could morning me please the court richard stone for a balance the decisions below are based upon a fundamental legal error and three other legal errors which follow from this first the court mistakenly found that section three b two of the i c a divest the court of jurisdiction and competence to determine a factual issue predicate to or i see a claim being whether yahoo violated the conditions of its two thousand exempt of declaration second the court mistakenly failed to address plaintiff standing to pursue forty seven b claims not as a third party but as a derivative plaintiff and the case law is clear on this third the court also failed to address several  and finally the court did not properly consider all of our allegations in connection with its improper conclusion that we've not pled unjust enrichment the decision below is based entirely on a judicial presumption the court's presumption as t meaning of section three b two the court concluded three things first that the commission's failure to revoke the registration cannot be second guessed by the court that the only remedy for violated exemptions is contemporaneous revocation by the  and third that the i c a does not exempt the definite from the definition only companies which show continuous compliance meaning you don't have to show content cast i was just curious and thinking through this case let's assume there was a private right of action which is is a huge  on not making it just to my get to my question how exactly was the pension fund damaged by yahoo's investment in ali baba i'm just curious they were not violated there was no injury related to the investment ali baba the injury that we're seeking is the hundreds of millions of dollars paid in connection with compensation to employees officers and directors that was in violation of the statute when you were not registered investment company the punitive policy is that you can't enter into contracts had they been a registered investment company the amount of money they would have gotten paid would have been much less there's a completely different standard of compensation that applies to forty are companies than to rebel regular public companies that's what they avoided by doing i think ok so section three b two cannot be read in this fashion three d two states only that the f c c can issue and withdraw exemptions that's all it says it doesn't say who decides it doesn't exclude the court it is not a unique grant  power in any respect section thirty eight of the i c a states the same thing it gives the f c c the power to adopt any rule order regulation under the investment company act each of the securities laws provides the same authority recovery three b two goes on to say whenever the commission either on his own motion or on the application finds circumstances which give rise to the order granting the application no longer exist and the commission shall revoke so it not only three not only gives them powers to issue gives them powers revoked as well judgeable that's correct but they have the same power to revoke any rule or  of the forty act under thirty four act under thirty three act so if the court is going to interpret the power to issue and revoke as meaning that only the f c c can interpret then we don't have twenty five review we don't have sixteen b review we don't have fourteen  o'hagan case was wrongly decided because courts don't have jurisdiction to determine the import and extent of regulations and apply facts to regulations we have a dual system the f c c has authority to interpret its rules regulations and orders and so courts and the jurisdiction granted under the forty act is clearly broad enough to cover that it doesn't cover simply claims arising under the forty act eclipse it covers any claim to enforce any liability or duty created created by the wising under the forty or so is it is your position that the pension fund or indeed any interested party would not have to go to the commission to get a commission revocation of this exemption but just any time they please at any time they can say you know what for the last twenty years we don't think your income clients and surprise the draconian remedy is that all of your contracts for the last twenty years are invalid is that much of a way to run around road you are on i'm unaware of any method by which we could go to the f c c doesn't isn't there a specific provision allowing you to petition the f c c to know they're going to run it there's a there's a specific provision allowing us to object and appeal the actual order itself so in two thousand when the order was issued we could have appealed that there was no reason to appeal it was validly issued we're not questioning the authenticity or the validity of the order what we're saying is it condition contained in the order client as a stockholder could make an application to the commission to revoke the exemption i am unaware of any process allowing us to do that but what is the words upon application mean what who are not that easy on application of deference to the limits application to the company who has the ruling in the first place not that i'm aware of your honor but i am unaware of any process or procedure whereby we could petition the f c c to have them make a finding that a condition was violated when the order was issued in two thousand had there been an issue we could have gone to the appellate court and challenge that that didn't happen but your honor the point here is all rules and regulations in or of all of them twenty five as a rule fourteen years rule are adopted the same way and the f c c has face same authority to amend them or withdraw that they could withdraw tempi five pursuant to an order to my that authority to issue and amend can't mean that courts are precluded from reviewing because courts do review o'higgins all about how far does twenty five spread what's the fiduciary duty requirement courts routinely have that three be two doesn't change that it is not a unique grant of power whatsoever it seems to me counsel that when they get to stand up they're going to talk about our north star case which i believe judge schroeder wrote for this court that seems to me a very bad case for you so can you explain i've read the briefs and didn't really see a really good explanation as to why northstar is not a really bad case if you can explain why we can ignore it or how we get around it northstar deals with whether or not a third party has a private right of action under forty seven big we are not a third party the court found that we had promptly put a derivative claim we stand in the shoes of yahoo forty seven tells the court what it may and may not do with respect to evaluating evidence it's entirely clear on the haven't disputed that yahoo itself if there's a violation of the investment company act can void contracts on the forty seven b and all of the cases so that at the river the party can do the same northstar says that forty seven b does have rights creating language it's simply that it's narrow or it doesn't create rights for third parties it creates rights for contracting parties but their take away from north star is that there's no private right about action under this act and that's the case why would it matter it's a derivative or third party a careful even a cursory read of northstar is only dealing with third party claims and not with the company's claims  that north star is dealing with a traditional third party claim as the private right of action and what forty seven b does uniquely is provide only contract in parties the company and the party contracts with with the right to rescind or for recessionary damages that's so easily distinguished so i'm worried if we're if giving some kind of an inconsistent argument you're saying north star is not controlling because we are suing derivative really as if we were the company itself the earlier you said when i talked about three be about upon application the commission can really examined you said well that doesn't apply to us because that application would have to be from the company but if you are suing derivative les then you would be the company so it seems to me for three b you're saying no we're not the company but for northstar you're saying we are you giving us inconsistent arguments your honor i said i didn't know what that provision meant i said it might mean that second was a derivative plaintiff we can't simply act in the shoes of the company we can bring lawsuits in the name of the company if we can't take over the company and run that obviously the company could have done that yahoo could have done that and gone to the essence you're trying to bring this and asked them to find that they were not in violation and they didn't do that either because there is no mechanism to do that the point is three b two does not limit the court's jurisdiction is broad it doesn't simply cover claims arising under forty seven it covers any claims any claim which or a state law claims where the liability or duty is the cases that we cited the rafferty case the ford case the biovail case all deal one of them is a third circuit case with the search circumstance where an order exists i lack standing to void that order because i'm not a party to that order but i can bring a cla based upon a violation of that order and have the court make that factual finding denying courts the right to review orders rules or regulations simply because the f c c can adopt and retract section three b two is the statute that controls here in the first it's absurd instance it's a threshold issue judgeable as you pointed out there is a mechanism in the statute establish that a private litigant has the right to come into court nor star clearly holds that digit mark says it has to be by clear evidence what do they need to show statutory language congressional intent or maybe one of the cases that have been decided in seventy eight years since the investment company act became law there is no such case they are trying to break new ground here and this is not the case to break new ground have any remedy if the stock holder wants to challenge that there is any remedy end of the investment act no gain our position is that a stockholder does not have a remedy other than to go to the f c c and  issued by the f c c and as your honour's recognized up front section three b two by definition says once you have an exemption you are not an investment company so if you're not an investment company you can't violate the investment company act that's the situation here where yahoo had an exemption all of plaintiffs claims are predicated on the idea that it was an investment company that violated the investment company act but it's got the exemption and to take the plain meaning of while the language is applicant you can apply you can write a letter as playing to a second volume of excerpts of record show this whole thing was based on letter writing to the f c c counsel can write a letter  how broad is that anybody write a letter i write a letter well i think that there is now nothing to limit the f c c is consideration of any issue that's raised by a private citizen i think that's even founded in the first amendment the right to petition your government for redress in any wire it doesn't trigger any requirement but the f c c could look at any requests raised and decide in its administrative discretion the throw delegation of power that the that congress g every single one of the f c c is every single one of yahoo's as you see filings for over ten years it was there the f c c specifically corresponded with yahoo about the sound investment and that in the supplemental excerpts of record that we submitted in this case so it's clear that the f c c was aware of this investment and turman that it didn't need to do anything but the issue really here is does a private litigant get to come into a federal district court and challenge that the answer is no because they've pointed to no statutory language legislative intent or case law that supports that idea they point to the general jurisdiction provision of section forty four where they're talking about the broad clear jurisdictional power of the courts unfortunately northstar here is directly and squarely on point they don't address this issue in the briefing page one seventeen northstar says the jurisdictional provision does not create causes of action if there is a cause of action created by the investment company act the court has jurisdiction the jurist court has jurisdiction to hear a challenge by the f c c the court has jurisdiction to hear the private rights of action created by thirty six b and thirty eight that northstar recognize those cases the claims were dismissed they were dismissed because there wasn't a predicate violation alleged of the act or for some other reason not a single one of those cases did the analysis required of sand of all in every single in the two cases that survived dismiss there was a predicate violation of the investment company act that gave rise to an independent cause of action that's in there those are in the cases there is one of them and  stronger than the north star case because before you even get to whether there's a private right of action you look at the exemption and say this is exemptions valid on its face how does a private litigant challenge that issue  they don't involve the statutory framework that is at issue here under the investment come the company had whereas northstar held various thorough delegation to the f c c so were different dealing with a different regime likewise none of those cases dealt with a situation where there was no provision there was no channel provision for judicial review as here where if there is an aggrieved party a party aggrieved by an order or an action by the f c c they can petition to the court of appeal there is redress ultimately for a litigant for a private party in the courts plaintiffs make it seem like they're out of court they're not they go to v s e and if they don't like the result they take it up  obviously there are multiple independent grounds that we addressed in our briefing to dismiss plaintiff's claims we didn't hear anything in the opening argument today about seven thousand two hundred but he alluded to the fact that he was going to address that so i'll just respond briefly councils submitted a twenty eight jail letter last week citing two northern district decisions from about ten and fifteen thirteen years ago respectively saying that thousand two hundred claims can be based on alleged violations of the investment company at all first of all there has to be an alleged violation of the investment company act before any client can kick in and second of all that case s case that we cited would reach issues where there was a challenge under seven thousand two hundred two investment advisor fees or policy changes under an investment company's policy but the california court of appeals decision from two thousand and four in balance remains controlling and it held you can't bring in seven hundred two hundred claim based on securities transaction the predicate issue here assuming they could get over the court under section forty three of the investment company act the the f c c just explained the process that they would write a letter that as you see would preview the letter they would essentially recap private litigant has been able to challenge the continued delivery of the exemption act so it really is playing a suburban here to show the way to do it because congress didn't create a more specific or direct mechanism and there's a reason because they delegated the power be considered by a court unless objections been urged before the commission unless there are reasonable grounds for failure to do so then it goes on to say the findings of the commission as to facts if supported by substantial evidence shall be conclusive so it is your position that that argument requires kind of as a matter of of a predicate condition that you go through the commission first yes it definitely would have to go through the commission first that's consistent with section three b to lead that is to say the commission has to take your objection what if you file the objection the commission simply says we don't accept it then what do you as i suggested you know i think it's plain of job to figure out what to do that there but i think the administrator said sally would you know the answer to that is you know you have the administrative procedures act potentially but i do think that the burden remains on plaintiffs to figure at th no matter how the court looks at it i think you know rolling up the proverbial stone here of planets causes of action there's no way you can get around to jim martin or star and their language of thirty two and a lack of president thank you for your time you're on a section forty three doesn't deal with the circumstance it deals with the adoption or issuance of an order that if we are injured by that we can object or go to the court of appeals has nothing whatsoever to do with fifteen years later the violation of the condition to what condition what condition was violated the condition that they use their money only for bona fide business purposes which were defined specifically by the f c c in connection with adopting the order to be using the money that they had to enhance their internet network and there are indeed instead what they did was take a billion dollars and buy from third parties not from ali baba itself a large chunk in a hot growing public company in connection with that transaction they got registration rights with the intention of reselling that within a year ok that is not consistent with the f c c finding of what's a bona fide issue they were over the edge they were more than forty percent in equities that's the standard after two tries they tr seven and then two thousand they got an exemption a very limited exemption the order itself says in it the base is based on the information in the application and that it's consistent has to be consistent with that information and that the order is subject to the conditions contained here in to require that the f c c monitor compliance with every water for seven thousand public companies and to say that because they didn't catch this one we don't think is a fair reasonable burd did hold on apparently for investment because they didn't sell it but you're saying that they saw a registration to be able to sell correct and at the time they purchased it so when they did they get that registry that  of dollars as a year they would not be able to have survived but for the money they got from selling the ali baba stock that's a fact that he pleaded but i want to end with one thing your honor the position of the f c c is not from the f c c as from the division of  market regulation as we showed you all of the authority with respect to exempt of orders and delegated from the commission itself to individual staff members and their position there is no question about this is a written letter it's excerpt of record six forty one here's what they say a market participant can rely on the relief only if the participant complies with the representations made in the request and with the terms and conditions imposed in response the position of the f c c which is undone by the decision below which as a yes you see must revoke the decision of the  delegation to investment management for hundreds of of orders and for hundreds of no action letters which are under the same regime is undone by that decision because they say immediately if you don't comply the order doesn't work the order says it's subject to conditions when you don't comply let letter written by the investment management head in two thousand you don't have an order what we're saying is there may be a fact issue as to whether compliance is there but it's a small fact issue and to deny the court competence to address that under the broad jurisdiction here is to allow people to continue to violate the water there is no mechanism to go to the f c c writing letters to the f c c doesn't get your response writing letters to president trump doesn't get you response that's not a legal remedy while coming to  any other questions your honor thank you very much counsel thank you thank you counsel for your argument this matter submitted