mr alter net was the court good morning jonathan roger for plaintiff appellant benjamin gross question in this summary judgment appeal is whether there were facts from which a reasonable jury could find in favor of the nonmoving party the answer is yes now we agree with the district court's finding that there were tribal issues as to falsity and materiality unless the court has questions about those elements i would proceed directly to s so i actually do i look at the statement focused on in the press release in which mr gooch a singular and what's exactly the language reflected a generic kind of indorsement of the proposed merger but in the same time the press release disclosed the insider transaction that would happen in this two  step range mint and i'm having difficulty seeing how it notwithstanding the reference to optimizing value for the shareholders generally why that is an actionable statement could you explain certainly in all addressing st and then answer the question more generally ok so in saying this court noted that the statements issued there were framed with cautionary language that spoke to the complexity  regulations and pointed to the potential in possibility of compliance giving the complexity and shifting nature of the government regulations there was no cautionary language in this case that related to the deal and under  to consider is the slimness of that chance and here defense expert calculated that the market understood the information released on july th to indicate a zero percent chance of a topic of a topic but now i think that's a little bit of an extreme go to the question of correcting the misimpression left by the statement now in virginia bank shares the supreme court held that a statement on a major transaction of this nature sale of the company was the most significant event in the life of a company quoting this court's decision as you see versus john found that he a statement that even said that was in as vague a term as high that a price was high was material and actionable in that context now here we can't just look at the statement because under kyle you have a duty to be accurate and complete when you speak he clearly was speaking about the value of the deal so we have to see under rule twenty five what was omitted from that statement no seal he did not say best well he said that correct was a goal you didn't say it was the only goal certainly he gave no indication that the major goal of this transaction was to deliver the brokers to him at a discount and that's exactly what b g c said when they came and made their announcement on september th they said far from being a an opportunity to return value to shareholders the c m e transaction deprives shareholders of the opportunity to realize appropriate value response to a response to an inferno this is misleading based on that that's a subsequent statement and it seems to me that this is this is a little bit of hindsight you know well let's go back to what happened in february of two thousand and thirteen jefferies made a presentation to gauge saying that the way to the optimal strategy the same optimized word used in the press release the optimal strategy here to unlock the value of the brokerage and deliver value to shareholders is to merge with a rd just a competitive nd without going into the history we're just looking at like to focus as you invited us to  meaning of the language that you focus on to the exclusion of other language you know be it in context here and whether eight if whether you can convince me that a reasonable shareholder would be low on a statement in the middle of a press release that disclosed subsequent insider transactions that a singular and unique opportunity is a guarantee of the best available price why why does why is that we stumble to infer that from those generic and somewhat opaque words it's not a matter of a guarantee right and we do have to look at the history because the question is what was omitted from the statement under basic material is information is material if you know minute fact w return value so he pointed out that there's a premium of the current stock price right in the previous sentence and then this is this this sentence that you selected out is in that context it  further explains the significance of of his prior statement the press release also notes the unanimous special committee approval without noting that gets killed the special committees market checked into private of bargaining power any reasonable shareholder would want to know that briefing in this and in our briefing here that the omissions are critical and you can't evaluate whether the statement is misleading without looking at the omissions and the admissions here about pitches manipulation of the process his delivering the brokers to himself drastically and severely discounted price and b g c s words this was a business that he was buying four hundred and sixty five million dollars it had two hundred and thirty one million dollars in cash could you shift over then i understand all that you can you shift over to the question of c enter here because it seems to be this is an odd way to perpetuate a scheme to defraud use one statement in the middle of a press release which explains parts to reports to explain a previous statement and that consciousness behavior which we believe established by the entire course of conduct leading to that statement recklessness or motive an opportunity now you know it's a jury question on the fact that this this guy wanted to isolate out the brokerage business and buy it in a private and take it private so that he could he could control it but there's nothing that you know it's it doesn't seem to me that that this statement requires that i don't see how this statement requires that kind of transaction is transformative to find and because it's in all our interest to sell shareholders on the deal that was an integral piece of plan to take the brokerage private at a discount and again discount compared to the in the personal reasons were personal profit taking two hundred million dollars of shareholder value away from the shareholders any reasonable shareholder would want to know that when the transaction is being announced they don't want that in till on september th b b c makes its announcement do you think there's a fiduciary duty of some kind going on here there was in this case and that was litigated separately in delaware absolutely the entire course of conduct from february when what happened in delaware in the delaware case well so when despite having a blocking position here gibbs was forced to do the deal with b g c that he did not want to do that is the short answer because that's the short answer so expect to see answer i mean you're saying that the plan here was to sell shareholders on this deal and hope that they wouldn't wait around to read registration statements or we wait to see how this thing out absolutely and i want to be clear that we believe that we that a jury could find see enter any in under any one of the three avenues provided by shields the city for us if you don't have to reach motive and opportunity but yes they believe this was important to sell shareholders on the deal their expert said their marks same press release we're going to have a registration statement this thing is not going to close for months not until the next calendar year and urge shareholders to read the statement right they did but it's not actually secretly hoped that they wouldn't that's the theory the reason that companies put out press releases is to communicate information there this record is replete with press releases on both sides they the companies felt that that was an important way to get information to shareholders and the stock would continue to trade during the interim period and under a usa life insurance versus ernst and young you know that if you make an announcement and have a prices below value that scheme is necessarily going to enter those people who sell in between so we believe that yes they believe that that would advance the project page felt that it was important to keep the price down in order to get shareholder approval which he wanted and this the proxy did not in the end disclose important facts like the content of jeffrey's february th thirteen presentation which explained to gauge which he knew that the way to optimize by the company was to combine with the synergistic competitor p g c on this acquisition is yielding one hundred and twenty five million dollars annually in synergies that was value that could have been returned to shareholders  and again is b g c points out that was for a business with two hundred and thirty one million dollars of cash and you shareholder would want to know that any reasonable shareholder would want to know that the value in a synergistic combination is three one hundred and sixty five dollars as the bidding went up in this case management raised it bid seventy percent without learning a single new fact about the company and that was and then they ran out of money and b g c the synergistic competitor had the money because they could yield yield the synergies any reasonable shareholder would have that answer your question i see we are keeping and so what is the basis that you could be the jury quddus aggregate proportion of the increase from the announcement versus the corrective disclosure to all that's required under duress fall following this court's decision in emergent is that you have a mis pricing and then a loss of that and underline tell versus merrill lynch we look to see the relationship between the loss and that by which point of claims to be been misled the level of slicing that the district  required here is not supported by any of this court's cases and in fact is contrary to the court's decision in wagoner where you had a consequence this was the attorney general's investigation and fines which didn't exist at the time of the fraud couldn't have been revealed because nobody knew that would happen for sure but because it was causally related it did not have to be desegregated from the from the rest of the drops and we believe that under the appropriate standard we've shown last causation  itself indicated that the value indicated what the non brokerage component would be and that's what they were interested in yes so the so that was higher and that's what that's what basically triggered their bit but what they said would be juicy set was that the brokerage is being purchased at a discount they call that a severely and drastically discounted price they were this in a just synergistic competitor that was able to treat the sale of sale price for trade in phenix as a fixed price and then bid the actual value for the brokerage right that was the whole scheme good morning honors and may it please the court kathleen sullivan i'll be arguing on behalf of all defendants i'd like to begin where judge sullivan and judge walker left off with my friend on the other side and say why you should affirm judge pauley on the ground that no reasonable j possibly find lost causation here and to see that we have to remember what the alleged fraud is here it's all about the single statement that judge carney focused on at the outset the single statement that supposedly this deal  singular and unique value at the time july st two thousand and fourteen it was announced there is no causal connection between that statement even if it's construed as false and material and we strenuously argue that it is neither false nor material and it was a real job loss that one of if we lost that one even if we think you could affirm on the alternative grounds that it wasn't false and it wasn't material for reasons we explained in our brief but even if you assume it was false and material we respectfully suggest that you should affirm on the ground that there was no loss causation and here's why their theory is that that statement about singular and unique value caused the last two plaintiffs of the page twenty seven he lists all the subsequent actions that could not have been known or knowable at the time the press release comes out and judge walker you hit the nail on the head you couldn't have known at the time the press release comes out that there was later going to be a buyer who suddenly saw based on the truth statement true statement in the press release that the c m a deal show that the software components had value that was new information so as pauley summarizes it special appendix page twenty seven the new information was b g c wanted to acquire in a hostile takeover at a cash premium amount because and this is a out it was true that there was more value in the software components of the business than i had known so under dura you don't need to go farther than you know the classic statement at five hundred and forty for us three hundred and forty three of dura that says new market conditions new changes in investor expectations can break the causal connection and here that's the case it's the true statement in the press release that th e there's value there's value enough to remember here the price goes up forty five percent the day after the press release it's a strange scheme that causes the price to go up if you're trying to keep the pri down so the last position theory here is economically implausible to begin with but judge pauley was certainly correct your honor that the truth it's the truthful information the software business is worth a lot to c m e and have to drive the stock price up to forty five percent that's what drives the new topping off or that occurs later in the year so the lost cause ation decision by judge pauley is absolutely correct under dura and it's sufficient grounds for you to affirm the fact that jeffrey's press release you know told these guys that it was worth more than it was the break up value was higher than the share price you know that that shouldn't have any effect look the the if i could just go back to summary judgment and they had eighteen months and fifty five thousand documents to try to prove the case and at the end of the day supposedly untrue statement or judge walker as you put it what if you had said well there might be another bit the expert offers no opinion on whether the stock price would have gone up at all as a result of that disclosure there could be another top and if he also admitted it for eighteen dollars to nineteen dollars that he doesn't have an opinion that a correct press release one that said we think this is a unique and valuable opportunity but there might be another deal that's their theory of what the correct press release would have been he then at four hundred and eighteen dollars to nineteen dollars their expert mr kaufman admits that he doesn't have an opinion on whether that correct press release would have caused the share price to hit five dollars in zero dollars twenty five cents this is not a case where they came in and they said well if you just said there might have been a topping that maybe you could a discount of the present value of that information to a few cents more on the on the deal their theory is five hundred and twenty five dollars or nothing their theory is it wouldn't have been four dollars fifty two cents statement unique and valuable opportunity the theory is that had had that had it been and had it been a dish and he said in a press release by the way there might be a better offer it would have gone up to five hundred and twenty five dollars and their expert has that so that's on last presentation if i could just go next to see enter the other ground on which to judge polling held that summary judgment needed to be denied we think that was also absolutely correct for the reasons judge sullivan and judge walker you already explored  friend on the other side it is a very strange scheme indeed if you're trying to make sure that people think there's never going to be a topping bid if you say in the press or look at the proxy statement deal close for a long time the next day you file your eight k with the merger agreement it has a fiduciary out there's three pages pages a forty one to a forty three saying it's ok if there's a better offer a superior proposal you may take that and then on the earnings call that takes place on august st you say again look to the proxies to be sure to wait for the proxy statement you can't have as judge pauley correctly found where there is that set of information simultaneously or contemporaneous with the press release is it your position that your statement in a press release like this look at the proxy statement is enough to negate an absolutely false statement  saying enter no your honor our position is read as a as a reasonable investor would you read all the facts in context you read the press release in context we think a reasonable investor would read this the way the analysts in fact read it if you look at page  and page i have a five hundred and twenty four you'll see one analyst alexander saying we don't know if there was a competitive bid run and ask what do we know about the process and mr have friends says look to the proxy statement we think in context a reasonable investor taking all of those statements into account not just the press release but all the contemporaneous statements would be taken into account would not read the statement to say i guarantee you they will never be a better fit than we think you can affirm on the grounds judge paul correctly decided the case on lost position and see enter for all the reasons we've discussed but let me just close by saying two things that we think you could alternatively rule for the reasons judge carney you explored at the outset that this case summary judgment was also are and we think that the summary judgment record amply confirms that there was no falsity on which a reasonable investor could have materially relied but your honor i just want to say a quick word in closing about the cross appeal we also objected to the certification of a class with an inadequate represented represented based on the conflict of interest caused by the familial relationship between mr gross and his attorneys i want to be clear that you need not reach across appeal and we would be happy to voluntarily withdraw it if you affirm the grant of summary judgment to defendants we simply posed it as a conditional cross appeal in the event you were to vacate and remand we don't think this court should be the st to bless an undisclosed conflict of interest between a lawyer and his counsel that will lead the council to potentially advance the interests of himself over the interests of the class do you think it merits a referral to the grievance committee does it go that far we don't take a position on that your honor  we just think that if you were to send us back it would be very important not to make new law on the circuit blessing this kind of arrangement in terms of your summary judgment arguments so how would you rank them materiality c m laws causation thank you your honor we rank them number one last causation number two materiality number three c enter and number four falsity but we'd be happy with any order the court decides to rule on thank you your honor any one of them thank you very much you have two were no developments in the id be that led to a higher price it was only the revelation that it was worth much more and knew that beforehand on the question of our experts opinion he did not opine that the price would go and twenty five dollars and that's in fact not what happened when the competing bid was was announced the price went to over six dollars because the market at that point understood that there was likely to be a bidding war because of undervaluation and the comments the b made about that discount now and he was also very specific and this goes to the key issue in the case of the misstatement versus the omissions he opined that it was the revelation of the omissions that would have caused the price to rise once the market learned that the brokers would be were so much more two hundred dollars one million dollars more to a center just a competitor that the market would demand that price and that is this theory of casting yano following the seven circus decision in jordan as to the proxy this idea that the that he nessus early would have made the proxy disclosures that he did have you see not interrupt the scheme runs headlong into this court case law slick versus appendix e which holds that even controlling management cannot be assumed to want to air its dirty linen out on the line and thereby expose itself to the suit or commission action and indiana public employees retirement system versus s e i c which says that we reject the argument that the benefits of a brief concealment would be low the brief concealment here because that confuses expected with realized benefits finally the cross appeal is reviewed for abuse of discretion the court did not abuse its discretion here against the background of this co forward thank you very much thank you for your arguments will reserve decision