thank you our good afternoon may it please the court my name is matthew zero and i am counsel to the appellants who include the members of the displaced board of directors of sino clean energy as well as certain shareholders counsel can you answer a procedural question for me certainly as i understand it then the individual just placed the board members were not named in the original action in the district court corps your honor the the action brought in the case commenced in bankruptcy which was the trial court of course in this case was brought at the insistence of those members of the board of directors indeed the resolutions in the record specifically were signed by the bankrupt the state is is the company is it not it's not the individuals who served on the board it is your honor yes so i renew my question what are they doing in this case imo your honor i do think that they are interested parties i do think that they are aggrieved part of it but you can't just have them willy nilly that that's the concern i have i don't understand why you did that or how you do it without an order either from the trial court or from the court of appeals seeking leave to do that and i don't see anything in the record indicating that that was done and with i missed that your honor there was no specific substitution what i would argue to you is that a corporation as an artificial entity can only act by and through individuals those individuals in question included specifically the very displaced board of directors except it doesn't mean that's the problem because the receiver was lawfully appointed and lawfully replaced your clients with a different set of individuals and once there has been a replacement board they just like people on the street aren't they i mean no your honor i don't think that's a fair characterization i think that these individuals acting on behalf of the company but they're not that's the question they don't  form or board of directors member act on behalf of anybody but him or herself well your honor is as the briefs indicate we do believe it's the appellant's positions cuse me that there is a residual authority that remains with even a displaced board in this situation even if there is a residual authority as you are here to answer just tom and john's grave as questions your clients did not seek to exercise it up there are already from the court saying that the appointment of the receiver somehow was improper on behalf of the company and no action was taken except by your client to file bankruptcy petition correct your honor that is true and to be clear my clients did not enter any appearance in the state court receivership action i think is what you're asking well they did participate but yeah but that went on and on and on and it sort of kind of force the hand right and that's why we here in the in a in a way because after inaction by your client other than the falling of a bankrupt but titian that's all they did to exercise whatever residual authority as you claim they had well in your honor what i would say to that in response is they didn't need to and indeed it's a troubling precedent to require parties to appear in state court  when what the real question we're talking about is the authority to file bankruptcy petition state courts should have no jurisdiction and no decision making authority ultimately it's the appellate position to state law where you wouldn't think you have to go to the state court to straighten that out and say no no we are the real board of directors i would agree with you to the extent that that is true to the extent they sought to attack the receiver ship order or seek to i suppose the my clients could've made any number of arguments to the state court appointing the receiver including we'd like the authority to file for bankruptcy or have the receiver file for bankruptcy on behalf of the company or disband the receivership your habs will you write that they could've made those kind of arguments to the state court but there is a separate question is the appellant's argument as to the authority to file you're absolutely right that generally speaking the authority to file bankruptcy is a matter of state law the problem i'm having with the position that you're taking is that by failing or refusing to enter an appearance before either the nevada state district court order the united states bankruptcy court your clients have affectively insulated themselves from submitting to the jurisdiction of the united states corps and yet you now purport to act on their behalf to seek relief in the united states court of appeals when so far as i can tell they are chinese nationals who have absolutely no contact with the united states other than they purport to be directors or former directors of this company don't i don't understand why the law should countenance that kind of tactical maneuvering by a party seeking relief who refuses to submit to the jurisdiction of a state or federal  court but i would say to you is the issue being raised is i understand it's of concern however i don't know how else the appearance would be entered if you're stating for example or suggesting i should say that the appearance should have been made by them personally in the bankruptcy court and saying and joining the dismissal order if i understood yeah i think that that is the question another was if they w relief whether it's from a state court a bankruptcy court or u s court of appeals they have to be parties to the action well your honor i do think that they would have they would be aggrieved parties first of all that would have standing but isn't the answer to that question to seek leave of a court to be joined as parties to the proceeding and then the court can entertain whatever arguments they wish to make and if the court rules in their favor issue appropriate orders granting the relief that they see  i would argue is that the failure to for them to be personally joined at the bankruptcy court level should not for close the right to an appeal of this very critical issue so if it's in a sense it's circular because your position is they do act on behalf of the corporation in the corporation as a party so if that's i think that's your point if we want that argument it would fold into i think judge thomas question my state law the receivership and the replacement of the morning so i don't understand how we can look behind that as a substantive manner and your honor to be fair i don't think that's what the appellants are asking for you to attack or look behind the receivership order i do think the argument may be more properly put from the appellant's perspective would be that we do believe there is a separate question as the as to the authority to file that is not in any way for closed by whatever it it seems like if you are attacking that in a collateral way i am not to be clear i'm not suggesting a rule for that the displaced board can willy nilly simply ignore the receivership order i am arguing for a narrowly tailored limited exception with respect to soley the issue of authority to file bankruptcy because of the important federal interest involved is there any support in nevada law for the idea that a former board member has any authority of any kind with respect to the corporation there is not your honor and i have looked and i think in the absence of that and indeed what i would argue obviously from the briefs is that it is not a matter of state law with respect to acting on behalf of a corporation i thought that's where we started the conversation i thought acting whether or not someone is intitled and to act on behalf of a corporation is a matter of as a general matter it absolutely is your honor what i'm arguing for is a very limited exception to that undoubtedly a general rule that is  other than wanting it to be so what is your authority for that authority i'm sorry your honor authority for before the proposition that even though you're your clients who are no longer board members in any way their former board members and i guess i don't see any legal authority for saying that in spite of that they have any opportunity to do anything on behalf of the corporation whether it's filing for bankruptcy or anything else i just don't see a source of law that gives them that option your honor the appellant's position would be that the authority does not derive from state law that interest derives from federal common law whacked how do you get around the supreme court's decision in price versus gurney and our decision and oil and gas company versus dury which as i read them clearly say this is an issue of state law and it seems to me that your clients are in exactly the same position as the decisions dealt with issues whereby you had a party who clearly didn't have the authority to file by way of example in dirty and dicta i believe it was at this placed officer and it was also an issue of a company that was legally an able to file it was an insurance company aren't some of these individuals former officers of the company well your honor the forty two yes but then why wouldn't at least those individuals because they're also of directors and that's my problem i guess with your position and what what is the source of what you referred to as common law and bankruptcy where where does that go to the best discussion of that is obviously in judge haynes from the disband group c for the district of arizona's decision in corporate leisure services we cited that case extensively and it is a i consider it a federal override if you will of state law given the important federal interest issue and so the to answer your question directly it is federal common law it is the preemptive effect of the bankruptcy code as it applies to state law in this specific instance i'm not arguing for broad based preemption i'm arguing for again a narrowly tailored limited exception to the general undoubtedly general rule that state law determines who has the authority to file and i think it's important to keep that a very narrowly tailored limited exception to be never challenge the state court orders and in fact has actually nor those state court orders and as justice tallman probably pointed out this is merely a tactical maneuver on be on behalf of the petitioners to usurp the receiver's authority where we can be tactical or not but if it's authorized it doesn't matter whether it's tactical or no so what there is a rather extensive opinion from another bankruptcy so regardless of difference is that the first of all first and foremost the facts of that case are exceedingly different from the facts of our case in that case you had a set of petitioners that actively was involved in the underlying underlying litigation they participated  they were involved they didn't have we didn't have a situation where we had a chinese company that withdrew from the u s and refused to appear before the state court and then filed bankruptcy on the eve of a contempt proceeding by the  receiver that's the first difference the second difference and this is very important because it goes to petitioners preemption argument and that is incorporated in leisure the court focused on the timing of the bankruptcy as it related to the receivership as well as several the other cases cited by petitioner in corporate in leisure there was exactly one month between the time that the receiver was appointed and the time that the bankruptcy was filed this is significant because the court incorporated leisure focused on that timing in looking at the preemption issue here we don't have that as justice tallman pointed out we have a long time between the time the receiver was appointed in may of two thousand and fourteen and the time of the bankruptcy was filed in july two thousand and fifteen in theory why should that matter it matters because of what happened in the interim time period first and foremost before the receiver went ahead and properly reconstituted the board of directors in this case in december of two thousand and fourteen he worked very diligently as we expressed in our briefs with mr wrenn the former chairman of sign a clean energy he visited him in china he attempted to negotiate a resolution for the defrauded investors who were owed millions of dollars he issued press releases he sent letters he attempted during that eight month period to resolve th and to no avail it's also significant because we know that mr wrenn and the former board of sidle clean energy for over two years failed to have a shareholder meeting so the fact that that mr chen the former chairman is now coming before this court and saying wait a second i get the opportunity to file bankruptcy or i get the opportunity to come back in and run this company is absolutely absurd and it's also significant because during that time period during that over one year period betime between the time the receiver was appointed to the bankruptcy was filed a very significant event took place and that was because the receiver could not get the chairman on board and could not reach our a resolution with the chairman he was forced to reconstitute the board of directors in december absolutely wrong wrongly decided for the reasons that were set forth by the district court for the reasons that were set forth in the recent opinion from the western district of pennsylvania in monroe heights you know corporate and leisure was a case where you know we had a situation where there was a board that was reconstituted for some of the entities after the bankruptcy was filed it's a very very different fact pattern than ours but i think even more importantly the cases that were correctly decided as the justice point out the jury opinion of course decision all of those decisions stand for the idea that once a receiver is appointed he steps into the shoes of the corporation he takes over the duties and responsibilities for that corporation and he's the important discussion by the petitioner in in their opening was that this you know this is all dependent on state law and in this case the state law that we have is a receivership order that was granted by the state court and that receivership order most tellingly sets forth the fact that the receiver has the power to reconstitute the board of directors and also the power to work alongside that reconstitute board of directors to reach a resolution in this case additionally the the state law says that the decision about who can file bankruptcy in the decision about the corporate matters that can take place is governed by the bylaws of the company and in this case we have a situation where a sino clean energy former board wasn't even following the existing bylaws that were in place prior to the receiver's appointment we have a situation here where the bylaws specifically said that there has to be an in person meeting in order to to reach a resolution the resolution in this case is the rogue resolution that was entered by the former board in february of two thousand and fifteen we know that there wasn't any in person meeting at least that's not what the resolutions set forth but the other way to do it under the bylaws is to not hold a formal meeting but to have unanimous or i'm sorry the majority consent of the shareholders in this case in february of two thousand and fifteen when the resolution was purportedly entered into by the former board of sino clean energy the only shareholder  director the only one with any power to do anything in this case was mr grayson mr grayson was a point in december of two thousand and fourteen two months prior to the rogue resolution being entered in this case so in both the leisure dispute over who has the authority what have you if any exceptions to applying the state law in that context well i think as noted in some of the other opinions i think the donaldson decision that was cited by petitioner there are exceptions and the exceptions are when there is fraud the exceptions are when the receivership is well underway and notably those two exceptions occurred and actually support the receiver's position in this case  contention a fraud i'm not on the receivers part no what we have is the state court order in this case that clearly says that the former board of sino clean energy was engaged in gross mismanagement  court even notably stated that the only party that should have any control over this company is the receiver and that's why it was so important the receiver and not the former board stay in control and the bankruptcy judge in this case did not like a corporate leader case say to the corporation you could never file for bankruptcy right exactly and this is not a situation where we have that we do not have a receivership order that says under no circumstances can sign a clean energy ever file bankruptcy that is not the case here we have a receivership order that doesn't say who can file bankruptcy but we do have a receivership or that gives the receiver the power to reconstitute the board and as we know from state law the board is the only one who can make the decision on  proper in the limited circumstance you know your honor i think the problem we have is in that situation it might be confer i might be construed as an if so facto clause in other words a clause against prohibiting a filing of bankruptcy i mean is pretty clear that you can't prohibit a corporation from filing bankruptcy so i think in that case we'd have a totally different factual circumstance so i think had corporate leisure been different on the facts i think we might have had a different resolution and in fact i think most notably you know the corporate leader court specifically said that this is a factual determination on the language that they used in the in that opinion was it's determined there's no bright line rule it's based on the facts of each case and it has to be a sensible and fact based decision and that's what we have here we don't have facts like corporate leader we have facts where we don't we had an absent chairman and absent company no resolutions passed for over two years no shareholder meeting we have a situation where they've decided to file bankruptcy on the eve of a contempt proceeding to hold mr wrenn in contempt we have investors that are out millions of dollars as a result of the inaction by mr wrenn and his cronies so this is a situation that's very very different from corporate in leisure and i think as your honour's pointed out the jury case was the one case that was correctly decided first and foremost i mean the jury case is a ninth circuit opinion so it's binding on this court the corporate leisure case w a bankruptcy decision out of arizona and in the words of the bankruptcy judge was clearly an outlier we believe that that is absolutely true it was an outlier liar decision now to address the se cond issue in this case the first issue of course being the authority to file which i mean we've can we contend as we've argued here today that the only party who had the power to file bankruptcy was the receiver or the receiver's appointee mr gra i think the second issue that's addressed in the briefing that we haven't touched on in any depth at this point is is the idea that somehow the courthouse doors were barred to the receiver and that there is some sort of a preemption argument first and foremost i don't think we even get there because i think is the district court noted because the bankruptcy court doesn't have jurisdiction over a bankruptcy that's an authorized we can't even get to the preemption argument until we have an authorized bankruptcy but putting that aside we have a situation as i mentioned previously where there's no race to the courthouse if this were a situation where the timing was a little bit different maybe there would be some sort of a preemption argument but we don't have that here and so there's no there's no preemption the petitioners argue in their brief they talk about the donaldson ford case and say that's analogous to our facts actually that case there was one day in between the receiver the receiver being appointed and the bankruptcy being filed on the cash currency case there was one week in between so we don't have a situation like that here we have over a year in between time where mr wrenn and his cronies sat on their rights and did absolutely nothing i think it's also important to note that the important thing is that there is somebody to file bankruptcy that as your honor pointed out this is not and if so facto situation where the courthouse doors are barred and nobody is permitted to file in fact in the words of the district court bankruptcy is just as available now as it ever was it's just the identity of who may file that has changed and i think that's extremely telling here it's the identity of who can file mr grayson is the one who has the power of file bankruptcy we haven't stripped clean energy of the to file bankruptcy we've just receiver has done quite a bit of digging and discovery and in the attempt to try to figure out what's going on with this company trying to figure out if it's still operating in china and to be honest i don't know that i can stand here before you and tell you one way or the other that it is or isn't i can tell you that the us entity  parent the one that we're here before the court about today has always been a holding company the purpose of the company as i understand in a petition or can correct me if i'm if i'm wrong the purpose was always to come over to the us set up a parent company raise money from u s investors and then the idea was to eventually go public on on the on the stock market as it didn't happen in this case because what happened was i know clean energy withdrew from the us refused to turn over books  petitioner in their briefing alleged that this was all a ruse by the receiver to try to get its fees to rack up its fees i mean i'm a little hesitant to give you a whole lot of detail but i can tell you because you asked the direct question that at this point in time the receiver's talking paid  you know we have a few other cases like this where sometimes the investors will will come in and they'll pay fees and costs bill will ask them you know look if you want to continue and we have a situation to where you know sometimes we file various lawsuits against accounting firms against law firms insurance exactly do you know if we can find the information so in those cases hopefully we are able to get some money to pay the receiver but  you know in this case i think the receiver's goal has been more of a you know we have a situation we've got a u s court order how do we enforce it in china how do we get the chairman over here to the u s and it's interesting and that's one of the reasons as we pointed out in our briefing why we were able to get why it was so important that we got the contempt order which our motion was filed you know about a month before they went and filed the bankruptcy and what we've been able to do since then is we've been able to get a bench warrant which is part of this record and we were able to lodge the bench warrant with interpol so that if mr wrenn is does enter into an interpol related country hopefully we can enforce the bench warrant which i believe the fine was several hundred dollars per day for every day he doesn't comply so i see my time is is almost expired you know i think justice holman you hit the nail on the head when you said essentially he's using the court system as both a shield and a sword he can't benefit from the u s bankruptcy bankruptcy system the way that he's attempting to do the way that mr ran inside of clean energy are attempting to do i think if you look at the facts and the law there is clearly no no error on the car of the court below arguing that the case should belong in bankruptcy and judge be easily as the bankruptcy court judge will undoubtedly exercise broad discretion to decide what he believes is appropriate well that's on the assumption that he has  by a properly filed petition or who has the authority to put the company in the bag of course your honor and i'm sorry i meant it in the event that your honors reverse and remained to be clear and i will tell for my best guess as to what would happen in that scenario is the bankruptcy judge would say a pox on both your houses mr wrenn i'm not going to let you remain as a fiduciary debtor in possession receiver erode a million dollars or the largest creditor of the case you're not going to run this bankruptcy case i'm going to put in a third party trustee and that is all we're arguing for is that what's that going to get us if this is essentially an empty shell   in order to file a bankruptcy case a an artificial and that he must under the bankruptcy rules designate what's called a responsible person that responsible person is the person who is the responsible person for the company on the line to face contempt and bankruptcy court and wanted that bankruptcy case to proceed even in the event that he may be removed by the bankruptcy court and a third party trustee put him he was a c e o was you know before he was he was a member he was the chairman of the board of directors and he was also the like thank your honor your honors in closing this appeal as a bankruptcy practitioner for some twenty odd years i think this this appeal presents a very interesting issue regarding the legal availability of access to the bankruptcy court for a corporate chapter eleven debtor acting through its management and how that access cannot as a matter of federal law ultimately be barred and indeed interfered with even by a state court acting pursuant to us to state acting pursuant to state  receivership law including a receivership order and any actions taken pursuant to that order including the removal of by the receiver of the existing board your honor thank you very much thank you counsel we appreciate the arguments of both of you