more your hours may please the court my name is scott babies and i represent a class of individuals represented by cynthia borden tom flanders the plaintiffs and parents in this matter rested the district court's decision dismissing our case  twenty six be reversed for really there's there's two fundamental issues here first the statute itself is very broad very remedial and it doesn't have any requirements other than the defendants participated in aided in any way in the sale of these illegal securities the district court a letter that found that we didn't allege other than normal banking activities well first of all there's no normal banking activities exception in the statute the practical facts although the defendants take issue with us calling the action and the practical effect of the ruling is to create that exception if it the complaint is in fact nothing but normal business activities then the effect of that is to create an exception to the statute it doesn't exist but the general assembly didn't put it and so if we look at what is alleged in the complaint the defendant's position in the district court agreed was that all we've alleged is normal banking activities so let's fundamentally not true there is a a litany of activity alleged in the complaint that one the forms that need to be filled out by all the individual investors we allege those were mr apostles helped fill out all those forms with each of the individual investors him or his companies secondly and something that i 'm not sure comes out entirely in the briefing there were direct contractual relationships with these defendants between mr apostles and or some of his companies that were that didn't include the investors that were needed and necessary requirements and were to facilitate these transactions if you look at exhibits two and three in our complaint those are some examples and we believe there there will be more in fundamentally we've been deprived of the opportunity doing discovery and to find company c n a i believe that is signed by mrs fairchild which its public record was part of the scam and work for mr apostle apostles that agreement again is independent of the individual did the complaint itself alleged this relationship between apostles and the defendants or is it through this these exhibits that were attached to your on the complaint itself says alleges  that the defendants were fundamental to these transactions that but for their their inclusion in these transactions they could not have happened it references specifically a list of all the documentation that was required in order to consummate these transactions effect so yes absolutely paragraph fifty five of it we've alleges that and again it's summarize that but fourpence go in kingdom trust and all the defendants involvement in these transactions couldn't have happened if you look at that relative what the statute says the statute says as long as you age or participate in any way in the sale of illegal securities then you're liable if the if the investor resends the transaction which is what what this case is about so there's no there's no science or clark i can see how the defendant aided in the purchase but i'm not sure i see how they did in the sale  to responses that you're on a first is the sale i think you have to look at it's a transaction i don't think the statute doesn't say in the transaction it says in the sale that's correct i'm trying to see how these defendants aided in the sale or the contract for sale they had contractual agreements with mr apostles who was the seller of the investments so those contractual agreements were a prerequisite in order for them to fund the sale legal securities in this case so i think their bond frankly both sides of the equation which i believe your honor is why we have to look at this is a sales transaction and not whether they're on the seller side or the purchaser side that someone else you're i think the nominal purchase and these are the third party or the defendants the self directed iras because that's where the paperwork was was set out as a practical matter though it's all of the individual investors money that was used to fund these sales and so if you if you described this case because they were purchasers then effectively what you've left to their recourse is hoping that somehow the defendants will sue themselves under the statute i think that's practical if not legal impossible so i would say that the investors the individual my clients are the persons who were purchasing these illegal securities for purposes and you haven't addressed this wells fargo decision would you take a moment to do that that case seems to recognize when you call it an exception and not this whole decision pursuant to rule fifty six it's not it's well the six decisions so after evaluating all the evidence the court said that there was not enough because it was normal banking activity these it was not enough to show that they participate in aid in the sale or factual perspective it's a much different case amir first was the friend of the got dismissed on summary judgment in that case and what they did was provide loans to individuals and take a mortgage on the individuals house those individuals then use the money to purchase legal securities from the defendant in that case that's not what we're talking about here we're talking about here is the person who perpetrated the scheme brought together the individual investors in the defendants in this matter and the defendants actually custom control of the security they didn't provide money to the investor who then in turn paid it to somebody else they actually got the security put in in their coffers if you will and purchase the security so that not to their own account but to the benefit of your client in all of these people in the class action that's correct others when they were told to purchase these things could they have said no ma'am we're not going to do that that's a bad idea no i don't think they could i think that the paperwork involved was either at the direction of my litigation we've not been able to conduct discovery we have alleged enough there for us to continue that discovery and that relationship just hasn't we haven't had the opportunity to flesh it out so we provided an alleged in the complaint what we what we know of that certainly lends itself to the involvement in the sale of these illegal securities by the defendants and we should be allowed to proceed at this point to conduct discovery and not be dismissed summarily and so much as a motion to dismiss has the ohio and all of those decisions are fifty six motions which i think is fundamental to this question but i also all those decisions talk about the actual activity which we haven't had the opportunity to develop and what that is relative normal banking activities at this point with the record in the case i don't think there's a definitive list of here's what all the normal banking activities are to which we can compare what was alleged in the complaint or what was actually done because we don't none of those things you see my time's  there is alleged some sort of relationship between apple leaves and mr apostolos that's not alleged in the complaint it's not an argument that's ever been made before there is no allegation when you go line by line through the complaint of any sort of relationship between these parties that is not factually correct what is a good case because this is the normal course for a custodian is that we act trustees and we stand in the shoes of the book the purchasers in this case and so that yes there is a note between the company involved here and it will have the name of for example  it that is the only contract but that is us acting as a trustee standing in the shoes of the buyer there is nothing else here no alleged relationship between mr apostle of the seller of the securities and the lease here let me step back a moment pence go both that believe or banks under state law school is regulated as a bank by the state regulators it's recognized under ohio law as a bank what it does and what it does not do is prescribed by the internal revenue code that sets forth what a custody and of an ira must do by r r c four zero eight of federal regulations underneath that it's twenty six one dot four zero eight dash two what it custody and does what is normal and customary for a custodian is set forth in the internal revenue code now what we have here is a complaint that actually alleges what a custodian does in the normal course i believe it's paragraph thirty eight through forty it then alleges as to these particular app believes that they did exactly what they custody and does in the normal course of business as they themselves alleged in the complaint the complaint also cites to the securities and exchange commission release that explains what an ira custod does so we have before the district court their own pleading as to what the standard custody in is held to and then what these custodians did the tour identical we have a standard and then the conduct alleged in no way goes beyond those banking activities required by the internal revenue code and they then themselves alleged are done in the normal course but i guess i understand the pla what of the various activities or relationship were in the normal you know routine in which were not so i think mr davies of pointed to paragraph fifty five  discovery my judge in training antenna go up and say wait a minute because you're pleading can survive a motion to dismiss you need more facts to plead welcome back to that moment as far as the specific allegations of forms again i will say that as a custody and under the internal revenue code we stand in the shoes of the buyer as trustee and have to have the same documents that a buyer would have which are exactly the documents that they've alleged were created i would a that they specifically allege a contractual relationship between pence go and in the case of mr flanders one of the appellant's that contract was before the district court and specifically enumerated the type of documents that will be required in order to effectuate the custodial relationship and custody the particular assets this customer was mine so no i think their own allegation sets forth what  standard is and like i said when they turn to alleging specific facts related to these particular app billie's the two are identical you can put a mirror up in it and it is what it is now related your honor is this question of summary judgment versus motion to dismiss which i don't think is a distinction with any substance it doesn't matter the procedural posture for a court to articulate what the legal standard is under this particular statue for participating with the seller in the sale or aiding the seller in the wouldn't that's not the case here it's not the case here your honor and if they allege not arguably is not the case here i don't see those words in this complaint however your honor under your hypothetical if they alleged something akin to actual knowledge of the wrongdoing in active participation with the seller in that wrongdoing then i think we have a different debate that's not this case this case is wells fargo pure and simple which is the most recent articulation of this legal standard from the highest court that's addressed it in ohio and it's frankly the most comprehensive survey of the law and most akin to our situation why because there you have a financial institution that is arguably working for the buyer as we were here we were brought to this by the buyer not by the seller and in that situation the facts are actually more involved with the seller than we have before the court today what i mean is in that situation there was an actual referral agreement between the seller and the person at the financial institution in the wells fargo case the person at the financial institution proactively telephoned the investor to solicit the mortgage the mortgage was absolutely key to that investment because the nature of the investment was taking a mortgage transferring the funds to the investment the investment and then made the payments on the mortgage it was a mortgage based investment and in that case the court of appeals for the state surveyed the case law and said wait a minute you know they're only providing ordinary commercial activities that the financial institution provides the that does not constitute participating with the seller in selling this investment and i note that and i wrote it down although i don't remember there's probably a dozen cases it in various ways addressed this question of what does participation mean and in every single one of them but the wells fargo case the participation is with the seller of the investment which is the point of this law that if you participate with the seller in doing something to have that seller's transaction happen from the seller side documents i can't speak to it but like i said it is correct that there will be documents linking the the investment with the custody and because there has to be the internal revenue code requires the custody and to hold legal title to the asset an individual cannot hold it in their own name therefore in the case of a note there has to be a note with the trustees name on the note that's different then some sort of an economic relationship a partnership an agency agreement something where we're in business together with the seller of the securities that would be a very different case and who brought the individual to pen's goes attention the individual themselves not not apostle that's no your honor this is a situation where just like if you were to open an account with merrill lynch or whoever you felt the paperwork you take it to merrill lynch and they open your account that's exactly what happened here and my time is up and  highest court that has squarely addressed this particular fact pattern and the the particular issue of the ordinary commercial activities i would note that the district court also in a subsequent ruling against another party c bank did issue another opinion dismissing the case against p and c that addressed this concept of an exception and the district court specifically held that nobody is calling this an exception this is a definition of what it means to participate with the seller and i understand that this is a remedial statute but that doesn't mean it's some sort of magic solvent that dissolves all of the years of precedent in this area and quite stands in the shoes of the investor instead what the actual construct is that the pert is that the purchase is made by an individual retirement account in the  defendants as custodians just like a trustee in any kind of a trust purchased the investments at the behest of the person who set up the account in this case the  plaintiffs and then be the purchase is actually made by the retirement account by the custodian who is the person acting for the retirement account and that in fact is what the complaint says throughout  we're dealing here your honor with the statute that he has certain elements and it's our contention that the complaint does not meet those elements first is that good extends certain rights only to purchasers of securities and we don't believe that the plaintiffs plaintiffs here are purchasers because as i said the purchasers are their individual retirement accounts if they were to purchase directly they would not be able to get the tax benefits of these investments and so that's why they're set up that way it's a construct established as one cincinnati be considered as purchasers even if technically it's the ira that's purchasing it but the irony is for their sole benefit this is this is your honor a statutory claim ok and we do have a case by an ohio appellate court smith versus wade in which the court says directly that section hundred seven point forty three can create no claim for relief in a plain if who does not allege that he personally was the purchaser of any of the securities and fobbed now the smith case is a different construct i admit it's not a beneficial ownership ownership situation but the fact is that the plaintiff here chose to use to file only one claim it was a statutory claim and he is constrained by the statute the statute sets up the statute recognizes that a sale purchase transaction has two sides on one side of the table we have the purchaser on the other side we have the seller all of the allegations about kingdom trust are about kingdom purchaser of course there are green minutes between the seller and the purchaser those are the agreements the plaintiff is pointing to if you were to read the statute the way plaintiff wants you to read it any purchase there would be a cause of action against any purchaser and how does it make any sense i mean you've got you get two sides to a transaction here yes the statute is a remedial statute yes it is broadly read but in the custodian making the purchase that you're involved in the transaction and you're on it was perfectly credit the statute doesn't talk about involvement in a transaction it talks about participating in an aging the sale and we've discussed each one of the cases each one of the ohio cases that talks about this in our brief the pages fifteen three sixteen and twenty one through twenty two and every single one of those cases has more involvement purchase as kingdom trust and pensacola are good question here i mean you know it's our position that this was an investment that the plaintiffs chose to make it's clear from the complaint they knew mr apost before they ever knew anything about kingdom trust they they decided to invest with mr apostle assess what the complaint lays out and you know we're going to get a tax benefit from this investment they opened ira with a custodian could have been kingdom trust could have been parents go could have been one of the twenty five john doe's that are mentioned in the complaint so there were a number of choices that the plaintiffs had you know the plaintiffs were certainly the one driving the bus here and they were the ones that made the decision that they wanted to purchase securities from mr apostolos but in order to get certain tax benefits they did it through a self directed ira account with kingdom trust in our case and as a result of that there they were not you know directly the purchaser and the law that the internal revenue code is very clear that if the investor the beneficial owner exercises any control over the ira account after the purchase is made they lose their tax exemption so clearly you know the money is put into an ira account the direction is given to the custodian to make this investment and and that's just the way it is set up and it set up that way so that the investor can get a tax benefit but i don't think that makes the investor the purchaser for the purpose of the ohio statute their house statute uses a very specific word purchaser it doesn't say beneficial on or it doesn't say somebody who is involved in the transaction in some way so you're saying that that kingdom of trust is in fact the purchaser yes your honor yes or no so my concern which is what i sued all long but my concern is then looking at the actual language of the statute what is the difference between aiding in the sale or the contract for sale and aiding in the purchase or a contract for purchase well the big difference is there's no liability on the purchaser side but under the statute under the statute if there's a distinction between aiding in the cot in the sale of the contract for sale and aiding in the purchase of the contract for purchase correct correct i mean the statute sets up a construct that the plaintiff is the purchaser the claimant asked to be the purchaser and the only possible persons with liability are either the seller himself or anyone who participated in or aided the seller in th what would be an example of someone participating in or aiding in the contract for sale what you have in the case law is a broker who brings the parties together someone who knows about the scheme and still does their you know whatever their little bit is there an underwriter for instance you have any number of possible see and specifically for all the ones to be tying apostolos and kingdom trusts together well your honor what that paragraph says is that mrs boyd opened an account with kingdom trust  fraud prods stirrers they call them go to someone and say you've got this big retirement account i can make you fifteen percent or twenty percent when even though the market is you know five or seven or whatever and it'll be tax free because you can do it through an individual retirement account and the legislature the congress in its infinite wisdom has set up this vehicle in this business that it is in place and is governed entirely by section four a way to the internal revenue code and said if you do it this way you don't have to pay taxes on the increase in value of the asset that is purchased with your retirement funds in that account so what this is saying is that it is i read it is other facts in the complaint that would support any relationship or any agency relationship in particular between kingdom trusts in a priceless and in fact what we have demonstrated in our briefs is that these forms are available on line on our website so anybody can go there and anyone does and whether it's apostolos who goes there and finds the forms and gives them to mrs boyd and helps her figure it out or whether mrs boyd goes there herself they're what's before the court and what was before the district court as a practical matter if you look at paragraph forty five forty six and forty seven to perpetrate the ponzi scheme including the sale of unregistered securities apostles directed the plans to invest with these folks were to go to these companies now i would submit that that's based on the anecdotal stories from many retired firefighters and police officers who were taken in the scheme that mr apostle has directed them to go to all these folks so to say that they were that the seller of the securities was not involved with a third party at this stage in the litigation there's no basis for we have to be able to conduct discovery to to flesh out what those relationships were but certainly what's in the computer if i tell you that i understand that you're going to have a big party and you need fresh seafood and the best place to get that is the local store on the corner and i direct you and all of your fellow partiers to a local store to get really good salmon and you do that that makes a relationship between me and the local store here i believe if there is a statute that says that you're responsible in eating or participating in the sale of that same or that fish i don't have any fish understand i don't have a store i'm not hav party i'm just sayin they've got really good fish i'm struggling with the idea that that creates a relationship which is what your complaint says  contracts are signed by mr apostle and with the defendants with the allegation that he brought the investors to the place the vehicle that would allow them to put money to get a possible it's money that they wouldn't otherwise know about i mean these are folks who sued for one case and pensions war were from the police department and from the fire department right there not sophisticated investors so i think that it's perhaps a little bit of an oversimplification to compare it to i think these guys have really good fish you should go by this is a very involved transaction there but for the defendants being involved in apostles bringing those folks together could never have happened so they couldn't have invested with mr possum's without first putting their money with the self directed ira