Legal Case Summary

as Jeffrey Abraham for plaintiff of Pellent, made police the court with the court's permission. I'd like to reserve four minutes for a bottle. This is not my first appearance before the court on this appeal. The first one came in October 2002 when we argued before panel consisting of Judge Greenberg, Judge Neungard, and Judge Michelle sitting by designation from the federal circuit. It resulted in what they said, and maybe it can help us, given what we said in maybe one, and how we specifically identified the absence of guidance or clarification from the SEC. Given the spring boys holding in brand acts and in Smiley versus City Bank, how can you win? Well, I think quite simply, Your Honor. The first thing is that there were real rules of decision in Levy. There was a decision asked to the law on 16B7. There was a decision asked to 16B3. 16B3 was held to be in applicable. 16B7. What do you say decision, you're talking about Levy 1? Levy 1 had real rules of law in them. Well, that's why I asked about brand X because it seems to me that's exactly the situation. We have you. There were real rules of law in Levy 1, but there were based upon an interpretation of an ambiguity and a regulation. We highlighted that and we said in the absence of guidance or clarification from the SEC, we interpret the regulation that is should be there to exclude from the exclusion, re-glossifications. I understand that, Your Honor. I think that we distinguish brand X and our brief as follows. Brand X involved an interpretation of the statute and in the context of administrative deference and interpretation of a statute, stary the slices cannot control future agency action. However, in the context of a court's determination as to what a regulation means, brand X doesn't apply because the concepts of deference are different

. What do you got, Seminoleation? Don't you run the smack dead men in Seminoleation which basically says it's a Chevron transpose to the regulatory scheme and you run through exactly the same problem? Well, I don't think so, Your Honor. Do you all respect? Because there's a limit to deference and the limit to deference is what do the words of the regulation mean? What does the regulatory history tell us about what the regulation meant at the time it was first adopted? And what does the regulatory context tell us as well? And I think in that context, the Christians in decision as well as the Kruza decision versus the written by Judge Alitos, Blopus or Sony Entertainment, established that where an agency has a regulation that says one thing and it wants to change the regulation it has to adopt a new regulation. It can't reinterpret the regulation to mean something other. It didn't reinterpret. It amended and changed the language of the regulation. So into a statute which can be referred in to that. How are you doing? I'm sorry? You're wrong. Which statute which gave it the power to do it? The statute gives the SEC the power to adopt regulations. However, when it wants to adopt a new regulation it has to change the regulation. Otherwise the old regulation is an effect your honor. And can only change the regulation prospectively. Well, well let's back up a minute. Before you get to the issue of deference, I want to question the way you view leaving one. Doesn't national cable say that where the prior construction by the court was not based upon unambiguous terms of the statute. Leaving no room for agency discretion where that has not occurred. Then we need then the agency construction will trump the prior court determination. Isn't that precisely where we find ourselves such that leavey one is now no longer controlling? Um, you're all right. I don't think so because I'll tell you why because Brandex is talking about in the context of eight of the I'm talking about national cable. I'm sorry

. I call the brand X. Okay. Yeah. I'm sorry. Same thing. Thank you. Okay. Brandex is talking about what happens when there's a statute and agency issues regulations governing the conduct and a statute can in court and brand X the ninth circuit made a determination as to what the statute meant. The agency disagreed with it and came out with a regulation that was different. The ninth circuit said we already decided what the statute meant. Too bad. The Supreme Court took that decision and said no. You have to go with what the agency says the statute met. We can't have ossification of the regulatory process in that context because you had not found that the terms of the statute were on invigations. But that was a statute and this is this case involving interpretation of two regulations. You have this agency construction. Does it really matter? It does matter, Your Honor, because you have the Christiansen decision by Judge Thomas. And in that decision he says when an agency wants to issue a new regulation it cannot reinterpret the regulation and the nature of ossification is different. When it comes to a regulation and when it comes to a statute

. That turns in whether as the second part of your argument is the third part I guess that turns in whether or not what the agency did here was a clarification or a change in the law. If it's a clarification of an ambiguity then what you're arguing about Christmas, Christiansen doesn't really help you does and then we're back into. Well, it's mildly. Your Honor, I guess the nature of the litigation here in Leave You One establishes when Judge Greenberg wrote the decision. He looked for traditional standards of regulatory interpretation which are similar to statutory interpretation. He looked at the language of the rule. He looked at the regulatory context. He looked at the regulatory history and all the adopting releases accompanied. He did say to me some more that the regulation was ambiguous. He said the way I think he said the words room to interpret it but he was able to interpret it at some level. And specifically he said in the absence of specific SEC guidance about which reglassifications are exempt from section 16B, Underworld 16B7. We believe that two principles should guide us in determining which reglassifications should be included in 16B7 and then he gets into the two principles. But he's clearly saying that as I said earlier in the absence of any clarification or gloss from the SEC about the kind of reclassifications that the clearly some reclassifications were exempt. The issue of Leave You One was worth or not that kind of reclassification fell within the exemption. Right. Your Honor, I think you take that and you should take the history of Leave You subsequent to that decision when we had a petition for a hearing and a petition for a hearing on bunk proceeding in which it was full briefing. The SEC put in a brief, there were multiple briefs put in and the SEC came in and said, vacate your decision third circuit. Here is our guidance. This is what rule 16B3D and rule 16B7 always meant

. Well, they did that in a brief. It's not. That would be entitled to differences. Well, I'm not sure what none of the brief represents only the position of the staff and not the position of the commission. That's very different. Where are you often we have that situation people arguing and we see it differently and clearly the Court and Leave You One so differently. Well, Your Honor, I believe the decisions on the difference establishes a brief and in the case of the SEC and SEC Amicus brief has to be, I believe, approved by the commissioners, but you can ask Mr. Capudi that. I'm, that's a concession that could impact the argument today, if you really. I believe that's the procedures they follow, Your Honor. That I believe that when the panel indicated that it adhere to its decision that you had a decision, you had a case where there were rules of law decided by the third circuit and they applied to this case going forward. Why do you get to your issue of substantive versus, you know, clarification change you're running out of time. I see that, Your Honor. It's important. Unless you want to do that on Rebuck. I will try to get everything I can in here. The point here is that it was a substantive rule of law. This is not a collateral issue to the case, 16B3 of 16B7. Under the use decision by the Supreme Court on the land graph, the change in the language of rule 16B7 and rule 16B3 operates a substantive change in the law

. Well, the 16B3, the change there only said we meant what we said when we said it doesn't have to be compensatory. So, I mean, how can that be a real change when all it did was clarify that the previous language that was previously there was meant, was there for a reason and meant something? Well, Your Honor, the actual language was here as a grant award or rather a requisition. I think that Judge Greenberg looked to the actual language, the principles of statutory interpretation, regulatory interpretation, the regulatory context. There was one way taken out a snippet, a snippet of regulatory history which Judge Greenberg correctly, I believe, interpreted in another way in the context of the only regulatory history. Well, we said that all the compensatory discussion outweighed the specific language that says it didn't have to be compensatory. And all that the new rule said was that last part that you looked at didn't think it was outweighed really meant something. But Your Honor, did it by changing the rule, language of the rule, issued a whole new regulatory lease, it's an entirely new rule. And it's not that that's always the happens, this entirely new rule, we still need to determine whether it's clarifying or substantive change as we discussed in Marmelayah. Are there every one of the tests established to determine whether a rule is substantive or interpretive, this rule is substantive? The SEC utilized its legislative authority to make the rule. The SEC and its own rules describe its rulemaking authority as being legislative in nature, in putting the sections of rules dealing with legislative... Don't we have to look at what I'm sorry to interrupt you? But you know, that's what happens when a rule, a new rule is enacted all the time, what you're talking about, don't we have to look and see exactly what it does, vis-a-vis what was there before? Well, what it does Your Honor quite frankly is under the previously-sleeved decision, the plaintiff would have been made in titles for a cover, and under the new rules, it prevents the plaintiff from recovering. That's a very essence of a substantive change in the law. Well, that doesn't mean that it's a new change, that doesn't mean that it's a change in the law. It simply means that we got it wrong. Not in the end, by chance, it's getting it wrong, but the clarification that we had, that we longed for in leave you one, and decided the case in the evidence of, the clarification of the country comes and says that we were in fact wrong. I'm out of time, I know something I was going to say from a prior decision of the Third Circuit, I could hold it for a bottle, or I could say it now. Your Honor, when you say we got it wrong, I don't think you got it wrong, and I've put a lot of briefing in on that, but even if you got it wrong, the principles of the standard, the size is established, that that is the decision of the Third Circuit, and to overturn it creates a substantive new rule of law

. And in the allegation- This should be un-boxed leave you one, is that what you're hoping for? Well, the panel reaffirm leave you one, that's the first thing, and on-bunk, leave you one, the petition was denied as well. I think it's not just the on-bunk denial, I think it's also the panel denial. But that happens, whatever, 90% of the time, when a petition for re-earing is signed, it's automatically petition for re-pandory hearing as well, it's court re-earing, and when it's denied, if a subsequent decision comes along, or something that's going to be penalized, that first panel is wrong, we ask the court to reconsider the first- I'm not sure it's necessary here, given what I said about Brand X and Smiley, but it seems to me what you're arguing for would make that something which you'd be- You'd welcome that, that we say we should reconsider leave you one. Well, you know, let me just read from this- I know a lot of time, and I think it might be fair to my adversaries to read from this decision, so they would have an opportunity to respond to it if not, I'll hold it for a bottle. Well, why don't you go for a bottle? What is the decision to be in front of you from leave you one? No, I'm going to- I'm going to read from Algady General Hospital, which is at 608F, second 965, or on. Okay. May I please the court? I'm Steed and Fearson, and I represent the appellaries in this matter. We ought to- I want to get one thing out of the way quickly if I may, which is this notion that this court had the benefit of SEC guidance on the petition for rehearing. As the court is well aware, a decision on a petition for rehearing is not a decision on the merits. There's a whole long string of cases from this court saying that for obviously good reasons, because there are a whole host of reasons why courts of appeals decide not to rehear a case at a certain point in time. For example, when this case was up last time, we were at the motion to dismiss stage. Might simply have been the court felt that it could wait. And especially in the context of- as the court has pointed out, the panel said that guidance from the SEC was lacking. Perhaps at a later point in time, the guidance from the SEC would be lacking, which is exactly the situation we have here. Sadly, when the SEC put in the brief, it only put in the brief on the issue of the petition for rehearing, didn't put in the brief on the substantive merits of the dispute. It said we- for all the following reasons, we think the court ought to rehear it. So we ought not to get confused about that. And Mr. Abraham has, since the petition for rehearing has been denied, consistently tried to use that as sort of leverage to say, oh, geez, the court of appeals actually had guidance from the commission and that the decision has been made

. And that's just not the case. Again, focusing on the lack of guidance language that you're on are read. I think it's interesting to note not only that that would seem to us to be the epitome of a decision which calls out for clarification, but it's interesting to note that the second circuit in the brewed decision actually pointed to that. In other words, when in that case, the argument was made, geez, you should do what the Levy Court did. The second circuit said, well, wait a second. The Levy Court said it did what it did in the absence of guidance from the commission. We now have guidance from the commission. We have to take a look at the guidance from the commission. But the true court also found that even without the guidance, it would have found the exemption to apply. Well, what it did, I think that's actually a little interior honor. I think what the Court did was to say, we don't have to deal with the new rule because we find the old rule, right, controls. One great lesson. But they did what they could do and the adopting release to determine what the intent of the commission always was back then. So they used it the same way the court's generally used adopting releases and other statements from agencies that interpret their own regulations. One of the arguments that Mr. Abraham made to try to get past the National Cable Brand X cases, oh geez, that was how to do it with a statute and not a regulation. We would have two responses to that. The first response is there's actually slightly more difference owed when an agency is interpreting its own regulation, not surprisingly because it's their regulation and their intent that matters. And secondly, in Montmelay House, the court dealt with an interpretation of a regulation, not the interpretation of the statute, as do loads of other cases

. And as the Court pointed out, it's really the same analysis. I mean, if you look at what the Chevron test is, you can't overturn the agency's view unless it's arbitrary, capricious or contrary to the statute. Well, in Montmelay, it was the guideline. It was the guideline and the agency came back. In other words, it wasn't a statute. But Congress by letting guidelines go into effect or legislating? Well, but you could argue the same thing here. The Congress by getting to the commission, the right to figure out what the exemptions are doing a similar sort of thing. I mean, there's really nothing much of a substance to the difference there. So whether you look at Montmelay House, whether you look at Brand X, whether you look at the whole host of other cases, we cite. The principle is the same, which is, courts have to make decisions when cases are in front of them. I mean, they can't just say, geez, it's unclear. We're sorry, we can't figure it out. We're going to make a decision. If you'd like to be able to do that, but you can. And so later when the agencies come in and say, geez, in essence, sorry, we could have been clear, here's what we always meant. Because it's their job to figure out what the regulation means in the first instance that will control. And the discussion, I agree with the Court, the discussion in Brand X about the balance between when you give a fact to what the court said and when you give a fact to what the agency said, I think controls here. And in essence comes down to this difference between clarifying and substantive. And as the Supreme Court made clear, and as this Court made clear in Montmelay House, the mere fact that a court decides something doesn't make it substantive

. In Montmelay House, this Court in fact said, in fact, one could posit that quite the opposite was the case, that the new language was fashioned to clarify the ambiguity made apparent by the case law. In other words, the court itself points out the ambiguity, which is exactly what happened here. But happened here in Levy, one is the court said with respect to 16 B7, we know it pertains to at least some reclassifications. We just don't know which ones and the commission hasn't been terribly helpful and at least we feel the commission has been terribly helpful in letting us know. Which is stronger, the B3 or the B7, we only need to find one, correct? Which do you think is stronger? It's a little bit like trying to choose between your children. I think they're both really strong in the sense that given the statement by the commission about what each one means, I think they're both, they're almost equally strong. If you ask me, the reclassification has strength because it's an issue of form over substance, what the commission is actually saying there is. As long as the substance of the transaction doesn't change, the substance of the investment just changes the firm. It was required that there be a merger or a consolidation before, and this does not emerge or a consolidation. So did it not affect substantive change? It did change the risk. That probably didn't change. The risk didn't change. As far back as 1981, the commission said you can treat, can treat reclassifications in the same way. They put the word reclassifications in the title for a reason, although... No, but we don't give effect to titles. But what the court does give effect to is the intent of the agency. The question really isn't, should be cost, they put it in the title, or be bound by it

. That's not the question because the answer to that is absolutely correct. The answer to that is no, because it's in the title. It's a different question, I would suggest. The different question is, is that tell us anything about the agency's intent, especially given the history of this thing, which is in 1981, it says it can apply to reclassifications. In 1991, it puts it in the title. It has the no action letters in St. Charles and Monk Austin dealing with reclassifications. In 2002, in amending the rules for the filing of the form 8K, it refers back and says reclassifications are exempt under 16-B7. But was it clear that the SE believe that every reclassification? No, and that's where you have... Well, but... No. That is fact to change whereby now all reclassifications... No, the issue, the question is, was it clear from those outward manifestations that every reclassification was covered? The answer is not that clear, which is why we have leave you want. That's different from saying, was it always that commissions intent to exempt all reclassifications? They didn't do a very good job. They may have done a very good job of saying it, but the issue here is, the way the standard is set up is, when you now look at it, and the commission has said, that's always been our intent. And unless there's something in the language itself, or alternatively elsewhere, that compels... That's the word that the case is used, compels a different conclusion. Then you have to go with what the agency says, it's intent always was, because they are the ones who know what their intent always was. The rest of us, in the absence of a clear statement which we now have, have to try to divine that. What's your best case on that point, that the regulation doesn't say that reclassification is included, but we divine the intent of the agency and say, that's what it meant, so that's what it is. I think the best argument for that is that it must necessarily have been included, and let me just give you one example. When folks out in the real world are structuring these transactions, they could have just as easily structured not to be a reclassification, but to be a merger. There's no reason except convenience to do it one way or the other. So for example, they could have created a new entity with its own stock, and then merged the existing entities into the new one, and all the shareholders would have had the new stock. Instead, what they did was they said, we're not going to do that. We'll do something else, we'll do a different corporate transaction, which is, we'll take the stock you have, and we'll reclassify it into the same kind of stock you would have had redone the merger. So I think the point is that again, reclassifications necessarily would have had to have been included. Essentially, the same thing, doing the same thing, which is simply changing the form of the investment, not the investment, et cetera, the economic value of the investment. I'm kind of surprised about your emphasis or your focus on B7, because I thought that B3 was actually a stronger case. Well, I think easier case

. That's different from saying, was it always that commissions intent to exempt all reclassifications? They didn't do a very good job. They may have done a very good job of saying it, but the issue here is, the way the standard is set up is, when you now look at it, and the commission has said, that's always been our intent. And unless there's something in the language itself, or alternatively elsewhere, that compels... That's the word that the case is used, compels a different conclusion. Then you have to go with what the agency says, it's intent always was, because they are the ones who know what their intent always was. The rest of us, in the absence of a clear statement which we now have, have to try to divine that. What's your best case on that point, that the regulation doesn't say that reclassification is included, but we divine the intent of the agency and say, that's what it meant, so that's what it is. I think the best argument for that is that it must necessarily have been included, and let me just give you one example. When folks out in the real world are structuring these transactions, they could have just as easily structured not to be a reclassification, but to be a merger. There's no reason except convenience to do it one way or the other. So for example, they could have created a new entity with its own stock, and then merged the existing entities into the new one, and all the shareholders would have had the new stock. Instead, what they did was they said, we're not going to do that. We'll do something else, we'll do a different corporate transaction, which is, we'll take the stock you have, and we'll reclassify it into the same kind of stock you would have had redone the merger. So I think the point is that again, reclassifications necessarily would have had to have been included. Essentially, the same thing, doing the same thing, which is simply changing the form of the investment, not the investment, et cetera, the economic value of the investment. I'm kind of surprised about your emphasis or your focus on B7, because I thought that B3 was actually a stronger case. Well, I think easier case. Maybe it's an easier case because you don't have the title problem, and when you have a reclassification, like you have here, essentially what happened pre-IPL is the investment bankers, and this is all under speed and record. The investment bankers come in and say, if you guys want to do an initial public arming, if you want to go sell stock to the public, you better not go try to do that when you have this huge preferred position, which would be above the common stock. Because the common stockholders would not surprisingly say, or the ones who were thinking about buying it would say, well, I don't get it. What are they so worried about that they won't be at the same level with me? It's not very complicated. So the bankers say, if you want to sell to the public, you better get down on the same level with them and take the same risks that they're taking. This happens every single time. It's typical corporate house keeping before you do an IPL. So the then existing shareholders before the IPO, before the public gets involved, get together and say, okay, the investment bankers are telling us we have to get rid of the preferred. At this stage, there were essentially three shareholders that were sterling, that was national, and that was the management group, the top executives held shares. And the three of them got together and said, well, we know what happened, weren't you? Because Mr. Abraham wanted to make a point. I did, because it was not. So thank you very much for your answer. Thank you very much. Thank you. Thank you. Okay. Your Honor, the commission did submit an Iqas brief in this case. It was a commission that submitted the brief

. Maybe it's an easier case because you don't have the title problem, and when you have a reclassification, like you have here, essentially what happened pre-IPL is the investment bankers, and this is all under speed and record. The investment bankers come in and say, if you guys want to do an initial public arming, if you want to go sell stock to the public, you better not go try to do that when you have this huge preferred position, which would be above the common stock. Because the common stockholders would not surprisingly say, or the ones who were thinking about buying it would say, well, I don't get it. What are they so worried about that they won't be at the same level with me? It's not very complicated. So the bankers say, if you want to sell to the public, you better get down on the same level with them and take the same risks that they're taking. This happens every single time. It's typical corporate house keeping before you do an IPL. So the then existing shareholders before the IPO, before the public gets involved, get together and say, okay, the investment bankers are telling us we have to get rid of the preferred. At this stage, there were essentially three shareholders that were sterling, that was national, and that was the management group, the top executives held shares. And the three of them got together and said, well, we know what happened, weren't you? Because Mr. Abraham wanted to make a point. I did, because it was not. So thank you very much for your answer. Thank you very much. Thank you. Thank you. Okay. Your Honor, the commission did submit an Iqas brief in this case. It was a commission that submitted the brief. I said, down the commission, we discussed the brief in the commission voting, and it's related to sending a brief that is... Is that a record? Actually, I just divulged a commission. I'm not sure you're going to say that. There's only one letter somewhere in the minutes of the commission that they approved the brief. You're in the short period of time that I have a line of focus on the commission's authority to adopt rule 16 B, three and rule 16 B set. The, according to the commission to adopt these two rules can be found in two clauses that are located in section 16 B. The first clause states that the commission may exempt any transaction as not comprehended within the purposes of section 16 B. Not comprehended within the purposes of section 16 B. The first, the second clause tells you what the purposes of section 16 B is. And that clause is found in the first sentence of section 16 B as the commission that says that the Congress enacted section 16 B for the purpose of preventing the unfair use of inside information. We didn't focus on that in the D. D. One argument. We could have really focused on that purpose in the D. One. And that and the same result, but really we didn't focus on it that much. How much should be focused on it now? We should focus on it because your honor Supreme Court has said that if you look at the purpose of section 16 B, what we're going to do is, the point that I've said four times is that what the purpose of section 16 B is is to prevent those situations wearing the insider using inside information, non public information about the company, trades with the investing public

. I said, down the commission, we discussed the brief in the commission voting, and it's related to sending a brief that is... Is that a record? Actually, I just divulged a commission. I'm not sure you're going to say that. There's only one letter somewhere in the minutes of the commission that they approved the brief. You're in the short period of time that I have a line of focus on the commission's authority to adopt rule 16 B, three and rule 16 B set. The, according to the commission to adopt these two rules can be found in two clauses that are located in section 16 B. The first clause states that the commission may exempt any transaction as not comprehended within the purposes of section 16 B. Not comprehended within the purposes of section 16 B. The first, the second clause tells you what the purposes of section 16 B is. And that clause is found in the first sentence of section 16 B as the commission that says that the Congress enacted section 16 B for the purpose of preventing the unfair use of inside information. We didn't focus on that in the D. D. One argument. We could have really focused on that purpose in the D. One. And that and the same result, but really we didn't focus on it that much. How much should be focused on it now? We should focus on it because your honor Supreme Court has said that if you look at the purpose of section 16 B, what we're going to do is, the point that I've said four times is that what the purpose of section 16 B is is to prevent those situations wearing the insider using inside information, non public information about the company, trades with the investing public. And I can read from, from the former's McKesson. The general purpose of Congress and the acting section 16 B is well known. Congress recognizes that insiders may have access to information about their company, it's not available to the rest of the investing public. By trading out of information, those persons could read, could read profits at the expense of less long-form investors. Now that's important for these rules because these rules are common rule commissions authority. If they exempt transactions that do not lend themselves to the kind of insider trading that section 16 B was directed, which is trading with inside information with the public, will 16 B3 D, that seems only trades that are with the issuer and the insider to no trade with the public involved here. And therefore cannot be any insider trading like any unfair use of inside information. Excuse me, I'm sorry. That is contemplated within the purposes of section 16 B3 D and that is what the nine circuits concluded in dryland versus American express. The commission has always said as to section 16 B3 D that it was not intended to have a common and a compensatory purpose. And again, those kinds of trades are not comprehended within the purpose of section 16 because they don't involve the public as to section 16 B7. And 16 B7, what's happening here and the commission has always always said that this rule applies where there's cross-unit or the 85% which would include a reclassification. With 16 B7, the transactions that are exempted are transactions where the insiders essentially acquire what he already owns. And so, the commission does not have any information that is required in the process of the transaction. And so, the commission does not have any information that is required in the process of the transaction. And so, the commission is not intended to have a common and a compensatory purpose. And so, the commission is not intended to have a common and a compensatory purpose. And so, the commission is not intended to have a common and a compensatory purpose. And so, the commission is not intended to have a common and a compensatory purpose

. And I can read from, from the former's McKesson. The general purpose of Congress and the acting section 16 B is well known. Congress recognizes that insiders may have access to information about their company, it's not available to the rest of the investing public. By trading out of information, those persons could read, could read profits at the expense of less long-form investors. Now that's important for these rules because these rules are common rule commissions authority. If they exempt transactions that do not lend themselves to the kind of insider trading that section 16 B was directed, which is trading with inside information with the public, will 16 B3 D, that seems only trades that are with the issuer and the insider to no trade with the public involved here. And therefore cannot be any insider trading like any unfair use of inside information. Excuse me, I'm sorry. That is contemplated within the purposes of section 16 B3 D and that is what the nine circuits concluded in dryland versus American express. The commission has always said as to section 16 B3 D that it was not intended to have a common and a compensatory purpose. And again, those kinds of trades are not comprehended within the purpose of section 16 because they don't involve the public as to section 16 B7. And 16 B7, what's happening here and the commission has always always said that this rule applies where there's cross-unit or the 85% which would include a reclassification. With 16 B7, the transactions that are exempted are transactions where the insiders essentially acquire what he already owns. And so, the commission does not have any information that is required in the process of the transaction. And so, the commission does not have any information that is required in the process of the transaction. And so, the commission is not intended to have a common and a compensatory purpose. And so, the commission is not intended to have a common and a compensatory purpose. And so, the commission is not intended to have a common and a compensatory purpose. And so, the commission is not intended to have a common and a compensatory purpose. And so, the commission is not intended to have a common and a compensatory purpose. And so, it did more than just simply put it in the title. Thank you very much. Thank you. Before we begin, maybe we can help with the whole concept of transactions that have the potential for abuse, vis-a-vis the marketplace. Now, how would a reclassification, or maybe you are being that we should not be that nearly focused, but to be said, we can be and should be that nearly focused. How would a reclassification run the kind of risk, vis-a-vis the marketplace, advancing some folks, given the general public, in the marketplace that are inside a trading that we normally think of would? Well, you heard Mr. Fearson say that the preferred stock and the common stock was not at the same level. So when I take the preferred stock and I get preferred stock in exchange, I made a purchase. And the very same potential for speculative abuse that exists when I go into the marketplace and buy stock for cash, exists when I take another piece of paper, and I get stock for that as well. If the prophylactic purpose of 16B is prevented, corporate insiders from manipulating corporate events, so as to profit from purchases and sales within six months. And I disagree with Mr. Caputti, quite frankly, I'd like to argue more about retroactivity or honor, but I disagree with Mr. Caputti that it's just directed at cases where there's an uninformed market participant on the other side of the transaction, because as an insider, stepping into the shoes of an insider, I have the same ability and same incentive to manipulate events. If I buy yourself from the company, if I buy yourself from the public investor, and what 16B is directed at in the aftermath of the Great Depression is market manipulations, where insiders kind of manipulated corporate events by buying and then selling quickly within six months by causing, I don't know, dividends to be declared or under-clarer, whatever the corporate events were, and there are different manifestations of corporate events that take place in different ages, but when you buy, when you sell within six months, that was Congress's judgment that it was an inherently abuse, potentially abusive series of transactions, and there should be a per se rule that profit should be discouraged, or profit should be discouraged. I want to squeeze all the profits out of it, so the shorter answer to your honor is that it's just as much a purchase as going into the market and buying it for cash when you have a reclassification. I want to address myself if I can't the issue of retroactivity because of decisions of normal layoffs and Brandex keep coming up. In our applied brief, we note that normal layoffs were subsequently distinguished by this court and the decision by now Justice Alito that where the new construction is inconsistent with the prior decision by the court, it's a substantive rule of law, and that decision is US versus Roverson and it's cited on page 8 of our applied brief. This court in US versus Diaz and the letter I recently sent to this court, and the DC Circuit similarly in the national mining case held that if there's a new regulation which is subsequently inconsistent with the prior decision of any court of appeals, it's substantive in nature

. And so, the commission is not intended to have a common and a compensatory purpose. And so, it did more than just simply put it in the title. Thank you very much. Thank you. Before we begin, maybe we can help with the whole concept of transactions that have the potential for abuse, vis-a-vis the marketplace. Now, how would a reclassification, or maybe you are being that we should not be that nearly focused, but to be said, we can be and should be that nearly focused. How would a reclassification run the kind of risk, vis-a-vis the marketplace, advancing some folks, given the general public, in the marketplace that are inside a trading that we normally think of would? Well, you heard Mr. Fearson say that the preferred stock and the common stock was not at the same level. So when I take the preferred stock and I get preferred stock in exchange, I made a purchase. And the very same potential for speculative abuse that exists when I go into the marketplace and buy stock for cash, exists when I take another piece of paper, and I get stock for that as well. If the prophylactic purpose of 16B is prevented, corporate insiders from manipulating corporate events, so as to profit from purchases and sales within six months. And I disagree with Mr. Caputti, quite frankly, I'd like to argue more about retroactivity or honor, but I disagree with Mr. Caputti that it's just directed at cases where there's an uninformed market participant on the other side of the transaction, because as an insider, stepping into the shoes of an insider, I have the same ability and same incentive to manipulate events. If I buy yourself from the company, if I buy yourself from the public investor, and what 16B is directed at in the aftermath of the Great Depression is market manipulations, where insiders kind of manipulated corporate events by buying and then selling quickly within six months by causing, I don't know, dividends to be declared or under-clarer, whatever the corporate events were, and there are different manifestations of corporate events that take place in different ages, but when you buy, when you sell within six months, that was Congress's judgment that it was an inherently abuse, potentially abusive series of transactions, and there should be a per se rule that profit should be discouraged, or profit should be discouraged. I want to squeeze all the profits out of it, so the shorter answer to your honor is that it's just as much a purchase as going into the market and buying it for cash when you have a reclassification. I want to address myself if I can't the issue of retroactivity because of decisions of normal layoffs and Brandex keep coming up. In our applied brief, we note that normal layoffs were subsequently distinguished by this court and the decision by now Justice Alito that where the new construction is inconsistent with the prior decision by the court, it's a substantive rule of law, and that decision is US versus Roverson and it's cited on page 8 of our applied brief. This court in US versus Diaz and the letter I recently sent to this court, and the DC Circuit similarly in the national mining case held that if there's a new regulation which is subsequently inconsistent with the prior decision of any court of appeals, it's substantive in nature. And Diaz is pretty clear, and I think it's a pretty comparable situation. I'm not going to say it's on World Fours, and it's in the letter we sent to the court on March 18th that when you have a new circuit court decision, a new rule which is essentially a sentencing guideline is, intended to overrule a decision by this court as that happened in Diaz. It's a substantive rule of law, and it can't be applied retroactively to the case. So we have that, you have the married decision from the DC Circuit. We said something diametrically opposed to that in Marmalayos. So can Diaz say something different without being in banked? Well, I guess this is possibly of unbanked Iran, but I think in Marmalayos, I don't know that there had been already a Third Circuit decision. I think the distinction is in Diaz, there was a Third Circuit decision that was on point which was the Smith decision, and that the new sentencing guideline, I think it was amendment 591 of Diaz's case, was seeking to overrule the Smith decision by the court, and even the sentencing commissions report specifically mentioned the Smith decision case, much as the SEC's new rules, the adopting release, mentioned the leavey decision. So I really believe that the Diaz's cases on point as is the national mining decision, although here to be has to be totally inconsistent, because it's on different facts. Well, addressing myself to the Rule 16B3D, which I guess you feel is my adversary, strongest point, and therefore my weakest, by the state of the law. No, I don't know if it's true or not. I'm just curious that there's so much of the argument is pertain to be said. Okay, you're on just, for example, on 16B3D, this court held that 16B3D is inapplicable to this case. If it's inapplicable and you have a new rule, which changes it to be applicable and controlling, that's a new rule of law. Well, but we really decided we weren't sure on balance how to read 16B3, and we had clearly, clearly, were weighing and trying to figure it out. Well, I think the best of a bad situation, if you will. You're right. You might say that, except for the fact that the circuit, that panel, said it was inapplicable. I mean, that is a clear statement of law. It's at page 124 of the decision

. And Diaz is pretty clear, and I think it's a pretty comparable situation. I'm not going to say it's on World Fours, and it's in the letter we sent to the court on March 18th that when you have a new circuit court decision, a new rule which is essentially a sentencing guideline is, intended to overrule a decision by this court as that happened in Diaz. It's a substantive rule of law, and it can't be applied retroactively to the case. So we have that, you have the married decision from the DC Circuit. We said something diametrically opposed to that in Marmalayos. So can Diaz say something different without being in banked? Well, I guess this is possibly of unbanked Iran, but I think in Marmalayos, I don't know that there had been already a Third Circuit decision. I think the distinction is in Diaz, there was a Third Circuit decision that was on point which was the Smith decision, and that the new sentencing guideline, I think it was amendment 591 of Diaz's case, was seeking to overrule the Smith decision by the court, and even the sentencing commissions report specifically mentioned the Smith decision case, much as the SEC's new rules, the adopting release, mentioned the leavey decision. So I really believe that the Diaz's cases on point as is the national mining decision, although here to be has to be totally inconsistent, because it's on different facts. Well, addressing myself to the Rule 16B3D, which I guess you feel is my adversary, strongest point, and therefore my weakest, by the state of the law. No, I don't know if it's true or not. I'm just curious that there's so much of the argument is pertain to be said. Okay, you're on just, for example, on 16B3D, this court held that 16B3D is inapplicable to this case. If it's inapplicable and you have a new rule, which changes it to be applicable and controlling, that's a new rule of law. Well, but we really decided we weren't sure on balance how to read 16B3, and we had clearly, clearly, were weighing and trying to figure it out. Well, I think the best of a bad situation, if you will. You're right. You might say that, except for the fact that the circuit, that panel, said it was inapplicable. I mean, that is a clear statement of law. It's at page 124 of the decision. Rule 16B3D is inapplicable. But the reasoning wasn't dictated. The reasoning was part of the decision. The reasoning is part of the decision, but there's a final decision that it's inapplicable and it only relates to compensation related transactions. It reaches its decision based upon an analysis of the language of the rule, the regulatory history, and the regulatory context. But there is a rule of decision in there. And if it, at the very least, I think everybody would have to admit, if the SEC never came out with a new rule, we have the rule of decision in the leading case. You're on it in just an closing. And by the way, the Brand X decision only applies to cases, prospectively, in addition to all the prior distinctions that I mentioned between interpretive rules of a statute and changing the meaning of a regulation. But in the Allegheny case, this court said almost 30 years ago that we must reaffirm certain fundamental tenants of the Dockham-Starrer decisis and then reassert the power of the Federal Dissire to interpret statutes enacted by Congress. The essence of the common law doctrine of precedent to starrer the Sises is that the rule of the case creates a blind and legal precept. The doctrine is so central to Anglo-American jurisprudence that is scarcely needs to be mentioned when it will discuss at length. A judicial precedent attaches a specific legal consequence for a detailed set of facts. And in a judge case, a judicial decision, which is then considered as furnishing the rule for the determination of a subsequent case involving identical or similar material facts and arising in the same court or lower court in judicial hierarchy. The reason why someone is red as long as you have a nits that's doing the pages, I get nervous. No, because the big said you know more. I'm going to read it. I'm a quick tober. I don't know if you should say you're on

. Rule 16B3D is inapplicable. But the reasoning wasn't dictated. The reasoning was part of the decision. The reasoning is part of the decision, but there's a final decision that it's inapplicable and it only relates to compensation related transactions. It reaches its decision based upon an analysis of the language of the rule, the regulatory history, and the regulatory context. But there is a rule of decision in there. And if it, at the very least, I think everybody would have to admit, if the SEC never came out with a new rule, we have the rule of decision in the leading case. You're on it in just an closing. And by the way, the Brand X decision only applies to cases, prospectively, in addition to all the prior distinctions that I mentioned between interpretive rules of a statute and changing the meaning of a regulation. But in the Allegheny case, this court said almost 30 years ago that we must reaffirm certain fundamental tenants of the Dockham-Starrer decisis and then reassert the power of the Federal Dissire to interpret statutes enacted by Congress. The essence of the common law doctrine of precedent to starrer the Sises is that the rule of the case creates a blind and legal precept. The doctrine is so central to Anglo-American jurisprudence that is scarcely needs to be mentioned when it will discuss at length. A judicial precedent attaches a specific legal consequence for a detailed set of facts. And in a judge case, a judicial decision, which is then considered as furnishing the rule for the determination of a subsequent case involving identical or similar material facts and arising in the same court or lower court in judicial hierarchy. The reason why someone is red as long as you have a nits that's doing the pages, I get nervous. No, because the big said you know more. I'm going to read it. I'm a quick tober. I don't know if you should say you're on. I'm going to skip the head a little bit to make it quick. I'm going to skip the head a little bit to make it quick. I'm just going to start with the Dissires. Yeah, I'm not going to read a decision by this court. Not only this is tough. We do, we get your point. Can I just go back to 10 more seconds, please, Ronald? What can you say that is what would do with this matter? What would be the same matters? A decision by the court. By this court, not only will the United States approve court, it's a decision of the court of the last or it's a resort in the federal, the district, it's a little circuit. I would like to read 10 more seconds, but I don't think you're on once a year. Okay. I think he's not sitting here for you. He is an exciting one to pursue. Yes. Thank you Mr. President. Well, thank you very much. It's not that I don't want to hear it. I'm just trying to get it out of my mind. I'm just trying to get it out of my mind

. I'm going to skip the head a little bit to make it quick. I'm going to skip the head a little bit to make it quick. I'm just going to start with the Dissires. Yeah, I'm not going to read a decision by this court. Not only this is tough. We do, we get your point. Can I just go back to 10 more seconds, please, Ronald? What can you say that is what would do with this matter? What would be the same matters? A decision by the court. By this court, not only will the United States approve court, it's a decision of the court of the last or it's a resort in the federal, the district, it's a little circuit. I would like to read 10 more seconds, but I don't think you're on once a year. Okay. I think he's not sitting here for you. He is an exciting one to pursue. Yes. Thank you Mr. President. Well, thank you very much. It's not that I don't want to hear it. I'm just trying to get it out of my mind. I'm just trying to get it out of my mind. I'm just trying to get it out of my mind. I'm just trying to get it out of my mind. I'm just trying to get it out of my mind. I'm just trying to get it out of my mind. I'm just trying to get it out of my mind. I'm just trying to get it out of my mind. I'm just trying to get it out of my mind. I'm just trying to get it out of my mind. I'm just trying to get it out of my mind. I'm just trying to get it out of my mind. I'm just trying to get it out of my mind.

as Jeffrey Abraham for plaintiff of Pellent, made police the court with the court's permission. I'd like to reserve four minutes for a bottle. This is not my first appearance before the court on this appeal. The first one came in October 2002 when we argued before panel consisting of Judge Greenberg, Judge Neungard, and Judge Michelle sitting by designation from the federal circuit. It resulted in what they said, and maybe it can help us, given what we said in maybe one, and how we specifically identified the absence of guidance or clarification from the SEC. Given the spring boys holding in brand acts and in Smiley versus City Bank, how can you win? Well, I think quite simply, Your Honor. The first thing is that there were real rules of decision in Levy. There was a decision asked to the law on 16B7. There was a decision asked to 16B3. 16B3 was held to be in applicable. 16B7. What do you say decision, you're talking about Levy 1? Levy 1 had real rules of law in them. Well, that's why I asked about brand X because it seems to me that's exactly the situation. We have you. There were real rules of law in Levy 1, but there were based upon an interpretation of an ambiguity and a regulation. We highlighted that and we said in the absence of guidance or clarification from the SEC, we interpret the regulation that is should be there to exclude from the exclusion, re-glossifications. I understand that, Your Honor. I think that we distinguish brand X and our brief as follows. Brand X involved an interpretation of the statute and in the context of administrative deference and interpretation of a statute, stary the slices cannot control future agency action. However, in the context of a court's determination as to what a regulation means, brand X doesn't apply because the concepts of deference are different. What do you got, Seminoleation? Don't you run the smack dead men in Seminoleation which basically says it's a Chevron transpose to the regulatory scheme and you run through exactly the same problem? Well, I don't think so, Your Honor. Do you all respect? Because there's a limit to deference and the limit to deference is what do the words of the regulation mean? What does the regulatory history tell us about what the regulation meant at the time it was first adopted? And what does the regulatory context tell us as well? And I think in that context, the Christians in decision as well as the Kruza decision versus the written by Judge Alitos, Blopus or Sony Entertainment, established that where an agency has a regulation that says one thing and it wants to change the regulation it has to adopt a new regulation. It can't reinterpret the regulation to mean something other. It didn't reinterpret. It amended and changed the language of the regulation. So into a statute which can be referred in to that. How are you doing? I'm sorry? You're wrong. Which statute which gave it the power to do it? The statute gives the SEC the power to adopt regulations. However, when it wants to adopt a new regulation it has to change the regulation. Otherwise the old regulation is an effect your honor. And can only change the regulation prospectively. Well, well let's back up a minute. Before you get to the issue of deference, I want to question the way you view leaving one. Doesn't national cable say that where the prior construction by the court was not based upon unambiguous terms of the statute. Leaving no room for agency discretion where that has not occurred. Then we need then the agency construction will trump the prior court determination. Isn't that precisely where we find ourselves such that leavey one is now no longer controlling? Um, you're all right. I don't think so because I'll tell you why because Brandex is talking about in the context of eight of the I'm talking about national cable. I'm sorry. I call the brand X. Okay. Yeah. I'm sorry. Same thing. Thank you. Okay. Brandex is talking about what happens when there's a statute and agency issues regulations governing the conduct and a statute can in court and brand X the ninth circuit made a determination as to what the statute meant. The agency disagreed with it and came out with a regulation that was different. The ninth circuit said we already decided what the statute meant. Too bad. The Supreme Court took that decision and said no. You have to go with what the agency says the statute met. We can't have ossification of the regulatory process in that context because you had not found that the terms of the statute were on invigations. But that was a statute and this is this case involving interpretation of two regulations. You have this agency construction. Does it really matter? It does matter, Your Honor, because you have the Christiansen decision by Judge Thomas. And in that decision he says when an agency wants to issue a new regulation it cannot reinterpret the regulation and the nature of ossification is different. When it comes to a regulation and when it comes to a statute. That turns in whether as the second part of your argument is the third part I guess that turns in whether or not what the agency did here was a clarification or a change in the law. If it's a clarification of an ambiguity then what you're arguing about Christmas, Christiansen doesn't really help you does and then we're back into. Well, it's mildly. Your Honor, I guess the nature of the litigation here in Leave You One establishes when Judge Greenberg wrote the decision. He looked for traditional standards of regulatory interpretation which are similar to statutory interpretation. He looked at the language of the rule. He looked at the regulatory context. He looked at the regulatory history and all the adopting releases accompanied. He did say to me some more that the regulation was ambiguous. He said the way I think he said the words room to interpret it but he was able to interpret it at some level. And specifically he said in the absence of specific SEC guidance about which reglassifications are exempt from section 16B, Underworld 16B7. We believe that two principles should guide us in determining which reglassifications should be included in 16B7 and then he gets into the two principles. But he's clearly saying that as I said earlier in the absence of any clarification or gloss from the SEC about the kind of reclassifications that the clearly some reclassifications were exempt. The issue of Leave You One was worth or not that kind of reclassification fell within the exemption. Right. Your Honor, I think you take that and you should take the history of Leave You subsequent to that decision when we had a petition for a hearing and a petition for a hearing on bunk proceeding in which it was full briefing. The SEC put in a brief, there were multiple briefs put in and the SEC came in and said, vacate your decision third circuit. Here is our guidance. This is what rule 16B3D and rule 16B7 always meant. Well, they did that in a brief. It's not. That would be entitled to differences. Well, I'm not sure what none of the brief represents only the position of the staff and not the position of the commission. That's very different. Where are you often we have that situation people arguing and we see it differently and clearly the Court and Leave You One so differently. Well, Your Honor, I believe the decisions on the difference establishes a brief and in the case of the SEC and SEC Amicus brief has to be, I believe, approved by the commissioners, but you can ask Mr. Capudi that. I'm, that's a concession that could impact the argument today, if you really. I believe that's the procedures they follow, Your Honor. That I believe that when the panel indicated that it adhere to its decision that you had a decision, you had a case where there were rules of law decided by the third circuit and they applied to this case going forward. Why do you get to your issue of substantive versus, you know, clarification change you're running out of time. I see that, Your Honor. It's important. Unless you want to do that on Rebuck. I will try to get everything I can in here. The point here is that it was a substantive rule of law. This is not a collateral issue to the case, 16B3 of 16B7. Under the use decision by the Supreme Court on the land graph, the change in the language of rule 16B7 and rule 16B3 operates a substantive change in the law. Well, the 16B3, the change there only said we meant what we said when we said it doesn't have to be compensatory. So, I mean, how can that be a real change when all it did was clarify that the previous language that was previously there was meant, was there for a reason and meant something? Well, Your Honor, the actual language was here as a grant award or rather a requisition. I think that Judge Greenberg looked to the actual language, the principles of statutory interpretation, regulatory interpretation, the regulatory context. There was one way taken out a snippet, a snippet of regulatory history which Judge Greenberg correctly, I believe, interpreted in another way in the context of the only regulatory history. Well, we said that all the compensatory discussion outweighed the specific language that says it didn't have to be compensatory. And all that the new rule said was that last part that you looked at didn't think it was outweighed really meant something. But Your Honor, did it by changing the rule, language of the rule, issued a whole new regulatory lease, it's an entirely new rule. And it's not that that's always the happens, this entirely new rule, we still need to determine whether it's clarifying or substantive change as we discussed in Marmelayah. Are there every one of the tests established to determine whether a rule is substantive or interpretive, this rule is substantive? The SEC utilized its legislative authority to make the rule. The SEC and its own rules describe its rulemaking authority as being legislative in nature, in putting the sections of rules dealing with legislative... Don't we have to look at what I'm sorry to interrupt you? But you know, that's what happens when a rule, a new rule is enacted all the time, what you're talking about, don't we have to look and see exactly what it does, vis-a-vis what was there before? Well, what it does Your Honor quite frankly is under the previously-sleeved decision, the plaintiff would have been made in titles for a cover, and under the new rules, it prevents the plaintiff from recovering. That's a very essence of a substantive change in the law. Well, that doesn't mean that it's a new change, that doesn't mean that it's a change in the law. It simply means that we got it wrong. Not in the end, by chance, it's getting it wrong, but the clarification that we had, that we longed for in leave you one, and decided the case in the evidence of, the clarification of the country comes and says that we were in fact wrong. I'm out of time, I know something I was going to say from a prior decision of the Third Circuit, I could hold it for a bottle, or I could say it now. Your Honor, when you say we got it wrong, I don't think you got it wrong, and I've put a lot of briefing in on that, but even if you got it wrong, the principles of the standard, the size is established, that that is the decision of the Third Circuit, and to overturn it creates a substantive new rule of law. And in the allegation- This should be un-boxed leave you one, is that what you're hoping for? Well, the panel reaffirm leave you one, that's the first thing, and on-bunk, leave you one, the petition was denied as well. I think it's not just the on-bunk denial, I think it's also the panel denial. But that happens, whatever, 90% of the time, when a petition for re-earing is signed, it's automatically petition for re-pandory hearing as well, it's court re-earing, and when it's denied, if a subsequent decision comes along, or something that's going to be penalized, that first panel is wrong, we ask the court to reconsider the first- I'm not sure it's necessary here, given what I said about Brand X and Smiley, but it seems to me what you're arguing for would make that something which you'd be- You'd welcome that, that we say we should reconsider leave you one. Well, you know, let me just read from this- I know a lot of time, and I think it might be fair to my adversaries to read from this decision, so they would have an opportunity to respond to it if not, I'll hold it for a bottle. Well, why don't you go for a bottle? What is the decision to be in front of you from leave you one? No, I'm going to- I'm going to read from Algady General Hospital, which is at 608F, second 965, or on. Okay. May I please the court? I'm Steed and Fearson, and I represent the appellaries in this matter. We ought to- I want to get one thing out of the way quickly if I may, which is this notion that this court had the benefit of SEC guidance on the petition for rehearing. As the court is well aware, a decision on a petition for rehearing is not a decision on the merits. There's a whole long string of cases from this court saying that for obviously good reasons, because there are a whole host of reasons why courts of appeals decide not to rehear a case at a certain point in time. For example, when this case was up last time, we were at the motion to dismiss stage. Might simply have been the court felt that it could wait. And especially in the context of- as the court has pointed out, the panel said that guidance from the SEC was lacking. Perhaps at a later point in time, the guidance from the SEC would be lacking, which is exactly the situation we have here. Sadly, when the SEC put in the brief, it only put in the brief on the issue of the petition for rehearing, didn't put in the brief on the substantive merits of the dispute. It said we- for all the following reasons, we think the court ought to rehear it. So we ought not to get confused about that. And Mr. Abraham has, since the petition for rehearing has been denied, consistently tried to use that as sort of leverage to say, oh, geez, the court of appeals actually had guidance from the commission and that the decision has been made. And that's just not the case. Again, focusing on the lack of guidance language that you're on are read. I think it's interesting to note not only that that would seem to us to be the epitome of a decision which calls out for clarification, but it's interesting to note that the second circuit in the brewed decision actually pointed to that. In other words, when in that case, the argument was made, geez, you should do what the Levy Court did. The second circuit said, well, wait a second. The Levy Court said it did what it did in the absence of guidance from the commission. We now have guidance from the commission. We have to take a look at the guidance from the commission. But the true court also found that even without the guidance, it would have found the exemption to apply. Well, what it did, I think that's actually a little interior honor. I think what the Court did was to say, we don't have to deal with the new rule because we find the old rule, right, controls. One great lesson. But they did what they could do and the adopting release to determine what the intent of the commission always was back then. So they used it the same way the court's generally used adopting releases and other statements from agencies that interpret their own regulations. One of the arguments that Mr. Abraham made to try to get past the National Cable Brand X cases, oh geez, that was how to do it with a statute and not a regulation. We would have two responses to that. The first response is there's actually slightly more difference owed when an agency is interpreting its own regulation, not surprisingly because it's their regulation and their intent that matters. And secondly, in Montmelay House, the court dealt with an interpretation of a regulation, not the interpretation of the statute, as do loads of other cases. And as the Court pointed out, it's really the same analysis. I mean, if you look at what the Chevron test is, you can't overturn the agency's view unless it's arbitrary, capricious or contrary to the statute. Well, in Montmelay, it was the guideline. It was the guideline and the agency came back. In other words, it wasn't a statute. But Congress by letting guidelines go into effect or legislating? Well, but you could argue the same thing here. The Congress by getting to the commission, the right to figure out what the exemptions are doing a similar sort of thing. I mean, there's really nothing much of a substance to the difference there. So whether you look at Montmelay House, whether you look at Brand X, whether you look at the whole host of other cases, we cite. The principle is the same, which is, courts have to make decisions when cases are in front of them. I mean, they can't just say, geez, it's unclear. We're sorry, we can't figure it out. We're going to make a decision. If you'd like to be able to do that, but you can. And so later when the agencies come in and say, geez, in essence, sorry, we could have been clear, here's what we always meant. Because it's their job to figure out what the regulation means in the first instance that will control. And the discussion, I agree with the Court, the discussion in Brand X about the balance between when you give a fact to what the court said and when you give a fact to what the agency said, I think controls here. And in essence comes down to this difference between clarifying and substantive. And as the Supreme Court made clear, and as this Court made clear in Montmelay House, the mere fact that a court decides something doesn't make it substantive. In Montmelay House, this Court in fact said, in fact, one could posit that quite the opposite was the case, that the new language was fashioned to clarify the ambiguity made apparent by the case law. In other words, the court itself points out the ambiguity, which is exactly what happened here. But happened here in Levy, one is the court said with respect to 16 B7, we know it pertains to at least some reclassifications. We just don't know which ones and the commission hasn't been terribly helpful and at least we feel the commission has been terribly helpful in letting us know. Which is stronger, the B3 or the B7, we only need to find one, correct? Which do you think is stronger? It's a little bit like trying to choose between your children. I think they're both really strong in the sense that given the statement by the commission about what each one means, I think they're both, they're almost equally strong. If you ask me, the reclassification has strength because it's an issue of form over substance, what the commission is actually saying there is. As long as the substance of the transaction doesn't change, the substance of the investment just changes the firm. It was required that there be a merger or a consolidation before, and this does not emerge or a consolidation. So did it not affect substantive change? It did change the risk. That probably didn't change. The risk didn't change. As far back as 1981, the commission said you can treat, can treat reclassifications in the same way. They put the word reclassifications in the title for a reason, although... No, but we don't give effect to titles. But what the court does give effect to is the intent of the agency. The question really isn't, should be cost, they put it in the title, or be bound by it. That's not the question because the answer to that is absolutely correct. The answer to that is no, because it's in the title. It's a different question, I would suggest. The different question is, is that tell us anything about the agency's intent, especially given the history of this thing, which is in 1981, it says it can apply to reclassifications. In 1991, it puts it in the title. It has the no action letters in St. Charles and Monk Austin dealing with reclassifications. In 2002, in amending the rules for the filing of the form 8K, it refers back and says reclassifications are exempt under 16-B7. But was it clear that the SE believe that every reclassification? No, and that's where you have... Well, but... No. That is fact to change whereby now all reclassifications... No, the issue, the question is, was it clear from those outward manifestations that every reclassification was covered? The answer is not that clear, which is why we have leave you want. That's different from saying, was it always that commissions intent to exempt all reclassifications? They didn't do a very good job. They may have done a very good job of saying it, but the issue here is, the way the standard is set up is, when you now look at it, and the commission has said, that's always been our intent. And unless there's something in the language itself, or alternatively elsewhere, that compels... That's the word that the case is used, compels a different conclusion. Then you have to go with what the agency says, it's intent always was, because they are the ones who know what their intent always was. The rest of us, in the absence of a clear statement which we now have, have to try to divine that. What's your best case on that point, that the regulation doesn't say that reclassification is included, but we divine the intent of the agency and say, that's what it meant, so that's what it is. I think the best argument for that is that it must necessarily have been included, and let me just give you one example. When folks out in the real world are structuring these transactions, they could have just as easily structured not to be a reclassification, but to be a merger. There's no reason except convenience to do it one way or the other. So for example, they could have created a new entity with its own stock, and then merged the existing entities into the new one, and all the shareholders would have had the new stock. Instead, what they did was they said, we're not going to do that. We'll do something else, we'll do a different corporate transaction, which is, we'll take the stock you have, and we'll reclassify it into the same kind of stock you would have had redone the merger. So I think the point is that again, reclassifications necessarily would have had to have been included. Essentially, the same thing, doing the same thing, which is simply changing the form of the investment, not the investment, et cetera, the economic value of the investment. I'm kind of surprised about your emphasis or your focus on B7, because I thought that B3 was actually a stronger case. Well, I think easier case. Maybe it's an easier case because you don't have the title problem, and when you have a reclassification, like you have here, essentially what happened pre-IPL is the investment bankers, and this is all under speed and record. The investment bankers come in and say, if you guys want to do an initial public arming, if you want to go sell stock to the public, you better not go try to do that when you have this huge preferred position, which would be above the common stock. Because the common stockholders would not surprisingly say, or the ones who were thinking about buying it would say, well, I don't get it. What are they so worried about that they won't be at the same level with me? It's not very complicated. So the bankers say, if you want to sell to the public, you better get down on the same level with them and take the same risks that they're taking. This happens every single time. It's typical corporate house keeping before you do an IPL. So the then existing shareholders before the IPO, before the public gets involved, get together and say, okay, the investment bankers are telling us we have to get rid of the preferred. At this stage, there were essentially three shareholders that were sterling, that was national, and that was the management group, the top executives held shares. And the three of them got together and said, well, we know what happened, weren't you? Because Mr. Abraham wanted to make a point. I did, because it was not. So thank you very much for your answer. Thank you very much. Thank you. Thank you. Okay. Your Honor, the commission did submit an Iqas brief in this case. It was a commission that submitted the brief. I said, down the commission, we discussed the brief in the commission voting, and it's related to sending a brief that is... Is that a record? Actually, I just divulged a commission. I'm not sure you're going to say that. There's only one letter somewhere in the minutes of the commission that they approved the brief. You're in the short period of time that I have a line of focus on the commission's authority to adopt rule 16 B, three and rule 16 B set. The, according to the commission to adopt these two rules can be found in two clauses that are located in section 16 B. The first clause states that the commission may exempt any transaction as not comprehended within the purposes of section 16 B. Not comprehended within the purposes of section 16 B. The first, the second clause tells you what the purposes of section 16 B is. And that clause is found in the first sentence of section 16 B as the commission that says that the Congress enacted section 16 B for the purpose of preventing the unfair use of inside information. We didn't focus on that in the D. D. One argument. We could have really focused on that purpose in the D. One. And that and the same result, but really we didn't focus on it that much. How much should be focused on it now? We should focus on it because your honor Supreme Court has said that if you look at the purpose of section 16 B, what we're going to do is, the point that I've said four times is that what the purpose of section 16 B is is to prevent those situations wearing the insider using inside information, non public information about the company, trades with the investing public. And I can read from, from the former's McKesson. The general purpose of Congress and the acting section 16 B is well known. Congress recognizes that insiders may have access to information about their company, it's not available to the rest of the investing public. By trading out of information, those persons could read, could read profits at the expense of less long-form investors. Now that's important for these rules because these rules are common rule commissions authority. If they exempt transactions that do not lend themselves to the kind of insider trading that section 16 B was directed, which is trading with inside information with the public, will 16 B3 D, that seems only trades that are with the issuer and the insider to no trade with the public involved here. And therefore cannot be any insider trading like any unfair use of inside information. Excuse me, I'm sorry. That is contemplated within the purposes of section 16 B3 D and that is what the nine circuits concluded in dryland versus American express. The commission has always said as to section 16 B3 D that it was not intended to have a common and a compensatory purpose. And again, those kinds of trades are not comprehended within the purpose of section 16 because they don't involve the public as to section 16 B7. And 16 B7, what's happening here and the commission has always always said that this rule applies where there's cross-unit or the 85% which would include a reclassification. With 16 B7, the transactions that are exempted are transactions where the insiders essentially acquire what he already owns. And so, the commission does not have any information that is required in the process of the transaction. And so, the commission does not have any information that is required in the process of the transaction. And so, the commission is not intended to have a common and a compensatory purpose. And so, the commission is not intended to have a common and a compensatory purpose. And so, the commission is not intended to have a common and a compensatory purpose. And so, the commission is not intended to have a common and a compensatory purpose. And so, the commission is not intended to have a common and a compensatory purpose. And so, it did more than just simply put it in the title. Thank you very much. Thank you. Before we begin, maybe we can help with the whole concept of transactions that have the potential for abuse, vis-a-vis the marketplace. Now, how would a reclassification, or maybe you are being that we should not be that nearly focused, but to be said, we can be and should be that nearly focused. How would a reclassification run the kind of risk, vis-a-vis the marketplace, advancing some folks, given the general public, in the marketplace that are inside a trading that we normally think of would? Well, you heard Mr. Fearson say that the preferred stock and the common stock was not at the same level. So when I take the preferred stock and I get preferred stock in exchange, I made a purchase. And the very same potential for speculative abuse that exists when I go into the marketplace and buy stock for cash, exists when I take another piece of paper, and I get stock for that as well. If the prophylactic purpose of 16B is prevented, corporate insiders from manipulating corporate events, so as to profit from purchases and sales within six months. And I disagree with Mr. Caputti, quite frankly, I'd like to argue more about retroactivity or honor, but I disagree with Mr. Caputti that it's just directed at cases where there's an uninformed market participant on the other side of the transaction, because as an insider, stepping into the shoes of an insider, I have the same ability and same incentive to manipulate events. If I buy yourself from the company, if I buy yourself from the public investor, and what 16B is directed at in the aftermath of the Great Depression is market manipulations, where insiders kind of manipulated corporate events by buying and then selling quickly within six months by causing, I don't know, dividends to be declared or under-clarer, whatever the corporate events were, and there are different manifestations of corporate events that take place in different ages, but when you buy, when you sell within six months, that was Congress's judgment that it was an inherently abuse, potentially abusive series of transactions, and there should be a per se rule that profit should be discouraged, or profit should be discouraged. I want to squeeze all the profits out of it, so the shorter answer to your honor is that it's just as much a purchase as going into the market and buying it for cash when you have a reclassification. I want to address myself if I can't the issue of retroactivity because of decisions of normal layoffs and Brandex keep coming up. In our applied brief, we note that normal layoffs were subsequently distinguished by this court and the decision by now Justice Alito that where the new construction is inconsistent with the prior decision by the court, it's a substantive rule of law, and that decision is US versus Roverson and it's cited on page 8 of our applied brief. This court in US versus Diaz and the letter I recently sent to this court, and the DC Circuit similarly in the national mining case held that if there's a new regulation which is subsequently inconsistent with the prior decision of any court of appeals, it's substantive in nature. And Diaz is pretty clear, and I think it's a pretty comparable situation. I'm not going to say it's on World Fours, and it's in the letter we sent to the court on March 18th that when you have a new circuit court decision, a new rule which is essentially a sentencing guideline is, intended to overrule a decision by this court as that happened in Diaz. It's a substantive rule of law, and it can't be applied retroactively to the case. So we have that, you have the married decision from the DC Circuit. We said something diametrically opposed to that in Marmalayos. So can Diaz say something different without being in banked? Well, I guess this is possibly of unbanked Iran, but I think in Marmalayos, I don't know that there had been already a Third Circuit decision. I think the distinction is in Diaz, there was a Third Circuit decision that was on point which was the Smith decision, and that the new sentencing guideline, I think it was amendment 591 of Diaz's case, was seeking to overrule the Smith decision by the court, and even the sentencing commissions report specifically mentioned the Smith decision case, much as the SEC's new rules, the adopting release, mentioned the leavey decision. So I really believe that the Diaz's cases on point as is the national mining decision, although here to be has to be totally inconsistent, because it's on different facts. Well, addressing myself to the Rule 16B3D, which I guess you feel is my adversary, strongest point, and therefore my weakest, by the state of the law. No, I don't know if it's true or not. I'm just curious that there's so much of the argument is pertain to be said. Okay, you're on just, for example, on 16B3D, this court held that 16B3D is inapplicable to this case. If it's inapplicable and you have a new rule, which changes it to be applicable and controlling, that's a new rule of law. Well, but we really decided we weren't sure on balance how to read 16B3, and we had clearly, clearly, were weighing and trying to figure it out. Well, I think the best of a bad situation, if you will. You're right. You might say that, except for the fact that the circuit, that panel, said it was inapplicable. I mean, that is a clear statement of law. It's at page 124 of the decision. Rule 16B3D is inapplicable. But the reasoning wasn't dictated. The reasoning was part of the decision. The reasoning is part of the decision, but there's a final decision that it's inapplicable and it only relates to compensation related transactions. It reaches its decision based upon an analysis of the language of the rule, the regulatory history, and the regulatory context. But there is a rule of decision in there. And if it, at the very least, I think everybody would have to admit, if the SEC never came out with a new rule, we have the rule of decision in the leading case. You're on it in just an closing. And by the way, the Brand X decision only applies to cases, prospectively, in addition to all the prior distinctions that I mentioned between interpretive rules of a statute and changing the meaning of a regulation. But in the Allegheny case, this court said almost 30 years ago that we must reaffirm certain fundamental tenants of the Dockham-Starrer decisis and then reassert the power of the Federal Dissire to interpret statutes enacted by Congress. The essence of the common law doctrine of precedent to starrer the Sises is that the rule of the case creates a blind and legal precept. The doctrine is so central to Anglo-American jurisprudence that is scarcely needs to be mentioned when it will discuss at length. A judicial precedent attaches a specific legal consequence for a detailed set of facts. And in a judge case, a judicial decision, which is then considered as furnishing the rule for the determination of a subsequent case involving identical or similar material facts and arising in the same court or lower court in judicial hierarchy. The reason why someone is red as long as you have a nits that's doing the pages, I get nervous. No, because the big said you know more. I'm going to read it. I'm a quick tober. I don't know if you should say you're on. I'm going to skip the head a little bit to make it quick. I'm going to skip the head a little bit to make it quick. I'm just going to start with the Dissires. Yeah, I'm not going to read a decision by this court. Not only this is tough. We do, we get your point. Can I just go back to 10 more seconds, please, Ronald? What can you say that is what would do with this matter? What would be the same matters? A decision by the court. By this court, not only will the United States approve court, it's a decision of the court of the last or it's a resort in the federal, the district, it's a little circuit. I would like to read 10 more seconds, but I don't think you're on once a year. Okay. I think he's not sitting here for you. He is an exciting one to pursue. Yes. Thank you Mr. President. Well, thank you very much. It's not that I don't want to hear it. I'm just trying to get it out of my mind. I'm just trying to get it out of my mind. I'm just trying to get it out of my mind. I'm just trying to get it out of my mind. I'm just trying to get it out of my mind. I'm just trying to get it out of my mind. I'm just trying to get it out of my mind. I'm just trying to get it out of my mind. I'm just trying to get it out of my mind. I'm just trying to get it out of my mind. I'm just trying to get it out of my mind. I'm just trying to get it out of my mind. I'm just trying to get it out of my mind