appellants this appeal is from a judgment of more than eight hundred million dollars in a case where the plaintiff not only suffered no actual loss of any significance but where the plaintiff complained about disclosures that freddie mac and fannie mae the investors never saw never hand when deciding to purchase the securities and where the defendants through numerous rulings of the district court were not permitted to introduce any evidence that those disclosures the allegedly false disclosures were unimportant to a reasonable investor standing in the shoes of these two purchasers or evidence showing that freddie and fannie themselves never thought that the disclosures had any importance at all in march two thousand and fifty during trial very close to the outset the united states supreme court issued the i am to carry decision one thirty five supreme court thirteen eighteen which says among other things quote an investor reads each statement within offering documents in light of all of its surrounding text including pages disclaimers and apparently conflicting information and further at thirteen that quote the investor takes into account the customs and practices of the relevant industry unquote this court earlier this year two important in a securities case saying the context includes an investor's understanding of the subtleties and include intricacies of the industry the result in sanofi turned on the sophistication of the investors and their understanding of the process employed to obtain f d a approval for a new drug not some generic investor who was on sophisticated in the industry but the sophisticated investors who brought the lawsuit on the fact of freddie and fannie mae have known that there were difficulties with began to originators compliance with the underwriting guidelines doesn't mean that they could rely upon a representation me by your client now you are representing that the ridge leaders had complied with the underwrit ok the language in question refers to general compliance with underwriting guidelines a lot of the specific representations that fall out the pages of representations don't have any meaning they have all the meaning  in the world why don't have the meaning that the district court ascribed to them but if i may i want to address materiality and i'd like to start with that if i could because this court's decision last year in united states against lead fak it seems to me is absolutely determinative of the issue here and there's nothing new about lit fact twenty five years ago this court held in cast a line against youngun rubik cam an opinion authored by judge feinberg that materiality depends on an inquiry about a reasonable investor quote standing in castillo's shoes unquote the third circuit is septa same thing in michaels against michaels and it's well there are a number of things judge wesley let's start with this the district court excluded all evidence about what freddie and fannie or any other investor standing in their shoes knew about underwriting practices at the time the district court excluded all evidence that the underwriting practices of these originators who whose loans were purchased by known you were and securitize were approved by freddie and fannie the court found it irrelevant that freddie and fannie committed to purchase in the aggregate two billion your honor they committed to purchase before they saw the pro subs out of nowhere they that's not a nancy it's what did they commit did they commit without any care with regard to whether they were good or bad is that what the government's policy was new of course not it there wasn't there wasn't evidence in the record that there were freddie and fannie called no witnesses f h a called no witnesses from freddie or fannie to testify about what was importan fact where the buyer used a sophisticated computer program to analyze risk before seeing any disclosures before the before little fact made his four statements about for example the price that jeffries had paid for the securities just as there are here the district court excluded all the evidence that these patterns use sophisticated computer programs to decide whether or not to buy before the pro subs even issued when that evidence got reliance not at all lit fact is very clear about this and if i is it one eighty three in the same basic statement one eighty five the full context and circumstances in which our m b a s are trade including the sophistication of the investor and the fact that the investors ran their own pricing models for the use it's a complete offense to sixty seven percent of the loans being bad the loans were not bad your honored loans actually record could conclude from hundreds testimony that they were bad to that extent only by using this finding as false disclosures that were never made for instance two hundred forty loans sick or ding to hunter were defective because they didn't meet minimum industry standards that he created and they did exists nowhere other than a litigation driven expert's creation the district court also found as false disclosures that were never made about underwriting guidelines you will recall for example that many of the pro subs say that for originators below twenty percent yours i guess i'm i'm not puzzling is to your problem with the district court's analysis when you read that provision it seems to say these loans were purchased by the sponsor from all over from various banks from various and were each loan originators and then there originated generally in accordance with the criteria described in the section that seems to me a representation that these you can rely on us we've done an investigation  reasonable guidelines have been followed from all these various originators will describe this guideline specifically with regards as originators that that provided more than twenty percent for all the others reasonable guidelines that were generally describing how else would you prove that that statement was false except to go back to the guidelines that were used stitched herman if they were in fact reasonable and if they were in fact complied with what hunter did and the district court followed and bless this was not at all to analyze the criteria described in this section but instead and judge cote said there said page two seventy one o opinion she said that that representation was insufficient to give comfort to investors that the loans had passed scrutiny unquote by declaring the representation to be insufficient she then rewrote it and decided that that representation should be interpreted exactly as the others which refer expressly to the guidelines that are in keeping with the general terms that are described in this process and we're talking about how you go about proving the falsity of that you have to go back to the specific guidelines that were used and show no the idea that these guidelines  criteria described in this section of the process which is quite different i might add here and i think this is of huge importance that among the cavity ott's and disclaimer factors three of the process up said that a substantial portion of the loans represent or in one case may represent owes was a very lenient approach to underwriting guidelines judge code in her post trial opinion makes reference along the way to the fact that at the time two thousand and five to two thousand seven it was well understood in the industry that exceptions were granted on a lenient basis hunter did none of that he applied a much tougher standard than the one that the up represented was being adopted in this case he didn't evaluate the reasonableness of the underwriters judgement but substituted his own and he was clear about that on cross examination that's not evaluating for falsity disclosures in the process that's changing them and that's exactly what the district court said she was doing when it comes to the process up where rests may was the originator of seventy seven percent of the loans the pro soap has a specific warning that because rest may had recently gone into bankruptcy the loans name not have been under written in accordance with the guidelines and if you'll forgive one of the words in the next sentence what the court said was that specific disclosure was trumped by big general reassurance that loans generally complied with guidelines never been used that is not found in the statutory language or in any decision the law she said that if the conduct at issue was related in some way to the phenomena that caused the housing crisis that these defendants were titled not at all to invoke the loss causation defense so that one let me ask you so what are your experts not of this have any cause on the losses that he said any losses attributed to the certificates were caused only by the market factors not by any of these failure of underwriting guidelines the the appraisals it was all because of the general national problems in judge droney doesn't make a difference freddie and it makes a difference because that's one hundred percent iran or attributable to factors other than the alleged false statements and of course freddie and fannie themselves made the same representation to courts and the securities and exchange commission that their losses on private label securities exactly of this sort were caused one hundred percent by macroeconomic factors already use for control what are used to make that measurement between the bad loans and the certificates and good logs he had for bench merit marking analyses three of which were excluded and as we point out in or brief wrongly excluded the one that was in evidence compared the year let the loans that mr hunter had found to be defective with those in these securitizations that hunter never said were defective of course he had every incentive to do so and in that benchmarking analysis the difference in losses on those two groups of securities was zero one hundred percent could be attributed to the decline in the housing market and not at all to any law allege false statements appreciate your time  about some of the issues that the district court decided really remarkably on summary judgment without trial issues like what did fannie and freddie know could fannie and freddie have discovered their claim earlier with reasonable diligence did we exercise reasonable care when we complied with industry standards and these are the sorts of issues on which summary judgment is just not appropriate in fact we haven't found a single case in which this court has ever a firm summary judgment on knowledge or on reasonable care and it should not have been granted here so let's start with knowledge no one knew more about the mortgage m you before you go there and i think i know where you're going can you what's wrong with the analogy that another district court use with regard to the car lot because that seems fairly apt that what we're really talking about is maybe they had a lot of generalize knowledge about problems with loans generally maybe they even knew something about specific originators but your client was in the position of making representations and if the dealer on the car lots as i know a lot of these cars have bad is the analogy of the taxi company being generally aware that's not this case freddie and fannie knew about these originators they knew about the loans that were defective you specific want these these specific court summarizes the evidence so fannie and freddie knew that the originators were producing defective loans they knew this in chapter and verse s p a three three eighty five has the district court summarizing the key piece of evidence on this and the evidence that makes this in easy issue it was testimony from freddie's p l s portfolio head so this is the guy you freddie who is responsible for deciding whether to purchase the certificates he testifies all quote it now directly if an originator was not following its own guidelines and was contributing the loans to the collateral for the pool freddie would expect that loans not underwritten to the originators guidelines would end up in the collateral for the pool so let me translate in other words when you drop from a source with a higher level of the facts you're going to naturally end up with a higher concentration of defective loans in the final pool so the better analogy is you've got a water treatment facility on the hudson river the buyer of that who wants to buy water safe in tanks for irrigation that that is wrong and by the way even if you don't accept this evidence this court has said numerous times most notably and ip which is that is in re ip which fifa does not even respond to that you don't have to have a direct link from the general evidence to the specific a wall in a lot of cases holds that you can prove specific knowledge even with evidence of what was generally known in the marketplace now let me transition the fact that they would known that a particular originator would might have just proportion number of of its longs becoming what does it say though about the representation that was made by no more and your client that indeed these generally these loans were in compliance with regard to the originators i mean the fact that they may have had a suspicion concern trust documents you had the right to reject loans that you thought were noncompliance and require them to be placed by be compliant falzon it was part of that's come home to hold tax structure works to these things so so thousand and four and two thousand and six they were satisfied with the number ten filter they knew that there were loans that were defective going through they knew we were not doing a hundred percent review but we were samp no fell over the right did does the record show that they knew about an e mail in their record that someone might construe that way no but this is this is summary judgment your honor what we're talking about in the issue of fact on what they knew that the issue representation that every single loan that got into the pool every loan was a compliant loan except for material departures ok and freddie and fannie could not possibly have freddie had knowledge about the due diligence program and wouldn't that create a fact issue or at least potentially create a fact issue as to whether they x your clients exercised reasonable care if in freddie thought they did some evidence that they did yes of course this is a fact question this was resolved on summary judgment your honor the district court acknowledged the there was ample evidence that r b s and no more both applied the level of care that was industry standard that should foreclose summary judgment no fifty can come in and try to prove that the entire industry was on reasonable but that's not something you resolve on summary judgment and then we just turn to because we've been talking a lot about knowledge but statute limitations goes hand in hand with knowledge even if you don't think our evidence of fannie and freddie here is sufficient to draw the link that they knew to give rise to a reasonable inference that they knew that the fals worked what was represented was there at a minimum what they knew and what they later learned over the course of the next two years put them on notice to ask questions perhaps the starkest evidence in this regard is the credit rating downgrades of several of the trenches that is the junior tranche is in for the securitizations those trenches were backed by the same loans that backed the senior tranche is it's the same foundation now where reasonable bester who saw these downgrades in the lower trenches would ask himself why is this happening and when he asked he learned as the record reflects fannie and freddie's own witnesses confirmed that the downgrade spoke to the quality of the same loans that that undergirded of the senior tranche is and they're the same ones with the same quality characteristics they don't even have to know that moody's said it moody's explained the reason for its downgrade the reason was this is receded as s p a four twenty that the underlying loans quote were originated in an environment of aggressive underwriting and appraisal inflation so moody said here's what the story is put fannie and freddie on notice and at least they could have pled out a claim and beyond that by september of two thousand and seven knew the two thirds of the originators disclosed in these process had either gone bankrupt or gone out of business now why did that happen because they were accused of misrepresenting the quality of loans and therefore were forced to buy back the loans there's a huge disconnect here your honour's and it's really unfair in denying the motion to dismiss for failure to state a claim the district court relied on this very evidence to demonstrate that the pro subs representations may have been inaccurate it held for example the quote originators whose loans support the g o c certificates disregarded their own underwriting guidelines that are widespread and systematic basis well if this evidence supported a plausible claim of falsity then it also necessarily demonstrated that fifa should have been on notice of the claims thank you your honors please the court kathleen sullivan for the federal housing finance agency your honour's as you've just heard r b s a new moral would like to make this case all about the buyer all about fannie and freddie and what they knew and what the incentives were i'd like to bring us back to where we are we're in a section twelve case section twelve is all about the seller not the buyer section twelve arose under the nine hundred thirty three act one thousand nine hundred three securities act which was designed to make sure that we never again had the markets crash the way they had in one nine hundred twenty nine and it puts strict liability on sellers it said everything you say in a prospectus sold to initial direct purchasers must be true and if there's a material misrepresentation the buyers get their purchase money back and of case now your honor is that if we remember that we're in a section twelve case we're not in live fact we're not in a criminal equivalent of ten b five or any of the ten s cases that come before us where as judge livingston noted buyers reliance might be relevant section twelve does not require reliance it does not require affirmative proof of causation and it does not require  totally unlike section to your adversary's argue that's fine but we have to have a misrepresentation and what happens here is that district court in effect rewrote the proceedings not so district court that you would disagree with that disregard to start with the remember we win on falsity is an issue decided a trial as my friends on the other side neglected to mention the standard is clear or an abuse of discretion for every issue here and but even if you underlying collateral loans generally accorded with underwriting guidelines now the other side tries to get out of this by saying oh no it's just referring to the guidelines described in this section but that's not right  honor this is a back to the future problem you can't say in the in your in your process up that the underlying loans we gathered from the banks were originated past tense generally in accordance with underwriting criteria described in the section how could they have been originated with something that didn't exist yet the process your honor as to both the unnamed and the named originators the representation as to underwriting guidelines was general compliance now the notion that you can have general noncompliance with underwriting guidelines misrepresentations as to loan to value ratios because of inflated appraisals or misrepresentation of the credit ratings based on false data so we went on any of those but on the underwriting guidelines that should be dispensed with and don't take it from me take it from no more his own witness mr graham if you go to the record on page sixty to ninety nine he testifies that of course we were looking to the origination guy lines quoth underwriting criteria used to originate the pool assets so with respect this whole idea that it wasn't really the originators guidelines that are being ripped and warranty to it was something described in the process is a post hoc litigation invention that bears no relation to the practice of the industry in fact the industry understood that original origination guidelines were what was referred to and frankly defendants understood it they put us at trial through endless rounds of discovery in which we had to match specific ones to specific originators guidelines years of discovery wouldn't have to go through if the postdoc story were right but your honor i'm spending a lot of time on full city i think that's an easy  because there are three different bases on which you can affirm the bench trial and the standard of review is clear error and there was no fair here the district court meticulously assessed the record she both resolved credibility disputes between the experts which can't be overturned here and to the extent she did her own loan by loan review confirming that she believes more of their experts then there is defendants remarkably fault her for doing that but in our system of justice judges make decisions experts don't tell them what to do so falsity i think is an easy case if i could return to some of the summary judgment issues your honor yes if you could address the reasonable care issue i would like to hear about that absolutely your honor  reasonable care remember is it's an affirmative defense section called puts the burden on defendants to prove that they exercised reasonable care and i know it seems a little odd at first to say we're going to decide reasonable care it's a re judgment as a matter of law but that isn't just judge coats approach it goes back to justice holmes justice holmes told us that if we know that it would lack reasonable care not to look both ways at a railroad crossing a judge can hold that that was a lack of reasonable care as a matter of law so where as in this case there are undisputed facts showing a lack of reasonable care it was appropriate to decide at summary judgment and your honors since my rosenkranz put us to the challenge where he said there's never been a case in which this court has ever affirmed a summary judgment granting lack of reasonable care i respectfully direct the court to in raid live and at one sixty one federal appendix one sixteen were six separate pillars on which the district court found lack of reasonable care let me take them off and then i'm going to show you how defendants have barely made a half swing at only two of them the district court said there was no diligence at the time of securitization and judge wesley this goes back to your point this is not a case about representations about the loans or this is a case about representations in securities in the security act by the loans but what is being sold is the security and my friends lose sight of that when they drag you back into the world of the origination of the loans what's at issue here is was there reasonable care in securitizing the loans and making the special reps and warranties that we paid up premium to have from this learned financial intermediary that was going to save us from market forces so the first one is it is undisputed there was no diligence at the time of securitization don't take it from me take it again from mr graham no more has witness at page twenty five sixteen of the record and multiple other places he admitted in the summary judgment record that there was no further diligence performed at the time of securit almost enough right there to decide the case on reasonable care but there's five more going to acquisition level diligence the district court found there was flawed not random sampling acquisition as sampling acquisition flawed nonrandom not industry standard sampling at acquisition again this is all based on admissions from their witnesses numerous mr co host at twenty twenty six thirty three sorry twenty six thirty one to thirty three s this was a non industry standard approach it's undisputed third pillar that there were missed affective loans an acquisition there isn't numerous on audit at page eight twenty three seventy showed that thirty percent of loans defect rates in the acquisition level sampling they were kicking out rates of fifteen point two percent their own witnesses admitted that was double the normal and fifth pillar the defendants ignored red flags their colorful statements tell you all you need to know about missing red flags if you look at page a twenty eight eighty six to eighty eight you'll find an e mail exchange in which the correspondence among the defendants says should we increase the sample size because the loans we have please excuse my language are crap we don't at that's not our pool it's not our poll reasonable care is an object of stance and it's measured by what a prudent person would do if they were working with their own money it doesn't satisfy that standard to say we don't need to increase the sample size to deal with crap because it's not our loan pool or if you look at page eight twenty nine zero six you'll see r b s is one of r b s as executives calling freemount one of the original nader's fraud much ignored red flags crap fraud montt no response and fifth they didn't verify the representations in the securities were accurate after the fact now you can look at the briefs the bluefish and the grey bricks and you're going to find only true facts there that defendants even try to dispute first they try to dispute oh well when it was fifteen percent really too high a kick out rate isn't that factual no because the as judge cote noted no more his own witness admitted that the twelve percent kickout rates that were being experience were higher than normal that's at a ten five forty and the other thing they take take a half swing at red flags and they don't even connect then they take a swing at the idea that there was no verification that the representations were accurate in the securit representation was true that's at twenty four sixty six so your argument is that whatever freddie may at one point opined about what it believed with regard to numerous due diligence practices the evidence was overwhelming so that no reasonable jury could find reasonable here and it does seem to be substantial evidence in this record as to back here that's exactly right your honor and if ever there was an issue that would be futile to remain and for trial it's this one because at bench trial the district court made repeated freddie at any duties of investigation section twelve says the baseline is truth what the seller reps is truth we bought a product remember we bought a specific security that was specifically to have very specific representations at these are highly specific representations they're not generally vaguely in accordance with some standard this is not more than seventy nine point five eight percent of the loans have a greater than eighty percent loan to value ratio not more than forty two point eight percent of the homes were not home owner occupied these are highly specific representations as judge journey pointed out before so your honor if there was no evidence in the freddie had reason to know that those particular representations in the securities were fools and if i could i'd like to follow and go to the knowledge point because my friends on the other side said well there shouldn't have been summary judgment on plaintiff second defendants had twenty nine depositions over forty six days and received one thousand million pages of documents and they were unable to find a single admission that fannie and freddie knew of the specific misrepresentations in the documents and in fact of course fannie and freddie went to the p l s market the private private label securities market to buy specially packaged lung groups we paid a price they paid a premium to get selected loan groups as collateral and judge livingston you hit the nail on the head when you cite a judge thompson's taxi analogy it's exactly at it is not the case that as judge leslie as you pointed out general knowledge about loan origination  loan market can lead to an inference of specific knowledge of misrepresentation in the securities reps and warranties which are very specific the legal standard is must be specific and if it's if the taxi analogy isn't enough your own rece seven securities with specific reps and warranties and there's no evidence in the record my friends say that due to a three eighty five what you find out that page is pure speculation there's no fact in the record to show that we knew about any diligence failures so market is irrelevant as judge thompson correctly held to specific knowledge of specific misrepresentations as to the specific reps and warranties that they raised to discovery issue they said if we could have had more discovery we might have been able to come up with evidence knowledge your honor with they had forty six that collectively the defendants had forty six twenty eight forty six days of twenty nine depositions they didn't come up with anything they would have to come up with something specific and they failed they had ample opportunity and they failed and again that's abuse of discretion and no grounds for reversal if i could quickly touch on mr rosenkranz his argument about notice there's no issue on statute of limitations were is no court that is ever held that was noticed by september of two thousand and seven the relevant date of defects in our m p s representations the senior tranches were not downgraded until two thousand and eight and there's no reason to suppose because a junior tranche is downgraded that there's problems in the senior tranche in fact in july of two thousand and eight the senior tranches were the credit ratings were reapproved reaffirm so that we had every reason to rely and we could never even if we the other side were given six minutes more to start and they took about ten minutes more between them will i have any extra time yes as we ask questions he will be able to answer them and i expect we have we have a question thank you very much your honor i appreciate the extra time journey let me address the last causation issue in the vandal cratering you identified the issue exactly let me start if i could with a reminder of the legal standard and this is we're not in ten b we don't have to prove causation the defendants have to prove negative loss causation and i think judge exactly anticipated this court's decision in the lorelei case in which this court used an analogy that's really perfect for our case in lorelei the court said that it may be enough at the pleading stage for a plan of to allege that a representation i'm selling you a well built house and then the house is destroyed in an earthquake that's enough at the pleading stage but importantly the next sentence of the opinion said it then falls to the defendant to proffer facts indicating their will built houses or even an earthquake proof one would have been destroyed in an earthquake if i read it's a well buil house then you say so what can i do there was an earthquake it fell down judge can't raise its decision for the court says this is what the defendant has to do you have to show the house would have fallen down in the earthquake even if it had been well built which was your representation this is exactly the case in other words what the defendants needed to prove is that these securities would have lost value even if they had truthful he disclosed all the defective loans that were non compliant with underwriting guidelines even if they had truthfully disclosed the number of houses that were actually underwater on their own t v s even if they had truth even if they had been falling down in the earthquake even if it had been well built and that was vandal and he spectacularly cratered at the track to the point where the district court is rightly said it's that special appendix to twenty five that he was used was the wrong one and he said member remet memorably a trial that may be what it says but that's not what it means so they can't come in and read it and rehabilitate his testimony now with something he didn't look to a trial i would or disentangle macroeconomic causes from the causes of the specific representation you have a problem with causation if you flip the bird in which section trial does the exact same thing applies in reverse you can't disentangle defendant's responsibility for losses from macro economic situation so we went either lauralee or f d i c footnote to and your honor as to miss my friend mr thompson suggestion well we were so little we didn't cause the whole collapse that's not the question question is not whether there misrepresentations were de minimus relative to the entire crash of the economy as a result of our m p s fraud the question is whether there misrepresentations can be disproved as the cause of our losses and they are highly relevant or not to minimize relative to us the argument is that when they have the burden that may be a problem they have the burden of disentangling the burden of  showing that there was a lack of lost cause ation that's right and that's the problem and they can't overcome it could be the plaintiff's burden in the other case but in this in this one it's the years that's exactly right your honor and again it goes back to the fundamental point you know i fear my friends problem is not with if it's with f d r we have section twelve strict liability for sellers requirement of honesty requirement of disclosure of truth and a rescission or a remedy if there is not a truth and so when the burdens are shifted your honor you're exactly right last causation was their burden and they can't meet it here because they can't disentangle what we also think that then if they can come up with better than vandal at trial they shouldn't get a second chance now i realize you put it at the start of your argument that there are multiple paths misrepresentation here but could you address the appraisal question for just a minute in the argument that these the first of all there's no dispute here on the legal standard that falsity has to l t v as falsity as to an opinion so there has to be both objective and subjective falsity we think that to china pick little holes when kilpatrick's testimony is not going to suffice to reverse the district court's holding on a clear error standard and here's why first of all a v m is our standard industry practice we have admissions from witnesses to that effect and the fact that kilpatrick created a g a v m they like to make a lot of fun of that why didn't he use a commercial off the shelf version and the answer is because by creating his own inputs he could make it more verifiable more testable and thus more reliable for dauber purposes at trial so he should be credited not fooled it for that and defend again we built almost our entire argument on defendant's admissions i've given you a parade of defense admissions and here's another one defendant's own expert mr kennedy admitted that the g a a v m outperformed industry a v m that's a day fifty seven zero one two zero three any any of it any objections to the use of tax assessed valuations or anything else goes to weight not credibility and to weight not hit miss ability and the credibility determinations the district court made about kilpatrick vs the country experts should be upheld on credit credibility assessment model but even though it is not an industry standard like an a v m it is based on the us p h p the standardized practices of the appraisal experts and the there's thirty one questions there derived exactly from whose path as it's called use path so if there is reliability there and again defendant's own appraisal expert admitted that the questions in the c m went to credibility that's a agree wholesale with mr kilpatrick after she did her review of the loans that were kicked out of the ga g m into the cam she said well i find eighty seven percent of them not credible eighty seven he said ninety two so she's doing a separate analysis that provides a check and it can't be overturned on clear or view but your honor even if you disregard the c m even if you had any problem with it there's independent evidence that not only corroborated the cam but independently suffices to show subjective falsity you had the petition evidence the remarkable petition evidence that a sixty six eighty seven the petitioners the appraisers survey at a sixty seven thirty two and you had even if you think that's hearsay you don't want to pay attention to the petition in the service you defendant's own appraiser witnesses who on the stand at trial said that they'd been pressured to inflate the appraisals and your honor it was perfectly permissible for the district court also to find all of that evidence that cam as to direct evidence pressure to inflate evidence is circumstantial evidence corroborating it there's additional circumstantial evidence corroborating it and that's that all the false appraisals moved only in one direction all you ever find here is overvaluation you never find undervaluation that doesn't happen in a game of chance if it's always moment in one direction it's not coincidental and so there is even without the c m you've got evidence of last year you've got the the fact that the district court deem suspicious that thirty percent two percent of the purchase money loans had appraisals that just happened exactly match the sale price which again wouldn't happen in nature so your honor we think that falsity is an easy case for affirmative for a firm and if you have any problems with the underwriting guidelines it's sufficient to affirm on loan to value falsity and vice versa and by the way the credit ratings is an independent ground to it's not just derivative from the other two because hundred testified contradiction eric sprott hunter testified without contradiction that data in the tapes sent to moody's and standard and poor's was itself forget about whether it was compliant it was false as to how many houses were owner occupied and so forth your honor we've covered a lot of issues i hope i've convinced you you don't need to reverse any of the summary judgment rulings on knowledge notice or reasonable care we've covered falsity they could say a brief word about materiality if that would take your patience too much  thirty seconds minutes no go have taken that take two minutes because you started with a few minutes in your adversary's total in the original scheduling order thank you your honor i'd like to go back to materiality because again w defendants want you to do is look at the buyer and not the seller section twelve is all about the seller to the seller tell the truth in under section twelve basically materia what is livingston as you said it's an object of was immaterial to a reasonable investor and unlike ten section ten where reliance is an issue we don't vary what a reasonable investor might think based on the idiosyncratic nature the reason you should affirm again unclear or review is it's not even close that this falsity was material to a reasonable investor just starting with the quantitative point we know that five percent deviation from material credit characteristics is a good presumptive benchmark for materiality how do we know that because the f c c told us this court's bill's hearing decision that says that when the f c c rules mandate disclosure it's there's a good ground to presume that the thing for is to be disclosed as material and rig a b says that you must disclose deviations from material credit characteristics in an a k report if there are more than five percent well this case blows that out of the water because the ranges the district court found that you should affirm on clear of you were that the underwriting deviations were forty five to fifty nine percent of the loans in each us l each sloan group and the l t v falsity infected eighteen to thirty six percent of the loans that's a lot higher than five percent i don't think we need to argue about how much water what constitutes a drizzle when we're in a hurricane so the and finally on the qualitative points even defend its own witnesses admitted that underwriting guidelines compliance and loan to value ratios are very important to reasonable investors why because they predict likelihood of an equitable rescission or a remedy at common law equitable rescission or a remedies like section twelve didn't need to have c enter causation or reliance that nothing in the amendments to the p l s or a change that because key language and section twelve still says amount recoverable it doesn't say damages as in section eleven and equity would be very happy that congress said will restore both parties to the status quo ante we're not going to allow windfall to plaintiffs that they get a little extra from stuff that wasn't caused by defendants misrepresentations of anything p l s or a perspex it is an equitable remedy and you should affirm not send anything back bench trial was proper clear on the bench trial issues and affirms on the summary judgment issues there are no further questions thank you very much honors may it please the court just a few very quick points first on the jury trial issue one thing that f h f a has never done is to answer the point that as to the non underwriter defendants there's no restitution possible they didn't receive any money they can't give it back or jury trial was stripped away from all defendants and of course if some were entitle to it all were further the laws causation amended in the p s l r a of one nine hundred ninety five makes absolutely clear that this isn't true rescission we have a statutory formula for damages modified by the affirmative defense of last causation secondly an materiality of what my adversary failed to do was to address judge coats test which she took from the pro sups she said the district court said that the test of materiality can be found in the five percent disclosure in the process no court has ever done anything similar in fact judge droney wrote in two thousand and eight when you were on the district court your honor in connecticut united states against ferguson five fifty three of subsecond it one fifty two that there is no bright line test for materiality that the second circuit has consistently rejected such a test citing guinea no against citizens from the year two thousand written by judge ca materiality of course depends in a section twelve test on the identity of the buyer that is the central teaching of delta holdings against national distillers a decision that came down twenty five years ago and written by judge feinberg materiality in a section twelve case which that was depends upon buyer and a purchaser with the sophistication of the plate so while it's nice to point to section twelve a strict liability and franklin roosevelt the truth is that the standard for materiality was not applied here and the evidence that the defendants proffered on the importance of these disclosures which neither fr fannie ever had at the time they made the decision to bot you never see all the evidence we proffered was rejected as irrelevant because of the district court wrong standard was used there is no basis in the statute to say that if the conduct is related in some way to the phenomena that cause the macroeconomic event that the defendant is stripped of the last causation defense and again the evidence we offered for the most part was rejected it wasn't just dr varian del and his benchmark which were excluded because the district court relied on the f c i c report the financial commission inquiry to two sorry financial crisis inquiry commission report the district court rejected fantail standards on the ground that that report which the court candidly said had never even been offered into evidence and the contents of which are not subject judicial notice that report showed that the whole industry was tainted as if the last causation defense can be stripped away from a particular defendant based on the conduct  authors know me or it is never even mentioned in that six hundred page report and finally on last causation i think your minute has and i thank you your honors here we very much appreciate your patience thank you me yes that is about the buyer's no knowledge is not a matter of the novo review is bissell of in acknowledges it's a fact question but the district court decided on summary judgment i want to focus a bit on diligence again this was summary judgment misawa been hasn't disputed our central point here you do not declare that an entire industry was unreasonable not dispute that we have evidence that the industry that what there are practices here on diligence were industry standard you don't to clear that an entire industry was on reasonable one was doing due diligence twice why was there no dirt due diligence the second time i go back to the water treatment analogy the water is coming out of the pipes it's tested at the factory it doesn't change later on in the representations in the produce ups were about origination so what did this look like an origination the loans are in changing their character at the point of securit bad sample going missed defects red flags classic back questions i'm not going to go into all of them but let me just take one example red flags classic fact question we know it in email later the seventy eight percent number that was an e mail and it's apples and oranges anyway our fifteen percent kick out number that my colleague has pointed to was a number that was drawn from the forty that is so unfair the district court took diligence out of the case decided on summary judgment then gratuitously made findings against us and diligence we did not present our diligence case we did not present a single witness and one just would be futile because at a bench trial there would be an entirely different case if you were presenting yes your honor and again we did not affirmatively present a single substantial cause that is so everyone agrees the housing crisis caused these losses f if a comes in and says well no no r b s a new more a cause a piece of it there is not a  piece of evidence saying that we caused it the only thing that the district court found was that we were not unrelated to a phenomenon that may or may not have caused it now this this theory touching upon touching upon is just an extraction or an extension of the theory that the dist that the supreme court has already rejected this touching on you need a substantial clause  amount of a de minimus cause a de minimus clause is by definition not substantial if there are no further questions i think the court for its attention and i request that the court reverse the district court's ruling