and they why that's the key word significantly influence the outcome of matters presented to the board and that doesn't mean well it's not a mandatory provision doesn't say shall there's no language that says the director shall accept and recommend no they can't vote but they vote except vote they can do everything else is not correct no they can't do everything else they had no power to form committees they had no power to form to set compensation on the organ about how no power to call general meetings no power to believe it means make suggestions to the sitting board of directors that's what i think it makes and it's not a mandatory cause and without the ability to vote i don't believe the board observers are stepping into the shoes in any way shape or form of a board of three provision it's a very narrowly tailored regulatory scheme which congress fashioned to expose to liability a very narrow class of corporate actors namely the individuals who control the company and to the to the extent that we have any disagreement is that mean the only reason this provision exists is to cover the situation where an entity does not follow the corporate formalities and actually name directors i think it's a little bit broader than that your honor and here we agree with the district court i think there could hypothetically be situations where corporate formalities are in fact observed but the nomenklatura is different and so someone who doesn't actually have the title of director or partner which are words that are actually used in the statute nevertheless has all of the power all the authority that is required to actually functional test not a nominal test since it's exactly right tries the functional test a of housekeeping mary's or two minutes place it was it was already think your hours and so to the extent that any courts have looked at this was the extent that there's any guidance from from a regulator it all goes back to that touchstone what is the regulatory scheme is it narrow so when courts have looked at this persons for for performing similar functions the language they've always sad what you have to do is functionally analyze whether or not the individual that you've got in the crosshairs is actually in control of the company and you've got this reality in the world of corporations that have on the one hand boards of individuals who can actually control the company and who have the power to do that isn't observers in advisory boards that don't and there's just never been a case and we can think of no good reason why there would be while why this second category of actors would be brought into the narrow regulatory believe also as to mr downs but i want to speak for him if they didn't engage in any activity after the registration statement became effective that looks in any way like the activity of someone who controls the company or for that matter just to be clear your honor i don't think they did anything in connection with the activities of this company even trying to influence decisions of the board so i think extrinsic evidence would only help our cause here whether you're and i think we agree with the district court that the proper analysis here is to just look to the language of the registration statement even if you take in evidence beyond that that's in the record there would be nothing to support bringing mr  within eleven but the problem might be that just that that did they didn't do anything they they are like anyone else that was there involved in working with the corporations had the ability to attend directors meetings and to give board meetings and done and i was about to write it show up would have been board members only board members only our desks rest and so to the extent that there was a board meeting called at which board members evaluated a proposition or exercise control over the company of course mr doing mr downs had the right so long as the triggering events never occurred that would have terminated their observer status to attend those board meetings and speak but i think there you know the analog that leaps mind is the difference between on the one hand a member of congress and on the other hand a lobbyist a lobbyist can exercise a tremendous amount of influence over all the things that congressmen do congressmen and women but at the end of the day they can't vote they're not answerable to their who wants to listen whereas these people have a right to be there and to express their opinion if you don't like their opinion and your honor there's record evidence for example that mr downes actually proposed a share buyback mechanism to the board and it was rejected and i believe that's the only instance in the record of these two either of these two observers attempting to exercise influence and their suggestion was rejected so i think it's clear that at the end of the day here all the individuals the only persons within language of the statute exercising control are the board members and i'm the only occasion that i'm aware of where the observers proposed something it was rejected flat out so  so here they're not directors bit but they're according to lower court persons performing similar functions yes you're ok let's talk about the functions of a director right directors e market and so you have a lot of influence to get the more money to help with your financing or you can influence the selection of senior officers but you don't vote to select you don't actually have a vote but you have a what about executive compensation to directors control executive to they said executive compensation directors approve it yes and did zahau and downs of the power to approve the executive committee had the ability to significantly influence and sway the board's approval of so they could they could suggest to recommend to the directors whether a bit of a good day because they didn't have a vote they could make they could they can't vote but they can push them and use their influence these guys have a lot of influence over have this company was going to operate no doubt no doubt influenced the prime movers behind it right you would argue i guess absolutely raising the capital base in the capital or boating the enterprise promoting the promoting in a private but all of all of that i don't know how that helps you satisfy the statutory language in isn't it isn't it the case that we need to be careful improve they didn't show that there was a question of fact it's i think they're doing a reasonable investigation so that's the first say the second thing is i don't think the judge acted in the capacious way if you look at his decision it's very very strictly construed the statute you looked at each word interpret each word you gave it its dictionary meaning and ascribe you know that didn't expand at all just said this is what the dictionary says this means significant  does influence get you to performing similar functions well so because if you want your art i don't even if directors were in the business of influencing corporate officers and influencing corporate policy it seems you have a slam dunk but my understanding is the directors actually set corporate policy they're just influence it directors have power they have real power and that only directors will ever have a right to vote just directors if you if you say a person has to have the right to vote in order to be liable under that statute the statue record meaningless because only directly because you could have all kinds of enterprises that don't use the word director that imbue call them let's say instead of being called directors they're called partners or called controllers or you know what let's say some crafty person was trying to do an end run around the statute and avoided the use of the word directors this statute that says if you perform the functions of a director you're going to be in the crosshairs but you aren't you know i know other companies there's a company salesman in the place you could be vice president you could be anything at all and you can influence what the directors are going to do so that for you to say well they have this you know influence and some are but they but the point of  them the power to vote but under under a p v i corporation only directors can vote right it's corporate law right so you can have somebody if someone was you know setting up a fly by night operation and you know wanted to information from china to the to the lawyers who put into the prospectus he was the go between but he was the person to sign on the bank account he was the one the only star on the bank account when three point eight million in cash which was withdraw cash withdrawal was not a check is if it was a cash withdrawal and he was the only person who had access so this is a kind of thing it's supposed to capture people who have control so you sue him for you know fraud fraudulent conveyance etc right i mean this this is a regulatory statute that it targets people who are performing the functions of directors and we've got to we've got to make that determination right and here but isn't it true that  another data point that says these people are not like director what it means what it means is if you require fiduciary duty or the ability to vo you rented the statue meaningless you've taken the  at the end of the day it's a question of fact the finder of fact is something does this person is this person similar to that person that's a question of fact but they have no power no power so how could they be similar they have the ability  worth what about the fact issue i think it needs and raise an important issue here mr rosen what are the disputed facts what would the jury if it were to go to a jury what would they be asked  performing functions similar to the direct to the directors it's very simple so you it's from going to where you read you know the like a question of statutory interpretation or that you just quoted the statutory language and that seems like a goal so them as if i were the rabbi and if i were the trial judge then my jury instructions would say something like this director's vote for board action do you find as a matter of fact the  stop i think i think directness do more than just select what they do is they formulate the policy and strategy the corporation the direction they decide things like should we make a should be doable should we go into this business we go in this business so we spent should we withdraw frequent million dollars from this bank account should we do another offering all these things are things that these people have the ability to influence and when you influence something you may not actually have the right to do the same thing but and and it really this actually doesn't say you have to be i guarantee thank you don't have the power i think they have to admit and they have admitted they have the ability to influence so i'm still struggling with what the jury would be asked to decide there they've conceded i think will double check that they have the ability to influence and their answer is under this statute the ability to influence is not the same thing as perform similar func perform the functions of a director in what i'm asking is is that not a legal determination for us to say that those are the same things you win or those are different things they were i think anytime you have somebody it's more it's more like asking somebody is it negligent would a reasonable person do that is the same as saying there's this look like that there's a lot of  strictly a question of law it doesn't go to the jury judge hearted watch it as ask him what they had it how can you charge a jury in a case like this where if a jury it turns out either way when it during your statutory in a corporation and say if these poor people are these people named as being individuals performing similar hog lives as as a statutory interpretation the legal definition of a director so you think there's a jury question yes absolutely john and i think that i think that the trial judge was right when he said there's there's enough evidence here to create a genuine issue of material fact as to whether these persons perform s because a director's i'm sorry eight and individuals the board servers powers and if and influence an ability to control and manage before the registration status file can create a strong inference that those abilities that management of control continue after the graduation is far out based on their position position and then afterwards their conduct afterwards is indicative of at side prospectus thank you mr rosen thank you improperly delegated to a jury the role of a judge so i just don't think that's accurate and is excused just a matter as simple as the statement that the email is that they the underwriter was suggesting a stock buyback that's all that happened and it and they ultimately didn't go through so i just want to clarify those two points and you don't deny do you  which might have significantly would influence a company in inferi in theory these two board of servers if they were really smart or their advice was really sound or perhaps they were very influential people who exercised you know some galley powers i mean the board inferi could follow every recommendation that they made right like just like the board in theory could follow every recommendation that the chinese council who was liste the prospectus gave advice to the board of directors and i i don't think so that's what you have to acknowledge that's a possibility of course it's a possibility you've got your i guess your point is it's also a possibility that they be completely ignored yes and the fact is the fact that there's a pretty large delta between them exactly exercising restraint gali like control over the company or being completely ignored indicates that they can't be performing functions similar to directors is it that simple i believe it's look at the brief discussion over as you say we should write a legal opinion saying that under these circumstances it's not within the statute because the statute talks in terms of what being sherry purview this is not you talk about those who are about to become directors those who are directors or those who are performing similar functions to directors the two cases that have ever looked at this language the mersenne a case in the locky case talk about that language was set up for situations where corporations don't need specific individuals to act as directors but those individuals are in fact acting as directors and sort of a de facto the terminations that's not what we have here at all can you read section eleven as targeting or deter and determining who was and is ition to ensure that representations made to the public are truthful respect us those who are simply bored observers who do not have power don't have that ability and the reason for naming them in the prospectus is the underwriter particularly with a new company and a board of their bring someone there just keep keep keep an eye on things for the benefit of the underwriter they don't know why do you do because doing stockholder unlike the directors they can't even you get a minute and a half i can't resist you know what what if there were a hybrid situation where they had some ability to vote on some things that they had or did didn't have the ability to vote but they controlled executive compensation your honor i could step of the analysis i think we agree with but here the notion that you would leave to the jury this question given the evidence of what is in the registration statement there are i believe twenty some odd specific powers that are enumerated for the board members for the directors it includes everything right so to your point your honor it's not even close to one of these potentially more ambiguous cases even without a bright line rule on these facts with this registration statement every single meaningful power is reserved exclusively to the directors our clients can only observe and have the potential as as the court has articulated to significantly influence but not any of the specifically new an enumerated powers that you would need to control the company it was i know you don't agree with this but if this was a fraud in a you know flimflam operation if we agree with your reading of the statute does that mean that mr rosen squire answer without a remedy that there's there's this lakota in the law here that provides victims of the sort of thing with no remedy no you are definitely not there are any number of other statutory and common law causes of action that could be brought in in fact were brought and rejected or abandoned in this case this is one very narrow provision that targets the very specific class of corporate actors who control the company and gives the plaintiffs the ability to sue them under what is essentially a strict liability statu standard there are other ways to get at individuals and entities that are engaged in or utilized for maybe one of their foreign nationals though and therein lies the problem perhaps i don't have at my fingertips a catalogue of all potentially useful causes of action but i have been involved enough cross border cases both civil and as a prosecutor a federal prosecutor i think there are any number of ways to go after fair foreign bad actors both civilly and criminally and i don't think that's a problem we face here i think the bigger problem we have here is you've got a situation where a district court on a record it's very clear  not close decided in just the last step of the analysis to put the question of interpret in that the statute in the hands of the jury which is going to create mischief because now your regulatory scheme could turn out differently every single time it goes to trial and you could have observers in this courtroom who don't have any of the powers of directors held liable under it and observers in another courtroom on the same exact facts you have a jury come to a different conclusion and