well welcome counsel we wish we could all be together in the court room in philadelphia but you know we all know the circumstances here so we're happy to have you and we're glad you're here  so we follow the usual rules fifteen minutes for side and i'll do i'll do the timing i would suggest you do so as well so you don't get thrown off when your time is up now st up would be  they didn't believe and yet they gave them to their banker morgan stanley if i directed them to use them and that's a record anyone sixty seven to use a boat with a base and a sensitivity case and looking at paragraph seventy six of your complaint and you one of the things you ledge is that the sensitivity case projections were forwarded to morgan to ensure that morgan would my colleagues the other proxies specifically says about the sheer value ranges is that they were created by morgan stanley in the type of analysis that morgan stanley  thought it was significant that one of the bases maybe the principle bases who are the sensitivity projection was there was a possibility of a decline in and in both the consumer and like tech like touch branches of the company here on the one hand that there is intense competition for the st on the nd that the schools were good and the demand was not there as they usually have in the school so it's not just that there's throwing out a statement they're giving reasons why they're doing it and yet they still say we want you to be aware of all of this because this is a situation that we have but we still go with the management projection because  much your honor there were many reasons why judge starr opinion here should be sustained by this court including the points he reached in several points he had no need to reach and the basic point i think is there is nothing false or misleading about his proxy the theory of the case the basic theory the essential allegation he is here that you heard it would be any problem claims is that the defendants did not believe the sensitivity case well that is a misconstruction of the record the defendant stated quite accurately and repeatedly what their belief was their belief was come out but importantly what they said was we anticipate the management case we do not anticipate the sensitivity case the superball was yesterday i'm certain there will lots of kansas city fans who believed it was very likely that their team would win at the same time as they believed it was likely their team will win they probably recognize there was a chance that here what the proxy said was explicit the projection that we expect that bigs best our circumstance is the battlement project and indeed when the plaintiffs look for evidence that there was  misstatement where they go they say we know they didn't believe it why because they said it in the proxy how can it be misleading when he said it in the proxy and plaintiff argue just now well no no plausible ok many reasons why there is no plausible case st of all your honor there are lots of reasons why this company should be considering a downside case in fact it would almost be improper for them not to do so remember some facts that the plane of concedes a year before the negotiation over this deal shutterfly stock was at one hundred dollars there was a time in june two thousand eight hundred dollars it touched one hundred dollars by the time they we during and you asked about is it is it strange that the the sensitivity case was developed in in the middle of the negotiations not at all i think in fact those negotiations as the record shows actually spurred development of the case because if you look at the sensitivity case it looks at two kinds of risks the life touch is n'est because their relationships with schools look like they were going down there were some problems there and the consumer business number one this was the plaintiff acts as if this was some invention the record shows and we cited in the brief these risks these very specific risks about life touch and the consumer business had been repeatedly disclosed to stockholders before they ever got into the building number one number two are the record council is a part of the record i believe it is my papers in addition what the proxy says is that two bidders actually dropped out in fact i think it's two it's three bidders actually dropped out and told the company one reason we're dropping out is we're concerned about exactly these issues we're concerned about your consumer business we're concerned about life touch this is a company and if you look at the public s c c disclosures you will see among their competitors are companies like amazon and google people are taking pictures on their phones and here we have a situation where you're sitting on the board of directors your stock price is down sixty percent from last year management has given you projections but they've had misses management has told the stockholders in s c c filings you've approved of two basic risks it would not be it would be surprising if you did not look at this and the proxy says that this was done so they could do strategic planning as judge stark said in the circumstances of this case if plaintiffs the yury was adopted this would be a huge problem for every every board of directors for several reasons number eleven thing that's very interesting if you look at footnote three on page two of plaintiff's reply brief in this case what they say is well it may be common for companies to have multiple sets of rejections that's not exactly a big concession and that's exact comes right to chancellor chandler's opinion but what do they say they say in the last sentence once you have determined the case that reflects the best estimate of future performance even though you can consider it they should not disseminate valuations predicated on the company's other anticipated future performance think about that for a nd the implication the necessary implication of their case and their theory in this case as they themselves said i'm quoting him is it's fine for the board to sit there and think about these alternatives and these risks indeed life is full of risks and business is full of risks you have to do that it's fine to consider it but keep it secret don't tell the stockholders well as judge stark said below if you do that now you really will draw a case you will and is a better case than the case that's made here and ironically if you look at the history of this case the st time m pleading what would the pleading say that cleaning did not say anything about the proxy being misleading because the sensitivity case was in there it was the kind of case that is often filed in mergers it said we want more information you haven't told us enough about the projections and indeed there was a supplement to the proxy file here that was in response to five different shareholder suits and what did those suits ask for they said we need more detail on all the projections including the sensitivity projections it's completely unrealistic to say that the company can't look at these projections which they really ought to do and i think plate of is basically conceding it but then keep it back from the shareholders and remember all of these projections get significant protection under the securities laws in many different ways number one they  so in other words even if you say as the plaintiffs do here and i think it's absolutely improper to say there was something wrong with putting together these projections you have to show almost every judge town was getting at a question about too is aisle to to help sort of damper shareholder expectations because that's where that's really all you know twenty two points number one that simply speculation number two the proxy why the proxy tells you  yes what's happening the company is involved the board is bargaining hard with with with the people who are coming in some of the bidders are dropping out they get down to a small number and the board to its credit pushes back against apollo and what does the proxy say the board is good the committee that's looking at this is a strategic committee they're saying what are we going to do with this company what's the best thing to do one issue is and they say so repeatedly in the proxy if we don't like these bids we'll just go along so what are they doing there saying you know if we if we draw a line in the sand at a particular dollar value with these beers and tell them to just go away what  we're left with this company well let's look at what risks this company faces and that's exactly what the what as and this exactly what they did and they do it in april be they were there were two months to go two months rate would be forty six percent when the evidence was very compelling that everyone knew that the tax rate was going to be dropped if they had done to two projections there maybe that would have been different in hershey with what they did is they used a forty six percent rate for taxes where the evidence was clear that congress was going to lower those those those tax rates so number one they didn't do alternative projections number two there was compelling evidence that an essential opinion so number one as an opinion you have to show not just subjective falsity meaning oh you guys didn't really think it was realistic object falsity meaning meaning and if you look at ofi tells you what is the communication that the proxy is making the communication to proxy is making is simply that these are the projections that were given to morgan stanley interesting late the challenge to the projections themselves has been withdrawn the only challenge in this case is the challenge to that so called implied valuation ranges in the proxy so that's it that's also an opinion and the proxy as judge stark found says number one don't rely on these projections please don't rely on the projections it says it again and it is not one sense it's not bury it's featured it there's a whole section saying projections are just guesses do not rely on projections point one point to the challenge here is to the valuation ranges there's another section that says number one don't rely on the fairness opinion the fairness opinion is just some advice your board of directors got nothing more thirdly it says specifically do not take these implied valuation ranges which is the one statement the only statement that plaintiff now challenges it says do not rely on the implied valuation ranges as any evidence of value of the company exactly the argument that they say makes it misleading what more can you do what more can you do to warrant one people and just what they say oh we know you didn't believe the case because you said so in the proxy they claim that's evidence of wrongdoing i say that simply reading the proxy in context that's why they are forced to admit in their brief that the necessary implication of what they're saying is people are now going to have to leave any alternative projection out of the proxy so one can always come in and say oh you really didn't believe it based on some vague claim and finally and not you have to remember i believe the p s l are a exactly to prevent frivolous securities cases that was why congress said they passed it says a couple of things that are very important here number one if there's a required state of mind you've got to prove it with a strong inference now they say we say this complaint sounds in fraud clearly it does but even if you say it sounds a negligence the argument that they say the argument that they use to support negligence and you find it sensitivity case but yet we gave it to the banker to use that was negligent that's his argue now that's his theory of the state of mind under the p s l array that he has to prove so this is not a situation where he can simply say gee someone said something in the past that was different i found an adult his report i found a snippet in an earnings report what he needs to do is show a strong inference of that state of mind he doesn't come close i think under the rule eight standard it wouldn't work under the under the strong inference standard it cannot work and i would also say quite apart from all of this judge stock was correct in saying in view of the disclaimers the levels of disclaimers disclaimers are the projections the fact that the objections are our opinions disclaimers of the fairness of the reliance on the fairness opinion specific disclaimers of these valuation ranges there is no materiality here and remember at this point in the case after the players brought a claim saying tell me more about the projections they now focus on one line morgan stanley did seven different analyses they use the sensitivity case they use the management case they also use projections from analysts and they look at the stock price they did all kinds of things and they do not for the guy they don't say your company is valued at x they simply say we are telling the board this is fair that's advice that the board gets and the board is saying we're making our decision based on what to do should we stay independent should we take this we did an auction look at all the things that we did we're not telling you what the value of the company is we're recommending to you in our view we think this deal is a good deal for you we're disclosing all of these facts just so you know what we did now to say with all those disclaimers with all of that explanation two lines based on a projection the board said will not happen those i think rule ninety does cover it but i want to go back to two to one point you just made i do think this is this is a fraud case but if you look at the two of the p s l or a the sec the strong inference section it doesn't use the word fraud what it says what it says is required state of mind and here even if you grant their argument that they're alleging negligence they've told us what the evidence is of their required state of mind and what the  state of mind is they have alleged call it fraud call it negligence call it wrongdoing call it recklessness they have alleged in this case that the state of mind was we don't really believe in these projections they therefore because the two talks about state of mind even if they try to argue this isn't right and it is fraud and that's what judge starr probably found even if that argument is carried out they still have to come in with strong evidence facts showing a strong inference of that state of mind that the that this projection was given for an improper reason to mislead stockholders otherwise all these rules several several reasons your honor this case already despite the fact that all that happened substantively was a motion to dismiss we've had we've had a long history we've already had some years of litigation as i mentioned verde actually started this case in the southern district of new york with one plaintiff then he moved down into delaware and he amended his complaint then we said that his is a quite lax standing and he said i'll bring someone else in we consented to do that through all of this although he amended the complaint he did not indicate there was any fact that he needed to add there was any theory that he needed to add we had an argument before injured start the court has the transcript of that he did not make any he didn't say here's what i want to do and judge stark found that he had adequate understanding of what our claims were we asked that the court did i leave to man because of a long history and moreover this is as this panel knows an issue that is within the sound discretion of judge stark and he sat with the case he heard the oral argument and i would respectfully submit there are no grounds to say that he abused his discretion because he considered it if you look at the transcript this was not an offhand remark judge starr can't study he said i come here i've been reading the process he read the proxy very carefully he you can see that in the oral argument and he says specifically based on the history here i do not believe that there should be leave to a man and i would respectfully submit that was i believe correct but fifty five dollars to ninety dollars and then to twenty nine dollars to forty seven dollars and then if you look at the disclaimer we've been talking about o put it in there for not bring another view to clean negative one to light couldn't they be exposing themselves to securities litigation for another reason they didn't give enough information absolutely there's no percent or rule not saying that you know not giving it they gave it so now they've got to live with the consequence when you think you've got to make sure you keep things in an accurate and none misleading way here a trip that's my point if we go with your position  circumstances we we live against do appreciate the work of the federal courts well that's nice to hear and we're glad you are flexible and are willing to do it this way and we really do appreciate all the effort you two gentlemen put in