why you didn't file in the bankruptcy your honor first bank has always believed that its primary remedy was against l b i as a collateral custodian the original swap contract  you yeah and you would have gotten something and then you would still be able to claim wouldn't you if you if you were in fact the customer under finra wouldn't you have been able to do that i believe that's correct ther lost the claim with respect to the securities of him selves you now make this rather contorted claim that you are a customer and there for something other ha added so what has first then how does first bank look at all like what kind of customer person who uses a broker and who the broker then does something improper with respect of a collector he or you had given money to somebody securities  something that they you could do some things but they could too that was in the contract but apart from the contract it was a clear what what that deal was this wasn't you'll go into a broker so confused me but the security side of things you had to deal with them and you gave them some stock and in the deal that you gave you gave them that stock you said you could sell it i don't tell my broker that he can he or she can sell my fit your honor there were three purchase to this relationship there was lehman's subsidiary not you they paid they moved to the certificates over to them and ultimately it was they that sold them to barclays after lehman went under yes no relationship with use the securities yeah i know it was not it wasn't in the exact same way well this is i don't it's creative but but one might say foolhardy your enemy a language that mable them to do that in the swap contract to go bankrupt on september seventh no one expected it you know i mean nobody actually people who are working well some of the issue here before the court is who was that securities account being held for wasn't healthy you know with due respect your honor we disagree no contract with we have no reason for the and the people that placed it there were not your agents they were free to do that stock as they wished all they had to do is on the day they defaulted and you demanded their return they had one of two options to return the securities to you or to pay you what their value was they had options they did not have to give you the stock back and had the right to give you the money and therefore if they did transfer title but your contract said that they could do what they want exactly maybe they didn't transfer title but you gave them something which was for purposes of whether this is  there i'll bet you your problem with that is that you got an a firm judgment at the circuit it's already determined that you had no property interest in that stock it became in those securities it became part of the bankruptcy state securities industry is based on the distinction between suppose we were wrong and that no i'm not no i'm not at all you can you agree that we were right on the ship has sailed with due respect and i disagree because it's is as you tried to make it out here that you had an interest other than the securities of him selves because you were a customer and therefore vat doesn't collaterally you stop you because you played something beyond the securities then the fact that the only thing that you can say about them is that they had to be for security doesn't matter then you are under karva that is i don't see how you could have it both ways if you bank obviously uses cash in customer's accounts to make loans to do trades whatever the bank always remains liable for the customer's account balances the securities industry is predicated on the exact same approach particularly u c c article eight which governs the entire industry it is common place billions trillions of dollars for collateral custodians and broker dealers to use securities that have been deposited for their own business model they do trades they use it as collateral for their own loans regardless of what happens they remain liable for the positions in their books and records that is what happened here the missions in their books and records remain the same out all bank monthly statement saying it was there at all times the records that l b i maintain said there were long positions they never change regardless of the securities flying all over the place and ending up in barclays if we say that securities and securities positions are the same not only the industry but every sympathies will be screwed up because the simple statute look at the definition of not equity it's based on securities positions there would not be a if the securities were still there it is based on the securities positions the definition of nec and equity everything you see article it says it does not matter what happened to the underlying asset you have a claim against the collateral  a classic try pretty close to a custody arrangement they were much more precise after lehman for of use traditions and dodd frank had to deal with this as well frank said we have got to get a hold on this because the stuff went all over the place and everybody lost their rights and now everybody is more precise my clients are going all the time to how do we segregate collateral how do we be specific now yeah they should have been in the past they didn't have the facts of the case that we have to deal with but all the records all the evidence says that they'll be always acting for both parties the control agreement that the trustee and sipek focus on so much if you do control agreements i can on my bank account and give a lien to my secured party all you have to do is the bank has to say under this control agreement i will follow you secure parties directions that doesn't mean i don't own my bank account that's exactly what happened here and that is why this is different from car of a car or carvel transfer title and the repo  with me it's clear the first bank is back before this court claiming the same collateral securities that it posted for the same swap agreement that this court carefully looked at a year ago and first bank is claiming that it has an ownership interest  really this is a thinly veiled attempt as as your honor went to to really recover money damages for a default by its counterparty lehman brothers special financing and as as you alluded to your honor first bank bargained for bankruptcy court there's no reason why they could not have in the record does indicate that they had conversations with individuals from l b s f n l b h i suggesting that they should go ahead and do that and there's no indeed no reason in the record why they could not have filed that claim your honor so yes accretive to affirm the district court but if i could just respond quickly to several points that mr honeywell just me and to your honor's point why this case isn't like chorale we agree with you with your honor that in fact the case is very much like are valid and in fact if anything the claimant in carvel how to possibly a stronger position because the claimant in corral was actually had entered into a contract with  your honor pointed out there is no contract no agreement with l b i here and in addition the the language of the credit support agreement here in the the language in the swap contract that much stronger it's it says free of any claim or right of any nature whatsoever it's difficult to imagine why that language wouldn't cut off any any interest at all the second point i would make is  to respond to mr honeywell's point that l b i was holding the collateral times that is not the case what the what the swap contract provided was that l b s f was quote deemed to hold the collateral at all times and finally with respect to the long positions that mr honeywell pointed to if your honour's look actually look at the the pieces of the stock market better and the joint appendix those long positions show that l b i was long to owners have now for the questions all you're going to sponge this and that was what that used to court granted and so we moved to expunge your honor in the bankruptcy court first and the bankruptcy court granted that motion we appealed that motion and we appealed sorry mr honeywell  kind of cute i represent the securities investor protection corporation good morning and may it please the court should the court not preclude their claim based on collateral estoppel we think it should affirm the decision below because first banks simply cannot meet the in trust me criteria this court has consistently applied for more than forty years to establish customer status under subpoena and there are three basic reasons why they can't do it one it had no contract with  contract in with a separate company l b s f and the plain terms of that contract provide that l b s f was deemed to be holding the collateral at all times first bank admits this on page twenty six of their opening brief and if you look at their actual claim as filed with the trustee first bank states that paragraph seven the first bank was required to post collateral with l b s f not with b i second the plain terms of the contract not only granted l b s f broad rights to use the collateral to loan it commingle it or sell it which they did but it also said that l b s f could use the collateral and i quote free from any claim or right of any nature whatsoever of first bank including any right of redemption unquote agreement that council referred to makes this crystal clear and it has it says in the master agreement that i quote l b s f is not acting as a financial advisor or fiduciary of first bank so as judge rake is the language that you know me well this is very very powerful i'm a little hesitant to go just of the language because i can conceive of situations where that language is be brokered to in effect take advantage of an ordinary customer and that we would read it in a different way that doesn't mean we should read it that way when you're dealing with two grown ups sophisticated participant this language is there and even if you had an ordinary investor who went to lehman brothers and said to lehman brothers you can do whatever you want with my money you can sell it you can loan it and that's free from any right of any nature whatsoever for me to redeem my collateral then of course yes you would not be a customer furthermore they want to do interest rate swaps they had to go to a special purpose lehman vehicle to do that they couldn't do that at the broker they couldn't do that at the sipek member they were doing something it wasn't even a security is protected under the securities investor protection act so here they are claiming that they are unique first impression case the only one of its kind one more point and that is they make this argument that some sort of difference between the actual securities they're claiming and the securities positions under seppa that argument has no merit for three basic reasons first it's a distinction that's contradicted by their very claim as judge rake off correctly held the room and the record clearly indicates first bank filed a claim seeking its securities securities positions whatever that may be and its claim for thirty three zero eight when it says l b i owes me securities answer yes at j thirty three fourteen in the narrative attachment to its customer claim first bank states that it seeking the return of the pledged collateral the securities second point under the net equity definition referred to by counsel what is pretty one who is protected must first be a customer and that is one with an account at the sipek member here the only account of the sipek member was the account style first ban pledge account for l b s f and as judge rake off correctly referenced in his decision this wasn't just a finding of fact this was a stipulation of fact found a j a thirty fifty three paragraph twenty eight they stipulated to a final point one with an account has its claim determined by a trustee who calculates the net equity and that is the dollar amount that one is owed that's how you get your pro rata share from the failed broker dealer and that calculation which they reference requires the trustee to perform what is essentially a legal fiction the net equity definition found at seventy eight triple l sub eleven incipit says that the dollar amount is the amount that would exist if the trustee had liquidated the customer's securities positions but a trustee doesn't do that in fact under the payments the customer section in simple that's found at seventy to be two it says and i quote with respect to claims relating to or net equities based upon securities and of course that's what we're dealing with here i trust the is obligated to satisfy the claim by returning to the customer the actual securities to the greatest extent practicable so to sum up under septa one is protected for the actual securities that are brokers to projects the custody function that a broker dealer performs here they were holding nothing those rights were cut off a claim and bankruptcy is a right to a payment there is no right to payment when the right has been caught off as this court has already concluded thank you custodian provision was not a political in other words l b i was not acting as like a sturdy and for o p s self the books and records reference that evidence the longer version throughout the life of the case were coded as so who was the customer indicated in the customer account in l b o s collateral account that was held here l b i'm meant that there were no such customers involved and sophisticated interest rates wops which post securities clairol is the and the lack of the designation of customer doesn't create the existence of one under subpoena it just perhaps it implies that there were no customer the ok the definition of customers in the simple statute itself i understand where it is but i asked you what you were talking about agreement so i was asking perhaps it was custom i was mentioning ever to talk about an agreement leads to poor customer a definition requires up to be a securit