[00:00:00] Speaker 02:
May it please your court.

[00:00:02] Speaker 02:
My name is Jake Biesolinsk on behalf of Lead Plaintiff's Walleye and the Securities Class Action, alleging insider trading.

[00:00:09] Speaker 02:
I want to start by just telling the very basic story at issue in this case.

[00:00:13] Speaker 02:
Intelsat was engaged in a bet the company deal to get permission from the FCC to launch a private auction of C-band spectrum.

[00:00:21] Speaker 02:
If the deal went forward, everyone agrees Intelsat's valuation would skyrocket.

[00:00:26] Speaker 02:
If the deal did not go forward, Intelsat was headed to bankruptcy.

[00:00:31] Speaker 02:
Intelsat thought the deal was going to go forward.

[00:00:33] Speaker 02:
Its CEO thought he had a handshake deal with Chairman Pai, the key decision maker.

[00:00:38] Speaker 02:
Analysts also thought the deal was on track.

[00:00:40] Speaker 02:
However, rumors began to surface that Senator Kennedy was rallying political support against the deal.

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And so on the evening of November 4th, Intelsat's lobbying group, the Seaband Alliance, reached out to the FCC and asked for a meeting the next day, apologizing for the short notice, trying to get a handle on the situation.

[00:00:58] Speaker 02:
That meeting happened, and according to confidential witness testimony, bankruptcy testimony, board minutes, and other corroborating sources, the meeting went terribly.

[00:01:08] Speaker 06:
At the meeting, the... Wait, wait, wait, stop, because we've all read the record, and maybe you can cut your description shorter.

[00:01:15] Speaker 06:
According to the bankruptcy testimony, at least the actual testimony given by human beings, it says what happened at the meeting was inconsequential.

[00:01:27] Speaker 06:
What the people at the meeting were told was, we haven't decided yet, and they weren't given much more information than they had before.

[00:01:35] Speaker 06:
You have confidential informants who weren't at the meeting who say, well, that may be true, but the body language of the person from the FCC they were meeting with

[00:01:45] Speaker 06:
must have communicated this to somebody else.

[00:01:49] Speaker 06:
But the record does not indicate that the meeting went terribly.

[00:01:53] Speaker 02:
So I don't think that the bankruptcy testimony says nothing was communicated.

[00:01:56] Speaker 06:
Well, it says that they were told no decision was made yet.

[00:01:59] Speaker 02:
And perhaps you're thinking of Chairman Pai's testimony, not in the bankruptcy, but in a Senate hearing?

[00:02:06] Speaker 06:
Right.

[00:02:07] Speaker 06:
He says, I talked to my counsel, and he says he didn't tell him anything.

[00:02:11] Speaker 02:
So I just want to distinguish.

[00:02:12] Speaker 02:
In the record here, there's testimony from the bankruptcy proceeding that is different than what Chairman Pai said.

[00:02:18] Speaker 06:
Is there any testimony from the bank?

[00:02:21] Speaker 06:
And you agree that the testimony from the bankruptcy proceeding is relevant?

[00:02:25] Speaker 02:
Absolutely.

[00:02:26] Speaker 06:
Tell me what testimony there is from the bankruptcy proceeding that the people who attended this meeting were told that a public auction was going to be conducted.

[00:02:37] Speaker 02:
They were there is no record that says they were told absolutely that was okay.

[00:02:41] Speaker 06:
So tell me what testimony there I just tell me what testimony there is in the record that says they were that somebody told them it was probable or likely.

[00:02:52] Speaker 02:
The context is that going into the meeting prior to the meeting, they thought they had a handshake deal.

[00:02:58] Speaker 02:
And there is clear testimony that coming out of the deal, they all felt that something had changed, that the situation had taken a turn for the worse.

[00:03:05] Speaker 02:
The confidential witnesses, and I know that's not what you're asking, say, including CWs who were informed of what happened at the meeting right afterwards, that it was a 180-degree reversal.

[00:03:14] Speaker 03:
Now, in- But again, we all read this record.

[00:03:19] Speaker 03:
I got from it is that all of this is based upon the body language of the lawyer for the chairman.

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If you were writing a public disclosure of what happened, what would you have said?

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where you're relying on the body language of the lawyer who said nothing to confirm the idea this wasn't going through.

[00:03:41] Speaker 03:
So how would you write that?

[00:03:43] Speaker 02:
I would say, so who am I when I'm writing this?

[00:03:46] Speaker 03:
You're just saying based on the body language of the counsel, we've concluded this is not going forward.

[00:03:52] Speaker 03:
You wouldn't have written that, would you?

[00:03:53] Speaker 02:
I would not have said due to the body language.

[00:03:55] Speaker 02:
It would be silly.

[00:03:56] Speaker 02:
What I would have said is the company had an understanding that there was a- Based on what?

[00:04:01] Speaker 02:
prior communications the company believed things were going well.

[00:04:04] Speaker 06:
That was their internal belief that it was going well.

[00:04:07] Speaker 06:
Everybody agrees they had no deal with the FCC.

[00:04:10] Speaker 02:
That's correct.

[00:04:11] Speaker 06:
They had been approaching them and asking them to conduct a private auction and they thought their

[00:04:18] Speaker 06:
entities were falling on receptive ears.

[00:04:22] Speaker 06:
They went to this meeting and now they were said, no, maybe I'm not so sure about this.

[00:04:27] Speaker 03:
Indeed, there had been 50 meetings with the FCC on this very point before.

[00:04:33] Speaker 03:
What changed?

[00:04:35] Speaker 02:
Well, what changed was that Senator Kennedy had rallied political support against the deal.

[00:04:39] Speaker 06:
Public information.

[00:04:40] Speaker 02:
And we have an email from Degani, the actual participant for Chairman Pai, saying, given where we are, we should play things cold correct.

[00:04:48] Speaker 01:
That isn't the information that's at issue, right?

[00:04:52] Speaker 01:
So we've got to figure out what's material, what's non-public, and what's the information.

[00:04:57] Speaker 01:
So I'm back to what is the information and how is that distinct, to make it non-public, from the public record that

[00:05:11] Speaker 01:
You know, Senator Kennedy and others had already established.

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So one way of thinking about this is the information was what the FCC had conveyed.

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And I think my view of the record is there is reason to believe they conveyed something of substance, right?

[00:05:24] Speaker 02:
Another way of looking at it.

[00:05:26] Speaker 01:
Under the pleading standards, don't you have to say a little bit more than something of substance?

[00:05:32] Speaker 02:
Yeah, what they conveyed was that there was a change in the FCC's willingness to go along with them.

[00:05:38] Speaker 06:
Well, but you haven't alleged that anybody at the meeting said, gee, we were willing to go along with this in the past, but now we're not.

[00:05:47] Speaker 06:
So what you've conveyed is that people left the meeting with an impression that things might not be as favorable as when they went in.

[00:05:56] Speaker 06:
Is that the non-public information that you think should have been disclosed?

[00:06:01] Speaker 02:
So I want to explain sort of two thoughts here, right?

[00:06:03] Speaker 06:
No, but first answer my question.

[00:06:06] Speaker 02:
We believe there are two ways of looking at what the non-public information was, and both of them would be actionable.

[00:06:12] Speaker 02:
One of them, which is the question you just asked, is absolutely an allegation in our complaint, and I believe

[00:06:17] Speaker 03:
a perfectly substantial one, which is that the companies... Which is basically based upon the body language of the chairman's lawyer, you holistically believe this is what came out of it.

[00:06:28] Speaker 03:
That doesn't qualify under 9B, does it?

[00:06:31] Speaker 02:
I absolutely... There's two things at issue.

[00:06:34] Speaker 02:
I think that if the question were just, is it MMPI, is it non-public information that the FCC had changed body language in a substantial way, given the importance of this deal... Body language?

[00:06:44] Speaker 02:
You're going to rely on body language for material, public?

[00:06:47] Speaker 01:
How about you give us what else you're relying on.

[00:06:48] Speaker 02:
And the other way of looking at it is that the company's own view of the prospect of the deal is itself MMPI.

[00:06:55] Speaker 02:
And we cite a number of cases that show that, for example, a company's view of the likelihood of FDA approval of their drug is absolutely MMPI.

[00:07:03] Speaker 02:
A company's view of its own likely forecast is absolutely MMPI.

[00:07:06] Speaker 01:
OK, so thank you.

[00:07:09] Speaker 01:
That's helpful in terms of moving this down.

[00:07:10] Speaker 01:
I guess I want to explore a little bit now

[00:07:14] Speaker 01:
the other element of this.

[00:07:17] Speaker 01:
Where's the who, what, when, where, how of this communication to defendants?

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

[00:07:24] Speaker 02:
So there's no question at all that we do not at this stage in the case in the record have the smoking gun evidence of exactly when they were.

[00:07:30] Speaker 06:
Well, you don't not only not have the smoking gun evidence, isn't it fair to say you have no evidence?

[00:07:35] Speaker 02:
What we have is very strong circumstantial evidence.

[00:07:38] Speaker 06:
But you ask us to infer that because a sale was made in close proximity to the meeting, that that's enough to demonstrate that the information was given from the people in the meeting to other people.

[00:07:51] Speaker 02:
Our argument is very much an inference, and it is not just the timing of the trade as an inference.

[00:07:56] Speaker 02:
It is the entirety of the circumstances.

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It's the importance of this deal to the company.

[00:08:01] Speaker 02:
It's the fact that there was a sense that there was a 180 degree reversal.

[00:08:05] Speaker 02:
It's the fact that the trade occurred that same day.

[00:08:07] Speaker 02:
It's that a very large quantity of shares were sold in an urgent aftermarket block trade at a steep discount.

[00:08:13] Speaker 01:
At least my review, correct me if I'm wrong, is that the PSLRI pleading standards require a little bit more than I think what you have here is motive and opportunity, perhaps, right, at best.

[00:08:27] Speaker 01:
Who did that?

[00:08:29] Speaker 01:
I mean, who communicated what, which then takes us back to what the information is.

[00:08:37] Speaker 02:
I don't think that this is purely a motive and opportunity.

[00:08:40] Speaker 02:
I think it is a totality of the circumstances.

[00:08:42] Speaker 02:
And what TeLEBS instructs is that even in PSLRA 9b standard cases, you are to look at the totality of the facts and make the decision of whether or not there is a strong inference supporting the claim.

[00:08:54] Speaker 01:
With respect to the circumstantial evidence, a big piece of this is the block sale.

[00:08:59] Speaker 01:
Anything in your complaint that suggests that this block sale was inconsistent?

[00:09:05] Speaker 01:
Because I think there's a plausible inference on the other side that there is an earnings report and this was within the window.

[00:09:13] Speaker 01:
So do you have anything that suggests that this is a departure from what they would have done or had done in the past?

[00:09:19] Speaker 02:
Yeah, so defendants make the argument that they had in the past also sold shares, and there is no record that they had ever engaged in this sort of urgent steep discount to the market price block trade as a way of disposing shares before.

[00:09:32] Speaker 01:
Well, that's not their burden to come back with respect to the complaint.

[00:09:36] Speaker 01:
Don't you have to allege, and I don't know whether it's information available publicly or not, but that

[00:09:44] Speaker 01:
It's not for them to come back.

[00:09:45] Speaker 01:
Don't you have to say to Kerry, your pleading burden, that you've looked at the past block sales or other trades or whatever, and they've never done that before?

[00:09:56] Speaker 02:
They have made sales in the past.

[00:09:59] Speaker 02:
There is no reason to believe they've ever made a block sale like this to dispose of shares in the past.

[00:10:03] Speaker 03:
But with respect to counsel, it seems to me you've got this backwards.

[00:10:07] Speaker 03:
In order to satisfy 9B, don't you have to show who it is that had the information?

[00:10:15] Speaker 03:
to whom that was communicated and that that was used as the basis for these sales.

[00:10:20] Speaker 03:
To start with, who is a big question?

[00:10:23] Speaker 03:
Almost every person you meet, it's all an inference, just assuming this occurred, it's all holistic.

[00:10:29] Speaker 03:
Why is that enough under the case law?

[00:10:32] Speaker 02:
Tellabs does not say that particularized pleading requires pleading every single detail of the allegation.

[00:10:37] Speaker 03:
This is all just speculative, is it not?

[00:10:40] Speaker 02:
The core premise of Tellabs is that you look at the facts as a whole and you assess whether or not the inference is as plausible as any alternative inference.

[00:10:48] Speaker 02:
The alternative inference.

[00:10:49] Speaker 06:
No, it has to be more plausible.

[00:10:51] Speaker 02:
My understanding of the standard is it's at least as, I think a tie goes to the runner.

[00:10:57] Speaker 06:
Let's assume a tie goes to the runner.

[00:11:00] Speaker 02:
Our point here is, the alternative inference here is this was a huge coincidence.

[00:11:05] Speaker 02:
That's possible.

[00:11:06] Speaker 02:
Discovery might prove that to be the case.

[00:11:08] Speaker 02:
We're not denying that.

[00:11:09] Speaker 02:
But the inference that, on the day the company

[00:11:12] Speaker 02:
learned that there was some change that put at jeopardy their bet the company deal, that a couple weeks later actually emerged as causing the company to completely fall apart.

[00:11:22] Speaker 02:
Their two biggest shareholders and their board chairman sell 246 million shares of stock in an urgently marketed, steeply discounted block trade.

[00:11:29] Speaker 06:
And held onto, in the case of one of the shareholders, 86% of its stock.

[00:11:36] Speaker 02:
And I don't think the fact that they held onto a position is in any sense counter evidence of the fact that this was motivated.

[00:11:43] Speaker 03:
Why not?

[00:11:43] Speaker 03:
If you hold a vast majority and you don't sell it, doesn't that tell you something?

[00:11:47] Speaker 02:
Yeah, so there's a number of cases that have recognized percents like this are suspicious, but more importantly, the logic of it, the logic of the alternative inference is, look, if we really had MMPI, we would have sold all of it, or we would have sold a whole lot more of it.

[00:12:00] Speaker 06:
Well, isn't there one defendant, and I'm trying, I was trying to find this in the record, and so you can help me on this.

[00:12:06] Speaker 06:
Wasn't one of the defendants under a restriction about not selling stock until this point?

[00:12:14] Speaker 06:
Wasn't there a six-month stay on one of them?

[00:12:16] Speaker 02:
I don't believe so.

[00:12:18] Speaker 06:
I thought the district court made some reference to that, but maybe your friends can talk about that.

[00:12:23] Speaker 03:
You want to save any of your time, you're down to two minutes.

[00:12:28] Speaker 03:
All right, now we've got, I guess, three different lawyers here, right?

[00:12:33] Speaker 03:
And who's going first?

[00:12:35] Speaker 00:
May it please the court, Melanie Blunchy for the BC Partners Appellees.

[00:12:39] Speaker 00:
Okay, very well.

[00:12:40] Speaker 00:
Separate counsel.

[00:12:40] Speaker 03:
And you each have five minutes, right?

[00:12:42] Speaker 00:
Thank you, Your Honor.

[00:12:43] Speaker 03:
Very well.

[00:12:43] Speaker 03:
Okay, please proceed.

[00:12:44] Speaker 00:
Yes.

[00:12:45] Speaker 00:
In this case, plaintiffs have not come close to meeting the PSLRA requirements for pleading material non-public information or science or

[00:12:54] Speaker 00:
And on top of that, have not met the requirements for statutory standing because they do not even allege that they traded in the block trade.

[00:13:01] Speaker 06:
With respect to MND- Do we have to reach statutory standing?

[00:13:04] Speaker 00:
You do not have to reach statutory- If we agree with you on the rest.

[00:13:07] Speaker 06:
If you agree with us- Because there seems to be some contrary case law on that issue.

[00:13:11] Speaker 06:
Do you agree?

[00:13:12] Speaker 00:
There's not binding contrary.

[00:13:14] Speaker 00:
I understand.

[00:13:15] Speaker 06:
If there were binding contrary case law, neither side will be making the argument.

[00:13:19] Speaker 00:
Correct.

[00:13:20] Speaker 00:
Under the two binding presidents, Brody and Neubronner, the court must screen out plaintiffs who could not possibly have traded with defendants.

[00:13:29] Speaker 00:
And while I does not allege that.

[00:13:30] Speaker 03:
This is on the contemporaneous issue, right?

[00:13:32] Speaker 00:
Exactly.

[00:13:32] Speaker 03:
And what's your best argument that this was not contemporaneous trading?

[00:13:37] Speaker 00:
Sure, under Brody, contemporaneous in the Ninth Circuit has been interpreted to mean someone who could possibly have traded with the defendants.

[00:13:48] Speaker 03:
But it doesn't, didn't Congress, following the, I think, Shapiro, the Second Circuit case, basically, it's kind of a proxy concept, not whether you actually traded with them, but whether you could have traded with them.

[00:14:00] Speaker 03:
Isn't that the standard that we would be looking at, perhaps?

[00:14:03] Speaker 00:
Whether you could have is it also exactly what Brody and that's what Shapiro said, right?

[00:14:10] Speaker 00:
Shapiro does it but Subsequent to Shapiro Wilson, which it was also incorporated in that house report The house specifically referred to the Shapiro case, right the house specifically referred to Shapiro and Wilson subsequent case which made clear that contemporaneous should be interpreted as

[00:14:30] Speaker 00:
to mean counter-parties that could have traded.

[00:14:33] Speaker 03:
And in this case, that could have, I mean, putting aside the issues that we've raised about whether the 9b pleading's been satisfied, if it had been satisfied, if we followed the Shapiro line of reasoning in Wilson, wouldn't this be enough for them to have standing?

[00:14:55] Speaker 00:
No, including because Brody and New Brauner require plaintiffs to plead with particularity.

[00:15:01] Speaker 00:
That's the 9B issue, right?

[00:15:04] Speaker 00:
Well, it's applying 9B to the contemporaneous.

[00:15:08] Speaker 06:
Well, here's my problem with your argument, taking the could have traded too far.

[00:15:13] Speaker 06:
And again, it may not be necessary in this case.

[00:15:16] Speaker 06:
Let's assume the sale is made on day one.

[00:15:20] Speaker 06:
You agree that people who buy roughly contemporaneously, which is maybe day two or three, still are entitled to sue.

[00:15:27] Speaker 00:
Not in the case where we're dealing with a private watcher.

[00:15:30] Speaker 06:
Well, I understand, but let me just, but we are certain, even if you sell on the public market on day one,

[00:15:39] Speaker 06:
bought on day two or three could not have bought your shares, correct?

[00:15:45] Speaker 06:
Just by timing.

[00:15:47] Speaker 06:
It may be contemporaneous, but we know the sale occurred on day one, and the next couple people bought on day two or three.

[00:15:55] Speaker 06:
But those folks, all the case law says, have standing to sue.

[00:15:59] Speaker 06:
So it seems to me it can't just be enough that they couldn't have possibly bought from you.

[00:16:04] Speaker 06:
there must be something else in the statute.

[00:16:07] Speaker 06:
Now, in your case, we know they couldn't possibly have bought because it was a private sale and we know who the buyers were.

[00:16:14] Speaker 06:
But the same thing is true if we have roughly contemporaneous transactions that occur

[00:16:20] Speaker 06:
two or three days later, you got your money out of the sale on day one, and the roughly contemporaneous transactions occur on day two and three.

[00:16:28] Speaker 06:
We know that the people on day two or three didn't buy from you, but nonetheless we give them standing.

[00:16:34] Speaker 06:
So tell me how you can reconcile the two of those.

[00:16:36] Speaker 00:
Sure.

[00:16:37] Speaker 06:
So, for one, it's generally considered a very tight window and whether it's... Well, no matter how tight it is, under my example, you know the people who bought on day two or three didn't buy from the seller who sold on day one.

[00:16:51] Speaker 00:
So, although potentially in the open market, you might have a better argument that their shares were affected directly by the buying and selling.

[00:17:00] Speaker 00:
Where in the private trade, you definitely don't.

[00:17:03] Speaker 00:
But of course, we don't need to get to that, especially, you know,

[00:17:06] Speaker 00:
when we look at, it's not even particularly played as NPI.

[00:17:10] Speaker 00:
If we look at FD.

[00:17:11] Speaker 00:
Ms.

[00:17:11] Speaker 01:
Mungi, I'd like to ask you that.

[00:17:12] Speaker 01:
Welcome back, by the way.

[00:17:13] Speaker 01:
Hope you've had a good week.

[00:17:15] Speaker 00:
Thank you.

[00:17:15] Speaker 00:
Good to see you again.

[00:17:18] Speaker 01:
What, I guess, the concern here that your friend has raised is what more would they have to show given all these coincidences lining up?

[00:17:29] Speaker 01:
I mean, they don't know that the block sale isn't

[00:17:34] Speaker 01:
isn't public in terms of the details of it.

[00:17:38] Speaker 01:
Of course, the whole meeting is private.

[00:17:40] Speaker 01:
What's missing from their allegations, and how would a plaintiff be able to develop those allegations with particularity under the standard you urge?

[00:17:50] Speaker 00:
May I finish my time?

[00:17:51] Speaker 00:
Yeah, you can answer his question.

[00:17:53] Speaker 00:
Sure.

[00:17:53] Speaker 00:
Thank you, Your Honor.

[00:17:54] Speaker 03:
There is no trap door.

[00:17:56] Speaker 00:
Thank you.

[00:17:57] Speaker 00:
Well, with respect to, first of all, the failings on MNPI, if we look to Epstein versus Washington state energy, the circuit has held that reliance on predictive statements in the context of regulatory proceedings is inherently unreasonable.

[00:18:14] Speaker 00:
So the regulatory process does not ordinarily invoke a duty to disclose.

[00:18:20] Speaker 00:
So when all we're talking about is more likely, less likely body language, there's just no way for plaintiffs to cross the line on MNPI.

[00:18:29] Speaker 00:
and then with respect to cienture uh... undertow labs we do have to be the competing inferences of the hearsay uh... confidential what you're getting out for us is what his question was versus this one testimony for in the bankruptcy proceeding from both uh... mister caller and mister spangler here ninety uh... one bc s c r seventy four uh... so they would have to

[00:18:55] Speaker 00:
close the gap and have sort of more specific communications or pleading allegations about communications or at least an avenue of communications.

[00:19:11] Speaker 00:
You know, in America West, for example, they plead board meetings and attendance at board meetings.

[00:19:17] Speaker 00:
They plead that these defendants were typically updated at board meetings, but they do not plead that there was any board meeting.

[00:19:24] Speaker 00:
They do not plead it could have happened in those scamped hours.

[00:19:26] Speaker 03:
Let me ask my colleagues, do you have additional questions?

[00:19:28] Speaker 06:
I know you'd have lots more to say, but you've got... Well, one of the difficulties with splitting arguments three ways, I will tell people, is that nobody gets to make a complete argument.

[00:19:39] Speaker 03:
That's a good way.

[00:19:40] Speaker 06:
But it's your choice, and you're all experienced lawyers.

[00:19:42] Speaker 03:
Good way to put it.

[00:19:43] Speaker 03:
All right, and who are you representing?

[00:19:46] Speaker 05:
I represent Defendant Appellee David McGlade.

[00:19:49] Speaker 03:
Okay, please proceed.

[00:19:51] Speaker 05:
Good morning.

[00:19:51] Speaker 05:
May it please the Court.

[00:19:52] Speaker 05:
So there's a variety of avenues we've set forth in our briefing that would allow this Court to properly affirm.

[00:19:58] Speaker 05:
I want to focus on two.

[00:20:00] Speaker 05:
They are the bases for the District Court's dismissal.

[00:20:03] Speaker 05:
The first is the lack of any particularized factual allegations to show Mr. McGlade's possession, non-public information at any point in time.

[00:20:11] Speaker 05:
Can I stop you there?

[00:20:11] Speaker 06:
Yeah, of course.

[00:20:12] Speaker 06:
Because it's the question that

[00:20:14] Speaker 06:
I want to ask somebody on your side, and you all have the same argument.

[00:20:19] Speaker 06:
When I look at this conglomeration of facts, if you asked me whether I thought these people likely learned something or something that happened that day likely triggered a private sale in the nighttime, it does seem likely to me.

[00:20:39] Speaker 06:
Now, maybe the PSRA and Rule 9b don't allow me to get there.

[00:20:43] Speaker 06:
But aren't we allowed to look at this through the lens of a little common sense?

[00:20:48] Speaker 06:
It wasn't the day before.

[00:20:50] Speaker 06:
It wasn't three days later.

[00:20:52] Speaker 06:
It was right after they had this meeting.

[00:20:54] Speaker 06:
Nobody's claiming on your side, gee, we learned something completely different or we needed the money or something.

[00:21:02] Speaker 06:
So it may not be able to get us there in a securities case, but there is some purchase in my mind to the plaintiff's notion that, oh, my God, you know, common sense suggests you learned something.

[00:21:15] Speaker 06:
I'll respond to that.

[00:21:17] Speaker 05:
Yeah, of course.

[00:21:17] Speaker 06:
Maybe common sense is not enough in securities cases.

[00:21:20] Speaker 05:
Well, I would certainly agree with that, especially in the lack of any- We'll stipulate to that.

[00:21:26] Speaker 05:
And so I'm going to attempt to not totally rely on the pleading standard in answering your question.

[00:21:32] Speaker 05:
On its surface, yes, I understand first blush there might be a sort of, oh my goodness, this must have been something.

[00:21:38] Speaker 05:
Gosh, I think Senator Kennedy had the same reaction.

[00:21:43] Speaker 05:
What this requires, even from a common sense perspective, is that outside directors of the corporation were informed about one meeting, one of 50, on a near instantaneous basis, and then completed a block sale later the same day just after market close.

[00:21:59] Speaker 01:
What if they alleged that Mr. McClade was present there that night?

[00:22:03] Speaker 01:
So there's allegations that he would office there sometimes.

[00:22:07] Speaker 01:
What if he was there?

[00:22:09] Speaker 05:
The office allegations are interesting.

[00:22:12] Speaker 01:
Well, I'm adding an allegation that I'm just trying to figure out how much smoke leads to fire under these pleading standards.

[00:22:22] Speaker 05:
Yeah, I'd like to answer that just directly, which is I think the starting point for a conversation of a viable complaint is some particularized fact to show a communication between someone in the know and Mr. MacLight.

[00:22:35] Speaker 05:
that we don't have.

[00:22:37] Speaker 01:
And that can't just be, as we talked about, motive and opportunity that assume he was, assume they allege that he was in the office that day, that night.

[00:22:49] Speaker 01:
There's already allegations that he regularly communicated with them.

[00:22:52] Speaker 01:
Does there have to be an allegation, an additional allegation that and he was either at the meeting or he was told that day, do they have to say who, what more?

[00:23:04] Speaker 05:
I think under New Brauner, yes, absolutely, they have to say who told him what and when.

[00:23:08] Speaker 05:
That's clear Ninth Circuit law, Rule 9b.

[00:23:14] Speaker 05:
Do you have more question than that?

[00:23:18] Speaker 03:
He's basically asking if we didn't have Rule 9b, would this be a viable case?

[00:23:24] Speaker 05:
Frankly, I think it fails under Twombly Ickball as well, because it lacks any facts whatsoever.

[00:23:30] Speaker 05:
But certainly under 9b in the PSLRA, we're not even close.

[00:23:33] Speaker 03:
They have to say who, when, where, all those questions, right, to be viable?

[00:23:41] Speaker 05:
Yeah, they have to meet the new broader standard.

[00:23:43] Speaker 03:
And there's no allegation that anybody in the know told Mr. McClade about the suspicion, the holistic concern, right?

[00:23:52] Speaker 05:
There is no allegation that anyone spoke to Mr. McClade on November 5th about anything whatsoever.

[00:23:57] Speaker 03:
And that's essential under 9B from your perspective.

[00:23:59] Speaker 03:
Yes, sir.

[00:24:00] Speaker 01:
No circumstantial securities fraud cases under PSLRA.

[00:24:05] Speaker 05:
Oh no, that's not what I'm saying.

[00:24:06] Speaker 05:
I think that the fact of a communication with Mr. McGlade would potentially provide some circumstantial evidence that with other things may well lead to potentially viable cases.

[00:24:18] Speaker 01:
So if one of the confidential witnesses said that they saw him talking to someone, but they didn't know what they were talking about, that's the sort of thing you're saying, but even that's missing.

[00:24:27] Speaker 05:
Yeah, so something like, we saw Mr. Maglade approach the folks at the hotel after the meeting.

[00:24:33] Speaker 05:
That would be a much more viable case than the one we're looking at, yes.

[00:24:36] Speaker 05:
Thank you.

[00:24:38] Speaker 05:
I just wanted to point out at the end, there's no cogent and compelling inference of Sienta whatsoever here.

[00:24:43] Speaker 05:
Mr. Maglade lost $81 million in the offing, leaving most of his shares on the table through the block trade.

[00:24:49] Speaker 05:
So in the absence of any facts, there's obviously no cogent or compelling inference of Sienta.

[00:24:55] Speaker 03:
And what percentage of the shares of the company did he retain after the sale?

[00:25:03] Speaker 05:
Oh, percentage of shares of the company?

[00:25:04] Speaker 03:
If you know.

[00:25:05] Speaker 05:
That I couldn't tell you, but he retained approximately 86% of his total holdings.

[00:25:10] Speaker 03:
OK.

[00:25:12] Speaker 03:
So if he thought there was something wrong, again, your friend on the other side sort of talked about that.

[00:25:18] Speaker 03:
It can bear on it, but it's not determinative, right?

[00:25:24] Speaker 05:
That's correct, and there was nothing that would restrain Mr. McGlade from selling on the open market if he thought that Intelsat was doomed to bankruptcy.

[00:25:32] Speaker 03:
Okay.

[00:25:32] Speaker 03:
Any other questions about my colleague?

[00:25:34] Speaker 03:
Thank you.

[00:25:35] Speaker 03:
Okay.

[00:25:38] Speaker 03:
And you are representing?

[00:25:40] Speaker 04:
Yes, Gerson's WIFAC for the Silver Lake defendants.

[00:25:44] Speaker 04:
Okay.

[00:25:44] Speaker 04:
I'm not here to argue for a great coincidence.

[00:25:47] Speaker 04:
I think if the court conducts the review commanded by Tellabs, a holistic review of everything,

[00:25:53] Speaker 04:
including the material subject to judicial notice like public trading records, you will come up with a compelling inference that Silver Lake's trade had nothing to do with the meeting on that day.

[00:26:05] Speaker 04:
Why do I say that?

[00:26:06] Speaker 04:
Well, Silver Lake was off the board for three years before the trade.

[00:26:11] Speaker 04:
The only argument that they make about Silver Lake potentially having access to the information is they cite the shareholder agreement.

[00:26:20] Speaker 04:
The shareholder agreement, which they cite five times, was subject to judicial notice.

[00:26:25] Speaker 04:
That's why we have the doctrine.

[00:26:27] Speaker 04:
And what it says is not you get board materials.

[00:26:30] Speaker 04:
What it says is you get what you need for your own internal and regulatory goals.

[00:26:36] Speaker 06:
Did the named three defendants in this case engage in a joint sale of their stock?

[00:26:44] Speaker 04:
Yes.

[00:26:45] Speaker 04:
And let me say.

[00:26:50] Speaker 06:
It's hard for me to separate.

[00:26:51] Speaker 06:
If one of them had, if there was a sufficient pleading as to one, it would seem to me to be much easier to say it was sufficient as to all because they all sold together in the same transaction, no?

[00:27:04] Speaker 04:
Not for the Silver Lake defendants because

[00:27:06] Speaker 06:
I understand, but is it not true that they sold together in the same transaction with the other two?

[00:27:14] Speaker 04:
That's absolutely true.

[00:27:15] Speaker 06:
No, stop fighting me for a second.

[00:27:18] Speaker 06:
Let's assume for a moment that there was dead certain evidence that one of the other three defendants had inside information.

[00:27:28] Speaker 06:
Is the fact that you all sold together in the same block transaction, wouldn't that give me sufficient evidence at least at this stage of the pleading at this stage to keep in Silver Lake?

[00:27:39] Speaker 04:
No, because the evidence is that Silver Lake during the sort of golden age of this handshake agreement

[00:27:46] Speaker 04:
where everybody was anticipating a 770% return, Silver Lake was selling.

[00:27:52] Speaker 04:
Silver Lake sold 4.3 million shares during the time of the pendency agreement.

[00:27:58] Speaker 01:
Well, that might go to the science or Mr. Seishaupt, but I guess to kind of follow up on this question.

[00:28:05] Speaker 01:
I guess it's kind of a mechanical question because I'm not sure how much of this is alleged or just inferred by it.

[00:28:12] Speaker 01:
How would Silver Lake for the trade get notice of its tag-along rights?

[00:28:18] Speaker 01:
You have a sale.

[00:28:19] Speaker 01:
Does the idea of a block sale pursuant to the tag-along rights require communication?

[00:28:26] Speaker 04:
Absolutely.

[00:28:27] Speaker 04:
It's right there in the shareholder agreement, which was incorporated by reference.

[00:28:31] Speaker 04:
What it says is BC Partners cannot sell a share without inviting Silver Lake to participate.

[00:28:38] Speaker 04:
So they had to invite us to participate, which is what happened.

[00:28:43] Speaker 06:
So what you're saying is that even if BC Partners had inside information, we can't attribute that to Silver Lake because

[00:28:53] Speaker 06:
they were required to say, they were required, you were required to sell a B.C.

[00:28:58] Speaker 04:
partnership.

[00:28:58] Speaker 04:
They were required to invite and they'd have no reason to tell us anything because that would be inducing us to do that which they knew we would do anyway.

[00:29:07] Speaker 04:
We had been selling for a year.

[00:29:09] Speaker 04:
We sold over two million shares the quarter before.

[00:29:12] Speaker 01:
But I guess from the plaintiff's perspective, assuming we've had a set of questions about the gap between the

[00:29:23] Speaker 01:
the corporate insiders and the defendants here, but among the defendants, that would be an opportunity at least of communication that happened that day among the defendants.

[00:29:36] Speaker 04:
It was a requirement.

[00:29:37] Speaker 04:
that they communicate.

[00:29:40] Speaker 04:
But there'd be no reason for them to tell us that which they knew we would do anyway because it was quite public for a year with public filings that Silver Lake was exiting the stock.

[00:29:51] Speaker 04:
So if they suddenly decided after months of watching us sell

[00:29:55] Speaker 04:
in the face of this handshake agreement and not cluing us in.

[00:29:59] Speaker 04:
We're going to reverse course, where for old times' sake, we're going to tell them about this.

[00:30:03] Speaker 04:
They'd have no reason to do it.

[00:30:04] Speaker 01:
Well, that's science here, but in terms of the passage of the material non-public information, that would be an opportunity.

[00:30:11] Speaker 04:
That'd be an opportunity.

[00:30:12] Speaker 04:
They'd have no reason to do it, and we didn't need a motivation.

[00:30:17] Speaker 04:
We had been doing it for a year.

[00:30:19] Speaker 04:
If I can just address the 14% for a second.

[00:30:21] Speaker 04:
Very quickly, yeah.

[00:30:22] Speaker 04:
I'm sorry.

[00:30:23] Speaker 04:
Court pointed out that

[00:30:24] Speaker 04:
14% is a small number.

[00:30:26] Speaker 04:
Everyone sold only 14% of their holdings because everyone had to sell an equal percentage of their holdings pursuant to the tag-along rights.

[00:30:35] Speaker 04:
And you're right.

[00:30:36] Speaker 04:
In this case, think about this case, the theory of materiality is either it's billions or it's immediate bankruptcy.

[00:30:44] Speaker 04:
So who in their right mind would think, here's an idea, I'm about to be wiped out on my investment.

[00:30:50] Speaker 04:
I'm only going to sell 14%.

[00:30:52] Speaker 04:
That way I'll have a good cover story when the 86% gets wiped out to zero.

[00:31:00] Speaker 04:
Thank you.

[00:31:01] Speaker 03:
Thank you very much.

[00:31:02] Speaker 03:
All right.

[00:31:05] Speaker 03:
So you have rebuttal time.

[00:31:06] Speaker 02:
Thank you.

[00:31:08] Speaker 02:
There's three things I'd like to address, and one is by far the most important.

[00:31:12] Speaker 02:
I'm deeply worried about the idea that we shouldn't decide this based on common sense.

[00:31:18] Speaker 02:
The standard set by telelabs is very- Or maybe we should decide it according to the law.

[00:31:23] Speaker 02:
And what the law says in Telebs is that the requirement is particularized pleading, which I'll address in a second, and a strong inference, which is, is it as likely as the alternative?

[00:31:33] Speaker 02:
The particularized pleading requirement does not set magic rules about you must show the who, what, where, when.

[00:31:40] Speaker 02:
And I really implore you to read New Brunner.

[00:31:42] Speaker 02:
It doesn't say that's a requirement in every case.

[00:31:44] Speaker 03:
But with respect, I've never seen a case like this where basically the body language

[00:31:52] Speaker 03:
of a monosyllabic lawyer is the basis of your case.

[00:31:58] Speaker 03:
This opens everything up.

[00:32:02] Speaker 03:
It makes it so that people say, you know, I was along the street and I saw somebody doing some drugs and they did it in a particular way that I thought I should sell my stock.

[00:32:10] Speaker 03:
And that makes no sense to me.

[00:32:12] Speaker 02:
So that's a question about the materiality of the information, which is slightly different from what I'm trying to talk about right this second, which is

[00:32:18] Speaker 02:
What is the pleading standard for whether or not the inference of scientists has been met?

[00:32:23] Speaker 02:
And the standard there is, are the facts pled?

[00:32:26] Speaker 02:
Whatever facts are pled, are those facts pled in a detailed way?

[00:32:29] Speaker 02:
And together, do those facts together support a strong inference of scientists?

[00:32:33] Speaker 02:
There's no magic rules requirement.

[00:32:35] Speaker 02:
Newbrenner doesn't state one.

[00:32:36] Speaker 06:
Well, but the question is not an inference of scientists, at least for me.

[00:32:40] Speaker 06:
The question is whether those facts pled together.

[00:32:43] Speaker 06:
create a strong inference that inside information.

[00:32:46] Speaker 06:
Assuming, by the way, nobody's addressed this, so we shouldn't spend time on it.

[00:32:51] Speaker 06:
You're all assuming that the body language of the person in the meeting was inside information.

[00:32:56] Speaker 06:
He's a public official, and I think people might be able to see his body language in any event.

[00:33:01] Speaker 06:
But let's assume that was.

[00:33:04] Speaker 06:
Put aside Cienta for a moment.

[00:33:05] Speaker 06:
What's the evidence that that inside information was transmitted to the

[00:33:11] Speaker 02:
to these defendants.

[00:33:23] Speaker 02:
The cases that they cite do not say that you need to have potentially been the counterparty to the trade.

[00:33:30] Speaker 02:
They are trying to grapple with the question of what period of time is appropriate for contemporaneous trading.

[00:33:35] Speaker 02:
And in doing that, some cases talk about, well, were you likely trading in the same market as them with them in the same time period?

[00:33:41] Speaker 02:
There has never been understanding that the standing requirement refers to actually having been the potential counterparty.

[00:33:46] Speaker 02:
The entire point of passing 20A was to get away from a privity requirement, and the logic of injury for an insider trading claim is that you were deprived of information that you had a right to receive as a member of the public because the defendant violated the duty to abstain from trading or publicly disclose the MNPI that they had.

[00:34:04] Speaker 02:
That's all the time that I have.

[00:34:06] Speaker 03:
Very well.

[00:34:06] Speaker 03:
Thanks to all counsel, very helpful to the court.

[00:34:09] Speaker 03:
The case just argued is submitted.