Case 2:19-ap-01147-SK Doc 114 Filed 04/15/20 Entered 04/15 ...€¦ · TABLE OF CONTENTS...

DLA PIPER LLP (US)LOS A NG EL ES

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ROBBIN L. ITKIN (SBN 117105) [email protected] DLA PIPER LLP (US) 2000 Avenue of the Stars Suite 400 North Tower Los Angeles, California 90067-4704 Tel: (310) 595-3000 Fax: (310) 595-3300

JOHN K. LYONS (Pro Hac Vice) [email protected] JEFFREY S. TOROSIAN (Pro Hac Vice) [email protected] JOSEPH A. ROSELIUS (Pro Hac Vice) [email protected] DLA PIPER LLP (US) 444 West Lake Street, Suite 900 Chicago, Illinois 60606-0089 Tel: (312) 368-4000 Fax: (312) 236-7516

Attorneys for Jonathan D. King as Chapter 7 Trustee

UNITED STATES BANKRUPTCY COURT CENTRAL DISTRICT OF CALIFORNIA

LOS ANGELES DIVISION

In re:

ZETTA JET USA, INC., a California corporation,

Debtor.

Lead Case No.: 2:17-bk-21386-SK Chapter 7 Jointly Administered With: Case No.: 2:17-bk-21387-SK

Adv. Proc. No. 2:19-ap-01147-SK

THE TRUSTEE’S OMNIBUS REPLY TO BOMBARDIER AND CAVIC’S OBJECTIONS TO THE TRUSTEE’S MOTION TO COMPEL

Hearing: Date: May 13, 2020 Time: 9:00 a.m. Place: Courtroom 1575

255 East Temple Street Los Angeles, CA 90012

[Related Dkt. Nos. 90, 105, 109]

In re:

ZETTA JET PTE, LTD., a Singaporean corporation,

Debtor.

JONATHAN D. KING, solely in his capacity as Chapter 7 Trustee of Zetta Jet USA, Inc. and Zetta Jet PTE, Ltd.,

Plaintiff,

v.

CAVIC AVIATION LEASING (IRELAND) 22 CO. DESIGNATED ACTIVITY COMPANY AND BOMBARDIER AEROSPACE CORPORATION,

Defendants.

Case 2:19-ap-01147-SK Doc 114 Filed 04/15/20 Entered 04/15/20 20:32:16 DescMain Document of 25


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TABLE OF CONTENTS

INTRODUCTION ............................................................................................................................1

BACKGROUND ..............................................................................................................................5

ARGUMENT ....................................................................................................................................6

I. The Defendants fail to provide any precedent stating that the Court does not have authority to compel Bombardier to deposit the Refund into the Court’s registry under Rule 22. ....................................................................................................6

II. The mandatory injunction will preserve the Trustee’s ability to enforce his powers to avoid and recover the Refund Under Sections 542(a), 544, 550, and 551 of the Bankruptcy Code and fully comports with Grupo Mexicanoand controlling Ninth Circuit law in Rubin v. Pringle (In re Focus Media). ................10

III. The preliminary injunction factors favor the Trustee. ..................................................14

a. The Trustee has demonstrated a likelihood of success on the merits. ..............15

b. Absent a preliminary injunction, the Trustee will suffer irreparable harm. ......15

c. The balance of hardships tips sharply in the Trustee’s favor. ...........................18

d. The public interest favors granting the injunction. ...........................................19

CONCLUSION ...............................................................................................................................20



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TABLE OF AUTHORITIES

CASES PAGE

Adelphia Commc’ns Corp. v. Rigas (In re Adelphia Commc’ns Corp.), 2003 WL 21297258 (S.D.N.Y. June 4, 2003) ...........................................................................12

Aetna Life Ins. Co. v. Bayona, 223 F.3d 1030 (9th Cir. 2000) .....................................................................................................8

Am. Gen. Life Ins. Co. v. Eisenhauer, 2015 WL 13039439 (C.D. Cal. May 7, 2015) ............................................................................7

Ball v. Soundview Composite Ltd. (In re Soundview Elite Ltd.), 2014 WL 2998529 (S.D.N.Y. Jul. 3, 2014) ..............................................................................12

Bankers Trust Co. v. Mfrs. Nat’l Bank of Detroit, 139 F.R.D. 302 (S.D.N.Y. 1991) ..........................................................................................9, 10

Bauer v. Uniroyal Tire Co., 630 F.2d 1287 (8th Cir. 1980) .....................................................................................................7

Bullock v. BankChampaign, N.A., 69 U.S. 267 (2013) ....................................................................................................................19

Caribbean Marine Servs. Co. v. Baldrige, 844 F.2d 668 (9th Cir. 1988) ...............................................................................................16, 17

CCDC Fin. Corp. v. Craven, 1991 WL 206231 (D.D.C. Sept. 26, 1991) .................................................................................7

Chalk v. U.S. Dist. Ct., 840 F.2d 701 (9th Cir. 1988) .....................................................................................................15

Delhagen v. McDowell, 2010 WL 2574038 (M.D. Pa. June 23, 2010) .............................................................................8

DeNoce v. Neff (In re Neff), 824 F.3d 1181 (9th Cir. 2016) ...................................................................................................19

Feldman v. Ari. Sec. of State’s Office, 843 F.3d 366 (9th Cir. 2016) .....................................................................................................14

Flynt Distributing Co. v. Harvey, 734 F.2d 1389 (9th Cir. 1984) ...................................................................................................17

Grupo Mexicano de Desarrollo S.A. v. All. Bond Fund, Inc., 527 U.S. 308 (1999) ..................................................................................3, 4, 10, 11, 12, 13, 14

Houdini Inc. v. Goody Baskets LLC, 166 Fed. Appx. 946 (9th Cir. 2006) ..........................................................................................17



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In re Arcapita Bank, 575 B.R. 229 (Bankr. S.D.N.Y. 2017) ......................................................................................19

In re Beaty, 306 F.3d 914 (9th Cir. 2002) .......................................................................................................8

In re Brizinova, 588 B.R 311 (Bankr. E.D.N.Y. 2018) .......................................................................................12

In re Dow Corning Corp., 280 F.3d 648 (6th Cir. 2002) .....................................................................................................12

In re Golden State Capital Corp., 317 B.R. 144 (Bankr. E.D. Cal. 2004) ....................................................................................7, 8

In re Martirosian, 2017 WL 1041107 (Bankr. C.D. Cal. Mar. 14, 2017) ..............................................................14

In re Owens Corning, 419 F.3d 195 (3rd Cir. 2005) ....................................................................................................13

In re Pali Holdings, Inc., 488 B.R. 841 (Bankr. S.D.N.Y. 2013) ......................................................................................12

In re Process Am., Inc., 588 B.R. 82 (Bankr. C.D. Cal. 2018) ........................................................................................12

In re SK Foods, L.P., 2011 WL 10723414 (Bankr. E.D. Cal. Oct. 11, 2011) .......................................................17, 19

In re Soundview Elite Ltd., 543 B.R. 78 (Bankr. S.D.N.Y. 2016) ........................................................................................12

Lazar v. Charles Schwab & Co., 2013 WL 12403551 (C.D. Cal. Aug. 21, 2013) ......................................................................6, 8

Meritus Payment Solutions, Inc. v. Choice Loan Consulting, 2010 WL 11597625 (C.D. Cal. Aug. 26, 2010) ........................................................................13

Republic of Philippines v. Marcos, 862 F.2d 1355 (9th Cir. 1988) ...................................................................................................17

Roland v. Hickman, 2015 WL 10735658 (D. Nev. Aug. 12, 2005) ............................................................................7

Rubin ex rel. N.L.R.B. v. Vista Del Sol Health Serv., Inc., 80 F. Supp. 3d 1058 (C.D. Cal. 2015).......................................................................................17

Rubin v. Pringle (In re Focus Media Inc.), 387 F.3d 1077 (9th Cir. 2004) .............................................................................3, 10, 11, 12, 13



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Shell Offshore, Inc. v. Greenpeace, Inc., 709 F.3d 1281 (9th Cir. 2013) ...................................................................................................14

Sherman v. SEC (In re Sherman), 658 F.3d 1009 (9th Cir. 2011) ...................................................................................................19

United States v. Oncology Assocs., P.C., 198 F.3d 489 (4th Cir. 1999) .....................................................................................................12

Wealthstorm Ltd. v. Digital Archives Inc., 2013 WL 12131284 (C.D. Cal. 2013) .......................................................................................13

Wilmington Trust Co. v. Gillespie, 397 F. Supp. 1337 (D. Del. 1975) ...............................................................................................7

Winter v. NRDC, Inc., 555 U.S. 7 (2008) ................................................................................................................16, 18

STATUTES AND RULES

11 U.S.C. § 105 .............................................................................................................................7, 8

11 U.S.C. § 362 ...............................................................................................................................19

11 U.S.C. § 542 ...........................................................................................1, 2, 3, 11, 12, 13, 14, 19

11 U.S.C. § 544 .......................................................................................................1, 2, 3, 11, 12, 13

11 U.S.C. § 547 ...............................................................................................................................19

11 U.S.C. § 548 ...................................................................................................................11, 12, 13

11 U.S.C. § 550 .......................................................................................................1, 2, 3, 12, 13, 19

11 U.S.C. § 551 .............................................................................................................1, 2, 3, 12, 13

Fed. R. Bankr. P. 7022 ......................................................................................................................7

Fed. R. Civ. P. 22 ..........................................................................................................2, 3, 6, 7, 8, 9

OTHER AUTHORITIES

3A Moore’s Federal Practice ¶ 22.07 at 22–47 (1991) ....................................................................9

Wright, Miller & Kane, 7 Federal Practice and Procedure § 1716 (3d ed. Nov. 2019) ...........................................................................................................................................9



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INTRODUCTION

The Trustee1 brought this adversary proceeding, in large part, to recover the $30 million

Refund for prepayments advanced under a purchase agreement that Bombardier is holding for the

exclusive benefit of the Trustee. CAVIC disagrees with the Trustee’s claim of entitlement to the

Refund, and maintains that Bombardier is holding the Refund for the exclusive benefit of CAVIC.

Whether the Trustee is correct or CAVIC, all parties agree on one fundamental point: Bombardier

has no economic interest in the Refund.

This Motion to Compel seeks to protect the estates’ interest in the Refund by requiring

Bombardier to deposit the Refund into an account designated by the Court, where the funds will be

available following adjudication of this adversary action for subsequent distribution of the Refund

to the Trustee (or, of course, to CAVIC, should the Court rule against the Trustee). The Motion is

particularly appropriate where, as here, Bombardier’s perilous financial condition, as evidenced by

the financial press and Bombardier’s own recent public statements, appears to create a significant

risk that Bombardier may file for bankruptcy protection or otherwise dissipate funds and the estates

will be deprived of the Refund even if the Trustee prevails in this action.

The Trustee’s entitlement to return of the Refund arises from a straightforward application

of the avoidance provisions (Sections 542(a), 544, 550, and 551) of the Bankruptcy Code. On

March 31, 2017, debtor Zetta Jet PTE, Ltd. executed the March 31 Assignment, which assigned all

of its rights under the APA to CAVIC as a security interest. CAVIC failed to perfect its interest,

then re-assigned these rights to its financier Export Development Corporation. Consequently, the

Trustee filed suit to avoid the March 31 Assignment as an unperfected security interest under

Section 544 of the Bankruptcy Code and recover the Refund from Bombardier under Sections

542(a) and 550 of the Bankruptcy Code. Upon this Court’s determination of avoidance, the Refund

will be preserved automatically for the benefit of the estates under Section 551 of the Bankruptcy

Code.

1 Terms not defined herein have the same meaning as those given in the Trustee’s Motion to Compel Bombardier Aerospace Corporation to Deposit Funds Into the Court Registry or Other Appropriate Court Controlled Account or, in the Alternative, for a Mandatory Preliminary Injunction Requiring Deposit of Funds Into the Court Registry or Other Appropriate Court Controlled Account [Docket No. 90] (the “Motion to Compel”).



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For its part, Bombardier has consistently disclaimed any ownership right to the $30 million.

In its motion to dismiss this adversary proceeding, Bombardier invoked Rule 22 by disclaiming

any interest in the Refund and promising to pay it over to the winning party: “This adversary

proceeding seeks to resolve competing claims between the Trustee and [CAVIC] to no less than

$30 million in prepayments” that Bombardier asserts it has “no economic interest in” and promised

to be “guided by the final resolution of these competing claims, and hence BAC’s original economic

disinterest in the funds at issue.” (Bombardier’s Mot. at 3.) It has been Bombardier’s position from

the very beginning of this case that it is “simply in possession of” the Refund for the benefit of the

winning litigant. In the first status report filed by the parties on August 12, 2019, Bombardier

represented to the Court: “The present adversary proceeding relates to the ownership of

approximately $30 million in funds claimed by both the Trustee and CAVIC which Bombardier

holds. Bombardier is simply in possession of the funds and will distribute those funds once the

parties agree to a resolution or the Court issues a decision on the adversary proceeding.” See

Docket No. 34 (emphasis added).2

The Trustee’s entire case with respect to the Refund turns on the enforceability of the

Trustee’s avoidance powers under Sections 542, 544, 550, and 551 of the Bankruptcy Code.

Because Bombardier disclaimed ownership of the Refund and asserts it is merely holding the funds

for CAVIC or the estates, the Complaint does not allege Bombardier breached the APA or seek

breach of contract damages. The Trustee is simply seeking to avoid the unperfected assignment,

and if the Court avoids the March 31st Assignment as constituting an unperfected security

assignment, the Trustee will be entitled to the Refund from Bombardier under the automatic lien

preservation provisions under Sections 550 and 551 of the Bankruptcy Code or, alternatively, the

turnover provisions of Section 542(a) of the Bankruptcy Code. If, however, CAVIC prevails on the

avoidance issues, CAVIC will be entitled to the Refund under the March 31 Assignment.

To ensure that Zetta PTE’s estate is not deprived of the Refund – and with the side benefits

2 In the Complaint, the Trustee alleges that “[p]ursuant to the APA, Bombardier is currently holding the Refund, has not asserted an independent claim to the Refund, and is awaiting the adjudication of the Trustee’s and CAVIC’s rights to the Refund before returning the Refund to the appropriate party.” See Compl. ¶ 8 [Docket No. 1].



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of both protecting CAVIC (should CAVIC prevail) and stopping the further accrual of prejudgment

interest against Bombardier – the Trustee filed the Motion to Compel. The Trustee is rightly

concerned about Bombardier’s perilous financial condition, as shown by Bombardier’s public

filings and statements, which exposes the Trustee and thus the estates to Bombardier’s credit risk.

Since filing the Motion, and of course through no fault of Bombardier, things have only worsened:

Bombardier recently shut down its plants due to the COVID-19 crisis and furloughed tens of

thousands of employees.

Bombardier’s objection [Docket No.105] (“Bombardier’s Objection”) and CAVIC’s

objection [Docket No. 109] (“CAVIC’s Objection” and together with Bombardier’s Objection, the

“Defendants’ Objections”) do not provide grounds to deny the Motion to Compel.

The Defendants focus their objections in large part on Rule 22 of the Federal Rules of Civil

Procedure. But Bombardier itself sought the relief afforded by interpleader in its Motion to Dismiss

and has repeatedly represented to the Court that it will turn over the funds that it is “simply in

possession of” to the winning litigant. Bombardier should not be able to invoke interpleader for its

benefit without also submitting to the Court’s power to compel the payment of those interpled funds

for the protection of the litigants vying for that money.

The Trustee is also requesting that the Court enter an order compelling Bombardier to

deposit the Refund into the Court’s registry based on Bombardier’s own pleadings and the Court’s

equitable powers under Section 105(a) of the Bankruptcy Code to protect the Debtors’ legal

interests in property of their estates. The Defendants misread the Supreme Court’s decision in

Grupo Mexicano de Desarrollo S.A. v. All. Bond Fund, Inc., 527 U.S. 308 (1999), and the Ninth

Circuit’s decision in Rubin v. Pringle (In re Focus Media Inc.), 387 F.3d 1077 (9th Cir. 2004).

Contrary to the Defendants’ arguments, the Trustee has not brought a breach of contract claim for

damages against Bombardier (nor is he seeking a prejudgment attachment), and Bombardier’s

obligation to turn over the Refund to the winning litigant is not disputed. Rather, the Trustee is

invoking his equitable bankruptcy powers under Sections 544, 550 and 551 to avoid the March 31

Assignment and seek turnover under Section 542(a) of the Bankruptcy Code of funds that

Bombardier “is simply in possession of” as an economically disinterested party for the benefit of



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the winning litigant. Indeed, by making representations to the Court that it holds no interest in the

funds and stands ready to disburse funds to the winning litigant, Bombardier has sought to avoid a

breach of contract claim. Because the Trustee has a clear equitable interest in the funds, the

Trustee’s request falls within the exception in Grupo Mexicano that allows issuance of a

prejudgment injunction to preserve equitable interests in property and property subject to a trustee’s

avoidance powers.

The Defendants also contend that the Trustee is not entitled to injunctive relief. All of the

factors – likelihood of success of the merits, irreparable harm, balance of the hardships, and public

interest – favor the Trustee, particularly in light of the Ninth Circuit’s “sliding scale” standard.

First, the Trustee has shown a strong likelihood of success on the merits because

Bombardier has conceded that it will not retain the Refund. Bombardier repeatedly admitted that it

was “simply in possession of” the $30 million and stands ready turn the funds over to either the

Trustee or CAVIC. Which party is ultimately entitled to the funds is irrelevant for the purposes of

the relief requested in the Motion, especially given that the Court’s order can fully protect CAVIC

to enable it to assert all of its rights to the funds.

Second, the Trustee likely will be irreparably injured if the relief is not granted. If

Bombardier files for bankruptcy protection or otherwise dissipates these funds as it navigates its

current financial difficulties, these funds would be subject to claims of Bombardier’s creditors, thus

imperiling the Trustee’s (and CAVIC’s) ability to collect a judgment.

Third, the balance of the hardships tips sharply in the Trustee’s favor. Bombardier has no

legal or equitable right to the Refund and thus cannot be harmed by turning it over to the Court. By

contrast, absent an injunction the Trustee and the creditors of the estate could lose everything if

Bombardier files for bankruptcy protection or otherwise dissipates assets.

Finally, the public interest favors the injunction. As stated in the Motion, the public interest

favors the equitable distribution of assets to creditors by this Court under the Bankruptcy Code

through the meaningful enforcement of the Trustee’s avoidance powers. The public interest also

favors adjudication on the merits of adversary cases and meaningful relief to the actual economic

parties in interest. Bombardier cannot be allowed to eviscerate the fundamental policies of the



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Bankruptcy Code and the Court’s ability to provide meaningful relief to parties to this litigation.

Bizarrely, CAVIC also opposes this relief even though it will be the co-beneficiary of

securing the Court’s custody of the $30 million Refund. To be clear, in this Motion to Compel, the

Trustee does not seek any adjudication on the merits of the rights of the Trustee and CAVIC to the

Refund.3 CAVIC’s opposition make no economic sense and CAVIC cannot show how it will be

harmed by relief requested by the Trustee. Indeed, if Bombardier were forced to seek protection

from creditors during this litigation, CAVIC like the Trustee would stand in line with all of

Bombardier’s other unsecured creditors.

Considering the evidence presented, the Trustee has sufficiently proven that each of the

preliminary injunction factors—likelihood of success on the merits, likelihood of irreparable harm,

the balance of equities, and the public interest—weighs in the Trustee’s favor regardless of which

standard the Court applies. The Court should grant the Motion to Compel.

BACKGROUND

Under the APA between Zetta PTE, as the “Buyer,” and Bombardier as the “Seller,” certain

pre-delivery payments were to be made on a periodic basis to fund the purchase of the Undelivered

Aircraft. The APA provides that upon early termination of the APA, all advance payments received

by Bombardier for the Undelivered Aircraft shall promptly be paid to Zetta PTE. (See Compl. at

Exhibit A, p. 4.) CAVIC agreed to finance the pre-delivery payments owed under the APA. As

security for the financing arrangement, Zetta PTE was required to execute, among other things, the

March 31 Assignment. The March 31 Assignment included the right to collect the Refund. The

March 31 Assignment constitutes an assignment for security, and not an absolute assignment, as a

matter of law. CAVIC failed to perfect its security interest in the Refund under the March 31

Assignment.

In the Complaint, the Trustee seeks a declaratory judgment that CAVIC’s security interest

in the Refund is unperfected and that the Trustee may avoid such unperfected security interest

pursuant to the strong-arm powers under section 544(a) of the Bankruptcy Code. The Trustee seeks

3 The Trustee is willing to include specific language to that end in any order requiring Bombardier to pay the Refund into the Court’s registry.



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turnover of the full Refund, plus prejudgment interest, for the benefit of Zetta PTE’s bankruptcy

estate. CAVIC disputes the Trustee’s claims, and is also seeking return of the full amount of the

Refund from Bombardier. (See CAVIC’s Mot.)

As stated above, Bombardier has repeatedly disclaimed any economic interest in the $30

million Refund in several filings with Court and has represented that it is “simply in possession of”

the Refund and promised to transfer the Refund to the winning litigant. See Docket No. 34, at 4;

(Bombardier’s Mot. at 3.).

In addition to the publications the Trustee relies on in his Motion to Compel (the

“Evidentiary Publications”), which are incorporated herein by reference (see Mot. to Compel at ¶¶

14-19), on March 24, 2020, Bombardier, Inc. issued a press release stating that it is suspending

aircraft and rail production activities starting April 26, 2020. (Lyons Decl. ¶ 7.) Additionally, since

the filing of the Motion to Compel on March 9, 2020, Bombardier’s stock price fell from CA$0.89

(approximately US$0.63) to CA$0.45 (approximately US$0.32).4

ARGUMENT

I. The Defendants fail to provide any precedent stating that the Court does not have authority to compel Bombardier to deposit the Refund into the Court’s registry under Rule 22.

The Defendants attempt to sidestep the relief sought in the Motion to Compel by asserting

that (i) the Trustee does not have standing to invoke Rule 22 (Bombardier’s Obj. at 3-4) and (ii) the

Motion to Compel is procedurally defective as a Rule 22 motion (CAVIC’s Obj. at 4). The Trustee’s

standing is not relevant because the Trustee is not invoking Rule 22 as the one holding the property.

Rather, the Trustee is requesting that the Court use its authority under Rule 22 to hold Bombardier

to its decision to invoke Rule 22 by asserting it is simply an interpleading defendant with no interest

in the money for which the other litigants are fighting. The Defendants fail to cite a single case

stating that the Court does not have this authority. The Trustee provided numerous cases showing

that the Court does have this authority. (Mot. to Compel at 6-7 (citing Lazar v. Charles Schwab &

Co., 2013 WL 12403551 at *9 (C.D. Cal. Aug. 21, 2013) (“Court has discretionary power to order

4 See Historical Data for Bombardier Inc. Class B Subordinate Voting Shares (BBD.B:CA), available at https://ir.bombardier.com/en/share-price?qm_symbol=BBD.B:CA (last accessed April 15, 2020).



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a deposit under Rule 22 of the Federal Rules of Civil Procedure.”); Wilmington Trust Co. v.

Gillespie, 397 F. Supp. 1337, 1340 (D. Del. 1975) (“it is within the Court’s discretion to order such

deposit or bond [under Rule 22], and this is commonly done”); Bauer v. Uniroyal Tire Co., 630

F.2d 1287, 1291 (8th Cir. 1980) (“The district court has discretionary power to require a deposit in

a Rule 22 interpleader action.”); CCDC Fin. Corp. v. Craven, 1991 WL 206231, at *5 (D.D.C.

Sept. 26, 1991) (granting defendants’ motion for an order requiring plaintiff to pay into the court

registry funds subject to a Rule 22 interpleader proceeding); Roland v. Hickman, 2015 WL

10735658, at *1 (D. Nev. Aug. 12, 2005) (granting Internal Revenue Service’s motion in an

interpleader action to compel plaintiff to deposit funds “in the court’s registry for safekeeping while

the parties litigate their claims”); and Am. Gen. Life Ins. Co. v. Eisenhauer, 2015 WL 13039439

(C.D. Cal. May 7, 2015) (ordering the party holding an annuity to post a bond in the amount of the

annuity, plus $25,000, where the party had primarily sought to keep the annuity subject to a legal

hold).)

The Trustee’s Motion to Compel makes clear that the Court also can issue such an order by

virtue of its powers under Section 105(a) of the Bankruptcy Code. CAVIC argues that Section

105(a) is not applicable here because it cannot create substantive rights that are otherwise

unavailable and it cannot take an action the Bankruptcy Code prohibits. (CAVIC’s Obj. at 8.) But,

neither is present here as Rule 22 does in fact afford the parties these substantive rights and the

Bankruptcy Code certainly does not prohibit Rule 22’s application. Indeed, Rule 22(a) – which

includes the subsection (2) involving interpleading defendants like Bombardier - is expressly made

applicable to these proceedings by Bankruptcy Rule 7022.

Section 105(a) provides that “[t]he court may issue any order, process, or judgment that is

necessary or appropriate to carry out the provisions of this title. No provision of this title providing

for the raising of an issue by a party in interest shall be construed to preclude the court from, sua

sponte, taking any action or making any determination necessary or appropriate to enforce or

implement court orders or rules, or to prevent an abuse of process.” 11 U.S.C. § 105(a). Further,

“the bankruptcy court is a court of equity and as such should refuse to invoke equitable principles

and doctrines ‘only where their application would be inconsistent with the Bankruptcy Code.’” In



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re Golden State Capital Corp., 317 B.R. 144, 149 (Bankr. E.D. Cal. 2004) (quoting In re Beaty,

306 F.3d 914, 922 (9th Cir. 2002)) (in the context of section 105(a) of the Bankruptcy Code).

The Trustee is neither seeking to create a new right nor seeking relief that the Bankruptcy

Code prohibits. Rather, the Trustee is asking the Court to invoke the “generally recognized”

equitable relief of interpleader, which “developed in equity and is governed by equitable

principles.” (Mot. to Compel at 5 (quoting Aetna Life Ins. Co. v. Bayona, 223 F.3d 1030, 1033-34

(9th Cir. 2000).)

CAVIC relies primarily on Delhagen v. McDowell, 2010 WL 2574038, at *1 (M.D. Pa.

June 23, 2010). That case is worth discussing at some length, since it is the primary opposition. The

plaintiff filed a lawsuit against her former employer. Id. The employer’s insurer sent the plaintiff a

letter informing the plaintiff that the employer’s $1 million insurance policy may be exhausted by

other claims during the policy period. Id. The plaintiff then asked the court to order the insurer to

pay $1 million into the court under Rule 22. Id. As the court explained, the plaintiff failed to cite a

single authority in support of her position: “As an initial matter, plaintiff’s briefs are shockingly

deficient in reliance on authority, to wit: there is none. Plaintiff’s brief in support of her motion is

less than two pages, and does not cite to any statute, rule or case law to support her position. . . . In

response, plaintiff submitted a three-page brief, arguing that federal law, not Pennsylvania law

should apply; again, without citing to even a single statute, rule or case. . . . We are not aware of

any authority to support plaintiff’s position, and apparently, neither is plaintiff as she did not cite

to any.” Id.

In this case, by contrast, the Court has been made aware of such authority to support the

plaintiff’s position because, as discussed above, the Trustee cited numerous cases and other

authorities for the well-recognized position that the “Court has discretionary power to order a

deposit under Rule 22 of the Federal Rules of Civil Procedure.” (Mot. to Compel at 6 (quoting

Lazar v. Charles Schwab & Co., 2013 WL 12403551 at *9 (C.D. Cal. Aug. 21, 2013), and collecting

authority.)

Bombardier simply distinguishes the Trustee’s cases on the facts. (Bombardier Obj. at 3-4.)

CAVIC does the same. (CAVIC Obj. at 5-6.) While the parties may debate factual similarities or



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differences in various cases, the Court’s power to afford the relief requested by the Trustee cannot

be contested.

The closest the Defendants come to such a case is Bankers Trust Co. v. Mfrs. Nat’l Bank of

Detroit, 139 F.R.D. 302, 307 (S.D.N.Y. 1991). CAVIC asserts that under Bankers Trust, an

interpleader action “must be brought by the stakeholder, and despite the prospects of multiple suits

a claimant not in possession or control of property cannot bring the action and thus force the

stakeholder to interplead.” (CAVIC Opp. at 6.) There are three significant problems for CAVIC.

First, the Trustee did not bring an interpleader action. The Trustee brought a lawsuit against

Bombardier seeking a declaration that the APA had terminated and seeking turnover of the Refund

from Bombardier. Rather than answer those claims, Bombardier chose to file a motion to dismiss

that invoked Rule 22, arguing that it “consistently has told the plaintiff . . . and this Court, that it

has no economic interest in the funds in dispute.” (Bombardier’s Mot. at 3.) Furthermore,

Bombardier asserted that its “disbursement of the [Refund] will be guided by the final resolution

of these competing claims, and hence [Bombardier’s] original economic disinterest in the funds at

issue.” Id. Thus, unlike in Bankers Trust, the party holding the stake did in fact invoke interpleader.

Second, the quoted authority in Bankers Trust is Moore’s Federal Practice. 139 F.R.D. at

307 (quoting 3A Moore’s Federal Practice ¶ 22.07 at 22–47 (1991)). Moore’s Federal Practice no

longer contains the quoted language. If this position were still good law almost 30 years later,

Moore’s would not have removed the quoted language. Further, the Trustee has also cited a well-

respected treatise, Wright & Miller’s Federal Practice and Procedure, which strongly suggests that

the contrary position now holds: “There is no express provision for deposit in court or the posting

of bond before the discharge of a stakeholder under Rule 22 . . . In cases in which it is thought

desirable to insure the preservation and availability of the fund, the court also may require a deposit

or a bond, either on motion or its own initiative.” Wright, Miller & Kane, 7 Federal Practice and

Procedure § 1716 (3d ed. Nov. 2019).

Finally, Bankers Trust is factually distinguishable because there was no stake. See 139

F.R.D. at 307. As the court there explained, “[t]he ‘right, duty and power to manage a fleet of

railcars’ is not, properly speaking, a stake under the interpleader statute . . . .” Id. “The stake



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requirement contemplates that there exist something analogous to a distinct fund or other thing of

value subject to competing claims.” Id. “[S]tatutory interpleader is an inappropriate means of

concentrating the entire dispute because the purported stake is not analogous to a distinct fund or

other thing of value.” Id. The court further explained that interpleader was inappropriate because

the party seeking to invoke interpleader did not “have any single obligation to only one of two

competing claimants” but rather faced “a situation in which it has inconsistent duties to separate

parties under two separate, but related, agreements, and may have breached one agreement by

complying with duties under the other.” Id. at 308. In this case of course there is a distinct fund at

issue (the Refund) and Bombardier has a single obligation to only one of two competing claimants

(the Trustee and CAVIC). Bankers Trust is not applicable here.

Bombardier is willing to invoke Rule 22 to avoid offering a defense, but it will not put the

proverbial money where its mouth is. Based on Bombardier’s statements, Bombardier has invoked

interpleader and the Court now has the power to require Bombardier to deposit the Refund into the

Court’s registry pending adjudication of the case on its merits. Thus, the Defendants’ Objections

should be overruled.

II. The mandatory injunction will preserve the Trustee’s ability to enforce his powers to avoid and recover the Refund under Sections 542(a), 544, 550, and 551 of the Bankruptcy Code and fully comports with Grupo Mexicano and controlling Ninth Circuit law in Rubin v. Pringle (In re Focus Media).

Bombardier argues that the Court does not have the authority to enter a prejudgment

preliminary injunction under the Supreme Court’s decision in Grupo Mexicano de Desarrollo S.A.

v. All. Bond Fund, Inc., 527 U.S. 308 (1999). Bombardier argues that because the Trustee’s claim

to the Refund is based upon the purchase agreement and is, in essence, a breach of contract claim

for money damages, it cannot form the basis for prejudgment injunctive relief under the Supreme

Court’s decision in Grupo Mexicano. Further, Bombardier argues that the Trustee’s reliance on

Section 542(a) of the Bankruptcy Code is misplaced because that statute does not “magically

transform” the Trustee’s alleged contractual claim into an equitable claim. Finally, Bombardier

argues that the Court cannot issue the mandatory injunction under Grupo Mexicano because it

would interfere with Bombardier’s property. CAVIC only makes a passing reference to Grupo



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Mexicano and states that it bars the Trustee from seeking a prejudgment attachment.

In making these arguments, Bombardier misstates the relief requested by the Trustee in his

Complaint, mischaracterizes the exceptions in Grupo Mexicano and the Ninth Circuit’s controlling

decision in Rubin v. Pringle (In re Focus Media, Inc.), 387 F.3d 1077 (9th Cir. 2004) (“Rubin”),

and contradicts its own repeated representations to this Court that it is an economically disinterested

party that has no ownership interest in the Refund and “is simply in possession of the funds and

will distribute those funds” to the winning litigant.

In Rubin, the Ninth Circuit thoroughly analyzed Grupo Mexicano and how the ruling

impacted the issuance of prejudgment injunctions to preserve a trustee’s ability to collect

bankruptcy avoidance claims. In that case, a trustee sought to enjoin Rubin, the sole shareholder of

the debtor, that caused the debtor to transfer over $20 million to him prior to the bankruptcy case

and made millions of dollars of loans to him so he could pay off personal taxes. Id. at 1081. The

trustee sought a preliminary injunction to, among other things, enjoin Rubin from further

transferring the $20 million. The bankruptcy court granted the injunction finding that the trustee

was likely to prevail on his claims against Rubin for (1) fraudulent conveyance under 11 U.S.C. §

548 (count one of the complaint), (2) fraudulent conveyance under 11 U.S.C. § 544(b) (count two),

and (3) turnover of property to the estate under 11 U.S.C. § 542 (count seven), and further that the

bankruptcy estate would otherwise be irreparably injured. Id. The district court upheld the

bankruptcy court’s injunction and found that Grupo Mexicano was inapplicable. Id. at 1081.

The Ninth Circuit affirmed. In its decision, the Ninth Circuit noted that the Grupo Mexicano

Court specifically excepted from the bar on prejudgment injunctive relief “instances of fraudulent

conveyance and bankruptcy: ‘The law of fraudulent conveyances and bankruptcy was developed

to prevent such conduct,” i.e., debtors trying to avoid paying their debts, or seeking to favor some

creditors over others; “an equitable power to restrict a debtor’s use of his unencumbered property

was not.” Id. at 1085 (citations omitted). The Rubin court further noted that “when equitable claims

are at issue, as opposed to solely legal damages claims, the rule barring issuance of a preliminary

injunction freezing assets is inapplicable as well.” Id. at 1084. The Rubin court concluded

that ”Grupo Mexicano thus exempts from its proscription against preliminary injunctions freezing



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assets cases involving bankruptcy and fraudulent conveyances, and cases in which equitable relief

is sought” and upheld the district court’s affirmance of the bankruptcy court’s injunction. Id. at

1085. Quoting the Fourth Circuit’s holding in United States v. Oncology Assocs., P.C., 198 F.3d

489, 496-97 (4th Cir. 1999), the Rubin court noted where “a plaintiff creditor asserts a cognizable

claim to specific assets of the defendant or seeks a remedy involving those assets, a court may in

the interim invoke equity to preserve the status quo pending judgment where the legal remedy might

prove inadequate and the preliminary relief furthers the court’s ability to grant the final relief

requested.” Rubin, 387 F.3d at 1085.

The Ninth Circuit’s rationale in Rubin dictates that the Trustee’s requested injunction to

preserve its ability to avoid and recover the Refund under Sections 542(a), 544, 550 and 551 of the

Bankruptcy Code squarely falls within the exception under Grupo Mexicano for fraudulent transfer

and bankruptcy claims and other equitable claims. These bankruptcy claims are inherently equitable

in nature. See, e.g., In re Process Am., Inc., 588 B.R. 82, 101 (Bankr. C.D. Cal. 2018) (noting that

section 542 is an “equitable remedy”); In re Brizinova, 588 B.R 311, 331 (Bankr. E.D.N.Y. 2018)

(citing Ball v. Soundview Composite Ltd. (In re Soundview Elite Ltd.), 2014 WL 2998529, at *3

(S.D.N.Y. Jul. 3, 2014) (“turnover proceedings are inherently equitable in nature.”)); In re Pali

Holdings, Inc., 488 B.R. 841, 851 (Bankr. S.D.N.Y. 2013) (“turnover action invokes the court’s

most basic equitable powers to gather and manage property of the estate”).5 In fact, numerous courts

flatly hold that Grupo Mexicano does not apply to bankruptcy claims at all. See In re Dow Corning

Corp., 280 F.3d 648, 658 (6th Cir. 2002) (holding that Grupo Mexicano does not apply because

under the Rule 105 “statutory grant of power, the bankruptcy court is not confined to traditional

equity jurisprudence”); In re Soundview Elite Ltd., 543 B.R. 78, 120-21 (Bankr. S.D.N.Y. 2016)

(“Grupo Mexicano does not constrain the powers to freeze the disposition of assets held by

bankruptcy courts, whose equitable authority is not derived from generally applicable, pre–1789

authority”); Adelphia Commc’ns Corp. v. Rigas (In re Adelphia Commc’ns Corp.), 2003 WL

21297258 at * 4 (S.D.N.Y. June 4, 2003) (“Grupo Mexicano’s holding specifically applied to the

5 Bombardier argues for almost a page that Section 542 claims are legal, not equitable, without citing any legal authority at all. (Bombardier Opp. at 6.)



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district courts, and therefore is inapplicable in the bankruptcy court context.”); In re Owens

Corning, 419 F.3d 195, 208 n.14 (3rd Cir. 2005) (“the Court’s opinion in Grupo

Mexicano acknowledged that bankruptcy courts do have the authority to deal with the problems

presented by that case”).

Contrary to Bombardier’s assertions, nowhere in the Complaint does the Trustee sue

Bombardier for breach of contract or even seek any damages against Bombardier. The Trustee

seeks the avoidance of CAVIC’s unperfected security interest under Section 544 of the Bankruptcy

Code (which Bombardier does not even mention) and, once avoided, to recover the Refund from

Bombardier under Section 542(a) which is an “entity . . . in possession, custody or control . . . of

property that the trustee may use . . .” or alternatively, and enforce the March 31 Assignment for

the benefit of the estates under Section 551 of the Bankruptcy Code to procure the Refund from

Bombardier. Given the Rubin court’s interpretation that “bankruptcy claims” which, in that case,

specifically included the trustee’s claims under Sections 542(a) of the Bankruptcy Code, the

Trustee’s bankruptcy counts involving Sections 542(a), 544(a), 550, and 551 of the Bankruptcy

Code likewise fall within the exception in Grupo Mexicano.6 Bombardier’s attempt to limit Rubin’s

holding to fraudulent conveyance claims is simply wrong. Moreover, there is no reason why

prejudgment injunctions to preserve the Trustee’s strong arm powers to avoid unperfected liens

under Section 544(a) of the Bankruptcy Code, although not specifically dealt with by the Rubin

court, should be treated any differently from fraudulent conveyance claims. Both Sections 544(a)

and 548 of the Bankruptcy Code seek to recover transfers and property for the benefit of the estates

and insure equality of treatment of all creditors. Bombardier has not even mentioned the Trustee’s

central 544(a) claim in its response, much less cited any legal authority to negate its qualification

as a bankruptcy claim falling within the Grupo Mexicano exception.

Moreover, the Trustee’s claims are equitable in nature because Bombardier has conceded

that it is “simply in possession of” the Refund awaiting instruction to which party to transfer the

6 None of the cases cited by Bombardier hold to the contrary. See, e.g., Meritus Payment Sols., Inc. v. Choice Loan Consulting, 2010 WL 11597625 (C.D. Cal. Aug. 26, 2010) (plaintiff did not bring any bankruptcy claims); Wealthstorm Ltd. v. Digital Archives Inc., 2013 WL 12131284 at *3 (C.D. Cal. 2013) (plaintiff did not bring any bankruptcy claims and the court recognized that “Plaintiff’s claim is solely for money damages”).



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Refund. Bombardier has thus conceded it has no property interest in the Refund which, of course,

was to be “promptly paid” under the APA. Bombardier’s “simply in possession of” language

mirrors the language in Section 542(a) that requires “an entity . . . in possession of property that the

trustee may use . . . under Section 363 of this title shall deliver such property to the trustee . . . .”

See 11 U.S.C. § 542(a) (emphasis added). By its own admission, because Bombardier is “simply

in possession” of the Refund, it will be required to deliver the Refund to the Trustee upon avoidance

of the March 31 Assignment. The requested injunction requiring that it be deposited with the Court

merely secures the Trustee’s equitable claim and rights under the avoidance statutes to the Refund.

Thus, contrary to Bombardier’s assertions, the requested injunction will not deprive

Bombardier of any property right. It has none. If anything, Bombardier’s reliance on Grupo

Mexicano raises significant concerns about Bombardier’s reluctance to deposit the Refund –

Bombardier may be commingling the Refund with other assets to insure sufficient cash reserves or

treating the Refund on its books as its own asset to prop up its balance sheet during its financial

struggles. If anything like this is true, it further validates the Trustee’s concerns about Bombardier,

rather than the Court, holding the Refund pending a decision on the merits.

III. The preliminary injunction factors favor the Trustee.

Both Defendants argue that the Trustee has not met his burden for a preliminary injunction.

The Trustee has met his burden. “A plaintiff seeking a preliminary injunction must establish that

he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of

preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public

interest.” In re Martirosian, 2017 WL 1041107 at *10 (Bankr. C.D. Cal. March 14, 2017) (quoting

Feldman v. Ari. Sec. of State’s Office, 843 F.3d 366, 375 (9th Cir. 2016)). But the Ninth Circuit

also applies a “sliding scale” test: “if a plaintiff can only show that there are ‘serious questions

going to the merits’—a lesser showing than likelihood of success on the merits—then a preliminary

injunction may still issue if the ‘balance of hardships tips sharply in the plaintiff’s favor,’ and the

other two . . . factors are satisfied.” Id. (quoting Shell Offshore, Inc. v. Greenpeace, Inc., 709 F.3d

1281, 1291 (9th Cir. 2013)). As stated in the Motion to Compel, each of the factors weighs in favor

of the preliminary injunction, especially given Bombardier’s lack of economic interest in the



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Refund and its representations to the Court that it “is simply possessing the funds” for the winning

litigant.

a. The Trustee has demonstrated a likelihood of success on the merits.

It is indisputable that Bombardier has no right to keep the Refund. It must be paid over to

either the Trustee or CAVIC. The relief sought by the Trustee requires Bombardier to transfer the

Refund into a court controlled account pending the adjudication of this case. The Court can enter

an order that contains clear language providing that neither the Trustee nor CAVIC is in any way

prejudiced in asserting their respective claims to collect the Refund.7 Thus, the Trustee’s and

CAVIC’s likelihood of success on their competing claims is irrelevant. The question for the Court

is whether Bombardier has a reasonable likelihood of success on the merits of retaining the Refund.

It does not.

b. Absent a preliminary injunction, the Trustee will suffer irreparable harm.

The Trustee has adequately shown that the Debtors’ estates will be irreparably harmed if

the Court does not order the Refund to be deposited into the Court’s registry. Specifically,

Bombardier has been facing significant financial struggles, which have only been exacerbated by

the current COVID-19 crisis. Accordingly, there is a significant chance that Bombardier may file

for bankruptcy protection or use the refund to pay operating expenses. If either scenario occurs, the

Trustee (or CAVIC if it is successful) may be left with an uncollectible judgment, and the Court’s

resources in adjudicating the adversary case will go for naught. The “basic function of a preliminary

injunction is to preserve the status quo pending a determination of the action on the merits.” Chalk

v. U.S. Dist. Ct., 840 F.2d 701, 704 (9th Cir. 1988). Furthermore, “[m]andatory injunctions are most

likely to be appropriate when ‘the status quo . . . is exactly what will inflict the irreparable injury

upon the complainant.” The Trustee is seeking the preliminary injunction because the present

situation will not preserve the status quo – that the full amount of the Refund remains available to

both CAVIC and the Trustee – due to the heightened risk that Bombardier may seek bankruptcy

7 The Trustee respectfully suggests language such as the following: “Nothing in this Order shall in any way modify, abridge, limit, waive, impair, or otherwise affect the Trustee’s or CAVIC’s positions, defenses, claims, or other rights that have been asserted, or that could be asserted, in this adversary proceeding, which positions, defenses, claims and other rights are hereby fully preserved.”



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protection and imperil the litigants’ ability to collect a judgment against a bankrupt company.

Bombardier argues that it will be able to pay $30 million to the party that succeeds on the

merits. (See Bombardier’s Obj. at 12.) Ironically, given Bombardier’s and CAVIC’s arguments

about the Trustee’s evidence to support the Motion to Compel, Bombardier fails to provide any

evidence whatsoever to support this assertion. Bombardier does not provide a balance sheet, a bank

account, or a declaration. In short, Bombardier provides no evidence whatsoever to show that the

Refund has been designated to be distributed to the successful party and the Refund is segregated

from Bombardier’s assets – and it is not even clear that those steps would be sufficient if

Bombardier fails. But Bombardier has provided nothing to support those positions.8

CAVIC argues that the Trustee’s irreparable harm is speculative in nature. (CAVIC’s Obj.

at 13.) CAVIC is wrong. CAVIC relies on Caribbean Marine Servs. Co. v. Baldrige, 844 F.2d 668

(9th Cir. 1988). In that case, the plaintiffs sought a preliminary injunction alleging that irreparable

harm would occur if it were forced to allow female observers of porpoises on their vessels because

their male employees would respond negatively (and may assault or harass the female observer)

and thus, cost the company money. Baldrige, 844 F.2d at 675. Baldrige is obviously distinguishable

from the facts here. The Trustee has provided numerous Evidentiary Publications to support his

allegations that Bombardier is in financial peril, as well as Bombardier’s own press releases

regarding the dire impact of COVID-19 and evidence of Bombardier’s plummeting stock price,

which continues to fall. (See supra and Mot. to Compel at 14-19.) To assert that the Trustee’s risk

of irreparable harm is speculative as compared to preventing female observers from joining an all-

male vessel is absurd. Additionally, CAVIC cites to Winter v. NRDC, Inc., 555 U.S. 7 (2008), but

that case involved a claim that the plaintiffs’ “scientific, recreational, and ecological interests”

would be harmed by the destruction of endangered marine mammal species due to Navy sonar

activities, even though the plaintiff failed to identify a single harm to a single marine mammal in

over 40 years. Id. at 21-22. Unlike in Baldrige and Winter, there is no vague, speculative harm or

8 If the Court believes that further evidence is needed on these issues, the Trustee respectfully requests an opportunity to serve expedited discovery and to depose a corporate representative with knowledge of Bombardier’s finances and the status of the Refund.



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chain of harms needed to show irreparable injury. By contrast, in this case the Trustee faces a

significant risk from allowing Bombardier to continue to hold the Refund.

The Defendants argue that Evidentiary Publications are inadmissible hearsay. Contrary to

the Defendants’ position, the Court can consider hearsay evidence on a motion for preliminary

injunction. Houdini Inc. v. Goody Baskets LLC, 166 Fed. Appx. 946, 947 (9th Cir. 2006) (“[T]he

district court did not abuse its discretion in considering hearsay ... because the rules of evidence do

not strictly apply to preliminary injunction proceedings.”); Republic of Philippines v. Marcos, 862

F.2d 1355, 1363 (9th Cir.1988) (“It was within the discretion of the district court to accept this

hearsay for purposes of deciding whether to issue the preliminary injunction.”); Flynt Distrib. Co.

v. Harvey, 734 F.2d 1389, 1394 (9th Cir. 1984) (rejecting hearsay objection because “urgency of

obtaining a preliminary injunction necessitates a prompt determination and makes it difficult to

obtain affidavits from persons who would be competent to testify at trial”); Rubin ex rel. N.L.R.B.

v. Vista Del Sol Health Serv., Inc., 80 F. Supp. 3d 1058, 1072 (C.D. Cal. 2015) (“It is well

established that trial courts can consider otherwise inadmissible evidence,” including hearsay, “in

deciding whether or not to issue a preliminary injunction.”); In re SK Foods, L.P., 2011 WL

10723414, at *25-26 (Bankr. E.D. Cal. Oct. 11, 2011) (considering evidence despite hearsay

objections to determine whether a preliminary injunction should be granted).

The Evidentiary Publications, albeit hearsay, provide a basis for the Court to conclude there

is a meaningful risk that the Refund could be imperiled by a potential filing by Bombardier or other

dissipation of assets. Bombardier’s own public filings (which are not hearsay by definition) show

that it is facing significant financial pressure. Bombardier’s most recent financial report for the

fiscal year ended December 31, 2019 admits that “2019 was challenging from a financial

performance standpoint.” (Lyons Decl. ¶ 5.) In recent years, Bombardier’s revenues dropped by

more than 13 percent from $18.2 billion in 2015 to $15.8 billion. (Lyons Decl. ¶ 5.) In 2019 alone,

Bombardier’s net income decreased by almost $2 billion from a $318 million gain in 2018 to a $1.6

billion loss in 2019 and its adjusted EBITDA dropped by 31%. (Lyons Decl. ¶ 5.) Under the “sliding

scale” approach, even a remote chance that Bombardier could file for bankruptcy or otherwise

dissipate the funds is enough given that the other factors that indisputably weigh in the Trustee’s



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favor. Simply put, Bombardier has no legitimate reason to continue to hold on to these funds and

not place them under Court control.

The urgent need for this relief and the risk to the Trustee is only exacerbated by the recent

COVID-19 disruption. On March 24, 2020, Bombardier, Inc. announced in a public press release

that it had suspended all non-essential work at its aircraft and rail production facilities in Canada

and furloughed tens of thousands of employees. (Lyons Decl. ¶ 7.) Its stock price has plummeted

by more than half (from US$0.63 to US$0.32). In short, even if Bombardier could have argued that

it would be a safer repository than the Court for the $30 million Refund – and its history of financial

struggles demonstrate that it is not – the COVID-19 crisis has made any such position untenable.

Businesses are already failing as a result of the COVID-19 crisis, and there is no fixed end date for

the COVID-19 crisis or the restrictions that are shuttering businesses like Bombardier. It is not only

possible, but likely, that Bombardier will need to dip into the Refund or declare bankruptcy. The

Court should not leave that decision in Bombardier’s hands because it has no property interest in

the Refund.

c. The balance of hardships tips sharply in the Trustee’s favor.

Neither Bombardier nor CAVIC make any legitimate argument that the balance of hardships

weigh in favor of Bombardier. Bombardier alleges that the Trustee fails to meet the other factors

and therefore the equities favor it. (Bombardier’s Obj. at 12.) CAVIC alleges that because

Bombardier has held the Refund since March 2017, the balance of hardships favors Bombardier.

(CAVIC’s Obj. at 17-18.) There is no hardship on Bombardier to deposit the Refund.

“In each case, courts must balance the competing claims of injury and must consider the

effect on each party of the granting or withholding the requested [preliminary injunction] relief.”

Winter, 555 U.S. at 24 (quotations omitted). Bombardier maintains that it holds no economic

interest in the Refund and “is simply in possession of” the Refund awaiting direction from the

Court. (Bombardier’s Mot. at 3; Docket No. 34 at 4.) The requested injunction thus will not affect,

let alone harm, Bombardier. Conversely, the Trustee is at risk of severe harm if the Refund is

dissipated or put beyond the reach of the Court due to Bombardier’s dire financial condition. This

harm to the Trustee (and consequently the Debtors’ estates and creditors) greatly outweighs the



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lack of harm to Bombardier.

d. The public interest favors granting the preliminary injunction.

The Defendants similarly fail to provide any basis for their position that the public interest

favors Bombardier. Both assert only that the Trustee failed to provide sufficient evidence to prove

that the public interest weighs in his favor. (CAVIC’s Obj. at 18-19; Bombardier’s Obj. at 12-13.)

By denying the injunction, the only interest that could be protected is Bombardier’s, and

Bombardier has no interest in the Refund. By granting the injunction, the Court will ensure that if

the Trustee succeeds on the merits of the case, the Refund will be readily available and recovered

for the benefit of the Debtors’ estate, creditors, and other parties-in-interest. And if CAVIC

succeeds, it will have access to the Refund. Either way, the requested relief will preserve the Court’s

ability to meaningfully administer justice on the merits of the case. As stated in the Motion to

Compel, “[t]he public has an interest in the successful and just resolution of the affairs of a bankrupt

debtor.” In re SK Foods, L.P., 2011 WL 10723414, at *36. One of the primary goals of the

Bankruptcy Code is the equitable distribution of funds to creditors, which requires the Trustee to

be able to avoid and actually recover funds for distribution. See DeNoce v. Neff (In re Neff), 824

F.3d 1181, 1187 (9th Cir. 2016) (“At the core of the Bankruptcy Code are the twin goals of ensuring

an equitable distribution of the debtor’s assets to his creditors and giving the debtor a ‘fresh start.’”)

(quoting Sherman v. SEC (In re Sherman), 658 F.3d 1009, 1015 (9th Cir. 2011), abrogated on other

grounds by Bullock v. BankChampaign, N.A., 569 U.S. 267 (2013)); In re Arcapita Bank, 575 B.R.

229, 240 (Bankr. S.D.N.Y. 2017) (“[T]he composition of a debtor’s estate is clearly central to a

U.S. bankruptcy case. The laws at issue in this case – Sections 362, 542, 547 and 550 of the

Bankruptcy Code – are designed to protect and pool the assets of the Debtor’s estate for the

equitable benefit of all its creditors. These provisions are the bedrock of the protections afforded to

creditors under the Bankruptcy Code.”). There is a significant public interest in facilitating these

core tenants of the Bankruptcy Code. See, e.g., In re SK Foods, LP, 2011 WL 10723414, at *36

(granting an injunction and finding that there “is a public interest in preserving the assets of the

estate of SK Foods for the benefit of its creditors.”).



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CONCLUSION

In sum, at the conclusion of this adversary proceeding, Bombardier will turn the Refund

over to either the Trustee or CAVIC. That is not in dispute. Bombardier has repeatedly stated that

it has no interest in the Refund, is “simply in possession” of it, and it awaits instruction from the

Court to whom to remit the Refund to the successful party. The Trustee requests the Court to

instruct Bombardier to remit the Refund to the Court pending adjudication of this adversary case.

DATED: April 15, 2020 DLA PIPER LLP (US)

By: /s/ John K. Lyons ROBBIN L. ITKIN JOHN K. LYONS (Pro Hac Vice) JEFFREY S. TOROSIAN (Pro Hac Vice) JOSEPH A. ROSELIUS (Pro Hac Vice)

Attorneys for the Chapter 7 Trustee


This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California.

June 2012 F 7004-1.SUMMONS.ADV.PROC

EAST\173624790.1

PROOF OF SERVICE OF DOCUMENT

I am over the age of 18 and not a party to this bankruptcy case or adversary proceeding. My business address is: DLA Piper LLP (US)

2000 Avenue of the Stars, Suite 400 North Tower Los Angeles, CA 90067-4704

A true and correct copy of (I) the entitled The Trustee’s Omnibus Reply to Bombardier and CAVIC’s Objections to the Trustee’s Motion to Compel will be served or was served (a) on the judge in chambers in the form and manner required by LBR 5005-2(d); and (b) in the manner stated below:

1. TO BE SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (NEF): Pursuant to controlling General Orders and LBR, the foregoing documents were served by the court via NEF and hyperlink to the document. On April 15, 2020, I checked the CM/ECF docket for this bankruptcy case or adversary proceeding and determined that the following persons are on the Electronic Mail Notice List to receive NEF transmission at the email addresses stated below:

☐ Service information continued on attached page

2. SERVED BY UNITED STATES MAIL: On April 15, 2020, I served the following persons and/or entities at the last known addresses in this bankruptcy case or adversary proceeding by placing a true and correct copy thereof in a sealed envelope in the United States mail, first class, postage prepaid, and addressed as follows. Listing the judge here constitutes a declaration that mailing to the judge will be completed no later than 24 hours after the document is filed.

☐ Service information continued on attached page

3. SERVED BY PERSONAL DELIVERY, OVERNIGHT MAIL, FACSIMILE TRANSMISSION OR EMAIL (state method for each person or entity served): Pursuant to F.R.Civ.P. 5 and/or controlling LBR, on April 15, 2020, I served the following persons and/or entities by personal delivery, overnight mail service, or (for those who consented in writing to such service method), by facsimile transmission and/or email as follows. Listing the judge here constitutes a declaration that personal delivery on, or overnight mail to, the judge will be completed no later than 24 hours after the document is filed.

VIA HAND DELIVERY

VIA ELECTRONIC MAIL

(Party, who is being served if different, and email address for each)

☒ Service information continued on attached page

I declare under penalty of perjury under the laws of the United States that the foregoing is true and correct.

April 15, 2020 William L. Countryman, Jr. /s/ William L. Countryman, Jr.Date Printed Name Signature

Case 2:19-ap-01147-SK Doc 114-1 Filed 04/15/20 Entered 04/15/20 20:32:16 DescProof of Service Page 1 of 2

This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California.

June 2012 F 7004-1.SUMMONS.ADV.PROC

EAST\173624790.1

Counsel via Electronic Mail

Bombardier Aerospace Corporation and Bombardier, Inc.

Attn.: Matthew S. Walker Email: [email protected]

Attn.: Andrew Troop Email: [email protected]

Attn.: Carolina A. Fornos Email: [email protected]

CAVIC Aviation Leasing (Ireland) 22 Co. Designated Activity Company

Attn.: Alan Watson Email: [email protected]

Attn.: Robert J. Labate Email: [email protected]

United States Trustee

Attn.: Dare Law Email: [email protected]

Attn.: Ron Maroko Email: [email protected]

Attn.: Jill Sturtevant Email: [email protected]

Attn.: Peter C. Anderson Email: [email protected]

Case 2:19-ap-01147-SK Doc 114-1 Filed 04/15/20 Entered 04/15/20 20:32:16 DescProof of Service Page 2 of 2

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