IN THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF TEXAS 

DALLAS DIVISION 

MATT BRODY, on behalf of himself and all 

others similarly situated, 

 Plaintiffs, 

v. 

ZIX CORPORATION, RONALD A. 

WOESSNER, et al., 

 Defendants. 

§ 

§ 

§ 

§ 

§ 

§ 

§ 

§ 

§ 

§ 

§ 

Civ. Action No. 3:04-CV-1931-K 

(Consolidated with 

Civil Action No. 3:04-CV-1998-K 

Civil Action No. 3:04-CV-2018-K 

Civil Action No. 3:04-CV-2041-K 

Civil Action No. 3:04-CV-2113-K 

Civil Action No. 3:04-CV-2161-K 

and 

Civil Action No. 3:04-CV-2337-K) 

JOINT REPORT 

PURSUANT TO FED. R. CIV. P. 26(F)

Pursuant to the Order entered on February 25, 2007, and in accordance with Fed. R. Civ. 

P. 26(f), and applicable local rules, the parties conducted a telephonic conference on March 16, 

2007. Lead Plaintiff, the Shinabarker Group,1

 was represented by its Counsel, Marvin L. Frank 

and Lawrence D. McCabe of Murray, Frank & Sailer LLP, Eric Lechtzin and Mark Danek of 

Schiffrin Barroway Topaz & Kessler, LLP, and Roger F. Claxton of Claxton & Hill. 

Defendants2 were represented by their Counsel, Gerard G. Pecht, Anne M. Rodgers, and Laurie 

A. Weiss of Fulbright & Jaworski L.L.P. In accordance with the Court’s Order, and the parties 

understanding of this Court’s desire for an expeditious schedule, the parties hereby submit the 

following Joint Report. 

 

1

 The “Shinabarker Group” is comprised of Terry Shinabarker, Joseph Simone, Carlo D’Amico, and C. Eric Ray. 

2

 The Defendants are John A. Ryan (“Ryan”); Daniel S. Nutkis (“Nutkis”); Steve M. York (“York”); Ronald A. 

Woessner (“Woessner”); and Dennis F. Heathcoate (“Heathcote”) (collectively the “Individual Defendants”) and 

Zix Corporation (“ZixCorp” or the “Company”) (together with the Individual Defendants, “Defendants”). 

 

 Case 3:04-cv-01931-K Document 78 Filed 04/06/07 Page 1 of 13 PageID 1306
1. Brief Statement of the Claims and Defenses. 

a. Lead Plaintiff: 

Lead Plaintiff asserts that Defendants violated Section 10(b) of the Securities Exchange 

Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, and that the 

Individual Defendants also violated Section 20(a) of the Exchange Act, by making materially 

false and misleading statements regarding ZixCorp’s core product, PocketScript, between 

October 30, 2003 and May 4, 2004, inclusive (the “Class Period”). In particular, it is alleged that 

Defendants substantially inflated the number of physicians already “using” PocketScript and the 

number of devices “deployed” by Zix. Moreover, based on the allegedly false number of 

“deployed” physicians using PocketScript, Zix issued revenue projections for fiscal years 2003 

and 2004 that were directly contradicted by then known facts. Defendants engaged in these 

actions knowingly and/or recklessly. 

b. Defendants: 

Pocket Script was a start-up technology in an emerging market that had always incurred 

significant losses, all of which was fully disclosed to shareholders. Defendants made no material 

misstatements or omissions. In addition, Plaintiff cannot establish causation because the alleged 

misstatements are not connected to any corrective statement as required by Dura Pharm., Inc. v. 

Broudo, 125 S. Ct. 1627 (2005). Plaintiff also cannot show that the alleged misrepresentations 

were made with scienter. John Ryan, the alleged primary speaker, sold no ZixCorp shares during 

the alleged class period so there is no motivation for any misrepresentation, let alone scienter. 

Moreover, a class should not be certified for many reasons, including the very large percentage 

of short sellers (who were betting the stock price would fall) who lack standing to sue and to 

whom the fraud-on-the-market presumption of reliance does not apply. 

 

 Case 3:04-cv-01931-K Document 78 Filed 04/06/07 Page 2 of 13 PageID 1307
2. Proposed Time Limit to file Motions to Join Additional Parties. 

Any motion to join additional parties shall be filed no later than August 17, 2007. 

3. Proposed Time Limit to Amend the Pleadings. 

a. The parties may amend any affirmative pleadings no later than August 17, 2007, 

except with respect to amendments as may be necessary to conform the pleadings 

to evidence pursuant to Fed. R. Civ. P. 15(b), which may be filed at any time, 

even after judgment. 

4. Proposed Time Limit to File Various Motions Including Dispositive Motions. 

a. Motion for Class Certification. 

i. Lead Plaintiff shall move for Class Certification no later than April 13, 

2007; 

ii. Lead Plaintiff’s Motion for Class Certification shall include a supporting 

affidavit(s) and designation of Lead Plaintiff’s expert(s) in support of class 

certification; 

iii. Defendants shall complete the depositions of Lead Plaintiff and any other 

proposed class representative(s) and Lead Plaintiff’s expert(s) no later 

than 45 days after service of the Motion for Class Certification; 

iv. Defendants shall designate and provide report(s) of their expert(s) on class 

certification no later than May 28, 2007; 

v. Lead Plaintiff shall complete the depositions of Defendants’ expert(s) no 

later than June 27, 2007; 

vi. Defendants shall file their opposition to the Motion for Class Certification, 

including any motion seeking to disqualify expert witnesses (including 

 

 Case 3:04-cv-01931-K Document 78 Filed 04/06/07 Page 3 of 13 PageID 1308
motions pursuant to Daubert v. Merrell Dow Pharm. Inc., 509 U.S. 579 

(1993) (“Daubert motions”)), no later than July 27, 2007; and 

vii. Lead Plaintiff shall file a reply, including an opposition to any motion 

seeking to disqualify expert witnesses (including Daubert motions), no 

later than August 16, 2007. 

b. Motions for Summary Judgment. 

i. Any motions for summary judgment shall be filed no later January 28, 

2008; 

ii. Opposing papers shall be filed no later February 27, 2008; and 

iii. Any reply papers shall be filed no later March 13, 2008. 

5. Proposed Time Limit for Initial Designation of Experts. 

a. Each party shall identify their respective trial experts pursuant to Fed. R. Civ. P. 

26(a)(2)(A) and serve expert reports pursuant to Fed. R. Civ. P. 26(a)(4)(A) for 

issues on which that party bears the burden of proof no later than November 1, 

2007; 

b. Depositions of the affirmative experts must be completed no later than 15 days 

after the after the service of the expert reports. 

6. Proposed Time Limits for Responsive Designations of Experts. 

a. Each party shall identify their respective trial experts and serve responsive reports 

shall be served no later than November 30, 2007; 

b. Depositions of responsive experts must be completed no later than no later than 

December 14, 2007; 

c. Rebuttal reports shall be exchanged no later than December 28, 2007; and 

d. Rebuttal expert depositions shall be completed by January 14, 2008. 

 

 Case 3:04-cv-01931-K Document 78 Filed 04/06/07 Page 4 of 13 PageID 1309
7. Proposed Time Limit for Objections to Experts (i.e., Daubert and Similar Motions). 

a. The parties shall serve any motions seeking to disqualify expert witnesses 

(including Daubert motions) no later than March 31, 2008; 

b. Oppositions to any motions seeking to disqualify expert witnesses (including 

Daubert motions) shall be served no later than April 18, 2008; and 

c. Replies to any motions seeking to disqualify expert witnesses (including Daubert

motions), if any, shall be served no later than April 29, 2008. 

8. Proposed Plan and Schedule for Discovery. 

a. Fact Discovery. 

i. Lead Plaintiff served its first request for production of documents on 

October 20, 2006, seeking discovery regarding the following subjects, 

among others: 

1. enrollment and deployment of PocketScript; 

2. historical and forecasted deployment of PocketScript and historical 

and forecasted number of prescriptions issued by physicians on 

PocketScript, but not the actual underlying prescriptions; 

3. sales forecasts for PocketScript; 

4. technical issues regarding the installation of PocketScript; 

5. physician complaints and/or inquiries regarding security concerns 

with the wireless Local Access Network (“LAN”) system for 

PocketScript PDAs; 

6. technical problems or concerns regarding PocketScript customers 

or distributors, including but not limited to: 

a. wireless connectivity or receptivity of PocketScript PDAs; 

 

 Case 3:04-cv-01931-K Document 78 Filed 04/06/07 Page 5 of 13 PageID 1310
b. availability of pharmacy contact information; 

c. security of information transmitted via PocketScript. 

7. transactions in Zix common stock by the Individual Defendants, 

and or any member of their families; and 

8. Defendant’s bases for each of the sales and earnings forecasts 

issued during the Class Period. 

ii. Defendants have undertaken a search for documents responsive to Lead 

Plaintiff’s first request for production of documents and have identified 

approximately 33 boxes of responsive documents as well as 350 gigabytes 

of data (or approximately 18 millions pages) of documents that may be 

responsive to Lead Plaintiff’s requests. These documents have been 

transferred to an electronic database that is being screened for responsive 

non-privileged documents that Defendants intend to produce to Lead 

Plaintiff on a rolling basis beginning on or before April 15, 2007. 

Defendants intend to complete their production of non-privileged 

documents responsive to Lead Plaintiff’s first requests for production of 

documents by July 31, 2007. 

iii. Electronic Discovery. The parties have agreed to meet and confer 

regarding the scope of electronic discovery, the preservation of electronic 

documents, the method for production of electronic documents, and the 

format for production of electronic documents. 

 

 Case 3:04-cv-01931-K Document 78 Filed 04/06/07 Page 6 of 13 PageID 1311
iv. Defendant ZixCorp served its first request for production of documents 

and first set of interrogatories on March 23, 2007, seeking discovery on 

the following subjects, among others: 

1. Lead Plaintiff’s purchase, ownership, and sale of ZixCorp 

securities; 

2. the identity of and communications with the alleged “confidential 

sources” cited in the complaint; 

3. the factual basis, if any, for lead plaintiffs’ allegations; 

4. communications between the lead plaintiffs and with other 

potential members of the alleged class; 

5. the adequacy of the lead plaintiffs as proposed class 

representatives; 

6. whether the lead plaintiffs are typical of the class they seek to 

represent; 

7. Lead Plaintiff’s reliance on any alleged misstatements or 

omissions; and, 

8. any alleged damages claimed by lead plaintiffs and the alleged 

class. 

Lead Plaintiff intends to respond to the discovery on or before April 30, 2007, and to 

produce all responsive non-privileged documents by that date. 

b. Completion of Fact Discovery. Fact discovery shall be completed by December 

14, 2007. 

 

 Case 3:04-cv-01931-K Document 78 Filed 04/06/07 Page 7 of 13 PageID 1312
9. Proposed Changes in the Limitations on Discovery Imposed by the Federal Rules, 

Local Rules and Other Limitations on discovery 

a. Confidentiality. The parties will negotiate a stipulation and proposed order 

regarding the confidential treatment of documents produced. Until such time as 

an order is entered by the Court, the parties agree that any documents produced 

will be limited to review only by the parties’ respective counsel, i.e., attorney’s 

eyes only. 

b. Number of Depositions.

i. Lead Plaintiff’s Position. In recognition of the fact that there are 

presently six individual defendants (and two additional defendants who 

were voluntarily dismissed, but whom Lead Plaintiff believes to have 

knowledge relevant to the case at bar), Lead Plaintiff believes that the 

limit of ten (10) depositions is insufficient. Lead Plaintiff believes it 

should be entitled to take twenty (20) merits depositions in this matter. 

ii. Defendants’ Position. Defendants believe the limit of ten depositions is 

ample. However, Defendants will consider in good faith any request by 

Lead Plaintiff to exceed ten depositions. 

c. Duration of Depositions.

i. Lead Plaintiff’s Position. Lead Plaintiff believes that five (5) of the 

depositions noticed by Lead Plaintiff may reasonably exceed the “one day 

of seven hours” time limitation for the taking of depositions set forth in 

Fed. R. Civ. P. 30(d)(2), provided that at the time any such deposition is 

noticed, Lead Plaintiff also provides notice of its intent to exceed the 

limitation. Lead Plaintiff reserves its right to request more than five (5) 

 

 Case 3:04-cv-01931-K Document 78 Filed 04/06/07 Page 8 of 13 PageID 1313
depositions to reasonably exceed the time limitation for the taking of 

depositions set forth in Fed. R. Civ. P. 30(d)(2). 

ii. Defendants’ Position. Defendants believe there is no need to exceed the 

one day of seven hours limitation for taking depositions. However, 

Defendants will consider in good faith any request by Lead Plaintiff made 

at least five days in advance of the deposition to exceed the time limitation 

for any particular witness. 

10. Proposed Trial Date, Estimated Length of Trial and Jury Trial Demand. 

a. Proposed trial date. 

Monday, May 5, 2008. 

b. Estimated Length of Trial. 

The parties estimate that a trial in this matter will take three (3) weeks or fifteen days. 

c. Jury Trial Demand. 

Lead Plaintiff and Defendants have properly demanded a jury trial. 

11. Proposed Date for Further Settlement Negotiations. 

The parties previously broached the issue of settlement; however, there are no on-going 

negotiations at the present time. The parties have agreed to seek mediation (see paragraph 14, 

below). 

12. Proposed Schedule for Rule 26(a)(1) Disclosures. 

The parties will serve Rule 26(a)(1) Initial Disclosures no later than 30 days after the 

filing date of this report. 

13. Whether the Parties Consent to Trial before a U.S. Magistrate Judge. 

At this stage of the litigation, the parties do not consent to a trial before a Magistrate 

Judge. 

 

 Case 3:04-cv-01931-K Document 78 Filed 04/06/07 Page 9 of 13 PageID 1314
14. Whether the Parties are considering Mediation. 

The parties have agreed to submit to mediation after a reasonable opportunity for 

discovery, in July or August 2007, before the Honorable Layn R. Phillips. 

15. Other Scheduling and Discovery Issues. 

None at this time.

16. Necessity of Conference before the Court. 

The parties do not believe a conference with the Court is necessary at this time.

17. Other Matters. 

None at this time. 

 

 Case 3:04-cv-01931-K Document 78 Filed 04/06/07 Page 10 of 13 PageID 1315
Respectfully submitted, 

Dated: April 6, 2007 

CLAXTON & HILL FULBRIGHT & JAWORSKI L.L.P.

s/Roger F. Claxton s/Anne Rodgers

Roger F. Claxton Gerard G. Pecht 

State Bar No. 04329000 State Bar No. 15701800 

Robert J. Hill Anne M. Rodgers 

State Bar No. 09652100 State Bar No. 17133025 

3131 McKinney Avenue, Suite 700 Houston, Texas 77010-3095 

Dallas, Texas 75204 1301 McKinney, Suite 5100 

Telephone: (214) 969-9029 Telephone: (713) 651-5151 

Facsimile: (214) 953-0583 Facsimile: (713) 651-5246 

Liaison Counsel for Lead Plaintiff Karl G. Dial 

 State Bar No. 05800400 

2200 Ross Avenue, Suite 2800 

 Dallas, Texas 75201-2784 

 Telephone: (214) 855-8050 

 Counsel for Defendants

Marvin L. Frank 

Lawrence D. McCabe 

MURRAY, FRANK & SAILER LLP 

275 Madison Avenue, Suite 801 

New York, NY 10016 

Telephone: (212) 682-1818 

Facsimile: (212) 682-1892 

-andEric Lechtzin 

Mark Danek 

SCHIFFRIN BARROWAY TOPAZ & KESSLER, LLP

280 King of Prussia Road

Radnor, PA 19087 

Telephone: (610) 667-7706 

Facsimile: (610) 667-7056 

Co-Lead Counsel for Lead Plaintiff 

 

 Case 3:04-cv-01931-K Document 78 Filed 04/06/07 Page 11 of 13 PageID 1316
CERTIFICATE OF SERVICE 

 I hereby certify that on this 28th day of November, 2006, I electronically filed the 

foregoing document with the clerk of court for the U.S. District Court, Northern District of 

Texas, using the electronic case filing system of the court. The electronic case filing system sent 

a “Notice of Electronic Filing” to the following attorneys of record who have consented in 

writing to accept this notice as service of this document by electronic means: 

Gerard G. Pecht 

FULBRIGHT & JAWORSKI L.L.P.

1301 McKinney, Suite 5100 

Houston, Texas 77010-3095 

gpecht@fulbright.com

Karl G. Dial 

FULBRIGHT & JAWORSKI L.L.P.

Texas Commerce Bank Tower 

2200 Ross Avenue, Suite 2800 

Dallas, Texas 75201 

kdial@fulbright.com

 

 Case 3:04-cv-01931-K Document 78 Filed 04/06/07 Page 12 of 13 PageID 1317
690500.1 

 I further certify that a true and correct copy of the foregoing document was sent by first 

class mail to counsel listed below that have not consented in writing to accept this notice by 

electronic means: 

Eric J. Belfi 

Marvin L. Frank 

Lawrence D. McCabe 

Murray, Frank & Sailer LLP 

275 Madison Avenue, Suite 801 

New York, NY 10016 

Eric Lechtzin 

Heather Tashman 

Schiffrin & Barroway, LLP 

280 King of Prussia Road

Radnor, PA 19087 

Thomas A. Dubbs 

Goodkind Labaton Rudoff & Sucharow 

100 Park Avenue 

New York, NY 10017 

Frank E. Goodrich 

Baron & Budd 

3102 Oak Lawn Avenue, Suite 1100 

Dallas, Texas 75219 

Jeffrey S. Nobel 

Andrew M. Schatz 

Schatz & Nobel 

1 Corporate Center, Suite 1700 

Hartford, CT 06109 

s/Roger F. Claxton 

Roger F. Claxton

 

 Case 3:04-cv-01931-K Document 78 Filed 04/06/07 Page 13 of 13 PageID 1318