address and that is to predict how the california supreme court would have decided the two questions that have come up because this kid this case is in federal court on diversity california law applies with that having been said i' mindful of what justice roberts recently said to a group of law students which was to the effect that if it were all that clear we wouldn't be here we have however this court's decision will standard california law and how the california supreme court would decide these issues or how to protect that with the side of these issues the district court in this case quoted that standard unfortunately the district court only question about this court must and it goes on to say innit that where the california intermediate appellate courts have addressed the issues this court absent convincing evidence the supreme court wouldn't do that is obligated to follow the intermediate appellate courts on the first issue the best case is it's california's supreme court decision and in michigan the supreme court said it was urged to accept the throat of the market theory for common law fraud and it said no thank you under california you have to plead five things for common law fraud and you must plead pleaded reliance and we will twelve two standards reliance is not an issue under california securities laws aereo the california supreme court we're facing this issue of to what extent fraud reliance isn't even an issue when you're pleading statutory fraud under california securities laws if however the california supreme court wanted to look outside its own jurisprudence under its own decision all anons where does it look it looks to the supreme court of the united states and the supreme courts of other states if it were to look first to federal law since i think it's a commonplace that in basic the u s supreme court made the very distinction that we asked the district court was asked to make here that is the say the distinction between face to face representation and what happens in the marketplace and the count at the u s supreme court said that in face to face transactions the inquiry is into an investor reliance upon information based on subjective pricing of that information by that investor and distinguish that from the market place whereas the supreme court put it in basic decision that adopted that long line of cases out of this circuit starting thirty two years ago with blacky work on the floor of the market there and in basic the us supreme court said we will accept throw out on the market when someone is relying on the marketplace as a rebuttal presumption as a substitute for reliance finally again if the california supreme court were to look beyond its own jurisprudence it would look at the hand it would look to the circuit  looks to the extent of most of federal law at all it does look to this circuit and i respectfully submit on this question if you want to look as a supreme court would to the most developed body of law on fraud in the market and whether three paid subscription reports had any impact on the market again i say respectfully submit you would look to the ninth circuit and in the next circuit we have the hambrecht and quist decision which again does makes exactly the same distinction that the state supreme court made in basic and hambrecht and quist the court distinct this court distinguish between an individual with a face to face false and misleading immaterial whether there is information out there in the market place or not the california supreme court would say it doesn't make any difference in a one on one representation in fact this circuit has said quist it doesn't make any difference the search this court has said omissions in a mission case by corporate insiders are not mender immaterial by the fact that the omitted facts are otherwise available to the public where a second at eleven fourteen so under california law the only relevance of information in the market would be to test the reasonable ness of the reliance because it has to be gets addressed is something just doesn't get addressed at the pleading stage which as we know the whole fraud case comes here on a twelve b six motion where it leads to amend was an even greate runners question i would like to turn if i may to the contract questions and i would like again to answer that question what are the best cases to look at again mindful of the decisional mandate of this court that it must look where the california supreme court has been silent up till now it must look to california intermediate appellate decisions unless it has convincing evidence that the california supreme court would reject those i will come there are in fact california decisions that address whether a survival i'm sorry that addressed the issue of whether survival absent any other words i there's no way to contract that hand with inquest is silent on the issue i suspect however your honor intent of the parties being what it is if the parties expressly say in this contract all that will be governed by the law of delaware we reject the statutes of limitations of the law of delaware were i can't imagine a court not honoring that that isn't this case here here what we have is the law of california applies and if you look at has no bearing on the time period for filing suit after the war he has been breached i respectfully submit that if this issue before the california supreme court absent convincing evidence it would ignore that it would take that into account in addressing the survival statute of limitations laws the hopper says yes you can but because we don't like it disfavor the word was used you must be clear and if you it will be decided against you because the default is what the legislature enacted sectored limitations is the language here clear so clear that as a matter of law a court can only go one way and as we all know all it says is server i respectfully submit it's not under california public intermediate appellate decisions the default is the statute of limitations the statue of limitations and what the court said was that's fine but you have thale to take into account california discovery rule and if you shorten a statute of limitations to a point where it makes it extremely difficult or impossible to discover the event i e the accrual of the cause of action then we're not going to allow that why because it is against california public policy now in this case the district court actually wrestled with that issue the first time when the court may remember this came up on the quote be motion in the district court said no no i cannot read statute contract statutory limit as factual imitations it came back on a summary judgment motion although the court acknowledged that it was still deciding this issue as a matter of law and basically flipped around and said they had a cause of action and they would have had only one day to get a lawyer have him do the investigation to file the lawsuit if you say that a one year statute of a one year survival clause is also a statute of limitations if you will it is a conflating of the accrual period and the statute itself absent convincing evidence that the california supreme court would reject hambrecht and quist marino and lois  change clause in the contract factually it is that the same things securities it were it would come out factually i suspect the evidence would be markedly the same if not exactly the same it would have the kind of the california supreme court look at two unreported just record decisions from two district courts here i have searched and have not found in any quick instance where it's an issue of first impression in california that the california supreme court has looked through district court decisions it has looked to circuit court decisions either to reinforce its own thinking or to expand its thinking i have yet to find a case it is contrary to the canons that the california supreme court itself says it is imposing when it looks outside its own in fact it's made very clear that it's weighed capable of rejecting federal court decisions as it did in mere can we will not adopt the fraud on the fraud in the market theory for as a substitute for reliance and common law fraud it did when it was urged in the diamond multimedia case to use a p s l r a standard of pleading the heightened standard of pleading and it said no we won't that's not the law of california which is why it's urged that this court should say that the california supreme court would apply grody it can't really as you know was determined on under the heightened standard of pleading under the p s l r a and in diamond multimedia the california supreme court expressly rejected the that since the p s l are right there are a whole bunch more securities lawsuits being filed in california state courts that's not for us to decide is a matter of public policy that's for the legislature we will apply the law and understanding of exactly what this context is on these claims you go right here that your time don't deviate from the complaint we have to assume for rule twelve purposes that the complaint is ac i understand you're on the road ahead ok first of all this case arises out of a stock for stock merger the current in two thousand the merger agreement was signed on august first two thousand and it was it was closed on august fifteenth two thousand now at that point in time terry dion had just completed its first two quarters of the year two thousand in the first quarter of the year two thousand it's worth keeping in mind this was the absolute high point of the high tech marketplace march two thousand was the high point of nasdaq the first quarter of two thousand terry than reported more sales and more orders than in any quarter in its forty year history this is not some little internet company it's a big notice of facts respect think market why phenomena such as the state of the marketplace and there are numerous cases that have gone on i want you to tell us when you're going outside the complaint what you just said right financial results in the first quarter of the year two thousand and the second quarter of the year two thousand many of those facts are in the complaint because they are they are also and the f e c filings of which the court can take judicial notice and regularly d take judicial notice and the actual historical results themselves are new prefers a route where yes you can your honor and several in several cases that's recognized in the circuit and it is vitally important to understand that the the year two thousand and that press release that's the july eighteenth press release and it reported record sales reported record aren't and they were eighty five percent higher than the year before now it also reported its orders for the second quarter of two thousand and those orders were eight hundred twenty six million dollars this is all in the complaint and in the press release which is incorporated by reference in the complaint those eight hundred twenty six million orders w the one hand they were hired by twenty percent then any order the company had ever reported for any quarter except the first quarter of the year two thousand they were twenty percent below the result the teradata reported in orders for the year two thousand it was sent yet it's played in the complaint now the complaint also alleges and this is really what the guts of the complaint is about but they're complaining as vote on this piece of it they're complaining that although the press ceradyne which should decline thirty percent in the second quarter as compared to the first quarter can we firm the district courts rule twelve dismissal without basically your honor in a nutshell even if tara what actually happened is that terry didn't did it broadly disclose its s e s orders for the year two thousand there are numerous reasons why the challenge misrepresentations are not that would be misleadingly incomplete but for the disclosure of the information there is no statement of material fact that terry diane made that would be misleadingly incomplete absent the disclosure  call all of its the exact amount of its s t s orders in the year in the second quarter of two thousand and that that information was continued in analyst reports which courts regularly judicially notice when looking at a motion to dismiss and in addition there was a wall street journal article came out the very next day on july nineteenth two weeks before the closing date being good for the docket was signed four weeks before the closing date that said terry that it's dr and words in the second quarter was attributable to necessarily disclose the decline in s t s orders and that is because as the complaint alleges at that point in time terry that was derive an eighty four percent of its profit from its s t s orders at that point disclosed as it did its best to guess the words for the second quarter of two thousand the challenge statements would still not be actionable the challenge statements are the press release the press release reported accurately historical information and it's not challenged to be an accurate and accurate statements of historical fact are actionable and the press release doesn't disclose anything about s t s orders in particular and the controlling case here on this issue addressing is applicable in state court cases and it that the p s l are a did not change the materiality standard under federal securities law let's suppose a hypothetical case  of the nature of this one were were the sole allegation in the complaint is is there some information exchange here in the purchase down here omitted material information and the response to that in the form of a motion to dismiss is that the information that was transmitted necessarily included by implication the full picture could a district court grant twelve beyond that well if i'm i'm i'm not saying that's this case i'm just asking i think the allegation is that a piece of paper omitted material fact right the response in the form of a motion to dismiss as your honor inferentially this statement contains the very omitted material that plaintiffs are complaining about you should you should dismiss because this doesn't state a claim right and the answer incomplete or does not include all relevant facts to be actionable under the securities laws and omission must be misleading and other words it must affirmatively create an impression of a state of affairs that differ material way from of the one that actually exists now in this stop this research in this case was originally filed in superior court and sent you that's correct and removed federal court that is correct and so the securities law we're talking about is what it is it is california state securities law securities law being talked about in the past would you just quoted is what is that all securities law except your honor and i now quoting mccormick versus fund america companies is regularly applied to state securities claims and i would cite you the following california state court case on that issue insurance underwriters versus matola which is cal app nine hundred eighty six we  circuit and in california state courts someone files either in telephone your state court or in a removed action in federal court under california law a complaint that alleges that a representation was on citation to authorities as we cite in this case looking at analogous statements and holding analogous statements in the serial as a matter of law for numerous reasons and that is that is this law because it only disclosed accurate historical information and the information that was allegedly that was omitted from it concerning the s t s orders did not render false or contradict in any way the impression created by the press release it was completely consistent with the impression created by the press release ask a hypothetical question let's suppose an instance in which the accurate information is in the marketplace it's in the financial media it's in the wall street journal it's in subscription services etc but at the time of closing the seller says to the buyer you don't have to look at this financial information that's in the press what's in this paper right here is entirely accurate that's what you need to rely upon could if that were the case understands not this case but if that were the case what they're a be a defense based on truth in the market concede that well i think that an argument could be made on a motion to dismiss that if accurate statement of fact accurate financial information is provided to the recipient i'm not sure in that instance that's within the market would be at the fence your honor but i think an argument would be there for the defendants to make that it's the issue isn't really true than the market in that case that if the if the plaintiff was given the accurate financial information and had it as this plaintiff did then under those circumstances that the reliance placed upon the subjective statements could be unjustifiable but i could also see that that is an issue that might be addressed on summary judgment that isn't the fact that i'm here but was apple and apple doesn't change anything here brody controls for the reasons that i discussed and the apple case presupposes that there is in this leading statement the language that the plaintiff cites from apple presupposes that there is in this leading statement here that the apple case turns on the issue does the omitted information render a non actionable and otherwise misleading statement the plaintiff put a hypothetical in his brief about a car dealership an auto maker that might say our cars are a thousand dollar profit and it's really four hundred dollars and tells the wall street journal's four hundred dollars but he told the plaintiff it's a thousand dollars there is no statement like that here there is no actionable misrepresentation the press releases an actual none of the statements they pointed to are actionable under governing law as a matter of law and the last point i'll make about this case about the fraud claim is it enter ground and that is why the disclosure to the entire marketplace is dispositive not just for the twelve b six route but for the nine be ground and that is because it simply makes no sense to suppose that if the defendants were allegedly trying to conceal from the plaintiff the amount of their s e s orders for the second quarter of two thousand they would have broadly disclosed to the entire marketplace that exact information on july eighteenth and nineteenth two thousand and had their act were published in places that are regularly considered by the courts to be public disclosure it simply is asking the court to leave its common stamp on the steps of the court california and all over the country that have uniformly interpreted the exact same way and have held this not susceptible to any other reasonable interpretation and i simply the plaintiff do not cite a single case that stands for their interpretation th district court had an obligation to find a meaning to the word survive under california law what does it mean the plaintiff's proffered interpretation is that it stands the period during which those representations can be breached corporate counsel could not cite one instance where a representation of material fact could be breached on any day following the day it was made for example if the warehouse burned down the day after someone says there's been no material adver change in our business condition it still doesn't render that representation false because it was true on the day it was made now as far as the hammer and quiz case of the plaintiff cite that case does not address this issue there was time bart there was the cases about a fight over choice of laws and the plaintiffs sued three plus years after the date but the breach occurred and under delaware statute of limitations it would be three years and time art under california four years in that footnote the plaintiff the i tried to argue that the survival clause extended to five years because it was a five year survival clause the period during which suit could be brought that is it extended that is it was created a breach period and what happens in that footnote is that the court rejects that eerie which is the plaintiff's very interested of the survival points in this case thank you thank you for your motion to dismiss under the heightened pleading standards of the p s l r a the plaintiff's complaint must specify and it goes on then we have the passage that we just heard read at the court and then this court went on to say thus in order to survive a motion to dismiss under the divine what the california supreme court would have done did can you decide the securities case without turning to pitch a co i do not believe so because if you look i'll be motion what the district court did i'm sorry throw it on the market there was your question at and i prefer the court two pages to twenty one to twenty two of the record judge lorenzo's now a district of massachusetts case go supports the view that information disclosed to the market renders the material a company's failure to disclose that information to the plaintiff that is the fault of the market theory in reverse from the market there we of course is that you are entitled to rely on the efficient market next page the court goes right on and does the same thing except that it also cites a case from california california california just a case the in re cyprus securities litigation information credibly entered the market because it was contained in reports by kater peabody and wortham schroeder and again if you look at that that was a fraud on the market case the rabbit that the district court puts in the hat here is that the information must be credibly in the market it is fact sensitive that is inappropriate for a twelve b six motion if i may one last point i would direct the court to per the paragraph twenty two of the complaint you gave mr hersman a hypothetical you said that that is a this case it is your honor in this case after the press release came out there was a face to face meeting on july twenty ninth at a hotel in san diego at which direct questions were put to us saturn and schneider and they responded and said in spite of what you've seen we're doing well our orders are up we can't kill them thank you very much ok thank you both for your arguments a very