reserve three minutes of my hood for a bottle after the rigorous analysis judge davis denied cert certis certify the class against clifford chance on the sole basis that were going to drag in here's here's what we had in a file is the problem the concern is that lawyers who are merely doing their job and advising clients should not find themselves undesirabl subject to tenby liability just because they advise their clients or the issue really is whether a lawyer here what we would say is if you were at all concerned about your previous test mr healey has creator plus that no matter where you draw that line mr healey is well on the other side of it he did not merely advise a client who was a troublesome client as to how they might word what they were doing this is different from the left coke a case in which the lawyer is asserted to have papered over the clients for aught he wrote happened was if not hourly on october eleventh two thousand and two to late delivered a letter to d v i identifying that there were material misses in the internal controls and that they would have to be disclosed and the company then drafted a disclosure and was very concerned because for a medical equipment finance company which is basically a pump for paper and money if they were not accurately reflecting the income it was coming in and indeed this was a core problem they were accruing income and notes that were not being paid some much longer than one hundred eighty days so that the internal control reconnaissance were substantial and six months later that's what brought the company down after being advised that the company would have to disclose this and drafting a disclosure which did disclose this they went to john healey had clifford chance and said here's what we're having here's what we intend to do what he did was call it kool aid plus he certainly made the statement that was put in the ten q but in order to do that he had to concoct a my reality a charade that went as follows what you will be regime will do an evaluation after the didn't write letters date but prior to the filing in which your division managers will certify that they've done an evaluation m of the internal controls our effective at a date after the date of the detroit letter and because the ten can only require at that point in heelys view to disclose changes in the internal controls thus we have a stablished a move reality a new baseline that says the internal controls we looked at them last saturday they're effective then no change and it was because of that it was only on that basis were those sort of occasions in fact one certification they division manager was so uncomfortable that signing it as an employee he signed it as an internal consultant out of his unease clearly nothing substantial had been done to make the internal controls affected how do you how see what we did do is we identified the facts in the way we had passed muster on the complaint but at the class certification stage which is where we are the talk the discussion is could the actors could be secondary actors to commit primary violations could nonetheless be liable under ten b you know stubbornness may have certainly changed the way matters were played thereafter but we were past that point we are on the whether the class could rely on whether class white lines could be shown on the state of the cliff or chance made it looks like stone ridge what it's doing is saying in effect the warning don't not use the refco test by judge lynch assuming that that is the test ultimately adopted by the second circuit when its opinion comes out refco is the test we were to the creator only making the post merely having a nine signer free with liability creates invites an arbitrary bright line in civil cases that is so easy to i mean you will have in the future you'll have because here you have a fraud which was not the companies this is this wasn't a troublesome company that went to its lawyer and said here's what we're doing how can we describe that and the creator test if the very least wherever you draw the line short of just black and white sign didn't side he was on the wrong side of that he only took a client who knew that they had a disclosure to make draft of the disclosure and he initiated the first audit which would enable him to make the statement that was a fraud even though it wasn't attributed it wasn't it sounds like the test you would like just uses the ninth circuit tests of stature participation substantial participation maybe i would call it creator plus that substantial participation in the fraud plus making the statement is certainly sufficient to have he really be on the wrong side of that and to have every honest well intentioned i mean you have a whole slew of people who will say if my client is defrauding the world if i is not i mean the ethics rule essentially prohibits the lawyer from telling the client how to violate the law and that is the thing that we really don't want to do however there will be you don't want to have somebody who says here's what your doing you can't advise people to artfully mislead i mean that's already who were obligated not to do that but for these purposes it is certainly sufficient if you say if you adopt a creator created the false statement this is a false statement this is a statement that the internal controls have not unchanged and refco would say that aiding and abetting is drafting the documents for your clients fraud personally i think mr collins that the the bizarre nature of refco is that responsible to the public at large who invested in refco which you know i respectfully submit is a crazy maybe an ill advised the version of responsibilities nonetheless create or plus scenario and you have lawyers who let's face it we don't operate in a in a in a vacuum in the law and lawyers will have inst opinions there are shades of gray in what they do and you're advocating for a situation where the burden it seems to me is going to be on the on the law firm under those circumstances to to  more than just draft a statement that might be considered wrong here if if you have something more that involves the lawyer in the f and makes then drafts the statement makes the statement then you have i believe the plus if the lawyer is an involved in the wrong but merely drafts a mis representing statement where the company has an independent remember that this point they had already fired their general counsel so he was their only securities counsel there's nobody else involved healey is well over that line understand you ronnie's with that but it is something more and we would have to find that in discovery which is what we did so the burden would be on us and so if the client if the idea here were the clients rather than i believe that the lawyer should be liable i believe that it is where the lawyer participates by making a false statement that there isn't any intervene or you know whether it be the existing general counsel who has control or something else where the lawyer is running the show if the client commits the wrong and the lawyer then just papers over the by a i knowingly misrepresenting statement i don't think the lawyers got it's the great equities in his behalf it isn't you know we are ethically required not to deceive them that is what we do actors there been three theories of liability in this case the first was the pre stone ridge scheme liability theory the second theory of liability advanced by the plaintiffs in the district court w this so called workaround theory it was still a scheme liability theory and the gist of the theory was that clifford chance came up with the idea to do this session audit and that special audit gave the auditor's and the the company comfort in issuing a ten q which stated falsely according to plaintiffs that the company's internal controls were effective the district court properly rejected that theory under stone rich because for as or as a predicate for a class certification saying that you can't use the fraud on the market presumption for theory such as that because all of the law firms conduct was behind the scenes that wasn't known to the public and therefore under stonebridge the plaintiff couldn't be said to have relied on to the public or not attributed to rip wasn't known to the public because it was a gonda it was supposedly this scheme to have this special audit that would make everyone comfortable issuing the ten q but now that we're in this court we're dealing here or we with the standard whether made and that they presented this vision testimony that to show that these things are capable of proof post certification why not give them the opportunity do that because they've waived these arguments your honor they never they're not in the and the argument now is that and what's worse is that the argument is that the statement that clifford chance allegedly drafted doesn't even say what plaintiffs a s s but again it's searching for the right test but it would be clever chancer or my old law firm richard leighton finger or whatever it might be at some point the firm can do enough that liability can be attributed to it and at what point is that what is the line that we should draw yes if this court is going to consider this claim even though it wasn't presented below or ruled on below the conduct here clearly doesn't approach the level that you need to have to make clear for chance liable as a primary violator first of all there's no evidence in the record none the clipper chance drafted  refco on appeal the second circuit has applied a bright line test and reffo is it is it is applying that applied that bright line test a very similar conduct because it involved a lawyer but the the test that we submit should be applied and that's a test that says that that if you didn't make the statement yourself or if it wasn't attributed to you you can't be held liable  be the argument is that clifford chance didn't just participate in a role but it orchestrated how the role was to be perpetrated in that context  ding that in that if that were true why could there not be liability despite story well if that were the theory orchestration of wrong that would be i would think a scheme liability theory and perhaps there would be liability but under stonebridge you couldn't use the fraud on the market presumption because the market wouldn't have known of the conduct and so you couldn't prove reliance which you need to prove on a class wide basis in order to have a class action so maybe somebody could make a claim under those circumstances but it couldn't be proved on a class wide basis because strong ridge says that you can only use a fraud on the market presumption if the conduct is known to the public maybe i'm confuse the known to the public they read the ten q what's what else stern which says you have to rely on the defendant's own conduct if the defendant's own conduct is work a stray shower of something and here that orchestration is alleged to be a special audit the idea of a special audit are you saying identity has to be known as well i'm saying that i'm saying that in a s liability case the conduct has to be made known the allegedly wrongful conduct and in a misstatement case this statement has to be known to the public and yes it must be attributed to the defendant or liability in a private right of action the f c c obviously has its powers the criminal authorities have their powers but the supreme court has made very clear that the ten be private right of action is a very limited one clearly were operating sub rosa this is this is different is that i don't i don't this case your honor no i don't think it's different at all in strong rates you have vendors who engaged in sham transactions with the company in order to allow the prosecution for a lawyer in this circumstance or in the last action if yes yes now you know that the supreme court is very clear that in stonebridge that you have to rely on the defendant's own conduct and the supreme court's also very clear that issuing public statements is the company's business that that no matter who's working behind the scenes ultimately it's the company that issues the public statements and the company that's responsible for them and this notion that lawyers are running the show is just is not the way the real world works and it's not the way things worked in this case and i do urge your honour's to look at the record because the record shows something very different than what mr chris law argue to you the record and it's a very meager one but the record shows that the chief accounting officer of d e v i drafted a statement that he gave it to the law firm to take a look at that he gave it to the accounting firm deloitte to take a look at that he revised the statement he the chief accounting officer revised the statement after talking to his lawyers and talking to his accountants that he then gave it to his people a and said take a look at it see if you can inhance it and when you're done give it to the accounting firm and make sure they're ok with it but you're arguing the alternative you say the record really doesn't matter here because it was in public actions i do say that but i'm also saying that the reality of the evidence here is that the role this law firm played is the role that law firms play every day in dealing with clients it provided some is vice as to what it disclosure should say the supreme court has said this is an area that require certainty and it's an area that requires clear lines that there are real cost to our realize i have a hard time your honor with the notion that it's something left for summary judgment when it wasn't in the complaint and it's never been this subject of a motion to dismiss i under i understand that but the the what you've been arguing the last couple of minutes seems to me go go to the facts but and the merits it yes i mean i what i am arguing does go to the facts it's what the facts show here and i think what the facts show here is that the law firm here did what law firms do every day of the week and that there's there's a very clear concern on the part of the supreme court that there be very clear lines and that professionals know what's wrong and what's right and that it be very clear where liability can fall it's a slippery slope once as the supreme court said once you get into the aiding and abetting area because it's not clear what substantial assistance is and so to here with the with the creator plus pastore creator test when is a law firm doing it just giving its best advice maybe it's wrong maybe it's not a law firm doesn't have all the information about the company and when it's the law firm the creator it's a very unclear area and there's a real risk if this court goes down that line of having very ambiguous fact by case by case fact based determinations of liability and that's exactly what the supreme court set in stone ridge and central bank that it didn't want to do because there are real costs to the system if it works out that way now you know there's there are there are cases i suppose this is not one of them where what an aider and abettor does is so egregious it ought to be addressed but but there is a remedy there it doesn't belong to private plaintiffs but the f c c would have the ability in such a case to bring an action so the public is protected by the fact that the f c c can act and in the meantime they securities industry is is protected because the standards are clear and the supreme court's been very very clear that it wants it to be a very narrow area of liability under ten beef under ten b and it wants to be very very clear so i say it's our position that the court doesn't need to address any of these issues in this case because they've been waived because they were not presented none of the arguments that they're being made today in this courtroom were made in the district court so ultimately we would say the court doesn't need to wrestle with these issues in order to affirm the decision below because they weren't presented to the court below and therefore we're way  back to be five a and a and c not be the argument you make now about where you made although we haven't talked about it model rule professional conduct four point one i don't see i don't see that being made in the district court that would be the words if you were trying to do the affiliated you kraut right that's and that came after but as part of stone ridge and finding out figure out where affiliated you where there was a responsibility to speak we did in the complaint if you look at the complaint it paragraphs first and then complaint paragraphs five fifty nine revive sixty two five fifty nine misstatements and omissions they are not claiming unfair surprise the class sort of occasion stage we allege these facts from it below without question and judge davis  clearly identified that in footnote thirty nine we my partner for the moment where he laid out what we were alleging that clifford chance done  presume we did not we didn't a legit specifically in that respect and we did not identify that as the basis on which we would see class certification but we're sort of a bit beyond the complaint at this stage and among the different things that we could complain about clifford chance we found this one thing would would clearly merit class sort of occasion even after stonebridge the idea that this is something that law firms do every day of the week not merely drafting things for their client but changing their client's facts to create a charade that was not true the idea that there was no evidence number one is for judge davis to look at it with the right standard but there was ample evidence including the affidavit by garfinkel the c f o who has completed his time in federal prison that that it was only heelys actions which did the work around that save the compan i think i think we're in good shape we understand your position the argument could as you wondering yeah gun point this is conduct they say it has to be conduct of the off s p conduct of the violator this is conduct the creator does not need to sign his work it is the creator heelys conduct that we are complaining about is in fact we would like to have