duty to them for example no duty to be truthful and further held that they're immune basically from adverse consequences for their willful or careless fabrication half truths and the trial a court found that because there was no fuchsia your duty therefore there was no duty whatsoever at all no duty in fraud no duty and never do in this representation or anything else and we submit that that is not the law in california unless the misrepresentation is obvious or apparent on its face restatement a rule and california law is that there is no duty to investigate regardless of who you are whether you fall off a turnip truck or harvard business school graduate the victim's reliance on the false statement is justifiable unfortunately the learned trial court found no duty he took some basic facts he extended and extrapolate d them with assumptions and speculation and held the plaintiffs were barred by his perception of their sophistication from believing what the defendants told them and worse this was not after trial  alleged fraud a misrepresentation and even crediting that that was made one would need justifiable reliance but what if we were to agree with you and say to make a determination on that point you  durham and the prototype model is concerned with do not apply to this case and second we adequately alleged false causation specific we in the durham model and its focus is on fraud of them off fraud on the market all the fraud on the market cases don't deal with actual reliance they deal with implied reliance implied reliance on the market implied reliance on the integrity of the market and reliance on the price that the truthfulness so forth is imbedded in the market price is the presumption and therefore it's the second item it talks about it either looks like inducement kind of reliance or the initial transaction reliance or when you come near losses through right now and i'm speaking about the i'm primarily concerned right now with the specific misrepresentations that were made and that truth never came out in the marketplace it was never made in the marketplace ok in eur which involved public announcements about this product and so on and so forth ok there was a public notice of that and later on they found out it's false and they published the notices ok and the price drop this case there were specific private not public misrepresentations now our clients we're going to merge with c m g i you're going to be a part of this company going to be heading it up what's going to be partners in teamwork it's like a joint venture don't worry about our ability to expand you begin the company you have we have the cash ability to take it to the next level we don't have to go for additional financing later on these are specific and private one on one representations that our clients and i am where and where it is a plea that those caused the loss as opposed to cause you to enter the transaction your honor right up front from the get go correct and now you're saying they thought they were going to be something else they signed this agreement now they know they're not going to be something else but that particular misrepresentation in effect honor that's correct but that doesn't mean for oil because a merger doesn't because the parties let's assume for the moment that there had been a contract to merge just like there's a contract to buy or sell real estate have you know a stronger base one of a different company and was actually closes right and there's no merger correct and your clients know that correct correct ok but there's no evidence right now in the record as to what they were told and when they were told as to why there was no merger and that that goes into this you know when  thank you or i would like to make one additional point about dura in that the difference between a market fraud case is that the only thing applying to for a purchaser relies upon a market fraud on the market case is the integrity of the price there's summary representation out there that affects the price you rely on the price so the only way to know if the change in that information affects you is by looking back at the price of the news has disclosed and it declines in response to that our situation is different in that we weren't just rely on the price we allege that they paid more than the market price of this stock on the date they purchased it based on these individual representation and that they were locked up for a year as part of that so all they could do is watch the stock go down so i think that our representation is are different and that because of the haircut it up it was more to us like a price for this pardon less so the calculation is above the the calculation of a person share amount was negotiated it wasn't the market price as of a date it was we are assigning a price to your shares that you're less they took less well i'm not talking just about the haircut i'm talking about how their price was determined the price was determined not by the market price on a specific day it was determined by a negotiated number that the two parties put on that stock forget the haircut for a minute just we're not only not like a public buyer who goes up what's troubling about that is you or your allegations of harm your allegation and really what i'm addressing there is the court did two things i think can correct that i don't find in any other courts provided any guidance on in the california corporations code twenty five four hundred plan where you get t because your time is running to deal with the statute of limitations issue you know it's a to you it's a one year statute of limitations and there was a two year period and first of all the district court did not rule on this in any w what the defendants are asking you to do is for in the first impression make a ninth circuit ruling as a matter of law without any discovery or facts or opportunity to imagine what the application of the statue of limitations  notice that it's a an issue of fact to be determined by the truck or inquiry notices is i think actual matter so deciding at the ninth circuit level on the first don't know i'm having some trouble understanding why with each passing day they know there's no merger if their complaint is that there is no merger merger so i understand we're leaving out the other facts in this discussion secondly because the record needs to be needs to have an indication in it as to what the reasons are if there are representation for example as well but one circuit other cases about the reasons for that merger not having taken place that would explain a delay if  any number of facts as we suggested in our reply brief could explain that as something other than a fraud so but those are all hypotheticals this was argued in the district court what what was the explanation presumably the one year was particularly significant because the representation about this potential merger was that you would be getting stock in another company and you would be able to sell it without any long the way in your ability to yourself was this what was significant to you and it didn't take place and you know it and you didn't get the advantage of it right in yes at some point and i like you thought it was going to close but then we you know they basically were stonewalling us are saying but then it's your obligation to come forward with that correct or right i understand that in this is the statute of limitations on a motion to dismiss what we didn't amend the complaint at any time to address that issue so so it was difficult to argue in the district or anything beyond what's in the actual complaint itself should you have alleged facts in the complaint since it was obvious that it was t causation argument we do believe that the case both supports that justifiable reliance can be determined as a matter of law where reasonable minds can come to only one conclusion on the facts and although it's usually and often a factual issue in this case the complaints were filed several years ago and we have a very detailed admissions in the and we can't tell you the details because as you were smart businessmen know you can't be disclosing things like in south to other people who are about to have this and it's going down any minute everything is wonderful  and you should take that into consideration we're asking you to have a haircut ok you know they're not stupid businessman but they rely on their and you're saying i think th can't correct we're saying that justifiable reliance is an element of a fraud claim and sure there's a matter of law you're saying as a matter of law that they couldn't have justifiably relied on those representations  for multiple reasons including the fact that they are that they were represented by counsel and if they had questions about what was being represented to them or if they wanted those particular facts to be contained in the merger agreement they could have insisted upon they say look we we need the information i believe these folks but we can't give you more information and by the way this has to go down really fast it's got to go down no doubt true they could have walked away i understand but you could have walked away isn't exactly the same as just well i think that goes to their sophistication they certainly knew they could have walked away because in fact they did walk away from the deal at one point i think the record is clear that they aggressively were represented in this transaction and again they knew enough if they were something where that important to them they should have insisted that it be contained in the agreement and how about the employment part they they say to them look you guys come aboard you're going to keep running your division and by the way you're going to be right at the top of our company giving us information and we're going to follow your information and by the way i guess allegedly if they court that that's pacifically said employment would be at well they had integration clause letters which indicated that they could not rely upon any other representations and then this goes back to their experience opinion you'll continue to run your division as a statement of opinion to the extent they make representations that they would have important roles within the company it could be a statement of opinion and in any event we do believe it should have been contained in the believe the record reflects that that that that that mr shell indicated that they had to sign the agreements as it is that they were not going to make revisions to the agreement and i believe that should have been an indication if there was something that they felt should have been included then they should have insisted that it be included in the agreements that they signed transactions controlling the marketplace which neither mr shell nor mr martin are alleged to have even made those are statements of opinion that could not be relied upon that finally with reply wouldn't that be when you get to a reasonable reliance that that just shouts fact question to me whether it was unreasonable or not would depend on the there are many reasons why mergers takeovers and you can cast tender offers are not alternately consummated they've admitted that in their briefs i think they've admitted that in argument today and the complaint is completely devoid of any evidence that there was any fraud or any false statement associated with these potential c m g i merge or well i thought that was i mean the complaint that was one in a series of things that led to the financial undoing of the company limitations but at the outset i want to offer a brief comment on c m g i the c m g i case is interesting in that it is that one of the predicates for the fraud cla we're hearing that we're unsure whether or not it didn't go forward for benign reason understand there's an affirmative allegation of fraud here and all come back to the statute of limitations as it relates to c m g i what we do know is that there was no merger and what we do know is that the stock did not become freely tradable we knew that and we know that in march of april of two thousand you will not find in the complaint any new fact occurring between march april two thousand and the filing of the complaint in march of two thousand and two any new fact that would be a trigger for the belief that a fraud had occurred with respect to the c n g r representations there was no new information and what the plaintiffs of tempted they took no steps in coming back to come back to the statute of limitations issue problem is of course they filed in arizona state court arizona state court we remove the federal court at arizona state claims first many complained that attend the five claims which then disappear out of a subsequent version but significantly i suspect they file the day before the expiration of the two year period and i would suggest th step limitations but they only have themselves to blame they only have themselves to blame for that outcome because the merger agreement had a choice of law provision and a venue provision venue right here in san francisco and what they are trying to do is keep this case in the backyard for whatever reason but he certainly did not initially want to go to arizona  federal court for whatever reason i'm not sure but if you look at the complaint you'll see that it claims complaint incorporates wholesale material allegations from the i p o vacation in the southern district of new york and what they did was they were trying to figure out a way to cobble together their own misfortune respect in the senate with the i p o litigation but if you look at the briefs and you look at the complaint it's all about it's all about the i were present in march or april of two thousand and no new facts are pled and no facts are pled that would excuse their failure to file timely under california when you merger are there are other state laws claims that are subject to the one year rule yes of the count all the california corporations code claims and that's part of what i mean so in other words i mean they have quite a large complaint so every one of these claims in terms of position in the company and those other claims also aren't are under their rely on twenty five four hundred in order to have a civil cause of action under twenty five five hundred so how to get there they didn't want to in ensnare and that sent us into this case because it was bankrupt could pull them into twenty five four hundred and then leap forward to twenty five five hundred have their civil action they get there they had to rely on twenty five for all three a criminal statute passed in  all three was the make sure that the control persons because remember criminal statutes corporations don't go to jail obvious with a corporation one of the legislator one of the do they wanted better control person to be subjected to criminal liability under twenty five four hundred very simple as a as a puppet distinct from a lying on relying on aider and abettor and control person liability which requires that there be another primary violator another primary violator and that is the that is why there there was no accident here that the plane just omitted there twenty five five o four and four point one claims here there is no suggestion there should be no suggestion that they didn't know about that statute because if you look in the complaint they they didn't want to make that sentence the primary violator they had to draw shell munchen oddie into primary violator status through this tortured reading and just flat wrong reading for zero three twenty five forty three and so they couldn't rely on the internet better statutes because they had already had done a fly shell launch an obvious primary violators and in order to have a five o four or a five a four point one violation it's so the as to the california corporation close claims the plaintiffs found themselves in a in a in a soup of their own making because of their tortured effort to avoid bringing that same as the bankrupt into the end of the they don't want to call them a primary violator and just then make it all the make all these eating of betting claims so in fact there is no there is no case showing that they are the primary violator very important issue if i could come back briefly to the statute of limitations issues generally because the effort of this suggestion has been devaney under devaney you know these motions that you know people lose on on statue limitations no right to amend after discovery after discovery the problem here the plaintiffs were in total control total control of the knowledge necessary to file a claim in fact in march of two thousand and two they know enough to file a claim so what did they learn in the interim nothing all they knew was a stock a gun down all they knew was a stock a gun down these claims are tear clearly time barred they were the product of their failure to file their wrong court get into california first time to start thinking about california statute and they also got into this mess because they didn't want to bring jannette senators in as a primary violator let me get to you're a fiver because i think you're basically o make i just touch very shortly yes thank you very much the dirt fiber issue is i would like to focus on one element of my notes here  representation that we're going to do see n g i not a representation that we were going to be hired as some senior level employee even though by the way there was no not even a recital in the employment agreement to that point asked for five million dollars pay cut you would have and that into this transaction correct and it would have been the other one if you got more money and you would have still suffered in the end the same lost your honor thing else everything else but it would have fallen down except your honour's that there's still the misrepresentations they had the cash to keep the business that's irrespective of c m g and so on and so forth we have the cash trust us we have the cash now you shouldn't trust it you should have relied on our telling you to have the only right to rely and be compensated when they do have losses i submit there is a they gave up a company it's not just cash they give up a company the opportunity to grow that company based on specific misrepresentations of fact we have the and they gave it away at least on false specific false idols libel misrepresentations that were never corrected in the marketplace were never told in the marketplace that's the durston area was a public market is told one thing public market is later told