Opinion ID: 731320
Heading Depth: 4
Heading Rank: 1

Heading: The Truth-on-the-Market Doctrine

Text: 97 In a fraud on the market case an omission is materially misleading only if the information has not already entered the market. Convergent Technologies, 948 F.2d at 513 (citing Apple Computer, 886 F.2d at 1114). As we have explained, [i]f the market has become aware of the allegedly concealed information, 'the facts allegedly omitted by the defendant would already be reflected in the stock's price' and the market 'will not be misled.'  Id. (quoting Apple Computer, 886 F.2d at 1114). This principle has been termed by some courts as the truth-on-the-market doctrine or corollary. See e.g., Associated Randall Bank v. Griffin, Kubik, 3 F.3d 208, 213-14 (7th Cir.1993); Wielgos, 892 F.2d at 516. 4 98 However, before the truth-on-the-market doctrine can be applied, the defendants must prove that the information that was withheld or misrepresented was  'transmitted to the public with a degree of intensity and credibility sufficient to effectively counterbalance any misleading impression created by insider's one-sided representations.'  Kaplan, 49 F.3d at 1376 (quoting Apple, 886 F.2d at 1116). 99 The defendants bear a heavy burden of proof. Summary judgment is proper only if they show that no rational jury could find that the market was misled. Kaplan, 49 F.3d at 1376. If the evidence presents a sufficient disagreement to require submission to the jury, summary judgment should be denied. Id. 100 Here, defendants claim that information about the risky nature of MIPS' stock entered the market. In support of their position, defendants submitted 31 analyst reports and articles. According to defendants' evidence, as early as October 1990, one analyst rated the stock as SELL. Another analyst, on February 13, 1991, recommended that MIPS be avoid[ed] because technology revenues are only partially predictable. 101 We do not think that these reports effectively counterbalance[d] defendants' false and misleading statements. Kaplan, 49 F.3d at 1376. There is no mention in the reports of defendants' allegedly improper revenue recognition practices, negative forecasts, or sales decline with the R6000 line. Most of the analysts link MIPS' riskiness with the unusual business model 5 adopted by MIPS and the unsuccessfulness of alliances like ACE. In these circumstances, we cannot say as a matter of law that defendants have sustained their contention that the truth-on-the-market doctrine applies.