[00:02:13] Speaker 05:
I thought that...

[00:02:43] Speaker 05:
if it passed the clinical trials and if the FDA approved it and you know if those clinical trials I guess replicated what had been found in the laboratory then this could be a cure.

[00:02:56] Speaker 05:
So why in view

[00:03:36] Speaker 02:
in your body.

[00:03:38] Speaker 02:
A body is not a Petri dish.

[00:04:03] Speaker 02:
we have language where they are repeatedly referring to the body, not to petri dishes,

[00:04:45] Speaker 02:
intensity and credibility sufficient to effectively

[00:05:21] Speaker 02:
am I approved yet?

[00:05:22] Speaker 02:
They make clear in their statements and in a Brunswick statement that if we were approved today, and by the way, saying if we're approved today pretty much means that they weren't talking about a hypothetical antibody because you can't get a hypothetical antibody approved today.

[00:05:35] Speaker ?:
But he's talking about if we were approved today, then everyone could go back to work, i.e.

[00:05:40] Speaker 02:
we have something that works, and we know that it works in people because we're talking about it being infused, we're talking about it being in your body.

[00:05:55] Speaker 02:
I'm glad you brought that up, Your Honor, because that was the second part of your previous question, and I didn't get to that yet.

[00:06:03] Speaker 02:
The if statement is the one that comes a week later, and that's the one that we're saying reveals the truth.

[00:06:08] Speaker 02:
And it's not just one if, it's three ifs of might and a potentially, which is completely different from, you know, there is a cure.

[00:06:39] Speaker 03:
what you hear on Fox News with a grain of salt.

[00:07:23] Speaker 02:
differ.

[00:07:24] Speaker 02:
That's not this case.

[00:07:25] Speaker 02:
It is not a situation where it's obvious.

[00:07:28] Speaker 01:
Just to kind of, I know the things that you're saying that you think were either false or misleading, but I just want to clarify.

[00:07:35] Speaker 01:
Just Mr. Zenoff alleged that Mr. Chi or Mr. Brunswick as senior executives withheld any relevant information concerning STI 1499.

[00:08:03] Speaker ?:
statements.

[00:08:04] Speaker ?:
That was not revealed.

[00:08:06] Speaker 05:
How is that different from saying, look, this has performed well in the laboratory, but we still have to go through actual clinical trials with real people and get the FDA to approve it before we can market it?

[00:08:20] Speaker 02:
Well, see, if your honor had made the statements to Fox News, then there would be no liability here, but that's not what they said.

[00:08:25] Speaker 02:
That's not what they said.

[00:08:26] Speaker 02:
They came out on you.

[00:08:27] Speaker 02:
We want to emphasize they're secure.

[00:08:29] Speaker 02:
There's a

[00:08:35] Speaker 02:
I respectfully disagree with the district court's analysis that this is huffery.

[00:08:39] Speaker 05:
But- He's not even Moderna and Pfizer have made that claim with regard to their vaccine.

[00:08:45] Speaker 02:
No, no.

[00:08:46] Speaker 02:
Although, I had the same experience with Judge Callahan.

[00:08:49] Speaker 02:
It didn't work for me either.

[00:08:51] Speaker 02:
So, yeah, I got it.

[00:08:55] Speaker 02:
But, Bobby, Your Honor, just if I could, just a couple

[00:09:39] Speaker 02:
that they weren't talking about s t i fourteen ninety nine and in context really would defendants have an interview with fox news it's going to be published all over the world and not talk about their own antibody rather than some

[00:10:33] Speaker 02:
these statements talking about in vitro and so on and so forth.

[00:10:35] Speaker 02:
They didn't say that's all we got.

[00:10:37] Speaker 02:
They didn't ever come out.

[00:10:39] Speaker 02:
Just imagine that Fox News is one of the most prominent news media outlets in the world.

[00:10:44] Speaker ?:
They didn't immediately say, oh, wait a minute, we didn't say that.

[00:10:47] Speaker ?:
We don't want to have anything anybody be misled.

[00:10:50] Speaker 02:
Instead, they let their stock price go way up while they were doing an at-the-market offering in which they had a substantial financial need.

[00:10:59] Speaker 01:
I mean, the district where... What is the evidence in the record of Sorrento

[00:11:07] Speaker 02:
May 20th.

[00:11:40] Speaker 01:
misleading or false?

[00:11:43] Speaker 02:
Well, Your Honor, the statements that we are challenging as being false, they... My colleague did not say do the shelf registration in March.

[00:11:54] Speaker 02:
They did.

[00:11:55] Speaker 02:
And then this was in May.

[00:11:57] Speaker 02:
Right, but if you do the math, if you divide the number, the amount of money that they made,

[00:12:34] Speaker 03:
I know, but, you know, sometimes in these people, that's why we talk about puffery, is that there's a, wow, this could be, I don't think anybody would hear what you're claiming they said and say, wow, it's already over, it's a cure.

[00:13:07] Speaker 03:
they were reporting all the sales but not the one-third returns to make it look like they were closer but you know they made money eventually and everybody who invested in Amazon did okay so you know what's the story here that why would people not look at this and say well it might be worth it

[00:13:48] Speaker 02:
the securities laws.

[00:13:50] Speaker 02:
The second part of the question is, is this puffery?

[00:13:55] Speaker 02:
And puffery is a very specific thing.

[00:13:58] Speaker 02:
It's, you know, we think that if you take this antibody, you're going to feel great.

[00:14:01] Speaker 02:
You're going to feel better.

[00:14:02] Speaker 02:
We're very confident it's going to be good.

[00:14:04] Speaker 02:
None of that kind of language appears here.

[00:14:06] Speaker 02:
And Your Honor, see, I only have one minute left.

[00:14:08] Speaker 02:
Can I possibly reserve some time for rebuttal, unless Your Honors have more questions?

[00:14:13] Speaker 02:
Thank you, Your Honor.

[00:14:14] Speaker 02:
I appreciate it.

[00:14:16] Speaker 02:
Thank you.

[00:14:30] Speaker 04:
Thank you, Your Honors.

[00:14:31] Speaker 04:
May it please the Court, Edward Hahn from Paul Hastings, appearing on behalf of the defendants below, and Appellee is here with me at my counsel table.

[00:14:36] Speaker 04:
This is Timothy Reynolds, my colleague.

[00:14:38] Speaker 01:
We can probably up your voice a bit.

[00:14:40] Speaker 01:
Absolutely, Your Honor.

[00:14:42] Speaker 01:
Sometimes people are yelling at me and I go like this.

[00:14:45] Speaker 01:
Fair enough.

[00:14:47] Speaker 04:
You can rack it up.

[00:14:48] Speaker 04:
Fair enough.

[00:14:48] Speaker 04:
And I actually would like to also abide by Judge Lassenick's comment.

[00:14:51] Speaker 04:
The prior order argument did simply state that I agree with the concerns that this Court has raised already in its questions and sit down.

[00:15:04] Speaker 04:
I do believe all of the arguments that Mr. Hapchuk raised were addressed in our brief that we submitted to this Court.

[00:15:20] Speaker 04:
I would like to…

[00:15:42] Speaker 04:
I don't believe the statements made on May 15th are enough to overcome a 12b6 motion.

[00:15:47] Speaker 04:
I believe the district court below got it right.

[00:15:50] Speaker 04:
There were a number of statements that were made on May 15th, and Judge Tomlin, I believe, was asking about the timeline, and just to get the timeline correct,

[00:16:05] Speaker 04:
ignored in that opening brief, mentioned twice in passing in the reply appellate brief, and mentioned once I believed her oral argument here.

[00:16:12] Speaker 04:
Why?

[00:16:13] Speaker 04:
Because that press release laid

[00:16:25] Speaker 04:
pro-preclinical experiments and that in those experiments it 100% inhibited the COVID virus from attaching to healthy receptor cells.

[00:16:33] Speaker 04:
So it was very promising and it stated that the defendants were going to then move on trying to get FDA approval to go to the next stage.

[00:16:40] Speaker 04:
Now anybody who invests in a life science company and going to judge last night's comments about investors here should know and I believe the Omnicare decision specifically points out that

[00:17:02] Speaker 04:
here as a life sciences industry, Your Honors.

[00:17:04] Speaker 04:
And here, first I'm going to claim it contains allegations about how courageous of a process it is to get a drug or a therapy before the FDA, to get it approved by the FDA.

[00:17:13] Speaker 04:
It's a long process.

[00:17:15] Speaker 04:
You have pre-clinical experiments.

[00:17:17] Speaker 04:
If those go okay, then you go into clinical studies, phase one, phase two, phase three, sometimes sub-phases, and it takes a long time.

[00:17:25] Speaker 04:
If you look at the defendant's press release that was issued on May 15th, same day as the Fox News article – and the Fox News article even references that press release.

[00:17:32] Speaker 04:
It says Sorrento is announcing this, this promising development.

[00:17:36] Speaker 04:
Now, going to some of the concerns that Judge Callahan raised about the Scantor element, I would like to talk about how this isn't a plausible security fraud case that the plaintiff is trying to allege here.

[00:17:47] Speaker 04:
How is this a plausible case?

[00:17:48] Speaker 04:
If you look at the statements made and if you look at the timeline of this,

[00:17:54] Speaker 04:
here by claiming Sorrento has a cure to COVID.

[00:17:58] Speaker 04:
SCI 1499 is a cure for COVID.

[00:18:01] Speaker 04:
Why would that only appear in one one document out of the many, including a lot of other articles that plaintiff doesn't cite too that were issued on that date?

[00:18:09] Speaker 04:
Why does it not appear in the defendant's own press release?

[00:18:24] Speaker 01:
roll 12B6 motion.

[00:18:27] Speaker 04:
Well, because in terms of the increase in stock, and I believe it's well settled by the Supreme Court as well as the Circuit, that's a standard corporate objective, and it doesn't lead to a strong inference of center.

[00:18:37] Speaker 04:
I would also like to point out, and I believe one of you had questions about this previously, about how the timing of the financing work and the shelf registration was made in March.

[00:18:47] Speaker 04:
And the sales started before the class period as well as after, and those sales were made pursuant to two financing arrangements that were done prior to the start of the class period.

[00:18:55] Speaker 04:
One, for a company to buy at the market offering $250 million worth of financial securities.

[00:19:02] Speaker 04:
The second was for a separate company to purchase 250 million shares of financial securities.

[00:19:07] Speaker 04:
Those were all done before this class period started.

[00:19:09] Speaker 04:
Those were all done before any of these comments were made.

[00:19:12] Speaker 04:
So it started to have the funds available.

[00:19:14] Speaker 04:
And so it was paying down the loan already to Oak Creek prior to the start of class period, paid a majority of it down, finished paying it off.

[00:19:21] Speaker 04:
And if the plaintiff is going to...

[00:19:26] Speaker 04:
in the sale of stock that benefited the company?

[00:19:48] Speaker 04:
the last period, Sorrento's press kept increasing.

[00:19:51] Speaker 04:
It hit eight, nine, 10, 12, $18 a share.

[00:19:55] Speaker 04:
So if this was a securities fraud that the defense were trying to perpetrate, well, they really messed up and they only did it for one week.

[00:20:02] Speaker 04:
And I also like to point out that the May 22nd article that supposedly discloses the truth doesn't disclose any truth.

[00:20:07] Speaker 04:
There's no admissions of wrongdoing.

[00:20:09] Speaker 04:
There's no admissions of prior false statements.

[00:20:12] Speaker 04:
The May 22nd article tracks what was in Sorrento's press release.

[00:20:29] Speaker 04:
So that May 22nd article was basically a defendant's attempt to push back on some of the negative press out there from the short-sum articles.

[00:20:36] Speaker 04:
And the short-sum articles do exactly what the plaintiffs are doing here.

[00:20:39] Speaker 04:
They focus on a couple statements made in the Fox News article that are taken out of context, completely taken out of context.

[00:20:46] Speaker 04:
Again, you look at those statements, there's nothing in those where we state, where the defendants say, we have the cure to COVID, as CF-1499 is a cure for COVID.

[00:20:54] Speaker 04:
Instead, that article was an interview

[00:20:58] Speaker 04:
about the promising results from STI 1499.

[00:21:02] Speaker 04:
So Dr. D and Dr. Brunswick were talking about what antibodies could do and what they hope to do.

[00:21:07] Speaker 04:
And it would be similar to any other scientist or doctor out there saying, we have a cure cancer.

[00:21:10] Speaker 03:
Why is the clinic jury questioned?

[00:21:12] Speaker 04:
Because I believe it is in context which all courts can consider in securities fraud so that this isn't just a factual question of what was

[00:21:41] Speaker 05:
your two chief corporate officers.

[00:21:44] Speaker 04:
It is, but if you look at the statements, there are no statements that actually state we have the cure to COVID.

[00:21:49] Speaker 04:
There are no statements that say STF-499 is a cure for COVID.

[00:21:52] Speaker 04:
And under Tesla… If you view them in context.

[00:21:54] Speaker 04:
If you view them in context.

[00:21:55] Speaker 04:
And under Tesla, under Omnicure, under many decisions of this court, the statements must be viewed in context.

[00:22:00] Speaker 04:
And in context, there was no false or misleading representation made.

[00:22:04] Speaker 04:
I believe the judge in the district court below got that right.

[00:22:07] Speaker 01:
Absolutely.

[00:22:19] Speaker 01:
you shouldn't publish, but if, but based.

[00:22:43] Speaker 04:
I believe it will be helpful because I believe the decision will go back to some of the other priority circuit decisions that give some indication to practitioners like the Tesla decision that focuses on statements that are made, focuses

[00:23:06] Speaker 04:
that doesn't exist.

[00:23:07] Speaker 04:
District courts have started picking up on those kind of decisions already, and there's a recent one that was issued in the Northern District based on Tesla.

[00:23:15] Speaker 04:
But I believe context is key, and the more direction that this court can give, the better it is.

[00:23:19] Speaker 04:
Judge Slasnik, I know, issued a decision back in 2009 about the securities fraud case where he found context was key, and he said there was no misrepresentation there because you looked at the

[00:23:32] Speaker 04:
that he issued in September 24, 2009.

[00:23:36] Speaker 04:
Context is key and knowing more about context and how this court views context will absolutely help practitioners.

[00:23:51] Speaker 03:
Is there a diminishing number, or it was just not coming to the Western District of Washington?

[00:23:57] Speaker 04:
It might not be coming to the Western District of Washington.

[00:23:59] Speaker 04:
It might not be coming to you, judges, because as you have some good analysis out there, there's still a lot of cases being filed.

[00:24:06] Speaker 03:
That is, I'm sure, the subject was the fact.

[00:24:08] Speaker 03:
The case that I was talking about, the plaintiff's lawyer was Bill Larrack, so he's not bringing them anymore.

[00:24:12] Speaker 04:
He is not, but his firm is still around, or at least the predecessor firm is still around.

[00:24:55] Speaker 01:
other if it's enough or it's not.

[00:25:00] Speaker 01:
If you won, you would say it would be a wonderful case to publish on, right?

[00:25:05] Speaker 02:
You know, I'm happy to win.

[00:25:07] Speaker 02:
I don't care if it's published or unpublished.

[00:25:08] Speaker 02:
If it's just one word, we reverse or to ask to actually.

[00:25:11] Speaker 02:
So it's all good for me.

[00:25:13] Speaker 02:
But I would like to, if I could, just address a couple of Mr. Hahn's arguments.

[00:25:18] Speaker 02:
The notion that the May statement on May 22nd didn't admit that what was said on May 15th was false.

[00:25:56] Speaker 02:
This is in your body.

[00:25:57] Speaker 02:
Well, there's no bodies in test tubes and petri dishes.

[00:26:01] Speaker 02:
It's not being infused.

[00:26:02] Speaker 02:
It's not curing.

[00:26:03] Speaker 02:
It's not giving immunity.

[00:26:05] Speaker 02:
So I don't think that an investor necessarily could put those things together.

[00:26:08] Speaker 02:
And ultimately, as Judge Tallman's question suggested, this is a question for a jury.

[00:26:12] Speaker 02:
And SEC Todd makes that very clear, both as to whether or not it's misleading and as to whether or not there are sufficient disclosures in the record in order to allow an investor to make that decision.