Free Declaration - District Court of Delaware - Delaware

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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK --------------------------------------------------------------x : Rembrandt Technologies, LP, : Plaintiff, : - against : Adelphia Communications Corporation; : Century-TCI California, LP; Century-TCI California Communications, LP; : Century-TCI Distribution Company, LLC; Century-TCI Holdings, LLC; : Parnassos, LP; Parnassos Communications, LP; : Parnassos Distribution Company I, LLC; Parnassos Distribution Company II, LLC; Parnassos Holdings, LLC; and : Western NY Cablevision, LP, : Defendants. : --------------------------------------------------------------x

Case No. 1:07-cv-00214 (WHP)

DECLARATION OF EILISH M. CAHALAN IN SUPPORT OF DEFENDANTS' MEMORANDUM IN OPPOSITION TO PLAINTIFF'S MOTION TO WITHDRAW THE REFERENCE TO BANKRUPTCY COURT I, Eilish M. Cahalan, declare under penalty of perjury, as follows: 1. I am an associate in the law firm of Willkie Farr & Gallagher LLP,

attorneys of record for reorganized Debtors Adelphia Communications Corporation; Century-TCI California, LP; Century-TCI California Communications, LP; Century-TCI Distribution Company, LLC; Century-TCI Holdings, LLC; Parnassos, LP; Parnassos Communications, LP; Parnassos Distribution Company I, LLC; Parnassos Distribution

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Company II, LLC; Parnassos Holdings, LLC; and Western NY Cablevision, LP (collectively, "Defendants"). 2. I submit this declaration in support of Defendants' Memorandum In

Opposition To Plaintiff's Motion To Withdraw The Reference To Bankruptcy Court. 3. Attached as Exhibit A is a true and accurate copy of an October 16,

2006 letter from Brooke A.M. Taylor to Roger Netzer. 4. Attached as Exhibit B is a true and accurate copy of Rembrandt's

First Request for the Production of Documents In the Adversary Proceeding, dated October 20, 2006. 5. Attached as Exhibit C is a true and accurate copy of the November

14, 2006 hearing transcript. 6. Attached as Exhibit D is a true and accurate copy of a November 15,

2006 stipulation and proposed order. 7. Attached as Exhibit E is a true and accurate copy of the November

22, 2006 Objection of Rembrandt Technologies, LP to Confirmation of the Fifth Amended Joint Chapter 11 Plan for Adelphia Communications Corporation and Certain of its Affiliated Debtors. 8. Attached as Exhibit F is a true and accurate copy of the December

13, 2006 Stipulated Order Establishing Separate Reserve for Rembrandt Technologies, LP Administrative Claim.

-2-

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I declare under penalty of perjury that the foregoing is true and correct. Executed this 2th day of March 2007 at New York, New York.

_/s/ Eilish M. Cahalan____ Eilish M. Cahalan

-3-

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Exhibit A

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Exhibit C

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK . IN RE: . Case No. 02-41729 . ADELPHIA COMMUNICATIONS, . New York, New York . Tuesday, November 14, 2006 Debtors. . 9:39 a.m. . . . . . . . . . . . . . . . REMBRANDT TECHNOLOGIES, LP, . . Plaintiff, . . v. . Adv. Proc. No. 06-1739 . ADELPHIA COMMUNICATIONS, . . Defendant. . . . . . . . . . . . . . . . . TRANSCRIPT OF PRETRIAL CONFERENCE BEFORE THE HONORABLE ROBERT E. GERBER UNITED STATES BANKRUPTCY JUDGE APPEARANCES: For the Plaintiff:

James L. Garrity, Jr., Esq. SHEARMAN & STERLING, LLP 599 Lexington Avenue New York, New York 10022-6069 (212) 848-4000 Joseph S. Grinstein, Esq. Tibor L. Nagy, Esq. SUSMAN GODFREY, LLP 590 Madison Avenue, 8th Floor New York, New York 10022-8521 (212) 336-8332

(Appearances continued) 20 Audio Operator: 21 22 23 24 25 Proceedings recorded by electronic sound recording, transcript produced by transcription service. Transcription Company: Electronically Recorded by Court Personnel Rand Transcript Service, Inc. 311 Cheyenne Road Lafayette, New Jersey 07848 (973) 383-6977

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1 APPEARANCES: 2 3 For the Defendant: 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Shelley Chapman, Esq. Roger Netzer, Esq. Thomas Meloro, Esq. WILLKIE, FARR & GALLAGHER, LLP 787 Seventh Avenue New York, New York 10014 (212) 728-8000 (Continued)

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1 2 3 4 5 6

I N D E X Page ARGUMENT By Mr. Grinstein By Mr. Garrity By Mr. Netzer By Ms. Chapman By Mr. Meloro Court Decision - reserved PRETRIAL CONFERENCE/SCHEDULING 5 15,22 16 18 23 30 31

7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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Colloquy 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 Netzer. morning. (Proceedings commence at 9:39 a.m.) THE COURT: Okay. We're here on a pretrial

conference, what I believe is the first pretrial conference in this adversary. I -- Mr. Garrity, I know you and I know I don't know

some of the folks at the other counsel table. everybody.

Do you want to make some introductions? I'd be happy to, Your Honor. Good

MR. GARRITY:

Jim Garrity from Shearman & Sterling.

Your Honor,

we are co-counsel principally for bankruptcy purposes of Rembrandt Technologies, LP, the plaintiff in this adversary proceeding. At counsel table with me are Joseph Grinstein and Tibor Nagy. Mr. Grinstein and Mr. Nagy are with the Susman

Godfrey firm and they are co-counsel in this matter and when we get to, if Your Honor will allow us a moment or two to talk about the complaint and the matters at issue, I will turn the floor over to them, if that's all right with you. THE COURT: Okay. Ms. Chapman, I know you and Mr.

And in between you is? MS. CHAPMAN: Good morning, Your Honor. In between

us is our partner Tom Meloro, who is a patent specialist and who will be addressing the merits, if, as, and when we get to that today. THE COURT: Okay. I think it would be constructive

if we spent just a couple of minutes for you folks to tell me

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Argument - Grinstein 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 underlying issues. It's my impression, very

impressionistically, that this is a case for -- an action for alleged post-petition patent infringement. I'm fully correct or not. Mr. Grinstein or Mr. Nagy, you want to give me a more detailed discussion of what it's about? MR. GRINSTEIN: for plaintiff Rembrandt. Just as an administrative matter, my pro hac admission is pending, but has not been acted on, so -THE COURT: Okay. Certainly you can speak today and Go ahead. Yes, Your Honor. Joseph Grinstein I don't know if

I have no doubt that it will be granted. MR. GRINSTEIN:

Thank you, Your Honor.

This is a patent infringement case, as you mentioned. The complaint was filed in September. It relates

solely to post-petition alleged infringement by the debtors. By agreement the debtors have not yet answered the complaint. Their answer will be due in a few weeks. THE COURT: Pause, please, Mr. Grinstein.

A patent with respect to what kind of a product or technology? MR. GRINSTEIN: asserted in this case. modem services. There are four patents that are They relate to the debtors' cable

More specifically, there is a standard by

which the entire industry performs cable modem services.

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Argument - Grinstein 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 That standard is called "DOCSIS," d-o-c-s-I-s.

"data over cable system interface specification." of words.

That is a standard that all of the cable companies got together in the late 1990s and formed as a way of making sure that each person's or each company's cable modems were compatible with each other; in other words, an industry standard designed to insure efficiency, reliability, compatibility. The allegation in this case by Rembrandt, the plaintiff, is that the DOCSIS standard infringes four of Rembrandt's patents and, by extension, any cable modem services that the debtors performed that were compliant with the DOCSIS standard, which would have been all of them, by implication therefore also infringed the patents. THE COURT: Now pause, please.

If the DOCSIS system is uniformly used across the industry, so by way of example I could, you know, go out to a J&R Music World and get a cable modem there and use it on a Time Warner system or a Comcast system, was there anything that Adelphia did unique to the industry or do you have this claim going out against all of the cable companies in the United States? MR. GRINSTEIN: other cable companies: We're making this claim against Time Warner, Comcast. I'm not sure

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if every cable company was yet got to, but we are making this claim against other cable companies. The allegation is that Adelphia, by the fact that it's standardized to this industry-wide standard, the industry-wide standard infringes our patents. So as long as

Adelphia was compliant with the standard, and there's no reason to believe that they weren't compliant with the standard or else their cable modem system would not have worked, they're alleged to have infringed. THE COURT: Now, did I hear you right that you have

similar actions pending against other major cable companies? MR. GRINSTEIN: THE COURT: We do, Your Honor.

And where are they pending? I believe we have action pending in

MR. GRINSTEIN:

the eastern district of Texas and I think Delaware as well. Not so sure about -- eastern district of Texas is at least one of them. THE COURT: individually? MR. GRINSTEIN: THE COURT: Yes, Your Honor. And they're all being prosecuted

Go on. There are four patents at issue in

MR. GRINSTEIN: this case.

The patents were originally developed by a

subsidiary of AT&T/Bell Labs known as Paradyne Corporation. Paradyne was one of the leaders and sort of at the forefront

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Argument - Grinstein 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 of modem technology back in the 1990s. A lot of what we see

today out in the modem marketplace was due to Paradyne's work. Rembrandt, the client who is at issue -- who is here

today, acquired those patents from Paradyne and is now serving them in this particular case. There are four patents. They relate specifically to

three areas of technology, three distinct methods of infringement. The first two patents are somewhat related. Both of those

They're the 159 patent and the 234 patent.

patents we allege are infringed by the DOCSIS standards that relate to the manner by which cable modems download and update new program content. From time to time a cable modem needs to update its operating system, get updated, get upgrades. THE COURT: You talking about updating the firmware

inside the modem as compared and contrasted to the programming content that the modem sucks off the internet? MR. GRINSTEIN: Right. It's the operating systems. That's being

You can call it the firmware in the modem. updated through this download process.

And those patents

relate to the DOCSIS standard about how that downloading is to occur. Those are the 159 and 234 patents. That's the

first area of infringement that we've alleged. The second area of infringement that we've alleged relates to the 761 patent, and that is a patent that covers

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Argument - Grinstein 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 right? MR. GRINSTEIN: Certainly, Your Honor. And the the manner by which cable modems communicate error control correction mechanisms.

One of the more important things that

a cable modem does when it's doing data transmission is control for errors. THE COURT: Well, any modem, cable or otherwise,

DOCSIS standard sets out a particular method by which cable modem services are supposed to obtain this error control correction mechanism. DOCSIS standard. The third distinct patent is the 444 patent. The The 761 patent, we allege, covers that

444 patent covers a particular aspect of data transmission by cable modems. -THE COURT: Grinstein? MR. GRINSTEIN: Yes. It's the 444 patent, and it Could you repeat that, please, Mr. Specifically, it's very important when you're

covers a DOCSIS standard that governs data transmission by modems. More specifically, when you're doing data

transmission in a modem, data is transmitted in blocks and chunks. And it's very important that you delimit the

beginning and the end of a particular block of data. The 444 patent relates to the DOCSIS standard for delimiting the beginning and the end of a particular data

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transmission, and that's particularly critical to exploiting the extent of a potential bandwidth on the system. So those are the three patents -- actually four patents, but they're related to three areas of technology. We've alleged that DOCSIS infringes those patents and, by implication, the defendant's products that -- products and services, I should say, that utilize DOCSIS. Where do we stand right now, Your Honor? We -- as I

mentioned, we filed the adversary complaint in September. The defendants have not yet answered the complaint. By

agreement, we've extended that answer date for some time. The parties have engaged in some informal discovery relating to the upcoming confirmation hearing. That informal

discovery has been aimed at communicating to the defendants what the aspects of our claim is, what the merits of our claim are. In connection with that informal discovery, there We have

has been a mutual document exchange by both parties.

produced documents relating to these patents, relating to our allegations. They've produced documents back to us. We have

some issues with the extent to which all the documents have been produced to us, but I don't think now is the time or place to discuss those. We've also engaged in some expert discovery. Rembrandt has provided to defendants an expert report from a computer scientist expert who has analyzed the patents,

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analyzed the DOCSIS standard, and has opined that the DOCSIS standard infringes these four patents. the debtors. We've also provided an expert report from an expert economist who has analyzed the revenues that these cable modem services have generated for the debtors and has stated a damages claim that he alleges -- he opines is the appropriate damages remedy in this particular case. THE COURT: What kind of damages you looking for? We have alleged that, because of We provided that to

MR. GRINSTEIN:

this alleged infringement, in a hypothetical negotiation, the defendants would have paid to us between a four and fivepercent royalty on cable modem services. I think that ranges

-- ends up ranging from between ninety to $115 million. I should say that we've filed the claim seeking $130 million as our administrative claim. Since we've done some

more refined analysis, after having engaged in a little bit of discovery and having talked back and forth with the defendants, we've now since refined that claim to the outside of the claim is I believe $115 million. fifteen. Excuse me. THE COURT: Okay. Now, I take it against the Ninety-two to one

Adelphia alleged infringers, at least, you're not looking for injunctive relief? MR. GRINSTEIN: We are not looking for injunctive

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Argument - Grinstein 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 Texas. THE COURT: Marshall? Marshall before Judge Ward. relief, Your Honor. THE COURT: And I should say -You're looking for injunctive relief

against the other defendants in your other lawsuits? MR. GRINSTEIN: No, Your Honor.

I should also mention that we are continuing to investigate infringement. There may well be other aspects of We're

the debtors' products that infringe our patents. continuing to investigate that.

The stuff that we've stated

now is very preliminary in nature, so there may be other services that the debtors do that we reserve our right to allegations infringement against. I stand somewhat corrected. My colleague reminds me

we are looking for injunctive relief in other venues, for example, against Time Warner. If your question related to

any possible connection between Adelphia and anyone else where there's injunctive relief, in the eastern district of Texas we are looking for injunctive relief, but not in this action. THE COURT: Where is that, in Plano? Excuse me?

MR. GRINSTEIN: THE COURT:

In Plano, Texas? No, the case is pending in Marshall,

MR. GRINSTEIN:

MR. GRINSTEIN:

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Argument - Grinstein 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 COURT: All right. Now, do you have a view or

position on the advantages or disadvantages of coordinating this litigation with the actions in the other jurisdictions where similar or identical issues are being raised? MR. GRINSTEIN: other side. I have not discussed that with the

I think if, you know, Your Honor wanted to

coordinate with Judge Ward and reach some sort of mutual claim construction with Judge Ward on one of the aspects of the patent cases to go through a procedure known as a "Markman procedure" where the Court construes the claims of patent. That claim construction probably would be applicable

both to Time Warner and to Adelphia to a certain extent, so I think it might be a good idea for you to coordinate with the eastern district of Texas with respect to issues like that. Frankly, we have not discussed that with the other side. THE COURT: Another option that's not infrequently

done in MDL litigation is to coordinate pretrial proceedings, discovery and the like, and then to send the action back to the district in which the underlying claim is pending. you thought about that? Do you have a view on the Have

desirability or undesirability of that? MR. GRINSTEIN: Your Honor. I think that would be desirable,

Candidly, the eastern district of Texas is a I won't say most of the

very sophisticated patent venue.

patent cases that are getting filed today are filed in that

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Argument - Grinstein 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 district, but a large percentage of them, so that district has a lot of experience with patent matters.

Not to suggest that Your Honor doesn't, but if Your Honor wanted to coordinate more closely with the eastern district and sort of follow along on pretrial matters with that district in the Time Warner case, I think that probably would be advantageous to everyone involved. The eastern

district has a very standardized and a very well-worn set of pretrial patent procedures. rules" of that district. THE COURT: Is this the same court that was the It's called the "local patent

subject of The Wall Street Journal article -MR. GRINSTEIN: THE COURT: New York Times.

-- about a lot of patent litigation

winding up in one particular district? MR. GRINSTEIN: Times article. THE COURT: Oh, New York Times. Okay. All right. Yes, Your Honor. It was a New York

Now, Mr. Grinstein, would either you or Mr. Garrity comment on your perceived views as to the affect or nonaffect on pending reorganization matters in this court and whether we can simply deal with this by creating a satisfactory reserve or whether this involves more stuff and, of course, what need I have to get this case decided under any particular time frame?

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Argument - Garrity 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 reserve. MR. GARRITY: Your Honor, Jim Garrity.

We have no objection to the establishment of a When we filed the complaint, we suggested that to That then led to, understandably so, requests

our adversary.

for discovery and information about our claim, which we've been happy to provide. We don't want to stand in the way of We'd like some money set aside to

confirmation, Your Honor.

address our claim once -- to pay the claim once the claim is resolved on the merits, however that may be done, whenever that may be done. It's basically, Your Honor, from our perspective, that simple. We thought there might be an estimation So,

proceeding instituted, but we understand there won't be. Your Honor, we certainly will support any interim type of

solution that leaves us with assurance that once our claim is finally allowed, as we believe it will be, that there will be sufficient funds to pay it, as any other administrative expense claim would have to be paid in the context of a Chapter 11 case. Honor. THE COURT: perspective. All right. Let me get the Adelphia So I think that's the short answer, Your

Mr. Netzer? Very briefly, Your Honor, we're going

MR. NETZER:

in reverse order here because, as I'm sure Your Honor suspects, I'm not a patent lawyer, Mr. Meloro is.

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Argument - Netzer 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 But with respect to Your Honor's questions about

injunctive relief and also with respect to what, if anything, needs to be done in the short term, what we haven't -- first, both gentlemen were correct in saying there has been some cooperative discovery. That doesn't mean we have had all of

our questions answered, Your Honor, and here's a big one that we asked right off the bat. We've been sued for patent infringement during the entire filing period, presumably, therefore, to the extent we were infringing, we were infringing before. four years ago, Your Honor. So we posed the question when we got the letter in September of 2006, just months before confirmation hearing, what was the date on which Rembrandt became aware of those products and services, as well as the date on which Rembrandt first had reason to believe that the products allegedly infringed the patents in suit, and the reasons why Rembrandt waited until September 13, 2006 to file its claims. We have That's more than

had no answer to that question in discovery, Your Honor, and I think it is a pertinent one. As to the need for an estimation proceeding, what we have said is that we are not -- still not yet in a position to evaluate their claim for reserve of $130 million. that nothing proves that we were not in a position to evaluate that than the fact that yesterday we learned that I think

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Argument - Netzer 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 Rembrandt hadn't evaluated it because it is no longer what they're demanding.

And if we hadn't gotten the expert report

yesterday, we wouldn't know even that. So I just wanted to give the context, Your Honor, because, frankly, it's one troubling to us and pertinent, I think, why it is that on the eve of confirmation, this came up for the first time. operating company. people. So -THE COURT: of this technology? MR. NETZER: No, Your Honor. I've learned an It's called Wait. Rembrandt was not the developer It's not as though Rembrandt is an

All they do is buy patents and sue

interesting term that I hadn't heard before. "patent trolls." These are people -Patent what? Patent trolls.

THE COURT: MR. NETZER:

Like in the Lord of the

Rings, trolls, t-r-o-l-l-s. THE COURT: Well, unfortunately, my boy isn't old You mean t-r-o-l-l-s?

enough to read that stuff yet. MR. NETZER: goats, trolls.

Like under the bridge with the billy

They're people who don't actually develop

patents or technology, but just buy it up and don't have operations, they just sue people. I know Your Honor has

nothing in -- there's nothing in the Court's experience to compare with people who just acquire interests in

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Argument - Chapman 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 litigations. (Laughter.) MR. NETZER: THE COURT: Mr. Netzer. MR. NETZER: elaborate. Your Honor, that's just by way of background. I That's why I thought I should But that is --

Well, that's a very alien concept to me,

leave to Mr. Meloro and Ms. Chapman the finer details of the patent and the bankruptcy issues. THE COURT: MS. CHAPMAN: Who's next for the Adelphia side? Your Honor, Shelley Chapman from

Willkie Farr for Adelphia. To just continue with what Mr. Netzer was saying, the -- as Your Honor knows, the sale of the assets closed at the end of July. That's the end of the infringement period

that has been alleged because as of that moment we were no longer an operating company and the assets moved to our purchasers. Notwithstanding that, this claim did not come in until the occurrence of the administrative bar date in the JV plan, so not to beat a dead horse, but there has been a lot of waiting here and we find ourselves now, less than a month before the commencement of the confirmation hearing, having to deal with this allegedly 130-million-dollar claim.

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Argument - Chapman 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 Mr. Netzer is right. As I understand it from Mr. We'd like an

Meloro, we just received this expert report.

opportunity to analyze it and I think it would be our intention to respond with an offer as to an appropriate reserve, of course, believing and maintaining when we get to that, that there is no infringement. But as Your Honor knows in other reserve situations, we have taken the approach of trying to come to a consensual resolution without burdening the Court with a trial or even a mini-trial on the merits. We do have a time constraint here.

We have to deal with this in a way that does not stand in the way of confirmation and that's what we're setting about doing now. What I would suggest is that -- and Mr. Meloro can talk about timing -- is that we go that next round. there will be an agreement, maybe there won't. Maybe

If there

won't, we may, in fact, have to be back here for some sort of a proceeding to estimate the claim. THE COURT: We are --

No, there -- I think I dealt with this

in the ABIZ decision, which I ultimately published a couple years after I issued it. MS. CHAPMAN: THE COURT: Yes, Your Honor. My memory of that holding, and I'm a

little stale on it, is that it's pretty clear that I have the ability to estimate, for purposes of establishing reserves,

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Argument - Chapman 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 even putting aside the issue of my ability to estimate for allowance for all purposes. MS. CHAPMAN: That's correct, Your Honor. We have

actually reviewed the decision recently in this context and in the ABIZ case there was a slight nuance there because there was a feasibility issue in the ABIZ case, so with that caveat, yes. In that case, Your Honor applied 502(c) and you estimated the Adelphia claim against the ABIZ debtors for reserve purposes, but not ultimate allowance purposes. I

think in that case they ended up being one and the same, but those facts I think are not applicable here. So we know Your Honor is familiar with that procedure. That's like the procedure that we would go down.

We have not, frankly, thought through what the proceeding here might look like, but given what's coming up with confirmation, it would be our position that it would have to be a fairly summary proceeding in nature. I also have heard -- I view this as estimation and reserve and I've heard the word "confirmation" used and I'd be interested to hear whether, if a satisfactory reserve is established, there are, nonetheless, confirmation issues or whether we're done, because from our perspective, we'd like to deal with Rembrandt, frankly, put it aside or have the patent lawyers continue a pace to deal with it on the merits,

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Argument - Chapman 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 but we've got a plan to confirm and that's -- we don't want to take our eye off that ball. THE COURT: As you properly observed, in ABIZ, if

the required reserve were too high, the ABIZ plan wouldn't have been feasible. I assume that in this case the plan,

whatever else people have complained about it, is feasible under all scenarios and the only issue is how much has to be held aside before stakeholders can get their recoveries. I correct? MS. CHAPMAN: That's exactly right, Your Honor. Am

There's a nuance, though, because a question might be asked, given that we are feasible, that we do have the cash, why not just do this, what's the down side. We felt that it was --

would be inappropriate and inconsistent with our fiduciary duty to simply agree to a number written on a piece of paper, which was $130 million. And, in fact, were you to set aside

that much money in cash, you would affect the mix of plan consideration that goes to the subsidiary creditors, putting aside how you would affect the parent company creditors. It's not large. I mean, in the case of this

magnitude, even $130 million isn't that large, but I think even a one-or-two-percentage shift in the plan consideration from the cash pot to the stock pot is of concern to us and, therefore, we felt it was necessary to really look at this very closely.

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Argument - Garrity 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 COURT: Okay. Mr. Garrity, to what extent do

you see any confirmation issues, other than the need to fix the size of the reserve? MR. GARRITY: Your Honor, from our perspective, if

we get an acceptable reserve, we don't believe, from our perspective, that there is a confirmation issue. respectfully differ. We

We think there is a significant

confirmation issue if there isn't a reserve, but we don't have to even investigate that in the event that there is a reserve. And I will tell you, Your Honor, we have said from the beginning that we are prepared to estimate this. outset of our discussions we were thinking about and discussing in concept -- and understood, nobody made a commitment, Your Honor -- we're going to estimate. then told, no, we're not going to estimate. being told we will estimate. Your Honor, we would just like -- the perfect world would be to agree upon a number, Your Honor, and we're happy, willing, and hopefully able, to sit down and try to work that out with the debtor. Again, the last thing we want to do is We were At the

And now we're

to be a fly in the ointment for this confirmation hearing. Now, if we can't do that, most respectfully, Your Honor, we would expect that there would be -- if there's going to be an estimation hearing, let's decide that that's

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Argument - Meloro 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 Paradyne. what's going to happen, let's agree on a process and procedure for doing it so that Your Honor can manage his

calendar for what may be, you know -- we're not close enough to know, Your Honor, whether this is going to be protracted or controversial, as far as the rest of the confirmation goes. We'd like to set some time out, subject to Your Honor's calendar, and an agreement to move forward if that's what they want to do. But, Your Honor, as of last week,

that's not what they wanted to do. So having said that, if we're able to work that out, there is no confirmation issue. THE COURT: heard on anything? correctly? MR. MELORO: Yes. Thank you, Your Honor. All right. Mr. Meloro? Anybody else want to be Did I pronounce your name

I just wanted to -- since Mr. Grinstein spoke a little bit about the patents, I thought it might be useful if we shared a few thoughts that we had. The plaintiff in the case, as you know, is an outfit called Rembrandt Technologies. These patents were purchased The allegations of

in the early part of 2005 by Rembrandt.

infringement relate to cable modem technology. The patents were purchased from a company called As best as we can tell, Paradyne had nothing to do

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Argument - Meloro 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 with cable modems.

As best we can tell, Paradyne had nothing The DOCSIS standards were They apparently

to do with the DOCSIS standards.

put together by the leaders in the industry.

all sat around a table, they attended meetings, they shared ideas, and they came up with the standards on which all cable modems -- essentially all cable modems operate. As best we can tell, Paradyne never showed up at those meetings. technology. They never came and said we have some useful

They never said we're a leader in this field.

Now maybe, while the leaders in the field were adopting the standards, Paradyne was sitting there typing Shakespeare and issuing patents exactly on those standards. If they did, they never showed up, as best we can tell, to come to the DOCSIS folks and say you're using our patents. They never went to the cable operators, as best we can tell, and said you're using our patents. Never offered a license,

never threatened to sue anybody; they just did nothing, as best we can tell. Now, we've asked for -- we couldn't find any record of communications with Adelphia from Paradyne or Rembrandt. We asked for that; we haven't gotten anything. We haven't

seen evidence that there was any extensive campaign to license folks. So what did Paradyne decide to do? They were in the

modem business, they just weren't in the cable modem

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Argument - Meloro 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 business. They decided to just sell their patents.

didn't want them anymore. Rembrandt. THE COURT:

So they went out and they found

Pause, Mr. Meloro.

Was Paradyne the

original filer of the patents with the patent office or are you suggesting that Paradyne, like your allegation as to Rembrandt, was kind of the patent equivalent to a claims trader? MR. MELORO: Paradyne was an operating company. I believe that it was a At

one point it was a part of AT&T.

separate company that was bought by AT&T and then sold by AT&T and became and independent company again. We don't have

research-and-development records from Paradyne, but my assumption is they were doing work in laboratories to develop products, they just weren't doing work to develop cable modems. They were other products. Paradyne eventually decided they had no need for the patents and it found Rembrandt. Rembrandt basically is a

pool of money and four lawyers, from what we can see from their website. They bought the patents, they bought a

seventy-three-percent interest in the patents for $1 million. That's what Rembrandt paid for a pool of patents. Early part of 2005 was the major transaction, as far as we can tell, and when Rembrandt bought those patents, it didn't contact Adelphia, as far as I know. The infringement,

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Argument - Meloro 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 even the post-petition infringement, had been going on for some time, if there's any infringement here. And it's

interesting because a bunch of lawsuits were filed in Texas against Comcast, Time Warner, Charter Communications, Cox, Sharpe. There may be others, but not for infringement of The suits filed in Texas were for

these four patents.

infringement of four completely different patents that had been bought by Rembrandt from Paradyne. Supposedly those four patents are the four which cover the DOCSIS standard. sue Adelphia at that point. A tactical choice was made not to Why? I don't know, but those

operators were sued under four different patents. We got to what I understand is the last day for filing administrative claims in this proceeding and on that day Adelphia was sued for infringement of these four patents. For some other tactical reason on that same day, Time Warner and Time Warner alone was sued for infringement of these four patents in Texas. Mr. Grinstein I think said he wasn't sure if they had yet gotten to every cable company. them all, but not on these patents. They've gotten to

We specifically asked

that question in one of our conference calls, is there anyone other than Time Warner that has been sued, and we were told no. Now, the DOCSIS standard supposedly is the basis for

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Argument - Meloro 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 infringement, but the DOCSIS standard was developed without

any reference to anybody at Paradyne, as best we can tell at this early stage. Mr. Grinstein referred to three different technologies that are involved with these patents. The first

-- I don't know if I have them in exactly the same order. The first that I have in my notes is the 761, which relates to -THE COURT: MR. MELORO: Error correction? -- error correction. Exactly. This

patent has nothing to do with cable modems.

It was filed in

the era of dial-up modems and it was filed with reference to the specific problems that you face with dial-up modems. You

know, in those old days, you'd hear the call going through on the dial-up modem and you'd hear these series of beeps and sounds and then you'd have to wait, and you'd wait and you'd wait and you'd hope that it would go through and sometimes it wouldn't go through. trying to solve. That was the problem that the 761 was

It was trying to solve these slow,

cumbersome hookups from the old dial-up modems. Cable modems operate on a completely different principle. The hookup is completely different. The DOCSIS

standard doesn't use the protocols, doesn't use the negotiation, doesn't use the sequence that's specified in that patent.

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Argument - Meloro 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

There were two other patents, 159 and 234, that Your Honor correctly characterized as relating to updating the firmware. And this relates to having some firmware remotely

in the cable modem and pushing some updates to the software through the system. Quite simply, there is absolutely nothing -- and this patent is specific not to remotely updating the software, but doing it in a very special way. There's prior These

art which relates to remotely updating software.

weren't the first folks to have the idea that you might want to push software updates through communication systems. And essentially, they got the patent by saying we have a very narrow idea of how you can do it in what they thought was an efficient way. DOCSIS standard doesn't

require, and as best we can tell, nobody uses the firmware update method that's in this patent. You can update firmware

using DOCSIS-compliant modems, you just don't use what's in this patent. Paradyne never said anybody did. Quite

frankly, Rembrandt didn't until quite recently. The last patent is the 444 patent and the 444 patent relates to the actual data that gets transmitted through the system. And there's a preamble that goes on the data. If

you want to send some command from your computer back to the internet, when it goes through your cable modem, they tack on a header, essentially, a preamble. And the patent relates --

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Argument - Meloro 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 preamble. THE COURT: MR. MELORO: Ahead of the block of data? Exactly.

And there's also something on

the tail end as well, but the patent really relates to what's on that preamble on the front end before what they call the "payload" comes through with the data that's being transmitted. And the patent relates to two aspects of that One is how you encode the information to make the

transmission more efficient, and the second is what information is in that preamble. Now, this patent, I have to say, we have progressed. This was the last of the patents that were filed by Paradyne and it was filed originally in 1999, so this was not a dialup modem patent, but it also wasn't a cable modem patent, it was a DSL patent. DSL is what you get from Verizon as

opposed to what you get from your cable company; faster than dial-up but completely different technology. And in fact, what was specified in the patent is a preamble that's used for DSL technology. The information

that goes in there is not information that goes into a DOCSIS preamble. We're still at an early stage, we're moving at

lightening pace by the standards of most complex infringement cases, we're still learning a lot, but the technology that's in these patents -- if you assume they're worth anything, even if you assume they're worth the million dollars that

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Court Decision 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 they paid for them, it's just simply not the technology that's used in cable modems. THE COURT: Okay. Obviously, I'm not going to be

making any judgments onto the merits either for estimation purposes or more extensive purposes today. I think we simply

need to develop a game plan for dealing with the triaging of our priorities in terms of getting things done. Subject to your right to be heard, it seems to me that I should set a period of time, not particularly lengthy, but a period of time for you folks to agree upon a consensual reserve, if one can be achieved. I must say, hearing the seemingly dramatic differences in views as to the merits, I have a sense that Adelphia might well come to the view that the reserve should be very modest. disagree on that. And although the reserve would only be for purposes of reserve and not for the purpose of ultimate liability, I don't know if Rembrandt is going to care about the cosmetic or other implications of a reserve that's so small that seems to suggest that at least somebody thinks its claims aren't worth a whole lot. I want to get your views on my tentative, nevertheless, that I should give you folks a period of time to see if you can reach a consensual reserve, and then what And if that's true, you may have to agree to

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Pretrial Conference 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

we need to do, if you agree to disagree, and what we need to do if I have to have an estimation proceeding, it seems to me that since -- and again, this is subject to your rights to be heard, but it seems to me that if Adelphia has the wherewithal to post a reserve at any place along the spectrum of the amount demanded by Rembrandt, we're still not talking about feasibility; and that if you've got to pay your admin claims or reserve for them on the effective date, we may be shooting for the effective date of the plan, rather than the confirmation hearing, but I want both sides to comment on that, so whichever side wants to be heard first. Chapman? MS. CHAPMAN: Your Honor, I think the outside date Ms.

is the effective date of the plan, however, I think if we have to agree to disagree, I wouldn't want to put the occurrence of the effective date at any risk, would want it to occur as soon as possible after confirmation; and therefore, I would like to be more aggressive on behalf of the debtors with respect to the timetable and perhaps have Your Honor allocate -- the parties have not discussed what a proceeding would look like. I don't think that we would be I know these are

looking at more than a day at the most.

extremely complex issues that I don't purport to begin to understand, but we have parameters that we have to operate under here.

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Pretrial Conference 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 So I think that the more prudent course for the debtors to insure that if we do get through confirmation successfully, as I hope and anticipate we will, that this will not be hanging out there. So I'd rather that we be

prepared to proceed sooner rather than later. I have to defer to Mr. Meloro as to timing since we just got the expert report and I don't know how quickly our team will be in a position to respond to the new damage range that we just became aware of, but I'd rather keep the focus on confirmation and prior to the end of confirmation, rather than have it slip until sometime before the effective date. But the effective date, you're correct, that's the drop-dead date by which all reserves have to be set. THE COURT: Now, with that said, we have a pretty

full December on matters wholly apart from this patent controversy. How much time, Ms. Chapman, Mr. Meloro, do you

folks think you need to have the dialogue with Rembrandt as to the consensual reserve, if a consensual number can be reached? MR. MELORO: Your Honor, we had discussed, before we

got the expert reports yesterday, a schedule for exchanging contentions and under that schedule, we would respond to the contentions we got yesterday by a week from tomorrow, the day before Thanksgiving. Things have changed dramatically in

terms of what they're saying, but we would still hope to keep

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to that schedule to work with our experts, to understand what they've said, to see where we agree or disagree, and it would seem to me that we would be in a position starting right after Thanksgiving to have a dialogue with them, once we had digested it and responded to what they've said. THE COURT: MR. GARRITY: Mr. Garrity or Mr. Grinstein? Your Honor, from the perspective of if

there's going to be an estimation, I guess from our perspective, certainly the effective date, from our perspective, would be the outside. We don't -- the way the

plan is drafted, Your Honor, administrative claims are going to be filed -- potentially filed forty days after the effective date, so we've got a real question as to how that's going to work. But again, from our perspective in dealing with our claim, if we can get an agreed reserve, of course we want to do that, and if we have to estimate it in the context of the confirmation hearing, you know, so be it. And, you know, we

will try to work out an agreement with regard to the evidence and how to put the evidence in, et cetera. I suppose we

could use your earlier work in the case you mentioned earlier. Forgive me, Your Honor, I can't remember the name. THE COURT: nickname is ABIZ. MR. GARRITY: Right. So let me defer to Mr. It's Adelphia Business Solutions. It's

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Pretrial Conference 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 Grinstein with regard to the issues on the merit claim. MR. GRINSTEIN:

I understand Your Honor doesn't want

to get into a debate about the merits, so I'll put aside -THE COURT: I assume that everything I heard from

Mr. Meloro you essentially disagree with. MR. GRINSTEIN: That's correct, Your Honor. And I

don't think now is the time or the place to state that. I will say -THE COURT: With one exception, Mr. Grinstein. Do

you quarrel with their assertion that you guys didn't develop the technology and that you acquired it and that, therefore, to the extent that the real developers of the technology have information relevant to this controversy, we're going to have to get that from them as third-party witnesses? MR. GRINSTEIN: I think, as I mentioned in my

opening presentation, absolutely we acquired these patents from Paradyne. Paradyne is the one who filed for those We acquired them subsequent to

patents and developed them. that.

As far as the location of documents, in the course of our dealings with Paradyne to acquire these patents, Paradyne provided us a lot of due diligence from its own files about those patents and that information we've already provided to the other side. There is some degree of

information which I imagine Paradyne didn't provide to us,

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Pretrial Conference 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 and in that situation, we're trying to work cooperatively with Paradyne to get that information from them to give to the other side. discovery. There might possibly be some third-party

I'm sure, to protect itself, the defendants will

want to engage in that, but there will be some sort of process of acquiring third-party discovery, some of which they've already got; I'm sure there's some more they need to get. As regard to the hearing that we're talking about, though, I will mention that the parties have negotiated a stipulation that governs the exchange of information relating to the claim, which was intended to be a stipulation that governs the exchange of information, were we to get to some sort of contested hearing in a few weeks about what to reserve for the claim. Pursuant to that stipulation, we were, yesterday, to provide an expert opinion to them relating to damages and relating to infringement. They were to have provided to us

an expert opinion where they stated forth their opinions that the patents were somehow invalid. We provided those expert

opinions to them, they did not provide to us. I assume we are still going forward on the basis of that stipulation and that stipulation will govern the manner by which we'll put discovery or put evidence in at the hearing; which is to say, I would hope by having not provided

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their invalidity report to us yesterday, they're not going to take some position that they can provide one at some future date and then put in invalidity evidence at the hearing in an effort to suggest to Your Honor that the patents are invalid and, therefore, a reserve of zero is appropriate. THE COURT: Well, I'm not a patent lawyer, never

was, but it seems to me that some of the points that Mr. Meloro was making could seemingly be related to contentions that part or all of your patents are invalid. MR. GRINSTEIN: And we had an agreement, Your Honor,

that they were to provide an expert opinion on that yesterday and they did not. They may well think that they don't need

an expert opinion or whatnot, but I just want to make clear that we have an agreement on how to proceed forward and how to exchange discovery and that agreement is aimed towards putting forth a presentation at the time of the hearing, the estimation hearing for the time of the claim. related to the adversary, really. It's not

We weren't gauging all of

this discovery right now focused on this estimation proceeding. They haven't even answered the adversary yet, so

there has been no formal adversary discovery. And so, to the extent that we are not able to reach consensus with respect to the amount of the claim, I just thought it important to point out to you, Your Honor, that we have reached consensus on how to proceed forward in discovery

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Pretrial Conference 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 towards the estimation hearing and, you know, Rembrandt intends to live by that particular arrangement. THE COURT: MR. MELORO: Okay. Mr. Meloro?

Yes, we do have an agreement with We chose not to

counsel on the exchange of expert reports. submit an invalidity expert report.

We don't intend to

present that evidence if there's a hearing some day. THE COURT: MR. MELORO: You say you do or you don't? We do not. Our contention, our main

contention, and the contention we're going to put through experts, is that we don't use the technology, we don't infringe on the patents. THE COURT: So assuming the patents are fully valid,

you still don't owe them anything? MR. MELORO: Correct. Now, there is one avenue of

invalidity that we don't think we need an expert report on and we don't -- and we haven't submitted an expert report on and it relates to some documents that are in their files that we believe creates at least a strong inference that there is a problem with this product having been released by Paradyne too early. And it results in invalidity not on the basis of

the work of others, but on the basis of Paradyne's own behavior and actions. We don't think we need an expert report on that, we don't intend to offer expert testimony on that. We've asked

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Pretrial Conference 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 counsel for additional documents and information on this issue. We haven't gotten any yet, so we're not quite sure

what, if anything, we're going to do with regard to that issue if there is a hearing some day, but we do intend to stay within the confines of our agreement that if you have a hearing and you're going to offer expert testimony, it's going to be by virtue of the subjects identified in the expert reports. THE COURT: Okay. Now, clarify one thing for me,

and I need to get an answer on this from Mr. Grinstein as well. Is the deal that you folks made on exchanges of

informal discovery and expert reports and the like, was that intended to do double duty for the merits and any estimation proceeding or was it for only one or the other? MR. MELORO: It was only as a preliminary matter for

an estimation or whatever bankruptcy-related proceeding might need to occur. It was not intended to be for the merits of I think we both envision a subsequent

the case as a whole.

full discovery period with expert reports following on later on. THE COURT: Okay. Mr. Netzer was rising. I don't

know if he wanted to talk to you or me. MR. NETZER: To you, Your Honor.

Just also to say that in addition -- not that this is unrelated to estimation. We needed, of course, to

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Pretrial Conference 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 evaluate their demand for a reserve and requested the information for that purpose.

The only other refinement I'd

offer to what's said is while, yes, there is an agreement about discovery, I think that -- and I'm not sure if you meant to imply this, Mr. Grinstein, that that is not necessarily the exclusive discovery that any party can take between now and -- at any time. THE COURT: Okay. Mr. Grinstein, do you agree or

disagree with what we just heard from Mr. Meloro and Mr. Netzer? MR. GRINSTEIN: Well, with respect to Mr. Meloro, I

agree that the expert reports that we're putting forth right now are not intended to do double duty. Typically you do

expert discovery long after fact discovery has concluded and there really has been no fact discovery, so these are preliminary reports. I will -- I think Mr. Meloro will agree that we've exchanged a lot of documents which won't need to be reexchanged, of course. As far as what Mr. Netzer indicated, I think our agreement was pretty clear about what scope of discovery we're agreeing to for purposes of the hearing. I certainly

don't think we've, you know, limited ourselves with respect to the adversary proceeding, but there is a scope of discovery we've agreed to with respect to the hearing; for

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Pretrial Conference 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 example, we've said that no party will take deposition of parties or non-parties, and so I would imagine that does

preclude a pretty large chunk of potential discovery between now and the hearing. THE COURT: Okay. How was the agreement papered, by

a letter agreement or a stip, and a stip that was going to be so ordered or was just between the parties or what? MR. GRINSTEIN: We've negotiated a stipulation and

agreed to its terms and we were intending to file it as soon as we can get signatures on it. agreement on that stipulation. THE COURT: All right. Okay. Anything else, anybody? I I think we're all in

Well, here's what we're going to do.

share your view that the full litigation of the adversary and the merits of the underlying controversy will need to play out in due course and what we need to do now is keep our eye on the ball of what we need to do in the short range. I haven't heard any objection to Ms. Chapman's proposal that we do a stop, look, and listen around Thanksgiving for the purpose of seeing whether there's a consensual agreement as to the size of an appropriate reserve, but I don't know whether I'm being unduly pessimistic, but I think we need to make arrangements for what happens if there isn't an agreement. And for that reason, then, we have to figure out

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Pretrial Conference 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 15th. when we're going to be doing this and whether it's your

expectation that you guys are going to try all of this before Christmas and then you're just going to look to me to work over Christmas and over the Christmas holiday to give you the answers you want. By my understanding, and I'm going to need help from the Adelphia folks on this, we have now reserved Thursday the 7th, Friday the 8th, and Thursday the 14th and Friday the 15th for all of the Adelphia confirmation issues that I knew about back at the time, which did not include this one; that I also have a day reserved for some kind of Adelphia purposes on Tuesday the 12th; and that I now have an open day on Monday the 11th, which was going to be used as an emergency contingency day. With all of that said, I don't know, given the most recent update on the acrimony in the Adelphia case as to the extent to which even that is going to be enough, and I want to give you from Adelphia, if you can provide them, as to when and how I should try to schedule this. MS. CHAPMAN: Your Honor, if I'm understanding

correctly, based on what is happening with the confirmation you now assume that you're going to be having confirmation proceedings on the 11th, the 12th, the 14th and the 15th? THE COURT: Well, the 7th, the 8th, the 14th and

The 12th is what we call an "Adelphia day," which you

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Pretrial Conference 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 can use in some fashion; and the 11th has not been given to anybody else because I was afraid that even that isn't -what I've already reserved isn't enough.

Or reserved not in

the sense of reserves like we're talking about here today, but saved for use for Adelphia needs. I do have to tell you that I have another ninety or a hundred Chapter 11 cases. MS. CHAPMAN: Yes, we tend to forget that, Your

Honor, but I am aware of that. I guess the only suggestion that I could make is that we be given time on the 11th and, at the risk of putting undue pressure on the patent attorneys, if there were any time prior to the 7th and the 8th, I believe that once we get into the thick of confirmation, that's going to have to assume a priority and we don't want to put Your Honor in a position to have to be laboring over a patent liability and/or damages opinion in the midst of that. THE COURT: Well, time out, Ms. Chapman. If you

guys are looking for anything other than an estimation decision before the effective date of a plan, assuming it's otherwise confirmed, I think that would be unrealistic as well. MS. CHAPMAN: I'm sorry, Your Honor. I didn't

understand what you just said. THE COURT: The most that we're going to be talking

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Pretrial Conference 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 about between now and the effective date of any plan, assuming, especially in the absence of people who have different views of the world than you and the Creditors' Committee, that the plan is confirmed, the most we're going to have is a determination of the reserve -MS. CHAPMAN: THE COURT: MS. CHAPMAN: THE COURT: MS. CHAPMAN: Yes, Your Honor. -- before the effective date. Yes. Okay.

That's all that we are contemplating.

That's all that we believe is necessary in order to move forward. THE COURT: MR. GARRITY: THE COURT: MR. GARRITY: Just a question. All right, then. Your Honor, pardon me. Yes, Mr. Garrity? I apologize for interrupting you.

On the reserve, Your Honor -- are you

contemplating the fixing of a reserve for the Rembrandt claim, not a larger reserve for all administrative claims? had understood it to be the former, the Rembrandt claim. THE COURT: I did as well. It's my understanding I

that the only reserves that I'm going to need to set in this case are those where the reserves would be sufficiently material so it has an effect upon creditor distributions and that most of them have been consensually resolved and maybe

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Pretrial Conference 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 there will be a few that I will have to do similar proceedings on, but I haven't been told of any such yet. MR. GARRITY: THE COURT: understanding? MS. CHAPMAN: situation. Well, Your Honor, this is a unique Thank you, Your Honor. Ms. Chapman, am I right in that

When we've been here before you on reserves, they

have been unsecured claims in different classes in the capital structure. THE COURT: MS. CHAPMAN: This is an administrative claim. All pre-petition unsecured claims. Correct. That's right, Your Honor. It's a horse of a

So this is an administrative claim.

different color and if I hear Mr. Garrity correctly, what I think they're asking for is their very own reserve with their name on it, not a piece of a reserve that builds up generally to a reserve for all admin claims similarly situated. believe that's what they're asking for. MR. GARRITY: Your Honor, that's exactly what we're I

asking for, and the reason we need it, Your Honor, is because in their plan there is an ability for people to file administrative priority claims after the eff