good morning may appease the court timothy delaying on behalf of appellant the jacksonville police and fire fund this is an appeal from the dismissal of the securities class action we submit that the court made four errors below primarily the errors were in the application of tell apps i think the court has a very thorough opinion and goes to the law and adequately states the law but then we submit misapplies that law and draws inferences against plaintiffs in violation of tellabs draws looks through the allegations and comes up with inferences that don't exist and are not supported by the allegations in the complaint and most importantly doesn't analyze plaintiff's inferences under tellabs that they are at least as likely as any other competing inference certainly tell abse indicates that you can consider competing inferences but it's not the tie goes to the plaintiffs i submit here even under that standard there's not even a tie it's not even close of the prior year so it's this is are making the same representation as of this point we didn't have any and in particular focus on the many many representation in two thousand and ten the representation that we don't have any information at this point your allegation in your complaint was they had already been told at that point did and the judges response to that i think was well that's hearsay right so if it if we credit if we credit your allegations the s to that one address what the district court said that seems to me the other two i have some difficulty with your cmdr arguments but as to that one i think if you credit the allegations in your complaint there see enter district or says well that's hearsay would you trust i will address it in the first thing on notice we're not a trial this is not we don't have to plead admissible at that either way is the c e o identified as my number everybody knows who he is don't think i'm sure if it was like a witness protection it is not the witness protection program it was by the way it's the c e o of the defendant george and i'm sure everyone does know who he is and that's part of the law that the ninth circuit's developed is that you identify the c w's so that the court can be assured that they were in a position to know the information that they are alleging to provide but the key point is we're not at trial so this is not admissible  there is some there isn't one circuit case law another case law that says to be plausible hearsay starts you get starts to get you because you don't really know what he said at the meeting or you know is what he told you he was going to say or said to deal with that you're absolutely right and that ninth circuit laws dealing with low level employees that say i heard from so and so from so and so in the hallway that someone said this or someone knew that this is the c e o of garrett the largest lender to see the their detailed allegations in the complaint establishing his involvement with a small number of highly ranking individuals a garret and the meetings that they had both before and after the meetings with c v b it's more than plausible based on those details that he provides e you have to we're not deciding this issue today why so tell me tell you we have to decide the issue in your case tell me why you why you fit within the loose what you know what we should interpret of having to and it's interesting the lower court didn't have the benefit of loose at the time of the opinion or at all who says we're just not treating this issue correct and what lou says is the announcement of an investigation standing on its own with nothing more is insufficient and then they analyze that an investigation doesn't tell you anything more than that there's an investigation so the footnote says you need more and we submit here there is the more the more is the september ninth announcement the murrays birth the internet posts that were hinting at the problem and those preceded the announcement of the f c c investigation so the riposte an internet internet post from an anonymous blogger questioning c v by back to find themselves that wouldn't be says no no absolutely i  measure damages i mean what here what happens if the stock goes down twenty percent in response to the f c c how do we do a loss causation the f c c goes down twenty percent response to the f c c announcement when when the c v b finally gets around to saying we're going to write down to guarantee truth is nothing happens in the socket goes down a couple pennies and comes right back up how do how do we know what caused the loss here how can we do in last proximate cause nation analysis or to merely that will be done by experts but i would submit in terms of what drops are permitted that the drop in the investor's reaction to the announcement the f t c subpoena immediately followed by analysts reports we did you see these other reports that were out there the company kept saying no no no here's the investigation it's looking at these exact same issues and less than a month later they come out admit yes everything care has is worthless and they entered into forbearance agreements with garrett sometime in august we don't know when but we do know certainly by the first week in september that they admit that they have these forbearance agreements so when did they enter into those agreements as opposed to when they actually announced to the market that all this all centers on their relationship with garrett and their practices with garrett and that's what the market knew and understood the now from the investigation with the preceding information that was out there the analyst reports that immediately identify garrett as the issue and then the admission a month later yes the stock moves six cents but it also moves six cents down on a day when the entire index was up and by moving move right back up to expire price within several are things that come out later that are fairly damning on the charge offs and all of that so but then are you able to use that to say the earlier that the earlier statements were false i mean are you able to use all of the statements that are negative later to bolster the earl attack earlier but i think the best direct answer your question is we are not pleading fraud by hindsight we're not looking at information that came out in the market in relation to the corrective disclosures and trying to say they knew that sooner we have specific facts of information that they knew as early as september two thousand and eight we also and this is where i think the district court erred are you allowed to i mean are you are you allowed you're quite i'm sorry can you do it by hindsight in the sense because it does seem to be wh knew you know when they knew certain things it adds to the entire picture and that's what the court's after till labs have instructed is that you have to view the complaint holistically and you have to view all the allegations together to make a determination as thirty sixty days behind at that point in time and the person tension was made at the end of are you saying that there's evidence in the record that when the mid or be fairly easy to figure this out at the end of two thousand and nine when the representations are effective is there information any indication in the record that that garrett was delinquent on any loan at that time i can tell you that three days before the end of that quarter december two thousand and nine they gave a thirty eight million dollar one the stronger your strongest allegation but as to the other two wouldn't it when we instruct the judge to look for plausibility and you've got somebody who's current i think on its on its obligations at one point and another point goes in and says let's statement is we don't have we don't have doubts about the ability of people to repay the amounts like loan in part because it's not they're performing as agreed that we don't have any doubts about their ability to repay they do have a statement defending meyer says they are the wouldn't look at that and say they signed it later so it must be accurate as to later they have they have an obligation to fully disclose information known to them they can't wait and say well we didn't know it that we know now as i'm signing this ten k i had a meeting with garrett they told me they can't perform i know that no other lender in the market is giving them money i know every other lenders foreclosing on them i know they've lost eighty five percent of their equity but i'm going to check the market because as of two thousand and nine  me that yet so i'm going to sign this document that's misleading on the securities laws you cannot do that this is misleading it gives rise to a private cause of action for the state one hundred percent they are representing that they're not aware of any loans that have the credit problems of the borrower puts at risk those loans and when they signed that document that ten k they absolutely do have a say as of that date i mean you have to file a new ten k a new ten q within a month or so correct so even if they do it as of that they're signing it as a the date they signed that ten k you can't they're trying to it's essentially i think it's quintessential securities fraud they have material information at the time they signed that ten k and they're trying to play a game by saying well we didn't know then we certainly we know difference in other words we're talking about the difference between december thirty first and january tenth are certain exactly right and i just want to be clear and i understand you're focused on on the january tenth we have allegations in the then you look at the complaint as a whole holistically and i think the court erred in not looking at the entirety of the complaint and just focusing on a few allegations and the hearsay of the c e o thank you thank you and may it please the court i'll start with last call to lose completely and the case no it doesn't it's got a footnote today says it does not point out that says we're not addressing your case because the what it says it has a footnote that says that we're not going to deal with cases where there was a subsequent finding of fraud now it says a subsequent disclosure was that which disclosure and so your disclosure later is oh well let me just finish and you didn't you can tell me where i'm wrong your disclosure later is not withstanding the representation we made in our in our filing we're writing down news we're writing down this series no inconsistency is the answer we wrote down that low those loans in september because of what happened at that time we designated them non performing at that time that doesn't mean that they were non performing at some prior times ok but now now we know that this is we know that the c e o of tells them something and it's alledged in the complaint that your client was expressly told in january that garrett couldn't perform on these loans but garrett well no but they they did but the problem is they did perform and they we were told other things as alleged by c w nine about why they could perform they could perform because they were going to potentially get new do equity they were going to put they were going to sell assets they had one hundred fifty million dollars in equity to say take from we also had one when we gave them t ten million dollars in two thousand and eight or two thousand and nine whenever it was we had excess we had liens on the excess cash flows we had a lot of reasons to believe that the they were going to and i said i don't and i think and i take that is true for purposes of your your argument to the beginning of january two thousand and but there's an allegation that the c e o came to your client and said we cannot pay the loans and it's in and and you know you're going to see if they if they had an affidavit from the and then sometime soon thereafter he came back and said i went to the meeting and i told them this and why isn't that because i have thought of another reason well it's not just a question of plausible they have to show that they have a cogent and compelling inference of center science or and that it's the most compelling inference but it's there all because there are a lot of other reasons in the complaint in the based upon the facts of the complaint that it's to show why we had a reason to believe they would pay for example  they they did continue to pay on the loans which is reflected actually in the allegations of the younger of the of the complain itself which say that the loan principle balance was eighty five million before the class period that it was eighty four million during the class period as reflected in the makary annals report which i'd like to get to in a minute and at the end it was eighty two million so it kept going down down down and they don't have any specific they don't have any specific allegations about what didn't pay they just have this allegation about t january the hearsay allegation about january two thousand and ten but we are where is the data about where where are the facts about what loans didn't pay and how much they were behind during the class period there is none they have to make these allegations about you know to invoke the core inference core the core operations inference about meetings and and and memos and the long committee no no no information about what how much they didn't pay k'naan and to go back i mean i would go back to i can find it too so yeah we can read and i'm glad you're asking this because it's important to have the exact language we are not aware of any other loans as of september thirty two thousand and nine for which known credit problems of the borrower would cause serious doubts as to the ability of such serious doubts as the ability of such borrowers to comply with their loan repayment terms or any known events that would log result in the loan being designated as non performing at some future date so what happened between the date of that representation and your write off that because it's some point they did they did they couldn't pay and they didn't pay but here's here's the here's the reason i'm between may and the time let's to go back to the holistic science or analysis there's a couple things that are missing credit is performing as expected stop they hit the stop but here's what the rest of the sentence is but remains on classified status piron sub standard well we also have two forty eight the definition of sub standard which is adopted by the controller of the currency f c and so on and so forth a sub standard asset is in adequately protected by the current sound worth and paying capacity of the ababa war of the collateral pledged or the collateral pledge of any assets so classified must have a well defined weakness or weaknesses that jeopardize the liquidation of the debt they are characterized by the distinct possibility that the institution will sustain some loss if that's efficiency  assume we don't want any weight on the analyst reports on the way i just want to point is they plead this analyst report we said this to the market that's inconsistent with c n c or if we were trying to deceive the market and think that these loans were never go test have a thief but these problems then if you look at everything that happened i mean could they have really i mean they didn't just happen overnight they did they don't just happen overnight but we're not required to take the most pessimistic view on to on this one particular alone and until we really make a conclusion and that's a judgment call and the question is was there science or did we intentionally deceive the locket about the this two point five percent of our loan portfolio and again to go back to this analyst report that they quote out of context they write three sentences before what they quote management confirmed that n p a's that's non performing assets and c e o s net charge offs have not yet peaked and are likely to experience mounting pressure particularly c r e that's commercial real estate and reserve additions will likely persist that's inconsistent with somebody trying to deceive and this is where their check to one hundred percent of our loan portfolio the two point five percent that somehow becomes became the focus of this case that's that shows that the fact that we would say this to analysts shows that there was no science there and not only that there is the disclosures that we have in our ten k s and ten q s about continuing to theory aeration in the real estate market that's affecting our largest borrowing relationships that may cause our largest borrowers not to be able to pay and there might be charge offs and there might be right but then you make a separate representation but that's we only have serious doubts about the following borrowers you have a list but but but but again no one just finish we give you time you have you make a representation that we have serious doubts we don't have serious doubts except as to the following doubts about garrett correct right we don't have serious doubts because we knew that i guess what i'm saying is that the representation to me cuts the other way we know that the real estate market is bad but nonetheless we don't have any serious doubts about garrett why would we lie this is the p s l and this is not just nine b it's the p s l r a where the congress if you look at the legislative history judge callahan talked about fraud by hindsight and how broad by hindsight this is in the legislative history was something that we want to get rid of and this is a perfect example of fraud behind cite because what they're saying is just because they're saying that essentially because we wrote this off in september of two thousand and ten we should have done it sooner that's the classic story in securities litigation that congress meant to this you know but there isn't but that's the again that's another point of us how are they supposed to get the internal reports are not supposed to because that's the point of the p s l are way you have to get it first before you can bring a suit that's what congress or not your fears they have and  just need you to return to this here they have if we discounted is hearsay then you're right but if we don't this kind of is hearsay here they have an allegation supported by the c e o of the company that your client was told in january that h p had told invidia hey your chips are bad and you're going to have to pay up which went to the contractors the chips you gave us were bad and the this court held that didn't supply speakers that didn't tell that that doesn't tell us whether nvid actually believed it was going to be liable to h p for the chips that's one to numbers against vix visit that was there was that was a case where very similarly there was an allegation of what the company physics was told by someone else and the court said well that's not enough that there has to be something about what what they believed because just because they told us that they were considering bankruptcy that's essentially the allegation well ok they didn't they didn't i went to bankruptcy for how many more more months they're also obviously they're saying oh we're dire you've got to give us a break we're going to do they want to do that but they also told us they also told us that they were looking to fix the problem that they were going to sell assets they were going to look for equity and they had a hundred fifty dollars million dollars still in equity they had skin in the game so it's perfectly reasonable for us to have concluded that well we don't have serious doubts yet we may but these are argument oh well gee do that wasn't the disclosure fraud and then a year later there the f c c charges them and there's a consent decree and whatnot or there's a there's a court case and they're guilty ok or something well ok that didn't happen that actually indicates that there was that not just not simply that oh you took a write down on something that somebody says you should have written down earlier but you have to have some kind of evidence that you should have taken the right down to earlier and  because this court in apollo held that rule nineteen now applies to loss causation sensually similar to that it's similar to the tell apps analysis and they don't have that here the two things they argue are first of all this blogger look at the blogger they even use the word statement ok in fact in loose there was a restatement right it's worse than the situation here here we simply said we're writing this down we didn't say we were writing this down because we should've written it down a year ago and so we're restating our accounts for the last year ok and luce they held that that restatement didn't count because there was no stock drop associated with right there was no causation but here we don't even have that that's the situation that's a restatement and s t c charge something that actually indicates fraud after the stock drop that doesn't really count ok and they don't have that here not only that that stock dropped they you know the stock drop that they allege in september again you have the point judge her with the stock went down and then it went up eight cents the next one day and that doesn't suffice course their argument is that the market had already absorbed all the information from you know why the well actually no one another reason why the stock that was basically no stock drop was another reason why there was a sign or we took a reserve we took what we wrote down thirty four million dollars of the eighty two million dollars which have been paid down from eighty five as i mentioned before we wrote down thirty for what we wrote off thirty four million in september and you know what the charge against earnings we took at that time was only nine million dollars because we had a route we took reserves and we told the market about those reserves which again is another point in the holistic analysis on c n n demonstrating why it is that there was no c answer here we ask one more fact i think she might have even cited the district court decision and lose and basically she loses directly follows on from corinthian colleges where you were basically this court said look if if you're disclosing the risk of something that's not sufficient to constitute the something