Case 1:10-cv-01178-SHS Document 17 Filed 02/23/2010 Page 1 of 22

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK
_____________________________________________________X
BANK OF AMERICA, N.A., as Trustee for the Registered
Holders of Wachovia Bank Commercial Mortgage Trust
2007-C30, acting by and through its Special Servicer,
CWCapital Asset Management LLC, BANK OF AMERICA,N.A., 10 Civ. 1178 (SHS)
as Trustee for the Registered Holders of COBALT CMBS ECF Case
Commercial Mortgage Trust 2007-C2 and Wachovia Bank
Commercial Mortgage Trust 2007-C31, acting by and through
CWCapital Asset Management LLC pursuant to the authority
granted under that certain Amended and Restated Co-Lender
Agreement dated March 12, 2007 and U.S. BANK NATIONAL
ASSOCIATION, as Trustee for the Registered Holders of
ML-CFC Commercial Mortgage Trust 2007-5 and ML-CFC
Commercial Mortgage Trust 2007-6, acting by and through
CW Capital Asset Management LLC pursuant to the authority
granted under that certain Amended and Restated Co-Lender
Agreement dated March 12, 2007,
Plaintiffs,
-against-

PCV ST OWNER LP, ST OWNER LP, TRI-LINE CONTRACTING

CORP., ATLAS FIRE PROTECTION, INC., POMALEE ELECTRIC
CO, INC., REFUSE SYTEMS CORP., PRO TILE
DISTRIBUTORS, INC., TRITON STONE AND MARBLE LLC,
S.T.S. TRADING INC. d/b/a S.T. LUMBER & HOME CENTER,
ELECTRICAL, PLUMBING, S.D. INT’L d/b/a S.D. STONE
DEPOT, ELBEX AMERICA OF NEW YORK, INC.,
NEW YORK CITY DEPARTMENT OF TRANSPORTATION
PARKING VIOLATIONS BUREAU, NEW YORK CITY
ENVIRONMENTAL CONTROL BOARD and FIRE
DEPARTMENT OF THE CITY OF NEW YORK,

Defendants,
-against-

APPALOOSA INVESTMENT L.P. , I, PALOMINO FUND LTD.,

THOROUGHBREDFUND L.P., and THOROUGHBRED
MASTER LTD.
Intervenor-Defendants.
_____________________________________________________X

MEMORANDUM OF LAW IN SUPPORT OF APPALOOSA INTERVENORS’

MOTION FOR LEAVE TO INTERVENE AS A PARTY-DEFENDANT
 Case 1:10-cv-01178-SHS Document 17 Filed 02/23/2010 Page 2 of 22

TO THE HONORABLE UNITED STATES DISTRICT JUDGE:

Pursuant to Rule 24(a) of the Federal Rules of Civil Procedure, Appaloosa

Investment L.P. I, Palomino Fund Ltd., Thoroughbred Fund L.P., and Thoroughbred

Master Ltd. (the Appaloosa Intervenors) have filed a motion seeking leave to intervene as

a matter of right in this Action as a party-defendant. Intervention is required because

Plaintiff CW Capital has pursued foreclosure in breach of its fiduciary obligations to the

Appaloosa Intervenors. Plaintiff CW Capital is also deeply conflicted, and does not

adequately represent the interests of the Appaloosa Intervenors, who have more than

three quarters of a billion dollars at stake in the trusts secured by the property at issue in

the foreclosure Action; namely, the mortgage on Peter Cooper Village and Stuyvesant

Town (the “Property”).

Plaintiff CW Capital Management’s actions in pursuing foreclosure on Peter

Cooper Village and Stuyvesant Town (“Stuyvesant Town”) violate its obligations as

Special Servicer to act as a prudent commercial mortgage servicer seeking to maximize

value for the benefit of all Certificateholders. By rushing to foreclose, when other less

hazardous avenues were available, Plaintiff CW Capital has recklessly and imprudently

exposed the Appaloosa Intervenors—and other Certificateholders—to wholly avoidable

losses, risks, and injuries, including:

• Double and Unnecessary Transfer Taxes: A foreclosure judgment will

require a double payment of New York City’s $100 million transfer tax on
the Property: once when title is transferred by foreclosure, and a second
time when the Property is sold in the inevitably necessary workout of this
loan. No prudent commercial mortgage lender would willingly assume
these tax liabilities, particularly when they could be limited by other
means, or avoided entirely in bankruptcy.

• Environmental Liabilities: The documents governing the trusts state

clearly that Plaintiff CW Capital may not pursue foreclosure unless, within

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six months prior to initiating the Action, it has obtained an environmental

assessment certifying that the relevant mortgaged property is in
compliance with applicable environmental laws and regulations. The
Appaloosa Intervenors do not believe any such assessment has been
obtained.

• Excess Rent Claims: The tenants at the Property are the beneficiaries of
an un-liquidated, potentially massive excess rent claim that may, in the
future, be converted into a damage judgment worth hundreds of millions
of dollars. The status of this liability is uncertain, as is its effect on the
rights of the Certificateholders and the value of the underlying mortgaged
property. Proceeding precipitously to take title by foreclosure, in the face
of this uncertainty, is again imprudent and not in the best interest of the
Certificateholders.

• Creation of Unnecessary Losses for Certificateholders: By subjecting the

property to transfer tax liability on foreclosure, Plaintiff CW Capital may
obtain a priming lien at the top of the capital structure to secure repayment
of that advance. This priming lien would create additional losses that
would not otherwise be suffered by holders of subordinated tranches,
including tranches of Certificates owned by Appaloosa.

• Voting Rights: Tranches whose recovery is wiped out by CW’s priming

lien will also be deprived of voting rights they otherwise would enjoy
under the trusts.

The Appaloosa Intervenors stand to suffer unique and irreparable injuries as a

result of Plaintiff CW Capital’s actions. The Appaloosa Intervenors own over

$750,000,000 of Certificates in the Wachovia Bank Commercial Mortgage C-30 Trust

(the “C-30 Trust”). Although much of this is senior debt, Appaloosa also holds over 30%

of three subordinated tranches of C-30 Trust Certificates. At a reported valuation range

of $1.8 - $2.2 billion, Appaloosa's particular series of subordinated Certificates are likely

to be the next loss-absorbing layers in the C-30 debt stack, and would thus become

impaired by the incurrence of $200 million of priming liens and back-end transfer taxes.

Moreover, the thickness of these debt layers is so narrow ($50-$100 million), that the

additional costs would likely be the difference between a recovery of zero and par on

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Appaloosa's particular tranches. These securities are likely to be the fulcrum securities in

any restructuring of the property. Appaloosa holds significant interests in other

subordinated tranches, as well. These losses could be avoided if Plaintiff CW Capital

were acting prudently and with due regard for its fiduciary obligations.

No other party to the Action can or will adequately represent the interests of the

Appaloosa Intervenors. When Appaloosa attempted to open substantive discussions of

the profound problems associated with pursuing foreclosure, Plaintiff CW Capital’s

counsel responded by offering to “write a letter for the Hall of Fame.” Plaintiff CW

Capital is not only acting imprudently, it is subject to a profound conflict of interest. In

addition, Plaintiff CW Capital’s actions will benefit the governmental entity Defendants,

at the expense of Appaloosa and the other Certificateholders, by subjecting the property

to $200 million of wholly unnecessary transfer tax liability. This tax liability does not

benefit the Certificateholders; instead, every dollar goes solely to benefit the

governmental entities. Absent an intervention, no party in the lawsuit will adequately

hold Plaintiff CW Capital accountable to perform its obligations as Special Servicer to

act in the best interests of the Certificateholders, and to pursue remedies that are

reasonably expected to maximize their recovery.

The Appaloosa Intervenors should not be made to wait for a damages remedy to

redress Plaintiff CW Capital’s breach of its fiduciary obligations, particularly when

intervention as of right is warranted, and could avoid these damages entirely.

I. INTRODUCTION

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The Appaloosa Intervenors hold over three quarters of a billion dollars of

Certificates1 whose repayment is secured by the mortgage on the Property. On February

16, 2010, without consulting with Appaloosa or—to Appaloosa’s knowledge—any other

un-conflicted noteholder, Plaintiff CW Capital Asset Management LLC (“CW Capital”),

in its capacity as Special Servicer and on behalf of the Trustees of various trusts, filed a

Complaint (“Action”) seeking to foreclose on the Property.

CW Capital’s foreclosure Action was instituted in violation of CW Capital’s pre-

and post-default, fiduciary obligations. As Special Servicer, CW Capital is obligated to

service and administer the loans with “the same care, skill, prudence and diligence” that

would be the “customary and usual standards of practice of prudent institutional

commercial mortgage lenders servicing their own loans.” It must do so “with a view to

the maximization of the recovery on such Mortgage Loans on a net present value basis

and the best interest of the Certificateholders,” and “without regard to … any relationship

… the Special Servicer may have with the related Mortgagor, the Depositor, any

Mortgage Loan Seller or any other party to the Transaction… and the ownership of any

Certificate or Companion Loan.”2 Despite these clear obligations, CW Capital has

pursued foreclosure even though a successful judgment will inflict the wholly

unnecessary, avoidable, and imprudent harms on Appaloosa and the other

Certificateholders described above.

1
As noted, certain of the Certificates are held in the C-30 Trust. The other Certificates are held in the
COBALT CMBS Commercial Mortgage Trust 2007-C2, Wachovia Bank Commercial Mortgage Trust
2007-C31, the ML-CFC Commercial Mortgage Trust 2007-5, and the ML-CFC Commercial Mortgage
Trust 2007-6 (“Other Trusts” and with the C-30 Trust, collectively, the “Trusts”).
2
See Pooling and Servicing Agreement $7,903,498,737 Commercial Mortgage Pass Through Certificates
Series 2007-C30 at pg. 78 “Servicing Standard.”

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Appaloosa is entitled to intervene as of right to protect its own interests from the

reckless behavior of an entity that is supposed to—but is not—acting in the best interests

of Appaloosa and the other Certificateholders. CW Capital’s recklessness is evident: It

has willfully created a risk of assuming double tax liability, a liability that would result in

a gratuitous and wholly unnecessary priming lien. Its negligent disregard for the interests

of the Certificateholders is evident, as well: It has moved precipitously to foreclose, even

though it exposes the Trusts (and perhaps the Certificateholders) to litigation risks and

other liabilities that could be avoided or limited if CW Capital were acting prudently.

Why, then, has CW Capital pursued this foreclosure? The answer is simple: CW

Capital is burdened by an irreconcilable conflict between its role as Special Servicer and

its status as a holder of junior notes and their rights as “Controlling Class Representative”

of the C-30 Trust. As Special Servicer, CW Capital has clear fiduciary obligations to act

in the best interests of all of the Certificateholders “without regard to the ownership of

any Certificates,” i.e. without regard to its own holdings of the notes. As Controlling

Class Representative, however, CW Capital has the power to direct the Special

Servicer—here, itself—to take actions solely in its own interests.3 That instruction right,

however, cannot be permitted to overcome CW Capital’s clear fiduciary obligations as

Special Servicer to act in the interests of all holders.

This conflict precludes any finding that CW Capital can “adequately represent,”

FED. R. CIV. P. 24(a)(2), the interests of all Certificateholders, much less the interests of

3
See PSA at § 6.11(b) (noting that the Controlling Class Representative “may take actions that favor the
interests of one or more Classes of the Certificates over other Classes if the Certificates, … may have
special relationships and interests that conflict with those of Holders of some Classes of Certificates, …
[and] may act solely in the interests of the Holders of the Controlling Class ….”) and (a) (providing that
“the Special Servicer will disregard any direction or objection … of the Controlling Class Representative
… if such direction or objection causes … the Special Servicer to violate the Servicing Standard ….”).

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the Appaloosa Certificateholders. The conflict between CW Capital and Appaloosa is

particularly profound: in the absence of CW Capital’s reckless assumption of priming

liens and other liabilities, Appaloosa holds Certificates that are the de facto controlling

class of the Trusts. The Appaloosa Intervenors, who hold more than $750 million of

Certificates, including tranches that stand to be wiped out and stripped of their rights as

fulcrum securities if CW Capital forecloses, have a clear, direct, and legally protectable

interest in the Property at issue in this Action. That interest is being significantly

impeded or impaired by the disposition of this Action, and by the conflicted actions of

CW Capital. Appaloosa by this intervention seeks to protect its interests and rights and,

as detailed below, should be afforded the opportunity to intervene as a party-defendant as

of right.

In reality, no current party to the case adequately represents the interests of the

Certificateholders, including Appaloosa, who stand to be injured irreparably by CW

Capital’s imprudent actions. CW Capital is profoundly conflicted. The Appaloosa

Intervenors have tried repeatedly to speak with CW Capital to resolve these concerns but,

since the Action was filed, CW Capital’s counsel has responded flippantly and

inappropriately to Appaloosa’s efforts to open a dialogue. CW Capital’s silence, in these

circumstances, ignores the gravity of the issues it faces, and is wholly inconsistent with

CW Capital’s fiduciary obligations as Special Servicer. The governmental entities that

are defendants will benefit—directly and indirectly—from the reckless and unnecessary

double tax payment that will be caused if CW Capital proceeds with its foreclosure.

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 Case 1:10-cv-01178-SHS Document 17 Filed 02/23/2010 Page 8 of 22

Each of these reasons establishes that Appaloosa is entitled to intervene as of right

in this Action. For these reasons, and those explained in greater detail below,

Appaloosa’s motion should be granted.

II. APPALOOSA SHOULD BE ALLOWED TO INTERVENE AS A PARTY-

DEFENDANT

A. Standard of Review

Rule 24(a) of the Federal Rules of Civil Procedure grants an applicant the ability

to intervene in a pending lawsuit as a matter of right when, upon timely application, it

demonstrates that:

… the applicant claims an interest relating to the property or transaction

which is the subject of the action and the applicant is so situated that the
disposition of the action may as a practical matter impair or impede the
applicant's ability to protect that interest, unless the applicant's interest is
adequately represented by existing parties.

FED. R. CIV. P. 24(a)(2) (emphasis added). To satisfy the requirements of Rule 24(a)(2),

a party must therefore (1) make a timely application; (2) demonstrate an interest relating

to the property or transaction which is the subject of the action; (3) show that disposition

of the action threatens to impair or impede its ability to protect that interest; and (4) show

that existing parties inadequately represent its interest. Brennan v. New York City Bd. of

Educ., 260 F.3d 123, 128-29 (2d Cir. 2001).

The test for intervention by right is flexible and discretionary; courts generally

look at all four factors and do not focus narrowly on any one of the criteria. See United

States v. Hooker Chemicals & Plastics, 749 F.2d 968, 983 (2d Cir. 1984) (“The various

components of the Rule are not bright lines, but ranges—not all ‘interests’ are of equal

rank, not all impairments are of the same degree, representation by existing parties may

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be more or less adequate, and there is no litmus paper test for timeliness. Application of

the Rule requires that its components be read not discretely, but together.”).

The applicant’s well-pleaded allegations must also be accepted as true for

purposes of considering the motion to intervene, with no determination made as to the

merits of issues in dispute. See Seneca Nation of Indians v. New York, 213 F.R.D. 131,

136 (W.D.N.Y. 2003); Sackman v. Liggett Group, Inc., 167 F.R.D. 6 (E.D.N.Y. 1996).

B. The Appaloosa Intervenors Have Met the Requirements for

Intervention as of Right

1. Appaloosa’s Motion to Intervene Is Timely

Appaloosa’s motion to intervene is indisputably timely. The Second Circuit

considers the following four factors to determine whether a motion under Rule 24(a)(2) is

timely: (1) the length of time the would-be intervenor knew or reasonably should have

known that its interest was imperiled before it moved to intervene; (2) the foreseeable

prejudice to the existing parties if intervention is granted; (3) the prejudice to the would-

be intervenor if intervention is denied; and (4) exceptional circumstances which may

militate against or in favor of allowing late intervention. United States v. Pitney Bowes,

Inc., 25 F.3d 66, 70 (2d Cir. 1994).

This case began just over a week ago. Appaloosa is seeking to intervene at the

earliest possible opportunity. The Court has yet to set a scheduling order and many

parties have not yet been served. Appaloosa’s motion for leave has also been filed before

any defendant filed an Answer, so none of the existing parties has (or will) suffered any

prejudice as a result of the intervention. Finally, the Court has not been asked to make

any substantive rulings in this Action. By every applicable measure, Appaloosa’s Motion

is timely.

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2. Appaloosa Has a Protectable Interest in the Action

Appaloosa has an interest in the property that is the subject of the Action. The

Second Circuit has held that the applicant must have a “direct, substantial, and legally

protectable” interest in the proceeding. United States v. Peoples Benefit Life Ins. Co.,

271 F.3d 411, 415 (2d Cir. 2001) (quoting Washington Elec. Corp., Inc. v. Massachusetts

Mun. Wholesale Elec. Co., 922 F.2d 92, 97 (2d Cir. 1990)).

Appaloosa’s interest in the Property and the foreclosure Action is enormous and

obvious. It holds over $750 million of Certificates secured by the Property. Although

much of this is senior debt, Appaloosa owns 30% of three subordinated tranches that are

fulcrum tranches with significant rights to control the restructuring of the property.

Appaloosa has significant holdings in other subordinated tranches, as well. Appaloosa, in

short, is one of the largest holders of Certificates. It stands to be uniquely injured by the

destruction of its voting and fulcrum security rights and the loss of principal on these

Certificates if CW Capital proceeds with the foreclosure and imposes a reckless,

unnecessary, priming lien at the top of the structure.

3. Appaloosa’s Interests May Be Impaired or Impeded if Intervention Is

Denied

The sale of the Property has the potential to inflict the following injuries on

Appaloosa: a) Plaintiff CW Capital, which has filed suit as Special Servicer, is also a

holder of notes and the Controlling Certificateholder, and thus suffers an irreconcilable

conflict of interest that has injured Appaloosa and the other Certificateholders; b) losses

due to excess tax liability and extinguishment of note recoveries for junior tranches that

result from that excess, but wholly avoidable, tax; c) the risk of environmental liabilities;

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and, d) additional losses due to a potential excess rent judgment in favor of the tenants.

We address each of these, in turn, below.

a. CW Capital Is a Conflicted Fiduciary and Cannot Proceed

The Special Servicer has roles and responsibilities that are fiduciary in character.

It is required, as noted earlier, to act in the best interests of all Certificateholders and

without regard to its own holdings of the notes. The foreclosure should not proceed,

given CW Capital’s profound conflict, until it carries its burden to demonstrate that

foreclosure is fair to the Certificateholders and calculated to maximize their recovery—

rather than maximizing their losses, as currently seems likely.

There are many means and methods that could be employed by the Special

Servicer to resolve the default on the Certificates. Foreclosure is one, but it is wholly

imprudent because of the tax and excess rent liabilities. Other alternatives were

available, and would have been used by a prudent—and disinterested—mortgage lender.

These include reorganization outside of bankruptcy, a sale of the property (which would

avoid the problem of double taxation), or a reorganization in bankruptcy, which could

avoid the tax entirely. 11 U.S.C. §1146(a) (a properly structured transaction in Chapter

11 bankruptcy made pursuant to a plan would avoid the imposition of a transfer stamp or

similar tax). Each of these alternatives, and others, has differing impacts on differing

classes of noteholders.

CW Capital (acting as Special Servicer) was permitted to decide—consistent with

the Servicing Standard—which of these alternatives would be employed. Given the

distressed nature of the Securitization, and the near-certainty that noteholders will suffer

significant losses no matter how the defaults at issue are resolved, the decisions by CW

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Capital, acting as Special Servicer, should have been undertaken so as to maximize the

Certificateholders’ recovery in all of their best interests, and all avenues that could lead to

a more favorable outcome should be pursued to exhaustion. Importantly, CW Capital

was required to make these judgments without regard to either its own note holdings in

the S tranche of the C-30 Trust or the collateralized debt obligation pools sponsored by

CW Capital.4

As Controlling Class Representative, however, CW Capital is permitted to

instruct the Special Servicer—here, itself—to take actions solely in CW Capital’s

individual interests, and in derogation of and direct conflict with the interests of other

Certificateholders.5 Obviously, CW Capital’s decisions can—and will—affect its own

note holdings, which may fare better or worse depending on which decisions it takes.

This, however, is precisely what the PSA prohibits: under its plain terms, CW Capital

cannot obey its own instructions, to itself, if to do so would cause it to violate the

Servicing Standard.6

Stated plainly, CW Capital has a direct interest in and will be directly impacted

by, the decisions that it is supposed to make as a disinterested fiduciary. Because CW

4
In addition to the holdings described above, the Appaloosa Intervenors believe CW Capital purchased
Certificates and placed them in Collateralized Debt Obligation pools sponsored by CW Capital. This is yet
another, profoundly conflicting interest that burdens CW Capital.
5
See PSA at § 6.11(b) (noting that the Controlling Class Representative “may take actions that favor the
interests of one or more Classes of the Certificates over other Classes of the Certificates, … may have
special relationships and interests that conflict with those of Holders of some Classes of the Certificates, …
[and] may act solely in the interests of the Holders of the Controlling Class ….”).
6
See PSA at § 6.11 (b). Controlling Class Representative “may take actions that favor the interests of one
or more Classes of the Certificates over other Classes of the Certificates, … may have special relationships
and interests that conflict with those of Holders of some Classes of the Certificates, … [and] may act solely
in the interests of the Holders of the Controlling Class ….”) and (a) (providing that “the Special Servicer
will disregard any direction or objection … of the Controlling Class Representative … if such direction or
objection causes … the Special Servicer to violate the Servicing Standard ….”).

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Capital is a self-dealing fiduciary with respect to the foreclosure Action, it does not—and

cannot—adequately represent the interests of other, un-conflicted Certificateholders like

Appaloosa. No foreclosure should be finalized or concluded without assuring that there

is a real party in interest to demand CW Capital’s faithful performance of its fiduciary

obligations. The Appaloosa Intervenors are not only willing to do so, they have

established their right to intervene to protect their own rights, which are at imminent risk

of being destroyed by CW Capital’s heedless, conflicted conduct.

Courts have granted intervention when presented with far more tenuous interests

in property. See, e.g., In re Oceana Int'l, 49 F.R.D. 329 (S.D.N.Y. 1969) (allowing the

current property owner to intervene in a suit brought by a former mortgage holder against

a bank for fraud committed in the previous foreclosure because, even though the current

property owner was not subject to losing the property, its title “could be made vulnerable

by the force and effect of the principles of stare decisis.”). Here, the profound conflict

afflicting CW Capital, and the billions of dollars of unrepresented Certificateholders

whose interests are at stake, warrant granting the Appaloosa Intervenors intervention as

of right.

b. Foreclosure Subjects the Securitization to Unnecessary and

Imprudent Double Taxation and Appraisal Risks, and So May Wipe
Out Appaloosa’s Junior Certificates and Their Voting Rights

Because Appaloosa’s interest is inexorably tied to the Property securing the

Certificates it owns, the disposition of the foreclosure and sale of the Property may also,

as a practical matter, impair or impede Appaloosa’s ability to protect its interest. As

pleaded in Appaloosa’s Complaint in Intervention, the C-30 Trust Certificates and the

certificates issued by the Other Trusts could face significant exposure to a double transfer

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tax associated with any foreclosure or sale of the Property. CW Capital’s payment of a

transfer tax entitles it to a priming lien under the terms of the PSA. This priming lien has

potential to impair or even wipe out certain of Appaloosa’s junior tranches of securitized

notes. Where a non-party’s rights could be impaired by any judgments or rulings in an

action, such as when one class of corporate shareholders might be favored over another,

this has been deemed a sufficient basis to allow intervention. See Consolidated Edison,

Inc. v. Northeast Utilities, 2004 WL 35445, at *6 (S.D.N.Y. 2004) (allowing a

shareholder of the target corporation in a merger-gone-bad to intervene in a breach of

contract suit between the acquirer and target, noting “[t]he intervenor’s rights could be

impaired by any obligations or judgments reached in this litigation, as, for example, by

rulings that found that Con Ed owed damages to the Judgment Class rather than the

March 5 Class.”).

Foreclosure will also necessarily involve the appraisal and valuation of the

Property which, likewise, could potentially impact or impair Appaloosa’s position and its

holdings. When purchased, the Property was originally valued at approximately $5.4

billion. CW Capital is obligated, and likely is already proceeding to obtain, an appraisal

of the value of the Property. That valuation may very well establish that, while a quick

path to foreclosure would place CW Capital in control of the property post-foreclosure,

the notes it holds are actually far “out of the money.” Indeed, it has recently been

estimated that the Property will now be appraised in a range of $1.8 - $2.2 billion.

Taking that into account, three subordinate tranches (of which Appaloosa holds over

30%) are the de facto controlling class of the C-30 Trust. CW Capital has no financial

interest in those tranches. The PSA, recognizing this created perverse incentives,

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authorized CW Capital to go to the Certificateholders (or to the Certificateholders in the

de facto controlling class) to confirm that they wished it to proceed with foreclosure. See

PSA at §6.10.

Amazingly, CW Capital chose not to do so. Instead, it rebuffed Appaloosa’s

efforts to open a dialogue concerning the most prudent path to take. These events

undercut any claim that CW Capital adequately represents the interests of the

Certificateholders, much less those of Appaloosa—whose holdings could be profoundly

impaired, or injured irreparably, if the foreclosure proceeds.

c. Foreclosure in the Face of Significant Uncertainty Concerning

Potential Excess Rent Liability Is Imprudent; Any Excess Rent
Judgment Has the Potential to Further Subordinate or Extinguish the
Value of Appaloosa’s Certificates and the Certificates of Other Junior
Holders

Another potentially significant impact on Appaloosa’s holdings may result from

the liability for an un-liquidated, but potentially massive claim for excess rent arising

from an earlier declaratory judgment action filed by the tenants of Stuyvesant Town. In

that action, as is set forth in Appaloosa’s Complaint in Intervention, the tenants of

Stuyvesant Town sued the current and former owners of the Property, claiming that they

were not entitled to take advantage of the luxury decontrol provisions of the Rent

Stabilization Law while at the same time receiving tax incentive benefits (“Excess Rent

Claim”). The Court agreed. As a result of this lawsuit, someone is potentially liable for

hundreds of millions of dollars of presently un-liquidated liability for this Excess Rent

Claim. It is by no means clear, however, who will ultimately bear that liability, how it

may be affected by the foreclosure, or whether it could be limited or avoided if the

property were restructured in some other way.

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Equally uncertain, and laden with enormous risk, is the issue of environmental

liabilities. As described in the motion, the Property is World War II-era construction.

The PSA states plainly that CW Capital cannot foreclose unless, prior to instituting

foreclosure, it has obtained the environmental assessments necessary to ensure that it is

not succeeding—recklessly and inadvertently—to environmental liabilities. See PSA at

§3.09. CW Capital does not plead that it has obtained these required assessments. No

foreclosure can—or should—proceed until a real party in interest is able to demand, and

document, that they have done so.

Foreclosure in the face of these uncertainties, and CW Capital’s decision to

expose all of the Certificateholders to the possibility of hundreds of millions of additional

dollars of losses over and above the losses they have already sustained, could have a

significant impact on Appaloosa’s holdings secured by the Property and its rights under

the Trust Agreements.

4. Appaloosa’s Interest May Not Be Adequately Represented by the Parties

The final element needed to establish Appaloosa’s right to intervene is a showing

that its interests may not adequately be represented by the parties to the original action.

An intervenor need only show that the representation may be inadequate, not that it is

inadequate. Trbovich v. United Mine Workers, 404 U.S. 528, 538 (1972) (emphasis

added). The Supreme Court has held that “[this] requirement . . . is satisfied if the

applicant shows that representation of his interest ‘may be’ inadequate; and the burden of

making that showing should be treated as minimal.” Trbovich v. United Mine Workers of

Am., 404 U.S. 528, 538 n.10 (1972) (emphasis added); see also Sackman v. Liggett

Group, Inc., 167 F.R.D. 6 (E.D.N.Y. 1996) (same).

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Appaloosa has more than met its burden to demonstrate that its interests are not

adequately represented in this foreclosure Action. This is not the typical case in which a

neutral Indenture Trustee may be counted on to faithfully protect the interests of all

bondholders. Here, foreclosure is being pursued by CW Capital, which is burdened by a

profound conflict of interest. CW Capital is a self-dealing fiduciary. Its personal

financial interests, and its role as Controlling Certificateholder, are directly in conflict

with Appaloosa’s rights as the holder of over 30% of the Certificates in the tranches that

are the de facto controlling classes of the C-30 Trust. Appaloosa therefore cannot rely on

CW Capital in its capacity as Special Servicer to adequately protect the interests of

Appaloosa, or any other Certificateholder, given both CW Capital’s conflict and its

reckless behavior to this point.

CW Capital emphatically does not “share the same ultimate objective,” Great

Atlantic & Pacific Tea Co. v. Town of East Hampton, 178 F.R.D. 39 (E.D.N.Y. 1998)

(providing that adequate representation is presumed only when the would-be intervenor

shares the same ultimate objective as a party to the lawsuit), as do the other

Certificateholders and Appaloosa. In a similar context, courts have permitted

bondholders to intervene when a trustee is not likely to advocate the position of a

bondholder. See, e.g., Aristocrat Leisure Ltd. v. Deutsche Bank Trust Co., 2005 WL

751914 (S.D.N.Y March 31, 2005) (holding that the bondholders were permitted to

intervene as a matter of right because the trustee, while similarly situated, would not

likely advocate one of the bondholders’ defenses based on a potential conflict that the

trustee had). The same should be true here, precisely because CW Capital is so

profoundly conflicted that it cannot be counted on to protect the rights of all

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Case 1:10-cv-01178-SHS Document 17 Filed 02/23/2010 Page 18 of 22

Certificateholders. See Aristocrat Leisure Ltd., 2005 WL 751914 at *6 (finding

inadequate representation of bondholders by trustee due to “risks of ‘collusion’ and

‘adversity of interest’ between Bondholders and the Trustee given the Trustee’s

association with a main underwriter of the offering”); Con-Ed., 2004 WL 35445 at *6

(finding adversity of interest and granting intervention because “[w]hile NU claims that it

and Rimkoski have the same ultimate objective in proving that Con Ed breached the

Merger Agreement, NU and Rimkoski have conflicting objectives in determining who

should receive any damages”); Miller v. Silbermann, 832 F. Supp. 663, 672

(S.D.N.Y.,1993) (noting that “[e]vidence of inadequate representation includes such

factors as (1) collusion; (2) adversity of interest; (3) possible nonfeasance; or (4)

incompetence.”).

Nor can Appaloosa rely on any of the Defendants to undertake to protect

Appaloosa’s interests. None of those Defendants is situated similarly to Appaloosa. The

Defendants include the defaulting borrowers. They certainly have no incentive to protect

the rights of those to whom they are likely to owe more than the $3 billion. The equity

owners of the Property made relatively insignificant capital investments to buy the

Property. Their investments are deeply out of the money. They are also exposed to

hundreds of millions of dollars of excess rent liability—since they, and not the

Certificateholders—pocketed the excess rents. Yet the equity owners have, inexplicably,

failed to put the Property in bankruptcy. The governmental entities similarly have an

obligation to protect only the public interest, and have no obligation to protect the

interests of Appaloosa and the other Certificateholders.

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Case 1:10-cv-01178-SHS Document 17 Filed 02/23/2010 Page 19 of 22

III. CONCLUSION

Intervention as of right is plainly warranted on these facts. Appaloosa, the holder

of $750 million of C-30 Certificates, including 30% of the de facto controlling

Certificates in the subordinate tranches, plainly has an interest in the Property. This

interest may be impaired or impeded by CW Capital’s reckless assumption of avoidable,

double transfer tax liability, or other litigation and environmental risks that it may assume

if it successfully forecloses on the Property without first discharging its fiduciary

obligations to explore, and pursue to exhaustion, other paths to restructuring that would

maximize the Certificateholders’ recovery, rather than maximizing their loss.

Appaloosa’s interests are not adequately represented by any party in the proceeding;

indeed, its interests are directly in conflict with CW Capital which is purporting to—but

is not—acting in the interests of Appaloosa and the other Certificateholders.

For these reasons, and those stated in its Motion for Leave to Intervene,

Appaloosa should be granted intervention as of right, and should be permitted to pursue

its claims for preliminary and permanent injunctive relief.

Dated: New York, New York

February 23, 2010

Respectfully submitted,

WARNER PARTNERS, P.C.

By: ___s/___________________
Kenneth E. Warner
KW 5524
KWarner@WarnerPartnersLaw.com
950 3rd Avenue
New York, NY 10022-2705
(212) 593-8000

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Case 1:10-cv-01178-SHS Document 17 Filed 02/23/2010 Page 20 of 22

ATTORNEYS FOR
INTERVENORS
APPALOOSA INVESTMENT L.P.
I, PALOMINO FUND LTD.,
THOROUGHBRED FUND L.P.,
AND THOROUGHBRED
MASTER LTD.

OF COUNSEL:

GIBBS & BRUNS LLP

Kathy D. Patrick
Texas Bar No. 15581400
Robert M. Madden
Texas Bar No. 00784511
Sydney Ballesteros
State Bar No. 24036180
Anthony N. Kaim
State Bar No. 24065532
1100 Louisiana, Ste. 5300
Houston, Texas 77002
Tel: (713) 650-8805
Fax: (713) 750-0903

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Case 1:10-cv-01178-SHS Document 17 Filed 02/23/2010 Page 21 of 22

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK
_____________________________________________________X
BANK OF AMERICA, N.A., as Trustee for the Registered
Holders of Wachovia Bank Commercial Mortgage Trust
2007-C30, acting by and through its Special Servicer,
CWCapital Asset Management LLC, BANK OF AMERICA,N.A., 10 Civ. 1178 (SHS)
as Trustee for the Registered Holders of COBALT CMBS ECF Case
Commercial Mortgage Trust 2007-C2 and Wachovia Bank
Commercial Mortgage Trust 2007-C31, acting by and through
CWCapital Asset Management LLC pursuant to the authority
granted under that certain Amended and Restated Co-Lender
Agreement dated March 12, 2007 and U.S. BANK NATIONAL
ASSOCIATION, as Trustee for the Registered Holders of
ML-CFC Commercial Mortgage Trust 2007-5 and ML-CFC
Commercial Mortgage Trust 2007-6, acting by and through
CW Capital Asset Management LLC pursuant to the authority
granted under that certain Amended and Restated Co-Lender
Agreement dated March 12, 2007,
Plaintiffs,
-against-

PCV ST OWNER LP, ST OWNER LP, TRI-LINE CONTRACTING

CORP., ATLAS FIRE PROTECTION, INC., POMALEE ELECTRIC
CO, INC., REFUSE SYTEMS CORP., PRO TILE
DISTRIBUTORS, INC., TRITON STONE AND MARBLE LLC,
S.T.S. TRADING INC. d/b/a S.T. LUMBER & HOME CENTER,
ELECTRICAL, PLUMBING, S.D. INT’L d/b/a S.D. STONE
DEPOT, ELBEX AMERICA OF NEW YORK, INC.,
NEW YORK CITY DEPARTMENT OF TRANSPORTATION
PARKING VIOLATIONS BUREAU, NEW YORK CITY
ENVIRONMENTAL CONTROL BOARD and FIRE
DEPARTMENT OF THE CITY OF NEW YORK,

Defendants,
-against-

APPALOOSA INVESTMENT L.P. , I, PALOMINO FUND LTD.,

THOROUGHBREDFUND L.P., and THOROUGHBRED
MASTER LTD.
Intervenor-Defendants.
_____________________________________________________X

ORDER

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Case 1:10-cv-01178-SHS Document 17 Filed 02/23/2010 Page 22 of 22

Upon consideration of the motion in intervention filed by Appaloosa Intervenors

L.P. (“Applicant”), Applicant’s Complaint, and any opposition thereto, the Court finds

that the Applicant meets the requirements for intervention under Rule 24 of the Federal

Rules of Civil Procedure.

Accordingly, it is ORDERED that Applicant’s Motion to Intervene is

GRANTED, and Applicant is given leave to participate as a party to this Action as

Intervenor-Defendant. It is further

ORDERED that Applicant’s Complaint which was attached as Exhibit “A” to its

Motion to Intervene be deemed filed as of the date of this Order and Applicant shall

proceed to serve said Complaint on the parties pursuant to the Federal Rules of Civil

Procedure.

IT IS SO ORDERED this ___ day of March, 2010.

______________________________

Judge Sidney H. Stein

United States District Judge

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