Opinion ID: 216819
Heading Depth: 4
Heading Rank: 2

Heading: Impact of Claimed Corrective Disclosures

Text: HCP next argues that the subsequent disclosures of truthful information about its offer broke the chain of causation as a matter of law. Specifically, HCP asserts that any misrepresentations contained in its February 14, 2007 press release were corrected prior to the unitholder vote on the Ventas deal. HCP cites the testimony of certain unitholders to suggest that unitholders were aware of the conditional nature of the offer shortly after HCP's February 14, 2007 press release. ( See, e.g., HCP Br. at 34-35 (citing, inter alia, R. 486 at 188-89 (Morgan Stanley).)) To the extent that any confusion lingered in the market, HCP notes that the condition was explicitly referenced in a February 19, 2007 press release by Sunrise, and a February 22, 2007 press release by Ventas. (App. at 590, 1228-29.) The proxy statements sent to unitholders on or about March 6, 2007 also discussed the existence of the condition. ( Id. at 1240-54.) HCP relies heavily on the market price of Sunrise during the relevant period. After HCP publicly announced its bid, the market price of Sunrise increased from approximately $15.00 per unit to $18.00 per unit, and remained at that approximate price until the unitholders rejected the Ventas deal. HCP notes that Ventas' expert admitted that he failed to find any statistically significant drop in the price of Sunrise after HCP disclosed that its bid was conditional. Because the alleged corrective disclosures had no effect on the stock price, HCP contends that any alleged misrepresentations either did not mislead or `were immaterial as a matter of law.' (HCP Br. at 42 (quoting In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1425 (3d Cir.1997).)) We again find HCP's argument unavailing. The purported corrective disclosuresnone of which were made by HCP directlydo not disprove causation as a matter of law. The jury could reasonably have found that any purported corrections were incomplete and did not neutralize the effect of HCP's fraud on proxy voting that started on March 7. (Ventas Br. at 40.) This would explain why the market price of Sunrise did not fall significantly after the market learned of the existence of the condition, and therefore why HCP's argument fails to show a break in the chain of causation. We note the many reasons that doom HCP's argument on appeal. First, the public never learned of the difficulties that HCP would likely face in reaching an agreement with SSL and thus in satisfying the condition. Although investors may have come to know of the existence of the conditional nature of HCP's offer, investors never learned the details of the troubled relationship between HCP and SSL, or that HCP's insistence on certain development rights threatened to prevent a deal from materializing as quickly as HCP suggested that it would, if a deal materialized at all. Even if the jury were to credit HCP's argument that it was SSL, not HCP, that caused the breakdown of the original negotiations, the difficult relationship between the parties, regardless of the cause of the difficulty, could likely frustrate future negotiations. Moreover, to the extent the public learned of the existence of the condition, the jury could reasonably have found that HCP falsely suggested to the market that it would remove the condition. On February 28, 2007, for instance, Flaherty suggested, in a letter to Sunrise that was made public, that HCP might be willing to remove the closing condition (App. at 733.) But Flaherty admitted at trial that he did not make an unconditional offer because he was not sufficiently confident that HCP would reach a deal with SSL, and in fact was not authorized to make a binding offer. ( See, e.g., Tr. 4A at 75.) Second, Ventas presented evidence that, in the aftermath of HCP's wrongful conduct, investors recognized that Ventas would be forced to raise its bid to complete the transaction so as to avoid injury to its reputation. ( See, e.g., id. at 101-03, 112; Tr.7B at 18.) This would suggest that the effects of HCP's wrongful conduct lingered in the market because investors sought to capitalize on its effects on Ventas' original offer. Third, the on-going litigation in Canada was not resolved until approximately two weeks after voting on the Ventas deal had begun. This timeline may have suggested to unitholders that the HCP deal was viable. Because HCP disclosed neither the difficulties it would likely encounter in reaching an agreement with SSL, nor any other factual barrier to the agreement, the pendency of the Canadian proceedings may explain why Sunrise's unit price did not fall. Finally, HCP's initial misleading statements changed the unitholder composition of Sunrise, which made approval of Ventas' $15.00 per unit offer highly unlikely. In the 48 hours after HCP announced its offer, over 40 million units of Sunrise changed hands, representing the largest day in the trading history of Sunrise. The evidence suggests that these new unitholders were largely arbitragers from the United States and had little incentive to accept Ventas' $15.00 bid, even after HCP withdrew its offer. As the district court observed, [t]he jury could reasonably decide that in the absence of this market shift, which it decided was caused by [HCP's] significantly wrongful conduct, [Ventas'] $15 offer would have been approved. (R. 520 at 5.) HCP asserts those new unitholders could not have affected the outcome of the vote because the four largest unitholders by themselves cast more than sufficient votes to defeat Ventas'[] offer. (HCP Br. at 45-46 (emphasis omitted).) But Ventas presented evidence that its initial offer of $15.00 was a good price to the unitholders and was recognized as such by the market and certain institutional unitholders. ( See, e.g., R. 482 at 102-03 (testimony of representative from Caisse, the largest Canadian unitholder, that he would have initially recommended approval); Tr.7A at 87-95 (testimony of Ventas' expert, opining that the Ventas offer had a 95% expectation of approval).) To the extent HCP cites competing testimony, the jury was not compelled to credit this speculative testimony, particularly in light of Ventas' evidence suggesting the opposite. Moreover, Ventas presented evidence that the institutional investors never learned of the obstacles that might prevent the condition from being realized, namely the difficult relationship between HCP and SSL. Such knowledge alone could have caused the unitholders to doubt the viability of the HCP offer and thus vote in favor of the Ventas deal. Institutional investors, for instance, testified that they believed a deal with HCP might still be viable even after HCP withdrew its bid. ( See, e.g., Tr.3A at 78.) In light of the totality of the evidence presented at trial, the jury arrived at a reasonable conclusion regarding the element of causation. The jury had sufficient evidence to find that HCP's improper interference caused injury to Ventas. Accordingly, we find that Ventas presented sufficient evidence to support a jury finding of causation, and AFFIRM the decision of the district court on that basis.