i'm going to the court may be aware that we're going to split up the time on our opening a argument i'm going to take eight minutes with respect to those cases mr john troll hand from new york who will speak to the a commodity a question regarding the similarity between for extracting and and other types of interest instruments that are recognized as protected under the bankruptcy seven sixty one open for and for  and the customer's name the customer a little bit wait a minute i want to be clear about this because my understanding and maybe i'm confusing transaction is that there was as it were a master account the peregrine had with chase and the customers deposited into that account then told you know the the broker you know this is what i want to buy this is what i want to sell but it was not a segregated account in the customer's name they were not  statements and also there's an internal accounting convention that is far as this the actual financial structure we have a customer we have the customer giving money to paragraph and it goes into this master account perfectly lawfully you know draw money off of that account if it exceeds a certain amount to pay whatever it wants to pay then peregrym is in turn a deposit or with chase as i recall  that's where i'm completely hung up your honor understood to two points with respect to the evidence at trial it is undisputed that all of the funds which the plane to sir seeking return to them were provided by them there's also no question that under the contract itself the customer had full of forty to trade those funds but the thing is the problem is that they aren't secret gated funds money is fungible and they're told and it's certainly possible to have funds and yet have the status of an unsecured creditors in bankruptcy those are just two different things altogether so just because they said you know i've got perfect records i can show i paid you know fifty thousand dollars into this account or whatever they paid in doesn't tell you secured versus unsecured you know or you know priority or are non priority that and they've been told you're an unsecure bankruptcy you may be an unsecured credit in bankruptcy there have been cases where there have been in the refco case which is not in the record there was coming link between the all of the trading accounts and the general operating accounts and the funds go into that account and there is no separate account for each individual and it's quite possible to do that because if you have other types of futures for example there are  segregated sure oh yes around it's and this wasn't done that way it's just a different instrument and so different consequences flow if as unfortunately happened here there's a bankruptcy either not somebody has kept track of how much got paid in write and how much got paid out and when somebody goes and buys you know so many euro's or so many rupees or whatever they're  buying that's that's an internal accounting measure that's not that doesn't mean that these funds are co mingled they are they're all in one big pot they're in one big pot they were maintained intact there's no question that the legal title of these funds was placed in paragould but as far as ownership equitable ownership the pens on the intent of the party or the place in the dance your whole argument and i just i'm not sure what the support is for that based on the district court first the bankruptcy court should throw over points out bankruptcy courts findings and then the just records findings about the the legal quality of this transaction well your honor we didn't this was a conflict this contract did not say jenner creditor this contract said you control the funds the funds that you have in the in your account can be used for margin are to be used for margin in collateral beg collateral pledged to support the margin trading in that account and your honor there is no way that a customer can be pledging as collateral funds that are not understood between the that would be the dispositive factor with that even without consideration of the other characteristics that we have in the cellar case your honor with respect to the exercise of ownership of the funds would be in the customer that under paragraph one of the the a contract all trading structured by the customer under paragraph three margin the customer exchange the cloud is a future straining commission doesn't think it's the exact same structure at all things that it's particularly given both contractual relations between the customers and peregrym and also  the warnings that were issued or whatever there's the alert statement saying should there be a bankruptcy you may be an unsecured creditors or there's a very there's a significantly lower level of sets in the in the commodities accounts it would be impermissible for the company to use excess money in the account pay its own debts whereas in these accounts that was perfectly all right well your honor i would respectfully point out that for example with the example of the foreign commodity futures regulatory segregation same thirty point seven four in futures speaks to regulatory separation not regulatory segregation and it's clearly newman every numerated is one of the commodities contracts under seven six because they've gone through the extra steps that are necessary for that i mean i think you're just trying to shortcut munich i'm trying to push bankruptcy i mean i understand live course you'd like to get paid but trying to push the bankruptcy law further than thousand and six national futures association which is commodity futures trading commission has approved self regulatory organization made the statement related to section seven sixty one that was not clear it application was not clear relating to the risk disclosure that they that brokers are required to give they specifically said we use the word may not not is not an unsecured creditors because the courts may have to determine  true reasonably to infer the congress implicitly exclude all unclear transactions from section from section seven sixty one well that's just not true respectfully there are at least two classes of contracts within commodities language that was included in two thousand and six under this similar contract schools and i think it's important to realize that that clause did not stated they have to be similar to two contracts for future delivery as request the whole key thing to say similar whenever you say similar you have to be saying similar in what respect you know and what the commission argues which i think is something you need to deal with is the respect is the these extra protections that are given for the traders in these various segregation requirements and limitations right what will that that's a great point and i appreciate you bringing up but as i said looking at all o little bit out of order but the commission is here today to be heard on the meaning of section seven sixty one of the bankruptcy code which i believe has this court understands was the knack to it to give effect to customer protections as exist in the commodity exchange act the senate report accompanying the passage of this provision said that it was being passed with two goals one of which was to give customer claims the highest priority in bankruptcy quote consistent with the commodity interrupting but let me just ask you this do you thing that the characteristics that are discussed in stone or are not the proper focus and that the focus should be on what are the plans are in segregated that it's yes i agree that the focus should be whether the funds are in segregated accounts i think the only way you get  if you need to decide the question of whether retail foreign exchange transactions are futures not whether they are similar to futures because similar to in this context really is about how the funds associated with these transactions are treated in the ordinary course of business that is if they are cordoned off from the assets of the futures commission merchant in the ordinary course of business they ought to be cordoned off from the assets of the futures commission merchant in bankruptcy as well whether or not he assets are cordoned off segregated held in a specially designated customer account and barred from being mixed with the assets of the futures commission merchant here the assets of the retail forex participants were held in a bank account labeled off its own obligations as both the bankruptcy court in the district court found and so that is certainly not coming lng under any definition that is coming going under every definition i've heard of excuse me and in fact the fact that it was held in a separate account really has no legal meaning here because the read the foreign exchange risk disclosure regulation five point eight specifically says you may be treated as a general unsecure creditor even if your assets are maintained in a separate account like they were here so this really isn't the kind of bar i'm coming ling that we talk about when we talk about futures accounts and swap clearance swaps accounts this this second point about foreign futures and about how regulation thirty point seven eight just says maintaining a separate account i really fail to see this argument because thirty point seven b says and those funds have to be held in a specially designated customer account and then thirty point seven easy as you keep those funds cannot be coming gold with assets of the futures commission merchant so the only way you get to a place where the regulation of form futures funds looks like the regulation of retail foreign exchange fin is if you only read thirty point seven and wish away the remainder of the provision asked for it to be national futures association rule that was passed in two thousand and six and the rule explanatory t that was that the fact that courts may have to decide this question was in response to something that the raft of foreign exchange participants had raised and the refco bankruptcy the legal landscape has moved on since two thousand and six putting further distance between retail foreign exchange transactions on one side and commodity contracts in the other for example congress gave the commission anti fraud jurisdiction in two thousand and eight over retail foreign exchange transactions anti fraud jurisdiction over spot metals transactions in two thousand and ten congress did not mandate that the funds associated with those transactions be segregated or barred from coming and accordingly congress did not and the definition of commodity contract in the bankruptcy code it did do so however for clear it swaps at the same time which it gave the commission jurisdiction over in two thousand and ten and then it did accordingly amend the definition of commodity contract in the bankruptcy interests it may be apparent by now that ever since the close of the secure leverage appellants case in chief before the bankruptcy court when the trustee moved for judgment on partial findings the appellants have since that time been in search of a proverbial glass slipper to run to make an argument that fits the evidence that they presented  addressed and that's i won't belabor them mustn't but i'm happy to discuss them principal issues i'd like to discuss today are why the trial judgment was correct and should be affirmed and why the dismissal of the miller adversary which has yet not come up yet was likewise correct and should be affirmed before i do that i'd like to make a brief remark to the trustees of you that the appellant's have unnecessarily complicated appellate review in this case for several reasons that have perhaps come through in the briefs the principal one of which is this the large part of this appeal is a judge is an appeal of the judgment rendered after a trial though if you were to read the would scarcely recognise that a trial took place well but there are late issues of legal characterisation we need to know you know what kind of account was it and what were the terms of the account and things of that nature but then you still have to issue of the resulting the main issue of the resulting trust issue which is whether or not there was a usual intent of the parts to form a resulting trust over these trading deposits now this doesn't look much like regular resulting trusts a point i believe you've made where you know eight pays the money and put something in these names that they actually has the the equitable interest still i'm not sure who is a and b in this crackdown obviously i would concur with your honor's remarks on that ip and i believe that the the reason for that is because the evidence tends to show that that was that the former resulting trust was actually not the mutual inten metal trades that you know they think of it is their money certainly ariens i think that is an intended to be their money i guess people price question you know however putting money saying you know now look if you trade forex these various calamities could befall you and this money so what about the man emphasized that the word is may not will may be treated you may be an unsecured creditors or under what circumstances might one be secured well i believe that you know bankruptcy case now we're talking more generally not necessarily about this case but i believe the language used in the custom in the forks wris disclosure was those are a regulatory form of words and i believe they were not meant to are intended to tie the hands of every bankruptcy trustee for every and every subchapter for liquidation that might come afterward commodities futures trading commission obviously is a party in interest by statute in these cases and as every bankruptcy case is it's a series of negotiated outcomes and perhaps in this case the come out of these futures trading commission has a particular position on the way for x creditor should be treated that might differ from a few but from another case in the commodities futures trading commission might advocate or even push for the bankruptcy court to put forex and in a different category for some other unknown reason for all for exercise or something unique about the contractual arrangements that we have before us here that would push you to say one or the other no i correct then not only because of that i would i would like to point out that it's not credible only because on the one hand the appellant's got up and said almost and wrote fashion you know well of course intended this money right but then they admitted on the simultaneously and quite frankly on cross examination they had to admit that yes so i read in understood the forks was disclosure which said money would not be mine in the event of a in the end of it in the event of the bankruptcy of p m t end of the line correct and it was not only the and worse risk disclosure there was also something that the parties refer to as the welcome emails and what they were was  once for its customers such as the appellant's signed up for a four x account they did all the paperwork either with their broker or on line and they got to the end and eventually they received an e mail that said you know more or less welcome to be of to you here's your new account number here's your log in credentials you know log in name in a in a password and at the end of that email every one of the appellant's received more or less a distilled down more colloquial plea worded version of the that was one of the reasons the bankruptcy judge found that the testimony of i intended the funds to be mine was not credible but it's also worth pointing out the as the district judge noted in his opinion that the other reason the bankruptcy judge found the testimony to be not credible was as a result of her evaluation of the appellate at trial there was in fact one instance where one of the appellant's sort of obstinately refused to acknowledge  prior consistent state and his deposition prompting the bankruptcy judge to to just say will just admit you you know you said something different you depositions so it's not only the substantive differences that it's impossible for these two things to co exist i had tended the money to be the argument there is that you don't need to file a proof of claim at least one of the arguments you don't need to file a proof of claim if the money really never is part of the bankruptcy bankruptcy estate  we were good if we didn't think so is it is it your position that if there's even you know let's say a legal claim but not an equitable claim you have to throw it into the bankruptcy state and let the bankruptcy court figure out whether it's the state but what's your argument well that's certainly the most prudent approach as a bankruptcy lawyer you know you if it's going to appear if there's a claims bar dating then you have to file a claim you want as well asserted and have someone say that well that's not part of the estate we can just agree that that should have been in there but legally this all comes down to the definition of claim under the bankruptcy code which is and section one hundred one subsection five now this is a bifurcated issue that let's deal with the z one first if i might the complaint in miller seeks compensatory damages punitive damages and attorney's fees so monetary component no one has ever argued i believe in any level but that's not clear so that does not appear to be a dispute really the only issue is whether the constructive trust remedy right constitutes a claim and i would suggest your honor your honor it's that this is resolved by the definition of claim in one zero one five subsection b which ties the equity that the issue is gives rise to the rights of payment so if the same breach is the reason they want compensatory damages and that same breach is the reason they want a constructive trust it's a claim that you want to send it's label constructive trust doesn't really help that it's all it is is a way of saying we want money yes yes that's one way to distill it picks oil and you delve down to a simple says the phrase yes but you don't even have to take my word for it although i'd be happy for the if you were to look at the miller plaintiff's complaint they make this is clear is day the complaint says now i quote that they said that they see quote to impose a constructive trust so that they refer to the appellants may receive payment from the estate apart from any other creditor in other words their own complaint binds the notion or the remedy of constructive trust to receiving a right to payment which means that the constructive trust remedy sought here falls squarely within one hundred one five d is section five forty one deals with what is and is not property of the of a bankruptcy a state five forty one d simply gives effect to a valid preposition trust and says if something of some property isn't a valid preposition trust it is not property of the state how obviously five forty one does five forty one d does not have anything to do with by its express terms the claims process the other statutes and rules clearly  do so five forty one d d does not say in fact would be inconsistent with one a one five b if it did say well if you have a equitable remedy you have to file a claim that would run but it would be flatly inconsistent of what one to one five b says and claim i'm happy to discuss that if if your honour's are interested in the obviously way well know what the standards are for relation back though the district court did note accurately that rule fifteen of the civil rules do facts alleged in the miller complaint which everyone agrees was filed two years after the claim started it strikes me as a level of generality problem because of course ultimately it all arises out of the embezzlement and you know the underlying facts the bankruptcy at a more granular level of course there's some real differences contract every store theories there are different kinds of proof so how are we supposed to resolve the correct level of generality well it's quite right i would say the a couple of recent observations there the the in the in this court's decisions the issue is always come down to whether the proof opposing party which i suppose nominally as the trustee i'm notice of what the the miller appellant's claims really work in other words they would have to have told the trustee saying well i represent actually a class for x people who you don't need to i would respectfully suggest go through any great mental gymnastics to answer that quote because the trustee in my judgment wisely when he prepared the specialized group of claim forms for this case specifically placing the a and b that your on to refer to we would suggest would be a would be the customer the would be parent and then the equable title would be retained by the customer in the account happen if there is wrongdoing obviously if it wasn't or got his hands on the floor x money that would have been a risk that you know we assume but also there was a risk as wason did with the segregated funds nobody can protect against crook but that's a risk but that does not change the intent the intent of the plaintiff always was to me take control this is reflected in the actual handling of the counts the repeat of the record keeping the counts they themselves has has set represents the most vulnerable class of retail investor the commission as a matter of policy and i'll address zellner very very quickly but you know the important issue with zellner is yet not to defining contracts for future delivery under the commodities act that definition under part two of the commodities acted as it existed in two thousand and three to extend that logic to come on of these interest under them might have going forward generally speaking as a matter of policy the irony of this case your honor is that if if our clients money had been in a regular tour really segregated commodity futures account and there was cross extends all the provisions of the actors supposed to be extended to retail for an exchange under the zone or fixed legislation or await ok ok thank you very much thanks our counsel the court will take this case under advisement and we will take a