Oral Argument Legal Case Summary

Oral Audio Transcript(Beta version)

. There is such a word as necessities in a different context, but it means something out. In the state court, fraudulent transfer statute, the uniform fraudulent transfer act, comment six does talk about necessities. And somehow Judge Wettich used the word luxuries instead, and Judge Wettich's not a bankruptcy judge. And so what's happened in the bankruptcy court context is my opponents have now taken that word luxury and run with it, and are trying to use it as a bankruptcy court might use it in a completely different context. And that Judge Markovet said is not right. Judge Markovet went through all of his analysis and said this is not a luxury discussion. This is a necessities discussion. And so if I can back the lens up for just a moment, fraudulent transfer claims are not complicated. They really aren't. We have overly complicated this case to the nth degree. A fraudulent transfer claim is simply this. The transfer for less than reasonably equivalent consideration. Except in the context of wages directly deposited into an entire piece of account, it does get a little more complicated, doesn't it? We're talking here about a constructive fraudulent transfer. Yes, so I mean your argument that there was no fraudulent transfer to the wife is absolutely correct, but absolutely irrelevant, isn't it? No, there was a fraudulent transfer to the wife by making deposits into the entire piece of account. Okay, we're talking about constructive now. This isn't a regular fraudulent transfer with intent to hit her delay and so forth. So that's that's what we're talking about. You're correct, Your Honor. There are two types of fraudulent transfers under the act. There's the per se and then there's with intent. Per se is where we're basically talking about insolvency at the time of the transfer for less than reasonably equivalent consideration. And with intent is something entirely different. We prove intent through the ten badges of fraud to determine whether or not they were intentionally trying to shield the asset from creditors. We've taken away the discussion of intent from the very beginning, Judge. Markovitz didn't rule on intent because it doesn't exist. It's your position, isn't it, that the fraudulent transfer occurs with the transfer into the into the joint account instead of his own account, but that there can be exceptions to that for reasonable and necessary household expenses. Well, exceptions is very interesting use of word, Your Honor, because what we claim is that there's a defense of necessities and that affirmative defense. Okay, but you start off with the concept is that it goes into the joint account. And then at that point, you do not include necessary, reasonable and necessary expenses, assuming it's raised as a defense. Yes, so we jump to another argument and that is the defendants argument relative to the, I'm sorry, with respect to our argument with respect to burden of proof. And so we'll touch on that just very briefly. Well, no, I'm talking about what the law is. Right, and so the way to conceptualize the law. And our position on the law is that our prime aficious showing of a fraudulent transfer is to show that the defendant directed his money into the entire account. That's the transfer. The transfer, which I believe is misconstrued by my opponent, is not payments to golf club membership. Right, and I, and I misspoke a moment ago because I was attributing to you the other, the argument on the other side. But this question of burden of proof seems well, you think they have to come in and prove the negative. We have to prove the prime aficious case, which is the transfer itself, the result, the resulting insolvency, which of course, we have a $4 million obligation, and I'm going to have $4 million in assets, so they're insolvened. And we have to prove that it was for less than a reason we equivalent consideration, there was no consideration. There is a defense, and that defense is necessities. And that's what's referenced in this comment six to the statute. Well, the question is whether that is in fact a defense or whether it negates part of your cause of action. I mean, whether it's an affirmative defense or whether it's simply saying no, no, it isn't. It isn't for it's what because of, and therefore, I mean, and therefore, the question is, was it part of your case to negate it or was it part of their case, as though it were affirmative defense, to prove it, right? I believe that's accurate

. Yes, that is the issue before us. If it is an affirmative defense, that was not our obligation to characterize the various expenditures that resulted from the entire his account going into trial. This trial would look very different. And again, back to my original position here. Well, the trial looks different or the outcome looks different. The trial is different. Well, do we care if the trial is different? Yes. The outcome is exactly the same. No, it would not be the same outcome. We want a new trial, and here's why. We were constrained. The trustee was constrained by the evidence that the trustee could enter that trial or offer it trial. The reason we were constrained is because Judge McCullough ran with Judge Wettich's ruling. And because he ran with Judge Wettich's ruling, it was interpreted by Judge McCullough that we must not bring to the court every line item of every deposit that had been transferred by the debtor into the entire his account for each deposit constitutes a transfer. And then show insolvency and then pass the burden to the defendant's state. But wait a second, some of the money that was transferred into that account has been used for necessary living expenses, necessities. And we should deduct that from the $1.2 million in transfers that were made into the account. That's how it should go. It's that simple. We couldn't do that. The trustee was prohibited by Judge McCullough from doing it that way. Judge McCullough said, no, you can't bring me 180 line items or pages of these deposits. I don't want to see those. All I want to see is name me the luxuries that were purchased out of that account. So, so, so, Judge McCullough essentially focused not on the transfers into the account, which really are the fraudulent transfers, less whatever's, and instead focused on the transfers out of the account. Would she forced us to identify? No, no, no, no, but even before who identifies it, that's correct. The fact of the matter is the fraudulent transfer is when the money goes in. And Judge McCullough was focusing on what was going out instead. Is that fair to say? That is very fair to say, right? Now, at what point did you bring this to the, Judge Markovitz? I mean, what point did you raise this issue? As I have phrased it at least, at what point did you raise this issue with Judge Markovitz or the District Court or any for the, this court? Well, certainly, the District Court was an issue on appeal. And the District Court, if I may use the words, rubber stamped it. And took Judge Markovitz ruling on its face and said the burden is the burden as it was. But we brought it to the attention of the Court at all times. We brought it to the attention of the Court when we first presented all the exhibits to the Judge pre-trial October 2010 and said, here are the exhibits that we want to use at trial. And he said, don't bring me these exhibits. I don't want to hear it. Here's all I want. And forced us under an umbrella of possible sanctions for violating a discovery stipulation to only use the exhibits relative to the five identified expenditures. That's inherently unfair. Well, you mean, it's not inherently, I'm against the law. I would say it's against the law. If there is, well, I guess the law is written the way it was to be fair, I would hope. What's your best authority for the idea that all you need to do is come in with by statements and cancel checks. 80 years of authority in the Commonwealth has supported the contention that deposits by an individual judgment debtor into an entirety's account, our fraudulent transfers. 80 years of authority, this is not a revelation

. We're not asking the Court to write new law. 80 years of authority in Judge Markovitz. But I let the authority said, except to the extent they are expended on necessities. And when Judge McCullough wrote the opinion in mind and saying exactly that, he then said the burden of that showing of necessities rests squarely with the defendants. Judge McCullough wrote that and that may or may not be correct. And I guess that's the question for us. There's no law anywhere. Any more? I just want to understand completely your argument. You're saying that the burden of the fraudulent transfer, at least initially, which is the transfer without equivalent return or compensation is on the trustee. And then the defense comes in that there are reasonable and necessary household expenses and that that burden is on the other side. Correct. And that's your position. Not again, rather than the entire burden of showing that they're fraudulent, that the monies that you are claiming are, you have to show a negative in effect if you have to show the defense. That's correct, Your Honor. And if I may cite two pieces of authority on that. Burling from the 11th Circuit, I think they use the best wording in the Rossine case that we cite. Matters extraneous to plaintiffs' prime of fish case. This is clearly a matter extraneous. Prime of fish cases for fraudulent transfer for millennia have suggested that all we have to show is the transfer for less than reasonably equivalent value to time when the transfer role is insolvent. That's it. But that's the prime of fish that you're showing. That's the one that constructives, fraudulent. Yes. For constructive fraudulent transfer, that's the prime of fish that you're showing. You're treating the deposit into the entire days as if it were an actual fraud. But the law has never called that an actual fraud. No, we're not doing it, you're wrong. It's constructive because you have to look further to see what comes out of that entire days account. And for what? Do we? Isn't that a part of your burden? I agree with you that we have to look at that. The question is, with whose evidence are we going to view it? Well, you have a right to discover it. You can take evidence from whomever and wherever you can find it. And Judge Markovitz is ruling, I think, was accurate on this. Judge Markovitz said that these are documents and information that rest squarely with the defendant. And it's extraneous to the prime of fish is showing. A prime of fish, and let's not forget, the statute says nothing about this. Only a comment addresses the idea of burden shifting and not with respect to this defense. It's completely... You mean a comment in the legislative history? Comment six, which everyone wants to focus on here, says nothing on this burden staying with the plaintiff, says nothing about that whatsoever. In fact, the fidelity case that cited is has nothing to do with the transfer of the burden with respect to this defense of necessities. So, are you concerned? Let me just say this. In this case, it seems to me all the facts were known to the judge and he made the rulings, he made. The evidence was out there. The other side produced facts related to the account

. He had all the account information. It sounds to me like in terms of this case, the realities of this case. And Judge Davis and I think his former district judges know that once you get the evidence in the case, the burden of proof is in a picture, but it's not. You know, you decide a case based upon the facts before you. Are you talking... Is this really a question more for what the third circuit law ought to be in this area, as opposed to any really practical consequences as far as this case is concerned? No, Your Honor, what we'd like to have, if I can run with your point, all the facts of the case are not in the case. The reason all the facts of the case are not in the case is because the trustee was constrained from putting all the facts in the case. Well, as soon as you say that, of course, the other side is going to say, well, we want a continuation of the findings of damages. And I didn't think you wanted that. We think the damages analysis has been cut off the way the defendant has put it here, saying now that for the first time... Oh, are you saying there should be a... This case can't... We can't decide this case finally. It's got to go back for the pursuant to the step before Judge McCullough. Contrary to what the defendant has done, we have asked the Court to recognize that we were prohibited from bringing evidence in. There is no such prohibition on the defendant from having brought in evidence. Tell us. Tell us. If we sent it back, how would the Court... I'm stuck here forever. How would the Court... How would your view with the bank... I said, soon it goes back to the Bank of C Court, the Bank of C. That would be correct. How would exactly, you know, from step to step, how would the Court in your view proceed appropriately and how would that affect the result? Before I answer your honor, I see that my 15 minutes are often... You may have questions. Time to adjust some of the other issues as well. This will not come out of your room, but thank you. There are people waiting here to argue so they would forget on it

. Thank you, Your Honor. So it would go back to the trial court and here's what the trial would look like. We would first bring in the bank statements showing every one of the deposits. It would be a long list of deposits over the course of a predetermined period, which we say starts in April of 2003 and runs through the date of the filing of the Bank of C, which is another one of the issues on appeal. This quote unquote, look back period, which really got run amok. So we would list all these deposits and we would show the amount of money that was put into the entire account. That amount of money constitutes at a time when the transfer was insolvent, a constructive fraudulent transfer. That's the prime official showing. He transferred his asset into an entire account. 80 years of loss as that's it. And that's it for them to show what were necessities. That's it. Or that the money came into the entire account came from another source. Correct. It's not a complicated issue. Fraudulent transfer cases. And this is what you asked Judge Markovitz to do and he wouldn't do it. We asked Judge Markov, in fact, that's a very interesting point. In between the time that Judge McCullough passed and the time that Judge Markovitz convened this matter from retrial, there was a discussion as to how this was going to proceed. I believe this is in the record. We haven't been asked to specifically address it, but I will hear. And Judge Markovitz was not so convinced as Judge McCullough was that Judge Wettich's ruling in the state court was the law of the case. And in fact, now his ruling does address this and says flat out, it's not law of the case. It was an interlocatory work. No, but we were just kind of aligning over the point. I thought we were focusing now on what it was that Judge Markovitz did that should be done differently if it was sent back and there was an effect. And now, a separate trial. I mean, we sort out these issues, the legal issues, and send it back. I guess is what you're asking for. And then you can basically introduce the entire account and then just say, okay, now it's your job to the other side to show what should come out of it. And then we'll take the rest. Yes. And so we asked Judge Markovitz to retry, well, actually, Judge Markovitz idea to retry the matter. You're asking to do what Judge Wettich said was your property was your position. Yes. And in fact, he said to us, can you show us in the record where you did that? Because I'm not, I'm not, I'm not sure about that. I don't believe that that was an interim hearing, Your Honor. I don't know that that actually made it into the record. Well, how are we going to take it then? I mean, you know, we don't, we got to go on the basis of what's in the, what's before us. Let's assume for purposes of argument that we don't have that in the record. We're not. Let's assume that it is to the question. Let's assume that it was never done. Sure. So then the question is, did we ask Judge Markovitz to do something different? Judge Markovitz is ruling, I think, is instructed

. Judge Markovitz is ruling recognizes that we wanted to do this. Because Judge Markovitz says that this sentient motion should never have been an issue. He didn't feel and he does say this in his memorandum opinion. He does not feel that we should have been constrained by the ruling of Judge Wettich in the state court. Let's assume, let me ask you this. If we agree with Judge Markovitz on the period 203 to 207, and we agree that reasonable and necessary expenses are accepted as he did. And we agree that with his findings as to the Country Club expenditures, and we don't think that there should be a, the, the, the step that there was not, and we agree that there was no real step for a, he wasn't bound by a step in stipulation that there'd be a separate proceeding. What is there for him to do? I mean, you want to, you basically, as I understand it, you want him, want us to send it back so that you can introduce all the deposits into the account from 2003 to 2010. Other than that, if it's just 2003 to 2007, are we, is this going to accomplish anything? I would say that it does, because again, we were asked to identify the luxury expenditures, and we were only able to come up with these five categories which you have before you. And included the golf club membership that transfers into the retirement accounts and the the house in Florida, thank you, and so these five items were all that we're going to come up with. It shouldn't be upon us to come up with the exhaustive list of what they did with their money, because that's what we're presenting to Judge McCullough. So you want them to account for each and every expenditure that they made over these years. That's the defense. That's the defense. Your view is the, it's very simple, whether it's right, whether you preserve the question. But your view is really, as you started out by saying very simple. All the money that went into that account was because it was out of your reach, because it was by the entirety, all that money was the beginning of, was fraudulent, was constructively fraudulent. And then it's for them to come up and say, here's stuff that we spent on necessities, whatever that means. And here's the stuff that didn't, in that account, that didn't come from the salary that was sent in there. And then you take those two things and you subtract it from the entire amount that was transferred because that's the fraudulent transfer. That's correct, Governor. If I may address your honors point, the reason we don't go all the way to determine whether or not it is a fraudulent transfer. The reason we only have to stop the deposits is this, the transfer, which I think we all agree on, now the transfer itself is the movement of the money from the possession of the judgment debtor, his wages and earnings, into the entire account. Stop. That's the transfer. Can I ask you a question about that? Was prior to a particular dating question, when you say he knew that he was insolvent, was the money from his wages and earnings going into a separate sole account for him? In other words, was it always going into the joint account? The vast majority, if not all, yes. I see. So this isn't something where all of a sudden woke up one day and said, I need to put this in the joint account to somehow put it out of the reach of creditors. Then we'd have an intent claim. And we're not bringing it in intent claim. We're being constructed. The mere fact of putting it in a joint account is sufficient to under the non-intent fraud, constructed fraud account. It last count, Your Honor. Seven different judges agree in these proceedings. Do we have any, oh, in these proceedings? In these proceedings. Seven different judges agree. We wanted to be ten. We would love it to be ten. Two district court judges, four bankruptcy judges, and a state court judge have all now acknowledged that the movement of the money from the individual's. The other case is tightest. And in this case, even the district court judge agreed. And I know that we're day and over here and we're going as though under law of the circuit. It says, we don't really care what the district says. There were of the five areas that you're concerned about. If we did what you want us to do, everything would be open again

. You'd have a chance to show that three hundred and thirty eight thousand went to her. That you'd have the floor to house. All of that would be open again. You'd have the clubs open again. You'd have the retirement open again. And you'd have the life insurance open again. Is that right? It's an effect, an effect, a redo of the whole thing. A redo and a very... In the sense you'd wipe those out and you'd say, we're entitled to show what into these accounts and maybe even to Mrs. Arbigast. And then throw the ball into their court to show that it wasn't, that it was reasonably an reasonable and necessary. That's the way it should be. That's the way these trials should all be. And unfortunately, five of them were all done under the pretense of Judge Wettich's order in the state court. Judge McCullough had warned before he passed that with respect to all five, he was going to constrain the trustee from putting on the evidence to show exactly that. Okay. And then Judge Markovitz even acknowledged. And here's, I suppose, the idiosecrecy of Judge Markovitz's ruling. Because he was dismissive of Judge Wettich's ruling, I feel would have been incumbent upon Judge Markovitz to then say, well, because I disagree that Judge Wettich's ruling is the law of the case, the trustee should get a fair shot at this. Yeah. My only question now is whether you made this very claim to Judge Markovitz, that this was your position and that, I mean, it's obviously things get refined as you think about how to appeal. And where on the record there is some, where he aired, really. And where he, where the fact that he was airing was brought to his attention. On this point, he didn't, Erie, on her. On this point with respect to the transfers and how we should have been able to look at the transfers. Right at the start of the five points. And he focused just on those five issues, you know, and then decided them. He didn't, the way we've just described it, wasn't his approach. His approach wasn't saying, okay, you prove the $1.x million that goes into that account. And it now is on the other side to show that they're reasonable and necessary. And that wasn't, that wasn't brought to his attention. I believe it was. And I think that that is evident by his ruling. I believe that what happened with Judge Markovitz with what I'm calling an inadvertent diversion. Judge Markovitz has now said that's not the law of the case. The trustee should not be sanctioned. The trustee should have been allowed to put this stuff in. But Judge Markovitz didn't see that it would make a difference if we did put it in. And so he ran with the five categories thinking that was the exclusive list of categories when it's not, well, we won't know. Let me ask this. Is there anything wrong with the five categories? No, those five categories should definitely be included. So, so I think you want to amend your response to Judge Walker because you're not asking to reopen all of that

. What I'm assuming that when you're under say reopen that we're not throwing away all the evidence, and certainly the evidence is what you're saying. No, no, no, I understand that. But I guess what Judge Davis is saying is, are you saying there's more than the five categories? There, you know what? And we recognize that there might be. And that works against us. Yeah. That clearly works against us. There may very well be. And again, I don't feel that anyone should be constrained. When you say it works against you, I'm not sure what you're saying. Nor am I. Because what if they raise additional defenses where they can show that some of the $1.2 million went for more than just these five necessities, maybe seven necessities. Right. But you're not, you don't feel you don't want to be constrained by the the monies that were spent on these these these items. So you you you would like to have, you know, the entire you're going to start from a different premise. You're not going to start with the money that was spent on these items. You're going to start with all the money that went into the account. Correct. And we believe that even with respect to these five items, we might come out better than we did. So even if we were limited to these five items, if the defendants were limited to these five items, we know that if we started under the premise that $1.2 million is our starting point, and then we subtract the money that was spent for actual necessities. You would much much rather start with 1.2 million. Correct. So you would you would recover, I guess under your theory, automatically any cash expenditure, any ATM withdrawal, you would get that automatically. No, I don't. Well, how would a defense, let's say you have a bank statement that shows a $300 cash withdrawal from an ATM in downtown Pittsburgh on X date 2006. Do you really think somebody could come in the court under oath and testify what he or she did with those 300 bucks? That's why it's not our burden. Our burden is only to show the transfer. So your answer is yeah. They have their stop. Even if the even if the spouses made a 200,000 deposit into the account two days before, your submission is those $300 taken from that ATM, we get that. It's not all the realm of reason to have someone come in and testify that I spend this much money on groceries per month, that I spend this much money on insurance premiums per month, that I spend about $300 taken from an ATM and you got your grandkids with you and you're buying an ice cream code. And so if we look at it line, if we look at it line and by line on them, yes, it might be difficult, but it would not be difficult to come in with annual expenditure showing what their necessities are. That's not that difficult. We all budget, we all use QuickBooks or we use some other type of budgeting to know whether or not we're going to have money at the end of the year to pair. Attaches, it's not that complicated. And when we're talking about necessities, it's even less complicated because we don't have to know how much money went to fuel the boat. So by the way, I assume I have looked at this closely. You know how much of his wages went in there, right? Yes. And you know how much of her independent funds went in there, right? Yes. Is that the 1.2? Is that net to know what's the net of that? Let's call it 1.2 net. 1

.2. His wages. And so you want as much of that 1.2 is they can't prove we're necessities. Precisely. Yeah. Can I just go go over the five items? It started off with transfers into Mrs. Arbigas' sole account. And I think the bankruptcy court there thought that it was just as likely as not that that money came from, not from him, looked from her. And then as far as the retirement account was concerned, that never went into the joint account. That was just came right from the employer. Some, yes. There were two categories of that. But yes, some went right from the employer. Yeah. But it didn't go into the joint account. None of the monies went to the joint account before it went to the retirement. I believe that's correct. And then the life insurance policy was for fair and adequate return to him. In other words, he got what the life insurance policy, that's not fraudulent. Correct. I believe that's what Judge Markman said. So that leaves you with the, and those rulings would presumably stand. I believe that's correct. Okay. Then, then, that leaves the clubs in Florida of the five that are at issue. Is there the largest under the theory, unless we throw out the whole thing and make everybody come back, you're basically saying that if there's a retrial of this whole case based upon your theory, then these other various rulings would still be applicable. I believe that's correct. Is it in on individual items? Those are legal arguments that we're not challenging. And my only real question is can you establish that you challenged the approach of the burden in the way you have today? We believe that Judge Markman is ruling memorializes our position. And does that, is that set forth? Can you show me there and where that is? And maybe in a rebuttal when you get back up where that is in his opinion? I will with that. Okay. Now, may I speak briefly to this look back period? Well, you should hold that for rebuttal. Okay. In rebuttal, we also are going to be addressing the cross appeal issues as well. Of course. Thank you very much. Okay. Mr. Crawlick, you'll be glad to hear from you, Sarah. Did I pronounce that correctly? Yes, you did, Your Honor. Thank you very much. It's uncommon for it to be pronounced correctly, but it is. Good morning, Your Honor. I'm Nicholas Crawlick and I represent in the court, although I represent Thomas Arbigas, the debtor of purpose to this argument

. I've been designated as arguing counsel for both Thomas Arbigas and his wife Mary Claire Arbigas. Listening to to counsel's argument, Your Honor, a lot of it may apply if this was all in a vacuum. And I've got to deal with this in terms of the background. Obviously, the predecessor to the trustee TriZick, which was the commercial landlord of the partnership, which Mr. Arbigas was a member, had filed suit and obtained a judgment in court comment, please. I think as the record will show, there are arguments, there are comments made that there had been extensive post-judgment asset discovery to determine what happened with the cash, the payments, the salary of Mr. Arbigas, and there's numerous references in the record about dozens of bankers box filled with thousands of documents going back over a decade as part of the asset discovery process and state court to provide the information to TriZick on the commercial landlord. So this is not a situation where the information regarding the transfers of the income, the wages, was squarely or solely within the possession of the debtor. The creditor had that information and obviously shared it with the trustee. Fast forward to the bankruptcy filing of Mr. Arbigas and then fast forward to the removal of the state court fraudulent transfer case, which is where this action began to the bankruptcy court for trial before Judge McCullough. The initial response filed by Mr. Arbigas to the fraudulent transfer complaint was a motion for a more definite statement. And what we asked was tell us out of all of these documents and everything that we've provided to you, you can look at them, tell us what you claim to be the fraudulent transfers so that we can go on and put in evidence to rebut what you're contending to be the fraudulent transfers. What's in the fraudulent transfer of the transfer in that or even a accomplished rather than these various transfers out? Well the transfers out would categorize them as whether or not the initial transfers were fraudulent because if they were used and this is where we get into the luxury necessities argument but if they're used for for necessities they're not fraudulent. Well you were about to say that you asked that the judge asked the trustee to say what was what was what was fraudulent and if the judge did that and the trustee responded to these five categories then I assume that your argument would be that's what that's those are those are the parameters of this case. Judge the judge didn't in a vacuum tell the the trustee you cannot allege these various transfers as fraudulent. What happened was in response to our motion for a more definite statement the parties and it entered into a stipulation for a case management order. That's in the record. Okay in consideration of the trustee identifying at a later time in a pretrial statement the specific categories of the transfers she claimed to be fraudulent we withdrew our motion for more definite statement as moot and filed an answer on the merits. That led to the April 20th I believe 2010 consent case management order where the agreement of the parties between the trial council which the trial council was Mr. Vedic and Mr. Levin whereby the parties agreement was set forth and in that consent case management order was a statement that said trustee is to identify those specific transfers which she claims to be fraudulent and those objections to which she those exemptions to which she continues to maintain an exemption. And does the record say tell us that she basically changed her mind about about that is that what happened here because I think what you just said is clearly in the record it is there seems to have been an agreement that the trustee would come forward with a list of what they said what she contended were not necessities. Correct that was our understanding that was the way that the way it appeared in the consent case management that's the way it appeared specific transfers. But then later she came back and said here take this 189 page or whatever it was list and you you saw it sanctions on the basis of that. And to go that route your honor would have involved going through as I mentioned earlier the thousands of pages of documents you know credit card receipts ATM withdrawals checks what was she entitled to change her mind. Not when she lender into a consent case management order and the second thing that was that's also clearly in the record was a evidentiary stipulation on the first day of trial October 14 2010 at the outset where the discussion was held a colloquy between Mrs. Arbygast the attorney in the court below Mr. McDonough and Judge McCullough wherein it was identified that this is what we have decided to do counsel for the trustee and us to expedite and to make this a more efficient process of going through the trial rather than going through the tens of thousands the trustee would introduce his or her exhibits identifying you know their evidence in support of the claims of fraudulent transherent they would have their offer of proof and then the Arbygast would want to take a stand and try to defend the exemptions and defend the transfers is not fraudulent. This this would help me. Sure your answer to this I think would help me. Imagine, care factually not this case but imagine that over four or five years his wages went into the entirety's account and never came out nothing ever came out. Not even for an assessment either not even not for anything. Do we have a fraudulent transfer? I would submit that you do not because they were not used to purchase either and let's let's forget about the argument either luxuries or non necessities. But what do you say? I mean he's hidden his wages hidden in quotes. He's put his wages. She clearly has no no interest, no protectable interest in his wages from the firm and he's he's basically just put his wages in a form that the creditor can't reach. Are you is your hypothetical that only his wages are put into that other funds as well. It's an entirety's account. Then to the extent that Mrs. Arbygast put in her separate assets her separate money then arguably he's received reasonably equivalent value and that's one of the elements of a fraudulent transfer claim. You transfer property. What is the reasonably equivalent value received by him by virtue of the spouses deposits in her separate assets she contributed to the marital estate. Okay but leave those aside because that's not what we're talking about. We're talking about his wages. That's what that's the issue here right. Right. So the question that Judge Davis asked was the simple fact of putting those into the entire of these account. You say it's not a fraudulent transfer and and yet Judge Markowitz as I understand it said it was and then the question comes up were expenditures reasonably and that reasonable and necessary for household expenses and then those will not be counted but the rest will be. And the Arbygast put on testimony with regard to what they used the money for and they also testify there's also some testimony although not a great deal of testimony about the extent of Mrs. Arbygast's contributions to the marital estate from her separate assets her separate funds. That goes to the question of reasonably equivalent value. He put in his wages into the into the joint account. She also put in her separate assets. So to the extent that Mrs. Arbygast put in her separate assets there's a couple of cases and related cases in the bankruptcy court in this in this matter from some of the other partners that there is a corresponding reduction in the amount of the claimed fraudulent transfer based on funds coming from other sources. Right. That's understood. Okay. So from the standpoint of you know in the abstract. We can forget those in terms of the analysis that we have to think about. They have no bearing on this case. Right. Well do respect your honor and Mrs. Arbygast contributions do have bearing on this case. Well they only only only on the output from the disbursements. Yeah. Your argument that it's not a fraudulent transfer unless she didn't contribute. I'm just I'm not getting that at all. It's the it's the constructive nature of him receiving wages in a nanosecond and then transferring immediately into the entire his account. That's the fraudulent transfer. Right. Right. That is the fraudulent transfer but to the extent he gets a reasonably equivalent value for his transfer by Mrs. Arbygast put in which has nothing to do with what she puts in except to the extent we can prove that she put something in that covered some. And then when she put it this way when she puts money into the account there's no fraud involved. That's correct. It's her money going into the joint account. Right. And she doesn't have any creditors. It's his creditors better important. It's law firm. You work for the law firm. So so so that's that's just confused as the issues to raise that. It seems to me because I don't see it how it has any bearing at all. Simple simple. My colleagues are saying it sounds so simple to me. I don't know why you're what problem you have with it is that the fraudulent transfer was the money that was paid by the law firm into their joint account period. And then you take out a necessaries but the fraudulent transfer itself the the universe of it is the money that was put in and then the question is how much is it you can call it for value and call it necessities the question is then how much do you reduce that amount by because of what it was spent on which you start with only what was given paid by the law firm to him and then through him to the account

. We're talking about his wages. That's what that's the issue here right. Right. So the question that Judge Davis asked was the simple fact of putting those into the entire of these account. You say it's not a fraudulent transfer and and yet Judge Markowitz as I understand it said it was and then the question comes up were expenditures reasonably and that reasonable and necessary for household expenses and then those will not be counted but the rest will be. And the Arbygast put on testimony with regard to what they used the money for and they also testify there's also some testimony although not a great deal of testimony about the extent of Mrs. Arbygast's contributions to the marital estate from her separate assets her separate funds. That goes to the question of reasonably equivalent value. He put in his wages into the into the joint account. She also put in her separate assets. So to the extent that Mrs. Arbygast put in her separate assets there's a couple of cases and related cases in the bankruptcy court in this in this matter from some of the other partners that there is a corresponding reduction in the amount of the claimed fraudulent transfer based on funds coming from other sources. Right. That's understood. Okay. So from the standpoint of you know in the abstract. We can forget those in terms of the analysis that we have to think about. They have no bearing on this case. Right. Well do respect your honor and Mrs. Arbygast contributions do have bearing on this case. Well they only only only on the output from the disbursements. Yeah. Your argument that it's not a fraudulent transfer unless she didn't contribute. I'm just I'm not getting that at all. It's the it's the constructive nature of him receiving wages in a nanosecond and then transferring immediately into the entire his account. That's the fraudulent transfer. Right. Right. That is the fraudulent transfer but to the extent he gets a reasonably equivalent value for his transfer by Mrs. Arbygast put in which has nothing to do with what she puts in except to the extent we can prove that she put something in that covered some. And then when she put it this way when she puts money into the account there's no fraud involved. That's correct. It's her money going into the joint account. Right. And she doesn't have any creditors. It's his creditors better important. It's law firm. You work for the law firm. So so so that's that's just confused as the issues to raise that. It seems to me because I don't see it how it has any bearing at all. Simple simple. My colleagues are saying it sounds so simple to me. I don't know why you're what problem you have with it is that the fraudulent transfer was the money that was paid by the law firm into their joint account period. And then you take out a necessaries but the fraudulent transfer itself the the universe of it is the money that was put in and then the question is how much is it you can call it for value and call it necessities the question is then how much do you reduce that amount by because of what it was spent on which you start with only what was given paid by the law firm to him and then through him to the account. But what I was driving at your own is that it is also reduced by the extent to which the non debtors files contributed her separate assets and her separate funds. That's not even in consideration because that's not fraudulent. It's not fraudulent but it's to show that there was really equivalent consideration, reasonably equivalent value to Mr. Arvigas because she contributed to the marital estate and that's why it's relevant in this case because there was a stipulation that the party's entered into to allow for just that type of evidence to go in after it was determined. Does anybody agrees I think? Does it matter how you map it? I think everybody agrees that if she put money in that the trustee doesn't get that money because she's not the debtor and she wasn't she was not that our payments and we're not fraudulent. She's not the debtor it's not a fraudulent transfer. What my point is is that it goes to reasonably equivalent value received by Mr. Arvigas for his deposit into the why is that? I mean what does it have to do with value to him for his deposit? Yeah because that's an element of a fraudulent transfer. Yeah I know that's an element of the fraudulent transfer but how is it valued to him as an individual to have done that. I mean it's it's unrelated to this to his transfer it seems to me he puts money into the joint account removes it from the creditors. She isn't doing anything she's just contributing to that account and you could have 10 other people contributing to that account too and that'd be fine too if they felt like it but but but the real thing we're focusing on is what his what his contribution was into that account and whether or not he got value back for that money that he put into the account not in terms of anything that anybody else put into the account but was it for reasonable and necessary expenses or was it for a purchase of a car which he got which was then part of the bankruptcy estate or something of that sort. It's value to the extent that the funds that Mrs. Arbigas contributed to the mayoral estate were used to satisfy Mr. Arbigas' obligations. That's the value he received. He wasn't the only one putting his wages into the account for resources. Right, but you're going to cut those. Are you is this an argument to try and get more money for the for the Florida House or reduce the Florida House value or something? I mean she did put money into the Florida House. It did not come out of the joint account, right? No the acquisition of the Florida House your honor came from a withdrawal from an exempt pension account plus another 5,000 from the joint account which Judge Markwood said well to the extent of the 5,000 that came from the joint account that that's a fraud when transferred but that erroneously presumed that none of Mrs. Arbigas' separate assets went into that account. I think I finally get your point. I think I agree with it but I think I get it. Is it your argument that he puts in a hundred dollars, she puts in a hundred dollars and they expend a hundred and fifty dollars to pay the light bill. Your argument seems to be that he gets credit for the first hundred dollars to its light bill. Is that your argument? Well, she only gets credit for the fifty of the hundred and fifty dollar light bill. Well, you'd have to change that that analysis to a non necessity or a luxury expenditure. The light bill is a necessity. Everybody agrees that. So it wouldn't be a fraudulent transfer in any event because it's a necessity. But we're not focused on the payment of the light bill as a transfer, fraudulent or not. We're focused at least in the first instance on what goes into the account and what I think we've been trying to get you to address in a way that we finally understand it is why it matters what she put in. Because to the extent that her funds were used to pay that obligation, then yes, that's the benefit to him. How could we possibly know who's funds? The funds are fundable. Well, that was one of the issues that we've created in our appeal in the sense that we didn't get the opportunity to show that. That's in our cross appeal. As far as the the pretrial evidentiary stipulation is how the parties were going to proceed. We're going to proceed to identify number one, what those fraudulent transfers were, which the trustee ultimately did after much effort. Then once the court made the ruling, if the court found that there were no fraudulent transfers, then the dollar amounts wouldn't be, wouldn't matter. Because there would be no fraudulent transfers. With the stipulation called for, which was entered into in the first day of trial, is to the extent that the court did find that there were fraudulent transfers, then the parties, number one, would attempt to agree as to the amounts that would be applicable to those findings, the dollar amounts, or that a subsequent. I think you will actually have a trial on all 189 pages. I don't think we need to have a trial on all 189 pages. Except for the five, except for the five categories, that is that what you, do you think you're going to come out better if you do it line by line? No, we did that, Your Honor, as a part of case management. It's part of making this case proceed in a judicially efficient and economical way. Judge McCullough didn't want to go through thousands and thousands of pages of documents with a three month trial involved

. But what I was driving at your own is that it is also reduced by the extent to which the non debtors files contributed her separate assets and her separate funds. That's not even in consideration because that's not fraudulent. It's not fraudulent but it's to show that there was really equivalent consideration, reasonably equivalent value to Mr. Arvigas because she contributed to the marital estate and that's why it's relevant in this case because there was a stipulation that the party's entered into to allow for just that type of evidence to go in after it was determined. Does anybody agrees I think? Does it matter how you map it? I think everybody agrees that if she put money in that the trustee doesn't get that money because she's not the debtor and she wasn't she was not that our payments and we're not fraudulent. She's not the debtor it's not a fraudulent transfer. What my point is is that it goes to reasonably equivalent value received by Mr. Arvigas for his deposit into the why is that? I mean what does it have to do with value to him for his deposit? Yeah because that's an element of a fraudulent transfer. Yeah I know that's an element of the fraudulent transfer but how is it valued to him as an individual to have done that. I mean it's it's unrelated to this to his transfer it seems to me he puts money into the joint account removes it from the creditors. She isn't doing anything she's just contributing to that account and you could have 10 other people contributing to that account too and that'd be fine too if they felt like it but but but the real thing we're focusing on is what his what his contribution was into that account and whether or not he got value back for that money that he put into the account not in terms of anything that anybody else put into the account but was it for reasonable and necessary expenses or was it for a purchase of a car which he got which was then part of the bankruptcy estate or something of that sort. It's value to the extent that the funds that Mrs. Arbigas contributed to the mayoral estate were used to satisfy Mr. Arbigas' obligations. That's the value he received. He wasn't the only one putting his wages into the account for resources. Right, but you're going to cut those. Are you is this an argument to try and get more money for the for the Florida House or reduce the Florida House value or something? I mean she did put money into the Florida House. It did not come out of the joint account, right? No the acquisition of the Florida House your honor came from a withdrawal from an exempt pension account plus another 5,000 from the joint account which Judge Markwood said well to the extent of the 5,000 that came from the joint account that that's a fraud when transferred but that erroneously presumed that none of Mrs. Arbigas' separate assets went into that account. I think I finally get your point. I think I agree with it but I think I get it. Is it your argument that he puts in a hundred dollars, she puts in a hundred dollars and they expend a hundred and fifty dollars to pay the light bill. Your argument seems to be that he gets credit for the first hundred dollars to its light bill. Is that your argument? Well, she only gets credit for the fifty of the hundred and fifty dollar light bill. Well, you'd have to change that that analysis to a non necessity or a luxury expenditure. The light bill is a necessity. Everybody agrees that. So it wouldn't be a fraudulent transfer in any event because it's a necessity. But we're not focused on the payment of the light bill as a transfer, fraudulent or not. We're focused at least in the first instance on what goes into the account and what I think we've been trying to get you to address in a way that we finally understand it is why it matters what she put in. Because to the extent that her funds were used to pay that obligation, then yes, that's the benefit to him. How could we possibly know who's funds? The funds are fundable. Well, that was one of the issues that we've created in our appeal in the sense that we didn't get the opportunity to show that. That's in our cross appeal. As far as the the pretrial evidentiary stipulation is how the parties were going to proceed. We're going to proceed to identify number one, what those fraudulent transfers were, which the trustee ultimately did after much effort. Then once the court made the ruling, if the court found that there were no fraudulent transfers, then the dollar amounts wouldn't be, wouldn't matter. Because there would be no fraudulent transfers. With the stipulation called for, which was entered into in the first day of trial, is to the extent that the court did find that there were fraudulent transfers, then the parties, number one, would attempt to agree as to the amounts that would be applicable to those findings, the dollar amounts, or that a subsequent. I think you will actually have a trial on all 189 pages. I don't think we need to have a trial on all 189 pages. Except for the five, except for the five categories, that is that what you, do you think you're going to come out better if you do it line by line? No, we did that, Your Honor, as a part of case management. It's part of making this case proceed in a judicially efficient and economical way. Judge McCullough didn't want to go through thousands and thousands of pages of documents with a three month trial involved. That's why the parties entered into the consent case management order saying, trustee, identify these. And yet, both parties are here complaining about not having been able to vindicate what they thought they were bargaining for in that case management order. I just heard you say we weren't permitted to do that. Well, the stipulation that I'm referring to was not in the case management order, but it was on the record in front of Judge McCullough based on the case management order. Based on the case management order. That's correct. You know, the appeal that was filed, and the claim against Mr. Arbagas was, as Your Honor pointed out, over like 1.2 million or several million. And the case came out with a $143,000 judgment against the Arbagas, which the trustee appealed. All right. You need more to be here. I understand. Yeah, we filed across appeal based on the issues we raised that we thought had merit. And that included, you know, the evidence for stipulation, which allowed us, which would have allowed us to introduce evidence of Mrs. Arbagas contribution, not just for the acquisition of a couple of the assets, you know, the Florida House wasn't anything from her money, as I mentioned earlier. There was one item, one of the club memberships. All right. There was evidence for the acquisition of that. You know, some of her money was paid the initiation dues. But the claims, okay, finish your thought. But the claims that the trustee was pursuing also was the continued support and expenses and maintenance of the Florida home and the continued expenditures on the club memberships and how Ms. Arbagas use those club memberships. And there was no evidence, no effort, no opportunity to provide evidence as terms of how much of Mrs. Arbagas separate assets were included and used in that in the payments of those expenses. And we're, now that's, that's what we complained of in our cross appeal that the trial, evidentiary stipulation was not given effect and Judge Markovitz essentially ignored it. Notwithstanding the fact that at the second hearing on April 27th at the outset, trial counsel for the trustee, and this is also in the record as well. So it's our understanding that the April 27th rehearing, which was occurred as a result of Judge McCullough's death, was not to replace the record of the October hearings, but to supplement it and using Mr. Fedick as words because he said, because there were stipulations plural. Okay, let me ask you, though, so that you are going back to the lookback period. We've got a, Judge decided that the lookback period was the four years prior to the civil act prior to the first state court action, 2003 to 2007, right? That's correct. And is it your position that that that was correct? Yes, Your Honor. Okay. The other side says it wasn't and I take it that your reason, your reason for that is that that was in effect the, what the parties discussed before Judge McCullough. Right. And also I take it, I think there's a general rule that the parties are supposed, when they go into bankruptcy are really standing in the shoes of the prior creditor and under state law. That those four years would have been the correct period of time. The, the, the trustee is standing in the shoes. Trustee standing in the credit. Yes, that's correct. Okay. I just want to be clear on that. Yes. This, Your Honor, I think we've pretty well covered what, what I want to address with regard to Mr. Levin's arguments and following up on the, the, the stipulation or the agreement regarding the four years, that, that was not an vacuum either because we had a situation where the trisicon through its Pittsburgh Council had, after the bankruptcy had been filed, had written a letter to Judge Wettick

. That's why the parties entered into the consent case management order saying, trustee, identify these. And yet, both parties are here complaining about not having been able to vindicate what they thought they were bargaining for in that case management order. I just heard you say we weren't permitted to do that. Well, the stipulation that I'm referring to was not in the case management order, but it was on the record in front of Judge McCullough based on the case management order. Based on the case management order. That's correct. You know, the appeal that was filed, and the claim against Mr. Arbagas was, as Your Honor pointed out, over like 1.2 million or several million. And the case came out with a $143,000 judgment against the Arbagas, which the trustee appealed. All right. You need more to be here. I understand. Yeah, we filed across appeal based on the issues we raised that we thought had merit. And that included, you know, the evidence for stipulation, which allowed us, which would have allowed us to introduce evidence of Mrs. Arbagas contribution, not just for the acquisition of a couple of the assets, you know, the Florida House wasn't anything from her money, as I mentioned earlier. There was one item, one of the club memberships. All right. There was evidence for the acquisition of that. You know, some of her money was paid the initiation dues. But the claims, okay, finish your thought. But the claims that the trustee was pursuing also was the continued support and expenses and maintenance of the Florida home and the continued expenditures on the club memberships and how Ms. Arbagas use those club memberships. And there was no evidence, no effort, no opportunity to provide evidence as terms of how much of Mrs. Arbagas separate assets were included and used in that in the payments of those expenses. And we're, now that's, that's what we complained of in our cross appeal that the trial, evidentiary stipulation was not given effect and Judge Markovitz essentially ignored it. Notwithstanding the fact that at the second hearing on April 27th at the outset, trial counsel for the trustee, and this is also in the record as well. So it's our understanding that the April 27th rehearing, which was occurred as a result of Judge McCullough's death, was not to replace the record of the October hearings, but to supplement it and using Mr. Fedick as words because he said, because there were stipulations plural. Okay, let me ask you, though, so that you are going back to the lookback period. We've got a, Judge decided that the lookback period was the four years prior to the civil act prior to the first state court action, 2003 to 2007, right? That's correct. And is it your position that that that was correct? Yes, Your Honor. Okay. The other side says it wasn't and I take it that your reason, your reason for that is that that was in effect the, what the parties discussed before Judge McCullough. Right. And also I take it, I think there's a general rule that the parties are supposed, when they go into bankruptcy are really standing in the shoes of the prior creditor and under state law. That those four years would have been the correct period of time. The, the, the trustee is standing in the shoes. Trustee standing in the credit. Yes, that's correct. Okay. I just want to be clear on that. Yes. This, Your Honor, I think we've pretty well covered what, what I want to address with regard to Mr. Levin's arguments and following up on the, the, the stipulation or the agreement regarding the four years, that, that was not an vacuum either because we had a situation where the trisicon through its Pittsburgh Council had, after the bankruptcy had been filed, had written a letter to Judge Wettick. And this is also in the record as well. Asking for a striking of the discontinuance without prejudice and reinstatement of the action against Mr. Arbigast because as you recall from the record, Mr. Arbigast had been excluded from the state court litigation as a result of the superior court decision, absolving him of liability, which the Pennsylvania Supreme Court reversed. The problem we had was that the, the trisicon had asked Judge Wettick to reinstate that and in violation of the automatic state because it occurred it was entered February 3rd 2010. That's all clear. How did that prejudice you? Well, we had a concern that, that there was violation on that state, but I'm not saying it prejudiced us. I'm not saying it prejudiced us. I'm saying it was a factor in consideration and entering into the stipulation as to the four-year lookback period. You make an argument in your brief that the country club expenditures were for his benefit alone and therefore not fraudulent. I don't understand that argument. It seems to me that the real question here is whether those expenditures were for non-necessary items and that a club membership is not necessary. Well, Ardolson, who benefits? I also said a case in my brief identifying what constitutes a transfer for the benefit of a third party. It's a blue-coil energy case. It's a night-ser-reply brief. KLV versus blue-coil energy. But we're talking here about whether expenditures were for necessary, reasonable and necessary household expenses or not. A club is not for reasonably reasonable and necessary household expenses, even if it's for his benefit. It's a luxury, or non-luxury, but it's not reasonable, not a necessary. But Mrs. Ardolson, not a transfer of that. No, but the transfer occurred under the theory that the judge operated on. Transfer occurred when it went into the joint account, not when it went to the club. But she derived no benefit from it and she was not so the point is, and the reasoning is. She's going gambling to Las Vegas for a week and she wasn't involved at all. That would be the same issue. It would all be for his benefit. I suppose then you'd have to argue, oh, well, somehow that was since that was for his benefit. It was a reasonable and necessary household expense to go to Las Vegas. So then the reasoning is to impose a liability on Mrs. Ardolson simply because her name was on the account, she was not a transfer, and she derived no benefit from it. And therefore she therefore has liability. I think the reasoning there runs a file of what the blue-coil energy case is. You think that the expenditure has to be for the non-necessary expenditure has to be for the benefit of her as well as him. That's that's our position here on. I see. So that if he did take the money out of the joint account and go to Las Vegas for a week and blow it all to the tune of $100,000, since she didn't get any benefit of that, that would be how to either. He could very well have gone, cashed his check at a bank, taken $100,000, put the rest of it in the joint account, and then go off to Las Vegas and then blow the account. Does that make Mrs. Ardolson reliable? That's the same rationale. It's a question whether it's a fraudulent transfer or not, and whether it was for a reasonable and necessary household expenses. I don't know that her liability is cuts in the picture. I mean, you're talking about a different, a different, uh, you're saying that would be fair, but is that the where's the fraudulent transfer? You're saying what difference is the outcome is the same, but the difference is that if it was accomplished one way, it's treated one way, and if it's accomplished by by by transfer first to a, uh, uh, a joint account, then it's treated everyone. Well, yeah, so it's under my scenario. It would not be a fraudulent transfer because Mr

. And this is also in the record as well. Asking for a striking of the discontinuance without prejudice and reinstatement of the action against Mr. Arbigast because as you recall from the record, Mr. Arbigast had been excluded from the state court litigation as a result of the superior court decision, absolving him of liability, which the Pennsylvania Supreme Court reversed. The problem we had was that the, the trisicon had asked Judge Wettick to reinstate that and in violation of the automatic state because it occurred it was entered February 3rd 2010. That's all clear. How did that prejudice you? Well, we had a concern that, that there was violation on that state, but I'm not saying it prejudiced us. I'm not saying it prejudiced us. I'm saying it was a factor in consideration and entering into the stipulation as to the four-year lookback period. You make an argument in your brief that the country club expenditures were for his benefit alone and therefore not fraudulent. I don't understand that argument. It seems to me that the real question here is whether those expenditures were for non-necessary items and that a club membership is not necessary. Well, Ardolson, who benefits? I also said a case in my brief identifying what constitutes a transfer for the benefit of a third party. It's a blue-coil energy case. It's a night-ser-reply brief. KLV versus blue-coil energy. But we're talking here about whether expenditures were for necessary, reasonable and necessary household expenses or not. A club is not for reasonably reasonable and necessary household expenses, even if it's for his benefit. It's a luxury, or non-luxury, but it's not reasonable, not a necessary. But Mrs. Ardolson, not a transfer of that. No, but the transfer occurred under the theory that the judge operated on. Transfer occurred when it went into the joint account, not when it went to the club. But she derived no benefit from it and she was not so the point is, and the reasoning is. She's going gambling to Las Vegas for a week and she wasn't involved at all. That would be the same issue. It would all be for his benefit. I suppose then you'd have to argue, oh, well, somehow that was since that was for his benefit. It was a reasonable and necessary household expense to go to Las Vegas. So then the reasoning is to impose a liability on Mrs. Ardolson simply because her name was on the account, she was not a transfer, and she derived no benefit from it. And therefore she therefore has liability. I think the reasoning there runs a file of what the blue-coil energy case is. You think that the expenditure has to be for the non-necessary expenditure has to be for the benefit of her as well as him. That's that's our position here on. I see. So that if he did take the money out of the joint account and go to Las Vegas for a week and blow it all to the tune of $100,000, since she didn't get any benefit of that, that would be how to either. He could very well have gone, cashed his check at a bank, taken $100,000, put the rest of it in the joint account, and then go off to Las Vegas and then blow the account. Does that make Mrs. Ardolson reliable? That's the same rationale. It's a question whether it's a fraudulent transfer or not, and whether it was for a reasonable and necessary household expenses. I don't know that her liability is cuts in the picture. I mean, you're talking about a different, a different, uh, you're saying that would be fair, but is that the where's the fraudulent transfer? You're saying what difference is the outcome is the same, but the difference is that if it was accomplished one way, it's treated one way, and if it's accomplished by by by transfer first to a, uh, uh, a joint account, then it's treated everyone. Well, yeah, so it's under my scenario. It would not be a fraudulent transfer because Mr. Ardolson has kept 100,000 out, but if he allowed to be deposited into a joint account, and then immediately took the 100,000 and spent it on himself and not for Mrs. Ardolson, then it imposes a liability on Mrs. Ardolson simply because she is a joint ten of the account. And I think that that reasoning is flawed from from the standpoint of what we have here. Well, except that maybe he's doing something to hurt, and maybe it's not so much, uh, credit is worried. Anyway, I see that my time is up now. Yeah. Could you take just 30 more seconds and give me your your best shot on bird to prove? Birdon of proof, you're on our, we agree with the finding Judge Markovitz had with regard to his looking at comments six of section 502, the Uniform Fraudal and Transfer Act. And as the party is asserting that the, uh, asserting the, the transfer being fraudulent has the burden of proving that it is. Having said that, the Ardolson gas undertook that burden on their own anyway because they're the only ones who put it on a testimony. I understand that, but why doesn't comment six cover the situation of the funds going into the entirety? And as I understand the argument on the other side, it's actually silent on the actual burden of proof as to expenditures. It is silent, the actual burden of proof, but the fidelity bond case adopts it and says, no, this is, this is the comment that provides that the burden of proof is on the party. The fidelity bond is your best. Yes. Well, if you talk about the burden of production, burden of production, I take it your, your, your view is that it was more than met. I mean, you did, it wasn't, there was a burden of production. That is, you had a turnover of all these papers and you start out your argument by saying there was a ton of that stuff. So, the burden of production was yours. That's right. You met it, right? That's correct. And Judge, Judge Markovitz said that he would impose upon the Ardolson gas, the burden of going forward with some production of evidence telling it and Mr. and Mrs. Arbigas, the only ones who testified at trial with very little cross examination, Mr. Vettiga. Then once you have done that, then the question was the burden of proof and I think is there's water to guess before. I'm not sure how much, once the production is made, once everybody has the same access to all of this material, I'm not sure how much it matters who has the burden of proof. And it really doesn't matter in this instance, because the Arbigas undertook it and we believe we met it. Well, it does matter if we accept the trustees theory, because he would wipe out everything that's happened. And go through 7,000 pages. And go through 7,000 pages and they would, they would prove all the money went into the account saying that's the fraudulent transfer and then say, you show us what was necessary and reasonable expenditure out of that and put the burden on you for that. That's what that's where it matters. And as a matter rule that way, you go you go to whole food sometimes and you pay with a debit card and they say you want some extra. So you take 40 bucks to put in your pocket, your client would have to take the stand under oath and explain what happened to that 40 bucks. And as a matter of case management, that's precisely why the party's energy that joint stipulation for case management order, that's why they went to the enter into the stipulations in front of Judge McCullough to avoid waste of judicial resources going through that process and to streamline the case and we submit that it will work properly. Thank you, Your Honor. Thank you, Mr. Grom. Yes, we've got the rebuttal. Now let's make no qualms about it. The stipulation was not entered into because we didn't want to bother the court. The stipulation was entered into because of Judge Wettich's ruling. And Judge McCullough's belief that that ruling was precedent in the case. That's why the stipulation was entered into the court. So where does that help you? Because the stipulation was agreed to. Signed off on

. Ardolson has kept 100,000 out, but if he allowed to be deposited into a joint account, and then immediately took the 100,000 and spent it on himself and not for Mrs. Ardolson, then it imposes a liability on Mrs. Ardolson simply because she is a joint ten of the account. And I think that that reasoning is flawed from from the standpoint of what we have here. Well, except that maybe he's doing something to hurt, and maybe it's not so much, uh, credit is worried. Anyway, I see that my time is up now. Yeah. Could you take just 30 more seconds and give me your your best shot on bird to prove? Birdon of proof, you're on our, we agree with the finding Judge Markovitz had with regard to his looking at comments six of section 502, the Uniform Fraudal and Transfer Act. And as the party is asserting that the, uh, asserting the, the transfer being fraudulent has the burden of proving that it is. Having said that, the Ardolson gas undertook that burden on their own anyway because they're the only ones who put it on a testimony. I understand that, but why doesn't comment six cover the situation of the funds going into the entirety? And as I understand the argument on the other side, it's actually silent on the actual burden of proof as to expenditures. It is silent, the actual burden of proof, but the fidelity bond case adopts it and says, no, this is, this is the comment that provides that the burden of proof is on the party. The fidelity bond is your best. Yes. Well, if you talk about the burden of production, burden of production, I take it your, your, your view is that it was more than met. I mean, you did, it wasn't, there was a burden of production. That is, you had a turnover of all these papers and you start out your argument by saying there was a ton of that stuff. So, the burden of production was yours. That's right. You met it, right? That's correct. And Judge, Judge Markovitz said that he would impose upon the Ardolson gas, the burden of going forward with some production of evidence telling it and Mr. and Mrs. Arbigas, the only ones who testified at trial with very little cross examination, Mr. Vettiga. Then once you have done that, then the question was the burden of proof and I think is there's water to guess before. I'm not sure how much, once the production is made, once everybody has the same access to all of this material, I'm not sure how much it matters who has the burden of proof. And it really doesn't matter in this instance, because the Arbigas undertook it and we believe we met it. Well, it does matter if we accept the trustees theory, because he would wipe out everything that's happened. And go through 7,000 pages. And go through 7,000 pages and they would, they would prove all the money went into the account saying that's the fraudulent transfer and then say, you show us what was necessary and reasonable expenditure out of that and put the burden on you for that. That's what that's where it matters. And as a matter rule that way, you go you go to whole food sometimes and you pay with a debit card and they say you want some extra. So you take 40 bucks to put in your pocket, your client would have to take the stand under oath and explain what happened to that 40 bucks. And as a matter of case management, that's precisely why the party's energy that joint stipulation for case management order, that's why they went to the enter into the stipulations in front of Judge McCullough to avoid waste of judicial resources going through that process and to streamline the case and we submit that it will work properly. Thank you, Your Honor. Thank you, Mr. Grom. Yes, we've got the rebuttal. Now let's make no qualms about it. The stipulation was not entered into because we didn't want to bother the court. The stipulation was entered into because of Judge Wettich's ruling. And Judge McCullough's belief that that ruling was precedent in the case. That's why the stipulation was entered into the court. So where does that help you? Because the stipulation was agreed to. Signed off on. Based on what the what the prior basis was and whether it was correct incorrect or whatever. If you didn't like what he was doing, you wouldn't sign the stipulation, but you did sign the stipulation. What Judge Wettich has said, and we have to read the entire colliloquy, he said that he was stipulating to the fact that the presumption was the record created today would be supplement of the record from October 14 and 15 with the understanding that everything that occurred prior to that point, prior to the trial, remains a matter of record because there were stipulations. He's acknowledging the fact that Judge McCullough was still working under the pretense that Judge Wettich's ruling governed the case. And here's how Judge Markovitz addressed that. Because the court agrees with the trustee in Trizek that a certain portion of the applicable law that must be used to resolve the instrument matter was indeed misstated by such predecessor judges, and since the confusion that ensued as a result of such misstatement has not been cleared up until now by the rendering of the instant opinion, the court cannot see fit to monetarily sanction the trustee in Trizek for trying to put that evidence into the record. Did you sign a stipulation at that point as referred to by your adversary or enter into a stipulation? The stipulation was not a consent to the law. The stipulation was just simply an acknowledgement of the law of the case as Judge McCullough was ruling upon it. Judge McCullough had already indicated at that point that he intended to- The extent that the stipulation laid out what the proof, what was to happen at trial in terms of the proof, that was a stipulation that you rendered into. If you didn't like it, you could have, you didn't have to enter into the stipulation. Oh, it was required at that point by Judge McCullough as a bill. Do you agree with the interpretations that were going on at that point? Never agreed with the interpretation. Did you reserve, did you take out an exception? The stipulation does not anywhere suggest that we agreed with the interpretation. Does it indicate that you didn't agree? It does not. Okay. But it is not an acknowledgement of the interpretation of the law, and Judge Markovitz recognized that too, that there was confusion over the fact that there was some belief by Judge McCullough that Judge Wettich's ruling governed. That was- that put the- that put the trustee at an unfair disadvantage. And at that point, what was the trustee supposed to do? Go before Judge McCullough and say, I don't care what you think. Here's what we have. And so we in fact tried something almost to that point. And the trustee put before Judge McCullough, and let's be clear on what this is that he put before Judge McCullough. It's actually 189 pages, not 7,000. What we put before Judge McCullough was not just the deposits, but the disbursements. So you're right. The documents were there. We didn't get to use them. The discovery was there for everyone to use. We didn't get to. We didn't get to even try and satisfy our burden that we show what happened to the money after when the entire discount. Wouldn't you- wouldn't you- as you say, you weren't looking to please the court. Why didn't you just come in with your 189 pages? Why did you even create the five categories? We did. We did. In Judge McCullough. But why did you create the five categories? That was- that was the extent of what Judge McCullough wanted to see. But- but you- you're not arguing to us as I understand it. You didn't care what Judge McCullough wanted to see. You wanted Judge McCullough to see 189 pages. And we presented those two of them and he kicked them out. Right. And then you could have appealed. You could have appealed at that point. We are. But you didn't. Well here we are. The Judge bludging you into the way he wanted to do the case

. Based on what the what the prior basis was and whether it was correct incorrect or whatever. If you didn't like what he was doing, you wouldn't sign the stipulation, but you did sign the stipulation. What Judge Wettich has said, and we have to read the entire colliloquy, he said that he was stipulating to the fact that the presumption was the record created today would be supplement of the record from October 14 and 15 with the understanding that everything that occurred prior to that point, prior to the trial, remains a matter of record because there were stipulations. He's acknowledging the fact that Judge McCullough was still working under the pretense that Judge Wettich's ruling governed the case. And here's how Judge Markovitz addressed that. Because the court agrees with the trustee in Trizek that a certain portion of the applicable law that must be used to resolve the instrument matter was indeed misstated by such predecessor judges, and since the confusion that ensued as a result of such misstatement has not been cleared up until now by the rendering of the instant opinion, the court cannot see fit to monetarily sanction the trustee in Trizek for trying to put that evidence into the record. Did you sign a stipulation at that point as referred to by your adversary or enter into a stipulation? The stipulation was not a consent to the law. The stipulation was just simply an acknowledgement of the law of the case as Judge McCullough was ruling upon it. Judge McCullough had already indicated at that point that he intended to- The extent that the stipulation laid out what the proof, what was to happen at trial in terms of the proof, that was a stipulation that you rendered into. If you didn't like it, you could have, you didn't have to enter into the stipulation. Oh, it was required at that point by Judge McCullough as a bill. Do you agree with the interpretations that were going on at that point? Never agreed with the interpretation. Did you reserve, did you take out an exception? The stipulation does not anywhere suggest that we agreed with the interpretation. Does it indicate that you didn't agree? It does not. Okay. But it is not an acknowledgement of the interpretation of the law, and Judge Markovitz recognized that too, that there was confusion over the fact that there was some belief by Judge McCullough that Judge Wettich's ruling governed. That was- that put the- that put the trustee at an unfair disadvantage. And at that point, what was the trustee supposed to do? Go before Judge McCullough and say, I don't care what you think. Here's what we have. And so we in fact tried something almost to that point. And the trustee put before Judge McCullough, and let's be clear on what this is that he put before Judge McCullough. It's actually 189 pages, not 7,000. What we put before Judge McCullough was not just the deposits, but the disbursements. So you're right. The documents were there. We didn't get to use them. The discovery was there for everyone to use. We didn't get to. We didn't get to even try and satisfy our burden that we show what happened to the money after when the entire discount. Wouldn't you- wouldn't you- as you say, you weren't looking to please the court. Why didn't you just come in with your 189 pages? Why did you even create the five categories? We did. We did. In Judge McCullough. But why did you create the five categories? That was- that was the extent of what Judge McCullough wanted to see. But- but you- you're not arguing to us as I understand it. You didn't care what Judge McCullough wanted to see. You wanted Judge McCullough to see 189 pages. And we presented those two of them and he kicked them out. Right. And then you could have appealed. You could have appealed at that point. We are. But you didn't. Well here we are. The Judge bludging you into the way he wanted to do the case. And you agreed to do that. No. And the end of story. I'm sorry. I don't think we had a right to appealed at that point. In time of trial, hadn't you been- No. No. You could have offered what you- you know how trials go. The plaintiff offers their case. The defendant offers their case. There's a judgment. And then there's an appeal if you don't like what happened. And- and that could have happened here without a stipulation. Judge, we don't- we're not going to enter into a stipulation. Our right is to offer everything that came out- everything that went into that account and rest. That's what we're going to do. I'm sorry, overruled, the orders, all sorts of different things. And then you appealed. That's exactly what happened. Yeah, but you entered into a stipulation. That was way before we tried to offer that. Way before. Way before. And he adhered to the stipulation. Your Honor, we offered that on the day of- Could you address as walkers, I'm missing something. Because you don't seem to be responsive to his point. No, Your Honor, maybe there's some confusion in the timeline. The stipulation was entered into back when council says he brought his motion for more definitive statement relative to the complaint. That was months before trial. Yes, right. And the day before of day of or right around the trial date, all the exhibit puts were presented to Judge McCullough. And it had everything in the context of the prior stipulation. No, no, we gave him everything. I see. You said, sorry, Judge, the prior stipulation doesn't apply. We're now retrying this case the way we want to try it. We believe that those documents were necessary to prove the case. And to your point, Your Honor, we tried to do it. He refused us. We're here appealing. And Judge Mark, if it signolages that, that that's exactly what happened. Okay. We entered into stipulation way back when we realized with all the documents in our burden that we don't have enough, we have to put the rest in because this is the way as fraudulent and transphircates should be tried. And Judge McCullough sent us on our way with that. Earlier, I characterized that as a change of mind by the trustee

. And you agreed to do that. No. And the end of story. I'm sorry. I don't think we had a right to appealed at that point. In time of trial, hadn't you been- No. No. You could have offered what you- you know how trials go. The plaintiff offers their case. The defendant offers their case. There's a judgment. And then there's an appeal if you don't like what happened. And- and that could have happened here without a stipulation. Judge, we don't- we're not going to enter into a stipulation. Our right is to offer everything that came out- everything that went into that account and rest. That's what we're going to do. I'm sorry, overruled, the orders, all sorts of different things. And then you appealed. That's exactly what happened. Yeah, but you entered into a stipulation. That was way before we tried to offer that. Way before. Way before. And he adhered to the stipulation. Your Honor, we offered that on the day of- Could you address as walkers, I'm missing something. Because you don't seem to be responsive to his point. No, Your Honor, maybe there's some confusion in the timeline. The stipulation was entered into back when council says he brought his motion for more definitive statement relative to the complaint. That was months before trial. Yes, right. And the day before of day of or right around the trial date, all the exhibit puts were presented to Judge McCullough. And it had everything in the context of the prior stipulation. No, no, we gave him everything. I see. You said, sorry, Judge, the prior stipulation doesn't apply. We're now retrying this case the way we want to try it. We believe that those documents were necessary to prove the case. And to your point, Your Honor, we tried to do it. He refused us. We're here appealing. And Judge Mark, if it signolages that, that that's exactly what happened. Okay. We entered into stipulation way back when we realized with all the documents in our burden that we don't have enough, we have to put the rest in because this is the way as fraudulent and transphircates should be tried. And Judge McCullough sent us on our way with that. Earlier, I characterized that as a change of mind by the trustee. Would you accept that? No. You wouldn't accept that? No, Your Honor, it's consistent with the idea that all along this is the way we felt a fraudulent transfer case needed to be tried. But why did you create the five categories? What you just said, it seems to me, is quite inconsistent with the idea of creating five categories. And litigating and arguing before the court, those five categories, it just seems to me, it's not exactly an election of remedies, certainly not that. But if your position is, we rest on the 189 pages. And now it's their burden, debtors' burden to come in and show that some portion of this $1.2 million that went into this entirety's account are not subject to recruitment by the trustee. It seems to me that's what you should have done, but you didn't do that. You can't try half a case the way the judges interpreted the stipulation and put documents in so that you can come to an appellate court and say, well, we never really wanted to do five categories in the first place, he made us do it. We, I'm not getting that. No, you're right, Your Honor, he made us do it. Those five categories were not our creation. But a court can't make anybody introduce evidence and a court can't make anybody to introduce evidence and do it. And that's the reason that we thought the five categories were the only ones that we identified at the data stipulation were we knew based on the information that we had that we were dealing with an issue of necessities. Well, in fact, what we were judging treated that as an act we essence in his interpretation of the stipulation. No, he didn't. That's not in the record anywhere. Judge McCollough never acknowledged that. Talking about Judge Mark. Judge Markovitz acknowledged that. That's the order we were looking at. I really should know the answer to this, but why was the entire third circuit recuases? I think it was one of the debtors. One of the partners was Judge Hardeman. He was not liable based on the timing of the lease. He had left the firm at point X. And so he was not one of the defendants. He was, however, named in a subsequent case. Of course, there's also somebody whose name is very much like Sikharurka. But it spelled a little differently. I've been trying to sort that out more than I should. Right. We did not, it was not because of Judge Sikharur. If I may just last point here. Thirty seconds. If the $100,000 was in an individual bank account. And he went off to Las Vegas. He'd never get on the plane. Because if it wasn't an individual bank account, we'd have the account. That's the point. He chose not to put an individual account. He chose to put it in an entirety's account. That changes the nature. We can't execute upon that because it's held by tendency of the entirety. We can't own the bank account. That's why we're bringing this

. Would you accept that? No. You wouldn't accept that? No, Your Honor, it's consistent with the idea that all along this is the way we felt a fraudulent transfer case needed to be tried. But why did you create the five categories? What you just said, it seems to me, is quite inconsistent with the idea of creating five categories. And litigating and arguing before the court, those five categories, it just seems to me, it's not exactly an election of remedies, certainly not that. But if your position is, we rest on the 189 pages. And now it's their burden, debtors' burden to come in and show that some portion of this $1.2 million that went into this entirety's account are not subject to recruitment by the trustee. It seems to me that's what you should have done, but you didn't do that. You can't try half a case the way the judges interpreted the stipulation and put documents in so that you can come to an appellate court and say, well, we never really wanted to do five categories in the first place, he made us do it. We, I'm not getting that. No, you're right, Your Honor, he made us do it. Those five categories were not our creation. But a court can't make anybody introduce evidence and a court can't make anybody to introduce evidence and do it. And that's the reason that we thought the five categories were the only ones that we identified at the data stipulation were we knew based on the information that we had that we were dealing with an issue of necessities. Well, in fact, what we were judging treated that as an act we essence in his interpretation of the stipulation. No, he didn't. That's not in the record anywhere. Judge McCollough never acknowledged that. Talking about Judge Mark. Judge Markovitz acknowledged that. That's the order we were looking at. I really should know the answer to this, but why was the entire third circuit recuases? I think it was one of the debtors. One of the partners was Judge Hardeman. He was not liable based on the timing of the lease. He had left the firm at point X. And so he was not one of the defendants. He was, however, named in a subsequent case. Of course, there's also somebody whose name is very much like Sikharurka. But it spelled a little differently. I've been trying to sort that out more than I should. Right. We did not, it was not because of Judge Sikharur. If I may just last point here. Thirty seconds. If the $100,000 was in an individual bank account. And he went off to Las Vegas. He'd never get on the plane. Because if it wasn't an individual bank account, we'd have the account. That's the point. He chose not to put an individual account. He chose to put it in an entirety's account. That changes the nature. We can't execute upon that because it's held by tendency of the entirety. We can't own the bank account. That's why we're bringing this. When I was talking about the money that went into the... This was in the context of his argument that somehow her putting money into the account affects... Lovers, they're burdened because there's a return of the value to him. But anyway, that was... We'll deal with that. The next time on the second circuit we have a difficult case, we'll have to include one of our colleagues as a defendant. Exactly. We'll ask... He was not a judge of the time. I'm very important. Keeping with the tradition in the fourth circuit, which other circuits find great difficulties, but we'll come down and greet Council. Oh, thank you. Why don't you lead the way? Thank you. It's an important circuit. It goes back to 1927. I like it. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. I just want to say, all right, thanks very much. Good luck, Andrew. I can be the important in the second circuit, the tradition of the last group. Thank you. Thank you. Thank you. Good luck.

How much public interest has been anticipated? Judge Walker, Judge Sack and I are pleased to greet Council this morning here at the third circuit. We look forward to your presentations. Council, you may proceed whenever you're ready. Thank you. May I please the court? Good morning, Your Honours. My name is Neil Levin and I represent the trustee in the chapter 7 bankruptcy proceedings, which brings us here today. I'd like to give you a very brief overview of the procedural history as to why we're here today. Actually, the law of the case is not that difficult. What got us here is a little bit convoluted. So we love the case in the technical sense or law of the case in the general sense of the law applicable to the case. I believe the law applicable to the case is easy to dissect. Because it's the law of the case in its traditional sense, in its technical sense, is one of these that makes this a very complicated case to try to figure out what was the law of the case before Judge McCullough passed away. If I may address that initially, Your Honour, because obviously it's top of mind. What we have to remember is one very important thing that may or may not have come out well in the briefs. The law of the case argument relative to Judge Wettich's ruling, Judge Wettich being the chief judge of the state of the Court of the Commonwealth did not apply to Mr. Arbigas, the debtor here. Because Mr. Arbigas' case had been dismissed at that period. So that's why even Judge Markovitz refers to Judge Wettich's ruling in the state court as the Titus decisions. Titus was one of the other Judgement debtors, and remains one today as a debtor in bankruptcy as well. So the law of the case is really not an argument here at all. There was no law of the case as prescribed by Judge Wettich. Counsel for the debtor would like the law of the case to be as Judge Wettich ruled. But that's not what was adopted by the Court. How about respect to what? I'm sorry, I didn't really mean this interrupt you, because I would like you to finish, but you were saying this is what we're talking about. Then there's a question of the law of the case as it apply to some of the rulings of Judge McCullough, right? Yes, and this is how the debtor has characterized Judge McCullough's ruling. He said that Judge McCullough didn't want to adopt his own ruling in mind, and Judge McCullough wrote the mine. He didn't want to adopt his own ruling. He wanted to adopt Judge Wettich's ruling. That's not exactly true. What Judge McCullough said is he felt bound by Judge Wettich's ruling because it had occurred at a time when this fraudulent transfer proceeding was pending in state court, but he was wrong. The reason he was wrong is because it didn't apply for the analysis. I just gave you. We're talking about luxuries versus necessities now. We're talking about Judge Wettich's use of the word luxury, yes. Right. And that's what created all the confusion from the inception. Didn't Judge Wettich equate luxuries with expenses that were not necessary? And isn't it your position that you can have non luxuries that are still not necessary? Yes, I think Judge Markov is a very good job of distinguishing luxuries and necessities, and I believe that Judge Wettich's ruling was erroneous in his recitation of the relevant statute. Luxuries seems to me a casual way of talking about it, rather than it's either necessary or not necessary. It's necessary how so expensive it's not necessary, isn't it? I agree with you, especially. I agree with you. In fact, what's happening is we're sort of bastardizing this idea of luxury and necessity. Luxury is a term of art, as you know, in the bankruptcy code. We look at luxuries as far as unnecessary expenditures. It's not it's otherwise, but it's not applicable to this case. Correct. There is such a word as necessities in a different context, but it means something out. In the state court, fraudulent transfer statute, the uniform fraudulent transfer act, comment six does talk about necessities. And somehow Judge Wettich used the word luxuries instead, and Judge Wettich's not a bankruptcy judge. And so what's happened in the bankruptcy court context is my opponents have now taken that word luxury and run with it, and are trying to use it as a bankruptcy court might use it in a completely different context. And that Judge Markovet said is not right. Judge Markovet went through all of his analysis and said this is not a luxury discussion. This is a necessities discussion. And so if I can back the lens up for just a moment, fraudulent transfer claims are not complicated. They really aren't. We have overly complicated this case to the nth degree. A fraudulent transfer claim is simply this. The transfer for less than reasonably equivalent consideration. Except in the context of wages directly deposited into an entire piece of account, it does get a little more complicated, doesn't it? We're talking here about a constructive fraudulent transfer. Yes, so I mean your argument that there was no fraudulent transfer to the wife is absolutely correct, but absolutely irrelevant, isn't it? No, there was a fraudulent transfer to the wife by making deposits into the entire piece of account. Okay, we're talking about constructive now. This isn't a regular fraudulent transfer with intent to hit her delay and so forth. So that's that's what we're talking about. You're correct, Your Honor. There are two types of fraudulent transfers under the act. There's the per se and then there's with intent. Per se is where we're basically talking about insolvency at the time of the transfer for less than reasonably equivalent consideration. And with intent is something entirely different. We prove intent through the ten badges of fraud to determine whether or not they were intentionally trying to shield the asset from creditors. We've taken away the discussion of intent from the very beginning, Judge. Markovitz didn't rule on intent because it doesn't exist. It's your position, isn't it, that the fraudulent transfer occurs with the transfer into the into the joint account instead of his own account, but that there can be exceptions to that for reasonable and necessary household expenses. Well, exceptions is very interesting use of word, Your Honor, because what we claim is that there's a defense of necessities and that affirmative defense. Okay, but you start off with the concept is that it goes into the joint account. And then at that point, you do not include necessary, reasonable and necessary expenses, assuming it's raised as a defense. Yes, so we jump to another argument and that is the defendants argument relative to the, I'm sorry, with respect to our argument with respect to burden of proof. And so we'll touch on that just very briefly. Well, no, I'm talking about what the law is. Right, and so the way to conceptualize the law. And our position on the law is that our prime aficious showing of a fraudulent transfer is to show that the defendant directed his money into the entire account. That's the transfer. The transfer, which I believe is misconstrued by my opponent, is not payments to golf club membership. Right, and I, and I misspoke a moment ago because I was attributing to you the other, the argument on the other side. But this question of burden of proof seems well, you think they have to come in and prove the negative. We have to prove the prime aficious case, which is the transfer itself, the result, the resulting insolvency, which of course, we have a $4 million obligation, and I'm going to have $4 million in assets, so they're insolvened. And we have to prove that it was for less than a reason we equivalent consideration, there was no consideration. There is a defense, and that defense is necessities. And that's what's referenced in this comment six to the statute. Well, the question is whether that is in fact a defense or whether it negates part of your cause of action. I mean, whether it's an affirmative defense or whether it's simply saying no, no, it isn't. It isn't for it's what because of, and therefore, I mean, and therefore, the question is, was it part of your case to negate it or was it part of their case, as though it were affirmative defense, to prove it, right? I believe that's accurate. Yes, that is the issue before us. If it is an affirmative defense, that was not our obligation to characterize the various expenditures that resulted from the entire his account going into trial. This trial would look very different. And again, back to my original position here. Well, the trial looks different or the outcome looks different. The trial is different. Well, do we care if the trial is different? Yes. The outcome is exactly the same. No, it would not be the same outcome. We want a new trial, and here's why. We were constrained. The trustee was constrained by the evidence that the trustee could enter that trial or offer it trial. The reason we were constrained is because Judge McCullough ran with Judge Wettich's ruling. And because he ran with Judge Wettich's ruling, it was interpreted by Judge McCullough that we must not bring to the court every line item of every deposit that had been transferred by the debtor into the entire his account for each deposit constitutes a transfer. And then show insolvency and then pass the burden to the defendant's state. But wait a second, some of the money that was transferred into that account has been used for necessary living expenses, necessities. And we should deduct that from the $1.2 million in transfers that were made into the account. That's how it should go. It's that simple. We couldn't do that. The trustee was prohibited by Judge McCullough from doing it that way. Judge McCullough said, no, you can't bring me 180 line items or pages of these deposits. I don't want to see those. All I want to see is name me the luxuries that were purchased out of that account. So, so, so, Judge McCullough essentially focused not on the transfers into the account, which really are the fraudulent transfers, less whatever's, and instead focused on the transfers out of the account. Would she forced us to identify? No, no, no, no, but even before who identifies it, that's correct. The fact of the matter is the fraudulent transfer is when the money goes in. And Judge McCullough was focusing on what was going out instead. Is that fair to say? That is very fair to say, right? Now, at what point did you bring this to the, Judge Markovitz? I mean, what point did you raise this issue? As I have phrased it at least, at what point did you raise this issue with Judge Markovitz or the District Court or any for the, this court? Well, certainly, the District Court was an issue on appeal. And the District Court, if I may use the words, rubber stamped it. And took Judge Markovitz ruling on its face and said the burden is the burden as it was. But we brought it to the attention of the Court at all times. We brought it to the attention of the Court when we first presented all the exhibits to the Judge pre-trial October 2010 and said, here are the exhibits that we want to use at trial. And he said, don't bring me these exhibits. I don't want to hear it. Here's all I want. And forced us under an umbrella of possible sanctions for violating a discovery stipulation to only use the exhibits relative to the five identified expenditures. That's inherently unfair. Well, you mean, it's not inherently, I'm against the law. I would say it's against the law. If there is, well, I guess the law is written the way it was to be fair, I would hope. What's your best authority for the idea that all you need to do is come in with by statements and cancel checks. 80 years of authority in the Commonwealth has supported the contention that deposits by an individual judgment debtor into an entirety's account, our fraudulent transfers. 80 years of authority, this is not a revelation. We're not asking the Court to write new law. 80 years of authority in Judge Markovitz. But I let the authority said, except to the extent they are expended on necessities. And when Judge McCullough wrote the opinion in mind and saying exactly that, he then said the burden of that showing of necessities rests squarely with the defendants. Judge McCullough wrote that and that may or may not be correct. And I guess that's the question for us. There's no law anywhere. Any more? I just want to understand completely your argument. You're saying that the burden of the fraudulent transfer, at least initially, which is the transfer without equivalent return or compensation is on the trustee. And then the defense comes in that there are reasonable and necessary household expenses and that that burden is on the other side. Correct. And that's your position. Not again, rather than the entire burden of showing that they're fraudulent, that the monies that you are claiming are, you have to show a negative in effect if you have to show the defense. That's correct, Your Honor. And if I may cite two pieces of authority on that. Burling from the 11th Circuit, I think they use the best wording in the Rossine case that we cite. Matters extraneous to plaintiffs' prime of fish case. This is clearly a matter extraneous. Prime of fish cases for fraudulent transfer for millennia have suggested that all we have to show is the transfer for less than reasonably equivalent value to time when the transfer role is insolvent. That's it. But that's the prime of fish that you're showing. That's the one that constructives, fraudulent. Yes. For constructive fraudulent transfer, that's the prime of fish that you're showing. You're treating the deposit into the entire days as if it were an actual fraud. But the law has never called that an actual fraud. No, we're not doing it, you're wrong. It's constructive because you have to look further to see what comes out of that entire days account. And for what? Do we? Isn't that a part of your burden? I agree with you that we have to look at that. The question is, with whose evidence are we going to view it? Well, you have a right to discover it. You can take evidence from whomever and wherever you can find it. And Judge Markovitz is ruling, I think, was accurate on this. Judge Markovitz said that these are documents and information that rest squarely with the defendant. And it's extraneous to the prime of fish is showing. A prime of fish, and let's not forget, the statute says nothing about this. Only a comment addresses the idea of burden shifting and not with respect to this defense. It's completely... You mean a comment in the legislative history? Comment six, which everyone wants to focus on here, says nothing on this burden staying with the plaintiff, says nothing about that whatsoever. In fact, the fidelity case that cited is has nothing to do with the transfer of the burden with respect to this defense of necessities. So, are you concerned? Let me just say this. In this case, it seems to me all the facts were known to the judge and he made the rulings, he made. The evidence was out there. The other side produced facts related to the account. He had all the account information. It sounds to me like in terms of this case, the realities of this case. And Judge Davis and I think his former district judges know that once you get the evidence in the case, the burden of proof is in a picture, but it's not. You know, you decide a case based upon the facts before you. Are you talking... Is this really a question more for what the third circuit law ought to be in this area, as opposed to any really practical consequences as far as this case is concerned? No, Your Honor, what we'd like to have, if I can run with your point, all the facts of the case are not in the case. The reason all the facts of the case are not in the case is because the trustee was constrained from putting all the facts in the case. Well, as soon as you say that, of course, the other side is going to say, well, we want a continuation of the findings of damages. And I didn't think you wanted that. We think the damages analysis has been cut off the way the defendant has put it here, saying now that for the first time... Oh, are you saying there should be a... This case can't... We can't decide this case finally. It's got to go back for the pursuant to the step before Judge McCullough. Contrary to what the defendant has done, we have asked the Court to recognize that we were prohibited from bringing evidence in. There is no such prohibition on the defendant from having brought in evidence. Tell us. Tell us. If we sent it back, how would the Court... I'm stuck here forever. How would the Court... How would your view with the bank... I said, soon it goes back to the Bank of C Court, the Bank of C. That would be correct. How would exactly, you know, from step to step, how would the Court in your view proceed appropriately and how would that affect the result? Before I answer your honor, I see that my 15 minutes are often... You may have questions. Time to adjust some of the other issues as well. This will not come out of your room, but thank you. There are people waiting here to argue so they would forget on it. Thank you, Your Honor. So it would go back to the trial court and here's what the trial would look like. We would first bring in the bank statements showing every one of the deposits. It would be a long list of deposits over the course of a predetermined period, which we say starts in April of 2003 and runs through the date of the filing of the Bank of C, which is another one of the issues on appeal. This quote unquote, look back period, which really got run amok. So we would list all these deposits and we would show the amount of money that was put into the entire account. That amount of money constitutes at a time when the transfer was insolvent, a constructive fraudulent transfer. That's the prime official showing. He transferred his asset into an entire account. 80 years of loss as that's it. And that's it for them to show what were necessities. That's it. Or that the money came into the entire account came from another source. Correct. It's not a complicated issue. Fraudulent transfer cases. And this is what you asked Judge Markovitz to do and he wouldn't do it. We asked Judge Markov, in fact, that's a very interesting point. In between the time that Judge McCullough passed and the time that Judge Markovitz convened this matter from retrial, there was a discussion as to how this was going to proceed. I believe this is in the record. We haven't been asked to specifically address it, but I will hear. And Judge Markovitz was not so convinced as Judge McCullough was that Judge Wettich's ruling in the state court was the law of the case. And in fact, now his ruling does address this and says flat out, it's not law of the case. It was an interlocatory work. No, but we were just kind of aligning over the point. I thought we were focusing now on what it was that Judge Markovitz did that should be done differently if it was sent back and there was an effect. And now, a separate trial. I mean, we sort out these issues, the legal issues, and send it back. I guess is what you're asking for. And then you can basically introduce the entire account and then just say, okay, now it's your job to the other side to show what should come out of it. And then we'll take the rest. Yes. And so we asked Judge Markovitz to retry, well, actually, Judge Markovitz idea to retry the matter. You're asking to do what Judge Wettich said was your property was your position. Yes. And in fact, he said to us, can you show us in the record where you did that? Because I'm not, I'm not, I'm not sure about that. I don't believe that that was an interim hearing, Your Honor. I don't know that that actually made it into the record. Well, how are we going to take it then? I mean, you know, we don't, we got to go on the basis of what's in the, what's before us. Let's assume for purposes of argument that we don't have that in the record. We're not. Let's assume that it is to the question. Let's assume that it was never done. Sure. So then the question is, did we ask Judge Markovitz to do something different? Judge Markovitz is ruling, I think, is instructed. Judge Markovitz is ruling recognizes that we wanted to do this. Because Judge Markovitz says that this sentient motion should never have been an issue. He didn't feel and he does say this in his memorandum opinion. He does not feel that we should have been constrained by the ruling of Judge Wettich in the state court. Let's assume, let me ask you this. If we agree with Judge Markovitz on the period 203 to 207, and we agree that reasonable and necessary expenses are accepted as he did. And we agree that with his findings as to the Country Club expenditures, and we don't think that there should be a, the, the, the step that there was not, and we agree that there was no real step for a, he wasn't bound by a step in stipulation that there'd be a separate proceeding. What is there for him to do? I mean, you want to, you basically, as I understand it, you want him, want us to send it back so that you can introduce all the deposits into the account from 2003 to 2010. Other than that, if it's just 2003 to 2007, are we, is this going to accomplish anything? I would say that it does, because again, we were asked to identify the luxury expenditures, and we were only able to come up with these five categories which you have before you. And included the golf club membership that transfers into the retirement accounts and the the house in Florida, thank you, and so these five items were all that we're going to come up with. It shouldn't be upon us to come up with the exhaustive list of what they did with their money, because that's what we're presenting to Judge McCullough. So you want them to account for each and every expenditure that they made over these years. That's the defense. That's the defense. Your view is the, it's very simple, whether it's right, whether you preserve the question. But your view is really, as you started out by saying very simple. All the money that went into that account was because it was out of your reach, because it was by the entirety, all that money was the beginning of, was fraudulent, was constructively fraudulent. And then it's for them to come up and say, here's stuff that we spent on necessities, whatever that means. And here's the stuff that didn't, in that account, that didn't come from the salary that was sent in there. And then you take those two things and you subtract it from the entire amount that was transferred because that's the fraudulent transfer. That's correct, Governor. If I may address your honors point, the reason we don't go all the way to determine whether or not it is a fraudulent transfer. The reason we only have to stop the deposits is this, the transfer, which I think we all agree on, now the transfer itself is the movement of the money from the possession of the judgment debtor, his wages and earnings, into the entire account. Stop. That's the transfer. Can I ask you a question about that? Was prior to a particular dating question, when you say he knew that he was insolvent, was the money from his wages and earnings going into a separate sole account for him? In other words, was it always going into the joint account? The vast majority, if not all, yes. I see. So this isn't something where all of a sudden woke up one day and said, I need to put this in the joint account to somehow put it out of the reach of creditors. Then we'd have an intent claim. And we're not bringing it in intent claim. We're being constructed. The mere fact of putting it in a joint account is sufficient to under the non-intent fraud, constructed fraud account. It last count, Your Honor. Seven different judges agree in these proceedings. Do we have any, oh, in these proceedings? In these proceedings. Seven different judges agree. We wanted to be ten. We would love it to be ten. Two district court judges, four bankruptcy judges, and a state court judge have all now acknowledged that the movement of the money from the individual's. The other case is tightest. And in this case, even the district court judge agreed. And I know that we're day and over here and we're going as though under law of the circuit. It says, we don't really care what the district says. There were of the five areas that you're concerned about. If we did what you want us to do, everything would be open again. You'd have a chance to show that three hundred and thirty eight thousand went to her. That you'd have the floor to house. All of that would be open again. You'd have the clubs open again. You'd have the retirement open again. And you'd have the life insurance open again. Is that right? It's an effect, an effect, a redo of the whole thing. A redo and a very... In the sense you'd wipe those out and you'd say, we're entitled to show what into these accounts and maybe even to Mrs. Arbigast. And then throw the ball into their court to show that it wasn't, that it was reasonably an reasonable and necessary. That's the way it should be. That's the way these trials should all be. And unfortunately, five of them were all done under the pretense of Judge Wettich's order in the state court. Judge McCullough had warned before he passed that with respect to all five, he was going to constrain the trustee from putting on the evidence to show exactly that. Okay. And then Judge Markovitz even acknowledged. And here's, I suppose, the idiosecrecy of Judge Markovitz's ruling. Because he was dismissive of Judge Wettich's ruling, I feel would have been incumbent upon Judge Markovitz to then say, well, because I disagree that Judge Wettich's ruling is the law of the case, the trustee should get a fair shot at this. Yeah. My only question now is whether you made this very claim to Judge Markovitz, that this was your position and that, I mean, it's obviously things get refined as you think about how to appeal. And where on the record there is some, where he aired, really. And where he, where the fact that he was airing was brought to his attention. On this point, he didn't, Erie, on her. On this point with respect to the transfers and how we should have been able to look at the transfers. Right at the start of the five points. And he focused just on those five issues, you know, and then decided them. He didn't, the way we've just described it, wasn't his approach. His approach wasn't saying, okay, you prove the $1.x million that goes into that account. And it now is on the other side to show that they're reasonable and necessary. And that wasn't, that wasn't brought to his attention. I believe it was. And I think that that is evident by his ruling. I believe that what happened with Judge Markovitz with what I'm calling an inadvertent diversion. Judge Markovitz has now said that's not the law of the case. The trustee should not be sanctioned. The trustee should have been allowed to put this stuff in. But Judge Markovitz didn't see that it would make a difference if we did put it in. And so he ran with the five categories thinking that was the exclusive list of categories when it's not, well, we won't know. Let me ask this. Is there anything wrong with the five categories? No, those five categories should definitely be included. So, so I think you want to amend your response to Judge Walker because you're not asking to reopen all of that. What I'm assuming that when you're under say reopen that we're not throwing away all the evidence, and certainly the evidence is what you're saying. No, no, no, I understand that. But I guess what Judge Davis is saying is, are you saying there's more than the five categories? There, you know what? And we recognize that there might be. And that works against us. Yeah. That clearly works against us. There may very well be. And again, I don't feel that anyone should be constrained. When you say it works against you, I'm not sure what you're saying. Nor am I. Because what if they raise additional defenses where they can show that some of the $1.2 million went for more than just these five necessities, maybe seven necessities. Right. But you're not, you don't feel you don't want to be constrained by the the monies that were spent on these these these items. So you you you would like to have, you know, the entire you're going to start from a different premise. You're not going to start with the money that was spent on these items. You're going to start with all the money that went into the account. Correct. And we believe that even with respect to these five items, we might come out better than we did. So even if we were limited to these five items, if the defendants were limited to these five items, we know that if we started under the premise that $1.2 million is our starting point, and then we subtract the money that was spent for actual necessities. You would much much rather start with 1.2 million. Correct. So you would you would recover, I guess under your theory, automatically any cash expenditure, any ATM withdrawal, you would get that automatically. No, I don't. Well, how would a defense, let's say you have a bank statement that shows a $300 cash withdrawal from an ATM in downtown Pittsburgh on X date 2006. Do you really think somebody could come in the court under oath and testify what he or she did with those 300 bucks? That's why it's not our burden. Our burden is only to show the transfer. So your answer is yeah. They have their stop. Even if the even if the spouses made a 200,000 deposit into the account two days before, your submission is those $300 taken from that ATM, we get that. It's not all the realm of reason to have someone come in and testify that I spend this much money on groceries per month, that I spend this much money on insurance premiums per month, that I spend about $300 taken from an ATM and you got your grandkids with you and you're buying an ice cream code. And so if we look at it line, if we look at it line and by line on them, yes, it might be difficult, but it would not be difficult to come in with annual expenditure showing what their necessities are. That's not that difficult. We all budget, we all use QuickBooks or we use some other type of budgeting to know whether or not we're going to have money at the end of the year to pair. Attaches, it's not that complicated. And when we're talking about necessities, it's even less complicated because we don't have to know how much money went to fuel the boat. So by the way, I assume I have looked at this closely. You know how much of his wages went in there, right? Yes. And you know how much of her independent funds went in there, right? Yes. Is that the 1.2? Is that net to know what's the net of that? Let's call it 1.2 net. 1.2. His wages. And so you want as much of that 1.2 is they can't prove we're necessities. Precisely. Yeah. Can I just go go over the five items? It started off with transfers into Mrs. Arbigas' sole account. And I think the bankruptcy court there thought that it was just as likely as not that that money came from, not from him, looked from her. And then as far as the retirement account was concerned, that never went into the joint account. That was just came right from the employer. Some, yes. There were two categories of that. But yes, some went right from the employer. Yeah. But it didn't go into the joint account. None of the monies went to the joint account before it went to the retirement. I believe that's correct. And then the life insurance policy was for fair and adequate return to him. In other words, he got what the life insurance policy, that's not fraudulent. Correct. I believe that's what Judge Markman said. So that leaves you with the, and those rulings would presumably stand. I believe that's correct. Okay. Then, then, that leaves the clubs in Florida of the five that are at issue. Is there the largest under the theory, unless we throw out the whole thing and make everybody come back, you're basically saying that if there's a retrial of this whole case based upon your theory, then these other various rulings would still be applicable. I believe that's correct. Is it in on individual items? Those are legal arguments that we're not challenging. And my only real question is can you establish that you challenged the approach of the burden in the way you have today? We believe that Judge Markman is ruling memorializes our position. And does that, is that set forth? Can you show me there and where that is? And maybe in a rebuttal when you get back up where that is in his opinion? I will with that. Okay. Now, may I speak briefly to this look back period? Well, you should hold that for rebuttal. Okay. In rebuttal, we also are going to be addressing the cross appeal issues as well. Of course. Thank you very much. Okay. Mr. Crawlick, you'll be glad to hear from you, Sarah. Did I pronounce that correctly? Yes, you did, Your Honor. Thank you very much. It's uncommon for it to be pronounced correctly, but it is. Good morning, Your Honor. I'm Nicholas Crawlick and I represent in the court, although I represent Thomas Arbigas, the debtor of purpose to this argument. I've been designated as arguing counsel for both Thomas Arbigas and his wife Mary Claire Arbigas. Listening to to counsel's argument, Your Honor, a lot of it may apply if this was all in a vacuum. And I've got to deal with this in terms of the background. Obviously, the predecessor to the trustee TriZick, which was the commercial landlord of the partnership, which Mr. Arbigas was a member, had filed suit and obtained a judgment in court comment, please. I think as the record will show, there are arguments, there are comments made that there had been extensive post-judgment asset discovery to determine what happened with the cash, the payments, the salary of Mr. Arbigas, and there's numerous references in the record about dozens of bankers box filled with thousands of documents going back over a decade as part of the asset discovery process and state court to provide the information to TriZick on the commercial landlord. So this is not a situation where the information regarding the transfers of the income, the wages, was squarely or solely within the possession of the debtor. The creditor had that information and obviously shared it with the trustee. Fast forward to the bankruptcy filing of Mr. Arbigas and then fast forward to the removal of the state court fraudulent transfer case, which is where this action began to the bankruptcy court for trial before Judge McCullough. The initial response filed by Mr. Arbigas to the fraudulent transfer complaint was a motion for a more definite statement. And what we asked was tell us out of all of these documents and everything that we've provided to you, you can look at them, tell us what you claim to be the fraudulent transfers so that we can go on and put in evidence to rebut what you're contending to be the fraudulent transfers. What's in the fraudulent transfer of the transfer in that or even a accomplished rather than these various transfers out? Well the transfers out would categorize them as whether or not the initial transfers were fraudulent because if they were used and this is where we get into the luxury necessities argument but if they're used for for necessities they're not fraudulent. Well you were about to say that you asked that the judge asked the trustee to say what was what was what was fraudulent and if the judge did that and the trustee responded to these five categories then I assume that your argument would be that's what that's those are those are the parameters of this case. Judge the judge didn't in a vacuum tell the the trustee you cannot allege these various transfers as fraudulent. What happened was in response to our motion for a more definite statement the parties and it entered into a stipulation for a case management order. That's in the record. Okay in consideration of the trustee identifying at a later time in a pretrial statement the specific categories of the transfers she claimed to be fraudulent we withdrew our motion for more definite statement as moot and filed an answer on the merits. That led to the April 20th I believe 2010 consent case management order where the agreement of the parties between the trial council which the trial council was Mr. Vedic and Mr. Levin whereby the parties agreement was set forth and in that consent case management order was a statement that said trustee is to identify those specific transfers which she claims to be fraudulent and those objections to which she those exemptions to which she continues to maintain an exemption. And does the record say tell us that she basically changed her mind about about that is that what happened here because I think what you just said is clearly in the record it is there seems to have been an agreement that the trustee would come forward with a list of what they said what she contended were not necessities. Correct that was our understanding that was the way that the way it appeared in the consent case management that's the way it appeared specific transfers. But then later she came back and said here take this 189 page or whatever it was list and you you saw it sanctions on the basis of that. And to go that route your honor would have involved going through as I mentioned earlier the thousands of pages of documents you know credit card receipts ATM withdrawals checks what was she entitled to change her mind. Not when she lender into a consent case management order and the second thing that was that's also clearly in the record was a evidentiary stipulation on the first day of trial October 14 2010 at the outset where the discussion was held a colloquy between Mrs. Arbygast the attorney in the court below Mr. McDonough and Judge McCullough wherein it was identified that this is what we have decided to do counsel for the trustee and us to expedite and to make this a more efficient process of going through the trial rather than going through the tens of thousands the trustee would introduce his or her exhibits identifying you know their evidence in support of the claims of fraudulent transherent they would have their offer of proof and then the Arbygast would want to take a stand and try to defend the exemptions and defend the transfers is not fraudulent. This this would help me. Sure your answer to this I think would help me. Imagine, care factually not this case but imagine that over four or five years his wages went into the entirety's account and never came out nothing ever came out. Not even for an assessment either not even not for anything. Do we have a fraudulent transfer? I would submit that you do not because they were not used to purchase either and let's let's forget about the argument either luxuries or non necessities. But what do you say? I mean he's hidden his wages hidden in quotes. He's put his wages. She clearly has no no interest, no protectable interest in his wages from the firm and he's he's basically just put his wages in a form that the creditor can't reach. Are you is your hypothetical that only his wages are put into that other funds as well. It's an entirety's account. Then to the extent that Mrs. Arbygast put in her separate assets her separate money then arguably he's received reasonably equivalent value and that's one of the elements of a fraudulent transfer claim. You transfer property. What is the reasonably equivalent value received by him by virtue of the spouses deposits in her separate assets she contributed to the marital estate. Okay but leave those aside because that's not what we're talking about. We're talking about his wages. That's what that's the issue here right. Right. So the question that Judge Davis asked was the simple fact of putting those into the entire of these account. You say it's not a fraudulent transfer and and yet Judge Markowitz as I understand it said it was and then the question comes up were expenditures reasonably and that reasonable and necessary for household expenses and then those will not be counted but the rest will be. And the Arbygast put on testimony with regard to what they used the money for and they also testify there's also some testimony although not a great deal of testimony about the extent of Mrs. Arbygast's contributions to the marital estate from her separate assets her separate funds. That goes to the question of reasonably equivalent value. He put in his wages into the into the joint account. She also put in her separate assets. So to the extent that Mrs. Arbygast put in her separate assets there's a couple of cases and related cases in the bankruptcy court in this in this matter from some of the other partners that there is a corresponding reduction in the amount of the claimed fraudulent transfer based on funds coming from other sources. Right. That's understood. Okay. So from the standpoint of you know in the abstract. We can forget those in terms of the analysis that we have to think about. They have no bearing on this case. Right. Well do respect your honor and Mrs. Arbygast contributions do have bearing on this case. Well they only only only on the output from the disbursements. Yeah. Your argument that it's not a fraudulent transfer unless she didn't contribute. I'm just I'm not getting that at all. It's the it's the constructive nature of him receiving wages in a nanosecond and then transferring immediately into the entire his account. That's the fraudulent transfer. Right. Right. That is the fraudulent transfer but to the extent he gets a reasonably equivalent value for his transfer by Mrs. Arbygast put in which has nothing to do with what she puts in except to the extent we can prove that she put something in that covered some. And then when she put it this way when she puts money into the account there's no fraud involved. That's correct. It's her money going into the joint account. Right. And she doesn't have any creditors. It's his creditors better important. It's law firm. You work for the law firm. So so so that's that's just confused as the issues to raise that. It seems to me because I don't see it how it has any bearing at all. Simple simple. My colleagues are saying it sounds so simple to me. I don't know why you're what problem you have with it is that the fraudulent transfer was the money that was paid by the law firm into their joint account period. And then you take out a necessaries but the fraudulent transfer itself the the universe of it is the money that was put in and then the question is how much is it you can call it for value and call it necessities the question is then how much do you reduce that amount by because of what it was spent on which you start with only what was given paid by the law firm to him and then through him to the account. But what I was driving at your own is that it is also reduced by the extent to which the non debtors files contributed her separate assets and her separate funds. That's not even in consideration because that's not fraudulent. It's not fraudulent but it's to show that there was really equivalent consideration, reasonably equivalent value to Mr. Arvigas because she contributed to the marital estate and that's why it's relevant in this case because there was a stipulation that the party's entered into to allow for just that type of evidence to go in after it was determined. Does anybody agrees I think? Does it matter how you map it? I think everybody agrees that if she put money in that the trustee doesn't get that money because she's not the debtor and she wasn't she was not that our payments and we're not fraudulent. She's not the debtor it's not a fraudulent transfer. What my point is is that it goes to reasonably equivalent value received by Mr. Arvigas for his deposit into the why is that? I mean what does it have to do with value to him for his deposit? Yeah because that's an element of a fraudulent transfer. Yeah I know that's an element of the fraudulent transfer but how is it valued to him as an individual to have done that. I mean it's it's unrelated to this to his transfer it seems to me he puts money into the joint account removes it from the creditors. She isn't doing anything she's just contributing to that account and you could have 10 other people contributing to that account too and that'd be fine too if they felt like it but but but the real thing we're focusing on is what his what his contribution was into that account and whether or not he got value back for that money that he put into the account not in terms of anything that anybody else put into the account but was it for reasonable and necessary expenses or was it for a purchase of a car which he got which was then part of the bankruptcy estate or something of that sort. It's value to the extent that the funds that Mrs. Arbigas contributed to the mayoral estate were used to satisfy Mr. Arbigas' obligations. That's the value he received. He wasn't the only one putting his wages into the account for resources. Right, but you're going to cut those. Are you is this an argument to try and get more money for the for the Florida House or reduce the Florida House value or something? I mean she did put money into the Florida House. It did not come out of the joint account, right? No the acquisition of the Florida House your honor came from a withdrawal from an exempt pension account plus another 5,000 from the joint account which Judge Markwood said well to the extent of the 5,000 that came from the joint account that that's a fraud when transferred but that erroneously presumed that none of Mrs. Arbigas' separate assets went into that account. I think I finally get your point. I think I agree with it but I think I get it. Is it your argument that he puts in a hundred dollars, she puts in a hundred dollars and they expend a hundred and fifty dollars to pay the light bill. Your argument seems to be that he gets credit for the first hundred dollars to its light bill. Is that your argument? Well, she only gets credit for the fifty of the hundred and fifty dollar light bill. Well, you'd have to change that that analysis to a non necessity or a luxury expenditure. The light bill is a necessity. Everybody agrees that. So it wouldn't be a fraudulent transfer in any event because it's a necessity. But we're not focused on the payment of the light bill as a transfer, fraudulent or not. We're focused at least in the first instance on what goes into the account and what I think we've been trying to get you to address in a way that we finally understand it is why it matters what she put in. Because to the extent that her funds were used to pay that obligation, then yes, that's the benefit to him. How could we possibly know who's funds? The funds are fundable. Well, that was one of the issues that we've created in our appeal in the sense that we didn't get the opportunity to show that. That's in our cross appeal. As far as the the pretrial evidentiary stipulation is how the parties were going to proceed. We're going to proceed to identify number one, what those fraudulent transfers were, which the trustee ultimately did after much effort. Then once the court made the ruling, if the court found that there were no fraudulent transfers, then the dollar amounts wouldn't be, wouldn't matter. Because there would be no fraudulent transfers. With the stipulation called for, which was entered into in the first day of trial, is to the extent that the court did find that there were fraudulent transfers, then the parties, number one, would attempt to agree as to the amounts that would be applicable to those findings, the dollar amounts, or that a subsequent. I think you will actually have a trial on all 189 pages. I don't think we need to have a trial on all 189 pages. Except for the five, except for the five categories, that is that what you, do you think you're going to come out better if you do it line by line? No, we did that, Your Honor, as a part of case management. It's part of making this case proceed in a judicially efficient and economical way. Judge McCullough didn't want to go through thousands and thousands of pages of documents with a three month trial involved. That's why the parties entered into the consent case management order saying, trustee, identify these. And yet, both parties are here complaining about not having been able to vindicate what they thought they were bargaining for in that case management order. I just heard you say we weren't permitted to do that. Well, the stipulation that I'm referring to was not in the case management order, but it was on the record in front of Judge McCullough based on the case management order. Based on the case management order. That's correct. You know, the appeal that was filed, and the claim against Mr. Arbagas was, as Your Honor pointed out, over like 1.2 million or several million. And the case came out with a $143,000 judgment against the Arbagas, which the trustee appealed. All right. You need more to be here. I understand. Yeah, we filed across appeal based on the issues we raised that we thought had merit. And that included, you know, the evidence for stipulation, which allowed us, which would have allowed us to introduce evidence of Mrs. Arbagas contribution, not just for the acquisition of a couple of the assets, you know, the Florida House wasn't anything from her money, as I mentioned earlier. There was one item, one of the club memberships. All right. There was evidence for the acquisition of that. You know, some of her money was paid the initiation dues. But the claims, okay, finish your thought. But the claims that the trustee was pursuing also was the continued support and expenses and maintenance of the Florida home and the continued expenditures on the club memberships and how Ms. Arbagas use those club memberships. And there was no evidence, no effort, no opportunity to provide evidence as terms of how much of Mrs. Arbagas separate assets were included and used in that in the payments of those expenses. And we're, now that's, that's what we complained of in our cross appeal that the trial, evidentiary stipulation was not given effect and Judge Markovitz essentially ignored it. Notwithstanding the fact that at the second hearing on April 27th at the outset, trial counsel for the trustee, and this is also in the record as well. So it's our understanding that the April 27th rehearing, which was occurred as a result of Judge McCullough's death, was not to replace the record of the October hearings, but to supplement it and using Mr. Fedick as words because he said, because there were stipulations plural. Okay, let me ask you, though, so that you are going back to the lookback period. We've got a, Judge decided that the lookback period was the four years prior to the civil act prior to the first state court action, 2003 to 2007, right? That's correct. And is it your position that that that was correct? Yes, Your Honor. Okay. The other side says it wasn't and I take it that your reason, your reason for that is that that was in effect the, what the parties discussed before Judge McCullough. Right. And also I take it, I think there's a general rule that the parties are supposed, when they go into bankruptcy are really standing in the shoes of the prior creditor and under state law. That those four years would have been the correct period of time. The, the, the trustee is standing in the shoes. Trustee standing in the credit. Yes, that's correct. Okay. I just want to be clear on that. Yes. This, Your Honor, I think we've pretty well covered what, what I want to address with regard to Mr. Levin's arguments and following up on the, the, the stipulation or the agreement regarding the four years, that, that was not an vacuum either because we had a situation where the trisicon through its Pittsburgh Council had, after the bankruptcy had been filed, had written a letter to Judge Wettick. And this is also in the record as well. Asking for a striking of the discontinuance without prejudice and reinstatement of the action against Mr. Arbigast because as you recall from the record, Mr. Arbigast had been excluded from the state court litigation as a result of the superior court decision, absolving him of liability, which the Pennsylvania Supreme Court reversed. The problem we had was that the, the trisicon had asked Judge Wettick to reinstate that and in violation of the automatic state because it occurred it was entered February 3rd 2010. That's all clear. How did that prejudice you? Well, we had a concern that, that there was violation on that state, but I'm not saying it prejudiced us. I'm not saying it prejudiced us. I'm saying it was a factor in consideration and entering into the stipulation as to the four-year lookback period. You make an argument in your brief that the country club expenditures were for his benefit alone and therefore not fraudulent. I don't understand that argument. It seems to me that the real question here is whether those expenditures were for non-necessary items and that a club membership is not necessary. Well, Ardolson, who benefits? I also said a case in my brief identifying what constitutes a transfer for the benefit of a third party. It's a blue-coil energy case. It's a night-ser-reply brief. KLV versus blue-coil energy. But we're talking here about whether expenditures were for necessary, reasonable and necessary household expenses or not. A club is not for reasonably reasonable and necessary household expenses, even if it's for his benefit. It's a luxury, or non-luxury, but it's not reasonable, not a necessary. But Mrs. Ardolson, not a transfer of that. No, but the transfer occurred under the theory that the judge operated on. Transfer occurred when it went into the joint account, not when it went to the club. But she derived no benefit from it and she was not so the point is, and the reasoning is. She's going gambling to Las Vegas for a week and she wasn't involved at all. That would be the same issue. It would all be for his benefit. I suppose then you'd have to argue, oh, well, somehow that was since that was for his benefit. It was a reasonable and necessary household expense to go to Las Vegas. So then the reasoning is to impose a liability on Mrs. Ardolson simply because her name was on the account, she was not a transfer, and she derived no benefit from it. And therefore she therefore has liability. I think the reasoning there runs a file of what the blue-coil energy case is. You think that the expenditure has to be for the non-necessary expenditure has to be for the benefit of her as well as him. That's that's our position here on. I see. So that if he did take the money out of the joint account and go to Las Vegas for a week and blow it all to the tune of $100,000, since she didn't get any benefit of that, that would be how to either. He could very well have gone, cashed his check at a bank, taken $100,000, put the rest of it in the joint account, and then go off to Las Vegas and then blow the account. Does that make Mrs. Ardolson reliable? That's the same rationale. It's a question whether it's a fraudulent transfer or not, and whether it was for a reasonable and necessary household expenses. I don't know that her liability is cuts in the picture. I mean, you're talking about a different, a different, uh, you're saying that would be fair, but is that the where's the fraudulent transfer? You're saying what difference is the outcome is the same, but the difference is that if it was accomplished one way, it's treated one way, and if it's accomplished by by by transfer first to a, uh, uh, a joint account, then it's treated everyone. Well, yeah, so it's under my scenario. It would not be a fraudulent transfer because Mr. Ardolson has kept 100,000 out, but if he allowed to be deposited into a joint account, and then immediately took the 100,000 and spent it on himself and not for Mrs. Ardolson, then it imposes a liability on Mrs. Ardolson simply because she is a joint ten of the account. And I think that that reasoning is flawed from from the standpoint of what we have here. Well, except that maybe he's doing something to hurt, and maybe it's not so much, uh, credit is worried. Anyway, I see that my time is up now. Yeah. Could you take just 30 more seconds and give me your your best shot on bird to prove? Birdon of proof, you're on our, we agree with the finding Judge Markovitz had with regard to his looking at comments six of section 502, the Uniform Fraudal and Transfer Act. And as the party is asserting that the, uh, asserting the, the transfer being fraudulent has the burden of proving that it is. Having said that, the Ardolson gas undertook that burden on their own anyway because they're the only ones who put it on a testimony. I understand that, but why doesn't comment six cover the situation of the funds going into the entirety? And as I understand the argument on the other side, it's actually silent on the actual burden of proof as to expenditures. It is silent, the actual burden of proof, but the fidelity bond case adopts it and says, no, this is, this is the comment that provides that the burden of proof is on the party. The fidelity bond is your best. Yes. Well, if you talk about the burden of production, burden of production, I take it your, your, your view is that it was more than met. I mean, you did, it wasn't, there was a burden of production. That is, you had a turnover of all these papers and you start out your argument by saying there was a ton of that stuff. So, the burden of production was yours. That's right. You met it, right? That's correct. And Judge, Judge Markovitz said that he would impose upon the Ardolson gas, the burden of going forward with some production of evidence telling it and Mr. and Mrs. Arbigas, the only ones who testified at trial with very little cross examination, Mr. Vettiga. Then once you have done that, then the question was the burden of proof and I think is there's water to guess before. I'm not sure how much, once the production is made, once everybody has the same access to all of this material, I'm not sure how much it matters who has the burden of proof. And it really doesn't matter in this instance, because the Arbigas undertook it and we believe we met it. Well, it does matter if we accept the trustees theory, because he would wipe out everything that's happened. And go through 7,000 pages. And go through 7,000 pages and they would, they would prove all the money went into the account saying that's the fraudulent transfer and then say, you show us what was necessary and reasonable expenditure out of that and put the burden on you for that. That's what that's where it matters. And as a matter rule that way, you go you go to whole food sometimes and you pay with a debit card and they say you want some extra. So you take 40 bucks to put in your pocket, your client would have to take the stand under oath and explain what happened to that 40 bucks. And as a matter of case management, that's precisely why the party's energy that joint stipulation for case management order, that's why they went to the enter into the stipulations in front of Judge McCullough to avoid waste of judicial resources going through that process and to streamline the case and we submit that it will work properly. Thank you, Your Honor. Thank you, Mr. Grom. Yes, we've got the rebuttal. Now let's make no qualms about it. The stipulation was not entered into because we didn't want to bother the court. The stipulation was entered into because of Judge Wettich's ruling. And Judge McCullough's belief that that ruling was precedent in the case. That's why the stipulation was entered into the court. So where does that help you? Because the stipulation was agreed to. Signed off on. Based on what the what the prior basis was and whether it was correct incorrect or whatever. If you didn't like what he was doing, you wouldn't sign the stipulation, but you did sign the stipulation. What Judge Wettich has said, and we have to read the entire colliloquy, he said that he was stipulating to the fact that the presumption was the record created today would be supplement of the record from October 14 and 15 with the understanding that everything that occurred prior to that point, prior to the trial, remains a matter of record because there were stipulations. He's acknowledging the fact that Judge McCullough was still working under the pretense that Judge Wettich's ruling governed the case. And here's how Judge Markovitz addressed that. Because the court agrees with the trustee in Trizek that a certain portion of the applicable law that must be used to resolve the instrument matter was indeed misstated by such predecessor judges, and since the confusion that ensued as a result of such misstatement has not been cleared up until now by the rendering of the instant opinion, the court cannot see fit to monetarily sanction the trustee in Trizek for trying to put that evidence into the record. Did you sign a stipulation at that point as referred to by your adversary or enter into a stipulation? The stipulation was not a consent to the law. The stipulation was just simply an acknowledgement of the law of the case as Judge McCullough was ruling upon it. Judge McCullough had already indicated at that point that he intended to- The extent that the stipulation laid out what the proof, what was to happen at trial in terms of the proof, that was a stipulation that you rendered into. If you didn't like it, you could have, you didn't have to enter into the stipulation. Oh, it was required at that point by Judge McCullough as a bill. Do you agree with the interpretations that were going on at that point? Never agreed with the interpretation. Did you reserve, did you take out an exception? The stipulation does not anywhere suggest that we agreed with the interpretation. Does it indicate that you didn't agree? It does not. Okay. But it is not an acknowledgement of the interpretation of the law, and Judge Markovitz recognized that too, that there was confusion over the fact that there was some belief by Judge McCullough that Judge Wettich's ruling governed. That was- that put the- that put the trustee at an unfair disadvantage. And at that point, what was the trustee supposed to do? Go before Judge McCullough and say, I don't care what you think. Here's what we have. And so we in fact tried something almost to that point. And the trustee put before Judge McCullough, and let's be clear on what this is that he put before Judge McCullough. It's actually 189 pages, not 7,000. What we put before Judge McCullough was not just the deposits, but the disbursements. So you're right. The documents were there. We didn't get to use them. The discovery was there for everyone to use. We didn't get to. We didn't get to even try and satisfy our burden that we show what happened to the money after when the entire discount. Wouldn't you- wouldn't you- as you say, you weren't looking to please the court. Why didn't you just come in with your 189 pages? Why did you even create the five categories? We did. We did. In Judge McCullough. But why did you create the five categories? That was- that was the extent of what Judge McCullough wanted to see. But- but you- you're not arguing to us as I understand it. You didn't care what Judge McCullough wanted to see. You wanted Judge McCullough to see 189 pages. And we presented those two of them and he kicked them out. Right. And then you could have appealed. You could have appealed at that point. We are. But you didn't. Well here we are. The Judge bludging you into the way he wanted to do the case. And you agreed to do that. No. And the end of story. I'm sorry. I don't think we had a right to appealed at that point. In time of trial, hadn't you been- No. No. You could have offered what you- you know how trials go. The plaintiff offers their case. The defendant offers their case. There's a judgment. And then there's an appeal if you don't like what happened. And- and that could have happened here without a stipulation. Judge, we don't- we're not going to enter into a stipulation. Our right is to offer everything that came out- everything that went into that account and rest. That's what we're going to do. I'm sorry, overruled, the orders, all sorts of different things. And then you appealed. That's exactly what happened. Yeah, but you entered into a stipulation. That was way before we tried to offer that. Way before. Way before. And he adhered to the stipulation. Your Honor, we offered that on the day of- Could you address as walkers, I'm missing something. Because you don't seem to be responsive to his point. No, Your Honor, maybe there's some confusion in the timeline. The stipulation was entered into back when council says he brought his motion for more definitive statement relative to the complaint. That was months before trial. Yes, right. And the day before of day of or right around the trial date, all the exhibit puts were presented to Judge McCullough. And it had everything in the context of the prior stipulation. No, no, we gave him everything. I see. You said, sorry, Judge, the prior stipulation doesn't apply. We're now retrying this case the way we want to try it. We believe that those documents were necessary to prove the case. And to your point, Your Honor, we tried to do it. He refused us. We're here appealing. And Judge Mark, if it signolages that, that that's exactly what happened. Okay. We entered into stipulation way back when we realized with all the documents in our burden that we don't have enough, we have to put the rest in because this is the way as fraudulent and transphircates should be tried. And Judge McCullough sent us on our way with that. Earlier, I characterized that as a change of mind by the trustee. Would you accept that? No. You wouldn't accept that? No, Your Honor, it's consistent with the idea that all along this is the way we felt a fraudulent transfer case needed to be tried. But why did you create the five categories? What you just said, it seems to me, is quite inconsistent with the idea of creating five categories. And litigating and arguing before the court, those five categories, it just seems to me, it's not exactly an election of remedies, certainly not that. But if your position is, we rest on the 189 pages. And now it's their burden, debtors' burden to come in and show that some portion of this $1.2 million that went into this entirety's account are not subject to recruitment by the trustee. It seems to me that's what you should have done, but you didn't do that. You can't try half a case the way the judges interpreted the stipulation and put documents in so that you can come to an appellate court and say, well, we never really wanted to do five categories in the first place, he made us do it. We, I'm not getting that. No, you're right, Your Honor, he made us do it. Those five categories were not our creation. But a court can't make anybody introduce evidence and a court can't make anybody to introduce evidence and do it. And that's the reason that we thought the five categories were the only ones that we identified at the data stipulation were we knew based on the information that we had that we were dealing with an issue of necessities. Well, in fact, what we were judging treated that as an act we essence in his interpretation of the stipulation. No, he didn't. That's not in the record anywhere. Judge McCollough never acknowledged that. Talking about Judge Mark. Judge Markovitz acknowledged that. That's the order we were looking at. I really should know the answer to this, but why was the entire third circuit recuases? I think it was one of the debtors. One of the partners was Judge Hardeman. He was not liable based on the timing of the lease. He had left the firm at point X. And so he was not one of the defendants. He was, however, named in a subsequent case. Of course, there's also somebody whose name is very much like Sikharurka. But it spelled a little differently. I've been trying to sort that out more than I should. Right. We did not, it was not because of Judge Sikharur. If I may just last point here. Thirty seconds. If the $100,000 was in an individual bank account. And he went off to Las Vegas. He'd never get on the plane. Because if it wasn't an individual bank account, we'd have the account. That's the point. He chose not to put an individual account. He chose to put it in an entirety's account. That changes the nature. We can't execute upon that because it's held by tendency of the entirety. We can't own the bank account. That's why we're bringing this. When I was talking about the money that went into the... This was in the context of his argument that somehow her putting money into the account affects... Lovers, they're burdened because there's a return of the value to him. But anyway, that was... We'll deal with that. The next time on the second circuit we have a difficult case, we'll have to include one of our colleagues as a defendant. Exactly. We'll ask... He was not a judge of the time. I'm very important. Keeping with the tradition in the fourth circuit, which other circuits find great difficulties, but we'll come down and greet Council. Oh, thank you. Why don't you lead the way? Thank you. It's an important circuit. It goes back to 1927. I like it. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. I just want to say, all right, thanks very much. Good luck, Andrew. I can be the important in the second circuit, the tradition of the last group. Thank you. Thank you. Thank you. Good luck

Legal Case Summary

In Re Thomas Dare Arbogast

Date Argued: Tue Jun 18 2013

Case Number: E2013-02398-COA-R3-CV

Docket Number: 2597658

Judges:Not available

Duration: 75 minutes

Court Name: Court of Appeals for the Third Circuit

Case Summary

In Re Thomas Dare Arbogast

Oral Audio Transcript(Beta version)