Opinion ID: 391276
Heading Depth: 2
Heading Rank: 2

Heading: Materiality and scienter.

Text: 20 Defendants attack the trial court's findings concerning the materiality of Richie's misrepresentations, his scienter, and Arrington's reliance. Defendants say there was insufficient evidence to support the court's findings on these matters. 21 Questions of materiality, scienter, and reliance are mixed questions of law and fact, but ones involving assessments peculiarly within the province of the trier of fact. TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 96 S.Ct. 2126, 48 L.Ed.2d 757 (1976). They are therefore reviewed under the clearly erroneous standard. F.R.Civ.P. 52(a). See Securities & Exchange Comm'n v. Mize, 615 F.2d 1046, 1053 (5th Cir. 1980); Keirnan v. Homeland, Inc., 611 F.2d 785 (9th Cir. 1980); Securities & Exchange Comm'n v. Arthur Young & Co., 590 F.2d 785, 788-89 (9th Cir. 1979); Nash v. Farmers New World Life Insurance Co., 570 F.2d 558, 561 & n.7 (6th Cir.), cert. denied, 439 U.S. 822, 99 S.Ct. 89, 58 L.Ed.2d 114 (1978); Rochez Bros., Inc. v. Rhoades, 491 F.2d 402, 408 (3rd Cir. 1974). 22 A finding is clearly erroneous only when, although there is evidence to support it, the reviewing court on the entire evidence is left with a definite and firm conviction that a mistake has been committed. United States v. United States Gypsum Co., 333 U.S. 364, 68 S.Ct. 525, 92 L.Ed. 746 (1948); Thomas v. S.S. Santa Mercedes, 572 F.2d 1331, 1335 (9th Cir. 1978). 23 Defendants contend that Arrington's handling of his stock shows that he was not concerned with short-term investments. They say this means that any misrepresentations about the short-term performance of the four recommended stocks were immaterial. Arrington's treatment of his Western Airlines stock is not probative of his intentions to handle all of his stocks as intermediate term investments. This showing does not convince us that clear error was committed when the district court found that Richie's misrepresentations about the predicted short term performance of Gulf Oil, Syntex, Monsanto, and Stone & Webster stock were material. 24 Defendants also fail to persuade us that the trial court's finding of scienter was plainly wrong. Richie testified that he believed the course of action he was suggesting carried little risk, but he did not testify that Merrill Lynch analysts had made the predictions he repeated to Arrington, or that he correctly explained margin financing and its risks. It is irrelevant that Richie subjectively believed the Arringtons would profit from the transactions he suggested. 25 Defendants offer no plausible support for their argument that Arrington did not rely on Richie's misrepresentations. Even if Arrington was not misled by Richie's incorrect statements about interest on margin financing, the evidence clearly supports the trial court's finding that Arrington did rely on the misrepresentations about the risks of stock trading on margin and the predicted short-term performance of the four stocks. 26 None of the trial court's factual findings in support of its conclusion that defendants were liable is clearly erroneous. 27