ok mr burton please the court your honors in your burger on behalf of the appellant the plaintiffs in the underlying action the essence of this case is not just the specific thirty or so false statements and omissions alleged rather this case is about a greater intended deception to mislead the market about auckland's ability to remediate its mortgage servicing illegalities as required by regulatory consent orders including with forty nine dollars attorneys general to carry out that essential to me a lot of this is puffery you know a corporation that is having lots of problems with state attorneys general and regulatory authorities acknowledges that it's having   sure you've got a lot of problems there you know i don't take that to be any any more then you know we're going to try to do better  right addressing the statements that are alleged to be puffery or immaterial puffery of just promises to do better the deception here is in the lie and deception is easy you can't have soft words within a statement that's misleading and have that inoculate the whole overarching deception that the technology would certainly and inevitably fail and that renders even true statements misleading if i could make an analogy if i'm running a train and i'm picking up passengers in new orleans and dropping them off in atlanta i can make statements all along the way with each mile of we're making progress towards our destination i really believe we're going to get there and things are going well but if i know that there is a hole in the tracks in birmingham or that the engine will not make it the entire distance then i have misled those passengers and even if i give a warning ahead of time i'm picking you up i'm taking you to land i believe that i will get there we are a great railroad but things might happen the track might break  i know that that has already happened and i have misled the passengers and that's what happened here but don't we have a situation here where everybody knew there was a hole in the track no everybody knew that auckland had servicing issues the extent of the issues in the extent of the flaw technology was not no that it was dent but the fact of it was you know that i had a problem the problem came from a broken technology but the extent of the break or that the technology was broken versus the ability to service the mortgage is what separates mismanagement from the fraud so every day you can then put your finger it sounds not now now like we're be fixed alk we could make progress towards fixing some of the servicing issues that resulted from the flawed take of what they should have told the investing world is we're incapable of fixing this problem exactly and anything less than that is fraud in your in your view i do believe that and that's what happened with the nd round of regulatory actions that took place at the end of the class period real servicing technology platform was required to be exchanged for a new technology platform that had the ability to fix these issues was taking any steps whether they were actually making progress or not was awkward taking any steps once the regula to fix the problem to try and fix the problem i want to differentiate the problem because there are servicing problems in illegalities the technology that you say cannot be fixed right even if you could put a band aid on some of the problems with the technology the overall fix reaching the end reaching atlanta could not happen unless that technology system was replaced and they were not replacing it they were not making efforts to replace it  if you don't know what steps if any aqua is actually taking to try and fix the technology isn't that a massive hole in your complaint you know because what we have from the results of an internal investigation by the company from the results of a outside external consultant coming in to look at the technology and most importantly from internal communications from executive officers to the c e o s saying this technology is broken it is a train wreck and the response is keep doing what we're doing keep trying to pacify the consumers who call in and have these problems fix their were in their e mail saying well we're working on it hopefully we'll assumption based on what would normally occur in corporation but those facts are not in evidence those statements are not in evidence and this is a pleading standard well soon that they're making technology fix but we don't see any evidence of that when the reports you can say that they knew about problems discovered in the internal investigation discovered by the external consultant before the internal investigation occurred and the external consultant came in and did that examination these are new issues being the raise and we see no response that is well let's try and fix them let's get to work on it all you see me ask you this is your point is your point that the the underlying software issue was physically or technically incapable of being fixed or that it was cost prohibitive to fix it incapable of something in the code that cannot be fixed i guess even by sort of rewriting code or whatever exactly it was a flaw can't say that it was cost prohibitive i can look at the facts in the record and say why the company would decide to keep the technology they developed in house they spun it off the chip executive chairman of when was the chairman of this new company this new company allowed them to to do to assist in financing the acquisition of more rights that's part of the true one thousand and sixteen consent decree that those decisions were made without the following the proper procedures and misstating the income so there's all teary or motives to keeping this this technology in place that are facts that are legend complaint but i can't tell you specifically it was cost prohibitive and that's why they did it obviously it had a huge impact on the cost it's a couple of one billion dollars in the narrative here is that the market knew of these problems and investors had to make a bet as to whether or not talking could fix it or not but but it becomes misleading because it's a rigged result and that gets right that's akin to the language basically of rolling dice and in a result if you know that these efforts will fail to the point where you're not allowed with it aqua is not allowed to acquire new rights which is what happened at the end of the class period when florida came in and said you cannot acquire new rights and it's going to cost you billions of dollars to get a new technology that's a rigged result into the marketplace and it's material information then i ask you a favor  amended complaint is the train wreck quote that you're talking about and this is was an internal communication in two thousand and fourteen which is before the a regulator stepped in and before the class period and the head of servicing  squat describes the technology as an absolute train wreck i know there's no shot in hell but if i could change systems tomorrow i would say this is before the class period and it's not somebody saying we cannot fix this or saying it's a terrible system the regulators then step in and we then hear the statements that are being made from auckland about trying to fix the technology but i'm looking at the statement st before the class period before the regulator step in and it's not telling me that statement in and of itself doesn't tell me there's no way it can be fixed tells me it's bad but but so how is this an actionable securities fraud well it's the train wreck e mail is a part of it the broken e mail is a part of it the internal investigation is a part of it the external consultants coming in is a part of it and you have broken tracks you have a but they're not per their never per promising perfection no they're not promising perfection and if they were earn say we may or may not get there you just say we're making efforts right well that that's the rigged result that's if you know that the efforts are going to fail then you're technically true statements are misleading and i'm running out of  time i say some time a rebuttal i just want to raise the point now i come back to it is puffery was a part of some of the statements there's also the forward looking statements that do not include puffery in the opinion statements that they're not include free we raise the issue of st impression with the consent order and whether or not it was an anti fraud position but i would also raise the issue of cautionary language ok when i come back we have your case mr berg you'll say four minutes  complaint they actually say that auckland contends i think it's worth quoting it complained quote during the class period defendants repeatedly represented to investors that  compliance with the terms of the aforementioned settlements and the extensive federal and state regulations that govern mortgage servicers the case below was about affirmative statements that they were in compliance it's also worth complain as well we invited and the discord invited council to identify where auckland actually says it doesn't say that so here we are in appeal and it's not well they weren't saying they were in compliance but they were failing to tell the market that we're never going to get there but there's nothing in the complaint that says that either your honour's have already put your finger on it but let's let's go with the evolved theory which is the market as they can see it in their briefing believe it page twenty four the market knew the auckland was not in compliance and how could it not know prior to the class period you had the settlement with the c f p b that put a national monitor in place the a few weeks before the class period you had the new york department a financial services and imposing a consent order that required the former chairman and founder to leave the company one hundred and fifty million dollars fine and importantly froze auckland's ability to acquire new mortgage service rights mr berger just mentioned that happened during the class period oh no no no that happened several weeks before the class period the new york d f s which imposed its own monitor which was live a said you can no longer require m s sars until we say so and there is going to be hoops you have to jump through which for a mortgage servicer means you're not going to grow because the way the mortgage servicers get paid is they service these mortgages you total up and there's an unpaid balance you p b and the mortgage servicer gets a few cents out of a percentage of that and if people pay their mortgages every month some of that unpaid  down and if you can't acquire any more mortgages you have a melting ice cube this was all known to the market before the class period began and then you have the california issue as well so but let's let's deal with the  theory which is you should have told us you couldn't get there nothing in the record supports that nothing in the complaint supports that but to pick up on the analogy that we've heard the train auckland was saying that there's a whole we all know there's a whole the market knows we're not in compliance plates can see that but we're working on it and we're working on it and we're putting in new resource more resources our costs are going up we're telling you they're going to go up and go but we're i recommend that the court look at their exhibit five below which is what we've done is we've taken the words that they have excised and we've surrounded it with the words that actually surrounded in the public filings and  i think that our papers we say it's green and yellow but in your in in what's been photocopied the light gray is what counts what the complaint contains the dark gray is what was not contained that which we want to emphasize  that says aha they're lying to the public and what's in the complaint is quote as a company we continue to make progress in resolving our legacy issues that's where that quote ends but in the f c c filing there's a comma and the following words but there is more work to be done and that is emblematic of how this complaint was drafted they pick out of cautionary language which says we've got regulators here we've got twenty five open state investigations there's no assurance we're going to make it there's actually a statement one point saying given what's going on with the regulators we don't think it's highly unlikely we will become profitable until we have significant change in our business model so auckland is trying and not only that in this not only saying there's a hole in the track and we're trying to fix it to strain this analogy even further they've got two sets of experts technicians railroad technicians if you want to call it onboard or out ahead of the track helping and that's the c f p be national monitor which is every three months through a process with an internal review group and external cross checks is telling up when here's where you're not quite making enough progress here's where you need to make some progress up when actually has a disclosure where they say we think we're going to fail one or two of these metrics but we're trying and then you've got the s monitor this other expert that's helping them build a hole in the track and that expert that monitor is adequate keeping a close eye and the none of those monitors was no evidence that those monitor said is hopeless those monitors are saying you've got to tweak this you've got to fix that in order to strive as you are continuing to strive towards ultimate compliance it strikes me i guess that there are two ways in which the things left unsaid may be relevant here one the way the one we were talking about on opening was sort of you know sort of toward omissions case which as you say is sort of the evolved version of the case this was principally a misstatements case now on appeal it's become an emissions case but it also they also did make the argument below right that there were certain sort of opinion related statements that i guess as i understand it under a governing law are actionable if in fact you can prove that the speaker didn't believe the opinion didn't sincerely hold the opinion and there i suppose the unstated material might be used to prove that in fact the speaker didn't believe that sort of the opinion that he or she was stating i don't think any reasonable investor who looks at those statements that were eisley in the complaint and up scales to look at the language around it would ever come to the conclusion that anything material was omitted but if i may just there are probably two buckets of statements that go to your honor's point one is forward looking statements and it's quite clear in the th circuit under harris v i i backs and others other cases that if forward looking statements are accompanied by meaningful cautionary language one does not need to turn to state of mind and the court below correctly found that that was the instance here with regard to puffery the i believe is the find what case said that once you that the focus is not on the mens rea of the speaker but on on the the meaning of the statement that said and its impact on the listener that a statement is a statement of fact or do was was basically three things and the judge did not go there one was to assess accept the op when it said something it didn't say i've addressed that the nd was to assume investors aren't looking at everything else and that that's what this case is really about it's there is paragraph after paragraph after paragraph about how terrible the real servicing software was and that brings this case squarely into the santa fe analysis bottom this is a complaint about a company that in the plain view was run pretty lousy only it had this software kept trying to make it work and it just couldn't do it a good job of it and i think in santa fe the supreme court said you know we're not going to have ten b become a way to federalize what is typically a state function of internal corporate government and management so i think that's one of the dangers here but let me go to a precise danger which is plaintiff's efforts to  to expand the exception to the statutory safe harbor for forward looking statements by adding twelve b twenty to that as i said before for looking statements  immunised frankly if they're come accompanied by meaningful cautionary language in congress meant to address the issue of we want investors want management to talk about the future and do so with a bit more freedom than before the private securities litigation reform act but it said if the f c c finds that you you've committed fraud you don't get that benefit for three years so here the plaintiff is trying to absolutely the case and there are there is no statute there is no law there is no regulation there is no as you see letter there is no there is nothing to support this novel expansion of twelve of ten b because if you're reducing an exception you're expanding the reprise right of action what they've cited too is an author of an anonymous outline that was on a website a of unknown prominent sigma for ourselves with the law as well your honor that's funny you should say that because you were on a panel s c c vimala rosso which while this issue wasn't directly presented that opinion  oblige the court to divide a series of statutes into two buckets and in modern row so you had a section it was a pure currying opinion a section that said anti fraud provisions and there was a discussion of section ten b section seventeen etc that section but keeping lo and behold that's where twelve b twenty is and the other sections that or issue in the january twenty six thousand consent order so let me ask you this just real quick because money is relevant but you know we when we were reporting to decide in that case definitively sort of which side of the line this one was on but so i think you're right that twelve b twenty if i've got it right doesn't entail a c into requirement but as i read again ten b being a judicially created right of action it comes with all of the things that hang around it that in particular see enter and your honor earlier put your finger right on it there's no c and a requirement and there's also a is on the table where a company might decide you know what we can't we can't accept the settlement because we'd like to make forward looking statements our investors want to know what we're thinking but if we do that we are putting ourselves at risk for tenby liability if we misspeak we don't have that congressionally mandated safe harbor if we do this so i think from a public policy perspective to expect to expand the exception to capture for  the st time we're unaware of any and in any case that's done this to to expand the exception to the safe harbor to twelve b twenty would have very negative policy implications in my two nameless members of this panel are alabama crimson tide fans and i couldn't help but thinking that a lot of this is what i would call saban speak you see nick saban give a press conference and it's like jabber jabber jabber jabber jabber jabber jabber and it all sounds very convincing and at the end of it even me as a fan i have no idea what he just said it's just sort of all use you use the language really become like soft speak it's really mean anything and i don't therefore i don't really sort of invest much credence in what i'm two factual issues before i respond to two points by mr coffee and i think it addresses this particular one is i made a reference to a florida action by the attorney general was referencing the one april th two thousand and seventeen after class jury not the new york action before but also oh i just like to point out that omissions were alleged in the underlying complaint and it's not a change in the allegations in those emissions some of those emissions alleged did not attach to the puffery arguments or the forward looking statement arguments or the opinion statements they were just alleged actual misstatements that may have been technically true but were nonetheless misleading because of the material information that's left out even if you accept all of the puffery arguments they're still additional statements i don't want to gobble up your rebuttal tom which i was limited but do you have by chance a little tick mark of citations to the complaint that you could give us where omissions specifically are alleged as freestanding violations y with the three lines of defenses if that were found to not be false but not addressed to whether or not they could still be misleading ok even the material information that was left out but that raises an important point and it was raised by mr coffey talk about conflating elements of falsity and see enter and it's not it's not a conflation it's sequential you have to allege false statements identify when they were made and why they're misleading and then there are exceptions the liability that comes up through through safe harbor or through say mischaracterizes opinion but there are limits to those exceptions to liability and knowledge is a key component to the limit whether or not there was an intention to deceive hiking with to watch your step knowing that the grand canyon lies a foot ahead right in the effort to fix the technology those are facts that are not in the statements that are alleged to be misleading it's not they're not stamens that are in the document requested for judicial notice it's part of a defense to knowledge is being made now but that was not challenged below the court address falsity only the motion to dismiss was about falsity only and  the final the final point that i want to make is we're talking about the problems with technology and the case that was referenced below was a company that immersion was having trouble integrating two technology platforms and  would that falls into the category of mismanagement and that's true but if the company knew that they were having problems integrating two softwares to software platforms and concealed that information and didn't explain that they were having those problems and didn't and didn't link them to financial results that there were being reported that goes beyond mismanagement and that falls into the securities laws but didn't everybody know that about the problems that often had because platform as a whole and it doesn't work and doesn't do it supposed to do the market reacted and it was an efficient market the market reacted and if everybody knew that wouldn't be new news because the market to react it would have gone it would come and go unless you have any