[Web note: Page formatting approximates, but does not match exactly, that of filed paper document.]

STEVEN M. SCHATZ, State Bar # 118356
TIMOTHY T. SCOTT, State Bar # 126971
THOMAS J. MARTIN, State Bar # 150039
DANIEL W. TURBOW, State Bar # 175015
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
650 Page Mill Road
Palo Alto, California  94304-1050
Telephone:  (415) 493-9300

Attorneys for Defendants



                  UNITED STATES DISTRICT COURT

                 NORTHERN DISTRICT OF CALIFORNIA

                        SAN JOSE DIVISION



GEORGE GENNA, On Behalf of Himself ) CASE NO.: C-96-20867-RMW (EAI)
and All Others Similarly Situated, )
                                   ) REPLY MEMORANDUM OF POINTS
          Plaintiff,               ) AND AUTHORITIES IN SUPPORT
                                   ) OF DEFENDANTS' MOTION TO
     v.                            ) STRIKE THE TORKELSEN
                                   ) DECLARATION
DIGITAL LINK CORPORATION, VINITA   )
GUPTA, DANIEL L. PALMER, TIMOTHY   ) Date:  April 18, 1997
K. MONTGOMERY, STANLEY E.          ) Time:  9:00 a.m.
KAZMIERCZAK, TONI BELLIN,          ) Judge: The Honorable
BENJAMIN W. BERRY, MOREY R.        )        Ronald M. Whyte
SCHAPIRA, GREGORY M. AVIS and      )
CHARLES R. MOORE,                  )
                                   )
          Defendants.              )
                                   )
___________________________________)



REPLY MEMORANDUM IN SUPPORT OF DEFENDANTS'
MOTION TO STRIKE THE TORKELSEN DECLARATION
USDC NORTHERN CASE NO. C-96-20867-RMW (EAI)




                          INTRODUCTION

     Defendants demonstrated in their opening brief ("Def. Mot. to 

Strike") that the Torkelsen Declaration should be stricken because 

its submission by plaintiff was procedurally improper, irrelevant 

to the determination of defendants' motion to dismiss, and contrary 

to the purpose of the Reform Act.  Plaintiff argues in response 

that defendants have "opened the door" by asserting a bespeaks 

caution defense, and that the Torkelsen Declaration is relevant to 

negating such a defense.  See Plaintiff's Opposition to Defendants' 

Motion to Strike 3-5 ("Pl. Mem.").  Plaintiff also relies on 

various decisions, none of which are on point from the Ninth 

Circuit, in support of his argument that the submission of the 

Declaration was procedurally proper.  Id. at 5-7.

     Plaintiff's arguments cannot overcome the simple fact that the 

Torkelsen Declaration is not a document that may be judicially 

noticed or was attached to the Complaint, and the Ninth Circuit 

authority is uniform in holding that such material may not be 

considered on a motion to dismiss.  Moreover, the Torkelsen 

Declaration does not even purport to address issues related to the 

bespeaks caution doctrine or any other argument raised by 

defendants.  Plaintiff's attempt to equate Torkelsen's purported 

analysis of the "materiality" of certain statements in relation to 

Digital Link's stock price on one hand, with concepts of 

materiality incorporated in the bespeaks caution doctrine on the 

other, is without basis.  Plaintiff's attempt to boot-strap its 

deficient factual allegations with a declaration from one of its 

"house" experts also contravenes the purpose of the Reform Act.  

For these reasons, this Court should strike the Torkelsen 

Declaration to make plaintiff's law firm aware that the "Reform" in 

Reform Act actually meant something.


                            ARGUMENT

I.   PLAINTIFF'S SUBMISSION OF THE TORKELSEN DECLARATION IS
     PROCEDURALLY IMPROPER ON DEFENDANTS' MOTION TO DISMISS

     Defendants demonstrated in their opening brief that 

plaintiff's submission of the Torkelsen Declaration is procedurally 

improper on a motion to dismiss.  Cases within the Ninth Circuit 

make clear that a court may not consider matters beyond the 

complaint unless they are matters of public record or other types 

of materials that may be judicially noticed.  See Emrich v. Touche 


REPLY MEMORANDUM IN SUPPORT OF DEFENDANTS'
MOTION TO STRIKE THE TORKELSEN DECLARATION
USDC NORTHERN CASE NO. C-96-20867-RMW (EAI)  -1-




Ross & Co., 846 F.2d 1190, 1198 (9th Cir. 1988); Arbabian v. BP 

America, 898 F. Supp. 703, 707 (N.D. Cal. 1995); Summit Tech. v. 

High-line Medical Instruments Co., 933 F. Supp. 918, 927 (C.D. Cal. 

1996); Bureerong v. Uvawas, 922 F. Supp. 1450, 1451 (C.D. Cal. 

1996).

     Plaintiff cites to various authorities in support of his 

argument that this Court may consider facts outside the Complaint 

on a motion to dismiss.  See Pl. Mem. 5-7.  Many of these cases are 

cited only to set forth the standard for dismissal under Rule 

12(b)(6) and accordingly add nothing of significance to plaintiff's 

argument.1  Moreover, the Supreme Court decision on which plaintiff 

places great emphasis is entirely distinguishable both because in 

that case the defendant did not object to the propriety of 

plaintiff's submission of the affidavits with the opposition to the 

motion to dismiss and because the affidavits presented factual 

materials supplementing the complaint which were available to 

plaintiff when the action was filed.  See Bakery Sales Drivers 

Local Union v. Wagshal, 333 U.S. 437, 444 (1948).  The only 

objection posed by defendants with respect to the submission of 

factual affidavits was defendant's argument that under the 

particular statute at issue in the case, the district court could 

not issue the injunction on the basis of the affidavits alone but 

was required to hear oral testimony on the matter.  Id.  In 

upholding the injunction, the Supreme Court rejected defendant's 

argument, treating the affidavits as in effect "an informal 

amendment" to the complaint and "merely a gloss on the complaint."  

Id.  Thus, the affidavits in Bakery Sales are completely unlike 

Torkelesen's expert declaration submitted by plaintiff.

     Bakery Sales is also distinguishable because the complaint in 

that case was filed in 1945 (see Bakery Sales Drivers Local Union 

v. Wagshal, 161 F.2d 380, 380-81 (D.C. Cir. 1947)), before Federal 

Rule of Civil Procedure 12(b)(6) was amended to add the current 

language requiring a court to give reasonable opportunity to 

present evidence after the court has converted a motion to dismiss 

into one for summary judgment by considering such extraneous 

matters.2  Thus, this decision is of dubious precedential value 

____________________

1    See Hishon v. King & Spaulding, 467 U.S. 69, 73 (1984); Conley 
v. Gibson, 355 U.S. 41, 45-46 (1957); Scheuer v. Rhodes, 416 U.S. 
232, 236 (1974); Strother v. Southern California Permanente Med. 
Group, 79 F.3d 859, 865 (9th Cir. 1996); Gilligan v. Jamco Dev. 
Corp., No. 95-56290, 1997 U.S. App. LEXIS 3787 (9th Cir. Mar. 5, 
1997).

2    If this Court were not to exclude the Torkelsen Declaration, 
the Court must treat defendants' motion to dismiss as one for 
summary judgement and provide notice to defendants accordingly.  
See California v. American Stores Co., 872 F.2d 837 (9th Cir. 
1989); Fed. R. Civ. P. 12(b)(6).


REPLY MEMORANDUM IN SUPPORT OF DEFENDANTS'
MOTION TO STRIKE THE TORKELSEN DECLARATION
USDC NORTHERN CASE NO. C-96-20867-RMW (EAI)  -2-




with respect to the propriety of considering extraneous matters on 

a motion to dismiss.

     Plaintiff also relies heavily on a few cases from the Seventh 

Circuit3 and on one decision from the Third Circuit.4  These cases 

are exceptions to the well-established rule precluding the court 

from considering extraneous matters on a motion to dismiss and have 

no support in this Circuit.  See Def. Mot. to Strike 2-3.  In fact, 

one of the authorities cited by plaintiff readily conceded that 

considering factual material outside of the complaint on a motion 

to dismiss is "a most irregular mode of proceeding."  Orthmann, 757 

F.2d at 914-15.

     Indeed, it is significant that plaintiff has failed to cite a 

single case within the Ninth Circuit holding that on a motion to 

dismiss it is proper for a court to consider material outside the 

complaint or material that is not properly the subject of judicial 

notice.  The only Ninth Circuit decisions cited by plaintiff for 

support that his submission of the Declaration is procedurally 

proper are Gilligan and Strother, both of which only reiterate the 

standard for a motion to dismiss and do not deal with supplementing 

complaints with expert declarations.  See supra n.1.  In fact, 

Gilligan actually supports defendants because the Ninth Circuit 

limited its review to "consider[ing] only the contents of the 

complaint[.]" 1997 U.S. App. LEXIS 3787, at *6 (emphasis added).  

Thus, this Court should follow the authority within the Ninth 

Circuit which precludes this Court from considering the Torkelsen 

Declaration in determining defendants' motion to dismiss.

____________________

3    See Orthmann v. Apple River Campground, Inc., 757 F.2d 909, 
914-15 (7th Cir. 1985) (not improper for appellate court to 
consider factual evidence to support allegations in complaint); 
Highsmith v. Chrysler Credit Corp., 18 F.3d 434, 440 (7th Cir. 
1994) (same); Dawson v. General Motors Corp., 977 F.2d 369, 372 
(7th Cir. 1992) (same); Hrubec v. National R.R. Passenger Corp., 
981 F.2d 962, 963-64 (7th Cir. 1992) (plaintiff may add essential 
facts by affidavit or brief or brief on appeal). 

4    Plaintiff has cited favorable language clearly out of context 
from Swin Resource Sys., Inc. v. Lycoming County, 883 F.2d 245, 247 
(1989).  In that decision, the court stated plainly that facts may 
not be considered "if they fall outside the ambit of the 
complaint."  Id.  The court allowed the use of deposition facts 
only because they were within the ambit of the complaint.  Id. 


REPLY MEMORANDUM IN SUPPORT OF DEFENDANTS'
MOTION TO STRIKE THE TORKELSEN DECLARATION
USDC NORTHERN CASE NO. C-96-20867-RMW (EAI)  -3-




     Even more significantly, none of the authority cited by 

plaintiff held that a court could consider a declaration from an 

expert retained by plaintiff on a motion to dismiss.  All of the 

decisions cited by plaintiff in support of his argument involved 

the consideration of facts that supplemented the complaint, 

provided a "gloss" on the complaint, or were consistent with the 

allegations of the complaint.  Those cases contrast sharply with 

the Torkelsen Declaration, which was not submitted to provide 

additional facts to the Complaint based on new evidence or 

discovery.  Rather than introducing any new facts to support the 

Complaint, the Torkelsen Declaration simply assumes all of the 

facts of the Complaint to be true and then "demonstrates to this 

Court" that defendants' representations were "material."  Pl. Mem. 

7.  In other words, the Torkelsen Declaration provides his legal 

interpretation of facts set forth in the Complaint.  Even the cases 

cited by plaintiff, which are exceptional in any event, do not 

provide authority for this Court to consider an expert declaration 

purporting to pass legal judgment on the allegations of the 

Complaint.


II.  THE TORKELSEN DECLARATION HAS NO RELEVANCE TO
     DEFENDANTS' BESPEAKS CAUTION ARGUMENT OR ANY OTHER
     ARGUMENT ADDRESSED IN DEFENDANTS' MOTION TO DISMISS

     This Court should strike the Torkelsen Declaration because it 

purports to analyze issues  largely irrelevant to the Court's 

determination of defendants' motion to dismiss.  Plaintiff claims 

that the Declaration is relevant because it addresses "materiality" 

and that the defendants have put materiality at issue by "asserting 

a bespeaks caution defense."  Opp. at 4.  Torkelsen's purported 

analysis of materiality, however, focuses only on whether certain 

alleged statements by the defendants affected the Company's stock 

price (and hence were purportedly "material"), an argument not even 

addressed by defendants in their motion to dismiss and scarcely 

even mentioned in plaintiff's opposition thereto.

     The issues relevant to the Court's determination of 

defendants' bespeaks caution doctrine argument are whether the 

defendants made "meaningful and specific cautionary disclosures . . 

. regarding the subject matter of the alleged misrepresentation."  

Shuster v. Symmetricom, Inc., No. C 94-20024 RMW (PVT), Slip Op. at 


REPLY MEMORANDUM IN SUPPORT OF DEFENDANTS'
MOTION TO STRIKE THE TORKELSEN DECLARATION
USDC NORTHERN CASE NO. C-96-20867-RMW (EAI)  -4-




8 (emphasis added).5  Plaintiff ignores that in addition to 

bespeaks caution, defendants' rely on the fact that they disclosed 

the very information which plaintiff claims they omitted.  See In 

re Stac Elecs. Sec. Litig., 89 F.3d 1399, 1409 (9th Cir. 1996).  

Accordingly, defendants' bespeaks caution argument is premised on 

their cautionary statements and disclosures, not on whether all of 

the other alleged statements did or did not affect the Company's 

stock price.  Conveniently, Torkelsen failed to analyze or even 

mention a single cautionary statement or disclosure made by the 

defendants.6  It is no surprise then that the Declaration does not 

even purport to discuss the bespeaks caution doctrine.  Thus, 

plaintiff's conclusion that the Torkelsen Declaration "disposes of 

defendants' bespeaks caution defense" is as startling as it is 

wrong.

     Contrary to plaintiff's assertions, defendants have not 

contradicted themselves by arguing that "the motion to dismiss is 

not based on any argument that defendants' statements were not 

material as a matter of law."  Motion to Strike at 4.  Plaintiff 

has ignored a sentence by defendants that followed shortly after 

the quoted language above and within the same paragraph stating 

that "[t]he closest that defendants come to arguing materiality is 

the bespeaks caution doctrine, a topic on which Mr. Torkelsen is 

completely silent."  Id. at 4 (emphasis added).  Moreover, as 

defendants discussed above, Torkelsen's purported analysis of 

"materiality" concerns only whether certain statements by 

defendants had an affect on Digital Link's stock price.  This 

purported analysis is totally unrelated and distinct from an 

analysis of whether certain cautionary statements and disclosures 

were specific and meaningful ("material") so as to prevent 

liability for other alleged misleading statements pertaining to the 

same subject matter.  Thus, the defendants' arguments in their 

motion to dismiss and their motion to strike are entirely 

consistent.

____________________

5    Attached as Ex. A to the Supplemental Declaration of Daniel W. 
Turbow In Support of Defendants' Motion to Dismiss, filed 
concurrently herewith.

6    For a full analysis of the defendants' cautionary statements 
during the class period, see Defendants' Memorandum of Points and 
Authorities In Support of their Motion to Dismiss at 11-15 and 
their reply brief in support thereof at 4-7.


REPLY MEMORANDUM IN SUPPORT OF DEFENDANTS'
MOTION TO STRIKE THE TORKELSEN DECLARATION
USDC NORTHERN CASE NO. C-96-20867-RMW (EAI)  -5-




     Moreover, even assuming defendants have put "materiality" at 

issue by asserting the bespeaks caution doctrine, plaintiff's 

submission of the Torkelsen Declaration is still improper.  The 

defendants' arguments under the bespeaks caution doctrine were 

based on cautionary statements and disclosures referenced in the 

Complaint or contained in documents that are the proper subject of 

judicial notice.  These types of documents may be considered on a 

motion to dismiss.  See Branch v. Tunnell, 14 F.3d 449, 454 (9th 

Cir.), cert. denied, 114 S. Ct. 2704 (1994); Emrich, 846 F.2d at 

1198; In re Valence Tech. Sec. Litig., No. C 95-20459 JW, 1996 WL 

37788, *3 (N.D. Cal. Jan. 23, 1996).  Because defendants did not 

introduce any other types of documents or evidence to support their 

bespeaks caution defense or any other argument, they did not open 

the door for plaintiff to introduce a declaration from his biased 

expert purporting to discuss "materiality" and instructing the 

Court on how to interpret the plaintiff's allegations.  Plaintiff 

has cited no authority for their proposition that defendants' 

proper submission of judicially noticeable documents in any way 

opened the door for the Court to consider the Torkelsen 

Declaration.  Because Torkelsen's Declaration does not address 

issues that are relevant to the Court's determination of 

defendants' motion to dismiss, this Court should strike it.


III. CONSIDERATION OF THE TORKELSEN DOCTRINE WOULD
     CONTRAVENE THE PURPOSE OF THE REFORM ACT

     As defendants noted in their opening brief, plaintiff's 

submission of the Torkelsen Declaration directly contravenes the 

purpose of the Reform Act.  By passing that Act, Congress was 

attempting to curtail what it saw as abusive litigation tactics of 

a small group of plaintiffs' law firms by the filing of suits 

without proper basis.  See Motion to Strike 5 & n.7.  Congress 

enacted the heightened pleading and scienter requirements as well 

as the discovery limitations of the Reform Act for that very 

reason.

     If courts were permitted to consider declarations from 

plaintiff's law firm's house experts on a motion to dismiss, the 

Reform Act could be substantially weakened if not eviscerated.  

Every plaintiffs' law firm, as evidenced by lead counsel's efforts 

here, would then submit their own expert opinion reciting the 

allegations of their complaint and "demonstrating" to the court 


REPLY MEMORANDUM IN SUPPORT OF DEFENDANTS'
MOTION TO STRIKE THE TORKELSEN DECLARATION
USDC NORTHERN CASE NO. C-96-20867-RMW (EAI)  -6-




that those allegations are "material" and impliedly sufficient to 

withstand a motion to dismiss.  Respectfully, we submit that this 

Court should strike the Torkelsen Declaration in order to make 

clear that the Reform Act cannot be so easily controverted and such 

material will not be considered at the motion to dismiss stage.



                           CONCLUSION

     For the foregoing reasons, this Court should strike the 

Torkelsen Declaration or refuse to consider it when determining 

defendants' motion to dismiss.



Dated:  April 4, 1997     WILSON, SONSINI, GOODRICH & ROSATI



                          By: _____________________________________
                                 Steven M. Schatz

                          Attorneys for Defendants





REPLY MEMORANDUM IN SUPPORT OF DEFENDANTS'
MOTION TO STRIKE THE TORKELSEN DECLARATION
USDC NORTHERN CASE NO. C-96-20867-RMW (EAI)  -7-