# Opposition Brief — Apollo Group, Inc. v. Policemen's Annuity & Benefit Fund > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386017_2749%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Opposition Brief - **Published:** January 1, 2011 - **Citation:** 562 U.S. 1270 ## Text oO No. 10-649 IN THE Supreme Court of the Ginited States APOLLO GROUP, INGC., TODD S. NELSON. AND KENDA B. GONZALES. Petitioners POLICEMEN’S ANNUITY AND BENEFIT FUND OF CHICAGO Respondent On Petition for a Writ of Certiorari to the United States Court of Appeals for the Ninth Circuit BRIEF IN OPPOSITION FOR RESPONDENT STEPHEN R. BASSER GERALD J. RODO SAMUEL M. WARD Counsel of Record BARRACK, RODOS & BACINE LEONARD BARRACK 600 West Broadway JEFFREY A. BARRACK Suite 900 BARRACK, RODOS & BACINI San Diego, California 9210 3300 Two Commerce Squar (619) 230-0800 2001 Market Street Philadelphia, Pennsylvania 19103 WILLIAM G. FAIRBOURN (215) 963-0601 FRANCIS J. BALINT, JR (vrodos@barrack.com KATHRYN HONECKER BONNETT, FAIRBOURN, FRIEDMAN & BALINT, P.C 2901 North Central Avenus Suite 1000 Phoenix, Arizona 85012 (602) 274-1100 February 4, 2011 QUESTION PRESENTED Petitioners attempt to paint this case as involving broad questions of securities law, but in fact the dis pute presented is narrow and fact-specific. In its current posture, the case presents one question: Whether the record evidence was sufficient for a properly instructed jury to find that a stock analyst’s reports issued on September 20, 2004, immediately before an economically and statis- tically significant decline in the stock price of corporate petitioner Apollo Group, Inc., were corrective disclosures that respondent could employ as part of its proof of loss causation. Ll TABLE OF CONTENTS Page et yy ae t-te y * | nn ee een l Woo Pee ae aay 8 |) yy |. Se iN (ogy 8 tT ty gt.) RUNDE Renee inn Ney Sere UMA BALI Rr ATR | STATEMENT OF THE CASE... ........0.c0ccecceesccccscccseens 2 REASONS FOR DENYING THE PETITION ......... 12 . APOLLO HAS FAILED TO SHOW ANY RELEVANT CONFLICT IN THE 2) | ig 5. Re ne eerie en At ee pee em Nee ee 12 A. There Is No Relevant Circuit Conflict About the Timing of Corrective Dis- IID accecuiphiince te ccuiptacanued ott tmaun: 12 B. There Is No Circuit Conflict Regard- ing the Treatment of Analyst Reports....... 18 It. APOLLO HAS FAILED TO SHOW ANY CONFLICT WITH BASIC OR DURA........... 21 A. Basic Expressly Declined To Adopt the Timing Rule Apollo Seeks.................. 21 B. Dura Did Not Draw the _ Fact- Opinion Distinction that Apollo FE Rae Moles et ete ORR SPR Sh RE leite oO 23 [l. THIS CASE IS AN UNSUITABLE VEHICLE FOR CONSIDERING THE QUESTIONS APOLLO SEEKS TO PE inspec encen eee etieseaen cadaeeeaen 24 A. This Case Is’ Fact-Specific and Record-Intensive, and Apollo Has Not Preserved Any Materiality a gre eers pc vets recneieeerrtueesaaeeen 24 B. The Recent Grant in Erica P. Johr vt Fund v. Halliburton Is Irrelevant....... 26 THE DECISION OF THE NINTH CIRCUIT IS CORRECT 28 CONCLUSION APPENDIX 1\ TABLE OF AUTHORITIES Page Archdiocese of Milwaukee Supporting Fund, Inc. v. Halliburton Co., 597 F.3d 330 (5th Cir. 2010), cert. granted sub nom. Erica P. John Fund, Inc. v. Halliburton Co., 131 S. Ct. 856 (2011) (No. 09-1403) .......0...... 19, 20, 26, 28 Aspen Skiing Co. v. Aspen Highlands Skiing fare., 472 Ud. 585 (1965) ...............2... rasnieeeiee 28 Basic, Ince. v. Levinson, 485 U.S. 224 EET... aca anicawsuiiesavukaiaioteneksiwir eee rh, Oey ee Burlington Coat Factory Sec. Litig., In re, 114 F.3d 1410 (3d Cir. 1997)..........000.000... 14, 17, 26 City of Monroe Employees Ret. Sys. v. Bridge- j stone Corp., 399 F.3d 651 (6th Cir. 2005)........... Dura Pharms., Inc. v. Broudo, 544 U.S. 336 (2005) acu eke uasuaudapuaskeces one A ie Erica P. John Fund, Inc. v. Halliburton Co.. cert. granted, 131 S. Ct. 856 (2011) (No. 09 | oe ccc euudunsuessacusuuvaseusansubnustaeeee 26, 27, 28 Gilead Sciences Sec. Litig., In re, 536 F.3d 1049 (9th Cir. 2008), cert. denied, 129 S. Ct. 1993 (2009) ..2. 000s. seantedeweie uaatome aaa Merck & Co., Inc. Sec. Litig., In re, 482 F.3d 261 (3d Cir. 2005)........ upnaceunawawanes uma See Li, $4, -+ vu. Martin K. Eby Constr. Co., 386 U.S J Neel: 9 od No. 84 Employer-Teamster Joint Council Pension Trust Fund v. America West Hold- ing Corp., 320 F.3d 920 (9th Cir. 20038)......... LG ve Omnicom Group, Inc. Sec. Litig., In_ re, aoe Foe GOL Cod Cit. DOIG)... cchecexsctrestoies 15, 16, 20 Oran v. Stafford, 226 F.3d 275 (3d Cir. 11) scpaceunderuenenastessed oeeeemieatin conte 13, 14, 17, 26 Reeves v. Sanderson Plumbing Prods., 530 U.S. Oe (OR, ca ee 3 30 Teachers’ Ret. Sys. of Louisiana v. Hunter, 477 F.3d 162 (4th Cir. 2007) ............ SAND Porn 19, 20 Teamsters Local 445 Freight Div. Pension Fund v. Bombardier Inc., 546 F.3d 196 eS a. I ss checscaxcs ne bres cence ear ee eee 16 Thompson v. RelationServe Media, Inc., 610 cee Gees C3 TO Aa oo ces ccc ses 15, 20 Weeks v. Angelone, 528 U.S. 225 (2000)................... 13 STATUTES, REGULATIONS, AND RULES Higher Education Act of 1965, tit. IV, 20 U.S.C. TEPER OF GOR: x. cedacceerec Dae oe Z 20 U.S.C. § 1094(a)(20)...ecccccccceccecececececeseseseseeeveeee: 2 Private Securities Litigation Reform Act of 1995, Pub. L. No. 104-67, 109 Stat. 737....... 23 17 C.F.R. § 240.10b-5 (SEC Rule 10b-5) ............ 10, 26 Fed. R. Civ. P.: PENNE Be sccnicecavsticn don L5 SRN ici viv etennten subsea ees Seas eaeninaceneee ate aS VI OTHER MATERIALS Brief in Opposition, Erica P. John Fund, Inc. v. Halliburton Co., No. 09-1403 (U.S. filed PR ee esc eicnencn cievewecaaras ecto veaundeocep suave: 27 ra Petition for a Writ of Certiorani, Krica P. John Fund, Inc. v. Halliburton Co., No. 09-1403 (EFAS. TARE RY BB, IE csicsvcscacendverscncntnssnseeseeys 27 Restatement (Second) of Torts (1977) 23 INTRODUCTION Petitioners Apollo Group, Inc., its former chief executive officer Todd Nelson, and its former chief fi nancial officer Kenda Gonzales (collectively, “Apollo”) seek review of a jury verdict finding them lable for securities fraud. After weeks of testimony, including expert testimony on both sides about the behavior of Apollo’s tock price, the jury found that Apollo de- frauded its investors by making misrepresentations about a highly critical report by the U.S. Department of Education (“DOE”) that had major implications for Apollo’s future prospects. Apollo now seeks to escape that verdict by asking the Court to rule that too much time passed between the date that its fraud was revealed and the date that its stock price fell, thereby precluding its inves- tors as a matter of law from proving that they were harmed by its fraud. Any such rule would be in- applicable here, because the jury, dutifully applying the instructions Apollo concedes are correct, actually found a stock price decline that came immediately after a fraud-revealing disclosure anc continued into the next day. That finding is not only correct and consistent with every court of appeals decision on analogous facts, but also far too fact-specific to war- rant this Court’s review. Apollo also seeks a second rule: that information received by the market cannot reveal a fraud if it constitutes analysis of, synthesis of, or commentary on previously disclosed information. That rule, too cannot apply on the facts necessarily accepted by the jury: that fraud in this case was revealed by an investment analyst who found new, fraud-related re information about Apollo that alerted investors to the increased risks arising from the DOE Report and 4 I the corrective actions demanded by DOE and taken by Apollo in response to the Report. Apollo’s arguments in favor of review are unper- suasive. Cases involving months-long gaps between the revelation of the fraud and the fall in the inves- tor’s stock price are simply inapposite, as is any ten- sion between the circuits over how to approach such scenarios. The court below rightly perceived this case as a fact-specific application of well-settled law, and there is no reason for this Court to review that judgment. STATEMENT OF THE CASE Apollo is the largest for-profit institution of higher education in the United States. The University of Phoenix (“‘UOP”) accounts for 95% of Apollo's reve- nues. UOP in turn derives 60% of its revenues from federal student loans issued under Title IV of the Higher Education Act of 1965 (“Title 1V”). To receive funds from Title IV loans, UOP needed (and had) a program participation agreement with DOK. That agreement “condition[ed] ... [UOP’s] eligibility” for Title [V loans on (among other things) a prohibition on making “any commission, bonus, or other incen- tive payment based directly or indirectly on success in securing enrollments or financial aid to any per sons or entities engaged in any student recruiting or admission activities.” 20 U.S.C. § 1094(a)(20). This case 1s about misrepresentations and omissions from Apollo to its investors about a DOK report finding that UOP had violated that prohibition and demand- ing corrective action to address the violations, as well as about the consequences for UOP’s future business from DOE’s finding. Apollo seeks judgment as a matter of law after an adverse jury verdict following instructions that 9 oO in relevant part largely tracked those submitted by Apollo (and that Apollo admits were “correct{],” Pet. 10). A court “entertaining [such] a motion” must “review all of the evidence in the record” and must “draw all reasonable inferences in favor of the non- moving party.” Reeves v. Sanderson Plumbing Prods., 530 U.S. 133, 151 (2000). It “may not make credibility determinations or weigh the evidence.” Id. Respondent sets forth the following summary of the evidence in light of that standard. 1. In August 20038, the DOE began a “Program Review” of UOP’s compliance with Title IV. The Program Review included witness interviews, site inspections, and a lengthy document review. It was followed by a Program Review Report (the “Report’). On February 5, 2004, Apollo received a copy of the Report from DOE. Excerpts of Record (“ER”) 370. The Report’s findings were damning. As DOE summarized it, the Report made “a serious finding” that UOP was using an “improper incentive compen- sation system for those involved in recruiting activi- ties” and was “systemically engag[ing] in actions designed to mislead [DOE] and to evade detection” of its misconduct. Jd. DOE described these findings as showing a “substantial breach of [UOP’s] fiduciary duty.” Jd. Among other things, the Report found that “UOP bases [recruiters’] salaries solely on the number of students they enroll,” ER379, and that UOP employed “evasion” and “euphemisms” to con- ceal “the fact that UOP pays distinct and significant financial incentives solely based on recruiters’ suc- cess in securing enrollments,” ER396.! | These findings were particularly damaging to Apollo be- cause, as the evidence later showed, it previously had an excel- lent reputation for regulatory compliance. As one analyst put In the Report, DOE demanded that Apollo take corrective actions, including “substantial and com- prehensive changes to the salary compensation sys- tem for its recruiters and their direct supervisors.” ER401. In June 2004, Apollo changed its compen- sation plan for its recruiters by including explicit weigh‘ed percentages for the different factors that were used to determine compensation. HR222-25. The change prevented recruiters’ supervisors from making salary determinations based solely on the number of enrollments that a recruiter obtained. ER223-24.2 Apollo “[s]ubmit/ed]” the new compensa- tion plan for review by DOE as part of a “corrective action plan to respond to [DOE’s] concerns” in order to obtain “closure” with DOE and avoid “similar find- ings in the future.” ER367-68. In addition, on September 1, 2004, Apollo paid $9.8 million to DOE as part of a settlement of the dispute arising out of the Report. This payment was the largest fine ever imposed by DOE on a for-profit university. ER63-64. 2. The jury was asked to consider whether Apollo made “an untrue statement of material fact or omit[ted] a material fact necessary under the cir- cumstances to keep the statements that were made from being misleading” when publicly discussing its relationship with DOE and the program review it, the investment community had perceived Apollo as being as “pure as the driven snow.” ER672 (internal quotation marks omitted). “ Apollo’s chief human resources officer testified that the June 2004 changes to Apollo's compensation plan were “material” and that any time “you change something material as compen- sation” it creates risks of increased employee dissatisfaction and lower productivity. ER224, ER227-28. throughout the class period. As to each statement the jury answered “yes.” See App., infra, la-2a (Verdict Form).? Petitioners did not disclose the exis- tence of the DOE Report until announcing the set tlement with DOE, and the jury was asked whether petitioners Apollo and Nelson then continued to mis lead the market about the Report’s highly negative findings about Apollo’s recruitment compensation scheme. The jury answered “yes.” See id. at 2a-3a, 6a-7a. The verdict reflects the jury’s conclusion that petitioners never revealed that DOE had demanded that Apollo make comprehensive changes to its sys tem for compensating recruiters or that Apollo had made such changes. Not until September 20, 2004, was there a full, adequate disclosure of these facts and their implications on Apollo. As an example of these false and misleading statements, in March 2004, more than five weeks after receiving the Report, petitioner ‘Todd Nelson (who was then Apollo’s CEO) mentioned to industry analysts during a conference call that DOE had con ducted a “normal” and “ongoing program review.” ER511. When asked “when any type of report will be issued” by DOE, Nelson answered that it was “tough to say.” ER515 (emphasis added). He also told the analysts that Apollo was “very comfortable” that the program review would lead to “nothing that would be material.” Jd. In fact, Nelson consciously recognized that the Report and the changes it required were material to Apollo, and he sought to prevent the pub % The knowingly false or misleading character of Apollo corporate statements was found by the jury, see App., infra, 2a 3a, and is not challenged in Apollo’s petition. The same is true for the individual petitioners. See id. at 6a-7a (Nelson), 9a-10a (Gonzales). 6 lic release of the Report by writing to the Secretary of Education, urging that DOE not publicly release the Report. ER353. In response, DOE did not release the Report. Upon examination at trial, Nelson was asked whether he had contemporaneously believed that public release of the report would “adversely impact the stock price of Apollo’s securities,” and he answered: “Absolutely, yes.” Trial Transcript (“Tr.”) 1103. On September 7, 2004, shortly after its agreement to pay DOE $9.8 million, Apollo issued a press release stating that it was “pleased to announce” an “agree ment” with DOE “to resolve ... the [UOP] program review. ER568. The press release minimized the significance of the resolution with DOE by disclosing it along with several other pieces of information, including the positive news that Apollo would be expanding into Mexico. It contained no substantive information about the contents of the Report. The same day, Nelson told analysts about the set tlement of the DOE program review and in doing so he made several false and misleading statements. He described the Report merely as an “interim report’ with a “negative tone.” ER572. He said that Apollo had “decided to settle this issue now rather than later for $9.8 million and put it behind us,” assuring the market that the settlement would “take[| away, hopefully, any clouds that may be lin gering with regulatory issues.” ER572. Nelson also said that the settlement would not “have a material impact on the growth of the com ‘On August 26, 2004, DOF had advised Apollo that it “dfid] not consider the [Report] to be an ‘interim’ report” and that the Report was a “discrete final action” by DOE. ER54‘% pany or our financial performance.” ER572. He mentioned the company’s new compensation scheme, which he said would make it more “transparent,” but stated that it was “unrelated” to the dispute with DOK. ER574. He did not disclose to the market the substance or contents of the Report; in particular, he said nothing about DOF’s finding that Apollo had engaged in systemic deception, nor did he disclose DOE’s demand for comprehensive changes to Apollo’ compensation scheme for recruiters the engine of Apollo’s revenue 3. On September 8, 2004, several Wall Street analysts, none of whom had actually read the Report, issued reports accepting Apollos claim that its regu latory problems were over (One analy St writing on September 8 described the disclosure as a “positiv for the company. that “could put to rest some ol the potential ‘noise related to the program review. ER658. Another described the settlement a “remov|ing] virtually every maternal legal/regulatory issue’ faced by Apollo. ER674. Notably, analyst Kelly Flynn of UBS Investment Services issued a report on September 8, 2004, adopting this theme and suggesting that the settlement “may reduce [Apollo’s] near-term event risk.” ER624. Apollo stock price had been $82.72 on September 7. _ It dropped shghtly to $82.07 on September 8, and fur ther to $80.50 on September 9. ER602-03 On September 14 and 15, several newspape. published articles describing ome of the Report findings. The articles related some of the Report negative findings and noted that Apollo had “di closed fey Ictau about tne Keport content KR672. The articles also quoted Nelson describing 1] ily the Report as “very, very unfair, ER580, and “tota false,” ER672. Neither these newspaper articles no: the prior analyst reports contained any details about the material changes to Apollo's compensation sy tem made in response to the Report or revealed that those changes were material and increased the oper ating risks associated with its future prospect Apollo’s stock price had been $80.63 on September 13. It dropped slightly to $80.09 on September 14 and further to $78.68 on September 15. ER603 On September 20, having received and read the Report, education specialist Kelly Flynn of UBS Investment Services, who had issued a report on september &, see supra p. 7, released two investment analyses about Apollo She concluded that “the con tents of the [Report] may cause more concerns about Apollo's] regulatory risk,’ ER502, and that Apollo : “enrollment growth [could] be hurt by,” among othe) things, “increasing enrollment advisor turnover HER491. She also reported that current and forme: recruiters had told her that “internal enrollment ta gets were getting harder to hit” and that “tui ove hald] increased since [the] 6/04 intro[duction] of {the] new complensation| plan.” ER502. Flynn was the first investment analyst to review the report and wa also the first to interview Apollo's recruiter Apol lo’s stock price had been $78.35 on September 17 (a Friday). It immediately dropped to $75.82 on Sep tember 20, and further to $72.00 on September 2] KR603. This two-day decline was statistically signif icant 1, On October |] 2004, a complaint was filed against Apollo for securities fraud. Respondent wa appointed lead plaintiff by the district court. Thi district court denied Apollos motions to dism) ind for summary judgment, and certified a cla of inve Q tors in Apollo’s stock. A jury trial commenced on November 14, 2007, and lasted 22 days. Loss causation was a heavily contested issue at trial. Both sides presented expert evidence about the significance of the Report and the subsequent disclo- sures, particularly Flynn’s September 20 reports. Dr. Steven Feinstein, an economist testifying for the investors, conducted an event study and gave an opinion that identified new information contained in the September 20 reports that revealed the fraud. Dr. Feinstein’s analysis parsed out other factors that could have otherwise impacted Apollo's stock price, including the movement of the stocks of the for-profit education sector, other non-fraud-related factors, and previously disclosed information. Tr. 1977-87: KR161-64. Apollo’s expert, Dr. Kenneth Lehn, con- ducted an event study that confirmed that Apollo’s stock price decline between September 20-21 was statistically significant. Tr. 3456-57; Trial Exhibit (“Ex.”) 24281, at 472-75. This point was uncontested at trial. Both experts agreed with the price data and calculations used by the other and both agreed that their analyses were designed to account for “random” movement. ER90, ER259-61, ER263; Tr. 2003-04. Despite this, and while acknowledging that “there’s only a 5 percent chance that what you are seeing is random,” Dr. Lehn contended that the statistically significant stock decline was due to “random” chance. ER263. At the close of the investors’ case, Apollo sought judgment as a matter of law, contending that the investors could not prove loss causation because Flyvnn’s analysis did mot comiain “new facts ... that demonstrate[d] the falsity of something that [Apollo] had previously ... said.” Tr. 2254. The district court 10 denied that motion, finding that the “jury cfould] conclude that the facts .. . dribble[d] into the market- place” over time, and that Flynn had “connect{ed] the dots in such a way that they became the corrective disclosure.” ER209. The district court instructed the jury that “the alleged misrepresentations and omissions in this case could have caused the plaintiff to suffer damages only if you determine that the analyst reports issued by Kelly Flynn on September 20, 2004 were correc- os tive disclosures” and that, “[i]f you conclude that these reports were not corrective disclosures, then you cannot find that a misrepresentation or omission caused the plaintiff to suffer damages.” ER298-99. Petitioners acknowledged that “this instruction is aimed at preventing ... the jury from looking at [earlier] disclosures and ... by making them deter- mine that the Flynn report was a corrective disclo- sure.” Tr. 3783-84. So instructed, the jury gave a verdict in favor of the investors on every element of a Rule 10b-5 claim, finding that Apollo had made (i) false or misleading statements (11) upon material matters (11) with scien- ter (iv) proximately causing damage to the investors. Nelson’s statements on the September 7, 2004 con- ference call announcing Apollo’s settlement with DOE were among the statements that the jury found fraudulent. See App., infra, 5a. 5. On August 4, 2008, the district court granted Apollo’s renewed motion for judgment as a matter of law, departing from its earlier reasoning and ruling that there was no evidence to support the jury’s finding on loss causation. The court first rejected Apollo’s argument that, as a matter of law, “a market analyst's opinion ... is not, and never can be, a 1] ‘corrective disclosure.” Pet. App. 8a. The court expressed concerns that such a rule would “give com- panies [a] perverse incentive to engage in opaque, piecemeal disclosures,” and “encourage corporate gamesmanship.” Jd. at 9a. The court further ob- served that the Third Circuit had expressly declined to adopt any such rule in In re Merck & Co., Inc. Securities Litigation, 432 F.3d 261 (3d Cir. 2005). The district court, however, did accept Apollo's narrower, case-specific argument that “the Flynn reports were not necessary t: reveal the fraud in this case because they did net provide any new, fraud-revealing analysis.” Pet. App. 10a. In doing so, the court stated that “Flynn was not the first to tie future regulatory problems to the DOE report” because the September 14 and 15 articles had already done so. /d. at lla. It stated that the hnk Flynn drew between the Report and increased turnover among Apollo’s recruiters was “factually wrong” and therefore could not “possibly be corrective informa- tion,” and also that the investors “did not present any evidence linking this claim to Apollo’s misrepresenta- tions.” Jd. Finally, the court stated that it did not matter that Flynn was the first analyst to read the DOE Report because she “did not disclose any of the [Report’s] contents” to the market. Jd. at 12a. In a footnote, the district court also acknowledged that the investors had presented two additional grounds for concluding that Flynn had made a cor- rective disclosure: “(1) Flynn’s statement that enroll- ment counselors had reported that enrollment tar- gets were getting harder to hit; and (2) the fact that the UOP had adopted a new compensation pian.” Id. at 12a n.3. The court rejected those additional IO grounds because it found they were not “linked in any way to Apollo’s prior misrepresentations.” Jd. 6. On March 3, 2010, the Ninth Circuit reversed in an unpublished memorandum opinion. The panel (Kozinski, C.J., Fletcher, J., and Gettleman, D.J., by designation) disposed of Apollo’s loss-causation claim by reasoning that “[t]he jury could have reasonably found that the UBS reports following various news- paper articles were ‘corrective disclosures’ providing additional or more authoritative fraud-related infor- mation that deflated the stock price.” Pet. App. 2a. On August 17, 2010, the court of appeals denied :2- hearing and rehearing en banc. REASONS FOR DENYING THE PETITION I. APOLLO HAS FAILED TO SHOW ANY RELEVANT CONFLICT IN THE CIRCUITS A. There Is No Relevant Circuit Conflict About the Timing of Corrective Disclosures Apollo contends that the circuits are divided on the question whether a price decline “weeks or months” after a corrective disclosure is sufficient to support loss causation as a matter of law. Pet. i. This case does not present that question because the jury was, as petitioners acknowledged, correctly instructed that it could only find for the investors if it found that Flynn’s September 20 reports were corrective disclosures. See supra p.10. The jury did find for the investors: therefore, it concluded that Flynn’s * The district court also rejected Apollo’s motion for a new trial, its various evidentiary challenges, and its attempt to obtain remittitur. The court of appeals upheld these rulings, and Apollo has net, challenged them in its petition 13 September 20 reports were corrective disclosures.® The jury’s necessary finding of loss causation from the immediate stock drop on that day and the follow- ing day, therefore, involves no delay of “weeks or months.” Further, even if the jury had reiiea upon the Sep- tember 14 and 15 newspaper articles as additional corrective disclosures, the delay between those dates and the end of the stock price decline was only four trading days. Apollo argues repeatedly that this case involves a delay of as long as “two weeks,” Pet. 9, 13, 18, but in doing so simply ignores the jury’s finding that Apollo’s initial announcement on September 7 was itself materially false and misleading, see App., infra, la-2a, 5a, and so could hardly have been a corrective disclosure. Apollo does not challenge {er acknowledge) that finding in its petition. Its conten- tion that this case involves a two-week delay between the revelation of fraudulently concealed information and the market’s reaction to that revelation is there- fore unsupported by the record. In any event, Apollo substantially overstates the disagreement among the circuits and mischaracter- izes the cases upon which it reltes. All of them can be straightforwardly distinguished from this case. First, Apollo cites (at 15-16) Oran vu. Stafford, 226 F.3d 275 (3d Cir. 2000) (Alito, J.), in which the Third Circuit stated that, “in an efficient market, the mate- riality of disclosed information may be measured post hoc by looking to the movement, in the period imme- diately following disclosure, of the price of the firm’s is “A jury is presumed to tollow its instructions,” especially where, as here, “each of the jurors affirmed in open court the verdict.” Weeks v. Angelone, 528 U.S. 225, 234 (2000): see Tr. 4120-22. 14 stock.” Id. at 282. The Third Circuit’s statement in Oran, however, must be read in light of the facts of that case, which involved a delay of more than two months between the disclosure of concealed informa- tion and the price drop for which investors sought tc recover. See id. at 280, 282-83 (disclosure on July 8, 1997; price drop beginning on September 15, 1997).? In re Burlington Coat Factory Securities Litigation, 114 F.3d 1410 (3d Cir. 1997) (Alito, J.), the other Third Circuit case on which Apollo relies, similarly involved a delay of “approximately two months” between the disclosure of concealed information and its effect on the company’s stock price. Jd. at 1425. The Third Circuit's conclustons in those cases that a two-month delay in market reaction precluded a securities-fraud plaintiff from showing materiality as a matter of law are irrelevant to the present case. It is entirely consistent with Oran and Burlington Coat Factory to hold that a jury could reasonably find loss causation in light of the far shorter interval at issue here (whether that interval is considered to be the day of the fraud-revealing disclosure and the follow- ing day, or four trading days). Indeed, the Third Circuit has clarified that it has not adopted any requirement that the price change “instantaneously.” Merck, 432 F.3d at 269 (considering a stock’s beha- vior over the month following a disclosure). ’ The Third Circuit also observed that the defendant compa- ny’s “share price rose by $3.00 during the four days after the [July 8] disclosure.” Oran, 226 F.3d at 283. Nevertheless, given the far longer two-month delay ectually presented by the facts it confronted, the Third Circuit cannot be considered to have held in Oran that any delay here dispels materiality as a matter of law. 15 Second, Apollo also erroneously relies on Thompson v. RelationServe Media, Inc., 610 F.3d 628 (11th Cir. 2010). Apollo claims that the Eleventh Circuit “h[eld| that a plaintiff’s theory of loss causation was ‘frivolous’ where the stock price did not react follow- ing an initial alleged corrective disclosure, but de- clined 22 days later following a second alleged correc- tive disclosure.” Pet. 16 (quoting Thompson, 610 F.3d at 689). Apollo also attributes to the Eleventh Circuit the statement that investors cannot prevail by “‘measur[ing] loss causation over twenty days after the market had learned of the alleged fraud.” Id. The language Apollo quotes, however, does not come from the majority opinion in that case, but froni Judge Tjoflat’s partial dissent.6 The Thompson majority did not reach any question of loss causation, but instead upheld the district court’s dismissal of a securities-fraud complaint for failure to plead scien- ter and failure to plead secondary lability. The court then remanded for a determination of Rule 11 sanc- tions rather than itself holding that the claims were frivolous. See 610 F.3d at 633-39. Apollo's careless mischaracterization of a dissenting position as a holding offers no support for its petition. Third, Apollo relies (at 17) on the Second Circuit's opinion in Jn re Omnicom Group, Inc. Securities Liti- gation, 597 F.3d 501 (2d Cir. 2010), which involved a delay of a year between the disclosure of allegedly concealed information and its effect on the company’s 8 See Thompson, 610 F.3d at 639 (start of Judge Tjoflat’s opi- ion); id. at 68 passage quoted by petitioners). Judge Tjoflat was 1n dissent vecause he thought that the court of appeals should itself impose sanctions in the first instance, which was the subject of his loss-causation argument at page 689. 16 stock price. See id. at 511. But Apollo concedes, as it must, that, “[wJith such a long time lag, the Second Circuit did not have occasion to opine about just how quickly the market must react.” Pet. 17. That concession gives up the game: the whole point of Apollo’s arguments is the supposed conflict “about just how quickly the market must react.” Apollo nevertheless suggests that the Second Cir- cuit took a position on that issue by stating that the market “‘promptly digested’” relevant information. Omnicom, 597 F.3d at 511. That phrase, however, was merely a quotation from the complaint in that case, see id., and is not the stuff of precedent. Later panels and district courts in the Second Circuit will not be bound by the language the Omnicom investors chose to use. And, even if they somehow were, the word “promptly” would encompass a time period of the day of the traud-revealing disclosure and the next day, or four trading days, depending on the circumstances.” Fourth, Apollo concedes (at 18-20) that the Ninth Circuit’s decision in this case was consistent not only with its own precedent, but also with the precedent of the Fifth and Sixth Circuits. The decisions it cites do indeed support the decision of the Ninth Circuit % Apollo further argues that Teamsters Local 445 Freight Division Pension Fund v. Bombardier Inc., 546 F.3d 196 (2d Cir. 2008), is relevant to the conflict it seeks to establish. Not so. Teamsters Local 445 held only that, after hearing expert evi- dence, a district court acting as factfinder did not clearly err in finding that an investor had failed to prove that the market for a particular security was efficient, based in part on evidence that the security's price had not moved in response to certain informs)on. See id. at 207-10. That case did not involve any determination of materiality or loss causation as avmatter of law. 17 — each of them considered a time period between disclosure and price drop substantially longer than the one at issue here, yet held that the period's length did not foreclose recovery as a matter of law. It is worth emphasizing, moreover, that (as Apollo admits, at 20) the Sixth Circuit cited Third Circuit precedent with approval when it held that investors could state a claim involving 2 price drop that occurs incrementally on separate disclosures over a period of six weeks. See City of Monroe Employees Ret. Sys. v. Bridgestone Corp., 399 F.3d 651 (6th Cir. 2005) (quoting Burlington Coat Factory, 114 F.3d at 1425). The Monroe court thus does not appear to have per- ceived any relevant conflict. Ulumately, to the extent there are differences among the circuits on the permissible length of such a period, they concern periods of two to three months. For periods of that length, Oran and Burlington Coat Factory suggest that the Third Circuit would deny recovery as a matter of law, and No. 84 Emplovyer- Teamster Joint Council Pension Trust Fund v. Amer- ica West Holding Corp., 320 F.3d 920 (9th Cir. 2003), and In re Gilead Sciences Securities Litigation, 536 F.3d 1049 (9th Cir. 2008), cert. denied, 129 S. Ct. 1993 (2009), suggest that the Ninth Circuit would leave the question to a jury. This case, however, would not be a suitable vehicle to resolve that ques- tion. If the Court affirmed the judgment of the Ninth Circuit, it might well leave open the possibility that the longer periods at issue in petitioners’ cited cases were still too long. And the Court would have no basis to reverse the judgment below under the ques- tion presented by netitioners without encroaching on the province of the properly instructed jury’s findings of fact given the record evidence. 18 B. There Is No Circuit Conflict Regarding the Treatment of Analyst Reports Apollo also contends that the circuits are divided on the question whether an investor may prove loss causation by relying on “an analyst|’s! ... report that merely synthesizes and comments upon ... already- public information.” Pet. i. This case does not present that question because Flynn’s September 20 reports — ‘the corrective disclosures on which the jury relied in this case - did more than merely synthesize and comment on already-public information: they provided the market with new fraud-revealing infor- mation, gleaned from Flynn’s review of the DOE Report and from her interviews of current and for- mer UOP recruiters, about the long-term significance of the Report, UOP’s new compensation plan, and its likely effect on Apollo’s prospects. See supra p. 8 and infra pp. 28-31 (describing the specific new informa- tion that Flynn provided to the market on September 20). In any event, Apollo again overstates its case. None of the cases it cites supports a categorical rule that a corrective disclosure may not arise out of an analysis or commentary that reveals a fraud by using publicly available information. Thus, even if Flynn had relied only on publicly available information in her September 20 report (which she did not), the Ninth Circuit’s decision would not implicate any intercircuit conflict. First, Apollo relies (at 20-22) on Merck, in which the Third Circuit considered a company’s disclosure that it had adopted a new accounting method. The effect of the new method on the company’s reported revenues was possible to derive using a “handful of calculations.” 432 F.3d at 270. The calculations 19 were made by a journalist a few months after the company’s initia] disclosure. The Third Circuit held that, because the calculations were of “minimal ... complexity,” the journalist’s article showing their re- sults was not a Corrective disclosure: the information was all previously available to the market. Id. As the district court noted, see Pet. App. 9a, the Third Circuit in Merck carefully avoided announcing a rule that analysis of existing information could never amount to a corrective disclosure. Instead, stating that it did not “wish to reward opaqueness,” the court “decline[d]| to decide how many mathemati- ‘al calculations are too many” in order for an analy- sis to constitute new information. Merck, 432 F.3d at 271. As a result, Merck cannot be read nearly as broadly as Apollo suggests. Instead, it invites a case specific determination of whether a particular analy- sis rises to the requisite level — which does not con flict with the Ninth Circuit’s approach here. Second, the other cases on which Apollo relies (at 20-22) are similarly far afield. In Teachers’ Retire- ment System of Louisiana v. Hunter, 477 F.3d 162 (4th Cir. 2007), the Fourth Circuit held that the de- scription in a court filing of certain transactions that a company had already disclosed years ago in filings with the Securities and Exchange Commission was not a corrective disclosure. See id. at 187-88. The case did not involve any analysis, synthesis, or commen- tary, much less adopt a rule that such matters are irrelevant. It therefore cannot be read as creating any conflict with the judgment below. In Archdiocese of Milwaukee Supporting Fund, Inc. v. Halliburion Co., 597 F.3d 330 (5th Cir. 2010), the Fifth Circuit stated that a corrective disclosure cannot be merely “[c]onfirmatory information [that] 20 is already known to the market and, having been previously digested by the market, will not affect the stock price.” Jd. at 337. As with Teachers, Halli- burton did not involve any analysis, synthesis, or commentary: the examples of “confirmatory” state- ments that the court identified involved comparing a statement by the defendant to an earlier statement by the defendant and concluding that it had con- cealed nothing material. See id. at 340, 343 n.50. In Omnicom, the Second Circuit rejected a claim that a newspaper article constituted a corrective dis- closure because there was “no ambiguity” that it did not “even purport to reveal some undisclosed fact with regard to ... specific misrepresentations in the complaint.” 597 F.3d at 512. The court further rejected comments from two accounting professors quoted in the article as mere “conclusory suspicions.” Id. Omnicom certainly stands for the proposition that some newspaper articles amount to mere “nega- tive characterization[s]” that do not tell the market anything new. /d. But, like Merck, Teachers, and Halliburton, it falls far short of the categorical rule that Apollo seeks. And Apollo’s erroneous reliance (at 20-22) on Judge Tjoflat’s dissent in Thompson, 610 F.3d at 690-61, and mischaracterization of that dissent as the law of the Eleventh Circuit, offers no support for its claim of a conflict. See supra p. 15. Third, to bolster its claim of a conflict, Apollo relies heavily on the Ninth Circuit's statement that “the jury could reasonably have found that the UBS reports following various newspaper articles were ‘corrective disclosures’ providing additional or more authoritative fraud-related information.” Pet. App. 2a. Apollo cannot dispute, however, that a report that provides “additional” information is properly a corrective disclosure. But Apollo's criticism of the Ninth Circuit for “ignor{ing] the critical fact that the Flynn reports did not disclose any additional facts” (Pet. 22 (internal quotation marks and emphas) omitted)) simply asks this Court to second-guess the jury's fact-finding province and offers no basis for this Court to grant certiorari on a question of law Apollo contends further that the Ninth Circuit use of the word “authoritative” reveals a circuit conflict, because (it say: ther circuits would not consider whether a statement was made by an “authoritative” source. Pet. 2] is we have shown \pollo has failed to establish that any other circuit follows the categorical r'le it seek Regardle the Ninth Circuit's choice of that particular word in an unpublished per curiam opinion would not warrant review — especially because the record shows that th iury here could reasonably have found that Flynn reports did provide the market with information that was “additional” as well as “more authoritative Se infra pp. 25-3] Il. APOLLO HAS FAILED TO SHOW ANY CONFLICT WITH BASIC OR DURA A. Basic Expressly Declined To Adopt th Timing Rule Apollo Seeks In Basic, Inc. v. Levinson, 485 U.S. 224 (1988), th Court adopted the fraud-on-the-market theory a means of proving reliance in class action Tha theory “1s based on the hypothesi that, in n opel and developed securities market, the price of a com pany s stock is determined by the available materia! information regarding the company and its hu ness. dd. at 241. As a result, “|[m]jisleading stat ments will therefore defraud purchasers of stoc! even if the purchasers do not directly rely on the misstatements. Jd. at 241-42. The theory creates a “rebuttabie presumption of relance” on misleading statements by those who buy stock during a time at which the price has been influenced by material mi representations. /d. at 242 In doing so, the Basic Court expressly declined conclusively to adopt any particular theory of how quickly and completely publicly available informa tion 1s reflected in market price ld. at 248 n.2# It also made clear that it was not attempting to determine by adjudication what economists and social t} clentists have debated through the use of sophi cated statistical analysis and the application of eco nomic theory ld. at 246 n.25 Apollo contend however, that the principl idopt ed in Basic requires the conclusion that “efficient tock markets generally respond to new information within one day Pet. 24.'° ‘To support this conten tion, Apollo cites nothing in asic, but instead reli na 1991 article reviewing the economic literature on the efficient-market hypothesi See id \pollo thus argues that Basic adopted a “particular theor f how quickly and completely publicly available information is reflected in market pric Rast 1s U.S. at 248 n.28, while ignoring the Court Lat nent that it wa not doling any uch thin Indeed the nth Cuireuit ae lO! mn 177 West, one of the primary targets of Apollo's ernticism market hypothesis. See 320 F.3d at 934 & n.12. It is Apollo's argument, rather than the decision of the court of appeals, that runs counter to Basic. B. Dura Did Not Draw the Fact-Opinion Dis- tinction that Apollo Urges In Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S 336 (2005), this Court held that the Private Securt- ties Litigation Reform Act of 1995 requires investors to “adequately allege and prove the traditional elements of causation and loss.” /d. at 346. In reaching that conclusion, the Court quoted a comment to § 548A of the Restatement (Second) of Torts (1977), which “says that a person who ‘misrepresents the financial condi tion of a corporation in order to sell its stock’ becomes lable to a relying purchaser ‘for the loss’ the pur chaser sustains ‘when the facts ... become generally known’ and ‘as a result’ share value ‘depreciate|s].” Dura, 544 U.S. at 344. Apollo’s claim that Dura supports its position relies entirely on Dura’s use of the word “facts” in this passage It argues that, by using that word, the Court established that “[aJnalyses, opinions, and predictions cannot be ‘corrective’ within the meaning of Dura.” Pet. 28. This is a remarkable feat of over- reading. Dura does not discuss the significance of analyses, opinions, and predictions in proving loss causation; none of those issues was contested in that case. Instead, Dura’s only significance for this case is that it establishes the investors’ burden to prove by a preponderance of the evidence that Apollo's fraudu- lent misrepresentations caused their losses. Anollo’s contention that. Dura (which does not even use the phrase “corrective cisclosure”’) augmented those basic requirements with specialized burdens of pleading 2A and proof is without support in this Court’s language Or reasoniny. Hl. THIS CASE IS AN UNSUITABLE VEHICLE FOR CONSIDERING THE QUESTIONS APOLLO SEEKS TO PRESENT A. This Case Is Fact-Specific and Record- Intensive, and Apollo Has Not Preserved Any Materiality Question Apollo’s failure to show any conflict of authority relevant to the Ninth Circuit's unpublished per curiam decision in this case would alone support a denial of review. Even if this Court were persuaded to develop the iaw of loss causation, however, this case would be an unsuitable vehicle for doing: so. There are at least three reasons why. Kirst, the judgment of the Ninth Circuit is firmly supported by the ground that the jury here found (after receiving undisputedly correct instructions) that Flynn’s September 20 reports were corrective disclosures and that the drop in Apollo's stock price occurred immediately and continued into the next day. If this Court were to grant review, the investors could and would defend the judgment below on that fact-specific basis. If the Court upheld the judgment on that. ground, it would have no occasion to reach the broader questions of law that Apollo argues in its petition, and its decision would have little signifi cance except to the parties in this case. The oral argument in the court of appeals makes 1 quite clear that the judges perceived this fact-specific ground for affirmance. Chief Judge Kozinski observed that the September 20 reports were “the first time there was a public disclosure about the high turnover 1] and its effect on the profitability of the company.” Judge Gettleman expressed the view that the Sep tember 20 reports gave “good reasons for [downgrad ing Apollo’s stock] that I don’t think were ever articu lated before ... based on facts that were articulated for the first time in this report.”'2) Judge Fletcher stated that “the things that are in the [UBS] Reports] seriously contradict numerous statements by Apollo” and that “the jury could readily conclude that they are fraud revealing.”'’ There is every reason to think that this Court would conclude likewise after hearing argument on the merits and reviewing the full trial record placed before the jury. second, the procedural posture of this CASE makes it an unattractive vehicle for another reason as well This is an evidentiary challenge to a jury verdict reached after 22 days of tnal and thousands of pages of testimony. Reviewing the record in such a case is not a good use of this Court’s limited resources. !" Because relatively few securities-fraud cases ever reach trial, a decision that apphes a_post-verdict standard is less likely to provide useful guidance for the lower courts than would an otherwise simular case at the pleading or summary judgment stage. Third, Apollo has hmited the questions presented to the issue of loss causation. See Pet.1i. The Third '! Audio Recording of Oral Argument in Policemen’s Annuity Benefit Fund of Chicago v. Apollo at 25:36-26:26, No. O08 16971 (9th Cir.), avatlable at http://www.ca9 uscourts.gov/datastore media/20 10/03/03/08- 1697 L.wma (‘Argument Recording’) 12 Id. at 31:37-32:52 Id. at 35:52-26-06 14 “Pinal action” on such a factual review “normally rest with the court of appeals.” Neely v. Martin kK. Eby Constr. Co., 386 U.S. 317, 327-28 (1967) ‘pg’ L0 Circuit cases on which Apollo relies, however, were all cases about materiality, not loss causation. See Burlington Coat lactory, 114 F.3d at 1425; Oran, 226 Resd at 282: Merck, 432 ¥.3d at 268-71. Indeed, the Third Circuit has resisted any attempt to conflate these two distinct elements of a Rule 10b-5 cause of action, imsisting that they are “different concepts.” Merck, 432. F.3d at 275. Given the central role that these decisions play in Apollo's argument, it only makes sense to consider them Qf at all) in a case where the particular argument that persuaded the Third Circuit has actually been preserved B. The Recent Grant in Erica P. John Fund v. Halliburton Is Irrelevant Apollo's petition does not mention the pendency before this Court of Erica P. John Irund, Inc. v Halliburton Co., No. 09-1403," in which this Court granted certiorari on January 7, 2011.'© However, a group of Apollo's amict argue that “taking this case in tandem with Halliburton would enable this Court to resolve the Circuit splits regarding the law of loss causation at the various stages of a case’s life cycle in a comprehensive manner.” Brief for Former SKC Commissioners and Law Professors as Amict Curtae in Support of Petitioners’ Petition at 15 > The decision of the Fifth Circuit under review in Hallibur ton was reported as Archdiocese of Milwaukee Supporting Fund, Inc. v. Halliburton Co., 597 F.3d 330, which is discussed supra pp. 19-20 l© Although Apollo’s petition was filed on November 15, 2010 before the Court had granted certiorari in Halliburton. the Court had already invited the Solicitor General to file) an amicus brief in that case on October 4, 2010, so Apollo certainly had notice that the Court was giving Halliburton serious con sideration when it filed its petition, and could have addressed that petition if relevant This contention lacks merit. The questions on which this Court granted certiorar: in Halliburton have to do with when investors must prove loss cau sation: whether they must “establish loss causation at class certification by a preponderance of admisst ble evidence,” or whether instead a requirement that they do so amounts to “improper|] considerfation of| the merits of the underlying litigation” at the certifi cation stage. Pet. ati, No. 09-1408. In this case, by contrast, the class has long been certified, and that certification is not now contested. (The parties stipu lated that all of the requirements of Rule 23 had been satisfied and stipulated to certification of the class. Dist. Ct. Dkt. Entries 116, 117.) The only question presented here is whether there was sufficient evi dence to support the jury’s finding for the investors on the merits. Nothing the Court 1s remotely lkely to say in Halliburton will shed light on that issue. See Br. in Opp. at 18, No. 09-1403 (observing that petitioners in that case have not sought review on the merits of loss causation). Kven if the Court were somehow to reach the merits of the loss-causation issue in Halliburton, u would still be highly unlikely that its decision would be relevant to this case. Although petitioners con- tend that the decision in Halliburton conflicts with the decision below here, they do not even allege that the Fifth Circuit’s decision is relevant to their first question presented, concerning the timing of correc- tive disclosures. As for the second question presented, concerning the degree to which analysis or commen- tary can serve as a corrective disclosure, the Fifth analysis, that the district court in that case had not abused its discretion based on the evidence before it. See 597 F.3d at 339-43. Were this Court. to review and uphold that decision in Halliburton, it would cast no doubt on the Ninth Circwit’s determination on the present, very different facts that the jury could reasonably find for plaintiffs here. As a result, the errant of review in /lalltburton supports neither a grant nor a hold of the present petition. IV. THE DECISION OF THE NINTH CIRCUIT IS CORRECT Review 1s unjustified for one more reason: — the Ninth Circuit was correct in reversing the district court’s grant of judgment as a matter of law and reinstating the jury’s verdict. A court reviewing a jury verdict “must interpret the entire record in the light most favorable” to the party that prevailed at trial, giving it “the benefit of all inferences which the evidence fairly supports, even though contrary infer ences might be drawn.” Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S 585, 604 (1985) There was ample evidence to support the jury's infer ence that the September 20 analyses contained new, fraud-revealing information that contradicted peti- tioners’ public statements and caused a statistically significant decline in Apollo’s stock price. The September 20 reports were the first to disclose the material changes to the enrollment counselor compensation system and the msks associated with those changes, and to note that then-current and former enrollment counselors told UBS that “turn- over has increased since 6/04 intro of new comp plan.” ER502. Dr. Feinstein explained to the jury that in- vestors would have been concerned about. “impacts on {|Apollo’s] sales and profits because of management distraction,” because “the new incentive plan might not be as incentivizing as the old incentive plan,” and YQ because “employee turnover [could occur] for that very same reason.” ER121. He also testified that investors would have interpreted Flynn’s reports as disclosing that “[s]lomething bad happened as far as the fundamentals and performance of the company at the same time they changed the comp plan.” ER180. Dr. Feinstein also tied the new, fraud-revealing information in the UBS reports to the statistically significant decline of Apollo stock on September 20 and 21. The reports also told the market that the “content: of the DOK’s recent program review may cause more concerns about [Apollo's] regulatory risk.” ER502 (emphasis added).'7 That disclosure directly contra- dicted Nelson’s September 7, 2004 claim that reso- lution of the DOE review “removeld] any potential distractions from our management.” KR572. And the jury could also infer that Flynn’s reports, which traced the link between the DOE Report and Apollo’s new compensation plan, informed the market for the first time that Nelson had hed when he stated that the new compensation plan was “unrelated” to the DOK Report and designed simply to make the system more “transparent.” ER574. Apollo sought to contradict this evidence of loss causation, by offering expert testimony that the decline in the stock price on September 20 and 21 was neither related to petitioners’ fraud nor related to the publication of Flynn’s reports, but was instead the result of a “random” decline. ER264-65. Apollo argued at length that there was “nothing new” in the '? This reference to increased regulatory msk specific to Apol- lo also differs fron a news article on September 15 that dis- cussed “regulatory control” of the education “sector” and risks to the sector from increased congressional scrutiny. ER598. 30 UBS reports and that their contents had already been disclosed to investors. See, e.g., Tr. 4007-14. Having heard this testimony and having weighed its credibility, the jury found for the investors. Moreover, the district court’s decision overturning the jury verdict was erroneous. ‘The court’s most obvious error was its reliance on Apollo's argument that “enrollment-counselor turnover actually decreased after the implementation of the new compensation plan.” Pet. App. lla. This argument was based on uncorroborated testimony from Apollo's director of human resources. See id. (citing Tr. 2408:1-2411:5); KR217-19. The court was not entitled to credit this testimony after the jury had rejected it. See Reeves, 530 U.S. at 151 (explaining that a court deciding a motion for judgment as a matter of law “must dis- regard all evidence favorable to the moving party that the jury is not required to believe”). Apollo conceded before the court of appeals tha! the jury “mfight] be entitled to disbelieve” this testimony because it was offered by an adverse party witness.!* Id. at 143 (jury may conclude that “defendant's explanation is pretextual’). The district court also erred when it ruled that the investors had failed to “link[] this claim to Apollo's misrepresentations.” Pet. App. lla. As just one example, Nelson’s September 7 statement which the jury found to be fraudulent — included statements that the settlement would not “have a material impact 1S Argument Recording at 19:27-19:32. ‘This witness was impeached at trial when her testimony that the changes to Apollo’s compensation plan were unrelated to the DOE Report was contradicted by an internal email indicating that Apollo's new compensation plan was designed to avoid “similar findings in the future” by DOK. ER367; see also ER352. on [Apollo's] growth . .. or [it]s financial performance” and that the new compensation scheme was “un- related” to the dispute with DOE. ER572, ER574. The jury could infer that the effect of the new compensation scheme would be material (through its effects on turnover and recruiters’ incentives), that it was closely related to Apollo’s dispute with DOK, and that these facts disclosed on September 20 were tightly linked to Apollo’s misstatements and omis sions and petitioners’ failure to disclose the contents of the DOE Report, its demand for corrective action, and the material changes to the enrollment counselor compensation plan resulting from that call for correc- tive action. The same lnk apphes to flynn’s state- ment that Apollo’s enrollment targets were becoming harder to hit, which the jury could infer was a result of Apollo’s new compensation plan. Finally, the district court also erred when it rejected the investors’ argument that Flynn’s reports “tie[d] future regulatory problems te the DOE report.” Pet. App. lla. The point of this argument was that Flynn had diagnosed the problem as being worse than expected based on previously available information. See ER502 (“We .. think contents of DOE’s recent program review may cause more concerns about |Apollo’s] regulatory risk.”). The jury could reasona bly infer that Flynn meant (and the market accepted) that Apollo’s stock price before issuance of the Sep- tember 20 Flynn reports was still overvalued in light of this risk. That reasonable inference provided sup- port for the jury’s conclusion that Flynn’s research provided new information to the market. In sum, the court of appeais correctly concluded that the district court had overstepped its bounds and usurped the jury's role by overturning its verdict. That highly fact-specific determination does not war rant this Court’s review. CONCLUSION The petition for a writ of certiorari should bi denied Respectfully submitted STEPHEN R. BASSER GERALD J. RODCS SAMUEL M. WARD Counsel of Record BARRACK, RODOS & BACINE LEONARD BARRACK 600 West Broadway JEFFREY A. BARRACK Suite 900 BARRACK, RODOS & BACINE San Diego, California 9210 3300 Two Commerce Square (619) 230-0800 2001 Market Street Philadelphia, Pennsylvania 19103 WILLIAM G. FAIRBOURN (215) 963-0600 FRANCIS J. BALINT, JR (grodos@barrack.com KATHRYN HONECKER BONNETT, FAIRBOURN, FRIEDMAN & BALINT, P. 2901 North Central Avenu: Suite 1000 Phoenix, Arizona 85 (602) 274-1100 February 4 APPENDIX la IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Master File No. CV 04-2147-PHX-JAT (Lead) CV 04-2204-PHX-JAT (Consolidated) CV 04-2334-PHX-JAT (Consolidated) CLASS ACTION IN RE APOLLO GROUP INC. SECURITIES LITIGATION This Document relates to: All Actions VERDICT FORM We, the jury, duly empaneled and sworn in the above-entitled case. upon our oaths, do hereby find a: follows: SECTION 10(b) CLAIM AGAINST APOLLO 1. Did Apollo make an untrue statement of a material fact or omit a material fact necessary under the circumstances to keep the statements that were made from being misleading? A) The Press Release of Apollo Group, Inc., dated February 27, 2004: Yes: X No: B) The Analyst Conference on March 12, 2004 Yes: X No: C) The Form 10-Q dated April 13, 2004: Yes: X No: D) The Analyst Conference Call on June 24, 2004 Yes: X No: KH) The Analyst Conference Call on August 25. 2004: Yes: X No I’) The Analy St Conferense e Call on September / 2004 Yes Xx No If you answered all parts of Question 1 “no,” leave Questions 2, 3, and 4 blank and proceed to Question 5. If you answered Question 1 “yes” as to any state ment, answer Question 2 as to that statement. Do not answer Question 2 for any statement for which you answered Question 1 “no.” 2. For any statement as to which a “yes” answer was given 1n Question 1, did Apollo act knowingly or recklessly with respect to that misrepresentation or omission? \) The Press Release of Apollo Group, Inc., dated February 27, 2004 Yes: X No The Analyst Conference on March 12, 2004 Yes x No C) The Form 10-Q dated April 13, 2004 Yes: X No D) The Analyst Conference Call on June 24, 2004 Yes: X No: E) The Analyst Conference Call on August 25. 2004: Yes: X No The Analyst Conference Call on September 7 2004 Yes: X If you answered Question 2 “no” as to all state ments left over from Question 1, leave Question: 3 and 4 blank and proceed to Question 5. If you answered Question 2 “yes” as to any statement answer Question 3 as to that statement Do not answer Question 3 for any statement for which you answered Question 2 “no 3 ror any statement as to which a “ye answel was given in Question 2, more specifically, did Apollo act knowingly with respect to that misrepresentation ) or omissi10n. \) The Pre Release of \pe llo Group. [1 dated ) February 27, 2004 Y ¢ xX No } he Ana! t Confers \ rcn YT Ye x O ()) lhe Form 10-Q dated Ap L004 Y« Xx No 1)) The Anal t Conierence Cal le ¢ ) Y Xx J ( I, ) The Analy { Conferen: Call on AU 2004 Ye Xx No H ) The Analvst Conference Call on Septem be 2ZU04 T7 v7 » res aA iN@® Proceed to Que tion 4 1. For any statement as to which a “yes” answer was given in Question 2, did that misrepresentation or omission cause the plaintiff to suffer damages? (By answering this question in the affirmative, you are finding that Apollo violated the securities laws.) \) Che Press Release of Apollo Croup, Inc., dated ) February 27, 2004 Vo x No 13 The Analyst Conference on March 2 2OOA Ye X No ( Ihe k‘orm 1O-Q d | qd \T ’ } {)A Y ¢ x No L)) The Analyst Conference Call on June 1 YPOO4A Y« 4 p () i) Ihe Analyst ¢ nierel ee } 2004 = Y ¢ . The Analyst Cont September 2OOA Ye \y J Pro Ped fT » Gur ia } SECTION 10(b) CLAIM AGAINST TODD NELSON 5. Did Todd Nelson make an untrue statement of a material fact or omit a matenal fact necessary under the circumstances to keep the statements that were made from being misleading? \) The Press Release of Apollo Group, Inc., dated February 27, 2004: Yes: X No: B) The Analyst Conference on March 12, 2004 Yes: X No: C) The Form 10-Q dated April 13, 2004: Yes: X No: D) The Analyst Conference Call on June 24, 2004: Yes: X No: Kk) The Analyst Conference Call on August 25, 2004: Yes: xX No I’) The Analyst Conference Call on September 7, 2004 Yes: X No If you answered all parts of Question 5 “no,” leave Questions 6, 7, and 8 blank and proceed to Question 9. If you answered Question 5 “yes” as to any state ment, answer Question 6 as to that statement. Do not answer Question 6 for any statement for which you answered Question 5 “no.” 6. For any statement as to which a “yes” answer was given in Question 5, did Todd Nelson act know ingly or recklessly with respect to that misrepresen tation or omission? A) The Press Release of Apollo Group, Inc., dated Mebruary 27, 2004 Yes x No » Analyst Conference on March 12, 2004 A No The Form 10-Q dated April 13, 2004 Yes: X No: The Analyst Conference Call on June 24, 2004 Yes: X No The Analyst Conference Call on August 2004 Yes pt No: The Analyst Conference Call on September 7, 2004: Tou: 3 No: lf you answered Question 6 “no” as to all state ments left over from Question 5, leave Question “% and 8 blank and proceed to Question 9. If you answered Question 6 “yes” as to any statement, answer Question 7 as to that statement Do not answer Question 7 for any statement for which you answered Question 6 “no.” 7. Kor any statement as to which a “yes” answet was given in Question 6, more specifically, did Todd Nelson act knowingly with respect to that misrepre sentation or omission? A) The Press Release of \pollo (;roup line a ited February 27, 2004: Yes: X No The Analyst Conferences Yes: X No The Form 10-Q dated April Yes: X No The Analyst Conference Call on June Yes: X No The Analyst Conference 2004: Yes: X No The Analyst Conference C: OO: Yes xX No Proceed to Question & 8. kor any statement as to which a “yes” answe) was given in Question 6, did that misrepresentation or omission cause the plaintiff to suffer damages? (By answering this question in the affirmative, you are finding that. Todd Nelson violated the securiti laws.) A) ‘The Press Release of Apollo Group, Inc., dated Kebruary 27, 2004 Yes: X No Yes: X No: C) The Form 10-Q dated April 13, 2004 Yes: X No: 1D) The Analyst Conference Call on June 24, 2004 Yes: X No Ki) The Analyst Conference Call on August 25, 2004: Yes: X No Ky) The Analyst Conference Call on September 7, 2004: Yes: X No: Proceed to Question 9 SECTION 10(b) CLAIM AGAINST KENDA GONZALES 9. Did Kenda Gonzales make an untrue statement of a material fact or omit a material fact necessary under the circumstances to keep the statements that were made from being misleading? A) ‘The Press Release of Apollo Group, Inc., dated February 27, 2004: Yes X No: 8) The Form 10-Q dated April 13, 2004 Yes: X No If you answered all parts of Question 9 “no,” leave Questions 10, 11, and 12 blank and proceed to Ques tion 13. If you answered Question 9 “yes” as to any statement, answer Question LO as to that statement Qa < Do not answer Question 10 for any statement for which you answered Question 9 “no.” LO. For any statement as to which a “yes” answer was given in Question 9, did Kenda Gonzales act knowingly or recklessly with respect to that misrep resentation or omission? A) The Press Release of Apollo Group, Inc., dated February 27, 2004: Yes: X No: B) The Form 10-Q dated April 13, 2004 Yes: X No: If you answered Question 10 “no” as to all state- ments left over from Question 9, leave Questions 11 and 12 blank and proceed to Question 13. If you answered Question 10 “yes” as to any statement, answer Question Il as to that statement. Do not answer Question 11 for any statement for which you answered Question 10 “no.” 11. For any statement as to which a “yes” answer was given in Question 10, more specifically, did Kenda Gonzales act knowingly with respect to that misrepresentation or omission? A) The Press Release of Apollo Group, Inc., dated February 27, 2004: Yes: X No: Bb) The Form 10-Q dated April 13, 2004 Yes: X No: ) Proceed to Question 12. 1Qa 12. For any statement as to which a “yes” answer was given in Question 10, did that misrepresentation or omission cause the plaintiff to suffer damages? (By answering this question in the affirmative, you are finding that Kenda Gonzales violated the securi ties laws.) A) The Press Release of Apollo Group, Inc., dated February 27, 2004: Yes: X No: _ B) The Form 10-Q dated April 13, 2004: Yes: X No: Proceed to Question 13. SECTION 20(a) CLAIM AGAINST TODD NELSON Answer Question 13 only if you answered Question 4 “yes.” If you answered “no” to Question 4 or left it blank, leave Questions 13 and 14 blank and proceed to Question 15. 13. Did ‘Todd Nelson possess, directly or indirectly, the actual power to direct or cause the direction of the management and policies of Apollo? Yes: X No: Proceed to Question 14 — — a 14. Did the defendants prove by a preponderance of the evidence both that Todd Nelson did not direct ly or indirectly induce Apollo’s violation of the securi- ties laws and that he acted in good faith as that term is defined in the jury instructions? Yes: No: X Proceed to Question 15. Answer Question 15 only if you answered Question 12 “yes.” If you answered “no” to Question 12 or left it blank, leave Questions 15 and 16 blank and proceed to Question 17. 15. Did Todd Nelson possess, directly or indirectly, the actual power to direct Kenda Gonzales? Yes: X No: Proceed to Question 16 16. Did the defendants prove by a preponderance of the evidence both that Todd Nelson did not direct- ly or indirectly induce Kenda Gonzales’s violation of the securities laws and that he acted in good faith as that term is defined in the jury instructions? Yes: No: X Proceed to Question 17 l2a Answer Question 17 only if you answered “ves” to Questions 4, 8, or 12. If you answered “no” to each of these questions or left them blank, sign and return the verdict form without answering any further questions. 17. Specify the total amount of damages per share that the plaintiff suffered as a result of the misrepre sentation(s) or omission(s): $ 5.55 per share Proceed to Question 18. l8. What is the percentage of responsibility for the plaintiff's loss that you assign to each defendant whom you found in answers to Questions 4, 8, and/or 12 to have violated the securities laws? The total must add up to 100%. In determining the percentage of responsibility for each such defendant, you must consider: (1) the nature of the conduct of each defen dant found to have caused or contributed to the loss incurred by the plaintiff; and (2) the nature and extent of the causal relationship between the conduct of each defendant and the damages incurred by the plaintiff. Percentage Apollo 60 Todd Nelson 30) Kenda Gonzales LO 100% Total Sign and return this form. 9 1/16/08 (Presiding Juror Number) (Date) --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386017_2749%3A2. Public record. Not legal advice.