this court has stated that the investor who seeks to blame her investment loss on fraud or misrepresentation must exercise reasonable due diligence to become aware of the nature of the investment and associated risks it is undisputed in this case that neither mr nor ms roatan conducted any investigation whatsoever prior to investing their life savings in the read and this court has repeatedly held to the well settled principle that this is an affirmative duty in fact in bone hammer vs shearson layman hutton and an opinion authored by judge jones a potential plaintiffs has an affirmative duty to diligently investigate facts which might lead to discovery of the fraudulent conduct and as this code court noted in martina's talking of vs chase manhattan bank in one nine hundred ninety eight a case that is very similar to this factually plaintive has to do more than simply rely on the bald assertions and promises of advisors but for investing life savings or any amount of money reasonable diligence requires her to read the only documents that exist governing the nature of the investment why do you think with so cummings although given at least three opportunities to consider the statute of limitations defendant didn't accept that your honor we believe in what we take issue with in judge cummings decision a rose at the summary judgment stage and it was there that judge cummings determined that the fact question of whether the romans received or did not receive the prospectus was dispositive as to whether the statutory period began to run at that time but that is entirely contradictory to this case  court's history of cases all our q three will lead us to wonder whether you client had cited the right cases to him well your honor we certainly started boden hammer which judge jones authored and in that case th court made very clear that there is an affirmative duty and that the investor must seek out the correct documents and seek out the readings and certainly this court did decide in martina's tapia and as noted by the united states supreme court in merck that an investor must respond to storm warnings and hear any issue about the fact where they got the proof of your honor no there was not specifically a question as to whether the prospectus was received there was a question as to whether they knew or should have known prior to april thirtieth of two thousand and nine because this case was filed over four years and seven months after fore your honor in this case mr breton signed the subscription agreement on september eighteenth two thousand and eight within the subscription agreement there are a total of eleven references to the prospect this now importantly some of those references actually did mention risk and that flies in the face of any guaranteed investment in fact the very idea of a guaranteed investment is a red flag itself as mr ro testified at trial he knew that there was no such thing as a guaranteed investment he testified maybe a cd but i know of no whether i was startled in the closing argument it was a sure closing argument but but you're your points were perhaps of value will still go up and then it was would it be reasonable that anybody would sign a guaranteed agreement but i didn't see any reference in the closing to impeachment use of the prospectus well your honor we certainly rose that issue i know it came up factually but but i was startled i guess it relates to to just questions about it may not be preservation but at the summary judgment stage what cases were given and to reformulate that is a question the district judge relied on the nashua partnership case could you distinguish that well your honor here it is true that the investors were bought it was a fact issue whether the prospect fact was not only not given but there was no reference to it in the discussions whatsoever in fact in martina's tapia the plaintiff didn't not even sign a subscription agreement and this court held that the plaintiff was charged with notice  in that case it was an offering circular because the plaintiff had read a brochure and the brochure referenced the offering circular here very similarly the subscription agreement reference the prospect is on at least eleven occasions in fact it required miss roden to war in represent that not only had she read and received the prospect despite she had done so five days prior to the subscription agreement now that is a storm warning and as  judge jones has characterized dies the flag read that there is incredibly important information in that prospect of and in fact if we look at the very first page of the prospect of this it warns the investor that this is a high risk investment and that the investor should not invest any money in this and less the investor is prepared for a quote total loss and then on that very first page it goes on to cite several various risks that are more fully explained later on or who are describing the subscription agreement this is the prospect in this rodent testified at trial that had they read the prospect is that they never would have invested their money in prospectus available online i'm just wondering but in overton that was not in evidence your honor but we do know that ms roatan said that she did sign the subscription agreement and that she quote read part of it and mr acknowledge that as a mortgage broker as he is that a party who signs an agreement is held to have read that agreement and been aware of the warnings do diligence a fact  determination hours a day object a reason it does the standard of due diligence differ depending on the sophistication of the investor absolutely not your honor it is an objective analysis and in fact that is exactly what the romans attempted to do here is excuse their behavior because they quote trusted the stock broker and that is where she told me to sign as ms written testified at trial and that's important because other investors in the past such as in jensen versus now wings attempted to rely on their own lack of sophistication to avoid the running of the statutory period and as this court stated one must exercise reasonable due diligence in order to a veil oneself to the tolling of the statutory period here there is no dispute that regardless of the prospectus or not there was no investigation whatsoever and in fact m to moni as to the eventual of investigation that she conducted in june or july of two thousand and ten reveals just how quickly she could have learned of her claims specifically ms roatan picked up the phone and call harvard rate and after one phone call misread miswrote was aware that the read was not a guaranteed investment she then went on to testify that she did some internet research and quickly learned that it was quote a bad investment but most importantly miss wrote in and mr repton did none of this at the time that they entered the the investment in fact must run testified that at the time she signed the subscription agreement she had not yet paid into the investment and at that moment she had a chance to demand that she either receive a prospectus or call the way to find out more information in fact on page fifty two fifty one of the record the roads testified that they had previously lost money in an investment and so if they are going to try to rely on their own subjective knowledge we have the fact that they previously lost money in an investment and that mr worked in the banks mortgage department he testified that he was well aware that the real estate market fluctuated this was an aria to investing in business properties so it was going to be generating income because of the r with in for that just that is fair your honor and there was some indication that due to the market crash that there was a decrease in value and that they entered this thing what two thousand and eight they invested in on september eighteenth two thousand and eight the market was in disarray to put it mildly at that point absolutely your honor in fact at the beginning of two thousand and eight the united states association of realtors had already reported the greatest loss that they had seen in over twenty five years and so while subjective knowledge is not what we base our analysis on mr rowton was in the mortgage business he understood real estate at least to the extent that he understood it that it could fluctuate did they receive the monthly statement the reflected the decline a sharp decline we believe it was in june of two thousand and your honor and that is the time yes that is the time that the court held that the statutory period began to run but that is contradictory to this court's decisions in prior cases such as been hammerin such as martina's tapia and certainly in jensen versus snelling's although that was different facts this court repeatedly discussed that storm warnings and red flags cannot be ignored the storm warnings that were there any notion that the claims that they made that the contract a violation of the jury found could have accrued could only have a crude once they realized it was a loss in value well your honor and interestingly while kept up securities was not included in the jury question for breach of contract texas courts have never held that a print of contract can be told even though that particular cause went to the jury but there is no evidence that the romans conducted any investigation whatsoever at the time that they entered the subscription agreement which is when the contract violation occurred yes your honor interestingly the itself but here importantly the very statement to that there were no as miss rightly described in kits available was a red flag as this court has stated a reasonable investor must inquire further w facts such as that are right and that has always been our argument that not only was there an affirmative duty prior to entering the investment that once there are red flags there is an additional duty under inquiry notice that then you are to investigate and the united states supreme court made this clear in merck versus reynolds in just a few years ago when it noted that inquiry notice triggers the time that the investor must begin an investigation and then the statutory period is triggered once that investigation would have revealed actual notice to an objective investor here because the misratah his own testimony we know that regardless of the prospect has been received or not she picked up the phone and called derringer harvard reed and at that moment she immediately knew that her investment was not guaranteed and importantly this is a very simple fact about a nature of investment as opposed to she was actually a risk language in the agreement itself that you think is the most sort of forward prodding you better look your honor on the second page of the subscription and raymond about midway down the investment in shares by certain tax exempt or tax deferred plans now that comes as an asterisk asterisk next to the custodial registration which is where this particular investment thought she also signed it notwithstanding but under penalty of perjury she was required to confirm that she had had the prospect as five days in advance yes your honor we felt that that was an important fact issue but regardless of whether she'd had the prospect us or not well i just thinking that's a red flag absolutely it is judge jones and that is part of what we pointed out at summary judgment in the rule fifty motion to the court regardless of which cases were that time that was a red flag out well as was the fact that the kids were sold out because it was selling quote so well for these reasons we asked this court to reverse and render judgment a please the court because one of the supreme court's mark opinion no reasonable investor would have discovered appellants fraud until they had lost more than half there were savings over a year later the rope was lost it was  filed and because a record is replete with evidence that the capra brokerage firm control the fraudulent advertising and its brokers the trial court properly in our judgment against camp rock as well where with the site where did the seven investment representation came from the written advertisements more than one written advertisement published in the magazine and it was reiterated in a face to face meetings with these two brokers in the written that does say guaranteed  if you aren't getting as much as seven percent elsewhere might want to look to us it says seven percent without any qualifying language is this a guarantee i don't believe it says that i have to look at the record again your i can do a  to trial that the ads promised a seven percent rate of return and she told the romans that the investment would be safer than mutual funds or stocks there was evidence it emitted in the trial that the romans did not receive the prospectus and that was buttressed by independent fact witness testimony from another potential investor of them while i still don't understand how you distinguish this case from martinez tapia or from nationwide in topic we had a highly sophisticated investor he was a former state finance  people aren't stupid they can i mean to be in the mortgage brokerage business what i mean how can you not know about the risks of mortgage lending mr roden had a high school education and nothing beyond paperwork that are required for every mortgage surely they the bank it's the whoever at the top the title company or whoever employed him send him to school to learn what those documents were about and say nothing in the record about any of that it talks about generally what he does to help people close mortgages and fill up paperwork but going back to the topic case that you raised judge jones that case is distinguished because in that case the court's opinion  a prospectus he never read it in essence that it was never discussed in this case it was withheld from the plaintiffs they said there's a prospectus but you can't have because we're having it in but she signed under penalty of perjury now that that's probably a false threat but wouldn't that raise reasonable suspicion to anybody she was told where to sign of what to sign by her broker what more could the ari have done to you think it should have had an like the drug companies that said seven percent as long as you're a sophisticated investor and you realize this and you don't have a more you don't have a big mortgage and you're not investing all your life you know like the drug ads where they  qualifiers i mean it looks to me i mean does the subscription agreement alone seems to suggest so over and over again that you have to be qualified financially to invest in it you have to you know it keeps referring back to the pros practice it doesn't want it's trying not to make representations so that it won't make half truth representations and then you sign under penalty of perjury it seems to me it's going to great lengths to protect investors the subscription grant that they did sign mention the word risk once this hill pointing to the only one place and that some groups in agreement but references about when he's go out and buy stocks from a stock broker unless it's a large amount you don't ordinarily have to they do make you fill out a form about your suitability but you know you just want to buy ten shares of a t n t they're not going to have you fill out a form that says i'm a suitable investor my net worth is a lot of the romans had no experience buying individual stocks and bonds that's in the record so they didn't have that base of knowledge to draw from in making this investment and it's not the rate company that was actually doing the read the fault here it's the brokers in responsible investment advertising whenever you have an investment advertised it always says there is a prospectus and read it before you invest this these ads in the book can see that there's a series of five ads no where in those advertisements does it say read this perspectives for risk discussion it just says seven percent rate of return and i guess what's your best case that when a party makes the contractual representation that they have read it our court will overlook that contractual representation i'm not sure i can put into question if you could really hear with the the penley perjury and the repeated  it it would seem like your clients made a contractual representation that they'd read it and i'm wondering is there any case that says well the facts can contradict their own signature that they have what cased you have that investor is a fact to consider in determining when the step she runs but your client said that by signing they were representing they had seen it as the opposite of concealment she just testified that she signed work her broker told her to sign and in that but what case allows that to undo the representation that's what i'm asking for your honor i don't have a case before right now i'd be happy no no that's that's sort of where i got into as well  these are the cases that appellate side are factually in apis it in almost all of them the investors actually proceed receive the prospectus itself that had detail in multiple warnings of risk and either has actual knowledge of facts forming the basis for a cause of action or when a hypothetical reasonably diligent plaintiff would have discovered those facts that's when the statute begins to run reasonably d to be considered when a client the merck test this court in mccune vs united states held the facts relevant to the existence of the injury or something to look at also when applying the discovery rule to the statute limitations here in the merck cases supreme court held that quote an incorrect prediction about a firm's future earnings by itself does not automatically tell us where the speaker deliberately lied and therefore does not constitute knowledge of facts regarding the element of scienter in considering limitations in a securities fraud action that's a page six fifty from the most opinion so the russians cannot be held responsible for the content of the prospect thirtieth she knew or investment of lost a bunch of money now i'm sure where these quarterly or or biennial investments seventy semiannual investment statement quarterly judge jones quarterly ok so it's not as if it went from one ninety five to one ten overnight no alright so by june of two thousand and ten it had been declining she makes one call and so on why did she wait three more years to file suit we wouldn't have had this issue if she isn't because obviously she was aware of something of a there's no guaranteed return and b that's what they told me there was only then two years  she did file suit within a four year limitation period from that point only from that point that's what i'm saying why did she wait three more years and let it go down the tubes even more rather she can sult of more than one more before our firm took a case well i'm not criticizing your firm i'm just saying that it doesn't make sense unless unless somehow you're trying to build up that the emonges which i strongly doubt they did they test and if they get out of the investment they only got out of the investment after judgment was right or in this case so it's a record fact so they got the investment you know when they realized that you know there was nothing more to be had it really would not rise again as the real estate market may rise in the real estate market has risen again those are out of the record fact well your brief says that the investment more most recently was worth ninety one thousand yes and so a lot and so only at that time when she realized she received six quarterly statements that they're not even smart enough to cut their losses i'm sorry to be i'm sorry to be cold about this but i just they cut their losses at the nadir and yeah it d because the real estate market rise back up again and has risen up again at some point the appellant's wanted to cut their losses again that's an extra record fact that's not before the court on appeal but the fact is she received six quarterly statements that coincided with the representations that the defendants made regarding the investment she had no reason she was not put on any type in one of them not one of them showed a seven percent annual return  it showed appreciation in investment that didn't seem to be wildly inconsistent with that amount no i was i think it might have been six percent but it was never seven percent and they were put on an  injury when they received that first statement that showed the lost over half its value and they took action within the four year limitation period once they were put on that note i guess i mean i hadn't thought of that point maybe it's an obvious one why weren't they on the inquiry notice as soon as it didn't meet the benchmark seven percent why wouldn't that have given them notice just as if they found the prospectus online a month later even though it's increasing in value but not seven percent wouldn't that be the point at which the claim would have to accrue the it would be what a reasonable investor would have caught that but no no one would have no one could not of caught it if it wasn't seven percent at the first statement it wasn't it wasn't a failure of a seven percent the first day but i believe and so was later on within that period of six quarterly statements when it did dip below seven percent i guess what i'm saying is i been under the assumption that it was the june statement where they've lost a lot but listening to colleagues questions it would strike me the argument would have to be that as soon as they didn't need seven percent they were a reasonable investor would be on notice it wasn't a guaranteed seven percent and the question goes back to reason is what would a reasonable investor done ever call robert robert goldstein and ask them they did after they got that seventh quarterly statement where they realized that this was not a fixed type of investment like it's going down before then had to be going it didn't precipitously drop it did it did precipitate it will that sort of what i asked you before i'm sorry do do you have those statements in the record yes or are they on the record they're on the record and there was a  drop only happened at the seventh quarterly statement they received and once they received that and it was clear in their minds if that was a complete variance with i thought it was a fixed rate of return investment like an annuity or certificate deposit they contacted their broker and said what's going on here and then they said oh you know this is never going to be a fixed rate of return either one of them at ever heard of a real estate investment trust before you know your honor no your honor we're other people just for our information may not be in the record so i don't only if it's on the record how do other people sooty their cap rock or these brokers i don't think it's in the record drought oh ok well i was curious tried to distance themselves and say this was just an independent contractor relationship and therefore kept rock the securities firm should not be responsible for its brokers were doing but that's not the quote to allow a brokerage firm to avoid secondary liability simply by showing ignorance of the act of its registered representative contravenes congress's intent to protect the public particularly unsophisticated investors from fraudulent practices here there was reciprocal discipline that would be in effect in all the brokers and it would robertson and gholston could not have sold these securities without kept rocks supervising  authority apart robertson signed the subscription agreement as the registrar representative for capra and so for those reasons there's plenty of evidence in the record it's almost they're not employee employer it's not employee employer that's what i thought it's it's more like an agency relations it is more like an agency relationship cap rock securities approve the fraudulent advertisement issue there's no question the record about that cap rock had a supervisor relationship cap rock held these brokers licenses the russians could not invest in the securities issue with that cap rock being part of the transaction i mentioned before there's reciprocal discipline so that when these brokers are ever disciplined the fact they have been has been passed capra could be displays a matter of course as well but they weren't disciplined in connection with this transaction or yet it again this happened after judgment outside the record they did get the degree disciplined ok so there was a pending case before regulatory bodies but there had been a conclusion by the time the case went to judgment government can move slowly sometimes the madoff investors and kept prop was the broker dealer for this transaction issues and appellate goldston acknowledge that his relationship with caprica securities is not like an independent contractor relationship because cap rock securities had supervisory obligations as his broker dealer and the president of cap rock securities practically admitted to failing in its supervisory duties roberson go when he admitted on the stand that cap rock had quote more responsibilities that it could handle close quote in terms of how they supervise these brokers and how they allowed themselves to conduct business for these honour's a couple of quick points on rebuttal first apple please attempt to distinguish the martina's tapia case by claiming that since the romans here actually asked for a prospect this and didn't get one then somehow as distinguished because of whether they were ever provided the prospect as they knew it existed they knew that it contained critically important information not only from the fact that they knew it should have been available next they should have received one but also because of the subscription agreement miss roden as has been discussed extensively agreed within the subscription agreement to be bound by its terms and conditions and as we also argue texas law has a very fluid incorporation by reference doctrine and here at the time of trial only state law claims remained now second apple please attempt to state that no recently diligence investor could have ever found out about the alleged misrepresentations until the injury but here one of the complaints that ms retton had with her investment is that it was not she was not able to redeem it it was not a liquid investment and there was no open market to be able to trade in her investment that injury occurred the moment that she put her investment in the fund there was an injury immediately and as this court and other courts have noted the full extent of the damages do not have to be realized at the time the statutory period begins to run and that injury was immediately realized now further your honour's we note that the romans investigation was incredibly brief and provided an immediate knowledge there for four months excuse me four years and seven months that seven months was more than enough time to pick up the phone it was more of their time to review a quarterly statement in analyze whether it was actually performing as it do you agree the there with his son catastrophic drop and in the value of the investment there was a big drop at that time that is true  honor but that was not the first red flag as this court noted in benton humor there were storm warnings prior to that big drop well but it i mean it it never made seven percent did it no your honor that that is important that the quarterly statements wow they were gradually going up at that time it was not this guaranteed seven percent that the plaintiffs were allegedly told that they had and these are presuming all the facts under the plaint interpretation of what happened the plaintiffs agree both testified that there was no questions asked about when they could get a prospect is no number requested to see when they could call the read to get the prospect in our case law involving storm warnings how how does pseudo properties fit into i'm sorry lawsuit over properties which is where my done by opposing counsel in their brief well your honor it and if i'm understanding you correctly opposing counsel attempts to contend that this sudden drop was the first time that they could have no no i'm back on the brief the point pseudo property issue was a case where we didn't find that there was sufficient duty to investigate further are you familiar with that case or not i'm sorry  that importantly and what the apple please attempt to do in their brief is claimed that no recently diligent plaintiffs could have possibly known prior to the big drop but the runs testify that they did not want their investment in a high risk investment they wanted the ability to feel secure that they'd lost money before if they had lost money before even looking at their subjective knowledge then they should have conducted just a minimally basic reasonable investigation and even a simple investigation would have revealed immediately those facts that would have given them notice of their claim and therefore their claims are barred and this that they simply consulted with tony robertson on where to invest their fines although the raffarin was noted in the risks that could be found in the prospect is on the second page of the subscription agreement for those reasons we asked this court to