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In re Oracle Corp. Derivative Litigation11/24/2004
e Revenue growth of "about 25%."
Put bluntly, as of the time Ellison actually instructed his broker to begin selling shares, Oracle's Best Estimate was that it would meet the Market Estimates and the most current Pipeline Report (which he did not see) also supported that proposition.
Ellison's broker actually began to trade on January 22. That day Minton produced another Best Estimate. Again, that Estimate indicated that Oracle would earn 12.06 cents and achieve license revenue growth of 29%, both beating the Market Estimate.
On January 29, Minton produced her final Best Estimate for January. For the first time, that Estimate projected that Oracle would not earn a full 12 cents per share, but instead would earn 11.58 cents per share. For reporting purposes, however, the 11.58 cents per share would be rounded up to 12 cents. In keeping with her revision to earnings, Minton reduced her Best Estimate of license revenue growth to 24% - an Estimate that falls squarely within the definition of "about 25%" in the Market Estimate. The January 29 Best Estimate was generated on a Monday. That day and the following two days ending January 31 completed Ellison's trading.
It bears emphasis that throughout the entirety of January, Oracle's sale units did not reduce the estimates they provided to Minton - these held firm throughout the month - and they continued to provide her with a basis to believe that the Market Estimates would be met. That is, although the sales units became less bullish as they knew more about how the quarter was shaping up, they did not provide input that suggested that Oracle would not be able to make its numbers. Oracle's best predictor, Minton, took this input seriously and applied her judgment to produce reduced Best Estimates that reflected her evaluation of the additional information she gleaned as the month progressed. But her increased pessimism has to be kept in perspective. Minton did not come to believe that Oracle would fall materially short of the Market Estimates. She came to believe that Oracle would more or less achieve the Market Estimates exactly.
Given this record, it is impossible for a rational mind to infer that Ellison possessed material, adverse information at the time he instructed his broker to sell shares on January 19, or at the time when he actually sold shares from January 22 to January 31, 2001. As of those dates, Oracle's estimated Pipeline, if converted at reasonable rates consistent with past relevant experience at the company, was sufficient for the company to meet the Market Estimates. As of those dates, Oracle's most accurate predictor of company performance was estimating that the company would achieve the Market Estimates. As of those dates, there is no evidence that any Oracle executive told Ellison or Henley that the company would fall materially short of the Market Estimates.
Because there is no rational basis to infer that Ellison possessed material, nonpublic information at the time he traded, he is entitled to summary judgment on the plaintiffs' Brophy claim.
3. The Post-February Events And Information Buttress The Conclusion That Ellison and Henley Are Entitled To Summary Judgment
On this record, there is no rational basis to infer that Ellison was aware of the actual results for January 2001 until after he had finished trading. The January Flash Report was not circulated until February 8, 2001.
By February 8, 2001, another Minton Estimate had been produced. The February 5 Best Estimate predicted that Oracle would earn 11.29 cents per share and achieve license revenue growth of $1.26 billion. While this was short of the Market Estimates, it was
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