Free Statement of Non-Opposition - District Court of California - California

Case 4:07-cv-04972-CW

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1 COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP 2 DENNIS J. HERMAN (220163) DANIEL J. PFEFFERBAUM (248631) 3 100 Pine Street, Suite 2600 San Francisco, CA 94111 4 Telephone: 415/288-4545 415/288-4534 (fax) 5 [email protected] [email protected] 6 Lead Counsel for Plaintiffs 7 UNITED STATES DISTRICT COURT 8 NORTHERN DISTRICT OF CALIFORNIA 9 OAKLAND DIVISION 10 JERRY TWINDE, On Behalf of Himself and ) No. 4:07-cv-04972-CW 11 All Others Similarly Situated, ) ) CLASS ACTION 12 Plaintiff, ) ) PLAINTIFFS' STATEMENT OF NON13 vs. ) OPPOSITION TO THE COURT'S ) CONSIDERATION OF THE 14 THRESHOLD PHARMACEUTICALS, INC., ) DECLARATION OF DENISE T. POWELL et al., ) PURSUANT TO LOCAL RULE 7-3(b), AND 15 ) MOTION TO LIFT PSLRA DISCOVERY Defendants. ) STAY 16 ) DATE: June 19, 2008 17 TIME: 2:00 p.m. COURTROOM: The Honorable 18 Claudia Wilken 19 20 21 22 23 24 25 26 27 28

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1 I. 2

INTRODUCTION In support of their Motion to Dismiss Plaintiffs' Consolidated Amended Complaint for

3 Violation of the Federal Securities Laws ("Motion to Dismiss"), Dkt. No. 24, defendants submitted 4 two audio recordings of investor conference calls, (and two transcripts recently prepared therefrom), 5 which contradict the Bloomberg and Thomson Financial transcripts that plaintiffs quoted in their 6 Consolidated Amended Complaint. See Exhibits H, I, L and M to the Declaration of Alexander 7 M.R. Lyon in Support of Defendants' Motion to Dismiss ("Lyon Declaration"), Dkt. No. 20; 8 Consolidated Amended Class Action Complaint for Violation of the Federal Securities Laws 9 ("Complaint"), ¶¶87, 105, Dkt. No. 18; Exs. A and B to the Declaration of Dennis J. Herman in 10 Support of Plaintiffs' Brief in Opposition to Defendants Motion to Dismiss, Dkt. No. 32. However, 11 as plaintiffs and the Court pointed out at oral argument on June 19, 2008, defense counsel Alexander 12 M. R. Lyon did not articulate any basis of personal knowledge to authenticate the exhibits.1 See 13 Lyon Declaration at 2-3; Plaintiffs' Response to Request for Judicial Notice in Support of 14 Defendants' Motion to Dismiss at 3-5, Dkt. No. 33. In response, defendants have now filed the 15 Declaration of Denise T. Powell ("Powell Declaration"), Senior Director of Corporate 16 Communications at Threshold Pharmaceuticals, Inc. ("Threshold"), in which she states that the same 17 exhibits are "true and correct cop[ies]" of the purported recordings. See Powell Declaration at 3. 18 The Powell Declaration does not properly authenticate the audio recordings, and therefore

19 fails to support defendants' inappropriate factual disputes made at the motion to dismiss stage. 20 However, in recognition of the Court's desire to resolve issues relating to authenticity of the 21 recordings (and the transcripts produced from them) at an early stage, plaintiffs hereby submit this 22 statement of non-opposition to permit the Court to consider the late-filed Powell Declaration in 23 connection with the pending motion. See N.D. Cal. Civ. L.R. 7-3(b). To the extent the Court wishes 24
1 Although Lyon claimed to have "personal knowledge" that the exhibits were each "true and 25 correct cop[ies]" of evidence they purported to be, he presented no substantive basis for this assertion. Lyon Declaration at 2-3; see also Request for Judicial Notice in Support of Defendants' 26 Motion to Dismiss Plaintiffs' Consolidated Amended Class Action Complaint for Violation of the Federal Securities Law at 2-3, Dkt. No. 22. Lyon did not allege to have any involvement whatsoever 27 in the preparation, recording, storage or production of the audio recordings.

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1 to resolve this matter on the pleadings, whether in current form or through an amended complaint, 2 the Court should lift the Private Securities Litigation Reform Act ("PSLRA") discovery stay for the 3 limited purpose of permitting plaintiffs to obtain any audio recordings of the March 1, 2006 and May 4 11, 2006 conference calls in the possession of Bloomberg or Thomson Financial. 5 II. 6 7 Authenticity is "a condition precedent to admissibility [and] is satisfied by evidence 8 sufficient to support a finding that the matter in question is what its proponent claims." Fed. R. 9 Evid. 901(a). In particular, with regard to audio recordings, "the trial court, in the exercise of its 10 judicial discretion, must be satisfied that the recording is accurate, authentic, and generally 11 trustworthy. The burden is properly on the offering party." United States v. King, 587 F.2d 956, 961 12 (9th Cir. 1978); United States v. Panaro, 266 F.3d 939, 951 (9th Cir. 2001). Some courts have 13 adopted a formalized approach to the authentication of tape recordings because of the potential for 14 15 16 foundation for the tape recording, the custodian of the tape testified about the time, place, and 17 manner of its creation, and of its continual custody in the archives of the national foundation for 18 trustees." United States v. Ford, 632 F.2d 1354, 1377-78 (9th Cir. 1980). 19 Powell cannot properly lay the foundation for the two audio-CDs submitted to the Court 20 because she has no personal knowledge of the recordings relating to the period from their creation in 21 22 "Those concerns led the Eighth and Third Circuits to adopt a formalized approach to authentication of audio tapes, requiring proof of all of the following facts": (1) "The recording 23 device was capable of recording the conversation"; (2) "The operator was competent to operate the recording authentic and changes, additions, 24 device"; (3) "Therecording"; was"The recordingcorrect"; (4) "No(6) "The speakers areor deletions were made in the (5) was preserved"; identified"; and (7) "The elicited conversation was made without inducement." 5-901 Weinstein's Federal 25 Evidence §901.05 (2d ed. 1997). 26 3 Such factors include: (i) "The operator's competence"; (ii) "The fidelity of the recording equipment"; (iii) "The absence of material alterations"; and (iv) "The identification of relevant 27 sounds or voices." Id. 28
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ARGUMENT A. The Powell Declaration Is Inadequate to Authenticate the Audio Recordings from March 1, 2006 and May 11, 2006

undetectable alterations.2 Those courts which do not apply formalized standards typically look to similar factors.3 For example, the Ninth Circuit found a tape recording authentic where "[a]s

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1 2006 until they were e-mailed to her in or around January 2008. As detailed in her declaration, 2 Powell arranged with Jeff Accomando, her contact with third-party vendor Shareholder.com, to have 3 Shareholder.com record the Company's conference calls. Powell Declaration at 2. Powell 4 participated in these conference calls with certain Threshold officers and directors, including Barry 5 Selick, Michael Ostrach, Janet Swearson and Alan Colowick. Id. Powell did not record the calls or 6 ever retain a copy of their audio recordings. Not until January 2008, in response to a request from 7 Laurence Weiss, counsel for defendants, did Powell obtain the recordings at issue by contacting 8 Accomando, at Shareholder.com. Id. at 2-3. Accomando e-mailed Powell two audio files ­ 9 19061thld.asp and 20562thld.asp ­ and Powell states that she listened to these files. Id. at 3. On the 10 basis that she recognizes the voices on the recording, Powell represents to the Court that the files are 11 "true and correct cop[ies]" of the audio recordings made in 2006. Id. 12 In the absence of a proper chain of custody, the Court should not accept Powell's

13 recollection, nearly two years after the fact, that what she listened to in January 2008 are the 14 accurately recorded conference calls which took place in 2006. Powell makes no representation that 15 she remembers the details of what was said that day, let alone that the few phrases in dispute in this 16 litigation are accurately captured on the audio recording she received from Shareholder.com. See 17 Motion to Dismiss at 19-20. By authenticating the recordings through their chain of custody, the 18 Court can avoid having to rely on Powell's memory of the conference calls or her assumption that 19 they are accurate.4 See Betz v. Trainer Wortham & Co., Inc., 519 F.3d 863, 876 (9th Cir. 2008) 20 (noting that memories fade over time). 21 22 23 24
4 The transcripts submitted by defendants raise additional authenticity issues. For instance, 25 the file names from which the transcripts are produced are not 20562thld.asf and 19061thld.asf, but "FINANCIALCONFCALLHELLEREHRMAN[.]MP3" and "HELLER26 EHRMAN2NDCONFCALL.MP3," indicating the possibility that the file format was altered from .asf to .mp3. See Exs. I and M to the Lyon Declaration at 2. If such a conversion occurred, 27 it should also be documented as part of the chain of custody.

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1 2 3

B.

If the Court Is Inclined to Resolve this Issue on the Pleadings, It Should Allowed Limited Discovery as to the March 1, 2006 and May 11, 2006 Conference Calls

Certain allegations in the Complaint are based upon transcripts of conference calls that were

4 circulated to investors immediately after the calls concluded. Complaint, ¶¶71, 73, 87, 102, 105. It 5 is not disputed that the Complaint properly quotes from the transcripts. See Plaintiffs' Brief in 6 Opposition to Defendants' Motion to Dismiss at 23, Dkt. No. 31. Instead, defendants dispute the 7 accuracy of these transcripts, a factual argument which is inappropriate at this point in the litigation. 8 See Motion to Dismiss at 19-20; Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). 9 At the motion to dismiss stage, a court may not weigh the evidence that might be presented at trial, 10 but must simply determine whether the complaint itself is legally sufficient. Id. 11 Plaintiffs recognize, however, that the accuracy of the transcripts will be a potential issue for

12 summary judgment. To the extent that the Court seeks to resolve this limited issue on the pleadings, 13 and in the interest of judicial economy, the Court should allow plaintiffs to discover any audio 14 recordings of the March 1, 2006 and May 11, 2006 conference calls in the possession of Bloomberg 15 and Thomson Financial. Plaintiffs are currently precluded from conducting any discovery by the 16 mandatory discovery stay provisions of the PSLRA, which may be lifted by the Court for the 17 purposes of evidence preservation or to prevent undue prejudice. See 15 U.S.C. §78u-4(b)(3)(B). 18 These third parties are under no obligation to preserve the audio recordings of the conference calls at 19 issue. The existence of recordings in the possession of either Bloomberg or Thomson Financial will 20 either confirm or refute the accuracy of the audio recordings and transcripts relied upon by 21 defendants, and will be crucial to the expedient resolution of this case as it pertains to the statements 22 made during the two conference calls. Were the Court to decide this issue on the pleadings currently 23 before it, plaintiffs would suffer undue prejudice as they have not been allowed factual discovery 24 related to the accuracy of the transcripts which are quoted verbatim in the Complaint. See In re 25 Rational Software Sec. Litig., 28 F. Supp. 2d 562, 566 (N.D. Cal. 1998); Medical Imaging Ctrs. of 26 Am., Inc. v. Lichtenstein, 917 F. Supp. 717, 720 (S.D. Cal. 1996)(defining undue prejudice as an 27 improper or unfair detriment). 28
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1 III. 2

CONCLUSION For the reasons outlined above, if the Court seeks to resolve the issue of the accuracy of the

3 transcripts relied on by plaintiffs on the pleadings, it should lift the PSLRA discovery stay for the 4 purpose of permitting plaintiffs to obtain any audio recordings of the March 1, 2006 and May 11, 5 2006 conference calls which are in the possession of Bloomberg and Thompson Financial. 6 DATED: July 8, 2008 7 8 9 10 11 12 13 14 Lead Counsel for Plaintiffs 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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T:\CasesSF\Threshold\STM00052436.doc

Respectfully submitted, COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP DENNIS J. HERMAN DANIEL J. PFEFFERBAUM

/s/ DANIEL J. PFEFFERBAUM 100 Pine Street, Suite 2600 San Francisco, CA 94111 Telephone: 415/288-4545 415/288-4534 (fax)

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1 2

CERTIFICATE OF SERVICE I hereby certify that on July 8, 2008, I electronically filed the foregoing with the Clerk of the

3 Court using the CM/ECF system which will send notification of such filing to the e-mail addresses 4 denoted on the attached Electronic Mail Notice List, and I hereby certify that I have mailed the 5 foregoing document or paper via the United States Postal Service to the non-CM/ECF participants 6 indicated on the attached Manual Notice List. 7 I further certify that I caused this document to be forwarded to the following designated

8 Internet site at: http://securities.csgrr.com/. 9 I certify under penalty of perjury under the laws of the United States of America that the

10 foregoing is true and correct. Executed on July 8, 2008. 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 /s/ DANIEL J. PFEFFERBAUM COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP 100 Pine Street, 26th Floor San Francisco, CA 94111 Telephone: 415/288-4545 415/288-4534 (fax) E-mail:[email protected]

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Mailing Information for a Case 4:07-cv-04972-CW
Electronic Mail Notice List
The following are those who are currently on the list to receive e-mail notices for this case. Kevin Anthony Burke [email protected] Michael L. Charlson [email protected],[email protected],[email protected],[email protected],[email protected],[email protected],[email protected],[email protected] Marc S. Henzel [email protected] Dennis J. Herman [email protected],[email protected],[email protected],[email protected] Alexander M.R. Lyon [email protected],[email protected] Daniel Jacob Pfefferbaum [email protected] Darren Jay Robbins [email protected] Samuel H. Rudman [email protected] Evan J. Smith [email protected] Laurence Andrew Weiss [email protected]

Manual Notice List
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Mary K. Blasy Coughlin Stoia Geller Rudman & Robbins LLP 655 West Broadway Suite 1900 San Diego, CA 92101

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