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UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF NEW YORK_____________________________________________________XBANK OF AMERICA, N.A., as Trustee for the RegisteredHolders of Wachovia Bank Commercial Mortgage Trust2007-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 CaseCommercial Mortgage Trust 2007-C2 and Wachovia Bank Commercial Mortgage Trust 2007-C31, acting by and throughCWCapital Asset Management LLC pursuant to the authoritygranted under that certain Amended and Restated Co-LenderAgreement dated March 12, 2007 and U.S. BANK NATIONALASSOCIATION, as Trustee for the Registered Holders of ML-CFC Commercial Mortgage Trust 2007-5 and ML-CFCCommercial Mortgage Trust 2007-6, acting by and throughCW Capital Asset Management LLC pursuant to the authoritygranted under that certain Amended and Restated Co-LenderAgreement dated March 12, 2007,Plaintiffs,-against-PCV ST OWNER LP, ST OWNER LP, TRI-LINE CONTRACTINGCORP., ATLAS FIRE PROTECTION, INC., POMALEE ELECTRICCO, INC., REFUSE SYTEMS CORP., PRO TILEDISTRIBUTORS, 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. STONEDEPOT, ELBEX AMERICA OF NEW YORK, INC.,NEW YORK CITY DEPARTMENT OF TRANSPORTATIONPARKING VIOLATIONS BUREAU, NEW YORK CITYENVIRONMENTAL CONTROL BOARD and FIREDEPARTMENT OF THE CITY OF NEW YORK,Defendants,-against-APPALOOSA INVESTMENT L.P. , I, PALOMINO FUND LTD.,THOROUGHBREDFUND L.P., and THOROUGHBREDMASTER 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 1 of 22
 
2TO THE HONORABLE UNITED STATES DISTRICT JUDGE:Pursuant to Rule 24(a) of the Federal Rules of Civil Procedure, AppaloosaInvestment L.P. I, Palomino Fund Ltd., Thoroughbred Fund L.P., and ThoroughbredMaster Ltd. (the Appaloosa Intervenors) have filed a motion seeking leave to intervene asa matter of right in this Action as a party-defendant. Intervention is required becausePlaintiff CW Capital has pursued foreclosure in breach of its fiduciary obligations to theAppaloosa Intervenors. Plaintiff CW Capital is also deeply conflicted, and does notadequately represent the interests of the Appaloosa Intervenors, who have more thanthree quarters of a billion dollars at stake in the trusts secured by the property at issue inthe foreclosure Action; namely, the mortgage on Peter Cooper Village and StuyvesantTown (the “Property”).Plaintiff CW Capital Management’s actions in pursuing foreclosure on PeterCooper Village and Stuyvesant Town (“Stuyvesant Town”) violate its obligations asSpecial Servicer to act as a prudent commercial mortgage servicer seeking to maximizevalue for the benefit of all Certificateholders. By rushing to foreclose, when other lesshazardous avenues were available, Plaintiff CW Capital has recklessly and imprudentlyexposed the Appaloosa Intervenors—and other Certificateholders—to wholly avoidablelosses, risks, and injuries, including:
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Double and Unnecessary Transfer Taxes: A foreclosure judgment willrequire a double payment of New York City’s $100 million transfer tax onthe Property: once when title is transferred by foreclosure, and a secondtime when the Property is sold in the inevitably necessary workout of thisloan. No prudent commercial mortgage lender would willingly assumethese tax liabilities, particularly when they could be limited by othermeans, or avoided entirely in bankruptcy.
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Environmental Liabilities: The documents governing the trusts stateclearly that Plaintiff CW Capital may not pursue foreclosure unless, within
Case 1:10-cv-01178-SHS Document 17 Filed 02/23/2010 Page 2 of 22
 
3six months prior to initiating the Action, it has obtained an environmentalassessment certifying that the relevant mortgaged property is incompliance with applicable environmental laws and regulations. TheAppaloosa Intervenors do not believe any such assessment has beenobtained.
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Excess Rent Claims: The tenants at the Property are the beneficiaries of an un-liquidated, potentially massive excess rent claim that may, in thefuture, be converted into a damage judgment worth hundreds of millionsof dollars. The status of this liability is uncertain, as is its effect on therights of the Certificateholders and the value of the underlying mortgagedproperty. Proceeding precipitously to take title by foreclosure, in the faceof this uncertainty, is again imprudent and not in the best interest of theCertificateholders.
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Creation of Unnecessary Losses for Certificateholders: By subjecting theproperty to transfer tax liability on foreclosure, Plaintiff CW Capital mayobtain a priming lien at the top of the capital structure to secure repaymentof that advance. This priming lien would create additional losses thatwould not otherwise be suffered by holders of subordinated tranches,including tranches of Certificates owned by Appaloosa.
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Voting Rights: Tranches whose recovery is wiped out by CW’s priminglien will also be deprived of voting rights they otherwise would enjoyunder the trusts.The Appaloosa Intervenors stand to suffer unique and irreparable injuries as aresult 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 rangeof $1.8 - $2.2 billion, Appaloosa's particular series of subordinated Certificates are likelyto be the next loss-absorbing layers in the C-30 debt stack, and would thus becomeimpaired 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 theadditional costs would likely be the difference between a recovery of zero and par on
Case 1:10-cv-01178-SHS Document 17 Filed 02/23/2010 Page 3 of 22
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