Opinion ID: 408195
Heading Depth: 1
Heading Rank: 3

Heading: The Due Diligence Jury Instruction and Interrogatory

Text: 60 As explained earlier, appellants were permitted to seek recovery under § 10(b) of the Securities and Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. With regards to this theory, the jury found that certain defendants had engaged in conduct which violated these provisions. The jury also found, however, that the appellants had failed to exercise due diligence in the purchase of the stock, and were, therefore, precluded from recovery. 49 61 It is appellants' position that the trial court erred in instructing the jury concerning the issue of due diligence. They claim that the court failed to instruct the jury that in order for the appellants to have failed to exercise due diligence, the appellants must have acted recklessly in deciding to purchase the stock. Put another way, they claim that the trial court failed to clarify that the mere fact that a plaintiff in a Rule 10b-5 action acted unreasonably or negligently in the purchase of stock does not preclude him from recovery. Appellants also submit that this inaccuracy was further exacerbated by the interrogatory which asked the jury, without additional explanation, whether due diligence had in fact been exercised in the stock purchase. 62 The appropriate starting point for issues of this type is the language of the instruction itself. With respect to due diligence, the court instructed the jury that 63 By way of defense, defendants contend that plaintiffs did not exercise due diligence regarding the purchase of stock in the Bank of St. Charles & Trust Company. For, even if you should find that any of the defendants violated Rule 10b-5, the plaintiffs are not entitled to recover unless you also find that the plaintiffs exercised due diligence in the transaction. 64 In this regard, you must determine whether or not the plaintiffs intentionally refused to investigate in disregard of a risk known to them or so obvious that they must be taken to have been aware of it, and so great as to make it highly probable that harm would follow. 65 Therefore, if you, the jury, find that the plaintiffs did not intentionally refuse to investigate, as stated above, you must conclude that they exercised due diligence in the purchase of the stock. However, if you find that the plaintiffs did intentionally refuse to so investigate, there can be no recovery. 66 The burden of proof is upon the plaintiffs to prove, by a preponderance of the evidence, that they exercised due diligence in the purchase of the Bank's stock. 67 Record, vol. 8, at 19-20. Rather than define due diligence as recklessly refused to investigate-the minimum standard of conduct in this Circuit to bar recovery 50 -the trial court defined it as intentionally (refused) to investigate. It is difficult to understand appellants' quarrel with this charge in that the standard expressed was both stricter and more favorable to their position than was required by law. If error was committed, it inured to their benefit. 68 The claim that the interrogatory propounded on the subject of due diligence was misleading and defective is also groundless. The interrogatory in question was no more brief or misleading than any other, and the term due diligence, as shown above, was sufficiently defined in the jury charges to prevent confusion. 69 AFFIRMED IN PART AND REVERSED IN PART; REMANDED to the court below to decide whether or not he will decide the state law claim or relegate the parties to the state courts of Louisiana.