UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF ILLINOIS 

EASTERN DIVISION

LAWRENCE E. JAFFE PENSION PLAN, On 

Behalf of Itself and All Others Similarly 

Situated, 

Plaintiff, 

vs. 

HOUSEHOLD INTERNATIONAL, INC., et 

al., 

Defendants. 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

Lead Case No. 02-C-5893 

(Consolidated) 

CLASS ACTION

Judge Ronald A. Guzman 

Magistrate Judge Nan R. Nolan 

PLAINTIFFS’ RESPONSE TO DEFENDANTS’ RECOMMENDATIONS FOR PHASE II 

PROCEEDINGS, IF NEEDED AND DEFENDANTS’ RESPONSE TO PLAINTIFFS’

POST-VERDICT SUBMISSION

Case 1:02-cv-05893 Document 1633 Filed 06/11/2009 Page 1 of 19
TABLE OF CONTENTS 

Page 

- i - 

I. INTRODUCTION ...............................................................................................................1

II. ARGUMENT.......................................................................................................................3 

A. Defendants’ Truth-on-the-Market Defense Was Litigated at Trial and 

Defendants Have Failed to Identify Any Relevant Evidence That Could be 

Obtained Through Further Discovery......................................................................3 

B. The Court Can Decide the Formula to Calculate Damages.....................................8 

III. OBJECTIONS TO DEFENDANTS’ NOTICE...................................................................9 

IV. DEFENDANTS HAVE NO RIGHT TO JURY TRIAL ...................................................10 

Case 1:02-cv-05893 Document 1633 Filed 06/11/2009 Page 2 of 19
TABLE OF AUTHORITIES 

Page 

- ii - 

CASES 

Argent Classic Convertible Arbitrage Fund L.P. v. Rite Aid Corp., 

315 F. Supp. 2d 666 (E.D. Pa. 2004) ...............................................................................4, 5 

Basic Inc. v. Levinson, 

485 U.S. 224 (1988).....................................................................................................1, 3, 5

Davis v. USN Communs., 

189 F.R.D. 391 (N.D. Ill. 1999)...........................................................................................2 

Freeland v. Iridium World Communs., Ltd., 

233 F.R.D. 40 (D.D.C. 2006)...............................................................................................5 

Ganesh, LLC v. Computer Learning Centers, Inc., 

183 F.R.D. 487 (E.D. Va. 1998) ..........................................................................................5 

Houseman v. United States Aviation Underwriters, 

171 F.3d 1117 (7th Cir. 1999) ...........................................................................................11 

In re Ask Sec. Litig., 

No. C-85-20207(A)-WAI, 1992 U.S. Dist. LEXIS 14944 

(N.D. Cal. Aug. 18, 1992)..................................................................................................12 

In re Bally Mfg. Sec. Corp. Litig., 

141 F.R.D. 262 (N.D. Ill. 1992).......................................................................................3, 5 

In re Initial Public Offering Sec. Litig. (“IPO”), 

227 F.R.D. 65 (S.D.N.Y. 2004) .......................................................................................4, 5 

In re LDK Solar Sec. Litig., 

255 F.R.D. 519 (N.D. Cal. 2009).........................................................................................5 

In re Oxford Health Plans Inc. Sec. Litig., 

199 F.R.D. 119 (S.D.N.Y. 2001) .........................................................................................2 

In re Priceline.com Sec. Litig., 

236 F.R.D. 89 (D. Conn. 2006)............................................................................................4 

In re Rhone-Poulenc Rorer, Inc., 

51 F.3d 1293 (7th Cir. 1995) .........................................................................................6, 11 

In re Royal Ahold NV Sec. & ERISA Litig., 

219 F.R.D. 343 (D. Md. 2003).........................................................................................2, 4 

Case 1:02-cv-05893 Document 1633 Filed 06/11/2009 Page 3 of 19
Page 

- iii - 

In re Scientific-Atlanta, Inc. Sec. Litig., 

571 F. Supp. 2d 1315 (N.D. Ga. 2007)................................................................................6 

In re Scott Paper Co. Sec. Litig., 

142 F.R.D. 611 (E.D. Pa. 1992)...........................................................................................5 

In re W. Union Sec. Litig., 

120 F.R.D. 629 (D.N.J. 1988)..............................................................................................5 

In re WorldCom, Inc. Sec. Litig., 

219 F.R.D. 267 (S.D.N.Y. 2003) .................................................................................2, 4, 5 

Jaroslawicz v. Engelhard Corp., 

724 F. Supp. 294 (D.N.J. 1989) ...........................................................................................5 

Levie v. Sears Roebuck & Co., 

496 F. Supp. 2d 944 (N.D. Ill. 2007) ...............................................................................1, 3 

Moskowitz v. Loop, 

128 F.R.D. 624 (E.D. Pa. 1989).......................................................................................4, 5 

Schleicher v. Wendt, 

No. 02-CV-1332-DFH, 2009 U.S. Dist. LEXIS 24810 

(S.D. Ind. Mar. 20, 2009).................................................................................................4, 5 

Zlotnick v. Tie Communications, 

836 F.2d 818 (3rd Cir. 1988) ...............................................................................................5 

STATUTES, RULES AND REGULATIONS 

15 U.S.C. 

§78j(b)..................................................................................................................................9 

Case 1:02-cv-05893 Document 1633 Filed 06/11/2009 Page 4 of 19
- 1 - 

Plaintiffs respectfully submit this memorandum in response to defendants’ 

“Recommendations for Phase Two Proceedings, if Needed” and defendants’ “Response to Plaintiffs’ 

Post-Verdict Submission.” 

I. INTRODUCTION 

In this seven year old case, the jury has finally spoken. Defendants’ post-verdict motions are 

replete with arguments already made by defendants and rejected by this Court and the jury. 

Therefore, the Court should begin the process of identifying and validating class members’ claims. 

A notice and claim form needs to be approved by the Court and sent to class members. 

Although plaintiffs and defendants disagree on the methodology, the parties agree that the Court 

should determine the damages formula to be used in calculating class members’ claims based on 

Household common stock trading data submitted by claimants and the jury’s determination of daily 

inflation. Based on the clear evidence at trial that no investors were told of the fraud, and the jury’s 

verdict that rejected defendants’ truth-on-the-market defense, the only issue left regarding the 

presumption of reliance is whether class members “would have” still purchased Household stock if 

they knew about the fraud. Obviously, investors would not knowingly purchase stock at a price that 

was inflated by defendants’ fraud. Nevertheless, since the Basic Court identified this unlikely 

scenario as a means to rebut the presumption, the question can be addressed in the claim form. 

Defendants’ attempt to rebut the presumption of reliance does not warrant the extensive 

discovery of class members proposed by defendants. The “questionnaire” defendants propose will 

not lead to the discovery of any relevant evidence. The information sought in defendants’ 

questionnaire – whether the class member was an options trader, short-seller, day trader, or used a 

hedging strategy, index trading strategy, automatic dividend reinvestment program, or a proprietary 

trading model – is not necessary. All Household investors relied on the integrity of the market and 

evidence of any of these trading strategies would not rebut the presumption of reliance. See Levie v. 

Case 1:02-cv-05893 Document 1633 Filed 06/11/2009 Page 5 of 19
- 2 - 

Sears Roebuck & Co., 496 F. Supp. 2d 944 (N.D. Ill. 2007) (day traders, short sellers and options 

traders rely on integrity of market); In re WorldCom, Inc. Sec. Litig., 219 F.R.D. 267, 296 (S.D.N.Y. 

2003) (index or computer model trading does not defeat presumption of reliance); Davis v. USN 

Communs., 189 F.R.D. 391, 396-97 (N.D. Ill. 1999) (class members’ short sales do not preclude 

reliance); In re Royal Ahold NV Sec. & ERISA Litig., 219 F.R.D. 343 (D. Md. 2003) (day traders and 

all types of investors rely on integrity of market); In re Oxford Health Plans Inc. Sec. Litig., 199 

F.R.D. 119 (S.D.N.Y. 2001) (same). 

In their initial submission, plaintiffs set forth the appropriate methodology for calculating 

damages for the Damages Period (March 23, 2001 – October 11, 2002) (the “Damages Period”). 

The Court should apply the “FIFO” method. The only offsets to recoverable damages should be for 

gains on sales that take place after November 14, 2001. Plaintiffs’ proposed methodology is 

consistent with the loss causation principles of Dura that state that only loss transactions completed 

after the first partial disclosure (November 14, 2001) should be considered as damages. This is 

consistent with plaintiffs’ prior position that only sales after November 14, 2001 should be 

considered for offsetting purposes. The Court should also reject defendants’ proposal to use 

Damages Period sales of pre-Damages Period purchases to offset damages. 

The defendants’ claim of a right to a jury trial is misplaced. Defendants had a jury trial on all 

relevant issues in this case. There is simply no jury trial right to rebut the presumption of reliance 

where the facts regarding truth on the market and actual knowledge were litigated at trial. 

Finally, defendants’ proposed notice is improper. The Court should adopt plaintiffs’ 

proposed notice, and provide class members with sufficient time (120 days) to obtain trading records 

and to submit a claim. In many cases the notice will not go directly to class members, but will be 

sent to nominees who held class members’ shares in “street name.” The nominees will need to send 

the notice to class members. Some class members have moved and additional time is needed to 

Case 1:02-cv-05893 Document 1633 Filed 06/11/2009 Page 6 of 19
- 3 - 

reach these claimants. Following receipt, retrieval of purchase and sale information for transactions 

seven or eight years ago will take additional time. In fairness, class members will need 120 days to 

have sufficient time to file a claim. Defendants’ request that class members provide trading 

information for other Household securities (i.e., options) should be rejected since gains or losses 

from option trades have no relevance to any damage formula or reliance issue. Claimants should 

only be required to produce information regarding their Household stock transactions during the 

Damages Period. 

II. ARGUMENT 

A. Defendants’ Truth-on-the-Market Defense Was Litigated at Trial and 

Defendants Have Failed to Identify Any Relevant Evidence That 

Could be Obtained Through Further Discovery 

In their Proposed Trading Questionnaire, defendants seek information about class members’ 

trading patterns, including information regarding: (1) other securities issued by Household or 

derivative contracts such as put options or call options; (2) hedging strategy; (3) index tracking 

strategy; (4) automatic dividend reinvestment programs; and (5) proprietary trading models. 

Defendants appear to be arguing that class members who purchased Household stock and also 

engaged in certain trading strategies cannot rely on the presumption of reliance.1

 However, under 

Basic, the presumption of reliance extends to all types of investors, regardless of their particular 

trading patterns. See Levie, 496 F. Supp. 2d at 949 (holding day traders, short sellers, and put and 

call option traders may rely on the presumption of reliance); In re Bally Mfg. Sec. Corp. Litig., 141 

F.R.D. 262, 269 n.6 (N.D. Ill. 1992) (“‘[the roster] of shareholders of every large, publicly traded 

corporation includes institutional investors, short-sellers, arbitrages, etc. The fact that these traders 

 

1

 Any options gains or losses are not part of any class members’ claim. The fact that certain class 

members may also have engaged in options trades does not rebut the presumption. 

Case 1:02-cv-05893 Document 1633 Filed 06/11/2009 Page 7 of 19
- 4 - 

have divergent motivations in purchasing shares should not defeat the fraud-on-the-market 

presumption absent convincing proof that price played no part whatsoever in their decision 

making.’”) (quoting Moskowitz v. Loop, 128 F.R.D. 624, 631 (E.D. Pa. 1989)).2

As noted in these cases, whether an investor used an index tracking, hedging, or proprietary 

trading strategy, they relied on the price of Household common stock being free of fraud. For 

example, the WorldCom court rejected the claim that different investment strategies – such as 

reliance on sophisticated investment managers or “passive” investment by use of a computer model 

– rebut the presumption of reliance, holding “[t]his argument can be swiftly rejected. Each of these 

methods of making investment decisions is representative of methods used by many other investors. 

Each of the methods reflects an evaluation of the publicly available information about WorldCom, 

whether by the named plaintiff, the advisor, or a computer model. There is no suggestion that any of 

the named plaintiffs had access to non-public information and learned that there was a fraud afoot 

and decided nonetheless to invest in WorldCom. None of the different strategies . . . will defeat the 

presumption.” 219 F.R.D. at 281-82. 

The cases defendants cite are not binding on this Court or do not support their position. In 

Bally Manufacturing, the Court cited Moskowitz, supra, for the proposition that all traders, including 

arbitragers, were entitled to the presumption of reliance and the only way to rebut the presumption 

 

2

 Numerous other courts have held likewise. WorldCom, 219 F.R.D. at 296 (short sellers, index or 

computer model investor may use fraud on the market presumption); Royal Ahold, 219 F.R.D. at 354-55 

(rejecting argument that day trader could not be lead plaintiff because “day traders allegedly do not rely on 

the financial statements or the fundamental value of a company as the rest of the market does. But where 

false information and misleading omissions pollute the market, all types of investors are injured.”); In re 

Initial Public Offering Sec. Litig. (“IPO”), 227 F.R.D. 65, 108 (S.D.N.Y. 2004) (day traders); In re 

Priceline.com Sec. Litig., 236 F.R.D. 89, 99 (D. Conn. 2006) (options traders and other traders of securities 

may use the fraud-on-the-market presumption of reliance); Schleicher v. Wendt, No. 02-CV-1332-DFH, 2009 

U.S. Dist. LEXIS 24810, *24-*29 (S.D. Ind. Mar. 20, 2009) (applying fraud on the market presumption to 

short sellers); Argent Classic Convertible Arbitrage Fund L.P. v. Rite Aid Corp., 315 F. Supp. 2d 666, 676 

(E.D. Pa. 2004) (same). 

Case 1:02-cv-05893 Document 1633 Filed 06/11/2009 Page 8 of 19
- 5 - 

was to show “convincing proof that price played no part whatsoever in their decision-making.” 141 

F.R.D. at 269 n.6. In In re Scott Paper Co. Sec. Litig., 142 F.R.D. 611 (E.D. Pa. 1992) (Defs’ Phase 

II Brf. at 9), the court did not endorse defendants’ assertion that the presumption had been rebutted 

because plaintiff purchased through an automatic dividend reinvestment plan, but simply noted that, 

even if this was assumed to be correct, it was irrelevant. 142 F.R.D. at 617. Jaroslawicz is a nonbinding district court opinion that focused on rejecting plaintiffs’ request for an aggregate damage 

award and pointed out that many reliance issues (such as truth-on-the-market) can be litigated on a 

class-wide basis. Jaroslawicz v. Engelhard Corp., 724 F. Supp. 294, 302 (D.N.J. 1989). 

The other non-binding cases cited by defendants, Zlotnick v. Tie Communications, 836 F.2d 

818 (3rd Cir. 1988) and Ganesh, LLC v. Computer Learning Centers, Inc., 183 F.R.D. 487 (E.D. Va. 

1998), have been “almost unanimously rejected” by other courts. IPO, 227 F.R.D. at 109 (courts 

“have almost unanimously rejected the Zlotnick exception”) (citing Argent Classic, 315 F. Supp. 2d 

at 676 n.13); see also Schleicher, 2009 U.S. Dist. LEXIS 24810, at *25-*26 (discussing and 

rejecting Zlotnick and Ganesh); Moskowitz, 128 F.R.D. at 630-31; In re W. Union Sec. Litig., 120 

F.R.D. 629, 637 (D.N.J. 1988). Significantly, Zlotnick predates the U.S. Supreme Court’s fraud-onthe-market presumption established in Basic Inc. v. Levinson, 485 U.S. 224, 246-47 (1988). IPO, 

227 F.R.D. at 109. 

Defendants also argue that certain class members’ purchases after partial disclosures of the 

fraud (during the period November 14, 2001 – October 11, 2002), including Lead Plaintiff 

Glickenhaus & Company, require discovery and could rebut the presumption of reliance because 

these investors must have known about the fraud. Yet “Courts have held that where the fraud is only 

partially revealed . . . the presumption is not defeated and the class can contain members who 

purchased both before and after the alleged corrective disclosure.” In re LDK Solar Sec. Litig., 255 

F.R.D. 519, 528 (N.D. Cal. 2009) (citing WorldCom, 219 F.R.D. at 307; Freeland v. Iridium World 

Case 1:02-cv-05893 Document 1633 Filed 06/11/2009 Page 9 of 19
- 6 - 

Communs., Ltd., 233 F.R.D. 40, 43-44 (D.D.C. 2006); In re Scientific-Atlanta, Inc. Sec. Litig., 571 F. 

Supp. 2d 1315, 1326-28 (N.D. Ga. 2007)). Further, defendants’ argument is simply a veiled attempt 

to relitigate their truth-on-the-market defense that was rejected by the jury. 

Defendants asserted that “investors knew” throughout the Relevant Time Period. See 

Plaintiffs’ Post-Verdict Submission regarding Phase II at 6-12 (discussing defendants’ efforts at trial 

to show that investors knew), Docket No. 1622. The jury rejected defendants’ contention and thus, 

defendants cannot now relitigate before a second jury whether any individual investor “knew” of the 

fraud because of a partial disclosure that preceded their purchase. In re Rhone-Poulenc Rorer, Inc., 

51 F.3d 1293, 1303 (7th Cir. 1995) (district court’s bifurcation between multiple juries 

impermissible under the Seventh Amendment where second jury would consider factual issues that 

overlapped with factual issues resolved by first jury). Put simply, the jury has already rejected 

defendants’ arguments by finding that the stock remained inflated after the partial disclosures. As 

such, the discovery defendants seek, whether from Glickenhaus or absent class members, is 

irrelevant. Purchases that follow a partial disclosure do not rebut the presumption. 

With one exception, defendants provide this Court with no reason to believe that their 

proposed discovery would yield anything other than delay. Defendants argue that Wells Fargo had 

access to inside information, which raises “significant questions” (Defs’ Phase II Brf. at 18) about 

any claim that Wells Fargo may file. However, defendants’ purported basis for seeking further 

discovery of Wells Fargo is unsupported by the facts. Defendants claim that Wells Fargo 

“maintained” its Household stock after the failed merger and later “increased” its holdings. Defs’ 

Phase II Brief at 18. Actually, the publicly available information shows that Wells Fargo decreased

its holdings of Household stock in 2002. By December 31, 2002, Wells Fargo had only 1.4 million 

shares, having divested over 1.8 million shares during 2002. See Defendants’ Trial Exhibit 701, 

attached as Ex. A. Yet, due to Wells Fargo’s unique situation in this case where it obtained nonCase 1:02-cv-05893 Document 1633 Filed 06/11/2009 Page 10 of 19
- 7 - 

public information from Household as part of the merger discussions, it may be appropriate to allow 

limited discovery of Wells Fargo. Specifically, defendants should be permitted to serve discovery 

designed to ascertain if Wells Fargo traded based on inside information. However, since no other 

class member obtained non-public information from Household, discovery should be limited to any 

claim by Wells Fargo. 

Defendants likewise claim that any class members that supported the 2001 and 2002 proxy 

effort, which attempted to link executive compensation to ethical behavior, should also be subjected 

to discovery. Naturally, defendants do not take a position about the type of discovery that should be 

permitted, nor do they explain how a shareholder’s interest in corporate governance could rebut the 

presumption of reliance. More importantly, however, defendants’ theory has already been rejected 

by the jury. Defendants raised this claim at trial, arguing that the proxy filings demonstrated that 

investors “knew” of the predatory lending fraud at Household. In response to defendants’ misguided 

argument at trial, plaintiffs pointed out that defendants denied that Household engaged in any 

predatory lending in its statement recommending a vote against the proxy measure, and failed to 

disclose its predatory lending practices. Once again, the jury already rejected defendants’ argument 

that the truth was in the market due to the proxy filings. Therefore, investors who supported efforts 

to tie executive pay to good governance are entitled to the same recovery as the rest of the class. 

Finally, defendants cannot predicate further discovery on this Court’s prior rulings regarding 

defendants’ attempts to depose the individual plaintiffs and their investment advisors. Those rulings 

dealt with the narrow issue of whether depositions of lead plaintiffs and their investment advisors 

were relevant to defendants’ truth-on-the-market defense. January 29, 2007 Minute Order at 1, 

Docket No. 935 (Guzman, J.); November 13, 2006 Memorandum Opinion and Order, Docket No. 

762 (Nolan, Mag. J.); Magistrate Nolan’s April 18, 2005 Minute Order at 5, Docket No. 225 (Nolan, 

Mag. J.). This Court ruled that discovery of third party analysts could be obtained to support their 

Case 1:02-cv-05893 Document 1633 Filed 06/11/2009 Page 11 of 19
- 8 - 

truth-on-the-market defense, and no discovery of plaintiffs or their investment advisors were 

required. See January 29, 2007 Order. To be sure, those Orders do mention the possibility of further 

discovery after trial on any unresolved issue of individual reliance. However, the Court’s rulings 

were also made prior to the jury’s rejection of defendants’ truth-on-the-market argument and 

defendants’ testimony that no investor, other than Wells Fargo, obtained non-public information 

from the defendants. See Plaintiffs’ Post-Verdict Submission Regarding Phase II at 6-15. Thus, 

there is very limited post-verdict discovery required since, with the exception of Wells Fargo’s 

acquisition of non-public information, all possible means of rebutting the presumption of reliance 

were addressed at trial. 

B. The Court Can Decide the Formula to Calculate Damages 

In their initial submission, plaintiffs set forth their position on the damages formula the Court 

should adopt. Plaintiffs’ proposal recognizes that certain offsets are legitimate and plaintiffs’ 

calculations will permit the class to recover only actual damages. Defendants’ proposal, on the other 

hand, is patently unfair. For example, since class members cannot recover damages for any 

purchases and sales prior to the first partial disclosure (November 14, 2001), it follows that any 

trading gains on similar transactions should not be used to reduce or offset damages. The only offset 

should be for purchases and sales between November 14, 2001 – October 11, 2002 that result in a 

profit. 

In addition, defendants propose to calculate alleged gains from shares purchased prior to the 

Damages Period and sold during the Damages Period. Defendants allege that any damages suffered 

by class members should be offset by these alleged gains. Once again, defendants’ proposal is 

unfair. First, purchases prior to the Damages Period are not used to calculate damages, so they 

should not be used to calculate alleged gains. Second, defendants’ alleged gain calculation also 

Case 1:02-cv-05893 Document 1633 Filed 06/11/2009 Page 12 of 19
- 9 - 

includes sales prior to November 14, 2001 which is improper as set forth above. See Supplemental 

Declaration of Bjorn I. Steinholt attached as Ex. B. 

With respect to whether the Court should use FIFO or LIFO to “match” shares purchased and 

sold for calculating a loss or gain, the case law relied on by defendants arises in the context of 

calculating the “largest financial interest” for lead plaintiff selection under the PSLRA. The 

determination of damages under §10(b) is different than a loss calculation for purposes of lead 

plaintiff appointment under the PSLRA. The loss calculation under the PSLRA lead plaintiff 

calculation does not take into account inflation per share or loss causation principles but rather 

calculates the “losses” based on the market prices of a company’s stock. In contrast, as discussed in 

plaintiffs’ initial submission, the vast majority of settlement plans of allocation use the FIFO 

method, as does the IRS in the treatment of taxes on stock transactions. Therefore, there is ample 

support for the Court to adopt FIFO in the context of damage calculations. 

III. OBJECTIONS TO DEFENDANTS’ NOTICE 

Plaintiffs object to defendants’ proposed notice. Among other things, plaintiffs object to the 

following provisions: 

1. Introduction paragraph – defendants’ reference to the statement that purchasers of 

Household International, Inc. common stock from July 30, 1999 through October 11, 2002 “may be 

eligible to receive an award” is misleading and wrong since, based on the verdict, only claimants 

who purchased between March 23, 2001 and October 11, 2002 are eligible to file a claim. 

2. The 45-day deadline for class members to submit claim forms and trading 

information is too short. Class members realistically need up to 120 days since many claimants will 

receive the notice from brokers or nominees, which can cause delays, and they also need time to 

collect responsive information that is eight years old. 

Case 1:02-cv-05893 Document 1633 Filed 06/11/2009 Page 13 of 19
- 10 - 

3. The repeated references to claimants being required to produce additional documents 

and undergo an examination by deposition are transparent attempts to discourage claims. 

Defendants’ reference to a jury trial is also not supported by the law and is also calculated to 

discourage the filing of claims. 

4. Defendants’ proposed Schedule of Transactions requests trades from July 30, 1999 – 

October 11, 2002. Information relating to trades prior to March 23, 2001 (the first day of the 

Damages Period found by the jury) is not necessary. 

5. The information requested in the Trading Questionnaire is not necessary to compute a 

valid claim. The request for any trades in other Household securities (such as Household debt, or put 

or call options) is not necessary since these trades will not be used to calculate damages. (See

Question 1). As discussed supra in §II.A., Questions 2-6 relating to individual claimants’ 

investment strategies have no relevance to the calculation of any claim or rebutting the presumption 

of reliance. 

IV. DEFENDANTS HAVE NO RIGHT TO JURY TRIAL 

While defendants harp on the fact that the Seventh Amendment guarantees them a right to a 

jury trial on individual reliance and damages issues, they neglect to consider the fact that these issues 

have already been examined by a jury. On May 7, 2009, the jury in this case found on a class-wide 

basis that the truth regarding the alleged fraud was not “on the market” until October 11, 2002. 

Defendants reiterated several times at trial that they followed the securities laws, including 

Regulation F.D., and therefore each individual investor (except Wells Fargo) was privy to (and 

therefore knew) the same information regarding defendants’ practices as every other investor. As 

the Seventh Amendment makes clear, “no fact tried by a jury, shall be otherwise re-examined.” U.S. 

Case 1:02-cv-05893 Document 1633 Filed 06/11/2009 Page 14 of 19
- 11 - 

Const. amend. VII.3 Since the jury found that plaintiffs proved reliance on a class-wide basis, 

defendants cannot now be permitted to reargue the same issues on an individual basis. 

In Rhone-Poulenc Rorer Inc., the Seventh Circuit emphasized that while a district court may 

bifurcate a lawsuit, “the judge must not divide issues between separate trials in such a way that the 

same issue is reexamined by different juries.” 51 F.3d at 1303. The court continued, “[t]he right to a 

jury trial in federal civil cases, conferred by the Seventh Amendment, is a right to have juriable 

issues determined by the first jury impaneled to hear them . . ., and not reexamined by another finder 

of fact.” Id. 

In Houseman v. United States Aviation Underwriters, 171 F.3d 1117 (7th Cir. 1999), the 

Court of Appeals provided further guidance on this issue. The Seventh Circuit held that to avoid 

conflict with the Seventh Amendment, “questions in a single suit can only be tried by different juries 

if they are ‘so distinct and separable from the others that a trial of [them] alone may be had without 

injustice.’” Houseman, 171 F.3d at 1126 (citation omitted). The court further explained that 

“[w]hile both juries can examine overlapping evidence, they may not decide factual issues that are 

common to both trials and essential to the outcome.” Id. While the Houseman court determined that 

bifurcation in that case did not conflict with the Seventh Amendment because the “claims against 

each defendant [were] based on different legal theories and involve[d] distinct inquiries,” (id. at 

1127), the court noted that bifurcation did create a risk of a Seventh Amendment violation, but this 

risk was rendered harmless by virtue of the initial jury verdict. Id. at 1128 n.16. Houseman

involved two juries deciding distinct questions in which the second jury could not have reexamined 

the conclusions of the first. Id. at 1128. In our case, however, should a second jury be empanelled 

 

3

 The Seventh Amendment provides that: “In Suits at common law . . . the right of trial by jury shall be 

preserved, and no fact tried by a jury, shall be otherwise re-examined.” U.S. Const. amend. VII. 

Case 1:02-cv-05893 Document 1633 Filed 06/11/2009 Page 15 of 19
- 12 - 

to determine individual reliance issues, as proposed by defendants, that jury will have to reexamine 

the conclusions related to class-wide reliance previously examined by the first jury. 

Defendants have not supplied sufficient support for their claim that further proceedings 

regarding individual reliance are necessary or that such proceedings must proceed in front of a new 

jury. As plaintiffs’ opening brief explained, the court in In re Ask Sec. Litig., No. C-85-20207(A)-

WAI, 1992 U.S. Dist. LEXIS 14944 (N.D. Cal. Aug. 18, 1992) held that the court could consider 

rebuttal evidence post-verdict by means of the claims mechanism process to protect defendants’ 

rebuttal rights. As part of the claims process, the issue can be resolved by adding a question in the 

claim form to be completed by all class members. Since the three class representatives are in the 

same position as all absent class members, there is no right (or need) to have a jury trial to answer 

this limited question of all class members. 

Defendants’ suggestion that they be entitled to a jury determination on damages issues cannot 

be reconciled with the jury’s previous findings. In this case, the jury already determined the 

inflation per share for each day Household’s stock was affected by defendants’ fraud – March 23, 

2001 to October 11, 2002. All that remains is determining the formula for calculating class 

members’ claims, and calculating damages. An independent claims administrator can perform the 

Case 1:02-cv-05893 Document 1633 Filed 06/11/2009 Page 16 of 19
- 13 - 

mechanical determination of each plaintiff’s out-of-pocket damages following receipt of trading 

information from the claimants. Plaintiffs’ Post-Verdict Submission Regarding Phase II at 18. 

Defendants provide no authority as to why a subsequent jury trial on such issues is required or 

necessary. 

DATED: June 11, 2009 Respectfully submitted, 

COUGHLIN STOIA GELLER 

 RUDMAN & ROBBINS LLP 

PATRICK J. COUGHLIN (111070) 

MICHAEL J. DOWD (135628) 

SPENCER A. BURKHOLZ (147029) 

DANIEL S. DROSMAN (200643) 

MAUREEN E. MUELLER (253431) 

/s/ Spencer A. Burkholz 

SPENCER A. BURKHOLZ 

655 West Broadway, Suite 1900 

San Diego, CA 92101 

Telephone: 619/231-1058 

619/231-7423 (fax) 

COUGHLIN STOIA GELLER 

 RUDMAN & ROBBINS LLP 

AZRA Z. MEHDI (90785467) 

D. CAMERON BAKER (154432) 

LUKE O. BROOKS (90785469) 

JASON C. DAVIS (253370) 

100 Pine Street, Suite 2600 

San Francisco, CA 94111 

Telephone: 415/288-4545 

415/288-4534 (fax) 

Lead Counsel for Plaintiffs 

Case 1:02-cv-05893 Document 1633 Filed 06/11/2009 Page 17 of 19
- 14 - 

MILLER LAW LLC 

MARVIN A. MILLER 

LORI A. FANNING 

115 S. LaSalle Street, Suite 2910 

Chicago, IL 60603 

Telephone: 312/332-3400 

312/676-2676 (fax) 

Liaison Counsel 

LAW OFFICES OF LAWRENCE G. 

 SOICHER 

LAWRENCE G. SOICHER 

110 East 59th Street, 25th Floor 

New York, NY 10022 

Telephone: 212/883-8000 

212/355-6900 (fax) 

Attorneys for Plaintiff 

S:\CasesSD\Household Intl\Trial\Post Trial\BRF00059736-Reply PV Submission.doc 

Case 1:02-cv-05893 Document 1633 Filed 06/11/2009 Page 18 of 19
DECLARATION OF SERVICE BY ELECTRONIC MAIL AND BY U.S. MAIL

I, the undersigned, declare: 

1. That declarant is and was, at all times herein mentioned, a citizen of the United States 

and employed in the City and County of San Diego, State of California, over the age of 18 years, and 

not a party to or interested party in the within action; that declarant’s business address is 655 W. 

Broadway, Suite 1900, San Diego, CA 92101. 

2. That on June 11, 2009, declarant served by electronic mail and by U.S. Mail to the 

parties PLAINTIFFS’ RESPONSE TO DEFENDANTS’ RECOMMENDATIONS FOR PHASE II 

PROCEEDINGS, IF NEEDED AND DEFENDANTS’ RESPONSE TO PLAINTIFFS’ POSTVERDICT SUBMISSION. 

The parties’ email addresses are as follows: 

TKavaler@cahill.com

PSloane@cahill.com

PFarren@cahill.com

LBest@cahill.com

DOwen@cahill.com

NEimer@EimerStahl.com

ADeutsch@EimerStahl.com

MMiller@MillerLawLLC.com

LFanning@MillerLawLLC.com

and by U.S. Mail to: 

Lawrence G. Soicher, Esq. 

Law Offices of Lawrence G. Soicher 

110 East 59th Street, 25th Floor 

New York, NY 10022 

David R. Scott, Esq. 

Scott & Scott LLC 

108 Norwich Avenue 

Colchester, CT 06415 

I declare under penalty of perjury that the foregoing is true and correct. Executed this 11th 

day of June, 2009, at San Diego, California. 

/s/ Rika J. Ellis 

RIKA J. ELLIS 

Case 1:02-cv-05893 Document 1633 Filed 06/11/2009 Page 19 of 19