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SUPREME COURT OF THE STATE OF NEW YORK

NEW YORK COUNTY: CIVIL TERM: PART 39
- - - - - - - - - - - - - - - - - - - - - - - -X
ABN AMRO BANK NV, BARCLAYS BANK PLC, BNP PARIBAS,
CALON, CANADIAN IMPERIAL BANK OF COMMERCE,
CITIBANK NA, HSBC BANK USA NA, JP MORGAN CHASE
BANK NA, KBC INVESTMENTS CAYMAN ISLANDS V LTD,
MERRILL LYNCH INTERNATIONAL, BANK OF AMERICA NA,
MORGAN STANLEY CAPITAL SERVICES INC, NATIXIS,
NATIXIS FINANCIAL PRODUCTS INC, COOPERATIEVE
CENTRALE RAIFFEISEN BOERENLEENBANK BA NEW YORK BRANCH,

Petitioners,

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Index Number:
601846-09

- against -

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ERIC DINALLO, in his capacity as Superintendent

Of the NEw York State Insurance Department,
THE NEW YORK STATE INSURANCE DEPARTMENT, MBIA INC,
MBIA INSURANCE CORPORATION, and NATIONAL PUBLIC
FINANCE GUARANTEE CORPORATION
(fka MBIA INSURANCE CORP OF ILLINOIS),
Respondents.

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- - - - - - - - - - - - - - - - - - - - - - - -X

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Supreme Court
60 Centre Street
New York, New York 10007

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May 8, 2012

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BEFORE:
HONORABLE BARBARA R. KAPNICK,
Justice of the Supreme Court

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Claudette Gumbs

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APPEARANCES(VIA TELEPHONE):

SULLIVAN & CORMWELL LLP

Attorneys for the Petitioners
125 Broad Street
New York, New York
BY: ROBERT J. GIUFFRA, ESQ.

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KASOWITZ BENSON TORRES & FRIEDMAN LLP

Attorneys for Respondents
1633 Broadway
New York, New York 10019-6799
BY:
MARC E. KASOWITZ, ESQ.

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OFFICE OF THE ATTORNEY GENERAL

Attorneys for the State Respondents
120 Broadway
New York, New York
BY:
DAVID HOLGADO, ESQ.

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Claudette Gumbs, Official Court Reporter

60 Centre Street
New York, New York 10007
646.386.3693

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Claudette Gumbs

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THE COURT:

I am here and my court attorney

Christine Rodriguez is here and our court reporter Claudette

is here.

and that will be fine.

Just identify yourselves before you start talking

So, to cut to the chase here, I have a letter that

Mr. Giuffra wrote on May 4th and I know we had scheduled a

conference call yesterday, but I was in the middle of a

hearing involving people from out of the country who had

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flown in from Singapore and Brazil, so I thought they were

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entitled to have a full day and I didn't have time to speak

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to you.

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I did get a response, a short responsive letter

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from Mr. Kasowitz this morning and a short response to that

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from Mr. Giuffra shortly thereafter.

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It seems that notwithstanding 60-some pages on the

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transcript on April 20th, that we are back to having some of

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the same conversations that we had last time about how this

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case is going to proceed.

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So I will let Mr. Giuffra start because he was the

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one that wrote the first article -- I mean the first letter,

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and of course, he was the only one on the phone, but Mr.

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Giuffra, why don't you briefly --

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MR. GIUFFRA:

I apologize.

We had a problem with

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communication and we thought they were all there in

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conference.
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Again, your Honor, we would very much prefer to do

this live and those are some of the problems -- obviously we

have difficulty with doing it by phone.

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THE COURT:

I understand, but I have a lot of

other cases.
MR. GIUFFRA:

Our position, your Honor, is that

on April 20th, the Court could not have been clearer that

the parties were having a trial starting on May 14th.

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Honor set aside three to four weeks for this trial.

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Honor said that there would be opening statements and

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testimony by witnesses.

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Your

Your

Since then, we have been working hard trying to

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prepare for trial, but the other side keeps maintaining that

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we are not having a trial.

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is required here because there are multiple, multiple

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disputed issues of fact and now, less than a week before the

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trial, we get a letter from MBIA asking the Court to

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reconsider what we understood to be the Court's decision on

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April 20th.

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The CPLR is clear that a trial

In fact, the entire purpose of the April 20th

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hearing was to determine whether there would be a trial and

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as your Honor will recall, petitioners were prepared to cite

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evidence on April 20th and I had the handouts that I was

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prepared to hand out, making clear that there were multiple

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triable issues of fact warranting a trial, and your Honor

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said that would not be necessary to do and your Honor said

that and I can quote your Honor, you said "I don't want to

hear all of the evidence --" this is Page 52 "-- this is not

the trial.

all the evidence today."

The trial starts May 14th.

I don't want to hear

Now, at multiple conferences your Honor had said

there was going to be a trial, and Justice Yates set a trial

date and repeatedly said there was going to be a trial and

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in fact, Justice Yates said that experts would be central to

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the case and we will put that in when we do our motion in

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limine response.

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Until the last several weeks, MBIA has always

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maintained the need for a trial.

That is why they said they

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needed all of the discovery that they sought.

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MBIA got in discovery a moratorium in the BCL action

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claiming that they needed time for a trial.

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addition, the Department wanted to do a sir reply brief.

In fact,

And in

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So now, essentially what people want to do is to

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reconsider what we understood to be the Court's ruling on

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April 20th and your Honor said the word trial -- we

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mentioned a few times oral arguments, witnesses -- said the

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word trial more than 40 times, and the rules are clear.

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Under the CPLR, if there is a disputed issue of fact, there

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must be a trial forthwith and that is under 7804(h), and

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there is no in between procedure in the rules.

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It is either

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a trial or a summary judgment motion, and in our view, there

are multiple disputed issues of fact.

As your Honor will recall, you directed the other

side to respond to our proposed stipulation of undisputed

facts and you were provided 144 proposed stipulations to

date.

who, I think changed 53 of them -- changed those 53.

could be no doubt that in the massive file before the Court

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We have reached agreement on none.

The respondents
There

there are multiple, multiple issues of fact.

The Department never moved to dismiss and the CPLR

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makes quite clear under 7803(e) that to the extent the

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respondent submits affidavits showing evidentiary facts, "as

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shall entitle him to a trial", but then 7804(e) makes clear

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"Statements in the answer, transcript or answering affidavit

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are not conclusive upon the petitioner".

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So given the fact that there are multiple facts in

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dispute, the affidavits that have been submitted by the

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parties are not evidence, they are merely hearsay and CPLR

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103(b) makes it quite clear that the procedure in a special

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proceeding -- which is what this is -- shall be the same as

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in actions of the provisions of the CPLR that are applicable

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to actions, shall be applicable to special proceedings.

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And we cite also in our letter to your Honor the Weinstein

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Korn treatise which says the same thing.

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Now, in his letter, Mr. Kasowitz cites several

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cases and those cases don't deal at all with whether or not

there should or should not be the first -- there should be a

trial.

Plaza Management that either side requested a trial.

case turned on the relatively simple issue, I dare say, that

is not what we could say here, but a regulation

distinguishing kitchens from kitchenettes, but more telling

is the case of Monroe Livingston which we faxed over to your

There is no indication in the first case called

That

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Honor and it is our view that Mr. Kasowitz' letter quotes

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that case out of context.

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In that case, the Court rejected Respondents'

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argument that it was error to direct the hearing and

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emphasized that when there is a hearing -- and this is a

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point we will press on the motions in limine -- that any

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competent and relevant proof that petitioner may have

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bearing on the trial issue will be presented with the

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admissible -- citing the Court of Appeals decision in

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Mandel.

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So, your Honor, we think there are multiple issues

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of fact to be tried.

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some of those issues of fact, but I thought that had all

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been decided on April 20th and that Mr. Kasowitz' letter is

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nothing more than an attempt to reconsider what your Honor

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had directed.

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THE COURT:

I am happy, your Honor, to go through

Okay.

Thank you.

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Mr. Kasowitz, you want to address what he said?

MR. KASOWITZ:

Sure.

I think nothing could be

further from the truth.

We are not asking for

reconsideration.

clear from the rule this is an Article 78 summary

proceeding.

didn't read of course is about pleadings and -- which is

7804(d), which says "There shall be a verified petition

Our understanding of this, and it is very

The section of the rule that Mr. Giuffra

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which may be accompanied by affidavits or other proof.

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Where there is an adverse party, there shall be a verified

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answer."

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case.

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may be accompanied by affidavits or other written proof.

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Where there is an adverse party, there shall be a verified

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answer which must state pertinent and material facts showing

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the grounds of the respondent's action complained of.

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There shall be a reply to the answer."

7804(d) sets forth what the record is in this

It says "There shall be a verified petition which

Sorry.

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"There shall be a reply to a counterclaim

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denominated as such and there shall be a reply to new matter

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in the answer or where the accuracy of proceedings annexed

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to the answer is disputed", and the like.

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All of this talks about -- sorry, I was reading the

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wrong one.

I was reading 7804(d).

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7804(c), which talks about "a notice of petition together

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with the petition and affidavits that specified in the

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I am talking about

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notice shall be served on any adverse party at least 20 days

before the time at which the petition is noticed to be

heard."

shall be served --" Then there is a reply together with

supporting affidavits, if any.

Then, "an answer and supporting affidavits, if any,

What the rule makes clear and what all of the cases

construing the rule make clear is that in a summary

proceeding like an Article 78 proceedings, the record in the

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case is where the parties have been working on for the past

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three years, namely the petition and the affidavits and the

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answer and the affidavits and the reply and the affidavits

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and here we have a sir reply and a sir sir reply, all with

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affidavits, all of which affidavits have exhibits.

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So the record before the Court, the record of this

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proceeding is very, very -- is very, very exhaustive and it

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is very, very complete.

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Now, it is the case that if there are, as

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subsection h of 7804 reads, there is a triable -- I will

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just read it, if there is a triable issue of fact, it shall

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be tried and certainly, the Court has indicated that if

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there are -- if there is an issue of fact or issues of fact,

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that shall be tried, but that trial does not then subsume

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and transform the summary proceeding into a full trial --

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into a full blown trial, the full blown plenary trial that

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the banks will have a year from now.

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So our position is very, very clear, and it is

very, very clear from the cases and I will read some quotes

from the cases as well, that we have a summary proceeding

here, that the way that the summary proceeding should go as

the Court indicated in the last conference, is that there

should be argument by other lawyers, other parties, to

present to the Court the evidence that has been adduced

during the course of this proceeding.

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And if there are issues of fact, if there is an

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issue of fact or issues of fact, then the Court can try

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those issues and if the Court would like to hear from

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witnesses, then the Court can say I would like to hear from

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some witnesses on some of the issues of fact and in fact,

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Section 409 which relates to special proceedings and which

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governs Article 78 here says that "The court may require the

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submission of additional proof."

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So if there are witnesses that the Court would like

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to hear from after the extensive argument from the parties,

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then the Court can indicate that it would like to hear from

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those witnesses and I think the Court indicated at the last

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conference that it would be interested in hearing from

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Messrs.

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straightforward.

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Buchmiller and Dinallo, so this is very, very

There should be extensive argument from the parties

next week.

We would request no less than two days for each

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party to present.

If a party does not want to take the

whole two days, then that is fine, and with motions in

limine and the like being dealt with on Monday and with the

fact that the Court has indicated that it won't sit on this

case on Wednesday because it has substantial other business

to do, then the better part of next week, if not the entire

week, will be taken up by argument and then, if there are

witnesses that the Court would like to hear, either

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additional witnesses or any issues of fact that the Court

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feels exist, then witnesses can be called.

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So I think that, you know, I think that the banks

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argue that because the Court used the word trial during the

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conference means that there is a full blown -- that this

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Article 78 proceeding is somehow transformed into a full

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blown plenary trial, is just not the law and not the case

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and I don't think it is what the Court intended.

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Rule 409 reads very clearly -- 409(b).

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make a summary determination upon the pleadings, papers and

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admissions to the extent that no triable issues of fact are

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raised."

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In fact,

"The court shall

And then, to the extent there are triable issues of

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fact raised, then the Court can hear further evidence on

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that, whether in the form of whatever written submissions

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the Court would like to be directed to in the affidavits or

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the like.
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Look, I think that the Thayer case was very clear

on this, when it talked about the power is to be -- that

while something is permissible and we will have a hearing,

it does not authorize a trial de novo in the reviewing

court.

care, where there appears to be a probability that the

effect of the additional testimony, if it is received, will

show the ruling complained of to be wrong and when the whole

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case comes to be decided upon the new testimony and the old,

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the Court even then is not to put itself in the position of

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the board, it is not to substitute trial starting its own

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discretion for that of the administrative agency established

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by the statute in a situation where the exercise of

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discretion is possible.

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The power is to be used cautiously, with extreme

And so, the point here -- and even where additional

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proof is taken, the ultimate issue to be decided is whether

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a determination was arbitrary or capricious and that was

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cited in the Monroe case that we sent to the Court, so it is

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very clear here your Honor, the old testimony is the -- is

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very -- is the record of the pleadings and the affidavits

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and the exhibits and if the Court wants to hear so-called

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new testimony, then it will indicate that, but there is no

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reason to do so here and it is -- it is completely

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inconsistent with the rules, completely inconsistent with

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the position here in a summary proceeding like this, where

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most of the facts frankly are not in dispute.

In fact, we contend that there are no disputed

issues of fact, there is no reason to transform this and it

would be improper to transform this into a full plenary

trial.

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THE COURT:

Well, I mean, I guess this goes back

to are there any issues of fact that need to be tried.

Obviously, this is not a trial de novo and this is

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not -- I mean, I have a relatively simple "determination" as

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to whether or not the Superintendent's determination, the

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Department of Insurance' determination was arbitrary and

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capricious and what I have to consider and -- before you

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were on the phone, I was saying to Mr. Giuffra well, what

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are actually the triable issues of fact?

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And I will let you mention a few of them Mr.

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Giuffra, except that I guess to some extent, those seem to

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me more not like triable issues of fact as much as the

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things that ultimately I have to consider and determine;

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whether or not Mr. Dinallo should have done something or

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should not have done something.

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issue of fact as I see it, that is really something that I

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will have to determine in the end in making my ultimate

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decision.

I mean, that is not an

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I don't really get what -- I mean --

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MR. HOLGADO:

Your Honor, may I be heard?

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THE COURT:

May who be heard?

MR. HOLGADO:

If I may be heard before Mr. Giuffra

launches into another explanation of what he thinks are

issues of fact.

this as well.

If I may, your Honor, I have some views on

THE COURT:

MR. HOLGADO:

I didn't mean to suggest you didn't.

Your Honor, the only request that I

would have --

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THE COURT:

I think certainly, Mr. Holgado, you

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sued both of them, so they are both respondents and I think

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I can give Mr. Holgado, against whom this case as I said is

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really brought, because it was his client's determination

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that is the subject of this Article 78.

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I mean, he didn't write a letter this time which is fine,

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because he had enough things to look at, but I will

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certainly let him briefly respond.

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saying that is where we had gotten when you guys were by

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mistake not on the phone, where I asked him about some

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issues of fact, but Mr. Holgado, why don't you briefly chime

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in?

So I didn't mean --

I was just sort of

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MR. HOLGADO:

Thank you, your Honor.

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Briefly, I just want to underscore, I do, I do

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agree with Mr. Kasowitz' position in the letter regarding

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Rule 409 and frankly, this was what we had been saying all

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along, the State respondents, that there was a need for your
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Honor to consider the papers that we had spent three years

preparing for your Honor and those papers, based on

countless requests for further discovery from petitioners

that were ultimately granted regarding the submissions from

MBIA to the department and that those papers, your Honor,

are before you and that I think as your Honor sort of

suggested just now, you have not found there to be a

specific triable issue of fact and you're getting argument

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from Mr. Giuffra even on this phone call as to what those

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issues might be.

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It is that very exchange, your Honor, I think is

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what puts into stark contrast what we are suggesting here,

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which is that because your Honor has not found those issues

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to exist yet, the hearing that your Honor really was

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contemplating is the one that is described very succinctly

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in Rule 409 which applies to this proceeding and in

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particular, 409(a), where your Honor should hear argument

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from the parties regarding the papers that have already been

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submitted and that you may, as Mr. Kasowitz pointed out, ask

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for submission of additional proof, which is the sum

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testimony that your Honor mentioned in addition to the

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"glorified oral argument" that you envisioned for this

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hearing.

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We have no issue whatsoever with what your Honor

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stated at the April 20th conference and we certainly have

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been trying to follow it faithfully in our preparation for

trying it.

position that your Honor ordered a trial, that your Honor

found triable issues of fact, that your Honor essentially

rejected the papers to the extent they were in the nature of

a summary judgment motion and that they have now been

rejected and indeed, in their most recent motion in limine

they rejected all of those submissions and the affidavits

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Unfortunately, Mr. Giuffra has taken the

thereon are now hearsay and not even admissible.

If there is anything that is more asking your Honor

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to substitute its determination for that of the

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Superintendent and the Department, it is to suggest that

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your Honor should not -- should strike or not consider the

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affidavits of the Department, the very purpose of which was

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to set forth the basis for their determination.

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And I think that rather than be overly formalistic,

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which is what petitioners are attempting to do, certainly

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the reason they want the trial is so they can make these

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arguments about hearsay, about constricting the evidence in

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such a way as to not allow your Honor to consider all of

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these papers that have and will be submitted and in that

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regard, your Honor, we think it is notable that Mr. Giuffra

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himself in a September 28, 2010, affidavit strenuously

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argued that the record in this case should include those

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very same affidavits and should include submissions from

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MBIA to the Department that had not been designated in the

908-page record that they are now seeking to constrict the

Department to, while simultaneously allowing them to submit

whatever proof they want.

And for that matter your Honor, the language that

is cited by petitioners regarding how any relevant competent

and relevant excuse me, competent and relevant proof may be

submitted by them, they are reading out of that language the

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standard relevance that we are only merely asking your Honor

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to abide by, which is simply this:

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evidence to be relevant to determining whether the

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Department's approval of the transformation had a rational

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basis, that evidence must have been either been before the

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agency itself or the evidence must at least evidence what

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was before the agency and those are the kinds of arguments

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we were seeking to make in our motion in limine, your Honor,

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which sounds like a technical argument that might not apply

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to a lot of documents, but as we showed in the appendix

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attached to our motion that we have already submitted and

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certainly sent a courtesy copy to your Honor, that over

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75 percent of the exhibits that have been offered by

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petitioners fit that category.

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Department and they don't even evidence what was before the

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Department, whereas of course submissions by MBIA to the

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Department and affidavits of the Department witnesses who

That in order for

They were never before the

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were responsible for the review and the approval evidence

that was in fact before the Department.

They are now seeking to have all of that excluded

as hearsay.

Not only the affidavits are they calling

hearsay, but in their objection to our exhibits and e-mails,

they are, you know, they are now saying this is hearsay.

Now, it is actually axiomatic that the administrative record

in an Article 78 record proceeding, your Honor, is going to

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contain the submissions of the applicant and to call that

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hearsay now because of some technical distinction where they

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are trying to call this a trial, that shows I think, your

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Honor, why it is important for us to decide what this is, to

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decide what May 14 legally is, because we will forestall

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arguments that I can -- that we believe are specious to

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begin with and we believe your Honor should of course

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consider the submissions that have already been made, should

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of course consider the things that were shared with the

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Department by MBIA, should of course consider what Mr.

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Dinallo and Mr. Buchmiller have to say regarding their

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analysis and the reasons for the determination and attempts

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to exclude those matters are bordering on the frivolous,

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your Honor, especially in light of the admissions already

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made by petitioners in this case in the course of seeking

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extensive discovery from the Department on the basis that

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they needed to challenge these same affidavits that they are

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now seeking to exclude.

But your Honor, that is why we think Rule 409(a)

really provides a clear basis and a clear grounding for what

-- exactly what your Honor said she envisioned at the

Article 78 -- the April 20th conference where you said you

wanted a hearing where you could hear some testimony.

have exactly that kind of flexibility with Rule 409(a), your

Honor, and we suggest that you direct that that is exactly

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what we are going to be doing.

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MR. GIUFFRA:

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I am pretty confident that I am correct with

You

Your Honor, if I can be heard.

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respect to the law.

Let me just sort of go through it.

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Article 78 says, and Mr. Kasowitz did cite this language in

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provision H under "Trial".

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raised in a proceeding under this article, it shall be tried

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forthwith."

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there is a trial, the rules that govern ordinary trials --

"If a triable issue of fact is

In addition, the rules are clear that once

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THE COURT:

But let me just interrupt you.

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I mean, I understand that on a trial, there are

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evidentiary rules.

But you can't tell me that all of those

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affidavits are excluded now because maybe some of the things

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in them are -- do not comport exactly with the evidentiary

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rules.

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accept that you're not trying to throw out all of the

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documents that you just spent the past three years

I mean, that I cannot accept.

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submitting.

That is part of the record.

One of the things that has been raised, which I am

not dealing with today is that some or all of those experts

may either be unnecessary or if some of them are necessary,

that some of them are not permissible for other reasons and

we will deal with that when you're here next week, but I am

not thinking that everything that you have submitted over

all of these years is supposed to be thrown out.

That is

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what you have submitted as part of this proceeding before

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me.

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people, documents that were considered by the Department in

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making their determination, other things, I mean, I don't

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want to suggest to you that I have gone through everything

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that is in there, but we have reviewed them, so we have some

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idea of what is in those boxes.

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say that I can't consider the affidavit of X because he

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happens to have one hearsay statement in it.

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it that there -- that might raise an issue as to how valid

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it is or whatever, but I don't judge affidavits submitted on

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motions the same way as I judge testimony that I am hearing

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on a full blown trial.

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Affidavits from lawyers, from witnesses, from other

I don't think you can now

You can raise

I mean, I don't agree with you, Mr. Giuffra.

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mean, it is very nice that somebody went through and counted

25

how many times the word trial was used in the transcript.

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don't have the time to do that or the interest or maybe the

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court reporter put that in the end or something like that,

but I envisioned not your standard trial, and I think that

is what I said at the end, even though I said some type of

trial, but sort of in quotation marks.

And really, this is a presentation by you as to why

you believe that you have enough information to suggest that

or to prove that, to support your petition that this

determination by the State Insurance Fund was arbitrary and

10

capricious and abuse of discretion.

11

the standard that I am bound by, by Article 78.

12

I mean, that is really

If, as we are going through this, somehow there is

13

an issue of fact, I mean, an issue of fact would be I

14

thought that the Insurance Department had these 4,500 pages

15

in front of them and now I learn they didn't and there is an

16

issue as to did they have them or didn't they have them.

17

That kind of issue of fact is not really the issue.

18

I mean, whether or not he should have used -- he

19

should have had 40 people or 30 people or 20 people or

20

outside people or more outside people, I mean, I don't see

21

those as issues of fact, but rather as issues that I have to

22

consider in determining whether or not this was a

23

determination that was arbitrary and capricious and I mean,

24

if you're able to show me that in no time in the world did

25

any insurance department ever make a decision like this in

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such a short time, on such a small record, a limited record,

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without more people, without more experience, I mean those

certainly all go towards your claim that this was arbitrary

and capricious under the circumstances presented here and

the other side will show me why, well no, they certainly

spent a lot of time or whatever they are going to say to

show that in fact it was not arbitrary and capricious, but

it doesn't lend itself exactly to a trial that I would have

after finding on a summary judgment motion that there were

10

issues of fact that had to be determined by a finder of

11

fact, whether that is a judge or a jury.

12

It is a different -- it is different.

I mean,

13

this seems to suggest 7804, subsection H, that if during the

14

argument or during the presentation of your -- of the case,

15

through the motion and whatever else you want to say, that

16

there are significant issues of fact that are raised, that

17

then you think there should be some type of hearing or trial

18

on that issue, then we will have to deal with that, but I

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don't -- I think that -- I thought that I did not say this

20

was a full blown trial that I might have in a lot of other

21

cases because it is an Article 78 proceeding which usually

22

does not have a trial, but might have some type of a hearing

23

and I have some discretion in what I want to hear and part

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of what I told you I want to hear is probably some witnesses

25

that were most involved and I gave two names because I could

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not imagine not hearing from those people, but there may be
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a few others that I wanted to hear from and the issue about

the experts we are going to have to talk to, talk about next

week.

I know I said something about opening statements

and I am not even sure if that makes sense, because I think

that Mr. Giuffra, you have the burden in the first instance

to make your presentation to me and if you think that you're

going to need to call some witnesses on that, you may, then

10

you should tell them who you want to call and then we will

11

talk on Monday about what the problems are with those

12

witnesses, whether you have agreed to certain witnesses, and

13

I am hopeful that you all understand that I do want to have

14

a few witnesses in here in addition to just saying Judge, we

15

made this petition, here are all of the papers and that is

16

the end of the day and thank you very much for inviting us

17

here.

18

I mean, nobody seems to listen to anything I said

19

last time.

20

weren't here for 65 pages on the transcript.

21

interpreting it in certain ways.

22

would sort of understand what I was saying, but I guess you

23

don't.

24

You all stuck to exactly your guns like we

You're all

I guess I hope that you

I do have to let the court reporter go to lunch at

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1:00 o'clock and I have a humongous conference case on in

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the courtroom at 2:00 o'clock and I still have to do

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something on that, because I have had emergency orders to

show cause with TROs all morning long, just in case I was

not doing anything this morning.

So I --

MR. GIUFFRA:

extremely important.

proceeding.

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This is

We are trying to prepare for a

THE COURT:

10

Could we do this?

Yes.

MR. GIUFFRA:

And your Honor, just so I could make

a record on this point.

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THE COURT:

You can come on Monday morning and do

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it.

14

four weeks in my calendar and they are still there for the

15

MBIA case.

16

order to be able to do that, I pushed a lot of things into

17

this week and plus, I don't have complete control over my

18

calendar in terms of orders to show cause with massive

19

temporary restraining orders that get assigned to me even

20

when I am doing a CLE program and I walk back and they are

21

put on by other people with people from all over the

22

country.

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say okay, for four weeks I would like nothing to be assigned

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to me.

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and I really can't deal with this.

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I mean, Mr. Giuffra, I know -- I did cut out three to

That is in there except for Wednesday.

In

I mean, I don't have complete control and I can't

So I have this whole week packed with things to do

What I am telling you is, you have made these

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pretty substantial letter applications as motions in limine

which you have decided all you have -- you're not responding

until Friday.

on the record, I have two law clerks.

combined put in more time than anybody else I know in this

Court, but everybody is entitled to see their mothers this

Sunday and I am not going to do that to my staff.

just can't ask them to do that and I can't hire anybody else

With all due respect, I am sorry to say this

I think we probably

So I

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as you know, contract attorneys to help me out.

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doesn't work that way here.

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be as prepared as we can be on all of these motions, in

13

limine, which I know are time consuming.

14

what I expect is that if you have important witnesses, that

15

you try to hold them -- I mean, I am not starting with an

16

expert Monday, so I don't think you should walk in with any

17

of those, but I really think you have -- I mean you are

18

planning for an opening statement of two hours, that is what

19

you asked me for and I am not sure if you will even get to

20

any sort of formal opening with all of these motions in

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limine and all of these other issues that everybody is

22

bringing up, but I think that I cannot accept the fact that

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the records and the affidavits and the papers that have been

24

submitted are not to be considered by me.

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MR. GIUFFRA:

It just

So we are going to hopefully

And I think that

Your Honor, on that one issue,

because I think this is a pretty basic important issue at

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the outset, our position is, and this is what I was hoping

to do on the April 20th conference, was to go through what

we thought were the issues.

Monday.

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7
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9

I am prepared to do it again on

Under the CPLR, under -THE COURT:

You don't have to keep reading them.

I have them in front of me.

MR. GIUFFRA:

"Statements made in the answer,

transcripts an answering affidavit are not conclusive upon

10

the petitioner."

11

there are basically two roads; you go down one road if there

12

are no genuine issues of material fact, there is just the

13

hearing and it can be decided on the pleadings that are

14

before the Court.

15

these pleadings was to ascertain whether there were issues

16

of fact that warranted a trial.

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And it is quite clear, your Honor, that

The entire purpose of putting in all of

Once you have gone down -- and you go down the

18

trial road, then we have the ability to have opening

19

statements, to call witnesses, experts, and many of the

20

witnesses cut across a number of the issues of fact that we

21

believe to be present, but we would suggest, your Honor,

22

there is no procedure in the CPLR to allow some sort of an

23

in between procedure.

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fact, particularly in cases of this enormity, where this

25

much time has been spent, there needs to be a trial governed

26

by normal rules and yes, our position is that the affidavits

Once there are disputed issues of

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are not conclusive upon us, that is what the rule says and

your Honor, they would be hearsay.

So for example, if Mr. Dinallo takes a position in

his affidavit about what he thought the Insurance Law meant,

it is not -- that is not a statement that -- that is not in

the approval letter, not in the administrative record, it is

a mere litigating position and the Court need not defer to

it.

10

THE COURT:

11

throwing out the whole thing.

12

Fine.

Then you raise that, but I am not

So you will tell me that is what he said and

13

this particular statement that he said, Judge, is not

14

conclusive on us and when he gets up and testifies, his

15

testimony in the courtroom has to be in accordance with the

16

evidentiary rules.

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MR. GIUFFRA:

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THE COURT:

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20

You know, your Honor -You have two minutes.

So what do you

want to say, Mr. Holgado?

MR. HOLGADO:

Your Honor, I just want to say that

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contrary to what Mr. Giuffra said there is a provision on

22

point for this and it was the one cited by Mr. Kasowitz.

23

Rule 409(a) of the CPLR specifically says that "The court

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may require the submission of additional proof."

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exactly what you're contemplating by hearing additional

26

testimony at this hearing.

That is

And I think Mr. Giuffra is

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skipping ahead to the point where he says that your Honor

has found that triable issues of fact exist and have

specifically rejected the papers and found there will be a

trial on specific issues of fact.

so, and I think your Honor has been clear about that on this

call and I want to underscore that your Honor clearly has

the right to hold this hearing pursuant to Rule 409(a).

MR. GIUFFRA:

Your Honor has not done

Your Honor, our position is that

10

there are factual issues to be tried, but once the Court

11

makes a judgment that there are factual issues to be tried,

12

the CPLR specifically provides for the procedure and it has

13

to be a regular trial, that is what is made quite clear,

14

special proceedings are governed by the same rules that

15

govern any trial, same evidentiary rules, procedural rules

16

and so, yes, your Honor, consistent with a hearing which I

17

thought we were having on the April 20th discussion, whether

18

issues need to be tried, but your Honor, there can be little

19

doubt in our view that for example, whether the Department

20

followed its normal procedures.

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22

We say no.

In fact, our position is that this transaction was

approved in a manner unlike any --

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THE COURT:

Okay.

But that is not an issue of

24

fact.

That is the ultimate determination.

25

show what you're saying is that they have -- they dealt with

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things in a way that it was never dealt with before and it

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was arbitrary and capricious and an abuse of discretion.

That is what this whole proceeding is about.

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5

I disagree with you that that is an issue of fact

that requires a full blown trial.

What I think you're going to say is, Judge, look at

these things that we have put in.

Exhibit A to my affidavit

from three years ago says this.

consider that affidavit and now I would like to call Mr.

I would like you to

10

Dinallo to the stand to be our first witness -- or Mr.

11

Buchmiller and then go through the whole proceeding.

12

I mean, you're trying to pigeonhole me into calling

13

something something that I have not said.

14

and read all 65 pages over the weekend, but that is not what

15

I said.

16

you thought was happening on the 20th.

17

seeing this as a hybrid.

18

used the word trial because it is shorter because that is

19

what Judge Yates, he is the one who always said trial and it

20

wasn't until Mr. Holgado said after three years I don't know

21

what you're talking about, we don't have trials on this, and

22

that is the word that everybody used up until a month or two

23

ago when this came up on, I think, a March conference call

24

and I think you ought to be prepared to deal with all of

25

your motions in limine on Monday and to talk about -- I

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mean, try to show me that there are issues of fact that

I didn't find issues of fact.

I will go back

Maybe that is what

I said I was really

That is what I said.

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require a trial.

So far, the issues of fact that I have heard and I

understand that you have more and I wanted to spend time on

it, but you can't any more today.

to a full blown trial.

fact, if, if there is an issue of fact, it shall be tried

forthwith, so I am not even sure that means there should be

a full blown trial from soup to nuts, or if there is a

You think you're entitled

I think if there are issues of

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particular issue of fact, but I don't think whether or not

11

there is an abuse of discretion and I know you termed it in

12

a different way, but whether or not he used the most bizarre

13

procedure to make the determination, isn't to me an issue of

14

fact as much as it is the ultimate determination that I have

15

to make in this case based upon everything that you're all

16

going to show to me.

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So, I think that is what probably Monday is going

18

to be about.

So you will be here all day long, but I may

19

not have a formal opening statement and I am not even sure

20

there will be a witness, and we will have to iron it out on

21

Monday.

22

presentation to me as to why you brought this proceeding,

23

what you have submitted to show why, and who you would like

24

to call as your first witnesses to strengthen or to

25

emphasize or based on everything to show me and that is how

26

we would start and the other people could cross examine that

But I saw it as, you know, you were going to make a

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person and then we would go on and see what other issues are

important to show me and then you would have another witness

and perhaps he would bring in or she would bring in some

other relevant factors and they could be cross-examined and

eventually, we will get to the respondents' position and

then you would have a chance to respond to it.

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9

So I mean, I never had so much time on a phone with

whether it is a hearing or a preliminary injunction, a

10

hearing, or a trial, or whatever.

11

mean, this is really a very unique situation.

12

I never have that and I

So I am sorry if I have not been as clear as you

13

think I should have been.

14

everything that you submit to us, and we will be prepared to

15

deal with it on Monday, but unfortunately, there are only a

16

certain number of hours in the day that I can keep the

17

courtroom open and I can't do it.

18

time on your case.

19

Mea culpa.

We will read

I can't spend any more

So I will see you Monday.

Monday at 10:00 o'clock

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promptly.

You can come in at 9:30 and set yourselves set up

21

at the tables and the only thing I have to say is, I told

22

you you could send people in on Friday and what we didn't

23

realize was there was an order to show cause signed by

24

someone else while I was doing a CLE last Friday at County

25

Lawyers about commercial practice and that is on at 2:15 and

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people are coming from Canada and so, I will need the use of
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my courtroom in the afternoon for a good part of it, and for

part of the morning.

courtroom, so you can send people in to set things up if you

still need to have some screens and things on Friday morning

and you can confirm that with Ray Vega.

this week, but hopefully he will be in by the end of the

week and now, I have to let the court reporter take a lunch

break and I have to prepare for my 2:00 o'clock conference.

We have something that won't be in the

10

MR. HOLGADO:

11

bit of clarification.

12

He has not been in

If I could just ask for one brief

On Monday you had mentioned to us that we are first

13

addressing the motions in limine and then was it my

14

understanding that you wanted oral argument on the question

15

of whether there exist issues of fact from all parties and

16

then we may proceed to additional testimony?

17

seems to me to be fair, to allow the respondents to respond

18

to assertions that will be made in what is going to probably

19

take the form of a summary judgment type argument or a

20

closing statement of a trial that Mr. Giuffra will try to

21

make, and I thought that would be something that may be

22

useful for your Honor before we proceed.

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26

THE COURT:

What, Mr. Giuffra?

I mean that

We have to get off

the phone.
MR. GIUFFRA:

I think we should deal with the

issue of whether there is a factual issue to be tried before

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we deal with the motion in limine and if there are no

factual issues to be tried, we go down one road and if there

are triable issues of fact, we go down another road and we

think that should be the first thing out of the box on

Monday and that is --

THE COURT:

I will tell you what.

I am really

sorry that there is nothing you can agree on.

very sorry.

I am really

I am not used to this and for lawyers of this

10

caliber to disagree on every single thing, not cooperate

11

with each other on anything.

12

I don't have time.

I am sorry, my court reporter

13

is looking at me and I have to hang up.

14

Holgado has said -- has there ever been anything argued that

15

I didn't let the other side respond to?

16

due respect, I don't think that was, you know, very fair or

17

-- I will not let Mr. Giuffra make his whole presentation

18

and then you know, not let you and Mr. Kasowitz talk?

19

mean, that is not the way I do anything, nor have I done

20

anything like that.

21

So everything Mr.

I mean, with all

And perhaps you could talk to each other and agree

22

that whether or not certain experts are relevant might

23

matter on exactly what the procedure is and so that might

24

make some sense for you to deal with that first, and we will

25

be prepared on those things and I -- I forget what else all

26

of the other in limine issues are about, but that might make
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some sense for you to do that, but I was kind of hoping -- I

think that does make sense, but I have not really spent a

lot of time thinking about that.

can agree on that when you send me your letters on Friday

they will say we have agreed and we think we should try to

proceed in this matter to the best of your ability.

8
9

MR. HOLGADO:

So I hope that maybe you

The reason we will disagree is

because Mr. Giuffra would love to spend most of his argument

10

on why this should be an issue of fact and the over 600

11

exhibits that we are moving to preclude from consideration

12

in the hearing that -- or whatever we call it, but also

13

exclude them from the papers already submitted because we

14

don't believe they are proper.

15

(Continued on next page.)

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THE COURT:

Fine.

So I will deal with the issues

of fact and the responses to that and the motions in limine.

That will be Monday's thing and you can be sure I am not

throwing out anybody's submission over the weekend.

MR. GIUFFRA:

THE COURT:

Okay.
I look forward -- sort of -- to seeing

you on Monday at 10:00 o'clock.

work out, we will deal with it correspondingly.

10

No.

11

Bye bye now.

12
13
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15
16

Okay.

Anything else you need to

I have to go.

*
*
*
Certified that the foregoing is a true and accurate
transcript of the original stenographic minutes of this
case.
-------------------Claudette Gumbs
Senior Court Reporter

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