Guo Wengui / Miles Guo — bankruptcy case · ECF #314

In Re: :

:

Debtor. :

Brien McMahon Federal Bldg.

(Transcription from Electronic Recording) Held Before:

A P P E A R A N C E S: For the Debtor:

BY: BENNETT SILVERBERG, ESQ.

BY: WILLIAM BALDIGA, ESQ. For Pacific Alliance Asia Opportunity Fund, LP (PAX):

BY: STUART M. SARNOFF, ESQ. DIANA PEREZ, ESQ.

BY: PETER FRIEDMAN, ESQ.

BY: PATRICK BIRNEY, ESQ. For Golden Spring New York, Limited, Proposed DIP Lender: COHN BIRNBAUM & SHEA P.C.

BY: SCOTT ROSEN, ESQ. A P P E A R A N C E S (cont.): For the U.S. Trustee:

BY: HOLLEY CLAIBORN, ESQ. For Rui Ma, et al.:

BY: CAROLLYNN CALLARI, ESQ.

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

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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

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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.

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1 THE COURT: Okay. Thank you very much.

3 all the way back there.

4 closer. Whatever you might desire, okay?

6 distancing as well, but whatever you're 7 comfortable with.

8 enough chairs. 9 MS. CLAIBORN: Okay. Thank you. 10 THE COURT: Okay.

11 housekeeping matters before we start on 12 anything today.

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

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.

25 going to rule?

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.

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1 THE COURT: Okay. Okay. All right.

2 that's helpful.

oh, yes.

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.

8 list of names of people that were referred

10 made, debtor's counsel made during that 11 hearing.

12 that list. 13 And I know that the person in the back 14 is interpreting, but that's a little --

15 got to try to be a little softer because all 16 I can hear is you, unfortunately.

17 won't be able to hear the lawyers, okay?

19 record is only audio.

20 stenographers.

22 bankruptcy courts to have a stenograph.

23 you all want to bring in a stenographer, 24 you're more than welcome to.

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.

11 probably shouldn't make, but I will make the

13 there has been apparently, and I'm not 14 suggesting I understand every of it --

15 bit of it because there's no way I could at 16 this point.

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.

22 assumption? 23 Yes. I got heads nodding. 24 MR. FREIDMAN:

25 Freidman.

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1 that's correct.

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:

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.

11 respect to the specific motion that was 12 filed. 13 THE COURT: Okay. That's fair.

14 just, just asking the question.

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.

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.

23 was a statement I think or, you know, not a

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.

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:

17 THE COURT: Sure. 18 MR. BALDIGA:

20 THE COURT: Yes. 21 MR. BALDIGA:

22 Honor.

23 him.

25 THE COURT:

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1 appreciate that.

2 odd.

3 hear better than the people in the front.

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:

9 THE COURT:

10 interpreter's already speaking a little more

12 appreciate that. Thank you. 13 MR. BALDIGA: Thank you, your Honor. 14 THE COURT: Okay.

16 management conference, we ask a series of 17 questions.

18 paragraph with 18 things in it, I think. 19 Yeah, 18 things.

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.

25 you are going to tell me this anyway, the

2 debtor's business and the reasons for the 3 Chapter 11 filing.

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.

9 at the time.

well, I don't know about.

11 not fair.

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.

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

24 questions that are listed.

25 that relate to this case.

1 there is no cash collateral.

3 referenced.

4 great length to explain why we're here.

5 would like to make a presentation to that -- 6 THE COURT: Sure. 7 MR. BALDIGA:

8 responsive to you, but I think, you know, I 9 would be remiss without referencing that. 10 THE COURT: No.

11 filed, counsel.

12 I will tell you that I looked at it, but I 13 didn't read it.

14 opportunity to read it fully. 15 MR. BALDIGA: There's a lot there.

17 been a lot of paper filed in the case 18 already from several parties.

19 step back then and first, the debtor has no 20 business. 21 THE COURT: Okay. 22 MR. BALDIGA:

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.

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1 The CCP had Interpol red notice alerts

2 based on fabricated charges seeking his 3 arrest and extradition to China.

4 and others sponsored many of the litigations

6 part of the creditor body here.

10 litigation, admittedly.

12 several well-publicized events in this 13 country to target Mr. Kwok.

14 paragraph 16, believes that if he were 15 extradited to China, he would killed.

16 believes that if he were imprisoned here, he 17 would be killed.

18 24/7 physical security.

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

3 to China, which Mr. Kwok believes would be 4 for the purposes of his death.

6 proceeding with Niki Leondakis, also for

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

public information.

15 the business and financial aspects of these

17 individual Chapter 11 case and I've been 18 involved in a few, is unusual by its very 19 nature.

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

25 years. I've never had a case like this.

2 committee in the Mike Tyson case.

3 case is extraordinary even compared to the 4 Mike Tyson case.

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.

10 as we should and do expect.

12 courtroom.

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

19 extraordinary transparency. 20 The debtor was examined for four hours 21 yesterday by creditors and by the United 22 States Trustee.

23 any Fifth Amendment privilege or any other 24 privilege.

25 answered and there will be many more hours

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1 of testimony and every question will be

2 continued to answered. 3 THE COURT: Is that at the 341 meeting?

5 MR. BALDIGA: Yes, your Honor. 6 THE COURT: Go head. I'm sorry.

7 just want to make sure. 8 MR. BALDIGA: No, that's okay.

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.

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.

23 three-person creditor's committee was just 24 formed yesterday.

25 committee, Rui Ma, her lawyers, Arkin

30, 2020, that her fees to sue Mr. 3 Kwok are being paid by a Mr. Zheng Wu, also

Wu. 5 THE COURT: Known as who?

6 known as who? I didn't hear you. 7 MR. BALDIGA: Bruno Wu. 8 THE COURT: Okay. 9 MR. BALDIGA: W-U.

10 not providing to the Court the names from 11 the last hearing.

week. 13 THE COURT:

14 very helpful to the Court. 15 MR. BALDIGA:

16 didn't do that.

18 Nunberg.

19 Bruno Wu, he helped arrange Rui Ma's lawyers 20 for her, Arkin Solbakken.

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.

Stone.

4 Street Journal and New York Times.

5 Roger Stone, retract and apologize as for 6 statements he has made regarding Guo MD,

Kwok.

9 found guilty and convicted of financial

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.

20 September 2017 and the fall of 2017, I

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

2 general of the National Committee on China

not a governmental think tank.

7 senior CCP officials. 8 That's our committee.

9 disparaging the committee.

11 extraordinary case.

12 today why we've already reached out to the 13 U.S. Trustee to say that even if the U.S.

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.

23 appointment of an examiner, we will pay for 24 it.

25 said if I'm going to have a transparent

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> 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.

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.

10 case. Truly independent.

12 yesterday for more than four hours.

13 answered every single question.

14 fully said, you tell me when to come back, 15 I'll do it again.

16 examined for several more hours. 17 Again, the interpretation's make it a

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.

25 but he thought that was important.

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2 examiner.

3 financing to do that. 4 Your Honor, we commit to file a plan in 5 the next 20 days.

6 about treatment of creditors and we will do 7 that.

8 dwindle for months and months and months.

10 extraordinary in many ways.

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.

16 explained and he accepts, is to file a plan 17 and confirm a plan.

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

22 creditors want.

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

7 family was arrested in China, if, if their 8 goal is to have him killed, which Mr. Kwok

10 retribution or to silence his political 11 speech, then this is going to be very 12 difficult.

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.

19 evaluate yourself what our creditors, such 20 as PAX really want.

21 to be commercial.

22 we intend to find out. 23 By this Chapter 11 case, Mr. Kwok also 24 admittedly wants to stay out of jail.

25 goes to jail, he believes he will be killed.

1 It is that simple.

2 exercise his life and liberty to be able to 3 administer this Chapter 11 case.

4 not be able to do so in jail.

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.

11 business, he can't even have a bank account 12 because of the campaign by the CCP.

13 will even allow him to have bank account. 14 On a full-time basis, he is a critic in

16 broadly, of the CCP.

17 work.

21 wealthy.

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.

2 generosity of his family.

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.

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

15 to earn income. He has no income.

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.

22 things.

24 MR. BALDIGA: Understood. 25 THE COURT:

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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.

4 for it. 5 THE COURT: Well, okay.

6 asking questions right now.

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.

12 associated with it.

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.

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:

25 opposition, we'll have to address that.

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2 think you said already today that you filed 3 the motion today.

4 are you, you're looking for expedited relief 5 is what I'm looking at?

6 things here.

7 order to enter quickly? 8 MR. BALDIGA: But not today, of course. 9 THE COURT:

10 going to enter today.

11 are you looking for as far as timing and -- 12 MR. BALDIGA:

14 hearing.

15 THE COURT:

16 differently on the preliminary and final 17 hearing, too.

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

22 because we want to see what's happening with 23 the plan.

25 said, I think I wrote down, 20 days or

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1 something?

2 MR. BALDIGA: Yes. 3 THE COURT:

4 would be a final DIP order in a sooner, 5 sooner than a later.

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.

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.

15 giving you an example so you understand what 16 the Court's perspective is.

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.

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.

1 assume, but I could be wrong, that the

2 committee will want to retain counsel and

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.

10 expectations I suppose in some respects. 11 MR. BALDIGA:

12 appreciated, your Honor. 13 THE COURT: Okay.

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.

21 circumstances of each case, okay?

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?

25 days,? Two weeks?

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1 for?

2 MR. BALDIGA:

3 case calendar in front of me.

4 hearing I think coming up. I don't have it. 5 THE COURT: I'll look.

6 you. Hold on. 7 MR. BALDIGA: April 12th? 8 MR. SILVERBERG:

9 for next Monday.

notice. 11 THE COURT:

13 MR. FREIDMAN:

14 for it. 15 MR. BALDIGA:

16 THE COURT: Okay.

17 an \$8 million DIP financing hearing from an

19 in four days.

20 so you don't have to worry about that.

22 committee.

24 to happen with that urgency.

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1 talking about it.

2 not going to put anybody in that position, 3 including the Court.

5 MR. BALDIGA:

6 THE COURT: April 12th. 7 MR. BALDIGA:

8 THE COURT:

we do.

10 have applications, a bunch of retention 11 professional applications on April 12th in 12 the afternoon.

13 going to end up doing in this case, at least 14 initially, and it might be throughout the

16 matters on Tuesdays, which is the regular

in this Court. 18 MR. BALDIGA: Okay. 19 THE COURT:

20 them on another day.

21 up doing is taking the matters that are 22 April 12th and moving them to April 13th for 23 example.

25 hear that day, nothing else.

1 there's many, many things going on and I

2 think the Court needs to devote the time to

4 a regular Tuesday hearings calendar in 5 Bridgeport. 6 So I think that's likely to happen.

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

14 MR. BALDIGA: Okay. 15 THE COURT:

16 13th. 17 MR. BALDIGA:

18 good day. 19 THE COURT: Yeah.

20 it makes sense to think that we're going to

22 Tuesday calendar when, you know, we have to 23 hear other matters.

24 sense. 25 MR. BALDIGA:

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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.

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?

8 going to have to address that at some --

9 some way. 10 MR. BALDIGA: Yes.

11 plaintiff litigations for which the debtor 12 is plaintiff. 13 THE COURT: Okay. 14 MR. BALDIGA:

15 assets of the estate. 16 THE COURT: Right. 17 MR. BALDIGA:

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:

23 I've described some of them.

24 are defamational, called defamation cases.

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1 ultimately, they all come out of China.

2 Almost all at about the same time.

3 a similar funding, including the PAX through

5 THE COURT:

6 the United States?

7 MR. BALDIGA: Yes. 8 THE COURT:

9 States? 10 MR. BALDIGA:

11 United States, yes.

12 been in the United States since I believe 13 2015. 14 THE COURT: Right. 15 MR. BALDIGA: Or so. 16 THE COURT: Okay.

17 MR. BALDIGA:

BVI. 18 I'm sorry. 19 THE COURT: I'm sorry. Say that again. 20 MR. BALDIGA:

21 British Virgin Islands. 22 THE COURT: Okay. Okay.

23 total are there?

24 like 30 or something did I see? 25 MR. BALDIGA: About that, yes.

1 THE COURT: Okay. All right.

3 properly. I'm not missing things. Okay. 4 Which I don't think I picked up the British

6 anything.

7 have seen that. 8 All right.

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.

13 continue this just in case I have more 14 questions. I may not.

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

19 including you.

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.

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2 I may come out and say at whatever that next

4 conference is concluded and we don't need to 5 schedule any more.

6 the issues in the pleadings that are pending

8 filed by the creditors.

9 committee, United States Trustee, whatever. 10 So even though I'm continuing this, I

13 do and you're not prepared, I'll give you -- 14 I mean, we'll figure it out.

15 problem. 16 MR. BALDIGA:

17 your Honor.

18 this case quickly as I said.

19 cases get old quickly.

a conclusion. 21 THE COURT: All right.

22 how things go.

23 all right?

24 ask any questions about the case management

1 question the debtor at the 341 meeting,

2 which obviously happened yesterday and it

it's not closed.

5 debtor's going to be subject to further 6 questioning. 7 MR. BALDIGA:

9 THE COURT: Okay. 10 MR. BALDIGA:

yes. 11 THE COURT: All right.

12 I understand, I have a good understanding I 13 should say.

14 thorough understanding, but I have a good 15 understanding of where things be.

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.

22 that in any way, shape, or form.

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

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2 impacted what's going on.

6 could have missed it.

7 second and I'll see if I can find it.

9 55, we talk about PAX.

10 litigation you talk about, starting at

12 MR. BALDIGA: Yes. 13 THE COURT:

15 guaranty, and then you talk about the 16 restraining order.

17 it says, the debtor says he has no ability 18 to pay this fine.

19 it with that, for that you're going to have 20 to address at some point, whether it's in

22 Court to determine that the State is not

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 am not ruling right now.

5 going to do if I do that, number one?

6 what are you going to do if I grant relief 7 from the stay?

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?

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?

20 that?

21 provide.

22 happen today. I'm not saying that yet.

23 haven't said that yet.

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.

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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

5 sentence. So can you explain that to me? 6 MR. BALDIGA: Yes. 7 THE COURT: Okay. 8 MR. BALDIGA:

9 boat. Never did. 10 THE COURT:

11 don't know if even anybody disputes that. 12 MR. BALDIGA: Okay. 13 THE COURT:

14 judge says doesn't matter whether he owns 15 it.

it. 16 MR. BALDIGA:

17 THE COURT:

18 said, right?

19 that wrong.

20 judge in New York said he controls it.

22 it, then, then why would he say, "I do not 23 have the authority to order it back to New 24 York"?

25 me. I'm sorry.

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1 MR. BALDIGA:

2 your Honor. 3 And Mr. Kwok does not control the boat. 4 THE COURT: Okay. 5 MR. BALDIGA:

6 finding that he did.

7 right. It's on appeal. But it's wrong. 8 And that's okay.

9 are wrong. 10 THE COURT: Yup. 11 MR. BALDIGA:

12 that that's what he found. 13 THE COURT: Okay. 14 MR. BALDIGA: He found that. 15 THE COURT: Okay. 16 MR. BALDIGA:

17 PAX has asked for here, and again, this ties 18 into the earlier presentation and it's --

19 don't think it's by coincidence.

20 enforcement of the State court's February 9 21 contempt order.

22 here at paragraph 9. 23 THE COURT:

24 beginning of the hearing; didn't I?

25 him, aren't you, aren't you really just

2 jurisdiction of the, of the New York court? 3 MR. BALDIGA:

4 papers say. 5 THE COURT:

6 what the paper said, but that's what I asked 7 him.

8 figure out a way.

10 fighting about everything.

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

16 what you said.

17 well.

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:

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.

5 do all that.

7 this Court and try to get the cooperation of

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:

20 on that.

21 somebody's not going to like the way I rule. 22 Whoever it is.

23 an appeal of that, too. Right?

24 there will be I would assume.

25 we're going to be continuing litigation

1 that's already been continuing in New York

2 for several years.

3 filed in 2017 I think.

4 about that. 5 MR. BALDIGA:

6 Voice of America podcast, yes. 7 THE COURT: Okay.

8 suggesting to you, to everyone, that sure, 9 we can do that.

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.

15 mean it's going to be sometime soon.

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

21 you talk as long you want.

22 debtor's counsel. You should be talking. 23 This is what we need to talk about.

24 going to let Attorney Freidman tell me why I 25 should grant his motion in a minute.

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talked yet.

2 talk. 3 MR. BALDIGA:

4 course. Listen is all. 5 THE COURT:

6 you'll be able to reply.

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.

11 just saying I could do that.

13 obvious issue in the room that we have to 14 address.

15 in any situation ruling because that's what 16 I'm supposed to do.

17 problem if people appeal because that's why 18 we have courts of appeals.

19 it wrong as you said.

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.

24 no choice.

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

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I want to be very careful.

2 saying that you're not taking any of this -- 3 MR. BALDIGA:

4 exactly what you mean, your Honor. 5 THE COURT:

of course you are. 6 MR. BALDIGA:

7 opportunity at the outset of this hearing to 8 have given you as much background as I have.

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.

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.

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.

ahead.

2 MR. FREIDMAN:

3 Honor.

4 and Meyers.

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

14 repeated from the lectern.

15 out from this case that Mr. Kwok has had 16 bank accounts.

18 purchased an apartment, talking about his 19 long banking relationships.

20 2015.

22 necessary, enormous testimony about how he

24 Sheridan Netherlands Apartment despite his 25 denying that in his declaration.

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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 --

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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

2 allegation. 3 Then, your Honor, the last page.

4 sorry, page 8.

5 beneficial interest in the Lady May.

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

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.

16 have the ability to bring the yacht back 17 should fall on deaf ears.

18 defendants claim all the time I didn't do it 19 after they've been convicted.

20 make it so.

21 can't do it when a court has found he can

23 complete contempt.

25 Ostrager's opinion for 268 days.

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.

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

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

indicative of the judicial process.

9 think it, you know, then becomes clear that

11 sanctions order that can be held to be -- 12 fall within the exception to the automatic 13 stay.

15 they rely on the White case.

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

contempt motions.

22 trying to seek.

23 not trying to seek damages.

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.

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.

17 at the moment, but thank you, Attorney 18 Freidman. 19 MR. FREIDMAN:

21 THE COURT:

22 anybody else wishes to be heard on PAX's 23 motion.

no, no, come first, counsel.

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:

5 Honor. 6 THE COURT: Good afternoon. 7 MS. CALLARI:

8 Callari Partners, again.

9 of Rui Ma.

11 counsel in this room.

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.

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.

25 language.

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?

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1 Okay.

4 creditor, Ms.

5 with regard to the motion. 6 MR. BALDIGA: Thank you, your Honor. 7 Again, William Baldiga for the debtor.

9 that we're focused on exactly the relief

12 be arguing a different one.

13 address the motion they filed.

15 motion. 16 THE COURT: All right. Hold on.

17 me catch up with you, okay? 18 MR. BALDIGA: Okay. 19 THE COURT:

20 get where you're talking to so that I'm -- 21 paragraph 9, page what? 22 MR. BALDIGA:

23 their motion at docket 57. 24 THE COURT: Just give me a second.

25 not quite there yet.

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1 yes, go ahead.

2 MR. BALDIGA: Okay.

I think it fairly clear.

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.

10 appended to that motion.

11 attorney declaration. 12 THE COURT: Yup, I got it. 13 MR. BALDIGA:

14 THE COURT: Go ahead.

it. 15 Tell me where you want me to look. 16 MR. BALDIGA:

17 sorry. 18 THE COURT:

20 MR. BALDIGA:

21 THE COURT: 16 of 134? 22 MR. BALDIGA: Yes, I believe so. 23 THE COURT: All right.

24 catch up with you. I'm almost there.

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1 THE COURT: Okay.

2 MR. BALDIGA:

3 of the, of the order? 4 THE COURT: It is, yes, it is. 5 MR. BALDIGA: Okay. 6 THE COURT:

8 docket, yes. 9 MR. BALDIGA: Okay.

11 obviously.

12 thirty-four millions dollars to PAX within

14 clear cut, although PAX has clarified today 15 and several places in the motion, they are 16 not seeking monetary relief.

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.

23 one thing that's left is judiciary law 753,

25 that entitles the court to imprison for

1 contempt.

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.

8 thirty-four million dollars or go to jail, 9 period.

10 THE COURT:

11 their reply say something different?

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 order? 19 MR. BALDIGA:

20 they're seeking to enforce.

22 THE COURT:

23 that.

24 counsel.

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.

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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

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.

8 thing.

9 identifying assets over which Kwok exercised 10 control.

11 apparently, an evidentiary hearing at which

13 appeared.

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.

19 about.

20 point here?

21 saying something that is inaccurate with

23 contempt? 24 MR. FREIDMAN: You're not, your Honor.

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1 Exhibit 5 of my declaration is the actual

2 order from Justice Ostrager.

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.

8 MR. FREIDMAN:

9 argument completely falls apart when you 10 look at that. 11 THE COURT:

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.

22 know what you want me to do.

23 can either purge yourself of the contempt or 24 you can't.

or you choose not to. 25 Excuse me, that is the more appropriate --

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1 those are the more appropriate words.

2 MR. BALDIGA:

3 THE COURT:

5 wasn't just Justice Ostrager apparently,

7 and control over this boat.

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,

15 unfortunate experience for him.

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.

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.

reply.

1 say they, I'm talking about PAX and the

2 debtor.

4 asked the question.

6 right in the extent that they're not seeking 7 to impose the monetary fine right now and

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.

14 that's what that means.

16 reply, we just want the boat back in our 17 jurisdiction.

18 the creditors of the estate.

20 that.

22 that the order if I were to grant the relief 23 requested, would, would say that.

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.

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

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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.

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1 MR. BALDIGA:

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.

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.

11 don't think there's an ability to elect -- 12 MR. BALDIGA:

13 quickly. 14 MS. CLAIBORN: Your Honor? 15 THE COURT: Yes. 16 MS. CLAIBORN: Maybe helpful.

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.

22 nothing, there's no ability to elect a 23 Chapter 11 trustee. 24 MR. BALDIGA: Excuse me.

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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.

4 saying, it seems inconsistent right now if 5 you read the actual language of the statue. 6 It seems very inconsistent.

7 to do, you have to have all three prongs of 8 (a) in order to elect under (b).

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:

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:

19 THE COURT:

20 says. 21 MR. BALDIGA:

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:

4 didn't change the statute because they, they 5 really should have changed the statute.

7 sections under Chapter 7.

9 know, where the code, that may be exactly 10 your intent that it be the same.

12 and it refers you to subsection (a), (b) and

14 addressed Chapter 7 sections.

15 make any sense.

17 that today.

18 interesting.

19 understand the election of a trustee under 20 Chapter 7.

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?

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1 MS. CLAIBORN: No, your Honor.

2 THE COURT: Okay.

3 matter for today's purpose.

5 MR. BALDIGA: I agree. 6 THE COURT:

I really have never seen that.

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.

15 points.

17 in a bankruptcy should be an examiner.

18 debtor is supposed to be a neutral fiduciary 19 for all its creditors.

20 not going to happen.

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.

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1 report is likely to be hearsay.

2 can't pursue causes of action.

3 help.

4 needs to go.

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.

10 declaration.

11 clear that Kwok is under a continuing

contempt fines of \$500,000 a day.

us to be paid.

jurisdiction. That's what we're trying to

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

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1 anything about collateral estoppel or race

2 judicata after Mr. Kwok had took the Fifth, 3 had an adverse inference draw against him,

6 daughter. I don't want to embarrass her.

8 were the decisions that they're collaterally 9 estopped, race judicata applies, that he

11 convincing evidence. 12 And I don't have anything further.

13 I did have a question, if I can ask the 14 Court? 15 THE COURT: Sure, go ahead. 16 MR. FREIDMAN:

18 be prepared to file our papers in connection

20 States Trustee's motion? 21 THE COURT:

22 good question.

23 the motion was filed on Saturday and there 24 was a motion to expedite that hearing.

address that now.

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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

3 expedited hearing on the appointment of an 4 examiner.

5 April 13 at 10:00 a.m. along with the other 6 matters.

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?

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:

4 crosstalk). 5 THE COURT: I understand. All right. 6 So then, yes, so then what we're going to do

9 tomorrow. 10 MS. CLAIBORN: That's (indiscernible). 11 THE COURT:

13 minute. Who you serving?

15 with the debtor's schedule with these 16 statements, right?

17 list look like? 18 MS. CLAIBORN:

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.

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?

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1 I'm assuming that all the dates you've just

2 accounted for that be put forth in an order

4 THE COURT: In that 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:

9 and underlying motion. 10 THE COURT: Okay. Great. Thank you. 11 MR. BALDIGA:

12 Honor, one of the motions that we have filed 13 is to retain service agent Streto (phonetic)

15 THE COURT:

16 why you need a service agent.

17 MR. BALDIGA:

18 take the burden off of other parties if that

20 THE COURT:

21 an administrative expense to the estate.

why are we doing that?

23 do we need a service agent?

24 I'm ruling on it.

25 question.

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1 you a question.

2 agent? 3 MR. BALDIGA:

4 the end of day, that would serve to be most

6 THE COURT: Well, I don't know.

7 it will, but I want to hear from other 8 people about it, right? 9 MR. BALDIGA: Okay. 10 THE COURT:

13 12th; isn't it? 14 MR. BALDIGA: Yes. 15 THE COURT:

16 deadline with regard to that motion already 17 in place. There should be.

19 MR. BALDIGA: Yes. 20 THE COURT:

be. 22 MR. BALDIGA:

23 then. 24 THE COURT:

25 MR. BALDIGA:

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1 accommodate.

2 THE COURT:

4 regardless of Chapter, but certainly in a 5 Chapter 11 case, the Court is concerned 6 about administrative expenses, right?

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.

18 watch it and make sure that administrative 19 expenses and things are not handled in a 20 rote manner.

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:

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1 of the reasoning.

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.

7 that. 8 THE COURT: Okay. Thank you. 9 MR. BALDIGA: Thank you. 10 THE COURT: Attorney Freidman? 11 MR. FREIDMAN:

12 perspective, we will meet and confer with 13 Mr. Kwok. 14 THE COURT:

15 Attorney Freidman. I'm sorry.

16 again. 17 MR. FREIDMAN:

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

23 will meet and confer in good faith. 24 THE COURT: Yeah, I thank you.

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.

4 to say something else. 5 MS. CLAIBORN:

6 to see if the Court had any other questions 7 for me. 8 THE COURT: No.

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.

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:

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.

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.

I'm sorry. 3 I just lost my place.

4 with me for a second.

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,

12 continued until April 13 at 10:00 a.m.

14 regard to that. Hold on one second, please.

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.

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.

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