ROBERT v. MOORES

Filed 3/20/09

CERTIFIED FOR PUBLICATION

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

STORY CONTINUE FROM PART I.

While the Zucco court concluded that one could not reasonably infer scienter from the defendants' stock sales in that case, plaintiffs in this case note that inKaplan v. Rose (9th Cir. 1994) 49 F.3d 1363, 1379-1380 (Kaplan), the Ninth Circuit concluded that defendants' stock sales were sufficient to create a genuine issue of material fact as to their scienter on the plaintiff's securities fraud claims. The defendants in Kaplan ─ the president and the CEO of a company ─ sold a large percentage of their stock in the company (one-fourth and two-thirds of their holdings, respectively), as soon as legally possible after the company's public offering in June 1988. (Id. at p. 1379.) In August 1989, just before the release of important clinical test results pertaining to the company's medical device product, the president sold the remainder of his stock. (Id. at pp. 1368, 1379.) The Ninth Circuit concluded that evidence of these sales was sufficient to raise a genuine issue of material fact regarding defendants' scienter, noting that the sales "were not consistent with earlier [trading] patterns," and that the sales were "in large amounts and at sensitive times." (Id. at pp. 1379-1380.)

Plaintiffs also cite Provenz v. Miller (9th Cir. 1996) 102 F.3d 1478 (Provenz), in which the Ninth Circuit held that the district court had erred in concluding that two corporate officers' sale of the corporation's stock did not support a finding of scienter. The Provenz court summarized the evidence on this issue as follows:

"The district court incorrectly concluded that the sales of stock by Miller and Boesenberg did not support a finding of scienter. There is evidence that Miller, [the corporation's] chairman and CEO, and Boesenberg, [the corporation's] president, traded their stock in large amounts at sensitive times. Miller sold about 20% of his stock for $1,340,000. Boesenberg sold about 90,000 shares during the class period ─ almost six times more stock than he had sold during the twelve months preceding the class period ─ for $1,479,650. Both Miller and Boesenberg sold their stock shortly after the April 25, 1991 conference call but before the $4 million loss and the restructuring charge were disclosed to the public." (Id. at p. 1491.)

(ii) Application

(a) For purposes of this decision, we assume

that suspicious stock sales may raise an inference

of scienter under California law

Plaintiffs have not cited, and we are not aware of, any California authority in which a court has concluded that suspicious stock sales by members of a corporation's board of directors may constitute circumstantial evidence of the directors' scienter for purposes of establishing a fraud or fraud related cause of action under California law. Nevertheless, we will assume that for purposes of proving fraud under California law, "'unusual trading or trading at suspicious times or in suspicious amounts by corporate insiders . . . [is] probative of scienter' [citation]" (In re Daou Systems, Inc., supra, 411 F.3d at p. 1022), and we will apply the factors that the federal courts have used to determine whether a defendant's stock sales may be considered suspicious for purposes of violations of federal securities law, as described in the federal authorities cited in part III.A.3.a.(i), ante.^[1]

(b) Plaintiffs contend in their opening brief that

defendants' February 2000 stock sales were suspicious

A plaintiff who seeks to prove scienter through evidence of suspicious insider trading must specifically identify those stock sales that the plaintiff contends are suspicious. In their opening brief, plaintiffs appear to contend that defendants' sales of Peregrine stock in February 2000 were suspicious. For example, plaintiffs state, "Within days of meeting with the CEO and the auditor who instructed that Peregrine change its ways of recognizing revenue [in January 2000], Moores, Noell, and Cole sold an unprecedented amount of stock, in excess of $200 million. [Citation]. These facts show suspicious insider trading sufficient to create an inference of scienter." Plaintiffs similarly contend, "[D]efendants sold off large sums of stock nine months into continuous bad reports," and maintain that defendants received the first such report in April 1999.^[2] Plaintiffs' contention in their opening brief that, "The discovery referee also found the inside[r] trades occurring in February 2000 were suspicious," lends further support to our conclusion that plaintiffs' argument is directed at defendants' February 2000 stock sales.^[3] (Italics added.) We therefore consider the evidence that plaintiffs cite in their brief in support of their contentionthat defendants' February 2000 stock sales were suspicious.^[4]

(c) Plaintiffs have failed to demonstrate that

defendants' stock sales in February 2000 were

sufficiently suspicious to raise a genuine issue of

material fact as to defendants' scienter

Plaintiffs include three bar graphs in their opening brief, one pertaining to each defendant, and contend that these graphs demonstrate that defendants' sales of Peregrine stock were suspicious. With respect to Moores, the Y-axis of the graph is labeled "No. of Shares Sold" and contains numbers ranging from 500,000 through 7,000,000, in increments of 500,000. The X-axis shows the time period August 1997 through February 2001. Bars representing the number of shares sold each month during this time period appear on the graph. Between the bars are the following statements: "April 1999 ─ Peregrine CFO tells Defendants the Company will MISS market expectations," "July 1999 ─ Board votes to sell Receivables," "October 1999 ─ CEO tells the Board there are problems with revenue," "January 2000 ─ CEO and Auditors tell the Board that there are concerns and recommend a change in revenue recognition."^[5] Plaintiffs constructed this graph using data obtained from forms entitled "Statement of Changes in Beneficial Ownership," that Moores filed with the United States Securities and Exchange Commission (SEC).^[6]

The graph pertaining to Moores shows that he sold approximately 200,000 shares in October 1997.^[7] In 1998, in five different months, Moores sold a total of approximately 2,500,000 shares. In 1999, Moores sold approximately 1,250,000 shares in February, 2,500,000 shares in May, and 2,225,000 shares in July. Moores sold approximately 6,500,000 shares in February 2000, and approximately 3,500,000 shares in February 2001.^[8]

Applying the factorsdescribed in Zucco Partners to this data, we observe the following: The graph pertaining to Moores's sales of stock indicates that Moores sold approximately 18,675,000 shares from October 1997 through February 2001. Approximately 35 percent of these sales were made in February 2000, the allegedly suspicious period. Accordingly, while plaintiffs provide no information in the graph that would allow us to determine the percentage of Moores's total holdings that these sales represented,^[9]the percentage necessarily must have been lower than 35 percent. This percentage is lower than the percentage that the Ninth Circuit has held is ordinarily sufficient to support an inference of scienter. (See Metzler Inv. GMBH v. Corinthian Colleges, Inc. (9th Cir. 2008) 540 F.3d 1049, 1067 ["[Defendant] sold only 37% of his total stock holdings during the Class Period. We typically require larger sales amounts . . . to allow insider trading to support scienter"].)

With regard to the timing of Moores's stock sales, plaintiffs alleged in the operative complaint that the fraudulent misrepresentations began in July 1999 and continued until March 2002. Unlike the stock sales in the cases on which plaintiffs principally rely, Kaplan, supra, 49 F.3d at page 1380 and Provenz, supra, 102 F.3d at page 1491, in which the defendants sold shares at "sensitive times" (Kaplan, supra, 49 F.3d at p. 1380) after having acquired discrete pieces of nonpublic information that were likely to be material to their company's share price (Provenz, supra, 102 F.3d at pp. 1488, 1491 [sales of shares after conference call on April 25 and before July 30 public announcement of restructuring charge supported finding of scienter]), plaintiffs in this case have demonstrated, at most, that Moores and the other defendants were provided with some negative information about Peregrine's economic prospects over a period of nine months (i.e., in April, July, and October 1999, and in January 2000), prior to the allegedly suspicious sales.^[10]

Plaintiffs note that in January 2000, Peregrine's CEO told the board of directors the following:

"Our channel business is now a cause for concern. . . . We have not been as successful, and in some cases unsuccessful, in getting the sell-through that would remove the inventory of software from the channels. Rather than a 3 to 6 month latency, the inventory is moving in closer to 9 months . . . . The net of this is that we are now at a level of channel inventory that makes our auditors uncomfortable. Therefore, we are going to change the way we compensate the channel sales force to place emphasis on sell-through and up-front payment. We . . . will start to treat portions of contracts as unbooked for purposes of revenue recognition until either payment or sell-through has occurred. This will take us two to three quarters to work through."

Plaintiffs also note that in January 2000, Peregrine's outside auditor, Richard Bigelow,^[11]expressed concerns to the board's audit committee regarding the company's accounting practices pertaining to channel sales.^[12] In his deposition, Bigelow testified:

"Q: Okay. Going back to my question . . . did your report to the audit committee ─ would it have told them or intimated to them in some way that the channel inventory situation had led you to believe that the financial statements were misstated?

"[Bigelow]: My [communication] to the audit committee was that we had a buildup in channel inventory that caused me enough concern that, one, I thought the company need[ed] to reassess its accounting for channel sales; and, two, that when you have a buildup like that, there was a risk that the company would start granting some sort of concessions, which would violate the provisions of [American Institute of Certified Public Accountants Statement of Position 97-2 ('Software Revenue Recognition')] 97-2 and bring the whole question of previous revenue recognition to the forefront."

The fact that an auditor and Peregrine's CEO expressed concerns to defendants about the appropriateness of continuing to use the existing accounting method to account for channel sales does not constitute evidence that defendants knew about the fraud at Peregrine, nor is it the type of highly sensitive nonpublic information that would be likely to have a material effect on a company's share price, as discussed in the case law that plaintiffs cite.^[13] We therefore conclude that the timing of Moores's stock sales in February 2000 does not support the conclusion that the sales were suspicious.^[14]

Although February 2000 represents the single largest volume month of shares sold by Moores, we cannot conclude that the quantity of shares that Moores sold in that month was "'"dramatically out of line with prior trading practices."'" (Zucco Partners, supra, 552 F.3d at p. 1005; compare with Provenz, supra, 102 F.3d at p. 1491 [defendant sold "six times more stock [in class period] than he had sold during the twelve months preceding the class period].) Further, since plaintiffs did not provide any argument in their brief concerning the price of the shares over time, they have not demonstrated that the sales were "'"calculated to maximize the personal benefit from undisclosed inside information."'"^[15] (Zucco Partners, supra, 552 F.3d at p. 1005.)

With respect to Noell, plaintiffs include a bar graph entitled, "Noell's Suspicious Trades." The Y-axis of the graph is labeled "No. of Shares Sold" and contains numbers ranging from zero through 100,000 in increments of 10,000. The X-axis shows various months between February 1998 and December 2002. Bars representing the number of sales per month during this time period appear on the graph. Plaintiffs constructed this graph using data obtained from forms entitled "Statement of Changes in Beneficial Ownership," that Noell filed with the SEC.^[16]

The graph shows that Noell sold approximately 30,000 shares in October 1998, approximately 50,000 shares in February 1999, and approximately 25,000 shares in May 1999. In February 2000, Noell sold approximately 90,000 shares and in February 2001 he sold another 80,000 shares. In December 2002, Noell sold approximately 40,000 shares. Noell sold a total of approximately 315,000 shares in the time period from October 1998 through December 2002. Approximately 29 percent of the sales occurred in February 2000. Noell thus sold a smaller percentage of his total holdings (as defined in footnote 23, ante) in the allegedly suspicious period than the Ninth Circuit has held may ordinarily support an inference of scienter. (See Metzler Inv. GMBH v. Corinthian Colleges, Inc., supra, 540 F.3d at p. 1067.)

The fact that Noell sold approximately 45,000 shares in December 2002, after the fraud was publicly disclosed, further weakens any inference of scienter on his part. (See In re Worlds of Wonder Securities Litigation (9th Cir. 1994) 35 F.3d 1407, 1428 [sales of stock "after the announcement of large quarterly losses," do not support inference of scienter].) The analysis provided above with respect to the lack of probative value of the timing of Moores's sales applies equally to Noell. In addition, it is not clear that Noell's trades in February 2000 were unusual, since he sold a total of approximately 75,000 shares in 1999, 90,000 shares in 2000, and 80,000 shares in 2001. (Compare withNo. 84 Employer-Teamster Joint Council Pension Trust Fund v. America West Holding Corp. (9th Cir. 2003) 320 F.3d 920, 939-940 ["massive insider trading over . . . three month period of time, after an extended period of inactivity, appears unusual].) Finally, as noted above with respect to Moores, because plaintiffs include no information in their opening brief as to the price of the shares over time, they have not demonstrated that Noell's February 2000 sales were "'"calculated to maximize the personal benefit from undisclosed inside information."'" (Zucco Partners, supra, 552 F.3d at p. 1005.)

With respect to Cole, plaintiffs include a bar graph entitled, "Cole's Suspicious Trades." The Y-axis of the graph is labeled "No. of Shares Sold" and contains numbers ranging from zero through 600,000 in increments of 100,000. The X-axis includes various months between February 1999 and February 2002. Bars representing the number of sales sold each month during this time period appear on the graph. Plaintiffs constructed this graph using information that Cole provided in a declaration.^[17]

The graph shows that Cole sold approximately 175,000 shares in February 1999, approximately 50,000 shares in July 1999, and another 50,000 shares in August 1999. In February 2000, Cole sold approximately 275,000 shares. In both February and November 2001, he sold 75,000 shares, and in February 2002, Cole sold approximately 500,000 shares. Cole thus sold approximately 1,200,000 shares in the time period from February 1999 through February 2002. Approximately 23 percent of the sales occurred in February 2000.

As with the other defendants, Cole sold a smaller percentage of his total holdings (as defined in footnote 23, ante) in the allegedly suspicious period than the Ninth Circuit has held may ordinarily support an inference of scienter. (See Metzler Inv. GMBH v. Corinthian Colleges, Inc., supra, 540 F.3d at p. 1067.) Plaintiffs have not disputed evidence in the record that Cole retained more than 1,000,000 shares of Peregrine stock ─ more than three times the number of shares that he sold in February 2000. This fact greatly weakens any inference of scienter. (See In re Worlds of Wonder Securities Litigation, supra, 35 F.3d at p. 1428.)

The analysis provided with respect to the other defendants as to the lack of probative value of the timing of their sales of stock applies equally to Cole. In addition, we cannot say that Cole's sale of 275,000 shares in February 2000 was unusual, since he also sold a large quantity of stock in February 1999 (175,000 shares) and an even larger quantity in February 2002 (500,000 shares). (Compare withNo. 84 Employer-Teamster Joint Council Pension Trust Fund v. America West Holding Corp., supra, 320 F.3d at pp. 939-940.) Finally, as noted with respect to the other defendants, because plaintiffs have included no information in their opening brief as to the price of the shares over time, they have not demonstrated that Cole's stock sales were ""'calculated to maximize the personal benefit from undisclosed inside information."'" (Zucco Partners, supra, 552 F.3d at p. 1005.)

In sum, we conclude that plaintiffs have failed to demonstrate that defendants' stock sales in February 2000 were sufficiently suspicious to raise a genuine issue of material fact as to their scienter.

b. Plaintiffs did not present evidence of inconsistencies

between information presented to the Board and Peregrine's

public disclosures sufficient to create a genuine issue of

material fact as to defendants' scienter

Plaintiffs claim that the existence of inconsistencies between information presented to the Board and Peregrine's public disclosures creates a genuine issue of material fact as to defendants' scienter.

(i) Plaintiffs' claim

Plaintiffs cite two types of evidence in support of this claim. First, plaintiffs cite evidence that the Board learned of potential concerns regarding Peregrine's accounting systems in the summer of 2001. Specifically, plaintiffs note that at a deposition, William Savoy, a member of Peregrine's board of directors and a member of the board's audit committee, testified as follows: "[T]he basic point of the meeting was Arthur Anderson [Peregrine's outside accounting firm] communicating their reconsideration of their opinion with regard to [a Peregrine transaction with] Critical Path, in particular, which gave rise to general concerns regarding Arthur Anderson's opinions of our revenue recognition policy and adherence to our policies previously."^[18] Plaintiffs also note that a second member of the board and audit committee, Thomas Watrous, testified in his deposition that at a board meeting in July 2001, during a discussion regarding concerns over Peregrine's accounting systems, Watrous informed the board that he had had a conversation with Matt Gless, Peregrine's chief financial officer, in April or May of that year. Watrous stated, "I asked [Gless] whether, on a scale of 1 to 10, what were the systems and procedures and polices like, just in terms of adequacy, et cetera. He said it would be, on a scale of 1 to 10, a 4 or 5." Plaintiffs claim that none of this information was disclosed to the public.

In support of their contention that there were inconsistencies between information provided to the board and Peregrine's public disclosures, plaintiffs also note that their expert witness, certified public accountant Paul Regan, provided a declaration in which he stated that Peregrine's earnings releases and SEC filings were inconsistent with materials and information that had been presented to the Board, and that Peregrine's "pattern of meeting earnings expectations was inconsistent with its peer groups."

(ii) None of the evidence that plaintiffs cite creates a

genuine issue of material fact as to defendants' scienter

With respect to the auditor's and CEO's concerns regarding Peregrine's accounting procedures, plaintiffs do not identify any statements made by defendants that were inconsistent with these concerns. Rather, plaintiffs merely state in their brief that Peregrine continued to report record revenues for the subsequent quarter. Expressions of concern among members of a firm regarding the firm's accounting procedures are not inconsistent with reports of record revenue. (See Ronconi v. Larkin, supra, 253 F.3d at p. 434 ["A company could experience 'serious operational problems,' 'substantial difficult[ies],' and 'difficult problems' and still have increasing revenues"].) Further, no reasonable factfinder could infer scienter based on defendants' failure to disclose such "concerns" to the public, particularly in light of the fact that there was no testimony that the auditor informed the Board of any actual accounting irregularities.

Plaintiffs do not articulate the manner by which Peregrine's earnings releases and financial statements were purportedly inconsistent with information that had been provided to the Board. Instead, plaintiffs improperly attempt to incorporate by reference their expert's testimony on this score.^[19](See Placer County Local Agency Formation Com'n v. Nevada County Local Agency Formation Com'n (2006) 135 Cal.App.4th 793, 815 ["We need not address this unsupported and undeveloped argument, and it is improper simply to incorporate by reference papers filed in the trial court"].) In any event, nothing in the cited portions of Regan's declaration suggests that the information provided to the Board hinted at the employee fraud that was occurring at Peregrine. Thus, unlike the circumstances presented in the cases that plaintiffs cite in support of this claim, defendants did not receive information regarding a particular subject and later make public pronouncements that were at odds with such information. (Compare with City of Monroe Employees Retirement System v. Bridgestone Corp. (6th Cir. 2005) 399 F.3d 651, 684 [finding a "'divergence between internal reports and external statements on the same subject,'" where company made statement that objective data "clearly reinforces our belief that there are high-quality, safe tires," while data received by the board demonstrated serious safety concerns with tires].)^[20]

Accordingly, we conclude that neither type of evidence that plaintiffs cite as representing an inconsistency between information presented to the Board and Peregrine's public disclosures creates a genuine issue of material fact as to defendants' scienter.

TO BE CONTINUED AS PART III.

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^[1] Plaintiffs do not contend that California law should differ from federal law on this issue. In their opening brief, plaintiffs acknowledge that "[t]he relevant factors to consider in determining if the trades are suspicious are: 1) the amount and percentage of shares sold by insiders; 2) the timing of sales; and 3) whether the sales were consistent with the insider's prior trading history."

^[2] Plaintiffs further contend that "in four consecutive board meetings starting in April 1999, Moores, Noell, and Cole were told in writing by management and by Peregrine's auditors that Peregrine was engaged in channel stuffing activities," and that "[i]n the nine months leading up to this massive stock sell-off, Moores, Noell, and Cole were repeatedly told of Peregrine's serious financial troubles and difficulties generating revenue." (Italics added.)

^[3] It appears that the discovery referee in fact made no such finding. In the discovery order to which plaintiffs refer in their brief, the referee considered various federal cases in determining whether evidence of Cole's use of the proceeds of his sale of Peregrine's stock was relevant to plaintiffs' claims. On the page of the record that plaintiffs cite in their brief, the discovery referee states, "Based upon the cases discussed in the previous section, it would seem that suspicious insider trading is circumstantial evidence of knowledge. . . ." We do not read this statement as constituting a finding that the Cole's stock sales were in fact suspicious. Further, even assuming that the discovery referee had made such a finding, it would have no relevance to this appeal, in light of the applicable de novo standard of review. (See pt. III.A.2., ante.)

^[4] In their reply brief, plaintiffs appear to contend that all of defendants' stock sales in the period February 1999 through February 2000 were suspicious. We need not consider this argument, since plaintiffs raise it for the first time in reply without having made any showing of good cause for failing to raise the argument in their opening brief. (See Shade Foods, Inc. v. Innovative Products Sales & Marketing, Inc. (2000) 78 Cal.App.4th 847, 894, fn. 10 [" ' "points raised in the reply brief for the first time will not be considered, unless good reason is shown for failure to present them before" ' "].)

^[5] These statements appear on each of the three bar graphs. The statements summarize nonpublic information that plaintiffs contend led defendants to sell stock in February 2000. We need not describe in detail the evidence on which plaintiffs base these summaries, in light of our conclusion that plaintiffs have failed to identify evidence from which this court can conclude that defendants' February 2000 stock sales were sufficiently suspicious to give rise to a triable issue of fact as to defendants' scienter. However, we do discuss in the text of this opinion the evidence on which plaintiffs rely to support their assertions regarding information that defendants gained in January 2000, in light of the temporal proximity to the February 2000 sales.

^[6] Plaintiffs fail to cite to any SEC forms in the record evidencing Moores's sales of Peregrine stocks in the year 1998. However, the graph in plaintiffs' brief suggests that Moores sold at least 2,500,000 shares of Peregrine stock in 1998. We assume for purposes of this opinion that plaintiffs' graph is correct.

^[7] We emphasize that these are approximations gleaned from the graphs presented in plaintiffs' briefs on appeal.

^[8] In their brief, plaintiffs also cite to exhibit number 3080 entitled, "Moores Group - Sale of Peregrine Stock." This exhibit summarizes in tabular form on a yearly basis: (1) the total number of Peregrine shares sold by Moores and his wife, as well as various affiliated entities or trusts, from 1999-2002; (2) the total amount of proceeds of from those sales; (3) the cost of the shares, and (4) the gain or loss from the sales. Plaintiffs make no argument with respect to the evidence presented in this exhibit in their opening brief.

^[9] By "total holdings" we mean the total number of shares that a defendant held over the entire time period represented in plaintiffs' graphs.

^[10] Plaintiffs raise no argument in their opening brief concerning the particular dates on which defendants sold stock. Plaintiffs summarize defendants' sales on a monthly basis.

^[11] Although not indicated on the page of the record that plaintiffs cite, we assume for purposes of this opinion that plaintiffs presented evidence demonstrating that Bigelow made these statements to the audit committee in January 2000, as plaintiffs contend in their brief.

^[12] Cole contends that the evidence is irrelevant as to him because he "was not a member of the Audit Committee and never heard Bigelow's remarks." In light of our conclusion that one cannot reasonably infer knowledge of fraud at Peregrine from either Bigelow's January 2000 statements and/or from defendants' sales of stock in February 2000, we need not consider Cole's contention.

^[13] Immediately after making this comment during his deposition, Bigelow acknowledged that his accounting firm continued to issue a "clean opinion" on Peregrine's financial statements notwithstanding these concerns.

^[14] The fact that the fraud at Peregrine continued for approximately two years after February 2000 further weakens any potential inference that one might draw from the timing of the February 2000 stock sales.

^[15] The record on appeal contains evidence related to this issue, but plaintiffs made no argument regarding the relevance of this evidence in their opening brief. "It is not [this court's] place to construct theories or arguments to undermine the judgment and defeat the presumption of correctness." (Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836, 852.)

^[16] As with Moores, plaintiffs fail to cite to any SEC forms in the record evidencing Noell's sales of Peregrine stocks in the year 1998. However, the graph in plaintiffs' brief, which we assume to be accurate, suggests that Noell sold approximately 30,000 shares of Peregrine stock in February 1998.

^[17] Although Cole does not indicate in his declaration the number of shares sold, he refers to the operative complaint, in which plaintiffs allege such information. We assume for purposes of this opinion that plaintiffs' graph is accurate.

^[18] Elsewhere in their brief, plaintiffs note that Peregrine's transaction with Critical Path was later determined to have had no actual economic value.

^[19] Plaintiffs' entire argument on this point in their opening brief consists of the following: "Plaintiffs submitted expert testimony about other inconsistencies in Peregrine's public disclosures. [Citation.] Specifically the expert testimony points out that 1) Peregrine's earnings statements were inconsistent with the Reviews and Outlooks [citation]; 2) Peregrine's SEC Filings were inconsistent with the Reviews and Outlooks (written reports to the board from the CEO) [citation]; and 3) Peregrine's pattern of meeting earnings expectations was inconsistent with its peer groups [citation]."

^[20] One could not reasonably draw an inference of scienter from the fact that Peregrine appeared to be performing better than most of its competitors.