good morning craig stuart for the appellants and i'd like to reserve two minutes for rebuttal the district court judgment should be reversed here because the court committed two fundamental errors first it concluded that diagnostic labs had alleged only a scheme that lasted no more than ten months and second it ruled that ten months of repeated conduct is not enough to constitute a pattern the first of these rulings violated the standard that governs rule twelve b six motions and the second of these rulings is directly contrary to governing rico standards as pronounced by the supreme court and by this court as as both of courts have recognized rico is to be construed broadly because of its consciously expansive language and because congress explicitly directed that it be liberally construed to effectuate its remedial purposes in the district court's order here is fundamentally inconsistent with the standards that first like to address the the the court's ruling that the scheme here was limited to only ten months ten months was only the period involving the initial victimization of diagnostic labs first choice and shriver but that was not all that we've alleged here and that's not all that was at issue here you're adding on the act after yes apps after two thousand and twelve which the district court disregarded after two thousand and twelve  n one of the defendants testified that he believed robert suer whom north america had had hired away from diagnostic labs had done a good job in what he'd done in two thousand and twelve and they wanted him to continue doing that good job and sewer himself testified that he was hired to go after all of them or i mean at least most of them a lot of them meaning the vendors to do to other  they went after the oxygen vendors after they'd terminated the x ray and lavenders in two thousand and thirteen they went after the pharmacy vendors and that continued according to their own testimony as late as june twenty fourth teen and then paulson's testified that he asked sue or to look at the food vendors if that was as of june two thousand and fourteen so it wasn't limited to just two thousand and twelve that extended at least ten to twenty four te middle of twenty fourteen by their own admission now the defendants say well there's no evidence that that there was fraud committed against the later vendors now if the defendants want to argue at trial that bobby's who're and the defendants change their stripes and stopped engaging in the conduct even though paulson testified that he thought he was doing a good job and they wanted him to continue it they're free to make that argument at trial but we're here on a  and there's internal documents that substantiate that they didn't change their stripes all of the sudden at the end of two thousand and twelve when they were going out to the other vendors in two thousand and thirteen and two thousand and fourteen their internal e mails reflect their position that a vendor who was simply adhering to the terms of the contract was quote overcharging and they advocated terminating vendors because they wanted to stick part of the twenty twell scheme what is your response to that i think what they're saying is these were only internal e mails they were not actually sent to the vendors but the point is that the emails reflect an intent behind the scheme if they reflect the position of the defendants in north america and to go after vendors simply not on the ground that they were overcharging in the correct sense of that word but only in the sense that they were adhering to the terms of their contract i mean part of what's going on here is there's there's the district court in the defendants or compartmentalizing improperly the various allegations and ignoring the overall  scheme on the extortion for example they say well this was ordinary business conduct to offer up a confidentiality clause but it was when you look at the overall scheme including the threats that were made explicitly i'm thinking now of the may twenty and fourteen letter in which they explicitly threatened diagnostic labs if they didn't cave in and drop their litigation this is the obstruction in the extortion that sorenson would be going to a conference with owners and operators of skilled nursing facilities to bad mouth diagnostic labs and to in their words reveal the massive and fraudulent overbilling the diagnosis that they claim diagnostic labs had been involved in so if the time period isn't artificially truncated i don't think there's any question that we have more than enough we have for five years a predicate acts which is more than enough to constitute closed in a continuity and on that basis alone the judgement has to be reversed without even reaching the other tests but there's also opening that continuity when the when the allegations are officially truncated because we have we have evidence that this was a regular way of doing business that they were going after vendors in a serial fashion there were forty to fifty vendors that they had and we know that it was x ray and labs and it was oxygen it was pharmacy then they were going after food this was a regular way of business at least as much as in the tykwer case of this court where there were three predicate acts over a period of thirteen months and the court found that was enough to constitute open ended continuity or the sun savings case where there were four predicate acts there were just a couple of months question if i could quickly in your time's ticking so your briefing talks a lot about the tally and the fact that there's a notation at the bottom of it to the effect of this is what you owe us thus far and you argue that in your briefing that that should be understood to mean that they were going to go after additional vendors do you ever argue that it should be understood as a threat that if you don't pay this isn't much we're going to go after you but start looking retrospectively at that earlier billing  oh i don't know they were making that condition or honored because i believe that was just an internal spreadsheet and so it wasn't actually used against our client as a threat to our client but certainly you know there's no reason i as explained in our brief even if the time period is only ten months under california architectural that is an up and under always which rejected any bright line rule in this circuit that ten month period was enough in part because of the multiple victims stripped of labels and conclusions all the deal has alleged is that over the course of proximity six months in early two thousand and twelve north american or any as we call it conducted an audit of possible overbilling by d l and two other that just calling something a shakedown scheme over and over again doesn't make it doesn't make it so contracting contracting parties are permitted to object to the way a contract has been waste for that proposition moreover whether or not there's a bright line test the ninth circuit it doesn't appear that any ninth circuit decision since h day has approved the finding of continuity where the scheme la approach to determine closed and continuity is there any reason why we should not and and point out there is no ninth circuit case there was a dispute court but what is wrong with  tests your honor i think that's what in fact the circuit is applying i believe that's what judge state and applied as well she focused on the nature of the allegations and the cases that speak especially about a multi factor test talk about the taking account of the totality of the circumstances which is exactly what judge stated she very carefully walked through the allegations of what the what the scheme alleged actually the scheme is a very specific one first that there was an audit conducted of of the of the vendors that whether it was they claimed was in a good faith whatever that means but in any event an audit was done at that point credits or refunds were demanded while payments were withhold were withheld at that point allegedly the vendors were told that the contract would be terminated unless the dispute was resolved but implied that if the contract would be extended if if in fact this bit was resolved and then finally based on an allegedly secret prior decision the vendors were fired regardless of the resolution it's undisputed that the only allegations in the complaint that even remotely go to this scheme as as alleged in the complaint and as specified in just statements order and in a palace opening brief are the three the three mobile lab and x ray vendors during the six six to seven to eight ten month period in in two thousand and twelve none of the other vendors are alleged to have undergone this particular scheme and this is the wrongful scheme i object there's nothing wrong full about much less a rico violation with seeking better pricing from one's vendors i think you are right that there are allegations that were raised in the motion practice that aren't don't i don't see alleged in the complaint does that mean that the correct remedy would have been to grant leave time and i'm sorry if you're even one thing to say that they can't come back and allege of cause of action on the facts that they're you know arguing but it seems to me what you're arguing now is that they we really are limit ourselves to the allegations in the complaint that they haven't raised what they need to raise to really withstand the dispositive motion and i'm asking whether or not the district court should have granted leave to amend we don't i don't believe th lieberman based on on that particular ground but and as a matter of fact the the allegations regarding the scheme did not change between the first complaint and this is the first amended complaint that they were virtually identical which i think is partly why the court was able to to resolve the motion based on the continuity allegations by themselves because there were no additional factual allegations that would have extended the scheme as defined so do you want to answer my question i'm sorry but that's ok i wasn't going to and it wasn't really very well articulated i think you have a point there arguments raised in the motions practice by opposing counsel that  that are included allegations that really aren't in on the on the face of the complaint we don't see them there and i'm wondering whether or not the pro appropriate remedy would have been to grant leave to amend well i don't if the allegations w then in the motion practice they switched again to the notion that well there was an audit but it wasn't a good faith audit was a legitimate audit even though the complaint the first minute complaint didn't use those terms at all i don't believe they ever asked leave to amend to formally change the first minute complaint or second a minute complaint that would have reflected that change in theory so you're not arguing that they would have had to request leap them and i'm sure it sounds like you're arguing that futur memo would have been futile would have been that there was no indication no properly pleaded alligator no allegation that the scheme would have continued or that it did continue and that she took notice of the fact that there was a three year gap between the last of the x properly and arguably properly alleged under the scheme as as as is alleged in the filing of the complaint i would like to point out that inter versus cooked this court did the same thing this this court interview says look to quote the threat of future premal conduct as part of the closed end continuity analysis judge state did nothing nothing there are any allegations even colorable e show mail or wire fraud judge state and found did not find as a matter of fact that they think that they properly pleaded those those predicate acts but for the sake of argument she she spreadsheet that refers only to mobile x ray and lab vendors were the three vendors at issue here it may have been mr sewers of his hopes but those those are the only three  is full of allegations of dealings with with other vendors after of the period none of which have any indication that there's any kind of misrepresentation to be made to any of the vendors they're simply  council's stated that there had never been a case that has found continuity enough for a scheme that lasted less than ten months that ignores california architectural which this court described in always at page fifteen twenty nine as having found continuity requirement satisfied with predicate acts that spanned five months that wasn't really a continuity case excuse me it was not true continuity case because it predated the supreme court's definition of close down continuity true but i think what always recognizes is that california architectural as well as sun savings are consistent with perhaps i'm just saying it wasn't a con who did case well the court rejected the multiple scheme requirement certainly but when it said there were multiple representations made to multiple victims over a period of five months it was finding a pattern and i am as concerned as always killed that was continuity finding least that's the way i believe always should be read your honor asked about leave to a man we did ask relieved to man in the district court this is the our thirty three and it s e r eleven i believe the allegations certainly are consistent i mean sufficient more than sufficient to establish this a scheme under either test  dismiss allegations we make regarding audits there be further allegations they already have obstruction of justice for example opposing counsel says the allegations audits came and went and that you conceded that an audit had been performed is that eddie and and then in the current complaint be amended complaint we allege no a lot of have been done and the basis for that allegation is as a legend paragraph three fifty two of the amended complaint they didn't follow any audit standards you know to have an audit you have to review the records suer admitted he didn't even have a contract until after he purportedly done the audit and as your honor noted they have never produced any of the audit documents that's the legends paragraph three fifty two and we have asked for them in discovery and the related actions they've never produced and they never been able to explain what the audit procedures that were done so we think our allegations on that point as well as all the others are more than sufficient and i don't believe we're relying on anything in our briefs in this court in anything i've said this morning that's not in the complaint but if the court were to conclude otherwise certainly we believe that leave them in should be granted thank you counsel thank you the case