Opinion ID: 1248085
Heading Depth: 1
Heading Rank: 9

Heading: certain statements of material facts

Text: The statements found above to have been made by Defendants must be analyzed in terms of the provisions of the applicable sections of the Uniform Securities Act and judicial interpretations of the language of those provisions. I am of the opinion, and I so find and conclude, that the aforesaid statements made in writing as representations and warranties hereinabove set out in Section IV of this Order in the written agreement of August 18, 1974 clearly meet the test of materiality. As to the statements made concerning the May 31, 1974 Balance Sheet, it is undisputed that it was referred to in the negotiations preceding the entry of the agreement, was many times expressly referred to in the provisions of said agreement, and of course, was actually made a part of the agreement, as Attachment C thereto. Certainly, an average prudent investor ought reasonably to be informed concerning the assets and liabilities of a corporation before purchasing the stock of that corporation, especially when he is purchasing substantially all of the outstanding stock. While the Defendant Paul Hullander testified that he informed the Plaintiffs of mistakes in the May 31, 1974 Balance Sheet, even Mr. Hullander did not claim that the statements concerning same were immaterial. Similarly, all of the other written statements specified by Plaintiffs and found above to have been made by Defendants were matters as to which an average prudent investor ought reasonably to be informed before purchasing. I further conclude that materiality does not require a showing of reliance, causation or that the sale would not have occurred absent the misstatement or omission. Hill York Corp., supra ; Demarco v. Edens , 390 F. (2d) 836 at 841 (2nd Cir.1968). The standard for determining materiality is an entirely objective one, and the actual attitude of the parties toward the matter is not determinative. SEC v. Texas Gulf Sulphur Co. , 401 F. (2d) 833, 849 (2nd Cir.1968), citing Kohler v. Kohler , 319 F. (2d) 634, 642, 7 A.L.R. (3d) 486 (7th Cir.1963), and List v. Fashion Park , 340 F. (2d) 457 at 462 (2 Cir.1965). I therefore further conclude that, on the issue of materiality, it is not necessary for the Court to consider certain testimony of the Defendant Paul Hullander regarding the extent to which the parties understood or relied upon said statements, which testimony was objected to by Plaintiffs and received in the record, with a reservation of a final ruling on Plaintiff's objections. For the foregoing reasons, I further conclude that the aforesaid written statements were material. There appears to be no issue as to whether the statements in questions were statements of facts, and I hereby conclude that such statements were statements of material facts.