good morning ladies and gentlemen this is judge scotter from the courtroom in chicago we have judge roeger and judge hamilton connected remotely as we do the lawyers this is worked out pretty well for our court i'll be patient with time keeping occasionally will run across a little connection glitch there's no one should worry we'll get through it just fine and we'll begin with our st case of the day which is correctly that there was a viable fraud scheme that had been pled in short the fraud keep scheme consisted of a bank which was the enterprise unintentionally procuring inflated appraisals so that it could sell hotels and commercial properties at inflated prices for essentially double their value and the benefit to them was to not only sell the properties but to get loans in connection with the sales so that they could receive interest payments and because of the inflated values and the actual worth worthlessness of the properties the bank could then was one of the entities that conceived of this scheme to defraud so from its very inception the judge found that woman and rosen and i have to separate out when you asked about the firms that's not smith ahmanson but this one  rosen participate at the very beginning at the inception of the fraud and i think that's important for several reasons because just start with many chords goes back to reeves and reeves is  very different than our case in many other cases involving attorneys because the foundation for reeves is an accounting relationship which is fundamentally the fundamentally different than a lawyer client relationship in that in the yes and i understand your honor the distinction that you and some of the case are trying to draw between what the case law calls mere legal services versus activities that would show more of a level of management  and control and i think the problem with some of the decisions is they simply look at the apparently of activities performed by attorneys and say gee those are legal services without making a proper inquiry into whether that really quaids with management and control and operational decision making and in this case when judge found its inception that the attorneys  least in part the fraud scheme i think that is enough evidence record evidence of management or operational control if i put all of that mr leonard the question judge rohner asked was not about them or the ge specificity that at from the inception that they were involved in the decision making to initiate the fraud scheme and based upon it was i mean they helped plan the  inflated we do we allege with regard to warn and rosen that they not only participated in the initial initiation of the scheme therefore they knew that they were going to use fraudulent places going forward but in the ordinary course of carrying out the scheme that the at all times understood that your praise was submitted by didon no were false with respect to the later firm which is this myth um incident city it's alleged that they knew because in their files they had real legitimate appraisals from the donovan is entities as well as false presents so they're  notice that these appraisal that were being used were fabricated mr leonard let me let me ask a stripe of the same question where i play where i pause is when you were when you use words like we alleged that wallin and rose and helped conceive of the fraud scheme or helped design it or words to that effect specific paragraphs contain the allegations to support those statements or the the specific allegations that we go that would go to one in rows in that or in the fifty man and sixty eight ok in which of those paragraphs if you can go back to where you were a minute or so ago on wallin and rosen as you know being involved in conceiving of the fraud scheme i think conceiving is the word that i remember using where i did what paragraph supports that argument well i mean i can ask the question a different way as you're looking there in your blue brief your leet your opening brief you contend that wolen and rosen and the smith farm where as you as you argue the lynch pin is linchpins is the word you use in carrying out the racketeering activities of the bank and what i'd like to do is to try to tether that argument to the complaint to a particular paragraph in the complaint that is absent from the complaint what about the substance of the law firms being involved in the in the conception of the fraud scheme that is that sufficient under the pleading standard we're operating under though well judge i think it is i think that just your coworker correctly found that based upon the nature of the allegations as to warning preserved all of your arguments and i'm going to quote because their opening brief incorporates all arguments made in objections to motions to dismiss and upon rehearing but my problem is that we have long held that a party cannot preserve three what i did was and i believed the other judges are looking for are allegations that the firms used racketeering judge and i think the problem with some of the case law is the labels of simply taking the contact and saying it's merely legal services when in a case like this if you accept the district court here read out all aspects of the scheme certainly i think there's a reasonable inference that that is a level of management and control of the enterprise i agree that if you just segregate out everything they do and say gee that activity is merely legal services that activities merely legal services it's virtually impossible for a law firm to ever be held liable under rico which is not what the ree held and in reeves they dealt with a very different type of professional service provider so i think for those reasons the reeves line of cases the cases the fall reads that merely characterize what attorneys do is merely legal services doesn't get to the heart of what reeves wanted courts who inquired to they didn't say in reeves that professional service providers such as lawyers or law firms can never be libel into rico they after discovery so certainly in this case with the discords finding in the in the st instance that we had made a sufficient showing that wanted rosen help participate in designing the scheme that should certainly open the door for discovery and allow us to get the detail of information of what their actual role was what persuasive power did they use did the company simply rubber stamp w rosen's concept of using the inflated appraisals scheme those would always all be directly relevant to the factual question of whether warnin rosen exercised it and to reach the conclusion of whether wanted rosen exercised management or operational control of an r v with respect to the scheme it's a letter to ask you about the underlying scheme itself as i understand it the core of the case is that the seller lenders in these commercial transactions do fraud to the buyers and borrowers who relied only on what the sellers were telling them fraudulent appraisals which put the value the prop is at two times their real value which they in fact in one what in what circumstances in a commercial transaction like this appraisals as part of the scheme one of the other significant participants was it different individual who control the praise of the entity so that the domino individual was a no no no no i'm i'm i'm i'm trying to think in this transaction there are people on one side of the table who are selling and lending people on the other side of the transaction who are buying and borrow and you're telling me that commercial investors took at face value appraisals that were provided by the sellers and said yeah good enough for us will write the checks well that's not quite accurate judge there is the appraisals were provided by what it appeared to be and what was represented as an holds himself out as to be someone sophisticated in hotels and the praise of the hotels and hotel transaction yes i think there would be certainly that reliance question would certainly be a question of fact for the jury as to whether it was reasonable based upon the different levels of sophistication experience for the lender to rely upon a rd party that's fraudulent been being me being represented them as independent of the bank so an r v is holding them out as someone who is apart from that and arm's length in their not so clearly that would be a question of fact not to be resolved at the pleading stage i see that i have three minutes up i'd like to reserve those three minutes yet that would be does not reveal anything that supports across plainest position and you know i have to i have to point out that that there is is nothing in at in fairness to mr lennard's position yes if you look at paragraphs one hundred and sixty one dollars for example and sixteen ok there is an allegation that roland rosen knew of the inflated appraisals ok there's that does appear there yet here is here your honor right isn't is your point that stating or just asserting that level of knowledge doesn't satisfy the pleading standard that they're under in a case like this point number one and point number two that it doesn't satisfy the reeves standard it is not you not the temple relationship to the purported scheme is way too far and their liability for defending an rb in this action has nothing to do with the alleged scheme there's no knowledge or is nothing as you pointed it may have known or had appraisals by the da no they're right and some are wrong that's not sufficient is that a claim against them there's nothing in this complaint it's a cause of action against them some for either rico state law claim a hold on separate and apart from the merits of the standing question mr dunne is is it your impression that michael merchant or his father's estate were part of the rule fifty four b judgement your honor i don't know i have to look at the judgement again i wasn't really focused on her i don't mean to i don't mean to put that to you as a quiz questions not your client either my understanding is and please tell me if i'm wrong i think i didn't understand the argument that it was argument that it puts and it seemed to me that merchants bankruptcy would be irrelevant to the statute of repair those here i mean the automatics they had a bankruptcy law mr dunn that's a fair response and a suggestion mr grand if you have anything to offer on the couple of questions that we asking here mr dunne you're welcome to wait a minute thank you frankly i have to cheat and look at it just reports of order which is on my table here to see if the standing issue was raised as as part of that about you know the twelve maybe to be certification of issues rather we've got a judgment correct we've got a judgment as to these four defendants so i would but that's that's my working hypothesis let me put it that way i and i and i i agree for the eye passes and i'm just looking at the order now i think that makes perfect sense o motion to dismiss and i did say earlier that the district court properly found the wanted rows and had conceived of the scheme along with two of the other defendants and i still stand by that i then went on to use the word which is are not merely legal services and certainly those allegations should like in reeves be subject to discovery and i know i only have about two minutes but if you get a chance to address  judge's decision dismissing all of the common law claims against one rosen and his mr grimm just mention in reference very briefly that was based upon a statute of repose finding by the district court says for finding that fraudulent concealment cannot apply was it citation to the brunswick case that was the sole authority for the court's finding brunswick is extraordinarily different than the situation faced here brunswick is an illinois court decision in which a party one party who is a party to a lawsuit that settled during the trial it was much publicized allege that the brunswick lawyer should have communicated his client's acceptance of a settlement agreement during jury deliberations all the brunswick a stands for is that he that there is not an independent cause of action against the company who or that type of failure to speak runswick does not address at all the fraudulent concealment arguments we've made in our brief which are plenty of all if this court properly applies the concept of fraud to an concealment then all of the common law claims against one rosen were properly brought within the appropriate special attention and i thank you for your time mr leonard thanks to you  and all counsel the case will be taken under advisement