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Article 78 Restructuring Trial (BofA v. NYID, MBIA) - May 8 Hearing Transcript

Article 78 Restructuring Trial (BofA v. NYID, MBIA) - May 8 Hearing Transcript

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Published by Isaac Gradman
Transcript from a last-minute hearing held telephonically by Judge Barbara Kapnick to address the parties' differing views of the Article 78 proceeding beginning May 14, 2012. BofA argues that the Court ruled that there would be a full blown trial, while the New York Insurance Department and bond insurer MBIA argued that the Court intended to hold a "summary proceeding" where only issues of fact identified by the Judge would be heard. Without making a formal ruling, the Judge appeared to side with the NYID and MBIA, but indicated that issues regarding the structure of the "trial" would be taken up when the proceeding began. But not before fireworks ensured between the parties, and the Judge was forced to hang up. Read more at: http://www.subprimeshakeout.com/?p=1060
Transcript from a last-minute hearing held telephonically by Judge Barbara Kapnick to address the parties' differing views of the Article 78 proceeding beginning May 14, 2012. BofA argues that the Court ruled that there would be a full blown trial, while the New York Insurance Department and bond insurer MBIA argued that the Court intended to hold a "summary proceeding" where only issues of fact identified by the Judge would be heard. Without making a formal ruling, the Judge appeared to side with the NYID and MBIA, but indicated that issues regarding the structure of the "trial" would be taken up when the proceeding began. But not before fireworks ensured between the parties, and the Judge was forced to hang up. Read more at: http://www.subprimeshakeout.com/?p=1060

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Published by: Isaac Gradman on May 14, 2012
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Claudette Gumbs
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SUPREME COURT OF THE STATE OF NEW YORK
NEW YORK COUNTY: CIVIL TERM: PART 39
- - - - - - - - - - - - - - - - - - - - - - - -X
ABN AMRO BANK NV, BARCLAYS BANK PLC, BNP PARIBAS,
CALON, CANADIAN IMPERIAL BANK OF COMMERCE,
CITIBANK NA, HSBC BANK USA NA, JP MORGAN CHASE
BANK NA, KBC INVESTMENTS CAYMAN ISLANDS V LTD,
MERRILL LYNCH INTERNATIONAL, BANK OF AMERICA NA,
MORGAN STANLEY CAPITAL SERVICES INC, NATIXIS,
NATIXIS FINANCIAL PRODUCTS INC, COOPERATIEVE
CENTRALE RAIFFEISEN BOERENLEENBANK BA NEW YORK BRANCH,
Petitioners,
Index Number:
- against - 601846-09
ERIC DINALLO, in his capacity as Superintendent
Of the NEw York State Insurance Department,
THE NEW YORK STATE INSURANCE DEPARTMENT, MBIA INC,
MBIA INSURANCE CORPORATION, and NATIONAL PUBLIC
FINANCE GUARANTEE CORPORATION
(fka MBIA INSURANCE CORP OF ILLINOIS),
Respondents.
- - - - - - - - - - - - - - - - - - - - - - - -X
Supreme Court
60 Centre Street
New York, New York 10007
May 8, 2012
BEFORE:
HONORABLE BARBARA R. KAPNICK,
Justice of the Supreme Court
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APPEARANCES(VIA TELEPHONE):
SULLIVAN & CORMWELL LLP
Attorneys for the Petitioners
125 Broad Street
New York, New York
BY: ROBERT J. GIUFFRA, ESQ.
KASOWITZ BENSON TORRES & FRIEDMAN LLP
Attorneys for Respondents
1633 Broadway
New York, New York 10019-6799
BY: MARC E. KASOWITZ, ESQ.
OFFICE OF THE ATTORNEY GENERAL
Attorneys for the State Respondents
120 Broadway
New York, New York
BY: DAVID HOLGADO, ESQ.
------------------------------------------------------
Claudette Gumbs, Official Court Reporter
60 Centre Street
New York, New York 10007
646.386.3693
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THE COURT: I am here and my court attorney
Christine Rodriguez is here and our court reporter Claudette
is here. Just identify yourselves before you start talking
and that will be fine.
So, to cut to the chase here, I have a letter that
Mr. Giuffra wrote on May 4th and I know we had scheduled a
conference call yesterday, but I was in the middle of a
hearing involving people from out of the country who had
flown in from Singapore and Brazil, so I thought they were
entitled to have a full day and I didn't have time to speak
to you.
I did get a response, a short responsive letter
from Mr. Kasowitz this morning and a short response to that
from Mr. Giuffra shortly thereafter.
It seems that notwithstanding 60-some pages on the
transcript on April 20th, that we are back to having some of
the same conversations that we had last time about how this
case is going to proceed.
So I will let Mr. Giuffra start because he was the
one that wrote the first article -- I mean the first letter,
and of course, he was the only one on the phone, but Mr.
Giuffra, why don't you briefly --
MR. GIUFFRA: I apologize. We had a problem with
communication and we thought they were all there in
conference.
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Again, your Honor, we would very much prefer to do
this live and those are some of the problems -- obviously we
have difficulty with doing it by phone.
THE COURT: I understand, but I have a lot of
other cases.
MR. GIUFFRA: Our position, your Honor, is that
on April 20th, the Court could not have been clearer that
the parties were having a trial starting on May 14th. Your
Honor set aside three to four weeks for this trial. Your
Honor said that there would be opening statements and
testimony by witnesses.
Since then, we have been working hard trying to
prepare for trial, but the other side keeps maintaining that
we are not having a trial. The CPLR is clear that a trial
is required here because there are multiple, multiple
disputed issues of fact and now, less than a week before the
trial, we get a letter from MBIA asking the Court to
reconsider what we understood to be the Court's decision on
April 20th.
In fact, the entire purpose of the April 20th
hearing was to determine whether there would be a trial and
as your Honor will recall, petitioners were prepared to cite
evidence on April 20th and I had the handouts that I was
prepared to hand out, making clear that there were multiple
triable issues of fact warranting a trial, and your Honor
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said that would not be necessary to do and your Honor said
that and I can quote your Honor, you said "I don't want to
hear all of the evidence --" this is Page 52 "-- this is not
the trial. The trial starts May 14th. I don't want to hear
all the evidence today."
Now, at multiple conferences your Honor had said
there was going to be a trial, and Justice Yates set a trial
date and repeatedly said there was going to be a trial and
in fact, Justice Yates said that experts would be central to
the case and we will put that in when we do our motion in
limine response.
Until the last several weeks, MBIA has always
maintained the need for a trial. That is why they said they
needed all of the discovery that they sought. In fact,
MBIA got in discovery a moratorium in the BCL action
claiming that they needed time for a trial. And in
addition, the Department wanted to do a sir reply brief.
So now, essentially what people want to do is to
reconsider what we understood to be the Court's ruling on
April 20th and your Honor said the word trial -- we
mentioned a few times oral arguments, witnesses -- said the
word trial more than 40 times, and the rules are clear.
Under the CPLR, if there is a disputed issue of fact, there
must be a trial forthwith and that is under 7804(h), and
there is no in between procedure in the rules. It is either
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a trial or a summary judgment motion, and in our view, there
are multiple disputed issues of fact.
As your Honor will recall, you directed the other
side to respond to our proposed stipulation of undisputed
facts and you were provided 144 proposed stipulations to
date. We have reached agreement on none. The respondents
who, I think changed 53 of them -- changed those 53. There
could be no doubt that in the massive file before the Court
there are multiple, multiple issues of fact.
The Department never moved to dismiss and the CPLR
makes quite clear under 7803(e) that to the extent the
respondent submits affidavits showing evidentiary facts, "as
shall entitle him to a trial", but then 7804(e) makes clear
"Statements in the answer, transcript or answering affidavit
are not conclusive upon the petitioner".
So given the fact that there are multiple facts in
dispute, the affidavits that have been submitted by the
parties are not evidence, they are merely hearsay and CPLR
103(b) makes it quite clear that the procedure in a special
proceeding -- which is what this is -- shall be the same as
in actions of the provisions of the CPLR that are applicable
to actions, shall be applicable to special proceedings.
And we cite also in our letter to your Honor the Weinstein
Korn treatise which says the same thing.
Now, in his letter, Mr. Kasowitz cites several
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cases and those cases don't deal at all with whether or not
there should or should not be the first -- there should be a
trial. There is no indication in the first case called
Plaza Management that either side requested a trial. That
case turned on the relatively simple issue, I dare say, that
is not what we could say here, but a regulation
distinguishing kitchens from kitchenettes, but more telling
is the case of Monroe Livingston which we faxed over to your
Honor and it is our view that Mr. Kasowitz' letter quotes
that case out of context.
In that case, the Court rejected Respondents'
argument that it was error to direct the hearing and
emphasized that when there is a hearing -- and this is a
point we will press on the motions in limine -- that any
competent and relevant proof that petitioner may have
bearing on the trial issue will be presented with the
admissible -- citing the Court of Appeals decision in
Mandel.
So, your Honor, we think there are multiple issues
of fact to be tried. I am happy, your Honor, to go through
some of those issues of fact, but I thought that had all
been decided on April 20th and that Mr. Kasowitz' letter is
nothing more than an attempt to reconsider what your Honor
had directed.
THE COURT: Okay. Thank you.
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Mr. Kasowitz, you want to address what he said?
MR. KASOWITZ: Sure. I think nothing could be
further from the truth. We are not asking for
reconsideration. Our understanding of this, and it is very
clear from the rule this is an Article 78 summary
proceeding. The section of the rule that Mr. Giuffra
didn't read of course is about pleadings and -- which is
7804(d), which says "There shall be a verified petition
which may be accompanied by affidavits or other proof.
Where there is an adverse party, there shall be a verified
answer." 7804(d) sets forth what the record is in this
case. It says "There shall be a verified petition which
may be accompanied by affidavits or other written proof.
Where there is an adverse party, there shall be a verified
answer which must state pertinent and material facts showing
the grounds of the respondent's action complained of.
There shall be a reply to the answer." Sorry.
"There shall be a reply to a counterclaim
denominated as such and there shall be a reply to new matter
in the answer or where the accuracy of proceedings annexed
to the answer is disputed", and the like.
All of this talks about -- sorry, I was reading the
wrong one. I was reading 7804(d). I am talking about
7804(c), which talks about "a notice of petition together
with the petition and affidavits that specified in the
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notice shall be served on any adverse party at least 20 days
before the time at which the petition is noticed to be
heard." Then, "an answer and supporting affidavits, if any,
shall be served --" Then there is a reply together with
supporting affidavits, if any.
What the rule makes clear and what all of the cases
construing the rule make clear is that in a summary
proceeding like an Article 78 proceedings, the record in the
case is where the parties have been working on for the past
three years, namely the petition and the affidavits and the
answer and the affidavits and the reply and the affidavits
and here we have a sir reply and a sir sir reply, all with
affidavits, all of which affidavits have exhibits.
So the record before the Court, the record of this
proceeding is very, very -- is very, very exhaustive and it
is very, very complete.
Now, it is the case that if there are, as
subsection h of 7804 reads, there is a triable -- I will
just read it, if there is a triable issue of fact, it shall
be tried and certainly, the Court has indicated that if
there are -- if there is an issue of fact or issues of fact,
that shall be tried, but that trial does not then subsume
and transform the summary proceeding into a full trial --
into a full blown trial, the full blown plenary trial that
the banks will have a year from now.
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So our position is very, very clear, and it is
very, very clear from the cases and I will read some quotes
from the cases as well, that we have a summary proceeding
here, that the way that the summary proceeding should go as
the Court indicated in the last conference, is that there
should be argument by other lawyers, other parties, to
present to the Court the evidence that has been adduced
during the course of this proceeding.
And if there are issues of fact, if there is an
issue of fact or issues of fact, then the Court can try
those issues and if the Court would like to hear from
witnesses, then the Court can say I would like to hear from
some witnesses on some of the issues of fact and in fact,
Section 409 which relates to special proceedings and which
governs Article 78 here says that "The court may require the
submission of additional proof."
So if there are witnesses that the Court would like
to hear from after the extensive argument from the parties,
then the Court can indicate that it would like to hear from
those witnesses and I think the Court indicated at the last
conference that it would be interested in hearing from
Messrs. Buchmiller and Dinallo, so this is very, very
straightforward.
There should be extensive argument from the parties
next week. We would request no less than two days for each
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party to present. If a party does not want to take the
whole two days, then that is fine, and with motions in
limine and the like being dealt with on Monday and with the
fact that the Court has indicated that it won't sit on this
case on Wednesday because it has substantial other business
to do, then the better part of next week, if not the entire
week, will be taken up by argument and then, if there are
witnesses that the Court would like to hear, either
additional witnesses or any issues of fact that the Court
feels exist, then witnesses can be called.
So I think that, you know, I think that the banks
argue that because the Court used the word trial during the
conference means that there is a full blown -- that this
Article 78 proceeding is somehow transformed into a full
blown plenary trial, is just not the law and not the case
and I don't think it is what the Court intended. In fact,
Rule 409 reads very clearly -- 409(b). "The court shall
make a summary determination upon the pleadings, papers and
admissions to the extent that no triable issues of fact are
raised."
And then, to the extent there are triable issues of
fact raised, then the Court can hear further evidence on
that, whether in the form of whatever written submissions
the Court would like to be directed to in the affidavits or
the like.
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Look, I think that the Thayer case was very clear
on this, when it talked about the power is to be -- that
while something is permissible and we will have a hearing,
it does not authorize a trial de novo in the reviewing
court. The power is to be used cautiously, with extreme
care, where there appears to be a probability that the
effect of the additional testimony, if it is received, will
show the ruling complained of to be wrong and when the whole
case comes to be decided upon the new testimony and the old,
the Court even then is not to put itself in the position of
the board, it is not to substitute trial starting its own
discretion for that of the administrative agency established
by the statute in a situation where the exercise of
discretion is possible.
And so, the point here -- and even where additional
proof is taken, the ultimate issue to be decided is whether
a determination was arbitrary or capricious and that was
cited in the Monroe case that we sent to the Court, so it is
very clear here your Honor, the old testimony is the -- is
very -- is the record of the pleadings and the affidavits
and the exhibits and if the Court wants to hear so-called
new testimony, then it will indicate that, but there is no
reason to do so here and it is -- it is completely
inconsistent with the rules, completely inconsistent with
the position here in a summary proceeding like this, where
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most of the facts frankly are not in dispute.
In fact, we contend that there are no disputed
issues of fact, there is no reason to transform this and it
would be improper to transform this into a full plenary
trial.
THE COURT: Well, I mean, I guess this goes back
to are there any issues of fact that need to be tried.
Obviously, this is not a trial de novo and this is
not -- I mean, I have a relatively simple "determination" as
to whether or not the Superintendent's determination, the
Department of Insurance' determination was arbitrary and
capricious and what I have to consider and -- before you
were on the phone, I was saying to Mr. Giuffra well, what
are actually the triable issues of fact?
And I will let you mention a few of them Mr.
Giuffra, except that I guess to some extent, those seem to
me more not like triable issues of fact as much as the
things that ultimately I have to consider and determine;
whether or not Mr. Dinallo should have done something or
should not have done something. I mean, that is not an
issue of fact as I see it, that is really something that I
will have to determine in the end in making my ultimate
decision.
I don't really get what -- I mean --
MR. HOLGADO: Your Honor, may I be heard?
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THE COURT: May who be heard?
MR. HOLGADO: If I may be heard before Mr. Giuffra
launches into another explanation of what he thinks are
issues of fact. If I may, your Honor, I have some views on
this as well.
THE COURT: I didn't mean to suggest you didn't.
MR. HOLGADO: Your Honor, the only request that I
would have --
THE COURT: I think certainly, Mr. Holgado, you
sued both of them, so they are both respondents and I think
I can give Mr. Holgado, against whom this case as I said is
really brought, because it was his client's determination
that is the subject of this Article 78. So I didn't mean --
I mean, he didn't write a letter this time which is fine,
because he had enough things to look at, but I will
certainly let him briefly respond. I was just sort of
saying that is where we had gotten when you guys were by
mistake not on the phone, where I asked him about some
issues of fact, but Mr. Holgado, why don't you briefly chime
in?
MR. HOLGADO: Thank you, your Honor.
Briefly, I just want to underscore, I do, I do
agree with Mr. Kasowitz' position in the letter regarding
Rule 409 and frankly, this was what we had been saying all
along, the State respondents, that there was a need for your
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Honor to consider the papers that we had spent three years
preparing for your Honor and those papers, based on
countless requests for further discovery from petitioners
that were ultimately granted regarding the submissions from
MBIA to the department and that those papers, your Honor,
are before you and that I think as your Honor sort of
suggested just now, you have not found there to be a
specific triable issue of fact and you're getting argument
from Mr. Giuffra even on this phone call as to what those
issues might be.
It is that very exchange, your Honor, I think is
what puts into stark contrast what we are suggesting here,
which is that because your Honor has not found those issues
to exist yet, the hearing that your Honor really was
contemplating is the one that is described very succinctly
in Rule 409 which applies to this proceeding and in
particular, 409(a), where your Honor should hear argument
from the parties regarding the papers that have already been
submitted and that you may, as Mr. Kasowitz pointed out, ask
for submission of additional proof, which is the sum
testimony that your Honor mentioned in addition to the
"glorified oral argument" that you envisioned for this
hearing.
We have no issue whatsoever with what your Honor
stated at the April 20th conference and we certainly have
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been trying to follow it faithfully in our preparation for
trying it. Unfortunately, Mr. Giuffra has taken the
position that your Honor ordered a trial, that your Honor
found triable issues of fact, that your Honor essentially
rejected the papers to the extent they were in the nature of
a summary judgment motion and that they have now been
rejected and indeed, in their most recent motion in limine
they rejected all of those submissions and the affidavits
thereon are now hearsay and not even admissible.
If there is anything that is more asking your Honor
to substitute its determination for that of the
Superintendent and the Department, it is to suggest that
your Honor should not -- should strike or not consider the
affidavits of the Department, the very purpose of which was
to set forth the basis for their determination.
And I think that rather than be overly formalistic,
which is what petitioners are attempting to do, certainly
the reason they want the trial is so they can make these
arguments about hearsay, about constricting the evidence in
such a way as to not allow your Honor to consider all of
these papers that have and will be submitted and in that
regard, your Honor, we think it is notable that Mr. Giuffra
himself in a September 28, 2010, affidavit strenuously
argued that the record in this case should include those
very same affidavits and should include submissions from
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MBIA to the Department that had not been designated in the
908-page record that they are now seeking to constrict the
Department to, while simultaneously allowing them to submit
whatever proof they want.
And for that matter your Honor, the language that
is cited by petitioners regarding how any relevant competent
and relevant excuse me, competent and relevant proof may be
submitted by them, they are reading out of that language the
standard relevance that we are only merely asking your Honor
to abide by, which is simply this: That in order for
evidence to be relevant to determining whether the
Department's approval of the transformation had a rational
basis, that evidence must have been either been before the
agency itself or the evidence must at least evidence what
was before the agency and those are the kinds of arguments
we were seeking to make in our motion in limine, your Honor,
which sounds like a technical argument that might not apply
to a lot of documents, but as we showed in the appendix
attached to our motion that we have already submitted and
certainly sent a courtesy copy to your Honor, that over
75 percent of the exhibits that have been offered by
petitioners fit that category. They were never before the
Department and they don't even evidence what was before the
Department, whereas of course submissions by MBIA to the
Department and affidavits of the Department witnesses who
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were responsible for the review and the approval evidence
that was in fact before the Department.
They are now seeking to have all of that excluded
as hearsay. Not only the affidavits are they calling
hearsay, but in their objection to our exhibits and e-mails,
they are, you know, they are now saying this is hearsay.
Now, it is actually axiomatic that the administrative record
in an Article 78 record proceeding, your Honor, is going to
contain the submissions of the applicant and to call that
hearsay now because of some technical distinction where they
are trying to call this a trial, that shows I think, your
Honor, why it is important for us to decide what this is, to
decide what May 14 legally is, because we will forestall
arguments that I can -- that we believe are specious to
begin with and we believe your Honor should of course
consider the submissions that have already been made, should
of course consider the things that were shared with the
Department by MBIA, should of course consider what Mr.
Dinallo and Mr. Buchmiller have to say regarding their
analysis and the reasons for the determination and attempts
to exclude those matters are bordering on the frivolous,
your Honor, especially in light of the admissions already
made by petitioners in this case in the course of seeking
extensive discovery from the Department on the basis that
they needed to challenge these same affidavits that they are
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now seeking to exclude.
But your Honor, that is why we think Rule 409(a)
really provides a clear basis and a clear grounding for what
-- exactly what your Honor said she envisioned at the
Article 78 -- the April 20th conference where you said you
wanted a hearing where you could hear some testimony. You
have exactly that kind of flexibility with Rule 409(a), your
Honor, and we suggest that you direct that that is exactly
what we are going to be doing.
MR. GIUFFRA: Your Honor, if I can be heard.
I am pretty confident that I am correct with
respect to the law. Let me just sort of go through it.
Article 78 says, and Mr. Kasowitz did cite this language in
provision H under "Trial". "If a triable issue of fact is
raised in a proceeding under this article, it shall be tried
forthwith." In addition, the rules are clear that once
there is a trial, the rules that govern ordinary trials --
THE COURT: But let me just interrupt you.
I mean, I understand that on a trial, there are
evidentiary rules. But you can't tell me that all of those
affidavits are excluded now because maybe some of the things
in them are -- do not comport exactly with the evidentiary
rules. I mean, that I cannot accept. I mean, I cannot
accept that you're not trying to throw out all of the
documents that you just spent the past three years
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submitting. That is part of the record.
One of the things that has been raised, which I am
not dealing with today is that some or all of those experts
may either be unnecessary or if some of them are necessary,
that some of them are not permissible for other reasons and
we will deal with that when you're here next week, but I am
not thinking that everything that you have submitted over
all of these years is supposed to be thrown out. That is
what you have submitted as part of this proceeding before
me. Affidavits from lawyers, from witnesses, from other
people, documents that were considered by the Department in
making their determination, other things, I mean, I don't
want to suggest to you that I have gone through everything
that is in there, but we have reviewed them, so we have some
idea of what is in those boxes. I don't think you can now
say that I can't consider the affidavit of X because he
happens to have one hearsay statement in it. You can raise
it that there -- that might raise an issue as to how valid
it is or whatever, but I don't judge affidavits submitted on
motions the same way as I judge testimony that I am hearing
on a full blown trial.
I mean, I don't agree with you, Mr. Giuffra. I
mean, it is very nice that somebody went through and counted
how many times the word trial was used in the transcript. I
don't have the time to do that or the interest or maybe the
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court reporter put that in the end or something like that,
but I envisioned not your standard trial, and I think that
is what I said at the end, even though I said some type of
trial, but sort of in quotation marks.
And really, this is a presentation by you as to why
you believe that you have enough information to suggest that
or to prove that, to support your petition that this
determination by the State Insurance Fund was arbitrary and
capricious and abuse of discretion. I mean, that is really
the standard that I am bound by, by Article 78.
If, as we are going through this, somehow there is
an issue of fact, I mean, an issue of fact would be I
thought that the Insurance Department had these 4,500 pages
in front of them and now I learn they didn't and there is an
issue as to did they have them or didn't they have them.
That kind of issue of fact is not really the issue.
I mean, whether or not he should have used -- he
should have had 40 people or 30 people or 20 people or
outside people or more outside people, I mean, I don't see
those as issues of fact, but rather as issues that I have to
consider in determining whether or not this was a
determination that was arbitrary and capricious and I mean,
if you're able to show me that in no time in the world did
any insurance department ever make a decision like this in
such a short time, on such a small record, a limited record,
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without more people, without more experience, I mean those
certainly all go towards your claim that this was arbitrary
and capricious under the circumstances presented here and
the other side will show me why, well no, they certainly
spent a lot of time or whatever they are going to say to
show that in fact it was not arbitrary and capricious, but
it doesn't lend itself exactly to a trial that I would have
after finding on a summary judgment motion that there were
issues of fact that had to be determined by a finder of
fact, whether that is a judge or a jury.
It is a different -- it is different. I mean,
this seems to suggest 7804, subsection H, that if during the
argument or during the presentation of your -- of the case,
through the motion and whatever else you want to say, that
there are significant issues of fact that are raised, that
then you think there should be some type of hearing or trial
on that issue, then we will have to deal with that, but I
don't -- I think that -- I thought that I did not say this
was a full blown trial that I might have in a lot of other
cases because it is an Article 78 proceeding which usually
does not have a trial, but might have some type of a hearing
and I have some discretion in what I want to hear and part
of what I told you I want to hear is probably some witnesses
that were most involved and I gave two names because I could
not imagine not hearing from those people, but there may be
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a few others that I wanted to hear from and the issue about
the experts we are going to have to talk to, talk about next
week.
I know I said something about opening statements
and I am not even sure if that makes sense, because I think
that Mr. Giuffra, you have the burden in the first instance
to make your presentation to me and if you think that you're
going to need to call some witnesses on that, you may, then
you should tell them who you want to call and then we will
talk on Monday about what the problems are with those
witnesses, whether you have agreed to certain witnesses, and
I am hopeful that you all understand that I do want to have
a few witnesses in here in addition to just saying Judge, we
made this petition, here are all of the papers and that is
the end of the day and thank you very much for inviting us
here.
I mean, nobody seems to listen to anything I said
last time. You all stuck to exactly your guns like we
weren't here for 65 pages on the transcript. You're all
interpreting it in certain ways. I guess I hope that you
would sort of understand what I was saying, but I guess you
don't.
I do have to let the court reporter go to lunch at
1:00 o'clock and I have a humongous conference case on in
the courtroom at 2:00 o'clock and I still have to do
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something on that, because I have had emergency orders to
show cause with TROs all morning long, just in case I was
not doing anything this morning.
So I --
MR. GIUFFRA: Could we do this? This is
extremely important. We are trying to prepare for a
proceeding.
THE COURT: Yes.
MR. GIUFFRA: And your Honor, just so I could make
a record on this point.
THE COURT: You can come on Monday morning and do
it. I mean, Mr. Giuffra, I know -- I did cut out three to
four weeks in my calendar and they are still there for the
MBIA case. That is in there except for Wednesday. In
order to be able to do that, I pushed a lot of things into
this week and plus, I don't have complete control over my
calendar in terms of orders to show cause with massive
temporary restraining orders that get assigned to me even
when I am doing a CLE program and I walk back and they are
put on by other people with people from all over the
country. I mean, I don't have complete control and I can't
say okay, for four weeks I would like nothing to be assigned
to me. So I have this whole week packed with things to do
and I really can't deal with this.
What I am telling you is, you have made these
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pretty substantial letter applications as motions in limine
which you have decided all you have -- you're not responding
until Friday. With all due respect, I am sorry to say this
on the record, I have two law clerks. I think we probably
combined put in more time than anybody else I know in this
Court, but everybody is entitled to see their mothers this
Sunday and I am not going to do that to my staff. So I
just can't ask them to do that and I can't hire anybody else
as you know, contract attorneys to help me out. It just
doesn't work that way here. So we are going to hopefully
be as prepared as we can be on all of these motions, in
limine, which I know are time consuming. And I think that
what I expect is that if you have important witnesses, that
you try to hold them -- I mean, I am not starting with an
expert Monday, so I don't think you should walk in with any
of those, but I really think you have -- I mean you are
planning for an opening statement of two hours, that is what
you asked me for and I am not sure if you will even get to
any sort of formal opening with all of these motions in
limine and all of these other issues that everybody is
bringing up, but I think that I cannot accept the fact that
the records and the affidavits and the papers that have been
submitted are not to be considered by me.
MR. GIUFFRA: Your Honor, on that one issue,
because I think this is a pretty basic important issue at
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the outset, our position is, and this is what I was hoping
to do on the April 20th conference, was to go through what
we thought were the issues. I am prepared to do it again on
Monday. Under the CPLR, under --
THE COURT: You don't have to keep reading them.
I have them in front of me.
MR. GIUFFRA: "Statements made in the answer,
transcripts an answering affidavit are not conclusive upon
the petitioner." And it is quite clear, your Honor, that
there are basically two roads; you go down one road if there
are no genuine issues of material fact, there is just the
hearing and it can be decided on the pleadings that are
before the Court. The entire purpose of putting in all of
these pleadings was to ascertain whether there were issues
of fact that warranted a trial.
Once you have gone down -- and you go down the
trial road, then we have the ability to have opening
statements, to call witnesses, experts, and many of the
witnesses cut across a number of the issues of fact that we
believe to be present, but we would suggest, your Honor,
there is no procedure in the CPLR to allow some sort of an
in between procedure. Once there are disputed issues of
fact, particularly in cases of this enormity, where this
much time has been spent, there needs to be a trial governed
by normal rules and yes, our position is that the affidavits
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are not conclusive upon us, that is what the rule says and
your Honor, they would be hearsay.
So for example, if Mr. Dinallo takes a position in
his affidavit about what he thought the Insurance Law meant,
it is not -- that is not a statement that -- that is not in
the approval letter, not in the administrative record, it is
a mere litigating position and the Court need not defer to
it.
THE COURT: Then you raise that, but I am not
throwing out the whole thing.
Fine. So you will tell me that is what he said and
this particular statement that he said, Judge, is not
conclusive on us and when he gets up and testifies, his
testimony in the courtroom has to be in accordance with the
evidentiary rules.
MR. GIUFFRA: You know, your Honor --
THE COURT: You have two minutes. So what do you
want to say, Mr. Holgado?
MR. HOLGADO: Your Honor, I just want to say that
contrary to what Mr. Giuffra said there is a provision on
point for this and it was the one cited by Mr. Kasowitz.
Rule 409(a) of the CPLR specifically says that "The court
may require the submission of additional proof." That is
exactly what you're contemplating by hearing additional
testimony at this hearing. And I think Mr. Giuffra is
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skipping ahead to the point where he says that your Honor
has found that triable issues of fact exist and have
specifically rejected the papers and found there will be a
trial on specific issues of fact. Your Honor has not done
so, and I think your Honor has been clear about that on this
call and I want to underscore that your Honor clearly has
the right to hold this hearing pursuant to Rule 409(a).
MR. GIUFFRA: Your Honor, our position is that
there are factual issues to be tried, but once the Court
makes a judgment that there are factual issues to be tried,
the CPLR specifically provides for the procedure and it has
to be a regular trial, that is what is made quite clear,
special proceedings are governed by the same rules that
govern any trial, same evidentiary rules, procedural rules
and so, yes, your Honor, consistent with a hearing which I
thought we were having on the April 20th discussion, whether
issues need to be tried, but your Honor, there can be little
doubt in our view that for example, whether the Department
followed its normal procedures. We say no.
In fact, our position is that this transaction was
approved in a manner unlike any --
THE COURT: Okay. But that is not an issue of
fact. That is the ultimate determination. You're going to
show what you're saying is that they have -- they dealt with
things in a way that it was never dealt with before and it
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was arbitrary and capricious and an abuse of discretion.
That is what this whole proceeding is about.
I disagree with you that that is an issue of fact
that requires a full blown trial.
What I think you're going to say is, Judge, look at
these things that we have put in. Exhibit A to my affidavit
from three years ago says this. I would like you to
consider that affidavit and now I would like to call Mr.
Dinallo to the stand to be our first witness -- or Mr.
Buchmiller and then go through the whole proceeding.
I mean, you're trying to pigeonhole me into calling
something something that I have not said. I will go back
and read all 65 pages over the weekend, but that is not what
I said. I didn't find issues of fact. Maybe that is what
you thought was happening on the 20th. I said I was really
seeing this as a hybrid. That is what I said. I may have
used the word trial because it is shorter because that is
what Judge Yates, he is the one who always said trial and it
wasn't until Mr. Holgado said after three years I don't know
what you're talking about, we don't have trials on this, and
that is the word that everybody used up until a month or two
ago when this came up on, I think, a March conference call
and I think you ought to be prepared to deal with all of
your motions in limine on Monday and to talk about -- I
mean, try to show me that there are issues of fact that
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require a trial.
So far, the issues of fact that I have heard and I
understand that you have more and I wanted to spend time on
it, but you can't any more today. You think you're entitled
to a full blown trial. I think if there are issues of
fact, if, if there is an issue of fact, it shall be tried
forthwith, so I am not even sure that means there should be
a full blown trial from soup to nuts, or if there is a
particular issue of fact, but I don't think whether or not
there is an abuse of discretion and I know you termed it in
a different way, but whether or not he used the most bizarre
procedure to make the determination, isn't to me an issue of
fact as much as it is the ultimate determination that I have
to make in this case based upon everything that you're all
going to show to me.
So, I think that is what probably Monday is going
to be about. So you will be here all day long, but I may
not have a formal opening statement and I am not even sure
there will be a witness, and we will have to iron it out on
Monday. But I saw it as, you know, you were going to make a
presentation to me as to why you brought this proceeding,
what you have submitted to show why, and who you would like
to call as your first witnesses to strengthen or to
emphasize or based on everything to show me and that is how
we would start and the other people could cross examine that
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person and then we would go on and see what other issues are
important to show me and then you would have another witness
and perhaps he would bring in or she would bring in some
other relevant factors and they could be cross-examined and
eventually, we will get to the respondents' position and
then you would have a chance to respond to it.
So I mean, I never had so much time on a phone with
whether it is a hearing or a preliminary injunction, a
hearing, or a trial, or whatever. I never have that and I
mean, this is really a very unique situation.
So I am sorry if I have not been as clear as you
think I should have been. Mea culpa. We will read
everything that you submit to us, and we will be prepared to
deal with it on Monday, but unfortunately, there are only a
certain number of hours in the day that I can keep the
courtroom open and I can't do it. I can't spend any more
time on your case.
So I will see you Monday. Monday at 10:00 o'clock
promptly. You can come in at 9:30 and set yourselves set up
at the tables and the only thing I have to say is, I told
you you could send people in on Friday and what we didn't
realize was there was an order to show cause signed by
someone else while I was doing a CLE last Friday at County
Lawyers about commercial practice and that is on at 2:15 and
people are coming from Canada and so, I will need the use of
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my courtroom in the afternoon for a good part of it, and for
part of the morning. We have something that won't be in the
courtroom, so you can send people in to set things up if you
still need to have some screens and things on Friday morning
and you can confirm that with Ray Vega. He has not been in
this week, but hopefully he will be in by the end of the
week and now, I have to let the court reporter take a lunch
break and I have to prepare for my 2:00 o'clock conference.
MR. HOLGADO: If I could just ask for one brief
bit of clarification.
On Monday you had mentioned to us that we are first
addressing the motions in limine and then was it my
understanding that you wanted oral argument on the question
of whether there exist issues of fact from all parties and
then we may proceed to additional testimony? I mean that
seems to me to be fair, to allow the respondents to respond
to assertions that will be made in what is going to probably
take the form of a summary judgment type argument or a
closing statement of a trial that Mr. Giuffra will try to
make, and I thought that would be something that may be
useful for your Honor before we proceed.
THE COURT: What, Mr. Giuffra? We have to get off
the phone.
MR. GIUFFRA: I think we should deal with the
issue of whether there is a factual issue to be tried before
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we deal with the motion in limine and if there are no
factual issues to be tried, we go down one road and if there
are triable issues of fact, we go down another road and we
think that should be the first thing out of the box on
Monday and that is --
THE COURT: I will tell you what. I am really
sorry that there is nothing you can agree on. I am really
very sorry. I am not used to this and for lawyers of this
caliber to disagree on every single thing, not cooperate
with each other on anything.
I don't have time. I am sorry, my court reporter
is looking at me and I have to hang up. So everything Mr.
Holgado has said -- has there ever been anything argued that
I didn't let the other side respond to? I mean, with all
due respect, I don't think that was, you know, very fair or
-- I will not let Mr. Giuffra make his whole presentation
and then you know, not let you and Mr. Kasowitz talk? I
mean, that is not the way I do anything, nor have I done
anything like that.
And perhaps you could talk to each other and agree
that whether or not certain experts are relevant might
matter on exactly what the procedure is and so that might
make some sense for you to deal with that first, and we will
be prepared on those things and I -- I forget what else all
of the other in limine issues are about, but that might make
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some sense for you to do that, but I was kind of hoping -- I
think that does make sense, but I have not really spent a
lot of time thinking about that. So I hope that maybe you
can agree on that when you send me your letters on Friday
they will say we have agreed and we think we should try to
proceed in this matter to the best of your ability.
MR. HOLGADO: The reason we will disagree is
because Mr. Giuffra would love to spend most of his argument
on why this should be an issue of fact and the over 600
exhibits that we are moving to preclude from consideration
in the hearing that -- or whatever we call it, but also
exclude them from the papers already submitted because we
don't believe they are proper.
(Continued on next page.)
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THE COURT: Fine. So I will deal with the issues
of fact and the responses to that and the motions in limine.
That will be Monday's thing and you can be sure I am not
throwing out anybody's submission over the weekend. Okay.
MR. GIUFFRA: Okay.
THE COURT: I look forward -- sort of -- to seeing
you on Monday at 10:00 o'clock. Anything else you need to
work out, we will deal with it correspondingly.
No.
Bye bye now. I have to go.
* * *
Certified that the foregoing is a true and accurate
transcript of the original stenographic minutes of this
case.
--------------------
Claudette Gumbs
Senior Court Reporter

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