Opinion ID: 1434342
Heading Depth: 1
Heading Rank: 6

Heading: The Statements Contained in the Internal Jones Day Memos

Text: The sixth additional fact relied on by the investors is that Jones Day, a law firm serving as outside counsel to Diebold, prepared two memos in 2003-2004 regarding whether selling uncertified voting machines to California counties would constitute a breach of contract and whether voting systems could be modified without California's approval. These memos concluded that such sales would likely breach Diebold's contract with California and that California's approval would be needed for system modifications. According to the investors, these memos show that Diebold's top executives knew or should have known that the Company could not report revenue from sales of voting machines that did not comply with state election laws because these voting machines would result in a breach of contract. These memos, however, are not probative of the Defendants' state of mind because the complaint does not allege that the Defendants ever read, received, or were informed of the existence of these memos. The memos, moreover, have nothing to do with whether revenue could be properly recognized from the voting machine sales. These memos therefore could not have put the Defendants on notice that revenue from the voting machines would be improperly recognized.