Source: https://m.openjurist.org/989/f2d/1435
Timestamp: 2019-07-16 16:19:11
Document Index: 480579644

Matched Legal Cases: ['§ 11', '§ 11', '§ 10', '§ 10', '§ 10', '§ 10', '§ 10', '§ 10']

989 F2d 1435 Krim v. Banctexas Group Inc | OpenJurist
989 F. 2d 1435 - Krim v. Banctexas Group Inc
989 F2d 1435 Krim v. Banctexas Group Inc
We review the district court's decision to preclude further discovery prior to granting summary judgment for abuse of discretion. Solo Serve Corp. v. Westowne Assoc., 929 F.2d 160, 167 (5th Cir.1991); Carriere v. Sears, Roebuck & Co., 893 F.2d 98, 102 (5th Cir.), cert. denied, 498 U.S. 817, 111 S.Ct. 60, 112 L.Ed.2d 35 (1990); Fontenot v. Upjohn Co., 780 F.2d 1190, 1193 (5th Cir.1986); SEC v. Spence & Green Chemical Co., 612 F.2d 896, 901 (5th Cir.1980), cert. denied, 449 U.S. 1082, 101 S.Ct. 866, 66 L.Ed.2d 806 (1981). No matter how the documents obtained in October, 1989 are characterized, and regardless of whether Local Rule 10.2(c) prohibited merits discovery pending resolution of the class certification question, the court's decision to consider defendant's motion for summary judgment was not an abuse of discretion, because plaintiff had failed to respond to defendant's motion for summary judgment with a statement specifically indicating why plaintiff was unable to oppose the motion at the time and how further merits discovery would enable him to respond.3
To obtain a continuance of a motion for summary judgment in order to obtain further discovery, a party must indicate to the court by some statement, preferably in writing (but not necessarily in the form of an affidavit), why he needs additional discovery and how the additional discovery will create a genuine issue of material fact. International Shortstop, Inc. v. Rally's, Inc., 939 F.2d 1257, 1266-67 (5th Cir.1991), cert. denied, --- U.S. ----, 112 S.Ct. 936, 117 L.Ed.2d 107 (1992); Washington v. Allstate Ins. Co., 901 F.2d 1281, 1286 (5th Cir.1990). The nonmoving party "may not simply rely on vague assertions that additional discovery will produce needed, but unspecified facts." Spence & Green Chemical Co., 612 F.2d at 901. If it appears that further discovery will not produce evidence creating a genuine issue of material fact, the district court may, in the exercise of its discretion, grant summary judgment. Netto v. Amtrak, 863 F.2d 1210, 1216 (5th Cir.1989); International Shortstop, 939 F.2d at 1267.
Having decided that the court did not err in considering the motion for summary judgment without permitting plaintiff to undertake further discovery, we need only consider whether, on the basis of the evidence before the district court, summary judgment was appropriate. An appellate court reviews a grant of summary judgment de novo. International Shortstop, Inc. v. Rally's, Inc., 939 F.2d 1257 (5th Cir.1991), cert. denied, --- U.S. ----, 112 S.Ct. 936, 117 L.Ed.2d 107 (1992); DuPlantis v. Shell Offshore, Inc., 948 F.2d 187, 189 (5th Cir.1991); Ayo v. Johns-Manville Sales Corp., 771 F.2d 902, 904 (5th Cir.1985); Fireman's Fund Ins. Co. v. Murchison, 937 F.2d 204, 207 (5th Cir.1991); Brooks, Tarlton, Gilbert, Douglas & Kressler v. United States Fire Ins. Co., 832 F.2d 1358, 1364 (5th Cir.1987). See also Fed.R.Civ.P. 56(c). In order for the grant of summary judgment to be appropriate, "[t]he pleadings, depositions, answers to interrogatories, and admissions of file, together with any affidavits, must demonstrate there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Ayo, 771 F.2d at 904. See also Celotex Corp. v. Catrett, 477 U.S. 317, 322-34, 106 S.Ct. 2548, 2552-58, 91 L.Ed.2d 265 (1986); Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970); Fed.R.Civ.P. 56(c). The plaintiff must present a genuine issue of material fact as to every one of the essential elements of each of his claims on which he bears the burden of proof at trial. Celotex, 477 U.S. at 322, 106 S.Ct. at 2552. See also Dunn v. State Farm Fire & Cas. Co., 927 F.2d 869, 872 (5th Cir.1991). A "material fact" is one that "might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). If the defendant does not seek to show that the evidence in the record "undermines one or more of the essential elements of the plaintiff's case," but seeks to show that the evidence in the record fails to establish one or more of the essential elements of plaintiff's claim, as in the instant case, then "the defendant need not produce evidence of its own because it is the plaintiff that will bear the burden of proof at trial." International Shortstop, 939 F.2d at 1264 (citing Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir.1986)).
In performing our analysis we look at the available evidence in the light most favorable to the nonmoving party. See, e.g., Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88, 106 S.Ct. 1348, 1356-57, 89 L.Ed.2d 538 (1986); Duplantis, 948 F.2d at 189; Dunn, 927 F.2d at 872; International Shortstop, 939 F.2d at 1260, 1263; Reid v. State Farm Mut. Auto. Ins. Co., 784 F.2d 577, 578 (5th Cir.1986). Although we may affirm the grant of summary judgment on grounds other than those on which the district court relied, provided that the record contains an "adequate and independent basis for that result," Meza v. General Battery Corp., 908 F.2d 1262, 1274 (5th Cir.1990), summary judgment is only appropriate if no rational trier of fact could possibly find for the nonmoving party. Matsushita, 475 U.S. at 587, 106 S.Ct. at 1356; Anderson, 477 U.S. at 248-49, 106 S.Ct. at 2511.
The elements of a securities fraud claim under §§ 11 and 12 of the 1933 Act are: (1) an omission or misrepresentation, (2) of a material fact required to be stated or necessary to make other statements made not misleading.8 A "material" fact is one which a reasonable investor would consider significant in the decision whether to invest, such that it alters the "total mix" of information available about the proposed investment. See Isquith v. Middle South Utilities, Inc., 847 F.2d 186, 207-08 (5th Cir.), cert. denied, 488 U.S. 926, 109 S.Ct. 310, 102 L.Ed.2d 329 (1988). Issuers are absolutely liable for material misstatements or omissions made under § 11 of the 1933 Act. Wielgos v. Commonwealth Edison Co., 892 F.2d 509, 513 (7th Cir.1989). Plaintiff has not come forward with facts to suggest that reasonable jurors might be able to find that the information allegedly omitted or misrepresented was known to BTX at the time the prospectus was prepared and disseminated, or at the time Krim purchased his securities. Moreover, the information allegedly omitted or misrepresented was not "material," because a reasonable investor viewing the information in context would not have considered the investment significantly more risky as a result.
892 F.2d at 515. While an affirmative statement by an issuer must have some basis in fact, an issuer, dealer or broker has no generalized duty to "volunteer [an] economic forecast." Arber v. Essex Wire Corp., 490 F.2d 414, 421 (6th Cir.), cert. denied, 419 U.S. 830, 95 S.Ct. 53, 42 L.Ed.2d 56 (1974). Similarly, projections of future performance not worded as guarantees are generally not actionable under the federal securities laws. See, e.g., Friedman v. Mohasco Corp., 929 F.2d 77 (2d Cir.1991); Hershfang v. Citicorp, 767 F.Supp. 1251 (S.D.N.Y.1991).
The recent case of Virginia Bankshares, Inc. v. Sandberg, --- U.S. ----, 111 S.Ct. 2749, 115 L.Ed.2d 929 (1991), is not to the contrary. In that case, a bank informed minority shareholders during a proxy solicitation for a vote on a proposed "freeze-out" merger that they would be offered $42 per share in the merger, and that this price was "fair" to the minority shareholders because $42 was a price above book value and market price. This statement of opinion or belief depended upon "provable facts about the Bank's assets, and about actual and potential levels of operation, [which would or would not] substantiate a value that was above, below, or more or less at the $42 figure ..." --- U.S. at ----, 111 S.Ct. at 2759. The evidence indicated that the Bank possessed factual information suggesting that the minority shareholders' shares were worth at least $60 on the open market. Id. The Court held that such a dichotomy between the evidence in the Bank's possession and the particular dollar value the Bank assigned to minority shareholders' shares in the proxy statement could be actionable as a violation of S.E.C.Rule 14a-9 (promulgated under the Securities Exchange Act of 1934).11
We note that defendant contends that plaintiff's affidavit submitted in opposition to defendant's motion for summary judgment contained inadmissible hearsay. We think the grant of summary judgment for defendant was proper whether that information was considered or excluded, but we agree that a party seeking to oppose summary judgment "must adduce admissible evidence which creates a fact issue concerning the existence of every essential component of that party's case. Unsubstantiated assertions of an actual dispute will not suffice." Thomas v. Price, 975 F.2d 231, 235 (5th Cir.1992) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986))
Plaintiff maintains that it was "manifestly unjust" for the district court to entertain defendant's motion for summary judgment prior to ruling on the plaintiff's motion for class certification. We disagree. There is no need to reach the question of class certification if the named plaintiff has not established a genuine issue of material fact to support his claims. However, many of the alleged class members' claims would have been barred for failure to state a claim on which relief may be granted, had the district court reached the issue. We make this observation because at oral argument, both parties maintained that Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 95 S.Ct. 1917, 44 L.Ed.2d 539 (1975), had no relevance to the class action in this case. It is apparent from plaintiff's complaint that the alleged class includes all persons who purchased BTX securities from January 1, 1987 to September 30, 1988. Persons who purchased securities prior to the distribution of the May 13, 1987 prospectus could not possibly have been induced to invest in BTX by that prospectus. At most, they could have been induced to retain their shares by relying on that prospectus. It is well established that mere retention of securities in reliance on material misrepresentations or omissions does not form the basis for a § 10(b) or Rule 10b-5 claim. See Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 95 S.Ct. 1917, 44 L.Ed.2d 539 (1975); Abrahamson v. Fleschner, 568 F.2d 862, 868 (2d Cir.1977) (fraudulent inducement to retain securities is not a Rule 10b-5 violation because it is not directly "in connection with" any purchase or sale), cert. denied, 436 U.S. 913, 98 S.Ct. 2253, 56 L.Ed.2d 414 (1978), disapproved on other grounds, Transamerica Mortgage Advisers, Inc. (TAMA) v. Lewis, 444 U.S. 11, 100 S.Ct. 242, 62 L.Ed.2d 146 (1979); Tully v. Mott Supermarkets, Inc., 540 F.2d 187 (3d Cir.1976) (breach of agreement to sell securities did not constitute violation of § 10(b) because required nexus between fraud and an actual sale was lacking; plaintiffs, being deprived of opportunity to purchase securities, could not demonstrate requisite causal connection between a sale or purchase of their own and any fraud by defendants); Morrow v. Schapiro, 334 F.Supp. 399, 402-03 (E.D.Mo.1971) (corporate insiders' persuasion of shareholder not to sell stock, when such sale would have been contrary to insiders' interests, was not a § 10(b) violation because no actual purchase or sale took place in connection with the alleged fraud; "However deceitful and false the misrepresentations may have been, the plaintiff must be a purchaser or a seller ... in a purchase or sale as to which there is a claim of fraud"); Baum v. Phillips, Appel & Walden, Inc., 648 F.Supp. 1518, 1526 (S.D.N.Y.1986) (merely being induced to retain securities does not constitute violation of Rule 10b-5), aff'd, Asch v. Phillips, 867 F.2d 776 (2d Cir.), cert. denied, 493 U.S. 835, 110 S.Ct. 114, 107 L.Ed.2d 75 (1989); Sacks v. Reynolds Sec., Inc., 593 F.2d 1234, 1241 (D.C.Cir.1978) (Blue Chip Stamps does not permit recovery under Rule 10b-5 when alleged fraud causes an investor to retain ownership in securities); Goldman v. A.G. Becker, Fed.Sec.L.Rep. p. 99, 172, 1983 WL 1302 (S.D.N.Y.1983) ("All of the decisions which plaintiff cites in support of the contention that he has standing to sue under Rule 10b-5 as an aborted seller antedate the Supreme Court's express adoption of the Birnbaum rule in Blue Chip Stamps "; after Blue Chip Stamps, mere retention of securities induced by misrepresentations cannot constitute a § 10(b) violation). In only a few cases has retention of securities supported a Rule 10b-5 claim. See Ingenito v. Bermec Corp., 376 F.Supp. 1154, 1174-78 (S.D.N.Y.1974). These cases require that the plaintiff have made a "new decision to invest," to "reinvest" or to sell, but that through defendants' fraud, this decision was thwarted. See, e.g., Freschi v. Grand Coal Venture, 551 F.Supp. 1220, 1227-30 (S.D.N.Y.1982). It does not appear that any of the alleged class members' claims fit into this category
The elements of a securities fraud claim under § 10(b) and Rule 10b-5 of the 1934 Act are: (1) a material misstatement or omission, (2) in connection with the purchase or sale of securities, (3) scienter, (4) harm, and (5) causation. See, e.g., Lloyd v. Industrial Bio-Test Laboratories, Inc., 454 F.Supp. 807 (S.D.N.Y.1978). In addition, the Fifth Circuit requires due diligence on the part of the plaintiff in protecting his own interests. Stephenson v. Paine Webber Jackson & Curtis, Inc., 839 F.2d 1095 (5th Cir.), cert. denied, 488 U.S. 926, 109 S.Ct. 310, 102 L.Ed.2d 328 (1988). Section 20(a) of the 1934 Act pertains to controlling person liability for violations of § 10(b)
To demonstrate scienter requires a demonstration of knowing, not merely negligent, statements or omissions which are misleading. Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193, 96 S.Ct. 1375, 1381, 47 L.Ed.2d 668 (1976)
Plaintiff's federal securities law claims were dismissed with prejudice, while his state law claims were dismissed without prejudice. As the dismissal of plaintiff's federal claims was proper, the dismissal of his state law claims was within the scope of the discretion of the trial judge. See, e.g., United Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218 (1966); Biechele v. Cedar Point, Inc., 747 F.2d 209, 216 (6th Cir.1984)