to your time our third case is jill brink on our own behalf and on behalf of those similarly situated versus raymond james and associates case number sixteen dosh putative class members in this case against raymond james the district court below aired by finding that raymond james misrepresentation that any of its customers who engaged in it who participated in its passport account program would not be charged a commission and that the processing fee that they were charging their constantly years was not a commission was material and found to be made in connection with the purchase or sel a covered security under the securities litigation uniform standards act this case this in this case at least to me and i speak for myself only and not for my colleagues really comes down to a question of line drawing in a very difficult at that because it seems to me you've got a pretty good argument given the facts alleged in this case and given some other circuit precedent but what happens if the misrepresentation concerns a charge that is equal to the purchase of the security in other words you buy ten thousand dollars worth of a stock you get charged ten thousand dollars the commission yes that is that material  i think that you have to look at the context in which it arises and for example there are cases out there the broker says hey listen it's you're going to get charged ten dollars per per trade and then all of a sudden you're getting charged dollar per dollar of the exact amount of stocks that you bought so instead of being charge ten dollars for buying ten thousand dollars worth of stock of i b m you're charged ten thousand dollars and so now you're ten thousand dollars in the hole before you even started to try to play the stock market is that material i think that under those factual circumstances your honor it could be immaterial but ok well and you're going to have the same problem in my view that your opponent is going to have that i'm going to draw the line for him somewhere else and so where do you draw the line if the issue concerns the length and the depth of the misrepresentation i don't think you draw the  i don't think that you can draw a line a bright line rule i think you do have to look at every situation a little bit differently right so in the context of your argument when you you've got nine and a half minutes tell me what the legal principle is that we can comfortably apply in this case and then comfortably apply in crazy scenarios like the one that i laid out for you i think that you have to take the reasonable investor standard that was used in both and you look and you say would a reasonable investor consider that represent that representation or that misrepresentation to significantly alter the total mix of the information available in making their investment decision and i think that if you to use your the courts example if they're told that they're only going to be charge a ten dollar fee and they're charged a ten thousand dollars fee then yes i do think that there's a problem there however and  it depend only on the amount of the overcharge no it does not necessarily just depend on the amount again you have to look at everything that's at play here in each case so for example in this court's opinion in an  million dollars misrepresentation and it's a different context it was an se c enforcement case that was found to be not material because of the nature of the misrepresentation there the misrepresentation was as to the financial strength and condition of a particular brokerage firm so you look at the nature of the misrepresentation in our case the misrepresentation was not that they would not be charged thirty dollars but how that thirty dollars would be split these folks whenever they made a trade they went into the trade knowing that they would be charged thirty dollars for the processing fee so that analysis that they did was already there the question becomes if they knew how that it was going to be split is different than what they were promised your complain alleges that they knew exactly what they were going to be charged in that there was no misrepresentation about that no your honor the complaint alleges that they were charged thirty dollars that that was they didn't know that was going to be the charge what they did not know was that a pig portion of that was going to be put into raymond james pocket it looked so you say your contention i mean you're telling me the complaint says that point blank that they knew that they were going to be they were charged x but they knew they were going to be charged  their only concern and their only problem is that they were not told the truth about where that money was going i don't know off the top my head if the allegation is they knew they would be charged thirty dollars but we certainly don't allege that they were did not know they would be charged thirty eight of the words that come from them because if there's a difference it seems to me even if you use the reasonable investor standard and again i'm talking only for myself if a client knows the amount of a charge and the alleged breach of contract or negligence of fraud only concerns a misrepresentation about where that money is going to be disbursed like to a subsidiary to the board of director to someone else to a slush fund whatever then i can see why you have a decent argument that it's not material because inter in monetary terms the investor knows thirty dollars coming out of my pocket right yes and i would have paid it anyways it's just a question of them lying to me about where the money went that is correct but if your argument is not only is that a problem but i didn't know that i was going to get charged thirty or get charged fifty when the actual processing cost was really three to five that's a different case so which is your case or which one is your case closer to i think our i think our case is closer to your first analysis and that is these folks knew and we don't allege in the complaint that they didn't know they were going to be charge of the process if you didn't allege they did know we did not get i don't know if tom had if we specifically said they did know the thirty dollars but we don't dispute that and i don't think the complaint anywhere suggests that we do what they are saying is that that thirty dollars in the way that it was distributed and the way that they were told it would be distributed was what was misrepresented to them and that had they known the difference reasonable investor have figured that this significant mix of information available had been altered i don't think so your honor and and i i appreciate the court's question on that because it is an issue and as a core pointed out earlier this particular case and the facts of this case are a little bit easier than that because we were not doing this blindly we have to circuit courts that have already addressed it both the second and the seventh and final and a part and i think that and those two those two opinions and particularly a part of the gay parts on all four with the facts of this case let me let me say this is the way the district court describe it and the district court may have gotten this wrong too so we have to take a very careful look but that this or court in its order described it as a claim that raymond james took a disguise commission by charging an excessive per transaction processing fee yes you're on a surfboard get that wrong no that is true so the allegations are that raymond james charged a processing fee let me let me take a step back to try and give that statement context the allegations are  passport account agreement says you will not be charged commissions but you'll be charged an advisory fee of one and a half percent of your account payable quarterly that's to replace commissions the passport agreement goes on to say you will also be charged a processing fee and the processing fee will be used to cover the execution and clearing expenses of your trade there is a line in the transaction per transaction ari and there is a line in the passport agreement and i quote it says processing fees are not commissions they are to defray the cost associated with training and execution of customers trades so you are arguing that you are charged too much i am argu that we were charged thirty dollars and we were told that none of that was going to be a commission where you just told me that that's why i'm having trouble with this case conceptually and factually you just told me that they were charged more than what the passport account documents said because the thirty dollars worth more than the cost associated with clearing the transaction well the the passport agreement sic has a schedule and says you're going to pay thirty dollars for an equity trade and that amount change in april of two thousand and twelve to ninety five but there's a schedule right there and everyone sees it everyone knows it but where the where the misrepresentation occurs is when they tell you what that passport feet what that processing fee is going to be used for they tell you who are there to tell their customers it is going to be used for one thing and that is execution and clearing cost for the trades when in reality actual net cost to raymond james or the costs that you use in normal accounting terms of what goes into you know one input for a company in other words you need it you need a human being or at least a human being operating a computer to execute a trade and you tricity to be able to do that and you need to lease space and so you aggregate all those costs and you attribute them over the course of a year to different sorts of transactions well and there's been discovery on that  purposes of today we allege that it cost them their actual cost to execute in clear is no more than about five or six dollars so the the actual pocketed commission that they they again they know they're paying the processing fee they know it and they knew that they were paying thirty dollars processing fee of thirty dollars or whatever the scheduled few was yes but they were told in writing in their contract that is not a commission and as it turns out based on the allegations in the complaint at least as a portion of it was and that's and that's what the case this case is about and that's why we believe the apra case in the fineman case are right on point no reasonable investor would consider not knowing how that money is split or that to use the words part the progress or pocketing some of the dollars would be would be material to their decision to engage in and a financial investment decision if we agree with you that the claim is not precluded what what do you think should happen next what should the court do well i think if this court reverses and assume your honor talking about the district court i think the district court th moves on and deals with the class certification issue and i believe there's a summary judgment pending that will have to deal with but the case would continue on as not a not as learned what about the jurisdictional issue well i think the jurisdictional issue would be over the inquiry would be it would be answered this proceeding for a moment but yes we would we would we would ask that either this court or the district court grants us leave to amend and change the word resident to citizen and also include a couple of of concrete examples of citizens in different states which first question that i'm sure is going to come out which was addressed your honor is that the essence and the heart of the complaint and the judge got it right is that they'd claim that the processing fee that they were charged was an undisclosed and authorized hidden commission when the complaint says that she wanted a commission free account that's on the other hand according to committee the schedule of the account indicates that they knew they were going to get charged this amount but they're there that the contract says that first period of time certain transactions and there will be a processing fee on these transaction be thirty dollars or fifty dollars in this period of time and that was for execution a clearing of the trade which she was claiming about from day one that that was a misrepresentation because she didn't want to commission she accounts she wanted a commission free account and what that twenty five dollars is on a five dollar charge that was the actual cost which they claim they're fair that's where the fraud is from the beginning or it's forty five it was a fifty dollars that was that as they've described and you know under those under the securities litigation uniform standard act what you look to is not the allegations of the complaint but what the complaint is about it doesn't have to be a fraud theory as long as a fraud claim as long as it's fraud theory and what they've said is i'll i'll grant you that that it's a fraud based claim but that doesn't answer everything well you still have to keep going absolutely absolutely and i don't so if there's so let me flip the tables on you or if you had a case where the allegation was that you were being charged one cent more the actual cost per processing fee would be material i don't think that that would be material and why not it's because i when you look at what this circuit has done in the quintet of cases of gobal and i'm working keegan and merchant and caribbean air what you're looking at is whether this information would affect a reasonable investor's decision is it useless is it trivial would it alter the mix so it depends how you amount of the overcharge in part it does but you have to look at the value of what the claim is here what we have we have to look not only at the the amount of the overcharge but the amount of the transaction in question you know what when i talk about value is going to the heart of what the representation is so they were told you're not going to be charged a commission and then because they have a million clients they're going to nickel and dime everyone to death and they're charging everybody a cent commission and they figure nobody's going to see it and over the course of years we're going to make a bundle when you lose that material i don't think the one percent the one cent and terms of what this court's precedents are i think that the court would say with respect to this transaction with a dollar i think a reasonable reasonable investor with that alter the mix no but a thousand percent markup which is what they claim or to the tune of millions and hundreds of millions of dollars which is the allegation here in a commission free account w that with the reasonable investor when i entered into this saying it was to be a commission free account and i wanted not to pay any commission relative to any of my trades where here i am if you're lying if you're buying millions of if you're the really wealthy wealthy investor and you're buying almost institutional type blocks of stock that's material to you to go you know other words you're buying twenty million dollars of stock in a pop and you're being charged thirty dollars instead of five as material to you the issue it might be if the answer to the question is what was they were alleged fraud here it is a thousand percent markup  terms of the transaction whatever reasonable this court doesn't make it's blind as to whether it's a million dollar investor or it's a ten million dollar investor or a one hundred dollar investor the test is under the circuit supported by supreme court precedent is when you look at that is that information reveal useless or to the decision would it alter in here when you're given that information i'm told i'm not going to pay any commission but you're told you're paying a processing fe just being there to don't is being you're just being denied legibly truthful information about what that consist of but you know you're paying it and you enter into the account knowing that that's going to be a cost and a drag on your earnings so how can it be material with respect to i mean you know you know that if you buy a thousand dollars worth of i b m stock you're going to pay thirty assuming to schedules at thirty dollars you're going to pay thirty dollars for that transaction right you know that going in that so there could be a thirty dollar execution and you know that going in and you end nevertheless you signed up with raymond james and you decided to ask him to execute a transaction for the purchase of one thousand shares of i b m stock and part of that representation that contract was i am not going to pay any profit is a pain going to visor if this is a profit for a noncommissioned account and according to the essence of this complaint that's the fraud well how is that likely to affect your trading behavior you know it's thirty dollars you know that's what it's going to cost you so how the money is split up can be a breach of contract or a fraud claim but it's not material to a reasonable investor well the issue is is it information as to whether or not in this case when you are paying a profit at that level of a thousand percent market we're not dealing with a dollar or two dollars pocket and when you go back and look at the cases that they refer to the application the fine case what the court said is a one dollar talking going to make that profit is that going to affect a reasonable investor's decision would it make a difference is that useless or trivial to them this court says says when you look at it and you have a district we slide the microphone over a little because we're losing you a little i'm sorry when you have a district court judge dimitrios got it right he said when you dealing with something that is so significantly higher than the actual cost that is something that would affect the analysis and that impacts a reasonable investor it's awarded were do you draw the line what significantly higher to affect the reasonable investor same saadi i think that the line what principle do you articulate in this case that a future panel of this court will comfortably apply to the different factual scenarios that have been bandied about here i think the principle your honor that you can apply in again we're dealing with an objective standard it's a precedent that this court as sat in terms of what you look at it in terms of materiality is when you balance those factors when you look at the one cent going back to your example or you look at one dollar in connection with the what is the import of the claim and the import of the claim here is not on commission and a different fraud each case is going to have a different set of alleged fraudulent behavior in this case the facts that we create a fraudulent theory that brings it under sluices remedial purposes when you add that and look at that and which the mitri judge dmitri to always said looking at a dollar in your pocket at a reasonable investor because that's an objective test as a factual analysis that he's got to that the judge he or she has to look at when she's looking at the facts of the case here well i'm i'm saying to you your honor the like what what do i write an opinion judge prior write an opinion judge reads risin opinion that says a misrepresentation by a broker dealer with regards to commissions paid homage transaction our material when they will in the blink when they affect a reasonable investors it to this case and so i'm trying to get help from both of you about how to fill in the rest of that picture i think that the i think the judge dmitri ola's told us that when it is significantly higher when it's when there is really truly a wind beyond no impact at all a dollar when you look at that here you have a thousand percent you have something that is significant decision totally divorced from what the understanding of this investor was and she's told us she actually told us that the most critical material the thing that affected my decision it was going to be no commission so the hidden commission is the most material misrepresentation when you have to look consider in the context of what the alleged in this case fraudulent theory is i wanted a profit free account would one cent do it no dollar we were going to look to the second and seven circuit for help when you write this opinion the volume of the trade itself and looking at significantly higher or not i don't see i don't think there is just the actual misrepresentation limited to its four corners i thought well and i think all of the the cases that have dressed this look at the actual misrepresentation within the four corners i don't think you can do monday morning quarterbacking because you're like what's we don't want artful pleading we don't want the remedial person purposes of the statute being triggered by a how many pieces of stock or shares of stock somebody buys you look at i believe at the time what is the underlying claim what's the what is the heart of the what we say is the fraudulent misrepresentation and here is i don't want a profit so we have guidance we have what i don't think is the appropriate precedent but we have a dollar or two but we're well use it it is me it seems to me that your argument means that any overcharge under a brokerage agreement as long as it reaches some level some amount would be material it isn't th logical reason i don't think that's logical here we have something this is an overcharge it can be x and a relevant or as a result of many things here this is not a  overcharge your first post to pay thirty we paid you paid fifty there is i did not want to pay any profit i'm willing to take the execution of clearing costs is represented it's market it i'm told i think you know when we get to the in connection with test which i'll get to in a second because that's the other part of what you have to look at since there are only two elements of slow so they're on appeal here i take it in context of that fact it's the theory here not that i was overcharged i wasn't supposed to pay any profit any commission so now i'm told if the client let me rephrase my question any charge that i think i wasn't supposed to pay is material when it reaches some amount that we think is reasonable i would go have to go back and analyze what we're what we're told by the supreme court we're told by this court you have to analyze the underlying claims to see whether or facts our motion to say dismissed it because this is under slew so i'm very confident lawyers truly enjoy the respect of professionalism and they're very smart and i think what we have here is an take all your time but it seems to me from a practical standpoint then today if we disagree with your argument materiality you this initially proven part of the claim that the players will have to prove that the case goes back to this initially acknowledge materiality well if they're if you file if you find you have to they failed to prove or we prove both elements that this was material and it was done in connect it was a misrepresentation or a mission of fact in connection with the purchase of sick cover security in a material way so they blend there's no question that there's overlap but you can you still have to meet the materiality element so if you found that it was in just wrap wrap it up relative to this precedent this court is guided by four five cases i call the quintet of cases from this circuit it's a materiality it's simple is this something that is either useless or trivia or and would not impact the decision and it isn't a with respect to picking your broker because your goble says if it's only that then it's not material but here it goes to the heart so in connection with purchase sale securit we have supreme court precedent going back to sanford this court faulted institute zero and abbott that says you can do in connection with the purchase and sale of covered securities two ways one  here the every time there was a transactions that processing fee was part of that bundled up into that they wanted a purchase it covered securities without that  and profit and the commission and it's here it's inherent in each one of the transactions so it's it does make a difference it's connected to it there that's the nexus i think your honor when you look at the complaint if you go back to paragraphs thirty six you need to wrap up transaction by fraudulent misrepresentations i mean that's my characteristic of the underlying essence of the claim that there would be a commission they did they've made these purchases they would not have purchased any coverage securities if they knew that they were going to pick commission a profit so we believe the judge to material has got it right on both counts those are the only two issues before you materiality it would make a difference and two it was in connection the fraud coincided thank you i thank you very right i did want to discuss the in connection with element but first i wanted to address the court's concerns numerous concerns about the materiality element of this you posed a question a theoretical question that suggest a standard when a overcharge is blank it is material and i would fill in the blank at least for purposes of this case with and to borrow words from judge pryor when it's likely to affect the trading behavior of a reasonable investor in this case it's not material i would fill in that blank with when you know the fee just not how it's broken up and how it's being spent your honor we did say that they knew they were paying the thirty dollars in paragraph for the complaint we even reproduce the schedule of the of the charges that were going to be there were known to be charged in paragraph thirty nine of the complaint i did want to touch very briefly on the in connection with element because again there's two here there's materiality and there's in connection with i just finding a reversal on either one of those elements is all that sluice it to be found not to apply and i think that the five cases that counsel talks about are in fact some of the cases that apply here but they don't like the supreme court's opinion and troy's choice was the matters in a connection matters when the misrepresentation makes a significant difference to someone's decision to purchase or sell a covered security but then but but if that's the case then you've made both the materiality and in connection with standards exactly the same well one one of them talks about can't be right well know that they are both they both have materiality but the first materiality requirement is the materiality as to whether or not they're going to enter into the transaction whereas the in connection with materiality is whether or not the misrepresentation connex the level of connectivity to a transaction in secured or uncovered securities are those two things any different well because one goes to a reasonable state of mind as to the nature of the misrepresentation the other goes to the connectivity that particular misrepresentation has to as an actual matter no no as as a as a reasonable person to do so they both have reasonable person standards they both have materiality they both deal with the transaction they seem to me one in the same there is some overlap there your honor i do admit that i will say this why is it royce is my good example of it though because why isn't a good way of looking at this just very practically that if you're dealing with the purchase of securities and you're dealing with fees commissions charges associated with the purchase of a security how can that possibly not be in connection with well it's the very essence of the transaction you're not getting it for free even when you use online trading platforms you're paying something how can that fee that charge that commission not be in connection with  transaction for securities when you're only having to pay that fee or commission or charge when you purchase securities because it's not the fee itself but the misrepresentation made concerning the fee that has to be made in connection with a covered security transaction so so to give an example if raymond james had promised these class members you know what we're going to send you a trade confirmation on recycled paper and then decided that we're not going to send it and sent it on regular paper it would be the same argument under under their analysis that would be in made in connection you know get a trade confirmation unless you actually purchased or sells i know but those that don't have to do with a charge per transaction well and this doesn't have to do with anything related this misrepresentation is made well before these transactions occur this was made at the time when they decided to but if you never have a transaction you can never sue if you never have a transaction the fee is never incurred but it's and you can and you can never sue you know it's only a misrepresentation that has the necessary causal elements if you execute a transaction right i think that you have to have you don't get charged the processing feel less you execute a trans it has to be in connection with well i don't think it is i again it's not the charging of the feet it's the nature of the misrepresenting but that means robbery in other words the misrepresentation is not actionable on the less you have a transaction and if you look at it in that sense it has to be in connection with a transaction unless it less than misrepresentation is material to that transaction occurring yes like troy's as an example where it was not and choice there misrepresentations were that by stanford c d s they're great c d s you're going to they're very liquid and they're backed by by market great securities the court found that was material but it was too far removed from the actual at the actual  purchase of a covered security to be in connection with why was that in that case because what was happening there is the c d s themselves are not covered securities the allegations are that they would be backed by corporate securities because you weren't purchasing a covered instrument in the directed somewhere purchase very minimal but it was basically just a an embezzlement case just like sanford ok ok ms sorted thank you very much we appreciate the argument on both sides were  recess until tomorrow morning