Legal Case Summary

May it please the court, Doug Northup with Phenomore Craig representing the marriage entities. I would like to reserve five minutes of my time for rebuttal if I may your honor. The trial court lacked subject matter jurisdiction under Article 3 and this case became moot in 2011 when JP Morgan was paid every penny it sought and every penny it could recover from marriage and repayment guarantee action. The controlling builders who are not before this court own and are developing the land marriage tried to acquire through the transaction and now want marriage to pay for it. Because the court cannot order any relief that would benefit the only plaintiff in this action JP Morgan through its sub agent ISG the case is moot. Dismissing this case your honors does not give marriage a free pass by any means. This would simply put the dispute in the proper forum a pending arbitration with the proper parties marriage and controlling builders and would not allow the builders to contrive and try to create subject matter jurisdiction where it otherwise does not exist. The court dismisses case and moot and allow the parties to hear their grievances against one another in the pending arbitration. It is undisputed that neither JP Morgan nor its sub agent will get one penny of any judgment in this case from Meredith. They have paid everything they sought and the testimony of JP Morgan's lawyer at the oral argument before Judge Pro, the gentleman named Jim Huff, made that clear. The lenders have been paid and the only beneficiaries are the builders. The bankruptcy plan and one of the things your honor I'm sure that Mr. Schaeffer will say to you something along the lines will the bankruptcy plan already dealt with this. First of course we know that an article one bankruptcy court cannot create jurisdiction in an article three court like this one but as Judge Pro even in his orders on summary judgment stated with respect to the treatment of the Meredith repayment guarantee the court held the bankruptcy court properly resolved the issue within its exclusive jurisdiction. The impact of the plan confirmation on Meredith's repayment guarantee under bankruptcy law and left for another forum to resolve the impact of any on the plan transactions on Meredith's repayment guarantee under applicable state law

. But the plan your honor section 3.4 F made it clear that the settling builders who are not before this court shall pay into an escrow account an amount equal to the portion of the settling builders consideration under the plan that is equal to the amount of the marriage repayment guarantee liability. And as Mr. Austin who negotiated the plan for JP Morgan testified and we quoted this extensively in the briefing JP Morgan and the lenders were paid. Every one of them took their money out of the escrow and they are finished with this case. We know your honor there have been numerous cases cited in Belent and the other ones that make it clear that a case is moved if there's no possible relief which the court could order that would benefit the party seeking it. And that's exactly the case here and I think it's telling your honor the only case that was cited for this proposition that JP Morgan through its sub agent retained standing was a sprint case from the United States Supreme Court. But the issue is the US Supreme Court stated there at page 2536 of the Supreme Court reporter. We have discovered that history and precedent are clear on the question before us. Assignees of a claim including assonees for collection have long been permitted to bring suit. It's undisputed here your honors. First of all the builders wanted JP Morgan just to not get paid on the marriage repayment guarantee and pursue that outside the bankruptcy in JP Morgan said no. We know and it's undisputed that the builders wanted an assignment of the JP Morgan guarantee. And JP Morgan said no they had the leverage to demand payment of all of the guarantees and that's exactly what happened

. So the district court concluded that in fact JP Morgan had not been made whole. Then in fact that there were $47 million deficiency. Tell me why you think the district court was wrong. Well first of all your honor under the plan section 3.5c, the states each holder of an allowed pre petition lender deficiency claim shall receive in full and complete settlement release and discharge of such claim vis-a-vis the estate and its assets a rateable share of $500,000 to be funded from the settling builders total plan contributions. So the deficiency was paid but even more important your honor the deficiency was a matter between the borrower South Edge and the lenders. That deficiency 10 extent existed was on the loan which ultimately was paid off. This is a suit on marriages repayment guarantee and under 3.4f of the plan the lenders were paid the entirety of the marriage guarantee liability. And that's why I said JP Morgan and the lenders were paid every penny not only that they sought in the repayment guarantee but that they could have recovered from marriage. So unfortunately Judge Bro when he based his decision that there was standing did so on that erroneous proposition and for those two reasons your honor the deficiency is actually we believe quite irrelevant here. So you agree there is a deficiency you just don't think it's structurally relevant to this litigation. No your honor the deficiency was paid under that section of the plan that I just read to you. Well the plan says it was Judge Bro says it wasn't pardoning the the plan says that the obligations were satisfied but we all know that in confirmation of bankruptcy plans sometimes that's not entirely accurate given the complexity of transactions and that's what I think Judge Bro was getting out here

. I suppose except the problem with that is there isn't ever going to be any money that can go to JP Morgan. I mean if there's a deficiency and JP Morgan had the ability to collect that deficiency against marriage somehow then there might be an argument there but as Mr. Austin said the builders are the lenders are done with the case. The lawyers that are arguing this case Mr. Schaeffer has never represented JP Morgan and he couldn't. JP Morgan to care less about this as well as the lenders because they all been paid everything that they ever will be paid and our point again is let it let this case be heard where it should be not under contrived jurisdiction that doesn't exist in federal court and under a repayment guarantee taking the trying to take the benefits of the repayment guarantee by a party who could not and did not get an assignment of the rights there. So explain to me this status of the arbitration. I'm sorry. Explain me the status of the arbitration. The arbitration was initiated by the builders. There were counter claims that were asserted and then the builders filed a motion to stay the arbitration and we quoted from it fairly extensively where they said panel stay this arbitration because the exact same money the exact same dispute that is before you is before the district court and now the night circuit court appeals and that's our point. We're more than welcome to take the challenge to litigate marriages claims and defenses against the builders who are the ones that paid its guarantee liability but there simply isn't jurisdiction in this court because the party who's trying to pursue the claim is fully paid and you're on another issue. I'm going to ask you this and your answer will make no difference. Is this claim subtlable? Is it subtlable? Yeah

. The reason I ask is that occasionally when we have some of these types of commercial disputes that our circuit mediators do a pretty good job even though of bringing people who aren't necessarily parties to the instant litigation in and trying to settle a reach of global settlement. Is that of interest to you? Well, I mean this case you're on or where it is now as a dispute between the builders and marriage would be subtlable. What's made that difficult is the fact that marriage was forced to pay its entire repayment guarantee liability plus attorneys fees plus default and other types of interest and the builders have marriage as property that it tried to take down. So what they're looking for now is for marriage to pay for the land that they own and are developing but is it subtlable? I mean I think any case is subtlable but it hasn't there have been attempts made and discussions made and the parties just haven't been able to resolve it largely because the issues we're talking about today. One other point you're on there's some discussion in the case about well what really happened in the case was that there were participation in threshold and the repayment guarantee and there's a couple of things on that. First of all the guarantee was assignable but it did not allow participation interest to be sold in the guarantee. The Assignment Provision Under Section 16 allows participation interest in the facilities which are defined in the first warehouse clause in the guarantee which include the loan but that first warehouse clause defines facility documents to include the repayment guarantee. So by its terms and these under New York Law you're on to have to be strictly construed in favor of the guarantor. There cannot be a sale of participation interest in the guarantee and of course there couldn't be sales of participation interest in the loan in the bankruptcy because the loan was paid off but one important point even if participation interest could somehow be sold the proper party the real party in interest there would be the transferee the builders it wouldn't be the party who's been fully paid and even under their argument transfer those claims. So we think for all these reasons Judge Prol Act subject manager's jurisdiction and the court should be dismissed for that reason. We made other arguments your honor that I think are fairly well fleshed out about Section 2B termination under the repayment guarantee. One thing that is important there Judge Prod determined that the termination did not occur because the money wasn't paid directly to JP Morgan but of course that's not the case because under JP Morgan's own loan documents the money had to be paid into an escrow as it was in 2007 when marriage and the other party successfully took down their property and the law of tender here really isn't disputed. Marriage made every opportunity JP Morgan was going to get all of its money out of the escrow it was earmarked directly for JP Morgan. So under Section 2B the guarantee terminated the same under 2C and one of the real issues here is when that guarantee terminated marriage had suburbation rights

. Marriage should have at least been able to get the property that it's paying so far it has paid for but under the plan that's not the way it would happen. So we've made argument under Section 2B of the assignment of the acquisition agreement. I see I'm beyond what I've already kept for a but I'm happy to answer any questions that your honours might have but we would ask that you dismiss this case. Thank you, Council. Good morning John Schaefer for ISG subagent for JP Morgan. May I please the court? Before I get into the merits of things I think it's very important that the court understand the legal relationship between the different parties in the case because I believe meritage attempts to conflate the different rules of JP Morgan and the agent. Under the credit agreement JP Morgan is the administrative agent. ISG who I represent is a subagent of JP Morgan and we are standing in its shoes. JP Morgan as administrative agent is responsible for enforcing all rights under the credit agreement that set forth in Section 10.01 and it set forth in the guarantee itself. If you look at the guarantee starting at ER81 you'll see that the guarantee demand under the guarantee suit under the guarantee payment under the guarantee is all made to JP Morgan. What JP Morgan then does under the credit agreement pursuant to Section 2.10 is distribute that money off to the lenders. The real party in interest here is and always was JP Morgan as administrative agent as Justice Breyer recognized in the sprint case the courts have always recognized that parties in a representative capacity receivers, a sign for the benefit of creditors, indenture trustees, and here administrative agents are the real parties and interest in litigation regardless of where the proceeds ultimately go

. Here JP Morgan ISG would collect and tend to collect from meritage what it does with the money afterwards. Justice Breyer quite clearly told us and Chief Justice Roberts agreed is really irrelevant. The money gets distributed pursuant to the credit agreement. Now what happened under the South Edge plan was pursuant to Section 3.4 of that plan which is at page SER 70. The lenders, not JP Morgan because JP Morgan didn't assign anything. The lenders assigned their right to receive money from JP Morgan to the builders who settled pursuant to the plan of reorganization. So prior to the confirmation of the plan, the way this litigation would have worked is that JP Morgan sued meritage. Maritage would have to pay JP Morgan. JP Morgan would distribute the money pursuant to the lender participants and at times there were more than 100 of them. As a result of the plan, all that is changed is that when JP Morgan ISG received the money, it will distribute it pursuant to the instructions of the lender participants and those instructions pursuant to the plan were to distribute it to the builders who paid over $300, $300 million in connection with the bankruptcy settlement. That's all that's changed here. And the sprint case makes absolutely clear that the fact that the proceeds may be going to someone else now does not change the legal standing of the party with legal title. And the party with legal title is JP Morgan ISG

. I just want to get a clarification there because I think you're talking about the escrow agreement within the restructuring plan, correct? Yes. Okay. So you have the escrow agreement. The money goes from the settling builders into this and then the lenders can assign out. Correct? Yes. Okay. So if they do that and the lenders get their pro-rattish share, why doesn't JP Morgan in effect in that same position that in effect, it's case against meritages, moot as a result of that transaction? Well, a couple of reasons, your honor. First of all, if Judge Reinhard gave you an IOU, I don't know if he'd be inclined to do such a thing, but if he did for $100 and you chose to independent of that agreement for whatever reason, say whenever Judge Reinhard pays me, I'll pay you the $100. Maybe I did a favor for you. That wouldn't change in any respect whatsoever, the legal relationship between you and Judge Reinhard. You would still be the party that can enforce the note. And in this case, the U is JP Morgan. So if I recover the money, but it's not, it's a debt doesn't go away just because the original creditor sells the loan. Right

. The the borrower doesn't go, oh, Jesus, this is great. No, but you have an intervening bankruptcy. Yeah, in this case, it's a different relationship given the restructuring plans. I don't think it's a straight one-to-one IOU from A to B and then I still, of course, have my legal claim against the original maker of the IOU. But in this case with the interrelation among the parties, it just seems to me that the Lenders, including JP Morgan, potentially, and then it's ISG as its agent, as you've laid out, that they really, in effect, have recovered the money owed. Well, the the Lenders received consideration for their assignment in an amount and it wasn't actually equal to the meritage guarantee and as Judge Thomas noticed, we was still a $47 million deficiency on the total loan on a large chunk of that is because of builder, other builders who didn't pay. But it's important to note that JP Morgan and ISG aren't out of the case. There were still administrative duties for JP Morgan to perform under the credit agreement. At the time the deal was signed, there were still indemnification rights and other litigation that needed to be resolved. JP Morgan doesn't have to be a lender in order to be the administrative agent. JP Morgan's role in the same way that a trustee generally isn't, and probably in fact shouldn't be, the beneficiary of a trust. And yet there's no question that a trustee is the one who has authority to speak for and to sue on behalf of the trust. JP Morgan, ISG are essentially assuming that role here and they've continued that role throughout the case. JP Morgan, as meritages counsel may clear, JP Morgan did not assign its own rights as administrative agent

. It refused to do so and frankly, it would be an prudent to do so. So JP Morgan and ISG are still in the case. I still deal with JP Morgan's counsel because they are the ultimate agent here. I represent the sub agent and we are now collecting this pursuant to the instructions of our lender participants, but they have instructed us to distribute the money to the Settling Builders because that was their deal. Sotomayor Well, that was the deal in the restructuring plan, right? JP Morgan That was the deal under the restructuring plan. Sotomayor That has been done. JP Morgan And that has been done. It was done in 2011, and I just to make things clear because I know the issue of settlement came up. The exact same deal that the four, the South Edge had eight members. Two of them, unfortunately, went bankrupt themselves. One of them actually had done all of its land purchases before the real estate crash. But of the five remaining members, four of them, the Settling Builders, interdend with settlement agreement with the City of Henderson, with the bankruptcy trustee, with JP Morgan. And as part of that deal, they agreed to pay $300,000,000 to bring South Edge out of bankruptcy. And part of that deal was honoring their own repayment guarantees

. Maritage for a period of six months during the bankruptcy was offered the exact same deal. And in fact, I stood personally at the confirmation hearing and put it on the record in the bankruptcy court that Maritage still until the close of that day had the opportunity to take the exact same deal as the four other members. And Maritage declined. Maritage's stated reasons was that it was different because it thought it was off the hook based upon some transactions that had occurred in April of 2008, which I'd be happy to get into. So we've had plenty of opportunity to settle this. And Maritage has had the opportunity to settle on the exact same terms as the other four builders. I think it would be very unpalatable to have Maritage get a better treatment than the other four builders got. In a sense, the way I understand the party's differences to the effect of the confirmation of the bankruptcy plan, which would be raised due to Cata, is that you believe that this action was expressly excluded from the plan and the rights of JP Morgan as administrator were preserved as to pursue to this action. Their position is I think that the bankruptcy plan is not an extinguished to that. And yes, that is their position, Your Honor, and that's incorrect because the Section 3.5 that Mr. Northrup was quoting makes very clear that the release of the deficiency was vis-a-vis the bankruptcy estate. It was not vis-a-vis other guarantors. And in fact, there were three other guarantors, one of them being Maritage and the other two were the bankrupt guarantors who have their own bankruptcy estates. There was no release vis-a-vis guarantors other than the guarantors who actually ponied up the $300 million to settle the case. The bankruptcy judge's confirmation order makes that absolutely clear at SER34 and 35 that there was no release of anyone other than the debtor. And Ninth Circuit Authority makes that clear too because when debtors get a discharge in bankruptcy, third party guarantors do not get a release. That's what the American hardwoods in the Underhill versus Royal cases say. Maritage did not get a free pass just because South Edge went through bankruptcy. Your Honor, Maritage cites various other evidence to try to get around the plain language of the plan. For example, they cite one particular section 8.7, but what that section of the plan provides is that the settling builders, the four who actually paid the $330 million to settle the case, were getting releases. They try to hang on one single sentence at the end or phrase at the end of that clause that says in full satish faction of the repayment guarantees. But you have to look at the plan as a whole document. And as a whole document, it's absolutely clear when you look at Section 3.4, when you look at the confirmation order, that the intention of the parties was not to have a satisfaction of Maritage's debt, but rather to have an assignment of that debt from the lenders to the settling builders so that the settling builders would take the risk of collection. If they collected, they'd be made whole. If they didn't, then it was there, it was their risk

. There was no release vis-a-vis guarantors other than the guarantors who actually ponied up the $300 million to settle the case. The bankruptcy judge's confirmation order makes that absolutely clear at SER34 and 35 that there was no release of anyone other than the debtor. And Ninth Circuit Authority makes that clear too because when debtors get a discharge in bankruptcy, third party guarantors do not get a release. That's what the American hardwoods in the Underhill versus Royal cases say. Maritage did not get a free pass just because South Edge went through bankruptcy. Your Honor, Maritage cites various other evidence to try to get around the plain language of the plan. For example, they cite one particular section 8.7, but what that section of the plan provides is that the settling builders, the four who actually paid the $330 million to settle the case, were getting releases. They try to hang on one single sentence at the end or phrase at the end of that clause that says in full satish faction of the repayment guarantees. But you have to look at the plan as a whole document. And as a whole document, it's absolutely clear when you look at Section 3.4, when you look at the confirmation order, that the intention of the parties was not to have a satisfaction of Maritage's debt, but rather to have an assignment of that debt from the lenders to the settling builders so that the settling builders would take the risk of collection. If they collected, they'd be made whole. If they didn't, then it was there, it was their risk. And that's what the plan did. Your Honor, I'd like to briefly talk about some of Maritage's other arguments. They make the contention that they attempted to tender for their liability in April of 2008. But if you look at the terms of their own tender, and in particular, their escrow instructions, which are on our excerpts of record, you'll see that the terms of the tender were not in compliant with the credit agreement. Maritage demanded a release of J. P. Morgan's leans upon the property at a time when South Edge was already in material default. And that default was the result of defaults by all the builders, including Maritage, is found by an arbitration panel. South Edge had misinterest payments, and as a consequence, J. P. Morgan, under 7.03 of the credit agreement, had a legal right not to release its leans on the collateral. And it had good reasons as found by Judge Pro based upon the undetfretuted evidence in the record, which is that J. P

. And that's what the plan did. Your Honor, I'd like to briefly talk about some of Maritage's other arguments. They make the contention that they attempted to tender for their liability in April of 2008. But if you look at the terms of their own tender, and in particular, their escrow instructions, which are on our excerpts of record, you'll see that the terms of the tender were not in compliant with the credit agreement. Maritage demanded a release of J. P. Morgan's leans upon the property at a time when South Edge was already in material default. And that default was the result of defaults by all the builders, including Maritage, is found by an arbitration panel. South Edge had misinterest payments, and as a consequence, J. P. Morgan, under 7.03 of the credit agreement, had a legal right not to release its leans on the collateral. And it had good reasons as found by Judge Pro based upon the undetfretuted evidence in the record, which is that J. P. Morgan, the lender, the agent, excuse me, for 125 lenders on a $585 million loan secured by 2,000 acres of real estate in Nevada, didn't want to have a bulkenization of the property and have one-off settlements with different builders. Maritage's property was about 41 acres. This was an integrated master plan development where streets would run into streets and sewers would run into sewers. And J. P. Morgan, for the benefit of its lender group, needed a comprehensive solution, because things were bad in April of 2008, although I don't know if anyone knew how bad they would get not that much later. But that is the reason why J. P. Morgan would not agree to release its leans. And it wasn't required to. Maritage misstates Section 5B of what is called the Assignment Agreement. That agreement simply provides that if South Wedge was normally on a quote-unquote takedown, this was the member's agreement to purchase land from South Edge. Normally, that money would go to South Edge. But in the event of a default, J

. Morgan, the lender, the agent, excuse me, for 125 lenders on a $585 million loan secured by 2,000 acres of real estate in Nevada, didn't want to have a bulkenization of the property and have one-off settlements with different builders. Maritage's property was about 41 acres. This was an integrated master plan development where streets would run into streets and sewers would run into sewers. And J. P. Morgan, for the benefit of its lender group, needed a comprehensive solution, because things were bad in April of 2008, although I don't know if anyone knew how bad they would get not that much later. But that is the reason why J. P. Morgan would not agree to release its leans. And it wasn't required to. Maritage misstates Section 5B of what is called the Assignment Agreement. That agreement simply provides that if South Wedge was normally on a quote-unquote takedown, this was the member's agreement to purchase land from South Edge. Normally, that money would go to South Edge. But in the event of a default, J. P. Morgan had the right to demand that all of the money that would have been paid to South Edge go directly to J. P. Morgan for obvious reasons. But that didn't excuse all of the multitude of other requirements for a buyer such as Maritage to complete its takedown, including the fact that they cannot get a release of J. P. Morgan's leans if there was a material default. And there was a tender that Maritage made. If you look at page 69, they are closing escrow statement, you will see that at most only $12 million was supposed to be going to J. P. Morgan. And while that was J. P. Morgan's release price, 5B, the Assignment Agreement, the section they rely upon, makes absolutely clear that the entire takedown proceeds had to go to J

. P. Morgan had the right to demand that all of the money that would have been paid to South Edge go directly to J. P. Morgan for obvious reasons. But that didn't excuse all of the multitude of other requirements for a buyer such as Maritage to complete its takedown, including the fact that they cannot get a release of J. P. Morgan's leans if there was a material default. And there was a tender that Maritage made. If you look at page 69, they are closing escrow statement, you will see that at most only $12 million was supposed to be going to J. P. Morgan. And while that was J. P. Morgan's release price, 5B, the Assignment Agreement, the section they rely upon, makes absolutely clear that the entire takedown proceeds had to go to J. P. Morgan. And if you look at ER 69, you will see that the entire takedown price was over $29 million. And at most Maritage was only allotting $12 million to J. P. Morgan. And frankly, Judge Pro even questioned that because if you look at the escrow instructions, it says all payments to seller South Edge, not to J. P. Morgan. Your Honor, I see I am out of time essentially. So unless there are any other questions, any further. Thank you very much. Thank you. The builders have cited to you no case where a party that owned a claim and has been fully paid on that claim has been held to have standing to continue to maintain it

. P. Morgan. And if you look at ER 69, you will see that the entire takedown price was over $29 million. And at most Maritage was only allotting $12 million to J. P. Morgan. And frankly, Judge Pro even questioned that because if you look at the escrow instructions, it says all payments to seller South Edge, not to J. P. Morgan. Your Honor, I see I am out of time essentially. So unless there are any other questions, any further. Thank you very much. Thank you. The builders have cited to you no case where a party that owned a claim and has been fully paid on that claim has been held to have standing to continue to maintain it. What counsel said about J. P. Morgan remaining on as administrative agent was I think frankly a little misleading because J. P. Morgan was a lender. It was one of the major lenders. It was the administrative agent, but it is undisputed. And you did not have a counsel stay that all of the lenders were not paid everything under the repayment guarantee they were. Now if J. P. Morgan or ISG wanted to remain on the case as a builders agent and take some actions because they had some kind of an assignment or something like that, where they are the ones that have paid it, that might be a different circumstance. So you are suggesting that his statement that they remain on with administrative duties including indemnification and other oversight duties is not sufficient for standing in fact they've been. Not at all your Honor because the J. P

. What counsel said about J. P. Morgan remaining on as administrative agent was I think frankly a little misleading because J. P. Morgan was a lender. It was one of the major lenders. It was the administrative agent, but it is undisputed. And you did not have a counsel stay that all of the lenders were not paid everything under the repayment guarantee they were. Now if J. P. Morgan or ISG wanted to remain on the case as a builders agent and take some actions because they had some kind of an assignment or something like that, where they are the ones that have paid it, that might be a different circumstance. So you are suggesting that his statement that they remain on with administrative duties including indemnification and other oversight duties is not sufficient for standing in fact they've been. Not at all your Honor because the J. P. Morgan came on as administrative agent, but it was one of the major lenders. They have been paid and as a 3.4 says and this is critical under the plan, the repayment guarantee, marriage's repayment guarantee liability was fully satisfied. And think about the jurisprudence that would be in a circumstance like this, somebody is owed money and they are fully paid. No question they don't get another penny yet they can contrive a scheme under which they get to stay on and complain as a plaintiff so that the court retains federal jurisdiction. That simply flies in the face of all of the case law and in the, as you recall in the sprint case, that was a 5 to 4 decision where Justice Roberts vigorously dissented about whether persons who even had an assignment had standing. But those folks had an assignment and it's undisputed here, there was no assignment. These are simply what your Honor's legal machinations that if this is allowed to maintain standing, I mean a party could go out and say well I don't have diversity jurisdiction, I'm going to go pay somebody to pursue my claim from me even though they don't have an interest in it and get diversity jurisdiction. I mean we're talking about the court's jurisdiction and we're not talking about marriage getting off scot free. I mean what Council said about the settlements and that, I'm not going to get into all that because I don't think it's appropriate. Sure we could have gotten on the plan under terms that were completely unacceptable and marriage has many defenses that it is, would eager to be able to bring against the proper parties, the builders, but has it been allowed to under the situation that was created here. And the bankruptcy plan your Honor's is not raised you to Cotta or anything of the kind. The bankruptcy plan is nothing more than a contract between the debtor and the creditors. Well no it is raised you to Cotta as to the issues that's decided

. Morgan came on as administrative agent, but it was one of the major lenders. They have been paid and as a 3.4 says and this is critical under the plan, the repayment guarantee, marriage's repayment guarantee liability was fully satisfied. And think about the jurisprudence that would be in a circumstance like this, somebody is owed money and they are fully paid. No question they don't get another penny yet they can contrive a scheme under which they get to stay on and complain as a plaintiff so that the court retains federal jurisdiction. That simply flies in the face of all of the case law and in the, as you recall in the sprint case, that was a 5 to 4 decision where Justice Roberts vigorously dissented about whether persons who even had an assignment had standing. But those folks had an assignment and it's undisputed here, there was no assignment. These are simply what your Honor's legal machinations that if this is allowed to maintain standing, I mean a party could go out and say well I don't have diversity jurisdiction, I'm going to go pay somebody to pursue my claim from me even though they don't have an interest in it and get diversity jurisdiction. I mean we're talking about the court's jurisdiction and we're not talking about marriage getting off scot free. I mean what Council said about the settlements and that, I'm not going to get into all that because I don't think it's appropriate. Sure we could have gotten on the plan under terms that were completely unacceptable and marriage has many defenses that it is, would eager to be able to bring against the proper parties, the builders, but has it been allowed to under the situation that was created here. And the bankruptcy plan your Honor's is not raised you to Cotta or anything of the kind. The bankruptcy plan is nothing more than a contract between the debtor and the creditors. Well no it is raised you to Cotta as to the issues that's decided. That's correct, why not a law. But as Judge, uh, Judge is both pro and Markelobeau said the bankruptcy plan did not even purport to and I think Judge Markelobe said didn't have jurisdiction to decide whether the plan transactions either health to marriage or hurt marriage in the repayment guarantee action that was going to have to be decided in another forum. And the other forum is we would respectfully submit the arbitration but it certainly was not the bankruptcy. So for all these reasons, you know, I want, unless you have further questions on the Mootness issue, I'm just about out of time. I did want to make a point on the Section 5B. Marriage was a 3.5% owner. It tried to do its take down. It voted to pay interest so there wasn't even a default. 5B of the assignment to the acquisition agreement was the out for the smaller members. You could take down your property but if JP Morgan demanded, you could have to pay the money directly to it. JP Morgan never demanded and if it had, marriage would have done so. All it wanted was his property. I'm happy to answer any questions and we appreciate your time

. That's correct, why not a law. But as Judge, uh, Judge is both pro and Markelobeau said the bankruptcy plan did not even purport to and I think Judge Markelobe said didn't have jurisdiction to decide whether the plan transactions either health to marriage or hurt marriage in the repayment guarantee action that was going to have to be decided in another forum. And the other forum is we would respectfully submit the arbitration but it certainly was not the bankruptcy. So for all these reasons, you know, I want, unless you have further questions on the Mootness issue, I'm just about out of time. I did want to make a point on the Section 5B. Marriage was a 3.5% owner. It tried to do its take down. It voted to pay interest so there wasn't even a default. 5B of the assignment to the acquisition agreement was the out for the smaller members. You could take down your property but if JP Morgan demanded, you could have to pay the money directly to it. JP Morgan never demanded and if it had, marriage would have done so. All it wanted was his property. I'm happy to answer any questions and we appreciate your time. Thank you, Your Honor. Thank you both for your arguments today. The case just will be submitted for decision.

May it please the court, Doug Northup with Phenomore Craig representing the marriage entities. I would like to reserve five minutes of my time for rebuttal if I may your honor. The trial court lacked subject matter jurisdiction under Article 3 and this case became moot in 2011 when JP Morgan was paid every penny it sought and every penny it could recover from marriage and repayment guarantee action. The controlling builders who are not before this court own and are developing the land marriage tried to acquire through the transaction and now want marriage to pay for it. Because the court cannot order any relief that would benefit the only plaintiff in this action JP Morgan through its sub agent ISG the case is moot. Dismissing this case your honors does not give marriage a free pass by any means. This would simply put the dispute in the proper forum a pending arbitration with the proper parties marriage and controlling builders and would not allow the builders to contrive and try to create subject matter jurisdiction where it otherwise does not exist. The court dismisses case and moot and allow the parties to hear their grievances against one another in the pending arbitration. It is undisputed that neither JP Morgan nor its sub agent will get one penny of any judgment in this case from Meredith. They have paid everything they sought and the testimony of JP Morgan's lawyer at the oral argument before Judge Pro, the gentleman named Jim Huff, made that clear. The lenders have been paid and the only beneficiaries are the builders. The bankruptcy plan and one of the things your honor I'm sure that Mr. Schaeffer will say to you something along the lines will the bankruptcy plan already dealt with this. First of course we know that an article one bankruptcy court cannot create jurisdiction in an article three court like this one but as Judge Pro even in his orders on summary judgment stated with respect to the treatment of the Meredith repayment guarantee the court held the bankruptcy court properly resolved the issue within its exclusive jurisdiction. The impact of the plan confirmation on Meredith's repayment guarantee under bankruptcy law and left for another forum to resolve the impact of any on the plan transactions on Meredith's repayment guarantee under applicable state law. But the plan your honor section 3.4 F made it clear that the settling builders who are not before this court shall pay into an escrow account an amount equal to the portion of the settling builders consideration under the plan that is equal to the amount of the marriage repayment guarantee liability. And as Mr. Austin who negotiated the plan for JP Morgan testified and we quoted this extensively in the briefing JP Morgan and the lenders were paid. Every one of them took their money out of the escrow and they are finished with this case. We know your honor there have been numerous cases cited in Belent and the other ones that make it clear that a case is moved if there's no possible relief which the court could order that would benefit the party seeking it. And that's exactly the case here and I think it's telling your honor the only case that was cited for this proposition that JP Morgan through its sub agent retained standing was a sprint case from the United States Supreme Court. But the issue is the US Supreme Court stated there at page 2536 of the Supreme Court reporter. We have discovered that history and precedent are clear on the question before us. Assignees of a claim including assonees for collection have long been permitted to bring suit. It's undisputed here your honors. First of all the builders wanted JP Morgan just to not get paid on the marriage repayment guarantee and pursue that outside the bankruptcy in JP Morgan said no. We know and it's undisputed that the builders wanted an assignment of the JP Morgan guarantee. And JP Morgan said no they had the leverage to demand payment of all of the guarantees and that's exactly what happened. So the district court concluded that in fact JP Morgan had not been made whole. Then in fact that there were $47 million deficiency. Tell me why you think the district court was wrong. Well first of all your honor under the plan section 3.5c, the states each holder of an allowed pre petition lender deficiency claim shall receive in full and complete settlement release and discharge of such claim vis-a-vis the estate and its assets a rateable share of $500,000 to be funded from the settling builders total plan contributions. So the deficiency was paid but even more important your honor the deficiency was a matter between the borrower South Edge and the lenders. That deficiency 10 extent existed was on the loan which ultimately was paid off. This is a suit on marriages repayment guarantee and under 3.4f of the plan the lenders were paid the entirety of the marriage guarantee liability. And that's why I said JP Morgan and the lenders were paid every penny not only that they sought in the repayment guarantee but that they could have recovered from marriage. So unfortunately Judge Bro when he based his decision that there was standing did so on that erroneous proposition and for those two reasons your honor the deficiency is actually we believe quite irrelevant here. So you agree there is a deficiency you just don't think it's structurally relevant to this litigation. No your honor the deficiency was paid under that section of the plan that I just read to you. Well the plan says it was Judge Bro says it wasn't pardoning the the plan says that the obligations were satisfied but we all know that in confirmation of bankruptcy plans sometimes that's not entirely accurate given the complexity of transactions and that's what I think Judge Bro was getting out here. I suppose except the problem with that is there isn't ever going to be any money that can go to JP Morgan. I mean if there's a deficiency and JP Morgan had the ability to collect that deficiency against marriage somehow then there might be an argument there but as Mr. Austin said the builders are the lenders are done with the case. The lawyers that are arguing this case Mr. Schaeffer has never represented JP Morgan and he couldn't. JP Morgan to care less about this as well as the lenders because they all been paid everything that they ever will be paid and our point again is let it let this case be heard where it should be not under contrived jurisdiction that doesn't exist in federal court and under a repayment guarantee taking the trying to take the benefits of the repayment guarantee by a party who could not and did not get an assignment of the rights there. So explain to me this status of the arbitration. I'm sorry. Explain me the status of the arbitration. The arbitration was initiated by the builders. There were counter claims that were asserted and then the builders filed a motion to stay the arbitration and we quoted from it fairly extensively where they said panel stay this arbitration because the exact same money the exact same dispute that is before you is before the district court and now the night circuit court appeals and that's our point. We're more than welcome to take the challenge to litigate marriages claims and defenses against the builders who are the ones that paid its guarantee liability but there simply isn't jurisdiction in this court because the party who's trying to pursue the claim is fully paid and you're on another issue. I'm going to ask you this and your answer will make no difference. Is this claim subtlable? Is it subtlable? Yeah. The reason I ask is that occasionally when we have some of these types of commercial disputes that our circuit mediators do a pretty good job even though of bringing people who aren't necessarily parties to the instant litigation in and trying to settle a reach of global settlement. Is that of interest to you? Well, I mean this case you're on or where it is now as a dispute between the builders and marriage would be subtlable. What's made that difficult is the fact that marriage was forced to pay its entire repayment guarantee liability plus attorneys fees plus default and other types of interest and the builders have marriage as property that it tried to take down. So what they're looking for now is for marriage to pay for the land that they own and are developing but is it subtlable? I mean I think any case is subtlable but it hasn't there have been attempts made and discussions made and the parties just haven't been able to resolve it largely because the issues we're talking about today. One other point you're on there's some discussion in the case about well what really happened in the case was that there were participation in threshold and the repayment guarantee and there's a couple of things on that. First of all the guarantee was assignable but it did not allow participation interest to be sold in the guarantee. The Assignment Provision Under Section 16 allows participation interest in the facilities which are defined in the first warehouse clause in the guarantee which include the loan but that first warehouse clause defines facility documents to include the repayment guarantee. So by its terms and these under New York Law you're on to have to be strictly construed in favor of the guarantor. There cannot be a sale of participation interest in the guarantee and of course there couldn't be sales of participation interest in the loan in the bankruptcy because the loan was paid off but one important point even if participation interest could somehow be sold the proper party the real party in interest there would be the transferee the builders it wouldn't be the party who's been fully paid and even under their argument transfer those claims. So we think for all these reasons Judge Prol Act subject manager's jurisdiction and the court should be dismissed for that reason. We made other arguments your honor that I think are fairly well fleshed out about Section 2B termination under the repayment guarantee. One thing that is important there Judge Prod determined that the termination did not occur because the money wasn't paid directly to JP Morgan but of course that's not the case because under JP Morgan's own loan documents the money had to be paid into an escrow as it was in 2007 when marriage and the other party successfully took down their property and the law of tender here really isn't disputed. Marriage made every opportunity JP Morgan was going to get all of its money out of the escrow it was earmarked directly for JP Morgan. So under Section 2B the guarantee terminated the same under 2C and one of the real issues here is when that guarantee terminated marriage had suburbation rights. Marriage should have at least been able to get the property that it's paying so far it has paid for but under the plan that's not the way it would happen. So we've made argument under Section 2B of the assignment of the acquisition agreement. I see I'm beyond what I've already kept for a but I'm happy to answer any questions that your honours might have but we would ask that you dismiss this case. Thank you, Council. Good morning John Schaefer for ISG subagent for JP Morgan. May I please the court? Before I get into the merits of things I think it's very important that the court understand the legal relationship between the different parties in the case because I believe meritage attempts to conflate the different rules of JP Morgan and the agent. Under the credit agreement JP Morgan is the administrative agent. ISG who I represent is a subagent of JP Morgan and we are standing in its shoes. JP Morgan as administrative agent is responsible for enforcing all rights under the credit agreement that set forth in Section 10.01 and it set forth in the guarantee itself. If you look at the guarantee starting at ER81 you'll see that the guarantee demand under the guarantee suit under the guarantee payment under the guarantee is all made to JP Morgan. What JP Morgan then does under the credit agreement pursuant to Section 2.10 is distribute that money off to the lenders. The real party in interest here is and always was JP Morgan as administrative agent as Justice Breyer recognized in the sprint case the courts have always recognized that parties in a representative capacity receivers, a sign for the benefit of creditors, indenture trustees, and here administrative agents are the real parties and interest in litigation regardless of where the proceeds ultimately go. Here JP Morgan ISG would collect and tend to collect from meritage what it does with the money afterwards. Justice Breyer quite clearly told us and Chief Justice Roberts agreed is really irrelevant. The money gets distributed pursuant to the credit agreement. Now what happened under the South Edge plan was pursuant to Section 3.4 of that plan which is at page SER 70. The lenders, not JP Morgan because JP Morgan didn't assign anything. The lenders assigned their right to receive money from JP Morgan to the builders who settled pursuant to the plan of reorganization. So prior to the confirmation of the plan, the way this litigation would have worked is that JP Morgan sued meritage. Maritage would have to pay JP Morgan. JP Morgan would distribute the money pursuant to the lender participants and at times there were more than 100 of them. As a result of the plan, all that is changed is that when JP Morgan ISG received the money, it will distribute it pursuant to the instructions of the lender participants and those instructions pursuant to the plan were to distribute it to the builders who paid over $300, $300 million in connection with the bankruptcy settlement. That's all that's changed here. And the sprint case makes absolutely clear that the fact that the proceeds may be going to someone else now does not change the legal standing of the party with legal title. And the party with legal title is JP Morgan ISG. I just want to get a clarification there because I think you're talking about the escrow agreement within the restructuring plan, correct? Yes. Okay. So you have the escrow agreement. The money goes from the settling builders into this and then the lenders can assign out. Correct? Yes. Okay. So if they do that and the lenders get their pro-rattish share, why doesn't JP Morgan in effect in that same position that in effect, it's case against meritages, moot as a result of that transaction? Well, a couple of reasons, your honor. First of all, if Judge Reinhard gave you an IOU, I don't know if he'd be inclined to do such a thing, but if he did for $100 and you chose to independent of that agreement for whatever reason, say whenever Judge Reinhard pays me, I'll pay you the $100. Maybe I did a favor for you. That wouldn't change in any respect whatsoever, the legal relationship between you and Judge Reinhard. You would still be the party that can enforce the note. And in this case, the U is JP Morgan. So if I recover the money, but it's not, it's a debt doesn't go away just because the original creditor sells the loan. Right. The the borrower doesn't go, oh, Jesus, this is great. No, but you have an intervening bankruptcy. Yeah, in this case, it's a different relationship given the restructuring plans. I don't think it's a straight one-to-one IOU from A to B and then I still, of course, have my legal claim against the original maker of the IOU. But in this case with the interrelation among the parties, it just seems to me that the Lenders, including JP Morgan, potentially, and then it's ISG as its agent, as you've laid out, that they really, in effect, have recovered the money owed. Well, the the Lenders received consideration for their assignment in an amount and it wasn't actually equal to the meritage guarantee and as Judge Thomas noticed, we was still a $47 million deficiency on the total loan on a large chunk of that is because of builder, other builders who didn't pay. But it's important to note that JP Morgan and ISG aren't out of the case. There were still administrative duties for JP Morgan to perform under the credit agreement. At the time the deal was signed, there were still indemnification rights and other litigation that needed to be resolved. JP Morgan doesn't have to be a lender in order to be the administrative agent. JP Morgan's role in the same way that a trustee generally isn't, and probably in fact shouldn't be, the beneficiary of a trust. And yet there's no question that a trustee is the one who has authority to speak for and to sue on behalf of the trust. JP Morgan, ISG are essentially assuming that role here and they've continued that role throughout the case. JP Morgan, as meritages counsel may clear, JP Morgan did not assign its own rights as administrative agent. It refused to do so and frankly, it would be an prudent to do so. So JP Morgan and ISG are still in the case. I still deal with JP Morgan's counsel because they are the ultimate agent here. I represent the sub agent and we are now collecting this pursuant to the instructions of our lender participants, but they have instructed us to distribute the money to the Settling Builders because that was their deal. Sotomayor Well, that was the deal in the restructuring plan, right? JP Morgan That was the deal under the restructuring plan. Sotomayor That has been done. JP Morgan And that has been done. It was done in 2011, and I just to make things clear because I know the issue of settlement came up. The exact same deal that the four, the South Edge had eight members. Two of them, unfortunately, went bankrupt themselves. One of them actually had done all of its land purchases before the real estate crash. But of the five remaining members, four of them, the Settling Builders, interdend with settlement agreement with the City of Henderson, with the bankruptcy trustee, with JP Morgan. And as part of that deal, they agreed to pay $300,000,000 to bring South Edge out of bankruptcy. And part of that deal was honoring their own repayment guarantees. Maritage for a period of six months during the bankruptcy was offered the exact same deal. And in fact, I stood personally at the confirmation hearing and put it on the record in the bankruptcy court that Maritage still until the close of that day had the opportunity to take the exact same deal as the four other members. And Maritage declined. Maritage's stated reasons was that it was different because it thought it was off the hook based upon some transactions that had occurred in April of 2008, which I'd be happy to get into. So we've had plenty of opportunity to settle this. And Maritage has had the opportunity to settle on the exact same terms as the other four builders. I think it would be very unpalatable to have Maritage get a better treatment than the other four builders got. In a sense, the way I understand the party's differences to the effect of the confirmation of the bankruptcy plan, which would be raised due to Cata, is that you believe that this action was expressly excluded from the plan and the rights of JP Morgan as administrator were preserved as to pursue to this action. Their position is I think that the bankruptcy plan is not an extinguished to that. And yes, that is their position, Your Honor, and that's incorrect because the Section 3.5 that Mr. Northrup was quoting makes very clear that the release of the deficiency was vis-a-vis the bankruptcy estate. It was not vis-a-vis other guarantors. And in fact, there were three other guarantors, one of them being Maritage and the other two were the bankrupt guarantors who have their own bankruptcy estates. There was no release vis-a-vis guarantors other than the guarantors who actually ponied up the $300 million to settle the case. The bankruptcy judge's confirmation order makes that absolutely clear at SER34 and 35 that there was no release of anyone other than the debtor. And Ninth Circuit Authority makes that clear too because when debtors get a discharge in bankruptcy, third party guarantors do not get a release. That's what the American hardwoods in the Underhill versus Royal cases say. Maritage did not get a free pass just because South Edge went through bankruptcy. Your Honor, Maritage cites various other evidence to try to get around the plain language of the plan. For example, they cite one particular section 8.7, but what that section of the plan provides is that the settling builders, the four who actually paid the $330 million to settle the case, were getting releases. They try to hang on one single sentence at the end or phrase at the end of that clause that says in full satish faction of the repayment guarantees. But you have to look at the plan as a whole document. And as a whole document, it's absolutely clear when you look at Section 3.4, when you look at the confirmation order, that the intention of the parties was not to have a satisfaction of Maritage's debt, but rather to have an assignment of that debt from the lenders to the settling builders so that the settling builders would take the risk of collection. If they collected, they'd be made whole. If they didn't, then it was there, it was their risk. And that's what the plan did. Your Honor, I'd like to briefly talk about some of Maritage's other arguments. They make the contention that they attempted to tender for their liability in April of 2008. But if you look at the terms of their own tender, and in particular, their escrow instructions, which are on our excerpts of record, you'll see that the terms of the tender were not in compliant with the credit agreement. Maritage demanded a release of J. P. Morgan's leans upon the property at a time when South Edge was already in material default. And that default was the result of defaults by all the builders, including Maritage, is found by an arbitration panel. South Edge had misinterest payments, and as a consequence, J. P. Morgan, under 7.03 of the credit agreement, had a legal right not to release its leans on the collateral. And it had good reasons as found by Judge Pro based upon the undetfretuted evidence in the record, which is that J. P. Morgan, the lender, the agent, excuse me, for 125 lenders on a $585 million loan secured by 2,000 acres of real estate in Nevada, didn't want to have a bulkenization of the property and have one-off settlements with different builders. Maritage's property was about 41 acres. This was an integrated master plan development where streets would run into streets and sewers would run into sewers. And J. P. Morgan, for the benefit of its lender group, needed a comprehensive solution, because things were bad in April of 2008, although I don't know if anyone knew how bad they would get not that much later. But that is the reason why J. P. Morgan would not agree to release its leans. And it wasn't required to. Maritage misstates Section 5B of what is called the Assignment Agreement. That agreement simply provides that if South Wedge was normally on a quote-unquote takedown, this was the member's agreement to purchase land from South Edge. Normally, that money would go to South Edge. But in the event of a default, J. P. Morgan had the right to demand that all of the money that would have been paid to South Edge go directly to J. P. Morgan for obvious reasons. But that didn't excuse all of the multitude of other requirements for a buyer such as Maritage to complete its takedown, including the fact that they cannot get a release of J. P. Morgan's leans if there was a material default. And there was a tender that Maritage made. If you look at page 69, they are closing escrow statement, you will see that at most only $12 million was supposed to be going to J. P. Morgan. And while that was J. P. Morgan's release price, 5B, the Assignment Agreement, the section they rely upon, makes absolutely clear that the entire takedown proceeds had to go to J. P. Morgan. And if you look at ER 69, you will see that the entire takedown price was over $29 million. And at most Maritage was only allotting $12 million to J. P. Morgan. And frankly, Judge Pro even questioned that because if you look at the escrow instructions, it says all payments to seller South Edge, not to J. P. Morgan. Your Honor, I see I am out of time essentially. So unless there are any other questions, any further. Thank you very much. Thank you. The builders have cited to you no case where a party that owned a claim and has been fully paid on that claim has been held to have standing to continue to maintain it. What counsel said about J. P. Morgan remaining on as administrative agent was I think frankly a little misleading because J. P. Morgan was a lender. It was one of the major lenders. It was the administrative agent, but it is undisputed. And you did not have a counsel stay that all of the lenders were not paid everything under the repayment guarantee they were. Now if J. P. Morgan or ISG wanted to remain on the case as a builders agent and take some actions because they had some kind of an assignment or something like that, where they are the ones that have paid it, that might be a different circumstance. So you are suggesting that his statement that they remain on with administrative duties including indemnification and other oversight duties is not sufficient for standing in fact they've been. Not at all your Honor because the J. P. Morgan came on as administrative agent, but it was one of the major lenders. They have been paid and as a 3.4 says and this is critical under the plan, the repayment guarantee, marriage's repayment guarantee liability was fully satisfied. And think about the jurisprudence that would be in a circumstance like this, somebody is owed money and they are fully paid. No question they don't get another penny yet they can contrive a scheme under which they get to stay on and complain as a plaintiff so that the court retains federal jurisdiction. That simply flies in the face of all of the case law and in the, as you recall in the sprint case, that was a 5 to 4 decision where Justice Roberts vigorously dissented about whether persons who even had an assignment had standing. But those folks had an assignment and it's undisputed here, there was no assignment. These are simply what your Honor's legal machinations that if this is allowed to maintain standing, I mean a party could go out and say well I don't have diversity jurisdiction, I'm going to go pay somebody to pursue my claim from me even though they don't have an interest in it and get diversity jurisdiction. I mean we're talking about the court's jurisdiction and we're not talking about marriage getting off scot free. I mean what Council said about the settlements and that, I'm not going to get into all that because I don't think it's appropriate. Sure we could have gotten on the plan under terms that were completely unacceptable and marriage has many defenses that it is, would eager to be able to bring against the proper parties, the builders, but has it been allowed to under the situation that was created here. And the bankruptcy plan your Honor's is not raised you to Cotta or anything of the kind. The bankruptcy plan is nothing more than a contract between the debtor and the creditors. Well no it is raised you to Cotta as to the issues that's decided. That's correct, why not a law. But as Judge, uh, Judge is both pro and Markelobeau said the bankruptcy plan did not even purport to and I think Judge Markelobe said didn't have jurisdiction to decide whether the plan transactions either health to marriage or hurt marriage in the repayment guarantee action that was going to have to be decided in another forum. And the other forum is we would respectfully submit the arbitration but it certainly was not the bankruptcy. So for all these reasons, you know, I want, unless you have further questions on the Mootness issue, I'm just about out of time. I did want to make a point on the Section 5B. Marriage was a 3.5% owner. It tried to do its take down. It voted to pay interest so there wasn't even a default. 5B of the assignment to the acquisition agreement was the out for the smaller members. You could take down your property but if JP Morgan demanded, you could have to pay the money directly to it. JP Morgan never demanded and if it had, marriage would have done so. All it wanted was his property. I'm happy to answer any questions and we appreciate your time. Thank you, Your Honor. Thank you both for your arguments today. The case just will be submitted for decision