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SUPREME COURT OF THE STATE OF NEW YORKNEW YORK COUNTY: CIVIL TERM: PART 39- - - - - - - - - - - - - - - - - - - - - - - -XABN AMRO BANK NV, BARCLAYS BANK PLC, BNP PARIBAS,CALON, CANADIAN IMPERIAL BANK OF COMMERCE,CITIBANK NA, HSBC BANK USA NA, JP MORGAN CHASEBANK NA, KBC INVESTMENTS CAYMAN ISLANDS V LTD,MERRILL LYNCH INTERNATIONAL, BANK OF AMERICA NA,MORGAN STANLEY CAPITAL SERVICES INC, NATIXIS,NATIXIS FINANCIAL PRODUCTS INC, COOPERATIEVECENTRALE RAIFFEISEN BOERENLEENBANK BA NEW YORK BRANCH,

Petitioners,

Index Number:- against - 601846-09

ERIC DINALLO, in his capacity as SuperintendentOf the NEw York State Insurance Department,THE NEW YORK STATE INSURANCE DEPARTMENT, MBIA INC,MBIA INSURANCE CORPORATION, and NATIONAL PUBLICFINANCE GUARANTEE CORPORATION(fka MBIA INSURANCE CORP OF ILLINOIS),

Respondents.

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

Supreme Court60 Centre StreetNew York, New York 10007

May 8, 2012

BEFORE:

HONORABLE BARBARA R. KAPNICK,Justice of the Supreme Court

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APPEARANCES(VIA TELEPHONE):

SULLIVAN & CORMWELL LLPAttorneys for the Petitioners125 Broad StreetNew York, New YorkBY: ROBERT J. GIUFFRA, ESQ.

KASOWITZ BENSON TORRES & FRIEDMAN LLPAttorneys for Respondents1633 BroadwayNew York, New York 10019-6799BY: MARC E. KASOWITZ, ESQ.

OFFICE OF THE ATTORNEY GENERALAttorneys for the State Respondents120 BroadwayNew York, New YorkBY: DAVID HOLGADO, ESQ.

------------------------------------------------------

Claudette Gumbs, Official Court Reporter60 Centre Street

New York, New York 10007646.386.3693

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THE COURT: I am here and my court attorney

Christine Rodriguez is here and our court reporter Claudette

is here. Just identify yourselves before you start talking

and that will be fine.

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

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

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

to you.

I did get a response, a short responsive letter

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

from Mr. Giuffra shortly thereafter.

It seems that notwithstanding 60-some pages on the

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

the same conversations that we had last time about how this

case is going to proceed.

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

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

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

Giuffra, why don't you briefly --

MR. GIUFFRA: I apologize. We had a problem with

communication and we thought they were all there in

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.

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. Your

Honor set aside three to four weeks for this trial. Your

Honor said that there would be opening statements and

testimony by witnesses.

Since then, we have been working hard trying to

prepare for trial, but the other side keeps maintaining that

we are not having a trial. The CPLR is clear that a trial

is required here because there are multiple, multiple

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

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

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

April 20th.

In fact, the entire purpose of the April 20th

hearing was to determine whether there would be a trial and

as your Honor will recall, petitioners were prepared to cite

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

prepared to hand out, making clear that there were multiple

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. The trial starts May 14th. I don't want to hear

all the evidence today."

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

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

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

limine response.

Until the last several weeks, MBIA has always

maintained the need for a trial. That is why they said they

needed all of the discovery that they sought. In fact,

MBIA got in discovery a moratorium in the BCL action

claiming that they needed time for a trial. And in

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

So now, essentially what people want to do is to

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

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

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

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

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

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

there is no in between procedure in the rules. 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. We have reached agreement on none. The respondents

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

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

there are multiple, multiple issues of fact.

The Department never moved to dismiss and the CPLR

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

respondent submits affidavits showing evidentiary facts, "as

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

"Statements in the answer, transcript or answering affidavit

are not conclusive upon the petitioner".

So given the fact that there are multiple facts in

dispute, the affidavits that have been submitted by the

parties are not evidence, they are merely hearsay and CPLR

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

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

in actions of the provisions of the CPLR that are applicable

to actions, shall be applicable to special proceedings.

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

Korn treatise which says the same thing.

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. There is no indication in the first case called

Plaza Management that either side requested a trial. That

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

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

that case out of context.

In that case, the Court rejected Respondents'

argument that it was error to direct the hearing and

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

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

competent and relevant proof that petitioner may have

bearing on the trial issue will be presented with the

admissible -- citing the Court of Appeals decision in

Mandel.

So, your Honor, we think there are multiple issues

of fact to be tried. I am happy, your Honor, to go through

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

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

nothing more than an attempt to reconsider what your Honor

had directed.

THE COURT: 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. Our understanding of this, and it is very

clear from the rule this is an Article 78 summary

proceeding. The section of the rule that Mr. Giuffra

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

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

which may be accompanied by affidavits or other proof.

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

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

case. It says "There shall be a verified petition which

may be accompanied by affidavits or other written proof.

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

answer which must state pertinent and material facts showing

the grounds of the respondent's action complained of.

There shall be a reply to the answer." Sorry.

"There shall be a reply to a counterclaim

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

in the answer or where the accuracy of proceedings annexed

to the answer is disputed", and the like.

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

wrong one. I was reading 7804(d). I am talking about

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

with the petition and affidavits that specified in the

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

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

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

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

three years, namely the petition and the affidavits and the

answer and the affidavits and the reply and the affidavits

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

affidavits, all of which affidavits have exhibits.

So the record before the Court, the record of this

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

is very, very complete.

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

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

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

be tried and certainly, the Court has indicated that if

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

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

and transform the summary proceeding into a full trial --

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

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.

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

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

those issues and if the Court would like to hear from

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

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

Section 409 which relates to special proceedings and which

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

submission of additional proof."

So if there are witnesses that the Court would like

to hear from after the extensive argument from the parties,

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

those witnesses and I think the Court indicated at the last

conference that it would be interested in hearing from

Messrs. Buchmiller and Dinallo, so this is very, very

straightforward.

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

additional witnesses or any issues of fact that the Court

feels exist, then witnesses can be called.

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

argue that because the Court used the word trial during the

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

Article 78 proceeding is somehow transformed into a full

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

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

Rule 409 reads very clearly -- 409(b). "The court shall

make a summary determination upon the pleadings, papers and

admissions to the extent that no triable issues of fact are

raised."

And then, to the extent there are triable issues of

fact raised, then the Court can hear further evidence on

that, whether in the form of whatever written submissions

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

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. The power is to be used cautiously, with extreme

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

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

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

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

discretion for that of the administrative agency established

by the statute in a situation where the exercise of

discretion is possible.

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

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

a determination was arbitrary or capricious and that was

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

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

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

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

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

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

inconsistent with the rules, completely inconsistent with

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.

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

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

to whether or not the Superintendent's determination, the

Department of Insurance' determination was arbitrary and

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

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

are actually the triable issues of fact?

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

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

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

things that ultimately I have to consider and determine;

whether or not Mr. Dinallo should have done something or

should not have done something. I mean, that is not an

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

will have to determine in the end in making my ultimate

decision.

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

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

this as well.

THE COURT: I didn't mean to suggest you didn't.

MR. HOLGADO: Your Honor, the only request that I

would have --

THE COURT: I think certainly, Mr. Holgado, you

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

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

really brought, because it was his client's determination

that is the subject of this Article 78. So I didn't mean --

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

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

certainly let him briefly respond. I was just sort of

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

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

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

in?

MR. HOLGADO: Thank you, your Honor.

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

agree with Mr. Kasowitz' position in the letter regarding

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

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

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

issues might be.

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

what puts into stark contrast what we are suggesting here,

which is that because your Honor has not found those issues

to exist yet, the hearing that your Honor really was

contemplating is the one that is described very succinctly

in Rule 409 which applies to this proceeding and in

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

from the parties regarding the papers that have already been

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

for submission of additional proof, which is the sum

testimony that your Honor mentioned in addition to the

"glorified oral argument" that you envisioned for this

hearing.

We have no issue whatsoever with what your Honor

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. Unfortunately, Mr. Giuffra has taken the

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

thereon are now hearsay and not even admissible.

If there is anything that is more asking your Honor

to substitute its determination for that of the

Superintendent and the Department, it is to suggest that

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

affidavits of the Department, the very purpose of which was

to set forth the basis for their determination.

And I think that rather than be overly formalistic,

which is what petitioners are attempting to do, certainly

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

arguments about hearsay, about constricting the evidence in

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

these papers that have and will be submitted and in that

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

himself in a September 28, 2010, affidavit strenuously

argued that the record in this case should include those

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

standard relevance that we are only merely asking your Honor

to abide by, which is simply this: That in order for

evidence to be relevant to determining whether the

Department's approval of the transformation had a rational

basis, that evidence must have been either been before the

agency itself or the evidence must at least evidence what

was before the agency and those are the kinds of arguments

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

which sounds like a technical argument that might not apply

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

attached to our motion that we have already submitted and

certainly sent a courtesy copy to your Honor, that over

75 percent of the exhibits that have been offered by

petitioners fit that category. They were never before the

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

Department, whereas of course submissions by MBIA to the

Department and affidavits of the Department witnesses who

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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

contain the submissions of the applicant and to call that

hearsay now because of some technical distinction where they

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

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

decide what May 14 legally is, because we will forestall

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

begin with and we believe your Honor should of course

consider the submissions that have already been made, should

of course consider the things that were shared with the

Department by MBIA, should of course consider what Mr.

Dinallo and Mr. Buchmiller have to say regarding their

analysis and the reasons for the determination and attempts

to exclude those matters are bordering on the frivolous,

your Honor, especially in light of the admissions already

made by petitioners in this case in the course of seeking

extensive discovery from the Department on the basis that

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. You

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

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

what we are going to be doing.

MR. GIUFFRA: Your Honor, if I can be heard.

I am pretty confident that I am correct with

respect to the law. Let me just sort of go through it.

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

provision H under "Trial". "If a triable issue of fact is

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

forthwith." In addition, the rules are clear that once

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

THE COURT: But let me just interrupt you.

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

evidentiary rules. But you can't tell me that all of those

affidavits are excluded now because maybe some of the things

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

rules. I mean, that I cannot accept. I mean, I cannot

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

documents that you just spent the past three years

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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

what you have submitted as part of this proceeding before

me. Affidavits from lawyers, from witnesses, from other

people, documents that were considered by the Department in

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

want to suggest to you that I have gone through everything

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

idea of what is in those boxes. I don't think you can now

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

happens to have one hearsay statement in it. You can raise

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

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

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

on a full blown trial.

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

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

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

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

capricious and abuse of discretion. I mean, that is really

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

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

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

thought that the Insurance Department had these 4,500 pages

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

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

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

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

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

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

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

consider in determining whether or not this was a

determination that was arbitrary and capricious and I mean,

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

any insurance department ever make a decision like this in

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

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

fact, whether that is a judge or a jury.

It is a different -- it is different. I mean,

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

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

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

there are significant issues of fact that are raised, that

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

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

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

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

cases because it is an Article 78 proceeding which usually

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

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

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

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

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

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

talk on Monday about what the problems are with those

witnesses, whether you have agreed to certain witnesses, and

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

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

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

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

here.

I mean, nobody seems to listen to anything I said

last time. You all stuck to exactly your guns like we

weren't here for 65 pages on the transcript. You're all

interpreting it in certain ways. I guess I hope that you

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

don't.

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

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

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: Could we do this? This is

extremely important. We are trying to prepare for a

proceeding.

THE COURT: Yes.

MR. GIUFFRA: And your Honor, just so I could make

a record on this point.

THE COURT: You can come on Monday morning and do

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

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

MBIA case. That is in there except for Wednesday. In

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

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

calendar in terms of orders to show cause with massive

temporary restraining orders that get assigned to me even

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

put on by other people with people from all over the

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

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

to me. So I have this whole week packed with things to do

and I really can't deal with this.

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. With all due respect, I am sorry to say this

on the record, I have two law clerks. I think we probably

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. So I

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

as you know, contract attorneys to help me out. It just

doesn't work that way here. So we are going to hopefully

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

limine, which I know are time consuming. And I think that

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

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

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

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

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

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

any sort of formal opening with all of these motions in

limine and all of these other issues that everybody is

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

the records and the affidavits and the papers that have been

submitted are not to be considered by me.

MR. GIUFFRA: 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. I am prepared to do it again on

Monday. 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

the petitioner." And it is quite clear, your Honor, that

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

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

hearing and it can be decided on the pleadings that are

before the Court. The entire purpose of putting in all of

these pleadings was to ascertain whether there were issues

of fact that warranted a trial.

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

trial road, then we have the ability to have opening

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

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

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

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

in between procedure. Once there are disputed issues of

fact, particularly in cases of this enormity, where this

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

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

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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.

THE COURT: Then you raise that, but I am not

throwing out the whole thing.

Fine. So you will tell me that is what he said and

this particular statement that he said, Judge, is not

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

testimony in the courtroom has to be in accordance with the

evidentiary rules.

MR. GIUFFRA: You know, your Honor --

THE COURT: You have two minutes. So what do you

want to say, Mr. Holgado?

MR. HOLGADO: Your Honor, I just want to say that

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

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

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

may require the submission of additional proof." That is

exactly what you're contemplating by hearing additional

testimony at this hearing. 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. Your Honor has not done

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, our position is that

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

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

the CPLR specifically provides for the procedure and it has

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

special proceedings are governed by the same rules that

govern any trial, same evidentiary rules, procedural rules

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

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

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

doubt in our view that for example, whether the Department

followed its normal procedures. We say no.

In fact, our position is that this transaction was

approved in a manner unlike any --

THE COURT: Okay. But that is not an issue of

fact. That is the ultimate determination. You're going to

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

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.

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. I would like you to

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

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

Buchmiller and then go through the whole proceeding.

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

something something that I have not said. I will go back

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

I said. I didn't find issues of fact. Maybe that is what

you thought was happening on the 20th. I said I was really

seeing this as a hybrid. That is what I said. I may have

used the word trial because it is shorter because that is

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

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

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

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

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

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

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

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

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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. You think you're entitled

to a full blown trial. I think if there are issues of

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

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

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

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

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

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

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

going to show to me.

So, I think that is what probably Monday is going

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

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

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

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

presentation to me as to why you brought this proceeding,

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

to call as your first witnesses to strengthen or to

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

we would start and the other people could cross examine that

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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.

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

whether it is a hearing or a preliminary injunction, a

hearing, or a trial, or whatever. I never have that and I

mean, this is really a very unique situation.

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

think I should have been. Mea culpa. We will read

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

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

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

courtroom open and I can't do it. I can't spend any more

time on your case.

So I will see you Monday. Monday at 10:00 o'clock

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

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

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

realize was there was an order to show cause signed by

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

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

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. We have something that won't be in the

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. He has not been in

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.

MR. HOLGADO: If I could just ask for one brief

bit of clarification.

On Monday you had mentioned to us that we are first

addressing the motions in limine and then was it my

understanding that you wanted oral argument on the question

of whether there exist issues of fact from all parties and

then we may proceed to additional testimony? I mean that

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

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

take the form of a summary judgment type argument or a

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

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

useful for your Honor before we proceed.

THE COURT: What, Mr. Giuffra? 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. I am really

very sorry. I am not used to this and for lawyers of this

caliber to disagree on every single thing, not cooperate

with each other on anything.

I don't have time. I am sorry, my court reporter

is looking at me and I have to hang up. So everything Mr.

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

I didn't let the other side respond to? I mean, with all

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

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

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

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

anything like that.

And perhaps you could talk to each other and agree

that whether or not certain experts are relevant might

matter on exactly what the procedure is and so that might

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

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

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. So I hope that maybe you

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.

MR. HOLGADO: The reason we will disagree is

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

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

exhibits that we are moving to preclude from consideration

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

exclude them from the papers already submitted because we

don't believe they are proper.

(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. Okay.

MR. GIUFFRA: Okay.

THE COURT: I look forward -- sort of -- to seeing

you on Monday at 10:00 o'clock. Anything else you need to

work out, we will deal with it correspondingly.

No.

Bye bye now. I have to go.

* * *Certified that the foregoing is a true and accurate

transcript of the original stenographic minutes of thiscase.

--------------------Claudette Gumbs

Senior Court Reporter