[00:00:00] Speaker 01:
All right, we're going to move to our next case, 25-4062, Kosher Eats versus Welch.

[00:00:14] Speaker 04:
Good morning, Your Honors.

[00:00:15] Speaker 04:
May it please the Court?

[00:00:16] Speaker 04:
Kenneth Chase for the appellants, plaintiffs below.

[00:00:19] Speaker 04:
If I could reserve three minutes for rebuttal, that would be fantastic.

[00:00:24] Speaker 01:
You have to, as you can see, you have to keep track of your own time.

[00:00:29] Speaker 04:
Thank you, Judge.

[00:00:30] Speaker 04:
The district court's order should be reversed because the standard set forth in Twombly and Iqbal was turned upside down.

[00:00:40] Speaker 04:
This case involves a theft of $8.3 million from small businesses.

[00:00:45] Speaker 04:
There was an advance fee fraud scheme that's at issue here.

[00:00:50] Speaker 04:
Pursuant to the advance fee fraud scheme, a law firm drafted a very unusual loan agreement.

[00:00:58] Speaker 04:
That unusual loan agreement

[00:01:00] Speaker 04:
provided that the borrowers would pay to Messner Reeves 25% of the amount of an enormous business loan.

[00:01:11] Speaker 04:
This enormous business loan, which was done to scale, and there were commitments made for over $40 million of these loans, these loans were to be at 6%, no personal guarantee, no real estate collateral, no payments for 10 years.

[00:01:30] Speaker 04:
interest only at 6%, no real estate collateral, no personal guarantee, no payments for 10 years, basically free money.

[00:01:37] Speaker 04:
The only catch was pay Messner Reeves 25% of that loan, and then Messner Reeves will hold that money, that deposit money, for up to 90 days in its sole possession and control.

[00:01:53] Speaker 04:
And if for whatever reason the loan doesn't fund,

[00:01:56] Speaker 04:
the money will be given back to the customer, to the borrower, to these members of the public.

[00:02:02] Speaker 04:
That didn't happen.

[00:02:03] Speaker 04:
The Bloc agreement, which was drafted by Messner Reeves, was riddled with false statements.

[00:02:09] Speaker 04:
It induced these victims to pay into Messner Reeves' trust account over $10 million, $8.3 million of which was from the plaintiffs, the appellants.

[00:02:23] Speaker 04:
It was paid in, and then

[00:02:26] Speaker 04:
disappeared, and then there were lies.

[00:02:30] Speaker 04:
What's at issue here, Your Honor, is the irregular nature of the law firm that perpetrated this advanced fee fraud scheme.

[00:02:40] Speaker 04:
This law firm has 77 attorneys, experienced attorneys, who identified themselves in every context, publicly, in sworn statements to the court, in referring to each other.

[00:02:56] Speaker 02:
Counsel, help me with this.

[00:02:57] Speaker 02:
I'm just having a real difficulty distinguishing between Mesner General Partnership and the law from Mesner Reeds.

[00:03:10] Speaker 02:
Can you help me with that?

[00:03:11] Speaker 04:
Absolutely, Your Honor.

[00:03:12] Speaker 04:
There is a corporate registration called Mesner Reeds LLP that is a corporate form that we argue exists concurrently with a unregistered general partnership.

[00:03:25] Speaker 04:
That corporate form, Your Honor, has a partnership agreement.

[00:03:30] Speaker 04:
That partnership agreement actually wasn't considered by the district court.

[00:03:33] Speaker 04:
But even if it was, it contains exactly what was alleged in the First Amendment amended complaint.

[00:03:39] Speaker 04:
There are 11 partners in Messner-Reed's LLP, not a single human being.

[00:03:45] Speaker 04:
All of the 11 partners are corporate forms.

[00:03:47] Speaker 04:
Zero of the 77 attorneys who identified themselves.

[00:03:52] Speaker 02:
That's not unusual, is it?

[00:03:54] Speaker 02:
a law firm be set up like that?

[00:03:56] Speaker 04:
Maybe it's not.

[00:03:57] Speaker 04:
Maybe it is, Your Honor, but it's not in the record how usual or unusual it is.

[00:04:02] Speaker 04:
The district court did cite a news article, a Reuters news article, talking about larger law firms, the Amwah law firms, which Mesner Reeds is not one of them.

[00:04:12] Speaker 02:
Well, let me ask you this.

[00:04:15] Speaker 02:
There's no written partnership agreement for Mesner General Partnership, is there?

[00:04:20] Speaker 04:
That's absolutely right, Your Honor.

[00:04:22] Speaker 04:
There is not a written agreement.

[00:04:23] Speaker 04:
And there does not need to be under partnership law in Colorado.

[00:04:27] Speaker 04:
At 764-202, Section 1, all a partnership requires is two or more people organized together, conducting a business, associating together for profit.

[00:04:39] Speaker 04:
That's it.

[00:04:41] Speaker 00:
So I think to kind of tag on to the questions that have been asked.

[00:04:45] Speaker 00:
So you allege that there's a limited partnership, which is Messner Reeves, the law firm.

[00:04:50] Speaker 00:
You also allege these individuals all worked as lawyers for that limited partnership law firm.

[00:04:56] Speaker 00:
You also allege facts that you contend show the existence of a general partnership, the alleged Mesner general partnership.

[00:05:02] Speaker 00:
And those facts include that the individuals all called themselves partners, they shared office space and resources, contributed resources, et cetera.

[00:05:09] Speaker 00:
But these facts could possibly support or be consistent with the existence of a general partnership

[00:05:16] Speaker 00:
But all those facts just as likely point to nothing more than the lawyers working together in a limited partnership law firm, something specifically alleged to exist in this case.

[00:05:25] Speaker 00:
So my question is, what facts have you alleged that would push the existence of the Messner General Partnership specifically versus just the law firm across the line from possible to plausible?

[00:05:38] Speaker 04:
That's an excellent question, Your Honor.

[00:05:40] Speaker 04:
There's no prohibition of the two corporate forms

[00:05:43] Speaker 04:
are the two forms existing simultaneously.

[00:05:46] Speaker 04:
There's no prohibition in law.

[00:05:47] Speaker 04:
So it's certainly feasible that that occur.

[00:05:50] Speaker 04:
What's unusual about this case is that there was an assumption that these attorneys were, quote, income partners.

[00:05:58] Speaker 04:
It exists nowhere in the partnership agreement.

[00:06:00] Speaker 04:
There's no terminology of what it means to be a non-equity partner.

[00:06:05] Speaker 04:
These other law firms that are probably referenced in the Reuters article have terms of engagement or terms that set forth

[00:06:13] Speaker 04:
Here is your compensation structure.

[00:06:14] Speaker 04:
Here's what it means to be non-equity.

[00:06:16] Speaker 04:
You are not a partner here.

[00:06:18] Speaker 04:
Here are your voting responsibilities.

[00:06:20] Speaker 04:
The assertions that were made by the defense, none of which should actually be considered in Rule 12 context, because the allegations are considered in the light most favorable to the plaintiff and accepted as true.

[00:06:31] Speaker 04:
The defense's assertion was, we have no paperwork.

[00:06:35] Speaker 04:
We have no agreement.

[00:06:37] Speaker 04:
We just decide to call each other partners all the time, publicly

[00:06:42] Speaker 04:
In social media posts, we announced lateral partners coming in to join the partnership, to come in as a partner.

[00:06:50] Speaker 04:
Never was it said that that only means job title.

[00:06:55] Speaker 04:
That's just nowhere in the record except defense's unsworn representation.

[00:06:58] Speaker 02:
Are you saying that those representations that you just talked about, including my colleagues and partners, is it that is somehow inconsistent?

[00:07:11] Speaker 02:
with the existence and operation of Messner-Reeves LLP?

[00:07:16] Speaker 04:
No.

[00:07:16] Speaker 04:
Your Honor, we say it's consistent.

[00:07:18] Speaker 04:
We're taking the attorneys at their word.

[00:07:21] Speaker 04:
We are saying these lawyers said that they're partners because they're partners in a partnership.

[00:07:26] Speaker 04:
They're either partners in a partnership or they're saying they're partners, but they're not partners at all.

[00:07:31] Speaker 04:
in which case they would need some sort of a public disclaimer, or caveat, or limitation.

[00:07:36] Speaker 02:
Well, the Mezner-Reeves is a partnership.

[00:07:40] Speaker 02:
It's just a limited liability partnership.

[00:07:43] Speaker 02:
Absolutely, Your Honor.

[00:07:44] Speaker 02:
Yes, it is.

[00:07:45] Speaker 02:
All right, so can't they call themselves partnered in referring to their position in Mezner-Reeves and their relationships rather than some

[00:07:58] Speaker 04:
of course they could your honor and they would it would not be hard for them to do so they could certainly say when they swear under oath as eight of them did in submissions to tribunals they could say my job title is partner however I am not actually a partner in a partnership I swear my rate is XYZ every time it was I'm

[00:08:26] Speaker 04:
I am a partner at Messner Reeves.

[00:08:30] Speaker 04:
It didn't say that it was just a job title.

[00:08:33] Speaker 00:
But wouldn't your theory of the Messner general partnership coexisting with the Messner Reeves law firms essentially give anyone an avenue to skirt the existence of a written partnership agreement?

[00:08:44] Speaker 04:
If the facts support it, Your Honor, then perhaps.

[00:08:47] Speaker 04:
Your Honor is asking me a very good question, which is, what's the limiting principle?

[00:08:51] Speaker 04:
The limiting principle is, number one, don't steal $8.3 million and have the existence of a partnership agreement be the linchpin of a RICO claim.

[00:08:59] Speaker 04:
That's number one.

[00:09:00] Speaker 04:
So this irregularity of the structure is in the context of very damning and very alarming allegations of the theft of a lot of money that's still unexplained and still hasn't been returned.

[00:09:13] Speaker 04:
But Your Honor's question is, what would stop plaintiffs from just alleging that a law firm with a corporate firm

[00:09:21] Speaker 04:
with proper corporate formalities, which this law firm did not have proper corporate formalities.

[00:09:27] Speaker 04:
If there are proper corporate formalities, the case wouldn't go anywhere.

[00:09:31] Speaker 04:
If these lawyers actually are not partners and actually didn't behave as partners and actually are income partners or whatever it is, and there's documentation as to it, there wouldn't be a viable legal claim.

[00:09:42] Speaker 02:
So let me ask you, is a lynchpin in your case

[00:09:46] Speaker 02:
that the representations that have been made by the individuals involved in Mesmeries, that's a linchpin of your case for liability, correct?

[00:09:59] Speaker 04:
As to the RICO, Your Honor, it is.

[00:10:02] Speaker 04:
Because that's the enterprise.

[00:10:03] Speaker 02:
Well, that's our focus is the RICO claim.

[00:10:08] Speaker 04:
Absolutely, Your Honor.

[00:10:09] Speaker 04:
That is the enterprise.

[00:10:10] Speaker 02:
All right.

[00:10:12] Speaker 02:
Will you answer my question?

[00:10:13] Speaker 02:
It's a linchpin.

[00:10:14] Speaker 04:
It is, Your Honor.

[00:10:16] Speaker 04:
Yes.

[00:10:16] Speaker 04:
It is the enterprise, which is an association of persons that are conducting the racketeering activities, which is at least five counts of wire fraud and at least five counts of transporting stolen... No, no, no.

[00:10:32] Speaker 02:
Wait a minute.

[00:10:32] Speaker 02:
My questions were about Mesner Reaves.

[00:10:37] Speaker 02:
You're now talking about Mesner General Partnerships.

[00:10:44] Speaker 04:
That's correct, Your Honor.

[00:10:45] Speaker 04:
Did Your Honor ask a specific question as to Rico as to the Messner-Reeves LLP?

[00:10:53] Speaker 02:
My question was, which I thought you answered, and that is, is it a linchpin to your Rico claim that the individuals involved in Messner-Reeves LLP, their representations are a linchpin, you know, as to partnership and things like that.

[00:11:09] Speaker 02:
It's a linchpin to your Rico claim.

[00:11:13] Speaker 04:
It is their representations are important, Your Honor.

[00:11:18] Speaker 04:
The lintpin's not exactly the terminology of RICO.

[00:11:21] Speaker 04:
Are they very important to your RICO?

[00:11:26] Speaker 04:
Your Honor, I would say that they're in the constellation of facts, all of which are important under the totality of the circumstances, which is the proper standard.

[00:11:33] Speaker 04:
It was asserted in some of the briefing by the defendant.

[00:11:36] Speaker 02:
Could you explain to me what's the rest of the constellation besides these representations?

[00:11:42] Speaker 04:
These attorneys not only represented themselves as partners in all contexts, represented each other when they're talking about each other in all contexts, made public statements about themselves and each other in all contexts.

[00:11:57] Speaker 04:
Those are the verbal statements, put themselves out to the public in all contexts as partners, then also engaged in the activities.

[00:12:06] Speaker 04:
of the partnership.

[00:12:07] Speaker 04:
The actual partnership agreement says only one person has all the control.

[00:12:11] Speaker 04:
That's not even logical that a law firm would even function in that manner.

[00:12:16] Speaker 04:
So there's an actual way.

[00:12:18] Speaker 02:
You're talking about the Mester Reeves.

[00:12:20] Speaker 04:
The Mester Reeves' actual partnership says one person has votes.

[00:12:25] Speaker 04:
It's not even a partnership.

[00:12:26] Speaker 04:
The way it's actually set up, in terms of the Mester Reeves' LLP, but the way the law firm actually conducted itself was

[00:12:36] Speaker 04:
There's 77 people are practicing law as partners.

[00:12:39] Speaker 04:
If I could yield and reserve my time for rebuttal.

[00:12:43] Speaker 01:
You may.

[00:12:43] Speaker 04:
Thank you, Judge.

[00:12:50] Speaker 05:
Good morning.

[00:12:51] Speaker 05:
Excuse me.

[00:12:51] Speaker 05:
I'm overcoming a cold.

[00:12:52] Speaker 05:
But good morning.

[00:12:53] Speaker 05:
My name is Troy Rackham from the law firm of Spencer Fane.

[00:12:56] Speaker 05:
And I'll be arguing on behalf of all of the appellees today.

[00:13:00] Speaker 05:
As the briefs make clear and as Your Honor's questions make clear,

[00:13:04] Speaker 05:
Plaintiff's appeal on the RICO claim rises and falls based on the enterprise element.

[00:13:09] Speaker 05:
And the law is very clear.

[00:13:10] Speaker 05:
Enterprise needs to be distinct from the enterprise defendants.

[00:13:14] Speaker 05:
But the appellants never pled cognizable RICO enterprise distinct from the defendants because the alleged Mesner general partnership doesn't exist.

[00:13:24] Speaker 05:
And the law is clear that the fact that a lawyer represents himself in an email or an affidavit as a partner doesn't

[00:13:33] Speaker 05:
convert to some general partnership status under partnership law, both under Colorado Uniform Partnership Law and the federal cases cited in the briefs.

[00:13:42] Speaker 05:
The case law is very clear on that topic.

[00:13:46] Speaker 05:
But even if the plaintiff alleged sufficient facts which accepted as true would establish a plausible Mezner general partnership theory, plaintiff's RICO claim failed on the other elements.

[00:14:00] Speaker 05:
They didn't allege personal participation and operation by the defendants in the enterprise, or a sufficient pattern of continuity, and they failed under Rule 9B.

[00:14:09] Speaker 05:
But let's talk about the focus, which is the general partnership piece of it.

[00:14:14] Speaker 05:
And Judge Murphy, you asked the question, what facts push it across, I'm sorry, the question was asked, what facts push this beyond the

[00:14:27] Speaker 05:
idea of possible to plausible, the idea of a general partnership.

[00:14:30] Speaker 05:
And the answer is none, because the critical part of being a general partner under Colorado law and under even the 10th Circuit law that interprets Colorado law is ownership in the enterprise and participation in profits and losses.

[00:14:47] Speaker 05:
And there is not a single fact in the plaintiff's first amended complaint that suggests any of these 77 individuals

[00:14:55] Speaker 05:
were to use the words of Judge Easterbrook in the Seventh Circuit case, in his concurring opinion, that they were on the hook for the losses.

[00:15:03] Speaker 05:
And that's the key part of being a partner as opposed to an employee.

[00:15:09] Speaker 05:
And Colorado statute is clear, the fact that employee gets paid compensation, which of course comes from the profits of the organization, doesn't make that person up.

[00:15:19] Speaker 05:
partner merely because they get paid compensation for it.

[00:15:22] Speaker 05:
They have to be entitled to get paid profits and be entitled to participate in the management and ownership of the partnership.

[00:15:29] Speaker 05:
And there are no allegations that any of the 77 individuals had the right to participate in the management or operation of the law firm or that most critically, they agreed to share profits and losses.

[00:15:48] Speaker 05:
There was a question asked or an argument made that there's no terminology about using non-equity partners in the affidavits or other representations made by these lawyers.

[00:16:01] Speaker 05:
That doesn't matter.

[00:16:03] Speaker 05:
The plaintiffs specifically allege that these 77 individuals were employees of Mesner Reeves.

[00:16:12] Speaker 05:
Mesner Reeves has amended and restated partnership agreement that was submitted in the record.

[00:16:18] Speaker 05:
the certificate of registration with Colorado Secretary of State, which was a public record and the trial court could properly consider.

[00:16:25] Speaker 05:
And it's really indisputable that there is a law firm called Mesner Reeves that is a limited liability partnership.

[00:16:32] Speaker 05:
And that law firm has lawyers who are employed by the law firm using the title as partner.

[00:16:40] Speaker 05:
But that doesn't convert them somehow to a general partner in a partnership operating outside of the context of the law firm.

[00:16:49] Speaker 05:
And that's critical because the law firm itself, Mesner Reeves Limited Liability Partnership, couldn't be the RICO enterprise when all of the RICO defendants are simply employees of the law firm, because there's no distinctness between the enterprise and the RICO defendants.

[00:17:09] Speaker 05:
And tense circuit law is very clear on that topic based on US Supreme Court law.

[00:17:15] Speaker 05:
And Judge Murphy, you asked, what is the difference between the Mesner Reeves firm, the limited liability partnership and the Mesner general partnership?

[00:17:24] Speaker 05:
The answer is nothing.

[00:17:25] Speaker 05:
There's no difference.

[00:17:27] Speaker 05:
These lawyers were acting as employees of the Mesner Reeves limited liability partnership.

[00:17:34] Speaker 05:
And they use the title partner because law firms, particularly in today's day and age, have

[00:17:39] Speaker 05:
equity partners, non-equity partners of counsel, employees, none of those labels are dispositive of whether a lawyer working in a law firm is a partner as compared to an employee.

[00:17:53] Speaker 05:
And the Seventh Circuit's decision in that Judge Easterbrook concurring opinion that I referenced is very persuasive on that, the EEOC versus Sidley, Austin and Brown and Wood.

[00:18:05] Speaker 05:
But you don't even need to go to the Seventh Circuit because the

[00:18:08] Speaker 05:
The Supreme Court's decision in the Clackamas case is very clear that the fact that a physician was referring to him or herself with some designation is not even relevant to the question of whether that physician was a partner as compared to an employee.

[00:18:25] Speaker 05:
And Judge Murphy, you also asked the question, it's not unusual for a law firm to operate this way.

[00:18:34] Speaker 05:
That's true.

[00:18:35] Speaker 05:
It's true not only from the Reuters article that the district court cited, but it's true from these cases that I referenced, the EEOC versus Sidley Austin Brown and Wood case, the Clackamas case, and the other cases cited.

[00:18:47] Speaker 05:
And I believe it was footnote 12 of Appellee's brief, which are clear that the fact that a lawyer calls him or herself partner is not dispositive of the partnership status or the employment status of the law firm.

[00:19:03] Speaker 05:
Plaintiffs advanced all sorts of theories about partnership by estoppel or partnership by representation.

[00:19:11] Speaker 05:
None of those are sufficient under the Colorado Uniform Partnership Act to establish a Colorado or establish a general partnership operating outside of Mesner Reeves because there were no allegations and there could be no allegations that these individuals had the right to participate in the profits,

[00:19:29] Speaker 05:
and as critically the losses of the law firm, or that they had to invest anything in the law firm in terms of capital that they put at risk to become a partner in the law firm.

[00:19:42] Speaker 05:
And even if every fact pled in the first amended complaint was accepted as true, the legal elements required to establish a general partnership are missing.

[00:19:54] Speaker 05:
the legal element of sharing in profits and losses, participation in the ownership and management of the firm, and compensation that's not just compensation, but compensation as a percentage of profits.

[00:20:10] Speaker 05:
None of those are contained in the first amended complaint.

[00:20:13] Speaker 05:
Instead, they allege benign allegations which would apply to every law firm with which I'm familiar.

[00:20:19] Speaker 05:
The lawyers practice together.

[00:20:21] Speaker 05:
They share work together.

[00:20:23] Speaker 05:
The revenue that comes into the law firm is used to pay compensation.

[00:20:27] Speaker 05:
The lawyers represent themselves in affidavits as partners.

[00:20:33] Speaker 05:
None of that would be sufficient to establish a general partnership under Colorado law.

[00:20:38] Speaker 05:
And it's pretty common for law firms to participate in that way.

[00:20:43] Speaker 05:
If you accepted the plaintiff's view and took it to its logical extreme, a law clerk,

[00:20:50] Speaker 05:
a first-year law student who's doing a summer law clerk in the law firm and represents themselves as sharing in the work, being part of a practice group, participating in moving the work around, that person would be a partner.

[00:21:06] Speaker 05:
That's simply not plausible.

[00:21:09] Speaker 01:
But counsel, that person wouldn't call themselves a partner.

[00:21:13] Speaker 05:
They'd call themselves a law clerk, right?

[00:21:17] Speaker 01:
I mean, we don't know.

[00:21:18] Speaker 05:
We don't know.

[00:21:19] Speaker 05:
It depends on what the law firm, I suppose, would authorize for that person.

[00:21:22] Speaker 05:
I mean, if I were a participant in the management of the law firm, I'd say, no, you should call yourself a law clerk instead of partner.

[00:21:29] Speaker 05:
But the point is the nomenclature used by that person is not sufficient to conclude that that person was a partner as opposed to something else.

[00:21:39] Speaker 05:
You need investment in the law firm.

[00:21:41] Speaker 05:
You need participation in the profits and losses.

[00:21:44] Speaker 05:
And none of those facts were alleged.

[00:21:46] Speaker 05:
And the district court was correct in deciding that.

[00:21:50] Speaker 05:
But even if you move beyond that.

[00:21:53] Speaker 05:
Yes, yes.

[00:21:54] Speaker 02:
That one significant defect in the allegations, there's no allegation of sharing in losses.

[00:22:05] Speaker ?:
That's correct.

[00:22:06] Speaker ?:
Can you just list for me the other

[00:22:10] Speaker ?:
critical absences of allegations.

[00:22:14] Speaker 02:
What are the absences of allegations, just listen for me, that are very important to undercut the existence of Mesner General Partnership as an enterprise?

[00:22:34] Speaker 05:
Sure.

[00:22:35] Speaker 05:
So in addition to the sharing in losses,

[00:22:40] Speaker 05:
There's no allegation of investment of personal capital into the firm to operate the firm, which is an indicia of partnership.

[00:22:49] Speaker 05:
Typically, two or more people get together, invest money into the entity and then the entity does its purpose.

[00:22:58] Speaker 02:
There's also... Can you have a partnership without that?

[00:23:03] Speaker 05:
You could have a partnership without

[00:23:06] Speaker 05:
investment of money as capital, you couldn't have a partnership without a something that indicates ownership of the partnership.

[00:23:18] Speaker 05:
So for example, in Colorado cases, and we've cited them in the briefs,

[00:23:23] Speaker 05:
You could have a partnership if one person in the partnership is contributing labor and the other person in the partnership is contributing capital or one's contributing land and one's contributing labor, something like that.

[00:23:34] Speaker 05:
But there are no allegations here that there were any personal contributions from any of these lawyers outside of labor, which, of course, would be, in fact, more indicative of the fact that they're employed by the law firm, necessarily.

[00:23:49] Speaker 05:
What about other deficiencies?

[00:23:52] Speaker 05:
Sure.

[00:23:52] Speaker 05:
Participation in the ownership and management of the firm.

[00:23:59] Speaker 05:
So, and you heard Mr. Chase respectfully say, you know, based on the amended, restated partnership agreement that Mesner Reads LLP has, there's only one person who manages the law firm.

[00:24:13] Speaker 05:
That's frankly not unusual.

[00:24:15] Speaker 05:
It makes sense for a large organization to designate one person to manage the law firm, and that person can then delegate

[00:24:22] Speaker 05:
But there's no allegation that any of these 77 individuals had regularly attended management meetings, directed the operation of the law firm in particular ways, had the authority to tell any of the other 77 individuals, you must do this or you must do that, could deprive them of compensation if they failed to meet expectations, those sorts of things.

[00:24:46] Speaker 05:
And then the final

[00:24:47] Speaker 05:
piece is participation in profits per se, meaning not receiving compensation as wages or as an employee, but receiving compensations as a percentage of the profits.

[00:25:00] Speaker 05:
There's never any allegation that any of these individuals received some additional form of compensation or different form of compensation as a percentage of the profits of the law firm.

[00:25:10] Speaker 05:
And those are the essential elements.

[00:25:13] Speaker 02:
That's no different than your primary.

[00:25:16] Speaker 02:
view that the most important allegations missing is that there's no sharing of profits or losses.

[00:25:27] Speaker 02:
That's the same thing, isn't it?

[00:25:28] Speaker 05:
It's part of that.

[00:25:29] Speaker 05:
It's the profits piece of it.

[00:25:31] Speaker 05:
The losses piece of it is also an essential component.

[00:25:34] Speaker 05:
And then one other thing that I omitted, and it's referenced in the EEOC versus Sidley Austin and Wood case and other cases, and that is receipt of some

[00:25:46] Speaker 05:
of ownership.

[00:25:51] Speaker 05:
So either a share that suggests you have X amount of shares in the partnership or something that suggests that the individual person has some ownership.

[00:26:01] Speaker 05:
And there's no allegation that any of these 77 individuals received something that suggests they owned a portion of the firm.

[00:26:10] Speaker 00:
So what about it's quoted in the district court's order.

[00:26:15] Speaker 00:
It's also paragraph 90.

[00:26:16] Speaker 00:
of the first minute complaint where it says the general partnership defendants jointly decided on new and existing client engagements, work allocation, and revenue and profit division.

[00:26:25] Speaker 00:
Why is that not sufficient for the sharing of profits?

[00:26:31] Speaker 05:
Several reasons.

[00:26:32] Speaker 05:
One, it's inconsistent with the limited liability partnership certificate that was filed with the district court.

[00:26:37] Speaker 05:
But second, the

[00:26:39] Speaker 05:
The allegation that they participated in the profits was an allegation that they get compensated from the profits.

[00:26:46] Speaker 05:
And Colorado statute removes or says, you know, when compensation is paid as a portion of the profits, but it's paid for exercise of labor, that that's not a share of the profits.

[00:27:03] Speaker 05:
Instead, a share of the profits would be the law firm at the end of the year has $100,000 in profits.

[00:27:08] Speaker 05:
And the five partners participate in some percentage in those $100,000 as profits as opposed to they get a paycheck every two weeks or they get a paycheck every month or something like that.

[00:27:21] Speaker 05:
The other parts of the allegation in paragraph 90 are just ordinary run-of-the-mill allegations of any lawyer working in a law firm.

[00:27:30] Speaker 05:
They jointly share cases.

[00:27:31] Speaker 05:
They share resources.

[00:27:33] Speaker 05:
They print from the same printer.

[00:27:34] Speaker 05:
They have the same secretary, all of those kinds of things, which would not be

[00:27:38] Speaker 05:
clearly sufficient under Colorado law.

[00:27:41] Speaker 05:
So for that, we ask the court to affirm the district court's dismissal for failure to state a claim.

[00:27:47] Speaker 01:
Thank you.

[00:27:54] Speaker 04:
Your Honors, the majority of the discussion there was about proof standards and not pleading standards.

[00:27:59] Speaker 04:
It's apples to oranges.

[00:28:00] Speaker 04:
There's no requirement that sharing in losses or contribution of capital, first of all, those are not requirements for a partnership anyway.

[00:28:08] Speaker 04:
But there is no case that talks about pleading standards.

[00:28:12] Speaker 04:
The Seventh Circuit cases, the Judge Easterbrook cases, those are cases on a full record at trial what must be proven.

[00:28:19] Speaker 04:
There is not a case that says that if you allege that two or more persons carried on a business as co-owners for profit and a lot more, paragraphs 83 to 98 set forth all sorts of information about how the partnership operated.

[00:28:37] Speaker 04:
There's no case that they cite

[00:28:38] Speaker 04:
that says that's insufficient.

[00:28:40] Speaker 04:
And what the district court did is said, well, I feel like that applies to a lot of contexts.

[00:28:45] Speaker 04:
Therefore, it's implausible.

[00:28:47] Speaker 04:
Wait a minute.

[00:28:48] Speaker 04:
If it applies to a lot of contexts and it's commonplace, then it's actually more plausible, not less plausible that it's actually a partnership.

[00:28:56] Speaker 02:
There can be two different court reports.

[00:29:00] Speaker 02:
Is there a specific allegation in the amended complaint of the sharing of profits and losses

[00:29:08] Speaker 02:
amongst the participants of the Mezner General Partnership.

[00:29:12] Speaker 04:
Absolutely, Your Honor.

[00:29:13] Speaker 04:
Paragraphs 90 and 92.

[00:29:15] Speaker 04:
Paragraph 90 talks about profit division, and Paragraph 92 talks about revenue sharing.

[00:29:20] Speaker 04:
It is not required that the allegations include loss sharing.

[00:29:24] Speaker 04:
That's not a pleading requirement.

[00:29:27] Speaker 04:
Nor would we have a basis to say that there... I'm interested.

[00:29:32] Speaker 02:
You know, what was the source of your ability to allege

[00:29:37] Speaker 02:
they share their profits.

[00:29:39] Speaker 02:
All the information.

[00:29:41] Speaker 02:
Let me finish my question.

[00:29:43] Speaker 02:
You did not have a source to allege they shared their losses.

[00:29:48] Speaker 02:
How many?

[00:29:52] Speaker 02:
You had no basis to allege they shared their losses.

[00:29:55] Speaker 04:
Is that correct?

[00:29:57] Speaker 04:
I can't speak about the burdens of proof and the investigation that exists, but I can say that there's a lot of inconsistency

[00:30:03] Speaker 04:
with reality versus what was proffered as to the LLP agreement.

[00:30:08] Speaker 04:
We've seen no employment contracts.

[00:30:10] Speaker 02:
What is the source of the basis for alleging share in profits?

[00:30:20] Speaker 04:
A lot of publicly available information.

[00:30:24] Speaker 02:
Is that publicly available information alleged in the complaint?

[00:30:32] Speaker 04:
The source of how as in have we seen the way that they actually compensate the conduct Calculate the compensation structure your honor.

[00:30:42] Speaker 02:
We haven't seen that All the information that we've seen It is alleged your honor

[00:31:02] Speaker 02:
And what is alleged is the source of that information?

[00:31:06] Speaker 04:
The source of the information is all the information that has been conducted in the investigation of this set of circumstances.

[00:31:18] Speaker 04:
I can't give a laundry list of it.

[00:31:20] Speaker 04:
I could circle back with a more detailed explanation of exactly how

[00:31:26] Speaker 04:
This comes to be a allegation, but I can't say that we've seen any of the records that they could provide.

[00:31:36] Speaker 02:
Thank you.

[00:31:38] Speaker 04:
Thank you.

[00:31:41] Speaker 01:
Thank you counsel for your helpful arguments and the case stands submitted and we will