FINDINGS OF FACT AND CONCLUSIONS OF LAW

ANITA B. BRODY, District Judge.

Lehman Brothers Holdings, Inc. ("Lehman"), the plaintiff, has brought suit against Gateway Funding Diversified Mortgage Services, L.P. ("Gateway"), the defendant, for contractual obligations between Lehman and Arlington Capital Mortgage Corporation ("Arlington"). Lehman's claim is based on a theory of successor liability, an alleged de facto merger between Arlington and Gateway.

Lehman purchased four loans from Arlington1 under a Loan Purchase Agreement in which Arlington warranted to Lehman that the loans did not contain misrepresentations. In 2007, Arlington acknowledged misrepresentations in three of the four loans — the two Pimentel Loans and Steinhouse Loan — and agreed to indemnify Lehman for all losses and damages suffered on the three loans. Arlington never indemnified Lehman. Lehman also claims that the fourth loan, the McNair Loan, also contained misrepresentations. Arlington, however, never acknowledged misrepresentations in the McNair Loan. Lehman argues that Gateway is now liable for these four loans because Arlington and Gateway entered into a de facto merger in early 2008.

On January 31, 2013, Lehman moved for summary judgment,2 arguing that Gateway is Arlington's successor under the de facto merger doctrine, that Arlington's contractual breaches and the damages from those breaches are not in dispute, and that Gateway is therefore liable to Lehman. I granted this motion in part, finding that Arlington's contractual breaches with respect to the indemnification agreements associated with the Pimentel and Steinhouse loans were not in dispute. I also found that no dispute existed as to the damages associated with those breaches and that the total damages for the three loans was $448,533.08 plus 6% prejudgment interest. I found that questions of fact remained as to whether: (1) Gateway is liable under the de facto merger doctrine for the damages associated with the four loans and (2) Arlington breached its Loan Purchase Agreement with respect to the McNair Loan. From August 21-22, 2013, I held a bench trial on these two questions. Both sides submitted proposed findings of fact and conclusions of law.3 Below are my findings of fact and conclusions of law.

I. FINDINGS OF FACT

A. Entities Involved

B. The Relationship Between Arlington and Gateway

5. The Arlington Entity After the Transaction with Gateway

C. The McNair Loan

1. The Loan Purchase Agreement Between Arlington and LBB

2. The McNair Loan Transaction

II. CONCLUSIONS OF LAW

A. De Facto Merger

As a general rule, under Pennsylvania law,13 "when one company sells or transfers all its assets to another, the successor company does not embrace the liabilities of the predecessor simply because it succeeded to the predecessor's assets." Phila. Elec. Co. v. Hercules, Inc., 762 F.2d 303, 308 (3d Cir.1985) (internal quotation marks omitted). There are four exceptions to this rule:

Id. at 308-09.14 Lehman claims that the second exception applies and argues that the asset purchase transaction between Arlington and Gateway amounted to a de facto merger.

The de facto merger determination is a matter of equity, designed to look beyond the contract. Fizzano Bros. Concrete Prod., Inc. v. XLN, Inc., 615 Pa. 242, 42 A.3d 951, 968 (2012). Pennsylvania courts examine four factors to determine the existence of a de facto merger:

Id. at 956.

In making the de facto merger inquiry, a court must "examine the substance of the transaction to ascertain its purpose and true intent." Phila. Elec., 762 F.2d at 310 (citing Knapp v. North American Rockwell Corp., 506 F.2d 361 (3d Cir.1974) (Rosenn, J., concurring), cert. denied 421 U.S. 965, 95 S.Ct. 1955, 44 L.Ed.2d 452 (1975)). "[B]ecause of the complex nature of corporate reorganizations and acquisitions the intrinsic nature of a transaction cannot be ascertained merely from the form by which it is structured." Phila. Elec., 762 F.2d at 310. A court must therefore "`refer not only to all the provisions of the agreement, but also to the consequences of the transaction and to the purposes of the provisions of the corporation law said to be applicable.'" Fizzano Bros., 42 A.3d at 961-62 (quoting Farris v. Glen Alden Corp., 393 Pa. 427, 143 A.2d 25, 28 (1958)). Such an analysis "requires that a court look beyond the superficial formalities of a transaction in order to examine the transactional realities and their consequences." Id at 968. A de facto merger "will always be subject to the fact-specific nature of the particular underlying corporate realities and will not always be evident from the formalities of the proximal corporate transaction." Id at 969. "[T]he elements of the de facto merger are not a mechanically-applied checklist, but a map to guide a reviewing court to a determination that, under the facts established, for all intents and purposes, a merger has or has not occurred between two or more corporations, although not accomplished under the statutory procedure." Id. "Although each of these factors is considered, all need not exist before a de facto merger will be deemed to have occurred." Cont'l Ins. Co. v. Schneider, Inc., 810 A.2d 127, 135 (Pa.Super.Ct.2002) aff'd, 582 Pa. 591, 873 A.2d 1286 (2005).

1. Continuity of Enterprise

The continuity of enterprise factor requires "a continuation of the enterprise of the seller corporation, so that there is continuity of management, personnel, physical location, assets, and general business operations." Fizzano Bros., 615 Pa. 242, 42 A.3d at 956. Merely continuing the business operations of the predecessor corporation is not sufficient. Continuity of management is also essential in order for continuity of enterprise to exist. See Berg Chilling Sys., Inc. v. Hull Corp., 435 F.3d 455, 469-470 (3d Cir.2006).

Gateway tries to argue that this factor is not met by characterizing the transaction as the simple purchase of a discrete asset — Arlington's pipeline of loans. Gateway claims that it acquired all of Arlington's other assets and its employees only because they were incidentally necessary to closing out the loan pipeline. Lehman argues more persuasively that Gateway bought much more than a discrete pipeline of loans. Rather, Gateway bought the ability to continue Arlington's entire loan production business and did in fact successfully continue that business. Lehman emphasizes that Gateway's CEO Pasceri himself testified that he not only wanted Arlington's current pipeline of loans but the ability to continue to generate that business in the future.

Looking at the transaction as a whole, Lehman has demonstrated continuity of personnel, management, physical location, assets, and general business operations sufficient to satisfy this factor. As delineated in the Court's findings of fact, Arlington's former offices continued to operate as the Arlington Branch of Gateway. For the most part, at the Arlington Branch of Gateway, the same personnel continued to carry out the same business operations, in the same markets, using the same assets, and at the same physical locations as Arlington had prior to the transaction. Gateway offered employment to the vast majority of Arlington's employees, and most of those employees accepted the offers. Russo testified that while some employees were let go after the pipeline closed, most of them — eighty or more percent — remained employed with Gateway. The Arlington Branch of Gateway remained in the same offices, with the same phone numbers, using the Arlington name as a d/b/a. Arlington's website redirected to Gateway's website, which continued to designate two Gateway offices as "Arlington" offices until at least 2011.

Furthermore, virtually all of Arlington's assets transferred to Gateway. The APA unambiguously provides that Gateway purchased all of the "Assets Used in the Business," which "represent all of the assets used by [Arlington] to conduct its mortgage origination business as it is now being conducted." The APA even designated that "all cash in all accounts" be transferred to Gateway as a part of the transaction. It is unclear why a mere asset purchase would include such a term.

Additionally, the transition to Gateway occurred with minimal interruption to Arlington's ongoing business. The APA required Arlington to ensure the continuity of its general business operations

Pl.'s Ex. 6 at § 6.01(a). Granahan testified that a goal of the transaction was to ensure that nothing would interrupt Arlington's business so there would be a seamless transition to Gateway. When asked about the transition, Leinhauser stated that, for the most part, Arlington's former employees showed up to the same office, worked under the same name, and continued to work in the same markets as they had before the transaction with Gateway.

Arlington's former business operations, however, did not continue at Gateway without the involvement of Arlington's four executive officers/shareholders. In connection with the APA, Gateway brought over the four Arlington shareholders into management roles at Gateway, where they continued to manage the same branches that they had owned prior to the transaction. After the transaction, Russo — Arlington's CEO — became President of Gateway, in which capacity he participated in Gateway Senior Management Team meetings for two years. Russo was one of only three senior Gateway employees who received a cut of Gateway's overall profits. Although Kenyon (Arlington President), Leinhauser (Arlington Executive Vice President), and Granahan (Arlington Executive Vice President) did not have senior management roles at Gateway, they became branch managers who managed the former Arlington enterprise that continued as the Arlington Branch of Gateway. As branch managers, they had hiring and firing powers and managed some of the same employees as prior to the transaction.

In light of the foregoing, Gateway's argument that it bought only a discrete asset — the pipeline of loans — rings hollow. Arlington's entire business was its pipeline of loans and the assets and ability to continually generate new pipelines of loans. Put simply, the assets Gateway bought are the business. Thus, although Gateway did receive a pipeline of loans, it received much more than that — it received all of Arlington's assets used in its business and the ability to generate more business in the future using Arlington's name, personnel, former managers, assets, and business relationships. Lehman has demonstrated continuity of personnel, management, physical location, assets, and general business operations. The continuity of enterprise factor thus weighs in favor of Lehman.

2. Continuity of Ownership

The continuity of ownership factor of the de facto merger analysis is often stated as requiring "a continuity of shareholders which results from the purchasing corporation paying for the acquired assets with shares of its own stock, this stock ultimately coming to be held by the shareholders of the seller corporation so that they become a constituent part of the purchasing corporation." Fizzano Bros., 42 A.3d at 956. In Fizzano Bros. Concrete Prod., Inc. v. XLN, Inc., the Pennsylvania Supreme Court recently affirmed this factor is mandatory and that "the de facto merger exception requires `some sort of proof of continuity of ownership or stockholder interest." Id. at 969 (emphasis added). The Fizzano Court emphasized that that "some sort of continuity is necessary "because `corporate liability adheres not to the nature of the business enterprise but to the corporate entity itself. The corporate entity and its shareholders ultimately are responsible for the disposition of the corporation's assets and the payment of its debts.'" Id. at 968 (quoting Bud Antle, Inc. v. E. Foods, Inc., 758 F.2d 1451, 1458 (11th Cir.1985)). Typically, even if one corporation sells to another all of its business operations, assets, and good will, the two corporations remain as distinct entities that are strangers — unless there is a continuity of shareholder interest. See Bud Antle, Inc. v. E. Foods, Inc., 758 F.2d at 1458. As the Third Circuit noted in Berg Chilling Sys., Inc. v. Hull Corp., 435 F.3d 455, 469 (3d Cir. 2006), the objective of the continuity of ownership requirement is to identify situations in which shareholders of a seller corporation retain an ownership interest in their assets after artificially cleansing those assets of liability and thus unfairly attempt to impose their costs or misdeeds on third parties. See also United States v. Gen. Battery Corp., Inc., 423 F.3d 294, 306-307 (3d Cir.2005).

Although Pennsylvania law requires "some sort of continuation of the stockholders' ownership," this continuity of ownership need not be evidenced by an exchange of stock. The Fizzano Court found that

Id at 969. The Fizzano Court concluded that the owners of the predecessor corporation need not receive shares of the successor corporation in the de facto merger context, because Pennsylvania's statutory merger provision does not require owners of the predecessor corporation to exchange their shares for shares of the successor corporation; the successor can pay them with cash, property, obligations, or other rights instead. Fizzano Bros., 42 A.3d at 968; 15 Pa. Cons.Stat. Ann. § 1922 (allowing owners of a predecessor corporation to surrender their shares of stock for `obligations' of the successor corporation, or `cash, property, or rights' in lieu of shares in the successor corporation). In light of Pennsylvania's statutory merger standard, the Fizzano Court decided that a de facto merger may also exist without an exchange of shares:

Fizzano Bros., 42 A.3d at 968. The Fizzano Court held that the "continuity of ownership prong of the de facto merger analysis certainly may not be more restrictive than the relevant elements of a statutory merger as contemplated by our legislature." Id. In sum, although "some sort of" continuity of ownership is required, it need not take the form of stock ownership.

The Fizzano Court recognized that "transactional realities sometimes require a scrutiny that extends the focus beyond the confines of the immediate consequences of the proximal asset purchase agreement." Id. at 968-69. Thus, in deciding whether a de facto merger exists, a court is required to "look beyond the superficial formalities of a transaction in order to examine the transactional realities and their consequences." Fizzano Bros., 42 A.3d at 968. In so doing, I find that the four Arlington shareholders continued to have an ownership interest in their assets after the transaction with Gateway. Before the transaction, the Arlington owners shared in Arlington's profits as shareholders. After the transaction, they continued to share in the profits of the Arlington Branch of Gateway.

As a condition of the APA, each of the four Arlington shareholders signed an employment agreement with Gateway. Russo, Arlington's majority shareholder, however, received the most lucrative employment deal — he was not only entitled to share in the profits of the Arlington Branch of Gateway, but shared in the profits of Gateway in its entirety. Russo's employment agreement contractually entitled him to five percent of Gateway's total profits. It also entitled him to ten percent of the profits of the Arlington Branch of Gateway, which included not only the former Arlington offices, but "any offices to which any of ... [Arlington's] business operations are transferred and any new offices opened with respect to such business operations." Pl.'s Ex. 9 at § 4(b). The agreement specified that Russo would receive these "Arlington Branch" profit sharing payments for the first three years regardless of whether he remained employed at Gateway. After three years, if still employed, Russo would receive fifty percent of Gateway's profits from the "Arlington Branch" — a percentage roughly equivalent to his original ownership interest in Arlington. Russo was also entitled to special severance benefits and change of control payments tied to the Arlington Branch's profitability. In essence, after the transaction, Russo maintained an ownership interest in Arlington's former assets after cleansing those assets of liability via the transaction with Gateway.

Russo, however, was not the only shareholder to receive contractual profit sharing rights at Gateway. The Branch Manager Employment Agreements signed by each of the three minority shareholders also entitled them to share in the profits of the former Arlington offices. Each of the three shareholders received the net profits from the branch they managed, and both Granahan and Leinhauser testified that their situation was similar to that of a small business owner. In this way, the three shareholders also maintained an ownership interest in Arlington's former assets after the transaction.

The Fizzano Court found that a continuing shareholder interest in the successor corporation may take the form of obligations, cash, property, or rights in lieu of shares in the new or surviving corporation. The Arlington shareholders' agreements entitling them to share in the profits derived from their former Arlington assets satisfy this requirement — these "obligations" allowed Arlington's shareholders to continue to have an ownership interest in Gateway after the transaction. Although the Arlington shareholders did not receive stock in Gateway, this is unsurprising given that Gateway is a limited partnership and Michael Karp essentially owns all of the partnership interest in Gateway. Thus, instead of shares or partnership interests (in a company with a single partner), the Arlington owners received profit sharing rights, entitling them to a share of the profits.

In addition to these profit sharing rights, Arlington's four shareholders received significant lump sum payments and forgivable loans as a part of their Agreements Not to Compete with Gateway.15 While all the shareholders agree these payments were, at least in part, consideration for their agreements, Granahan testified that these payments were also, in part, compensation for the fact that the transaction rendered his shares worthless. Granahan, unlike Kenyon and Russo, no longer works for Gateway and appears to be a disinterested third party. I thus find Granahan's testimony to be credible. Although Leinhauser did not testify that the payments were compensation for his stock, he did admit that his shares were worthless. Indeed, Arlington has paid no distributions to its shareholders since shortly after the transaction in 2008, and Arlington has continued to possess only a minimal amount of cash since 2009.

It remains unclear what proportion of these payments served to compensate the Arlington shareholders for the value of their ownership interests. However, it is more likely than not that some element of these payments served to compensate the shareholders for the value of their stock, given Granahan's testimony, the significant value of the lump sum payments and forgivable loans, and the fact that the transaction rendered the company's stock virtually worthless. Even without these payments, however, the Arlington shareholders retained an ownership interest in their assets after the transaction by virtue of their contractual profit sharing entitlements. Continuity of ownership thus exists, and this element of the de facto merger analysis is satisfied.

3. Cessation of Ordinary Business Operations

The third factor of the de facto merger analysis is often stated as a requirement that the "seller corporation cease[] its ordinary business operations, liquidate[], and dissolve[] as soon as legally and practically possible." Fizzano Bros., 42 A.3d at 956. Through this factor, "[t]he de facto merger doctrine recognizes that an essential characteristic of a merger is that one corporation survives while the other ceases to exist." Berg Chilling Sys., Inc. v. Hull Corp., 435 F.3d 455, 470 (3d Cir.2006). Under Pennsylvania law, however, a corporation need not completely cease to exist. Courts have found this factor to be satisfied when the predecessor corporation does not dissolve, but is reduced to an assetless shell. See Knapp v. N. Am. Rockwell Corp., 506 F.2d 361, 368-69 (3d Cir.1974) ("Denying [plaintiff] the right to sue [the successor] because of the barren continuation of [the predecessor] after the exchange with [the successor] would allow a formality to defeat [plaintiff]'s recovery. Although [the predecessor] technically existed as an independent corporation, it had no substance.") (applying Pennsylvania law); Com. v. Lavelle, 382 Pa.Super. 356, 555 A.2d 218, 228 (1989) ("There was also a cessation of ordinary business by [the predecessor] shortly after the formation of [the successor], and, although the corporation was not dissolved, it was reduced to an assetless shell."); Chicago Title Ins. Co. v. Lexington & Concord Search & Abstract, LLC, 513 F.Supp.2d 304, 315 (E.D.Pa.2007) ("The predecessor corporation need not actually dissolve; reduction to an assetless shell is sufficient.") (applying Pennsylvania law). While this factor may be met if the corporation as a whole ceases its ordinary business operations, it is not sufficient for only one division of a corporation to cease its operations. In Berg Chilling, for instance, the Third Circuit found that this factor was not met where one division of a corporation ceased its operations after all of its assets were sold to another company, but the larger corporation maintained other divisions that it continued to operate for years. 435 F.3d at 470.

In the instant case, Arlington neither dissolved, nor ceased all activity, and continued to exist as an entity that filed tax returns and defended law suits. Although Arlington did not formally dissolve, however, Arlington retained no employees, offices, or assets of substance after the transaction. Arlington also ceased its ordinary business operations: Arlington discontinued its residential mortgage origination business — its primary enterprise — as required by the Arlington shareholders' Agreements Not to Compete. Furthermore, by the end of 2009, Arlington had essentially devolved into an assetless shell. Its cash assets were virtually depleted and only $11,000 remained in the bank. In the years since 2009, Arlington has seen little fluctuation in its cash assets and continues to exist as an assetless entity. Arlington has not made disbursements to shareholders since shortly after the transaction, and two of Arlington's shareholders testified that their ownership interest was worthless.

After the transaction with Gateway, however, Russo (with some involvement from Kenyon) continued to use the Arlington entity as a vehicle for one-off transactions outside of the residential mortgage origination sphere. Russo estimates that he conducted somewhere in the range of one to ten of these transactions. Leinhauser and Granahan — two of the four shareholders — were not even aware of these one-off transactions and had believed that Arlington would "wind down" after the sale. Russo, himself, stated that it was fair to say that he is the only one operating under the Arlington entity. Although Russo did continue to use the Arlington entity to take advantage of a few opportunistic transactions outside of the residential mortgage origination sector, the deal with Gateway essentially required Arlington to cease its normal business operations and rendered Arlington an assetless shell within two years following the transaction.

While it is clear that Arlington did not completely cease all activities after the transaction, it is also clear that Arlington's minimal level of activity did not rise to the level of that found by the Third Circuit in Berg Chilling. Unlike the corporation in Berg Chilling, Arlington did not just sell one division of its business and continue to operate the other divisions in the ordinary course of business. Rather, Arlington's ordinary business operations did cease, but the majority shareholder of Arlington continued to use the entity to engage in a few one-off transactions. For all intents and purposes, Arlington was not carrying on an independent business after the merger. Although this factor is the most debatable of the factors, I find that it weighs slightly in favor of Lehman.

4. Assumption of Liabilities Ordinarily Necessary for the Uninterrupted Continuation of Normal Business Operations

To satisfy the fourth de facto merger factor, the purchasing company must "assume[] those obligations of the seller ordinarily necessary for the uninterrupted continuation of normal business operations of the seller corporation." Fizzano Bros., 42 A.3d at 956. Courts have found this factor satisfied where the purchasing entity assumes the liabilities on the seller's balance sheet as well as the seller's contractual obligations. See Gen. Battery Corp., Inc., 423 F.3d at 308 (finding factor met where the parties' "agreement expressly provided that [the successor] would assume [the predecessor]'s contractual obligations and all other obligations appearing on [the successor]'s balance sheet"); Com. v. Lavelle, 555 A.2d at 228 (factor met where successor assumed accounts payable and contracts and continued insurance policy). As demonstrated by the Asset Purchase Agreement, the Assignment, Delegation, and Assumption Agreement, and Pasceri's testimony, Gateway assumed substantially all of Arlington's debt and liabilities related to its ongoing loan origination business, including obligations on its balance sheet, Arlington's warehouse liabilities, and "substantially all of the contracts, liabilities and obligations of [Arlington] relating to [Arlington]'s business and operations...." Pl.'s Ex. 30. Additionally, Gateway does not contest this factor in its post-trial briefing and does not address it in its proposed findings of fact and conclusions of law. I thus find that the fourth factor of the de facto merger analysis is satisfied because Gateway assumed Arlington's liabilities necessary for the uninterrupted continuation of Arlington's normal business operations.

B. McNair Loan

The Loan Purchase Agreement between Arlington and Lehman contains a choice-of-law clause providing that New York law governs the construction and enforcement of the contract. "Under New York law, an action for breach of contract requires proof of (1) a contract; (2) performance of the contract by one party; (3) breach by the other party; and (4) damages." Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 525 (2d Cir.1994). In order to demonstrate that Arlington breached the LPA, Lehman needed to prove that Arlington was contractually obligated to repurchase the McNair Loan, because the McNair Loan application "contain[ed] any untrue statement of fact or omit[ted] to state a fact necessary to make the statements contained therein not misleading." Pl.'s Ex. 22 at § 703 ¶ 1.

Lehman has failed to prove that Arlington breached the LPA between the two parties, because Lehman failed to prove the McNair Loan application contained a misrepresentation that would obligate Arlington to repurchase the loan. Lehman argues that McNair misrepresented the amount of debt he owed on the DC Property in his loan application with Arlington because of the discrepancy between the amount of mortgage debt reported in McNair's August 2006 loan application ($158,471) when compared to his June 2006 refinance document ($328,800) and the March 2007 Notice of Foreclosure ($339,956.20). In support of its case, Lehman provided three documents that state the amount McNair owed on the DC Property at three points in time:

However, Baker — Lehman's only witness — could not confirm or deny whether McNair paid down, refinanced, or borrowed against the loan on his DC Property between June 2006 and August 2006 or between August 2006 and March 2007. Baker did not familiarize himself with the McNair Loan until after the commencement of this litigation and had no first-hand knowledge about the loan application or whether the alleged misrepresentation had occurred. Furthermore, McNair neither testified at trial, nor was deposed by the parties. Without more evidence, the three documents provided by Lehman do not prove by a preponderance of the evidence that McNair misrepresented his debt on the DC Property in his August 2006 loan application with Arlington. Gateway is therefore not liable for the damages associated with the McNair Loan.

C. The Pimentel and Steinhouse Loans

At summary judgment, I found that Arlington breached its indemnification agreements with Lehman with respect to the two Pimentel Loans and the Steinhouse Loan. I determined that the damages associated with these breaches is as follows:

   Loan Total           Loss Before Pejudgment Interest

Pimentel (# 2680)               $67,143.68

Pimentel (# 2672)               $163,869.76

Steinhouse (# 2995)             $217,519.64

I also found that prejudgment interest would accrue at a rate of 6 percent per annum. Gateway is thus liable to Lehman in the amount of $448,533.08 plus 6% prejudgment interest.16

III. CONCLUSION

All four factors of the de facto merger analysis individually weigh in Lehman's favor, and, taken together, the facts relevant to each of these factors lead to the conclusion that a de facto merger occurred between Arlington and Gateway. Furthermore, equitable considerations also weigh in favor of finding that a de facto merger occurred. When faced with financial hurdles and the potential loss of Arlington's warehouse capacity, Arlington's shareholders joined with Gateway, where they were largely able to keep their business and sales force intact and continue to manage the former Arlington offices as the Arlington Branch of Gateway. Significantly, they were able to continue profiting off their former assets, while at the same time cleansing those assets from liability by selling them to Gateway via an asset purchase agreement. Gateway also received significant benefits from the transaction in the form of increased production and profits. Gateway received much more than an asset — it essentially acquired an entire company, while leaving behind that company's liabilities. In light of the realities of this transaction, it would be inequitable to allow the two companies to avoid Arlington's obligations to its creditors. I thus conclude that the transaction between Gateway and Arlington amounted to a de facto merger between the two companies under Pennsylvania law. Gateway is thus liable for Arlington's breach of the indemnification agreements associated with the Pimentel and Steinhouse loans in the amount of $448,533.08 plus 6% prejudgment interest. Lehman did not carry its burden with respect to the McNair Loan. Gateway is therefore not liable for the damages associated with the McNair Loan.

ORDER

AND NOW, this 17th day of December, 2013, it is ORDERED that, pursuant to the accompanying Findings of Fact and Conclusions of Law, JUDGMENT IS ENTERED in favor of Plaintiff Lehman Brothers Holdings, Inc. with respect to the two Pimentel Loans and Steinhouse Loan in the amount of $448,533.08 plus 6% prejudgment interest. It is further ORDERED that JUDGMENT IS ENTERED in favor of Defendant Gateway Funding Diversified Mortgage Services, L.P. with respect to the McNair Loan.