Preview
CASE NO. 2016-22242-151
CAPITAL ROYALTY PARTNERS II, IN THE DISTRICT COURT
L.P., CAPITAL ROYALTY PARTNERS
II PARALLEL FUND “A”, L.P.,
PARALLEL INVESTMENT
OPPORTUNITIES PARTNERS II, L.P.,
CAPITAL ROYALTY PARTNERS II
(CAYMAN) L.P., and CAPITAL
ROYALTY PARTNERS II
PARALLEL FUND “B” (CAYMAN)
L.P., HARRIS COUNTY, TEXAS
Plaintiffs,
NAVIDEA BIOPHARMACEUTICALS,
INC. and MACROPHAGE
THERAPEUTICS, INC.,
Defendants. 151ST JUDICIAL DISTRICT
PLAINTIFFS’ RESPONSEIN OPPOSITION TO
DEFENDANTS’ MERGENCY MOTION TO STAY EXECUTION
Plaintiffs Capital Royalty Partners II, L.P.; Capital Royalty Partners II Parallel Fund “A”,
L.P.; Parallel Investment Opportunities Partners II, L.P.; Capital Royalty Partners II (Cayman)
L.P.; and Capital Royalty Partners II – Parallel Fund “B” (Cayman) L.P. (“CRG” or “Plaintiff ”)
file this response in opposition to Defendants’ Emergency Motion to Stay Execution, and in
support thereof, would show the Court the following:
PRELIMINARY STATEMENT
Despite contractually agreeing not to request reconsideration of the Court’s judgment (and
never conferring on their motion), in a last ditch attempt to avoid repaying Plaintiffs the money
owed them, Defendants now ask the Court to reconsider its judgment. Because, under the Global
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Settlement Agreement, Defendants are not permitted to request reconsideration of the Court’s
judgment, the Court should not issue a stay of Plaintiffs’ execution of the Final Judgment.
Further, Defendants’ request for reconsideration is based on a misinterpretation of the Loan
Documents and other arguments that the Court has already rejected. Defendants’ calculation also
includemathematical errors that purport to reduce the amount of the judgment
In addition, if the Court stays execution of the Final Judgment to allow Defendants to
request reconsideration despite the parties’ contractual agreement otherwise then Plaintiffs
may request consideration of other rulings that will have the effect of increasing the judgment,
thereby offsetting any reduction sought by Defendants. Accordingly, because Defendants are not
entitled to reconsideration of the Court’s Final udgment, the Court should not stay execution of
the Final Judgment.
ARGUMENTS AND AUTHORITIES
Defendants Have Waived Requests For Reconsideration Of The Court’s Final
Judgment
As this Court is aware, the parties entered into a Global Settlement Agreement in which
they agreed that the Court’s judgment would be final, unappealable, and not subject to
reconsideration
he Texas Court’s decision shall be final and non appealable and
not subject to reconsideration, and shall be binding on all of the
Parties to this Agreement.
This makes sense, of course, because the aim of the settlement was finality. The parties never
carved out exceptions for potential errors, whether legal, factual, or mathematical.
Global Settlement Agreement § 2.1.
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Now, despite their repeated efforts to use the Global Settlement Agreement to re argue
(unsuccessfully) their affirmative defenses, Defendants want to avoid its terms. Indeed,
Defendants seek to circumvent their xplicit agreement to waive reconsideration by characterizing
their request as one to correct mathematical errors But, a plain reading of Defendants’ Emergency
Motion to Stay Execution and December 29, 2017 letter brief make clear that Defendants are, in
fact, seeking reconsideration the Final Judgment. Not only that, Defendants are requesting that
the Court stay Plaintiffs’ execution of the Final Judgment so that the Court can resolve Defendants
request for reconsideration. But, because Defendant have waived all rights to request
reconsideration of the Final Judgment, the Court should deny Defendants’ request to stay
executionof the Final Judgment
Defendants’ Request or Reconsideration Is Based On Flawed Factual And Legal
Premises That Have Been Rejected By The Court.
Plaintiffs re Entitled o Recover or Defendants’ PIK Loans.
Defendants ask the Court to reconsider its ruling awarding Plaintiffs the amount of
Defendants’ PIK Loans. Specifically, Defendants argue that committing Events of Default as
of May 8, 2015, Defendants caused the end of the “PIK Period,” which made their PIK Loans
improper. Defendants made this argument several times at trial, including during closing
argument, and it was properly rejected by the Court.
Defendants fail to explain why, if they were not permitted to take additional PIK Loans
after they committed an Event of Default, Defendants continued to take additional PIK Loans after
they committed an Event of Default. Indeed, if Defendants were not permitted to take additional
See Dec. 29, 2017 Letter from Glenn A. Ballard to Judge Engelhart, at 2 (“To be clear, Navidea is not
seeking reconsideration, but simply seeks to address the math errors in the existing Final Judgment.”).
December 18, 2017 Trial Transcript, at 163:5 164:14.
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PIK Loans, then they should have made larger payments during the period in which they disputed
the Events of Default. Defendants apparently believe that by committing Events of Default the
reduced the amount of their repayment obligations. The Court rejected this line of reasoning when
addressing the prepayment premium owed by Defendants and further rejected Defendants’
arguments when it awarded Plaintiffs the full $4.674million for Defendan ts’ PIK Loans.
Defendants’ argument further relies on the incorrect assumption that they are not required
to pay “interest on interest.” Defendants do not cite any provision in law or the Loan Documents
that support this argument. Moreover , Defendants’ argument is flawedin several respects.
First, under the Loan Agreement, Defendants agreed they would pay interest on interest.
Specifically, Section 3.02(a) of the Loan Agreement provides that “Borrower agrees to pay the
Lenders interest on the unpaid principal amount of the Loans and the amount of all other
outstanding Obligations,” in the amount of 14% per annum. And, under Section 3.02(b) of the
Loan Agreement, the default rate of interest was 4% greater than the general rate of interest, and
that section specifically mentions that it applies to “any Obligation.” The term “Obligation” is a
Findings of Fact and Conclusions of Law, dated December 27, 2017, at p. 19, 95 (“To be clear, the Court
is persuaded that a borrower may not default its way out of a prepayment premium obligation.”).
See Defendants’ Emergency Motion to Stay Execution at 2, 2 (“When that interest calculation is corrected
to charge the interest per the Term Loan Agreement, and not interest interest as improperly requested by Plaintiffs’
Accrued Interest PIK number, . . . .”).
Loan Agreement § 3.02(a) (“Subject to Section 3.02(d), Borrower agrees to pay to the Lenders interest on
the unpaid principal amount of the Loans and the amount of all other outstanding Obligations, in the case of the Loans,
for the period from the applicable Borrowing Date, and in the case of any other Obligation, from the date such other
Obligation is due and payable, in each case, until paid in full, at a rate per annum equal to 14.00%.”) (emphasis added).
Loan Agreement § 3.02(b) (“Notwithstanding the foregoing, upon the occurrence and during the
continuance of any Event of Default, the interest payable pursuant to Section 3.02(a) shall increase automatically by
4.00% per annum (such aggregate increased rate, the ‘Default Rate’). Notwithstanding any other provision herein
(including Section 3.02(d)), if interest is required to be paid at the Default Rate, it shall be paid entirely in cash. If any
Obligation is not paid when due under the applicable Loan Document, the amount thereof shall accrue interest at a
rate equal to 4.00% per annum (without duplication of interest payable at the Default Rate).”).
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defined term that includes “interest.” Thus, despite their argument otherwise, Defendants
contractually agreed to pay “interest on interest.”
Second, it is undisputed that the oan accrued interest at the contract rate of 14% per
annum, and the rate of interest increased to 18% after Defendants’ May 8, 2015 default. It is further
undisputed that Defendants never paid more than 10% interest during any applicable pay period.
Defendants’ failure to pay the additional 4% interest was the PIK Loan taken by Defendants.
Defendants also contend that their Events of Default meant that they were not permitted to
take PIK Loans. However, if that were true, then by paying only 10% of the oan interest and
not the 14% required by the Loan Agreement Defendants were not paying the full amount they
owed. That would unquestionably be an Event of Default. However, Defendants now argue that
ey are not required to repay any interest on the amount they underpaid. Defendants thus argue
without citing to any law or contractual provision that committing Events of Default somehow
reduced the applicable interest rate by %. This argument is without legal or logical support.
Defendants cannot default their way to a lower interest rate. Indeed, as described above, the parties’
Loan Agreement specifically contradicts that argument.
Third, Defendants make no attempt to show how they have calculated the amount of
interest that should be applied after their purported reductions based on the PIK Loans. Defendants
state simply that the amount of Accrued PIK should not be $4,673,545, and that if you “properly”
Loan Agreement at 12 13 (“‘Obligations’ means, with respect to any Obligor, all amounts, obligations,
liabilities,
covenants and duties of every type and description owing by such Obligor to any Lender, any other
indemnitee hereunder or any participant, arising out of, under, or in connection with, any Loan Document, whether
direct or indirect (regardless of whether acquired by assignment), absolute or contingent, due or to become due,
whether liquidated or not, now existing or hereafter arising and however acquired, and whether or not evidenced by
any instrument or for the payment of money, including, without duplication, . . . , (ii) all interest, whether or not
accruing after the filing of any petition in bankruptcy or after the commencement of any insolvency, reorganization
or similar proceeding, and whether or not a claim for post filing orpost petition interest is allowed in any such
proceeding, and (iii)all other fees, expenses (including fees, charges and disbursement of counsel), interest
commissions, charges, costs,disbursements, indemnities and reimbursement of amounts paid and other sums
chargeable to such Obligor under any Loan Document.”) (emphasis added).
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calculated interest based on a different amount of PIK Loans, it would total
However, Plaintiffs are unable to determine how Defendants arrived at that number, and
Defendants make no effort to show how or why their number is correct. Defendants do not even
allege what they contend the correct amount of PIK Loans would be, let alone show how they have
calculated the interest on those PIK Loans, or how they have accounted for the amounts Defendants
underpaid their bligations during the relevant time period. Given the extent of Defendants’
miscalculations in other respects, it seems unlikely that Defendants have accurately determined
amount alleged , and their argumentsshould, as a result, be rejected by the Court
Accordingly, the Court should not reconsider the Final Judgment reduce the amount
owing in relatito Defendants’ PIK Loans.
Defendants’ Handwritten Calculation Proposed Changes to the Final
Judgment ContainsFactual nd Legal Errors.
Defendants also ask the Court to reconsider its Final Judgment based on a convoluted series
of handwritten calculations. However, Defendants’ calculations themselves are riddled with errors.
First, Defendants make several math errors in their calculation of the remaining amounts
owed. Notably, all of Defendants’ math errors have the effect of reducing the amount Defendants
owe on the loan. Accordingly, the Court should not accept Defendants’ calculations because they
are mathematically incorrect.
Second, Defendants claim that “[t]he Court has further found that CRG cannot charge
interest on legal fees and costs.” Defendants are wrong.
Defendants apparently base this claim on twosentences from the Court’s Findings of Fact
and Conclusions of Law. However, Defendants misconstrue those sentences. In paragraph 48 of
the Findings of Fact and Conclusions of Law, the Court state [i]t is the Court’s understanding
that this interest is not calculated, in whole or in part, on the amount of attorney’s and professional
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fees claimed by Plaintiffs.” In paragraph 99, the Court state [a]gain, it is the Court’s
understanding that none of this interest is based upon any attorney’s or professional fees incurred
in this case.” Neither of th se sentences state that Plaintiffs may not recover interest on attorney’s
or professional fees; they simply state the Court’s understanding of how those numbers were
calculated.
In fact, the Loan Agreement provides that interest and default interest shall run on all
“Obligations.” The term “Obligations” is defined to include a amounts owed by Defendants to
Plaintiffs, including “all other fees, expenses (including fees, charges and disbursement of
counsel), . .. charges, costs, disbursements, . .. and reimbursement of amounts paid and other
sums chargeable to such Obligor under any Loan Documents.” 10 cordingly, interest and default
interest shouldand does accrue on all attorneys’ and professional fees incurred by Plaintiffs.
Third, Defendants apply the entire $59 million payment to the principal amount of the
oan. Once again, that is inconsistent with Loan Agreement. Two sections of the Loan Agreement
provide specifically that Plaintiffs are entitled to apply payments to any Obligations owed by
Defendants in whatever manner they want, including the application of such payment to the fees
Loan Agreement § 3.02(a) (“Subject to Section 3.02(d), Borrower agrees to pay to the Lenders interest on
the unpaid principal amount of the Loans and the amount of all other outstanding Obligations, in the case of the Loans,
for the period from the applicable Borrowing Date, and in the case of any other Obligation, from the date such other
Obligation is due and payable, in each case, until paid in full, at a rate per annum equal to 14.00%.”) (emphasis added);
. § 3.02(b).
Loan Agreement at 13 (“ Obligations means, with respect to any Obligor, all amounts, obligations,
bilities,covenants and duties of every type and description owing by such Obligor to any Lender, any other
indemnitee hereunder or any participant, arising out of, under, or in connection with, any Loan Document, whether
direct or indirect (regardless of whether acquired by assignment), absolute or contingent, due or to become due,
whether liquidated or not, now existing or hereafter arising and however acquired, and whether or not evidenced by
any instrument or for the payment of money, including, without duplication, (i) if such Obligor is Borrower, all Loans,
(ii) all interest, whether or not accruing after the filing of any petition in bankruptcy or after the commencement of
any insolvency, reorganization or similar proceeding, and whether or not a claim for post filing or post petition interest
is allowed in any such proceeding, and (iii) all other fees, expenses (including fees, charges and disbursement of
counsel), interest, commissions, charges, costs, disbursements, indemnities and reimbursement of amounts paid and
other sums chargeable to such Obligor under any Loan Document.”).
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11
owed by Defendants Accordingly, there is no basis either law or in the Loan Documents
for Defendants to argue that the $59 million payment should be applied only to the principal of the
oan, and to Defendants’ other Obligations.
The reason Defendants apply the entire $59 million payment to principal and not to fees
is simple. Defendants (incorrectly) claim that Plaintiffs are not entitled to recover interest on
collection fees. Thus, by applying the entire $59 million payment to principal, Defendants attempt
to reduce the final judgment by millions of dollars in interest. However, as described above, that
is improper, and the Court should not reconsider the Final Judgmenton that basis.
Fourth, Defendants incorrectly appl the payments to principal. The undisputed evidence
at trial showed that Plaintiffs, pursuant to the Loan Agreement, applied $758,228.67 to legal and
professional fees in 2016, and the rest of the funds to loan fees, interest, and principal. 12
Accordingly, Defendants mproper allocation of those funds to principal and not to legal and
professional fees improperly reduces the remaining principal balance.
If the Court properly applies the funds, then the remaining principal amount of the oan
would be increased by $75 Thus, Defendants’ calculation of interest on $8,950 is
incorrect. Instead, at an absolute minimum, interest should run on $767,178.67. Eighteen percent
Loan Agreement § 4.01(b) (“. . . and in the event that Obligors fail to so specify, or if an Event of Default
has occurred and is continuing, the Lenders may apply such payment in the manner they determine to be appropriate
. . . .”); Loan Agreement § 4.04(a) (“Upon the occurrence and during the continuance of any Event of Default, the
Lenders and each of their Affiliates are hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by the Lenders or such Affiliates to or for the credit or the
account of Borrower against any and all of the Obligations, whether or not the Lenders shall have made any demand
and although such obligations may be unmatured.”).
Specifically, Plaintiffsapplied $1,000,000 to the Back End Fee; $2,145,608.86 to the Prepayment
Premium; and $208,596.64 to principal and interest.
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interest on $767,178.67, over a period of 283 days, calculated based on a 360 day year, 13 is
08,555.78. Thus, Defendants’ interest calculation of $1,208 is over $100,000 too low
th, even if Defendants’ myriad mistakes and misleading statements were accepted
which they should not be Defendants miscalculate their final interest number Defendants
contend that 18% interest applied to $8,950 in principal, calculated over 283 days, 14 is $1,208.
That is wrong. It is actually ($8,950 * .18 * 283 / 360 15=) $1,2
Thus, the Court should not stay execution of the Final Judgment based on Defendants’
request for reconsideration.
If The Court Negates The Parties’ Settlement Agreement And Permits Motions For
Reconsideration, Plaintiffs May Argue That The Court Should Reconsider Its
Judgment In Amounts That Would Offset Any Reduction In The Damages Awarded.
Because reconsideration is barred by the plain terms of the Global Settlement Agreement,
staying execution of the Final Judgment to allow Defendants to seek reconsideration will open a
new can of worms. Indeed, under those circumstances, Plaintiffs would argue that the Court should
reconsider its rulings increase the Final Judgment in an amount that would offset the reduction
in damages sought by Defendants.
For example, the Court did not award any amount to Plaintiffs in connection with the fees
incurred by Venable and Piper Jaffray because the Court did not find that such fees were
“sufficiently connected with Plaintiffs’ recovery in this case to be awarded at trial of this collection
lawsuit.” 16 This standard mirrors the purported standard advanced by Defendants at trial, which is
Pursuant to the Loan Agreement, interest is calculated based on a 360 day not 365 day year. See Loan
Agreement § 4.02 (“All computations of interest and fees hereunder shall be computed on the basis of a year of 360
days . . . .”).
March 4, 2017 through December 11, 2017 includes 283 days.
Loan Agreement § 4.02 (“All computations of interest and fees hereunder shall be computed on the basis
of a year of 360 days . . . .”).
Findings of Fact and Conclusions of Law, dated December 27, 2017, at 20, ¶ 97.
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at odds with the language of the Loan Agreement. 17 Under the parties’ Loan Agreement, such fees
were recoverable regardless of whether they were connected with Plaintiffs’ collection lawsuit.
Specifically, Section 12.03(b) of the Loan Agreementprovides, in pertinent part:
(b) Indemnification. Borrower hereby indemnifies the Lenders,
their Affiliates, and their respective directors, officers, employees,
attorneys, agents, advisors and controlling parties (each, an
Indemnified Party”) from and against, and agrees to hold them
harmless against, any and all Claims and Losses of any kind
(including reasonable fees and disbursements of counsel), joint or
several, that may be incurred by or asserted or awarded against any
Indemnified Party, in each case arising out of or in connection with
or relating to any investigation, litigation or proceeding or the
preparation of any defense with respect thereto arising out of or in
connection with or relating to this Agreement or any of the other
Loan Documents or the transactions contemplated hereby or thereby
or any use made or proposed to be made with the proceeds of the
Loans, whether or not such investigation, litigation or proceeding is
brought by Borrower, any of its shareholders or creditors, an
Indemnified Party or any other Person, or an Indemnified Party is
otherwise a party thereto, and whether or not any of the conditions
precedent set forth in Section 6 are satisfied or the other transactions
contemplated by this Agreement are consummated, except to the
extent such Claim or Loss is found in a final, non appealable
judgment by a court of competent jurisdiction to have resulted from
such Indemnified Party’s gross negligence or willful misconduct. 18
Accordingly, Plaintiffs are not limited to recovering fees incurred in connection with this litigation
Rather, Plaintiffs are entitled to recover any fees incurred in connection with investigations,
proceedings, or the preparation of a defense such as defense to counterclaims, cross claims, or
a bankruptcy proceeding or to anything else relating to or connected to the Loan Documents.
Plaintiffs are therefore entitled to recover the fees incurred by Venable and Piper Jaffray because
they are at a minimum related to the Loan Documents, and also because they are related to the
See December 15, 2017 Trial Transcript (Day 4) at 146:10 17, 164:5 24, 168:7
Loan Agreement § 12.03(b) (emphasis added).
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preparation of defenses in connection with Defendants’ counterclaims, cross claims, and
threatened bankruptcy
Further, Jeffrey Sabin was an attorney for Venable who testified at trial regarding the
reasonableness and necessity of Venable’s fees. And while Mr. Sabin has extensive experience
with bankruptcy issues, his involvement in this case was not limited to bankruptcy issues. Mr.
Sabin testified that he “was involved almost day day in this case.” 19 He testified to providing
services in connection with “the proper exercise of [Plaintiffs’] rights and the collection of what
was owed them properly under the documents.” 20 He testified that he was retained on April 13,
21
only a few days after this lawsuit was initiated and that his firm was asked “to assist
Lackey Hershman.” 22 And Mr. Sabin testified that he provided assistance in the litigation in both
Texas and Ohio. 23 He reviewed and edited drafts, engaged with discussions with other attorneys
representing Plaintiffs in this litigation, looked at deposition transcripts, prepared for depositions,
and was involved with multiple TROs and motions. 24 He also provided analysis of lender liability
claims asserted by Defendants in this lawsuit. 25 He testified that those actions were “extremely
December 14, 2017 Trial Transcript, at 41:14 17 (“Because I understood and because I was involved almost
day day in this case . . . .”).
. at 49:7
Id. at 50:13
. at 51:24 52:1 (“So initially it was, please be ready to assist Lackey Hershman, especially as this case
may soon enter bankruptcy proceedings.”).
. at 52:17 53:11 (“Q. . . . Did you provide any assistance in the litigation in Texas and Ohio? A. I
hope you feel so, but yes.”).
.; see also id. at 58:16 59:5 (“So, for example, work beginning of the case, especially dealing with the
TROs . . . .”).
. at 45:4 11 (“So the work that Venable did over the time frame of its engagement, which includes
through today, otherwise included . . . their asserted lender liability claims . . . .”); at 46:12 22 (“. . . you will see that
early on in May, May 2, there were already threats in writing of lender liability, . . . and other matters that invoked,
for the client, requests to do work that was necessary and/or reasonable in order to prepare for the possibility that my
services might otherwise elevate because a bankruptcy may otherwise intervene or my expertise in lender liability
itself may be needed to assist and supplement the work that the Lackey Hershman firm is doing.”); 56:25 57:5 (“And
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relevant to what actions to take, if any, to collect what [Plaintiffs] thought was properly owed to
them.” 26
Mr. Sabin also testified that he not only participated in the mediation that resulted in the
Global Settlement Agreement which substantially narrowed the issues presented at trial but
was “the architect and chief negotiator and draftsperson of the global settlement agreement.”27
And, of course, Mr. Sabin offered testimony at the trial in this matter. Accordingly, even if
Plaintiffs were required to demonstrate connection between the work performed by Venable and
this litigation which is not the correct standard under the Loan Documents the uncontradicted
testimony demonstrates that Venable did, in fact, provide services in connection with this
litigation.
The fees incurred by Venable totaled $932,951.05. The fees incurred by Piper Jaffray
totaled $1,253,124.05. If the Court ignores the Settlement Agreement and reconsiders the Final
udgment as requested by Defendants, the Court should also revise its indings of act and
onclusions of aw to includein fees
As another example, the indings of act and onclusions of aw states that the Court
does not award any interest on the attorneys’ and professional fees incurred by Plaintiffs. 28
However, as described above, the Loan Agreement provides that interest and default interest shall
run on all “Obligations,” which includes any amounts owed by Defendants to Plaintiffs, including
so if we were hired on April 13 and by May 2, publicly there were threats, effectively, of bankruptcy and lender
liability, then however amount of foresight the client had and I think it was justified soon thereafter.”).
. at 53:4
. at 53:19 54:2.
Loan Agreement § 3.02(a) (“Subject to Section 3.02(d), Borrower agrees to pay the Lenders interest on the
unpaid principal amount of the Loans and the amount of all other outstanding Obligations, . . . .”) (emphasis added)
Loan Agreement § 3.02(b) (“Notwithstanding the foregoing, upon the occurrence and during the continuance of any
Event of Default, the interest payable pursuant to Section 3.02(a) shall increase automatically by 4.00% per annum . .
. .”).
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“all other fees, expenses (including fees, charges and disbursement of counsel), . . . charges, costs,
disbursements, . . . and reimbursement of amounts paid and other sums chargeable to such Obligor
under any Loan Documents.” 29 Accordingly, interest and default interest should accrue on all
attorneys’ and professional fees incurred by Plaintiffs.
If the Court calculates 18% interest on the first $2.5 million in fees incurred by Lackey
Hershman, and such interest begins running on the date of the invoices and runs through the first
day of trial, the interest totals $562,683.74. If the Court runs interest on the remaining fees
excluding any fees of Venable and Piper Jaffray from the date that they were invoiced until the
first day of trial, the interest totals $61,852.96. Accordingly, the total interest from professional
fees excluding Venable and Piper Jaffray should be increased by $624,536.70.
If the Court includes the fees from Venable, then interest on those fees will be $174,361.59.
Interest on the fees from Piper Jaffray would be $228,862.12. Accordingly, the total interest from
professional fees including Venable and Piper Jaffray should be increased by $1,027,760.41
As another example, Plaintiffs calculated the Prepayment Premium based on a default date
of April 7, 2016, which was one of the dates on whichPlaintiffs declared an Event of Default. As
such, Plaintiffs calculated a Prepayment Premium based on 4% of the outstanding oan balance. 30
However, the indings of act and onclusions of aw state specifically that Defendants
Loan Agreement at p. 12 13 (“ Obligations means, with respect to any Obligor, all amounts, obligations,
liabilities,
covenants and duties of every type and description owing by such Obligor to any Lender, any other
indemnitee hereunder or any participant, arising out of, under, or in connection with, any Loan Document, whether
direct or indirect (regardless of whether acquired by assignment), absolute or contingent, due or to become due,
whether liquidated or not, now existing or hereafter arising and however acquired, and whether or not evidenced by
any instrument or for the payment of money, including, without duplication, (i) if such Obligor is Borrower, all Loans,
(ii) all interest, whether or not accruing after the filing of any petition in bankruptcy or after the commencement of
any insolvency, reorganization or similar proceeding, and whether or not a claim for post filing or post petition interest
is allowed in any such proceeding, and (iii) all other fees, expenses (including fees, charges and disbursement of
counsel), interest, commissions, charges, costs, disbursements, indemnities and reimbursement of amounts paid and
other sums chargeable to such Obligor under any Loan Document.”).
Loan Agreement § 3.03(a)(i)(B).
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committed an Event of Default on May 8, 2015. Accordingly, Plaintiffs were entitled to calculate
a Prepayment Premium based on 5% of the outstanding principal balance of the oan. 31Thus, the
Prepayment Premium should have been $2 plus interest. That is an increase of
approximately $400,000.00
In addition, Plaintiffs’ interest calculation could have included interest on the amount
owing under the Global Settlement Agreement that was not indefeasibly paid, which would have
substantially increased recoverable interest under the Loan Agreement.
Finally, Plaintiffs’ interest calculations run through December 11, 2017, which was
originally supposed to be the first day of trial. However, nearly a month has passed since that date.
Accordingly, Plaintiffs are entitled to recover interest at the contractual default rate of 18%
between December 11, 2017, and the date of the inal udgment.
CONCLUSION
For the reasons set forth above and in Plaintiffs’ December 29, 2017 letter to the Court
Plaintiffs respectfully request that this Court deny Defendants’ Emergency Motion to Stay
Executionin its entirety, and grant all further relief as this Court deems just and proper.
Loan Agreement § 3.03(a)(i)(A).
PLAINTIFFS’ RESPONSE IN OPPOSITION TO
DEFENDANTS’ EMERGENCY MOTION TO STAY EXECUTION Page
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Respectfully submitted,
LACKEY HERSHMAN LLP
By: /s/ KristenA. Miller Reinsch
Paul B. Lackey
State Bar No. 00791061
pbl@lhlaw.net
Michael P. Aigen
State Bar No. 24012196
mpa@lhlaw.net
Kristen A. Miller Reinsch
State Bar. No. 24048660
kam@lhlaw.net
3102 Oak Lawn Avenue, Suite 777
Dallas, Texas 75219 4259
Telephon (214) 560
Facsimile: (214) 560
ATTORNEYS FOR PLAINTIFFS
PLAINTIFFS’ RESPONSE IN OPPOSITION TO
DEFENDANTS’ EMERGENCY MOTION TO STAY EXECUTION Page
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CERTIFICATE OF SERVI
I certify that on January a true and correct copy of the foregoing document was
served on all counsel of record in accordance with the Texas Rules of Civil Procedure.
Alain M. Baudry
alain.baudry@kutakrock.com
Kutak Rock LLP
60 South Sixth Street, Suite 3400
Minneapolis, Minnesota 55402
Glenn A. Ballard, Jr.
glenn.ballard@dentons.com
Mark W. Wege
mark.wege@dentons.com
Mukul S. Kelkar
mukul.kelkar@dentons.com
DENTONS US LLP
1221 McKinney Street, Suite 1900
Houston, Texas 77010
/s/ Kristen A. Miller Reinsch
Kristen A. Miller Reinsch
PLAINTIFFS’ RESPONSE IN OPPOSITION TO
DEFENDANTS’ EMERGENCY MOTION TO STAY EXECUTION Page
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Preview
CASE NO. 2016-22242-151 CAPITAL ROYALTY PARTNERS II, IN THE DISTRICT COURT L.P., CAPITAL ROYALTY PARTNERS II PARALLEL FUND “A”, L.P., PARALLEL INVESTMENT OPPORTUNITIES PARTNERS II, L.P., CAPITAL ROYALTY PARTNERS II (CAYMAN) L.P., and CAPITAL ROYALTY PARTNERS II PARALLEL FUND “B” (CAYMAN) L.P., HARRIS COUNTY, TEXAS Plaintiffs, NAVIDEA BIOPHARMACEUTICALS, INC. and MACROPHAGE THERAPEUTICS, INC., Defendants. 151ST JUDICIAL DISTRICT PLAINTIFFS’ RESPONSEIN OPPOSITION TO DEFENDANTS’ MERGENCY MOTION TO STAY EXECUTION Plaintiffs Capital Royalty Partners II, L.P.; Capital Royalty Partners II Parallel Fund “A”, L.P.; Parallel Investment Opportunities Partners II, L.P.; Capital Royalty Partners II (Cayman) L.P.; and Capital Royalty Partners II – Parallel Fund “B” (Cayman) L.P. (“CRG” or “Plaintiff ”) file this response in opposition to Defendants’ Emergency Motion to Stay Execution, and in support thereof, would show the Court the following: PRELIMINARY STATEMENT Despite contractually agreeing not to request reconsideration of the Court’s judgment (and never conferring on their motion), in a last ditch attempt to avoid repaying Plaintiffs the money owed them, Defendants now ask the Court to reconsider its judgment. Because, under the Global PLAINTIFFS’ RESPONSE IN OPPOSITION TO DEFENDANTS’ EMERGENCY MOTION TO STAY EXECUTION Page {00104168.DOCX;5} Settlement Agreement, Defendants are not permitted to request reconsideration of the Court’s judgment, the Court should not issue a stay of Plaintiffs’ execution of the Final Judgment. Further, Defendants’ request for reconsideration is based on a misinterpretation of the Loan Documents and other arguments that the Court has already rejected. Defendants’ calculation also includemathematical errors that purport to reduce the amount of the judgment In addition, if the Court stays execution of the Final Judgment to allow Defendants to request reconsideration despite the parties’ contractual agreement otherwise then Plaintiffs may request consideration of other rulings that will have the effect of increasing the judgment, thereby offsetting any reduction sought by Defendants. Accordingly, because Defendants are not entitled to reconsideration of the Court’s Final udgment, the Court should not stay execution of the Final Judgment. ARGUMENTS AND AUTHORITIES Defendants Have Waived Requests For Reconsideration Of The Court’s Final Judgment As this Court is aware, the parties entered into a Global Settlement Agreement in which they agreed that the Court’s judgment would be final, unappealable, and not subject to reconsideration he Texas Court’s decision shall be final and non appealable and not subject to reconsideration, and shall be binding on all of the Parties to this Agreement. This makes sense, of course, because the aim of the settlement was finality. The parties never carved out exceptions for potential errors, whether legal, factual, or mathematical. Global Settlement Agreement § 2.1. PLAINTIFFS’ RESPONSE IN OPPOSITION TO DEFENDANTS’ EMERGENCY MOTION TO STAY EXECUTION Page {00104168.DOCX;5} Now, despite their repeated efforts to use the Global Settlement Agreement to re argue (unsuccessfully) their affirmative defenses, Defendants want to avoid its terms. Indeed, Defendants seek to circumvent their xplicit agreement to waive reconsideration by characterizing their request as one to correct mathematical errors But, a plain reading of Defendants’ Emergency Motion to Stay Execution and December 29, 2017 letter brief make clear that Defendants are, in fact, seeking reconsideration the Final Judgment. Not only that, Defendants are requesting that the Court stay Plaintiffs’ execution of the Final Judgment so that the Court can resolve Defendants request for reconsideration. But, because Defendant have waived all rights to request reconsideration of the Final Judgment, the Court should deny Defendants’ request to stay executionof the Final Judgment Defendants’ Request or Reconsideration Is Based On Flawed Factual And Legal Premises That Have Been Rejected By The Court. Plaintiffs re Entitled o Recover or Defendants’ PIK Loans. Defendants ask the Court to reconsider its ruling awarding Plaintiffs the amount of Defendants’ PIK Loans. Specifically, Defendants argue that committing Events of Default as of May 8, 2015, Defendants caused the end of the “PIK Period,” which made their PIK Loans improper. Defendants made this argument several times at trial, including during closing argument, and it was properly rejected by the Court. Defendants fail to explain why, if they were not permitted to take additional PIK Loans after they committed an Event of Default, Defendants continued to take additional PIK Loans after they committed an Event of Default. Indeed, if Defendants were not permitted to take additional See Dec. 29, 2017 Letter from Glenn A. Ballard to Judge Engelhart, at 2 (“To be clear, Navidea is not seeking reconsideration, but simply seeks to address the math errors in the existing Final Judgment.”). December 18, 2017 Trial Transcript, at 163:5 164:14. PLAINTIFFS’ RESPONSE IN OPPOSITION TO DEFENDANTS’ EMERGENCY MOTION TO STAY EXECUTION Page {00104168.DOCX;5} PIK Loans, then they should have made larger payments during the period in which they disputed the Events of Default. Defendants apparently believe that by committing Events of Default the reduced the amount of their repayment obligations. The Court rejected this line of reasoning when addressing the prepayment premium owed by Defendants and further rejected Defendants’ arguments when it awarded Plaintiffs the full $4.674million for Defendan ts’ PIK Loans. Defendants’ argument further relies on the incorrect assumption that they are not required to pay “interest on interest.” Defendants do not cite any provision in law or the Loan Documents that support this argument. Moreover , Defendants’ argument is flawedin several respects. First, under the Loan Agreement, Defendants agreed they would pay interest on interest. Specifically, Section 3.02(a) of the Loan Agreement provides that “Borrower agrees to pay the Lenders interest on the unpaid principal amount of the Loans and the amount of all other outstanding Obligations,” in the amount of 14% per annum. And, under Section 3.02(b) of the Loan Agreement, the default rate of interest was 4% greater than the general rate of interest, and that section specifically mentions that it applies to “any Obligation.” The term “Obligation” is a Findings of Fact and Conclusions of Law, dated December 27, 2017, at p. 19, 95 (“To be clear, the Court is persuaded that a borrower may not default its way out of a prepayment premium obligation.”). See Defendants’ Emergency Motion to Stay Execution at 2, 2 (“When that interest calculation is corrected to charge the interest per the Term Loan Agreement, and not interest interest as improperly requested by Plaintiffs’ Accrued Interest PIK number, . . . .”). Loan Agreement § 3.02(a) (“Subject to Section 3.02(d), Borrower agrees to pay to the Lenders interest on the unpaid principal amount of the Loans and the amount of all other outstanding Obligations, in the case of the Loans, for the period from the applicable Borrowing Date, and in the case of any other Obligation, from the date such other Obligation is due and payable, in each case, until paid in full, at a rate per annum equal to 14.00%.”) (emphasis added). Loan Agreement § 3.02(b) (“Notwithstanding the foregoing, upon the occurrence and during the continuance of any Event of Default, the interest payable pursuant to Section 3.02(a) shall increase automatically by 4.00% per annum (such aggregate increased rate, the ‘Default Rate’). Notwithstanding any other provision herein (including Section 3.02(d)), if interest is required to be paid at the Default Rate, it shall be paid entirely in cash. If any Obligation is not paid when due under the applicable Loan Document, the amount thereof shall accrue interest at a rate equal to 4.00% per annum (without duplication of interest payable at the Default Rate).”). PLAINTIFFS’ RESPONSE IN OPPOSITION TO DEFENDANTS’ EMERGENCY MOTION TO STAY EXECUTION Page {00104168.DOCX;5} defined term that includes “interest.” Thus, despite their argument otherwise, Defendants contractually agreed to pay “interest on interest.” Second, it is undisputed that the oan accrued interest at the contract rate of 14% per annum, and the rate of interest increased to 18% after Defendants’ May 8, 2015 default. It is further undisputed that Defendants never paid more than 10% interest during any applicable pay period. Defendants’ failure to pay the additional 4% interest was the PIK Loan taken by Defendants. Defendants also contend that their Events of Default meant that they were not permitted to take PIK Loans. However, if that were true, then by paying only 10% of the oan interest and not the 14% required by the Loan Agreement Defendants were not paying the full amount they owed. That would unquestionably be an Event of Default. However, Defendants now argue that ey are not required to repay any interest on the amount they underpaid. Defendants thus argue without citing to any law or contractual provision that committing Events of Default somehow reduced the applicable interest rate by %. This argument is without legal or logical support. Defendants cannot default their way to a lower interest rate. Indeed, as described above, the parties’ Loan Agreement specifically contradicts that argument. Third, Defendants make no attempt to show how they have calculated the amount of interest that should be applied after their purported reductions based on the PIK Loans. Defendants state simply that the amount of Accrued PIK should not be $4,673,545, and that if you “properly” Loan Agreement at 12 13 (“‘Obligations’ means, with respect to any Obligor, all amounts, obligations, liabilities, covenants and duties of every type and description owing by such Obligor to any Lender, any other indemnitee hereunder or any participant, arising out of, under, or in connection with, any Loan Document, whether direct or indirect (regardless of whether acquired by assignment), absolute or contingent, due or to become due, whether liquidated or not, now existing or hereafter arising and however acquired, and whether or not evidenced by any instrument or for the payment of money, including, without duplication, . . . , (ii) all interest, whether or not accruing after the filing of any petition in bankruptcy or after the commencement of any insolvency, reorganization or similar proceeding, and whether or not a claim for post filing orpost petition interest is allowed in any such proceeding, and (iii)all other fees, expenses (including fees, charges and disbursement of counsel), interest commissions, charges, costs,disbursements, indemnities and reimbursement of amounts paid and other sums chargeable to such Obligor under any Loan Document.”) (emphasis added). PLAINTIFFS’ RESPONSE IN OPPOSITION TO DEFENDANTS’ EMERGENCY MOTION TO STAY EXECUTION Page {00104168.DOCX;5} calculated interest based on a different amount of PIK Loans, it would total However, Plaintiffs are unable to determine how Defendants arrived at that number, and Defendants make no effort to show how or why their number is correct. Defendants do not even allege what they contend the correct amount of PIK Loans would be, let alone show how they have calculated the interest on those PIK Loans, or how they have accounted for the amounts Defendants underpaid their bligations during the relevant time period. Given the extent of Defendants’ miscalculations in other respects, it seems unlikely that Defendants have accurately determined amount alleged , and their argumentsshould, as a result, be rejected by the Court Accordingly, the Court should not reconsider the Final Judgment reduce the amount owing in relatito Defendants’ PIK Loans. Defendants’ Handwritten Calculation Proposed Changes to the Final Judgment ContainsFactual nd Legal Errors. Defendants also ask the Court to reconsider its Final Judgment based on a convoluted series of handwritten calculations. However, Defendants’ calculations themselves are riddled with errors. First, Defendants make several math errors in their calculation of the remaining amounts owed. Notably, all of Defendants’ math errors have the effect of reducing the amount Defendants owe on the loan. Accordingly, the Court should not accept Defendants’ calculations because they are mathematically incorrect. Second, Defendants claim that “[t]he Court has further found that CRG cannot charge interest on legal fees and costs.” Defendants are wrong. Defendants apparently base this claim on twosentences from the Court’s Findings of Fact and Conclusions of Law. However, Defendants misconstrue those sentences. In paragraph 48 of the Findings of Fact and Conclusions of Law, the Court state [i]t is the Court’s understanding that this interest is not calculated, in whole or in part, on the amount of attorney’s and professional PLAINTIFFS’ RESPONSE IN OPPOSITION TO DEFENDANTS’ EMERGENCY MOTION TO STAY EXECUTION Page {00104168.DOCX;5} fees claimed by Plaintiffs.” In paragraph 99, the Court state [a]gain, it is the Court’s understanding that none of this interest is based upon any attorney’s or professional fees incurred in this case.” Neither of th se sentences state that Plaintiffs may not recover interest on attorney’s or professional fees; they simply state the Court’s understanding of how those numbers were calculated. In fact, the Loan Agreement provides that interest and default interest shall run on all “Obligations.” The term “Obligations” is defined to include a amounts owed by Defendants to Plaintiffs, including “all other fees, expenses (including fees, charges and disbursement of counsel), . .. charges, costs, disbursements, . .. and reimbursement of amounts paid and other sums chargeable to such Obligor under any Loan Documents.” 10 cordingly, interest and default interest shouldand does accrue on all attorneys’ and professional fees incurred by Plaintiffs. Third, Defendants apply the entire $59 million payment to the principal amount of the oan. Once again, that is inconsistent with Loan Agreement. Two sections of the Loan Agreement provide specifically that Plaintiffs are entitled to apply payments to any Obligations owed by Defendants in whatever manner they want, including the application of such payment to the fees Loan Agreement § 3.02(a) (“Subject to Section 3.02(d), Borrower agrees to pay to the Lenders interest on the unpaid principal amount of the Loans and the amount of all other outstanding Obligations, in the case of the Loans, for the period from the applicable Borrowing Date, and in the case of any other Obligation, from the date such other Obligation is due and payable, in each case, until paid in full, at a rate per annum equal to 14.00%.”) (emphasis added); . § 3.02(b). Loan Agreement at 13 (“ Obligations means, with respect to any Obligor, all amounts, obligations, bilities,covenants and duties of every type and description owing by such Obligor to any Lender, any other indemnitee hereunder or any participant, arising out of, under, or in connection with, any Loan Document, whether direct or indirect (regardless of whether acquired by assignment), absolute or contingent, due or to become due, whether liquidated or not, now existing or hereafter arising and however acquired, and whether or not evidenced by any instrument or for the payment of money, including, without duplication, (i) if such Obligor is Borrower, all Loans, (ii) all interest, whether or not accruing after the filing of any petition in bankruptcy or after the commencement of any insolvency, reorganization or similar proceeding, and whether or not a claim for post filing or post petition interest is allowed in any such proceeding, and (iii) all other fees, expenses (including fees, charges and disbursement of counsel), interest, commissions, charges, costs, disbursements, indemnities and reimbursement of amounts paid and other sums chargeable to such Obligor under any Loan Document.”). PLAINTIFFS’ RESPONSE IN OPPOSITION TO DEFENDANTS’ EMERGENCY MOTION TO STAY EXECUTION Page {00104168.DOCX;5} 11 owed by Defendants Accordingly, there is no basis either law or in the Loan Documents for Defendants to argue that the $59 million payment should be applied only to the principal of the oan, and to Defendants’ other Obligations. The reason Defendants apply the entire $59 million payment to principal and not to fees is simple. Defendants (incorrectly) claim that Plaintiffs are not entitled to recover interest on collection fees. Thus, by applying the entire $59 million payment to principal, Defendants attempt to reduce the final judgment by millions of dollars in interest. However, as described above, that is improper, and the Court should not reconsider the Final Judgmenton that basis. Fourth, Defendants incorrectly appl the payments to principal. The undisputed evidence at trial showed that Plaintiffs, pursuant to the Loan Agreement, applied $758,228.67 to legal and professional fees in 2016, and the rest of the funds to loan fees, interest, and principal. 12 Accordingly, Defendants mproper allocation of those funds to principal and not to legal and professional fees improperly reduces the remaining principal balance. If the Court properly applies the funds, then the remaining principal amount of the oan would be increased by $75 Thus, Defendants’ calculation of interest on $8,950 is incorrect. Instead, at an absolute minimum, interest should run on $767,178.67. Eighteen percent Loan Agreement § 4.01(b) (“. . . and in the event that Obligors fail to so specify, or if an Event of Default has occurred and is continuing, the Lenders may apply such payment in the manner they determine to be appropriate . . . .”); Loan Agreement § 4.04(a) (“Upon the occurrence and during the continuance of any Event of Default, the Lenders and each of their Affiliates are hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Lenders or such Affiliates to or for the credit or the account of Borrower against any and all of the Obligations, whether or not the Lenders shall have made any demand and although such obligations may be unmatured.”). Specifically, Plaintiffsapplied $1,000,000 to the Back End Fee; $2,145,608.86 to the Prepayment Premium; and $208,596.64 to principal and interest. PLAINTIFFS’ RESPONSE IN OPPOSITION TO DEFENDANTS’ EMERGENCY MOTION TO STAY EXECUTION Page {00104168.DOCX;5} interest on $767,178.67, over a period of 283 days, calculated based on a 360 day year, 13 is 08,555.78. Thus, Defendants’ interest calculation of $1,208 is over $100,000 too low th, even if Defendants’ myriad mistakes and misleading statements were accepted which they should not be Defendants miscalculate their final interest number Defendants contend that 18% interest applied to $8,950 in principal, calculated over 283 days, 14 is $1,208. That is wrong. It is actually ($8,950 * .18 * 283 / 360 15=) $1,2 Thus, the Court should not stay execution of the Final Judgment based on Defendants’ request for reconsideration. If The Court Negates The Parties’ Settlement Agreement And Permits Motions For Reconsideration, Plaintiffs May Argue That The Court Should Reconsider Its Judgment In Amounts That Would Offset Any Reduction In The Damages Awarded. Because reconsideration is barred by the plain terms of the Global Settlement Agreement, staying execution of the Final Judgment to allow Defendants to seek reconsideration will open a new can of worms. Indeed, under those circumstances, Plaintiffs would argue that the Court should reconsider its rulings increase the Final Judgment in an amount that would offset the reduction in damages sought by Defendants. For example, the Court did not award any amount to Plaintiffs in connection with the fees incurred by Venable and Piper Jaffray because the Court did not find that such fees were “sufficiently connected with Plaintiffs’ recovery in this case to be awarded at trial of this collection lawsuit.” 16 This standard mirrors the purported standard advanced by Defendants at trial, which is Pursuant to the Loan Agreement, interest is calculated based on a 360 day not 365 day year. See Loan Agreement § 4.02 (“All computations of interest and fees hereunder shall be computed on the basis of a year of 360 days . . . .”). March 4, 2017 through December 11, 2017 includes 283 days. Loan Agreement § 4.02 (“All computations of interest and fees hereunder shall be computed on the basis of a year of 360 days . . . .”). Findings of Fact and Conclusions of Law, dated December 27, 2017, at 20, ¶ 97. PLAINTIFFS’ RESPONSE IN OPPOSITION TO DEFENDANTS’ EMERGENCY MOTION TO STAY EXECUTION Page {00104168.DOCX;5} at odds with the language of the Loan Agreement. 17 Under the parties’ Loan Agreement, such fees were recoverable regardless of whether they were connected with Plaintiffs’ collection lawsuit. Specifically, Section 12.03(b) of the Loan Agreementprovides, in pertinent part: (b) Indemnification. Borrower hereby indemnifies the Lenders, their Affiliates, and their respective directors, officers, employees, attorneys, agents, advisors and controlling parties (each, an Indemnified Party”) from and against, and agrees to hold them harmless against, any and all Claims and Losses of any kind (including reasonable fees and disbursements of counsel), joint or several, that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or relating to any investigation, litigation or proceeding or the preparation of any defense with respect thereto arising out of or in connection with or relating to this Agreement or any of the other Loan Documents or the transactions contemplated hereby or thereby or any use made or proposed to be made with the proceeds of the Loans, whether or not such investigation, litigation or proceeding is brought by Borrower, any of its shareholders or creditors, an Indemnified Party or any other Person, or an Indemnified Party is otherwise a party thereto, and whether or not any of the conditions precedent set forth in Section 6 are satisfied or the other transactions contemplated by this Agreement are consummated, except to the extent such Claim or Loss is found in a final, non appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s gross negligence or willful misconduct. 18 Accordingly, Plaintiffs are not limited to recovering fees incurred in connection with this litigation Rather, Plaintiffs are entitled to recover any fees incurred in connection with investigations, proceedings, or the preparation of a defense such as defense to counterclaims, cross claims, or a bankruptcy proceeding or to anything else relating to or connected to the Loan Documents. Plaintiffs are therefore entitled to recover the fees incurred by Venable and Piper Jaffray because they are at a minimum related to the Loan Documents, and also because they are related to the See December 15, 2017 Trial Transcript (Day 4) at 146:10 17, 164:5 24, 168:7 Loan Agreement § 12.03(b) (emphasis added). PLAINTIFFS’ RESPONSE IN OPPOSITION TO DEFENDANTS’ EMERGENCY MOTION TO STAY EXECUTION Page {00104168.DOCX;5} preparation of defenses in connection with Defendants’ counterclaims, cross claims, and threatened bankruptcy Further, Jeffrey Sabin was an attorney for Venable who testified at trial regarding the reasonableness and necessity of Venable’s fees. And while Mr. Sabin has extensive experience with bankruptcy issues, his involvement in this case was not limited to bankruptcy issues. Mr. Sabin testified that he “was involved almost day day in this case.” 19 He testified to providing services in connection with “the proper exercise of [Plaintiffs’] rights and the collection of what was owed them properly under the documents.” 20 He testified that he was retained on April 13, 21 only a few days after this lawsuit was initiated and that his firm was asked “to assist Lackey Hershman.” 22 And Mr. Sabin testified that he provided assistance in the litigation in both Texas and Ohio. 23 He reviewed and edited drafts, engaged with discussions with other attorneys representing Plaintiffs in this litigation, looked at deposition transcripts, prepared for depositions, and was involved with multiple TROs and motions. 24 He also provided analysis of lender liability claims asserted by Defendants in this lawsuit. 25 He testified that those actions were “extremely December 14, 2017 Trial Transcript, at 41:14 17 (“Because I understood and because I was involved almost day day in this case . . . .”). . at 49:7 Id. at 50:13 . at 51:24 52:1 (“So initially it was, please be ready to assist Lackey Hershman, especially as this case may soon enter bankruptcy proceedings.”). . at 52:17 53:11 (“Q. . . . Did you provide any assistance in the litigation in Texas and Ohio? A. I hope you feel so, but yes.”). .; see also id. at 58:16 59:5 (“So, for example, work beginning of the case, especially dealing with the TROs . . . .”). . at 45:4 11 (“So the work that Venable did over the time frame of its engagement, which includes through today, otherwise included . . . their asserted lender liability claims . . . .”); at 46:12 22 (“. . . you will see that early on in May, May 2, there were already threats in writing of lender liability, . . . and other matters that invoked, for the client, requests to do work that was necessary and/or reasonable in order to prepare for the possibility that my services might otherwise elevate because a bankruptcy may otherwise intervene or my expertise in lender liability itself may be needed to assist and supplement the work that the Lackey Hershman firm is doing.”); 56:25 57:5 (“And PLAINTIFFS’ RESPONSE IN OPPOSITION TO DEFENDANTS’ EMERGENCY MOTION TO STAY EXECUTION Page {00104168.DOCX;5} relevant to what actions to take, if any, to collect what [Plaintiffs] thought was properly owed to them.” 26 Mr. Sabin also testified that he not only participated in the mediation that resulted in the Global Settlement Agreement which substantially narrowed the issues presented at trial but was “the architect and chief negotiator and draftsperson of the global settlement agreement.”27 And, of course, Mr. Sabin offered testimony at the trial in this matter. Accordingly, even if Plaintiffs were required to demonstrate connection between the work performed by Venable and this litigation which is not the correct standard under the Loan Documents the uncontradicted testimony demonstrates that Venable did, in fact, provide services in connection with this litigation. The fees incurred by Venable totaled $932,951.05. The fees incurred by Piper Jaffray totaled $1,253,124.05. If the Court ignores the Settlement Agreement and reconsiders the Final udgment as requested by Defendants, the Court should also revise its indings of act and onclusions of aw to includein fees As another example, the indings of act and onclusions of aw states that the Court does not award any interest on the attorneys’ and professional fees incurred by Plaintiffs. 28 However, as described above, the Loan Agreement provides that interest and default interest shall run on all “Obligations,” which includes any amounts owed by Defendants to Plaintiffs, including so if we were hired on April 13 and by May 2, publicly there were threats, effectively, of bankruptcy and lender liability, then however amount of foresight the client had and I think it was justified soon thereafter.”). . at 53:4 . at 53:19 54:2. Loan Agreement § 3.02(a) (“Subject to Section 3.02(d), Borrower agrees to pay the Lenders interest on the unpaid principal amount of the Loans and the amount of all other outstanding Obligations, . . . .”) (emphasis added) Loan Agreement § 3.02(b) (“Notwithstanding the foregoing, upon the occurrence and during the continuance of any Event of Default, the interest payable pursuant to Section 3.02(a) shall increase automatically by 4.00% per annum . . . .”). PLAINTIFFS’ RESPONSE IN OPPOSITION TO DEFENDANTS’ EMERGENCY MOTION TO STAY EXECUTION Page {00104168.DOCX;5} “all other fees, expenses (including fees, charges and disbursement of counsel), . . . charges, costs, disbursements, . . . and reimbursement of amounts paid and other sums chargeable to such Obligor under any Loan Documents.” 29 Accordingly, interest and default interest should accrue on all attorneys’ and professional fees incurred by Plaintiffs. If the Court calculates 18% interest on the first $2.5 million in fees incurred by Lackey Hershman, and such interest begins running on the date of the invoices and runs through the first day of trial, the interest totals $562,683.74. If the Court runs interest on the remaining fees excluding any fees of Venable and Piper Jaffray from the date that they were invoiced until the first day of trial, the interest totals $61,852.96. Accordingly, the total interest from professional fees excluding Venable and Piper Jaffray should be increased by $624,536.70. If the Court includes the fees from Venable, then interest on those fees will be $174,361.59. Interest on the fees from Piper Jaffray would be $228,862.12. Accordingly, the total interest from professional fees including Venable and Piper Jaffray should be increased by $1,027,760.41 As another example, Plaintiffs calculated the Prepayment Premium based on a default date of April 7, 2016, which was one of the dates on whichPlaintiffs declared an Event of Default. As such, Plaintiffs calculated a Prepayment Premium based on 4% of the outstanding oan balance. 30 However, the indings of act and onclusions of aw state specifically that Defendants Loan Agreement at p. 12 13 (“ Obligations means, with respect to any Obligor, all amounts, obligations, liabilities, covenants and duties of every type and description owing by such Obligor to any Lender, any other indemnitee hereunder or any participant, arising out of, under, or in connection with, any Loan Document, whether direct or indirect (regardless of whether acquired by assignment), absolute or contingent, due or to become due, whether liquidated or not, now existing or hereafter arising and however acquired, and whether or not evidenced by any instrument or for the payment of money, including, without duplication, (i) if such Obligor is Borrower, all Loans, (ii) all interest, whether or not accruing after the filing of any petition in bankruptcy or after the commencement of any insolvency, reorganization or similar proceeding, and whether or not a claim for post filing or post petition interest is allowed in any such proceeding, and (iii) all other fees, expenses (including fees, charges and disbursement of counsel), interest, commissions, charges, costs, disbursements, indemnities and reimbursement of amounts paid and other sums chargeable to such Obligor under any Loan Document.”). Loan Agreement § 3.03(a)(i)(B). PLAINTIFFS’ RESPONSE IN OPPOSITION TO DEFENDANTS’ EMERGENCY MOTION TO STAY EXECUTION Page {00104168.DOCX;5} committed an Event of Default on May 8, 2015. Accordingly, Plaintiffs were entitled to calculate a Prepayment Premium based on 5% of the outstanding principal balance of the oan. 31Thus, the Prepayment Premium should have been $2 plus interest. That is an increase of approximately $400,000.00 In addition, Plaintiffs’ interest calculation could have included interest on the amount owing under the Global Settlement Agreement that was not indefeasibly paid, which would have substantially increased recoverable interest under the Loan Agreement. Finally, Plaintiffs’ interest calculations run through December 11, 2017, which was originally supposed to be the first day of trial. However, nearly a month has passed since that date. Accordingly, Plaintiffs are entitled to recover interest at the contractual default rate of 18% between December 11, 2017, and the date of the inal udgment. CONCLUSION For the reasons set forth above and in Plaintiffs’ December 29, 2017 letter to the Court Plaintiffs respectfully request that this Court deny Defendants’ Emergency Motion to Stay Executionin its entirety, and grant all further relief as this Court deems just and proper. Loan Agreement § 3.03(a)(i)(A). PLAINTIFFS’ RESPONSE IN OPPOSITION TO DEFENDANTS’ EMERGENCY MOTION TO STAY EXECUTION Page {00104168.DOCX;5} Respectfully submitted, LACKEY HERSHMAN LLP By: /s/ KristenA. Miller Reinsch Paul B. Lackey State Bar No. 00791061 pbl@lhlaw.net Michael P. Aigen State Bar No. 24012196 mpa@lhlaw.net Kristen A. Miller Reinsch State Bar. No. 24048660 kam@lhlaw.net 3102 Oak Lawn Avenue, Suite 777 Dallas, Texas 75219 4259 Telephon (214) 560 Facsimile: (214) 560 ATTORNEYS FOR PLAINTIFFS PLAINTIFFS’ RESPONSE IN OPPOSITION TO DEFENDANTS’ EMERGENCY MOTION TO STAY EXECUTION Page {00104168.DOCX;5} CERTIFICATE OF SERVI I certify that on January a true and correct copy of the foregoing document was served on all counsel of record in accordance with the Texas Rules of Civil Procedure. Alain M. Baudry alain.baudry@kutakrock.com Kutak Rock LLP 60 South Sixth Street, Suite 3400 Minneapolis, Minnesota 55402 Glenn A. Ballard, Jr. glenn.ballard@dentons.com Mark W. Wege mark.wege@dentons.com Mukul S. Kelkar mukul.kelkar@dentons.com DENTONS US LLP 1221 McKinney Street, Suite 1900 Houston, Texas 77010 /s/ Kristen A. Miller Reinsch Kristen A. Miller Reinsch PLAINTIFFS’ RESPONSE IN OPPOSITION TO DEFENDANTS’ EMERGENCY MOTION TO STAY EXECUTION Page {00104168.DOCX;5}