this morning the first has to do with the dismissal of the complaint or second amended complaint which is under the no review standard and the second has to do with the denial of our motion under rule b c sixty b which has to do with  abuse of discretion standard and like to address the the complaint first the court were to rule in our favor on the on the complaint and reverse then we don't believe the court has to address the root sixty issue so i'd like to start with that this is the complaint that quite frankly has an awful lot of support in it we had nine confidential witnesses to support our allegations starting from before the class period through the end of the class period about the fundamental issues that life lock was misrepresenting we have two cases one was an employment wrongful employment case that also corroborates information from the basic allegations in our case nonetheless the court throughout this going on of its own fact finding mission to the rule come to a conclusion that or an investor conclude believe that life was missed not misrepresenting its compliance court applied the heightened pleading standards required by the statute and the statute was passed to correct and obvious abuse that existed previously in this type of cases where the investors who were in the class that the plaintiff's lawyers purported to represent were often the losers in the cases and in that right and  didn't the drug lords recognize that and apply the proper standard here which is the heightened pleading requirement required by the statute that was passed pacifically to to correct the abuses that were common in this type of case well your honor the court may have a apply the high pleadings they were not challenging what the standard was we're challenging the application of it because in that application the court made fact findings that were counter to the allegations in the complaint which the courts required to accept as true for purposes of a motion to dismiss him and then applying the standard to that to its own  determination of the facts then found against us but we believe can you put can you point me to your best instance that would support your claim that the judge made fact finding determinations that she should be made we've read all the stuff we understand but where i'd like to see that part of judge bolton's opinion where you say she went off the rails by fact finding instead of dealing with just inferences as is as she's required to do into the writing pleading i don't have a cite directly to the the ordered since the sections were huge which which we're short of first second it's in the it's her second order which are firms or first order right and what she did she she discounted the allegations by claiming that all these were were was mismanagement and lapses in business but that isn't then i don't see any place and here was she said i'm finding as a matter of fact or anything close to that she seems to be dealing with the inferences which the courts have said we've got to look at all the inferences measure i'm up against against each other where did she say she's finding facts she doesn't come out specifically want to say that's perhaps my point that's why i ask you where did she do that now you admit she didn't do that no i believe that what she's doing is fine in fact she's not your herrick they're rising what she says absolute you are not i'm characterizing what she did as having found making fact findings choosing between the fans interpretation of the given of set of events and the finding or finding reasonable inferences are you saying that that the court's determination that the most reasonable or the reasonable inference is this is growing pains management problems that that's a fact finding this from the inference she drew from from the statements in the filings if she's yes because what she did is she uses that to deny that there was a misrepresentation made it isn't wasn't that which is required to do to determine whether there's it's representation you look at the state there is not it's supposed to be based on the allegations as presented by the plaintiff he say you're saying that she did which is supposed to do but she did it wrong that's what i'm saying ok thank you and what i'm saying to you today compliance during that period we have from and from insiders in the company at the time that they they will were not doing the giving the services that they were presenting t the public so this is one of your key points defendants represented to the market that life lock was in compliance with the settlement that's correct your and where's the settlement in the record in the excerpt of record  measurement that you're asking us to look to to compare these things against and i was mildly surprised not to find the settlement in the record well it's in the complaint sections over in the complaint sections of it but i'll think that's correct the material sections of it are in the complaint and generally it's in complaints courts don't accept just wholesale putting exhibits and in support it's rather what are the the sections of the exhibit or whatever the underlying evidence is that's material to the case and we did cite it where do they say we are in compliance with settlement they do not directly say we are and the whole point but the point is this court the ninth circuit has said that you  don't have to explicitly state that you have to look at things in context it's said that where do we say that you say that in matrix you say that in thing so so that the district court looking at things in context and this is the argument i in the context of all these warnings a reasonable investor would not be misled so what's wrong with that analysis because you have to look at what the statements are both to the finance and the court when they when they're focusing on those types of statements those are statements that are talking about the business aspect of the company not f t c compliance with f t c compliance all that basically saying is we have the agreement with the f t c we're required to monitor but they warn that the f giving that warning they're in violation they hadn't been they had been doing this throttling from before the class period through the end of the class you're in violation doesn't necessarily mean that it's intentional fraud or deliberate recklessness am i right about that i think that when you are this is a unique situation this isn't a situation where it's a news new company and it's out there doing something it may be in violation not not quite sure of this company when they were when they had the original settlement with the f t c the eff to this very issue was was given to them by the f t c one of the complaints of it from the original  but they were being told this is what they were telling their clients in the f t c was false in the first complaint was life law clients were contacted every time someone attempts to open credit in their name or change an address that is what the throttl because it was a little difficult for me to understand exactly what that referred to like one of the characterizations i guess by opposing counsel is that they would get alerts when something related to credit would come and like someone with that was register a sexual offender register came into the neighborhood so that the area that they were explaining was alerts wouldn't go out when some low priority information that didn't affect credit that likely did not affect credit came in and that's exactly what's happening that's exactly not the case here and what happens is that when someone you it's someone's opening up credit if someone's using a credit and there's some and the agency or the company that has used the credit card alerts the life lock then life lock contacts its customer and then the customer because most of this was being sold to elderly men that's what the demographic that's what the demographic of what the the chief marketing officer said because of their age they weren't inclined to get on the computer and write back they call up on a phone so they had phone banks around the country that were taking the calls because they stopped taking the alerts in because they were getting too many calls so that's why basing this on this they weren't giving any alerts so they weren't get periods of time they weren't giving any alerts are confidential witness three who was a random marketing one of these centers or phone said at one point it went to three weeks now it was happening consistently they would do it for a while then they'd start again but they would stop it and this is something they knew in my main show more than just the fact that they were having problems getting their act together because this was a relatively new system does that mean the fact  it happened and mean that they did it on purpose fraudulent really does your honor they this already it happened and they were subject to a settlement from two thousand and eight we're talking about from two thousand and thirteen forward this wasn't something they just started they had already been in under an agreement with the f c c because this type of thing was again as i cited was part of what they were told not to do that they were doing everything they could to comply with the f t c ordered corrective probably  know if it's ok if you're drawing to do everything you can but you have to disclose it again both of the tos defendants in this case power and davis sold stock davis three hundred shares one hundred fifty thousand shares throughout almost the entire class period on a regular monthly basis my time's coming up i just want to finish this point under the dark speech and cheer ella cases which are still good law in this country anyone who sells is required to disclose all material information or not trade they were selling they had an obligation to disclose material information they told everyone on their own website that they work their information they were given was complete now they're arguing we're not required to but they told the public they were given complete information so the public the investors believed they were getting complete information i'm hearing ok i'm sorry thank you please the court boris feldman for the at police i appreciate a judge i could his remarks on judge trot i was acquitted of every one of those congratulations on your retirement actually one of the accomplishments that didn't get mentioned was the amendment of the u s u k extradition treaty for terrorists in one thousand nine hundred six when judge truck was at the justice department and i was a young lawyer at the state department who got to work with him on that so congratulations and i retired to see you again as your honour's correctly noted the issue here is did life lock represent that it was in compliance with the order and so i'd like to focus on that statement there is one statement in the complaint that relates to that and it came very late in the class period it was february nineteenth of two thousand and fourteen now the class period goes back a year before that february of two thousand and thirteen and it goes on a few months later to may of two thousand and fourteen interesting lead the only lead plaintiff in the case whose name chet gray he'd made his last stock trade before then so at the time of the alleged actionable statement the only lead plaintiff was no longer in the market in s c are two ninety three and the statement was made just two weeks before the first lawsuit was filed that timing is going to matter so you all have read many complaints and shareholder cases and you know the format there's a section called the misleading firm of statements and then they say and then the truth came out so one would expect that for the key the key the cornerstone affirmative statement here that it would be in the section of the complaint called misleading affirmative statements but it isn't in step that those are  excerpts of record one forty to fifty four instead the statement about compliance here is in a section called the truth slowly emerges which is that each one fifty four in curiously judge to ask about the settlement agreement with the f t c the plaintiff did not include this statement which their case terms on in the excerpts of record we put it in it's from the ten k for two thousand and thirteen  page ten we put it in excerpt of record i'm sorry supplemental acts up a model of record twenty two the statement which i'm going to read to in a minute came in the annual report to shareholders for two thousand and thirteen now significant that life lock put the statement in the ten k even though the event had not occurred in two thousand and thirteen it was the subsequent event in two thousand and fourteen but they put it into the can anyway and there's a section in title government governmental regulations this is s e r twenty two from the ten k and i'm quoting what s e r one twenty two twenty three and what the company has said it's quote we endeavor to comply with all applicable laws and believe we are in compliance with the requirements of the f t c order close quote that statement is governed by a recent supreme court decision  ny care about statements of opinion in statements of belief in compliance judge bolton applied on day care it had not come down at the original time briefing but the parties that brought  before argument she addressed it at length in her opinion on the second motion to dismiss that's an excerpt of record sixty five to sixty nine in she correctly pointed out that in omni care the supreme court said the context of a statement of opinion matters so let's look at that context to see whether she got it right or not the annual report the ten k mentions the f t c order thirty eight times if it's almost like regulatory tourettes they kept referring back to their f t c order that's in the amps or in brief nine footnote nine we cite those thirty eight examples in addition to including the disclosures under governmental regulation the company also put it under risk factor captioned we are subject to extensive government regulation which could impede our ability to market and provide our services and have a material at first effect on our business that's in the ten k page twenty one and then they run through these but plaintiffs seem to suggest these are boilerplate so i just want to read to you four sentences that surrounded the statement of opinion again s c r twenty two quote on january seventeenth two thousand and fourteen we met with the f t c staff at our request to discuss issues regarding allegations that have been asserted in a whistleblower claim against us relating to our compliance with the f t c order close quote so far from saying there's no issue here they said a whistleblower said we're not complying so we met with the staff second sentence quote following this meeting we expect to receive either a formal or informal investigatory request from the f t c for documents and information regarding our policies procedures and practices for our services and business activities close quote so there's an f t c investigation coming based on the whistleblower third quote given the heightened public awareness of data breaches as close quote and then they did the sentence to i think at the heart of the last quote we endeavored to comply with all applicable laws in believe we are in compliance with the requirements of the f t c order so let's just take the opposing counsel's idea that the the company has been advertising there providing information about all alerts that they receive that they consciously have a plan not to because they're running into difficulties in their alerts enter so they have a throttling plan in place and they know that that is contrary to their advertising and therefore  inconsistent with the selman order but they don't disclose it now you've you've given some suggestions about well we know we're being investigated but on the care also says if you make a statement of ated two elements of an opinion statement the object of in the subjective and i think you're focused on the subjective based on what the c w said and that's why i began by talking about timing the statement in the ten q ten case sorry was made on february twenty fourth february nineteenth two thousand and fourteen not a single one of the c not sending out alerts to customers was a company policy discussed decided on by lifelike employees senior senior management i'm sure you saw it ok so is there idling something that life lock used to discuss the process by which it was not sending out alerts it it is without getting into facts beyond the complaint the at the complaint attributes that the c w is right none of whom was at the company at the time of the ten k and it also that you may recall council talked about two lawsuits want a wrongful term want to whistleblower the talked about throttling those people were also long gone burke was gone by march of two thousand and thirteen peters was gone by july or august of two thousand and thirteen the settlement prohibit throttling i don't believe that the settlement used that term it talked about the company complying with the advertising out so it's just settlement in the brief say yes we do but twenty four seven three sixty five week and alert we send it on to you so they certainly indicate that that's that's how the business works but that an advertising or consumer claim is not a securities fraud claim there were different laws right but the so there's an advertisement there is intentional non not doing what you're advertising which is what those two things together violate the settlement orders so that's that's the argument they're making if i understand it correctly i think you are your honor but it's not supported by the allegations in several respects first in the opening brief on appeal the appellate and said we have no way of knowing how many alerts were sent out in a timely way and they tried to run away from that a little bit in the reply brief but in a company with so many customers and millions of alert the decisions that this court require some indication that it was a substantial problem that would have risen to the level of a violation of the f t c to create none of the witnesses none of them no matter when they were at the company attribute d to the defendant and the statement or knowledge that they were violating the f t c decree so when you ask about omni care yes if one of the defendants had said to one of the c w look i know that were in violation of the to creep but we can't really say that or the f t c will come down on us that would call into question under the care the subject of knowledge but they have nothing like that remember every c w in every whistleblower who talked about throttling was no longer at life lock when the company put out its ten k so a more plausible inference is that yes the company did not perform perfectly they were under an f consent decree in the risk factors ten k make clear that they had a lot of growth problems but that by the time they issued the ten k in two thousand and fourteen they'd made progress on it and we're comfortable saying we believe we're in compliance but that's not an insurance policy to say we believe for in compliance could i ask you to briefly discuss the the other issue that the council raises which was about the the wallet application and if i understand the theory that the company did did due diligence before they were acquired lemon i think is the name of the company and so it was known that the all the application didn't have didn't meet the p c i standards as part of the due diligence but nevertheless they went ahead and bought it and they suggest that this is correct maybe you can address that that without the p c i compliance the credit card and factors would use it so it wouldn't do what it intended to do and this was not disclosed to the wall it was essentially not valuable and in fact was ultimately withdrawn from the customer base so address that as the failure to disclose that's the other and wallet so the passive voice covers many sins so when you say it's alleged that they allege that it was known but by who it's the securities fraud case well they have all the confidential witnesses saying that management was aware of that no actually your honor they don't they with respect they say that there was extensive due diligence they say that the c say that some people learned during diligence that it was not fully compliant with p c i requirements they say that there was a disk sion of risks with the defendant davis and power at no point does the complaint say this c w heard davis or powers say or heard them be told that the wallet application they were acquired were acquiring was not is p c i compliance necessary for all that to do what it was supposed to do because otherwise it wouldn't be is if so then i think it's a pretty powerful inference that badgeman would have known it before they acquired the the application it had so it did have p c i certification after the acquisition closed in either late in the class period or after the class period life lock learned that the wall the wallet app actually retained your little code number when you enter credit card and want to the number the date and then the secret code the c v c c in it retained that and it shouldn't retain that for p c i compliance but that doesn't alter the fact that it had p c i compliance at the time they brought it it's important to note that there's no allegation in the complaint or from any c w that there was any breach or loss of any customer information as a result of that formal noncompliance with p c i the final point i want to make and i know i'm out of time the plaintiffs threw up the sort of plaintiff's favorite mode of stock sales  if you look and that's i guess the weight and the timing so between the ten k in the first complaint being filed was two weeks the ten k was on feb nineteenth stock in our answering brief at page fifteen notes forty three and forty four we analyzed the public data in the record which shows that every trade was made pursuant to rule ten b five one plan before the ten k was filed not after so if you're asking yourself in a way every ten b five pleading motion under the reform act comes down to does this case have a plausible inference of fraud and i suggest you're on  that this one does not thank you yeah  may thirtieth two thousand and thirteen june twenty eighth two thousand and thirteen july two thousand and thirteen there's a series of statements in there doing the stock sales during that period it doesn't just address one statement but the other thing is again i get back to the issue that the the the court if you are making a statement and that the at the time at the current time the the the facts  otherwise you have to disclose them you can be talking about all the things that may happen if the f t c finds us in violation but at the time you're making that statement if you know a material issue and this is a very material issue that the company was described as an alert company and you're not giving alerts that goes to the heart of the of the case i mean that's not the kind of thing this is not some some small aspect of it and we do allege that with respect to the p c s the the the lemon confidential informant for says she was on the due diligence committee and during their due diligence they found out that it wasn't p c i compliant whose the day the people on the due diligence  same it was they made a presentation to the to the to the book to the executive leadership board which consists of five members including davis and power and at that meeting did she describe to them the pros and cons of acquiring a lemon and that the wallet app was not p c i compliant that's an e r one thirty one thirty one paragraphs one sixty one two one sixty three of our amended complaint you judge bolton says i'm talking from the excerpt zero thirty five even assuming that c s c adequately pleads the defendants made a misleading statement concerning life locks compliance with the applicable p c i security standards in the context of promoting its mobile wallet application the cac fails to adequately plead that the statement was made with scienter no specific allegation of the individual individual defendants had actual knowledge that the mobile wallet application was not c i compliant or the defendants were in a position to discover that violation without extraordinary effort at the time the statement with made none of the cacs allegations based on on observations of former employees or confidential witnesses supports an inference because each of these individuals either stopped working for a life lived before a life like acquired the wallet or has not claimed to have personal knowledge of any aspect of the mobile wallet applications and then a footnote seven they say on may sixteenth two thousand and fourteen you know what it says the form eight cases we have determined that certain aspects of the lemon wallet which we acquired as part of our acquisition of limit are not fully compliant so where she off the rails there really because as i just s confidential witness for was was part of the due diligence team acquiring lyman she gave a presentation and told at which davis and power were present and board no statement about p c i or that she was present there sixty four c w four confirmed that the fact that the wallet was not p c i compliant came up in discussions with the executive leader of a no first person witnessing of it well the executive leadership board is comprised of davis and power and she doesn't say that she was there that she heard it presented to them i mean at that seems to be what the district court w the entire executive leadership board to discuss ten to twenty risks involved with the purchase of women she was out that meet at the meeting so the court thought it was artful drafting and you're saying it was just mistaken draft and it could have been drafted to say she was at those meetings she heard this information being given to davis and power as yes i mean what we the way we present this is the way that we get it from the witness when i can't put words into their mouths she was should have been just sort of granted thank you very much your honor we thank both sides for their argument the case of gravy life lacking is submitted and we are the german for this session and for that week thank you