[00:00:00] Speaker 02:
Good morning, Your Honors. Steven Eisenberg on behalf of Appellant Fresh Mix.

[00:00:07] Speaker 02:
With regard to time, Your Honor, I would like to try to reserve five minutes in rebuttal. Can you speak up a little bit? Sorry. Sorry, Your Honor. To the extent I can reserve about five minutes for rebuttal. See how that goes. Your Honors, this is an interesting and complicated case when you look at it as a whole, but when you peel back the layers It's rather a very simple case that I think the district court got muddled in the complexities. So we have three different proceedings, Your Honor.

[00:00:40] Speaker 02:
We have an arbitration, we have a state court case, and we have a bankruptcy proceeding.

[00:00:46] Speaker 02:
So the defendants, the vast majority of them, represented FreshMix as well as other entities.

[00:00:53] Speaker 00:
The potential malpractice claims apply to all three?

[00:00:58] Speaker 02:
So no, Your Honors, and that's one of the complexities. The malpractice case applies to the bankruptcy proceedings. And so you have these two prior proceedings in which these attorneys, a group of these attorneys represented FreshMix as well as others. You then have a bankruptcy proceeding, Your Honors, and it's very simple boiling down. Look at the bankruptcy proceeding. Who's the creditor?

[00:01:22] Speaker 02:
Get Fresh.

[00:01:24] Speaker 02:
Who is the debtor? FreshMix. Now we get this complication that the other side and the district court got caught in. Who were Mr. Ligudian-Ponder?

[00:01:35] Speaker 02:
Well, in the bankruptcy, Mr. Ligudian-Ponder are the equity holders of FreshMix.

[00:01:41] Speaker 00:
In fact, they fight— Well, they're not the only equity holders of FreshMix.

[00:01:44] Speaker 02:
GetFresh was a creditor in that bankruptcy, Your Honor.

[00:01:47] Speaker 00:
Well, yes, but they also, as a matter of fact, were equity holders.

[00:01:53] Speaker 02:
Yes, but how did they behave in the bankruptcy, Your Honor's? They were a creditor.

[00:01:57] Speaker 04:
Before the settlement, Liguti and Ponder were minority owners who did not have the right to bring the legal malpractice claims at issue. After the settlement, they purported to have the right to bring the claims, but Nevada law prohibits the assignability of legal malpractice claims regardless of how the assignment is accomplished. Why isn't that what took place here, simply Liguti and Ponder trying to make an end run to Nevada law.

[00:02:28] Speaker 02:
So what happened, Your Honors, is Liguti and Ponder actually exercised their corporate rights, their membership rights in the LLC prior to any settlement. In 2021, 2022, as a result of GetFresh's breach of the operating agreement, they became the sole owners of FreshMix during the pendency of the bankruptcy.

[00:02:53] Speaker 00:
But nobody ever declared them such.

[00:02:55] Speaker 00:
You're saying that we could go back now and look at the operating agreement and make a determination that they should have been recognized as owners during the bankruptcy, but they weren't in fact recognized.

[00:03:09] Speaker 02:
It's alleged in paragraph 207 of the complaint that they exercised their rights under 8.3 of the operating agreement during the bankruptcy and became the sole owners.

[00:03:19] Speaker 00:
How did they exercise their rights?

[00:03:21] Speaker 02:
They sent a notice to the other side. They declared get fresh in default. They sent a notice, and they sent payment as required under the operating agreement. So I can tell you the trustee did not want to exercise— his rights in buying the company, the remaining units of the company. But Mr. Liguti and Ponder did. Now, I can tell you because I represented the estate. So I was there while this happened.

[00:03:53] Speaker 02:
And, in fact, Mr. Liguti and Mr. Ponder were the remaining owners of Fresh Mix. Now, there's an allegation.

[00:04:00] Speaker 00:
You said the trustee didn't want to do what?

[00:04:02] Speaker 02:
Didn't want to exercise to own more of Fresh Mix, own units of Fresh Mix, because he owned the rights of Fresh Mix already in a bankruptcy.

[00:04:10] Speaker 00:
Did the trustee bring a malpractice claim?

[00:04:14] Speaker 02:
So the trustee attempted to in state court. We were told that it was premature. And so the trustee continued to do discovery in the bankruptcy proceeding. And the bankruptcy proceeding actually resolved with a bad faith dismissal before all the discovery issues were resolved.

[00:04:30] Speaker 02:
So the turnover of records required under 7.055 and ethics, 1.16 of ethics, had not been concluded. There were motions to compel pending. The court had already ordered that Fresh Mix was entitled to all of its records. The court had already concluded that, I'll say, the arbitration and state court attorneys had indeed represented Fresh Mix as well as Get Fresh. The state court attorneys opposed those positions.

[00:05:00] Speaker 03:
Sorry, can I just interrupt you? It seems like the gist of what you're arguing is that the settlement didn't actually do anything because it was all already done. And that seems a little bit implausible. So what do you think the settlement did, if this is your argument?

[00:05:15] Speaker 02:
So what I'll do is let me boil it down a little bit more, Your Honors. I think Nevada state law is best stated as an assignment of a legal malpractice claim to an adversary from the same litigation that gives rise to the malpractice claim violates public policy. That is the actual Nevada standard. So what we have here is, was there a de facto assignment of rights? We all know, we all agree, Ligudi and Ponder were owners of FreshMix at all times.

[00:05:50] Speaker 04:
Sorry, can you, it's the same. Sorry, can I just repeat my question first?

[00:05:54] Speaker 02:
Yeah, sorry.

[00:05:55] Speaker 03:
I didn't understand your answer to my question.

[00:05:57] Speaker 02:
What did the settlement do? Sorry. So the settlement practically confirmed exactly what had happened during the scope of the bankruptcy.

[00:06:04] Speaker 03:
So you are saying the settlement did nothing? So the settlement— Well, it could pay $25 million as well.

[00:06:09] Speaker 02:
Well, so Ligudian, Ponder, and Geffresh, there were some allegations of monies being taken out inappropriately. by Get Fresh from Fresh Mix that belonged to the Goodyear Ponder. Those elements were resolved. The settlement, as I believe Pisanelli-Bice pointed out, the settlement itself, and as Get Fresh pointed out in the settlement agreement, Get Fresh surrendered all right title and interest to Fresh Mix.

[00:06:36] Speaker 02:
By their surrender of their units, whatever they had, whatever it was that was left, which is a factual issue that has to be ferreted out, Whatever they had left went back to Fresh Mix. It didn't go to Lagudian Ponder. So the practical is the only remaining owners of the company are Lagudian Ponder. Remember, Get Fresh acted as a creditor to attack its own entity. That was a violation of the operating agreement. So yes, in a weird way, Your Honor, Lagudian Ponder had acquired whatever rights Get Fresh had during the bankruptcy.

[00:07:11] Speaker 02:
Whatever was potentially left for sake of clarity, let's call it, Get Fresh had to wash its hands of whatever it was touching, that it still touched. We don't know what that is, actually. That hasn't been litigated. But the complaint alleges that Ligudian Ponder acquired Get Fresh's interests as a result of their default under the LLC operating agreement. So I think Oceania is what the district court looked to.

[00:07:40] Speaker 02:
The dissent in Oceania appropriately points out What about corporate formalities? And that's the weird thing in this case, Your Honor, is that the corporate formalities in this case, Get Fresh breached its duties, and it had consequences to it. But the consequences were before the settlement.

[00:07:59] Speaker 03:
So can I just ask, though, so I think one of the big policy concerns in these cases about not assigning malpractice claims is that in the negotiation of a settlement, there becomes a conflict of interest between the lawyers representing the one side here, not Ligudi, the other side. So the lawyers, all these lawyers representing that side have to suddenly both negotiate for that side and save themselves from this problem.

[00:08:33] Speaker 03:
And I don't understand how that policy problem didn't exist in the negotiation of this settlement. That policy is driving this doctrine, I think, and it seems to exist here. But correct me if I'm wrong.

[00:08:44] Speaker 02:
So let me take you back to another moment in this case that was pointed out by Brownstein Hyatt. I'm going to take you back to 2019 before the involuntary And this is at Brownstein, Hyatt, BHFS, ER 34. Okay?

[00:09:04] Speaker 02:
At this time, the lawyers in question have a duty to both get fresh and freshman, because I think we agree to that. Joint representation.

[00:09:12] Speaker 02:
This is Jim Pisinelli to the entire team at that time.

[00:09:16] Speaker 02:
On a very different note, I'm not going to read you the whole thing, but I think it summarizes the problem. The conflict already existed. This duty of loyalty was already breached. So this idea of them being in a conflict because of a settlement...

[00:09:30] Speaker 02:
That ship had sailed, Your Honor. On a very different note, I would like us to talk very early next week about the options including the bankruptcy option.

[00:09:39] Speaker 02:
I'm now going to skip.

[00:09:41] Speaker 02:
And this is, again, 34.

[00:09:44] Speaker 02:
And we need to consider the impact and applicability, if any, of the supermajority consent requirement for extraordinary events. That's the bankruptcy. They needed Mr. Ligudi's approval to put this company into bankruptcy.

[00:09:56] Speaker 00:
That's why they brought an involuntary bankruptcy. Mm-hmm. in the guise as creditor. And that act seems very important to me because they were not in the bankruptcy operating as the controlling entity of Fresh Mix, but instead as adverse to it.

[00:10:19] Speaker 02:
So the controlling, you get Fresh, was the adversary. And the policy is you can't assign to the adversary. Get Fresh is the adversary, not Fresh Mix, not Lagudian Ponder.

[00:10:30] Speaker 03:
That's one policy, but I guess I think this other policy of trying to protect the legal profession from this conflict that happens when you start negotiating this type of settlement, I guess I didn't understand. Your answer was they already had conflicts, and I understand that's the malpractice claim, but the conflict that is happening when you're negotiating the settlement I think is a big part of this doctrine.

[00:10:51] Speaker 02:
So it may be boiled down, Your Honor, a little bit more simply, and I apologize.

[00:10:56] Speaker 02:
None of these parties to the settlement owned the malpractice claim. The malpractice claim was in the bankruptcy estate. That belonged to Fresh Mix, and the trustee was not a party. Any considerations in this case? In fact, the court on January 12th, after the settlement was done, on January 12th, 2024, says, okay, the estate can pursue this litigation, this malpractice claim, but if I dismiss the case, it's going to go back to Fresh Mix, whomever that is.

[00:11:26] Speaker 02:
So the deal was done.

[00:11:28] Speaker 02:
The estate that wasn't part of this deal now returns the asset to FreshMix, to the only people who were fighting on the same side as FreshMix, who were aligned with FreshMix. And at that point in time, when this asset is returned, Whatever the ownership is of FreshMix, it is. There's not an assignment of ownership. So this idea of de facto assignment is what we're looking to because we know there isn't an assignment of, there's not an assignment of the claim. The claim returns from the bankruptcy estate to FreshMix.

[00:12:01] Speaker 02:
So the assignment issue is not proper under Nevada law. We have to look to this de facto issue, which Oceania, isn't the same fact pattern here at all, and that's probably why it's an unreported decision, but I'd look to the dissent with Tal, where he talks about corporate formalities, and corporate formalities here are very important.

[00:12:24] Speaker 00:
Can I step back a minute?

[00:12:27] Speaker 00:
Someone along the way raised the question of certifying those questions in Nevada Supreme Court. What's your position on that?

[00:12:34] Speaker 02:
I would be fine with that, Your Honors, because I think this is complicated because you have two matters in which the parties are aligned one way. But you didn't seek certification. We did not because I believe Oceania is very distinguishable and I think the judge's decision at the district court was incorrect because you have two matters where you can argue adversity, whatever.

[00:12:56] Speaker 00:
In fact, the Nevada Supreme Court or even the Nevada Court of Appeals has no presidential decision anywhere in this field of de facto assignments of this nature?

[00:13:12] Speaker 02:
No, because it's about ownership and an ownership fight that occurred within the context of a bankruptcy where one owner acted as a creditor, adverse to its own company.

[00:13:22] Speaker 00:
I'm saying even more broadly.

[00:13:26] Speaker 00:
No. More broadly as to this question of attributing what you're calling disregarding the corporate and finding an asset assignment because of a switch in ownership, essentially, of an entity, a switch of shareholders or members rather than of entities.

[00:13:55] Speaker 02:
Well, I don't think there is a case on point where one group of shareholders is removed because of their misconduct.

[00:14:02] Speaker 00:
Well, even leaving all that aside, I'm saying even on the broader questions here, like the Oceana kind of situation. There is no Nevada Supreme Court.

[00:14:13] Speaker 02:
No, there's no Nevada Supreme Court precedent. The only thing that Nevada was clear about is, again, the assignment of a legal malpractice claim to an adversary.

[00:14:24] Speaker 02:
The bankruptcy legal malpractice claim, Fresh Mix, Ligudi, and Ponder are aligned. The courts have decided that. The bankruptcy court decided their alignment in the order against piece of advice for turnover. And the court said get fresh was the adversary. So there's no assignment to get fresh. That's the problem. So this de facto assignment issue, it would be an issue if get fresh got rights.

[00:14:49] Speaker 00:
So Oceana also was very concerned about the fact, and Duro too, I think, that the parties would have to switch their positions. That's not true here.

[00:14:58] Speaker 02:
That is very important, Your Honor. There was no switch in positions. GetFresh said FreshMix was worth zero. FreshMix, Liguti, and Ponder said GetFresh is worth $80 million.

[00:15:09] Speaker 02:
So there was no switch in position, so that... But even as to the malpractice issues that would come up, there was no switch in position. There was no switch in position, Your Honor. That's correct.

[00:15:18] Speaker 04:
All right. Your time is expired, so I'll give you two minutes for rebuttal. Thank you, Your Honor. Thank you.

[00:15:34] Speaker 01:
Good morning. May it please the court. Phil Irwin, appearing on behalf of Appellees Pisanelli-Bice, PLLC, James Pisanelli, Deborah Spinelli, and Ava Schaffer. I will also be presenting argument today on behalf of the other appellees in the case who are all represented by counsel here today. I can introduce everybody, but it may be better to just jump into it.

[00:15:56] Speaker 01:
I wanted to briefly address before I start my argument a couple of factual representations about what was in the complaint that were just made by my colleague representing Fresh Mix. So it was argued that the malpractice claim only relates to the bankruptcy. In paragraph 283, for example, he expressly pled that the malpractice claim related to commencing an arbitration as well as a number of other acts. So we flatly disagree that only the bankruptcy was at issue in the malpractice claims.

[00:16:28] Speaker 01:
Similarly, this notion, and I'll get into this more later in my argument, but that the settlement was a formality and didn't accomplish anything because control had been transferred in 2021 or at some earlier date. At paragraph 263 of the amended complaint, Fresh Mix alleged, quote, GFSI parties settle with Liguti and ponder control of Fresh Mix transferred to Liguti.

[00:16:54] Speaker 04:
Well, so the corporation in this case, FreshMix, remains the same entity in name, correct?

[00:17:00] Speaker 01:
Correct. You're right.

[00:17:01] Speaker 04:
So doesn't your case depend on the assumption that FreshMix, as reconstituted after the settlement with the change in shareholders, is somehow a legally different entity than it was before?

[00:17:16] Speaker 01:
I don't know in the context of de facto assignments in violation of public policy on malpractice claims that it needs to be a reconstituted corporate entity. I think the key is that control of the malpractice claim has transferred to a party that never had the direct relationship with the attorney.

[00:17:39] Speaker 00:
Who's the party?

[00:17:41] Speaker 01:
Excuse me, Your Honor?

[00:17:42] Speaker 00:
To what party has it transferred?

[00:17:44] Speaker 01:
So in this case, which is very similar to the Duro Incorporated v. Rodino matters out of the Northern District of Indiana and the Seventh Circuit, control here in the settlement transferred from Get Fresh Sales Incorporated, which I'll refer to as GFSI, and it transferred to Mr. Liguti and Mr. Ponder, who were previously minority shareholders.

[00:18:06] Speaker 00:
That does require disregarding the corporate entities.

[00:18:08] Speaker 01:
Excuse me, Your Honor?

[00:18:08] Speaker 00:
That does require disregarding the corporate entities.

[00:18:13] Speaker 00:
But... That's what's peculiar about this. We spend so much time respecting the separateness of the corporate entities, and this whole doctrine, as the dissenter in Oceano pointed out, completely disregards that.

[00:18:32] Speaker 00:
So it's a little bit of a wrench in terms of the way lawyers usually think about corporate entities.

[00:18:38] Speaker 01:
It may be, Your Honor, but I think the public policy concerns are the most important here, and those reasons trump the corporate formalities, which is why the majority in the ocean— So what about certifying this to Nevada Supreme Court and seeing which they care about more? Well, I think Nevada law, and frankly the law in this area across the country, is uniform. Nevada has an absolute prohibition against the assignment of legal malpractice claims.

[00:19:05] Speaker 00:
But there is no Nevada Supreme Court case.

[00:19:08] Speaker 00:
about the notion that you are transferring, that you are assigning a claim when it's a single entity that has the claim because the ownership's changed. There is not... And how far that reaches. I mean, obviously, I mean, these are very small entities, and it's possible you could even pierce the corporate value. We don't know. But if you had a... You know, if you had Paramount and... and CBS, and they had a malpractice claim and they changed ownership.

[00:19:46] Speaker 00:
Does the malpractice claim disappear at that point?

[00:19:50] Speaker 01:
On the question of certifying the question to the Nevada Supreme Court, I would note that the Nevada Supreme Court declined to review the Oceania decision. There was a petition to have that heard by the higher court, and they did not do that. I also think Nevada law is in accord with other states' law, and I'd again point to the Duro v. Rodino decision because those courts relied on the Piccadilly decision from the Indiana Supreme Court, which Nevada has also looked to. The Nevada Supreme Court looked to that in Fever v. Tomcheck.

[00:20:21] Speaker 04:
Is there any evidence in the record that any of the parties used the legal malpractice claims as a bargaining chip during their settlement agreements?

[00:20:30] Speaker 01:
No, and we don't know anything about the settlement agreement. We've never even seen it. We only know what Fresh Mix alleged, and it very clearly alleged a de facto assignment. But as far as whether or not it was a collusive settlement, I think the Nevada Supreme Court— Collusive was whom? Excuse me?

[00:20:48] Speaker 00:
Collusive was whom? Was Get Fresh?

[00:20:52] Speaker 01:
Our position, Your Honor, is that it doesn't need to be a collusive settlement for this doctrine to apply. if you look at footnote four of the Oceania decision, as well as the Beaver v. Tomcheck decision, the specific facts, and this goes to distinguishing the case law, are not as relevant as the policy considerations.

[00:21:14] Speaker 00:
And in footnote four of the Oceania decision, the majority took issue with the dissent of... There's a counter-policy decision here, which is a malpractice claim, which...

[00:21:27] Speaker 00:
rests on conflict of interest contentions, and which was being pursued, or you can tell me whether that's true or not, or at least was considered to be pursued by the trustee in bankruptcy on behalf of the same corporation, is now up in smoke. Nobody will ever be able to assert it. Is that right?

[00:21:49] Speaker 01:
That's correct, Your Honor.

[00:21:51] Speaker 01:
And as far as the conflict of interest, I'm like a broken record, but I would again look to the Duro case, which had almost identical facts with the minority and majority shareholders. There was also multiple motions to disqualify claiming a conflict of interest.

[00:22:06] Speaker 00:
What's strange about this case is that the majority shareholder, with regard to the bankruptcy, was adverse to its own subsidiary, if you call it a subsidiary, because it was treating— If it had brought a voluntary bankruptcy, it would have been a different story, but it brought an involuntary bankruptcy purported to be a creditor of its own subentity.

[00:22:32] Speaker 00:
And so collusion under those circumstances seems extremely far-fetched.

[00:22:39] Speaker 00:
And the fact that the entity in the guise of the bankruptcy of state was...

[00:22:49] Speaker 00:
Pursuing the malpractice suggests that it has independent merit, and it only went away because the bankruptcy was an invalid bankruptcy. According to the bankruptcy judge, the bankruptcy judge dismissed it as an improper bankruptcy. If it had continued as a bankruptcy, the malpractice claims would have continued.

[00:23:12] Speaker 01:
Potentially, Your Honor, the trustee never filed malpractice claims.

[00:23:15] Speaker 00:
No, but he was trying to, as I understand.

[00:23:18] Speaker 04:
Would adopting your position mean that courts would have to sort out all of the various percentages of shareholder interests in every case like this one in order to apply the rule prohibiting assignments of legal malpractice claims? I don't know that that doesn't seem like a workable practice. Wouldn't a formal rule that doesn't require courts to look under the corporate hood be easier to administer?

[00:23:49] Speaker 01:
I don't think so, Your Honor. And I think that's borne out by the case law in this area, not just in the Oceania and Indiana, but you also have the Kenco decisions out of Washington, decisions out of Oklahoma and Kentucky, where the law is uniform. And these types of de facto assignments have been done through a federal court order transferring control or transferring that equity or selling, you know, or gifting, you know, the adverse party 50% so they can pursue the claims. Regardless of the specific facts, I think courts have been able to kind of see through this.

[00:24:22] Speaker 01:
And in this particular case, it's right in the amended complaint. I mean, Fresh Mix made it very clear that the settlement agreement, which resolved the claims between the adversaries, transferred control from the majority shareholders to the minority shareholders. There was a waiver of attorney-client privilege, which again is a hallmark of a de facto assignment in violation of public policy.

[00:24:45] Speaker 00:
Sorry, could you say that again? I missed the beginning of that. Last sentence.

[00:24:48] Speaker 01:
That GFSI waived privilege in the settlement agreement, which these courts, Nevada Supreme Court, or not the Nevada Supreme Court, the Seventh Circuit, Indiana, these other decisions have all found that that is a hallmark of a de facto assignment against public policy.

[00:25:08] Speaker 01:
all of these allegations are expressed in the face of the amended complaint. So for FreshMix to come in here and say, oh, it transferred earlier because we sent this notice, or it happened, you know, as a result of the bankruptcy, I don't think FreshMix can make those arguments because it has binding judicial admissions in its complaint about the effect of the settlement.

[00:25:31] Speaker 00:
Under that law, as I understand it, it's not just legal malpractice claims that aren't assignable.

[00:25:38] Speaker 00:
personal injury claims in general aren't assignable. So does this become now a rule about any personal injury claim?

[00:25:44] Speaker 01:
Well, I think it's limited to the facts of the case, and this is legal malpractice, and Nevada law is absolute here. There are no exceptions to Nevada law in this area, and it doesn't matter what the specific facts of the case are. You cannot assign a legal malpractice claim for a number of policy reasons.

[00:26:07] Speaker 01:
And it's not related to the specific facts of whether those policy concerns are present. It is the risk. If the court looks at Beaver v. Tomchak, the Nevada Supreme Court— Well, that makes—yes, of course.

[00:26:20] Speaker 00:
But as to the question of whether that principle applies under these circumstances, you would think you would go back to the policy considerations.

[00:26:29] Speaker 00:
In other words, the circumstances here are not an assignment. They're a— asserted de facto assignment accomplished through the change of ownership of an extant entity which apparently had reason to be considering and was considering the malpractice claims beforehand. I gather also that this rule about not transferring claims is not obviously applicable to claims that already exist.

[00:27:05] Speaker 00:
It has to be incipient claims. Is that right?

[00:27:10] Speaker 00:
Claims that already... In other words, if the case is already in court, it's not clear how Nevada law treats those.

[00:27:19] Speaker 01:
If the claims had already been filed and then control of the company transfers, I have not seen a case like that, Your Honor. What I have seen, though, is that every court that has addressed these de facto assignments has come down one way. And I have also seen Fresh Mix not cite a single case in support of its position. Judge Berzani, you pointed out earlier, you can distinguish the facts of just about any case, but you get a lot more mileage distinguishing facts when you're pointing at something that helps your position.

[00:27:50] Speaker 01:
Here, all Fresh Mix has done is distinguish cases, not just from the Nevada Court of Appeals, but from several other states and a sister circuit of this court, all coming down in the exact same place, which is, If there is a de facto control where the control of the entity holding the claims transfers, then that's an invalid assignment in violation of public policy, and there's just no dispute under the law there.

[00:28:17] Speaker 00:
Do you regard that rule as at least limited to circumstances in which the adversaries were – the parties were adversaries to each other so that – you wouldn't start applying it in the context that I was suggesting before.

[00:28:38] Speaker 01:
I think the adversarial nature is a critical feature of this assignment, but what I would point to... That's not a critical feature of the rule about assignments in general. That's right, Your Honor, and that's where I was going, because the Seventh Circuit pointed that out in response to the exact same argument of, oh, we were always fighting on, you know, the minority shareholder was always fighting for the company, so there was no conflict. The Seventh Circuit said that that stretches it way too far. And even if that were true, that there were no adversarial relationship, the rule against the assignment of malpractice claims is absolute.

[00:29:14] Speaker 01:
So I don't know that.

[00:29:15] Speaker 00:
So that means that you're not limiting this de facto rule to circumstances in which there was an adversarial relationship. So that becomes a, you know, if we at least limited it.

[00:29:28] Speaker 00:
Regarded as limited to those circumstances, at least we have a box into which this is fixed. Otherwise, it seems to become extremely broad. Because corporate controls switch all the time.

[00:29:40] Speaker 01:
Your Honor, that's not me saying that. That is the Seventh Circuit Court of Appeals addressing the same Indiana law that the Nevada Supreme Court has looked at.

[00:29:48] Speaker 00:
We should rule if we're going to rule on this.

[00:29:50] Speaker 01:
I think this is a motion to dismiss, I think. The court is limited to, there's a lot of extraneous stuff that got put into the record, including the email that got read earlier in the argument. But I think the court is limited to the allegations in the amended complaint, which are abundantly clear that this settlement agreement was designed to accomplish a de facto assignment in violation of public policy where the former lawyers, the adversaries of Mr. Libutti and Ponder are carved out from the releases.

[00:30:20] Speaker 01:
There is a waiver of privilege. All of the hallmarks.

[00:30:24] Speaker 03:
Can I just ask, so it seems like the complaint basically incorporates by reference this settlement agreement, but I think you said earlier you've never seen it. Why don't we have the settlement agreement?

[00:30:33] Speaker 01:
It's never been produced to us. The case never went to discovery, but my clients as well as the other lawyers weren't in the room when this deal got hashed out.

[00:30:42] Speaker 01:
So to the point of whether there was a collusive settlement or not, I don't believe that matters to find a de facto assignment in violation of public policy, but we don't know So we don't have that information. We've never seen the settlement agreement work.

[00:30:57] Speaker 03:
So the clients negotiated this by themselves without the lawyers? I was asking a question earlier. I thought the lawyers would sort of be in this weird position of having to negotiate for the client and against themselves, but you're saying the lawyers didn't negotiate.

[00:31:08] Speaker 01:
Separate counsel. But my clients were out by the time this agreement was reached. But all we are relying on is the allegations and the amended complaint, which kind of rendered that discovery unnecessary because, you know, the Ninth Circuit is saying you can plead yourself out of a claim. And FreshMix has pled every fact you need and every hallmark of a de facto assignment in violation policy. It is in the 100-page complaint. We know exactly what the settlement agreement did.

[00:31:41] Speaker 01:
And I don't see any other conclusion that it was transparently orchestrated to accomplish what the law prohibits.

[00:31:48] Speaker 01:
I know I'm out of time, Your Honor. If the panel has any other questions, I'm happy to answer those.

[00:31:52] Speaker 04:
We do. Thank you.

[00:31:54] Speaker 01:
Thank you.

[00:32:03] Speaker 02:
Thank you, Your Honors. So what I'll note is that my colleague, Mr. Irwin, had mentioned the Duro case and Once again, the public policy in the Duro case, the overarching public policy, is a duty of loyalty.

[00:32:27] Speaker 02:
So that's the public policy we're seeking to address. Now, the letter that I read from, the email that I read from, it wasn't put into the record by me. It was put into the record by a Pelley counsel.

[00:32:40] Speaker 02:
By a Pelley counsel. Not Mr. Irwin, though. Another counsel.

[00:32:45] Speaker 00:
It's a motion to dismiss, so how is it put into the record at all?

[00:32:49] Speaker 00:
Is this a motion to dismiss? How is it in the record at all?

[00:32:52] Speaker 02:
It was part of the motion practice. It was attached to various motions as additional exhibits for the court to take into account.

[00:32:59] Speaker 00:
On a motion to dismiss?

[00:33:01] Speaker 02:
On a motion to dismiss, Your Honor, yes. There were various exhibits added to the motion to dismiss with the idea that, look, if you're going to dismiss it, let us amend as well. So don't dismiss. You need us to correct things. Here's some reasons why we'll amend. So we have counsel that said the prolux complaint.

[00:33:18] Speaker 03:
But wait, your side would have been the side amending. Correct, correct. So you would usually be the one saying, here's what I would amend with. You're saying they are the ones who gave that, though?

[00:33:26] Speaker 02:
They put it in in response to the motion. They put it into this record, Your Honors. The underlying record, it wasn't part of the complaint. So we didn't add it to this record.

[00:33:37] Speaker 02:
The appellee added it to the record. So they're allowed to. They chose to. I didn't make that decision. But that letter that I referenced goes in and talks about the systematic decisioning that's happening with council to drive Fresh Mix value to zero for the benefit of Get Fresh.

[00:33:57] Speaker 02:
That's planning against the client.

[00:33:58] Speaker 00:
That's the malpractice claim. It's not responsive to the question of whether there was an assignment here.

[00:34:04] Speaker 02:
Sorry, Your Honor, I did not hear that.

[00:34:06] Speaker 00:
I said that suggests that you have a quite possibly... valid underlying malpractice claim, but what does that have to do with the assignment question?

[00:34:15] Speaker 02:
So, Your Honor, it doesn't have to do with the assignment question, but it has to do with the public policies of duty of loyalty. You can't claim there's an assignment that would cause a disloyalty issue or a loyalty issue when you're already disloyal to that client. You helped a creditor and an owner put that client into an involuntary bankruptcy. You weren't loyal to FreshMix. They can't claim we're protecting the professionalism of the law practice when you already breached professionalism.

[00:34:44] Speaker 00:
There would be a rule, which Duro does not seem to recognize, that when the malpractice claim is based on a conflict of interest or disloyalty, then the assignment rule doesn't apply, or what?

[00:34:56] Speaker 02:
Well, there isn't an assignment here, so that's sort of the problem.

[00:34:59] Speaker 00:
Well, I know, so that's the question.

[00:35:02] Speaker 00:
So I don't see the pertinence of what you're saying. I mean, it might not be a bad rule that says when... when there is no loyalty, when the claim is lack of loyalty, the assignment rule doesn't apply, but you're not arguing for that. You're arguing that this isn't an assignment.

[00:35:17] Speaker 02:
Correct. There's no de facto assignment, and I think Judge Callahan pointed it out. What percentages do we use? When do we do that? There's some times where let the fact finder hear the case, try the case. When there wasn't an assignment, acknowledge corporate formalities, let them stand, and let the trier of fact decide ultimately what happened here. Rather than putting in this rule into Oceania, it can get expanded dramatically.

[00:35:45] Speaker 04:
And I want to... I'm going to ask you to wrap up.

[00:35:47] Speaker 02:
Sorry.

[00:35:48] Speaker 04:
Now you've gone into overtime. I'm sorry.

[00:35:51] Speaker 02:
So one of the critical evaluations, look at all of the Nevada law, and you'll find it's a transfer to a creditor. That has always happened. That's been the issue. Not that a majority has been found to do something wrong, knowingly wrong with the aid of attorneys, it's always a transfer to a creditor. There's no transfer to a creditor. There's no de facto transfer to a creditor. That didn't happen here. In fact, Get Fresh was the creditor.

[00:36:18] Speaker 02:
Ligudi and Ponder were owners left in charge because of the other creditor owner's malfeasance, but the attorneys owed a duty of loyalty to Fresh Mix.

[00:36:30] Speaker 02:
That's the duty of loyalty. Thank you, honors.

[00:36:32] Speaker 04:
Thank you for your argument in this matter, and...

[00:36:36] Speaker 04:
The stand submitted in this court is in recess until tomorrow at 9.