that the war that is at play now is the need to engage in interests analysis she actually i had the same take is church window and the the master actually used that same phrase rigorous analysis in other words she page order by the just report well that's because most of his work was done by judge welsh he says after careful examination of the substantial materials presented by the parties the report correctly found that the plaintiffs establish i mean that's judicial economy and a sense whether the district court believed in the face of the objections that whether the special matter applied rigorous analysis standard or something less than this is this is at the court then went on especially with respect to the expert testimony to actually engage in what looks like a pretty thorough analysis comparing what the plaintiff's expert said to what the defendant's experts if the liberal construction statement had not been made is there anything to suggest that there was anything other than a rigorous analysis absolutely in for both the special master and for the just there was a complete absence of focus on a number of report said that since liability is the focus of the class certification inquiry the court wasn't going to consider issues of injury or loss causation what to me under section eleven case you cite section eleven how misrepresentation and registrations in a registrations and then you can take the price of stock so that and the price of the stock at the time suit was brought or at the time there was a disclosure that at the time suit was brought is one of the measures correct correct and what's so complicated about it if you find eleven case that if it well that implies to all these years and it's uniform if this there wasn't caused by the failure to disclose his it was lost by the fact that the hurricane came in and knocked down the buildings of the company and everybody assumed the company was going to be that that may or may not be true in an efficient market the problem we have here is that the plaintiffs have refused to take a position let me give you the example if it's an inefficient market right in an efficient market the law is clear that if a shareholder sells his her or its stock prior to the corrective disk that person doesn't have a there but that sort of thing that in my view it's putting the cart before the horse because if it is an efficient market then that may well be true if it's an inefficient market there is no way to judge you'll have to judge a person by person and no one i give you much let me give you a hypothetical which is ok there allegedly misrepresentations in the state certainly bought the stock at twelve it was worth five twenty and that is due to the fact of the misrepresentations in the defendants come in and say no no no that that that damage was caused not by the misrepresentation but by the fact that it was a cold summer and fewer beverages were bought and by the fact that people began to distrust black plastic into work and that is why the value of the stock went down not because of the misrepresentations now why is that an individual assessment because in an inefficient more there is not uniform knowledge of sheep but you're not talking about what they knew you're talking first saying we bought our stock for twelve dollars and it was worth twenty five dollars or twenty cents when this suit was brought and that rock was caught by the misstatements and you say no no no that rock was caused by the cold summer body or do you have to go person by person what is the person one person calmly nefesh i don't know don't tell me about an efficient market tell me about predominate predominance of issues in that case because in the setting that judge the value of the stock that they know the value of their stock with five dollars and when he said yep you have to but on the affirmative defense we're going to come in and say that the players are going to say something else the issues the issue we have a right to say that but you watch how much it drops that's that's that's the merkel doesn't the efficient market require some sort of history where there is trading of stocks so that there's information that's available or that's that is generated as a result of trading that the prospective investors will consider but in this case there's no trading there is one price for the shares said that was stated in the an i p o and that's it and section eleven proposes a mathematical formula that provides for damages for a drop in the shares why do you need the with deficient market theory or inefficient work in theory section eleven doesn't doesn't contemplate any of that well for two reasons first of all encompass on in order to figure out whether or not you can try this on a class white basis whether or not a drop in stock in the stock price was due to the misrepresentation as compared to something else posit you have to you have one of two choices you either have an efficient market which rates all the knowledge and which this court has said you look at the efficient market and that will tell you whether the stock price drop is due to the suppose in this representation which limits is just a drop put in her hypothetical once you have a material misrepresentation that's all you need and then you have the mathematical formula that's that's that determines the the amount of damages if if somebody and as an after market trough i mean it seems to me you may be talking about individual eyes testimony of people you know order for the current court to decide the uniform issue of what caused the loss because once decided it's going to be that something cause a loss and that is not an individual ised issue that is a side issue that's going to apply to everyone but requiring individuals testimony and you know what we'll hear from you on  or a mission for the registration statement the statute itself says the losses because it was the class include people who bought their stock after the idea absolutely right then it was is them then don't you get into individual issues of what they knew when they booked the stuff if the defendants contend that specific class members knew the full truth then i suppose they can put on or a bottle case like you know by analogy one would do and if not in the market case for basic against levinson the united states supreme court said it's proper to certify a class action and its action can be cased despite the fact the defendants have the right to come in and robot reliance by individual class members by showing that individual class members specific ones knew the truth or would have bought anyway had they known the truth that did not defeat classification in basic and i don't think it would defeat classification here they are case law after basic the academic commentary makes it very clear is judge fuentes observed that you don't knowingly purchase a stock that's trading at inflated price you don't knowingly buy a strock when you're aware of a fraud that other people don't know about yet it just as a practical matter doesn't happen so i don't think that that's a real problem here can you tell me the relationship between the concept of material fact under section eleven and materiality where we have found that the failure of the drop of a stock in an efficient market shows a lack of materiality of that fact what's the how do we reconcile or is there a distinction between the proof required as to eat i think you're right it is a decision between the proof and the element of materiality that's being proved section eleven speaks in terms of  registration statement that misstates a material fact or amidst material information as of the registration statements effective date and what can be cases to the focus was on whether the defendants made a material misrepresentation that was misleading and that they had reason to know was misleading at the time that they made it the absence of a stock drop if the stock is clearly the first disclosure of the undisclosed information or its effects but absence of a stock drop is evidence that goes to whether there was a material misrepresentation made it in earlier time now information can come into the market in any number of ways and the fact that you don't have a stock drop me indicate that the market's already figured out the problem here for example when you've got you know it's that we're going to have to restate goodwill the announcement itself says you know the stock prices dropped a long way from call boxes here in the offering to five dollars and change now and considering the fact that the company clearly is not doing all that well we're going to have to write off the goodwill why seems to say that it is the united states supreme court has said that it's not the united states supreme court and t f c industry says and i quote the question of materiality it is universally agreed is an objective one involving the significance of in a minute or represented fact to a reasonable represented reasonable investor the disclosure obligations of the securities laws the standard of liability under section eleven the standard of criminal liability under section twenty four speaks in terms of whether material fast were misstated or deliberately withheld with respect to section twenty four and would that be i'm sorry go ahead and with respect to section eleven we don't have to have any kind of deliberate misconduct it just has to be defective innocence is not a defense with respect to the company and the defendant would have to prove an affirmative defense that they acted diligently but in any event material something that governs disclosure requirements is something that corporate counsel advises the corporation has to what do you have to put into this is it a material fact it goes in your registration statement if it's immaterial it doesn't have to go in and that's not something that turns on what investors are thinking in terms of their individual state of mind six months later well though isn't it true you could have testimony as to what is important by investors but the issue that needs to be decided by the court is whether it was material could you not have to have testimony or or the view of experts as to what might or might not have been important to an objective as you gently to a reasonable investor i'm reasonably bester as i happen to care about this but then the issue that's decided is materiality it's one if the issue of materiality is one issue in the usual materiality would be decided by the trier of fact and it's part of the merits of the case and it's not something that you decide  classification is a merits issue the question we've got here a class or to cation is whether the elements of rule twenty three required for class or difficult mission are satisfied and one of the fundamental questions there with respect  predominance is whether when you go to trial and prove these things out are they susceptible to common proof are prima facia case clearly common prove their expert says well if the market wasn't efficient th materiality is an individual issue that ain't the law the supreme court said that's not the law and they say if the market isn't efficient in the sense that it instantly any asli reflects any new information then it's impossible to evaluate the value of the stock unless you have individual interviews with each person who purchased the stock which i submit is nonsense it's a very simple very straightforward pleading requirement on your part in your burden is really low it seems and en tapes and newton is a case that distinguishes most securities cases including section ten b cases saying that if a misrepresentation in the typical case of securities litigation goes to value of the stock ordinarily certification appropriate because the value of the stock is subject to common prove in newton the question was whether broker dealers were executing specific trades at the best available price it wasn't a question of what's the underlying value of the st and it required analysis of individual transactions on an individual transaction by individual transaction basis millions and millions and millions of them with a sampling haven't been having been done this jested that the great majority of them did not involve any violation so under those circumstances this quarter indicated that in a case it does not resonate with the typical tenby action let alone a section eleven action ice class could not be certified newton also indicates however that in cases where reliance can be presumed and in section eleven it's not even an element and where loss causation can be presumed certification is appropriate newton mandates certification are the and burdens of proof that the defendants bear trying to shift him to the plaintiffs at classification making us prove our case on a class certification motion which we don't have to do we don't have to plead last causation we don't have to prove wa causation if we erred under the pleading rules and in his paid an affirmative defense which the supreme court and vance versus terasa says we're not supposed to do the supreme court and footnote eleven of that case also says that it can't be held against us it doesn't shift any kind of an extra burden to us we've got a case here with the defendants contend that if they go to trial they're going to move up a watch causation defense that according to their theory of their defense in which they bear the burden market efficiency matters and they say we have to prove whether the market was efficient market efficiencies or relative concept if a stock price immediately reflects all available information and so you cannot make profits by learning of new information the market sufficient but if it takes a week for the stock price to reflect new information it's not efficient we've got a case where you know any proof on the point would be theirs to come in and who and they haven't done it make use us of hiding the ball but it's their ball and their expert simply put in a declaration that says in last the plaintiffs show that the market is efficient the elements of materiality loss causation are going to be individual issues well if they think that it's relevant to their case let them come in with their evidence and we'll figure out what's going on let's say that you can you can establish that a material misrepresentation was made and then your next step i suppose would be the assessment of damages yes or how how in light of the district court's order would you go about that i mean there are those who did not lose anything in their investor so that not everyone is going to be a victim in the class there are going to going to be a few people near the very end of the class period who perhaps purchased at a price that was basically the price of the day his suv so poor the tail end of the class period might be able to carry their burden on a few of the class members for most of the class period though you're watching a fairly consistent decline in the stock price the stock starts out at twelve dollars a share in the initial public offering by july it's now to eight or nine b the july twenty ninth and thirtieth press release and conference trigger another thirty percent drop you get a thirty percent drop to that another thirty percent drop and it keeps heading down to the point that they say well you know what we've got to restate our goodwill given what's being reflected in this company's stock price so i guess the individual realize has no place in this case there's no basis for thinking that individuals last memories in this case had knowledge of the misstatements and bought the stock anyway they haven't shown that there's any basis to think that there's going to be a significant number of investors of which that might be true in the supreme court's case holding in basic that intent be cases the availability of a non reliance individual on reliance defense does not preclude classification would be controlling with respect to calculation of the damages you'll have the statutory scheme somebody who bought the stock at nine dollars would and held it to the end of the class period you'd be looking then they can reduce the amount of the damages but that's no different than it can be a class action where you've got a value line throughout the class period and you're plotting the price paid the amount of inflation and in the last causation standards we can be trying to shift them to the plaintiffs a classification saying that they're going to be individual issues at trial when there aren't going to be that's basically what it comes down and last are any questions i think that pretty much covers the central issues that  the plaintiff has cited to no case and we are aware of not where a section of eleven case was ever certified as a class action in an inefficient market economy let's let's understand where we was that when the announcement was made about the write down of goodwill guess what happened the price did not go down we move therefore to dismiss and already gone down had it not well the issue no well the issue is yes stock price went down song but the question you always have to link up on the last causation whether the stock price went down in connection with the supposed misrepresentation or for some other reason for example just bad earnings not   representation so when the goodwill write down was announced the stock price went down their response to that could have been a g s it went down for some other reason the thing had leaked out you know you lose it that wasn't fails to focus on the fact that the district court needed to deal with these issues in the district or did not do is that there's that plaintiff after plaintiff now in section eleven cases will simply refuse to take any position on whether the market is efficient or