Ebix Class Action Lawsuit_Argument for Dismissal 8-21-2013

7/29/2019 Ebix Class Action Lawsuit_Argument for Dismissal 8-21-2013

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF GEORGIA

ATLANTA DIVISION

)

IN RE: EBIX, INC. )

SECURITIES LITIGATION )

)

CIVIL ACTION NO.

1:11-CV-02400-RWS

REPLY MEMORANDUM IN FURTHER SUPPORT OFDEFENDANTS MOTION FOR JUDGMENT ON THE PLEADINGS

Todd R. David

Georgia Bar No. 206526

John A. Jordak, Jr.Georgia Bar No. 404250

Todd F. Chatham

Georgia Bar No. 196328ALSTON & BIRD LLP

1201 West Peachtree Street

Atlanta, Georgia 30309Telephone: (404) 881-7000

Fax: (404) 253-8358Counsel for Defendants

Case 1:11-cv-02400-RWS Document 70 Filed 08/21/13 Page 1 of 20


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TABLE OF CONTENTS

Page No.

TABLE OF AUTHORITIES .................................................................................... ii

I. INTRODUCTION ...........................................................................................1

II. ARGUMENT AND CITATION OF AUTHORITIES ...................................2

A. The Copperfield Report is Not a Corrective Disclosure.......................2

B. The BloombergArticle is Not a Corrective Disclosure. .......................9

C. Defendants Motion is Properly Before the Court. .............................13

III. CONCLUSION..............................................................................................14



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TABLE OF AUTHORITIES

Page(s)CASES

Billhofer v. Flamel Tech., S.A.,

281 F.R.D. 150 (S.D.N.Y. 2012) ........................................................................10

Bricklayers & Trowel Trades Intl Pension Fund v. Credit Suisse First

Boston,853 F. Supp. 2d 181 (D. Mass. 2012).................................................................12

Cohen v. USEC, Inc.,70 F. Appx 679 (4th Cir. 2003).........................................................................12

FindWhat Investor Grp. v. FindWhat.com,

658 F.3d 1282 (11th Cir. 2011) ..............................................................4, 7, 8, 12

In re Merck & Co. Sec. Litig.,432 F.3d 261 (3d Cir. 2005) ...............................................................................12

In re Pfizer, Inc. Sec. Litig.,

538 F. Supp. 2d 621 (S.D.N.Y. 2008) ............................................................7, 12

Katyle v. Penn Natl Gaming, Inc.,

637 F.3d 462 (4th Cir. 2011) ................................................................................4

Meyer v. Greene,710 F.3d 1189 (11th Cir. 2013) ...................................................................passim

Thompson v. Relationserve Media, Inc.,

610 F.3d 628 (11th Cir. 2010) ..........................................................................3, 4

White v. H&R Block, Inc.,No. 02 Civ. 8965 (MBM), 2004 WL 1698628 (S.D.N.Y. July 28, 2004) ...11, 12

OTHERAUTHORITIES

Fed. R. Civ. P. 12(c).................................................................................................13

LR 7.1(A)(i), NDGa.................................................................................................13



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I. INTRODUCTION

As demonstrated in Defendants Motion for Judgment on the Pleadings

(Motion) [Dkt. No. 62], Defendants are entitled to dismissal under the recent

authority ofMeyer v. Greene, 710 F.3d 1189 (11th Cir. 2013). UnderMeyer,

neither the March 22, 2011, Copperfield Report (Motion at Ex. A) nor the June 30,

2011, BloombergArticle (id., Ex. B) is a corrective disclosure as that term is

defined for the purposes of a securities law claim. Because these are the only two

allegations of corrective disclosure, and because those allegations are not

cognizable underMeyer, this case should be dismissed.

Meyerholds that a third-partys repackaging or characterization of

previously disclosed public information about a company cannot be a corrective

disclosure. 710 F.3d at 1197-1200. Here, neither of the two alleged corrective

disclosures provided the market with any new information.

Lead Plaintiff offers no meaningful opposition to Defendants arguments

underMeyer. Indeed, Lead Plaintiff tacitly concedes that the information allegedly

contained in the Copperfield Report and the Bloomberg Article had already been



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made public in previously released documents.1 Nevertheless, Lead Plaintiff

argues in vain that the Court should treat these disclosures as sufficient for loss

causation purposes because they purportedly acted as intervening conduit[s] that

enable[d] the market to absorb previously disclosed public facts. (Opposition

at 15; see also id. at 20-21). As demonstrated below, Lead Plaintiffs argument is

contrary to the teaching and holding of Meyer.

Accordingly, the Consolidated Amended Complaint (CAC) [Dkt. No. 22]

should be dismissed with prejudice.

II. ARGUMENT AND CITATION OF AUTHORITIES

A. The Copperfield Report is Not a Corrective Disclosure.

Defendants Motion established that the March 22, 2011, Copperfield Report

is not a corrective disclosure for the purposes of pleading loss causation because it

merely repackaged previously disclosed public information. (See Motion at 14-

17.) In other words, it did not disclose any new information that the market had

1 Lead Plaintiffs Opposition (Opposition) [Dkt. No. 68] concedes that the

Copperfield Report merely summarized the information in Ebixs 2010 10-K andthat the information in the Copperfield Report emanate[d] from the 2010 10-K.

(Opposition at 8, 12). Furthermore, Lead Plaintiff also concedes that the

information purportedly revealed to the market in the Bloomberg Article hadalready been detailed in the publicly available Peak Complaint. (Id. at 19.)



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not already seen. (Id.) Lead Plaintiff himself concedes that the Copperfield Report

did nothing more than summarize[] the previously disclosed and publicly

released 2010 10-K that was issued by Ebix on March 16, 2011 (2010 10-K).

(Opposition at 8; see also id. at 12 (admitting that the information in the

Copperfield Report emanated from the 2010 10-K.).) Nevertheless, Lead

Plaintiff concocts an argument that the Copperfield Report should be considered a

corrective disclosure because the market could not absorb Ebixs 2010 10-K

until it absorbed the subsequently released Copperfield Report six (6) days later.

(Opposition at 12.) Lead Plaintiff offers no persuasive authority for that novel

argument, which, in any event, is foreclosed by Meyer.

Meyerand other cases explain that any allegation of corrective disclosure

must be consistent with the basic premise of the efficient market theory controlling

fraud-on-the market claims. See, e.g., Meyer, 710 F.3d at 1194-1200; Thompson v.

Relationserve Media, Inc., 610 F.3d 628, 691 (11th Cir. 2010). For example,

because the bedrock concept of such claims is that the market quickly digests and

reflects in a stocks price any information made public, a claim cannot be based on

re-packaging of previously disclosed news. Meyer, 710 F.3d at 1199-1200.

The Eleventh Circuit in Meyerclearly articulated the above-summarized

principles as follows:



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The efficient market theory . . . posits that all publicly available

information about a security is reflected in the market price of the

security. Therefore, any information released to the public isimmediately digested and incorporated into the price of a security. . . .

It follows that [c]orrective disclosures must present facts to the

market that are new, that is, publicly revealed for the first time.

710 F.3d at 1197-98 (emphasis added) (quoting Thompson, 610 F.3d at 691; Katyle

v. Penn Natl Gaming, Inc., 637 F.3d 462, 473 (4th Cir. 2011)) (citing FindWhat

Investor Grp. v. FindWhat.com, 658 F.3d 1282, 1311 n.28 (11th Cir. 2011)).

As noted above, Lead Plaintiff concedes that the information in the

Copperfield Report and the BloombergArticle had been previously released to the

market. (See supra at note 1.) Further, Lead Plaintiff affirmatively alleges that the

market for Ebix stock was efficient. (See CAC 10, 260-261.) Lead Plaintiffs

positions on these two points is, in fact, fatal to his claims. As the Eleventh Circuit

made abundantly clear in Meyer,

[t]he efficient market theory . . . is a Delphic sword: it cuts both ways.

. . . Investors cannot contend that the market is efficient for purposesof reliance and then cast the theory aside when it no longer suits their

needs for purposes of loss causation. Either the market is efficient or

it is not. A plaintiff . . . must take the bitter with the sweet, and if he

chooses to embraces the efficient market theory for purposes of

proving one element of a 10(b) claim, he cannot then turn aroundand contend that the market is not efficient for purposes of provinganother element of the very same claim.

710 F.3d at 1198-99.



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UnderMeyer, because the information contained in the Copperfield Report

(which was published on March 22, 2011) was available in the 2010 10-K (which

was filed six (6) days earlier on March 16, 2011), then the information in the

Copperfield Report cannot be considered new or corrective. (See Opposition at

13 (emphasis added).) Accordingly, the Copperfield Report is not a corrective

disclosure as a matter of law. Meyer, 710 F.3d at 1197-1200.

Citing no applicable legal authority whatsoever and in complete

contravention to his concessions elsewhere, Lead Plaintiff comes up with his own

novel legal theory in response to the binding Meyerdecision. Lead Plaintiff posits

that for information to be available publicly, it must be more than simply public;

some needle must actually synthesize and inject it into the market price.

(Opposition at 14; see also id. at 10, 15.) Lead Plaintiff apparently contends that

so-called analyst reports (like the anonymous Copperfield Report) fill the role of

these theoretical needles. Under Lead Plaintiffs contrived notion of the efficient

market theory, such reports are somehow necessary for the market to absorb

previously disclosed public facts. (Id. at 14-15.) Lead Plaintiffs argument is

directly contrary to Meyer.

Defendants made clear in their opening papers that neither Meyernor any

other controlling or applicable authority supports Lead Plaintiffs proposition. (See



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Motion at 6-13.) Lead Plaintiff shies away from any comparison of the allegations

in Meyerto what is alleged in the CAC by characterizing them as a superficially

similar factual scenario. (Opposition at 4.) Contrary to Lead Plaintiffs assertion,

the Einhorn Presentation that the Eleventh Circuit rejected in Meyer is virtually

identical to the Copperfield Report here, as demonstrated in Defendants opening

papers. (Motion at 14-17.)

In Meyer, the Eleventh Circuit concluded, as a matter of law, that the

Einhorn Presentation at issue there did not qualify as a corrective disclosure

because it was indisputable that all of the information in the presentation was

obtained from publicly available sources. Id. at 1198 (internal quotations

omitted); see also Motion at 8-13. In sum, nothing in Meyermentions

absorption or the other terms Lead Plaintiff seeks to employ.

Thus, the relevant inquiry is not, as Lead Plaintiff improperly claims,

whether the Copperfield Report, or any other so-called intervening conduit,

acted to enable the market to absorb the information that Lead Plaintiff

necessarily concedes had already been made publicly available when Ebixs 2010

10-K was filed with the SEC. Rather, the sole question underMeyeris whether the

alleged curative information had already been made publicly available. 710 F.3d

at 1197-1200. As echoed by a sister court, the relevant inquiry is not whether the



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truth was absorbed by the market, but whether it was available to the market. In

re Pfizer, Inc. Sec. Litig., 538 F. Supp. 2d 621, 632 (S.D.N.Y. 2008). Defendants

have demonstrated repeatedly that the answer is a resounding yes.

In a weak attempt to distract the Court from the issue at hand, Lead Plaintiff

misreads the Eleventh Circuits FindWhat decision and argues that it somehow

established, for purposes of applying the efficient market theory in fraud-on-the-

market cases, that market professionals have to read, absorb, compare, and

analyze . . . data before that information can be incorporated into a stocks price.

(Opposition at 14; see also id. at 5-6.) A plain reading ofFindWhat makes clear,

however, that it is of no relevance to this case. The issue of whether some amount

of time must pass before information is reflected in the price of a security was not

even before the court in FindWhat. The Eleventh Circuit has held that any

information released to the public is immediately digested and incorporated into

the price of a security. Meyer, 710 F.3d at 1197 (emphasis added). Indeed,

contrary to Lead Plaintiff here, the plaintiffs in FindWhat contended that

immediately after the Company . . . revealed the truth through its own statements

in a May 5, 2005 conference call, the inflation in [the Companys] stock price

dissipated, causing substantial losses to Class Period investors. 658 F.3d at 1313



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(emphasis added). At no point did the plaintiffs in FindWhat argue the strained

notion that Lead Plaintiff raises in his Opposition.

2

Finally, in a last ditch effort to avoid the fatal effect ofMeyer, Lead Plaintiff

incorrectly argues that the Einhorn Presentation at issue there discussed only

potential future events, whereas the Copperfield Report purportedly revealed new

facts. (Opposition at 16-18.) Lead Plaintiff fails to identify what these new facts

are. Instead, Lead Plaintiff points to the opinions of the anonymous author of the

Copperfield Report. The Eleventh Circuit in Meyerrejected that very same

argument. [I]f the information relied upon in forming an opinion was previously

known to the market, the only thing actually disclosed to the market when the

opinion is released is the opinion itself, and such an opinion, standing alone, cannot

reveal[] to the market the falsity of a companys prior factual representations.

Meyer, 710 F.3d at 1199 (quoting FindWhat, 658 F.3d at 1131 n.28).

Defendants have clearly established, and Lead Plaintiff necessarily admits,

that each and every source relied upon in the Copperfield Report was made

2 FindWhatpresented an unusual set of facts that required the Court to analyze

whether a re-publication could be said to preserve price inflation from a statement

that was held to be inactionable from before the class period. No such facts arepresented here. For that reason and others, Meyeris the controlling precedent.



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publicly available well before the Copperfield Report appeared as an article on the

Seeking Alpha website on March 22, 2011. (See Motion at 14-17; Opposition at

11-15.) Accordingly, under the clear binding authority expressed by the Eleventh

Circuit in Meyer, the Copperfield Report cannot, as a matter of law, be considered

a corrective disclosure.

B. The BloombergArticle is Not a Corrective Disclosure.

Defendants also demonstrated in their opening papers that the Bloomberg

Article fails as a corrective disclosure underMeyerbecause, like the Copperfield

Report, it parrots previously disclosed public information namely, the allegations

in an earnout lawsuit filed by the Peak Directors (Peak Complaint). (Motion at

18-22.) The Peak Complaint was indisputably publicly available to the market

(and any other interested party) via the District Courts electronic filing system for

well over a month before the Bloomberg Article was released on June 30, 2011.

Lead Plaintiff admits (as he must) that it is a matter of fact that the Peak

Complaint was filed (and thus made publicly available thereafter on the District

Courts electronic docket) on May 24, 2011. (Opposition at 20.) Furthermore,

Lead Plaintiff in fact concedes that the BloombergArticle did nothing more than

report allegations that had already been detailed in the Peak Complaint. (Id. at

19 -20.) As such, the BloombergArticle did not reveal any new information to



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the market, and, pursuant to Meyer, it cannot amount to a corrective disclosure.

710 F.3d at 1198; see also id. at n. 9.

Despite that each and every piece of purportedly material information about

Ebix that Lead Plaintiff contends was contained in the Bloomberg Article had

already been public for more than a month, Lead Plaintiff nevertheless asks the

Court to find that the BloombergArticle amounts to a corrective disclosure. Under

the clear and binding authority of Meyer, however, Lead Plaintiffs arguments fall

flat.

Lead Plaintiff argues that the Bloomberg Article should be considered a

corrective disclosure because there are allegedly no reports or other public

statements mentioning the Peak Complaint prior to the release of the Bloomberg

Article. According to Lead Plaintiffs flawed argument, the Bloomberg Article

absorbed the suit and its underlying facts into the market. (Opposition at 21.) As

demonstrated above, however, no applicable legal authority requires the

intervention of any report or other public statement in order for an efficient market

to absorb already public information. (See supra at 5-7.) Lead Plaintiffs

reliance on Billhofer v. Flamel Tech., S.A., 281 F.R.D. 150 (S.D.N.Y. 2012) is

misplaced. (Opposition at 22-23.) There, the inadequate corrective disclosure was

posted in an obscure location on the internet. Id. at 160. Here, on the other



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hand, the Peak Complaint was widely available for all to review on the District

Courts electronic docket. See, e.g., White v. H&R Block, Inc., No. 02-Civ.-

8965(MBM), 2004 WL 1698628, at *6, *12-13 (S.D.N.Y. July 28, 2004). Under

Meyer, therefore, because the allegations of the Peak Complaint were already

public more than a month before the BloombergArticle was published, the

BloombergArticle is not a corrective disclosure as a matter of law.

As he did with the Copperfield Report, Lead Plaintiff primarily bases his

argument regarding the Bloomberg Article on nothing other than his own self-

constructed beliefs regarding how the efficient market theory applies to fraud-on-

the-market cases such as the instant action. Lead Plaintiff again relies exclusively

on the contrived, legally unsupported, and logically unsound notion that the

efficient market theory requires the act(s) of some intervening conduit in order to

enable the market to absorb previously disclosed public information.

(Opposition at 20-23.)

As discussed above, however, neither Meyernor any other controlling or

applicable authority supports the proposition that under the efficient market theory,

an intervening conduit, such as a reporter or analyst, is required to take some

affirmative action, such as releasing a news story or analyst report that summarizes

or repackages certain previously disclosed public facts, in order for an efficient



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market to be deemed to have absorb[ed] such previously disclosed public facts.

Meyer, 710 F.3d at 1197-98; see also Pfizer, 538 F. Supp. 2d at 632; FindWhat,

658 F.3d at 1310; 1313; Bricklayers & Trowel Trades Intl Pension Fund v. Credit

Suisse First Boston, 853 F. Supp. 2d 181, 189-90 (D. Mass. 2012). Contrary to

Lead Plaintiffs assertion, numerous courts have expressly held that, even in cases

where there is an utter absence of any alleged act of dissemination being carried

out by a so-called intervening conduit, any information otherwise made publicly

available to the market will be deemed to have been absorbed into the price of a

security under the efficient market theory. See, e.g., In re Merck & Co. Sec. Litig.,

432 F.3d 261, 270-71 (3d Cir. 2005); H&R Block, Inc., 2004 WL 1698628, at *12-

13; cf. Cohen v. USEC, Inc., 70 F. Appx 679, 687-89 (4th Cir. 2003).

Lead Plaintiff cannot escape that it is a matter of public record that the Peak

Complaint was available to the market well over a month before the Bloomberg

Article was published. UnderMeyer, that fact means that the BloombergArticle

cannot be a corrective disclosure. Meyer, 710 F.3d at 1197-1200 . As noted

above, Meyerexpressly teaches that the sole relevant inquiry is whether the alleged

curative information had already been made publicly available. (See supra at 5-7.)

Finally, Lead Plaintiff makes the same ineffective argument as he made

regarding the Copperfield Report that the Bloomberg Article contains new



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information about past actions taken by Ebix. (Opposition at 23-24.) Once again,

however, Lead Plaintiff fails to identify what this new information is and, instead,

merely points to the unsupported allegations asserted in the Peak Complaint. (Id.)

Accordingly, the Bloomberg Article is not a corrective disclosure as a matter

of law.

C. Defendants Motion is Properly Before the Court.

Tacitly admitting the weakness of his positions, Lead Plaintiff opens his

Opposition by arguing that the Motion is not properly before the Court based on

LR 7.1(A)(i), NDGa. and the Courts earlier Order on Defendants Motion to

Dismiss [Dkt. No. 38]. With respect to LR 7.1(A)(i), NDGa. as an initial matter,

the recent Order denying Lead Plaintiffs Motion to Certify the Class pending

resolution of the present Motion (and stating that the present Motion was

credible) was silent with respect to compliance with the local rules. [Dkt. No.

65.] In any event, Defendants have complied with Fed. R. Civ. P. 12(c), which

clearly has a timing component, by filing their Motion on June 19, 2013, [a]fter

the pleadings are closed but early enough not to delay trial . . . . There was no

prejudice whatsoever to the Lead Plaintiff based on the timing of the filing of the

Motion. Finally, read literally, LR 7.1(A)(i), NDGa. could be said to contradict a



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rule of procedure, as opposed to implementing it. Notwithstanding the above, if

the Court would like, Defendants will file a Motion for Leave to File the Motion.

With respect to the earlier Order on the Motion to Dismiss [Dkt. No. 38], the

Court did not have the benefit of the Eleventh Circuits February 2013 ruling in

Meyerwhen that Order was issued in September 2012. Defendants have shown

that the faulty Einhorn Presentation in Meyer is virtually indistinguishable from the

Copperfield Report and Bloomberg Article here. The Eleventh Circuits decision

in Meyer, therefore, has direct application to the allegations in the CAC. As we

have demonstrated in our papers, the only new information in the Copperfield

Report and the BloombergArticle is the gloss and opinion of the authors, which

Meyerhas clearly held do not qualify as corrective disclosures.

III. CONCLUSION

For the foregoing reasons, Lead Plaintiff can prove no set of facts in support

of his claim that would entitle him to relief and judgment on the pleadings should

be entered in favor of the Defendants.

Respectfully submitted, this 21st day of August, 2013.

ALSTON & BIRD LLP

/s/ John A. Jordak, Jr.Todd R. David

Georgia Bar No. 206526John A. Jordak, Jr.



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Georgia Bar No. 404250

Todd F. Chatham

Georgia Bar No. 1963281201 West Peachtree Street

Atlanta, Georgia 30309

T: (404) 881-7000F: (404) 253-8358

Counsel for Defendants



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CERTIFICATE OF COMPLIANCE

The undersigned does hereby certify that the within and foregoing has been

prepared with one of the font and point selections approved by the court in LR 5.1,

N.D. Ga.

/s/ Todd F. Chatham

TODD F. CHATHAM



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CERTIFICATE OF SERVICE

I hereby certify that on August 21, 2013, the foregoing REPLY

MEMORANDUM IN FURTHER SUPPORT OF DEFENDANTS MOTION FOR

JUDGMENT ON THE PLEADINGS was filed electronically with the Clerk of

Court using the CM/ECF system, which will automatically send an e-mail

notification of such filing to all attorneys of record in the above-referenced action.

/s/ Todd F. ChathamTODD F. CHATHAM


Ebix Class Action Lawsuit_Argument for Dismissal 8-21-2013

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