good morning your honor may it please the court my name is julie riser on behalf of the plaintiff appellant oklahoma teachers retirement system this case is brought under the exchange act the complaining starts that g e had a duty to disclose the recall of the key components within g e s most important product in order to not mislead investors as the market learned about the blade oxidation defect in the ha turbaned g e stock price fell more than twelve percent over a series of partial disclosure fell even further on news that g e was taking a four hundred and eighty million dollars warranty reserve over two quarters which amounted to thirty eight percent of rd quarter profit and twenty seven percent a poor quarter profit and g e fell from  st to last place in market share or gas turbans at the end of the class area a gas turbine or the flagship product because of its promise to revitalize the company marketed the turban as being able to generate more energy than competitor cars and financial impact analysis that went to the company's most senior officers it would eventually have to replace all the blades on a turban with serious oxidation but then it also knew that revealing the date that would expose g e to power division graham as meeting and in many cases exceeding performance goals every customer site today by contrast the same senior officers approved a plan to secretly tell customers to run a picture been less efficiently thereby generating less power to avoid kacang and catastrophic in early september twenty eight teen that cause a blip customer preemptively shut down three other ha turban but g e downplayed the problem it said the blade had that it should contact customers to tell them to check for the blade breaking or cracking at more frequent intervals and to run the blades at cooler temperatures the fact of what cation is there what indication is there in the complaint that that approach would fail that this was not going to be a sufficient way of managing and containing the oxidation problem that the approach was to recall all of the blades it was trying to do was to hope that it could do it quietly with customers instead of publicly by letting investors are that it had a recall if you and  alleges is that by summer two thousand and seventeen had a plan in place to reach out to customers and that there or throughout the class period g e was aware that it would have to recall all  need to recall all the blades and then lo and behold the rest of the world catches up and finds out that is correct you have to replace the blade and so the inference here to be drawn is far more probable that g executives were very concerned about the market learning that they had an effect on their hands with their most important product and if that of coming clean publicly they made an intentional choice to work directly with customers to try to replace the seven billion dollars in revenue during the same quarter you know which seemed possibly immaterial amount of it's obviously substantial but maybe not material for purposes of the kind of fraud that profit in the rd quarter and twenty seven percent of the net profit in the th quarter that we disagree that comparing it as to revenue is an appropriate comparison when it is a cost and therefore should come off the pop a profit and that is the basis to say that with material as well as the repeated stock the client and the fact that g s market share fell for st to last very good thank you  that he's back with no throughout the clock period the solution also was known it needed a fleet wide recall and they were already in progress of replacing blades at the time that exel occurred there was a customer meeting in september th and th where customers were talking about the way plant opening because their new blade was being diverted to somebody else's current operating in a turban so have to recall every one of those blades means that the inference about four hundred and eighty million dollars is much stronger to be said that at the beginning of the class period they knew that that was the likely warranty reserve and that they would have to take that amount if they had to come clean and disclose it publicly but instead they made the intentional choice to try to lay in the hope that good news would overtake the bad and it fell clearly within  complaint that we have pled actual knowledge began with the blade breaking two thousand and sixteen that that knowledge then did through a root cause analysis and financial impact analysis that went to senior executives a question of if oxidation would occur it was when the oxidation defect would occur and she was actively doing what it could to get new glades in before there was a catastrophic break so the timing argument that making it a little bit of a red herring because it didn't matter i mean it mattered in the sense that the public became aware of the plate shattering and that tight attention to the problem but the fact of oxidation the fact that a shortened martinez for the g e defendants judge coats dismissal of this case should be affirmed for two overarching reasons st g e statements here were not false or misleading the vast majority of them were innocuous statements of corporate optimism the cleanest concede were literally true none of the pre x on statements implied anything about the lifespan of the age class blades or about how quickly oxidation would affect those plates and the post exelon statement g e believed that it had a viable solution for the oxidation issue which was to repair or to replace the blades but this has not made and cannot make any allegation that g e knew this solution would fail and in fact you  had good reason to think that that solution would succeed the two thousand and fifteen break had come at twenty two thousand hours of operation so g e thought it had plenty of time to implement the coatings or the replacement of the place without und confidential informant claiming that they don't have any smoking gun documents and they have no insider stock sale to point to nor do they have any sort of overarching coherent theory of why g e would lie if g suggest that their solution wouldn't work and that the blade would be breaking right and left that problem would have been impossible to conceal it would have come to light and it would have been pointless for g e to try to hide the truth  mr martinez this is to current he was concerned about the statements made in twenty eight in september after the excellent power plant suffered a total lake failure where the statements were made that the minor adjustments that we need to make don't make the ha any less a record setting turbine that's fine general and they are meeting their performance goals at every customer site today and again and i think the key thing to note about that statement is that it comes after a very fulsome five point disclosure of the oxidation problem about what the problem is about the fact that it had a fleet wide impact about the fact that  was had a solution that was going to be ample implemented that it was going to include include shutting down temporarily all four of the exelon units and it's only at the end after sort of explaining the problem and what he knew and what it was doing about that problem did he then reiterate the entirely correct statements about the current performance of the of the turbine so i think in context i don't think that there was anything false or misleading about g e saying that although we've we've we've diagnosed this issue and we have a solution for st fixing blades and replacing voice as if we're going to implement that currently the you know the services that are operating are operating at record setting levels and i don't think that that last part is at every customer site today was actually inaccurate but it was the problem was disclosed so it was kind of except for what we just told you about otherwise they're doing what we said they would do what every customer site is that correct no deterring let me let me clarify that i think the statements about the present the nature of the problem here was not that there was some immediate defect in all  turbines that was preventing them from operating that wasn't the problem the problem was essentially that with cheap with exelon showed g e was that the lifespan of the turbine you know woods was shorter than they had anticipated that didn't mean that the turbines weren't running perfectly well at the time you know it it just meant that at a later they were going to essentially have oxidation issues sooner than g e had a to support it and you know the nature of these is not that they're they're put into that engine and they're supposed to last forever everyone understands from day one that they're not going to last forever the question is how long are they going to last and the two thousand and fifteen break shows if there was a problem at twenty two thousand didn't in less than ten thousand hours but that didn't change the fact that the b turbines that were currently operating had not yet experienced those problems and were not yet operating at their record setting capacities so i think that's how you would how you would square those statements and that's why the september th statement about the fact that you know our turbines are working well around the world is totally consistent with the idea that you know we now understand that they have a shorter life span and therefore we're going to we're going to implement a swap out replacement of these turbines faster than we otherwise would have if you want to discard the i do want to go back to your question your original question about the september th statement as well about the minor adjustments and then you want to be very clear about what about what that was referring to apparent twenty a stigma in the reuters article said that the and i'm quoting here the minor adjustments that we need to make do not make the ha any less of a record setting to remind their meeting and exceeding their performance goals in every customer site today i think that treatment process for making the blade so in other words it was saying we've we've we've seen this problem with exxon glace we understand that we need to fortify them against this oxidation problem and the solution is going to be to refer to an earlier heat treatment process i e the treatment i bet that had been used on earlier sets a place and that's going to fix the problem and in that sense it's just the technical adjustment the manufacturing process was minor they didn't have to redesign the blade they didn't have to come up with a brand new gave this riser some extra time to answer your question so i'd like to give you a couple extra minutes as well and i'd ask you to address what your adversary said about care about the secret customer meeting i think not disclos coated they were going to be essentially repaired by putting a new coating on them or they were going to be replaced i'm not sure that that matters because either way the solution that g e had in place was one that was not going to cause a if that solution had worked it wouldn't cause a material you know problem because of the fact that the solution would be implemented before the place started to break and so customers would experience the problem and that wouldn't and this solution would be less costly because they could be implemented you know on a more leisurely replacement schedule you know that all went out the window with exelon because exelon shows g e that the replacement had to happen sooner but of course it can't be held responsible for knowing that the exxon break about about g e s belief that it had a plan in place that was decidedly more more plausible than the inference to see enter i think the rd point that i was just emphasize is that this is an unusual case in which they don't really the other side doesn't really have any of that the classic signs of center you know there's no no no confidential informant claiming she knew it was lying no smoking gun document no insider stock sales and as i said earlier there really isn't a coherent theory of why g e would try to mislead people it would be pointless to mislead investors and basically pretend like you were you know everything was fine if in reality as plaintiff theory sort of suggest would do that because all she's deception would do is delay the a moment of reckoning by you know almost a couple of months so there's really that doesn't hang together very good i think we have your argument excellent point the four hundred and eighty million dollars is is point four percent of g s overall revenue which we think is the relevant market here the overall revenue of the company was one hundred and twenty two billion dollars in tw eighteen it's also point four percent of g s overall market cap which is one hundred and fifteen billion dollars in twenty eight dollars teams and i think if you look at it in terms of the profit you know we don't i don't think that that number is alleged in the complaint if you look at the financial documents the the effect of the four hundred and eighty million dollars charge was about zero dollars five cents or so on there are names for share and the motley fool investors report that the plaintiffs themselves  cite and it's it appears that page fifty of the joint appendix describes it says that the four hundred and eighty one million dollars would be a quote minor issue if it takes just a few cents off of to use for earnings per share and that's ultimately where that charge came out and you know your honor i don't have that number immediately in front of me so i think it's around i don't want to speculate because i don't want to get it wrong but i will say i guess i would just say that that the way that the analysts that we're looking at it when they looked at that zero dollars five cents or a few cents is the motley fool report said it was treating that as a minor issue and that those are the words of the analyst a minor issue but the stock price that's right you're right and what that motley fool analyst report eddie fifty of the joint appendix says is that it was saying that look if the impact here turns out to be just a few cents of earnings per share then it's a minor issue and motley fool said that means that the stock overreacted in other words that that you know that the real the real effects just you know they didn't justify that kind of stock prop and i think ultimately that's what happened you know they  disclosed the four hundred and eighty one million dollars it was just a few cents of their earnings per share for that year and you know and and i think therefore it's fairly characterized as motley fool characterize it as a minor issue in the context of the  a need to replace them therefore the idea that they could have done this in a minor way and you declared under materiality threshold with the f t c it's about five percent of net profits would be material in addition to all these other factors that the stock dropped it means that at the beginning of the class period had to have thought it would be under about twenty million dollars and that somehow over the course of the year it ballooned to four hundred and eighty million dollars it says this is a minor issue it did not mention a blade had shattered inside the turf and did not mention that the plates had to be replaced it's just that it was a premature  mention that there were a lack of replacement plates and they were robbing peter to pay paul and this was delaying you plant start up it also did not mention that the return had preempted we shut down and in fact by september t that number with five preemptively shut down like one was injured and the other four preemptively shut down for blade replacement at the time on september th when defendant said every site is meeting or exceeding performance guarantees five of those sites were not even in operation that's ten percent of their troops not even working that really two weeks later october th g e revealed that fourteen of the blade registrant financial conditions the result is not reasonably likely to occur so it has a presumption in favor of disclosure just like panther partners here the district court erred in using revenue with a way to get around the fact that  recall should trigger a duty to disclose we have clearly clad the fact that they had a defect issue that they knew that trend or uncertainty and i guess you know because of the tw the complaint plausibly alleges that defendant had a motivation to conceal this information and that it would matter to the market so there are a number of analyst reports that talk about this issue as minimizing franchise value hurting turban brand image noting that the stock price is falling because of the oxidation issue and so while i appreciate judge without questions about her all profitability this was the e that was charged with turning around the entire company and the fact of the effect within these units did cause the stock price to drop or at least it alleged an analyst agreed that this was