IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
ZOHAR CDO 2003-1, LLC; ZOHAR CDO :
2003-1, LTD; ZOHAR II 2005-1, LLC; :
ZOHAR II 2005-1 LTD.; ZOHAR III, LLC; :
and ZOHAR III, LTD., :
:
Plaintiffs, :
:
v. : C.A. No. 12247-VCS
:
PATRIARCH PARTNERS, LLC; :
PATRIARCH PARTNERS VIII, LLC; :
PATRIARCH PARTNERS XIV, LLC; :
PATRIARCH PARTNERS XV, LLC, and :
PATRIARCH PARTNERS AGENCY :
SERVICES, LLC, :
:
Defendants. :
MEMORANDUM OPINION
Date Submitted: September 14, 2016
Date Decided: October 26, 2016
Kenneth J. Nachbar, Esquire and Thomas P. Will, Esquire of Morris, Nichols,
Arsht & Tunnell LLP, Wilmington, Delaware, and Michael Carlinsky, Esquire,
Jonathan Pickhardt, Esquire, Ellison Ward Merkel, Esquire, Blair Adams, Esquire,
and Jonathan Spital, Esquire of Quinn Emanuel Urquhart & Sullivan, LLP, New
York, New York, Attorneys for Plaintiffs.
Gregory V. Varallo, Esquire, Robert W. Whetzel, Esquire, Sarah A. Galetta,
Esquire of Richards, Layton & Finger, P.A., Wilmington, Delaware; Robert M.
Abrahams, Esquire, Taleah E. Jennings, Esquire, Kristie M. Blase, Esquire,
Frank W. Olander, Esquire, Heidi G. Crikelair, Esquire, and Alexander H.
Wharton, Esquire of Schulte Roth & Zabel LLP, New York, New York; and Reed
Brodsky, Esquire of Gibson, Dunn & Crutcher LLP, New York, New York,
Attorneys for Defendants.
SLIGHTS, Vice Chancellor
Even discrete disputes between long-standing business associates quite often
are not as straightforward as they first appear. The parties in this case have been in
a business relationship for more than ten years. And, true to form, they have
sought to expand litigation of a claim that was pled as a narrow, straightforward
breach of contract into a vehicle through which they could air a wide range of
grievances and cross-grievances, many of which raise serious questions regarding
the bona fides of the structure of their complex relationship. Having now
conducted a trial, and having reviewed the operative contracts that govern the
parties’ various relationships, I am satisfied that the dispute sub judice is, in fact, as
straightforward as it first appeared. The claim as pled is that the defendants
breached discrete provisions within the parties’ operative contracts by failing to
produce documents to the plaintiffs. The Court need not expand its focus beyond
the unambiguous language of those contracts to resolve this claim. While it is
clear the parties’ broader disputes will go on long after this litigation is over, the
resolution of those disputes will have to await another day.
Plaintiffs, the Zohar Funds (defined below), are special purpose vehicles that
issue securities in the form of collateralized loan obligations secured by the funds’
assets. Defendants, the Patriarch entities (defined below), separately or
collectively, directly or through their owner, Lynn Tilton, acted in various
capacities with respect to the Zohar Funds, including as equity holders and note
1
holders of the funds and as part owner, creditor, manager or board member of
certain of the Zohar Funds’ borrowers (referred to by the parties as “portfolio
companies”). In addition, and particularly relevant here, from their inception
through early 2016, Patriarch acted as the sole Collateral Manager to the Zohar
Funds.
When relations between the parties began to sour, Patriarch resigned as
Collateral Manager effective March 1, 2016. The Zohar Funds allege that
Patriarch breached its obligations under various collateral management agreements
to assist in the orderly transition to a new collateral manager by turning over
certain documents. Patriarch denies that it is contractually bound to turn over
documents to the new collateral manager but, in any event, contends that it has
produced all documents in its possession that the new collateral manager needs to
perform its collateral management function.
In the course of litigating this discrete controversy, the Zohar Funds have
alleged and have sought to introduce evidence that Tilton has attempted to exploit
the structure of the Zohar Funds and has abused her various roles with respect to
the Zohar Funds for her sole benefit and to the detriment of the other investors.
Patriarch, in turn, has alleged that the Zohar Funds have breached contractual
obligations owed to Patriarch and are attempting improperly to shift responsibility
for the Zohar Funds’ poor performance from the controlling class of the funds,
2
who would otherwise bear sole responsibility, to Tilton and Patriarch. The extent
to which Patriarch must produce documents during the transition from one
collateral manager to another, however, is a discrete issue that is governed solely
by discrete provisions within the contracts that govern the parties’ relationships.
The Court need not consider other aspects of the parties’ relationship or the
implications of broader aspects of the parties’ various disputes with one another to
resolve this narrow dispute.
For reasons explained below, I find that Patriarch is contractually obligated
to produce to the Zohar Funds certain documents within its possession relating to
the collateral it previously managed and its function as Collateral Manager.
Having failed to produce these documents thus far, Patriarch is in breach of the
contracts.
I. FACTUAL BACKGROUND
To follow are my findings of fact based on the stipulations of the parties,
documents which I have determined to be admissible evidence and testimony from
seven fact witnesses and one expert witness presented during a two-day trial.1
1
The testimony of witness Kris Talgo was presented only by deposition.
3
A. The Parties
Plaintiffs and Counterclaim Defendants Zohar CDO 2003-1, LLC, Zohar II
2005-1, LLC and Zohar III, LLC are Delaware limited liability companies. 2
Plaintiffs and Counterclaim Defendants Zohar CDO 2003-1, Ltd. (together with
Zohar CDO 2003-1, LLC, “Zohar I”), Zohar II 2005-1, Ltd. (together with Zohar II
2005-1, LLC, “Zohar II”) and Zohar III, Ltd. (together with Zohar III, LLC,
“Zohar III”) are Cayman Islands exempted companies. 3 Zohar I, Zohar II and
Zohar III (collectively, the “Zohar Funds”) are separate collateralized loan
obligation (“CLO”) investment vehicles that issued and sold notes to investors for
cash and used the proceeds to purchase a pool of assets to serve as collateral for the
funds.4
Defendants and Counterclaim/Third-Party Plaintiffs Patriarch Partners, LLC
(“Patriarch Partners”), Patriarch Partners VIII, LLC (“Patriarch VIII”), Patriarch
Partners XIV, LLC (“Patriarch XIV”) and Patriarch Partners XV, LLC
(“Patriarch XV”) are Delaware limited liability companies. 5 Patriarch VIII,
Patriarch XIV and Patriarch XV are affiliates of Patriarch Partners, LLC.6 Until
2
Pretrial Stipulation and Order (“PTO”) 3,4 ¶¶ 1, 3, 5.
3
Id. ¶¶ 2, 4, 6.
4
Id. at 5 ¶ 13.
5
Id. at 4–5 ¶¶ 7–10.
6
Id. at 4 ¶ 7.
4
March 3, 2016, Patriarch VIII served as Collateral Manager for Zohar I,
Patriarch XIV served as Collateral Manager for Zohar II and Patriarch XV served
as Collateral Manager for Zohar III.7
Third-Party Defendant Alvarez & Marsal Zohar Management, LLC
(“AMZM”) is a Delaware limited liability company with a principal place of
business in New York, New York. Effective March 3, 2016, AMZM was
appointed as replacement Collateral Manager for each of the Zohar Funds.8
B. Formation of the Zohar Funds
Zohar I was born out of a business relationship between Patriarch Partners
and MBIA Insurance Corporation (“MBIA”). Patriarch Partners had managed a
prior special purpose deal called Ark II on which MBIA had served as the
monoline insurer, meaning it had insured the principal and interest due to
noteholders in the case of a default by the issuer, Ark II. Monoline insurance
serves not only to protect noteholders from default, but also to enhance the credit
rating of the debt issue. For this reason, a monoline insurance company, such as
MBIA, is frequently referred to as a “credit enhancer” for the debt issue.
7
Id. at 4–5 ¶¶ 8–10. For ease of reference, unless otherwise indicated, I will refer to
Patriarch VIII, Patriarch XIV and Patriarch XV collectively as “Patriarch.”
8
Id. at 7 ¶ 19.
5
Following the Ark II deal, MBIA approached Patriarch Partners and its
CEO, Lynn Tilton, to find a solution for seven struggling collateralized debt
obligations (“CDO”) and CLOs (collectively, the “MBIA CDOs”) on which MBIA
had, by its own estimate, a total potential insurance exposure of $235 million.9
The solution proposed by Tilton and Patriarch Partners was for Patriarch Partners,
through an affiliate, to take over as collateral manager for the seven distressed
deals and to create a new investment vehicle, Zohar I, which would raise new
investment money and would purchase a separate pool of collateral.10 As part of
the Zohar I deal, MBIA was given Class B notes in Zohar I which would pay out
after all of the Class A senior secured notes had been paid. The deal was
structured in this manner to provide MBIA with upside potential in Zohar I so that
it could be made whole for any amounts it was not able to reinvest or work out in
the MBIA CDOs. 11 Affiliates of Patriarch Partners took over as collateral
managers of the MBIA CDOs between October 2003 and March 2004.12
Zohar I launched in November 2003.13 Patriarch VIII signed a Collateral
Management Agreement among Zohar CDO 2003-1, Limited, Zohar CDO 2003-1,
9
Tr. 383 (Tilton).
10
Tr. 384–85 (Tilton).
11
Tr. 385 (Tilton).
12
Tr. 391 (Tilton).
13
PTO 5 ¶14.
6
LLC and Patriarch Partners VIII, LLC dated as of November 13, 2003 (the
14
“Zohar I CMA”) to serve as Collateral Manager. Zohar I generated
approximately $530 million from the sale of notes.15
Zohar II and Zohar III were created to raise additional capital which would
allow the Zohar Funds greater access to larger and more diverse transactions. 16
Pursuant to an indenture (the “Zohar I Indenture”), dated as of November 13, 2003
between Zohar CDO 2003-1, Limited, Zohar CDO 2003-1, Corp., Zohar CDO
2003-1 LLC, MBIA Insurance Corporation, CDC Financial Products, Inc. and U.S.
Bank National Association (the “Trustee”), Zohar I was limited in the amount of
collateral it could hold from any single issuer.17 Access to additional capital raised
through Zohar II and Zohar III would not only allow the funds to engage in larger
transactions, but would also serve a risk management function through increased
diversification of the fund collateral. 18 Zohar II closed in January of 2005;
Zohar III closed in April of 2007.19
14
JTX-005 (Zohar I CMA).
15
PTO 5 ¶ 14.
16
Tr. 416 (Tilton).
17
JTX-006 (Zohar I Indenture) (“[N]ot more than 3.0% of the Maximum Investment
Amount may consist of obligations issued by any single issuer or any of its
Affiliates . . . .”); Tr. 416-17 (Tilton).
18
Tr. 416–17 (Tilton).
19
PTO 5 ¶14; Tr. 418 (Tilton).
7
Patriarch XIV executed a Collateral Management Agreement on January 12,
2005, with Zohar II 2005-1, Limited, Zohar II 2005-1, LLC (the “Zohar II CMA”)
to serve as Collateral Manager of Zohar II.20 Patriarch XV executed a Collateral
Management Agreement on April 6, 2007, with Zohar III, Limited, Zohar III, LLC
(the “Zohar III CMA”) (collectively, with the Zohar I CMA and the Zohar II
CMA, the “Patriarch CMAs”), to serve as Collateral Manager of Zohar III.21 Each
fund generated approximately $1 billion from the sale of notes.22
C. The Relationship Between Patriarch Partners and MBIA Sours
By the terms of the Zohar I Indenture, MBIA was not only given upside
potential in Zohar I in the form of subordinated Class B notes, but also insured the
fund as credit enhancer. 23 MBIA also agreed to serve as credit enhancer for
Zohar II pursuant to an indenture (the “Zohar II Indenture”) dated January 12,
2005. 24 The first sign of any conflict between Patriarch Partners and MBIA
surfaced when MBIA would not agree to serve as credit enhancer for Zohar III,
pursuant to an indenture (the “Zohar III Indenture”) (collectively with the Zohar I
Indenture and the Zohar II Indenture, the “Zohar Indentures”), dated April 16,
20
JTX-011(Zohar II CMA).
21
JTX-019 (Zohar III CMA).
22
PTO 5 ¶ 14.
23
Zohar I Indenture §1.1.
24
JTX-013 (Zohar II Indenture).
8
2007.25 Tensions boiled over in 2009 when MBIA filed suit in federal court in
New York claiming that Patriarch VIII had breach its agreements, including the
Zohar I Indenture.26 In 2011, while the litigation between MBIA and Patriarch
VIII was still ongoing, Tilton, and by extension Patriarch Partners, began to sense
that it might be best for all concerned if Patriarch stepped down as Collateral
Manager. 27 Over the next few years, Tilton offered Patriarch’s resignation as
Collateral Manager several times but the offers were not accepted by the
controlling classes as required under the Patriarch CMAs.28
In November of 2015, Zohar I defaulted on several of the notes it had
issued. 29 A bankruptcy proceeding followed during which Tilton once again
offered to have Patriarch resign as Collateral Manager.30 On February 3, 2016,
during a meeting between Tilton, representatives of MBIA as Controlling Party of
Zohar I and Zohar II and representatives of the Zohar III Controlling Class, Tilton
verbally tendered resignations on behalf of Patriarch as Collateral Manager of each
25
JTX-020 (Zohar III Indenture); Tr. 428–29 (Tilton).
26
MBIA Ins. Corp. v. Patriarch P’rs, LLC & LD Inv., LLC, 950 F.Supp. 2d 568
(S.D.N.Y. June 10, 2013).
27
Tr. 431 (Tilton).
28
Tr. 432 (Tilton).
29
Tr. 432 (Tilton).
30
Tr. 433 (Tilton).
9
of the Zohar Funds.31 Two days later, on February 5, Tilton sent a separate letter
on behalf of Patriarch to the relevant constituencies of each of the three Zohar
Funds providing written notice of Patriarch’s resignation as Collateral Manager
effective March 1, 2016. 32 The letters referenced the ongoing litigation with
MBIA dating back to 2009 as well as statements made in connection with the
recent bankruptcy proceeding as evidence that it would be in the best interest of all
interested parties for a transition to a new collateral manager to occur.33
D. The Transition Period
In each of the letters of resignation, Tilton, on behalf of Patriarch, asked that
the Controlling Class for each of the Zohar Funds notify Patriarch Partners when a
replacement collateral manager was selected. 34 In the weeks that followed,
Patriarch Partners contacted MBIA and other representatives of the Zohar Funds to
remind them of the impending effective date of Patriarch’s resignation as
Collateral Manager and to inquire regarding the identity of Patriarch’s
replacement.35 At first, the responses to Patriarch’s inquiries were encouraging in
31
MBIA served as Controlling Party of Zohar I and Zohar II. MBIA chose not to serve
as credit enhancer for Zohar III and, therefore, did not represent the Controlling Class of
Zohar III.
32
JTX-047.
33
Id.
34
Id.
35
Id.
10
that they acknowledged the looming resignation and assured Patriarch that the
search for a replacement collateral manager was underway.36 As the weeks went
by, however, the responses to Patriarch took on a sharper tone, suggesting that the
Controlling Classes were surprised by Patriarch’s “sudden” decision to resign. 37
Tilton responded that Patriarch was confused by the Controlling Class’ surprise
since MBIA had taken the position during the Zohar I bankruptcy proceedings in
November 2015 that it was prepared to terminate Patriarch as Collateral Manager
for Zohar I and believed that Patriarch should be removed as Collateral Manager
for all of the Zohar Funds.38 In this same correspondence, Tilton advised MBIA
that the portfolio companies were concerned regarding the delay in selecting a
replacement collateral manager and reiterated Patriarch’s readiness to comply with
its transition responsibilities under the Patriarch CMAs.39
Patriarch did not learn that AMZM had been selected as the successor
collateral manager until March 3, 2016, two days after Patriarch was to have
resigned. 40 AMZM assumed its role as Collateral Manager by entering into a
36
Id.
37
Id.
38
Id.
39
Id.
40
Id.
11
series of Collateral Management Agreements for each of the three Zohar Funds, all
of which were dated as of March 3, 2016.41
The first contact between AMZM and Patriarch was the next day, March 4,
when Bryan Marsal, co-CEO of Alvarez and Marsal LLC (“A&M”), an affiliate of
AMZM, wrote to Tilton requesting her assistance in the transition process and
asking for a convenient time to meet with her and her staff.42 Tilton responded via
e-mail later that same day and told Marsal she would be available to meet the
following week between Wednesday and Friday, March 9–March 11. 43 After
exchanging thoughts regarding topic areas for discussion, the meeting was set for
March 11.44
On March 7, Tilton contacted Marsal to express her concern over reporting
for the month of March and suggested that it might be advisable for AMZM to
delay the transfer date. 45 In response, Marsal designated Elizabeth LaPuma,
Managing Director at A&M, and Kris Talgo, a Senior Director, as the two AMZM
representatives who would be handling the reporting issues.46 Tilton spoke with
LaPuma and Talgo later that afternoon and, following the call, wrote them an email
41
JTX-064; JTX-065; JTX-066.
42
JTX-070.
43
JTX-071.
44
Id.
45
JTX-072.
46
Id.
12
in which she expressed Patriarch’s view that AMZM had “been placed in an
impossible position” by being forced to take over reporting responsibilities for the
funds without “proper time, training, and information.”47 For a second time, Tilton
suggested that it would be best to delay transfer of collateral management
responsibilities through the current reporting period so that AMZM could shadow
Patriarch and learn the job first-hand. 48 She requested approval from the
Controlling Classes for a more gradual transition and offered to sit down with
AMZM on March 9 to review processes and to turn over books and records.49
Less than two hours later, an employee from Tilton’s office contacted
LaPuma and Talgo to set up a meeting for March 9.50 The day before that meeting,
March 8, Marsal sent an email to LaPuma, Talgo, and Kelly Stapleton, a Managing
Director of A&M, in which he described Tilton’s overtures as an “olive branch”
and emphasized that “baby steps need to be taken in building trust.”51 In a separate
email on March 8, Talgo advised LaPuma and Marsal that Adam Katz from
Patriarch had reported that Patriarch was “99% done on loading data onto a hard
47
JTX-074.
48
Id.
49
Id.
50
JTX-075.
51
JTX-079.
13
drive for delivery tomorrow.” 52 Talgo closed the email by observing that Katz
“[w]as more than willing to answer any questions and go over any items we wish
to discuss.”53 Later in the day, Katz followed up by sending Talgo some sample
credit agreements and amendments.54
E. Cooperation Ends
The first sign of trouble surfaced on the evening of March 8 when LaPuma
advised Marsal and Talgo that Tilton’s offer to allow A&M to shadow Patriarch
actually contemplated that Patriarch would continue to be paid as Collateral
Manager through the month of March.55 LaPuma went on to express her view that
the Controlling Classes likely would not consent to Patriarch remaining as
Collateral Manager, particularly if they were going to be expected to pay Patriarch
another $4 million in fees.56 LaPuma was correct; the Controlling Classes took the
position that Patriarch was required by the Patriarch CMAs to assist in the
transition, including by turning over the books and records of the Zohar Funds, and
that no further payment to Patriarch was required.57
52
JTX-081; Tr. 58 (LaPuma).
53
JTX-081; Tr. 58 (LaPuma).
54
JTX-082; JTX-83; JTX-084; Tr. 59 (LaPuma).
55
JTX-085.
56
Id.
57
Id.
14
The meeting between Patriarch and AMZM went forward on March 9 as
scheduled. The following day, LaPuma detailed the highlights of the two hour
meeting with Tilton and her employees in an e-mail to Marsal.58 LaPuma reported
that Tilton had provided her with a flash drive containing “many of the initial
documents we need to get going.”59 She also reported that Tilton was no longer
pushing to stay on as Collateral Manager during the current reporting period. 60
Tilton had declined to provide internal Patriarch documents regarding its financial
reporting infrastructure or its methodology for waterfall calculations citing liability
concerns, but did offer to have her employees walk AMZM through the waterfall
calculation. 61 Although LaPuma felt Tilton had provided many of the initial
documents that AMZM needed to get started as Collateral Manager, she did note,
with prescient reserve, that Tilton had declined to provide “equity documents.”
LaPuma explained that Tilton had described “two buckets of equity”; “equity that
is collateral for which we will hopefully get information” and “equity she controls
through LLC interests over which she has complete control, with the trusts
potentially getting some value if and when the Company is sold.” 62 LaPuma
58
JTX-095.
59
Id.
60
Id.; Tr. 71–72 (LaPuma).
61
JTX-095; Tr. 72 (LaPuma).
62
JTX-095; Tr. 72–73 (LaPuma).
15
indicated that she and Talgo asked for a sample LLC agreement to illustrate the
second type of equity which Tilton said she would provide.63 LaPuma concluded
her report of the meeting by noting “[w]e will obviously need to dig deeper on [the
equity] subject, but that’s for later.”64
During the second half of March, Patriarch and AMZM continued to
communicate about transition issues while AMZM employees digested the
documents that Patriarch had provided thus far. Internally AMZM began to “log []
financial [] information we have and do not have.” 65 LaPuma expressed her
concern to Marsal that “we do not even have a list of everything we own . . .” 66
She continued, “[w]e are trying to get a complete initial set of documents for each
investment.”67 She noted that Scott Whalen, a credit analyst at Patriarch Partners,
had initially offered to provide more updated financials for the portfolio
companies, but she found it “a bit concerning” that Whalen had since gone “radio
silent.”68
All of these concerns and questions came to a head on March 22, when
Marsal emailed Tilton stating that as the Collateral Manager for the Zohar Funds,
63
JTX-095.
64
Id.
65
JTX-096.
66
JTX-110.
67
Id.; Tr. 14–15 (LaPuma).
68
JTX-110.
16
AMZM needed to receive “Patriarch’s comprehensive collateral manager books
and records” and referencing several areas where AMZM felt that information was
missing or needed to be explained or supplemented.69 Adam Katz replied two days
later in a letter which clearly signaled a change in the tone of the communications
between the parties. Katz’s letter began: “at the outset Patriarch has, in fact,
provided A&M with its comprehensive collateral manager books and records as of
March 2, 2016.”70 He continued, “[w]e have no obligation to prepare charts, lists,
summaries, synopses or corporate histories for you and decline to do so.”71 He
then addressed AMZM’s itemized requests and explained how, in Patriarch’s view,
everything that AMZM had requested either had already been provided or could
readily be obtained by AMZM from other sources.72
The next day, March 25, LaPuma responded on behalf of AMZM with a
series of follow-up questions. Importantly, she questioned how Patriarch was
defining the term “collateral” and expressed AMZM’s view that the term
“collateral” as referenced in the Zohar Indentures includes all of the Zohar Funds’
69
JTX-133.
70
JTX-138.
71
Id.
72
Id.
17
debt and equity investments.73 Based on this understanding, she again requested a
“complete list of collateral including any equity interests of the funds . . .”74
On March 30, Marsal once again wrote to Tilton, this time in a formal letter,
claiming that AMZM still had not received the information necessary to know the
collateral that it was managing or the rights and obligations associated with that
collateral.75 That same day, Marsal also sent an email to Katz, with whom LaPuma
had been corresponding, expressing concern over the lack of a response regarding
financials and collateral.76 On April 1, Tilton responded in a letter that removed all
doubt that the relationship between AMZM and Patriarch had turned. After
suggesting that AMZM was, in essence, asking Patriarch to do AMZM’s job,
Tilton staked Patriarch’s final position that it had fully complied with its obligation
to turn over all of the books and records relating to the Zohar Funds that AMZM
needed to perform its function as Collateral Manager. 77 Tilton closed her
correspondence by stating that she had directed her employees to respond to
LaPuma’s most recent list of questions and making it clear that “this will be our
73
JTX-139.
74
Id.
75
JTX-151.
76
JTX-152; Tr. 468–69 (Tilton).
77
JTX-158.
18
final act” and “[t]he time has now come for you to sink or swim on your own.”78
Despite Tilton’s letter, AMZM and Patriarch continued to correspond through the
month of April, albeit not productively.79
F. Litigation Begins
The Zohar Funds initiated this action on April 22, 2016. They filed an
Amended Verified Complaint on May 9, 2016 adding Patriarch Partners Agency
Services, LLC (“PPAS”), an agent of the Zohar Funds under certain credit
agreements, as a defendant. The next day, the Zohar Funds moved for
expedition.80 Patriarch then moved to dismiss or stay this action in favor of a
related action filed in New York. On May 27, 2016, the Court granted the Zohar
Funds’ motion for expedition and denied Patriarch’s motion to dismiss or stay.81
On the eve of trial, the parties filed cross-motions for partial summary judgment on
78
Id.
79
JTX-160; JTX-165; JTX-168; JTX-174; JTX-179; JTX-180.
80
The Zohar Funds’ motion for expedition was based, to a great extent, on the irreparable
harm that the Zohar Funds would suffer if they were unable to receive the documents
they needed to understand and manage their Collateral in time to devise a plan to avoid or
to minimize the impact of the potential default of $750 million in Zohar II notes which
mature in January 2017.
81
The Court did dismiss the Zohar Funds’ claims relating to Patriarch’s document
production obligations under thirty-six credit agreements since those agreements
contained exclusive New York choice of forum provisions. Thereafter, the Court
dismissed claims arising under an additional fifteen credit agreements upon determining
that they did not oblige Patriarch to produce documents under New York agency law.
Shortly before trial, Plaintiffs withdrew their claims against PPAS under all remaining
credit agreements leaving only the claims for documents under the Patriarch CMAs for
trial.
19
the issue of whether Patriarch was required under the Patriarch CMAs to turn over
any documents to the Zohar Funds and AMZM. The Court deferred ruling on the
cross- motions until after trial.
II. LEGAL ANALYSIS
The cross-motions for summary judgment call the threshold question of
whether the Patriarch CMAs require Patriarch to produce any documents to the
Zohar Funds upon the termination of its services as Collateral Manager.82 The
answer to this question is revealed by a relatively straightforward exercise of
contract construction that is not confounded by disputed facts. 83 As explained
below, I am satisfied that the clear and unambiguous terms of the Patriarch CMAs
require Patriarch to produce certain book and records relating to the Collateral of
the Zohar Funds so that AMZM can function as successor Collateral Manager.
Before turning to the construction of the Patriarch CMAs that will drive the
Court’s analysis here, both with respect to the cross-motions for summary
82
I note that Patriarch appears to have shifted its position regarding whether the Patriarch
CMAs require the outgoing collateral manager to produce documents. Indeed, Patriarch
acknowledged its obligation to produce documents more than once following the delivery
of its resignation notice. See JTX 158, 179, 180, 189, 203. Whatever caused Patriarch
to alter its view regarding the scope of its post-resignation contractual obligations does
not matter. As discussed below, Patriarch’s obligations are defined by the clear and
unambiguous terms of the Patriarch CMAs.
83
See Demetree v. Comm. Trust Co., 1996 WL 494910, at *1 (Del. Ch. Aug. 27, 1996)
(Allen, C.) (granting one party’s motion for summary judgment, denying the other party’s
cross-motion for summary judgment and ordering specific performance of a clear and
unambiguous contract upon determining that there were no “disputes as to the material
facts” under Court of Chancery Rule 56).
20
judgment and the trial issues, I pause for a moment to return to where I started.
This case is a straightforward breach of contract case, nothing more and nothing
less. 84 The contracts at issue here are the products of arms-length bargaining
between highly sophisticated parties. It is rare that even sophisticated scriveners
capture all that a court might like to see in a document to reveal the objective
meaning of disputed terms. This case is no exception. Even so, I am satisfied that
the Patriarch CMAs are clear and unambiguous and may be construed by reference
only to the terms that appear within their four corners. I need not and will not
consider the competing extrinsic evidence offered by the parties.
A. The Patriarch CMAs Require Patriarch to Produce Books and Records
to the Zohar Funds or Its Representative
The Patriarch CMAs are governed by New York law.85 Delaware and New
York share the view that “[i]nterpretation of an unambiguous contract provision is
84
As noted, I am fully aware that the parties have more on their minds here than a dispute
over the production of books and records. Patriarch believes that the Zohar Funds are
acting at the behest of MBIA, who they claim is attempting to push responsibility for the
impending default of Zohar II onto Patriarch in the wake of MBIA’s public
announcement that it may not be able to meet its obligation to insure the Zohar II notes.
Defs.’ Post-Trial Br. at 27 n.18. For their part, the Zohar Funds maintain that Patriarch’s
reluctance to comply with its production and inspection obligations is driven by a desire
to conceal what Defendants characterize as the “myriad, often conflicting roles” played
by Patriarch Partners, and in particular Tilton, in the management of the Zohar Funds.
Post-Trial Br. of the Zohar Entities (“Pls.’ Post-Trial Br.”) at 2. While these issues no
doubt have animated the parties’ litigation positions here, none of these issues are before
the Court and none will be addressed or resolved by the Court. Nothing in this decision
should be construed as a reflection that I have formed any view whatsoever regarding the
parties’ broader dispute.
85
Zohar I CMA §7.5; Zohar II CMA §7.5; Zohar III CMA §7.4.
21
a function for the court, and matters extrinsic to the agreement may not be
considered when the intent of the parties can be gleaned from the face of the
instrument.” 86 In other words, “[w]here the terms of a contract are clear and
unambiguous, the intent of the parties must be found within the four corners of the
contract, giving a practical interpretation to the language employed and reading the
contract as a whole.”87 Following traditional principles of contract interpretation,
“words and phrases used by the parties must . . . be given their plain meaning.” 88
A contractual provision is unambiguous if, on its face, the provision is “reasonably
susceptible of only one meaning.” 89 And a contract is not ambiguous “simply
because one of the parties attaches a different, subjective meaning to one of its
terms.”90
86
Chimart Assoc. v. Paul, 489 N.E.2d 231, 233 (N.Y. 1986) (quoting Teitelbaum Hldgs.,
Ltd. v. Gold, 396 N.E.2d 1029, 1032 (N.Y. 1979)). See also Pellaton v. Bank of New
York, 592 A.2d 473, 478-79 (Del. 1991) (same).
87
Ellington v. EMI Music, Inc., 21 N.E. 3d 1000, 1003 (N.Y. 2014).
88
Id.
89
Banco Espirito Santo, S.A. v. Concessionaria Do Rodoanel Oeste S.A., 951 N.Y.S.2d
19, 24 (N.Y. App. Div. 2012).
90
Sasson v. TLG Acq. LLC, 9 N.Y.S.3d 2, 4 (N.Y. App. Div. 2015).
22
1. Section 5.7 of the Patriarch CMAs
According to the Zohar Funds, Section 5.7 of the Patriarch CMA, entitled
“Action Upon Termination,” is one source of Patriarch’s document production
obligation. 91 It reads in relevant part:
From and after the effective date of the termination of the Collateral
Manager’s duties and obligations pursuant to this agreement or
removal of the Collateral Manager hereunder . . . . the Collateral
Manager shall as soon as practicable: (i) deliver to the Company or (at
the direction of the Company) any successor collateral manager that is
appointed all property and documents of the Trustee, the Company,
the Co-Issuer, or the Zohar Subsidiary, as the case may be, relating to
the Collateral then in the custody of the Collateral Manager. . .
The Zohar Funds argue that this provision plainly and unambiguously
requires Patriarch to “deliver” to the Zohar Funds or AMZM “all property and
documents” of the Zohar Funds “relating to the Collateral” immediately upon the
“termination” of Patriarch’s “duties and obligations” under the Patriarch CMAs.
Patriarch counters that this construction is not reasonable because Patriarch was
not “terminated” as Collateral Manager under the Patriarch CMAs; it voluntarily
resigned.92
After carefully considering the terms of Section 5.7, I am satisfied that the
Zohar Funds’ construction of the provision is the only reasonable construction.
91
The relevant provision is §5.7 in the Zohar I CMA and Zohar II CMA and §5.6 in the
Zohar III CMA. Because the language is identical in all three agreements, however, I
will refer only to §5.7 to avoid confusion.
92
Defs.’ Post-Trial Br. at 32.
23
While it is correct, as Patriarch points out, that Section 5.7 references
“termination” of the Collateral Manager “pursuant to this agreement,” which
Patriarch contends refers to Sections 5.2 and 5.3 describing grounds for removal of
the Collateral Manager, Section 5.7 also addresses Patriarch’s obligations upon
“termination of [its] duties and obligations” under the agreement, which is
precisely what happened when Patriarch tendered its resignation as Collateral
Manager. At the moment the Zohar Funds accepted Patriarch’s resignation, the
parties understood that Patriarch’s “duties and obligations” under the Patriarch
CMA would “terminate” upon the effective date of its resignation.93 To construe
Section 5.7 otherwise would be to render the “termination” language “nugatory.”94
Patriarch has failed to explain how a “practical interpretation” of Section 5.7 would
require Patriarch to deliver to the Zohar Funds records relating to the Collateral
after Patriarch had been removed (terminated) as Collateral Manager but would not
require Patriarch to do so after Patriarch resigns as Collateral Manager and thereby
terminates its services.95 Patriarch’s proffered construction of Section 5.7 is not
reasonable.
93
See Zohar I CMA §5.5(b); Zohar II CMA §5.5(b); Zohar III CMA §5.4(a).
94
Ruttenberg v. Davidge Data Sys. Corp., 626 N.Y.S. 2d 174, 177 (N.Y. App. Div.
1995).
95
Ellington, 21 N.E. 3d at 1003. See also Sasson v. TLG Acq. LLC, 9 N.Y.S.3d 2, 4
(N.Y. App. Div. 2015) (holding that a contract is not rendered ambiguous simply because
24
2. Section 6.3 of the Patriarch CMAs
The Zohar Funds allege that Patriarch has also breached its document
production obligations under Section 6.3 of the Patriarch CMAs. That provision
reads in relevant part:
The Collateral Manager, with the assistance of the Collateral
Administrator, shall maintain appropriate books of account and
records relating to services performed hereunder and relating to the
Collateral including invoices for professional fees, and such books of
account and records shall be accessible for inspection by a
representative of the Company, the Zohar Subsidiary, the Trustee, the
Credit Enhancer, the Preference Share Paying Agent, the Holders of
the Notes and the independent accountants appointed by the Company
pursuant to the Indenture at a mutually agreed time during normal
business hours and upon not less than three Business Days’ prior
written notice; provided, however, that following the Collateral
Manager’s receipt of a notice of its removal pursuant to Section 5.3
hereof, the Collateral Manager shall at the request of the Controlling
Party use its commercially reasonable efforts to promptly provide to
the prospective successor collateral manager copies of the books and
records of the Zohar Obligors and copies of Underlying Instruments
(in each case in the possession of the Collateral Manager) (for the
avoidance of doubt, such books and records and other information
shall not include the credit templates or other proprietary information
of the Collateral Manager); provided further that the Collateral
Manager shall be required to provide the information described in the
immediately preceding proviso if (i) the prospective successor
collateral manager executes a confidentiality agreement reasonably
acceptable to the Collateral Manager and (ii) the release of such
information is permitted under the Transaction Documents and the
Underlying Instruments. Upon the termination of its obligations
hereunder in accordance with this Agreement and the Indenture, the
Collateral Manager agrees to either (i) maintain or cause the Collateral
Administrator to maintain, such books and records as provided above
one party ascribes a different “subjective meaning” to otherwise clear and unambiguous
terms).
25
for a period of three years (or such longer period required by
applicable law) from such termination or (ii) deliver, or cause the
Collateral Administrator to deliver, all such books and records (or
copies thereof) to the Trustee promptly following such termination.
Section 6.3 imposes three obligations upon the Collateral Manager with
respect to books and records relating to the Zohar Funds. First, the Collateral
Manager is to maintain appropriate books of account and records relating to its
collateral management services and the Collateral. Second, the Collateral Manager
is to allow for inspection of these books and records by the Zohar Funds or their
representative, in this case AMZM. This right of inspection is conditioned on the
receipt of written notice of a demand for inspection by the Collateral Manager.
The right of inspection converts to an obligation on the part of the Collateral
Manager to produce specifically designated documents under specifically
designated conditions in the event the Collateral Manager is removed for cause.
Third, upon termination of the Collateral Manager’s obligations under the Patriarch
CMAs, the Collateral Manager will “maintain or cause the Collateral
Administrator to maintain, such books and records as provided above for a period
of three years (or such longer period required by applicable law) from such
termination or deliver, or cause the Collateral Administrator to deliver, all such
books and records (or copies thereof) to the Trustee promptly following such
termination.”
26
The Zohar Funds focus on the first and second of Patriarch’s three
obligations under Section 6.3 and contend that Patriarch is obliged to maintain
“books of account and records relating to [the services it provided under the
Patriarch CMAs] and the Collateral” and to make such “books of account and
records accessible for inspection by a representative of the [Zohar Funds]. . . .”96
This focus seems to be well-placed as Section 6.3 does appear to require Patriarch
to maintain “books of account and records relating to [Patriarch’s] services
performed hereunder and relating to the Collateral” and to grant the Zohar Funds
or its representatives a clear right of inspection.97 Patriarch argues, however, that
the right of inspection is not so clear cut because, as it reads Section 6.3, the
obligations to maintain books of account and records and to make them accessible
for inspection apply only to a current Collateral Manager and not a former
Collateral Manager. Under this construction, Patriarch’s obligation to maintain
books and records ended when Patriarch resigned.
Patriarch’s interpretation of Section 6.3 might carry the day if that provision
was construed in a vacuum. But that is not how contract construction works.
Rather, the Court must view all of the provisions of the contract together and give
96
Pls.’ Post-Trial Br. at 20–21.
97
The third document production obligation in Section 6.3 requires Patriarch to deliver
books and records to the Trustee, not the Zohar Funds or AMZM.
27
effect to all terms.98 Patriarch’s interpretation of Section 6.3 ignores Section 5.6 of
the Patriarch CMAs.99 That section, entitled “Survival,” states that “[u]pon any
termination or assignment of this Agreement, the provisions of Sections . . . 5.7
[and] 6.3 . . . shall survive such termination or assignment and remain operative
and in full force and effect.” Therefore, the obligations in both Sections 5.7 and
6.3 expressly survive termination of the Patriarch CMAs and remain “in full force
and effect.” Patriarch’s attempts to reconcile Section 5.6 and Section 6.3 falls
short.100 While it is true that the fundamental obligations set forth in Section 6.3
are not altered by Section 5.6, the extent to which these obligations survive
termination clearly is governed by Section 5.6. The only reasonable construction
of Sections 5.6 and 6.3 is that Section 6.3 survives the termination of Patriarch’s
service as Collateral Manager. To hold otherwise would be to ignore the survival
provision altogether.101
98
Ruttenberg v. Davidge Data Sys. Corp., 626 N.Y.S. 2d 174, 177 (N.Y. App. Div. 1995)
(“An interpretation that gives effect to all the terms of an agreement is preferable to one
that ignores terms or accords them an unreasonable interpretation.”).
99
The relevant provision is §5.6 in the Zohar I CMA and Zohar II CMA and §5.5 in the
Zohar III CMA. I will refer only to §5.6 to avoid confusion.
100
Post-Trial Arg. at 79–80 (“5.6 which is the survival clause, I don’t think changes the
fundamental language in the other provisions that are preserved.”).
101
Brad H. v. City of New York, 951 N.E.2d 743, 746 (N.Y. 2011) (“To determine
whether a writing is unambiguous, language should not be considered in isolation
because the contract must be considered as a whole.”); Pearce, Urstadt, Mayer & Greer
Realty Corp. v. Atrium Dev. Assocs., 571 N.E.2d 60, 64 (N.Y. 1991) (“[R]eading the
agreement as a single integrated contract and giving effect to all its provisions—as
[courts] are obliged to do—[courts] cannot and should not accept an interpretation that
28
The Zohar Funds’ demand for documents is supported both by Section 5.7
and Section 6.3. Either provision of the Patriarch CMAs provides a separate,
independent basis to require Patriarch to produce documents.102
3. Patriarch’s Defenses to Specific Performance
In addition to offering strained constructions of Sections 5.7 and 6.3 to avoid
its document production obligations, Patriarch has advanced three threshold
defenses that it contends prevent an award of specific performance of these
provisions or, at least, the broad specific performance the Zohar Funds seek here.
For the reasons that follow, I disagree.
First, Patriarch contends that the Court must take into account the Zohar
Funds’ purpose in seeking books and records before ordering production. 103
Patriarch points to 8 Del. C. § 220 by analogy and notes that “Delaware courts
recognize that books and records provided under Section 220 are not ‘open-ended’
ignores the interplay of the terms, renders certain terms ‘inoperable,’ and creates a
conflict where one need not exist.”).
102
Because I conclude that the plain and unambiguous language of Section 5.7 requires
Patriarch to produce the documents and property of the Zohar Funds related to the
Collateral, and the plain and unambiguous language of Section 6.3 requires Patriarch to
make the books of account and records related to its collateral management services and
the Collateral accessible for inspection, Patriarch’s motion for summary judgment is
denied and the Zohar Funds’ cross-motion for partial summary judgment is granted.
103
Defs.’ Pretrial Br. at 22.
29
and should be interpreted based on the underlying purpose.”104 In response, the
Zohar Funds cite case law of this Court which stands for the proposition that a
court will not read a proper purpose requirement into a contractual obligation to
produce books and records when the contract is otherwise silent with respect to the
permitted purpose of a books and records demand.105
This is not a Section 220 case; it is a breach of contract case. If the parties
wished to qualify the purposes for which the Zohar Funds could require Patriarch
to produce books and records, they could have and presumably would have done
so. In the absence of such language in the operative provisions, I see no basis to
write it into the agreements or imply it here.106
Second, Patriarch argues that because the Zohar Funds failed to perform
under the Patriarch CMAs, by failing to pay for collateral management services
previously rendered, Patriarch’s obligation to perform is excused under New York
law. On this point, I note that this issue—the extent to which payment has been
104
Id. (citing Carapico v. Phila. Stock. Exch., Inc., 791 A.2d 787, 792-93 (Del. Ch.
2000)).
105
Pls.’ Post-Trial Br. at 22 n.7 (citing Madison Real Estate Immobilien-
Anlagegesellschaft Beschrankt Haftende Kg v. Kanam USA XIX Ltd. P’ship, 2008 WL
1913237, at *13 (Del. Ch. May 1, 2008); Wall Props. MLP v. Vanta Commercial Props.
LLC, 2015 WL 298294, at *2 (Del. Ch. Jan. 22, 2015)).
106
Nor will I condition Patriarch’s document production obligation on what Patriarch
contends AMZM requires “to manage the Zohar Funds’ Collateral.” See Defs.’ Post-
Trial Br. at 7. See also, id. at 12, 14, 26, 39 (arguing that AMZM has all the documents it
needs to perform as Collateral Manager.). The Patriarch CMAs impose no such
condition.
30
wrongfully withheld from Patriarch—is squarely before a court in New York. The
issue was not tried before me and I have no basis in this record to conclude one
way or the other whether the Zohar Funds have wrongfully withheld payment from
Patriarch for services rendered under the Patriarch CMAs.107
Third, Defendants contend that their obligation to produce documents under
the Patriarch CMAs was not a “material” obligation and, therefore, the Court has
no authority to order specific performance of either Section 5.7 or Section 6.3. A
breach of contract will be deemed “material” under New York law if it
“substantially defeat[s] the purpose” of the agreement.108 The primary purpose of
the Patriarch CMAs is to facilitate management of the substantial and diverse
Collateral of the Zohar Funds. The Patriarch CMAs recognize that Patriarch may
cease providing collateral management services under various scenarios and they
provide the means by which those services will be transitioned to a successor
107
Patriarch agreed to defer prosecution of its counterclaim until after its document
production obligation under the Patriarch CMAs was litigated. Moreover, I note that
Patriarch’s counterclaim was not included in the Pretrial Stipulation and Order as an
issue of fact or law to be litigated in this action and Patriarch’s statement for relief in the
Pretrial Stipulation and Order requested only that the Court dismiss the Zohar Funds’
claims. PTO 13–14 ¶¶1–4, 15 ¶¶1–3.
108
See Frank Felix Assocs., Ltd. v. Austin Drugs, Inc., 111 F.3d 284 (2d Cir. 1997)
(“Under New York law, for a breach of a contract to be material, it must ‘go to the root of
the agreement between the parties.’”) (internal citations omitted). See also Wechsler v.
Hunt Health Sys., Ltd., 330 F.Supp. 2d 383 (S.D.N.Y. 2004) (noting “a material breach is
a breach that . . . ‘is so substantial that it defeats the object of the parties in making the
contract.’”) (internal citations omitted).
31
collateral manager, including through the orderly transmittal of books and records
relating to the Zohar Funds’ Collateral and other aspects of the Collateral
Manager’s services. To characterize this transition process as “immaterial” is
simply not credible. I suspect if the shoe was on the other foot, Patriarch would
agree.
B. Categories of Documents to be Produced
Having determined that the clear and unambiguous terms of the Patriarch
CMAs require Patriarch to produce documents even after its resignation as
Collateral Manager, I turn now to the scope of its document production obligation.
Because Patriarch is required to produce property and documents of the Zohar
Funds “relating to Collateral,” per Section 5.7, and to make accessible for
inspection “books of account and records relating to services performed [under the
Patriarch CMAs] and relating to the Collateral,” per Section 6.3, a determination of
the scope of documents to be produced is necessarily dependent on the definition
of “Collateral.” The Patriarch CMAs incorporate the definition of Collateral
within the Zohar Indentures:
[a]ll money, instruments, accounts, payment intangibles, general
intangibles, letter-of-credit rights, chattel paper, electronic chattel
paper, deposit accounts, investment property and other property and
rights subject or intended to be subject to the lien of this Indenture for
the benefit of the Secured Parties as of any particular time pursuant to
the Granting Clauses of this Indenture.
32
In other words, Collateral is anything that the Zohar Funds owns, or might
own in the future based on current rights, that could be used to satisfy the Zohar
Funds’ obligations to noteholders. Importantly, however, the document production
obligations set forth in the Patriarch CMAs are not limited to documents that
themselves represent or evidence Collateral. The documents captured within
Sections 5.7 and 6.3 also include all property and books of account and records
“relating to Collateral.” Not surprisingly, New York courts interpret “relating to”
broadly in keeping with the dictionary definition of the phrase.109
Since the parties elected to impose a broad document production obligation
upon Patriarch upon the termination of its services under the Patriarch CMAs, it is
appropriate that Patriarch be compelled to produce not only documents that reflect
or evidence the Collateral but also documents that are “connected” to the Collateral
in some “established or discoverable” sense. With this in mind, in the absence of
any temporal restriction in either Section 5.7, Section 6.3 or the definition of
Collateral within the Zohar Indentures, I cannot agree with Patriarch that its
document production obligation is limited to documents relating only to current
109
See HMS Hldgs. Corp. v. Moiseenk, 49 Misc.3d 1215, at * 4 (N.Y. Sup. 2015) (“To
arise out of . . . generally indicates a causal connection, whereas the phrase ‘relating to’ is
defined more broadly to simply mean ‘connected by reason of an established or
discoverable relation’”) (quoting Coregis Ins. Co. v. Am. Health Found., Inc., 241 F.3d
123, 128–29 (2d Cir. 2001) (Sotomayor, J.) (citing Webster’s (Third) New International
Dictionary at 1916 (1986)).
33
holdings. Rather, I conclude that Patriarch must produce documents that relate to
historical holdings of Collateral as well.
Patriarch has maintained throughout this litigation that it would be willing to
produce certain documents if the Zohar Funds and AMZM agree to enter into a
standard confidentiality agreement with respect to such documents. Patriarch has
been unable, however, to tie any such condition on the production of documents to
any language in the Patriarch CMAs or the related documents. As noted,
Patriarch’s obligation to produce documents is a contractual obligation. It cannot
alter or modify that obligation after the fact simply because it does not like the deal
it struck in the first instance.110 I decline to condition Patriarch’s production of the
documents it is required to produce under the Patriarch CMAs on the execution of
a confidentiality agreement for the simple reason that no such obligation appears in
the contract.
There is one final issue to address regarding the scope of production before
addressing the specific categories of documents the Zohar Funds have identified as
110
“[C]ourts may not by construction add or excise terms, nor distort the meaning of
those used and thereby make a new contract for the parties under the guise of interpreting
the writing.” RE/MAX of New York, Inc. v Energized Realty Gp., LLC, 24 N.Y.S. 3d 176,
178 (N.Y. App. Div. 2016). This of course is just as true in a situation in which one party,
in hindsight, thinks it could have negotiated a better deal. I note that the parties knew
how to impose the condition of a confidentiality agreement on Patriarch’s document
production obligation when that is what they intended. Patriarch’s obligation to produce
documents under Section 6.3 following its removal as collateral manager is conditioned
upon the “prospective successor collateral manager execut[ing] a confidentiality
agreement reasonably acceptable to [Patriarch].”
34
still missing from Patriarch’s production: whether Patriarch must produce
documents that reflect its own internal and proprietary work product even if that
work product “relates to” to the Collateral? Fortunately, I need not undertake a
dissection of the Patriarch CMAs or related documents to resolve this issue since
the parties appear to agree on the outcome. The Zohar Funds are not seeking
“proprietary or internal analyses or assessments.”111 In fact, they acknowledge that
the line between what is property and documents of the Zohar Funds and internal
work product of Patriarch is “the distinction . . . between analysis and ministerial
work.”112 Thus, Patriarch need not produce internal and proprietary work product.
Similarly, Patriarch need not produce privileged documents.113
I turn now to the specific categories of documents the Zohar Funds have
requested from Patriarch to determine (1) whether they fall within the scope of
documents that must be produced under the Patriarch CMAs; and (2) whether the
Zohar Funds carried their burden of proving that Patriarch has breached its
contractual obligation to produce such documents. In the conclusion of this
decision, the Court will provide guidance for an implementing order to be
submitted on notice by the Zohar Funds that will address the timing and means by
111
Pls.’ Post-Trial Br. at 18.
112
Post-Trial Arg. at 7.
113
Cmty. Serv. Soc. v. Welfare Inspector Gen., 398 N.Y.S.2d 92, 95 (N.Y. Sup. 1977)
(“To constitute a waiver there must be a clear relinquishment of a known right.”).
35
which documents must be produced and will serve as the Court’s final judgment on
the Zohar Funds’ claims.
1. Debt Documents
Patriarch does not dispute that documents which evidence the outstanding
loan agreements and amendments to these agreements should be produced. 114
Credit agreements and amendments to those agreements exist for all of the
portfolio companies of the Zohar Funds and they are stored on a Patriarch Partners’
drive (the “P drive”). 115 Patriarch maintains that any failure to produce these
116
documents was “inadvertent.” In any event, all credit agreements or
amendments that have not been produced must be produced in accordance with the
implementing order.
2. Equity Documents
The parties focused much of their energy before, during and after the trial
grappling over the different types of equity that are connected to the Zohar Funds
and the types of documents that might relate to such equity holdings. After much
debate, it appears that the parties agree that the Zohar Funds do hold interests in
114
Post-Trial Arg. at 85 (“The first category, debt documents, I think we’re all in
agreement that those are documents that should be turned over. . .”).
115
Tr. 106–107 (Whalen).
116
Post-Trial Arg. at 85.
36
certain types of equity securities, 117 “equity kickers” 118 and “equity workout
securities” 119 as Collateral. 120 Equity kickers, of which there were several
117
The Zohar Indenture defines “Equity Security” as: “(a) Any Equity Kicker, (b) any
Equity Workout Security, (c) any equity security (including any equity security attached
to an Unrestricted Collateral Debt Obligation) purchased with funds on deposit in the
Unrestricted Collateral Account and (d) any other security that does not entitle the holder
thereof to receive periodic payments of interest and one or more installments of principal,
including those received by the Issuer or the Zohar Subsidiary, as applicable, as a result
of the exercise or conversion of an Equity Kicker or other convertible or exchangeable
Collateral Debt Obligation or Unrestricted Collateral Debt Obligation. No Equity
Security other than an Equity Kicker or an Originated Special Loan/Preferred Security
that is a Preferred Security may be purchased by the Issuer or the Zohar Subsidiary (other
than (i) in connection with a workout or restructuring of an Obligor, its Affiliates, or the
lines of business of the Obligor, or its Affiliates, or, subject to Section 7.8(a)(v), any
Collateral Debt Obligation or Unrestricted Collateral Debt Obligation or (ii) subject to
Section 7.8(a)(v), with proceeds from the Unrestricted Collateral Account). For the
avoidance of doubt, a PIK Loan is not an Equity Security.” Zohar I Indenture; Zohar III
Indenture; Zohar III Indenture at §1.1.
118
The Zohar Indenture defines “Equity Kicker” as: “Any Equity Security or any other
security that is not eligible for purchase by the Issuer but is received with respect to a
Collateral Debt Obligation or purchases as part of a ‘unit’ with a Collateral Debt
Obligation.” Zohar I Indenture; Zohar III Indenture; Zohar III Indenture at §1.1.
119
The Zohar Indenture defines “Equity Workout Security” as: “Any security received in
exchange for or in connection with a Collateral Debt Obligation or Unrestricted
Collateral Debt Obligation, which security does not entitle the holder thereof to receive
periodic payments of interest and one or more installments of principal.” Zohar I
Indenture; Zohar III Indenture; Zohar III Indenture at §1.1.
120
Post-Trial Arg. at 87 (“The second category, equity documents, or equity-related
documents, there’s two categories there; equity that Patriarch contends is collateral and is
permissible to be collateral under the indentures, and those documents have been
produced.”); Tr. 398–399 (Tilton) (“Two are permitted under the indentures, and one can
hold them in the funds but you can't pay for them. And in the indenture, they’re defined,
and one is an equity kicker, which I will explain. And the other is a workout security that
can be equity.”); Tr. 541 (Tilton) (if equity is listed in the Trustee report, “it should be
Collateral.”); see also, Zohar I CMA; Zohar II CMA; Zohar III CMA at §§2.2(b), 2.2(c),
and 2.2(d) (addressing Collateral Manager’s obligations to acquire Collateral, enter into
37
described at trial, are evidenced in the terms of the credit agreements reflecting
loans to portfolio companies. 121 One type of equity kicker was described as a
“pay-off amount.”122 For this equity kicker, as consideration for the extension of a
loan, the underlying credit documents would include terms that required an extra
payment to the Zohar Funds if and when the loan was paid off. 123 Another
example of an equity kicker would be warrants that are given to the Zohar Funds
under the terms of the underlying credit agreement that could be converted into
equity if the portfolio company went public.124 A special type of equity kicker was
described as a preferred loan origination security. 125 This equity kicker was
agreements with respect to Collateral and any “Equity Security” and negotiate with
prospective sellers or issuers of Collateral.).
121
Tr. 399 (Tilton) (“[Equity kicker] could come in many different forms as long as it
was attached to the loan.”).
122
Tr. 399 (Tilton).
123
Tr. at 399–400 (Tilton).
124
Tr. at 400 (Tilton).
125
Tr. at 407 (Tilton). In the Zohar II and Zohar III Indentures, this so-called “Originated
Special Loan/Preferred Security” is defined as: “Any loan or other debt obligation or
Preferred Security that (i) was acquired by the Issuer and/or the Zohar Subsidiary in
connection with the origination of a new Collateral Debt Obligation, (ii) does not
otherwise satisfy clause (a) of the definition of “Collateral Debt Obligation” at the time of
such origination and (iii) in the case of a Preferred Security, has a face or stated amount
and a fixed maturity or redemption date. Where the context requires, the Principal
Balance of each such Preferred Security shall be its face or stated amount. For the
avoidance of doubt, the term ‘Originated Special Loan/Preferred Security’ includes other
loans or other debt obligations or Preferred Securities, as applicable, received in
connection with any exchange, workout, restructuring or refinancing of an Originated
Special Loan/Preferred Security.” This type of security did not exist in the Zohar I
Indenture. Tr. at 407 (Tilton).
38
created upon the origination of a loan for no compensation and had both a
redemption date and a coupon which would payout if the company to whom the
loan was made ended up reaching certain performance benchmarks.126
An equity workout security is a security which the Zohar Funds would
receive in exchange for either a portion or all of the amount of a collateral debt
obligation that occurred as part of a workout restructuring or bankruptcy.127 Again,
these are specifically identified in the Zohar Indentures.
For a third type of equity interest, so-called “equity upside interests,” 128
Patriarch is adamant that documents related to these interests need not be produced
126
Tr. 407–409 (Tilton).
127
Tr. 399 (Tilton).
128
Patriarch’s attempt at trial to explain or describe equity upside interests was, at best,
confusing and, at worst, codswallop. See, e.g., Tr. 403, 483–484, 515, 519–22 (Tilton);
Tr. 250 (Dudley) (Q. “Do you have an understanding of - - or have you ever heard the
term ‘equity upside interest?’” A. “I've heard it. Yes.” Q. “Do you have an understanding
as to what it is?” A. “Not 100 percent, no.” Q. “Would you enter equity upside interest
into the loan administration system?” A. “Can you tell me your explanation of an upside
interest?” Q. “No. I’m asking if you are aware you said you've heard the term, and so
I’m wondering whether it's a term you’ve used in connection with work you've done in
the loan administration system.” A. “No. I wouldn’t have.” Q. “So you did not enter
equity upside interest into the loan administration system?” A. “Not to my knowledge,
no.”.
As best I can discern, equity upside interests are membership rights that the Zohar
Funds enjoy as evidenced by LLC agreements or shareholder agreements. In her
testimony, Tilton explained that in this arrangement she paid for and acquired the equity
of portfolio companies through various LLC or shareholder agreements and then shared
the upside of this equity with the Zohar Funds as reflected in the terms of the LLC
agreements or shareholder agreements. Through this arrangement, she claims, the Zohar
Funds are able to enjoy rights to the equity upside without carrying any of the liabilities
39
because they do not in any manner “relate to Collateral.” Indeed, Patriarch
contends that the Zohar Funds are forbidden by the Zohar Indentures from holding
“equity upside interests” as Collateral and that a declaration from this Court that
the Zohar Funds do hold such Collateral will cause a default under the Zohar
Indentures. 129 Moreover, Patriarch argues that such a declaration would strip
Tilton of her interests in the equity upside interests which Tilton acquired with
personal funds and for which she bears the entire tax burden. The Zohar Funds
counter that regardless of what the Zohar Indentures state about what can and
cannot be held as Collateral, based on the broad definition of Collateral, the
documents that evidence the Zohar Funds’ equity upside interests are required to
be produced since the funds do enjoy “rights” with respect to such interests.
As to the equity kickers and equity workout securities, because there is no
dispute that such interests represent Collateral of the Zohar Funds, the documents
that relate to these interests must be produced. The Zohar Funds offered evidence
of the equity—liabilities which the Zohar Funds are restricted from assuming under the
Zohar Indentures--because these liabilities are carried by her individually.
129
Under negative covenants contained in Article 7 of the Zohar Indentures and
eligibility criteria for Collateral contained in Article 12 of the Zohar Indentures, the
Zohar Funds are not permitted to acquire various types of Collateral in a variety of
situations. Relevant here is the restriction against encumbering the Collateral with any
type of liability, e.g., tax liability, that might be associated with the acquisition of equity.
See Zohar Indentures §7.8(a); §12.1.
40
of these documents at trial.130 Therefore, any documents that reflect or relate to the
Zohar Funds interests in equity kickers or equity workout securities which remain
outstanding must be produced in accordance with the implementing order.
As to the final type of equity, equity upside interests, I decline to determine
whether or not the underlying interests contained in various LLC Agreements
represent Collateral of the Zohar Funds or whether such interests belong to the
Zohar Funds, Patriarch Partners or Tilton. Even if I accept Patriarch’s description
of the equity upside interests, it is clear that the Zohar Funds may, at some point,
enjoy the rights and benefits of such upside interests. Thus, even if the equity
upside interests are not currently Collateral, documents reflecting such interests
broadly “relate to Collateral” in the sense that they relate to rights in equity
interests that the Zohar Funds may draw upon at a “particular time” in the future to
satisfy their obligations to noteholders.
Evidence at trial revealed that there are documents—e.g., LLC agreements,
shareholder agreements, stock certificates—that reflect the equity upside interests
given to the Zohar Funds.131 Patriarch admitted as much in its post-trial brief.132
130
Tr. 236–237 (Dudley) (Q. “[I]t’s your testimony that the only type of equity [the loan
administration system] tracks is an equity kicker?” A. “Yes.” Q. “And what do you
understand an equity kicker to be?” A. “It’s equity that’s attached to a loan.”); Tr. 18–19,
72–73 (LaPuma); Tr. 116–17 (Whalen); Tr. 368 (Marsal); Tr. 467–77, 483–90 (Tilton).
131
Tr. 405–406, 488, 518 (Tilton).
132
Defs.’ Post-Trial Br. at 88–89.
41
In fact, Patriarch produced exemplars of these documents in this litigation but
insist that the Zohar Funds and AMZM enter confidentiality agreements before any
additional documents will be produced.133 As previously explained, that condition
is not justified by the Patriarch CMAs. Therefore, since documents reflecting the
equity upside interests relate to Collateral of the Zohar Funds, in the broadest
sense, these documents must be produced in accordance with the implementing
order.
3. New Deal Documents
New deal documents are documents that memorialize the closing of
transactions in which the Zohar Funds made investments. Because these closing
documents memorialize investments of the Zohar Funds, they are documents
relating to Collateral. The Zohar Funds introduced evidence of these documents at
trial.134 Therefore, any documents that memorialize the closing of transactions in
which the Zohar Funds made investments which remain outstanding must be
produced in accordance with the implementing order.
4. Acquisition, Transfer and Disposition Documents
These documents include records that reflect the terms of the Zohar Funds’
acquisition, transfer, or disposition of assets. As these documents reflect instances
133
Id.
134
Tr. 224–225 (DeVito) (Q. “There were legal documents created that memorialized the
closing of that transaction, correct, sir?” A. “There were legal documents created.”).
42
in which the Zohar Funds acquired, transferred, or disposed of assets, the
documents which reflect these transactions relate to Collateral or to the
performance of services under the Patriarch CMAs. The Zohar Funds introduced
evidence of these documents, which include so-called “trade tickets,” at trial.135
Therefore, any documents that reflect the acquisition, transfer, or disposition of
assets by the Zohar Funds, including trade tickets, must be produced in accordance
with the implementing order.
5. Waiver and Forbearance Documents
These documents reflect instances when Patriarch, on behalf of the Zohar
Funds, granted a waiver of a payment or a forbearance of interest in favor of a
portfolio company. Because these documents reflect the interest that the Zohar
Funds can expect to receive going forward, they are documents that relate to
Collateral or relate, at least, to Patriarch’s services as Collateral Manager. The
Zohar Funds presented evidence of these documents at trial, including notices that
135
Tr. 150–152 (Whalen); Tr. 252–254 (Dudley) (Q. Now, Patriarch maintained records
of when it acquired assets for the Zohar Funds; correct?” A. “Yes.” Q. “Those records
include trade tickets?” A. “Yes.” Q. A trade ticket is a record of the transaction; right?”
A. “Yes.” Q. “Trade tickets were also created when there was a disposition of a piece of
collateral correct?” A. “Yes.” Q. “Trade tickets were also used to record other changes,
such as a change in interest rate on a loan, a change in maturity, or a new loan; right?”
A. “Yeah. And so were amendments.”). According to Tilton, Patriarch would create a
trade ticket to summarize the terms of loans made by the Zohar Funds for use in the
preparation of trustee reports and for input into the loan administration system. Tr. 402
(Tilton) (“[Y]ou’ve heard about these trade tickets . . . . [i]t was a form that we filled out
that would have all the terms of the underlying loan obligation so that it could be put into
the trustee reports and it could be put into the loan administration system.”).
43
were signed on behalf of the Zohar Funds.136 Any analysis undertaken by Patriarch
to determine whether to grant a waiver or forbearance need not be produced as
such analyses would reflect internal, proprietary work product that would not be
property or documents of the Zohar Funds. The documents signed on behalf of the
Zohar Funds which reflect waiver of payments or forbearance of interest, however,
are documents of the Zohar Funds relating to the Collateral, or Patriarch’s services
as Collateral Manager, and must be produced in accordance with the implementing
order.
6. Restructuring Documents
These documents evidence the restructuring of credit agreements. Because
these documents set out the terms of the Zohar Funds’ investments that have been
restructured, they are documents relating to Collateral. The Zohar Funds
introduced evidence regarding these documents at trial.137 The Zohar Funds also
introduced evidence of spreadsheets prepared by Patriarch employees that analyze
the impact of restructurings and reviews prepared by credit analysts that evaluate
136
Tr. 162–163 (Whalen); Tr. 255–257 (Dudley) (Q. “Now, the interest waiver forms that
you indicated were signed by Miss Tilton, do you know whether those were included
among the categories of documents that were turned over to A&M?” A. “I don’t
know.” . . . . Q. “Well, let me ask who she was waving it on behalf of.” A. “Well, if the
interest was due to the Zohar Funds, it would have been for the Zohar Funds.”).
137
Tr. 166–168 (Whalen) (Q. “There are records that are maintained with respect to
restructurings of credit agreements, aren’t there?” A. “Yes.”).
44
the impact of potential restructurings on the portfolio companies. 138 These
documents are the type of internal work product to which the Zohar Funds have
admitted they are not entitled. Therefore, any documents that reflect the
restructuring of the credits agreements held by the Zohar Funds or the terms of
these restructurings must be produced in accordance with the implementing order,
but internal analyses prepared by Patriarch regarding the impact of potential
restructurings need not be produced.
7. Trustee Reporting Documents
These documents include the documents used by the Trustee to prepare
periodic reports. Because these documents reflect current and historical assets of
the Zohar Funds, they are documents relating to Collateral or Patriarch’s services
as Collateral Manager. The Zohar Funds produced evidence of these underlying
documents at trial.139 The fact that these documents may also be in the possession
of the Trustee does not relieve Patriarch of its obligation to produce them under the
Patriarch CMAs as no such qualification appears in those agreements. Any
138
Tr. 166–168 (Whalen) (Q. “For example, there’s a spreadsheet prepared by the
structured finance group that looks at the impact of a restructuring of certain tests under
the CLO indenture, is that right?” A. “Yes.”).
139
Tr. 261–262 (Dudley) (Q. “It was also your responsibility to send issuer orders to the
trustee; correct?” A. “Yes.” Q. “And you also provided borrowing notices, interest rate
notices, change forms, and rate-set notices to the trustee; is that right?” A. “Yes. I
believe so. Yes.” Q. “And all of those documents were saved in a centralized location on
the Patriarch share drive; correct?” A. “Yes.”).
45
underlying documents that belong to the Zohar Funds in Patriarch’s possession that
it supplied to the Trustee so that the Trustee could prepare periodic reports must be
produced in accordance with the implementing order.
8. Third Party Reporting Documents
These documents include reports that were prepared for third parties, most
notably rating agencies. The underlying documents that were used to prepare these
reports are documents that reflect the assets held by the Zohar Funds and are
therefore documents of the Zohar Funds relating to the Collateral or Patriarch’s
services as Collateral Manager. Any summaries of these documents that were
given to third parties, however, need not be produced to the extent they reflect
Patriarch’s internal work product. The Zohar Funds presented evidence that
Patriarch did possess and utilize underlying financial information belonging to the
Zohar Funds in order to prepare its internal analyses.140 Patriarch is not obligated,
however, to turn over spreadsheets it prepared related to the portfolio companies
that were sent to the rating agencies or presentations that Patriarch prepared for the
140
Tilton Dep. 167:20–168:10 (Q. “Did you give the rating agencies any factual non-
subjective information?” A. “Yes.” Q. “Like what?” A. “Monthly financials, audited
financials. They’re usually hundreds of pages of backup information to our templates
that were provided to the rating agencies. Any kind of underlying security agreements,
audited financials, monthly financials, any kind of formal waivers or restructures, any
kind of formal documentation as in the objective data that we're talking about would have
been attached to any subjective or Patriarch analysis done.”); Tr. 171 (Whalen)
(Q. “[Spreadsheets] went to the rating agencies twice a year correct?” A. “Along with - -
yes, along with underlying financial information that we used to do the analysis.”).
46
rating agencies related to the Zohar Funds as these documents reflect internal work
product of Patriarch. 141 Any documents that reflect the underlying financial
information that was used to prepare the third party reports, however, must be
produced in accordance with the implementing order.
9. Related Party Transactions
These documents include documents that reflect related party transactions in
which the Zohar Funds were involved. Even if these transactions involved
Patriarch or Tilton personally, if they also involved the Zohar Funds, and reflect
the encumbrance, disposition or acquisition of Zohar Funds assets, then the
documents reflecting these transactions are documents of the Zohar Funds relating
to Collateral. The documents that reflect related party transactions, therefore, must
be produced in accordance with the implementing order. Any internal legal or
other proprietary analyses of related party transactions, however, need not be
produced.
10. Portfolio Company Financial Documents
These documents include financial information obtained from the portfolio
companies to which the Zohar Funds have extended loans. Because these
documents relate to the loans made to the portfolio companies, these documents
are documents of the Zohar Funds relating to Collateral. Evidence was presented
141
Tr. 170–172 (Whalen).
47
at trial that these portfolio company financial documents were, in some instances,
received by Patriarch on behalf of the Zohar Funds in its capacity as Collateral
Manager.142 Other portfolio company documents were acquired by Patriarch in the
performance of roles other than Collateral Manager. Any portfolio company
financial documents that were acquired by Patriarch while performing a role in
which it was not acting as a representative of the Zohar Funds need not be
produced since these documents do not belong to the Zohar Funds. To be clear,
however, any company financial documents received by Patriarch on behalf of the
Zohar Funds must be produced in accordance with the implementing order.
11. Tax and Accounting Documents
These documents include any tax or accounting documents that either are
issued by taxing authorities to the Zohar Funds or prepared on behalf of the Zohar
Funds. Patriarch has resisted producing tax documents out of concern that Tilton’s
personal tax information might be exposed if Patriarch is required to produce these
documents.143 According to Patriarch, because these tax documents relate to equity
upside interests, interests which they argue are not and cannot be Collateral, the
142
Tr. 174–177 (Whalen); Tr. 451–452 (Tilton) (Q. “Mr. Whalen, you are aware of
Patriarch being entitled to receive financial documents from portfolio companies pursuant
to the terms of credit agreements, correct?” A. “Yes.” . . . . Q. “Now is it your best
belief that the credit analysts saved the portfolio company financials that were received to
the P drive?” A. “Yes.”).
143
Defs.’ Post-Trial Br. at A-4 (“[T]he tax documents Plaintiffs seek are Ms. Tilton’s
personal documents, and the financial information reflected on those documents flow
directly into Ms. Tilton’s personal tax returns.”).
48
information flows directly through to Tilton’s personal tax returns.144 In addition
to contending that the equity upside interests are related to Collateral, the Zohar
Funds argue in any case that the tax documents at issue, such as K-1s, are issued in
the name of the Zohar Funds and therefore must be produced.145 Because the tax
documents reflect assets held by the Zohar Funds, and reflect the tax obligations of
the Zohar Funds with respect to these assets, these documents are documents of the
Zohar Funds relating to Collateral. Evidence was presented that tax documents,
such as Schedule K-1s, issued on behalf of the Zohar Funds were received care of
Patriarch.146 To the extent that any purely personal tax information of Tilton’s is
revealed in the Zohar Funds tax documents, such information can be redacted.
Any tax or accounting documents which were issued in the name of the Zohar
Funds or on behalf of the Zohar Funds must be produced in accordance with the
implementing order.
144
Id.
145
Post-Trial Arg. at 50 (“There are K-1s issued in our name. It is our responsibility in
the eyes of the I.R.S. So we need to know the full picture, the full situation. We could get
a call from the I.R.S. tomorrow asking what's going on with company X. We have no
idea. We don't have the documents. So we need them.”).
146
Tr. 553 (Tilton) (Q. “This K-1 indicates that it was actually issued by Galey & Lord to
Zohar I. Do you see that?” A. “Yes.” Q. “Care of Patriarch Partners, correct?”
A. “Yes.”); JTX-36.
49
12. Other Zohar Fund Execution Documents
These documents include any documents that were executed on behalf of the
Zohar Funds to the extent they are not captured by the categories previously
discussed. These documents reflect instances where Patriarch signed agreements
on behalf of the Zohar Funds and thereby bound the Zohar Funds to those
agreements. The Zohar Funds introduced evidence that when documents, such as
contracts, were entered into on behalf of the Zohar Funds, these documents were
maintained by Patriarch as Collateral Manager. 147 These documents evidence
instances when the Collateral Manager took potentially binding positions on behalf
of the Zohar Funds. Any documents that were executed by Patriarch on behalf of
the Zohar Funds or signed in the name of the Zohar Funds that relate to Collateral
or while performing as Collateral Manager must be produced in accordance with
the implementing order.
III. CONCLUSION
Patriarch is obligated under the Patriarch CMAs to produce all property and
documents of the Zohar Funds relating to Collateral and to make books of account
and records relating to Collateral accessible for inspection. Having reviewed the
evidence presented at trial, I have determined that there are documents identified
by the Zohar Funds which Patriarch is obliged to produce upon the termination of
147
Tr. 122–123 (Whalen).
50
its services as Collateral Manager but has not yet produced. These documents
must be transmitted to the Zohar Funds and their new Collateral Manager, AMZM,
consistent with Patriarch’s contractual obligations. The collection and production
of these documents will no doubt place a burden, perhaps even a significant one,
on Patriarch. But Patriarch has enjoyed the substantial benefits of the Patriarch
CMAs for many years and has known all along that it would face substantial
document production obligations when and if its service as Collateral Manager to
the Zohar Funds came to an end. It is now time to fulfill those obligations.
The Zohar Funds shall submit an implementing order on notice within five
(5) days. In addition to reflecting the rulings in this opinion, the implementing
order shall include the following elements: (1) a provision for the rolling
production of documents hereby ordered to be commenced within five (5) business
days of the entry of the order and completed within twenty (20) days; (2) the
means and format of production; (3) a process by which a Special Master will be
appointed to facilitate compliance with the implementing order, said appointment
to be made within ten (10) days; and (4) any other proposed conditions that will
facilitate compliance with the letter and spirit of this post-trial decision.
IT IS SO ORDERED.
51