please the court jim swanson on behalf of the william bone ospital i would like to reserve five minutes for rebuttal place there are two issues that i wanted to address today the first one is when did the william bowman hospitals claim a crew for under michigan law there is a statutory provision both sides agree that the statutory provision involved is m c l six hundred point fifty eight twenty seven and it says the claim accrues at the time the wrong upon which the claim is based was done regardless of the time when the damage results this provision has been construed by the michigan supreme court five times it's been construed by the michigan courts consistently five times and the rule that can be distilled from what the michigan supreme court has said is that wrong for purposes of this statute means harm and harm means damages such that until there is a harm and until there is damages there is no cruel of a claim in the statute of limitations cannot begin to run that sort of stands to reason when you consider the elements of a claim for fraud one of the elements of a claim for fraud is damages so until you have damages you don't have a cla that is has been consistent connally was the first case that talked about it calmly also was the case that discussed this language at the end of the statute the regardless of the time when the damage results in connally the court said that that regardless language is meant to make it clear that when you have damages that start and continue you measuring the cruel from the time they start not from the time that they continue so continuing damages do not extend the statute of limitations period this rule clearly applies in fraud cases the boyle case another michigan supreme court case says that it said in footnote five the wrong is done when the plaintiff is harmed rather than when the defendant acted so we would submit to your honors that that rule that interpretation of the law is very clear under michigan low and that the district court got that rule wrong when the district court said michigan law differentiates between harmon damages that's just plainly a wrong statement of law connelly case and the other  cases stevens shane dorfman boyle all affirm that that is the case he seemed to believe that there's a special rule in fraud cases where the fraud induces a contract that the harm in their briefing in this case and they've cited a number of races to purchase something that you are fraudulently induced because you're told that for instance th jam that i'm selling you is a diamond defrauded you by telling you it's a diamond but there's only one jim there and you enter into a contract and you buy this jim is that does it accrue at the time you get the diamond or does the crew at the time because of the time you get the diamond when you get the diamond yes exactly at the in a group well if it accrues at the time you execute the contract in that case because you're damaged immediately you you thought you had a diamond and you don't have a dime so the damages think you have a diamond and you don't have a dime so it's you could at that time you had accrued it doesn't accrue at the time you get it even if you think you have a diamond because michigan doesn't use the discovery rule and and my colleagues there will point that out and i agree there is no discovery rule in michigan the question is do you have damages or not the cases that they cite are all cases where upon the x just like your in your example the act at the time of the execution of the contract the damages result a bunch of the cases are mortgage cases and in those cases the claim was that the plaintiff as a result of executing the contract had to pay additional charges and expect for you sell the diamond as when you get the diamond so if you are still defrauding him i'm having trouble seeing how all of this is accrued i guess i'm sorry the nature of fraud is that you're deceiving someone correct and it makes sense i don't think apart from the cases it makes sense to say that when the deception is over that's when it accrues but you're saying the deception can being misled has caused you harm and that's still going on even though the contract has been has been executed but i think there's a separate doctrine of law that covers that situation when actually that situation applies to a certain extent in our case because a number of the acts that we contend are fraudulent occurred after the contract was executed in fact a big portion of our complaint paragraphs eighty through one o three that outlined the post late two thousand and seven conduct and the fact that the defendants here understood that the market for error s was in terrible shape and they were having meetings at the hospital where they were giving could report on market conditions all of which is spelled out in paragraphs one hundred to one hundred three of our complaint that they were misleading us about the state of the market at that time but the the  unfortunate if left that impression i haven't done a very good job of articulating you say if he comes if you say it a cruise the instant the contract is entered into the contract in your case was entered into at a time that would make your claims well you used you got a deal you got these auction related secured you entered into these i think involved money in a way that that was going to have much higher interest than you thought  necessarily an x the reason we didn't suffer damages at the time we executed the contract the if you look at the case the frank the linker case it is exactly the situation we have in our case in that a situation was there the plaintiffs allege that there was a contract that was entered into as a result of fraud it was a reorganization contract and that contract was entered into but you couldn't tell at the time it was entered into whether it would cause damages or not you didn't know that you didn't know not because of the fraud but because the event said in happened that would or would not trigger the damages in the genuine market out there and in fact there was no genuine market out there is your argument right correct in that that did not you meant that was artificially maintained by the defendants wrecked so the nature of what you bought was fallacious when you bought it sort of like the diamond the diamond just in what other did jim was in a diamond and these are these auction related securities weren't really auction related securities they were some kind of current different animal right that's correct so as soon as you bought those things under your diamond example it accrued that's no trouble miss but that's what the fraud cases it says in other words the defendants a legit wrongdoing occurred in two thousand and nine plaintiff said no claim for damages to enforce in two thousand and nine since they had incurred none at best their damages were speculative at that time and plaintiffs cannot maintain claims for speculative damages and they go on to articulate scenarios in which although the fraud was committed there might not be any damages we have a case that is exactly on point here it's the elysee de case and in that case judge prescott of the southern district of new york said that  use no more than five minutes the statue of limitations bars this claim because this claim accrued at the point that the contracts were entered into the essence and the graph and then of this claim was at the claimant the plaintiff here below alleged that it was misled fraudulently induced and entering into contracts to issue the auction rate securities they allege that they got something they did not bargain for the roam the harm accrued the day that they signed those contracts when they acquired the more risky securities the riskier securities that they thought that they did not enter they did not buy they had a viable cause of action brought a contractor as sound and tore the frauds downs and tore but this is a fraudulent inducement to enter into a contract they could have rescinded they had a viable cause of action that day to rescind this transaction to set it aside the cases on which they rely or the personal injury cases where the person has out a fraud in my sample it say you have a painting that you claim is a misled the defendant why is that why is it just at the time that the contract occurs that seems to me to be a strength for purposes of fraud that seems to be a strange time in which to say that cruz well let me address that your honor first of all  michigan law does not have a discoverable with us number one so the fact of when you discover the fraud is implicit will to the statute itself states that the claim accrues at the point that the wrong occurs the wrong here was a fraudulent inducement to enter into any issue securities that's what occurred that was the room all those securities that are secure i'm sorry if it's that the fraud is that there are issues there getting you to issue securities that aren't securities in the nature that you said that you believe that they were yes right and you took action on that and you took action and then you issued the securities and also you cannot overlook the fact that in their complaint they allege that as a result of issuing those securities they paid higher broker dealer fees in the in the tune of hundreds of thousands of dollars that wrong occurred from the beginning and michigan law was just this year i want to ask you something else on the this is the i'm pretty sure that what you are you're saying would be right under tennessee law for example unless there were a fraudulent concealment of some sort but i'm having michigan law seems a bit murkier on this point to me and can you tell me where i'm supposed to look in the michigan case law to know that you are exactly right yes your honor i would ask the court to look to the case of the cases of romeo for example and also your honor of this corps has also applied michigan law in the context of this very statute in the context of other fraud cases for example a prime example was the cat case vs p and c bank and there the allegations were that a plaintive entered into a mortgage believing that it was a fixed rate not a variable rate and the plaintiff entered honor that case is distinguishable because it's the nature of the wrongness alleged in the frank case the frank case is based on an allegation that there was a subsequent contract that was signed years later that actually harmed the plaintiff it is not a fraud to an inducement case like we have here in that case the wrong occurred from a second contract that was entered into years later here the allegations of this the loss occur is merely a reference to the last occasion that the second contract not a reference to the point at which it became apparent that the plaintiff would have damage from the fraudulent michigan law is entirely clear on this boy or i do and every case that discussed a fraud inducement theory every one of those cases holds that the fraud is in the fact in the act of entering into the contract is the a cruel deed for purposes the statue of limitations we cited a number of those cases respectfully the appellant cites not a single because the nature of the personal injury cases it's the factual circumstances are abundantly distinguishable for example the leading case the condit case and for the court to appreciate what happened in that case there was a  press and the court said logically of course that cannot be the cruelty for purposes that a statue imitations because it would in at that result in the extinguishment of a claim be forty existed well and that's not   in in their appellate papers beaumont takes issue with the district court for not supposedly addressing all three of beaumont's theories of fraud this is largely belmont's fault belmont represented to the district court that it had but one unified theory of fraud and hardly brief to those other two theories below having said that we don't think that any of their three theories has merit and this court can just follow this court's previous decision in the ashland case and the numerous cases that have come out of the second circuit and the southern district on these terrorist cases which almost universally grant motions to dismiss and affirm that the the primary argument that belmont made below which is now buried in the back of their brief is that the defendants didn't sufficiently warrant belmont of the risks of auction rate securities and the importance that covered bids played in making that market function that argument is directly foreclosed by this court's published opinion in the  case which is six four eight f three d four six one from two thousand and eleven a very surprisingly in its reply brief tried to distinguish the ashland case as dealing only with federal securities claims brought under the p s l array that's completely incorrect that's correct only if you read the first half of the opinion the second half of the opinion this court dealt directly with with ashley's claims against oppenheimer under state law claims for fraud promis estoppel and negligent misrepresentation under kentucky law which are obviously very similar in terms of their elements as the claims that belmont brings under michigan law are there any a r s cases out there that were successful for the plaintiffs other than by investors there are a couple of cases your honor where the motion to dismiss was denied those arose under two specific circumstances one for example in the merrill lynch case that counsel for beaumont cited where the disclosures the warning disclosures weren't given to the purchaser until after the transaction was occurred so the reasonable reliance issue wasn't wasn't there the other circumstances and weak and weak sort of the where there were very specific alleged misstatements in the fall two thousand and seven and the winter of two thousand and eight where the investor came to broker dealer and said i'm worried about the auction rate securities market you know i'm concerned that it's becoming illiquid what's going on and the broker dealer said no no everything is perfectly fine those were investor case those were investor cases merrill lynch is an investor case too and there is one issue or case for merrill lynch and there's also the u s education fund case out of the southern district of new york where the court granted the motion to dismiss it featured both maximum rate claims and failure to warrant claims as well the there they ground motion to dismiss so if we look and if i'm looking for to see what cases outside and in the rest of the world rest of the nation hold with respect a r a s cases and i'm only looking for issuer cases that go against you or that are you really go in the other direction we're just talking about merrill lynch only i think that's correct your honor and i think that you'll note there that the it was obviously a very different situation counsel for beaumont seems to think that the investor cases are weaker cases than the issuer cases and i think it's one hundred eighty degrees the other way in this situation beaumont was the issuer bomani in its own official statement disclosed to all of its investors all the risks that belmont claims were now omitted in terms of its conversations with goldman sachs and morgan stanley  investors heard by the in these investor case other than the investors heard i mean the the lack of knowledge causes the interest rates to go up right that's correct but some of in certain of these cases but not all of them depending on how the maximum rate was determined whether it's formulaic or fixed and also some of these investors were not able to sell their ass and so their cash if they wanted to get cash would become illiquid and that was the only there it's the fact that there's a claims this court looked at the c n tower arguments and we do make those below here but more importantly i think looking at the negligent misrepresentation and promissory estoppel claims that ashleigh that ashley brought against oppenheimer this court said look you know you had disclosures that disclose these exact risks and in that case those disclosures were fairly i would characterize them as weak compared to the disclosures here so in that case this court cited the following through disclosures that  obligated to submit a bid to prevent an auction failure and oppenheimer provides no assurance as to the outcome of any option in this case the disclosures which came from beaumont itself are much more fulsome think lou that each of the broker dealers also routinely places one or more bids in auctions generally to prevent in a failed auction or clearing rate it believes it is not a market rate while they may do so with regard to the two thousand and six error as they are not obligated to do so and may elect not to do so and don't want to tax this disclosure and it says well you only said you may retain we do so but that's not what this disclosure says this disclosure says the broker dealers routinely place these bids bowman is looking to disclosures that were made in other cases in front of the second circuit which by the way the second circuit found were perfectly sufficient to overcome any kind of reasonable rinds oma hospital or other people borrowing money would enter into these things that they knew it was totally under the control of the people they were selling and they could just sort of decide one day to have it collapse i do your honor to read first of all this market had functioned perfectly well for over twenty years and it was really as i think a lot of people have acknowledged the onset of the credit crisis in two thousand and seven two thousand and eight which disrupted lots of functioning markets across the world that caused the particular problems here more importantly what goldman sachs and morgan stanley were doing was simply acting as market makers which is very typical throughout almost any type of securities transactional market and in fact until you had the advent of the trading and high frequency trading in the stock market you had market makers there too and the stock market when to function without them when they say we make a market in this security what is that meaning with that means is that if they need in order to make that with the market liquid if they need to take securities on to their inventories and then find buyers for them later that's what they mean by making a market and it makes sense here because you have thousands of auctions going on every day and not necessarily going to have all the right beter showing up to all the right options and so you may have options where there are bits really ninety percent or eighty five percent or ninety five percent of the bonds and so the broker dealer will take the remaining balance of those of the those excess bonds onto its market and then look to quickly sell it off in the secondary market so it doesn't mean  unhealthy it just means that they're making a market as you do in the new york stock market as you do with the u s treasuries market as you do with anything else there's nothing the ferias about this is really you know we lost money so we're going to see you type things and that's what the southern district and the second circuit have almost routinely said they said this this was in plain sight here i want to very close a second circuit case that supports your there is the ashland case from the second circuit there is the wilson case from the second circuit them they've all been cited and if i could just very quickly sum up in my ten seconds as the max reclaim that they have they haven't come close to satisfying rule nine b here the only thing they've said is they had general meetings with goldman sachs and morgan stanley few employees attended and there was discussion about the max rate they don't even tell us which defendant morgan stanley goldman sachs is that correct that the district court never cited nine b i think i think that's correct your honor i would have to look again but that's because it didn't reach the c entered issue really focused on reasonable reliance which again courts almost universally have found lacking in these situations and in dismissing thank you for market collapsed in february two thousand and eight that was one of our primary thrusts of our case they are same that our case accrued before they committed those fraudulent acts to get to the point that i think you were raising earlier now what the actual in case said which is the sixth circuit case action versus oppenheimer was that there are cases that have dismissed these claims or allowed these claims to go forward and in general the cases that have gone forward are cases where there are specific allegations of wrongdoing in late two thousand and seven and two thousand and eight you need to look at our complaint paragraphs eighty three through one zero three and you will see that we made those specific kinds of allegations that have allowed these cases to go forward judge rogers u s which cases have have allowed the cases to go forward one is the l a cd case which is similar to this an issue or case in a superdome issued bonds that another one is to defer versus raymond james case another one is another merrill lynch case it was part of that same m t l another one was the people state bank case another one is the tutor perini case and another one is the and schultz case those are all cases that are side in our brief but they are all cases where the motion to dismiss was denied because the allegations were specific and just like the allegations that we have on high issuers that merrill lynch deal only two cases and i could be wrong on this that i know of that are issue are cases that were resolved in court and there in a lot of arbitrations involving  that was c l o cd case and the other one denied granted the motion to dismiss your connolly c d s what he's calling merrill lynch that's what i'm calling it's louisiana stadium and exposition district case and the reason i cite it that way is because there are issues were cases were brought in arbitration but but the only two issue are cases of the l c d case which i would submit is quite similar to this case and the other student loan case that that he was talking about which is cited  the time in the period from august two thousand and seven to february two thousand and eight when the heiress market was in trouble goldman sachs for example was worried because their inventories were rising and they had strict inventory limits that they were that they needed to comply with and they were they knew that they weren't going to be able to comply with them as a result of that they took steps to prepare for the time when the auction rate market would collapse they were in for example the disabled their computer system that systematically splay steese support bids all of which these allegations of statements that were made to the issuers yes there are specific allegations of statements made and omissions made to to beaumont in paragraphs one hundred to one hundred three of the complaint there is a series of meetings they were having what they called market update meetings where they would come to beaumont or there would be a conference call all and and what would happen is they would give us state of the market and when they gave the state of the markets they did not say that they were preparing to jet to get out of the market i'm sorry they didn't say they did not say that they were they were running into inventory problems that they were very worried that either they or another underwriter was another broker dealer was going to fail the options and that they had disabled their own computer system and were getting ready and prepared ever allege that they said something as opposed to they didn't say something the misrepresentation claim has to do with the maximum rate and that is paragraphs i think but the so the answer is no well the answer is yes on a different point with respect to the market updates they were providing a hundred to one hundred three that's what you're citing or in there there's no statements it's just not there those are omissions yes are there and there's where the statement  the statements are paragraphs i think fifty eight through sixty three you have fifty eight or sixty three paragraphs twenty three and twenty four and and let me just conclude by saying that judged the district court agreed that we did not suffer damages until february two thousand and eight he plainly says that in his decision therefore if you rule but the statute of limitations issue was wrongfully wrongly decided which you will i think i submit you have almost have to do because we're alleging fraud that occurred in two thousand and seven and two thousand and eight  which i think completely destroys the underpinnings of the execution of the contract argument then if you get to these allegations of the misrepresentations fifty eight through sixty three ok thank you very