morning your honour's may please the court my name is geoffrey norton for the appellants are basically two issues on the deal here that are matters of critical importance as they touch upon the fundamental rights of union members as embodied in new york's labor from liability no matter how great the fiduciary breaches or how great the harm to union members others to basis is for the district court's dismissal of failure to demand failure for failure to allege demand futility with particularities and failure to meet the not for profit law five percent standing requirement one to address in the interest of time i like to jump to the second issue first the alternative basis first  because we believe that was in itself an egregious finding because the application of the five percent requirement here under new york's not for profit law section six twenty three five we do believe the court of appeals would but what's the basis for that and if it's a multiple basis one on this case alone there was zero discussion of any interplay between the our my p a and and the n p c out the court didn't address it apparently it was in some papers on appeal it wasn't addressed at the district court level so this one this one sentence it says the complaint is not alleged plaintiff represents at least five percent l it's not on point you're saying it just didn't really engage with that issue there's no discussion of this knows there's no discussion of statutory interpretation there's no discussion of whether the is the more specific statute since the protect union members in new york and their ability of any member to proceed in a derivative action whereas the p c l is a statute eternal application if you're right about that could you help me understand why you are entitled to bring a civil rico claim under the labor laws seven twenty five when i look at seven twenty five i read were an officer an agent is violators violating any of his obligations provided in section seven twenty two that's important to me since that's your basis for federal jurisdiction here so could you help help me understand how you would be entitled to pursue a civil rico action under seven twenty five scheme but we don't believe that that that precludes an action a direct a separate action under rico because if you're standing in the shoes as a derivative action standing in the shoes of the union the union certainly had that standing to bring rico action but the act but the thing is that the section seven twenty five refers to a private right of action only for violations of seven twenty two and seven twenty three of the new york labor law and that's when you're excused from the outside of the five percent realm you're in that you start to show futility but you're in the seven twenty in the new york labor law realm what's the reason there are so there are the claim to our broader than just that in this action the claims are also bar against third parties that we wouldn't have necessarily that same standing to to bring in the seven twenty five because the platinum partners and some of the other defendants that this is a broader conspiracy  and and i haven't seen a case that that says you can't do that you know and it's still it's striking in that specificity still that you know you're excused from demand but only as to actions that are it doesn't seem as far reaching as civil rico so you just say there's no authority to the contrary so why not that's is that is i simply stated or that we would accept that thank you and i ask you to and dress me and futility i understand your argument about that we shouldn't pay any attention to clarke anderson the statutory argument i understand your desire for certification but ultimately even if we get to the question of certification that is speaks for itself and i believe that we've we've alleged that with adequate particularities and i could go through those matter how mr seabrook controlled the board and cemented their loyalty the the  incorrect in and faulting us for group leading because the law is fairly clear that if there if you if the defense are all similarly situated there's no need to be have to poke superfluous pleading by naming out each everyone but even if particularities on the first marks prong wasn't met which we believe it was on the second prong it's it's it's inconceivable that we didn't meet that when the board here didn't fulfill their fiduciary duties of monitoring the funds i mean there's an admissions on the record that they basically they let seabrook do whatever he wished whereas the bylaws in new york law provide that they had a non d oversee these funds and make sure they were managed correctly the district court erred by by couching this more is a failure to investigate claims but it's not a failure to investigate claims it's a failure to have any mechanisms whatsoever in place to that would have caught what happened at that twenty percent of the general far new eighty five and forty percent of the general fund are invested in a ponzi scheme which the which which the the union's own lawyer his own counsel judge carney nailed it right off the bat i agree with you judge claims four five six and seven they're gone right off the bat there's no scenario those claims survive they're just gone  law and the labor law and taking the approach the district court did those are all wiped out well i bill i think the state law the five percent rule is actually very if there is great clarity to it if i did i was with judge i can i don't see a problem or dispute the five percent rule you know the the l m v l in my p s a states in it at section seven thirty one c of the labor law section seven thirty one c says in it this is ten years before the not for profit corporation i was even written it says at section seven thirty one c sub one nothing contained in this article shall be construed to relieve any member agent representative from compliance with any other provision of this chapter or any other political state law so the labor law specifically invokes the future idea ten years from now that if you are not for seemed contrary to the purpose of this overall of this statute you know in which mimic the and which seemed to look for ways to allow individuals  of people in charge of their money i understand judge and i apologize if i implied that i thought they thought there may be this five percent rule into the future what the state legislature and the governor  when the governor signed the the labor law what they were anticipating is there might be future requirements imposed there might be or there that would additionally be obligatory to any member it says any member still has to comply with any other statutes ten years later the legislature and the governor saw fit to implement a five percent rule now rads and now are actually the supreme court case ragin hour is quite interesting on this point and the reason why is because that's the case where there's the national banking law and the securities exchange act there are two different provisions one says very limited venue and one says very broad venue and what the supreme court ruled is the two can be read together you just have to do the more limited venue that's what ratan our stand for that's what's happening here it's there is clarity to this the two can be read together members don't lose mr norton wants us to conclude wants your honour's to conclude that there is an insulation from liability of course there's not an insulation from liability they just have the five percent rule if they want to do it against a not for profit in a derivative we wander into this territory isn't this precisely the sort of question the new york presume you remember it and in that case you certified it to the court of appeals and the question was the interpretation of a specific credit card law regarding a i forgot what it was about but in that case both of your honor's concluded that there was no law there was no law whatsoever and it would be impractical for you to then do a first amendment constitutional analysis with no state law at all here we have clark detroit we have them in clark fi troy you go to gr that there's no recently offered we have one paragraph we have a pro se litigant we have a highly developed argument and there's no rationale provided for the bottom line and i don't believe that that's a sufficient basis to ignore it order requir required to do we required to defer to that i think you are required to defer to the reality that there is no contrary case law you have this appellate division case on point out be it with limited analysis  point you have the section seven thirty one provision in the labor law that i sing that i offer compels the conclusion that that they are obligated to follow this rule so it's so we you know these these still have to get to pleading demand futility with with particularity which there was a complete and total failure to do here and i would just want to say one thing on that will two things if i may and i appreciate your indulgence the it's interesting that the appellant's in the matter in the in regarding pleading futility they rely on barfi waxman which is the one nine hundred seventy five court of appeals case that says that they argue stands for the proposition that there is this essentially a god you have all for years been mis understanding the bar case they say we now deem it necessary to offer the following lab or following elaboration and then they go on to say look it is not sufficient merely to name a majority of the directors with concludes reallocations so there's no there's very little reliance on marks in their papers there's have to alliance on bar which the court of appeals is very clear has been misunderstood for decades thank you very much  amended complete the rivet of amended complaint by the appellants on two independent grounds and your honor heard a little bit about both of them the first i'd like to speak talk about is the it to plead with particularity that any demand unquote is bored would be futile because a majority of the board of directors were quote controlled by self interested director or that the board did quote did not fully inform themselves about the challenge transaction to the extent reasonably appropriate under the circumstances even today the appellant's fail to articulate anything but a conclus allegation with respect to bolt with respect to their allegation that the majority of the board was self interested what they've relied upon is delaware law in their reply brief they turn to delaware wall and the standard on delaware law in the rail delaware supreme court opinion and grail was to make their claim that steve pleaded the man futility would sufficiency however as your honour's know in the new york court of appeals decision in mar the marks decision expressly rejected the reasonable doubt standard under delaware law they called it quote overly subjective with thereby permitting a wide variance in the application of delaware law to similar that's what the new york court of appeals set forth in marks is that you need more than just close research in of self interest here all the  that there was a power by norman seabrook the head of the board to control them there was a power that he had without alleging any particular threat any particular evidence any particular allegation that in fact mr seabrook controlled they also allege in broad sweeping fashion that holiday gifts annual holiday gifts are somehow the mechanism by which mr seabrook controlled them but the allegation was completely implausible as judge at can found that the holiday gifts were nonspecific they were very general there were no one is left to guess as to the when these gifts were given how much who paid what what expenses were paid for if any and they can't meet the standard with a card to i mean it's still is striking that the numbers that were just acknowledge this sixty percent of the general fund and twenty percent maybe of if i have this right of the the special fund were all invested in this one with this one fund which is really as a striking misallocation way and so i'm having difficulty imagining what exactly would need to have been done by the plaintiffs in order to satisfy the demand requirement with particularity that you are money to the platinum fund and there were eleven other members of the board that the plaintiffs could have taken their claims to who the who the plaintiffs assert were not involved in any of the allocations either the allocations by the annuity subgroup or the allocation by mr seabrook from the general fund to platinum fund so they had the ability to take their claims to the eleven other members who according to their according to their amended complaint had nothing to do with the actual decision to allocate what they then rely on not to go to eleven board members is this unspecified assertion that there was a non d board members to monitor the investments and they attach to their point the constitution in the bylaws of cobol and generally rely on that but there is no specific constitutional or bylaw requirement of that the all the board members had to monitor every dollar spent what they rely on inside every dollar spent i'm talking about an allocation that's so grossly disproportionate that it would kind of leap off the page to anyone who looked at the balance sheet there was no requirement on the bylaws or the constitution that the board members as a group could not delegate to a subgroup the responsibility to make an allocation decision and they could turn to the eleven board members who were not involved in this decision and they could ask them to to bring claims and take their claims that is the entire purpose of demand futility but they didn't do that they decided to to move ahead and i think the case law is very very clear as judge can relied on for example in one dell a judge in one dell the court said failure to plead with the requisite position particularity at the directors had specific information or reason to inform themselves about the details of the allegedly wrongful conduct in that case it was backdated stock stock options just like in one dell here there is no allegation that the eleven board members who the plaintiffs say had nothing to do with the allocation to platinum fund had any reason to inform themselves about the allocation the general search and that they should have done it just because they were board members is not sufficient  a mechanism in the bylaws that one treasurer had to prove the transfer of money but one treasurer one board member even if suing their allegations are true does not preclude them from taking their complaint to eleven other board members who had nothing to do with the allegation the other independent ground that the appellant's failed to satisfy is nonprofit law section six twenty three now i know there was discussion about this what with the appellants or the plaintiffs failed to do is they failed to suggest or show how the new york court of appeals would decide clause three twat any other way yes admittedly it is a short opinion but nothing in the law requires a court of appeals the new york court of appeals to flesh out their opinion th very little reasoning in the go ahead please yes your honor there's very little reasoning i but the real facts are squarely on point there can be no denial that the facts and clarke the twat could not be more squarely on point it is an intermediate appellate court it's not the court of appeals but the facts show was an allegation that this union and an outside law firm allowed the former president to use money and lease an automobile for his own personal use thank you thank you very  much thank you so i quickly go back to the to the point about the the possible conflict between the alan might be and the n p c we don't believe there actually is a conflict we believe that these two two statutes can co exist that the elem i p a actually provides an alternative basis for standing for union members that that it would not do harm to the n p c l two in the union context to allow claim t arise under the for the any member standing so we don't believe that the two there is an irreconcilable conflict and obviously the statutory law asked for construction of your attention again back to whether demand futility has been adequately alleged setting aside setting aside the potential conflict between these two statutes your adversaries and just said there are eleven board members weren't involved in the in the p v a investments appeals which held the directorship cannot be a mere position of honor void of responsibility and that was in the bargain rachman case the executive board has a role and ultimately they have a non delegate will duty if they so decided to pick some to two to select some investment advisors or nudie subcommittee there's that doesn't mean they get abdicate all responsibility ultimately these individuals are the f plans they had no mechanisms in place what so ever to catch a forty percent investment in one fund twenty percent investment in the other so whether or not you brought the story tension vague they can't they're not just sitting waiting obligation if they were the eleven who were not personally responsible for the investment decision why they were they were responsible they are responsible monies that go out of that fund it's our the responsibility of the against norman seabrook said that basically said they're the annuity subgroup meant nothing either because my l o who is the treasurer and also a member of this annuity subgroup specific least told the f b i yeah norman seabrook does what he wants to do we had no he doesn't come to us for anything so that's not a grounds for saying that they're relieved of responsibility because they sit idly by the question is what how does that satisfy the requirement that you plead with particularity that demand would have been futile and the fact that they had a responsibility an overarching responsibility doesn't necessarily suggest that demand will have been futile but the fact is they violated their kabul for twenty years he installed each and every one of these individuals on the executive board he cemented their loyalty with with cushy job assignments keeping them from rikers island another thing that was was came out of the f report and these individuals knew that secret had the power to remove them if you so choose so this the quintessential case on on kind of like this self interest level of self interest and and dominance is is the rails case out of delaware which marks cites as well and this case is rails in rails the brothers that were ran the the come the ran the company they ran other companies that these board members sat on and  rails the supreme court of delaware said that was enough that was enough to show that they lacked independence to make independent decisions when they were so loyal to them that the rails brothers thank you very much you