argument is essentially the plaintiffs are trying to have it both ways but in fact edward jones is trying to have it both ways and there they try to do it below and they were successful they're trying to do the same thing on appeal let me try to explain in order to defeat the disclose that there were fees being charged in this account and we disclose what the nature of the fees were then you can claim that there was fraud in connection with getting our clients into the account online but when edward jones incorporated the potential a mission that was there was in the disclosures if you look at the brochures that we handed out that gave you all the information that you needed that's how they define independent five claim what the court didn't focus on the low and i'm hoping that you will in making the decision to transfer the money to the few days that count the client is quote not relying on the advice or recommendation of it were jones so what i said before was that crystallized the case but that's material i understand that's half your argument on a how is that not a material admission here's why because i think we need to be careful about what this standard is that applies as northstar says the question is w have that that incorporated by reference that language into the complaint we know that it won't be part of the state law claims what will a trial look like on the breach of the new sherry due to claims that are now crystallized in you're not allowed as a financial advisor to give your clients an option to go into a fee based account or do anything else without conducting a suitability analysis st and then the the defendants in this  essentially the situation here is a financial advisor who's told hey you've got a client waiting out there at the table can you want to talk to you about potential accounts and a financial advisor on the way out run past a board of brochures grabbed a handful of brochures randomly and scattered them out in front of acquired them to hear you decide and i'm going to force you in any agreement that you enter into this claim that you relied on my advice if your burden to choose weren't so we're going to skip ahead i guess to the nd of argument that we're making they were material to whether or not a client when choose one account versus another account but as to whether the client would invest or buy a security or not buy a security they had nothing to do with that is there any evidence or any allegation that suggests that that would have affected any of the sort of well the allegation is that the fee would have affected the decision whether or not to enter into the to account and self the claim is that the clients never should have been presented with the option of entering into these kind of accounts but i think you focus on an important issue because i think that takes us into the realm of freeman this case is on all fours with freeman and the court may remember that freeman involved a variable life insurance if you know in part of the premium was invested in that case and  know that there are allegations of fraud in the complaint but it's really question about what does this cost of insurance mean and the trial is going to be a dispute about what the contract is saying isn't saying that the cost of insurance would be excessive if we did it this way or is it saying that you met industry standards and the trial in this case will be exactly the same thing it will be over the issue of whether there was a breach of whether there was a fiduciary duty and what the duty was and what'll happen is the plaintiffs in to eleven imposes on you a duty not to give us any options other than ones that are suitable to you are suitable for us given our history of investments and then what's going to happen is exactly what edward jones been below they're going to introduce evidence and say no we fulfilled our duty because we gave you all these disclosures you knew everything that you were supposed to know and then the jury will be asked did they did was that enough to fulfill their dut and no misrepresentations will come in a trial at all so this case is on all fours with freeman and judge smith just to go back to the question about the connection with the to claim was a fraud but let's assume god is the case for now and so now we're asking whether it was made in connection with the purchase or sale of a security and i think again it's really important that the quarter here was as close as possibly to the standards  ished in this target for determining that issue the supreme court said that misrepresenting misrepresentation must be material to a decision to buy or sell a security that's troy's earlier they said that it has to the relationship between any security transactions in this case and the breach that's being alleged is at most tangential and that's because there didn't have to be any transactions occurring there didn't have to be any folders and then stead that they were active traders they wouldn't qualify as being members of the class yes that's correct so but that's part of part of the point about why and i'm not sure the court has any other questions for me on these points now the main issue here i think is that the court needs to focus on the way that as edward jones litigated the matter below it ended up actually even presenting an option of the basic out to do some sort of determination about it they didn't they offered that as a possibility and the clients entered into the few days count that was the breach and were jungle undoubtedly come back and her evidence and what we disclosed everything that was there and as they did below and that argument is an argument about whether there is a duty and what the scope of the duty is it's not an argument about material  yes no that's not correct your honor so the damages don't result necessarily from the security trade and you know they result from the fact that a fee is being taken out from whatever amount of money is perry thank you your honor may i please the court judge smith you asked my friend whether the fee based accounts are material to the investment decision mr brown said no this is why we have complaints paragraph one hundred and sixty two dollars of the complaint and i quote the commission based fee based i come out of me is critical and material to any investment decision including lead plaintiffs investment decision to transfer from commission based accounts into fee based accounts that is an allegation in this case to be sure it is in the twenty five dollars section of the complaint but it is a factual of vermin by the lead plaintiff by mr brown's clients about what plaintiff that edward jones was not conducting a suitability analysis lead plaintiffs would have looked elsewhere for investment advisory service that is an audi have so counsel to borrow a phrase from church buyers and holders e m from an account where they would pay based on trades an account where they would pay based on the asset amount and they don't trade and so i mean irrespective of what their temby five allegations are i'm having a lot of trouble seeing how moving from a transaction based fee to a jones did that quote through the sale of these assets the allegation is that the assets were sold the securities were sold out of the commission account and different assets were purchased and if you count the transfer itself is effectuated by a true purchase complaint that as part of the transfer the assets that were in the complaint were sold and converted into different assets direct your honour's paragraph thirty nine in causing these clients to move from commission days to count through the sale of their assets to feed based accounts and it goes on from there the sale of the sale is here it is alleged in the complaint the reason for that if you look into the sure is is that there were different mutual fund options depending on which accounts were chosen the commission based accounts of course you could you could invest in anything some of the few basic out we were limited so there were transactions in place in connection with the transfers and us pleaded in the complaint and undisputed and that satisfies in connection with rd part of the so called reverse churning claim is that no transactions happened after the transfer that's not true in the real world and they know it's not true in the real world and so they pleaded in paragraph forty one which was added by the way in the nd amended complaint after it had already been dismissed on salusa grounds they added paragraph forty one dollars in the fiduciary breach allegation which says that these additional trades which they call phantom trades were made to give the appearance that edward jones was managing the fee based account in a deceptive effort to justify its fees but but those are alleged to have occurred after the initial suitability issue an initial transfer so i don't see how it would relate back to answer just been st that the whole notion of a reverse turning claim which no court of course has ever recognized this was a test case on this new theory that's never been accepted is that the financial advisor does nothing to justify the fee for example as paragraph forty two dollars placing a client's funds into a fee based account for no reason other than to collect a fee and there are many allegations that say the part of the reverse churning claim is that edward jones did nothing to justify the fee if there were actual trades that would justify the fee that's the purpose of paragraph forty one dollars it's part and parcel of the reverse turning claim is not it doesn't after doesn't make any sense in this country or difference in this context your honor because the scheme carries on through the transfer the nd answer your question then it is also the answer to an earlier question by judge math regarding the damages the damages are the net  this paragraph fifty eight dollars the amount of fees they paid less the commissions they would have played us the amount of value of assets so any trades that took place would have to be netted out of the damages analysis so it is no answer to say that after the trade judge bennett it is part of i understand your argument that the damages would be net of any legitimate trades that were conducted on behalf of the buyers and alders but i still don't see how that virg an initial putatively improper transfer into in connection with the sale of securities if are simply because in computing damages you have to look and see if there are any w complaint a reverse churning scheme the scheme carries through from this the alleged provision of advice through the alleged transfers to the later alleged failure to provide services the scheme covers all of those things if any of those things are done in connection with the purchase or sales securities under sanford in o'hagan in troy the in connection with requirements satisfied there is no requirement of securities laws that in connection with be tied to a point in the scheme when  claims remain important in this case in the ten p five case the plaintiff had to plead that this scheme was undertaken in connection with the purchase or sale a security that was an element of their cause of action and they came forward in good faith under rule levin and pleaded that it was made in connection with the personal security they didn't prevail but then salusa says because they couldn't prevail under ten b they don't get to turn around and do it under state law and that's the whole purpose of this point there is not a single case from this court there's not a single case from any appellate court since loser with an act and has been many years now in which a plaintiff pleaded simultaneously atin be claim and a state law claim let based on the same facts but the state claim wasn't held precluded by sluice i mean they're asking this court to make a dramatic unprecedented change to say for the st time ever a to be claimed is gone but the parallels they claim survives and the reason for that is that the ten b claim that they pleaded in this complain allegations underlying a state like plain quote could have been pursued under rule ten b five that's in fleming at page one thousand one hundred and fifty three we know that these factual allegations could have been pursued under twenty five because they were pursued under twenty five in the st complaint in the nd complaint and in the rd complaint the plaintiff said the same facts satisfied in the file which then comes to where mr brown started on this notion of alternative pleading this pleadings but help me as someone not too conversant with this general area of the law i have the understanding that sleaze was essential designed to address what as a layman i would say strike suits fraud on the market stock goes down on you omitted  something and in connection with the purchase or sale of security i got odin's why is that not completely different from what's happening here where what they're saying is you d isn't that just a completely different thing now maybe they're doing artful pleading and you're trying artful defense under sleeves but am i missing what sluice it was really supposed to be about securities claim is going to state a cause of action that was the whole purpose of the p s l are a right that the do the the order of legislation here was st congress made it harder to bring federal securities claims then plaintiffs tried to do an end run by going under state law then congress and act as looser to say no no no if you can't do it under federal law you can't do it at all this case is actually a perfect example of that the plaintiffs tried under federal law they have a firy of reverse churning that as i said no theory no court has ever accepted but they tried it under federal law it didn't work so now they're trying it under state law in effect in the reply brief they step right into the sluice a problem they say well the fact that we couldn't have proved intentional scienter based violations of in rule tw and eleven we could still base our state law a claim on negligence well that's exactly was loose is designed to prevent is state laws with lower standards or different requirements based on the same crown doc and counsel you're you're clearly not arguing that simply bringing a federal securities claim bars you from also claiming that it's that it's a bring up all state law claim as opposed to you still have to meet the requirements of sluice a if you bring a frivolous federal claim odd that clearly doesn't meet the requirements that's not going to stop you no matter what you pleaded it may give you some ethical issues but it's not going to stop you from  om trying to bring a class action based on a state law claim if your federal allegations based on the same facts clearly don't cut the mustard right i i think that's right judge bennett but this is not and never has been a frivolous claim this was a very serious claim these plaintiffs put a lot of time and effort into this you know there's large you articles that they cite in the brief about this subject there you know they were trying to make law here they were trying to get this notion of reversed turning accepted by a court they sales securities which they plead in so many words in their twenty five dollars claim then they don't get to turn around and take a nd bite at the apple under state law that is what's loose requires and that in this case that you know if that's the answer we win then if we take out the ten b claim entirely and i think mr brown's point right let's just put it to the side let's look only at the fiduciary breach claim and i have to bring the court back to paragraph forty one i mean if we were analyzing this from scratch on a blank page plaintiffs allege quote in a deceptive effort to justify its feet edward jones blindly traded assets in plaintiff's account only for the sake of moving them around right there in quote thank you your honors let me let me start with the phantom trades allegation because the phantom stranger allegation as we explain in the brief was clearly in anticipation of the argument that mr perry just made which was that the fuse were justified  urn and the point there was really i think it's out of place in the complaint the point there was to anticipate the contract the images argument that was going to be made but it also as judge bennett pointed out it happens at a completely separate time from the actual breach that occurred here which was at the time that and rejoins actually extended the option to the clients and so the phantom trey's allegation there  a look at the questionnaires that the defendants relied on below and introduced into the record you'll see that the questionnaires don't show that any suitability analysis was conducted in fact when they were part of the agreement to enter into the account itself i was going judge bennett and i hope this answers your question i think the point that's being made there is that the questionnaires that were given to the clients were not part of the suitability analysis at all questionnaires were there to determine what was the appropriate investment strategies once they weren't in the case account and so there was no suitability done for her this isn't determine whether a fee based account would be suitable but the question was once you're in the few based accounts how should we invest your money and so the fee based account is a separate act and separate conda question about you know the questionnaires in the whole purpose of the questionnaires is to say what is your risk level once you're in the and so my point is that to the extent there were sales that took place or purchases it i mean look it's a it's a brokerage account right so there are going to be some sales in there going to be some purchases but the question is when was you know  would go in the same bucket as to your allegation of the phantom trades that your honor in your view it didn't have anything to do where the fiduciary duty breach which was the account switching and it was not in  do and frankly we thought it was fraud the district court didn't think it was fraud fine but it's also breach of fiduciary duty and what mr perry is wrong respectfully is that you're allowed to grow and this is what the supreme court is and you're allowed to