---
type: court_doc
id: "court_ctb_1907_0"
court: "CTB"
case_no: "22-50073"
doc_number: 1907
doc_type: "UNKNOWN"
filed_date: "2023-06-14"
lang: "zh"
url: "https://mubeitech.com/court/court_ctb_1907_0"
json_url: "https://mubeitech.com/api/court/court_ctb_1907_0"
---
# |
> 原始法庭文件为英文；下方为英文全文，顶部为中文摘要。
| | UNITED STATES BANKRUPTCY COURT
DISTRICT OF CONNECTICUT
BRIDGEPORT DIVISION |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| In Re | *
Case No. 22-50073 (JAM) |
| | * |
| HO WAN KWOK and GENEVER | * |
| HOLDINGS CORPORATION, | *
* |
| Debtor. | * |
| HK INTERNATIONAL FUNDS | *
Adv. Proc. No. 22-05003 |
| INVESTMENTS (USA) LIMITED, | * |
| | *
Bridgeport, Connecticut |
| Plaintiff, | *
June 6, 2023 |
| | * |
| v. | *
* |
| LUC A. DESPINS, | * |
| | * |
| Defendant. | * |
| * * * * * * * * * * * * * * * * | * |
| #1789
AFFILIATED ENTITIES
#1805
2004 SUBPOENAS
#1806
MOTION TO SEAL
#1845
AUGUST 7, 2023
#1850
2004 SUBPOENAS
#1864
ORDER SETTING STATUS CONFERENCE
# 227
ORDER SETTING STATUS CONFERENCE | TRANSCRIPT OF
FIFTH OMNIBUS MOTION FOR EXAM MOTION FOR 2004 EXAM
OF ADDITIONAL ENTITIES AND INDIVIDUALS AFFILIATED
WITH DEBTOR AND ENTITIES DOING BUSINESS W/DEBTOR AND
SECOND OMNIBUS MOTION TO COMPEL COMPLIANCE W/RULE
MOTION TO EXTEND TIME TO RESPOND TO TRUSTEE'S MOTION
TO COMPEL COMPLIANCE W/RULE 2004 EXAM SUBPOENA TO
CONSENTED TO MOTION OF HUDSON DIAMOND NY LLC AND
HUDSON DIAMOND HOLDING TO ADJOURN HEARING ON MOTION
OF CHAPTER 11 TRUSTEE FOR ENTRY OF AN ORDER HOLDING
HUDSON DIAMOND NY LLC AND HUDSON DIAMOND HOLDING LLC
IN CIVIL CONTEMPT FOR FAILING TO RESPOND TO RULE |
| | BEFORE THE HONORABLE JULIE A. MANNING
UNITED STATES BANKRUPTCY JUDGE |
| 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: | |
|----------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|
| Chapter 11 Trustee: | LUC A. DESPINS, ESQ.
Paul Hastings
200 Park Avenue
New York, NY
10166 |
| For the Chapter 11 Trustee: | NICHOLAS A. BASSETT, ESQ.
AVRAM EMMANUEL LUFT, ESQ.
Paul Hastings LLP
200 Park Avenue
New York, NY
10166 |
| | PATRICK R. LINSEY, ESQ.
Neubert Pepe & Monteith, PC
195 Church Street
New Haven, CT
06510 |
| 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 |
| For the Creditor, Pacific
Alliance Asia Opportunity
Fund L.P.: | STUART SARNOFF, ESQ.
O'Melveny & Myers LLP
Times Square Tower
7 Times Square
New York, NY
10036 |
| | TREVOR L. BRADLEY, ESQ.
Robinson & Cole
28 Trumbull Street
Hartford, CT
06103 |
| For HK International Funds
Investments, LLC and
Mei Guo: | MELISSA I. FALK WERNICK, ESQ.
Chiesa Shanhinian &
Giantomasi, P.C.
105 Eisenhower Parkway
Roseland, NJ
07068 |
| | AARON ROMNEY, ESQ.
Zeisler & Zeisler, P.C.
10 Middle Street, 15th Floor
Bridgeport, CT
06604 |
| For the Creditors Committee: | KRISTEN MAYHEW, ESQ.
Pullman & Comley
850 Main Street
Bridgeport, CT
06601 |
2
APPEARANCES: (Cont'd) For the Defendant, Hing Chi CHRISTOPHER J. MAJOR, ESQ. Ngok: Meister Seelig & Fein LLP 125 Park Avenue New York, NY 10017 For G Clubs Operations, LLC: JEFFREY M. SKLARZ, ESQ. KELLIANNE BARANOWSKY, ESQ. Green & Sklarz, LLC One Audubon Street New Haven, CT 06511 CAROLINA FORNOS, ESQ. Pillsbury Winthrop Shaw Pittman 31 West 52nd Street New York, NY 10019
3
Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 4 of 140
Ho Wan Kwok - June 6, 2023 4 (Proceedings commenced at 1:07 p.m.) THE CLERK: 22-50073, Ho Wan Kwok and Genever Holding, LLC, and Adversary Proceeding 22-05003, HK International Funds Investment USA Limited vs. Despins. THE COURT: Okay. Before we take appearances, I just want to note for the record that -- as I've noted in the past, that the federal government has determined that there's no longer a pandemic, and so hearings are in person unless there's cause for someone to appear remotely. And I've granted motions today for people to appear remotely when there was a reason given. And I granted one when there wasn't a reason given. Just being an out-of-state lawyer is not a reason to appear remotely. So if you are not able to appear in person, and your reason is that you're an out-of-state lawyer, your motion to appear remotely will be denied. So I just want everyone to be aware of that. So let's take appearances for the record, starting with the Chapter 11 trustee, please. MR. DESPINS: Good afternoon, Your Honor. Luc Despins, Chapter 11 trustee. MR. BASSETT: Good afternoon, Your Honor. Nick Bassett from Paul Hastings on behalf of the Chapter 11 trustee. MR. LUFT: Good morning, Your Honor. Avi Luft of
Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 5 of 140
Ho Wan Kwok - June 6, 2023 5 Paul Hastings on behalf of the Chapter 11 trustee. MR. LINSEY: Good afternoon, Your Honor. Patrick Linsey for the trustee. MS. CLAIBORN: Good afternoon, Your Honor. Holley Claiborn for the U.S. Trustee in the main case. MR. ROMNEY: Good afternoon, Your Honor. Aaron Romney -- MR. SARNOFF: Stuart Sarnoff -- THE COURT: Hold on, Attorney Sarnoff. We're going to take people in the courtroom first, please. Go ahead. MR. ROMNEY: Aaron Romney, Zeisler & Zeisler, on behalf of the debtor, HK International, Mei Guo, and the Hudson Diamond entities. THE COURT: Good afternoon. MR. ROMNEY: Good afternoon. MR. MAJOR: Good afternoon, Your Honor. Chris Major, Meister Seelig & Fein. We represent Ms. Ngok and Greenwich Land, LLC. THE COURT: Good afternoon. Before we take appearances of people who are appearing remotely, is there anyone else in the courtroom who would like to note their appearance? MR. BRADLEY: Good afternoon, Your Honor. Trevor Bradley from Robinson and Cole, Connecticut counsel for
Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 6 of 140
Ho Wan Kwok - June 6, 2023 6 Pacific Alliance Asia Opportunity Fund. Thank you. THE COURT: Good afternoon. Attorney Bradley, you may have done that, but have you filed a notice of appearance yet in the case? MR. BRADLEY: Yes, Your Honor. This morning. THE COURT: Okay. Thank you. I just haven't had an opportunity to see that. MS. MAYHEW: Good afternoon, Your Honor. Kristin Mayhew on behalf of the creditors' committee, appearing in the main case, not in the adversary proceeding. THE COURT: Good afternoon. MR. SKLARZ: Good afternoon, Your Honor. Jeffrey Sklarz, Green & Sklarz, for G Club Operations, LLC, with Kelli Baranowsky from my office and Carolina Fornos of Pillsbury Winthrop who was admitted pro hac vice I believe yesterday and will be getting her appearance on file as soon as possible. MS. FORNOS: Yes, Your Honor. THE COURT: Thank you. MR. SKLARZ: In the main case only. THE COURT: Thank you. Good afternoon. Welcome. MS. FORNOS: Good afternoon. THE COURT: All right. So I think we've taken all appearances of counsel in the courtroom. We've now taken -- obviously, I asked Trustee Despins to note his appearance
Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 7 of 140
| | Ho Wan Kwok - June 6, 2023
7 |
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| 1 | first.
So then I'll turn to Attorney Sarnoff and Attorney |
| 2 | Wernick.
So go right ahead, please. |
| 3 | MR. SARNOFF:
Thank you, Your Honor.
Stuart |
| 4 | Sarnoff on behalf of Creditor PAX in the main case. |
| 5 | MS. WERNICK:
And good afternoon, Your Honor. |
| 6 | Melissa Wernick of CSG Law on behalf of Ms. Guo and HK USA. |
| 7 | THE COURT:
Good afternoon. |
| 8 | All right.
There are, as I noted, several matters |
| 9 | on the calendar today, one in the HK International Funds |
| 10 | Investment Adversary Proceeding, 22-5003, and then several |
| 11 | matters in the main case of the individual debtor and the |
| 12 | related corporate entities, which is 22-50073. |
| 13 | There is one matter that it's on the calendar that |
| 14 | I think is consented to, but I don't know if I'm correct, |
| 15 | which is 1850, which is a consented-to motion of Hudson |
| 16 | Diamond and -- LLC and -- oh, I'm sorry.
I know that's not |
| 17 | consented to is what I should say, right?
Isn't that the |
| 18 | situation where there was a dispute upon whether there was |
| 19 | really consent to an adjournment of a hearing? |
| 20 | Is that what I'm -- I'm going to ask you first, |
| 21 | Attorney Romney, and then -- okay.
Go ahead. |
| 22 | MR. ROMNEY:
Yes, Your Honor.
Aaron Romney for |
| 23 | the record.
You are correctly describing the matter.
As I |
| 24 | stated in my reply, I'm not -- I don't understand the basis |
| 25 | of the dispute given what I understand we agree on.
I'm |
| | |
Ho Wan Kwok - June 6, 2023 8 certainly here to work that out. I've always understood Attorney Luft to be an extremely reasonable person, so I don't know what to say. He disagrees with something we've written. I was happy to correct it. But I don't understand it, so I'm here to work this out. THE COURT: So has it been corrected, whatever the "it" might be? And I'm not sure, Attorney Romney, what the "it" is, but I know if I -- you refresh my recollection. MR. ROMNEY: Your Honor, from my perspective, originally I was unable to ascertain what the "it" was, because I was reading back what our agreement was from the other side. And I was not understanding what the source of the contention was. As of yesterday evening, I was able to ascertain one discrepancy which was the date by which a -- the hearing would be adjourned to in the event that compliance was not satisfactory. I was able to pick up on that. I put in my reply, as well as attempted to make contact with Attorney Luft but was unsuccessful with that, that we're certainly amenable to some earlier date. It was not an intentional one-over on the trustee. So I'm here to work this out. THE COURT: Okay. MR. ROMNEY: I don't want to make a big issue out Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 8 of 140
Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 9 of 140
| | Ho Wan Kwok - June 6, 2023
9 |
|----|---------------------------------------------------------------|
| 1 | of this.
There was no intent to be deceptive.
Had there |
| 2 | been something I could have ascertained, I would have |
| 3 | corrected the record myself as I informed Attorney Luft. |
| 4 | But there appears to be a miscommunication.
Thank you. |
| 5 | THE COURT:
Okay.
Thank you. |
| 6 | Attorney Luft? |
| 7 | MR. LUFT:
Your Honor, I'll ask you your |
| 8 | preference.
If you'd like to address this issue now, I'm |
| 9 | happy to do it.
I'm also happy to do it in the context of |
| 10 | the motion to compel, whichever is the Court's preference. |
| 11 | THE COURT:
Well -- |
| 12 | MR. LUFT:
But -- |
| 13 | THE COURT:
-- I don't know if I have a preference |
| 14 | at the moment.
But what I would like to determine is with |
| 15 | regard to -- it seemed to me, anyway, so just understand |
| 16 | that I could be incorrect, that there was some form of an |
| 17 | agreement on continuing this hearing on the contempt.
Is |
| 18 | that correct, or am I wrong about that? |
| 19 | MR. LUFT:
Your Honor, there was what I thought |
| 20 | was an agreement based on terms of a negotiation. |
| 21 | THE COURT:
Okay. |
| 22 | MR. LUFT:
Unfortunately, what was filed with the |
| 23 | Court on a consent motion that we were never shown does not |
| 24 | express the terms of what was agreed to. |
| 25 | THE COURT:
Okay. |
| | |
Ho Wan Kwok - June 6, 2023 10 MR. LUFT: And that's what we said. So while -- and when I've asked for that to be corrected and to -- for the filing to be fixed to match those terms, the other side has declined. So I don't know whether we have an agreement with regard to what we did. THE COURT: Well, here's what we're going to do. I'm going to have you and Attorney Romney go out and talk about it for a few minutes, and I bet you're going to come back with an agreement. MR. LUFT: I would appreciate that, Your Honor. THE COURT: Okay? Because I think it's an issue that can be resolved. And if it can't be resolved, then I'll resolve it, and we'll move on to other things. Okay? MR. LUFT: Thank you, Your Honor. THE COURT: I understand both of what you're both saying, but I think we're all at a point where we can agree. And if we can't agree, then I will rule. It's just that simple. So why don't you -- I mean, with regard to the other matters on the calendar, is it going to be detrimental if the two of you step out of the courtroom right now and -- while the other matters are addressed? MR. DESPINS: Well, Your Honor, if I could? This is Luc Despins. I tried to address that, because I would really appreciate the Court's indulgence in going into the Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 10 of
Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 11 of
Ho Wan Kwok - June 6, 2023 11 status conference regarding the stay pending appeal. So I don't know whether that's going to be the Vartan firm or Mr. Romney who's going to handle that. THE COURT: Or Mr. Romney? Okay. MR. ROMNEY: Attorney Wernick will be handling that, so -- THE COURT: Okay. So Attorney Wernick's going to handle that issue. So I think, Mr. Romney, then it would be okay if you were -- and you and Attorney Luft were to go out and talk. MR. ROMNEY: Certainly from my perspective. THE COURT: Okay. Why don't you do that. And then we'll turn to the stay pending appeal issue. Because Attorney Wernick is going to address that with -- I don't know if you, Mr. Despins, are going to address that or Mr. Bassett -- MR. DESPINS: Yeah, I will. THE COURT: -- or Mr. Linsey are going to address that. MR. DESPINS: I will, Your Honor. THE COURT: All right. So why don't you two go see what you can accomplish. If you can't accomplish something, I'll just rule. But I would think -- I understand -- you know, I think we can agree that maybe things -- there wasn't a complete meeting of the mind before
Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 12 of
| | 140 |
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| | Ho Wan Kwok - June 6, 2023
12 |
| 1 | things were filed and things were shown or not shown.
But |
| 2 | we're here now, so let's just resolve it.
Okay? |
| 3 | MR. ROMNEY:
Thank you very much, Your Honor. |
| 4 | THE COURT:
All right. |
| 5 | MR. LUFT:
Your Honor, if there's any -- I will be |
| 6 | handling the whole motion to compel which has other parts. |
| 7 | So if that could be put to the end -- |
| 8 | THE COURT:
We're not getting there yet.
Yeah. |
| 9 | MR. LUFT:
-- I would appreciate that. |
| 10 | THE COURT:
Yeah.
We're not going to get to the |
| 11 | motion to compel yet. |
| 12 | MR. ROMNEY:
Thank you, Your Honor. |
| 13 | THE COURT:
Okay?
All right.
Thank you. |
| 14 | MR. ROMNEY:
Thank you, Your Honor. |
| 15 | THE COURT:
Appreciate it. |
| 16 | All right.
So with regard to 1850, we're just not |
| 17 | going to address that at the moment.
What we are going to |
| 18 | address is, I believe, Trustee Despins is in the adversary |
| 19 | proceeding, the motion for stay pending appeal of the status |
| 20 | conference request.
Is that what you're suggesting we turn |
| 21 | to now? |
| 22 | MR. DESPINS:
If Your Honor will allow this, yes. |
| 23 | THE COURT:
Yes.
Please proceed. |
| 24 | MR. DESPINS:
Okay.
So, Your Honor, more than two |
| 25 | weeks ago, I believe, you entered an order that is very |
| | |
Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 13 of
| 140 | | |
|-----|---------------------------------------------------------------|--|
| | Ho Wan Kwok - June 6, 2023
13 | |
| 1 | clear, had various findings including the fact that the | |
| 2 | escrowed funds were property of the estate, including | |
| 3 | directing the debtor's daughter and old HK USA to transfer | |
| 4 | all property of HK USA to us by June 2nd, and none of that | |
| 5 | occurred despite the fact that we prompted the -- you know, | |
| 6 | both the Zeisler firm and the Vartan firm to do that.
And | |
| 7 | on Friday, they filed a motion for a stay pending appeal. | |
| 8 | And, you know, left to their own devices, they would have | |
| 9 | this motion heard like probably two months from now. | |
| 10 | The point is that right now there's an enforceable | |
| 11 | order, and you were very specific about the fact that the | |
| 12 | order is effective immediately.
There had been a breach of | |
| 13 | that from day from day one after entering the order. | |
| 14 | They're still in breach of it. | |
| 15 | And the fact that we filed a motion for a stay | |
| 16 | pending appeal does not excuse noncompliance.
And what we | |
| 17 | want is to schedule a hearing, because -- on the stay | |
| 18 | pending appeal for -- obviously subject to Your Honor's | |
| 19 | availability, for next week, because we think there needs to | |
| 20 | be a full airing of some issues, including the issue of -- | |
| 21 | and I'm not suggesting a stay should issue.
But Your Honor | |
| 22 | has the ability to not only deny the stay but also to deny | |
| 23 | the stay and say and if the stay were to be granted I would | |
| 24 | impose a bond requirement of X dollars. | |
| 25 | And that's what we think there should be evidence | |
# Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 14 of
| | 140 |
|----|--------------------------------------------------------------|
| | Ho Wan Kwok - June 6, 2023
14 |
| 1 | on which is the detriment to the estate of the stay being in |
| 2 | place with respect to that order.
And so, therefore, we |
| 3 | would -- just the punchline is we would like to file our |
| 4 | objection, our response to this by Monday morning at 9 a.m. |
| 5 | and subject to Your Honor's availability next week, you |
| 6 | know, to be heard on Tuesday or Wednesday of next week so |
| 7 | that this stay issue can be resolved one way or another. |
| 8 | Because there's just delay at this point and enforcement of |
| 9 | an order that is enforceable, we believe, according to its |
| 10 | terms. |
| 11 | THE COURT:
Okay.
I'm just taking a look at |
| 12 | something while you're saying that. |
| 13 | MS. WERNICK:
And, Your Honor, I'm prepared to |
| 14 | respond whenever the Court's ready. |
| 15 | THE COURT:
Thank you.
Yes.
I just need a |
| 16 | minute, Attorney Wernick.
I just wanted to look at one |
| 17 | thing, please.
Thank you. |
| 18 | (Pause) |
| 19 | THE COURT:
Okay, Attorney Wernick.
Thank you. |
| 20 | You may respond. |
| 21 | MS. WERNICK:
Thank you, Your Honor.
So first, I |
| 22 | would just say while we certainly disagree with the |
| 23 | trustee's statement that there has been any delay or that |
| 24 | this matter presents an emergent issue, you know, we |
| 25 | certainly have no issue with the Court scheduling a hearing |
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| | 140 |
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| | Ho Wan Kwok - June 6, 2023
15 |
| 1 | in connection with the motion sometime next week at the |
| 2 | Court's convenience.
But what I do have an issue with and |
| 3 | which I think is really separate from the motion to stay |
| 4 | which is pending is the notion that there hasn't been |
| 5 | compliance with the order. |
| 6 | As the trustee well knows, and I think the dispute |
| 7 | really centers upon the escrow funds, because I don't think |
| 8 | there's anything else to turn over, is that HK and Ms. Guo |
| 9 | don't have control over the escrow funds.
They're held in |
| 10 | escrow by the escrow agent. |
| 11 | And both our firm, the Zeisler firm, and the |
| 12 | trustee received correspondence by counsel for the escrow |
| 13 | agent indicating that from the escrow agent's perspective, |
| 14 | there has not been an identified event calling for the |
| 15 | release of the escrow funds because the Court's summary |
| 16 | judgment order is currently not a final non-appealable |
| 17 | order. |
| 18 | So by operation of that order, it certainly, you |
| 19 | know, would be our position that the trustee has -- you |
| 20 | know, already has to the effect -- you know, HK's rights |
| 21 | under the escrow agreement, but the escrow agent is taking |
| 22 | the position that it's not a final non-appealable order such |
| 23 | that the funds can be released.
So the objection to the |
| 24 | presentation this morning is really one of compliance. |
| 25 | MR. DESPINS:
Okay.
So, Your Honor, this is easy. |
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| | 140 |
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| | Ho Wan Kwok - June 6, 2023
16 |
| 1 | This is like the Lady May II.
They say that they've |
| 2 | complied.
So why don't we just send a joint letter from the |
| 3 | Vartan, Zeisler firm and from Paul Hastings to the escrow |
| 4 | agent saying we hereby direct you to transfer the funds to |
| 5 | the trustee account.
I assume that that's something that, |
| 6 | obviously, if you're in compliance, you would be happy to |
| 7 | send that letter -- that joint letter to the escrow agent, |
| 8 | correct? |
| 9 | MS. WERNICK:
Well, so, no.
It's a different |
| 10 | issue, though, right?
So right now, the escrow agreement -- |
| 11 | and by virtue of the escrow agreement, the funds are to be |
| 12 | released on a final non-appealable order and -- |
| 13 | MR. DESPINS:
No, no, no -- |
| 14 | THE COURT:
It doesn't say just that, Attorney |
| 15 | Wernick. |
| 16 | MR. DESPINS:
Your Honor -- |
| 17 | THE COURT:
It does say or court order.
It |
| 18 | doesn't say a final -- |
| 19 | MR. DESPINS:
Oh, but, Your Honor -- |
| 20 | THE COURT:
-- non-appealable order of summary |
| 21 | judgment on an alter ego claim.
It doesn't say that.
But |
| 22 | with regard to -- |
| 23 | MR. DESPINS:
But, Your Honor -- |
| 24 | THE COURT:
Hold on a second, Trustee Despins. |
| 25 | MR. DESPINS:
Okay. |
| | |
Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 17 of
Ho Wan Kwok - June 6, 2023 17 THE COURT: With regard to Trustee Despins' suggestion, why -- first of all, where is -- do you have a letter from U.S. Bank -- aren't they the escrow agent -- saying they won't release the money? MS. WERNICK: We have a letter from counsel to the escrow agent. THE COURT: All right. Has that been filed on the docket of this case? MR. DESPINS: No. MS. WERNICK: I don't know that it has. THE COURT: Okay. Well, I would like to see that. MR. DESPINS: Your Honor, this is very simple. THE COURT: I'd like to see that. Okay? I -- MR. DESPINS: But -- THE COURT: Hold on a second, Trustee Despins. So I -- I'm ordering you to file that letter on the docket of this adversary proceeding by 9:00 a.m. tomorrow morning. Okay? That's first and foremost, number one. Number two, as you know, and Attorney -- Trustee Despins already raised the issue. But everybody knows that if you got a stay pending appeal, you may be required to post a bond. So if the \$37 million isn't going to be turned over because of the appeal, then you may have to post a bond for 37 million or more. And HK USA asserts it has no other property. So how are you going to address the -- I mean,
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Page 18 of
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| | Ho Wan Kwok - June 6, 2023
18 |
| 1 | the rules talk about a bond.
How are you going to address |
| 2 | that issue while an appeal is pending? |
| 3 | MS. WERNICK:
Yeah.
Certainly, Your Honor, in |
| 4 | certain circumstances a bond may be directed by the Court in |
| 5 | order to obtain a stay pending appeal.
And if that's |
| 6 | something that the trustee intends to put forward in their |
| 7 | opposition papers, you know, obviously we'll have to respond |
| 8 | to it at that time. |
| 9 | It sounds like the trustee is indicating that |
| 10 | that's a condition that they are going to be seeking.
But I |
| 11 | think that would be more appropriately addressed at the |
| 12 | hearing on the motion once there is papers and that we can |
| 13 | have to respond to. |
| 14 | MR. DESPINS:
Your Honor, if I may? |
| 15 | THE COURT:
Well, I don't -- I -- well, okay.
I |
| 16 | understand what you just said, except that you filed a |
| 17 | motion under Rule 8007 for a stay pending appeal.
And it |
| 18 | says -- initial motion in the bankruptcy court. |
| 19 | It says, "Ordinarily, a party must move first in |
| 20 | the bankruptcy court for the following relief: a stay of a |
| 21 | judgment order or decree of the bankruptcy court pending |
| 22 | appeal, the approval of a bond or other security provided to |
| 23 | obtain a stay of judgment." |
| 24 | So I don't know that it's the trustee's burden. |
| 25 | It's your burden.
You're the moving party.
The rule -- |
| | |
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Page 19 of
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| Ho Wan Kwok - June 6, 2023
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| 1
you're the party that's seeking the stay, not the trustee, |
| 2
right?
So under Rule 8007, you're going to have to address |
| 3
the issue of a bond. |
| 4
MS. WERNICK:
Certainly.
But it's not as though a |
| 5
bond is required in each and every case in order to obtain a |
| 6
stay pending appeal. |
| 7
THE COURT:
Well, in this case, though, counsel, |
| 8
the -- what you're not turning over is \$37 million, right? |
| 9
So and we have no idea how long the appeal will last, right? |
| 10
And this is a situation where the arguments have been |
| 11
made -- and you've made them.
You've represented your |
| 12
clients on behalf of the arguments that have been made.
And |
| 13
those arguments have not been found to be persuasive. |
| 14
And this -- and you argued and briefed and put |
| 15
forth -- I don't mean you necessarily only personally, I'm |
| 16
saying on behalf of your clients -- the arguments to attempt |
| 17
to defeat summary judgment on the second counterclaim in |
| 18
which the Court found after extensive briefing and arguments |
| 19
of the parties that HK International Funds Investment USA |
| 20
Limited is and was at all relevant times the alter ego of |
| 21
Mr. Ho Wan Kwok and that all of the property of HK USA, |
| 22
including the Lady May, the Lady May II, and the escrowed |
| 23
funds, constituted and constitute as applicable property of |
| 24
the individual bankruptcy debtor's Chapter 11 estate. |
| 25
So that's what this Court found.
You absolutely |
| |
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| 1 | have the right to appeal it, and you are, and that's fine. |
| 2 | But if you want a stay pending appeal, your stay pending |
| 3 | appeal, absent a bond, would -- your argument is you don't |
| 4 | have to turn over the 37 million while there's an appeal |
| 5 | pending unless you get a stay. |
| 6 | MS. WERNICK:
I -- |
| 7 | THE COURT:
Well, maybe you would get a stay, but |
| 8 | you're going to have to -- it seems to me that if -- you're |
| 9 | trying to -- and I don't mean trying -- you are arguing that |
| 10 | you need a stay of that order because you don't want to turn |
| 11 | over the escrowed funds.
That's the only thing left, right? |
| 12 | As far as we've been told, the only assets of the Lady -- of |
| 13 | HK USA are the Lady May, the Lady May II, and the escrowed |
| 14 | funds. |
| 15 | We know -- I think we generally all know where the |
| 16 | Lady May is and what's happening with that.
We know a |
| 17 | little bit about the Lady May II.
And your clients have |
| 18 | stipulated that the trustee has control over the Lady May |
| 19 | II. |
| 20 | Now the Court has found that the escrow funds |
| 21 | constitute and constituted properties of the individual |
| 22 | Chapter 11 estate of the debtor and that on or before June |
| 23 | 2nd, which was last Friday, that your client, Ms. Guo and HK |
| 24 | USA, shall deliver all property to Mr. Despins not in his |
| 25 | personal capacity but as the Chapter 11 trustee.
And that |
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| 1 | hasn't been done.
And there was no stay pending appeal, and |
| 2 | there still is no stay pending appeal, in place at this |
| 3 | time. |
| 4 | So your clients are already -- have not -- are |
| 5 | already in violation of an order even if it's on appeal. |
| 6 | MS. WERNICK:
So, again, Your Honor -- right.
So, |
| 7 | again, Your Honor, I would just go back -- and I will, per |
| 8 | the Court's directive, make sure that the letter from the |
| 9 | escrow agent is, you know, immediately filed on the docket |
| 10 | so Your Honor has the benefit of that. |
| 11 | But second and, you know, why I would take, you |
| 12 | know, issue with the notion of a separate bond being |
| 13 | provided pending appeal here is the fact that -- escrow |
| 14 | funds are there.
They're currently being held in escrow. |
| 15 | You know, ordinarily, when you're seeking a bond pending an |
| 16 | appeal, it's to ensure that a judgment amount is ultimately |
| 17 | going to be available.
Here, we know that those funds are |
| 18 | going to be available, because they're sitting in escrow. |
| 19 | And so I think that presents, you know, a unique |
| 20 | circumstance of litigation that would obviate the need for a |
| 21 | bond. |
| 22 | MR. DESPINS:
Your Honor -- |
| 23 | THE COURT:
Well, they're not going to be |
| 24 | available if you get a stay pending appeal, because you're |
| 25 | not going to turn them over.
So they're not going to be |
| | |
Ho Wan Kwok - June 6, 2023 22 available. MR. DESPINS: Exactly. THE COURT: So that argument is -- I mean, I understand your argument, but I'm not sure it's persuasive. You want a stay pending appeal. And I understand this. I understand your position. You want a stay pending appeal so you don't have to have the \$37 million turned over to Trustee Despins. I completely understand that. But then you basically have taken the order granting the motion for summary judgment, which you had every opportunity to defend, which you did, and have it have no effect unless and until the appeal is resolved, which we have no idea when that will be. No idea. And this trustee has duties under the Bankruptcy Code which he's been attempting to carry out for some time now. We're almost at a year. And so, you know, you can say they're available. So what happens if they're available and you lose your appeal? So what's the damages to the estate then for the loss of that money during that time? Doesn't the Court have to consider that? MS. WERNICK: And so perhaps -- again, you know, I would like the benefit of the trustee's position on all of this. You know, and, again, certainly there are certain circumstances where a bond may be posted pending appeal.
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| 1 | But I would certainly take the position given that the funds |
| 2 | are in escrow there would be no need for a bond approaching |
| 3 | the amount of the escrow funds to address that concern. |
| 4 | THE COURT:
Okay.
But that doesn't answer my |
| 5 | question -- |
| 6 | MR. DESPINS:
Your Honor? |
| 7 | THE COURT:
-- right, which is doesn't the Court |
| 8 | have to consider that if you obtain a stay pending appeal |
| 9 | without a bond and you lose your appeal, what are the |
| 10 | damages -- we all know why the bond has to be posted.
It |
| 11 | has to be posted to protect against damages that the other |
| 12 | party suffers if the stay pending appeal is not granted -- I |
| 13 | mean, is granted. |
| 14 | And so what happens if you get a stay pending |
| 15 | appeal without a bond and then the trustee -- and the |
| 16 | trustee wins on appeal, but it takes two years or three |
| 17 | years from now for that to happen?
What are the damages |
| 18 | then?
Doesn't the trustee and the estate have damages for |
| 19 | the loss of the use of the \$37 million or some other form of |
| 20 | security while the appeal is pending? |
| 21 | MS. WERNICK:
I don't know that the trustee does. |
| 22 | And I -- you know, I would leave it to the trustee to make |
| 23 | that argument. |
| 24 | THE COURT:
No.
I think you have to make that |
| 25 | argument.
Remember, you filed the motion.
Read Rule 8007. |
| | |
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| 1 | You filed the motion.
It's your burden.
It's not the |
| 2 | trustee's burden. |
| 3 | You're seeking an extraordinary remedy, a stay |
| 4 | pending appeal of a decision that states that the order goes |
| 5 | into effect immediately.
And the compliance was required |
| 6 | last Friday.
And there is no stay pending appeal right now. |
| 7 | So your clients are already in violation of that order. |
| 8 | So anyway -- |
| 9 | MS. WERNICK:
So again, Your Honor, that -- |
| 10 | THE COURT:
Anyway, I hear everything you said. |
| 11 | And I'm sure you'll consider what I've said, and we'll hear |
| 12 | all about it.
And we'll make a determination.
Okay? |
| 13 | MR. DESPINS:
But, Your Honor, if I may be heard |
| 14 | briefly? |
| 15 | THE COURT:
Yes.
We affirmatively opposed the |
| 16 | release of the funds from the escrow.
There was an email |
| 17 | from Mr. Kindseth saying the funds should not be released. |
| 18 | That's number one.
Okay? |
| 19 | THE COURT:
Where is that?
Where is that email? |
| 20 | MR. DESPINS:
While there's an order saying -- |
| 21 | THE COURT:
Where is that email? |
| 22 | MR. DESPINS:
That email?
That will be produced |
| 23 | with the other email where the bank says, well, it looks |
| 24 | like there's a dispute here, so I'm not going to |
| 25 | distribute -- disburse the funds.
There was an email saying |
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| 1 | there's no final order, don't -- you know, basically, |
| 2 | there's no requirement to disburse the money.
That's number |
| 3 | one. |
| 4 | Number two is there -- you're absolutely right. |
| 5 | There's damage to the estate for the -- not being able to |
| 6 | use the funds.
There's definitely damage to the estate for |
| 7 | not being able to use the funds. |
| 8 | And right now, as I said, they're in violation of |
| 9 | a court order that's immediately effective, and they -- it's |
| 10 | very simple how to resolve this.
They say, oh, we've |
| 11 | complied, we've complied.
Let's send a joint letter, |
| 12 | Zeisler, Paul Hastings, and the Vartan firm, to the escrow |
| 13 | agent saying all three parties and the creditors' committee, |
| 14 | we have no objection to the funds being transferred to the |
| 15 | trustee account.
That will be compliance with the order. |
| 16 | And so -- but, of course, not doing that is not |
| 17 | being compliant in the sense that let's just assume for a |
| 18 | second that the escrow was created on -- in March of last |
| 19 | year, March 1st.
Let's assume the parties, which are HK |
| 20 | International and the creditors' committee, agreed the next |
| 21 | day, you know what, we don't need this escrow; U.S. Bank, |
| 22 | turn over the money to HK USA.
You think that the bank |
| 23 | would go, oh, I can't do that; I don't have a final order? |
| 24 | Both parties that are parties to the agreement say turn over |
| 25 | the money to HK USA. |
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Ho Wan Kwok - June 6, 2023 26 That's exactly what they could make happen today, but they're not, because they are interfering, and they're exercising control of the property of the estate. And that's -- Your Honor, I'm sorry to say that that's sanctionable. Violation of the automatic stay. This is an individual case. There can be multiple damages awarded on that. (Indiscernible) be awarded more than that. Because they are exercising control over property of the estate. You found it's property of the estate. And by their inaction, and more than inaction, by saying to the trustee -- to the escrow agent don't distribute, they are violating the stay, because that's exercising control of the property. And as Your Honor knows, counsel have been -- you know, and situations like this, I have been sanctioned in other cases for clear violations for less than that. Even sending a letter demanding payment can be a violation of the stay. Here, they're doing worse than that. They're telling the escrow agent don't distribute. And it's within their control. I guarantee you that if both Zeisler, Vartan, and Paul Hastings and (indiscernible) sends a letter to U.S. Bank tomorrow saying we all agree that the funds can be transferred to the trustee subject to the right of HK USA or Ms. Guo to appeal that the money would come to our account
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| 1 | the next day.
But they're not doing that, because they're |
| 2 | exercising control over the property of the estate.
And |
| 3 | that's a violation of the stay, Your Honor. |
| 4 | So I think this is really fundamental.
I'm not |
| 5 | asking you to rule on that now.
But I want to make sure |
| 6 | that you are aware of all the facts.
They have the ability |
| 7 | to undo the escrow with us, but they're not, because they |
| 8 | are interfering -- not only not complying with your order |
| 9 | but they're interfering with property of the estate. |
| 10 | So I'm really upset about this.
And I'm sorry if |
| 11 | I interrupted people, but I thought that these points are |
| 12 | very important to be made.
Thank you, Your Honor. |
| 13 | THE COURT:
Thank you. |
| 14 | Does anyone else wish to be -- |
| 15 | MS. WERNICK:
And, Your Honor -- |
| 16 | MR. DESPINS:
So, Your Honor -- |
| 17 | THE COURT:
Oh, I'm sorry.
Go ahead -- |
| 18 | MR. DESPINS:
Sorry. |
| 19 | THE COURT:
-- Attorney Wernick.
Were you going |
| 20 | to say something?
I apologize. |
| 21 | MS. WERNICK:
Yes.
No problem, Your Honor. I just |
| 22 | wanted to follow up.
The email that the trustee is |
| 23 | referencing from Mr. Kindseth is appended to the letter from |
| 24 | the escrow agent.
And I think it was, you know, somewhat |
| 25 | mischaracterized in the trustee's presentation.
But, you |
Ho Wan Kwok - June 6, 2023 28 know, the Court will see it when it's filed on the docket. THE COURT: Okay. Thank you. MR. DESPINS: Oh, that letter doesn't say we consent, right? It says the opposite of consent. THE COURT: Well, we'll -- MR. DESPINS: So -- THE COURT: Let me take a look at it. MS. WERNICK: It presents facts. THE COURT: Let me take a look at it -- MR. DESPINS: Yeah. THE COURT: -- and we'll see where things go. Okay? MR. DESPINS: So, Your Honor, we wanted -- THE COURT: With -- MR. DESPINS: The other thing we want is to schedule a hearing -- THE COURT: I understand. MR. DESPINS: -- and to get a deadline -- THE COURT: I understand. I understand. Okay. I think, Attorney Sarnoff, were you going to say something? MR. SARNOFF: I'm sorry, Your Honor. I was not. THE COURT: Okay. Thank you. Does anyone else wish to be heard? This is a status conference only on the motion for stay pending Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 28 of
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| 1 | appeal.
Right now, the request is that -- the Chapter 11 |
| 2 | trustee's request is that the motion for stay pending appeal |
| 3 | be set for hearing next week subject to the Court's |
| 4 | availability and that the trustee have -- I think you said, |
| 5 | Trustee Despins, until 9 a.m. on Monday, July -- June 12th |
| 6 | to file a reply to the motion for stay pending appeal.
Is |
| 7 | that what -- was that your request? |
| 8 | MR. DESPINS:
Correct, Your Honor. |
| 9 | THE COURT:
Okay.
Does anyone else wish to be |
| 10 | heard?
All right.
Hearing nothing, then the motion to stay |
| 11 | pending appeal filed on behalf of Mei Guo and HK Funds -- HK |
| 12 | International Funds Investment USA Limited, LLC, which is |
| 13 | ECF Number 227 in Adversary Proceeding 22-00 -- I'm sorry -- |
| 14 | 22-05003 will be set for hearing. |
| 15 | I need to look at the calendar.
So if you'll -- |
| 16 | you'll all have to bear with me for a moment. |
| 17 | (Pause) |
| 18 | THE COURT:
Well, we already have matters |
| 19 | scheduled at 1:00 on June 13th in this case, in the main |
| 20 | case, and so we can -- we will schedule in this adversary |
| 21 | proceeding the hearing on the motion for stay pending appeal |
| 22 | for June 13th at 1 p.m. |
| 23 | MR. DESPINS:
Thank you, Your Honor. |
| 24 | THE COURT:
And the reply of the trustee to the |
| 25 | motion for stay pending appeal, which was filed on Friday, I |
Ho Wan Kwok - June 6, 2023 30 believe, June 2nd, ECF-227, will -- the trustee will have until 9 a.m. on June 12th to file the response to the motion for stay pending appeal. MS. WERNICK: Might we also have until 9 a.m. on the 13th to submit any reply? THE COURT: No. But you can have until 6 p.m. on the 12th. MS. WERNICK: Okay. Thank you, Your Honor. THE COURT: Okay? Thank you. I'm just making a note, so please just bear with me for a moment. So that addresses the status conference on the motion for stay pending appeal in the HK International vs. Despins adversary proceeding. I see that Attorney Romney and Attorney Luft are back in the courtroom, so I'm interested to hear what progress you made with regard to the motion of Hudson Diamond to adjourn the hearing on the trustee's motion for an order holding the Hudson Diamond entities in contempt. MR. LUFT: Your Honor, I'm happy to report that we have an agreement. I have language which I could read to the Court and that, if the Court wishes, we could then put into a proposed order for you to sign if that's helpful. THE COURT: We definitely need an order. But are you -- I would assume that includes a hearing date and time. Is that true? Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 30 of
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| 1 | MR. LUFT:
Your Honor, it does, although I think |
| 2 | that will be contingent on -- the agreement in short, which |
| 3 | I'll get to the details, is that we will give them two weeks |
| 4 | to fully comply.
They have agreed to raise no objections |
| 5 | other than as to privilege as to the subpoenas.
So my hope |
| 6 | is that all that will go well and that, ultimately, we may |
| 7 | not need any hearing.
But we have language which addresses |
| 8 | that, but that is the very short version of what we're |
| 9 | aiming for. |
| 10 | If Your Honor would like, I could read the |
| 11 | language which we've agreed to. |
| 12 | THE COURT:
Well, let me just -- before you do |
| 13 | that -- |
| 14 | MR. LUFT:
Sure. |
| 15 | THE COURT:
-- let's, just for the sake of |
| 16 | argument, assume that there is no compliance.
What hearing |
| 17 | date -- did you -- the two of you discuss an eventual |
| 18 | hearing date? |
| 19 | MR. LUFT:
We did, Your Honor. |
| 20 | THE COURT:
And what is that? |
| 21 | MR. LUFT:
Without consulting the Court's |
| 22 | calendar, so I apologize if it conflicts with yours, we |
| 23 | talked about June 21st as a date with the idea being that |
| 24 | Mr. Romney's clients would have until June 15th to complete |
| 25 | their production.
That would allow them to do so and give |
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| 1 | the parties a chance to see what was actually produced |
| 2 | before having to come to the Court if necessary. |
| 3 | THE COURT:
The 21st, unfortunately, does not |
| 4 | work. |
| 5 | MR. LUFT:
Okay. |
| 6 | THE COURT:
So we'd have to -- we've already |
| 7 | scheduled -- well, let's just -- we could schedule something |
| 8 | on June 26th, but it would have to be in the afternoon. |
| 9 | MR. LUFT:
Your Honor, do you mind if I check my |
| 10 | calendar? |
| 11 | THE COURT:
No.
Go right ahead. |
| 12 | MR. LUFT:
I have no problem with that date, Your |
| 13 | Honor, and the afternoon is fine. |
| 14 | THE COURT:
Thank you. |
| 15 | Attorney Romney, does June 26th in the |
| 16 | afternoon -- and I'm probably talking about 2 or 3:00, |
| 17 | because we have a contested matter on in the morning.
I |
| 18 | don't think it's going to go until 2:00, but it could, so -- |
| 19 | MR. ROMNEY:
Yes, Your Honor.
The short answer |
| 20 | is -- I have a medical appointment in the morning, but I |
| 21 | should be out by the afternoon.
And if not, I'm sure I can |
| 22 | get either a colleague from Zeisler & Zeisler or CSG to |
| 23 | cover that hearing. |
| 24 | THE COURT:
Well, what about if we say 3 p.m. to |
| 25 | be on the safe side. |
Ho Wan Kwok - June 6, 2023 33 MR. ROMNEY: I think if I'm not out by 3 a.m., I have -- THE COURT: 3 p.m. MR. ROMNEY: I'm sorry, 3 p.m., I have bigger problems than this. THE COURT: Well, hopefully that is not the case, so -- MR. ROMNEY: I don't expect it to be, but thank you. THE COURT: So let's schedule -- when you -- I want you to put together this order and include in that order the hearing date -- the continued hearing date on the motion of June 26th at 3 p.m. Okay? MR. LUFT: Yes, Your Honor. THE COURT: Now, go ahead and tell me what your agreement is, please. MR. LUFT: Yes, Your Honor. I'll read it in. The parties have no reason to and, therefore, do not dispute that the Hudson entities were properly served with the Rule 2004 subpoenas directed to each of them through a statutory service agent. However, the Hudson entities contend that the relevant individual at the Hudson entities was not actually made aware of the subpoenas until after the filing of the motion, a contention the trustee is in no position to admit or deny. Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 33 of
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| 1 | Having now been apprised of the subpoenas and the |
| 2 | motion, the Hudson entities agree that they will fully |
| 3 | comply with the subpoenas and agree to raise no objections |
| 4 | to the subpoenas other than to issues of privilege.
The |
| 5 | parties agree that, based on the Hudson entities' agreement |
| 6 | to fully comply with the subpoenas, to not raise any |
| 7 | non-privilege objections to them.
The Hudson entities will |
| 8 | have until June 15, 2023, to complete their production to |
| 9 | the trustee. |
| 10 | Accordingly, the parties request that the motion |
| 11 | hearing be adjourned until June 26, 2023.
The parties agree |
| 12 | that should the motion hearing be deemed by the parties to |
| 13 | no longer be necessary, the parties will promptly inform the |
| 14 | clerk of the court. |
| 15 | THE COURT:
Okay.
And, actually, you wouldn't |
| 16 | inform the clerk of the court.
You'd just inform the |
| 17 | courtroom deputy, just so you know.
Okay? |
| 18 | MR. LUFT:
Yes, Your Honor. |
| 19 | THE COURT:
Because the clerk of the court might |
| 20 | not see it, and the courtroom deputy will. |
| 21 | MR. LUFT:
Okay. |
| 22 | THE COURT:
So I'd rather that be handled that |
| 23 | way.
Okay? |
| 24 | MR. LUFT:
Yes, Your Honor. |
| 25 | MR. ROMNEY:
For the record, that recitation was |
| | |
Ho Wan Kwok - June 6, 2023 35 accurate, Your Honor. THE COURT: Thank you, Attorney Romney. Okay. So then you'll get that order in, in the next day or two? MR. LUFT: Yes, Your Honor. THE COURT: Okay. All right. So let's just note for the record that 1850 -- we should just continue that to the June 26th at 3 p.m., but you're going to be submitting a stipulated order. And, obviously, if there's some agreement or resolution, then you'll let the courtroom deputy know, and there won't be a hearing on June 26th at 3 p.m. Okay? MR. LUFT: Thank you, Your Honor. THE COURT: All right. Thank you, both. All right. So let's turn to the remaining matters on today's calendar. MR. DESPINS: And, Your Honor, I'm sorry to interrupt. I just want to mention that, first of all, thank you for letting me appear via Zoom. I need to go back to my trial. It starts at 2:30 again. So I may disappear. So I don't want to be rude, but I may just sign off during the next ten minutes or so. So I didn't want you to take that as I was just not interested. And I apologize. I need to run eventually. Thank you. THE COURT: I understand. Thank you. All right. So we have a few more matters on the Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 35 of
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| 1 | calendar: the fifth omnibus motion for examination, the 2004 |
| 2 | examinations, the second omnibus motion to compel compliance |
| 3 | with subpoenas, motion to seal, the motion to extend time to |
| 4 | respond to the trustee's motion to compel.
Is that -- filed |
| 5 | by G Club?
Is that an agreed-upon motion or not? |
| 6 | UNIDENTIFIED SPEAKER:
No, Your Honor, it's not. |
| 7 | THE COURT:
Okay.
All right.
So before -- |
| 8 | counsel, before we talk -- don't go away.
I just have one |
| 9 | other question, though, while the trustee's still here with |
| 10 | us. |
| 11 | With regard to the main case, before we address |
| 12 | some of the other motions, there's also a status conference |
| 13 | in the main case scheduled for today.
Is there something |
| 14 | else that you want to report to the Court with regard to the |
| 15 | main case? |
| 16 | MR. DESPINS:
No, Your Honor.
Not at this time. |
| 17 | THE COURT:
Okay.
All right.
So then we're not |
| 18 | going to worry about anything else in the main case other |
| 19 | than the specific matters we're going to address now.
Okay? |
| 20 | Just give me one moment, please. |
| 21 | All right.
So let's turn to that motion for |
| 22 | extension of time to respond to the trustee's motion to |
| 23 | compel that's been filed on behalf of G Club Operations, LLC |
| 24 | in the main case, which is ECF-1845. |
| 25 | MS. FORNOS:
Good afternoon, Your Honor.
Carolina |
| | |
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Ho Wan Kwok - June 6, 2023 37 Fornos of Pillsbury Winthrop, and I'm here with Kelli Baranowsky -- THE COURT: Good afternoon. MS. FORNOS: -- of Green & Sklarz. MS. BARANOWSKY: Good afternoon, Your Honor. Jeffrey Sklarz entered an appearance earlier, but he had to excuse himself due to an unmovable medical appointment this afternoon. THE COURT: Okay. Thank you very much. MS. FORNOS: And, Your Honor, just for the record, the notice of appearance has been filed. THE COURT: Thank you. MS. FORNOS: And we appreciate the Court's approval of the pro hac vice. THE COURT: Thank you. MS. FORNOS: With respect to the request for adjournment, as we stated in our papers, Your Honor, we have requested a 60-day adjournment of the motion to compel hearing. The reason for that adjournment is quite straightforward. G Club Operations did not have anyone to direct counsel until recently when it had an independent director appointed, an independent manager. We stated in our papers it has officially been appointed as of June 1st. I have spoken with that manager. That manager specifically requested a 60-day adjournment. The reason for
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| 1 | that adjournment is the manager needs to, for obvious | |
| 2 | reasons, understand the operations of the company, meet with | |
| 3 | employees of the company, understand where the records are | |
| 4 | kept. | |
| 5 | And, as we have represented to the trustee, we | |
| 6 | want to comply with the request.
It is not a matter of not | |
| 7 | wanting to comply.
It is over broad, and we can address | |
| 8 | that issue at a separate time.
But all we have wanted for | |
| 9 | now is a 60-day adjournment of the motion to compel, because | |
| 10 | it's premature. | |
| 11 | Once the independent manager is able to assess, we | |
| 12 | can have discussions.
We can certainly commence rolling | |
| 13 | production.
But we think that the 60-day adjournment is | |
| 14 | reasonable, Your Honor. | |
| 15 | THE COURT:
I just want you to know, just so you | |
| 16 | know, because you may not know, because you haven't been in | |
| 17 | this case for -- you know, this is your -- the Court has | |
| 18 | been told by parties in the past that they would produce | |
| 19 | rolling production to the trustee, and they did not do so. | |
| 20 | So I just want you to understand that if any party makes any | |
| 21 | representation to the Court that rolling production is going | |
| 22 | to be made and it isn't made, that's going to be a problem | |
| 23 | for that party.
Okay? | |
| 24 | MS. FORNOS:
Understood, Your Honor.
And part of | |
| 25 | the reason for the adjournment is so that we can have the | |
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| 1 | independent manager have the time he needs to assess what |
| 2 | documents are responsive and available.
And certainly, we |
| 3 | hope, the trustee will be more reasonable than to ask for |
| 4 | every single document in G Club Operation's possession. |
| 5 | We also note, Your Honor, I had also asked for an |
| 6 | extension, because I did have a personal conflict.
I was |
| 7 | supposed to be in trial in the Western District of Texas. |
| 8 | That was resolved yesterday.
I was in court yesterday.
I |
| 9 | flew in last night to make sure that I could be here today. |
| 10 | Thank you. |
| 11 | THE COURT:
Appreciate that.
Thank you. |
| 12 | Attorney Luft? |
| 13 | MR. LUFT:
Your Honor, may I approach? |
| 14 | THE COURT:
Yes. |
| 15 | MR. LUFT:
Thank you, Your Honor.
Avi Luft on |
| 16 | behalf of the Chapter 11 trustee.
What you just heard is a |
| 17 | request saying that they want to comply, that there is no |
| 18 | one who could have answered these questions, and that they |
| 19 | want to be reasonable.
What that does is leaves out the |
| 20 | most important thing. |
| 21 | This new trustee -- this new independent -- what |
| 22 | is he referred to -- manager was appointed, we're told, on |
| 23 | June 1st.
The subpoena and the order in connection with it |
| 24 | was filed on December 2, 2022. |
| 25 | Ms. Fornos contacted me on December 21st saying |
| | |
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| 1 | that she needed a 14-day extension to respond.
Then on |
| 2 | January 4th asked for another three days to respond.
Then |
| 3 | on January 9th filed response and objections to the Rule |
| 4 | 2004 subpoena with nothing but boilerplate objections |
| 5 | indicating that they would not produce a single document in |
| 6 | response to a Rule 2004 subpoena of G Club. |
| 7 | We had our first meeting to confer on February |
| 8 | 9th.
I was told what you just heard.
Well, the subpoena is |
| 9 | a little broad.
We'd like to comply. |
| 10 | But do you know why it's too broad?
Because the |
| 11 | debtor really just has a very tangential relationship to G |
| 12 | Club.
I believe the phrase told to me is he's just an |
| 13 | unpaid spokesperson. |
| 14 | Now, by this point, Your Honor had already entered |
| 15 | an order in connection with the preliminary injunction |
| 16 | hearing that G Club was one of the G Series entities, as |
| 17 | they were referred to, which already had been found to be |
| 18 | controlled by the debtor.
I told Ms. Fornos that based on |
| 19 | that and other information that we had, it was not |
| 20 | reasonable for them to contend to us that they weren't -- |
| 21 | that the subpoena was over broad or that they shouldn't |
| 22 | produce any documents based on the idea that they debtor |
| 23 | really has a very tangential relationship. |
| 24 | She told me she'd go back and look at that, and |
| 25 | she wanted to consider it.
And we said we would see how we |
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Ho Wan Kwok - June 6, 2023 41 could prioritize our requests. Not waive any of them but prioritize so we can get the most important information. Now, on March 7th -- now we're three months past when we served our subpoena. There was a second meet and confer. And on that meet and confer, I was not on it, but my colleagues were. I am told that Ms. Fornos responded that G Club was so offended by the idea that I said that the debtor has been found to have a connection to G Club that they were no longer interested in participating in discovery and that they would come to Your Honor to seek relief and that they would do so by March 10th, because the -- to clarify this incorrection (sic) that there was a connection between the debtor and G Club. March 10th came and went. Nothing was filed with Your Honor. And once again, we were left to reach out again to say what is going on. Where are -- we need to comply with this. By that point, the debtor had been indicated. The SEC had filed a complaint. And lo and behold, what is central to that SEC complaint as well as the indictment is that G Club is a central part of the debtor's operations and, at least according to the indictment and the SEC complaint, his fraud. What does G Club do? It sells discounted
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| 1 | membership in G Coin, G Fashion, unregistered securities for |
| 2 | the debtor, all the debtor's entities.
As far as I know, |
| 3 | G Club has no business other than the debtor. |
| 4 | So the notion that they stalled for months based |
| 5 | on the idea that this has nothing to really do with them or |
| 6 | he's just an unpaid spokesperson who happens to like a |
| 7 | company that's not really related to them wasn't true.
And |
| 8 | shortly thereafter, we got a new story from the debtor is |
| 9 | not really involved to, it turns out, because of these |
| 10 | filings all senior leadership has abandoned the company.
No |
| 11 | one can be found anymore.
Because, presumably, the debtor |
| 12 | was so intertwined that whoever they are is in hiding. |
| 13 | I will note I never got a name of who are these |
| 14 | people who disappeared.
I don't know who they are.
I don't |
| 15 | have a name of an independent manager.
I don't know if |
| 16 | they're the same person.
What I know is now, all of a |
| 17 | sudden, the debtor was so involved. |
| 18 | And so this is what we were told on April 11th at |
| 19 | the third meet and confer, that there had been resignations |
| 20 | in light of the SEC complaint. |
| 21 | We asked them specifically please prioritize the |
| 22 | trustee's request for bank accounts, assets, and transfers, |
| 23 | so we can understand what's going on with this entity which |
| 24 | clearly is deeply involved with the debtor and that the SEC |
| 25 | and the U.S. Attorney's office allege tens of millions of |
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| 1 | dollars were going through to fund the debtor's personal |
| 2 | lavish lifestyle. |
| 3 | On April 25th, I got a message that said in an |
| 4 | email that Ms. Fornos was optimistic that they would have an |
| 5 | independent director in place next week.
So that's one week |
| 6 | from April 25th. |
| 7 | On April 29th, there was a call in which they said |
| 8 | we think the independent director will be in place in the |
| 9 | next couple days.
No later than May 3rd we'll get back to |
| 10 | you. |
| 11 | May 8th, we haven't heard anything.
We have to |
| 12 | call again.
May 9th, we get -- receive a message from |
| 13 | Ms. Fornos that says, "FG Club Operations continues to |
| 14 | actively work to engage an independent director.
Although |
| 15 | that effort is far along, it's not yet concluded.
Once |
| 16 | concluded, addressing the trustee's requests is a top |
| 17 | priority." |
| 18 | Now, Your Honor, that's the last communication we |
| 19 | got until we got their objections when, lo and behold, the |
| 20 | independent manager was appointed on the very day they had |
| 21 | to file an objection to our motion to compel.
And now they |
| 22 | come to you and say we're totally reasonable.
We just need |
| 23 | two more months, accounting for eight months total, to |
| 24 | respond to a subpoena.
And we'll make a rolling production. |
| 25 | Your Honor, they could have started making a rolling |
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| 1 | production to us in January. |
| 2 | These subpoena (sic) goes to the heart of what's |
| 3 | going on here.
This is clearly a Kwok-controlled entity. |
| 4 | It only does business with other entities this Court has |
| 5 | found to be controlled. |
| 6 | I told Ms. Fornos that this Court has already made |
| 7 | findings about this.
I've pointed to it.
To turn up now |
| 8 | and just say we just need two more months for some unnamed |
| 9 | independent manager to "get up to speed" is not reasonable. |
| 10 | We have spent six months chasing them for what |
| 11 | should have never been in dispute.
There is no plausible |
| 12 | basis to argue that G Club was not alleged -- related to the |
| 13 | debtor, to make up that they were so offended about the |
| 14 | suggestion that they wouldn't even participate, and then |
| 15 | later to -- what has now been three months of we'll appoint |
| 16 | an independent manager in a day or two of just waiting on |
| 17 | that. |
| 18 | So, look, I know that Ms. Fornos also filed an |
| 19 | objection to the scope of the subpoena.
I'm more than happy |
| 20 | to address that if we're going to move ahead with that |
| 21 | hearing when we do.
But the notion that there should be any |
| 22 | further delay I have to strongly object to, Your Honor. |
| 23 | G Club has wasted substantial trustee time and |
| 24 | resources hounding them for this.
And the fact that they |
| 25 | are so deeply involved in what is an alleged fraud that both |
Ho Wan Kwok - June 6, 2023 45 the SEC and the U.S. Attorney are involved in, that they have to -- that their management is either here or there or who knows about it is not a basis to deny the trustee the documents. It's, in fact, a basis to expedite this. And I -- quite frankly, I'd ask that they complete their production by the end of the week. We have chased this forever, Your Honor. THE COURT: When you say conclude the production, though, there hasn't been any production really, correct? MR. LUFT: Correct, Your Honor. THE COURT: I just want to be -- MR. LUFT: I mean start -- THE COURT: I just want to be clear about that. MR. LUFT: Absolutely. I have not gotten a single document from G Club. So you're right to point that out. I'd like it started and completed by the end of the week. I think the trustee owes it. And I'll note to the extent we're going to hear that's unreasonable, how could we get things done, the manager was just appointed on June 1st, they managed to get two filings -- the lawyers were able to work to get two objections on file on June 1st. They could have spent some of that time getting us the documents we were owed. Nothing stopped them from getting those documents during the time it was an obligation. The company didn't go Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 45 of
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| 1 | out of business.
The idea that no one was there, it's just |
| 2 | a black box.
We're just told no one could do anything. |
| 3 | They had a valid subpoena.
They didn't come to |
| 4 | the Court and seek leave and ask for relief because of what |
| 5 | was going on.
All they did was string us along.
Two more |
| 6 | days, two more days, call me in a week.
Oh, I'll get back |
| 7 | to you. |
| 8 | It's us who continually had to make contact.
It's |
| 9 | us who continually chased.
Your Honor knows that there's a |
| 10 | lot going on in this case, that we are in desperate need of |
| 11 | actual documents, because the debtor refuses to produce |
| 12 | almost anything to us.
When we have to spend six months |
| 13 | just to start getting the documents, it is a true damage to |
| 14 | the creditors and the estate. |
| 15 | Thank you, Your Honor. |
| 16 | THE COURT:
Thank you. |
| 17 | Attorney Fornos, would you like to respond? |
| 18 | MS. FORNOS:
Yes, Your Honor.
I most certainly |
| 19 | would like to respond.
I'd like the record to reflect that |
| 20 | this is the first time that G Club Operations is entering an |
| 21 | appearance in this case.
It has never appeared before.
It |
| 22 | has not had -- |
| 23 | THE COURT:
And that's completely fair.
But do |
| 24 | you disagree with anything that Attorney Luft said about |
| 25 | your prior representations about production of documents and |
Ho Wan Kwok - June 6, 2023 47 when the independent director would be appointed and that it would be the independent director's -- well, he said a lot of things, actually. MS. FORNOS: Yes. I'm happy to address them, Your Honor. I -- THE COURT: Well, did anything he say -- was anything he said inaccurate? MS. FORNOS: Other than the dates, I think the characterizations of everything he said is inaccurate. First of all, the issue that we have is that the trustee -- first, he's not the SEC. He's not the Department of Justice. I do strongly recommend that the trustee carefully review those papers, because the way he's characterizing what G Club Operations is and its allegations of its relationships to the debtor are incorrect. What I specifically told the trustee is that the debtor was the ambassador -- the brand ambassador to G Club Operations. And G Club Operations is a membership organization. It operates -- sells memberships to the -- to individuals who want to participate and get benefits in the luxury lifestyle business. His characterization of G Clubs are improper, particularly when this entity has never appeared before Your Honor and had an opportunity to defend itself. Now, with respect to the dates -- Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 47 of
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| 1 | THE COURT:
Well, that's a different issue.
Okay? |
| 2 | Hold -- just step back for a second.
I understand what |
| 3 | you're saying.
But G Club was served with a subpoena, and |
| 4 | they didn't respond, and they didn't move to quash, and they |
| 5 | didn't move for a protective order.
So why do they get to |
| 6 | do that now? |
| 7 | MS. FORNOS:
Here's why.
When we first received |
| 8 | the broad, overarching subpoena -- |
| 9 | THE COURT:
That's not the issue.
That's not the |
| 10 | question. |
| 11 | MS. FORNOS:
Yes.
Understood, Your Honor.
But -- |
| 12 | THE COURT:
The question is -- my question was a |
| 13 | very direct question.
No one -- they were served with a |
| 14 | subpoena.
They didn't respond.
They didn't move to quash. |
| 15 | They didn't move for a protective order.
So why should you |
| 16 | be able to do that now?
There were people -- you've |
| 17 | admitted that there were people there -- |
| 18 | MS. FORNOS:
Yes. |
| 19 | THE COURT:
-- right?
That it's an operation? |
| 20 | MS. FORNOS:
Yes. |
| 21 | THE COURT:
So why should you now get to respond |
| 22 | because an independent director has been appointed as of |
| 23 | June 1st when there were already people that were in control |
| 24 | of that entity that chose not to respond to the subpoena? |
| 25 | MS. FORNOS:
No.
Your Honor, we did respond to |
| | |
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| 1 | the subpoena, and we filed objections.
The hope was -- |
| 2 | THE COURT:
Only you did and just now. |
| 3 | MS. FORNOS:
No.
I'm sorry, Your Honor.
We |
| 4 | served objections and -- to the Rule 2004 to the trustee. |
| 5 | We weren't just silent.
We responded and objected to the |
| 6 | broad requests. |
| 7 | THE COURT:
Yeah.
But you didn't file a motion |
| 8 | for a protective order under the Federal Rules of Civil |
| 9 | Procedure. |
| 10 | MS. FORNOS:
No, Your Honor. |
| 11 | THE COURT:
Okay. |
| 12 | MS. FORNOS:
And we -- and -- |
| 13 | THE COURT:
See, that's a problem. |
| 14 | MS. FORNOS:
Understood, Your Honor.
And we would |
| 15 | beg the Court's indulgence in this, because we were in the |
| 16 | process of doing that when the indictments were filed and |
| 17 | the SEC was -- complaint was filed.
And that -- |
| 18 | THE COURT:
The subpoena was issued in December. |
| 19 | Mr. Kwok wasn't indicted until March 15th. |
| 20 | MS. FORNOS:
Yes, Your Honor. |
| 21 | THE COURT:
And the only reason I know that is |
| 22 | because we were about to start a trial that morning.
Okay? |
| 23 | And I was told by people -- everyone in the courtroom when I |
| 24 | thought we were going to call the first witness that that -- |
| 25 | I believe that was the date.
I could be wrong, but I think |
| | |
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Ho Wan Kwok - June 6, 2023 50 it was March 15th. MS. FORNOS: Your Honor is correct. THE COURT: We were scheduled for trial, right? So all I'm saying to you is I understand your argument -- MS. FORNOS: Uh-huh. THE COURT: -- but there hasn't been compliance with the Federal Rules of Civil Procedure. And your client -- and you may not have been involved or may have been involved, I don't know -- you know, takes that risk. MS. FORNOS: Understood, Your Honor. And we hear the Court. But we did try to negotiate the scope with the trustee. The trustee was adamant and unwavering in its position that G Club Operations is one and the same as the debtor and, therefore, they're entitled to everything, basically akin to a forensic analysis of this entity. And -- THE COURT: Well, a Rule 2004 examination, you know, you could argue that it is that. I'm sure you know what the case law says. It's akin to a fishing expedition. It's not a deposition. It's not a notice of deposition. It's a Rule 2004 examination. MS. FORNOS: Your Honor, then -- Your Honor, we do respectfully submit that there are boundaries to it. THE COURT: I'm not saying there aren't. I'm just saying when you say -- I agree that there can be boundaries
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| 1 | on a Rule 2004 examination.
I'm not suggesting that there |
| 2 | can never be a boundary.
But it's not the same argument |
| 3 | with regard to a Rule 2004 examination as it is with regard |
| 4 | to a notice of deposition. |
| 5 | This 2004 examination process is part of the |
| 6 | Federal Rules of Bankruptcy Procedure that are there to |
| 7 | allow parties to investigate.
This trustee was appointed |
| 8 | specifically to investigate the affairs of the debtor.
You |
| 9 | can argue and you might be right about the scope.
But you |
| 10 | have to do that under the Federal Rules of Civil Procedure |
| 11 | and timely under the Federal Rules of Civil Procedure.
And |
| 12 | that didn't happen in this case. |
| 13 | MS. FORNOS:
And, Your Honor, we are before the |
| 14 | Court now asking for that adjournment.
And we do have a |
| 15 | situation -- |
| 16 | THE COURT:
Seven months after the subpoena was |
| 17 | served. |
| 18 | MS. FORNOS:
Understood, Your Honor.
But we do |
| 19 | now have a situation where the independent manager is not |
| 20 | able -- he just got appointed on June 1st. |
| 21 | THE COURT:
Well, he -- maybe they shouldn't have |
| 22 | taken on the job. |
| 23 | MS. FORNOS:
Your Honor, respectfully, this is not |
| 24 | your run-of-the-mill case.
This is a unique situation.
And |
| 25 | we -- the rules are simple.
There are limits to how much |
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| 1 | they can get.
They want everything without any boundaries. |
| 2 | THE COURT:
I'm not -- we can address that. |
| 3 | MS. FORNOS:
It is costly.
It's expensive. |
| 4 | THE COURT:
I'm not worried about that, counsel. |
| 5 | I really am not.
You know, I will listen to your issues |
| 6 | about boundaries.
That's not the problem.
The problem is |
| 7 | you're now seeking a motion to extend time to compel |
| 8 | compliance with a subpoena that your clients are already in |
| 9 | violation of. |
| 10 | MS. FORNOS:
Your Honor, understood.
But we did |
| 11 | respond to the trustee.
The trustee until now has not filed |
| 12 | a motion to compel.
This is what we're addressing now.
And |
| 13 | the motion to compel that is presently before the Court is |
| 14 | one that we simply ask that the Court adjourn for 60 days to |
| 15 | enable someone who needs to get up to speed to respond to |
| 16 | the trustee. |
| 17 | It is fairness.
It is absolutely not feasible to |
| 18 | comply when someone just took this position June 1st.
And |
| 19 | it's an issue, at the end of the day, of practicality.
We |
| 20 | would like the trustee to be more reasonable and certainly |
| 21 | pare down their request. |
| 22 | THE COURT:
Well -- |
| 23 | MS. FORNOS:
And we would like to work with them |
| 24 | to try to respond. |
| 25 | THE COURT:
What documents do you have right now |
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Ho Wan Kwok - June 6, 2023
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that you haven't produced?
What documents do you have right |
|-----------------------------------------------------------------------------------------------------------|
| |
| |
| now? |
| MS. FORNOS:
We have corporate formation |
| documents.
We have email -- |
| THE COURT:
Okay.
And what's unreasonable about |
| that request? |
| MS. FORNOS:
Your Honor, I have -- Your Honor -- |
| THE COURT:
No, no.
I'm asking -- |
| MS. FORNOS:
Yeah. |
| THE COURT:
-- a question. |
| MS. FORNOS:
As counsel -- |
| THE COURT:
This is a 2004 examination of an |
| entity that I'm not sure if I know exactly the proper |
| corporate name, so -- |
| MS. FORNOS:
Sure. |
| THE COURT:
But of the G Club entity -- |
| MS. FORNOS:
Operations. |
| THE COURT:
-- that -- Operations that they're |
| asking -- the trustee, who is appointed to investigate the |
| affairs of the debtor -- |
| MS. FORNOS:
Yeah. |
| THE COURT:
-- is asking to see the corporate |
| records of this entity, right?
And you just told me you |
| have corporate formation documents.
So what's unreasonable? |
| Because that's what I'd have to find, right?
Wouldn't I |
| |
Ho Wan Kwok - June 6, 2023 54 have to find under the rules that -- MS. FORNOS: Yes. THE COURT: -- the request is reasonable or unreasonable? MS. FORNOS: Sure. You -- THE COURT: Whether it's scope or in time. MS. FORNOS: Yes. THE COURT: So what's unreasonable about asking about the corporate formation -- for the corporate formation documents? MS. FORNOS: Well, we can certainly turn over corporate formation documents, but that's not what he's asking. THE COURT: But why haven't you. Well, yes, you -- you just said he was asking for it. MS. FORNOS: No. He's asking for all financial records, and I do not have all financial records. And the independent manager -- THE COURT: Okay. MS. FORNOS: The independent manager is the person who has to authorize me. Your Honor, I as counsel cannot act unless I have a client who authorizes me to act on their behalf. THE COURT: Yeah. But you have to advise your client -- Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 54 of
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| 1 | MS. FORNOS:
Yes. |
| 2 | THE COURT:
-- how your client should act to be in |
| 3 | compliance with the law, right? |
| 4 | MS. FORNOS:
And they're -- |
| 5 | THE COURT:
And they might not agree with you. |
| 6 | MS. FORNOS:
And -- |
| 7 | THE COURT:
But you still have to advise them. |
| 8 | MS. FORNOS:
Exactly, Your Honor.
And that is why |
| 9 | the time is needed.
June 1st, there's a new person that is |
| 10 | in charge. |
| 11 | And I have represented to the trustee that the |
| 12 | independent manager knows this is a priority.
I have |
| 13 | personally made that clear.
I do have to advise our client. |
| 14 | But at the end of the day, I can only act once our client |
| 15 | gives me the authority. |
| 16 | Now, here the independent manager specifically |
| 17 | said I need to understand what records there are.
And, yes, |
| 18 | we will work towards this production. |
| 19 | THE COURT:
Who's -- I don't need to know the |
| 20 | person's name.
I'm not -- but is the -- the independent |
| 21 | manager, I assume, has -- is a businessperson? |
| 22 | MS. FORNOS:
It is. |
| 23 | THE COURT:
Okay.
So I would think that that |
| 24 | businessperson has a pretty good idea of what kinds of books |
| 25 | and records and information should be included in a |
| | |
Ho Wan Kwok - June 6, 2023 56 corporate entity, right? MS. FORNOS: Understood. THE COURT: Okay. MS. FORNOS: And they need the time -- this is -- and, also, I should make this clear. This is an entity in Puerto Rico, Your Honor. Its office is in Puerto Rico. It's -- THE COURT: Okay. MS. FORNOS: Understood. I just want to make sure that the Court understands -- THE COURT: That doesn't matter, though, with a subpoena. MS. FORNOS: Yes, Your Honor. That wasn't my issue. My concern is one of logistics and practicality. We need time for the independent manager to get -- to assess what's available so that we can respond. And that's all we're asking the Court. THE COURT: Are the books and records in Puerto Rico? MS. FORNOS: Yes. Everything is in Puerto Rico. THE COURT: So he's in physical possession and control of the books and records? MS. FORNOS: Not -- shortly, yes. He has been in -- he has been appointed to make sure that he can review this. Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 56 of
Ho Wan Kwok - June 6, 2023 57 THE COURT: Right. So as of today -- today is June 6th. MS. FORNOS: Uh-huh. THE COURT: So as of today, as we sit here right now, this independent director -- I don't know if it's a he or a she. I'm sorry. I don't know. I'm just going to say this independent director, that person -- MS. FORNOS: Yes. THE COURT: -- is in possession and control of the books and records of the G Club entity. And I apologize again. I don't know specifically. You just said it. Operations? Is that -- MS. FORNOS: Yes. THE COURT: -- correct? MS. FORNOS: Yes, Your Honor. It's G Clubs Operations. THE COURT: Oh, here it is. G Club Operations, LLC. Okay? So he's in possession and control of those documents? MS. FORNOS: He is in the process of becoming in possession and control, right? He needs to review this. And I -- we are -- THE COURT: Well, I don't -- I -- MS. FORNOS: -- assisting with this. THE COURT: That's not what I'm asking. I'm Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 57 of
Ho Wan Kwok - June 6, 2023 58 saying if I walked over to the director, right, if I were you and I went to Puerto Rico and I walked into the director and I'd say where are the records of this company, does he know where they are? MS. FORNOS: I can't answer for him -- THE COURT: Okay. MS. FORNOS: -- right now, Your Honor. THE COURT: Does he have a key to a safe or a cabinet where all the records are? MS. FORNOS: Your Honor, I don't -- I cannot answer -- THE COURT: Okay. Well, I think -- MS. FORNOS: -- for the independent manager. THE COURT: I think that's the point, right? You're going to have to answer those questions. MS. FORNOS: And we need the time. Exactly. And we need those -- that time so that -- THE COURT: Well, except the problem that you have on that -- MS. FORNOS: Uh-huh. THE COURT: -- is, according to Mr. Luft anyway, which I'll give you the opportunity to refute, you've been saying for some months now that you've been having conversations about these documents. And now you want an additional 60 days to just respond to the motion. Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 58 of
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Ho Wan Kwok - June 6, 2023 59 You're not even saying you're going to produce -- well, you did say, and I cautioned you, because I had a situation in this case already about somebody telling me they were going to make a rolling production. MS. FORNOS: Uh-huh. THE COURT: And because of that representation of counsel -- MS. FORNOS: Yeah. THE COURT: -- I -- the Court acted -- ordered something to happen based upon that -- MS. FORNOS: Sure. THE COURT: -- representation which was not true and did not happen. Okay? So and, aside from all that, you and trustee's counsel as well have obligations as officers of the Court to address discovery disputes and not involve the Court unless it's absolutely necessary. Because those obligations exist independent of the Court under the Federal Rules of Civil Procedure. So, you know, if you're telling me you're going to make a rolling production of documents, I want to know when and what documents. MS. FORNOS: Your Honor, may I clarify one issue? We were asking for a 60-day adjournment of the hearing. The hope is that this hearing would be moot, because
Ho Wan Kwok - June 6, 2023 60 hopefully -- THE COURT: But what if it's not? I understand the hope, and I want the parties to work together. I'm not suggesting that you don't -- that that couldn't happen. But what if it's not? What am I going to do 60 days from now? MS. FORNOS: But the idea is to have the hearing in 60 days. And if Mr. -- if the trustee stands in front of you in 60 days and says they've done nothing, Your Honor, then I think that's a different situation. But that's not what I'm envisioning in 60 days. And, again, it's adjourning the hearing for 60 days so that we can have the opportunity to hopefully moot all of this and not waste the Court's time. THE COURT: I understand what you're saying. I understand. There's just been -- unfortunately, there have been -- the Court has had to be involved in too many -- MS. FORNOS: Uh-huh. THE COURT: -- discovery disputes in this case. Okay? And here's another one where there are representations being made that the -- well, I know -- I can see from the docket and from the information filed that the subpoena was served in December of 2022. It's June of 2023. That's not -- that's a problem. MS. FORNOS: And, Your Honor, if we perhaps can ask the Court to consider that in this particular case this Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 60 of
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| 1 | entity after losing management following what most people |
| 2 | wouldn't want to deal with -- these are directors.
These |
| 3 | are officers.
These are general counsel of the company. |
| 4 | This company has undertaken an independent |
| 5 | manager.
And for the record, this is not some relative of |
| 6 | anybody.
This is an independent company that specializes in |
| 7 | coming in, assessing, taking stock of where the company is. |
| 8 | That's what's happened.
And that is an effort to ensure |
| 9 | compliance. |
| 10 | We cannot make a better representation than the |
| 11 | fact that an independent company has been hired to come in |
| 12 | and do this.
And that's a good faith effort to ensure that |
| 13 | documents are preserved and obligations are met.
And that's |
| 14 | why we're asking the Court for the adjournment. |
| 15 | THE COURT:
I understand. |
| 16 | MS. FORNOS:
It's for the independent manager. |
| 17 | THE COURT:
I understand.
I'm just somewhat |
| 18 | concerned about the series of unfortunate events, if we want |
| 19 | to call that -- call it that, that's led up to this, which |
| 20 | is that, at least according to Attorney Luft -- |
| 21 | MS. FORNOS:
Uh-huh. |
| 22 | THE COURT:
-- okay, there was a meet and confer |
| 23 | on February 9th.
Then there was a second meet and confer on |
| 24 | March 2nd.
And at that meet and confer, he said that you |
| 25 | said that G Club was offended that it would be -- somehow |
| | |
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| 1 | have connection to the debtor.
And then on the third meet |
| 2 | and confer on April 11, which is more than two months -- |
| 3 | almost two months ago, everyone resigned. |
| 4 | And then there's going to be this independent |
| 5 | director shortly thereafter, but it doesn't happen until |
| 6 | June 1.
Those are factors that the Court -- I mean, facts, |
| 7 | unless disputed, the Court has to take into consideration. |
| 8 | MS. FORNOS:
Well, Your Honor, if the Court may |
| 9 | indulge me, because the characterizations is what's |
| 10 | troublesome here.
The issue is that we did try to negotiate |
| 11 | to try to -- I explained to the trustee you're asking for |
| 12 | everything.
And his position was very simple.
I'm not |
| 13 | going to back down from everything that I'm asking, because |
| 14 | I'm entitled to everything that I'm asking, because there's |
| 15 | findings that apparently G Club, which has never entered an |
| 16 | appearance, is somehow, findings, part of the debtor's |
| 17 | network. |
| 18 | THE COURT:
No one has to enter an appearance for |
| 19 | a Court to make findings about another party. |
| 20 | MS. FORNOS:
Your Honor, all we're stating is that |
| 21 | I wanted the time to understand how it is that the trustee |
| 22 | can take the position that he's entitled to everything down |
| 23 | to a forensic examination of our entity and that there's |
| 24 | allegedly findings.
All we have asked is for an |
| 25 | opportunity -- |
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| 1 | THE COURT:
Well, there are -- |
| 2 | MS. FORNOS:
-- to narrow -- |
| 3 | THE COURT:
There are -- they're not -- allegedly |
| 4 | are findings.
There are findings.
This Court made |
| 5 | findings -- |
| 6 | MS. FORNOS:
Your Honor, I -- |
| 7 | THE COURT:
-- in connection with a preliminary |
| 8 | injunction.
You can disagree with them.
And I believe |
| 9 | that's on appeal and all those other things.
But that's |
| 10 | what I did. |
| 11 | MS. FORNOS:
Your Honor, respectfully, I did |
| 12 | review that ruling, and there is only one reference, one |
| 13 | reference to G Club Operations.
I realize that there were a |
| 14 | lot of other references to a lot of G entities, and I |
| 15 | realize that the trustee's position is that anything that's |
| 16 | a G entity is apparently a Kwok-affiliated entity. |
| 17 | We don't need to take up that fight right now. |
| 18 | For the record, we dispute the allegations of the trustee. |
| 19 | THE COURT:
I'm sure you do. |
| 20 | MS. FORNOS:
And we -- but the issue that's before |
| 21 | the Court today is a request from an independent manager |
| 22 | through counsel to please allow the independent manager to |
| 23 | have the time to organize, understand so that they can |
| 24 | comply and hopefully moot further appearances before the |
| 25 | Court.
That's the representation that I'm making to the |
| | |
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Ho Wan Kwok - June 6, 2023 64 Court. THE COURT: Okay. Thank you. Attorney Luft? MR. LUFT: Yes, Your Honor. I'll try to be short about this, but I did want to highlight a couple things. I think your inquiry about what documents they have and don't have is quite telling. Not only were they -- was G Club Operations served and the order entered on December 2nd, but Ms. Fornos has been their attorney since December 21st at least. That's at least when we knew. Yet seemingly no one seems to know what documents they have. Now, even if you put out to when the debtor was indicted on March 15th, that would have been three months of not examining anything. Now, what I told her is what it is. Your Honor made findings about G Club. In fact, Your Honor -- it's referenced in paragraph 2 of the order in which it is stated as part -- being part of the G series. So while the name G Club is only referenced once, G series is referenced multiple times. I don't think that changes anything. And certainly the fact that I didn't apprise the other side of a court order is not a basis to say that they won't comply. We have six months -- they had months when they could have -- management was there and could have complied. Then we've had since at least April until June
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| 1 | 1st of repeated references to the fact that an independent |
| 2 | manager is about to be hired. |
| 3 | She says we did not move prior.
That was because |
| 4 | we were trying to work it out, each time asking, requesting, |
| 5 | being told we're just a day away, we're going to comply. |
| 6 | If this is the professional organization that she |
| 7 | asserts, then they should be very up to speed on how to deal |
| 8 | with these things.
The independent manager himself does not |
| 9 | need to personally review any record.
He's obviously had |
| 10 | counsel on retainer for six months working this case. |
| 11 | They should be prepared to move ahead and proceed. |
| 12 | I don't understand what is the issue that a manager has to |
| 13 | get up to speed on other than being told we have a subpoena, |
| 14 | we are out of compliance, we haven't complied for a long |
| 15 | time, we need to comply. |
| 16 | Ms. Fornos wants to make arguments as to what the |
| 17 | scope of the subpoena should be.
I'm more than happy to |
| 18 | address it.
But we certainly do not need to wait two months |
| 19 | for the independent manager to presumably take stock of what |
| 20 | it means to have received the subpoena. |
| 21 | Thank you, Your Honor. |
| 22 | MS. FORNOS:
Your Honor, just briefly.
The |
| 23 | trustee acts like all they're asking for are corporate |
| 24 | formation documents.
I want to be clear that what they're |
| 25 | asking for is everything: membership, every money, every |
| | |
Ho Wan Kwok - June 6, 2023 66 dollar, every dime that came from members, all bank accounts, all financial transactions, tax, audits, et cetera. It's limitless. THE COURT: When was G Club Operations, LLC formed? MS. FORNOS: It was formed in October of 2020, Your Honor. THE COURT: Okay. So we're talking about documents that are less than three years old, right? MS. FORNOS: Your Honor, that would be correct. But what they're asking for is a lot more than just corporate -- THE COURT: That's not my question. You're talking about -- you say they want everything. MS. FORNOS: Yeah. THE COURT: That's one thing. But you said timing. Well, the corporation was filed less than three years ago. That's not unreasonable, not from this Court's perspective. Whether or not the scope -- the -- what they're asking for, that may be something that I can review. But if the corporation was filed in October of 2020, and the trustee is conducting his investigation as he is required to do under the Bankruptcy Code, then, you know, I think that your client has got to make this more of a priority. This Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 66 of
Ho Wan Kwok - June 6, 2023 67 is -- MS. FORNOS: Understood. THE COURT: This is not a situation -- I understand your arguments, but this is a situation where the trustee's efforts to investigate in this Chapter 11 case have been -- I mean, we've said it -- I've said it before -- have been met with resistance at almost, if not every, step in the process. And now I hear that with regard to a subpoena that was served on an entity that was created in October of 2020 and there were people there who got the subpoena and didn't do anything, even though I guess you represented them at the time, that's what the representation is, they want 60 days to figure out what they need to do. That seems to me to be not reasonable. MS. FORNOS: Your Honor, I have to reiterate the issue is the independent manager who has just been onboarded on June 1st. THE COURT: I understand all that. I understand. Hey, he takes it -- what he finds -- MS. FORNOS: He does. THE COURT: -- when he came there, right? MS. FORNOS: Yes, Your Honor. THE COURT: So he or she or -- you know, the independent director -- I understand everything you're
Ho Wan Kwok - June 6, 2023 68 saying. However, what else does the independent director have to worry about right now? MS. FORNOS: He needs to understand where these documents are and operations. THE COURT: Well, you just told me -- MS. FORNOS: But I -- THE COURT: -- everything is in Puerto Rico, and he's in Puerto Rico. MS. FORNOS: Yeah. But -- THE COURT: Or he or -- the independent director. I don't know who the person is. I'm sorry. MS. FORNOS: Your Honor -- THE COURT: But that -- so what's he -- MS. FORNOS: -- this company to understand -- THE COURT: I understand that. What's the company doing? Isn't it -- I have to -- MS. FORNOS: Your Honor -- THE COURT: I understand that the company is a company and maybe it has some business operations. I don't know what its business -- I mean, I know what has been put forth before the Court and, apparently, what's been pled by -- in case -- in the indictment and in the matter from the Securities and Exchange Commission. MS. FORNOS: Uh-huh. THE COURT: But what's before this Court is why Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 68 of
Ho Wan Kwok - June 6, 2023 69 haven't they produced the documents. MS. FORNOS: And what we're representing to this Court is that the hope is if we have this adjourned for 60 days that will be time -- THE COURT: Yeah, but I don't -- MS. FORNOS: -- sufficient time -- THE COURT: I can't live -- we're not living on hope, right? MS. FORNOS: Yes, Your Honor. THE COURT: The Federal Rules of Civil Procedure, I don't think I've ever seen the word "hope" in there. MS. FORNOS: Your Honor -- THE COURT: I think there's requirements, right? MS. FORNOS: Yes, Your Honor. And part of that requirement is making sure they comply. And part of that compliance is having an independent manager who is onboarded and can do this and meet the deadlines and meet the requirements that need to be satisfied. And that is why we are requesting the time. THE COURT: Okay. MS. FORNOS: Thank you, Your Honor. THE COURT: Thank you. All right. Anybody -- would anyone else wish to be heard on the motion to extend time filed on behalf of G Club Operations, LLC? Okay. Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 69 of
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| 1 | I'm going to take the matter under advisement, and |
| 2 | I will rule accordingly. |
| 3 | MS. WERNICK:
Thank you, Your Honor. |
| 4 | THE COURT:
Thank you. |
| 5 | MS. FORNOS:
Thank you, Your Honor. |
| 6 | THE COURT:
Thank you. |
| 7 | MS. FORNOS:
We appreciate the Court's time. |
| 8 | THE COURT:
Thank you. |
| 9 | All right.
Then the other matters on the calendar |
| 10 | today relate to 2004 examination issues and a motion to |
| 11 | seal.
So how are we proceeding? |
| 12 | MR. LUFT:
Your Honor? |
| 13 | THE COURT:
Yes? |
| 14 | MR. LUFT:
Can I?
We have the other -- there |
| 15 | are -- on the motion to compel, there are a number of |
| 16 | parties that just didn't respond. |
| 17 | THE COURT:
Oh, yes.
That's fair.
But go ahead. |
| 18 | Sorry. |
| 19 | MR. LUFT:
So I believe that's what's left in |
| 20 | terms of the motion to compel.
So I'll start with the happy |
| 21 | news.
One of the entities, US Himalaya Capital, has reached |
| 22 | out to us.
They have told us they will comply.
So at this |
| 23 | point, Your Honor, provided that they stay true to their |
| 24 | word and that we continue to work forward with them, I would |
| 25 | ask that we hold off on the contempt relief that we sought |
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| 1 | as to them, because they are seeking to comply. |
| 2 | Otherwise, if Your Honor will indulge me, I would |
| 3 | like to address the other parties who have chosen not to |
| 4 | appear or say anything in our motion, if that's okay with |
| 5 | the Court. |
| 6 | THE COURT:
Just give me one second to catch up |
| 7 | with you. |
| 8 | MR. LUFT:
Of course, Your Honor. |
| 9 | THE COURT:
I'm trying to find your motion.
Are |
| 10 | you talking about 805, you mean the omnibus -- 1805, the |
| 11 | omnibus motion to compel compliance? |
| 12 | MR. LUFT:
Yes. |
| 13 | THE COURT:
Oh. |
| 14 | MR. LUFT:
1805.
Yes, Your Honor. |
| 15 | THE COURT:
Okay.
All right.
Go right ahead |
| 16 | then, please. |
| 17 | MR. LUFT:
May I approach? |
| 18 | THE COURT:
Yes, please. |
| 19 | MR. LUFT:
Thank you, Your Honor.
Your Honor, I |
| 20 | will take it in two batches as to the remaining entities. |
| 21 | The first batch is Saraca and GTV Media Group. |
| 22 | THE COURT:
They haven't complied, right? |
| 23 | MR. LUFT:
They have not complied, Your Honor. |
| 24 | They have a somewhat unique circumstance in that they had a |
| 25 | counsel, a man named Jeremy Tempkin at the Morvillo firm who |
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| 1 | represented them for a few months.
They negotiated with us. |
| 2 | They did not produce any documents, but they said that they |
| 3 | were willing to.
They said they had a database which may |
| 4 | produce documents based on what they had to produce to the |
| 5 | SEC. |
| 6 | We told them that we'd be happy to take a look at |
| 7 | it.
But, notably, one of the people involved with it was |
| 8 | Aaron Mitchell, who Your Honor has probably heard that name |
| 9 | before.
He was a director of GTV.
He was not included. |
| 10 | And we specifically told Mr. Tempkin at the time that we |
| 11 | were happy to consider the database, but it certainly would |
| 12 | not be sufficient, to our view, if it didn't even include |
| 13 | the emails and the documents of one of the directors, |
| 14 | particularly Mr. Mitchell. |
| 15 | We hit the point where we told Mr. Tempkin, look, |
we either need to reach a resolution where you're going to produce or we need to move ahead. So Mr. Tempkin informed us on late November, November 29th, abruptly right when we were saying we were going to -- either we have to produce or we have to move ahead that his firm was withdrawing, and they were not representing either of these entities prior to a single -- either one of them producing a single document. Mr. Tempkin would not -- THE COURT: So this is GTV and Saraca? MR. LUFT: And Saraca.
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| 1 | THE COURT:
Okay.
Go ahead. |
| 2 | MR. LUFT:
Yes, Your Honor.
And for some context, |
| 3 | GTV was the media entity that ran Mr. Guo's rights.
Saraca |
| 4 | is the parent to GTV.
It also paid at least \$2 million |
| 5 | towards the purchase of Mr. Kwok's home.
Saraca owns the |
| 6 | trademark to Mr. Kwok's name and has been -- is one of the |
| 7 | entities that Your Honor found in the preliminary injunction |
| 8 | hearing, along with GTV Media, to be ones that Mr. Kwok |
| 9 | controls. |
| 10 | At that -- I asked Mr. Tempkin on what basis he |
| 11 | was withdrawing or whether he had been fired.
He would not |
| 12 | give me any details.
He simply wrote to me on December 14, |
| 13 | 2022.
This is Exhibit E1 to 1805: "I suggest you direct |
| 14 | further inquiries regarding GTV and Saraca to Aaron |
| 15 | Mitchell." |
| 16 | Your Honor will recall that Mr. Mitchell is |
| 17 | Mr. Kwok's consigliere and house attorney, whatever is the |
| 18 | role he has at that moment.
We did.
We reached out to |
| 19 | Mr. Mitchell.
Mr. Mitchell has proceeded to respond to us |
| 20 | to say I don't know why Mr. Tempkin told you that.
I have |
| 21 | no -- I'm not representing either entity.
Nor can I tell |
| 22 | you who -- first he -- sorry.
First he told us he would |
| 23 | tell us who is representing them as soon as he knew.
And |
| 24 | now he says he doesn't. |
| 25 | And since December, we have been left with no one. |
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| 1 | No one to speak to at any -- at either entity.
No one |
| 2 | saying anything. |
| 3 | So we went from what I would say is a motion to |
| 4 | compel type situation where we at least have an adversary |
| 5 | who we're dealing with, who we're trying to get information |
| 6 | from, to once again when it's time to produce documents, |
| 7 | poof.
At the Kwok entities, everyone disappears.
There's |
| 8 | no one to speak to. |
| 9 | Now, here, Mr. Mitchell is found.
He continues to |
| 10 | be involved in this case for Mr. Kwok.
And while he says |
| 11 | that he is not personally involved, Mr. Tempkin specifically |
| 12 | said that it would be Mr. Mitchell to speak to, which |
| 13 | strongly suggests that it's Mr. Mitchell who is involved in |
| 14 | the Morvillo firm dropping out.
And more so, Your Honor, |
| 15 | Mr. Mitchell was also a director of GTV.
But he is not |
| 16 | responding. |
| 17 | We need someone to deal with.
We keep running up |
| 18 | against the wall, as we'll get to in a minute, of entities |
| 19 | who clearly were involved with regard to the debtor's |
| 20 | estate.
And then when time comes, there's no one to speak |
| 21 | to.
We've had this -- we've talked about this with Golden |
| 22 | Spring and Lamp Capital previously on motions to compel. |
| 23 | These entities are doing all these things, and then when the |
| 24 | time comes, all of a sudden, no one responds anymore, and |
| 25 | they just take a default.
And at the same time, we're told |
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| 1 | that each of these entities are the ones that actually have |
| 2 | the documents. |
| 3 | So with regard to those two entities, Your Honor, |
| 4 | aside from the contempt finding for noncompliance, I'm here |
| 5 | to ask for a little bit of extraordinary relief. |
| 6 | Mr. Mitchell's involved in this case.
Mr. Tempkin clearly |
| 7 | pointed to him as the person who would know about it.
He |
| 8 | was previously a director if not he's currently a director. |
| 9 | I don't know if anyone is a director of any of these |
| 10 | entities anymore at GTV. |
| 11 | Let him come in.
Let someone come and speak to |
| 12 | this Court and say here's who runs these entities.
Here's |
| 13 | where their documents are.
Because right now, I can't get |
| 14 | information if there's no one to speak to.
And it's quite |
| 15 | convenient that the people seem to evaporate every time it's |
| 16 | time to produce the documents. |
| 17 | So that's where we stand with GTV and Saraca, |
| 18 | entities that had significant involvement with the debtor |
| 19 | and his estate where actual funds flowed through.
Because |
| 20 | we don't have any documents from them, I can't tell you if |
| 21 | they still have millions of dollars in their accounts or |
| 22 | not. |
| 23 | But I do know that we at least have one person at |
| 24 | those entities who seems to be able to know something about |
| 25 | the information.
He continues to represent the debtor and |
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| 1 | Ms. Guo, Mei Guo, to this day.
I think he should have to |
| 2 | come forward to this Court and explain to the Court where -- |
| 3 | who's in charge, where these documents are so that we have a |
| 4 | chance to get some information. |
| 5 | With regard to the remaining entities, Your Honor, |
| 6 | there are two other G Club -- there's G Club US Operations |
| 7 | LLC, G Club US Operations Inc.
My understanding is they are |
| 8 | not represented by Pillsbury.
They have just defaulted on |
| 9 | their subpoenas.
No one has responded to those. |
| 10 | There is G Fashion and G News who obviously have |
| 11 | been involved and seem every -- the debtor was happy with |
| 12 | taking money from their operations until it was time for a |
| 13 | subpoena.
And, once again, no response.
They just seem |
| 14 | willing to take a default.
They should be in contempt. |
| 15 | New York MOS Himalaya LLC.
No response.
Crane |
| 16 | Advisory Group, no response.
Mei Weng Trading, LLC, no |
| 17 | response.
And, again, this is no response both to the |
| 18 | subpoenas and then a motion to compel which was also served |
| 19 | upon them which we don't have any response to. |
| 20 | So we are in a tough place, as I said, where -- in |
| 21 | the case of Saraca and GTV where Mr. Mitchell seems to be |
| 22 | involved and know something.
I'd ask that as an officer of |
| 23 | the Court who's involved in this case he should come forward |
| 24 | and help provide that information. |
| 25 | With regard to them and the other entities, they |
| | |
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Ho Wan Kwok - June 6, 2023 77 should be held in contempt. Look, what I'd love to do is wave a magic wand and say, great, now there's someone who we can deal with and we can actually get the documents. I don't think there's much question that they're involved with the debtor. The problem is, there's no one. They're just not responding. So I would ask that we be able to -- a contempt finding be found for them. I'd ask that if we move forward with these cases and ultimately make a motion to -- with -- an adversary proceeding or some action with regard to them that they should not be able to play games and appear when they want to appear. But and I -- otherwise, I'd ask the Court to allow us just to reserve to the extent we think we can find these documents to get further aid later. And that's where we are with the remainder of that motion, Your Honor. THE COURT: So with regard to the noncompliant respondents, G Club Operations LLC obviously seeking an extension of time to comply. GT Media -- GTV Media and Saraca Media have not complied -- MR. LUFT: Correct, Your Honor. THE COURT: -- in any way, shape, or form. MR. LUFT: Other than they originally hired counsel -- THE COURT: Originally had a lawyer who they
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Ho Wan Kwok - June 6, 2023 78 don't -- MR. LUFT: -- but since then -- THE COURT: So -- MR. LUFT: And we have no documents. Not one. THE COURT: So aren't they the -- aren't they defaulting respondents at this time too? MR. LUFT: In my view, they are, Your Honor, at this point. THE COURT: All right. So then with regard to the entities that you noticed as defaulting respondents, the Hudson Diamond entities you've worked out an agreement with. MR. LUFT: Yes. THE COURT: So they're not subject to any kind of an order at this time. And the -- you said the US Himalaya -- MR. LUFT: US Himalaya Capital seems to be working with us, Your Honor. THE COURT: Okay. MR. LUFT: So we'd (indiscernible). THE COURT: But everybody else is still -- all the other parties that you've listed in your motion are still defaulting respondents. They haven't done anything? MR. LUFT: Correct, Your Honor. THE COURT: So your -- my read of your motion is that you want the Court to enter an order with regard to the
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| 1 | defaulting respondents to give them an additional three days |
| 2 | to comply or they'll be held in contempt? |
| 3 | MR. LUFT:
Correct, Your Honor. |
| 4 | THE COURT:
And then with regard to the |
| 5 | noncompliant respondents, which really is only G Club at |
| 6 | this time, but they're asked for a motion for -- they've |
| 7 | asked for a motion for extension of time.
But you wanted |
| 8 | those parties to comply within 14 days according to your |
| 9 | motion? |
| 10 | MR. LUFT:
Yes, Your Honor. |
| 11 | THE COURT:
Okay.
So I have to just go back and |
| 12 | look at and see if I agree with your orders, and then I'll |
| 13 | figure out what to do.
In the past when people have not |
| 14 | complied with the subpoenas and there have been a motion to |
| 15 | compel compliance, I believe that we've given them one last |
| 16 | opportunity before being held in contempt, which is what |
| 17 | you're saying insofar as you'd give them an additional |
| 18 | period of time to comply, a short period of time but a |
| 19 | period of time to comply.
And if not, they'll be held in |
| 20 | contempt. |
| 21 | Golden Spring and Lamp Capital, I -- were |
| 22 | different.
I'm thinking about what we've done in other |
| 23 | situations in this case were a little bit different, because |
| 24 | they had had appearances in this case.
And they were |
| 25 | represented by counsel in this case. |
| | |
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| 1 | MR. LUFT:
Previously before going dark, yes, Your |
| 2 | Honor. |
| 3 | THE COURT:
Yes.
None of the other entities |
| 4 | except for G Club Operations LLC today has filed any -- and |
| 5 | the Hudson entities that Mr. Romney's filed an appearance on |
| 6 | behalf of have filed -- there's no lawyers that I'm aware |
| 7 | of, is that correct, that have filed an appearance on behalf |
| 8 | of any of these parties? |
| 9 | MR. LUFT:
Your Honor, I'm not aware of whether |
| 10 | they have, whether G Fashion and G News ever had -- |
| 11 | THE COURT:
I'm talking about in this case or |
| 12 | any -- |
| 13 | MR. LUFT:
No.
I'm saying -- |
| 14 | THE COURT:
Nothing in this case? |
| 15 | MR. LUFT:
Not that I'm aware of, Your Honor.
I |
| 16 | don't remember if in the context of the PI where they were |
| 17 | specifically at issue they had an appearance, but I'm not |
| 18 | aware of it. |
| 19 | Look, Your Honor, it won't come as a surprise that |
| 20 | it is the trustee's view that these entities, particularly |
| 21 | these G entities, all have -- Mr. Kwok's counsel is |
| 22 | effectively, particularly through Aaron Mitchell, overseeing |
| 23 | all of these entities.
So I think they have notice.
But |
| 24 | have they come before you and said something?
No. |
| 25 | That's part of the big problem we're having, which |
| | |
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Ho Wan Kwok - June 6, 2023 81 is there seems to be shadow counsel outside the -- of this Court who makes decisions or doesn't show up, and then they hire outside counsel who, you know, does their best but isn't really aware of what is happening. So I am not aware of those entities actually having someone made an appearance. I do believe that they are all strongly linked to the debtor. And given his active involvement in every aspect of our attempts to get information about this, my gut is that they're of course aware of what's going on. But that is just gut, Your Honor. MR. ROMNEY: Your Honor, may I be heard briefly? THE COURT: On behalf of whom? MR. ROMNEY: On behalf of the debtor. THE COURT: For what purpose? None of these subpoenas are issued to the debtor. None of -- MR. ROMNEY: And I -- THE COURT: None of the relief that's sought is sought against the debtor. MR. ROMNEY: I understand that, and I have no objection to any of the relief sought against any of the entity -- any of these entities, none of whom I represent. I do take issue with characterizations of the debtor's relationship to these entities of which I certainly have no knowledge. And I don't believe, at least with respect to some of them, there's been any evidentiary foundation for
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| 1 | that.
And with respect to the rest of them, I believe those |
| 2 | are all on appeal. |
| 3 | So just for the record, I'm objecting to any |
| 4 | characterization of a legal relationship between the debtor |
| 5 | and these entities.
I also would object to the |
| 6 | characterization of Mr. Mitchell as the debtor's |
| 7 | "consigliere."
I don't know what that means.
Again, I'm |
| 8 | not sure that's relevant to any of the relief being |
| 9 | requested. |
| 10 | But to the extent the relief being requested is |
| 11 | based on an established relationship with the debtor, I |
| 12 | object solely on that basis.
Thank you. |
| 13 | THE COURT:
Thank you. |
| 14 | MR. LUFT:
Of course, Your Honor, I don't -- |
| 15 | THE COURT:
You know, every -- I'm not worried |
| 16 | about anything that I -- people make arguments, and I give |
| 17 | it whatever weight I think it is appropriate.
Okay? |
| 18 | UNIDENTIFIED SPEAKER:
Of course, Your Honor. |
| 19 | UNIDENTIFIED SPEAKER:
Thank you, Your Honor. |
| 20 | THE COURT:
All right.
Thank you. |
| 21 | All right.
So with regard to 1805, the second |
| 22 | omnibus motion to compel compliance with Rule 2004 |
| 23 | subpoenas, does anyone else wish to be heard?
Okay. |
| 24 | Hearing nothing.
Then the Court will take that matter under |
| 25 | advisement and will rule accordingly.
But I -- again, I |
Ho Wan Kwok - June 6, 2023 83 believe that will be a ruling that we'll issue in short order. Okay? MR. LUFT: Thank you, Your Honor, for your time. THE COURT: Thank you. Now, with regard to -- there's, I think, two more matters. I need to -- just hold on one second. Okay? (Pause) THE COURT: There's a fifth omnibus motion for 2004 examination and a motion to seal. Before I address those, no -- I have to take a one-minute break, because I've been told I need to look at something. So I'm going to do that. And I'm going to come right back. So no one should leave the courtroom. I shouldn't be more than a minute or two. So Court will be in very short recess. THE CLERK: All rise. (Court recessed from 2:50 p.m. to 2:55 p.m.) THE CLERK: Back on the record. THE COURT: Thank you. Sorry about that. We only then have to address, I believe, and so everyone please correct me if I'm wrong, the fifth omnibus motion for 2004 examination of additional entities and the motion to seal. Is that correct? UNIDENTIFIED SPEAKER: Yes, Your Honor. THE COURT: Okay. So however you want to proceed, please proceed. Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 83 of
Ho Wan Kwok - June 6, 2023 84 MR. LUFT: Your Honor, maybe we could just do the motion to seal, because I'm hoping it'll be very quick. THE COURT: Sure. MR. LUFT: I believe the motion to seal is in connection with our motion to compel. And, quite frankly, all it does is that there were documents produced to us with a confidentiality designation pursuant to the protective order. Accordingly, we've filed them under seal to comply with that order. We'd ask that the motion to seal just be granted for that. THE COURT: Okay. Thank you. Does anyone else wish to be heard on the -- excuse me -- the motion to seal? And are -- I'm just looking -- I don't know if I see the proposed order on the motion to seal yet. Give me one moment, please. I think in the past -- but, again, I -- I'm not sure I can recall at the moment if under these circumstances, because you're dealing with the provisions of the protective order and the confidentiality order, that we've just entered your proposed order, I think. But I'm not sure I'm right on that. Since there are 1,800 entries on this docket, I sometimes don't remember. Okay. There is a proposed order attached to the motion to seal. It appears at pages 10 through 12 of ECF 1806. The only thing I would ask you to do is just note Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 84 of
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| 1 | today's hearing date on the top of the second page of the |
| 2 | order which is page 11 of the ECF document.
It says, "And |
| 3 | good cause having thereby and otherwise been shown" -- I |
| 4 | would say, you know, following a hearing held on June 6, |
| 5 | 2023, so it's clear we had a hearing.
And then the order |
| 6 | can enter.
Okay? |
| 7 | MR. LUFT:
Thank you, Your Honor. |
| 8 | THE COURT:
All right.
So with regard to 1806, |
| 9 | the motion is granted.
The motion to seal is granted, and |
| 10 | the proposed order with the minor changes noted on the |
| 11 | record will enter.
Okay? |
| 12 | So that leaves for this afternoon the Rule 2004 |
| 13 | examination motion which is the fifth omnibus motion for |
| 14 | 2004 examinations of additional entities which is ECF Number |
| 15 | 1789.
So who will be handling that matter? |
| 16 | MR. BASSETT:
I'll be handling that one for the |
| 17 | trustee, Your Honor. |
| 18 | THE COURT:
Okay.
Go right ahead then, Attorney |
| 19 | Bassett. |
| 20 | MR. BASSETT:
Your Honor, may I use the podium? |
| 21 | THE COURT:
Yes, please. |
| 22 | MR. BASSETT:
Again, just for the record, Nick |
| 23 | Bassett from Paul Hastings on behalf of the trustee.
So, |
| 24 | Your Honor, I think, unfortunately, there's been a bit of a |
| 25 | theme in the matters that have been presented to the Court |
| | |
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| 1 | today.
And, unfortunately, it's not one of parties |
| 2 | complying with their discovery obligations under Rule 2004. |
| 3 | Frankly, it's actually a little odd that we're even here on |
| 4 | this one today on a contested basis.
And I'll explain that |
| 5 | in a second. |
| 6 | But this motion is, as you said, the fifth motion |
| 7 | the trustee has filed to seek 2000 (discovery).
It covers, |
| 8 | I believe, eight additional parties that the trustee has |
| 9 | identified either through his ongoing investigation or |
| 10 | through other recent developments as having, in the |
| 11 | trustee's view, relevant information that is subject to |
| 12 | examination under Rule 2004. |
| 13 | The reason why I say it's odd that we're here |
| 14 | today on a contested basis is that not a single one of the |
| 15 | eight targets of the investigation has filed an objection to |
| 16 | the motion.
The only two objections that have been filed |
| 17 | are by the debtor and then another objection by the debtor's |
| 18 | wife and Greenwich Land, LLC. |
| 19 | These objections purport to object to discovery in |
| 20 | the case of the debtor that the trustee is seeking from an |
| 21 | entity called Nodal Partners LLC, which has been disclosed |
| 22 | in a filing to this Court as an entity responsible for |
| 23 | providing the source of compensation to the debtor's |
| 24 | counsel.
Also noted in that disclosure is that this entity |
| 25 | apparently has some relationship to the debtor's daughter, I |
| | |
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Ho Wan Kwok - June 6, 2023 87 believe. The objection filed by the debtor's wife in Greenwich Land is purportedly on behalf of an entity called Bento Technologies which is a spending management platform, as we understand it, which has in the past received monies from, among other sources, Greenwich Land and Golden Spring. To the extent that we get into specific issues with respect to the debtor's wife's and Greenwich Land's objection and Bento Technologies, Mr. Linsey will actually be handling that. So I'll spend the balance of my time addressing the debtor's objection that relates to Nodal Partners LLC. There are two issues that the debtor raises in that objection -- or the two issues, I guess, not that the debtor raises but two issues -- I'm sorry, Your Honor. Yes. Two issues that the debtor raises. One of them actually is separate from Nodal Partners. The first issue is, in fact, whether discovery from Nodal Partners under 2004 is appropriate. The debtor takes the view that it's not. The second issue relates to the debtor's ability to participate in 2004 examinations if
they have notice of those examinations. I'll get to that in a second after I address the Nodal Partners issue.
As to the Nodal Partners discovery, I think it's easy to dispense with this objection because the debtor simply does not have standing to be heard to raise an
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| 1 | objection to this discovery.
I think that's true for two |
| 2 | separate reasons.
First, if you look at the basis for the |
| 3 | objection -- I think this is kind of remarkable.
If you |
| 4 | look at the objection -- and this is the first paragraph -- |
| 5 | the debtor says he's objecting to the discovery sought from |
| 6 | Nodal Partners on the grounds that it is "broad, invasive, |
| 7 | and burdensome." |
I have no idea how the debtor is able to stand here before the Court and assert a burdensomeness objection on behalf of a party who itself has not appeared and objected and taken the position that the discovery is burdensome. The debtor simply has no basis whatsoever to make that argument.
And the fact that the debtor is here objecting and making that kind of argument frankly should make it all the more apparent why there must be a reason for that and why there must be a reason that the discovery the trustee is seeking from this entity is critically important, especially when it is the source of funding of the debtor's counsel.
The second reason that the debtor does not have standing is because, as Your Honor has already found, this is not a case where there is a reasonable prospect of there being a surplus. The debtor could theoretically have argued in response to our 2004 motion that he thinks some or all of the motion is unnecessary and, therefore, a cost that should
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Ho Wan Kwok - June 6, 2023 89 not be expended on behalf of the estate by the trustee. But the debtor has no basis to make that kind of objection, because he has no economic interest in this bankruptcy case, because there's no prospect of a surplus. So I think we can just stop there as it relates to this objection at least -- if not entirely, at least as it relates to Nodal Partners and dispense with it, because the debtor cannot possibly have standing to be heard.
If we want to go further and look at, okay, let's assume the debtor does have standing to be heard, is this discovery appropriate, I think there's no question that the discovery is appropriate. Again, this is an entity that -- this is in ECF 1774 filed on May 9th. The debtor disclosed to the Court \$256,000 in compensation from this entity.
And to the extent the debtor is suggesting -- which I can't tell, frankly, because there are inconsistent statements in what the debtor has filed. But to the extent the debtor is suggesting that he's being paid by this entity but yet this entity has no relationship whatsoever to the debtor and, therefore, there's no basis under the extremely broad rubric of 2004 which allows a fishing expedition for the trustee to get the discovery, I think that is just not at all believable. It's completely incorrect on the law.
As the Court well knows, entities that have funded the debtor in the past, most notably Golden Spring, have
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Ho Wan Kwok - June 6, 2023 90 obvious connections to the debtor. I don't think anybody is disputing that. And I don't think anybody is seriously suggesting that this entity, Nodal Partners, LLC, is randomly paying the debtor's counsel's expenses out of the goodness of its heart. The trustee is entitled to discovery of the relationship that the debtor has with that entity under Rule 2004.
And as it relates to what -- you know, what does this entity really do, what is its connection to the debtor, I just want to point out, because I think this is -- it's very troubling to me, and I think it should be for the Court, a couple of things. If you look at paragraph 3 of the debtor's objection, there's a line where the debtor says -- one second, Your Honor. There's a line where the debtor says, "Publicly available information establishes that Nodal is an operating company located in Austin, Texas that is managed by established and well-educated professionals and has no apparent connection to the debtor."
Similarly, in the fee disclosure that I mentioned earlier that was filed on May 9th, the debtor in a footnote said that upon information and belief, the -- someone affiliated with or somebody in control of this entity is a friend of the debtor's daughter. What I think is remarkable about both of these statements is that the debtor is pretending to have no knowledge of whether he has a
Ho Wan Kwok - June 6, 2023 91 connection. I think more likely what it is, is it's counsel submitting papers, doing research online to try to figure out what this entity is and not actually confirming it with anybody. Zeisler & Zeisler represents Mei Guo. Why they have to allege on information and belief that there's a relationship is beyond me. There either is or there isn't, and they should know the nature of that relationship. And as it relates to the connection that this entity has to the debtor, I don't know why they would need to say it has no apparent connection to the debtor. It either does or it doesn't. And they should be able to make a representation in that regard. It's not going to change whether we need discovery, but the fact that they're not even able to get that level of information to the Court is very troubling. So for those reasons, I think it's -- there shouldn't be any doubt at all that this discovery is appropriate. But the debtor shouldn't have an opportunity to object to it in the first place. So I think that deals with the issue of discovery from Nodal Partners. The other issue that the debtor raises relates to his complaint that he has not received advance notice of all
the trustee has taken pursuant to this court's past Rule
of the examinations or, more specifically, depositions that
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| 1 | 2004 orders.
A few responses to this argument. |
| 2 | First of all, for arguments I'll get to, it's just |
| 3 | wrong on the law.
But I think, up front, it's been waived. |
| 4 | The trustee began this investigation -- I was looking back |
| 5 | before the hearing and, remarkably, we're almost coming up |
| 6 | to the one-year mark -- about ten months ago.
And the Court |
| 7 | began entering 2004 orders shortly thereafter, which, as the |
| 8 | debtor acknowledges in his objection, are -- were all the |
| 9 | same form of order that has been entered subsequently in the |
| 10 | additional motions that the trustee has filed. |
| 11 | And the trustee, by the way, has been taking |
| 12 | depositions, examinations for months.
If the debtor's |
| 13 | position was that he all along was entitled to advanced |
| 14 | notice of every deposition and entitled to participate, I |
| 15 | submit that's an issue that he should have raised a long |
| 16 | time ago and not nearly a year later or ten months later. |
| 17 | As to the merits of the argument, the debtor |
| 18 | relies on Local Rule 2004-1(b) as supporting his position |
| 19 | that the debtor, along with certain other notice parties, is |
| 20 | entitled to advance notice of every deposition and |
| 21 | apparently entitled to participate in those depositions as |
| 22 | well.
This is a facially wrong reading of the rule, because |
| 23 | Section 2004-1(b) makes clear that it does not apply to this |
| 24 | situation.
Local Rule -- |
| 25 | THE COURT:
Doesn't it only apply if there's some |
| | |
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| 1 | kind of an agreement? |
| 2 | MR. BASSETT:
Exactly, Your Honor.
Local Rule |
| 3 | 2004-1(b) applies -- and the framework of the rule -- |
| 4 | THE COURT:
If there's an agreement without a need |
| 5 | for a motion even, right? |
| 6 | MR. BASSETT:
That's exactly right. |
| 7 | THE COURT:
Yeah. |
| 8 | MR. BASSETT:
And the -- |
| 9 | THE COURT:
That's my recollection of the rule. |
| 10 | MR. BASSETT:
And the framework of the rule -- |
| 11 | THE COURT:
Yeah. |
| 12 | MR. BASSETT:
-- makes perfect sense when you read |
| 13 | it in context.
So 2004-1(b) says if there is a private |
| 14 | agreement between two parties for a 2004 examination which |
| 15 | would not require the filing of a motion, and therefore |
| 16 | inherently would not require any notice to anyone, in that |
| 17 | situation notice must be given to the debtor, the trustee, |
| 18 | and certain other notice parties.
I think a creditor's |
| 19 | committee is in there.
Has to give notice to those parties. |
| 20 | And it specifies what kind of notice.
And it does say with |
| 21 | respect to examinations a certain number of days, et cetera. |
| 22 | But the next part of the rule applies to |
| 23 | situations where there has been a motion for 2004 discovery |
| 24 | filed.
That's 2004-1(c).
And in that case, obviously, the |
| 25 | filing of the motion itself is done pursuant to the Court's |
| | |
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Ho Wan Kwok - June 6, 2023 94 rules and practices that require notice to the various parties in the case. So it is already assumed for purposes of 2004-1(c) that's built into the rule that all these parties are going to get notice of the motion. And Mr. Romney would say, well, you need to imply based on 2004-1(b) that, you know, the -- whoever -- the drafters of the rules must have thought that that same additional notice requirement for examinations also applies when there's a motion. First of all, they could have said that. The rule does not say that at all. Second of all, it makes perfect sense that it was done the way it is, because once there's a 2004 motion filed, and people have been -- have had the opportunity to object to both the motion and to whatever proposed order is attached to the motion, and an order is granted, it is, of course, that order which governs what else must be done in order to carry out the investigation. And to the extent the debtor from the very beginning had wanted an order entered in response to our 2004 motions that said additional notice must be given to the debtor and other parties, that was the time to ask for it. And that's why the framework of the rule makes sense. Because when you're going by motion, you have a
Fiore Reporting and Transcription Service, Inc.
motion and you have an order, the order governs. You don't
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| 1 | need to refer back to inapplicable notice provisions of |
| 2 | 2004-1(b) which only apply where there's an agreement. |
| 3 | The next point I would make, Your Honor, is even |
| 4 | if the debtor had an argument that he should be given notice |
| 5 | and should have the ability to at least make the case to the |
| 6 | Court that he's entitled to participate, I think that is |
| 7 | entirely -- with a narrow exception that I will mention, I |
| 8 | think that is entirely not necessary and inappropriate in |
| 9 | this case.
I don't believe the debtor has cited any case |
| 10 | standing for the proposition that a debtor, particularly a |
| 11 | debtor out of possession, is entitled to notice and an |
| 12 | opportunity to participate in every deposition that a |
| 13 | trustee would take when investigating the debtor's affairs, |
| 14 | particularly as, here, when this is a case that's not likely |
| 15 | to have a surplus and, therefore, the debtor can't be |
| 16 | participating to protect an economic interest. |
| 17 | And, in fact, I think the opposite is true in a |
| 18 | case like this where the trustee has been appointed for the |
| 19 | very purpose of investigating the debtor's affairs.
There |
| 20 | have been all kinds of allegations and findings by the Court |
| 21 | of concealment of assets.
I mean, the entire track of the |
| | |
trustee's investigation and the entire theme of this case is trying to untangle the web of entities and individuals that this debtor has used to hold his assets, to hide his funds. And the trustee is very concerned. And I think
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Ho Wan Kwok - June 6, 2023 96 there's examples of this kind of thing continuing while this case is proceeding. And if the debtor were able to attend every deposition that the trustee is taking of somebody trying to figure out what's happening to assets, the debtor is only going to be left with a roadmap to understand where the trustee is going with his investigation and, therefore, stay one step ahead of where the trustee is going next. It would be completely counterproductive.
9 In addition to that, as Your Honor well knows based on its finding in connection with the preliminary injunction motion that was filed related to the protests at the end of last year, there are individuals who are very fearful of intimidation and retaliation, et cetera, by the debtor. And allowing these individuals -- allowing even a representative of the debtor to attend these depositions of some of these parties may, in fact, have a chilling effect on their willingness to cooperate. I think that's a real concern as well.
The one exception that I had mentioned was that, and there's been one exception like this to date, we deposed Williams & Connolly, which was one of the debtor's former law firms. And Williams & Connolly had expressed a concern to us about making sure the debtor was present at that deposition for purposes of being able to assert limited privilege objections in accordance with this Court's earlier
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Ho Wan Kwok - June 6, 2023 97 privileges order which preserved the debtor's ability to potentially make objections based on information that, if disclosed, could result in personal harm to the debtor. In that case, understanding of that, which I thought -- which we thought was a reasonable request, the trustee did allow Mr. Romney to participate and he did, in fact, participate. And the trustee is willing to, I think, consider that in depositions of counsel on a case-by-case basis moving forward, but that is the only situation that I can think of where it would be potentially appropriate for the debtor to have representation at these examinations. So that concludes like the issues on the debtor's objections, Your Honor. If you want to hear from Mr. Linsey on the debtor's wife's and Greenwich Land's objection, I think he can address that now or potentially in response to Mr. Romney. THE COURT: Well, they're two separate pleadings, right? I mean, so why don't we just take it a pleading at a time insofar as with regard to Nodal. Or I'm not sure I'm pronouncing it right, but -- MR. BASSETT: That's how I would pronounce it, but I'm not sure either, Your Honor. THE COURT: Mr. Romney filed that objection, correct? MR. BASSETT: That's correct.
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| 1 | THE COURT:
And then with respect to the other |
| 2 | entities, I think it's Attorney Major that filed that |
| 3 | objection, correct? |
| 4 | MR. BASSETT:
That's correct. |
| 5 | THE COURT:
Okay.
So I'd rather -- if you |
| 6 | don't -- I'd rather -- |
| 7 | MR. BASSETT:
Sure. |
| 8 | THE COURT:
-- hear from Mr. Romney first so I can |
| 9 | address the debtor's objection first.
And then we'll go |
| 10 | from there. |
| 11 | MR. BASSETT:
Thank you, Your Honor. |
| 12 | THE COURT:
Okay?
And then we'll hear from |
| 13 | Mr. Linsey and Mr. Major. |
| 14 | MR. BASSETT:
Thank you, Your Honor. |
| 15 | THE COURT:
Thank you. |
| 16 | Mr. Romney? |
| 17 | MR. ROMNEY:
Thank you, Your Honor.
For the |
| 18 | record, Aaron Romney, Zeisler & Zeisler, on behalf of the |
| 19 | debtor.
I'll begin by saying -- expressing my respect and |
| 20 | admiration for the trustee and his counsels' talented |
| 21 | advocacy and taking things entirely out of context. |
| 22 | The basis for the debtor's motion to the 2004 exam |
| 23 | motion with respect -- or I apologize -- the debtor's |
| 24 | objection with respect to the trustee's motion with Nodal |
| 25 | Partners is not based on the fact that the debtor and his |
| | |
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| 1 | daughter have no connection with Nodal Partners.
In fact, |
| 2 | that is the basis for our objection. |
| 3 | The connection between the debtor and the debtor's |
| 4 | daughter and Nodal Partners has been publicly acknowledged |
| 5 | on this docket by my office in a disclosure of compensation. |
| 6 | That connection is the fact that Nodal Partners has |
| 7 | gratuitously paid some of the debtor's legal expenses to my |
| 8 | firm.
And one of the principals of Nodal Partners is a |
| 9 | friend of my client, Mei Guo.
And as I've stated, I |
| 10 | believe, in the objection, they're supporters of Mr. Kwok's |
| 11 | political causes. |
| 12 | There is no objection on the part of the debtor |
| 13 | certainly.
I can't speak for Nodal Partners, who I don't |
| 14 | represent.
And it is Nodal is my understanding, for the |
| 15 | record. |
| 16 | THE COURT:
Say it again. |
| 17 | MR. ROMNEY:
Nodal. |
| 18 | THE COURT:
Nodal? |
| 19 | MR. ROMNEY:
Yeah. |
| 20 | THE COURT:
Like D-A-L?
So emphasize the A? |
| 21 | MR. ROMNEY:
Correct. |
| 22 | THE COURT:
Okay.
Go ahead.
Thank you. |
| 23 | MR. ROMNEY:
There is no objection to -- on the |
| 24 | part of the debtor to the trustee inquiring or examining |
| 25 | into the connections between Nodal Partners and the debtor, |
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| 1 | some of which have been disclosed.
But, obviously, they do |
| 2 | not need to take our word for it.
We do not object to a |
| 3 | subpoena going to Nodal Partners to inquire into their |
| 4 | affairs. |
| 5 | What we object to based upon this subpoena is |
| 6 | based solely on a connection to the debtor which has been |
| 7 | publicly disclosed voluntarily -- well, I guess I shouldn't |
| 8 | say that, because it was required by the rules.
But on our |
| 9 | own initiative, it was disclosed by the debtor.
We further |
| 10 | disclosed the personal relationship between Nodal's |
| 11 | principal and Ms. Guo. |
| 12 | The trustee is now seeking to inquire into every |
| 13 | aspect of Nodal Partners' business without requiring a |
| 14 | connection to the debtor.
Our issue with these subpoenas, |
| 15 | Your Honor, is that we believe the trustee is intending to |
| 16 | send a message that anybody who supports the debtor, anybody |
| 17 | who has any acknowledgment of a connection to the debtor |
| 18 | that is not adverse would be subject to a subpoena that |
| 19 | requires Nodal Partners to disclose every asset that it has, |
| 20 | the source of every asset that it has, and all of its use of |
| 21 | credit without the hook that it -- that there be a |
| 22 | connection to the debtor. |
| 23 | In this particular case, that -- the scope of that |
| 24 | subpoena is all the more outrageous given that it does not |
| 25 | take a tremendous amount of effort for one with publicly |
Ho Wan Kwok - June 6, 2023 101 available information to look up and see what Nodal is. It is a internationally renowned mechanical engineering firm with principals that all have either PhDs or higher-level education. My understanding is that it is a government-approved contractor that does substantial business with the United States Government such that making the disclosures required by -- or purportedly required by the subpoena would certainly be very problematic and overly burdensome. THE COURT: All right. MR. ROMNEY: And so -- THE COURT: Well, let me stop you right there. Because now you're making -- you're representing Nodal. But you're not representing Nodal. So I don't want to hear that argument. MR. ROMNEY: Well -- THE COURT: But the argument I do want to hear, though, is you say that there has to be some connection to the debtor. So where in Rule 2004 does it say that? Because the first sentence of Rule 2004 says on motion of any party in interest, the Court may order the examination of any entity. That's what it says. It doesn't say anything about it has to have a connection with the debtor. MR. ROMNEY: May relate to acts, conducts, or Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 101 of
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| 1 | property or to the liabilities and financial conditions of |
| 2 | the debtor or to -- |
| 3 | THE COURT:
Where are you reading?
What section? |
| 4 | MR. ROMNEY:
I'm referring to Section 2004(b). |
| 5 | THE COURT:
The scope of the examination? |
| 6 | MR. ROMNEY:
That's correct. |
| 7 | THE COURT:
Right.
That's the scope.
Right. |
| 8 | MR. ROMNEY:
That's correct. |
| 9 | THE COURT:
That's the scope of the examination. |
| 10 | MR. ROMNEY:
Correct. |
| 11 | THE COURT:
So how does this -- the -- how does -- |
| 12 | first of all, when was the subpoena served on Nodal, before |
| 13 | you disclosed that they were paying the attorney's fees or |
| 14 | after? |
| 15 | MR. ROMNEY:
After. |
| 16 | THE COURT:
Okay. |
| 17 | MR. ROMNEY:
I believe after. |
| 18 | THE COURT:
I don't know for sure, honestly, |
| 19 | because I think this happened in the pretty recent past, |
| 20 | right?
This -- |
| 21 | MR. ROMNEY:
I -- the -- |
| 22 | THE COURT:
Was it before or after?
I'm asking |
| 23 | the trustee's counsel. |
| 24 | UNIDENTIFIED SPEAKER:
There's actually no |
| 25 | subpoena, because the motion has not been granted.
But the |
| | |
Ho Wan Kwok - June 6, 2023 103 motion was filed -- THE COURT: Oh, yeah. This is just the 2004 examination. I'm sorry. I'm getting ahead of myself. I'm sorry. UNIDENTIFIED SPEAKER: But the -- UNIDENTIFIED SPEAKER: They are served with the motion. UNIDENTIFIED SPEAKER: Yeah. Exactly, Your Honor. THE COURT: Yeah. They were served with the motion. UNIDENTIFIED SPEAKER: And the motion was filed on the 15th of May. So it would have -- THE COURT: Before the disclosure? UNIDENTIFIED SPEAKER: It would have been six days after. THE COURT: After the disclosure. UNIDENTIFIED SPEAKER: I think the disclosure was on May 9th. THE COURT: Okay. UNIDENTIFIED SPEAKER: The motion refers to the disclosure, Your Honor. THE COURT: Okay. Okay. I'm sorry. It is difficult to keep all the entities and requests in order given the -- as I've -- I mean, it's -- I'm not -- I'm just saying it's difficult. There's 1,800 docket entries. Okay? Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 103 of
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| 1 | MR. ROMNEY:
I can relate, Your Honor. |
| 2 | THE COURT:
And every motion is substantial, |
| 3 | right?
I don't think I've had any -- I don't think there's |
| 4 | been a motion under three pages, right -- |
| 5 | MR. ROMNEY:
I -- |
| 6 | THE COURT:
-- in a -- in more than a year.
So in |
| 7 | any event, okay, so you're talking about the scope of the |
| 8 | examination.
Okay? |
| 9 | MR. ROMNEY:
Yes.
And -- |
| 10 | THE COURT:
And so the scope of the examination |
| 11 | says in (b) -- it says -- and as you know, Attorney Romney, |
| 12 | very well -- you know this.
We all know this, that the |
| 13 | scope of the 2004 examination can be very broad.
In fact, |
| 14 | case law has stated all over the country that it's akin to a |
| 15 | fishing expedition.
We've already -- we've had that |
| 16 | discussion on many times. |
| 17 | But it does say, "relates to the acts, conduct, or |
| 18 | property or to the liabilities and financial condition of |
| 19 | the debtor or to any matter which might affect the |
| 20 | administration of the debtor's estate or to the debtor's |
| 21 | right to a discharge."
Okay? |
| 22 | So there's a disclosure that's made that this |
| 23 | entity, Nodal, has -- is paying -- and is it your firm's |
| 24 | legal -- I don't recall.
I know there was a disclosure with |
| 25 | regard to the criminal attorney's fees.
This is your |
Ho Wan Kwok - June 6, 2023 105 firm's? MR. ROMNEY: That's correct. THE COURT: Okay. Okay. MR. ROMNEY: It was Zeisler & Zeisler's disclosure -- THE COURT: Okay. MR. ROMNEY: -- that referenced -- THE COURT: So -- MR. ROMNEY: -- Nodal Partners. THE COURT: So what you're arguing, it doesn't say 11 -- it says the examination of an entity under this rule or of the debtor -- well, we're not examining the debtor in this motion, the motion is directed to Nodal -- may relate only to the acts, conduct, or property or to the liabilities and financial condition of the debtor and to any other matter that may affect the administration of the debtor's estate. So you have disclosed properly that you're being paid by this entity. I think -- MR. ROMNEY: That we have been paid in one instance we disclosed. THE COURT: Okay. Okay. Then the trustee is seeking to examine that entity, which 2004(a) allows on its face. I mean, if the Court grants it, right? It's an examination of any entity. And they're -- and the trustee Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 105 of
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| 1 | is arguing that it may affect the administration of the |
| 2 | debtor's estate.
And it may relate to the acts, conduct, or |
| 3 | property of -- or to the liabilities and financial |
| 4 | conditions of the debtor.
Because, for example, I have no |
| 5 | idea what this agreement is, but maybe Mr. Kwok is supposed |
| 6 | to pay the -- these people back.
Has that -- |
| 7 | MR. ROMNEY:
That -- |
| 8 | THE COURT:
Maybe I'm wrong.
Have you disclosed |
| 9 | that the monies that are paid to you never have to be a |
| 10 | liability of Mr. Kwok? |
| 11 | MR. ROMNEY:
We have not disclosed that.
I don't |
| 12 | believe Attorney Kindseth did the disclosure.
But I -- as |
| 13 | best as I can recall, I don't believe so. |
| 14 | THE COURT:
Okay.
So all I'm saying is, so that's |
| 15 | a relevant area of inquiry, right -- |
| 16 | MR. ROMNEY:
Certainly.
I -- |
| 17 | THE COURT:
-- for the trustee to know whether or |
| 18 | not Mr. Kwok has any liability -- has incurred any liability |
| 19 | to Nodal for Nodal's agreement to pay attorney's fees of |
| 20 | Mr. Kwok in this case.
I think that's a legitimate inquiry. |
| 21 | MR. ROMNEY:
I agree. |
| 22 | THE COURT:
Okay. |
| 23 | MR. ROMNEY:
I completely agree, Your Honor. |
| 24 | THE COURT:
Okay.
So then your problem is that |
| 25 | Nodal is a big corporation, has government contracts -- and |
Ho Wan Kwok - June 6, 2023 107 I don't mean that -- I'm trying to understand your objection -- and that that shouldn't be allowed? MR. ROMNEY: Yes. That -- THE COURT: That's Nodal's argument, not your argument. MR. ROMNEY: Well, if I may explain why I believe it's my argument, Your Honor? THE COURT: Yeah. Go ahead. MR. ROMNEY: So the issue is, is that Nodal -- during a time when many people, as you've heard throughout this -- for many counsel today, many people are no longer around who were formerly working with various entities that at least have some connection to the debtor. It is clear that many people who once wanted something to do with him no longer do. And if anybody who expresses support for the debtor is subject to subpoenas that have limitless breadth without regard to qualifying them as a connection to the debtor, then everyone is going to refuse to have anything to do with him because of fear of persecution from the trustee. And that is the basis of our objection, which is that facially a subpoena issued because of support for the debtor should at least be tied on its face to a connection to the debtor and the estate. This one does not. And it's actually evident from Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 107 of
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| 1 | the face of the proposed subpoena itself.
Some of the |
| 2 | requests are properly drafted such as all documents |
| 3 | regarding any income or asset of the debtor, the debtor's |
| 4 | estate, or an associated entity.
Others are not, such as |
| 5 | documents sufficient to show all of your assets and sources |
| 6 | of income or funding.
There is no qualification connected |
| 7 | to the debtor in that. |
| | |
And when you're talking about whether it's a natural person or an entity that is supportive of the debtor, they should not be subject to a subpoena, even on its face a subpoena that requires court approval, that doesn't have that hook of connection to the debtor. And I say that because my understanding is that complying with this subpoena or objecting to this subpoena based on the stakes that this subpoena requires, requires a massive undertaking.
And to the extent my objection is not sustained, my guess is somebody else will be standing in this chair, and it will be their argument at that time. However, the point is there is a chilling effect on even allowing a court authorized Rule 2004 examine that doesn't purport to even require a connection to the debtor. And that's all that we're saying.
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Ho Wan Kwok - June 6, 2023 109 of reasonableness then, yes, that will be their fight to either work something out on consent or stand before Your Honor and respond to an order. I don't know how that conversation is going to go. My sole issue, Your Honor, is the chilling effect on personal relationships with the debtor and his family based upon the appearance that the Court is willing to authorize blanket examinations into all affairs of anybody who has any connection to the debtor when those examinations are not limited to connections to the debtor. That's the sole basis of my objection with respect to the scope of Nodal. THE COURT: Okay. MR. ROMNEY: Thank you, Your Honor. THE COURT: Thank you. Mr. Bassett -- MR. ROMNEY: May I respond to the issue of notice, Your Honor? Or if Attorney -- THE COURT: Sure. Go ahead. MR. ROMNEY: Okay. With regard to the issue of notice, I guess a -- several things. And I guess I will start near the end of where Attorney Bassett left off, which is something that I heard for the first time today. And I'm not saying that this goes far enough but saying that, perhaps, when we're talking about the debtor's former
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| 1 | counsel whom the debtor has a right to assert personal harm |
| 2 | privileges with respect, that they should have notice of |
| 3 | 2004 exams, the time and place that they're actually going |
| 4 | to occur.
Because as has been pointed out and -- with |
| 5 | respect to the consent privilege order, the debtor is the |
| 6 | person who has to have the reasonable belief under the |
| 7 | Court's interpretation of the language, which has been |
| 8 | followed in this case, to assert the personal harm. |
The debtor, through his counsel -- through his current counsel, whether myself or one of my colleagues, cannot assert a privilege argument in a 2004 examination deposition when we don't know it's happening and we're not present. So what we're then left with is a conundrum where the benefits that were negotiated before this Court -- and thank you for Your Honor's efforts in getting us here and having a consensual order on this. But the benefits that were negotiated many, many months ago are being superceded if the debtor is the one that needs to make the objection and the debtor is not aware of the time and place of that -- of when the deposition is taking place.
So certainly the most important thing going forward is that -- from the debtor's perspective is that the debtor be given notice of depositions where there could be a conceivable privilege objection. In this particular Rule 2004 exam, I believe the only one of those where there could
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| 1 | be a potential privilege objection would be the |
| 2 | Ernst & Young firm.
But I don't know that for a fact. |
| 3 | Point number two is that notice of something |
| 4 | happening, even if one assumes at face value that the debtor |
| 5 | is not entitled to participate and -- or the debtor's |
| 6 | counsel is not entitled to participate in every 2004 exam -- |
| 7 | and I think it's highly unlikely that the debtor or the |
| 8 | debtor's counsel, whether me or somebody else, would want to |
| 9 | participate in many 2004 exams. |
| 10 | But notice of something happening, the right to |
| 11 | participate, and actual participation are three separate |
| 12 | things and particularly when you're talking about a former |
| 13 | professional of the debtor or evidence that the trustee |
| 14 | intends to offer in a pending adversary proceeding or |
| 15 | subsequent adversary proceeding but the party is known. |
| 16 | There's no harm from notice.
It's not even saying that |
| 17 | notice is the right to appear at this stage. |
| 18 | But if we don't have notice, we can't ask Your |
| 19 | Honor's permission to attend.
And what's the harm of notice |
| 20 | and giving us the right to ask?
And Your Honor can say no. |
| 21 | THE COURT:
Well, let me ask you a question about |
| 22 | that.
You get every motion that's filed that lists who |
| 23 | they're going to -- they're trying to seek an order to |
| 24 | conduct a 2004, so why do you need advance notice?
You get |
| 25 | notice.
Why couldn't you say -- with regard to that, why |
| | |
Ho Wan Kwok - June 6, 2023 112 couldn't you respond and say I want to appear at these depositions, can I? MR. ROMNEY: Well, Your Honor, I would say -- THE COURT: At these 2004 examinations, I should say. MR. ROMNEY: I would say two things to that. One, that's exactly what I'm doing right now. I'm responding to a 2004 exam that has proposed subpoenas attached to it, and I'm saying I am -- object to this to the extent that the trustee, unbeknownst to me until a few weeks ago -- and I understand this was a miscommunication. I'm not -- there's no allegation of anything here. But I'm saying in the very context that counsel just said the point should be raised which is when they get notice of these subpoenas or proposed subpoenas, they should have said something then. Well, this is now. Now is then in this context. THE COURT: Okay. So I'm listening. You're being heard. MR. ROMNEY: And what I'm saying is, their proposed order, we've never construed it to allow particularly a professional's depositions to go forward Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 112 of
You know, what -- the use of those depositions that we weren't present there is a different issue that is not
without providing notice. You know, what's done is done.
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| 1 | before the Court.
And we haven't raised it before the |
| 2 | Court. |
| 3 | What I'm asking, Your Honor, is to the extent -- |
| 4 | and I imagine Your Honor will grant these examinations at |
| 5 | least to a large extent, because there isn't an objection |
| 6 | with respect to many of them.
What I'm asking is that the |
| 7 | trustee be required to provide us with notice of the actual |
| 8 | time and place of the depositions.
And if the trustee at |
| 9 | that time wants to object to our participation, we can deal |
| 10 | with that at the time.
If the trustee wants to allow our |
| 11 | participation, and we want to participate, that's great. |
| 12 | That's what ultimately happened with the Williams |
| 13 | & Connolly deposition, albeit at the request of Williams & |
| 14 | Connolly and albeit on approximately six days' notice for a |
| 15 | deposition in D.C., which was a little bit of a crunch.
So |
| 16 | we'd like a little bit more than that. |
| 17 | But I'm not here to worry about -- |
| 18 | THE COURT:
Well, but you can't have it that way, |
| 19 | right?
You want notice.
You can't control their schedule, |
| 20 | you know?
You're either available or you're not. |
| 21 | MR. ROMNEY:
Well -- |
| 22 | THE COURT:
I mean, I'm not going to have them |
| 23 | change their deposition schedule, because you or somebody |
| 24 | else wants to attend.
I mean, that's not -- there's nowhere |
| 25 | in the rules that require that, especially when you're not |
Ho Wan Kwok - June 6, 2023 114 the party to whom the subpoena is served. MR. ROMNEY: But, Your Honor, I'm not suggesting that I should be -- THE COURT: Well, you just an example that it was tight. Too bad. MR. ROMNEY: Well -- THE COURT: This isn't discovery directed to you, to your client. MR. ROMNEY: Your Honor, if I may clarify what I was -- THE COURT: Okay. MR. ROMNEY: -- attempting to say, apparently not very artfully. My understanding is that deposition had been scheduled for considerably more than six days in advance. I was given six days' notice of it is the point that I was attempting to -- THE COURT: But where in the Code does it say that the debtor gets to know about every single 2004 examination and that you somehow have to be made aware of that? I don't think I've ever seen a case that's even come -- it certainly doesn't state it anywhere in the rules or the Code. So the only place that it would come up would be in a case. So where is a case that says that? MR. ROMNEY: Well, Your Honor, certainly it's common practice to provide other parties notice of subpoenas Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 114 of
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| 1 | served in a case.
And when a deposition is rescheduled, |
| 2 | it's re-noticed. |
| 3 | THE COURT:
A common practice where?
How many |
| 4 | common -- how many Chapter 11 cases is there a trustee |
| 5 | appointed in to investigate the affairs of the debtor where |
| 6 | the debtor gets prior notice of every deposition that the |
| 7 | trustee's conducting to investigate his affairs?
Tell me |
| 8 | that. |
| 9 | MR. ROMNEY:
This is the first case I've ever been |
| 10 | involved in with a -- |
| 11 | THE COURT:
Right. |
| 12 | MR. ROMNEY:
-- Chapter 11 trustee.
So I can't |
| 13 | answer that. |
| 14 | THE COURT:
Yeah.
Well, I'm telling you, I |
| 15 | just -- I mean, I hear what you're saying.
But there is |
| 16 | some unreasonableness associated with that. |
| 17 | MR. ROMNEY:
Well -- |
| 18 | THE COURT:
You're not going to control the |
| 19 | trustee's investigation and schedule of examinations that |
| 20 | the trustee is going to conduct.
You're not going to do |
| 21 | that.
I mean, it's not going to happen. |
| 22 | So the issue is, is there an ability to come to |
| 23 | some kind of an agreement when you get served with a -- and |
| 24 | you have.
You're objecting to this one.
So I assume that |
| 25 | you're saying that you want to attend the Nodal deposition |
Ho Wan Kwok - June 6, 2023 116 when that occurs. Is that correct? MR. ROMNEY: I'm not even saying that -- THE COURT: I mean, the 2004? MR. ROMNEY: -- at this point in time. What I'm saying is -- THE COURT: Well, you got to say it at this point in time, or you lose, right? Otherwise -- insofar as you're not going to be able to come in and say I, Judge, want to know exactly when that deposition is going to be. You need to -- no. You have to say -- you have to show a reason why you should be able to be at that deposition -- that 2004 examination, right? MR. ROMNEY: Ultimately. Because I'm not asking for the right to attend. I'm asking for the right to have notice of something. I suppose, I mean -- THE COURT: Well, what do you -- you don't need notice of it if you're not going to attend. What do you need notice of? That's what I'm -- MR. ROMNEY: Because -- THE COURT: -- I'm struggling with your argument. Because what -- you know they're going to take their deposition. You've already gotten -- a 2004 examination. You've already -- well, assuming the order enters, right, they're going to take their 2004 examination. That's what they're going to do. So you have notice of it. Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 116 of
Ho Wan Kwok - June 6, 2023 117 MR. ROMNEY: Right. I don't have notice of when they're going to take it -- THE COURT: And I'm telling you you're not going to get that unless you specifically ask and obtain it, because you're not going to control the trustee's discovery schedule. MR. ROMNEY: Well -- THE COURT: You're not going to do that. MR. ROMNEY: Well, Your Honor -- THE COURT: Show me a case where that's happened, Attorney Romney, please. Even in not a Chapter 11 trustee appointed case. You're not going to find one. MR. ROMNEY: Your Honor, I don't believe that I need to go beyond to case law. I can't -- as I sit here, I can't comprehend the reason why the parties would be entitled to notice of the time and location of an examination if that time and location is reached by agreement but not pursuant to motion. It's the same notice, time and location of examination. Presumably, if there were a motion, the time and location would come out through the order. The order's -- THE COURT: That's not how the 2004 process works. And our local rule doesn't require that. And our local rule has a two-step process. You file the motion. People can object to the motion. The motion gets granted or denied. Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 117 of
Ho Wan Kwok - June 6, 2023 118 If the motion gets granted, the subpoenas issue, and the person to whom the subpoena is directed gets to object to that subpoena under the applicable rules of the Federal Rules of Civil Procedure and our local rules. That's the process. MR. ROMNEY: And then subpoenas are served, Your Honor, and -- THE COURT: No. I was already presuming they were served. That's my point. MR. ROMNEY: Well -- THE COURT: The other gets entered. Our local rule process is a two-step process. You don't have to object to the motion for 2004 examination if you don't want to. But that's what the rule says. The order can issue authorizing a party to conduct the Rule 2004 examination. But if that party then serves a subpoena, the party -- the person to whom the subpoena is served on or the entity still has the right under the Federal Rules of Civil Procedure to object to that subpoena. That's specifically what the bar of the Bankruptcy -- Commercial Law and Bankruptcy Section of the Connecticut Bar Association authored the Rule 2004 examination rules for that very purpose. That it was a two-step process. That you didn't have to object to the motion to begin with. And that your Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 118 of
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Ho Wan Kwok - June 6, 2023 119 rights with regard to the subpoena and to move to quash or for a protective order or anything along those lines were preserved once and only if the subpoena is served, right? So that's how it works. That's how it works in our district, which all the Connecticut Bar Association are the people and the representatives that crafted that rule that was then out for comment to the bar for quite some time and then to the public for quite some time. And there were no objections to that process. And the United States District Court for the District of Connecticut voted to approve those rules. So that's the rules. MR. ROMNEY: I understand that. I'm very familiar with many of the people who were part of that process. I wasn't. Many of them share my reading of the rule, but I suppose that's neither here nor there. Your Honor, it seems like a very light ask to have notice of when depositions are taking place -- of when 2004 examination depositions are taking place. Certainly, I mean, Rule 2004 itself expressly requires notice to all the parties when -- THE COURT: Of the motion -- MR. ROMNEY: -- when -- THE COURT: -- which you got. MR. ROMNEY: As well as of the subpoena --
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| 1 | THE COURT:
Where does -- no, it doesn't.
Where |
| 2 | does it say that you -- there's notice -- the subpoena has |
| 3 | to be -- first of all, the subpoena isn't -- it tells you |
| 4 | that the subpoena -- you have to review your subpoena rules, |
| 5 | which is there's nothing in the 2004 rule that's -- of the |
| 6 | Federal Rules of Bankruptcy Procedure.
And then our local |
| 7 | rule refers to the subpoena rule which is, what, 9016 -- |
| 8 | MR. ROMNEY:
16. |
| 9 | THE COURT:
-- right? |
| 10 | MR. ROMNEY:
Yeah. |
| 11 | THE COURT:
And 9016 says -- |
| 12 | MR. ROMNEY:
It requires notice of subpoenas that |
| 13 | require -- that request documents. |
| 14 | THE COURT:
Yeah.
To be served on whom? |
| 15 | MR. ROMNEY:
On the parties. |
| 16 | THE COURT:
Right.
The party.
No, the party to |
| 17 | whom the subpoena is directed. |
| 18 | MR. ROMNEY:
I -- |
| 19 | THE COURT:
It doesn't say he's got to serve it on |
| 20 | anybody -- what would be the point of serving it on anybody |
| 21 | else?
They wouldn't have a right to object or move to quash |
| 22 | or move for a protective order. |
| 23 | MR. ROMNEY:
Well, sorry.
Federal Rule 9016 |
| 24 | incorporates Federal Rule 45. |
| 25 | THE COURT:
Yep.
It sure does. |
| | |
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| 1 | MR. ROMNEY:
Which requires notice to the parties. |
| 2 | THE COURT:
Which requires notice to the party |
| 3 | upon whom the subpoena is served. |
| 4 | MR. ROMNEY:
It requires notice to other parties |
| 5 | before service, though granted that the -- |
| 6 | THE COURT:
Where?
Tell me where you're reading |
| 7 | that, Attorney Romney, because I'm not with you. |
| 8 | MR. ROMNEY:
And as I was attempting to finish my |
| 9 | sentence, that does specifically on its face just refer to |
| 10 | the inspection of documents.
But it's Rule 45(a)(4). |
| 11 | THE COURT:
Notice to other parties before |
| 12 | service.
"If the subpoena commands the production of |
| 13 | documents, electronically stored information, or tangible |
| 14 | things or the inspection of premises before trial" -- before |
| 15 | trial -- "then before it is served on the person to whom it |
| 16 | is directed, a notice and a copy of the subpoena must be |
| 17 | served on each party." |
| 18 | Well, that's already happened, because you've |
| 19 | already gotten the motion, and you've gotten the subpoena |
| 20 | that's going to be served on Nodal.
So that's been complied |
| 21 | with. |
| 22 | MR. ROMNEY:
Well, no.
The subpoena hasn't been |
| 23 | served.
I don't think that's disputed.
And -- |
| 24 | THE COURT:
Well, and the rule you just recited |
| 25 | presumes exactly what you just said, that the subpoena |
Ho Wan Kwok - June 6, 2023 122 hasn't been served. Then before it is served on the person to whom it is directed, a notice and a copy of the subpoena must be served on each party. That's already occurred. They've already -- MR. ROMNEY: Right. Except -- THE COURT: They've already complied with Rule 45(a)(4). MR. ROMNEY: Except that the proposed subpoenas, as my best of recollection, and I won't recall, but is blank with respect to time of performance. So it's not the subpoena. It's a proposed subpoena that has not yet been authorized by the Court. THE COURT: Okay. Go ahead. Keep going. MR. ROMNEY: That's what I got for you, Your Honor, at this time. THE COURT: Okay. MR. ROMNEY: I think fundamental principles of fairness entitle the debtor's counsel to have notice of Rule 2004 exams, particularly when we're talking about the debtor's professionals. And I think that it would be far more efficient for the trustee to just provide us notice than for us to go through this exercise each time the trustee files a motion for Rule 2004 exam. And then we could deal with it only -- if and when -- only if the debtor -- Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 122 of
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Ho Wan Kwok - June 6, 2023 123 THE COURT: Well, maybe you can come to some kind of agreement on that with regard to professionals. But Nodal isn't a professional. MR. ROMNEY: That's correct. Ernst & Young is. And -- THE COURT: Well, maybe you can come to an agreement on that. MR. ROMNEY: I attempted to come to an agreement as set forth affidavit. THE COURT: Well, maybe you can keep trying after today's hearing. MR. ROMNEY: I would love to. I love agreements. THE COURT: Maybe you can do that. MR. ROMNEY: Thank you. THE COURT: Okay? But what I'm saying to you is, right now, I believe that the trustee has complied with Rule 2004 and our Local Rule 2004-1 processes in our district. I have to rule on whether or not your objection is sustained or overruled. And I have to -- I'm going to go back and look at everything. I'm not going to rule right now, because I had to hear from you. I've heard from you. I understand your arguments. And I'm not going to rule today. I hope I'm going to rule tomorrow, Thursday, or Friday, right? Real soon. Because I -- you know, these
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| 1 | kind of issues have to be ruled on so the parties know where |
| 2 | they stand and what next steps, if any, can be taken.
Okay? |
| 3 | But I understand -- |
| 4 | MR. ROMNEY:
Thank you very much, Your Honor. |
| 5 | THE COURT:
I understand your argument.
Okay? |
| 6 | MR. ROMNEY:
I appreciate it. |
| 7 | THE COURT:
All right. |
| 8 | MR. ROMNEY:
Thank you for hearing me today. |
| 9 | THE COURT:
Thank you. |
| 10 | All right.
So this matter is -- the motion for |
| 11 | examination and the objection by the debtor is taken under |
| 12 | advisement. |
| 13 | Now, we only have the remaining issue of the |
| 14 | deposition -- the 2004 -- excuse me, that the -- that |
| 15 | Mr. Major's clients have objected to.
So, Mr. Linsey, you |
| 16 | go ahead and make your argument, please, and then I'm going |
| 17 | to hear from Attorney Major. |
| 18 | MR. LINSEY:
Thanks, Your Honor.
I'm going to try |
| 19 | to be brief, because, as I think we stated in our reply, the |
| 20 | trustee's position is this issue has really been argued |
| 21 | before.
The objection that was filed by Greenwich Land and |
| 22 | by Mrs. Ngok takes issue with Rule 2004 discovery that's |
| 23 | sought with respect to Bento Technologies. |
| 24 | Our understanding is Bento Technologies is a -- |
| 25 | essentially like a corporate Venmo.
It's a system for |
| | |
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| 1 | corporations to track their transfer of funds and transfer |
| 2 | funds to other corporations.
As we said in the 2004 exam |
| 3 | motion, Greenwich Land is one of the entities that we |
| 4 | believe was involved with payments that the debtor had an |
| 5 | interest in that went through this system. |
| 6 | We certainly don't think Greenwich Land is the |
| 7 | only one.
You heard Mr. Bassett say that we believe Golden |
| 8 | Spring is another one.
And the experience and the trustee's |
| 9 | investigation to date tends to suggest that when we believe |
| 10 | there are a couple, oftentimes there are more. |
| 11 | Greenwich Land and Ms. Ngok filed an objection, |
| 12 | and in their objection they cite the pending action |
| 13 | doctrine.
If that sounds familiar, that's because six |
| 14 | months ago an objection was filed by the debtor's daughter |
| 15 | and by HK USA that made exactly the same legal argument with |
| 16 | respect to discovery that was sought from a yacht company |
| 17 | and a law firm that was involved in the sale of the Lady |
| 18 | May. |
| 19 | And they made the argument that there's a pending |
| 20 | adversary proceeding concerning ownership of the Lady May |
| 21 | and, therefore, the trustee was not entitled to get |
| 22 | discovery -- 2004 discovery from entities that are not |
| 23 | parties to the lawsuit because of this pending action |
| 24 | doctrine.
They cited a number of cases. |
| 25 | The issue was extensively briefed.
Your Honor had |
| | |
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| 1 | a long hearing, and Your Honor entered a ruling determining |
| 2 | that issue.
And that ruling determined that the pending |
| 3 | action doctrine does not block the trustee's Rule 2004 |
| 4 | investigation with respect to non-parties to any adversary |
| 5 | proceeding.
Your Honor cited case law to that effect.
It's |
| 6 | consistent with the case law. |
Apparently, the debtor's wife and Greenwich Land do not like that decision and disagree with it and want another bite at the apple. But, Your Honor, that's law of the case at this point. You know, the law is clear that when a legal determination is made in a case, it should continue to control unless there is some manifest change in the law or factual circumstances in the case.
And certainly, in a case like this where we hear affiliate after affiliate after affiliate come to court and make the same objections and the same complaints and the same -- everybody says they're trying to cooperate. Bou know, if people were cooperating, you'd think there'd be more cooperation. It's pulling teeth to get any document.
We can't have the same arguments recycled over and over and over again. This issue has been dispensed with. Your Honor ruled. There's already been prejudice to the trustee from this objection, because it's delayed the issuance of the subpoena. We need to move forward. To the extent that Your Honor would even consider
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| 1 | and entertain the merits of the objection, I would just note |
| 2 | that as a payment transfer and management program, to the |
| 3 | extent that Greenwich Land was somehow involved with this -- |
| 4 | with transfers, it ought to have had the records.
Those |
| 5 | records ought to have already been produced to the trustee |
| 6 | in accordance with the trustee's subpoenas to Ms. Ngok and |
| 7 | Greenwich Land.
The notion that they're somehow prejudiced |
| 8 | that we could get this from another source is fanciful. |
| 9 | And to the extent that Greenwich Land legitimately |
| 10 | believes that it needs discovery and to participate in |
discovery in order to determine what its own financial conduct is, because, I mean, that seems to be the practical meaning of the argument, nothing here is stopping Greenwich Land from taking its own discovery under the Part -- Part 7 of the Bankruptcy Rules in the adversary proceeding.
So unless Your Honor has any questions, that's all we have to say about the Greenwich Land objection.
THE COURT: I don't have any at the moment. Thank you.
MR. LINSEY: Thank you, Your Honor. THE COURT: Attorney Major, go right ahead. MR. MAJOR: Good afternoons, Your Honor. Chris Major, Meister Seelig & Fein. We represent Greenwich Land LLC and Ms. Ngok.
Counsel for the trustee just indicated that they
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| 1 | were prejudiced by the fact that we objected to the Rule |
| 2 | 2004 motion, which, of course, was our right.
But the only |
| 3 | delay that was caused is because the trustee chose not to |
| 4 | serve a subpoena under Rule 45 which he was free to do in |
| 5 | the context of the adversary proceeding where our clients |
| 6 | are the defendants. |
| 7 | A Rule 2004 exam, to start from the top, the |
| 8 | only -- relevance is not the only question.
It's up to the |
| 9 | trustee to demonstrate first that the information that the |
| 10 | trustee is seeking is relevant but then also, as the case we |
| 11 | cite in our opposition establishes, the trustee must |
| 12 | establish that either the 2004 is necessary or that without |
| 13 | it the trustee would suffer undue hardship or injustice. |
| | |
The trustee has only identified Greenwich Land as the relevant entity for which it believes it -- he needs discovery under Rule 2004. I know that counsel for the trustee just indicated that they believe there are others.
The only thing they've said in their papers, they've done a year-long investigation. We've heard about it all day. The only thing they say is in their opening Rule 2004 motion where they spend a grand total of a paragraph describing the relevance of Bento. And they say on page 5 "potentially other affiliates of the debtor including, among others, Golden Spring." The trustee can't use speculation, which is all that the papers reveal, to
Ho Wan Kwok - June 6, 2023 129 establish that, well, we're not just seeking it in terms of Greenwich Land. In their reply, they only mention Greenwich Land, and they identify no other entities despite all of the 2004s that have been done, despite a year-long investigation. The discovery that they -- THE COURT: It's not quite a year, just to be clear for the record. MR. MAJOR: I'm sorry? THE COURT: It's not quite a year, just to be clear for the record. I don't -- MR. MAJOR: Oh, just about. THE COURT: I believe that the trustee was not appointed until July of last year. So go right ahead. MR. MAJOR: Understood, Your Honor. The discovery that the trustee wants can be had in the context of the adversary proceeding. And it's easy for the trustee to do. He just has to serve a Rule 45 subpoena. He does have to, obviously, give us a copy of the subpoena before it's served under the Federal Rules of Civil Procedure which unquestionably govern the adversary proceeding. And then he would have to serve us with the notice of deposition providing us with the date and time of the deposition. The Court and the trustee have both described today the nature of a 2004 exam and that courts refer to it Case 22-50073 Doc 1907 Filed 06/14/23 Entered 06/14/23 21:33:14 Page 129 of
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| 1 | as being permissible to conduct a fishing expedition.
Well, |
| 2 | that's not the case in an adversary proceeding -- |
| 3 | THE COURT:
I understand. |
| 4 | MR. MAJOR:
-- which is a lawsuit. |
| 5 | THE COURT:
I understand. |
| 6 | MR. MAJOR:
And the trustee is not seeking to |
| 7 | examine the affairs of the debtor here.
He's not seeking to |
| 8 | see if he has a claim.
He told this Court he had a claim. |
| 9 | He filed the lawsuit.
Not only did he do that, he obtained |
| 10 | ex parte relief, a temporary restraining order, and |
| 11 | certified that he had sufficient information for doing so. |
| 12 | So he's already charted the course here, which |
| 13 | he's suing our clients in order to take back Ms. Ngok's |
| 14 | home.
And he's established -- or asserted to the Court that |
| 15 | he has -- already has the evidence of that.
He's identified |
| 16 | Bento, and the only entity that he's affirmatively connected |
| 17 | it to is Greenwich Land which is a defendant in the |
| 18 | adversary proceeding. |
| 19 | There's no question that this discovery is being |
| 20 | taken for that purpose.
And, therefore, our client is |
| 21 | entitled to participate in that deposition and to have |
| 22 | advanced notice of it.
The discovery cannot be taken under |
| 23 | Rule 2004. |
| 24 | I just refer the Court also back to last week when |
| 25 | we were before Your Honor on the scheduling issues when |
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| 1 | Mr. Luft said that everything the trustee's doing in terms |
| 2 | of his investigation is work product, which means he's going |
| 3 | to argue -- when I serve the trustee with discovery, he's |
| 4 | going to argue I'm not entitled to it and that he can go |
| 5 | take discovery, which he's representing to the Court is |
| 6 | relevant to my client in a pending adversary proceeding. |
| 7 | He's going to take the position that I'm not entitled to see |
| 8 | that. |
And I think that that's not only improper but grossly unfair under the circumstances. He hasn't attempted a showing that he can't get this discovery through the adversary proceeding. And I think that's what he would have to do to meet the standard that he'd suffer undue hardship or injustice if he can't get the 2004.
He can get this discovery. I'm not contesting the discovery. In fact, I want to participate in the discovery. But he can't get it under the -- in the context of a Rule 2004 exam.
I think also it's worth pointing out that the pending action doctrine, there is no case cited by the trustee where an objecting party in an adversary proceeding was unable to participate in the discovery. The purpose of the doctrine is to prevent the lack of application of the Federal Rules of Civil Procedure to the discovery. The Federal Rules of Civil Procedure are not limited to party
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| 1 | discovery.
They apply, of course, to third-party discovery |
| 2 | which is what this is going to be. |
| 3 | And Rule 45 is the particular rule.
That rule has |
| 4 | to be enforced in the context of the adversary proceeding. |
| 5 | This motion was filed long after the trustee filed the |
| 6 | adversary proceeding and could have even without filing this |
| 7 | motion -- they don't need the permission of this Court at |
| 8 | this point to take the deposition testimony of Bento if they |
| 9 | have a reasonable belief that it has some connection to |
| 10 | Greenwich Land. |
| 11 | They just had to serve the subpoena which could |
| 12 | have been done long ago.
So any delay here is the cause of |
| 13 | the trustee trying to take discovery with broader than |
| 14 | permissible rules in the context of an adversary proceeding |
| 15 | and outside the purview of our client participating in it |
| 16 | and being able to enforce their rights in connection with |
| 17 | the discovery. |
| 18 | The last thing I'd like to address, Your Honor, is |
| 19 | the law of the case.
The Court's ruling, which is quoted in |
| 20 | the trustee's reply, was that "Upon consideration of the |
| 21 | pleadings, the arguments advanced at the hearing, the facts |
| 22 | and circumstances of this case, and of the applicable law, |
| 23 | the Court finds that the pending proceeding doctrine is not |
| 24 | a bar to the examinations of Apsley Yachts Limited and DWF |
| 25 | LLP, because they are not parties to the pending adversary, |
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| 1 | HK International Funds Investments USA Limited v. Despins," |
| 2 | and it cites the main Kwok case at that point in time. |
| 3 | There was not a ruling as to Bento.
There was not |
| 4 | a ruling as to our client's particular objection.
The law |
| 5 | of the case doctrine is designed to take specific rulings |
| 6 | and make sure that those are consistent if -- and it's on a |
| 7 | mandatory basis if it comes from an appellate court in that |
| 8 | case.
And it's on a discretionary basis if it's from the |
| 9 | trial court in that particular case. |
| 10 | Our clients obviously did not participate in |
| 11 | whatever the prior hearing was.
The issues that are before |
| 12 | the Court right now, which is you have a witness identified |
| 13 | who is identified and only tied affirmatively by the trustee |
| 14 | through allegations in a pleading, not in -- not with any |
| 15 | proof, tied to the defendant in the adversary proceeding, I |
| 16 | think on the facts that are now before the Court -- I don't |
| 17 | think the law of the case doctrine bars it.
But on the |
| 18 | facts that are now before the Court, my clients are entitled |
| 19 | to participate in the discovery.
And it can be done in the |
| 20 | context of the adversary proceeding with a plain vanilla |
| 21 | Rule 45 subpoena with the federal rules governing it. |
| 22 | If the Court finds that the law of the case is |
| 23 | implicated here, the case law that's been cited, including |
| 24 | by the trustee in In Re ServiCom and many, many other cases |
| 25 | establish that the Court is not -- the law of the case |
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| 1 | doctrine at most in this context, which I don't think it |
| 2 | applies, but even if the Court finds that it applies, it at |
| 3 | most should be part of the guide of the Court's discretion. |
| 4 | Well, what I would ask the Court to do is to look |
| 5 | at the facts and circumstances.
Look at the words that the |
| 6 | trustee wrote in the motion papers where the only |
| 7 | affirmative tie is to Greenwich Land and to note that not |
| 8 | only did the trustee feel comfortable enough to file the |
| 9 | lawsuit, he felt comfortable enough to get ex parte |
| 10 | extraordinary relief in the form of a temporary restraining |
| 11 | order and prejudgment attachment on the basis of his belief |
| 12 | that he had enough to bring that lawsuit and to get that |
| 13 | extraordinary relief. |
| 14 | And so for all of those reasons, Your Honor, I |
| 15 | think under the facts and circumstances of this case and the |
| 16 | adversary proceeding that is a separate adversary proceeding |
| 17 | from the other case, the Court should require the trustee to |
| 18 | take the discovery under Rule 45 and not under Rule 2004, |
| 19 | because we do have a pending lawsuit where the federal rules |
| 20 | apply. |
| 21 | THE COURT:
Thank you. |
| 22 | MR. MAJOR:
Thank you, Your Honor. |
| 23 | THE COURT:
Any response, Attorney Linsey? |
| 24 | MR. LINSEY:
Yes.
Just briefly, Your Honor.
A |
| 25 | couple things.
First of all, Mr. Major is correct that the |
| | |
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| 1 | scope of a Rule 2004 examination is broader than Rule 45 |
| 2 | subpoena discovery in an adversary proceeding.
And that's |
| 3 | important here, because the subpoena that the trustee wishes |
| 4 | to issue to Bento addresses subject matter that is |
| 5 | substantially broader than the existing adversary |
| 6 | proceeding. |
| 7 | We have seen enough of the trustee's -- rather the |
| 8 | debtor's entities and affiliates in this case to understand |
| 9 | how the economics of these entities work.
Assets and cash |
| 10 | flow through these entities like water.
There are numerous |
| 11 | transfers between these entities. |
| 12 | Bento was the tool that was apparently used to |
| 13 | make some of these transfers.
And so it is obvious the |
| 14 | facts and the records that we are seeking from Bento are |
| 15 | going to have implication far beyond this one existing |
| 16 | adversary proceeding that's impossible to cabin the scope of |
| 17 | the Rule 2004 subpoena that the trustee wishes to issue into |
| 18 | 45 discovery in an adversary proceeding. |
| 19 | The Court has looked at this specific legal issue |
| 20 | before.
And at ECF Number 1184, the Court has ruled on it. |
| 21 | And if every time we have a new omnibus Rule 2004 motion |
| 22 | we're going to have to have the same arguments again and |
| 23 | it's going to be held up every time, it just adds further |
| 24 | expense and delay to this case. |
| 25 | And, again, the trustee has been specifically -- |
| | |
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| 1 | has specific knowledge through the trustee's investigation |
| 2 | that Bento was used by entities other than Greenwich Land. |
| 3 | So to the extent that Greenwich Land believes that it needs |
| 4 | to obtain Rule -- rather it needs to obtain discovery from |
| 5 | Bento, it's free to do that under the Part 7 rules.
It |
| 6 | ought to have those records.
Because there's -- I have a |
| 7 | Venmo account, Your Honor.
I can tell you any money that I |
| 8 | send or is sent to me through my Venmo account.
It ought to |
| 9 | be able to do the same thing. |
| 10 | It should have produced those records a long, long |
| 11 | time ago.
It's not -- it shouldn't be using procedural |
| 12 | technicalities now to try to constrain what is a |
| 13 | multifaceted investigation where the trustee is going to |
| 14 | obstruct it at every turn.
Thank you, Your Honor. |
| 15 | THE COURT:
Thank you. |
| 16 | MR. LUFT:
Your Honor, may I address one small |
| 17 | issue? |
| 18 | THE COURT:
Yes. |
| 19 | MR. LUFT:
Thank you, Your Honor.
Avi Luft.
I |
| 20 | just -- there was a reference made to what we had last week |
| 21 | with regard to the Greenwich Land proceeding and the idea of |
| 22 | work product.
I just want to touch on this for one moment. |
| 23 | This sort of hits the nail on the head. |
| 24 | Mr. Major is free to take whatever discovery he |
| 25 | wants of Bento if he thinks it's pertinent to his case.
And |
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| 1 | just as the trustee would be free to take discovery in that |
| 2 | case of Bento to the extent he thinks it's pertinent in that |
| 3 | case.
And we'll -- and the normal rules in an adversary |
| 4 | proceeding would apply. |
| 5 | What I heard Mr. Major complaining about was the |
| 6 | idea that I've indicated that he can't just call the trustee |
| 7 | and say I'd like your work product.
I'd like to see what |
| 8 | you're developing in your investigation.
And I worry that |
| 9 | that's where we're heading. |
| 10 | And I don't want to come back in front of you for |
| 11 | no reason, so I'll be very clear.
That's right, Your Honor. |
| 12 | I do not have any intention of handing my work product over |
| 13 | to Mr. Major.
If he'd like to know anything about Bento, he |
| 14 | is welcome to seek discovery from them. |
| 15 | Now, what Mr. Linsey was just talking about was a |
| 16 | scope -- 2004 examination, because Bento seems to be |
| 17 | involved with multiple aspects of the debtor's case.
That's |
| 18 | what we'll be searching for.
The admissibility and |
| 19 | usefulness of that information will be addressed at the |
| 20 | time.
If it's inadmissible, then we will have to go get it |
| 21 | another way with regard to the other case. |
| 22 | But, quite frankly, that shouldn't have any |
| 23 | bearing on the trustee's ability to investigate.
And the |
| 24 | fact that Mr. Major is -- doesn't get a free preview of what |
| 25 | we're investigating through our work product should also |
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| 1 | have no bearing, Your Honor. |
| 2 | THE COURT:
Okay.
Thank you. |
| 3 | Mr. Major, any response? |
| 4 | MR. MAJOR:
Your Honor, I'll just respond briefly |
| 5 | on one point, which is the pending action doctrine exists |
| 6 | for a reason.
And the reason for that is to make sure that |
| 7 | the federal rules apply to the discovery in an already filed |
| 8 | action.
And that's what we have here. |
| 9 | We've addressed the case law.
There is no basis |
| 10 | for the trustee here to take discovery.
Which they keep |
| 11 | saying there are all these entities that are involved.
They |
| 12 | haven't identified a single one beyond Greenwich Land.
They |
| 13 | only said potentially others.
They're saying here that |
| 14 | there are many others.
You know, the words are changing a |
| 15 | little bit. |
| 16 | But at the end of the day, the trustee could have |
| 17 | very easily either today stood up and identified somebody or |
| 18 | put something in the papers or demonstrated it otherwise |
| 19 | very easily.
I don't think that our clients and the Court, |
| 20 | frankly, should have to just take the trustee's word for it |
| 21 | on all of these various issues.
He's not being deprived at |
| 22 | all of discovery if he follows the rules, and we just ask |
| 23 | that the Court require he do so. |
| 24 | THE COURT:
Okay.
Thank you. |
| 25 | MR. MAJOR:
Thank you. |
| | |
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| 1 | THE COURT:
All right.
What I'm going to do with |
| 2 | this motion is I'm going to, again, take this under |
| 3 | advisement.
I need to think about the arguments that were |
| 4 | made by counsel today and -- but, again, my goal is to rule |
| 5 | on this quickly.
That's what I'm hoping to do.
There are |
| 6 | several discovery matters today that I have to rule on, so |
| 7 | that is what I will do. |
| 8 | Anything further from anyone else this afternoon? |
| 9 | Okay.
Then I believe we have addressed all of the matters |
| 10 | on today's calendar.
And for that reason, Court is |
| 11 | adjourned. |
| 12 | IN UNISON:
Thank you, Your Honor. |
| 13 | THE CLERK:
All rise.
Court is adjourned. |
| 14 | (Proceedings concluded at 4:10 p.m.) |
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| 2 | I, CHRISTINE FIORE, court-approved | |
| 3 | transcriber and certified electronic reporter and | |
| 4 | transcriber, certify that the foregoing is a correct | |
| 5 | transcript from the official electronic sound recording of | |
| 6 | the proceedings in the above-entitled matter. | |
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| 9 | June 13, 2023 | |
| 10 | Christine Fiore, CERT | |
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