[00:00:00] Speaker 01:
And we'll next hear argument into Lee versus prestige community credit union.

[00:00:39] Speaker 00:
Good morning.

[00:00:39] Speaker 00:
Rupa Singh on behalf of plaintiffs and appellants.

[00:00:42] Speaker 00:
My trial counsel is also here, Mr. Steve Nunez.

[00:00:45] Speaker 00:
And may I please reserve five minutes for rebuttal?

[00:00:48] Speaker 01:
Okay, please watch the clock.

[00:00:50] Speaker 00:
Okay.

[00:00:51] Speaker 00:
So summary judgment in this case should be reversed for all the reasons that are set forth in the opening brief.

[00:00:56] Speaker 00:
and the reply brief, but I'd like to focus today on two main errors by the district court.

[00:01:02] Speaker 00:
First, the district court misapplied the summary judgment framework and the standard in multifaceted ways that prejudiced plaintiffs as a non-moving party.

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Second, the district court badly misapplied the three-part governmental interest choice of law tests to erroneously conclude that there was a conflict between Texas and California law and that Texas law applied.

[00:01:25] Speaker 00:
So what do I mean by the district court

[00:01:27] Speaker 00:
misapplied the summary judgment standard.

[00:01:29] Speaker 00:
The district court relied solely on the reply statement of uncontroverted facts submitted by defendants based on its

[00:01:41] Speaker 00:
Adoption of the critique by defendants that plaintiffs had not genuinely opposed the material statement of facts with evidence But that's not the case rule 56 3 local rule 56 3 of the Central District of California states that the district court can presume to be deemed admitted all material facts in a statement of genuine material facts and

[00:02:05] Speaker 00:
unless they're controverted in an opposition statement of disputed facts or in declarations or other evidence submitted in opposition.

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And that's exactly what happened here.

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Moreover, the point of summary judgment is for a defendant to affirmatively negate an element of the plaintiff's claims.

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Here, everybody agrees that knowledge of actual fraud was an element of plaintiff's claims.

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But nowhere in their genuine statement of uncontroverted fact do defendants deny knowledge of actual fraud.

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Rather, for example, in Fact 10, they said their CEO testified that he did not have knowledge of actual fraud.

[00:02:55] Speaker 00:
But Reeves v. Superior Court says that you cannot

[00:03:01] Speaker 00:
fashion as fact something that witnesses testified to or perceived So the district court excused defendants from meeting the burden of negating an element by allowing that just undisputed fact of testimony to stand in for the fact that there was no knowledge and

[00:03:27] Speaker 04:
I'm having a hard time tracking how this argument fits into the case, because at the end of the day, don't we still just get down to, is there a genuine issue of knowledge?

[00:03:37] Speaker 04:
Absolutely.

[00:03:39] Speaker 04:
And so I'd like to hear where there's a genuine issue of knowledge, because that seemed to be where the district court said you fell short.

[00:03:47] Speaker 00:
Right.

[00:03:47] Speaker 00:
But I think that, Judge Nelson, the district court said, I'm not even going to look at the evidence, because I don't think it's

[00:03:54] Speaker 00:
Here, so let me give can you cite that then yeah, yeah, yeah So it relied it it started its summary judgment order by saying I'm relying exclusively on the reply Statement of genuine disputes submitted by defendants.

[00:04:09] Speaker 04:
I think my question.

[00:04:10] Speaker 04:
Maybe okay enough is fine Okay, we've got a look at this.

[00:04:15] Speaker 00:
Okay.

[00:04:15] Speaker 04:
You can look at the whole record as summary judgment Okay, where is I mean I didn't find it

[00:04:20] Speaker 04:
Where is the disputed fact that there was knowledge here?

[00:04:24] Speaker 04:
I mean it's Not to front load this, but I think part of your The way you win potentially is that you don't have to show knowledge But that seems to maybe only apply to the elder abuse claim if I understand it correctly So I mean first of all you think there was knowledge tell me where there's knowledge, okay?

[00:04:43] Speaker 00:
So there's a lot of disputes and there are there's evidence that can show that

[00:04:49] Speaker 00:
Allow a jury to infer that there was knowledge so for example the credit unions BSA compliance officer testified that She completed heightened due diligence based on the fact that the BSA says Non-governmental entities and nonprofit churches is particularly susceptible to financial fraud But then if you look at the record what she actually did is is

[00:05:10] Speaker 00:
Incompletely fill out a one-page questionnaire, and I believe that's on er 866 That counter that goes against your position because that suggests she doesn't have knowledge well been negligent, but what I'm saying is that there were

[00:05:26] Speaker 00:
Answered the due diligence was not conducted properly whereas the expert says okay, so she It shows okay, there's other things for example They testified that they looked at the web they being the BSA compliance officer and the CEO testified they looked at the church's website multiple times including in 2018 and there is a prominent display in that website that

[00:05:54] Speaker 00:
advertises the church's financial investment services, right?

[00:05:59] Speaker 04:
So knowing that the church was doing something that it was, that it- Why does that suggest they were aiding and abetting a Ponzi scheme?

[00:06:08] Speaker 00:
The totality of the evidence.

[00:06:10] Speaker 00:
That's just one piece of it.

[00:06:11] Speaker 00:
There's a, there's a, the expert testified that when you have, as you have here, a check system report that says, do not do business with this individual.

[00:06:24] Speaker 00:
the beneficial owner of the church.

[00:06:26] Speaker 00:
You don't stop at just striking their name off the account.

[00:06:30] Speaker 01:
You do not do business with the entity of which... We're looking for actual evidence that they knew there was a Ponzi scheme going on, and I didn't see any evidence of that either.

[00:06:43] Speaker 01:
So maybe you can point to something showing there was a Ponzi scheme and that Christie knew about it.

[00:06:51] Speaker 00:
Well, for example, Garner, there were

[00:06:53] Speaker 00:
Multiple wire transfers going out of the church's account to Whitney the very person That was not supposed to have anything to do with the account each time those wire transfers went out there was a system alert saying This person is on a list of people not to do business with and you should do a serious investigation That this is the same person can't Whitney so you fit in this should have known that

[00:07:18] Speaker 04:
But but what I'm saying is that's just see that's the third or fourth Look your problem is the law The law says you have to have actual knowledge.

[00:07:29] Speaker 04:
You've presented a bunch of evidence about should have known Well to you know, I haven't heard anything that you've said today that suggests there's actual knowledge that the bank knew there was a Ponzi scheme so I think the totality of this circumstantial evidence could allow a jury to confer a

[00:07:45] Speaker 00:
Not just that it should have known, but they did.

[00:07:47] Speaker 00:
Why would you override alerts saying don't do business with this person?

[00:07:53] Speaker 04:
Why would you look at a website?

[00:08:00] Speaker 00:
Understood, but shouldn't that be the jury's province?

[00:08:04] Speaker 00:
Shouldn't the jury be allowed to determine, does that show actual knowledge, or as you say, does that show innocent reasons for not doing more?

[00:08:14] Speaker 04:
I'm not even sure it's innocent reasons.

[00:08:15] Speaker 04:
I'm giving you the benefit of the doubt.

[00:08:17] Speaker 04:
It does probably rise to the level of they should have done more.

[00:08:21] Speaker 04:
There was negligence here.

[00:08:22] Speaker 04:
There was over.

[00:08:24] Speaker 04:
There was a miss.

[00:08:26] Speaker 04:
But the law says it has to be actual knowledge.

[00:08:29] Speaker 00:
And I'm submitting that based on at least the three pieces of evidence and more.

[00:08:34] Speaker 04:
What's your case that suggests that the evidence that you've presented, that Goethe should have known, would be enough to send this to a jury?

[00:08:41] Speaker 00:
Well, there's a lot of cases that say that circumstantial evidence alone is enough to overcome summary judgment, which is to say, to send it to a jury.

[00:08:50] Speaker 00:
I'll give you an example from a Texas case, even though we haven't gotten to the choice of law analysis.

[00:08:56] Speaker 00:
On ER 17, footnote 8, this is the district court summary judgment order.

[00:09:02] Speaker 00:
The district court talks about a case called Turk, in which the Texas district court recognized that Texas has

[00:09:10] Speaker 00:
forever recognized a common law tort of knowing participation in a breach of fiduciary duty.

[00:09:18] Speaker 00:
So it's a different name than aiding and abetting, but that's a claim.

[00:09:22] Speaker 00:
As part of its analysis in the footnote, the district court acknowledges that circumstantial evidence is sufficient to establish under Texas law this analogous claim to aiding and abetting.

[00:09:37] Speaker 00:
Now, I'm not

[00:09:38] Speaker 00:
I'm not being able to cite.

[00:09:40] Speaker 04:
You're in a tough position, though, because Texas does not recognize aiding and abetting in this context.

[00:09:46] Speaker 04:
So you have to rely on California law, right?

[00:09:48] Speaker 04:
Because you're arguing California law applies.

[00:09:51] Speaker 00:
We are arguing two things.

[00:09:52] Speaker 00:
First, that there's no conflict, because Texas actually does recognize.

[00:09:57] Speaker 00:
Because of this case.

[00:09:58] Speaker 00:
Because of this case, because of other cases that I'm happy to cite to the court.

[00:10:03] Speaker 02:
But that's limited to that Texas Securities Act, right?

[00:10:06] Speaker 00:
No, no, your honor.

[00:10:07] Speaker 00:
The Rothstein case, which you are talking about, did recognize in the context of the Sanford Ponzi scheme that under the Texas Securities Act, you can have a claim for knowing participation.

[00:10:17] Speaker 02:
But there's no, is there a case that explicitly says Texas recognized aiding and abetting?

[00:10:21] Speaker 02:
I think you cited saying, well, we don't necessarily preclude recognizing in the future.

[00:10:27] Speaker 02:
But I mean, that's not saying it recognizes it.

[00:10:30] Speaker 00:
So it's more of a statement that Texas recognizes it and is open to recognizing it.

[00:10:36] Speaker 02:
But it hasn't yet.

[00:10:37] Speaker 00:
Well, it has actually, to be fair.

[00:10:40] Speaker 00:
Turk versus Pershing, take a look at that case discussed in the district court's footnote.

[00:10:45] Speaker 00:
The district court acknowledges the quote from that case saying, Texas has long recognized a common law claim for knowing participation in the breach of a fiduciary duty.

[00:10:54] Speaker 00:
It then goes on to list the elements of that claim, and I submit to you that they are identical.

[00:11:00] Speaker 00:
to a California law claim for aiding and abetting.

[00:11:02] Speaker 00:
And that case goes on to say that circumstantial knowledge is enough.

[00:11:06] Speaker 00:
Now, I'm not calling to mind California law cases that say that, but I know they're citing their beefs, and if the court would give me a day, I would be happy to submit a supplemental letter with those citations.

[00:11:17] Speaker 00:
Circumstantial evidence is enough.

[00:11:18] Speaker 00:
I'll point to you another case, Judge Lee.

[00:11:20] Speaker 00:
It's called Jewell, and it was cited in all parties' papers, Jewell versus Arrington, and that's a Texas Supreme Court case

[00:11:30] Speaker 00:
which rejected or said, we won't expressly adopt a concert of action theory.

[00:11:39] Speaker 00:
It was a weird case.

[00:11:40] Speaker 00:
It was a case about a police officer suing

[00:11:42] Speaker 00:
Demonstrators that he had to remove because they were blocking access to an abortion clinic so not the facts here But in that case the district court said we're not sure that we're going to do this concert of action type of claim But the restatement 876 B does say that there's a claim for knowing that

[00:12:01] Speaker 00:
No, substantial aid to a wrongdoer for committing a tortious act.

[00:12:09] Speaker 00:
And the elements of that claim are identical to aiding and abetting a fiduciary duty.

[00:12:13] Speaker 00:
The court only went on to reject that theory by saying the evidence was insufficient.

[00:12:19] Speaker 00:
So the Texas Supreme Court is appearing to indicate that in the right case, it would recognize such a claim.

[00:12:26] Speaker 02:
But it would, but it hasn't.

[00:12:28] Speaker 00:
Well, that was a 1996 case.

[00:12:30] Speaker 02:
There's a lot of things where courts say, we might or we might not.

[00:12:33] Speaker 02:
We just don't know.

[00:12:34] Speaker 02:
We haven't.

[00:12:35] Speaker 00:
So I would comment to the court on two things.

[00:12:39] Speaker 00:
Rothstein, the case about the Texas Securities Act, which, by the way, does involve Ponzi scheme.

[00:12:45] Speaker 00:
And remember, the choice of law analysis doesn't just require the district court to look at whether the law is the same or different.

[00:12:54] Speaker 00:
as to the question and the circumstances.

[00:12:57] Speaker 00:
So Rotstein involved the Ponzi scheme.

[00:12:59] Speaker 00:
It said that under Texas Securities Act, we recognize it.

[00:13:04] Speaker 00:
Then it went on to cite a bunch of cases stating

[00:13:09] Speaker 00:
that Texas has long recognized a common law claim for knowing participation in breach of fiduciary duty, the elements of which are identical.

[00:13:20] Speaker 00:
So the issue that we come up with, and Judge Nelson, you're absolutely right, the law is our problem, because Texas just hasn't said it in the way that we would want it to.

[00:13:29] Speaker 00:
Texas just hasn't used the moniker aiding and abetting.

[00:13:32] Speaker 00:
Okay?

[00:13:33] Speaker 00:
And then the other case, Judge Lee, to your point is Turk.

[00:13:36] Speaker 00:
Not only because it itself recognized a claim for common law participation in breach of fiduciary duty arising out of the Sanford Ponzi scheme.

[00:13:46] Speaker 00:
So again, Ponzi scheme institution can't facilitate.

[00:13:50] Speaker 00:
But it also went on to discuss the history of how Texas came to recognize that common law claim.

[00:13:56] Speaker 00:
And so to, you know, there just isn't any conflict in California and Texas law.

[00:14:02] Speaker 00:
It's just a conflict of nomenclature.

[00:14:06] Speaker 00:
And I would suggest that that's not enough to say that there's a true conflict, that California law doesn't apply.

[00:14:11] Speaker 00:
California law does apply.

[00:14:12] Speaker 00:
And with respect to the remaining.

[00:14:14] Speaker 04:
The problem with that is that only gets you, I mean, Texas doesn't recognize this.

[00:14:18] Speaker 04:
California does.

[00:14:19] Speaker 04:
But you still have all the problems with should have known versus actual knowledge.

[00:14:26] Speaker 04:
Can I ask you about your elder abuse claim?

[00:14:28] Speaker 04:
Because I was, that one,

[00:14:31] Speaker 04:
It seems to be that there, like I said, you may have evidence that there's a genuine issue of disputed fact on should have known, but there is a case in California that suggests that elder abuse under the statutory section you have brought claims under 15610.3082 does require actual knowledge.

[00:14:55] Speaker 04:
This is DOS versus Bank of America, 2010.

[00:14:59] Speaker 04:
Are you aware of that case?

[00:15:00] Speaker 04:
And do you have any response to that case of whether California requires actual knowledge?

[00:15:09] Speaker 00:
So to be perfectly candid, I was not aware of the case.

[00:15:12] Speaker 00:
My research indicated that California only requires knowledge by the defendant of the victim's actual age in a criminal prosecution for elder abuse.

[00:15:22] Speaker 00:
And my research indicated that that's different for civil claims of elder abuse, which is what we have here.

[00:15:29] Speaker 00:
And what I would like to do with the court's permission is to look at DOS and be able to submit something if the court would like.

[00:15:37] Speaker 04:
I'll give you the citation.

[00:15:38] Speaker 04:
It's 186 Cal App 4th, 727.

[00:15:42] Speaker 04:
And the pin site to that would be 745 that might lead you in the right direction.

[00:15:49] Speaker 00:
Absolutely.

[00:15:49] Speaker 00:
Would the court permit us to submit a supplemental letter brief no more than three pages by tomorrow?

[00:16:00] Speaker 01:
Yes, that's fine.

[00:16:01] Speaker 01:
And we'll give the government a chance.

[00:16:04] Speaker 01:
I mean, we'll give the other side a chance to respond.

[00:16:07] Speaker 00:
And I was very enthusiastic in saying tomorrow, but could I have it until Friday?

[00:16:11] Speaker 01:
Yes, Friday is fine.

[00:16:13] Speaker 00:
Okay.

[00:16:13] Speaker 00:
And I'd like to reserve the rest of my time for rebuttal.

[00:16:15] Speaker 01:
All right.

[00:16:16] Speaker 00:
Thank you.

[00:16:17] Speaker 01:
We'll hear from the other side, from the bank.

[00:16:41] Speaker 03:
Good morning, Your Honors.

[00:16:42] Speaker 03:
May it please the Court, my name is Howard Alperin, along with my co-counsel, Kevin Steinberg, for the Appellee Prestige Community Credit Union.

[00:16:54] Speaker 03:
Directing to a statement made by my adversary about evidence on the, looking at the court's, at the website for the church,

[00:17:08] Speaker 03:
that there was a graphic.

[00:17:09] Speaker 03:
There's no evidence in the record as to what this graphic was, what it means, who saw it, whether the plaintiff saw it.

[00:17:16] Speaker 03:
We never saw it.

[00:17:17] Speaker 03:
There's no evidence to the contrary of that.

[00:17:18] Speaker 03:
Prestige is a small Texas credit union with two offices in the Dallas area of Texas.

[00:17:28] Speaker 03:
All of its operations and employees are in Texas.

[00:17:33] Speaker 03:
The district court correctly analyzed the choice of law analysis using California's three-step governmental interest test.

[00:17:48] Speaker 03:
In concluding that the failure to apply Texas law

[00:17:55] Speaker 03:
in this case would significantly impair Texas interest.

[00:17:59] Speaker 03:
The district court cited the Cooper case holding, California courts have frequently applied foreign laws that serve to protect businesses by limiting liability even when applying the law precludes recovery by injured California residents.

[00:18:15] Speaker 03:
And, sorry, the flip between the glasses.

[00:18:20] Speaker 03:
The district court correctly dismissed

[00:18:22] Speaker 03:
the aiding and abetting claims because Texas does not recognize them.

[00:18:29] Speaker 03:
The arguments raised on appeal that the Rothstein case and others allow for knowing participation of a breach of fiduciary duty

[00:18:40] Speaker 03:
are cases that are not on point with this case.

[00:18:42] Speaker 03:
This case was a common law aiding and abetting claim.

[00:18:47] Speaker 03:
The Rothstein case and the cases decided in Texas that allow for knowing participation require a primary wrong of the Texas Securities Act.

[00:18:59] Speaker 03:
I believe that the choice of law analysis was correct by the district court.

[00:19:03] Speaker 03:
and should be affirmed by this court.

[00:19:04] Speaker 01:
But the argument was that the elements of the knowing participation are the same as the elements of aiding and abetting in California.

[00:19:13] Speaker 01:
Do you disagree with that?

[00:19:17] Speaker 03:
Judge Akuda, the elements of knowing participation require actual knowledge.

[00:19:25] Speaker 03:
Less than actual knowledge, such as constructive knowledge, are not sufficient under the Texas Securities Act.

[00:19:31] Speaker 03:
In California, the requirement under Casey is actual knowledge and substantial participation or substantial assistance.

[00:19:43] Speaker 03:
And there's no evidence of either of those elements in this case.

[00:19:48] Speaker 03:
The appellants argue that cases like Evans and First Alliance are similar to the facts in this case.

[00:19:55] Speaker 03:
They're not.

[00:19:56] Speaker 03:
In those two cases, the banks were active participants in the business operations that ended up being sued.

[00:20:05] Speaker 03:
Prestige was simply a bank that handled deposits and withdrawals for its customer.

[00:20:11] Speaker 03:
It did not participate.

[00:20:12] Speaker 03:
It did not give loans.

[00:20:13] Speaker 03:
It did not give other services.

[00:20:15] Speaker 03:
such that you can show actual knowledge of any of the wrongdoing alleged or substantial participation or actual participation in the fraud.

[00:20:24] Speaker 04:
So it seems like we have two questions and I think what Judge Akuta was asking you was look at the district court and get it wrong on the choice of law because as plaintiffs have pointed out, that footnote that the district court relied on doesn't actually say what the district court said it does.

[00:20:42] Speaker 04:
I'm wondering if it matters because

[00:20:44] Speaker 04:
Even if California law applied or we were going to apply California law, the district court also did a secondary analysis and said, even if California law applied, there's no actual knowledge.

[00:20:56] Speaker 04:
So either way, I mean, there's nothing to suggest Texas.

[00:21:00] Speaker 04:
And maybe this is what you were responding.

[00:21:02] Speaker 04:
There's nothing to suggest in Texas law that that law, even if it were, even if you analogized from the Securities Act or whatever, it wouldn't be any different than California law.

[00:21:14] Speaker 04:
They didn't state a claim or they didn't have a genuine issue of material fact sufficient to go forward to defeat summary judgment.

[00:21:21] Speaker 04:
That's correct, okay?

[00:21:24] Speaker 01:
Are you familiar with the case of Judge Nelson reference DOS v. Bank of America?

[00:21:29] Speaker 03:
I can honestly say I have read DOS in a prior case, but it's not at the forefront of my mind Okay with and if you know again if the appellants are gonna have an opportunity to

[00:21:43] Speaker 03:
Submit a brief.

[00:21:44] Speaker 03:
We would like one as well.

[00:21:45] Speaker 01:
Yes, and if you can also have the deadline of Friday, so simultaneous briefing, thanks Can you can you help me out with what what did the district court do on the elder abuse claim?

[00:22:03] Speaker 04:
I

[00:22:03] Speaker 04:
Did the district court say that there was no evidence?

[00:22:09] Speaker 04:
Did it assume a should have known standard and said there was no evidence, no genuine issue of material fact even as to the should have known standard?

[00:22:18] Speaker 03:
Yes, Your Honor.

[00:22:20] Speaker 03:
Judge Nelson, the court went through the analysis of the prestigious involvement with the shared branch network

[00:22:29] Speaker 03:
And that it did not have knowledge of the actual transactions And it concluded that summary judgment on the claim was warranted because the facts Read in the light most favorable to the plaintiff failed to lead a reasonable person to believe that prestige should have known About the church's alleged Ponzi scheme and its harm to elders agree with that I mean obviously you do you want on it, but but I mean it seems like they I think in fairness summary judgment

[00:22:58] Speaker 04:
There's some suggestion that they should have known there were there were I mean you don't disagree that there was at least a genuine issue of material factors to you know red flags and warning signs that something should have been looked at well just just I don't agree with that because

[00:23:14] Speaker 03:
Certainly the California case of Casey specifically says that red flags and such are not signs of actual knowledge.

[00:23:25] Speaker 04:
No, I'm giving you that.

[00:23:26] Speaker 04:
They're not signs of actual knowledge.

[00:23:28] Speaker 04:
But if we apply a should have known standard, I mean, that's a tougher issue, I think, for your client.

[00:23:36] Speaker 03:
Again, I would respectfully say that it's not.

[00:23:40] Speaker 03:
What's your case on the should have known?

[00:23:42] Speaker 03:
Casey talks about the speed of banking transactions and how looking at them, monitoring accounts and things like that are not things that a bank does.

[00:23:52] Speaker 03:
A bank has no duty to non-customers.

[00:23:55] Speaker 03:
And again, as I talked about the Evans and the First Alliance case, this is not a case where prestige was funneling loans or propping a company up.

[00:24:07] Speaker 02:
But if I may interrupt, this isn't just about transactions.

[00:24:09] Speaker 02:
The bank actually took affirmative steps to kind of look a little further into it.

[00:24:13] Speaker 02:
They went to the website.

[00:24:15] Speaker 02:
They went to look at the property on whatever it was, Google Maps.

[00:24:18] Speaker 02:
So it wasn't just some transactions going through the wires, and they didn't look at it.

[00:24:22] Speaker 02:
They were actually on notice.

[00:24:24] Speaker 02:
Maybe not knowledgeable Ponzi scheme, but something a little bit awry was happening here.

[00:24:29] Speaker 03:
And Judge Lee, there's no evidence in the record that at the time that they did that,

[00:24:36] Speaker 03:
that they looked at the website, and there's no evidence that when they looked at the website that it would have made any difference in this case.

[00:24:43] Speaker 03:
The discussion is that that occurred in late 2018 or in 2018, and the SEC came in in the early part of 2019.

[00:24:54] Speaker 03:
So I don't think that goes to show that they had actual or some type of knowledge that there was anything wrong.

[00:25:02] Speaker 02:
I think most of us, I think,

[00:25:05] Speaker 02:
I think the actual knowledge, maybe not actual knowledge here, but should have, possibly, definitely, I think.

[00:25:12] Speaker 02:
And how do you draw the line?

[00:25:15] Speaker 02:
Where do we draw the line, you know, where it becomes should have to, maybe they did have actual knowledge, and when does that become an issue for the jury?

[00:25:23] Speaker 02:
Because your friend on the other side is saying there's so many red flags here, it's not just should have, but at least should have given to the jury to figure out whether it was actual knowledge.

[00:25:33] Speaker 03:
Again, I go back to the Evans and the First Alliance case where they talk about how the bank had an interest in loans for the customers of the bank and they were supposed to receive proceeds of those loans into a lockbox that the bank actually monitored.

[00:25:53] Speaker 03:
And over time, there was no actual money coming into the lockbox from operations of the bank such as the bank had

[00:26:01] Speaker 03:
had knowledge, or even reasonable suspicion, if there's no money coming in, there's no legitimate business enterprise going on.

[00:26:08] Speaker 03:
And that's the standard that the cases talk about.

[00:26:11] Speaker 01:
Do you disagree with the red flags that were identified by opposing party?

[00:26:16] Speaker 03:
Yes, Your Honor, I do, because they don't rise to the level of actual knowledge.

[00:26:22] Speaker 03:
And again, Casey talks to it, the Chason case, and there's a Gill case.

[00:26:27] Speaker 03:
that all talk to, there's no duty to non-customers.

[00:26:32] Speaker 03:
And with the speed of banking transactions in this country, you cannot look at individual deposits and withdrawals going through a regular depository account.

[00:26:42] Speaker 04:
So you keep saying there's no duty to determine actual knowledge.

[00:26:47] Speaker 04:
And maybe you're just saying, as a legal matter, even the should-have-known standard can't apply to a bank here, because under that theory, they don't have a duty to investigate anything.

[00:26:57] Speaker 04:
Even if, I mean, supposedly, I mean, under your theory, even if the church came in and said, hey, we're really glad that we can use your bank.

[00:27:07] Speaker 04:
We love the friendly atmosphere and it helps us because we're doing some shady stuff here and we're ripping these people off.

[00:27:16] Speaker 04:
You would say, tough luck, we don't have a duty to investigate what they're doing to other people.

[00:27:24] Speaker 04:
I mean, I want to give you a chance to flesh that out.

[00:27:27] Speaker 03:
Sure, and Judge Nelson, if they had knowledge that they're doing shady things, they do have an obligation, but not to non-customers.

[00:27:39] Speaker 04:
Well, right, but I mean, that theory suggests that even if they came in and said, we're ripping these people off, you would say, well, I don't have a duty to these people because they're not our customers.

[00:27:51] Speaker 04:
I just, I think you've overstated your position.

[00:27:54] Speaker 04:
Maybe I'm wrong.

[00:27:55] Speaker 04:
Maybe you are right.

[00:27:57] Speaker 04:
If you're right, then the debate about should have known and knowledge doesn't matter.

[00:28:02] Speaker 04:
But that's not, that was not my impression of, at least as I dug into the elder abuse claim.

[00:28:12] Speaker 04:
I mean, you've been making a statement that the bank has no duty to a third party.

[00:28:17] Speaker 04:
That may be, I could see a rationale where that goes, but I just don't know that that carries the day.

[00:28:23] Speaker 04:
They do have a duty to a third party.

[00:28:25] Speaker 04:
If they have actual knowledge that that third party is getting ripped off by one of their customers and their banks being used to do that, you would say they do have a duty to a third party.

[00:28:34] Speaker 04:
Correct.

[00:28:34] Speaker 04:
I agree.

[00:28:34] Speaker 04:
Yeah.

[00:28:34] Speaker 04:
Okay.

[00:28:37] Speaker 03:
And if the panel has any further questions?

[00:28:42] Speaker 01:
Thank you.

[00:28:43] Speaker 01:
Thank you.

[00:28:44] Speaker 01:
You have some time for rebuttal.

[00:28:53] Speaker 00:
Yes, thank you so much, Your Honors.

[00:28:55] Speaker 00:
I don't want to look a gift horse in the mouth, so I will submit that brief, but it turns out that DOS

[00:29:00] Speaker 02:
Interpreted a prior version of the elder abuse statute and there's a footnot in DOS that particularly says we're not construing the new statute This is still the old statute, but we'd be happy to submit that brief and if you look at if you can explain are there actual material differences between I think 2000 pre 2008 and the current one if you can focus on that Absolutely, we'll do judge Lee and not just rely on the language say them aware that language and the DOS opinion But right actually look at the text of the two statutes and great great

[00:29:26] Speaker 00:
And then I didn't want to address this actual knowledge issue, and my time is short.

[00:29:30] Speaker 00:
So what I would say is I would point the court to our reply brief.

[00:29:34] Speaker 00:
In pages 24 and 25, we talk about how plaintiffs presented evidence for a jury to infer that prestige eventually learned that instead of collecting membership dues, what the church was doing was getting money to invest for its clients.

[00:29:52] Speaker 00:
And there was a lot of evidence of this, and Mr. King testified to it.

[00:29:56] Speaker 00:
The point being a Ponzi scheme is not one fraud, right?

[00:29:59] Speaker 00:
The fraud is you purport to be selling something or making something, but instead what you're doing is you're getting money from innocent people and paying off prior people that you promised it to.

[00:30:09] Speaker 00:
So the first step of knowledge, sorry.

[00:30:12] Speaker 01:
What was the evidence of Ponzi scheme of using investment monies to pay off prior investors?

[00:30:21] Speaker 00:
First, there was sufficient evidence to show that the money that was coming in was not membership dues.

[00:30:27] Speaker 00:
The balance increased from $111,000 in January of 2018 to $3 million in September of 2018.

[00:30:36] Speaker 01:
So how does that show they were using the incoming funds to pay off prior investors?

[00:30:42] Speaker 00:
The first piece of it is that everybody acknowledged that this was a suspicious, worrying increase in balance.

[00:30:50] Speaker 00:
It didn't necessarily show that they were using the money to pay off prior investors, but it showed that this was not membership dues.

[00:31:01] Speaker 01:
This was not the Ponzi scheme where it was paying off investors.

[00:31:15] Speaker 00:
It was actually just You know funding mr.. King's lifestyle, but what I'm saying is

[00:31:21] Speaker 00:
There was sufficient evidence there was Yes, there were there were a number of deposit or wire transfers from the church account to mr. King in amounts about $5,000 Which the bank's own policy the credit unions own policy requires it to investigate furthermore each of those transactions

[00:31:44] Speaker 00:
led to an alert saying there's a Kent Whitney that is not supposed to be doing financial business in the United States.

[00:31:50] Speaker 00:
Can you please investigate?

[00:31:51] Speaker 00:
And the bank overrode those alerts.

[00:31:54] Speaker 00:
So it had knowledge that checks were coming in with the memo line saying from client, not dues from members, in amounts 5,000, sometimes 10,000, which generated cash reports that you can deposit $10,000 in cash without some kind of investigation.

[00:32:16] Speaker 00:
So there was that evidence.

[00:32:17] Speaker 00:
And then there was evidence that there was money going out to Mr. Whitney, the very person that they struck from the account, and they were being alerted to investigate.

[00:32:28] Speaker 00:
And all of those transfers are going to PayPal accounts.

[00:32:31] Speaker 00:
And some of those transfers said to pay for personal items, for girlfriends' dress, for student loans, and for things of that nature.

[00:32:41] Speaker 00:
So if you look particularly at the evidence that's cited in the reply brief on pages 24, 25, I believe that we have submitted at least enough evidence to show that a jury could infer that there was actual knowledge.

[00:32:56] Speaker 00:
Now, remember, summary judgment, extraordinary, drastic, not to be,

[00:33:01] Speaker 00:
granted without caution Particularly where knowledge intent or motive are at issue and so I think if you look at that in that context the district court may have been a little too hurried in its analysis and not giving and also Undermining the witnesses credibility could lead a jury to infer that when they deny actual knowledge that

[00:33:25] Speaker 00:
They're not actually being able to, they're not believable.

[00:33:28] Speaker 00:
So when the CEO says, I looked at Google Maps and I saw this warehouse, but we can show that the Google Maps should actually show this.

[00:33:35] Speaker 00:
Why couldn't a jury sit there and infer when he says, I didn't have actual knowledge, if he's wrong about this, he's wrong about that.

[00:33:41] Speaker 00:
Credibility determinations are the jury's province.

[00:33:44] Speaker 00:
Sorry, Judge Akuta, did you want to?

[00:33:46] Speaker 01:
You're running out of time, so.

[00:33:47] Speaker 00:
Okay.

[00:33:48] Speaker 00:
I think, I just wanted to mention the,

[00:33:50] Speaker 00:
Evans case, and just note that it's not a matter.

[00:33:53] Speaker 00:
It may be that a bank does not have a duty.

[00:33:56] Speaker 00:
Evans was a pleading case.

[00:33:57] Speaker 00:
It's an unpublished Ninth Circuit case, but it did say it doesn't matter whether the bank had a duty or not.

[00:34:02] Speaker 00:
It matters what the bank did.

[00:34:04] Speaker 00:
And in this case, the bank acknowledged that there were red flags, and it looked into it.

[00:34:08] Speaker 01:
All right.

[00:34:09] Speaker 01:
Thank you.

[00:34:09] Speaker 00:
And so we would submit that the court should reverse.

[00:34:12] Speaker 01:
I think we have your argument.

[00:34:13] Speaker 00:
Thank you for your time.

[00:34:14] Speaker 01:
And I thank both sides for their arguments, and the court for this session is adjourned.

[00:34:19] Speaker 00:
Thank you.