applied the wrong legal standard when evaluating the purported independence of the special committee and the trustees that it appointed that committee and erred in determining the special committee's investigation appoint this litigation demand which failed to utilize the most basic investigatory tools and which the committee members themselves were largely absent and which resulted in a report it was lloyd of factual support was reasonable for purposes of cited section seven point directors are independent as that term is defined in the statute as used in seven point four four the term independent means both free of domination and control and nd disinterested not having an interest direct or indirect into the transaction being evaluated how do i know that because comment one to section seven forty four express lee says only the word independent has been used because it is believed that the word necessarily also includes the requirement that a person have no interest in the transaction massachusetts courts applying section seven dollars have recognized that issue and in fact the the independent standard that is required by such as seven point four four of the n b c l instead the district court looked to a different statute in a different section of the message as a general laws in a different chapter to take the independent standard for an interested person as defined by the investment company to act of nine hundred and forty and the court look to section two b of chapter one hundred and eighty two the mess is best used as business corporations the courts adoption and or use of the the i c a definition of interested person for purposes of a valuating independence under section seven point four four is wrong for three reasons st if we're going to use section seven forty four to best apply to apply to mess use of business trusts the defendants and the district court should not be allowed to pick and choose what sections of the statute they want to apply the text of section seven  so speaking of the tax doesn't section to be specifically applied to trustees quote when making any determination we're taking any action has trustees not on fairly specific whereas seven  situation where the supreme court of massachusetts says yes we're going to apply the statute that biased term doesn't say so but we're going to say you have to use section seven forty four so so to the extent there is any ambiguity as to what the the the quite quote the question of independence is fundamental to every aspect of judicial inquiry under section seven point four four and if the question of independence is so fundamental to the analysis of section trust the required standard of independence defined in that statute should apply nd the standard for independence under the i c a is a fundamentally different question as to  whether or not someone is independent for purposes of analyzing a derivative claim the reason is because the focus of the of the i c a just like the st prong of the analysis under the under under the under seven point four four is the vertical relationship between the trustee and the investment advisor the i c a sets forth a statue tory definition of independence for purposes of that relationship when you're looking at a derivative claim i look at that relationship but that's not the only thing i look at i look at the transaction itself and in this case the relevant inquiry isn't the relationship necessarily with the with investment buys or not just the relationship with the investment advisor but the sideways relationship the relationship with respect to the transaction itself and in this case all of the trustees just produce areas  both the general the gender the global allocation fund and the n l p fund a decision to reject the investments or to it or to stop the investments or to withdraw the investments from the would have had a huge adverse impact on the n l p fund and therefore could have cost constituted a bridge if it is your duty by those trustees in their capacity report's analysis and whether the conclusions are justified are squarely protected by the committees and the board's right to rely on business on the business judgment rule that's only true if they qualify  independent under the definition under seven dollars without that presumption if they did not apply as independent then it was the defendant's burden to prove that the defendant's burden to prove the reasonable  and good faith of the investigation not a presumption that was adopted by the district court so for that reason alone it was outcome determinative it ought to be reversed and it ought to be the district court should be required  allocation fund constituting a core voted to reject plaintiff demand that the board pursue legal action against the investment adviser and the trustee defends in that the vote occurred after reasonable and good faith investigation by the committee appointed by the board and after the board's consideration of that investigation therefore consistent with massachusetts law the district court also determine the plaintiff's claims must be dismissed in seeking to attack the sound reasoning of judge len the appellant offers a scattershot kitchen scene type approach which includes some arguments raised for the st time in her reply brief as well as efforts to revisit arguments or resurrect arguments abandoned or disavowed in the open the appellant ignores the record before the district court including a record of a thorough investigation of the demand and a good faith business judgment by the independent trustees pursuit of the proposed claims would not be in the best interest of the fun or it sure all before addressing some specific arguments made by the appellant including if it please the court i'd like to touch on a couple of fundamental and overarching things that we respectfully submit shaped this other this case involves a mutual fund and it arises in the context of the mutual fund industry there are a number of federal and state laws that pertain specifically to mutual funds mutual funds are subject to a comprehensive very substantial and detail s e c minister trustees of a mutual fund persons who are disinterested or independent with respect to the investment advisor and the federal statute in implementing s e c rules and guidance specify what is required to be deemed disinterested or independent these matters were covered specifically before the district the investment company act in detail the regulatory regime and s b c apparatus gov mutual funds also recognize and reflect conventions and standard practices in the mutual fund industry one of which is service dependent trustees on the board of multiple funds with an unusual fun family this reality regarding how the mutual fund industry function is awesome congress which passed the investment company act in which amends it from time to time is not lost on the f c c lost on the massachusetts legislature significant percentage of mutual funds are organized as interest a person with respect to the trust as defined in the investment company act quote game to be given dependent and disinterested when making any determination or taking any action as a trustee  referenced by the plaintiff i'd like to make one other related fundamental observation regarding the issues before the court appellant grounds much of her attack on suppose you conflicts of interest flow from the case the potential for such conflicts which are endeavor it isn't demick to the mutual fund industry is what gives rise to the federal statutory and regulatory requirement of a certain disinterested trust mutual fund it has been recognized repeatedly by the courts and with respect and significant a matter in the amount of compensation or advisory feet to be paid to the investment advisor which must be approved by the independent trustees us supreme court has stated and joins versus terrorists that informed business judgments of the independent trustees persons who satisfy the definition under the investment company are entitled to deference this is consistent with a broad and overwhelming body of us already in massachusetts and elsewhere regarding the ability of mutual fund directors and trustees to reject  are misguided first in the papers appellant points to the fact that section seven point four four was enacted after section two b and thus is the more recent statute this is court nd as judgement pointed out in as i noted earlier section two b is the more specific statute it pertains to mutual funds organized as business trusts under massachusetts law and the independent trustees of together is consistent with the norms of statute statutory interpretations that quote hans is a initial framework of section two b and the investment company merely provides further fixed gu posts for what constitutes under the laws of massachusetts in the context of a business trust that is also an investment company under the investment company these guys are not intentional section seven  blake case is really an actress it's not a mutual fund case it's a case involving different kinds of relationships with corporate directors and it involves a circumstance not where that was investigat the allegations against the trustees are collectively insufficient so it's not to tell you the circumstances but it talks about the collect and sufficiency or insufficiency of is made in the showing made by the  modest in relation to the compensation for service as a mutual fund trustee and thereby may have some sort of conflict or may be subject under influence those are respectfully very strained arguments that the district court engaged and disposed of i think very surly we have covered those extensively in our release the one thing i would say with respect to some of the relationships which were attenuated and and remote in time on the district court proper and consistent with the history of cases that is for demand consideration attentional business judgment dismissal purposes is considered at the time of the demand and so the fact that someone had prior previous dealings with affiliates and social relationships those kinds of things don't tip the scales but in routinely and consistently determined by courts not to create independent issues and possibly the boilerplate argument that if they agreed with the demand of the term in the claims to be pursued they would be authorizing claims against themselves that contention is routinely rejected by the courts there is no serious independent question independence question with respect to any of the end interest particularly trustees mrs wharton for all it clearly constitute a core and with respect to meeting at which the committee's recommendation was considered and voted upon their two votes are enough if you if you disregard the other three and saying that there can't in some way we submit that they're not in the district court proper we found that they were the two remaining trustees really are unassailable in terms of their end and their two votes are sufficient under the statute and consistent with massachusetts law the plaintiff covered a few other things and glanced against what i'm assuming are coming attractions with respect to his in this case the record judge lynn speaks about it in her order but you have the benefit of the record on feel as well the record reflects a responsible thorough and good faith process a process that exhibits hallmarks of reasonable is cited with approval in a long list of cases the committee in gage deeply experienced independent legal counsel attorneys spent nearly a one thousand hours of attorney investigating the matter very nearly one hundred dollars gauged detailed report setting forth the process the record and the findings of the committee with voluminous exhibits all of which were provided to the district co committee reached out through counsel to mr barrett and his contact to solicit their input and the information they have they believe they have bearing on the committee requested thousands of pages of documents are fun this was a principled reasonable good faith process and the appellant now seeks to attack aspects of the process there greta which are whether e mails or other documents were collected review who attended interviews in the record is pretty clear that the members of the committee one or both members of the committee attended all of the interviews except for trustee you know questions have been raised about interview notes or memory and those are responded to by noting that those documents are privileged but also noting that the report which is before the court and tains in its text numerous detail references to the content record the committee and its counsel reviewed all of these issues in detail as the district court noted these attacks on the report the attacks on the process the attacks on the business a good faith business judgment informed business judgment reached by the trustees most amounts a matter is as to which reasonable minds may differ respectfully these are not matters or issues that thank you your honor st my my my friend spends a lot of time talking about industry practice and that it's standard in the mutual fund industry to have trustees serve on the boards of multiple funds i don't just i don't dispute that and that doesn't compromise their independence visa via the investment advice but that doesn't answer the question as to whether or not they're independent with respect to cross fund investments on investments or other funds as to which they also service produced produce year ease that creates a unique situation where they do have an indirect interest in that transaction and seven dollars gives them the opportunity to take advantage of the of the procedures under that under that section by and by asking a court to appoint an independent person to it to to to consider that you know sort of the litigation demand they had an opportunity to still take advantage of it and they chose not to  as that term is defined there then you don't get the president of the business judgment rule and you have to affirmatively prove the reasonable miss in good faith there is no such presumption it's a burden ship think exercise finally getting to the the process my friend talks about there's a lot about this is an extensive good process and and it's a long it's a long report st it's a long report that doesn't lot they say we got a lot of documents the basic investigatory tool is not public information the vast majority almost everything that was attached to that to that report are public documents that i can get from  they had access to nonpublic documents they had access to corporate emails and communications contemporaneous corporate e mails communications and they didn't bother to ask for a single one of them the only not public stuff in there in the in the contains an affirmative misrepresentation that memo says that the that the prospectus authorizing the perspectives of those respects of the pardons authorized them to make the investment and the n l p fund because we can address we can invest in any other highland and highland highland funds and that's just wrong as explained in our brief as we explained in the tribes of the trial the the the only disclosure in the prospectus that allows cross funds investments allows investment of one highland fund into an highland exchange traded fund and the n l p fund it was not an e t f was not an exchange traded fund as a result the only disclosures in the prospectus about oh the committee members he says the committee members attended all the all the interviews that's just not true we do know that there is ten interviews but one committee member only ten did four by phone and one in person total five