said that their claims were claims of misrepresentation claims that are barred by the f t c a michael my clients have never alleged the i r s owed them a duty to tell them anything in why did but the i r s didn't instead  my clients have alleged the i r s has a duty to properly regulate in wine as a tax professional services firm and to refrain from soliciting and accepting bribes from those professionals it's those  acts that are unconnected also unconnected with the assessment collection of tax and not the acts or failings of e n y that the court has to consider in order to properly resolve the case extra separate those two sets of acts what i thought you were complaining that they concealed information for you from you all are provided misinformation in why i had a duty as a fiduciary to tell us that they were under criminal investigation and also had a duty to tell us that they paid a promoter penalty but i'm talking that the room it's not irrelevant i mean even why as the as a fiduciary as essentially like a lawyer they had a duty to tell us that the iris has a set of regulations the office of professional responsibility separate from the examining part of the s the claim is that they permitted ernst and young to continue to represent my clients when they knew they had a conflict of interest they knew that conflict was they were told that by ernst and young and they instead of auditing the promoter penalties like they were supposed to they're supposed to audit determine a thirteen point six million dollar penalty which they did determine and assert that penalty if even one had a problem with that they would have paid it and sued for a refund to get it back that would have been disclosed it would been open in the taurus in my would have had its position but it was not it was not disclosed but it's not it's not about that it would have been open in the tourist but it wasn't open in the tories because it wasn't disclos think was taken out and therefore they didn't disclose something that your clients that your clients cost but it's not that that r s had a responsibly disclosing iris had a responsibly do its job what's its job its job is to assert a thirteen points but just thirteen point six million dollars or more a penalty but the taxi and limousine commission supposed to keep the camps clean i take it dirty taxi cab i can't sue the taxi and limousine commission even though they have a duty to keep the  they were supposed to properly regulate them they did not properly regulate them even knowing that they had a conflict of interest and two they instead of just doing their job thirty point six billion dollars write it up they said no even when told them look that we can't pay the thirteen point six million dollars we can't have a called a penalty and ira said well it needs to be called a penalty and they said look we really can't pay that ok you're going to have to sweeten the deal pay us more pass more money and we will conceal the fact that it's a penalty will not just conceal it we won't write it up as a penalty that's a nondisclosure that's that's a failure to disclose it so it's not a fair is a fair to a sort of this is the whole problem with this removal of the work penalties it what you're complaining about here but in any event it reduced to its essence it's a claim of concealment which is we've recognised as a kid into a misrepresentation and not not actionable it isn't a claim for consuming your honor they should have done their job what that one of them can you know from want to say it's a claim for concealment because you know that that loan you can't maintain that but you're not telling us what the grab them in is of what the i r s did that injured you i mean when you explain it it reduces to they didn't they didn't fairly call it a penalty that's an act of concealment your they didn't do their job visa v ernst and young all they had to do and don't you don't have a cause of action for them not doing their job is against ernst and young your honor we do if it helps even more hide something this isn't about the i r s on us to do to tell us something it's about was substantial assistance provided by the third party the aider and abettor and that we were damn those are the three elements and so we have a breach of producer duty by in why we have substantial assistance in the form of permitting them to continue to represent them  do anything to affirmatively assist ernst and young in their dealings with you they they they didn't reveal certain things and that's so this is an end run around the exception it it is your honor and you said to tell them they didn't meant to tell them they primitive them to continue to represent in contravention to their own regulations and this is the agency that regulates ernst and young ok that's an act that's not passive and so all they had to do that tell us anything they just had to do you connect your damages to that what seems like a very clunky series of connections your honor at the time that that criminal or fail to defend your client and therefore your client was assessed a sum of money by the i r s that you otherwise would have had to pay you have to go go through a number of other linkages your i would say with respect to  damages the the most direct damages if we had known of my clients would know that ernst and young was under criminal investigation ok if they knew him enough someone had told them or in staying young would have told them not the i r s ok ernst and young would have told it would have drawn from their case and at that point in time they were fighting for their corporate lives with sprint and know you're on the underlying act is not an admission better light act is failure to regulate and if they would have properly regulated ernst and young couldn't have been representing my clients at that point in time and so all of this when they got to the sprint board and they were having this discussion to sprint board it would have been clear to the sprint board what the decision was if i can just speak real quickly to the tax exception act i want to make sure i cover that and the easiest way to do that is the government's the government's best argument on if you were under exam one of us was under iris exam and we went to the i r s building because we had to meet the agent or something like that we slipped and fell on the steps ok that is not connected to the underlying examination in this case the x that we're talking about our show you're to regulate which is not connected to the investor audits ok excepting soliciting and accepting a bribe which is not connected to the investor on it's ok those things have nothing to do with the underlying investor or as a tax exception act the tax exception to the f t c does not apply i think all this what i think the failure to regulate is they had them under criminal investigation they needed to that what did they fail to do with respect to the when you say they failed to regulate because i'm trying to understand how that's different from not making them tell you that that they were under ation they certainly are i telling them they can't represent us anymore it's that simple you can't represent them unless unless there is unless they have a waiver basically that's that's what their own rules say if the i r s know that ernst and young did not elicit a waiver from your may please the court we want  less on behalf of the government mourning the court need only look to the complaint itself to understand why this claim arises out of misrepresentation the plaintiffs allege that they were injured as a result quote of the irises active concealment of the criminal investigation and the truth about the tax shelter promoter bought it that's in their complaint that's their description of their claim and the court is absolutely right that this claim arises out of misrepresentation based on allegations like that in the complaint the other thing the court needs to take into consideration is that this is a claim however that a claim that the i r s knowingly participated in those misrepresentations is not a claim arising out of misrepresentation and that's absurd the cases they cite the cases involving negligence claims for instance in the context of coast guard duties or in the context of supervision though that's a completely different context and those aren't aiding and abetting claims what you have here is a claim of knowing participation in the misrepresentations even apart from the direct allegations in the complaint that they were injured by the i r s is quote concealment with respect to the tax exception briefly this case is about the investor audit if it is about anything the point of contention that they're not taking issue with iris action about removing or a penalty from the press release or not including it in the press release even if it could have caused some injury that they allege is itself an allegation of concealment so that one is easily disposed of the one of re took place after there is a causation problem so we exactly well there is a causation problem but even setting aside the causation problem if we could get past that you would still have a misrepresentation claim with respect to the argument this is really about the i r s permitting ernst and young to represent the plaintiffs before the i r s the problem with that is they don't allege any injury resulting from ernst and young's representation of them before the i r s and even in their briefs on appeal their argument for why this representation somehow injured them it converges with an argument that by not barring ernst and young from representing them the i r s failed to disclose information forced to reveal information again your honor their argument is that the i r s would have indirectly disclosed information that otherwise it was helping to conceal i don't believe that that argument makes sense but that's the only argument they have for how the mere fact of representation is somehow connected to an injury that is based on a lack of  information with respect to the investor audits the plaintiffs themselves in the complaint in order to establish venue in the southern district in district of new york make a point of alleging that i r s employees working on the investor audits worked in new york new york had an occasion to prevent what they consider wrong i mean they don't identify any other context in which the i r s interacted with them and could have disclosed information they say was concealed this complaint is about the investor audits and there is no dispute that the investor audits are part of the irises mechanism for assessing and collecting taxes prior to the resignations from sprint in two thousand and three i'm not sure how that's relevant to the question of whether this is arises in respect of the investor audits but even if i r a c r d was also conducting a criminal investigation the point is what does pla taxes for these tax shelters and there's no dispute in this case that the investor audits are part of activities conducted in the course of the investor audits would fall within the exception in twenty six twenty eight u s c twenty six eighty c which is the exception for claims arising in respect of the assessment or collection of any tax or customs duty there's there's been no dispute about that about the investor audits being covered by that exception honor i would i don't i would address briefly this question of the i r s regulations they're not relevant to the question of whether the exceptions in twenty six eighty apply but the court is correct that they didn't impose any requirements on the i case an internal requirement like iris manual or internal guidance wouldn't provide any rights to taxpayers but again it's that's that issue is completely irrelevant to whether the misrepresentation exception applies or to whether the tax exception applies the exceptions in twenty it goes up higher well hopefully i'm getting picked up at that point so just a few few points one these are not internal policies it's a regulation thirty one u s c is a has to tell thirty one and circle to thirty is a regulation it is not internal policy with respect to the damages and the promoter on it versus investor audit the actions that were bad took place in the promoter on it they did not take place in the investor audit that took place in the crime of us to gauge that took place in the promoter every single event took place there nothing bad happened in the investor audience again it's like the slip and fall example i gave before yeah they were under on it but they were and they were coming that's a background fact that's true but it's not where the harm took place and it's not in respect that the statute says in respect of assessment collection of tax these farms in our rise out of in respect of assessment collection tax with respect to causation between the the the breach to the promoter audit breach and the end of two thousand and three we absolutely did plead that we had increased arbitration costs associated with that non disclosure if you look at our complaint in in paragraph fifty seven s has that working why is it that speculative in and and beyond anyone's capacity to estimate i don't think it's speculative you're that when you're you're in an arbitration with the service provider that sold you something there's a question about that they violate the law right that's fundamental that they violate the law and not knowing about the promoter penalty ok up until that point in time is definitely impacts your ability to recover they had to fight to get ernst and young to actually admit yeah we did violate the law they did finally admit it but they had to fight to get them to admit and so your claim against the i r s here is the failure of the i r s to disclose that it was a penalty they had no obligation to disclosure on their album to write up the penalty number at which point in time ernst and young would have to pay it and sue for a refund that's nothing to do with the i r s disclosure that's just the law just do your job right the penalty up they pay at these two for a refund that's that's not about misrepresentation from the government's perspective this is about doing what you're supposed to do i think also the final point we can finish thank you final point with respect to causation on the criminal investigation the idea that sprint when it was evaluating ernst and young or estrella made to fire these people or do i far the auditor wouldn't have been impacted by the fact that ernst and young was under criminal investigation that would have been impacted by that the iris had no obligation to tell them that but the produce eery did the few siri did the argument though the counsel for the  other side is just made is that if the i r s could not be liable as a principle misrepresent care how could it be liable as an aider and abettor of misrepresentations or omissions what's your response to that the law doesn't require that you're on the law require substantial assistance what substantial assistance the actual assistance of of a matter that they could not be liable for i mean it does seem curious to suggest that they they cannot be liable for misrepresenting but they can be liable for assisting someone else in misrepresenting i don't think that's curious sure you have any law that says that that can that that is how we could interpret the exception you're i don't think i don't think that came up in the you for law it says a substantial assistance you are and the only thing that we have in our new york laws that says it has to be some sort of affirmative acts that's the test and we have affirmative actually of permitting them to continue to to to to go forward even though they can't re misrepresentation of ernst and young now you can be liable for the misrepresentation either because you're the principal or because you aided and abetted the principal but either way the action is f misrepresentation it's not for misrepresentation saying that the action at the end of the day is the is the regulation rule and the fact that they didn't properly do their job it's not about misrepresentation they would have had to have a duty to at the end there was what would have been an intentional tort doesn't mean that there might not be something else in their interest because at the end there's a misrepresentation it doesn't mean that there isn't a prior tort the can give rise to liability just like sharon you're not injured by the prior action until