---
type: court_doc
id: "court_ctb_314_0"
court: "CTB"
case_no: "22-50073"
doc_number: 314
doc_type: "UNKNOWN"
filed_date: "2022-05-02"
lang: "zh"
url: "https://mubeitech.com/court/court_ctb_314_0"
json_url: "https://mubeitech.com/api/court/court_ctb_314_0"
---
# | UNITED STATES BANKRUPTCY COURT
> 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 |
| --------------------------x
In Re:
:
Case No. 21-50073
: |
| HO WAN KWOK,
:
Chapter 11
Debtor.
:
--------------------------x
March 23, 2022 |
| Brien McMahon Federal Bldg.
915 Lafayette Street
Bridgeport, Connecticut |
| PRELIMINARY HEARING |
| (Transcription from Electronic Recording) |
| Held Before: |
| THE HON. JULIE A. MANNING |
| United States Bankruptcy Judge |
| Transcription Services of
FALZARANO COURT REPORTERS, LLC
4 Somerset Lane
Simsbury, CT
06070
860.651.0258
www.falzaranocourtreporters.com |
2
```
A P P E A R A N C E S:
For the Debtor:
BROWN RUDNICK, LLP
Seven Times Square
New York, New York 10036
212-209-4800
BY: BENNETT SILVERBERG, ESQ.
BROWN RUDNICK, LLP
185 Asylum Street
Hartford, Connecticut 06103
860-509-6500
BY: WILLIAM BALDIGA, ESQ.
For Pacific Alliance Asia Opportunity Fund, LP
(PAX):
O'MELVENY & MYERS, LLP
Times Square Tower
7 Times Square
New York, New York 10036
212-326-2000
BY: STUART M. SARNOFF, ESQ.
DIANA PEREZ, ESQ.
O'MELVENY & MYERS, LLP
1625 Eye Street, NW
Washington, DC 20006
202-383-5300
BY: PETER FRIEDMAN, ESQ.
ROBINSON & COLE
280 Trumbull Street
Hartford, Connecticut 06103
860-275-8275
BY: PATRICK BIRNEY, ESQ.
For Golden Spring New York, Limited, Proposed
DIP Lender:
COHN BIRNBAUM & SHEA P.C.
100 Pearl Street
Hartford, CT 06103
860 493 2200
BY: SCOTT ROSEN, ESQ.
```
```
3
```
```
A P P E A R A N C E S (cont.):
For the U.S. Trustee:
OFFICE OF THE UNITED STATES TRUSTEE
The Giaimo Federal Building
150 Court Street - Room 302
New Haven, Connecticut 06510
203-773-2210
BY: HOLLEY CLAIBORN, ESQ.
For Rui Ma, et al.:
CALLARI PARTNERS
1 Rockefeller Plaza #10
New York, NY 10020
(212) 202-3055
BY: CAROLLYNN CALLARI, ESQ.
MCELROY DEUTSCH MULVANEY & CARPENTER
1300 Mount Kemble Ave,
Morristown, New Jersey, 07960
(860) 241-2637
BY: PETER ZARELLA, ESQ.
```
(Proceedings commenced at 2:12 p.m.) THE CLERK: Case number 22-50073 Ho Wan Kwok. THE COURT: Okay. Good afternoon. If we could have appearances for the record, starring with the debtor's counsel, please. Good afternoon, your Honor. William Baldiga of Brown Rudnick for the debtor with my partner Ben Silverberg. THE COURT: Good afternoon. MR. SILVERBERG: Good afternoon. MR. ROSEN: Good afternoon, your Honor. Scott Rosen for Golden Spring New York, Limited, the proposed DIP lender. THE COURT: Okay. Let me stop you right there. Did you -- I -- is there a motion for DIP financing that's been filed? MR. BALDIGA: Not on for today, your Honor. It was just filed this morning. THE COURT: Okay. Well, that's why I don't know what's going on. MR. BALDIGA: Nobody leaked today. THE COURT: Attorney Rosen, did you -- I'm sure you did, but I'm asking, did you
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 5 of 123
file a notice of appearance? MR. ROSEN: I was just retained and I will be filing a notice of appearance. THE COURT: Okay. Thank you. MR. ROSEN: Got by tomorrow morning. THE COURT: Thank you. Okay. Go ahead, counsel. MR. FRIEDMAN: Good afternoon, your Honor. It's Peter Friedman from O'Melveny Meyers on behalf of PAX and I'm joined by Diana Perez and Stuart Sarnoff of O'Melveny and Meyers. And good afternoon, Mr. Birney. THE COURT: Good afternoon. MR. BIRNEY: (Indiscernible) Birney of Robinson Cole. THE COURT: Good afternoon. MS. CLAIBORN: Good afternoon, your Honor. THE COURT: A couple of -- oh, I'm sorry. Go ahead Attorney Claiborn. MS. CLAIBORN: Sorry, we ran out of seats. So. THE COURT: That's okay. MS. CLAIBORN: Holley Claiborn for the
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 6 of 123
U.S. Trustee. THE COURT: You want another chair from over here? MS. CLAIBORN: That's okay. I'm good with the bench. THE COURT: Okay. Go ahead, counsel. If you could just come forward because you need to -- our record is only audio, so you have to speak into a microphone. MS. CLAIBORN: You want me to come back up? THE COURT: Sure, you can come -- whatever you're comfortable. MS. CLAIBORN: As long as you -- however you're going to hear me best. MS. CALLARI: Good afternoon, your Honor. Carollynn Callari with Callari Partners on behalf of Rui Ma and certain other creditors. You have, thankfully, approved my pro hoc vice at entry 89. I am here with the sponsoring counsel. Kristen Mayhew was unable to be here, but her colleague Peter Zarella from McElroy Deutsch is here with me.
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 7 of 123
| 1 | THE COURT:
Okay.
Thank you very much. |
|----|--------------------------------------------------|
| 2 | And, you know, you don't have to sit |
| 3 | all the way back there.
I mean, you can sit |
| 4 | closer.
Whatever you might desire, okay?
I |
| 5 | know we're trying to maintain social |
| 6 | distancing as well, but whatever you're |
| 7 | comfortable with.
Sorry if there aren't |
| 8 | enough chairs. |
| 9 | MS.
CLAIBORN:
Okay.
Thank you. |
| 10 | THE COURT:
Okay.
A couple of |
| 11 | housekeeping matters before we start on |
| 12 | anything today.
So and these are just |
| 13 | things that are just how the District of |
| 14 | Connecticut works, which maybe is different |
| 15 | from some of your experiences in other |
| 16 | districts, but we don't take phone calls |
| 17 | about questions for things on the calendar. |
| 18 | If you have a question about something |
| 19 | on the calendar, you, you take that |
| 20 | question, you put it in an email to the |
| 21 | appropriate courtroom deputy box, and then |
| 22 | that courtroom deputy will either respond or |
| 23 | not respond depending upon your question. |
| 24 | If your question is how's the judge |
| 25 | going to rule?
I would think that you're |
not going to get a response. If your question is what time do I have to be there? You'll probably get a response, but you should know that regardless.
We don't take phone calls. In the past, there have been -- counsel have taken advantage of that situation and to a point where other people felt that those counsel and those parties were being treated with -- disparately -- or with more of an in, for lack of a better term. And so we don't do that here in Connecticut. So I just want to give everybody notice of that.
Also, I think, you know, there's a lot going on in this case, which I understand and that's fine. We've got a lot of different motions that have been filed. Obviously, I didn't know -- I've been in court all day, so I wouldn't know that there was a DIP financing motion filed.
But we don't need people to submit any binders or any information of exhibits or anything unless you're asked to do so, okay? Because we do everything, we essentially do everything paperless. And when we have
hearings and exhibits are required, the parties to file those exhibits on the docket, and we use the docket to put together the exhibits, essentially. Unless, I say, but you know what, I know you did that, but I still need you to do X, Y, and X and then that's what you'll do. Okay? But we do not need any paper unless we ask for it. Everything is on the computer, okay? So those are just minor housekeeping issues. I do believe, although I could be completely wrong, that most of the motions for admission of visiting counsel have been granted in this case. So I don't think there's any outstanding motions from any of the parties here, but if there is an outstanding motion, would someone bring it to my attention right now? UNIDENTIFIED MALE VOICE: Your Honor, outstanding for PAX, your Honor. THE COURT: Okay. Thank you. And for debtor? MR. BALDIGA: We're good, your Honor. Thank you.
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 10 of 123
| 1 | THE COURT:
Okay.
Okay.
All right. |
|----|---------------------------------------------------|
| 2 | that's helpful. |
| 3 | Then I don't --
oh, yes.
There was one |
| 4 | other housekeeping matter for the debtor. |
| 5 | We had asked during the last hearing, which |
| 6 | I don't have my note in front of me, but it |
| 7 | was a few weeks ago obviously.
To supply a |
| 8 | list of names of people that were referred |
| 9 | to in what --
a presentation that counsel |
| 10 | made, debtor's counsel made during that |
| 11 | hearing.
And I don't think we've received |
| 12 | that list. |
| 13 | And I know that the person in the back |
| 14 | is interpreting, but that's a little --
you |
| 15 | got to try to be a little softer because all |
| 16 | I can hear is you, unfortunately.
And I |
| 17 | won't be able to hear the lawyers, okay? |
| 18 | We need that information because our |
| 19 | record is only audio.
We don't have |
| 20 | stenographers.
There aren't enough
funds in |
| 21 | a budget given to the judiciary for |
| 22 | bankruptcy courts to have a stenograph.
If |
| 23 | you all want to bring in a stenographer, |
| 24 | you're more than welcome to.
I mean, you |
| 25 | have to pay for it and you need to tell the |
Court in advance if you're interested in doing that. But otherwise, our official record -- and that wouldn't be an official record even if you had a stenographer. Our official record is the audio.
And therefore, when there's any kinds of issues with regard to not just peoples' names, but a name of a building or whatever and it's not clear, we're going to need the parties to submit that information to the courtroom deputy. Otherwise, our record won't be clear. And that is obviously of utmost importance to the Court that the record be clear. Okay?
So those are the housekeeping matters I have. Does anyone have any housekeeping matters before we start talking about the case today?
Okay. Hearing none, then we have two matters on today's calendar. The first is the Chapter 11 case management conference that our court in the District of Connecticut has in every Chapter 11 case and then there also is the motion of PAX that was filed and an expedited hearing was
| 1 | granted on that, preliminary expedited |
|----|-------------------------------------------------|
| 2 | hearing on the motion of PAX for the entry |
| 3 | of an order confirming the inapplicability |
| 4 | of the automatic stay or in the alternative, |
| 5 | for relief from the stay. |
| 6 | I have looked at a number of the briefs |
| 7 | and the replies and then the responses and |
| 8 | the replies on that issue and we'll talk |
| 9 | about that when we get to it. |
| 10 | I would make an assumption that I |
| 11 | probably shouldn't make, but I will make the |
| 12 | assumption that given the --
given that |
| 13 | there has been apparently, and I'm not |
| 14 | suggesting I understand every of it --
every |
| 15 | bit of it because there's no way I could at |
| 16 | this point.
But given that there appears to |
| 17 | be protracted litigation between the |
| 18 | creditors and the debtor, I would assume |
| 19 | that there has been no discussions and |
| 20 | certainly no resolution of the motion that's |
| 21 | been filed by PAX.
Am I correct on that |
| 22 | assumption? |
| 23 | Yes.
I got heads nodding. |
| 24 | MR. FREIDMAN:
Your Honor, Peter |
| 25 | Freidman.
As it relates to the debtor, |
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 13 of 123
| 1 | that's correct.
We have reached an |
|----|-------------------------------------------------|
| 2 | agreement with the creditors who filed |
| 3 | conditional statements on language with |
| 4 | respect to a proposed order. |
| 5 | THE COURT:
Okay. |
| 6 | MR. FREIDMAN:
We suggest we were able |
| 7 | to do moments before the hearing, which if |
| 8 | the motion is granted, we will circulate to |
| 9 | everybody before an order is settled.
But |
| 10 | we have not had discussions or --
with |
| 11 | respect to the specific motion that was |
| 12 | filed. |
| 13 | THE COURT:
Okay.
That's fair.
I |
| 14 | just, just asking the question.
Because |
| 15 | what I think I saw and we're not going to -- |
| 16 | we're going to address a few things first |
| 17 | before we really address your motion, |
| 18 | counsel. |
| 19 | But the --
what I believe I saw --
and |
| 20 | I just would like you to tell me if I'm |
| 21 | wrong or right, okay, which all I'm asking |
| 22 | you to do at this point.
Was, that there |
| 23 | was a statement I think or, you know, not a |
| 24 | --
it was a sentence in the paragraph or two |
| 25 | or maybe it was in more than one place, |
where I believe PAX said that you would agree to relief from the automatic stay for the limited purpose of getting the ship, for lack of a better term -- I'm not sure if that's the proper term -- into the jurisdiction of the United States and specifically into the New York Court's jurisdiction. Am I correct that that's what your papers say? MR. FREIDMAN: Yes, your Honor. THE COURT: Okay. That, that's what I wanted to make sure I was reading that properly, okay? Because as I'm sure you know, I've had a lot of things to read and that's fine. I have no problem with that. But, you know, this case, there's obviously there's a lot of different interests at stake on -- in many different, and many different stakeholders. So go ahead, counsel. I'm sorry. MR. FREIDMAN: Just, your Honor, or if the debtor refuses to do that, for an appropriate court to, you know, impose other, other nonmonetary sanctions. THE COURT: Okay. Thank you, Attorney
| 1 | Freidman. |
|----|--------------------------------------------------|
| 2 | All right.
So just give me --
so |
| 3 | Attorney Baldiga or Attorney Silverberg, |
| 4 | which of the two of you are going to make a |
| 5 | presentation in connection with the Chapter |
| 6 | 11 case management conference? |
| 7 | MR. BALDIGA:
I will, your Honor. |
| 8 | THE COURT:
Okay.
Fine.
Thank you. |
| 9 | So as I'm sure you reviewed, we have an |
| 10 | order that in the District of Connecticut |
| 11 | Bankruptcy Court that we issue in all |
| 12 | Chapter 11 cases, where we expect the debtor |
| 13 | and the debtor's here.
I see him, correct? |
| 14 | MR. BALDIGA:
Yes, your Honor. |
| 15 | THE COURT:
Okay. |
| 16 | MR. BALDIGA:
If I could introduce -- |
| 17 | THE COURT:
Sure. |
| 18 | MR. BALDIGA:
Ho Wan Kwok, the debtor |
| 19 | -- |
| 20 | THE COURT:
Yes. |
| 21 | MR. BALDIGA:
And you were right, your |
| 22 | Honor.
That --
he has his interpreter with |
| 23 | him.
I think she's been quieter since your |
| 24 | -- |
| 25 | THE COURT:
Yes, she has and I |
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 16 of 123
| 1 | appreciate that.
Thank you. This room is |
|----|------------------------------------------------|
| 2 | odd.
Sometimes the people in the back I can |
| 3 | hear better than the people in the front.
I |
| 4 | don't know why, but I didn't, you know, I |
| 5 | don't really have any control over that. |
| 6 | But I appreciate that.
Thank you. |
| 7 | MR. BALDIGA:
Let us know if it's |
| 8 | distracting and we'll -- |
| 9 | THE COURT:
And I agree that the |
| 10 | interpreter's already speaking a little more |
| 11 | softly and I'm not hearing her, so I |
| 12 | appreciate that.
Thank you. |
| 13 | MR. BALDIGA:
Thank you, your Honor. |
| 14 | THE COURT:
Okay.
So in our order |
| 15 | scheduling initial Chapter 11 case |
| 16 | management conference, we ask a series of |
| 17 | questions.
You know, we have a numbered |
| 18 | paragraph with 18 things in it, I think. |
| 19 | Yeah, 18 things.
That the judge expects the |
| 20 | debtor and the debtor's counsel to explain |
| 21 | to the Court, just so that the Court can |
| 22 | understand what's happening in this Chapter |
| 23 | 11 case. |
| 24 | So the first, the first and I assume |
| 25 | you are going to tell me this anyway, the |
| 1 | first item
on the list is the nature of the |
|----|---------------------------------------------------|
| 2 | debtor's business and the reasons for the |
| 3 | Chapter 11 filing. |
| 4 | So I understand this is an individual |
| 5 | case and it may not be a business per se, |
| 6 | but my understanding, and maybe I'm wrong, |
| 7 | is that the individual debtor has been in |
| 8 | business.
I don't know if he is in business |
| 9 | at the time.
And operates and is a member |
| 10 | of many --
well, I don't know about.
That's |
| 11 | not fair.
What I've heard is that he's a |
| 12 | member of different corporate entities and I |
| 13 | want to understand that a little better, and |
| 14 | then the reason for this Chapter 11 filing. |
| 15 | I'd like you to start there, please. |
| 16 | MR. BALDIGA:
Certainly, your Honor. |
| 17 | And again for the record, William Baldiga |
| 18 | from Brown Rudnick for the debtor. |
| 19 | All right.
Your Honor, I do reference |
| 20 | as well because we took seriously the order |
| 21 | and we filed at docket 107 Mr. Kwok's |
| 22 | declaration, which went into in some detail |
| 23 | under oath all, we think all,
of the 18 |
| 24 | questions that are listed.
At least those |
| 25 | that relate to this case.
For example, |
| 1 | there is no cash collateral. |
|----|--------------------------------------------------|
| 2 | So, but all the ones that are |
| 3 | referenced.
And the declaration goes into |
| 4 | great length to explain why we're here.
I |
| 5 | would like to make a presentation to that -- |
| 6 | THE COURT:
Sure. |
| 7 | MR. BALDIGA:
--
and to be fully |
| 8 | responsive to you, but I think, you know, I |
| 9 | would be remiss without referencing that. |
| 10 | THE COURT:
No.
And I know it was |
| 11 | filed, counsel.
I
do know it was filed and |
| 12 | I will tell you that I looked at it, but I |
| 13 | didn't read it.
I didn't have the |
| 14 | opportunity to read it fully. |
| 15 | MR. BALDIGA:
There's a lot there.
And |
| 16 | I think it will take some time to --
there's |
| 17 | been a lot of paper filed in the case |
| 18 | already from several parties.
But I will |
| 19 | step back then and first, the debtor has no |
| 20 | business. |
| 21 | THE COURT:
Okay. |
| 22 | MR. BALDIGA:
The debtor is one of a |
| 23 | very large family that grew up in China. |
| 24 | This debtor in his early 20s was supportive |
| 25 | of the protests in Tiananmen Square. |
Watched his brother be shot to death in connection with those protests and from that time on has been a -- was arrested and tortured. And for a while was able to maintain himself as part of a wide-ranging family business in real estate development and other business in China.
After he was released from prison in 1991, the family had some significant success, which we lay out in the declaration as to the real estate development. In fact, the family's business was very successful. Mr. Kwok, however, has been extremely committed to criticism, political speech, which in this country is recognized. In China, very much not so.
He fled to Hong Kong in 2000. And continued to be very critical of the CCP, of the Chinese Communist Party. And in fact, on many websites and so forth, is listed as the most vocal critic of the CCP in terms of the CCP's watch list and desires to be silenced.
He expanded his criticism in 2015. His family, his brothers, his wife, his daughter were all arrested. (Indiscernible) to later closely affiliated with several top CCP officials and a foreign agent, entered into a very significant business transaction with PAX or the parent of PAX.
And Mr. Wu called in 2015, called my client, the debtor, to say that his family would be released from prison if he would cease his political speech. He has not done that. In 2017, in fact -- and this is all in the declaration -- in all of this, during this time, because he was on all of these political watch lists, he cannot maintain business activities.
He cannot even have a bank account. And when he tried to have a bank account, most recently a few years ago, the bank terminated the account. In 2017, he was arrange -- there was arranged a Voice of American interview to be aired on April 19, 2017, in which he was going to be extremely critical of the CCP. During that week, PAX filed its lawsuits, that is the significant driving effect -- event precipitating this Chapter 11 case.
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 21 of 123
| 1 | The CCP had Interpol red notice alerts |
|----|------------------------------------------------|
| 2 | based on fabricated charges seeking his |
| 3 | arrest and extradition to China.
And Mr. Wu |
| 4 | and others sponsored many of the litigations |
| 5 | that you see that are in this --
that are |
| 6 | part of the creditor body here. |
| 7 | Almost all of that litigation or much |
| 8 | of that
litigation is sponsored by the same |
| 9 | foreign agents who are funding the |
| 10 | litigation, admittedly. |
| 11 | Since that time, there have been |
| 12 | several well-publicized events in this |
| 13 | country to target Mr. Kwok.
Mr. Kwok at |
| 14 | paragraph 16, believes that if he were |
| 15 | extradited to China, he would killed.
He |
| 16 | believes that if he were imprisoned here, he |
| 17 | would be killed.
For that reason, he has |
| 18 | 24/7 physical security. |
| 19 | Notwithstanding
that, we have as |
| 20 | exhibits to the declaration, your Honor, |
| 21 | three separate criminal proceedings in this |
| 22 | country, federal criminal proceedings of, of |
| 23 | convictions.
One of a top DOJ lawyer. |
| 24 | Another one of Elliott Broidy, who has been |
| 25 | a significant political operative for trying |
| 1 | to --
he plead guilty and was convicted for |
|----|-------------------------------------------------|
| 2 | lobbying
efforts to have Mr. Kwok extradited |
| 3 | to China, which Mr. Kwok believes would be |
| 4 | for the purposes of his death. |
| 5 | And then another separate criminal |
| 6 | proceeding with Niki Leondakis, also for |
| 7 | lobbying
efforts to the Trump administration |
| 8 | to have Mr. Kwok extradited and he believes |
| 9 | killed. |
| 10 | This is not Mr. Kwok's nightmares, but |
| 11 | these are criminal informations, guilty |
| 12 | pleas and so forth attached to the |
| 13 | declaration
of
public information. |
| 14 | This is, your Honor --
and I'll get to |
| 15 | the business and financial aspects of these |
| 16 | --
I will be the first to acknowledge every |
| 17 | individual Chapter 11 case and I've been |
| 18 | involved in a few, is unusual by its very |
| 19 | nature.
Not many Chapter 11 case are |
| 20 | individuals. |
| 21 | This case is extraordinarily unusual. |
| 22 | I'll be the first to admit, I won't come in |
| 23 | here and stand here and pretend anything |
| 24 | that this case is --
I've been doing this 38 |
| 25 | years.
I've never had a case like this. |
| 1 | And I was --
I
represented the crimes |
|----|-----------------------------------------------|
| | |
| 2 | committee in the Mike Tyson case.
And this |
| 3 | case is extraordinary even compared to the |
| 4 | Mike Tyson case. |
| 5 | But extraordinary does not mean |
| 6 | improper and we condition taking on this |
| 7 | case for Mr. Kwok on the absolute agreement |
| 8 | that he would do everything by the book as |
| 9 | this Court and should and does expect.
And |
| 10 | as we should and do expect. |
| 11 | The debtor will toe the line in this |
| 12 | courtroom.
As an example, in prior |
| 13 | proceedings,
the debtor did take the Fifth |
| 14 | Amendment protection, from time to time. |
| 15 | The debtor understands that while Chapter 11 |
| 16 | debtors have from time to time exercised |
| 17 | their rights, Constitutional rights not to |
| 18 | testify, a Chapter 11 case requires |
| 19 | extraordinary transparency. |
| 20 | The debtor was examined for four hours |
| 21 | yesterday by creditors and by the United |
| 22 | States Trustee.
There was no exercise of |
| 23 | any Fifth Amendment privilege or any other |
| 24 | privilege.
Every single question was |
| 25 | answered and there will be many more hours |
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 24 of 123
| 1 | of testimony and every question will be |
|----|----------------------------------------------|
| 2 | continued to answered. |
| 3 | THE COURT:
Is that at the 341 meeting? |
| 4 | Is that what -- |
| 5 | MR. BALDIGA:
Yes, your Honor. |
| 6 | THE COURT:
Go head.
I'm sorry.
I |
| 7 | just want to make sure. |
| 8 | MR. BALDIGA:
No, that's okay.
I, I'm |
| 9 | try --
and again, but just to give an |
| 10 | example and this won't be the time and place |
| 11 | for a full exposition of these issues, but |
| 12 | on the theory that there are some things |
| 13 | that you just couldn't make up. |
| 14 | But just --
I want the Court to |
| 15 | appreciate that we appreciate --
and this |
| 16 | debtor appreciates just how unusual this |
| 17 | case is and to know that we come before you |
| 18 | appreciating the extraordinary burden we |
| 19 | have to make this Court feel reasonably |
| 20 | comfortable that this case will be conducted |
| 21 | again to your full expectations. |
| 22 | But just to give you an example.
A |
| 23 | three-person creditor's committee was just |
| 24 | formed yesterday.
One member of that |
| 25 | committee, Rui Ma, her lawyers, Arkin |
| 1 | Solbakken, confirmed by letter dated |
|----|-------------------------------------------------|
| 2 | September
30, 2020, that her fees to sue Mr. |
| 3 | Kwok are being paid by a Mr. Zheng Wu, also |
| 4 | known as Bruno
Wu. |
| 5 | THE COURT:
Known as who?
You say also |
| 6 | known as who?
I didn't hear you. |
| 7 | MR. BALDIGA:
Bruno Wu. |
| 8 | THE COURT:
Okay. |
| 9 | MR. BALDIGA:
W-U.
And I apologize for |
| 10 | not providing to the Court the names from |
| 11 | the last hearing.
We will do that this week |
| 12 | as to the last hearing, next
week. |
| 13 | THE COURT:
That'd be, that would be |
| 14 | very helpful to the Court. |
| 15 | MR. BALDIGA:
Well, I apologize we |
| 16 | didn't do that. |
| 17 | The second member of
the committee, Sam |
| 18 | Nunberg.
It had been a personal
friend of |
| 19 | Bruno Wu, he helped arrange Rui Ma's lawyers |
| 20 | for her, Arkin Solbakken.
Mr. Nunberg, a |
| 21 | member of the committee is the subject of a |
| 22 | publically filed in the United States |
| 23 | District Court for the Seventh District of |
| 24 | Florida, in case number 1820983 in Mr. |
| 25 | Kwok's case against Roger Stone.
That Roger |
Stone.
| 2 | Roger Stone's statement as later |
|----|-----------------------------------------------|
| 3 | published in the --
by him, in the Wall |
| 4 | Street Journal and New York Times.
"I, |
| 5 | Roger Stone, retract and apologize as for |
| 6 | statements he has made regarding Guo MD, |
| 7 | also known as Miles
Kwok.
Mr. Stone has |
| 8 | publically stated when Mr. Guo
has been |
| 9 | found guilty and convicted of financial |
| 10 | crimes in and the United States --
in the |
| 11 | United States and that Mr. Guo has violated |
| 12 | U.S. election laws by making political |
| 13 | donations to Hilary Clinton and financing a |
| 14 | Presidential run by Steven Bannon. |
| 15 | All of these statements are not true. |
| 16 | I failed to do proper research before making |
| 17 | those statement and improperly relied on |
| 18 | information conveyed to me by Sam Nunberg," |
| 19 | it's a committee member.
"Between early |
| 20 | September 2017 and the fall of 2017, I |
Bruno Wu."
So that's, those are -- and Bruno Wu, your Honor, just to complete the picture, in his registration as a foreign agent, he
believed the source of that information was
| 1 | served as a vice chairman and
secretary |
|----|----------------------------------------------------|
| 2 | general of the National Committee on China |
| 3 | U.S. relations as an affiliate of the |
| 4 | Carhartt
Institute, a Chinese governmental |
| 5 | think tank
--
not a governmental think tank. |
| 6 | Most of the other members of which
are |
| 7 | senior CCP officials. |
| 8 | That's our committee.
The --
I'm not |
| 9 | disparaging the committee.
I'm just saying |
| 10 | that in and of itself makes this an |
| 11 | extraordinary case.
I will come to later |
| 12 | today why we've already reached out to the |
| 13 | U.S. Trustee to say that even if the U.S. |
| 14 | Trustee had
not moved for the appointment of |
| 15 | an examiner, we think an examiner is in |
| 16 | order. |
| 17 | We don't see how anyone, including the |
| 18 | Court, could be comfortable with the amount |
| 19 | of transparency demanded for a successful |
| 20 | Chapter 11 case without a truly independent |
| 21 | examination of this debtor. |
| 22 | Not only do we consent to the |
| 23 | appointment of an examiner, we will pay for |
| 24 | it.
Mr. Kwok has gone to his family and |
| 25 | said if I'm going to have a transparent |
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 28 of 123
> Chapter 11 case, we need to have an examiner and we need to pay for it. And his family has agreed to do that.
The reason I referenced the DIP motion earlier on and again, I will put this on the list of things that I have never seen before in any other case. Mr. Kwok's sons' family office, represented by Mr. Rosen, is committed to make as \$8 million DIP loan fully subordinated to all valid creditor claims. No security, no administrative priority, not even on par with creditor claims. So that it doesn't come out in any creditor pocket.
Millions of dollars of that are earmarked for an examiner so that things can be done right. And so you don't need to just rely on me or Mr. Kwok telling you that we know this and we know that.
So that's one other example of us intending to move this case in the right direction. We filed -- we needed a couple of extra days. The burdens of interpretation from back and forth to China when you absolutely insist that everything
| 1 | be done perfectly, the interpretation does |
|----|------------------------------------------------|
| 2 | present a timing challenge, but we filed our |
| 3 | schedules, a statement of affairs. |
| 4 | Mr. Kwok has engaged very experienced |
| 5 | and truly independent counsel and financial |
| 6 | advisor, that is none of us have anything to |
| 7 | do with Mr. Kwok or any of his creditors or |
| 8 | family members or whatever, until shortly |
| 9 | before the case.
A few days before the |
| 10 | case.
Truly independent. |
| 11 | As I said, Mr. Kwok was examined |
| 12 | yesterday for more than four hours.
He |
| 13 | answered every single question.
And as |
| 14 | fully said, you tell me when to come back, |
| 15 | I'll do it again.
And we'll I'm
sure be |
| 16 | examined for several more hours. |
| 17 | Again, the interpretation's make it a |
| 18 | challenge, but that's --
he's committed to |
| 19 | do that. |
| 20 | We filed this comprehensive declaration |
| 21 | in a individual Chapter 11 case with this |
| 22 | extraordinary, that the debtor goes under |
| 23 | oath as to everything that has led up to the |
| 24 | case.
He's done in a fully transparent way, |
| 25 | but he thought that was important. |
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 30 of 123
| 1 | We consent to the appointment of an |
|----|------------------------------------------------|
| 2 | examiner.
We will provide for the DIP |
| 3 | financing to do that. |
| 4 | Your Honor, we commit to file a plan in |
| 5 | the next 20 days.
Chapter 11 case is all |
| 6 | about treatment of creditors and we will do |
| 7 | that.
This case will be too expensive to |
| 8 | dwindle for months and months and months. |
| 9 | We want --
in some ways this case is |
| 10 | extraordinary in many ways.
But at the end |
| 11 | of the day, every Chapter 11 case is about |
| 12 | money or it should be. |
| 13 | Mr. Kwok wants to pay his creditors and |
| 14 | treat them fairly and is committed to do |
| 15 | that.
And the way you do that, we've |
| 16 | explained and he accepts, is to file a plan |
| 17 | and confirm a plan.
All of this, including |
| 18 | today, is to give us a chance to pay our |
| 19 | creditors and treat them fairly. |
| 20 | We will find out, your Honor, and you |
| 21 | will find out whether our --
what our |
| 22 | creditors want.
If our creditors want to be |
| 23 | paid fairly on their claims and have their |
| 24 | claims allowed in fair amounts, then this is |
| 25 | going to be a very successful Chapter 11 |
case.
| 2 | If on the other hand, PAX and the other |
|----|------------------------------------------------|
| 3 | creditors who filed their claims, most of |
| 4 | them within a few-week period, around a |
| 5 | Voice of America broadcast, all in an effort |
| 6 | to silence --
at the same time Mr. Kwok's |
| 7 | family was arrested in China, if, if their |
| 8 | goal is to have him killed, which Mr. Kwok |
| 9 | believes or to otherwise exercise |
| 10 | retribution or to silence his political |
| 11 | speech, then this is going to be very |
| 12 | difficult. |
| 13 | But we will
have that feeling presented |
| 14 | in this Court because a bankruptcy court is |
| 15 | the time to reduce all of this to claims, to |
| 16 | allowable claims and to satisfy those |
| 17 | claims. |
| 18 | And you will have an opportunity to |
| 19 | evaluate yourself what our creditors, such |
| 20 | as PAX really want.
We hope they are going |
| 21 | to be commercial.
We have some doubts, but |
| 22 | we intend to find out. |
| 23 | By this Chapter 11 case, Mr. Kwok also |
| 24 | admittedly wants to stay out of jail.
If he |
| 25 | goes to jail, he believes he will be killed. |
| 1 | It is that simple.
His --
he intends to |
|----|---------------------------------------------------|
| 2 | exercise his life and liberty to be able to |
| 3 | administer this Chapter 11 case.
He would |
| 4 | not be able to do so in jail. |
| 5 | And when we get to the PAX exact |
| 6 | relief, that they frame in a motion of |
| 7 | relief, it will be ironic I feel to address |
| 8 | exactly what they've asked for, but we'll |
| 9 | come to that in due course. |
| 10 | To go to the issue of Mr. Kwok's |
| 11 | business, he can't even have a bank account |
| 12 | because of the campaign by the CCP.
No bank |
| 13 | will even allow him to have bank account. |
| 14 | On a full-time basis, he is a critic in |
| 15 | memory of his brother, but also more |
| 16 | broadly, of the CCP.
That is his life's |
| 17 | work. |
| 18 | He --
all of his expenses, and we go |
| 19 | into great detail in the declaration
--
are |
| 20 | funded by --
his son is independently very |
| 21 | wealthy.
And his son through his son's |
| 22 | family office, Golden Springs, which happens |
| 23 | to be our DIP lender, funds everything, what |
| 24 | he eats, what he wears, what he rides in. |
| 25 | Mr. Kwok has nothing.
He would be in the |
| 1 | gutter or worse if he didn't have the |
|----|-----------------------------------------------|
| 2 | generosity of his family. |
| 3 | But this is not --
and again, this is |
| 4 | what it will take an examiner to show and to |
| 5 | come to this Court and to report to you and |
| 6 | to everyone else, this is not one of these |
| 7 | cases where it's a self-settled Trust or |
| 8 | other creditor manipulation.
This is a |
| 9 | product of 30 or more years of political |
| 10 | speech that has rendered him unable to work |
| 11 | and unable to have his own assets. |
| 12 | But he is fortunate, indeed, extremely |
| 13 | fortunate to have a wealthy family that |
| 14 | satisfies his needs without him being
able |
| 15 | to earn income.
He has no income. |
| 16 | And the reasons for the Chapter 11 |
| 17 | filing, most succinctly put, is to stay |
| 18 | alive so he can put these creditor claims |
| 19 | behind him through the confirmation of a |
| 20 | Chapter 11 plan. |
| 21 | THE COURT:
Okay.
I --
a couple of |
| 22 | things.
I mean, again, I haven't studied |
| 23 | this because -- |
| 24 | MR. BALDIGA:
Understood. |
| 25 | THE COURT:
--
it was filed on Sunday I |
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 34 of 123
think, right? MR. BALDIGA: Yes. THE COURT: Filed on Sunday and it has several attachments to it, which is fine. I just want to be clear. I haven't gone through it all. MR. BALDIGA: Understood, your Honor. THE COURT: I haven't had the opportunity to do that, number one. Number two, you know, there's a few things that you said there -- and I'm not, I'm just asking questions of you like I did and -- MR. BALDIGA: Of course. THE COURT: -- counsel asking questions and getting answers. So you have no opposition. In fact, I think you said you consent to the United States Trustee's motion to appoint an examiner? MR. BALDIGA: Yeah, we haven't talked about the order and there was a revised order that I haven't even had to -- been able to read, submitted this morning. But to the concept of an examination, one, of an examiner, we agree. We would
| 1 | have asked for it if the United States |
|----|------------------------------------------------|
| 2 | Trustee didn't and third, we will pay for |
| 3 | it.
And I say we, our DIP lender will pay |
| 4 | for it. |
| 5 | THE COURT:
Well, okay.
I'm just |
| 6 | asking questions right now.
We'll get -- |
| 7 | I'll have to speak with the United States |
| 8 | Trustee's office in a little bit. |
| 9 | Obviously, the motion's not on today's |
| 10 | calendar, but it was filed on I think |
| 11 | Saturday.
There's a motion to expedite |
| 12 | associated with it. |
| 13 | If what you're telling me is you |
| 14 | consent, I guess I need to hear from the |
| 15 | creditors and I will, not, not at the |
| 16 | moment, but I will ask you.
Because I don't |
| 17 | --
I mean, if there's an ability, if there |
| 18 | is an ability to agree on something without |
| 19 | the need for a hearing and protracted |
| 20 | findings and things of that nature, then |
| 21 | that would obviously be an avenue that I |
| 22 | would like to explore. |
| 23 | MR. BALDIGA:
Of course. |
| 24 | THE COURT:
If, if there is an |
| 25 | opposition, we'll have to address that. |
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 36 of 123
| 1 | With regard to the DIP financing, I |
|----|-------------------------------------------------|
| 2 | think you said already today that you filed |
| 3 | the motion today.
That you're looking -- |
| 4 | are you, you're looking for expedited relief |
| 5 | is what I'm looking at?
I'm seeing some |
| 6 | things here.
You're looking that, for that |
| 7 | order to enter quickly? |
| 8 | MR. BALDIGA:
But not today, of course. |
| 9 | THE COURT:
Oh, I'm not suggesting it's |
| 10 | going to enter today.
I'm asking you what |
| 11 | are you looking for as far as timing and -- |
| 12 | MR. BALDIGA:
As, as more traditional, |
| 13 | a preliminary hearing and then final |
| 14 | hearing.
They -- |
| 15 | THE COURT:
Well, we do things a little |
| 16 | differently on the preliminary and final |
| 17 | hearing, too.
Now, but it might work in |
| 18 | your case if what you've suggested as a road |
| 19 | map works because we don't normally in a |
| 20 | Chapter 11 case enter a final DIP financing |
| 21 | order on --
as quickly as other courts might |
| 22 | because we want to see what's happening with |
| 23 | the plan. |
| 24 | Now, if you file a plan, I think you |
| 25 | said, I think I wrote down, 20 days or |
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 37 of 123
| 1 | something? |
|----|-------------------------------------------------|
| 2 | MR. BALDIGA:
Yes. |
| 3 | THE COURT:
Then maybe, maybe there |
| 4 | would be a final DIP order in a sooner, |
| 5 | sooner than a later.
But just to be clear, |
| 6 | we don't always enter those final orders as |
| 7 | quickly as some other jurisdictions do in |
| 8 | the Chapter 11 context because we want to |
| 9 | see how the Chapter 11 case is developing. |
| 10 | That doesn't mean it couldn't happen.
I'm |
| 11 | just giving you a heads up. |
| 12 | The same is true with cash collateral. |
| 13 | You know, if we have a cash collateral -- |
| 14 | which I know you're not seeking.
I'm just |
| 15 | giving you an example so you understand what |
| 16 | the Court's perspective is.
We often enter |
| 17 | many interim orders of cash collateral |
| 18 | before we ever get to a final because of all |
| 19 | the provisions that parties want parties to |
| 20 | be bound by, other than themselves in many |
| 21 | cases.
So we don't always do that.
Number |
| 22 | one. |
| 23 | Number two, I know that there's been a |
| 24 | committee formed because I saw the document |
| 25 | and you just confirmed that.
I would |
| 1 | assume, but I could be wrong, that the |
|----|------------------------------------------------|
| 2 | committee will want to retain counsel and |
| 3 | I'll have to
deal with that and we'll have |
| 4 | to deal with the committee's position, too, |
| 5 | on DIP financing in addition to some other |
| 6 | issues. |
| 7 | So it's not a problem from the Court's |
| 8 | perspective, anything you've said.
I'm just |
| 9 | giving you --
I'm trying to set your |
| 10 | expectations I suppose in some respects. |
| 11 | MR. BALDIGA:
And that's very |
| 12 | appreciated, your Honor. |
| 13 | THE COURT:
Okay.
Which is that we |
| 14 | will proceed with whatever we need to |
| 15 | proceed with, but we, we don't always go to |
| 16 | a final hearing on cash collateral, DIP |
| 17 | financing in the same way some other courts |
| 18 | do. |
| 19 | Does that mean that --
as I said, but |
| 20 | that --
it depends upon the facts and |
| 21 | circumstances of each case, okay?
And so, |
| 22 | so with regard to the DIP financing, I just |
| 23 | want to understand what you're looking for a |
| 24 | hearing in a week?
Less than a week?
Ten |
| 25 | days,?
Two weeks?
What are you looking |
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 39 of 123
| 1 | for? |
|----|-------------------------------------------------|
| 2 | MR. BALDIGA:
Well, I don't have the |
| 3 | case calendar in front of me.
There's a |
| 4 | hearing I think coming up.
I don't have it. |
| 5 | THE COURT:
I'll look.
I can look for |
| 6 | you.
Hold on. |
| 7 | MR. BALDIGA:
April 12th? |
| 8 | MR. SILVERBERG:
Your Honor, they asked |
| 9 | for next Monday.
They asked for four and a |
| 10 | half days'
notice. |
| 11 | THE COURT:
Well, that's not going to |
| 12 | happen, so don't -- |
| 13 | MR. FREIDMAN:
That's why I
didn't ask |
| 14 | for it. |
| 15 | MR. BALDIGA:
That's why we -- |
| 16 | THE COURT:
Okay.
I'm not going to do |
| 17 | an \$8 million DIP financing hearing from an |
| 18 | insider essentially
I think is what I heard, |
| 19 | in four days.
That's not going to happen, |
| 20 | so you don't have to worry about that.
As I |
| 21 | just said, we have to wait for the |
| 22 | committee.
I've got to see what the |
| 23 | committee's position --
none of this going |
| 24 | to happen with that urgency. |
| 25 | That doesn't mean we can't start |
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 40 of 123
| 1 | talking about it.
But I'm not going to, I'm |
|----|-------------------------------------------------|
| 2 | not going to put anybody in that position, |
| 3 | including the Court.
Because there isn't |
| 4 | any --
I haven't been told -- |
| 5 | MR. BALDIGA:
April 12th, I believe -- |
| 6 | THE COURT:
April 12th. |
| 7 | MR. BALDIGA:
--
is your -- |
| 8 | THE COURT:
Well, here's what --
I will |
| 9 | tell you, April 12th we have --
we do.
We |
| 10 | have applications, a bunch of retention |
| 11 | professional applications on April 12th in |
| 12 | the afternoon.
What I'm thinking we're |
| 13 | going to end up doing in this case, at least |
| 14 | initially, and it might be throughout the |
| 15 | whole case,
is that we don't schedule the |
| 16 | matters on Tuesdays, which is the regular |
| 17 | calendar hearings
in this Court. |
| 18 | MR. BALDIGA:
Okay. |
| 19 | THE COURT:
But we're going to schedule |
| 20 | them on another day.
And so what we may end |
| 21 | up doing is taking the matters that are |
| 22 | April 12th and moving them to April 13th for |
| 23 | example.
And it will just be hearings in |
| 24 | this Chapter 11 case
that the Court will |
| 25 | hear that day, nothing else.
Because |
| 1 | there's many, many things going on and I |
|----|-------------------------------------------------|
| 2 | think the Court needs to devote the time to |
| 3 | that as opposed to having it be --
appear on |
| 4 | a regular Tuesday hearings calendar in |
| 5 | Bridgeport. |
| 6 | So I think that's likely to happen.
Is |
| 7 | that --
even the one --
even the matters |
| 8 | that appear to be somewhat administeral, but |
| 9 | I'm not sure they are, but that's another, I |
| 10 | mean, you know, you can, we can all talk |
| 11 | about that. |
| 12 | I think even the matters around April |
| 13 | 12th are
probably going to be moved -- |
| 14 | MR. BALDIGA:
Okay. |
| 15 | THE COURT:
--
to a date like April |
| 16 | 13th. |
| 17 | MR. BALDIGA:
I'm sure we'll find a |
| 18 | good day. |
| 19 | THE COURT:
Yeah.
I just don't think |
| 20 | it makes sense to think that we're going to |
| 21 | be able to address issues in a --
on a |
| 22 | Tuesday calendar when, you know, we have to |
| 23 | hear other matters.
It just doesn't make |
| 24 | sense. |
| 25 | MR. BALDIGA:
That's my initial sense |
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 42 of 123
of this case as well, your Honor. THE COURT: Okay. All right. So April 12th or 13th, might work for you on a preliminary hear on DIP financing; is that correct? MR. BALDIGA: Yes, your Honor. THE COURT: All right. I just want to make a note so I get everybody, I get everyone's thoughts down and then I can try to figure out where we're going from here. All right. So with regard to the presentation you've made and the debtor's affidavit or declaration I should say, but as I said, I have read it, but I haven't studied it. I know you've submitted a lot of information. You've told me a lot of things. The one thing that -- there is, obviously, there's the litigation with PAX. I know a little bit about it just given what's been filed. But I think the debtor's involved in other litigation, correct? MR. BALDIGA: Yes, your Honor. THE COURT: Okay. MR. BALDIGA: And they are -- the
| 1 | litigation adversaries are the creditor |
|----|------------------------------------------------|
| 2 | (indiscernible). |
| 3 | THE COURT:
Okay.
And so I guess I'll |
| 4 | need to hear about those at some point and |
| 5 | figure out what's going to happen with those |
| 6 | cases that are pending outside of this |
| 7 | bankruptcy court, right?
I mean, we're |
| 8 | going to have to address that at some --
in |
| 9 | some way. |
| 10 | MR. BALDIGA:
Yes.
And there are two |
| 11 | plaintiff litigations for which the debtor |
| 12 | is plaintiff. |
| 13 | THE COURT:
Okay. |
| 14 | MR. BALDIGA:
And which constitutes |
| 15 | assets of the estate. |
| 16 | THE COURT:
Right. |
| 17 | MR. BALDIGA:
And we've disclosed what |
| 18 | they are and they hopefully will be one of |
| 19 | the sources of one of the means to satisfy |
| 20 | creditors. |
| 21 | THE COURT:
Okay.
All right. |
| 22 | MR. BALDIGA:
The adverse litigations, |
| 23 | I've described some of them.
Many of them |
| 24 | are defamational, called defamation cases. |
| 25 | Others --
but they're sponsored -- |
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 44 of 123
| 1 | ultimately, they all come out of China. |
|----|-------------------------------------------------------|
| 2 | Almost all at about the same time.
All from |
| 3 | a similar funding, including the PAX through |
| 4 | Bruno Wu who's -- |
| 5 | THE COURT:
But they're pending here in |
| 6 | the United States?
All the matters are -- |
| 7 | MR. BALDIGA:
Yes. |
| 8 | THE COURT:
--
pending in the United |
| 9 | States? |
| 10 | MR. BALDIGA:
I believe all in the |
| 11 | United States, yes.
Because Mr. Kwok has |
| 12 | been in the United States since I believe |
| 13 | 2015. |
| 14 | THE COURT:
Right. |
| 15 | MR. BALDIGA:
Or so. |
| 16 | THE COURT:
Okay.
At this moment -- |
| 17 | MR. BALDIGA:
He
--
one
in the
BVI. |
| 18 | I'm sorry. |
| 19 | THE COURT:
I'm sorry.
Say that again. |
| 20 | MR. BALDIGA:
There's one action in the |
| 21 | British Virgin Islands. |
| 22 | THE COURT:
Okay.
Okay.
But how many |
| 23 | total are there?
Did I --
am
I --
is this |
| 24 | like 30 or something did I see? |
| 25 | MR. BALDIGA:
About that, yes. |
| 1 | THE COURT:
Okay.
All right.
I just |
|----|------------------------------------------------|
| 2 | want to make sure I'm reading things |
| 3 | properly.
I'm not missing things.
Okay. |
| 4 | Which I don't think I picked up the British |
| 5 | Virgin Island, but that doesn't mean |
| 6 | anything.
I've been looking and I might not |
| 7 | have seen that. |
| 8 | All right.
Then with regard to this |
| 9 | case management conference, what we often do |
| 10 | and I will do in this case because of -- |
| 11 | there's at least at this point, there's |
| 12 | still a lot of moving parts.
I will |
| 13 | continue this just in case I have more |
| 14 | questions.
I may not.
I may not have any |
| 15 | more questions once I really review the |
| 16 | declaration of the debtor and all the other |
| 17 | questions I may have may come out through |
| 18 | other pleadings from other parties, |
| 19 | including you. |
| 20 | I mean, it may, it may all --
so what |
| 21 | we normally do is I'm going to continue this |
| 22 | conference to whatever the date is that we |
| 23 | all choose and, you know, and I'm going -- |
| 24 | we'll address that towards the end of the |
| 25 | hearing. |
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 46 of 123
| 1 | But even if it
appears on the calendar, |
|----|------------------------------------------------|
| 2 | I may come out and say at whatever that next |
| 3 | hearing is, I really feel that the |
| 4 | conference is concluded and we don't need to |
| 5 | schedule any more.
I'm going to address all |
| 6 | the issues in the pleadings that are pending |
| 7 | on things filed
by the debtor or things |
| 8 | filed by the creditors.
Creditors' |
| 9 | committee, United States Trustee, whatever. |
| 10 | So even though I'm continuing this, I |
| 11 | am not --
I don't know if that really means |
| 12 | I'll ask you anymore --
and obviously if I |
| 13 | do and you're not prepared, I'll give you -- |
| 14 | I mean, we'll figure it out.
It's not a |
| 15 | problem. |
| 16 | MR. BALDIGA:
We'll try to be prepared, |
| 17 | your Honor.
Because we're going to push |
| 18 | this case quickly as I said.
And Chapter 11 |
| 19 | cases get old quickly.
We're going to push |
| 20 | this one to
a conclusion. |
| 21 | THE COURT:
All right.
Well, we'll see |
| 22 | how things go.
But that, that's helpful, |
| 23 | all right?
I don't normally allow anyone to |
| 24 | ask any questions about the case management |
| 25 | conference because you're allowed to |
| 1 | question the debtor at the 341 meeting, |
|----|------------------------------------------------------|
| 2 | which obviously happened yesterday and it |
| 3 | appears the 341 meeting is going --
it's not |
| 4 | --
it's not closed.
It's going to be --
the |
| 5 | debtor's going to be subject to further |
| 6 | questioning. |
| 7 | MR. BALDIGA:
In two weeks, it will be |
| 8 | -- |
| 9 | THE COURT:
Okay. |
| 10 | MR. BALDIGA:
--
yes. |
| 11 | THE COURT:
All right.
So then I feel |
| 12 | I understand, I have a good understanding I |
| 13 | should say.
I'm not saying I have a |
| 14 | thorough understanding, but I have a good |
| 15 | understanding of where things be. |
| 16 | The only thing that I would say that |
| 17 | you didn't talk about that --
and we have to |
| 18 | talk about because of PAX's motion is, when |
| 19 | you talked about filing, the reason for the |
| 20 | filing, you said that the debtor filed to |
| 21 | save his life.
And I'm not quarreling with |
| 22 | that in any way, shape, or form.
But |
| 23 | obviously, the PAX litigation has had an |
| 24 | impact on that as well, because the timing |
| 25 | of the filing and the issue of the decisions |
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 48 of 123
| 1 | out of the New York court had to have |
|----|-------------------------------------------------|
| 2 | impacted what's going on. |
| 3 | And so I think that in order to be |
| 4 | fully accurate, I guess I don't
remember |
| 5 | seeing --
let me just take a look cause I |
| 6 | could have missed it.
So just give me a |
| 7 | second and I'll see if I can find it. |
| 8 | Of the 55 paragraphs, I think it was |
| 9 | 55, we talk about PAX.
In the PAX |
| 10 | litigation you talk about, starting at |
| 11 | paragraph 20 -- |
| 12 | MR. BALDIGA:
Yes. |
| 13 | THE COURT:
--
and you talk about the |
| 14 | loan and you talk about the personal |
| 15 | guaranty, and then you talk about the |
| 16 | restraining order.
And it says you have -- |
| 17 | it says, the debtor says he has no ability |
| 18 | to pay this fine.
So the problem that I see |
| 19 | it with that, for that you're going to have |
| 20 | to address at some point, whether it's in |
| 21 | connection with this motion to --
for the |
| 22 | Court to determine that the State is not |
| 23 | apply or that relief
from the stay should be |
| 24 | granted is for some --
right now you're |
| 25 | getting \$8 million, your client's getting \$8 |
million from a source. Other loans have been made. You're being -- again, I'm not quarreling with any of it. Your firm is getting a retainer of a good amount of money. You say you want to come up with a plan that will be -- that you hope the creditors will accept and as I unfortunately started off this hearing saying, it's clear -- and you know, this happens all the time. I'm not saying there's anything extraordinary to use your terms, about disputes between a debtor and creditors. But I think that for your client to say he has no ability to pay the fine, might, might be problematic at some point. I mean, this is, this case was filed and stayed, the actions that were occurring in the New York court, right? MR. BALDIGA: Yes. THE COURT: I mean that's clear. MR. BALDIGA: Yes. THE COURT: That the, the actions that occurred in the New York court, from what I can see, so just -- again, I'm qualifying
this on what I have reviewed, were very extensive and very detailed. And the judge's findings were very detailed.
And as you know, I think you know, I'm not going to litigate that issue that's been litigated in New York. I mean that's not going to be part of this Chapter 11 case. But I have to listen to creditors who come in and say hey, I got a motion here and I want you to tell -- I want you to find either that the automatic stay does not apply or in the alternative, that we're entitled to relief from the stay.
And so that was one of the reasons I asked the question at the beginning of the hearing and one of the reasons I asked counsel for PAX the question, which was -- and I'm not sure they would be wholly satisfied, but we're going to start talking about the motion for relief from stay. Well, it's not a -- I call it that, but it's really that's the alternative relief. The main relief that's being sought is the inapplicability of the stay. Saying that it doesn't apply cause it fits under (b)(1).
362(b)(1).
| 2 | So let's just assume I agree with them. |
|----|--------------------------------------------------|
| 3 | Just for the sake of argument here.
I'm not |
| 4 | --
I am not ruling right now.
What are you |
| 5 | going to do if I do that, number one?
Or |
| 6 | what are you going to do if I grant relief |
| 7 | from the stay?
Do you, you know, the -- |
| 8 | what, what I --
how I read their papers and |
| 9 | I'm going to give everybody a moment to |
| 10 | talk, but what I want you to think about, |
| 11 | counsel, because I'm going to turn to PAX |
| 12 | and let them present their motion, is what, |
| 13 | what are you going to do? |
| 14 | As you know, the bankruptcy court is |
| 15 | somewhat constrained and required to address |
| 16 | an issue regarding the automatic stay, |
| 17 | whether it's the inapplicability or the |
| 18 | request for relief from the stay on an |
| 19 | expedited basis.
Right?
I mean, you know |
| 20 | that?
You know that's what the rules |
| 21 | provide.
I'm not saying it, it's going to |
| 22 | happen today.
I'm not saying that yet.
I |
| 23 | haven't said that yet. |
| 24 | But what I am saying is you're |
| 25 | suggesting some pretty aggressive things and |
I don't mean aggressive in a bad way. I'm talking about, you know, you said you're going to file a plan in 20 days, you got DIP financing of \$8 million, you want -- you know, you want a lot of things to happen quickly and I understand that.
But then I've got the competing claims of the creditors who, who want a lot of -- at least one thing to happen quickly. They want to go get that boat, right? Isn't that pretty obvious? So have you had any discussions about -- I'm not talking about with opposing counsel. I'm talking about with you, with your client, about trying to -- if you really want to make this work, right, and I'm not suggesting you don't. But if you really want to make this work, don't you think if you're going to get the creditors to be in any way supportive of what happens in this case, don't you think you need to seriously consider what -- and I'm not saying you -- that's not fair. I'm not saying you haven't seriously considered. So let me just step back.
Don't you think you need to address the
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 53 of 123
| 1 | issue of the boat?
Now, here you say, Mr. |
|----|--------------------------------------------------|
| 2 | Kwok says, "I did have access to the boat, |
| 3 | but I did not have the authority to order it |
| 4 | back to New York."
I don't understand that |
| 5 | sentence.
So can you explain that to me? |
| 6 | MR. BALDIGA:
Yes. |
| 7 | THE COURT:
Okay. |
| 8 | MR. BALDIGA:
Mr. Kwok does not own the |
| 9 | boat.
Never did. |
| 10 | THE COURT:
I don't think anybody --
I |
| 11 | don't know if even anybody disputes that. |
| 12 | MR. BALDIGA:
Okay. |
| 13 | THE COURT:
But the, but the New York |
| 14 | judge says doesn't matter whether he owns |
| 15 | it.
He controls
it. |
| 16 | MR. BALDIGA:
He does -- |
| 17 | THE COURT:
That's what, that's what he |
| 18 | said, right?
I mean, I don't think I read |
| 19 | that wrong.
I think the New York --
the |
| 20 | judge in New York said he controls it.
He |
| 21 | didn't -
it, it's if --
so if he controls |
| 22 | it, then, then why would he say, "I do not |
| 23 | have the authority to order it back to New |
| 24 | York"?
How --
so go ahead, explain that to |
| 25 | me.
I'm sorry. |
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 54 of 123
| 1 | MR. BALDIGA:
Cert --
no, certainly, |
|----|------------------------------------------------|
| 2 | your Honor. |
| 3 | And Mr. Kwok does not control the boat. |
| 4 | THE COURT:
Okay. |
| 5 | MR. BALDIGA:
The judge made the |
| 6 | finding that he did.
It doesn't mean that's |
| 7 | right.
It's on appeal.
But it's wrong. |
| 8 | And that's okay.
I mean, sometimes judges |
| 9 | are wrong. |
| 10 | THE COURT:
Yup. |
| 11 | MR. BALDIGA:
But I'm not disputing |
| 12 | that that's what he found. |
| 13 | THE COURT:
Okay. |
| 14 | MR. BALDIGA:
He found that. |
| 15 | THE COURT:
Okay. |
| 16 | MR. BALDIGA:
The specific relief that |
| 17 | PAX has asked for here, and again, this ties |
| 18 | into the earlier presentation and it's --
I |
| 19 | don't think it's by coincidence.
Is the |
| 20 | enforcement of the State court's February 9 |
| 21 | contempt order.
That's the specific relief |
| 22 | here at paragraph 9. |
| 23 | THE COURT:
But I asked counsel at the |
| 24 | beginning of the hearing; didn't I?
I asked |
| 25 | him, aren't you, aren't you really just |
| 1 | wanting
to get the boat back into the |
|----|--------------------------------------------------|
| 2 | jurisdiction of the, of the New York court? |
| 3 | MR. BALDIGA:
But that's not what the |
| 4 | papers say. |
| 5 | THE COURT:
I understand that's not |
| 6 | what the paper said, but that's what I asked |
| 7 | him.
I'm trying to figure out a way --
not |
| 8 | figure out a way.
I'm trying to suggest to |
| 9 | you that it --
we can be here for years |
| 10 | fighting about everything.
You know, it's |
| 11 | happened before.
It'll happen again. |
| 12 | Or we can try to see if there's a way, |
| 13 | and you know, I take you at your word that |
| 14 | the debtor wants to move forward in a |
| 15 | meaningful way to have an --
I can tell you |
| 16 | what you said.
I mean I think you said it |
| 17 | well.
You want to commit to
file a plan in |
| 18 | the next 20 days and Mr. Kwok wants to pay |
| 19 | his creditors fairly and he wants to have a |
| 20 | chance to propose that fair treatment and |
| 21 | treat them fairly.
Okay? |
| 22 | MR. BALDIGA:
Yes. |
| 23 | THE COURT:
So the problem, the problem |
| 24 | that exists, that existed when this case was |
| 25 | filed, right, that has nothing to do with |
| 1 | the bankruptcy itself, was all the findings |
|----|-------------------------------------------------|
| 2 | and all the litigation that went on before |
| 3 | this and I understand you're appealing it. |
| 4 | I'm not --
you know, you have every right to |
| 5 | do all that. |
| 6 | But if, but if you're going to be in |
| 7 | this Court and try to get the cooperation of |
| 8 | the creditors to get a plan confirmed
so Mr. |
| 9 | Kwok can, he's, you know, he wants to move |
| 10 | on and he wants to save his life is what you |
| 11 | said, and I have no real knowledge about all |
| 12 | the in-depth facts that you stated, you |
| 13 | know, about unfortunate events and things |
| 14 | that apparently occurred, but this is a |
| 15 | situation where I'm going to have to rule on |
| 16 | that motion if there isn't an agreement on |
| 17 | that motion, right? |
| 18 | MR. BALDIGA:
Yes. |
| 19 | THE COURT:
I'm going to have to rule |
| 20 | on that.
And you might not --
well, |
| 21 | somebody's not going to like the way I rule. |
| 22 | Whoever it is.
And then there's going to be |
| 23 | an appeal of that, too.
Right?
I mean, |
| 24 | there will be I would assume.
And so then |
| 25 | we're going to be continuing litigation |
| 1 | that's already been continuing in New York |
|----|-------------------------------------------------|
| 2 | for several years.
I think the case was |
| 3 | filed in 2017 I think.
I could be wrong |
| 4 | about that. |
| 5 | MR. BALDIGA:
Judge, the week of the |
| 6 | Voice of America podcast, yes. |
| 7 | THE COURT:
Okay.
So again, I'm, I'm |
| 8 | suggesting to you, to everyone, that sure, |
| 9 | we can do that.
We can continue to litigate |
| 10 | everything in this Court, but I will have |
| 11 | parameters under which that's going to |
| 12 | happen and I have under the bankruptcy code |
| 13 | and the bankruptcy rules, I have to decide |
| 14 | this motion.
And it's going to be fast.
I |
| 15 | mean it's going to be sometime soon. |
| 16 | And so, you know, I don't know if |
| 17 | that's going to work for you or for the |
| 18 | creditors, but I'm going to do that. |
| 19 | And I, you know, what I'm going to do |
| 20 | now is I
have let and I am happy to have let |
| 21 | you talk as long you want.
You're the |
| 22 | debtor's counsel.
You should be talking. |
| 23 | This is what we need to talk about.
But I'm |
| 24 | going to let Attorney Freidman tell me why I |
| 25 | should grant his motion in a minute.
He |
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 58 of 123
| 1 | hasn't
talked yet.
I'm going to let him |
|----|------------------------------------------------|
| 2 | talk. |
| 3 | MR. BALDIGA:
I'm going to --
of |
| 4 | course.
Listen is all. |
| 5 | THE COURT:
And you'll listen and |
| 6 | you'll be able to reply.
This is a |
| 7 | preliminary hearing on the motion that PAX |
| 8 | has filed.
I can do many things with that. |
| 9 | I could, I could order a final hearing |
| 10 | tomorrow.
I'm not going to do that, but I'm |
| 11 | just saying I could do that. |
| 12 | I think you really need --
it is the |
| 13 | obvious issue in the room that we have to |
| 14 | address.
And, you know, I have no problem |
| 15 | in any situation ruling because that's what |
| 16 | I'm supposed to do.
And then I have no |
| 17 | problem if people appeal because that's why |
| 18 | we have courts of appeals.
The judges get |
| 19 | it wrong as you said.
Sometimes the judges |
| 20 | get it wrong and they need assistance from a |
| 21 | higher court to tell them what they did |
| 22 | wrong. |
| 23 | But I'm going to have to rule.
I have |
| 24 | no choice.
I have no choice on a couple of |
| 25 | levels including how the bankruptcy code was |
amended in 2005 that says basically, you know, in 362(e)(2), what I think it is, you know, you got 60 days essentially and then there's no more stay. It's an individual case. Unless I make some other kind of findings. So I'm going to have to do that at some point unless I rule within 60 days, which is also extremely possible.
So I just ask you to listen to -- and I know you will -- Attorney Freidman and I ask you both to consider, you know, where things are going to go after today. I understand -- I've been involved in it when I was a practicing lawyer, I understand when parties don't agree. I understand it. You know, but at some point, at some point at the end of the day, I don't know where that's going to get us, but I'm here. I'll do whatever I can to help you.
But there are certain things I have no control over, as you know. And the relief from stay issue and this motion and the timing that's already started to run, I just think people need to seriously -- and I'm not saying you're not. It comes -- I don't
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 60 of 123
| 1 | --
I want to be very careful.
I am not |
|----|-----------------------------------------------|
| 2 | saying that you're not taking any of this -- |
| 3 | MR. BALDIGA:
Of course, we know |
| 4 | exactly what you mean, your Honor. |
| 5 | THE COURT:
--
of course you are. |
| 6 | MR. BALDIGA:
I appreciate the |
| 7 | opportunity at the outset of this hearing to |
| 8 | have given you as much background as I have. |
| 9 | I will accept your invitation
to sit for a |
| 10 | moment and to listen and I'm sure I'll be |
| 11 | back up in a few minutes to talk further as |
| 12 | to the boat.
Thank you. |
| 13 | THE COURT:
Thank you.
Thank you. |
| 14 | Okay, Attorney Freidman, now I am going |
| 15 | to proceed with your motion, okay.
We |
| 16 | essentially concluded the case management |
| 17 | portion of the hearing, even though I'm |
| 18 | continuing it till a date that we haven't |
| 19 | determined yet, but it will probably be as I |
| 20 | discussed, April 13th. |
| 21 | But that your motion, I granted your |
| 22 | motion to expedite the hearing on your |
| 23 | motion for the Court to determine whether |
| 24 | the stay even applies and if it does, then |
| 25 | for relief from the stay.
So go right |
ahead.
| 2 | MR. FREIDMAN:
Good afternoon, your |
|----|------------------------------------------------|
| 3 | Honor.
It's Peter Freidman from O'Melveny |
| 4 | and Meyers.
I just, I want to make just a |
| 5 | couple of preliminary comments, which is I |
| 6 | actually don't believe that Mr. Kwok wants |
| 7 | to avoid going to jail because if he wanted |
| 8 | to avoid going to jail, he would not have |
| 9 | violated the U.S. code by submitting a |
| 10 | declaration so filled with falsehoods and |
| 11 | lies that it's embarrassing. |
| 12 | And what you uncover in the course of |
| 13 | this case, and I --
unfortunately were |
| 14 | repeated from the lectern.
You will find |
| 15 | out from this case that Mr. Kwok has had |
| 16 | bank accounts.
He's had, you know, people |
| 17 | submit letters on his behalf when he |
| 18 | purchased an apartment, talking about his |
| 19 | long banking relationships.
And that was in |
| 20 | 2015. |
| 21 | You will hear if it ever becomes |
| 22 | necessary, enormous testimony about how he |
| 23 | held himself out as the owner of the |
| 24 | Sheridan Netherlands Apartment despite his |
| 25 | denying that in his declaration. |
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 62 of 123
He lists -- he says in his declaration that the PAX agreement was a forgery. We've put in a footnote all the reasons we know that to be obviously false. The pattern of lying hasn't stopped and it's distressing to see it repeated from the lectern. It's distressing -- Mr. Kwok talked about all the litigation he's been involved with it, much of it for people accusing him -- I don't know if it's true or not -- of being a Chinese spy. I know he's frequently accused of being a Chinese spy himself and a collaborator with the Chinese Communist Party. I have no idea. I don't know if that's true. But he's effectively had his counsel accuse my client of the exact same thing here today with zero basis. It, it's sanctionable in our view for opposing counsel to stand at a lectern and accuse another party with no basis of conspiring with the Chinese Communist Party. It's outrageous. Your Honor, I want to make a few other points. Now, the declaration, which is
docket number 107, which is his declaration, was submitted on a Saturday. Your Honor, Mr. Kwok's opposition to our motion was filed Wednesday and referred to it, the declaration. He didn't file it for four more days. He filed it then just for the heck of it in support of the motion, but he didn't file until today.
It's a litigation by incompetent ambush. And that gives you a sense when Mr. Baldiga says we're going to, we're going to run this case in an appropriate manner and follow every rule. It's just not true.
And the proof, you saw it in the petition. You saw it in the schedules. You see it in the way they conduct this case. So notwithstanding what you heard, I think the actions speak much louder about how this case might go.
I do also want to let the Court know we don't consent to appointment of an examiner. We think and examiner is a tremendous waste of time and money. A trustee should be appointed. We'll be seeking that relief. Obviously we'll be filing an objection to
the examiner motion whenever the Court requires that that be objected to. If the debtor really is going to file a plan within 20 days, we obviously have to get the examiner -- the trustee motion moved very quickly because the interplay between timing for a trustee and timing of a -- of confirmation hearings in a plan. You know, what plan other than I will pay all my creditors in full could make sense here? I don't know. You heard yet again this is somebody who doesn't have any money. It's unclear whose benefit this case is being even run for. But I don't want to get too far out ahead of where things are going go, so I'm going to come back to this particular motion. Your Honor, you had a colloquy with Mr. Baldiga and sort of asked some questions about what Justice Ostrager actually determined in his hearing, in his, in his sanctions order. And I think it's worth looking at the sanctions order because it says --
THE COURT: Can you just point me -- is
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 65 of 123
that, is it an exhibit -- is it Exhibit A? MR. FREIDMAN: It is Exhibit A to the Freidman declaration. THE COURT: Okay. If you give me a second, I'll be able to look at it with you at the same time, okay? MR. FREIDMAN: Okay. (Pause.) THE COURT: Okay. I'll almost there. (Pause.) THE COURT: All right. I think I'm there. Let me just check with you, okay, to make sure I'm looking at the right document. So it says, "Supreme Court of the State of New York, New York County," and then at the top there's an index number and a motion sequence number of 19 -- MR. FREIDMAN: Yes, your Honor. THE COURT: Okay. All right. Go right ahead then. I'm with you. MR. FREIDMAN: So on page 2, the first full paragraph. "On February 2nd, 2022, this court held an evidentiary hearing at which seven witnesses submitted direct testimony by affidavit and were made
available for cross-examination." I'm going to stop quoting. Some of those witnesses were, were -- virtually all those witnesses were Mr. Kwok's witnesses. His family members, people whose testimony he submitted, right? So when he tells you the judge got it wrong, remember what was in front of Justice Ostrager and all the opportunities they had to litigate this matter. Going back to quoting, "Those proceeding established among other things, that Kwok exercised dominion and control over a yacht called the Lady May." As we go to page 4, "The testimony adduced at the hearing out of the mouths of defendant's witnesses clearly and convincingly demonstrated that Kwok beneficially owns and controls the Lady May and has utter contempt for this court and the judicial process." Pause there. Your Honor, if we have to get into it at some point later, we'll also show you tweets where Mr. Kwok accused Justice Ostrager of being a CCP agent. Just to show
| 1 | you how promiscuous he is with that |
|----|-------------------------------------------------|
| 2 | allegation. |
| 3 | Then, your Honor, the last page.
I'm |
| 4 | sorry, page 8.
"Kwok has much more than a |
| 5 | beneficial interest in the Lady May.
Not |
| 6 | only does Kwok control the yacht, it appears |
| 7 | he provided the funds to purchase it and he |
| 8 | is the person who principally enjoys the use |
| 9 | of the
yacht."
These are all facts that a |
| 10 | court of competent jurisdiction has found. |
| 11 | They cannot be whether it's under Rooker |
| 12 | Feldman or collateral estoppel or race |
| 13 | judicata, as this court said they can't be |
| 14 | re-evaluated here. |
| 15 | Mr. Kwok's claim is that he doesn't |
| 16 | have the ability to bring the yacht back |
| 17 | should fall on deaf ears.
Because |
| 18 | defendants claim all the time I didn't do it |
| 19 | after they've been convicted.
It doesn't |
| 20 | make it so.
He doesn't get to just say I |
| 21 | can't do it when a court has found he can |
| 22 | and he has
refused to as an act of utter and |
| 23 | complete contempt. |
| 24 | Mr. Kwok was in contempt of Justice |
| 25 | Ostrager's opinion for 268 days.
And |
Justice Ostrager concluded that if billionaire litigants can simultaneously seek to use the court process in New York and elsewhere in the United States while knowingly and intentionally violating court orders, there is no rule of law. That's what -- by the way, that's what the stakes were in front of Justice Ostrager
and how obviously disturbed he was by this pattern of conduct that Mr. Kwok showed.
But I read you all of those in order to show, your Honor, but that whatever is in the declaration, whatever factual predicates Mr. Kwok wants to make, whatever loopholes he's looking to escape, simply are not available to him in this Court given the breadth -- frankly, even if the findings of fact were cursory, there would still be collateral estoppel, but they aren't. They're deep and based on extensive testimony.
Mr. Kwok's protestation was to the contrary and he can't do it. If they're addressed, they should be addressed in New York State on appeal and Mr. Kwok tried to
get an interim stay of Justice Ostrager's order and interim stay. He couldn't even get that, much less a false stay pending appeal. That's how little the New York Court of Appel -- Appellate Division thought of his, his likelihood of success on the merits. I note when we submitted this in connection with our schedules, Mr. Kwok also put on Getter that if he -- you know, he might consider fleeing the jurisdiction of the United States if the sanctions are (indiscernible) was -- the contempt order
asked whether if the stay is lifted, Mr. Kwok intends on fleeing the United States jurisdiction to avoid the consequences of his contentious behavior. Your Honor, a couple of other points that I wanted to address. Obviously Kwok --
was pursued. Perhaps Mr. Baldiga should be
Mr., Mr. Kwok has sought to remove the action to federal court. Nothing that moots the relief. First of all, it's an obviously deficient form of removal. Rooker Feldman provides that mandatory abstention,
permissive abstention, are out of play. But even if remand was appropriate, there's still an action pending now in the Southern District of New York and the Southern District of New York then can have the stay lifted if it's the appropriate forum to order return of the yacht.
So the removal while a quasi-clever tactic to try to cause delay does nothing to moot our motion or the relief that could be granted if necessary. And we would amend our order to say that, whether it's the State court in New York or the federal court if the action's properly been moved, the stay is lifted.
Your Honor, I want to make another point. That -- just address another point that's in Mr. Kwok's papers. Mr. Kwok says don't lift the stay because if the stay is lifted or the stay is modified I guess to use less colloquial language, the stay -- the code doesn't cover about lifting a stay. It talks about modification or termination of a stay.
Don't do it because then I won't get a
DIP from Golden Spring because my family won't lend me the money under those circumstances.
There's an old parable about Lincoln, right? That Lincoln, Lincoln would describe somebody as, as being like the highway man who comes up to you and says give me your wallet or else I'll shoot you and it will be your fault that I'm a murderer, right? If Kwok's family won't lend him the money and the case goes off the rails, this case can't be pursued because Kwok won't bring a boat back or because the Court lifts the stay, that's on him.
That's not on the creditor body. That's not on this Court. That's a form of, of a hostage taking that I don't think is appropriate to suggest. If they don't want to lend the money, so be it under that circumstance.
What I would say about that is we should stop and think about it, right? These are the people who Kwok says, you know, fund his lavish lifestyle and have done so for years. These are the people who
are going to help resolve claims against the estate, are going to provide a lot of funding to get their dear old dad out of Chapter 11, not have to face sanctions.
But if the relief that's granted -- we ask for is granted, they won't lend money, which doesn't make sense cause if the relief that's granted, one of two things is going to happen. He's going to stop his contentious behavior, I don't know why, and bring the boat back. I don't know why that would prevent them from wanting to lend money other than they feel like their favorite toy has been taken away. Or he'll remain in contempt.
And if he remains in contempt, there's a natural consequence to that behavior. Again, in that circumstance, I guess they're willing, if you take him at his word, to let their dad go to jail and have all the terrible things he claims are going to happen, happen. That also doesn't really make any sense.
So I want to now turn to the legal bases for a motion. We've said the stay
doesn't apply because of the exception that has been recognized by virtually every court. (Indiscernible), we know that a civil contempt order can be exempt from the automatic stays. I spent a lot of time in their paper saying it's -- it's in a criminal contempt order. We agree. It's not. It's a civil contempt order.
But civil contempt orders are exempt from the automatic stay where they are designed to vindicate the interest of a court or -- and are focused on not compensation -- and to be clear here, the hundred and thirty-four million dollar funds completely separate from the underlying judgment that was rendered in our clients' favor. But because there's been an assault on the dignity of a court. And I just -- I want to go back to what I read to you. If -- Justice Ostrager said, if billionaire litigants can simultaneously seek to use court process in New York and elsewhere in the United States, knowingly and intentionally violating court orders, there is no rule of law. I think there couldn't
| 1 | be a clearer statement about what Justice |
|----|------------------------------------------------------|
| 2 | Ostrager thought, the purpose of the |
| 3 | sanction laws. |
| 4 | And it was to, you know, to hold Mr. |
| 5 | Kwok in contempt for refusing to abide by |
| 6 | court orders and insulting the integrity of |
| 7 | the --
indicative of the judicial process. |
| 8 | So I don't --
from that perspective, I |
| 9 | think it, you know, then becomes clear that |
| 10 | this
is the kind of motion, contempt --
a |
| 11 | sanctions order that can be held to be -- |
| 12 | fall within the exception to the automatic |
| 13 | stay. |
| 14 | Well, their arguments, for example, |
| 15 | they rely on the White case.
I think as we |
| 16 | explained in our reply brief, first of all, |
| 17 | the White case recognizes as it has to that |
| 18 | an exception exists to the automatic stay |
| 19 | for civil actions versus for certain civil |
| 20 | kinds of
contempt motions.
That cases
about |
| 21 | collection of
damages, which we're not |
| 22 | trying to seek.
We've been very clear we're |
| 23 | not trying to seek damages.
We're not even |
| 24 | seeking it necessarily --
we not even |
| 25 | seeking imposition of additional fines. |
What we are seeking is to ensure that the Lady May is returned to New York. Now, the February 9th contempt order specifically does require the return of the Lady May and says to the extent the Lady May is not back, fines continue to accrue. We're not actually asking for fines to continue to accrue. We're not seeking damages. We're seeking return of the boat, we're seeking return of the boat for the benefit of all creditors. We can quite clear and we've clarified it even further in our draft order that the boat will remain subject to further order of this Court. So the kinds of concerns that animated cases like White, where one creditor was seeking to obtain a financial advantage for itself in connection with the contempt motion are not present here in any way. Your Honor, I think the, you know, the debtor also tries to draw distinction from some of our cases saying that those cases related to post-bankruptcy, post-petition sanctions orders. And our response to that is the timing may have been different in
those cases, but the analytical framework that the Court evaluated. What's the nature of the sanction? What is the person seeking to lift the stay hoping to achieve by doing it? Are they trying to detract from the estate? Are they trying to agglomerate or accumulate more for themselves? Are they trying to just harass a debtor? None of those factors are present here. We're simply trying to get the debtor to bring back one of its most valuable assets. They say you shouldn't worry about,
yeah, why do you need to that? The boat is subject to worldwide jurisdiction of the bankruptcy court. First of all, I think it's very clear that Mr. Kwok doesn't respect certain bankruptcy -- any court's orders.
Second of all, the asset, even if it's subject to worldwide jurisdiction, could potentially continue to dissipate. It's being used by I don't know who, but it's always at risk. And has Mr. Kwok done the basic things that a debtor ought to do? To assert control over his assets. Has he
filed a turnover motion? Has he sought to hold his family in contempt for -- with respect to the automatic stay for continuing to exercise control over one of his assets? Of course he hasn't. What he's continued to try to do is squirrel out of Justice Ostrager's ruling that it's his boat and that he controls it. So the fact that the boat is also subject to worldwide jurisdiction of this Court and frankly, who knows if the Court in somewhere else, wherever the boat is, would acknowledge the validity of that, is of zero comfort to us. Your Honor, the last point I want to make is with respect to the automatic stay. If the automatic stay is held to be applicable. I think the most important Sonnax factors here is that is that every creditor who's spoken up, our client and the two other creditors, favor this relief. They want the asset back. They don't want it floating out there. It, it benefits all creditors. The only one it doesn't benefit are Mr. Kwok and his family members who are
not legitimate creditors. I know Mr. Kwok didn't talk about Rui Ma and her creditor claim other than to cast dispersions on her. I know her counsel is here. I don't know if she intends on explaining the basis for that claim, but it's a horrifying claim and I'm not surprised counsel didn't go into details about what Mr. Kwok is accused to have done in that case. Not surprised at all. The other Sonnax factors obviously, sort of, they cut in our favor no matter what, right? Either, if there's more protracted litigation to go ahead, nobody better to do it than Justice Ostrager. There may be nothing left to do because the order has already been entered. So it's not like we are dealing with a case that really should be litigated in this forum because it hasn't been address extensively somewhere else. We know it has. Enforcing to the contempt order won't interfere with this case. It's going to help this case. The only way it's going to
interfere with this case is if Kwok lets it.
If Mr. Kwok won't assert his rights, then it will interfere with this case to an extent. But if he does what he's supposed to do, what he's been ordered to do, it will enhance this case, not undermine it. Your Honor, this isn't a real case in the context of the other factors, for example, that are cited in Sonnax. There's no operating business. He has no innocent employees who would be harmed by an injunction. He has no business to deal with except litigate cases. That's all he does. And if he won't abide by the court's ruling in New York and is incarcerated, he can be deposed wherever he is in the future, unless he flees the jurisdiction, but again, I don't think fleeing jurisdiction is a basis or the threat that he might flee jurisdiction is a basis for granting -- for denying stay relief. The two other things I would say, your Honor, is the comparison to Res Cap, is not well taken. I'm sure this Court is well familiar with the Res Cap case and the \$375
billion residential mortgage book that had
to be dealt with that case from over two and a half million different homeowners. Not even apples and oranges. It's pineapples and concrete. How different those are. There's just nothing in common between this case and Res Cap. And the same with Sonnax. The Sonnax was an operating business. This isn't. And if the Court has any questions, we're -- I don't know if anybody thinks something else escaped my attention or I should raise, but I don't have anything further, your Honor, other than I'd like to rebut any opposition. THE COURT: I don't have any questions at the moment. Now, I -- well, that's not true, I do. I set this up as you I'm sure noticed as a preliminary hearing under the Bankruptcy Code and the Rules. What other information, if any, do I need from you, from your perspective to decide -- I mean your clients' perspective -- MR. FREIDMAN: Sure. THE COURT: -- obviously, to decide
| 1 | this motion? |
|----|------------------------------------------------|
| 2 | MR. FREIDMAN:
Not a bit.
And I'd go |
| 3 | further, your Honor to say that Kwok should |
| 4 | be barred from trying to introduce any other |
| 5 | evidence and should not be allowed to rely |
| 6 | on his declaration to the extent it seeks to |
| 7 | reconsider factual matters determined by |
| 8 | Justice Ostrager. |
| 9 | THE COURT:
Okay. |
| 10 | MR. FREIDMAN:
Thank you, your Honor. |
| 11 | THE COURT:
I understand your position. |
| 12 | And I'm just looking to make sure I don't |
| 13 | have any further questions, but I don't |
| 14 | think I do. |
| 15 | MR. FREIDMAN:
Okay. |
| 16 | THE COURT:
At the moment.
No, I don't |
| 17 | at the moment, but thank you, Attorney |
| 18 | Freidman. |
| 19 | MR. FREIDMAN:
Your Honor, I don't know |
| 20 | if any of the other creditors -- |
| 21 | THE COURT:
Yeah, I'm going to ask if |
| 22 | anybody else wishes to be heard on PAX's |
| 23 | motion.
I'm going to let the debtor respond |
| 24 | to --
no, no, come first, counsel.
I'm |
| 25 | going to hear from creditors first and then |
| 1 | I'll let the debtor respond. |
|----|------------------------------------------------|
| 2 | And I'll let PAX respond to the debtor |
| 3 | and that'll be that. |
| 4 | MS. CALLARI:
Hi, good afternoon, your |
| 5 | Honor. |
| 6 | THE COURT:
Good afternoon. |
| 7 | MS. CALLARI:
Carollynn Callari with |
| 8 | Callari Partners, again.
I'm here on behalf |
| 9 | of Rui Ma.
First I just want to say that I |
| 10 | find it --
and I don't know that any of the |
| 11 | counsel in this room.
So it's not meant to |
| 12 | be professionally, but when your Honor sees |
| 13 | the complaint that Rui Ma filed and reads |
| 14 | it, you will understand the disgust I feel. |
| 15 | And any allegation that the merits of her |
| 16 | claim are anything but real and that they're |
| 17 | part of some sort of conspiracy. |
| 18 | When we get to it, your Honor will see |
| 19 | the chronology of the facts of life make |
| 20 | their argument impossible.
That her claims |
| 21 | are just made up by this other person in |
| 22 | part of his scheme to bring down the debtor. |
| 23 | So with that, we support PAX's motion |
| 24 | as modified.
We agree to additional |
| 25 | language.
In our limited statement we |
provided a couple of paragraphs that we thought would be appropriate. PAX's counsel has altered them, but it's a similar concept, which basically means that we support PAX's efforts to basically natural assets of this estate and to bring them back to this estate and then have your Honor determine what happens with them and what is the appropriate priority. And we also noted that this would not
be any advantage to PAX and that any monies received would be subject to this estate and not be superior to any of the other creditors. That was our main concern that this would end up, you know, if, if the monetary damage is continued and they only went to PAX, that would not be beneficial and we have clarified that in the order.
So with that clarification and with the rebuttal to the disparaging remarks on behalf of Ms. Ma, we support PAX's motion. Thank you, your Honor. THE COURT: Thank you.
Does anyone else wish to be heard before I let the debtor respond?
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 84 of 123
| 1 | Okay.
Seeing no one, go ahead, |
|----|-------------------------------------------------|
| 2 | counsel, you can respond to Attorney |
| 3 | Freidman's and attorney for the other |
| 4 | creditor, Ms.
Cicarelli's (sic) assertions |
| 5 | with regard to the motion. |
| 6 | MR. BALDIGA:
Thank you, your Honor. |
| 7 | Again, William Baldiga for the debtor. |
| 8 | Your Honor, I want to first make sure |
| 9 | that we're focused on exactly the relief |
| 10 | that PAX
has asked for because they're |
| 11 | arguing --
they filed one motion, we seem to |
| 12 | be arguing a different one.
And I want to |
| 13 | address the motion they filed. |
| 14 | At paragraph 9 on page 7 of their |
| 15 | motion. |
| 16 | THE COURT:
All right.
Hold on.
Let |
| 17 | me catch up with you, okay? |
| 18 | MR. BALDIGA:
Okay. |
| 19 | THE COURT:
Just give me a second to |
| 20 | get where you're talking to so that I'm -- |
| 21 | paragraph 9, page what? |
| 22 | MR. BALDIGA:
Page 7, paragraph 9 of |
| 23 | their motion at docket 57. |
| 24 | THE COURT:
Just give me a second.
I'm |
| 25 | not quite there yet.
The relief requested, |
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 85 of 123
| 1 | yes, go ahead. |
|----|------------------------------------------------|
| 2 | MR. BALDIGA:
Okay.
So I mean, that's |
| 3 | --
I think it fairly clear.
I think it's |
| 4 | consistent with the rest of the motion, but |
| 5 | I thought that was the place that was most |
| 6 | succinctly and clearly stated that they wish |
| 7 | relief as to the enforcement of Justice |
| 8 | Ostrager's February 9th contempt order. |
| 9 | So let's turn to that order, which is |
| 10 | appended to that motion.
Actually to the |
| 11 | attorney declaration. |
| 12 | THE COURT:
Yup, I got it. |
| 13 | MR. BALDIGA:
Which is that -- |
| 14 | THE COURT:
Go ahead.
I've got
it. |
| 15 | Tell me where you want me to look. |
| 16 | MR. BALDIGA:
I'm at page 134 --
I'm |
| 17 | sorry. |
| 18 | THE COURT:
You're on --
no, that's the |
| 19 | number of pages -- |
| 20 | MR. BALDIGA:
Page 16 of -- |
| 21 | THE COURT:
16 of 134? |
| 22 | MR. BALDIGA:
Yes, I believe so. |
| 23 | THE COURT:
All right.
Just let me |
| 24 | catch up with you.
I'm almost there. |
| 25 | (Pause.) |
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 86 of 123
| 1 | THE COURT:
Okay.
I'm on page 16 of -- |
|----|-----------------------------------------------|
| 2 | MR. BALDIGA:
And is that the last page |
| 3 | of the, of the order? |
| 4 | THE COURT:
It is, yes, it is. |
| 5 | MR. BALDIGA:
Okay. |
| 6 | THE COURT:
On the version I'm looking |
| 7 | at, which is the version that's
on the |
| 8 | docket, yes. |
| 9 | MR. BALDIGA:
Okay.
And so let's read |
| 10 | what the, the ruling is,
the last sentence |
| 11 | obviously.
"Kwok must remit a hundred and |
| 12 | thirty-four millions dollars to PAX within |
| 13 | five business days."
That seems
pretty |
| 14 | clear cut, although PAX has clarified today |
| 15 | and several places in the motion, they are |
| 16 | not seeking monetary relief.
So that's, |
| 17 | that's not what they seek. |
| 18 | "The Court is prepared to exercise its |
| 19 | full authority under judiciary law 753 in |
| 20 | the event of the fine is not timely paid." |
| 21 | So PAX is saying we're not seeking relief as |
| 22 | to the fine.
We're seeking, obviously, the |
| 23 | one thing that's left is judiciary law 753, |
| 24 | which is the State --
New York State law |
| 25 | that entitles the court to imprison for |
| 1 | contempt. |
|----|------------------------------------------------------|
| 2 | So when you boil down the motion that |
| 3 | was filed --
I --
it's clear, I'm looking at |
| 4 | the order that they seek to enforce, in the |
| 5 | order that they seek to enforce by the |
| 6 | motion they chose to file, it's not for |
| 7 | return the boat.
It's to pay a hundred and |
| 8 | thirty-four million dollars or go to jail, |
| 9 | period.
That's -- |
| 10 | THE COURT:
Well, isn't that --
doesn't |
| 11 | their reply say something different?
Number |
| 12 | one and number two, if they're seeking to |
| 13 | enforce it, doesn't your client have the |
| 14 | ability to relieve himself of that contempt |
| 15 | by doing exactly what the judge ordered him |
| 16 | to do and not go to jail? |
| 17 | MR. BALDIGA:
Not by this order. |
| 18 | THE COURT:
What
--
not
by
what order? |
| 19 | MR. BALDIGA:
But not by the order |
| 20 | they're seeking to enforce.
They're asking |
| 21 | you to allow -- |
| 22 | THE COURT:
Well, I don't agree with |
| 23 | that.
I'm not sure I agree with you, |
| 24 | counsel.
Because if I'm a judge and I enter |
| 25 | a contempt sanction against a client -- |
against a party and they come in and they -- and the contempt is because, at least my reading, is that because the boat's outside of the jurisdiction and they correct that problem, the judge isn't going to enforce the fine and the contempt order because he would have purged himself of the contempt by getting the boat back into the jurisdiction to which this whole, this whole decision was rendered on. I mean, that -- the -- if you go -- I'll hear you, but I'm not sure I agree with you on that. MR. BALDIGA: I, I'm not -- THE COURT: Plus they've already just said they don't -- they're not trying to put him in jail. They're not trying -- MR. BALDIGA: That's why they're not arguing their motion. THE COURT: But you are, you're saying you -- your opposition is you don't want the motion to be granted because they're trying to put him in jail and make him pay the fine. They've just stated we're not seeking monetary -- we're not seeking payment of the fine. We're not seeking to put him in jail.
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 89 of 123
We want -- and that' s-- I think I asked this question at the very beginning of today's hearing, two hours ago. I said isn't what -- I said, Attorney Freidman, am I reading your papers right? Isn't that what I said? I said, I'm reading your papers right? Aren't you asking for the return of the boat to this jurisdiction, to the United States jurisdiction so that the boat is here and subject to the jurisdiction of the courts? And Attorney Freidman said yes. MR. BALDIGA: In lieu of the fine? THE COURT: He just said he's not seeking the fine. He's not seeking a mone -- at this time. They're not seeking that. And if we go back and we look at what, at least again, let me step back and say I am nowhere near as familiar with this as all of you are, but the reason there was a contempt order issue is because the boat was supposed to be seized for the judgment and this and the boat then disappeared from New York to wherever it went. The Bahamas and then it went somewhere else and then it went to
Italy or wherever.
Well, obviously, Justice Ostrager doesn't have the ability to get the boat back from Italy. I mean, he has an order that somebody may or may not acknowledge in Italy or wherever it is. I don't think he has -- he doesn't -- his order doesn't allow the boat to be arrested and then under maritime law brought back to -- because it's not a maritime case. And brought back to the United States under which the jurisdiction of the United States court would be -- would apply. So this -- unless I'm reading something wrong, which is very possible, but I don't think so, the whole reason the contempt
And Judge, Justice Ostrager who I apologize at the beginning of the case today, I didn't state his name because I didn't have in front of me and I didn't want
proceeding was brought was because the boat
was gone. It's just like anything else, you
asset's gone, you don't -- you can't execute
got an asset you can execute on. If the
on it.
| 1 | to say it improperly, he said whether -- |
|----|-----------------------------------------------|
| 2 | that PAX has met the burden of establishing |
| 3 | that the court should enter a final order of |
| 4 | civil contempt against Kwok for the reasons |
| 5 | that follow, the court is simultaneously |
| 6 | issuing the order. |
| 7 | And then he goes through this whole |
| 8 | thing.
PAX encountered
difficulty |
| 9 | identifying assets over which Kwok exercised |
| 10 | control.
Then the court had a hearing |
| 11 | apparently, an evidentiary hearing at which |
| 12 | a number of people supporting
your client |
| 13 | appeared.
And then that judge made |
| 14 | determinations, whether
you appeal them or |
| 15 | not or, you know, is a different story, that |
| 16 | Mr. Kwok had dominion and control over that |
| 17 | boat and that boat's gone. |
| 18 | So that's what the contempt is all |
| 19 | about.
Attorney Freidman, am I missing the |
| 20 | point here?
I just want to know, am I |
| 21 | saying something that is inaccurate with |
| 22 | regard to why you were seeking this |
| 23 | contempt? |
| 24 | MR. FREIDMAN:
You're not, your Honor. |
| 25 | Also if you look at page --
if you look at |
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 92 of 123
| 1 | Exhibit 5 of my declaration is the actual |
|----|---------------------------------------------------|
| 2 | order from Justice Ostrager.
In paragraph |
| 3 | 3, he talks about how fines will continue to |
| 4 | accrue until Kwok returns the Lady May to |
| 5 | the jurisdiction. |
| 6 | THE COURT:
Right.
And he says, he |
| 7 | says -- |
| 8 | MR. FREIDMAN:
So Mr. Baldiga's |
| 9 | argument completely falls apart when you |
| 10 | look at that. |
| 11 | THE COURT:
--
the appellate, the |
| 12 | appellate division's first department |
| 13 | affirmed this court order on November 4, |
| 14 | 2021, holding Kwok in conditional civil |
| 15 | contempt finding that the daily fine of |
| 16 | \$500,000 was intended to strongly encourage |
| 17 | defendant to purge himself of the contempt. |
| 18 | You know, I've had cases where people |
| 19 | have been in jail and they could purge |
| 20 | themselves of the contempt and they don't, |
| 21 | they don't do it.
And I said, well, I don't |
| 22 | know what you want me to do.
I mean, you |
| 23 | can either purge yourself of the contempt or |
| 24 | you can't.
And the --
or you choose not to. |
| 25 | Excuse me, that is the more appropriate -- |
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 93 of 123
| 1 | those are the more appropriate words. |
|----|--------------------------------------------------|
| 2 | MR. BALDIGA:
Well, your Honor -- |
| 3 | THE COURT:
Justice
Ostrager found, |
| 4 | whether you agree or not, that --
and it |
| 5 | wasn't just Justice Ostrager apparently, |
| 6 | that Mr. Kwok is in control --
has dominion |
| 7 | and control over this boat.
And I think -- |
| 8 | I started this whole hearing asking this |
| 9 | question. |
| 10 | So if he has dominion and control over |
| 11 | this boat and he doesn't want to go to jail, |
| 12 | that's what you told me, he doesn't want to |
| 13 | go to jail because he's afraid he'll, |
| 14 | unfortunately he'll --
that will be a very |
| 15 | unfortunate experience for him.
And he |
| 16 | wants to work with all these creditors and |
| 17 | he wants to have a plan that's fair to all |
| 18 | of them, then bring back the boat. |
| 19 | I don't think that --
and that is why I |
| 20 | asked Attorney Freidman that question at the |
| 21 | very beginning of the hearing because I |
| 22 | understand your point about what the motion |
| 23 | says.
Then I read your objection, then I |
| 24 | read their
reply.
And my reply --
in my |
| 25 | reading of their reply --
and I shouldn't |
| 1 | say they, I'm talking about PAX and the |
|----|-------------------------------------------------|
| 2 | debtor.
I should be more careful, but in |
| 3 | PAX's reply and I asked --
that's why I |
| 4 | asked the question. |
| 5 | It seemed to me, yeah, I think you're |
| 6 | right in the extent that they're not seeking |
| 7 | to impose the monetary fine right now and |
| 8 | they're not seeking to have --
I don't know |
| 9 | what that section of New York law is, but |
| 10 | you just said to me, I guess that is the |
| 11 | section of the New York law that you could |
| 12 | put somebody in jail for contempt if they |
| 13 | don't purge themself of contempt.
I assume |
| 14 | that's what that means. |
| 15 | But what I'm saying
is, it said in the |
| 16 | reply, we just want the boat back in our |
| 17 | jurisdiction.
And not just for us, for all |
| 18 | the creditors of the estate.
And I actually |
| 19 | heard
from another creditor who said just |
| 20 | that.
She's asked that and apparently the |
| 21 | PAX's --
PAX and their counsel have agreed |
| 22 | that the order if I were to grant the relief |
| 23 | requested, would, would say that.
That the |
| 24 | boat is not just for --
it's not coming back |
| 25 | so PAX can arrest it or put a lien on it or |
do whatever you can under maritime law, which there's a lot of that. And the New York judges know how to do that. Then that's not what they're asking. They're asking, they're asking essentially, in my opinion, to go back to the status quo where -- it's not exactly the status quo, but at least have the boat within the jurisdiction of the United State court -- courts. That's what they're asking and that's what he said. So your argument about the fine and the jail, again, the problem with contempt is always the same problem. If the person who is being held in contempt does not choose to purge himself of that contempt, then that person faces the consequences of that choice. The Court can't do anything about it. I can't make him do anything about it. If he doesn't do it, then, yeah, maybe he will go to jail. That's up to the New York court to decide. But they're not asking that right now. They're asking him, in my opinion from what I've read, and I'm not
ruling today, but they're asking for an incremental step. That incremental step you might not like and you may still oppose it. Like getting the boat back into New York or the jurisdiction of the United States courts. But that's what they're asking. And I think that's pretty clear as of today.
Now, you know, relief from the stay or any determination that the State doesn't apply, can be incremental. It doesn't have to be a complete resolution and essentially, that's what PAX is asking. We're not asking to put him in jail. By the way, he can avoid being in jail if he does what the court told him he had to do. He can -- but we're not asking him to be in jail. We're asking him to get the boat back in the jurisdiction of the United States.
If he chooses not to do that, then he chooses not to do that at his own peril. And that's what a contempt order does. So your argument about what they say in their original motion versus the reply, okay, I understand it.
MR. BALDIGA: That was my whole point,
your Honor. THE COURT: But the reply says that they're not asking for what they said in their original motion. And what they're asking for in their original motion, what they're asking for now should actually benefit your client, not harm your client. MR. BALDIGA: Thank you, your Honor. I -- of course I'm not arguing that their contempt didn't arise from a failure to have the boat in the New York jurisdiction. I'm -- of course. I'm not arguing, actually, with anything that you said. I was making the point, which you've actually amplified, that the motion as filed is very different from the subsequent papers and especially today's argument and I wanted to make that very clear. THE COURT: I understand. If you're concerned that I didn't understand that, I'm happy -- I understand that. Are you -- is that all -- MR. BALDIGA: I'm not longer concerned. THE COURT: Okay. Fine. MR. BALDIGA: You've made that
absolutely clear. THE COURT: I understand. I understand. MR. BALDIGA: And so that's -- I appreciate that. Secondly, and there would be time for further argument on this, I expect. The Rooker Feldman document -- I'm sorry, doctrine is a bit of a red herring here and we'll be able to with your permission, because we don't have leave to file a sir reply, but I think given a reply, we'd like to brief this. Rooker Feldman doctrine applies to under the veteran decided case law, final State court judgments in which we don't have, but even more importantly, it applies to final judgments on the merits. It does not apply to supplemental proceedings. For example, in the -- THE COURT: Well, what about the fact that he held an evidentiary hearing and there were witnesses that and testimony and exhibits introduce -- that wasn't a supplemental proceeding. MR. BALDIGA: Well, enforce the
proceeding -- THE COURT: There was a trial. There was a trial MR. BALDIGA: -- it was an enforcement proceeding. THE COURT: It was a trial; wasn't it? MR. BALDIGA: I meant by supplemental as to not going to the merits of the underlying dispute, but as to ways to enforce a judgement. For example, in the VanderKodde case at 951 F3d, 397, which is a Sixth Circuit decision in 2020, the Sixth Circuit held that the Rooker Feldman doctrine simply does not apply to post- judgement garnishment. That is means to collect the debt. It just didn't apply. And that's an example of the very limited scope of Rooker Feldman. And that makes sense especially in the context of a bankruptcy proceeding where the Court is dealing with the interest of balancing the interests of the debtor and all creditors. And how to deploy what may or may not be assets of the estate and to determine whether assets of the estate and
#### Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 100 of
to the disposition of those assets. That is much different than a final judgment in a State court as to the amount of a claim. And given that they just briefed that in the reply and we' haven't had an opportunity to address that, I wanted the Court to know because we all deal with Rooker Feldman, frankly not that often, that there -- they misapplied Rooker Feldman. And that's okay. We'll have again an opportunity I would hope to address that more fully, including with briefing. I -- so those are the two points, your Honor, that I'm disappointed to hear that perhaps because the debtor supports it. You would have thought with the earliest part of their argument they would have been all for an examination because they would have thought that a truly independent examiner as
opposed to, for example, a trustee that they hope to elect would be the way to -- it's an unfortunate case. All right.
I want to say, your Honor, we are -- all sides cast dispersions on the veracity of others and that's all we've heard so far
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 101 of
and that's unfortunate. We thought an examiner would be exactly the mechanism because the one thing about an examiner as opposed to every other role in a Chapter 11 case, is that only an examiner has no other allegiances and must be fiercely independent and is not elected or appointed -- THE COURT: Well, let's -- MR. BALDIGA: -- by creditors or chosen by a debtor -- THE COURT: -- examiner is actually appointed just like a Chapter 11 trustee would have to be appointed. So I'm not sure I agree with that argument. MR. BALDIGA: Or elected. Or elected. THE COURT: Well, but they're -- where's the ability to elect a Chapter 11 trustee? There's an ability to elect a trustee in Chapter 7 after the interim trustee is appointed by the 341 meeting, but I don't know that there's an ability to elect a Chapter 11 trustee. MR. BALDIGA: Well, actually I'm not sure. THE COURT: I don't think there is.
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 102 of
| 1 | MR. BALDIGA:
But in any event, an |
|----|------------------------------------------------|
| 2 | examiner seems to be --
and maybe I regret |
| 3 | having signaled our support for exactly the |
| 4 | relief that the U.S. Trustee thought was |
| 5 | most appropriate, just to bring that back, |
| 6 | to have PAX oppose it.
But so be it.
And |
| 7 | that might be the nature of the case. |
| 8 | In any event, your Honor, those are the |
| 9 | primary points in opposition. |
| 10 | THE COURT:
Okay.
I'm just looking.
I |
| 11 | don't think there's an ability to elect -- |
| 12 | MR. BALDIGA:
No, I may have spoken too |
| 13 | quickly. |
| 14 | MS. CLAIBORN:
Your Honor? |
| 15 | THE COURT:
Yes. |
| 16 | MS. CLAIBORN:
Maybe helpful.
There is |
| 17 | not. |
| 18 | MR. BALDIGA:
Oh, there is. |
| 19 | THE COURT:
Where?
There is or is not? |
| 20 | MS. CLAIBORN:
Is not. |
| 21 | THE COURT:
No, there is not.
There's |
| 22 | nothing, there's no ability to elect a |
| 23 | Chapter 11 trustee. |
| 24 | MR. BALDIGA:
Excuse me.
Just may I |
| 25 | have one second, your Honor, to -- |
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 103 of
THE COURT: Yup. MR. BALDIGA: -- confer with my partner. (Pause.) MR. BALDIGA: Okay. I'm just reading quickly, your Honor. Section 1104(b)(1). "The election of a trustee shall be conducted in the same way as under Section 702." THE COURT: It says "except as provided in an 11, on the request of a party in interest. Made not later than 30 days after the court orders the appointment of a trustee. The United States Trustee shall convene a meeting of creditors for the purpose of electing one" -- yeah. Which the same thing as what happens in Chapter 7. MR. BALDIGA: Yeah, that's what, that's what I said. THE COURT: So, yeah, but the election shall be -- so you're saying if they want to come in with somebody else, they can elect them. That's what you're saying? MR. BALDIGA: That was my point. And an examiner as I understand it, your Honor,
#### Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 104 of
is assiduously independent. And without any right of election or other interference. That's why we have examiners with whatever powers the Court --
THE COURT: Well, not many people have examiners. I'm not saying that it doesn't -- it's not going to happen. I'm saying they don't happen as frequently as you're indicating.
MR. BALDIGA: Well, I'm not -- this -- I'm not pretending that anything about this case is frequent. I'm just saying that it would be unfortunate if the debtor were to consent to what would otherwise in pending matters be highly contested matter only to have our consent and be used against us to have the most litigious creditor say, yeah, but we're going to oppose it because that seems too independent.
In any event, that's -- but again, they'll litigate this case as they so choose. MS. CLAIBORN: Your Honor, if I may
make one more comment?
THE COURT: Sure.
#### Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 105 of
MS. CLAIBORN: Holley Claiborn for the United States Trustee. THE COURT: Can you just speak a little bit more into the microphone? Thank you. MS. CLAIBORN: Sorry. Should the order enter from this Court directing the U.S. Trustee to appoint a Chapter 11 trustee, the U.S. Trustee would do so and part of that process is to ask for the input of the parties. And subsequent to that, the U.S. Trustee makes a determined decision about who to appoint. And it's after that point, should there be a dispute over the appointment of that particular party as the trustee, that there is a process for an election. THE COURT: We have 702(c) says, and (b), "Creditors may elect one person to
serve as a trustee in the case if election of a trustee is requested by creditors that may vote under subsection (a) of this section." So you have to have a creditor who holds an allowable, undisputed, fixed, liquidated, unsecured claim of a kind entitled to distribution under and it just
#### Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 106 of
talks about Chapter 7, by the way. It doesn't cite to any Chapter 11 provisions, which is kind of interesting.
"It does not have an interest materially adverse other than an equity interest that is not substantial in relation to such creditor's interest as the creditor, to the interest of creditors entitled to such distribution and is not an insider."
So it's really kind of interesting because although you're right that you just pointed out 1104(b) says you can elect in the manner set forth in -- provided in subsections (a), (b), and (c) of Section 702 of this title, 702 says, "A creditor may vote for a candidate for trustee only if such creditor hold an allowable, undisputed fixed, unliquidated, unsecured claim of a kind entitled to distribution under," and then it only refers to Chapter 7 sections.
So if -- I don't know if that really does work. If it only applies to Chapter 7 sections, this isn't going to be a distribution under any of those sections. It's a Chapter 11 case. So if that's the
#### Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 107 of
| 1 | case, then there isn't an election of a |
|----|-----------------------------------------------|
| 2 | trustee. |
| 3 | I don't know the answer.
I'm just |
| 4 | saying, it seems inconsistent right now if |
| 5 | you read the actual language of the statue. |
| 6 | It seems very inconsistent.
Cause you have |
| 7 | to do, you have to have all three prongs of |
| 8 | (a) in order to elect under (b).
And under |
| 9 | 702(a), and 702(a) says "entitled to a |
| 10 | distribution under Section 726(a)(2), 726 |
| 11 | (a)(3), 726 (a)(4), 752, 766 or 766 (h) or |
| 12 | 766(i). |
| 13 | MR. BALDIGA:
I think, your Honor, the |
| 14 | case law would say that the standards are |
| 15 | the same in Chapter 7. |
| 16 | THE COURT:
Well, it may or may not. |
| 17 | It's not what the statute says. |
| 18 | MR. BALDIGA:
I agree, but -- |
| 19 | THE COURT:
That's not what the statute |
| 20 | says. |
| 21 | MR. BALDIGA:
In any event, the bigger |
| 22 | point was we would like the case to proceed |
| 23 | on something other than sort of a war of |
| 24 | attrition basis and I thought we had the |
| 25 | makings of some good progress in that regard |
### Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 108 of
| 1 | and we would like the Court to see it that |
|----|------------------------------------------------|
| 2 | way and move the case in that direction. |
| 3 | THE COURT:
It's interesting they |
| 4 | didn't change the statute because they, they |
| 5 | really should have changed the statute.
You |
| 6 | know,
because it only refers to 7 -- |
| 7 | sections under Chapter 7.
They should have |
| 8 | --
here's a perfect example where you, you |
| 9 | know, where the code, that may be exactly |
| 10 | your intent that it be the same.
That's not |
| 11 | --
if you, if you look at 1104(b), then -- |
| 12 | and it refers you to subsection (a), (b) and |
| 13 | (c) of 702, (a) --
702(a) only, only |
| 14 | addressed Chapter 7 sections.
So it doesn't |
| 15 | make any sense. |
| 16 | But anyway, we don't have to decide |
| 17 | that today.
I just thought that was |
| 18 | interesting.
I mean, I completely |
| 19 | understand the election of a trustee under |
| 20 | Chapter 7.
I just don't think I've ever |
| 21 | seen anyone elected trustee at a 341 meeting |
| 22 | after, in a Chapter 11 after they've been |
| 23 | appointed by the Office of the United States |
| 24 | Trustee. |
| 25 | Have you, Attorney Claiborn? |
Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 109 of
| 1 | MS. CLAIBORN:
No, your Honor. |
|----|------------------------------------------------|
| 2 | THE COURT:
Okay.
It really doesn't |
| 3 | matter for today's purpose.
I'm sorry I'm |
| 4 | diverted attention -- |
| 5 | MR. BALDIGA:
I agree. |
| 6 | THE COURT:
--
but I'm just trying to |
| 7 | --
I really have never seen that. |
| 8 | But anyway, okay, Attorney Freidman, |
| 9 | I'm going to give you the opportunity to |
| 10 | respond. |
| 11 | MR. FREIDMAN:
Thank you, your Honor. |
| 12 | Peter Freidman from O'Melveny and Myers on |
| 13 | behalf of PAX. |
| 14 | I just --
I want to make a couple of |
| 15 | points.
It's disturbing that Mr. Kwok's |
| 16 | counsel thinks that
the only neutral person |
| 17 | in a bankruptcy should be an examiner.
The |
| 18 | debtor is supposed to be a neutral fiduciary |
| 19 | for all its creditors.
Obviously, that's |
| 20 | not going to happen. |
| 21 | Your Honor, with respect to the |
| 22 | examiner/trustee issue, as we'll get into |
| 23 | our objection, examiners are great except |
| 24 | they're not because ultimately an examiner |
| 25 | is just going to issue a report.
And that |
### Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 110 of
| 1 | report is likely to be hearsay.
An examiner |
|----|------------------------------------------------|
| 2 | can't pursue causes of action.
It doesn't |
| 3 | help.
It doesn't move this case where it |
| 4 | needs to go.
And Mr. Kwok just remains in |
| 5 | possession with control of the case. |
| 6 | As to the actual argument on the motion |
| 7 | we're here on, as I mentioned, the order |
| 8 | from Justice Ostrager is a two-page order. |
| 9 | It's at page 5 --
it's Exhibit 5 to my |
| 10 | declaration.
In
paragraph 3, he makes it |
| 11 | clear that Kwok is under a continuing |
obligation to return the Lady May to the
enforce. We are not trying to ask for
payment today. We're not asking for
imposition of additional sanctions or
contempt fines of \$500,000 a day.
us to be paid.
jurisdiction. That's what we're trying to
To be clear, we also are reserving our
right to be paid on that hundred and thirty-
asking for it to grow. We're not asking for
concededly a thorny doctrine. I think we're
four million dollar fine, but we're not
Your Honor, Rooker Feldman is, is
right. If we're not right, do you know
### Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 111 of
| 1 | anything about collateral estoppel or race |
|----|-------------------------------------------------|
| 2 | judicata after Mr. Kwok had took the Fifth, |
| 3 | had an adverse inference draw against him, |
| 4 | had his family members --
but you can read |
| 5 | what Justice Ostrager said about his |
| 6 | daughter.
I don't want to embarrass her. |
| 7 | And so those apply in --
you know, those |
| 8 | were the decisions that they're collaterally |
| 9 | estopped, race judicata applies, that he |
| 10 | owns and controls found by clear and |
| 11 | convincing evidence. |
| 12 | And I don't have anything further.
Oh, |
| 13 | I did have a question, if I can ask the |
| 14 | Court? |
| 15 | THE COURT:
Sure, go ahead. |
| 16 | MR. FREIDMAN:
But --
when should we be |
| 17 | pre --
do you have a sense of when we should |
| 18 | be prepared to file our papers in connection |
| 19 | with the U.S. Trustee's exam --
the United |
| 20 | States Trustee's motion? |
| 21 | THE COURT:
Yeah, I have --
that's a |
| 22 | good question.
As I said, I understand that |
| 23 | the motion was filed on Saturday and there |
| 24 | was a motion to expedite that hearing.
So I |
| 25 | am going to
address that now.
I think we |
### Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 112 of
need to address it now for a number of reasons. So if you'd give me a second. First thing first. The matters in this case -- I'm looking at the courtroom deputy now, that are scheduled for April 12th at 2:30, we're going -- those are -- and those are all applications to employ professionals at this point. That's the only thing that's scheduled? I'm going to reschedule those to April 13th at 10:00 a.m. in this Court, okay? Now with regard to the examiner motion, I just need to hear from the United States Trustee on -- I want to ask her, but I am going to address it now, which will end up answering your question as when you need to file papers in response to it. MR. FREIDMAN: May I sit, your Honor?
THE COURT: Yes, please. Go right ahead.
So Attorney Claiborn, I know it's not on the calendar yet because -- and I didn't get a chance to look at it until this morning, but I'm going to -- I am going to
#### Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 113 of
| 1 | grant the --
I'm doing this in court, the |
|---|-----------------------------------------------|
| 2 | United States Trustee's motion for an |
| 3 | expedited hearing on the appointment of an |
| 4 | examiner.
And that hearing will be held on |
| 5 | April 13 at 10:00 a.m. along with the other |
| 6 | matters. |
| 7 | The parties that --
anyone that wishes |
| 8 | to oppose that motion for the appointment of |
| | |
an examiner or anyone that wants to file anything, you're all filing it on the same day. We're not going to get into a replies and -- we all know what the issue is, okay? You're all -- anyone that wants to file anything in support of or in opposition to the motion for the appointment of an examiner must do so by 5:00 p.m. on April 6th.
The motion -- I'm sorry.
Attorney Claiborn, did you want to be heard on that?
MS. CLAIBORN: I was just going to inquire about a deadline for making service. THE COURT: Oh, you haven't served the motion yet?
MS. CLAIBORN: No, because we were
#### Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 114 of
| 1 | waiting for your Honor to issue an order. |
|----|-------------------------------------------------|
| 2 | THE COURT:
Okay, sorry. |
| 3 | MS. CLAIBORN:
(Indiscernible
- |
| 4 | crosstalk). |
| 5 | THE COURT:
I understand.
All right. |
| 6 | So then, yes, so then what we're going to do |
| 7 | --
what I'm going to do is
this order |
| 8 | probably isn't going to enter until |
| 9 | tomorrow. |
| 10 | MS.
CLAIBORN:
That's (indiscernible). |
| 11 | THE COURT:
So your service is going to |
| 12 | be required --
well, let's talk for a |
| 13 | minute.
Who you serving?
Who are you |
| 14 | serving that it --
you know, we'd have to go |
| 15 | with the debtor's schedule with these |
| 16 | statements, right?
Like what's the creditor |
| 17 | list look like? |
| 18 | MS. CLAIBORN:
We have made copies to |
| 19 | serve the entire creditor matrix, which is |
| 20 | approximately I think 60-something parties. |
| 21 | THE COURT:
60? |
| 22 | MS. CLAIBORN:
60-something. |
| 23 | THE COURT:
Okay. |
| 24 | MS. CLAIBORN:
It's between 60 and 70. |
| 25 | I just don't have the exact number.
So |
#### Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 115 of
those copies are ready -- THE COURT: How, how -- I'm asking you a question, a serious question. Is it possible for you to make service by the close of business on Thursday or would you rather have Friday? And if you say Friday, that's fine with me. MS. CLAIBORN: No, Thursday should be fine. THE COURT: All right. So then I'm going to have you make service of the -- what will be an order granting the expedited hearing and scheduling that hearing for April 13th at 10:00 a.m., setting a deadline to file any responses in support of or as opposed to or opposed to the motion by 5:00 p.m. on April 6. Having you make service of the motion to appoint an examiner by 5:00 p.m. on March 24th and then file a certificate of service on the docket of this case demonstrating how service was made by 5:00 p.m. on March 29th. Is that acceptable to the United States Trustee's office?
MS. CLAIBORN: Yes, your Honor. And
#### Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 116 of
| 1 | I'm assuming that all the dates you've just |
|----|--------------------------------------------------|
| 2 | accounted for that be put forth in an order |
| 3 | -- |
| 4 | THE COURT:
In that order.
The order |
| 5 | granting the motion to expedite will have |
| 6 | all those dates in them for you and those |
| 7 | times.
Okay? |
| 8 | MS.
CLAIBORN:
We will serve the order |
| 9 | and underlying motion. |
| 10 | THE COURT:
Okay.
Great.
Thank you. |
| 11 | MR. BALDIGA:
In that regard, your |
| 12 | Honor, one of the motions that we have filed |
| 13 | is to retain service agent Streto (phonetic) |
| 14 | and -- |
| 15 | THE COURT:
Yeah, I don't understand |
| 16 | why you need a service agent.
Can you -- |
| 17 | MR. BALDIGA:
Just for this reason, to |
| 18 | take the burden off of other parties if that |
| 19 | were -- |
| 20 | THE COURT:
Well, but it's going to be |
| 21 | an administrative expense to the estate. |
| 22 | Why are you --
why are we doing that?
Why |
| 23 | do we need a service agent?
I'm
not saying |
| 24 | I'm ruling on it.
I'm asking you a |
| 25 | question.
You brought it up so I'm asking |
#### Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 117 of
| 1 | you a question.
Why do you need a service |
|----|-----------------------------------------------|
| 2 | agent? |
| 3 | MR. BALDIGA:
We, we thought that at |
| 4 | the end of day, that would serve to be most |
| 5 | efficient, but if the -- |
| 6 | THE COURT:
Well, I don't know.
Maybe |
| 7 | it will, but I want to hear from other |
| 8 | people about it, right? |
| 9 | MR. BALDIGA:
Okay. |
| 10 | THE COURT:
I mean, that --
is that -- |
| 11 | that's on for hearing on the --
that was |
| 12 | originally
scheduled for
hearing on the |
| 13 | 12th; isn't it? |
| 14 | MR. BALDIGA:
Yes. |
| 15 | THE COURT:
So there's an objection |
| 16 | deadline with regard to that motion already |
| 17 | in place.
There should be.
I haven't |
| 18 | looked -- |
| 19 | MR. BALDIGA:
Yes. |
| 20 | THE COURT:
--
at the notice of |
| 21 | hearing, but there should
be. |
| 22 | MR. BALDIGA:
Then I won't volunteer |
| 23 | then. |
| 24 | THE COURT:
Yeah, I just -- |
| 25 | MR. BALDIGA:
I'm just trying to |
#### Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 118 of
| 1 | accommodate. |
|----|------------------------------------------------|
| | |
| 2 | THE COURT:
All I'm --
look, one thing |
| 3 | that in every Chapter, in every case, |
| 4 | regardless of Chapter, but certainly in a |
| 5 | Chapter 11 case, the Court is concerned |
| 6 | about administrative expenses, right?
So we |
| 7 | need to figure out whether or not --
if |
| 8 | everybody thinks it's good, then I'll |
| 9 | probably agree, but I want to make sure |
| 10 | everybody thinks it's good. |
| 11 | And maybe I will agree.
I don't know. |
| 12 | I haven't, I haven't really reviewed it |
| 13 | enough to make an educated ruling, but I |
| 14 | just throw out there, you know, like all |
| 15 | these applications to employ professionals, |
| 16 | as you said, this is not a normal Chapter 11 |
| 17 | case.
It's extraordinary, so I have to |
| 18 | watch it and make sure that administrative |
| 19 | expenses and things are not handled in a |
| 20 | rote manner.
It's going to be decided |
| 21 | whether or not it's appropriate under the |
| 22 | circumstances of this case. |
| 23 | MR. BALDIGA:
Understood, your Honor. |
| 24 | THE COURT:
Okay? |
| 25 | MR. BALDIGA:
And my --
and just some |
### Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 119 of
| 1 | of the reasoning.
My experience is |
|----|------------------------------------------------|
| 2 | especially when it comes to tabulating the |
| 3 | voting on a plan, having a professional |
| 4 | independent, a firm that does that has often |
| 5 | proved to be beneficial.
But again, |
| 6 | everyone will have a chance
to speak to |
| 7 | that. |
| 8 | THE COURT:
Okay.
Thank you. |
| 9 | MR. BALDIGA:
Thank you. |
| 10 | THE COURT:
Attorney Freidman? |
| 11 | MR. FREIDMAN:
Your Honor, from PAX's |
| 12 | perspective, we will meet and confer with |
| 13 | Mr. Kwok. |
| 14 | THE COURT:
We couldn't hear you, |
| 15 | Attorney Freidman.
I'm sorry.
Say that |
| 16 | again. |
| 17 | MR. FREIDMAN:
From PAX's perspective, |
| 18 | we share concerns, but this isn't --
I will |
| 19 | call Mr. Baldiga this week and discuss |
| 20 | certain (audio skip) retention application. |
| 21 | So if we can actually take an issue off of |
| 22 | your plate from having
to be litigated, we |
| 23 | will meet and confer in good faith. |
| 24 | THE COURT:
Yeah, I thank you.
I |
| 25 | anticipate that the parties will have |
#### Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 120 of
| 1 | discussions before the objection deadline |
|----|-------------------------------------------------|
| 2 | and we'll see where we are.
Okay. |
| 3 | Attorney Claiborn, I think you wanted |
| 4 | to say something else. |
| 5 | MS. CLAIBORN:
No, I just was staying |
| 6 | to see if the Court had any other questions |
| 7 | for me. |
| 8 | THE COURT:
No.
But I would --
that |
| 9 | order most likely will not get out, |
| 10 | obviously right now, but the clerk's office |
| 11 | is going to be closing in a little while, |
| 12 | until tomorrow.
But it will get out.
It |
| 13 | will be issued and you can --
do you want me |
| 14 | to recite those dates for you again or do |
| 15 | you have them? |
| 16 | MS. CLAIBORN:
I wrote them down. |
| 17 | THE COURT:
Okay. |
| 18 | MS. CLAIBORN:
I'm good. |
| 19 | THE COURT:
And then we will go from |
| 20 | there. |
| 21 | Now with regard to today's matters, the |
| 22 | Chapter 11 case management conference, all |
| 23 | right, I already indicated that's going to |
| 24 | be continued.
So that's going to be |
| 25 | continued until April 13th at 10:00 a.m. as |
#### Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 121 of
| 1 | well. |
|----|----------------------------------------------------|
| 2 | With regard to the motion --
I'm sorry. |
| 3 | I just lost my place.
Just give me --
bear |
| 4 | with me for a second. |
| 5 | With regard to the motion,
Pacific |
| 6 | Alliance is your opportunity find for entry |
| 7 | of order confirming the inapplicability of |
| 8 | the automatic stay or in the alternative |
| 9 | relief from the automatic stay, pursuant to |
| 10 | Section 362(b)(2) of the bankruptcy code, |
| 11 | the hearing --
the preliminary hearing is |
| 12 | continued until April 13 at 10:00 a.m. |
| 13 | Now, I'm going to do one thing with |
| 14 | regard to that.
Hold on one second, please. |
| 15 | (Pause.) |
| 16 | In PAX's reply to the objection filed |
| 17 | by the debtor to this motion, paragraph 8, |
| 18 | paragraph 9, paragraph 10, paragraph 11 talk |
| 19 | about the Rooker Feldman doctrine and race |
| 20 | judicata.
I'm going to give the debtor till |
| 21 | a week from --
not a week --
till March 28th |
| 22 | at 5:00 p.m. to file a brief no longer than |
| 23 | five pages to respond to those specific |
| 24 | paragraphs in the reply and that's it.
No |
| 25 | more briefing will be allowed in connection |
#### Case 22-50073 Doc 314 Filed 05/02/22 Entered 05/02/22 17:17:16 Page 122 of
with this motion. Anyone have any questions? MR. BALDIGA: No, your Honor. THE COURT: Okay. Is there anything further we need to address? I don't think that there is because there's nothing further on the calendar today. MR. BALDIGA: No, your Honor, thank you very much. THE COURT: All right. So then the hearings in the Kwok matter today are concluded. This is the last matter on today's calendar. The Court is adjourned. THE CLERK: All rise, Court is adjourned. (Hearing adjourned at 4:22 p.m.) (End of recording.)
CERTIFICATE I hereby certify that foregoing 122 pages are a complete and accurate transcription to the best of my ability of the electronic recording of the CHAPTER 11 PRELIMINARY HEARING in the matter of HO WAN KWOK, Debtor, Case No. 22-50073, held before the Hon. Julie A. Manning, U.S. Bankruptcy Judge, in Bridgeport Connecticut recorded on March 23, 2022. Joanne Auger, Transcriber Date: March 24, 2022