i would like to at the outset reserve fifteen minutes for  rebuttal as an overview i have appearing in the consolidated case of which there are four appeals but outside of the four appeals there are two twenty eight j letters of supplemental authorities which have been presented to the court there are three requests for a judicial notice that  before this court is the question of the correctness of the district court's dismissal as untimely in the books it's a motion to dismiss this is in case five six six nine five votes which is motion to dismiss is not before this court today but books which believe the dismissal should be reversed and the motion should be heard as a demonstration of bad faith by the debtor to the bankruptcy court bad faith and or an absence of subject matter jurisdiction is fatal to a chapter eleven action i have a question on the district court to snaffle as your appeal of the denial of your motion what does that isn't that moot in the sense  that my review of the record seems to indicate that you're ample to argue in your subsequent appeals that that's a circuit court one of the primary issues that the dist that imogene three board lacked authority to file for bankruptcy and therefore the bankruptcy court had no jurisdiction we did get to file that your honor but the motions in the court below that in the bankruptcy court included the grounds of that face which was not addressed because the motion to dismiss was was not based basically that that when we pointed out to the debtor that there was a way that they could gain relief from the right and that's it that's my point your bad faith argument was that you believed that the transaction of the transactions were going to fall because of not having a full board of directors correct that's part of it your honor then we went on and we moved on to when the when the help wasn't the extended hand wasn't received we went on to moving into the state court and my client was asserting his right and i guess my question is like judge callahan's those issues are now before us in this appeal here to question of whether or not the transactions were somehow invalid because the board didn't wasn't completely staffed at the time the other questions about whether or not the appeal deprive the court of jurisdiction all are in front of us now so i'm trying to figure out once again by sending something back to the district court to address your motion to dismiss when all the grounds for it on front of us now the court believes the grounds are in front of it now then we don't have an objection to that to not sending it back on this on the bad faith issue if we will if we rule on these issues one way or the other it seems to be there's nothing left for the district court to do it did certainly not at the district court level and if you remanded it back for further instructions to the bankruptcy court then that's a different matter but at this court has before it if it has sufficient facts to and it's in his judgment to make those determinations well let me ask again so that i'm clear insufficient number of members of the board of directors are found by this court to be valid do you have a bad faith claim we do to the extent that we said that rather than let our governance issue which is a direct right of my client be decided in state court they to maintain control it was dragged into the bankruptcy court so i don't but i'm just i'm asking a legal question let's assume that we find that notwithstanding your argument that these transactions later having been reaffirmed by a full board are valid or not voidable do you have a bad faith claim i mean i'm asking because it's really the question this preliminary question both judge callahan and i are focusing on i think your bad faith claim presumes that there's something wrong with these transactions and if we find that there is something wrong with the transactions but then you know then you will prevail on that if we find that there's not then i'm not sure that you have a band faith claims and that's why i'm asking we have a bad faith claim in this in the sense that there's no way for this board that lack power of management to appoint a fourth board member balian right that stature governors claim i understand it may get i want to get to the merits of that but i guess my question is doesn't your big face claim rise or fall with your governance claim as to the technical details of getting into bankruptcy yes that component can't be offensive here but there's the other bad faith is how they proceeded and why their motivations for getting into bankruptcy which is also in in the in the record ok i'm sorry didn't mean to take you off track but it would be helpful to me then if you'd explain to me why you let me just let me posit a scenario for you let's assume that the were too few members of the board at some point they appointed a force that by the time this case comes to us a full board was appointed and they ratified prior actions and i think that's what this record discloses why isn't that ra sufficient to and to validate the prior actions but i don't know in the record where anybody or any board has ratified the the actions other than the than in the in the sense that the plan  somehow what you've got now is the plan and appointment of that board ratifying the fact that the board the petition filed the petition didn't have authority to do that and so what we're looking at is now that is i understand the law the petition is the block point that the people who are under underprice bigger and to the people who presented that petition have the power to do it otherwise my client could have continued to pursue his claims  at state court level and got the board that he wanted or any board that could properly installed and then that board could decide a bankruptcy was the appropriate i'm just two separate questions here let me maybe a confusing t two one was the authority of the board to file the bankruptcy protection the other was the authority the board to enter into certain transactions prior to the filing a petition with respect to that second issue hasn't actions i'm not sure what the court's asked me about transaction could use this was your you claim that a bunch of transactions that occurred before bankruptcy can be avoided because in your view the board wasn't sufficiently wasn't legal at the time with each other so far yes ok with respect to those transactions not with back to the bankruptcy filing hasn't there been a subsequent ratification of those transactions by a full board not that i'm aware of not in the record your honor no record doesn't disclose that doesn't disclose that well let me then take you vollmer on this is obviously a central issue to all of your appeals can you point to a case involving a california corporation where an act of the board of directors has been held void due to the failure to hold an annual meeting my understanding california corporations code three hundred one b states that the directors quote shall hold office until the expiration of the term for which they are elected and until a successor has been elected and qualified and why doesn't that language show that the problem with that it doesn't need the body of corporate statutes cases burnet these days and they said by delaying or avoiding an election you can't keep yourself in power or mr books which had gone to the state court to so what do you say that your past case that stands for the proposition that where an act of the board of directors has been held boyd yet that  case and there's one other case the supreme court case which is the eighteen hundreds case which is puerto v last i'm looking at a california corporation was it a california involving a california corporation yes it was that's one twenty seven cal to sixty one to sixty eight hundred ninety nine and they said that you for the that shareholders are entitled have been critical decisions are being made they're entitled to have a full board and up until the moment that the petition was filed the day before there were only three directors and my client had in  four directors what's your case that if there are four directors that the three who who filled one vacancy to get that to get that majority didn't have were was an illegal board at the they follow that and fill before now there was a quorum of the board and under california law a quorum of the board can act so what's wrong with the action what's wrong with the filing being authorized by four directors see because it makes the case law burnette and price your position is that there must be seven the debord must be silk filled at any time in order to take a no your honor what we're saying is that that those three had lost power of management because by client had gone to the state court and was pursuing his remedy of demanding a state board so well but i mean that's what i'm asking i'm i'm not a california lawyer thankfully  but i can't find any california authority for the notion that they lost on us already simply because you brought an action with an action would have done was compel the filling of the board but did you think they lost their authority to select the fourth member of the board because you brought that action with us to bases what is the answer my question yes you think they lost the authority to to fill a vacancy on the board because your client had brought to california's death or not yes i do you tell me what it is tell me what case you ok i had a question it's going to a different issue you conceded in your brief that four of the six claims in the state complaint are derivative and the state complaint is labeled complaint shareholder's derivative action under these circumstances why did the bankruptcy court and the district court err in determining that the grab a man of the state complaint a to a corporation rather than to your client as an individual shareholder so because the court they determined  was basically a derivative suit can you point to any case where a shareholder has directly recover damages for a corporation style you're to hold an annual meeting or for an action to remove a director or is it still the same cases that you're talking about same cases that i have now they don't really they're not on point but you can see that i mean you're sort of deriving an argument from them that they're not they don't they're not they don't they're not in some corporation in the sense that my client was the complete violation of the business judgment rule in my client then would have a claim for negligence against the corporation  while those nanda riveted claims i mean it seems to me there they are they're sort of classic derivative claims not to know my my client has an independent right under the under the code to compel an election that an annual meeting when one hasn't been held that's one of the causes of action now to the extent that you know that the bankruptcy court or the district court may have relied on the title of the how the complaint was drafted the fact is that as a matter of law each cause of action is either is found to be either derivative or  direct and frankly by labeling it that way i was wrong it should have been that bringing derivative causes of action and direct cause of action but the label shouldn't control here so if if i understand your argument correctly you think you should be entitled to go back to state court to bring a suit to fill the seven seats to compel an election to fill a side of this that that was outside of title eleven that was dragged into bankruptcy question as that election already been held there's been no election other than in the sense that the board a slate of directors was before proposed in the plan and they were approved by the court so there's no election but there is a court of the already appointing a board well that's my question if there's a bankruptcy court order a plan appointing the board can you go back to say court and do that would not  not be a direct attack on the bankruptcy courts jurisdiction that certainly would be your honor but what we're saying is if if if this court dismisses the bankruptcy action then we go back to state court and we're back where we started and then it will go back to the fourteen thousand shareholders that are been dispossessed they'll decide who they want their management to be and then in due course they'll do what any board doesn't act in the best interest so fully of the corporation  i'm i'm still not clear and maybe you can help me in this you make a stern versus marshall argue this is the same point you're just making now which is that you know what if the bankruptcy is not dismissed  aren't your claims your clients claims for sort of loss of stock valued cetera directly related to the bankruptcy you know it would if stern versus marshall only works of course is the bankruptcy so continuing  bankruptcy dismissed and we don't have to worry about it but as a bankruptcy it was not improperly filed aren't your aren't your claims for loss of stock value sort of classic core claims as opposed to the   can be interpreted that way your honor yes but to go that would be the claim twenty three but as the claim twenty four the only reason my we didn't prevail on claim twenty four was because the case move to bankruptcy is substantial benefit i mean we do have even through the bankruptcy court now there is a board that's that's acting weak when we change their conduct and california law is substantial benefit is different from federal law and we don't have to get the judgment on in order to have forced the corporations change its conduct now i noticed in your you argued that the bankruptcy court was stepped up to have jurisdiction when your client filed his notices of appeal how do you distinguish  a two thousand and seven one circuit case if the bankruptcy court is in research and retain jurisdiction to enter in order to starching the debtors debt even though the f c c had already appealed the denial of its motion to dismiss the sherman seems to personify problem for you on that argument  it does your honor frankly i'm at a loss right now to respond to the quick a while maybe you can think of something i read that all thank you rather i want to go back to your claims twenty three twenty four because i really have two separate sets of questions about it these are claims you submitted t bankruptcy court correct yes you're right and now you're saying the bankruptcy court didn't have jurisdiction to determine them under certain verses marshall we said i mean isn't that isn't that kind of you invoke the jurisdiction of the bankruptcy court to rule on these how can you now claim that it didn't have jurisdiction is wrong because under what i think under wellness your honor it's apparent that we didn't we have no choice but to present these claims to the bankruptcy court review assuming that there's jurisdiction of the bankruptcy courts determination that your litigation in state court didn't come for a substantial benefit we review that to the whole use of discretion what's our standard of  i think it's important you're asking well yes you're asking us to say that the you know the bankruptcy court somehow erred in determining that this litigation activity didn't confer substantial benefit in a corporation and you make arguments about why a benefit was conferred i want to know whether i'm free to just decide that the way i want or whether i have to determine if the bankruptcy court abused its discretion and in coming to a contrary conclusion would seem that the bankruptcy court had to make some factual assessments that there's sort of a subjective component to that in making that determination which would put you in the at the ascent discretion i think that the  achieved f d a approval at the time of the confirmation because the the bankruptcy court relied on expert testimony that relied on the testimony of mr janes is the main actor in this and we've submitted requests for judicial notice we're impeaches his own statement about the number of units that could be could be sold and what time frame plus you have the fair market valuation of what the what the public marketplace thought the technology was worth and that flies completely in the face t face of what what the evaluator came up with and why and the basis for how we came up with it was there contrary valuation evidence presented yes your honor we had an expert  declaration from an expert who sells these machines that knows technology intimate lee and he said that with a run rate over five years on sales that this company could easily be a thousand in within five years so what we have we have to valuations one gun by one side one time by the other and the judge finds one more credible than the other how do how do we review decision the jury had done it we would say we would give a lot of deference to the jury who were heard on the facts and made a decision why do we give the same deference to the judge here if you have if you have an evidentiary i understand that but i'm just talking now about the the choice between valuations and that once again one with that we give a lot of deference to the trier of fact had to rely on what mr james told them and the court was even in its own in its own transcript indicates its skeptical and it had but its just relying on what mr james said rebuttal just you were correct in not allowing someone to speak from the gallery here but if we don't have a lot of cases stand the shroom at table if you'd like you you can have your client at counsel table if you'd like but i'm going to you know i'm going to say that we can't have people speaking from the audience but i watching them write notes here if you want to pass something to at the counsel table but you handled it correctly but if you'd like him to sit up there that's that's your choice thank you roger ok so i'll allow fifteen minutes for about then thank you strewn throughout these four appeals and what i'll try to do is obviously address the questions that you're on as counsel on it's like start you out and that you know that and then you can certainly use your time but what should we make the fact that that the m a g three board filed for bankruptcy right before the scheduled hearing and mr vickers says state court litigation i want to shareholders suppose to do if a board was hold annual meeting if a board can block a suit under california corporations code section six hundred c by filing for bankruptcy i think i'm encapsulating what i understand to be some of the appellant claims here  i understand the concept appellant has about that issue but there is an issue that occurs in everyday life it happens all the time that a creditor a plaintiff brings an action against a party who on the e of a trial on the eve of a foreclosure files a bankruptcy law but it's a little bit different in a typical creditor claim i understand when somebody who to me your bunch of money brings a claim and you say i want to head this off and get into bankruptcy and ghanaians here is the claim was you're not following the california laws of corporate governance and you had that lawsuit off by filing for bankruptcy he's different this litigation was one of the unfortunate several issues that were facing the company when one looks at the question of bad faith as the bankruptcy judge heard and that is a question of fact one most of the court obviously evaluated whether under the totality of the circumstances it was appropriate for the state to file whether it was in bad faith and it was rather clear that you had large debts and nobody got sound on this record we had that the company not only had large debts but as is pointed out the problem that the company got itself into unwittingly i think is that it entered into these various financing agreements and as a result of the share price decreasing each time it decreased it gave their particular shareholder a right to reduce the share price and they got into what's called the death spiral which unfortunately is something that happens to small pink she traded companies this lawsuit they hadn't held the meeting mr bruce which may demand that they hold the meeting and a month later he filed the lawsuit it wasn't as though they had been years that had gone by and there was one of the things that the burnette court actually had talked about that it was a it was really an egregious situation where from the time of its formation there had never been a board meeting but as importantly and i think this was a lot of the questions that the court was asking counsel there are parallel provisions under the california corporations there is absolutely nothing there's not a single case that says that the failure to hold a meeting results in a direct of losing power this simply not a case that says that there are a number of cases and there is a statute section three zero one b section six hundred of the california corporation's code which talk about the fact that if there isn't a meeting that's held at the appropriate time the remedy is for an agreed shareholder to go into court of course the superior court to force that meeting indeed that is what this plaintiff that always respected transactions that occurred pre bankruptcy what's the effect of not having a four board of directors is there any which if the president of the company enters into a transaction with a third party and it turns out at the time there's not a full board of directors does that fact or galatea the transaction your honor i'm not sure i relevant in this sense so let me let me rephrase your opponents argument your opponent says this is a bad faith filing because you had alternatives these transactions if you are the ones that lead to to debts were void of all because you didn't have a full board and if you'd only taken that route instead of filing for bankruptcy things would be better maybe i'm making the different argument he makes but that's i think the one he's making so tell me what tell me what tell me what the into where there wasn't a full board and their court drew a distinction between the effect of those transactions on the shareholders and the fifth of those transactions and third parties and said that in so far as third parties are concerned because a third party was relying on the apparent authority right now because that was my question it i don't think and this is the one of the premises i think of the of your posts argument i don't think you could get out of those transactions because you didn't have a full board at the time you're stuck with them are you not that is what again i think it was a phony case but i believe that is what the case that if it was the bernie case excuse me and i guess my second question i asked your pony this why there are subsequent ratifications by a board with a sufficient quorum of these transactions or is actually simply the result of the reorganization where no the that somehow the just record did you consider the bad faith argument or not be the district court again there's a lot of things that it's we want to talk about their faith that's a very broad did consider was whether or not the board had jurisdiction if the movie said it was a board had authority it was a freudian slip is a big difference between jurisdiction and authority the bankruptcy court did consider whether the board had the that he had made so that's i think that's what we were all a little bit getting at whether it's this bad faith if the district court if if we found that you know i asked i think in my first question about why isn't that moot because we're getting to all of the issues it's are something we're not getting to because of what the district court dead in the first instance says and i think judge hurwitz was trying to say do you have a stand alone bad faith claim or is the bad faith claim based on everything else that we're going to address in all of the other motions before the court first or something we're not going to reach is there a little kernel and there other ones some of them as i read them were he should have should have walked away from these transactions or and did them because you didn't have a full board and you didn't therefore you didn't have to file for bankruptcy because you didn't have this crushing debt that you thought you would have had and that's one i think we can address because because it's a legal matter were there others besides that your honor i'm not sure that that is an eagle matter i think that the finding of bad faith is no no i'm my question the question i think we can address is whether or not now yes you've this question a moment ago whether or not under california law having a a short board if you will entitle the corporation to walk away from transactions with third parties if we conclude it is not and issues the district court didn't address or we can't address that down that are in demand basically not telling you how we're going to rule on them i'm just trying to figure out the parameters of a claim you think that's the entire claim i believe so your hon filed bankruptcy how does that relate to a bad faith claim let's assume that i have an entity that's got obligations in excess of its ability to pay but i also don't like somebody who's bringing a lawsuit against me is a bad faith claim if i have mixed motives no your honor and the traditional bad faith they're used in bankruptcy cases really wasn't an issue in this case and there is a whole body of was the author of the of the board if this court were to to rule this court has everything in front of it i think that it needs to have in front of it i don't want to take you out of order but i'm interested in the insertion of the  plan in the disclosure statement as this court's aware what both the bankruptcy court found and the district court found was that correctly so as a matter of law that rule bankruptcy procedure three zero one six requires that if there is an injunction which is not permitted by the bankruptcy code then it must be in the planning disclosure statement what both the bankruptcy court in the district court found was that the scope of these injunctive provisions were with injunction the language there in the order is no broader than the discharge injunction permitted by the code and indeed one of the things that the bankruptcy judge did is he cut it back in certain circumstances because he felt it was too statute says that any party who participates in the formulation and the solicitation and issuing of stock under a plan if it's done in good faith in compliance with the law is entitled to to the therefore was not necessary to be in the in the plan itself there so what would you understand then the appellant's argument to be on this point that the scope of the injunction all that that's what i think the correct legal question is your honor i'm not sure that's exactly what intelligence argument is but i believe that that is the correct legal question where you believe that's the question that permit it this doesn't exclude anything there was one of the other insertions that the bankruptcy judge made to ensure that the provisions fail within the permitted provisions of the bankruptcy code eleven forty one section eleven twenty five so we are to interpret this is being no broader than those permitted by the code that's correct your honor and i will say to the court that having brought the discharge provisions are commonplace in bankruptcy cases now in the ninth circuit the courts where there you can't have an injunction a party that's not permitted that section twenty five twenty four eve the bankruptcy code delaware and other places they do permit that in the ninth circuit that's not permitted this plane doesn't contain a discharge injunction against other parties it's against the so you said so that's how the legal issue should be framed but you said you're not sure that's what the appellant's argument is what do you understand the appellant's argument to  y i'm really not sure you're honest to be quite honest sometimes i can't fully understand the appellants arguments and we had drifted in our briefs the best way that we can based upon the legal issue here it seems to me there's only two two is to attack this one is that it should have been part of the plan and you've addressed that and the other one is that even even no matter how it arrived into the court's order if it's too broad and even dress that too i think those are the only two possible attacks on  extreme i mean one spike at a billion and the others just add a few million and the one that the judge ultimately selects how do you explain that well i mean because usually there are there are different but they're not that different think about the circumstances here your honor you have a company that is a startup company for all intents and purposes has a product that has not been approved by the f d a it may be approved it may not be approved if it is approved it may have a certain impact on the market the evidence that was presented to the assume f d a approval and assume sales that the that the judge just fell at that it wasn't a reasonable hypothetical and that's how you justify i mean i'm just asking because you know when they're that far apart and in fact what the what the bankruptcy judge one of the issues in connection with that appraisal excuse me in connection with the the declaration of mr cash on who was the company's expert which said even if you take that as accurate there's a number of assumptions that you can take that you can't assume what he says would come to pass and he takes into account  a discount issues and there's a variety of factors which he used and the bankruptcy court it was a two day confirmation hearing they were there were witnesses on the stand there's really nothing in the record which shows this court a clear and convincing basis there and even the court with a definite and firm conviction that there was an error by the trial court of the bankruptcy judge evaluated the evidence in front of him yes it was far apart the bankruptcy judge was intimately familiar with the case he had lived with the case during the period of the bankruptcy and it was his estimation and his and in fact there were a number of valuations that were proposed by mr keshi on and there was one there the bankruptcy judge selected as the appropriate for impeachment or what was it being used for or it was apparently a two thousand nine hundred courting by mr james of certain things that he said to shareholders at the time so the first argument is why wasn't a presented to the trial judge i mean this this wasn't something new that came up afterwards this was in two thousand and nine number two is the court's well away or their judicial notice of something new on appeal is  the court to take the record as it is this shouldn't be a whole lot of new matter introduced on appeal that there's a whole lot of is about that the court's aware of that and number three is even if it were to be admitted it's the question is what's the relevancy as difficult to understand how one can take judicial notice of something on a website of a company there that it just is not the kind of thing that want to pick takes judicial notice of i don't think the process is correct i don't think the request is correct and i don't t the timing is correct when you go back to a question i asked your opponent his contention as i understand it and maybe we don't understand it the same way but let me try i cites everybody cites for everything the burnett case for the proposition is that california law does the filing of the action keeps the board from filling the vacancy the filing of the lawsuit filing the lawsuit in california court that's i think your authority to and the fourth member the fourth member being the person who gave them a quorum to file three organization petition if that's his argument what's the california law on there was no stay in place the filing of the lawsuit doesn't five which is a specific section that allows the board to appoint another member in the event of a vacancy it doesn't say it doesn't limit i mean it does say that if the board fails to after that point at some point filing of a lawsuit can act as some level of injunction without a court order requiring that well how do we review the bankruptcy court judge's determination that the state court lawsuit didn't confer a substantial benefit on the corporation it does appear that many of the things that mr vertex sought filling the board other things doing with the preferred stock i thin are current a result of the question i don't think it's a no question i believe it's a substantial benefit just sounds in the nature of something factual and so to address the second point that your point of brought up he says the judge didn't find a substantial benefit simply because the state court suit didn't proceed to judgment is that right that is that's one of his arguments are however bear in mind your own of that there were six courses of question but in any event what the bankruptcy court also found was that it was largely it was at least in part as a result of the focus litigation at the company ended up in a bankruptcy so again based upon the multitude of facts in front of the bankruptcy thousand and twelve may two thousand and twelve and when is the bankruptcy protection filed it was filed i think i should know the answer to that you're right how how long after i'm going to say it was sometime  and they really are two fundamentally different questions there was also a question i think your honor raised about stern v marshall and just to step back under twenty eight u s c thirteen thirty four congress gave to the district court original and exclusive jurisdiction of all bankruptcy cases that is also under twenty eight u s c section one fifty seven b one however for proceedings within a bankruptcy case that is with the district court has original but not exclusive jurisdiction so what the twenty eight u s c one fifty seventy two does it creates a series of proceedings which are considered a score proceedings which supposedly the bankruptcy court is to is able to to hear and the court's well aware in the circuit and all the other circuits there is a plan could order a referral of all the bankruptcy cases from the district court to the bankruptcy court when there's simply no question in my mind there's no legal question that the bankruptcy court had jurisdiction jurisdiction of the bankruptcy case was conferred on the twenty eight u s c thirteen thirty four when we're talking about claims twenty three and twenty four and what this is  what the trilogy of cases of stone the marshall building them and wellness talk about is not the jurisdiction of the bankruptcy case they talk about the jurisdiction of these proceedings that are going on in the bankruptcy case in title eleven what proceedings  when the is this discussion of stone v marshall it still doesn't get anywhere close to whether the bankruptcy court had jurisdiction over the bankruptcy case it did now with regard to his claim i think you're trying to raise the sternly marshall dealt with whether or not the bankruptcy estate which launched a counter claim against a creditor whether that was within the constitutional authority of the those deal with whether or not a claim that's asserted by the bankruptcy case in a civil proceeding in a chapter eleven case or in a title eleven case where the court has jurisdiction and so i just thought it was important to clarify that because the vested i mean you obviously are very knowledgeable in the area of bankruptcy law that and you obviously have a client to represent but let's let's just if i'm just trying to fit all of the appellant's arguments and th if the court this court which we haven't discussed the case so there i'm just speaking hypothetically if we were to find that the bankruptcy court if he were to lose on i would say his biggest argument that if we said that the bankruptcy court had jurisdiction he still has some other areas where he could win little parts correct i mean or does everything in your mind fall on if the bankruptcy court had jurisdiction but you just said  marshall that's a different argument i mean we could reach a different conclusion there even though you've given our reasons why we shouldn't but if we said the bankruptcy court had jurisdiction what else remains of his arguments and what if you're looking at a road map well if we go through the board feels in front of your honor yes the first one is the confirmation order so the confirmation order if you give me a minute the confirmation order addressed the plan that was in the plan and the plan remains valid no matter what happens there after the bankruptcy judge fair do you need to re solicit the creditors because if you are making a fundamental change to a plan then you need to go back to the creditors and my argument to the bankruptcy court was no you're out of this  well i suppose if the court finds that the bankruptcy court had jurisdiction the court could still theoretically find that the that the district judge was wrong in ordering the dismissal as untimely and then send that back i suppose that's conceivable idea in your honour's and i'm looking at my cock over here the the federal rules of bankruptcy procedure are very very clear about what must happen on an interlocutory appeal you've still got to appeal within fourteen days you just have to file your motion for leave to appeal at the same time which may or may not be granted the while most of the books which argues merger that it merged into the confirmation order  law that he cites is a non bankruptcy case where there was a tightly interrelated issue we've cited to the court a number of cases where the courts talk about bankruptcy cases as being really a multitude of different sort of proceedings and you can't wait for the final final order before any order becomes final i just don't think that there's any basis for that argument i think i'm not clear ason is the question judge callahan asked of beginning what would we do if there he sought there his lawsuit be abandoned so that he could continue it right it's a strange sort of this is a strange sort of circumstance so a lawsuit is probably of no value but the but the corporation retains it normally what happens is the corporation retain stuff that's of value and abandon stuff of no value here and it seems to me it's retaining the lawsuit in order not to have to spend the money to defend it which was of significant hurt right which is which is that that's a strange sort of situation isn't it but then there are other fundamental misconceptions about the abandonment because what mr brooks  thought in petitioning the bankruptcy court abandon is that somehow it would come back to him abandonment is a legal concept under section five fifty four of the bankruptcy code which says that you can abandon something out of the derivative suits and perhaps the the shareholder could then pursue it conceivably but the courts are already found that it was the relatives that's correct but if it's abandoned it would be a vendor into the success or the new corporation right don't want to approve a claim with a corporation that we know is still going to have to defend this kind of lawsuit unless the court would overturn the play and i think at least in this case your honor that that there really is no there is no effective relief that can be given told that there's a legal question here but let's assume i'm a third party and i'm dealing with a corporation and i enter into a transaction that's signed by the president do i have to check and make sure there were enough people on the board before i can rely on the president's signature law in california or others you have to have two signatures in order for it to be automatically confirmed that the plan was signed in presumption under california law that you entered into a corporation entered into that once who's the second signature from another officer i think is the c f o ok where the two signatures on these projects were not so that's your contention is because it was only one signature these transactions were wrecked your honor in fact these private placement agreements that were entered into at least one set of them with the krahn shire people they lease those private placement documents from some place in new york and when we raised this objection they subsequently modified their work i went to see what they if there was any reaction there certainly was they they completely revamped the signature portion of their least private placement documents that that hedge funds use based upon i believe the fact that we raised this  as far as the the issue of amnesty what the what the district court and the bankruptcy court have said is that because of this reorganization my client and every other shareholder under california law has lost standing to prove true proceed on a derivative basis in the new corporation and what we've argued to this court into those courts that we've automatically lost standing that under california law if you're a shareholder at the time that the claim arose and you are a shareholder at the time you bring the lawsuit then you have you continue to have standing and the issue is that at the time when they went when the plan was confirmed the the issue was well suppose that  mr james and his new owners you know quickly go and get f d a approval and all of a sudden we suddenly now have a billion dollar corporation what the sheryl should have the right to do is since they do belong to the new corporation to derivative league go to the new board and say we want to sue past directors for malfeasance that was support that was the point now if this court is willing to say one that my client too did not lose standing and to that he has full derivative rights for pre position conduct of the directors then fine then that but with the way the  a new corporation is do you can use to tell me how that works it's the the if we had standing to proceed derivatives really presumably you would sue the directors of the old corporation for malfeasance of some sort  and we would we would sue the new directors and say that the because you retain rights as in the new corporation to cause of action that arose in the old west but that doesn't that isn't that precisely what the bankruptcy plan does away with this is this is an asset is the reason for all it's not your individual asset and i said of the corporation and the new corporation how now as a fresh start it's been through a bankruptcy point every organization i understand your argument that you get to sue the directors of the old corporation but presumably you don't want that money to go into the oh i don't understand how you how we how after the plan of reorganization you retain a derivative claim against the directors of the new corporation for free partition conduct tell me how that works because in the bankruptcy plan they retain that right to go after the old directors but the fact is that that they'll never do it because the people who are in control of the corporation right now or are people affiliated with mr james so they're just not going to go after mr janes who's after all as an inventor they need in governance of the new corporation correct correct it's malfeasance and governance of the old corporation it's it's correct that must be brought derivative lead by the directors of this client doesn't have standing any longer and to my best that's i'm not sure and what court has told you that the district court have yet tempted to bring a derivative suit against the directors of the new corporation that i don't have standing to do things my client has no standing i don't think the senate your client is the shareholders you know he is ok the new corporation has this asset that it's retained which is the ability to sue the old directors is correct ok why can't you bring a derivative suit against the new car and against the new corporation for its failure to pursue to use that asset because the bankruptcy court i mean the district court and the bankruptcy court said that when the new corporation was formed that book six lost his standing still lost his standing for the old lawsuit to be sure this is a new lawsuit you have and you've never brought the ending for the new lawsuit when it ever comes up and where does where does that say that new owner it says it in the in the in the bankruptcy confirmation order it says that you may not bring future lawsuits with respect to the future  but now we're talking about different things that misconduct that you seem to be describing now is the misconduct of the current board failure to pursue this asset which it retained which is a claim against prior against prior financing i don't read the plan is saying you can't go out tomorrow and file that lawsuit but you'll probably lose but that's a separate issue there's no i don't tell me where the plan says you can't pursue that lawsuit i understand why you can't pursue the lawsuit for pre pare titian conduct on your own but this is not reproducing conduct that you're talking about it's talking about kind of post petition by the new board which is retained this asset because it didn't want to abandon it and if you think that  k that's what they're telling everyone is that nobody can sue for pre partition misconduct at the door the board can overturn this asset but i don't have standing when they don't do that that's why i want them to abandon it so that i can do it because they won't two separate issues about which they abandon it maybe you could do it but they have it and you're saying that the plan says that you can make no claim against the board for their failure to pursue it could have a look and plan for it and in the in the eight k and in the in a ruling on the issue of where the court on the motion to dismiss the bankruptcy court proceeded on the basis it said very affirmatively that it did so on a core basis it said that this is a core function of the of the bankruptcy so forth and under twenty eight us the one fifty seven today it isn't listed jurisdiction is it listed as a core proceeding in front of where the bankruptcy court can decide that we're arguing have argued in our papers that that the issue of jurisdiction and subject matter jurisdiction remains with the district court and that what should have happened is that this should have been treated as a non core matter and on that basis that findings of fact and conclusions of law should have been prepared by the bankruptcy court and submitted to the district court for for the final order that was necessary to you talking about when i think is paragraph twenty four of the confirmation plan is you think that's the one that prevents you from bringing an action for the future actions of the board