our perspective is related to a calculation there are three orders that we appeal the summary judgment order of the reconsideration order as well as the bench trial however if we just kind of put it all in the one thing it's related to when the fault actually occurred we believe that the district court basically miscalculated what consists of what they define a court a quarter's three months they've they put that out there force three full months that was of course in summary judgment we came in and we argued kind of from a business perspective where it was first quarter so first quarter you know january through march second quarter april through june so forth that's what we argued the record said no it's in the three months how was it defined in the agreement it's defined as quarter yes to quarter ye general understanding of a quarter is three months correct and i when that doesn't have to be january through march and then mark and then april through june it doesn't have to necessarily segment that way does it no it doesn't and i mean when the district court came back and said here's what our definition of a quarter is while we contested it somewhat in the reconsideration our main point of contention was if that's your definition of what a quarter is you still miscalculated how the when default took place because in this case the payments were all due on the seventh the seventh of the mon so they said in the order ok if a payment didn't happen may seventh by july seventh or you're in default well that's not true may seventh to july seventh is two months but the last payment was made on april seventh so there's three consecutive missed payments a problem a one month may june two months june july through months that's up to three months so that i would disagree that there are three consecutive missed payments because april seventh there was it three payments write three consecutive parents may seventh june seventh july seventh three were correct but that's not what is defined as a porter a quarter is defined as three months so he missed a payment on  month later he missed a payment on june seventh and then a mere month later he missed a payment on july seventh but now you're taking the approach that may seventh to july seventh history month it's not may seventh to you don't pay it in march and you don't pay it in april do you think the mortgage company is going to say you only missed two payments well it depends when you don't pay it in april what if you pay it what if you on may you said first i believe first so you put pay your april payment on april thirtieth but that's not the facts in this case it is it is if you look at it from the reverse side honestly if you look at it from the reverse side it makes perfect sense because  mr mcdonald would have made a payment on august sixth two thousand and eleven fifty nine pm if he makes that payment and my client says no you defaulted he didn't default and i think this court would say no he didn't of default because as the note says if you make if you don't make a payment within any quarter in the three months if you start killing april he's already made that payment it's it's not part of the quarter th order i mean i just i'll be frank with you i just don't buy that reading but but do you have anything i mean we're looking at the same language you are is there anything else that you all put in the record to suggest that your reading is the one that the two to both sides had in mind you standpoint the reading that i think it was just wrong to have been advocating seems to make more sense from what your client for example what your client would have wanted so that's what i'm wondering is there something something something extra in sick to the agreement itself that supports the reading you're now advocating i would point you to the letter that was attached to summary judgment where mr mcdonald he wrote a letter on may twenty eighth if you have it your cite for that will absolutely the one where he said he's not going to pay anymore oh well he also write also says in that letter that he's taking advantage of the clause in the in the contract or the promissory note excuse me that says he's deferring this payment right correct so i  think the fact that this came out on may twenty eighth this is a may twentieth letter while on may twenty eighth would he be were if if we calculated that the way that you're apparently leaning right at this time oh if we calculate it that way while on may twenty because he's saying he's missing his first payment because he has missed the payment as of may seventh and under the agreement interest is now occurring that he's going to have to pay now he's not going to be in the fault if he doesn't make you know if you've got three right but all the same i think is that look i yeah i'm on the hook i guess for whatever current interest i can remember if the interest can get with it but seven percent it's right but the payments are do the around the promissory note also tells you that if they're not technically late until you don't make a quarterly payments so technically there are these payments are until you missed the recall i'm talking about it specifically only addresses late payments in one section of the promissory note i have it right in front of you so what are you referring to because i read it as saying these payments are due on the seventh of each month they argue on the seventh and if you go to the second page through excerpts three three ninety six i believe this third excerpt three ninety six i got a different number from you but what provision of the this is the second page of the note and it's the second or the first full paragraph the second paragraph ok what is the talks about a lake that's the only thing in the entire greenman that says late and you've seen contracts clearly they generally tell you what late is go see this does not describe what late is except for here this is the only place it actually addresses this is how we constitute late and here's the penalty for it whereas most contracts will say it's concerned later if it's not within five of when the due date or something to that effect which i think this also will go back to lend support to the calculation of the payment being late when is when is late when it's default not until the end of the quarter and so if he if they don't make the april seventh payment and they instead make it on may sixth it's not late it's it's fun but they did make the seven payments so and so then we move to the next month period which is  fact of lee what we're talking about here and they didn't make the money said payment and then he wrote the letter that said you know i'm deferring this payment but then you have to start calculating from that you don't you can't calculate from april because april has been made and that's part of a whole that's that's its own separate month payment period and that's what i used to my brief obviously right is the are the payment periods but when you start determine and let's  late if you look at the no to really doesn't say this is how we constitute late until you get over that quarter so i mean from from my perspective of the whip my reading of it and that's what i've argued argued all along is that what the judge came back and said the district court judge may seventh to july seventh is not giving the full benefit of it and if you looked at it from the perspective of mr mcdonald wanted to keep the company if he made a payment on august six he wouldn't have been in the fall if he made any payment on august sixth just one he would have been in default and i think if you look at it that way you have to turn around and determined that the way that my client and i are looking at it is a correct that he had been terminated in may and there was a clause in not a promissory note but the employment agreement that if he was terminated then he would mr macdonald would be required to immediately purchase shares so he but the district court said they didn't determine he had been terminated and that was the whole of the claim and that's not here today but so i don't know if he ever did cease to be a shareholder based on what the district court decided no matter in this case because that issues no longer correct joint ok correct yeah we didn't appeal that they determined that the only thing we appealed was i'm talking to your your client not mcdonnell i'm talking about your client that and i am speaking of yeah  also have the the appeal related to mr mcdonald's when the court determined that he was no longer a shareholder yeah i'm not talking about that ok yeah but so i mean the company ceased to exist as a view as of june when he that remiss thinks in terms of your client a shareholder correct and technically he still is a shareholder and then you lose because it says whichever period is later that's why i was asking this question i thought you were going to say well he seems to be a shareholder as a general did then i'd lose if my client is still a shareholder right my that's longer than two years right but why would i if it's more than two years i don't lose default he says if the fault occurs when i see your point processing through because you're right you're right as i think everybody including the district board we kind of passed up on that agreement but obviously when the company shut down in june and when there were never sure there were no sure that it went into receivership in july and it was done so thankfully we're past that if you we get back to the calculation issue and i don't know if you want to talk more about the dates of my calculation i can i can get to the my declaratory relief are you running out of please the court right bo she on behalf of the mcdonnell parties i would submit initially that i think my mortgage holder is the same as director on sons of calculates mortgages the same way june you know may seventh june seventh july seventh that's three months and if you once you've missed that you've missed that i don't want to necessarily spend a lot of time on that issue because i think the more interesting issue and probably why we're here for argument probably relates to the last versus transaction causation and this court's decision intervene i would however point out that mr blasio us unless something has changed and we don't believe it has never ceased being a shareholder of m s i in fact our position is that we soon as mr mcdonald forfeited and sent the may twenty eighth letter saying he's no longer a shareholder that all of the shares revert back to mr blasio said he is the only shareholder of m s i and i understand that the company's business was shut down in june and there was litigation and the result will even bankruptcy but the company didn't ceased existing prior to august seventh of two thousand so again to judges argument and position with with counsel i think that gives yet another reason why that argument fails in addition to the math but i think well well that's the agreement thing that the sheriff's report back it does the promissory note says that if if he does why asking the question i understand what i'm saying is there are no other shareholders but but but if he never exercises his right under the agreement to reclaim  are automatically to him do that but i don't think i my my position my point was whether he executes on the seventy five percent of the shares that are in escrow or not as soon as mr mcdonald sends the letter and on may twenty eighth there are no other shareholders of the company except mr blasio so whether he ever executes on those seventy five percent shares in escrow or not on that day fees it is the only ranger and still has his twenty five percent the whole law that's correct and he is still a shareholder off in either instance because we're keeping any of the money as it was a does turned out anyway but you're probably correct judge in that analysis so to that end the only thing i would say about what mr klaas uses argue on appeal is normally when i appellate court either the supreme court door or this court i have to argue that there was one one instance of clear error by a court in this case what they're asking this court to do is overturn findings of fact that were made three separate times there was a motion for summary judgment there was a motion for reconsideration and there was a trial and these issues were discussed and addressed at a trial and there were findings by judge do on these issues that rami that mr mcdonald was defaulted  finding in fact i believe it's fifty nine as a shareholder on may twenty eighth so even putting the mathematical issues aside even putting everything else aside this court would have to substitute you know would have to make new findings of fact and find clear error three separate times by the district court and we would submit that that's just it's not appropriate under these facts and it was not warranted by what has been submitted argued under me ask you  it doesn't deal with that ok if i understand the record correctly the district court held that there was no private right of action in nevada revised statutes section i v point five seven zero the court did find  so because of that there was no and you're on your or your opposition was trying to get under that and maybe it would have been beneficial to do so but i'm taking a look at that statute the the district court and maybe council overlooked section nine zero point six six zero which in my review loops unequivocally creates a private right of action for securities violations under section one hundred point five seven zero so as i understand the the record the court just was looking at five seven zero and says there's no right of action but if it had been called to her attention that ninety point six six zero zero appears unequivocally to create the private right of action that for security violation under section ninety point five seven zero then there was a right to bring that forward under the basis of ninety point six six zero zero was that discussed at all was it raised at the time that she was making a decision that there was no private right of action under ninety point five seven  we i don't think we raise that issue at trial i don't think it was necessarily discussed because we didn't we didn't have a closing argument we didn't discuss anything along those lines i think we drafted and in our reply brief to this court i think we had addressed that to the court in our in our pretrial and post trial briefing i would say that the claim was was not brought under that specific section was brought under five seven zero and that's where i think the judge i think it on our opinion misinterpreted the statute because brief it doesn't really make sense that the battle legislature would actually take away rights for citizens and persons to pursue you know in this case a curious violations under state law that it would only be limited to state action because that actually harms the people that the legislature is trying to protect and we think that the statute does create does create the private right of action well the section i know ninety  the standard that we're going to have to meet and i think the burden that we're going to have to show goes to what i'm about to argue which is i think that the elements that we would have to prove are the same elements we'd have to prove under ten b five claim and so you know and i think i i think  n i'm going to have to convince your honour's that we have lost causation and transaction causation whether it's a state whether it's a state statute cause or a ten b five cars and so if it's reversed and remanded back i or just reversed i think it's going to the same standard i think that your honour's are going to determine that we are entitled to relief under ten b five if we are entitled to relief under ten b five we would also be entitled under the nevada statute as well because it issue that was discussed or no did anybody suggest to the district judge then i think you can under ninety point five seven zero proceed forward because of ninety point six six no it didn't what we didn't discuss in a trial that was i mean obviously because because there were no legal arguments no closing armin's brought up i believe and i have to go back and look at the earlier of your records that that was that was part of the briefing and there was substantial brief in this case been around for almost ten years and i don't think we actually cited six sixty in our briefing to to this court but i believe you're right i believe that a private cause of action under the first section of five seventy does exist and i believe that the legislature was very clear in other statutes in further and i think sixty's the one your honor just pointed out that that that would that would create private cause of action again because if not why would the legislature do something that would actually inhibit the protection that they're trying to afford to individuals so they just judge was wrong on that point we think so we think that she just did not did not see caught private cause of action where there was one but again that may be important may not be depending on last causation so here's  here's the i guess the huckleberry and i understand the supreme court laid down the kind of the foundation for this and then this court in nuveen so forth and that's what judge navarro determine and i think you know to be bl private transactions a little bit harder which you know which makes my job a little bit more difficult in arguing it but i would say in this case this isn't a situation where the misrepresentations were you know they're about risks or about the stock value may be different in this case than the misrepresentations that were made were about assets that simply didn't exist mr mcdonald paid a purchase price for assets that just simply weren't there there's three hundred fifty thousand dollar accounts receivable i mean let me just ask you about the district courts finding though was that the company ultimately failed and caused your clients loss largely because of i guess it was a plus ios who decided to take the company in a different direction that's part it and i was i was going to address that next but up about us now you say part of it but that's that the district courts that through the trial heard all the evidence and concluded that ultimately the reason your client suffered this loss was not tied in fact to the misstatements they were made in the financials but rather was tied more to this the company's change in direction and ultimately was unable to succeed probably also the tanking economy had something to do with it too i would suspect so i look at that it seems like a reasonable factual finding on this record and i don't go any further so what's your response ok and my response to that would be the company alternately fails because of the cash flow issues and because of any again i don't even disagree with the judge saying that the they took on these large public works jobs that the company needed more cash to do here's where i think the judge was mistaken here's where i think moving does apply the cash flow problems cannot be separated from the fact that there wasn't a three hundred fifty thousand dollar asset that the company was supposed to have it's an account receivable that simply didn't exist there was three hundred thousand dollars of equity in the temecula property that simply didn't exist there was a seventy nine thousand dollar account receivable that was subsequently almost immediately written off as  bt that's seventy nine thousand dollars of revenue that the company simply doesn't have and so when you talk about cash flow issues and the fact that there wasn't cash flow in it mr macdonald had to loan all of this money to the companies well that is absolutely completely intertwined with the fact that these assets didn't exist and this money wasn't coming into the company and had to accept that i don't think you get credit for all of that missing all of those missing assets because the judge also good i'm not prepared to say that that was clearly erroneous if that funding is accepted then isn't the amount the disparity in assets trump quite dramatically to a couple hundred thousand dollars no it isn't because the three hundred fifty thousand dollar account receivable was on the march financials the seventy nine thousand dollars count receivable was on the march financials the three hundred thirty six thousand dollars conversely well that was later written off as bad debt was on the march financials those misrepresentations were there in march and they were still there in august that's where i think the judge made a mistake with respect to that particular calculation because she focused and this may be my fault because maybe i focused on it too much she focused more on the discrepancy there's a discrepancy between august and march and her finding was that mr mcdonald as a savvy businessman should have caught that right my counter to that is the she also made a finding that my client was not looking for fraud and was not and there is no duty in of absolute for fraud he should not be any it was reasonable for him to rely on the march financials it was reasonable for him to rely on the verifications in march that mr plushy has provided all of the things i just described were there in march i'm not talking about the increase in the credit line i'm not talking about the increase in the accounts payable i'm talking about the things that were there in march ok and we're still there and they're fair enough but nonetheless what that means that what we'd have to be persuaded of is that but for those misstatements notwithstanding the company's turn a different direction it somehow would have succeeded and i guess i don't find that plausible well and let me say that was getting to the second part of my argument the company ultimately fails and there is and there's economic loss to that and there are damage to that and i think that goes more to the net the misrepresentation claims the negligent intentional misrepresentation claims the judge do just kind of passed over after she made the proximate cause finding what i would submit is what or not the company ultimately failed after august of two thousand and six my client suffered a damage at closing that day when he paid for assets that did not exist he suffered and then this is where i come back with with the nuveen analysis the three hundred fifty thousand dollar account receivable for example and there were four of them i think identified but that one that is multiplied by three in the purchase price and my client pays a million dollars for that asset now even if m s i had prospered and succeeded and gone on and done wonderful things and the note would have gone forward that claim would have been appealed it doesn't matter because my client still would have paid a million dollars more than he should have for an asset that did not exist and that's where i think the proximate economic loss causation that this court identified as being significant nuveen is met here because the fact that misrepresentation and again it that this goes falls into the zone of risk that the second circuit as a as talked about in this court has cited that that is a material misrepresentation of an asset that does not exist that mr plus us knows or certainly should know is going to cause damage and it is in there to induce mr mcdonald pay more for the company than he should of which he did it is a tangible economic consequence and on august seventh when he closes astro and pays that million dollars for that asset that does not exist he has suffered a damage whether the company succeeds whether the company fails and then the as the company ultimately failed and the judge found that there was a cash flow and there were work product issues i don't think you can completely separate those from the misrepresentations that were made in the march financials because part of the reason that the company didn't have a significant enough cash flow to go forward is and there was another finding by the judge mr blasio as represented that these were jobs that they were going to do going forward and that was one of the representations he made to mr mcdonald the court found and mr plazas testified the court determined that mr just didn't know how to do these jobs that that was a misrepresentation of fact that he made prior to closing and he didn't tell mr macdonald that this additional cash was going to be required so as the company is going forward this goes more to the negligent intentional misrepresentation claims post closing mr mcdonald doesn't know what cash flow is going to be required mr philosophy is just telling him well this is just par for the course this is what we need this is what's going on all these jobs are to start making us money and that's where the loans come from and that's where the economic loss comes from there but it has nothing to do with the money they see never saw because the assets didn't exist and that's where i think the economic loss that's from the and i just i hear you and that is an argument i hadn't focused on is that an argument you made in those terms to the district court absolutely we made the district court i think we've made the briefs i think we've i think we've made it significantly and in all the pleadings that we've submitted i think ok maybe i didn't focus on i certainly remember you asking for basically recovery of everything all the money paid not actually i remember fifteen million dollars that's what we're entitled to i think that's why i explore it yeah and that's what i'm saying but that's all you asked for i can understand why the district court didn't do a separate analysis of the negligent misrepresentation or intentional misrepresentation claims because you're focused on a tiny sliver of the damages you ultimately asked for and i grant you that there probably is causation for respect to the overpayment for the value of the asset but i don't remember that argument being carved out as a separate and distinct sub request for damages why don't i don't think we made a sub request for damages i mean that that's a fair point judge i think that what we did was we asked for all of the damages collectively because i don't think what i'm saying now is with respect to the nuveen decision with respect to economic loss in a secure in a ten b five claim that window of damages a smaller of that goes up to put to the close of escrow that is did the misrepresentations of fact they fall within the zone of risk do they actually create a tangible economic loss as opposed to kind of a speculative this is riskier than it might have been and we alternately lost money it did i mean these created a tangible economic loss on the date of closing the rest of the damages that we were seeking again some of which european of damages related to the things that happened post closing that happened to the loans and the loss of value in the money that was paid to mr blasio butts and i still think that the judge you know kind swept those claims away when she determined that there was no proximate cause a security point because did you say to her your honor even if you don't give us the whole kit and caboodle at the very least you have to give us this narrower sliver of damages because closing and that's why the judge kind of focuses on that in her order there's the pre closing there's the closing and she says it kind of merges the post closing damages with the date of closing damages which i think was improper because the  claims really stop as soon as the securities are so all this is the securities are purchased then you either have an economic loss or you don't and then post closing you either have intentional misrepresentation negligent misrepresentation damages so you don't ok so where do i look or where would we book this to verify that in fact you carved out this subcategory of damages for recovery before the district court and people can go on a regular just like you did you guys have like post trial so ok so there's trial briefs and post rubber even if there was an opening argument there was a and then there was post thing and i believe that the damages were addressed at those in those and says and i think i am completely out of time so i know every time the judges have any questions thank you for your time this morning thank you for having for hearing argument thank you i'd like to address a couple quick things the causation is not economic loss what he's talking about nuveen was very clear about that what he's talking about is more of a transactional loss this company this company went and i will get to the three hundred fifty thousand dollars here shortly but the company went on for two years the company didn't shut down you know you can read the letter the company didn't shut down because mr mcdonald ran out of money the company shut down because he got tired of putting in money so the investment could have continued if he wanted to put more money in the company did not have to shut down it does not fail they had work the problem was the work was expensive public works you have to put a lot of money that was the so to say that somehow his failed investment is related to this three hundred fifty thousand dollars is not correct to say he overpaid because of this three hundred fifty thousand dollars is not correct the three hundred fifty thousand dollars was a note receivable from another subsidiary we'll call it of the big company m s i it was in no it was also in the march financials at which time mr mcdonald circled it and said what is this between march and the time it closed in in august which i asked mr mcdonald at trial what did you do to follow up on this what did you do to find out i mean he could easily found out this was a note from one to city or to the main company but he told me he did nothing he told me he didn't he he should have done more i believe was  he should have done more so to say this is a made up asset it's not a made up asset money was a loan from the main company to buy pacific pacific sun nurseries not to buy it excuse me to buy a piece a land that they had a nurturing so to sit here and claim there was nothing in there is unfair it's it's a mischaracterization characterization of what the facts really are there was an asset now because of the fact he did it he chose maybe not to look at it that same way as an asset which my client hid and i shall address that as well real quickly you can look through the court's order you can look through my briefing and go through the excerpts of the record there's testimony from the bookkeeper there's testimony from the accountants the c p a s that all says my client even knew how to use quick books how in the world can he defraud mr macdonald and his accountants i mean let's not also forget that between the march sixth records and the august i think third records are of august fourth records it wasn't just mr macdonald that had the records he gave them to mr beetle which was his c p a mr beedle testified he looked at them and they looked in order with meeting the projections in the district court also found that it was not realistic and not  you couldn't expect them to do a full scale audit of the financials there's just there are too many right so correct so i mean i take your opponent's argument to say let's say they were correct that your client had fraud generally included you know three hundred fifty thousand dollars asset on the books that there really was no way for them to detect it has been illegitimate absent doing you know basically a full scale audit which is not not reasonable here if that were true i think he's right that from a causation standpoint he would he would show as well as the fact that the valuation was basically just wasn't triplane out of our what are we talking about economic loss i'm not going to tell you no no i'm not talking about that i'm talking about just regular old negligent intentional misrepresentation that kind of claim i don't think there's a lost cause mission component to that because i would have shown that i even if this business had been phenomenally successful i still would have paid a million dollars and that's what he's saying a million dollars more for the as hope than then i should have absent the front end seems to me that it's caused a red however when first i mean i understand that he has told us today i don't believe there's anything in the record that says he paid three times that to get two million dollars when he figured out its price in fact he even testified at trial that he didn't use that to determine how much to pay he testified that he used matthew way meyer another c p a that had personally given him these financials he had to testify that he used those financials to determine the price to pay so to say that somehow this is my client made some acid up or he did something improper he didn't touch the books he didn't provide them to mr macdonald as you know you've seen in my briefing they went through an assistant to the bookkeeper to to the broker he didn't have anything to do with financials and didn't even have access to quick books so to suggest that he somehow made up this this asset when mr mcdonnell knew about that asset in march and never asked anything further than circle and saying what is this i mean if he had an issue with that he could have determined that long before he even made the offer because the offer to purchase didn't have to the mag so i mean i would just say i understand your point if it was true but to sit complete calendar for the day and the week we are journey all right