Opinion ID: 677610
Heading Depth: 1
Heading Rank: 1

Heading: Pre-Trial Partial Summary Adjudication

Text: 13 Two crucial factors in the partnerships' viability were the sufficiency of available bench space to grow the quantities of plants envisioned and the adequacy of Agretech's financial resources to cultivate the plants. Prior to trial, plaintiffs moved for partial summary judgment, asking the district court to order that certain material facts be deemed established at the trial. The district court granted part of their motion, and instructed the jury that 14 [t]he following material facts are without substantial controversy, and are deemed to be established: 15 [...] 16 B, the bench space requirements of NP 1985-I and for the other FPI partnerships were not disclosed in the prospectus or in the registration statement for NP 1985-I or in the 1986 offerings. 17 C, the amount of bench space which Agretech actually had was not disclosed in the prospectus or in the registration statement of NP 1985-I or in the 1986 offerings. 18 D, the amount of bench space which Agretech had, the amount of bench space which would have been required for 1985-I, if fully funded, and the amount of bench space that would have been required for the other FPI partnerships were material facts which were required to be disclosed in the prospectus and in the registration statement for 1985-I and in the 1986 offerings. 19 E, as of October 1985, Agretech had an aggregate negative balance of $61,143.55 in all of its bank accounts. 20 F, the amounts that were allocated and to be paid by NP 1985-I to Agretech for cultivation and facilities lease rental, assuming full funding, were as follows: For the cultivation of plants, from the offering proceedings, $821,600; from plant sales, $1,041,700; on behalf of the lease rental, $376,900, for a total of $2,240,200. 21 G, the amount that would actually have been required to cultivate the plants to be acquired by NP 1985-I, the amount that would have been required to cultivate the plants for the FPI partnerships formed prior to NP 1985-I, and Agretech's financial circumstances as of November 1985, were not disclosed in the prospectus or in the registration statement for NP 1985-I or in the 1986 offerings. 22 H, the amounts that would actually have been required to cultivate the plants to be acquired by NP 1985-I, the amounts that would be required to cultivate the plants for the NP partnerships formed prior to NP 1985-I, and Agretech's financial circumstances as of November 1985, were material facts which were required to be disclosed in the prospectus and in the registration statement for NP 1985-I and in the 1986 offerings. 23 (Emphasis added). 24 AY contends that the district court erred in granting plaintiffs' motion, on the ground that whether the facts were material was an issue for the jury to decide. We review the district court's grant of summary judgment de novo. T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors' Ass'n, 809 F.2d 626, 629 (9th Cir.1987). We must determine, viewing the evidence in the light most favorable to the nonmoving party, whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law. Tzung v. State Farm Fire & Casualty Co., 873 F.2d 1338, 1339-40 (9th Cir.1989). 25 A fact is material if a reasonable investor might have considered [it] important in the making of [his] decision. Affiliated Ute Citizens v. United States, 406 U.S. 128, 153-54 (1972). Materiality [is a] fact-specific issue[ ] which should ordinarily be left to the trier of fact. In re Apple Computer Secs. Litig., 886 F.2d 1109, 1113 (9th Cir.1989), cert. denied, 496 U.S. 943 (1990). However, summary judgment may be granted in appropriate cases. Id. Summary adjudication is proper if the established omissions are 'so obviously important to an investor, that reasonable minds cannot differ on the question of materiality.'  TSC Indus. v. Northway, Inc., 426 U.S. 438, 450 (1976) (quoting Johns Hopkins Univ. v. Hutton, 422 F.2d 1124, 1129 (4th Cir.1970)). 26 Parts B, C, F, and G of the district court's instructions are undisputed; the information was omitted from, or included in, the prospectus included in the 1985-I and 1986 offerings. Part E was not contested by AY. Thus, AY can only challenge Parts D and H. These instructions did not, as AY alleges, state that the offering documents were rendered 'materially false and misleading' by their omission. Rather, they stated only that the facts were material and required to be included in those documents; whether their omission thereby rendered the documents false and misleading was left for the jury to determine. 27 Furthermore, the fact that the district court found that the specific amount of space and funds required was an issue for the jury does not mean that the materiality of those amounts, whatever they were, was also necessarily an issue for the jury. A numerical quantity may be material--important to an investment decision--without the specific quantity being known. The district court did not instruct the jury that the difference between the money and space required versus that available was material--an instruction that would have required a specific quantity determination--but only that the amounts themselves were material. 28 Finally, the district court did not by these instructions essentially direct[ ] a verdict on all claims against AY; to find AY liable, the jury still needed to decide whether AY, as the accountant, had a duty to disclose the facts and, if so, whether AY had the proper degree of scienter for not disclosing them. Thus, our review is limited to determining whether the district court erred in finding facts D and H to be material facts requiring disclosure. 29 The amount of funds required to cultivate the partnerships' plants (and therefore whether the partnerships would have sufficient funds to cover those expenses) was clearly a material fact, because it related to the fundamental issue of the partnerships' viability and profitability. Agretech's financial condition was also material, given the prospectus' statement that the Partnership will be dependent upon the performance of Agretech for the success of the Partnership. Similarly, because of the partnerships' dependence on Agretech, the space required to grow the plants versus Agretech's existing capacity would have been a material issue; again, it related directly to the fundamental matter of the partnerships' viability. These facts are so obviously important to the investor that we hold that they are material as a matter of law. Accordingly, the district court did not err in granting the plaintiffs' motion for partial summary judgment.