131658cv

Dalberth,etal.v.XeroxCorporation,etal.
UNITEDSTATESCOURTOFAPPEALS 1
FORTHESECONDCIRCUIT 2
____________________ 3
4
AugustTerm,2013 5
6
(Argued:March14,2014Decided:September8,2014) 7
8
DocketNo.131658cv 9
10
____________________ 11
12
THOMASDALBERTH,onbehalfofhimselfandallotherssimilarlysituated, 13
IBEWLOCAL164WELFAREFUND,onbehalfofitselfandallotherssimilarly 14
situated,ROBERTW.ROTEN,onbehalfofhimselfandallotherssimilarly 15
situated,GEORGIASTANLEY,onbehalfofherselfandallotherssimilarly 16
situated, 17
18
PlaintiffsAppellants, 19
20
v. 21
22
XEROXCORPORATION,BARRYROMERIL,PAULA.ALLAIRE, 23
RICHARDTHOMAN, 24
25
DefendantsAppellees.
*
26
27
____________________ 28
29
*
TheClerkofCourtisdirectedtoamendthecasecaptionasabove.
Case: 13-1658 Document: 126-1 Page: 1 09/08/2014 1313636 43
1 of 45
Before:JACOBS,POOLER,CircuitJudges,andREISS,DistrictJudge.
**
1
2
AppealfromajudgmentoftheUnitedStatesDistrictCourtfortheDistrict 3
ofConnecticut(AlvinW.Thompson,J.)grantingDefendantsmotionfor 4
summaryjudgmentonPlaintiffsclaimsallegingviolationsofSections10(b)and 5
20(a)oftheSecuritiesExchangeActof1934,15U.S.C.78j(b)and78t(a),and 6
Rule10b5,17C.F.R.240.10b5.BecauseweconcludethatXeroxandits 7
executiveofficersmadesufficientdisclosuresregardingtheirworldwide 8
restructuringinitiativeandtheirU.S.basedCustomerBusinessOrganization 9
Reorganization,weaffirm. 10
____________________ 11
BRAD N. FRIEDMAN, Millberg LLP, New York, N.Y., 12
CounselforPlaintiffAppellantIBEWLocal164WelfareFund. 13
14
StanleyD.Bernstein,BernsteinLeibhardLLP,NewYork, 15
N.Y.,ClassCounselandCounselforPlaintiffAppellantRobert 16
W.Roten. 17
18
MarkLevine,Stull,Stull&Brody,NewYork,N.Y.,Class 19
CounselandCounselforPlaintiffsAppellantsThomas 20
DalberthandGeorgiaStanley,onbehalfofthemselvesand 21
allotherssimilarlysituated. 22
23
**
TheHonorableChristinaReiss,ChiefJudgeoftheUnitedStatesDistrict
CourtfortheDistrictofVermont,sittingbydesignation.
2
Case: 13-1658 Document: 126-1 Page: 2 09/08/2014 1313636 43
2 of 45
SANDRAC.GOLDSTEIN,Cravath,Swaine&Moore 1
LLP,(J.WesleyEarnhardt,onthebrief),NewYork,N.Y., 2
forDefendantAppelleeXeroxCorporation. 3
4
ThomasD.Goldberg,DayPitneyLLP,Stamford,CT,for 5
DefendantAppelleeG.RichardThoman. 6
7
JohnA.Valentine,WilmerCutlerPickeringHaleand 8
DorrLLP,Washington,D.C.,forDefendantsAppellees 9
BarryD.RomerilandPaulA.Allaire. 10
11
AlfredU.Pavlis,FinnDixon&HerlingLLP,Stamford, 12
CT,forDefendantsAppelleesBarryD.RomerilandPaulA. 13
Allaire. 14
POOLER,CircuitJudge: 15
NamedPlaintiffsandclassrepresentativesThomasDalberth,RobertRoten, 16
GeorgiaStanley,andtheInternationalBrotherhoodofElectricalWorkersLocal 17
164WelfareFund(collectively,Plaintiffs)appealfromanApril1,2013 18
judgmentandaMarch29,2013rulingoftheUnitedStatesDistrictCourtforthe 19
DistrictofConnecticut(AlvinW.Thompson,J.),grantingsummaryjudgmentin 20
favorofXeroxCorporationandexecutiveofficersBarryD.Romeril,PaulA. 21
Allaire,andG.RichardThoman(collectively,XeroxorDefendants).Inre 22
XeroxCorp.Sec.Litig.,935F.Supp.2d448(D.Conn.2013)(Xerox). 23
3
Case: 13-1658 Document: 126-1 Page: 3 09/08/2014 1313636 43
3 of 45
Weconsiderhereasituationwhereacorporationundertakesalargescale, 1
worldwiderestructuringinitiative,whichwasitselfcomprisedofmultiple 2
smallersubinitiatives,andaddresswhetherthereisagenuinedisputeof 3
materialfactwithrespecttothesufficiencyofthecorporationsdisclosures 4
regardingtheprogressofasinglesubinitiative.Plaintiffsfiledthisclassactionin 5
1999allegingthatXeroxandexecutiveofficersRomeril,Allaire,andThoman 6
violatedfederalsecuritieslawbymateriallymisrepresentingthatXeroxs 7
worldwiderestructuringinitiativewasfinanciallybeneficialtothecorporation, 8
when,infact,onespecificcomponentoftherestructuringtheCustomer 9
BusinessOrganizationReorganizationwascausingsignificantandongoing 10
economicdistresstothecompany.Becauseweconcludethatthereisnogenuine 11
disputeofmaterialfactwithrespecttothesufficiencyofXeroxsdisclosures 12
aboutthesuccessesandfailuresofthiscomponentofitsworldwide 13
restructuring,weaffirmthedistrictcourtsgrantofsummaryjudgmentinfavor 14
ofDefendants. 15
BACKGROUND 16
Thisisaclassactionlawsuitbroughtonbehalfofallpersonswho 17
purchasedcommonstockfromXeroxduringtheperiodfromOctober22,1998 18
4
Case: 13-1658 Document: 126-1 Page: 4 09/08/2014 1313636 43
4 of 45
throughOctober7,1999,allegingviolationsoftheSecuritiesExchangeActof 1
1934(theExchangeAct).PlaintiffsbringtheirclaimsunderSections10(b)and 2
20(a)oftheExchangeAct,15U.S.C.78j(b)and78t(a),andRule10b5,17C.F.R. 3
240.10b5,promulgatedbytheSecuritiesandExchangeCommission(SEC) 4
pursuanttoSection10(b)oftheExchangeAct. 5
TheactionsgivingrisetothislawsuitcommencedasaresultofXerox 6
takingonseveralinitiativesin1998and1999,whenXeroxwasattemptingto 7
makeitselfmorecompetitiveintheglobalmarket.Duringsomeorallofthis 8
time,RomerilwasXeroxsChiefFinancialOfficer(CFO);AllairewasXeroxs 9
ChiefExecutiveOfficer(CEO);andThomanwasXeroxsPresidentandChief 10
OperatingOfficer(COO).ThomanalsoservedtemporarilyasCEOfrom1999 11
to2000.Thethreeinitiativesrelevanttothislawsuitare: 12
1. theWorldwideRestructuring(WWR),announcedonApril 13
7,1998,whichincluded150specificprojectsandwasintended 14
tobefullyimplementedin2001; 15
2. the1998CustomerBusinessOrganizationReorganization 16
(CBOReorganization),whichwasoneofthe150WWR 17
initiativesandwasfocusedprimarilyonimprovingand 18
centralizingthesupporttoXeroxsU.S.basedsalesforce, 19
knownastheNorthAmericanSolutionsGroup(NASG); 20
and 21
3. the1999SalesForceRealignment(1999SFR),announcedon 22
January6,1999,whichwasdistinctfromtheWWR,andhada 23
5
Case: 13-1658 Document: 126-1 Page: 5 09/08/2014 1313636 43
5 of 45
goalofrealigningsalesforceterritoriesfromgeographybased 1
toindustrybasedselling. 2
3
Asdiscussedingreaterdetailbelow,Plaintiffscontendthattheproblemsthat 4
arosefromtheCBOReorganizationwhichinvolvedtheclosureofoneof 5
XeroxsfourCustomerAdministrativeCenters(CACs)andthereorganization 6
ofthethreeremainingcentersintoCustomerBusinessCenters(CBCs)were 7
insufficientlydisclosedtothemarket. 8
Thedistrictcourtsopinionsetsoutincommendabledetailthefactual 9
backgroundinthiscase,withwhichweassumethepartiesfamiliarity.SeeXerox, 10
935F.Supp.2dat45183.Wesetforthbelowprimarilyfactswhicharepertinent 11
tothequestionofsufficientdisclosure.Thisevidenceistakenfromthesizable 12
summaryjudgmentrecord,andisundisputedunlessotherwisenoted. 13
I. TheWorldwideRestructuringProgram 14
OnApril7,1998,XeroxannouncedtheWWR,acompanywide 15
restructuringprogramthathadthegoalofenhancingitscompetitiveposition 16
andloweringcostsoverall.InXeroxs1998Form10KsubmissiontotheSEC, 17
Xeroxidentifiedanddescribedthefollowingthree[k]eyinitiativesofthe 18
WWR: 19
6
Case: 13-1658 Document: 126-1 Page: 6 09/08/2014 1313636 43
6 of 45
1. Consolidationof56Europeancustomersupportcentersinto 1
onefacilityandimplementingasharedservicesorganization 2
fororderentry,invoicing,andotherbackofficeandsales 3
operations. 4
2. Streamliningmanufacturinglogistics,distributionandservice 5
operations.ThiswillincludecentralizingU.S.partsdepots 6
andoutsourcingstorageanddistribution. 7
3. Overhaulingourinternalprocessesandassociatedresources, 8
includingclosingoneoffourgeographicallyorganizedU.S. 9
customeradministrativecenterswiththeremainingthree 10
refocusedbycustomersegment,enablingimprovedcustomer 11
supportatlowercost.[(theCBOReorganization)] 12
13
Appxat2756.TheWWRalsoanticipatedtheeliminationofanestimated9,000 14
positionsworldwide,tobeaccomplishedthroughvoluntaryreductionsand 15
layoffs.Appxat390.Xeroxestimatedthatoncefullyimplemented,thepretax 16
savingsfromtheWWRwouldamounttoapproximately$1billionannually. 17
TheCBOReorganization,listedasthethirdkeyinitiativeabove, 18
involvedtheeliminationofapproximately550positions,andwasanticipatedto 19
costabout$30milliontoimplementandultimatelyproduce$45millionin 20
annualsavings.ItprimarilyinvolvedtheclosureofoneofXeroxsfourCACs, 21
andthereorganizationofthethreeremainingCACsintoCBCs,locatedinIllinois, 22
Texas,andFlorida.AspartoftheCBOReorganization,Xeroxtransferredthe 23
orderentryfunctionoriginallyperformedbyCustomerBusinessRepresentatives 24
7
Case: 13-1658 Document: 126-1 Page: 7 09/08/2014 1313636 43
7 of 45
(CBRs)initsregionalsalesofficesaroundtheU.S.tothethreeCBCs. 1
EmployeesattheCBCsrequiredsubstantialtraininginordertotakeonthese 2
shiftedresponsibilities. 3
OnOctober22,1998,Xeroxissuedareleasereportingstrongthirdquarter 4
earningsfor1998,attributingthetwodigitearningspershareincreaseinpartto 5
theinitialbenefitsfromtheworldwiderestructuringprogram.Appxat2198. 6
XeroxalsoreportedthatinconnectionwiththeWWR,1,700employeeshadleft 7
thecompanyduringthethirdquarter,bringingthetotalnumberofpositions 8
eliminatedthusfarto3,200.Thereleaseremindedthepublicthat 9
[a]pproximately9,000jobswillbeeliminatedundertheprogram,whichis 10
designedtoenhancethecompanyscompetitivepositionandfurtheralignits 11
coststructurewiththedemandsofthedigitalworld.Appxat2199. 12
A. 1998InternalCommunicationsAbouttheCBOReorganization 13
AsmemorializedinXeroxsinternalcommunications,theWWR,andalso 14
theCBOReorganizationspecifically,contemplatedandcausedsignificant 15
changesinstaffinglevels.ToputitinXeroxsterms,roughly500headswere 16
capturedasaresultoftheCBOReorganization.Appxat3584.Theseshiftsin 17
staffinghadeffectsonXeroxsoperationsthroughouttheUnitedStates. 18
8
Case: 13-1658 Document: 126-1 Page: 8 09/08/2014 1313636 43
8 of 45
Bywayofexample,theaccountingfirmKPMGvisitedtheTexasCACon 1
October26and27,1998,andreportedseveralissueswiththeCBCtransition, 2
includingthat[s]alesrepresentativesareveryunhappywiththelackoffaceto 3
faceinteractionwiththeCBRs.Appxat5025.Challengeswithstaffingchanges 4
andreductions,duetothedisruptioncreatedbythereductioninresourcesand 5
therestructuringtransitionchanges,Appxat2295,werefurtherdescribedinan 6
internalmemorandumpreparedbyKPMGonthesubjectofbillingqualitydated 7
November6,1998. 8
TheNovember6,1998KPMGmemorandumspecificallydescribedthe 9
effectsoftheCBOReorganizationonbillprocessing,whichincludedmoving 10
eightypercentofXeroxsaccountstonewsupportlocations:[c]oincidentwith 11
theclosingandreorganization,....veryfewtenured...orderprocessing 12
administratorsrelocatedtothenewCBCs,and...experiencedCAC/CBC 13
collectionandbillingadministratorswerereassignedtoorderentrypositions. 14
Appxat2296.Theresultofalloftheseshiftswasthataproximatelytwenty 15
percentofthebillingsupportstaffwascomprisedofcompletelynewhires.The 16
memorandumprojectedfurtherdeteriorationinbillingandinvoicingpriorto 17
anysignificantimprovementsinthoseareas.Appxat2295.Inanotherinternal 18
9
Case: 13-1658 Document: 126-1 Page: 9 09/08/2014 1313636 43
9 of 45
memorandumsenttotheOperationsCommitteeonthesameday,accounts 1
receivablefundusagewasdescribedasworsethantheprioryear,withthe 2
deterioration...largelydrivenbythereorganizationofthecustomer 3
administrationcentersintheU.S.Appxat5032. 4
B. 1999InternalCommunicationsAbouttheCBOReorganization 5
Initsinternalcommunicationsthroughout1999,Xeroxattemptedtodeal 6
withtheCBOReorganizationanditseffectsonoperations.InApril1999,the 7
presidentoftheNASG,ThomasJ.Dolan,submittedamemorandumtoRomeril 8
onthesubjectofSecondQuarter/SecondHalfinresponsetoRomerilsrequest 9
forkeymessagestotheinvestmentcommunity.Appxat705.Dolannotedthat 10
theprofitplanshortfallwasattributabletopoorsaleactivitylevel,asalegross 11
marginshortfall,weakerthanexpectedPostSale,andaboveplanService/Admin 12
costs.Appxat705.Healsonotedthat[w]earecurrentlyaddressingseveral 13
costrelatedissuesincluding...Adminresourceaddbackandbaddebtflow 14
throughimpactonouragingreceivable.Appxat706. 15
OnJuly1,1999,aninternalmemorandumfromPatrickJ.Fulford,thevice 16
presidentoftheNASGFinance,describeda[s]tateof[e]mergencyforthe 17
NASG.Appxat3376.ThiscorrespondencedidnotreferenceoridentifytheCBO 18
10
Case: 13-1658 Document: 126-1 Page: 10 09/08/2014 1313636 43
10 of 45
Reorganizationspecifically,althoughtheattachedchartrevealedlowsales 1
productivityandBadDebt.Appxat3378.AJuly22,1999internalpresentation 2
ontheCBOReorganizationnotedthemassivebacklogrelatedtoagedaccounts 3
receivableandbillingerrors,andnotedthatitwas[t]oofartoofast.Appxat 4
3397.Asubsequentslidestatedthat[w]ehaveafivealarmfire,andnoted 5
majorimpactoncustomersandsalesproductivity.Appxat3398.The 6
presentationalsocitedproblemswithcustomersatisfaction;billingaccuracyand 7
timeliness;aswellasemployeesundersevereduress.Appxat3398. 8
AninternalmemorandumdatedJuly26,1999sentfromanewlyhired 9
seniorvicepresidentoftheNASGtoCBOemployees,acknowledgedthatthere 10
weresomeseriousissueswithwhichtocontend.Thememorandumstatedthat 11
weobviouslyhavegonethroughamassivechangeinthelast12months.We 12
tookasignificantreductioninresourcesandlostsubstantialexperienceand 13
tenure....Seniormanagementhasacknowledgedwewenttoofar,toofast. 14
Appxat3488. 15
InadocumenttitledCBOBackgroundSummarycreatedforameetingin 16
September1999,theCBOReorganizationwasdescribedashavingcaused 17
problemsattheservicelevelimmediately.Id.at3584.Specifically,itidentified 18
11
Case: 13-1658 Document: 126-1 Page: 11 09/08/2014 1313636 43
11 of 45
AccountsReceivable(A/R)andDaysSaleOutstanding(DSO)numbersas 1
havingincreased,whichmeantthatXeroxwasnotcollectingonitsbillsas 2
rapidlyasithadinthepast.SeeXerox,935F.Supp.at45253.The[r]oot 3
[c]ausesoftheproblemsweredescribedaslackofresources,lossofskills,and 4
disruption,aswellasthefactthatXeroxhadlosthundredsofmanyearsof 5
experiencewhenweredeployedthehighlyexperienced[CBRs]intoother 6
assignments...andhiredmanycompletelynewpeopleinthe[CBCs].Appxat 7
3584. 8
Laterin1999,ThomanandRomerilgrappledwiththeeffectsoftheCBO 9
ReorganizationwithinthelargercontextoftheWWR.Forexample,aSeptember 10
27,1999internalmemorandumfromThomantooperationscommitteemembers, 11
withthesubjectHeadcountApproval,warnedthatthecompanymustbe 12
betterincontrolofmanpowergiventhecompanysexpenditures,andhenoted 13
that[a]saresultofourfailuretostrictlycontrolresources,wehave,inessence, 14
spentmuchofthebenefitoftherestructuringaction.Appxat3608.OnOctober 15
6,1999,RomerilsentThomananinternalmemorandumwithtalkingpointsin 16
preparationforthephoneinmeetingforpreliminary1999thirdquarterresults, 17
andatpoint(10)ofthememorandumRomerilasked:[w]hathappenedto 18
12
Case: 13-1658 Document: 126-1 Page: 12 09/08/2014 1313636 43
12 of 45
restructuringbenefits?Iftheywerereal,theymusthavebeenspent,delayedor 1
offsetbydeteriorationelsewhere.Appxat3612. 2
II. XeroxsPublicDisclosuresDuringtheClassPeriod:October22,1998 3
throughOctober7,1999 4
5
WhileXeroxsofficersweredraftinginternalmemoranda,presentations, 6
andemailsdiscussinghowtofixthebillingissuesandtheincreasedA/Rand 7
DSOnumbersasaresultoftheCBOReorganization,Xeroxwasalsoissuing 8
publicstatementsabouthowitsWWRwasprogressing.Weprovideasmall 9
representativeportionofthosestatementsinthefollowingtwosubsections. 10
A. OctoberDecember1998Disclosures 11
InXeroxs1998thirdquarterForm10QfilingwiththeSECdated 12
November10,1998Xeroxstatedthattherewerehigheraccountsreceivabledue 13
tostrongerequipmentsalesgrowthandsomeincreaseindayssalesoutstanding 14
duetothetemporaryeffectsfromthereorganizationandconsolidationofU.S. 15
customeradministrativecenters.Appxat2320. 16
Romeril,XeroxsCFOatthetime,metwithseveraldifferentsecurities 17
analystsinNovemberandDecember1998.OnNovember20,1998,inameeting 18
withananalystatPutnamSecurities,contemporaneousnotestakenbyLeslieF. 19
13
Case: 13-1658 Document: 126-1 Page: 13 09/08/2014 1313636 43
13 of 45
Varon,XeroxsController,reflectedthatRomerilacknowledgedthatXeroxhad 1
notdonewelloninvenandreceivmgt,butassuredthatwerealloverit,and 2
predictedthat[i]n99,wellgobacktoratioswehadin97&thenmove 3
forwardfromthere.Appxat334.AtaDecember14,1998meetingwith 4
WellingtonManagement,Romerilnotedthattherewasatemporarydisruption 5
withA/Rduetoadminrestruc.,butthatit[s]houldbefixedbyend99. 6
Appxat337.AtanotherDecembermeeting,RomeriltoldaMerrillLynch& 7
CompanyanalystthatXeroxsreceivablesissuewasattributedtoits 8
consolidationofcustomeradministrationcentersandchangesincollection 9
processesintheUnitedStates. 10
Followingthislastmeeting,aMerrillLynchanalystreportdatedDecember 11
17,1998described[r]evenuegrowthas[its]neartermconcern.Appxat970. 12
ThereportannouncedthatXeroxplannedtoimprovecashflowmanagement, 13
andnotedthatoperatingcashflowshadbeennegativelyaffectedbyincreasesin 14
receivablesandinventories.Finally,thereportnotedthat[t]hecompany 15
estimatesthatitcanreduceinventoriesby$300400million(nowriteoffs)and 16
improveDSOsthroughfastercollections.Appxat972. 17
14
Case: 13-1658 Document: 126-1 Page: 14 09/08/2014 1313636 43
14 of 45
B. JanuaryOctober1999Disclosures 1
Atanearningsreleaseteleconferenceforthefourthquarterof1998,heldon 2
January26,1999,Romerilannouncedearningspershareandincomeincreases, 3
whichheprimarilyattributedtooutstandinggrowthindigitalproduct 4
revenues,improvedoperatingmargins,andtheongoingbenefitsfromour 5
worldwiderestructuringprogram.Appxat762.HealsonotedthatDSOhad 6
increasedbecauseoftheCBOReorganization,statingthat[s]omeofthe 7
restructuringthatwedidintheUnitedStatesgaveusadislocationsothatour 8
daysalesoutstandingwentoutabit.Andonamechanisticbasisalone,thatgives 9
youabitmoreinthebaddebts.Appxat78182.AtameetingwithaMorgan 10
StanleyDeanWitteranalystalsoheldthatday,RomerilcommentedthatXeroxs 11
costcuttingmeasuresandU.S.restructuringhadbeen[t]ooambitious.Appx 12
at347;seealsoAppxat328.Romerilalsomentionedthatifhewasrightaboutthe 13
[r]eceiv[ables],theywontseeUSbaddebtsrepeated.Appxat347. 14
Thefollowingday,MorganStanleyDeanWitterissuedareportdescribing 15
thisinformationtoinvestors,notingthatweraiseacautionaryeyebrowat 16
Xeroxsworkingcapitalperformancein1998,andthat[w]hilefulldetailshave 17
yettobedisclosed,managementstatedthatbothinventorylevels/turnsand 18
15
Case: 13-1658 Document: 126-1 Page: 15 09/08/2014 1313636 43
15 of 45
receivables/DaysSalesOutstandingproveddisappointmentsin1998.Appxat 1
977. 2
OnFebruary25,1999,MorganStanleyDeanWitterreleasedaPreliminary 3
UpdateonYearEndBalanceSheetandCashFlowItemsstating: 4
ACCOUNTSRECEIVABLEALSOEXPANDEDXeroxsA/R 5
balanceincreased25%yearoveryear,to$2.7billion.Thereceivables 6
balloonedasXeroxattemptedtorestructureseveraloperationsinthe 7
US.Thereorganizationandreorientationofbusinessunits(from 8
geographicaltocustomerfocused)ledtothedisruptioninbilling 9
cycleproductivity.Onceagain,managementremainscommittedto 10
reducingreceivablelevelsbacktothosefoundin1997byyearend 11
1999. 12
13
Appxat1001. 14
InApril1999,theCenterforFinancialResearchandAnalysis(CFRA) 15
releasedareportdetailing[s]ignsofpossibleoperationaldeteriorationfor 16
[Xerox]during1998,andreportingthat[Xerox]sreceivablesgrewmuchfaster 17
thanrevenueduring1998.Appxat1154.Thereportquantifiedcomparative 18
growthinreceivablesandDSOsfromthefourthquarterof1996through1998, 19
andreportedthatXeroxattributedtheDecembertoDecemberDSOincreaseto 20
temporaryeffectsfromthereorganizationandconsolidationofU.S.customer 21
administrativecenters.Id. 22
16
Case: 13-1658 Document: 126-1 Page: 16 09/08/2014 1313636 43
16 of 45
Thenextmonth,ataninvestorconferenceheldonMay14,1999,Romeril 1
statedthat: 2
1998cashgenerationwasclearlyunsatisfactory.Anditwas 3
principallycausedbyadeteriorationinreceivables,indaysales 4
outstandingandourinventoryperformance.Thegrowthin[A/R] 5
wasprimarilytheresultofthereorganizationandrestructuringin 6
ourUSadministrativesupportactivities.Weclosedonecustomer 7
admincenterandwereorganizedtheremainingthreeadmincenters 8
fromageographictoacustomersegmentbasis.Muchalongthelines 9
ofwhatweredoingforthebusinessasawhole.Andfrankly,we 10
reducedtheheadcountaswedidthatattoofastarate.Anditwas 11
toomuchchange,toofast. 12
13
Appxat118788.Lateronatthesamemeeting,Romerilexplainedfurther: 14
[W]ehad,aswerolledoutourG&Aprograms,individualareas 15
wherewecausedsomelackoffocusonoursalesforcebecauseof 16
ourG&Aactivities.Forexample,wetalkedaboutourChicago 17
center[i.e.,oneofthethreeCBCsthatremainedpostCBO 18
Reorganization].Unquestionablythathadsomeimpactonoursales 19
force.Theyhadtoworryaboutthebillingbeingdonecorrectly. 20
21
Appxat120102. 22
AsubsequentPaineWebberresearchnotedatedJune7,1999statedthat: 23
ItappearsthatXeroxsrestructuringprogramintheUShadquitean 24
adverseeffectonthecompanysreceivablesin4Q1998and1Q1998 25
[sic].Inthesecondhalfof1998,[Xerox]reduceditsUS 26
administrativecentersto3from4previously,reducing 27
administrationheadcountby30%intheprocess.The3 28
administrativecenterswerereorganizedtospecializeonGeneral 29
Markets(channel,agent,concessionaireandtelewebsales),the 30
17
Case: 13-1658 Document: 126-1 Page: 17 09/08/2014 1313636 43
17 of 45
publicsectorandother(directsalesforceincluded).Asaresultof 1
thesignificantdisruptionfrommovingandlayoffs,thecompanys 2
orderandinvoicingprocessesexperiencedsignificantdelaysand 3
evenerrors,pushingupreceivables.Infact,[Xerox]isnowinthe 4
processofrehiringsomelaidoffpersonnelinanefforttoimprove 5
theorderprocessatthe3newadministrationcenters.Improvements 6
arealreadyunderwayandXeroxexpectssignificantimprovementin 7
receivablesbysecondhalf1999. 8
9
Appxat1337. 10
OnAugust13,1999,SalomonSmithBarneyreportedthattheA/Rfigure 11
roseby21%yeartoyearand5%sequentiallyfromQ1.Appxat1368.The 12
reportalsocommentedthat: 13
While[thisA/Rnewsis]disappointing,thisshouldnothavecomeas 14
toomuchofasurprise,sincemanagementhasindicatedrepeatedly 15
thatreceivableswouldstarttocomedownmoreinthesecondhalf 16
thanthefirst.Thecompanyisaddingover100peoplebacktoits 17
[CACs],inparttohelpbolstercollectionsefforts,whichwere 18
damagedbyheadcountreductionsduringtherestructuring.This 19
willbeanimportantissuetomonitorforimprovementinQ3and 20
Q4. 21
22
Id. 23
InaSeptember22,1999announcement,Romerilacknowledgedthat[i]tis 24
alsoveryclearthatwesignificantlyunderestimatedtherevenueimpactinthe 25
firstquarterofthisyearofallthecustomeradministrationchangeswemadein 26
theUSAlastyear.Appxat1379.Then,onOctober8,1999,Xeroxannounced 27
18
Case: 13-1658 Document: 126-1 Page: 18 09/08/2014 1313636 43
18 of 45
thatitwouldnotmakeitsthirdquarterearningsprojections.Xeroxspress 1
releaseprovided,inpertinentpart: 2
XeroxCorporation...announcedtodaythatitexpectstoreport 3
essentiallyflatrevenuesforthethirdquarterandabouta1012 4
percentdeclineindilutedearningspersharefrom53centsinthe 5
1998thirdquarter.Overall,revenuewasweakerthananticipated 6
bothintheUnitedStatesandEurope,particularlyinSeptember.The 7
earningsshortfallisacombinationofweakerrevenuestogetherwith 8
unfavorableproductmixandincreasedcompetitivepressures, 9
whichsignificantlyimpactedoperatingmargins.Salesproductivity 10
wasaffectedbythecontinuedrealignmenttoanindustryoriented 11
approachandintheU.S.bytheongoingimpactofthecustomer 12
administrationrestructuring.Inaddition,resultsinBrazilwerehurt 13
bythecontinuingeffectsofthecurrencydevaluationandeconomic 14
weakness.FujiXeroxresultswerelowerthananticipated. 15
16
Todaysannouncementisclearlydisappointing,saidXerox 17
PresidentandChiefExecutiveOfficerRickThoman.However,we 18
areconvincedthatourstrategyoffocusingonindustrysolutions,a 19
broaderarrayofdistributionchannelsandanexpandingproduct 20
andservicesportfolioiscorrectandovertimewillachievethe 21
revenueandearningsbenefitsitisintendedtoproduce. 22
Appxat3615. 23
C. PublicDisclosuresAboutthe1999SalesForceRealignment 24
OnJanuary6,1999,Xeroxhadalsoannouncedanotherinitiative,the1999 25
SFR.The1999SFRfocusedonrealigning[Xeroxs]documentprocessing 26
businessunderfouroperations:IndustrySolutions,GeneralMarkets,Developing 27
19
Case: 13-1658 Document: 126-1 Page: 19 09/08/2014 1313636 43
19 of 45
Markets,andBusinessGroupOperations.Appxat2513.Thestatedgoalofthe 1
1999SFRwasultimatelytorealignthesalesforceterritoriesfromgeography 2
basedsellingtoindustrybasedselling.The1999SFRwasdistinctfromtheWWR 3
ortheCBOReorganization,thoughtherewassomeoverlapinitsfocusonthe 4
U.S.salesforce. 5
Relatedtothe1999SFR,onSeptember16,1999,aPrudentialSecurities 6
analystissuedareportwithaheading:XEROXTOIMPLEMENTANOTHER 7
ROUNDOFSALESFORCEREALIGNMENTSIN1Q00LOWERSREVENUE 8
VISIBILITYANDLIKELYTOPRESSURE[Xerox]UNTILIMPACTCANBE 9
DETERMINED.Appxat3541.Thereportcontinued: 10
OurfieldcontactsareindicatingthatXeroxisreadyinganother 11
roundofsalesforceaccountrealignmentsimilartotheprogram 12
whichdisruptedthefirsthalf1999revenueperformance.We 13
confrontedXeroxsmanagementandtheyacknowledgedthat 14
anotherroundisplannedfor1Q2000andindicatedthenumberof 15
peopleinvolvedandaccountsinvolvedwouldbelargerthanthe1Q 16
1999realignmentwhichwascitedasalargeportionofthecausefor 17
the1H1999revenueshortfall.Xeroxsmanagementmustbe 18
cognizantofthepainfulexperiencetheyhadlastyear,andtheyare 19
indicatingtheyaretakingeverypossiblesteptominimizeany 20
disruptionfromthismove. 21
22
Appxat354142.Laterthatsameday,ReutersreportedthatsharesofXeroxfell 23
morethantenpercentamidfreshgrowthconcerns.Appxat3545. 24
20
Case: 13-1658 Document: 126-1 Page: 20 09/08/2014 1313636 43
20 of 45
ThePrudentialSecuritiesreportwasbasedonamisunderstandingthat 1
therewasanewrealignmentprogram,ratherthanamerecontinuationofthe 2
alreadyannounced1999SFR.Romerilcorrectedthismisunderstandingina 3
subsequentannouncementheldonSeptember22,1999:thereseemstohave 4
beensomemisconceptionthatweannouncedanewrestructuringofthesales 5
organization,lastweek.Nosuchannouncementoccurred....Infact,wesimply 6
tookanotherstepimplementingthedirectionweannouncedlastJanuary[i.e.,the 7
1999SFR].Appxat359798. 8
D. AllegedCorrectiveDisclosures 9
PlaintiffslosscausationexpertProfessorAnthonySaundersopinedthat 10
thereweretwocorrectivedisclosures,whichrevealedtheproblemswiththe 11
CBOReorganizationtothemarket,eachofwhichhasbeenalreadydescribed 12
above.First,PlaintiffsclaimthattheSeptember16,1999PrudentialSecurities 13
reportdescribingXeroxasreadyinganotherroundofsalesforceaccount 14
realignment,Appxat3541,afterwhichXeroxsharesdropped,wasacorrective 15
disclosure.Second,PlaintiffspointtotheOctober8,1999pressrelease 16
announcingthatXeroxwouldbemissingitsprojectedearningsforthethird 17
quarterof1999,andreportingthat[s]alesproductivitywasaffectedbythe 18
21
Case: 13-1658 Document: 126-1 Page: 21 09/08/2014 1313636 43
21 of 45
continuedrealignmenttoanindustryorientedapproachandintheU.S.bythe 1
ongoingimpactofthecustomeradministrationrestructuring,Appxat3615,as 2
havingacorrectiveeffectonXeroxsstockprice. 3
III. ProceedingsBeforetheDistrictCourt 4
Plaintiffsfiledsuitinthiscasein1999,allegingviolationsofSection10(b) 5
oftheExchangeActandRule10b5andSection20(a)oftheExchangeActagainst 6
theindividualdefendants.In2001,thedistrictcourtdeniedXeroxsmotionto 7
dismiss.SeeInreXeroxCorp.Sec.Litig.,165F.Supp.2d208(D.Conn.2001).The 8
courtgrantedPlaintiffsmotionforclasscertificationin2008.Overthecourseof 9
2009and2010,thecourtruledonmultiplemotionstoexcludethetestimonyof 10
expertsprofferedbybothsides.SeeInreXeroxCorp.Sec.Litig.,746F.Supp.2d 11
402(D.Conn.2010)(SaundersRuling);InreXeroxCorp.Sec.Litig.,821F.Supp. 12
2d504(D.Conn.2010)(DenisRuling);InreXeroxCorp.Sec.Litig.,2009WL 13
8556135,CivilActionNo.3:99CV02374(AWT)(D.Conn.Apr.22,2009) 14
(GompersRuling). 15
InMarch2013,thedistrictcourtgrantedXeroxsmotionforsummary 16
judgmentinitsentirety,holdingthatthestatementsabouttheoverall 17
costsavingsoftheWWRdidnotprecludetheentryofsummaryjudgmentin 18
22
Case: 13-1658 Document: 126-1 Page: 22 09/08/2014 1313636 43
22 of 45
favorofXerox.Xerox,935F.Supp.2dat48283,485.Thecourtalsoheldthat 1
whileXeroxhadnotmetitsburdenofprovingthatitdidnothaveadutyto 2
disclosethattheCBOReorganizationoffsetsomeofthecostsavingsofthe 3
WWR,id.at48588,andevenassumingthatXeroxhadadutytodisclose,there 4
wasnogenuinedisputethatthecompanyhadsufficientlydisclosedthe 5
challengesthatitwasexperiencingwiththeCBOReorganization,id.at48893.As 6
tothecorrectivedisclosures,thedistrictcourtconcludedthatthosetwo 7
disclosuresdidnotaddanynewinformationtothemarket,andasaresult, 8
Plaintiffshadnotestablishedagenuinedisputeofmaterialfactastoloss 9
causation.Id.at49396.Finally,inlightofitsconclusionthattherewasno 10
underlyingviolationoffederalsecuritieslaw,thecourtalsograntedsummary 11
judgmentonPlaintiffscontrolpersonliabilityclaimagainsttheindividual 12
defendants.Id.at496. 13
DISCUSSION 14
Onappeal,Plaintiffscontendthatthedistrictcourterredingranting 15
summaryjudgmenttoDefendantsbecause,viewingtherecordevidencein 16
Plaintiffsfavor:(1)XeroxmisrepresentedthattheWWRresultedinfinancial 17
benefitstothecorporation;(2)Xeroxspublicdisclosuresaboutthechallenges 18
23
Case: 13-1658 Document: 126-1 Page: 23 09/08/2014 1313636 43
23 of 45
resultingfromtheCBOReorganizationincludingtheincreasesinA/Rand 1
DSOsomittedtheextentoftheCBOReorganizationsilleffects;(3)Xerox 2
falselyattributeditsdecreasedsalesactivitytothe1999SFR,ratherthantheCBO 3
Reorganization;and(4)thedistrictcourtsSeptember2010SaundersRuling, 4
whichfoundadmissiblePlaintiffswitnessAnthonySaunderssexpertreporton 5
losscausation,precludedthedistrictcourtfromgrantingsummaryjudgment. 6
I. ApplicableLegalStandards 7
A. TheStandardofReview 8
Wereviewadistrictcourtsgrantofsummaryjudgmentdenovo.Lawrence 9
v.Cohn,325F.3d141,147(2dCir.2003).Summaryjudgmentisonlyappropriate 10
ifthemovantshowsthatthereisnogenuinedisputeastoanymaterialfactand 11
themovantisentitledtojudgmentasamatteroflaw.Fed.R.Civ.P.56(a).An 12
issueoffactisgenuineiftheevidenceissuchthatareasonablejurycouldreturn 13
averdictforthenonmovingparty.Andersonv.LibertyLobby,Inc.,477U.S.242, 14
248(1986).Inlookingattherecord,weconstruetheevidenceinthelightmost 15
favorabletothenonmovingpartyanddrawallinferencesandresolveall 16
ambiguitiesinfavorofthenonmovingparty.InreOmnicomGrp.,Inc.Sec.Litig., 17
597F.3d501,509(2dCir.2010)(bracketsandinternalquotationmarksomitted). 18
24
Case: 13-1658 Document: 126-1 Page: 24 09/08/2014 1313636 43
24 of 45
B. Section10(b)andRule10(b)5 1
Section10(b)oftheExchangeActforbids(1)theuseoremploy[ment]... 2
ofany...deceptivedevice;(2)inconnectionwiththepurchaseorsaleofany 3
security,and(3)incontraventionofSecuritiesandExchangeCommission 4
rulesandregulations.DuraPharm.,Inc.v.Broudo,544U.S.336,341(2005) 5
(quoting15U.S.C.78j(b)).Rule10b5forbidsthemakingofanyuntrue 6
statementofamaterialfactortheomissionofanymaterialfactnecessaryin 7
ordertomakethestatementsmade...notmisleading.17C.F.R.240.10b5.;see 8
alsoDuraPharm,544U.S.at341. 9
ARule10(b)5actionrequiresthefollowingelements: 10
(1)amaterialmisrepresentation(oromission); 11
(2)scienter,i.e.,awrongfulstateofmind; 12
(3)aconnectionwiththepurchaseorsaleofasecurity; 13
(4)reliance,oftenreferredtoincasesinvolvingpublicsecurities 14
markets(fraudonthemarketcases)astransactioncausation; 15
(5)economicloss;and 16
(6)losscausation,i.e.,acausalconnectionbetweenthematerial 17
misrepresentationandtheloss. 18
19
DuraPharm.,544U.S.at34142(citationsanditalicsomitted). 20
Tofulfillthematerialityrequirement,theremustbeasubstantial 21
likelihoodthatthedisclosureoftheomittedfactwouldhavebeenviewedbythe 22
25
Case: 13-1658 Document: 126-1 Page: 25 09/08/2014 1313636 43
25 of 45
reasonableinvestorashavingsignificantlyalteredthetotalmixofinformation 1
madeavailable.BasicInc.v.Levinson,485U.S.224,23132(1988)(internal 2
quotationmarksomitted).[Section]10(b)andRule10b5(b)donotcreatean 3
affirmativedutytodiscloseanyandallmaterialinformation....Evenwith 4
respecttoinformationthatareasonableinvestormightconsidermaterial, 5
companiescancontrolwhattheyhavetodiscloseundertheseprovisionsby 6
controllingwhattheysaytothemarket.MatrixxInitiatives,Inc.v.Siracusano,131 7
S.Ct.1309,132122(2011). 8
II. Analysis 9
Inessence,thiscaseisaboutPlaintiffswishtohaveknownmoreabout 10
XeroxsWWRandCBOReorganization.However,acorporationisnotrequired 11
todiscloseafactmerelybecauseareasonableinvestorwouldverymuchliketo 12
knowthatfact.Rather,anomissionisactionableunderthesecuritieslawsonly 13
whenthecorporationissubjecttoadutytodisclosetheomittedfacts.InreTime 14
WarnerInc.Sec.Litig.,9F.3d259,267(2dCir.1993);seealsoMatrixxInitiatives,131 15
S.Ct.at1321(Thequestionremainswhetherareasonableinvestorwouldhave 16
viewedthenondisclosedinformationashavingsignificantlyalteredthetotalmix 17
ofinformationmadeavailable....[T]hemereexistenceofreportsofadverse 18
26
Case: 13-1658 Document: 126-1 Page: 26 09/08/2014 1313636 43
26 of 45
events...willnotsatisfythisstandard.Somethingmoreisneeded....(internal 1
quotationmarksomitted)). 2
InlightofXeroxspublicstatementsaboutitsrestructuringand 3
realignmentinitiatives,weconcludethatthereisnogenuinedisputeasto 4
whetherareasonableinvestorwouldhaveviewedtheundisclosedfactsabout 5
theCBOReorganizationashavingsignificantlyalteredthetotalmixof 6
informationthatwasalreadydisclosedbyXeroxorotherwiseavailable.Below, 7
wefirstaddressPlaintiffscontentionthatXeroxsstatementsaboutthefinancial 8
benefitsoftheWWRtothecorporationwereactionablyfalse.Next,weaddress 9
Plaintiffscontentionthat,viewingtheevidenceintheirfavor,summary 10
judgmentwasimproperbecauseofthedisputeregardingwhetherXeroxspartial 11
disclosuresandoverlytepidlanguagedescribingtheCBOReorganizationwere 12
materiallymisleading.Finally,weaddressbrieflyPlaintiffsremainingassertions 13
challengingthedistrictcourtsconclusionsonlosscausationandtheSaunders 14
Ruling. 15
27
Case: 13-1658 Document: 126-1 Page: 27 09/08/2014 1313636 43
27 of 45
A. ThereisNoGenuineDisputeRegardingtheStatementsaboutthe 1
WWR 2
3
InrulingonXeroxsmotionforsummaryjudgment,thedistrictcourt 4
consideredbothPlaintiffsexpertCharlesR.DrottsreportandXeroxsexpense 5
chart,preparedbyNASGFinanceVicePresidentFulford,andconcludedthat 6
approximately$339.5millioninexpensewasincurredduringtheClassPeriodas 7
aresultoftheCBOReorganization.Xerox,935F.Supp.2dat482.After 8
correctingfordoublecountingacrossbothdocuments,thecourtdeterminedthat 9
theDrottreportandFulfordchartshowedatotalexpenseof$295.5millionto 10
Xerox.Id.at48283.TakingintoaccountXeroxs$550millionincostsavingsasa 11
resultoftheWWR,thecourtdecidedthatXeroxhadanetcostsavingsfromthe 12
WorldwideRestructuringofatleast$254.5million.Id.at483. 13
Weconcludethattherecordonsummaryjudgmentcreatesnogenuine 14
disputeregardingthetruthfulnessofXeroxsstatementsabouttheoverall 15
benefitsoftheWWR.Asaninitialmatter,Plaintiffsprovidenopublicstatements 16
actuallyquantifyingtheamountofsavingsXeroxclaimedresultedfromthe 17
WWR,andcontemporaneousrecordsfromXeroxshow$124.6millioninsavings 18
inthefourthquarterof1998;$128.9millioninthefirstquarterof1999;$147.1 19
28
Case: 13-1658 Document: 126-1 Page: 28 09/08/2014 1313636 43
28 of 45
millioninthesecondquarterof1999;and$144.6millioninthethirdquarterof 1
1999.PlaintiffsdonotdisputeXeroxsclaimedcostsavingsfigures,andthey 2
acknowledgethattheeliminationof9,000jobsworldwidenecessarilyreduced 3
costs.Atmost,therecordsupportsaninferencethattheadditionalcostscreated 4
bytheCBOreorganizationoffsetsavingscreatedbytherestructuringasawhole. 5
Plaintiffsattempttocreateagenuinefactualdisputebyquarrelingwiththe 6
extentofthebenefitsaccruedasaresultoftheWWR,ratherthanwiththefactthat 7
benefitsdidaccrue,whichisnotanargumenttheyraisedbelow.Wedeclineto 8
exerciseourdiscretiontoconsiderthisargumentforthefirsttimeonappeal.
1
See 9
InreNortelNetworksSec.Litig.,539F.3d129,133(2dCir.2008);AllianzIns.Co.v. 10
Lerner,416F.3d109,114(2dCir.2005);Nortonv.SamsClub,145F.3d114,117(2d 11
Cir.1998). 12
1
Asasubpartoftheirnewlyraisedargument,PlaintiffspointtotheDrott
reportandFulfordchart,whichbothdiscussthesameCBOReorganization
relatedissues.Eachdocumentcitesbillingerrors,interestarisingfrom
insufficientcashflow(duetoincreasedDSO),etc.,ascontributingtovarious
costs,andthereissignificantoverlapbetweenthetwo.Plaintiffsofferno
explanationforhowthenumbersinthesedocumentsshouldbeanalyzedsoasto
avoiddoublecounting.Thus,thisargumenthasnotbeenadequatelydeveloped
onappeal,andwewillnotattemptourownparsingoftheDrottandFulford
documents.

29
Case: 13-1658 Document: 126-1 Page: 29 09/08/2014 1313636 43
29 of 45
Further,thoughPlaintiffsrelyontwocontemporaneousinternal 1
documentstoarguethatthereisagenuinedisputeastowhetherthestated 2
benefitsoftheWWRwereillusory,thesedocuments,evenwhenviewedinthe 3
lightmostfavorabletoPlaintiffs,donotreasonablypermittheinferencePlaintiffs 4
seektodraw.Thefirstdocument,aSeptember27,1999internalmemorandum 5
fromThomantooperationscommitteemembers,notesthat[a]saresultofour 6
failuretostrictlycontrolresources,wehave,inessence,spentmuchofthebenefit 7
oftherestructuringaction.Appxat3608.Second,PlaintiffspointtoanOctober 8
6,1999internalmemorandumfromRomeriltoThoman,preparedinadvanceof 9
thephoneinmeetingforpreliminarythirdquarterresultsfor1999.Inparticular, 10
PlaintiffsemphasizeRomerilsquestion:[w]hathappenedtorestructuring 11
benefits?Iftheywerereal,theymusthavebeenspent,delayedoroffsetby 12
deteriorationelsewhere.Appxat3612. 13
Sincethereisnoreadingoftheactualnumbersthatsupportsthese 14
statements,theyareevidentlyexaggerationsintendedtoinjecturgencyintothe 15
companysefforts.Moreimportantly,theywouldbemisleadingifpublicly 16
disclosedasthecompanysassessment.Further,whilethesetwointernal 17
documentsshowthatXeroxhadsignificantcoststocontendwith,theyalso 18
30
Case: 13-1658 Document: 126-1 Page: 30 09/08/2014 1313636 43
30 of 45
revealthattherewereundisputedbenefitsthathadaccruedfromtheWWRfor 1
Xeroxtoputtouse.Thus,thesetwodocumentsdonotsupportthereasonable 2
conclusionthatXeroxmadeanymisstatementsastothebenefitsoftheWWR. 3
PlaintiffsalsoassertthatthesestatementsabouttheWWRsbenefitswere 4
merelyhalftruthsthatrequiredamorethoroughexplanationtonotbe 5
deceptive.However,asdiscussedabove,Plaintiffsdidnotactuallyshowa 6
genuinedisputeastowhetherXeroxaccruedfinancialbenefitsasaresultofthe 7
WWR.Onthisrecord,itwouldbeconjecturetoconcludethatXeroxsstatements 8
aboutthecostsavingsoftheWWRwithoutasubsequentreferencetothecosts 9
incurredasaresultoftheCBOReorganizationweremisleading.SeeBasicInc., 10
485U.S.at239n.17(Tobeactionable,ofcourse,astatementmustalsobe 11
misleading.).Therecordshowsthatthereisnogenuinedisputeaboutwhether 12
thestatementsregardingtheWWRbeingabenefittoXeroxfromacostsaving 13
standpointweremisleading. 14
31
Case: 13-1658 Document: 126-1 Page: 31 09/08/2014 1313636 43
31 of 45
B. ThereisNoGenuineDisputeRegardingtheSufficiencyofthe 1
DisclosuresabouttheCBOReorganization
2
2
3
Plaintiffsfurtherassertthatthedistrictcourtimproperlydrewinferences 4
andresolvedfactualdisputesinXeroxsfavorwhenitdeterminedthatthere 5
werenoactionablemisstatementsoromissionswithregardto:(1)Xeroxspublic 6
disclosuresabouttheproblemsresultingfromtheCBOReorganizationand(2) 7
Xeroxsattributionofsalesforcetroublestothe1999SFRratherthantotheCBO 8
Reorganization. 9
10
2
XeroxassertsthatinlightofthefactthattheWWRdidresultincost
savingsforthecorporation,itwasundernodutytodiscloseanyinformation
abouttheparticularsoftheCBOReorganization.Thisargumentgoestoofar.In
therestructuringcontext,theremaywellbecircumstancesinwhichdetailsabout
asinglecomponentofalargerrestructuringinitiativewouldbematerialtoa
reasonableinvestorinawaythatwouldrequiredisclosureofcertainfacts.We
declineXeroxsinvitationtomakeanysortofbrightlineruleonthispoint.
Further,thelackofanindependentdutyisnot[]...adefensetoRule10b
5liabilitybecauseuponchoosingtospeak,onemustspeaktruthfullyabout
materialissues.Caiolav.Citibank,N.A.,N.Y.,295F.3d312,331(2dCir.2002).
Thus,astherecordclearlyindicatesthatXeroxchosetospeak,andactuallyspoke
atgreatlength,aboutitsU.S.basedreorganization,itwasunderadutytospeak
truthfully.
Inanyevent,asdiscussedbelow,therewereampledisclosuresmadeabout
theCBOReorganization.Assuch,weneednotanddonotaddressthequestion
ofwhetherXeroxhadadutytodiscloseanyinformationabouttheCBO
Reorganizationinthefirstplace.
32
Case: 13-1658 Document: 126-1 Page: 32 09/08/2014 1313636 43
32 of 45
Forthereasonssetforthinthissection,weholdthatthereisnogenuine 1
disputeastowhetherthedisclosuresaboutthevariouschallengesandobstacles 2
createdasaresultoftheCBOReorganizationsufficientlyinformedareasonable 3
investoraboutitsongoingeffectsduringtheclassperiod. 4
1. ClaimedOmissionsandMisstatementsAbouttheCBO 5
Reorganization 6
7
Plaintiffsassertthatthedistrictcourtincorrectlydecidedthatthe 8
distinctionsbetweenXeroxscarefullyphrasedpublicdisclosures(e.g.,some 9
increaseinDSO)ascomparedtothemorecolorfullanguageinthecorporations 10
internaldocuments(e.g.,significantdeterioration)wereimmaterial.Plaintiffs 11
alsoarguethatXeroxfailedtodisclosematerialfactsabouttheactual, 12
quantifiableimpacttheCBOReorganizationproblemswerehavingon 13
operations,sales,andearnings. 14
PlaintiffscontendthatitwasmisleadingforXeroxtohavepublicly 15
attributedanincreaseinA/Rtostrongerequipmentsales,whileprivately 16
revealingthatA/RincreaseswerelargelydrivenbytheCBOReorganization. 17
Withregardtothepublicdisclosures,PlaintiffspointspecificallytoXeroxs 18
November10,1998thirdquartersubmissiontotheSEC,whichattributedan 19
33
Case: 13-1658 Document: 126-1 Page: 33 09/08/2014 1313636 43
33 of 45
increaseinA/Rtostrongerequipmentsales.Thesamedocumentalsostatedthat 1
theincreaseinDSOswastheresultoftheeffectsofreorganizingand 2
consolidatingtheU.S.CACs.Plaintiffsthenemphasizethataninternal 3
memorandumcirculatedonthesamedatestatedthattheincreasedA/RandDSO 4
werelargelydrivenbythereorganizationofthe[CACs]intheU.S.Appxat 5
5032. 6
AnyassertionthatXeroxattributedhigherA/Rsolelytostronger 7
equipmentsalesisbeliedbytherecordevidence.Plaintiffsargumentfailsto 8
accountforthemanysubsequentdisclosures,someoftheminNovemberand 9
Decemberof1998,thatdirectlydiscussthebaddebtsthataccruedasaresultof 10
increasedA/RandDSOs.Thus,althoughPlaintiffsmayhaveuncovereda 11
discrepancyinearlyNovember1998,themyriaddisclosuresthatfollowedstate 12
theprimaryreasonsforincreasesinA/RandDSOs.Forexample,inFebruary 13
1999,MorganStanleyDeanWitterreportedonXeroxsyearendbalancesheet 14
andnotedthat[Xeroxs]receivablesballoonedasXeroxattemptedtorestructure 15
severaloperationsintheUS.Thereorganizationandreorientationofbusiness 16
units(fromgeographicaltocustomerfocused)ledtothedisruptioninbilling 17
34
Case: 13-1658 Document: 126-1 Page: 34 09/08/2014 1313636 43
34 of 45
cycleproductivity.Appxat1001.Thus,anyconfusiononthecauseofthe 1
increasedreceivablesandDSOswasclearedupwithintherelevanttimeperiod. 2
Inaddition,theCBOReorganizationsnegativeeffectsonXeroxsrevenue 3
growthingeneralwasdiscussedinXeroxspublicdisclosures.AnApril1999 4
MerrillLynchreportdescribingXeroxsfirstquarterin1999statedthatrevenue 5
wasdisappointing,andnotedthatXeroxsrevenuegrowthwashurtbysales 6
forceandrestructuringinitiatives,aselfinflictedwound.Appxat1945.The 7
CFRAreportfromthatsamemonthdescribed[s]ignsofpossibleoperational 8
deterioration,includinganincreaseinDSOnumbers,andstatedthatXerox 9
attributedthatincreasetotheCBOReorganization.Appxat1154.InMay1999, 10
Romeriladmittedtoinvestorsthat1998cashgenerationwasclearly 11
unsatisfactory,Appxat1187,andheexplainedthatthiscashgenerationwas 12
principallycausedbyadeteriorationinreceivables,indaysales 13
outstandingandourinventoryperformance.Thegrowthinaccounts 14
receivablewasprimarilytheresultofthereorganizationandrestructuring 15
inourUSadministrativesupportactivities.Weclosedonecustomeradmin 16
centerandwereorganizedtheremainingthreeadmincentersfroma 17
geographictoacustomersegmentbasis. 18
19
Appxat118788(emphasisadded). 20
35
Case: 13-1658 Document: 126-1 Page: 35 09/08/2014 1313636 43
35 of 45
Eachofthesepublicdisclosures,alongwiththeotherslistedinthe 1
backgroundsectionabove,leavesnodoubtthatitwasdisclosedthatthe 2
reorganizationoftheU.S.operationscauseddeteriorationinA/RsandDSOs.The 3
investingpublichadaccesstothisinformationasearlyasNovember1998,and 4
throughouttheremainderoftheclassperiod,priortoeitherclaimedcorrective 5
disclosuredateinSeptemberandOctober1999.WhilePlaintiffsmayhave 6
desiredmoredetailedornuancedlanguage,thatisnotwhatthelawrequires. 7
Corporationsarenotrequiredtophrasedisclosuresinpejorativeterms.Inre 8
MerrillLynchAuctionRateSec.Litig.,704F.Supp.2d378,392(S.D.N.Y.2010),affd 9
subnom.Wilsonv.MerrillLynch&Co.,Inc.,671F.3d120(2dCir.2011);cf.Inre 10
DonaldJ.TrumpCasinoSec.Litig.TajMahalLitig.,7F.3d357,375(3dCir.1993) 11
([P]laintiffscannotsuccessfullycontendthattheprospectusisactionable 12
becauseitfailedtodescribeitsdebtequityratioaseitherunwarrantedor 13
excessive.). 14
ThoughPlaintiffsseektoestablishafactualdisputeonthebasisthatan 15
investorwouldhavewantedtoknowthatXeroxinternallyreferredtoitssales 16
forceandbillcollectionissuesasafivealarmfire,wehaveneverrequireda 17
corporationtoframeitspublicinformationwithspecificadjectives.Disclosureis 18
36
Case: 13-1658 Document: 126-1 Page: 36 09/08/2014 1313636 43
36 of 45
notariteofconfessionorexerciseofcommonlawpleading.Wilson,671F.3dat 1
131(internalquotationmarksomitted).Rather,[w]hatisrequiredisthe 2
disclosureofmaterialobjectivefactualmatters.Id.(internalquotationmarks 3
omitted).Indeed,wehaveheldthatitwouldbeasseriousaninfringementof 4
SECregulationstooverstatethedefinitenessof...plansastounderstatethem. 5
Id.(bracketsomitted)(quotingElec.SpecialtyCo.v.IntlControlsCorp.,409F.2d 6
937,948(2dCir.1969)). 7
ThatPlaintiffswishthatmorewassaid,perhapsinmoreevocative 8
language,issimplyinsufficienttoestablishagenuinedisputeastowhetherthe 9
marketwasadequatelyinformedabouttheimpactoftheCBOReorganizationon 10
Xeroxduringtheclassperiod.Thetouchstoneoftheinquiryisnotwhether 11
isolatedstatements...weretrue,butwhetherdefendantsrepresentationsor 12
omissions,consideredtogetherandincontext,wouldaffectthetotalmixof 13
informationandtherebymisleadareasonableinvestorregardingthenatureof 14
thesecuritiesoffered.Halperinv.eBankerUSA.com,Inc.,295F.3d352,357(2dCir. 15
2002). 16
Weholdthathere,whetheronereferredtoaproblemasafivealarmfire 17
internallyorasjustcausingadeteriorationastheresultoftoomuchchange, 18
37
Case: 13-1658 Document: 126-1 Page: 37 09/08/2014 1313636 43
37 of 45
toofastpublicly,thebottomlinewasthesame:thepublicinformationreflected 1
thattheCBOReorganizationwascausingproblemsforXeroxsbillcollectionand 2
salesforceoperations.Onthesignificantfactualrecordbeforeus,noreasonable 3
jurorcouldfind,basedonthedisclosuresmadebyXeroxoverthecourseofthe 4
classperiod,thatmaterialinformationwasomittedorfalselyreported.The 5
districtcourtsconclusiononthispointwascorrect. 6
2. ClaimedMisstatementsConflatingtheCBOReorganization 7
andthe1999SFR 8
Forsimilarreasons,wealsorejectPlaintiffsassertionthatthedistrictcourt 9
improperlyresolvedevidentiaryissuesinXeroxsfavorwithrespecttothe 10
relationshipbetweentheCBOReorganizationanditseffectonXeroxssales 11
force.Plaintiffsarguethattheevidenceshowedthatthetruecauseofsales 12
disruptionswastheCBOReorganizationandnotthe1999SFR,andthatXerox 13
falselyattributeditspoorsalesperformancetothe1999SFR. 14
Insupportoftheirargument,PlaintiffspointoutthatThomansscriptfor 15
theMay1999investorconferencespecificallymentioned[t]oomuchtimefixing 16
customerproblemsbecauseofourconsolidationofadmincenters,Appxat 17
2994,andthatattheinvestorconferenceitself,Thomandecidednottosay 18
38
Case: 13-1658 Document: 126-1 Page: 38 09/08/2014 1313636 43
38 of 45
anythingabouttheproblemswiththeadmincenters.SeeAppxat314546.As 1
aninitialmatter,thisisaninaccuratedescriptionofwhatThomanactuallysaidat 2
theinvestorconference.ThomandiddiscusstheCACs:[f]orexample,wetalked 3
aboutourChicagocenterafterhavingnotedthattherewasalackoffocuson 4
oursalesforce.Appxat1202.Thatwasadirectreferencetotheongoingeffects 5
ofCBOReorganization,giventhattheclosureofoneofthefourCACswasa 6
mainpartoftheCBOReorganizationinitiative. 7
Further, thepublicwasinformedthatXeroxwasundergoingseveral 8
initiativesatthesametimebetweenlate1998andOctober1999:theWorldwide 9
Restructuring,theCBOReorganization,andtheSalesForceRealignment.For 10
example,onJuly1,1999,PrudentialSecuritiesreportedthatXeroxciteda 11
laundrylistofdistractionswhichencumberedthesalesforcein1Q.Manysales 12
officeswereclosedormovedasaresultoftherestructuring.Salespeoplewere 13
distractedbytoomanytrainingprograms.Appxat1359(emphasisadded).This 14
reportdiscussedtheeffectsofboththeCBOReorganizationandthe1999SFRas 15
addingtoXeroxslaundrylistofdistractions. 16
Therecordinthiscasecontainsample,undisputedevidencethatthe 17
problemsplaguingXeroxssalesforcewereconnectedtotheCBOReorganization 18
39
Case: 13-1658 Document: 126-1 Page: 39 09/08/2014 1313636 43
39 of 45
andtheaddedpileonofthe1999SFR,andthatXeroxdisclosedasmuchtothe 1
investingpublic.Thedistrictcourtwascorrecttoconcludethattheinformation 2
aboutthenegativeimpactthattheCBOReorganizationhadonXeroxssales 3
forcewasdisclosedtothemarketbeforeeitheroftheclaimedcorrective 4
disclosuredates. 5
C. PlaintiffsRemainingArgumentsonAppeal 6
1. LossCausation 7
Forthereasonsdiscussedabove,weconcludethattherecordevidence 8
doesnotsupportPlaintiffsoverarchingtheoryofthiscase.Thisisbecausethe 9
markethadaccesstonumerousdisclosuresaboutsalesdisruptionsand 10
operationaldifficultiessufferedasaresultoftheU.S.restructuringthroughout 11
theclassperiod.Asaresult,noneofthese[claimed]mattersevenpurportedto 12
revealsomethenundisclosedfactwithregardtothespecificmisrepresentations 13
alleged.InreOmnicomGrp.,597F.3dat511;seealsoid.at512(Anegative 14
journalisticcharacterizationofpreviouslydisclosedfactsdoesnotconstitutea 15
correctivedisclosureofanythingbutthejournalistsopinions.);TeachersRet. 16
Sys.ofLa.v.Hunter,477F.3d162,18788(4thCir.2007)(notingthatnegative 17
characterizationofpreviouslyknowninformationcannotconstituteacorrective 18
40
Case: 13-1658 Document: 126-1 Page: 40 09/08/2014 1313636 43
40 of 45
disclosure);cf.InreMerck&Co.Sec.Litig.,432F.3d261,26971(3dCir.2005) 1
(findingelucidationofpastdisclosurebyTheWallStreetJournaldidnotconstitute 2
acorrectivedisclosure).Asweaffirmthejudgmentofthedistrictcourtonthe 3
basisthatthereweresufficientdisclosuresmadepriortoeitheroftheclaimed 4
correctivedisclosuredates,Plaintiffslosscausationargumentalsofails. 5
2. TheInteractionBetweentheDaubertandSummaryJudgment 6
Rulings 7
8
WealsoaddressbrieflyPlaintiffsassertionthat,havingqualifiedSaunders 9
asanexpert,summaryjudgmentshouldnothavebeengranted.Despite 10
Plaintiffsprotestations,thedistrictcourtsSaundersRulingisnotcontradictedby 11
itslatersummaryjudgmentopinion.Rather,thesubstanceoftheSaundersRuling 12
wasthatthecourt:(1)acceptedSaunderssprofferedmethodology,746F.Supp. 13
2dat41112;(2)concludedthatProf.Saunderscouldshowthatthealleged 14
correctivedisclosurescontainednewinformationthatwasmaterial,id.at412; 15
and(3)decidedthatSaundersreliedonanapproachthatisrecognizedinthe 16
literature,id.at41314.Properlyreadincontext,thedistrictcourtsconclusion 17
thatProf.Saunderscouldshowthattheallegedcorrectivedisclosurescontained 18
newinformationthatwasmaterial,id.at412(emphasisadded),wasnota 19
41
Case: 13-1658 Document: 126-1 Page: 41 09/08/2014 1313636 43
41 of 45
decisionthat,asamatteroflaworfact,Saundershadestablishedanythingatthat 1
pointinthelitigation.Further,itisnotclearthatthedistrictcourtwas 2
consideringthefullsummaryjudgmentrecordwhendecidingtheDaubert 3
motions. 4
Thecourtperformsthesameroleatthesummaryjudgmentphaseasat 5
trial;anexpertsreportisnotatalismanagainstsummaryjudgment.Raskinv. 6
WyattCo.,125F.3d55,66(2dCir.1997).Whileitisperhapsuncommonforthe 7
courttohavecreditedtheexpertsopinioninaDaubertrulingonlytogrant 8
summaryjudgmentwithoutanydiscussionofthatexpertsopinion,summary 9
judgmentisnotperseprecludedbecausethereareconflictingexperts.Inre 10
OmnicomGrp.,597F.3dat512.Anexpertmaybeentitledtohisopinion,butheis 11
notentitledtoaconclusionthathisviewofthefactsnecessarilyprecludes 12
summaryjudgment.Here,becauseweconcludethattheinformationaboutthe 13
CBOReorganizationsnegativeeffectsonoperationsandsaleswasknowntothe 14
marketpriortoSeptember16,1999,ProfessorSaunderssopinionaboutthe 15
correctivedisclosuresis,asamatteroflaw,unsustainableonthisrecord.Seeid. 16
at513. 17
18
42
Case: 13-1658 Document: 126-1 Page: 42 09/08/2014 1313636 43
42 of 45
CONCLUSION 1
Forthereasonsdiscussedabove,weaffirmthedistrictcourtsgrantof 2
summaryjudgmentinfavorofDefendants. 3
43
Case: 13-1658 Document: 126-1 Page: 43 09/08/2014 1313636 43
43 of 45
United States Court of Appeals for the Second Circuit
Thurgood Marshall U.S. Courthouse
40 Foley Square
New York, NY 10007
ROBERT A. KATZMANN
CHIEF JUDGE
CATHERINE O'HAGAN WOLFE
CLERK OF COURT
Date: September 08, 2014
Docket #: 13-1658cv
Short Title: Giaraputo v. Xerox Corporation
DC Docket #: 99-cv-2374
DC Court: CT (NEW HAVEN)
DC Judge: Thompson
BILL OF COSTS INSTRUCTIONS
The requirements for filing a bill of costs are set forth in FRAP 39. A form for filing a bill of
costs is on the Court's website.
The bill of costs must:
* be filed within 14 days after the entry of judgment;
* be verified;
* be served on all adversaries;
* not include charges for postage, delivery, service, overtime and the filers edits;
* identify the number of copies which comprise the printer's unit;
* include the printer's bills, which must state the minimum charge per printer's unit for a page, a
cover, foot lines by the line, and an index and table of cases by the page;
* state only the number of necessary copies inserted in enclosed form;
* state actual costs at rates not higher than those generally charged for printing services in New
York, New York; excessive charges are subject to reduction;
* be filed via CM/ECF or if counsel is exempted with the original and two copies.

Case: 13-1658 Document: 126-2 Page: 1 09/08/2014 1313636 1
44 of 45
United States Court of Appeals for the Second Circuit
Thurgood Marshall U.S. Courthouse
40 Foley Square
New York, NY 10007
ROBERT A. KATZMANN
CHIEF JUDGE
CATHERINE O'HAGAN WOLFE
CLERK OF COURT
Date: September 08, 2014
Docket #: 13-1658cv
Short Title: Giaraputo v. Xerox Corporation
DC Docket #: 99-cv-2374
DC Court: CT (NEW HAVEN)
DC Judge: Thompson
VERIFIED ITEMIZED BILL OF COSTS
Counsel for
_________________________________________________________________________
respectfully submits, pursuant to FRAP 39 (c) the within bill of costs and requests the Clerk to
prepare an itemized statement of costs taxed against the
________________________________________________________________
and in favor of
_________________________________________________________________________
for insertion in the mandate.
Docketing Fee _____________________
Costs of printing appendix (necessary copies ______________ ) _____________________
Costs of printing brief (necessary copies ______________ ____) _____________________
Costs of printing reply brief (necessary copies ______________ ) _____________________

(VERIFICATION HERE)
________________________
Signature
Case: 13-1658 Document: 126-3 Page: 1 09/08/2014 1313636 1
45 of 45