[00:00:00] Speaker 03: Morning, Your Honor, may it please the court? [00:00:02] Speaker 03: I'd like to reserve three minutes for rebuttal. [00:00:06] Speaker 03: Your Honor, this case boils down to four points, all of which are factually pleaded. [00:00:11] Speaker 03: First, SNAP's future depended on its advertisers' response to ATT, and that in turn depended on their success, the advertisers successfully transitioning from IDFA to SCAN. [00:00:24] Speaker 03: Second, it was Ms. [00:00:24] Speaker 03: Gorman's job to know how that transition was going. [00:00:28] Speaker 03: Third, in April 2021, she told investors she did know how the transition was going and that it was going well. [00:00:36] Speaker 03: She said advertisers that represent a majority of our direct response advertising revenue have successfully implemented scan for their snap campaigns. [00:00:45] Speaker 03: Fourth, that was a lie. [00:00:46] Speaker 03: Four CWs reported that as of April, 2021 snaps advertisers had not implemented scan successfully or otherwise. [00:00:56] Speaker 03: And multiple CWs reported that in fact snap had no solution to ATT at all. [00:01:01] Speaker 03: But snap waited another six months to disclose that to investors. [00:01:07] Speaker 03: Turning to Cianter, Telebs tells us that we have to, the court has to take into account plausible opposing inferences of innocence. [00:01:17] Speaker 03: But as this court held in South Ferry, it is not required to close its eyes to circumstances probative of Cianter viewed from a common sense perspective. [00:01:27] Speaker 03: That is what defendants are asking you to do here. [00:01:30] Speaker 03: They contend that even though ATT posed an existential risk to SNAP, even though it was Gorman's job to know how the response to ATT was going, even though Gorman said SNAP was working closely with Apple to implement scan, even though she told [00:01:48] Speaker 03: said that SNAP was working with its advertisers to navigate ATT, even though Gorman said SNAP was educating its advertisers and talking to them deeply about the coming changes. [00:02:01] Speaker 03: Even though SNAP had worked with its advertising partners to test scan before the rollout of ATT, [00:02:12] Speaker 03: And even though Gorman said that the SNAP's response to ATT was a huge cross-functional effort between products, engineering, the sales team, and the marketing teams, and even though she then reported that advertisers had successfully implemented SCAN for their SNAP campaigns prior to the rollout of ATT, despite all of that, defendants are asking you to find that it makes no sense to assume that Gorman or anyone else at SNAP [00:02:40] Speaker 03: knew prior to the rollout of ATT that scan did not work. [00:02:45] Speaker 03: It's defendant's story here that makes no sense. [00:02:48] Speaker 03: It was not a secret that scan did not work. [00:02:51] Speaker 02: It had... Can I ask you, I mean, in the statement, and you made this point in your brief, that the statement in question talks about direct response [00:03:03] Speaker 02: A majority of SNAP's direct response advertising revenue have successfully implemented a scan for their SNAP campaigns. [00:03:09] Speaker 02: I think you made the point. [00:03:10] Speaker 02: There's kind of two parts to that. [00:03:12] Speaker 02: One is, have you implemented it all? [00:03:14] Speaker 02: Two, if you have, has it been successful? [00:03:17] Speaker 02: Is the first part of that, have you implemented that at all? [00:03:20] Speaker 02: Is that a sufficient [00:03:23] Speaker 02: If, if one concludes you're right about this point that you have pled that, is that enough for this claim to move forward? [00:03:29] Speaker 03: I think it is. [00:03:30] Speaker 02: I'm not sure my question was clear, but it seems like you understand it. [00:03:33] Speaker 03: I think I, yeah, I think I understand it. [00:03:35] Speaker 03: I think some CW one has said, no, they didn't implement it at all. [00:03:40] Speaker 03: Um, there were very few adoptees in April or Q1 and Q2 of 2021. [00:03:46] Speaker 03: So that would say they didn't implement, they had not implemented it. [00:03:50] Speaker 03: She then also went on to say that they didn't, the ones who, the few who did, did not like it. [00:03:55] Speaker 03: And then in August, CW2 confirmed that they still couldn't get their advertisers even to take the initial steps to opt in to scan. [00:04:07] Speaker 03: So again, she's confirming that they have not implemented at all. [00:04:14] Speaker 03: Just turning back to the point. [00:04:17] Speaker 03: They claim that they wouldn't have known whether it worked prior to the rollout of ATT. [00:04:23] Speaker 03: But again, SCAN had been available for years. [00:04:26] Speaker 03: It came out in 2018. [00:04:33] Speaker 02: Let's just pause for a second. [00:04:42] Speaker 02: Well. [00:04:44] Speaker 02: Welcome to San Francisco. [00:04:45] Speaker 02: We don't get too many tsunami warnings here. [00:04:52] Speaker 02: I apologize for the interruption, Ms. [00:04:54] Speaker 02: Charington. [00:04:56] Speaker 02: So that's a first for us with the tsunami warning, but why don't we go- We're safe on the second floor. [00:05:01] Speaker 03: ATT had been, our scan had been available since 2018. [00:05:07] Speaker 03: So they had years to test it. [00:05:09] Speaker 03: They already knew they didn't like it. [00:05:11] Speaker 03: That was publicly reported by the media long before the ATT was rolled out. [00:05:16] Speaker 03: Snap zone MMPs. [00:05:18] Speaker 03: reported that they didn't like it prior to the rollout of ATT and they weren't even planning to rely on it. [00:05:25] Speaker 03: But more importantly, ATT, the reason Apple delayed the rollout of ATT was to allow advertisers to test scan at the same time that IDFA was still in place. [00:05:39] Speaker 02: The district court seemed to have had two kind of problems. [00:05:42] Speaker 02: The district court gave this very careful consideration. [00:05:45] Speaker 02: But he had sort of two difficulties with it. [00:05:47] Speaker 02: One, you know, were there enough factual allegations to show that, to suggest that the advertiser's problems with SCAN had emerged as of the time of the statement in question? [00:05:57] Speaker 02: And two, whether these issues had been communicated to Ms. [00:06:00] Speaker 02: Gorman? [00:06:01] Speaker 02: So how do you respond on both those? [00:06:03] Speaker 03: So I think it's very clear that the issues had arisen prior to the rollout of ATT. [00:06:10] Speaker 03: That wasn't a surprise. [00:06:11] Speaker 03: No one wanted to use scan. [00:06:13] Speaker 03: They didn't like it. [00:06:14] Speaker 03: They had had access to it for years. [00:06:16] Speaker 02: But to my, I guess this relates somewhat to my initial question was, does it matter? [00:06:19] Speaker 02: I mean, if they hadn't actually, if your allegation is they hadn't actually implemented it all, do we need to know the answer to the question of whether these issues had been provided, had been conveyed to SNAP at the time? [00:06:32] Speaker 03: Perhaps not, but I think they had been conveyed to SNAP at the time. [00:06:35] Speaker 03: CW1, who was working directly on the conversion from [00:06:42] Speaker 03: IDFA to scan with advertisers said that they did not like scan and that's why they were not implementing it, and that those who did had trouble with it immediately. [00:06:54] Speaker 03: And CW4, who's another MMP, also said that [00:06:59] Speaker 03: SNAP had no solution. [00:07:01] Speaker 02: I'm not sure it's been pledged that Gorman was specifically told that, but you're asking us to say she should have clearly known that. [00:07:08] Speaker 03: Yes, we can see it. [00:07:10] Speaker 03: There is no allegation that she has been specifically told that. [00:07:14] Speaker 03: Under core operations, given her position, given the importance of this information to the company's future, it was putting more than half of their revenue at risk. [00:07:24] Speaker 03: The idea that the head of advertising would not have known [00:07:29] Speaker 03: that their sole solution to ATT did not actually work is not plausible. [00:07:36] Speaker 03: So we've met the absurdity prong of core operations, no need for it to have been communicated to her. [00:07:41] Speaker 03: But I think also under the other core operations prong, [00:07:45] Speaker 03: the, um, actual access prong. [00:07:47] Speaker 03: I think she's, we've also met that too, because she herself provided the information. [00:07:51] Speaker 03: So as in Reese, she bridged, bridged the, the C-enter gap and all of her statements to investors leading up to, uh, her false statement indicated that she understood what investor or to, she understood what advertisers were saying. [00:08:08] Speaker 03: That what their response was, she was involved in this, like discussions with the advertisers. [00:08:14] Speaker 03: Spiegel said she's having a lot of communications with advertisers. [00:08:18] Speaker 03: She didn't deny that she was having those communications. [00:08:23] Speaker 03: I just, I want to touch on motive quickly. [00:08:27] Speaker 03: I think as I'm sure you all know, the Supreme court has twice now held that motive is not necessary. [00:08:34] Speaker 03: Um, it is a factor to be considered. [00:08:37] Speaker 03: We can see that. [00:08:39] Speaker 03: I would say though, that this case is different from endologics. [00:08:43] Speaker 03: Um, in that case, the court rejected an inference of Santa or Santa because it was not plausible. [00:08:51] Speaker 03: A company would promise approval of the drug that they knew was hopeless. [00:08:55] Speaker 03: This situation is a little bit different here. [00:08:58] Speaker 03: The crux of the complaint is that Snap knew in April, 2021 that scan was not a satisfactory response to ATT. [00:09:07] Speaker 03: The second question was, would Snap ever have a satisfactory response to ATT? [00:09:13] Speaker 03: And we don't say that Snap never thought it would have one. [00:09:16] Speaker 03: And that distinction is critical because what she did by saying that advertisers were relying on scan, [00:09:25] Speaker 03: was she bought the company time. [00:09:27] Speaker 03: They were working on another product. [00:09:29] Speaker 03: Facebook did the same thing, and they actually succeeded. [00:09:32] Speaker 03: Snap failed, but they were trying to come up with another product. [00:09:36] Speaker 03: And had they been able to do that, it's entirely possible that they would have righted the ship and the good news would have overtaken the bad news before they ever had to disclose a revenue loss. [00:09:50] Speaker 03: because they also weren't controlling the timing of the ATT rollout, so it wasn't going to hit their revenue immediately, not on April 26, the day ATT rolled out. [00:10:02] Speaker 03: If I could just quickly turn to falsity. [00:10:15] Speaker 00: Before you turn to the Falsity Council, could the communication of information such as we have a majority of advertisers implementing this product and generally things seem to be going well, could that first portion of that information have the deceptive impact of just conveying the general message of things seem to be going well so far, the process has gotten started, [00:10:41] Speaker 00: And if it does have that impact, would that alone be enough to sustain the type of market impact case that you're trying to make here? [00:10:51] Speaker 03: Yeah, so actually, I'll shift gears and I'll talk a little bit about the warnings because I think that will get to your question. [00:11:01] Speaker 03: One of the warnings that defendants point to that, first of all, their warnings [00:11:06] Speaker 03: this court has held many times that the speech caution doctrine does not apply to false statements of present fact. [00:11:16] Speaker 03: So it's an inappropriate application were that to apply here. [00:11:19] Speaker 03: And in Livid Holdings, this court explained that applying it to false statements of present fact would encourage management to conceal misrepresentations between the mantle of broad cautionary language. [00:11:33] Speaker 03: But the problem is the warnings that they point to, one of those warnings came during that same April earnings call. [00:11:42] Speaker 03: She first said they'd successfully implemented scan for their snap campaigns, and then said, but we know there's a lot of work to be done to transition smoothly. [00:11:52] Speaker 03: Here's the problem. [00:11:54] Speaker 03: Had she told the truth, had she said they haven't implemented scan, it doesn't work, and we have no solution, [00:12:03] Speaker 03: investors would have known there was no possibility of a smooth transition. [00:12:07] Speaker 03: That statement itself would not have been accurate because there wasn't a possibility of it. [00:12:13] Speaker 03: So that's the key difference. [00:12:14] Speaker 03: I hope that answered your question. [00:12:25] Speaker 02: and out of you know that time but when i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i [00:12:52] Speaker 04: So I think we need to get to the heart of the issue here, which is a timing issue. [00:12:57] Speaker 04: This case, we know because the corrective disclosure that comes out in October of 2021 tells us that at some point advertisers surfaced concerns about scan, which was one of the solutions that was out there in the market to help deal with the rollout of ATT. [00:13:13] Speaker 04: We know at some point Ms. [00:13:14] Speaker 04: Gorman learned about those problems because she disclosed them in October of 2021. [00:13:19] Speaker 04: But the core problem with this case and what the plaintiffs really have no response to is that they cannot identify anywhere in the complaint where they can show that these problems that advertisers surfaced had surfaced as early [00:13:32] Speaker 04: As April of 2021 when Ms. [00:13:35] Speaker 04: Gorman made her statement about advertisers representing a majority of direct response advertising revenue have successfully implemented scan and. [00:13:45] Speaker 04: The only allegations that the plaintiffs really point to on this timing point come from CWs who cannot actually place any information, much less Ms. [00:13:56] Speaker 04: Gorman's information, but really any information contemporaneous with April of 2021. [00:14:02] Speaker 04: So let's start with the CWs, and then I want to respond to some of these other points. [00:14:06] Speaker 04: CW allegations require very careful scrutiny. [00:14:10] Speaker 04: That's what this court said in the Zuko Partners case and in the EndoLogix case. [00:14:15] Speaker 04: They can't satisfy the standard by using alarming adjectives that are short on facts, right? [00:14:20] Speaker 04: Instead, we need to know whether these folks are positioned to actually know the information. [00:14:25] Speaker 04: We don't rely on their unreliable hearsay and conclusory assertions. [00:14:30] Speaker 04: So here, these CWs have no insight into what Ms. [00:14:34] Speaker 04: Gorman knows in April. [00:14:36] Speaker 04: None of them are alleged to have talked to her about the rollout of scan as a possible solution for ATT. [00:14:45] Speaker 04: And CW1, who the plaintiffs rely on most heavily for the proposition that either advertisers weren't implementing at all or it wasn't successful, [00:14:54] Speaker 04: CW1 is not alleged to have had any contact with Ms. [00:14:58] Speaker 04: Gorman, and CW1 simply isn't positioned to know company-wide information. [00:15:04] Speaker 04: She sits in one out of 12 verticals at the company. [00:15:07] Speaker 04: It's the gaming division. [00:15:08] Speaker 04: The gaming division in July is disclosed by SNAP as having already sustained... But isn't CW1 well positioned to know what's happening with the advertisers, though? [00:15:18] Speaker 04: Well, I think CW1 is positioned to know what's happening with some advertisers in the gaming division. [00:15:23] Speaker 04: She doesn't provide any details about how many particular advertisers she's responsible for their accounts. [00:15:29] Speaker 04: She does not identify by name or even by industry. [00:15:33] Speaker 04: I guess other than we know she works in gaming. [00:15:35] Speaker 04: one advertiser as of April 2021 who has articulated a concern with Scan. [00:15:43] Speaker 04: Think about this. [00:15:44] Speaker 04: In many securities cases, the plaintiffs have to rely on CWs, former employees, who can surface concerns. [00:15:50] Speaker 04: Here, the information that the plaintiffs are relying on, which is that advertisers were [00:15:54] Speaker 04: purportedly already experiencing problems with scan was not just in the hands of snap, it would have been in the hands of the advertisers themselves. [00:16:02] Speaker 04: There are a lot of people in the world who could have supplied allegations here for the plaintiffs that as of April 2021, [00:16:09] Speaker 04: They've implemented scan, they're testing it, and they're surfacing concerns to snap. [00:16:14] Speaker 04: But the plaintiffs can't point to one advertiser who did that as of April. [00:16:19] Speaker 04: And if you actually look at what CW1 says, it's very loose. [00:16:23] Speaker 04: She says that she's aware of only a few advertisers who have implemented it in the first half of the year. [00:16:29] Speaker 04: We don't know how many. [00:16:30] Speaker 04: how many advertisers she is even responsible for. [00:16:33] Speaker 04: And she doesn't name one, much less tell us how much revenue did that advertiser account for. [00:16:39] Speaker 04: What were the concerns that they articulated? [00:16:41] Speaker 04: What she actually says is, I didn't find the product effective, or I didn't find something about scan support very effective. [00:16:49] Speaker 04: But what were the problems that purported advertisers had purportedly surfaced? [00:16:54] Speaker 04: She doesn't tell us any of that. [00:16:55] Speaker 02: But both CW1 and CW2 do say pretty clearly that a majority of advertisers had not adopted this at all. [00:17:05] Speaker 04: So I think that goes to the apples and oranges problem, Your Honor. [00:17:08] Speaker 04: What Ms. [00:17:09] Speaker 04: Gorman said was advertisers representing a majority of direct response advertising revenue. [00:17:15] Speaker 04: right, that is not the same as half of all advertisers. [00:17:19] Speaker 04: And I'll make the analogy, right, if my law firm came to the litigation department and said, we're putting a new billing system in place, you need to get your clients to hook this thing up so that we can send billing information back and forth. [00:17:32] Speaker 04: The litigation department might have hundreds if not thousands of clients in any given year, but I could get 20, 30 of our clients to hook up the system, and that would cover 50% of the revenue. [00:17:44] Speaker 04: In any given moment in time, you have your big clients, and of course, common sense says you start with those folks. [00:17:51] Speaker 04: And by the way, direct response advertising revenue as of that moment in time [00:17:55] Speaker 04: is approximately half, a little more than half, Ms. [00:17:57] Speaker 04: Gorman says, in April of 2021 of revenue. [00:18:00] Speaker 04: That leaves an awful lot of advertisers outside of Ms. [00:18:03] Speaker 04: Gorman's statement. [00:18:05] Speaker 04: So you've got a big apples and oranges problem here. [00:18:08] Speaker 04: If CW2 in August [00:18:10] Speaker 04: And she's, by the way, CW2, not responsible for scan implementation at all. [00:18:14] Speaker 04: That's not her job. [00:18:15] Speaker 04: She says, I stopped by my colleague's desk, and there's a spreadsheet on the desk, and it shows that a majority of advertisers haven't yet implemented scan. [00:18:25] Speaker 04: Well, okay, but that's not inconsistent with advertisers representing a majority of direct response advertising revenue. [00:18:33] Speaker 04: Ms. [00:18:33] Speaker 04: Gorman was very careful to explain what she meant. [00:18:36] Speaker 04: And plaintiffs have not pleaded that that fact is wrong, much less identified. [00:18:40] Speaker 04: Who are the advertisers and what portion of direct response? [00:18:44] Speaker 00: When you say Ms. [00:18:45] Speaker 00: Gorman was careful to explain that, is there another part of her statement that says, I'm really only talking about two companies, but they comprise 60% of the revenue of our company? [00:18:57] Speaker 00: Because all this information, my concern is, I know this because you're telling me and I read it in your briefs, but how would I know that from [00:19:05] Speaker 00: just judging the sufficiency of the pleading, which is essentially what we're doing here. [00:19:09] Speaker 04: Well, I think the question you're asking, Your Honor, is [00:19:12] Speaker 04: Ms. [00:19:12] Speaker 04: Gorman chose to provide a certain statistic. [00:19:15] Speaker 04: The plaintiffs have never alleged that that statistic itself is actually wrong. [00:19:20] Speaker 04: Throughout their papers, they repeatedly say, a majority of advertisers, a majority of advertisers, a majority of advertisers. [00:19:27] Speaker 04: They need to say that they know or they have facts that show that advertisers representing a majority of direct response advertising revenue had not successfully implemented SNAP. [00:19:39] Speaker 00: So you're saying the evidence could pan out such that the statement, once we have the discovery and once we have the evidence, there is a scenario in which that statement could have been correct. [00:19:52] Speaker 00: But if we're looking at pleading, and I know there's this heightened standard here, but we're really judging the sufficiency of the pleadings and there is a baseline in the light most favorable. [00:20:02] Speaker 00: So how is it deficient from [00:20:06] Speaker 00: How is it deficient in terms of just passing this pleading hurdle right now? [00:20:10] Speaker 04: I think the question before the court is, Congress has chosen to impose very high pleading standards in these cases, right? [00:20:16] Speaker 04: Not only do you need the who, what, when, where, and how, which is things like what advertiser, how much revenue did they represent, who told who, did any of that information make its way to Ms. [00:20:26] Speaker 04: Gorman, right? [00:20:26] Speaker 04: These are all facts that Congress has required be pled in these cases before the plaintiffs even get discovery. [00:20:32] Speaker 04: Discovery is state, and that's a congressional decision. [00:20:35] Speaker 04: So you don't get discovery unless you can plead the facts. [00:20:38] Speaker 04: And here, even though the plaintiffs repeatedly say through their briefing, advertisers representing a majority, that's not what Ms. [00:20:44] Speaker 04: Gorman said. [00:20:45] Speaker 04: She said advertisers representing a majority of direct response advertising revenue. [00:20:50] Speaker 04: And unless those words are false and they don't plead that they are, [00:20:53] Speaker 04: because of this apples-to-oranges problem, they have not gotten past that threshold. [00:20:59] Speaker 01: And you're under... I want to poke on that a little bit because Cienta is a little bit different than some of the other allegations in that only the heightened pleading standard doesn't come under Rule 9, it only comes under the statute. [00:21:11] Speaker 01: And you have to have a strong inference. [00:21:13] Speaker 01: And the Supreme Court told us in TEL Labs that a strong inference means that the inference has to be at least as likely as something else. [00:21:20] Speaker 01: So you have gone through and sort of poked holes in the evidence from the CWs, and I think those are rational points to make, but in terms of is the inference that the plaintiffs want to draw here that there's some people in the company who deal with advertisers who are reporting that sort of the trend is advertisers are not on board with this, and yet we've got an executive saying, making public statements that suggest the opposite. [00:21:46] Speaker 01: Why isn't that an inference that [00:21:50] Speaker 04: satisfies the TEL-LABS standard. [00:22:08] Speaker 04: credit, because the people are not positioned to have company-wide information, because they're not really talking about the thing Ms. [00:22:15] Speaker 04: Gorman said, but about something else, whatever the reasons are. [00:22:18] Speaker 04: You still have to engage in that weighing analysis. [00:22:21] Speaker 04: And here, there are really compelling opposing inferences, which the plaintiffs really don't grapple with. [00:22:28] Speaker 04: And I think just five key points on that that I want to make. [00:22:32] Speaker 04: One is that lack of motive is actually important. [00:22:36] Speaker 04: The Prado Nova case and many other cases say, [00:22:38] Speaker 04: that lack of motive makes it less likely that a plaintiff can show a strong inference of CNTER. [00:22:43] Speaker 04: And here, I think we really need to think about, you know, not only is there no motive, in other words, there's no personal gain to Ms. [00:22:50] Speaker 04: Gorman in making these statements, she's not alleged to have made suspicious stock sales, [00:22:54] Speaker 04: But it would be illogical for SNAP and Ms. [00:22:57] Speaker 04: Gorman to lean into one of the solutions, SCAN, which is an Apple product, there's other solutions out there, if they really believed that it wouldn't work. [00:23:06] Speaker 04: And that is a really compelling inference. [00:23:08] Speaker 04: Not only is there no motive, but this is illogical behavior. [00:23:12] Speaker 04: Why would you lean into a solution in April if you already thought this isn't gonna do the job, this isn't gonna help us? [00:23:19] Speaker 02: Well, but isn't the point that it would get them some additional amount [00:23:24] Speaker 02: passage of time to allow advertisers to maybe lock into this? [00:23:28] Speaker 02: I don't think there's a suggestion that they believed it would never work, but the question is what was the state of play at the time she made the statement? [00:23:35] Speaker 04: Well, I think, as in the endologics case, leaning into something if you know inevitably it's just not going to pan out, like seeking FDA approval for a drug you don't think is going to work, is illogical. [00:23:46] Speaker 04: There are other options out there. [00:23:48] Speaker 04: In fact, SNAP had its own proprietary measurement solution that it was also marketing. [00:23:53] Speaker 02: But I don't think they've alleged here that SNAP believed it would never work. [00:23:56] Speaker 02: I think the question is, [00:23:57] Speaker 02: What did they know at the time that the statement was made correct your honor? [00:24:01] Speaker 04: And I think here the the again we go back to the problem We don't have facts showing that at the time the statement was made Snap believed that this scan product was not going to be able to sort of fill in Look every look and to take a step back. [00:24:17] Speaker 04: You know the plaintiff say everybody knew scan was defective That's an oversimplification of their own complaint everybody understands that scan is [00:24:26] Speaker 04: is not going to replace IDFA. [00:24:28] Speaker 04: That's publicly reported. [00:24:30] Speaker 04: IDFA is individualized user data. [00:24:33] Speaker 04: Everybody would rather get that, right? [00:24:35] Speaker 04: But that's not going to be available anymore. [00:24:37] Speaker 04: Apple's privacy changes are taking that away. [00:24:39] Speaker 04: One option is to look at aggregated data. [00:24:42] Speaker 04: Scan provides aggregated data. [00:24:44] Speaker 04: And what the company eventually discloses in October is that as the rollout happened, because of course this is pre-rollout. [00:24:51] Speaker 04: We don't even have the rollout having happened at the time this statement is made. [00:24:55] Speaker 04: as the rollout happens, as more users lose, more iPhone users lose their IDFA signals, the product didn't scale as hoped and advertisers surfaced concerns. [00:25:06] Speaker 04: But that, that information that ultimately comes out in the, on the October 21st call [00:25:12] Speaker 04: Snap explains what types of concerns advertisers have been surfacing. [00:25:16] Speaker 04: The problem is that the plaintiffs can't point to anywhere, whether it's public information or internal to Snap, that says that anyone understood those concerns or knew of those concerns at the time. [00:25:26] Speaker 04: And so this is really a situation of the product didn't work out as well as we hoped it would work out as a substitute for IDFA, but that [00:25:34] Speaker 04: Again, absent well-pled facts that someone at SNAP understood that and communicated it to Ms. [00:25:39] Speaker 04: Gorman, that's just not enough. [00:25:41] Speaker 04: That's fraud by hindsight. [00:25:43] Speaker 04: I want to go back to the other inferences for a moment. [00:25:46] Speaker 04: Not only would it be illogical for SNAP to lean into a solution and is there no motive, but I think we also have to look at the context of the April statement. [00:25:55] Speaker 04: When Ms. [00:25:55] Speaker 04: Gorman is asked what successfully implemented meant, [00:25:58] Speaker 04: She said it means implemented. [00:26:00] Speaker 04: There's a Q&A on this. [00:26:01] Speaker 04: It's pages 158 to 159 of the record. [00:26:05] Speaker 04: And I would encourage Your Honors to look at what she says, because she's asked what does it mean, and she could have said, well, it means all of these things. [00:26:12] Speaker 04: It means they've implemented it, they've begun testing it, and they're finding X, Y, and Z. She doesn't say any of those things. [00:26:18] Speaker 04: She's asked what does it mean. [00:26:19] Speaker 04: She says it implemented it. [00:26:22] Speaker 04: And the other important context is in the sentence right before the challenged words, where she talks about how the additional time that they've gotten from the rollout being delayed allowed SNAP to begin implementing and testing with their partners. [00:26:36] Speaker 04: Again, this is not someone suggesting this is a fait accompli, we've figured it all out. [00:26:40] Speaker 04: She is saying in the very sentence before that, this is allowing us to begin implementing and testing with our partners. [00:26:47] Speaker 04: Other important context here, her warnings. [00:26:50] Speaker 04: We're not making the point that, you know, [00:26:52] Speaker 04: Warnings are relevant here because it's a forward-looking statement. [00:26:55] Speaker 04: That's not our argument. [00:26:56] Speaker 04: The argument is that when executives come out and give really strong warnings that this ATT change is going to be, you know, could seriously harm our business, could be particularly material, Ms. [00:27:09] Speaker 04: Gorman herself in February of 2021 says, changes to this ecosystem are usually disruptive and the outcome is uncertain. [00:27:16] Speaker 04: She says in July, it's too early to determine how long it will take [00:27:22] Speaker 04: There's many, many examples in our briefs. [00:27:24] Speaker 04: The solutions are not yet fully finalized. [00:27:26] Speaker 04: That's another thing Ms. [00:27:27] Speaker 04: Gorman says in July. [00:27:28] Speaker 04: If she was trying to mislead people about whether scan ultimately was the right solution, she would not have given these vociferous warnings. [00:27:37] Speaker 04: Then you have another problem, which is in April at the time that the statement is made, there's no contemporaneous revenue impact. [00:27:45] Speaker 04: So we're asking to assume, and I think I heard opposing counsel argue, that she must have known in April. [00:27:52] Speaker 04: must have known is an awfully, first of all, it's not the standard under the PSLRA, but must have known something that is not having any revenue impact at the time. [00:28:01] Speaker 04: Remember, April is a quarter where SNAP is reporting fantastic quarterly earnings, 116% growth over the prior year. [00:28:09] Speaker 04: I mean, there's no known revenue impact in April from these changes yet. [00:28:14] Speaker 04: So that's another thing that really undermines the notion that Ms. [00:28:17] Speaker 04: Gorman must have known something. [00:28:19] Speaker 04: And then just one final point on the weighing of the inferences. [00:28:23] Speaker 04: You know, the district court held that this statement was ambiguous. [00:28:27] Speaker 04: He said successfully implement may mean that, you know, it was a [00:28:32] Speaker 04: correctly put in place or implemented successfully, as in you had, you know, SNAP had to set scan up on its end and the advertisers had to set it up on their end and they had to be able to like exchange signals across the pipeline. [00:28:45] Speaker 04: It could mean that, which is defendant's interpretation, or it could mean what the plaintiffs say, which is that it was successfully implemented, meaning that advertisers had some level of satisfaction with the use of it as a substitute for IDFA. [00:29:00] Speaker 04: So when people make ambiguous statements that are capable of multiple meanings, that also undermines an inference of CNTER. [00:29:07] Speaker 04: A defendant who intends to mislead people doesn't mislead people with a statement where, as the district judge says, our interpretation is just as likely as the plaintiff's interpretation. [00:29:18] Speaker 02: We'd like to go a little over. [00:29:19] Speaker 02: Do you want to make a concluding remark? [00:29:21] Speaker 04: Just one final remark. [00:29:24] Speaker 04: The core operations doctrine, which the plaintiffs have really leaned heavily into here, as your honors know, is exceedingly rare. [00:29:31] Speaker 04: And what I heard the plaintiffs start with, the four points to start with, [00:29:36] Speaker 04: The core operations doctrine does not allow you to say someone is senior or she had oversight for the system. [00:29:42] Speaker 04: This was a really important issue at Snap because advertising revenue was the core of their business. [00:29:49] Speaker 04: That is not enough under the core operations doctrine. [00:29:51] Speaker 04: The fact that Ms. [00:29:53] Speaker 04: Gorman is alleged to have misled investors about was that advertisers had already surfaced concerns about scan. [00:30:00] Speaker 04: If that fact is not in existence as of April, meaning if they have not pled, [00:30:05] Speaker 04: somewhere in the complaint that dissatisfaction with SCAN has already emerged from advertisers as of April, the core operations doctrine would not apply. [00:30:14] Speaker 04: And this would be the first case. [00:30:16] Speaker 04: We could not find any other case where the knowledge of senior management is assumed, where the so-called bad information isn't known within the company, where it's not having a revenue impact within the company, and where [00:30:31] Speaker 04: really what this case is about is third-party advertisers' satisfaction with something, which is a third-party product. [00:30:38] Speaker 04: So to assume Ms. [00:30:39] Speaker 04: Gorman knew something on those facts would be unprecedented and would be an unprecedented expansion of cooperations. [00:30:46] Speaker 02: Thank you very much, Ms. [00:30:47] Speaker 02: Soloway. [00:30:47] Speaker 02: And Ms. [00:30:48] Speaker 02: Charington will be pleased to hear rebuttal. [00:30:57] Speaker 03: Just a few quick points. [00:31:00] Speaker 03: First, the fact that it hadn't impacted revenue yet is irrelevant. [00:31:05] Speaker 03: There is no requirement in this circuit or any other circuit that I am aware of that it has to have impacted revenue in order for her to have understood that this was an issue. [00:31:17] Speaker 03: If that were the rule, [00:31:18] Speaker 03: A drug company that's developing its first product could never be found liable under core operations because it would sales would not have started under like if they were waiting for FDA approval. [00:31:31] Speaker 03: There are many, many circumstances where it does not need to impact revenue before the executive would have been aware of it. [00:31:39] Speaker 03: And in this case, [00:31:40] Speaker 03: She would have been aware of it. [00:31:42] Speaker 03: It put half of the company's revenue at risk, and she was the executive in charge of that revenue. [00:31:51] Speaker 03: I'm going to say that there was nothing in the company at the time that these problems had been raised. [00:32:02] Speaker 03: identified multiple problems that had arisen when advertisers tried to transition to scan, including that there was delayed reporting and including that they could not target the, the refined targeting was no longer available and that they lost their old data. [00:32:20] Speaker 03: Those were the same issues that had been publicly reported before ATT was introduced. [00:32:26] Speaker 03: scan employees or sorry, snap employees were reporting that their advertisers were having those issues. [00:32:33] Speaker 03: And those were the issues that snap pointed to in October. [00:32:38] Speaker 03: Um, they, in October did not say like that they had, they identified like an inability to refine targeting and delayed reporting as being among the issues that advertisers had surface. [00:32:50] Speaker 03: Those had come up before snap was well aware of them in April. [00:32:56] Speaker 03: Um, Oh, the majority verse of revenue versus majority of advertisers. [00:33:09] Speaker 03: This might go also to the successfully implemented versus just implemented. [00:33:14] Speaker 03: But the fact is in August, CW two reported that she spoke with a snap employee who said nothing is working. [00:33:22] Speaker 03: They advertisers will not use it. [00:33:24] Speaker 03: So we are trying to come up with alternative solutions. [00:33:29] Speaker 03: Had they gotten the majority of their revenue onto these, this product, why would they be doing that? [00:33:36] Speaker 03: Why? [00:33:36] Speaker 03: I mean, it doesn't make any sense at all. [00:33:39] Speaker 03: The inferences are favor on that one. [00:33:42] Speaker 03: Um, and on the CW allegations, I know that they say CW one was only one department at snap and so wouldn't have had insight into other departments. [00:33:53] Speaker 03: Glazer in 2023, um, pointed out that, or said that that doesn't matter. [00:34:00] Speaker 03: You don't have to have company. [00:34:01] Speaker 03: She has to have personal like enough. [00:34:04] Speaker 03: She has to be reliable about the personal info, the information she's providing. [00:34:08] Speaker 03: She has to have enough knowledge. [00:34:10] Speaker 03: to provide that specific information, which is what she did. [00:34:14] Speaker 03: Once you combine that and review allegations holistically, you can see that the company as a whole had no solution to ATT, scan was not working, and it wasn't specific to the gaming department. [00:34:27] Speaker 03: Had it been specific to gaming, again in October, they could have been trying to [00:34:32] Speaker 03: still use scan, but they didn't. [00:34:34] Speaker 03: Now they're talking about other products in October because no one wanted to use it. [00:34:39] Speaker 03: Thank you, Your Honor. [00:34:40] Speaker 02: Thank you very much. [00:34:41] Speaker 02: We want to thank both counsel for the very good briefing and argument in this matter. [00:34:46] Speaker 02: This case is submitted. [00:34:48] Speaker 02: The court is now concluded for the day. [00:34:49] Speaker 02: We'll stand in recess until tomorrow morning.