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

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 OF DEFENDANTS 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. 196328 ALSTON & BIRD LLP 1201 West Peachtree Street Atlanta, Georgia 30309 Telephone: (404) 881-7000 Fax: (404) 253-8358 Counsel for Defendants

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TABLE OF CONTENTS Page No. TABLE OF AUTHORITIES .................................................................................... ii I. II. INTRODUCTION ...........................................................................................1 ARGUMENT AND CITATION OF AUTHORITIES ...................................2 A. B. C. III. The Copperfield Report is Not a Corrective Disclosure. ......................2 The Bloomberg Article is Not a Corrective Disclosure. .......................9 Defendants Motion is Properly Before the Court. .............................13

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 OTHER AUTHORITIES Fed. R. Civ. P. 12(c).................................................................................................13 LR 7.1(A)(i), NDGa.................................................................................................13 - ii

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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 of Meyer v. Greene, 710 F.3d 1189 (11th Cir. 2013). Under Meyer, neither the March 22, 2011, Copperfield Report (Motion at Ex. A) nor the June 30, 2011, Bloomberg Article (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 under Meyer, this case should be dismissed. Meyer holds 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 under Meyer. 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 1417.) In other words, it did not disclose any new information that the market had

Lead Plaintiffs Opposition (Opposition) [Dkt. No. 68] concedes that the Copperfield Report merely summarized the information in Ebixs 2010 10-K and that 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 had already 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. Meyer and 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 Meyer clearly 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 is immediately 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 Bloomberg Article 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 purposes of 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 around and contend that the market is not efficient for purposes of proving another element of the very same claim. 710 F.3d at 1198-99.

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Under Meyer, 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 Meyer decision. 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 Meyer nor 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 Meyer to 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 Meyer mentions 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 under Meyer is 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-themarket 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 of FindWhat 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 of Meyer, 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 Meyer rejected 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

FindWhat presented 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 are presented here. For that reason and others, Meyer is 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 Bloomberg Article is Not a Corrective Disclosure.

Defendants also demonstrated in their opening papers that the Bloomberg Article fails as a corrective disclosure under Meyer because, 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 Bloomberg Article did nothing more than report allegations that had already been detailed in the Peak Complaint. (Id. at 19 -20.) As such, the Bloomberg Article 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 Bloomberg Article 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 Bloomberg Article was published, the Bloomberg Article 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 selfconstructed beliefs regarding how the efficient market theory applies to fraud-onthe-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 Meyer nor 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 *1213; 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. Under Meyer, that fact means that the Bloomberg Article cannot be a corrective disclosure. Meyer, 710 F.3d at 1197-1200 . As noted above, Meyer expressly 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 Meyer when 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 Bloomberg Article is the gloss and opinion of the authors, which Meyer has 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. 206526 John A. Jordak, Jr. - 14 -

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Georgia Bar No. 404250 Todd F. Chatham Georgia Bar No. 196328 1201 West Peachtree Street Atlanta, Georgia 30309 T: (404) 881-7000 F: (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. Chatham TODD F. CHATHAM