a few minutes late we apologize but not to real hair argument insidious growth bill versus horizon lines good morning your honor sir john brown on behalf of you know i would like to reserve three minutes for rebuttal grant mr brown if i could ask you something right out of the starting blocks what about the horizon  government although strongly implicated and suggested by the government but others that are named by us in our complaint what is the government used the word superiors what do they mean by that you have an error the days that they yes i have specified what they really meant the government didn't specify by name what they meant but the only possible implication from what the government said after this two and a half year investigation is of this appearance were people who were superior to sarah and the only individuals who were superior to sarah at the company or two but who resigned in radically  you say the two and a half year vest a geisha we still don't know which let's assume somebody of those five we don't know who i agree with that your honor we have to make a showing we don't have to prove it now what we have to do now is raise a  could be an important one because i think it's a very important case for this for this case you contend that the individual defendants who pled guilty sara glover with a top officer sponsible for puerto rico including pricing marketing sales of that are and that the other defendants the other five who have not pled guilty made false statements directly about these topics so that the guilty defendants therefore must have supplied the false information that was distributed to the public are you familiar with the supreme court's decision of june thirteenth janice capital group versus first derivative traders yes i mean what is the effect in your view that that has on this case let me answer that briefly because i was i will say candidly i was surprised there has been no twenty eight jail letter of the statement is the person or entity with ultimate authority over the statement including its contents and whether or how to communicate it if the puerto rican if puerto rico defendants as your friends call them so if you the principals and agents and the way the corporations act through their janice was soley discussing the liability of company as a distinct legal entity for status made by company b another distinct liability  proposed definition that would permit private plaintiffs to sue a person who provides the false or misleading information that another person and puts in the state rejected that argument  that argument again in the context of separate legal entities which i do think is important here but also your honor it never said that when a company acts through its agents when the company is the with copies agent supplies a faucet permission that doesn't mean i can't sue the agent and i can't sue the company it can't be that that's what that is and if a company officer knowingly supplies false information certainly with knowledge that it's going to be reflected in s c c statement even if you doesn't actually make that as you say that there has to be liability there found that five high ranking officers of horizon repeatedly made numerous false statements over two and a half year period while three other officers at a minimum were engaging in a massive criminal any trite massive and in it criminal any trust price sarah is responsible for some of these statements that we think the inference from the face of the pleadings is that yes whether when raymond keenan and taylor traveled to puerto rico and out of the fact that they were discussing with gilbert sarah the pricing rate for that wife whether provided information to them or whether they discussed a conspiracy which i think is a very plausible inference especially in light of the government's recent statements and the unexplained i think it's a been a bloodbath of the senior management level  because for three reasons there's no dispute that the conspiracy right or the company statements materially false notice you know this appeal there's no dispute that the conspiracy was carried out by very very high level officers of poverty and there is no dispute that  of the five others that you've named well i think i think with respect to one particular statement the pre sentence report it can be read that way there are potentially but there are other statements as well if there were statements from the government since sarah was in the middle level of the conspiracy and even in the statement that you're talking about the government went on to say including currently on charge of it where it was a quote senior executive close quote he was but he was charged at that time so it had to be sarah plus someone else and we to require an intent to see manipulator if you really have that from just the skilled people your honor again we have it in the circumstances here where the person who committed the themselves from liability or for earth a ten b five they should have discovered the conspiracy and told by means of a press release that there was a price what i'm saying is what they did was they either discovered the conspiracy or they were incredibly reckless in not doing so they spoke repeating we are talking about and i'm guilty feet of and it's not the heat of about pricing and rates and other things  then we find out that the tentacles of it were everywhere every corner of this company and people keep falling like that but they're supposed to know something that is secret or you say they're supposed to go out and discover something even though they don't know it but there were no particular  investors were sort of the willard at times during the class period about how the company horizon kept raising its rates in the super competitive environment and they climbed high me and asked these gentlemen how is this happening and these gentlemen said we've gone to puerto rico we've spoken to our customers this is why it's happening and they gave legitimate reasons which were false they had a duty to investigate those reasons if they were going to answer those questions and give legitimate reasons they were at least reckless two things they were either reckless in not really but i have one more specific if i know what kind nobody would like to be so i have one more specific fact that i think is important and it's lost a little bit i'm afraid in the briefing this was not a particularly difficult price fixing conspiracy to uncover i don't believe from inside the company because while the defendants characterize it as a parallel pricing conspiracy in the district court adopted that it wasn't proper for the district court to do that because that's not what we as in our complaint and that's not what the government has charged these individuals with it was a market allocation of price fixing his fears which means that in puerto rico one company would come to come the prize and say please ship my goods to jacksonville florida and because that caught customer may have been allocated to a competitor they would say sure we'll do it for a billion dollars and they say well no i'm not going to do that because the other people over here are going to do it for a reasonable rate so when these officers were down in puerto rico discussing with their customers as they said they were like what about these rates how do you see rates in the market the customers would say well you know your rate is pretty good but you know what for some for some things other people's rates are kind of crazy it would have found it's only possible to see assume they would have found information that's inconsistent with the legitimate reasons that they repeatedly gave during burn conference calls and i think if you take all of that together together with  that i want to address the court's attention to and i previewed it a little bit but the criminal defendant spoke to the market and in particular defendant sarah in the journal of commerce article in two thousand and six and this was an article  commissioned by the company horizon in a journal that's regularly consulted by investors and analysts and cited by analysts who cover horizon and that that article was divided into sections and each section was clearly the responsibility of a particular horizon executive the one that sits there was responsible for at his picture talk about puerto rico and it quoting only sarah no one else the district court found the defendants don't dispute that there was false information in that article but they say we there's no reason to believe that it came from sara i submit there is every reason to believe that it came from sarah and there is more than that there is every reason to give us discovery at this stage to attempt to prove that that he for information either came from sarah or be explicitly noted in the complaint and then dynamics the century said that the individual does not have to be expressly noted as well do you perceive janice as interfering with central bank and these cases all deal with a concern that other companies just think legal and these are going to get swept up in securities fraud because they're doing business with fraud in companies and i think central banks said there was no aiding and abetting liability storage said because motorola sold it will set top boxes under a certain agreement or some other something they couldn't be sued because that other company was committing fraud and now janice has said when they're true distinct legal entities even though they might be really talking occasionally about the same thing if one is the one committing the fraud you can't speak the other and be untrue but what janice did not say so that's where i think that it's a step further down that road of not bringing outside entities its employees entered into agreements with its competitors to to fix prices and that was already established that's already something that was pleaded earlier in the case and we didn't dispute the particularity that pleading because you had three employees who had pleaded guilty they were in prison the fact that the company would later plead guilty was it was something that i think you could view as an inevitable the n c trust respond the of superior principles into the securities laws and what's required but you're going to get an add on there you've got an add on saying that there were superiors in addition to them that were involved and nobody contesting that that was not the case i realize it's not a deposition and i assume if we ever get past a motion to dismiss but it would likely that sarah or global or go would be depos well the issue is we are here and they haven't had discovery yet and if complained about the absence of discovery but they can go to congress on that and there are the six the statute was set up at this point look at this not with the statute i mean clearly under is it true to see if i have the law right that when you look at whether there see enter or that you have to look at all the facts alleged taken collectively whether they give a sorry for keepin this that i'm sure will give you extra time but you're saying i mean i'm struck with the fact that the liability principles with regard to securities fraud i'm always now individuals what they knew and i'm i'm a knowledge and what they said or it's because there's different elements for for the company to the facts a company would have to admit to be guilty of securities fraud was it would have to admit that statements were made to the investing public of enough to render the corporation libel come to have such a thing in securities litigation i don't know i was sitting you can because the people who were speaking for the company did not you had you had someone within the organization who had the thrust of the securities litigation i am just confused by what this could mean and i don't know but it's i don't think it's unique to this case you have situations with some frequency where there's problems i mean corporations are huge organizations they've got numbers of people in the world who who might be engaged in wrongdoing that we would be faced with or with a standard that any wrongdoing that anyone does on behalf of a company because under principles responde would they would subject the company to serious violations for opening their mouths and i think the standard that has been set by by every court except for the sixth circuit is a much more reasonable standard but which i mean let me also ask the primary and we we may end up coming back to us isn't it also that in order to establish a strong inference it requires a comparative analysis of competing inference is that correct that's one element of it has to be at least as  it creates a higher level but if you're going to have that comparative analysis of competing in francis doesn't the district court have to look at those competing inferences and deal with them in the opinion i believe this court did any other than possibly parallel pricing i couldn't find any basically what the court did was it looked at each individual inference that was suggested by the pla and it said i i don't buy that i don't buy that i don't buy that and then when it was supposed to take them collectively i'm pages forty two and forty three one single page are dealt with taken collectively and really didn't deal with  questions here to me this morning as indicated is this is a third of their business this goes to their margins but that shouldn't they have known what you must have that's a double edged sword because via they were saying that you know one of the key things was the financial integrity of the company and that the there was every incentive to make sure that that company was doing well and in this case you not only had that but you had a plus factor you had an i p o that you want to make this company look as good as it possibly could look you have services you have circumstances here where you're asking for speculation about whatever information would have come up to the senior executives in the regard to these three individuals and puerto rico when it's of but it is that really what is required don't you have to you in your brief dealt with a host of competing in princes and i don't see that being done in the district court opinion weeks before the d o j investigation he left he left behind a four million dollars i think in stock options he would no severance no parachute you have horizon pleading guilty to and i trust violations you have raman in kenan leaving the same day you have the government allocation allegations in the sara and gil and a lot of matters that there were superior is involved you have the nature and scope of a of a conspiracy which is a pretty big operation it was important to the health of the entity and you certainly have opportunity and plaintiffs have argued motive as well with with respect to that well i think there's no question he he sets out then he has an obligation to consider it collectively he states that he does consider it collectively i mean the bottom i mean literally you go from the last three lines of page forty two t the last three lines of page forty three it's literally one page that's it well and i would also submit that if if this court were to write its opinion differently and and walk and consider it collectively because we are here on de novo review that if you look at each of those they're not independent factors i mean all of this really comes down to must he here are the chief chief executive officer and chief operating officer of the company must they have been involved because this this is a conspiracy that relates to a significant component of the business while the competing inference i think there's two that the judge consider and one thing the judge considered is that it's a secret conspiracy that the court  notice that that that that a competing inference that was very plausible was that this was being secretly carried out by people who are conservative isn't covert exactly and therefore if you're going to allege that people were involved in  normally you if you make allegations you are allowed to get some discovery because of the abuses that took place the p s l or i came into being in the mid ninety's and the p s r i says is going to be more difficult but it can there's a pendulum you're saying has swung so far with respect to how we interpret the p s l are right that they never get a shot to develop the facts they may lose a summary judgment who knows but should they at least be allowed to get past the motion to dismiss only if they meet the standard and the standard was established for a reason and tell abs not only says that to consider it altogether but makes very clear that omissions and ambiguities count against alleged to be a senior officer in the company with respect to the fact that the company's made up a recent management change is that all that surprising a company is now three years after this came out so it's not as if they fired the c e o in the wake of this disclosures i mean the management of the company is in effect imploded but in the maritime industry the captain goes down with the ship does that mean he steered it into the iceberg well except the one thing i individually and as in totality so if they were individually found wanting either because they were speculative or because they were not  judge didn't really do his job we've got like eighty ninety pages of considering all the and you know the the the stock options being exercised about only you know all of that stuff and he found them wanting not there was a competition witness who said it was it was horace's c e o or someone similar well that was from seal and that was somebody from another company and they were saying that well there was a confidential witness who said that there was documents that person was from seals it was another confidential witness who worked in the is it consistent with tellabs it it discounted that confidential witnesses view because it was vague there was no there was no statement about the confidential witness being in a position to know what he was saying plus this statements that they're pointing to are in proximity to his picture so they say that he must have said that as well what the district court stated is that information comes right out of the public filings so i think it's much more reasonable to infer that the information comes out of it was taken from the public filings and put into the advertisement not by sarah but by by the authors of the agreement i think there's two responses to this is well that strengthen it from a case law perspective one is this court's decision in weiner which sa thinks janet and for anything and if it doesn't why did they grab there and we've got a comment from somebody outside the peanut gallery ok and then the one last point i have may have one minute because it's something that was raised in the reply brief and that  we haven't had a chance to respond to which is the contention that our pricing doesn't explain this because what you had here was was random price allocation agreement first of all the the allegations in the complaint repeatedly say that there was an agreement to fix prices read beginning and allocate customers so it's not just an allocation agreement but the only description of prices that were wildly increased in response to a customer paragraphs one ten through one twelve of the complaint that's it a four eight nine and a ninety four ninety and that describes see stars dealing with one of its customers it doesn't describe horizon lines dealings with its customer so there's actually no specific a particular iris allegation about horizon dealing with any customer in this way there's certainly no particular specific allegations about information being available to the senior executives what they're alleged to have known was the net you know and the last thing counsel said before he stepped down seemed to be disputing that there was an inference that a criminal conspiracy took place here and i think that's an example of how far things have swung under the p s are a were reasonable inferences really are not court disregarded them i do believe that was that was error and in the sixth circuit most recent case inter breeding tellabs and matrix which by the way held nine off and that there was scienter under some very stimpy facts the six circuit in this day in a court case that came down on may twenty fifth said exactly what judge ambrose has been saying so you have to look at these allegations collectively and you can't just go through each allegation and dismiss it for this reason and that reason and then at the end of the day said well there's there's no smoke here i think we all agree there is smoke here even when you do that but the sixth circuit said you risk losing the forest from the trees is what the supreme court instructed the matrix and that's exactly what is happening here when i have to stand up here and brief the district court and  court and say with this particular allegation you could spin it this way and this but if that way and maybe the size of the conspiracy isn't enough i submit that if you read the a via pinioned which is very good law but the weight of the inference is here again  give one more contrary view about janice you know whatever janice does mean and obviously we can quibble about it i doubt i get the last word of what it means but whatever it means it does not mean anything about corporate side or it did not speak advisement and the court would like to get the parties to order a transcript of this argument and submit it to us as soon as that can be done and can you can find out who pays for  thank you very much counsel