1 JOEL A. FEUER, SBN 100663 [email protected] 2 · JOEL A. FEUER, SBN 100663...

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JOEL A. FEUER, SBN 100663 [email protected] TIMOTHY W. LOOSE, SBN 241037 [email protected] GIBSON, DUNN & CRUTCHER LLP 2029 Century Park East, Suite 4000 Los Angeles, California 90067 Telephone: (310) 552-8500 Facsimile: (310) 551-8741

MARK A. KIRSCH, admitted pro hac vice [email protected] LADAN F. STEWART, admitted pro hac vice [email protected] DIANA M. FEINSTEIN, admitted pro hac vice [email protected] GIBSON, DUNN & CRUTCHER LLP 200 Park Avenue New York, NY 10166 Telephone: (212) 351-4000 Facsimile: (212) 351-4035

Attorneys for Defendant THE BANK OF NEW YORK MELLON

16 UNITED STATES DISTRICT COURT

17 CENTRAL DISTRICT OF CALIFORNIA, SOUTHERN DIVISION

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INRE: MEDICAL CAPITAL SECURITIES LITIGATION

CASE NO. ML 10-2145 DOC (RNBx) 19

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-----------------1 DEFENDANT THE BANK OF NEW

This document relates to:

CASE NO. SACV09-1048 DOC (RNBx)

23 STEVEN MASONEK, et ai.,

24 Plaintiffs,

25 v.

26 WELLS FARGO BANK, NATIONAL ASSOCIATION, et ai.,

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28 Defendants.

YORK MELLON'S FIRST AMENDED ANSWER TO PLAINTIFFS' THIRD AMENDED CONSOLIDATED COMPLAINT

Gibson, Dunn & Crutcher LLP DEFENDANT THE BANK OF NEW YORK MELLON'S FIRST AMENDED ANSWER TO PLAINTIFFS'

THIRD AMENDED CONSOLIDATED COMPLAINT

Case 8:10-ml-02145-DOC -RNB Document 181 Filed 05/06/11 of 41 Page ID #:4575

1 Defendant Bank of New York Mellon ("BNYM")l answers the Third

2 Amended Complaint of Steven J. Masonek, et al. as follows:

3 BNYM asserts that the headings and sub-headings in the Third Amended

4 Complaint are argumentative and require no response. To the extent any response is

5 deemed necessary, BNYM denies each and every allegation deemed to be contained in

6 each such heading and sub-heading.

7 Similarly, BNYM does not understand the Preface to the Third Amended

8 Complaint (Third Amended Complaint, at p. 1, In. 1-18) to call for any response. To

9 the extent a response is required, BNYM denies the allegations of the Preface, except

10 BNYM lacks knowledge or information sufficient to form a belief as to the truth of the

11 allegations of the Preface as they relate to Wells Fargo Bank, National Association

12 ("Wells Fargo") or to the Plaintiffs themselves, and, on that basis, denies such

13 allegations.

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1. The allegations in paragraph 1 contain legal conclusions as to which no

responsive pleading is required.

2. BNYM denies the allegations in paragraph 2, except admits that Plaintiffs

purport to bring claims on behalf of a class of persons and entities who allegedly

purchased promissory notes (the ''Notes'') issued by Medical Provider Financial

Corporation II ("MP II"), Medical Provider Financial Corporation III ("MP III"),

Medical Provider Financial Corporation IV ("MP IV"), Medical Provider Funding

Corporation V ("MP V"), and Medical Provider Funding Corporation VI ("MP VI")

(collectively, the "SPCs").

1 Plaintiffs stipulated to the dismissal of The Bank of New York Mellon COrPoration as a defendant in the above-captioned action, but the text of Plaintiffs' Third Amended ComRlaint still includes The Bank of New York Mellon Corporation in the definition of "BNYM." All references herein to BNYM reference The Bank of New York Mellon; and not The Bank of New York Mellon Corporation, which is no longer a defenaant in this action.

1 DEFENDANT THE BANK OF NEW YORK MELLON'S FIRST AMENDED ANSWER TO PLAINTIFFS'



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3. Upon information and belief, BNYM alleges that (1) Sidney Field was

the CEO of Medical Capital Holdings, Inc. ("MCH") and Medical Capital Corporation

("MCC"); (2) Joseph Lampariello was the COO and President ofMCH and MCC; (3)

that MCH was based in Tustin, California; (4) MCH's business included the factoring

of medical receivables; (5) MCH did some of its business through MCC; and (6) MCC

is a wholly owned subsidiary of MCH. Except as expressly alleged, BNYM lacks

knowledge sufficient to form a belief as to the truth of the allegations in paragraph 3.

4. BNYM lacks knowledge or information sufficient to form a belief as to

the truth of the allegations in paragraph 4, except alleges upon information and belief

that MCH raised money through the offering of the Notes issued by the SPCs.

5. BNYM understands and believes that the allegations in paragraph 5

purport to reference the Private Placement Memorandum ("PPMS"), and on that basis,

BNYM respectfully refers this Court to the PPMs for the complete and accurate

contents thereof.

6. BNYM denies the allegations in paragraph 6 except admits that BNYM

served as indenture trustee for the Notes issued by MP II, MP IV, and MP VI, and that

it received a fixed annual fee for its services as indenture trustee along with 12b-l fees

for marketing and distribution of trust assets as permitted by the Note Issuance and

Security Agreements ("NISAs") and 17 C.F.R. § 270.12b-l(b). BNYM further states

that it lacks knowledge or information sufficient to form a belief as to the truth of the

allegations in paragraph 6 regarding Wells Fargo.

7. BNYM lacks information or knowledge sufficient to form a belief as to

the truth of the allegations in paragraph 7. To the extent the allegations in paragraph 7

purport to reference the Court-appointed Receiver's Reports ("Receiver's Reports")

and correspondence from BNYM and Wells Fargo to investors, BNYM respectfully

refers this Court to those documents for the complete and accurate contents thereof.


the truth of the allegations in paragraph 8. BNYM further states that the PPMs


TIDRD AMENDED CONSOLIDATED COMPLAINT


1 disclosed that the SPCs intended to invest in non-medical assets and that MCC could

2 "direct the sale of accounts receivable and other assets or loans from one [SPC] to

3 another." See, e.g., MP VI PPM at 11,30 (Declaration of Ladan F. Stewart in Support

4 of Defendant the Bank of New York Mellon Corporation's Motion to Dismiss the

5 Second Amended Consolidated Complaint, Exhibit 4 (Case No. 09-1048 D.E. 179)).

6 9. BNYM denies the allegations in the first and second sentences of

7 paragraph 9, except lacks knowledge or information sufficient to form a belief as to

8 the truth of the allegations in paragraph 9 regarding Wells Fargo. To the extent the

9 allegations in paragraph 9 purport to reference the Receiver's Reports and the SEC

10 Complaint filed on March 16, 2010, in S.E. C. v. Medical Capital Holdings, Inc., et al.,

11 No. SACV 09-0818 DOC (RNBx) (Dkt. No. 111) ("SEC Complaint"), BNYM

12 respectfully refers this Court to those documents for the complete and accurate

13 contents thereof.

14 10. BNYM lacks knowledge or information sufficient to form a belief as to

15 the truth of the allegations in paragraph 10, except alleges upon information and belief

16 that the SPCs have defaulted on principal and/or interest obligations to investors, and

17 that Plaintiffs purport to seek to recover damages for their alleged losses. To the

18 extent the allegations in paragraph 10 purport to reference the Receiver's Reports,

19 BNYM respectfully refers this Court to the Receiver's Reports for the complete and

20 accurate contents thereof.

21 11. The allegations in paragraph 11 contain legal conclusions as to which no

22 responsive pleading is required.


24 responsive pleading is required, except BNYM denies that it committed any violation

25 of U.S. law, and alleges upon information and belief that MCR and MCC were

26 headquartered in Tustin, California.

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2 the truth of the allegations in paragraph 13, except states that Steven J. Masonek is

3 listed on a note register for MP II and for MP IV.


5 the truth of the allegations in paragraph 14, except states that Sandra J. Masonek is

6 listed on a note register for MP II and for MP IV.


8 the truth of the allegations in paragraph 15, except states that Robert B. Price is listed

9 on a note register for MP II.


11 the truth of the allegations in paragraph 16, except states that Mary Zahara is listed on

12 a note register for MP IV.


14 the truth of the allegations in paragraph 17, except states that Joann Hosking is listed

15 on a note register for MP IV.


17 the truth of the allegations in paragraph 18.




21 the truth of the allegations in paragraph 20, except states that Peter Braunstein is listed

22 on a note register for MP IV.

23 21. BNYM lacks knowledge or information sufficient to forma belief as to

24 the truth of the allegations in paragraph 21, except states that Michel Rapoport is

25 listed on a note register for MP IV.


27 the truth of the allegations in paragraph 22, except states that Kathleen Darrow is

28 listed on a note register for MP VI.







3 24. BNYM admits the allegations in the first and second sentences of

4 paragraph 24. BNYM denies that the allegations in the third sentence of paragraph 24

5 accurately and completely set forth BNYM's marketing and promotional activities,

6 and respectfully refers this Court to its website, http://www.bnymellon.com. for the

7 complete and accurate contents thereof.

8 25. No responsive pleading is required for paragraph 25.




12 responsive pleading is required.

13 28. Upon information and belief, BNYM alleges that the broker-dealers who

14 marketed and sold the Notes to Plaintiffs, among others, are· responsible, in whole or

15 in part, for the alleged damages that Plaintiffs purportedly suffered, and BYNM

16 intends to assert third party claims against such parties pursuant to Fed. R. Civ. P. 14.

1 7 BNYM lacks knowledge or information sufficient to form a belief as to the truth of the

18 remaining allegations in paragraph 28.

19 29. Upon information and belief, BNYM alleges that MCH is a Nevada

20 corporation with its principal place of business in Tustin, California. BNYM lacks

21 knowledge or information sufficient to form a belief as to the truth of the remaining

22 allegations in paragraph 29.

23 30. Upon information and belief, BNYM alleges that MCC is a Nevada

24 corporation and wholly owned subsidiary of MCH, with its principal place of business

25 in Tustin, California; MCC is the administrator for each ofMCH's SPCs, including

26 MP II, MP III, MP IV, MP V and MP VI, and provides management, underwriting,

27 and administrative services, such as bookkeeping, payroll, and accounting services,

28 including administration of all investor promissory notes and interest payments; the





1 directors ofMCC are Field and Lampariello, as well as Lawrence J. Edwards; Field

2 serves as MCC's CEO and Lampariello serves as MCC's President and COO; Alan

3 Meister serves as MCC's Treasurer and Chief Financial Officer; and Thomas Fazio

4 serves as MCC's General Counsel. Except as so alleged, BNYM denies the

5 allegations in paragraph 30.

6 31. Upon information and belief, BNYM alleges that MTS is a wholly owned

7 subsidiary of MCH, that MTS is a Nevada Corporation, and that MTS provided

8 certain services to the SPCs. BNYM lacks knowledge or information sufficient to

9 form a belief as to the truth of the remaining allegations in paragraph 31.

10 32. Upon information and belief, BNYM alleges that Sidney M. Field was

11 CEO and director ofMCH and certain ofMCH's subsidiaries, including MCC.

12 BNYM lacks knowledge or information sufficient to form a belief as to the truth of the

13 remaining allegations in paragraph 32. BNYM respectfully refers this Court to the

14 public filings and records of the California Department of Insurance for a complete

15 and accurate statement of any investigation of Sidney M. Field.


17 the allegations in paragraph 33, except alleges upon information and belief that Joseph

18 J. Lampariello served as the president, COO, and director of MCH, and that

19 Lampariello and Field are defendants in the pending SEC enforcement action.

20 34. BNYM lacks information or knowledge sufficient to form a belief as to

21 the truth of the allegations in the first, second and third sentences of paragraph 34,

22 except: (i) alleges upon information and belief that MP is a Nevada corporation and

23 wholly-owned SPC ofMCH that was formed in October 2003; alleges upon and belief

24 MP II failed to pay interest and/or principal to certain investors, and, as a result,

25 certain of the Notes are currently in default; and denies that MP II conducted two

26 series of note offerings. BNYM further denies the allegations in the fourth sentence

27 of paragraph 34, except states that BNYM took over as indenture trustee for the Notes

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1 issued by MP II after Zions First National Bank ("Zions Bank") resigned in October

2 2005.


4 the truth of the first, second and third sentences of paragraph 35. BNYM denies the

5 allegation in the fourth sentence of paragraph 35, except alleges upon information and

6 belief that Wells Fargo served as indenture trustee for the Notes issued by MP III.



9 except alleges upon information and belief.that MP IV is a Nevada corporation and

10 wholly-owned SPC ofMCH that was formed in July 2005 and commenced operations

11 in October 2006; and that MP IV failed to pay interest and/or principal to certain

12 investors, and as a result, certain of the Note are currently in default. BNYM denies

13 the allegations in the fourth sentence of paragraph 36, except states that BNYM served

14 as indenture trustee for the Notes issued by MP IV.


16 the truth of the first, second and third sentences of paragraph 37. BNYM denies the

17 allegation in the fifth sentence of paragraph 37, except alleges upon information and

18 belief that Wells Fargo served as indenture trustee for the Notes issued by MP V.



21 except alleges upon information and belief that except alleges upon information and

22 belief that MP VI is a Nevada corporation and wholly-owned SPC ofMCH that was

23 formed in April 2008; and that MP VI failed to pay interest and/or principal to certain

24 investors and as a result, certain of the Notes are in default. BNYM denies the

25 allegations in the fourth sentence of paragraph 38, except states that BNYM served as

26 indenture trustee for the Notes issued by MP VI.


28 the truth of the allegations in the first sentence of paragraph 39, except alleges upon





1 information and belief that MP II, MP IV, and MP VI, among other activities,

2 provided financing to healthcare providers by purchasing their accounts receivable at

3 a discount and making secured loans to them. Upon information and belief, BNYM

4 further alleges that MCC is a wholly owned subsidiary ofMCH; MCC served as the

5 Administrator for MP II, MP IV, and MP VI pursuant to an Administrative Services

6 Agreement; and MTS served as the Servicer for MP II, MP IV, and MP VI pursuant

7 to a Master Servicing Agreement.

8 40. Upon information and belief, BNYM alleges that MCC and MTS

9 performed several functions ofMP II, MP IV, and MP VI, including (a) negotiating,

10 executing and issuing promissory notes, (b) identifying and evaluating potential

11 receivable purchase transactions, loans and other investments, (c) producing reports

12 and statements to the Trustees for the release of monies for the funding of receivable

13 purchases, loans and other investments, (d) handling healthcare provider and

14 noteholder relations, (e) processing receivable payments and other loan investment

15 payments through lockbox accounts to BNYM, and (f) providing periodic reports to

16 BNYM.

17 41. BNYM denies the allegations in paragraph 41, except lacks knowledge or

18 information sufficient to form a belief as to the truth of the allegations regarding Wells

19 Fargo.



22 Fargo. BNYM further denies that the allegations in paragraph 42 accurately and

23 completely set forth BNYM's marketing materials, and respectfully refers this Court

24 to its website, http://www.bnymellon.com. for a complete and accurate statement of

25 BNYM's marketing materials.

26 43. BNYM denies the allegations in paragraph 43 except admits: (a) BNYM

27 entered into NISAs with MP IV and MP VI; (b) Zions Bank entered into a NISA with

28 MP II; (c) Zions Bank assigned its duties as indenture trustee to the Notes issued by





1 MP II to BNYM pursuant to a Tri -Party Agreement signed by Zions Bank, BNYM,

2 and MP II in September 2005 ("Tri-Party Agreement"); (d) upon information and

3 belief, Wells Fargo entered into NISAs with MP III and MP V; and (e) the NISAs are

4 substantially similar for each SPC. BNYM respectfully refers this Court to the NISAs

5 as well as the Tri-Party Agreement for the complete and accurate contents thereof.

6 44. BNYM understands and believes that the allegations in paragraph 44

7 purport to describe the NISAs, and on that basis, BNYM respectfully refers this Court

8 to the NISAs for the complete and accurate contents thereof.









17 to the NISAs for the complete and accurate contents thereof. BNYM further denies

18 the allegations in the second sentence of paragraph 47.

19 48. BNYM denies that the allegations in paragraph 48 accurately and

20 completely set forth the contents of the NISAs and Administrative Services

21 Agreements, and respectfully refers this Court to the NISAs and Administrative

22 Services Agreements for the complete and accurate contents thereof.



25 to the NISAs for the complete and accurate contents thereof. BNYM lacks knowledge

26 or information sufficient to form a belief as to the truth of the allegations in the last

27 sentence of paragraph 49.

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50. 'BNYM understands and believes that the allegations in paragraph 50

purport to describe the NISAs and the PPMs, and on that basis, BNYM respectfully

refers this Court to those documents for the complete and accurate contents thereof.

In addition, BNYM is unable to determine from Paragraph 50 what other agreements

or disclosures Plaintiffs are referring to with the term "agreements" and "disclosures,"

and on that basis denies the remaining allegations.

51. BNYM alleges that its rights and obligations with respect to its role as

indenture trustee are established and governed by the NISAs. BNYM understands and

believes that the allegations in paragraph 51 purport to reference the NISAs, and on

that basis, BNYM respectfully refers this Court to the NISAs for the complete and

accurate contents thereof.

52. BNYM denies the allegations in the first sentence of paragraph 52, and

states that BNYM's rights and obligations in connection with MP IV and MP VI are

governed by New York law, and by Colorado law in connection with MP II. The

remaining allegations in paragraph 52 contain legal conclusions as to which no

responsive pleading is required. To the extent a response is required, BNYM denies

the remaining allegations in paragraph 52.

53. BNYM denies the allegations in paragraph 53, except admits that it

served as indenture trustee for securities issued by medical receivables companies

other than MedCap, and lacks knowledge or information sufficient to form a belief as

to the truth of the allegations regarding Wells Fargo. BNYM further denies that the

allegations in paragraph 53 accurately and completely set forth the contents of Exhibit

1 to the Third Amended Complaint, and respectfully refers this Court to Exhibit 1 for

the complete and accurate contents thereof.


the truth of the allegations in paragraph 54, except alleges upon information and belief

that the SPCs issued the Notes to investors.





2 purport to describe the PPMs, and on that basis, BNYM respectfully refers this Court

3 to the PPMs for the complete and accurate contents thereof. BNYM further states that

4 the PPMs explicitly disclosed that the relevant SPC could use net offering proceeds to

5 purchase non-healthcare related receivables and to make investments in non-

6 healthcare related businesses. See, e.g., MP VI PPM at 6,9 (Declaration of Ladan F.

7 Stewart in Support of Defendant the Bank of New York Mellon Corporation's Motion

8 to Dismiss the Second Amended Consolidated Complaint, Exhibit 4 (Case No. 09-

9 1048 D.E. 179)).


11 the truth of the allegations in paragraph 56 concerning what the SPCs "touted to

12 investors." To the extent paragraph 56 makes allegations about the scope ofBNYM's

13 duties, such allegations are legal conclusions to which no responsive pleading is

14 required. To the extent a response is required, BNYM denies such allegations.

15 Further, to the extent the allegations in paragraph 56 purport to reference the NISAs,

16 BNYM respectfully refers this Court to the NISAs for the complete and accurate


18 57. BNYM denies the allegations in paragraph 57, except admits BNYM

19 served as indenture trustee for the Notes issued by MP I, MP II, MP IV, and MP VI,

20 and, upon and information and belief, Wells Fargo served as indenture trustee for the

21 Notes issued by MP III and MP V.

22 58. BNYM denies the allegations in paragraph 58 except admits that the SEC

23 commenced an enforcement action against MCR, MCC, MP VI, Field and

24 Lampariello on July 16,2009, and respectfully refers this Court to the SEC Complaint

25 for the complete and accurate contents thereof.


27 purport to describe the NISAs and the SEC Complaint, and on that basis, BNYM

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1 respectfully refers this Court to those documents for the complete and accurate

2 contents thereof.


4 the truth of the allegations in the first and second sentences of paragraph 60. BNYM

5 denies the allegations in the third sentence of paragraph 60. BNYM understands and

6 believes that the remaining allegations in paragraph 60 purport to describe the PPMs

7 and the SEC Complaint, and on that basis, BNYM respectfully refers this Court to

8 those documents for the complete and accurate contents thereof.


10 purport to describe the SEC Complaint, and on that basis, BNYM respectfully refers

11 this Court to the SEC Complaint for the complete and accurate contents thereof.


13 purport to describe the SEC Complaint, and on that basis, BNYM respectfully refers


15 BNYM further alleges, upon information and belief, that the Court appointed a

16 receiver for MCR and certain of its affiliates (collectively, "MedCap") after the SEC

17 filed its complaint.


19 purport to describe the Nineteenth Receiver's Report, and on that basis, BNYM

20 respectfully refers this Court to the Nineteenth Receiver's Report for the complete and

21 accurate contents thereof.

22 64. BNYM understands and believes that the allegations in the first, second,

23 and fifth sentences of paragraph 64 (including the chart) purport to reference the

24 Receiver's Reports, the SEC Complaint, and Field's and Lampariello's filings in the

25 SEC Action, and on that basis, BNYM respectfully refers this Court to those

26 documents for the complete and accurate contents thereof. BNYM denies the

27 allegations in the third and fourth sentences of paragraph 64, except lacks knowledge

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1 or information sufficient to form a belief as to the truth of the allegations concerning

2 Wells Fargo.



5 Fargo.


7 purport to reference the SEC Complaint, and on that basis, BNYM respectfully refers



10 purport to reference the Receiver's Reports and the SEC Complaint, and on that basis,

11 BNYM respectfully refers this Court to those documents for the complete and accurate

12 contents thereof. BNYM denies the remaining allegations in paragraph 67:

13 68. BNYM understands and believes that the allegations in the first and

14 second sentences of paragraph 68 purport to reference the Receiver's Reports, and on

15 that basis, BNYM respectfully refers this Court to the Receiver's Reports for the

16 complete and accurate contents thereof. BNYM denies the remaining allegations in

17 paragraph 68.





22 Fargo.



25 Fargo.

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MP VI, among other things, provided financing to healthcare providers by purchasing

accounts receivable at a discount and by making secured loans to such healthcare




1 providers. BNYM understands and believes that the remaining allegations in

2 paragraph 72 purport to reference the NISAs, and on that basis, BNYM respectfully

3 refers this Court to the NISAs for the complete and accurate contents thereof.


5 responsive pleading is required. To the extent a response is required, BNYM denies

6 the allegations in paragraph 73, except lacks knowledge or information sufficient to

7 form a belief as to the truth of the allegations in paragraph 73 regarding Wells Fargo.



10 Fargo. To the extent the allegations in paragraph 74 purport to reference the NISAs,








18 76. BNYM denies the allegations of paragraph 76, except lacks knowledge or










28 purport to describe the terms of the NISAs, and on that basis, BNYM respectfully

14 Gibson, Dunn &

Crutcher LLP DEFENDANT THE BANK OF NEW YORK MELLON'S FIRST AMENDED ANSWER TO PLAINTIFFS' THIRD AMENDED CONSOLIDATED COMPLAINT


1 refers this Court to the NISAs for the complete and accurate contents thereof. BNYM

2 further denies the remaining allegations of paragraph 79.



5 Fargo and MP III.

6 81. BNYM understands and believes that the allegations in the second

7 sentence of paragraph 81 purport to reference the NISAs, and on that basis, BNYM

8 respectfully refers this Court to the NISAs for the complete and accurate contents

9 thereof. The first, third, fourth and fifth sentences of paragraph 81 are too vague,

10 ambiguous and unintelligible for BNYM to formulate a response, and on that basis

11 BNYM denies them. The remaining allegations in paragraph 81 contain legal

12 conclusions to which no responsive pleading is required. To the extent a response is

13 required, BNYM denies the remaining allegations in paragraph 81, except lacks

14 knowledge or information sufficient to form a belief as to the truth of the allegations

15 regarding Wells Fargo.

16 82. BNYM understands and believes that the allegations in the first three

1 7 sentences of paragraph 82 reference the NISAs, and on that basis, BNYM respectfully

18 refers this Court to the. NISAs for the complete and accurate contents thereof. BNYM

19 further denies the allegations in the second and third sentences of paragraph 82,

20 except lacks knowledge or information sufficient to form a belief as to the truth of the

21 allegations in paragraph 82 regarding Wells Fargo. BNYM denies the allegations in

22 the fourth sentence of paragraph 82, except lacks knowledge or information sufficient

23 to form a belief as to the truth of the allegations regarding Wells Fargo. BNYM

24 further states that it was not required to maintain a list of Approved Payors.

25 83. BNYM understands and believes that the allegations in the first three

26 sentences of paragraph 83 purport to describe the terms of the NISAs, and on that

27 basis, BNYM respectfully refers this Court to the NISAs for the complete and accurate

28 contents thereof. BNYM further denies the allegations in the fourth sentence of



TIllRD AMENDED CONSOLIDATED COMPLAINT


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paragraph 83, except lacks knowledge or information sufficient to form a belief as to

the truth of the allegations regarding Wells Fargo.

84. BNYM understands and believes that the allegations in the first, second,

third and fourth sentences of paragraph 84 purport to reference the NISAs and the

Receiver's Reports, and on that basis, BNYM respectfully refers this Court to those

documents for the complete and accurate contents thereof. BNYM lacks knowledge

or information sufficient to form a belief as to the truth of allegations in paragraph 84

regarding Wells Fargo. The remaining allegations in paragraph 84 contain legal

conclusions to which no responsive pleading is required. To the extent a response is

required, BNYM denies such allegations, except lacks knowledge or information

sufficient to form a belief as to the truth of the allegations regarding Wells Fargo.

85. BNYM denies the allegations in the first sentence of paragraph 85, except

lacks knowledge or information sufficient to form a belief as to the truth of such

allegations regarding Wells Fargo. BNYM understands and believes that the

remaining allegations in paragraph 85 purport to reference the NISAs, and on that

basis, BNYM respectfully refers this Court to the NISAs for the complete and accurate

contents thereof. BNYM further states that pursuant to the NISAs, "[i]n the absence

of bad faith on its part, [BNYM] may conclusively-rely, as to the truth of the

statements and the correctness of the opinions expressed therein, upon certificates or

opinions furnished to [BNYM]-and conforming to the requirements of this Note

Agreement (it being understood that [BNYM] shall have no obligation to investigate

or confirm the accuracy of any mathematical calculations or other facts stated

therein)." See, e.g., MP VI NISA, § 5.06(a)(ii) (Declaration of Ladan F. Stewart in

Support of Defendant the Bank of New York Mellon Corporation's Motion to Dismiss

the Second Amended Consolidated Complaint, Exhibit 8 (Case No. 09-1048 D.E.

179)).

86. BNYM alleges that its rights and obligations with respect to its role as

indenture trustee are established and governed by the NISAs and BNYM respectfully


THIRD AMENDED CONSOLIDATED COMPLAINT,


1 refers this Court to the NISAs for the complete and accurate contents thereof. To the

2 extent that paragraph 86 references the Receiver's Reports, BNYM respectfully refers

3 this Court to the Receiver's Reports for the complete and accurate contents thereof.

4 The remaining allegations in paragraph 86 contain legal conclusions to which no


6 the remaining allegations in paragraph 86, except lacks knowledge or information

7 sufficient to form a belief as to the truth of such allegations regarding Wells Fargo.

8 87. BNYM denies the allegations in the first sentence of paragraph 87.

9 BNYM understands and believes that the remaining allegations in paragraph 87

10 purport to reference the Receiver's Reports, and on that basis, BNYM respectfully

11 refers this Court to the Receiver's Reports for the complete and accurate contents

12 thereof.




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18 purport to reference the NISAs, and on that basis, BNYM respectfully refers this

19 Court to the NISAs for the complete and accurate contents thereof. BNYM further

20 denies the allegations in the third sentence of paragraph 89. BNYM lacks knowledge

21 or information sufficient to form a belief as to the truth of the remaining allegations

22 regarding Wells Fargo and MP V.

23 90. BNYM denies the allegations in paragraph 90, except admits it had a

24 tickler system, and lacks knowledge or information sufficient to form a belief as to the

25 truth of the allegations regarding Wells Fargo. To the extent the allegations in the last

26 sentence of paragraph 90 reference the NISAs, BNYM respectfully refers this Court to

27 the NISAs for the complete and accurate contents thereof.

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tickler system, and lacks knowledge or information sufficient to form a belief as to the

truth of the allegations regarding Wells Fargo and MP V.

92. BNYM denies the allegations in paragraph 92, except lacks knowledge or

information sufficient to form a belief as to the truth of the allegations regarding Wells

Fargo. BNYM further states that the allegations in the second sentence of paragraph

92 contain legal conclusions to which no responsive pleading is required. To the

extent a response is required, BNYM denies the allegations in the second sentence of

paragraph 92.

93. BNYM denies the allegations in paragraph 93, except: (i) lacks

knowledge or information sufficient to form a belief as to the truth of the allegations

regarding Wells Fargo; (ii) lacks knowledge or information sufficient to form a belief

as to the truth of the allegations regarding Sidney M. Field; (iii) admits it has policies

concerning prospective and active corporate trust clients, and respectfully refers this

Court to those policies for the complete and accurate contents thereof; and (iv) states

that the allegations in the last sentence of paragraph 93 contain legal conclusions to

which no responsive pleading is required; to the extent a response is required, BNYM

denies the allegations in the last sentence of paragraph 93.

94. BNYM denies the allegations in paragraph 94, except admits it has

internal policies governing the Corporate Trust Department, and respectfully refers

this Court to those policies for the complete and accurate contents thereof,· and lacks


regarding Wells Fargo.

95. BNYM understands and believes that the allegations in the first sentence

of paragraph 95 purport to reference the NISAs, and on that basis, BNYM respectfully

refers this Court to the NISAs for the complete and accurate contents thereof. The

remaining allegations in paragraph 95 contain legal conclusions to which no





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such allegations, except lacks knowledge or information sufficient to form a belief as

to the truth of the allegations regarding Wells Fargo.


purport to reference the SEC Complaint and the Receiver's Reports, and on that basis,

BNYM respectfully refers this Court to those documents for the complete and accurate

contents thereof.

97. BNYM denies the allegations in the first and last sentences of paragraph

97, except lacks knowledge or information sufficient to form a belief as to the truth of

the allegations regarding Wells Fargo. BNYM understands and believes that the

remaining allegations in paragraph 97 purport to reference the SEC Complaint, and on

that basis, BNYM respectfully refers this Court to the SEC Complaint for the

complete and accurate contents thereof.

98. BNYM admits that the chart in paragraph 98 appears in the SEC

Complaint, and respectfully refers this Court to the SEC Complaint for the complete

and accurate contents thereof. BNYM denies the remaining allegations in paragraph

98, except lacks knowledge or information sufficient to form a belief as to the truth of

the allegations regarding Wells Fargo.

99. BNYM denies the allegations in the second sentence of paragraph 99,

except lacks knowledge or information sufficient to form a belief as to the truth of the

allegations concerning Wells Fargo. BNYM understands and believes that the

remaining allegations in paragraph 99 reference the SEC Complaint, and on that basis,

BNYM respectfully refers this Court to the SEC Complaint for the complete and

accurate contents thereof. BNYM also incorporates its responses to the allegations in

paragraphs 131-142.

100. BNYM denies the allegations in the second and sixth sentences of


the truth of the allegations concerning Wells Fargo. BNYM understands and believes

that the remaining allegations in paragraph lOO purport to reference the lO Day Report




1 and Accounting of the Receiver ("10 Day Receiver's Report"), and on that basis,

2 BNYM respectfully refers this Court to the 10 Day Receiver's Report for the complete

3 and accurate contents thereof.

4 101. BNYM denies the allegations in paragraph 101, except lacks knowledge

5 or information sufficient to form a belief as to the truth of the allegations regarding

6 Wells Fargo.

7 102. BNYM denies the allegations in the third sentence of paragraph 102,


9 allegations concerning Wells Fargo. BNYM understands and believes that the

10 remaining allegations in paragraph 102 reference the Receiver's Reports and Mr.

11 L amp ari ell 0 's filings in the SEC action, and on that basis, BNYM respectfully refers

12 this Court to those documents for the complete and accurate contents thereof.


14 purport to reference the NISAs and Administrative Services Agreements, and on that

15 basis, BNYM respectfully refers this Court to those documents for the complete and

16 accurate contents thereof. BNYM further lacks information or knowledge sufficient

17 to form a belief as to the truth of the allegations in the last sentence of paragraph 103.


19 purport to reference the NISAs and PPMs, and on that basis, BNYM respectfully

20 refers this Court to those documents for the complete and accurate contents thereof.




24 the truth of the allegations in paragraph 106. To the extent the allegations in

25 paragraph 106 purport to reference the Receiver's Reports, BNYM respectfully refers

26 this Court to the Receiver's Reports for the complete and accurate contents thereof.







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refers this Court to the Receiver's Reports for the complete and accurate contents

thereof.

108. The allegations in the last sentence of paragraph 108 contain legal


required, BNYM denies the allegations, except lacks knowledge or information

sufficient to form a belief as to the truth of the allegations concerning Wells Fargo.

BNYM understands and believes that the remaining allegations in paragraph 108

purport to reference the Receiver's Reports, and on that basis, BNYM respectfully


thereof.


the truth of the allegations in the first, second and third sentences of paragraph 109.

BNYM denies the allegations in the last sentence of paragraph 109, except lacks


concerning Wells Fargo.

110. BNYM denies the allegations in first sentence of paragraph 110, except

lacks knowledge or information sufficient to form a belief as to the truth of such

allegations regarding Wells Fargo. BNYM further states that the allegations in the

third sentence of paragraph 110 contain legal conclusions to which no responsive

pleading is required. To the extent a response is required, BNYM denies the

allegations in the third sentence of paragraph 110, except lacks knowledge or

information sufficient to form a belief as to the truth of such allegations regarding

Wells Fargo. BNYM understands and believes that the remaining allegations in

paragraph 110 purport to reference the NISAs, and on that basis, BNYM respectfully

refers this Court to the NISAs for the complete and accurate contents thereof.

Ill. BNYM understands and believes that the allegations in the first sentence

of paragraph III purport to reference the NISAs, and on that basis, BNYM

respectfully refers this Court to the NISAs for the complete and accurate contents




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thereof. The allegations in the second sentence of paragraph 111 contain legal


required, BNYM denies the allegations in the second sentence of paragraph 111,

except lacks knowledge or. information sufficient to form a belief as to the truth of

such allegations regarding Wells Fargo.

112. BNYM admits that The Bank of New York Trust Company, N.A.

("BNYTC") was previously involved in litigation against DynaCorp Financial

Services and respectfully refers this Court to the public record for a complete and

accurate recitation of the facts and findings of law in that matter. See Dell'Oca v.

Banko/New York Trust Co., N.A., 159 Cal. App. 4th 531 (2008). BNYM denies the

remaining allegations in paragraph 112.


purport to summarize BNYM's communications with noteholders, and on that basis,

BNYM respectfully refers this Court to those communications for the complete and

accurate contents thereof BNYM further denies the allegations in the last sentence of


the truth of the allegations regarding Wells Fargo. BNYM further states that

beginning in November 2008, it sent several letters to noteholders ofMP II, MP IV,

andMPVI.

114. The allegations in the first sentence of paragraph 114 contain legal


required, BNYM denies the allegations in the first sentence of paragraph 114, except

lacks knowledge or information sufficient to form a belief as to the truth of the

allegations regarding Wells Fargo. BNYM understands and believes that the

remaining allegations in paragraph 114 purport to reference the NISAs, and on that

basis, BNYM respectfully refers this Court to the NISAs for the complete and accurate

contents thereof.




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115. BNYM denies the allegations in paragraph 115, except lacks knowledge

or information sufficient to form a belief as to the truth of the allegations regarding

Wells Fargo.


purport to summarize provisions in the NISAs, and on that basis, BNYM respectfully

refers this Court to the NISAs for the complete and accurate contents thereof.



Wells Fargo.


the truth of the allegations in paragraph 118, except alleges upon information and

belief that MP IV acquired an interest in the Perfect Game, LLC, and The Perfect

Game is a film about a Little League team from Mexico that won the Little League

World Series in 1957.




thereof.




thereof.




thereof.







2 thereof.




6 thereof.


8 purport to reference the Receiver's Reports and the OC Weekly article entitled "SEC

9 Investigation of Medical Lender Sets Sail for a Party Yacht," and on that basis,



12 125. Upon information and belief, BNYM alleges that MP IV made a loan to

13 Pyramid Technologies, Inc. BNYM understands and believes that the remaining

14 allegations in paragraph 125 purport to reference the Receiver's Reports, and on that

15 basis, BNYM respectfully refers this Court to the Receiver's Reports for the complete

16 and accurate contents thereof.




20 thereof.

21 127. BNYM alleges that its rights and obligations with respect to its role as

22 indenture trustee are established and governed by the NISAs, and BNYM respectfully


24 The allegations in paragraph 127 contain legal conclusions to which no responsive

25 pleading is required. To the extent a response is required, BNYM denies the

26 allegations in paragraph 127, except lacks knowledge or information sufficient to form

27 a belief as to the truth of such allegations regarding Wells Fargo.

28





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128. The allegations in paragraph 128 contain legal conclusions to which no


the allegations in paragraph 128, except lacks knowledge or information sufficient to

form a belief as to the truth of such allegations regarding Wells Fargo.

129. The allegations in the first and third sentences of paragraph 129 contain

legal conclusions to which no responsive pleading is required. To the extent a

response is required, BNYM denies the allegations in the first and third sentences of


the truth of the allegations concerning Wells Fargo. BNYM understands and believes

that the remaining allegations in paragraph 129 purport to reference the NISAs, and on

that basis, BNYM respectfully refers this Court to the NISAs for the complete and


130. BNYM denies that the allegations in paragraph 130 accurately and

completely set forth the contents of the Fourteenth Receiver's Report, and BNYM

respectfully refers this Court to the Fourteenth Receiver's Report for the complete and

accurate contents thereof. BNYM further denies that any noteho1ders were harmed as

a result ofBNYM's conduct.


purport to reference the Receiver's Reports and the SEC Complaint, and on that basis,

BNYM respectfully refers this Court to those documents for the complete and accurate

contents thereof. BNYM further denies that it participated in any way in any alleged

Ponzi-like scheme perpetrated by MedCap.


purport to reference certain statements in the SEC Complaint, and on that basis,

BNYM respectfully refers this Court to the SEC Complaint for the complete and



purport to reference certain statements in the Fourteenth Receiver's Report, and on

25 DEFENDANT THE BANK OF NEW yoRk MELLON'S FIRST AMENDED ANSWER TO PLAINTIFFS'



1 that basis, BNYM respectfully refers this Court to the Fourteenth Receiver's Report

2 for the complete and accurate contents thereof.



5 Wells Fargo.



8 Wells Fargo.


10 purport to reference the SEC Complaint, and on that basis, BNYM respectfully refers

11 this Court to the SEC Complaint for the complete and accurate contents thereof. To

12 the extent the allegations in paragraph 136 contain legal conclusions, no responsive

13 pleading is required.


15 purport to reference certain statements in the SEC Complaint and the 10 Day

16 Receiver's Report, and on that basis, BNYM respectfully refers this Court to those

17 documents for the complete and accurate contents thereof.

18 138. BNYM denies the fourth sentence in paragraph 138, except lacks

19 know ledge or information sufficient to form a belief as to the truth of the allegations

20 regarding Wells Fargo. BNYM understands and believes that the remaining

21 allegations in paragraph 138 purport to reference certain statements in the SEC

22 Complaint and the 10 Day Receiver's Report, and on that basis, BNYM respectfully


24 139. BNYM denies the allegations in the first, fourth and fifth sentences of

25 paragraph 139, except to the extent the allegations contain legal conclusions to which

26 no responsive pleading is required. BNYM understands and believes that the

27 allegations in the second and third sentences of paragraph 139 purport to reference the

28





1 SEC Complaint, and on that basis, BNYM respectfully refers this Court to the SEC

2 Complaint for the complete and accurate contents thereof.


4 purport to reference the Receiver's Reports, NISAs and PPMs, and on that basis,


6 contents thereof.

7 141. BNYM understands and believes that the allegations in the second and

8 third sentences of paragraph 141 purport to reference the 10 Day Receiver's Report,

9 and on that basis, BNYM respectfully refers this Court to the 10 Day Receiver's

10 Report for the complete and accurate contents thereof. BNYM further denies the

11 allegations in the first and fourth sentences of paragraph 141. BNYM alleges that

12 transfers of assets between the SPCs occurred from time to time.

13 142. Paragraph 142 contains legal conclusions to which no responsive

14 pleading is required. To the extent a response is required, BNYM denies the

15 allegations in paragraph 142, except lacks knowledge or information sufficient to form

16 a belief as to the truth of the allegations regarding Wells Fargo.


18 purport to reference the NISAs, and on that basis, BNYM respectfully refers this

19 Court to the NISAs for the complete and accurate contents thereof. To the extent the

20 allegations in paragraph 143 contain legal conclusions, no responsive pleading is

21 required.

22 144. BNYM denies that the allegations in paragraph 144 completely and

23 accurately set forth the contents of the NISAs, and respectfully refers this Court to the

24 NISAs for the complete and accurate contents thereof

25 145. BNYM denies the allegations in paragraph 145, except to the extent they

26 contain legal conclusions as to which no responsive pleading is required.

27 146. BNYM denies the allegations in paragraph 146 except to the extent they

28 contain legal conclusions as to whichno responsive pleading is required, and lacks





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regarding Wells Fargo.


the truth of the allegations in the first sentence of paragraph 147. BNYM denies the

remaining allegations in paragraph 147, except alleges upon information and belief

that MP II failed to pay interest and/or principal to certain investors in August 2008,

and as a result, certain of the Notes are in default.

148. BNYM denies the allegations in paragraph 148, except admits that it

entered into a NISA for MP VI in August 2008, and that it gave notice of an Event of

Default to MP II noteholders on November 10,2008. Upon information and belief,

BNYM further alleges that MP II failed to pay interest and/or principal to certain

investors in August 2008, and as a result, certain of the Notes are in default.


the truth of the allegations in paragraph 149. To the extent the allegations in

paragraph 149 purport to reference a requirement under the NISAs, BNYM


thereof.



Wells Fargo. BNYM further lacks knowledge or information sufficient to form a

belief as to the truth of the allegations in the second sentence of paragraph 150.

151. BNYM denies the allegations in paragraph 151, except to the extent they

contain legal conclusions as to which no responsive pleading is required. BNYM

further lacks knowledge or information sufficient to form a belief as to the truth of the

allegations regarding Wells Fargo.

152. BNYM denies the allegations in paragraph 152, except admits it gave

notice of an Event of Default to MP II noteholders on November 10,2008, and lacks





2 . regarding Wells Fargo.

3 153. BNYM admits the allegations in the first sentence of paragraph 153,


5 allegations regarding Wells Fargo. BNYM further denies the allegations in the second

6 sentence of paragraph 153 except admits it communicated with Medical Capital's

7 management. BNYM denies that CT Moffitt was a consultant to BNYM as alleged in

8 the sixth sentence of paragraph 153. BNYM lacks knowledge or information

9 sufficient to form a belief as to the truth of the remaining allegations, except denies

10 BNYM "did not act as required by the terms of the NISAs," and alleges upon

11 information and belief that Medical Capital retained a consultant known as Waverton

12 Group LLC.

13 154. BNYM denies the allegations in paragraph 154, except: (i) lacks


15 regarding Wells Fargo; (ii) admits it participated in conference calls with Noteholders;

16 and (iii) admits it first noticed an Event of Default to MP II noteho1ders on November

17 10,2008. To the extent the allegations in paragraph 154 purport to reference

18 statements made by BNYM in Exhibit 1 to the Third Amended Complaint, BNYM

19 respectfully refers this Court to Exhibit 1 to the Third Amended Complaint for the

20 complete and accurate contents thereof.

21 155. The allegations in the first sentence of paragraph 155 contain legal

22 conclusions to which no responsive pleading is required. To the extent a response is

23 required, BNYM denies the allegations in the first sentence of paragraph 155, except

24 lacks knowledge or information sufficient to form a belief as to the truth of the

25 allegations regarding Wells Fargo. BNYM states that it lacks knowledge or

26 information sufficient to form a belief as to the truth of the remaining allegations in

27 paragraph 155.

28





1 156. BNYM admits the first sentence of paragraph 156, and admits it incurred

2 professional fees and expenses in connection with the Events of Default in MP II, MP

3 IV and MP VI, as permitted under the NISAs. BNYM denies the remaining

4 allegations in paragraph 156, except to the extent the allegations contain legal

5 conclusions as to which no responsive pleading is required .. BNYM further states that

6 it lacks knowledge or information sufficient to form a belief as to the truth of the

7 allegations in paragraph 156 regarding Wells Fargo.

8 157. BNYM admits that it received a fixed annual fee of$35,000 for each SPC

9 for which it served as indenture trustee. BNYM denies the remaining allegations of

10 paragraph 157, except lacks knowledge or information sufficient to form a belief as to

11 the truth of the allegations regarding Wells Fargo.

12 158. BNYM admits it earned approximately $313,000 in 12b-1 fees for

13 marketing and distribution of trust assets as permitted by the NISAs and 17 C.F.R.

14 § 270.12b-l(b). BNYM denies the remaining allegations of paragraph 158, except


16 allegations regarding Wells Fargo.

17 159. BNYM admits it earned approximately $313,000 in 12b-l fees for

18 marketing and distribution of trust assets as permitted by the NISAs and 17 C.F .R.




22 160. BNYM admits it earned approximately $313,000 in 12b-l fees for

23 marketing and distribution of trust assets as permitted by the NISAs and 17 C.F.R.




27 161. BNYM understands and believes that the allegations in the first sentence

28 of paragraph 161 purport to reference the NISAs, and on that basis, BNYM

30 Gibson, Dunn &

Crutcher LLP DEFENDANT THE BANK OF NEW YORK MELLON'S FIRST AMENDED ANSWER TO PLAINTIFFS' TIDRD AMENDED CONSOLIDATED COMPLAINT


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thereof. The allegations in the second sentence of paragraph 161 contain legal

conclusions as to which no responsive pleading is required. To the extent a response

is required, BNYM denies the allegations in the second sentence of paragraph 161,

except lacks knowledge or information sufficient to form a belief as to the truth of the

allegations regarding Wells Fargo.


contain legal conclusions as to which no responsive pleading is required. To the

extent a response is required, BNYM denies the allegations in paragraph 162, except

lacks knowledge or information sufficient to form a beliefas to the truth of the

allegations regarding Wells Fargo. Further, to the extent the allegations in paragraph

162 purport reference the NISAs, BNYM respectfully refers this Court to the NISAs

for the complete and accurate contents thereof.


contain legal conclusions as to which no responsive pleading is required. To the

extent a response is required, BNYM denies the allegations in paragraph 163, except

lacks knowledge or information sufficient to form a belief as to the truth of the

allegations regarding Wells Fargo. BNYM further denies that the allegations in

paragraph 163 accurately and completely set forth the NISAs, and respectfully refers

this Court to the NISAs for the complete and accurate contents thereof.



Wells Fargo.



Wells Fargo.

166. BNYM admits that BNYTC was previously involved in litigation against

DynaCorp Financial Services and respectfully refers this Court to the public record for




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a complete and accurate recitation of the facts and findings oflaw in that matter. See

Dell'Oca v. Banko/New York Trust Co., N.A., 159 Cal. App. 4th 531 (2008). BNYM

denies the remaining allegations in paragraph 166, except to the extent they contain

legal conclusions as to which no responsive pleading is required. To the extent a

response is required, BNYM denies the remaining allegations, except lacks knowledge

or information sufficient to form a belief as to the truth of such allegations regarding

Wells Fargo.

167. Upon information and belief, BNYM alleges that beginning in August

2008, MP II through MP VI defaulted on their obligations to certain investors to make

principal and/or interest payments on certain Notes. BNYM understands and believes

that the remaining allegations in paragraph 167 purport to reference the Receiver's

Reports, and on that basis, BNYM respectfully refers this Court to the Receiver's

Reports for the complete and accurate contents thereof.




thereof.

169. Paragraph 169 does not require a responsive pleading.


purport to reference the Receiver's Reports, and on that basis BNYM respectfully


thereof.




thereof.







2 thereof.




6 thereof.




10 thereof.

11 175. Paragraph 175 purports to define the class, and as such, no responsive

12 pleading is required.

13 176. The allegations in the first sentence of paragraph 176 contain legal

14 conclusions as to which no responsive pleading is required. To the extent a response

15 is required, BNYM denies the allegations in paragraph 176. BNYM lacks knowledge

16 or information sufficient to form a belief as to the truth of the allegations in the second

17 sentence of paragraph 176.

18 1 77. The allegations in paragraph 177 contain legal conclusions as to which no


20 the allegations in paragraph 177.







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the allegations in paragraph 180.

181. BNYM lacks sufficient knowledge or information to form a belief as to

the truth of the allegations in paragraph 181, except states that the names and

addresses of certain of the noteholders of MP II, MP IV and MP VI are available in

the note registers furnished to BNYM by MedCap.

182. BNYM hereby incorporates by reference all of its responses to the

foregoing paragraphs.

183. BNYM admits it served as indenture trustee under the NISAs for the

Notes issued by MP II, MP IV, and MP VI, and upon information and belief, alleges

that Wells Fargo served as indenture trustee under the NISAs for the Notes issued by

MP III and MP V. BNYM denies the remaining allegations in paragraph 183.

184. Upon information and belief, BNYM alleges that Wells Fargo entered

into a NISA dated June 25, 2007, a First Supplemental NISA dated April 10, 2007,

and a NISA dated October 8, 2007. BNYM further denies the allegations in the

second sentence of paragraph 184, and states that it entered into a NISA dated October

23,2006, and a First Supplemental NISA dated May 2,2007. The allegations in the

third sentence of paragraph 184 do not require a responsive pleading.


purport to reference the NISAS, and on that basis, BNYM respectfully refers this

Court to the NISAs for complete and accurate contents thereof, including the rights

and duties of BNYM as indenture trustee. The remaining allegations of paragraph 185

contain legal conclusions as to which no responsive pleading is required.


purport to reference the NISAs, and on that basis, BNYM respectfully refers this

Court to the NISAs for the complete and accurate contents thereof. The allegations in

the last sentence of paragraph 186 contain legal conclusions as to which no responsive




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pleading is required. To the extent a response is required, BNYM denies the

allegations in the last sentence of paragraph 186.


purport to reference the NISAs, and on that basis, BNYM respectfully refers this

Court to the NISAs for the complete and accurate contents thereof. The allegations in

the second sentence of paragraph 187 contain legal conclusions as to which no


the allegations in the second sentence of paragraph 187.




form a belief as to the truth of the allegations regarding Wells Fargo.




form a belief as to the truth of the allegations regarding Wells Fargo.

DEFENSES

BNYM asserts the following defenses and reserves the right to assert

other defenses or claims when and if they become appropriate and/or available in this

action. BNYM does not admit that it has the burden of proof on any of the defenses

alleged in this Answer:

FIRST DEFENSE

Plaintiffs' claim alleged in the Third Amended Complaint fails to state a

claim upon which relief can be granted.

SECOND DEFENSE

Plaintiffs did not suffer damages as alleged in the Third Amended

Complaint, or at all, and BNYM is not responsible for any damages allegedly suffered

by Plaintiffs.




1 THIRD DEFENSE

2 Plaintiffs' damages, if any, were in no way caused by, or the result of, any

3 fault, act or omission by BNYM, but were caused by persons, entities and/or

4 circumstances for whom and/or which BNYM is not and may not be held responsible.

5 FOURTH DEFENSE

6 Plaintiffs' own conduct has contributed to their damages, if any, and to

7 the extent of such contribution, any damages awarded to Plaintiffs should be reduced

8 accordingly.

9 FIFTH DEFENSE

10 At the time and place of the incidents alleged in the Third Amended

11 Complaint, Plaintiffs lmew of the risks incident to their investment in the Notes but,

12 despite such knowledge, freely and voluntarily assumed and exposed themselves to all

13 risk of loss along with consequential injuries and damages.

14 - SIXTH DEFENSE

15 Plaintiffs have failed to mitigate their damages, if any, and to the extent

16 of such failure to mitigate, any damages awarded to Plaintiffs should be reduced

17 accordingly.

18 SEVENTH DEFENSE

19 Plaintiffs' Third Amended Complaint, and each purported cause of

20 action therein, is barred in whole or in part by applicable statutes of limitations.

21 EIGHTH DEFENSE


23 action therein, is barred in whole or in part by reason of Plaintiffs' unclean hands.

24 NINTH DEFENSE


26 action therein, is barred in whole or in part, by the doctrines of ratification, waiver,

27 consent and/or release.

28





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TENTH DEFENSE

Plaintiffs' Third Amended Complaint, and each purported cause of action

therein, is barred in whole or in part by the doctrine of laches.

ELEVENTH DEFENSE


therein, is barred in whole or in part by the doctrine of estoppel.

TWELFTH DEFENSE


therein, is barred in whole or in part by the doctrine of in pari delicto.

THIRTEENTH DEFENSE


therein, is barred in whole or in part by Plaintiffs' bad faith.

FOURTEENTH DEFENSE

The non-performance of MP II, MP IV and MP VI bars any recovery for

breach of contract by Plaintiffs as third-party beneficiaries.

FIFTHTEENTH DEFENSE

BNYM's partial performance is excused by the failure ofMP II, MP IV

and MP VI to satisfy a condition precedent to BNYM's performance.

SIXTEENTH DEFENSE

MP II, MP IV and MP VI waived any right to sue for defects in BNYM's

performance by accepting partial performance with full knowledge of those defects, if

any, and Plaintiffs' breach of contract claims are barred by this waiver.

SEVENTEENTH DEFENSE

The acceptance by MP II, MP IV and MP VI ofBNYM's performance

served as an accord and satisfaction that bars Plaintiffs' breach of contract claims.

EIGHTEENTH DEFENSE

Inequitable conduct by MP II, MP IV and MP VI equitably estops

Plaintiffs' breach of contract claims.


TlURD AMENDED CONSOLIDATED COMPLAINT


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NINETEENTH DEFENSE

To the extent any noteholder received any benefit as a result of any

alleged breach of contract, BNYM is entitled to an offset in the amount of such

benefit. By way of example, Plaintiffs allege that the sale of assets for cash from one

SPC to a different SPC constitutes a breach of contract, and that as a result of the

alleged breach the Noteholders of the SPC that purchased the assets for cash were

injured because the assets the SPC received were worth far less than the cash paid, and

the Noteholders of the SPC that sold the assets received a windfall or were unjustly

enriched as a result of the transaction and alleged breach because the cash the SPC

received far exceeded the value of the assets sold. To the extent that any Noteholders

received a windfall or were unjustly enriched in connection with a transaction that

Plaintiffs allege constitutes a breach ofBNYM's duties, BNYM is entitled to an offset

in the amount of such windfall or unjust enrichment against any damages in this action

alleged by the Noteholders who received the windfall or unjust enrichment.

TWENTIETH DEFENSE

Some Plaintiffs are not third-party beneficiaries under the NISAs

because, among other things, they were not qualified Accredited Investors under

applicable federal laws and regulations and/or the Notes were an unsuitable

investment given, inter alia, those Plaintiffs' respective age, net worth, income,

investment experience, investment goals, and/or tolerance for risk of loss.

III

III

III

III

III

III

III

III




1 WHEREFORE, Defendant BNYM, prays for judgment as follows:

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a.

b.

c.

d.

That Plaintiffs take nothing by their Third Amended Complaint;

That the Third Amended Complaint be dismissed with prejudice;

For costs of suit as may be provided by law; and

For such other and further relief as this Court deems just and proper.

Dated: May 6, 2011 GIBSON, DUNN & CRUTCHER LLP

By:~4.~ Joel A. Feuer




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CERTIFICATE OF SERVICE

I, Babak La1ezari, declare as follows:

I am employed in the County of Los Angeles, State of California; I am over the

age of eighteen years and am not a party to this action; my business address is 333

South Grand Avenue, Los Angeles, California 90071-3197, in said County and State.

On May 6,2011, I served the following document(s):

DEFENDANT THE BANK OF NEW YORK MELLON'S FIRST AMENDED ANSWER TO PLAINTIFFS' THIRD AMENDED CONSOLIDATED COMPLAINT

BY CMlECF Electronic Service: I caused such document to be served via the Court's (NEF) electronic filing system on all registered parties.

BY First-Class Mail, Postage Prepaid: I caused such document to be served via U.S. mail to the following non-CM/ECF participants:

Gi1mur R. Murray Muqay and Howard LLP 760 Market Street Suit 1068 San Francisco, CA 94102

Laura Sch1ichtmann Cotchett Pitre and McCarthy 840 Malcolm Road Suite 200 Burlingame, CA 94010

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

Executed on May 6, 2011.

J01 07241 6_3 ,DOC


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