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Dietz v. Spangenberg

United States District Court, Eighth Circuit

August 29, 2013

Michael S. Dietz, Trustee, Plaintiff,
Erich L. Spangenberg, Audrey E. Spangenberg, Christian Spangenberg, Stephen Peary, FPX, LLC, FP Tech Holdings, LLC, TechDev Holdings, LLC, Acclaim Financial Group, LLC, NMPP, Inc. and Walter J. Gates, III, P.A., Defendants.

Michael S. Dietz, Esq., Scott J. Hoss, Esq., John C. Beatty, Esq., and Christopher D. Nelson, Esq., Dunlap & Seeger, P.A., Rochester, MN, on behalf of Plaintiff.

Timothy R. Thornton, Esq., Kevin M. Decker, Esq., and Leah Ceee O. Boomsma, Esq., Briggs & Morgan, P.A., Minneapolis, MN, on behalf of Defendants Audrey E. Spangenberg; Christian Spangenberg; TechDev Holdings, LLC; and Acclaim Financial Group, LLC. Michelle Kriedler Dove, Esq., and Lewis A. Remele, Esq., Bassford Remele, Minneapolis, MN, on behalf of Defendants Erich Spangenberg and NMPP, Inc.

Richard D. Anigian, Esq., Haynes and Boone, LLP, Dallas, TX, on behalf of Defendants FP Tech Holdings, LLC and FPX, LLC.

Elizabeth Wiley, Esq., The Wiley Law Firm PC, Austin, TX, on behalf of Defendant Stephen Peary.

Robert T. Kugler, Esq., Lara O. Glaesman, Esq., William Anders Folk, Esq., Peter J. Schwingler, Esq., and Todd A. Noteboom, Esq., Leonard Street and Deinard, P.A., Minneapolis, MN, on behalf of Defendants Audrey E. Spangenberg; Erich Spangenberg; Christian Spangenberg; FPX, LLC; FP Tech Holdings, LLC; TechDev Holdings, LLC; Acclaim Financial Group, LLC; NMPP, Inc.; and Stephen Peary.

Larry Ricke, Esq., and R. John Wells, Esq., Ricke & Sweeney, P.A., St. Paul, MN, on behalf of Defendant Walter J. Gates, III, P.A.


ANN D. MONTGOMERY, District Judge.


This matter is before the undersigned United States District Judge on the Defendants' Objections [Docket No. 12, Attachs. 16, 17] to the following three orders issued on October 1, 2012, by United States Bankruptcy Judge Dennis D. O'Brien: Order Denying Motions for Summary Judgment ("Summary Judgment Order") [Docket No. 12, Attach. 12]; Order Granting Leave to Amend Complaint ("Leave to Amend Order") [Docket No. 12, Attach. 11]; and Order to File Document Under Seal and Determination Regarding Attorney-Client Privilege ("Order for Production of Documents") [Docket No. 12, Attach. 10] (collectively, "Bankruptcy Court Orders"). The Bankruptcy Court Orders address non-core proceedings and are therefore considered proposed findings of fact and conclusions of law. 28 U.S.C. 157(c)(1).[1] Accordingly, this Court reviewed de novo those matters to which the Defendants have specifically objected. See id; Fed.R.Bankr.P. 9033.[2]

Based on this Court's de novo review, the Objection of Defendant Walter J. Gates, III, P.A. ("WJG") [Docket No. 12, Attach. 16] is sustained, and the Objection of the remaining Defendants [Docket No. 12, Attach. 17] is sustained in part and overruled in part. As a result, and for the reasons set forth below, the summary judgment motion of WJG [Docket No. 10, Attach. 11] is granted, the summary judgment motion of the remaining Defendants [Docket No. 10, Attach. 12] is granted in part and denied in part, the summary judgment motion of the Trustee [Docket No. 10, Attach 6] is denied; the Leave to Amend Order is modified; and the Order for Production of Documents is rejected as moot.


This bankruptcy adversary proceeding arises out of a series of transactions in which Defendant FP Tech Holdings, LLC ("FP Tech") acquired all of the first-priority secured debt of Firepond, Inc. ("Firepond") from third-party note holders, declared a default and foreclosed on the debt, acquired all of Firepond's assets at the foreclosure sale, and transferred the assets to a newly formed company, Defendant FPX, LLC ("FPX"), which now operates as "FPX fired by Firepond." At the time of the transactions, the chair of Firepond's board of directors, Audrey Spangenberg, was also the CEO of FP Tech and FPX.

Approximately nine weeks after the foreclosure sale, Firepond filed for Chapter 7 bankruptcy protection. The Chapter 7 Trustee of Firepond's bankruptcy estate, Michael Dietz, has filed this adversary proceeding alleging claims for fraudulent transfer, preferential transfer, turnover, equitable subordination, breach of fiduciary duty, conversion, alter ego liability, and punitive damages. Defendants deny any wrongdoing and argue that all of the claims fail because the Trustee is unable to prove injury to Firepond's unsecured creditors.

A. Parties

Plaintiff Michael Dietz ("Trustee") is the Chapter 7 bankruptcy trustee for Firepond, which had operated as a publicly-traded Delaware corporation with its principal place of business in Mankato, Minnesota. Am. Compl. [Bankr. Docket No. 172] ¶¶ 1, 30.[3] Firepond's business was developing and providing computer-based sales technology that permitted businesses to provide accurate, real-time price quotes for customized products. Decl. of R. Kugler, Apr. 30, 2012 ("First Kugler Decl.") [Bankr. Docket No. 137, Attach. 13] Ex. 3 at 2-3.

Defendants Audrey and Erich Spangenberg are husband and wife.[4] Am. Compl. ¶ 5. Defendant Christian Spangenberg is their son. Id . ¶ 6.

Corporate Defendants Acclaim Financial Group, LLC ("AFG"), TechDev Holdings, LLC ("TechDev"), FP Tech, FPX, and NMPP, Inc. ("NMPP") are all Texas companies owned and managed by the Spangenbergs or their closely-held corporations. See id. ¶¶ 8-16, 19-20. AFG is a venture capital and private equity firm owned 99% by Audrey and 1% by Christian. Id . ¶¶ 13-14. AFG owns 100% of TechDev, which owns 99.5% of FP Tech, which in turn owns 100% of FPX. Id . Statement of Corporate Ownership [Bankr. Docket No. 27] at 1. Audrey is the sole manager of FP Tech and FPX. First Kugler Decl. Ex. 1 ("First Audrey Dep.") at 2-8. NMPP is a strategic financial advisory firm owned and controlled by Erich that provides services to AFG and its affiliates through an advisory services contract. Am. Compl. ¶ 16; Aff. of E. Spangenberg ("Erich Aff.") [Bankr. Docket No. 137, Attach. 1] ¶¶ 1, 4, 8, Ex. 1; First Kugler Decl. Ex. 2 at 21; First Audrey Dep. at 9.

Defendant Stephen Peary served as CFO of Firepond from the time Firepond was formed in 2005 until May of 2008. Aff. of Stephen Peary ("Peary Aff.") [Bankr. Docket No. 137, Attach. 3] ¶ 2. Thereafter, he served as Firepond's General Counsel until February 23, 2009, when he became the sole officer of Firepond. Id . ¶ 3. From approximately February 24, 2009, to August, 2010, Peary also served as General Counsel to FPX. Id . ¶ 3.

Throughout this adversary proceeding, the Spangenbergs, the corporate defendants owned and managed by them, and Peary have filed joint motions and briefs. Therefore, these Defendants will be collectively referred to here as the "Spangenberg Defendants."

Walter J. Gates, III, P.A. ("WJG") is a professional association located in Mankato, Minnesota. Am. Compl. ¶ 21. WJG conducted the February 23, 2009, foreclosure sale of Firepond's assets. Id . ¶¶ 147, 155.

B. Timeline of Events

1. Firepond Issues Secured Notes in 2007

In January 2007, Firepond issued $5.6 million in senior secured convertible notes (the "CAP Notes") to approximately eleven institutional investors as part of a financial restructuring. See Peary Aff. Ex. 5 at 2. The CAP Notes were secured by a first-priority lien on all of Firepond's assets. Id.

In August 2007, Firepond obtained additional financing by issuing $3, 337, 500 in senior secured subordinated notes (the "Bridge Notes"). Id . The Bridge Notes were secured by a lien on all of Firepond's assets and were scheduled to mature on May 2, 2008. Id. at 3.

2. FP Tech is Formed and Invests in Firepond

FP Tech was formed on December 27, 2007, and Audrey was designated as its manager. Aff. of M. Dietz, Apr. 30, 2012 ("First Dietz Aff.") [Bankr. Docket No. 134] Ex. A at 3. A week after its formation, FP Tech purchased approximately 31% of Firepond's stock and two CAP Notes from Firepond investor Douglas Croxall and his affiliated entity, Jaguar Technology Holdings, LLC. Id . Ex. A3 at 21-26.

Thereafter, in February 2008, Erich, on behalf of FP Tech, contacted one of Firepond's major note holders to propose a "plan that gives [Firepond] a chance and reflects proper treatment of the debt." Decl. of R. Kugler, March 16, 2012 ("Second Kugler Decl.") [Bankr. Docket No. 113] Ex. C at 21. Erich sought to "come to a consensus without the complication of involving 9 other holders" and asked that their communications remain confidential. Id.

On April 17, 2008, FP Tech purchased CAP and Bridge Notes in the face amounts of $280, 000 and $168, 000, respectively, from Plexus Fund Limited for a total purchase price of $250, 000. See Peary Aff. Ex. 12 at 73-80.

3. Firepond Issues Secured Exchanged Notes in April 2008 Financial Restructuring

By early 2008, it became clear that Firepond would default on the Bridge Notes when they matured on May 2, 2008, and Firepond therefore restructured its secured debt on April 24, 2008. Pursuant to the financial restructuring, Firepond entered into an Amendment and Exchange Agreement (the "Exchange Agreement") with the holders of the CAP and Bridge Notes. Peary Aff. Ex. 5 at 3-4. Under the Exchange Agreement, the noteholders agreed to exchange the existing CAP and Bridge Notes for new notes (collectively, the "Exchanged Notes") with extended maturity dates of December 2009 and July 2009, respectively. Id . As with the original CAP and Bridge Notes, the Exchanged Notes were secured by a lien on all of Firepond's assets. Id.

Under the terms of the Exchanged Notes, Firepond undertook a covenant to meet a minimum Consolidated EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) of negative $121, 174 during the quarter ending December 31, 2008. Peary Aff. Ex. 13 at 9, 36, Ex. 15 at 5, 26. Stated more simply, Firepond agreed it would not lose more than $121, 174 during the last quarter of 2008. Failure to achieve the minimum Consolidated EBITDA would constitute a default. Id . Ex. 13 at 9, Ex. 15 at 5. The Exchanged Notes provided that a default could be declared upon the delivery of default notices by holders of Exchanged Notes representing at least 30% of the aggregate debt owing under the Exchanged Notes. Id . Ex. 13 at 9-10.

In conjunction with the issuance of the Exchanged Notes, Firepond executed a Collateral Security Agreement which appointed Bank of New York as the collateral agent ("Collateral Agent") responsible for overseeing the foreclosure process in the event of a default on the Exchanged Notes. Peary Aff. Ex. 16 at 28-71 ("Collateral Security Agreement"). The Collateral Security Agreement provided that the collateral agent could be removed by holders of Exchanged Notes representing a majority of the aggregate amount of debt owing under the Exchanged Notes. Collateral Security Agreement §§ 1(c); 10(b). The Exchanged Notes and the Collateral Security Agreement specify they are governed by New York law. Peary Aff. Ex. 13 at 24-25, Ex. 15 at 15, Ex. 16 at 46.

The financial restructuring also included an agreement by FP Tech to purchase $1.5 million in Firepond stock and to convert into equity approximately $400, 000 in obligations Firepond owed FP Tech under the CAP Notes and under an equipment lease. Id . Ex. 11 at 68-69. Additionally, FP Tech had the option to purchase additional shares of Firepond stock in July 2008, which it exercised by purchasing $500, 000 in shares. Id . Ex. 25 at 49-97.

4. Firepond Elects New Board Members, Appoints New President

Also in April 2008, Firepond's board of directors and management were changed to include a number of individuals associated with FP Tech and its affiliates. The Exchange Agreement required Scott Kline and Francis Knuettel II to be appointed as board members. Exchange Agreement § 7(t). Kline and Knuettel had previously been recommended by FP Tech in January of 2008, for service on Firepond's board. Peary Aff. Ex. 11. Audrey, FP Tech's CEO, was also elected to Firepond's board and designated as the board's chair.[5] Id . Ex. 18 at 15, 17. Subsequent to the board meeting at which Audrey was elected, two Firepond board members resigned, leaving Kline, Knuettel, and Audrey as Firepond's only board members. Am. Compl. ¶¶ 67-68.

Thereafter, Firepond's board of directors appointed Bradlee Sheafe as the president of Firepond. Id . ¶ 71. Sheafe simultaneously served as president of TechDev, the company which owns FP Tech. Id.

5. FP Tech Affiliate Adds Firepond's General Counsel to Payroll

In approximately June 2008, Peary began receiving monthly payments of $7, 500 from CWC, Holdings, LLC ("CWC"), an FP Tech affiliate. First Kugler Decl. Ex. 5 at 8; First Dietz Aff. Ex. B at 4; Aff. of M. Dietz, Feb. 27, 2012 ("Second Dietz Aff.") [Bankr. Docket No. 103] Ex. M. Peary avers the payments represented one half of his salary as Firepond's general counsel, and that the payments were being made by an FP Tech affiliate pursuant to a "business plan... to make Firepond['s] cash flow positive." First Kugler Decl. Ex. 5 at 8. However, in a May 8, 2008 email from Erich to Peary, Erich stated he was winding down his management of TechDev and was "recommending that [Peary] be made president/manager of CWC Holdings at a salary of $7, 500 a month." Second Dietz Aff. Ex. C. Peary responded with an email thanking Erich and Audrey and stating: "Being a part of the TechDev/CWC/Acclaim Financial team is an honor." Id.

6. FP Tech Begins Purchasing Exchanged Notes from Third Party Noteholders

In July 2008, Erich, acting through NMPP and on FP Tech's behalf, continued his efforts to exert control over Firepond's debt. See Second Kugler Decl. Ex. N at 24-26, Ex. O at 28. Erich sought to persuade the institutional investors holding Exchanged Notes (the "Third Party Noteholders") to foreclose on the Exchanged Notes and invest in a new company that would take over Firepond's business operations. Erich Aff. Ex. 8 at 41. In October 2008, Erich tried to enlist a Third Party Noteholder to help him convince the other Third Party Noteholders to foreclose on the Exchanged Notes. Id . In stating his intent to foreclose, Erich stated: "I will be the ringleader-if you will be my elephant trainer." Id . As an alternative to persuading the Third Party Noteholders to agree to foreclose, FP Tech sought to purchase enough of Firepond's aggregate secured debt under the Exchanged Notes to hold the 30% of aggregate debt needed to declare a default and foreclose on its own. First Dietz Aff. Ex. B2 at 18.

During FP Tech's ongoing efforts to force consensus among Third Party Noteholders or to purchase their Exchanged Notes, Peary sent Erich an email offering his assistance, stating: "Let me know how I can help. Whether this turns into a heated process or a gentler approach, making lemonade out of lemons is the stuff I love." First Dietz Aff. Ex. B at 15. Erich responded, "You are in the game-I appreciate your help and give full credit to you when I talk to Audrey. I like working with you." Id . That same day, Peary informed Erich by email of a discussion between himself and a Third Party Noteholder. Id. at 14. Peary relayed his suspicion that the Third Party Noteholders had been in communication with each other and were "likely forming a unified front" against Erich's buyout attempts. Id . Erich responded, "Perfect-great intel... thanks.... It is always more fun when you kick the shit out of a unified group' than a group of banditos who are not unified." Id.

7. Firepond Drafts and Files Form 10-Q, Circulates Foreclosure Proposal

During the time he was negotiating with the Third Party Noteholders, Erich also assisted in drafting Firepond's Form 10-Q ("10Q"), to be filed with the SEC for the quarter ending September 30, 2008. On November 11, 2008, Erich circulated an email to Peary, Audrey, Sheafe, and Firepond's CEO titled "Re: draft Firepond 10Q." First Dietz Aff. Ex. B2 at 16. In the email, Erich offered the following suggestion for Firepond's 10Q Report: "MD&A... I would repeat all the bad stuff out of Note 1... right up front... then tone down any optimism in the remaining MD&A [repeating all the bad stuff in future liquidity] Yep." Id . (alterations in original).

In conjunction with drafting the 10Q, Erich suggested a "plan" to Peary. Firepond would circulate a letter to its creditors, stating: "Attached is the 10Q of the Company for the quarter ended December 31, 2008. As you will note under this document, the Company believes it will be in default as early as December 31, 2008 under the Exchanged... Notes. Firepond desires to continue a dialogue that will preserve value for our relevant corporate constituencies...." Second Dietz Aff. Ex. I at 1. Erich stated that after sending the letter, AFG would recommend a phone conference of senior creditors, circulate a term sheet, and then: "Come December 31- game over... Let me know your thoughts-I need to get clear on the game plan." Id.

On November 12, 2008, Firepond filed its 10Q for the quarter ending September 30. Second Kugler Decl. Ex. V at 1-28. The 10Q stated: "Based on the current operational performance, the company believes it will not be able to comply with the financial covenants of its senior indebtedness as of December 31, 2008." Id. at 9.

The next day, Erich sent an email to the Third Party Noteholders informing them that Firepond "filed its 10Q yesterday and announced that it will not meet the EBITDA covenant." First Dietz Aff. Ex. B at 7. The email further stated that Firepond's subordinated secured debt and equity were "beyond impaired-they are worthless, " and explained he had "been authorized by Firepond and FP Tech" to circulate a term sheet that proposed foreclosing on the Exchanged Notes and investing in a new, privately-held company. Id . Audrey received a courtesy copy of the email, which she forwarded to Firepond board member Knuettel on November 19. Id . Knuettel responded: "Did we hear anything back from [Third Party Noteholders] Radcliff and/or JMG?" Id . Audrey replied: "Not yet, we are going to lob another email letting everyone know that Bankruptcy will be the next step...." Id . Knuettel then replied, "[H]ow big a haircut are you offering to purchase?" Id . Audrey responded, "We would buy out either JP Morgan or Radcliffe['s Exchanged Notes]... at $0.20... [Firepond's] stock is at $0.15." Id.

On the day the 10Q was filed, FP Tech purchased the Exchanged Notes held by two additional institutional Third Party Noteholders. Second Kugler Decl. Ex. M at 14-15, Ex. DD at 20-25. On December 11, 2008, FP Tech purchased the Exchanged Notes held by an additional Third Party Noteholder. Id . Ex. M at 16, Ex. EE at 26-32. With these purchases, FP Tech held a sufficient percentage of the aggregate debt needed to declare a default under the senior Exchanged Notes and to replace the Collateral Agent under the Collateral Security Agreement.

8. FP Tech Informs Collateral Agent of its Intent to Foreclose

On or about December 11, counsel for FP Tech contacted Bank of New York-the Collateral Agent responsible for overseeing the foreclosure process-to inform it of FP Tech's intent to foreclose. Additionally, Peary contacted the Bank of New York and informed it that, from Firepond's perspective, "this is a friendly foreclosure." First Dietz Aff. Ex. B at 19. In apprising Audrey of his conversations with Bank of New York's counsel, Peary stated that his "biggest worry" was that Bank of New York would "put a strict reading to the CAP Note default provision to conclude there can not be a default until after December 31. So far no indication of that, but it is a risk." Id.

The next day, counsel for the Bank of New York asked Peary to provide it with Firepond's Company Register ("Register") of Exchanged Note transfers in the preceding six months. First Dietz Aff. Ex. B at 22. Peary informed Audrey and FP Tech's counsel that he would "gin one up, " and thereafter sent the Bank of New York an email that included as an attachment a certified copy of Firepond's Register listing the names of all Exchanged Note owners and the amount owed under each Note. Id .; Peary Aff. Ex. 19 at 22-26.

9. FP Tech Gives Firepond Notice of Default and Issues Press Release

On December 15, 2008, FP Tech sent Firepond a letter stating Firepond had defaulted under the Exchanged Notes based on Firepond's admission in its 10Q that it would not meet the minimum Consolidated EBITDA required under the Note. Second Kugler Decl. Ex. GG at 4-5. The letter further stated that, as a consequence of the default, all amounts due and owing under the Exchanged Notes were immediately payable, and that FP Tech was entitled to foreclose on the collateral securing the Note. Id. at 5.

The same day, Audrey, in her role as FP Tech's CEO, sent a letter-drafted verbatim by Erich-to Firepond's CFO stating that "AFG... now holds approximately 60% of the senior secured debt of Firepond, " and that "[c]ounsel for AFG has provided formal notice of foreclosure to Firepond, Bank of New York, and Firepond's secured creditors." First Dietz Aff. Ex. B2 at 8. The letter further stated that "[a]ll this is unfortunate, but AFG believes the best plan is to eliminate all of the indebtedness of Firepond, reinvest in [a] new company [to be named FPX] and, in the process, save 40 very high paying jobs in Minnesota and continue to offer Firepond's customers its market-leading configuration, pricing and quoting [technology]." Id . The letter further informed that Sheafe, Firepond's president, would move to a board of director position with the new company. Id. at 9.

On December 17, 2008, FP Tech issued a press release that published the entire letter and announced AFG's delivery of the letter to Firepond. Id. at 8-9. The same day, Audrey reviewed a checklist of tasks and requirements pertaining to the formation of a new entity (FPX) that would take over Firepond's operations. Id. at 27-28.

10. Outside Holders Respond to Default Notice

After FP Tech issued the Notice of Default, a Third Party Noteholder contacted Peary to inform him they were "thinking about fighting' the process." Id . Ex. B at 26. Peary relayed the information to Erich and Audrey. Id . Erich responded: "I beg them to get in the ring with me." Id . Erich also sent separate emails to Audrey stating, "have u ever seen that movie play tough... u may get sued, but sooooo what..., " and "F them... I will rock their world." Id. at 27-28.

The Third Party Noteholders retained counsel, who sent a letter to FP Tech's counsel demanding that FP Tech rescind the Notice of Default and "cease all efforts to take control of [Firepond] and its assets, for the sole benefit of FP Tech and its principals, and to the detriment of all other parties in interest." Peary Aff. Ex. 36 at 46. The Third Party Noteholders contended the "so-called" default was not an actual default because Firepond had neither failed to make a payment nor violated a financial covenant under the Exchanged Notes. Id. at 47. Rather, FP Tech was asserting a prospective default based on the statement in Firepond's third quarter 10Q that it would not satisfy the Consolidated EBITDA covenant for the final quarter of 2008. Id.

The Third Party Noteholders further stated FP Tech's principals were on both sides of the purported default. Specifically, Audrey was the CEO of FP Tech, the company declaring the default. She was also the Chairman of Firepond's board of directors, the board that bore "primary responsibility" for the statements in Firepond's 10Q that FP Tech was using as the basis for the default. Id . Additionally, FP Tech's president, who signed the 10Q, was to serve as a board member of the new company. Id.

11. Collateral Agent Refuses to Foreclose

Following FP Tech's Notice of Default, Bank of New York informed FP Tech's counsel that it would not proceed until FP Tech had provided Bank of New York with financial statements and sufficient indemnity to cover Bank of New York's costs, expenses, and liabilities which might be incurred in the foreclosure process. First Dietz Aff. Ex. A at 29. Bank of New York stated it did not intend to resign as Collateral Agent, but noted that the Collateral Security Agreement permitted the Collateral Agent to be removed upon the appointment of a successor collateral agent. Id.

Thereafter, Peary, despite his position as Firepond's general counsel, sent an email to counsel for Bank of New York and counsel for FP Tech stating: "While I have not been asked to intercede here, [Bank of New York] is getting the indemnity they have asked for Arrangement of other security is expensive and a waste of time. FP Tech is part of a well funded private group that does not care to share their financial reports with anyone." Second Dietz Aff. Ex. DD at 1. Peary further stated: "Remember, this is a friendly foreclosure." Id.

12. FP Tech Issues Second Notice of Default

On January 5, 2009, Firepond's CFO certified that Firepond had failed to achieve the minimum Consolidated EBITDA for the fiscal quarter ending December 31, 2008. Aff. of M. Dietz, March 19, 2012 ("Third Dietz Aff.") [Bankr. Docket No. 119] Ex. D at 18. Thereafter, on January 8, 2009, FP Tech's counsel sent Firepond a second Notice of Default asserting that an event of default had occurred. Id. at 23-24. The Third Party Noteholders again responded, asserting a default had not yet occurred because the applicable fiscal quarter had just ended, and Firepond had not yet filed its 10Q for the fourth quarter with the SEC. Id. at 19. In a letter addressed to Peary, the Third Party Noteholders contended the premature Notice of Default was "evidence that the insiders of [Firepond] have conspired with FP Tech and its principals to abscond with [Firepond's] assets." Id . They further expressed concern that "no disinterested directors, unaffiliated with FP Tech and its principals, " were protecting the interests of Firepond and its creditors. Id. at 20. Firepond's outside counsel responded on January 12, 2009, with a letter stating, "Ms. Spangenberg has recused herself from all deliberations on these matters." Id. at 5.

13. FP Tech Replaces Collateral Agent with WJG

In late January 2009, FP Tech removed Bank of New York as Collateral Agent and replaced it with WJG. Aff. of W. Gates, III, Apr. 30, 2012 ("Gates Aff.") [Bankr. Docket No. 136] ¶¶ 5, 9. Peary signed the removal documents on behalf of ...

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