next case on the call the doctor today's agenda number nine sally cases case numbers one one two two one nine one one two two twenty one and one one two two twenty three there's multiple parties here for the sake of so that there was no way plaintiffs could ever make any money from their investment and by assuring them that if they did have losses on their investment that those losses could be offset other taxable gains that they may and secondly after that cause of action in crude the plaintive knew at the latest by may of two thousand and three that he was injured in that it was wrongfully cause the reason the trial court found that the plaintiffs knew by that date was after the point he made his initial investment in one thousand nine hundred ninety address put out a bulletin almost four days later after the original option trade where there was a loss in that bullet and they described this tax shelter and said we're not going to recognize these losses because there can try to they're not real losses they have no economic substance nevertheless plaintiff again participated in an investment in two thousand after being assured cording to his complaint that this time he really would make money again he lost again in two thousand there was an iris notice that according to the plaintiff's complaint stated unequivocally and clearly that this was an illegal in abusive tax shelter nevertheless after that second notice goes to federal court and it summons information from b the sidemen and tries to get their tax files which included the plaintiffs plaintiffs intervened in that  proceeding in two thousand to and said those tax files my tax files are privileged that went up to the seventh circuit later he intervened again in two thousand and three mind you all before the five year time period would pleading later that in two thousand and three after he became aware that these notices were out there that he disagreed with that he had to hire counsel that was a pivotal point for the trial court because at this point he says in this complaint we should have been aware of those tax notices he now says he is and yet after the harvest counsel he waits another year and couple months before he files a lawsuit against us in this case however on july twenty third two thousand and three again six years before he files this lawsuit he files he's part of a class yet he says he doesn't have enough information to file until two thousand and nine so the facts in this case with those tax notices with his intervention in the federal court which by the way the petition which is referred to again in the record in the cases that we cited the british and it was found by the i r s said that they were filing that against video simon because of their abusive tax shelters  of profits rather that the assertion here seems to be it's just based on the tax liability so there's that is there any distinction and then that in the tax liability case we're looking at the assessment of the tax penalty versus a class action six years earlier which would put presumably go into those last potential profits your honor i agree that he's not  claimed in losses due to the lost investment but what he is claiming in this case which is a separate injury is that he wants a discouragement of the fees that he paid to torch a bank in one thousand nine hundred nine in two thousand and i if there is any question that that was an injury that he claims as a result of entering into what he calls a bogus investment and i think it's important to take note that there are two components to his complaint here first of all his allegations against bank unrelated to the tax shelter are that this was not really an investment that i was a predestined loser in a ri into investing in these premiums and options that had no chance of game but the bank failed to disclose the true likelihood that these contracts would pay out these are fraudulent allegations against the bank unrelated to the tax shelter so what happens ultimately in terms of what additional damages he may have incurred in two thousand and eight when he actually has no sufficiency is really irrelevant sane i have an investment injury here because i paid premiums and i was also told which by the way if those investments don't pan out investors by their very nature may have some breasts i can  losses through this mechanism by fleeting the basis of certain partnerships liquidating those partnerships and then taking those losses against gains that's what he had argued in the appellate court yet the appellate court respectfully ignored the injury that's thomas to your point that he incurred earlier when he paid premiums for an investment that he claims were sham investment he doesn't say oh i was just going along with this i knew i wouldn't make any money because i was trying to create losses for the tax shelter later he makes an independent claim against the reach of bank for misleading him into this investment opportunity and he wants his premiums back now he could have some of those it any time after the year two thousand particularly when the tax notice at the i r s it sent out says that the purpose of these shelters are to create losses shouldn't that put him on notice at that point that there was really never an opportunity for him to make money he was told in those both notices and they even described in the second notice this digital option strategy was a very tax shelter he entered into that the purpose was to create losses there contrived losses they have no economic benefit at that point he clearly ultimately determined that there was a loss and the public policy behind finding that is that they wanted to keep the plaintive working with his accountant to see if the accountant here you have an actual injury you have fraud and there really is no public policy basis for encouraging the plaintive to stay with in this case a bank that they had no dealings with at the year two thousand and wait nine years if this court were to adopt what the plaintiffs are suggesting they should stop anyone who is the father in a tax shelter deal or any type of deal where there may be some sort of later result would have to wait all of that time before they could do anything until there was an ultimate decision in this case i think we've stated in our previous it's still not clear to us whether or not there's been a final resolution of this tax liability we know that there was an appeal to the tax credit we know those notes deficiency in two thousand and eight but it's still unclear so you imagine if you create a policy that would require someone who's been to fraud it when i'm talking about professional methods for talking about fraud by his own allegations would have to wait nine ten eleven years even though in those circumstances like in here they have incurred injury by painting over a million dollars to what they called a sham invest so we would respectfully ask that this court agreed with the trial court that he was on notice that there had been fahd committed by the bank he was on notice that it had been wrongfully cause because the i r s notices were clear and he hired a lawyer after cording to his own words he disagreed with those notices and he felt he needed the harbor lawyer and he filed a class action lawsuit essentially making the same allegations against us in july of two in that call he described the mechanism by which the option transaction would occur and then in november of one thousand nine hundred nine the plaintive signed a confirmation agreement at the time of the purchase of the options which said we don't rely on anything that's been said to us previously by the bank we're making this judgment independent of any of those conversations we're not relying on those conversations they proceed responsibility to advise him that he should have filed earlier but there's no facts to substantiate that which point then will your position which point without the deficient not latest he knew in two thousand and three that after he hired counsel that the i r s was and had said this was an abusive tax shelter and he at that point have incurred damages in he at that point could have not i wouldn't use the word certainly and i don't think this court ever has been in applying the discovery will what he said is they knew or should have known that he had been wrongfully caught you don't have to prove your cause of action in order to file but what you have to do  in at least some reasonable inquiry notice that you have a claim and at that point he was on notice through his attorney and through those tax notices that had been set up by the i r s and by the lawsuit he filed and by the intervention point that it was more than likely wrong fully cause because the i r s is referring to these as the use of tax shelters legal tax shelters that's pretty clear notice that some things are right and in  relying totally on just those notices what the trial court would judge ford found it was after those notices after khan said i was aware of those notices and i needed to hire an attorney that he at that point knew he had been injured knew it might have been wrongfully caused and should have taken some action and on the other side of this were the defendants which be unity or that these are this is a good tax shelter well he could put no faith in that he does allege that the accounts b t o sidemen advised him not to take part in the two thousand and two amnesty program that the i r s and the later two thousand and four amnesty program but there's no allegations was georgia bank on that and secondly your honor this point it would have you believe because they've now we characterize their whole complaint in this because they lost a lot of oh they're saying well this whole thing is about a tax shelter that's not what they say in their complaint their complaint repeatedly says over and over and over we were duped by don't reach a bank because we were told we could double our money we could make a profit we could get this huge return that's the part of the complaint where he he addresses thank you thank you brought against accountants has a two tiered structure it bars claims not asserted within two years of discovery as well as claims regard loss of discovery and the crew are not asserted within five years after commitment of the strategy which occurred in september two thousand to an april two thousand and one plaintiffs a certain paragraph twenty eight of their complaint that defendants in which again they include grand porton entered into an arrangement where each would receive a certain portion of the fee for each investments sold plane of selection paragraph one fifteen of their complaint that plaintiff khan was  strategy would provide substantially more profit potential and at the same time possible tax benefits plaintiff a certain paragraph one twenty two that there was in fact no possibility at the time of advancement that plaintiffs could ever make a profit in excess of the fees charged had they known be a certain paragraph one twenty eight they would not have entered into the strategy the coin strategy like the digital option strategy before it is alleged to have been a fine and plaintiffs were injured when the investment was made asserting as damages the fees paid for the fraudulent investment and the complaint alleges the exact same injuries and the same damages against all defendants including defendant grand forward the true test of the two year statute of limitations is when did the ca action ripen here they're coming no doubt then a cause of action occurs when the forces wrongfully put in motion produce injury here plaintiffs claimed injury in the form of fees paid for the investment in a worthless investment at the time it was made so while the results of the i r s audit process may be additional claim damages here the triggering point for the cruel of parse but based on this record there is no question that the cause of action accrued by two thousand and three it's a two year statute of limitations for grand floridian therefore was discovered and the second argument is the five year period of repose now with regard to the coin strategy the action of a grand thorton ended in two thousand and one saw it would cut off any claims against grand thorton after two thousand and six this lawsuit was not intel two thousand and nine no there are certain exceptions to the repo statute and one of them is with regard to a sas mint but here as the record shows their hands full no assessment and certainly there is no assessment against thomas spear which is the only tax statute as written there's never going to trigger this exception the exception doesn't apply were more than five years beyond the two thousand one act and therefore for that thank you thank you court to the very long and distinguished appellate court opinion which true almost no criticism this morning the appellate court went into great length about the applicable governing principles and let me just take off a few that they exist before claim can accrue there must be damages that is the case in fraud it is the case in negligence is the case in malpractise it's the case in five years sherry duty and for the damages to occur they have ripen to the point where they can be actionable later on my argument i'll get to the scenario that deutsche bank would have you believe should have been engaged in by mr khan and i would suggest to you that a suit in two thousand and three would have been met with the defense that it was on right at that time but for a claim to accrue there have to be damages the damages in al case as probably found by the appellate court did not right then until the point where the i r s had disallowed the losses that had been claimed now why is that the complaint surrendered let me ask you where you are on that where you are i think you have made pretty clear that you're not seeing in this case you're n in you're asserting that your complaint is consistent with that you're not seeking absolutely and you would even further to say that you know in the brief when i don't see that's correct so my question is should it matter that you're not see let me put it to you this way i think the facts in this case are different than they are characterized there is a lot of mischaracterization of our complaint going on in their briefs and in the argument today if you look at paragraph twenty four of the complaint what it does is it highlights a two prong tax reducing investment strategy mr khan wasn't looking for a way to get a tax shelter he was actually looking for a way to get japanese yen to expand his businesses which are very profitable and employ a lot of people in the united states his longtime trusted advisors and b t o came to him and said hey we've got experts that we know over to each a bank who can help you figure out how to get the foreign currency that you want and by the way you can reduce your taxes if you go to that strategy so mr khan being a savvy businessman said hey if there's a way that i can do something to get my foreign currency and reduce my taxes  pitch always was with god lists of the outcome of the investment you get to claim your losses on your tax return and it's not just what we have confidence that you can claim your losses we encourage you to go to this nationally recognized law firm since jenkins in gilcrest they will give you a legal opinion of course you have to pay a couple hundred thousand dollars to get that legal opinion but this deal had about as gold plating on  you could imagine you had an international the renowned bank you had a nationally renowned accounting firm you had a nationally where we're running out of law from all giving the rubber stamp to this deal to say you were going to get your losses allowed by the i r s don't worry if you get audited you will survive an audit and that is what the deutsche bank people said that is what the other defendant said and mr kahn who had been brought into this by his own trusted advisers trusted them to his great regret now but the deal was not so much you you will definitely get some kind of investment gain the deal was we're garden lists of the investment position you definitely will get to claim losses and this is been vetted by the best tax lawyers that money can buy and you will get through your audit and you should challenge your audit so that by the time these i notices come out and they are not specific to the deals that boychuk bank and the other defendants had pedalled they were speech they spoke in much more general terms mr khan is reassured don't worry about those i r s notices they don't apply vis deal you will survive an audit and you should fight it and when the i r s comes out with an amnesty program they say don't participate in the amnesty program because you will survive the audit you don't need to it's for a quite heavily one is that we knew that the fact that the investment went south somehow were led to some thought of long doing that was not how this was presented at all and it wasn't until two thousand and eight when we hired experts to un transactions that we were able to infer that there was no chance of ever getting an investment gain secondly mr eaton several times says that mr khan filed a lawsuit as part of a class action that is not true khan was not aware of the class action he was apparently an unnamed class member he never got a notice of the class action it was a completely different deal and it went to the law from and not to the participation of these particular defendants anyway so what we have here is a situation in which had mr khan followed the advice that mr eaton would give which is to file suit in two thousand and three they would be making the very same argument we are making which is that their claims are non right they suffered no damage we promised them an opportunity to get a tax loss the audit is still occurring we have been advised that the audit will come out and there is no reason for the court to waste their time on a completely speculative and hypothetical lawsuit is that why is that will there be your answer to why he shouldn't have been on notice in two thousand and two in the intervening media  documents and records that were being created by virtue of his consultations with his tax counsel and tax advisors that b t o that was what was going on with the intervention there it was not it didn't have to do with a belief a fraud at the time or even negligent misrepresentation throughout this period mr kahn is believing his advisor saying you're going to get through the i r s process unscathed and it wasn't until two thousand and eight when the i r s issues its deficiency notice saying europe your your structures there did not have the requisite economic substance in order to allow your losses to be occurring that there became any damage that he actually suffered because the fees he had paid in one nine hundred ninety nine in two thousand were from a two prong strategy either get an investment gain or regardless you will get a tax loss and that's why he pays the fees he doesn't lose anything off those fees in ninety nine or two thousand until the i r s disallows his losses and that doesn't occur until two thousand and eight now so with respect to the  with respect to the hypothetical that they would have you q i would submit to you that that is contrary to the long standing decisions of this court and other courts that look at when the loss is sustained and contrary to doit's of banks argument here the analogy is perfectly apt to legal malpractise and accounting malpractise in those situations the courts in his state have consistently held that there is no loss that's actionable against the accountants or the lawyer in that situation until the i r s has issued a deficiency notice or assessment and and the and that is for the very good reason that we don't want in the law to encourage lawsuits against advice givers prior to there being an accrual of an actual loss so how would how do you characterize what the ira's didn't two thousand and three when mr eaton says mr kahn should have been on notice two thousand and three they a notice saying we're going to audit your books and records that's what they did those kinds of audit notices happen all the time in the united states so there was there was no two thousand three iris aeration of these you know doctors or whatever the right term is disallowable what did happen your honor was that in ninety nine in two thousand there were i r s notices and those notices are or public record there you can review them and you can draw your own conclusion they say nothing about the specific deal that deutsche bank was oystein on its putative clients what they do say is that deals that don't have economic substance will not lead to proper tax losses but simultaneously with getting those notices the defendants are telling mr conne don't worry about the i r s process you are going to win in the audit you should fight the audit and you should not participate in the amnesty program so having trusted advisers and following them he does what they suggest and then it comes to the point where the i r s in fact rules against him in disallows the losses but that's no different than the normal accounting malpractise case or lawyer malpractise case where there is a claim that the advice given was to claim a certain loss so that you would not have to pay the requisite amount of taxes the course in this in this state and federal aid it is very clear on this point same kinds of circumstances are applying here because what he was buying in ninety nine in two thousand was an investment opportunity but regardless of what happened in the investment an opportunity to gain to claim a loss  now with respect to defy the sherry duty claim what the court of appeals held was that there would rule requisite factual allegations for a common law fighting duty that would arise out of the relationship that been convicted of crime for his role in this escapade they told him and built a relationship that is that meets the standards of special trust and duty riposte that's all we have to do to plead at this the case is here on a motion to dismiss we're not here arguing about facts per se the question is the court of appeal determined was whether or not the pleading standard had been met moreover no one here on the other side has argued about another claim that we have raised involving negligent misrepresentation and at the very least this case has to go back for further development on negligent misrepresentation because the other side concedes that unlike for audit where there is a law that says that one saying this representation has occurred your claim might accrue then even if you may not have suffered a loss at that time that's a rule that we would submit is contrary to the gilliland case decided by this court but even if you were to accept the notion that a wrongful statement or wrongdoing might trigger a fraud the rule has always been different for negligent misrepresentation which is that the claim doesn't accrue when the negligence occurs they claim accrues when damages occur and here those damages did not occur until two thousand and eight they have virtually nothing to say about this claim the pellet court found that to be a sufficiently stated claim to go forward and to be remanded for trial now i do want to say i and i want to reiterate because this is important the denny case is not a basis for finding any kind of notice because and even if there was some kind of disagree with the way cramped orton has argued about our complaint and how we believe they have mischaracterized the complaint that goes against the contrary a longstanding rule of the state that a complaint should be construed to in the light most favorable to the plaintiffs what they are seeking to do in effect is to take words out of context and concepts out of context in order to get to a place where we should have discovered the  engaged in long before the disallowance occurred now their arguments with respect to the statute we believe are flawed for a couple of reasons one is that the discovery here would only occur after some significant part of the portion of the process with the i r s has concluded i e there being a tax deficiency because the way th suit but rather what's necessary is that the accounting gauging wrong doing that results in a return being filed and that we try on inception you're going to the detriment of another now they claim that somehow we should have discovered by of these i r s notices that there should have been harm earlier but as i said earlier those i r s notices were not specific to this particular strategies and they were they were fraudulent lee concealed through the actions of the defendant saying don't worry about those iris notices we have a different deal here and you will get through the audit process now on the statute of repose argument here the way the statute of repose works for accountant claims there is a five year period but then it says provided however a vast and those words provided however the vast are sort of like the word b u t but in the law that  an exception and what that exception means is that within two years after the assessment of the taxes the suit can proceed against the accountant notwithstanding the fact that the five year period  repose would have expired it is a special and unique provision for accountants but it is very clear on the plain true moms that did that period of time in which to bring a suit is extended until two years after the assessment is made in may so there is a question in this case was an assessment made now position is that we surely cannot be faulted for bringing suit within two years after the deficiency notice because state law has a different way of looking at assessment then the feds do with respect to when an iris notice is done so at the very least if a claim if the if the current time or at the time it was filed might have been premature because a formal assessment had not been made by the federal government i think we can surely be excused for bringing a claim in a time that would have allowed grant thornton properly to defend it and and as the record on falls on remand that's not an issue that this court would need to decide now it's simply a question of which you could make a determination that the word assessment is when some legal liability for taxes under state law ensues and at that point it was clear that when the i r s made its a deficiency notice that that was in fact the case i believe that i've stated all the arguments that i came here to state i think here indulgence i'm happy to answer any questions that you may have with my remaining time and if you have non will rest on the briefs thank you thank you justice thomas let me begin by responding to your questions i stated repeatedly their my main argument that there are two components to their alleged fraud one that they could make a profit on their investment secondly if they didn't those losses could be captured through a tax shelter there's two components counsel says i'd miss characterize or complain well let's look at paragraph twenty four which is exactly the paragraph you mention the defendants and the other participants acting pursuant to an elaborate and carefully devise common scheme counseled and advice point gives to undertake investment strategies claiming the investment strategies could be yield a substantial profit and if the same time legally minimized point of state and federal tax liability at the time defend is marketed and sold the investment strategist a point there if defendants knew or should have known that the investment strategies would not and could not yield the investment results number one all this is plaintiff's complaint tax treatment claims importantly defendants primary motive in their pre planned scheme was to exact significant fees and commissions from the plaintiff's this is not soley a claim with respect to the tax shelter just stream and let me address your question again for some reason i think better sitting down and saying up thought about and that is when we're talking about the fiduciary duty claim that's independent of the sash limitations if we're successful in the states limitations then the case is over period end of story it was after the court found in the two six nineteen that the statue limitations had expired that the court went on to thirty six filed by mr kahn against the iraqis he says in paragraph if team only on in the audit for each year the i arrest directly and indirectly per claim that it would disregard the entities disallow all losses and expenses related to the investments in a sort of forty percent penalty consequently mr khan and his advisors disagreed with the positions taken by the i r s and therefore into space the litigation paragraph seventeen mr khan in his ventures therefore engaged counsel in may of two thousand and three his own allegations in a federally filed said he knew in two thousand and three of those notices he disagreed with them and that he had a counsel and that's what persuaded the trial court with respect to the denny lawsuit and also remarkably says he's miss record we're not part of that well look at judge holderman is opinion which is part of the record and i'm apologize i do not have that exact site but this is a two thousand and seven opinion which was part of the was an affidavit that was submitted on the two six nineteen and judge holderman refers to khan as a participant in the danny class action lawsuit because the other side raised an issue with respect this dissipates and he says that in the opinion that he wrote i didn't make that up bets in an opinion written by judge halderman that was part of this record in is part of this record so he knew in july of two thousand and three when he file allegations alleging fraud with respect to the investment he made with us as to both parse and door each he knew then that what he gave us the purchased those options was a sham investment and that he should be entitled to his money back he knew from those i r s notices that they were saying these were contrived losses there never was an intent to make money he's clearly on those he has an attorney and the statute of limitations cut off those claims in the trial that was absolutely correct in finding that at the latest by may of two thousand and three  thank you very much thank you there's absolutely no allegation in the complaint that grand floridian said anything to the plaintiffs after they did the two thousand two thousand and one tax return for therm morning apple e stated that there was some kind of soothing a few years but there is no allegation of that by grant thornton with regard to the notice what's interesting if you look at paragraph one thirty the complaint the plaintiff so waves that there is no doubt that the two thousand strategy defendants knew or should have known as a result of i or as notice two thousand issued on august eleventh two thousand if not earlier that the conclude that the purported losses arising from the two thousand coins strategy were not properly allowable what the circuit court did here was say well look you put this in your complaint you're saying everybody here should know it by the i r s notices you've hired in attorney and experience attorney an expert account need two thousand and three if they should have known back then you know as of two thousand and three that's why the cause of action is a crude under the discovery rule and there's when the statute of limitations began and suit was not watch here against grand thorton until two thousand and nine based on the statute is written