ORDER
JANET NEFF, District Judge
Pending before the Court is Plaintiff's Motion to Renew Motions (Dkt 53), filed June 28, 2010, in which Plaintiff seeks to vacate two orders of the Court on the sole grounds that he allegedly did not receive copies of either the Order or the underlying Report and Recommendation:
(1) Order (Dkt 45) denying his Motion for Leave to Pursue Interrogatories (Dkt 42), and
(2) Order (Dkt 51) Approving Report and Recommendation, denying Plaintiff's Second Motion for Preliminary Injunction (Dkt 33).
Plaintiff provides no basis for vacating the above orders. Plaintiff has not shown that he was prejudiced by the delayed receipt of the documents at issue nor has he offered any grounds for vacating the orders as to the substantive matters addressed.
Plaintiff questions whether his failure to receive copies has anything to do with the Magistrate Judge's [alleged] hostility toward Plaintiff's religion; however, the mailing of copies to a pro se party is a ministerial function handled automatically by the Clerk's Office, not the Magistrate Judge. Moreover, the court docket shows that copies of the documents at issue were timely sent to Plaintiff via U.S. Mail ( see docket entry for May 17, 2010).
With respect to the first Order (Dkt 45), the Court denied Plaintiff's Motion for Leave to Pursue Interrogatories because there was no indication that Plaintiff ever submitted a discovery request to Defendants, which was a necessary prerequisite to the relief sought. The Court essentially denied the relief as premature, and the Court stated that Plaintiff could refile his motion if appropriate. Plaintiff has not shown any substantive grounds for vacating this order.
Plaintiff argues that the second order, Order Approving Report and Recommendation (Dkt 51), should be vacated because he was denied fundamental fairness since he never received the Report and Recommendation (Dkt 44) issued on May 14, 2010. Plaintiff states that he learned about the Report and Recommendation on June 21, 2010 in the order (presumably, Dkt 51) received from the Clerk.
While the Court agrees that the failure to receive the Report and Recommendation may raise a question of fairness with respect to the timeliness of objections to the Report and Recommendation, it does not automatically warrant vacating the June 17, 2010 Order. Plaintiff has not sought to file objections to the Report and Recommendation concerning his Second Motion for Preliminary Injunction, nor has he indicated any basis for his entitlement to relief on the merits, i.e., that the Court erred in denying his Second Motion for Preliminary Injunction. Thus, unless and until Plaintiff objects to the Report and Recommendation, and shows a meritorious basis for his objections, the Court finds no reason to vacate the June 17, 2010 Order (Dkt 51).
Because it is unclear from Plaintiff's motion and the record whether Plaintiff has since received copies of the documents at issue, the Court will direct the Clerk's Office to once again mail copies. THEREFORE, IT IS ORDERED that Plaintiff's Motion to Renew Motions (Dkt 53) is DENIED.
IT IS FURTHER ORDERED that the Clerk's Office shall again mail Plaintiff a copy of the Order (Dkt 45) denying his Motion for Leave to Pursue Interrogatories and a copy of the Report and Recommendation (Dkt 44).
, and, insofar as it prevents loss, the amount saved should be credited to the wrongdoer."). This principle is consistent with the fundamental view that "damages are meant to put a plaintiff in the same economic position he would otherwise be in but for a defendant's breach of contract."
Boyce v. Soundview Tech. Group, Inc.,
464 F.3d 376, 392 (2d Cir. 2006)
see also Oscar Gruss Son, Inc. v. Hollander,
337 F.3d 186, 196
(2d Cir. 2003) (McLaughlin, J.);
Lucente v. Int'l Bus. Machs. Corp.,
310 F.3d 243, 262 (2d Cir. 2002) (McLaughlin, J.).
a. $16,834,376 Offset to Judgments of QVT, Lehman, and DBAGL
Aristocrat contends that three of the Bondholders — QVT, Lehman, and DBAGL — improperly ask the Court to award them general damages without an offset of $16,834,376 in gains that they earned when closing their short positions in Aristocrat stock — "gains they would not have realized absent the breach." (See Aristocrat's Consol. Mem. of Law In Partial Opp'n to Mots. Of Intervening Defs., Deutsche Bank AG, London Branch, and Deutsche Bank Trust Co. Ams. For Entry of J. ("Aristocrat's 54(b) Opp'n") 6; see also Damages Decl. of David J. Ross ("Ross Decl.") ¶¶ 15-16 Ex. F.) Aristocrat contends that this nearly $17 million gain should be offset against QVT's, Lehman's, and DBAGL's full measure of general damages.
Bondholders proffer two arguments for why Aristocrat is not entitled to a nearly $17 million offset. First, Bondholders contend that Aristocrat is attempting to re-litigate issues already resolved by the Court in its summary judgment decision on damages from April 27, 2009. (See Bondholders' 54(b) Reply 5-8; DBAGL's Mem. of Law in Supp. of Its Proposed Final J. in Response to Aristocrat's Partial Opp'n ("DBAGL Mem.") 2-3.) Bondholders claim that, prior to the instant motion, Aristocrat never argued that an award of "general damages should be offset for any `profit' that would ultimately be realized if and when the judgments in this action are finally paid where short positions were closed at prices below the share price on the date of breach." (Bondholders' 54(b) Reply 6.) Bondholders further claim that Aristocrat has waived its offset argument because Aristocrat was aware that Bondholder witnesses who had closed their short positions "uniformly" said, as early as their 2006 depositions, "that they did not intend to return or credit the difference" to Aristocrat for any financial profit made when closing their short positions. (Id.) Aristocrat counters that since Bondholders have the burden to establish the amount of actual damages and "have never before asserted that their damages awards should be computed without regard to these profits," Aristocrat "cannot have waived a defense to an issue on which the Bondholders have the burden of proof and which they have never previously raised." (Aristocrat's Sur-Reply Mem. of Law in Partial Opp'n to Mots. of Intervening Defs., DBAGL, Trustee for Entry of J. ("Aristocrat's 54(b) Sur-Reply") 7.)
Second, Bondholders contend that Aristocrat is not legally entitled to a nearly $17 million offset because an offset against general damages is justified under New York law only where the non-breaching party saved money or avoided expenses as a result of its not having to perform under the contract following the breach. (Bondholders' 54(b) Reply 9; DBAGL's Mem. 3.) Bondholders argue that here, where they, as the non-breaching parties, have performed fully their contractual obligations, there is no expense to be saved or loss avoided as a result of Aristocrat's breach. (See Bondholders' 54(b) Reply 9.)
The Court first holds that Aristocrat has not waived its argument that damages should be offset by the amount that Bondholders earned from closing their short positions. Prior to the instant motions, the offset issue was not raised by either side, and the Court agrees with Aristocrat that the issue could not have been raised in a meaningful way any earlier, since QVT, Lehman, and DBAGL did not disclose that they had realized approximately $17 million upon closing their short positions until September 2009, one month prior to the trial on consequential damages. (See Aristocrat's Rule 54(b) Opp'n 7
DBAGL contends that Aristocrat was aware of the earnings DBAGL made on its short position well in advance of trial. (See DBAGL Mem. 2 n. 3) Aristocrat does not dispute that it "was in possession of documents outlining all of DBAGL's trades in Aristocrat stock related to [DBAGL's $8,339,000 Asian Convertible Bonds Trading Desk ("DBAGL Asian")] at the time Aristocrat deposed a DBAGL representative on October 24, 2006." (Id.) However, Aristocrat did not possess trading information with respect to another DBAGL position, DBAGL OMNIS (for $3,301,000), until shortly before trial. (See Aristocrat's 54(b) Sur-Reply 7 n. 10; Trial Tr. 1033:14-1034:5.) DBAGL does not dispute this fact. Because there is only one DBAGL party in this action representing both the DBAGL OMNIS and DBAGL Asian positions, Aristocrat did not possess all of the relevant DBAGL trading information until shortly before trial. Moreover, because there is only one DBAGL party representing both DBAGL positions, there should be only one DBAGL judgment in this case encompassing both positions.
n. 8; Aristocrat's 54(b) Sur-Reply 7 n. 10 8.) Therefore, Aristocrat has not waived its argument that it is entitled to an offset equivalent to the gains that QVT, Lehman, and DBAGL generated upon closing their short positions.
Second, the Court holds that Aristocrat is entitled to an offset. As discussed above, if a victim derives a benefit from the breaching party's breach of contract, the breaching party only is responsible for the victim's net loss. See Indu Craft, 47 F.3d at 495; S K Sales, 816 F.2d at 852; Stern, 539 F.2d at 1311-12. The parties do not dispute that had Aristocrat delivered shares upon conversion, those Bondholders with short positions would have closed their short positions and would not have engaged in post-breach trades. See Trial Tr. 328:19-329:4 [DBAGL], 364:12-20 [UFJ], 416:14-417:19 [Deephaven], 588:14-590:8 [KBC FP and KBC HK], 810:25-811:3 [QVT], 913:14-18, 916:9-16 [Lehman], 949:23-950:4 [D.E. Shaw], 975:19-23 [CQS], 1451:18-20, 1457:18-21 [Alexandra], 1573:19-22, 1580:9-12 [KBC AIM funds]; Aristocrat's 54(b) Opp'n 14. Accordingly, had Aristocrat performed fully under the Indenture, Bondholders with short positions would not have generated earnings on their short positions following conversion.
The parties dispute who has the burden of proving the amount of offset or setoff to damages. Federal district courts in the Second Circuit do not have a consistent view on whether the breaching party or the victim of the breach bears the burden of proof on offset. Compare Mathias v. Jacobs, 238 F. Supp. 2d 556, 580-81 (S.D.N.Y. 2002) ("[Plaintiff] had the burden of proof to establish the portion of damages he alleged was represented by the full amount of the options, and to refute [defendant's] claim for an apportionment and offset to reduce [plaintiff's] asserted losses."); Minpeco, S.A. v. Conticommodity Servs., Inc., 676 F. Supp. 486, 490 (S.D.N.Y. 1987) ("[T]he accepted rule is that the plaintiff, because it bears the burden of proving its claim for damages, also bears the burden of proof with regard to the offset."); Filmline (Cross-Country) Prods., Inc. v. United Artists Corp., 662 F. Supp. 798, 813 (S.D.N.Y. 1987) (Sprizzo, J.) (requiring plaintiff to prove offsetting costs saved by reason of defendant's wrongful conduct), with Auburn Chevrolet-Oldsmobile-Cadillac, Inc. v. Branch, No. 06 Civ. 0362, 2009 WL 667430, at *10 (N.D.N.Y. Mar. 10, 2009) ("The Court finds that Defendant has not met his burden of showing that he is entitled to any recoupment or set-off with regard to that [damages] amount."); Ruhlmann v. Smith, 323 F. Supp. 2d 356, 368 (N.D.N.Y. 2004) ("Defendants do not dispute that, as the parties asserting that set-off is appropriate, they bear the burden of proof."); Aniero Concrete Co., Inc. v. N.Y. City Constr. Auth., 308 F. Supp. 2d 164, 190-91 n. 17 (S.D.N.Y. 2003) (stating that because "the defendant wishes to reduce the amount of [plaintiff's] claim by asserting its right to a `credit,' `offset,' or `setoff,' defendant bears the burden of proving its entitlement by a preponderance of the evidence"); U.S. for Use and Benefit of F G Mech. Corp. v. Manshul Constr. Corp., No. 94 Civ. 2436, 1998 WL 849327, at *28 (E.D.N.Y. Oct. 1, 1998) (holding "that defendant has failed to satisfy its burden of proof on its claims for set-off or recoupment");Susi v. Belle Acton Stables, Inc., 261 F. Supp. 219, 222 (S.D.N.Y. 1966) ("[T]he burden of proving . . . a set-off, recoupment, or reduction of damages is upon the defendants."). New York state courts, on the other hand, consistently require the party that would benefit from the offset — in this case, Aristocrat — to prove its entitlement to a reduction of damages. See Am. Oil Co. v. Coughlin, 24 N.Y.S.2d 731, 732, 261 App. Div. 852 (App. Div. 1941) (holding that, where defendants "pleaded a counterclaim or set-off," they "had the burden of proof on [that] issue"); Feiger v. Iral Jewelry, Ltd., 382 N.Y.S.2d 216, 221, 85 Misc. 2d 994 (Sup. Ct. 1975) (stating that defendant has the burden of proof to establish offset on commission payments owed to plaintiff, which defendant did not meet, but noting that, even if plaintiff had the burden, plaintiff still would prevail); Porter v. McMorran, 264 N.Y.S.2d 296, 299, 48 Misc. 2d 79 (Sup. Ct. 1965) (holding that "[t]he burden of proof as to any amount sought to be offset was upon
the [defendant] . . . and failure to sustain this burden at trial cannot thereafter precipitate a collateral attack upon the judgment . . . [by way of] a counterclaim in a subsequent proceeding"); Tiger Sec. Group, Inc. v. State, 851 N.Y.S.2d 74 (Table), 2007 WL 4105821, at *16 (Text) (Ct. Cl. Sept. 25, 2007) ("Defendant bears the burden of proof on any affirmative defense, rights to set-off, or counterclaims asserted by it."); Mastic Acres, Inc. v. State, 260 N.Y.S.2d 532, 535, 46 Misc. 2d 660 (Ct. Cl. 1965) ("The defendant has failed to meet its burden of proof by way of offset. . . ."). The Court need not resolve whose burden it is to prove entitlement to an offset because even if Aristocrat bears the burden, Aristocrat has satisfied it by demonstrating that, as a result of its breach of the Indenture, QVT, Lehman, and DBAGL derived gains upon closing their short positions at favorable prices. (See Ross Decl. ¶¶ 15-16 Ex. F.)
Aristocrat also refutes Bondholders' limited reading of the offset principle, (see Bondholders' 54(b) Reply 9 (contending that an offset is appropriate only "where the non-breaching party saved money or avoided expenses as a result of its not having to perform under the contract following the breach")), by proffering authority supporting the bedrock principle that an injured party should not recover more from the breach than he would have gained had the contract been performed fully. (See Aristocrat's 54(b) Opp'n 6-13; Aristocrat's 54(b) Sur-Reply 3-6.) Although Bondholders attempt to factually distinguish ten cases that Aristocrat cites, (see Bondholders' 54(b) Reply 9-11), these cases, though factually dissimilar, do not limit, or otherwise qualify, the legal principle that an injured party "cannot choose to recover for his injuries yet retain his windfall."Minpeco, 676 F. Supp. at 488. Indeed, the factual diversity of these cases demonstrates the broad reach of the offset principle, which extends even to securities fraud victims whose damages are offset by profits derived as a result of a wrongdoer's actions. See, e.g., Byrnes v. Faulkner, Dawkins Sullivan, 550 F.2d 1303, 1314 (2d Cir. 1977) (holding that securities fraud losses must be offset by corresponding gains since "the transaction cannot be fractionated"); Minpeco, 676 F. Supp. at 490 (holding that whatever losses plaintiff trader incurred on its short positions when price of silver increased
Bondholders seek to distinguish Freund, 34 N.Y.2d at 382-83, as "not concern[ing] an offset to general damages but[, rather,] a claim for the cost of self-publishing a book following the breach of contract to publish." (Bondholders' 54(b) Reply 11.)
Bondholders seek to distinguish the following offset cases as limited to circumstances where the non-breaching party did not have to perform a duty after the breaching party breached the contract: Indu Craft, 47 F.3d at 493-95; Am. List Corp., 75 N.Y.2d at 44; McMaster, 108 N.Y. at 548-53; R I Elecs., 411 N.Y.S.2d at 404. (Bondholders' 54(b) Reply 9-10.)
Bondholders seek to distinguish these offset cases as limited to the employee-wage context: Rudman, 30 N.Y.2d at 14; Cornell, 17 N.Y.2d at 74; Hollwedel, 263 N.Y. at 101. (Bondholders' 54(b) Reply 10.)
Bondholders seek to distinguish offset cases involving claims of fraudulent securities activity from the instant case, which involves a breach of contract: Apex Oil Co. v. DiMauro, 744 F. Supp. 53, 55 (S.D.N.Y. 1990) (Wood, J.); Minpeco, 676 F. Supp. at 490. (Bondholders' 54(b) Reply 11.)
as a result of defendant's fraudulent securities activities "must be offset by the measure of the increase in value which accrued to its own physical silver holdings"); see also Apex Oil, 744 F. Supp. at 55 (stating that, as in Minpeco, "requiring each counterclaimant to net out its gains and losses will neither unjustly enrich [the wrongdoer], nor shelter it from any appreciable liability, nor undermine the goal of deterrence . . . [because t]here is no unjust enrichment where a claimant has actually benefited from the alleged wrongdoing of another" (emphasis in original)).
Additionally, neither of the cases that Bondholders cite in affirmative support of their argument against an offset applies here. In Allied Semi-Conductors International, Ltd. v. Pulsar Components International, Inc., the court held that the disputed damages issue was resolved by the "clear statutory mandate" of section 2-711(1)(a) of the New York Uniform Commercial Code ("N.Y. U.C.C."), which expressly allows a buyer who receives non-conforming goods to recover "so much of the price as has been paid" plus the cost of "cover." 907 F. Supp. 618, 630, 632 (E.D.N.Y. 1995) (quoting N.Y. U.C.C. § 2-711(1)(a)). Because the buyer "sustain[ed] no cover damages" from the seller's breach of contract, the court awarded only "the purchase price paid" and, as mandated by statute, disregarded the buyer's profit on its cover transaction. Id. Because the N.Y. U.C.C. does not apply to the instant case, Allied Semi-Conductors is unavailing. In G.A. Thompson Co., Inc. v. Wendell J. Miller Mortgage Co., Inc., the claimant's gains occurred "before the breach," unlike Bondholders' gains, which occurred because of the breach, thereby rendering G.A. Thompson inapplicable to the instant case. 457 F. Supp. 996, 998-99 (S.D.N.Y. 1978).
In a footnote in their reply brief, Bondholders contend that Aristocrat's proposed judgments erroneously include offsets for payments in lieu of dividends received by QVT, Lehman, and DBAGL. (Bondholders' 54(b) Reply 12 n. 3; see also Ross Decl. Ex. F.) Bondholders claim that because the Court previously ruled that in lieu of dividend payments are not recoverable as damages, "they should not be taken into account for offset purposes either." (Bondholders' 54(b) Reply 12 n. 3.) In its April 27, 2009 ruling, the Court precluded Bondholders from obtaining "in lieu of dividend payments" as part of their damages award because such payment would be tantamount to receiving "double recovery."Aristocrat Leisure, 618 F. Supp. 2d at 301-02. The Court did not address, let alone preclude, the offset at issue in the instant motion. Moreover, Aristocrat deducts the in lieu of dividend payments made by DBAGL, Lehman, and QVT from DBAGL's, Lehman's, and QVT's total gains on closing their short positions, resulting in a smaller, rather than larger, offset against these Bondholders' general damages. (See Ross Decl. ¶ 16 Ex. F at 2-5 (subtracting "In Lieu Dividend Payment" from the "Cumulative Gain" for DBAGL Asian, DBAGL OMNIS, Lehman, and QVT).)
For the foregoing reasons, the judgments of QVT, Lehman, and DBAGL shall be offset by the amount of earnings QVT, Lehman, and DBAGL derived upon closing their short positions.
b. $1,093,358 Offset to Judgments of Deephaven, KBC FP, and four KBC AIM funds-ARB, MAC 28, Multi, and OPPS
Aristocrat contends that several Bondholders — Deephaven, KBC FP, and four of the five KBC AIM funds (ARB, MAC 28, Multi, and OPPS) — "have omitted from their calculation of consequential damages the interim trading gains they made on their short positions before the positions were finally closed," resulting in a net overstatement of consequential damages of $1,093,358 (after adjusting for interim trading losses of certain other Bondholders-UFJ, KBC HK, and one KBC AIM fund, Melody). (Aristocrat's 54(b) Opp'n 7, 13; Ross Decl. ¶ 14 Ex. E.) Bondholders contend that "these trades generally either were made in error and quickly reversed or were the result of what was called at trial a `dynamic hedging strategy' following the breach." (Bondholders' 54(b) Reply 13.) Bondholders' position is that "[b]ecause these trades are not within an established category for reduction of damages, the proposed offset should not be allowed." (Id.) Bondholders also claim that because some of these trades served to increase rather than close short positions, "the proposed offset is at odds with this Court's prior ruling[] . . . that consequential damages are limited to the extra costs the Bondholders incurred when they `bought shares in the open market to close the short positions left open by Aristocrat's refusal to honor the conversion notices.'" (Id. (quoting Aristocrat Leisure, 618 F. Supp. 2d at 302).) Bondholders also contend that Aristocrat never argued during the October 2009 trial that these adjustments were unreasonable. (Id. 14.)
The Court agrees with Aristocrat that a $1,093,358 offset against consequential damages for interim trading gains is appropriate. For the reasons discussed above, Bondholders are not entitled to retain earnings derived as a result of Aristocrat's breach because such gains, when added to the damages Bondholders are to receive as a result of Aristocrat's breach, would put Bondholders in a better position than they would have been absent Aristocrat's breach. Accordingly, the gains that Deephaven, KBC FP, and four KBC AIM funds (ARB, MAC 28, Multi, and OPPS) earned on their short positions through interim trading will be offset from their consequential damages.
For the foregoing reasons, Aristocrat is entitled to a downward adjustment to general damages in the amount of $16,834,376 for gains realized by DBAGL, Lehman, and QVT when they closed their short positions. Aristocrat also is entitled to a downward adjustment to consequential damages in the amount of $1,093,358 for the interim trading gains that Deephaven, KBC FP, and four of the five KBC AIM funds (ARB, MAC 28, Multi, and OPPS) earned on interim trades on their short positions.
2. Pre-Judgment Interest
The parties disagree about the calculation of certain aspects of the applicable pre-judgment interest rate. The Court begins by summarizing the pre-judgment interest rate calculation issues to which there is no dispute. Then the Court analyzes the pre-judgment interest issues in dispute.
The parties agree that (1) with respect to general damages, unhedged Bondholders are entitled to recover pre-judgment interest on the value of their shares from the breach date, previously determined to be the conversion date, through May 30, 2006 — after which the interest rate is in dispute — at the statutory rate of 9% simple interest per annum, pursuant to N.Y. C.P.L.R. §§ 5001(a) and 5004; and (2) with respect to consequential damages, Bondholders are entitled to recover pre-judgment interest from each Bondholder's cover date through the date of final judgment at the statutory pre-judgment interest rate of 9% simple interest per annum, pursuant to N.Y. C.P.L.R.
§§ 5001(a) and 5004. See Aristocrat Leisure, 618 F. Supp. 2d at 310; Aristocrat Leisure, 2006 U.S. Dist. LEXIS 34709, at *52; Geiger Decl. Exs. 1-16; Decl. of W. David Sarratt in Supp. of Aristocrat's Consol. Mem. of Law in Partial Opp'n to the Mots. of Int. Defs., DBAGL, Trustee for Entry of J. ("Sarratt Decl.") Exs. G-W; Ross Decl. ¶¶ 18-19; Aristocrat's 54(b) Sur-Reply 9 n. 13.
Now the Court turns to the pre-judgment interest issues in dispute: (a) with respect to general damages, whether a pre-judgment interest rate of 7.5% applies to the period from May 31, 2006, through the date each Bondholder signed a Receipt and Release Agreement; (b) with respect to general damages for hedged Bondholders, whether the statutory pre-judgment interest rate of 9% should accrue from the date of each such Bondholder's cover transaction (as Aristocrat contends) or from the conversion date (as Bondholders contend). Below, the Court addresses each issue in turn.
a. Pre-Judgment Interest Rate of 7.5% Applies to Principal Payments From May 31, 2006, Through the Date that Each Bondholder Signed a Receipt and Release Agreement
Aristocrat contends that because Bondholders' proposed judgments fail to account for the Court's ruling that an interest rate of 7.5% per year, rather than 9% per year, applies to the pre-judgment interest for the principal amounts of Aristocrat shares from May 31, 2006, through the dates of the Receipt and Release Agreements, Bondholders' proposed judgments overstate pre-judgment interest by $409,000. (Aristocrat's 54(b) Opp'n 14 n. 16 (citing Aristocrat Leisure, 618 F. Supp. 2d at 310 (holding that, pursuant to section 4.03 of the Indenture, "Bondholders are entitled to prejudgment interest for theprincipal amounts at the 7.5 percent interest rate from May 31, 2006 through the date each Bondholder signed a Receipt and Release Agreement." (emphasis added))); Ross Decl. ¶ 18 n. 10.) Bondholders respond that the 7.5% interest rate does not apply to this time period because Aristocrat's payments under the Receipt and Release Agreements were not "in fact a payment of principal" but rather "a down payment of damages for the failure to deliver shares in an amount equal to principal." (Bondholders' 54(b) Reply 19.)
It is undisputed that pre-judgment interest on general damages does not accrue following the date that each Bondholder signed a Receipt and Release Agreement. See Geiger Decl. Exs. 1-16; Ross Decl. ¶ 18.
The Court reiterates that with respect to pre-judgment interest "for principal payments," section 4.03 of the Indenture entitles Bondholders to prejudgment interest "at the 7.5 percent interest rate from May 31, 2006, through the date each Bondholder signed a Receipt and Release Agreement." Aristocrat Leisure, 618 F. Supp. 2d at 310. The issue here is whether the payments Aristocrat made to Bondholders under the Receipt and Release Agreements, which are equivalent to the principal amounts, effectively constitute principal payments under the Court's April 27, 2009 ruling. The Court finds in the affirmative, and contemplated as much in its April 27, 2009 decision. See id. (referring to the payments Aristocrat made to Bondholders under the Receipt and Release Agreements as "principal payments"). The Court repeats, therefore, that the pre-judgment interest rate of 7.5% applies to the payments Aristocrat made to Bondholders under the Receipt and Release Agreements for the period from May 31, 2006 through the date each Bondholder signed a Receipt and Release Agreement.
As Aristocrat notes, calculating the pre-judgment interest rate from the date each Bondholder signed a Receipt and Release Agreement, as opposed to the date that Aristocrat made payment pursuant to the Receipt and Release Agreement, is consistent with the Court's April 27, 2009 decision. See Aristocrat Leisure, 618 F. Supp. 2d at 310; Ross Decl. ¶ 18 n. 10. If the signature date is not available for certain Bondholders, the parties may calculate pre-judgment interest from the date on which Aristocrat made payment. (See Ross Decl. ¶ 18 n. 10.)
b. Pre-Judgment Interest Rate of 9% Applies to General Damages As of Each Bondholder's Conversion Date
Aristocrat contends that for Bondholders who held short positions ("hedged Bondholders"), pre-judgment interest on general damages for short positions should be calculated from the dates of the cover transactions. (Aristocrat's 54(b) Opp'n 14.) Bondholders, on the other hand, ask the Court to award pre-judgment interest on general damages from the conversion date, regardless of whether a particular Bondholder was fully hedged, partially hedged, or unhedged. (Bondholders' 54(b) Reply 14.) Aristocrat argues that calculating pre-judgment interest on general damages for hedged Bondholders from the conversion date, as Bondholders request, would give Bondholders "nearly $34 million in pre-judgment interest premised on the supposed loss of use of money that they would not have had if [Aristocrat] had fully performed under the contract." (Aristocrat's 54(b) Opp'n 19.)
Bondholders proffer several arguments for why pre-judgment interest on general damages for short positions should accrue from the conversion date. First, Bondholders assert that Aristocrat has waived its argument that pre-judgment interest should run from the date of each Bondholder's cover transaction because Aristocrat did not raise it during the parties' briefing of the summary judgment motion on damages. (See Bondholders' 54(b) Reply 15.) Second, Bondholders contend that this Court previously rejected Aristocrat's proposal that hedged Bondholders should receive pre-judgment interest as of their cover date when it held that "Bondholders are `entitled to statutory interest of nine percent' both `on the value of the shares on the Conversion Date, and for any consequential damages ultimately awarded for the costs associated with covering [Bondholders'] short positions.'" (Id. 15-16 (quoting Aristocrat Leisure, 618 F. Supp. 2d at 310).) Third, Bondholders argue that pre-judgment interest on hedged positions should accrue from the conversion date because, from that date, "Bondholders were deprived of their ability to `use' property to which they were rightfully entitled, and therefore are entitled to pre-judgment interest on the value of that property." (Id. 16 (citing Love v. State of N.Y., 78 N.Y.2d 540, 544, 583 N.E.2d 1296 (1991) ("[Prejudgment interest] is simply the cost of having the use of another person's money for a specified period."); BVE Prods., Inc. v. Saar Co., LLC, 835 N.Y.S.2d 555, 556, 40 A.D.3d 349 (App. Div. 2007) ("CPLR 5001(a) provides that [prejudgment] interest `shall' be recovered on monetary damages awarded for breach of contract or any act or omission affecting possession or enjoyment of property." (quoting N.Y. C.P.L.R. § 5001(a)))).) Finally, Bondholders note that using the cover date, as Aristocrat suggests, "would create without cause a fundamental distinction between the relief available to Bondholders who hedge and those who do not" and, thus, "is not a fair measure." (Bondholders' 54(b) Reply 17.)
The Court holds that the pre-judgment interest rate on general damages for all Bondholders, including hedged Bondholders, shall be calculated from each Bondholder's conversion date, as Bondholders suggest. As a threshold matter, the Court holds that Aristocrat has not waived its argument for using the cover date as the pre-judgment interest accrual date for general damages for hedged Bondholders. Section 5001(c) of the New York Civil Practice Law and Rules ("N.Y. C.P.L.R.") provides that "[t]he date from which interest is to be computed shall be specified in the verdict, report or decision," but "[i]f a jury is discharged without specifying the date" — as occurred here — then "the court upon motion shall fix the date." N.Y. C.P.L.R. § 5001(c); see also Aristocrat's 54(b) Sur-Reply 11-12. Thus, it is not untimely for Aristocrat to dispute the applicable date from which pre-judgment interest should accrue on general damages for hedged Bondholders.
Though timely, Aristocrat's argument fails on the merits. On April 27, 2009, the Court determined that Bondholders are entitled to a statutory pre-judgment interest rate of 9% "on the value of the[ir] shares on the Conversion Date, and for any consequential damages ultimately awarded for the costs associated with covering their short positions." Aristocrat Leisure, 618 F. Supp. 2d at 310 (emphasis added). In deciding that Bondholders are entitled to a 9% pre-judgment interest rate on the value of their shares "on the Conversion Date," the Court did not distinguish between hedged and unhedged Bondholders. Id. The Court sees no reason to draw such a distinction now.
Section 5001(a) of the N.Y. C.P.L.R. provides, in relevant part, that "[i]nterest shall be recovered upon a sum awarded because of a breach of performance of a contract." N.Y. C.P.L.R. § 5001(a). The statute further mandates that "[i]nterest shall be computed from the earliest ascertainable date the cause of action existed, except that interest upon damages incurred thereafter shall be computed from the date incurred." Id. § 5001(b); see also Ginett v. Computer Task Group, Inc., 962 F.2d 1085, 1101 (2d Cir. 1992). Interest "is intended to indemnify successful plaintiffs `for the non-payment of what is due to them' and is not meant to punish defendants for delaying the final resolution of the litigation." Love, 78 N.Y.2d at 544 (quoting Trimboli v. Scarpaci Funeral Home, Inc., 326 N.Y.S.2d 227, 230, 37 A.D.2d 386 (App. Div. 1971), aff'd 30 N.Y.2d 687, 283 N.E.2d 614 (1972));see also Brushton-Moira Cent. School Dist. v. Fred H. Thomas Assocs., P.C., 91 N.Y.2d 256, 262, 692 N.E.2d 551 (1998) ("The award of interest reflects . . . the principle that damages are properly ascertained as of the date of the breach and . . . that there may be a time lag between the accrual of a plaintiff's cause of action and the resulting damage sustained and actual payment by defendant."). "[I]nterest is not a penalty. Rather, it is simply the cost of having the use of another person's money for a specified period." Love, 78 N.Y.2d at 544; see also Paddington Partners v. Bouchard, 34 F.3d 1132, 1141 (2d Cir. 1994) ("The purpose of interest awarded under Section 5001 is to compensate adequately the recipient, rather than to penalize the paying party.").
In a breach of contract action, pre-judgment interest ordinarily accrues from the date of the breach. See Brushton-Moira, 91 N.Y.2d at 263 (holding "that plaintiff's damages . . . should be based on the cost to repair or replace the defective panels as of [the breach date] and, pursuant to statutory mandate, prejudgment interest must also be calculated from that same date"); Love, 78 N.Y.2d at 544 (holding that, in the context of a bifurcated trial, pre-judgment interest should accrue from the date of liability, rather than the date of assessment of plaintiff's damages); Kaiser v. Fishman, 590 N.Y.S.2d 230, 234, 187 A.D.2d 623 (App. Div. 1992) ("In the instant case, the contract was breached on June 5, 1981, . . . and that is the date from which the trial court should have awarded interest on the cost-to-cure damages. . . ."). But "where damages are incurred at various times after the cause of action accrues, section 5001 grants courts wide discretion in determining a reasonable date from which to award pre-judgment interest." Conway v. Icahn Co., Inc., 16 F.3d 504, 512 (2d Cir. 1994). "An award of interest is `often appropriate from the time at which a party was deprived of the use of money.'"Calgon Carbon Corp. v. WDF, Inc., ___ F. Supp. 2d ___, 2010 WL 1244766, at *7 (S.D.N.Y. Mar. 25, 2010) (quoting Lawyers' Fund for Client Prot. v. Bank Leumi Trust Co., 94 N.Y.2d 398, 407, 727 N.E.2d 563 (2000)); see also 155 Henry Owners Corp. v. Lovlyn Realty Co., 647 N.Y.S.2d 30, 31, 231 A.D.2d 559 (App. Div. 1996) ("`The award of interest is founded on the theory that there has been a deprivation of use of money or its equivalent and that the sole function of interest is to make whole the party aggrieved. It is not to provide a windfall for either party.'" (quotingKaiser, 590 N.Y.S.2d at 234)).
In its April 27, 2009 decision, the Court made clear that "damages should be calculated from the Conversion Date, which is the day [Bondholders] expected to receive, but did not actually receive, Aristocrat shares." Aristocrat Leisure, 618 F. Supp. 2d at 294 (emphasis added). Aristocrat now argues that the Court should afford different treatment to general damages, which Aristocrat does not dispute run from the conversion date, and to pre-judgment interest on those general damages, which Aristocrat says should accrue from hedged Bondholders' cover dates. The Court sees no reason for this disparate treatment. After Aristocrat breached the Indenture by failing to deliver shares upon conversion, Aristocrat was holding shares that it no longer was entitled to hold, thereby "realiz[ing] some profit, tangible or otherwise, from having [the shares] in hand." Love, 78 N.Y.2d at 545 ("[D]efendant, who has actually had the use of the money, has presumably used the money to its benefit and, consequently, has realized some profit, tangible or otherwise, from having it in hand during the pendency of the litigation."). Thus, contrary to Aristocrat's argument, there is "nothing unfair about requiring [Aristocrat] to pay over this `profit' in the form of interest to [Bondholders], the party who was entitled to the [shares] from the date [Aristocrat's] liability was fixed."Id. Indeed, because Aristocrat "was not entitled to the use of the money [equivalent to the value of shares upon conversion] from the moment that liability was established, a rule that would permit [Aristocrat] to retain the cost of using the money (i.e., interest) would provide [Aristocrat] with a windfall." Id.
Aristocrat's argument that hedged Bondholders did not lose the use of money until they closed their short positions is unavailing. Bondholders lost the use of the shares on the conversion date, as it is on that date that they were entitled to the shares and, accordingly, entitled to decide what to do with them — i.e., use them to close their short positions, sell them, lend them, or hold them. The fact that Bondholders testified that they would have used Aristocrat conversion shares to close their short positions does not lead to Aristocrat's proffered conclusion that Bondholders were not deprived of the use of those shares; on the contrary, Bondholders' testimony illustrates that Bondholders were deprived of their intended use
of those shares. In addition to loss of use of their conversion shares, Bondholders had to re-mark their Aristocrat positions on their books from parity (convertible bonds had a value equal to the price of the shares into which they were convertible) to par (bonds were not convertible and were worth no more than a non-convertible bond). (Bondholders' 54(b) Reply 17.) In some cases, Bondholders also had to post collateral to cover this remarking, requiring them to incur costs that they would not have incurred absent Aristocrat's breach. (Id. 17 n. 5; Trial Tr. 721:8-726:24, 1607:2-11 (testimony of Patrick Patterson of KBC AIM).)
Aristocrat heavily relies on Bulk Oil (U.S.A.), Inc. v. Sun Oil Trading Co. in support of its position that when a victim of a breach intends to use money owed by the breaching party to pay off a separate loan, "an award of statutory interest . . . on that part . . . of the contract price which [plaintiff] would have used to pay off the loan would be a windfall." 697 F.2d 481, 485-86 (2d Cir. 1983) (rejecting plaintiff's argument that it was deprived of its ability to use nearly $4 million to which it was entitled because plaintiff would have used the funds to pay off a separate loan). Unlike the instant case, where pre-judgment interest is governed by section 5001(b), in Bulk Oil, pre-judgment interest was determined under section 2-709 of the N.Y. U.C.C. See id. at 486 n. 12 ("Plainly, UCC § 2-709 is specifically applicable to contracts for the sale of goods, whereas CPLR § 5001 is of general application, among other things, to breach of any contract."). Therefore, Bulk Oil, the only case that Aristocrat proffers, and that the Court has found, that precludes pre-judgment interest for money meant to be used to pay off a separate loan, is inapplicable. Because the Court holds that hedged Bondholders were deprived of their use of property to which they were entitled upon Aristocrat's non-delivery of conversion shares, it is from this date that pre-judgment interest should accrue at a statutory rate of 9% simple interest per annum.
For the foregoing reasons, a pre-judgment interest rate of 7.5% applies to the payments Aristocrat made to Bondholders under the Receipt and Release Agreements for the period from May 31, 2006 through the date each Bondholder signed a Receipt and Release Agreement, and a 9% pre-judgment interest rate on general damages shall accrue for all Bondholders — whether fully hedged, partially hedged, or unhedged-as of each Bondholder's conversion date.
3. Coupon Payments on Deposit With the Court
Aristocrat contends that coupon payments that Aristocrat previously deposited with the Court in the amount of $7,859,300 million "should be distributed to the Bondholders and credited against the overall damages award." (Aristocrat's 54(b) Opp'n 20 n. 24.) Aristocrat explains that such a calculation "work[s] no unfairness on the Bondholders" because "[a]t the Court's direction, the funds were deposited in an interest-bearing account," and, as Aristocrat's "proposed judgments reflect, the Bondholders will get the benefit of that interest." (Id. 21.)
Bondholders and the Trustee argue that the Trustee's senior lien on the coupon payments precludes application of those funds toward the judgments. (See Bondholders' 54(b) Reply 19; DBAGL Mem. 2 n. 4; Trustee's Reply Mem. in Supp. of Its Mot. for Ct. to Consider Whether to Issue J. in Favor of Add'l Non-Party Bondholders ("Trustee's Reply") 4.) The Trustee contends that because Aristocrat's coupon payments "are on deposit in an interest bearing account pursuant to Orders of the Court [that] acknowledg[e] that the Trustee has a senior lien on all such funds . . . [t]he funds on deposit with the Court are not available for distribution as suggested by Aristocrat." (Trustee's Reply 4.) The Trustee insists that the Court should reject Aristocrat's suggestion that, after the funds deposited with the Court are applied to satisfy the claims of the various Bondholders, Aristocrat "will promptly satisfy the Trustee's fees out of separate funds," (Aristocrat's 54(b) Opp'n 20 n. 25), because "this Court has already ruled [that] the Trustee may
continue to incur recoverable costs and expenses through the end of this litigation." (Trustee's Reply 4.) The Trustee, therefore, claims that its "entitlement to compensation, reimbursement and indemnification cannot be quantified until the end of this litigation, including any appeal." (Id.)
The Court holds that the coupon payments deposited with the Court shall not be applied to reduce the damages judgment Aristocrat must pay. The Court previously held, and Aristocrat does not dispute, that the Trustee has a senior lien over the coupon payments deposited with the Court. (See Aristocrat's 54(b) Opp'n 20 n. 25.) Since the Trustee will incur additional fees on appeal, the Court agrees with the Trustee that "it is not possible to finally quantify the Trustee's claim at this time." (Trustee's Reply 5.) Additionally, it would not serve the interests of judicial economy for the Court to require the Trustee to quantify its expenses to date, apply the coupon payments on deposit with the Court toward these expenses, apply any remaining funds on deposit toward the judgments in this case, and, subsequently, require the Trustee to obtain an alternate method of security from Aristocrat for expenses incurred on appeal, as Aristocrat suggests. (See Aristocrat's 54(b) Sur-Reply 13.) The Court also rejects Aristocrat's request to pay the Trustee out of separate funds, as this approach ignores the Trustee's senior lien, which the Trustee is entitled to pursuant to the terms of the Indenture. See Aristocrat Leisure, 618 F. Supp. 2d at 300 ("The Indenture . . . dictates that the Trustee gets first priority in the distribution of any funds that the Trustee collected for overdue coupon or principal payments." (citing Indenture §§ 4.06 5.06 for the propositions that any funds that the Trustee collects under Article 4 of the Indenture first should be distributed to compensate the Trustee and that the Trustee can assert a senior claim and lien upon all property or funds held or collected by the Trustee)). The Court concludes that the Trustee may continue to assert its senior lien over the funds on deposit with the Court and those funds shall not be made available to Aristocrat at this time to satisfy Bondholders' judgments.
4. Post-Judgment Interest
Aristocrat contends that post-judgment interest should be calculated according to the post-judgment interest rate set forth in 28 U.S.C. § 1961(a), which, at the time of briefing the instant motions, ranged from approximately 0.27-0.32%. (See Aristocrat's 54(b) Opp'n 21.) Section 1961(a) of Title 28 of the United States Code provides that "[i]nterest shall be allowed on any money judgment in a civil case recovered in a district court." 28 U.S.C. § 1961(a). Bondholders, on the other hand, contend that because this case is governed by New York state law, post-judgment interest should be set at the 9% rate provided in sections 5003 and 5004 of the N.Y. C.P.L.R. (Bondholders' 54(b) Reply 20.)
After the parties submitted briefing on this issue, the Second Circuit rendered a decision resolving any ambiguity regarding the applicable post-judgment interest rate, holding that the federal post-judgment interest rate, as articulated in 28 U.S.C. § 1961(a), applies to civil judgments issued by federal district courts sitting in diversity even where a general choice-of-law provision in a contract giving rise to the action calls for the application of New York law. See FCS Advisors, Inc. v. Fair Fin. Co., Inc., 605 F.3d 144, 145, 149 (2d Cir. 2010) (per curium) (holding that post-judgment interest should be calculated at the federal rate provided for under 28 U.S.C. § 1961(a) where "jurisdiction is premised on the diversity of the citizenship of the parties and the contract giving rise to the action contains a general choice-of-law provision requiring the application of New York law"), vacating No. 07 Civ. 6456, 2009 WL 1616518, at *1 (S.D.N.Y. June 9, 2009) (Chin, J.) (holding that the choice-of-law provision in the parties' contract requires the application of New York law, rather than 28 U.S.C. § 1961(a), to the calculation of post-judgment
interest). The Second Circuit in FCS Advisors explained that while parties are free to contract to a different interest rate, such an agreement must express a clear, unambiguous, and unequivocal intent to deviate from the federal rate, and must select a rate that would apply to judgments rendered, not simply to contract debts. FCS Advisors, 605 F.3d at 148 ("If the parties intend[] to . . . specify an interest rate that applies tojudgment debts, . . . they [are] required to `express such intent through clear, unambiguous and unequivocal language.'" (emphasis in original) (quoting Westinghouse Credit Corp. v. D'Urso, 371 F.3d 96, 102 (2d Cir. 2004))). Because the parties in this case did not clearly, unambiguously, and unequivocally agree to a specific post-judgment interest rate for judgment debts, the Court shall apply the federal post-judgment interest rate articulated in 28 U.S.C. § 1961(a).
The Court notes that, by letter dated June 2, 2010, Bondholders — consistent with their ethical obligations-informed the Court that FCS Advisors, 2009 WL 1616518, a case upon which they relied in their briefs, had been vacated by the Second Circuit. See N.Y. Rule of Prof'l Conduct 3.3(a)(2) (effective Apr. 1, 2009); see also Great E. Shipping Co. Ltd. v. Phoenix Shipping Corp., No. 07 Civ. 8373, 2007 WL 4258238, at *2 (S.D.N.Y. Dec. 4, 2007).
For the foregoing reasons, post-judgment "interest shall be calculated from the date of the entry of the judgment, at a rate equal to the weekly average 1-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System, for the calendar week preceding the date of the judgment." 28 U.S.C. § 1961(a). Pursuant to these guidelines, the Court shall set the post-judgment interest rate upon entry of judgment. Because, as discussed below, the Court grants the parties fourteen (14) days to exchange limited discovery regarding the five non-party Bondholders for whom the Trustee seeks entry of judgment, and seven (7) days thereafter to submit joint revised proposed final judgments consistent with this Opinion and Order, the Court shall enter final judgment at a later date and set the post-judgment interest rate at that time.
5. Judgments for Non-Parties
The Trustee moves the Court to declare that Aristocrat is in breach of its obligations under the Indenture to deliver shares to five non-party bondholders (the "Non-Party Bondholders") and to issue judgments in favor of each of the Non-Party Bondholders on the same terms as other similarly situated Bondholders. (See Trustee's Mem. in Supp. of Its Mot. for Ct. to Consider Whether to Issue J. in Favor of Add'l Non-Party Bondholders ("Trustee's Mem.") 3; Trustee's Reply 2.) The five Non-Party Bondholders are: (1) Sloan Financial Corp. ("Sloan"), the holder of $250,000 aggregate principal amount of Aristocrat's 5% Convertible Subordinated Bonds due 2006, who submitted conversion documents through its agent Clearstream Banking Lux; (2) Flushing Enterprises ("Flushing"), the holder
of $250,000 aggregate principal amount of Aristocrat's 5% Convertible Subordinated Bonds due 2006, who submitted conversion documents through its agents Lombard Odier Darier Hentsch Cie and ANZ Bank; (3) P. Van Woerden and M. Van Woerden-Visser ("Van Woerden"), the holders of $10,000 aggregate principal amount of Aristocrat's 5% Convertible Subordinated Bonds due 2006, who submitted conversion documents through their agent Orbay; (4) UBS AG, the holder of $530,000 aggregate principal amount of Aristocrat's 5% Convertible Subordinated Bonds due 2006; and (5) Angus Barker, the holder of $120,000 aggregate principal amount of Aristocrat's 5% Convertible Bonds due 2006. (Trustee's Reply 1-2 n. 1.)
The Trustee submits to the Court copies of conversion notices and Deposit/Withdrawal at Custodian ("DWAC") requests from the Depository Trust Company ("DTC") for Sloan, Flushing, and Van Woerden, evidencing the tender of their interests in the Global Bond for conversion, and asks the Court to declare that Aristocrat is in breach of its obligation to deliver shares to each of these Non-Party Bondholders. (See Second Decl. of Alec G. Singh 8/18/06 ("Singh Decl. II") Exs. C-D (Sloan), E-F (Flushing), and G-H (Van Woerden).) The Trustee previously submitted to the Court copies of conversion notices and DWAC requests for Angus Barker and UBS AG, and the Court declared that Aristocrat is in breach of its obligation to deliver shares to Angus Barker and UBS AG. See Aristocrat Leisure, 2006 U.S. Dist. LEXIS 34709, at *14, 22-23; Decl. of Alec G. Singh 9/23/05 ("Singh Decl. I") Exs. A B). The Trustee now submits proposed final judgments for each of the five Non-Party Bondholders, noting that these judgments mirror the proposed final judgment for DBAGL and, other than being final rather than partial, also mirror the proposed judgments of the other Bondholders that are parties to this action. (See Ltr. from Laura Fraher to the Court, 11/13/09, at 1 Exs. 1-2 (proposed final judgments for UBS AG and Angus Barker); Fraher Decl. Exs. 2-4 (proposed final judgments for Flushing, Sloan, and Van Woerden).)
The Bondholders' interests in the bonds are represented by interests in the Global Bond held by the DTC. See Aristocrat Leisure, 2006 U.S. Dist. LEXIS 34709, at *12. The tender of interests in the Global Bond for conversion is referred to as the DWAC process. Id. at *13.
Aristocrat does not dispute that it has not delivered shares to any of the Non-Party Bondholders. (See Fraher Decl. Ex. 1 (Ltr. from R. Beynon to L. Fraher 11/12/09).) While Aristocrat acknowledges the Trustee's authority to submit form judgments on behalf of the five Non-Party Bondholders, it opposes entry of judgment at this time because "[t]he current record does not provide adequate information for calculation of any damages that may be owed to the Non-Party Bondholders." (Aristocrat's 54(b) Opp'n 3.) Specifically, Aristocrat requests that the Trustee provide "information about whether the Non-Party Bondholders held short positions in [Aristocrat] stock, and if so, when they closed those position(s) and at what price(s)" because "this information is essential to the proper calculation of damages and pre-judgment interest," (id. 3 n. 3), and is "needed to assess whether [the Non-Party Bondholders] had gains that might affect their proposed judgments" (id. 7 n. 8).See Ross Decl. ¶ 8 n. 3; Sarratt Decl. Ex. A (Letter from R. Beynon to L. Fraher, 11/13/09).)
The Court first reiterates that the Trustee has standing to seek declaratory relief on behalf of converting bondholders. See Aristocrat Leisure, 2006 U.S. Dist. LEXIS 34709, at *22 (acknowledging that "the Trustee has provided evidence of conversion notices and DWAC requests" on behalf of non-party bondholders). Aristocrat and the Trustee also agree that the Trustee has authority to act on behalf of Non-Party Bondholders. (See Aristocrat's 54(b) Opp'n 3 n. 3; Trustee's Reply 2 n. 3.) The Trustee correctly states that the Court already has declared Aristocrat in breach of its obligation to deliver shares under the terms of the Indenture to UBS AG and Angus Barker, albeit without referencing them by name. See Aristocrat Leisure, 2006 U.S. Dist. LEXIS 34709, at *22-23. The Trustee does not object to Aristocrat's request that judgments for Non-Party Bondholders be entered in the name of the Trustee, who is a party to this action. (See Trustee's Reply 2 n. 3; Aristocrat's 54(b) Opp'n 3 n. 3.) The Trustee also does not dispute that it did not provide information to Aristocrat regarding whether the five Non-Party Bondholders held short positions in Aristocrat stock, whether they closed any such short positions, and, if so, at what prices. (Trustee's Reply 3 n. 4.) Likewise, the Court has no record of this information. See Aristocrat Leisure, 2006 U.S. Dist. LEXIS 34709, at *44 n. 21 (noting "that the record includes no evidence that any of the nonparty bondholders who have submitted valid conversion notices and DWAC requests . . . have taken any short positions"). The Trustee requests that, should the Court accept "any of Aristocrat's arguments" regarding the calculation of damages, the Court should grant the Non-Party Bondholders "a reasonable amount of time to supplement the record with additional relevant factual information." (Trustee Reply 4.)
The Court declares that Aristocrat is in breach of its obligations to deliver shares under the terms of the Indenture as to each of the five Non-Party Bondholders — Sloan, Flushing, Van Woerden, UBS AG, and Angus Barker — who have satisfied the Indenture's requirements regarding the submission of conversion notices and tender of interests. Because Bondholders' judgments shall be offset by earnings from closing short positions at a favorable price and by interim trading gains earned as a result of Aristocrat's breach, the Non-Party Bondholders' judgments shall be afforded the same treatment. Therefore, the Court orders the Trustee, on behalf of the five Non-Party Bondholders, to provide to Aristocrat within fourteen (14) days from the date of this Opinion and Order discovery regarding whether (1) any of the five Non-Party Bondholders held short positions in Aristocrat stock on each non-party's conversion date and, if so, (2) what interim trading on short positions each Non-Party Bondholder engaged in, if any, (3) when each Non-Party Bondholder closed its short position(s), and (4) at what price(s).
CONCLUSION
For the foregoing reasons, Aristocrat's motion for judgment as a matter of law pursuant to Rule 50(b) is DENIED. Aristocrat's motion for a new trial pursuant to Rule 59 is DENIED. Bondholders' motion for entry of partial judgment pursuant to Rule 54(b) is DENIED. Bondholders' claims for violations of Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 and for breach of the implied covenant of good faith and fair dealing are DISMISSED WITHOUT PREJUDICE. The Trustee's motion to enter final judgment for five Non-Party Bondholders — Sloan, Flushing, Van Woerden, UBS AG, and Angus Barker — is DENIED, pending discovery described herein.
The Court directs the Trustee, on behalf of the five Non-Party Bondholders, to provide to Aristocrat within fourteen (14) days from the date of this Opinion and Order discovery regarding: whether (1) any of the five Non-Party Bondholders held short positions in Aristocrat stock on each non-party's conversion date and, if so, (2) what interim trading on short positions each Non-Party Bondholder engaged in, if any, (3) when each Non-Party Bondholder closed its short position(s), and (4) at what price(s). Seven (7) days after the exchange of this limited discovery, the parties shall submit to the Court JOINT REVISED PROPOSED FINAL JUDGMENTS for all Bondholders, including the five Non-Party Bondholders in the name of the Trustee, consistent with this Opinion and Order. The Court further directs that, with respect to Bondholder DBAGL, the parties shall submit one joint revised proposed final judgment covering both the OMNIS and Asian positions. Upon receipt of the parties' joint revised proposed final judgments, the Court shall enter final judgment.
The Court reiterates below its holdings with respect to the calculation of Bondholders' judgments:
(1) For the judgments of DBAGL, Lehman, and QVT, Aristocrat is entitled to an offset to general damages in the amount of $16,834,376 for gains realized upon closing short positions. (2) For the judgments of Deephaven, KBC FP, and four of the five KBC AIM funds (ARB, MAC 28, Multi, and OPPS), Aristocrat is entitled to an offset of $1,093,358 for interim trading gains on short positions. (3) A pre-judgment interest rate of 7.5% per year applies to the principal payments Aristocrat made to Bondholders under the Receipt and Release Agreements for the period from May 31, 2006, through the date each Bondholder signed a Receipt and Release Agreement. (4) For all Bondholders, whether fully hedged, partially hedged, or unhedged, a pre-judgment interest rate of 9% on general damages shall accrue from each Bondholder's conversion date. (5) Aristocrat is not entitled to an offset for bond interest coupon payments that Aristocrat previously paid to the Trustee, who paid them into the Court. (6) The post-judgment interest rate shall be set pursuant to 28 U.S.C. § 1961(a) upon entry of final judgment.
SO ORDERED.