Opinion ID: 1988100
Heading Depth: 1
Heading Rank: 8

Heading: The Materiality of Wesley Green's Statements

Text: The chancery court decided to use an objective test to determine whether Wesley Green's statements to his mother regarding her liability on Champs-Elysees's line of credit were material. Accordingly, the court reasoned that regardless of whether Edna Green considered being released from liability on the line of credit to be important, a reasonable person would have considered being released from liability on a $75,000 line of credit as part of a sale of corporate stock to be significant. Therefore, the chancery court concluded, as a matter of law, that Wesley Green's statements to his mother regarding the AmSouth Bank line of credit were material. The Court of Appeals did not directly address this question. In their arguments to this Court, the parties maintain their disagreement regarding the materiality of Wesley Green's statements to his mother regarding the AmSouth Bank line of credit. Wesley Green, adopting a subjective approach, asserts that his statements were not material because his mother did not rely on his statements and because she knew or believed that his statements were not correct. Edna Green, adopting an objective approach, counters that a reasonable person would consider being released from a $75,000 obligation to be an important factor in deciding whether to sell securities for $8,000. The United States Supreme Court has followed a cautious approach when it has dealt with materiality determinations in the context of motions for summary judgment. The Court observed that in determining whether a summary judgment on the issue of materiality is appropriate, courts must bear in mind that the underlying objective facts, which will often be free from dispute, are merely the starting point for the ultimate determination of materiality. The determination requires delicate assessments of the inferences a reasonable shareholder would draw from a given set of facts and the significance of those inferences to him, and these assessments are peculiarly ones for the trier of fact. Only if the established omissions are so obviously important to an investor, that reasonable minds cannot differ on the question of materiality is the ultimate issue of materiality appropriately resolved as a matter of law by summary judgment. TSC Indus., Inc. v. Northway, Inc., 426 U.S. at 450, 96 S.Ct. 2126. The Court has also expressed wariness about applying bright-line rules in assessing the fact-specific finding ... [of] materiality in securities actions. Basic Inc. v. Levinson, 485 U.S. 224, 236, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988). [43] A majority of courts have similarly treated materiality as a factual issue and have left its resolution to the jury. [44] As was well summarized by Judge Easterbrook writing for the United States Court of Appeals for the Seventh Circuit, [m]ateriality is hard to pin down in the abstract ... [and] close cases should not be resolved by summary judgment. Wielgos v. Commonwealth Edison Co., 892 F.2d 509, 517 (7th Cir.1989). The parties in this case disagree about what Wesley Green actually said to Edna Green, when he first said it, and Edna Green's understanding or knowledge of the truth or falsity of his assertions. As previously discussed, the test of materiality is an objective inquiry. As a general matter, statements regarding the effects of a sale of corporate stock on the seller's personal liability for corporate debts would be deemed material to the transaction. However, we must view the facts and draw all reasonable inferences from the facts in the light most favorable to Wesley Green because he is the non-moving party. The total mix of information made available to the reasonable investor, viewed in such a light, includes in this case knowledge regarding signing such a loan and whether he or she is obligated thereupon. In light of the unsettled state of this record regarding what Wesley Green said and what Edna Green knew and understood, we conclude that the chancery court erred by determining, as a matter of law that Wesley Green's statements to Edna Green regarding the effect of her sale of the Champs-Elysees stock on her personal liability for the corporation's AmSouth Bank line of credit were material.