settlement proceeds which was botched not once but twice in the first instance a settlement was proposed which eliminated the rights of four classes of securities holders to participate in the settlement no holders action holders there were four of them we objected let them along objected in response to our objection to your honor i've always been a little confused about the question of this question and whether it's going to be de novo because i think in most of these instances of whether the proper standard was appl and that could be characterized as an imputes of this question if they didn't apply the proper standard but on the other hand i think it's also with a noble question so i think that when the court applies a one standard surfaces was there any notification given to the members of the class that that the procedure were not going to be twenty five cents  particular point yes in fact the judge an early stage so well if there were going to be changes then a new notice would have to be sent out to the class that was not sent out to the class  case which i'm sure this the circuit this court is quite familiar with the settlement provides that ins and outs traders will buy during the class period and sell before there was disclosure of the false and fraudulent statements can recover and as we point out in our brief that was the third that was the ni circuit's position that the wrong occurred at the time of purchase as an aside i believe this circuit was right i believe the supreme court was wrong nevertheless the supreme court i think  get you very far down snow now nevertheless the supreme court judge the ninth to nothing that ins announced basically do not get recovery because there was an inflation at the time that they but it the settlement was thirty five million dollars so this is we point one five so it's you know a reasonably substantial amount sold and there were no holders and there were stockholders and so forth so this this is an amount that's been taken away from legitimate class members that's being given through illegitimate placement is really remind me what what is mr malone's status and  now was there any basis for an argument i think one of the points made is that during this timeframe that there might have been news coming out about this this change and therefore there would be a basis for a lawsuit there after making it reasonable to settle that there's no basis for that at all your honor can i say it's impossible i come back with the old saw nothing in this world is impossible never the last there's nothing in the complaint there's nothing in any anything that's been presented which gives any basis for the possibility that there had been any kind of that's not an open of all of these of these other issues my question is do you really know and do we now have to decide whether these various rulings wor europe they are ins and outs the supreme court says no recovered i don't know how you can make nonmembers of the class members of the class regardless of what your personal feelings are into before your it was decided and so forth but the fact is that at the time that at the time this corrected seven was presented and that's what we were arguing about at that time duress had already been decided at that time we were raising the point that there are a precluded these ins and out people and i think the court was aware of that was another yes it was aware of it and the court  fundamental reasons why that's wrong in the first place you said some things well they had contracted in essence not exactly the words they had contracted with the defendants the pay this there was not the defendants didn't give a hoot then the judge was presented with a new settlement at a point when dora was a factor she she put in a new  us members the note holders the option holders the whole settlement was changed around for all practical purposes the whole allocation was now a new allocation and she ruled on it and she should've ruled on it in  terms of durable too because that was affected our so let me suggest that perhaps we hear from the other side you've got plenty of time unless you're anything else you want to tell us now ok well let me just finish up this  ins and outs and if the ins and outs were precluded were taken out of this claim yes the leak plaintiffs would get virtually nothing at all so in our view that we were in a conflict of interest and instead of following juror to the to the detriment of their own interest and to the interests of the remainder of the clay asked their doctor the course of conduct which benefited and gave an estimate of what each shareholder would recover the language of the p s l array says the amount of the settlement proposed to be distributed to the parties to the action determined in the aggregate and on an average everyone knew it was thirty five million dollars but the notice indicated that one would share a twenty five cents a share which is supposed to eight and a half cents a share if everyone participate district court eventually had because it gets that often enough and you start to think well what's going on and so what the district heartless out because we need to find out what ok on here so that's what the district court did so on in the july twenty ninth fairness hearing the district court said all right how can you people are saying it's twenty five cents a share and i keep hearing from him that it's in half cents a share which it and so she asked both parties to submit briefing and support for the number and lead plaintiffs submitted briefing and two declarations from  unsigned holt mr malone submitted briefing and and two letters from his economists and after in bjorn stein holtz declaration he explained the eight half cent number is wrong and it's wrong in two ways number one it starts with an inflated damages number instead of using the one hundred seventy seven million total damages that would have been achievable after trial damages number not now the thirty five million seven number instead of using that number he used some three million something number which was derived by using a discredited economic model and bjorn stein hold explained that and then he explained that there was also explain that this was at the this was in the briefing and declarations following the july twenty ninth fairness hearing so this was the district what happened is the district court wanted to be had a ready approval notice that said twenty five cents based on the reasonable estimate that had been made and said more of it's not more that's the correct number but she kept hearing this objection that no that's not the correct number it's a no have sense it's a nonsense and so finally she said she had the same concerns that you were having and so she said look i don't understand why somebody else keeps saying a different number so please supply me with everything and declarations why is that the correct number and if it's not sure if it's on one hundred percent of the shares it's based on a the best information so they can evaluate the settlement and the best information is based on realistic numbers as opposed to unrealistic ones it's different from the court's consideration of what whether thirty five million dollars is a fair settlement amount of one hundred seventy seven that's based that's a completely different consideration where the court looks at that and says gee that's twenty percent and there's evidence that settlements range from two percent to six percent is that your interpretation going back to the on an average person basis but on an average per share that's likely to be claimed basis is that or how do you interpret that on a realistic estimate of the average per share basis and what's the basis for reading in the realistic estimate in the language of the statute i think that the basis for that is trying to provide class members with the most accurate and realistic information because the point of that does not have to do with the district's evaluation of the settlement it has to do with giving information to class members on whether they want to participate in the settlement and it's better to give them accurate as it's better to give them information that's as realistic as possible out of policy congressional policy i'm sorry yes it is you could get more money doesn't that doesn't that imply that we've already anticipated the number that will claim i would assert that it does but it doesn't suggest that if more than anticipated send in t submit that this was within the district court's discretion and when the district court became concerned about whether the notice which she had or what it already approved as being fair and reasonable was proper she requested briefing she requested declarations from and letters from both sides and reviewed all of that information and found no reason to issue notice here on the notice issue we're not talking about abuse of discretion that we're talking about whether it complies with the statute or not it's still within her discretion to approve the notices being fair and reasonable but there's still a question of wall as to whether she clearly applied the correct law there's no there's no contention here that she applied any incorrect law and so it would be her discretion in evaluating whether or not this notice was fair and reasonable in light of the circumstances of this case which is in fact the language of her order that her the finding was that it was fair and reasonable in light of the trying to do is give class members realistic information so that they can realistically evaluate because if we send notice to class members that says well if if there were one hundred percent participation this is what they were covering her share would be class members don't realize that that's not going to in his declaration that the forty three cent number is what was used here what was said is the forty three percent figure has been determined by nira frankly fairly defense oriented organization that came up with a number and what stein hope said was using the very inflated damages number that mr malone's expert came up with and applying the nearer forty three percent number you would still come out with twenty five cents per s he wasn't commenting on that the percentage that was estimated here which i can tell you with was higher than that actually it was estimated that that claims would be in the range of seventy five to eighty percent and on that basis the twenty five cents per share was calculated and that's why we didn't is that correct is that on the record i thought the record indicated that the twenty five percent was based on a forty three percent producer of the forty three percent participation this was actually in response to an argument to mr miller that mr malone's expert made and was quoting a near a study that showed that estimation was it was explaining why mr mcgovern wait a minute if if in fact seventy five percent participate and then the i don't have the math but i could provide it for you this afternoon if you like by letter and word didn't have sense come from the eight nasa sent comes from using an inflated damages number using a discredited economic model and then applying hundred percent participation to that representing in open court here that you have seventy five percent participated in they would get twenty five cents per share if seventy five to eighty percent of the people participated in a one hundred seventy seven million dollar party in a thirty five million seventy seven number there would be a twenty five cent per share you know whether that's out of the thirty five out of the thirty five yes that's what i'm representing i'd like to turn to that i know you're i don't i don't know if you're ready to leave that one but i'd like to five percent and the fact is the in and out holders are the doura holders had a reasonable basis for recovering it's not just the fact that the settlement was reached three months before girl was decided and that we had a fiduciary duty to all of the class members it's the fact that as mr stein hold explained in his declaration those people had a reasonable claim the complaint as he explained even prior to an official corrective disclosure by defend inflation in the stock can come out through partial disclosures or leakage it can come out through a decline in percentage of placement of inflation and it can come out simply through the passage of time and he said moreover it's that those possibilities are supported by the complaint here because the complaint alleged that at the beginning of the class period the stock price was in play that inflated by five point four excuse me five dollars and thirty cents the corrected disclosure which he used because it was given the state of information in this case at the time of settlement it was the best definition of the fraud inflation of the amount of fraud inflation was on november fourteenth and it was a dollar thirty to drop so you have a five dollars and thirty cent inflation and a dollar thirty two cent drop there's more inflation in there and it is certainly arguable at least that some of that fr precisely and based on that she held the limited recovery for in and out traders reflects a reasonable estimate of the difficulty plaintiffs may have faced in attempting to prove damages suffered by in and out traders in light of the uncertainties of the law court of the supreme court's issu decision but she credited bjorn stein holt's explanation that some leakage may have come out before the partial disclosures and was there any evidence your opposing counsel says there was no evidence in the record nothing supporting that but he's wrong because the complaint as a as i just explained the complaint what first of all there was evidence from during study hall who provided an expert declaration explaining th he believed that there was by the way to those claims and second he said it was supported by the complaint allegations in this case the difference between the five hundred thirty cent inflation and the dollar thirty two cent reduction in the inflation from the corrective disclosure inference that the expert me based on changes in value but was there any evidence of actual leakage the case hadn't been the case was great discovery and so we didn't there wasn't of a developed record which is only counsel sat down and thought all right we've got this settlement it's a great settlement for the class how can we most fairly allocate it among the class members certainly the people who held prior to the november fourteenth disclosure and continue to hold after that their stock before and sold it or held it after have the biggest losses they should get the dollar thirty two deflation in the fraud that occurred immediately following that correct disclosure because we can even at this early stage we can show that that was likely attributable to the fraud the other the people before and the people after got the lesser of their actual damages or ten cents so there was a great reduction in the allocation that went to those other those other parts of the class but they were still class members to whom we have a fiduciary duty and who had viable claims and so it was reasonable to include them and the settlement that he came up with was the most fair way of doing that and he did i mean he did point out that in coming up with a plan of allocation you want to consider the relative weight of the claims you want to consider the various types of securities and you want to come up with a plan that is going to be easy to understand for class members so they can decide whether or not to opt in or opt out and it's going to be easy and efficient to administer so that you don't waste the class proceeds in administration administration c we didn't this really didn't discuss the cap on options i don't know if the court is concerned about that just in short what i'd like to say about option holders is that it's extremely difficult the only evidence in the record is that it's extremely extremely difficult to value the impact of fraud on options claims because actions claims change the strike date changes the expiration date changes it's really hard to do in fact are the  lead plaintiff expert mr stein whole submitted academic authority saying it really can't be done and so in light of that the best way he could figure out to do it is to say look we'll just give them one hundred percent of their loss without speaking what which portion was due to fraud which portion was due to something else other market factors and kept it at the ratio of option holders to the entire pool of class members it seemed to be the most fair way to do it the district court agreed and what's interesting about mr milans objections although he has objected over and over to that method he's never offered any other method for doing it counsel don't read anything into this but mr reagan in response to a question of mine indicated that it was not too late to in effect have another notice and start this process over again do you agree with the words that the fines are still essentially in escrow and if we were to conclude and i'm not saying we will but if we were to conclude two years because of meritless objections i think it would be a huge disservice to the class to delay the distribution any further i don't think there was anything wrong with the notice i think the notice was absolute proper ob participation and i just wanted to clarify for you that was in connection with that hearing on the first notice not the notice that went out and it was and it was and it was a misstatement by counsel at a hearing where no class member including mr malone was present no class member heard that was a mistake but but the judge didn't rely on it because the judge doesn't consider the judge isn't concerned with the twenty five cent number in evaluating the fairness of the settlement the judge is concerned with the fact that correct but it's but she asked her that hearing there were two subsequent hearings and then there was briefing and the expert declaration and the expert letters explaining how all the numbers were were derived and after reviewing to reserve time and i daresay you've got some responses to make well i'm totally confused and totally surprised we use the forty three percent figure because that's what's right throughout the record they said there was a survey by nearer and council has referred to it and they said well and they were said well only forty three percent apply and here's forty three percent and when you do the calculations it comes out to about eleven cents a share so i don't know where we're coming up now with there's nothing in the record that thoughts about seventy five percent or eighty percent or anything like that i didn't make the number forty three percent up out of my hat that's in the record seventy five percent or eighty percent i don't know it may be in the internal records of of the company or a foreign steinitz records but they're not in this record no what you would dispute that the twenty five percent number was twenty five cents yeah number was based on a seventy five percent participation i don't know what to say i'm just totally confused by it i don't know what they're they're saying i mean you told us that it's not the record  really relevant yeah and that's it's not it's just it's just not there i've been working with the forty three percent this is the first i've heard about it it's not even in any of the briefs there's nothing well of sign of the clear blue sky we now have seventy five to eighty percent but let me  let me talk about this question of leakage could have been might have been should have or is the door issue this is the door issue if we're going to talk about it in those terms any decline in the price of a stock over a period of time before the disclosure could be said to be oh well there might have been leakage and if that's the case then ins and outs should be able to recover and if that's the case what you're doing is really negative being durable what you're really doing is taking a side step around and saying well ends an ounce can recover because there is a embezzling money from the treasury there's a possibility that that could have been discovered but if that's the case are then ins and outs could be classed representatives because there are they have damages in other words  if they can even pleaded which they couldn't hear if they can even plead enough to withstand a motion to dismiss i don't think these people are class members the defendants certainly were insisting upon this there was no possibility there were certain instances where it's too far fetched and it's wrong to give money to people who are essentially not place members on the one in a thousand chance that maybe somewhere somehow it could be possible that they could that they could recover and i think that is this kind of case and may i say since i've been in this field for practically all my professional life since dura i haven't seen any case in which ins and outs we cover anything i see the allocations and they say if you want and so within the pla period you get zero and there are scores of cases there's no question about it people don't even think about it dora has spoken we listen and we provided we provided the figures in the figures and not in the spirit and the way the way the damages are set up without the bounce back provision which means that you look not at the price of the stock when the mediately falls after the disclosure but the ninety day average and simply that's very easy to figure out you get a paralegal takes him about two hours three hours at the most in fact i think the re  that's that's i think musafir story because a settlement is based on damages on possible damages the underpinning for settlements damages you can't just say well i'm going to give a dollar here a two dollars there are and the bounce back to a vision should be applied in the interest of fairness you have competing claims as of security council your red light is on so please wind up