we hope you all exercise your privilege of voting today but you still have time we just want to point you with a traffic light system which we will observe even though we only have two or a large human to smore ning when you have when it signals two minutes you start winding up your argument and when you see the red light comes on you should conclude unless you're answering the question from the court we have for read the briefs and record excerpts in the case we have not necessarily been into the record and therefore we appreciate record citations when those are a couple first katzman this case is defined by a large number of disputed material facts luckily i am not asking this court to decide all those disputes i am asking this court to recognize that it was here for the district court  to pick out kevin wallace's witnesses and give their declarations little weight and then proceed to decide the factual contentions using to sort of his theory of the evidence i am also asking this court to find that the district court abused its discretion in declaring that the testimony of douglas rule was expert testimony and had to be stricken because it had not been the subject of a timely notice of intent to  use a subject matter expert and then in denying wallace's motion for leave to make a late as a nation of war as an expert we were here three years ago after the district court had dismissed this case the pleading and at that time a different panel of this court issued what's become an important decision in whistleblower jurisprudence the court held that an employee who is providing information about potential fraud or assisting in a nascent fraud investigation would also be protected by sarbanes oxley employee protection the court said that leaving these employees unprotected would have grave consequences for the statutory scheme of employee protection no other court has said this quite this way or as such clarity about the grave consequences to the remedial purpose of sops to make sure that investors are getting information they can rely on and to protect our economy from crises such as that brought on by enron pricing kind of putting aside how the f c c and general accounting principles require that companies report their earnings segment segment by segment so that investors can that misleads the investors about which segments of the company are really generating the relevant profits and for whatever reason the investment community and to sort of through their bonus incentive program was looking to encourage the reporting of profits as part of marketing asked what they wanted to show the profits and this device including the point of sale taxes which are include the local sales taxes and environmental and hazardous material fees and eventually came to sometimes fifty cents on the gallon well what is the government of your complaint because it seems pretty significant to two thousand and nine report which which was for fiscal year two thousand and eight they only mention the excise taxes and they changed that we believe in part in response to kevin wallace's concerns for their two thousand and nine report which came out in early march twenty ten rate around the time that wallace was being fired so at the time wallace was investigating and raising and pressing this concern the reference to sales tax as was not in the footnote that was on file for there and were turned wallace did sign off that he was not aware of any errors or violations in the reporting for two thousand and nine but that was because the investigation the granular nature of the investigation that his staff was the appropriateness of a disclosure in the s c c filing which relates only to excise taxes in two thousand and nine rotten and then you're saying but it makes all the difference in the world  sales taxes was not in there and that was what he had begun investigating i don't know about all the difference in the world but it isn't true in the serial and it had to be material in order to be disclosed  were the right climate to disclose it yes it has been material that's right although that does not apply to the narrative sections of the ten k but i would like to talk about douglas rule because four years reporting the transfer prices among its different segments and he discovered that you know this issue had been left dormant since kevin wallace was fired in two thousand and ten you know he picks it up finds it has merit that indeed  failure to properly account for transfer prices and that has to be fixed and he fixes that at a cost of about three hundred fifty million dollars in new accounting upgrades which is what really should have happened back when kevin wallace raise the issue back in two thousand and ten so what we think that what what douglas will was saying really corroborate the merits of the concern that kevin wallace raised indeed you know if if his concern was true then his belief and it was reasonable and that's what douglas will establish is particularly in a part of his declaration the paragraph seven this is that page twenty seven eighty two of the record paragraph seven at the last two sentences  which is a section that was not stricken and he makes clear that when he picked up this issue you know there simply was no standard valid mechanism for tesoro to analyze these transfer prices and it was done entirely a significantly undercuts that besides is there any other evidence for such a decision by your client was reasonable yes we think the testimony  of tracey chesley corroborated our clients concerned she is the one who submitted the email in march twelve saying oh this is bad you know the misreporting is thirty million dollars a year and she says it's a train wreck on so many levels we think that's directly corroborates kevin wallace's concern and comes up on the very morning in which they decide to fire him even before h i had finished its investigation of the concerns about kevin  's management in fact you know to sort of made this false claim that obama roe was a reluctant decision maker and had to go along with his recommendation when we did discovery we found out h r never recommended firing kevin wallace and in fact told any response for the contention that he was insubordinate that he told employees to disregard what mr morrow was what executives above his level weren't affecting him  there's a high burden to bear and showing by clear and convincing evidence that he was the the company took this action but i still didn't see i don't recall seeing in the briefs anything in response to the that i think is important here which is that the source making this claim that their investigation of workplace misconduct by kevin wallace was completely unrelated to the concerns he was raising and a jury does not have to agree with that the jury could find that the descriptors of this misconduct including that he was making unilateral decisions which i think may touch on this insubordination issue you were talking about that he was autocratic and willing to compromise a jury could look at that and say well that could describe someone who has the integrity to stand up and raise their concern when they know they're right and the company is wrong so i don't i don't agree that these are entirely separate and i think a jury could conclude that once while started raising these are criticizing each other and the fact that the whistleblower is being criticized by the those who are the targets of the alleged wrongdoing does not prevent the whistleblower from winning their case that was the kansas gas electric case in our well exactly what position are you taking here visa v mr wallace's claim are you taking the position that he uncovered something which was material to the c filing and was so material that the company finally had to correct it or are you saying merely that the company should be liable because he had a reasonable belief that he was uncovering something that was material and had to be disclosed i am saying both of those and i am also saying that kevin wallace participated in the process certification that's required by sox and that's also protected under fifteen fourteen a one to agree with the certification yes but he reported yes on retaliation and question thirteen and that was the answer that we contend prompted his terminations it happened the same day he got fired you know just hours later after he submitted that report they walked him out the door with no advance warning no progressive discipline well  happens sometimes some people get fired but yes but but when the when the employer has a duty to show by clear and convincing evidence that they would have taken the same action without a protected activity it gets very hard when they're protected activity comes on the day deloitte report is part of kevin wallace's reason the believe that the s a p accounting system to store was relying on was an adequate for the job that it couldn't factor out the pass through cost gap requires organizations to do it it is not sufficient to merely disclose hey our profits may include some taxes gap requires that you get a handle on that and you find out how much those taxes are and where they are properly  because of noncompliance with gap did the company ever do that i don't know that they ever did but i do know that once douglas will finished his management of change process  of finally bit the bullet and had to pay over three hundred fifty million dollars to upgrade their sap system and you know that is definitely material thank you very much all right so you have time  side if one looks at all of the c c filings that are in the record they all contain the same material of the same disclosures the filings that are in the record or for the years two thousand and eight two thousand and nine  two thousand and ten there's also those are ten cases also ten q s if i could just give you the record citations for the year two thousand and eight i don't believe these are cited in the brief but they are in the record twenty two seventy five of the record is the disclosure  twenty two seventy six twenty two seventy six of this is for the year two thousand and eight which was before wallace was beginning he's investigation federal excise and state motor fuel taxes on sales by our retail segment are included in both revenues  and cost of sales and operating expenses in our statements of consolidate operations and also states in twenty to seventy five that state motor fuel taxes are included in both revenues and cost of sales and then it says what these taxes says these taxes primarily related to sales of gasoline and diesel fuel that's two thousand and eight two thousand and nine these are the ones that he did certified sub certify were correct and then when he was terminated that same day he certified what he claims to have related only to two thousand and nine that there was no misreporting in two thousand and nine contain the same material you the same there's a maybe one more different so that's on page twenty two eighty one you can find  the first disclosure and it's identical to the one i just read you before twenty two eighty two and this is the ten k for the year two thousand and nine says federal and state motor fuel taxes on sales by our retail segment are included in both revenues and cost of sales and operating expenses and then it goes on to list exactly what those numbers are so any shareholder that was looking at it not only knew that they were disclosed but could actually tell you you could look and see exactly how much they were twenty ten and this was filed shortly after he was actually shortly before he was terminated i don't know if he'll be the twenty two to twenty ten filing wasn't made until after he was terminated but that filing has the same disclosures as twenty two thousand nine so that's on pages two twenty two ninety of the record and twenty two ninety one and i'm not going to read it because it's the same then we have the ten q s for the third quarter of two thousand and nine which was filed on november ninth two thousand and nine which would be during the period of time when he was the sub certified or twenty two eighty four it says federal and state motor fuel taxes on sales by our retail segment are included in both revenues and cost of sales  the same that says what those numbers are the ten q for twenty for march thirty first two thousand and ten which was filed after he was terminated shortly after twenty two eighty six same thing so basically there was no change here they had the same disclosures he wasn't reporting anything to the company that they didn't they already know and b already had fully disclosed to shareholders the company a modified its accounting or disclosure at any time  following these years i do not have anything past the two thousand and ten years but again many of some of those were filed after he was terminated and there materially the same so you're saying this whole business about the deficiency of the p accounting program is or is a red herring or meritless or what it's a it's a red herring your honor it was that that to the extent that has any relevance that relates to his looking at internal reporting by the company and what he  was pulling data out of the counting system that he thought was a discrepancy i think if you look at ms jackson deposition she was the accountant when he told her oh i'm finding these things in the internal not not the s e c reporting this is the internal reporting of the company she looked at it actually so you can actually look at pages twenty one eleven twenty one twelve twenty one sixteen twenty one eighteen twenty one twenty eight of the record and what she said there is be looked at all of this and we found that in fact that they were in the company admits it was including sales taxes and all other taxes in revenue but it was also taking it out in cost so there is no net the net zero and that's what they were also disclosing to shareholders and she said we looked at it and it was perfectly fine she also says in twenty seven thirteen to fourteen we followed gap i don't think he mentioned gap in his opening argument i don't see any evidence in the record that gap won't when this case was before the court the first time the court really managed on one narrow claim saying that wallace's complaint taken as true soley for purposes of the motion to dismiss substantiate those allegations with actual evidence and the magistrate judge in what i think is a very thorough opinion said he failed to do that and the district court affirmed and we think you can the court can affirm that that none of this reporting that was at issue regardless a reasonable belief but in so far as the accuracy is that none of that reporting was inaccurate or improper made to the to the as she see up through march of two thousand and ten which was the actual date of the trial and yes so but beyond that that's not relevant i think what we're looking at now those reports position of just a rose is that they were accurate and were not improperly dealing with sales taxes that is that is true we spent three hundred fifty or two hundred fifty or a billion dollars on that posing counsel was talking about i'm not sure in the record where he's referring to that but i think two hundred fifty million dollars i don't be facetious about so what was that about i think what he's saying is that we that the company upgraded its accounting system and spent money to do that that's what i'm understanding him to say but it wasn't because of any of these issues to the extent they needed a new accounting system they needed new accounting system but i've heard says we're get it does but i think the important thing is that he has to prove as plaintiff has to produce evidence on summary judgment showing that he had a reasonable belief that there was a violation of the law covered by socks he refers kind of vaguely in his brief that there was an f c c misreporting he has to show by evidence not just allegations that there was a reasonable belief in that he can't do that here rogers because among other things number one and this is the issue i was just talking about the f c c filings all expressly disclosed the thing that he was reporting i mean can't get to the jury on just disagreements about internal accounting practices or the stockholders that are material that are important ok absolutely your honor and those those disclosures quite clearly disclosed the very thing that he was speaking about and they did that i would note by the way that in his deposition he admits that he wasn't even aware of the disclosures when he was refer reporting his findings to mr jackson who was the count and he says and this is at page hundred fifty four of the record two twenty nine of his deposition he says our conversation mine and mr jackson who's the counting person so the particular turn to that particular footnote that she referred to she was bringing up the footnotes and he said because i had no knowledge of the footnotes and couldn't have been responsible for that but she brought it up so the point i'm making from this is that he didn't even have an investigation into what the f c c filings actually said much less that they were improper he was looking at something different he was looking at what he thought were internal discrepancies in his jackson confirmed that there really weren't any of those either but he was not looking at f c c misreporting and so he also that the nother factor which i think sort of demonstrates that he did not have a reasonable belief is what we discussed in the opening argument in fact is he certified on the very day that he left that he was aware of no misreporting for the years two thousand and nine when i will say i mean he wasn't wasting his time here mr murray told him to investigate this situation right mr lewis had told him he was a mr senior but but he mr lewis had told him to investigate more generally profitability in different regions he was not tasked with this particular looking at taxes and revenues that's something that he looked at and he learned that the accounting system was reporting those taxes as revenues he thought that overstated what some internal units were profitability but as miss jackson confirmed in fact it wasn't because it was being cost it out in a different place that he wasn't looking at but he was not tasked with this particular thing this was something that the company knew about and you could see that mr bill ailes deposition where he said our external reporting unit the folks who were responsible for s c c filings knew about this they may confirm that this was proper to do this and disclose so and that's on page twenty eight sixty one of the record so that's the first issue and i think that's frankly all the court needs to get into in order to affirm this is just to say there is no evidence here of his reasonable belief but even that i think beyond that number one we think he had no even subjective belief because when he was doing his reporting he said quite clearly in his e mail and this is the only email in the record that has anything to do with his reporting this is on twenty eight thirty three quote i don't think there is so he is talking about his internal issues and then he says i don't think there is any chance that at the corporate level this is not properly accounted for and he confirmed his deposition that that meant external reporting so he didn't have a subjective belief but beyond that there's no evidence competent evidence in the record that he ever reported anything to do with c misfile s he was reporting internal numbers internal transaction data that he thought was not not what should be doing that by the date he was terminated march whatever two thousand he should have because he was a sub certifier of the two thousand and nine year filings which he said meant that he was responsible for looking into learning management any issues and the important thing about that is on the very day he was terminated he signed the certification for two thousand and nine saying he was aware of no misreporting by the company and he confirmed his that position that that was accurate as on the day he was terminated he was aware of no missed reporting for the year two thousand and nine so either he didn't look at them or he looked at him he thought they were fine either way there's no reasonable belief of a cover violation and that's what he needs to have to to to win his case i think the measure judge is very thorough on this but further than this the fact that he didn't report anything with s e c filings but there's also the fact that clear and convincing evidence showed that he would have been terminated for his serious and judge jones his indisputable undisputed workplace misconduct regardless of any reporting activity in here i think the case is just like this case was a retaliation claim the person was retaliated allegedly retaliating against but the evidence showed that the people the employee relations department that made the recommendation was unaware of any of his reporting activity here it is undisputed that the employee relations department was investing and they had no knowledge of his alleged reporting of any of these accounting things had eight months along a very thorough and very well documented investigation that revealed in general terms that mr wallace was a hostile indictive abusive and uncooperative manager those findings by the employee relation department made without knowledge or unrelated in this summary judgment record as a measure judge said well that's not fair because he did have people that he worked with who said that he was not abusive of insubordination and favoritism that he displayed to other employees and so the people that were signing this declarations were in fact part of the investigation the sense that he was a found to have been unfairly favoring certain people over others and those were the people that his declarations were from so what the magistrate judge said is they don't dispute the specific instances for example him  mr wallace when he publicly in his word burned an employee in front of another employee that was undisputed it court doesn't need to get to this issue but it's just the last in the you know one line of reasons why  year that summary judgment was proper in this case i think that the court when it reminded the first time said that his allegations even in his complaint were hard to understand i think it's now been seven years of litigation in this case and it was time for mr wallace to actually come forward with the evidence that shows that he had a reasonable belief of a covered by a lation that he actually reported that violation ok and what do you say about anything that mr properly and within their discretion excluded that because it was undisclosed expert testimony and the magistrate judges judge southwick noted was very carefully went through the declaration line by line and said some of these things the rule is talking about what a reasonable person would do and that's an expert type of declaration and in order as the magistrate judge noted in his opinion in order for something to be a properly lay testimony it has to be based on the what is it the process of reasoning familiar in everyday life versus the process of reasoning which can be missed which can be mastered only by specialists in the field and that's on page thirty four seventy one  is the material that the magistrate judge struck was clearly material that mr rule was offering as a specialist not as a lay witness and it showed for example his  testimony that one looking at the f c c filings would understand the words to mean certain things which is clearly accounting to expert testimony it's not based on any personal perception well suppose just suppose paragraph twenty two he said that an excise tax is different from the sales tax and that the excise taxes on a specific product well the only things that the record shows that mr wallace was ever looking r i i'm sorry i don't have in my i don't have the specifics of that i think there was a five percent correction and i mean i'm getting out of my time i would like to answer one of judge jones's questions as well if i might but there was a report that said thirty one eighty s or i think it's thirty one eighty six i believe that's a report of what his meeting his term nation meeting was but i'm not absolutely sure about that i'm not sure that it that he's relying on what was said or wasn't said in his terminations he filed his osha complaint shortly thereafter in this case when it yes i don't know that it makes a difference in his case stronger but it would have would have made a difference i think it was from mr wallace but i think he was informed very shortly after as a terminations certainly in the osha proceedings what the reasons eliminated i think that was they were undergoing a corporate reorganization and my understanding i don't have the exact cite right now but i believe that that would have given him severance payment if his job was eliminated pursuant to that reorganization which is something they frankly the same day that he was terminated it related to something other than what he was looking into it's not connected directly to his and it most importantly doesn't say anything about as c c misreporting thank you thank you reiner let me start with a footnote in the c c filings that it's our contention that that footnote is really inadequate in especially if you compare it with tracey jackson's testimony about what is an excise tax what is a sales tax she simply did not have an understanding about what these terms in the f c c footnote really mean and the investigation that wallace is working on really uncovered that this issue is way more complicated than they had in to subpoenaed because every the reported segment profits are really just to pass through taxes is something to sort o had no handle on and even with the footnote they still had a duty to make sure that their segmented profit reports it's it is jackson's jackson testified that it was two hundred fifty million at record twenty seven twenty two twenty one and were set for that was how much play upgrading the software to address this problem process was this upgrade in the accounting system and that's how much it cost so there's the connection i presume with that much money and say probably other things were dressed too but that's how much it cost to fix this problem and come into compliance  right while this was never given an opportunity to respond to these allegations that were eventually made against him he was at the time of his terminations told that he was being let go as part of a reorganization plan but that turned out not to be true and soprano admitted that it was really just a determination of just wallace that's at thirty twenty to twenty one of the record and for the record of what happened at the terminations meeting in h r staffer was there question and his statement is at thirty one eighty eight where he documents that at that meeting wallace reported that he had been the victim of unlawful retaliation that he had reported the retaliation just  labor i don't understand the occupation right they must not have had enough to do it i'd have to explain it that's ok i understand in that the secretary is assigned this task to osha and then they investigate twenty two different