Barc Response

UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORK

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In re

LEHMAN BROTHERS HOLDINGS INC.,et al.,

Debtors.

Chapter 11Case No. 08-13555 (JMP)

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ARCHSTONE LB SYNDICATIONPARTNER LLC, LEHMAN BROTHERSHOLDINGS, INC., REPE ARCHSTONE GPHOLDINGS, LLC, LUXEMBOURGTRADING FINANCE S.A.R.L.,LUXEMBOURG RESIDENTIALPROPERTIES LOAN FINANCE S.A.R.L.,LUXEMBOURG RESIDENTIALPROPERTIES LOAN FINANCE 2 S.A.R.L.,and LEHMAN COMMERCIAL PAPER,INC.,

Plaintiffs,

v.

BANC OF AMERICA STRATEGICVENTURES, INC., BANK OF AMERICA,N.A., BIH ASN LLC, BARCLAYSCAPITAL REAL ESTATE INC., andARCHSTONE EQUITY HOLDINGS INC.

Defendants.

Adversary ProceedingNo. 11-02928 (JMP)

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THE BARCLAYS DEFENDANTS’ OPPOSITION TOPLAINTIFFS’ MOTION FOR EXPEDITED DISCOVERY

11-02928-jmp Doc 22 Filed 12/20/11 Entered 12/20/11 16:23:17 Main Document Pg 1 of 15

TABLE OF CONTENTS

Page

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PRELIMINARY STATEMENT ................................................................................................... 1

ARGUMENT................................................................................................................................. 8

I. THIS COURT SHOULD DENY PLAINTIFFS’ REQUEST FOR EXPEDITEDDISCOVERY..................................................................................................................... 8

II. ALTERNATIVELY, DEFENDANTS SHOULD BE GRANTED LEAVE TOTAKE EXPEDITED DISCOVERY.................................................................................. 9

III. THIS COURT SHOULD UNSEAL THE AGREEMENTS TO WHICHDEFENDANTS CONSENT AND TO WHICH PLAINTIFFS ALREADYSELECTIVELY REFER IN PUBLIC FILINGS............................................................. 10

CONCLUSION............................................................................................................................ 11


TABLE OF AUTHORITIES

Page

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FEDERAL CASES

In re Food Management Group, LLC,359 B.R. 543 (Bankr. S.D.N.Y. 2007).....................................................................................11

In re Orion Pictures Corp., 21 F.3d 24 (2d Cir. 1994)............................................................10, 11

FEDERAL STATUTES

11 U.S.C. § 107(b) .........................................................................................................................11

RULES

Bankruptcy Rule 7026 .....................................................................................................................9

Bankruptcy Rule 7030 .....................................................................................................................9

Bankruptcy Rule 7034 .....................................................................................................................9

Bankruptcy Rule 9018 ...................................................................................................................11

Fed. R. Civ. P. 26(d) ........................................................................................................................9

Fed. R. Civ. P. 26(f).........................................................................................................................9

Fed. R. Civ. P. 30.............................................................................................................................9

Fed. R. Civ. P. 34(b) ........................................................................................................................9


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Defendants BIH ASN LLC, Barclays Capital Real Estate Inc., and Archstone Equity

Holdings Inc. (collectively “Barclays”) respectfully submit this memorandum in opposition to

Plaintiffs’ motion for expedited discovery:

Preliminary Statement

This Court should deny Plaintiffs’ request for expedited discovery because there is no

need for a preliminary injunction in this case. Plaintiffs are suffering no harm whatsoever –

much less any irreparable harm – and Plaintiffs themselves seek damages, a fully adequate

remedy at law. Complaint ¶¶ 130-31. Further, this Court can deny Plaintiffs’ injunction request

based on the plain and unambiguous language of the agreements they invoke. Should this Court,

however, order any discovery, it should be a two-way street – both sides should have an

opportunity to develop the factual record through discovery prior to any hearing on the merits.

This litigation is nothing more than an attempt by Plaintiffs to rewrite the express terms

of a document to which they agreed and of which this Court approved. Section 3.01(d) of the

parties’ agreement in this matter provides that any equity holder in Archstone may:

(1) make the decision to sell “on its own,” without any input from any otherowner;

(2) sell its equity “for its own account,” without sharing any sale proceedswith anyone; and

(3) sell to any third party, as determined “in its sole discretion.”

Second Amended and Restated Bridge Equity Providers Agreement (“BEPA”) § 3.01(d)

(emphasis supplied).

By this action and their conduct leading up to it, Plaintiffs have sought to void each of

these provisions and deprive Defendants of their carefully negotiated rights. At base, Plaintiffs

simply don’t like the fact that Defendants have chosen to sell 50% of their interests in the

Archstone Entities to a competitor, Equity Residential (“EQR”) – by far the highest bidder in a


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sale process in which Plaintiffs themselves were an integral part. According to Plaintiffs, the

EQR bid is simply “inadequate” and understates the value of Archstone by “an additional $1

billion of value.” Plaintiff Lehman Brothers Holdings Inc., Current Report (Form 8-K)

(December 5, 2011), attached as Ex. A to Declaration of Matthew L. Craner dated December 20,

2011 (“Craner Decl.”). Although Plaintiffs may not like EQR and the price it is paying for

Defendants’ interests, that’s the deal they struck – Defendants may sell their interests whenever,

to whomever, and for whatever price they find acceptable. BEPA § 3.01(d). Plaintiffs cannot

now use this litigation to rewrite the parties’ agreement.

The parties’ agreement instead provides Plaintiffs with protection from being joined by

an unwelcome co-investor or an undervalued sale of Archstone equity. Under that agreement,

not only do Defendants have the right to sell to whomever they want at whatever price they find

acceptable, but Plaintiffs also have a Right of First Offer (“ROFO”) with respect to any such

sale. BEPA § 4.02(a). This ROFO right, along with a corresponding “tag-along” right in

Section 4.02(b), allows Plaintiffs to buy Defendants’ interest at the same price and on the same

terms as any other potential buyer. If Plaintiffs actually believe, as they say in their securities

filing, that EQR’s bid is too low by almost “$1 billion in value,” then Plaintiffs should be

dancing in the streets – under the ROFO, Plaintiffs can buy Defendants’ half interests for the

same low, low price. If, by contrast, Plaintiffs just don’t like EQR, they don’t get to disqualify

the highest bidder and dictate to whom Defendants may sell.

And that’s what this litigation is about. Plaintiffs have invoked their ROFO rights,

stating an intent to match EQR’s bid and take that bid for themselves. At the same time,

Plaintiffs have filed this litigation and thrown a cloud of allegations against Defendants all in an

attempt to obstruct the sale to EQR. According to Plaintiffs, Defendants have: (1) “conspired” to

sell to EQR; (2) failed “to provide information about the sale process to Plaintiffs;” (3) failed to


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give Plaintiffs sufficient time to exercise their ROFO rights; (4) entered into some sort of

improper “voting trust or agreement” with EQR; (5) failed to allow Plaintiffs to ROFO the other

50% interest of the Defendants’ interests that is not currently for sale and for which a sale price

has yet to be set; and (6) generally have acted unfairly in violation of the implied covenant of

good faith and fair dealing. Complaint ¶¶ 5-10. Yet, each of Plaintiffs’ conflicting theories falls

of its own weight.

First, Plaintiffs contend that Defendants have conspired to sell 50% of their interests to

EQR, and that, because EQR is a competitor, there must be a series of nefarious and yet-to-be-

discovered “side agreements” between Defendants and the buyer. In support, Plaintiffs point to

exactly . . . nothing. Not a single explanation for what those “side agreements” might be or why

Plaintiffs so strenuously claim that they exist. Plaintiffs offer nothing in support of their wild

accusations for one simple reason: there are no such agreements.1

Second, Plaintiffs contend that Defendants have failed to supply sufficient information

about the sale process. In support, Plaintiffs point to a series of correspondence, culminating in a

pre-litigation demand letter that they sent to Defendants on December 4, 2011, seeking various

categories of additional information.

In claiming ignorance of the EQR bid, Plaintiffs neglect to mention that it was the

Plaintiffs themselves who actually helped run the sale process that led to EQR’s offer.

Beginning in early 2011 and continuing to as late as September of this year, Plaintiffs

established a M&A data room, Plaintiffs filled that data room with relevant sale information,

Plaintiffs identified and approved potential bidders (including EQR), Plaintiffs participated in

buyer due diligence, Plaintiffs received and evaluated bids (including a bid from EQR), and then

1 If any such agreements existed, EQR, as a public company, would have filed those agreements with theSEC along with the Interest Purchase Agreement and Other Interest Agreement.


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Plaintiffs decided to drop out of the process after deciding that they no longer wanted to sell their

interest in the Archstone Entities. In dropping out of the sale process that they had helped to run,

Plaintiffs informed Defendants that they wished them well in their continued efforts to sell their

individual interests. However, Plaintiffs also informed Defendants that they would offer no

assistance in changing corporate governance to incentivize bidders, and stated that Plaintiffs

would be there at the end to “clean up” any bid with their “ROFO.”

Far from denying Plaintiffs information after they declined to sell, Defendants continued

to provide Plaintiffs with various types of information, including unfettered access to the M&A

data room – access that Plaintiffs used on a weekly and sometimes daily basis to keep themselves

informed on the sale process.2 And when EQR submitted a second and ultimately successful bid,

Defendants promptly delivered Plaintiffs a ROFO notice describing the proposed transaction in

full.3 In doing so, Defendants went far beyond merely identifying the interest “to be

transferred,” the “price payable,” and the “other economic terms relevant to such proposed

Transfer” as required by the parties’ agreement. BEPA § 4.02(a). Indeed, Defendants

voluntarily provided a copy of the actual Interest Purchase Agreement between Defendants and

EQR – even though their agreement with Plaintiffs expressly did not require such disclosure.

And when Plaintiffs sent their pre-litigation letter on December 4, 2011, seeking all sorts

of additional information – information expressly not required by the parties’ agreement –

Defendants again went out of their way to indulge Plaintiffs and sent the additional information.

Perhaps as a result, Plaintiffs’ Complaint is completely silent on any information they ever

2 Plaintiffs and their advisors were very active in the data room during the second round of bidding. Theyactively accessed the relevant documents and monitored which bidders were doing the same. Further, Plaintiffs andtheir advisors conferred with several bidders during this period. Indeed, one bidder even referenced severalagreements with Plaintiffs that emerged from those discussions as part of that bidder’s formal bid.

3 Far from being news to Plaintiffs, the second round EQR bid was identical to the first round bid thatPlaintiffs received while still an active seller. EQR included the same essential terms and conditions in its secondbid and merely scaled the consideration on offer to reflect the smaller size of the Defendants’ interests for sale.


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requested but actually didn’t get. The reason, of course, is that Plaintiffs have received

everything required under the parties’ agreement, and much more.4

Third, Plaintiffs complain that Defendants somehow are trying to deny them sufficient

time to exercise their ROFO rights. Yet, not only did Defendants give Plaintiffs abundant

information about the EQR bid, but Plaintiffs then had sufficient time to form a definitive

judgment about value (a judgment that Plaintiffs then announced to the world in their own

securities filings subject to the accuracy requirements of Section 10(b) and Rule 10b5). More to

the point, when Plaintiffs complained that they needed even more information about the EQR bid

than they already had, Defendants again gave Plaintiffs the requested information and, in a

further attempt to avoid litigation, even reset the ROFO clock – providing Plaintiffs several

additional days beyond the 50 day time period for Plaintiffs to deliver their binding notice of

election to purchase as provided for in the parties’ agreement. Far from squeezing Plaintiffs on

time, Defendants have gone out of their way to be reasonable and to provide additional time for

Plaintiffs to form their own judgments about value – judgments that directly led to Plaintiffs

invoking their ROFO rights on December 14, 2011.

Fourth, Plaintiffs accuse the Defendants of giving EQR “veto” rights over material

decisions about the Archstone Entities. In an argument that strains credulity, Plaintiffs point to

the provision in the Interest Purchase Agreement that requires Defendants to notify EQR of any

proposed changes to the Archstone business that would have a “material” effect on the “asset

composition or capital structure” of Archstone and then gives the buyer a termination right if any

such material change occurs. Interest Purchase Agreement §§ 8.4, 13.3.1, attached as Ex. O to

Declaration of Jeffrey Fitts In Support of Plaintiffs’ motion for a Preliminary Injunction, Specific

4 Media sources such as the Wall Street Journal also closely followed the Archstone sale process withperiodic updates on events. Although they were otherwise fully aware of events, Plaintiffs need only have picked uptheir daily paper for yet another source of information.


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Performance, and Declaratory Relief. According to Plaintiffs, such a garden variety M&A

provision actually rises to the level of some sort of improper “voting agreement or trust.”

While Plaintiffs are correct that the BEPA does in fact prohibit “voting agreement[s] or

trust[s],” the Defendants’ Interest Purchase Agreement with EQR is nothing of the kind. Under

the Interest Purchase Agreement, Defendants are completely free to vote any way they want on

“Special Major Matters” that might fundamentally affect Archstone’s balance sheet. Indeed,

even after any sale, Defendants still would own a significant portion of Archstone. According to

Plaintiffs, however, Defendants purposefully might vote the wrong way and intentionally injure

their remaining interests in Archstone. In reality, the reason for the provision at issue (which, as

a matter of law, does not qualify as a voting agreement or trust of any kind) is the unremarkable

fact that no buyer (not EQR or anyone else) would ever agree to spend billions of dollars for a

company with a particular balance sheet, allow that balance sheet to be materially diminished

through operational changes, and then still pay the same purchase price. Plaintiffs’ argument to

the contrary is another way of saying that they don’t want Defendants to be able to sell to anyone

who cares about the value of their billion dollar investment. Such an argument is tantamount to

saying that Defendants may not sell their interests to anyone.

Fifth, Plaintiffs point to the fact that, in addition to the Interest Purchase Agreement,

EQR also entered into a fully disclosed option agreement (called the “Other Interest

Agreement”) with Defendants. The Other Interest Agreement allows EQR to buy the remaining

50% of Defendants’ interests, but only if Plaintiffs buy the first 50% through a successful ROFO

of EQR’s first offer. Under the Other Interest Agreement, EQR is barred from exercising its

option to acquire the remaining 50% of Defendants’ interests if EQR’s first purchase of

Defendants’ is successful. In other words, the Interest Purchase Agreement and Other Interest

Agreement provide EQR with the right to purchase at most half of Defendants’ interests, and


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nothing more. Even reading the two agreements together as Plaintiffs incorrectly suggest, EQR

would never be able to purchase all of Defendants’ interests in Archstone. Plaintiffs’ contention

to the contrary goes far beyond the rights Plaintiffs bargained for in the BEPA or that EQR has

under the Other Interest Agreement.

Significantly, while the Other Interest Agreement leaves price undetermined other than

establish a floor, any agreement by EQR to purchase the remaining half of Defendants’ interests

would still be subject to Plaintiffs’ ROFO rights. That is, if EQR exercises its option to purchase

the remaining 50% of Defendants’ interests, Plaintiffs may still ROFO that acquisition at the

same price ultimately agreed to by EQR.

Despite being completely separate from EQR’s agreement to buy the first 50% of

Defendants’ interests in Archstone, Plaintiffs argue that the two agreements somehow are one

and the same. According to Plaintiffs, they may ROFO not only the existing agreement to

purchase Defendants’ interests, but also a potential agreement to purchase for which the

triggering event has yet to occur (and may never occur) at a price that has yet to be determined.

In Plaintiffs’ view, they get to take a purchase agreement that has yet to be struck and at a price

of their choosing (not surprisingly the lowest price) from among the range of prices that EQR

might pay if it could and did exercise its option. Yet, that’s not what the parties’ original

agreement says, nor what EQR’s option provides. Further, if Plaintiffs ever had the right to

ROFO EQR’s option – and they did not – the time for Plaintiffs to do so has now expired.

Plaintiffs’ effort to convert EQR’s option into a right (exercisable only by them) to purchase

100% of Defendants’ interests is completely unsupported by the law and by the text of the

relevant agreements.

Sixth, in a final attempt to taint Defendants with a very broad brush indeed, Plaintiffs

argue amorphously that Defendants somehow have violated the “implied covenant of good faith


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and fair dealing.” Yet, not only have Defendants acted in strict good faith, it is instead the

Plaintiffs who first secretly tried to sell Archstone without Defendants’ knowledge by forming a

second data room with the intent of running a clandestine sale process in breach of the parties’

agreement. Not only does the Complaint fail to cite any examples of Defendants’ purported bad

faith, the Plaintiffs come to this Court with unclean hands.

Argument

I. THIS COURT SHOULD DENY PLAINTIFFS’ REQUEST FOR EXPEDITEDDISCOVERY.

Plaintiffs are not entitled to preliminary injunctive relief because they face no irreparable

harm and have an adequate remedy at law. Moreover, their claim for an injunction fails under

the plain and unambiguous terms of the governing agreements. Accordingly, there is no need for

discovery on an expedited basis.

First, there simply is no urgency to this matter. Plaintiffs already have invoked their ROFO

right. By their own admission, they had enough information to do so. The orderly corporate

process envisioned by the parties’ agreement is now underway. In such circumstances, Plaintiffs

are entitled to no more time for the ROFO process than the time for which they originally

bargained.

Second, if Plaintiffs have been injured in some way by the sale process, that injury would be

purely monetary. If Defendants have breached the parties’ agreement and Plaintiffs end up

overpaying for Defendants’ interests (as opposed to radically underpaying, as Plaintiffs now

contend), then Plaintiffs already have sued for any damages that result. See Complaint ¶ 130

(suing for damages as a result of Defendants’ alleged breach of contract). Similarly, if Plaintiffs

end up exercising their ROFO right with respect to interests subject to EQR’s option under the

Other Interest Agreement – if it ensues that EQR can and does exercise that option – at a price


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higher than they otherwise would have been obligated to pay, then Plaintiffs have already sued

for those damages as well. In short, this Court should not let Plaintiffs create an emergency

where there is none and should deny Plaintiffs’ request for expedited discovery.

II. ALTERNATIVELY, DEFENDANTS SHOULD BE GRANTED LEAVE TO TAKEEXPEDITED DISCOVERY

In the alternative, Barclays seeks expedited discovery on specific topics that are relevant

to Plaintiffs’ claims and Barclays’s defenses. Among other things, Barclays seeks discovery

concerning:

• The history of the marketing and negotiations for the sale of Barclays’s, BofA’sand Plaintiffs’ interests in the Archstone Companies;

• Documents concerning Plaintiffs’ potential exercise of any ROFO right;

• Communications between or among Lehman, its creditors and the ArchstoneCompanies concerning the transfer or potential transfer of any interests in theArchstone Companies; and

• Documents concerning the conduct alleged in the Complaint.

The specific discovery requested includes previously-served requests for the production of

documents and deposition notices attached as Exs. B and C to the Craner Decl., as well as the

third-party subpoenas attached as Ex. D to the Craner Decl.

Federal Rule of Civil Procedure 26(d)(1) (incorporated by Bankruptcy Rule 7026)

provides that a party may, by court order, seek discovery before the parties have conferred under

Rule 26(f). See Fed. R. Civ. P. 26(d). Federal Rule of Civil Procedure 30 (incorporated by

Bankruptcy Rule 7030) also permits parties to take depositions prior to the Rule 26(f) meet and

confer. See Fed. R. Civ. P. 30(a)(2)(A). Additionally, Federal Rule of Civil Procedure Rule

34(b) (incorporated by Bankruptcy Rule 7034) provides that a court may order that a party

produce documents within a shorter time than the default 30-day period provided in Rule 34(b).

See Fed. R. Civ. P. 34(b)(2)(A).


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Barclays has good cause to seek expedited discovery in order to prepare for any

preliminary injunction hearing. The discovery sought is narrowly tailored to address the issues

likely to be raised in any preliminary injunction hearing, and such discovery is necessary for

Barclays to prepare adequately and to defend against Plaintiffs’ claims and requests for relief.

The interests of fairness and reasonableness also weigh heavily in favor of permitting Barclays to

pursue expedited discovery if Plaintiffs are allowed to do so.

III. THIS COURT SHOULD UNSEAL THE AGREEMENTS TO WHICHDEFENDANTS CONSENT AND TO WHICH PLAINTIFFS ALREADYSELECTIVELY REFER IN PUBLIC FILINGS.

Barclays also requests that this Court unseal certain exhibits to Plaintiffs’ Motion that are

agreements between the parties to this action:

The Second Amended and Restated Bridge Equity Providers Agreement, dated December1, 2010, attached as Exhibit B to the Fitts Dec. In Support of Plaintiffs’ Motion;

The Archstone Enterprise LP First Amended and Restated Limited PartnershipAgreement, attached as Exhibit G to the Fitts Dec.

Plaintiffs’ motion to seal these two agreements lacks any basis. Barclays – a party to the

agreements – consents to their public filing, as do the BofA Defendants. Plaintiffs – the only

parties who ask this Court to keep the agreements confidential – themselves have quoted

extensively from the BEPA in their publicly-filed pleadings.5 In such circumstances, Plaintiffs

should not be permitted to hide the full terms of these governing agreements (terms that

expressly contradict Plaintiffs’ allegations) from public view.

The Second Circuit permits documents to be filed under seal only in “compelling or

extraordinary circumstances” – circumstances not present here. In re Orion Pictures Corp., 21

F.3d 24, 26-27 (2d Cir. 1994). Indeed, this court recognizes a strong presumption of public

5 Key provisions of the relevant agreements also have been widely reported in media outlets such as theWall Street Journal.


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access to court records. See In re Food Mgmt. Group, LLC, 359 B.R. 543, 553 (Bankr. S.D.N.Y.

2007).

Here, the information Plaintiffs would have under seal does not fall into either of the

categories enumerated in Section 107(b) of the Bankruptcy Code, 11 U.S.C. §107(b) (or the

related provision of Bankruptcy Rule 9018), pursuant to which Plaintiffs filed their motion. See

Motion Pursuant to Section 107 of the Bankruptcy Code and Bankruptcy Rule 9018 for

Authorization to File Exhibits to Plaintiffs’ Motion for Injunctive Relief, Specific Performance

and Declaratory Relief Under Seal (“Plaintiffs’ Motion to Seal”). In particular, the information

contained in the agreements would not “cause an unfair advantage to competitors by providing

them information as to the commercial operations of the debtor.” In re Orion Pictures Corp., 21

F.3d at 27 (emphasis supplied; internal quotation marks omitted). Plaintiffs fail to allege that

any competitive disadvantage would result to them if the agreements were publicly filed.

Having repeatedly (and selectively) referred to the terms of those agreements in unsealed and

publicly-filed papers, Plaintiffs unfairly attempt to skew the public record and paint a misleading

picture of the facts in this case. See, e.g., id. at 26 (presumption in favor of public access “helps

safeguard the integrity, quality, and respect in our judicial system.”) (internal quotation omitted).

This Court should unseal the two documents at issue.

Conclusion

For the foregoing reasons, Barclays respectfully requests that this Court enter the

attached proposed Order denying Plaintiffs’ motion for expedited discovery and unsealing

Exhibits B and G to the Fitts Decl. Alternatively, Barclays respectfully requests that this Court


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unseal Exhibits B and G to the Fitts Declaration and grant Barclays’s motion for expedited

discovery in support of which this memorandum is offered.6

DATED: December 20, 2011

ORRICK HERRINGTON & SUTCLIFFE LLP

s/ Joseph J. Frank______________________Joseph J. FrankSteven J. FinkMatthew L. CranerOrrick, Herrington & Sutcliffe LLP51 West 52nd StreetNew York, New York 10019Tel: (212) 506-5000Fax: (212) [email protected]@[email protected] for Defendants BIH ASN LLC,Barclays Capital Real Estate Inc., andArchstone Equity Holdings Inc

6 Barclays does not consent to the entry of a final order by the Bankruptcy Court as to any of the reliefsought by Plaintiffs in this proceeding.


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