good morning may please the court i'm theodore j butros jr representing the appellant's today i'd like to focus on three main points first this case should be dismissed for lack of subject matter jurisdiction and the findings in judgment below should be vacated second even if there were subject matter jurisdiction that just report committed legal error by invalidating as an unlawful penalty the three point eight million dollar fee that we submit was expressed the authorized by  the nevada revised statutes and finally at a bare minimum the court should reverse the just records finding as legally erroneous regarding success or liability let me begin with the jurisdictional point because that's the threshold back at least to the mid one nine hundred seventy s by decisions from the u s supreme court by other circuits and by the district courts ultimate ruling in this case which is on page four forty four of our excerpts of record where the district court said that he was unable to find any case where a bar or in a commercial loan transaction i had been able to bring the securities claim based on the loan transaction itself and that if any transact anyone had a claim it might be the investors who went through purchase the secondary fractionalized interests that were sold and bundled together as separate instruments in addition the plaintiffs in this case the plaintiff doesn't land did not have standing as a purchaser for seller us that transaction bears in the feeding the close resemblance to a mortgage on a home they needed money to buy property they came to my clients and borrowed that money and then the prop the loans were secured by deeds of trust jurisdictional fact of the existence of the security were not present in this case there was no federal jurisdiction and is this court held in the herman family revokable process case because there was not a hook for federal jurisdiction to begin with there was no jurisdiction over these seventeen supplemental claims including the supplemental the one claim upon which the district judge found in favor of desert land the plaintiffs one of the issues i wanted to address is the question of the substantiality test and how it plays into this case the our position is that with respect to a jurisdictional fact whether or not there was an arguable basis that this was a security because standing to assert an equal protection violation as a citizen and clearly one it was proper to argue that certain statutes gave unequal treatment in an irrational way so that the threshold to be reached but the argument was that those claims the equal protection argue that that was meant to only apply to consumer credit card transactions and i think that is clearly incorrect the statute says is broadly worded and i don't think that the nevada legislature meant to hold allow any penalty at all to be imposed  fee to be imposed against the consumers but not just the fifty k did business people like mr bullah judgment land in this case so i think that the language is very clear and we believe that it was incorrect for the court to find that th report eight million dollars penalty fee was an unlawful penalty and against public policy because the only source of policy that anyone has pointed to is this nevada statute that authorizes these the charge allies or the related company and mr bullock and his company drafted the ultimate agreement in february two thousand regarding the three point million dollars penalty one of his staff members said that they found that amount acceptable in order to get the additional funding and then after the transaction closed within a week august and august thirty nine hundred ninety nine miserable looked at the thank you letter to mr she stuck in his company my client conduct amongst the corporations there's no allegation that that the corporate identity had any unfair fact with respect the plaintiffs plaintiffs and the district judge found there was no fraud claim that viable in any of this and  here the successor liability claim doesn't hang together as a matter of logic or law because g m and i took the company to whom the the the fifty three point eight million dollars was owed i who received  and and before any liability had been incurred so as a matter of fact it would have been impossible for best into assumed or incurred or for taking over those liabilities from the company because they hadn't come into existence before his judgment but this mentions that the company succeeded to some of the to the assets but not i think somewhere in the record i think a letter from the general counsel says that the  that the company that they're only be one company left standing or that the liabilities were transferred in and someone fairness would occur absent a finding of successful i village which which did not happen here appropriate you know and we will talk about professor miller's comments in his treatise and course of our discussion here today this case arises from the course of dealing that involves seriously misleading con diamond alone the record also shows the imperial on this loan was syndicated to a large number of ordinary members of the public who were investors this affidavit proffered in opposition to a motion for summary judgment in support of his motion for summary judgment described his concerns about making the airport loan which was the second one in one thousand nine hundred nine and i quote from his affidavit i was concerned that unless diamond was paid off i would have a borrower of almost fifty million dollars of investors money in speculative ventures without a track record of repayment to provide a level of comfort to my vester that i wish them to five of the supplemental exerts a record which demonstrate that over six hundred investors put up the thirty four and a half million dollars for the airport loan those are the notes that are at issue here as to whether they're securit raising the money this record clearly understood appellants never alone their own money to desert land they raised the money from investors by distributing fractional interest in the notes and deeds of trust in fact the notes were doubled down there was one note for thirty four and a half million dollars and a series of six now it's broken down to facilitate the distribution public distribution was the normal ordinary and intended course of business by appellants and it was the course of business intended to be followed that was followed with respect to both the blue diamond loan of the simple principles there is no question that with respect to both of these transactions desert land was the issuer of the no there is no question that the appellant's were the underwriters of the note who distributed them t the public as was intended there is no question these notes were securities the notes were signed and bore interest from and after august sixteenth of one nine hundred ninety nine i get invite the court's attention to  repayment of the blue diamond loan which was already in place three days before the loan was fine after as judge may have found in his finding other potential of lending sources in favor of getting this new closed and at a time when if they did not bow out to mr issue sticks to demand they would lose the whole airport assemblage opportunity that they had dick says you will make a four point five million dollar prepayment of the thirteen million dollar believe i'm alone within forty eight hours after the airport loan flows this or there will be a ten million dollars penalty and if you manage to make that one you will make a three and a half million dollar prepayment within one hundred business days or there will be a five million dollars penalty really negotiated counsel they did manage to make that first four and a half million dollar reduction and avoided the ten million dollars family they were not able to make the three and a half million dollar prepayment even though the loan listened to get under its terms within the hundred days and so the five million dollars penalty was negotiated was demanding and then was negotiated down to three point eight million dollars in pain now what is the simple essence of the securities claim the desert land c this case it wasn't appellants entered into the loan commitment on the airport loan august and took notes on aug sixteenth and conceal their intent to impose this panel lease on the preexisting long the wallander case the second circuit so held in the paula case where playing in each of those cases the claim was asserted by the investor that doesn't change the character of the transaction  may not but it may raise some standing questions and we can talk about that your honor there is the first point to be made on that is that the issue of standing under the burn ban case in the second circuit in of the blue chip chance can't change the case of the supreme court is not an article three standing issue is standing that is associated with proof of one of the elements of the offenses under the thirty four act that law is clear banker said to the corporation issuing the stock we will do this deal for a one percent fee underwriting fee and then after the deal has been marketed and when they're ready to close the banker says oh by the way the fee is five percent and the evidence is the allegation isn't the evidence is that the rover intended that from the beginning you made a misrepresentation to the issue jurisdictional issue in this case is really straightforward and is mandated by fifty five years of jurisprudence found in the decisions of this court consistent with the binding decisions of the supreme court was the securities fraud claim pleaded in it lands complaint sufficient to invoke the article three of the district court or to frame the question in the language of the decided cases was that claim so quote absolutely devoid of merit wholly insubstantial obviously scalia's opinion in one thousand nine that the district court simply never had subject matter jurisdiction over the action as professor miller correctly states in history is not in the briefs filed here sale of vestel does not give rise to admiralty jurisdiction that's one case and then she talks about the wall of the case in this case which entails quote the district court's discretionary authority to retain jurisdiction over claims the issue as one of the district court subject matter jurisdiction because the question of whether the case involved a security was itself a federal question the district court had subject matter yours diction first i invite this court to read the complaint in this case it is it exerts a record one we submit the court will find that in every respect it satisfies the requirement of a well well pleaded securities fraud  chief judge pro the night a motion to dismiss raised all the jurisdictional securities arguments made here he denied a motion to reach for reconsideration that raised all of those issues the trial judge judge may hand deeply experienced state court judge who had recently been appointed to the federal bench that night a motion for summary judgment made after the close of all discovery that again raised all the jurisdictional insecurities arguments here made by you claim here excuse me there and whether it has any merit i don't know that's nine exerts a record ages one fifty six fifty seven after six days of trial and after the parties rested their cases judge may handed four things with only four things first he ruled that the court had jurisdiction over the securities from playing second he exercised his discretion as part of that ruling he ruled that and established liability of defendant any defendant in connection with the federal securities claim you didn't say there was no security he didn't say there was no standing he simply said liability is not  third he noted in his or ruling not in his findings that this court in walbrook had held that the notes were securities that he referred to the fact that the plaintiffs in that case were investors and he thought that if there was a claim it would belong to the investors and not to the borrower that quote that incidentally is clearly incorrect if it constitutes a statement of the law that issuer does not have a securities fraud claims a matter of law because this court so held in rochelle against mary matalin and finally he found that there was no fraud regularly do some negligent misrepresentation or breach this last observation let me turn now briefly to the successor liability issue the accounts have discarded the village builders place is really immaterial to this case i invite the court's attention to the statements in village builders about what must be proven continuation of the business assumption of the liabilities associated with the ordinary operation of the business and the continuity of ownership those are all established in the record and under a village builder successor that they were bound by their statements made to the f c c let me turn briefly to the issue of penalty i asked mr hsu stick by the way the parents want to argue that this is a theory on money do or owing and that those kinds of fees are valid under an r s ninety nine zero five so let's see how mr shoes dick himself characterized this penalty in his testimony he already have a minimum understand i said you call it an insanity thieve by that you mean that this was a real hammer bullock didn't do what this agreement said he was going to get hit for ten million dollars answer yes question and that's what you intended when you came up with the fourth the of trust answer no i didn't intend hitting with a hammer what i wanted to do is him to stay to his word when lawyers are too stupid to raise that the judges are too stupid to have recognized it and therefore this court is not bound by those decisions to those are the most recent authoritative pronouncements of the nevada supreme court on this question and i respect federal court is bound as well as have contended by the controlling of that a law we respectfully submit that the judgment should be affirmed in all respects the jurisdiction is clear the penalty is invalid purchaser seller as a plaintiff then there is no jurisdiction in this case we believe the court should have resolved that at the motion to dismiss state or of the summary judgment stage and the fact that the court made that determination after the trial does not mean that the as it is aware that any point during the case even if no party has raised it on appeal in this court in the supreme court it becomes clear that federal law has not been implicated by the claim that the plaintiff does not have standing which they do not have there is no jurisdiction and then as this court held in the herman family case since i was no hook to begin with the federal jurisdiction there is no self or mental jurisdiction and under plaintiff's theory as long as the plaintiffs were able to keep the issue in play jurisdictional question of whether it was a security if they can obtain a ruling on the state law question then then it's ok but that that would exceed the power of the of the court to rule on the outweigh the argument is baseless the this court in the great western bank ruled that the subsequent or related transactions do not convert a loan transaction into a security be the bass case from the sixth circuit that we have started to talk about the thank you thank you they think we have that but we haven't ruled them the motion