me please the court my name is sam banderas from here on behalf of the opponents the pallant represents a punitive class of current and former employees of whole foods market and this case turns on the application of the supreme court's pleading standard announced a fifth third bank or b didn't offer which states that if you are bringing a claim for breach of the fiduciary duty of prudence against the fiduciary of an employee stock option plan you must propose that the defendant have taken an alternative action that would be consistent with the securities laws and would not have been viewed by a prudent to do sherry as more likely to is referring to the hedging product alternative doesn't mean the idea is that you take a certain amount of cash that plan has a cash buffer in it and you take a certain amount of the cash and it is you buy a product you buy into a pool which is a pool of usually u s treasuries or something similar and it there's a bunch of other companies similarly situated companies that are also pooled in there and if you if the stock then goes down for whatever reason you are paid back you are reimbursed out of that pool and if it doesn't then you get most of your money back minus a small fee but the stock is rebound correct  the whole food stock at the time of our filing of the complaint the stock had not bounded the stock had in fact was trading at a lower price than it was at the time that we let the class period ended but did any of your planet sell at the lower price time talking about damages well damages in a risk context can be measured by the amount by which they overpaid for the stock and so even if the stock ultimately recovers they still paid as i think the second circuit put a price too dear for that stock and so what they paid is so even if there is a full recovery down the line they still are deprived of profits that they would have otherwise earned had they bought at an accurate price and then for those who actually sold at the lower price their damages are locked in but both kinds of damages in the arista context are allowed to be pleaded i want to focus if i may with the  radio shack case those because in both of those cases and in our case you have an allegation that an employee stock plan became artificially inflated did misrepresentations made by the company that the fiduciary is knew or should have known about that artificial inflation and that the fiduciary should have made a corrective disclosure or endeavored to have a corrective disclosure made before the disclosure was made and what this  in saying is that under due to harford that's not enough to pass the supreme court's more harm than good test because a prudent to do sherry looking at that situation would say well if i make a corrective disclosure there's going to be a stock price drop after all if it's artificially inflated has to come back to earth and so if i correct it there's going to be a stock price drop that could harm the plan therefore that's not  we've done is we've alleged to unique facts to this case that we believe distinguish it from whitley and from seeing the first and this is really the most important is the fact that over the course of the class period here throughout the class period buyers of the artificially inflated stock were outpacing sellers of the artificially inflated stock so imagine your prudent fiduciary you're looking at the situation you know the stock is inflated you're thinking should i make a corrective disclosure which i know will cause a stock price drop well how will that affect the people in the plan the sellers people who make sell in the future are not going to like this because they've been selling  inflated price and making a nice profit for themselves that's good they've been benefited but by future buyers they want the stock to come back to earth because they don't want to pay too dear price for the stock and then you have holders and i think holders it's kind of a wash because the stock goes up the stock goes down they don't really experience anything other than a paper loss or paper game where holders are affected isn't the second factor we've alleged and that's has to do with the stock price recovery t so in this case throughout the class period we've alleged is that buyers of the artificially inflated stock were outpacing sellers there were more people buying and selling if you're pretty fiduciary you know you're you're  look at asks you to compare harm and good based on what will be the effect of a can comment and drop in the price of the stock if you make a correct disclosure up to what you are now saying to the producer that you you make a choice as to who's going to harm than good to those people in the plan now if you have people benefiting who have more sellers benefiting them than buyers then arguably you wouldn't want to make a corrective disclosure because more people if any action you take might hurt one plan participant even if it benefits all of the others you'll never be able to take any action at all and essentially that means that there is no duty of prudence or any sought for do sherry because any possible live by the prudent person standard and that a defense friendly pleading presumption created by the judiciary not found in the statute is not appropriate it would be strange for the and in fact that's what we pleaded we pleaded not based on technically the number of employees who bought and sold but based on the amount by which you go to the individuals not to some last group yes your honor but the best way really the only feasible way to measure harm versus good is based on the overall financial impact to the place and it is possible for a plant fiduciary in real time if their job is to monitor the purchases and sales the investment opportunities in the plan they can find out which is the trend are and if if they look at that information and they determine that there's a lot more sales going on than purchases or even that it's a close question one might say well then you have a plausibly alleged military action they should've taken but here where there's a clear gap and in real time they could determine that over the course of this multi year class period action consistent with the produce your obligation without redefining order if you do zero because we believe that you can your honor and the fact that it's important that a fiduciary who takes on what is supposed to be the highest duty known to the law has to do that hard work of determining which is an action i'm going to take more look going to cause i that harm to the people i owe that duty to or is it going to be a net benefit to those people i know that duty to and outweighs the net harm to prospective sellers that will result from a correct disclosure you know the district court talks about the fear of an overcorrection but in practical experience the courts and you know the efficient markets theory don't really look at disclosure public stocks in that way generally speaking the theory is that if there's an artificial inflation of a stock because it's there's been a misrepresentation when the correct disclosure comes out however it comes out it's going to diminish by roughly the amount by which was artificially inflated due to the misrepresentation even if there is an overcorrection and brief it usually evens out after some time the concern here is that if you let it go on further you're going to have more people buying at that inflated price than possibly selling or holding and then the second factor which we have alleged and which is unique to this case although the district court didn't see it that way is that you have a corporate entity here wholefoods that has made the centerpiece of its presentation to its customers in the public it's trustworthiness and at the same time what it is guilty of is overcharging those same customers and concealing it from the public that is why we have alleged in the complaint that when the stock when the stock price correction eventually occurred it's not just that you had a drop which is you know you have to consider is that a net harm or a net benefit but you had a much slower than necessary recovery of the stock price doing part to the fact that a company whose entire reputation is about we're the good corporate citizen you can trust us we are honest with you we don't live in a way that is much different from the way most companies present themselves had lost some of that trustworthiness with the public because they delayed telling the truth about what they had been doing in fact it wasn't their choice to tell at all they were essentially outed by regulatory agencies in the media at that point in time wasn't the investigation still going on and house when they were outed well here are our allegation is that the investigation of the regulatory commissions had already been concluded in california and had resulted in significant fin finding of wrongdoing the same instrument albany that was in two thousand and fourteen or two thousand and fifteen and that the new york investigation was enough for the new york regulatory agency to announce that there had been widespread overcharging there as well and that you know what corporate defendant can always say about alleged wrongdoing especially when regulators involved well we were still investigating we weren't sure but we believe we plausibly alleged is that after years of being caught in their two biggest markets california and new york there was more than enough information in the hands of defendants to know that this was not just something they needed to further investigate and in fact when they admitted what had happened they even use the language of trust to describe why they had failed and why their stock price had felt a negative impact from the announcement you do with suppose if you do users have information that is quite good and so e breakthrough and product or whatever is going to make a real buy that's insider information now they have a fiduciary duty to disclose that because if they don't if they don't they don't disclose it  if it's not known it's not certain then you are in the situation that are information and that they know that there's going to be a strike a diamond found whatever i have there that they know what it is and know that the district court and did it with the whitney case immediately forecloses two of the three arguments that morto raises in his complaint the first thing really disclosure and the second being the halt in trading as i will discuss and including the net purchaser argument that has been raised these two alternatives can be dealt with very quickly and rejected very quickly the third alternative this purchase of a hedging product that is not fully described in the complaint well that's not covered and i'll discuss the hedging product again in more detail but for now i want to note that as the diff to court found the purchase of the head product would have to be disclosed under issa and the plans documents the trust disclosure could lead to a decline in the stock price and given the be more likely to harm the funding to help him as a result this appeal should be dismissed counsel has raised some issues of fact and so i do want to address those just briefly before i move on plus it's also important to client that a few things come out first of all with regard to argued of trustworthiness of course whole foods maintains a level of trust with its clients and with its customers that has not been eroded here and the trustworthiness is not distinguishable from distinguishable from radio shack or from a lehman or from any other cases that have come before the various courts across the country trustworthiness is what every company wants to project to its customer and project to the public so that issue right off  bat can be disregarded but more telling them in the complaint does not allege any statement action or mission by any of the defendant or do sherry's to show that a scheme or some sort of conspiracy actually existed to mislead the customers or the public more tone alleges no actual inside information with specificity that the defendant the new sheriff did not disclose from the defendant who share his perspective nothing about the dca investigation should have caused any of them to take the action set forth as a matter of fact the president of the california region published a letter to the public describing the california based again and describing the result this was public and it was more than two years before the new york dca investigation so any already determined what the stock price should be but what we have is in the amended complaint as we have reference to california we have reference to albany and then we have legal conclusions and we are speculation and the speculation a legal conclusion doesn't survive to let alone fifty third and with that said and i appreciate the court's indulgence in talking about the facts here but the district court's opinion doesn't include all those additional facts so this offer and judge pittman as i mentioned earlier at the district court level applied when properly and also apply that if they're pleading standard and in cases such as somewhere in the six circuit and then reinhart of the second have addressed how high the standard is and they agree but they also agree it is high for a reason the reason behind this high burden is congress's desire to encourage the creation of these sounds in light of a risk as general duties of prudence and then also still ensuring that the  insiders would indeed have inside information and they would also be fiduciary wary to hats as insiders to do sherry's would have access to information that they could not act on without violating the securities laws congress also did not want to create a repackaged that that standard that burden and made into a pleading standard but it did not lessen at all i'm sorry did not lessen at all the burden the planet must meet in order to remain in court so such a high standard recognizes the social conclude that it would not do more harm than good and he stop stop drug case should be dismissed and the attempted end run around the p s l array and not be allowed to your honor's early disclosure and then the halt in trading obligated to take the turn of those and cannot be held accountable for not acting now council has raised this idea and the purchaser this is just window dressing it doesn't change the standard doesn't change the impact of the decision of the  fiduciary only knows what is available at a particular point in time and then must act in the best act in the best way possible to protect the phone and so we still don't understand from the american plane or from the how it is that a fiduciary is supposed to determine in any particular day whether a fund is in the purchase or sell it in any event you still have the opportunity or the obligation rather  necessarily constitute is a security level because at that point then the fiduciary is making a determination based upon net purchaser information or seller information which can then you can then manipulate the stock price but actually making a disclosure to anybody simply  gives rise to the same concerns as regular disclosure and that's a risk of loss to the stock price accordingly martin was not purchase your argument does not distinguish this case from whitley or from radio shack or from any of the other cases that are decided across the country and it should described for purposes of this argument in such a way that a fiduciary might want to consider it well it still must be disclosed the diversion of money into a housing product and as the district court considered on its own and its own analysis of the risk and the related regulations as well as the plan documents here for whole foods for one k plan does require that the fiduciary if it's going to invest in a housing product must make the participants aware that this is going on well as soon as that disclosure occurs that is going to attention the cause concern among participants why why are you doing this what's wrong with the company what's wrong with the stock and that's going to bleed out into the market as a whole so the disclosure of the i think that has any product for falls for thales rather for some other reason one is that more tone fails to acknowledge that any offer of a heavy product is going to want the purchaser to represent th is unaware of any materially adverse information that has not been disclosed so if the fiduciary does not disclose to the author then the producer areas then committing fraud and that's not what is obligated under fift and then failure to disclose the purchase could be a security violation of itself because at that point the d c area has been acting on inside information without telling the general public so we have a situation where if the fiduciary decides to raised i believe in counsel's brief but the other courts have considered have discussed this the hedging product even if it's purchased early even if it's done many many years ahead of any potential causes of concern t alternatives to a specific city here that so clearly but are so clearly beneficial that a reasonable fiduciary could not conclude that such an action would not be likely to cause more harm to the fun than to help case law is clear that early disclosure the whole thing in trading offer states that the court is supposed to act as a gatekeeper with these cases justice briar's opinion says that there are you need to be able to separate the plausible sheep from the meritless goats one thing that's impl that is that there are still supposed to be sheep out there not every case is a goat but if the standard exclusively for how we judge these cases is that well if a fiduciary might be worried about a stock price drop by taking an action that's enough then it's game over for all of these claims because all of these claims are based on the idea that the stock is trading at an artificially inflated level you cannot correct artificial inflation a stock without bringing the stock down if that's the end of the more harm than good analysis if it stops right there and we don't consider any other factors like whether there are more purchase or more purchases than sales then we're not performing a gatekeeper function anymore we're putting up a wall and you know council and i've heard this argument in a number of places that this is concocted to be an end run around the p s l array there is nothing in any case didn't offer otherwise from the supreme court that suggests th view these claims that way didn't offer is concerned with reminding us that even aesop fiduciary is as much as congress wanted to encourage their creation wanted to hold them to the same standard of prudence as every other if we look at the factor of say it buyers vs sellers if we look at the risk of fiduciary should've taken into account about the recovery of the stock price from the drop in addition to looking at the stock price drop if we consider all those factors the district courts can still perform that gatekeeper function it's not going to let all the cases in which i know is a concern that didn't offer expresses that's not going to happen because there are going to be plenty of opportunities plenty of situations where the sellers are outnumbering the buyers or are selling more than they're buying and therefore they don't pass muster plenty of opportunities where you can't adequately implausibly allege that the stock price recovery was going to be slower than it should have been there will be situations where you cannot  factors particularly buyers versus elves was not polluted in that case and was not before the court in this case if we take all those off the table and say that all that matters stock price drop that's all a person for sharing his story about we are giving those who do shares enron stock price to drop that's a perverse result and there is nothing in didn't offer amgen or any other case that suggests that that is what the supreme court wanted this to be if we don't like the fact that this claim exists we have to take it up with congress because the claim of prudence against fiduciary is aesop's it's in the statute it is not something that the courts can simply wipe out with an impossible pleading standard try to prevent harm to those planned participants and that is a critical difference between the two situations described finally with respect to the hedging claim our point is that the district court in looking at that made a lot of inferences about whether that hedging product would need to be disclosed to plan participants and then on top of that whether that would therefore make public information and whether that would therefore cause the stock price to drop that is a lot of factual inferences being done in favor of the defendant it is at least equally plausible given the language of the plan and the language of the arista statute that that product would not need to be disclosed to plan participants and therefore would not become public and would not cause the stock price to drop for these reasons we asked that the opinion of the district court be reversed and remanded thank you for think