Free Declaration - District Court of Delaware - Delaware

Case 1:07-cv-00799-JJF

Document 6

Filed 12/10/2007

Page 1 of 3

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE In re: ) ) Oakwood Homes Corporation, et ) al., ) ) Debtors. ) _______________________________ ) OHC Liquidation Trust, ) ) Plaintiff, ) ) v. ) ) Credit Suisse (f/k/a Credit ) Suisse First Boston, a Swiss ) banking corporation), Credit ) Suisse Securities (USA), LLC ) (f/k/a Credit Suisse First ) Boston LLC), Credit Suisse ) Holdings (USA), Inc. (f/k/a ) Credit Suisse First Boston, ) Inc.), and Credit Suisse (USA), ) Inc. (f/k/a Credit Suisse First ) Boston (U.S.A.), Inc.), the ) subsidiaries and affiliates of ) each, and Does 1 through 100, ) ) Defendants. ) ) Chapter 11 Bankruptcy Case No. 02-13396 (PJW) Jointly Administered

Adversary Proceeding No. 04-57060 (PJW)

Civil Case No. 07-00799

DECLARATION OF WHITMAN L. HOLT IN SUPPORT OF THE REPLY BRIEF IN SUPPORT OF THE PLAINTIFF'S MOTION TO WITHDRAW THE REFERENCE AND TO SET DATES FOR A PRE-TRIAL CONFERENCE AND JURY TRIAL BEFORE THE DISTRICT COURT

Case 1:07-cv-00799-JJF

Document 6

Filed 12/10/2007

Page 2 of 3

Case 1:07-cv-00799-JJF

Document 6

Filed 12/10/2007

Page 3 of 3

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 1 of 37

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 2 of 37

IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: ) ) Oakwood Homes Corporation, et ) al., ) ) Debtors. ) _______________________________ ) OHC Liquidation Trust, ) ) Plaintiff, ) ) v. ) ) Credit Suisse (f/k/a Credit ) Suisse First Boston, a Swiss ) banking corporation), Credit ) Suisse Securities (USA), LLC ) (f/k/a Credit Suisse First ) Boston LLC), Credit Suisse ) Holdings (USA), Inc. (f/k/a ) Credit Suisse First Boston, ) Inc.), and Credit Suisse (USA), ) Inc. (f/k/a Credit Suisse First ) Boston (U.S.A.), Inc.), the ) subsidiaries and affiliates of ) each, and Does 1 through 100, ) ) Defendants. ) ) Chapter 11 Case No. 02-13396 (PJW) Jointly Administered

Adversary Proceeding No. 04-57060 (PJW)

Re: Adv. Proc. D.I. No. 215

PLAINTIFF'S ANSWER IN OPPOSITION TO DEFENDANTS' MOTION FOR LEAVE TO APPEAL

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 3 of 37

TABLE OF CONTENTS Page PRELIMINARY STATEMENT ...........................................1 ARGUMENT ........................................................4 A. Because There Is A Key Distinction Between Decisions Recognizing The Constitutional Jury Right And Decisions Denying That Right, The Jury Trial Opinion Involves No Controlling Question Of Law..............................5 Because The Bankruptcy Court Appropriately Considered And Applied Controlling Case Law, There Are No "Substantial Grounds" For Disagreement.............................................8 1. Controlling Case Law Makes Clear That A Jury Right Exists Whenever Any "Legal" Claims Are Present Or "Legal" Relief Is Sought.............................................10 Controlling Case Law Makes Clear That A Claim Must Be A Necessary Part Of The "Claims-Allowance Process" In Order To Result In An Implied Waiver Of A Jury Right..............................................13 Controlling Case Law Rejects The Notion That A Jury Right Is Lost When A Legal Suit Is Brought In A Court Of Equity...............16 Controlling Case Law Requires That Contractual Jury Waivers Be Narrowly Construed; The Bankruptcy Court Properly Limited The Purported Waiver On The Facts Before It.............................18

B.

2.

3.

4.

C.

An Appeal At This Juncture Will Not Materially Advance The Progress Of This Litigation, But Will Only Create Further Expense And Delay.......................................22 This Case Does Not Involve Any "Exceptional Circumstances" That Could Justify An Immediate And Premature Appeal..........................26

D.

CONCLUSION .....................................................30

i

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 4 of 37

TABLE OF AUTHORITIES CASES Aetna Ins. Co. v. Kennedy, 301 U.S. 389 (1937) ................................... 19, 20 Allegheny Int'l, Inc. v. Allegheny Ludlum Steel Corp., 920 F.2d 1127 (3d Cir. 1990) ............................... 6 Beacon Theatres, Inc. v. Westover, 359 U.S. 500 (1959) ..................................... 6, 7 Billing v. Ravin, Greenberg & Zackin, P.A., 22 F.3d 1242 (3d Cir. 1994), cert. denied, 513 U.S. 999 (1994) ....................................... passim Bowie Produce Co. v. Magic Am. Cafe, Inc. (In re Magic Rests., Inc.), 202 B.R. 24 (D. Del. 1996) ............................. 5, 29 Cantor v. Perelman, No. 97-586-KAJ, 2006 WL 318666 (D. Del. Feb. 10, 2006) ................................................. 11 Chaplin v. Harbison Group, 119 B.R. 433 (S.D.N.Y. 1990) ............................... 6 Chauffeurs, Teamsters & Helpers v. Terry, 494 U.S. 558 (1990) ........................................ 7 City of New York v. Beretta U.S.A. Corp., 317 F. Supp. 2d 193 (E.D.N.Y. 2004) ........................ 7 In re Crown Vantage, Inc., No. 02-03836, 2002 U.S. Dist. LEXIS 26109 (N.D. Cal. Dec. 16, 2002) ....................................... 15 Dairy Queen, Inc. v. Wood, 369 U.S. 469 (1962) ................................... 10, 11 Dal-Tile Intl., Inc. v. Color Tile, Inc., 203 B.R. 554 (D. Del. 1996) ................................ 5 In re Del. & Hudson Ry. Co., 96 B.R. 469 (D. Del. 1989), aff'd, 884 F.2d 1383 (3d Cir. 1989) ....................................... 27 Dimick v. Schiedt, 293 U.S. 474 (1935) ........................................ 7

ii

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 5 of 37

EEOC v. Blue Star Foods, Inc., No. 78-5-W, 1980 U.S. Dist. LEXIS 11131 (S.D. Iowa Mar. 7, 1980) ......................................... 7 EEOC v. Waffle House, Inc., 534 U.S. 279 (2002) ....................................... 19 Educ. Testing Servs. v. Katzman, 670 F. Supp. 1237 (D.N.J. 1987) ............................ 7 Enron Corp. v. Springfield Assocs., L.L.C. (In re Enron Corp.), No. M-47 (SAS), 2006 U.S. Dist. LEXIS 63223 (S.D.N.Y. Sept. 5, 2006) ........................... 9, 25, 29 First Fid. Bank, N.A. v. Hooker Invs., Inc. (In re Hooker Invs., Inc.), 937 F.2d 833 (2d Cir. 1991) ............................... 25 First Union Nat'l Bank v. United States, 164 F. Supp. 2d 660 (E.D. Pa. 2001) ....................... 20 In re Franklin Towne Lodge Ltd. P'ship, No. 91-2702, 1992 U.S. Dist. LEXIS 18817 (E.D. Pa. Nov. 25, 1992) ........................................ 16 Germain v. Conn. Nat'l Bank, 988 F.2d 1323 (2d Cir. 1993) ...................... 13, 15, 16 In re Globe Parcel Serv., Inc., 75 B.R. 381 (E.D. Pa. 1987) ............................... 16 Granfinanciera, S.A. v. Nordberg, 492 U.S. 33 (1989) .................................... 10, 12 Harriscom Svenska AB v. Harris Corp., 947 F.2d 627 (2d Cir. 1991) ............................... 21 Hays v. Equitex, Inc. (In re RDM Sports Group), 260 B.R. 915 (Bankr. N.D. Ga. 2001) ....................... 16 Hulmes v. Honda Motor Co., 936 F. Supp. 195 (D.N.J. 1996) ......................... 9, 23 Int'l Union, United Auto., Aerospace & Agric. Implement Workers of Am. v. Midland Steel Prods. Co., 771 F. Supp. 860 (N.D. Ohio 1991) ......................... 27 Kennard v. United Parcel Serv., Inc., 531 F. Supp. 1139 (E.D. Mich. 1982) ....................... 24 Langenkamp v. Culp, 498 U.S. 42 (1990) ........................................ 14

iii

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 6 of 37

Lauro Lines s.r.l. v. Chasser, 490 U.S. 495 (1989) ....................................... 27 Link v. Mercedes-Benz of N. Am., 550 F.2d 860 (3d Cir. 1977), cert. denied, 431 U.S. 933 (1977) ............................................ 5 MCI WorldCom Commc'ns v. Commc'ns Network Int'l, Ltd. (In re WorldCom, Inc.), 358 B.R. 76 (S.D.N.Y. 2006) ............................... 21 M&E Contractors v. Kugler-Morris Gen. Contractors, 67 B.R. 260 (N.D. Tex. 1986) .............................. 16 McClelland v. Braverman Kaskey & Caprara, P.C. (In re McClelland), 332 B.R. 90 (Bankr. S.D.N.Y. 2005) ........................ 14 Milbert v. Bison Labs., 260 F.2d 431 (3d Cir. 1958) ................................ 5 Mirant Corp. v. Southern Co., 337 B.R. 107 (N.D. Tex. 2006) ............................. 15 NDEP Corp. v. Handl-It, Inc. (In re NDEP Corp.), 203 B.R. 905 (D. Del. 1996) ............................... 16 Official Comm. of Unsecured Creditors v. Qwest Commc'ns Corp. (In re A.P. Liquidating Co.), 350 B.R. 752 (E.D. Mich. 2006) ............................. 6 Orson, Inc. v. Miramax Film Corp., 867 F. Supp. 319 (E.D. Pa. 1994) ........................... 5 Parsons v. Bedford, 3 Pet. 433 (1830) ......................................... 10 Pereira v. Farace, 413 F.3d 330 (2d Cir. 2005), cert. denied, 126 S. Ct. 2286 (2006) ........................................ 11 Rafoth v. Nat'l Union Fire Ins. Co. (In re Baker & Getty Fin. Servs., Inc.), 954 F.2d 1169 (6th Cir. 1992) ............................. 27 Ross v. Bernhard, 396 U.S. 531 (1970) ................................... 16, 17 Thermo-Stitch, Inc. v. Chemi-Cord Processing Corp., 294 F.2d 486 (5th Cir. 1961) .............................. 10 Tracinda Corp. v. DaimlerChrysler AG, 502 F.3d 212 (3d Cir. 2007) ........................... 18, 20

iv

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 7 of 37

Urban Outfitters, Inc. v. 166 Enter. Corp., 136 F. Supp. 2d 273 (S.D.N.Y. 2001) ....................... 20 United States v. Kramer, 19 F. Supp. 2d 273 (D.N.J. 1998) .......................... 28 United States v. McAlister, 630 F.2d 772 (10th Cir. 1980) .............................. 7 Vodusek v. Bayliner Marine Corp., 71 F.3d 148 (4th Cir. 1995) ................................ 6 Williston v. Eggleston, 410 F. Supp. 2d 274 (S.D.N.Y. 2006) ....................... 18 Zygmuntowicz v. Hospitality Invs., Inc., 828 F. Supp. 346 (E.D. Pa. 1993) .......................... 22 STATUTES AND RULES 28 U.S.C. § 157(e) ............................................. 27 28 U.S.C. § 158(a) ......................................... passim 28 U.S.C. § 1292(b) ............................................ 24 FED. R. BANKR. P. 8003(a) ........................................ 1 OTHER AUTHORITIES U.S. CONST. amend. VII ...................................... passim WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY (unabridged 2002) ..................................................... 28

v

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 8 of 37

Pursuant to Federal Rule of Bankruptcy Procedure 8003(a), Plaintiff OHC Liquidation Trust ("Plaintiff"), by and through its duly appointed trustee, Alvarez & Marsal, LLC, hereby submits this answer in opposition to the "Defendants' Motion For Leave To Appeal" (the "Motion") filed on November 26, 2007 by the Defendants in the above-captioned adversary proceeding (collectively, "Defendants" or "Credit Suisse"). PRELIMINARY STATEMENT This would-be interlocutory appeal arises out of a thoughtful and comprehensive memorandum opinion (the "Jury Trial Opinion"1) issued by the United States Bankruptcy Court for the District of Delaware, Walsh, J. (the "Bankruptcy Court") on November 15, 2007. In the Jury Trial Opinion,

which was rendered after substantial briefing by the parties, the Bankruptcy Court cogently explained why controlling Supreme Court and Third Circuit cases lead to the conclusion

1

A true and correct copy of the Jury Trial Opinion [Adv. Proc. D.I. No. 207] is attached as Exhibit "A" to the accompanying Declaration of Whitman L. Holt (the "Holt Declaration"). All capitalized terms used but not otherwise defined herein have the meaning set forth in the Jury Trial Opinion. Further, rather than burden this Court with yet another summary of the proceedings below, Plaintiff respectfully refers the Court to the background material provided by the Bankruptcy Court on pages 3-7 of the Jury Trial Opinion, as well as that set forth on pages 311 of the pending motion to withdraw the reference (the "Motion to Withdraw Reference," a copy of which is attached as Exhibit "B" to the Holt Declaration) that Plaintiff filed on November 19, 2007 based upon the Jury Trial Opinion.

1

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 9 of 37

that Plaintiff has a constitutional right to a jury trial as to three of its counterclaims against Credit Suisse. In the

process, the Bankruptcy Court expressly considered and rejected all of the unjustifiable theories that Credit Suisse now attempts to repackage for this Court's consideration. Frustrated by their loss before the Bankruptcy Court, Defendants go to desperate lengths ­ including mischaracterizing cases, obfuscating the record, and griping about aspects of the proceedings below that have no relevance to their requested relief ­ to convince this Court that the Jury Trial Opinion is one of those rare decisions that meets the stringent standards for interlocutory review. Defendants'

efforts fall flat, however, because they cannot demonstrate that all four of the conditions necessary for an interlocutory appeal exist here. In fact, not even one of those required

conditions is satisfied. First, Defendants improperly conflate the distinction between a lower court opinion denying a jury right and one recognizing a jury right. The difference is crucial

because, as the Supreme Court has explained, the right to a jury is a fundamental one, enshrined in the Constitution, but there is no corresponding right to a non-jury trial. Second, Defendants attempt to manufacture the "substantial ground for a difference of opinion" necessary to

2

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 10 of 37

indict the Jury Trial Opinion.

Yet the Bankruptcy Court

merely referenced and applied the Supreme Court and Third Circuit decisions that control the outcome of this dispute. The fact that Defendants may be unhappy with the Bankruptcy Court's analysis, or that there may be non-binding cases which are allegedly not in accord with the Jury Trial Opinion, is simply not enough to establish the substantial judicial disagreement required for an interlocutory appeal. Third, Defendants hardly bother to argue that an appeal at this juncture will materially advance the ultimate termination of the adversary proceeding. Defendants' feeble

attempt is easily explained by the fact that their proposed interlocutory appeal: (i) will not resolve even a single disputed issue, but rather will merely determine the factfinder for a static body of issues; (ii) will generate lengthy and time-consuming briefing that will unnecessarily increase the costs to the parties and delay a trial on the merits; and (iii) raises questions that could be reanimated by either of the parties following the entry of a final order. Moreover,

the case law is clear that where, as here, discovery has concluded and the parties are ready for trial, interlocutory appeals do not advance the litigation's ultimate termination. Fourth, Defendants cite no truly "exceptional circumstances" that merit a piecemeal appeal. The fact that a

3

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 11 of 37

corporate defendant disputes a plaintiff's Seventh Amendment right to a jury and threatens to raise that issue in a future appeal from a final judgment is a fact-pattern presented by legions of high-stakes commercial cases. Such a timeless tale

hardly embodies the "exceptional" case ­ one that threatens fundamental rights or entire markets ­ for a premature appeal. In sum, none of the factors courts consider when analyzing whether to grant leave to appeal under 28 U.S.C. § 158(a) are present. As such, the Motion should be denied. ARGUMENT The Jury Trial Opinion and the associated order represent an interlocutory decision by a bankruptcy court, which means Credit Suisse cannot appeal as a matter of right. Rather, Credit Suisse may appeal only "with leave of the court" under 28 U.S.C. § 158(a). Section 158(a) does not provide criteria for determining whether "leave" should be granted, but the Motion properly recites the applicable standards; in order to justify their requested relief, Defendants must establish that: 1. 2. 3. The Jury Trial Opinion involves a controlling issue of law; There is a substantial ground for difference of opinion about the Bankruptcy Court's rulings; An immediate appeal will materially advance the ultimate termination of this adversary proceeding; and

4

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 12 of 37

4.

This case involves some "exceptional circumstances" that justify departing from the general policy against piecemeal appeals.2

See Motion at pp. 8-9; see also, e.g., Dal-Tile Intl., Inc. v. Color Tile, Inc., 203 B.R. 554, 557 (D. Del. 1996); Bowie Produce Co. v. Magic Am. Cafe, Inc. (In re Magic Rests., Inc.), 202 B.R. 24, 26 (D. Del. 1996). Because the test for interlocutory appeal is conjunctive, Defendants bear the burden of proving that all four criteria have been satisfied. This is fatal since, as

detailed below, not even one of these factors is present here. A. Because There Is A Key Distinction Between Decisions Recognizing The Constitutional Jury Right And Decisions Denying That Right, The Jury Trial Opinion Involves No Controlling Question Of Law. In a desperate attempt to clear the hurdles of pursuing an interlocutory appeal, Defendants baldly assert that the Jury Trial Opinion raises a controlling question of law because "the allowing of a jury trial where no jury right exists would plainly be reversible error." (Motion at p. 9.)

Rather than cite a single authority that actually supports

2

In this Circuit there exists a strong policy against piecemeal appeals, and interlocutory relief should be "sparingly applied" and "used only in exceptional cases." Milbert v. Bison Labs., 260 F.2d 431, 433 (3d Cir. 1958); see also, e.g., Link v. Mercedes-Benz of N. Am., 550 F.2d 860, 863 (3d Cir. 1977) ("[W]e cannot sanction an erosion of the prohibition against 'piecemeal' appellate review."), cert. denied, 431 U.S. 933 (1977); Orson, Inc. v. Miramax Film Corp., 867 F. Supp. 319, 321 (E.D. Pa. 1994).

5

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 13 of 37

this position, Defendants cite Official Committee of Unsecured Creditors v. Qwest Communications Corp. (In re A.P. Liquidating Co.), 350 B.R. 752 (E.D. Mich. 2006), and Chaplin v. Harbison Group, 119 B.R. 433 (S.D.N.Y. 1990). Defendants,

however, have completely misapplied the holdings of each case; both A.P. Liquidating Co. and Chaplin hold that the denial of the constitutional right to a jury trial raises a controlling question of law. trial. There is no corresponding right to a bench

See, e.g., Beacon Theatres, Inc. v. Westover, 359 U.S.

500, 510 (1959) (explaining that "the right to jury trial is a constitutional one," and "no similar requirement protects trials by the court"); Vodusek v. Bayliner Marine Corp., 71 F.3d 148, 152-53 (4th Cir. 1995) ("While the Seventh Amendment guarantees a jury trial in cases 'at common law,' no constitutional provision guarantees, or indeed prohibits, jury trials for cases tried in equity or in admiralty."). The obvious distinction between recognizing a fundamental right and denying that right is crucial when considering whether to exercise discretionary judicial powers. For instance, the Third Circuit has explained that the "drastic" remedy of a writ of mandamus is an appropriate method of protecting a party's right to a jury trial. See,

e.g., Allegheny Int'l, Inc. v. Allegheny Ludlum Steel Corp.,

6

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 14 of 37

920 F.2d 1127, 1133-34 (3d Cir. 1990).3

No comparable relief

exists with respect to the non-right to a non-jury trial. In fact, the constitutional character of the jury right has led courts affirmatively to conclude that they should commit Credit Suisse's allegedly "reversible error" in close cases. As powerfully explained by one court:

the right to a trial by jury is one of the most precious of the rights guaranteed by the Constitution, and should be one of the most jealously guarded. In view of this, if the Court is to err in its holding, it chooses to err in favor of granting a right to trial by jury, as opposed to denying such an important right. EEOC v. Blue Star Foods, Inc., No. 78-5-W, 1980 U.S. Dist. LEXIS 11131, at *11 (S.D. Iowa Mar. 7, 1980).4 The Bankruptcy

3

Likewise, the Supreme Court has repeatedly emphasized that the "'[m]aintenance of the jury as a fact-finding body is of such importance and occupies so firm a place in our history and jurisprudence that any seeming curtailment of the right to a jury trial should be scrutinized with the utmost care.'" Chauffeurs, Teamsters & Helpers v. Terry, 494 U.S. 558, 565 (1990) (quoting Beacon Theatres, 359 U.S. at 501 (quoting Dimick v. Schiedt, 293 U.S. 474, 486 (1935))). See also, e.g., Beacon Theatres, 359 U.S. at 510 ("Since the right to jury trial is a constitutional one . . . [judicial] discretion is very narrowly limited and must, wherever possible, be exercised to preserve jury trial."); United States v. McAlister, 630 F.2d 772, 774 (10th Cir. 1980) (noting how if a decision will "require too many jury trials, we properly err on the side of protecting a constitutional right"); City of New York v. Beretta U.S.A. Corp., 317 F. Supp. 2d 193, 196 (E.D.N.Y. 2004) ("One guiding beacon has been lit by the Supreme Court: when in doubt, grant a jury trial."); Educ. Testing Servs. v. Katzman, 670 F. Supp. 1237, 1243 (D.N.J. 1987) (Barry, J.) (concluding that if court erred by denying motion to strike, it "erred on the side of protecting an important constitutional right, fundamental to the fair administration of justice").

4

7

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 15 of 37

Court analyzed the instant dispute in a fashion wholly consistent with principle. (See Jury Trial Opinion at p. 9.)

Defendants have failed to cite even a single case where the granting of a jury trial has been held to raise a controlling question of law for the purposes of pursuing an interlocutory appeal. Accordingly, Defendants are unable to

carry their burden of proving this first criterion. B. Because The Bankruptcy Court Appropriately Considered And Applied Controlling Case Law, There Are No "Substantial Grounds" For Disagreement. The Jury Trial Opinion unfolded in several phases, each of which rejected arguments made in Defendants' lengthy briefing before the Bankruptcy Court. First, the Bankruptcy

Court scrutinized the historical nature of Plaintiff's claims and the character of its requested relief, concluding that a jury right would obtain outside of bankruptcy. Trial Opinion at pp. 10-17.) (See Jury

Second, the Bankruptcy Court

juxtaposed the counterclaims as to which Plaintiff requests a jury with Plaintiff's substantive objections to the proofs of claim filed by a Defendant, reasoning that those counterclaims were not a necessary part of the "claims-allowance process." (See id. at pp. 17-20.) Third, the Bankruptcy Court

considered and rejected Credit Suisse's radical suggestion that a debtor or bankruptcy trustee may never file suit in a bankruptcy court without losing its jury rights. (See id. at

8

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 16 of 37

20-22.)

Fourth and finally, the Bankruptcy Court held that a

purported contractual jury waiver did not bind Plaintiff, either as a matter of law or of fact. (See id. at 22-28.)

Defendants aver that there are substantial grounds for difference of opinion about all four parts of the Jury Trial Opinion. Defendants are wrong. As explained below, the

Bankruptcy Court carefully considered and applied the controlling Supreme Court and Third Circuit authorities and reached a proper result with respect to each issue before it. Defendants proffer no new case law that went unconsidered by the Bankruptcy Court; rather, they simply want a second bite at the apple. Credit Suisse's own confusion about the

Bankruptcy Court's analysis is not the litmus test for whether the substantial legal uncertainty required for interlocutory appeals exists, however. See, e.g., Enron Corp. v.

Springfield Assocs., L.L.C. (In re Enron Corp.), No. M-47 (SAS), 2006 U.S. Dist. LEXIS 63223, at *19 (S.D.N.Y. Sept. 5, 2006) (explaining that an interlocutory appeal will not lie merely because "the relevant case law is 'less than clear' or allegedly 'not in accord' or that there is a 'strong disagreement among the parties'" (footnotes omitted)); Hulmes v. Honda Motor Co., 936 F. Supp. 195, 208 (D.N.J. 1996) ("A party's disagreement with the district court's ruling does not constitute a 'substantial ground for difference of

9

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 17 of 37

opinion' . . . .

Rather, the difference of opinion must arise

out of genuine doubt as to the correct legal standard."). 1. Controlling Case Law Makes Clear That A Jury Right Exists Whenever Any "Legal" Claims Are Present Or "Legal" Relief Is Sought. As the Supreme Court explained in Dairy Queen, Inc. v. Wood, "[i]t would make no difference if the equitable cause clearly outweighed the legal cause so that the basic issue of the case taken as a whole is equitable. As long as any legal 369

cause is involved the jury rights it creates control."

U.S. 469, 473 n.8 (1962) (emphasis added) (quoting ThermoStitch, Inc. v. Chemi-Cord Processing Corp., 294 F.2d 486, 491 (5th Cir. 1961)); see also Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 41 (1989) (underscoring the key distinction between "suits in which legal rights were to be ascertained and determined, in contradistinction to those where equitable rights alone were recognized, and equitable remedies were administered" (bolded emphasis added) (quoting Parsons v. Bedford, 3 Pet. 433, 447 (1830))). The Bankruptcy Court

correctly recognized and applied Dairy Queen and Granfinanciera by rejecting Defendants' "mixed relief" theory. Unable to argue that there is substantial disagreement about whether Dairy Queen and Granfinanciera are controlling law and mean what they say (or dispute that their "mixed relief" thesis parallels the "incidental" construct

10

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 18 of 37

forcefully rejected in Dairy Queen), Defendants resort to mischaracterization of both the law and the facts. Such

intellectual sleight-of-hand clearly cannot create the "substantial" disputes required for leave to appeal. First, Defendants state that both Pereira v. Farace, 413 F.3d 330 (2d Cir. 2005), cert. denied, 126 S. Ct. 2286 (2006), and Cantor v. Perelman, No. 97-586-KAJ, 2006 WL 318666 (D. Del. Feb. 10, 2006), involved "a mixture of legal and equitable claims." (See Motion at p. 10.) This is an issue

of reading comprehension, if not deliberate misstatement; the only claims at issue in both cases related to alleged breaches of fiduciary duty, which both courts concluded were "equitable" in nature. In fact, Judge Jordan expressly noted

how the analysis in Cantor would have been different "if at least one of Plaintiffs' claims [had been] legal rather than equitable." 2006 WL 318666, at *7 n.7. Indeed, the

Bankruptcy Court distinguished Cantor from the instant case on precisely those grounds. 16.) (See Jury Trial Opinion at pp. 15-

This was the proper result because two of Plaintiff's

claims ­ negligence and breach of implied contract ­ are wholly "legal" claims. Credit Suisse's misreading of the case

law should not change this conclusion. Second, Defendants improperly suggest that Plaintiff's complaint and subsequent damages requests have

11

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 19 of 37

been focused on "disgorgement" and not compensatory damages. (See Motion at p. 5, p. 11 n.6.) for at least three reasons: 1. Plaintiff's initial recitation of each of the relevant claims expressly included requests for damages, including compensatory damages (see Motion Ex. "B" at ¶¶ 51 (seeking "to recover consequential and actual damages" for Credit Suisse's breach of fiduciary duty), 54 (seeking "damages in an amount to be proved at trial" for the negligence claim), 96 (same for the breach of implied contract claim)); Plaintiff provided Defendants with a 10-page supplemental Rule 26(a)(1) initial disclosure of its claimed damages, which supplement described forms of compensatory damages sought for each of the relevant claims (see Holt Declaration Ex. "C"); and During the process of preparing for a possible bench trial before the Bankruptcy Court, Plaintiff's counsel expressly informed Defendants' counsel that Plaintiff intends to seek compensatory damages of at least $50 million at trial (see Holt Declaration ¶ 7). But Defendants know better,

2.

3.

Defendants' attempt to impugn the Bankruptcy Court's analysis of the Plaintiff's requested relief thus rings quite hollow. In sum, the Bankruptcy Court followed the precise analytic process prescribed by the Court in Granfinanciera. The undisputedly "legal" character of two of Plaintiff's claims, combined with the "legal" nature of its requested relief, creates no question ­ let alone a "substantial" one ­ that the Bankruptcy Court reached the correct result.

12

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 20 of 37

2.

Controlling Case Law Makes Clear That A Claim Must Be A Necessary Part Of The "ClaimsAllowance Process" In Order To Result In An Implied Waiver Of A Jury Right. The case law is clear that when a cause of action

"falls within the process of the allowance and disallowance of claims," neither the debtor's estate nor the defendant has a Seventh Amendment right to trial by jury "because [the] claim has been converted from a legal one into an equitable dispute over a share of the estate." See Billing v. Ravin, Greenberg

& Zackin, P.A., 22 F.3d 1242, 1253 (3d Cir. 1994), cert. denied, 513 U.S. 999 (1994). In contrast, when a legal cause

of action is not integrally related to the claims-allowance process, but instead seeks to garner additional funds that will "augment" the bankruptcy estate, both the debtor and the defendant retain their constitutional right to have a jury try such an action. See, e.g., Germain v. Conn. Nat'l Bank, 988

F.2d 1323, 1327 (2d Cir. 1993) (explaining how "suits . . . which would augment the estate but which have no effect on the allowance of a creditor's claim simply cannot be part of the claims-allowance process"). Credit Suisse suggests that the claims-allowance process is implicated merely by the procedural posture of this case, i.e., because the proceeding involves "counterclaims filed by a liquidation trust in response to a proof of claim."

13

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 21 of 37

(See Motion at p. 11.)

But this paints with far too broad a

brush; the critical task for any court faced with this issue is to "ask whether the resolution of the particular dispute at issue is necessarily part of the process of the disallowance and allowance of claims" against the bankruptcy estate. Billing, 22 F.3d at 1252 n.14 (emphasis added).5

5

Beyond being facially inconsistent with Billing, Credit Suisse's blunderbuss argument has been roundly rejected by courts outside of the Third Circuit. As one court explained: Unlike the act of filing a proof of claim, the assertion of a counterclaim by the debtor does not automatically result in waiver of the right to trial by jury on those counterclaims. Moreover, counterclaims such as the ones in this case often go beyond the mere allowance or disallowance of the filed claim to seek affirmative recovery against the claimant. The Court must consider whether the counterclaims are "integral to the restructuring of the debtor-creditor relationship through the bankruptcy court's equity jurisdiction," which would dispense with [the] right to a jury trial on those counterclaims. McClelland v. Braverman Kaskey & Caprara, P.C. (In re McClelland), 332 B.R. 90, 95 (Bankr. S.D.N.Y. 2005) (emphasis added) (quoting Langenkamp v. Culp, 498 U.S. 42, 44-45 (1990)). In McClelland, the estate's counterclaims were "integrally related to the allowance or disallowance of the [creditorClaimants'] claims" because "[t]he very services for which Claimants seek compensation in their proofs of claim are the same services, for the same time periods during which the Debtor counterclaims that the Claimants engaged in negligence and malpractice." See id. at 97-98. As explained in the text and as found by the Bankruptcy Court, that clearly is not the case here; the relevant proofs of claim are based solely upon "services" allegedly provided to the Oakwood Companies between August 19, 2002 and November 15, 2002, but Plaintiff's counterclaims as to which the Bankruptcy Court held it has a jury right stem from other "services" provided to the Oakwood Companies in a different time period. (See Jury Trial Opinion at pp. 19-20.)

14

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 22 of 37

When applying this rule, courts approach the issue claim-by-claim, in each instance asking whether a particular cause of action bears a necessary logical relationship to the allowance or disallowance of a creditor's claim in bankruptcy. See, e.g., Germain, 988 F.2d at 1327-32; Mirant Corp. v. Southern Co., 337 B.R. 107, 120-22 (N.D. Tex. 2006); In re Crown Vantage, Inc., No. 02-03836, 2002 U.S. Dist. LEXIS 26109, at *9-12 (N.D. Cal. Dec. 16, 2002). This is precisely

what the Bankruptcy Court did here; there are no "substantial grounds" for concluding it applied the wrong legal standard. Nor can there be any real dispute about whether the Bankruptcy Court made the proper finding. The basic problem

with Defendants' position below was their inability to explain why common law claims ­ negligence, breach of fiduciary duty, and breach of implied contract ­ based upon a pattern of misconduct beginning years before the contract underlying the relevant proofs of claim was executed have a necessary logical relationship to whether claims based on that contract should be allowed in bankruptcy. The Motion makes no better effort

to address this obvious problem ­ or to explain why all aspects of a multi-year relationship must be crammed into a contract covering only the last 88 days of that relationship ­ because it cannot be solved; the counterclaims as to which the Bankruptcy Court affirmed Plaintiff's jury rights could be

15

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 23 of 37

resolved apart from the proofs of claim, and thus they are not necessarily part of the "claims-allowance process."6 3. Controlling Case Law Rejects The Notion That A Jury Right Is Lost When A Legal Suit Is Brought In A Court Of Equity. The Supreme Court has clearly instructed that "legal claims are not magically converted into equitable issues by their presentation to a court of equity." 396 U.S. 531, 538 (1970).7 Ross v. Bernhard,

The Third Circuit has similarly

6

Indeed, as a purely logical matter, the counterclaims that encompass pre-August 19, 2002 conduct are utterly separate from the proofs of claim; it is conceivable that Plaintiff could succeed on some or all of those claims yet fail in its claim objections, or vice versa. As explained in the pending Motion to Withdraw Reference, judicial economy strongly favors withdrawing the reference as to all of the Plaintiff's counterclaims and then conducting one trial ­ with a jury resolving issues of fact and law pertaining to the claims as to which Plaintiff has a Seventh Amendment right, and this Court resolving the remaining issues. (See Motion to Withdraw Reference at pp. 16-21.) Nevertheless, such a process is not strictly necessary; the pre-August 19, 2002 counterclaims could in theory be tried as a completely separate action, which trial could occur either before or after the proofs of claim are resolved. Absent compelling reasons to favor this plainly inefficient result, it is proper to advance judicial economy and minimize unnecessary cost and delay to the parties. Numerous district courts in this Circuit similarly reject Credit Suisse's rigid forum-based rule, often using Ross's clear guidance as a foothold. See, e.g., NDEP Corp. v. Handl-It, Inc. (In re NDEP Corp.), 203 B.R. 905, 912-13 (D. Del. 1996); In re Franklin Towne Lodge Ltd. P'ship, No. 91-2702, 1992 U.S. Dist. LEXIS 18817, at *8-10 (E.D. Pa. Nov. 25, 1992); In re Globe Parcel Serv., Inc., 75 B.R. 381, 383 (E.D. Pa. 1987). These decisions are in accord with circuit-, district-, and bankruptcylevel authority from other circuits. See, e.g., Germain v. Conn. Nat'l Bank, 988 F.2d 1323, 1330 (2d Cir. 1993); M&E Contractors v. Kugler-Morris Gen. Contractors, 67 B.R. 260, 266-67 (N.D. Tex. 1986); Hays v. Equitex, Inc. (In re RDM Sports Group), 260 B.R. 915, 920-25 (Bankr. N.D. Ga. 2001).

7

16

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 24 of 37

expressed its belief that a waiver theory based solely on a bankruptcy forum "raises as many questions as it answers," and the mere "fact that the debtor may have voluntarily submitted itself to the bankruptcy court's equitable jurisdiction does not complete the analysis. A court must also ask whether the

resolution of the particular dispute at issue is necessarily part of the process of the disallowance and allowance of claims." See Billing v. Ravin, Greenberg & Zackin, P.A., 22

F.3d 1242, 1251-52, n.14 (3d Cir. 1994) (emphasis added), cert. denied, 513 U.S. 999 (1994). As discussed above, the

Bankruptcy Court properly followed this structure by analyzing whether each of the Plaintiff's counterclaims is a necessary component of the "claims-allowance process." Moreover, the Bankruptcy Court also correctly followed the teachings of Ross and Billing and rejected Credit Suisse's per se "waiver" theory. pp. 21-22.) (See Jury Trial Opinion at

There can be no dispute that Ross and Billing are

controlling law here or that Credit Suisse's extreme suggestion is obviously foreclosed by those opinions. Credit

Suisse's disagreement with Plaintiff about how to read those cases (even combined with a reference to a handful of decisions, virtually all from other circuits, which arguably support some other result) does not give rise to "substantial" questions about whether the Bankruptcy Court is correct on

17

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 25 of 37

this issue.

See, e.g., Williston v. Eggleston, 410 F. Supp.

2d 274, 277 (S.D.N.Y. 2006) (noting how "the fact that the parties themselves disagree as to the interpretation of persuasive authority [does not] constitute 'a difference of opinion' sufficient to warrant certification"). 4. Controlling Case Law Requires That Contractual Jury Waivers Be Narrowly Construed; The Bankruptcy Court Properly Limited The Purported Waiver On The Facts Before It. Credit Suisse further argues that "the Bankruptcy Court's conclusion that [a purported] contractual waiver is wholly inapplicable provides substantial ground for difference of opinion." (Motion at p. 15.) Yet Credit Suisse

conveniently neglects to mention that the Bankruptcy Court rejected their contractual waiver argument for three separate reasons, any one of which would be sufficient to render that waiver inoperative. (See Jury Trial Opinion at pp. 22-28.)

As explained below, all three prongs of the Bankruptcy Court's waiver analysis are well-supported. Perhaps most importantly, however, all of the Bankruptcy Court's analysis was performed through the lens of the repeated instruction that, "[b]ecause the 'right of jury trial is fundamental, courts indulge every reasonable presumption against waiver.'" Tracinda Corp. v. DaimlerChrysler AG, 502

18

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 26 of 37

F.3d 212, 222 (3d Cir. 2007) (emphasis added) (quoting Aetna Ins. Co. v. Kennedy, 301 U.S. 389, 393 (1937)). The Bankruptcy Court's first problem with the purported waiver was that the relevant contracts were not executed by even close to all the parties to this litigation, either on Plaintiff's side or on Defendants' side. Trial Opinion at pp. 22-25.) (See Jury

It is difficult to understand

how Defendants could dispute this conclusion, which likely explains why it goes unmentioned in the Motion.8 See, e.g.,

EEOC v. Waffle House, Inc., 534 U.S. 279, 294 (2002) ("It goes without saying that a contract cannot bind a nonparty."). The Bankruptcy Court's second problem with the purported waiver was that it only applies to actions relating to a single financing transaction, whereas the gravamen of this litigation "is about whether Defendants breached far broader duties, not arising from any written contract, by partaking in a myriad of alleged illicit transactions with the Oakwood Companies," which falls far outside the scope of the purported waiver. (See Jury Trial Opinion at p. 25.) Beyond

8

Among the Bankruptcy Court's conclusions was that the sole beneficiary of the purported waiver ­ "Credit Suisse First Boston, New York Branch" ­ is separate from the other Defendants, and may not even be a party to the action. The Motion makes no mention of this issue, perhaps because Defendants' counsel is unwilling definitively to state whether "New York Branch" is or is not a party to this litigation. (See Holt Declaration ¶ 8.)

19

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 27 of 37

merely asserting "that the waiver is both broad and explicit" (Motion at p. 15), Credit Suisse makes no attempt to explain why there are substantial grounds for disagreement about this conclusion. In fact, there are no such grounds since the

Bankruptcy Court's narrow reading of the purported waiver was required under Aetna Insurance Co. and Tracinda. See also,

e.g., Urban Outfitters, Inc. v. 166 Enter. Corp., 136 F. Supp. 2d 273, 275 (S.D.N.Y. 2001) ("Courts are to strictly construe jury waiver clauses, as the right to a jury trial is fundamental and protected by the Seventh Amendment."). The third part of the Bankruptcy Court's waiver analysis also goes unmentioned in the Motion, for reasons that will be clear shortly. This part of the Jury Trial Opinion

applied the framework of First Union National Bank v. United States, 164 F. Supp. 2d 660 (E.D. Pa. 2001), to this case's facts. (See Jury Trial Opinion at pp. 26-28.) Under First

Union, the party seeking to enforce a purported waiver must proffer some "evidence that there was not a gross disparity in bargaining power between" the parties, which is particularly important when the signatory corporation is in poor "financial straits at the time the documents were executed, [since] it is highly likely that there was a severe disparity in bargaining power" in such circumstances. See 164 F. Supp. 2d at 665.

Here, the Bankruptcy Court reviewed testimony from the record

20

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 28 of 37

and concluded that "there is a good argument that the two Oakwood Companies were at a severely disadvantaged bargaining [position]" when they negotiated the purported waiver, and because "Defendants did not offer any evidence to the contrary," they had failed to meet their burden of proof on this issue. (See Jury Trial Opinion at p. 28.)

The Bankruptcy Court's factual finding and stated need for more evidence is critically important, because it can be reversed on appeal only if Credit Suisse offers contrary evidence. Questions of fact, or mixed issues of law and fact,

do not satisfy the requirements for an interlocutory appeal, however. See, e.g., Harriscom Svenska AB v. Harris Corp., 947

F.2d 627, 631 (2d Cir. 1991) ("Where, as here, the controlling issues are questions of fact, or, more precisely, questions as to whether genuine issues of material fact remain to be tried, the federal scheme does not provide for an immediate appeal solely on the ground that such an appeal may advance the proceedings in the district court."); MCI WorldCom Commc'ns v. Commc'ns Network Int'l, Ltd. (In re WorldCom, Inc.), 358 B.R. 76, 79 (S.D.N.Y. 2006). Thus, granting leave for an

interlocutory appeal would not provide a venue in which Credit Suisse could obtain a reversal on this issue in any event, even assuming arguendo that the evidentiary burden unmet

21

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 29 of 37

before the Bankruptcy Court could somehow be satisfied on appeal (which Credit Suisse never contends in the Motion). In sum, the Bankruptcy Court's rejection of Defendants' contractual waiver argument ­ like all of the Jury Trial Opinion ­ was based on a cogent analysis and application of the applicable authorities. There simply is no substantial

ground upon which to question the Bankruptcy Court's reasoning, and Credit Suisse fails to persuade otherwise. C. An Appeal At This Juncture Will Not Materially Advance The Progress Of This Litigation, But Will Only Create Further Expense And Delay. In the Motion, Defendants make a half-hearted attempt to explain why granting leave for interlocutory appeal at this time will advance the litigation. 15 ¶ 34.) (See Motion at p.

This conclusory effort fails for several reasons. First, Defendants' entire argument on this point

rests on the unsupported and completely self-serving allegation that the United States District Court for the District of Delaware (the "District Court") is too busy to schedule the jury trial required in this adversary proceeding, whereas the Bankruptcy Court can supposedly schedule a bench trial at any time. Unfortunately for Defendants, mere

conjectures or hypotheses about a court's schedule or imagined savings of time and expense are inadequate to justify an interlocutory appeal. See Zygmuntowicz v. Hospitality Invs.,

22

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 30 of 37

Inc., 828 F. Supp. 346, 353-54 (E.D. Pa. 1993).

Furthermore,

Defendants' proposed appeal would only add to the Court's schedule. Defendants, therefore, have simply failed to carry

their initial burden of proof on this criterion. Second, even a cursory review of the established facts demonstrates that allowing Defendants to take an interlocutory appeal at this juncture will only create further expense and delay, including potentially subjecting the parties to two trials. Shortly before the entry of the Jury

Trial Opinion, both Plaintiff and Defendants emphatically informed the Bankruptcy Court that they were ready for trial. (See Motion to Withdraw Reference at pp. 8-9.) Furthermore,

Plaintiff has requested in the Motion to Withdraw Reference that the District Court schedule a pre-trial conference and a trial date at the earliest opportunity. (See id. at p. 16.)

Thus, the best way to materially advance the termination of this adversary proceeding is to expeditiously proceed with an actual jury trial before the District Court instead of potentially staying the litigation in order to allow Defendants to appeal an interlocutory order. In fact,

numerous courts have held that where discovery has been concluded and the parties are ready for trial, a request to pursue an interlocutory appeal should be denied. See, e.g.,

Hulmes v. Honda Motor Co., 936 F. Supp. 195, 212 (D.N.J.

23

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 31 of 37

1996); Kennard v. United Parcel Serv., Inc., 531 F. Supp. 1139, 1149 (E.D. Mich. 1982) ("[D]iscovery has closed in this matter and the parties are currently preparing summary judgment motions and a final pretrial order. This case could

be tried in its entirety before appellate review of the proposed interlocutory appeal takes place."). Although the proximity of this case to trial is determinative regarding this criterion, it is important not to forget the expense and delay attendant to any appeal before this Court.9 If leave to take an interlocutory appeal is

granted, a meaningful appellate briefing schedule will have to be set. Both sides will undoubtedly incur material costs

preparing their appellate briefs and arguing the appeal. During this very same period of time, however, the parties' resources and effort could be directed toward trying the case on the merits, the results of which trial could eliminate either party's desire to appeal and provide a forum in which any number of alleged errors could be addressed. Defendants'

9

Additionally, it is unlikely that this dispute will stop at this Court if leave to appeal is granted. Regardless of the result on appeal, it seems likely that the losing party will seek certification under 28 U.S.C. § 1292(b) or otherwise attempt to put the issue to the U.S. Court of Appeals for the Third Circuit. While the disagreement between the parties may be the sort that ultimately must be resolved by the Third Circuit, it seems best to allow that lengthy and costly process to unfold after a verdict on the merits, rather than at this point in the case.

24

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 32 of 37

proposed alternative would merely complicate the litigation and waste the resources of both the Court and the parties. Third, the specific issues presented by this wouldbe appeal are even less worthy than many other potential interlocutory issues (such as the denial of motions to dismiss or for summary judgment) insofar as a reversal here would not dispose of even one of Plaintiff's claims. As explained by

the Second Circuit, a determination of the parties' jury rights "merely prescribes the method of fact-finding to be applied to the underlying dispute; it obviously does not dispose of the dispute." First Fid. Bank, N.A. v. Hooker

Invs., Inc. (In re Hooker Invs., Inc.), 937 F.2d 833, 837 (2d Cir. 1991). In other words, the precise universe of issues

will exit Credit Suisse's proposed appeal as entered it, and all those issues will still remain to be tried following the appeal; the sole effect of a reversal on appeal would be to shift the form of fact-finder from a jury to a bankruptcy judge. Thus, the potential ramifications of this appeal

(tabling, for the moment, the constitutional implications vis-- a-vis Plaintiff) are of a notably lesser degree than those of other cases where leave has been granted. Cf. Enron Corp. v.

Springfield Assocs., L.L.C. (In re Enron Corp.), No. M-47 (SAS), 2006 U.S. Dist. LEXIS 63223, at *37-38 (S.D.N.Y. Sept. 5, 2006) ("The third prong is easily met, because granting

25

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 33 of 37

leave to appeal both the subordination and disallowance opinions may result in the disposition of the Adversary Proceedings in their entirety. . . . If both of these

opinions are reversed, Enron's case may be dismissed."). In the final analysis, it is very clear what will materially advance the resolution of this litigation: to promptly set a jury trial so that this case may proceed apace toward the entry of a final judgment on the merits. Then,

when that process is over, either party may appropriately raise whatever issues it wishes on appeal. Critically, the

jury trial required by the Jury Trial Opinion could occur during the exact same time-frame as Credit Suisse's proposed appellate briefing. The intractable problems this fact

presents for Defendants' position likely explains why they devote a mere two sentences of the Motion to developing the argument. This tepid effort is not nearly enough to satisfy

Defendants' affirmative burden on this element ­ which must be met in order to justify their requested relief ­ and this conclusion alone is sufficient reason to deny the Motion. D. This Case Does Not Involve Any "Exceptional Circumstances" That Could Justify An Immediate And Premature Appeal. Defendants argue that "exceptional circumstances" exist to justify an immediate appeal because, if the Jury Trial Opinion is ultimately reversed on appeal, the parties

26

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 34 of 37

may have to incur the expenses of re-trying some things before the Bankruptcy Court. (See Motion at pp. 15-16.) Courts,

however, universally reject this argument as a justification for an interlocutory appeal. See, e.g., Lauro Lines s.r.l. v.

Chasser, 490 U.S. 495, 499 (1989) (declining "to find the costs associated with unnecessary litigation to be enough to warrant allowing the immediate appeal of a pretrial order"); Int'l Union, United Auto., Aerospace & Agric. Implement Workers of Am. v. Midland Steel Prods. Co., 771 F. Supp. 860, 862 (N.D. Ohio 1991) (possibility that the parties may have to incur the expense of another trial is insufficient to justify an interlocutory appeal); In re Del. & Hudson Ry. Co., 96 B.R. 469, 473 (D. Del. 1989) (budgetary restriction of a party does not constitute exceptional circumstances to justify an interlocutory appeal), aff'd, 884 F.2d 1383 (3d Cir. 1989). An interlocutory appeal simply is not a proper vehicle for an early review of the Jury Trial Opinion, and Defendants fail to cite any case law that supports their position.10

10

The solitary case Defendants cite ­ Rafoth v. National Union Fire Insurance Co. (In re Baker & Getty Financial Services, Inc.), 954 F.2d 1169 (6th Cir. 1992) ­ involved a totally different issue and is not relevant here. The underlying dispute in Rafoth related to the constitutional question of whether bankruptcy judges, as non-Article III courts, could constitutionally conduct jury trials. This problem was resolved by Congress's codification of 28 U.S.C. § 157(e) in 1994, but was still an open and important issue when Rafoth was decided. See id. at 1172 ("We have not decided whether bankruptcy courts may conduct jury

27

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 35 of 37

Other than the hypothetical costs of retrying some matters before the Bankruptcy Court, Defendants have offered no other example of "exceptional circumstances."11 In fact,

there is nothing exceptional or extraordinary about the underlying adversary proceeding or about the Jury Trial Opinion. Litigation against investment banks and/or financial

advisory firms is hardly uncommon in the District of Delaware, and disputes over the right to a jury trial often arise in adversary proceedings relating to large chapter 11 bankruptcy cases. In addition, Plaintiff's counterclaims against Credit

trials, and the three circuits which have decided this issue are split."). The Sixth Circuit concluded that the resolution of this thorny issue of constitutional import merited interlocutory review, see id., but its decision had nothing to do with whether any party actually had jury rights since it was clear a jury trial would be conducted regardless of the court's ultimate conclusion about whether that trial could be supervised by a bankruptcy judge or had to go to the district court. See id. This is a very different issue than whether interlocutory relief ought to be based on Defendants' non-right to a non-jury trial.
11

Indeed, the facts that Defendants allege are "exceptional" ­ i.e., a corporate defendant, who has failed in its attempt to repudiate a plaintiff's constitutional right to a jury trial, raising the specter of rearguing that issue in a post-trial appeal ­ are a common occurrence in contentious litigation. If such a scenario justifies interlocutory review in this case, then every case involving a similar set of facts would necessarily be an "exceptional" one. Such a construct does extreme violence to the plain meaning of "exceptional." See, e.g., WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY 791 (unabridged 2002) (defining "exceptional" as, among other things, "being out of the ordinary" and "uncommon, rare"). Cf. United States v. Kramer, 19 F. Supp. 2d 273, 282 n.12 (D.N.J. 1998) ("[I]f most settling parties nonetheless believe they are paying more than their fair shares, [defendant]land is a bit like Garrison Keillor's Lake Wobegon, 'where all the children are above average.'").

28

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 36 of 37

Suisse do not implicate fundamental human rights, risk irreparable injury, or carry the potential to undermine billion dollar markets. Cf. Enron Corp. v. Springfield

Assocs., L.L.C. (In re Enron Corp.), No. M-47 (SAS), 2006 U.S. Dist. LEXIS 63223, at *5 (S.D.N.Y. Sept. 5, 2006) (granting leave to appeal in part "because of the uncertainty that [the bankruptcy court's] rulings ­ if left undisturbed ­ would inject into the market for the sale of postpetition claims"). Instead, the adversary proceeding is mainly about monetary damages, and Plaintiff has a cardinal right to try three of its counterclaims to redress those damages before a jury. Rather than providing an "exceptional" set of facts, the proceedings below and the Jury Trial Opinion represent what ought to be the norm under the pertinent authorities. Defendants failed to persuade the Bankruptcy Court otherwise, and their desire for a premature second bite at the apple before this Court does not come anywhere close to the standards required to justify interlocutory relief. See,

e.g., Bowie Produce Co. v. Magic Am. Cafe, Inc. (In re Magic Rests., Inc.), 202 B.R. 24, 26 (D. Del. 1996) ("Although [a defendant] asserts that determining this issue now would save time and avoid having to resolve other factual and legal matters, [the defendant] has not sufficiently established an urgency that sets this case apart from the typical case.").

29

Case 1:07-cv-00799-JJF

Document 6-2

Filed 12/10/2007

Page 37 of 37

Finally, even Defendants are uncertain about whether their requested relief is justified. Rather than allow the

Motion to proceed in due course, Credit Suisse has mounted a thinly-disguised collateral attack on the Jury Trial Opinion.12 Defendants' fear of a jury trial on the merits neither compels a premature appeal nor excuses an improper collateral attack. CONCLUSION For the reasons and based on the authorities presented above, the Motion should be denied in its entirety. Respectfully submitted, Dated: December 4, 2007 Wilmington, Delaware /s/Marla Rosoff Eskin MARLA ROSOFF ESKIN (No. 2989) KATHLEEN CAMPBELL DAVIS (No. 4229) CAMPBELL & LEVINE, LLC 800 N. King Street, Suite 300 Wilmington, DE 19801 (302) 426-1900 -andTONY CASTAÑARES (CA SBN 47564) STEPHAN M. RAY (CA SBN 89853) SCOTT H. YUN (CA SBN 185190) WHITMAN L. HOLT (CA SBN 238198) STUTMAN, TREISTER & GLATT, P.C. 1901 Avenue of the Stars, 12th Fl. Los Angeles, CA 90067 (310) 228-5600
Special Counsel for the OHC Liquidation Trust
12

Plaintiff's forthcoming Reply Brief in support of the Motion to Withdraw Reference will detail the problems with this strategy.

30

Case 1:07-cv-00799-JJF

Document 6-3

Filed 12/10/2007

Page 1 of 20

Case 1:07-cv-00799-JJF

Document 6-3

Filed 12/10/2007

Page 2 of 20

UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE . . Chapter 11 . Oakwood Homes Corporation, . et al., . . Debtor(s). . Bankruptcy #02-13396(PJW) ............................................................. . OHC Liquidation Trust, . . Plaintiff, . . vs. . . Credit Suisse First Boston, . et al., . . Defendants. . Adversary #04-57060(PJW) ............................................................... IN RE: Wilmington, DE October 4, 2007 9:30 a.m. TRANSCRIPT OF STATUS CONFERENCE BEFORE THE HONORABLE PETER J. WALSH UNITED STATES BANKRUPTCY JUDGE APPEARANCES: For The OHC Liquidating Trust: Marla Eskin, Esq. Campbell & Levine, LLC 800 N. King St.-Ste. 300 Wilmington, DE 19801 Anthony Castanares, Esq. Stutman, Treister & Glatt, P.C. 1901 Avenue of the Stars 12th Floor Los Angeles, CA 90067

Case 1:07-cv-00799-JJF

Document 6-3

Filed 12/10/2007

Page 3 of 20

2 Whitman Holt, Esq. Stutman, Treister & Glatt, P.C. 1901 Avenue of the Stars 12th Floor Los Angeles, CA 90067 For Credit Suisse: Russell C. Silberglied, Esq. Richards Layton & Finger, P.A. One Rodney Square 920 N. King St. Wilmington, DE 19899 R. Paul Wickes, Esq. Linklaters, LLP 1345 Avenue of the Americas New York, NY 10105 Justin Williamson, Esq. Linklaters, LLP 1345 Avenue of the Americas New York, NY 10105 Michael Osnato, Esq. Linklaters, LLP 1345 Avenue of the Americas New York, NY 10105 Audio Operator: Transcribing Firm: Leslie Murin Writer's Cramp, Inc. 6 Norton Rd. Monmouth Jct., NJ 08852 732-329-0191

Proceedings recorded by electronic sound recording, transcript produced by transcription service.

Case 1:07-cv-00799-JJF

Document 6-3

Filed 12/10/2007

Page 4 of 20

3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 THE CLERK: THE COURT: Please rise. Please be seated. Ready to proceed? What

is it, a status conference? MR. CASTANARES: MS. ESKIN: Yes, Your Honor.

Good morning, Your Honor, Marla Eskin, We're here

Campbell & Levine, for the OHC Liquidation Trust.

today for the status conference in OHC Liquidation Trust versus CSFB, Adversary 04-57060. the Court this morning. THE COURT: Okay. Thank you, Your Honor. As the status Mr. Castanares will be addressing

MR. CASTANARES:

conference report states, Your Honor, I think we are pretty close to ready in this case and the one -- there were two issues that were left unresolved in the status conference report. Before I begin, I'd like to -- if the Court is not

familiar with Mr. Matt Kvarda of Alvarez & Marsal, the Liquidation Trustee in the case, he's also present in the Court today. THE COURT: Okay. One issue that was left -- stated to

MR. CASTANARES:

be left unresolved in the status conference report was the issue of expert discovery, and I'm happy to report to the Court that seems to be resolved. The Defendants have advised us that

they do not intend to submit a rebuttal witness, so the only thing that really remains to be done is to conduct the

Case 1:07-cv-00799-JJF

Document 6-3

Filed 12/10/2007

Page 5 of 20

4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 deposition of our expert witness who is the subject of Your Honor's recent letter ruling. The other side has requested

that that deposition occur on the 22nd of October, which is acceptable to us, but our expert is out of the country at the moment. So I'm verifying that, and I expect to have an answer But I anticipate no problem.

for him by very early next week.

And subject to the next thing I'm about to say, then, I think the matter is entirely ready for trial. The next thing The

I'd like to say, though, is the question of a jury trial.

Plaintiff has demanded a jury trial in this case, and as the status conference report states, Plaintiff is willing to consent to the holding of such a jury trial in this Court. least as of the moment, the Defendant is not. At

So that means if

there's going to be a jury trial, it would have to occur in District Court. And we are aware, Your Honor, that there is an issue as to whether we are entitled to a jury trial or not. The Defendant

did file a Proof of Claim on this matter; nonetheless, many of the claims that we assert in this case are not specifically related to the allowance or disallowance of that Proof of Claim but relate to conduct prior to the events that gave rise to that Proof of Claim. jury trial. We believe that will give us a right to a

And we are prepared to brief that issue.

And if I may state what our preferences would be, Your Honor, it would be to conduct a trial on the date now set for

Case 1:07-cv-00799-JJF

Document 6-3

Filed 12/10/2007

Page 6 of 20

5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 trial, but I understand that if the matter has to go to District Court, that isn't going to happen. My second preference would be, given the fact that we recognize that there is an issue as to whether we're entitled to a jury trial, if it is -- if the Court could accommodate an expedited briefing schedule, we'd be prepared to file an opening brief on this almost -- today or tomorrow so that the Court could resolve the issue of whether we're entitled to a jury trial. And if we don't prevail on that issue, it would

still be our preference to go to trial on the date now scheduled in November, if that is possible and the Court can accommodate it. The only other thing -- I think that means, Your Honor, that we're completely concluded on al discovery issues. The

only really remaining issue is the jury trial, and then I think there are a couple other housekeeping matters that the Court might wish to consider and that is the submission of a pretrial order and the conduct of a pre-trial conference if the Court desires a face-to-face conference. And since the other

side has no experts, we don't anticipate making any Daubert Motions, and I don't know whether they do or not, but it might make some sense, if they plan to do so, to try to figure out what a briefing schedule ought to be, given the current schedule. Thank you, Your Honor.

I would just say also on the jury trial issue, Your Honor,

Case 1:07-cv-00799-JJF

Document 6-3

Filed 12/10/2007

Page 7 of 20

6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 I don't know whether the Defendant's changed position or not. I do know that in early drafts of the status conference report t