we would strongly urge the chord to adopt a did novo review across the board for all twenty three point one issues the court presently applies it to novo review with respect to content issues like contemporaneous ownership subject matter though he thought it was wrong and i feel the same way i think your argument is one hundred percent right but how would we disregard those i think there is a time and a place where this panel might be able to do so with respect if it would become material to the po decision in the case as to whether or not it should be to novo or whether the abuse of discretion c and it was sustain the district court's order i think in that circumstance it can be proposed perhaps from bhangra view that here's an instance where the case where the santa review matters material and therefore i think the court can propose for him bock review and i think essentially that was the invitation by judge around rinehart and it would be good for the circuit i think to follow the prevailing trail or trend i should say in adopting the nova review on twenty three point one rulings across the board to me especially with respect to the me and futility of the first second recently and twenty way but all three agreed what we would to follow and i don't know how we can do anything unless our car goes in bank that we could other than do that i happen to sit on the  they reviewed so i'm not opposed to that but it seems like to me you could petition for rehearing and bank but i don't think the three of us can do anything to change the very strict determination i understand the argument it's not a bad argument and it's convinced many other circuits but we're just a humble panel of three and we can't rewrite the costs they have but clearly judge reinhardt of said it should come up and in bank or to do something about it but we can't follow respect to the demand futility issue before the court it's important to note that we've only contested one ground the demand futility ruling and that is with respect to whether or not the disclosure claim should be would constitute an abuse of discretion so that's our basis for an abuse of discretion in this case is that the court replied the wrong test and that is is presumes and is built on the foundation that there wasn't board action in the board members the majority of the board member seven of the eleven preparing reviewing making approving and signing  financial statements throughout the period of two thousand and eight through through town through two thousand and twelve me jump in because i'm looking to you to educate me because i know you know the stuff way better than i do but as i read the cases it doesn't matter which of these two tests applies because either way you are going to need to allege something equivalent to bad faith and i the main case that i get stuck on is the wood case so maybe you can sift through this stuff and help me see why i'm wrong in that that i understand well board action and therefore you take a look at the second prong of the of the aaronson to us and whether or not there is a valid exercise of business judgment was respect to the second second prong there are cases the prime case the mcfadden case oxford health seen at where the delaware courts and elsewhere or southern district new york have applied the second prong of the  activities of the board who are then collectively signing statements funny to say i'm sick i stop because that you're not really responding to my question and i'll be more specific the reason i say think doesn't seem to matter is one way or the other which test applies so you're arguing why it should be there and i could care less because it seems to me even if you're right on that don't you still need to allege something equivalent to bad faith because the directors are exculpated from  any claims a ground grounded on gross negligence so why is that wrong because the delaware courts have made a plane was in the bram and they found towards a state that it is possible through a grossly negligent process that is ordered has not been fully informed or properly informed have gone about a process that leads them to make false and misleading statements that that grossly negligent process can constitute demand futility under the second prong of parents would have there's no reason to question whether they would be independent unbiased in deciding whether to accept the right because they're not going to be on the h personally if they're exculpated for everything up to gross negligence right we're talking about process here in and procedures here so initially this court is charged with determining whether or not the man futility exists with respect to whether they're demand was futile based on this grossly note in the village and a process that can be found here and is found here because there's already action there are false statements there's a ten months before the february two know not entirely i think there  is that there can be a finding of demand futility on a grossly negligent process what happens next certainly the plaintiffs have the further burden of getting her out from this clause of a showing bad fa the second prong of aronsen relates to business business decisions and that's what we've anything this is a look at business decisions are you looking forward we're going to do this it looks like to me that the that the particular issues you're dealing with this is looking back press releases these types of things so why doesn't it move towards rails and not hearings because a board process and approving and sending out a financial statement requires all the board members sign on to that  statement it requires a process by which they are fully informed and informed of all the material information that would go into it so they're involved in the review the approval in signing selectively as a board if the board doesn't sign off on the statement it can't be c requirement it doesn't happen without a collective board action and the action together in the preview approval and signing of the financial statements five action if we agreed with that it seems to me everything the board did would be under and but that isn't what that isn't with they say with it they make this distinction between board business and types of things everything else israel if there were no sunny a lot of financial statements and yes we wouldn't have that type of board action but that's what happens here and that's this claim is not only a breach of loyalty claim which is not before the court but it is closure claim and that derives from the requirement stated in brain in the dollar courts that directors are required to make full accurate  in this instance it comes in the form of the financial statements the tent use of the ten k s which spoke directly to the reliability of these modules with which i spoke directly to how the the operational excellence of these modules when in fact the board knew that there were problems with the how the modules handle heat and with respect to how they handle the defects with respect to the production of low power modules so with those two particular aspects in mind the board consul it constituted at least a grossly negligent process and a breach of the duty of due care to then signed off on those statements again disseminating information the s e c and to shareholders that was false and misleading and that's our basis for concluding demand futility would be futile seven of the board members have good morning your honor it's an ericsson line on behalf of first solar and then it is a fundamental rule under delaware law that the decision whether or not to initiate litigation can only be taken away from the board under extraordinary circumstances those extraordinary circumstances have not been shown by plaintiffs in the complaint as a district court held there are three independent reasons in the court has already addressed a couple of those in terms of why the district court's decision was the court must consider the exculpatory provision when evaluating to me and futility my opponent is just wrong when he says that it's not supposed to be reviewed at the demand utility stage not only does the dollar supreme court say that it would be vom it also says the ritter and it makes sense as judge watford put pointed out because otherwise you're evaluating is whether the directors face a substantial likelihood of liability they do not face a substantial likelihood of liability if they the court had actually made the holding that you don't apply the exculpatory provision and the demands utility contacts that would be in direct conflict with delaware supreme court authority both wood and stone to be read or do you just say the question so the second independent reason is because as my opponent said the underlying claim here is a duty of disclosure claim it is not a breach of the food you share a duty for due care and the reason of course is because the due care claim is exculpate it as a dell or supreme court held in malone v brink when you're assessing a duty of disclosure claim the standard is about face did the directors just deliberately mislead when they made false misleading statements therefore under that that claimed the only way the directors can face a substantial likelihood of liability is if they acted in bad faith if they were intentional and knew that the statements they were made in making were false or misleading so those are two independent reasons why the district court cracked the third reason is that in any event aronsen doesn't apply and this goes to a number of the questions or the questions that you are asking judge was is because the question isn't whether it's a decision or will or it's an affirmative action if that was the question then that would just that it's well everything and there'd be parents and it would follow what rails basically question is whether it's a decision where the judgment business judgment is applied to that decision and then going back to just the reason why there's the business judgment as presumption in the first place it's because courts are not supposed to second guess decisions of comp of the board of directors so i when a board of directors is making a decision for example about whether to what kind of employment agreement to enter into with its c e o or terminations agreement or even whether to enter into litigation number the considerations they have to take are business considerations it doesn't make sense for the business to do this what are the cost and benefits to this to to the corporation and the business presumption says courts are not supposed second guess those decisions so those are the kind of decisions that are a plot that we're looking at and whether in the aaronson context here that's not what's happening it's not a business decision that the board is making by issue by when they sign these into this so called looking forward looking backward analysis i don't i don't really understand how that makes the difference in terms of you know whether the argument goes that if you're proving something that's already been done like a press release or that the you're looking backwards it's not a business decision of going forward and so real supplies not aronsen but i'm not sure that's right  is going to move forward based on that decision it's entering into a decision deciding approving whether or not to say sell a subsidiary of the corporation that's sort of the same thing where you're putting the corporation is going to is based on the decision the corporation is going to enter into certain kind of conduct or an act which is to sell the corporation or enter into a certain kind of agreement like a terminations agreement or employment agreement so how would you how would you compare that with financial reports so you're not by approving the financial reports or not putting the business in you know asking the business to do anything they're just they're signing it's statement that's been put in front of them mainly about what  eighty six that delaware enact legislation went to be seven which allowed corporations to exculpate their directors for liability so the time that aronsen came down you could it was more likely they were you could bring and you could still agree breach of duty of care about a claim for gross negligence and if corporations of corporations didn't have a tory provisions that time could you know if the plaintiff could show particular his facts that the directors were grossly negligent in making a decision then they would have faced a substantial likelihood of liability here we have to exclude the tory provision and we have a different claim a duty of candor  im so unless there are other questions on the merits points just briefly on the standard of review it doesn't matter here whether it's abuse of discretion or don't know what you're looking at really is a question of law what standard applies to  the demand futility in this context and for the three reasons i laid out it's the district court was cracked in and applying the batf a standard thank you thank you counsel bottle you're not think it's important to know with respect to the looking forward looking back analysis these statements the financial statements that are intended to capsulize the current state of operations are also intended to have a forward of fact for example statements with respect to operational excellence with respect to the modules with respect to to the company knowing while while knowing that there are issues with respect to how it handles heat and low power those have been a factor in a proposed impact going forward these are business decisions the board is made set out on so i would suggest and i think it's entirely appropriate that what happened with respect to the collector decisions to propose financial statements propose representations within those that they're intended to cause a future effect intended to execute the business plan of the corporation going forward so i think with respect to save in spain in the in the in a financial statement or representations made in financial  statement looking for looking backward dissension perhaps doesn't matter all that much it's still a business a course a collective business decision the course of the companies embarking on going forward and i would suggest that that then brings all of this within the second again we are left with nick paton we're left with oxford health and seen it with respect to those how it was you still have sorry you haven't you still have not persuasively addressed would well and i look at page one forty one forty one forty one and it's just dead on the money it says in whichever test applies you've got to allege a non exculpated claim and in this case that means something rise in level of bad faith and i don't think you've faith you or well i would suggest if you could take a look at paragraph one sixty three of the amount of complaint of the operative complaint that lists all of the particular statements that are false in the board's knowledge going in the board's knowledge with respect to those statements be a paragraph one fifty or para fifty four paragraph one forty five talk about specifically the equal sham  demonstration and presentation to the board again ten months before its disclose with all these particular issues now the court the district court determine that those problems or were issues were related mostly to the reserve that have been taken out with specter warranties but but but the statements that were posed eaglesham presentation also related to the operational excellence of the company and how it was and how their modules were performing when in fact there were issues and problems that the company was forced to divulge ten months after the board knew of it so in those in that circumstance