asks you how you are today with a certain emphasis on the word today to underscore the common sense notion that i am asking about now currently and in the present yet in this case today has somehow been given a different meaning two thousand and eleven when a star disclosed slowing demand and an inventory correction by customers after recent explicit denials not only of the inventory buildup but of the possibility of a new tory build up by its customers one o admitted that the company saw the impact of the slowdown a couple of months before the disclosure on march eighth and that it was not limited to just one customer the other co c e o admitted that the slowdown was more pronounced starting at the beginning of been under the heightened pleading standard here i mean and then and then are our precedent which seems to require a lot of specificity with respect to the to the allegations right in terms of falsity the pleading standard should be the who what when and why the statement was false with respect to the day in the inventory build up at bottom plaintiffs are alleging that the defendants were saying that there were strong demand at a time where they admittedly knew that there was weakening demand plausibility comes in we see ensor and in this circuit there certainly intermixed but the standard is as plausible equally plausible and i think it's equally plausible to say that when defendants are saying today the manager strong that they are in fact talking about the current counsel just speaking only for myself i don't have much difficulty with the falsity but i'm concerned about the pleading of scientists are and whether there is enough here in the current complaint to demonstrate that finis had an intent to defraud or whether instead it simply didn't have sufficient or accurate information from its customers but this is so would you address what pleading exists in this complaint about siam to her and then secondly whether there's more of that you could have pleaded such that it if it isn't sufficient it should be remanded right well in terms of what more could have been pleaded and the district court mentioned something about having an internal report or evidence to show that defendants were aware of the inventory that was certainly the smoking gun evidence but as tell the us and the supreme court  explain that you do know i need a smoking gun evidence to make your case so working backwards from march eighth in the disclosure of the inventory buildup and slowing demand what we have are to the co c e o s admitting that they knew for a while that the man was slowing and that and in a more pronounced way by february if you look to the seventh circuit and tell apps to intel of came back down from the supreme court i think that's address where they say even if defendants thought that it might correct in the future or that by the end of the quarter which is an argument has been made that defendants that demand would rebound that at the time they are making the statement that's a false statement what we do have is also we have the company touting throughout the class period we know what our customers need they have to tell us we have to know for their needs we have detailed reports sometimes by weekly reports that customers were deceive and the issue for me is that they're relying on third party use their customers to tell them about inventory because they don't go out personally and count so there's at least there's no allegation that they go out personally and count so i think judge work was asking a region of the same question that is in my mind which is why do you see here that demonstrates  r is a strong inference that there is wrongful intent as distinct from bad information so let's let's take for the argument's sake that it's correct that  inventory of level of their customers and they genuinely had no idea yet at the same time they're telling the market we haven't seen any of these issues we don't see an inventory build up sure one or two customers day that's reckless for creating an impression to the market under the most recent president of resource resource in the low i q as he says it comes in i guess a statement that comes close and you started up your argument with with this is th buildup and the other is demand but to get back to the incentive i think we have to look at what happened and the stock chart tells the story for five quarters the stock stays the same price or around the same price despite record earnings and then as soon as the inventory build up is denied the stock price shoots up and it wasn't benign and it wasn't it wasn't an accident it was on purpose right after those statements there's a stock offering for one hundred eighteen million and right after those statements  sales selling at forty and heightened levels for seven million dollars from insider sales at increased prices you know i don't want to be being naive that says that one hundred twenty million and seven million personal gains might not be as big and some of the more notable frauds are over time but to be able to cash in a nearly triple price on the offering and inside sales within this short window of a few months is certainly investigation see what came out i think we have to be more informed by this the decisions of the circuit and what the standards are pleading standards are for recklessness and for emissions in our most recent complaint we know there's only false statements without emissions and i think recklessness would play a bigger factor is any of the i'm sorry go ahead could any of the confidential witnesses cited i'm curious following up on judge ward last question side in tailored focused discovery i it's what i was going to ask you about is is there anything was there anything pending in the district court requesting discovery on this specific point there was no but i also like to to address some more the september eighth statement and getting beyond the fact of the interim whether or not there center for the same in the district court's opinion on falsity i like to deal with the parents that are c disseminate statements made by the company or by his executives and there's a difference between disseminating and making but also on the facts here this is an investor events where investors were present and the co c e o finnis started every intention of reaching investors in the market and the end of the report indicates that the title is in evening with management if in a sorry speaking directly about finesse are in the mentions parent thetic lee that other companies have made similar denials not coincidentally one of those other companies actually has a sustained fraud complaint against them with the similar allegations here a clear where they also represented that the man was strong there was no inventory buildup and it turns out that that was not the case i don't think there's any indication or any declaration or any facts supporting the notion that the analysts were somehow informed by third parties or by the competing companies affinis on and i or referencing two new cases apollo and intuitive on the subject and while i think those facts are easily distinguished while also i to point out ninth circuit precedent that a later three judge panel cannot overrule a previous three judge panel january and february statements if there's no further questions i reserve my time you may do that thank you mr burn it please the court good morning your honor is surely weiss d l a piper for the defend dance and may i also introduce david preview with me and my clients general counsel christopher brown and joshua  also counsel with intissar your honour's the private securities litigation reform act imposed the highest pleading standards for pleading securities fraud known to the civil law those pleading standards are as follows with respect to a challenge statement alleged to be misleading the plaintiffs must set forth particular facts showing why it was misleading at the time it was said i can't so i think you know again the bar is higher but it's not insurmountable and i guess to my way of thinking there's of allegations that opposing counsel describe sufficient to create an inference a strong inference of science are there not at all your honor and i'll come back to falsity but first of all the stock sales did not occur what plaintiff is referring to is the reservation of stock by the company this is a transaction between the company and mr ralls or mr  but but mr rawls sold those stock his stock was deducted at the time a vest and that the company holds on to a certain amount of stock and plaintiff is pretending that that is stock sales that is not stock sales number one but there's there's also there also are allegations in the complaint from confidential witnesses that it's industry practice for a customer to explain the level of their inventory in negotiations before they send in a purchase order and that specifically their customers generally have told finesse are their demand volume  and that they receive these forecasts white wire isn't that enough to show that that they actually knew that there are statements were false made the statements anyway they're not at all sufficient your honor if your honor scrutinizes those allegations all they say is that confidential witnesses generally say that inventory and pricing are discus negotiations and nowhere is it alleged that finnis are was told that their customers were stockpiling inventory well if they are right i guess my question why can't we infer that they discuss them accurately well your honor because that's not an inference that you can draw that is cogent and compelling when you have an inference you have to have an inference that is at least as cogent as and compelling for cyan tr and there is no there is no basis in order to infer that the inventory levels were being communicated precisely to thinness are and accurately and in fact the then the customers have every reason not to communicate accurately they want there has been a historical supply shortage in an order to get an allocation why on earth would they be accurate and even if they were not intentionally being inaccurate they are motivated to do their own forecasts on the high side and to err on the side of of their own forecasts so finishers information is twice removed this is distinguished from rescind gilliatt where the company itself was aware of the corrosive pipes or the fact that they were off selling label here finisterre is dependent on what information it is receiving from a third party but so you're saying the plaintiffs i guess are short for out what in your view that the plaintiffs need to lead to customers discuss the inventory levels and that they revealed an inventory build up your honor there's nothing if you take a look at those confidential witness allan you know what i'm just saying is that what you're saying is required because that seems like that's almost impossible me a very difficult her i don't like that i think that's exactly what that they need to say they need to say that their confidential witnesses said that they were present at the negotiations or that they saw the communications and if innocent was told that the the customers were stockpiling or building up inventory only that renders i mean if you tells statement he's he doesn't pretend to have perfect knowledge he says well couple of people could be stockpiling but it's not how is it let me at give you an example i'm i'm working a paragraph sixty six for example where confidential witness number one was personally involved in making purchases from fairness on her and that customers and i'm i'm leaving out some words but the customers tell famous are the volume of demands in advance for weeks or more before making a purchase and that during the annual negotiations see this person discussed with fairness our of the projected volumes volume of orders and the current year volume so you're asking us to assume that the amounts that are discussed in those discussions are false or inaccurate your honor all it says is that there was discussions over a three month period of time this is dynamic time period the discussions are not finalized until december i know that you are you your argument seems to be that we have to assume that when the customers reveal their demand or their inventory levels that we have to assume that they weren't telling the truth i think your honor on the basis of those allegations there is no reason for the court to draw an inference that there was an accurate transmission of information on a real time follows that three month period of intense negotiations well which took place the one or two months later that both mr ross and mr gurr tell and met they had already seen the slowdown one way to interpret it you can interpret it other ways as well well your honor i think that if you look at it in context first of all even if you take the statements out by themselves the statement that demand is strong in case after case after case has been found nonspecific in order to support fraud demand was still strong they beat expectations in the third quarter which is what they announce is very today finds itself in a very strong demand environment that's a true statement your honor i mean that that is not tethered to a percentage or you know a particular level or and it was it was a true statement they beat analyst expectations even for the third quarter and he is coming off of looking at i mean he's saying basically today you know i'm showing you what what we've done and he's his references point of reference is the past but even if it wasn't the point of the past your honor the mere statement demand a strong it was still strong even as of that day and it is it's a circumstance in which a statement that the man is strong would be actionable under the securities law well i specificity that at the time that the defendant is making that statement he has been told that he's not going to get orders that he had projected to the public that might be a circumstance where that might be misrepresentation i think basically what plaintiff is pointing to is in march this rolls a saying with hindsight ok a couple of months ago so that if you back it up a couple of months ago if it's to the day you're basically saying that first week in january mr wallace should have realized that to me and was not strong when in fact i think the indications overall to them was that demand remained there is strong can just a second there is there's nothing to runner in the record that shows that on september eighth two thousand and ten inventory levels had increased or stockpiling had occurred there's absolutely nothing in the record that points to that statement being false number one number two under the law of janice that statement where you know the analyst basically characterizes the statement and groups it with two other companies that cannot be attributed to mr tel is actually not specifically referenced with respect to that statement so that that statement cannot be judged to be false at all with respect to the december second statement what mr telus saying is on the telecom side they can be one or two guys who try to build their own inventory but by far the majority of customers are expediting products that that means they're they're putting in orders to us this is you can take this to the bank we've got orders and it doesn't look to us not visible to us at all all these quarters if they are building in inventory that's hardly a definitive statement that they've been told that they've been told or that they that they know for sure what their customers are doing except that when they were asked about the build up of inventory they could easily have said we're not sure we don't know we have to rely on our customers but instead they said no there's no build up well no i don't think that's what he said he says it's not visible to us it's not visible to us that means we are not we don't have visibility that means we don't know for sure and yes they do there's no question they ask questions you have to have side by side with the statements that i was referring to earlier that said that they were told on a rolling basis what the inventories were by their customers which takes us back to the question of whether we have to assume that those statements were by the customers to friend us and you are i don't think you can infer that strong a statement from the with the allegation about the confidential witness it is simply it is intentionally vague about what was discussed all he all that witness says is this was discussed they don't say finnish star was told that we are putting aside how whatever euphemism they wanted to use we're putting aside additional inventory just in case allegation to that effect and it is intentionally vague the other confidential witness wasn't there and has no standing to say what what occurred and it's doubtful whether or not this person was there during the entire period so i think the court is reading way too much into their confidential witnesses allegation and i think counsel admitted themselves they weren't able to get the information i don't think you even really early back and  enter you have no stock sales at all by mr rawls and with respect to mr gurr tell they are these twenty five thousand dollar programmed increment they don't there's no allegations that they're suspicious in two completely different things now i mean there is certainly a the impact on each other economically not necessarily your honor there's just not a linear relationship between negotiation for prices and obviously what they're communicating to fit a size that they have a great need they have a great demand and that's what's being communicated to finish are what they're not communicating to finish saw is that they're having a great demand because they're stockpiling they are not motivated  that's again with respect to falsity the january eleventh and february statements we believe that the court was correct viewing those in context and determining that mr rolls was comparison and they're not false standing on their own and the fact that there might have been some slowdown in orders when viewed with hindsight does not mean that demand was not strong and does not mean that demand was not historically strong and mr rawls was not acting with c n n or there's no reason to conclude that he had an intent to deceive or defraud he has no motivation to do that i think  point something minutes remaining thank you let me get right to the bottom of c answer recklessness must be considered but was not considered by the district court in response malone a ninth circuit decision which came out during briefing the court found it was reckless where there's a lending an element of certainty to a situation previously indicating risk and they were able to bridge the sea enter a gap in their allegations because defense discussed discussing him to hear this information that would have been discussed if they had made an inquiry as just like reason alone or if they had made an increase they certainly would have made a discovery when you're asked for five quarters whether or not there's been an image  you should enquire or if you answer the question you are at least implying that you have inquired gilliard says the same thing in this in this circuit created the impression that the man was strong which it was but for reasons that were not will understood by investors if you look to the third circuit in of a repeated focus questions by analysts not only indicated that the issue was material to investors but the confidence unhedged denials made obvious they should remain in korea but they went beyond that they said we get very specific rolling forecasts twelve months out and then they made the statement on seven second is not visible to us at all that all of these quarters they are building in three it's not plausible that inventory was built in the week before march eighth or even the month before march eighth if you just do the math they had eight percent growth you can't build a name tori in that quarter the inventory was being built over the five corners in which analysts were questioning whether it's good i don't know what that means is not a sale stock was sold for the benefit of these defendants whether they had the stock in their possession and sold it or whether it came from the company and then was sold the point is there's no evidence on what it was all we have is the form fours  publicly filed to show stock was disposed of and the benefit went to these defendants so the amounts and the timing may have been pre determined that may not be suspect in a self but look at the timing of when it occurred and what the information was no alleged all three defendants had a sale or some disposition on march eighth at a price of forty dollars and forty cents give or take of my memory's a little off and it was after those sales at the end of the business day after the stays flat only after they say we have no visibility into imagery build up only after they say we have rolling forecasts to tell us what our customers in our customers have to tell us we need to know does the stock jump nearly three times and that's when they do the offering that's two times with their sales pre determined or or the tax benefit that i have there's no evidence on the record of what that is it's only in their briefing it's more of a summary judgment issue as would whether or not these  very much the arguments of both parties