Patriot-BSP City Center II, LLC et al v. U.S. Bank National Association et al

REPLY to opposition to motion re MOTION for Temporary Restraining Order

D.D.C.June 2, 2010

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA Civil Division _________________________________________ : PATRIOT-BSP CITY CENTER II, LLC, et al., : C.A. No. 1:10-cv-00890-RMU : Plaintiff, : : v. : : U.S. BANK NATIONAL ASSOCIATION, et al., : : Defendants. : _________________________________________ : REPLY MEMORANDUM IN FURTHER SUPPORT OF PLAINTIFFS' MOTION FOR A TEMPORARY RESTRAINING ORDER Plaintiffs Patriot-BSP City Center II, LLC, Patriot-BSP City Center III, LLC, Patriot-BSP City Center IV, LLC, Patriot Equities, LP, Erik E. Kolar, Alan S. Werther, Michael C. Kolar, Timothy E. McKenna and Geoffrey C. Gardner, through undersigned counsel, respectfully submit this Reply Memorandum in Further Support of their Motion for a Temporary Restraining Order. A. SUMMARY OF GROUNDS FOR ISSUANCE OF A TRO Plaintiffs seek a temporary restraining order ("TRO") to enjoin a June 8, 2010 foreclosure sale at which defendants intend to sell plaintiffs' valuable and unique real estate, which is listed on the National Register of Historic Places. Given the uniqueness of the Property, and the imminence of the foreclosure sale – to be conducted less than six days after the filing of this Reply Memorandum – plaintiffs clearly have demonstrated that they will suffer certain, great, and actual irreparable harm in the absence of a TRO. Plaintiffs also have more than adequately demonstrated that they are likely to succeed on the merits of their claims – principally, that any "defaults" alleged by defendants as justification for the foreclosure sale were directly caused by Case 1:10-cv-00890-RMU Document 6 Filed 06/02/10 Page 1 of 25 2 defendants' own material breaches of the parties' Loan Agreement, such as refusing to fund construction draws which they had previously approved. At the very least, plaintiffs have demonstrated the existence of serious legal questions going to the merits of their claims – all that is needed to justify injunctive relief, particularly given the strength of defendants' showing of imminent irreparable harm. As for the balance of equities, defendants allege that the Property to be sold is worth "far less" than the purported amount of the debt, and proffer in support thereof an "appraisal report," prepared at the behest of defendants' counsel, which is facially incredible and is contradicted by the same appraiser's previous appraisal of the same property, as well as a binding written offer, made on June 1, 2010, from a third party who wishes to purchase the Property for an amount which exceeds the debt by millions of dollars and which is more than 2.3 times the "appraiser's" valuation. For all of these reasons, as set forth in greater detail in plaintiffs' Motion and below, plaintiffs respectfully request the entry of a TRO enjoining the June 8, 2010 foreclosure sale. B. PROCEDURAL BACKGROUND Plaintiffs commenced this action in the Superior Court of the District of Columbia on Monday, May 24, 2010, by filing a Verified Complaint together with the instant motion for a TRO (the "Motion"). Shortly after the action was commenced, the Superior Court ordered the parties to appear before the Judge in Chambers for a hearing on the Motion, which was scheduled for Tuesday, June 1, at 3:30 p.m. Late in the afternoon on Friday, May 28 – the eve of the long Memorial Day weekend – defendant U.S. Bank, N.A. ("U.S. Bank") served plaintiffs with a notice of removal, removing the action to this Court. Later that evening, this Court ordered defendants to file their opposition to the Motion by noon on June 1 – an Order with which no defendant other than U.S. Bank complied – and permitted plaintiffs to file this Reply Case 1:10-cv-00890-RMU Document 6 Filed 06/02/10 Page 2 of 25 3 Memorandum on June 2. Notably, defendants JP Morgan and Lawyers Title – both of which were served with process and consented in writing to the removal of this action to this Court – have not filed any opposition to the entry of a TRO. C. DEFENDANTS' SUBSTITUTION OF A SUCCESSOR TRUSTEE IS NO OBSTACLE TO THE ENTRY OF A TRO The Purchase Money Deed of Trust which purportedly entitles defendants to sell plaintiffs' unique and valuable real property at auction lists a single entity – defendant Lawyers Title Realty Services, Inc. ("Lawyers Title") – as the "Trustee" thereunder. See Deed of Trust (Exhibit B to the Complaint) at 1. From the date the Deed of Trust was executed in January 2008 until the afternoon of June 1, 2010, no defendant ever notified any of the plaintiffs that Lawyers Title had ceased serving as Trustee. Indeed, on May 28, U.S. Bank filed a "Consent to and Joinder in Removal" executed by Lawyers Title (a true and correct copy of which is attached hereto as Exhibit A) in which neither U.S. Bank nor Lawyers Title saw fit to notify plaintiffs or the Court that Lawyers Title has purportedly been replaced as Trustee. Instead, defendants waited until the afternoon of June 1, 2010 to notify plaintiffs, for the first time, that Lawyers Title was purportedly removed as Trustee, and that a successor Trustee was appointed, purportedly on April 15, 2010. See Defendant U.S. Bank's Opposition to the Motion ("U.S. Bank Mem.") at 3-4. In an apparent attempt at obfuscation and delay, U.S. Bank neither identified the substitute Trustee nor filed with the Court a copy of the instrument which accomplished the purported substitution. See id. at 3-4, 16, and 34 (asserting appointment of substitute Trustee but refusing to identify such Trustee). Plaintiffs have now obtained a copy of such instrument – a "Deed of Removal of Trustee and Appointment of Successor Trustee," a copy of which is attached hereto as Exhibit B, and have learned that the successor Trustee is one Stuart H. Gary, Esq., of the law firm of Gary & Regenhardt PLLC, Vienna, Virginia. Case 1:10-cv-00890-RMU Document 6 Filed 06/02/10 Page 3 of 25 4 Notably, despite U.S. Bank's repeated assertion that Mr. Gary was appointed as substitute Trustee on April 15, 2010, the Deed of Removal and Appointment makes plain that such appointment became effective only on May 5, 2010 – the very same day that U.S. Bank gave plaintiffs notice of the intended foreclosure sale. See Deed of Removal and Appointment (noting recordation of instrument on May 5, 2010); Deed of Trust (Exhibit B to the Complaint), § 1.16 (permitting appointment of successor Trustee "by a written instrument . . . recorded in" the District of Columbia"); Notice of Foreclosure (Exhibit I to the Complaint) (dated May 5, 2010). Upon learning of Mr. Gary's purported appointment as substitute Trustee, plaintiffs immediately amended their Complaint to name Mr. Gary as a defendant (in his capacity as substitute Trustee). A true and correct copy of plaintiffs' Verified First Amended Complaint (the "Amended Complaint") is attached hereto as Exhibit C. Plaintiffs' counsel also immediately contacted Mr. Gary to determine whether he would accept service of the Amended Complaint. See Declaration of Richard S. Julie, Esq. ("Julie Decl."), a true and correct copy of which is attached hereto as Exhibit D, ¶9. Mr. Gary agreed to accept service of the Amended Complaint, and stated that he had already received copies of the original Complaint, the Motion, and U.S. Bank's Memorandum in Opposition to the Motion. Id., ¶¶10-11. Mr. Gary – the Trustee who intends to sell plaintiffs' Property on June 8 – also stated that he had no objection to the entry of a TRO which would restrain him from conducting such sale, so long as he is bears no personal liability in connection therewith. Id., ¶12. Finally, Mr. Gary stated his intention to file a short brief or letter with the Court stating such non-opposition to the entry of a TRO. Id., ¶13. U.S. Bank asserts that plaintiffs' Motion for a TRO must be denied because it "has been asserted against the wrong party" – i.e., Lawyers Title. U.S. Bank Mem. at 16. Given defendants' surreptitious substitution of Mr. Gary as Successor Trustee, their argument is too Case 1:10-cv-00890-RMU Document 6 Filed 06/02/10 Page 4 of 25 5 cute by half; notably, plaintiff's Motion specifically seeks a TRO "enjoining defendants U.S. Bank, National Association, J.P. Morgan Chase Bank, National Association and Lawyers Title Realty Services, Inc. from selling the Property . . . at the scheduled June 8, 2010 foreclosure sale." In any event, U.S. Bank's argument has been rendered moot by the filing of the Amended Complaint which names Mr. Gary as a defendant. D. PLAINTIFFS HAVE ESTABLISHED THAT THEY WILL SUFFER CERTAIN, GREAT, AND ACTUAL IRREPARABLE HARM IN THE ABSENCE OF A TRO As this Court has held, The basis for injunctive relief in the federal courts has always been irreparable harm and the inadequacy of legal remedies. Wis. Gas Co. v. FERC, 758 F.2d 669, 674, 244 U.S. App. D.C. 349 (D.C. Cir. 1985) . . . . First, the injury must be both certain and great, actual and not theoretical. [Id.] at 674; see also Ashland Oil, Inc. v. FTC, 409 F. Supp. 297, 307 (D.D.C. 1976), aff'd, 179 U.S. App. D.C. 22, 548 F.2d 977 (D.C. Cir. 1976) . . . (the party seeking injunctive relief must show that "[t]he injury complained of [is] of such imminence that there is a 'clear and present' need for equitable relief to prevent irreparable harm."). Second, the harm must be irreparable, in that the harm cannot be remedied solely with monetary damages. Wis. Gas Co., 758 F.2d at 674. "Mere injuries, however substantial, in terms of money, time and energy necessarily expended in the absence of a stay are not enough." Id. Monument Realty LLC v. WMATA, 540 F. Supp. 2d 66, 74–75 (D.D.C. 2008). U.S. Bank asserts that a TRO should not be entered because "other than a request for injunctive relief, . . . all of the relief sought in Plaintiff's Complaint is entirely economic." U.S. Bank Mem. at 13-14 (emphasis added). U.S. Bank goes on to assert – irrelevantly – that such "economic . . . injuries are not irreparable" and that "equity will not interfere to restrain the breach of a contract." Id. at 14. None of these arguments address – much less refute – the irreparable harm which plaintiffs will suffer in the absence of a TRO. Unless they are enjoined, defendants plan to sell plaintiffs' valuable and unique real estate, the former Hecht Company Warehouse, at a thinly- Case 1:10-cv-00890-RMU Document 6 Filed 06/02/10 Page 5 of 25 6 advertised auction on June 8, 2010, in the midst of the most severe recession to hit the economy in general – and the real estate market in particular – in generations. As alleged in the Verified Complaint and the Amended Complaint, this Property – the principal asset of plaintiffs Patriot- BSP City Center II, LLC, Patriot-BSP City Center III, LLC, and Patriot-BSP City Center IV, LLC (collectively, the "Borrowers") – is a unique and historically significant art deco "Streamline Moderne" building which is listed on the National Register of Historic Places. See National Park Service Certification Form, a true and correct copy of which is attached hereto as Exhibit E (certifying entry of Hecht Company Warehouse on National Register due to its "innovative Streamline Moderne architecture, early and extensive use of glass block, and importance to the city's economic heritage"); see also plaintiffs' marketing materials for the Property (attached hereto as Exhibit F) (showing graphic rendition of the Property upon completion of renovations). This Court and the District of Columbia Court of Appeals have long held that "[w]hen land is the subject matter of the agreement, the legal remedy is assumed to be inadequate, since each parcel of land is unique." Tauber v. Quan, 938 A.2d 724, 732 (D.C. 2007) (quoting Flack v. Laster, 417 A.2d 393, 400 (D.C. 1980)); see also Monument Realty, 540 F. Supp. 2d at 75 (same); Peterson v. D.C. Lottery & Charitable Control Bd., 1994 U.S. Dist. LEXIS 10309, *14 (D.D.C. July 28, 1994) ("It is settled beyond the need for citation . . . that a given piece of property is considered to be unique, and its loss is always an irreparable injury"); United Church of the Med. Ctr. v. Med. Ctr. Comm'n, 689 F.2d 693, 701 (7th Cir. 1982) (same); Salmon v. Old Nat'l Bank, 2010 U.S. Dist. Lexis 35056, *11 (W.D. Ky. Apr. 9, 2010) (same); Bennett v. Dunn, Case 1:10-cv-00890-RMU Document 6 Filed 06/02/10 Page 6 of 25 7 504 F.Supp. 981, 986 (D.Nev. 1980) ("Property is always unique under the general principles of the law of equity and its possible loss or destruction usually constitutes irreparable harm").1 The fact that plaintiffs bring separate claims against the various defendants for breaches of various contracts, violations of the Equal Credit Opportunity Act, and other declaratory and equitable relief is irrelevant to the central issue before the Court on this Motion – irreparable harm. Plaintiffs will suffer irreparable harm if the foreclosure sale is not enjoined. This harm is both "certain and great," and is imminent. As U.S. Bank concedes, it is planning to sell the Property at auction less than six days from now, "on June 8, 2010 at 12:30 p.m." U.S. Bank Mem. at 12. The threat of a foreclosure sale of real property is presumptively irreparable harm. See Peterson, 1994 U.S. Dist. Lexis 10309 at *14 ("That [plaintiff] will suffer irreparable harm if he is not granted the temporary restraining order is not in doubt. Failure to [enter the TRO] will result in foreclosure of real property . . . It is settled beyond the need for citation . . . that a given piece of property is considered to be unique, and its loss is always an irreparable injury."); Monument Realty, 540 F.Supp.2d at 76 ("Because the Bus Garage is real property that is valued for its uniqueness, the Court concludes that the plaintiffs have established that the harm here cannot be remedied with monetary damages alone, and is thus irreparable"). Moreover, developments which have transpired since the Motion was filed have only reinforced the irreparable nature of the harm which plaintiffs will suffer if the foreclosure sale is not enjoined. Plaintiffs have been negotiating with a proposed purchaser of the Property (the "Purchaser") who, on June 1, 2010, tendered to plaintiffs a binding, written offer to purchase the Property for an amount that is far in excess of both the principal balance of the Loan and the 1 See also Douglas v. Lyles, 841 A.2d 1, 9 n. 4 (D.C. App. Ct. 2004) (quoting Coburn v. Heggestad, 817 A.2d 813, 823 (D.C. 2003), in turn quoting 1010 Potomac Assoc. v. Grocery Mfrs. of Am., Inc., 485 A.2d 199, 212 (D.C. 1984)). Case 1:10-cv-00890-RMU Document 6 Filed 06/02/10 Page 7 of 25 8 amount (approximately $39 million) which defendants contend is owed under the Loan Documents. See Julie Decl., ¶¶14-16. Given the present uncertainty surrounding the Property – including the threat of the imminent foreclosure sale – plaintiffs have not yet accepted the Purchaser's offer, though they retain the right to do so. Given defendants' assertion that they may sell the Property at auction for a pittance, and then seek recourse against the guarantor plaintiffs for any deficiency, the threatened loss of this opportunity to sell the Property to the Purchaser for a profit constitutes irreparable harm which is more than adequate to justify the entry of a temporary restraining order.2 E. PLAINTIFFS HAVE ADEQUATELY ESTABLISHED A LIKELIHOOD OF SUCCESS ON THE MERITS SUFFICIENT TO JUSTIFY A TRO As the Court of Appeals for the D.C. Circuit has long held, a party seeking preliminary injunctive relief "need not establish an absolute certainty of success: It will ordinarily be enough that the plaintiff has raised serious legal questions going to the merits, so serious, substantial, [and] difficult as to make them a fair ground of litigation and thus for more deliberative investigation." Population Inst. v. McPherson, 797 F.2d 1062, 1078 (D.C. Cir. 1986) (citations omitted). Thus, "[t]he likelihood of success on the merits that a movant for injunctive relief must demonstrate varies with the quality and quantum of harm that it will suffer from the denial of an injunction." United Mine Workers v. Int'l Union, United Mine Workers, 412 F.2d 165, 168 (D.C. Cir. 1969). Under this flexible approach, "a movant need not always establish a high probability of success on the merits. Probability of success is inversely proportional to the degree of irreparable injury evidenced. A stay may be granted with either a high probability of success and some injury, or vice versa." Cuomo v. United States NRC, 772 F.2d 972, 974 (D.C. Cir. 1985); 2 Moreover, the Purchaser's binding offer to purchase the Property for an amount far in excess of the debt drives a stake through the heart of U.S. Bank's argument that the value of the Property is far less than the purported amount of debt. See U.S. Bank Mem. at 36. Case 1:10-cv-00890-RMU Document 6 Filed 06/02/10 Page 8 of 25 9 see also Population Inst., 797 F.2d at 1078 (applying Cuomo standard to motion for injunction and holding that "[i]njunctive relief may be granted with either a high likelihood of success and some injury, or vice versa "); Davenport v. Int'l Bhd. of Teamsters, 166 F.3d 356, 360–61 (D.C. Cir. 1999) (holding that factors underlying preliminary injunction analysis "interrelate on a sliding scale and must be balanced against each other"); Mylan Labs., Inc. v. Leavitt, 495 F. Supp. 2d 43, 47 (D.D.C. 2007) ("a movant need not always establish a high probability of success on the merits, as a particularly strong showing of irreparable injury or some other combination of factors may warrant a stay"). Given the strong likelihood of imminent irreparable harm demonstrated by plaintiffs – as set forth above – plaintiffs need only establish the existence of "serious legal questions going to the merits" to satisfy the "likelihood of success" prerequisite to issuance of a TRO. Population Inst., 797 F.2d at 1078; see also Monument Realty, 540 F. Supp. 2d at 75 ("it will ordinarily be enough that the plaintiff has raised questions going to the merits so serious, substantial, difficult and doubtful, as to make them a fair ground for litigation and thus for more deliberative investigation" (quoting WMATA v. Holiday Tours, Inc., 559 F.2d 841, 841 (D.C. Cir. 1977)).3 Plaintiffs have more than amply demonstrated the existence of such "serious questions." 3 Notably, the Court of Appeals for the Second Circuit, which applies the same "serious questions" standard as the D.C. Circuit, recently held (citing Davenport) that this standard remains in effect even after the Supreme Court's recent trilogy of preliminary injunction decisions in Winter v. NRDC, Inc., 129 S. Ct. 365 (2008), Munaf v. Geren, 553 U.S. 674 (2008), and Nken v. Holder, 129 S. Ct. 1749 (2009). See Citigroup Global Mkts., Inc. v. VCG Special Opportunities Master Fund, Ltd., 598 F.3d 30, 37 (2d Cir. 2010) ("The Supreme Court's recent opinions in Munaf, Winter, and Nken have not undermined its approval of the more flexible approach . . . None of the three cases comments at all, much less negatively, upon the application of a preliminary injunction standard that softens a strict 'likelihood' requirement in cases that warrant it"). Similarly, Chief Judge Walker of the Northern District of California recently held that, even after Winter, a preliminary injunction remains appropriate "where irreparable injury is likely and imminent – for example, in the case of imminent foreclosure . . . – and the plaintiff Case 1:10-cv-00890-RMU Document 6 Filed 06/02/10 Page 9 of 25 10 1. Plaintiffs Have Demonstrated Serious Questions Concerning Defend- ants' Material Breaches of the Loan Agreement – Which Would Excuse Any "Default" by Plaintiffs and Would Bar a Foreclosure Sale Plaintiffs' Motion amply demonstrated that plaintiffs are likely to succeed on the merits of – and, at the very least, have raised serious questions regarding – defendants' material breaches of the Loan Agreement and other Loan Documents. These material breaches pre-date any purported "defaults" by plaintiffs, and therefore excuse any such "defaults." See, e.g., Rosenthal v. Sonnenschein Nath & Rosenthal, LLP, 985 A.2d 443, 452 (D.C. App. Ct. 2009) (it is a "basic principle of contract law” that a party "is excused from performance under a contract if the other party is in material breach thereof”). In particular, plaintiffs alleged that U.S. Bank and JP Morgan materially breached the Loan Agreement by refusing to fund plaintiffs' Draw Request No. 11 – that is, by refusing to loan to plaintiffs the funds which they had agreed to loan. It is undisputed that: a. Plaintiffs submitted Draw Request No. 11 – in the amount of $1,190,714.25 – to U.S. Bank (as a Lender and Agent) on March 16, 2009 (see Exhibit F to the Complaint);' b. Draw Request No. 11 included $409,291 for payment to Davis under the Davis Contract, which U.S. Bank had previously approved (see id.); c. U.S. Bank unconditionally approved Draw Request No. 11 on March 30, 2009 (see Exhibit G to the Complaint (e-mail from vice president of U.S. Bank stating "I have approved the draw on my end"); d. JP Morgan then approved Draw Request No. 11 on the same date (see Exhibit N to U.S. Bank Mem. ("JP Morgan Chase has confirmed that they will release their portion of the draw"); and e. U.S. Bank and JP Morgan ultimately failed to fund Draw Request No. 11 in full (see U.S. Bank Mem. at 18). has demonstrated a serious merits issue but may be unable to determine a likelihood of success on the merits." Sharma v. Provident Funding Assocs., LP, 2010 U.S. Dist. Lexis 1407, *3 (N.D. Cal. Jan. 8, 2010). Case 1:10-cv-00890-RMU Document 6 Filed 06/02/10 Page 10 of 25 11 U.S. Bank now seeks to muddy this issue by raising non-existent "defaults" and newly- asserted excuses for defendants' failure to comply their funding obligations under the Loan Agreement. U.S. Bank asserts that it was entitled to renege on its obligation and agreement to fund Draw Request No. 11 because the Loan was not "in Balance," as purportedly evidenced by plaintiffs' request that funds be reallocated from the over-funded Interest Reserve to cover a purported shortfall in the operating expense reserve. See id. This argument finds no support in the Loan Agreement, which states that the "Loan is in Balance if all remaining unpaid costs of the Property . . . including the Reserves, do not exceed the amount of the Loan proceeds not yet advanced by the Lenders." Loan Agreement (Exhibit A to the Complaint), § 3.2. That is, for purposes of determining whether the Loan is in Balance, the Loan Agreement requires the various Reserves to be aggregated. U.S. Bank's assertion that the Interest Reserve was over- funded and that the operating expense reserve was under-funded – even if proven – does not establish that the Loan was out of Balance, unless the under-funding was greater than the over- funding – which U.S. Bank does not even allege to have been the case.4 In any event, U.S. Bank concedes that it agreed to reallocate the funds among the various Reserves, thus bringing the Loan into Balance as of March 2009 – at which time the Bank nevertheless stopped funding the Loan. See U.S. Bank Mem. at 18. As set forth in the Motion, U.S. Bank's and JP Morgan's unjustified and unlawful refusal to disburse any Loan funds from and after April 2009 – their material breach of their Agreement to loan such funds – resulted in a cascade of purported "defaults" by plaintiffs which the banks have now used to justify their attempt to steal the Property through an unlawful foreclosure sale. 4 Notably, Section 3.2 of the Loan Agreement requires U.S. Bank, if it determines that any Reserve is insufficiently funded, to give notice to plaintiffs, who then have three days to cure any such deficiency. U.S. Bank does not even allege that it complied with this requirement of the Loan Agreement – because it did not. Case 1:10-cv-00890-RMU Document 6 Filed 06/02/10 Page 11 of 25 12 The purpose of the Loan was to provide plaintiffs with the funds necessary to redevelop the Property and make it suitable for leasing or sale to third parties. See Loan Agreement, § 1.1 ("Lender . . . agrees to lend to Borrower . . . the proceeds of the Loan . . . for the purpose of refinancing the acquisition costs of the Property, leasing the Improvements, performing the Renovations, paying interest on the Loan, and otherwise paying the approved costs set forth in the Sworn Construction Cost Statement"). Specifically, the Loan Agreement provides that: a. Interest on the Loan shall be paid from the proceeds of the Loan (id., § 3.1, Fourth Paragraph); b. Construction costs shall be paid from the proceeds of the Loan (id., § 3.6(c)); c. Real estate taxes shall be paid from the proceeds of the Loan (id., § 3.6(h)); and d. Other indirect (non-construction) items (including, without limitation, utility bills) shall be paid from the proceeds of the Loan (id.). U.S. Bank asserts that plaintiffs defaulted under the Loan Agreement – purportedly entitling defendants to sell the Property at the impending foreclosure sale – by failing to pay interest on the Loan, failing to pay real estate taxes, failing to pay construction costs, and failing to make certain "swap payments." U.S. Bank Mem. at 8-9. But each and every one of these payments which plaintiffs were purportedly required to make and purportedly failed to make were to be paid from the Loan proceeds which defendants unilaterally and unlawfully refused to disburse. Both at law and in equity, the Lenders may not be heard to complain of "defaults" by plaintiffs which were caused in toto by the Lenders' own defaults under the Loan Agreement.5 At the very least, these constitute "serious legal questions going to the merits" sufficient to 5 For the same reason, U.S. Bank's assertion that plaintiffs "defaulted" by suffering the imposition of mechanics' liens on the Property (U.S. Bank Mem. at 11) is belied by the fact that such liens were imposed because U.S. Bank breached its obligation to fund payments to the general contractor and sub-contractors under construction contracts which U.S. Bank had approved in advance. Case 1:10-cv-00890-RMU Document 6 Filed 06/02/10 Page 12 of 25 13 justify a TRO to maintain the status quo pending a full hearing on the parties' competing claims and allegations. Similarly, U.S. Bank asserts that plaintiffs defaulted under the Loan Agreement by failing to meet a Leasing Hurdle, which required that a certain percentage of the Property be leased to third parties by a certain date.6 But U.S. Bank concedes that the Property "needs approximately $200,000 in repairs to complete renovations so that it can be leased." U.S. Bank Mem. at 11 (emphasis added). That is, U.S. Bank asserts that certain construction work needs to be done at the Property to render it suitable for leasing; concedes that the Loan Agreement provides (at § 3.6(c)) that such construction costs were to be paid from the Loan proceeds; concedes that U.S. Bank and JP Morgan have refused to disburse the Loan Proceeds; and argues that the Borrower 6 U.S. Bank repeatedly asserts that plaintiffs have "acknowledged" their purported "default" with respect to the Leasing Hurdle. See, e.g., U.S. Bank Mem. at 3, 7, 20, & 34. Its sole support for this allegation is a settlement communication letter (Exhibit O to the U.S. Bank Mem.) which explicitly stipulates, at paragraph 6, as follows: Inadmissible Evidence. All evidence of conduct and communications of any nature whatsoever (whether verbal or nonverbal, or express or implied) of any party in connection with the discussions contemplated by this agreement or in any meetings or correspondence relating to a possible modification of the Loan shall be inadmissible for any purpose whatsoever in any judicial or similar proceeding. The foregoing sentence is intended to be broader than the restrictions on admissibility contained in Rule 408 of the Federal Rules of Evidence and District of Columbia law. U.S. Bank's filing and repeated reliance on this document, which it agreed would be "inadmissible for any purpose whatsoever in any judicial or similar proceeding," is a gross breach of its obligations stated therein. The Court should lend no credence to U.S. Bank's assertion that plaintiffs "acknowledged" any Leasing Hurdle "default." While plaintiffs do concede that the Leasing Hurdle has not been satisfied, such failure is attributable entirely to defendants' breaches of the Loan Agreement, and thus is not a "default" by plaintiffs. Case 1:10-cv-00890-RMU Document 6 Filed 06/02/10 Page 13 of 25 14 therefore has somehow breached its obligation to lease the premises.7 Though U.S. Bank's position is obviously without merit, at the very least, these dueling allegations demonstrate "serious legal questions going to the merits" sufficient to justify the imposition of a TRO. There can be no legitimate, principled dispute over the fact that the defendant Lenders breached their obligations under the Loan Documents by failing to fund the construction draw that they had already approved.8 Of course, the failure to fund the draw had the predictable domino effect. Contractors went unpaid, and ultimately filed liens and then lawsuits. Taxes went unpaid. Utilities went unpaid and, importantly for purposes of this Motion, leasing prospects came to a grinding halt. While U.S. Bank makes much of the fact that the Borrowers were unable to achieve the April 2009 Leasing Hurdle, the undisputed fact is that defendants never declared a default on that basis until October 2009. See U.S. Bank Mem. at 9 (describing October 21, 2009 "Notice to Cure"). By that time, following seven months of the Lenders' refusal to fund any monies under 7 U.S. Bank's assertion that it was not obligated to fund "tenant improvements" at the Property (U.S. Bank Mem. at 19) is simply a red herring, given that (a) plaintiffs have made no claims with respect to tenant improvements and (b) plaintiffs never submitted any draw requests to the Lenders for any funding for tenant improvements. The Davis Contract, which U.S. Bank approved and then refused to fund, was for general construction and repairs ("Renovation work" under § 3.6(c) of the Loan Agreement), not for Tenant Improvements under § 3.8 of the Loan Agreement. 8 U.S. Bank's argument that it was not obligated to fund the draw because the Loan was not "in Balance" is belied by the factual history and, indeed, by the documents that U.S. Bank has submitted in opposition to plaintiffs' Motion. Thus, while it is true that, according to the banks' calculations, the Loan was not "in Balance” as of March 23, 2009 (see Exhibit 1.M to U.S. Bank Mem.), plaintiffs had over-funded the interest reserve, and had requested that such over-funding be transferred to fund the draw request. See Exhibit L to U.S. Bank Mem. U.S. Bank agreed to do so. See U.S. Bank Mem. at 18. Thereafter on March 30, 2009, the defendant Lenders expressly agreed to fund the draw, which they had approved weeks earlier. Case 1:10-cv-00890-RMU Document 6 Filed 06/02/10 Page 14 of 25 15 the Loan Agreement, defendants had succeeded in creating a default and rendering it virtually impossible for plaintiffs to meet the Leasing Hurdle.9 Defendants ignore the "cure rights” that the parties had negotiated. First, the Loan Agreement provides that a failure by the Borrower to achieve the Leasing Hurdle would only constitute an event of default "within twenty (20) days after receipt of written notice that such obligation was not performed." Loan Agreement, § 6.1(c). In this case, it is undisputed that no written notice of default relative to the Leasing Hurdle was sent on April 10, 2009 or within any reasonable time thereafter. If a notice had been served on April 10, 2009, the Loan Agreement further states that "if cure cannot reasonably be effected within such twenty (20) day period, such failure shall not be an event of default hereunder so long as Borrower promptly (and in any event, within ten (10) days after receipt of such notice) commences cure, and thereafter diligently (in any event, within forty five (45) days after receipt of such notice) prosecutes such cure to completion." Id. (emphasis added). Under such circumstances, U.S. Bank's reliance upon the Leasing Hurdle provision is curious at best. No default was declared for failure to meet the Leasing Hurdle in April 2009. Had such a default been declared, defendants would have been entitled to liberal cure opportunities. However, the cure necessarily would have entailed the Lenders' living up to their obligations under the Loan Documents, including funding the construction draws that they had already approved. By failing to do so, defendants sounded the death knell, resulting in unpaid 9 Indeed, contrary to defendants' unsubstantiated contentions, plaintiffs had substantial, viable leasing prospects. Indeed, the Architect of the Capitol had submitted an RFP and ultimately had negotiated a lease for approximately 90,000 square feet at the Project. Although it was fully negotiated and ready to be signed, approval of that lease needed to wend its way through a separate approval process at the GSA – which ultimately broke down when defendants brought the renovations to a halt by unlawfully cutting off funding. Case 1:10-cv-00890-RMU Document 6 Filed 06/02/10 Page 15 of 25 16 contractors, taxes, utilities and most importantly for purposes of this motion, the elimination of leasing opportunities. Plainly, defendants are estopped from relying on the Leasing Hurdle as a default; indeed, having created the conditions they complain of, defendants are estopped from asserting any default at all. 2. Plaintiffs Have Demonstrated Serious Questions Concerning Defendants' Tortious Conversion of $10 Million of Plaintiffs' Funds Plaintiffs have asserted a claim against U.S. Bank and JP Morgan for tortious conversion of $10 million held by U.S. Bank in a "Blocked Account" and under a Letter of Credit (the "LOC"). U.S. Bank asserts that plaintiffs are unlikely to succeed on the merits of this claim because (a) the Blocked Account (accounting for $8 million of the converted funds) is owned by Buchanan (a non-party which owns 86% of the membership interests in the three plaintiff LLCs); (b) defendants were entitled to seize the $10 million due to plaintiffs' purported defaults; and (c) a bank that wrongfully seizes money held in a depositor's account can be held liable only for breach of contract, not for the tort of conversion. See U.S. Bank Mem. at 21-26. None of these arguments has any merit. Addressing them in reverse order, the law is clear that a defendant is liable for tortious conversion where it "unlawful[ly] exercise[s] ownership, dominion or control over the personal property of another in denial or repudiation of his rights thereto.' " Cuneo Law Group, P.C. v. Joseph, 669 F. Supp. 2d 99, 123 (D.D.C. 2009) (quoting Duggan v. Keto, 554 A.2d 1126, 1137 (D.C. 1989)). This Court and the D.C. Circuit have upheld conversion claims brought by depositors who alleged wrongful seizure of deposited funds by banks. See, e.g., Muir v. Navy Fed. Credit Union, 529 F.3d 1100, 1111 (D.C. Cir. 2008) (affirming summary judgment in favor of depositor on his conversion claim against Bank which wrongfully set off funds held in deposit account). Case 1:10-cv-00890-RMU Document 6 Filed 06/02/10 Page 16 of 25 17 U.S. Bank's second argument – that it was entitled to seize the $10 million in funds from the Blocked Account and the LOC due to plaintiffs' purported "defaults" under the Loan Agreement – must be rejected, at least at this stage, for the reasons set forth above. Each and every purported "default" by plaintiffs was directly and proximately caused by the defendant Lenders' own defaults on their obligations to fund the Loan. As set forth at length above, plaintiffs have, at the very least, more than adequately demonstrated "serious legal questions going to the merits" of the default issue sufficient to justify the imposition of a TRO. Finally, U.S. Bank asserts that plaintiffs' conversion claim is unlikely to succeed because plaintiffs purportedly "do not have any viable claim relating to monies in the Blocked Account," which were deposited in such account by Buchanan. See U.S. Bank Mem. at 22.10 This argument is belied by the very Loan Documents which plaintiffs are alleged to have breached. The Blocked Account was created pursuant to Section 5 of the Modification Agreement (Exhibit 1.G to the U.S. Bank Mem.), which provides that "Borrower" – i.e., plaintiffs Patriot- BSP City Center II, LLC, Patriot-BSP City Center III, LLC, and Patriot-BSP City Center IV, LLC – "shall deposit, or cause to be deposited, $8,000,000 . . . into one or more U.S. Bank controlled blocked bank accounts held by [U.S. Bank] on behalf of the Lenders." It further provides that "Borrower hereby grants to [U.S. Bank] a first priority security interest in . . . [the] Blocked Account." Modification Agreement, § 5. Finally, it provides that "Amounts held by [U.S. Bank] in any Blocked Account . . . shall be credited towards the satisfaction of the Patriot and Principals Guarantors' Liquidity requirement set forth in the Patriot and Principals' Guaranty. . . . Additionally, amounts . . . applied by [U.S. Bank] out of the Blocked Account toward amounts owing under the Loan . . . shall be credited against the maximum principal amount 10 Notably, this argument does not apply to plaintiffs' $2 million Letter of Credit, which the defendant Lenders unlawfully liquidated. Case 1:10-cv-00890-RMU Document 6 Filed 06/02/10 Page 17 of 25 18 guaranteed under the Patriot and Principals Repayment Guaranty." Id., § 8. The "Patriot and Principals Guarantors" are plaintiffs Patriot Equities, LP, Erik E. Kolar, Alan S. Werther, Michael C. Kolar, Timothy E. McKenna and Geoffrey C. Gardner. The "Patriot and Principals Repayment Guaranty" is the document identified in the Complaint as the "Patriot Guaranty," which is attached to the Complaint as Exhibit C. Regardless of who owns formal title to the Blocked Account, the Modification Agreement makes plain that beneficiaries of the Blocked Account are the plaintiffs in this action. 3. Plaintiffs Have Demonstrated Serious Questions Concerning Defendants' Violations of the Equal Credit Opportunity Act With respect to plaintiffs' claim for violations of the Equal Credit Opportunity Act, 15 U.S.C. § 1691 et seq. ("ECOA"), U.S. Bank concedes that plaintiffs' claim is timely (U.S. Bank Mem. at 32, n.6) and that both Washington Mutual Bank (now JP Morgan) and U.S. Bank itself demanded that the plaintiff guarantors obtain guarantees from their respective spouses in connection with the Loan Agreement and the syndication thereof. See id. at 32 ("U.S. Bank requested the spousal guarantee"); id. at 31 ("Washington Mutual . . . provided Plaintiffs again with the choice to either have their spouses sign off on the guarantees or provide additional collateral"). Under ECOA, a lender may require a co-signer or co-guarantor where the principal borrower or guarantor is not sufficiently credit-worthy. Despite U.S. Bank's protestations to the contrary, however, it is crystal-clear that a lender violates ECOA when it demands that a borrower's or guarantor's spouse – as opposed to any other credit-worthy person or entity – co- sign a loan or guaranty. U.S. Bank concedes that it demanded spousal guarantees, and asserts that such conduct was lawful, despite the fact that U.S. Bank has made these same arguments – unsuccessfully – in prior litigation. See Boyd v. U.S. Bank, N.A., 2007 U.S. Dist. Lexis 72455, *16 (D. Kans. Case 1:10-cv-00890-RMU Document 6 Filed 06/02/10 Page 18 of 25 19 Sept. 26, 2007) ("When an individual applicant fails to meet the creditor's standards 'the creditor may require a cosigner, guarantor, endorser, or similar party – but cannot require that it be the spouse" (emphasis in original) (quoting Official Comment to 12 C.F.R. § 202.7(d), 68 Fed. Reg. 13,144)). Indeed, just days ago, the Iowa Supreme Court reaffirmed this black-letter law, holding that "section 202.7(d) bars a creditor from requiring the signature of a guarantor's spouse." Bank of the West v. Kline, 2010 Iowa Sup. Lexis 43, *12 (Iowa May 14, 2010). ECOA makes it "unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction . . . on the basis of . . . marital status . . . or . . . because the applicant has in good faith exercised any right under this chapter." 15 U.S.C. § 1691(a). Under the Federal Reserve System Board of Governors' Regulation B, 12 C.F.R. Part 202, a guarantor is considered an "applicant," and requiring a spousal guarantee constitutes "discrimination on the basis of marital status." See, e.g., Boyd; Bank of the West; FDIC v. Medmark, Inc., 897 F.Supp. 511 (D. Kans. 1995). Defendants in this action admit that they demanded spousal guarantees from the Guarantor Plaintiffs. See U.S. Bank Mem. at 31-32. They concede that such Guarantors refused to provide spousal guarantees – i.e., that such Guarantors "exercised [their] right[s] under" ECOA. See id. at 29-30. And they concede that they provided plaintiffs with a Hobson's Choice – "either to have their spouses sign off on the guarantees or provide additional collateral. Again, the decision was entirely Plaintiffs' to make – they had every right to walk away and not agree to the syndication." Id. at 31. That is, defendants concede that they gave plaintiffs the option of (a) agreeing to an ECOA violation; (b) torpedoing the syndication, which would have required plaintiffs to pay $18 million in cash within ten days; or (c) posting $10 million of additional collateral. This "choice" was no choice at all – it was a penalty for plaintiffs' good-faith exercise of their rights under ECOA. Plaintiffs Case 1:10-cv-00890-RMU Document 6 Filed 06/02/10 Page 19 of 25 20 have more than adequately demonstrated serious questions going to the merits of their ECOA claim sufficient to justify a TRO. F. THE BALANCE OF EQUITIES FAVORS PLAINTIFFS Plaintiffs asserted in their Motion that the balance of equities favors plaintiffs, given that they stand to lose their Property at a thinly-advertised foreclosure sale where the successful bidder will most likely be defendant U.S. Bank, and that defendants, by contrast, are attempting to collect a debt secured by the Property after declaring "defaults" which were caused by defendants themselves. In response, U.S. Bank unsurprisingly asserts that the balance of equities favors denial of plaintiffs' Motion because "[t]he present fair market value of the . . . Property, which constitutes U.S. Bank's security interest for its Loan, is worth [sic] far less than the amount owed by Defendants." U.S. Bank Mem. at 36. This amount, U.S. Bank contends, is approximately $39 million (the "Purported Balance"). See id. at 1. Plaintiffs' Complaint referenced (but did not attach) an appraisal report, prepared on U.S. Bank's behalf, opining that the Property had an “as is” value, as of October 8, 2007, of approximately $87,000,000. A true and correct copy of this Report (the "October 2007 Appraisal") is attached hereto as Exhibit I. U.S. Bank now asserts that this same Property which was worth $87 million in October 2007 "is worth far less than" $39 million today. U.S. Bank Mem. at 36. In support of this assertion, U.S. Bank has filed a new appraisal report (the "March 2010 Appraisal") under seal. This March 2010 Appraisal, according to its cover page, was "Prepared For: Mr. Edward F. Schiff, Esq." of the Sheppard Mullin law firm – U.S. Bank's counsel in this action and related litigation concerning the Property and the Loan. That is, the March 2010 Appraisal was prepared at counsel's behest for purposes of litigation; it is not a business record created in the ordinary course of business. Case 1:10-cv-00890-RMU Document 6 Filed 06/02/10 Page 20 of 25 21 Remarkably, the March 2010 Appraisal – opining that the Property is now worth "far less than" $39 million – was prepared by the same appraiser who opined in October 2007 that the Property had an "as is" value of $87 million. This precipitous decline in value, according to U.S. Bank's hired gun, is "due to declining market conditions and the impact of the ongoing global financial crisis." See March 2010 Appraisal at 2. This assertion is belied by the most basic recollection of news headlines from the past few years. By October 2007 (the date of the $87 million appraisal) and January 2008 (when the Loan closed), the "global financial crisis" was already in full swing. Indeed, on October 15, 2007 – merely one week after the $87 million appraisal was prepared – Federal Reserve Chairman Benjamin Bernanke gave a speech at the Economic Club of New York, titled "The Recent Financial Turmoil and its Economic and Policy Consequences," noting: The past several months have been an eventful period for the U.S. economy. In financial markets, sharpened concerns about credit quality induced a retrenchment by investors, leading in some cases to significant deterioration in market functioning. . . . [C]redit became harder to obtain and, for those who could obtain it, more costly. Tightening credit conditions . . . threatened to intensify the ongoing correction in the housing market and to restrain economic growth. . . . [S]ince early this year, investors have become increasingly concerned about the credit quality of mortgages, especially subprime mortgages. The rate of serious delinquencies has risen notably for subprime mortgages with adjustable rates, reaching nearly 16 percent in August, roughly triple the recent low in mid-2005. . . . The problems in the mortgage-related sector reverberated throughout the financial system and particularly in the market for asset-backed commercial paper (ABCP). In this market, various institutions have established special-purpose vehicles to issue commercial paper to help fund a variety of assets, including some private-label mortgage-backed securities, mortgages warehoused for securitization, and other long-maturity assets. Investors had typically viewed the commercial paper backed by these assets as quite safe and liquid, because of the quality of the collateral and because the paper is often supported by banks' commitments to provide lines of credit or to assume some credit risk. But the Case 1:10-cv-00890-RMU Document 6 Filed 06/02/10 Page 21 of 25 22 concerns about mortgage-backed securities and structured credit products (even those unrelated to mortgages) greatly reduced the willingness of investors to roll over ABCP, particularly at maturities of more than a few days. The problems intensified in the second week of August after the announcement by a large overseas bank that it could not value the ABCP held by some of its money funds and was, as a result, suspending redemptions from those funds. Some commercial paper issuers invoked their right to extend the maturity of their paper, and a few issuers defaulted. In response to the heightening of perceived risks, investors fled to the safety and liquidity of Treasury bills, sparking a plunge in bill rates and a sharp widening in spreads on ABCP. The retreat by investors from structured investment products also affected business finance. In particular, issuance of collateralized loan obligations (CLOs) and collateralized debt obligations (CDOs), which in turn had been major buyers of leveraged syndicated loans, fell off significantly during the summer. Demand for leveraged loans slowed sharply, reducing credit access for private equity firms and other borrowers seeking to finance leveraged buyouts (LBOs).11 Chairman Bernanke was not alone in late 2007 in noting the ongoing economic crisis. By June 2007, Bear Stearns was notoriously in deep financial trouble, resulting from severe declines in the value of billions of dollars worth of collateralized debt obligations it held.12 The collapse of Bear Stearns' hedge funds "sent[] shudders through Wall Street."13 On March 14, 2008 – mere weeks after the Loan closed – the Federal Reserve Bank of New York agreed to provide Bear Stearns with a $25 billion bailout loan. Two days later, Bear Stearns agreed to be acquired by defendant JP Morgan for two dollars per share – a 99% discount to its trading price a year 11 See Bernanke Remarks, available at http://www.federalreserve.gov/newsevents/speech/bernanke20071015a.htm 12 See Julie Creswell, $3.2 Billion Move by Bear Stearns to Rescue Fund, N.Y. TIMES, June 23, 2007 (available at http://www.nytimes.com/2007/06/23/business/23bond.html). 13 See Mark Pittman, Bear Stearns Fund Collapse Sends Shock Through CDOs, BLOOMBERG, June 21, 2007 (available at http://tinyurl.com/BloombergBearStearns). Case 1:10-cv-00890-RMU Document 6 Filed 06/02/10 Page 22 of 25 23 earlier.14 Meanwhile, Fannie Mae and Freddie Mac were deep in crisis beginning in the summer of 2007.15 In short, the global economic crisis was well underway and well-publicized by October 2007, when the appraiser opined that plaintiffs' Property had an "as is" value of $87 million. The same appraiser now asserts that the same Property is now worth "far less than" $39 million due to the "impact of the ongoing global financial crisis." March 2010 Appraisal at 2. Plaintiffs submit that a credibility crisis – or an intellectual honesty crisis – is the more likely cause of the discrepancy between the appraiser's two reports. In any event, the appraiser's conclusion as to the Property's value is belied by the fact that a ready, willing, and able Purchaser has now offered to purchase the Property for an amount which exceeds the Purported Balance by millions of dollars, and which is more than 2.3 times the purported "current market value" stated by the "appraiser" in his March 2010 Appraisal. See Julie Decl., ¶¶14-15. G. THE PUBLIC INTEREST WOULD BE SERVED BY A TRO Plaintiffs asserted in their Motion that the public interest will be served by entry of a TRO preventing the foreclosure sale because such a TRO would help to promote economic development in the District of Columbia by allowing for completion of the renovation project and return of the landmark Property to viable commercial status. In response, U.S. Bank argues that the public interest would not be served by "permitting the continuing deterioration of a highly visible and well-known warehouse property in the District of Columbia." U.S. Bank Mem. at 38. But there is no indication that any such "deterioration" has occurred (or would continue) absent a foreclosure sale. U.S. Bank concedes that the Property will be suitable for 14 See Matthew Goldstein, JPMorgan Buys Bear on the Cheap, BUSINESS WEEK, March 16, 2008 (available at http://tinyurl.com/BWBearStearns). 15 See, e.g., In re Fannie Mae 2008 Sec. Litig., Fed. Sec. L. Rep. (CCH) ¶95,530, 2009 U.S. Dist. Lexis 109886 (S.D.N.Y. 2009). Case 1:10-cv-00890-RMU Document 6 Filed 06/02/10 Page 23 of 25 24 leasing following only $200,000 of additional repairs – out of a total original construction budget of nearly $7 million on a $66.6 million Loan. U.S. Bank Mem. at 11. There is no reason for the Court to suppose that the Lenders – whose Loan is secured by the Property – will continue refusing to fund this relatively minor amount ($200,000) which, U.S. Bank asserts, is necessary to protect the Property (the Lenders' security) and mitigate the Lenders' purported damages. In the absence of a TRO, on the other hand, the Property will be seized from plaintiffs – experienced real estate developers who have sunk tens of millions of dollars of their own equity into the project – and sold at a thinly-advertised auction, most likely to U.S. Bank itself. It is difficult to see how the population of the District of Columbia would be served by the presence of yet another vacant, foreclosed industrial property, owned by an out-of-town Bank which will not develop the Property. H. CONCLUSION For all of the foregoing reasons, as well as those set forth in the Motion and the Amended Complaint, plaintiffs Patriot-BSP City Center II, LLC, Patriot-BSP City Center III, LLC, Patriot- BSP City Center IV, LLC, Patriot Equities, LP, Erik E. Kolar, Alan S. Werther, Michael C. Kolar, Timothy E. McKenna and Geoffrey C. Gardner respectfully request that their Motion for a Temporary Restraining Order be granted and that defendants be restrained from selling the Property located at 1401-1403 New York Avenue, N.E., Washington, D.C. at the scheduled June 8, 2010 foreclosure sale. Case 1:10-cv-00890-RMU Document 6 Filed 06/02/10 Page 24 of 25 25 REQUEST FOR HEARING Pursuant to Local Civil Rule 7(f), plaintiffs hereby request an oral hearing with respect to their Motion. Respectfully submitted, KASS, MITEK & KASS, PLLC BY: /s/ Benny L. Kass Benny L. Kass (D.C. Bar No. 025155) 1050 Seventeenth Street, N.W. Suite 1100 Washington, D.C. 20036-5596 (202) 659-6500 Attorneys for Plaintiffs Patriot-BSP City Center II, LLC, Patriot-BSP City Center III, LLC, Patriot-BSP City Center IV, LLC, Patriot Equities, LP, Erik E. Kolar, Alan S. Werther, Michael C. Kolar, Timothy E. McKenna and Geoffrey C. Gardner Dated: June 2, 2010 CERTIFICATE OF SERVICE I hereby certify that a copy of the foregoing Reply Memorandum in Further Support of Plaintiffs’ Motion for Temporary Restraining Order was served via the court’s electronic filing system this 2nd day of June, 2010 upon all parties of record: /s/ Benny L. Kass Benny L. Kass Case 1:10-cv-00890-RMU Document 6 Filed 06/02/10 Page 25 of 25