[PUBLISH] IN THE UN ITED STATES COURT OF APPEALS FOR THE ELE VENTH CIRCUIT

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JOSEP H C. HUBBARD, in di vi du al ly andon be ha lf o f al l o th ers si m il arl y si tu at ed , ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll Pl ai nt iff , STATE-BOSTON RETIREMENT SYSTEM, ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll Pl ai nt iff - App el la nt , ve rs us BANKATLANT IC BANCOR P, INC., JAM ES A. WHITE, VALARIE C. TOAL SON, JAR ETT S. L EVAN, ALAN B. LE VAN, ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll Defen da nt s - Ap pe ll ees .

__ __ __ __ __ __ __ __ __ __ __ __ App eal s fr om

th e Uni te d S ta te s Di st ric t Co urt forth e So ut he rnDis tri ctof F lo rid a

__ __ __ __ __ __ __ __ __ __ __ __ (J ul y 23 , 20 12 ) Case: 11-12410 Date Filed: 07/23/2012 Page: 1 of 35Befo re TJ OFLAT, PRYOR an d F AY, Circ ui t J ud ge s.

TJOFLAT, Cir cu itJu dg e: Thi s ap pe al co nc ern s a p riv at e se cu rit ie s fr au d c la ss act io n b ro ug htun de r § 1 0( b) of t he Secu rit ie s Ex ch an ge Act o f 19 34 an d S EC Ru le 10 b- 5 ag ai ns t a 1 2 ba nkho ld in g c om

pa ny, BankAtl an ti c Ban co rp , Inc ., andit s m an ag em en t (co ll ect iv el y , “ Ban co rp ”) by Stat e-Bo st on Ret ire m en t Syste m , a sh areh ol de r an d 3 Section 10(b) pr ovides, in releva nt part: 1 It shall be unlawful f or any person, dire ctly

or indirec tly , by

the use of a

ny means or instrumenta lity

of interstate commerc e or of the mails, or of a

ny fac ility of any national sec urities exchang e—

. . . . (b) To use or employ , in connec tion with the purchase or sale of any security reg istered on a

national sec urities exchang e or a ny security not so reg istered, . . . a

ny manipulative or de ceptive de vice or contrivanc e in contrave ntion of such rules a nd regulations as the [S ecurities and Ex chang e] Comm ission may presc ribe a s nece ssary

or appr opriate in the public interest or f

or the prote ction of investors. 15 U.S.C. § 78j(b). Rule 10b-5, promulg ated unde r § 10(b) of the Sec urities Ex chang e Ac t, provides: 2 It shall be unlawful f or any person, dire ctly

or indirec tly , by

the use of a

ny means or instrumenta lity

of interstate commerc e, or of the mails or of a

ny fac ility of any national sec urities exchang e, (a) To employ

any device , scheme , or ar

tifice to def

raud, (b) To make any

untrue stateme nt of a mate rial fa ct or to omit to state a materia l fac t nece ssary

in order to make the statements made , in the light of the circ umstances unde r which the y wer e made , not misl eading , or (c) To eng ag e in any

act, pr actice , or cour se of business whic h operates or would operate as a

fra ud or dec eit upon any

person, in connec tion with the purchase or sale of any security
. 17 C.F.R. § 240.10b-5. The off icer s named a s defe ndants wer e James Whi te, the for mer Executive Vice 3 President and Chief F inancial Of fice r (“ CFO” ) of the holdingcompany and for mer CFO of its subsidiary , Ba

nkAtlantic; J ohn Abdo, the Vice Chairman of the Boa rd of Dir ector s for the 2 Case: 11-12410 Date Filed: 07/23/2012 Page: 2 of 35th e le adpl ai nt iff . Stat e-Bo st on so ug htto pro ve at t ria l tha t the ho ld in g c om pa ny ha d m is rep res en te d t he lev el of r is k a ss oc ia te d wi th co m m erci al real est at e lo an s he ldby its subs id ia ry , Ban kAt la nt ic . After t he tri al , th e Dis tri ctCo urt s ub m it te d th e cas e to th e jury ona ve rd ic t fo rm see ki ng ge ne ral ve rd ic ts an d ans wers to sp eci al in te rro ga to rie s u nd er Fe de ral Ru le of C iv il Pro cedur e 4 9( b) . Whe n t he jury retu rn eda ve rd ic t p art ia ll y in fav orof S ta te -Bo st on , Ban co rp m ov edfor jud gm en t as a m at te r of

law u nd er Fe de ral Ru le of C iv il Pro cedur e 5 0. Pe rcei vi ng anin co ns is te nc y

be twee n t wo o f th e jury’ s i nt erro ga to ry an swe rs , th e Dis tri ct Co urt d is card edon e o f th em an d g ran te d t he m ot io n o n t he ba si s o f th e rem ai ni ng fin di ng s. Thi s was erro r. Whe n aco urt co ns id ers a m ot io n fo r jud gm en t as a m at te r of law— ev enaft er the jury ha s re nd ereda ve rd ic t— on ly the su ffi ci en cy of t he
ev id en ce m at te rs . Cha ne y v. Ci ty of Orla nd o, 4 83 F.3d12 21 , 12 27 (11 th Cir
. 20 07 ). The ju ry ’s fin di ng s ar e irrel ev an t. See id . at 1 22 7– 28 . Desp it e th e Dis tri ct Co urt’s erro r, we m ay

affi rm foran y reas on supp orte d b y

th e rec or d. E.g., Un it ed St at es v. Harr is , 60 8 F .3d12 22 , 12 27 (11 th Cir . 20 10 ). In t hi s ca se , we con cl ud e holding c ompany

and the subsidiary ; Valerie Toalson, the CF O of the holdingcompany and Ex ecutive V ice Pre sident and CFO of the subsidiary ; J are tt L evan, the President of the subsidiary and, af ter January

16, 2007, the President of the holding c ompany and CEO of the subsidiary ; and Alan L evan, the former Chairman of the Boa

rd and CEO of

the holding c ompany

and for mer Chairman of the Boa

rd and Pre sident and CEO of the subsidiar y . 3 Case: 11-12410 Date Filed: 07/23/2012 Page: 3 of 35th atth e ev id en ce was in su ffi ci en t t o s up po rt afin di ng of l os s caus at io n, an

el em en t re qu ire d t o m ak e o uta se cu rit ie s fr au d c la im un de r Ru le 10 b- 5. Se e, e.g ., Dur a Ph arm ., Inc . v. Bro ud o, 5 44 U.S. 33 6, 3 42 , 12 5 S . Ct. 1 62 7, 1 63 1, 1 61 L. Ed. 2d57 7 (2 00 5) (li st in g a m on g t he ele m en ts of a§ 1 0( b) sec ur it ie s fr au d c la im “ lo ss cau sa ti on , i.e., a caus al co nn ect io n b etweenth e m at eri al mis rep res en ta ti on an d t he lo ss ” (em ph as is om it te d) (in te rn al qu ot at io n m ark s o m it te d) ). W e th eref or e aff irm. I. A. Ban kAt la nt ic Ban co rp , Inc ., is a publ ic ly trad edba nkho ld in g c om pa ny in co rp or at edan d h ead qu art eredin Flo rid a. Its subs id ia ry , Ban kAt la nt ic , is a fed eral ly chart eredbankth atoff ers co ns um er an d c omm erci al ba nk in g a nd le nd in g s erv ic es th ro ug ho utFlo rid a. Thi s ca se co nc ern s al le ga ti on s t ha t fr om Octo be r 19 , 20 06 , un ti l Oct ob er 2 5, 2 00 7 (t he “ cl as s p eri od ”), Ban co rp 4 frau du le nt ly mis le d t he publ ic ab ou t the de te rio rat in g c red itqu al it y of

The c lass cer

tified by the District Court orig inally included eve ryone who bought 4 Ba ncorp stock be tween N ovember 9, 2005, and Oc tober 25, 2007, a nd suffe red da

mag es as a result. B ut on August 18, 2010, the District Court gr anted B ancor p summary

judgme nt on all claims arisingfrom the pe riod from Nove mber 9, 2005, through October 18, 2006. Be cause State-B oston does not challeng e that disposition on appeal, no cla ims from that period ar e bef ore us. 4

Case: 11-12410 Date Filed: 07/23/2012 Page: 4 of 35Ban kAt la nt ic ’s comm erci al real est at e p ortfo li o. Thatpo rtf ol io co m pr is edlan d 5 acqui si ti on an d d ev el op m en t l oans ; l an d a cqui si ti on , dev el op m en t, an d
co ns tru ct io n l oa ns ; an d b ui ld er l an d b an k l oa ns (“ BLB l oans ”). Each of t he se cat eg or ie s co m

pr is edlo an s t o i nv es to rs to bu y lan d fo r in it ia l d ev el op m en t fo ll owe d b y

sal e fo r fu rth er d ev el op m en t. The rel ev an t d is ti nc ti on forpu rp os es of th is cas e is be twee n B LB lo an s, wh ic h wer e m ad e to in ve st or s af te r th ey ha d s ol d op ti on s t o p ur ch as e lo ts to ho m eb ui ld ers , andno n- BLB l oa ns , whi ch in vo lv edno su ch pre -d is bu rs em en t o pt io n c on tra ct s. Ban kAt la nt ic in te rn al ly m on it or edth e ri skass oc ia te d wi thth es e la ndlo an s by ass ig ni ng each lo ana gr ad e o n asca le fro m on e to th irt een—t he lo wer the gr ad e, th e sa fer t he lo an . Grade s o ne th ro ug h n in e were c on si de redpa ss in g. Bu t
on ce a l oa n was ass ig ne d agra de of t en—an d t he refo re cl as si fie d a s a “ sp eci al
m en ti on ” as se t— ora gr ad e o f el ev en—an d t he refo re cl as si fie d a s a “ subs ta nd ard ”
as se t— itwas p la cedona “ Loa n Watch Lis t” to all ow t he ba nk ’s m an ag em en t t o

Be causeof the proc edura l posture of this case , in rec iting the f acts, we g ive cr edenc e to 5 State-B oston’s evidenc e, as w ell as uncontra dicted and unimpea ched e videncesupporting Ba ncorp, a nd drawall rea sonable infe renc es in State-B oston’s favor . See Ree ves v. Sander son Plumbi ngProds., Inc., 530 U.S. 133, 150–51, 120 S. Ct. 2097, 2110, 147 L . Ed. 2d 105 (2000). For a fuller statement of the sta

ndard of revie w of a

rulingon a motion for judgment as a matter of law, se e infra

part I I I
. 5 Case: 11-12410 Date Filed: 07/23/2012 Page: 5 of 35ke ep tra ckof l oa ns th atm ig htpo se pro bl em s. 6

The Loan W at ch Lis t, wh ic h was up da te d m on th ly, was a pu rel y in te rn al ris k- m on it or in g t oo l; itwas n otrel eas edto th e p ub li c. Ban co rp ’s publ ic di sc lo su res di d re gu la rly reve al th e am ou ntof l oans de si gn at ed“ no na ccru al ,” as op po se d t o “ accrui ng .” Thatde si gn at io n i nd ic at edth e b an k’s ju dg m en t tha t a l oa n was un li ke ly to b e rep ai d a cco rd in g t o t he term s o f th e lo anag reem en t. Bu t m an y co m m erci al real est at e lo an s t ha t wer e g rad edten or e le ve n, an d t he refo re cat al og ue d o n t he Loan W at ch Lis t, were no t d es ig na te d n on accrua l. Co nc ern ab ou t the se lo an s, the refo re, was no t re ve al edto th e p ub li c. B. St at e-Bo st on ’s cas e co nc ern s t he se co m m erci al real est at e lo an s d es ig na te d

Acc ordingto Ba

nkAtlantic’s Commercia l Real Estate a nd Commercial L oan Policy , 6 specia l-mention assets, assigned a grade of ten, “ have pote ntial weakne sses that deser ve manag ement’s c lose attention. I f left unc orre cted, these potential weaknesses may result in deterioration of the r epay ment prospec ts for the a sset or in the instituti on’s cr edit position at some future date.” A grade of ele ven—or, e quivalently , a designation of “substanda rd”—r efle cts an asse ssment that the loan “is inade quately protec ted by

the cur rent sound wor

th and pay

ing capa city of the oblig or or the c ollatera l pledg ed, if a ny .” Substandard a ssets have a “we ll defined weakness or set of

wea knesses” and “a

re c hara cterized by

the distinct ‘possibili ty ’ that the B ank will sustain som e loss.” That loss potential, however, ne ed only exis t “in the ag greg ate a

mount of Substandard a ssets”; it “does not haveto exi st in indi vidual assets cla ssified Substandard.” Ba nkAtlantic’s policies a lso provided that a grade of twelve or thirteen w arr anted place ment on the L oan Watch L ist. Those g rade s, howeve r, we re se ldom assigne d in prac tice. Ty pically , by

the time a loan ha d deteriorated e nough to warr ant a grade of twelve or thirteen, a write-down of its value had a lrea dy occur red, making a

further downgrade within the one-tothirteen risk-gradingsy stem unnece ssary . Notably , the L oan Watch L ist also included any loans designated “ nonacc rual,” a ter m we explain below, or pa st due 90 day s or more.

6 Case: 11-12410 Date Filed: 07/23/2012 Page: 6 of 35sp eci al -m en ti on or s ub st an da rd , or o th erwi se id en ti fie d a s p ot en ti al ly pro bl em at ic ,

bu t n otde si gn at edno na ccru al an d t he refo re n otdi sc lo se d t o t he publ ic as aso ur ce of co nc ern . Accor di ng to Sta te -Bo st on , Ban co rp kn ew atlea stas e arl y as t he fal l of 20 06 th atitha d re as on to be worr ie d abo utth e cre di t qua li ty of th e co m m erci al real est at e p ortfo li o. St at e-Bo st on in tro du cedev id en ce o f wha t i t v ie wedas l ax un de rwri ti ng , as wel l as in te rn al co m m un ic at io ns withi n B an kAt la nt ic th at
rev eal edco nc ern th atso m e b orro wers m ig htbe un ab le to sel l the lan d s ecu rin g th ei r lo an s t o h om eb ui ld ers , m ak in g t he ir l oa ns di ffi cu ltto pa y off
. Inpubl ic st at em en ts , ho wev er, Ban co rp de ni edco nc ern ab ou t Ban kAt la nt ic ’s comm erci al real est at e p ortfo li o. OnOcto be r 19 , 20 06 , ina qu art erl y earn in gs co nf

eren ce ca ll op ento th e p ub li c, Ja m es Whi te , th enBan co rp ’s Ch ie f Fi na nc ia l Offi cer, s ai d, “ The re’s rea ll y no th in g s ig ni fic an t t o n ot e o n t he cred itqu al it y

fro nt [,] whi ch in it se lf[ ,] gi ve n the cu rren t re al est at e en vi ro nm en t[,] I th in k i s a f

av or ab le co m

m en tary .” Whi te no te d t ha t the lan d s ecu rin g Ban kAt la nt ic ’s comm erci al real est at e lo an s m ig htbe de ve lo pe d m or e sl owl y th an an ti ci pa te d, b utsu gg es te d t ha t the ba nk ’s un de rwri ti ng ga ve in ve st or s re as on for
co nf id en ce: “ [I]n o ursi tu at io n a ndbe cau se of o urin si st en ce o n h ardequi ty in pr ojec ts ,” he sai d, “ we be li ev e we’re de al in g wi th bo rro wers with s ta y in g p owe r th atwil l en ab le th em

to rid e th ro ug h t hi s i f in de edth attre nddo es m an ife st .” On

7 Case: 11-12410 Date Filed: 07/23/2012 Page: 7 of 35Nov em

be r 29 , 20 06 , at an in ve st orco nf eren ce i n New Yo rk , Jar ett Lev an , th en Pres id en t o f Ban kAt lant ic , ann ou nc edth atth ere wer e n o tro ub li ng cred itqu al it y tre nd s ah ead
. Ove r ti m e, ho wev er, Ban co rp ’s pri va te co nc ern s ab ou t the co m m erci al real
es ta te po rtf

ol io —as refl ect edinth e in crea si ng nu m be r of accrui ng bu t s pe ci al
m en ti on or s ub st an dardlo an s o n t he Loan W at ch Lis t— in te ns ifi ed . The fi rs t it erat io n o f th e Loa n Watch Lis t g en erat eddu rin g t he cla ss pe rio d s ho wedno sp eci al -m en ti on or s ub st an da rdco m m erci al real est at e lo an s t ha t wer e acc ru in g an d t he refo re u nkno wn t o t he publ ic . On Ma rch 31 , 20 07 , ho wev er, the Loan W at ch Lis t s ho wed , inad di ti onto m or e th an$2 0.5 m il li on in no na ccru al lan d lo an s, an accrui ng bu t s ub st an da rdlan d l oan o f m or e th an$2 1.2 m il li on . By th en , con cern ab ou t the co m m erci al real est at e p ortfo li o h adreg is te redin ot he r in te rn al co m

m un ic at io ns as we ll . For e xa m pl e, in anem ai l t o s ev eral Ban kAt la nt ic off

ic ers da te d M arch 14 , 20 07 , Alan Leva n, t he n B an co rp ’s CEO
an d C ha irman of

th e Bo ardof Di rect or s, n ot eda “pa rad e o f la ndlo an s co m in g i n fo r ex te ns io ns rece nt ly” andwarn ed , “ It’s p ret ty obv io us th e m us ic ha s s to pp ed
. Inm os t ca se s, the pre so ldco nt ractto a bu il de r ha s ei th er g on e away or is in di sp ut e o r be in g m od ifi ed .” Andat aCred itPo li cy Co m m it te e m eet in g o n M arch 21 , 20 07 , sev eral Ban kAt la nt ic off ic ers di sc us se d t he rece nt“ m ig rat [io n]” o f ab ou t 8 Case: 11-12410 Date Filed: 07/23/2012 Page: 8 of 35$9 0 m il li on in co m m erci al real est at e lo an s fr om gra de fou r, in th e b an k’s ri sk
gr ad in g s y st em , to th e lo wer, b utst il l p as si ng , gra de s o f fi ve , si x, an d s ev en be cau se of the weak en in g h ou si ng m ark et . On Ap ril 25 , 20 07 , inan8-K rep orti ng fin an ci al res ul ts forth e fi rs t qua rte r 7 of 20 07 , andin an ot he r earni ng s co nf eren ce ca ll th e n ex t d ay , Ban co rp pa rti al ly di sc lo se d i ts co nc ern ab ou t the co m m erci al real est at e p ortfo li o. In ad di ti on to di sc lo si ng th e am ou ntof B an kAt la nt ic ’s no na ccru al lo an s, the 8-K warne d, The cu rren t en vi ro nm en t fo r res id en ti al lan d a cqui si ti on an d de ve lo pm en t l oa ns is a co nc ern , parti cu la rly in F lo rid a, an d re pr es en ts anareawher e we rem ai n v ery cau ti ou s i n o urcred itm an ag em en t. In vi ew of m ark etco nd it io ns , we ant ic ip at e we m ay ex pe rie nc e fu rth er de te rio rat io n i n the po rtf

ol io ov er the ne xtsev eral qu art ers as t he m ark etatt em

pt s t o abs orb a n o ve rs up pl y of ava il ab le lo t i nv en to ry . Dur in g t he Apri l 2 6 c on fere nc e cal l, Al anLeva n m en ti on edtwo no na ccru al lo an s i n B an kAt la nt ic ’s comm erci al real est at e p ortfo li o— on e fo r ab ou t $ 12 .5
m il li on an d o ne forab ou t $ 7.5 m il li on . Levan sai d b ot h wer e BLB l oa ns . He
warn edth atth e Fl or id a h ou si ng m ark etwas s lo win g a ndth at , as ares ul t, the ris k
as so ci at edwith t he BLB p ortfo li o c ou ldwors en . Becau se of m ark etco nd it io ns , Lev ansai d, h om eb ui ld ers were b eco m in g m or e rel uc ta ntto bu y lo ts on th e la nd

Acc ordingto the SEC’s website, “F orm 8-K is the ‘c urre nt report’ companies must file 7 with the SEC to announce major e vents that share holders should know about.” For m 8-K, U.S. Sec. & Ex ch. Comm’n, http://www.se c.g ov/answer s/form8k.htm (last modified J uly 22, 2009). 9 Case: 11-12410 Date Filed: 07/23/2012 Page: 9 of 35th atsec ur edth e BLB l oa ns . Thatda y , Ban co rp ’s st oc k p ric e dro pp edfro m $1 0.5 5 pe r sh are t o $ 9.9 9. C. So m e o f th e ri skass oc ia te d wi thBan kAt la nt ic ’s comm erci al real est at e po rtf ol io rem ai ne d u nd is cl os ed . Duri ng th e Apr il 26 co nf eren ce ca ll , Leva n d id
no t d is cl os e th ata $2 1.2 m il li on BLB lo anha d b een de si gn at ed“ subs ta nd ard ” an d pl acedon th e Loa n Watch Lis t. No r di d h e d is cl os e co nc ernab ou t the no n- BLB po rti onof t he co m

m erci al real est at e p ortfo li o. Bu t, i n fa ct , th e smalle r of th e two lo an s Lev anm en ti on eddu rin g t he co nf eren ce ca ll was ano n- BLB l oa n, an d t he

“pa rad e” o f ex te ns io ns m en ti on edin hi s M arch 14 em ai l h adin cl ud edno n- BLB lo an s. Ove r th e y ear, t he ris k a ss oc ia te d wi thth e co m m erci al real est at e p ortfo li o wor se ne d c on si de rab ly. By th e en d o f Apr il 20 07 , th e Loa n Watch Lis t s ho wed $6 0.3 m il li on in sp eci al -m en ti on or s ub st an da rdBLB lo an s, i n a dd it io n t o the $1 2.5 m il li on lo anLevan h adm en ti on ed , andm or e th an$3 8.7 m il li on in sp eci al
m en ti on or s ub st an dardno n- BLB l oa ns , inad di ti on to th e $ 7.5 m il li on no na ccru al lo anLeva n h adm en ti on ed . By th e en d o f Ju ne 20 07 , Ban kAt la nt ic ha d $ 12 .6
m il li on inno na ccru al BLB lo an s an d $ 3.2 m il li on inno na ccru al no n- BLB l oa ns , whi chwere re fle ct edinth e to ta l am ou ntof n on accrua l l oans di sc lo se d i n a n 8 -K 10 Case: 11-12410 Date Filed: 07/23/2012 Page: 10 of 35on Ju ly 24, 2 00 7. Un di sc lo se d, h owe ve r, were the ad di ti on al $9 0.7 m il li on in

accrui ng bu t s pe ci al -m en ti on or s ub st an da rdBLB lo an s an d $ 55 .5 m il li on in
accrui ng bu t s pe ci al -m en ti on or s ub st an da rdno n- BLB l oans . As h adAlan Leva n dur in g t he Apri l 2 6 c on fere nc e cal l, Banc or p’s p ub li c st at em en ts co nt inue d t o n ot e th e ri skass oc ia te d wi th Ban kAt lant ic ’s BLB lo an s bu t m in im iz edth e ri skass oc ia te d wi th th e n on -BLB p orti onof t he co m m erci al real est at e p ortfo li o. Ba nc or p’s 1 0- Q forth e fi rs t qua rte r of 20 07 , fil edon May 8 10 , to ldth e p ub li c th at“ m an ag em en t co ns id er[e d] th es e o th er l oa ns ”—t he no nBLB l oa ns —“ to be of r el at iv el y lo wer ri skth anth e ‘bu il de r la ndlo an s.’” In 9
For m 10-Q, a r eport that “ must be filed [with the SEC] for e ach of the first three fiscal 8 quarte rs of the c ompany ’s fisca l y ear ,” “inc ludes unaudited fina ncial stateme nts and provides a continuing vie w of the c ompany ’s financ ial position during the year .” F orm 10-Q, U.S. Sec. & Ex ch. Comm’n, http://www.se c.g ov/answer s/form10q.htm (last modified Sept. 2, 2011). The c ontextof this remar k was a s follows: 9 Conditi ons in the residential re al estate marke t nationally and in Florida continued to deteriorate during the first quarte r of 2007. Ne w home sale s and applications for

building per

mits fell significa

ntly from pea k levels during

2005 and inventorie s of unsold homes have significantly incre ased. The Ba

nk’s commerc ial rea l estate loan por tfolio consists of severa l sub-cate g ories of loa ns, eac h with differing c ollatera l and diffe rent leve ls of risk. The “ builder land loan” segment, at appr ox imately $140 milli on, consists of land loans to borrow ers who have option agree ments with reg ional and/or national builders. These loa ns were orig inally underwritten based on pr ojected sa les of the de veloped lots to the builders/option holders and timely repa y ment of the loans is primarily depende nt upon the ac quisiti on of the prope rty pursuant to the options. I f the lots are not acquir ed as origina lly

anticipated, w e anticipate that the borr ower may not be in a position t o servicethe loan with the likely result beingan incr ease in nonperf ormingloans and loan losses in this cate g ory . The “ builder land loan” segment discussed above is part of B ankAtlantic’ s total commerc ial rea l estate a cquisition and development portf olio of 11 Case: 11-12410 Date Filed: 07/23/2012 Page: 11 of 35an ot he r publ ic ly acces si bl e qua rte rly earn in gs co nf eren ce ca ll on Ju ly 25, 2 00 7, Alan Leva n s ai d B an kAt la nt ic ’s comm erci al real est at e p ortfo li o h ad“pe rfo rm ed
ex tre m el y well .” “ The on e cat eg ory th atwe jus t ar e fo cu se d o n,” he sai d, “ is th is la ndlo anbu il de r po rtf

ol io ”—tha t i s, the BLB p ortfo li o— “be cau se , y oukn ow, jus t fro m on e d ay to th e n ex t, the en ti re h om eb ui ld in g i ndus try, y oukn ow, wen t i nt o a st at e o f fl ux an d turm oi l an d i s i m pa ct in g tha t p art ic ul ar cl as s.” B ut , he s ai d,

“ th ere are n o p art ic ul ar as se t cl as se s t ha t we’re co nc ern edab ou t o th er tha n t ha t
on e cl as s.” An d i n b oth i ts fir st -qua rte r an d s eco nd -quarte r 10 -Qs, Ba nc or p g av e a fig ur e p ur po rti ng to rep res en t Ba nk Atl an ti c’s “ to ta l p ot en ti al pro bl em lo an s” —$ 7.8 m il li on in th e fi rs t-qua rte r 10 -Q an d $ 8.3 m il li on in th e se co nd
1 0 qu art er 1 0- Q—tha t co ul d n otpo ss ib ly hav e in cl ud edall of t he co m m erci al real

approximately

$562 milli on as of Ma

rch 31, 2007. The loans other than the “builder la

nd loans” in this categ ory are g ener ally

secur ed by

residential a

nd commerc ial rea l estate whic h will be fully develope d by

the borrow er or

sold to third parties. The se loans g ener ally involve proper

ty with a long er inve stment and development horizon and are guara nteed by the borrow er or

individuals and/or secur ed by

additional collater al such that it is expected that the borr ower will have the ability to service the debt under curr ent conditions for a

longe r period of time. Acc ording ly , manag ement conside rs these othe r loans to be of relatively lower risk than the “builder

land loans.” Simi lar languag e appe are d in Ba ncorp’ s second- quarte r 10-Q f iled on August 9, 2007. Total potential problem loans, a s prese nted in the 10-Qs, r epre sented the sum of loa ns 1 0 past due 90 da

y s or more, pe rfor

ming- impaired loans, a

nd restruc tured loans. 12 Case: 11-12410 Date Filed: 07/23/2012 Page: 12 of 35es ta te lo an s o n t he Loan W at ch Lis t. 1 1

On Oct ob er 2 5, 2 00 7, Ba nc or p re le as edan8-K t ha t, ac co rd in g t o S ta te Bo st on , bro ug htth e fraudto anen d. Th e 8 -K rep orte d t ha t Bank Atl an ti c’s pr ov is io n fo r lo anlo ss es in th e th irdqu art er o f 20 07 was $ 48 .9 m il li on , up fro m $4 .9 m il li on in th e p rev io us qu art er. Itals o re ve al edth atBan kAt la nt ic he ld $1 56 .3 m il li on in no na ccru al co m m erci al real est at e lo an s, up fro m $2 1.8 m il li on 1 2 in to ta l n on accrua l l oa ns at t he en d o f Ju ne 20 07 . Anditrev eal edforth e fi rs t t im e th e am ou ntof s ub st an dardco m m erci al real est at e lo an s h el d b y Ban kAt la nt ic —at th atpo in t, $ 90 .3 m il li on , no t co un ti ng no na ccru al lo an s. By th e ti m e th e 8 -K 1 3
was rel eas ed , Ban co rp ’s st oc k p ric e h adalr eady fal le n g radua ll y

ov er the cla ss pe rio d, fr om

$1 2.6 6 p er s ha re t o $ 7.6 5. OnOcto be r 26 , 20 07 , itfel l b y an ot he r $2 .93 , or 3 8 p erce nt , to $4 .72
. II.

At the end of

the first quar

ter of 2007—that is, at the end of Ma rch—the L oan Watch 1 1 L ist showed more than $21.2 million in accr uing but spe cial-me ntion or substandard c ommercia l rea l estate loans. And a s we note in pa rt I .B, supr a, at the e nd of the sec ond quarte r of 2007—that is, at the end of June—the L oan Watch L ist showed about $146.2 million i n acc ruing but special-me ntion or substandard c ommercia l rea l estate loans. BLB loa ns acc ounted for $81.1 million of this total, and non-BLB loa ns for $75.2 1 2 milli on. Of this total, BLB loa ns acc ounted for $28.7 million, and non-B LB loa ns for $61.6 1 3 milli on. The 8-K

ref err ed to these loa

ns as “c lassified,” but Jay McClung, B ankAtlantic’ s Chief Risk Officer , testified that “c lassified” w as equiva lent to “substandar d.” 13 Case: 11-12410 Date Filed: 07/23/2012 Page: 13 of 35Thre e d ay s l at er, the pre se ntact io n was fil edin th e Uni te d S ta te s Di st ric t

Co urt fo r th e So ut he rnDis tri ctof F lo rid a. Sta te -Bo st on ass ert edcla im s u nd er 1 4 § 1 0( b) of t he Secu rit ie s Ex ch an ge Act an d R ul e 1 0b -5 , all eg in g t ha t Ba nc or p h ad frau du le nt ly mis rep res en te d t he ris k a ss oc ia te d wi th Ban kAt la nt ic ’s comm erci al real est at e p ortfo li o. Sta te -Bo st on all eg edth ataltho ug h s om e o f th atris k was 1 5
rev eal edin th e 8 -K rel eas edon Apri l 2 5, 2 00 7, Ba nc or p h adco nt in ue d t o m is le ad th e p ub li c b y

su gg es ti ng th atth e ri skwas l im it edto th e BLB s eg m en t o f th e po rtf ol io
. Sta te -Bo st on ass ert eda frau d- on -th e-m ark etth eo ry , in vo ki ng th e 1 6 pr es um pt io n o f rel ia nc e ap pr ov edby the Supr em e Co urt i n B as ic , Inc . v. Lev in so n, 4 85 U.S. 22 4, 2 45 –4 7, 1 08 S. Ct. 9 78 , 99 0– 92 , 99 L. Ed. 2d19 4 (1 98 8)
. It c la im edth atBan co rp ’s m is rep res en ta ti on s h adart ifi ci al ly infl at edth e p ric e o f
Although the initial complaint was filed on Octobe r 29, 2007, by an individual 1 4 share holder named J oseph Hubba rd, our c hara cterization of the alleg ations relies on the F irst Amended Consolidated Complaint filed by State-B oston on J anuar

y 12, 2009, afte r it was appointed lea d plaintiff. The individuals named a s defe ndants wer e also a lleg ed to be liable a s control per sons 1 5 under § 20( a) of

the Securities Ex chang e Ac t. See 15 U.S.C. § 78t(a) (“ Every person who, direc tly or indirec tly , controls any person liable unde r any

provision of this chapter

or of a ny rule or re gulation thereunde r shall also be liable jointly and seve rally

with and to the same e x tent as such controlled pe rson . . . is liable . . . , unless the controllingperson a cted in g ood faith and did not directly

or indirec tly

induce the a ct or a cts constituting the violation or c ause of action.”)
. Although the First Amende d Consolidated Compl aint did not alleg e any other fr aud 1 6 afte r April 25, 2007, State-B oston argued at tria l that Ba ncorp’ s statements duringthat period had also fr audulently

conce aled the le vel of risk a ssociated with the B L B por tfolio by omitti ngto mention acc ruingbut special-me ntion or substandard B L B loa ns. 14 Case: 11-12410 Date Filed: 07/23/2012 Page: 14 of 35it s s to ckan d t ha t i nv es to rs ha d s uf fere d d am ag es when th e p ric e dro pp edin
res po ns e to th e d is cl os ur es onApri l 2 5, 2 00 7, an d Oct ob er 2 5, 2 00 7. Th e Dis tri ct Co urt ce rti fie d apl ai nt iff cla ss of “ [a]ll pe rs on s o r en ti ti es who pu rch as edor ot he rwis e acqui redsh ares of t he Cla ss A comm on st oc k o f Ban kAt la nt ic Ban co rp , In c. be twee n No ve m

be r 9, 2 00 5 a ndOcto be r 25 , 20 07 an d wer e d am ag ed th ereb y .” 1 7 St at e-Bo st on ’s on ly evi de nc e o f lo ss cau sa ti on an d d am ag es was t he ex pe rt te st im on y of C an da ce Pr es to n, a f

in an ci al an al y st . Pres to n p erfo rm edanev en t study , a st at is ti cal tec hn ique form eas ur in g t he effe ctof n ew in fo rm at io n o n t he
m ark etpri ce o f a s ecu rity , to de te rm in e h ow m uc h o f th e d ecl in e in th e p ric e o f Ban co rp ’s st oc k o n Ap ril 26 , 20 07 , andOcto be r 26 , 20 07 , was at tri bu tabl e to fact or s s pe ci fic to Ban co rp , rathe r th anto ge ne ral m ark etor i ndus try facto rs . 1 8
As noted above , howeve r, the District Court later grante d summary

judgme nt for 1 7 Ba ncorp on a ll claims arisingfrom the pe riod betwe en Nove mber 9, 2005, a nd October

18, 2006, eff ectively shorteningthe class pe riod. See supra note 4. The methodology

of an e vent study

is as follows: 1 8 Event study

analy sis compare s the day-to-day perc entag e cha

ng e in the marke t price of

a compa ny ’s common stock (known a s a “r eturn” ) to the re turn predic ted by

a mar ket model that uses a ma

rket index, such as the S& P 500 Index or the NA SDAQ Composite Index, and possibly an industry

index. The market model describes the normal r elation betwe en the r eturn on the c ompany ’s common stock and the r eturn on the ma rket a nd industry

indexes. W hen signific ant new inf

ormation about the c ompany (e.g ., corr ective disc losures, ear nings r eports, dividend cha ng es, stock splits, regulatory ruling s, acquisition bids, asset sales, or tax leg islation) is disclosed to the market, the mar ket model is used to deter

mine the component of

the stock re turn that would be e x pecte d based 15 Case: 11-12410 Date Filed: 07/23/2012 Page: 15 of 35Pres to n u se d t he S&P 5 00 Ind ex to eli m in at e an y po rti on of t he pri ce d ecl in es at tri bu tabl e to m ark et -wid e fac to rs . To rem ov e th e eff ectof i ndus try-sp eci fic fact or s, s he rel ie d o n t he NASDAQ BankInd ex , an i nd ex of t he st oc k p ric es of hu nd red s o f ba nk s an d b an k h ol di ng co m pa ni es tra de d o n t he NASDAQ. Sh e te st ifi edth atth es e were t he in de xe s u se d b y Ban co rp to co m

pare i ts st oc k p ric e
m ov em en ts to m ark etan d i ndus try tren ds an d t ha t s he ha d fo un d a“ st at is ti cal fit ” be twee n B an co rp ’s st oc k p ric e m ov em en ts an d t ho se in de xe s. On Ap ril 26 , 20 07 , alt ho ug h B an co rp ’s st oc k p ric e dro pp edm or e th an5 pe rcen t, the S&P 5 00 an d t he NASDAQ BankInd ex each fel l l es s t ha n 1 pe rcen t. Pres to n c on cl ud edba se d o n t ho se in de xe s t ha t, o f th e 5 6- cen t Ap ril 26 pri ce de cl in e, 55 cen ts co ul d n otbe ex pl ai ne d b y m ark etor i ndus try facto rs an d th eref or e m us t h av e res ul te d fr om

co m pa ny-sp eci fic fact or s. To is ol at e th e am ou ntatt rib ut ab le to th e al le ge d fr au d, as op po se d t o o th er co m pa ny-sp eci fic fact or s, Pr es to n l oo ke d a t s ev eral an al y st s’ pro jecti on s o f Ban co rp ’s earn in gs pe r sh are f or20 07 . Tho se pro

jecti on s, s he ob se rv ed , dro pp edby an av erag e o f 15
on the re turn of the ove rall marke t and industry . The re maining c omponent of the stock retur

n (that which c annot be e xplained by the re turn on the marke t and industry) is attributed to the newcompany-spec ific information or to chanc e. I f the disclosure of

the new inf

ormation is acc ompanied by a stock re turn that is outside of the stock’s nor mal volatility

rang e (a s measure d by

the marke t model), then the re turn is said to be “statistically signific ant.” Fr ank Torc hio, Proper Eve nt Study Analy sis in S ecurities L itigation, 35 J. C orp. L . 159, 160–61 (2009) ( footnotes omitted). 16

Case: 11-12410 Date Filed: 07/23/2012 Page: 16 of 35cen ts aft er the Apri l 2 6 d is cl os ur es . Bas edon in fo rm at io n i n t he an al y st s’ rep orts ,

Pres to n c on cl ud edth attwo -th ird s o f th atdro p i n B an co rp ’s pro jecte d e arn in gs were at tri bu tabl e to th e d is cl os ur e o f pr ev io us ly con ceal edris k i n t he co m m erci al real est at e p ortfo li o o n Ap ril 26 . She th enreas on edth atth e sa m e p ro po rti on of th e 5 5- cen t re si du al de cl in e in Ban co rp ’s st oc k p ric e—t wo- th ird s, o r 37 1 9
cen ts —was att rib ut ab le to th e fraud
. On Oct ob er 2 6, 2 00 7, as Ban co rp ’s st oc k fe ll 38 pe rcen t, the S&P 5 00 ros e ab ou t 1 pe rcen t, an d the NASDAQ BankInd ex ros e 2 pe rcen t. Pre st on co nc lu de d th atbu t fo r co m

pa ny-sp eci fic fact or s, Ba nc or p’s s to ckpri ce wo ul d h av e ri se n o n th atda y . She th us fou nda res idua l d ecl in e o f $3 .15 , eve n m or e th anth e actua l de cl in e o f $2 .93 . To ex cl ud e co m pa ny-sp eci fic fact or s o th er tha n t he frau d, Pres to n l oo ke d a t an al y strep orts res po nd in g t o t he Octo be r 25 di sc lo su res . Bec au se an al y st s s eem edm os t co nc ern edab ou t the de te rio rat io n o f th e co m m erci al real est at e p ortfo li o, Pr es to n c on cl ud edth atall of t he res idua l d ecl in e was attrib ut ab le to th e d is cl os ur e o f pr ev io us ly con ceal edris k i n tha t p ortfo li o. Sh e th eref

or e o pi ne d t ha t the en ti re Oct ob er 2 6 p ric e d ecl in e o f $2 .93 was

Preston used the ter

m “re sidual decline”to refe r to the diffe renc e betwe en the stock 1 9 price ’s pre dicted beha

vior, based on the indexes chosen, and its ac tual behavior —that is, the portion of the stock pric e dec line not expl ainable by marke t or industry

forc es, as de termined by the eve nt study
. 17

Case: 11-12410 Date Filed: 07/23/2012 Page: 17 of 35at tri bu tabl e to th e fraud
.

The Dis tri ctCo urt s ub m it te d t he cas e to th e jury ona ve rd ic t fo rm th at di vi de d t he cas e in to two pe rio ds , th e fi rs t fr om Octo be r 19 , 20 06 , to Apri l 2 5, 20 07 —t ha t i s, up t o t he pa rti al di sc lo su re i n t he Apri l 2 5 8 -K—a ndth e se co nd fro m Apri l 2 6, 2 00 7, t o Oct ob er 2 5, 2 00 7. Fo r eac h p eri od , th e v erd ic t fo rm reque st eda ge ne ral ve rd ic t o n l iabi li ty andda m ag es , alo ng with ans wers to sev eral in te rro ga to rie s as ki ng whet he r eac h o f ni ne te enall eg edm is st at em en ts was frau du le ntan d m ad e wit h s ci en te r, an d anu m be r of qu es ti on s re la te d t o c on tro lpe rs on li ab il it y

un de r § 2 0( a) o f th e Sec ur it ie s Ex ch an ge Act. See Fe d. R. C iv
. 2 0 P. 49 (b )(1 ) (“ The co urt m ay subm itto th e jury form s fo r a g en eral ve rd ic t, t og ethe r wit h wri tt enqu es ti on s o n o ne or m or e is su es of f actth atth e jury m

us t d eci de .”). W it h re sp ectto th e fi rs t p eri od , th e jury fou ndth atBan co rp ha d v io la te d § 1 0( b) bu t award edno da m ag es . W ith re sp ectto th e se co ndpe rio d, the jury fo un d tha t Ba nc or

p, i n e ig htst at em en ts , hadvi ol at ed§ 1 0( b) an d a ward ed da m ag es of $ 2.4 1 p er s ha re. Upo n t he return o f th e v erd ic t fo rm , th e Dis tri ct
Section 20(a) provides, in re levant par t: 2 0 Every person who, dir ectly

or indirec tly , controls any person liable unde r any provision of this chapter

or of a ny rule or r egulation thereunde r shall also be liable jointly and seve rally

with and to the same e x tent as such c ontrolled person . . . is liable . . . , unless the contr olling per son acte d in good f aith and did not direc tly

or indirectly induce the a ct or a cts constituting the violation or c ause of action. 15 U.S.C. § 78t(a). 18

Case: 11-12410 Date Filed: 07/23/2012 Page: 18 of 35Co urt n ot edanap pa ren t i nc on si st en cy inth e jury’ s fi nd in gs on th e fi rs t s ta te m en t fro m th e se co ndpe rio d. The jury fou ndth atAlan Leva n h ad“ act edkn owi ng ly 2 1 wit h re sp ectto th atst at em en t.” Itals o fo un d, h owe ve r, th atLeva n h ad“ act edin go odfai th an d d idno t d ire ct ly or in di rect ly induc e th e Sec ti on 10 (b ) vi ol at io n.” 2 2 Ban co rp m ov edforjud gm en t as a m at te r of law u nd er Fe de ral Ru le of C iv il Pro cedur e 5 0( b) an d fo r a n ew tr ia l u nd er Ru le 59
. In ru li ng on th e Ru le 50 (b ) 2 3
m ot io n, t he Dis tri ctCo urt fo cu se d o n t he jury’ s fi nd in gs . Becau se of t he pe rcei ve d i nc on si st en cy

no te d abo ve , th e Dis tri ctCo urt d is card edth e jury’ s fin di ng th atth e fi rs t s ta te m en t fr om th e se co ndpe rio d h adbe enm ad e kno win gl y an d re fu se d t o c on si de r th atst at em en t as a po te nt ia l b as is forli ab il it y . The co urt
This was Alan L evan’ s statement duringthe ea rning s confe renc e ca ll on April 26, 2 1 2007, that both of the nonac crua l commerc ial rea l estate loans we re B L B loa ns. The ve rdict for

m asked for

a dete rmination of that fa ct bec ause it is a def ense to 2 2 control-pe rson liability

under § 20( a) that “the contr olling per son acte d in good f aith and did not direc tly or indirec tly

induce the a ct or a cts constituting the violation or c ause of action.” 15 U.S.C. § 78t(a). Ba ncorp ha d timely

moved for judgment as a matter of law at the close of State- 2 3 Boston’s e vidence at trial. We note that beca

use the jury

returne d a g ener al ver dict awa rdingno damag es with respe ct to the first par

t of the cla ss period, B ancor p’s re newe d motion for judgme nt as a matter of law—and the rulingunder r eview he re—c oncer ned only the § 10(b) c laim based on stateme nts made during the second pe riod, from April 26, 2007, to October 25, 2007. See In re Ba nkAtlantic B ancor

p, Inc. Sec. L itig., No. 07- 61542-CIV-UN GARO, slip op. at 19–20 (S.D. Fla. A pr. 25, 2011) ( “The parties a gree on most of the judgme nt compelled by the ver dict—all Def endants a re e ntitled to judgment in their fa vor for the first period and Def

endants [J ohn] Abdo, J are tt L evan, a

nd [J ames] Whi te ar e entitled to judg ment in their favor for the se cond. The pa rties dispute only

the prope r judg ment reg ardingDef endants B ancor

p, Alan L evan, a

nd [Valerie] Toalson as to the sec ond period.” ). 19

Case: 11-12410 Date Filed: 07/23/2012 Page: 19 of 35th entu rn edto th e o th er s ta te m en ts th e jury hadfou ndto vi ol at e § 10 (b ), ig no rin g

th e o th ers . Con cl ud in g tha t St at e-Bo st on ha d n otpre se nt edev id en ce s uf fic ie ntto
supp ort a f

in di ng th atth e st at em en ts fou ndby the jury to vi ol at e § 10 (b ) ha d
cau se d t he ir l os se s, the Dis tri ctCo urt g ran te d B an co rp ’s m ot io n fo r jud gm en t as a
m at te r of law. Th e co urt al so co nd it io na ll y de ni edBan co rp ’s m ot io n fo r a n ew tri al . See Fed . R. Civ . P. 50 (c)( 1) (“ If the co urt g ran ts a ren ewedm ot io n fo r jud gm en t as a m at te r of

law, i t m us t al so co nd it io na ll y

rul e o n a ny m ot io n fo r a ne w tri al by det erm in in g wh ethe r a n ew tr ia l s ho ul d b e g ran te d i f th e jud gm en t i s la te r va cat edor r ev ers ed .”). Sta te -Bo st on no w app eal s t he Dis tri ctCo urt’s g ran t of jud gm en t as a m at te r of

law, an d B an co rp cro ss -ap pe al s t he co nd it io na l d en ia l of it s m ot io n fo r a n ew tr ia l. III. W e rev ie w a di st ric t co urt’s ru li ng on a m ot io n fo r jud gm en t as a m at te r of la w de n ov o. Go od m an -Gab le -Go ul d C o. v . TiaraCo nd o. As s’n, 5 95 F.3d12 03 , 12 13 n.2 9 (1 1t h C ir. 2 01 0) . In d eci di ng a m ot io n fo r jud gm en t as a m at te r of law,
we rev ie w all th e ev id en ce, drawi ng all reas on ab le in fere nc es in fav orof t he
no nm ov in g p arty . Reev es v. Sa nd ers on Plu m bi ng Pro ds ., Inc ., 53 0 U.S. 1 33 , 15 0, 12 0 S . Ct. 2 09 7, 2 11 0, 1 47 L. Ed. 2d10 5 (2 00 0) . W e d o n otm ak e cre di bi li ty de te rm in at io ns or we ig h t he ev id en ce. Id . W e g iv e cre de nc e to ev id en ce 20 Case: 11-12410 Date Filed: 07/23/2012 Page: 20 of 35supp orti ng th e n on m ov in g p arty ’s cas e, as well as “ un co nt rad ic te d a nd

un im pe ach ed ” ev id en ce s up po rti ng th e m ov in g p arty , “ atlea stto th e ex te ntth at th atev id en ce co m es fro m di si nt eres te d wi tn es se s.” Id . at 1 51 , 12 0 S . Ct. at21 10 (in te rn al qu ot at io n m ark s o m it te d)
. A. The Dis tri ctCo urt erredwhen itrel ie d o n t he jury’ s fi nd in gs ingra nt in g Ban co rp ’s ren ewedm ot io n fo r jud gm en t as a m at te r of law. Fed eral Ru le of C iv il Pro cedur e 5 0 a ll ows a di st ric t co urt t o g ran t a m ot io n fo r jud gm en t as a m at te r of la w if “ th e co urt fi nd s tha t a r eas on ab le jury wou ldno t h av e a l eg al ly suf fic ie nt
ev id en ti ary ba si s t o fi ndfor th e [n on m ov in g p arty ]. ” Fed . R. Civ . P. 50 (a). Th is is th e st an da rdwhet he r th e m ot io n i s m ad e b efo re o r aft er the cas e is subm it te d t o t he jury. Ch an ey

v. Ci ty of Orla nd o, 4 83 F.3d12 21 , 12 27 (11 th Cir . 20 07 ); s ee al so 9B Ch arl es Alan Wrig ht& Arth urR. Mi ll er, Fed eral Prac ti ce an d P ro cedur e § 2 53 7, at61 9– 24 (3ded . 20 08 ) (“ The st an da rdforgra nt in g aren ewedm ot io n fo r jud gm en t as a m at te r of

law u nd er Ru le 50 (b ) is pre ci se ly the same as th e st an da rd fo r gr an ti ng th e p re-s ub m is si on m ot io n u nd er Ru le 50 (a). Th us , th e p os t-v erd ic t
m ot io n fo r jud gm en t ca n b e g ran te d o nl y if t he pri or

m ot io n s ho ul d h av e b een gr an te d.” (fo ot no te om it te d) ). Onl y th e su ffi ci en cy

of t he ev id en ce m at te rs ; wh at th e jury actu al ly fou ndis irr el ev an t. See Ch an ey , 48 3 F .3dat 1 22 7– 28
. 21 Case: 11-12410 Date Filed: 07/23/2012 Page: 21 of 35Thu s, we h el d i n C hane y th atth e Dis tri ctCo urt h aderre d wh en , ingrant in g a ren ewedm ot io n fo r jud gm en t as a m atte r of law, i t “ effe ct iv el y

ba se d i ts
co nc lu si on s o n t he jury fin di ng s co nt ai ne d i n t he sp eci al ve rd ic t fo rm .” Id . at 12 27 . In Ch an ey , th e p la in ti ff s ue d the Cit y of Orl an do an d acit y

po li ce o ffi cer un de r 42 U.S.C. § 1 98 3, al le gi ng wron gf ul arre st , exc es si ve for ce, an d m al ic io us pr os ecu ti on . Id. at12 22 . The Di st ric t Co urt s ub m it te d t he cas e to th e jury ona sp eci al -v erd ic t fo rm , andth e jury fou nd , am on g o th er thi ng s, tha t the pl ai nt iff’s
arre stha d b een supp orte d b y pro babl e cau se . Id. at12 25 . The co urt re li edhe av il y on th atfin di ng in it s o rd er g ran ti ng th e o ffi cer’s re ne wedm ot io n fo r jud gm en t as a
m at te r of law. See id . at 1 22 5– 26 . The co urt re as on edth atbe cau se th e arr es t was
supp orte d b y

pro babl e cau se , itco ul d n otbe wron gf ul . Id. at12 25 . The co urt al so rel ie d o n t he pro babl e-caus e fi nd in g t o ju st ify its reject io n o f th e p la in ti ff’s o th er cl ai m s. Id . at 1 22 6. We hel d t ha t i t was erro r to gra ntth e Ru le 50 m ot io n b as edin pa rt o n t he jury’ s fi nd in gs in st eadof f oc us in g s ol el y

onth e su ffi ci en cy

of t he
ev id en ce. Id . at 1 22 8. The Dis tri ctCo urt m ad e a s im il ar err orhe re. In st eadof c on si de rin g whe th er the ev id en ce was su ffi ci en t t o s up po rt ave rd ic t i n fa vo r of Sta te -Bo st on , th e co urt re li edon th e p erce iv edin co ns is te nc y of t wo o f th e jury’ s an swe rs to th e

22 Case: 11-12410 Date Filed: 07/23/2012 Page: 22 of 35sp eci al in te rro ga to rie s as agro un d fo r di sc ard in g t he po ss ib il it y th aton e o f 2 4 Ban co rp ’s st at em en ts co ul d s up po rt l iabi li ty. The c ou rt a ls o i gn or edst at em en ts
no t fo un d b y

th e jury to v io la te § 1 0( b) , so le ly on t he ba si s o f th e jury’ s fi nd in gs . Thi s t he co urt co ul d n otdo
. B. Nev erthe le ss , we m ay

affi rm foran y reas on supp orte d b y

th e rec or d. E.g., Uni te d S ta te s v . Harri s, 6 08 F.3d12 22 , 12 27 (11 th Cir . 20 10 ). In thi s ca se , we di sc ern su ch a reas on : St at e-Bo st on di d n otin tro du ce ev id en ce s uf fic ie ntto
supp ort a f

in di ng in it s fa vo r on th e el em en t o f lo ss cau sa ti on . It fai le d t o ad equa te ly sep arat e lo ss es cau se d b y frau d fr om

th os e cau se d b y

th e 2 00 7 c ol laps e of th e Fl or id a rea l es ta te m ark et . The jury th eref or e d idno t h av e a s uf

fic ie nt
ev id en ti ary ba si s t o c on cl ud e th atth e frau d was a subs tant ia l co nt rib ut in g fa ct orin br in gi ng ab ou t the cla ss ’s lo ss es . 1. Ina Ru le 10 b- 5 s ecurit ie s fr au d a ct io n, t he pl ai nt iff m us t p ro ve (1) a
m at eri al m is rep res en ta ti on or o m is si on , (2) sci en te r, (3 ) a co nn ect io n b etweenth e
m is rep res en ta ti on or o m is si on an d t he pu rch as e o r sa le of asec ur it y , (4) rel ia nc e
We leave una

nswere d the question whethe r the jury ’s finding s were in fac t inconsistent 2 4 and, if they

wer e, what the eff

ect of any such inconsistency

might be. N o answe r is nece ssary to the disposition of thi s appea l. 23

Case: 11-12410 Date Filed: 07/23/2012 Page: 23 of 35up on th e m is rep res en ta ti on or o m is si on , (5) eco no m ic lo ss , and(6) lo ss cau sa ti on .

Led fo rdv. Pe ep le s, 6 57 F.3d12 22 , 12 48 (11 th Cir . 20 11 ). Pro vi ng lo ss cau sa ti on requi res m or e th ansh owi ng th atth e p la in ti ff b ou gh t the sec ur it y at apri ce tha t
was art ifi ci al ly infl at edby fraudul en t m is rep res en ta ti on s o r omiss io ns . Dura Ph arm ., Inc . v. Bro ud o, 5 44 U.S. 33 6, 3 38 , 12 5 S . Ct. 1 62 7, 1 62 9, 1 61 L. Ed. 2d 57 7 (2 00 5) ; Ro bb in s v . Kog er Pro ps ., Inc ., 11 6 F .3d14 41 , 14 48 (11 th Cir . 19 97 ). The pl ai nt iff

m us t o ffer“pr oo f of

a cau sa l co nn ect io n b etweenth e
m is rep res en ta ti on an d t he in ve st m en t’s s ub se qu en t d ecl in e inva lu e.” Ro bb in s, 11 6 F .3dat 1 44 8. In ot he r wor ds , ina frau d- on -th e-m ark etcas e, th e p la in ti ff m us t pr ov e n oton ly tha t a f

rau du le ntm is rep res en ta ti on art ifi ci al ly infl at edth e se cu rit y ’s val ue bu t al so th at“ th e fraud -in du cedin fla ti on th atwas b ak edin to th e pl ai nt iff’s pu rch as e p ric e was subs eque nt ly rem ov edfro m th e st oc k’s p ric e, th ereb y cau si ng lo ss es to th e p la in ti ff.” Fi nd Wha t In ve st orGrp. v . Fin dWhat .co m , 65 8 F .3d12 82 , 13 11 (11 th Cir . 20 11 ) (ci ti ng Ro bb in s, 1 16 F.3dat 1 44 8)
. As the Supr em e Co urt o bs erv edin Dura , when anin ve st orbu y s s to ckat a n art ifi ci al ly infl at edpri ce an d re se ll s ata lo wer p ric e, th e p ric e d ecl in e, an d t he in ve st or ’s con se qu en t l os s, m ay res ul t i n p artfro m

fact or s o th er than t he di ss ip at io n o f frau d- in du cedin fla ti on . “ [T]hatlo wer p ric e,” the Co urt ex pl ai ne d,

“ m ay refl ect , no t the earl ie r m is rep res en ta ti on , bu t ch an ge d e co no m ic
24 Case: 11-12410 Date Filed: 07/23/2012 Page: 24 of 35ci rcu m st an ces , chang edin ve st orex pe ct at io ns , new i ndus try-sp eci fic or firmsp eci fic fact s, co nd it io ns , or o th er ev en ts , whi ch tak ensep arat el y or t og ethe r acco un t fo r so m e o r al l o f th atlo wer p ric e.” 5 44 U.S. at 3 43 , 12 5 S . Ct. at16 32
. Rec og ni zi ng as m

uc h i n R ob bi ns , we con cl ud edth atlo ss cau sa ti on do es no t requi re p ro of

th atth e fraud—o r, m or e p reci se ly, th e d is si pa ti on of t he frau din du cedin fla ti on—was th e so le cau se of t he sec ur it y ’s dec li ne in va lu e. 11 6 F .3d at14 47 . W e h el d, h owe ve r, th atth e p la in ti ff m us t s ho w th atitwas a“ subs ta nt ia l”
or“ si gn ifi can t co nt rib ut in g c au se .” Id . (qu ot in g B ru sc hi v. Br own , 87 6 F .2d15 26 , 15 31 (11 th Cir . 19 89 )) (i nt ern al qu ot at io n m ark s o m it te d) . W e al so no te d t ha t the st an da rdforpro of

of d am ag es is m or e d em an di ng . As we ex pl ai ne d i n R ob bi ns , The di st in ct io n b etweenth e lo ss cau sa ti on requi rem en t an d p ro of of da m ag es is im

po rta nt . To sa ti sf

y th e lo ss cau sa ti on ele m en t, a pl ai nt iff ne edno t s ho w th ata m is rep res en ta ti on was t he so le reas on fo r th e in ve st m en t’s d ecl in e in va lu e. Ult im at el y , ho wev er, a p la in ti ff wil l b e al lo wedto reco ve r on ly dam ag es actua ll y cau se d b y

th e m is rep res en ta ti on . . . . [A] s l on g a s t he m is rep res en ta ti on is on e subs ta nt ia l caus e o f th e in ve st m en t’s d ecl in e in va lu e, ot he r co nt rib ut in g fo rces wil l n otba r reco ve ry un de r th e lo ss cau sa ti on requi rem en t. Bu t i n d et erm in in g re co ve rab le da m ag es , th es e co nt rib ut in g fo rces m

us t b e is ol at edan d re m ov ed
. Id . at 1 44 7 n .5. Thu s, t o s uc ceedin a frau d- on -th e-m ark etcas e, itis no t en ou gh to po in t t o a de cl in e in th e se cu rit y ’s pri ce af te r th e trut h o f th e m is rep res en te d m at te r was

25 Case: 11-12410 Date Filed: 07/23/2012 Page: 25 of 35rev eal edto th e p ub li c. The p la in ti ff m us t al so off

er ev id en ce s uf

fic ie ntto all ow th e jury to s ep arat e p orti on s o f th e p ric e d ecl in e at tri bu tabl e to cau se s u nr el at edto th e fraud , lea vi ng on ly the pa rt o f th e p ric e d ecl in e at tri bu tabl e to th e d is si pa ti on of th e fraud -in du cedin fla ti on . A prec is e ap po rti on m en t, as we ex pl ai ne d i n Ro bb in s, i s n eed edon ly to p ro ve th e am ou ntof d am ag es owedto th e p la in ti ff. See i d. at14 47 & n .5; see als o M il le r v. As en si o & Co ., 36 4 F .3d22 3, 2 32 (4t h Ci r. 20 04 ) (“ [I]n a g iv encas e, a jury cou ldpro pe rly con cl ud e th at(1) th e p la in ti ff pr ov edth e d efen dant ’s frau d c on st itut eda subs ta nt ia l caus e o f pl ai nt iff ’s lo ss an d
so fin d t he de fen da ntli ab le bu t (2 ) th e p la in ti ff fai le d t o p ro vi de a m etho d t o di sc ern by j us t an d re as on ab le in fere nc e th e am ou ntof p la in ti ff’s lo ss so le ly
cau se d b y de fen da nt ’s frau d, an d s o re fu se to awardth e p la in ti ff an y da m ag es .” (ci ta ti on om it te d) (in te rn al qu ot at io n m ark s o m it te d) ). Bu t i f th ere a re co nf ou nd in g fa ct or s t ha t co ul d a cco un t fo r m uc h o f th e d ecl in e in th e p ric e o f th e se cu rit y , th e p la in ti ff m

us t o fferso m e ev id en ce s ep arat in g t he vario us cau se s o f th e d ecl in e in th e se cu rit y ’s pri ce ev ento est ab li sh lo ss cau sa ti on . Oth erwi se th e jury has no ba si s o n wh ic h t o c on cl ud e th atth e d is si pa ti on of the frau d- in du ced in fla ti on was asubs ta nt ia l fa ct orin bri ng in g abo utth e p la in ti ff’s lo ss . See In re Sci en ti fic Atl an ta , Inc . Sec. Lit ig ., 75 4 F . Sup p. 2 d 1 33 9, 1 37 6 (N.D. Ga. 2 01 0) (“ [A] dete rm in at io n o f th e subs ta nt ia li ty of th e fraudul en t co nduc t’s ef fectrequi res 26 Case: 11-12410 Date Filed: 07/23/2012 Page: 26 of 35so m e m eas ur em en t o f th e lo ss att rib ut ab le to th atco nduc t.”)
. 2. Inth is cas e, St at e-Bo st on cla im s cl as s m em be rs pu rch as edBan co rp st oc k a t pr ic es th atwere arti fic ia ll y in fla te d b ecau se Ban co rp frau du le nt ly con ceal edth e po orcred itqu al it y

of B an kAt la nt ic ’s comm erci al real est at e p ortfo li o, an d t ha t th os e sh ares lo stva lu e whe n t he po rtf ol io ’s det eri or at io n was rev eal edto th e
m ark et . In ef

fect , Sta te -Bo st onrel ie s o n wh atso m e co urts ha ve cal le d a

“ m at eri al iz at io n o f th e co nc eal edris k” th eo ry of l os s caus at io n. Len te ll v. Me rri ll Ly nc h & Co ., 39 6 F .3d16 1, 1 73 (2dCir . 20 05 ); s ee al so Ray v. Ci ti gr oup Gl ob al Mkts ., Inc ., 48 2 F .3d99 1, 9 95 (7t h C ir. 2 00 7) (“ The re ar e se ve ral way s i n wh ic h a pl ai nt iff m ig htgo ab ou t p ro vi ng lo ss cau sa ti on . The fi rs t i s s om et im es cal le d t he ‘m at eri al iz at io n o f ri sk ’ st an dard .”). Thatth eo ry all ows li ab il it y

on a se curit ie s frau d c la im

ev enif t he de cl in e in a se cu rit y ’s pri ce i s n otcau se d b y th e m ark et ’s
reac ti on to a co rrec ti ve di sc lo su re re ve al in g p reci se ly the fact s co nc eal edby the frau d, as th ey

ex is te d a t the ti m e o f th e d efen da nt ’s mis st at em en ts . Und er the th eo ry , th e p la in ti ff m ay

pro ve lo ss cau sa ti onby sho win g, i ns te ad , th atth e
m at eri al iz at io n o f a fraudul en tl y co nc eal edris k c au se d t he pri ce i nf la ti on in du ced

27 Case: 11-12410 Date Filed: 07/23/2012 Page: 27 of 35by the co nc eal m en t o f th atris k t o d is si pa te . 2 5

Init s b rie fs to th is co urt, St at e-Bo st on do es no t ap pe ar t o c omm itto eit he r a

For example, in In re O mnicom Group, Inc. Securities L itigation, 597 F .3d 501 (2d 2 5 Cir. 2010), investors brought a sec urities fra ud class ac tion alleg ing, unde r a f raud- on-the-ma

rket theory , that Omnicom, a mar ketingand adve rtising holdingcompany , had fa iled to acc urate ly repor t in its books the dec lining value of Interne t companies it owned. I d. at 508. On appe al from a grant of summar

y judgme nt for the de fenda nts, the Second Circuit conc luded that the plaintiffs had not shown that any corr ective disc losure of the inacc urate bookkeeping had ca used a pric e dec line. I d. at 513. The c ourt neve rtheless we nt on to consider whe ther the pla intiffs had shown that the stock price decline “ was for esee able a nd cause d by

the materialization of the risk conce aled by the fra udulent statement.” I d. (quotingATSICommc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 107 (2d Cir. 2007)) ( internal quotation marks omitted). Eve n without a corr ective disc losure, the court e x plained, the plaintiffs c ould show loss causation if they showed that the subse quent “re signation [ of Robert Callande r, a dire ctor a nd the cha ir of Omnicom’s a udit committ ee,] and the ensuingneg ative media attention were fore seea ble risks of the f

raudule nt [ bookkeeping ] and cause d the tempora

ry share price decline in June 2002.” I d.; see a lso id. at 511 (noting that “[e]st ablishing e ither [of the plaintiffs’] theor[ies] ”—“that the marke t rea cted ne g atively to a corr ective disc losure of thefra ud” or “ that neg ative investor infe renc es dra wn from Callande r’s resignation and fr om the news stories in June 2002 caused the loss and wer e a f orese eable materia liz ation of the risk c oncea led by the fra udulent statement”—“ would sufficeto show loss causation”). The c ourt conc luded, howeve r, that Callander ’s re signation and the media’ s rea ction—which ultimately cause d the stock pricedecline—w eretoo tenuously rela ted to the fra udulent bookkeepingto be consider ed within the “zone of risk” conc eale d by the fra ud. I d. at 513–14. The Sec ond Circuit enterta ined a similar theor y in L entell v. Merrill Ly

nch &Co., 396 F.3d 161 ( 2d Cir. 2005), an e arlier fra ud-on-the- marke t casein which investors sued Me rrill Ly nch asse rtinga cla im based on alleg edly false r eports making

investment rec ommendations. I d. at 164. Ther e, the c ourt sug g ested that the pla intiffs would have a dequate ly pled loss causation had they

alleg ed fa cts showingthat the marke t rea cted ne g atively either to a

disclosure of the fa lsity

of Mer rill’s rec ommendations or to the materialization of a risk conce aled by the repor ts. See id. at 175 (“T here is no alleg ation that the marke t rea cted ne g atively to a cor rec tive disclosure re g ardingthe fa lsity of Mer rill’s ‘buy ’ and ‘ acc umulate’ re commendations and no alleg ation that Merrill mi sstated or omitted risks that did lead to the loss. This is fatal under Second Circuit pre cede nt.” (footnote omitted))
. This court has ne ver de cided whe ther the materialization-of-c oncea led-risk theor y may be used to prove loss ca

usation in a fra

ud-on-the- marke t case . We need not re ach the issue here
. Instead, we assume, without deciding , that this approac h is valid and explain why , even on tha t assumption, St ate- Boston fa iled to offer evidenc e suff

icient to support a ver dict in its favor. 28 Case: 11-12410 Date Filed: 07/23/2012 Page: 28 of 35st rai gh tfo rwardco rrec ti ve -d is cl os ur e o r m at eri al iz at io n- of -ri skth eo ry

of l os s cau sa ti on . It ch arac te riz es Pres to n’s t es ti m on y as s ho win g t ha t “ th e en ti rety of t he Octo be r 26 , 20 07 st oc k p ric e dro p was cau se d b y th e rev el at io n o f pr ev io us ly
un di sc lo se d i nf

orm at io n re ga rd in g B LB an d n on -BLB ri sk , or[ ] th e m at eri al iz at io n of pre vi ou sl y

co nc eal edBLB an d n on -BLB ri sk .” App el la nt s’ Br. 34 (em ph as is ad de d) . ButSta te -Bo st on canon ly be rel y in g o n am at eri al iz at io n- of -ri skth eo ry . Supp os e fo r th e m om en t tha t, as Sta te -Bo st on ’s exp erttes ti fie d, t he en ti re d ecl in e in Ban co rp ’s st oc k p ric e o n Oct ob er 2 6, 2 00 7, d idres ul t fr om th e m ark et ’s
reac ti on to th e 8 -K’s di sc lo su re o f pr ob le m s i n B an kAt la nt ic ’s comm erci al real
es ta te po rtf

ol io . Evenon th atass um pt io n, t he po rtf

ol io ’s con di ti on as d is cl os edin th e Oct ob er 2 00 7 8 -K was wo rs e th anth e p ortfo li o’s co nd it io n a t the ti m e o f th e
m is st at em en ts . Som e o f th e fac ts th e 8 -K di sc lo se d— so m e o f th e fac ts th at , 2 6
Consider the dollar a

mount of land loans consider ed “c lassified” ( in the 8-K’s te rms) 2 6 or “substanda

rd” ( in the terms of B ankAtlantic’ s internal risk-gradingsy stem) at the time of the October 2007 8-K a

nd at the times of the va

rious misstatements. The Octobe r 2007 8-K disclosed $90.3 million i n classified or substandard la

nd loans, not including loa ns designated nonacc rual. B ut at the time of the April 2007 earning s confe renc e ca ll, accor ding to wha t was then the most rec ent iteration of the L oan Watch L ist, BankAtlantic ha d one commercial re al estate loa n—a B LB loa

n—of about $21.2 million that was acc ruingbut substandard. As late as J une 30, 2007—af

ter seve ral of the misstatements were made—the L oan Watch L ist showed only about $53.8 million i n acc ruingbut substandard c ommercia l rea l estate loans, c omprising $34.2 milli on in non-BLB loa

ns and $19.6 million i n BLB loa ns. The dollar a

mount of nonacc rual c ommercia l rea l estate loans disclosed in the O ctober 2007 8-K wa s also much greater than the amount of such loans at the time of any of B ancor

p’s misstatements. The 8-K r eporte d that $156.3 milli on in commerc ial rea l estate loans, both B L B and non-B L B, w ere designated nona ccr ual. B ut acc ordingto the L oan Watch L ist, as late as August 31, 2007—after

all the misstatements were made—only $25.5 milli on in commerc ial rea l 29 Case: 11-12410 Date Filed: 07/23/2012 Page: 29 of 35acco rd in g t o S ta te -Bo st on , m ad e th e st oc k p ric e fal l— di d n otex is t atth e ti m e o f

Ban co rp ’s m is st at em en ts . Andth e fac ts co nc eal edor m is rep res en te d b y Ban co rp ’s m is st at em en ts , as t he y ex is te d a t the ti m e o f th os e m is st at em en ts —fo r ex am pl e, th e num

be r, type, an d d ol la r va lu e o f th e la ndlo an s o n t he LoanW at ch Lis t—were n otin factdi sc lo se d i n t he Octo be r 20 07 8-K. Thus , eve n i f th e p ric e de cl in e o n Oct ob er 2 6, 2 00 7, re fle ct edon ly the m ark et ’s react io n t o t he 8-K’s di sc lo su re o f weakne ss in th e co m m erci al real est at e p ortfo li o, the re i s n o re as on to be li ev e itrefl ect edon ly the m ark et ’s react io n t o the co rrec ti on of B an co rp ’s pr ev io us m is st at em en ts . Sta te -Bo st on ’s arg um en t, the n, ca n o nl y be th atth e 2 7
estate loa ns were designated nona ccr ual. Another w ay

to put the point is that even if , as Preston testified, the price de cline 2 7 resulted solely

from the 8- K’s disclosureof we akness in the c ommercia l rea l estate portf olio, not all of that dec line can be attributed to the dissipation of inflation cause d by Ba ncorp’ s misstatements. That decline still may have r efle cted the ma

rket’s r eac tion to facts that could not possibly have be en disclosed at the time of Ba ncorp’ s misst atements. The re is ther efor e no rea son, even a ccepting Pre ston’s conclusions, to assume that the amount of that decline is equa l to the differ ence betwee n the price at which c lass members bought Ba ncorp’ s stock and the price at which they

would have bought it if not for the fra ud—the usual mea sure of damag es. See Robbins v. Koge r Props., Inc., 116 F .3d 1441, 1447 n.5 (11th Cir. 1997) (“ The prope r mea sure of damag es utiliz es the out-of -pocke t rule: the plaintiff c an re cover ‘the diff ere nce be tween the price paid and the “ rea l” value of the sec urity , i.e., the fa ir marke t value abse nt the misrepre sentations, at the time of the initial purcha se by the def raude d buyer.’ ” (quoting Huddleston v. Her

man & MacL ean, 640 F .2d 534, 556 (5th Cir. Unit A 1981), af f’d in par t and rev’ d in part on other grounds, 459 U.S. 375, 103 S. Ct . 683, 74 L . Ed. 2d 548 (1983)) ). Thus, to allow a jury

to awar d damag es on that usual mea sure, State- Boston would still have to separ ate the amount of the stock price de cline attributable to the ultimate disclosure of f acts a bout the portfolio that wer e known at the time of Ba ncorp’ s misst atements from the portion of the dec line cause d by the disclosure of

new f acts a bout the portfolio. State-B oston has, howeve r, made no attempt to do so. We need not dec ide whethe r some other measure of dama g es would be a ppropriatein a 30 Case: 11-12410 Date Filed: 07/23/2012 Page: 30 of 35Octo be r 20 07 8-K re fle ct edth e m at eri al iz at io n o f a ri sk —t he ris k t ha t the
co m m erci al real est at e p ortfo li o wo ul d d et eri or at e—t ha t Ba nc or p h adco nc eal ed fro m th e p ub li c, an d t ha t the m at eri al iz at io n o f th atris k re m ov edth e in fla ti on crea te d b y

it s co nc eal m en t. St at e-Bo st on ’s exp ert , Can da ce Pr es to n, t es ti fie d tha t the en ti re 3 8 p erce nt de crea se in Ban co rp ’s st oc k p ric e o n Oct ob er 2 6, 2 00 7, re su lt edfro m th e
m at eri al iz at io n o f th atris k. As de sc rib edin pa rt I I, supr a, Pres to n a tt em pt edto is ol at e th e eff

ectof c om

pany-sp eci fic fact or s fr om th e eff ectof g en eral m ark et tre nd s b y co m pa rin g t he ch an ge in th e Ban co rp ’s st oc k p ric e to th e ch an ge in th e S&P 5 00 . She als o a tt em pt edto sep arat e th e eff

ectof c om

pa ny-sp eci fic fact or s fro m in du st ry -wid e tr en ds by com pa rin g B an co rp st oc k t o t he NASDAQ Bank In de x, an in de x o f th e st oc k p ric es of h un dr ed s o f ba nk s an d b an k h ol di ng co m pa ni es tra de d o n t he NASDAQ. Pres to n fa il ed , ho wev er, t o a cco un t fo r th e eff ect s o f th e co ll ap se of the Fl or id a rea l es ta te m ark et . The NASDAQ Ban k In de x m ay be well su it edto cap tu re the effe ct s o f na ti on al tre nd s i n t he ba nk in g i ndus try, suc h a s t he bro ad er

case—like this one, on State-B oston’s theory —in which the materialization of a conce aled risk cause d the price to decline by more than the differ ence betwee n the inflated price at which the plaintiff purc hased the security and the price the pla intiff would have pa id had the risk not bee n fra udulently conce aled. As w e explain below, State-B oston has failed f or other r easons to prese nt evidence sufficie nt to support a findingof loss causation. I t theref ore c annot pre vail on the issue of liability , and it is unnece ssary to rea ch the da

mag es issue. 31 Case: 11-12410 Date Filed: 07/23/2012 Page: 31 of 35na ti on al fin an ci al cri si s tha t re ach edit s n ad ir i n 2 00 8. Bu t i n 2 00 7, Fl or id a,

ha vi ng be ne fit te d m or e th anm os t s ta te s fr om th e rea l es ta te bo om

of t he pre vi ou s y ears , was h ithard er tha n m os t b y th e en su in g b us t. AndFlo rid a fi na nc ia l 2 8 in st itut io ns , as Pr es to n a dm it te d o n c ro ss -ex am in at io n, m ad e up o nl y a sm al l pe rcen ta ge of the NASDAQ BankInd ex . Thatin de x, t he refo re, wo ul d b e in ap pr op ria te forth e ta skof f il te rin g o utth e eff

ect s o f in du st ry -wid e fac to rs th at
m ig htaffe ctth e st oc k p ric e o f a b an k, o r of th e h ol di ng co m

pa ny of a b an k, wh os e as se ts were co nc en tra te d i n l oans ti edto Flo rid a rea l es ta te in 20 07
. Ban kAt la nt ic is jus t s uc h aba nk . As Ban co rp ackno wled ge d i n s ev eral publ ic SEC fi li ng s dur in g t he cla ss pe rio d, Ba nk Atl an ti c’s as se ts were co nc en tra te d i n l oa ns ti edto Flo rid a rea l es ta te . As a res ul t, Ba nk Atl an ti c an d Ban co rp were p art ic ul arl y su sc ep ti bl e to an y

de te rio rat io n i n t he Flo rid a rea l es ta te
m ark et , inad di ti on to an y na ti on al de ve lo pm en ts . To supp ort a f in di ng th at Ban co rp ’s m is st at em en ts were a s ub st an ti al fact orin bri ng in g abo utit s l os se s,

Data c ompiled by

the Off ice of Fe dera l Housing Ente rprise O versight, which has since 2 8 become the Fe dera l Housing F inance Ag ency , help g ive a se nse of the r elative se verity of Florida ’s re al estate marke t downturn during2007. Of the 20 me tropolitan statisti cal a rea s with the lowest rates of house price a pprec iation over the year

endingon September 30, 2007, e ight wer e in Florida. Off

ice of Fe d. Hous. Enter. O versight, House Prices Weaken F urther in Most Rece nt Quarte r 30 (2007) , available at http://www.fhfa.g ov/webfiles/1174/3q07hpi.pdf. Depe nding on the index us ed, F lorida saw e ither the four th-lowest or sixt h-lowest rate of house price appre ciation over

the same pe riod, see id. at 10, and had the f ourth-highest fore closure r ate, see id. at 14. 32

Case: 11-12410 Date Filed: 07/23/2012 Page: 32 of 35th eref

or e, St at e-Bo st on ha d t o p res en t ev id en ce tha t wo ul d g iv e a jury so m e in di cat io n, h owe ve r ro ug h, o f ho w m uc h o f th e d ecl in e in Ban co rp ’s st oc k p ric e res ul te d n otfro m

th e fraudbu t fr om

th e g en eral do wnturn i n t he Flo rid a rea l es ta te
m ark et —t he ris k o f whi ch Ban co rp is no t al le ge d t o h av e co nc eal ed
. Cf. Len te ll , 2 9 39 6 F .3dat 1 76 –7 7 (c on cl ud in g t ha t the pl ai nt iff s d idno t ad equa te ly alle ge lo ss cau sa ti on be cau se no ne of t he all eg edm is st at em en ts ha d c on ceal edth e p ric evo la ti li ty riskth atm at eri al iz edan d c au se d a t l eas t s om e o f th e p la in ti ffs ’ lo ss es ); Bas ti anv. Pe tre n R es . Cor p., 8 92 F.2d68 0, 6 86 (7t h C ir. 1 99 0) (reject in g aRu le

In fac t, Ba

ncorp a ffirma

tively war ned the public of

that risk. For

example, in its 2006 2 9 10-K, filed on Ma

rch 1, 2007, B ancor

p cautioned: The national rea l estate mar ket is showing signs of a slow down, particula rly in are as that have seen significant growth, includingFlorida and California. Our

loan portfolio is conce ntrated in c ommercia l rea l estate loans (virtually all of which a

re loc ated in F lorida), r esidential mortg ag es (nationwide), and consume r home-e quity loans (F lorida). We have exposure to cre dit losses that may arise f rom this concentr ation in what many believe is a

softeningrea l estate se ctor. Included in the c ommercia l rea l estate loans a re a pproxi mately

$389 milli on of land de velopment loans, which a re susc eptible to extended maturities or borr ower

defa ult due to a slow-down in F lorida construc tion activity , and $95.1 milli on of deve lopment loans for low a nd mid-rise condominium projects in Florida , wher e ther e is an incr easingsupply of newconstruction in the fa ce of fallingdemand.

. . . . The majority

of B ankAtlantic’ s loan portfolio consists of loans sec ured by rea l estate. B ankAtlantic’ s loan portfolio included $2.2 billion of loans secur ed by residential r eal e state and $1.4 billion of commer cial re al estate , construction and deve lopment loans at Dec ember 31, 2006. At Dec ember

31, 2006, Ba nkAtlantic’s commer cial re al estate , construction and de velopment loans, which ar e conc entra

ted mainly

in Florida, r epre sented a

pproxi mately

37.6% of its loan portfolio. The r eal e state marke t in Florida is cur rently exhibi ting signs of weakness. I f re al estate values in F lorida we re to de cline, the c redit quality of Ba nkAtlantic’s loan por

tfolio and its earning s could be a dverse ly impacted. 33 Case: 11-12410 Date Filed: 07/23/2012 Page: 33 of 3510 b- 5 c la im

be cau se th e p la in ti ffs , in ve st or s i n o il an d g as pa rtn ers hi ps , “ kn ew th ey were as su m in g aris k t ha t o il pri ces m ig htdro p u ne xp ect ed ly” andwere

“un wil li ng to try to p ro ve th atan yth in g b ey on d t he m at eri al iz in g o f th atris k
cau se d t he ir l os s” ); I n re Merr il l Lync h & Co . Res earc h R ep orts Sec. Lit ig ., 56 8 F
. Supp . 2d34 9, 3 64 (S.D.N.Y. 20 08 ) (“ [T]he [d efen da nt s] warn edin ve st or s t ha t the fat e o f CMGI , a co m

pany tha t o wne d n um ero us subs id ia ry Int ern et -b as ed ho ld in gs , was d ep en de nton th e fat e o f th e In te rn etsec to r as a who le
. . . . [T] he Co m pl ai ntdo es no t as se rt f

act s t ha t d is ti ng ui sh be twee n t he all eg edfrau d a ndth e
m ark et -wid e co ll ap se of I nt ern etst oc ks as t he cau se of [ th e p la in ti ff’s] los se s.”)
. St at e-Bo st onfai le d t o d o s o. No ne of i ts ev id en ce ex cl ud edth e p os si bi li ty tha t cl as s m em

be rs ’ lo ss es res ul te d n otfro m an yth in g s pe ci fic ab ou t Ba nkAtl an ti c’s
co m m erci al real est at e p ortfo li o t ha t Banc or p h idfro m

th e p ub li c, bu t fr om

m ark et fo rces th atitha d warne d o f—a ndth atwou ldli ke ly hav e cau se d s ig ni fic an t l os se s fo r anin ve st orin any

ba nkwith asi gn ifi can t cr ed itpo rtf ol io in co m

m erci al real
es ta te in Flo rid a in 20 07 . Ban co rp is th eref or e en ti tl edto jud gm en t as a m at te r of la w. 3 0

Be cause we a ffirm the D istrict Court’s gr ant of judgment as a matter of law , we

3 0 dismiss as moot Ba

ncorp’ s cross-a

ppeal f rom the District Court’s conditional denia l of its moti on for a new tria l. See Rankin v. Evans, 133 F .3d 1425, 1428, 1443 (11th Cir. 1998) (a ffirminga post-verdic t gr ant of judgment as a matter of law and dismissing as moot the def endants’ c rossappea l from the conditional denia l of their motion for a ne w trial). 34 Case: 11-12410 Date Filed: 07/23/2012 Page: 34 of 35IV.

Fo r th e fo reg oi ng reas on s, the jud gm en t o f th e Dis tri ctCo urt i s AFFIR MED.

35 Case: 11-12410 Date Filed: 07/23/2012 Page: 35 of 35