MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH (68581)
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
     - and -
KIMBERLY C. EPSTEIN (169012)
222 Kearny Street, 10th Floor
San Francisco, CA 94108
Telephone: 415/288-4545
415/288-4534 (fax)

KAPLAN, KILSHEIMER & FOX, LLP
ROBERT N. KAPLAN
685 Third Avenue, 26th Floor
New York, NY 10017
Telephone: 212/687-1980

Co-Lead Counsel for Plaintiffs

[Additional counsel appear on signature page.]

I. INTRODUCTION

II. BACKGROUND

III. ARGUMENT

IV. CONCLUSION

TO: ALL PARTIES AND THEIR RESPECTIVE COUNSEL OF RECORD

PLEASE TAKE NOTICE that on September 22, 1998, at 1:30 p.m. or as soon thereafter as the matter may be heard, before the Honorable Jeremy Fogel of the above-entitled Court, plaintiffs will cross-move for an order striking Exhibits 1, 4, and 6-16 to the Declaration of Michael L. Charlson in Support of Defendants' Motions to Dismiss Plaintiffs' First Amended Complaint (the "Declaration").

I. INTRODUCTION

In this Court's Order Granting Defendants' Motion to Dismiss With Leave To Amend, dated February 17, 1998 ("Order"), Judge Ware rejected defendants' attempt to submit documents, including SEC filings and analyst reports, not attached to or referred to in plaintiffs' complaint. Specifically, Judge Ware stated:

As an initial matter, Defendants contend that all of the alleged misstatements have been quoted out of context. Defendants assert that they have located the documentary source of each alleged misstatement and urge the Court to review the full text of the documents containing each alleged misstatement. Defendants have also submitted SEC filings, which they contend demonstrate that the forward-looking statements alleged by Plaintiffs are not actionable under the bespeaks caution doctrine. The parties have also submitted documents which purport to substantiate the Defendants' stock sales during the class period, and to compare those sales with sales prior to the class period.

In light of the parties' substantial disputes over the admissibility of these documents, the Court prefers to exercise its discretion and restrict its focus to the allegations contained in the 63-page complaint and finds it unnecessary to add more paper to the already voluminous record in order to resolve the present motions to dismiss. Accordingly, Plaintiffs' Cross-Motion To Strike Certain Evidence Offered By Defendants On Their Motions To Dismiss is granted. . . .

Order at 7 n.3 (emphasis added, complaint references omitted).

Defendants' attempt to relitigate an issue already decided by this Court in favor of plaintiffs should be rejected.⁽¹⁾

Should the Court reconsider this issue, plaintiffs' cross-motion to strike should be granted. Contrary to Ninth Circuit law, defendants have improperly submitted copies of certain documents not specifically referred to in the Complaint or subject to judicial notice. These documents, attached as exhibits to the Declaration, (1) constitute evidence "outside the pleading" under Fed. R. Civ. P. 12(b)(6); (2) are not subject to judicial notice; and (3) constitute inadmissible hearsay. These documents cannot be considered in determining defendants' motions to dismiss.

II. BACKGROUND

In support of their motion to dismiss, defendants submitted the Declaration, which attaches 17 exhibits. These exhibits include copies of certain of defendant Symantec Corporation's ("Symantec") filings with the Securities and Exchange Commission ("SEC"), analyst reports, and Form 4s for certain of the individual defendants. The vast majority of these documents are neither referenced nor quoted in the First Amended Complaint for Violation of the Securities Exchange Act of 1934 ("FAC"). One exhibit even predates the Class Period by over two months.

III. ARGUMENT

The Ninth Circuit has consistently held that in deciding a motion to dismiss, the Court may not consider material outside the complaint. Branch v. Tunnell, 14 F.3d 449, 453 (9th Cir. 1994); see also Fecht v. Price Co., 70 F.3d 1078, 1080 n.1 (9th Cir. 1995). A document is not "outside" the complaint if the complaint specifically refers to the document and if its authenticity is not questioned. See Branch, 14 F.3d at 453.

While some courts have taken judicial notice of SEC filings in determining motions to dismiss, many courts have been reluctant to do so. See, e.g., In re Sun Microsystems, Inc. Sec. Litig., No. C-89-20351-RPA, 1990 U.S. Dist. LEXIS 18740, at *5-*6 (N.D. Cal. Aug. 20, 1990) (court refused to take judicial notice of defendants' SEC filings because to do so would convert motion to dismiss into one for summary judgment).

In In re Wickes Cos. Sec. Litig., [1982-1983 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶99,055 (S.D. Cal. 1983), Judge Enright concluded that the use of an SEC filing in a 12(b)(6) motion was improper:

[Defendant] urges the court to compare the allegations of the complaint with the Form S-14 Registration Statement, which includes the Joint Proxy Statement and Prospectus. It requests that the court take judicial notice of the SEC filing.

. . . Whether the statements contained in the prospectus were misleading is a question of fact. Even if this fact were uncontested, which it is not, the prospectus does not provide answers to the other allegations contained in the complaint. The prospectus does not demonstrate whether [defendant] had knowledge of the evidence or recklessly ignored evidence of the adverse impact of the proposed combination.

Id. at 95,002 (emphasis added).

Wickes is instructive. Here, without even a request for judicial notice, defendants ask the Court to compare certain cautionary language in Symantec's 1995 Form 10-K (Ex. 1) and Joint Proxy Statement for the Delrina acquisition (Ex. 4) with forward-looking statements contained in other documents or made in oral presentations. Neither of the exhibits is quoted or specifically referred to in the FAC. Whether these cautionary statements made the forward-looking statements not misleading is a crucial and hotly contested question of fact. As the court held in Fecht, the question of "whether a public statement is misleading, or whether adverse facts were adequately disclosed is a mixed question to be decided by the trier of fact." 70 F.3d at 1081.

In any event, even if the Court were to take judicial notice of the Form 10-K and the Proxy Statement, these documents would be unavailing to defendants in their attempt to invoke the bespeaks-caution doctrine or the safe-harbor provisions of the PSLRA to immunize their forward-looking statements.

As discussed in Plaintiffs' Memorandum of Points and Authorities in Opposition to Defendants' Motion to Dismiss Plaintiffs' First Amended Complaint, the cautionary language contained in the Form 10-K and Proxy Statement cannot be used to immunize any forward-looking statements contained in other documents or oral presentations, since, under the bespeaks-caution doctrine and safe-harbor provisions of the PSLRA, the cautionary language must be contained in the same document or oral presentation as the forward-looking statement. The FAC does not allege that any of defendants' forward-looking statements are contained in the Form 10-K or Proxy Statement.

Exhibits 14-16 are copies of Form 4s filed with the SEC by defendants John Laing, Derek Witte and Eugene Wang, respectively. These Form 4s may not be considered by the Court in determining defendants' motions to dismiss, as they are not specifically referred to in the FAC and are not subject to judicial notice.⁽²⁾ Moreover, they constitute inadmissible hearsay.

The individual defendants' Form 4s filed with the SEC may not be considered to establish -- as a matter of law, no less -- defendants' lack of scienter. These submissions are hearsay offered for the truth of their contents. Hearsay is a statement, other than one made by the declarant while testifying at trial or hearing, offered in evidence to prove the truth of the matter asserted. Fed. R. Evid. 801(c). Unless otherwise excepted, hearsay is not admissible. Fed. R. Evid. 802.

Here, defendants seek to use the contents of the Form 4s to make the factual assertion that their insider selling could not create any inference of scienter, a key factual issue in this action. See In re Apple Computer Sec. Litig., 886 F.2d 1109, 1113 (9th Cir. 1989) (scienter is a fact-specific issue which should ordinarily be left to the trier of fact). Defendants' Form 4s may not be used to decide issues of knowledge and intent, as they constitute inadmissible hearsay evidence.

Furthermore, Exhibits 6-13 are copies of analyst reports which are not specifically referred to, cited or quoted in the FAC. These reports are plainly outside the FAC, are beyond the scope of these motions and may not be considered by the Court in determining defendants' motions to dismiss.

IV. CONCLUSION

For all the foregoing reasons, the documents attached as Exhibits 1, 4 and 6-16 to the Declaration should be stricken because they constitute documents outside the FAC, are inadmissible hearsay and are not subject to judicial notice.

SYMANTE2\DRD01958.NOT

1. With the exception of Exhibit 8, which is a Morgan Stanley analyst report not previously submitted, Exhibits 1, 4 and 6-16 are the same exhibits submitted with defendants' motion to dismiss plaintiffs' original complaint, which Judge Ware declined to consider.

2. It is axiomatic that a judicially noticed adjudicative fact must be

one not subject to reasonable dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned.

Fed. R. Evid. 201(b). In other words, for a fact to be judicially noticed, "indisputability is a prerequisite." Hennessy v. Penril Datacomm Networks, 69 F.3d 1344, 1354 (7th Cir. 1995). The power to judicially notice facts "is to be exercised by courts with caution. . . . Every reasonable doubt upon the subject should be resolved promptly in the negative." Brown v. Piper, 91 U.S. 37, 42-43 (1875). At this early stage in the litigation, with discovery stayed, plaintiffs in good faith refuse to concede the accuracy of these SEC filings.

I, the undersigned, declare:

1. That declarant is and was, at all times herein mentioned, a citizen of the United States and a resident of the County of San Diego, over the age of 18 years, and not a party to or interested in the within action; that declarant's business address is 600 West Broadway, Suite 1800, San Diego, California 92101.

2. That on July 30, 1998, declarant served the NOTICE OF CROSS-MOTION AND CROSS-MOTION TO STRIKE CERTAIN EVIDENCE OFFERED BY DEFENDANTS ON THEIR MOTION TO DISMISS PLAINTIFFS' FIRST AMENDED COMPLAINT AND MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF by depositing a true copy thereof in a United States mailbox at San Diego, California in a sealed envelope with postage thereon fully prepaid and addressed to the parties listed on the attached Service List and that this document was forwarded to the following designated Internet site at:

3. That there is a regular communication by mail between the place of mailing and the places so addressed.

I declare under penalty of perjury that the foregoing is true and correct. Executed this 30th day of July, 1998, at San Diego, California.