[00:00:11] Speaker 03:
All rise.

[00:00:12] Speaker 03:
This court resumes its session.

[00:00:25] Speaker 03:
Please be seated.

[00:00:29] Speaker 07:
All right, thank you for your patience with our break and good morning and welcome back.

[00:00:34] Speaker 07:
So now we have three cases that are being heard for argument at the same time and we have.

[00:00:43] Speaker 07:
five attorneys who are going to be arguing.

[00:00:45] Speaker 07:
So this is how I think it's going to happen.

[00:00:47] Speaker 07:
And counsel, you can correct me and make sure we allocate this in the proper order.

[00:00:54] Speaker 07:
So I believe Mr. Cohen is going to argue first and he has 10 minutes and may reserve a minute for rebuttal.

[00:01:02] Speaker 07:
And then Ms.

[00:01:03] Speaker 07:
Singh will go second and she has 15 minutes, but may reserve five minutes of that for rebuttal.

[00:01:08] Speaker 07:
And we'll give you separate clocks.

[00:01:10] Speaker 07:
So you're not just on a 25 minute clock, you're going to separate this out.

[00:01:13] Speaker 07:
So your time will end and then Ms.

[00:01:15] Speaker 07:
Singh will get her time.

[00:01:17] Speaker 07:
Then I believe Mr. Hincky is going to argue.

[00:01:24] Speaker 07:
And he

[00:01:30] Speaker 07:
Okay.

[00:01:30] Speaker 07:
So Ms.

[00:01:31] Speaker 07:
Tartuffe is going to be the next one.

[00:01:32] Speaker 07:
Okay.

[00:01:33] Speaker 07:
And she has 10 minutes, then Mr. Hincky for 10 minutes, and then Mr. Fates for five minutes.

[00:01:43] Speaker 07:
And then if Mr. Cohen and Ms.

[00:01:45] Speaker 07:
Singh have in fact kept some time for rebuttal, we'll circle back up for their rebuttals.

[00:01:49] Speaker 07:
That's how you all foresee this playing out?

[00:01:52] Speaker 07:
All right.

[00:02:09] Speaker 03:
Thank you.

[00:02:23] Speaker 07:
Well, we could.

[00:02:24] Speaker 07:
This is a way that the clerk just laid out to me that you all had requested to do this.

[00:02:29] Speaker 07:
So now it sounds as if you're missing, you're suggesting something different.

[00:02:33] Speaker 07:
And I don't know if the others are on board with that or not.

[00:02:36] Speaker 07:
I don't want to just change the procedure at the last minute.

[00:02:39] Speaker 07:
So we have a plan.

[00:02:41] Speaker 07:
We've read all your briefing.

[00:02:42] Speaker 07:
We can sort this out.

[00:02:44] Speaker 07:
So my concern is to make sure you each get your allocated time.

[00:02:49] Speaker 07:
And that's why you're on separate clocks.

[00:02:51] Speaker 07:
we can jump from case to case as we as we need to.

[00:03:07] Speaker 07:
Okay, so what you're suggesting, Mr. Cohen is you would argue first, who would then and who would respond?

[00:03:13] Speaker 07:
Miss charter?

[00:03:15] Speaker 07:
And dismiss chart is she only responding to you or is she responding and other arguments only?

[00:03:20] Speaker 07:
Okay.

[00:03:21] Speaker 07:
So Mr. Cohen would have 10 minutes, possibly one minute reserved for rebuttal.

[00:03:27] Speaker 07:
Then Ms.

[00:03:27] Speaker 07:
Chardoff is going to argue for 10 minutes.

[00:03:29] Speaker 07:
Then Mr. Cohen's rebuttal.

[00:03:31] Speaker 07:
That's what you're proposing.

[00:03:32] Speaker 07:
Then we would move to Ms.

[00:03:34] Speaker 07:
Singh with 15 minutes, five possibly for rebuttal.

[00:03:40] Speaker 07:
Mr. Hincky and Mr. Fates both taking their time to answer and then returning to Ms.

[00:03:47] Speaker 07:
Singh for her rebuttal.

[00:03:48] Speaker 07:
All right.

[00:03:49] Speaker 07:
Is everybody on board with that?

[00:03:51] Speaker 07:
Okay.

[00:03:52] Speaker 07:
All right.

[00:03:52] Speaker 07:
Then let's start with Mr. Cohen.

[00:04:04] Speaker 01:
That was the most difficult part of them.

[00:04:07] Speaker 01:
May it please the court, I'm appearing on behalf of Ovation Fund Management, an investment company.

[00:04:14] Speaker 01:
Ovation challenges a ruling in the receivership action that bars the company from pursuing fraud claims in the state court against appellee Nosiman, a law firm that advised Ovation that it was safe to invest in a company that it turned out was operating a Ponzi scheme.

[00:04:30] Speaker 01:
While Ovation's investment fund recouped its investment from one of the Ponzi participants, Chicago Tidal,

[00:04:36] Speaker 01:
Ovation itself lost $35 million in management fees when unrelated in-vet clients withdrew their money from other funds that Ovation was managing.

[00:04:49] Speaker 01:
And it's Ovation's state court action, which has been enjoined, seeks to recover those funds from Nassim.

[00:04:56] Speaker 01:
Now, if I understand correctly, Nassim's position is that it should be immune from liability for its fraudulent conduct, even though Ovation's claim was not an asset of the receivership.

[00:05:07] Speaker 01:
And even though a judgment against Nassim would not have to be paid out of funds that the receivership is collecting on behalf of defrauded investments.

[00:05:15] Speaker 01:
As a matter of law, Your Honor, that position lacks merit.

[00:05:19] Speaker 01:
And the reason is that in receivership actions, courts do not have authority to bar third-party claims like ovations.

[00:05:27] Speaker 01:
If they are claims the receiver, him or herself, in this case herself, could not have pursued,

[00:05:34] Speaker 01:
And if the funds and if the lawsuit, the state action seeks funds, the receiver does not seek funds, the receivership could distribute it on behalf of defrauded investors.

[00:05:47] Speaker 01:
In this case, the simple and dispositive fact is that the receiver could not have pursued a claim to recover Ovation's lost management fees.

[00:05:57] Speaker 01:
Only Ovation has standing to pursue that claim.

[00:06:02] Speaker 01:
And if Ovation is successful in that claim,

[00:06:04] Speaker 01:
and recovers those management fees, those fees would not be shared with defrauded investors because they are not proceeds of the Ponzi scheme.

[00:06:13] Speaker 00:
It seems to me the question here is whether if Ovation was successful and got some sort of recovery from Nasimun, could Nasimun turn to ANI or the receiver standing in the shoes of ANI and try to recover for the

[00:06:31] Speaker 00:
the amount it had to pay ovation.

[00:06:33] Speaker 00:
And is there a possibility of that happening?

[00:06:36] Speaker 01:
No, there's no possibility because under California law, that sort of indemnity action would be barred by 11 USC section 524 E, which provides that- Well, that's not California law.

[00:06:53] Speaker 01:
Wait a minute.

[00:06:54] Speaker 01:
And if you're talking about indemnity- I come to the wrong tab here.

[00:06:58] Speaker 01:
I apologize.

[00:06:59] Speaker 01:
I was actually referring to Code of Civil Procedure Section 875D.

[00:07:04] Speaker 01:
which provides there should be no right of contribution in favor of any tortfeasor who has intentionally injured the injured party.

[00:07:14] Speaker 00:
My understanding is that the allegations that Ovation has made also encompass negligence, which is lesser than intentional.

[00:07:22] Speaker 00:
That wouldn't trigger that provision of California lawyers.

[00:07:25] Speaker 01:
Two responses to that, Your Honor.

[00:07:27] Speaker 01:
First, in order to prove negligent misrepresentation, it's not just negligence, but misrepresentation,

[00:07:33] Speaker 01:
It includes an element of an intent, an intent to do reliance on facts one has no reason to believe are true.

[00:07:41] Speaker 01:
So that we believe that Section 875D would apply that as well.

[00:07:46] Speaker 01:
But more to the point, Your Honor, if the negligence representation claim would open the door to an indemnity action in Your Honor's view,

[00:07:53] Speaker 01:
Ovation would be willing to dispense with that claim and proceed only with its fraud claims.

[00:07:59] Speaker 00:
How do we deal with that now in dealing with this appeal?

[00:08:02] Speaker 00:
I mean, we sort of take the litigation as it exists and try to figure out basically, is there a way for fingers to reach back to the receivership pot of money?

[00:08:12] Speaker 00:
And if we conclude that there is the possibility for that to happen based on the allegations and the claims as they exist,

[00:08:19] Speaker 00:
How would we imagine this case to be something other than what it actually is right now?

[00:08:24] Speaker 01:
I think the court can take a representation by counsel that that claim will no longer be part of the case and accept that as the current record of the appeal.

[00:08:34] Speaker 01:
But the court can also look under the term negligence at the more operative term misrepresentation and conclude, as we explained in the brief, that this really does include an intent element.

[00:08:48] Speaker 01:
If you look at the allegations in the complaint that spell out exactly what that claim consists of, it's one intentional act after another.

[00:08:58] Speaker 01:
And we think that would bring into operation the prohibition against indemnity claims by one intentional tortfeasor against another.

[00:09:08] Speaker 01:
I might say that in respect to that principle, there was a California case, a court of appeal case in 1993, the Baird case that my opponent relies on, that said one intentional torturista could pursue a claim against another.

[00:09:24] Speaker 01:
But in our view, that rule has been, first of all, it's dubious validity given a section 875D.

[00:09:34] Speaker 01:
But more to the point, it's inconsistent with the U.S.

[00:09:37] Speaker 01:
Supreme Court's decision in the B.B.

[00:09:39] Speaker 01:
vs. County of L.A.

[00:09:40] Speaker 01:
case, which makes quite clear that an intentional tort visa under no circumstances can reduce its liability by a proportionate share of fault.

[00:09:49] Speaker 01:
While that case involved Prop 51, which limits non-economic damages claims, each party is liable only for its percentage of share.

[00:09:58] Speaker 01:
The court said that

[00:10:00] Speaker 01:
An intentional tort visa could not reduce its share of liability for non-economic damages because the whole history of comparative fault in California

[00:10:10] Speaker 01:
on which Prop 51 was based does not include intentional tort feasors.

[00:10:15] Speaker 01:
And we submit that were the California Supreme Court to address that issue, it would endorse that position.

[00:10:23] Speaker 01:
It would reject the position that the Court of Appeal adopted and bared.

[00:10:29] Speaker 01:
We think the dissenting opinion and bared presents a more cogent argument and explanation.

[00:10:35] Speaker 01:
As far as the negligence claim, Your Honor,

[00:10:37] Speaker 01:
As we said, we believe you can deal with, the court can deal with that in several ways.

[00:10:41] Speaker 01:
One is to look at what the actual allegations of the negligent misrepresentation claim are, which do allege intentional misconduct by the Nausman firm, not only in connection with the way that claim is defined in the Casey instructions.

[00:11:04] Speaker 01:
Let's see.

[00:11:08] Speaker 01:
It's Casey 1903.

[00:11:11] Speaker 01:
Makes clear that one has to prove an intent to induce reliance on facts one does not believe.

[00:11:17] Speaker 01:
That's an intentional tort.

[00:11:21] Speaker 01:
It is a form of misrepresentation.

[00:11:24] Speaker 01:
And I might add that my opponents point out that that claim is probably barred

[00:11:29] Speaker 01:
as a matter of law by the statute of limitations.

[00:11:31] Speaker 05:
You're using words like probably, but that still will require the executor or the administrator to litigate the issue potentially.

[00:11:40] Speaker 01:
I suppose your honors could write an opinion that said, yes, the only claim that can be barred is a negligence claim at which point

[00:11:51] Speaker 01:
ovation would be free to drop that claim and then proceed with whatever instructions this court provides and the remainder of its opinion.

[00:12:00] Speaker 01:
That would be a way to address it without overturning the, you know, without endorsing the entire bar order, which is- Does the law indicate that we have to go or that the district court had to go claim by claim as opposed to action?

[00:12:13] Speaker 00:
I mean, the district court's order seems to go action by action and decide if there's something in this action.

[00:12:19] Speaker 00:
that could trigger the receivership assets or, as Judge Ebell just talked about, the requirement to litigate, to assert the receiver's interests.

[00:12:30] Speaker 01:
Well, the district court found that both claims could proceed.

[00:12:36] Speaker 01:
It found that, under Baird, the fraud claim could proceed.

[00:12:42] Speaker 01:
because there was negligence alleged as an aspect of a negligent misrepresentation, that claim could proceed.

[00:12:49] Speaker 01:
So it did analyze it on a claim by claim basis.

[00:12:52] Speaker 01:
I see my one minute rebuttal will be exhausted unless Your Honors would like to ask further questions on those points.

[00:13:03] Speaker 01:
I'll reserve whatever remaining time I have.

[00:13:05] Speaker 07:
Right.

[00:13:05] Speaker 07:
Thank you.

[00:13:06] Speaker 01:
Thank you.

[00:13:08] Speaker 07:
So now we have Ms.

[00:13:10] Speaker 07:
Chardoff for 10 minutes.

[00:13:18] Speaker 08:
Thank you, Your Honors.

[00:13:19] Speaker 08:
Hannah Chardoff on behalf of Nasimin and Marco Castales.

[00:13:23] Speaker 08:
Ovation claims that its litigation against Nasimin, including its attempt to undo this bar order, will have no impact on the receivership or any investors.

[00:13:33] Speaker 08:
That is wrong.

[00:13:34] Speaker 08:
If Ovation is allowed to proceed with its litigation against Nasimin, the receivership entities would face claims for contribution and indemnity, which are different things, which would be costly and time consuming.

[00:13:45] Speaker 08:
As of the receiver's last status report, there's $9 million remaining in the estate that is being held for these litigation risks.

[00:13:54] Speaker 08:
The receiver recognized in her business judgment that there is a risk of contribution and indemnity claims from NASA men, and that is on that basis, and the exercise of her business judgment that she settled with NASA men and requested the district court to enter the bar order in this case, and the district court granted that bar order.

[00:14:15] Speaker 08:
finding that it was necessary to protect the res.

[00:14:19] Speaker 08:
This court reviews those findings for an abuse of discretion and should therefore affirm.

[00:14:25] Speaker 08:
I want to talk first today about the claim that Mr. Cohen just made that the negligent misrepresentation claims would be barred by 875D.

[00:14:36] Speaker 08:
I have not seen any case holding applying 875D to any negligent misrepresentation claims.

[00:14:44] Speaker 08:
And it's important to note that the text of 875 D says that the injury must be intentional, not the intent to reduce reliance, one can make completely truthful statements and intend for someone to rely on them and there's no intent to injure inherent there.

[00:15:02] Speaker 08:
But even if this court were to find that 875D applied, it does not address the intentional tort claims, as the panel already recognized.

[00:15:12] Speaker 08:
It also says nothing about the claims for potential for Nassim to raise indemnity claims.

[00:15:19] Speaker 08:
against the receivership estate.

[00:15:21] Speaker 08:
And while Mr Cohen addressed Baird, he did not address at all this court's binding decision in First Alliance, which finds that an intentional tortfeasor may seek a

[00:15:34] Speaker 08:
indemnity from another intentional tortfeasor.

[00:15:37] Speaker 08:
This court adopted the California Court of Appeals decision in Baird and it would not be able to make an alternative finding in this case without going on bonk to overturn First Alliance.

[00:15:49] Speaker 07:
I'm not sure that's entirely correct because

[00:15:52] Speaker 07:
You know of our case law that if there's intervening higher authority that is clearly irreconcilable, then we don't have to take something on bonk.

[00:16:00] Speaker 07:
And that is typically in the context of federal case law under Miller versus Gammie, but also when the state law has changed.

[00:16:09] Speaker 07:
So, we wouldn't be bound by a panel decision if it is in fact that the California Supreme Court would not follow Baird, if that's been made clear.

[00:16:19] Speaker 07:
We just published an opinion on this within the last week.

[00:16:23] Speaker 07:
When the state law changes from the time that a Ninth Circuit panel has addressed it, then that's intervening authority.

[00:16:30] Speaker 08:
That's a fair point Judge Beatty, but BB is not intervening authority in this case for two reasons.

[00:16:35] Speaker 08:
One, it's about a different statute.

[00:16:37] Speaker 08:
It's not about 875D.

[00:16:38] Speaker 08:
And two, it's not about an intentional tort visa trying to get indemnity from another intentional tort visa.

[00:16:45] Speaker 08:
It is again about a situation in which a intentional tort visa was trying to offset its claim based on the negligence of another tort visa.

[00:16:56] Speaker 08:
And that's exactly what was laid out in

[00:17:00] Speaker 08:
in all of the other authority that Ovation cites in its opening briefs, that it is a, the Allen case, et cetera, Baird is Baird and First Alliance are the only cases that anyone has cited in this case that involve an intentional tort user.

[00:17:21] Speaker 08:
trying to offset its claims against another intentional tortfeasor by seeking indemnification from another intentional tortfeasor and there's no doubt that that's the case.

[00:17:31] Speaker 05:
So it's your position that even with the consideration of that case that the law in California is an intentional tortfeasor may seek indemnification from another one at a discretionary level.

[00:17:45] Speaker 05:
I mean the court's not bound to it but that's the claim that could be made.

[00:17:50] Speaker 08:
Yes, Judge Bell, that under California law, there is no inherent legal bar to an intentional tortfeasor seeking indemnification from another intentional tortfeasor.

[00:18:00] Speaker 08:
And I think, again, it's important to remember that this legal question is pretty deeply buried in the abuse of discretion standard here, as the panel already recognized.

[00:18:12] Speaker 08:
the receiver, if would need to litigate this issue.

[00:18:18] Speaker 08:
And there would be litigation costs to trying to defend against indemnity action by Nausmane in this case.

[00:18:25] Speaker 08:
And that is the same kind of analysis that courts have considered, for example, in the Stanford International Bank cases.

[00:18:33] Speaker 08:
In Lloyd's, the court explicitly distinguished the Lloyd's bar order from the Coletta

[00:18:40] Speaker 08:
bar order in another earlier unpublished Fifth Circuit case to note that

[00:18:48] Speaker 08:
When the party who's getting the bar order, the Nasimun party, equivalent party in this case, if that party is a potential co-defendant of the receivership entity who might try to seek indemnification from the receivership entity, that that is a basis to uphold a bar order and a reasonable consideration for the district court to make when entering a bar order.

[00:19:16] Speaker 08:
in this case.

[00:19:18] Speaker 08:
I also want to discuss briefly Ovation's position that this claim is distinct.

[00:19:24] Speaker 08:
It is not distinct from the claims that it already settled.

[00:19:27] Speaker 08:
They are based on the same representations.

[00:19:30] Speaker 08:
They flow directly from the Ponzi scheme.

[00:19:33] Speaker 08:
The damages are different.

[00:19:36] Speaker 08:
Certainly these are out-of-pocket damages versus consequential damages that Ovation is now seeking to recover.

[00:19:43] Speaker 08:
But that doesn't make the claim different and trying to phrase it frame this as a different claim is exactly the kind of wordplay that the Fifth Circuit in the Stanford International Bank cases rejected as a basis for finding that a district court abused its discretion.

[00:20:03] Speaker 08:
in that way.

[00:20:04] Speaker 08:
And every investor is likely to have consequential damages from losing money in a Ponzi scheme.

[00:20:12] Speaker 08:
So this doesn't make ovation unique in any sense of the word.

[00:20:17] Speaker 08:
It, like many other investors, lost money in what turned out to be Ponzi scheme.

[00:20:23] Speaker 08:
It has those direct investment losses, and it also has additional consequential damages.

[00:20:27] Speaker 08:
And the receiver, as this court has

[00:20:31] Speaker 08:
held in both the Smith, the Arthur Anderson case and the Moser case has standing to bring litigation against.

[00:20:42] Speaker 08:
against people who are alleged to have been participants in the Ponzi scheme.

[00:20:47] Speaker 08:
And I want to make it very clear that at this point, these are unproven allegations.

[00:20:51] Speaker 08:
Nassim strongly contests the truth of those allegations and any facts, but even assuming that the allegations are true for purposes of this analysis, this kind of bar order is exactly the kind of bar order that the Fifth Circuit in the Stanford International Bank cases

[00:21:09] Speaker 08:
found was appropriate to uphold.

[00:21:11] Speaker 08:
And the parties seem to agree that the Fifth Circuit and the Tenth Circuit's de Young decision are really the governing authority and the most persuasive standard that this court should also apply.

[00:21:23] Speaker 08:
These are investors seeking to bring litigation against people who are alleged to have participated in a Ponzi scheme for losses that flow directly from their Ponzi scheme losses.

[00:21:37] Speaker 08:
And it's appropriate for the court to uphold.

[00:21:40] Speaker 08:
It's appropriate for the district court to issue a bar order in this case, again, based on the receiver's business judgment that this was the most appropriate way to resolve her claims.

[00:21:50] Speaker 08:
And this court should not find that it's abusive discretion in that case.

[00:21:58] Speaker 08:
The panel has no further questions.

[00:22:00] Speaker 07:
Thank you very much.

[00:22:01] Speaker 07:
All right, Mr. Cohen, you have a little over a minute.

[00:22:05] Speaker 07:
You have a minute and four seconds.

[00:22:08] Speaker 01:
The question is, can I make three points in one minute?

[00:22:11] Speaker 01:
We shall see.

[00:22:17] Speaker 01:
does is inconsistent with Alliance and contrary to opposing counsel's representation, BB does cite section 875, noting that it's notable that Prop 51 did not mention that statute, which has established a right of contribution in tort actions and expressly denied that right to intentional tort features.

[00:22:41] Speaker 01:
So I think if you look at BB,

[00:22:44] Speaker 01:
you'll conclude that it does overrule this court's reliance on Baird.

[00:22:50] Speaker 01:
As far as whether an indemnity claim would be costly, even if an indemnity claim were permissible, it's a claim that's based on equity.

[00:23:02] Speaker 01:
And under the Munoz California Court of Appeal case, if a claim lacks equity, it can be disposed of on a demurrer.

[00:23:11] Speaker 01:
So there's really no, we're not talking about a trial.

[00:23:14] Speaker 01:
We're talking about a claim that would be inequitable for the very reasons the receiver argued below when they opposed- Just because it's inequity doesn't mean you wouldn't take evidence on the issue.

[00:23:26] Speaker 01:
take evidence.

[00:23:27] Speaker 01:
I think that the evidence has been developed.

[00:23:30] Speaker 05:
Well, maybe, maybe not.

[00:23:31] Speaker 05:
From your point, yes, maybe, maybe not from the other side.

[00:23:35] Speaker 01:
Well, yes, but your honor, but if there is no merit.

[00:23:38] Speaker 01:
You have little time.

[00:23:39] Speaker 01:
Go ahead.

[00:23:40] Speaker 01:
The last point, in terms of whether the claim is derivative, I think the best way to analyze that question is could Ovation file a claim with the receiver to recover its

[00:23:51] Speaker 01:
lost management fees, which bear no relationship to investments that were lost by defrauded parties.

[00:24:01] Speaker 01:
Clearly, it could not make that claim.

[00:24:04] Speaker 01:
The reason derivative claims can be barred is because they should be made

[00:24:08] Speaker 01:
before the receiver and the equity court can then decide who among the defrauded parties gets the money.

[00:24:13] Speaker 01:
This is not money that was lost through an investment.

[00:24:16] Speaker 01:
The money that evasion invested was recouped.

[00:24:19] Speaker 01:
This is a business loss completely unrelated to any investments the company made.

[00:24:23] Speaker 01:
So I'll defer.

[00:24:25] Speaker 01:
I mean, I'll respond with those points and submit to your honors.

[00:24:31] Speaker 07:
Thank you.

[00:24:35] Speaker 07:
So now we're going to turn to Ms.

[00:24:38] Speaker 07:
Singh and you have 15 minutes.

[00:24:42] Speaker 07:
You've indicated you'd like to reserve five minutes for rebuttal.

[00:24:45] Speaker 06:
So keep your eye on the clock and please go ahead.

[00:24:49] Speaker 06:
Good morning.

[00:24:49] Speaker 06:
Rupa Singh for the Peterson Appellants.

[00:24:51] Speaker 06:
Mr. Peterson is here today and both of us thank you for the opportunity to be heard.

[00:24:55] Speaker 06:
I will reserve five minutes for rebuttal.

[00:24:57] Speaker 06:
There are three compelling reasons why this court should reverse the bar order.

[00:25:01] Speaker 06:
Number one, because the claims of the Peterson Appellants

[00:25:04] Speaker 06:
are non-derivative and independent, number two, because they do not affect the receivership rate, and number three, because the bar order is inequitable.

[00:25:12] Speaker 06:
I'm going to address these points in order.

[00:25:14] Speaker 06:
The number one reason why the claims are different, non-derivative, independent is because the receiver said so in multiple pleadings and repeatedly said these claims are different from the ones that are already pending in state court.

[00:25:27] Speaker 06:
not only the claims, but the damages as well.

[00:25:29] Speaker 06:
And it was successful in that position.

[00:25:31] Speaker 06:
Therefore, the receiver is not stopped from saying exactly to the contractor that the claims are related.

[00:25:38] Speaker 07:
But aren't these claims based on investments in the scheme?

[00:25:42] Speaker 07:
They are.

[00:25:42] Speaker 07:
And that's exactly what the investor's claims would be.

[00:25:47] Speaker 07:
They're all making the same claims for

[00:25:49] Speaker 07:
the investments in the scheme that we lost.

[00:25:53] Speaker 06:
If you look at the Stanford International Bank case, which has also been referred to as a Lloyd's case, the court there distinguished, the Fifth Circuit there distinguished two types of claims.

[00:26:02] Speaker 06:
There were claims that we bring brought against the underwriters.

[00:26:05] Speaker 06:
and DNO policies, and the employees and the officers were going to seek indemnification under the same policy proceeds.

[00:26:12] Speaker 06:
And so the Fifth Circuit said those claims could conceivably be barred if those parties have a right to participate in the distribution.

[00:26:21] Speaker 06:
But the extra contractual tort claims and statutory claims against the same underwriters for the same injury writing on the same transaction

[00:26:31] Speaker 06:
were not going to be related and derivative because they were bad faith denial of coverage claims.

[00:26:38] Speaker 06:
They were not going to come out of the policy proceeds.

[00:26:40] Speaker 07:
But that's not what we have here.

[00:26:41] Speaker 07:
Well, you know, we don't have like a malpractice claim, a bad faith claim.

[00:26:45] Speaker 07:
We don't have any of that.

[00:26:46] Speaker 07:
We have claims for people being duped into fraudulent investments and

[00:26:51] Speaker 07:
And what I understood your briefing to suggest was that there was something that was different because of some loan documents between the Peterson funding entities and the investors.

[00:27:04] Speaker 07:
But it was so unclear what those loans were and what it meant that would Peterson have any liability based on those loan documents that would be different from the investment liability.

[00:27:14] Speaker 06:
Right.

[00:27:14] Speaker 06:
And so let me address those two points.

[00:27:16] Speaker 06:
There are two types of claims, at least, that I want to give as an example.

[00:27:19] Speaker 06:
One of those is the guarantees.

[00:27:22] Speaker 06:
So unlike any other participant in this fraud who was defrauded, the Peterson appellants, Mr. Peterson and his trust personally in the trust guaranteed $100 million of loans that were then used to fund what turned out to be the fraud.

[00:27:39] Speaker 06:
Those personal guarantees are not exhausted by the MIMO settlements that the money in money out settlements that anybody ever sued them or tried to sue Peterson on the guarantee.

[00:27:49] Speaker 06:
Well, there were two actions pending in both of which there was an action pending by Bank of California.

[00:27:56] Speaker 06:
Chicago title settled that and got the sign.

[00:28:00] Speaker 05:
That is no.

[00:28:00] Speaker 05:
How about the other one?

[00:28:02] Speaker 06:
There are tolling agreements.

[00:28:05] Speaker 06:
There are seven tolling agreements with seven parties for millions of dollars on the loans that have been guaranteed.

[00:28:11] Speaker 06:
And those parties are going to sue the Peterson Andes as soon as those tolling agreements, the condition is for the litigation, the state court litigation that has just now been barred to be resolved.

[00:28:23] Speaker 05:
Has Peterson filed a claim in the receivership for liabilities that might incur through the guarantee?

[00:28:30] Speaker 06:
I believe he did and it was rejected.

[00:28:33] Speaker 05:
So that's wrapped up in the receivership.

[00:28:34] Speaker 06:
Well, just because you made a claim for that doesn't mean that it wasn't different.

[00:28:38] Speaker 05:
The injury is that all you're entitled to is to file a claim.

[00:28:41] Speaker 05:
You're not entitled to win the claim.

[00:28:42] Speaker 06:
Understood.

[00:28:43] Speaker 06:
But in trying to determine whether the claim is derivative or independent, what you look at is where is the injury coming from?

[00:28:50] Speaker 06:
The injury is that unlike any other investor,

[00:28:53] Speaker 06:
there were personal guarantees can now be sued on that the receiver lacked standing to break.

[00:28:58] Speaker 06:
The receiver could never sue on behalf of the Peterson Appellants for loans.

[00:29:04] Speaker 05:
Let me just caution her about this derivative independent.

[00:29:08] Speaker 05:
As far as I could tell, that language is not statutory.

[00:29:11] Speaker 05:
It's not in the case law.

[00:29:13] Speaker 05:
It's kind of come from a Fifth Circuit case.

[00:29:16] Speaker 05:
And it seems to me that that is confusing language, that when you look at the truth of it,

[00:29:23] Speaker 05:
There is nothing being dependent or derivative.

[00:29:27] Speaker 05:
Is it a claim against the assets of the estate?

[00:29:31] Speaker 05:
And is it part of, would the Ponzi scheme have affected it?

[00:29:35] Speaker 05:
So I think that particular language may have us going a bit down an unhelpful alley.

[00:29:43] Speaker 06:
Well, if it helps, the other way to look at it is that it's not targeting the same rate of the receivership estates.

[00:29:51] Speaker 05:
The case law is pretty clear that you can have different kinds of damages and still you will fall within the receivership.

[00:30:00] Speaker 06:
But, for example, with respect to the Lloyd's decision, whether it's targeting the same policy proceeds that the receiver was,

[00:30:06] Speaker 06:
whereas it was bad faith denial that is not policy proceeds.

[00:30:09] Speaker 06:
That's the array of what belongs to the receivership.

[00:30:12] Speaker 06:
So let's play out the Peterson Appellant state court claims and see if it would ever come to the receivership.

[00:30:18] Speaker 06:
If the Peterson Appellant succeed in suing Chicago title and saying that you owe us for the money that we guaranteed, that money turns around and goes to those guaranteed lenders.

[00:30:31] Speaker 06:
If the Peterson appellants fail in that claim, that money stays with Chicago title.

[00:30:36] Speaker 06:
In no event does that money ever come part of the receivership estates way.

[00:30:42] Speaker 06:
And that's a helpful way to look at why the claims are unrelated and non-derivative.

[00:30:47] Speaker 00:
Well, even if that's true though, if Chicago title ends up having to pay and turns around to A&I or the receiver and says, I had to pay and you should share.

[00:30:55] Speaker 00:
and the liability I had to pay, then we've got the res triggered again.

[00:31:00] Speaker 06:
Well, the issue of the indemnity, which I think you're asking just first, is there's in every case, the through line for California cases, Baird, Laco, BB Kane, is that if indemnification is against public policy, we will not allow it.

[00:31:16] Speaker 00:
But that's going to have to be litigated.

[00:31:19] Speaker 00:
That's not a given.

[00:31:19] Speaker 00:
That's not a facial we understand what the answer is going to be.

[00:31:22] Speaker 00:
It's a litigated question.

[00:31:23] Speaker 06:
Well, to the extent it's litigated, it's litigated on the pleadings.

[00:31:26] Speaker 06:
And let me explain why.

[00:31:27] Speaker 06:
Because in every one of those cases, you have joint tort feesers who owe joint and several liability to the plaintiffs.

[00:31:35] Speaker 06:
They have to pay, and then they fight out who gets to contribute and who gets to fund that payment.

[00:31:41] Speaker 06:
Unlike that situation, a receiver's only way is the assets that it has collected for distribution to the victims.

[00:31:50] Speaker 06:
So what we are saying here is a tortfeasor like Chicago Title could sue the receiver and take funds that have been sitting there collected for compensation to investors, cut in line and say, before you pay those victims, you pay me.

[00:32:07] Speaker 06:
And that is against public policy.

[00:32:09] Speaker 06:
And that's something that is not needed to be developed in evidence.

[00:32:14] Speaker 06:
That's not a trial issue.

[00:32:15] Speaker 06:
That is an issue that can be litigated on the pleadings.

[00:32:17] Speaker 06:
And it's certainly not going to take $9 million.

[00:32:19] Speaker 06:
And even if it is, here's another kicker.

[00:32:23] Speaker 06:
The receivership is essentially in solvent.

[00:32:25] Speaker 06:
Chicago title claims that it's releasing $100 million worth of claims against the Peterson appellants.

[00:32:31] Speaker 06:
The receivership has just said that it has $9 million in assets.

[00:32:34] Speaker 06:
What incentive does Chicago Title have to sue an essentially insolvent receiver?

[00:32:44] Speaker 06:
And it's not whether it can or cannot, but it's ephemeral.

[00:32:48] Speaker 06:
It's speculative.

[00:32:49] Speaker 06:
It makes no sense for Chicago Title to say, we're going to sue a receiver who has $9 million or $100 million worth of liability.

[00:32:55] Speaker 06:
It just doesn't make any sense.

[00:32:56] Speaker 05:
This isn't directly responsive, but it's related.

[00:33:01] Speaker 05:
What should we make, if anything, of the suggestions that Peterson was an insider?

[00:33:11] Speaker 05:
Insider in a securities law has a very particular meaning.

[00:33:15] Speaker 05:
And Peterson doesn't seem to meet that in that context.

[00:33:20] Speaker 05:
But in receivership context, here the court is using it more broadly.

[00:33:24] Speaker 05:
And I must say, I've just been confused in this case.

[00:33:29] Speaker 05:
what if anything to do with the reference to being an insider?

[00:33:35] Speaker 06:
As well you should be your honor because there was no adjudication of Mr. Peterson's insider status.

[00:33:42] Speaker 06:
All that was done was there were allegations.

[00:33:44] Speaker 05:
That's being litigated though a little bit.

[00:33:46] Speaker 05:
Isn't there a case still to litigate that?

[00:33:48] Speaker 06:
There was no opportunity to litigate that.

[00:33:50] Speaker 05:
I mean I think there is a case pending

[00:33:52] Speaker 05:
still might decide that question.

[00:33:55] Speaker 06:
Exactly.

[00:33:56] Speaker 06:
And that has not been decided.

[00:33:58] Speaker 06:
That is a case in which the receiver has alleged that the Peterson appellants were insiders.

[00:34:03] Speaker 06:
It's the clawback action.

[00:34:04] Speaker 06:
It's pending for the same district court judge.

[00:34:06] Speaker 06:
It's the same action in which the receiver has now taken an assigned claim from CalPrivate and is also suing on that guarantee note.

[00:34:13] Speaker 06:
So to your point of whether that note is gonna come, those guarantees are gonna come back and haunt the Peterson appellants, they are because they currently are being brought by the receiver.

[00:34:22] Speaker 06:
But the point is there was no adjudication in the receivership action about Mr. Peterson's alleged insider status.

[00:34:30] Speaker 06:
In fact, the district court in its distribution order stated

[00:34:34] Speaker 06:
notwithstanding Peterson ignorance of the fraud.

[00:34:38] Speaker 06:
He's an insider because of his business relationships, his compensation structure, his personal relationships.

[00:34:44] Speaker 06:
But what that essentially means is business relationships.

[00:34:47] Speaker 06:
If you don't know that it's a fraud and you sign a contract with somebody, are you saying that somebody on the other side of a contract can't be defrauded?

[00:34:54] Speaker 07:
It wasn't the district court.

[00:34:55] Speaker 07:
The district court wasn't saying, as you've just quoted from the order, that Mr. Peterson had knowledge of the fraud, but rather that his relationship to the scheme was different than other investors.

[00:35:05] Speaker 07:
He was more intimately involved.

[00:35:07] Speaker 07:
He owned a percentage of ANI.

[00:35:09] Speaker 07:
He had a voting share.

[00:35:14] Speaker 07:
recruited about 65% of the investments that were lost.

[00:35:18] Speaker 07:
I mean, he was different from other investors.

[00:35:21] Speaker 06:
And I think that the point is that being different doesn't make you a tortfeasor, doesn't make you an insider.

[00:35:29] Speaker 06:
If you don't know about the fraud and you have a 50% interest in what turns out to be a fraudulent

[00:35:34] Speaker 07:
But wasn't the district court just making an equitable point that it's fair to treat somebody who is an insider and more intimately involved in this scheme differently than other innocent investors who had no involvement whatsoever other than writing a check?

[00:35:49] Speaker 06:
If it was, then it wasn't following the applicable case law.

[00:35:53] Speaker 05:
Well, except that if that is what happened here, we do have to give deference to the receiver.

[00:36:00] Speaker 06:
Well, there are two things.

[00:36:01] Speaker 05:
And so the receiver's got quite a lot of substantial latitude.

[00:36:05] Speaker 05:
And so if that's the articulation by the receiver, we've got to give an awful lot of latitude to that.

[00:36:11] Speaker 06:
But every case that says that the receiver and the receivership court has latitude also says that it's not unbridled.

[00:36:18] Speaker 06:
And one point to keep in mind is the district court never issued the bar order based on Mr. Peterson's alleged insider status.

[00:36:27] Speaker 06:
The bar order was issued only because of the claims being related.

[00:36:32] Speaker 06:
and the threat of indemnity.

[00:36:34] Speaker 06:
It was only for the first time on appeal that Chicago Title argued that that reason, which was a reason to deny the claims in the distribution order, should be bootstrapped as another reason to affirm the barter.

[00:36:47] Speaker 06:
And if you do that, then what you're doing is you are prejudging

[00:36:52] Speaker 06:
The claims that are pending against Mr Peterson in the cloud back action, you are saying we have decided that he's a court toward freezer.

[00:37:00] Speaker 06:
And that's the reason to deny the bar order because the only relevance is that indemnity could be indemnity actions could be filed, assuming my public policy argument fails.

[00:37:10] Speaker 06:
So that's a problem with that equitable argument.

[00:37:12] Speaker 06:
There's also the problem that none of the cases allowed this type of an adjudication in a summary proceeding.

[00:37:18] Speaker 06:
You look at that Merrill Scott case, there was live testimony that was presented about an early investor.

[00:37:24] Speaker 06:
There was SEC presented documentary and other evidence showing that he had set up offshore accounts.

[00:37:30] Speaker 06:
Perhaps some of this conduct followed

[00:37:32] Speaker 06:
The SEC's lawsuit, but the point was there was an evidentiary hearing, then there was the buyer's case in which the people who were found to have insider or be insiders who denied knowledge of the fraud.

[00:37:47] Speaker 06:
were people who were found to have actively participated in the development and the marketing of the scheme, not the business relationships, the scheme.

[00:37:58] Speaker 06:
And here we have record evidence to the contrary.

[00:38:01] Speaker 06:
We have Gina Champion Kane, the mastermind of the Ponzi scheme, stating on the record in her deposition in taken by Chicago title that Mr. Pearson did not know about the fraud to the end.

[00:38:13] Speaker 06:
So if you're making an equitable inference,

[00:38:17] Speaker 06:
that this is somebody different.

[00:38:18] Speaker 06:
Take all of the evidence to account, there's not a single case in which this determination has been made without an adjudication and evidentiary hearing, certainly not on these facts and not on this evidence.

[00:38:29] Speaker 06:
I want to reserve my time for rebuttal.

[00:38:30] Speaker 00:
Before you sit down, I want to ask you, you've talked mostly about the bar order and a little bit about the distribution order, but with regard to the distribution order, how do we have a jurisdiction over an appeal of that order?

[00:38:41] Speaker 00:
And how is that even a final order?

[00:38:45] Speaker 00:
I mean, it's filed because it's a denial of claims.

[00:38:49] Speaker 00:
Well, it's an interim order in the sense that the receivership is ongoing.

[00:38:54] Speaker 00:
And I think that the receiver still retains authority to make changes to the distribution order if it deems necessary.

[00:39:02] Speaker 06:
I'm sorry that I don't see it that way, because essentially, it's akin to judgment being entered against a party in a multi-party action.

[00:39:11] Speaker 06:
With respect to the Peterson Appellants, there's no avenue for them to

[00:39:16] Speaker 06:
resubmit their claims to seek some, the receiver could unilaterally change his mind, but that's the same as a party against whom judgment has been entered settling out of court.

[00:39:24] Speaker 06:
That does not make the order non-appealable.

[00:39:26] Speaker 06:
Now, to the extent that there's an issue of equitable mootness because distributions have been made, we will point out that that's not a fault of Mr. Peterson or the appellants who stays at the district court and

[00:39:37] Speaker 06:
at the Ninth Circuit level to avoid this very fact from happening.

[00:39:41] Speaker 06:
But to the extent that there's a problem with being able to either take jurisdiction of the distribution order appeal or reverse it because of equitable muteness, even stronger reason, even more important that this court reverse the borrower.

[00:39:55] Speaker 07:
I have to reserve my time for a bottle if I have any.

[00:39:58] Speaker 07:
You're actually out of time.

[00:39:59] Speaker 07:
But I think at the point you indicated you wanted to reserve time, you had about a minute 15.

[00:40:03] Speaker 07:
So I'll give you that.

[00:40:04] Speaker 07:
Thank you so much.

[00:40:12] Speaker 07:
This is Mr. Hincky.

[00:40:15] Speaker 04:
Your honor, it's kind of like Heineken, except I missed.

[00:40:21] Speaker 07:
So how do you say it?

[00:40:21] Speaker 07:
Hincky?

[00:40:22] Speaker 04:
Hincky.

[00:40:23] Speaker 07:
Hincky.

[00:40:23] Speaker 07:
OK.

[00:40:24] Speaker 07:
And you have 10 minutes.

[00:40:26] Speaker 04:
Thanks very much.

[00:40:29] Speaker 04:
I think the central thing here is what is the bar order doing?

[00:40:35] Speaker 04:
And what the bar orders are doing is protecting the receivership estate from claims.

[00:40:43] Speaker 04:
That's part of the receiver's duties to do that, to protect it.

[00:40:48] Speaker 04:
I think if you look at the Young case, it got it exactly right because it says,

[00:40:56] Speaker 04:
I'm going to paraphrase.

[00:40:58] Speaker 04:
And most importantly, first, Utah had a right to indemnification.

[00:41:04] Speaker 04:
The indemnification provision could force

[00:41:08] Speaker 04:
the receiver to indemnify First Utah for claims brought against it.

[00:41:14] Speaker 04:
That would reduce the receivership of state.

[00:41:17] Speaker 04:
That was the most important reason the court in 10th Circuit in DeYoung said we should impose this bar order.

[00:41:25] Speaker 04:
And we submit that the situation here is the same.

[00:41:29] Speaker 04:
The bar orders are protecting the receivership of state from claims.

[00:41:34] Speaker 04:
And that's what they're supposed to do, that's what they're doing here.

[00:41:38] Speaker 04:
Now, the other side says, well, there's no equitable indemnity claim here, so there's really no protection to the estate.

[00:41:48] Speaker 04:
But there's several problems with that.

[00:41:50] Speaker 04:
The first is, nobody has ever determined that Chicago title was an intentional tortfeasor.

[00:41:58] Speaker 04:
So the basis of the other side's argument, your intentional tortfeasor, you can't get equitable indemnity, hasn't been proven.

[00:42:07] Speaker 04:
That would have to be litigated at great expense, great delay, great cost in the case if there wasn't a bar order.

[00:42:17] Speaker 04:
Second, our opponents say, well, the law really is that intentional tort claims are barred by this California statute.

[00:42:27] Speaker 04:
In fact, if you listen to what they said and if you look at their briefing,

[00:42:33] Speaker 04:
They have a very complicated theory as to why an intentional tort beazer cannot get equitable indemnity.

[00:42:43] Speaker 04:
That would have to be litigated.

[00:42:44] Speaker 04:
They have nothing that says flat out, no, you can't do this.

[00:42:48] Speaker 04:
There are cases that you can argue about and what their implications are and so on.

[00:42:53] Speaker 04:
And they have an argument like that, but that would all have to be litigated out.

[00:42:58] Speaker 04:
And even if none of that was true,

[00:43:01] Speaker 04:
There's the point that some of the claims are negligent claims.

[00:43:06] Speaker 04:
They can't possibly be barred by this statute.

[00:43:09] Speaker 04:
They are not even arguably barred by this statute.

[00:43:14] Speaker 04:
Now, the other side says, oh, OK, I'll drop.

[00:43:17] Speaker 04:
Well, that's too late.

[00:43:19] Speaker 04:
They missed the boat on that.

[00:43:20] Speaker 04:
If they wanted to drop them, they should have dropped them long ago.

[00:43:23] Speaker 04:
We're here with what they did and what they said and what they sought below.

[00:43:27] Speaker 04:
And they sought recovery of negligent

[00:43:30] Speaker 04:
misrepresentation claims.

[00:43:33] Speaker 04:
And so for that reason, their argument that there cannot be equitable indemnity also fails.

[00:43:41] Speaker 04:
Even if all that wasn't true, the fact of the matter is, if we're going to litigate all these things about equitable indemnity, whether Chicago title was an intentional tortfeas or whether or not

[00:43:54] Speaker 04:
The law is intentional and tort feesers cannot get equitable indemnity.

[00:43:59] Speaker 04:
Whether the negligent misrepresentation claims are not barred in any event, what happens?

[00:44:06] Speaker 04:
There's the expense to the receivership of state.

[00:44:09] Speaker 04:
There is the delay.

[00:44:10] Speaker 04:
And it's not just the delay of the litigation as such.

[00:44:16] Speaker 04:
But as a receiver, you can't then distribute the money.

[00:44:20] Speaker 04:
You can't wrap up the state.

[00:44:22] Speaker 04:
You can't move forward.

[00:44:23] Speaker 04:
You have to go over and do all these things before you can get there.

[00:44:28] Speaker 04:
And so even if the other side was right, that there is no equitable indemnity claim, the receiver could reasonably say in her discretion,

[00:44:37] Speaker 04:
Well, wait a second.

[00:44:38] Speaker 04:
I need to get this thing moving.

[00:44:39] Speaker 04:
I need to get it done.

[00:44:40] Speaker 04:
I'm going to do this.

[00:44:43] Speaker 04:
I'm going to cut the best deal I can, and I'm going to move on.

[00:44:46] Speaker 04:
And that's what happened here.

[00:44:47] Speaker 04:
Your Honor, I think that really is the answer to this case, that the receiver is protecting

[00:45:02] Speaker 04:
race, the receivership estate from claims of others.

[00:45:09] Speaker 04:
And that's what the claims were here.

[00:45:10] Speaker 04:
What are Peterson's claims?

[00:45:12] Speaker 04:
Peterson says, well, I could be held liable for investor claims, what the parties called money in, money out of claims.

[00:45:22] Speaker 04:
Is there a lawsuit against him for that?

[00:45:24] Speaker 04:
No.

[00:45:26] Speaker 04:
What does he say here today?

[00:45:27] Speaker 04:
He says they're tolling agreements.

[00:45:29] Speaker 04:
There's nothing in the record of any tolling agreement.

[00:45:33] Speaker 04:
There's no showing that those exist.

[00:45:35] Speaker 05:
So they can't rely on that.

[00:45:37] Speaker 05:
The fact of the matter is- That's interesting.

[00:45:40] Speaker 05:
You're representing that there's nothing in the record.

[00:45:43] Speaker 04:
I understand.

[00:45:44] Speaker 05:
There's nothing in the record indicating whether or not there are independent claims against Peterson.

[00:45:50] Speaker 04:
Right.

[00:45:50] Speaker 05:
No, not independent claims, tolling agreements.

[00:45:56] Speaker 04:
Our position is,

[00:45:58] Speaker 04:
The investor claims have been paid off and it's too late to bring them, even if they hadn't been paid off.

[00:46:05] Speaker 04:
Their argument is, oh, no, it's not too late.

[00:46:08] Speaker 04:
People could bring those because they're tolling agreements.

[00:46:11] Speaker 04:
Our position is there's nothing in the record that shows these tolling agreements exist.

[00:46:17] Speaker 04:
I appreciate that.

[00:46:18] Speaker 04:
Thank you.

[00:46:22] Speaker 04:
Those claims are all by the board.

[00:46:25] Speaker 04:
So what else is there?

[00:46:27] Speaker 04:
Well, the receiver settled with one of the investors called CalPrivate Bank and CalPrivate Bank assigned to the receiver its claims against Peterson and the receiver is pursuing those claims.

[00:46:45] Speaker 04:
But those are all part of the Ponzi scheme.

[00:46:48] Speaker 04:
I take your point that this language about derivative independent is a little fuzzy and it's hard to know what the cases really mean and how to make a lot of it.

[00:46:57] Speaker 04:
It really just comes out of one circuit.

[00:47:00] Speaker 04:
It sounds good until you start thinking about it.

[00:47:04] Speaker 04:
But anyway, you look at the claims here, the receivers claims against Peterson, which he wants to then turn around and sue Chicago title over.

[00:47:12] Speaker 04:
And then Chicago title was going to end up suing the receiver.

[00:47:15] Speaker 04:
Those are investor claims.

[00:47:16] Speaker 04:
That's the heart of this.

[00:47:18] Speaker 04:
This is about a Ponzi scheme on the investors.

[00:47:21] Speaker 04:
They couldn't be any more part of the receivership estate than anything here.

[00:47:28] Speaker 04:
And so we don't have to decide derivative, dependent, or anything else.

[00:47:32] Speaker 04:
They are the claims at the heart of the Ponzi scheme that the receiver is now pursuing against Peterson.

[00:47:37] Speaker 04:
And he wants to say, oh, I want to turn around Chicago title and say, no, no, it's really their fault.

[00:47:44] Speaker 04:
But these are claims that are at the heart of the case, the Ponzi scheme.

[00:47:49] Speaker 04:
And those are the kinds of claims that the receiver is entitled to deal with.

[00:47:57] Speaker 04:
in the receivers reasonable discretion if the receivership court approves it, which is what happened here.

[00:48:04] Speaker 04:
The receivership court said, yes, this makes sense.

[00:48:07] Speaker 04:
It's in the best interest of the estate and everybody who has a claim to it.

[00:48:11] Speaker 04:
And we submit on that basis.

[00:48:13] Speaker 04:
that this court should affirm the bar orders here because they protect the receivership estate and its assets.

[00:48:22] Speaker 04:
The opposing party says, well, there are no assets.

[00:48:24] Speaker 04:
Well, that's not quite right.

[00:48:26] Speaker 04:
There's something like $9 million left right now.

[00:48:29] Speaker 04:
But at the time this was all decided, there were many more millions of dollars that had not been distributed.

[00:48:36] Speaker 04:
So the receivership wasn't insolvent.

[00:48:39] Speaker 04:
There was money there that

[00:48:42] Speaker 04:
Mr. Peterson was trying to go after through Chicago title.

[00:48:47] Speaker 04:
So the idea that there wasn't anything that anyone was going to pursue, I respectfully submit is not true.

[00:48:54] Speaker 04:
Unless the court has anything else, I would like to submit.

[00:48:58] Speaker 07:
Thank you.

[00:48:59] Speaker 04:
Thank you.

[00:49:03] Speaker 07:
Mr. Fates?

[00:49:06] Speaker 07:
All right, you're going to be talking fast because you only have five minutes.

[00:49:09] Speaker 02:
I will do my best.

[00:49:10] Speaker 02:
Good morning, Your Honors.

[00:49:11] Speaker 02:
Ted Fates on behalf of Krista Freytag, the court-appointed receiver.

[00:49:14] Speaker 02:
I'll be speaking about the distribution order.

[00:49:17] Speaker 02:
And there are three main reasons that the distribution order.

[00:49:22] Speaker 00:
Can I interrupt you before you launch into the merits reasons on the jurisdiction question?

[00:49:25] Speaker 00:
I don't understand the briefing to be challenging our jurisdiction.

[00:49:29] Speaker 00:
But of course, we have our own duty to assure ourselves of jurisdiction.

[00:49:32] Speaker 00:
So why is the distribution order appealable?

[00:49:36] Speaker 02:
I heard your question on that, and I don't know the answer.

[00:49:40] Speaker 02:
I'm going to admit that.

[00:49:42] Speaker 05:
Just to support that there's a Seventh Circuit case that says it's not appealable, there's a Fifth Circuit case that says that, and there's probably a Ninth Circuit case, American principle that says that.

[00:49:53] Speaker 02:
I think when we looked at this appeal, we saw that the distribution order resolves the claims made by the Peterson parties as to this receivership, as whether they would be allowed to participate in any distribution of receivership estate funds.

[00:50:12] Speaker 02:
And we considered that, I guess, perhaps incorrectly to be a final ruling on that discrete issue.

[00:50:20] Speaker 02:
But perhaps the case law goes the other way, perhaps because there's estate funds still to be distributed, that that isn't a final order.

[00:50:30] Speaker 02:
I don't know the answer to that question.

[00:50:31] Speaker 07:
It doesn't seem to be a final order as to the distribution, but there are procedures as a rule in which the party can ask the district court to certify that it's finalized that particular party, and then it could be appealed in rule 54.

[00:50:45] Speaker 02:
That was not done here.

[00:50:47] Speaker 02:
So perhaps another reason why this court may lack jurisdiction.

[00:50:54] Speaker 02:
But I will get to the merits of the claims and why the district court correctly denied them.

[00:51:04] Speaker 02:
Specifically, the court correctly found that Mr. Peterson was more intimately involved in the Ponzi scheme than other investors.

[00:51:13] Speaker 02:
And that set him in a different

[00:51:15] Speaker 02:
position vis-a-vis this Ponzi scheme than the other investors who are making claims.

[00:51:21] Speaker 02:
Second,

[00:51:22] Speaker 02:
his claims were duplicate of the investor claims.

[00:51:26] Speaker 02:
Both parties are making claims for the exact same losses, the investors who put their funds into the scheme.

[00:51:34] Speaker 02:
And then Peterson essentially saying, I'm liable to those investors because they lost money.

[00:51:41] Speaker 02:
And so I'm making a claim for those same losses based on my potential liability.

[00:51:47] Speaker 02:
to those investors.

[00:51:49] Speaker 02:
So the district court had to weigh the two sets of claims for the same exact losses and allow one and disallow the other, which the court carefully did.

[00:51:59] Speaker 02:
And the third reason is at this point, there is no mathematical way in which

[00:52:07] Speaker 02:
Peterson parties could establish a claim against the receivership estate.

[00:52:11] Speaker 02:
It is an undisputed fact that they received and retained over $12 million from the Ponzi scheme and its participants.

[00:52:21] Speaker 02:
At this stage, the investors that they are claiming, the losses form the basis for their claim.

[00:52:30] Speaker 02:
Those investors have been

[00:52:33] Speaker 02:
compensated through the settlements and through the distributions from the receivership, and their remaining losses are only about $1.6 million.

[00:52:41] Speaker 02:
So even if you were to accept a claim that they're the proper claimants for this $1.6 million of losses, all that would do would

[00:52:52] Speaker 02:
take a little bit off the total of gains that the Peterson parties received from this Ponzi scheme, and there would never be a money in, money out net loss that the Peterson parties could ever establish.

[00:53:06] Speaker 05:
They would still be a net gainer.

[00:53:08] Speaker 02:
They would still be a net winner.

[00:53:10] Speaker 02:
That's correct.

[00:53:12] Speaker 02:
Going back to the first point about

[00:53:15] Speaker 02:
more intimately involved, the court carefully looked at the facts, the documents, the testimony here.

[00:53:21] Speaker 02:
They gave the Peterson parties the opportunity to brief this twice and submit evidence twice.

[00:53:29] Speaker 02:
And the judge carefully looked at these facts.

[00:53:32] Speaker 02:
Not did Mr. Peterson have knowledge, but what was his relationship to the Ponzi scheme?

[00:53:39] Speaker 02:
Did he promote the Ponzi scheme?

[00:53:41] Speaker 02:
Did he seek investor funds to be brought into the Ponzi scheme?

[00:53:45] Speaker 02:
How much money did he raise?

[00:53:47] Speaker 02:
How much money had he received in commissions and referral fees?

[00:53:52] Speaker 02:
Those are the facts that the judge looked at and relied on in determining that Mr. Peterson was more intimately involved with this Ponzi scheme and in a very different position than the other investors.

[00:54:04] Speaker 02:
And that is, again, a proper basis on which to distinguish and deny his claims.

[00:54:11] Speaker 02:
That I'll submit.

[00:54:12] Speaker 07:
Thank you.

[00:54:13] Speaker 07:
All right, Ms.

[00:54:14] Speaker 07:
Singh, you have...

[00:54:21] Speaker 06:
I wonder if we could do some math for lawyers and round up to two minutes.

[00:54:27] Speaker 06:
Okay, I'll dispense with the distribution order claim by saying to the extent that I'm losing the jurisdictional battle.

[00:54:34] Speaker 06:
If that's the case, there's just two points I think I need to make.

[00:54:38] Speaker 06:
There was no allegation or evidence or testimony about promoting recruiting the scheme.

[00:54:44] Speaker 06:
He was absolved of knowing anything about the scheme to the extent that there were business relationships.

[00:54:50] Speaker 06:
It presumes knowledge to say,

[00:54:53] Speaker 06:
that that relationship creates insider status.

[00:54:56] Speaker 06:
If you don't know that you are entering into a fraudulent contract, you're not guilty of being in fraud.

[00:55:02] Speaker 06:
That said, second point about the distribution order is if this court decides it lacks jurisdiction over the distribution order appeal, then there is nothing before this court in the record about insider status.

[00:55:13] Speaker 06:
That was an argument that was made by the receiver only with respect to denial of claims.

[00:55:17] Speaker 06:
in the distribution order motion.

[00:55:19] Speaker 06:
That was a finding that was made only with respect to the distribution order denial or affirmance.

[00:55:25] Speaker 06:
And so if that's the case, if this court lacks jurisdiction, then there's nothing in the record.

[00:55:29] Speaker 06:
There wouldn't have been nothing in the record before this court about the distribution order.

[00:55:33] Speaker 06:
Speaking of the record, I will concede the tolling agreements are not in the record.

[00:55:38] Speaker 06:
I take full responsibility.

[00:55:40] Speaker 06:
That is

[00:55:41] Speaker 06:
Something that we cannot explain, other than I can represent as an officer of the court.

[00:55:45] Speaker 06:
I have seen them.

[00:55:46] Speaker 06:
I have read them and proof that they exist are the claims that have already been brought that the receiver is actually pursuing as they just said in the clawback action.

[00:55:54] Speaker 06:
So the fact that the receiver had to get an assignment.

[00:56:00] Speaker 06:
of that claim from CalPrivate in order to bring it to the clawback action, to me is persuasive that that is not a claim that belonged to the receivership estate, had no standing to bring it.

[00:56:15] Speaker 06:
This is something the receiver stated repeatedly.

[00:56:18] Speaker 06:
The district court agreed and found that the claims were different.

[00:56:22] Speaker 06:
They're not the same.

[00:56:23] Speaker 06:
And therefore that alone should stop it.

[00:56:26] Speaker 06:
I know I'm running out of time, so I'll just wrap up by saying,

[00:56:29] Speaker 06:
There's only one thing that this bar order does.

[00:56:32] Speaker 06:
It protects Chicago title, a core participant in this scheme.

[00:56:36] Speaker 06:
And so for that reason, and for all the reasons articulated in our briefs and today, we respectfully ask that you reverse.

[00:56:42] Speaker 06:
Thank you for your indulgence and giving me more time, your honor.

[00:56:45] Speaker 07:
Thank you.

[00:56:46] Speaker 07:
Council, thank you all for the arguments this afternoon.

[00:56:48] Speaker 07:
They're very helpful.

[00:56:49] Speaker 07:
And we are in recess until tomorrow morning.

[00:56:57] Speaker 03:
All rise.

[00:57:13] Speaker 03:
This court for this session stands adjourned.