[00:00:03] Speaker 00:
Case number 14-1079, Gordon Brent Pierce Petitioner versus Securities and Exchange Commission.

[00:00:10] Speaker 00:
Mr. Wells for the petitioner, Mr. Schifrin for the respondent.

[00:00:14] Speaker 03:
Good morning, Your Honors.

[00:00:15] Speaker 03:
Mr. Marcellino and I represent Petitioner Gordon Brent Pierce.

[00:00:19] Speaker 03:
We're asking you to vacate the Securities and Exchange Commission's disgorgement order in the second case.

[00:00:27] Speaker 03:
and grant no further relief beyond the disgorgement that Mr. Pierce has already paid as a result of the final order in the first case.

[00:00:38] Speaker 03:
There are three primary reasons that you should do this.

[00:00:41] Speaker 03:
First of all, raised judicata applies.

[00:00:44] Speaker 03:
There was no fraudulent concealment well before the end of the first case.

[00:00:50] Speaker 03:
And Mr. Pierce's other affirmative defenses, equitable estoppel, judicial estoppel, and waiver, would also bar the claim in the second case.

[00:00:59] Speaker 07:
Is there fraudulent concealment before the beginning of the first case?

[00:01:03] Speaker 03:
That's debatable, Your Honor.

[00:01:05] Speaker 03:
We don't need to debate that, but we think you do.

[00:01:07] Speaker 07:
I'd like you to debate that.

[00:01:09] Speaker 03:
I'll be happy to.

[00:01:10] Speaker 03:
The initial order instituting proceedings alleged that Mr. Pierce conducted an illegal distribution

[00:01:20] Speaker 03:
in that S8 shares issued by Lexington Resources were delivered to him and he then resold them through a conduit, Newport, which was one of the parties in the second case, and which was one of the associated persons of Mr. Pierce in the first case.

[00:01:39] Speaker 03:
General Robb was another one of the offshore companies referred to in the first case in the OIP as the associates of Brent Pierce.

[00:01:48] Speaker 03:
The revenues sought to be disforged in the second case of $7.5 million were part of the $13 million alleged in the OIP in the first case.

[00:01:59] Speaker 07:
My understanding is that before the first case, he was asked if he had an ownership interest in Newport.

[00:02:06] Speaker 07:
And all he said was he had an interest, but did not admit to an ownership interest and denied any interest at all in Jenny Robb.

[00:02:13] Speaker 07:
Am I right that he said those things and that he said them before the first case started?

[00:02:18] Speaker 03:
In effect, yes, Your Honor, but he did admit that he controlled Newport in the first case.

[00:02:23] Speaker 03:
He referred to it as his company.

[00:02:25] Speaker 03:
He simply denied that he was the actual beneficial owner of the string, which is actually meaningless.

[00:02:31] Speaker 03:
We will, if it needs to be conceded.

[00:02:33] Speaker 07:
Did he file a form?

[00:02:35] Speaker 07:
registration form of the SEC after the investigation started that didn't disclose all of the trades that he did for Newport and disclosed no trades whatsoever through Jenny Robb?

[00:02:45] Speaker 03:
That's a beneficial ownership form.

[00:02:47] Speaker 03:
He contends that he did file what was required by that form.

[00:02:50] Speaker 03:
It did not require him to identify every single stock transaction that Newport conducted over that period of time.

[00:02:58] Speaker 03:
He should have filed a claim, I'm sorry, a form for Jenny Robb as well.

[00:03:03] Speaker 03:
He did not.

[00:03:04] Speaker 03:
So the commission actually has a debatable or colorable claim that Mr. Pierce concealed the trading or the amounts traded by Newport and Jennerab.

[00:03:19] Speaker 03:
although he did not conceal that they were his associates because the Commission well knew that.

[00:03:25] Speaker 03:
They were in documents.

[00:03:26] Speaker 03:
In fact, when we asked that the, in a motion to clarify that the Commission, that the Division of Enforcement identify the associates, their response was, well, Mr. Pierce knows who they are.

[00:03:36] Speaker 03:
They're in all the documents that his company produced.

[00:03:39] Speaker 07:
So that's why we say from the outset the Commission had... My understanding is your argument here isn't that there weren't activities that could be characterized as fraudulent concealment.

[00:03:49] Speaker 07:
Your position was limited to the question of whether fraudulent concealment can apply at all given that they knew about it before the first proceeding ended.

[00:03:57] Speaker 07:
Is that right?

[00:03:59] Speaker 03:
I'm not sure I heard your question, Your Honor.

[00:04:02] Speaker 07:
That you are not fighting over whether the activities in which he engaged, his answers to questions, his filings, could be characterized as fraudulent concealment in the abstract, but instead your position is

[00:04:17] Speaker 07:
You knew everything before the case ended, so we just can't get to fraudulent concealment at all.

[00:04:22] Speaker 03:
We didn't say they knew everything.

[00:04:23] Speaker 03:
We believe that the Commission knew enough to raise the claim under the standards applicable in most circuit courts throughout the country.

[00:04:33] Speaker 04:
For example, they were required to seek to amend to

[00:04:37] Speaker 04:
I mean, as I understand it, this information came to them after the proceedings were ongoing.

[00:04:44] Speaker 04:
Were they supposed to amend the OIP or whatever the development document is at that point?

[00:04:49] Speaker 03:
Yes, Your Honor, but only a portion of the information came to the Commission.

[00:04:54] Speaker 04:
So the rate of judicata applies to the extent they could have defeated it by amending it, obviously they could have, but they're required to amend or else rate of judicata is going to apply?

[00:05:07] Speaker 03:
They are required either to amend or specifically reserve the claim, either get Mr. Pierce's agreement to reserve the claim or get the court's agreement, or at least that would start with the commission.

[00:05:20] Speaker 03:
They did the poor opposite of that.

[00:05:22] Speaker 02:
Each violation is individual.

[00:05:23] Speaker 02:
They don't have to bring all violations together.

[00:05:26] Speaker 03:
That's correct, Your Honor, and they chose not to do that at the outset.

[00:05:30] Speaker 03:
So what we have a problem with is their position in the second case, because at the close of the evidentiary hearing in the first case, they had not yet even argued that Mr. Pierce controlled Lexington.

[00:05:43] Speaker 03:
They obtained evidence from Liechtenstein.

[00:05:47] Speaker 03:
They used that evidence to support the second claim, the seven and a half million dollar claim pertaining to the trading in the accounts of Newport and General.

[00:05:54] Speaker 02:
But I don't know why that matters, the fact that you have evidence that would support both individual violations.

[00:06:02] Speaker 02:
I don't see, I'm not sure I understand the legal prescription against that.

[00:06:07] Speaker 02:
Well, once they obtain the evidence... No, I understand, but you can have evidence that will support a second claim, which is an individual claim that you do not have to join.

[00:06:16] Speaker 02:
They have no obligation to join all individual violations of the Act.

[00:06:20] Speaker 02:
They can pursue them separately.

[00:06:22] Speaker 02:
But you can have evidence that crosses over both.

[00:06:26] Speaker 02:
Exactly.

[00:06:27] Speaker 02:
So merely because you use the evidence in a separate independent, from a separate independent violation in support of your first one, doesn't mean that you're now barred from pursuing the second.

[00:06:36] Speaker 02:
Where is, I've never seen that.

[00:06:38] Speaker 03:
Well, yes, Your Honor, once you actually make the claim.

[00:06:41] Speaker 03:
That's the problem the division has here.

[00:06:43] Speaker 03:
They did capture the evidence in time to bring the claim in the first proceeding.

[00:06:48] Speaker 03:
Right.

[00:06:49] Speaker 03:
They chose not to reserve the claim for a different proceeding.

[00:06:51] Speaker 02:
Well, they, in fact, did reserve the claim.

[00:06:54] Speaker 03:
No, they did not.

[00:06:54] Speaker 02:
They did the poor act.

[00:06:55] Speaker 02:
In fact, I mean, in fact, they did because they couldn't pursue it.

[00:06:59] Speaker 02:
They could, Your Honor.

[00:07:00] Speaker 02:
They did.

[00:07:01] Speaker 02:
No, they didn't because they were barred from it.

[00:07:04] Speaker 03:
No, they weren't barred, Your Honor.

[00:07:05] Speaker 03:
They chose to abandon the claim at the preliminary level.

[00:07:09] Speaker 03:
But not on the merits.

[00:07:12] Speaker 02:
well yes they did your honor and i don't know i don't know i don't know i don't think that's just a matter of how we're reading the record i hear what you're saying i misunderstood what you were saying i thought they actually used the claim to establish liability in the first place they did they did your honor they absolutely did that they used it in the first place they used the evidence to establish liability but that's not prohibited no it's not i mean that doesn't in other words that doesn't get you where you want to go on stare decisions i mean so what

[00:07:40] Speaker 02:
Well, they had the same legal... What I'm trying to say is, so you're answering what my concerns are.

[00:07:47] Speaker 02:
You can have evidence from a lot of claims that you're going to bring later and use them in the first claim.

[00:07:53] Speaker 02:
That does not mean you cannot pursue those other claims later.

[00:07:58] Speaker 03:
Yes, it does.

[00:07:59] Speaker 02:
If you... Just a second, Roger.

[00:08:00] Speaker 02:
You're not going to show me the case law that says that.

[00:08:03] Speaker 02:
Well, it's in our briefs.

[00:08:04] Speaker 02:
If the starting notion is that this enforcement agency

[00:08:11] Speaker 02:
has the authority to pursue enforcement actions one after one after one.

[00:08:15] Speaker 02:
They don't have to join them.

[00:08:17] Speaker 02:
They can take them one at a time.

[00:08:18] Speaker 02:
And that's my understanding.

[00:08:21] Speaker 02:
And my understanding is there may be evidence with respect to those many claims.

[00:08:26] Speaker 02:
that you would offer in a number of them.

[00:08:30] Speaker 02:
Right.

[00:08:31] Speaker 02:
My further understanding is, because you use evidence in the first one that you're going to use in the second one, you're not barred from bringing in the second one.

[00:08:38] Speaker 02:
Because the second claim is based on a different theory.

[00:08:41] Speaker 02:
Right.

[00:08:42] Speaker 02:
Well, no, Your Honor.

[00:08:43] Speaker 03:
It's not based on a different theory.

[00:08:44] Speaker 02:
That's the problem.

[00:08:45] Speaker 02:
No, I'm not talking about this case.

[00:08:46] Speaker 02:
It's a general understanding.

[00:08:47] Speaker 02:
Oh, yes, Your Honor.

[00:08:48] Speaker 03:
No problem with that.

[00:08:49] Speaker 02:
OK.

[00:08:49] Speaker 03:
And that's why actually the stronger argument that we have and the one that we would actually prefer to make rather than the questionable one about whether the Commission had constructive knowledge at the outset of the OIP was that they actually did

[00:09:04] Speaker 03:
raised the claim in pleadings, pleading after pleading repeatedly.

[00:09:10] Speaker 03:
They submitted the new evidence shortly after the initial hearing concluded.

[00:09:14] Speaker 03:
The hearing was reopened.

[00:09:15] Speaker 04:
They submitted the evidence not to make a claim.

[00:09:17] Speaker 03:
Yes, they did, Your Honor.

[00:09:18] Speaker 03:
They had the claim in several pleadings.

[00:09:20] Speaker 03:
The motion?

[00:09:21] Speaker 03:
Do you think they did assert this as a claim?

[00:09:23] Speaker 04:
Yes, Your Honor.

[00:09:25] Speaker 04:
Hold on.

[00:09:25] Speaker 04:
Whoa, whoa, whoa.

[00:09:25] Speaker 04:
Wait just a minute.

[00:09:26] Speaker 04:
Please try to talk while we're... I'm sorry.

[00:09:29] Speaker 04:
Please don't talk while we're interrupting.

[00:09:32] Speaker 04:
I thought I understood you to say

[00:09:38] Speaker 04:
You're not going to be saying they did assert.

[00:09:40] Speaker 03:
They did.

[00:09:41] Speaker 03:
Exactly.

[00:09:41] Speaker 03:
Which is it?

[00:09:42] Speaker 04:
That they should have amended to assert the claim or that they did assert?

[00:09:45] Speaker 03:
They did.

[00:09:46] Speaker 03:
That's the argument I preferred to make.

[00:09:47] Speaker 03:
I was actually asked to make the preliminary argument that we don't think is as strong as the argument that we make in our brief.

[00:09:54] Speaker 07:
Just to clarify, are you saying, when you say they asserted it, are you talking about they tried to put it in and then the ALJ said no?

[00:10:03] Speaker 03:
They didn't just try to put it in.

[00:10:05] Speaker 03:
They did put it in.

[00:10:06] Speaker 07:
The preliminary... And then the ALJ said, I won't take those additional claims.

[00:10:10] Speaker 03:
Yes.

[00:10:10] Speaker 03:
The ALJ said, I'll take the evidence and I'll use it to find that Mr. Pierce controlled all of these entities, including Lexington.

[00:10:17] Speaker 03:
That's not impermissible.

[00:10:19] Speaker 03:
No problem with that.

[00:10:20] Speaker 04:
The direct or did not allow the ALJ, did not allow the direct claim based on that part of the transactional framework.

[00:10:27] Speaker 03:
In effect, Your Honor, the ALJ said, I can't handle this seven and a half million dollar claim, although I'm going to use all the evidence supporting it, because the commission hasn't delegated to me the authority to handle this claim.

[00:10:41] Speaker 03:
To allow an amendment of the OIP.

[00:10:42] Speaker 03:
Exactly.

[00:10:43] Speaker 03:
So the division had at its behest tools that it should know better than anybody in the form of the rules that allowed it to move to amend.

[00:10:53] Speaker 03:
It actually cited a sort of an appellate rule, 452, to submit the evidence, a rule that's used at the commission level rather than the ALJ level.

[00:11:02] Speaker 03:
And it had rule 410, which says you better appeal within 21 days or that order by the ALJ is going to become final.

[00:11:10] Speaker 07:
And so Mr. Pierce... I just wanted to back up on one thing in response to some questions from Judge Edwards, and that is you said they could bring one claim at a time.

[00:11:20] Speaker 07:
I suppose in a civil proceeding, they could have in civil litigation in regular

[00:11:26] Speaker 07:
federal court.

[00:11:28] Speaker 07:
They could bring one action for one sale and another action the next day for another sale.

[00:11:33] Speaker 07:
But if they choose in federal court to come in and group all of these sales together and treat them as a common violation or common basis for a collective basis for violation, a collection of activities for which they are asserting liability.

[00:11:51] Speaker 07:
Say they said we're going to do every sale from

[00:11:55] Speaker 07:
2000 to 2002, but then left out three from December 2002.

[00:12:03] Speaker 07:
Complete that litigation.

[00:12:05] Speaker 07:
Could they then say, well, we get to bring those three we left out from December 2002?

[00:12:09] Speaker 07:
Because we could bring one at a time anyhow, so now we're fine to bring those.

[00:12:12] Speaker 07:
Would they or would Race Judicata prevent that?

[00:12:14] Speaker 03:
They could make that argument.

[00:12:16] Speaker 03:
That would be one of the closer cases.

[00:12:17] Speaker 07:
But here they... Would Race Judicata prevent that?

[00:12:20] Speaker 03:
I thought you would quickly say that it would be a judicata.

[00:12:23] Speaker 03:
I don't know why.

[00:12:23] Speaker 03:
I don't know why.

[00:12:24] Speaker 03:
This is pretty easy.

[00:12:26] Speaker 03:
In most courts, it would.

[00:12:27] Speaker 03:
And I would suggest that in this court, it would.

[00:12:30] Speaker 03:
Under the case appropriately named Capitol Hill Group out of the circuit, certainly that would be the hard test that would be applied to bar the claim.

[00:12:40] Speaker 07:
Well, why are you conceding that they could have brought all of these one at a time?

[00:12:43] Speaker 07:
Because they made a decision up front to group them

[00:12:47] Speaker 07:
That's what we're going to litigate and so I thought your race judicata argument is that's fine then you got to get everything that's within that group and we have to decide whether the second case claims were within that group.

[00:12:58] Speaker 03:
Well, because people are allowed to reserve claims if they do so explicitly.

[00:13:03] Speaker 07:
But aside reserving, not reserving, just do they, I think under Judge Edwards' hypothetical, they wouldn't have, they would never reserve.

[00:13:08] Speaker 07:
They could just bring a lawsuit one day on one claim or another lawsuit another day on another claim.

[00:13:12] Speaker 03:
Well, theoretically, they could do that and raise Unicata might not apply.

[00:13:16] Speaker 03:
For example, if the parties were not the same, if the claims did not derive from the common nucleus of operative fact, if there were different facts and different legal theories supporting different claims,

[00:13:26] Speaker 03:
If a new statute generated a new remedy after the first set of claims, they could come back.

[00:13:31] Speaker 03:
We've discussed those exceptions in our brief.

[00:13:34] Speaker 03:
Unfortunately for the Commission, that's not the case.

[00:13:37] Speaker 03:
They chose to make the claim in their proceeding.

[00:13:42] Speaker 03:
In effect, picture the Commission as a district... But they didn't get to make the claim in their proceeding.

[00:13:46] Speaker 03:
But they did, Your Honor.

[00:13:48] Speaker 03:
They made it.

[00:13:49] Speaker 03:
And they had...

[00:13:55] Speaker 04:
Is that not the one we're talking about?

[00:13:57] Speaker 03:
Yes, Your Honor, but that's a subordinate.

[00:13:59] Speaker 03:
That's not the commission.

[00:14:00] Speaker 03:
That's the commission's task manager, if you will.

[00:14:02] Speaker 03:
Picture the commission as a federal district court with peculiar expertise in securities law.

[00:14:08] Speaker 03:
They know all the nooks and crannies of securities law.

[00:14:10] Speaker 03:
So cases go to that district judge because she knows the nooks and crannies of securities law.

[00:14:15] Speaker 03:
That district judge says, well, I think I'll have a special master to weed out all the facts and handle all these legal arguments and save me a lot of time.

[00:14:24] Speaker 03:
And then some party makes a claim before the special master, submits evidence before the special master, then says, wait a second, special master.

[00:14:34] Speaker 03:
I've got more evidence and I've got another claim.

[00:14:36] Speaker 03:
And the special master says, I'll take your evidence.

[00:14:39] Speaker 03:
But for that new claim, you better go to the federal district judge, because I don't have the authority.

[00:14:45] Speaker 04:
You're saying that would work a preclusion of that claim?

[00:14:48] Speaker 03:
Absolutely, Your Honor.

[00:14:51] Speaker 03:
Because if not, look at the other side of the equation.

[00:14:55] Speaker 03:
Mr. Pierce was following the rules in the litigation channel he was forced to handle.

[00:15:02] Speaker 03:
He was stuck in the Commission's litigation channel.

[00:15:06] Speaker 03:
He wasn't following the rules because he didn't give them all the information they needed.

[00:15:10] Speaker 03:
Well, but they got it anyway.

[00:15:12] Speaker 03:
So assuming he didn't, and that's a fair assumption, they got the information in time, and they chose to use it then, which then induced Mr. Pierce not to appeal.

[00:15:23] Speaker 07:
Well, but the then was pretty late in the process.

[00:15:25] Speaker 02:
It was too late to pursue.

[00:15:27] Speaker 02:
If I'm an enforcement prosecutor, it's not doing me any good to get the information that late to build my case on the second case.

[00:15:34] Speaker 02:
It may help my first case.

[00:15:36] Speaker 02:
You wouldn't want that either if you were the prosecutor.

[00:15:39] Speaker 02:
You wouldn't want to start on your second claim that late in the game?

[00:15:42] Speaker 02:
Well, Your Honor, it didn't bother them a bit.

[00:15:45] Speaker 03:
They have good resources.

[00:15:46] Speaker 07:
It bothered you.

[00:15:47] Speaker 07:
You opposed even having it come in at all, and then now you want to argue to us that they should have brought it in.

[00:15:53] Speaker 03:
That's right, Your Honor, because we followed the rules.

[00:15:55] Speaker 03:
We said, hey, this is sort of we're being blindsided.

[00:15:58] Speaker 03:
They said, well, that's OK.

[00:16:00] Speaker 03:
Things work sort of in reverse in the commission's proceedings.

[00:16:03] Speaker 03:
You have a factual hearing, and then you have ample post-hearing briefs.

[00:16:08] Speaker 03:
And this claim was made in a motion after the hearing

[00:16:11] Speaker 03:
way before the post-hearing briefs were filed.

[00:16:15] Speaker 03:
So the division submitted the $7.5 million claim, exactly the same claim, same facts, same legal arguments as were brought in the second case, where they even used collateral to stop them.

[00:16:26] Speaker 03:
And then they argued again in their post-hearing briefs that they should get an extra $7.5 million in discouragement.

[00:16:35] Speaker 03:
The ALJ only discouraged $2.1 million.

[00:16:39] Speaker 03:
not $9.6 million.

[00:16:42] Speaker 03:
Mr. Pierce looked at the rules, and he said, you know, these are rules just like the federal court has rules, and we better follow them.

[00:16:49] Speaker 03:
But, you know, if we appeal the $2.1 million discouragement award and all the complaints we have about getting the evidence out of Liechtenstein, they might actually cross-appeal, and they might get an additional $7.5 million.

[00:17:02] Speaker 03:
Because after all, they're before the commission.

[00:17:05] Speaker 03:
The commission hasn't even ruled yet.

[00:17:07] Speaker 03:
And so Mr. Pierce said, I better play by the rules and I want to sacrifice my appeal rights so that I can get finality.

[00:17:15] Speaker 03:
And he then paid the judgment resulting from the final order.

[00:17:19] Speaker 03:
The division had the same obligation to follow the rules

[00:17:23] Speaker 03:
and appeal the amount of the discouragement order.

[00:17:27] Speaker 03:
If they thought 2.1 million was not sufficient remediation to serve the public interest, then they were the ones charged with knowledge, and they certainly have the expertise, and they certainly know the rules.

[00:17:39] Speaker 03:
And they could have appealed within 20 days, in which case then they would have signaled to Mr. Pierce, you better cross-appeal, or we're going to get $9.6 million out of this.

[00:17:48] Speaker 03:
And then he would have cross-appealed, and he said, maybe not.

[00:17:51] Speaker 03:
Maybe you'll get zero.

[00:17:52] Speaker 03:
And you know what?

[00:17:52] Speaker 03:
Maybe there would have been a settlement for $2 million.

[00:17:55] Speaker 03:
What's really unfair about this is that by following the commission's rules, Mr. Pierce is being punished because the commission has been allowed to use the Senate.

[00:18:04] Speaker 04:
You keep following the rules, including not providing all the information that the commission needs.

[00:18:10] Speaker 04:
At the outset?

[00:18:11] Speaker 04:
Right.

[00:18:13] Speaker 04:
At the time, he didn't provide it.

[00:18:16] Speaker 04:
You're saying he followed the rules.

[00:18:19] Speaker 03:
At that point, yes, Your Honor.

[00:18:22] Speaker 03:
I'm not going to argue that he did everything he should have done from the outset.

[00:18:28] Speaker 03:
He had records in Liechtenstein.

[00:18:31] Speaker 03:
So they got those records.

[00:18:33] Speaker 03:
And so the Commission was able to bring the claim.

[00:18:37] Speaker 03:
Now the question becomes, should the Commission follow rules that it enforces in the public interest itself?

[00:18:45] Speaker 03:
Or should we have a government agency that can create its own rules, not play by its own rules, and exploit

[00:18:52] Speaker 03:
people who actually do follow the rules, and it's not like they didn't get their pound of flesh from Mr. Pierce.

[00:18:58] Speaker 03:
They got $2.1 million in disgorgement from him by raising the $7.5 million claim, and now they want to use it a second time and take another, well, now it's up to $11 million with all the interest.

[00:19:12] Speaker 07:
I think we've got your argument.

[00:19:14] Speaker 07:
We'll hear from the SEC now.

[00:19:15] Speaker 07:
Thank you.

[00:19:29] Speaker 01:
May it please the court, Ben Schiffrin, for the Securities and Exchange Commission.

[00:19:32] Speaker 01:
And I think the rule that we're talking about here is rage judicata.

[00:19:37] Speaker 01:
And I think the reason rage judicata doesn't apply here, there are two reasons which the court was just talking about.

[00:19:44] Speaker 01:
One, that the causes of action in the two proceedings aren't the same.

[00:19:48] Speaker 01:
And that two, even if the causes of action could be considered the same, the fraudulent concealment exception would prevent the application of rage judicata here.

[00:19:55] Speaker 06:
Can I ask you to clarify one thing?

[00:19:58] Speaker 07:
On denying reconsideration, J88, the commission said disavowed reliance on any flexible administrative rules of race judicata and said its ruling is entirely consistent with the application of race judicata in the federal courts.

[00:20:22] Speaker 07:
Given that the application of race judicata in the federal courts is not itself particularly consistent, what did they mean by that?

[00:20:29] Speaker 07:
Did they mean federal court cases applying race judicata to agency proceedings or general civil litigation or federal restatement rules of race judicata?

[00:20:40] Speaker 07:
I'm just not sure what that means.

[00:20:42] Speaker 01:
I think that was in response to Pierce's argument that

[00:20:46] Speaker 01:
the commission was somehow acting differently because this was an administrative, it was applying the rules of registry to kind of differently because this was an administrative proceeding and the commission was saying that in its opinion, that's not what it was doing.

[00:20:58] Speaker 01:
And I think its opinion makes that clear, but I think it just wanted to be

[00:21:02] Speaker 01:
especially clear in response to Pierce's argument in his motion for reconsideration.

[00:21:06] Speaker 07:
During the broad general rule, it's grounding his decision in broad general principles of race judicata.

[00:21:12] Speaker 01:
Right, as announced by the federal courts in cases arising from judicial proceedings.

[00:21:17] Speaker 07:
It's kind of surprising to me.

[00:21:18] Speaker 07:
The Commission could help itself right out of cases like this by saying, look, we looked at our statute, we're interpreting it, and for these types of administrative hearings, we need a little more flexibility.

[00:21:29] Speaker 07:
You know, they're investigatory.

[00:21:31] Speaker 07:
Things are ongoing.

[00:21:32] Speaker 07:
Things can change quickly.

[00:21:34] Speaker 07:
We need to have some flexibility.

[00:21:37] Speaker 07:
And barring someone arguing that that violates the statute or the Constitution, they would have that, and we wouldn't have to sit here trying to figure out

[00:21:45] Speaker 07:
what's in the common nucleus of operative facts and what's out in this case.

[00:21:49] Speaker 01:
Right, well I think the commission did in its opinion point out that some courts have said it can apply more flexibly.

[00:21:55] Speaker 07:
But it didn't claim to be doing that as a matter of its authority under the statutes at issue.

[00:22:00] Speaker 01:
Except for one instance, I think that once

[00:22:04] Speaker 01:
it invoked the federal court cases to show that the causes of action weren't the same, and it invoked the federal court cases to show that even though the causes of action were the same, the courts and the concealment exception would apply.

[00:22:14] Speaker 01:
It said that one of the reasons the division didn't have to move to amend was because unlike in district court, here the law judge didn't have the authority to grant a motion to amend the OIP, unlike a district court judge would obviously.

[00:22:28] Speaker 07:
So they say that in the motion for reconsideration?

[00:22:31] Speaker 01:
No, no, no.

[00:22:31] Speaker 07:
So that's the problem.

[00:22:32] Speaker 07:
I think the problem is the motion for reconsideration seems to turn its back on any reliance on uniqueness of the administrative process, unique needs of the SEC's investigatory process, and throw itself

[00:22:47] Speaker 07:
into the mess that is race judicata law in the federal courts?

[00:22:52] Speaker 01:
I don't think the commission was turning its back.

[00:22:54] Speaker 01:
I think it was, as it did in its opinion, saying, look, you don't need to rely on some impeccable administrative race judicata.

[00:23:02] Speaker 01:
You can just use the regular federal court cases.

[00:23:06] Speaker 01:
But Pierce's argument was that the commission had somehow heavily relied on that, and that simply wasn't the case.

[00:23:12] Speaker 07:
And then you keep saying it's a different cause of action, but my understanding of general principles of race judicata in federal courts is that if you have

[00:23:22] Speaker 07:
if you have out of the same accident, same incident, I've got a breach of contract and a tort claim and maybe some statutory claim under the UCC or something as well, but it's all from the same period of incident.

[00:23:37] Speaker 07:
This month when things went haywire, you've got to bring those three causes of action together.

[00:23:41] Speaker 07:
Is that right?

[00:23:42] Speaker 01:
I think that is right, Your Honor.

[00:23:44] Speaker 07:
So how does it help to say that these are different causes of action?

[00:23:47] Speaker 01:
Because here, the trade that

[00:23:50] Speaker 01:
The facts are different.

[00:23:51] Speaker 01:
The trades at issue in the first proceeding were trades in a personal account in June 2004.

[00:23:56] Speaker 07:
The trades at issue here were trades at... But to be clear, the reason you used, at least as to Newport, you had to show volumes of sales and some control to get them out of the exemption and to get them into, I think I could have it backwards, maybe the Section 13 requirement, you needed volumes of sales.

[00:24:16] Speaker 07:
So you actually used Newport

[00:24:19] Speaker 07:
And you had to use it, or at least you seemingly had to use it.

[00:24:23] Speaker 07:
The ALJ relied on that as a basis for finding the violation in the first case.

[00:24:28] Speaker 07:
So you already had sort of the corporate responsibility established in the first case.

[00:24:33] Speaker 07:
That's why your whole second case was largely collateral estoppel.

[00:24:37] Speaker 01:
I'm not sure that's exactly right, Your Honor.

[00:24:40] Speaker 01:
I think that, number one, the cause of action in the first OIP was just based on the trading in the personal account and, as you mentioned, the failure to report.

[00:24:50] Speaker 01:
Then, additional evidence that was previously fraudulently concealed comes to light, showing that Pierce was the beneficial owner of Newport and Jenner Up.

[00:24:58] Speaker 01:
And I agree that the law judge in the first proceeding used the evidence that Pierce was the beneficial owner of Newport and Jennerob.

[00:25:05] Speaker 01:
This is, I think, J.A.

[00:25:07] Speaker 01:
166-67 for purposes of the reporting violation.

[00:25:12] Speaker 01:
For purposes of the control with respect to the Section 5 violation, it issued in the first

[00:25:16] Speaker 01:
proceeding.

[00:25:17] Speaker 01:
I think she says you could establish control just by Pierce's relationship with Atkins, Lexington CEO, so it wasn't necessary.

[00:25:24] Speaker 01:
She then said, yes, it's a further factor.

[00:25:28] Speaker 01:
But I think the point is that the evidence that Pierce was a beneficial owner of Newport isn't the same as the trading that was subsequently conducted through Newport in general.

[00:25:38] Speaker 01:
That's actually two different pieces of evidence.

[00:25:40] Speaker 04:
Isn't it accurate to say

[00:25:41] Speaker 04:
uh... uh... division could have i think yet the question is whether it had to and i don't think you know

[00:26:21] Speaker 04:
I think we would say that you have to bring all of them that you've got

[00:26:32] Speaker 01:
Right, well first, and I think one of the reasons the Commission didn't go down that route and ask the Commission to amend, as was alluded to earlier, is that Pierce had opposed the inclusion of the trading out of the corporate accounts in the first proceeding.

[00:26:46] Speaker 01:
You can see that in J.A.

[00:26:47] Speaker 01:
148 in the law of judge's order.

[00:26:50] Speaker 01:
And so I think it was reasonable for the Commission to say, okay, well let's do this in a separate proceeding.

[00:26:56] Speaker 07:
Really?

[00:26:57] Speaker 07:
No, that can't be right.

[00:26:58] Speaker 07:
You can't get out of race judicata just because somebody didn't want to let you amend your complaint to add that contract.

[00:27:02] Speaker 02:
I mean, the strange thing is why, I mean, is it routine that the commission, I said stare decisis before I met race judicata, that the commission really wants to take this on as the operative notion in enforcement actions?

[00:27:17] Speaker 02:
That's very strange.

[00:27:18] Speaker 02:
In fact, both of some case photos suggest the contrary.

[00:27:21] Speaker 02:
That is, that race judicata, as we would apply it,

[00:27:25] Speaker 02:
is not applicable to the commission in its own proceedings.

[00:27:28] Speaker 02:
I mean, you're taking on a very heavy burden, and I think my colleagues are right.

[00:27:32] Speaker 02:
If the commission's taking its burden on, it's an uphill climb.

[00:27:37] Speaker 01:
I'm not sure that's true for the reasons you were alluding to earlier, that here there are two different causes of action.

[00:27:43] Speaker 01:
No, no, no.

[00:27:44] Speaker 02:
You can get away with that within the context of the administrative framework, I think, and say this is the way we do business.

[00:27:51] Speaker 02:
The question is, have you imposed on yourselves a higher responsibility?

[00:27:58] Speaker 02:
And my colleagues are absolutely right.

[00:27:59] Speaker 02:
If you really mean to, my view is that

[00:28:03] Speaker 02:
I'm surprised that you would take this on, but if you really have taken on the federal notion of race judicata, you have a lot of problems here, unless you're right on fraudulent concealment.

[00:28:15] Speaker 01:
Well, I think that just taking that on, the Commission said the reason you wouldn't have to amend it is because you would have two separate causes of action, even under the federal principles.

[00:28:27] Speaker 02:
Well, no, that's not true.

[00:28:29] Speaker 02:
That's who we're trying to say to you, under the federal principles, no, unless the fraudulent concealment somehow comes into play.

[00:28:36] Speaker 01:
But I think under the Greenberg case, the Proctor case, the Bernstein case that we cited in our brief, that would be German Greenberg involved, very similar to here, you know,

[00:28:46] Speaker 01:
transactions brought in one proceeding and very similar transactions brought in a second proceeding and there the court said well those were different transactions.

[00:28:55] Speaker 07:
I think the difficulty with that as I was trying to telegraph to your friend is that

[00:29:01] Speaker 07:
got some Second Circuit law on race judicata.

[00:29:04] Speaker 07:
And there's plenty of other law from other jurisdictions and the restatement, which I think is what DC follows, that doesn't have as strict a test as the Second Circuit applied in Greenberg.

[00:29:16] Speaker 07:
It wasn't race judicata if it was common nucleus of operative facts.

[00:29:20] Speaker 07:
It was, was it something you absolutely had to have that you were required to prove in the prior proceeding, which is a much

[00:29:27] Speaker 07:
more strict view of race judicata.

[00:29:30] Speaker 07:
That's why I began by saying what was the commission throwing itself into when it made that sentence, that statement in denying reconsideration.

[00:29:39] Speaker 01:
Well, I think that the Second Circuit also applies to the restatement test.

[00:29:44] Speaker 01:
It was simply applying the restatement test.

[00:29:45] Speaker 07:
The restatement doesn't require that it be a required element, that you can bring as many claims in a row as you want as long as one wasn't a required element to the other.

[00:29:54] Speaker 07:
That's like a double jeopardy analysis.

[00:29:56] Speaker 07:
That race judicata is much more broader than that.

[00:29:59] Speaker 01:
Exactly.

[00:29:59] Speaker 01:
I think the restatement says that it has to be the same transaction or series of transactions.

[00:30:04] Speaker 07:
The commission chose to bundle all this up together and say, we're going to grab all these years and we're going to look at this time period.

[00:30:14] Speaker 07:
We're going to grab this time period and we're going to look at what trading he did.

[00:30:18] Speaker 07:
And within that, we are going to establish such things as his control over this corporate entity.

[00:30:25] Speaker 07:
We need to do that to establish these claims.

[00:30:28] Speaker 07:
And then when you get to the second case, there's nothing left to prove other than the fact that the sales happened because everything else is collateral and stuff.

[00:30:35] Speaker 07:
I think that kind of proves that it was a common nucleus of opt of facts.

[00:30:39] Speaker 01:
Well, had the commission alleged in the first OIP that all of the trading violated section five, that Pierce was responsible for all the trades, and that the shares and the trades were unregistered?

[00:30:51] Speaker 01:
I would agree with you, but that's not what the first OIP alleges.

[00:30:54] Speaker 01:
The first OIP in paragraph 16, this is a J-40, only alleges that Pierce

[00:30:58] Speaker 01:
engaged in a sale of 300,000 shares.

[00:31:00] Speaker 07:
No, I understand that.

[00:31:00] Speaker 07:
The question is whether you were obliged, just like if someone just alleged the contract violation and not the tort, the question is whether you were obliged to do them both, as long as you were in the process of proving his control over Newport and Jenny Robb as part of proving that case.

[00:31:18] Speaker 07:
And these sales, my understanding, were all going on at the same time.

[00:31:22] Speaker 07:
He wasn't differentiating.

[00:31:23] Speaker 07:
He was just selling stocks, some personal, some from the corporate account.

[00:31:26] Speaker 07:
There was no differentiation in

[00:31:28] Speaker 07:
whom he approached, the tactics he used, and he was selling them both at the same time in that same time period.

[00:31:34] Speaker 01:
Right, and I think you're right that the question is whether they had to bring it all at the same time, but I think the answer is no under the cases that we cited in our presentation.

[00:31:42] Speaker 02:
The highest fraudulent concealment weigh in your argument?

[00:31:45] Speaker 01:
Well, so fraudulent concealment, you get to fraudulent concealment if you disagree, if you think that.

[00:31:50] Speaker 02:
Yeah, I know.

[00:31:50] Speaker 02:
Well, let's assume that we might.

[00:31:52] Speaker 01:
Right.

[00:31:53] Speaker 01:
So then fraudulent concealment comes into play because the reason, even if the commission had an obligation to bring it all together, the reason that it didn't is because you're fraudulent conceal the trades in the corporate accounts at the time the first proceeding was instituted.

[00:32:07] Speaker 01:
And so the commission really couldn't bring it.

[00:32:09] Speaker 01:
If you consider it as one cause of action, the commission couldn't bring its entire cause of action.

[00:32:13] Speaker 01:
at the time the first proceeding was instituted.

[00:32:19] Speaker 07:
When does it matter for fraudulent concealment?

[00:32:23] Speaker 07:
Do we look at the beginning of the case?

[00:32:25] Speaker 07:
Do we look at the end of discovery or end of the fact hearing or end of the proceeding?

[00:32:30] Speaker 07:
Because I think his argument is

[00:32:33] Speaker 07:
long before you filed your post hearing briefs in this case, you had, there was no fraudulent concealment.

[00:32:40] Speaker 07:
It was done, it was revealed.

[00:32:43] Speaker 07:
And so I think the question of when we have to look for fraudulent concealment is very important to you.

[00:32:48] Speaker 01:
I agree, Your Honor.

[00:32:50] Speaker 01:
And that's why the Commission, in its opinion, in our brief, recited the one example I could find of a fortunate concealment case where the concealment was discovered before the end of the first proceeding.

[00:33:00] Speaker 01:
That was the Alai case from California.

[00:33:02] Speaker 01:
And there they said, there's no obligation to amend.

[00:33:05] Speaker 01:
And they also analogized, just as the Commission did, the cases where you have additional misconduct that occurs after the beginning of the first proceeding, but is also discovered before the end of the

[00:33:15] Speaker 07:
But that was the only case you found?

[00:33:16] Speaker 07:
Because again, I guess we have the question of when the Commission said we're throwing ourselves into the arms of general federal race judicata, did they also throw themselves into the arms of general fraudulent concealment law?

[00:33:29] Speaker 07:
And if so, really there's just one case?

[00:33:31] Speaker 01:
That was the only case I could find.

[00:33:34] Speaker 01:
Pierce certainly doesn't cite any case holding the opposite.

[00:33:38] Speaker 01:
I don't think he cites many cases on that point at all.

[00:33:41] Speaker 01:
But even if that's the only case dealing with fraudulent concealment being discovered, I think the analogy is apt to cases where additional misconduct occurs after the first proceeding is instituted, but is discovered.

[00:33:53] Speaker 04:
It may be analogous in some sense, but it's not the same thing.

[00:33:57] Speaker 04:
Additional misconduct occurring is difficult to say that even

[00:34:02] Speaker 04:
effect after the litigation has started.

[00:34:06] Speaker 04:
So you only have the one case that really deals with fraudulent concealment, the facts, two facts of which are discovered after the

[00:34:17] Speaker 04:
that's the bottom line on that, right?

[00:34:20] Speaker 01:
That's true, but I think the reason the commission analogizes to those cases is that the idea would be the same, the rationale would be the same.

[00:34:28] Speaker 01:
That is to say, in First Jersey, the case dealing with additional misconduct occurring after the first proceeding, it says the agency shouldn't have an obligation to amend its

[00:34:42] Speaker 01:
to amend its complaint after it learns about the additional misconduct, or at risk the borrower's judicata.

[00:34:48] Speaker 01:
And I think the same thing should be true here, where the advance has been formally concealed.

[00:34:53] Speaker 01:
I mean, there's no question, I don't think, under the law of quarterly concealment, that has the concealment not been discovered until after the end of the first proceeding, the exception would apply.

[00:35:04] Speaker 01:
And I don't think it makes sense to say that just because the division was diligent,

[00:35:10] Speaker 01:
and discover the concealment before the end of the first proceeding and it's in a worse position.

[00:35:14] Speaker 07:
How do you answer the argument that your friend made about this type of sort of tag team strategy by the SEC

[00:35:26] Speaker 07:
really being unfair to the people, to the defendants in the case who come in.

[00:35:31] Speaker 07:
They say, look, here's what they're coming after me on.

[00:35:33] Speaker 07:
They're seeking two million.

[00:35:35] Speaker 07:
They got this time period.

[00:35:36] Speaker 07:
They know about Newport.

[00:35:37] Speaker 07:
They know about Jenny Robb.

[00:35:39] Speaker 07:
And this is what they're seeking for this time period.

[00:35:42] Speaker 07:
I make decisions based on how I can test, what I can test, in this case, whether I feel it says.

[00:35:47] Speaker 07:
I make all these decisions.

[00:35:50] Speaker 07:
Low and behold, once I'm done with that, I write my check, I think I'm done, you go, by the way, we've got a whole lot more coming.

[00:35:57] Speaker 07:
How does the Commission deal with that unfairness argument?

[00:36:04] Speaker 01:
I think that gets back to the Judge Judicata question, because it's only unfair if Judge Judicata would bar the second proceeding.

[00:36:11] Speaker 01:
Nothing prevented Pierce from appealing the first proceeding, and in fact, at times, for appealing the act concurrently, so he couldn't have relied on it.

[00:36:18] Speaker 01:
You would say rather than relying on it, he threw the dash.

[00:36:22] Speaker 01:
Yeah, I think that's right here on her.

[00:36:24] Speaker 01:
I think that's exactly right.

[00:36:26] Speaker 02:
The thing that most perplexes me is why does

[00:36:31] Speaker 02:
Why doesn't the commission in this situation have an obligation to say we're reserving?

[00:36:37] Speaker 01:
The idea of reserving is just an exception, one of the exceptions to Res Judicata.

[00:36:43] Speaker 01:
And here the commission said, look, you don't need an exception because the causes of action aren't the same.

[00:36:48] Speaker 01:
You're throwing the dust, in other words.

[00:36:50] Speaker 01:
Yeah, I mean, I... Well, I think, I mean, it could happen, but I don't think it has to happen.

[00:36:55] Speaker 02:
You see, it's a notice.

[00:36:57] Speaker 02:
There's a kind of a notice problem here.

[00:36:59] Speaker 02:
If the Commission says, this stuff came in late, we're going to use it, use some of the evidence because it's relevant here, but we're not going to try this case.

[00:37:08] Speaker 02:
We're reserving it.

[00:37:10] Speaker 02:
That is clear notice.

[00:37:11] Speaker 02:
And you avoid, I think you avoid, the race judicata problems, fairly, using a standard that seems to me perfectly reasonable for an administrative agency to use in an enforcement context.

[00:37:24] Speaker 02:
It's good and clean.

[00:37:25] Speaker 02:
I don't see how you could possibly lose that here.

[00:37:28] Speaker 02:
It seems to me you created problems for yourselves.

[00:37:30] Speaker 02:
What's the problem?

[00:37:31] Speaker 02:
We were reserving.

[00:37:33] Speaker 02:
You're trying to have your cake and eat it, too, depending on how you look at this record.

[00:37:38] Speaker 02:
Let's see if we can sneak it by, and then, okay, we didn't, so let's pursue it later.

[00:37:46] Speaker 01:
I don't think so, Your Honor.

[00:37:48] Speaker 02:
Why don't you reserve?

[00:37:49] Speaker 02:
Why wasn't there an obligation to reserve?

[00:37:53] Speaker 01:
I don't think there was an obligation to her service because there was no raised judicata, because the causes of action weren't the same and there was fraudulent concealment.

[00:38:03] Speaker 02:
Then we come back to whether you've taken on a burden that's larger than you should have taken on with raised judicata.

[00:38:12] Speaker 04:
Or you're relying completely on fraudulent concealment.

[00:38:17] Speaker 01:
I mean, I think that's what the commission did.

[00:38:19] Speaker 01:
It said, first, the causes of action aren't the same.

[00:38:21] Speaker 01:
It said, second, even if they are, there's frustrating concealment.

[00:38:25] Speaker 01:
It did, though, say, look, it's an administrative proceeding.

[00:38:28] Speaker 01:
One of the reasons you wouldn't have to move to amend is because it's an administrative proceeding.

[00:38:32] Speaker 01:
They didn't say that.

[00:38:35] Speaker 01:
I think the commission did say that.

[00:38:36] Speaker 01:
I think the commission said that's where it said the idea of race judicata applying more flexibly comes into play.

[00:38:45] Speaker 07:
But then it disavowed that.

[00:38:47] Speaker 07:
We're stuck with the final agency decision.

[00:38:49] Speaker 07:
And it disavowed any reliance on.

[00:38:54] Speaker 07:
You would be on much firmer ground.

[00:38:56] Speaker 07:
We'd have a whole different case if we were analyzing this as a matter of an administrative conception of race judicata.

[00:39:04] Speaker 07:
I read it, and I thought that's what your answer was to me in my first question, is that they disavowed it and just said, we're going with federal court res judicata.

[00:39:12] Speaker 01:
I don't think that statement disavows part of the commission opinion.

[00:39:18] Speaker 01:
I think it was responding to Pierce's argument that all it was doing was relying on some flexible notion of res judicata.

[00:39:25] Speaker 01:
And I believe the commissioner is saying, no, we weren't only relying on that, we were certainly relying on principles articulated in judicial proceedings.

[00:39:36] Speaker 07:
If we were confused about what that meant, then I suppose we could ask the SEC to clarify.

[00:39:42] Speaker 01:
Well, but I think if you just look at what the Commission, I don't think you need to, because I think if you look at what the Commission said in its opinion, and when you look at it said in the order denying reconsideration, it's entirely consistent.

[00:39:53] Speaker 01:
That it was relying on the judicial cases dealing with judicial proceedings, and that really is the heart of the SEC's opinion.

[00:40:02] Speaker 07:
It was relying on one strand of race judicata law.

[00:40:05] Speaker 07:
That's difficult in federal courts.

[00:40:07] Speaker 07:
Not all courts follow as strict a test as the Second Circuit does.

[00:40:12] Speaker 07:
That's the difficulty for you.

[00:40:13] Speaker 01:
No, I understand what you're saying.

[00:40:15] Speaker 01:
I just think that the Second Circuit test isn't that different from the other course.

[00:40:19] Speaker 01:
I don't think it's that different than the Seventh Circuit, the Bernstein case that we cited.

[00:40:22] Speaker 01:
And to the extent that the DC Circuit relies on the restatement, I don't think it's different because the Second Circuit, if you look back at all the lineage of the cases from Procter to Greenbrook to First Jersey, they all go back to an NLRB, I think the United Technologies, where the Second Circuit adopts the restatement test.

[00:40:41] Speaker 07:
Thank you very much.

[00:40:46] Speaker 07:
All right, Mr. Wells, we'll give you two minutes for rebuttal.

[00:40:49] Speaker 03:
Thank you, Your Honor.

[00:40:50] Speaker 03:
The problem the Commission has is that unlike all the cases it cites, in this case, the Commission actually made the claim.

[00:40:59] Speaker 03:
In the second case, the operative facts are identical.

[00:41:02] Speaker 03:
The legal theories are identical on the $7.5 million claim.

[00:41:08] Speaker 03:
Even under their best case, they mentioned Wiley, but they really discussed allied signal along with that.

[00:41:13] Speaker 03:
And as we showed in our briefs in allied signal, the test under the reasoning there was whether a claim was actually made in a supplemental pleading after the first case had begun, like a motion to amend or motion to supplement the pleadings.

[00:41:31] Speaker 03:
The division did precisely that.

[00:41:34] Speaker 03:
They made a claim.

[00:41:36] Speaker 03:
They put it in pleadings.

[00:41:37] Speaker 03:
They then argued the very same law and the very same facts with the chutzpah to use collateral estoppel as a basis for liability in the second case and now contend that there really is no reason to not.

[00:42:00] Speaker 04:
your friend at the other table can come up with only one case and support his proposition.

[00:42:06] Speaker 04:
Do you have any in support of your proposition?

[00:42:08] Speaker 03:
Well, there's so many in the brief I could hardly begin, Your Honor.

[00:42:11] Speaker 04:
Well, begin with one of them.

[00:42:12] Speaker 04:
The case where the discovery happens after litigation has been initiated and there has not been an amendment made.

[00:42:22] Speaker 03:
The one that comes to mind first your honor is in polio where the federal district court did not grant a motion for leave to amend to add some claims that were related to the claims already in process.

[00:42:43] Speaker 06:
I'm sorry I'm moving in here.

[00:42:45] Speaker 03:
I believe it's a Ninth Circuit case MPOYO

[00:42:49] Speaker 03:
I believe we cited it in both our initial brief and the reply brief.

[00:42:53] Speaker 07:
I was thinking it was EMP when you said that.

[00:42:55] Speaker 07:
Got it?

[00:42:56] Speaker 03:
So it's somewhat analogous to this case, although it's a much, this case is an even stronger case to apply race due to CATA.

[00:43:04] Speaker 03:
But in Employo, the United Circuit said when the claims were brought again in a second case, that is the claims that the plaintiff sought to amend by motion in the first case,

[00:43:17] Speaker 03:
And in the first case, those claims were denied by the federal district court judge.

[00:43:21] Speaker 03:
I think he said, you're too late.

[00:43:23] Speaker 03:
You're past the deadline.

[00:43:24] Speaker 03:
That sounds familiar here, doesn't it?

[00:43:27] Speaker 02:
Wait, where's the fraudulent concealment?

[00:43:30] Speaker 03:
Well, the employer said, I would have known about these claims, but the evidence was varied and hard to find.

[00:43:37] Speaker 04:
And so... They actually have fraudulent concealment.

[00:43:39] Speaker 02:
Fraudulent concealment.

[00:43:41] Speaker 04:
They're finding fraudulent concealment.

[00:43:42] Speaker 02:
Do you have a case dealing with fraudulent concealment?

[00:43:46] Speaker 02:
But it can't be fraudulent.

[00:43:47] Speaker 04:
Do you have a case with the word fraudulent concealment in it that says that if it is discovered during the litigation, the party is obligated to assert it, amend to assert it, or else be barred by a rescued cut?

[00:44:00] Speaker 03:
Probably not, Your Honor, because the fraudulent concealment doctrine actually applies post a judgment.

[00:44:07] Speaker 04:
I'm aware of that counsel, but what I'm asking you for is if you had a case where somebody came back and tried to make a second, or tried a second litigation and was told, even though fraudulent concealment continued until after the initiation of the first litigation, you're still barred by a rescue to cut it if you don't amend or do something with it.

[00:44:29] Speaker 03:
No, Your Honor, because no one has conceived that there could be fraudulent concealment of a claim that is actually asserted in pleadings in the first case.

[00:44:37] Speaker 04:
That's a different question than perhaps what I asked you.

[00:44:41] Speaker 04:
We've got the direct answer that no, you don't have a case.

[00:44:43] Speaker 04:
That's better than a lot of lawyers do.

[00:44:46] Speaker 03:
No, my initial answer was no, and I'm explaining why.

[00:44:49] Speaker 03:
Because if you actually look at the fraudulent concealment doctrine, it applies post-judgment.

[00:44:54] Speaker 04:
We're all aware of that.

[00:45:04] Speaker 04:
or fraudulent concealment has occurred, but the information has come to the plaintiff or claimant during the first litigation, does that fraudulent concealment exception still apply to prevent the preclusion in relation to the cut?

[00:45:22] Speaker 03:
I can't say that I've seen those exact words used in those cases you're on.

[00:45:27] Speaker 07:
Thank you.

[00:45:27] Speaker 07:
Any more questions?

[00:45:28] Speaker 07:
The case is submitted.