the morning your honour's basically didn't yes yes and i also have the receiver mr isaiah here with me at counsel table rogers in this case the receiver is alleging that the defendant chase aided and abetted a ponzi scheme by knowingly permitting the fraudsters to use chase deposit accounts to perpetrate the scheme these claims we concede in the brief require a plausible inference that chase actually knew that fraud was being committed and the receiver meets that burden here this is not a case like all of the cases cited in the bank's brief involving a bank that merely should have known that something was amiss based on red flags that the bank either missed or disregarded afraid but of this tell you up front my problem with with the complaint is that under under twamley and it is nothing but conclusions i don't know what they are so judge as i as i understand this transaction to the nothing in the bank and the deposit or and then you import into that any rules of law by statute that the state requires in effect to be included in the a great many by that judge is there any indication what their contract terms were and this complaint not that's true judge you didn't attach anything and there is no citation of any statutory a regulatory provision that the law and closes that would be included in the contract it may be that i agree with that judge although the complaint is premised on common law whatever the case may be the rule  may be common law but the common law is the contract between the bank and the deposit or judge but the can't the bank can't contract around the common lie dude and i understand that i understand that so you take the contract and you break rule st of all you don't cite the contract all you say is they deposit money right judge so we don't know what we don't know the parameters of the contract i don't dispute anything you're saying judge but assuming you know carrying out the point of argument that you're making the line of argument that you're making if the contract said that the the deposit holder cannot hold the bank accountable or liable for aiding and abetting an intentional tork there's case law on this isn't brief so i don't have that case like my fingertips but there is case law that says you can't contract around the common law duty not to aid and abet an intentional tort so irrespective of any contract terms the bank did have a duty to not knowingly aid and abet really the duty that the bank had would you agree them from the contract i agree the duty stems from the contract we have to now wait a minute you have to know what the contract is do you agree with that i do not i do not agree with that i know he has a duty stems from a contract but we don't need to know what the contract was the bank's duty to not aid and abet an intentional tort does not appreciate the word that i appreciate that very much obviously judge but again i think irrespective of any contract terms the bank had a common law duty not to aid and abet an intentional tort can i ask you i mean it seems to me that this case turns on whether the bank had actual knowledge would you agree with that yes yes judge ok and so what are the allegations that you rely on to show that the bank had actual knowledge of this ponzi scheme so the key the key allegations in our complaint judge are that generated documents associating the accounts with fraud but control do something about that so the bank freezes the accounts because it says that there is suspected fraud right correct judge ok but does it say what kind of fraud it is or any information i mean could it be fraud on the account that is fraud on the victims i proud on the looking at the owners of the account as the victims i mean is there any indication there as to what they thought that fraud was it's possible right i would concede it's it's possible that that's what the bank was thinking it's also plausible that the bank had identified fraud on the account fraud being perpetrated with the account and then determine for reasons unknown to anyone really other than chase decided to open new accounts let the account holders move their money into those accounts and continue transacting business for another two months now because we and we know that circumstance we know that scenario is plausible because we've seen it happen and this court in the perlman vs wells fargo decision said yes those facts which that court had before which essentially  facts that this court has before it now state plausible aiding and abetting claims because of the paying if the bank realize because of its internal account monitoring systems it's and i money laundering system it's fraud investigative systems if the bank comes to realize that a ponzi scheme is being perpetrated through the banks accounts at that point the bank has sufficient knowledge to be held liable as an aider and abettor and can be held liable on those claims if it continues to allow the accounts to be used for that purpose and again those those were exactly the facts in the wells fargo perlman versus wells fargo case which we discussed extensively in our brief the only real differences between  the facts in this case the circumstances in this case and the circumstances and wells fargo is that the receiver was permitted to engage in discovery in the wells fargo case the receiver engaged in discovery was able to obtain the bank internal investigative records anti money laundering records which showed what the bank was thinking when it froze the accounts which showed that the bank realised what was going on in the accounts and why it made the decision to freeze them the receiver in that case also deposed  bank fraud investigator who testified that she immediately recognised the account activity which is the same account activity that we allege in detail in our complaint she immediately recognised that account activity as being indicative that the accounts were being used for fraud she testified that it was the type of activity that would make the hair on the back of a fraud investigators neck stand up in this case the banks ordered that discovered in this case the receiver tried to get those same account records the investigative records which show exactly what the bank knew and exactly when to gain that knowledge and the bank convinced the state court presiding over the receivership that because this federal case was pending it should hold off and not allow the receipt would have that discovery in the state court the bank then convinced the district court in this case to stay that discovery pending a ruling on the motion to dismiss which of course is extremely unfair because the bank obtained dismissal based on lack of allegations concerning actual knowledge when at the same time it was stifling the discovery that it successfully stonewalled dealt with exactly that issue there's really there's really the bank has never disputed i don't believe the bank could in good faith dispute that it has at its fingertips documents that will tell us that will tell the court that will tell the receiver exactly what the bank knew exactly when it came back and what was the bank thinking when it froze the accounts what was the bank thinking when it decided to unfreeze the accounts  you know it's it's safe to assume the bank is not hiding those documents because they're exonerated they would exonerate the bank right i mean that it's resisted that discovery presumably because it's bad it would be bad for the banks case and  by the way the banks never really offered any legitimate reason why it can't produce those documents under than the sort of general vagary that it would likely be burdensome to produce the documents it would likely entailed great cost there's never been any affidavits applied or any actual proof specificity proffered to support the suggestion that it would be it would be burdensome for the bank to produce those documents and we're not talking about documents like you know all communications or all e mails these are not the types of documents that get lost in a lower level bank employee drawers these are significant important documents that the bank generates that again presumably and in my experience the bank has available at its fingertips your client offer to pay for the production of these documents in response to their response that it was overly burdensome and costly i'd i'm not sure it really makes a difference but if they did that might be something i don't believe there's anything in the record to that point  i can tell you that outside of the record to my knowledge the bank asked for an exorbitant fee to produce documents which presents you know real practical herder hurdles a state court appointed receiver that has has no money right other than the money generated from litigation recoveries i don't i don't think you know again speaking anecdotally outside of the record i don't think that would have moved the needle because frankly these are simply cancels the account clothes and the account it invokes a term in the contractual relationship which allows it to discontinue the relationship but terminate the relationship that's all it does and you and you have evidence that a ponzi scheme is you've got a case against the bank i would say i'd say if all the receiver alleges is there was an insult you have a case against the bank again and i just want to make sure  you make an allegation that the bank you allege this bank closed the account because suspected criminal activity that that the posits were proceeds of criminal activity that's what you allege correct all the bank did was close the account without then reopening the count and allowing that as i claimed i would say judge no no i would say there is no aiding and abetting claim call you're missing the crucial piece of it and the depositor takes its money right ok which is what it did later on it took its money it put it back in the bank you then took it again it put it a little bit took it again they closed the account and they you know without saying a word they just close it and they happened to open it again a week later and then it's empty you got a case under common law if the bank closed the account because account was reopened and then empty which is the case here the critical facts which i think distinguish our case from the hypothetical you're describing are that the bank continued the relationship despite realizing that the but your best case i don't understand your question judge i got to your best case yet proposition the perlman vs was fargo case supports that if the bank continues if your argument is your argument is the bank as a matter of tort law we're going to stick with the hypothetical bank closes the account no announcement from the fraud section of the bank no now just close that they the new account of the stablished take the money out the fact that they established a new account the money was take it out crates the common law to knowledge is what creates the common law oh if i don't have an alibi and i apologize oh the knowledge was that the fraud section said we're closing the account suspicious so they don't say a word they just anybody they just close the account and they do that so that they can avoid a lawsuit money is gone people got the money you file a lawsuit then you get into discovery to find out why the bank did that i think there you do have a pleading issue because if i don't have some good faith basis for alleging that the bank well then i can't believe that they knew right not rule eleven would tell you you can't do that and as a matter of routing you know the law would say you could not sue the bank all a bank that is close we write opinion which says if the bank simply just closed the account not said a word they can't be liable well i think you know again trying to to go down the north there under a theory that they  got in bed with the ponzi deal right and there are potentially other avenues of discovery again in it as a general matter in a receivership case a receiver is able to investigate these issues pre and is able to formulate a good faith basis one way or the other priest as to what the bank knew that was attempted to be done here but it was stifled by the bank because the federal case started and filed and what what damages do you want the damage  aiding and abetting the bank never had how do you get all the bank knew is what came in and went went out banks have an obligation under federal statute in the bank secrecy act to report those types of things to the federal authorities so i hope i hope that answered your question judge i feel like i was kind of heading over myself trying to follow you there but i'm just trying to get to the consequences of your point i appreciate that judge i think that you know again the requirement of actual knowledge protects against what i what i sense is the slippery slope argument that you're identifying right if the bank if and i know i'm i'm over my time if that's right if the if the plaintiff generally court appointed fiduciaries bankruptcy trustees receivers right does not have some good faith basis for either based on what the bank said as as you identify judge or based on priest suit discovery investigative discovery if the fiduciary receiver in this case doesn't have some good faith basis for alleging well at the bank you actually you're standing in the shoes of the ponzi dealer of the ponzi entity that you're you are you are ponzi himself well i am the entity that the pilots are not you are subject to your sub everything ponzi is you agree now there's a lot of the brush and i'm not i'm not sure that that would work you know but i think that's distinct that that's where you are you're pons they bring on the lawsuit against the bank i'm a court appointed receiver lawsuit against the bank so there is the sweep that will go get a judge a shoes of the bank that went under that's my understanding judge yes they do they don't they don't get better position today and that's my understanding so what we do is we invent a rule which says a judge appoints a receiver for a ponzi the receiver is got a gold mine well judge you know there are practical policy considerations the support the law that says that yes i mean up for example the receiver here is acting for the benefit of various to fraud creditors and it is your honor and i think the case law that the receiver cites about that actually speaks more to situations where the receiver is trying to claw back transfers to rd parties investors who are better off and so  i think the receiver and the bank have some dispute as to exactly what the receiver is entitled to do in these circumstances but i agree yes your honor so your colleagues  n the allegations at the bank to tactic fraud in those two accounts are sufficient in view of the fact that it's not allowed to have discovery yet to establish the plausibility of its claim did you want to respond to that why is that not plausible yes your honor i'll respond to that in two ways st of all the receiver doesn't have a lower bar for crossing the threshold of a motion to dismiss before  the doors to discovery than any other litigant does the receiver i don't think he's making that argument but the question is why is why is that why is it not plausible to take from that allegation that the bank had knowledge that there was a ponzi scheme and then when it opened the new account on behalf of the same wrongdoers i guess that it had knowledge that it was somehow assisting in this scheme so i think your honor hit the nail on the head earlier that the deposit slips or the withdrawal slips that the receiver is relying on say fraud transfer to new account and the other one says fraud on account transfer to new account and so the purported detection of fraud could have been fraud on the account holder consistent with the language on that withdrawal slip your position is that it's just as likely it's at least just as likely that the bank believed that there was fraud on the count owner's as it is that the bank believed that the account owners were committing a fraud certainly that's the case your honor in the complaint ation of what those statements mean on the withdrawal slips and i'd actually point the court to to lawrence in which the court found that allegations that a banker spoke positively about the scheme or in the schemers accounts was less was less likely to show that the bank knew about the scheme and was in fact more likely to show that the bank was an innocent participant can i ask you another question  you know it seems to me like it's not completely impossible if we were to if we were to agree that there wasn't enough in this particular duration of the complaint it seems to me that it's not completely impossible then the plaintiffs would be able to come up with enough to survive a motion to dismiss and the district court denied permission to amend so what is your best argument for why that was a correct decision so that the district the receiver didn't seek leave to amend in the district court and certainly didn't put before the district court any additional facts that the receiver would be able to plead and actual knowledge is a high acquires a strong inference of the other hand even though even though there might not have been a specific motion in that particular case the the plaintiffs were responding to a motion to dismiss and probably didn't expect on the st motion to dismiss that it would be dismissed with prejudice be that as it may or honor the receiver is given no indication that there are any additional allegations the receiver can come forward with and i'd actually like to return to spent sorry before you get there let's just assume for purposes of this argument that the receiver had some other allegations that it might be able to come forward with is there some reason why they shouldn't be allowed at least one opportunity to try to amend the complaint no your honor other than the fact that the receiver hasn't actually asked for it attempted to do it and there's no indication that the receiver has anything else so i think it's and in fairness it was dismissed before they really had an opportunity to do so right i mean it was the motion to dismiss was granted on your motion and in napa order it was dismissed with prejudice right yes your honor that's accurate alleged typical red flags atypical transactions that sort of thing and also alleged that the bank froze the accounts and then unfroze them and this court said that's not enough to show actual knowledge that's very similar to the to the circumstances that are alleged here it's the amended complaint in problem and b wells fargo that this court to allow to move past the motion to dismiss stage because that complaint allege things like names of bankers and the particular knowledge that they had that there was in fact a scheme afoot and we don't have any of that here i do want to touch on something your honor asked at the beginning of the argument though which is whether this case revolves around actual knowledge and i think that's the case for the aiding and abetting claims that is not the case for the fraudulent transfer claims that are also want to appeal the fraudulent transfer claims that the receiver alleges do not get out of the gate because the receiver hasn't alleged a transfer which is an essential element of the receiver's affirmative case and so while the receiver has collapsed that into a mere conduit analysis which would be an affirmative defense chase made available cells of the the transfer element itself shouldn't be brushed by and doesn't have anything to do with what knowledge chase did or didn't have and the district court's dismissal of the fraudulent transfer claim based on the absence of a transfer is consistent with the statutory language within it's consistent with this court's decision in we end the wells fargo is consistent with a line of cases in this circuit in the bank bankruptcy context and it's also consistent with every other court of appeals to reach the issue finding that where a debtor transfers or moves money in and do it it's certainly the case that the receiver did not allege that there were any conditions on these accounts that's that's correct and that's why the district court properly found that there were no transfers here the st element of the fraud fraudulent transfer claim before even follow i'm not sure that i followed your orders class at the bank had to the court had to assume what the contrary between the palms and the bank provided it in that st there has to be established a transfer for the theft claims but with respect to the other three you would agree it with respect to the common law claims you would agree that knowledge is the actual knowledge is really the key issue yes your honor i would agree that that is the key issue and that the district court properly found that this complaint asserts typical red flags suspicious activity perhaps suspicions of fraud or as the district court put  actual knowledge at some point in time at the time that cancelled the account it had actual knowledge as it was a ponzi scheme all right your honor it closes the account yes  the liability no your honor i think in that area they have the bank has done exactly what we would want the bank to do all that happened here was that it took they took the money that they were titled to have even though it  but if they had actual knowledge and the bank close the count account because of the actual knowledge and then the bank having actual knowledge that this was a ponzi scheme allowed the count to be opened again and the new account to be used to further the ponzi scheme in any way then you would agree that that would be a problem if the bank had actual knowledge i think then your honor we would be talking about whether what the bank did crossed that st st threshold of actual knowledge of the damage the damage to bondi would already have occurred your honor if what i'm saying is the bank closes it count with actual knowledge you and i ask you to address two things please certainly judge and they're not exactly related so the st thing would be if you could address your colleague's argument that the idea that  there was actual knowledge of the idea that there was no actual knowledge is at least as possible as the idea that there was actual knowledge and just one second and so under tom playing netball when you have two equally possible alternatives you haven't established possibility and the nd question which is unrelated is what is your position about possible amendment so i think judge if if two possibilities are each at least as possible then the court's duty is to infer the complaint and make the inference that favors the plaintiff and here it seems as though the case went the other way the district judge in very telling language said well the bank had knowledge of symptoms of a ponzi scheme to me that's enough how could a plaintiff with nd hand knowledge ever allege more than the symptoms of knowledge that's every knowledge case ever is allegations and evidence of symptoms of knowledge so i think if each possibility to answer your question directly again is equally possible then the plaintiff wins the tigers to the plaintiff do you think that each possibility is equally possible and if not then why i think either the bank made a mistake perhaps was negligent identified a problem with the account fraud with the account and either opened the account anyway because somebody was asleep at the wheel or somebody in the bank pulled a lever and decided to continue allowing the fraud to be perpetrated through the account i would say i bet it's one of those two things judge in my heart or the bank investigated as far as they could tell there's no illegal activity that would be i would put that in the st category right there because there was a legal activity so and there's no dispute as to that so if the bank investigated in came to that conclusion it made a mistake not liable on an actual knowledge aiding and abetting standard  or it's the other possibility in which we state a claim and proceed judge given the opportunity to amend what i would say is we we need the discovery in order to know what the bank knows chase knows what the bank what it knows in order to allege knowledge we need the discovery and to answer judge show flight your question about the contract directly i'm told by the receiver who was whispering in my ear that we requested the contract but the bank failed and refused to produce it in connection with the discovery stay and i'm out of time unless the court