This is the docket for Houston, Texas on the four o'clock docket, and I do apologize for the delay
We have the jointly administered cases in case number two two dash nine zero three four one core scientific
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For core
For the record of Ted's agrees from while got you for the debtors and Christine color graces with me as well
Your honor I did put together a
Demonstrative to walk through if I could have control
Given over to miss
And how are you going to be listed with your computer?
It's my name
Secretary's I just couldn't hear
It's my name your honor Christine. Oh, okay. I was looking for like wild presentation one or something
Oh, you should have it
On my screen, Your Honor, it's showing the first page, but it looks like on the court's
monitor.
So I think we have hard copies.
Is it easier if I just give you one, Your Honor?
Yes.
And I assume you folks have the copies?
Your Honor, just to level set, this is the motion for summary judgment that we filed
in connection with the claim that's feared filed.
Two parts.
We hope there's no second part, but we have two parts.
The first part is that they're not a party, and the second part is limitations of liability.
And then depending on how that goes, there was an agenda item that the schedule would
be discussed.
So, Your Honor will indulge me.
So the first page, just take you through.
The issue really comes down to whether or not sphere is a party to the MSA and the orders
that govern the MSA.
That's really what it comes down to.
And there was some discussion in the papers about whether you need to have discovery in
order for you to rule on summary judgment, and the case law supports it, you don't.
If the facts are clear that they're not a party, you can rule in our favor.
If the facts are clear that the limitation of liability applies, you can rule in our
favor.
And really what this first page shows is who are the parties.
The parties are Griffin and Core.
And in that MSA, which was in September, early September, sphere is not even mentioned.
There was an order number one done on that same day.
Sphere is not mentioned in that one either.
And this shows, these are just excerpts.
For the record, the MSA is at 1099-5 and order number one is at 1099-6.
And you can see here, Your Honor, Core Scientific, Griffin.
Order number one, Core Scientific, Griffin.
In fact, as I said, those two documents don't even mention Sphere.
Now, we've heard in Sphere's papers that Griffin was acting as a manager.
That's not anywhere in the contract.
And even if it was between the two of them, that's not really our business.
Core has nothing to do with that.
So it's irrelevant.
So what does it come down to?
Order number two.
And I put some slides in there just to show, Your Honor, we didn't make this point.
And I think the point of this, no third-party beneficiary and no assignment, is just to level set.
That absent anything else, there is no third-party beneficiary.
There is no assignment.
So let's get to the meat of the matter.
Order number two has an amendment to Section 8D.
Section 8D is the section in the MSA that says no assignment.
The language is in front of you.
This would be at 1099-7.
That's order number two.
And it says Griffin can assign to Sphere.
It doesn't say that Griffin did assign to Sphere.
It's something that can happen.
So this document doesn't say any rights had been assigned.
It only provides a mechanism for an assignment to occur.
And then there's language at the end of that provision.
As long as Sphere 3D Corp satisfies company, that's Corp, requirements prior to.
That's what it says.
Now the other side will tell you, well, what does that mean?
What are the requirements?
We put in a declaration from Mr. Cann, who you've met before,
and you know him to be the head of mining, executive VP, client services.
The declaration affirms he's familiar with the agreements,
the relationship between the parties,
and has personal knowledge of that relationship.
He also knows whose core customers are and whose miners they're hosting.
Whatever those requirements are, and he lays them out in his declaration,
but whatever they are, they have to be at least one.
And the other side had to satisfy at least something.
Otherwise that provision is meaningless,
and that goes against every candidate of interpretation under Delaware law or any other law.
So they say, well, we don't know which ones they were.
Our response to that is it doesn't matter,
and we don't have discovery that you need from us.
You, Sphere, had to do something.
You had to satisfy company requirements,
and if you did that, presumably you'd have some evidence of it.
You'd have some email, something that went between the two parties.
Nothing.
What we do have, to try to get out of summary judgment,
first they rely on 56D.
That's a federal rule.
I'm sure you're well aware that if you believe that you don't have available discovery,
you can make an application to the court to ask for leave to put off summary judgment while you get the discovery.
Okay, but what discovery do they need here that would not be in their possession?
Again, if they satisfied a requirement, they would know.
They would have sent something to somebody, and they didn't.
So 56D doesn't really help them.
If you flip the page to the one that has the invoice, it's page six in the slide deck.
All of the invoices, all of them, have billed to Griffin, shipped to Griffin.
Nowhere is Sphere on any of these invoices.
And this one here is from May 12, 2023, and that's a date that's important.
I'll come back to it in a minute.
So what does Sphere say to try to get out of summary judgment?
Well, they say three things, basically, maybe four.
The first one is they point to a sublicense and delegation agreement.
That one will be on slide seven, Your Honor.
The problem is we're not a party to that.
The court is not a party to that agreement.
Again, they could agree to whatever they want to agree.
If those requirements were not satisfied, the condition for assignment did not occur.
So that's sort of number one.
But the sublicense agreement doesn't help them.
So let's get to the heart of it.
It's the next page.
They point to three things, a meeting with the former CEO of CORE, Mike Levitt, in April of 2022,
a text message from someone at CORE reviewing a press release regarding Sphere and Griffin,
and then a July 27, 2022 letter from Griffin's CFO to some unnamed person at CORE.
None of these are sufficient to withstand summary judgment.
We'll start with Mr. Levitt's conversation.
Now, we deny that the statement was made, but that's neither here nor there for today.
Even if it was, it's too vague a statement as to context, what was being discussed,
or to support that Sphere has rights under order number two, or that any requirements were satisfied.
It also took place, according to them, six months after these agreements were signed.
That can't change the contractual requirements.
And again, all of the evidence that we have, and they have documents, too, if they had something different,
all of the invoices say, Griffin.
So then let's look at the text messages.
That one is at 1098-7.
Your Honor, I'm going to pull that up myself.
And that goes with 1099-3, and I apologize, this is part of a bigger document, at page 61.
So the text message is referring to this press release, two different documents.
So nothing in the text or the press release say anything about CORE agreeing that Sphere satisfied any requirements.
Nothing.
All the press release says is that Sphere and Griffin entered into an agreement, and CORE is going to be hosting some miners.
Well, yeah, CORE is hosting miners, Griffin is miners, to this day, and we have the invoices to show it.
Now, the reason I mentioned earlier that I'll come back to that date, the invoice was 2023, May of 2023, going to Griffin.
If, in fact, CORE had a contract with Sphere based on that conversation that happened in April of 2022,
this was a year later, and it's still going to Griffin.
So there's nothing from that conversation, there's nothing in these texts or in the Sphere press release indicating a satisfaction of any requirements.
None.
And then lastly, this July 27, 2022 letter, that can be found at 1098-6.
Let's look at that letter.
CFO of Griffin, again, dated July 27, 2022, three months after the supposed meeting in April of 2022.
And what does it say? To whom it may concern.
Not dear CEO, not dear CFO, just to whom it may concern, want to let you know that the money that was paid came from Sphere.
Okay, so what? That's all it says. Doesn't say that the contract and all the rights that Griffin had under the contract have been assigned to Sphere.
It doesn't say that. In fact, it's limited to just the issue of the money.
Nothing else. Nothing that says, oh, by the way, they satisfied those requirements. Nothing.
In fact, at the very end, it says not withstanding anything above, Griffin doesn't waive or otherwise amend or modify any provision of the MSA.
According to Griffin, it's their contract, not Sphere's. And again, three months after that meeting in Miami.
So at the end of the day, as it comes to whether or not Sphere has any rights, we submit that summary judgment, disallowing Sphere's claim, is appropriate.
Because we've set out that they don't have any rights, they haven't satisfied the requirements, and they haven't put any evidence in that they did.
Can I ask you to take just a pause? I have a very inappropriate...
Oh, I see them behind me. Yeah. Well, I was done with that piece anyway, so that's good.
I'll be really quick. Yes, sir. Can we get an immigration order? Because we're going to try and start tomorrow.
Okay, we'll get it done on the Friday evening, and I'll email it to you tonight.
Okay, all the parties are present for this request. All right. Thank you.
Perfect. Then are you all on the... No.
...he fails in his job? All right. Okay, thank you.
Thank you, Your Honor. Thank you, everybody.
Thank you. That's it? Okay.
So, Your Honor, on that first piece that I talked about, they're not a party, that's our argument.
We've laid out the undisputed facts, they didn't have anything in response, and there we are.
Up to you, but I could stop there or continue on on the second piece, which is the limitation of liability.
If they don't have any rights under the contract, the second part doesn't matter, or I can just go and finish everything up and then take it all.
Go ahead and make the argument. Okay.
So, if you reach this issue, this relates to the limitation of liability provisions that are in the MSA.
If they have rights under the contract, they have all rights, they have all obligations, they don't get to pick and choose, right?
Right. Well, our argument is if they have rights, they're subject to these limitations.
You can't get, you know, Goose Gander, Bittersweet, pick your metaphor, you know, or idiom.
So, there are really two in the MSA.
One we call as to type, consequential incidental punitives, one as to amount, one month's fee.
So, the one month's fee, if you have the foot book, we'll call it, page nine, that's at section 5D.
And again, company is core, total liability to client in the aggregate for the entire term,
and regardless of whether brought during or after term, et cetera, will not exceed an amount equal to one month's fee payable to company pursuant to the applicable order.
Now, there's debate about what that means.
Our view, and we think it's supported by the contract, is that one month's fee would be the month before any alleged breach.
Because that's usually when this would come in. So, we picked the month before we filed the motion.
They're pretty much the same as it relates to SPHERE anyway, roughly in the 80,000 range.
And the reason why we say that is you have to read, again, contract interpretation 101, the contract as a whole.
And there are other portions of the contract that tell us, well, what are they talking about, one month's fee?
Section three, and again, the contract is at 1099-5. And by contract, I mean MSA here.
Company, this is A, company will invoice client monthly in advance for all applicable fees for use of company facility and provision of services as set forth in the applicable order.
Then it talks about how clients are going to pay these within calendar days, et cetera.
So, the way it works is they get billed based on the number of minors times whatever the cost is for hosting.
And then there's a true up later. But this is all based on what's happening at the facility.
So, we say one month's fee, all right, let's say the month of May, it was 84,000.
And that we have the invoice that we just looked at, which is part of the materials we showed you, number six, 84,658 sent in May.
They say, well, wait a minute, it can't be that. It's got to be more.
Because there are other provisions in order number two, and most typical orders that I think you've seen in this case, that talk about distribution dates and prepayments and things of that nature.
So, they say, well, prepayments have to be factored in. Well, prepayments are not services.
Prepayments are not fees. And I think one way to put a fine point on that, if you look at order number two, there's a section, payment due prior to installation.
So, it doesn't say fee for services for monthly services, payment due prior to installation.
And just look at the third bullet, 15 million in change, right? 30% of prepayment for March 2022 to November.
That's not a month. That's multiple months. And it relates to payments that are prepayments. They're not for services.
So, it doesn't make any sense what Sphere is saying that look to the prepayments to factor in what the one month's fee is.
You look at the monthly fee for actually hosting. Another reason why it makes no sense, according to them, even if there were only 500 miners,
but maybe under a schedule for a particular month, there were supposed to be 5,000 miners, even though they didn't pay for 5,000 miners to be hosted, we should use that as a one month's fee.
Well, that makes no sense. That's the amount. 5C, which is, there's no number on here, but it's page 10 in the deck.
This is what we call as to type. And it's pretty broad. Notwithstanding anything to the contrary in this agreement. In no event will either party, so either party,
be liable to the other party for lost profits, loss of business, loss of revenues, except that client, that's them, or Griffin actually,
shall be liable for any fees or other amounts owed to company. That's us. So the only exception to that is going in our favor.
Loss interruption, use of data, etc. Any consequential or indirect damages. This is as to type. There's no question Delaware law upholds provisions like this.
They make some noises about fraud, claims, intentional torts, with the exception of one thing about Bitcoin that they say we stole, which we'll have to deal with, I guess.
This provision applies to everything. And if you look at the next page, 5E and 5F make that clear.
The limitations set forth in sections, this is in E, Your Honor. The limitations set forth in sections 5C and 5D, the ones we just looked at, apply to all claims and causes of action,
regardless of whether in contract, tort, strict liability, or other theory. There are Delaware cases they cited about intentional torts.
I suggest in those cases, there weren't these broad provisions. You should take a look if there's any issue. Those cases did not have provisions like this that say explicitly,
whether in contract, tort, strict liability, or other theory. And then just to let everybody know how important these provisions are, in F it says,
each party recognizes and agrees that the warranty disclaimers, limitations of liability, and remedy limitations in this agreement are materially bargained for by the parties.
It couldn't be more clear.
I think you can flip to the end. We went over some of the other points. So when you look at what are the damages they're alleging, they're all contract-based.
Claim for hosting deposits, claim for alternative hosting costs, claim for storage fees, losses and damages arising from cores, failure to satisfy its obligations,
including but not limited consequential expectation of reliance damages. The exact damages that the contract says you're not allowed to get.
So let me ask you this. You start off by saying they're not a party to the contract. So if they're not a party to the contract, then the limitations are correct?
Yeah, if they're not a party to the contract, then we would say they have no rights. They're out.
Again, I don't have enough information to know what happened with respect to the prepayment. Did the prepayment come directly from Sphere or did it come through?
We have it from Griffin. Sphere may have sent it to Griffin. Again, we would say it'd be like if Judge Isgur paid for one of your bills. If I have a contract with you, I don't care who else is paying for it.
I just want to walk through this. This is not binding on you. We're having a conversation. So if they're not a party to the contract, as you would like, then the claim for the return of a part or all of the deposit doesn't fall under the contract.
It's some other theory. You took money. Money hadn't received. It's a deposit that you wrongfully converted. All of those things, that's not a claim under the contract.
I would say it's not a claim under the contract and it's not a claim against us because I got paid under the contract by some guy who I had the contract with. If you have a beef with somebody, maybe it's that other guy.
Does it matter who sent you the money?
I don't think so. I have a contract with you. I don't want to make a personal. I have a contract with some third party.
How did you know the money was for?
Well, Griffin sends us money.
It came from Sphere.
Well, Griffin sent us money, even if it came from Sphere. We have the money coming to us, say, Griffin wire transfer.
So it came from Griffin?
Yeah, but they're saying they gave it to them and if we look at the letter and give it to Frieden, no, no, and we give Frieden.
If it came from Sphere, then it's a slightly different issue, right? How did you know whose money it was?
I would say the fact that you paid for somebody else's obligation, that's between you and him.
That's my question. How did you know that if the money came from Sphere, and I don't know where it came from.
Let's assume for our discussion here it came from them, but to pay for this contract.
How did you know it was to pay for this contract?
Well, there's an invoice. I mean, we can get into that. There's an invoice that would show that we got these prepayments.
There was one attached to their papers that shows Griffin, that they say they gave the money to Griffin to pay us.
You didn't see that, though, did you?
We would know it came from Griffin.
How did you know that it came from Sphere?
Well, it wouldn't be obvious that it came from Sphere.
Are you saying how would we know, like, in the abstract?
I had a wire transfer for a million dollars in my bank account.
Well, Griffin did tell us. I mean, there's a letter from Griffin saying that the money came from Sphere.
At the time?
Certainly in July.
Okay.
But again, I would say that's between the two of them. Like, even if Sphere is paying for this contract, if they didn't get – if they didn't do what they needed to do to get the rights, who pays doesn't matter.
And if they're out money because Griffin didn't pay them back, we're still using whatever these prepayments were.
They're still being applied to the Griffin miners.
Do we know what the number was on the petition date? Do we know what the number is today?
Yeah, it's about $34 million.
Well, that's what they said, claims.
I mean, that's close. I mean, I couldn't give you to the penny, but it's up there.
Okay.
And our view is, okay, if you – it can't be where I think you're asking me, that you have no rights under the contract. You give me money anyway for the contract for the other guy, but somehow I have to give it back to you, even though I have the contract with the other guy.
He's not asking me for the money back. He's using the money as a credit for the miners that I'm hosting for him.
So let's break that down if we could.
Sure.
Because you started off by saying they're not a party under the contract.
That's right.
And I think we put that issue to bed, is that if they're not a party for the contract, they have no benefits under the contract. They have no obligations under the contract. If they're not a party.
If they're not a party.
So it means that to the extent that they have a claim, it has to arise under some other legal theory.
A claim against us, if one legal theory exists.
Okay, I'm just, you know, I'm being a lawyer here.
But if it can't arise under the contract if they're not a party for the contract.
It can't. If they have no rights under the contract, then their right to that payment cannot come from the contract.
Right. It has to come from some place else.
Some place else.
If at all.
Okay.
Or they have a claim against us.
That means both.
I don't know about that.
You're a good lawyer.
Yeah, well.
So what I'm trying to figure out is on a summary judgment basis.
If, and see I've gone down both branches of the tree.
That's why you're a good judge.
Yeah.
That's still a learning.
If, as you say, they're not a party for the contract, then to the extent they have a claim, it has to arise from somewhere else.
If they are a party for the contract, then they're subject to all of the limitations, all of the contractual provisions that we bring.
Do you agree with that?
I would agree with that, yeah.
Okay.
And so is there anything in your mind in the proof of claim that suggests an alternative theory other than damages under the contract?
Not that I'm aware of.
Their theory is that they have the rights under the contract, that they were assigned to them.
That's it.
I got it.
Okay.
Thank you for indulging me.
Your Honor, bear with me for one moment.
Of course.
As I understand it, you wanted to put some things up, but only in the court.
Yeah, so we'll give you a copy as soon as they give it up at the demonstrator, and we'll also give our adversaries a copy.
Okay, so you don't want to publish it or you do?
We're fine either way.
So why don't we publish it and we'll give it to you as well.
Okay.
Thank you.
Okay, I'll approach you.
Oh.
Ms. Harper, are you plugged in?
I am now.
Your Honor, my name is, oh, if you're ready.
I want to make sure that, sorry.
So, Your Honor, my name is Greg Wolf.
I represent Sphere alongside my friends Pat Davidson, Ashley Carper, and Brendan Bean.
Also in attendance is your different friend, and also in attendance is Sphere's CEO, Patricia Tromper.
Just as a housekeeping matter, I'd like to move all exhibits on our exhibit list into evidence for purposes of this MSJ hearing and record only.
And Sphere's exhibits are filed under seal, docket numbers 1098-1 through 1098-9.
Any objection?
No.
Not at all.
In fact, I was remiss.
I apologize, Your Honor.
Prior to the hearing we did discuss with counsel that we would agree to that and also reciprocally for us, which would be at the 1099 numbers.
So no objection to both for purposes just of the hearing today.
Certainly.
So, my agreement, I will admit, Sphere's exhibits 1 through 9 identified as 1098-1 through 1098-9, and core exhibits 1 through 8 identified as 1099-1 through 1099-8.
Did I get them all?
I think so, Your Honor.
Okay.
Thank you.
Of course.
So I'd like to begin, actually, where Your Honor left off on whether we have any claims outside the contract.
Right.
And I direct you to page four of our proof of claim, paragraph 13.
Okay.
So I want to use your impact.
Which exhibits you were...
I apologize.
I didn't know.
I just let you know.
I don't think it's one of your marked exhibits.
I believe it's attached to our summary judgment papers.
Okay.
That would be great if you know.
Just so the record's clear, we filed two proofs of claims that are materially identical.
And I direct you to paragraph 13 on page four.
And as you'll see, we asserted that there were, in fact, claims outside the contract, including unjust enrichment, conversion, and a stop.
And the estoppel claim, for example, would arise when my...
Ms. Trompeter and Mr. Sosopoulos go to meet with the core CEO, and he says, you have a contract.
Keep making deposit payments.
That will give rise to an estoppel.
Conversion, you get a conversion claim when someone holds onto your property wrongfully.
Those are claims outside the contract.
And that more within our briefing fit within the rubric of, look, we would need discovery on this.
I think we can beat the motion for summary judgment as to whether we have contractual rights on the merits, and I'd like to get into that.
But I just do want to make clear we do have claims outside the contract.
So help me...
Sorry, let me just a second.
Okay.
So do you have a copy of the addendum available to you?
So I now understand...
That's the same claim there are.
Oh, no, that was for you.
Oh, for me.
Oh, sure.
He has a...
I now understand.
Okay.
So what you did in paragraph 13 is you said, I filed a demand for arbitration.
I asserted all of these theories, and that you, by reference, incorporated those claims within the addendum.
I missed that one sentence.
Because then I went on and said...
This is a little bare.
No, no, no.
In 15 and 16, and quite frankly, the rest of it, it's all contractual based?
Yes.
But I got it.
Okay.
Yes.
And do you think you can have both?
I think it depends.
I think for the conversion claim, their position is they've canceled the contract a long time ago.
And as a result, they're still holding onto our property.
So convert, right?
You can't just keep...
You can't have a contract and then just keep holding onto property, right?
So you've been...
You believe that you or you've been told, I assume in writing, that prior to the petition date, the agreement was canceled?
Well, it's funny you should say that.
So we...
It's sort of not clear.
I think the position they took with us in 2022 was at some point, this has been canceled.
I then read their papers, and they sure seem to indicate it's been canceled.
And yet, I just heard my adversary saying that they're still billing things in accordance with order number two, which is sort of the opposite, right?
That contract's still effective.
It seems to me the contract has been canceled, but without discovery, I'm not sure.
So let me ask you, if we thought about pushing that issue, doesn't that change your view of the world?
I want to be very clear.
I want to tell you exactly where I'm headed.
Sure.
On this track that we're currently on, you're going to have to choose, because I don't think that the claims can exist together.
Either you're a party to the contract, and you're going to be subject to all the limitations and everything else,
or you're going to take the position that, no, I have tort claims that are based upon whatever theories you have,
because I don't think – I mean, I got the conversion claim, if in fact, maybe, I don't know.
I have to read the entire contract to find out what the rights and remedies are of parties on determination.
But I don't think that you can maintain this, at least based on what I've read, as both – I'm just going to call it a tort claim and a contractual claim.
I think it's one or the other.
Yes. So part of the issue is my adversary's going to move on that.
But what I would say is, for unjust enrichment, you're probably right.
Classically, there has to be a contract, otherwise there's no unjust enrichment.
For estoppel, which is more a quality contract –
It's not really a claim.
Well, it can be, right. So in estoppel claim, for example, if he says – right, there's no contract. But he says –
Oh, but it's a contract.
Yes. I'm basically substituting consideration.
Some jurisdictions can sue that out of tort, some a contract.
As far as the conversion claim, I will agree with you that there may be some elements of it that we can't maintain.
But I do believe that the law would say, for example, with respect to the machines – right, if that's our property.
The machines are our property, and they cancel the contract, and then they just won't give them back.
That's a conversion claim. Right? They've converted them.
Assuming they have – right, I mean assuming they have no right to hold it. Right?
Assuming they have no right.
Right. I got it.
So – all right. I want to hear your contractual-based argument.
Yes, please.
Could I start with that? I – so I want – I absolutely want to hear – given what I've said, I'm also trying to figure out if you really want to maintain that or not.
Well, I think we will. And hopefully I can sway your honor away from struggling to a decisive feeling that it should just be denied at the very least at this juncture.
So let me begin where I think I would have began, which is just to level-set what's at stake here.
Over the course of a little over half a year, we paid CORE $35.1 million in deposit funds.
Can I ask you the same question that Mr. Zacharias couldn't answer? Who paid it?
So if Sphere would give it to Griffin, who would then give it to CORE?
Oh. Okay. So from the debtor's point of view, if we were only looking at the wire transfer, they would have no idea that you paid it?
If you were only looking at the wire transfer. But I will get to why it makes sense under the delegation agreement.
Right. I've got to start at the easy part.
Of course. So the wire transfer – you wire transferred the money to your – how do you refer to them?
Our exclusive manager.
You transfer it to your manager. Your manager has been transferred to the debtor.
Yes. And if you put blinders on and you were only looking at the wire transfers –
Okay.
So as I began, $35.1 million to them. We get a few hundred thousand dollars for the services.
And then they say, we're not going to host any more of your miners. We're not going to uphold our end of the bargain.
So are there miners being hosted today?
There are approximately 600 miners being hosted.
And are they your miners or are there somebody else's?
There are miners.
Okay. And so is it your belief that you have to pay for those or you don't have to pay for those?
They've been using, telling me, our prepayments down there.
But –
Yes. Yeah. Absolutely.
That's a different question.
We would absolutely have to pay for that.
Okay. And is it that you believe you have to pay for it pursuant to Order 2 or some other agreement?
Well, they've canceled Order 2 according to them.
That's what I'm struggling with.
Right. I know. So I think what – if you were – you can cancel a contract and continue to charge a fair rate without a contract in place.
Well, that's actually a different kind of –
It seems like that's what's going on here, right? They won't give it back, but they're still following Order 2's rate.
How can that be when sophisticated parties and $35 million are here?
That's why we're here before you, Your Honor.
Okay. Is the – were there any agreements that the $35 million had to be segregated or it was just a deposit that could go into the general coffers and be spent?
My understanding is if you look at the B schedule within Order 2 is that this would be credits for – right, so it's hosting.
So that would be – right, that would suggest to me that you would have it as a separate state money allocated toward the series of battles.
Well, that just says in the county entry, I'm going to take your money in, but on the ledger of life, you just have a plus that it gets a paper deduction every month, right?
Yeah. I mean, so if – I don't know if it's that simple because if you are running out – right, so let's say you were to put it into the general ledger on your hypothetical,
and then all of a sudden, right, you have below $30 million in the general ledger.
You can't do what you were supposed to do under the contract for speed writing.
Why not?
Well, because you don't have enough money, right? It was – you got $35 million from the sphere you didn't get.
Well, at that point, it's not money. It's credit.
I may not be following your question.
I asked you an accounting question, which was not fair because once I take your cash in, you swapped your cash for credit.
So you have an account there that reflects for subject to future deductions.
You took your cash. It's in the general coffers, and you now have a credit there against – which will satisfy future bills.
So I don't actually need cash at that point.
So I will be candid. My mom is an accountant, and there was only one profession she said I couldn't go into that was accounting.
Okay, fair enough.
So the question before the contested matter, and we look forward to presenting our case to you,
hopefully on a full discovery record and at trial on whether the core should enjoy a windfall.
You just heard from my adversary. They still have $34 million of our money, right?
So the question will be should they enjoy the windfall.
So let me ask Mr. Seger-Edison.
Yes, sir.
Is there a contract in force or not?
There's a contract with Griffin that we're performing under, even though we believe that Griffin is in breach.
Griffin's miners – I mean, my adversary keeps saying they're his, and not his, they're Griffin's.
The miners that are there are Griffin's. They were never Spears. I mean, that's the whole argument, right?
Our view is the miners that came over, their argument is they belonged to Spear.
Their argument is no, they're Griffin's, and I got the invoice to prove it, right?
It says Griffin, May 2023.
So let me ask you a bankruptcy question.
Oh, boy.
So I'm assuming this contract has neither been rejected nor assumed.
That is correct.
So if they're your manager, why haven't they moved to compel rejection of the agreement?
Because you're going to allege that they can never care.
May I go back?
Yes.
The answer to that question is I'm not sure you're on.
Why they haven't done it.
I think our impression was that the – up until – right, they said that – I'll take a step back.
There are two conflicting things here, right?
One is the contract is in force.
I'm warning too, but okay.
You know, as I was listening to my friend speak, I was thinking, gee, there sure do sound like a lot of fact issues here.
But I think the problem is they indicate – right, I think they indicate in their claim objection that the contract is no longer in effect.
And they say they won't host any more miners.
But then they say they're also continuing to host miners, which suggests that the contract is in effect.
I think it's just unclear at the end of the day.
So what is your relationship with your manager today?
Do you have the ability to direct them or not?
I think we would have the opinion that we do have the ability to direct them.
I think they may have a different view of that.
So is this really a $35 million dispute between you and your manager?
No, definitely not.
So, I mean, you're telling me that the money that paid for your manager and your manager forwarded it on, had you asked your manager for the money back?
Can I ask my client whether we have an issue?
I'm just trying to – this doesn't make sense to me.
Well, can I go to – can we get to the delegation agreement and I can explain why it would make sense?
Okay.
So let me walk through the relevant agreements with you.
And – right.
Four agreements.
Let's start with – let me start with slide two.
So here we have the agreement between Sphere and Griffin, which provides that – uses the terms provider and customer, but you can just replace those with Griffin shall be Sphere's exclusive provider of any and all management services.
Sure.
Is it your belief that CORE and NOBOT this agreement?
Had it?
Signed onto it?
Brought it?
Passed it?
Did they agree to it?
Given that they – I don't know if they passed away through it.
Did they know about it?
Given that the order number two is so explicit in providing that rights would be assigned to Sphere and that they then –
There was something going on.
Right.
And then that they then signed off on a press release from Griffin, or excuse me, from us describing the delegation.
It sure seems that they knew about it.
But if Sphere was taking over, then why would they need a man-to-man agreement?
Why don't I just get to the delegation agreement and explain how I think it functions and –
I'll be quiet.
I think that will – I'm glad you're interested.
So again, the next is we have order number two and the third is the MSA and then the final agreement, and I think this is sort of the key here, is the delegation agreement between Sphere and Griffin.
And what – I think what may be the cause of the struggle is not everything is being assigned.
Right. What's being assigned is the right to access and use the company facility pursuant to order number two, and then it's delegating the obligation to make payments to Core pursuant to order number two.
What hasn't been delegated are all the obligations to actually interact with Core, and there's a reason for that.
They're the exclusive manager.
They're the ones who are getting paid to ultimately deal with Core.
Right.
In terms of whose money it is, it's our money that's coming to them.
So why didn't your manager have a personal client?
I'm not sure that they would consider that they had – it's a good question.
I'm not sure that they would consider that they had rights to the money given that it's our money.
Well, no.
They don't have any rights to the money, I mean, according to you.
Right.
Do managers take action all the time that have financial benefits to the folks that they're managing for?
I can't speak for them.
Okay. Are they represented by anybody?
Panel gates.
Okay. Can I take it they haven't filed a proof of claim in this case?
That's correct.
Okay.
All right. So if we can put up slide six, which we've been discussing ad nauseam.
Right. You have slide six, which specifically refers to Sphere.
As your honor just put it, they knew something was going on.
Right. It doesn't say anti-parity.
It says Sphere.
Right.
It's a really reference to it.
And we then go to the crux of just what are the requirements prior to.
They submitted this affidavit from Mr. Cann.
I think we're all in agreement now, my adversaries included, that there's no way you can read the phrase requirements prior to and think that's what those requirements are.
And so the question for you then becomes what are the requirements?
And the requirements, given that there's no written consent required, seem perfunctory to us.
And it could be as simple as CORE signing off on a press release.
Right. It could be CORE doing a search and just verifying that Sphere is a Canadian company.
There's no mechanism in the contract that actually says, oh, Sphere has to submit something to CORE.
Right. It could be Griffin that's submitting it.
And there's no mechanism that actually says CORE has to announce your requirements have been met.
And there's no mechanism because there's no written consent required.
And so there are many things that could have been done to satisfy the requirements.
We don't know what the requirements are.
And given that Griffin and CORE were the ones interacting, they would be the parties that ultimately know if the requirements were satisfied.
I think we have a lot of evidence and certainly sufficient evidence on this record to go past the emotion for summary judgment.
And I'd begin with order number two, which contains the assignment language that specifically references Sphere.
We then have the delegation agreement.
And it's undisputed that whether effective or not, it was certainly the intent of Griffin.
Right. It was the intent of the parties to accomplish a delegation.
And then third, and we have the declarations of Ms. Trompeter and Mr. Sassopoulos, excuse the mispronunciation.
There are unrebutted admissions that CORE CEO said, yeah, we have a contractual relationship.
Right. And that's dispositive.
And I heard a lot about from my adversary whether the requirements had been met.
But what I hadn't heard is anything about whether there was a waiver for condition precedent.
And when the CEO of a company says we have a contractual relationship, you are our customer,
that sure suggests that either whatever happened between Griffin and CORE, that the requirements were met or we don't really care if the requirements are met.
Keep paying us millions of dollars. We like it when you pay us money.
We don't really care if it comes from you or Griffin.
We just want to keep receiving the money.
And, Your Honor, we think that that's dispositive and there's really no need to go to the other evidence.
But we did offer other evidence.
Right. We have the, and if we go to slide nine, right, we have CORE approving a press release disclosing the delegation agreement.
Surely, if CORE thinks this delegation isn't effective, it's going to say, wait, hold on.
You can't. You can't disclose this delegation.
So we have the approval of the delegation agreement.
And finally, we also have the statements from Griffin that this is actually our money.
And unless you have more questions on that branch of the motion, I'll move on to the limitations of liability.
Okay.
If it's okay with Your Honor, I know that TAD began with contract construction.
I'd like to begin with public policy.
Sure.
So CORE contends that Section 5C eliminates certain categories of damages, such as lost profits,
and that Section 5B limits its liability to just over $84,000.
And its argument fails for several reasons.
The parties agree that Delaware public policy controls, and Delaware public policy will not permit a party to exploit itself for intentional torts
or contract claims that include allegations of bad faith.
And we've included both claims here.
Now, there was actually, we've put up on the deck for you the paragraphs discussing why intentional torts can't be disclaimed.
And while my adversary said today, oh, look at the underlying opinion, see the limitations of liability and their scope,
that was nowhere within their reply papers.
And I'm unfamiliar with any jurisdiction that permits conversion claims to be disclaimed.
And the purpose of Delaware law indicates that can't be, and I've never seen a decision that says that an intentional tort can be disclaimed.
But the conversion claim isn't under the contract, right?
Correct.
So I think your point is either way, it probably wouldn't be subject to limited liability.
I don't need to figure that out because your theory on the conversion claim is that there is no contract.
And their post-contract termination, they're wrongfully keeping my money and have no right to do so.
I think it might wind up being a little bit more nuanced than that.
But either way, I think we're in agreement that the limitations of liability can't limit the conversion claims.
I wouldn't make that assumption.
Okay. Either way, that's our position.
And then, so to our mind, what this really boils down to is whether contractual bad faith can be disclaimed.
And our adversaries say that there is no Delaware precedent for striking a limitation on contractual liability
because of a party's bad faith breach of contract.
And what we submit is that this is a misstatement of Delaware law.
And we cited Delaware precedent indicating that Delaware, like most jurisdictions, in fact, does not allow a party to limit its liability for a bad faith breach.
My adversaries cited the same case law.
And we'd refer you to the petroleum, the Magellan terminal holdings case.
The question was whether the limitation of liability was enforceable against bad faith breach.
As you can see, the limitation of liability was very at issue in Magellan.
It was very similar to the limitation of liability here as reflected in Section 5C.
And what the court holds is that whether a bad faith breach can be limited is an issue of fact that cannot be decided before trial.
And I quote, the case law from the Superior Court carves out an exception for bad faith breaches of contract in specific instances.
It is undisputed that parties cannot absolve themselves for their own conduct amounting to fraud.
However, as the claims that fall somewhere short of fraud, such as claims for bad faith, the court must undergo a factual analysis that is premature on summary judgment.
Now, on reply, my adversaries say that the Magellan case only reached this conclusion because there were also fraudulent inducement allegations in the case.
And if you read the case, the presence of fraud allegations ultimately had nothing to do with the court's ruling on bad faith breach of contract.
You can see it right there. It's undisputed that fraud can't be exculpated.
The only question is whether bad faith breach of contract can't be.
And the court says that raises fact issue that I need to address at trial.
And we'd also submit that petroleum is consistent with the majority position in Delaware that bad faith breaches cannot be limited.
And, for example, if we could go to the next slide.
In the context of interpreting a contract construction provision that did not specifically carve out exception for bad faith, the court in J.A. Jones construction versus city of Dover observed that even if a contract reports to give a general exoneration from damages,
it will not protect the party from a claim involving its own fraud or bad faith. And my adversaries in their brief say that J.A. Jones only dealt with tort liability.
That's not correct. The court in petroleum, as the court in petroleum noted, J.A. Jones also dealt with contract liability.
And if we could go to the next slide, the rule and it may be the rule in every jurisdiction, but it's certainly the rule in the majority of jurisdictions is consistent with the law we've just given you, which is that bad faith breach cannot be limited.
And my adversaries didn't dispute that. And I'd like to read you what the Texas Supreme Court has said to say on that issue in Zachary Construction Court.
Generally, a construction provision exempting a party from tort liability or harm caused intentionally or recklessly is unenforceable on grounds of public policy.
We think the same may be said of contract liability to conclude otherwise but incentivize wrongful conduct and damage contractual relations.
This conclusion is supported by lower court decisions in Texas and court decisions in at least 20 American jurisdictions.
And I think that's a very important point to make when we're doing this overwhelming consensus.
And so the question then is, I think we've addressed the public policy aspect of my adversaries motion.
And so, it says sphere of arbitration gets core certain claims for repudiation of a contract breach contract be reached the implied covenant of faith and their appealing on Justin Richmond version.
I'm sorry. No, sir.
Of course, there are satisfied obligations to the claim and included but limited to consequential expectation of the line.
Obviously, you don't have our own delay arbitration demand, but it would be clear that we're seeing bad faith.
But I'd also know that a breach of implied covenant of good faith and fair dealing under Delaware law necessarily requires proof that of a bad faith breach.
And so that's that's where we would rely on.
And so, again, that's a we, I guess we're going to where where I was going, which was in in their motion.
My adversaries promised you very narrow legal issues of contract interpretation.
And in their reply, they're giving you very fact heavy questions on whether bad faith has been whether we're going to be able to prove bad faith on this record.
And that's a fact that's a bad faith is a classic fact question.
And that is would be inappropriate to be resolved now before there's been discovery.
But on top of it, we've given you evidence that there was, in fact, bad faith conduct as reflected in this Trompeter's declaration.
Poor hooked up Sears miners and use them to mine Bitcoin for its own benefit.
It stated it compensated sphere, but never did so.
The contract may not say explicitly, oh, gee, you can't hook up your customers, miners and use it for your own benefit, but it's surely bad faith conduct to do so.
And we'd also submit that accepting three five million dollars in deposits and then maybe keeping part of the contract in place, maybe not.
And then just refusing to take on more miners is also bad faith conduct.
And I'd like to make one last point here, and this was another argument raised in reply, not in the opening.
Whore's citing to the anti bootstrapping rule, which precludes a party from alleging a fraud claim in the guise of a breach of contract.
And I think I heard my friends on the other side also mentioned fraud.
We haven't asserted any fraud claims.
So the anti bootstrapping rule really has no application here.
Unless you have any more questions on public policy, I'll move to contract interpretation.
OK, so section five D provides and there's language in the middle, but the gist is course, total liability will not exceed an amount equal to one month to be payable to core.
Pursuing to order number two and course contention is that section five D unambiguously limits its liability to the amount charged on the last invoice before it files for summary judgment, namely eighty four thousand six hundred eighty five dollars and ninety four cents.
I'll help you that I don't buy that argument at all.
Well, I also don't buy the one that it's the most expensive, which was yours.
So I got it. OK, well, fortunately, we didn't move for summary judgment on that.
So I don't know. All I'm just telling is I didn't believe me.
Well, I'll I'll reserve on that for later.
And so I'm going to move now just to a final word on discovery, which is we submitted a rule fifty sixty motion or affidavit.
Excuse me. I don't think you need to reach it, but I do want to say just a word on discovery.
The norm, the norm in the run of the mill case, ninety nine point nine percent of cases is that you get to you get to have your claims heard on a full discovery record.
And this is not the case that deserves to be cut off at the knees before we have that record.
And I'm a baseball fan and I thought, sorry. So let me ask what's the end result in this?
So you learn today that somebody still has a contract.
Nobody's moved to do anything with that contract.
I mean, you told me that you had miners that were there.
You dispute who they belong to. You told me that you agree that you should pay for them.
And there's letters are standing up saying there's a contract between them and your manager.
So what's the end result? Well, I'm going to dispute whether there is a contract.
They told us there was. All right. So there's some sort of. Yeah.
Because you still got people there. Right. You mean miners. Yeah.
Sure. So you're asking what's the end result? We see one of our claims.
We proved that there was a breach or we prove a non-contract claim and we get our money back and potentially limited by limitation liability.
But you get a claim that's potentially money back at all. Sure. Fair enough.
We have money. But the miners go away. Hopefully we'll get them back.
I don't know how that works. OK. It's part of our proof of claim. At the end of the day.
I'm sorry. What? The miners are part of our proof of claim.
I mean, at the end of the day, what you get is a generalist. Sure.
Maybe you've got some basis for that. I hadn't heard yet, but maybe you do.
You end up getting a generalist. Right.
And your relationship with the core is terminated. To the extent that you had one. Fair. Fair.
And of course, there's always the potential for negotiation or something.
I'm just trying to understand what the end game is.
We're trying to get our money back and that's the end game. And if it's through a general unsecured claim, we're in a better position than we are today.
What I'm really trying to understand is you're not asserting that there's some sort of trust file.
You believe you gave these folks a deposit in return for services. There's a dispute about who services were provided to and who's entitled to act with respect to whatever agreement is that parties think exists.
But at the end of the day, I've been pointed to nothing. I've read nothing that would suggest that there's a fund there or there's some sort of trust fund theory.
This is a good claim. Like a person who sold a box of pencils and didn't get paid on their receipt.
If you don't mind, I'd like to consult with my Steve Goh counsel.
That would be great because it helps me understand what questions to ask.
Good afternoon, Your Honor.
I'm Ted Davidson for Sphere. I think in the proof of claim, we reserve rights to assert election of remedies and other sort of arguments. We reserve a right for an admin claim.
I'm pressing you.
We understand the court's pressing and concern and questions about that trust fund issue.
We're not waiving those rights, but we haven't asserted them yet.
What was the bar date?
It's passed.
So I'm going to guess a trust fund claim would be used and the claim probably gone.
Whatever the effect of the bar date would be, Your Honor.
I got it.
Okay.
Thank you.
And, Secretary Deese, have we, do we, I'm trying to figure out what we're really fighting about. Have we figured out what the likely distribution to GUCS is going to be?
I think the last version of the plan is stock.
Your Honor, it's a 100 cent case.
In terms of cash to unsecured?
Equity.
Okay.
And was that contemplated, I mean, in terms of getting your money back, that is an entirely different world, right?
Okay, Your Honor.
So parties are listening, just so everybody can hear.
As I said, something is better than nothing.
I think I said it carefully, Your Honor.
If this were a hot plant with a million dollars in it, we might not be here fighting so hard.
They've got a proposed plan that at least has an economic recovery that says our claims are going to be paid in full.
Yes, it's in equity, but it's still $35 million of equity based upon the value of the reorganized company.
I wouldn't argue with you.
I'm just trying to understand.
All right.
Just a couple of points.
I thought you were finished.
I'm sorry.
I interrupted you a million times.
I've enjoyed it, Your Honor.
It's much lonelier not having a conversation.
I just want to say one final word.
We've put up the slide, and I just want to say just a couple more words on when it's appropriate to eliminate discovery or to eliminate a case before discovery is complete.
As we pointed out in our papers, courts applying Delaware law never rule on the application of partial limitations of liability like those at issue here without the benefit of discovery.
My adversaries did not cite a single case to you that did so.
My adversaries did not cite a remotely similar case to this one that would have cut off the use of the case before discovery has commenced.
When a party files for bankruptcy protection, they incur certain obligations.
One of those is to meet contested matters.
This is an immensely important case to my client.
We deserve our day in court and to present to you with a full record at trial.
We look forward to that.
Thank you.
What is it that you think you're going to need in discovery?
Isn't most of this?
I got it that you want to go take the depot.
Yeah.
He either said or didn't say certain things.
Sure.
What else do you really need for your case?
I would think it would be coming back the other way.
I think we're lucky.
I guess if there's a disputed issue of material fact on whether the requirements were made today, there's going to be a dispute tomorrow too, regardless of what discovery feels most like.
I just didn't get whether.
If there's a dispute today, I assume that their motion for summary judgment was their best shot at this.
If there's a dispute today about whether the requirements were met, then there's going to be a dispute tomorrow too.
That will ultimately need to be resolved in a credibility determination.
We'll need depositions.
Isn't that the same depot you're going to take the guys?
Yes.
Fair enough.
We'll need discovery into whether the recommendations were made, what the requirements were, whether they were met, whether they were waived.
Is this something we could try in 60 days?
In 60 days?
I don't know that that's realistic in part because our star witness is unfortunately undergoing cancer treatments and is expecting a major procedure.
I apologize.
Not to me, to her.
Yeah.
So, but barring working through that, that is something that could be done.
It just doesn't sound like it's that complicated.
It's a big number of the disputes of relative reach and find.
We ought to be able to do this relatively quickly.
It's not something we need six months of discovery and three months to get ready and we try this sometime next year.
We could do this before the end of the year if we want to do it, right?
I think we, I'm not sure about that.
Let me, can I think about it?
So, let me ask you this.
Yes.
If subject to all of the legal arguments that you want to make with respect to the effect of certain provisions, do you agree with the basic premise that if you have rights under the contract, they come full burden with all of the obligations under contract?
I think that it's a little complicated because there's a partial assignment.
So, I think, but in terms of the limitations of liability, which is really what we're talking about.
Yeah.
Okay.
So, you agree that if you are, if you have rights under the contract, you are subject to all of the limitations that are set forth under the contract?
The ones we've just discussed today, absolutely.
Okay.
Are there others that I've missed?
I'm sure my adversaries will bring them up to you if they have.
All right.
I think I got it.
Thank you.
Just briefly, Your Honor.
I'll pick up on that last point because I think there were some schedules submitted and we had a very different view.
We agree with Your Honor.
We think this could be done by the end of the year.
So, we, you know, we can turn to that when we need to, but their schedule had us going to April, which to us is a non-starter.
Just a few points I wanted to make, there was some accusation that whatever happened at that April Miami lunch that somehow that's the basis for this estoppel point that counsel was trying to find in his proof of claim.
All the money that was paid was paid before then.
If you look at the order number two, that adds up to about $35 million.
It's not correct, Your Honor.
Okay. Well, if you look at the order, when I say keep paying millions, when you add up, and if I'm wrong, I'm wrong, but if when I add up order number two and what the payments were, they come up to about $35 million.
So, it's not like we were sitting around saying keep sending us money, but in any event, we did cite.
Sorry.
Go ahead.
So let me ask you this.
Let's assume that somebody filed a motion to compel rejection of the evening.
Somebody was standing.
Like Griffin.
Whoever has standing files a motion to compel rejection because they allege that you can't cure, can't assume.
What happens to the balance?
I mean, it's a good question, Your Honor.
I haven't.
Yeah, I mean, it'd be a rejection damage claim, but we, in connection with this, if the party that, I mean, I'll just, you know, be candid.
If Griffin were to have done that, we think that they've reached the contract because they didn't supply these miners.
Like Griffin reached the contract.
So.
We're still performing, we have 600 miners, and we're using order number two.
And I.
What would the effect of that be if, in fact, Griffin reached the agreement?
We would say we get to keep the money.
Under what theory?
Under the contract.
We built out facilities.
The provision I read to you about the limitations of liability has a carve out that runs in our favor.
You would have to file a lawsuit when?
Oh, yeah.
I mean, yeah.
You don't just.
Right.
You just don't.
You just don't get the key.
Yeah.
Of course.
So if we went down that path, there would then be a piece of litigation summoned.
Yeah.
I mean.
And so you're objecting to the proof of claim.
And so if you win, you're not pursuing anything else.
You're just done with it.
Is that right?
Yeah, well, the only the only entity that's asked for money is sphere.
Right.
Griffin didn't.
We in our objection to the proof of claim, we pointed all out how they didn't have the wherewithal to provide the miners are part of the all that stuff we would get into to show that there's no basis.
Even if they are a party that they can't recover this money, we would get into some of that in discovery. And so if we won at the end of the day, all of that, that would be it.
We wouldn't be pursuing anybody else for money because we'd be resolving that issue here.
In this context.
And my guess is there will be some subpoenaing of the Griffin people in this context.
I was just trying to figure out should they be since I didn't really understand what the relationship is between fear and Griffin.
Is it we need to join those folks?
I mean, what I don't want to do is I don't want to do this twice.
I mean, I know we got a bar day, but I don't want somebody to come.
I don't want them to run in and go, well, no, it was my money and I have a client.
To which we'd say, well, I got all of that.
But, you know, we're in a chapter 11. You got excusable neglect.
And, you know, well, I thought they were going to do it right and they didn't.
And I, you know, I'm just trying to be efficient about this. I don't want to do this.
Well, I mean, at the risk of thinking out loud here on the podium, you know, we want to be done with this as quickly as possible.
We also, everyone's talked about chapter 11. Yeah, that's right.
We have a plan. We want to get done. Right. And we don't want things hanging out.
So, I mean, I have some concern inviting more people to the party. But I take your point.
I mean, we're going to be saying things about Griffin. We will be deposing Griffin.
I mean, I'm going to subpoena them, no doubt.
You know, but at the end of the day, you know, I still get back to it's a problem between those guys on some level.
Like, right now, right now, there are miners over at CORE that we say are Griffin's miners.
They say they're their miners. Well, Griffin thinks they're Griffin's miners, too.
So, that's why the issue of do they have a contract, do they have any rights is so critical to us.
And we did propose, one of the things I'll just segue a bit, we did propose taking discovery just on that limited issue,
targeted upfront, 30 days, 45 days, whatever, on that issue as an alternative possibility.
So, we don't have to go down the other path. I mean, our point, I think I heard some comment that we, you know,
we agree with them that we can't prove bad faith or not saying that we're not able to prove.
That's got nothing to do with this. The whole point about the bad faith is that's not a basis to get around the limitations provisions.
We would say there should be no whatever that discovery even looks like into bad faith.
Because bad faith, and we cited cases, e-commerce and a couple others, where the court said you can't just say bad faith and get around the limitations provisions.
So, that's kind of a threshold point for you today. Otherwise, we're going to need to take discovery on that, too.
So, if we're going down that path, then I'm thinking more four months.
If we're going down just the path on the are they a party, then I'm thinking six to eight weeks.
So, would you have any objection to including a provision or order that said that, Griffin, you're going to intervene.
You do it by this date. Are you waiving the claim against the estate?
I mean, my own view now is they've already waived it. So, I'm not sure that I'd want to open that up to them.
How have they waived it?
They had an opportunity to file a claim, and they didn't.
Well, isn't that what Pioneer says? I mean, they can get another bite of the apple.
Well, it's excusable neglect. What's the excuse here? They know about it.
All I'm trying to do is I only want to do this once.
I appreciate that point, and I take that to heart.
This makes absolutely zero sense to me in how we got here, but we're going to keep going.
I'm not prepared to say that.
I don't think there's anything else to really get into. You understand what's going on here.
I've got before me the debtor's motion for summary judgment.
I do find that I have jurisdiction over the matter pursuant to 28 U.S.C. Section 1334.
I do find that the resolution of claims against the estate constitutes a court proceeding under 28 U.S.C. Section 157.
I further find that I have the right as a constitutional authority to enter a final order to be considered applicable with respect to the motion.
I want to start with what I think we have learned today.
I think we now have an admission agreement, which I find to be binding, that if, in fact,
the tax sphere has rights to the contract, they come burdened with the obligations under the contract as well.
That is about as far as I was going to be willing to go today.
As I said, I don't buy the theory that it's the last invoice.
I don't buy the theory that it's based on what I've heard, that it's the most expensive invoice.
I don't know how I would figure that out if, in fact, that limitation applies.
I also find the language that's in there about having the necessary permissions, if you will.
That's one of the poorest written provisions that I've ever read.
If it was intended to be substantive, someone just didn't do a very good job.
I don't know what that means.
I am going to have to have testimony on both what it meant at the time, because I do find there's an ambiguity.
I'm obviously going to hear testimony about whether or not those conditions were met,
to the extent that we're going to go down the path of living under the contract.
I do think that the attachment to the group of claim asserts claims that are outside of the agreement.
They don't do it with specificity.
It's hard to figure out exactly what is being asserted.
That is the basis for some limited discovery.
I am, with the omission that was made on the record, which I accept,
and I don't think there was much to give at all about the status of the contract,
I'm going to deny the motion for some judgment.
We're going to move on to scheduling.
I want to tell everybody, this is not a six-month thing.
This is not that hard.
I don't pretend to be a doctor or to understand anyone's personal medical condition.
I want to be as sensitive to that as I can be.
But I also have to recognize that this is a company that, if it's going to survive, it has to get out,
and it has to get out relatively quickly.
This is going to be one of those things.
I don't know why we can't try this.
I'm not going to give you a schedule. You all can agree to it, but it's going to be a schedule that has a trial date this year.
I'm perfectly happy to let you all work through that.
I'm perfectly happy to pick dates that work for me.
Have your choice.
Well, do you want to give us some ideas of what dates you're thinking that work for you,
and we can work backwards from that?
So let me ask, if you had to guess, worst case, what do you think it takes to try?
A day? Two days?
My guess would be two days.
We'd have one, two, three.
Well, I've seen how things go. Maybe three.
We'd have probably a couple of witnesses from Griffin, a couple at least from Coeur,
probably six fact witnesses, maybe seven.
You have to imagine, but I'll start talking.
I'm thinking out loud here, Your Honor.
So you think two days.
Yeah. I mean, we had filed our proposal that had us having, I mean, we had a trial in January,
but I'm certainly not opposed to before the end of the year, just being mindful of the holidays.
What holidays?
I don't know.
Get all seriousness. If you want it in January, you're the debtor.
I might view this as needful.
Your Honor, I would also just add, Ms. Tromper, who is the head of the table witness,
she has procedures that are scheduled for tomorrow, actually, and then end of October.
So that's the only potential spot.
All right. So January would work better for you as well?
Yes.
I saw a nod, yes.
Mr. Grady?
Mr. Crossman was just telling me December would be better, but if we can do it,
maybe split the baby and have it in the beginning part of January?
Sure. You want the second and third?
How about the third?
I'll have to take a break on the fourth, but I can absolutely give you the third and the fourth.
And what I'll do is we'll do a late lunch.
You guys can go grab a bite, and I'll talk about the couple matters that are scheduled
and aren't complicated.
So that's Wednesday, the third, and Thursday, the fourth?
Okay.
And then should we just confer on working back from there?
Works for me.
Is that all right?
I don't know if you guys can talk and work through those.
It's all fine by me.
The concern we have on the third and fourth of January is just we're talking about six witnesses,
trying to make six witnesses available right after the New Year,
which I think might have been some of the holidays you might have been referring to.
So we think later in January probably works better from availability for witnesses.
I don't know who they are yet.
I'm okay with the third and the fourth.
I mean, I know who my guys are going to be.
You know, there's a lot to learn in all of this, because again,
this still makes no sense to me as to why you guys are standing here.
So I'm going to give you the third and the fourth, and Brianna, just reserve the fifth as well.
It turns out to be a problem.
You know how to talk jointly to Mr. Alonzo.
He's got full ability to move the calendar.
But this really needs to be honed down.
I can't imagine there are six witnesses.
Let me ask this.
Do you want – I mean, I trust you all, so I don't require this from folks that I know and trust.
Do you want a final pretrial?
You don't care or don't need it?
You want to ask for one if you get a logjam in December?
We're going to work out an order with those dates and work back
and then have the ability to talk to Mr. Alonzo as well to accept the pretrial.
All right. Absolutely. That's only if you need it.
And if things come up, you're able to –
Yeah, it's going to be discovery issues or whatever.
Well, discovery, again, because we've got such a short timeframe.
Do not engage in the letter writing campaign.
Come see me immediately, as you are.
I tend to save paper and email traffic.
All right.
I'm going to – what I would ask, Mr. Davidson, if you just draft a short order that says,
for the reasons stated on the record for some bank pursuers,
70-50-70 percent of judges deny without prejudice, things may change.
I have so many questions and I'm just trying to be as quiet as I can be.
But with that, sign office to form only by signing office to form only,
not waiving any right of appeal or review you may have.
You're simply confirming that the paper reflects the oral order.
All right?
Yes, sir.
And if you would shoot Mr. Alonzo a text or email once you've uploaded the scheduling order,
but we've reserved time, if that's going to change, let me know ASAP.
Okay.
Or some other people will take it.
All right.
Thank you, Your Honor.
All right.
Sorry for keeping you late.
Sorry for starting.
I'm going to sit right here because I've got to do judge's day's good order.
So with that, everybody have a good day.
Thank you.
Thank you, Your Honor.