king thank your honor me pleased the court i'm at working and i represent the forty nine plaintiffs appellants in this matter i have one point that i'm going to discuss today that the district court erred when it ruled that plaintiffs were on inquiry notice of their claims against the defendants alliance simmons and venti as of april two thousand and ten when the fifteen and dismissed two claims based on that ruling the district court reached the same conclusion it the same conclusion when ruling on a motion for summary judgment in two thousand sixteen which dismissed claims as to everyone except three plaintiffs who have since this mr claims voluntarily according to the  enforcement action in april two thousand and ten that automatically put the plaintiffs on inquiry notice about it about their potential claims  parties isn't the point rather that they are them on inquiry notice that they've been defrauded and then it's up to them to take steps to figure out who if anyone against whom if anyone they have a viable claim your honor i agree with with what this statement when the f c c brought its enforcement action back in april two thousand and ten plaintiffs were put on inquiry notice and they had their c complaint says that by september two thousand and nine approximately one half of all funds assets had been loaned were vested affiliated often cash for of financially desperate begins with entities only about three point six million of the approximately one hundred six million raised by the four funds were invested in liquid publicly traded companies orders would have discovered that would never know your water auditor is job is not to discover fraud auditors job is to render opinion about represents in their papers in their opinions to public and to their management team that their opinion is limited for that purpose that the financial statements or income from what the generally accepted accounting principles nothing more than that so the auditor wouldn't have been reviewing the and checking the substance behind the recorded interview for him transactions in your view i believe the auditor is have reviewed those things the question is whether their review alone is sufficient that's something that's to be decided in some situations yes auditors to detect fraud if you can you just go ahead please that goes to the merits of whether there is a c against these orders doesn't it the point is whether or not not the f c c complaint would allow private individuals to figure out that they could right then and there bring a claim it isn't the issue once that complaint is filed isn't it the responsibility of defrauded parties to investigate and try to i mean suppose there never had been a statement by the  c expert much later the the plaintiffs can't just say well we never did any investigation right to figure out who if anyone  essentially and that is correct your honor and the reason that they did not take any further steps other than following along what the court was doing and what the permanent receiver who was appointed by the district court was doing at the time and there is the record is replete with the statement before then sixty eight plaintiffs who said they checked weekly sometimes deli about what was going on with the receiver and receivers efforts to try to recoup the money that was lost it begs the question about why should you look for another potential defendant when there is already a defendant identified one for the same reason that you're here today because the defendant has been identified may have no money and you're looking for a deep pocket to go after who may have some money to contribute to the fund right that's why you go looking for the secondary parties the law firms the auditors the accountants and the question is if the plane we have a different case wouldn't we have the pl said we hired private investigators we made inquiries of the order we tried to find out what they knew and what they knew and we can't against a blank wall we were not able to develop any information we didn't have subpoena power wouldn't that be a very different situation than just we sat back and waited and hoped the as the sea would come up with enough money to make us all under this court addressed that very point in the lentil le case in two thousand and two thousand and five when the when that issue came up about whether the plaintiffs did enough diligence about the inquiry in that case there was a attorney general new york attorney general's office who started investigating against merrill lynch who was a secondary actor and by the way in that case this court noted the difficulty of identifying a secondary actor or tertiary actor so as opposed to the primary actor and in their case we've reversing the individual plaintiffs do not have that kind of power absent filing an action but we could i speak to the judge lynch's point is is is he right in saying and this is my understanding as well that there's no reflection in the record of any efforts that plaintiffs made to investigate the nature of the fraud and other possible defendants that your position seems to be that you weren't in possession of information until ms pailin testified in tw fourteen and that at that point you had enough to state a claim that would survive and that's what was necessary under the pontiac case but it does the record reflect any efforts at all that were made after the plaintiffs i know that the s c c had a website for this ron is a right to publish some information that was by the it was a receiver yes your honor by the receiver published information almost daily about what was going on so did the receiver publish that simon's had not identified as a target i know there was a motion to quash the subpoena directed to him and his lawyers he's been identified as a target of this investigation was i put on the website at the time it happened i believe it i'm not i'm not sure on it because that was done i don't think it did your honor because that was done in the separate action filed by the department of justice by the united states government in a criminal action i don't think that was done by the i c c action but i'm not quite sure but more importantly you are that was done in two addressed by the district court the court should have addressed what information was available to the plaintiffs and you are are you mentioned whether the i c c complain at the time mention a certain transactions between the the funds or related entities which is a classic example of ponzi scheme and when that happened she do go after every professional who was involved in on the writing of a security issue in a securities such as a good morning may please the court my name is brandon sheen on behalf of the defendants at pelleas your honour's pointless argument that they were not an angry notice they're getting abetting fraud claims against the defendants until they had access to the defendant's work papers and twenty fourteen through the testimony of ms palin fails for multiple reasons first in reaching its inquiry notice determination below the lower court cited several several cases in which courts held that plaintiffs similar reasoning just this march in the sage imprecision case which we've cited in our papers however even if the there was a need for defendant specific storm warnings as plain tax work mr simons was the target of a criminal investigation i would you veterans learn of that well i believe that they had a duty and this was filed in the northern district of new york they knew that the broker dealer was located in the district of new york based in albany and that the f c c action had been commenced in the northern district of new york i believe was incumbent upon them to to monitor the public there was there was if they had if they had shown that that they had actively monitor the docket that they hired an investigator but that some of these facts were not obvious and difficult to develop without subpoena power w suggest do they have to you know what can be diligent without necessarily being able to create a completed complaint that would satisfy the particularity requirements of the federal rules do for the statute to run him in a kind of fair and equitable way would they would do you have to demonstrate that the particular allegations that would be necessary to survive or rule specificity motion to considerations in new york or to distinguish between circumstances such as this reporting of stone for many investigation and found that it that's fatal to their claim where is if if they had investigated which they admit they did not then at least  er the new for the new york statute of limitations the time would be delayed until a reasonable point if would have discovered is the rule very much different in florida delaware new jersey there is there is no second part in those states those states it begins to run mr simons followed instructions from mr smith to reclassify fees loans and that's located it page fourteen eighty six of the appendix and the second factual mission is that as a result of a following that instruction the return f five of the complaint but there are at least seven implicit references to those factual allegations and i'd like to highlight two of those two to make this point in paragraph one hundred sixty of the complaint which is paragraph of page one thirty six rather of the appendix appendix plaintiff's allege defendants had actual knowledge of the fraud of participating in the fraud for example the defendant's mischaracterize income payments to against with principles as loans although they knew that the monies were reportable as income and perhaps most importantly if the motion to dismiss hearing below plaintiff's counsel was making the argument of the import of the guilty plea in terms of supporting their claim and at page one hundred eighty six of the appendix plaintiff's counsel stated that the guilty plea quote goes to actual knowledge of fraud and and additionally in two thousand and twelve january twenty sixth two thousand and twelve mr mcguinty mr smith were indicted on criminal charges relating to the and the indictment specifically referred to outside accountants and allege that that mr smith a directed accounts of the broker dealer and an outside accounting firm to reclassify transactions so again it's a notice of this reclassification of transactions which is that we talked about for months ago there was a press release issued the same type and same day by the u s attorney's office so even if they were not monitoring the docket in the northern district as i would submit they had an obligation to do in light of all the and case in their case to the court specifically noted again about the difficulty of addressing any notice in korea as a secondary actor that compared to the primary actor in their case their stern was declaring bankrupt participate in the fraud perpetrated by perpetrated by a foster stalling on like the case that we have in that case everyone knew about the participation by information did the plaintiffs have at the time what information do they have they would trigger them to trigger an increase notice which takes us to the case that look at the court of the court of appeals ruled back in has to be a reason just because something goes wrong just because your investment fails does not mean that you have a duty to inquire here we know there was fraud or at least a reasonable investor would have a very good reason to think there was a fraud because the f c c charged the operators of the ponzi scheme with fraud so there's no question that a duty to inquire arises and now the question is is there scuse me authority under state law is there authority under state law for the proposition that when you are on notice that you've been defrauded and you do nothing to try to figure out who is responsible for that fraud that nevertheless you need to be specifically on separate notice as to each defendant that you may choose ultimately to sue and your honor that's exactly what happened in the barrister in case a couple of years before the plaintiffs brought their claims against bear stearns s e c brought an action in portman actions against a primary actor which was fostered sterling and two years later that's when the plaintiffs brought their action against  secondary actor which is bear stearns and that was applying the new york state statute of limitations yes yes yes your honor and the court and then this court said despite s c c s bring in an action two years before plaintiffs still do not have a reason to trigger this inquiry notice and this going back to the higgins versus kraus case and what the court of appeals held worse you need to have a suspicion that not only the the defendant right defendant just because something goes wrong and you fall lost that that the court the court called that the rash doctrine which of course called it unnatural and that's what we have in this case thank you very