morning may it please the court my name is ebony branch and i represent the appellant in this matter mary jane jackson and thomas jefferson with the court's permission i would like to reserve three minutes for rebuttal i obviously watch the time and try to pay some argument accordingly i'll try to watch  ultimately you're responsible for your time here certainly thank you your honor the the pellets in this matter petition the court for review and reversal of two court orders issued by the district court the first was issued on june court also dismissed the two federal securities claims but did grant the plaintiffs leave to amend those claims the plaintiffs did amend and did file a second i'm in a complaint on august fourteenth two thousand and fifteen the dish a court subsequently dismissed that complaint in its entirety in an order that was issued on april nineteenth two thousand and sixteen before getting into the legal arguments for this case i would like to take a few minutes to really pinpoint to highlight some of the approved for distribution in europe contrary to the definitive assertions the appellants in this case are not merely describe to investors who are disappointed that kissimmee was not approved for sale in europe they were heavily invested shareholders and as such they deserve the truth about the regulatory approval process in europe it's not just talk about this so this is about the approval or the temp to get approval for this quiz which is a weight loss drug yeah right and the company was trying to do that both here in the united states and in europe there were sort of parallel approval proceedings going on to get it right i guess i just want to know what's your best argument that you know there was some sort of missed by presentation or fraud on the investors in particular your clients when there were all these sort of warnings and disclaimers all along the process that you know we don't know what the european you know of approval this is going to do it's just because the f d a might be reacting one way you know they kept telling them along the way so i'm just trying to figure out what is your best smoking gun evidence of fraud or misrepresentation by the company to the best i think that can answer the answer by breaking down the nature of the misrepresentations into two categories the first pertains to the way in which the defendants characterize the requests for information that can only be derived from cardiovascular studies the defendants in their various filings use the word may it is the contention that they should have used the word or words like they have requested information that could have been derived from cardiovascular studies and the support for that particular contention comes from the explicit language in the various c h m p reports that were issued by the co reparatory as a by the rapper tours so for example turning the course attention to it would be exhibit  event and psychiatric did disorders cognitive impairment and potential metabolic acidosis are of concern and preclude obtaining any market authorization with the available overall data now to be clear it appears from the various reports that we've had submitted some form of cardiovascular information from either previous studies or from other studies that they had not personally conducted however it was clear that the information that they submitted to the c quoting someone you see here that the applicant should further justify the lack of cardiovascular events in both high and low risk populations as well as the lack of c v safety study before proved and this was because it appeared to the ca chimpy that the defendants had submitted studies that did not adequately capture the population they were most interested in well it seems to me and seems with the argument  seems like a reasonable one and that the statements that the regulators you know may require a provable part of the scale are study which i think is what you're talking about are true statements because the issue remains an open question it seems like until the c h m p rejected by this is mark application so i mean how do you counter that so it to as their argument i would actually point the direct conversations with various executive members all of the communications there would be with us well i think that i think the fact that mr jadwin felt compelled to actually personally call various members including  i believe it was defended morse and inquire specifically about the overall regulatory process shows that he was confused as to the information that was being provided by the company both through his filings and even through the public statements that his regulatory approval process was so i think that in itself would lend itself to our argument that the defendants were not unequivocally clearest exactly what was required of them to obtain the requisite approval for in europe  wasn't completely in the dark that this was an issue that was unresolved is not a first name where you say there was an issue that was still unresolved you meaning the fact that there were that the c h p was asking questions about cardiovascular safety i think that the problem here isn't that he wasn't made aware that it was an issue i think the larger problem is that the defendants failed to identify the gravity of the problem and had they done that done so would have allowed him to make a more informed decision about his we believe speak directly to that point that being amlin farm cv therapeutics in reno willow and also kinetics in those cases the court did hold that when a pharmaceutical company is making statements regarding the prospects of a drug being approved they have an obligation to their shareholders to inform the book of the most important or the most part and parcel of those conversations and hear the most important person in an important part of the conversation with the e m a was that they had serious reservations serious questions serious hesitations about the defend its ability to convince them that this was a safe drug that could be approved for sale in europe and the defendants did not do that they did not inform shareholders such as mr jackson of the grave concerns that the c h p had regarding this drug and even more so to that point the defendant conflate it and seemingly confusing two process so the second part of to answer your initial question your honor is the defense has made statements as if the process was directly online and interact with the f d a and that they made it seem as though the m a had not requested or  had information that was not in line with the f d a had requested and again we believe that that's not wholly accurate and that's why mr jackson felt compelled again to reach out to mr morris and ask him specifically was there a difference highlight that so that's one of the ones that you mention and warned that c h m p would not necessarily handle this issue in the same way as the f d a i mean seems like the warning them and telling them and telling them they're worried about it i'm trying to figure out why they didn't fulfill that obligation that you identified but again i think in terms comes down to the fact that the defendant spoke in very general terms that failed to convey the severity of the gravity of the  concerns your honor so again looking back to the cases that the appellate cited in their brief again that being amylin c b therapeutics kinetics we believe that those cases do impose upon the defendant an obligation to provide shareholders in such a situation with additional information regarding the regulatory process when whether it's the f d a or the e m a has expressed such grave concerns that really threaten the prospects of the judge being approved for distribution is a distinction between disclosure and characterization in the sense that there were disclosures made but perhaps not with terms that were as drastic as you would be like well i would say that we would have liked i think that is a warts are appropriate so yes to answer your question the short answer is ye it's one thing to make a disclosure is another thing to actually adequately inform and it's our position that the defendants failed to adequately inform the shareholders including mr jackson particularly about the concerns that the e mail had joined a research yes if i may morning on robyn what's going on behalf of the defendants and the district court correctly dismissed the claims and as you speak right into the microphone yes i'm sorry your honor the district court correctly dismissed the claims in this action plaintiffs have consistently been unable to identify a single false or misleading statement plaintiffs have also failed to plead facts that give rise to a cogent and compelling inference of sandra which is required under tellabs plaintiffs focus on one side effect of q symeon and that's the cardiovascular risk the risk here is that certain patients have a slight elevation of heart rate a little more than a beat a minute on the high dose a little less than a half than to be a minute on the low dose vivus disclose that we've just disclosed that in copious detail vivus also talked about the implications of that we've just talked about how both the f d a and the m a had been concerned about cardiovascular issues vivus talked about the overhang offend fan which was a previous diet drug that had been pulled from the market and put a cloud over the approval of diet drugs thereafter and vivus explained why the elevated heart rate was not linked to major adverse cardiovascular events what matters is whether there adverse events not whether the heart rate is raised in isolation at the same time the heart rate was the elevated heart rate was counter balanced by a decrease in blood pressure which is a good thing from a cardiovascular perspective even explained all of this and then critically vivus also said that's our view of the data there's no guarantee that the f d a is going to see this the same way there's no guarantee that the m e is going to see this the same way there's no guarantee that if one sees it our way the other will see it our way to there's no guarantee that the a m a is going to approve this drug without requiring a pre approval cardiovascular study all of that was now i think i think the court is rightly focused on the risk disclosures that the company made i think the court is rightly focused also as was the district court on the regulatory record that the jacinth have submitted that can you distinguish i guess this am one case and some of the other cases that the sub branches sure sure there are four district court cases that at the appellant cited in their briefs that we have a footnote in which we distinguish all of them but i'm happy to go through them again there are different circumstances in all of those cases in several of them what's not disclosed are facts about the drug or that clinical trials themselves for example in the kinetics case mice who were given the drug developed  cancer that was never disclosed nor was the fact that the f d a was concerned about that and that he and that the f d a had never approved a drug in which mouse studies turned out turned out with such results  in other cases there were definitive statements made by an agency that the company didn't disclose we don't have anything like that my adversary focused on statements in isolation in the eighty day report by the co wrapper to her which was the co wrapper terse individual report not the committee speaking as a whole she also focused on some statements in isolation from the one hundred twenty day report which was the report of the committee as a whole but as we've explained and i think it's judge freeman correctly ruled you need to look at those reports not sentence by sentence but as a whole and as part of a process and when you look at the process it's clear that what the plaintiffs have said was the state of affairs which is that there was a requirement for a pre approval study was not the state of affairs at all you can tell it wasn't the state of affairs because the process didn't end didn't end it one hundred twenty days it didn't end at one hundred eighty days it didn't end until the vote at the very end of the process and significantly divided for the vote was nineteen to ten we just didn't know what the vote was going to be before the vote was taken and for plaintiffs to say that vegas had an obligation to say that the drug was going to be rejected is simply to imagine a state of regulatory reality that is not present on the record i mean that is the fatal defect of plaintiff's claim that the statement they wish that we've has had made is not a statement that would have been accurate are portions of the record in the european regulators one hundred eighty day study concerning these vascular cardiovascular studies that are redacted and without disclosing any protective details i just was curious is there anything in there that the courts should be aware of that is relevant to this well that's a very interesting question i have to explain how those reports came to be on the record this is the unusual securities case where the excerpts of the record are ones to r j and the district court or not submitted by the defendant but by the plaintiffs the six hundred pages of regulatory records three hundred pages of s c c filings were also admitted by the pla vivus did not put those materials in vivus did not provide the plaintiffs with the a m a documents the plaintiffs receive those directly from the me and the a m a made the redactions i've never seen those documents i don't know what's in the retractions those are redactions that were made by the agency not in their reply brief i think plaintiffs recognize to some extent that their reality they pose doesn't align with the regulatory record and they say in their reply well we've issued of disclosure there was a g creased likelihood of approval that can't save their claims it can't save their claims factually because if anything if you look at the course of the regulatory proceedings the likelihood seems to be improving as judge min note it at one hundred eighty days the agency seemed more open to approval without a prior study than at one hundred twenty days as a legal matter or decrease likelihood doesn't cut it either there is no duty under the securities laws to assign probabilities to events nor nor would a duty like that be workable on the contrary the cases including the cases that we've cited make clear that the court recognized the fluidity of the regulatory process the opaqueness in some cases of the regulatory process it wasn't possible for visa to say on one day well it's forty percent and the other day it's sixty percent on another client's position on the significance of the cmdr requirement for this case yes i would be happy to just go in fact i wanted to get there i think when when we look at enter one of the most important factual issues or factual repositories is there is the company's communications not with the a but with the investing public and when you look at the disclosures in the company's ten q s and ten k s you can see copious copious details one thing that the company did is every time it had a communication with the c h m p it dutifully updated the market we've just gotten another report we've just gotten another list of questions we've just met face to face here's what happened so copious detail about the proceedings as they unfolded also exhaustive detail about health care a law when you buy point about all of these disclosures as these are not the actions of a company that is trying to defraud its investors these are not the actions of executives who are trying to hide the risk this is a company that is doing everything right and informing investors of all of the risks that they face and i think that is inconsistent with i am sure and a far more compelling inference to draw is that there was a risk that unfortunately materialized that was the risk that the c h m p was not happy with the post approval study the way the f d a was that's unfortunate but it's not a risk that was concealed i think in  reply brief if i could if i could touch on that for a moment plaintiffs again drop back a little bit and say well maybe not deliberate fraud maybe just recklessness that doesn't work either first of all as a legal matter the standard for recklessness in the ninth circuit is very high it's not mere recklessness it's recklessness approaching conscious misdoing and factually we don't have a record that shows recklessness in any event it shows extraordinary character ordinary attention to detail and i would say eggs employee communication with investors about risk thank you i want to talk about this state claims toss the case you cited in august of this year that's a case where a district court dismissal of security was reversed by this court and i bring it up because that case is completely different from our that's a case where there was a clear simple factual misstatement the company said one component of its medical device had been f d a cleared which is the equivalent of approved and it hadn't been we don't have anything like that here there was no mystery about the approval process or where the company was in the approval process the toss a case also involves a regulatory communication that was only partially disclosed there was a warning letter that identified three different issues with the product and the company chose to chose to discuss only one of them the court found that was that was misleading again we don't have anything like that here we have very complete disclosures of all of the health issues all of the other risks least recorded nor no the district court looked at the district court talked about it in its discussion of the issue if i could set the stage a little bit on the state claims the important fact there is that plaintiffs dismissed their state action with prejudice once you do that under california law this principle of retracts it comes into play and with prejudice dismissal has the same effect as a ruling on the merits plaintiffs have never disputed that all three prongs of race judicata under california law are matt their only out is they say well you can contract around race due to carter when you do this and we contract it around it they cited to the district court california law and district court law applying california law that said yes you can do that and you can do that by means of express agreement there is no express agreement here plaintiffs don't even contend anymore that there was an express agreement instead they asked this court to look behind the express agreement requirement which they themselves cited to the district court look behind judge code decision in the carets case in which he talked about the express agreement requirement from california law look behind the nine hundred seventy seven case that judge poe relied on and which also holds that there is an  that's not appropriate especially given the plaintiff's citation of that standard to the trial court even if it were an i'll try to say this in forty five seconds even if you could contract around race judicata by ordinary contractor mr rather than by express reservation plaintiffs haven't shown that they have not shown that there was a meeting of the minds that some state court claims would be allowed to be brought into the federal proceeding there is nothing about reserving claims in the agreement that the plaintiffs have cited but i just want to before you sit down apparently though both sides did come to an agreement regarding how to proceed and it seems like the your clients here agreed that well wolf if you decide to come to  federal court instead of state court we'll you know let's prove if you agree to come to steak or that will be fine and we won't push back on the statue of limitations so there was some discussion in agreement and i don't know if it was discussed the state law claims and exactly how they were discussed but i guess they agreed the plaintiffs here agreed that they would let go of whatever killings that they had already presented do you know if there was any discussion about all the state law claims or i will say that the plaintiffs agreed that they would dismiss those claims with prejudice and the negotiations took place against the background of california law in which the parties understood what a with prejudice dismissal means and a with prejudice dismissal means you are for closed from bringing any claim that you could have brought they were in for close from bringing the federal claims because they couldn't have brought those in state court there is exclusive federal jurisdiction for those claims but they're with prejudice dismissal means you were for close from bringing anything that you could have brought and that was the background against which the parties negotiated if the plaintiffs had wish to preserve state law claims they could have tried to negotiate with about that they would have said all right will dismiss these three but we've got seven more that we'd like to bring will you agree to that i don't know how that would have came up come out all we know is what we have and we can't look at that agreement in isolation we need to look at it against the background of what experience council knew our thank you very much thank you your honor thank  gold i may just address the state law claims as counsel indicated the parties did come to an agreement as to what was being dismissed and the contents of the disagreement the dismissal agreement contains the specifically identified enumerated statutes that were being dismissed and the court has to look at the plain language of that agreement in determining what the parties intent was it is evident from that agreement that the parties did not place any limitations on any other state law claims they agreement on its face simply indicated that the seventh that the state law claims there were specifically identified in the remit will be dismissed indifferent to the other provisions the request to dismiss the state action did not include the agreement between the parties to only proceed in federal court it didn't just simply said that i know is there a reason you chose of the case law that cited miller we do believe that miller did not did not establish a hard set bright line rule that said that in order to survive the application be the plaintiff must include express reservation miller does not explicitly state that and the reason we take issue with any indication that it does is because alaina that decision is a one that misinterpreted miller's holding and that and the court then specifically cited elaina's reasoning but in doing so the court misconstrues the holding of miller miller simply said that the plaintiffs in that case were able to survive the application of or issued a kata because the plaintiffs had included express reservation but the court and even a critical review of that decision makes it clear that the court was somewhat irritated by the complexities of that agreement the core assembly junctures indicated that the parties that included contradictory portions in the end that agreement in the course of the court had to parse through and figure out what the parties really intended and after doing so the court ce and the dismissal agreement they agree to dismiss those specific state law claims there was no mention as to whether or not the parties were precluded from bringing other state law claims at least within the four corners of that dismissal agreement but you do understand that if it's dismissed it's going to be dismissed with prejudice unless you've made some reservation we understand they'll be dismissed what we're saying about position is that it is not a requirement that the parties include express reservation and that's based on our interpretation of miller and also looking at how the court  consumer advocacy versus exxon mobil ruled as well and that case the court looked at the expressed terms of an agreement and said that they were they were declining to to encompass claims that were not specifically identified in the settlement agreement