morning they call the council the tables are the awards for having the most kelso to travel or did i think your honor i want to start by saying i'm arguing the sanctions  order today my co counsel some former co counsel have yielded their time to me on this on this issue but for the court's edification with me in the courtroom today obviously myself mr flynn in the back mr h sanctioning counsel for what is alternately a violation of rule of professional conduct three point three we're also here test court relatedly to vacate the monetary component of that sanctions order awarding fees and cost s to the defendants related to their prosecution of the sanctions motion reduced to its essence the sanctions order imposes sanctions against counsel for violating rule of professional conduct three point three for failing to correct a prior statement of fact made to the court and for not taking reasonable remedial measures to correct that statement of fact without the rule three point three a violation there is no predicate act or predicate wrong upon which the court could invoke its sanctioning authority under twenty eight u s c nine hundred twenty seven and the courts inherent powers so i'm going to focus today primarily on the what i believe is the core issue which is the duty of candor issue or the law and the alleged failure of counsel to live up to counsel's duty of candor she gives the court the perspective on it the i think some of the timeline is important so i want to briefly hit that the this case was initially file in january through two thousand and ten within a few months of the case being filed the defendant sought in a pain to discovery stay of all discovery twenty six obligations disclosure obligations had yet been implicated either motions to dismiss were promptly filed we responded and the case was in limbo for almost a year well we're waiting for the court to rule on the motion to dismiss subsequently during that time period i should say plaintiff counsel during our fashion of this occasion we learn of what we believe to be a whistleblower witness mr michael miller mr miller is invited to our office i'm personally present heartly was present there at my office where he gave us a witness statement we draw down his witness statement in the form of a draft declaration mr miller did not sign the draft declaration at that time your time is ticking and we've read these ok thank you so the key issue becomes in our pinion as we read the magistrate's order the alleged failure was on our part was the failure to inform the court that mr miller had provided us a signed affidavit or declaration i think that what he was concerned about is that and i think he was concerned about the fact that during the interval after your team got the declaration sign which i'm going to call i don't need to be disparagement all the watered down  inclusive version it was signed and there was an interval after that time and before the defendants had it where they were continued representations including one where he quoted the judge quoted that the that your one of the lawyers on your team represented to the court that the that the declaration was as good as worn that's the interval that i think the judge was concerned about thank you are two points on that there is a question i want i don't believe the good a sworn test i believe that's the magi is what mr miller will testify to at a deposition and at that time the counsel made that statement signed declaration was already in your back pocket but the other side didn't have it right no when mr h all are on that so it was in connection with seeking a lifting of the discovery stay so we could take the preservation deposition we did not have the signed affidavit at that time ok so can you issue your honor and thank you for asking it the representations were all references to the third allegations derived from mr miller's with witness interview allegations in the third amended complaint if you look at the record and everything we said in our opposing br to the motions to dismiss and at the oral argument on the motions to dismiss the references or all to the allegations in the third amended complaint this was a thirty minute complaint was was amended in response to this discovery request it was the court certainly was was aware of it the representation was this witness would mr miller would say these things and i think in good faith you thought that he would casting aspersions there and then the complaint was amended and the complaint by my read incorporates the on the third american plan issue we the procedural posture was motions to dismiss right we had a good faith basis for the allegations in a thirty minute complaint when counsel any counsel files a complaint and we know there's  there with him he never recanted that he never told us subsequently though it might be understood i just want to make sure i understood your question so even if you would have the sign declaration when you were preparing the third amended complaint would it contain the same  essentially the same the same allegations yes ron i believe so it's a good question but i missed by many theories that what that he continued to be intimidated and that he would say  the full story under oath or what yes your honor he had never he told us originally here i don't want to sign this declaration i will sit for a deposition and i believe i'll tell you the exact same things that are in this declaration i just don't want to do it in an affidavit i did a deposition he never recanted that he never retracted it we continued to have a good faith basis for he was deposed and he didn't i  appreciate that but if that's with twenty twenty hindsight when you say he never recanted at deposition his testimony does differ from the inside declaration quite markedly doesn't i don't believe so he's aspecific me by mr flood during the deposition is the reason why you didn't sign the declaration because you thought anything in there was untrue and he says he said no or i just read it last night mr flood's questioning was is it that isn't the reason why you didn't sign the declaration because you thought things in there were untrue or was it because you were afraid you were going to breach some employment confidentiality obligations are afraid of retaliation he says yes i think i read it too he says a lot of things in there and i think that there are certainly omissions that's my read but i'm taking your time i have another question which is your is your position that the judge district court didn't make the findings it needs to impose these penalties or that the findings aren't i read carefully what the district court found and today it sounds like your argument is not that the findings weren't made but that in but they weren't supported by the record correct i don't believe the the facts underline the merits of the sanctions i don't believe they're supported because you didn't violate your duty of candor right correct and that goes back to judge pius question which is even if you'd had the sign declaration that thirty minute complaint would have been the same yes and ellie's i think it's important to put in context what plaintiff's counsel told the court when they filed the motion to depose mr miller and attached to mr huntley's affidavit the unsigned miller declaration this was a bombshell they claimed he was a whistleblower type witness he was welling to come forward with testimony which would incriminate both cushman and credit suisse of knowingly and intentionally developing an utilizing the misleading and likely illegal total net value appraisal methodology and that mr miller quote is of the opinion that the appraisal methodologies were violated of both firing and use patent counsel i haven't read anything to indicate that that was that would support those comments that's why i keep trying to get i'm going to focus on that interval because things change when they sign declarations out absolutely ok can you talk about how you use what happened then that you think is was prejudicial and worthy of sanction well what happened was they didn't bring to the court they continue to say in this appeal that there is no material differences your honor we filed and it's in the record a right we prepared a red line the red is what mr miller then they would be basing allegations on things that miller supposedly said them but then when he signed a declaration refused to sign it to me that creates an inference that that's not true it's a disturbing record i'm not trying to make light of it but if you could could you respond to opposing counsel's statement that at the time of the deposition the witness was still one of the things he said was still that he was not that he that at the time he signed the written declaration that it was watered down my word my phrase because of his fear because he was intimidated what is your response to that please sure at his deposition it was a totally different story first mr miller said he had prepared numerous total net value appraisals while having prepared them certified them all as being compliant with use pap that hardly it is consistent with someone who was a whistleblower who says there's something wrong with total not value appraisals he he said he saw nothing wrong with reporting the total cash flow as opposed to the market value if that's what your client asked you to do so his deposition and we asked him did you go or are you a whistleblower absolutely not is the question for me is all when the defendants knew that right that he was actually substantive fully retracting the statement from what he made in the very first unsigned declaration you know right as opposed to that that sign declaration being a product of intimidation but on the deposition i agree with you reading in its entirety if i think it's pretty clear he said and gently retracting yeah well is that if the question is about these intimidation at the deposition he testified he wasn't intimidated he did he had left cushman and wakefield he had an agreement you know terminations agreement he was worried about violating that if it wasn't an attempt to answer the question the question is that i'm not asking very well so forgive me but the question is at the time that the written declaration was given to opposing counsel the issue was what did they know what did they think and did they think that that watered down version was still a function of the witness feeling intimidated which is i think pretty tough for them to by the time the deposition rolls around but to the written declaration that's a year earlier so what is your response to that well i think when you submit to the court first submitting an unsigned declaration is a little outside the norm when you submit an unsigned declaration because a witness will sign it then you get a signed declaration so obviously he is willing to sign something and it's mature it's different even if it's the same i think they had an obligation to to file it with the court and give it to us but when it's different and when they when the witness has deleted substantive allegations that they're relying on they absolutely had an obligation to the submitted to the court and give it to us that's your conclusion i'm just asking a slightly different question and i wanted to give you a chance to respond but if you've got one please ok and so there their position is at that time when they got what i'm calling the watered down declaration at that time that they in good faith they say still believed that this witness is willing to ascribe to everything he said in the unsigned version but that he was giving them only the watered down version because he was at that point intimidated i asked ruby so what they say they fought a science they filed with the court and have been relying they were they continue to rely on the arguments after that point on things he deleted from the unsigned one right and that's what i trying to get at the very beginning after they had the signed one what happened in the litigation and i miss think we have a timeline here in my notes about about motions practice that continue your work that was done in reliance on what everybody thought which was that the unsigned definition was going to pan out jurors so that they we had filed our motion to dismiss after they received the signed declaration they filed their opposition to the motion to dismiss where they refer to miller as a whistleblower the word whistleblower is not in his declaration that they and then they also there was a motion to strike a we fought a motion to strike some pleading i forget what it was they filed in opposition to that and in that opposition they referred to some of the allegations that miller had deleted in the declaration he had signed not advising the court you know declaration not advising the corridor or citing the third amended complaint that that just repeated them verbatim not advising the court that the witness now had signed something that did not include that we see that there is a sanctionable event here fine under one hundred twenty seven i think this court has held that you don't need to go through the procedural safeguards if it's not a serious amount and this court found in hand sha that five thousand dollars in one thousand nine hundred nine dollars was not serious that would be almost ten thousand dollars to more than ten thousand dollars today the supreme court in the meanies case found the ten thousand dollars did not invoke you know a fine of ten thousand dollars did not invoke the court's inherent power what about that there's a comment that part of this is criminal in nature that's the six thousand dollar yeah they make the argument that the six thousand dollar is really criminal and therefore they were entitled to procedural safeguards under the case that argument would fly under the inherent power but not under nineteen twenty seven and what about mr stillman dolan yes yes what about him there was a finding that his conduct was at least reckless yes stellman is the one who drafted the opposition to the motion to dismiss where he cites things from the third amended complaint but it which had been deleted in the signed declaration conduct that every all more than gauged in amount was in amounted to bad faith he did he found that they all gave out and then he gave the lawyers who felt that they may be had a had some something to say to add to say additionally an reviewed the signed declaration obviously knew it was substantially different from the unsigned one and therefore had an obligation to advise the court of that and using the unsigned one after that was bad faith flood said we didn't do that we didn't know mr stellman it's kind of said he didn't know but then the judge i think found what you had to know because you were drafting the opposition to the motion to dismiss you cited the unsigned declaration and it's just motions to dismiss pending if we have put in front of the court the signed affidavit what is the court supposed to do with that the court cannot legally do anything with that the court is bound by the four corners of the complaint under that will be  have could have done that easily and under those circumstances it seems like a reasonable thing a reasonable judge would probably would have said sure and i understand that your honor instead you don't we didn't didn't cross your mind we did not i didn't cross your mind that you knew about it we did not see the allegations of the thirty many complaint employee changed or implicated or recanted by having received the signed declaration and that that's our issue it was because we continue to maintain our rule of a basis we believe mr miller at that point in time was going to sit down at a deposition and reaffirm everything you told us at our witness interview and if he started to waffle well that's grist for the mill at trial that's what you do get discovery set i don't want to deal with the tangled morass of legal and factual issues during the pleading stage and frankly that's why i did not think it would be wise to the grid to does appear to put in a signed affidavit in front of  the judge during the cleaning stage would i just peered in my opinion gratuitous but given his because the judge had denied permission to depose him because the judge said i don't want to deal with potential factual issues right now so we go in front of the judge and say judge hey look at all this look at what we just discovered that's not what the printing stage i think that trial judge wants to see i think it looks reflects poorly on on counsel frankly thank you thank you  argument the case of khalid versus credit suisse group securities she'll be submitted and we think counsel on both sides for their excellent arguments and we also have  or under torturous interference negligence mr presentation fraud and negligence including negligence per se for the violations of the standards of the conduct required in the industry as articulated by those two statues the duty connection urged by the defendant simply does not apply you know towards this interference case  california here we have the defendants in the developers acting in concert to put a toxic product on on the market and they have they had to know based on their experience creeds who he's and the number one appraisal firm and in the world radically they would know that putting this product on which is over leveraged which is problem with about the developers in the resorts being able to survive then an un top of that the credit suisse was in on it on the plan and and  cushman knew what was going on here these developers were taking money off the top and normally in the development of a master planned community when you get a loan you put the money in to build the facilities million went out into some shell corporations and not a bit of that money went into the development and therefore the the the more the mortgages were doing great damage to the viability of these corporations then as a result of that our plaintiffs had interests in the the had to purchase and sale contracts they had  reports by michael mason and a need to report by larry leisure colliers established that for purposes of summary judgment that the downturn economy was only twenty percent of the cause of the  that was available to judge kirshner was available to us and is available and is in the record and it was there presented before judge quackenbush he  of these two positions that is that the the sole cause and the reputation of the bankruptcy on the twenty for example is one thing that i would notice in all of the pleadings that would cases that were put to in the defense's briefing there is not one case they have where you have a concert of people different individuals and organizations putting a scheme out onto the market that is a toxic product it's a predatory lending practice and it caused the struct it and the total net value has never been used before to my knowledge in the united states it's never been used since it is and so i think that not only does new in this situation the praiser was on campus every three months updating their praise all the appraisers knew that the amenities and the contracts were very important to these people and that they were not getting anything without them and so they had to know what that what they were doing was causing likely to cause damage and it surely did did you want to keep some powder dry for lender for the defendant credit suisse just to give the court orientation i'm going to spend my time covering the causation argument and then mr sure is going to spend some time talking about the individual claims which were additional grounds for granting summary judgment it is undisputed in this case that causation is a required element of each of plaintiff's claims during discovery the plaintiffs admitted that the economy impacted the property values but that they were not competent to apply on causation and they said that was an issue for experts and in fact during discovery plaintiff counsel actually instructed his witnesses not to answer questions about causation saying that that was an issue for experts but when it came time to presenting expert testimony plaintiff's expert did not provide any evidence of causation in fact he admitted at his deposition that he did not analyze whether the loans were the cause of the loss of the humanities he also admitted that he never reviewed the loan terms never reviewed the actual sales or the projected sales or any of the relevant data so without looking at that data he obviously was not competent to opine on the issue of causation as to whether the developers could have repay these loans or not or what caused them not being able to do so and the plaintiffs didn't dispute that during summary judgment as the court below found in fact the plaintiffs never cited to their expert during summary judgment as supposed evidence of creating an issue of fact on causation so they can't do it for the first time on appeal that's the smith v marsh case and even though causation was claimed as burden the defense actually presented a suite of evidence to show that it was in fact the economy not the loans that caused these issues we presented expert testimony developer projections financial records credit suisse sensitivity analyses developer testimony all uniformly saying that the loans would have been paid off but for this incredible economic crisis that caused sales to drop to basically very low levels now on appeal for the first time the two things that mr comey talked about was the yellowstone decision and his other expert mr leisure and they also actually cite mr miller's affidavit which was the subject of the last motion but plaintiffs didn't cite any of those in the summary judgment decision below on the issue of causation again they can't do so now and in based on smith and as you heard on the if we were going to look at this despite the fact that they didn't raise it below the yellowstone decision was based on a different record with different experts they admit there's no collateral stoppel there mr miller was not offered as an expert he was actually not involved in any of the loans that are at issue here or did any of the appraisal work and in terms of mr leisure mr leader also didn't pine on causation he was actually there to testify about whether the appraisals met the appropriate standards or not so essentially there was no evidence put in by the players to dispute our our evidence and they did not show disputed issue of fact on causation so because they failed to do so the court was correct in granting summary judgment for the defendants and that's the court has any questions i will turn it over to my colleague to talk about the individual claims thank you questions for baez or give no questions think you thank you your honors i'm going to focus on three issues and the rest on a breeze on the rest and the three are independently in addition to whatever to the finding of lack of causation and mr lender just addressed the failure of evidence of an element of each of the causes of action that or in this case the failure of evidence that there was any breach of any contract which is a predicate for the tortious interference with contract claim failure evidence that there was any  duty for these defendants that were named in this case to these plaintiffs as the court found of evidence there and finally the failure of justifiable reliance on this representation claims putting aside the additional fair that there was any of this actual misrepresentation made i just want to focus on the lack of reliance because just cleaner on the torsen affair into a contract what was alleged in the complaint was that there in the basis for this cause of action was that there were these substantial uniform contracts that promise the title of these plaintiffs to amenities when the evidence came out it became clear that was all false that all the contracts either said the exact opposite to the extent they were with the developers we had i don't think it's necessary for me to reiterate all of the language that was in block quotes and capitalized the court's clearly seen seen all those many of the contracts were not with the developers at all that with secondary home purchases and clear they were they promised nothing and they were silent on the issue there can be no greed tortious interference with contract if there is no breach everyone acknowledges that in fact the plaintiffs here the balance here don't even try to identify contractual provisions that were actually breached so have waived the issue on appeal the one last point on that is that on appeal they raise an argument that actually was way because they didn't raise it below but they dress it  on the issue and fundamentally the claim in that case was that the employment will contract was terminated when none of the contracts that are alleged to have been interfered with were terminated and the disclaimed any expectancy of any of these claim and a key limitation of the court's say on the scope of liability in negligence claims where there where the harm claimed is economic such as it is here is the scope of the duty found it interesting that  appraiser they do not oppose an affirmative duty of care on an appraiser in favor of a lender who is not a client or designated intended use says the opposite of what was argued previously  basically eliminates the the duty element as to all defendants credit suisse and cushman and wakefield the fact that the plaintiffs acknowledge that there was never any communication no contact whatsoever no relationship we were strangers to these plaintiffs until the lawsuit got filed eliminates the relationship that would be necessary to establish a duty in any of it even were not for the additional layer of protection that this committee case provides so again on the negligence claim no that fails for lack of duty on the on the misrepresentation claims fraudulent any kind of any kind of possible reliance on the fact that they make a point that the fact that the district court allowed three of these claims to proceed in the face of a motion to dismiss somehow calls into question the gran summary judgment in fact the opposite is true what what occurred was all of the misrepresentation claims except these three were thrown out that the motion to dismiss stage because those other planets couldn't even allege reliance these three it was more questionable but now but the district court made it clear that really even in those three cases that the reliance element was quote hanging by a thread and invited the defendants to make the motion for summary judgment that we ended up making  this newfound theory the last point i'll make this newfound theory of conspiracy well conspiracy with the developers again i'll put aside for a second that for the first several years of this case it was the opposite argument the argument was that somehow the developers had been duped by by the defendants but even with delayed switch that occurred because all developers testified that in fact they weren't to think what was going on there is no evidence of a conspiracy developers they make no real attempt to establish that and there's also no evidence that even the developers had the kind of relationship with these plaintiffs that would establish anything other than a contractual buy cell type that one of our people had seen the appraisals that was raised on both rounds a motion is dismissed and i know it's a different standard there but it passed the test and here's why  example a person who's been hit by an airbag that explodes has never seen the mechanism so when you're talking about towards our people didn't have to see these appraisals the it's a toxic product people have a right to rely on the fact that if tributes weezer reputable bank is doing this and then they're going to do it by the standards in the industry industry which protects and we have plenty of evidence in this record that show that he's wrong in saying that the the economy was the only cause what we have here is fraud and misrepresentation which the judge cures are pointed out in great the detail all that evidence is available for us at trial and so to be standing here today and say we have no evidence of causation and no evidence of the way that the downturn the economy wasn't the only cause is just incorrect and so this case should be sent back to him  we appreciate