good morning and may it please the court my name is miles shriner with the law firm montevideo associates and we represent the plaintiff jesse campbell in this action your honor as we believe the district court erred in finding as a matter of law on a motion to dismiss that both of the two distinct rule fourteen a nine disclosure violations plaintiff alleged should be dismissed on materiality grounds now the supreme court in t this trees set forth a very high bar for when the issue of materiality could be decided as a matter of law and that's only when no reasonable investor could have possibly been misled by the statement and we submit that conclusion could not and should not have been reached by the district court on a motion to dismiss i'd like to start with the disclosure issue that the district court acknowledged could have been quote more clear and that is the statement appearing directly above the table on page sixty of the proxy in the financial projections section stating that it contained quote  court and the defendants point to certain statements in other distinct sections of the proxy that purportedly rendered the scription appearing directly above that table not misleading as a matter of law  they first contend that because the revenue projections in the table were broken down into separate services and technology lines that the stink ssion made it so that no reasonable shareholder could have believed that the table contained solely for scipio's pre merger standalone revenue projections and that is because according to defendants and the district court certain statements in the proxy describe generally as a quote biotechnology company and percipient as a quote diagnostic services company now the relevant question is really whether any reasonable  could have believed that the table was indicating that the pre merger standalone percipient show was projected to generate revenues from both a services and technology business segment of its own and we believe the answer to that question is yes for a few reasons let me interrupt you sure tell me what you think your very best close as case is on this particular disclosure ira we haven't seen one  that the omission based one is the omission of the gap in that oh you say the heading should be there while the heading hearing should be there but the powerpoint information should be beneath that right as paragraph six your complain and so what we're alleging the first disclosure claim the one that this record conceded was perhaps more closed in its opinion was that the statement on page sixty of the proxy so it's a one twentieth of the record or the well what it should have said was it should have said that these are pro forma projections not precipitous projections percipient was the finest it's your case but in paragraph six you say they negligently allowed the projections from what i call the profit s g n a and r and d in operating profit correct but i mean we're focused now on the net income the bottom line and i don't want to conflate the two disclosure claims are because they are distinct and in the complaint in my mind but i'm happy talk about the omissions based want to see if that's what the court wants to well i think they are tied together perhaps i think that's where you allege them yes yes what they are they're related because they both relate to this table but there are two distinct in my mind because presidio where is that and that is the third line of the second paragraph starting with yeah but it's not in quotes is it or princes like all the others get it there it's not so it's not anywhere in the whole dang deal if you word searches it in quotations yeah in quotations and a fine line that i think the next example i had was a sixty one but i don't know about the court ations i don't think it's ever d defined in quotation marks throughout the proxy as the post merger combined company and so we believe that that description was inaccurate and misleading because it caused or could have caused a reasonable shareholder to significant distinction if a shareholder is thinking that these revenues are coming from solely pre merger standalone percipient you're adding that entire technology line a value which is really coming from tranche anomic that's that's a value that you as a shareholder already own so it's really making presidio the entity that you're merging with look more valuable and that's what we allege happened here and that's what the deception is and the power point makes it look pretty weak well i actually want to go back to the services first technology distinction and we believe that both the district court and defendant simply picked plucked out one reference where  was described as a services company but if you look at the broader context the description of pre merger percent there were statements in there that could have caused a reasonable shareholder to believe that it was in the process of generat technology which are actually coming from trans anomic and so the misrepresentation is it's causing a shareholder to think that they're merging with a company that's more valuable than actually it's now i'll move on to the second disclosure issue which is the omission of the net income projections and i'd like to give a brief back pack and of how we got there prior to the shareholder vote we had obtained the final banker's presentation from defendant's previous counsel and when we looked through that presentation we noticed that the net income projections had been excised from the proxy they were nowhere to be found and that struck us as odd because obviously they were easily disclosable obviously they differed significantly from revenues and we demanded that they disclose them they refused and that's why we're here today and their arguments regarding why they don't think they had to disclose them are there's a few of them and well you you grieve that for one year they're there right in the proxy for says that sixty for net income no i don't believe so they are yeah sure they're in the financial statement goodness gracious eight to sixteen bigger in life so i believe and that's what caused this record some confusion too i believe around is referring to the district court i thought of had every year on right but that's referring to historical information so looking backwards will counsel you've got sixteen throughout yours with an easy by it you know so there's one year in all of your numbers that's accounted for with that income and in this record you were referring to a to say to sixteen for bigger in life and so just look at it right there not food because it's as net loss and stood in it had come and they mean the same thing council but these are going backwards twenty fifteen to us is sixteen in sixteen what you put in a bio pad here fair what you're driving about so then for seventeen eighteen nineteen and twenty you know where to be found right and apparently the district court thought they were there right well i think it was confused because i think it was conflating historical versus forward looking information but perhaps it was just suggesting that sixteen was there but there's no dispute that seventy nine thousand nine hundred twenty were nowhere to be found and is the term net income anywhere in this proxy statement i don't believe so and certainly not the projections there and his net loss in there anywhere i don't know the answer to that your honor ok but the numbers the actual projections management projections what are the closest numbers here to net income and net loss all there all that given here is revenues council that's not true they got several places they do earnings before interest taxes  all that's based on the same but counting information that yields net income and that loss and so they also contend that they gave cash flow when and the point there is that there's a body of case law that says that w cash flow projections are prepared by a banker which is really a hired gun who's paid a lot of money to find fairness they're immaterial the delaware cases say that and that's an important distinction and the delaware cases they rely on also emphasize the importance of management projections and that's precisely because management is the one that seemed to have the best view of the company's future prospects so we also believe that was a material omission  and again i want to emphasize the entire claim really falls on materiality and and the district court recognized that and we believe it really usurped the role of the trier of fact as set forth by the supreme court and see it conceded that the table could have been described more clearly we think at the very least the should have been allowed to proceed discovery should have gone forward and try or faction of the side of this good morning your honor said may it please the court in this case despite two hundred fifty plus pages of extensive disclosures by the companies describing the reasons for this merger and the processes behind it plaintiffs argued today that the company should have disclosed even more information plaintiff makes two basic arguments that the proxy as a whole materially misleading both of them failed first despite courts consistently holding that companies don't need to disclose every ticking tax line allegation which is that there used to be as most finance people accounting people would expect on page a one twenty eight there used to be the second down there there used to  projections of the same thing this for transient amik on the top lines get it i am i understand there it's an emissions claim that that they that omission and then as you put it out the headings wrong on the table i disagree the counsel that's not a close call you define quote unquote we found it finally percent below earlier so that means it is being the pre i mean you know that's not the straight faced argument so and you need to tell us why it's not misleading terms it has to do that so it's not misleading for a variety of reasons i mean first among them let me just say it's not a misstatement it's describing the sources of these projections throughout the proxy financials and you look at the revenues broke out in two pieces for the combined company services revenue technology revenue exactly the same as on page one twenty eight there is a combined revenue at the bottom exactly the same as the total copy so you say th think you why then when you look at the top look at the top of page one twenty eight kirk notice it's got for transient revenues cosco so gross profit all that stuff in operating profit why don't any of those numbers look anything like the numbers that you show a should apply to transit i make under the technology part of page a one twenty share don't those accounting term is articulate why don't they articulate the reason that your honor the numbers are not the same is because the combined companies projections that includes both these pieces after they had merged those projections were developed by percipient management trends do not make management developed its own projections those are those appear on page one twenty eight record those projections are also used in the individual company analysis of transaction comics so if you look really are in the proxy when craig hallum analyzes the revenue and calculates where the revenue multiples for transgenic standing alone it's try to figure out where those are in a one twenty you can't that's that's right your honor in me why not they're not there is that your best argument and it doesn't articulate so they're not there because the proxy makes makes clear that combined company projections were created by percipient management the numbers your honor twenty two at the top of page one twenty eight are prepared by transgenic management they were not used in this combined company analysis what was used is what appears  in the deal their different set of numbers that's right and i just happen to have a few that happen to be the same i don't believe i follow you on what you say the technology and services revenue are the same of the two pages right that's right y proxy craig callan lays out the facts and figures that used in developing the analysis and that includes the analysis on page one twenty and they say very clearly they they took projections for transgenic standing alone and that's what appears in one twenty eight they take that from transgenic management they also take bit numbers for principia alone that's that that's there is the services revenue and they take numbers for the combined company that's developed by percipient  it's typical in these transactions that both sides prepare their own sets of projections so you say one twenty one company in one twenty it's from the other company that's correct a one twenty that page is developed entirely from precipitous management to the top table on page one twenty eight is our projections developed by transfer nomics management team the other company and again that's because both companies developed their own projections as they were analyzing the valu company materials it's not described as having done so and that's why there are numbers in the proxy for the combined company precisely because just fail any test of comparability right if you want to clarify what you mean by ok i mean looking like they fit together ok look at the top but you wonder you know says tranche anomic internal financial projections and you just tell me what those are percent beals internal financial projections and they don't look a thing like the other and they have the same heading leading into that and you said the page before they were going to be comparable i don't i don't believe that a problem is comparable they look alike they don't look alike at all do they they don't they don't think you i think i mean the reason they don't your honor is they were prepared by different companies management it's not surprising that the two management teams came up with different numbers for either the combined company or each of them going forward different management teams would come up with different projections who prepared the power point slide the powerpoint slide as a summary presentation to the board prepared by craig hallum as described in the proxy the numbers the well it's if i understand the power point source said that's correct why should that appear right there so they're backing up the securities laws require disclosure and counsel why shouldn't it appear right there why shouldn't the table yeah yeah already two hundred fifty pages if every statement that the board looked at at all had to be included twice that like you know how long you know this is my double sided version right here and it's i have anyone to do it right yeah i words searchable mall kinds of things it is it misleading is a one twenty eight misleading no your honor it is not and was it negligently done that way you know what paragraph success yes did you negligently take out out cut from that table the stuff that's on e three ninety five know the how the wait hold on that's a denial they allege it's true for this proceeding we have to assume it's true your honor you have to  is an allegation you can make but were plaintiff has to make out to make his claim is he has to allege not just a negligent omission and negligent omission that ren renders materially misleading some other statement in the proxy the only statement that the plaintiff points to this is in paragraph thirty four of his many complaint are the revenue numbers he says revenue is made materially misleading because you didn't disclose net income the reason that doesn't work is because as he concedes in his briefing any reader of the proxy and especially the reasonable investor the standard the court has to follow would understand that revenue is not net income the expenses are the difference between the two if you say what you're right there's a lot of things a lot of things yeah yeah there's a lot a lot of things but go ahead it was so i mean that's that's exactly it revenue is not misleading because because you're not saying income you know that there is a difference between the two and that difference means that you're not misled as the number and example in this is an example from the cases of how revenue might be misleading is if i said we had two hundred million dollars in revenue but omitted the fact that one hundred million of that was fraudulent related party transactions that that would be an  in love with delaware thinness go ahead so it comes from the supreme court the supreme court laid out the standard c industries and they said there must be a significant likelihood that the omission would significantly alter the total mix of information provided to shareholders that contains almost every element that's important to the court's analysis here we're talking about the total mix we're talking about everything you can't read a page alone in isolation you have to look at every statement disclose that's part of the standard the supreme court laid out it also means that statements missing need to significantly alter it is not just could it be useful is the information cumulative is there a substantial change with this number in compared to what was disclosed and even beyond that misleading is an element of the claim not just materiality i see the yellow lights on for me i wanted to speak briefly about our last causation argument here we mentioned at the end of our that the plaintiffs always allegations point towards what was the proper value of percent an important thing to consider the only economic harm in this case there could be the only economic part of this case is the ratio at which transfer nomic shareholder shares and percipient shareholder shares were exchanged that number was set independently from the analysis conducted by craig helen independently of all the numbers we've talked about today so even if plaintiffs makes out an allegation that presidio analysis conducted by craig hallum undervalued it that doesn't go to the point of whether or not the exchange ratio was fair put it put a different way if i sold your twelve thousand dollars whether or not i had earlier told you it was worth five thousand or six thousand it doesn't matter because you got a good deal whether or not percipient was valued correctly or improperly doesn't directly connect to whether the exchange ratio the only thing with any economic value in this case was right so nothing to ever be misleading in this proxy statement i think you put your argument proves too much i m not trying to say that that nothing could have been misleading when trying to say i plenty of need to make some allegation beyond a conclusion i was harmed to connect the misleading statement he said is made and the economic effects of this case he can't make a claim simply by saying there could have been more information yes to say that also harmed me in some economic way and the economic event in this case was the exchange of those shares and if you i encourage the court to go look at the  parents forty one forty two think point to that most clearly if the court has no further questions i see my red light is on so your questions thank you for the argument  the text of rule fourteen a nine prohibits statements which are false or misleading with respect to any material fact misleading is defined as giving the wrong idea or impression it synonymous with confusing ambiguous deceiving if you look at a one twenty eight the statement presidio internal financial projections is a misleading statement precisely because those are not precipitous internal financial projections paragraphs forty one forty two yes and the surrounding paragraphs and the justices and again dura and the district courts in this circuit have all said it's a rule eight notice pleading standard for last causation we allege that transition on it was undervalued because the merger didn't account for certain business developments major contracts in canada and europe and we allege that percipient was overvalued i see my time is up you finish your sentence for sure