Lee S. Attanasio John G. Hutchinson Benjamin R.

Nagin SIDLEY AUSTIN LLP 787 Seventh Avenue New York, NY 10019 (212) 839-5300 Attorneys for Appaloosa Investment L.P. I, Palomino Fund Ltd., Thoroughbred Fund L.P., and Thoroughbred Master Ltd. UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ------------------------------------------------------x In re : : : Innkeepers USA Trust, et al., : Debtors. : ------------------------------------------------------x

Chapter 11 Case No. 10-13800 (SCC) Jointly Administered

REPLY BRIEF IN FURTHER SUPPORT OF MEMORANDUM OF LAW OF APPALOOSA INVESTMENT L.P. I, PALOMINO FUND LTD., THOROUGHBRED FUND L.P., AND THOROUGHBRED MASTER LTD. IN SUPPORT OF THEIR STATUS AS PARTIES IN INTEREST ENTITLED TO STANDING Appaloosa Investment L.P. I, Palomino Fund Ltd., Thoroughbred Fund L.P., and Thoroughbred Master Ltd. (collectively, Appaloosa or the Appaloosa Funds), all parties in interest in these cases, by and through their counsel, respectfully submit this Reply Brief (i) in further support of their Memorandum of Law in Support of Their Status as Parties in Interest Entitled to Standing (the Initial Brief),1 and (ii) in response to Debtors Omnibus Limited Objection to Certificateholders Standing Requests (the Debtors Opposition) and Reply and Objection of Midland Loan Services to the Motions of (a) Appaloosa Investment L.P. I, Palomino Fund Ltd., Thoroughbred Fund L.P., and Thoroughbred Master Ltd. and (b) LNR Securities Holdings, LLC and Wells Fargo Bank, N.A., as Trustee Seeking (i) Judicial Determination of
1

Capitalized terms used herein without definition are used herein as defined in the Initial Brief.

Party in Interest Status Under Section 1109(b) of the Bankruptcy Code, or in the Alternative (ii) Granting Intervention Pursuant to Federal Rule of Bankruptcy Procedure 2018 (the Midland Opposition). PRELIMINARY STATEMENT Unable to dispute the status of the Appaloosa Funds as parties in interest, the Debtors and Midland turn cartwheels to convince the Court to impose barriers to the Appaloosa Funds participation in the proceedings related to the Stalking Horse Motion by ignoring both the facts applicable to Appaloosa and the plain language of the governing statute. As holders of Preferred Shares and as a lender under the Five Mile DIP Loan (see Declaration of James E. Bolin, dated as of January 25, 2011) (the Bolin Declaration) (Dkt. No. 859), the Appaloosa Funds are parties in interest entitled to be heard on any issue in the Bankruptcy Case, and certainly on an issue like the Stalking Horse Motion that directly impacts their interests as DIP lenders and preferred shareholders. While that should be the end of the discussion, both the Debtors and Midland would have the Court ignore these interests and the substantial financial stake in the outcome of the Bankruptcy Case that Appaloosa has as a Certificateholder. These facts cannot be ignored, and the case law cited by the Debtors and Midland cannot somehow undo Appaloosas clear, statutory standing. The Debtors and Midlands attempts to use the contractual terms of the Servicing Agreements or related documents to exclude Appaloosas participation fail even more dramatically. As a threshold matter, the Midland Opposition fundamentally, and perhaps intentionally, misconstrues Appaloosas objections to the Stalking Horse Motion as an attempt to challenge Midlands role as special servicer, or somehow take over administration or servicing of

the Trusts.2 See Midland Opposition, 3. This assertion entirely misses the mark. Appaloosa is simply opposing the stalking horse bid and related bidding procedures put forth by the Debtors procedures that Appaloosa believes will negatively impact it as a Certificateholder, DIP Lender and shareholder, just as they negatively impact other stakeholders who have voiced their opposition. Appaloosa is not, however, initiating a proceeding to enforce the Fixed Rate Mortgage Loan, nor taking any other action prohibited by the Servicing Agreement. Needless to say, Appaloosa does not approve of Midlands (substantial) role in the harmful path the Debtors are pursuing, and can have a separate day in court to directly challenge the propriety of Midlands actions if it so chooses but those issues are not before the Court. In connection with the issues that are before the Court, it is critical that questions be posed, and dissenting voices such as Appaloosas be heard, and nothing in the contracts cited by the Debtors or Midland precludes such participation. REPLY I. Appaloosa is a Party in Interest Entitled to be Heard on Any Issue in the Bankruptcy Case In its Initial Brief, Appaloosa established, and no one disputes, that the Appaloosa Funds are parties in interest under 1109(b) of the Bankruptcy Code. See Initial Brief, p. 7-8. As such, and as set forth in the Initial Brief, the Appaloosa Funds have an unqualified right to be heard on any issue in the bankruptcy proceeding. See id.; see Collier on Bankruptcy 1109.04 (15th ed. rev. 2009) ([T]he text of section 1109(b) and its legislative history only support the conclusion that the section applies to every issue in every proceeding.); see also S.

The Debtors also make this allegation, asserting that [t]he Standing Motions inaccurately overstate the legal rights ascribed to Certificateholders and seek to usurp the role of the servicers of the REMICs in these Chapter 11 Cases. Debtors Opposition, 42.

Rep. No. 989, 95th Cong., 2d Sess. 116 (1978). It is difficult to imagine a motion that goes more directly to the heart of this Bankruptcy Case than the Stalking Horse Motion, which raises precisely the types of issues that are core to the Bankruptcy Code and the bankruptcy process, and as to which the voice of a party in interest is most critical. Both the Debtors and Midland properly concede that Appaloosa has standing as a party in interest as a result of its status as a lender under the Five Mile DIP Loan and its holdings of preferred shares. See Debtors Opposition, 1 n.4, 23 (The Debtors do not dispute that Appaloosa has standing in its capacity as a post-petition lender and preferred shareholder.); see also Midland Opposition, 47. Therefore, there is no dispute that Appaloosa may participate in this proceeding, including in discovery and at the hearing. Faced with Appaloosas unassailable status, the Debtors and Midland instead seek to create artificial limitations on Appaloosas rights in contravention of the Bankruptcy Code. Apparently, the Debtors and Midland want the Court to parse out each statement and objection made by Appaloosa in this proceeding to determine whether each statement or objection relates to the Five Mile DIP Loan, the Preferred Shares or the Certificates. See Debtors Opposition, 23 (Appaloosa should be limited to raising arguments that are related to the treatment of the claims arising out of the postpetition financing and the interests arising out of the preferred shares.). No controlling case law is cited in support of this unworkable position and Appaloosa has found no analogous case in which a party like Appaloosa which admittedly falls within the party in interest categories defined in section 1109(b) of the Bankruptcy Code is denied, or granted only limited, party in interest standing.3 In fact, given the breadth and impact of the

To the extent that In re Quigley Co., 391 B.R. 695, 703-06 (Bankr. S.D.N.Y. 2008) can be read to limit standing to particular issues that directly affect an entities interests, see Midland Opposition, 48, that case is distinct from the case at bar because the insurers seeking to confirm standing were insurance contract counter-parties that did not have the broad range of pecuniary interests potentially implicated here, including interests that fall within the

Stalking Horse Motion, all of Appaloosas various interests are likely to be affected.4 There simply is no basis to preclude Appaloosa, as a party in interest, from identifying for the Court the myriad reasons why the Stalking Horse Motion should be denied. As the various filing parties on this issue have acknowledged, there is no case law that squarely rules on the bankruptcy standing of a certificateholder that otherwise is conceded to be a party in interest.5 Nonetheless, and contrary to the Debtors dismissive footnote (Debtors Opposition, 34 n.21), the cases addressing potential bidders and plan sponsors provide a close analog to the case at hand. Courts have consistently confirmed the ability of a potential bidder to object to motions affecting its potential acquisition, or to propose a reorganization plan, based on wholly separate and distinct standing acquired in the case. In re First Humanics Corp., 124 B.R. 87, 88-91 (Bankr. W.D. Mo. 1991) (finding standing to file a plan based on unsecured claims purchased post-petition and significant financial interests in the debtors estate). In In re Rook Broadcasting, Inc., 154 B.R. 970 (Bankr. D. Idaho 1993), for example, the bankruptcy court recognized an entitys standing in order to take action and file a competing plan of reorganization on the basis of claims that had been purchased against the debtors estate

express terms of the statute, as does Appaloosa. See In re SFD @ Hollywood, LLC, 411 B.R. 453, 455 (Bankr. S.D. Fla. 2009) (finding standing to intervene in a claim objection matter because equity holder had an unfettered right to be heard on any issue in a chapter 11 case) (emphasis added).
4

Mr. Friedmans comments on behalf of Five Mile at the September 1 hearing on the PSA Motion are equally applicable here: Your Honor, were wearing all of our hats but I think the DIP lender hat is dispositive. I dont think we need to debate the certificateholder issue today. As a DIP lender, we have a contractual right to be repaid within one year. Thats we dont think, if the estate pursues the path its on right now, that our we think there will be significant risk to our contractual rightsI mean, this is a one-year DIP and they are thrusting this case absolutely in the wrong direction that will cause it, without a doubt, to be embroiled in litigation. And we think our contractual rights will be at risk on the DIP. Not the right to get repaid; we think that were money good at some point, even if the estates are liquidated. But we have a right to get paid at maturity. And the way this case is being run, particularly in the context of the PSA [here, the Stalking Horse Motion], we think that our contractual rights are put at risk by reason of this motion. Hrg Tr. 74:21-75:1-12 (Bankr. S.D.N.Y. Sept. 1, 2010).

While there was no holding on certificateholder standing in the Extended Stay proceedings, there can also be no doubt that certificateholders were in fact permitted to be heard on cash collateral issues at the outset of that case. See Extended Stay Inc. et al., (No. 09-13764) (JMP) Hrg Tr. 25:15-20 (Bankr. S.D.N.Y. June 16, 2010).

standing that was derived from its purchased claims, but which allowed the party to participate in the case in its capacity as an acquirer/plan sponsor. See also In re El Comandante Mgmt. Grp., 359 B.R. 410, 416-18 (Bankr. D. P.R. 2006) (finding that prospective purchaser of debtors asset who purchased a claim post-petition had standing by virtue of such post-petition claim purchase to pursue its separate interest in proposing a competing plan). Courts have addressed the potential risk associated with so-called acquired standing not by limiting a partys standing, but by conducting an inquiry into a partys good faith in acquiring its party in interest standing. Neither the Debtors nor Midland has even suggested an improper motive or bad faith in these cases, nor could they.6 Appaloosas desire to protect its financial interests in these proceedings, including through the acquisition of the Preferred Shares and participation in the Five Mile DIP Loan, is entirely appropriate and permissible.7 See Initial Brief, p. 12; In re First Humanics, 124 B.R. at 91-92 (purchasing claims, either pre-petition or post-petition, to protect ones own economic self-interest is not bad faith); see also In re Three Flint Hill Ltd. Pship, 213 B.R. 292, 301 (D. Md. 1997) ([I]t is well-settled that a creditor does not act in bad faith by pursuing its own self-interest.).
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By striking contrast to the facts herein, bad faith generally is found in extreme circumstances, such as where a creditor acts in furtherance of an ulterior motive, unrelated to its claim or interests as a creditor, including efforts to (i) assume control of the debtor; (ii) put the debtor out of business or otherwise gain a competitive advantage; (iii) destroy the debtor out of pure malice; and (iv) obtain benefits available under a private agreement with a third party that depends on the debtor's failure to reorganize. See e.g. In re DBSD North America, Inc. (In re DBSD), 421 B.R. 133 (Bankr. S.D.N.Y. 2009), order affd, 2010 WL 1223109 (S.D.N.Y. March 24, 2010), affd in part, revd in part, 627 F.3d 496 (2d Cir. 2010) (disqualifying votes cast by a creditor and competitor of the debtor, on the basis that such creditor did not act as a traditional creditor seeking to maximize the return on its investment, but rather was a strategic competitor with the ulterior motive of seeking to gain control of the debtors company by purchasing all of the first-lien debt and block confirmation). Appaloosas interests have been fully disclosed both to the Debtors as early as August, and more recently in a public filing in connection with this proceeding. See Bolin Declaration. Nonetheless, both the Debtors and Midland note in passing that Appaloosa has not yet filed a statement under Rule 2019 of the Federal Rules of Bankruptcy Procedure (Rule 2019), and suggest that the lack of such statement could support exclusion of Appaloosa from these proceedings. Given that it is entirely unclear whether Rule 2019 applies to the representation of the four Appaloosa Funds here, and that there can be no dispute that the relevant information is and has been available to both the Debtors and Midland for some time (and is now public), this is yet another sideshow by which the Debtors and Midland seek to distract from the critical issues raised by the Motion.
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Unable to contest that Appaloosa is a party in interest in the Bankruptcy Case, both the Debtors and Midland instead ask the Court to review Appaloosas status as if it were only a mere certificate holder. See Midland Opposition, 1, 17. Even viewed through this narrow, and utterly false, construct, Appaloosas substantial financial stake as a Certificateholder in the outcome of the Bankruptcy Case and in the Stalking Horse Motion in particular confers standing on Appaloosa consistent with the broad reach of section 1109(b) of the Bankruptcy Code. See Initial Brief, pp. 8-9; see In re Stone Barn Manhattan LLC, 405 B.R. 68, 74 (Bankr. S.D.N.Y. 2009) (The basic test under section 1109(b) is whether the prospective party in interest has a sufficient stake in the outcome of the proceeding so as to require representation.); see In re SFD @ Hollywood 411 B.R. at 455 (stating that the ability of individual stakeholders, which have a financial stake in the bankruptcy case, to have a voice in the chapter 11 process is a fundamental one). The Debtors and Midland can hardly refute Appaloosas significant financial stake in the Bankruptcy Case. Nonetheless, the Debtors and Midland rely on cases that involve parties with no direct or only very limited financial stake in the outcome of the bankruptcy case. See e.g. Kane v. Johns-Manville Corp. (In re Johns Mansville), 843 F.2d 636 (2d Cir. 1988) (lack of standing for future asbestos claimants who lacked a direct interest in the outcome of the bankruptcy and who were otherwise represented in the case); In re Ionosphere Clubs, Inc. & Eastern Airlines (In re Ionosphere Clubs), 101 B.R. 844 (Bankr. S.D.N.Y. 1989) (lack of standing found for consumer advocate group due to lack of direct financial relationship with the debtor); In re St. Vincents Catholic Med. Ctrs. of New York (St. Vincents), 2010 WL 4456975, *1 (S.D.N.Y. Oct. 26, 2010) (state-court plaintiffs with an interest in the St. Vincents hospital

lacked standing to move for relief from automatic stay because their interests were undifferentiated from that of the general public). The decision in St. Vincents, cited by both the Debtors and Midland, is a particularly good example of how far afield the opposition has gone in their efforts to mute Appaloosas interests as a Certificateholder. See Debtors Opposition, 29; see Midland Opposition 29. In St. Vincents, plaintiffs, who had brought a state-court action five days after the bankruptcy filing seeking to stay any closing of St. Vincents Hospital, sought to intervene in the bankruptcy proceeding and obtain a declaratory judgment from the bankruptcy court to permit the state-court action to continue or, alternatively, to lift the automatic stay and allow that state-court action to proceed. In re St. Vincents, 2010 WL 4456975 at *1. On appeal, the district court held that the state-court plaintiffs did not have standing as parties in interest and could not intervene because, not only did they not fall into any of the enumerated categories under section 1109(b), but also their interests in the bankruptcy case were so remote as to be undifferentiated from that of the general public. Id. It is untenable to analogize Appaloosa to citizens with a public agenda or to future asbestos claimants or consumer groups based on the relevant courts findings that such parties interests in the debtors or the bankruptcy cases are too attenuated.8 The Debtors and Midland also rely on cases that arise in the context of parties seeking standing to intervene in an adversary proceeding, situations that are both substantively and procedurally different from Appaloosas position here. See Krys v. Official Committee of Unsecured Creditors of Refco, Inc. (In re Refco), 505 F.3d 109 (2d Cir. 2007) (seeking party in
8

While certain courts have rejected, or implicitly criticized, the standing of a creditor of a creditor, Appaloosas situation is quite different. In the first instance, an owner of a certificate in a CMBS trust is the owner of beneficial interests in the assets owned by that trust Appaloosa is not a creditor of a creditor. Moreover, in none of the cited cases was the party seeking standing also a party in interest as defined in section 1109(b). The unique posture of this case cannot be analogized to those instances in which a more attenuated interest was found to be insufficient.

interest standing for investors in a segregated investment portfolio to intervene in an adversary proceeding concerning the settlement of a preferential transfer action); Savage & Assocs. P.C. v. Mandel (In re Teligent, Inc.), 417 B.R. 197 (Bankr. S.D.N.Y. 2009) (seeking party in interest standing to intervene in mediation in connection with adversary proceeding for purposes of objecting to settlement agreement). The oppositions reliance on Refco overlooks the critical differences between that case and this. In Refco, investors in a segregated portfolio company (Sphinx) sought to intervene and be recognized as parties in interest in an adversary proceeding brought by the unsecured creditors committee of the Refco debtors seeking to avoid a preferential transfer, and to object to a settlement agreement resolving the preference action. In re Refco, 505 F.3d at 112. The bankruptcy court held that the investors did not have standing as parties in interest to intervene in the adversary proceeding because they did not have any rights distinct from those of Sphinx. Id. at 119. Not only were the Refco investors effectively seeking to intervene in a narrow, two-party dispute the estates preference action against Sphinx their interest, as investors in the defendant, was to see less money go into the Debtors estate. By striking contrast, Appaloosa is seeking to be heard on a fundamental issue in the bankruptcy case for the very purpose of airing concerns about the Motions failure to maximize the value of the Debtors. II. Appaloosa is Not Contractually Precluded from Objecting to the Bid Procedures Motion In the absence of a meaningful objection to Appaloosas standing, the Debtors and Midland have raised a strained contractual argument that the Servicing Agreement and the Co-Lender Agreement, and specifically a no-action provision (the No-Action Provision) in the Servicing Agreement, prohibit Appaloosa from objecting to the Bid Procedures Motion in its capacity as a certificateholder. This argument is a red herring intended to muzzle a party in

interest in the Bankruptcy Case, and only underscores potential conflicts of interest faced by Midland in connection with the Five Mile/Lehman Bid. Appaloosas standing should not be jeopardized as a result. The plain language of the No-Action Provision on which the Debtors and Midland rely by which Certificateholders forego the right to institute any suit, action or proceeding in equity or at law upon or under or with respect to [the Servicing Agreement] or any Mortgage Loan in no way precludes, or even implicates, Appaloosas participation with regard to the Stalking Horse Motion. To be sure, an action has been instituted but by the Debtors, not Appaloosa. As a party in interest, Appaloosa seeks to be heard in response to the Motion, and to the stalking horse bid and related bidding procedures that will potentially alter the direction of these cases to the detriment of all stakeholders (other than, notably, those stakeholders who are bidders or other participants in the bid). Appaloosa is most certainly not attempting to lift the stay to enforce remedies, or to initiate an adversary proceeding on behalf of or in the name of the Trusts, or to take any other action regarding the operation or management of the Trusts.9 At base, Midland (and to a lesser extent, the Debtors) express a concern that granting standing to a certificateholder would result in multiple parties seeking to vote or control the legal interest of the Trusts. While this potentially is a legitimate concern and one that may have animated the decisions cited in the opposition papers, here Appaloosa does not seek to vote for the Trusts or negotiate on their behalf that is Midlands role and it will face whatever consequences arise if

The Debtors and Midlands comments that Appaloosas failure to file a proof of claim is somehow relevant to the question of standing or to certificateholder rights under the Servicing Agreement borders on the offensive. Appaloosa has never taken the position that it is a creditor of the Debtors because it holds certificates in the Trusts. More to the point, however, even if it were, the bar date order specifically excluded holders of an interest in the Fixed Rate Mortgage Loan from the requirement to file a proof of claim. See 9/16/10 Order Establishing Deadlines and Procedures for filing Proofs of Claim and Approving the Form and Manner of Notice Thereof, p. 5, 8(i) (the Bar Date Order) (Dkt. No. 440). Based on the terms of the Bar Date Order; Midland did not file a proof of claim in this case either.

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the Servicing Standard is not met. Appaloosa seeks to participate as a party in interest on the Motion. It strains credulity to suggest that by lodging objections to a motion that will impact the entire reorganization, Appaloosa, already a party in interest in the Bankruptcy Case, is instituting a suit, action or proceeding. Indeed, Midland succinctly points out in its opposition, [t]he issue that will be before this Court at the hearing on the Bid Procedures Motion is whether the Bid Procedures Motion should be granted. Midland Opposition, 44. This is an issue as to which Appaloosa has a right to be heard, and for which Midland clearly does not adequately represent Appaloosas interests. The bankruptcy court is fundamentally intended to provide a forum for multiple constituencies with distinct interests to be heard; the fact that more than one perspective on the propriety of the Stalking Horse Motion will be heard hardly gives rise to the concerns that have justified use of a no-action clause. Contrary to Midland and the Debtors insinuations, there is no danger in this case that multiple objections will somehow bog these cases down to an untenable level.10 See Debtors Opposition, 40 (If the [Certificateholders] are allowed to intervene, the floodgates may be opened to identical motions and the Debtors would then be forced to negotiate with literally hundreds of certificateholders in the C-6 and C-7 Trusts ); see Midland Opposition, 32 ([I]f bankruptcy courts are too lenient in granting standing

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Indeed, Appaloosa and LNR have been the only Certificateholders (other than Five Mile, the co-stalking horse) that have sought to be heard at this juncture in the cases, despite the publicity and adversarial posture that has surrounded the Bankruptcy Case since July of last year. Although Midland asks this Court to be wary of opening the door for other certificateholders to appear in these and other cases (Midland Opposition, 34 n.21), the fact is that under the unique circumstances of this case, only Appaloosa and LNR, as parties in interest, have participated and seek to continue to do so Debtors disingenuous references to five Certificateholders notwithstanding. The floodgates are safely shut, and this Courts decision on standing in this instance will not open them. See In re Matter of Marin Oil, Inc., 689 F.2d 445, 453 (3d Cir. 1982) (granting standing and rejecting the argument that multitudes of individual creditors and stockholders would seek standing to intervene in an adversary proceeding should the court choose to engage in a broad and absolute reading of section 1109(b), and recognizing that the applicable Bankruptcy Rules and Federal Rules of Civil Procedure would afford to the bankruptcy court sufficient means to control any confusion, disorder or expense that might result from granting standing to parties seeking to intervene).

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applications, the reorganization process can be overburdened by allowing numerous parties to interject themselves into the case on every issue, thereby thwarting the goal of a speedy and efficient reorganization.) (citing In re Refco, 505 F.3d at 118). Failing to demonstrate the applicability of the No-Action Provision in the case at hand, or to supply the Court with a supportable policy justification to expand it, the Debtors and Midland turn to glaringly inapposite case law. Midland points to In re Chrysler LLC, 405 B.R. 84 (Bankr. S.D.N.Y.), affd, 576 F.3d 108 (2d. Cir.), cert. dismissed, 130 S.Ct. 41 (2009), and In re Metaldyne Corp., 409 B.R. 671 (Bankr. S.D.N.Y. 2009), as examples of courts attempting to funnel representation to a single representative. Neither opinion deals with prohibiting standing based on a no-action clause. Similarly, the Debtors spend an entire footnote discussing six cases that do not deal at all with no-action clauses (much less with how a no-action clause may impact a bondholder or certificateholders right to participate in a bankruptcy case), but rather deal with general principles regarding standing in a range of inapplicable fact scenarios.11 In addition, the two other cases cited by Midland actually deal with the very types of actions that are specifically precluded by no-action clauses, and are thus not relevant to the case at hand. See Teachers Ins. & Annuity Assn of Am. v. CRIIMI MAE Servs. Ltd. Pship, 681 F. Supp. 2d 501, 505-06 (S.D.N.Y. 2010) (finding that certificateholder actions for breach of contract by special servicer was not barred by no-action clause); McMahan & Co. v. Wherehouse Entmt, Inc., 65 F.3d 1044 (2d Cir. 1995) (barring, pursuant to no-action clause, state law claims but not securities law claims brought by bondholders).

See Debtors Opposition, 42 n.29; See, e.g., In re Kang Jin Jwang, 396 B.R. 757 (Bank. C.D. Cal. 2008) (finding that bank that assigned rights but remained in possession of note not real party in interest); In re Shilo Inn, Diamond Bar, LLC, 285 B.R. 726, 728 (Bankr. D. Or. 2002) (determining that special servicer, and not certificateholders, have right to vote on plan of reorganization).

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Finally, the Debtors and Midland attempt to make hay of the recent Stuytown decision in which LNR filed an amicus brief opposing Appaloosas standing to intervene in a foreclosure action against the borrower of a securitized mortgage loan based on a no-action clause. See Debtors Opposition, 45; see Midland Opposition, 40-42. In that matter, the Court held that Appaloosa could not intervene in the foreclosure action. However, even the sections of the LNR amicus brief cited by Midland (Individual certificateholders have no right to seek to change or override the actions of a CMBS special servicer or a second guess through intervention the [sic] special servicers exercise of remedies . . . . ) (emphasis added) speak to the applicability of the no-action clause to the foreclosure action in question, and not to a general prohibition on, or lack of standing in, a bankruptcy proceeding. Midland Opposition, 41. Once again, although the Stuytown decision may be instructive, based on the specific facts and circumstances therein, on the applicability of a no-action clause with respect to a formal enforcement action, it is not instructive in this case where Appaloosa does not seek to take the place of Midland as Special Servicer. Ultimately, the lack of case law illuminating this argument is not surprising: that a non-action does not violate a no-action clause is a tautology. Although the Debtors and Midland now that it is in agreement with the Debtors plans to restructure pursuant to the Bid Procedures Motion attempt for the first time to invoke the No-Action Provision and would have the Court prohibit a party in interest from being heard in these cases, the plain language of the No-Action-Provision does not apply in this instance, and Appaloosas standing as a party in interest in these cases accordingly should not be restricted.

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CONCLUSION For the foregoing reasons, the Appaloosa Funds respectfully request that the Court find that they have standing as parties in interest in these proceedings and reject any unsupported claim to the contrary. Dated: New York, New York February 4, 2011 Respectfully submitted, SIDLEY AUSTIN LLP

By: /s/ Lee S. Attanasio_____________ Lee S. Attanasio John G. Hutchinson Benjamin R. Nagin 787 Seventh Avenue New York, New York 10019 Telephone: (212) 839-5300 Facsimile: (212) 839-5599 lattanasio@sidley.com jhutchinson@sidley.com bnagin@sidley.com Attorneys for Appaloosa Investment L.P. I, Palomino Fund Ltd., Thoroughbred Fund L.P., and Thoroughbred Master Ltd.

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