afternoon jim swanson i represent the plaintiffs appellants in this case assume the panel is well familiar with the factual issues that are contained in the record so i'm going to hit on what i believe to be the two main you're raising here the most business value damage is correct you're not seeking lost property you're only seeking the lost business value damage that is correct your honor thank you yes and that gets right to the heart of the heart of the question at the motion filing deadline the defendants filed a number of motions to dispositive motions emotions etc as it's kind of standard these days in a case like this  alternately the district court ruled that with respect to our claims for economic damages he believed those claims were too speculative and that to be presented to the jury and dismissed them that's the sole issue here today on appeal in doing so the district court said that the fact that we were asserting lost business value damages as opposed to lost profits damages was a distinction without a difference under the facts of the case and in doing so judge the judge indicated he didn't make any comment whatsoever on the fact that we had  as part of our evidence and a critical part of our evidence an actual term sheet from a experienced and well financed private equity firm for the business at the time of the at or near the time of the breach and that the on the term sheet there is not what is the amount suppose we would have been offered what the term sheet was was it was an offer to do was to finance the project and so in order to figure out what that meant you'd have to go back and look at the pro form is that the time the offer was at that the project cost at that time based on what was a year it did in the term sheet understood there's no fixed amount given on the term sheet no there isn't but if you go and look at the evidence in the record including the pro forma sara looking at you can see that the construction cost was estimated time to be one hundred six million dollars how do we link that from the term sheet to the pro forma is there some ring something something in the term sheet saying we're going to finance certain functions i just don't follow how you go from a term sheet to the pro forma is and well i think a punch through the mouth yeah the way you would do the math is what you'd have to look at to determine that are four things the first thing you'd have to look at is the term sheet itself the second you'd have to understand the financial figures that were exchanged between the parties at the time which are part of the record and the third thing that you'd need to know is you'd have to look at the expert's report of legacy capital legacy capital was the investment banking firm that was providing the expert witness testimony on law lost business value in the case and finally you'd have to look at the other documents and the testimony of luke taylor which is in the record if you looked at all four of those things you could you could determine what that value was but you you make a good point that dollar figure was not listed in the offer itself although i submit to you that if you look at the record you could divine what that dollar figure is quite quite easily and readily if you look at the legacy capital report that's in the record the towards the end of it there's a section that discusses in detail the stone offer and what it means now that some of that is a translation sort of an investment banking translation of what that term sheet means in real dollar terms and but i think that it stone peak proposal isn't an actual offer it isn't a current interest so it would require the jury to have the reasonable juror to know the permits were going to occur the engineering was going to  it in other words we in the me put that into question what comes after phillips in texas allows draws an equivalency between the offer that was real phillips and this film proposal or is your argument that there is dispute fact contingent on the legacy report's interposition of the proposal i think that the answer to that is that the offer that we have in this case is very similar to the offer of that was on the table in the phillips case which was also an offer and it was ultimately not a consummated offer and there are a number of cases and we've cited several other ones in our brief where an offer can be evidence of value that the jury can see can consider in order to  determine the damages in this case i think because of the nature of what you said about the stone peak offer you would need to be able to do that you would need to have the stumping offer and then you'd need to have the testimony of the expert witness the legacy capital people who deal in private equity deals all the time and they can understand when it says we're we're making an offer to finance this project what that means i mean if you make an offer to finance a project what it means is that you are making an offer to finance the estimated cost of the project and by that time there were there was a not to exceed bid for the project upon which all that information was was based so i think that all the legacy report the the district court doesn't mention the stone peak proposal but it also doesn't mention the legacy report their brief says that you didn't urge it that you forfeited reliance on the legacy report to create a dispute if you recall that statement i do recall that statement in the brief and it to me it's a puzzling statement because right in our response to the motion is an argument about the stone think offer on the legacy report they're both contained right in there  and i don't have record cites up here with me but i could get your record cites for that words about seventy pages long there are multiple different damage models do all three depend on the stone peak proposal or not no they don't and there they really are three separate separate models are very similar actually to the the the report that was in the well logics case because what that what i was on that panel there you actually had a venture capital investment of eight million for a thirty percent interest that looks identical to phillips to me whether i was right or wrong in being on that panel but here it is to me it isn't the offer itself i just keep thinking it's much more contingent on things happening and the term sheet have stated the same but i'm very troubled by from the standpoint this is a softball question to you that the legacy reports out there there is no deal bear inquiry even given to it it's not even mentioned and yet it would seem to me a damage expert that's extrapolating valid correct i would agree with i would agree with that the the legacy report what the legacy report did is it did really three different things really four things and they all combined to come to the value that the legacy report substantiates the first of the first is what we've been talking about the stone peak term sheet it interprets what the stone to keep the term sheet does and converts that into a dollar figure it also contains an analysis of comparable public companies public entities that are in the same business analyzes they're there and and  held companies you have to have you have to do public comparables because if you don't do public comparables there are no comparables where you have the detailed financial statements that are can contained in the securities reporting now the private transactions was the third thing that the legacy report does and in that regard you're looking at privately held companies not and smaller and smaller companies than the public held but what they're looking for is substantiating certain aspects of the business model and figuring out the multiples at which these companies trade and figure out what the appropriate discount rate is now we we had of course mary and then meters company legacy capital they do transactions like this all the time they're not a professional expert witness firm they do what they do on the ground every day when they're valuing businesses and then you had the canon which can was a p h d that testified a great deal he is  an expert witness in a very good one so the idea of it was we were going to combine these things all of which to substantiate the last business value in this case and we think that that that should be at that seem to be to me to be very solid evidence of a value that should have gotten by the speculative this standard in my opinion there's also a good bit of independent pro forma as and financials that are in the records of this case including  pro farmers and financials that were used by the defendants themselves to evaluate this project and they also bear upon this value and substantiate the idea that the project had value and none of them are in as detailed as a legacy report none of them are as detailed as the mccann report but they they bear upon that as well all of those things go to establishing the business value so you know my thinking on it was that we had a very solid damn lost business value damage estimate and we chose lost business value as opposed to lost profits for the very reason that is outlined in in some of the  case law specifically that when the district court said that this was a distinction without a difference the cases don't say that they say this is a difference that makes a difference it's inherently less speculative says the show schoenfeld case the basic idea of it is that businesses are traded all the time their their business start up businesses are traded all the time and they're traded based on the idea that that what a willing buyer will pay a willing seller at that time for the chance to make the speculative profits so the point is that if you have a lost profit analysis you would need to be able to say ok we're going to earn this amount of income and this month we're going to it's the cost of that's going to cost us this much in this month if we have a project it's going to be completed on this time frame if the if the project is going to cost this must it's going to be completed for this much all of those things have to be estimated you have to have a very detailed crystal ball and if any of them are all wrong then the ultimate loss profit numbers wrong lost business value isn't like that because what you're valuing is what somebody would pay for the opportunity to take those risks and that is a real distinct difference a very meaningful difference in this case and that's what the the and and and the other thing that i wanted to make sure that i said well i was up here was that the philips case i think speaks directly to this point because it says the laws need be no more spit skeptical than the market itself is and in this case we had stone peak and stone peak was at about a billion six in capital  to about five hundred million or so of it at a billion dollars available that their board was included forrest wiley who was a of the chairman of buckeye which was in and in this exact business they were excited about this business they went to texas and met with our guys several times they took these pro forma as they did sensitivity analysis on them and if you read the loop taylor testimony they said they were very interested in this prospect ok it's not exactly what we had in well logic it's not exactly what we had in philips but it's awfully close and there are other corroborating circumstances i think that carries it easily carries it across the line so with all your time used the  know that's one of the many factual issues in this case the evidence on that issue is that at the time that they were talking to the people at the louisiana sugar refinery about this project they had six or seven acres themselves which included the important component which was the deepwater dock that was kind of unique to this particular property property and wasn't something that was a widely available they also had neighbors that they that they said that they would be able to deliver their property and help make the acquisition of that property so on the ground at the time it was never that much of a concern and there's summary judgment evidence it's that's the subject of a different summary judgment on that point that substantiate idea that getting the rest of the land which was basically rural land that's a little bit away from the river wasn't going to be a problem another one hundred thirty four acres or something on the net in the neighborhood of one hundred acres and and ultimately they got that land later after you know after all of this occurred so it wasn't something that was impossible and it was something every everybody was planning for and had a plan to get  good afternoon your owners may please the court i understand from mr swanson the plaintiffs are not claiming any form of lost profits and they're claiming only lost business value what they say is that their argument as i understand it now is that the offer from stone takes this out of the last profits world and puts it into something different entirely it does not in fact the stone take term sheet expressly reflects the same uncertainties the judge and the heart referred to in branding s because it's only two pages long it's in the record it eighteen thousand and thirty two and thirty three and it lists preconditions to closing the preconditions to closing are the same uncertainties that judge engle heart relied on stone pete made it quite clear here an ambiguous lead that it wouldn't invest any money none until these things occurred there were minimum level of taker paid contracts signed it's undisputed that none were ever signed but there is a financial close of third party debt financing none of it was ever closed that all nondiscretionary permits were attained none were that the right away for the land was obtained it wasn't that there was a third party engineering approval of the design the construction budget and the contracts and that didn't happen either so unlike in philips where there was an actual offer that was not contingent on all of these things here the only claim to financing was expressed in the contingent on that so judge higginson along the lines of the questions that you have asked under philips you still have to go through the reasonable certainty analysis here the other two cases the plaintiffs rely on that are most comparable that involve offers or well logics a case from this court in the schoenfeld court case from the second circuit  they do not say it always requires it to be an actual offer there all the cases are quite clear that this is very fact specific but what they all say is that there has to be some basis for reasonable certainty in the i mean the real difficulty for you you h address that head on first of all your honor we do have a pending d'albert motion to exclude the expert on legacy the district court founded on necessary to reach that because even taking the facts in the light most favorable they found it was still on certain and so you know fundamental problem with the legacy analysis and that is the legacy analysis simply assumes that all of these uncertainties are covered and your honor when you go to the part where you see what the comparables are in the analysis that goes through legacy specifically says repeatedly multiple times that the financials it's using for plaintiffs as the assumption are the projections in two thousand and twenty it's not using current financial strain when the breach occurred it's using projections for two thousand and twenty so it just assumes past all the uncertainties that's the fundamental flaw in that and legacy of the expert doesn't testify and doesn't give any independent basis saying yes i the expert electricity capital i'm confident that all of these things would have happened they don't say that they were directed to assume that they had happened and then make the preparation based on that that's the problem there and that's why it doesn't create any issue of fact there's there's nothing to close the uncertaint es the judge angle hair pointed to and to this point philips is quite clear and holds very clearly that regardless of whether you're asking for lost profits straight up or whether you're using a projection of them to calculate lost value the analysis is exactly the same ok but some of the uncertainties he points to to defeat the loss of profits analysis like the volatility the oil market in the future would have no relevance to him at the time assessment no i disagree your honor i did i disagree with that because in let me explain exactly why the fact that oil markets were volatile is something that  everyone knows what he refers to later saying actually their experience prove that they are volatile yes hindsight does show that but the actual fact that there volatile is something that everybody knew at the time and was reliant on and counsel for the other side said that you know the difference between a lost value and lost profits is that lost value is made at one point in time and doesn't require rejection phillips of the texas supreme court specifically rejected that nature of it being a single point in time matters so that can't be relied on that that's just a play and like i said this and their logic is very clear why why would you just declare that you can do something through lost value by that relies on profits that you couldn't do by asking for profits directly if anything it magnifies uncertainty because value is a multiple of profits and you're basically leveraging your uncertainty so so that's the law in texas on here and when you go back to the things that the judge relied on you know he points out their status as brand new entities this is page three and four of his opinion in the record there on their questionable ability to finance the project which i've mentioned stone peak was expressly contingent on all of these uncertainties their lack of permits is what he points to he does point to the volatility in the market which mr going t a himself referred to as one of the principal uncertainties in just to to be clear here what was going on the reason this was so novel is that this was the first time that a party that didn't own either the railroads or the oil was trying to build this kind of terminal and that was unusual because the problem with this terminals it depends on a spread between the price of canada and gulf coast crude the spread has to be big enough to cover the transportation costs everybody agreed with that mr gray t have pointed out in his analysis everybody knew that the prices could fluctuate so the spread was wind already exist so what do you do with the uncertainty well if you're an oil company or a railroad company you can float the uncertainty because you have the other assets and as a hedge but if you don't have those other things you've got to shift the uncertainty to somebody else that's why mr going to be a testified and it's under spirited that in order to make this work they had to have take or pay contracts for five unit trains of oil on a basis to shift that uncertainty so that somebody else the customers would bear the risk of price fluctuations otherwise if the price fluctuated they stop using the terminal you'd lose a bunch of money so when that the district court pointed out that there is the uncertainty of securing sufficient take or pay customer agreements that's exactly the uncertainty that exists in here in a sea uncertainty that stone pete also said is that we won't invest until you close that gap at legacy capital assume that they had closed the gap but they have no factual support for that and they don't claim that they were told to assume it so they did that's the problem on their the other doctor mechanics exactly the same assumption on this end and let me you know just i want to be clear hundred twenty six or sixteen thousand nine hundred twenty six in that range is where in the legacy reports around pages twenty to twenty three of that for example to make it clear we're where they're making these assumptions on this because they do it multiple times so i'm looking at now they say they start it's it's page twenty of the report it's record sixteen thousand nine hundred twenty assume the lease was signed for the land they assume that it obtained the permits the customer contracts the construction contracts and the financing sources they soumik got operational they assume the debt got paid off you're looking at all three models rest on those assumed contingencies yes i would be simplifying to say your answer to the legacy report is not that they forfeited it which at least existed in your brief it's that if you look at it it's as defective as th don't peak proposal yet that the core point is that yes that the forfeiture point related to just one of the models within there but but go to the go to the root cause all of that to take this out of just the pure lost profits which i understand they're not pursuing and to take this into an actual offer to buy the only link there is stone pete that's the only thing that would change this argument is that stone peak record page eighteen thousand and thirty two lists all of these same uncertainties as conditions precedent and the testimony of luke taylor luke taylor was the corporate representative for stone peak who testified on this and  testimony on that and its pages in the record thirteen thousand four hundred thirty nine through fifty four is the place where it's made its most categorized together so again thirteen thousand four hundred thirty nine to fifty four he went through and said yeah these conditions are real they hand investigated whether plaintiffs had financing they said we're going to rely on our condition and they hadn't investigated whether they had engineering there relying on their condition to make good and investigated whether they had customers they were relying on the conditions to make that good so stone pete reinforces the uncertainty it doesn't undermine it with stone peep shows that a real sophisticated investor like they say it is a real reasonable juror be able to infer from cargoes own statement that it wanted to invest that there was some value at least to get past summary judgment yet let me answer both of those first of all you're correct that legacy doesn't discount simply  counting though does not answer the predicate question of whether it's certain enough at all that the law will out an actual offer he can't be that for a new business there has to be an actual offer i mean  no you're right there there can't where's the line between two contingent to allow for summary judgment the question of damages stopped the case as opposed to and we've got an expert that's going to willingly discount and show you there's still value the cases they cited on discounting by the way none of those addressed the predicate requirement of whether it's certain enough under texas always and they just say is the discount right and they're in the cases they have their breach of like a supply contract for fifteen years there's no uncertainty at all of whether it's going to happen that's just discounting the future value of those cases our commitment to help completely off that so let me say that you know philips i think is philips is the guiding principle that you know and so here's the list they say here are the things that make it too uncertain an activity dependent on uncertain or changing market conditions check chancy business opportunities brand new thing nobody's ever done before check entry into an unknown market again new third party check success of a new or unproven enterprise check and just let's go through the cases that we have here are the cases that they've said enough phillips there's an actual offer by the defendant it was a confession by the defendant the court said this mission well logics and actual investment by venture capitalist a site that no adventure is this case from the eastern district this was the destruction of two arby's that were in business so you had a track record there there was also an offer to buy but they didn't business you had a new you know exactly what they meant the eateries case from the tenth circuit it was a chain of restaurants that have been in existence and  offer that the district court made a finding of fact that it would have closed but for a salmonella incident caused by the defendant so there you had a track record existing businesses plus that schoenfeld actual broadcasting contract with communications for the b b c network again the defendant had signed on to it so there's confession by the defendant checker bag of an existing cotton candy business perfect it was an existing rental building those are the cases they cite that enough so  are the cases that we've cited says it's not enough texas instruments they're developing a new voice controlled thermostat george garrett they're negotiating to get a new freight route they got it court found it wasn't certain of even for is a louisiana case it was a developer who had bought four hundred acres they already had the land as opposed to here and they found it was still uncertain because there is no construction rower's it was an actual business they set an offer two years down the road wasn't enough to make it certain in two thousand and three c q kink you know we cite all these cases i got to tell you when you line up the string of cases that say not certain enough cases that say absolutely certain this case is down that too because the plaintiff who is the plaintiff there had made the same argument on saying the expression of interest is enough and they said no actually i'm wrong it's the texas instruments case because the a texas interim miss said yes we're and you are interested in this thermostat courts as a matter of law it's not enough that you're interested you've got to go beyond interest investment and let's make it clear what happened here the defendants here never put a dime into this there isn't anything here that's like philips or a logics or anything like that where there's a mission for a devoted the only hook is stone peak and stone peak as i said reinforces the uncertainty my making  contingent on the very same things are just there isn't any easy way around there isn't any legal way you can say we don't have to care about the undisputed uncertainty let me just say why is it undisputed it's undisputed that their new entities yes they were formed in march or april or may of two thousand and thirteen they started talking with defendants here in august of two thousand and thirteen discussions broke down by january it was a four month period you're only eight months old when it ended there are only two or three months old when it started there's no dispute about that this is the first third party terminal of any kind that's undisputed because mr goaty other principal testified to it it's in the record eight five five five and fifty six does this depend on the market spreading crude and is subject to volatility yes because mr goaty again put it in this investment form that's in the record at seventy nine eighty four is that undisputed that they had no customer commitments no contracts yes because he agreed to that too the question for mr swanson if he comes up here is is there any actual dispute about any of those sources of uncertainty the answer to that is no that now does stone people washed that out as did they say then you go to a legacy say did legacy fill that gap did they say that they make it less certain they say oh no they're going to get the customers they're going to get the railroads they're going to get the permits they're going to get all that his legacy testified of that or do they assume that if the answer is they assume it they don't help at all the close the factual uncertainty they just do the math at that point and as many as your honor one of your honors pointed out there is one difference between plaintiffs here and all of the comparables and legacy that makes him uncomparable in the extreme and that is this business didn't have anything no history no profits no contracts no lan no terminal no nothing every one of those businesses had those things and the main point of the comparable analysis this is this court's wurman decision this in the briefs the plaintiffs cite five hundred fed second at six sixty seven here's the rule when you do a comparables a nalysis the business used as a standard must be as nearly identical to the plaintiff's as possible legacy compares what they projected based on their assumptions this businesses would be in tw point is if they are in the record we have to do that work yeah you know and in what i say your honor is that the district court wrote a five page opinion on this he could have written a twenty page opinion the pages that address this those list of uncertainties all of them are undisputed none of them are cured in any of these places and that's the reason it was entirely correct or thank  know i would dispute everything that he was just saying about the facts of this case and i'll see if i can give you a little bit of understanding what i think the record discloses here the record shows that up until around the beginning of january the parties are working constructively together and a lot of work had been done on this project and then the defendants decided they were going to do the project themselves and they lost the ability to to do the project at this dock at that point in time so we were prevented from doing all of the things that would be necessary to have finalized some of these items he's talking about and that creates the uncertainty that agreed that his legacy was only assumptions no i don't agree with that and that was what i was i was about to get to your honor the the fact of the matter is every bit of this stuff if you look at our brief here in the court of appeal and if you look at the briefs that were that are filed in the trial court and they're even more exhaustive and more detailed on this with respect to every point we can demonstrate you take for example they say there was no engineering drawings well the engineering has gotten pretty far along and we had  not to exceed bid for this project for the engineering for example the permits the yes we hadn't issued a permit because we needed to have the dock and be able to write it on to the permit form to get the permit but there had been a lot of work done by high paid consultants on the permit in process and there is testimony in the record that establishes they believe there was going to be no problem with the permit and with respect to the customers there's a lot of evidence in that record on the fact that there were customers that were very interested in this project the it was and luke taylor himself testified in this in his deposition that you wouldn't expect that you would have signed customer commitments until such time as you had the location so you couldn't get them to sign for the taker pay until you knew exactly where the facility was but all of that was very far along reasonable juror to think what the image misconduct the conditions would all have been fulfilled yes there is at there is there is evidence on every single one of those points in the record that as stablish says that absent the defendant's misconduct this all would have taken place and could have taken place all if we disagree that there is a debate debatable evidence on did the legacy report assume the conditions when it gave valuations did it is true is he correct in that statement that all the models assume those conditions would be f if you look at the deposition of marion van meter which is attached to the motions on the subject you will see that she went back and made it attempt to verify every single factual thing that she was under that was included in her report and that she was confident that those conditions could be met so when you say assume no she did not just get she did not just take what somebody told her was was an assumption and run the numbers like this gentleman just said no she made an attempt to verify all that and and it was her firm opinion that all of it put up and done and in the legacy report the thing they don't mention is that there is a discount rate applied to this which is a twenty five percent discount rate and it's broken down into different components one of those components are specific business risks that we're facing this specific business a twenty five percent discount rate is a very hefty business the discount rate and it reflects all the fact that ok maybe the eighteen months may would have taken eighteen months for a job in one thousand months or seventeen months but all of that was built in accounted for in both of those expert reports so what you have is you have a  record here that shows everything that was done and they make it sound i think a little like there was not very much done but if you look at the record there was very much done since hearing where you both made these competing arguments about these expert reports ye discredit these expert reports before the district judge well we knew they were there were referred to of course in our in our motion papers and i mean there was a hearing yes that's what i'm trying to think but we didn't have a we didn't have an oral argument on it so i don't you know we didn't know exactly what concerns the judge breyer may not have had at the time but all of that is set forth in attached to our our motion papers here so when they say this wasn't argued below well that's i mean that's definitively