well he grew up in racine wisconsin in then off to san diego california and well sized by his family for having done so so they'll all his brothers in wisconsin say canoed sin we in san diego say newton because we always like to think ourselves part of the inuits and cottage cheese industry we weren't but you know that's just the way it went very well mr knutson without a k kick us off sure if i could this is i think a rather straightforward case for lack of a better term i think the district court judge got snookered into something that the defendants raised earlier on which we cited in our briefs makes it very clear it doesn't matter it's going to be governed by florida law and the reason why is because magic jack might have been an israeli corporation but it was operated through its why max a subsidiary here in florida in what is maybe an ignorant but but to me kind of basic question about determining whether the cause of action is director derivative if this arises out of the federal securities laws why is it exactly that we're looking through to state or israeli or whatever law to determine whether the action is is director derivative there may be a really good an easy answer that i'm just not i absolutely agree with your honor if this is a issue of federal statutory violation if yet it's direct all right so let me ask you this though because i'm not really sure i didn't mean i wasn't trying to throw a fastball but i wasn't trying to throw a softball either i'm not really sure that if this is governed by federal law that sort of cinches the deal for you because at least as i read this case of the u s supreme court jay i case court says the injury which a stockholder suffers from corporate action pursuant to a deceptive proxy solicitation ordinarily flows from the damage done to the corporation rather than the damage inflicted directly upon the shareholder that sounds to me like derivative although j i was a section ten b it was not a section no it's there is difference because section fourteen a does not require intent it does not require  forward did the proxy statement actually disclose factually all of the material facts that should have been provided and so i'm not sure derivative versus direct affects your burden of proof the question is whether the relief you're seeking is common to the other shareholders correct it is and i'll tell you why is because what has changed in this wasn't in the briefing but what has changed in this case is that the actual acquisition of magic jack has now occurred and so that means the only damages are going to be monetary in nature there's no injunctive relief and the only people that are going to be entirely to receive monetary damages are going to be those that are subjected to the i'm assuming the accuracy of your contentions in your nd amended complaint ok and i am assuming that those would be violations of the code correct it seems to me still the damages you're seeking are common to all shareholders not just in particular your client it at that at that time correct that would be standing issues of a shareholder came along and challenge something that occurred when and not a share and then you get into an issue quite frankly because this is a class action quite frankly where you could determine whether or not these shareholders actually received should have received it because he would have been mailed the proxy statements district court gave you a clear signal before the nd a medic complaint that you needed to plead and a verified complaint that there'd been some demand or that demand would have been futile there the district court did so but i don't require that's i don't believe that is required under the fourteen a or rule one thousand four hundred and eighty nine or the regulation this record draw correct and i know this district court judge good judge ok it was just a wrong decision and i hate to say that but it was just a wrong decision based upon what florida law says if you've got a statutory violation it's a direct claim it's not a derivative claim so i don't know where to go from there i don't really understand that frankly because you said earlier in response to my question shouldn't really put it that way but derives from the nature of the relief sought right not sort of the front end elements scienter materiality whatever at the end of the day if the relief sought runs to everybody or some substantial subset of everybody who was in play at the it it's a little bit of both and let me explain what ok it is derivative if you have to have i say enter requirement on a section b or a rule to be five ok you're going to need that you don't need that it's strict liability under fourteen but just explain to me how that maybe i'm just dense as a beacon because the what why it is that that affects the direct versus derivative now because if it's strict liability it doesn't matter what the company was thinking what the directors were thinking what they were actually in trying to accomplish is if it is material that's the real key and what we say is materials of fact that they had a nine dollars fift cent shareholder off or on the table when they were going through this process and never let me take you back to beginning of your argument is one thing i wanted to step back toward you said the court erred by saying that israeli law control this i think the court said it was state of incorporation on with judge newsome i'd like to backtrack a little bit make sure i understand how that rule came about if it came about is there really any distinction though between that the court was ultimately determine that is really a law it didn't matter because it was going to apply florida law and that's really the law the form that should apply the difference is that is really law does not recognize direction or hold or actions and that was kind of the argument that the defendants were trying to fit we know that from the translation of these opinions apparently so i mean i think it's in a mess it is really translation was because of the relief sought this is derivative not direct and ali and i think judge rosenberg would have said about florida law or what she intimated about florida law anyway and that's why quite frankly i can understand why she went with st straight lose it really didn't deal with the statutory violation it had to do with quite frankly whether or not it was a common duty or not it did recognize inside it deniro which did say that there is a statutory right for  action in other words if there's a statutory violation or breach of contract which is another vein that you can go down and so she never really quite frankly focused on that issue i think she just got sidetracked quite frankly and what i wish would have happened is if we had had this argument before her because she decided the case without oral argument i think this could have been clarified at the district court level because i just still see this as a it's you know straightforward statutory violation strict liability in a fourteen day there's no real question about that under the laws that made the law is this it doesn't matter whether plaiting a statutory violation of that you can plead a violation the statute that's not a quote statutory violation the question is what type of relief are you seeking on it saying that i am a disassociated investor who was singled out and mistreated that's a direct claim if you're saying that the corporation took actions that violated the statute that affected all shareholders across the board then that your claim derives from the corporations duty to the shareholders so it seems that's a derivative claim isn't it that the simple distinction between these things now because i think under section fourteen a in rule fourteen a nine dash knight the claim because all shareholders that meet within the class definition and that is a matter of quite frankly class notice and class claim process would comply with the requirement to receive the relief if it was like you know i like the name of the company unite in really give it well you also have to show commonality and typicality commonality means all the shareholders have similar they receive the same proxy statement questions means that there is the classes claims are similar to that of the class reps claims correct typical idea doesn't that further established a derivative kno commonality is very easily proven by quite frankly the every class member received the exact same proxy information ok it doesn't different they didn't since some seem to somebody else than from somebody else whatever it's the same to pick callid he just means that my client robert friedman on behalf of himself in the class a st i was did not a higher compensation per share price that was known to the company but was never disclose so that they could get the board to get reelected and then get their change in control provisions and acted on the july  that denied me a fair corporate suffrage which basically means i wasn't out all the money that they're basically trying to keep from themselves now and the nub of the matter to me is how is his claim i was denied money that they're keeping for themselves different from the next shareholder and the next year holder in the next year holder in the next year holder and then in a can't because if the if the proxy statement was uniformly misleading for everybody it's not like they sent out secret note right so it affected everybody to say i can't read everybody because it lean way at least to me that that's very telling ok so you're a minute and forty five over so let's hear from your adversary pelleas magic jack the company and the individual director defendants it is important to focus on what the plaintiff actually alleged in his complaint to proxy statements he challenges march th two thousand seventeen proxy issue connection with a shareholder vote on april th two thousand and seventeen that vote appointed directors to the magic jack board and then he complains about the june rd proxy statement issued in connection with the july  st vote and that vote approves certain compensation for directors those are the only two proxies he challenges under section fourteen a he does not challenge the proxy that was issued much later in february two thousand and eighteen in connection with the vote in march two thousand and eighteen to approve the sale of magic jack to be riley also board to consider the relief he seeks for the alleged injuries he seeks no remarkably he seeks damages relating to the stock price received for the sale of the shares in the b riley transaction even though he doesn't allege a misstatement in the proxy relating to that transaction as your point as to the director derivative nature of all of this is that those the relief saw insurers to all shareholders equally that is correct in effect the value of the corporation the share price whatever but it ignores everybody right i mean these same issues also result in a lack of causation to his claims that would easily support a firm and so on the grounds of error twelve the six motion which the court below did not reach can you just not it may be academic i'm not really sure that i see much daylight between why is that on a federal statutory claim we look to state law as to the nature of the cause of action because in the cases we cite all do say when you consider the director riveted the issue it's a you look to the relevant law the state of incorporation they don't want to kill it the reason but i believe the reason for that is that this issue direct versus derivative implicates the powers of a corporation and its board which is a matter of state law that's not saying that state law applies to the substantive claims and that is it is a red herring that the plaintiff has introduced there is no finding by the court below there is no argument by the defendants that state law that  is israeli state law or florida state law would apply to his claims under section fourteen a those are evaluated under the you know statutory law and precedent under section fourteen a of the securities exchange at the point is that when you look to determine whether the claim is direct or derivative in nature that is a matter of state law because it implicates the powers of the corporation with respect to the issue of the difference i agree that there is not a meaningful difference here between the florida law and the israeli law with respect to the direct r distinction and i think judge rosenberg got that right as well in her opinion which is that in in israel the court articulated in the precedents we submitted as saying that a shareholder may not assert a claim directly unless he sustained a direct injury and sustained damage that is not common to all shareholders and that's virtually identical or substantially the same as the direct harm requirement and the special injury requirement to florida last record as the interpretation english translation of israeli decisions a pardon i missed the st one raised in the district court any issue regarding english translation of these or israeli decisions on what's derivative and why no there were there is no challenge to the translations to the accuracy of the citations to the accuracy of our synthesis of the effect of that holding that was never disputed below moreover even if the court as we discussed were to look to florida law the same result would apply as judge rosenberg found given the special injury test so therefore the what the what the plaintiff asserts is a derivative claim and the court correctly held that he could not pursue that directly  with respect to the main injury the the the injury his certs is also woefully deficient under the relevant standards in that the the only economic injury that he has talked about is the sale price ultimately to the company we agree with your position on derivative nature of this claim we don't have to reach that issue do it you do not have to reach that issue you do not have to reach that issue we set forth at l brief and i would be happy to discuss any aspect of that as to which you have any questions i think the a lack of causation to the claims is glaringly apparent but no you do not need to reach that if you decide e this isn't a special injury test question it's a statutory contractual it's not even contractual quite frankly it's a statutory violation it's one of the three prongs that were delineated i n dinero identified as true luiza it was aso recognize and rail versus muscle muscle beach you have any view on what mr reeder said about why we look to state law in determining whether something is derivative or direct st you agree that you look to state law and nd do you agree with his rationale for why you do honestly i have no idea why florida this and i and the reason why i say that in and i'm dead serious the complaint pleads federal law securities violations does not plead florida state law violations for whatever reason florida district court cases and there's others around will take a look at and say well is it really direct or is it really derivative because if it's a derivative then you do look to state court but once you get to the fact that there's an alleged violation of a federal state law i'm not quite sure why the district court would do that analysis it's ok she did the analysis but she just reached the wrong conclusion because you cannot have a violation of federal law not being at wreck shareholder inus judge rosenberg sided to an unpublished th circuit case for this proposition a district of maryland case a district of district district columbia case and another southern district florida case in her opinion on pages five and six i understand that she did that just to busy agree with my notes i've got a th circuit case and th circuit case a couple of treatises i mean it seems fairly well settled that you looked at state law i was just curious why but even if you looked at well i guess the reason why you'd look to state law is because you look to where the corporations actually based so it's a matter of the extensive corporate law that it is going to be back to you know where they base well they're they're based in west palm beach ok they might be an israeli corporation but they're american subsidiaries over here everything's run out of west palm beach the only thing that did not happen in west palm beach was a shareholder vote which was happened in their new york q i mean there are traded on the united states securities exchange so they can't really claim you know you can apply you can't force us to comply with united states securities laws in our proxy statements they have to that's part of the requirement to be registered on the securities exchange commission for nasa i mean it's i mean i don't know how else to than he was then right yes the answer to that question is yes yes all right thank you so much the case