yes i'm sorry he has she has claims in this case has alleged claims under both section ten b and common law state become a must a claim with respect to the ten b claims particularity but not intention and knowledge they didn't attend the claim does require has does have a heightened standard but it's not the impossible standard that the defendants would have this court believes is the supreme court recognized intel abs and this court recognized in recess south ferry and thomson in particular which concerned an attorney's misrepresentations to an adverse party to a transaction the test is whether the complaint states with particularities facts giving rise to a strong inference that the defendant acted with a deliberate recklessness or engaged in knowing or intentional conduct dealing the alleged facts here and the reasonable inferences in the light most favorable to e s d and viewing the entirety of the complaint it is clear that the s g has met this burden so will even if your allegations support  of deliberate recklessness sufficient to state a claim under section ten b of the federal securities fraud how can we conclude that you have adequately pled actual knowledge of the fraud which is required in order to stay claims for conspiracy stay claims for conspiracy in aiding and abetting the allegations with respect to actual knowledge are similar to the allegations with respect to santer and i'd like to go through those at this point in february in february of two thousand and eleven for every ninth of two thousand and eleven bloomberg issued an article which outlined mr stratas history of fraud his use of false names swindling  victims that he was arrested by the french police officers that he had a judgment for fraud mr meyer read this article mr meyer also read the complaint in which mr venable represents in which  represented mr stratas in the call murphy case so they start out with that information one week one week after the bloomberg article comes out mr meyer forms investors because he can't use his own name in light of the bloomberg article i was also troubled by the bank account where he got blacklisted at certain bank accounts and mr myers opened other bank accounts for him yes mr meyer knew that mr stratus could not open any bank account that no bank would deal with him and therefore no bank also would deal with some io if it was being used by mr stratas so bank accounts into first of all they use client trust account as the first place to deposit mr stratus money stratus money goes into the venable client trust account the s g money goes into the venerable client trust account mr meyer convinces mr burns to release that money to somalia because somalia allegedly has purchased shares of facebook which mr meyer knows is not possible because some ai has no money and no assets and opaque accounts so he convinces to burns to release its money to somalia but venables doesn't release the money to smile instead annabelle engages in seventy separate transactions from its client trust account to pay personal expenses of stratas including a civil judgment for a judgment that was referenced in the bloomberg article and venables own fees after that and wasn't there a car that was lost yet a land rover a condo in las vegas all kinds of personal expenses paid out of a law firm trust account and that trust account was referenced to belonging the whole trust account belongs to venable but that a deposit was made with respect to mr stratas so they knew it was made with respect to mr stratas even though mr burns was told that it was some a a transaction well some of it's ok some of it you're sort of preaching to the choir for me on some of this but i do have a question  on the agent's immunity rule and what i think your answer would be on that and if it's your position that it does not apply because meyer owed stratus an independent professional duty doesn't it follow from that that section three forty point six one year statute of limitations bars any claims predicated on the alleged professional duty mr meyer owed the s g and mr burns  independent legal duty not to engage in fraud he had that obligation not because he was the attorney for mr stratus or had any other kind of relationship he owes that duty just like everyone else in the whole world owes that duty to not engage in fraud with another person and the the statue of limitations doesn't apply for two reasons number one the cases at least the cases suggest and the statute suggests that the statute applies to brought by a client against their attorney now there is some california case law that suggests otherwise but that's what the statute says and that's what the most recent roger cleveland case says that it is not a case in any case involving an attorney and secondly the section itself contains a fraud exception everything in this case is subject to the fraud exception fraud or fraud based claims are subject to the exception so that the three forty point six doesn't apply how crucial is that to the grab and then of what you're bringing here i'm sorry your internet well if and i can't speak for anyone and i mean we haven't obviously discussed this but wish we were to agree with you on everyone else but that how does that affect your if the three forty point six applies to the state law claims it doesn't it can't apply to the fraud claim by its terms  applied to the fraud claim so if for example the court were to conclude that somehow the conversion and breach a fiduciary duty and unjust enrichment claims were not fraud based and subject to that exception then we would need to look to see when the statue of limitations of crude and in our in our view is that it accrued less than one year prior to the time the claims were brought because prior to that time mr burns intentionally misled the partnership and the limited partners as to whether there was any whether there was any issue the shares were purchased but they could not be released for six months after the i p o was affected so that was in november of two thousand twelve so it wasn't until november of two thousand and twelve that the limited partners actually knew that anything had happened to this and so therefore they then brought the claim within one year of that november two thousand and twelve  express exempted from the statute and it doesn't apply because it didn't accrue until less than one year prior to the filing of the complaint in this case and to respond to your question with respect to the bank accounts come since that bank account from its g e bank of america immediately regrets its decision and freezes the account because things it's fraud or money laundering or something equally horrible bendable doesn't stop there it goes down the bank of america again and says oh you just need to release these funds to us and not worry about it so bank of america releases the funds to venable under those representations venable then persuades another law firm take five millions of it and put it in its client's trust account and then goes to another bank u b s it opens a bank account again for somalia didn't just stratus just get convicted of something yes he was convicted of the fraud that underlies the civil action in this case he he has another he's the nicole murphy criminal case is still pending so he has not been sentenced on this case but he has  been convicted of the fraud against the s g in this case as a matter of a federal criminal conviction there's no question that there's fraud there's no question that there's misrepresentations and frankly there's no question was his was his concern that this would then attorneys could not make representations for their clients and therefore they would then be polled  what why and why do you think you bought their two things for thought i wasn't involved in the case at that point secondly there was never any hearing or argument in this case so we never got to hear what judge wright thought or didn't think but i think he did not view the allegations as necessarily establishing actual knowledge in the case and he thought perhaps that there was an innocent explanation for what went on but when you put it all together in timing there is no innocent explanation see mister mr meyer mr venables attorneys suggest that that chain for a client to be tensional investors acting as a client's banker paying the client's personal expenses out of your own trust account running interference with banks that are reluctant to deal with a client and running personal errands for the client you good morning your owners may please the court kevin rosen on behalf of respondent venable l l p what i'd like to do with the court's indulgence is to respond to what i think would be helpful is to respond to some of the points that just came in and judge nelson you have to know in terms of sort of the allegations because fundamentally what i'd like to try to explain to you is is the description of this case does not comport with all of the factual allegations in this case and that's when you seem thing to say but i'd like to take just a couple minutes and try to walk you through that to demonstrate what i'm referring to because it's probably a good idea because actually for me this was pretty shocking in terms of that this is not the usual attorney havior so and you know and i can understand i mean there are people that represent someone for murder and they know that the person dead but then they don't go to the d a and say oh my client told me he did it obviously there's a turning client privilege and we have to we have to you know attorneys can't be branded with the misdeeds of their clients as it were appreciate that i think i'm up for the challenge of if the court will allow me to walk through some of this and obvious if you have any questions feel free but and what i will do is i will start with the two areas that your honor said focused on specifically in common comments to appellant counsel in that context judge callan i think your point is important to keep in mind here because we are talking about lawyers who are very often retained to represent and help clients who have been accused of wrongdoing so there's an element of context that's important and unique to lawyers here that we do need to take into account and i also think it's important as you noted that this is a fraud base case it is not a negligence case i'm happy to discuss the pleading standard i think the collective the higher standard there's no doubt about it but there are particulars here right to the question as to the particular show fraud and that's exactly what i'd like to walk the courtroom so without further ado if you will let me get let me launch into a few of the examples well let me let me just tell you that ok so some of the things that yes she has alleged as material emissions for purposes of can be there when meyer made material missions when he failed to reveal that one there was no fa deal to that stratus not to my ass securities with animals client three that stratus was falsely representing himself it can damage to e s d and for that two point eight positives would be a media only disbursed as having deposited his own funds initially with facebook that's what's alleged page two zero one of the record paragraph want to wait so what the initial two point eight million dollars is is a reimbursement for money that straddles has deposited two to walk in if you will the facebook transaction and i'll come to the facebook transaction because fundamentally here judge callahan for example you posed the question failed to disclose that there was no facebook transaction respectfully what i would say is the question here is have the alleged facts to show that meyer knew there was no facebook transaction i think in fairness to the bounce for the guy to he said he's good for or something like that and i'll come to that but again it's all about unless you're going to take the position that a lawyer is not entitled to rely on what his client says then the question is what  establish that meyer knew that some of these things that we're talking about were not accurate well how about the fact that he was representing stratus in a suit allege that stratus stole seven million dollars now that's the nicole murphy suit dismissed no allegations that lawsuit had nothing to do with the facebook transaction all right so so the question is what about the representation of the nicole murphy lawsuit that as that mr meyer does knows that there's transaction and the answer is nothing you refer to the underlying criminal prosecution again i think if we were i mean lawyers normally go down the banks and open accounts for their lawyers they and then i never heard that before well keep in mind that what what is it what is happening here is that lawyers do represent clients who are trying to dig themselves out of issues that that have confronted them and there's no in the process right but then again that's the conclusion the question is well but it's could be an m prince from all of s i mean he doesn't look like your typical lawyer i mean he looks like it's a coconspirator almost in some of this well but if you if you start with what has been alleged that the two point eight million dollars in judge nelson all of the payments that you refer to came out of that initial two point eight million dollars payment there's no allegation in fact it couldn't be that the the the seven point two million dollars payment in the four point two million dollars payment that there was any any of those sorts of buys p s g that any money came out of that so we're talking about the initial two point eight million dollars payment so in it did as alleged that that initial two point eight million has to reimburse strat for money that he had previously paid to or as a deposit on facebook shares in a time that the complaint is very clear myer is not involved member myra's not alleged to have become involved in this process at all until the facebook transaction is done and it's time for payment and so if mr based on the allegations in the complaint understands that mr stratus is being personally reimburse that two point eight million dollars because he put that money as a deposit in order to secure the transaction and then effectively what's going on  using that two point eight million dollars to capitalize some maya and so if if mr stratus decides that it's appropriate for sue maya to to take some of the money that is his reimburse is using th capitalized maya and make pell out payments to be made here that doesn't suggest that someone knows that there's a fraud going on all they know is that mr stratus is getting his money back for purposes of the deposit  authorizing that the money that money be used and sure there's no question that there were issues associated with the bank account because of the prior history which venable as lawyers do is engage to help correct we  counsel acknowledge part of what is done with that money is to pay prior judgments to help mr strauss which is what lawyers do dig himself out of the hole that he is in and so we have to be careful about tagging lawyers just because there's a fraud that went on and in hindsight which we know from this court's authority we're not really supposed to use but just because there was a fraud that ultimately happened the question is at the time mr meyers looking at this those he know that there's fraudulent activity going on ok but let me ask you this ok so you're kind of given an explanation as if we were having a trial and all of that but it seems to me under taleb versus make so if you can explain it both ways then it's still not you know to kick someone out at this particular stage it it seems that taleb says that that's wrong in your honor what i would say is i am not what i am telling you is not an explanation both ways what i am telling you is that there is these are the facts that are alleged and they don't suggest reasonably suggest that there was knowledge of fraud in i think it's important to to keep focused on what the standard is in as this court said an eclectic properties that were a complaint please facts that are merely consistent with the defendant's billett stop short of the line between possibility implausibility of entitlement to relief plaintiff cannot offer allegations that are merely consistent with their favorite explanation but are also consistent with the alternative explanation so if what i'm telling you if you were to conclude that what i'm telling you is consistent with an alternative explanation under epileptic properties for example which itself is saying that it's applying  well and you know tell us is an even higher standard ten b that's not good enough well ok so when you're saying ok this is they were just using that two point eight million two they were using it in different ways so if respectfully around think that's a fair characterization ok and here's why yes she authorized and this is it page two thirty one of the record authorized without restriction the release and use of those funds so we know from the complaint that the two point eight million dollars is to reimburse straddle us which then ties into why funds are being used to certain payments have been used we know that there is no restriction given by us g n the authorization letter which i said is it is a two page to thirty one of the record and we also know that mr meyer was not involved encountered including the litigation with nicole murphy in let me just say one other thing with respect to the bank account the only allegation in the complaint is that mr stratos had problems at bank of america because it triggered their anti money laundering red flags it wasn't because bank of america thought there was some fraud being perpetrated by stratus and that's it page two ten of the record paragraph one fifty eight so i think we need to be very careful about what's actually factually alleged that my heirs knows he has to go to bank of america where he has a personal relationship because stratus is blackballed at other banks at other banks right while my nose is strapped there's no question that stratus is having a problem opening a bank account but again that that puts us back into the context of a lawyer who's retained to represent a client who has had prior issues but it's kind of like a why w why would he she sure is gee that that then was in the sale were legitimate well that's that's not what's alleged around or that's not what what he said right and there's no out here so fundamentally you know i mean if you keep in mind we have we have strauss who clearly is posing a day in court but there's a countervailing proposition that this court has all courts bounce there's a gatekeeper element here well and there's some this your client would never win in a trial that i mean  don't love lawyers and if that getting to death so you have a legal right to win if they can't sufficiently a legit and that's a much better place for your client to be because twelve people in the community i don't lot of jury work are not going to look kindly on this wall although i would say all the more reason why well that's but if you're entitled to a legal judgment if that's exactly that can be the right qualified immunity cases with police officers are another thing i mean that if they're entitled to qualified immunity under the law then you do it because jurist probably wouldn't be able to follow the law so if there isn't a triable issue or whatever or if you haven't if they haven't met their burden with the law also recognizes that it's that there is a cost associated in those for cost of associated and of making a defendant particularly in a fraud case sit through the process this court in a collective properties that characterized it as the supreme court has the  there's a balancing that goes on it's not just about a let him have their day in court and see what the jury says we have an absolute right it's reflected in this court's jurisprudence in the supreme court juris prudence in the in the congressional legislation with respect to the p s l array and it's embodied in the higher pleading standard rule mine be as well as the standards of what we saw a lot of security cases when the market went bad that people were suing and they wanted to blame someone in the whole problem was the market went bad just got kicked out of court because they couldn't allege with any specificity that anyone that anyone had done anything more wrong you know what happened to everyone else but this this has some this has some and this is like almost like a movie here well alleged that they don't talk about in the script that they're writing for you or that is inconsistent with the script that they're writing for well let me let me just this is like a little tiny piece of it but i was asking appellants counsel  have some view that that might be a correct ruling but what can you counter what you said on that on with respect to three forty forty point six california law is very clear that he's actually wrong and that cause of action only for example because well we cited makes it clear that even constructive fraud fits within three forty point well but it's but i think it's predicated on a per professional duty so when that if if the one year statute of limitations bars any claims predicated on an alleged professional duty what's the professional duty here that case as a conversion but that case is do you see analyzing the issue at the end of the day on the program today because that court decided that the more specific probate courts that codes statute and statute of limitations was applicable rather than to fourteen point six and more fundamentally than that the issue is yes is the connection to professional services whether same fraud based claims they're saying in the context of probate and that case is very specific in that it's dealing with the probate code and so i think that is the answer to your question your honor and if you look at the california cases that we cited they're very clear consistent with the statute that that all causes of action other than actual fraud are subject to three forty point six the only case we're talking about is conversion as i say and as we said in the brief there were other issues with the way that they played their conversion but what i'd like to do assuming out of six adequately answered your question is that it is very important to me to at least try to convey to you why there are issues and a disconnect between the story you're hearing and the factual allegations that are being made i've said what i've said about the payments and the fact that it's really given give us an example i'll give you give you bank right at the outset when they talk about here's why we win and they tell you in a paragraph that's one of the core pieces they tell you well what they told the district court yesterday told the district court that meyer was mine that's a page three ninety six of the record they told the district court that venable drafted semi's operating documents that's a three eighty six of the record they give specific examples of things that meyer did for including for example retaining a client under their words under lawyer client privilege that's a page fifty of the record paragraphs to sixty six that's their initial complaint venable drafted the formation documents for some minor and dealt with incorporating in the secretary of state incorporating it with the secular state of delaware those are all functions filed lawyers so when they is part of their script tell you that my is a liar because he told burns that they represented s inconsistent with the facts that they've alleged so one of the one of the linchpin lies of their case is actually not a lie at all according to them according to the allegations in the complaint another example of what i'll call a confirm that slim was affiliated with sue my that's at page one ninety eight of the record paragraph ninety five why is that important there is no factual allegation whatsoever suggesting that meyer knew that slim was not affiliated with sue maya and that's what myers alleged to have said affiliated myers not alleged to have said slim owns or has an ownership interest in sue mine in fact what is m do he files the documentation with the secretary of state that shows stratus as the owner and show slim as not an owner and certainly slam could be affiliated again we're talking about whether meyer knows what's being told to him by his client is false certainly slim could be affiliated with sue my if it's so if he's a lender if you some sort of promoter it's not exclusive so to suggest that meyer lies because he says he told burns that they that slim didn't own or invest in somalia that has nothing to do with what they alleged because they alleged affiliation only and that's not exclusive they that part of their story as well  big part of their script is that some i was created to hide stratus of hate but here's what they don't point out in their script as i said before meyer publicly listed stratus in the formation documents meyer if the question is does meyer is meyer trying knowingly can swear king to commit this fraud by concealing the existence of stratus which is the very foundation of their theory why in the world is the record whether he was fired i can not in the record i can tell you was not fired but there's nothing in the record about that so i would urge you not to ask whether he was fired because that itself is not in the record think that gets back to our point that we were talking about for lawyers ok so if if a lawyer is engaged to help a client who's had issues work his way through those issues you know for example that part of the money is used to pay judgments and pay earlier judgments and they're defending a lawsuit which is dismissed so the lawyers hired should we is it is it fair to just infer i would submit it's not consistent with the with the standards lot of time into this but there is a chilling effect in the context of lawyers representing clients who may have been engaged in wrongdoing or or certainly accused of wrongdoing there is a connection there's an inevitable connection is specially if it turns out that there was truth to what the accusations are and and it is very easy then you know the formula here's the formula right you should have you should have figured it out i complete fraud generally under ninety i'll forget the fact that relate applies don't bother following the supreme court in suavely next fall i'll just turn at what is it worse a negligent case in terms of negligently relying on what your client tells you or not fully not not conducting an independent investigation of every single thing your client oh now i understand you're saying it's a slippery slope and this might be and how i am so i don't have any for that distance thank you but why men think a bothers me is the what they say is that my or that their their point is that meyer never spoke with dinosaur slam and therefore he shouldn't be able to he shouldn't have appropriately relied on strat one in a spin a seven minute conversation between a point in time and the next day that you know ours is based on a seven minute conversation by myers being asked certain questions about slimming it's not your honor as as what's being said i would urge you not to rely on what's in the brief but what they actually say was said in the complaint the factual allegation in the complaint so meyer is reporting what his client and mine are never is not alleged to have told byrne that he spoke with ken dennis or that he ever spoke with carlos slim he's not alleged it's not alleged that yesterday that dennis bought facebook shares for slim if you look at the complaint page one ninety eight of the record paragraph eighty nine strato says the one who made that statement dennis and meyer knows dennis exists and so fundamentally what this question boils down to i think at the end of the day you really think the complaint is a fraud now i'm not no i  to know your honor i think what it's a question of advocacy it's a question of what facts somebody focuses on what facts somebody doesn't focus on and how one spins one's case i certainly disagree with the fact that they have not acknowledged certain facts another fact that you don't see anywhere in their brief if meyer knows that this is a fraud why in the world is he doing research on the secondary market for facebook shares which is alleged  complaint if he's knowingly participating in the fraud how is that consistent you didn't hear anything about that in that script that you read so so fundamentally what this is about at the end of the day at best is that meyer negligently failed to figure out that in fact this was a fraud and or meyer had an obligation to investigate the accuracy of what stratus was telling him about the much thank your honour's so here's what myers knew he knew who strato twas he knew before he had during this period of time twenty five imprisoned meetings with stratas and a hundred telephone calls with meyer also knew that the email address the byrnes was using to communicate with the imposture can dennis was actually mr stratas email address because that's the same email address that mr meyer used to communicate with originally the deal with set up from the beginning that miss that yes you would deposit the money into venables trust account that was what mr stratus told mr burns from the beginning and it was to be escrowed the money comes in on mr meyer does not have to investigate his clients every word but he's not allowed to get on the phone to a potential investor and val's for his client on the basis of information that at best he doesn't know was for to secure the facebook shares right how does it equate that then he can use it to pay off mr strata says other judgments that have nothing to do with face book it doesn't your honor in fact mr burns agreed that the money could be released to somalia to replace the deposit that some i had allegedly made to obtain facebook shares the same iron knows that no deposit was made that there was no replacement going to be happening and that subsequently the venable trust account if you go back and look at all of those most of the deductions from the venerable trust account were on mr meyers authorization he's the one that said release money for this purpose release money for that purpose it did not go to somalia to replace a deposit it went to mr stratus not so my to to pay mr stratus personal expenses including the fraud judgment the condo the landrover and all the other personal expenses that mr starters well as a lawyer takes money knowing what it's for do they have that i asked and he said always we don't have any duty to e s p as to how we spend the money in our wrigley it was a trust account remediation funds placed into a trust account in for chain and it was holding stock in escrow and in both of those cases the court said you have an obligation to  get their side if you're going to take on these duties you can't just say oh no i just represent my client and walk away you don't just represent your client you have obligations to the other side so they simply and the end they had an agreement with mr burns as to what the money was supposed to go for to begin with it was supposed to be escrow there until the stock came and subsequently mr burns misguidedly agreed that it could be used to replace the sun and deposit when he entered into that agreement with mr burns he had an obligation to make sure that that's in fact what the money went for and he did not this was going to be distributed before there was a nischelle public offering after your honor what happens is i'm i didn't know this before either but after what happens is if you own stock before a public offer and then you require enter into an agreement basically that you want to strip you won't distribute it until six months after the public offering so that it doesn't mess up the investment bankers public offerings so that the people that had the stock already before the public offering agreed to sell this is what i suppose to work would agree to sell but you wouldn't actually get your stock until six months after the public offering and so that's why  the time period that's why the limited partners actually didn't know that they didn't get the stock that they didn't vested in until november of two thousand and twelve read in the new york times this morning hatched this plan so that mr stratus could continue to swindle victims using the somalia name and so that's why this was set up from the beginning and finally one of the reasons one might suggest as to why mr meyer was  investigating facebook pretty i p o shares was so that he would have the information he needed in order to perpetuate the fraud so the fact that he investigated it has says nothing about the legitimacy of