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April 1, 2024 Chicago Riyadh
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The Honorable Margaret Chan Hong Kong Singapore
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New York, New York 10007 Los Angeles
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Washington, D.C.
Re: Pacific Investment Management Company LLC v. Humboldt Americas LLC et al.,
Index No. 650524/2024 (N.Y. Sup. Ct.)
Dear Justice Chan:
Pursuant to Commercial Division Rule 14 and Your Honor’s Part Rule I(E),1 Plaintiff
Pacific Investment Management Company LLC (“Plaintiff” or “PIMCO”) respectfully requests
urgent resolution of the parties’ dispute regarding the scope of expedited discovery in advance of
the submission hearing date on Plaintiff’s application, by order to show cause, for a preliminary
injunction and appointment of a temporary receiver (the “Application”).
By way of brief background, this dispute arises from Defendants’ refusal to pay the Series
5 Purchasers money that they are owed pursuant to a Receivables Sale Agreement (the “RSA”).
The Series 5 Purchasers purchased notes, known as the Series 5 Notes, issued by Defendant
Humboldt Americas LLC (“Humboldt”) pursuant to a receivables program called the Humboldt
program. The Humboldt program is one of several receivables programs operated by the same
management team—Jason Tilroe, Russell Schreiber and Nial Ferguson. The other receivables
programs operated by this management team that are relevant to the current dispute are the NATF
program and the CUBITT program.
On February 26, 2024, PIMCO filed a proposed order to show cause seeking (i) a
temporary restraining order (“TRO”) and preliminary injunction prohibiting Defendants from
purchasing receivables and from using funds from collections for any purpose other than paying
the principal on the Series 5 Notes; and (ii) an order appointing a temporary receiver over certain
assets in the possession and under the control of Defendants. See NYSCEF Nos. 9–21. Both
requests were made to protect the Series 5 Purchasers’ secured property interest in the receivables
that collateralize the Series 5 Notes.
1
Because this request for expedited discovery in advance of the preliminary injunction hearing
does not address a specific disclosure dispute in the normal course of discovery, it is counsel’s
understanding that a Part 49 discovery form is not required. Counsel stands ready to furnish the
Court with any documentation requested in advance of the conference.
April 1, 2024
Page 2
On March 15, 2024, the Court denied Plaintiff’s request for a temporary restraining order.
NYSCEF No. 50. In the Order, the Court noted that “[a]t this stage, defendants’ representation
that their receivables-liquidation business would collapse without the ability to buy and sell
receivables, which would negatively affect repayment to all note-holders beyond just plaintiff, tips
the balance of equities in defendants’ favor.” Id. at 3. The Court ordered Defendants to serve
opposition papers to Plaintiff’s Application by April 5, 2024, and Plaintiff to serve reply papers
by April 12, 2024. Id.
Following the Court’s Order of March 15, 2024, the parties agreed that limited discovery
is warranted in connection with the Application, particularly in light of PIMCO’s broad audit rights
under the RSA.2 See Exhibit A.3 PIMCO sent Defendants three narrowly tailored document
requests, which it further narrowed throughout the course of the parties’ meet and confers over the
past two weeks. See id. Eventually, Defendants objected to portions of two of those requests—in
particular, Defendants refused to produce documents and communications exchanged with
Nuveen and Kuvare (the Series 6 and 8 Purchasers) regarding any misconduct by three individuals
who manage the Humboldt receivables program. Below are the three document requests PIMCO
made of Defendants, with the red highlights reflecting the portions to which Defendants objected:
(i) All documents and communications exchanged between Defendants or their agents, on the
one hand, and the Series 6 and 8 Purchasers (Nuveen and Kuvare) or their agents, on the
other, that relate to the Humboldt receivables program or any misconduct by the
management team of that program (specifically, Jason Tilroe, Russell Schreiber, or Nial
Ferguson), from the period of August 1, 2023 to present.
(ii) All documents and communications exchanged between Defendants or their agents, on the
one hand, and the B-Note Purchasers or their agents, on the other, that relate to the
Humboldt receivables program or any misconduct by the management team of that
program (specifically, Jason Tilroe, Russell Schreiber, or Nial Ferguson), from the period
of August 1, 2023 to present.
(iii) Documents sufficient to show Defendants’ financial condition and the status of
Receivables (as defined in the RSA) from January 1, 2022 to present.
PIMCO’s requests for documents exchanged with Nuveen and Kuvare regarding
misconduct by the management team overseeing the Humboldt receivables program are directly
relevant to the issues at stake in PIMCO’s request for injunctive relief and for appointment of a
temporary receiver. For one thing, such documents are relevant to the issue of irreparable harm.
2
Under Section 6.1(q) of the RSA, Plaintiff is entitled to “examine and make copies of and
abstracts from all books, records and documents (including computer files, tapes and disks) . . .
relating to the Receivables” and “to discuss matters relating to Receivables or [Humboldt’s]
performance . . . with any of [Humboldt’s] officers or employees having knowledge of such
matters” within “two (2) Business Days’ prior written notice” following a Termination Event.
NYSCEF No. 11, § 6.1(q).
3
Exhibit A contains limited redactions of settlement discussions protected under CPLR 4547.
April 1, 2024
Page 3
To the extent the documents show that the management team has improperly transferred,
dissipated or mismanaged funds or receivables in other receivables programs, such documents will
directly support PIMCO’s contention that it faces an imminent threat of irreparable harm if the
same management team is allowed to continue using PIMCO’s secured collateral to purchase
receivables in the Humboldt program. See Goldman Sachs Bank USA v. Schreiber, 2022 WL
60650, at *2 (Sup. Ct. N.Y. Cnty. Jan. 6 2022) (“The sale of these assets in direct contravention of
the governing documents irreparabl[y] harms the lender by taking away the value of the
collateral.”); White Oak Commercial Finance, LLC v. EIA Inc., 2023 WL 4149527, at *7 (Sup. Ct.
N.Y. Cnty. June 23, 2023) (recognizing “legally recognized interest in preventing dissipation of
encumbered property prior to obtaining judgment”).
Such documents and communications also go to balance of the equities. At the TRO
hearing, Defendants argued that their business would “collapse” if they are enjoined from
purchasing additional receivables. NYSCEF No. 23, at 9. But it appears that Defendants’ and
their affiliates’ business is already in dire financial straits, and the other noteholders (Nuveen and
Kuvare) are simply attempting to gamble with PIMCO’s collateral in an effort to salvage some
value on their under-water notes and/or their failing investments in other receivables programs. In
particular, the day after the TRO hearing, counsel for Defendants sent PIMCO a letter from certain
holders of “B-Notes” asserting additional payment defaults under the “Humboldt program.” See
Exhibit B. That letter—which was dated several days before the TRO hearing, but only shared
with PIMCO after the hearing—stated that Humboldt’s parent company has defaulted on its
payment obligations to certain B-Note Purchasers, and failed to make payments on B-Notes that
matured on February 28, 2024 and February 29, 2024. Id. Notably, Defendants previously
informed Plaintiff via memorandum (the “B-Notes Memorandum”) that failure to pay the B-Note
Purchasers would “trigger multiple adverse events,” including “devaluing [] the receivables
portfolio in Humboldt,” and “potential criminal liability” for management, “thereby also
threatening the on-going existence and economic viability of [Humboldt] group companies.” See
Exhibit C. In the B-Notes Memorandum, Defendants informed Plaintiff that non-payment of B-
Notes “will jeopardize up to US $1.3 billion of liquidity, aimed at redeeming senior noteholders
and securing the future of the business.” Id. As further evidence of Defendants’ financial distress,
Defendants lack the funds to repay the $70 million in Series 2 Notes held by Apple Bank, which
mature on or about April 19, 2024. See NYSCEF No. 49, at ¶ 22; see also Goldman, 2022 WL
60650, at *2 (“The balance of the equities also weighs in favor of the Lender, as . . . there have
been multiple events of default by the Grantor and the Borrowers with respect to the Revolving
Loans.”); Telcom-SNI Investors, L.L.C. v. Sorrento Networks, Inc., No. CIV. A. 19038-NC, 2001
WL 1117505, at *10 (Del. Ch. Sept. 7, 2001) aff’d, 790 A.2d 477 (Del. 2002) (“The balancing of
equities and hardships decidedly tilts in favor of Plaintiffs, who are being denied the benefits of
their bargain and the reasonable expectation of effective and continuing protective provisions.”).
The requested discovery also goes to PIMCO’s request for a temporary receiver. If the
management team of Messrs. Tilroe, Schreiber and Ferguson has engaged in fraud or other
misconduct with regard to any of the receivables program, that would plainly support PIMCO’s
request to appoint a temporary receiver. See Somerville House Mgmt., Ltd. v. Am. Television
Syndication Co., 100 A.D.2d 821, 822 (1st Dep’t 1984) (appointment of receiver warranted where
plaintiff showed “that defendants are on the verge of insolvency or may dissipate the assets”). The
April 1, 2024
Page 4
need for appointment of a temporary receiver will be particularly acute if discovery shows that
Nuveen and Kuvare (the Series 6 and 8 Purchasers) are aware of the fraud or misconduct of the
management team. That is because, as Defendants have admitted, Nuveen and Kuvare currently
are exercising control over Defendants, including by instructing Defendants not to pay the Series
5 Purchasers and to continue purchasing receivables despite the express prohibition of the RSA.
After informing Defendants that PIMCO intended to raise this narrow dispute concerning
management misconduct to the Court unless Defendants informed PIMCO that no such documents
existed, at 11:57 am this morning, Defendants suddenly asserted that they would not provide any
of the previously agreed-upon documents and deposition discovery to PIMCO because it had not
been “ordered by the Court.” Accordingly, Plaintiff has no choice but to respectfully request that
the Court schedule a discovery conference at its earliest convenience to resolve these issues, and
to order Defendants to produce the requested discovery responsive to PIMCO’s limited requests
above.
Respectfully submitted,
/s/ Jooyoung Yeu
Jooyoung Yeu
of LATHAM & WATKINS LLP
cc: All counsel of record (via NYSCEF)
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1271 Avenue of the Americas New York, New York 10020-1401 Tel: +1.212.906.1200 Fax: +1.212.751.4864 www.lw.com FIRM / AFFILIATE OFFICES Austin Milan Beijing Munich Boston New York Brussels Orange County Century City Paris April 1, 2024 Chicago Riyadh Dubai San Diego VIA NYSCEF & EMAIL Düsseldorf San Francisco Frankfurt Seoul Hamburg Silicon Valley The Honorable Margaret Chan Hong Kong Singapore Supreme Court of the State of New York Houston Tel Aviv 60 Centre Street, Courtroom 252 London Tokyo New York, New York 10007 Los Angeles Madrid Washington, D.C. Re: Pacific Investment Management Company LLC v. Humboldt Americas LLC et al., Index No. 650524/2024 (N.Y. Sup. Ct.) Dear Justice Chan: Pursuant to Commercial Division Rule 14 and Your Honor’s Part Rule I(E),1 Plaintiff Pacific Investment Management Company LLC (“Plaintiff” or “PIMCO”) respectfully requests urgent resolution of the parties’ dispute regarding the scope of expedited discovery in advance of the submission hearing date on Plaintiff’s application, by order to show cause, for a preliminary injunction and appointment of a temporary receiver (the “Application”). By way of brief background, this dispute arises from Defendants’ refusal to pay the Series 5 Purchasers money that they are owed pursuant to a Receivables Sale Agreement (the “RSA”). The Series 5 Purchasers purchased notes, known as the Series 5 Notes, issued by Defendant Humboldt Americas LLC (“Humboldt”) pursuant to a receivables program called the Humboldt program. The Humboldt program is one of several receivables programs operated by the same management team—Jason Tilroe, Russell Schreiber and Nial Ferguson. The other receivables programs operated by this management team that are relevant to the current dispute are the NATF program and the CUBITT program. On February 26, 2024, PIMCO filed a proposed order to show cause seeking (i) a temporary restraining order (“TRO”) and preliminary injunction prohibiting Defendants from purchasing receivables and from using funds from collections for any purpose other than paying the principal on the Series 5 Notes; and (ii) an order appointing a temporary receiver over certain assets in the possession and under the control of Defendants. See NYSCEF Nos. 9–21. Both requests were made to protect the Series 5 Purchasers’ secured property interest in the receivables that collateralize the Series 5 Notes. 1 Because this request for expedited discovery in advance of the preliminary injunction hearing does not address a specific disclosure dispute in the normal course of discovery, it is counsel’s understanding that a Part 49 discovery form is not required. Counsel stands ready to furnish the Court with any documentation requested in advance of the conference. April 1, 2024 Page 2 On March 15, 2024, the Court denied Plaintiff’s request for a temporary restraining order. NYSCEF No. 50. In the Order, the Court noted that “[a]t this stage, defendants’ representation that their receivables-liquidation business would collapse without the ability to buy and sell receivables, which would negatively affect repayment to all note-holders beyond just plaintiff, tips the balance of equities in defendants’ favor.” Id. at 3. The Court ordered Defendants to serve opposition papers to Plaintiff’s Application by April 5, 2024, and Plaintiff to serve reply papers by April 12, 2024. Id. Following the Court’s Order of March 15, 2024, the parties agreed that limited discovery is warranted in connection with the Application, particularly in light of PIMCO’s broad audit rights under the RSA.2 See Exhibit A.3 PIMCO sent Defendants three narrowly tailored document requests, which it further narrowed throughout the course of the parties’ meet and confers over the past two weeks. See id. Eventually, Defendants objected to portions of two of those requests—in particular, Defendants refused to produce documents and communications exchanged with Nuveen and Kuvare (the Series 6 and 8 Purchasers) regarding any misconduct by three individuals who manage the Humboldt receivables program. Below are the three document requests PIMCO made of Defendants, with the red highlights reflecting the portions to which Defendants objected: (i) All documents and communications exchanged between Defendants or their agents, on the one hand, and the Series 6 and 8 Purchasers (Nuveen and Kuvare) or their agents, on the other, that relate to the Humboldt receivables program or any misconduct by the management team of that program (specifically, Jason Tilroe, Russell Schreiber, or Nial Ferguson), from the period of August 1, 2023 to present. (ii) All documents and communications exchanged between Defendants or their agents, on the one hand, and the B-Note Purchasers or their agents, on the other, that relate to the Humboldt receivables program or any misconduct by the management team of that program (specifically, Jason Tilroe, Russell Schreiber, or Nial Ferguson), from the period of August 1, 2023 to present. (iii) Documents sufficient to show Defendants’ financial condition and the status of Receivables (as defined in the RSA) from January 1, 2022 to present. PIMCO’s requests for documents exchanged with Nuveen and Kuvare regarding misconduct by the management team overseeing the Humboldt receivables program are directly relevant to the issues at stake in PIMCO’s request for injunctive relief and for appointment of a temporary receiver. For one thing, such documents are relevant to the issue of irreparable harm. 2 Under Section 6.1(q) of the RSA, Plaintiff is entitled to “examine and make copies of and abstracts from all books, records and documents (including computer files, tapes and disks) . . . relating to the Receivables” and “to discuss matters relating to Receivables or [Humboldt’s] performance . . . with any of [Humboldt’s] officers or employees having knowledge of such matters” within “two (2) Business Days’ prior written notice” following a Termination Event. NYSCEF No. 11, § 6.1(q). 3 Exhibit A contains limited redactions of settlement discussions protected under CPLR 4547. April 1, 2024 Page 3 To the extent the documents show that the management team has improperly transferred, dissipated or mismanaged funds or receivables in other receivables programs, such documents will directly support PIMCO’s contention that it faces an imminent threat of irreparable harm if the same management team is allowed to continue using PIMCO’s secured collateral to purchase receivables in the Humboldt program. See Goldman Sachs Bank USA v. Schreiber, 2022 WL 60650, at *2 (Sup. Ct. N.Y. Cnty. Jan. 6 2022) (“The sale of these assets in direct contravention of the governing documents irreparabl[y] harms the lender by taking away the value of the collateral.”); White Oak Commercial Finance, LLC v. EIA Inc., 2023 WL 4149527, at *7 (Sup. Ct. N.Y. Cnty. June 23, 2023) (recognizing “legally recognized interest in preventing dissipation of encumbered property prior to obtaining judgment”). Such documents and communications also go to balance of the equities. At the TRO hearing, Defendants argued that their business would “collapse” if they are enjoined from purchasing additional receivables. NYSCEF No. 23, at 9. But it appears that Defendants’ and their affiliates’ business is already in dire financial straits, and the other noteholders (Nuveen and Kuvare) are simply attempting to gamble with PIMCO’s collateral in an effort to salvage some value on their under-water notes and/or their failing investments in other receivables programs. In particular, the day after the TRO hearing, counsel for Defendants sent PIMCO a letter from certain holders of “B-Notes” asserting additional payment defaults under the “Humboldt program.” See Exhibit B. That letter—which was dated several days before the TRO hearing, but only shared with PIMCO after the hearing—stated that Humboldt’s parent company has defaulted on its payment obligations to certain B-Note Purchasers, and failed to make payments on B-Notes that matured on February 28, 2024 and February 29, 2024. Id. Notably, Defendants previously informed Plaintiff via memorandum (the “B-Notes Memorandum”) that failure to pay the B-Note Purchasers would “trigger multiple adverse events,” including “devaluing [] the receivables portfolio in Humboldt,” and “potential criminal liability” for management, “thereby also threatening the on-going existence and economic viability of [Humboldt] group companies.” See Exhibit C. In the B-Notes Memorandum, Defendants informed Plaintiff that non-payment of B- Notes “will jeopardize up to US $1.3 billion of liquidity, aimed at redeeming senior noteholders and securing the future of the business.” Id. As further evidence of Defendants’ financial distress, Defendants lack the funds to repay the $70 million in Series 2 Notes held by Apple Bank, which mature on or about April 19, 2024. See NYSCEF No. 49, at ¶ 22; see also Goldman, 2022 WL 60650, at *2 (“The balance of the equities also weighs in favor of the Lender, as . . . there have been multiple events of default by the Grantor and the Borrowers with respect to the Revolving Loans.”); Telcom-SNI Investors, L.L.C. v. Sorrento Networks, Inc., No. CIV. A. 19038-NC, 2001 WL 1117505, at *10 (Del. Ch. Sept. 7, 2001) aff’d, 790 A.2d 477 (Del. 2002) (“The balancing of equities and hardships decidedly tilts in favor of Plaintiffs, who are being denied the benefits of their bargain and the reasonable expectation of effective and continuing protective provisions.”). The requested discovery also goes to PIMCO’s request for a temporary receiver. If the management team of Messrs. Tilroe, Schreiber and Ferguson has engaged in fraud or other misconduct with regard to any of the receivables program, that would plainly support PIMCO’s request to appoint a temporary receiver. See Somerville House Mgmt., Ltd. v. Am. Television Syndication Co., 100 A.D.2d 821, 822 (1st Dep’t 1984) (appointment of receiver warranted where plaintiff showed “that defendants are on the verge of insolvency or may dissipate the assets”). The April 1, 2024 Page 4 need for appointment of a temporary receiver will be particularly acute if discovery shows that Nuveen and Kuvare (the Series 6 and 8 Purchasers) are aware of the fraud or misconduct of the management team. That is because, as Defendants have admitted, Nuveen and Kuvare currently are exercising control over Defendants, including by instructing Defendants not to pay the Series 5 Purchasers and to continue purchasing receivables despite the express prohibition of the RSA. After informing Defendants that PIMCO intended to raise this narrow dispute concerning management misconduct to the Court unless Defendants informed PIMCO that no such documents existed, at 11:57 am this morning, Defendants suddenly asserted that they would not provide any of the previously agreed-upon documents and deposition discovery to PIMCO because it had not been “ordered by the Court.” Accordingly, Plaintiff has no choice but to respectfully request that the Court schedule a discovery conference at its earliest convenience to resolve these issues, and to order Defendants to produce the requested discovery responsive to PIMCO’s limited requests above. Respectfully submitted, /s/ Jooyoung Yeu Jooyoung Yeu of LATHAM & WATKINS LLP cc: All counsel of record (via NYSCEF)