good morning your honour's may please the court get albert stone a baron and bottom behalf of the plaintiffs in appellants and i'd like to approach this a little differently because i want to go directly to the issue of common purpose here if i may i think it's it's important to understand first of all i'd like to focus on two areas one is the court's dismissal of the rico claim and second with respect to the court's denial of our motion for catulus fees this is not a made up case and i've heard listen carefully the arguments that were made in the court's comments before but this case is not a made up case it's not a case in search of a theory or nobody's suggesting ampere it's a made up case we just ask questions to make sure that you're meeting the  the things right are necessary for rico and i want to focus on that exactly that is the core pointed out in the common purpose section of the enterprise we pointed out that the common purpose was to repeatedly and repeatedly order assess and charge borrowers for property inspections and there's sufficient allegations within that complaint that first the many complaints the plausibly allege that and out and explain what they are first of all we alleged that we allege that safeguard collaborated with citi with respect to the development of these policies and procedures with respect to property inspection with plausibly allege that we also know from the complaint that is that greater than the contractual relationship between two oh yes this is let's talk about that issue because you know that's what i'd like you know i appreciate that this exceeded just normal business conduct between the parties as as we've pointed out in our first of many complaint in two thousand and four fannie mae one of the major investors in these loans that services like city services they warned and they warned loan servicers do not charge the link went borrowers for multiple property inspections unless the circumstances warranted it so in your apply brief you back away from the idea that the inspectors knew about the charging of delinquent borrowers right but what we're focused on is and maybe again in our family is the idea that there's a so there's a distinction between the the the enterprise and the predicate acts and we never intended nor do we believe we alleged that the predicate acts were engaged in by that the non defendant safeguard property inspectors they never engaged in the assessment of it and didn't have the fraudulent intent and we know from feldman even though the common purpose  was in the indictment was alleged to have been a fraudulent common purpose i e to defraud insurance companies that in that case one of the members of the enterprise albert feldman did not have a fraudulent purpose and so we never intended to allege as to the common purpose that was fraudulent and a fair reading of the complaint if you look at all of the allegations and i could point you to a number of them make absolutely clear that the city defendants used the property inspectors inspectors as instrumentalities to carry out their fraud and so did the property inspectors know they were carrying out unnecessary inspections absolutely one because they develop the policies and number two the state is the policies with respect to collaboratively with citi in terms of when to inspect these properties and to pass on charges and what about that they were unnecessary it showed a necessary given a given example of state's state's one of the class representatives and in the record we have evidence of the fact that with respect to the states they lived in a gated community in a condominium high rise that you're saying something about the policies they developed showed that they were going to be unnecessary what about the policy the policies of of of inspecting them and charging for each one and not take into account whether or not the they warranted the borrowers or these charges should be passed on or you just said that they didn't i know i i thought you were saying both entities had this policy but a minute ago you said that the inspectors didn't say anything about charges so now you're bringing them back around to having a policy about charging i'm if i'm confusing i really apologize what i'm saying is that they didn't have they didn't engage in the of fraud of assessing it they obviously knew that some they were passing along charges that were inappropriate when they didn't when they didn't complete the inspections or whether they were unnecessary inspections and they knew they were necessary because they were circumstances were not warranted because when because in the state case for example investors when i was giving you the contract provided between safeguard and city don't pass along for example if you get to a gated community you can have access and this is one of the class reps you cannot pass along a charge if you can't get access to do a property inspection and we know from the record that that's exactly what they did they passed off the charges and that city paid the charge and assessed the states for multiple property inspections when the construction was never conducted and we know from the record that city did not want to change its policies and why because they would have to do what the district court asked in suggested it's orders who profited from this i mean city didn't profit from it only the property inspectors and that's just not true the truth is that city enormously profited from it because they didn't have to absorb the costs of those inspections when they passed them along to the borrowers and we know that and we know internally for example saying they shouldn't be on the inspections at all so i mean they hadn't done them at all then no one would have profited and if they if they did them but they charge the cost then they're not profiting i'm a little confused about what you think i would have done what i'm saying is charging the borrowers is the fraud that somebody wants to go by for whatever reason whether it's necessary or unnecessary and do an inspection nobody cares nobody's harmed if city wants to absorb the cost of each and every inspection whether it's done every day every week or every month who cares but where the fraud comes in is when you're assessing borrowers for property inspections that your investor the holder of the note tells you don't charge the borrowers and the record supports the fact that fannie mae that hud that the national mortgage settlement all said don't do what your doing stop it and they never stopped it until after they understood city that our case was proceeding after april two thousand and thirteen and so what i'm getting my point is this the common purpose was to order assess and to charge for unnecessary property inspections who engaged the charge part of it wasn't to charge or i thought you were saying it wasn't i didn't say that they engaged in the predicate acts of charging that the property our activity same thing with albert feldman in the feldman case he was a member of the enterprise but he didn't have the fraudulent intent he didn't engage in the predicate acts the pattern of racketeering the other robert felt pursuant to a contract then how is that a print it can act because they didn't they didn't know it it you gotta understand that a let you have the right to dispute the fee i mean anybody has the right to dispute t fee but just to merely charge the fee or ask the person to pay the fee that doesn't make it an app ok in the act here we go good point that it was a promise without an intention to perform and we've we've alleged that in the complain at the time city took over took the servicing rights and service the loans they understood at that moment in time and it's in the complaint that they couldn't comply with the investor requirements that they couldn't compl based on their systems they couldn't do that but what are the investor requirements have to do with the contractual obligation to the borrower that there's nothing enforceable i don't think you're arguing that there's a claim based on the investors but that's but that's a fraud if your principal tells you as the agent don't charge borrowers unless the circumstances warrant it and you do that anyways and you don't tell the borrowers that your principal who actually holds the note told you not to charge you that's sec my worry is that and that's why i tried to get you there it seems to me if i just give you that there's an enterprise i've still got to have a pattern of racketeering activity and i was trying to come up with the predicate acts but the predicate acts as i understand is that they send out a billing statement which says that these fees are delinquent and they have to be paid but the bottom line that's a contractual arrangement you can fight that in court you don't have that's that's just trying to collect a bill they already had it's how can that be the predicate has at the time you enter into the contract or in this situation at the time you take over the servicing rights you made a promise in accordance with that agreement that you're talking about without an intention to perform it they could never ever the violation is as to the investor that sounds like you're saying that the promise they entered a contract with the investor and that they never investor told the agent don't charge the borrower for multiple property inspections if the principal who owns the note the owner of the note tells the guy who's charging you don't charge the borrower and you don't tell the borrower that and you don't tell the bar with it you can't comply with the holder's holder's instructions then you've committed fraud here's a here's another example you're a minute over thank you i've heard your argument and here the next briefed on that but the district court dismissed the rico claims because the complaint didn't plead facts supporting the complaints theory that city and safeguard shared a fraudulent common purpose i'm hearing plaintiffs seem to be backing away at least in part from from that allegation but the reality is they pled that the complaint allege that city and safeguard formed in a prize and i quote to defraud borrowers close quote and that was no accident they made the exact same allegation the prior complaint district court just missed the prior complaint for failing to plea to compress and then they repeated the same allegation all over again in the a minute complaint no plan of our saying that while we should have been given we have to file an fifteen requires a gross abuse of discretion got to be illogical or implausible i mean in the other case and i can't pull up the dates as quickly as that like to me the other case the allegation was that the judge sat on the motion to dismiss so long are going to matter what would've happened that would've happened in january of two thousand and fifteen when when the judge dismissed the rico claims with prejudice but that's because there were multiple men exactly they filed three complaints that you know they had one complaint in the original biased case those consolidated with chase and other cases then they fought a complaint or case then the amended complaint after a year of discovery and so you know there's no abuse of discretion in refusing to allow them to file a fourth complain asserting a new theory and then if you're there is futile anyway for reasons i think we've already covered but it seems like the common purpose now is just to conduct inspections and it's divorced from the supposed fraud which is to charge for the inspections  theory it's city alone not the enterprise that committing fraud you know they've got distinctiveness problems in addition to common purpose problems and there are a lot of courts that say you know a services contract by itself just isn't enough to form a rico enterprise otherwise plans could easily convert just about any fraud claim into a rico claim because of course these sorts of vendor contracts are commonplace now plaintiffs also  plead or produce evidence of racketeering or fraud and here the claims overlap because rico fraud and i'm just and richmond claims are all based on the same two fraud theories one is that city's monthly mortgage statements concealed property inspection because there was no concealment before ordering inspections city sent letters telling plaintiffs that if you don't carry a default we're going to inspect your property and we're going to charge you for the inspection under the category delinquency expenses on your monthly statement then city sends monthly statements that charge plaintiffs for the inspections under the category blank once expenses and the statements themselves define delinquency expenses to include inspection fees so i don't think the concealment theory works at all players also argue their second theory is that city's monthly statements implicitly misrepresented and that the fees were authorized by the mortgage that's just a representation of law though as the district judge said and players need a misrepresentation of fact now plaintiffs say that the monthly statements incorporated a factual representation that the inspections took place that they made a different argument in the district court they said and i quote as a footnote to sentence response plaintiff fraud claims are based on misrepresentations of fact i e that the challenge property inspections were authorized under the fannie mae freddie mac you know for mortgage contracts close quote well that's just the representation of law that's not the argument they're making now about fact at those reports the plaintiffs say the stitch inspections didn't take place because the vendor safeguard was unable to access the floor in which the states live in their apartment building  now i don't think that's right for reasons i'll talk about but but even if plaintiffs are right there is no evidence whatsoever that the states were deceived by any representation that the inspector inspections took place to the contrary mr stitt actually but i thought the claim was that they were charged for an inspection that didn't occur not just that it didn't occur that's right yeah but they're trying to get around the misrepresentation the doctrine that says you can't base a fraud claim on a representation of law by saying that there was embedded in there a factual representation that the inspections took place and they can't get there because there's no there's no deception there well they were totally aware of the facts they were and there was no reliance  that's right but was there a charge for an inspection did not occur a charge that him if you're charged for an inspection you have reason to believe that inspection occurred and if you're charged for it that's misrepresentation of well well we did charge them for your honor but the plaintiffs knew the facts right and so if they wanted to dispute it they could have they knew that we had charged them for inspections and they had the belief that the inspections couldn't have taken place so they had as there's a lot inspections but safeguard visit of the property took pictures of the building you can see the buildings still flying and submitted reports charge city so you know the inspections did take place whatever you may think of how much information you get from them now we have an alternative argument that i just sort of alluded to i think which is that the plants are limited to a breach of contract claim here and that's what they are alleging that plants have come repeatedly said that their theory is that cit mortgage breached the mortgage by charging for these inspection but you can have a fraud based claim that's based just on a breach of contract in a place of several responses they cite the vega case that yes that's correct exactly but there's nothing like that here we disclose the fees we didn't mark up the fees there's just no comparison i heard mr albritton talk today about the another attempt to shift this from contractor fraud law the exception where the promise or doesn't intend to honor the contract at the time the contract entered two problems with that argument one it wasn't made below it wasn't made in their opening brief i think it was the first time that i said member it was the irrelevant and has nothing to do with the legal issues that we're talking about whether those a representation of law whether this is really a contract claim whether we disclose the fees and so on plaintiffs also want to tourney fees based on the notion that their lawsuit w successful and cause city to change its practices again nothing the logical or implausible about the district judge did here in fact was completely correct a couple points on it if god doesn't need to be correct contemporaneous internal sitting emails showing that we were reacting to the national mortgage settlement a massive silence from the federal government overseen by a monitor and a judge they required us to change our inspection practices there's no nothing to suggest this case had anything to do with it thank you thank you very much is finished here i mean you seem pretty excited that i stopped you after your argument was over but i'll be nice to you can i have another minute appreciate that your honor thank you very much i want to get to two two issues actually three quick issues one is the letters that counsel mentioned to you about these preen special letters that put borrowers on notice you need to read them there in the record those principal action letters constituted the second fraudulent representation those that fraud is in the letters they say that those inspections are being done in accordance with the mortgage agreements  and as requested by the investors were quire mit's neither was true that's number one number two in terms of the cattle sfi motion i just want to take you through the timing because i believe the district court abused its discretion with respect to denying them first off she the district court relied heavily on the testimony of kimco v x cities represent a representative but then deposition mr kovi act refused to ask answer the question why did you change your policies it was objected to based on attorney client privilege she refused to answer the question but then said it wasn't this lawsuit and we we argued to the district court that they had waived their right to argue against our motion once they took the asserted privilege and refused to tell us why they didn't have the ability to argue number one number two is none of the evidence that they put forward the counsel just mentioned to you substantiates at all that it was driven by the national mortgage settlement as i said in one thousand nine hundred four hundred had regulations that told them don't charge borrowers in two thousand and do anything two thousand and four fannie mae told them don't charge borrowers for these inspections they didn't do anything the national mortgage came out in two thousand and twelve and they didn't do anything it wasn't until after our the order came out that allowed this case to proceed where the court where were they made the changes and if you look at the record in the documents