days' notice. THE COURT: Well, that's not going to happen, so don't -- that's not going to happen. UNIDENTIFIED SPEAKER: Right. MR. BALDIGA: No, that's why we --
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THE COURT: Okay. MR. BALDIGA: I already said -- THE COURT: I'm not going to do an \$8 million DIP financing hearing from an insider, essentially I think is what I heard, in four days. That's not going to happen, so you don't have to worry about that. And as I just said, we have to wait for the committee. I've got to see what the committee's position -- none of this is going to happen with that urgency. That doesn't mean we can't start talking about it, but I'm not going to -- I'm not going to put anybody in that position, including the Court, because there isn't any -- I haven't been told -- MR. BALDIGA: April 12th, I believe. THE COURT: April 12th. MR. BALDIGA: Is your court hearing. THE COURT: Well, here's what I will tell you. April 12th, we have a -- we do. We have applications, a bunch of retention professional applications on April 12th in the afternoon. What I'm thinking we're going to end up doing in this case, at least initially, and it might be throughout the whole case, is that we don't schedule the matters on Tuesdays, which is the regular calendar hearings in this court.
MR. BALDIGA: Okay. THE COURT: But we're going to schedule them on another day. And so we -- what we may end up doing is taking the matters that are on April 12th and moving them to April 13th, for example, and it will just be hearings in this Chapter 11 case that the Court will hear that day, nothing else, because there's many, many things going on, and I think the Court needs to devote the time to that as opposed to having it appear on a regular Tuesday hearings calendar in Bridgeport. So I think that's likely to happen, is that -- even the one -- even the matters that are -- that appear to be somewhat ministerial, but I'm not sure they are, but that's another -- I mean, you know, you can -- we can all talk about that. I think even the matters that are on April 12th are probably going to be moved -- MR. BALDIGA: Okay. THE COURT: -- to a date like April 13th. MR. BALDIGA: I'm sure we'll find a good day. THE COURT: We just -- I just don't think it makes sense to think that we're going to be able to address issues in a -- on a Tuesday calendar when, you know, we have to hear other matters. It just doesn't make sense in this case. MR. BALDIGA: That's my initial sense of this case
as well, Your Honor. THE COURT: Okay. All right. So April 12th or 13th might work for you on a preliminary hearing on DIP financing. Is that correct? MR. BALDIGA: Yes, Your Honor. THE COURT: All right. I just want to make a note so I get everybody -- I get everyone's thoughts down and then I can try to figure out where we're going from here. All right. So with regard to the presentation you've made on the -- and the debtor's affidavit or declaration, I should say -- but I -- as I said, I have read it, but I haven't studied it. I mean, I know you've submitted a lot of information. You've told me a lot of things. The one thing that there -- there is -- obviously, there's the litigation with PACS. I know a little bit about it just given what's been filed, but I think the debtor is involved in other litigation, correct? MR. BALDIGA: Yes, Your Honor. THE COURT: Okay. MR. BALDIGA: And they are -- the litigation adversaries are the creditor body here. THE COURT: Okay. And so I guess I'll need to hear about those at some point and figure out what's going to happen with those cases that are pending outside of this
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bankruptcy court, right? I mean, we're going to have to address that at some -- in some way. MR. BALDIGA: Yes. And there are two plaintiff litigations for which the debtor is plaintiff. THE COURT: Okay. MR. BALDIGA: And which constitutes assets of the estate -- THE COURT: Right. MR. BALDIGA: -- and we've disclosed what they are, and they hopefully will be one of the sources of -- one of the means to satisfy creditors. THE COURT: Okay. All right. MR. BALDIGA: The adverse litigations, I've described some of them, many of them are defamation -- so- called defamation cases. Others -- but they're sponsored -- ultimately, they all come out of China, almost all at about the same time, all from a similar funding, including with PACS through Bruno Wu, who's -- THE COURT: But they're pending here in the United States. All the matters are pending -- MR. BALDIGA: Yes. THE COURT: -- in the United States. MR. BALDIGA: I believe all in the United States, yes. THE COURT: Okay.
| 35 |
|---------------------------------------------------------------|
| MR. BALDIGA:
Because Mr. Kwok has been in the |
| United States since -- |
| THE COURT:
Right. |
| MR. BALDIGA:
-- I believe, 2015 -- |
| THE COURT:
Right. |
| MR. BALDIGA:
-- or so. |
| THE COURT:
At this moment -- |
| MR. BALDIGA:
One in the BVI.
I'm sorry.
I'm |
| corrected. |
| THE COURT:
I'm sorry.
Say that again. |
| MR. BALDIGA:
There's one action in the British |
| Virgin Islands. |
| THE COURT:
Okay.
Okay.
But how many total are |
| there.
Did I -- am I -- is it like 30 or something did I |
| see, is -- |
| MR. BALDIGA:
About that, yes. |
| THE COURT:
Okay.
All right.
I just want to make |
| sure I'm reading things properly, I'm not missing things. |
| Okay.
Which I don't think I picked up the British Virgin |
| Islands, but that doesn't mean anything.
I've been looking |
| and I might not have seen that. |
| All right.
Then with regard to this case |
| management conference, what we often do, and I will do in |
| this case bed of there's -- at least at this point, there's |
| still a lot of moving parts. |
| |
I will continue this just in case I have more questions. I may not. I may not have any more questions once I really review the declaration of the debtor and all the other questions I may have may come out through other pleadings from other parties, including you. I mean, it may -- it may all -- So what we normally do is, I'm going to continue this conference to whatever the date is that we all choose and, you know, and I'm going to -- we'll address that toward the end of the hearing, but even if it appears on the calendar, I might come out and say, at whatever that next hearing is, I really feel that the conference is concluded and we don't need to schedule anymore. I'm going to address all the issues in the pleadings that are pending on things filed by the debtor, things filed by the creditors, the creditor's committee, U.S. Trustee, whatever. So even though I'm continuing this, I am not -- I don't know if that really means I'll ask you anymore at the -- and obviously, if I do and you're not prepared, I'll give you -- I mean, we'll figure it out. It's not a problem. MR. BALDIGA: We'll try to be prepared, you know, because we're going to push this case quickly, as I said, and Chapter 11 cases get old quickly and we're going to push this one to a conclusion.
| 1 | THE COURT:
All right.
Well, we'll see how things |
|----|--------------------------------------------------------------|
| 2 | go, but that's helpful, all right?
I don't normally allow |
| 3 | anyone to ask any questions about the case management |
| 4 | conference because you're allowed to question the debtor at |
| 5 | the 341 meeting, which obviously happened yesterday, and it |
| 6 | appears the 341 meeting is going to -- it's not closed, it's |
| 7 | going to be -- the debtor is going to be subject to further |
| 8 | questioning. |
| 9 | MR. BALDIGA:
In two weeks, there will be -- |
| 10 | THE COURT:
Okay. |
| 11 | MR. BALDIGA:
Yes. |
| 12 | THE COURT:
All right.
So then I feel I |
| 13 | understand -- I have a good understanding, I should say. |
| 14 | I'm not saying I have a thorough understanding, but I have a |
| 15 | good understanding of where things be. |
| 16 | The only thing that I would say that you didn't |
| 17 | talk about that -- and that we have to talk about because of |
| 18 | PACS's motion is, when you talked about filing, the reason |
| 19 | for the filing, you said that the debtor filed to save his |
| 20 | life, and I'm not quarreling with that in any way, shape, or |
| 21 | form, but obviously it -- the PACS litigation has had an |
| 22 | impact on that as well, because the timing of the filing and |
| 23 | the issue of the decisions out of the New York court, had to |
| 24 | have impacted what's going on. |
| 25 | And so I think that in order to be fully accurate |
| | 38 |
|----|------------------------------------------------------------------|
| 1 | -- I guess, I don't remember seeing -- and let me just take |
| 2 | a look, because I could have missed it, so just give me a |
| 3 | second and I'll see if I can find it.
Of the 55 paragraphs |
| 4 | -- I think it was 55.
We talk about PACS -- in the PACS |
| 5 | litigation you talk about starting at paragraph 20. |
| 6 | MR. BALDIGA:
Yes. |
| 7 | THE COURT:
And you talk about the loan.
And you |
| 8 | talk about the person guarantee.
And then you talk about |
| 9 | the restraining order.
And it says, you have -- it says |
| 10 | that the debtor says he has no ability to pay this fine. |
| 11 | So the problem that I see with that, or that |
| 12 | you're going to have to address at some point, whether it's |
| 13 | in connection with this motion to -- for the Court to |
| 14 | determine that the stay does not apply, or that relief from |
| 15 | the stay should be granted is for some -- right now, you're |
| 16 | getting \$8 million.
Your client is getting \$8 million from |
| 17 | a source.
Other loans have been made.
Your being -- again, |
| 18 | I'm not quarreling with any of it.
Your firm is getting a |
| 19 | retainer of a good amount of money. |
| 20 | You say you want to come up with a plan that will |
| 21 | be -- that you hope the creditors will accept and as I |
| 22 | unfortunately started off this hearing saying, it's clear -- |
| 23 | and you know, this happens all the time.
I'm not saying |
| 24 | there's anything extraordinary, to use your terms, about |
| 25 | disputes between a debtor and creditors. |
| | |
But I think that for your client to say he has no ability to pay the fine might be problematic at some point. I mean, this is -- this case was filed and stayed the actions that were occurring in the New York Court, right? MR. BALDIGA: Yes, Your Honor. THE COURT: I mean, that's clear. MR. BALDIGA: Yes. THE COURT: That the actions that occurred in the New York Court, from what I can see, so again, I'm qualifying this on what I have reviewed, were very extensive and very detailed and the judge's findings were very detailed. And as you know -- I think you know -- I'm not going to litigate that issue that's been litigated in New York. I mean, that's not going to put be part of this Chapter 11 case. But I have to listen to creditors who come in and say, hey, I've got a motion here and I want you to tell -- I want you to find either that the automatic stay does not apply, or in the alternative, that we're entitled to relief from the stay. And so, that was one of the reasons I asked the question at the beginning of the hearing, and one of the reasons why I asked counsel for PACS the question, which was -- and I'm not sure they would be wholly satisfied, but
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we're going to start talking about the motion for relief from stay. Well, it's not a -- I call it that, but it's -- really, that's the alternative relief. The main relief at being sought is the inapplicable ability of the stay, saying that it does in this playa because if it's under (b)(1). 362(b)(1). So let's just assume I agree with them, just for the sake of argument here. I am not ruling right now. What are you going to do if I do that, number one? Or what are you going to do if I grant relief from the stay? Do you -- you know, what I -- how I read their papers, and I'm going to give everybody a moment to talk, but what I want you to think about, counsel, because I'm going to turn to PACS and let them present their motion, is what are you going to do. As you know, the bankruptcy court is somewhat constrained and required to address an issue regarding the automatic stay, whether it's the inapplicability or the request for relief from the stay on an expedited basis. Right? I mean, you know that. You know that's what the rules provide. MR. BALDIGA: Of course, Your Honor. THE COURT: I'm not saying it's going to happen today. I'm not saying that yet. I haven't said that yet. But what I am saying is, you're suggesting some
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pretty aggressive things. And I don't mean aggressive in a bad way. I'm talking about, you know, you said you're going to file a pan in 20 days. You've got DIP financing of \$8 million. You know, you want to a lot of things to happen quickly and I understand that. But then I've got the competing claims of the creditors who want a lot of thing -- well, at least one thing to happen quickly. They want to go get that boat. Right? Isn't that pretty obvious? So have you had any questions about -- I'm not talking about with opposing counsel. I'm talking about you with your client, about trying to -- if you really want to make this work, right, and I'm not suggesting you don't, but if you really want to make this work, don't you think if you're going to get the creditors to be in any way supportive of what happens in this case, don't you think you need to seriously consider what -- and I'm not saying you -- that's not fair. I'm not saying you haven't seriously considered. So let me just step back. Don't you think you need to address the issue of the boat? Now here, you say -- and Mr. Kwok says, I did have access to the boat, but I did not have the authority to order it back to New York. I don't understand that sentence. So can you explain that to me? MR. BALDIGA: Yes.
THE COURT: Okay. MR. BALDIGA: Mr. Kwok does not own the boat. Never did. THE COURT: I don't think anybody -- well, I don't know if even anybody disputes that. MR. BALDIGA: Okay. THE COURT: But the New York judge says, it doesn't matter whether he owns it. He controls it. MR. BALDIGA: He does -- THE COURT: That's what he -- that's what he said, right? I mean, I don't think I read that wrong. I think the New York -- the judge in New York said, he controls it. He didn't -- it -- so if he controls it, then why would he say, I do not have the authority to order it back to New York? So, go ahead. Explain that to me. I'm sorry. MR. BALDIGA: No, certainly, Your Honor. And Mr. Kwok does not control the boat. THE COURT: Okay. MR. BALDIGA: The judge made the finding that he did. It doesn't mean that's right. It's on appeal. But it's wrong. And that's okay. I mean, sometimes judges are wrong. THE COURT: Yes. MR. BALDIGA: But I'm not disputing that that's what he found.
THE COURT: Okay. MR. BALDIGA: He found that. THE COURT: Okay. MR. BALDIGA: The specific relief that PACS has asked for here, and again this ties into the earlier presentation and it's -- I don't think it's by coincidence, is the enforcement of the state court's February 9 contempt order. That's the specific relief here at Paragraph 9. THE COURT: But I asked counsel at the beginning of the hearing, didn't I? I asked him, aren't you -- aren't you really just wanting to get the boat back into the jurisdiction of the New York Court? MR. BALDIGA: But that's not what the papers say. THE COURT: I understand that's not what the papers said, but that's what I asked him. I'm trying to figure out a way -- not figure out a way. I'm trying to suggest to you that -- we can be here for years fighting about everything. You know, it's happened before, it will happen again. Or we can try to see if there's a way -- and you know, I take you at your word that the debtor wants to move forward in a meaningful way to have -- and I'll tell -- I can tell you what you can said. I mean, I think you said it well. You want to commit to file a plan in the next 20
days, and Mr. Kwok wants to pay his creditors fairly, and he wants to have a chance to propose that fair treatment and treat them fairly. Okay? MR. BALDIGA: Yes. THE COURT: So the problem -- the problem that exists -- that existed when this case was filed, right, that has nothing to do with the bankruptcy itself, was all the findings and all the litigation that went on before this. And I understand you're appealing it. I'm not -- you know, you have every right to do all that. But if you're going to be in this court and try to get the cooperation of the creditors to get a plan confirmed so Mr. Kwok can -- you know, he wants to move on and he wants to save his life, is what you said, and I have no real knowledge about all the in-depth facts that you stated, you know, about unfortunate events and things that apparently occurred. But this is a situation where I'm going to have to rule on that motion if there isn't an agreement on that motion. Right? MR. BALDIGA: Yes. THE COURT: I'm going to have to rule on that. And you and you might not -- well, somebody's not going to like the way I rule. Whoever it is. And then there's going to be an appeal of that too, right? I mean, there will be, I would assume. And so then we're going to be continuing
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Case 22-50073 Doc 144 Filed 03/30/22 Entered 03/30/22 15:41:05 Page 45 of 97
litigation that's already been continuing in New York for several years. I think the case was filed in 2017. I think. I could be wrong about that. MR. BALDIGA: Okay, the week of the Voice of America broadcast. THE COURT: Yeah. MR. BALDIGA: Yes. THE COURT: Okay. So again, I'm suggesting to you, to everyone that, sure, we can do that. We can continue to litigate everything in this court, but I will have parameters under which that's going to happen, and I have under the bankruptcy code and the bankruptcy rules, I have to decide this motion and it's going to be fast. I mean, it's going to be sometime soon. And so, you know, I don't know if that's going to work for you or for the creditors, but I'm going to do that. And I, you know -- what I'm going to do now is -- I have let -- and I'm happy to let you talk as long as you want. You're the debtor's counsel. You should be talking. This is what we need to talk about. But I'm going to let Attorney Friedman tell me why I should grant his motion in a minute. He hasn't talked yet. I'm going to let him talk. MR. BALDIGA: I'm going to, of course, listen as well. THE COURT: And you'll listen and you'll be able
to reply. This is a preliminary hearing on the motion that PACS has filed. I can do many things with that. I could order a final hearing tomorrow. I'm not going to do that, but I'm just saying I could do that.
I think you really need -- it is the obvious issue in the room that we have to address. And, you know, I have no problem in any situation ruling, because that's what I'm supposed to do, and then I have no problem if people appeal, because that's why we have Courts of Appeals. The judges get it wrong, as you said. Sometimes the judges get it wrong and they need assistance from a higher court to tell them what they did wrong.
But I'm going to have to rule. I have no choice. I have no choice on a couple of levels, including how the bankruptcy code was amended in 2005 that says basically, you know, in 362(e)(2) I think it is, you know, you've got 60 days essentially and then there's no more stay. It's an individual case unless I make some other kind of findings. So I'm going to have to do that at some point, unless I rule within 60 days, which is also extremely possible.
So I just ask you to listen to -- and I know you will -- Attorney Friedman, and I ask you both to consider, you know, where things are going to go after today. I understand -- I've been involved in it when I was a practicing lawyer. I understand when parties don't agree.
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I understand it, you know. But at some point -- at some point at the end of the day, I don't know where that's going to get us. But I'm here. I'll do whatever I can to help you, but there are certain things I have no control over as you know. And the relief from stay issue, and this motion, and the timing that's already started to run, I just think people need to seriously -- and I'm not saying you're not. It comes -- I want to be very careful. I am not saying that you're not taking any of this -- of course you are. MR. BALDIGA: I'm taking it exactly as you mean it, Your Honor. THE COURT: Of course. Of course you are. MR. BALDIGA: I appreciate the opportunity at the outset of this hearing to have given you as much background as I have. I will accept your invitation to sit for a moment and to listen, and I'm sure I'm beat back up in a few moments to talk further as to the boat. Thank you. THE COURT: Thank you. Thank you. Okay, Attorney Friedman, now I am going to proceed with your motion. Okay? We essentially concluded the case management portion of the hearing, even though I'm continuing it to a date that we haven't determined yet, but it will probably be, as I discussed, April 13th. But your motion, I granted your motion to expedite
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the hearing on your motion for the Court to determine the -- whether the state even applies, and if it does, then for relief from the stay. So go right ahead. MR. FRIEDMAN: Good afternoon, Your Honor. It's Peter Friedman from O'Melveny and Myers. I just -- I wanted to just make a couple of preliminary comments, which is I actually don't believe that Mr. Kwok wants to avoid going to jail, because if he wanted to avoid going to jail, he would not have violated the U.S. Code by submitting a declaration so filled with falsehoods and lies that it's embarrassing. And what you will uncover in the course of this case -- and they unfortunately were repeated from the lectern. You will find out from this case that Mr. Kwok has had bank accounts. He's had, you know, people submit letters on his behalf when he purchased an apartment, talking about his long banking relationships. And that was in 2015. You will hear, if it ever becomes necessary, enormous testimony about how he held himself out as the owner of the Sherry Netherlands apartment, despite his denying that in his declaration. He lists -- he says in his declaration that the PACS agreement was a forgery. We've put in a footnote all the reasons we know that to be obviously false. The pattern
of lying hasn't stopped and it's distressing to see it repeated from the lectern. It's distressing -- you know, Mr. Kwok talks about all the litigation he's been involved with, much of it for people accusing him -- I don't know if it's true or not -- of being a Chinese spy. I know he's frequently accused of being a Chinese spy himself and a collaborator with the Communist Chinese Party. I have no idea. I don't know if that's true, but he's effectively had his counsel accuse my client of the exact same thing here today with zero basis. It's sanctionable, in our view, for opposing counsel to stand at a lectern and accuse another party with no basis of conspiring with the Chinese Communist Party.
It's outrageous.
Your Honor, I want to make a few other points. Now the declaration, which is Docket No. 107, which is his declaration, was submitted on a Saturday.
Your Honor, Mr. Kwok's opposition to our motion was filed Wednesday and referred to it, the declaration. He didn't file it for four more days. He filed it then, just for the heck of it, in support of a motion that he didn't file until today.
It's sort of litigation by incompetent ambush, and that gives you a sense when Mr. Baldiga says, we're going to -- we are going to run this case in an appropriate manner
and follow every rule, it's just not true. And the proof, you saw in the petition, you saw in the schedules, you see it in the way they conduct this case. So notwithstanding what you heard I think the actions speak much louder about how this case might go. I do also want to let Court know we don't consent to an appointment of an examiner. We think an examiner is a tremendous waste of time and money. THE COURT: Okay. MR. FRIEDMAN: A trustee should be appointed. We'll be seeking that relief. Obviously, we'll be filing an objection to the examiner motion whenever the Court requires that that be objected to. If the debtor really is going to file a plan within 20 days, we obviously have to get the examine -- the trustee motion moved very quickly because of the interplay between timing for a trustee and timing of confirmation hearings and a plan. You know, what plan other than I will pay all my creditors in full could make sense here? I don't know. You heard yet again, this is somebody who doesn't have any money. I mean, it's unclear whose benefit this case is being even run for, but I don't want to get too far out ahead of where things are going to go, so I'm going to come
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back to this particular motion. Your Honor, you had a colloquy with Mr. Baldiga and sort of asked some questions about what Justice Ostrager actually determined in his hearing, in his sanctions order. And I think it's worth looking at the sanctions order, because it says -- THE COURT: Where -- can you just point me -- is that -- is it -- is it Exhibit A? MR. BALDIGA: It is Exhibit A to the Friedman declaration. THE COURT: Okay, if you'd give me a second I'll be able to look at it with you at the same time. Okay? MR. BALDIGA: Okay. (Pause.) THE COURT: Okay, I'm almost there. (Pause.) 17 All right. I think I'm there. Let me just check with you, okay, to make sure I'm looking at the right document. So it says, Supreme Court of the State of New York, New York County and then at the top it has an index number and a motion sequence number of 19. MR. FRIEDMAN: Yes, Your Honor. THE COURT: Okay. All right. Go right ahead then, I'm with you.
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MR. FRIEDMAN: So on Page 2, the first full paragraph, "On February 2nd, 2022, this Court held an evidentiary hearing at which seven witnesses submitted direct testimony by affidavit and were made available for cross-examination."
I'm going to stop quoting. Some of those witnesses were -- virtually all of those witnesses were Mr. Kwok's witnesses. His family members, people whose testimony he submitted. Right? So when he tells you the judge got it wrong, remember what was in front of Justice Ostrager and all the opportunities they had to litigate this matter.
Going back to quoting. "Those proceedings established, among other things, that Kwok exercised dominion and control over a yacht called the Lady May."
As we go to Page 4, the testimony adduced at the hearing out of the mouths of defendant's witnesses, clearly and convincingly demonstrated that Kwok beneficially owns and controls the Lady May and has utter contempt for this court and the judicial process. Pause there.
Your Honor, if we have to get into it at some point later, we will also show you tweets where Mr. Kwok accused of Justice Ostrager or of being a CCC -- a CCP agent, just to show you how promiscuous he is with that allegation.
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Then, Your Honor, the last page -- I'm sorry, Page 8. "Kwok has much more than a beneficial interest in the Lady May. Not only does Kwok control the yacht, it appears he provided the funds to purchase it and he is the person who principally enjoys the use of the yacht." These are all facts that a court of competent jurisdiction has found. They cannot be, whether it's under *Rooker-Feldman* or collateral estoppel or res judicata, as this Court said, they can't be reevaluated here. Mr. Kwak's claims that he doesn't have the ability to bring the yacht back should fall on deaf ears, because defendants claim all the time, I didn't do it after they've been convicted. Does that make it so? Right? He doesn't get to just say, I can't do it when a Court has found he can and he has refused to as an act of utter and complete contempt. Mr. Kwok was in contempt of Justice Ostrager'a opinion for 268 days. And Justice Ostrager concluded that if billionaire litigants can simultaneously seek to use court process in New York and elsewhere in the United States while knowingly and intentionally violating court orders, there is no rule of law. That's what -- by the way, that's what the stakes were in front of Justice Ostrager and how obviously disturbed he was by this pattern of conduct that Mr. Kwok
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showed. But I read you all of those in order to show, Your Honor, that whatever is in the declaration, whatever factual predicates Mr. Kwok wants to make, whatever loopholes he's looking to escape simply are not available to him in this court given the breadth -- frankly, even if the findings of fact were cursory, they would still be collateral estoppel, but they aren't. They were deep and based on extensive testimony. Mr. Kwok's protestations to the contrary that he can't do it, if they're addressed, they should be addressed in New York State on appeal. And Mr. Kwok tried to get an interim stay of Justice Ostrager order and interim stay. He couldn't even get that much less a false stay pending appeal. That's how little the New York Court of Appeal -- Appellate Division thought of his likelihood of success on the merits. I note, and we submitted this in connection with our schedules, that Mr. Kwok also put on GETTR that if he -- you know, he might consider fleeing the jurisdiction, fleeing the United States if the sanctions order was -- the contempt order was pursued. Perhaps Mr. Baldiga should be asked whether, if the stay is lifted, Mr. Kwok intends on fleeing the United State's jurisdiction to avoid the consequences of his
contemptuous behavior. Your Honor, a couple of other points that I want to to address. Obviously, Kwok -- Mr. Kwok has sought to remove the action to federal court. I think that moots the relief. First of all, it's an obviously deficient form of removal. *Rooker-Feldman* provides that, mandatory abstention, a permissive abstention are all at play. But even if remand was appropriate, there's still an action pending now in the Southern District of New York, and the Southern District of New York then can have the stay lifted if it's the appropriate forum to order return of the yacht. So the removal, while a quasi-clever tactic to try to cause delay, does nothing to moot our motion or the relief that could be granted if necessary. And we would amend our order to say that whether it's the state court in New York or the federal court, if the action has properly been removed the stay is lifted. Your Honor, I want to make another point that -- just address another point that's in Mr. Kwok's papers. Mr. Kwok says, don't lift the stay because if the stay is lifted or the stay is modified, I guess to use more -- less colloquial language, the stay -- the code doesn't talk about lifting a stay, it talks about modification or termination
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of the stay. Don't do it because then I won't get a DIP from Golden Spring, because my family won't lend me the money under those circumstances.
There's an old parable about Lincoln, right? That Lincoln would describe somebody as being like the highway man who comes up to you and says, give me your wallet or else I'll shoot you, and then it will be your fault that I'm a murderer. Right?
If Kwok's family won't lend him the money and the case goes off the rails, this case can't be pursued because Kwok won't bring a boat back or the Court lifts the stay, that's on them. That's not on the creditor body. That's not on this Court. That's a form of hostage taking that I don't think is appropriate to suggest. If they don't want to lend the money, so be it under that circumstance.
What I would say about that is we should stop and think about it, right? These are the people who Kwok says, you know, fund his lavish lifestyle and have done so for years.
These are the people who are going to help resolve claims against the estate, are going to provide a lot of funding to get their dear old dad out of Chapter 11, not have to face sanctions.
But if the relief that's granted -- that we ask for is granted, they won't lend money, which doesn't make
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sense, because of the relief that's granted -- one of two things is going to happen. He's going to stop his contemptuous behavior. I don't know why -- and bring the boat back. I don't know why that would prevent them from wanting to lend money, other than they feel like their favorite toy has been taken away. Or he'll remain in contempt. And if he remains in contempt, there's a natural consequence to that behavior.
Again, in that circumstance I guess they're willing, if you take him at his word, to let their dad go to jail and have all the terrible things he claims are going to happen, happen. Also doesn't really make any sense.
So I want to now turn to the legal basis for a motion. We've said the stay doesn't apply because of the exception that has been recognized by virtually every court.
Doctrinally, we know that a civil contempt order can be exempt from the automatic stay. They spend a lot of time in their paper saying, this isn't a criminal contempt order. We agree. It's not. It's a civil contempt order.
But civil contempt orders are exempt from the automatic stay where they are designed to vindicate the interests of a Court and are focused on not compensation.
And to be clear here the \$134 million fine is completely separate from the underlying judgment that was rendered in our client's favor, but because there has been
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an assault on the dignity of the Court. And I just -- I want to go back to what I read to you. Justice Ostrager said, if billionaire litigants can simultaneously seek to use the Court process in New York and elsewhere in the United States while knowingly and intentionally violating court orders, there is no rule of law. I think there couldn't be a clearer statement about what Justice Ostrager thought the purpose of the sanction was, and it was to, you know, to hold Mr. Kwok in contempt for refusing to abide by court orders and insulting the integrity of the judicial -- and the dignity of the judicial process. So I don't -- from that perspective I think it, you know, then becomes clear that this is the kind of motion -- contempt -- a sanctions order that can be held to be -- fall within the exception to the automatic stay. Well, their arguments -- for example they rely on the *White* case. I think as we explained in our reply brief, first of all, the *White* case recognizes, as it has to, that an exception exists to the automatic stay for civil actions versus -- for certain civil kinds of contempt motions. That case is about collection of damages, which we're not trying to seek. We've been very clear, we're not trying to seek damages. We're not even seeking it necessarily -- we're not
even seeking the imposition of additional fines. What we are seeking is to ensure that the Lady May is returned to New York. Now, the February 9th contempt order specifically does require the return of the Lady May and it says, to the extent the Lady May is not back, fines continue to accrue. We're not actually asking for fines to continue to accrue. We're not seeking damages. We're seeking return of the boat. We're seeking return of the boat for the benefit of all creditors. We've been quite clear, and we've clarified it even further in our draft order, that the boat will remain subject to further order of this Court. So the kinds of concerns that animated cases like *White*, where one creditor was seeking to obtain a financial advantage for itself in connection with the contempt motion are not present here in any way. Your Honor, I think the -- you know, the debtor also tries to draw a distinction from some of our cases saying that those cases related to post-bankruptcy post- petition sanctions orders. And our response to that is the timing may have been different in those cases but the analytical framework that the Court evaluated, what's the nature of the sanction, what is the person seeking to lift the stay hoping to achieve by doing it? Are they trying to detract from the
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estate, are they trying to agglomerate or accumulate more for themselves? Are they trying to just harass the debtor? None of those factors are present here. We're simply trying to get the debtor to bring back one of its most valuable asset. And they say you shouldn't worry about -- you know that -- why do you need to do that? The boat is subject to worldwide jurisdiction of the bankruptcy court. First of all, I think it's very clear that Mr. Kwok doesn't respect bankruptcy -- any court's orders. Second of all, the asset, even if it's subject to worldwide jurisdiction, could potentially continue to dissipate. It's being used by I don't know whom, but it's always at risk. And has Mr. Kwok done the basic things that a debtor ought to do to assert control over his assets? Has he filed a turnover motion? Has he sought to hold his family in contempt for -- with respect to the automatic stay for continuing to exercise control over one of his assets? Of course he hasn't. What he's continued to try to do is squirrel out of Justice Ostrager's ruling that it's his boat and that he controls it. So the fact that the boat is also subject to worldwide jurisdiction of this Court, and frankly, who knows
if the court in -- somewhere else, wherever the boat is, would acknowledge the validity of that is of zero comfort to us. Your Honor, the last point I want to make is with respect to the automatic stay, if the automatic stay is held to be applicable. I think the most important *Sonnax* factors here is that every creditor who's spoken up, our client and the two other creditors, favor this relief. They want the asset back. They don't want it floating out there. It benefits all creditors. The only people it doesn't benefit are Mr. Kwok and his family members, who are not legitimate creditors. I know Mr. Kwok didn't talk about Rui Ma and her creditor claim, other than to cast dispersions on her. I know her counsel is here. I don't know if she intends on explaining the basis for that claim, but it's a horrifying claim and I'm not surprised counsel didn't go into details about what Mr. Kwok is accused to have done in that case. I'm not surprised at all. The other *Sonnax* factor is obviously sort of -- they cut in our favor no matter what, right? Either, if there's more protracted litigation to go ahead, nobody better to do it than Justice Ostrager. There may be nothing left to do because the order is already been entered.
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So it's not like we are dealing with a case that really should be litigated in this forum because it hasn't been addressed extensively somewhere else. We know it has. Enforcement of the contempt order won't interfere with this case. It's going to help this case. The only way it's going to interfere with this case is if Kwok lets it. If Mr. Kwok won't assert his rights, then it will interfere with this case to an extent. But if he does what he supposed to do, what he's been ordered to do, it will enhance this case, not undermine it. Your Honor, this isn't a real case in the context of the other factors, for example that are cited in *Sonnax*. There's no operating business. He has no innocent employees who would be harmed by an injunction. He has no business to do except litigate cases. That's all he does. And if he won't abide by the court's ruling in New York and is incarcerated, he can be deposed wherever he is in the future, unless he flees the jurisdiction, but again, I don't think fleeing the jurisdiction is a basis -- or the threat that he may flee the jurisdiction is a basis for granting -- for denying stay relief. The two other things I would say, Your Honor, is the comparison to *Res Cap* is not well taken. I'm sure this Court is well familiar with the *Res Cap* case and the \$375
billion residential mortgage book that had to be dealt with that case over two and a half million different homeowners. It's not even apples and oranges. It's pineapples and concrete how different those are. There's just nothing in common between this case and *Res Cap*. And the same with *Sonnax*. The *Sonnax* -- *Sonnax* was an operating business. This isn't. I don't know if the Court has any questions or -- I don't know if anybody thinks something else escaped my attention or I should raise, but I don't have anything further, Your Honor, other than I'd like to rebut any opposition. THE COURT: I don't have any questions at the moment. Now I -- well, that's not true. I do. I set this up, as you I'm sure noticed, as a preliminary hearing under the Bankruptcy Code and the rules. What other information, if any, do I need from you from your perspective to decide -- and I mean your client's perspective -- MR. FRIEDMAN: Sure. THE COURT: -- obviously -- to decide this motion? MR. FRIEDMAN: Not a bit. And I'd go further, Your Honor, to say that Kwok should be barred from trying to introduce any other evidence and should not be allowed to rely on his declaration to the extent it seeks to reconsider
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factual matters determined by Justice Ostrager. THE COURT: Okay. MR. FRIEDMAN: Thank you. THE COURT: I understand your position and I'm just looking to make sure I don't have any further questions, but I don't think I do -- MR. FRIEDMAN: Okay. THE COURT: -- at the moment. No, I don't at the moment, but thank you, Attorney Friedman. MR. FRIEDMAN: Okay. Your Honor, I don't know if any of the other creditors -- THE COURT: Yeah, I'm going to ask -- MR. FRIEDMAN: Okay. THE COURT: -- if anybody else wishes to be heard on PACS's motion. I'm going to let the debtor respond too. No, no, come first, counsel. I'm going to hear from creditors first and then I'll let the debtor respond, and I'll let PACS respond to the debtor, and that will be that. MS. CALLARI: Hi. Good afternoon, Your Honor. THE COURT: Good afternoon. MS. CALLARI: Carollynn Callari, with Callari Partners, again, here on behalf of Rui Ma. First, I just want to say that I find it -- and I don't know that I -- any of the counsel in this room. So
it's not meant to be professionally, but when Your Honor sees the complaint that Rui Ma filed, and reads it, you will understand the disgust I feel in any allegation that the merits of her claim are anything but real and that they're part of some sort of conspiracy. When we get to it, Your Honor will see the chronology of the facts of life make their argument impossible that her claims are just made up by this other person and part of his scheme to bring down the debtor. So with that, we support PACS's motion as modified. We agree to additional language. In our limited statement we've provided a couple of paragraphs that we thought would be appropriate. PACS's counsel has altered them, but it's a similar concept, which basically means that we support PACS's efforts to basically marshal assets of this estate and to bring them back to this estate, and then have Your Honor determine what happens with them and what is the appropriate priority. And we also noted that this would not bring any advantage to PACS in that any monies received would be subject to this estate and not be superior to any of the other creditors. That was our main concern that this would end up -- you know, if the monetary damages continued and they only
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went to PACS, that would not be beneficial, and we have clarified that in the order. So with that clarification and with the rebuttal to the disparaging remarks on behalf of Ms. Ma, we support PACS's motion. Thank you, Your Honor. THE COURT: Thank you. Does anyone else wish to be heard before I let the debtor respond? Okay. Seeing no one, go ahead, counsel. You can respond to Attorney Friedman's -- and attorney for the other creditor, Ms. Callari's assertions with regard to the motion. MR. BALDIGA: Thank you, Your Honor. Again, William Baldiga for the debtor. Your Honor, I want to first make sure that we're focused on exactly the relief that PACS has asked for, because they're arguing -- they filed one motion, they seem to be arguing a different one, and I want to address the motion they filed. At Paragraph 9 on Page 7 of their motion -- THE COURT: All right. Hold on. Let me catch up with you, okay? MR. BALDIGA: Okay. THE COURT: Just give me a second to get where you're talking so that I'm -- Paragraph 9, page what? MR. BALDIGA: Page 7, Paragraph 9 of their motion
at docket, 57. THE COURT: Okay. Give me a second. I'm not quite there yet. (Pause) THE COURT: The relief requested. Yes, go ahead. MR. BALDIGA: Okay. So, I mean that's I think fairly clear. I think it's consistent with the rest of the motion, but I thought that was the place it was most succinctly and clearly stated that they wish relief as to the enforcement of Justice Ostrager's February 9 contempt order. So let's turn to that order, which is appended to that motion. Actually, to the -- THE COURT: Attorney declaration. MR. BALDIGA: -- attorney declaration. THE COURT: Yep. I've got it. MR. BALDIGA: Which is that -- THE COURT: Go ahead. I've got it. Tell me where you want me to look. MR. BALDIGA: I'm a page 134. I'm sorry. THE COURT: You're on -- no. That's the number of pages. You're -- go to -- MR. BALDIGA: No. Page 16 of -- THE COURT: 16 of 134? MR. BALDIGA: Yes, I believe so.
THE COURT: All right. Just let me catch up with you. I'm almost there. (Pause) THE COURT: Okay. I'm on page 16 of 134. MR. BALDIGA: And is that the last page of the order? THE COURT: Yes, it is. MR. BALDIGA: It is -- THE COURT: Yes, it is. MR. BALDIGA: Okay. THE COURT: On the version I'm looking at, which is the version that's on the docket, yes. MR. BALDIGA: Okay. And so let's read what they - -the ruling is, the last sentence obviously. Kwok must remit \$134 million to PACS within five business days. That seems pretty clear cut, although PACS has clarified today and several places in the motion, they are not seeking monetary relief. So that's -- that's not what they seek. The Court is prepared to exercise its full authority under Judiciary Law 753 in the event that the fine is not timely paid. Okay. So PACS is saying, we're not seeking relief as to the fine, we're seeking -- obviously the one thing that's left is Judiciary Law 753, which is the state -- New York
State law that entitles the Court to imprison for contempt. So when you boil down the motion that was filed -- and it's clear, I'm looking at the order that they seek to enforce. In the order that they seek to enforce by the motion they chose to file, it's not for returning the boat. It's to pay \$134 million or go to jail. Period. That's -- THE COURT: Well, isn't that -- doesn't their reply say something different, number one? And number two, if they're seeking to enforce it, doesn't your client have the ability to relieve himself of that contempt by doing exactly what the judge ordered him to do and not go to jail? MR. BALDIGA: Not by this order. THE COURT: What -- not by what order? MR. BALDIGA: Not by the order they're seeking to enforce. They're asking you to allow them to -- THE COURT: Well, I don't agree with that. MR. BALDIGA: -- enforce this order. THE COURT: I'm not sure I agree with you, counsel. Because if I'm a judge and I order contempt sanction against a client -- against a party, and they come in and they -- and the contempt is because -- at least my reading is that because the boat is outside the jurisdiction and they correct that problem, the judge isn't going to enforce the fine in the contempt order, because he would have purged himself of the contempt by getting the boat back
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into the jurisdiction to which this whole -- this whole decision was rendered on. I mean that -- if you go -- I'll hear you, but I'm not sure I agree with you on that. MR. BALDIGA: I - I'm not -- THE COURT: Plus, they've just already just said they don't -- they are not trying to put him in jail. They're not trying to -- MR. BALDIGA: That's why they're not arguing their motion. I -- THE COURT: Well, but you are -- you're saying -- your opposition is you don't want the motion to be granted because they are trying to put him in jail and make him pay the fine. They've just stated, we're not seeking monetary -- we're not seeking payment of the fine. We're not seeking to put him in jail. We want -- and that's -- I think I asked this question at the very beginning of today's hearing two hours ago. I said, isn't what -- I said, Attorney Friedman, and my reading your papers right? Isn't that what I said? I said, I'm reading your papers right. Aren't you asking for the return of the boat to this jurisdiction, to the United States jurisdiction so that the boat is here and subject to the jurisdiction of the courts?
And Attorney Friedman said yes. MR. BALDIGA: In lieu of the fine? THE COURT: He just said he's not seeking the fine. He's not seeking a -- at this time, they're not seeking that. And if we go back and we look at what -- at least again, let me step back and say, I am nowhere near as familiar with this is all of you are, but the reason there was a contempt order issue is because the boat was supposed to be seized for the judgment and the boat then disappeared from New York to wherever it went. The Bahamas. And then it went somewhere else. And then it went to Italy or wherever. Well, obviously Justice Ostrager doesn't have the ability to get the boat back from Italy. I mean, he has an order that somebody may or may not acknowledge in Italy or wherever it is.
I don't think he has the -- he doesn't -- his order doesn't allow the boat to be arrested and then under maritime law, brought back to -- because it's not a maritime case -- and brought back to the United States under which the jurisdiction of the United States Court would be -- would apply.
So this -- unless I'm reading something wrong, which is very possible, but I don't think so, the whole
reason the contempt proceeding was brought was because the boat was gone. It's just like anything else. You've got an asset you can execute on. If the asset is gone, you don't - - you can't execute on it.
And Judge -- Justice Ostrager, who I apologize at the beginning of the case today I didn't state his name because I didn't have it in front of me and I didn't want to say it improperly -- he said whether -- that PACS has met the burden of establishing that the Court should enter a final order of civil contempt against Kwok for the reasons that follow. The Court is simultaneously issuing the order.
And then he goes through this whole thing. PACS encountered difficulty identifying assets over which Kwok exercised control. Then the court had a hearing, apparently, an evidentiary hearing at which a number of people supporting your client appeared.
And then that judge made determinations, whether you appeal them are not or -- you know, is a different story, that Mr. Kwok had dominion and control over that boat and that boat's gone. So that's what the contempt is all about.
Attorney Friedman, am I missing the point here? I just want to know, am I saying something that is inaccurate with regard to why you were seeking this contempt?
MR. FRIEDMAN: You're not, Your Honor. Also, if
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you look at page -- if you look at Exhibit 5 of my declaration, is the actual order from Justice Ostrager, and in Paragraph 3 he talks about how fines will continue to accrue until Kwok returns the Lady May to the jurisdiction. THE COURT: Right, and he says -- MR. FRIEDMAN: So Mr. Baldiga's argument completely -- THE COURT: -- he says that -- MR. FRIEDMAN: -- falls apart when you look at that. THE COURT: -- the appellate -- the appellate division's first department affirmed this court old order on November 4th, 2021, holding Kwok in conditional civil contempt, finding that the daily fine of \$500,000 was intended to strongly encourage defendant to purge himself of the contempt. You know, I've had cases where people have been in jail and they could purge themselves of the contempt and they don't do it. And I say, well, I don't know what you want me to do. I mean, you can either purge yourself of the contempt or you can't, or you choose not to. Excuse me. That is the more appropriate -- those are the more appropriate words. MR. BALDIGA: But, Your Honor -- THE COURT: Justice Ostrager found, whether you
agree or not, that -- and it wasn't just Justice Ostrager, apparently -- that Mr. Kwok is is in control -- has dominion and control over this boat. And I think -- I started this whole hearing asking this question.
So if he has dominion and control over this boat, and he doesn't want to go to jail, that's what you told me, he doesn't want to go to jail because he's afraid he'll unfortunate -- he'll -- that will be a very unfortunate experience for him and he wants to work with all these creditors, and he wants to have a plan that fair to all of them, then bring back the boat.
I don't think that -- and that is why I asked Attorney Friedman that question at the very beginning of the hearing, because I understand your point about the motion said. Then I read your objection. Then I read their reply. And my reply -- and my reading of their reply -- and I shouldn't say they. I'm talking about PACS and the debtor. I should be more careful. But in PACS's reply. And I asked -- that's why I asked the question.
It seemed to me, yeah, I think you're right in the extent that they're not seeking to impose the monetary fine right now, and they're not seeking to have -- I don't know what that section of New York law is, but you just said to me, I guess that is the section of the New York law that you could put somebody in jail for contempt if they don't purge
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themself of contempt. I assume that's what that means. But what I'm saying is it said in the reply, we just want the boat back in our jurisdiction, and not just for us, for all the creditors of the estate. And I actually heard from another creditor who said just that. She's asked that, and apparently the PACS's -- PACS and their counsel have agreed that the order, if I were to grant the relief requested, would say that, that the boat is not just for -- it's not coming back so PACS can arrest it, or put a lien on it, or do whatever you can on a maritime law, which there's a lot of that -- and the New York judges know how to do that -- then that's not what they're asking. They're asking -- they're asking essentially, in my opinion, to go back to the status quo where -- it's not exactly the status quo, but at least have the boat within the jurisdiction of the United States Court. That's -- court. That's what they're asking, and that's what he said. So your argument about the fine and the jail, again, the problem with contempt is always the same problem. If the person who is being held in contempt does not choose to purge himself of that contempt, then that person faces the consequences of that choice. The Court can't do anything about it. I can't make him do anything about it. If he doesn't do it then, yeah, maybe he will go to jail.
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| 1 | That's up to the New York Court to decide. |
|----|----------------------------------------------------------------|
| 2 | But they're not asking that right now.
They're |
| 3 | asking him, in my opinion from what I've read, and I'm not |
| 4 | ruling today but they're asking for an incremental step. |
| 5 | That incremental step you may not like, and you may still |
| 6 | oppose it by getting the boat back into New York or the |
| 7 | jurisdiction of the United States courts.
But that's what |
| 8 | they're asking.
And I think that's pretty clear as of |
| 9 | today. |
| 10 | Now, you know, relief from stay, or any |
| 11 | determination that the stay doesn't apply, can be |
| 12 | incremental.
It doesn't have to be a complete resolution. |
| 13 | And essentially, that's what PACS is asking.
We're not |
| 14 | asking to put him in jail. |
| 15 | By the way, he can avoid being in jail if he does |
| 16 | with the Court told him he had to do.
But he can't -- we're |
| 17 | not asking them to be in jail.
We're asking him to get the |
| 18 | boat back in the jurisdiction of the United States. |
| 19 | If he chooses not to do that, then he chooses not |
| 20 | to do that at his own peril and that's what a contempt order |
| 21 | does.
So your argument about what they say in their |
| 22 | original motion versus the reply, okay, I understand it, but |
| 23 | -- |
| 24 | MR. BALDIGA:
That was my whole point, Your Honor. |
| 25 | THE COURT:
But the reply says that they're not |
| | |
asking for what they said in their original motion. MR. BALDIGA: And that -- THE COURT: And what they're asking for in their original motion and what they're asking for now should actually benefit your client, not harm your client. MR. BALDIGA: Thank you, Your Honor. Of course I'm not arguing that the contempt didn't arise from a failure to have the boat in the New York jurisdiction. Of course. And I'm not arguing, actually, with anything that you said. I was making the point which you've actually amplified, that the motion as filed is very different from the subsequent papers, and especially today's argument, and I wanted to make that very clear. THE COURT: I understand. If you're concerned that I didn't understand that, I'm happy -- I understand that. Are you -- is that what -- MR. BALDIGA: I'm no longer concerned. THE COURT: Okay. Fine. MR. BALDIGA: You've made that absolutely clear. THE COURT: I understand. I understand. MR. BALDIGA: And so that's -- THE COURT: Okay. MR. BALDIGA: I appreciate that. Secondly -- and there would be time for further argument on this I expect. The *Rooker-Feldman* document --
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I'm sorry, doctrine, is a bit of a red herring here, and we'll be able to, with your permission because we don't have leave to file a surreply, but I think given the reply, we'd like to brief this. The *Rooker-Feldman* Doctrine applies to -- under the better of the decided case law, final state court judgment, which we don't have. But even more importantly, it applies to final judgments on the merits. It does not apply to supplemental proceedings. For example, in the -- THE COURT: Well, what about the fact that he held an evidentiary hearing and there were witnesses that -- and testimony and exhibits introduced? That wasn't a supplemental proceeding. It was a trial. MR. BALDIGA: Well, enforcement proceed -- THE COURT: It was a trial. MR. BALDIGA: -- it's an enforcement proceeding. THE COURT: It was a trial, wasn't it? MR. BALDIGA: I meant by supplemental as to not going to the merits of the underlying dispute, but as to ways to enforce a judgment. For example, in the *VanderKodde* case at 951 F.3d 397, which is a Sixth Circuit decision in 2020, the Sixth Circuit held that the *Rooker Feldman* Doctrine simply does not apply to post-judgment garnishment. That is, means to
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collect the debt. It just didn't apply. And that's an example of the very limited scope of *Rooker-Feldman.* And that makes sense, especially in the context of a bankruptcy proceeding where the court is dealing with the interest of -- balancing the interest of the debtor and all creditors, and how to deploy what may or may not be assets of the estate and to determine what are assets of the estate and to the disposition of those assets. That is much different than a final judgment in a state court as to the amount of a claim. And given that they just briefed that in the reply and we haven't had an opportunity to address that, I wanted the Court to know, because we all deal with *Rooker-Feldman*, frankly not that often, that there -- they misapplied *Rooker-Feldman*. And that's okay. We'll have, again, an opportunity, I would hope, to address that more fully, including with briefing. So those are the two points, Your Honor, that I'm disappointed to hear that perhaps because the debtor supports it -- you would have thought with the earliest part of their argument they would have been all for an examination, because they would have thought that a truly independent examiner, as opposed to, for example, a trustee that they hope to elect, would be the way to -- it's an unfortunate case, I want to say, Your Honor, where all sides
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cast dispersions on the veracity of others, and that's all we've heard so far, and that's unfortunate. We thought an examiner would be exactly the mechanism, because the one thing about an examiner, as opposed to every other role in a Chapter 11 case, is that only an examiner has no other allegiances and must be fiercely independent and is not elected or appointed, you know, by creditors -- THE COURT: Well, it would still have to be -- MR. BALDIGA: -- or chosen by a debtor. THE COURT: The examiner would have to be appointed, just like a Chapter 11 trustee would have to be appointed. So I'm not sure I -- MR. BALDIGA: Well, or elected. THE COURT: -- agree with that argument. MR. BALDIGA: Or elected. THE COURT: Well, but there -- where is the ability to elect a Chapter 11 trustee? There's an ability to elect a trustee and Chapter 7 after the interim trustee is appointed and -- by the 341 meeting, but I don't know that there's an ability to elect a Chapter 11 trustee. MR. BALDIGA: Well, actually, I'm not sure. THE COURT: I don't think there is. MR. BALDIGA: But in any event, an examiner seems to be -- and maybe I regret having signaled our support for
exactly the relief that the U.S. Trustee thought was most appropriate, just to bring that back to have PACS oppose it, but so be it. And that might be the nature of the case. In any event, Your Honor, those are the primary points in our position. THE COURT: Okay. I'm just looking. I don't think there's an ability to elect -- MR. BALDIGA: No, I may have spoken too -- THE COURT: -- a Chapter 11 trustee. MR. BALDIGA: -- too quickly. MS. CALLARI: Your Honor. THE COURT: Yes. MS. CALLARI: May I be helpful. There is not -- MR. BALDIGA: Oh, there is. There is. THE COURT: Where? There is or is not? MS. CALLARI: Is not. THE COURT: No, there is not. There's nothing -- there's no ability to elect a Chapter 11 trustee. MR. BALDIGA: Excuse me. Just -- may I have one second, Your Honor -- THE COURT: Yep. MR. BALDIGA: -- to confer with my partner? (Pause.) Okay. I'm just reading quickly, Your Honor, Section 1104(b)(1). "The election of a trustee shall be
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conducted in the same way as under Section 702." THE COURT: It says, "Except as provided in 11 on request of a party in interest made not later than 30 days after the court orders the appointment of a trustee. The United States Trustee shall convene a meeting of creditors for the purpose of electing one" -- yeah. Which is the same thing as what happens and Chapter 7. MR. BALDIGA: Yeah, that's what -- that's what I said. THE COURT: So -- yeah, but what -- but the election shall be -- so you're saying if they want to come in with somebody else, they can elect them. That's what you're saying. MR. BALDIGA: That was my point. And an examiner, as I understand it, Your Honor, is assiduously independent and without any right of election or other interference. That's why we have examiners with whatever powers the Court -- THE COURT: Well, not many people have examiners. I'm not saying that it doesn't -- it's not going to happen. I'm saying they don't happen as frequently as you're indicating. MR. BALDIGA: I'm not -- this -- I'm not pretending that anything about this case is frequent.
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I'm just saying that it would be unfortunate if the debtor were to consent to what would otherwise, in many matters, be a highly contested matter only to have our consent then be used against us to have the mostly litigious creditor say, yeah, but we're going to oppose it because that seems to independent. In any event, that's -- but again, they'll litigate this case as they so choose. MS. CLAIBORN: Your Honor, if I may make one more comment? THE COURT: Sure. MS. CLAIBORN: Holly Claiborn for the U.S. Trustee. THE COURT: Can you just speak a little bit more into the microphone? Thank you. MS. CLAIBORN: Sorry. Should the order enter from this Court directing the U.S. trustee to appoint a Chapter 11 trustee, the U.S. Trustee with do so, and part of that process is to ask for the input of the parties. And subsequent to that, the U.S. Trustee makes a determined decision about who to appoint, and it's after that point, should there be a dispute over the appointment of that particular party as the trustee that there is a process for an election. THE COURT: Well, yeah. 702(c) says -- and (b),
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"Creditors may elect one person to serve as a trustee in a case if election of a trustee is requested by creditors that may vote under subsection A of this section." So you have to have a creditor who holds an allowable, undisputed, fixed, liquidated, unsecured claim of a kind entitled to distribution under -- and it just talks about Chapter 7 by the way. It doesn't cite to any Chapter 11 provisions, which is kind of interesting. "Does not have an interest -- an interest materially adverse, other than an equity interest, that is not substantial in relation to such creditor's interest as a creditor to the interest of creditors entitled to such distribution and is not an insider." So it's really kind of interesting, because although you're right that you just pointed out 1104(b) says you can elect in the manner set forth in -- provided in subsections (a)(b) and (c) of Section 702 of this title, 702 says a creditor may vote for a candidate for trustee only if such creditor holds an allowable, undisputed, fixed, liquidated, unsecured claim of a kind entitled to distribution under, and that it only refers to Chapter 7 sections. So I don't know if it really does work. If it only applies to Chapter 7 sections, this isn't going to be a distribution under any of those sections. It's a Chapter 11
case. So if that's the case, then there isn't an election of a trustee. I don't know the answer. I'm just saying, it seems inconsistent right now if you read the actual language of the statute. It seems a very inconsistent, because you have to do -- you have to have all three prongs of (a) in order to elect under (b). And under 702(a), and 702(a) says entitled to a distribution under section 726(a)(2), 726(a)(3), 726(a)(4), 752, 766 or 766(h) or 766(i). MR. BALDIGA: Your Honor -- I think, Your Honor, the case law would say that the standards are the same in Chapter 7. THE COURT: Well, it may or may not. MR. BALDIGA: I'm just -- THE COURT: That's not what the statute says. MR. BALDIGA: I agree, but -- THE COURT: It's not what the statute says. MR. BALDIGA: In any event, the biggest point was, we would like the case to proceed on something other than sort of a war of attrition basis, and I thought we had the makings of some good progress in that regard, and we would like the Court to see it that way and move the case in that direction. THE COURT: It's interesting they didn't change the statute, because they really should have changed the
statute. You know, because it only refers to 7 -- the sections under Chapter 7. They should have -- here's a perfect example where you, you know -- where the code -- that may be exactly your intent that it be the same. That's not -- if you look at 1104(b), then -- and it refers you to subsections (a), (b), and (c) of 702. 702(a) only addresses Chapter 7 sections. So it doesn't make any sense. But anyway, we don't have to decide that today. I just thought that was interesting. I mean, I completely understand the election of a trustee under Chapter 7. I just don't think I've ever seen anyone elect a trustee at a 341 meeting after -- in a Chapter 11 after they've been appointed by the Office of the United States Trustee. Have you, Attorney Claiborn? MS. CLAIBORN: No, Your Honor. THE COURT: Okay. It really doesn't matter for today's purpose. I'm sorry I'm -- MR. BALDIGA: I agree. THE COURT: -- diverting attention, but I'm just trying to -- I really have never seen that. But anyway, okay. Attorney Friedman, I'm going to give you the opportunity to respond. MR. FRIEDMAN: Thank you, Your Honor. Peter Friedman from O'Melveny and Myers on behalf of PACS.
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I just -- I want to make a couple of points. It's disturbing that Mr. Kwok's counsel thinks that the only neutral person in a bankruptcy should be an examiner. The debtor is supposed to be a neutral fiduciary for all its creditors. Obviously, that's not going to happen. Your Honor, with respect to the examiner trustee issue, as we'll get into our objection, examiners are great, except they're not, because ultimately an examiner is just going to issue a report and that report is likely to be hearsay, and an examiner can't pursue causes of action. It doesn't help. It doesn't move this case where it needs to be -- to go, and Mr. Kwok just remains in possession with control of the case. As to the actual argument on the motion we're here on, as I mentioned, the order from Justice Ostrager is a two page order. It's at page 5 -- it's Exhibit 5 to my declaration. In Paragraph 3, he makes it clear that Kwok is under a continuing obligation to return the Lady May to the jurisdiction. That's what we're trying to enforce. We are not trying to ask for payment today. We're not asking for imposition of additional sanctions or contempt fines a \$500,000 a day, to be clear. We also are reserving our right to be paid on that \$134 million fine, but we're not asking for it to grow.
We're not asking for us to be paid. Your Honor, *Rooker-Feldman* is concededly a thorny doctrine. I think we're right. If we are not right -- you didn't hear anything about collateral estoppel or res judicata after Mr. Kwok had, you know, took the Fifth, had an adverse inference drawn against him, had his family members -- you can read what Justice Ostrager said about his daughter. I don't want to embarrass her. And so those apply, and you know, those were the decisions that they were collaterally estopped, res judicat applies, that he owns and controls, found by clear and convincing evidence. I don't have anything further. Oh, I did have a question if I can ask the Court? THE COURT: Sure. Go right ahead. MR. FRIEDMAN: When should we be -- do you have a sense of when we should be prepared to file our papers in connection with the U.S. Trustee's exam - the U.S. Trustee's motion? THE COURT: Yeah. I have -- you know, I -- that's a good question. As I said, I understand that the motion was filed on Saturday and there was a motion to expedite that hearing. So I am going to address that now. I think we need to address it now for a number of reasons. So if you'd give me a second.
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First thing first, the matters in this case -- I'm looking at the courtroom deputy now -- that are scheduled for April 12th at 2:30, we're going -- those are -- and those are all applications to employ professionals at this point. That's the only thing that's scheduled. I'm going to reschedule those to April 13th at 10:00 a.m. in this court. Okay? Now with regard to the examiner motion, I just need to hear from the United States Trustee on -- I want to ask her -- but I am going to address it now, which will end up answering your question as to when you need to file papers in response to it. Okay? MR. FRIEDMAN: Okay. May I sit, Your Honor? THE COURT: Yes, please. Go right ahead. So, Attorney Claiborn, I know it's not on the calendar yet because -- and I didn't get a chance to look at it until this morning, but I'm going to -- I am going to grant the -- I'm doing this in court, the United States Trustee's motion for an expedited hearing on the appointment of an examiner. And that hearing will be held on April 13th at 10:00 a.m., along with the other matters. The parties that -- anyone that wishes to oppose that motion for the appointment of an examiner, or anyone that wants to file anything, you're all filing it on the same day. We're not going to get into replies and -- we all
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know what the issue is. Okay? You're all -- anyone that wants to file anything in support of or in opposition to the motion for the appointment of an examiner must do so by 5:00 p.m. on April 6th. The motion -- I'm sorry, Attorney Claiborn, did you want to be heard on that? MS. CLAIBORN: I was just going to inquire about a deadline for making service. THE COURT: Oh, you haven't served the motion yet? MS. CLAIBORN: No, because we were waiting for Your Honor to issue an order. THE COURT: Oh, okay. Sorry. MS. CLAIBORN: So the order with the motion. THE COURT: I understand. All right. So then -- yes. So then, what we're going to do -- what I'm going to do is -- this order probably isn't going to enter until tomorrow. MS. CLAIBORN: That's okay. THE COURT: So your service is going to be required -- well, let's talk for a minute. Who are you serving? Who are you serving that -- you know, we'd have to go with the debtor's schedules and statements. Right? Like, what's the creditor list look like? MS. CLAIBORN: We have made copies to serve the
entire creditor matrix, which is approximately, I think, 60- something parties. THE COURT: 60? MS. CLAIBORN: So -- 60-something. THE COURT: Okay. MS. CLAIBORN: It's between 60 and 70. I just don't have the exact number. So those copies are ready, and ready to go. THE COURT: How -- I'm asking you a question, a serious question. Is it possible for you to make service by the close of business on Thursday, or would you rather have Friday? And if you say Friday, that's fine with me. MS. CLAIBORN: No, Thursday should be fine. THE COURT: All right. So then, I'm going to have you make service of the -- what will be an order granting the expedited hearing and scheduling that hearing for April 13th at 10:00 a.m., setting a deadline to file any responses in support of or as opposed to -- or opposed to the motion by 5:00 p.m. on April 6th, having you make service of the motion to appoint an examiner by 5:00 p.m. on March 24th, and then file a certificate of service on the docket of this case demonstrating how service was made by 5:00 p.m. on March 29th. Is that acceptable to the U.S. Trustee's office? MS. CLAIBORN: Yes, Your Honor. And I'm assuming
that all the dates you've just accounted for are going to be put forth in an order to be entered -- THE COURT: In that order. MS. CLAIBORN: -- by the Court? THE COURT: The order granting the motion to expedite will have all those dates in them for you, and those times. MS. CLAIBORN: Very good. THE COURT: Okay? MS. CLAIBORN: We will serve the order in our underlying motion. THE COURT: Okay, great. Thank you. MR. BALDIGA: In that regard, Your Honor, one of the motions that we have filed is to retain service agent, Stretto, and they'd be prepared to -- THE COURT: Yeah. I don't understand why you need a service agent. Can you -- MR. BALDIGA: Just for this reason, to take the burden off other parties. If that were -- THE COURT: Well, but it's going to be an administrative expense to the estate. Why are you -- why are we doing that? Why do we need a service agent? I'm not saying I'm ruling on it, I'm asking you a question. You brought it up, so I'm asking you a question. Why do you need a service agent?
MR. BALDIGA: We thought that at the end of the day, that would serve to be most efficient, but if the Court doesn't -- THE COURT: Well, I don't know. Maybe it will, but I want to hear from other people about it, right? MR. BALDIGA: Okay. THE COURT: I mean, that is -- that's on for hearing on the -- that was originally scheduled for hearing on the 12th, isn't it? MR. BALDIGA: Yes. THE COURT: So there's an objection deadline with regard to that motion already in place. There should be. I haven't looked at -- MR. BALDIGA: Yes. THE COURT: -- the notice of hearing, but there should be. So -- MR. BALDIGA: Then I won't volunteer them. THE COURT: Yeah, I just -- MR. BALDIGA: I'm just trying to accommodate. THE COURT: You know, all I'm -- look, one thing that -- in every chapter -- in every case regardless of chapter, but certainly in a Chapter 11 case, that the Court is concerned about administrative expenses. Right? So we need to figure out whether or not -- if everybody thinks Case 22-50073 Doc 144 Filed 03/30/22 Entered 03/30/22 15:41:05 Page 93 of 97
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it's good, then fine -- then I'll probably agree. But I
want to make sure everybody thinks it's good. MR. BALDIGA: Sure. THE COURT: And I -- and maybe I will agree. I don't know. I haven't really reviewed it enough to make it an educated ruling, but I just throw out there, you know, like all these applications to employ professionals. As you said, this is not a normal Chapter 11 case. It's extraordinary. So I have to watch it and make sure that administrative expenses and things are not handled in a rote manner. It's going to be decided whether or not it's appropriate under the circumstances of this case. Okay? MR. BALDIGA: Understood, Your Honor. THE COURT: Okay. MR. BALDIGA: And my -- and just for some of the reasoning, my experience is, especially when it comes to tabulating the voting on a plan, having a professional independent firm that does that has often proved to be beneficial. But again, everyone will have a chance to speak to that. THE COURT: Okay. Thank you. MR. BALDIGA: Thank you. THE COURT: Attorney Friedman? MR. FRIEDMAN: Your Honor, from PACS's perspective, we will meet and confer with Mr. Kwok. THE COURT: We couldn't hear you, Attorney
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Friedman. MR. FRIEDMAN: I'm sorry. THE COURT: I'm sorry. Say that again. MR. FRIEDMAN: Sure. From PACS's perspective, we share concerns, but this is something I will call Mr. Baldiga this week and discuss, Stretto's retention application. So if we can actually take an issue off of your plate from having to be litigated, we will meet and confer in good faith and come back with that. THE COURT: Yeah. I thank you. I anticipate that the parties will have discussions before the objection deadline and will see where we are. Okay? Attorney Claiborn, I think you wanted to say something else. MS. CLAIBORN: No, I just was standing to see if the Court had any other questions for me. THE COURT: No, I -- but I -- that order most likely will not get out obviously right now. The clerk's office is going to be closing in a little while until tomorrow, but it will get out. It will be issued and you can -- do you want me to recite those dates for you again, or do you have them? MS. CLAIBORN: I wrote them down. THE COURT: Okay.
MS. CLAIBORN: I'm good. THE COURT: And then we will go from there. Now with regard to today's matters, the Chapter 11 case management conference, I already indicated that it's going to be continued. So that's going to be continued until April 13th at 10:00 a.m. as well. With regard to the motion -- I'm sorry, I just lost my place. Just, if you would give me -- bear with me for a second. (Pause) THE COURT: With regard to the motion, Pacific Alliance Asia Opportunity Fund for entry of order confirming the inapplicabilty of the automatic stay, or in the alternative, relief from the automatic stay, pursuant to Section 362(d)(2) of the Bankruptcy Code, the hearing -- the preliminary hearing is continued until April 13th at 10:00 a.m. Now, I'm going to do one thing with regard to that. Hold on one second, please. (Pause). THE COURT: In PACS's reply to the objection filed by the debtor to this motion, Paragraph 8, Paragraph 9, Paragraph 10, Paragraph 11 talk about the *Rooker-Feldman* Doctrine and res judicata. I'm going to give the debtor until a week from --
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not a week. Until March 28th at 5:00 p.m. to file a brief no longer than five pages to respond to those specific paragraphs in the reply and that's it. No more briefing will be allowed in connection with this motion. Does anyone have any questions? MR. BALDIGA: No, Your Honor. THE COURT: Okay. Is there anything further we need to address? I don't think that there is because there's nothing further on the calendar today. MR. BALDIGA: No, Your Honor. Thank you very much. THE COURT: All right. So then the hearing in the Kwok matter today are concluded. This is the last matter on today's calendar, so court is adjourned. (Proceedings concluded at 4:22 p.m.) I, CHRISTINE FIORE, Certified Electronic Court Reporter and Transcriber, certify that the foregoing is a correct transcript from the official electronic sound recording of the proceedings in the above-entitled matter. 23 March 28, 2022 24 Christine Fiore, CERT