Opposition Brief — Thane International, Inc. v. Milkowski (No. 07-1577)

(Q FILED

No. 07-1577 JUL 18 2008

OFFICE OF THE CLERK

SUPREME COURT, U.S.

IN THE

Supreme Court of the United States

THANE INTERNATIONAL, INC., et al.,

Petitioners,

v.

JOSEPH J. MILKOWSKI, et al.,

Respondents.

On PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES Court OF APPEALS

FOR THE NINTH CIRCUIT

BRIEF IN OPPOSITION

LIONEL Z. GLANCY JOEL C. FEFFER

PETER A. BINKOW Counsel of Record

GLANCY Binkow & GOLDBERG LLP DANIELLA QUITT

1801 Avenue of the Stars PETER W. OVERS, JR.

Suite 311] Harwood FEFFER LLP

Los Angeles, CA 90067 488 Madison Avenue

(310) 201-9150 New York, NY 10022

(212) 935-7400

Counsel for Respondents

217044 g

COUNSEL PRESS

(800) 274-3321 * (800) 359-6859

1

QUESTIONS PRESENTED

1. Whether petitioners have presented compelling

reasons to grant the petition, where the Ninth Circuit’s

opinion reversing the district court and remanding this

action for further proceedings is not a final order and

petitioners failed even to suggest any argument

supporting interlocutory review.

2. Whether petitioners have presented compelling

reasons to grant the petition on the basis that the Ninth

Circuit exceeded its authority under Fed. R. Civ. P 52(a)

where it simply applied the applicable rule of law to

uncontested facts.

3. Whether petitioners have presented compelling

reasons to grant the petition where the Ninth Circuit’s

holding that the misrepresentations were material does

not conflict with a decision of this Court, involve a split

in the circuits, or implicate a Federal question that has

not been settled by this Court.

il

TABLE OF CONTENTS

QUESTIONS PRESENTED ................

PTET APE SAPINE EINES cine escwecsvercctess

TABLE OF CITED AUTHORITIES .........

ee 66k berg ioe sti kes cox Sweae

STATEMENT OF THE CASE ...............

eB a ee

REASONS FOR DENYING THE PETITION ...

I.

IT.

IIT.

THE PETITION IS PREMATURE ....

THE RELEVANT FACTS WERE NOT

IN DISPUTE AND THE NINTH

CIRCUIT APPLIED THE

APPROPRIATE CLEAR ERROR

STANDARD UNDER FED. R. CIV. P

ea a ae a eee a

THE NINTH CIRCUIT APPLIED

WELL-ESTABLISHED PRECEDENT

REGARDING MARKET EFFI-

PURER. $0s5 ava sk eweon eeevencere tees

A. The Circuit Precedents Are Uniform

eoeeoeveveeeveeseveeereseseeeeeeeeeereee ee ee © ©

Page

14

14

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Contents

Page

B. There Is No Split Between The

Second and Ninth Circuits Regarding

The Use Of Price In Cases Where

The Stock Is Inefficient ........... 26

C. The Ninth Circuit’s Decision

Followed This Court’s Precedents .. 27

D. The Ninth Circuit’s Opinion Is Well

ee ee anes 29

E. The Ninth Circuit’s Opinion Will Not

Likely Have Any Effect On The

Legitimacy Of Bench Trials ........ 32

eID 84 6 os a deg owen Vrere es thee ea eae 33

iv

TABLE OF CITED AUTHORITIES

Page

CASES

Affiliated Ute Citizens v. United States,

Ee ans Sic oeew ee nese cues 28

Akerman v. Oryx Comme'ns, Inc.,

609 F. Supp. 363 (S.D.N.Y. 1984),

aff ’d, 810 F.2d 336 (2d Cir. 1987) ........... 26, 27

Akerman v. Oryx Comme’ns, Inc.,

S10 F.a0 S06 (2a Cir. 1967) ..........2.2205- 27

Alexander Proudfoot Co. World

Headquarters v. Thayer,

OTe Bee See Ch bee Gir. 1GGD) . onc cvcccesesss 20

Am. Constr. Co. v. Jacksonville T&K. W. Ry. Co.,

ue es ee 15

Basic Inc. v. Levinson,

ee AE ED «5 viv cevevavcwesees 21-22, 25, 28

Bhd. of Locomotive Firemen & Enginemen v.

Bangor & Aroostook R.R. Co.,

| ee 15

Binder v. Gillespie,

184 F.3d 1059 (9th Cir. 1999) ........... 22, 24, 26

Bose Corp. v. Consumers Union of U.S., Inc.,

ee ee CED. ko daca padas vd ees en mens 18

Vv

Cited Authorities

Page

Cammer v. Bloom,

711 F. Supp. 1264 (D.N.J. 1989) .......... passim

Easley.v. Cromartie,

SP ED oc ccc cen eens 7, 17, 18, 20

Eckstein v. Balcor Film Invs.,

| 29

Freeman v. Laventhol & Horwath,

915 F-2a 193 (Gth Cir. 1990) ................ 27

Gillespie v. United States Steel Corp.,

I ceca e es cccccscecese 15, 16

Hall v. Nat'l Gypsum Co.,

BGe bee oe Coen Cir. 1907) ... 2.2... eee. 19

Hamilten-Brown Shoe Co. v. Wolf Bros. & Co.,

csc een seccecscccees 14

In re Burlington Coat Factory Sec. Litig.,

114 F:3d 1410 (8d Cir. 1997) ................ 30

In re Initial Public Offerings Sec. Litig.,

Eee eee 27

In re NAHC, Inc. Sec. Litig.,

Soe wae tole Goo Cir. BGs) ..............-. 30

vi

Cited Authorities

Page

In re PolyMedica Corp. Sec. Litig.,

224 E-R.D. 27 (D. Mass. 2004) .............. 25

In re PolyMedica Corp. Sec. Litig.,

ee ee BF GIG Gls Be woes vcccccence 23, 24, 31

In re SCOR Holding (Switzerland) AG Litig.,

587 F. Supp. 2d 556 (S.D.N.Y. 2008) ......... 27

In re Xcelera.com Sec. Litig.,

4350 Fae 568 (ist Cir. 2006) ..............0.. 24

Land v. Dollar,

Ee ee 16

Larson v. Domestic & Foreign

Commerce Corp.,

EIT uv ecesvcccceccesesees 16

McFarland v. T.E. Mercer Trucking Co.,

Tal Fd 12346 Gth Cir. 1986) ............... 19

Nathenson v. Zonagen, Inc.,

267 F.3d 400 (5th Cir. 2001) ............ ee

Office of Senator Mark Dayton v. Hanson,

oe Ee 14

Padilla-Manqual v. Pavia Hosp.,

LS 20

vil

Cited Authorities

Page

TSC Indus., Inc. v. Northway, Ince.,

ee i iv densckseeue as 27-28

Unger v. Amedisys Inc.,

401 F8d 316 (5th Cir. 2005) ............ 23, 24, 26

United States v. Gen. Motors Corp.,

823 U.S. 373 (1945) ........6> rn ee 15, 16

Virginia Military Inst..v. United States,

508 U.S. 946 (1993) ..... gn a ee eee 14

STATUTES AND RULES

See oo ec nena sé ave dwes > 3

RE ares al hy bana eae aad 3

ee eS ls ener re 21

Ree fe ere ere passim

a ee ee SP ae en rns ones 1

vill

Cited Authorities

Page

MISCELLANEOUS

Marc Galanter, A World Without Trials?,

S006 J. Tem. OOS kis cn toi sc ene sos 32

Kevin M. Clermont & Theodore Eisenberg,

Anti-Plaintiff Bias in Federal Appellate

Courts, 84 Judicature 128 (2000) ........... 32

Theodore Eisenberg & Michael Heise,

Plaintiphobia in State Courts? An Empirical

Study of State Court Trials on Appeal,

Cornell Legal Studies Research Paper No.

OTR CR, PE 0 woo xs cine bis 450 tases 32

]

INTRODUCTION

Petitioners have not presented any compelling

reasons for their petition for a writ of certiorari to be

granted. See Sup. Ct. R. 10. Although the Ninth Circuit

directed judgment in favor of respondents, it also

remanded the action for further proceedings, including

a determination of loss causation. There is no mention,

much less discussion, in the petition of the lack of finality

of the Ninth Circuit’s decision. ‘The petition should be

denied as premature.

There are no compelling or extraordinary legal

issues raised in the petition. Petitioners’ argument that

the Ninth Circuit’s opinion conflicts with prior holdings

of this Court regarding the application of Fed. R. Civ. P

52(a) is premised on petitioners’ contention that the

Ninth Circuit dissembled when it articulated the

standard of review it employed. Petitioners’

disparagement of the Ninth Circuit is gratuitous, as the

Ninth Circuit merely applied the correct legal standard

to undisputed facts.

Petitioners contest the Ninth Circuit’s

determination that the district court should first have

determined that the stock traded in an efficient market

before relying on reported stock prices to find lack of

materiality in an action brought under the securities

laws. The Ninth Circuit simply corrected the district

court’s failure to apply controlling precedent to

uncontroverted facts. Specifically, there is no dispute

where, when, and by whom the misstatements at issue

were made or that Thane’s stock did not trade in an

efficient market. After trial, the district court itself

2

concluded that the stock did not trade efficiently. The

issue faced by the Ninth Circuit turned on whether it

was appropriate for the district court to disregard

uniform precedent as to when reported trading prices

are determinative. There is no split between the Second

and Ninth Circuits or any other Court of Appeals on

the applicability of the efficient market theory in

determining the materiality of a misstatement.

The Ninth Circuit’s materiality holding is consistent

with numerous decisions across the country which have

analyzed the issue of market efficiency in the context of

determining the propriety of utilizing the fraud-on-the-

market presumption of reliance. Given that the Ninth

Circuit’s opinion corrected what the district court

perceived was a foray into “unchartered waters,”

petitioners’ contention that there is a circuit split strains

credulity.

As neither the district court nor Ninth Circuit found

that the stock at issue traded in an efficient market,

petitioners’ arguments with respect to an alleged circuit

split with respect to the relationship between price and

materiality in an efficient market is a non sequitur and

should be disregarded. (See Petition at 34-39.) The issue

before the Ninth Circuit was not the appropriate time

within which a particular stock should react to news in

an efficient market, z.e., the degree of market efficiency,

but whether one could look at reported trading prices

in the absence of an initial finding of market efficiency.

3

STATEMENT OF THE CASE

Respondents (plaintiffs below) are former

stockholders of Reliant Interactive Media Corp.

(“Reliant”). Reliant was acquired by defendant Thane

International, Inc. (“Thane”) in a stock-for-stock

merger. Petitioners — Thane and Thane’s four principal

executive officers, three of whom were also directors of

Thane — are defendants below.

Respondents allege in their complaint that the

combined proxy statement- prospectus used by

petitioners (a) to induce a favorable vote by Reliant

stockholders on the proposal to merge with Thane, and

(b) to register the shares of Thane stock to be exchanged

for Reliant stock in the event of a favorable vote,

contains numerous materially misleading statements

with respect to the market in which the newly-issued

Thane stock would trade following the merger.

Respondents allege that the proxy statement-

prospectus represented that Thane’s stock would trade

on the National Association of Securities Dealers’

National Market System (“NMS”) but, despite the stock

qualifying for listing on the NMS, defendants caused

Thane’s stock to trade on the over-the-counter market’s

bulletin board (the “OTCBB”). The complaint sets forth

a claim for violation of Section 12(a)(2) of the Securities

Act of 1933, as amended, 15 U.S.C. § 771(a)(2), against

all defendants, and a control person liability claim

pursuant to Section 15 of the same Act, 15 U.S.C. § 770,

4

against each of the four individual defendants.

Respondents seek rescissory damages pursuant to

Section 12(a)(2).!

Procedural History

Respondents filed their complaint in the Superior

Court, Riverside County, on September 23, 2002. On

October 28, 2002, petitioners removed this action to the

United States District Court for the Central District of

California. Petitioners’ motion to dismiss was denied by

order entered June 26, 2003, respondents’ motion for

class certification was granted by order entered

November 3, 2004, and cross-motions for summary

judgment were granted in part and denied in part by

order entered March 4, 2005.

A bench trial was held on April 12 and 13, 2005 and

closing arguments made on April 14, 2005. By decision

entered June 2, 2005, the district court ruled in favor of

petitioners. The district court held for petitioners

because it found that (a) the alleged misrepresentations

were technically truthful, and (b) even if the statements

in question were actionable, they were not material. The

district court, despite concluding that Thane’s stock did

not trade in an efficient market,” went on to hold that

1. Accordingly, this is not “an action for money damages”

as characterized by petitioners in their second of two Questions

Presented. Petition at i. The equitable nature of this action

underlied petitioners’ motion “to strike plaintiffs’ request for a

jury trial.” Petition at 10.

2. The district court found that “{tjhere is little doubt that

Thane stock would not meet the tests for an efficient market

(Cont’d)

5

“(iJf the Court factors in the price effect, the Court

believes that listing on the NMS was not a material fact.”

Pet. App. at 87a. The sole basis of the district court’s

finding a lack of materiality was its reliance on the

reported trading prices of Thane’s stock on the OTCBB

immediately after the merger. Such reliance on reported

trading prices in the absence of first finding that

Thane’s stock traded in an efficient market was

unprecedented and contrary to uniform analogous

precedent. The district court candidly acknowledged

that by relying solely on reported prices on the OTCBB

to support a finding of materiality, it was “proceed[ing]

into unchartered waters.” Pet. App. at 89a. The district

court also candidly acknowledged that it was not

applying the reasoning of a seminal decision with regard

to efficient markets, Cammer v. Bloom, supra, as it held

that “[t]here is little doubt that Thane stock would not

meet the tests for an efficient market under Cammer.”

Id. at 90a n.11. The district court further acknowledged

that the Ninth Circuit follows Cammer. Pet. App. at 89a.

The district court framed the issue thus: “can one

even assess the price effect in Thane given that it did

not trade in an efficient market?” Pet. App. at 88a. This

is purely an issue of law. The district court answered

(Cont'd)

under Cammer [v. Bloom, 711 F. Supp. 1264, 1286-87 (D.N.J.

1989)]. Volume was relatively modest after the merger. For

nearly a month, Thane had only one or two market makers.

Thane was not followed by any analysts. Thane did not qualify

for using SEC Form S-3. The only Cammer factor present to

any Significant degree is the empirical fact that the stock

reacted to some events, such as earnings reports.” Pet. App. at

90a n.11.

6

the question in the affirmative without citing any

authority in support of its decision to rely on Thane’s

reported market price. All analogous authority,

including that of the Ninth Circuit, is to the contrary.

Final judgment was entered on June 10, 2005 and

respondents timely filed a notice of appeal on July 11,

2005. None of the issues raised on the appeal involve

disputed issues of fact. The district court noted “the

substantial factual stipulations which the parties made

in the Pretrial Conference Order.” Pet. App. at 63a.

The Ninth Circuit reversed, directed judgment in

favor of respondents, and remanded for further

proceedings on loss causation and other matters.

Petitioners sought a rehearing and suggestion of

rehearing en banc in which they stated, among other

things, that “an appellate court [should] not reverse a

factual determination unless it comes away with a

‘definite and firm conviction’ that an error has been

made.” Petition For Rehearing and Suggestion of

Rehearing En Banc at 16. The petition for rehearing

and suggestion of rehearing en banc was presented to

the entire Ninth Circuit and, as no active judge

requested a vote on whether to rehear the matter, the

petition was denied.

At the same time, the Ninth Circuit issued an

amended opinion. After analyzing the language at issue,

the Ninth Circuit found, based largely on

uncontroverted documentary evidence, that petitioners

7

misrepresented where Thane’s stock would trade.*®

The Ninth Circuit then restated, verbatim, its original

express finding that it had a “‘definite and firm

conviction that a mistake has been committed.’”

Pet. App. at 19a and 48a (quoting Easley v. Cromartie,

532 U.S. 234, 242 (2001)). The Ninth Circuit also found

that the misrepresentations were material. Specifically,

the Ninth Circuit found that the district court’s

consideration of “the movement in share price of a stock

that did not trade on an efficient market to determine

materiality under the circumstances of this case” was

clear error. Pet. App. at 20a. Here, as well, all of the

evidence upon which the Ninth Circuit relied was

undisputed. In rendering its decision, the Ninth Circuit

even “accept[ed] as true all of [petitioners’ expert’s]

testimony” on the materiality issue thereby conclusively

demonstrating the absence of any disputed factual

issues. Pet. App. at 25a. On the issue of materiality, as

well, the Ninth Circuit applied Fed. R. Civ. P 52(a)’s

“clear error” standard. Pet. App. at 20a.

Background Facts

Thane and Reliant executed a merger agreement

on November 21, 2001, which agreement was amended

in December 2001. Section 7.2(a) of the merger

agreement made Reliant stockholder approval a

condition precedent to the merger, while Section 2.8

provided that, upon consummation of the merger,

3. Oral testimony could not be of any use to petitioners as

they also believed that they were representing that Thane’s

stock would be listed on the NMS. This is evident as petitioners

required Reliant and Reliant’s principal stockholders to waive,

in writing, the requirement to list on the NMS. Pet. App. 87a

n.10.

8

Reliant stock would be converted into Thane stock ata

specified exchange ratio.

In order to satisfy Federal and state law implicated

by the proposed merger, Thane filed a registration

statement with the Securities and Exchange

Commission (“SEC”) on January 3, 2002, and filed

amendments thereto on February 21, 2002, March 29,

2002, April 23, 2002, and finally on April 26, 2002, when

the registration statement was declared effective by the

SEC. The proxy statement-prospectus, which is part of

the registration statement, was distributed to Reliant

stockholders. The registration statement served a dual

purpose: the proxy statement portion of the registration

statement was required in order to provide information

to Reliant’s stockholders concerning the proposed

merger sufficient to enable them to cast an informed

vote; the prospectus portion of the registration

statement was necessary in order to register the shares

of Thane to be exchanged for Reliant stock upon

approval of the merger by Reliant’s stockholders.

Prior to the merger, Thane’s stock was not publicly

traded. The proxy statement-prospectus was replete

with various representations concerning where Thane’s

stock would be listed following the merger.‘ For example,

4. Contrary to the assurances made by petitioners to this

Court, the single representation reprinted in the petition is not

“illustrative” of all of the representations and which

representations are not “substantially similar” to one another.

Petition at 7 and 7 n.2. Particularly significant is the failure of

petitioners to discuss the representations concerning liquidity,

quoted below, especially as these were of obvious importance to

the Ninth Circuit in finding clear error. See Pet. App. at 28a-

29a.

9

the proxy statement-prospectus stated as follows,

beginning with its cover page:

The shares of Thane common stock to be

received by the stockholders of Reliant in

connection with the merger have been

approved for quotation and trading on the

NASDAQ National Market upon completion

of the merger, subject to Thane’s compliance

with the minimum bid price requirements of

$5.00 per share.

“Similar statements appear elsewhere.” Pet. App. at 67a

n.2.

In the section entitled “Summary of Proposed

Merger,” which appears at the beginning of the proxy

statement-prospectus, petitioners made the following

representations:

The combined company is expected to meet

the initial listing requirements of the

NASDAQ National Market, which would

provide the Reliant stockholders with greater

liquidity than they have with Reliant common

stock trading on the over-the-counter market.

The Thane common stock to be issued in

connection with the merger has been

approved for quotation and trading on the

NASDAQ National Market upon the

completion of the merger, subject to Thane’s

10

compliance with the minimum bid price

requirements of $5.00 per share.

Pet. App. at 67a.

The “Questions And Answers About The Merger”

section of the proxy statement-prospectus, the purpose

of which is to distill the most important aspects of the

transaction and present them in plain English, also

focused on NMS listing:

Q: Will Reliant continue as a public company

if the merger agreement is approved?

A: No. Reliant will become a wholly-owned

subsidiary of Thane upon the completion

of the merger, and Reliant stockholders

will become holders of Thane common

stock. Thane has received approval for

quotation and trading of its common stock

on the NASDAQ National Market upon

completion of the merger, subject to

Thane’s compliance with the minimum bid

price requirements of $5.00 per share.

Pet. App. at 67a-68a.

Reliant stockholders were told the following under

the heading “Reliant’s Reasons for the Merger”:

The combined company is expected to meet

the initial listing requirements of the

NASDAQ National Market, which would

provide the Reliant stockholders with greater

11

liquidity than they have with Reliant common

stock trading on the over-the-counter market.

Pet. App. at 68a.

Under the heading “Per Share Market Price

Information,” petitioners represented as follows:

The Thane common stock to be issued in

connection with the merger has been

approved for quotation and trading on the

NASDAQ National Market upon the

completion of the merger, subject to Thane’s

compliance with the minimum bid price

requirements of $5.00 per share.

Pet. App. at 5a.

Reliant stockholders were also provided a copy of

the merger agreement as part of the proxy statement-

prospectus. Section 6.5(b) of the merger agreement

discusses listing under “Covenants of Thane”:

Thane shall use commercially reasonable

efferts to cause its outstanding Thane

Common Stock immediately after the Merger

to be approved for quotation on the NASDAQ

National Market System or, in Thane’s

reasonable discretion. another national

securities exchange, subject to official notice

of issuance, as promptly as practicable after

the date hereof, and in any event prior to the

Effective Time.

12

Pet. App. at 68a-69a. Thane was required, as a condition

precedent to Reliant’s obligation to consummate the

merger, to have “‘complied in all material respects with

all covenants.” Pet. App. at 69a. By letter dated April 9,

2002, prior to the merger closing, Thane was notified

that its application to list its securities on the NMS was

approved. In addition, Thane’s stock also met the

minimum $5.00 per share bid requirement, the only

remaining condition precedent to listing. Nevertheless,

“Thane’s stock was never listed for trading on the

NASDAQ National Market System.” Pet. App. at 105a.

There is nothing in the proxy statement-prospectus that

even suggests that Thane reserved the right voluntarily

to list on the OTCBB rather than the NMS.

Notwithstanding the representations set forth in the

proxy statement-prospectus and quoted above, Thane’s

decision not to list on the NMS was concealed from

Reliant’s public stockholders prior to its merger with

Thane. The decision not to list, however, was not

concealed from Reliant’s principal stockholders. Rather,

that the parties (including the petitioners) attached

great importance to the requirement to list on the NMS

is evident by the fact that petitioners required Reliant

and Reliant’s principal stockholders to execute a written

waiver of Thane’s contractual obligation to list its shares

on the NMS. Pet. App. at 87a n.10.

The Thane-Reliant merger was consummated on

May 24, 2002, at which time Thane’s stock began trading

on the OTCBB. Pet. App. at 69a. Thane did not publicly

explain the reason for its stock trading on the OTCBB,

rather than the NMS, for approximately ten weeks

thereafter. As described by the Ninth Circuit, Thane

13

stockholders “experienced a wild ride.” Pet. App. at 7a.

Finally, on August 14, 2002, Thane filed its Quarterly

Report on SEC Form 10-Q for its quarter ended June

30, 2002, which, for the first time, publicly disclosed that

petitioners intentionally opted not to list Thane’s stock

for trading on the NMS:

In May and June of this year, we met with our

investment bankers to discuss. an

underwritten public offering of our common

stock. Our investment bankers advised us

that we could potentially obtain more

favorable pricing for the public offering if we

implemented our move to the NASDAQ

National Market in conjunction with the

underwritten public offering. Over the course

of June and July we have been preparing for

the public offering, but we have recently

concluded that present market conditions are

no longer favorable for an underwritten public

offering of common stock. As such, we are

currently evaluating the listing of our common

stock on a national! market.

Pet. App. at 70a-7la. Remarkably, this more or less

contemporaneous statement fails to even mention a

pivotal April meeting which the district court found is

the time when the decision not to list was made.

Pet. App. at 65a-66a.

After Thane’s stock’s reported price quickly plunged

from a high of $8.50 per share, petitioners took

advantage of the bargain price of Thane’s stock they

14

created by squeezing out the former Reliant public

stockholders in a going-private transaction at $0.35 per

share. Pet. App. at 7la.

REASONS FOR DENYING THE PETITION

I. THE PETITION IS PREMATURE

Inexplicably, petitioners are silent concerning the

fact that they are asking this Court to exercise

jurisdiction over a non-final order.® Petitioners can

neither demonstrate extraordinary inconvenience nor

present a fundamental issue worthy of review prior to

the conclusion of these proceedings that would warrant

this Court to depart from its long-standing policy of

declining consideration of non-final orders.

See Hamilton-Brown Shoe Co. v. Wolf Bros. & Co., 240

U.S. 251, 258 (1916)(Lack of finality “itself alone

furnished sufficient ground for the denial of the

application.”); Office of Senator Mark Dayton v.

Hanson, 127 S. Ct. 2018, 2021 (2007) (Denying petition

for certiorari where there are, inter alia, no “special

circumstances that justify the exercise of ...

discretionary certiorari jurisdiction” of an interlocutory

order.).

This Court has long declined the invitation to review

interlocutory decisions. See, e.g., Virginia Military Inst.

v. United States, 508 U.S. 946, 946 (1993) (“We generally

5. Petitioners’ description of the Ninth Circuit’s decision

(Petition at 13) refers only to the reversal of the judgment in

favor of petitioners and ignores the remand to address loss

causation and other issues.

15

await final judgment in the lower courts before

exercising our certiorari jurisdiction.”) (Scalia, J.,

concurring); Bhd. of Locomotive Firemen & Enginemen

v. Bangor & Aroostook R.R. Co., 389 U.S. 327, 328

(1967)(“[B]Jecause the Court of Appeals remanded the

case, it is not yet ripe for review by this Court.”).

This Court is mindful that review of non-final orders

can result in unnecessary delay, costs, and inconvenience.

Gillespie v. United States Steel Corp., 379 U.S. 148, 152-

53 (1964). Petitioners have failed to demonstrate either

“extraordinary inconvenience and embarrassment in the

conduct of the cause,” Am. Constr. Co. v. Jacksonville

T&K. W. Ry. Co., 148 U.S. 372, 384 (1893), or presented

an issue that is “fundamental to the further conduct of

the case,” United States v. Gen. Motors Corp. , 323 U.S.

373, 377 (1945).

The Ninth Circuit’s opinion reversing the district

court’s decision also remanded this action to the district

court. The district court has yet to rule on damage issues

or whether petitioners have met their burden of proving

their affirmative defense of lack of loss causation. Any

further delay only prejudices the respondents.

Petitioners have already availed themselves of en banc

consideration by the Ninth Circuit.

The Ninth Circuit’s ruling on materiality cannot be

said to constitute a ruling “fundamental to the further

conduct of the case” insofar as the trial has been

completed and the record closed. Only in circumstances

where the issue sought to be reviewed by writ of

certiorari affects the further conduct of the trial of

issues necessary to the resolution of the merits of the

16

claims asserted in an action will the exercise of certiorari

be warranted. See Gillespie, 379 U.S. at 153-54

(discussing cases granting writs cf certiorari “where,

as here, the case had not yet been fully tried”); Gen.

Motors, 323 US. at 377 (granting certiorari where issue

concerning offer of proof required clarification prior to

further conduct of trial); Larson v. Domestic & Foreign

Commerce Corp., 337 U.S. 682, 685 (1949) (granting

certiorari where issue would affect further trial

proceedings); Land v. Dollar, 330 U.S. 731, 734 (1947)

(granting certiorari where Court of Appeals reversed

and remanded for trial).

As discussed herein, while respondents do not

believe that the petition presents any compelling

interests that would warrant consideration by this

Court, the petition, in any event, is premature.

Respondents submit that petitioners’ failure to even

attempt to substantiate the extraordinary relief of

review of a non-final order should in and of itself be

grounds for denial of the petition.

Il. THE RELEVANT FACTS WERE NOT IN

DISPUTE AND THE NINTH CIRCUIT APPLIED

THE APPROPRIATE CLEAR ERROR

STANDARD UNDER FED. R. CIV. P. 52(a)

Petitioners’ contention that the Ninth Circuit failed

to follow the requirements of Fed. R. Civ. PR 52(a) is

premised on their suggestion that the Ninth Circuit

dissembled when it articulated its standard of review.

Petition at 5 and 25-26. Petitioners even advance a

“sotcha moment.” Petitioners think it telling that the

Ninth Circuit’s holding on materiality refers to

17

“the circumstances of this case.” Petition at 26. As is

clear from the district court’s opinion, however, “the

circumstances of this case” consist of undisputed

evidence and the district court’s error was not in its fact

finding but in its application of the law to the undisputed

facts.

Initially, the Ninth Circuit, relying on Kasley, 532

U.S. at 242, held that after examining the documentary

record, we have a “‘definite and firm conviction that a

mistake has been committed,’” and held that the

statements in question were false and misleading.® The

Ninth Circuit, on the issue of materiality, then held that

the district court “erred when it considered the

movement in share price of a stock that did not trade

on an efficient market to determine materiality under

the circumstances of this case.” Pet. App. at 20a. It went

on to hold that “[t]herefore, its conclusion that Thane

International’s misrepresentations were immaterial is

clear error.” Jd. Stated another way, the Ninth Circuit

corrected the district court’s mistake of law and then

discussed the undisputed evidence contained largely in

SEC filings and written trial declarations that were

submitted in advance of the bench trial and that

supported its conclusion.

The district court’s decision itself, makes it clear

that the Ninth Circuit’s reversal of the materiality prong

6. The petition does not seriously challenge this prong of

the Ninth Circuit’s holding. As set forth supra, the oral

testimony could not have been of any aid to petitioners as

petitioners required Reliant and its principal stockholders to

waive NMS listing, thereby demonstrating their own belief that

they had represented that Thane would list on the NMS. See

Pet. App. at 87a n.10.

18

of the district court’s decision was based on the

application of correct legal principles to uncontested

facts. The district court candidly stated that “without

regard to price effects,” it “would find that listing on

the NMS is marginally material.” Pet. App. at 86a. The

district court went on to acknowledge that in

considering the reported trading prices of a stock which

clearly did not trade in an efficient market, “the Court

admittedly proceeds into unchartered waters.” Pet. App.

at 89a. The Ninth Circuit emphasized the lack of factual

issues by noting that “[e]ven accepting as true all of

[petitioners’ expert’s] testimony, there is no factual

dispute between the experts that [NMS] listing carries

objective benefits that directly and positively affect

corporate earnings, investor returns, and a stock’s pool

of potential shareholders.” Pet. App. 25a.

While petitioners take issue with the Ninth Circuit’s

citation to Bose Corp. v. Consumers Union of U.S., Inc.,

466 U.S. 485 (1984), they do not (and cannot) point to

any disputed evidence that forms the basis of the Ninth

Circuit’s holding. Instead, petitioners’ entire argument

on the perceived error under Fed. R. Civ. P. 52(a) is

nothing more than a narration of cases that preceded

and followed this Court’s decision in Kasley. See Petition

at. 16-22. The Ninth Circuit held unequivocally that the

“clearly erroneous” standard applies to all factual

findings and applied the most recent pronouncements

of this Court. Pet. App. at lla, 18a-19a, 20a, and 29a.

Petitioners’ attempt to create disputed factual

findings by the Ninth Circuit is unavailing. The Ninth

Circuit’s holding turned on the applicability of the

efficient market theory in determining materiality, the

19

case law on which subject the district court consciously

disregarded. It is not, as petitioners suggest, that the

Ninth Circuit suddenly “favored” one expert over the

other (Petition at 27) but rather that petitioners’ expert,

at petitioners’ direction, disregarded binding legal

precedent without presenting any contrary factual

arguments. To the extent the Ninth Circuit credited

plaintiffs’ expert, that testimony, as well as the facts

underlying it, were unrefuted. See, e.g., Pet. App. at 27a

(“Preston’s uncontested testimony”). Again, it was the

application of law to the uncontroverted facts which

triggered the reversal of the district court. To support

their argument that the Ninth Circuit’s opinion conflicts

with decisions of this Court and other Circuits,

petitioners disregard the Ninth Circuit’s unequivocal

statement that it applied the Rule 52(a) “clear error”

standard and do nothing short of accusing the Ninth

Circuit of misrepresenting the nature of its own opinion.

Petition at 16.

The supposed intra-circuit split in the Fifth Circuit

is based on a strained reading of McFarland v. TE.

Mercer Trucking Co., 781 F.2d 1146, 1148 (5th Cir. 1986).

McFarland concluded that the district court’s review

of testimony (deposition) should be upheld unless

clearly erroneous. Jd. Hall v. Nat'l Gypsum Co., 105 F.3d

225, 228 (5th Cir. 1997) also applied the clearly erroneous

standard. So did the Ninth Circuit in Thane.

The litany of decisions cited by petitioners from the

First, Fourth, and Ninth Circuits, concededly occurred

in a variety of inapposite procedural contexts, and all

20

utilized the “clearly erroneous” standard.’ Petition at

18-20. Petitioners’ argument that there is some

confusion in the application of Fed. R. Civ. P 52(a) is

based almost verbatim on the 1985 Advisory Committee

Notes while at the same time giving short shrift to this

Court’s opinion in Kasley, supra, decided long after the

1985 amendment to Rule 52(a). An examination of the

underlying facts of these cases suggests that Kasley,

which was followed by the Ninth Circuit (Pet. App. at

19a), like the case at bar, involved primarily

documentary and expert evidence, and credibility played

a “minor role” (532 U.S. at 243). Petitioners attempt to

distinguish Hasley by claiming that it involved a

“constitutional” issue, notwithstanding that Fasley and

the Ninth Circuit’s decisions are consistent with Rule

52(a).

Il. THE NINTH CIRCUIT APPLIED WELL-

ESTABLISHED PRECEDENT REGARDING

MARKET EFFICIENCY

A. The Circuit Precedents Are Uniform

The district court held that, “without regard to price

effects,” the representations concerning listing on the

7. For example, petitioners’ reliance on Alexander

Proudfoot Co. World Headquarters v. Thayer, 877 F.2d 912, 916

(11th Cir. 1989) is baffling as the issue there was the propriety

of a granting of a dismissal motion based on personal

jurisdiction involving a de novo review of the complaint and

affidavits. In Padilla-Manqual v. Pavia Hosp., 516 F.3d 29 (1st

Cir. 2008), the court reversed the dismissal for lack of

jurisdiction and remanded for an evidentiary hearing to hear

testimony to insure that a complaint was not dismissed without

the opportunity to be heard. /d. at 34.

21

NMS would be “marginally material.” Pet. App. at 86a.

The district court candidly acknowledged that by relying

solely on reported prices in an inefficient market to

support a finding of immateriality, it was proceeding

“into unchartered waters.” Pet. App. at 89a. The district

court also candidly acknowledged that it was not

applying the reasoning of the seminal decision with

regard to efficient markets, Cammer, supra, as it held

that “[t]here is little doubt that Thane stock would not

meet the tests for an efficient market under Cammer.”

Pet. App. at 90a n.11.

The district court asked: “can one even assess the

price effect in Thane given that it did not trade in an

efficient market?” Pet. App. at 88a. This is purely an

issue of law. The district court answered the question in

the affirmative without citing any authority in support

of its decision to rely on Thane’s reported market price

exclusively. All analogous authority is to the contrary.

The issue of market efficiency typically arises in the

context of a putative class seeking to avail itself of the

“fraud-on-the-market” presumption ‘of reliance in

connection with class certification. In order to eliminate

reliance as an individual issue in securities fraud actions,

a putative class usually seeks to establish reliance based

upon a security’s reported trading prices, 7.e., the

“market,” contending that the conduct in question

constitutes a fraud-on-the-market. A determination that

reliance is an individual issue would preclude the

necessary Fed. R. Civ. P 23(b)(3) finding “that questions

of law or fact common to the members of the class

predominate over any questions affecting only individual

members. ...” See Basic Inc. v. Levinson, 485 U.S. 224,

22

242 (1988) (“Requiring proof of individualized reliance

from each member of the proposed plaintiff class

effectively would have prevented respondents from

proceeding with a class action, since individual issues

then would have overwhelmed the common ones.”).

Quoting from a Third Circuit decision, this Court in

Basic Inc. defined the fraud-on-the-market

presumption as being “‘based on the hypothesis that,

in an open and developed securities market, the price

of a company’s stock is determined by the available

material information regarding the company and its

business. .. .” 485 U.S. at 241. The most widely accepted

test for determining whether there is 2% “open and

developed” (1.e., “efficient”) securities market, is that

articulated in Cammer. The Cammer court enumerated

five factors as particularly relevant to determining

whether the market for a particular stock is efficient:

(1) the stock’s average weekly trading volume; (2) the

number of security analysts who follow the stock;

(3) the existence of market makers and arbitrageurs

active in the stock; (4) eligibility to file an SEC Form S-

3 registration statement (eligibility for which is limited

to large, well-known, and seasoned issuers); and (5) facts

demonstrating a cause-and-effect relationship between

unexpected corporate developments and an immediate

stock price response. 711 F. Supp. at 1286-87. The Ninth

Circuit, in Binder v. Gillespie, 184 F.3d 1059 (9th Cir.

1999), endorsed reliance on the Cammer factors, noting

that they “are designed to help make the central

determination of efficiency in a particular market.”

Id. at 1065.

23

Particularly relevant to this action is Unger v.

Amedisys Inc., 401 F.3d 316 (5th Cir. 2005), in which

the Fifth Circuit analyzed, in considerable depth, the

issue of market efficiency in the context of a stock which

traded on the OTCBB and where plaintiffs were seeking

the benefit of the fraud-on-the-market presumption of

reliance. The Fifth Circuit held that “[w]Jithout an initial

demonstration of market efficiency, there is no assurance

that the available material information concerning the

stock translates into an effect on the market price and

supports a classwide presumption of reliance.” 401 F.3d

at 322. Here, not only was there no “initial

demonstration of market efficiency,” there never was

any demonstration of market efficiency as respondents’

expert opined that the market was inefficient and

petitioners’ expert avoided making any assumption on

whether Thane’s stock traded in an efficient market in

either of his two reports.

In performing its market efficiency analysis, the

court below did not use the correct standard of market

efficiency. The First Circuit’s decision in /n re

PolyMedica Corp. Sec. Litig., 482 F.3d 1 (1st Cir. 2005),

contains a comprehensive analysis of the concept of

market efficiency. The First Circuit defined an efficient

market as “one in which the market price [of the stock]

fully reflects all publicly available information.” Jd. at

12. (Emphasis in original). It rejected the lower court’s

definition which focused “on the general consideration

by market professionals of most publicly announced

material statements about companies.” Jd. (Emphasis

in original.) Here, tiie district court did not even consider

whether the price of Thane’s stock reflected “most

publicly announced material statements” (2d. at 14;

24

emphasis in original); its analysis was limited to whether

Thane’s stock’s price reflected one fact and one fact only

— that it was not trading on the NMS.

On the same day as it issued its PolyMedica decision,

the First Circuit applied the standard of market

efficiency adopted in its decision in PolyMedica to its

decision in Jn re Xcelera.com Sec. Litig., 4380 F.3d 503

(1st Cir. 2005). In affirming the district court, the First

Circuit endorsed “the district court’s reliance upon

Cammer to determine whether the Xcelera market was

efficient.” Jd. at 508.

The district court here acknowledged that “[t]here

is little doubt that Thane stock could not meet the tests

for an efficient market under Cammer.” Pet. App. at 90a

n.11. Nevertheless, the district court concluded “that

Thane had the ability to impound the fact of non-listing

fairly promptly.” Jd. Without reference to any authority,

the district court “perceived” its duty in analyzing

market efficiency at the trial stage to be less rigorous

than a court examining market efficiency at the class

certification stage. Pet. App. at 89a. The only explanation

the district court gave was a reference to “sweeping due

process consequences” of class certification. Jd. It is

counterintuitive to presume that the standard used by

the trier of fact to determine materiality would be

weaker than the standard used by a court determining

whether a class should be certified at the initial stages

of the litigation. Although the reason for ascertaining

market efficiency here is different than in Cammer,

Binder, Unger, PolyMedica, and Xcelera, the district

court was dealing with the same market having the same

mechanism for converting information into price. If the

25

market mechanism is found deficient in the context of a

plaintiff seeking class certification, the same deficiencies

should prevent a defendant from escaping the

consequences of its misrepresentations because the

reported prices in an inefficient market did not

immediately drop.

The district court’s approach to the issue of the

relevance of the reported prices of Thane’s stock is not

typical. “When legal precedent is available, I follow it,

not economic or academic literature.” In re PolyMedica

Corp. Sec. Litig., 224 FE R.D. 27, 41 (D. Mass. 2004). The

PolyMedica approach has the benefit of support in the

precedent from this Court: .

We need not determine by adjudication what

economists and social scientists have debated

through the use of sophisticated statistical

analysis and the application of economic

theory. For purposes of accepting the

presumption of reliance in this case, we need

only believe that market professionals

generally consider most publicly announced

material statements about companies, thereby

affecting stock market prices.

Basic Inc., 485 U.S. at 247 n.24. Here, there is no dispute

that “market professionals” had little, if any, interest in

Thane’s stock. Thane’s stock was not followed by any

analysts or arbitrageurs, and there were few market

makers. Pet. App. at 90a n.11. Although it may have

been known that Thane was trading on the OTCBB

shortly after the merger, there is no evidence that there

were sufficient market mechanisms available to translate

26

that knowledge into price. The focus of Cammer and

Unger is to identify such mechanisms (e.g., volume,

analyst following, multiple market makers, market

capitalization, etc.) and verify their existence prior to

relying on reported market prices. The district court

chose to ignore the absence of these market mechanisms

and thereby committed clear error by relying on the

reported OTCBB prices generated in a demonstrably

inefficient market.

B. There Is No Split Between The Second and

Ninth Circuits Regarding The Use Of Price

In Cases Where The Stock Is Inefficient

Petitioners’ sole authority in support of its theory

that a court could look to price in determining

materiality in the absence of a finding of an efficient

market for a stock is Akerman v. Oryx Comme'ns, Inc.,

609 F. Supp. 363 (S.D.N.Y. 1984), aff’d, 810 F.2d 336 (2d

Cir. 1987), a case which was decided before the “efficient

market theory” was explicated in Cammer, supra. The

efficient market analysis of Cammer was endorsed by

the Ninth Circuit in Binder, 184 F.3d at 1065, and

explicitly rejected by the district court in its opinion

resulting in the reversal. The district court candidly

acknowledged by not following Cammer and Binder, it

“proceeds into unchartered waters.” Pet. App. at 89a.

Inexplicably, petitioners do no bother to cite to Cammer

or Binder in their petition.

The efficient market theory explicated in Cammer

is likewise the standard in the Second Circuit as

evidenced by numerous decisions decided after

Akerman. Any alleged split in the Circuits is thus

27

illusory. In Jn re Initial Public Offerings Sec. Litig.,

471 F.3d 24, 42 (2d Cir. 2006), the Second Circuit relied

on the Sixth Circuit’s analysis of market efficiency in

Freeman v. Laventhol & Horwath, 915 F.2d 193, 199

(6th Cir. 1990), which is premised on Cammer. See also

In re SCOR Holding (Switzerland) AG Litig., 5387 F.

Supp. 2d 556, 574 n.24 (S.D.N.Y. 2008) (relying on the

Cammer factors to determine whether the market for

shares was efficient).

Significantly, in Akerman, there is no discussion of

the efficient market hypothesis and materiality and

efficiency essentially were presumed.’ 810 F.2d at 341.

Implicit in the Second Circuit’s acknowledgment that

the price of the stock rose in reaction to the disclosure

of the misstatement was the reliance on the propriety

of the stock price. Akerman, 810 F.2d at 343. In

Akerman, both plaintiffs and defendants relied on the

price of the stock and the district court noted that the

case was “far from one of monumental significance.”

609 F. Supp. at 366. The only relevance Akerman has to

the case at bar is the Second Circuit’s refusal to

take jurisdiction over interlocutory issues. 810 F.2d at

339-40.

C. The Ninth Circuit’s Decision Followed This

Court’s Precedents

The Ninth Circuit’s decision is also consistent with

this Court’s holdings in TSC Indus., Inc. v. Northway,

8.. There is a stray reference by plaintiffs to “the thin

market” for the subject stock which reference was found to be

“internal[ly] inconsisten[t]” with other positions of plaintiffs.

810 F.2d at 343.

28

Inc., 426 U.S. 438, 449 (1976), Basic, and Affilzated Ute

Citizens v. United States, 406 U.S. 128 (1973). T'SC, sets

forth an objective standard for materiality of omissions

or misstatements for all Federal securities law purposes:

“An omitted fact is material if there is a substantial

likelihood that a reasonable shareholder would consider

it important in deciding how to vote.” TSC, 426 U.S. at

449. The standard contemplates:

a showing of a substantial likelihood that,

under all circumstances, the omitted fact

would have assumed actual significance in the

deliberations of the reasonable shareholder.

Put another way, there must be a substantial

likelihood that the disclosure of the omitted

fact would have been viewed by the

reasonable investor as having significantly

altered the “total mix” of information made

available.

Id. Accord Basic, 485 U.S. at 231-32.

The Ninth Circuit’s analysis of materiality took into

account undisputed facts, accepted as true all of

petitioners’ expert’s testimony (Pet. App. at 25a), and

only disagreed with the district court on the issue of

the legal consequences of the lack of an efficient market.

In Affiliated Ute, 406 U.S. at 152-53, this Court ignored

the share price holding that the district court “is not

restricted to actual sales prices in a market so isolated

and so thin as this one.” Jd. at 155. This is precisely what

the market for Thane was — isolated and thin.

29

D. The Ninth Circuit’s Opinion Is Well Reasoned

The Ninth Circuit’s opinion also is consistent with

both modern finance theory and common sense.

Petitioners represented that listing on the NMS would

increase the liquidity of Thane’s stock.’ One of the main

reasons for this is that most institutional investors

cannot trade in stocks listed only. on the OTCBB. Pet.

App. at 27a. It is Economics 101 that a decrease in

demand — 48.3% of all equities were owned by

institutional investors in 2001 (id.) — 2.e., lowering the

demand curve, results in a lower price.

The concept of different degrees of efficiency

presumes the existence of an efficient market that meets

the threshold standards of Cammer. The very case cited

by petitioners supports this proposition. Petitioners cite

Eckstein v. Balcor Film Invs., 8 F.3d 1121, 1130 (7th

Cir. 1993), for the proposition that “‘(e]fficiency’ is not

an all-or-nothing phenomenon.” Yet, the issue in

Eckstein was whether the market for the partnership

units at issue was “efficient.” Jd. The court considered,

inter alia, that there were no market makers and the

units were thinly traded. The Eckstein court in effect

rejected the “fraud-created-the-market theory” as a

substitute for reliance based on the specific

circumstances of that case. /d.

In order to entice this Court to exercise jurisdiction

over the petition, petitioners claim an alleged split in

9. As the Ninth Circuit pointedly noted, mere “approval

[of listing) alone would do absolutely nothing to increase a

stock’s liquidity.” Pet. App. at 15a.

30

the Circuits concerning the relationship between price

and materiality in efficient markets. Petition at 34-35.

Again, petitioners simply disregard “the undisputed fact

that the newly merged Thane International never did

trade on an efficient market.” Pet. App. at 29a. Any

argument relating to consideration of movements in

price in an efficient stock is irrelevant here and not

appropriate for review as it is uncontroverted that

Thane stock did not trade in an efficient market. Further,

petitioners fail to articulate any error committed by the

Ninth Circuit in this regard and simply provide a

narrative of other circuits’ analysis of price in

determining materiality.

Seemingly, the issue raised by petitioners is one of

timing, 27.e., what is the appropriate time within which a

stock price must move in reaction to news for it to impact

materiality. Implicit in each of the decisions cited by

petitioners is the existence or presumption of an efficient

market. Interestingly, if one looks beyond the snippets

of quoted material and delves into the facts in Jn re

Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1425

(3d Cir. 1997), there was no real issue on how long it

took the stock price to react to the disclosure of negative

news; it never reacted. The Burlington plaintiffs

asserted that the stock was efficient and the disclosures

at issue had no effect on the company’s stock price. In

decisions following Burlington, the Third Circuit has

made it clear that lack of materiality based on price is

predicated on an “efficient market.” See, e.g., In re

NAHC, Inc. Sec. Litig., 306 F.3d 1314, 1330 (3d Cir.

2002).

31

The distinction noted by petitioners regarding the

Fifth Circuit limiting the effect of price in an efficient

market to determine reliance and not materiality is

irrelevant here as reliance is not an issue. See Nathenson

v. Zonagen, Inc., 267 F.3d 400, 415 (5th Cir. 2001).

Finally, the First Circuit’s decision in PolyMedica,

432 F.3d at 7, defines “efficiency” as the “flow of

information in the relevant market and effect of that

information on the price of the stock.” PolyMedica held

that an efficient market is “one in which the market

price of the stock fully reflects all publicly available

information.” 432 F.3d at 14 (emphasis in original). It

has never been alleged even by respondents that the

market for Thane stock could reflect “all public

information.”

Ironically, the Ninth Circuit’s view of the efficient

market theory is fully consistent with that of petitioners’

expert, albeit in testimony in another case. In a

Delaware action in which petitioners’ expert acted as a

trial expert, he ignored the reported trading price of a

stock trading on the New York Stock Exchange, which

otherwise lacked indicia of efficiency, and opined that it

was fair for the expert’s client to force a public company

that such client controlled to pay $17.75 per share for a

stock the reported trading price of which was only $3.70

per share. The district court characterized this testimony

as opining that the trading price reported on the New

York Stock Exchange “is irrelevant” but failed to apply

the same logic to this case. Pet. App. at 86a n.8.

32

E. The Ninth Circuit’s Opinion Will Not Likely

Have Any Effect On The Legitimacy Of Bench

Trials

Petitioners’ argument that the Ninth Circuit’s

opinion would adversely affect bench trials is both

irrelevant and not based on sound legal or empirical

data. It is doubtful whether any of the statistical data

available would be applicable to securities cases where

in recent years there have been only a handful of cases

that went to trial. Here, it was petitioners who

demanded the commonly believed more defendant-

friendly bench trial. Petition at 10. Recent studies have

noted the overall decline of civil trials'’® as well as the

possible existence of an anti-plaintiff bias at the federal

appellate level.'! In addition, studies have shown higher

reversal rates for verdicts reached by juries. See, e.g.,

Theodore Eisenberg & Michael Heise, Plaintiphobia

in State Courts? An Empirical Study of State Court

Trials on Appeal, Cornell Legal Studies Research Paper

No. 07-006, at 3 (Sept. 2007). Suffice it to say, the data

offered by petitioners is selective.

10. Mare Galanter, A World Without Trials?, 2006 J. Disp.

Resol. 7, at 2.

11. Kevin M. Clermont & Theodore Eisenberg, Anti-

Plaintiff Bias in Federal Appellate Courts, 84 Judicature 128

(2000).

33

CONCLUSION

For all the foregoing reasons, respondents

respectfully request that the petition be denied.

Respectfully submitted,

JOEL C. FEFFER

Counsel of Record

DANIELLA QUITT

PETER W. OVERS, JR.

Harwoop FEFFER LLP

488 Madison Avenue

New York, NY 10022

(212) 935-7400

LIONEL Z. GLANCY

PreTER A. BINKOW

GLANCY BiInkow & GoLDBERG LLP

1801 Avenue of the Stars

Suite 311

Los Angeles, CA 90067

(310) 201-9150

Counsel for Respondents