on my name is richard gaines and i represent the plaintiff appellants in this case i very much appreciate you all and me to argue today that was it was my fault we're looking forward to hearing thank you your honor that this case was originally brought the western district of tennessee it is somewhat complicated in its facts it is a case by the investors against companies and individuals chiefly for inducement of fraud fraud in the inducement and that case was brought in western district to see transferred by judge lippman there of the southern district of new york workers before judge crotty judge crotty after hearing motion middle district of tennis a fraud in the inducement is separate from a derivative claim as a partner and they project if this is a direct claim you're saying fleischer honor it is i'm not i didn't hear the first part your question i'm sorry i'm sorry i asked in the middle district of tennessee there is law that says isn't derivative jonna because our client suffered direct damages were under the new york standard under cap continent casualty that we're using right here and so the new york standard in the new york law based on far in the inducement by individuals  companies to our clients prior even to the investment firm being fully funded and how those damages differ from the damages they suffered derivative like you are that's that's the question that's the exact question i'm going to answer and that's what judge pro we say the individuals and companies that we've sued not only in documents induced and verbal and directly verbally and it's our complaint and should be taken as true induced my clients to punitive class to invest in the investment and met thirteen which is the investment company who later subsidize things out but i don't know assets at all when they put their investment so how do we measure damages but your honor at the damages are exactly the amount of money that we paid in to that investment company met thirteen did have value unlike what judge crotty stated it had value because it was under a contract under a confidence disclosure memoranda yes and a subscriber agreed and it had and the intent of the investors was an expectation that met thirteen would carry on with either developing the oil and gas reserves or selling the property for if we agree with you and you say the measure of damages is what you put in on the day you bought in to this deal would you also get derivative damages as limited partners because you can't double count that's exactly right that's exactly right that is one of the distinctions and can't you know casualty it's from our case there were prior suit on behalf of the partners and on behalf of net thirteen that were all settled there is a settlement agreement and there's orders by judge surewood on that and there is a release for some of the parties however we're our individual rights for direct damages are not released that those when you have to set off whatever you got in the s absolutely your honor we didn't get a pin from the settlement we are us investors unlike cardinal casualty were it was clear there was an issue of whether the investors were going to double dip because the trustee was also conducting an investigation in this case that st all over the only way for us to recover anything and we've not recovered a pinny of what turns out to be an absolutely worthless investment is to get is to have this claim of a fraud in the inducement even prior to thirteen really  think you said a moment ago that there was a settlement with these defendants no the and the and the and the partnership there are no our clients my  the investors that i say that they did not settle anything i meant and that i didn't ask you that i asked with the partnership itself entered into a settlement with some or all of these defendants your honor the manager of that part yes met thirteen in part may have settled with some of the other parties they may have well it's not one i'm sorry there's a factual question in the record of whether mr releases exchanged leases works changed by the partnership and it was a general release from lawsuit pretty broadly actually by the general partner and others from thirteen but he didn't have the authority to release these individual claims by way of the conscious c subscriber agreement on page one joint appendix page a seventy seven a seventy eight did he prepared to i don't believe he did your honor i think there is a question about who signed what at the time of the settlement agreements and whether mr pro rata share based on a derivative claim then we don't have to subtract that from our direct damages or we would have no lawsuit but there is nothing like that and mr les in fact the manager under a seventy seven a seventy eight in the joint appendix that's the c d n that describes his power of attorney he would have had to get special permission from the investors themselves my clients to give our release to any kind of lawsuit based on our direct damages moreover our direct images occur the partnership check is to the partnership yes your honor met thirteen and we have given that we have expectation of value because we have a thought about what that country is going to write and met thirteen's a partner has some of the already power of more about what mr les siac knows the manager he is barred from talking to us your honor he's barred from talking to us the prior lawsuit has made it so that he is concerned about his own liability there's a clause that says he cannot encourage lawsuits we needed to post casualty is different because of a lot of reasons one there was at first the sky which is a claim for us to there was distorts discovery plenty of it in that case determined damages three there were two parallel cases going on in the plainest with what they were going to double dip and that's not the case in this case and for i know there's a fourth distinction but there is a lot of distinction we have there's a lot of things connel casualty we agree with we agree with that case but it's distinct from this case so we're certain simply our direct fraud prior to mint thirteen true enough probably it is extremely important that we talk to the met thirteen manager and get more information to deposition settlement that you say may or may not have taken place if it took place what would be the tunes i don't know if the terms matter because he never had the authority to get tickets to waive and i understand that that's just to deal with things that don't matter what with the terms that i can only speak generally to the terms it did it was a what was termed english as a global settlement release that sure we put in or trying it was all money money did not come to us money did not go to met said sometimes they get money and the question is did they get money and if they got the money and they didn't give it to the investors you may have a claim against my better team yes that could be true if that were the case if they receive money that we don't know about yes asking for a lot of other things like expectation of profit management fees we're not asking for that we're just asking for our direct we wrote into the phone back we want to money preserve rebuttal one minute your thank for a police defendant's istream holdings and all accounts i have in front of me the language to which opposing counsel alludes from continental casualty and you have to tell me why it doesn't apply in this case neither party disputes they said in twenty one i believe that plaintiffs as limited partners of a partnership may assert a direct claim or fraud in the inducement why doesn't that make their claim direct instead of derivative your honor judge who or that is the relevant language in the relevant language is whether or not at the time of investment there are certain claims that they have at the time of investment because here counsel in papers below as expressed we waived any claim after the date of investment the second in the language in the briefs as something to the effect of after the check was written we have no claims so what happened at the date of investment and that's what they invested they had the claim but they didn't have a claim your honor what the what the private placement memorandum and next to the complaint here says and what counsel admits in their papers below in the brief page nine that's under strict documentary sixty five is women this is not just derivative it's doubly derivative but maybe that thirteen was going to work as set forth in the private placement if they were going to lend money at twenty percent plus to not present to their manager to read energy l l c read energy was then going to do due diligence as the private placement service as with the general partner with thirteen do due diligence and then decide whether or not to acquire these assets the shell rights you mentioned there was an option contract for twelve million for the shell rights they did due diligence the court for three million why weren't these contracts worth something they didn't have not there was no closing on this until january fourth of twenty twelve the investments were december of two thousand and eleven with the property i've met there to know they were not the property thirteen who had the ownership of these contracts the option contract first of all there were there were no ownership of any contracts for the deep rights the shell rights was an option owned by s g m at that time on january fourth two thousand and twelve well after the invested there was a closing at which time the option contract was transferred and given the option contract was to buy the shell rights for twelve million dollars and they to do instant decided it wasn't worth twelve million dollars i would respectfully submit that it wasn't worth much if not worth probably negative since at that point you have an option worth nothing these these investors invested based on the assumption that it would be due diligence by read they'd be due diligence by the general partner of met thirteen they would decide what to invest they ended up not investing in some of the deep rights they ended up buying the shallow operation for twenty five percent of what the option was for they and not all the components of the show operation they bought just in ohio and i don't highland west virginia i think they left off five license for investing in something they were investing this is like a open ended that we found they were investing in the intelligence of their fund manager to find great investments and to do due diligence on those investments and to have their in and to appoint someone to run read energy to find those investments and who knows what what i'm hearing is judge who ask you why there would not be a claim for fraud and you do this but at the time that your was written and everything you said after that is explaining why such a claim would be in wrong unsupported and everything else but could go back to that question there were no assets as of the date of investment thirteen had zero assets it didn't have a contract you didn't have any rights what what if purchasing something with no track record what europe what this court has called as you know inherently speculative investment school land which has never been drilled for well guess what i'm hearing there's no asset there's no contract not really answered why it is that there cannot be a fraud in the inducer i think you have to admit there can be fraud in the deuce when calling for an investor in limited partnership if the freud sucks the person into the investment says if the plaintiff can show that what they purchased was overvalued there's a portfolio that was overvalued at the time they have a claim i suppose it's everybody that invested thought that they were buying an oilfield that was going to make them rich they didn't think we're just giving money to fidelity and fidel is going to be smart and put it in good stocks they had a specific plan that had been disclosed there is alleged fraudulent right they had a plan whereby there would be due diligence after investment with the money scanner through investment to determine whether it was worth buying these things and i thought it says a sixty six sixty seven there would be due diligence afterwards to see things things are worth something at page sixty six the c d m a explains by investing in net thirteen the limited partners were purchasing a  investment and equity interest in read l l say they purchase something an entity which is not operating is not purchasing anything they are purchasing fifty two percent of read and if you continue to if seventy four it says before there are any investments by read read operation that's what it says in a seventy four so we sign up or operating at that point it's after words so we are doing is they're investing in the hope and expectation that not gonna be partners the founder and the thirteen would do something right in the future and i will i will note one other thing we heard today the claim that when we have a claim against net thirteen or know it is absolutely agreed that the time they invested there was nothing there was no portfolio it was absolutely great read wasn't operating that's in the private placement of c d s it was absolute greed that they were going to be due diligence before they bought anything that cain had was the value related to the specific opportunity described there in the opportunity to hold the destiny dept investment an equity interest in the shallow and deep because a contract will allow you to do due diligence and may allow you to withdraw but if you want if you do your due diligence and you satisfy the contract a contract can allow you to do that the we didn't have a to the extent to the extent they were paid anything they have the proceeds you you negotiate it so you can you tell me to the extent they got anything you know the extent to which they gained s they didn't get money we got money they got certain rights and we gave up equity interest in thirteen we have forty percent equity interest and we have forty percent equity interest and read which we gave up for in interest in thirteen in the when there was a sale of acreage that was twenty eight dollars a barrel oil is an inherently speculative quantity and when you're talking about land which is never been drilled and disputes among partners whether you spend the money drilling or spend the money doubling down and buying another instead of six thousand acres in the stadium thirty five thousand acres which is what it was a set of you're going to have disputes as to whether in fact the what it was worth and ultimately as well as for conspiracy between the defendant runner if if they have made an agreement to commit fraud that our claim would have been a conspiracy based on and i'm more of a federal criminal just want to make clear yes  not the rico crime your honor i think that there could be plenty of other legal issues that have and have were not decided by judge broady that could be decided by the district court but some discovery and i want to come back with some discovering clearing the manager remember one thing is as we talk here that met thirteen's manager was never he never talked to us we never were able to talk to him he essentially had a gag order we never deposed him so whether he's a target of of us of amended complaint or not we believe not we believe he was the subject to fraud as well and helped transfer that fraudulent intent on to the investors music you use victim fraud yes you're right we believe at this time based on what we know that he was a victim rather than a proponent of the fraud so we didn't sue him put a footnote down and said that he would like he likely thought the global sort of agreement might actually encompassed this dismissal as lawsuit and i counted today already with that by saying that they that the manager and the companies that were involved in it global summit did not have