my name is william bates on behalf of the a felon with me is patrick weston my colleague and i'd like to reserve five minutes tonight going to begin your honor with the reason why the entire judgment five million dollars in two private placements of debt and the compensatory damages which were awarded exactly equal the amount raised and that is not by coincidence because that is the amount that is the only amount that was mentioned in the closing argument as the amount for damages and the problem is that the amount of  allowed under the law is not the amount that's raised in those private placements the plaintiffs here is not one of the investors under those private placements who claims that he or she was defraud therefore that is what needs to be proven and we know as a matter of incontestable fact that it was not and here is why and one of the reasons it was because that you objected to proof of allocation right absolutely because your honor the district court judge held that because of lack of forthcomingness by the plaintiff counsel below their expert their evidence was restricted now you say you cannot offer oh pinion evidence as to allocation of the trial and so we took that pretrial ruling and every time they tried to offer that evidence we said your honor you said this would not come in we have jacked and every time the judge sustained us yes but that and then may have the unintended consequences of the jury being faced with an all or nothing decision on damages right big jury was faced with a fundamental question of whether or not damages had been proven right and the only proof given to the jury was proof of the wrong element and therefore we we submit the jury's verdict was improper as a matter of law and the judgment and judgment as a matter of law should have one reason we know it is wrong is because included in that amount is most of the four hundred fifty thousand dollars that was raised in the first offering that was used to repay hold not your honor and it doesn't for the reason set forth in the back bill case which we cited and that is backed all says that it is insufficient to say that all everything about the business is attributable to represent patients that go to something less about something other than the entire business in fact all the land seller was tud for misrepresentations and the and the plaintiffs was allowed to recover the cost of drilling new wells whereas the only representations dealt with the old wells  or the panel said you need to tie more specifically than that the consequences to the misrepresentations and mr behrens did not try to do that he admitted for example that some of those fines were used to repay old that now if if i am owed money by if i owe money to any way and i borrow the five dollars there would still be a hole if you will of all of that old repayment of debt that went out even if those programs were self sustaining in other words if the rest of the all of it on the basis that it was that it was damages but let me address more directly the evidence which bothers you about the self sustaining nature of those operations the plaintiff admitted that it had not only the windows based business i'm going to adopt the shorthand that's used in the briefs the windows based business on which e plaintiff's brief on appeal it says that the evidence shows that it was self sustaining and they cite to the revenues which totaled some six hundred twenty eight thousand dollars i'm now on scuse me page twenty three of the plainest brief on appeal and they acknowledge costs of some two hundred fifty five thousand dollars and they stay we have we have three hundred forty thousand dollars to play with the problem with that your honor is that there is no cost of goods sold in that calculation when you look at their financial statements for the year in question one nine hundred ninety seven and this is at excerpts of record page three sixteen you find expenses and one of the expenses is purchases cost of goods sold and it itself is three hundred fifty seven thousand dollars so it is simply not true even under the plaintiff's own evidence that business was self sustaining where the year for which they offer any proof which is nine hundred ninety seven thousand nine hundred ninety six is also included at least half of that year in the damage calculation and there was evidence that is really relied on by the plaintiff is mr barron statement that i wouldn't have raised or spent like for these representations there needs made essentially the same statement the trial judge rocket as being without foundation we did not of jacked through oversight to mr barron statement we've indicated to you but it came at the end of a dialogue in which the judge said i'm not going to let you allocate i think that's opinion testimony that you're not permitted and we say to you in the brief case that says  testimony should have been stricken you can regard it having been stricken so i concede for purposes of this argument that it's still in the record even though we believe it should not be but fact bill says it is not enough the expenses that we cite such as thanks for art for the lobby paying for the christmas party there is simply no way that all of misrepresentation was there something similar to that in fact all that we said was that there was there was no such you're correct there was no such statement there was a reading of expenses to the jury from a list as the proof of the damages the court of appeal on review looked at this and sa and i'm sorry i have a life this printout and i can't find the i can't find the reporter page site but by no stretch of the imagination can many of the expenditures claimed by bets will meet th is without foundation it is contradicted by all of the evidence concerning the not not the raised not the raised the raised part is irrelevant it may well be that mr behrens would not have gone out and on behalf of the company borrow this money unless he had those representations that the jury found were incorrect but thus expenditures there was an existing ongoing business which demanded rent every month which took art for the lobby which took a christmas party for the employees there is no causal nexus certainly not in  words with a good deal of certainty between such expenditures and any representation by compa count against compacts account because some of them were contractually required we point out in the brief that there is arizona law that says you cannot claim that you've spent in reliance on a misrepresentation and the amount you were required to spend any way and we have shown you in the brief that there are several such expenditures for hundreds of thousands of dollars all within that three point two four five million dollars the only way you get to that total is by counting them and under arizona law you're not allowed to jail the contract required contract between compact in the plaintiff require those expenditure use an excuse me and the contract notwithstanding the misrepresentations that were found was up held it was in force art counterclaim under that contract was granted by the judge to the tune of three hundred thousand dollars i'm running out of time i'd like to turning object to the damages instruction did you there was let me deal with the pre judgment interest in interest question and obviously if we're talking about this we're doing it only because you rule against us on the issue that we've talked about  even if you find that there is some way to tell how much convenient automation spent during the damage period that's not enough to award prejudgment interest on that amount you must also conclude that those  damages can be computed based on the evidence of course exactly without opinion or discretion under the arizona law and i obviously  do not know how you would get to finding that the damage you were proved at all and so i can assert with certainty that you could do so finding that they were sustained exactly without opinion or discretion but you need to examine that question if you decide against us and the term and that has been proved in addition that's one hurdle there's another hurdle you also must decide that plaintiff gave compaq data to support and document the calculation of its client because interest doesn't begin to run pre judgment interest doesn't begin to run and arizona law until that occurs the plaintiff relies on one and only one submission for that and that is a letter in which compaq acknowledged the plaintiff's claim receipt of a claim from the plaintiff the compact is responsible for quote responsible for the three point two million dollars in that convenient automation chose to take on that's a page seven sixty nine of the excerpts of record and that isn't enough for the reason that i do out on in the first part of my argument which is that the amount of debt the plaintiff chose to take on is not the measure of damages and therefore telling us the amount of that that they chose to take on is not telling us giving us the information from which we can calculate with precision without discretion the amount of their damages your honor i don't think i'm going to reach my third point because i would like to reserve time to yes and i respon well morning your arse and may please the court my name is scott being in from phoenix representing plaintiff convenient automation as you probably know from reading the briefs in the record in this case i'm new to this case i was in hired after the trial and in fact after the briefs were written that's only significant because my introduction to what this case was about  went and got the transcript and read the trial and found out what happened at trial and realized that they have left out all of that stuff as paul harvey used to say on the on the drive time radio the rest of the story if you will  the jury here certainly knew the rest of the story and judge here borg certainly knew the rest of the story what they are the defendant is in essence asking this court to do is retry the facts of this case on part of the facts spun the way the defendant wants you to spend them well to cut to the change there wasn't much damage evidence right there was less damage is evidence then was intentionally intended however when judged to bourg made the ever danger ruling regarding the accounts testimony he specifically pointed out on the record that the financial records that had by that time already been admitted were the best evidence and there was no real need to have the account come up and read to the jury what these various entries on the financial records say especially in this this was picked up on of course that his testimony alone would be sufficient to put down all of their damages arguments in addition to his also gary hubbard who was the day to day president of the corporation the founder and who also testifie there's a little bit of a setup here their essential argument is that these private offerings raised three point two four five million and that that amount was not spent on the stuff related to the windows the the current the contract with compaq very hubbard testified during his cross examination that approximately initially when the first compact work was done about ten to twenty percent of their work was still at that time being devoted to dos and then that trickled out to virtually nothing as the time expended the significance of that regarding the damages is the defendant has extrapolated that testimony  twenty percent of the of their time was devoted to dos and therefore the expenditure of the three point two four five million or could not have all been their fault because some was related to dos problem with that argument the fundamental problem with that argument there are several but that the main problem is it's a shell game what they're not telling you and it's nowhere in the opening brief as of the early in the in the financial records that were given to the jury the total revenue for com are for convenience during this time was not the three point two four five million that's just what was a pain and spent in reliance on the fraud and misrepresentations of the defendant and keep in mind they are not at all on appeal but they did not commit the fraud of the misrepresentations what they don't tell you me is that another one million dollars was raised in one nine hundred ninety seven alone this is reflected on exhibit one fifteen given to the jury discussed with the jury the revenues and sales of doest stuff which were the only sales made at that time was seven hundred three thousand it was a common stock purchase of fifty two thousand a in capital of one hundred eighty nine thousand and a loan from a shareholder of one hundred three thousand this told us a million forty seven thousand dollars in additional funds into convenient during one nine hundred ninety seven now this is through the whole time was spent on just what even if you give them the benefit of that which i don't think the evidence supports but if you give them that whole benefit we're still ten percent above that there's a lot of the four point two million total of the of the what came  separate from the the private offerings and the private offerings still puts you after you take out the entire twenty percent four hundred twenty grand to the good that judge greenberg or specifically to your question about self sufficien yeah and i'm not sure if that was hubbard's i thought that was bare as they made me both have covered that the significance of that your honor and mr bates brought that up during his all argument or during his opening argument wa specifically told the jury explain to the jury actually that he was told by at the time he was just raising money for this other company and both the a who they conveniently overlook in most of their brief specially regarding the punitive damages stuff he was the bad guy here he told barron's that he needed to get involved personally in this operation clean up the management get things cleaned up and get ready for a rapid move forward start hiring people but they also forget to tell you in their opening  oral argument is that the initial four hundred fifty thousand dollars was raised in june or the offering was in june so assuming the money came in fairly shortly thereafter we're talking summer of one thousand nine hundred six the porting agreement the work for these people the ramping up for these people began four months earlier so a lot of debt in the jury knew this is all this is not even debated the jury knew that for four or five months prior to the four fifty coming in they were ramping up and doing which for fifty was spent on this and the two million seven ninety five second offering and that was told to the jury the first day it was repeated through the trial and it was told in the closing arguments by my  i specifically told the jury that our actual damages were just what i told you that the entire offering money the three point two four five was spent in reliance on the lies and misrepresentations of pierce involving he said that's the only reason that he brought in investors to this operation it's the only reason that parents personally got involved at their insistence it's the only reason the parents who was the authorizer that's the right word he was the person who had authorized testimony was that convenient started this work continue this conversion work solely because of the contract with compaq they understood that windows was eventually going to be coming down the road that they had no immediate plans or frankly finances to do the transfer or the conversion porting work themselves the distribution and licensing agreement is also significant but again they don't tell you about this and the direct sales that we were going to get the benefit of the problem that is forceful still have to give them a cut of the proceeds until we pay them their three hundred thousand dollars back under the docking agreement and more importantly most importantly fundamentally why we're all here today is because we never got the sales they yank the rug out from under thi before we even got to any benefit to us or frankly them they make the same argument regarding the programmers that's there were some of the of the thirty six eventual programmers that were hired in sales people some of these folks were doing asked this to hubbard during his direct testimony forced into their argument that the three forty five wasn't all sprint hubbard's response was to to the question of answer das questions but there weren't very many of those dos questions because dos was up and running this was january fourteenth trial customarily beginning on page one the jury knew all about this the jury heard their argument this is not new to us maybe the jury included the the little specifics maybe they didn't because under arizona law it doesn't matter all arizona requires is that the jury with reasonable certainty give damages a fair estimate of the i'd like to talk briefly about the the self supporting of the gospels that seems to be quite a bit with the argued about and judge graver you brought that up in your questioning you know if you take away hubbard's testimony that it was overall twenty percent and you actually look at exhibit one fifteen and take out all of the costs related to dos which is all the stables full benefit if you take twenty percent of everything else the total expense for the da stuff is five hundred ninety five das is still money ahead because as i've already discussed the records reflect the dot sales in court the rest of the story they had meant that and it's worth emphasizing that there are no evidence or issues here there are no jury instruction issues here there are no legal issues here it's all  this guy who's fraud and misrepresentations were suing was a liar clearly a jury question and they argued to the jury that that they shouldn't be although they are legally responsible for his actions that the jury should hold them responsible pre judgment interest in essence that rises and falls with their damages argument which is invalid for the reasons i've already discussed the standard for  awarding pre judgment interest as the gem star the ernst and young case which is actually a case that i had back in phoenix in in the late ninety's emphasizes that prejudgment interest is a matter of rights if the amount is located and the amount is liquidated under arizona law if they can be computed without reliance on opinion in discretion and i mention of the court previously our position from the get  o from before the lawsuit was even filed starting at the april second meeting when we told them that they owed us the three point two for our reliance on their fraud this was confirmed by them in april thirty ninety eight as validated by the the exhibit one fifteen and the other exhibits in the record that were given to the jury the jury could look at those holes all over there or you didn't and that's why the jury found in our favor and that's why they gave the specific amount evidence we actually don't disagree with him on that but we do disagree with them about what they show for nine hundred ninety six they show nothing because there is no one nine hundred ninety six financial statement total cost of sales are shown as six hundred eighty six thousand dollars they are not the two hundred fifty five thousand dollars that counsel mentioned in his argument and again most of the difference is that the things that he counts as expenses do not include any of the purchase price of the goods that they resold in the expense to course when they resold them he mentions that the prior he mentioned that there had been work in connection with the compaq program prior to that first offering and maybe that's where some of those old that's came from i don't believe that's factually true but i'm not going to try and unwind the record in that respect i'm going to point you instead to the fact that the only damages that they can get by things that they spent in reliance on misrepresentations by compaq not anything to do with compa and judged ruled that the first misrepresentation that they could try to prove was one that might have occurred on the twenty ninth of may you'll find that in his pretrial order  at page fifty one of the excerpts of record so if there were debts incurred prior to that date because of some expectation of working with compact they were not incurred on account of any misrepresentation because joe hill board ruled that no one could know no such representation could be proven at the trial we actually did quibble with the instruction that was given as to punitive because we believe that it should have said that there had to be an element of outrage so miller to that usually found  crime and we drew that from the rawlings case which is an arizona case in the restatement second of torts and we believe that that is the correct standard and i can't argue the evidence on that to you today but i can tell you that if you look through that you will find that what caused the damage to the plaintiff here yes that compact program was canceled and they were set adrift but it wasn't only the cancellation of one program the entire division of compaq under which this program and many many others were sponsored was like you know invited out and they convinced the jury that they'd been misled and they'd been assured that nothing would happen and this was all a fraud on them i commend to you that record because i think that when you go through it you will find that this is nothing more than their their own private placement memo said it what you might expect if you start dealing with a large company these things can happen there are no guarantees that's what their private placement memo said and that no matter what you find you will find