now through her business partner came up to dr mizzle in a round may of two thousand and fourteen and offered him the opportunity to build a business and what she wanted to bring to the table were management of the business the expertise of the business and the ability to generate the revenue for the business interstate it's a better ability to generate the revenues that the business which i think is the core allegations in the securities case was that she number one had a trade secret method of billing for intra operative monitoring services when services she had great connections in the industry and the billing industry she had worked for blue cross blue shield she had worked for u h c united health care and she learned some secrets as to how to generate quote unquote the highest payouts and then she quantified what those highest payouts were saying that was fifty thousand to seventy five thousand dollars per procedure dr missouri who is a neurosurgeon who has a lot of neurosurgeon friends that he envisioned with could utilize the services of this business agreed and what he was going to do was he was going to put his money a little bit of his time but mainly his credibility and his connections and that's what he was bring to the table he brought his business partner dinesh on for a month from this is for he was bringing the connections to the table not merely monetary contributions but he was bringing in his broader connections his rolodex is i think that's fair to say is true he was able well known in the industry and obviously he knows how to talk to neurosurgeons i think that was that was really but that was really it he's otherwise operated as sort of a passive c e o when there were decisions high level decisions to make mainly regarding distributions he was brought in but in terms of running the day to day operations of the district court got tripped up so i won't answer yes because solely can be such a total lies in terms but if i would say overwhelmingly on the efforts of others i think the answer would be would be yes but he brought his own expertise and connections to the endeavor which i don't i wouldn't say he wrote his own expertise your honor and i don't mean to to quibble semantically with you because he didn't have an expertise in the actual i o and business he doesn't know what the technicians do when they actually monitor the surgeries and he didn't do the function of the what the called professional component to actually review the schematics of the monitoring he's a neurosurgeon that's his expertise i think them the most we can say is that he brought some credibility to the business he brought some investors in those and again who are the other investors who went in there what are they look like what are their qualifications some of the some of the other investors in the other energies are energies owned by other physicians who likewise can help bring business in interoperate of monitoring business and so if you look at the entities they are geographically dispersed and so they would have sort of an anchor physician who could also help call their friends and bring business some of the is it fair to say that the investors in this thing were basically other doctors like like he worth i would say i would say that's that's generally going to be true i think there were some non doctor investors but by and large they were dr investors and not to get too much into the corporate practice of medicine there are some types of businesses doctors can own and some types of businesses doctors couldn't own based upon their filiation with the business and so if you look all of the day to day management functions from finding the business from getting doctors to send them i want procedures that the c names would go out and perform to doing the billing to doing the accounting to scheduling the summarized and two two i think overarching points the first is the district court really didn't give us the benefit of the doubt look we're supposed to have the benefit of reasonable inferences on any sort of ambiguous allegations if there were any unless you know the judge presiding is a really good judge on this kind of complex business case this is really one of his shop strong points is understanding this kind of business relationship i'm going to agree with you and then some i think is a fantastic judge were in front of him all the time and i'm not saying that because i don't think he's going to listen to this but i just think you have to get it wrong here your honor i agree i think he's also very overtaxed has a ver overtaxed court because of the being in the eastern district of texas and so i don't lie blame at his feet i just think he got it wrong here but i think we should have had a chance at the very least to amend and try to try to plug the holes that he identified the first and primary thing that he says is the first primary problem i think is that he took the sentences that we alleged from that first same conversation where she says i can achieve the highest payouts and i do achieve the highest chaos in the industry essentially she has the secret sauce which that secret sauce has been upgraded in two thousand and seventeen in a t r o hearing in front of a state court judge in dallas has been upgraded to an algorithm that can actually pinpoint within ten percent the pay and that those payouts she believes because of her secret sauce or other aspects of her secret sauce documents and methodology is and what not actually helps retrieve those payouts same same discussion and that the payouts happen in six months it's all one conversation the court split those up into separate sentences and dealt with them in isolation however even dealing with those in isolation the first one he took on was that you know that her secret sauce achieves the highest payouts in the industry and they said that that was mere puffery it was discounted as mere puffery i would say this isn't your puffery one because it was actually quantified right after that same conversation fifty thousand to seventy five thousand dollars per procedure secondly virginia virginia bank shares took nearly identical language in the context of a direct sale to a shareholder i think that's what distinguishes our case in virginia bank shares for many of the other cases cited by the apple lease which is that the fact that this is a commercial context were you know that type of hype even if it's hyperbole is understood or expected to be understood by the listener as having some substantial substantiation it's not in your puffery under virginia bank shares and i no the apple east have cited not a single case to contradict virginia bankers or to show how that language in this context could be taken as anything other than a statement of fact about the existing metrics the existing ability in other words something a statement of historical fact at that time because of what she'd already been doing especially when it's followed right away with a quantification of what that really need to focus focus on and where you have time on why this is an investment contract and therefore security but i think your honor i will do that i think there's several reasons first is obviously the contracts themselves say it's a security now i know that that's not outcome determinative but the case law says that at least gives you a presumption that means the parties intended for it to be security and both of the contracts at issue say this falls under the thirty three act now this lawsuit is a ten b five which obviously falls into the thirty four act but it's pretty well established that what ten p five applies is a broader set of securities than those requiring registration of the thirty three so i think that's sort of your first piece of evidence that should have that should've been enough frankly i think to get us past twelve the six at this point secondarily though we have the f c c regulations which discussed what a promoter is this was a woman who came in and said you create these businesses you're going to give me a security you're going to take a security lp interest or securities l l c interests can be securities when they're derived and i know i know sometimes the how retest is solely from the efforts of others but it's actually been revised to overwhelmingly or quite predominately on the efforts of others to allow for this promoter aspect that that you have some of if there's a little bit of something being done by the promoter or by the person raising raising the raising the  breeze and i noticed that i would also note the run of the court below didn't rule on this issue normally when courts are going to find that something is in the security that's an a priori question they address before they get to the nuts and bolts and meat of whether or not there was a fraudulent the apple e's in their briefing on this point actually didn't raise a single argument about facts similar reasonable case dealing with the facts as they exist here they discuss you know random investment contracts and people actively work in their business we don't really case i found it in my notes the the last thing i would say on that is that the l l c interest specifically which is a profits interest is a is a typical investment contract it is the everything about a security without the control and that was done as a technical workaround for the corporate practice of medicine by some corporate lawyer somewhere in dallas but the fact that it says it is a security that the interest related to that is untied to anyone's efforts it's a passive interest what this woman says basically is that you know i can turn dross into gold or words to that effect i mean i can take your receive of both and get a better payout and then you can if you just go along the way you're doing it net in its essence doesn't require the creation l l p or security interest or any of that so why i mean that's the the problem here is that what she was essentially offering to do wouldn't have required creating all these entities and so why i mean how do you tie that into the security part of it and to that question yeah please i agree with everything  to generate the highest payouts i grooved of all i had was a billing contract with her we wouldn't be on the securities case but she wasn't satisfied with just a billing contract she asked to be you know not an old has to be in order five ten percent one thirty five percent of the business and both sides on the l l c site and on the lp side she asked to be and i think that's the distinction that i would make john she asked to be a part of the business normally billers don't do that and normally in a commercial context someone says i can perform the service for you they don't call so go and i want a piece of the company for well and the other thing that tends to support the suggestion that it's the security is that you got all these other investors in effect and the doctors absolutely  know i mean doctors are the quintessential molex of the our i mean you know they they what they want to do is turn dross and to go on i mean get more money for their receivables it's not that not grosse actually or receivables but they also want a piece of the action and there are rules about how they do and that's that explains the complex web of entities but i completely agree with your arm and i think the fact that there were massive interests all over the place is got this perfectly correct but i'm going to address these issues in the order in which the questions came in to focus initially on the security before focus and on my judgment zant focused on which is the actual language both individually and  relationship with neurosurgeons gave him an edge over other providers when competing to offer i o m services to these doctors dr ms those relationships paid off in two and a half years since it was a he's analogy to people who serve on the board of directors of a major company these are maybe well known prominent people for one reason or another who serve on the board not because they have any expertise in running a company but because he called it gravitas or or credibility they lend something to the company's relationship with the rest of the world by being on the board but not by knowing how to how to manufacture a widget necessarily but your honor your honor makes a good point but the involvement that is plaguing the complaint you know and i just as conceded in the briefing is more than just somebody who's passively on the board i mean the language that they're trying to that they have to kill it in the complaint is very simple that that he was involved and so in such a manner that it was critical that's their language that they play and it was result oriented it was because of his  connections and his bringing the other doctors in these connections because he also pleads that he introduces anthony's anthony's as arias to dr silva and that's an example that he pleads in which he is introducing and he's involved  neurosurgeon he's a carryover they ask you are surgery runners correct yes and so it's those example pardon me that conduct shows and doctor me nare also was involved in the operations of it that's something that they they pled specifically in their complaint he's not he's involved in operations that's how he was supposed to be compensated another misstatement i believe that was made was the assertion that the reality is somehow a limited partner or a member she is not a she is an less was not a limited partner was not a member it was solely a billing company and all of the representations at issue concerned m p s so when examining the securities issue you look to the language test now it came to a different conclusion than the facts support here and they came to the conclusion that in that instance they were passive investment and that just because they had a title that was not sufficient but here we've got management the other issue i wanted to address was this issue of presumptive securities there is not a case in texas heard me of this in this district that indicates that these are  this going to be a security it doesn't say that at all but otherwise why would you have the how we test in connection with whether or not it's an investment contra clearly that's it just doesn't make any sense in that context additionally  while these documents reference the act when we went in connection with the argument that these are these things concede or argue that they're part of the act i think they reference the act i do not think that in any way they adopt or indicate that they are part of the act  securities interpretations or the texas business organization code somehow would apply but the fifth circuit this court's opinion has not in any way adopted that or applied that in connection with the how you test it's very specific to whether or not they  solely an expectation that the money's going to come from the profits going to come from a third party and that's not what's happening here period and judge did not address this he did indicate that there were five five arguments raised in this context and only one of them that he needed to address and and that's what he did he addressed the ones that that obviously on its face appeared to be sufficient to dismiss this complaint and we believe that the purpose behind behind the p s l array is why the court frightfully dismissed this complaint and that is to avoid this lawyer driven litigation and one other issue before i go to that was there was an assertion that somehow in the state  m or any any federal claim at all so that i wanted to address that issue to the extent that it may have confused or in any way misled the court but the purpose behind behind me is to and quote could generate the highest payouts now judgments and relied on on proper authority clearly in this region in this area they've tried to sidestep this and make it about about a very different type of case but this court has recently as recently as october third of twenty eight team back i believe it's judge king wrote the opinion the me it's the employees retirement system versus whole foods market case in which there were that the types of representations the second tranche though is a is a lot like and uses a lot of the similar language that is it at issue here first is is that whole food statement to investors that it had quote the highest standards in supermarket industry highest standards ok and that it was different and better than most of its competitors these are vague statements for which an investor wouldn't rely on what about the statements about what fifty thousand dollars per alleged in connection with the there's a twenty fourteen and then there's there's a later an e mail that they talk about as well that there are some communication that e mail i think wasn't even an e mail to him but but no you're correct those are not the same profitable and the dr result could earn a substantial return on his poem and money if he were to invest and i owe him something that's the statement that they assert that he said that again is exactly the kind of puffery it's not a specific statement it's talking about a possible to earn a substantial return very big and that this general business was extremely profitable again very vague also the court determined that that was we believe the judge was and had it right he mailed it down not and that was why those particular statements that and the fact that these are board members that are making these fairly general statements but they also did you reasons and rationales behind them that differentiate remember we've got strangers meeting in two thousand and fourteen at at i believe it's a it's a quarter bakery very very different sort of circumstances here then a board member a board members talking about general statements and then a thousand also didn't address this virginia bank shares opinion is because it clearly wouldn't have applied it's not consider it doesn't apply at all doesn't fit within this genre of litigation so it's up by itself pardon me in that additional statements that were made there are there are actually i want to address statements six and seven very briefly and there is these are judgments and found that there were two statements where the where there lack of particularly was met the where requirement there was a there's nothing that indicates where this with said it doesn't meet that initial requirement so again to your honor's question with regard to this fifty thousand of these statements these blending of these facts judgments and got it right or you term other specificity r two plaintiff's admit they say the complaint did not specifically state that these statements were made in e mails from villareal and then they ask to amend now let me address that amendment issue this court has as has time and again had this type of situation happen but here's the difference between those previous situations and this one there was no request in the response to the motion to dismiss for a moment no where they didn't make that request after the court made its ruling there was no post judgment request for amendment there was nothing submitted that indicated this would be how they would fix it there's nothing there's nothing attached to indicate or filed and given the district court judgments and a chance to even consider this issue about whether or not they should get to amend cording to fifth circuit authority that means they waive they don't get to come here and argue for the first time directly address and discuss the issue to see what was the ransom versus national city mortgage company and then publish an opinion five ninety five f appendix three o of the record did show however that there was an extensive set of or anything about whether or not the first amended complaint was proper in the first place and judgment did give them that opportunity to amend it and in their response they indicated that the only purpose that they need to amend because they felt like they were so confident with their initial pleading was to address certain issues with regard to a party that's not even on appeal here with now which is u s mine which is a contracting entity that actually with that held the pointed out in the record where they say that's the reason so there is an additional ground to the extent the court wants to do the analysis of the two lady additionally beyond the fact that they waited a few times they've already indicated that was their best shot now they want to come back and say oh well this you know we need to fix these things for the for this third time part of me the big issues we believe though i have three minutes left is this this is simply a fraud by hindsight case time and time could possibly happen in the future because these ultimately don't happen though after two and a half years it's fraught it's that's fraught by hindsight there is no discussion whatsoever with no pleadings from up for these statements that show that why each statement as it was made was in fact untrue when it was made or that they knew that it was not true when it was made and judgments and very handily disposed of all of the admissions because they never at one point even addressed the scienter argument whatsoever with regard to any of the three omissions that are at issue but in looking at the those surviving me those surviving portions of these statements that he didn't knock out because they failed to meet particularity and i think those are statements i want to say it's two through it is i think it's  yes it is it's two three four those statements did not survive so they're not have me did not provide any sort of substantial discussion or any sort of specific facts to indicate that particularly requirements for scien was the general statement they say defendants must have known or defendants had a motive to take the business and i ask you does it make sense when a billing company and that they want to have some sort of positive inference well here's that the counter inference in connection with thirty five percent return why would they terminate their agreements if they were trying to steal the business that's what motivated this court has held numerous times that that type of profit motive one is not sufficient by itself and they do not need sufficient facts to indicate why how or what the process was that was going to actually and none see any of this scienter requirement they don't do it they never do it this is forty four i'd like to start with framing the p s l already and differ genia bank shares case to p s l re was inactive because there were too many class actions stock dropped class actions being filed in the ninety's routinely every time the market changed a bunch of publicly traded companies were getting sued by people saying well i lost money in the public market in therefore i need to be able to sue that's what the p s l already was trying to to rectify was to be able to differentiate at the pleading stage between people that lost money due to the national natural the acetate vacillations of a stock market versus some actual fraud happening in a public company that's not this case even though the p s l are a applies here those strictures don't exist  the issues don't exist here we don't have a company where someone is being sued just because they signed the ten k which leads me over to the virginia bank shares i don't think you framed the opinion correctly you frame the opinion as a discussion amongst board members if you look at the actual holding the holding was that when somebody says you should buy the shares because it's going to be highly profitable for me a great return and that is communicated to shareholders to approve a merger then the court said that is sufficient under the securities laws and it's not mere puffery because it was being directly stated to shareholders for them to be able to take an action to buy the securities of the new company since he was a stock for stock exchange that's why it's a political is because it was in the context where it was being directed at shareholders as opposed to the other examples that he gave the examples i mentioned in my opening where someone is simply called foods for example to say you know we're the best in the business that's in your puffery because number one it's not even a statement directed at shareholders it's a general statement about the company in the market moving towards i'm going to go where she ended which is that this is somehow fraud by by hindsight i'd like to address that if i could if you look at the tim of the conversation happened in may she quantified the highest payouts in an oral conversation in may she never achieved those out of thirteen hundred cases and procedures that they did less than six percent of those paid anywhere near the amounts that she had over fifty percent of them barely paid so most of them paid zero and barely paid over zero dollars so this isn't a situation where we have a radical change in the market where she's at one point she was getting fifty thousand dollars but something changed and now she just couldn't so it's a promise unfulfilled but not her fault we don't have any of those circumstances here she reiterated in an e mail six months later dr missouri because they're not getting the fifty thousand dollars payouts ansted they have this growing are asked two questions what you say the payouts were fifty thousand to seventy five thousand dollars how much of the hundred ten million a are do you think we're going to collect she was i usually say fifty percent but oftentimes it's that's what she  her fraudulent statements in writing when he's looking for assurances saying didn't you say we're going to get fifty thousand dollars that's the proper context of those conversations so the fact that tests and that also leads us to why there is c entered why i believe there's a strong in ence of c enter number one she personally made those representations multiple times number two this is a small business it's her secret sauce it's her algorithm that she says she developed she's talking about it's ability her ability via this algorithm to generate profits this is all information that's within her control it's not like the bernie ebbers case the m c i world com case that they cite where bernie ever simply signed the ten k and they said well you should have known that your accounting didn't violated gap because you sauce she had personal knowledge and she immediately failed to live up to it the case law says that when you have such a temporal failure with a representation of fact and the failure of that fact without any explanation without any intervening cause that should be enough you waived it and you said i don't believe we waited i agree with him we didn't file it post judgment motion at the end of our closing brief we asked for other such relief as the court may allow us or intimat we thought were good at hearing as well where we could understand whether we needed to be able to do that but not that notwithstanding we did ask we did to make a general request for any other relief in addition to denying their motion the only other relief we