Opinion ID: 456274
Heading Depth: 2
Heading Rank: 1

Heading: Inventory Supply Problem

Text: 12 Plaintiffs introduced evidence that Frank attended a Nucorp Board meeting on August 28, 1981. The minutes of the meeting indicate that the head of Nucorp Supply subsidiary discussed the reasons for the large inventory build-up at Nucorp Supply and the steps being taken to reduce the risk associated with the build-up. Plaintiffs contend that the inventory build-up was material in August, before plaintiffs' investments, because the build-up signaled a downturn in sales and the deterioration of Nucorp's financial position. Nucorp's September 24, 1981 prospectus conceded that a decrease in sales would have an adverse effect on its profitability. Plaintiffs further contend that the press release on November 11, 1981, after their investments, virtually concedes the materiality of that information. That release announced a sudden over-supply occasioned by foreign imports. 13 Defendants, however, contend that Frank was not aware that the inventory level was a problem until late 1981 or early 1982, after plaintiffs' purchases of Nucorp securities. In his deposition, Frank testified that he was not alarmed by the August report of the inventory level and did not consider it material. He was unaware of the sudden over-supply until the press release was available publicly in November. He further testified that he did not consider the oversupply serious until he was given new inventory figures in January 1982. The district court agreed with defendants that the inventory oversupply was not material at the time of plaintiffs' investments in Nucorp securities. 14 We do not believe that a jury reasonably could find that the August 1981 inventory level was material. The historically high inventory figure for Nucorp Supply may have been an early symptom of Nucorp's problems. A reasonable investor, however, would not have considered the inventory level in August 1981 problematic. At the August Board meeting, Nucorp Supply reported that their inventory levels were high because technological improvements were being made and asserted that steps were being taken to reduce the inventory. None of the evidence offered by the plaintiffs discredits this explanation and suggests that the inventory level warned the Board of Nucorp's deteriorating financial condition.