morning your honour's may please the court trovato failed to disclose in its offer materials that it was implementing one of the biggest what it described as one of the biggest changes in the recent past to its market place and was doing so to address the fact that the advertiser responsible for forty four percent of its revenue was not complying with its landing page rules according to drugs actives price lines of violations were creating any fission seas in the marketplace and in fear over all use of value they were undermin strategic direction which was to increase competitive for smaller advertisers and so like i said they implemented what defendant have heard described as the biggest change in the recent past to their market place none of this was disclosed to investors in the companies offering recently expected the relevance assessments implementation to have a material impact on its net sales or revenues i've read this and it seemed quite unclear given their cautionary language that you know people were going to pay the penalty or leave the site or what was going to happen really is from what i can see so where did you allege that they knew at the time that this would have a material impact on thier sales and  the fact and that fact is the reason we like the immaterial they're obligated to disclose it it kind of puts the burden on them to disclose its potential potential problems but there is actually i mean three speaks to two trends an uncertainty it was uncertainty which as as the defendant state was creating inefficiencies into your overall your value and undermining company strategic direction we believe that they were obligated therefore to disclose these facts to investors and there are not uncertainty as to whether there is a trend there has to be a trend and the company has to notice a trend even though as you point out you don't necessarily know how  mean to take an example if the company were to everything is uncertain i mean if you talk about all the things we don't know number the things we do know but if there's an event where the company's largest customers violating their land page rules they would be obligated suppose that section eleven the securities act was enacted to implement a policy of full disclosure so at the point at which their largest customers violating the rules is having these dilatoriness facts on the company's business and they're implementing the largest change in recent memory to the marketplace to address the issue how did they know did you allege facts suggesting they knew that price lines practice was actually having a deleterious effect i thought they were adjusting to see if they could capture more of but there wasn't data about that was there so when the executive defendants in reflecting about why they made the change they state that it was having a dilatory effect they to disclose how these trends these uncertainties might reasonably expected to affect future revenue there might be a chance that there be no no effect or some effect but as long as a material effect is reasonably likely to occur they're obligated to disclose it maybe you could go on to material falsity your tenby claims you just have two minutes left sure so material falsely and the ten b claims this is actually consistent pattern trivago had a pattern of that st non disclosure of these issues and problems and this major change their platform to address them and then kind of had a so in the th quarter they say you know we had improved commercialization because of changes asked what changes you're out of them they said oh you know it's paraphrasing here but something like we have minor tweaks here and there it's not really it's too tough to get into the technical detail that's false because what the reality was is that the that they were personally involved in the implementation of the relevance assessment so this is of course is dealing with their largest customer that's a major it's the biggest one of these changes over their platform and they later describe the reasons that they decided problem so they knew with the largest advertiser the news one of these changes ever so in the for example the th quarter and say well we're just making you know we are making small changes to our platform and that's knowingly false in light of what we later learned to be the facts of the change which was that it was much more thank you good morning your honor may it please the court jared gerber from clara gottlieb on behalf of defendant trivago the amended complaint here fails for a host of reasons as the district court held and as we laid out in our briefs  in the interest of time i'll just focus on a couple of the most significant flaws here perhaps the most fundamental one that i think judge carney was getting at before is that this action is based on pure hindsight and this and its affiliated brands accounted for somewhere between twenty seven percent and forty three percent right of toronto's total revenue so if there was a change in the model for dealing with a customer of that magnitude or prompted priceline to withdraw our change its relationship in a major way we have that vulnerability why wasn't that suitable and required for disclosure so it meets the material effect needs to be reasonably likely and here  think as of the time that the relevant assessment was adopted and as of the time of the i p o when it was not reasonably likely to occur because it depended on how priceline and other customers reacted to the relevance assessment whether they would decide to adopt their landing pages so they wouldn't have to pay any penalty at the time so there would be no impact on the revenue you'd say that even if if it was not known  because it was not known what the effect would be the fact that a change was going to occur with respect to the major client that is not required to be disclosed because no one knows what's going to happen that's right and i need you need to be able to tell that it's reasonably likely to have a material effect going forward the fact of volatility of some kind is not something that's required to be disclosed right in three and three is that your view that that's right and i think that's also b s he sees a view if you look at the f c c release that the plaintiffs cite here the s e c distinguishes between requiring disclosures under item three o three that's when there's a known trend that likely to have a material effect and it distinguishes that from forward looking information that's optional under item three o three where the trend is and the impact of the trend is uncertain either one of two things can happen either the companies could come into compliance so they could remain out of compliance they remained out of compliance which is what happened at  be a benefit in every business decision that's made every business initiative is expected you know that a company wouldn't adopt a change unless they thought it would help the business over time one that they think will materially help the business then they that priceline is a large customer there are no allegations about how the revenue would be impacted if priceline just changed their landing pages and didn't pay any  additional revenue under the relevant assessment whether that would be material or not and whether it be reasonably likely to be material even if it's not absolutely material i think it just if the standard can't percent and that's the overall overall revenue but that's not the change from the relevance assessment that's just the amount of the overall revenue that's attributable priceline and there are no allegations about what the impact was to that amount of revenue in absolute dollar figures and whether that amount is material was reasonably likely to be material it was anticipated to be material so we would say that if there were a change in  customer policy such that refuse it was going to refuse to deal with any company whose name started with p that might require disclosure but the effects here were really very uncertain about how it customers would respond to including priceline and this is priceline and its affiliates right so there were several different companies that might have had different ways of dealing with the penalty in the future is that right that's right and i i do want to bring the court back to the f c c release that that says require disclosure is based on currently known trends events and uncertainties that are reasonably expected to have material effects in contrast optional forward looking disclosure involves anticipating a future trend or event or anticipating a less predictable impact of a known bench trends are uncertain not so easy to tell the difference between those two things well i'd i think what we've just been been talking about is a less predictable impact that could have an impact it could have material impact it might not have material impact it might have an impact on revenue it might not have an impact on revenue that's the sort of optional forward looking disclosure that the f c c realizes is not called for three hundred and three i'd like to move on to the exchange act since i only have a couple of minutes left  i think that the complaint doesn't adequately plead that the relevance assessment was a big thing as opposed to a small thing in the th quarter and i think that the complaint actually affirmative statement that revenue increased ten percent as a result or ten percent of the revenue increase was attributable to the relevance assessment and that means that ninety percent of the revenue increase was caused by other factors other  to say that you know that smaller number could have been changed more by just a ten percent change but there's still the ninety percent that had nine times greater impact on that some number than the relevance assessment to it so it would have been affirmatively misleading to say that the revenues that relevant assessment was entirely responsible for it the last point i want to make to get judge park's point is that there really is no allegation no adequate allegation of c enter here there's no  particular allies fact no internal report no stock sales no you know witness there's nothing exciting here and there's just the hindsight assumption that because something bad happened later it must have been known before and that's that's plainly insufficient under under this court's decisions judge friendly call that fraud by hindsight i see him peering over my shoulder that's that's not sufficient here the other theory is that they advance are so the purpose of the securities act is to provide an atmosphere of full disclosure which should have been done here as investors should have been notified in the offering materials that they're having these major problems with their largest customer and that they're implementing this major change their platform and then let customers decide at that point you know whether they're going to buy the stock whether they're going to participate in the i p o if they're willing to pay the price of the company is asking in the i p o as defendants basically admitted in their in their in their portion here they were unsure about the effect that priceline was going to have the executives said that priceline actions were having a deleterious impact these were all issues events uncertainties that were present at the time of the if priceline began to comply then obviously it would have corrected this major problem that their experience of the i p o regardless of which kind of either direction it when it was going to be material defendants had a right to know they had a right to know the risk  company's revenue is being kept alive by this penalty assessment which accounted for you know ten percent that's ten percent of their growth so if their growth was sixty percent it was ten percent of the sixty which is not six percent but ten percent of the sixty so again you know the district court in deciding that these issues were not really likely to be material ignored to the key facts which were the descriptions by the executives that it was having the dilatory effect on the company's marketplace which was pretty unfair overall your value does this record ignored those and the district court took the statement about this is the biggest change over to our platform and said well the company wasn't talking about kind of the change their platform for the company was talking about was or what the defense were talking about was just to the eventual financial impact so by kind of ignoring those three key facts which go toward the question of whether or not these issues were recently likely to be material  e think that should be reversed and in fact you know at the end of the day you know these these issues were material that goes somewhat to the question of the argument and the stranger act concerning whether something  was largely driven one of the drivers that was not made in the district court was that the issue of whether all those statements that we alleged that are false for those reasons were in that were in the complaint that we